NEWS,01 AND 02.04.2013

World Bank urges end to extreme poverty

World Bank chief Jim Yong Kim on Tuesday called for a global drive to wipe out extreme poverty by 2030, acknowledging that reaching the goal will require extraordinary efforts."A world free of poverty is within our grasp. It is time to help everyone across the globe secure a one-way ticket out of poverty and stay on the path toward prosperity," Kim said in a speech in Washington, according to the prepared text.The World Bank president said that in practical terms, the goal would be to lower the number of people living on less than $1.25 a day from 21% of the world's population in 2010 to just 3% by 2030."Below 3%, the nature of the poverty challenge will change fundamentally in most parts of the world. The focus will shift from broad structural measures to tackling sporadic poverty among specific vulnerable groups," Kim said in a speech at Georgetown University."Though we will continue to reach out to those who suffer from sporadic and occasional poverty, the fight against mass poverty that countries have waged for centuries will be won."In 2000, the international community set eight UN Millennium Development Goals to be reached by 2015. One of them, to halve extreme poverty, was accomplished in 2010, five years ahead of time, Kim noted, after developing countries invested in social safety nets and created buffers to protect against crises."To reach the 2030 goal, we must halve global poverty once, then halve it again, and then nearly halve it a third time all in less than one generation," he said.To do that will require three main factors, he said.Higher economic growth rates will be needed, in particular sustained high growth in South Asia and Sub-Saharan Africa. Efforts must be made to curb inequality and ensure that growth reduces poverty, especially through job creation.And potential shocks, such as new food, fuel, or financial crises and climatic disasters, must be averted or cushioned.The World Bank president also set another poverty-reduction target that is less measurable: to increase the incomes of the poorest 40% of the population in each country.Kim, speaking ahead of the World Bank and International Monetary Fund meetings in Washington later in the month, said the goals of ending poverty and boosting shared prosperity require coordinated efforts."They are goals which we hope our partners our 188 member countries will achieve, with the support of the World Bank Group and the global development community," he said.

Cyprus finance minister quits

Cypriot Finance Minister Michael Sarris quit on Tuesday after concluding talks with foreign lenders on a bailout that forced the island to slap unprecedented losses on bank depositors in return for aid.The news came after Cyprus announced a partial relaxation of currency controls, raising the ceiling for financial transactions that do not require central bank approval, but keeping most other restrictions in place.Sarris, who was dispatched to Moscow last month but returned empty-handed as Cyprus sought Russian aid after rejecting a European bank levy proposal, said his main goal of agreeing a deal with lenders had been accomplished.He said it was also appropriate to resign since he was among several people under scrutiny by a team of investigators looking into the collapse of the country's banking system. His resignation was accepted by the government."I believe that in order to facilitate the work of (investigators) the right thing would be to place my resignation at the disposal of the president of the republic, which I did," Sarris said.Before quitting, he said it was not clear when the remaining capital controls would be lifted.The island introduced curbs on money movements when banks reopened on March 28 after a two-week shutdown while the government negotiated a €10bn bailout from the International Monetary Fund and the European Union.Cyprus's status as a financial hub has crumbled in the space of a fortnight after authorities were forced to wind down one bank and slap heavy losses on wealthier depositors in a second in return for the financial aid.Its capital controls are a first for the eurozone, introduced by Cyprus as it strives to prevent a cash drain.Bailout terms disclosed A finance ministry decree on Tuesday, the third since controls were first introduced, raised the ceiling on transactions which do not require central bank approval to €25 000 from €5 000. It also permits the use of cheques worth up to €9 000 per month.Other restrictions introduced last week, including a €300 per day cash withdrawal limit and a €1 000 limit on the amount travellers can take overseas, remain in place.The decree signed by Sarris and dated April 2 is valid for two days. Cypriot officials have said it could take up to a month for restrictions to be fully removed.Cypriot President Nicos Anastasiades, who has been in power for just over a month, says he was forced to accept onerous terms imposed by lenders to avert a default and an exit by the island from the eurozone.Under the terms of the deal, Cyprus will have until 2018 to carry out measures to shore up its finances and begin to receive aid starting in May.The island will pay an interest rate of 2.5% on its rescue loans, with repayment starting in 10 years. The loans will repaid over 12 years.On Tuesday, Anastasiades appointed three retired Supreme Court judges to investigate political, civil and criminal responsibilities over the demise of the economy, one of the bloc's smallest.Cyprus last week agreed to break up its No. 2 lender Popular Bank, kept on an ECB liquidity lifeline for months, into a "good" and a "bad" bank. The bank's "good" assets will be transferred to Bank of Cyprus, where depositors have been forced into accepting massive losses on uninsured deposits of more than €100 000.The process, known as a "bail-in" sees 37.5% of deposits exceeding €100 000 converted into equity in the bank, and an additional 22.5% used as a buffer which could also be converted into equity if circumstances warrant it.In a deal brokered early on Tuesday morning, it was also agreed that a small portion of the remaining 40% in uninsured deposits effectively frozen under the arrangement, 10%, be unblocked.The Cypriot government had unsuccessfully argued that the entire 40% be unblocked, a source familiar with the consultations said.

