NEWS,26.11.2012

Obama drafts Geithner to crack budget

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

 

Medvedev does not rule out Kremlin return

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

 

Euro zone to seek Greek aid deal without write-off

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

NEWS,17.10.2012

Putin says Russia will not be dictated to on arms sales

President Vladimir Putin said today that only the UN Security Council could restrict Russian weapons sales abroad, a remark that appeared aimed at defending the Kremlin against criticism of its arms supplies to the Syrian government."Only sanctions imposed by the UN Security Council can serve as a basis for limiting weapons supplies," Putin said, according to state-run Itar-Tass news agency."In all other cases, nobody can use any pretext to dictate to Russia on how it should trade and with whom," he was quoted as telling a meeting of a state commission on the arms trade.The West has criticised Russia for vetoing, along with China, three UN Security Council resolutions aimed at putting pressure on Syrian President Bashar al-Assad to end a conflict that has killed an estimated 30,000 people in 19 months.Russia sold Syria $1 billion worth of weapons last year and has made clear it would oppose an arms embargo in the Security Council because of what it says are concerns rebels fighting Assad's government would get weapons illegally anyway.Putin said in June that Russia was not delivering any weapons to Syria that could be used in a civil conflict.Turkey said on October 11 that a Syrian passenger plane grounded en route from Moscow to Damascus was carrying weapons. Moscow said the cargo included radar parts that were of dual civilian and military use but were fully legal.Moscow in 2010 scrapped plans to deliver high-precision air defence missile systems to Iran, citing sanctions imposed by the UN Security Council over Tehran's nuclear programme, a move welcomed by the United States and its European allies.Russia denies trying to prop up Assad, who allows Russia to maintain a naval supply facility in the port of Tartus that is its only military base outside the former Soviet Union.But Moscow says Syria's crisis must be resolved without foreign interference, particularly military intervention.

Greece declares progress as inspectors depart

Inspectors from Greece's international lenders will leave Athens after making substantial progress on talks to unlock aid for the near-bankrupt country but without agreement on crucial labour reforms, officials said today.After months of often heated and testy negotiations, Athens and its European Union and International Monetary Fund lenders appeared to be in the home stretch toward a comprehensive deal on spending cuts and reforms needed to avoid a Greek bankruptcy."I'm confident we're doing everything we have to do in order to get it (a deal) and get it soon, so that we can move towards a recovery," Prime Minister Antonis Samaras said at a meeting of European centre-right parties in Bucharest.A senior Greek government official earlier said the two sides had reached agreement on all issues except labour reforms.In a rare statement to reporters during talks late on Tuesday, the IMF's mission chief for Greece, Poul Thomsen, also declared that the two sides had agreed on "most policy issues", with agreement on the rest expected soon.Thomsen and his European Commission and European Central Bank counterparts are due to depart Athens today in order to brief leaders at a two-day European Union summit, where Greece's future will loom large despite not being the focus of talks.Once a deal on the austerity package and reforms is clinched, the so-called troika of EU, ECB and IMF lenders are due to present a report on Greece's progress in meeting the terms of its bailout and whether it can cut its debt down to sustainable levels.That report is expected to show that Greece is hugely off track on its commitments, which critics blame on a lack of political will, political paralysis during repeat elections this year and a deeper than expected recession.But with Greece due to run out of money next month and Europe determined to avoid fresh market turmoil that drags down bigger economies like Spain and Italy, Athens is expected to ultimately secure its next 31.5 billion euro aid tranche.Still, Athens needs the blessing of the troika on a 11.5 billion euro austerity package as well as a long list of reforms first to be able to unlock that aid.Talks on both fronts have moved slowly since July, with signs of progress tempered by tension and mistrust over the ability of Greece's political brass to push through public sector reform and generate savings."Hard red line" On Tuesday, the two sides resolved differences on the extent of Greece's recession next year and issues related to health spending cuts after hitting an impasse on labour reforms during an earlier round of talks, officials said.They agreed Greece's economy would contract 4.2% next year - a key estimate in calculations to determine whether Greek debt will be viable - after Athens initially predicted a 3.8% tumble and lenders forecast a 5% contraction.Officials also suggested that most of the issues related to the long-discussed spending cuts package had been resolved apart from disagreement over the use of brand name or generic drugs in the state healthcare system."There has been substantial progress on all fronts and only some issues remain open, mainly labour and structural," a second Greek government official said."We are confident these will also be resolved in time."

