NEWS,04.01.2013

US jobs ease on fiscal cliff angst

The pace of hiring by US employers eased slightly in December, pointing to a lackluster pace of economic growth that was unable to make further inroads in the country's still high unemployment rate.Payrolls outside the farming sector grew 155 000 last month, the labour department said on Friday. That was in line with analysts' expectations and slightly below the level for November.Gains in employment were distributed broadly throughout the economy, from manufacturing and construction to health care.That should reinforce expectations that the economy will grow about 2% this year, unlikely to quickly bring down the unemployment rate or make the US Federal Reserve rethink its easy-money policies, which have been propping up the recovery."It's not a booming economy, but it is growing," Jim O'Sullivan, an economist at High Frequency Economics in Valhalla, New York, said before the data was released.The jobless rate held steady at 7.8% in December, down nearly a percentage point from a year earlier but still well above the average rate over the last 60 years of about 6%. The labour department raised its estimate for the unemployment rate in November by a tenth of a point to 7.8%, citing a slight change in the labour market's seasonal swings.Most economists expect the US economy will be held back by tax hikes this year as well as by weak spending by households and businesses, which are still trying to reduce their debt burdens.Friday's data nonetheless gave signals of growing momentum in the labour market's recovery from the 2007/9 recession. Many economists had expected December's payroll gains to be padded by one-time factors like the recovery from a mammoth storm that hit the East Coast in late October.The government had said last month the storm had no substantial impact on the November data, and many economists expected the government to recant by revising downward in Friday's report its estimate for payroll gains in November. Instead, the government revised its estimate for November payrolls upward by 15 000. "There is some evidence that underlying jobs growth has improved," Paul Dales, an economist at Capital Economics in London, said before the report was released. Austerity's biteDespite the signs of some momentum in hiring, a wave of government spending cuts due to begin around March loom over the economy. Many economic forecasts assume the cuts which would hit the military, education and other areas will ultimately be pushed into next year as part of a deal sought by lawmakers to reduce gradually the government's debt burden.Initially, the cuts were planned to have begun this month as part of a $600bn austerity package that also included tax hikes. Hiring in December may have been slowed by uncertainty over the timing of the austerity, economists say. Congress this week passed legislation to avoid most of the tax hikes and postpone the spending cuts.Even with the last-minute deal to avoid much of the fiscal cliff, most workers will see their take-home pay reduced this month as a two-year cut in payroll taxes expires. That leaves the Fed's efforts to lower borrowing costs as the main program for stimulating the economy.The Fed has kept interest rates near zero since 2008, and in September promised open-ended bond purchases to support lending further. On Thursday, however, minutes from the Fed's December policy review pointed to rising concerns over how the asset purchases will affect financial markets.Analysts ahead of the report expected some of the strength in job creation in December would be due to the Fed's policies."Despite the end-of-year angst over the fiscal cliff, financial conditions remained supportive of job growth in December," economists at Nomura said in a note to clients earlier in the week.

Aid for Sandy victims falls short

US lawmakers finally approved emergency disaster aid for victims of Hurricane Sandy on Friday, but only after a delay that sparked East Coast Republican outrage against their own party leadership Lawmakers voted 354-67 to provide the Federal Emergency Management Agency with $9.7bn to pay the flood insurance claims of thousands of victims of the killer October storm that devastated coastal communities.The bill now goes to the US Senate, where it could pass as early as Friday before the two chambers go into recess, but the sum falls short of what was originally promised and bitter debate is likely top continue.The Senate had approved a comprehensive $60.4bn Sandy aid package last week, but House Speaker John Boehner, stung by fractious negotiations over the deal to avert the fiscal cliff crisis, refused to bring it to the floor."It's been 70 days and many have been living in misery and heartache," Republican congressman Rodney Frelinghuysen of New Jersey told the House, describing the vote as "the first step of what we need to do to rebuild lives."Democrats again attacked the Republican leadership for what congressman Rob Andrews of New Jersey called the "inexcusable and unjust" delay in getting a bill to the House floor.And, while Boehner has pledged to bring the remaining $51bn in aid to a vote on January 15 as a two-part package, Andrews said it would be "meaningless" unless the Senate turned around and quickly approved the aid.Boehner had scrambled to tamp down fury over the delay on aid to victims of the storm, which killed 120 people and destroyed tens of thousands of homes and businesses in New York, New Jersey and neighbouring northeastern states.President Barack Obama, instrumental in cobbling together the $60bn package, joined New Jersey's outspoken Republican Governor Chris Christie in leading the charge against Boehner's delay.Christie offered a blistering critique of his own party's congressional leadership, calling Boehner's delay "absolutely disgraceful."Fuming Republican congressman Peter King of New York also tore into his own leadership, saying the delay was "a knife in the back of New Yorkers and New Jerseyans."The outrage quickly gained the national spotlight, and Boehner wasted little time announcing the two-part vote."This is not a handout, this is not something we're looking for as a favor," King told the House. "What we're asking for is to be treated the same as victims (from) other natural disaster victims have been treated."Some Republicans including Senator Marco Rubio from Florida, a hurricane-prone state which has received billions in federal disaster aid, voted against the Sandy bill in the Senate, claiming it was stuffed with "pork" funding for projects or elements unrelated to Sandy relief.Darrell Issa, the powerful Republican chairman of the House Oversight Committee, continued in that vein Friday, saying "we need to get the pork out" and pointing to funding in the Senate bill that went to programs in Alaska, more than 3 000 miles (4 800 kilometers) from the Sandy disaster zone.He said he was hopeful the re-written legislation due for a vote January 15 would be a "clean bill" focused exclusively on Sandy relief."I believe today we are buying a little bit of time, but for the people on the Eastern Seaboard who are suffering, time is running out," he said.FEMA has announced it will soon run out of flood insurance funding without the $9.7bn increase.

