NEWS,15. AND 16.02.2013

Foreign investors set to sue Spain

Foreign investors in renewable energy projects in Spain have hired lawyers to prepare potential international legal action against the Spanish government over new rules they say break their contracts.It is unclear how much claims might be worth, but international funds have more than €13bn of renewable energy assets in Spain and say that the government has reneged on the terms of their investment.The Spanish Parliament approved a law on Thursday that cuts subsidies for alternative energy technologies, backtracking on its push for green power.That measure, along with other recent laws including a tax on power generation that hit green energy investments especially hard, will virtually wipe out profits for photovoltaic, solar thermal and wind plants, sector lobbyists say.International commercial law firm Allen & Overy on Thursday that it is representing a group of investors in concentrated solar power plants in relation to potential claims under the international Energy Charter Treaty."International investment funds are consulting with legal advisers on how to proceed with action. There will be various lawsuits," Luis Crespo, secretary general of Spain's solar thermal association.He said that investors from the United States, Japan and the United Arab Emirates are among those pursuing action through the Brussels-based Energy Charter, an internationally ratified treaty that binds members to rules on energy and arbitration.Allen & Overy is already handling an earlier claim against Spain, filed in 2011 on behalf of photovoltaic investors. The investors it is representing for potential new claims are in the solar thermal industry.Spain's Industry Minister Jose Manuel Soria defended the law in Parliament on Thursday, saying that the measures were necessary to eliminate the accumulated €28bn tariff deficit in the electricity system.That deficit, built up through years of the government holding down electricity prices at a level that would not cover regulated costs including renewables premiums, is at the heart of Spain's energy sector woes.A spokeswoman for the ministry said that its policy was not to comment on legal issues."I don't know why anyone would put another penny in investment in the sector in Spain," said one leading investor whose firm is studying possible claims.The same source, who asked to remain anonymous, said that the reforms could drive some solar industry projects, particularly ones that are highly leveraged, into bankruptcy.Foreign investors poured money into Spanish wind and solar projects, drawn to generous subsidies during a decade-long economic boom that helped the country to become one of the biggest markets for investments in green energy.The problem was that the cost of the subsidies were not passed on fully to consumers because that would have pushed prices to unprecedented highs.Spanish companies such as Acciona and Abengoa have also been hit hard by the new rules, but because it is passed as a decree by the government, Spain-based companies have virtually no form of appeal and will not join the claims being studied by foreign investors.Listed foreign companies with investments in the sector include Germany's E.ON and Japan's Mitsubishi and Mitsui, several sources from the energy sector said.Some of the funds planning legal action are also among the 11 investors who sent a letter to Prime Minister Mariano Rajoy in July to complain of another energy reform with a retroactive impact on investments, the sources said.

 