Wall Street rises on US housing data

Global stocks rose and the euro hit a one-month high today, helped by brighter prospects for resolving Spain's debt woes, while better-than-expected housing data and gains among financials lifted the US equity market.US and German government debt prices fell after Spain avoided a damaging ratings downgrade from Moody's and stronger-than-expected US housing data pointed to an improving economy, which reduced safe-haven demand.Growing speculation that Spain will ask for a bailout next month lifted the euro. A possible line of credit to Spain and some easing of German opposition to aid for Greece and Spain were also likely to support the euro in the near term.Wall Street was mostly higher, putting the S&P 500 on track for a third day of gains, but disappointing results from Intel Corp and IBM weighed on the Dow.Intel slumped 3.0% to $21.68 while IBM lost 5.2% to $200.08. Both were among the biggest drags on the Dow and Nasdaq 100.M&T Bank jumped 5.2% to $102.48 after posting third-quarter results, helping to lift the KBW Bank index 1.5%, while the S&P financial services index rose 1.1%, the biggest gainer among the 10 S&P 500 sectors."It seems like it's a classic earnings period reaction. Either people are too exuberant and expectations are raised too high to beat when the actual number comes out or people are too pessimistic and the earnings are just not as low," said Rick Meckler, president of hedge fund Liberty View Capital Management in Jersey City, New Jersey.The Dow Jones industrial average was down 7.52 points, or 0.06%, at 13,544.26. The Standard & Poor's 500 Index was up 6.30 points, or 0.43%, at 1,461.22. The Nasdaq Composite Index was up 10.01 points, or 0.32%, at 3,111.19.European shares rose for a third consecutive session after Spain clung to its top grade credit rating, bolstering expectations the euro debt crisis can be contained."Spain is in a better place for now," said Richard Robinson, a fund manager at Ashburton who recently bought shares of Spanish bank Bankinter and Italian bank Intesa on prospects of improved euro zone economic problems.The FTSE Eurofirst 300 index of top European shares gained 0.5% to close at 1,118.62. MSCI's all-country world equity index rose 0.8% to 338.24, extending Tuesday's 1.2% gain.The euro was up 0.55% at $1.3124, its highest since mid-September.Bond losses accelerated after data showed that groundbreaking on new US homes surged in September to its fastest pace in more than four years, another sign that the housing sector's budding recovery is gaining traction."The housing starts and permits are both up a ton. The market was already selling off, it started overnight with Moody's affirming Spain's investment grade rating," said James Newman, head of Treasuries and Agency trading at Keefe, Bruyette and Woods in New York.Benchmark 10-year notes fell 19/32 in price to yield 1.79%.Brent crude futures fell further and US crude turned lower in choppy trading after a report from the Energy Information Administration showed US crude oil stocks rose more than consensus expectations last week.December Brent fell 92 cents to $113.08 a barrel. US oil for November fell 21 cents to $92.88.

NEWS,04.08.2012

Spain creeping towards full bailout

Spanish Prime Minister Mariano Rajoy inched closer today to asking for an EU bailout for his country, but said he needed first to know what conditions would be attached and what form the rescue would take.His comments, at his first post-cabinet meeting news conference since taking office last December, came a day after the European Central Bank signalled it was preparing to buy Spanish and Italian bonds but only after EU bailout funds were triggered and countries had asked for help.A source said separately that Spain would not decide whether to apply for several weeks.Buying bonds and providing aid would all be designed to bring down what have been prohibitive borrowing costs in the indebted countries.Rajoy said he was ready to do what is best for Spain, going far further than he did on Thursday when, during a press appearance with Italian Prime Minister Mario Monti, Rajoy three times declined to say whether he would seek the aid."I will do, as I always do, what I believe to be in the best interest of the Spanish people," Rajoy said yesterday."We still don't know what these measures are," he said, reference to a comment by ECB President Mario Draghi that the bank was examining non-conventional measures to defend the euro."What I want to know is what these measures are, what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision," he said.A source familiar with Rajoy's thinking confirmed this possibility was actively looked at and that Rajoy was ready to bear the political cost of a request.In a letter to Herman Van Rompuy on Friday, Rajoy urged the president of the European Council to work towards creating a euro zone-wide banking and fiscal union as soon as possible.He said he believed that the outline for a single supervisory system for the banking sector should be ready before the end of this year.Rajoy added he believed granting the European Stability Mechanism (ESM), the permanent bailout fund, a banking licence that would allow it to tap almost unlimited funds from the European Central Bank (ECB)ECB President Mario Draghi on Thursday said the fund was barred by European law from tapping the central bank for funding."In any case, whatever mechanism is put into place should be an umbrella mechanism, one that is applied equally to all the countries that meet its requirements," Rajoy said in the letter.Spain has already asked for aid for its stricken banks."People have said the main reason why he is not seeking help is because he is too proud. But this is not true. He requested an assistance for the banks because it was the adequate instrument to solve a specific problem. There is no opposition to do it again," the source said.An aid request would entail negotiating a memorandum of understanding with other euro zone countries and would likely bear strong conditionality, something Rajoy wants to discuss in detail before moving forward.Although Spain already complies with stringent EU and International Monetary Fund demands to reform its economy and has announced a package of 65 billion euros of tax hikes and spending cuts in July, the government fears it could now be asked to reform further the pension system.The measure is the last campaign pledge Rajoy has not been forced to break so far and could undermine even more the support for the government after it already fell sharply in recent weeks as hundreds of thousands of Spaniards took the streets to protests against austerity steps.A euro zone official told Reuters last week Spain had for the first time conceded at a meeting between Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble it might need a full bailout worth 300 billion euros if it's borrowing costs remain unsustainably high.Rajoy's office however denied that talks on this issue had taken place.People who discussed the question with Rajoy explain that he may still hope to avoid making the request because he thinks by just knowing that the EU rescue funds and the ECB are geared up would be enough to shield Spain from market pressures."The thinking is that the instruments need to be in place and possibly the risk premium will go down so much that there will be no need to go any further," said one senior politician.