Signs of hope for eurozone

Tentative signs the eurozone may have passed the worst of its downturn emerged in December but business surveys also suggested Britain's economy tipped back into contraction in the final months of 2012.Friday's purchasing managers indexes, which measure the activity of thousands of companies worldwide, brought mixed news from Europe.Activity in Britain's dominant services sector fell for the first time in two years and at a faster pace than predicted by any analyst polled by Reuters, while the speed of decline among French, Italian and Spanish firms slowed.Data from the United States due later on Friday are expected to show continued but modest jobs growth and a steady expansion of its services sector.With Chinese growth showing evidence of revival, that leaves Europe as the world's economic slowcoach going into 2013.In particular, economists were surprised by news the UK services PMI slipped to 48.9 in December from 50.2 last month, sagging below the 50 mark that divides from contraction for the first time in two years."The PMIs point to an economy that is contracting modestly," said Rob Wood, chief UK economist at Berenberg Bank. "The broader picture is that for some time the economy has been bouncing around the bottom ... and I think this is likely to stay with us for the next couple of quarters."Survey compiler Markit said the figures suggest Britain's economy shrank 0.2% in the final quarter of 2012, a slightly bigger drop than most other private-sector forecasts.The eurozone composite PMI hit its highest levels since last March, rising to 47.2 in December from 46.5 in November, although it remained rooted below the 50 mark for an 11th month."I think (the eurozone PMIs) are showing a decisive bottoming-out of activity," said James Nixon, chief European economist at Societe Generale."Now, the actual levels of the surveys are still consistent with GDP declining, but at least things aren't getting worse any faster."  Worst over?The decline eased among the services firms that make up the bulk of the eurozone's economy, ranging from banks to restaurants, but manufacturers endured an awful end to 2012.Survey compiler Markit warned that Friday's figures would probably fail to prevent the eurozone's recession deepening in the fourth quarter of last year, thanks to dismal figures in October and November."The surveys at least bring some substance to the belief that the worst is over and that a return to growth is in sight for the region in 2013," said Chris Williamson, chief economist at Markit.As with last year, the eurozone economy's fate hinges on the resolution of the sovereign debt crisis, which still smoulders despite the creation of financial firewalls by the European Central Bank and European Union.German Finance Minister Wolfgang Schaeuble said last week he thought the worst had passed for the debt crisis, although similar sentiments have been expressed by various European policymakers and politicians since mid-2010.Friday's European data followed news that China's services sector saw its slowest rate of expansion in nearly a year and a half in December, although the HSBC services PMI still pointed to a modest revival in economic growth.And economists expect the US ISM non-manufacturing survey, another PMI, to fall slightly to 54.2 in December from November's 54.7. While showing slowing growth, that would still signal a far brighter economic outlook for the US compared with its European peers.Analysts also predict the US economy added around 150 000 non-farm jobs in December, compared with 146 000 the previous month.