Casinos to kickstart Cypriot economy

Cyprus plans to lift a ban on casinos and offer firms tax exemptions on profits reinvested on the island under a package of reforms to kickstart its ailing economy, its president said on Monday.The country's eurozone partners agreed on a €10bn rescue package last Monday after weeks of tense negotiations that showed the debt crisis racking the 1-nation currency union is far from over.The tough terms of the deal look set to deepen the island's recession, shrink its banking sector and lead to thousands of job losses, while the capital controls imposed to prevent a run on Cypriot banks may test the ties that bind the single-currency bloc as a whole.President Nicos Anastasiades, who briefed ministers on the economy at an informal meeting on Monday, said the 12-point growth plan would be put to the cabinet for approval within the next 15 days.The programme includes measures to attract foreign investment to the island a hub for offshore finance as well as tax exemptions on business profits reinvested there, and the easing of payment terms and interest rates on loans.With about €68bn in its banks, Cyprus has a vastly outsized financial system that attracted deposits from abroad, especially Russia.In a bid to attract more tourists to the south of the island, it also hopes to lift a ban on casinos, which so far only operate legally in Turkish-controlled northern Cyprus.Speaking to reporters after a memorial service to commemorate the 1955 armed campaign against British rule, Anastasiades said the government would focus on "growth and incentives for growth".Cyprus's bailout is the first to impose steep losses on depositors with more than €100 000 in their accounts, and is expected to hit business activity especially hard.Asked to make a forecast on the likely depth of recession Cyprus faces, government spokesperson Christos Stylianides said: "It's not possible at this time to put numbers on the recession.""The government, having inherited an atomic bomb, tried to deactivate it and in doing so spared this country from total bankruptcy. It is now dealing with a post-earthquake period with the aim to kickstart the economy," he said.Stylianides said the cabinet discussed pending issues in the country's negotiations with its international lenders relating to the financial sector, fiscal adjustment measures, structural measures in the public sector and energy issues. He said Anastasiades would also chair a meeting of party leaders at 18:00 GMT on Monday to brief them on the matter.Under the bailout deal, major depositors in Cyprus's biggest lender, Bank of Cyprus, will lose around 60% of savings above €100 000.The country's banks reopened on Thursday after a nearly two-week hiatus aimed at averting a bank run, but the ripple effect of their closure is likely to strangle business on the island for a long time to come.There are also concerns that depositors in other struggling eurozone nations could take fright at the conditions imposed on Cyprus, although there have been no signs of bank runs.The capital controls imposed on the country raise questions about the long-term viability of the euro. There is also the risk that euros on the island may be valued differently to those in the rest of the bloc due to them being less liquid as a result of the controls. Anastasiades has defended the rescue deal as painful but essential, saying that without it, Cyprus had faced certain banking collapse and risked becoming the first country to be pushed out of the European single currency.

Cyprus probes causes of bankruptcy

Cyprus authorities on Tuesday launched a judicial probe into how the island was pushed to the verge of bankruptcy before having to agree a crippling eurozone bailout.Cypriot President Nicos Anastasiades called on the three-judge commission George Pikkis, Panayiotis Kallis and Yiannakis Constantinides to investigate himself and his family members as a "matter of priority" and with "extra vigour".This is seen as a move to counter unsubstantiated allegations that his family members used privileged information to get money out of the country before deposits were locked down.Accusations have also been made against other leading politicians and business figures that they took advantage of their position to protect their assets from a hit on bank deposits imposed by European Union-led creditors last month.Anastasiades said nobody was immune from the inquiry not even his extended family or the law firm in which he was a partner until recently."The current plight of the economy and our people is without a doubt the result of a synergy of factors both external and internal," Anastasiades said at the swearing-in ceremony."A series of acts or omissions from those authorised to manage the economy or the banking system led the country to the brink of bankruptcy, the dissolution of one its largest banks and the loss of billions from an impairment of deposits," he added.The massive losses suffered by savers in the island's two largest banks in the first eurozone rescue package to punish larger depositors has sparked huge resentment against anybody seen as having taken unfair advantage to shirk their share of the burden.Big depositors in largest lender Bank of Cyprus face losses of up to 60%, while those in second lender Laiki will have to wait years to see any of their money as the bank is wound up with the loss of thousands of jobs.The government is looking to free up the remaining 40% of BoC deposits of more than €100 000 that are not frozen as part of the bailout agreed with the "troika" of the EU, European Central Bank and International Monetary Fund.Allegations have swirled of big movements of cash out of both banks in the run-up to the bailout agreement as those in the know scrambled to protect their money.The panel, which has three months to report its findings, will also probe a list published by Greek media of Cypriot politicians who allegedly had loans forgiven during the meltdown.Cypriot banks have been operating under stringent capital controls since they reopened on Thursday, after a near two-week lockdown prompted by fears of a run on deposits.Central Bank of Cyprus governor Panicos Demetriades said in an interview with the Financial Times published on Tuesday that the controls would be eased in stages."I can't really tell you if it will be seven or 14 days before capital controls end," Demetriades said. "We have to lift them gradually."He played down fears there would be a run on accounts once the controls were eventually relaxed."Once people realise how well capitalised the banks are there is little reason why there will be deposit flight," he said.The draconian controls limit daily withdrawals to €300 and ban the taking of more than €1 000 in cash out of the country.At the island's main international airport in Larnaca, signs in Greek, English and Russia warn departing travellers of the restrictions.