Euro Crisis 2012: Greece Reportedly Saved From Bankruptcy By European Central Bank

 

The European Central Bank (ECB) has saved Greece from bankruptcy for the time being by securing it interim financing in the form of additional emergency loans from the Bank of Greece, German newspaper Die Welt said on Saturday.The ECB's Governing Council agreed at its meeting on Thursday to increase the upper limit for the amount of Greek short-term loans the Bank of Greece can accept in exchange for emergency loans, the newspaper said in an advance copy of the article due to appear in its Saturday edition.Until now the Bank of Greece could only accept T-Bills up to a limit of 3 billion euros ($3.70 billion) as collateral for emergency liquidity assistance (ELA) but it has applied to have this limit increased to 7 billion euros, the daily said, citing central bank sources.The ECB Governing Council gave this wish the green light, the paper said.The move should enable the Greek government to access up to an extra 4 billion euros of funds, the paper said, adding that this should ensure the country keeps its head above water until the "troika" of the European Union, the European Central Bank and the International Monetary Fund decide on the disbursement of the next tranche of money from its aid program in September.The ECB declined to comment, the paper said.

NEWS, 06.06.2012.

European lender plants onus on euro zone governments

 

The European Central Bank today put the onus firmly on euro zone governments to solve the bloc's debt crisis, dashing expectations it could take near-term action despite saying the currency area's economy was under increasing threat.After the ECB left interest rates at 1%, President Mario Draghi said the bank was not open to trading with governments on the policy response to the crisis.Increasingly alarmed by signs Spain's banking crisis is opening a new front in the debt crisis, some in financial markets had hoped Draghi would signal a readiness for the ECB to take fresh action if euro zone governments take bolder action.Instead, Draghi said it was wrong for the ECB to fill a policy vacuum created by others and that there would be no quid pro quo between the central bank and governments."There is no sort of horse trading here," he told a news conference."Some of these problems in the euro area have nothing to do with monetary policy ... and I don't think it would be right for monetary policy to fill other institutions' lack of action."The respite the ECB bought the euro zone early this year by injecting over 1 trillion euros into its banking system with twin 3-year loan operations (LTROs) has faded, with borrowing costs for troubled countries such as Spain soaring again.Draghi played down prospects of any imminent third round of long-term money creation, saying LTROs and the ECB's dormant bond-buying programme were instruments that are in place but temporary and "not infinite"."The issue now is whether these LTROs would actually be effective," he said when asked about another round.Draghi said the decision to leave rates unchanged was taken by "broad consensus". He said a few members, but not many, of the bank had wanted a rate cut.The ECB has never before lowered its main refinancing rate below 1%. Berenberg Bank economist Holger Schmieding said it was an open question whether the ECB would cut rates in July."In addition, the ECB offered no hint today that it may re-activate its two most important non-standard measures, that is the 3-year long-term refinancing operations (LTROs) and the purchases of sovereign bonds," Schmieding said."This suggests that it would take a major further escalation of financial tensions for the ECB to go beyond a possible rate cut in July," he added.Draghi said markets tensions had not returned to the levels of late last year, when the ECB offered the 3-year LTROs, and stressed the euro zone was far from facing a situation like the one after the collapse of Lehman Brothers in September 2008.Although flagging the increasing threat to the currency area's economy, new ECB growth forecasts for 2012 were unchanged - in a -0.5 to 0.3% range. The prediction for the following year was barely changed either."The economic outlook for the euro area is subject to increased downside risks relating in particular to a further increase in the tensions in several euro area financial markets and their potential spillover to the euro area real economy," Draghi said.Markets were unsure how the ECB would react to a recent wave of weak economic data, knowing that the bank also wants to keep the pressure on euro zone leaders to tackle the crisis more effectively.The euro was steady at $1.25 after the decision, Europe's benchmark stock market was up 2% after a recent steep fall.Dilemma Jolted into action by Spain's banking crisis, EU leaders have started considering the form of economic union needed to make the bloc durable as well as more immediate measures to help Madrid.But that end-game is still months or years away and in the meantime investors view the ECB as the institution with the firepower to keep the crisis in check."For the time being, the ECB is sitting on its hands as the bloc's economy and financial markets deteriorate further," said Nicholas Spiro, managing director of Spiro Sovereign Strategy.