NEWS,11.10.2012

Spain comfortable with waiting game on aid

Spain is comfortable putting off an international aid request for weeks or even months as it waits out German political obstacles, analysts and sources say.In the meantime, Spanish Prime Minister Mariano Rajoy is focusing on measures such as intensifying labour market reforms, as well as pushing for a European banking union that would help rebuild confidence in Spain's tarnished banking sector.Spain's borrowing costs spiked in July, the yield on the benchmark 10-year bond jumped over an unsustainable 7%, but tumbled after ECB head Mario Draghi unveiled a bond-buying scheme to lower Spanish borrowing costs.Spain must first sign up for a European rescue plan to trigger the bond buying. Given its debt position, the Spanish government still sees that step as inevitable but pressure has eased as investors are less willing to bet against Spain with the ECB waiting in the wings.Germany has sent Spain strong signals that it should hold off because German Chancellor Angela Merkel is wary of presenting a fresh aid request to her parliament, euro zone sources say.Sources familiar with Rajoy's thinking say he also wants the ECB to indicate exactly what it will achieve with the bond-buying. "We will end up there, with ECB action, but the ECB is still designing the instrument in more accurate terms," said a source close to the government. "The markets understand that we have the fire extinguisher. We'll see how it evolves in the coming weeks."Turmoil over Greece, a fresh spike in Spanish yields or a credit rating downgrade to junk status for Spanish government bonds could accelerate the process, but for now Madrid is comfortable taking it slow, the source said.Spanish officials see more risks to moving ahead quickly without assured German backing, than in delaying a request.Meanwhile, they think things are moving in the right direction. For example, criticism of Draghi's plan has died down after strident objections from European Central Bank Governing Council Member Jens Weidmann, who heads the German Bundesbank."We think that the current period of vacillation might last for several months if events don't intervene," Alex White, an economist with JP Morgan in London, wrote in a research note.White said he saw little on the horizon to change Germany's desire to avoid a Bundestag vote on Spain in the near-term.Then there is Rajoy's personality to consider."Rajoy has infinite patience to put up with tension where others would break down," said a senior banker in Spain.Although Rajoy has said he is studying conditions for seeking European aid, there is no mystery over what the European Commission would demand of Spain in terms of structural reforms and spending cuts.Euro zone sources have said conditions are likely to be largely in line with measures the country has already taken, since Spain would not be applying for a full rescue programme that would cover all of its financing needs.The International Monetary Fund has sent a strong message to European policymakers to focus on growth even as they try to correct deficits, a line Spain applauds.With the economy in a deep recession and unemployment close to 25 percent, Spanish officials point out that ECB intervention might bring liquidity, but won't revive economic growth."With or without liquidity we have a growth problem globally, that we must start discussing," said the source close to the government.Banking reform Rajoy has concentrated on moving forward with banking union - under which the ECB would supervise European banks and the region would set up a deposit guarantee fund - which he sees as key to improving Spanish banks' access to liquidity.After meeting French President Francois Hollande on Wednesday the two leaders called for rapid progress toward banking union at a European leaders' summit next week. However, Germany and others do not expect agreement even on cross-border supervision for a year or more.Originally, Spain was pushing for the banking union because it would have allowed the ESM rescue fund to directly recapitalise Spanish banks, keeping the cost of a financial sector rescue off the country's public accounts.However, Spain is less concerned about that impact now, since it estimates it will use only 40 billion euros of the 100 billion euros of bank rescue funds lined up, equivalent to only 4 points of gross domestic product.Treasury Minister Cristobal Montoro calculated the deficit would swell to 7.4% of GDP this year when taking the bank rescue into account, but he said the European Commission would not consider that as non-compliance with targets, since it is a one-off.But banking union is still paramount for Spain since it would foster some confidence in its financial sector, which was crippled by a decade-long building boom that collapsed four years ago leaving the banks with 184 billion euros of bad debt.Rajoy has announced 65 billion euros in budget savings by the end of 2014 to try to bring Spain's deficit down drastically, in line with European Union targets.But rising unemployment, falling tax revenue and the recession are undermining his efforts.The Spanish government is acutely aware that next door, Portugal's severe spending cuts have failed to revive the economy.In Madrid, the source close to the government said under European rules if the government misses is deficit target because of recession, the European Commission would not apply sanctions for a missed deficit.

S&P downgrades Spain two notches

Standard & Poor's cut Spain's sovereign debt rating on Wednesday by two notches to just above junk level, citing the deepening recession and strains from the country's troubled banks.S&P cut the rating to BBB- from BBB+, just one level above "speculative" or "junk" grade debt, which could have sent Madrid's borrowing costs skyrocketing to untenable levels."The downgrade reflects our view of mounting risks to Spain's public finances, due to rising economic and political pressures," S&P said."The deepening economic recession is limiting the Spanish government's policy options," it said, adding that rising joblessness and tighter spending will likely intensify social conflict and tensions between the country's regions and Madrid.Moreover, S&P expressed doubts that all of the eurozone governments will give their backing to the bloc's effort to recapitalize Spain's banks, leaving more of the burden at least on the Spanish government and forcing its debt burden to balloon."Against the backdrop of a deepening economic recession, we believe that the government's resolve will be repeatedly tested by domestic constituencies that are being adversely affected by its policies," S&P said."Accordingly, we think the government's room to maneuver to contain the crisis has diminished."The ratings agency also attached a "negative outlook" to the rating, a warning of a possible further downgrade over the medium term.Such a downgrade would come, S&P said, if political support for the government's reform agenda weakens, if eurozone support fails to prevent Spain's borrowing costs from jumping above sustainable levels, or if debt tops100 percent of economic output or debt payments surpass 10% of general government revenues.

