NEWS,21.06.2013

EU to scale back tobacco curbs

European Union health ministers agreed on Friday to ease tough planned restrictions on tobacco products to overcome opposition from some governments to the draft rules.
The ministers rejected a ban on slim cigarettes proposed by the bloc's executive, the European Commission, but said they should be sold in normal-sized packets to reduce their appeal. They also agreed to outlaw menthol cigarettes and other tobacco flavourings.
The bloc's health commissioner said that, despite the need for compromise in order to reach an agreement, the spirit of the Commission's original proposals has been retained.
"The main thrust is that tobacco should look like tobacco not like perfume or candy and that it should taste like tobacco as well," the Maltese commissioner Tonio Borg told a news conference in Luxembourg after the ministerial talks.
Cigarette sales in the 27-nation EU bloc have fallen sharply in recent years but at about 33%  Europe still has a higher proportion of smokers than any other region of the globe, according to data from the World Health Organization.
The Commission proposed a crackdown on attractive tobacco branding in December, saying such branding was designed to recruit a new generation of younger smokers to replace the estimated 700 000 Europeans who die of smoking-related illnesses each year.
The discussions pitted western European nations that favour tough tobacco controls against a group of central and eastern member states led by Poland one of Europe's top cigarette producers who fear the impact on tobacco industry jobs.
The Commission's proposal that graphic visual and written warnings should cover 75% of the surface of all cigarette packets in future leaving just 25% or less for the brand - was weakened to 65% by ministers on Friday.
Poland, Bulgaria, Romania and the Czech Republic did not support the compromise, but their opposition is not enough to prevent the law from being adopted.
Irish Health Minister James Reilly, who led Friday's talks, dismissed economic arguments against tougher tobacco controls.
"It can never be never a choice between jobs and lives," he told reporters.
Holding up a slim metallic cigarette packet designed to look like a lipstick, Reilly said: "That is advertising. That is entrapment of young people."
In 2010, the world's four leading tobacco companies British American Tobacco, Imperial Tobacco, Japan Tobacco, and Philip Morris produced more than 90 percent of the cigarettes sold in Europe, the Commission said.
Plain packaging
Last month, Ireland became the first European country to agree a ban on all branding on cigarette packs in favour of plain packaging and uniform labelling, following the example of Australia.
While the EU proposals stop short of a full ban on branding, ministers agreed that countries such as Ireland should be free to impose plain packaging if they choose.
The proposals must also get the approval of the European Parliament before becoming law, and the lawmaker leading the debate in the assembly has called for a total ban on branding.
Friday's agreement means the rules could be finalised before the start of European Parliament elections next May, allowing them to enter force in 2016.
The draft rules have been in development for more than two years and were the focus of intense lobbying by the tobacco industry.
They played a part in the October resignation of former EU Health Commissioner John Dalli, after one of his associates was accused of seeking bribes from Swedish Match, a producer of moist oral-snuff known as "snus", in return for lifting a sales ban on the product outside Sweden.
Under the agreement, the sale of snus would remain illegal across the EU except in Sweden. But a proposal that would have forced snus producers to reformulate their products to remove distinctive flavourings was dropped.
As concerns grow over the unregulated use of increasingly popular electronic cigarettes, ministers tightened proposed controls by agreeing that those containing 1 milligram (mg) of nicotine or more would be classified as medicinal products requiring prior EU marketing approval.
That also applied to e-cigarettes containing 2 mg or more per millilitre for those that mix nicotine with water.

Switzerland delays settling US tax dispute

The Swiss government will consider ways to allow its banks to hand over information to US authorities either next Wednesday or a week later, a spokesperson said on Friday, later than previously indicated.
The government is under pressure to find a way to save its banks from criminal charges for helping wealthy Americans evade tax after parliament blocked a bill on Wednesday that would have allowed the banks to sidestep strict secrecy laws.
Finance Minister Eveline Widmer-Schlumpf had said the government could consider issuing an executive order on Friday to allow banks to comply with US demands, but the government spokesperson said her ministry was still working on the plans.
The spokesperson told a regular news conference that the finance ministry now planned to present a solution at the next cabinet meeting on Wednesday or a week later.
US authorities have more than a dozen banks under formal investigation, including Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet in Geneva and local government-backed Zuercher Kantonalbank and Basler Kantonalbank.

 