"The message from today's ECB meeting is a worrying one: any mutualisation of euro zone debt is a long way off yet credible interim measures to shore up confidence will not be forthcoming for the time being," Spiro added.In the run up to today's meeting, International Monetary Find chief Christine Lagarde said the bank had room to cut rates. Spain and other hard hit parts of the euro zone would also like the ECB to revive its bond buying programme to provide them with cover while they undertake planned repairs to their economies.Euro zone unemployment stood at a record 11% in April, business confidence has slumped and surveys of manufacturing have hit three-year lows, adding to conviction that the bloc's economy is set to drop back into recession.The bank's dilemma is that if does too much, pressure for government action falls. Yet if it does nothing, troubled sovereign debtors could find it harder and harder to finance themselves or maintain confidence in the banks that have bought much of their debt.Draghi said the ECB would continue to supply euro zone banks with all the liquidity they ask for at least until January 15 next year. It had said in October it would give euro zone bank unlimited access to central bank funding at least until July 10.Before the crisis, the ECB allotted a certain amount in its refinancing operations for which banks had to put in bids. Since the crisis began, the ECB has extended the maturity of such operations to as long as 3 years and has lifted funding limits.Most ECB watchers had expected it would keep its powder dry until after June 17 Greek elections and a crunch summit of EU leaders at the end of June, which Draghi and his colleagues hope will dispel any doubts about Europe's commitment to the euro.There are also growing signs that a decision on a bailout for Spain's debt-laden banks will have been taken by the end of the month.

 

EU seeks to shield taxpayers from bank failures

 

European officials proposed Wednesday a new system of financial regulations that aims to keep bank failures from costing taxpayers billions and bankrupting governments.Because many European governments are already overburdened with debts, rescuing their failed banks risks bankrupting some of them. Ireland has had to ask for an international bailout for that reason and investors fear Spain may be next.The banks, in turn, own huge amounts of their governments' bonds, which drop in value when investors lose confidence in the country's financial future. The result is that any fall in confidence in either the banks or the government tends to create a downward spiral requiring foreign financial aid.Under the European Commission's proposal, banks that posed no systemic risk to the stability of financial markets would simply be allowed to fail. Those whose failure did threaten to become unmanageable would be propped up in part by having unsecured creditors of the bank, such as bondholders and shareholders, take losses rather than having governments give them taxpayer money."We're going to break the link between banking crises and public budgets," said Michel Barnier, the European commissioner responsible for the internal market, as he outlined the measures in Brussels. "We don't want taxpayers to have to pay."If he ever achieves that, however, it will be too late to alleviate the current banking crisis afflicting Europe and one of its biggest economies, Spain, where banks are sitting on huge losses that the government cannot afford to plug. The Spanish government's borrowing rates are at painfully high levels around 6.25 percent on fears it will go bankrupt saving the banks.The Commission's complex proposal is not scheduled to take effect fully until 2018. In any event, it also needs the approval of the European Council, composed of the leaders of the 27 EU countries, and the European Parliament, and may be significantly altered in the process of gaining approval.At the moment in Europe there is no central regulator with the power to step in and force weak banks to ask investors for more capital to strengthen finances, or to break them apart and restructure them. There is also no central deposit insurance backstop, making it more likely that a bank failure would exhaust one country's fund to compensate depositors.In the United States, by contrast, state and federal banking regulators have the power to shut down failing banks. The Federal Deposit Insurance Corp. takes over the failed banks and sells their loans and deposits to stronger banks or private investor groups.And unlike in Europe, the FDIC guarantees deposits up to $250,000 per account. That prevents bank runs because depositors are protected if a bank fails.Barnier was at pains to emphasize that he had been working on the proposals for years, and they were not a response to the banking crisis in Spain or other recent bank bailouts.While Barnier said the new rules are necessary because so many banks operate across borders, he did not propose setting up a powerful central banking authority, as the Commission had suggested a weak earlier.Many analysts say Europe needs such a central banking authority, which would have the financial power to bail out banks anywhere in the eurozone, bypassing national governments that are often reluctant to admit the extent of problems in their domestic financial systems. It would also spread the cost of bailouts across multiple countries.The importance of such a measure was made clear in the U.S. bank bailouts in recent years. Insurer AIG, for example, failed financially and had to be rescued. Although it was incorporated in Delaware and headquartered in New York, neither state had to go bankrupt paying for the rescue. The burden was shouldered by the U.S. Treasury.Germany remains opposed to such a measure, however, fearing it will end up paying the bulk of bank rescues.Barnier's proposal is more likely to be welcomed in Berlin. He said it would strengthen the ability of national authorities to hopefully head off bank failures before they happen and to deal with them decisively when they do."If we're going to avoid in the future banking crises, each member state has to be equipped with the appropriate tools to take action in time, not when it's too late," Barnier said.All the national banking authorities would be operating with the same rules rules that would enable them to intervene early, require banks to draw up recovery plans, and even to dismiss the bank's management.If a bank was about to fail, national authorities would have the power to sell or merge the businesses, to create a temporary "bridge bank" to carry out essential functions, to separate good assets from bad ones, and to write down the bank's debts."The resolution tools will ensure that essential functions are preserved without the need to bail out the institution, and that shareholders and creditors bear an appropriate part of the losses," the commission said in an explanatory statement on the proposal.This last part having the bank's unsecured creditors take losses is being termed a "bail-in" in contrast to a taxpayer-funded bailout.Barnier acknowledged that the proposal would not have an immediate effect, but he said EU officials need to take both short-term and long-term actions to regain financial stability.Other measures that senior European officials have floated recently include creating a central deposit insurance scheme to reassure savers across the continent that their money will not disappear in case a bank runs into trouble. A key worry is that rumors of a bank failure might trigger a bank run, fueling panic that could spread across countries.