Greece's biggest company flees

Greece's biggest company, Coca Cola Hellenic, is leaving the country, the drinks bottler announced today. The immediate material impact on Greece is limited - its Greek plants stay open and CCH said the small portion of it activity that the world's second-ranked Coke bottler has in Greece will be unaffected. But analysts quickly saw it as bad news for a nation struggling to compete inside the euro zone.CCH, which has said it fears the Greek crisis could disrupt its multinational business, said in a bourse filing in Athens that shareholders, most of whom are abroad, will exchange their stock for shares in Coca Cola HBC AG, based in Switzerland and effectively shorn of the Greek tag "Hellenic".That stock will be primarily quoted on London's LSE."A primary listing on Europe's biggest and most liquid stock exchange reflects better the international character of Coca Cola Hellenic's business activities and shareholder base," the company said in its regulatory statement.The firm, in which The Coca-Cola of the United States has a 23% stake, bottles Coke and other produce in 28 countries from Russia to Nigeria. About 95% of its shareholders and business activity are outside Greece."This transaction makes clear business sense," chief executive Dimitris Lois told analysts in a conference call. An overwhelming majority of shareholders have already accepted moving a company which has long complained about Greek taxes.Analyst Manos Hatzidakis of Beta Securities in Athens said that the move made sense for the firm, which follows Greek dairy group FAGE this month in seeking a low-tax, low-volatility haven for its corporate base - in FAGE's case Luxembourg."The Greek bourse is losing a very good company and the London Stock Exchange is gaining a very important group," said Hatzidakis. "It's very bad news for the Greek economy and bourse."For brokers on the stock exchange, losing a stock that made up 8% of daily turnover this year will be unwelcome - especially since total volumes are down by half since last year.For the Greek treasury, the loss of tax revenue is unclear. Though CCH officials did not detail tax savings from moving the registered office to Switzerland, it has complained of high - and increasingly unpredictable - taxation in crisis-hit Athens.But the move may further discourage investment in Greece.Trade unionists saw the corporate exodus as immoral and one, Stathis Anestis, spokesman for the biggest labour group GSEE, suggested a boycott of Coke: "This is unacceptable," he said."CCH and FAGE are speculating at the most crucial moment for the Greek economy and the Greek people. Consumers should use their power to punish these companies."Country risk One analyst said CCH, which rose to the top of corporate rankings as the values of Greek banks collapsed, was out to rid its share price of such risks associated with Greece; the country is mired in recession and facing mass discontent as its leaders slash budgets to meet international creditors' terms for loans intended to keep Athens inside Europe's single currency."This is a healthy company that does not want to suffer from Greece's high country risk," said the analyst, who spoke on condition of anonymity.Foreign investors have been steadily reducing their investment in the Athens Stock Exchange since the country was engulfed by the sovereign debt crisis in 2009. Greece's future in the 17-nation euro zone still remains in doubt.Aided by the fact that it is doing most of its business outside Greece, CCH consistently outperformed the general Athens stock market index, which has slumped to 20-year lows.CCH has become the country's biggest firm by market value with a capitalisation of around 6 billion euros, representing about a fifth of the Athens bourse's total.The company, which last year made net profit of 330 million euros on sales of 6.85 billion, has complained of taxes imposed under Greek government austerity measures.A US filing shows it paid about 20 million euros in both 2009 and 2010 for one-off "social responsibility" levies in Greece.Profits at operating units in other countries are generally taxed locally. The Greek parent company reported 32 million euros in Greek taxes in 2010 and none last year. New withholding tax on dividends in Greece might have affected CCH in future.In its US filing for 2011, the company said: "Greece, which accounted for approximately 6% of our unit case sales volume and approximately 8% of our net sales revenue in 2011, is currently facing a severe economic crisis resulting from significant government fiscal deficits and high levels of government borrowing.""The ... Greek government debt crisis may have impacts on our liquidity that currently cannot be predicted."CCH said it would delist from the Athens Stock Exchange and then seek to re-enter that bourse with a secondary listing.Coca Cola Hellenic shares closed down 4.9% at 15.66 euros in Athens. Analysts explained the drop by the low cash price of 13.58 euros the company is offering to those shareholders who refuse the offer of new Swiss shares.

