Showing posts with label countries. Show all posts
Showing posts with label countries. Show all posts

Friday, August 24, 2012

NEWS,24.08.2012


dear folLowers, i will return with new post on 16th september

 

Mission Accomplished for Big Oil?

In 2011, after nearly nine years of war and occupation, U.S. troops finally left Iraq. In their place, Big Oil is now present in force and the country’s oil output, crippled for decades, is growing again. Iraq recently reclaimed the number two position in the Organization of the Petroleum Exporting Countries (OPEC), overtaking oil-sanctioned Iran. Now, there’s talk of a new world petroleum glut. So is this finally mission accomplished?Well, not exactly. In fact, any oil company victory in Iraq is likely to prove as temporary as George W. Bush’s triumph in 2003. The main reason is yet another of those stories the mainstream media didn’t quite find room for: the role of Iraqi civil society. But before telling that story, let’s look at what’s happening to Iraqi oil today, and how we got from the “no blood for oil” global protests of 2003 to the present moment.Here, as a start, is a little scorecard of what’s gone on in Iraq since Big Oil arrived two and a half years ago: corruption’s skyrocketed; two Western oil companies are being investigated for either giving or receiving bribes; the Iraqi government is paying oil companies a per-barrel fee according to wildly unrealistic production targets they’ve set, whether or not they deliver that number of barrels; contractors are heavily over-charging for drilling wells, which the companies don’t mind since the Iraqi government picks up the tab.Meanwhile, to protect the oil giants from dissent and protest, trade union offices have been raided, computers seized and equipment smashed, leaders arrested and prosecuted. And that’s just in the oil-rich southern part of the country. In Kurdistan in the north, the regional government awards contracts on land outside its jurisdiction, contracts which permit the government to transfer its stake in the oil projects  up to 25%  to private companies of its choice. Fuel is smuggled across the border to the tune of hundreds of tankers a day.In Kurdistan, at least the approach is deliberate: the two ruling families of the region, the Barzanis and Talabanis, know that they can do whatever they like, since their Peshmerga militia control the territory. In contrast, the Iraqi federal government of Prime Minister Nouri al-Maliki has little control over anything. As a result, in the rest of the country the oil industry operates, gold-rush-style, in an almost complete absence of oversight or regulation.Oil companies differ as to which of these two Iraqs they prefer to operate in. BP and Shell have opted to rush for black gold in the super-giant oilfields of southern Iraq. Exxon has hedged its bets by investing in both options. This summer, Chevron and the French oil company Total voted for the Kurdish approach, trading smaller oil fields for better terms and a bit more stability.Keep in mind that the incapacity of the Iraqi government is hardly limited to the oil business: stagnation hangs over its every institution. Iraqis still have an average of just five hours of electricity a day, which in 130-degree heat causes tempers to boil over regularly. The country’s two great rivers, the Tigris and Euphrates, which watered the cradle of civilization 5,000 years ago, are drying up.  This is largely due to the inability of the government to engage in effective regional diplomacy that would control upstream dam-building by Turkey.After elections in 2010, the country’s leading politicians couldn’t even agree on how to form a government until the Iraqi Supreme Court forced them to. This record of haplessness, along with rampant corruption, significant repression, and a revival of sectarianism can all be traced back to American decisions in the occupation years. Tragically, these persistent ills have manifested themselves in a recent spate of car-bombings and other bloody attacks.In the period before and around the invasion, the Bush administration barely mentioned Iraqi oil, describing it reverently only as that country’s “patrimony.” As for the reasons for war, the administration insisted that it had barely noticed Iraq had one-tenth of the world’s oil reserves. But my new book reveals documents I received, marked SECRET/NOFORN, that laid out for the first time pre-war oil plans hatched in the Pentagon by arch-neoconservative Douglas Feith’s Energy Infrastructure Planning Group (EIPG).In November 2002, four months before the invasion, that planning group came up with a novel idea: it proposed that any American occupation authority not repair war damage to the country’s oil infrastructure, as doing so “could discourage private sector involvement.” In other words, it suggested that the landscape should be cleared of Iraq’s homegrown oil industry to make room for Big Oil.When the administration worried that this might disrupt oil markets, EIPG came up with a new strategy under which initial repairs would be carried out by KBR, a subsidiary of Halliburton. Long-term contracts with multinational companies, awarded by the U.S. occupation authority, would follow. International law notwithstanding, the EIPG documents noted cheerily that such an approach would put “long-term downward pressure on [the oil] price” and force “questions about Iraq’s future relations with OPEC.”At the same time, the Pentagon planning group recommended that Washington state that its policy was “not to prejudice Iraq’s future decisions regarding its oil development policies.” Here, in writing, was the approach adopted in the years to come by the Bush administration and the occupation authorities: lie to the public while secretly planning to hand Iraq over to Big Oil.There turned out, however, to be a small kink in the plan: the oil companies declined the American-awarded contracts, fearing that they would not stand up in international courts and so prove illegitimate. They wanted Iraq first to have an elected permanent government that would arrive at the same results. The question then became how to get the required results with the Iraqis nominally in charge. The answer: install a friendly government and destroy the Iraqi oil industry.In July 2003, the U.S. occupation established the Iraqi Governing Council, a quasi-governmental body led by friendly Iraqi exiles who had been out of the country for the previous few decades. They would be housed in an area of Baghdad isolated from the Iraqi population by concrete blast walls and machine gun towers, and dubbed the Green Zone.  