Eurozone manufacturing slump deepens

The downturn in the 17-nation eurozone's manufacturing sector deepened sharply in March, with even powerhouse economy Germany dragged down, a key survey showed Tuesday.The Markit Eurozone Manufacturing Purchasing Managers Index fell to 46.8 points in March, up from an initial estimate of 46.6 but well short of the already weak 47.9 posted in February.The outcome left the closely followed indicator at a three-month low and below the 50-points boom-bust line since August 2011.The average PMI for the three months to March was 47.5 points, which Markit said was the best performance since the first quarter of 2012, but the latest figures showed a clear deterioration across the eurozone.Germany at 49 points slipped to a two-month low while "rates of decline gathered pace in all the other nations ... with the exception of France," Markit said in a statement.France stood at 44 points, a three-month high, while Italy was on 44.5, its lowest for seven months and Spain on 44.2, a five-month low.Markit warned that the data suggested worse could be to come, after recent figures had allowed analysts to hope that the economy might have finally touched bottom.Manufacturing "looks likely to have acted as a drag on the economy in the first quarter, with an acceleration in the rate of decline in March raising the risk that the downturn may also intensify in the second quarter," Markit chief economist Chris Williamson said in a statement."The surveys paint a very disappointing picture across the region, with all countries either seeing sharper rates of decline or in the cases of Germany and Ireland sliding back into contraction," Williamson said.He said the Cyprus bailout appeared not to have had any impact so far but "the concern is that the latest chapter in the (eurozone debt) crisis will have hit demand further in April."

Eurozone unemployment hits record high

Eurozone unemployment ran at a record 12% in February, with more than 19 million people on the dole as the debt crisis continued to sap the economy, official data showed Tuesday.The Eurostat data agency said unemployment in the 17-nation eurozone at 12% was unchanged from January when the figure was initially given as 11.9%.In the full 27-member EU, unemployment in February rose to 10.9% from 10.8%, with 26.34 million out of work, it said.Some 33 000 joined the jobless queues in the eurozone and 76 000 in the EU over the month of February, Eurostat said.Compared with a year earlier, the increase in registered unemployment was 1.78 million in the eurozone and 1.81 million in the EU.The highest unemployment rates in February were found in Spain with 26.3% and neighbour Portugal, on 17.5%. Greece was put at it 26.4% but this figure is for December, the latest available.The lowest rates were 4.8% in Austria and 5.4% in Germany, Europe's biggest economy.With youth unemployment a huge cause of concern, Eurostat said that the jobless rate for under-25s ran at 23.9% in the eurozone and 23.5% in the EU.Among the countries with the highest youth jobless levels, Spain was on 55.7%, followed by Portugal on 38.2% and Italy with 37.8%.Greece was the highest with 58.4% but this figure was for December, the last available.

UK manufacturing contracts in March

Britain's manufacturing sector shrank for a second consecutive month in March, a survey showed on Tuesday, leaving the country's more resilient services sector as the best hope of avoiding a new recession.The Markit/CIPS manufacturing purchasing managers' index came in at 48.3, only slightly above February's shock reading of 47.9, and a touch weaker than the consensus forecast.The output component of the survey fell in March at its fastest pace since October.The survey suggests manufacturing exerted an even bigger drag on growth between January and March than it did in the fourth quarter of 2012, when it accounted for a third of the economy's 0.3% contraction."The onus is now on the far larger service sector to prevent the UK from slipping into a triple-dip recession," said Rob Dobson, senior economist at Markit.Official GDP data for the first quarter won't be released until April 25 but the evidence so far suggests a strong risk that Britain will record a second consecutive quarter of contraction the technical definition of recession.A third recession in less than five years would be an embarrassment for the government which is sticking to tough austerity measures despite faltering growth at home and abroad.Despite the weakness in the economy, the Bank of England is not expected to take new stimulus measures when it meets on Wednesday and Thursday, although more action is widely expected before the end of the year.The Markit report blamed the poor performance of manufacturing in March on tough market conditions, subdued client confidence and ongoing bad weather.New orders from abroad contracted for the 15th month running in March. The survey blamed the fall on weak demand from Europe and strong competition in US and South Asian markets.In further bad news for UK policymakers, there were also signs that inflation pressures were picking up. Output prices rose at the fastest pace in three months while input prices picked up sharply, driven by the weakness of sterling and higher energy and food costs.Manufacturing accounts for around a fifth of British economic output. Surveys of the construction and service sectors for March are due to be released on Wednesday and Thursday respectively. There have been signs that the services sector is faring better than manufacturing. It grew at its fastest pace in five months in February, according to Markit and official data showed it notched up its best performance in January for five months.