NEWS,26.11.2012

Obama drafts Geithner to crack budget

US President Barack Obama has made Treasury Secretary Timothy Geithner lead White House negotiator in budget talks with Congress aimed at averting the fiscal cliff, a report said Monday The Wall Street Journal said Geithner was viewed on Capitol Hill as a straight-shooter who had a better chance of brokering a deal than Jacob Lew, Obama's former budget chief who has burnt his bridges with some Republicans.If no deal is reached before the end of the year, a poison pill law of tax hikes and massive spending cuts, including slashes to the military, comes into effect with potentially catastrophic effects for the fragile US economy.The report said Geithner, who is preparing to leave his post as treasury secretary early in Obama's second term, has spent months already preparing for the fiscal talks, which will begin this week in earnest in Washington.Geithner will be joined by White House budget and tax experts, including Lew, now Obama's chief of staff, and National Economic Council Director Gene Sperling, the Wall Street Journal said.They will try to hammer out an elusive compromise with congressional aides but final decisions will be made by political leaders such as Obama and Republican House Speaker John Boehner, the report said.In recent days, several leading Republicans have indicated a willingness to accept a deal that includes more revenue from ending loopholes in the tax code in return for cuts in funding to Democrats' beloved welfare programs.Geithner, 51, is not affiliated with any party and has spent his career in government finance and on the political sidelines.He first joined the Treasury at age 27. When George W. Bush became president in 2001, he went to work for the Council on Foreign Relations and the International Monetary Fund.At 42, he was tapped to be head of the Federal Reserve Bank of New York, considered the Fed's second-most influential post because the New York bank interacts directly with a powerful constituency that includes Wall Street.Despite holding high office in the years leading up to the 2008 financial collapse, when regulatory authorities are accused of having been asleep at the wheel, he was tapped by Obama to lead the recovery.Upon assuming office in early 2009, he was charged with overseeing two major bailout packages worth more than $1.5 trillion and aimed at shoring up the country's distressed banking sector.The administration has said that the stimulus, while costly, averted another Great Depression, while conservative critics have branded it a costly expansion of government that has failed to revive the economy.

 

Medvedev does not rule out Kremlin return

Prime Minister Dmitry Medvedev said he is not ruling out a return to the Kremlin after his 2008-2012 single term as Russian head of state but was happy working as premier under his mentor Vladimir Putin."If I have sufficient strength and health, if our people trust me in the future with such a position, then of course I do not rule such a turn of events," Medvedev said in an interview with Agence France-Presse and Le Figaro when asked if he had the ambition for another Kremlin term.Medvedev, who on Monday embarks on a working visit to France, served as president after Putin stepped aside following the maximum two consecutive terms allowed by the constitution after his 2000-2008 stint.But Putin, aged 60, stayed on as a powerful prime minister and Medvedev, aged 47, never fully emerged from the shadow of his fellow Saint Petersburg native, an impression strongly reinforced when Putin returned to the Kremlin in May 2012.Medvedev, who in turn was then appointed prime minister in May, failed to bring about lasting change through a much-trumpeted modernisation programme in his one term as president.But in his interview with AFP, he revealed he had not lost his political ambition. "This returning to the presidency depends on a whole range of factors." "Never say never, especially as I swam in that river once and this is a river that you can swim in twice," he said.Russia will only go to the polls to vote for a president again in March 2018 and in the next half decade society is expected to see major change as the middle class grows and internet use explodes. Putin has also not ruled out standing again.This year's tightly choreographed job swap was criticised for being played out far from the public, and frustration over the return of Putin to the Kremlin fuelled the opposition protests that rocked Russia in the last year.Medvedev acknowledged the protests that began last December had shown a transformation in Russian society that the authorities could no longer ignore."Our society changed, it had become more active and the authorities needed to take account of this and react," said Medvedev, saying the government had done this by introducing electoral reform.Some of Medvedev's supporters who saw him as a possible champion of a refreshed, innovative and more pro-Western Russia were hugely disappointed by his apparent surrender of the Kremlin back to Putin.But Medvedev played up the tight links between the two men, saying he would find it impossible to work under anyone else."I would hardly have become prime minister under another president, I cannot imagine it at all," he said."If there is someone you can work with comfortably as prime minister after being president it is just one person, Vladimir Putin."However Medvedev has distanced himself from Putin on some issues, notably the case of feminist punk rockers Pussy Riot, two of whom have been sent to prison camps for performing a song against the Russian strongman in a church.Reaffirming his belief that they should be released, he said: "I think they have already tasted what prison is... So further punishment in the form of prison is not necessary. This is my personal position."On the case of Russia's best known prisoner, the former tycoon Mikhail Khodorkovsky, Medvedev said court decisions had to be respected but noted that the convict had never made a bid for clemency from the Kremlin.Medvedev admitted that his modernisation drive had so far fallen short but expressed hope there was still time to put his ideas into place."It's true that for the moment modernisation has not turned into a national idea and there has been no kind of radical progress reached."