EU to decide who pays when banks fail

The European Union sought on Friday to forge rules to force losses on large savers when banks fail, a divisive reform that will shape how the eurozone deals with its sickly lenders.
Finance ministers in Luxembourg are trying to resolve one of the most difficult questions posed by Europe's banking crisis - how to shut failed banks without sowing panic or burdening taxpayers.
"We are in for a very tough negotiation," Sweden's Finance Minister Anders Borg told reporters as he arrived for the meeting, saying a one-size-fits-all rule for all EU countries was "dangerous".
The European Union spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011, plundering taxpayer cash but struggling to contain the crisis and in the case of Ireland almost bankrupting the country.
But countries are divided over how strict the new rules should be, with some worried that imposing losses on depositors could prompt a bank run while others argue the rules of the game must be made clear from the start.
While there is no immediate deadline for a deal, dithering could undermine confidence in the ability of Europe's politicians to repair the financial system, encourage banks to lend again and help the continent emerge from its economic stagnation.
"Midsummer is the longest day of the year so we have plenty of time," said Olli Rehn, the European Commission's top economics official, referring to the northern hemisphere's June 21 summer solstice.
A 300-page draft EU law that forms the basis of discussions recommends a pecking order in which first bank shareholders would take losses, then bondholders and finally depositors with more than €100 000 ($132 000) in their account.
That would make the harsh treatment of savers that was part of Cyprus's bailout in March a permanent feature of Europe's response to future banking crises. EU countries would be required to follow these rules when closing banks.
The rules to impose losses on savers, whether wealthy individuals or companies, could be made stricter within the euro zone, in particular for banks seeking help from the single currency's rescue fund.
'Nothing is insurmountable'
A central element to ensure the eurozone's long-term survival is a system to supervise, control and support its banks, known as banking union.
Although not part of the same project, common rules in the wider European Union are considered a stepping stone towards the eurozone's banking union.
Agreeing EU-wide norms would address Germany's demand that European rules on closing banks be in place before the 17-nation eurozone's bailout fund can help banks in trouble.
Eurozone finance ministers agreed late on Thursday to set aside €60bn to help banks via the fund, the European Stability Mechanism, but with tough conditions.
If agreed, the new EU rules would take effect at the start of 2015 with the provisions to impose losses coming as late as 2018.
Still, the idea divides countries with big banking sectors who have the most at stake in any financial crisis.
Sweden, Britain and France say countries should have the final word in deciding how to close banks and not be tightly bound by any new EU rules.
But Germany, the Netherlands and Austria want regulations that will be applied in the same way across all 27 countries in the European Union. They fear that granting too much national leeway would undermine the new law.
While Sweden is adamant it must have as much control as possible over how it deals with its banks, France's Finance Minister Pierre Moscovici signalled Paris is open to compromise.
"France wants flexibility but it is willing to agree to some limits," Moscovici said. "Nothing is insurmountable."

NEWS,07.05.2013

EU targets banks to help consumers

The European Commission will propose new rules to make it easier for consumers to open and switch bank accounts, as well as see what banking fees they are being charged.

The proposal, to be published on Wednesday and which could become law in the European Union in three years, also requires banks to shoulder the administrative burden when clients switch accounts, such as transferring direct debits.

Officials with knowledge of the draft law said it would also oblige banks to spell out their charges in a standardised way, making it easier for customers to compare.

The Commission wants at least one bank in each country to offer a basic account, allowing people currently outside the banking system to deposit cash and pay bills.

The EU executive will also suggest giving citizens the legal entitlement to open an account, acting out of a growing sense of frustration that efforts to cajole banks into better self-regulation is not working.

Studies by Commission officials showed that banks did not offer enough information on switching accounts and that consumers did not know what fees they paid for banking services.

The studies also found that 58 million citizens in Europe had no bank accounts - including half the populations of Bulgaria and Romania.

The Commission hopes introducing a standard guide to fees for people opening an account, as well as an annual summary of charges and establishing a national comparison website will change this.

Under the new rules, consumers wanting to switch banks would only have to inform the new bank, which would then be obliged to tell gas, electricity and other providers of the changes to account payments.

The proposal will go to EU member states for their approval or possible change before the changes can be introduced.

China braces for surge in gold imports

Chinese gold imports are likely to swell further after rising strongly for a second straight month in March, as investors seek safety from economic uncertainty and after prices plunged to a two-year low last month.

"Physical demand picked up significantly over the last couple of weeks. Consumers and industrial users tend to see price drops as buying opportunities," Zhang Bingnan, secretary-general of the China Gold Association, told Reuters.

"Investment demand should continue to stay strong through the rest of the year because of limited investment alternatives," said Zhang, adding that gold sales and processing volumes both spiked in April. 

He said China's gold consumption in the first quarter probably rose 10% to 15% from 255.2 tonnes in 2012. Net gold flows from Hong Kong to China, the world's number two gold consumer after India, rose to 223.519 tonnes in March from 97.106 tonnes in February, data from the Hong Kong Census and Statistics Department showed on Tuesday (www.censtatd.gov).

In March, Shanghai gold futures fetched premiums of more than $30 to global prices, making it cheaper to buy the metal overseas. April could see imports swell further after the drop in international prices spurred frenzied buying in Asia, leading to a shortage of gold bars and coins in Singapore as well as Hong Kong, which is China's main source for gold imports.   

Demand for gold from India and China is a major factor in global prices, with the World Gold Council saying the two countries account for more than a third of global appetite. China produced 403 tonnes of gold in 2012, but consumption was more than double at 832.2 tonnes.

Gold tumbled to around $1 321 an ounce on April 16, its lowest in more than two years, after a fall below $1 500 and fears of central bank sales led to a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds.

It stood at around $1 460 on Tuesday.

 "April imports will be stronger than March," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "The world was buying gold and China was no different at all."

Heavy traffic 

The drop in gold prices has prompted a gold rush in China, with Chinese shoppers flocking to retailers to buy jewellery and gold bars.  

A spokesman for Hong Kong jewellery chain Chow Tai Fook , the world's largest jewellery retailer by market value, told that traffic at its China stores jumped by 50% during the May Day holidays.

The surge in Chinese travellers during the three-day May Day holiday also drove gold sales in Hong Kong to rise by an estimated 50%, with total gold sales from April 29 to May 2 reaching some 40 tonnes, local media quoted Haywood Cheung, president of the Hong Kong Gold and Silver Exchange, as saying. 

The jump in Chinese physical demand also prompted some banks to ship in more supplies from London and Swiss vaults, traders said.

With China's economy still on shaky ground, investors could increasingly be turning to gold as a so-called safe-haven investment. 

China's annual export growth may have picked up slightly in April due to a low comparison from a year ago, while import growth probably eased, a Reuters poll showed, suggesting the underlying momentum for both the domestic and global economies remains tepid. Gold exports to China from Hong Kong hit an all time high  of 557.478 tonnes in 2012.

