NEWS,28.09.2012

Netanyahu speech dampens war speculation

Prime Minister Benjamin Netanyahu's UN speech about Iranian nuclear advances has dampened speculation in Israel that he could order a war this year.Analysing Thursday's address in which Netanyahu literally drew a "red line" on a cartoon bomb to show how close Iran was to building nuclear weaponry, commentators saw his deadline for any military action falling in early or mid-2013, well after US elections in November and a possible snap Israeli poll."The 'decisive year' of 2012 will pass without decisiveness," wrote Ofer Shelah of Maariv newspaper on Friday.Without explicitly saying so, Netanyahu implied Israel would attack Iran's uranium enrichment facilities if they were allowed to process potential weapons-grade material beyond his red line.Maariv and another mass-circulation Israeli daily, Yedioth Ahronoth, said spring (northern hemisphere) 2013 now looked like Netanyahu's target date, given his prediction that by then Iran may have amassed enough 20%-enriched uranium for a first bomb, if purified further.But the front pages of the liberal Haaretz and pro-government Israel Hayom newspapers cited mid-2013 - Netanyahu's outside estimate for when the Iranians would be ready to embark on the last stage of building such a weapon, which could take only "a few months, possibly a few weeks".Reluctant to eleborateIran, which denies it is seeking nuclear arms, said Netanyahu's speech made "baseless and absurd allegations" and that the Islamic Republic "reserves its full right to retaliate with full force against any attack". Israel is widely assumed to have the Middle East's only atomic arsenal.Israeli diplomats were reluctant to elaborate on Netanyahu's speech, saying its main aim was to illustrate the threat from Tehran.Asked on Israel's Army Radio whether Netanyahu had signalled he would strike in the spring if US and European Union sanctions fail to curb Iran's nuclear work, Foreign Minister Avigdor Lieberman said: "No, no, I would not go that far.""The prime minister clarified a message to the international community [that] if they want to prevent the next war, they must prevent a nuclear Iran," Lieberman added.Netanyahu's increasingly hawkish words on Iran in recent weeks and months strained relations with US President Barack Obama, who has resisted the calls to set Tehran an ultimatum while fending off charges by his Republican rival, Mitt Romney, that he is soft on Israel's security.Netanyahu praised Obama's resolve in his UN address, which the prime minister described as advancing their "common goal" - a strong signal that Israel would not blindside Washington with a unilateral attack on Iran.Netanyahu's political worriesIsrael Hayom pundit Dan Margalit said the speech constituted "an almost explicit acknowledgment that he [Netanyahu] is declaring a truce in the public argument between him and the president. At least, until after the [US] election".Netanyahu has political worries too, given deadlock in his coalition government over the 2013 budget which, if not ratified by December, could trigger an early Israeli election next year.In a broadcast editorial, Army Radio depicted war with Iran as no longer an imminent dilemma troubling the prime minister.Instead, the station said, Netanyahu would have to decide "whether he is going to elections sooner, in January, February, or maybe March, or whether he will be able to pass the budget, take care of the Iranian issue and then go to elections in October [2013] as scheduled".US Defence Secretary Leon Panetta said this month that Washington would have "about a year" to stop Iran should it decide to cross the threshold of producing nuclear weaponry - a more expansive timeline than that put forward by Israel.That could spell fresh clashes between the allies over Tehran's continued 20% uranium enrichment, a process the Iranians say they need for medical isotopes but that also brings the fissile material much closer to weapons grade.An Israeli official briefed on the government's Iran strategy cautioned against interpreting dates Netanyahu gave at the United Nations as deadlines, saying the preparations had already been made for military strikes."When he says Iran will have a bomb by this-or-that point in time, that in no way means the war option must wait until then," the official said. "There are other considerations to the timing - operational and strategic."

Spain unveils price of banking rescue

Spain unveils on Friday the full cost of rescuing its stricken banks, seen by investors as one of the final steps before a looming sovereign bailout.An independent audit, to be released after markets close, will serve as the basis for the release of up to €100bn from a eurozone rescue loan agreed in June.It comes a day after Spain announced a tight-fisted budget for 2013, which squeezes out €39bn in austerity measures, sparing only retirement pensions, to rein in the public deficit.Broad, savage cuts including in education and health have sparked fierce protests, leading to clashes outside parliament this week between police and anti-austerity demonstrators.Analysts say Prime Minister Mariano Rajoy is hoping the budget and banking audit will satisfy the conditions of any sovereign bailout, saving it the political humiliation of bowing to outside demands."The suspicion is that Rajoy is hoping these new measures will be enough to prevent the imposition of even tougher terms when Spain applies for its bailout," said a report by London-based foreign exchange firm Moneycorp."Whatever his citizens might have thought, investors were impressed by the prime minister's policy. They saw it as a step closer to the bailout which, they still believe, will solve the problems of Spain and the eurozone."The banking audit, led by US financial consultants Oliver Wyman, examines each of Spain's 14 major banking groups making up 90 percent of the struggling financial system.A huge swathe of the system is bogged down with bad loans from a 2008 property market collapse. Only a few, such as Santander, the eurozone's biggest in terms of market value, have solid balance sheets.The audit will also help to determine the price of toxic assets held by the banks, government sources said.A first group of banks, which have already been nationalised and whose capital requirements are expected to be confirmed by the audit, are to receive rescue money from November.Among them is state-rescued lender Bankia, the country's fourth biggest bank, whose request for more than €23bn in capital forced Madrid into the arms of its eurozone partners.Whatever the price tag placed on the rescue, Rajoy's right-leaning Popular Party government has stressed that not all the cash need come from the rescue loan; some may be able to find private financing.But signs are mounting that Madrid, despite all its manoeuvring, may end up picking up the tab for the financial sector rescue, boosting its overall debt level and heightening the urgency of a sovereign bailout.The rescue loan is to be funnelled through Spains's state-backed Fund for Orderly Bank Restructuring (FROB).But Spain's government had hoped that a new European Stability Mechanism would eventually be empowered by Brussels to inject the loan directly, keeping the debt off Madrid's books.A June summit of European leaders had in fact agreed to set up a European banking union with a single supervisor by the year's end, allowing the ESM to take such action.On Tuesday, however, Germany, the Netherlands and Finland laid down a series of new conditions, and said the ESM should only act on new problem loans, not "legacy assets" such as those being dealt with in Spain.If Spain does formally request a broader sovereign bailout, it would become eligible to benefit from a bond-buying programme for troubled states that was outlined by the European Central Bank on September 6.Such a programme would curb Spain's borrowing costs but to qualify Madrid would have to formally apply for help from the ESM and submit to its conditions.As Spain's borrowing costs remain high, with the yield on 10-year bonds only just below six percent on Friday morning, the odds on a sovereign bailout seemed to be shortening daily.Political tensions are rising between Madrid and the northeastern Spanish region of Catalonia, an economically powerful state that has called snap elections on November 25 in a drive for more independence.The debt-struck region's parliament Thursday voted for referendum on Catalonia's "collective future". Spain's central government has vowed to thwart any attempt to hold a poll on Catalan independence. Investors fear these tensions could make it harder for Madrid to rein in deficits in the regions, which account for half of Spanish expenditure with responsibilities for health and education.The regions' debt situation is perilous, forcing many to apply for help from an €18bn central government liquidity fund. Castilla-La Mancha asked for €848m on Thursday, adding to earlier requests from Catalonia, Valencia, Andalusia and Murcia that already amount to a total of about €15bn.