 

Euro zone to seek Greek aid deal without write-off

Euro zone finance ministers and the International Monetary Fund made their third attempt in as many weeks to agree on releasing emergency aid for Greece today, with policymakers saying a write-down of Greek debt is off the table for now.Greek Finance Minister Yannis Stournaras said he was confident the ministers would reach a deal after Greece fulfilled its part of the deal by enacting tough austerity measures and economic reforms."I'm certain we will find a mutually beneficial solution today," he said on arrival for what was set to be another marathon meeting.Greece, where the euro zone's debt crisis erupted in late 2009, is the currency area's most heavily indebted country, despite a big "haircut" this year on privately-held bonds. Its economy has shrunk by nearly 25% in five years.EU Economic and Monetary Affairs Olli Rehn said it was vital to disburse the next 31 billion euro tranche of aid "to end the uncertainty that is still hanging over Greece". He urged all sides to "go the last centimetre because we are so close to an agreement".Negotiations have been stalled over how Greece's debt, forecast to peak at 190-200% of GDP in the coming two years, can be cut to a more sustainable 120% by 2020.Without agreement on how to reduce the debt, the IMF has held up payments to Athens because there is no guarantee of when the need for emergency financing will end.The key question is: Can Greek debt become sustainable without the euro zone writing off some of the loans to Athens?IMF Managing Director Christine Lagarde said on arrival that the solution must be "credible for Greece".A source familiar with IMF thinking said the global lender was demanding immediate measures to cut Greece's debt by 20 percentage points of GDP, with a commitment to do more to reduce the debt stock in a few years if Greece fulfills its programme.Under the source's scenario, Greece's debt could be reduced to around 125% of GDP by 2020 using a variety of methods including a debt buyback, reducing the interest rate on loans and returning euro zone central bank 'profits' to Greece, but further steps would still be needed to hit the 120% goal.The ministers took an extended break in mid-afternoon while experts worked on how to formulate a link between short-term measures and a credible assurance of eventual debt relief.Germany and its northern European allies have so far rejected any idea of forgiving official loans to Athens.German Finance Minister Wolfgang Schaeuble told reporters on arrival that a debt cut now was legally impossible, not just for Germany but for other euro zone countries, if it was linked to a new guarantee of loans."You cannot guarantee something if you're cutting debt at the same time," he said. That might not preclude debt relief at a later stage if Greece has completed its adjustment programme and no longer needs new loans.The source familiar with IMF thinking said a loan write-off once Greece has established a track record of compliance would be the simplest way to make its debt viable, but other methods such as foregoing interest payments, or lending at below market rates and extending maturities could all help.The German banking association (BDB) said a fresh "haircut" or forced reduction in the value of Greek sovereign debt, must only happen as a last resort.Two European Central Bank policymakers, vice-president Vitor Constancio and executive board member Joerg Asmussen, said debt forgiveness was not on the agenda for now.Asmussen told Germany's Bild newspaper the package of measures would include a substantial reduction of interest rates on loans to Greece and a debt buy-back by Greece, funded by loans from a euro zone rescue fund.So far, the options under consideration include reducing interest on already extended bilateral loans to Greece from the current 150 basis points above financing costs.How much lower is not yet decided - France and Italy would like to reduce the rate to 30 basis points (bps), while Germany and some other countries insist on a 90 bps margin.Another option, which could cut Greek debt by almost 17% of GDP, is to defer interest payments on loans to Greece from the EFSF, a temporary bailout fund, by 10 years.The European Central Bank could forego profits on its Greek bond portfolio, bought at a deep discount, cutting the debt pile by a further 4.6% by 2020, a document prepared for the ministers' talks last week showed.Not all euro zone central banks are willing to forego their profits, however, the German Bundesbank among them.Greece could also buy back its privately-held bonds on the market at a deep discount, with gains from the operation depending on the scope and price. Officials have spoken of a 10 billion euro buy-back at around 30 cents on the euro, that would retire around 30 billion euros of debt, although since the idea was raised the potential gain has fallen as prices have risen.But the preparatory document from last week said that the 120% target could not be reached in 2020, only two years later, unless ministers accept losses on their loans to Athens, provide additional financing or force private creditors into selling Greek debt at a discount.The latest analysis for the ministers showed the debt could come down to 125% of GDP in 2020, one euro zone official with insight into the talks said.