Companies 'cooking books' to meet targets

Hard-pressed company bosses across much of the world are under so much pressure to deliver on growth that many have resorted to cooking the books, Ernst & Young says in its latest Fraud Survey published on Tuesday.
One in five of almost 3 500 staff quizzed in 36 countries in Europe, the Middle East, Africa and India said they had seen financial manipulation in their companies in the last 12 months, the accounting and consultancy firm said.
In addition 42% of board directors and top managers surveyed said they were aware of "some type of irregular financial reporting".
And despite scandals and regulatory failures in the wake of the credit crunch, almost a quarter of top financial services staff surveyed said they were aware of manipulation and almost 10% of all staff said their companies had understated costs, overstated revenues or used unprincipled sales tactics.
Meanwhile, almost half of the sales staff surveyed across all sectors did not consider anti-corruption policies to be relevant and more than a quarter thought it acceptable to offer personal gifts or services to win or retain business.
In India, over a third felt justified in offering cash - triple the number in Western Europe.
"Our survey shows that to find growth and improved performance in this environment, an alarming number appear to be comfortable with or aware of unethical conduct," said David Stulb, head of E&Y's fraud investigation and dispute services practice.
In Spain, ranked alongside Russia and just below Nigeria and Slovenia, 61% of staff believed companies often exaggerated results, compared with only 7% in Finland.
And E&Y said the vast majority of managers from Norway to Nigeria and Russia to Greece were feeling the pressure to deliver a good financial performance over the next 12 months, despite little optimism that business conditions would improve.
They were now forced to balance the risks of expanding into rapid-growth markets, where winning contracts can go hand-in-hand with corruption, cutting costs further and piling pressure on staff or suppliers - or distorting results, the firm said.
E&Y warned multinationals based in mature markets they could be more vulnerable to the risks of unethical behaviour. One quarter of those asked thought watchdogs in rapid-growth markets focussed more on the behaviour of foreign businesses.
The consultancy called on managers to ask more robust questions focus on key risks, such as poor due diligence accounting checks of intermediaries and associates, and punish unethical behaviour.

Egypt replaces economy ministers

Egypt announced a cabinet reshuffle on Tuesday that removed two ministers closely involved in talks with the International Monetary Fund (IMF) and increased the representation of President Mohamed Mursi's Muslim Brotherhood in government.

The opposition had been demanding the installation of a politically neutral cabinet to oversee parliamentary elections later this year.

Prime Minister Hisham Kandil announced nine changes to his cabinet. These included the appointment of Amr Darrag, a senior official in the Brotherhood's Freedom and Justice Party, as planning minister.

The outgoing minister, Ashraf al-Arabi, had played a central role in talks with the IMF over a $4.8bn loan seen as crucial to easing a deep economic crisis. Egypt has yet to seal a deal with the IMF.

Fayyad Abdel Moneim, a specialist in Islamic economics, was appointed as finance minister, replacing Al-Mursi Al-Sayed Hegazy, another expert on Islamic finance who was appointed in January, the last time Kandil reshuffled the cabinet.

Abdel Moneim received a doctorate from Al-Azhar University in Islamic economics in 1999.

The government has been widely criticised for failing to revive an economy that is in deep crisis because of more than two years of political turmoil.

Another Brotherhood member, Yehya Hamed, was appointed investment minister. The new cabinet includes at least 10 politicians affiliated to the Muslim Brotherhood or the FJP, compared to eight in the old one.

Ahmed Suleiman was named as justice minister, replacing Ahmed Mekky, who resigned last month in protest at efforts by Mursi's Islamist allies to purge the judiciary.

The ministers of interior, defence and foreign affairs were left unchanged.

Crisis sees rise in German immigration

An influx of people from crisis-hit southern European countries like Spain, Italy and Greece has led to the biggest surge in German immigration in nearly 20 years.

The Federal Statistics Office said 1.081 million immigrants flocked to Germany last year, up 13% from 2011 and the highest number since 1995.
Leading the way were arrivals from countries in eastern Europe and from southern eurozone countries, struggling with recession and high unemployment as a result of the currency bloc's three-year old debt crisis.
The number of immigrants coming from Spain, Greece, Portugal and Italy rose by 40% or more compared to the prior year.
"The rise in immigration from EU countries hit by the financial and debt crisis is particularly strong," the Statistics Office said.
Safe haven
Germany has been a rare pillar of strength during the crisis, benefitting from deep structural reforms introduced a decade ago, competitive small-and-medium sized companies and record low interest rates resulting from its status as a safe haven.
Unemployment, at 6.9%, is hovering just above a post-reunification low.
By contrast, more than one in four workers in Spain and Greece are without a job, and youth unemployment in these countries is close to 60%.
This has made Germany, Europe's largest economy, an increasingly attractive destination, despite barriers like the language.
Still, the numbers from southern Europe remain fairly small in total terms compared to those from the east.
A total of 34 109 people came from Greece and 29 910 from Spain in 2012.
That compared to 176 367 from Poland and 116 154 from Romania.