EU finance trade tax applicable globally

A financial transactions tax to be adopted by 11 EU states should raise €30-35bn each year but the levy will apply worldwide, the European Commission said Thursday, sparking a sharp reaction from opponents led by Britain.The Financial Transaction Tax (FTT) imposes a tax of 0.1% on a trade in shares and bonds, and of 0.01% for derivative instruments.The Commission said that if any of these investments originate in one of the 11 FTT states, then they can be taxed wherever they are traded, giving them a global reach.The British government, which led opposition to the original 2011 proposal on concern over its impact on the giant London financial centre, said this "unilateral (tax) ... will hit growth for the countries taking part, which is why Britain was right not to participate in such a measure."Business organisation the Institute of Directors in London was scathing, rejecting any suggestion the 11 EU states could enforce the tax in Britain, which like all EU members, retains full national control over taxation."This is a daft idea which will throw grit in the wheels of the market, catching not just banks but also customers, pension funds and businesses," said Simon Walker, head of the group."Any attempt to extend it to the UK by the back door would violate the (EU) single market. We are fully entitled to transact business in financial products issued in France, Germany or the other countries on our own terms, under our own tax regime," Walker added.After failing to get support from all 27 EU states, France and Germany pushed ahead with the tax under the EU's Enhanced Cooperation procedure and they were joined by Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.EU finance ministers last month cleared the tax, seen as a way of clawing back state money spent in propping up the banking sector during the debt crisis.EU Tax Commissioner Algirdas Semeta said the FTT "is an unquestionably fair and technically sound tax, which will strengthen our Single Market and temper irresponsible trading."Asked by reporters how the FTT could apply to countries refusing to sign up, Semeta said he saw no problem and that discussions would resolve such issues.The FTT has three main objectives, Semeta said in a statement, firstly strengthening the EU Single Market by "reducing the number of divergent national approaches to financial transaction taxation."Secondly, it will ensure that the financial sector makes a fair and substantial contribution to public revenues. "Finally, the FTT will support regulatory measures in encouraging the financial sector to engage in more responsible activities, geared towards the real economy," he said, highlighting the political drive to make the financial sector pay for some of the excesses blamed for causing the debt crisis.The statement said the FTT will to be based on a "residence principle" which could have far-reaching implications"This means that the tax will be due if any party to the transaction is established in a participating Member State, regardless of where the transaction takes place," it said.The "residence principle" is expressly aimed "to safeguard against the relocation of financial transactions," according to background notes provided.The tax will also incorporate an "issuance principle" as a further safeguard against avoidance of the tax, the statement said. "This means that financial instruments issued in the 11 Member States will be taxed when traded, even if those trading them are not established within the FTT-zone."Supporters of the tax such as Oxfam pressed for speedy adoption of the FTT."The smart design and the scope of the FTT ... will make it difficult for financial institutions to avoid or evade the tax," the charity said in a statement."It is vital that this proposal is adopted in full to ensure the financial sector contributes its fair share to the costs of the crisis, which is hurting hundreds of millions around the world."

The FTT proposals now go to the European Parliament and EU leaders for approval.

 

Gold demand losing its glitter

Demand for gold fell last year for the first time since 2009 as Asians bought less jewellery and Western investment dipped, the World Gold Council said in a report.Gold output fell by 21.2% in volume terms in December, Statistics South Africa said on Thursday.The WGC, which is funded by the gold industry, said on Thursday that gold consumption was expected to be steady this year but added that it may be some time before it revisits the high levels seen in the worst of the financial crisis."It's hard to see a major move up in demand (this year). I know there are bears out there who are starting to call the end of the bull market in gold, but we don't agree," said the WGC's managing director for investment, Marcus Grubb. "Demand will remain high, but we're talking small single-digit (percent) numbers in terms of growth from the current tonnage level," he said.In 2012 demand was down 4% from the previous year's total, the WGC report said. "The tonnage last year was 4 405 tonnes for consumer demand, and if you add in over-the-counter demand, it's another 100 tonnes higher," Grubb added. "We would expect 2013 to be quite similar."Grubb said he saw gold prices, which have traded between $1 625 and $1 695 an ounce this year, staying in their current trading range, although events that could destabilise the market, such as US budget talks, could push them higher.The gold price is down 1.4% so far this year after posting its biggest quarterly drop since 2008 in the last three months of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in gold's bull cycle this year."Unless something major changes in the macro landscape, this (report) does back up the idea that investors' attention is much more focused elsewhere at the moment," Credit Suisse analyst Tom Kendall said. Jewellery demand fell 3% last year to 1 908.1 tonnes, with the biggest absolute drop noted in India, the largest gold consumer, where a weak rupee led to record-high local prices.In the fourth quarter it rose 11%, however, helped by a 35% rebound in Indian jewellery demand. "Jewellery could have a good year in 2013," Grubb said. "Western demand might at last improve as the US economy and others improve."China, the second-biggest gold buyer behind India, saw a 1% drop in jewellery demand to 510.6 tonnes, its first annual decline since 2002.Overall demand was flat in China in the full year and fell 12% in India, although buying rose in the final quarter as buyers scrambled to avoid a widely anticipated rise in import duty that was announced in January."Provided we see no more increases in import duty, we still think we will see India continue to recover from what was a difficult year in 2012 overall," Grubb said. He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would probably favour the metal.When you look at the full year, we're anticipating that we'll see 865-965 tonnes of demand," he said. In China, demand is expected to recover to between 780 and 880 tonnes this year, against 776.1 tonnes last year."The jury's out on a major re-acceleration of growth in Chinese gold demand," Grubb said. "Last year we saw the first significant slowdown in the Chinese economy in years. That did affect these numbers. What you're seeing in January and February is a re-acceleration in the Chinese economy."Buying by various central banks continued its upward trend to hit a 48-year high at 534.6 tonnes. Grubb said he expected the official sector to match last year's buying in 2013, partly because monetary easing by developed countries was undermining confidence in the value of currencies."Emerging country central banks regard quantitative easing policies as divisive and (believe they) affect the value of the assets that they hold - the dollar and euro, for example," he told at the Global Gold Forum."They are diversifying away from traditional currencies and buying gold as a hedge." Bar and coin investment fell sharply in the United States and Europe last year, with US offtake dropping by more than a third and European buying down 29%. Overall investment demand last year fell 10% to 1 534.6 tonnes. Investment via gold-backed exchange-traded funds rose, however, with ETF demand up by more than half at 279 tonnes."Overall for the year (coin and bar demand) was weak, and it reflects the fact that in Europe the announcements by the European Central Bank took away tail risk in the mind of the investor," Grubb said."The announcement of (bond-buying) in Europe and quantitative easing in the United States also mitigated fears of a near-term crisis, and I think that's why bar and coin demand fell. Institutional investors and private wealth took a different view you see the ETF tonnages went up 51 percent and over-the-counter (demand) had a strong year." He said while more optimism over the outlook for the global economy was likely to encourage investment in other assets like stocks, the fact that much of that was driven by extremely loose monetary policy meant gold investment was unlikely to fall."Investors are trying to call a turn in the asset cycle," Grubb said. "The jury's still out on whether this will be the year when it actually happens. Even if you do start to look at the world more optimistically in 2013, it doesn't mean there isn't a role for gold in your portfolio."