There, the politicians would feast, oblivious to and unconcerned with the suffering of the rest of the population.The first post-invasion Oil Minister was Ibrahim Bahr al-Uloum, a man who held the country’s homegrown oil expertise in open contempt. He quickly set about sacking the technicians and managers who had built the industry following nationalization in the 1970s and had kept it running through wars and sanctions. He replaced them with friends and fellow party members. One typical replacement was a former pizza chef.The resulting damage to the oil industry exceeded anything caused by missiles and tanks. As a result the country found itself -- as Washington had hoped -- dependent on the expertise of foreign companies. Meanwhile, not only did the Coalition Provisional authority (CPA) that oversaw the occupation lose $6.6 billion of Iraqi money, it effectively suggested corruption wasn't something to worry about.  A December 2003 CPA policy document recommended that Iraq follow the lead of Azerbaijan, where the government had attracted oil multinationals despite an atmosphere of staggering corruption (“less attractive governance”) simply by offering highly profitable deals. Now, so many years later, the corruption is all-pervasive and the multinationals continue to operate without oversight, since the country’s ministry is run by the equivalent of pizza chefs.The first permanent government was formed under Prime Minister Maliki in May 2006. In the preceding months, the American and British governments made sure the candidates for prime minister knew what their first priority had to be: to pass a law legalizing the return of the foreign multinationals tossed out of the country in the 1970s to run the oil sector.The law was drafted within weeks, dutifully shown to U.S. officials within days, and to oil multinationals not long after. Members of the Iraqi parliament, however, had to wait seven months to see the text.The trouble was: getting it through that parliament proved far more difficult than Washington or its officials in Iraq had anticipated. In January 2007, an impatient President Bush announced a “surge” of 30,000 U.S. troops into the country, by then wracked by a bloody civil war. Compliant journalists accepted the story of a gamble by General David Petraeus to bring peace to warring Iraqis.In fact, those troops spearheaded a strategy with rather less altruistic objectives: first, broker a new political deal among U.S. allies, who were the most sectarian and corrupt of Iraq’s politicians (hence, with the irony characteristic of American foreign policy, regularly described as “moderates”); second, pressure them to deliver on political objectives set in Washington and known as “benchmarks” -- of which passing the oil law was the only one ever really talked about: in President Bush’s biweekly video conferences with Maliki, in almost daily meetings of the U.S. ambassador in Baghdad, and in frequent visits by senior administration officials.On this issue, the Democrats, by then increasingly against the Iraq War but still pro-Big Oil, lent a helping hand to a Republican administration. Having failed to end the war, the newly Democrat-controlled Congress passed an appropriations bill that would cut off reconstruction funds to Iraq if the oil law weren’t passed. Generals warned that without an oil law Prime Minister Maliki would lose their support, which he knew well would mean losing his job. And to ramp up the pressure further, the U.S. set a deadline of September 2007 to pass the law or face the consequences.It was then that things started going really wrong for Bush and company. In December 2006, I was at a meeting where leaders of Iraq’s trade unions decided to fight the oil law. One of them summed up the general sentiment this way: “We do not need thieves to take us back to the middle ages.” So they began organizing. They printed pamphlets, held public meetings and conferences, staged protests, and watched support for their movement grow.  Most Iraqis feel strongly that the country’s oil reserves belong in the public sector, to be developed to benefit them, not foreign energy companies. And so word spread fast -- and with it, popular anger. Iraq’s oil professionals and various civil society groups denounced the law. Preachers railed against it in Friday sermons. Demonstrations were held in Baghdad and elsewhere, and as Washington ratcheted up the pressure, members of the Iraqi parliament started to see political opportunity in aligning themselves with this ever more popular cause. Even some U.S. allies in Parliament confided in diplomats at the American embassy that it would be political suicide to vote for the law.By the September deadline, a majority of the parliament was against the law and  a remarkable victory for the trade unions it was not passed. It’s still not passed today.Given the political capital the Bush administration had invested in the passage of the oil law, its failure offered Iraqis a glimpse of the limits of U.S. power, and from that moment on, Washington’s influence began to wane.Things changed again in 2009 when the Maliki government, eager for oil revenues, began awarding contracts to them even without an oil law in place. As a result, however, the victory of Big Oil is likely to be a temporary one: the present contracts are illegal, and so they will last only as long as there’s a government in Baghdad that supports them.This helps explain why the government's repression of trade unions increased once the contracts were signed.  Now, Iraq is showing signs of a more general return to authoritarianism (as well as internecine violence and possibly renewed sectarian conflict).But there is another possibility for Iraq. Years before the Arab Spring, I saw what Iraqi civil society can achieve by organizing: it stopped the world’s superpower from reaching its main objective and steered Iraq onto a more positive course.Many times since 2003 Iraqis have moved their country in a more democratic direction: establishing trade unions in that year, building Shi'a-Sunni connections in 2004, promoting anti-sectarian politicians in 2007 and 2008, and voting for them in 2009.  Sadly, each of these times Washington has pushed it back toward sectarianism, the atmosphere in which its allies thrive.  While mainstream commentators now regularly blame the recent escalation of violence on the departure of U.S. troops, it would be more accurate to say that the real reason is they didn’t leave far sooner.Now, without its troops and bases, much of Washington’s political heft has vanished. Whether Iraq heads in the direction of dictatorship, sectarianism, or democracy remains to be seen, but if Iraqis again start to build a more democratic future, the U.S. will no longer be there to obstruct it.  Meanwhile, if a new politics does emerge, Big Oil may discover that, in the end, it was mission unaccomplished.