NEWS,08.01.2013

Bumpy road for German economy - experts

More evidence of sliding German exports and industry orders on Tuesday compounded concerns that the eurozone crisis may have battered the region's largest economy into contraction at the end of last year.German imports and exports slid in November, narrowing the trade surplus, and industry orders fell more than expected.Imports slid 3.7%, while exports fell 3.4%, data from the Federal Statistics Office showed on Tuesday. Economists polled by Reuters had expected imports to increase by 0.4% and shipments abroad to drop 0.5%. Seasonally-adjusted industrial orders fell 1.8% in November, due mainly to a sharp fall in demand from non-eurozone countries. That was below a 1.4% drop forecast by a Reuters poll of 29 economists. Germany has served as a pillar of regional strength through the three-year eurozone debt crisis but the economy slowed in the third quarter of last year and economists expect it to have contracted in the last quarter. Although many see Germany escaping a recession and staging a steady improvement this year, Tuesday's data prompted some economists to predict a bumpy road." With a pick-up of global demand, exports could quickly return as the reliable growth driver. However, (the) latest new order data illustrate that the way out of contraction will not necessarily be a straight upward-sloped line," said Carsten Brzeski, senior economist at ING. Germany is unlikely to join eurozone stragglers, he added, but "could end up humming the 'things will get worse before they get better' tune still for some time."Trade surplus narrows The seasonally-adjusted trade surplus narrowed more than expected to €14.6bn from a downwardly revised 14.9bn in October. The consensus forecast in a Reuters poll was for it to narrow slightly to €15.0bn. Weakness in the European Union, where Germany sells roughly 60% of its exported goods, is weighing on exports. Sovereign debt crises have driven most of its partners to raise taxes and cut spending, weakening appetite for German goods, although demand from emerging markets has gone some way to compensating for that.A breakdown of the German trade data on an unadjusted basis showed exports to the eurozone slumped 5.7% on the year, even as exports to countries outside Europe rose 5.6%.The drop in imports raises questions about the ability of German consumers and companies to prop up growth during the eurozone crisis, as many had hoped, with unemployment on the rise and consumer morale deteriorating. Nonetheless, unemployment is close to a 20-year low and wages are rising for the first time in years. Purchasing managers' reports showed the private sector expanded for the first time in eight months in December, while the Ifo index showed morale at German businesses rising in November and December. The economy ministry played down the decline in manufacturing orders given strong October figures."Overall, demand seems to be stabilising. The slight improvement in sentiment indicators also points to this," said the ministry in a statement.Providing some reassurance about domestic demand, bookings from within Germany increased by 1.3%.However, foreign orders fell by 4.1%. While bookings from the eurozone inched up 0.2%, contracts from countries outside the currency union slumped by 6.5% after an 8% rise in October. "Demand for capital goods remains low in view of the weak economic environment in Europe, where there is significant overcapacity in many places," said Bernd Hartmann, head of investment research at VP Bank.

Eurozone jobless rate jumps to new high

Europe's unemployment numbers are rising to worrying new records with dire figures from Spain especially underlining a growing north-south divide, official data showed on Tuesday.The unemployment rate across the troubled eurozone hit 11.8% in November, up from 11.7% in October, with the number of people out of work in the 17-nation single currency area now nudging 19 million. The 19th rise in a row for the eurozone, home to some 330 million people, represented an increase of more than two million on the dole compared to a year ago. London-based IHS Global Insight analyst Howard Archer calculated the cumulative increase since April 2011 as 3.278 million out-of-work."The only crumb of comfort was that this was the smallest rise since August, although it did follow a particularly sharp rise of 220,000 in October," Archer said, adding that he expected the jobless rate to "move clearly above 12% during 2013."While the jobless numbers exceeded 26 million for the first time across the full 27-member European Union, which includes Britain and Poland, the EU as a whole recorded an unchanged 10.7-percent unemployment rate.Indeed, there were more jobless over the past year, according to Eurostat data, in the 17-nation eurozone where the number of newly unemployed was 2.015 million, compared to 2.012 million for the EU. Facing a bust property boom and riddled with bad debt in its banks, Spain recorded the highest unemployment rate of all the European countries - at 26.6%, worse even than bailed-out Greece. Among under-25s, both countries saw unemployment rates hovering around 57%.According to Eurostat figures seasonally-adjusted for comparative purposes, the November unemployment rate in key rival economies was 7.8% for the United States and 4.1% for Japan."2012 has been another very bad year for Europe in terms of unemployment and the deteriorating social situation," said European Commissioner for Employment, Social Affairs and Inclusion Laszlo Andor. Giving his annual report on employment trends, he said that "appropriate labour market reforms and improvements in the design of welfare systems" could make countries more resilient to economic shocks. But with a north-south divide between Germany and similar satellite economies faring far better than Europe's southern Mediterranean rim, Andor said it was "unlikely that Europe will see much socio-economic improvement in 2013.""A widening gap is emerging," Andor said, even between the north and south just of the eurozone. The Commission concluded there was a divergence between "countries that seem trapped in a downward spiral of falling output, fast-rising unemployment and eroding disposable incomes, and those that have so far shown good or at least some resilience."Southern and peripheral countries whose governments and companies face much higher interest rates or no access to market financing will continue to struggle, the Commission said, citing an over-allocation of lending during the construction boom of the last decade.