 

NEWS, 02.05.2012.

Cyber-Attacks 'Bought Us Time' On Iran: U.S. Sources

 

The United States under former President George W. Bush began building a complex cyber-weapon to try to prevent Tehran from completing suspected nuclear weapons work without resorting to risky military strikes against Iranian facilities, current and former U.S. officials familiar with the program said.Barack Obama accelerated the efforts after succeeding Bush in 2009, according to the sources who spoke on condition of anonymity because of the classified nature of the effort. The weapon, called Stuxnet, was eventually used against Iran's main uranium enrichment facilities.The effort was intended to bridge the time of uncertainty between U.S. administrations after the 2008 presidential election in which Obama was elected, and allow more time for sanctions and diplomacy to avert Iranian nuclear weapon development, according to the current and former officials.The sources gave rare insight into the U.S. development of its cyber-warfare capabilities and the intent behind it.One source familiar with the Bush administration's initial work on Stuxnet said it had stalled Iran's nuclear program by about five years."It bought us time. First, it was to get across from one administration to the next without having the issue blow up. And then it was to give Obama a little more time to come up with alternatives, through the sanctions, et cetera," said the source.Only in recent months have U.S. officials become more open about the work of the United States and Israel on Stuxnet, the sophisticated cyber-weapon directed against Iran's Natanz nuclear enrichment facility that was first detected in 2010.The cyber-attacks provided the United States with an avenue to try to stop Iran from producing a suspected weapon without turning to military strikes against Iranian facilities - all at a time when U.S. forces already were fighting wars in Iraq and Afghanistan, the sources said.In the end, senior U.S. officials agreed the benefit of stalling Iran's nuclear program was greater than the risks of the virus being harnessed by other countries or terrorist groups to attack U.S. facilities, one source said.Two sources with direct knowledge of the U.S. program said it cost hundreds of millions of dollars to carry out.The United States for years has been developing - and using - offensive cyber-capabilities to interfere with the computers of adversaries, including during the Battle of Falluja in Iraq in 2004 and in finding Osama bin Laden and other al Qaeda figures, the sources said.Last year, the United States also explicitly stated for the first time that it reserved the right to retaliate with military force against a cyber-attack.The New York Times reported on Friday that from his first months in office, Obama secretly ordered attacks of growing sophistication on the computer systems running the main Iranian nuclear enrichment facilities, greatly widening the first sustained U.S. use of cyber-weapons. The Times said the attacks were code-named Olympic Games.White House spokesman Josh Earnest declined comment on the substance of the New York Times article, but denied "in the strongest possible terms" that it was an authorized leak of classified information. Obama is seeking re-election on November 6 in part on the strength of his foreign policy achievements.Reuters reported on May 29 that the United Nations agency charged with helping member nations secure their national infrastructures plans to issue a sharp warning about the risk of the Flame computer virus that was recently discovered in Iran and other parts of the Middle East.Stuxnet is one of many weapons in the U.S. cyber-arsenal, which some experts say also includes a data-gathering tool known as Duqu that was deployed to cull information about Iran's weapons programs.Iranian officials have described the cyber-attacks as part of a "terrorist" campaign backed by Israel and the United States.Some current and former U.S. officials, who asked not to be named, criticized the Obama administration for talking too freely to the media about classified operations.Representative Peter King, the Republican chairman of the House of Representatives Committee on Homeland Security, said, "I believe that no one, including the White House, should be discussing cyber-attacks.""The U.S. will now be blamed for any sophisticated, malicious software, even if it was the Chinese or just criminals," added Jason Healey, who has worked on cyber-security for the Air Force, White House and Goldman Sachs, and is now with the Atlantic Council research group.