US jobless claims drop

The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to a continued steady improvement in labour market conditions.Initial claims for state unemployment benefits dropped 27 000 to a seasonally adjusted 341 000, the Labour Department said on Thursday. The prior week's claims figure was revised to show 2 000 more applications received than previously reported.Economists  had expected claims to fall to 360 000.A Labour Department analyst said claims for Illinois and snowstorm-hit Connecticut had been estimated.Nevertheless, because most claims are filed online, the blizzard that slammed the East Coast appeared to have little effect on the broader claims data, he said.While companies are no longer aggressively laying off workers, they appear to be in no hurry to step-up hiring against the backdrop of still lackluster demand.The economy has struggled to grow much more than 2% since the 2007 to 2009 recession ended.ob gains averaged 181 000 per month in 2012, far less than the at least 250 000 that economists say is needed to significantly reduce the ranks of unemployed.The four-week moving average for new claims, a better measure of labour market trends, rose 1 500 to 352 500.The prior week's drop to a near five-year low was probably exaggerated by difficulties at the start of the year smoothing out the data for seasonal fluctuations.The number of people still receiving benefits under regular state programs after an initial week of aid dropped 130 000 to 3.11 million in the week ended February 2. That was the lowest level since July 2008 and could reflect people exhausting their benefits.So-called continuing claims had hovered around 3.2 million since late November and economists had viewed that as an indication of little change in the unemployment rate. The jobless rate rose 0.1 percentage point to 7.9% in January.