Italian jobless ranks swell

Italy's jobless rate remained at a record high in November while youth unemployment jumped to a new peak above 37%, data showed on Tuesday. Italy has been in a deep recession since the middle of 2011 and unemployment has risen steadily as businesses clamp down on staffing levels to cope with crumbling domestic demand. The plight of the unemployed and particularly young people will be a crunch issue at the election and outgoing Prime Minister Monti, who heads a centrist group, has been criticised by opponents on the left and right of hurting the economy in his efforts to fix public finances. Unemployment was stable in November at October's record high of 11.1%, national statistics institute ISTAT reported. Joblessness rose above 11% in October for the first time since the first quarter of 1999. Before January 2004 ISTAT only issued quarterly jobs data. November's rate was marginally below a forecast of a further rise to 11.2% in a Reuters survey of analysts, but it was up 1.8 percentage points from November 2011 when Monti was appointed to save Italy from a mounting debt crisis. The youth unemployment rate, referring to 15-24 year-olds, jumped for the third month running in November to 37.1%, its highest level since records began in 1992.Companies are reluctant to give new recruits regular contracts because strong job protection means it is hard to fire them. So young people tend to move from one temporary contract to the next, and opportunities have dried up in the recession. Monti sought to address the problem with a hotly contested labour reform passed last summer, but critics say that by making it more costly and complicated for firms to offer temporary contracts the reform discouraged hiring in the recession. "You always hope that if you put some effort in you will get something back," said 22 year-old Michele Andaloro as he lined up in search of work at one of Rome's largest job centres. "The next government needs to work for the future of young people and not behave like in the past." Analysts say the growing financial difficulties of families are also forcing more young people to look for work rather than study or live off family income. In a dismal series of records, the employment rate edged down in November to a 12-month low of 56.8%, while the male employment rate fell to 66.3%, the lowest since records began in 1992."The worst hit by the crisis are those in the industrial section and construction," an ISTAT spokesperson said.I talian industrial output is still more than 25% lower than its level of mid-2008, before the recession brought on by the global financial crisis. Analysts say the real challenge for Italy is to increase its chronically low rates of employment and participation in the labour market, which are among the lowest in the industrialised world, especially among women, the young and the elderly.

NEWS,14.12.2012

EU holds back on eurozone overhaul

European leaders doused hopes of a radical eurozone overhaul on Friday, after brokering deals to control banks and refloat Greece seen as adequate to stem the immediate crisis.The last EU summit of a year that saw Greece close to bankruptcy and bigger Latin countries pressured to overhaul their economies in line with German demands saw a series of ambitious proposals effectively kicked into the long grass.Despite worries over political uncertainty in Italy, flagship plans to fix fundamental flaws criticised since the introduction of the single currency were put to one side until late 2014 at the earliest.Europe's effective paymaster, German Chancellor Angela Merkel, hinted that "financial aid" could in the future be given to countries committing to reforms as part of moves towards greater economic co-ordination in the bloc.In the eurozone alone, joblessness is heading towards the 20 million mark after a year of devastation and with recession set to last throughout much of 2013.However, the sense of imminent panic on financial markets that dominated much of 2012 decision-making has receded significantly since the European Central Bank (ECB) issued a long-resisted but near-unlimited guarantee in the summer to stand behind countries in financial difficulty."No doors were closed," said Jose Manuel Barroso, the head of the executive European Commission.Yet ideas heavily promoted by EU President Herman Van Rompuy over the last six months, including a central eurozone budget, seemed to fizzle out.Van Rompuy said he would present another report to leaders in June 2013, as well as proposing that national governments sign up to contracts with the EU on reforms."All the hard work is beginning to pay off. A lot has been achieved over the course of a year," he insisted."This work is not over: the dynamic will carry on in the coming year," pledged Van Rompuy.French President Francois Hollande said that late-2014, when a new Commission is installed, "would be the time we could envisage a new phase with a modification of the treaties."The resumption of loans to Greece followed a successful plan to wipe tens of billions of euros from the country's debt pile.A first payment of €34.3bn would be flowing to Athens "as early as next week," said outgoing Eurogroup chair and Luxembourg Prime Minister Jean-Claude Juncker.The accord prompted Greek Prime Minister Antonis Samaras to declare that "Grexit", the idea that Greece would be forced out of the 17-nation bloc, was "dead.""Greece is back on its feet," declared an ecstatic Samaras, who has pushed through painful economic reforms demanded by international creditors, sometimes in the face of violent street protests.Meanwhile, the deal for the eurozone's largest banks to come under the aegis of the ECB from March 2014 was hailed by its head Mario Draghi as "an important step towards a stable economic and monetary union, and towards further European integration".Despite a noticeably more bullish tone at the summit, fears over Italy lurked in the background, after Prime Minister Mario Monti, credited with important reforms there, said he was stepping down soon.Former leader Silvio Berlusconi had hinted that he might stand for a fourth time but appeared to row back, telling Belgian television that he had "so much to do" outside politics.Hollande downplayed the chance Berlusconi would run in a future election, saying: "I don't think there is a very serious likelihood" of this."Merkel underlined a closing of ranks at the summit. "I made clear that the government of Mario Monti has done a great deal of helpful work for the confidence that Italy is now enjoying again," she said.Leaders were to reconvene later Friday at 10:00am (09:00 GMT) to discuss moves towards a common security and defence policy as well as to take a position on the Syria crisis.