Spain PM insists on sticking to austerity measures

 

Spain will stick to harsh austerity measures until it emerges from financial crisis, the prime minister said Saturday, promising that the country would survive the present economic turmoil.Mariano Rajoy acknowledged that the country is experiencing turbulence, but said "we are not at the edge of a precipice, we will not sink."The government has "the will to persevere in this line for as long as is necessary," he said.Spain, where unemployment stands at a Eurozone high of 24.4 percent, has imposed spending cuts and tax hikes to escape a crisis many fear could eventually swallow other countries using the European single currency.Rajoy said Saturday that he supported the creation of a single European fiscal authority to uphold the credibility of the euro, and acknowledged that for this to happen it would be necessary for member states to "surrender more of their fiscal autonomy."He said that while it was possible Spain could have lived beyond its means, it was also true that those who are now criticizing Spain a reference to Germany had also lent it money at very cheap rates.German Chancellor Angela Merkel has long maintained that austerity is the most important step toward easing the eurozone debt crisis, however, the leaders of some of those countries hardest hit faced with anti-austerity demonstrations that have at times turned violent have also called for steps to be taken to try and boost employment.Newly elected French president Francois Hollande has also warned against too much of the belt-tightening that Merkel advocates for fear it could unleash political chaos.Demonstrations against austerity measures in Greece frequently turn violent, and Spanish police baton-charged striking coal miners marching in Madrid on Thursday after a group started throwing stones and bottles. Police said two people were arrested and nine were slightly hurt.Despite months of painful austerity reforms by Rajoy's conservative government, there is growing concern that its leaders have not done enough and Spanish banks may need to be saved from loans gone bad and foreclosures of property now worth far less than the loans paid out for it.The country's banking sector is laden with soured investments on real estate and the government recently needed (EURO)19 billion ($23.4 billion) to rescue just one bank, Bankia SA.Some estimates have put a complete Spanish banking sector bailout cost at between (EURO)50 billion and (EURO)150 billion, but Spain only has (EURO)5 billion left in the (EURO)19 billion bailout fund it established in 2009.Spain's banking sector, however, is not the sole issue. The economy is mired in its second recession in three years and is forecast to contract 1.7 percent for the year.This means the country has to raise money in bond markets and the interest rate on Spanish 10-year bonds finished trading Friday at 6.47 percent, as reported by financial data provider FactSet.A rate of 7 percent is considered unsustainable in the long run. Countries such as Greece, Portugal and Ireland that have faced such rates have had to be bailed out.Spain's current banking problems have startling similarities with Ireland. Both countries witnessed unprecedented property building and buying sprees enabled by their 1999 entry into the euro.

It was an entry that many economists say was partly responsible for both countries' present problems by entering into the single currency with more stable economies their credit-risk profiles were lowered giving their banks unprecedented access to international loans at rock-bottom rates.

NEWS,12.04.2012.

North Korean missile crisis: Will Pyongyang defy the world?

Fighter jets roared through the skies over downtown Pyongyang on Thursday as the world watched to see whether North Korea would defy international warnings and launch a long-range rocket over the Yellow Sea. The five-day window for the launch of a rocket mounted with an observation satellite opened on Thursday as North Koreans woke to details about developments at a Workers' Party conference where leader Kim Jong Un ascended to top posts and brought with him a new generation of officials. His father, Kim Jong Il, was granted the posthumous title of "eternal general secretary" at the special one-day party conference on Wednesday. The immortalisation of the late leader provided a glimpse into how North Korea will handle the nation's second hereditary succession and indicates he will be honored much in the same way his father, Kim Il Sung, was made "eternal president" following his 1994 death.Footage on state TV Thursday showed Kim Jong Un seated at the front of the conference with white statues of his grandfather and a new statue of his father in his trademark khaki work ensemble, one arm on his hip. There was no word on Thursday morning on the timing of the controversial launch, which the North has said will take place sometime between Thursday and Monday. In 2009, a similar launch from an east coast site took place on the second day of a five-day window. The United States, Japan, Britain and others say the launch would constitute a provocation and would violate UN Security Council resolutions banning North Korea from developing its nuclear and missile programs.
Experts say the Unha-3 carrier is similar to the type of rocket that could be used to fire a missile mounted with a nuclear warhead to strike the US or other targets.

 Software engineer's job best, reporter's fifth worst

A reporter's job figures among the ten worst professions, alongside the likes of butchers, waiters and dishwashers, as per a new study by the US-based consultancy CareerCast, which has named a software engineer's occupation as the best for the year 2012.The annual study has ranked a total of 200 jobs from best to worst on the basis of five core criteria such as physical demands, work environment, income, stress and hiring outlook.It mostly covered the jobs in the US and is based on data from the US Bureau of Labour Statistics and other government agencies.Among the ten worst jobs, the study has named a newspaper reporter's occupation at the fifth position, after that of a lumberjack, dairy farmer, enlisted military soldier and oil rig worker.Others in the ten worst jobs for 2012 include waiter/waitress, meter reader, dishwasher, butcher and broadcaster."As the digital world continues to take over and provide on-demand information, the need for print newspapers and daily newscasts is diminishing. To be sure, both jobs once seemed glamorous, but on-the-job stress, declining job opportunities and income levels are what landed them on our worst Jobs list," the report noted.The study has also listed out ten most stressful jobs and none of these occupations figure in the list of ten best jobs.CareerCast has ranked enlisted soldier, firefighter, airline pilot, military general, police officer, event coordinator, public relations executive, senior corporate executive, photo-journalist and taxi driver among the most stressful jobs.On the other hand, job of a software engineer has topped the list in the best jobs category, followed by actuary, human resources manager, dental hygienist and financial planner.Software engineers earn a median income of more than $ 88,000 with few physical demands and minimal stress, it noted.The report further said that those in the top categories earn between $ 68,000 to $ 104,000 annually.