Sunday, July 29, 2012

NEWS,29.07.2012



The Countries That Will Win the Most Olympic Medals

 

According to a newly released report, the United States is predicted to win the most medals at the London 2012 Olympics. For a country with less than 5% of the world’s population, the U.S. is expected to win 103 medals at the XXX Olympiad, 10% more than the runner up China. This may come as no surprise to some, considering that it has won the most medals in 14 of the 25 Summer Games that it has participated in,including the past five Games.However, based on a report, published by the Tuck School of Business at Dartmouth, the number of medals a country wins supports the probability that it will win medals in subsequent Olympics. The report’s model predicted the medal count in Beijing in 2008 with 95% accuracy and has been the most accurate predictor of medal distribution among countries since it was unveiled for the Sydney Games in 2000. Based on the report, 24/7 Wall St. identified the ten countries that will win the most Olympics Medals at the London Summer Games.The accuracy of the formula is impressive, given that it only considers four main factors. It includes two economic measures population and gross domestic product (GDP) per capita which it assigns equal weight. The other two factors that it considers are unique to the Olympics and include total medals won, which it accords the most weight, and whether a country is hosting the Olympics, which has been assigned a different weight with each game.According to Emily Williams, author of the report and PhD candidate at London Business School and a recent graduate of Tuck School of Business at Dartmouth, when looking at the results “the lagged medal share has the biggest impact and the hosting effect is also pretty substantial.” The model takes into account the total number of medals won by each country in every Olympiad since 1960. China and the U.S. have dominated in recent years, which was factored into their 2012 estimate. Meanwhile, Russia, Australia, and Germany, fell below expectations last year, which has hurt their projections for this year as well.The host effect is considerable and should be a boon to the United Kingdom this summer. “The U.K. stands ready to greatly benefit in terms of its overall medal count and especially its coveted gold medal total,” Williams observes in the report. For the United Kingdom, the model predicts that this advantage will assure third place this summer with 25 golds, up from fourth place in 2008 when it was awarded only 19. It will also increase its total medals won from 47 in 2008 to 62 in 2012.In the 2004 study which the Williams’ report is based on, the authors suggest that the host effect could be the result of diminished costs for athletes from the host nation to participate, the benefit of participating in a home facility or the motivational force of competing before family, friends and fellow countrymen.A look at the countries with the most medals demonstrates the impact that a country’s population can have on the eventual medal count. According to the report, “The larger the population a country has, the more chance it will have an athlete with the extraordinary natural ability necessary to become an Olympic champion.” Of the top ten countries that are predicted to win the most medals this year, seven of the 10 are among the 10 most populous countries in the world. The exceptions are Pakistan, Nigeria and Bangladesh.Neither the population size nor the GDP per capita can be considered in isolation of the other. The U.S. and Germany both do well because they have large populations and considerable wealth. But having an edge in one of these factors can help compensate for a weakness in the other. For instance, China, with its large population, wins more medals than many countries with a higher GDP per capita. Although Australia’s population size ranks just 51st in the world, its GDP per capita ranks seventh, and its standing in the medal count for 2012 is predicted to be seventh.Based on the report, “Jolly Good Show: Who Will Win the 2012 Olympic Games in London?,” by Emily Williams, which relies on the model developed by Dartmouth professors Andrew Bernard and Meghan Busse, 24/7 Wall St. reviewed the countries that are likely to win the most medals at the 2012 London Games. To approximate the data which was used to calculate the projections, we considered 2011 GDP and population data from the World Bank for the 28 countries that the model predicts will win 6 or more gold medals. We obtained total Summer Olympics medal counts from the NBC website, also to approximate the data used for the formula. For countries that have not consistently had the same borders, including Germany and Russia, the medal counts for the entire area were included. For example, all medals won by the former USSR were included in Russia’s count.These are the ten countries that will win the most medals in the London Olympic Games.