Fiscal cliff looming larger

Wall Street declined as US House Speaker John Boehner renewed concern about the lack of progress in talks aimed at preventing US$600 billion in tax increases and spending cuts taking effect on January 1."Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk our economy right up to the 'fiscal cliff,'" Boehner told a news conference.Failing to reach a deal to avoid the so-called fiscal cliff could push the world's largest economy into recession next year, the non-partisan Congressional budget office has forecast.Further evidence of the glacial pace of negotiations has increased uncertainty about the outlook for the economy and corporate profits."There's a lot of confusion. Nobody knows what's going to happen with the cliff," Tom Schrader, managing director of US equity trading at Stifel Nicolaus Capital Markets in Baltimore.In afternoon trading in New York, the Dow Jones Industrial Average fell 0.44 percent, the Standard & Poor's 500 Index shed 0.56 percent, while the Nasdaq Composite Index dropped 0.75 percent.Positive economic data, while welcome, did little to help the mood. New claims declined 29,000 to a seasonally adjusted 343,000, according to the Labor Department."The labour market might be improving a bit quicker than expected," David Sloan, an economist at 4Cast in New York, told Reuters. And two separate reports from the Commerce Department showed that retail sales increased 0.3 percent last month, following a 0.3 percent slide in October, while business inventories gained 0.4 percent in October.Shares of Best Buy soared, last up 14.9 percent, after a report in the Minneapolis Star-Tribune newspaper that company founder Richard Schulze will offer to buy the consumer electronics retailer by the end of the week.In Europe, the Stoxx 600 Index ended the day with a 0.4 percent drop from the previous close. That was its first drop this month, according to Bloomberg. National benchmark stock indexes declined in Frankfurt, Paris and London, falling 0.4 percent, 0.1 percent and 0.3 percent respectively.Standard & Poor's today cut its crediting rating outlook for the UK to negative from stable.Meanwhile, UBS faces a fine of about US$1 billion next week to settle charges of rigging the Libor interest rate benchmark, Reuters reported, citing a person familiar with the situation."The global settlement is about US$1 billion," the source told Reuters on Thursday. "It's expected early next week on Monday or Tuesday."

No need for Spain bailout right now - PM

Spain's Prime Minister Mariano Rajoy insisted on Friday that his country currently had no need of a bailout from the Eurozone to fix its public finances. Spain will seek help to ease its borrowing costs if necessary, but "currently we do no need to and therefore we have not asked for it", he told Cadena Ser radio.Rajoy has for months been fending off speculation that Spain will seek help from Eurozone emergency funds, which would trigger supportive action by the European Central Bank."We will use this mechanism only if necessary for the interests of the Spanish people," said Rajoy, interviewed on the sidelines of a European Union summit in Brussels.He spoke a day after European leaders approved a new system of banking supervision for the Eurozone, a key move for Spain, the bloc's fourth-biggest economy.Spain has had to seek a Eurozone bailout for its banks, ruined by financial turmoil in recent years, and speculation mounted that it would have to seek aid when its borrowing costs surged to danger levels in July.But Rajoy has held off from making such a demand and Spain has managed to complete its financing operations for 2012 without outside help.Figures released by Spain's central bank on Friday showed that the level of debt owed by Spanish banks to the European Central Bank decreased for a third month running in November, to €340.8bn.This indicated that Spanish banks were finding it easier to raise money on regular financial markets, a sign of recovering confidence in the sector whose collapse has fuelled a bitter recession in Spain.Other data from the Spanish central bank Friday showed that Spain's public debt rose to a fresh record at 77.4% of gross domestic product in September and was forecast to reach at least 85.3% by the end of 2012.

NEWS,29.11.2012

The Politics of Fear

To those who were surprised that the European Union received the Nobel Peace Prize, I say: "Think twice." This was not only a deserved award for Europe's contribution to bringing peace and stabilizing democracies in the recent past  the Nobel Committee was also sending a clear warning to contemporary leaders. I could almost hear them saying: "On this difficult odyssey, don't abandon ship. In today's world, the EU is too valuable to squander."It was an indirect but powerful rebuttal to the dangerous nationalist and populist rhetoric some politicians have adopted when describing the recent financial crisis.This message couldn't have come at a better time.Like ghosts from the past, we see political violence, xenophobia, migrants being scapegoated and extreme nationalism creeping into our public debates even into our parliaments. This is a Europe diverging from its founding principles. Principles that rendered nationalistic hatreds an anathema.But it is these politics of fear that seem to have incapacitated Europe. A Europe seemingly incapable of ending this crisis, a fractious Europe. This has undermined a sense of trust between us and in our European institutions. This climate does not inspire confidence either in our citizens or the markets. Nor will our retreat into a renationalization of Europe be the solution.My recent experience in dealing with the financial crisis in Greece and in Europe has confirmed my belief that this is a political crisis more than a financial one.I am convinced that, with the political will, we could have avoided much pain, squelched market fears and stabilized the euro, while at the same time reformed ailing, unsustainable economies such as ours in Greece. Despite media hype to the contrary, it is the Greek people who first and foremost have wanted this change. Instead, we allowed fear and mistrust to overcome us. And fear begets more fear and uncertainty. Instead of understanding, we have name-calling. Instead of collective, transparent action by our institutions, we have moved into a mode where the community method is undermined by makeshift intergovernmental decision-making, with the balance of power tipping dangerously towards the very large member states. Instead of real, necessary reform and fiscal responsibility, we are implementing an overdose of austerity dealing more with symptoms and less with the root causes of the economic woes of Europe. Instead of rewarding superhuman efforts, we are condemned for our shortcomings. More than anything else, it has been this political climate that has undermined our common efforts to deal with today's financial crisis. Whether it is banks or governments, we have adopted a passive, almost defeatist, attitude, which we cloak in the language of "caution and responsibility. "It is our responsibility to break this cycle of fear and mistrust now. We are vastly underestimating our own capacities as a union. Our capacity to calm markets or create jobs. We again need to believe in the great capacity of our peoples north and south, west and east. We must rekindle the spirit that united us in 1989 when the Berlin Wall fell. We know the difficulties we then faced. But we did not cower. We decided to invest in the potential Europe and our peoples had. And there is so much hidden or untapped potential in our youth, our experience, our diversity and our cultures.But this not simply an issue of political will. We must combine this will with an understanding of our real weaknesses. Over the decades we have become more and more interdependent in Europe. This was not by chance, this was by design -- from the days of Monnet and Schuman. It is this interdependence that has made the wars of the past unthinkable.But if interdependence is important to keep the peace, it is not enough to make us effective, adaptive, powerful on the global scene. Neither does interdependence guarantee the democratic empowerment of our citizens and the liberation of our peoples' potential.In fact, this interdependence today is seen by many as a straight jacket, hindering us rather than giving us the capacity to deal with new global challenges. The debate about the breakup of the euro, or even euro-exits, is a case in point.Our citizens, therefore, wonder whether this European structure is still useful or if we should go our own separate, independent ways. As in The Odyssey, the sirens are beckoning that we change course. However sweet their song, we know their purpose is that we crash on the shallow rocks. If we are to avoid these rocks, we need to radically rethink our governance structures and policy responses so that we capitalize on our strengths and neutralize our weaknesses.Three fundamental principles must underpin a more progressive Europe.First, we must strengthen Europe's institutional capacity. Priority today must be in the financial-economic sphere. The eurozone is the world's largest economy, the euro is the world's second reserve currency and on aggregate we have strong economic fundamentals; but we are not able to leverage our strengths due to weak or missing institutions. Despite significant progress such as:

- More robust fiscal monitoring;
- The European Stability Mechanism;
- The Six-Pack to strengthen governance and oversight; and
- A broader mandate for the European Central Bank, with the recent introduction of Outright
Monetary Transactions, we must go one step further. 

We have already pooled our risks, now we must pool our strengths. Eurobonds and a federal banking union are vital tools to safeguard the EU from similar crises and set our economy on a more stable footing. Second, we need to liberate and reenergize Europe's human capacity. High unemployment needs to be offset by investment in our human capital, education, research, green growth and the necessary infrastructure for green energy and a knowledge society. In our race towards competitiveness, we are emulating models that have little to do with our traditions. In many emerging markets, a lack of collective bargaining and democratic accountability, low wages, substandard working conditions and denigration of the environment combined with tax havens which have robbed countries of huge revenues up to 11 billion euros per year in Greece alone may offer a temporary comparative advantage. But in seeking growth, we cannot race to the bottom. We must base our competitiveness on quality, not inequality. Third, we must strengthen our democratic capacity. We need innovative democratic institutions that will empower our citizens and strengthen the legitimacy of our decisions .The EU's complex decision-making process has been an outcome of a delicate historical balance between member states. Today, however, people feel they are sidelined by these decisions. In trying to confront its fiscal deficit, Europe has run up a democratic deficit. As we take the next steps towards European integration, we must give ownership of this process to the people. Policies imposed on citizens without their active consent are doomed to fail. Already, a frustrated, educated but unemployed younger generation is losing faith in our European institutions and values. This vacuum has created fertile ground for populism and extremism. When our citizens feel disempowered, they will turn to saviors or target scapegoats as they do not participate through dialogue and responsible deliberation to understand and solve common problems. Europe can regain the confidence of the markets, but first we must regain the confidence of our citizens. That is why I called for a referendum in Greece, so that people could debate and decide on their own future. There is nothing wrong with European countries ceding sovereignty in the interest of creating a stronger Europe. Indeed, they already have. But as we do so, we need to rethink how our representatives in the Union are elected and how decisions are made. An EU president, elected by a European Parliament (or even a directly elected president), European-wide referenda, forms of more direct citizen participation and the use of social media are ideas already ripe to explore. This new Europe, as I see it, will not be the product of one grandiose decision, dictated by an elite minority of powerful nations or some anonymous bureaucrats in Brussels. Small, incremental but complementary steps -made by each of us individually and all of us together -will build the values and the foundations for the Europe that we want. Democracy and education will give new capacity to our citizens and that, in the end, will empower Europe and reinforce its legitimacy in our societies and around the world. We do have a choice. Either we empower Europe and its citizens and become a catalyst for humanizing our global economy, or globalization will dehumanize our societies and undermine the European project. As a citizen of Europe, I vote for the first choice.

 

EU outlines stop-gap 2013 budget

European Union negotiators have provisionally agreed to fix the bloc's spending at nearly 133 billion euros ($209 billion) in 2013, as part of a deal that adds 6 billion euros to spending this year.The agreement which must now be approved by EU governments and the European Parliament ensures stable funding for EU programmes next year.It also guarantees the continuation of several employment, education and research programmes this year that had been threatened with cancellation because of a funding gap."There was an agreement on the draft package for the 2013 budget that will be submitted to the European Council and Parliament in the coming days," a spokesman for the European Commission said in a statement.But one EU official warned that the approval of governments and lawmakers was far from guaranteed. "I'm not sure that everyone is going to be happy with this package, particularly among some MEPs," said the official, speaking on condition of anonymity. A successful conclusion to the 2013 budget row would allow governments and officials to focus on the far thornier subject of the bloc's next long-term budget, for 2014-2020.EU leaders failed to reach a deal on that 1 trillion euro ($1.57 trillion) budget at a summit in Brussels last week, and are expected to try again early next year.As part of Thursday's deal, EU payments next year will be limited to a maximum of 132.84 billion euros ($US208.97 billion).That would have represented an increase of 2.9% compared with this year far below the rise of 6.8%demanded by the European Parliament and the executive Commission, and only a small real increase after inflation is taken into account. But the extra 6 billion euros agreed for this year means that spending in 2012 will now amount to 135 billion euros the highest level ever and as a result, the budget will actually fall by 1.6% next year. During previous rounds of talks, the Commission had insisted that an extra 9 billion euros was needed to fill the 2012 funding shortfall. But at Thursday's meeting, the EU's executive said it could forgo some of the extra funds while it checked whether all the conditions for payment had been met.About three-quarters of the EU's annual budget is spent on farm subsidies and funding for new motorways, bridges and other public infrastructure projects in poorer eastern and southern European member countries.