NEWS,23.07.2012

Hugo Chavez: Mitt Romney, Henrique Capriles Share An Agenda

 

Venezuela's Hugo Chavez has signaled a preference in the U.S. presidential campaign by comparing Mitt Romney to his own challenger.Chavez, who is up for re-election a month before U.S. President Barack Obama, has in recent weeks expressed a clear preference for the man currently in the White House.In a campaign speech Saturday night, Chavez equated the agenda of his challenger, Henrique Capriles, with that of Romney, saying both men represent the callously selfish capitalist elite.Chavez claims Capriles, a moderate former governor, is trying to trick Venezuelans into believing he genuinely cares about the poor, the core of Venezuelan president's constituency."I believe the person to best explain the loser's agenda isn't Barack Obama but rather Romney, because it's the extreme right-wing agenda that borders on the fascism of the United States," Chavez told tens of thousands of supporters in the western city of Maracaibo."In the end, it's the same project," Chavez said, referring to Obama as "a good guy."He alleged that the 220,000 families he says his government has provided with homes risk losing them if Capriles wins, while banks would make obtaining credit impossible for lower-income homebuyers. Chavez also says Capriles would eliminate the social programs that have been a hallmark of his 13 years in office a charge Capriles denies.Chavez's comments follow Romney's criticism of an Obama statement July 11 regarding the relative danger to U.S. interests of Chavez's deepening of ties with Iran.Obama said his "overall sense is that what Mr. Chavez has done over the past several years has not had a serious national security impact on us."Romney responded by saying it was "simply naive" to think Chavez does not pose a threat to the United States.Chavez denies his crusade to create a socialist Venezuela poses any threat to the United States, the chief purchaser of Venezuelan oil.He said in a July 13 television interview that "today's Venezuela doesn't present any kind of threat to anyone."In the same interview, Chavez said Obama "deep down is a good guy, if you remove him from the context of being president of an empire."Michael Shifter, president of the Inter-American Dialogue think tank in Washington, said he thinks U.S. voters generally perceive Chavez as a "nuisance" rather than a threat to U.S. national security."They believe Romney's more hardline stance will only boost up the verbal sparring with Chavez, and end up bolstering him, as has often been the case in the past."Romney could make points, however, with conservative Cuban-Americans who despise Chavez's close friend Fidel Castro as well Venezuelan exiles concentrated in Florida, a tightly contested state in the U.S. presidential election.

Trillions hidden in tax havens – report

 

The world's wealthiest individuals have stashed $21 trillion worth of assets in offshore tax havens, equivalent to the combined GDPs of the United States and Japan, a tax transparency report said on Sunday.The report commissioned by campaign group Tax Justice Network drew data from a wide range of sources including the Bank of International Settlements and the International Monetary Fund.Report author James Henry, former chief economist at consultancy McKinsey, said that the headline figure was conservative, adding that up to $32 trillion may have found its way into havens such as the Cayman Islands and Switzerland.According to Henry, these assets are "protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy". The report found that the top 10 private banks managed more than $6 trillion in 2010, up from $2.3 trillion five years earlier.Tax expert and British government adviser John Whiting said he was doubtful of the figure. "There clearly are some significant amounts hidden away, but if it really is that size what is being done with it all?" he asked.The Tax Justice Network campaigns for tax transparency and against tax havens.

Spanish region denies seeking aid

         

Spain's eastern region of Murcia denied on Sunday that it has decided to tap a recently created emergency loan fund set up by the central government to help cash strapped regions.Earlier on Sunday regional daily newspaper La Opinion de Murcia quoted the president of the regional government of Murcia, Ramon Luis Valcarcel, as saying his government would seek "some €200m or €300m" from the fund.The regional government of Murcia would formally make the request in September, he added according to the newspaper.But in a statement the regional government of Murcia said it "roundly denies" that it has decided to request money from the fund worth up to €18bn that was set up last week by Madrid."Regarding the liquidity fund made available by the state, the regional government has said on numerous occasions that it is studying it, but there is no decision with respect to this," the statement added. Valcarcel was referring to the need to quickly set up "hispanobonds" - bonds backed jointly by all regions in order to meet debt and deficit payments - during his interview with the newspaper and was not talking about the liquidity fund, the statement said.The heavily indebted region of Valencia said Friday it would apply for aid from the fund because it cannot find the funds to meet its financial obligations, making it the first Spanish region to decide to tap the fund.The Valencia regional government did not say how much money it would seek from the fund but daily newspaper El Pais reported Sunday that the amount would be over €2bn.Spain's 17 regional governments, which fund education and health, are crucial to the country's efforts to slash its public deficits and rein in mushrooming sovereign debt.They are blamed for two-thirds of Spain's deficit slippage last year, when the country missed its target of keeping the deficit to 6.0 percent of economic output and instead let it slide to 8.9%.