Eurozone falls deeper into recession

The eurozone slipped deeper into recession in the last three months of 2012 after its largest economies, Germany and France, shrank markedly at the end of the year.It marked the currency bloc's first full year in which no quarter produced growth, extending back to 1995. Economic output in the 17-country region fell by 0.6% in the fourth quarter, the EU's statistics office Eurostat said on Thursday, following a 0.1% drop in output in the third quarter.The drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4% drop in a poll of 61 economists. For the year as a whole, gross domestic product (GDP) fell by 0.5%.Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia. The big economies set the tone. Germany contracted by 0.6% on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.France's 0.3% fall was also slightly worse than expectations. Worryingly for Berlin, it was export performance the motor of its economy that did most of the damage although economists expect it to bounce back quickly. "In the final quarter of 2012 exports of goods declined significantly more than imports of goods," the German Statistics Office said in a statement.The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full eurozone figures. Back revisions to the French figures showed its output fell by 0.1% in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.While the European Central Bank's pledge to do whatever it takes to save the euro has taken the heat out of the bloc's debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government's deficit goal for 2013 out of reach.Economists say the eurozone may also shrink in the first quarter of 2013 although more resilient Germany is expected to rebound."The chances that the (German) economy will return to growth at the beginning of this year are very good. The early indicators are all pointing upwards," said Andrea Rees, chief German economist at UniCredit."The question is how strong the first quarter will be. We expect growth of 0.3% but it could be more."Dutch GDP dropped 0.2% over the quarter, keeping it in recession, while the Austrian economy shrank at the same rate.For the more embattled members of the currency bloc, matters are of course worse.Italy suffered its sixth successive quarterly fall in GDP his time by a sharp 0.9% putting it into a longer slump than it suffered in 2008/2009.Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.With an election due on February 24/25, all sides in a three-way race between Monti's centrist bloc, Pier Luigi Bersani's centre-left coalition and Silvio Berlusconi's centre-right are pledging to cut taxes to try to kickstart economic growth.Spain, the eurozone's fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7% contraction in the fourth quarter.Madrid is also pressing on with harsh austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.There are signs that countries like Spain are starting to benefit from harsh internal devaluations marked by wage falls and job losses aimed at making companies leaner and more productive.The ECB predicts the eurozone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.More recent data for January have already suggested some upturn in the first months of 2013, in the bloc's stronger members at least, and if improvement comes it is likely to be seen in Germany first."The debt crisis has ebbed significantly and the global economy has turned up," said Joerg Kraemer at Commerzbank. "Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

Dubai to build giant Ferris wheel

Dubai's ruler approved a $1.6bn island development project that would be home to what's billed as the world's biggest Ferris wheel.The project reflects a renewed appetite in Dubai for extravagance as the economy rebounds from a debt-driven slump during the past three years.The official WAM news agency said Wednesday that the Ferris wheel, dubbed the Dubai Eye, will stand 210 meters (688 feet), exceeding the London Eye's 135 meters (443 meters). Construction is set to begin this year.Dubai has proposed a series of mega projects reminiscent of its boom years before the downturn hit in 2009. The projects include theme parks and a satellite city named for Dubai's ruler, Sheik Mohammed bin Rashin Al Maktoum.

Strikes cripple German airports

A strike by security staff over pay hit two key regional airports in Germany for the second day in a row on Friday and was set to resume next week.At Hamburg airport, 147 flights were cancelled out of a total of 358 scheduled for Friday, a spokesperson for the northern German airport told AFP.The day before some 117 departures and arrivals had been cancelled in Hamburg.At Cologne/Bonn airport in the west of Germany, 107 flights were scrapped, or more than half of those scheduled for the day, according to a statement on its website.The Verdi services union called the strike for security staff responsible for checking passengers and hand luggage, in a dispute with management over pay deals.The union said the strike would be suspended over the weekend before resuming Monday.On Thursday, Duesseldorf airport had also been affected by the walkouts.