NEWS,10.04.2012.

North Korea readies for controversial rocket launch

 

Isolated and impoverished North Korea says it is ready to go ahead with its proposed long-range rocket launch in a move that has sparked immediate condemnation from South Korea and Russia and a plea from China, its main ally, for calm.The launch of the Unha-3 rocket, which North Korea says will merely put a weather satellite into space, breaches UN sanctions imposed to prevent Pyongyang from developing a missile that could carry a nuclear warhead."We are expecting to complete the assembly by today," said Ryu Kum-chol, vice director of the space development department of the Korean Central Space Committee."The launch of Kwangmyongsong-3 satellite is the gift from our people to our great leader, comrade Kim Il-sung, on the occasion of his 100th birthday, so this cannot be a missile test," he added.The launch, due between Thursday and next Monday, will coincide with the anniversary celebrations of the country's founder and North Korea says that it is its sovereign right to launch the rocket.The West says it is a disguised ballistic missile test by a country which walked out of so-called six-party disarmament talks three years ago.South Korea, which remains technically at war with the North after their 1950-53 conflict ended with a truce, not a treaty, warned Pyongyang it would deepen its isolation if it went ahead with the launch.Security sources in Seoul, citing satellite images, have said that North Korea is also preparing a third nuclear test following the rocket launch, something it did in 2009, a move bound to trigger further condemnation from the West."It is disappointing that the North is forcing its people to endure sacrifices with this provocative action and is bringing isolation and sanctions to itself from the international community," the South's Unification Ministry said in a statement. Russia, a former backer of North Korea which has boosted economic ties with Pyongyang recently, condemned the launch."We consider Pyongyang's decision to conduct a launch of a satellite an example of disregard for UN Security Council decisions," state-run news agency RIA quoted Russian Foreign Ministry spokesman Alexander Lukashevich as saying.The rocket will bisect a sea that separates South Korea and China and its flight path will take it towards the Philippines where a second stage of the rocket is due to come down in waters close to the archipelago.China, which backs North Korea economically and diplomatically, reiterated its pleas for calm and said it had "repeatedly expressed its concern and anxiety about the developments", Foreign Ministry spokesman Liu Weimin told a press briefing in Beijing.The prospect of a North Korean rocket launch has alarmed Japan, which was overflown by an earlier rocket and said it would shoot it down if it crossed its airspace."If North Korea launches a missile, Japan will consider the next step in cooperation with international society including the UN Security Council," Japanese Prime Minister Yoshihiko Noda said.Airlines have re-routed flights to avoid the rocket's path.

France's economy grinding to a halt

France's economy posted no growth in the first quarter and there are no signs of a strong recovery in activity in the coming months, according to a Bank of France survey today.In its monthly report, the Bank of France indicated that the euro zone's second largest economy avoided a recession, after it grew by 0.2% in the fourth quarter.However, it said that activity was likely to remain stable in the coming months, a picture confirmed by soft manufacturing data today from the INSEE national statistics office.The Bank of France said that its business sentiment indicator for industry was unchanged in March at 95, a 3-month low it reached in February.It noted that industrial activity improved, with rises in pharmaceuticals and chemicals, transport equipment and hi-tech goods. "Forecasts suggest that activity will remain stable in the short term," the bank said.Economists said that w ith fiscal tightening across Europe weighing on external demand for French goods and with rising domestic unemployment likely to peak next year above 10%, it was no surprise the growth outlook was weak."The figures are a little bit disappointing," said Michel Martinez, economist at Societe Generale in Paris, who forecasts modest 0.5% growth in France for the year as a whole."They are in line with the cyclical picture of the French economy which stalled in the fourth- and the first-quarter and where the recovery will be weak," he said. "You cannot have a tough fiscal adjustment over two years and expect strong growth at the same time."President Nicolas Sarkozy, who trails his Socialist rival in polls ahead of next month's crucial presidential runoff, has made cutting France's deficit a top priority. His government cut the deficit to 5.2% of GDP last year, below its target of 5.7%, and has pledged to balance the budget by 2016.The Bank of France said industrial capacity utilization was unchanged in March and remained below its long-term average. Order books were close to normal levels while inventories were slightly above target.For the services sector, meanwhile, the business sentiment level was also unchanged at 93, while the Bank of France said activity here had grown at a faster pace on the back of transport and engineering.In a separate survey, INSEE said that manufacturing output fell by 1.2% in February after slipping a revised 0.1% in January.For industry as a whole, output increased by 0.3%, in line with economists' forecasts, helped by a rise in gas and electricity consumption amid a cold snap.Industrial output rose a revised 0.2% in month-on-month in January, in line with the euro zone average."Industrial production has been on a downward slope since mid-2011," wrote Fabrice Montagne, an economist at Barclays Capital."We will need to see stronger signs in terms of business sentiment, demand and competitiveness before we can expect a clear upswing in the French industrial sector," he said.Economists said that the data confirmed the picture of an economy in the doldrums."Today's industrial production data support our forecast for flattish GDP in the first quarter," wrote Tullia Bucco, an economist at Unicredit in Milan.Insee had also forecast last month that France's 2 trillion euro economy would post no growth in the first quarter.For the last three months as a whole, manufacturing output fell by 1.1%. It stood 1.6% below its level of a year earlier.Hit by the closure of the Petit-Couronne plant, owned by insolvent oil refiner Petroplus, refining activity plunged by 13% in February.The Purchasing Managers' index (PMI) data last week showed the biggest decline in factory activity for 33 months in March, after briefly stabilizing in February.