BoE urges UK banks to boost capital

British banks need to act now to bolster their defences against financial shocks, as many have underestimated the cost of loans going sour and future fines for misconduct, the Bank of England (BoE) has said.Underlining a growing sense of urgency about capital defences, outgoing BoE Governor Mervyn King said that while the problem was "manageable", he wanted the banks' regulator to report back by March on what steps banks were taking, and warned that he did not want them to cut lending."Our primary concern has been to ensure that UK banks have sufficient capital ... so that they are on a solid footing to support economic growth," King told a news conference."The problem is manageable, and is already understood at least in part by markets. But it does warrant immediate action," he added.King made the comments as he presented the half-yearly report by the BoE's Financial Policy Committee, which from next year will take charge of British bank regulation.He said that the government would not need to put extra money into Royal Bank of Scotland or Lloyds Banking Group, the two banks in which it has held controlling stakes since the financial crisis. Instead, he said banks could raise funds by issuing contingent debt that converts into equity in a crisis, or by restructuring actions - often a euphemism for asset sales. The BoE said that British banks' true capital position was probably worse than relatively healthy official numbers imply, and this was already hurting investors. "Progress by banks in raising capital has slowed and investor confidence remains low," the BoE said in its half-yearly Financial Stability Report. "Market concerns are likely to reflect in part uncertainty about bank capital adequacy."he BoE has repeatedly urged British banks to raise capital levels, and November's report marks a stepping up of these recommendations, despite a slight reduction in the risks facing the financial system due to an easing in euro zone tensions. "UK banks' capital buffers, available to cushion losses and maintain the supply of credit following realisation of a stress scenario, are not as great as headline regulatory capital ratios imply," it said.King also confirmed the new effort would apply to international banks with British subsidiaries which are regulated by the Financial Services Authority.The BoE identified three main areas where banks were over-optimistic about how much capital they had.First, information from supervisors suggested some British banks would suffer bigger losses on loans than they had made provision for, according to the report.Second, it said banks had also persistently underestimated the scale of fines they would face for past misconduct, adding that external analysts had suggested further costs of 4 billion to 10 billion pounds ($7.8 billion to $31 billion) for missold payment protection insurance and the LIBOR rate-rigging scandal. Finally, the BoE criticised the "complex and opaque" system banks use to calculate the riskiness of its assets, with the amount of capital that banks estimated they needed sometimes varying threefold between banks for the same type of assets.The report also revealed muted results from the BoE's June effort to get banks to boost lending, by paving the way for up to 500 billion pounds of liquidity reserves held by the banks to be run down.But it noted that just 31 billion pounds had been released and that it was mostly used to repay debt rather than provide direct support to credit growth.The BoE cautioned that it was "too early" to judge the impact of the initiative.

US stocks and euro sell-off on Boehner comments

US stocks and the euro sold off after US House Speaker John Boehner said there had been "no substantive progress" in talks to avoid the fiscal cliff.Republican Boehner made the comments after speaking with President Barack Obama and Treasury Secretary Timothy Geithner, saying there was a real danger no agreement would be reached to avoid $US607 billion of automatic tax increases and spending cuts that kick in on January 1. Democrats had "yet to get serious about spending cuts," Boehner said.There was no mention of the optimism he cited 24 hours ago that gave a boost to Wall Street and was echoed around the globe.The Congressional Budget Office has warned that falling off the fiscal cliff could drive the US jobless rate back up to 9.1% by the end of 2013 and send the world's biggest economy back into recession.The dollar pared its decline against the euro, which traded recently at $US1.2967, having early touched $US1.30.US stocks did recover some ground after the selloff.The Dow Jones Industrial Average was up 0.2% and the Standard & Poor's 500 Index up 0.4%."One minute the portents for a deal on the fiscal cliff are negative, the next minute they are positive," Mike Mason, a senior trader at Sucden Financial Private Clients in London, told Reuters."This is likely to be the pattern all the way up to the deadline on January 1. Equities are sure to remain volatile and trading subdued until there is any concrete outcome to these negotiations."Economic data in the US was mixed, though the revised reading for gross domestic product in the third quarter was 2.7%, up from the 2% pace previously published.That just missed the estimate in a Bloomberg survey of 2.8% and marks an acceleration from the second quarter's 1.3% growth.Consumers, though, were subdued. Household spending rose a revised 1.4%, down from the first reading of 2%, according to the Commerce Department. Economists were hoping the revision would only be down to 1.9%.Yet the US trade deficit shrank for revised to US$US403 billion from an initial estimate of $US413.7 billion and inventories turned positive.And an index of pending home resales beat estimates by rising 5.2%, according to the National Association of Realtors, while the number of Americans applying for jobless benefits fell 23,000 to 393,000 last week, according to the US Labor Department.Stocks in the UK rallied, as did equity markets across Europe, which closed before Boehner made gloomier noises about the US fiscal cliff.The FTSE 100 advanced 1.2%, with Rio Tinto up 5.1%. Germany's DAX 30 climbed 0.8% and France's CAC 40 was up 1.5%.In the UK, Lord JusticeLeveson's long-awaited report into media ethics that followed the phone hacking scandal at Rupert Murdoch's News Corp called for a new independent media regulator to stamp out unethical behaviour.UK Prime Minister David Cameron, who himself was tarnished by associations with Murdoch's lieutenants in Britain, have a tepid welcome to the report while saying he wouldn't support new law to enshrine such a body.