Luhabe: World needs economic revolution

In a world rife with inequality and unemployment there is a crying need for a new breed of entrepreneur who can combine profit with a social conscience, said acclaimed author and social entrepreneur Wendy Luhabe.Speaking at the Entrepreneurs Unite conference which took place in Stellenbosch this week, Luhabe said: "The global economy is at a crossroads in most parts of the world."We are experiencing an explosion of extreme wealth and inequality, and the confluence of these two factors is making it impossible to tackle poverty and address many vested interests in the economy."Luhabe pointed out that the widening gap between the top 1% and the rest of society - as well as the inequality of resource allocation and opportunity - are at their highest levels since the time of the Great Depression. Little wonder then that the World Economic Forum identified inequality as a global risk for 2013.But market forces, said Luhabe, do not exist in a vacuum. "We shape them by the decisions that we make... we shape them with poor leadership or we even shape them with moral bankruptcy."She lauded Brazil one of the world's fastest-growing economies for shaping market forces "in ways that have lowered inequality while creating more opportunities and higher growth".The worldwide trend of shrinking employment is not likely to change, said Luhabe. "We need an economic revolution therefore that can produce a new dynamic and innovative generation of entrepreneurs, but who in addition to creating great enterprises is prepared to determine a new socioeconomic contract. "The education system worldwide, said Luhabe, is "totally out of alignment with the reality of the 21st century". She identified inequality, unemployment and education as this century's biggest timebombs. "Time is running out," cautioned Luhabe. "The world needs a different economic logic where human capital, social and environmental objectives become a top priority. "Turning to Africa, Luhabe said the International Monetary Fund believes the economy of the continent has the potential to outstrip Brazil's growth over the next five years. "Much of that growth will come from startups which will bring the mobile internet to consumers" and businesses which until recently have not had internet access, said Luhabe. She further identified e-commerce, health and education as areas primed for growth."There is an entirely new generation of entrepreneurs that are changing the face of Africa.... Moral of the story is therefore that the future of the global economy will be shaped by entrepreneurs who are sensitive to the social challenges that exist in their environment."They will have the ability to create sustainable businesses which are profitable yet at the same time address social challenges, said Luhabe.

ECB officials rebuff FX targeting

The head of the European Central Bank and its two German policymakers pushed back against political pressure to target the euro's exchange rate ahead of meeting of Group of 20 financial leaders on Friday.Speaking ahead of the meeting in Moscow, ECB President Mario Draghi said recent loose talk on currencies was "inappropriate, fruitless and self-defeating".Bundesbank chief Jens Weidmann, a strong voice on the ECB's 23-man Governing Council with whom Draghi in the past has been at odds, earlier weighed in to say the euro was not seriously overvalued and that the ECB would not change monetary policy based on its impact on inflation alone."All this chatter that has been undertaken in the past few weeks is either inappropriate or fruitless in all cases it's self defeating," Draghi said in opening remarks at a news conference after meeting with Russian central bank officials.The Italian head of the bank had said last Thursday that the ECB would monitor the economic impact of the strengthening euro, feeding expectations the climbing currency could open the door to an interest rate cut.Both Weidmann and Joerg Asmussen, the German member of six-member Executive Board that forms the nucleus of the Governing Council, said the ECB would not target the euro's exchange rate."I don't think that Mario Draghi was trying to talk the euro up or down," Weidmann said, adding that the ECB "will abstain from manipulating or directly targeting the exchange rate."French President Francois Hollande last week raised the possibility of political interference in exchange rate policy when he called for a medium-term target for the euro's value, a move to counter its recent appreciation."I fear a politicization of the exchange rate," Weidmann told news agency Bloomberg in an interview."I saw indications of that in Japan but you could as well refer to recent statements by European politicians not too far from here," he added in a thinly veiled rebuff of Hollande's call for a currency target.The G20 forum, which put together a huge financial backstop to halt a market meltdown in 2009, is back in the spotlight after a week in which the Group of Seven rich nations tried, and spectacularly failed, to speak on currencies with one voice. The G7 issued a joint statement on Tuesday reaffirming "our longstanding commitment to market determined exchange rates". Yet the show of unity was quickly undermined by off-the-record briefings critical of Japan."In the last couple of days the Group of Seven biggest industrial nations made clear once again that currency exchange rates should be market-based and that we have no exchange rate targets and that's true for us at the ECB too," Asmussen told Germany's Deutschlandfunk radio.The euro hit a 15-month peak of $1.3711 on Feb. 1, before easing slightly. The euro's strength "is one factor among many in determining future inflation rates", Weidmann, who heads Germany's Bundesbank said in the Bloomberg interview conducted on Feb. 13.He added: "We will certainly not justify any monetary policy decision with one single factor".