Greece in "Great Depression", says PM

Greece is in a "Great Depression" similar to the American one in the 1930s, the country's Prime Minister Antonis Samaras told former US President Bill Clinton on Sunday.Samaras was speaking two days before a team of Greece's international lenders arrive in Athens to push for further cuts needed for the debt-laden country to qualify for further rescue payments and avoid a chaotic default.Athens wants to soften the terms of a €130bn bailout agreed last March with the European Union and the International Monetary Fund, to soften their impact on an economy going through its worst post-war recession.By the end of this year Greek GDP is expected to have shrunk by about a fifth in five consecutive years of recession since 2008, hammered by tax hikes, spending cuts and wage reductions required by two EU/IMF bailouts. Unemployment climbed to a record 22.6% in the first quarter. "You had the Great Depression in the United States," Samaras told Clinton, who was visiting Greece as part of a delegation of Greek-American businessmen. "This is exactly what we're going through in Greece - it's our version of the Great Depression."Athens must reduce its budget deficit below 3% of GDP by the end of 2014, from 9.3% of GDP in 2011 - requiring almost another €12bn in cuts and higher taxes on top of the €17bn successive governments have cut from the budget shortfall.Greece wants its lenders to give it two more years to achieve the budget goal to avoid an even deeper economic slump but its lenders have opposed the idea because it would imply even more financial aid. Highlighting growing frustration with Athens, German magazine "Der Spiegel" reported on Sunday, citing high-ranking representatives in Brussels, that the IMF may not take part in any additional financing for Greece.The German and Greek finance ministries declined to comment on the report, which suggested additional support required for Athens could range from €10bn-€50bn. Officials have already indicated there would be a shortfall on the current bailout. How much is likely to depend on the extent by much Greece continues to miss its fiscal targets and the extent of support needed to keep its major banks afloat.German economy minister Philipp Roesler told ARD public television he did not expect Greece could fulfill its requirements and that that would mean no more money to Athens."I am more than sceptical," Roesler, who is the head of the junior party in Germany's ruling coalition and often outspoken on euro zone issues, said in an interview."If Greece does not fulfill its requirements, there cannot be any more payments to Greece," added Roesler, whose views often do not reflect those of Chancellor Angela Merkel or Finance Minister Wolfgang Schaeuble.The inspection team of the international "troika" of the EU Commission, the IMF and the ECB will focus on the €11.7bn of spending cuts Athens needs to take in 2013 and 2014.Clinton criticised Greece's lenders for focusing excessively on austerity, saying Athens will be more likely to repay its debt if its manages economic recovery first."(It) is self-defeating... if every day people are saying this may or may not work to give us back 100 cents on the dollar, so give us more austerity today," he told Samaras."People need something to look forward to when they get up in the morning - young Greeks need something to believe in so they can stake their future out here," Clinton said.

NEWS, 04.06.2012.

Spain puts on the pressure for financial rescue

 