NEWS,18.03.2012.

US: North Korean satellite launch would be "deal-breaker"

North Korea's announcement Friday of plans to launch an observation satellite in April brought condemnation from the United States, South Korea, Japan and the United Nations due to concerns that the launch could be used to test ballistic missile technology. US State Department spokeswoman Victoria Nuland said Washington now had 'grave concerns' about the February 29 agreement in which North Korea agreed to a moratorium on its nuclear and long-range missile programmes and international nuclear inspections, in exchange for 240,000 metric tons of food aid from the United States. 'We made clear unequivocally that we considered that any satellite launch would be a deal-breaker,' she said Friday. The Kwangmyongsong-3, borne by the Unha-3 carrier rocket, was to be launched between April 12-16 to mark the centenary of the birth of North Korea's founder, Kim Il Sung, who was born on April 15. Nuland said that a launch would be 'highly provocative' and in violation of United Nations Security Council resolutions 1718 and 1874, which banned launches using ballistic missile technology. The February 29 agreement had raised hopes that the six-party talks on Pyongyang's nuclear and ballistic missile programmes - including North and South Korea, the United States, Japan, China and Russia - could be resumed. Nuland said that US officials consulted Friday with other participants, and all were 'caught by some surprise' by North Korea's satellite announcement. 'Now, the question is for all of the six-party members to make clear that this is not the way to go forward if (the North Koreans) want to work with us,' she said. Nuland said that a North Korean launch would create 'tensions,' making 'implementation of any kind of a nutritional agreement quite difficult.' The South Korean Foreign Ministry expressed 'grave concern' over the planned launch, which it said would be a 'clear violation' of United Nations Security Council Resolution 1874, which bans 'any launch using ballistic missile technology.' Seoul said it would 'closely cooperate' with the other members of the six-party talks 'so that North Korea ceases such a provocative action.' In Tokyo, chief cabinet secretary Osamu Fujimura said: 'Japan will strongly urge North Korea not to go ahead with the launch.' The possible satellite launch 'undermines the efforts to settle various issues, which have been made through talks' with North Korea, Fujimura said. A spokesman for the North Korean Committee for Space Technology was quoted by Pyongyang's official news agency KCNA as saying the move would 'offer an important occasion of putting the country's technology of space use for peaceful purposes on a higher stage.' The 'polar-orbiting, Earth-observation satellite will be blasted off southward' from the Sohae Satellite Launching Station in the eastern province of North Pyongan, which lies on the Chinese border and Yellow Sea, the spokesman said. Pyongyang denied any military aspect to the launch. 'The DPRK will strictly abide by relevant international regulations and usage concerning the launch of scientific and technological satellites for peaceful purposes,' the spokesman said. Previous launches of multi-stage rockets by North Korea in 1998 and 2009, which Pyongyang said aimed to put satellites into orbit, were condemned by the US, South Korea and Japan as potential tests of military ballistic technology. The deal, under which Pyongyang was also to stop the enrichment of uranium at a major nuclear facility and permit visits by nuclear inspectors, had raised hopes of a possible resumption of six-nation talks on North Korea's nuclear weapons programme, which have been stalled since late 2008. The talks reached an agreement in 2005 in which North Korea was to dismantle its nuclear programme, but the reclusive communist state has since carried out two nuclear tests in addition to the long-range missile launches. The UN Security Council passed Resolution 1874 in June 2009 in response to the tests. UN Secretary General Ban Ki-moon urged Pyongyang 'to reconsider its decision in line with its recent undertaking to refrain from long-range missile launches.' He sai a launch would be a violation of the UN resolutions.