Prime Minister Mariano Rajoy is pressing for a direct European rescue for Spain's banks with moral support from the European Commission, but Germany appeared to rule out such a "bailout lite" for the euro zone's fourth biggest member.A source with knowledge of the matter said Madrid is working along with European institutions to find a way to directly refinance banks using rescue funds without the government having to come under a full EU/IMF adjustment programme."Right now the most urgent issue is the banks, and there are negotiations to refinance the banks directly without it being an intervention. It's a mechanism for all (European) banks, not just for Spanish banks," the source said.Spain's borrowing costs have jumped in recent weeks, largely due to doubts over whether the government can raise enough funds for the rising bill to strengthen its banks, left with big holes after the 2008 crash of the housing and construction market.Under current rules Spain can get a loan from the European rescue fund, or EFSF, but it would come with tough conditions and intrusive supervision, with a high political cost for Rajoy. The new permanent European rescue fund, the European Stability Mechanism (ESM), due to enter into force in July, can lend to banks but the request still has to be made by the state.The source with knowledge of the matter said Spain believed the European Union's executive could take a plan for bank aid to a summit of the bloc's leaders on June 28-29.EU Economic and Monetary Affairs Commissioner Olli Rehn said Brussels was considering direct bank recapitalisation by the ESM to break the link between weak sovereigns and ailing banks, but it was not possible under the treaty currently being ratified by member states."This is not part of the ESM treaty for the moment, in its present form, but we see that it is important to consider this alternative of direct bank recapitalisation as we are now moving on in the discussion on the possible ways and means to create a banking union," Rehn said.Germany, the main contributor to the bailout fund, opposes changing the ESM treaty to allow direct bank recapitalisation and has veto power. Berlin contends that only a formal programme approved by national parliaments permits proper international supervision of how aid funds are spent."It is only for a national government to decide whether it draws on the rescue mechanism and the requirements that are linked to it. That of course is also true for Spain," government spokesman Steffen Seibert told a news conference when asked about media reports that Berlin was pushing Madrid to apply.Seibert also said Spain first needed to figure out how much money it needs to recapitalise its banks.After pressing in vain for the European Central Bank to ride to Spain's rescue by buying government bonds, Rajoy took a different line on Saturday, calling in a speech for a euro zone fiscal authority with powers to manage member states' budget policies, to show markets the euro project is irreversible.Some analysts saw the call as a way of preparing Spaniards for the need for a European rescue for their country. Others saw it as a goodwill gesture towards the Germans.Gary Jenkins, director at Swordfish Research, said the fact Rajoy was pushing for greater transfers of fiscal sovereignty was a sign of how urgent the situation was in Spain."Spain is heading towards requiring significant intervention in order to avoid a disaster scenario," he wrote.Spain meets criteria for aid Spain already complies with the terms for the state to tap the temporary European Financial Stability Facility (EFSF) under its "guidelines on recapitalisation of financial institutions".Those conditions are: it needs the money as a last resort to recapitalise systemic lenders, such as Bankia, and it has also started an independent audit of its banks in two stages.The ECB and key EU partners such as Berlin are keen to avoid a repeat of last year's events when they had to push Portugal to seek aid after former Prime Minister Jose Socrates resisted for months owing to the stigma attached to an "IMF bailout".The ECB stopped buying Portuguese bonds in the secondary market and Portuguese banks took the unprecedented step of warning the government that they too might stop buying its debt -- a move that probably tipped Socrates into seeking help.The head of Portugal's banking association, Antonio de Sousa, told Reuters in an interview at the time that the ECB had told the country's banks to cut exposure to government debt.German Finance Minister Wolfgang Schaeuble insisted then that aid could only be granted in the framework of a reform programme, the same stance Berlin is now taking towards Madrid.Bank audits Spain rescued its fourth biggest bank, Bankia, in May, in a bailout that will cost some 23.5 billion euros, much higher than anticipated, raising doubts over whether other Spanish banks have yet to recognise bigger losses.Independent auditors contracted by the government are due to report in mid-June on the state of the banks, and a detailed International Monetary Fund report on the financial system is due on June 11.Both studies should shed light on the scale of the final bill for plugging the holes in the banks, which have some 184 billion euros in exposure to repossessed property and sour loans to real estate developers.The government and the biggest banks hope the reports will show Bankia was an exception, that most of the banking system is solvent and that the rest has been addressed by regulations that have forced lenders to recognise more than 80 billion euros in losses.Still, after confusion over how Bankia's rescue would work damaged Madrid's market credibility, it's hard to imagine a bank rescue figure that will automatically restore confidence."What is not clear is whether it will be enough to recover the market confidence, that is not going to make things worse," said a senior Spanish banker, regarding the audits.Spain has said it will borrow money on the markets to recapitalise Bankia.Even with 10-year bond yields at 6.5 percent, the government says it does not face trouble tapping the markets because its average borrowing costs are lower, at 4.07 percent, and only 2 percent of public expenditures go to service debt.Political risk consultancy Eurasia Group said Europe would do its best to ease the pain for Rajoy, who has spread much of the blame for mismanaging the banking sector on his Socialist predecessors and the outgoing Bank of Spain governor."At this stage, EU political and policy elites are open to design a programme that would emphasize banks and would be light on conditionality to facilitate Rajoy's ability to manage internal constraints," it said in a report.But Eurasia Group said Rajoy would delay as long as possible to avoid the stigma that could affect his party in subsequent elections and because it will look as if his austerity programme and economic reforms had merely set the country up for a banking bailout instead of putting it back on track.One high-level government source argued that there is little motivation for Rajoy to take some 70 billion euros in aid for the banks if there are no guarantees it will actually bring down borrowing costs.

NEWS,09.05.2012.

Germans warn Greece: no cuts, no aid

Leading German politicians have warned Greece that the country would not receive a cent more aid unless it fulfills all the conditions of its international bailout.An election on Sunday in Greece failed to deliver a parliamentary majority for the two big pro-bailout parties, plunging the country into political limbo and increasing the risk that another vote may be required to resolve the impasse.On Tuesday, the leader of the Left Coalition party, which benefited from rising anger over austerity to take second place in Sunday's poll, declared Greece's policy pledges under its EU/IMF rescue null and void.As Europe's largest economy, Germany has contributed the biggest share of the financial guarantees under Greece's bailout, which is paid out in installments on the condition that Athens meets specific savings goals."The agreements must be respected. I don't think we can or should renegotiate," said Martin Schulz, a German politician and president of the European Parliament, on a visit to Berlin.Gerda Hasselfeldt, a senior member of the Bavarian Christian Social Union (CSU), sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU), echoed Schulz in warning Greece against any backsliding."Our position is unchanged. Aid can only flow if the conditions are met," Hasselfeldt told reporters.Greece must push a new round of spending cuts through parliament next month to qualify for an 11.5 billion euros aid installment that it needs to avoid bankruptcy. The post-election deadlock has raised questions about whether that timeline can be met.The vote in Greece and the victory of Socialist Francois Hollande in a French presidential election at the weekend underscored a growing backlash in Europe against austerity measures favoured by Berlin as the way out of the single currency bloc's debt crisis.France is struggling with weak economic growth, a gaping trade deficit, 10 percent unemployment and strained public finances that prompted ratings agency Standard & Poor's to cut its triple-A credit rating in January.Despite this backdrop, Hollande promised during his campaign to raise the minimum wage, hire tens of thousands of new teachers and dilute the increase in France's retirement age that outgoing President Nicolas Sarkozy pushed through against strong opposition from unions and the French left.Hollande has promised to push back against German austerity policies, but many expect him to water down his plans after an audit of state finances that could be completed next month.Peter Altmaier, a leading conservative ally of Merkel, said on Tuesday that a new French government would have very little room to manoeuvre on fiscal policy."The French economy and the country's finances remain in a precarious position," Altmaier, parliamentary whip for Merkel's CDU, told reporters. "Any country that attempts through higher deficits ... to run a supply-driven policy will run foul of the markets very quickly and see its interest rates rise," he added. "There simply isn't any wiggle room."Altmaier said he was hopeful that, once French parliamentary elections are over in June, Berlin could reach a policy consensus with Paris that reaffirmed the path of budget consolidation in Europe "once and for all".Merkel, who publicly supported conservative incumbent Sarkozy in the French race, telephoned Hollande on Sunday after his victory and invited him to Berlin for talks.The two leaders are due to meet next week, after Hollande is sworn in as president, to try to iron out their differences.

Pressure builds on France's Hollande over EU debt plans

Pressure built on president-elect Francois Hollande to stand by France's austerity vows Tuesday, with Germany's Angela Merkel saying Europe was counting on them to resolve the bloc's debt crisis.Elected Sunday on a wave of anti-austerity feeling and pledges to put growth at the heart of European economic policy, Hollande attended his first official function Tuesday at a World War II commemoration ceremony.The Socialist joined his ousted right-wing rival Nicolas Sarkozy in laying a wreath at the Tomb of the Unknown Soldier beneath the Arc de Triomphe in Paris, as France marked the anniversary of the end of World War II in Europe.Hollande said the ceremony was a sign of French unity after a fierce campaign that highlighted the country's deep left-right divide and saw him win with 51.6 percent of the vote."There are issues that unite us all, beyond the person of Nicolas Sarkozy or of me," said Hollande, who is due to formally take office on May 15.But outside France divisions came to the fore, as Merkel noted in a letter to Hollande that he was assuming power in the European Union's second-largest economy "at a time full of challenges"."It is up to us to take the necessary decisions for the European Union and the eurozone, to prepare our societies for the future and protect and advance prosperity in a sustainable way," Merkel wrote in the letter released by her office.Merkel said Monday that she would welcome Hollande with "open arms" when he makes his first foreign trip as president to Berlin next week.But she also made clear she had no plans to renegotiate the fiscal pact setting tough budgetary rules for EU states that she spearheaded, despite calls by Hollande to rework it to do more to foster growth.Japan joined those raising concerns about his plans Tuesday, with Finance Minister Jun Azumi warning Hollande to keep France's fiscal discipline in place."We want (France) to do what has been decided so far," Azumi told a regular news conference, according to Dow Jones Newswires."I don't know whether Mr Hollande will immediately act on what he has said in heated debates during the election campaign."But realistically, I think it is impossible (for European nations) to give up on fiscal-rebuilding efforts," he said.Hollande promised cheering supporters Sunday that he would reopen talks to ensure the EU fiscal pact focused on growth rather than simply imposing deficit-cutting austerity rules.EU president Herman Van Rompuy announced Tuesday that the bloc's leaders would meet on May 23 for an informal dinner ahead of an EU summit on June 28 and 29 that is expected to focus on growth.Hollande's transition chief Pierre Moscovici said Tuesday the Socialist would not give up on his plan for "a European project that is more favourable to growth" and that France's partners would budge."We will find a compromise. And I am convinced that things are starting well," Moscovici told RTL radio.The uncertainty generated by Hollande's election and the political turmoil in Greece, where election gains by hard-left and extreme-right parties stripped the ruling coalition of its majority, have riled the markets.