Aurora Shooting: Mall's Troubled History Of Racism, Crime

Until last week, the Town Center at Aurora seemed like a typical mall.But the 37-year-old shopping center had problems even before July 20, when a gunman opened fire at a midnight screening of "The Dark Knight Rises" in the movie theater that sits adjacent to the mall in its parking lot.In recent years, shoppers have fled the aging mall for fancier centers like nearby Cherry Creek. Management, seeking to weed out what it perceived as undesirable customers, set a curfew for minors and enforced a dress code for shoppers. In 2004, a mall leasing agent was caught on audio tape explaining that the mall wanted to attract more whites and "reduce negative aspects" like "young, black customer(s)." "This is why we don't hang around aurora mall/Century 16," one resident tweeted hours after the shooting. "Aurora mall has always been ghetto, tho" said another.In some ways, Town Center's history follows the same rise and stumble as many American malls. When it opened in 1975, J.C. Penney and Sears fed the shopping appetite of new middle class fleeing Denver for cul-de-sacs and spotless mailboxes. In 1998, Simon Property Group, the largest mall owner in America with 221 U.S. properties and an annual revenue of $4.3 billion in 2011, acquired the mall. Simon rechristened the structure in 2005, calling it Town Center, an appropriate name in Aurora; the sprawling suburb of 325,000 had built its own municipal campus across the highway from the mall in 2003 -- an attempt to manufacture a downtown.When malls were first conceived, they were meant to be utopias. Early mall developer Victor Gruen called them "crystallization points for suburbia's community life." But these days, the rise of online shopping and a lingering economic crisis have sucked away malls' reverie. Many are abandoned, attracting crime and draining municipal budgets; others are losing shops. The average vacancy rate for regional malls is currently at 8.9 percent, according to Reis Inc., a real estate data and analysis firm. Once hovering around 5 or 6 percent in the mid 2000s, the rate nearly doubled over the course of the recession.While Town Center hasn't suffered from fleeing stores, it has coped with crime before. Gang activity surfaced at the mall in the early 2000s and was one factor that led Simon to announce it planned to spruce up the center with a $100 million renovation. In 2005, during the renovations, a woman was shot and killed outside the Champs store. The city of Aurora contributed $15 million in tax incentives to the renovations.At the time, the mall also faced accusations of racism. Before the shooting, a leasing agent was caught on audio tape by one of the mall's tenants saying the planned renovations were in part to attract more white people. After local television station 7NEWS aired the comments in August 2004, Simon suspended the agent, promising to hire more black staff and begin a parental patrol program that paid adults to supervise youth. Three months after the shooting in 2005, Simon also established a curfew for teens. The movie theater, where the shooting occurred Friday, was built in 1998 by Century Theaters now a part of Cinemark in the southeast parking lot of the oval-shaped mall complex. Though unattached, the Century 16 theater has always been considered part of the mall. The theater sits on land registered to Simon Debartolo Group, the former name of Simon Property Group, according to the Arapahoe County assessor database. The theater is owned by Century Theatres.Up until this week, the theater was also listed as a business on Simon's official website for the mall alongside the rest of the stores. But in the days following the shooting, Town Center removed Century 16 from its online directory. A cache of the old listing from July 7 is still available.In a written statement sent to The Huffington Post on Thursday, Simon said, "There is no connection between our operation of the mall and the terrible tragedy which occurred at the theater last Friday morning. Since 2004, we have invested nearly $60 million in Town Center at Aurora and have made it a great shopping venue for our tenants and customers." Les Morris, a spokesman for Simon, refused to answer questions or confirm facts about the mall. Since the shooting, store employees have been told by management not to talk to press, according to a cashier at the mall boutique Luxie.In a statement released on Friday, Cinemark said that it was "deeply saddened about this tragic incident."Locally, there is a history of complaints about racial profiling at the mall. In 1990, the NAACP spoke out about the mall's security guards, provoking then owner Corporate Property Investors to retrain staff and hire more minority guards.In wake of the scandal over the leasing agent's comments, residents hoped the mall's policies might change for good. Alvertis Simmons, 55, a community organizer in Aurora, flew to Simon's headquarters in Indianapolis that year to discuss how the mall could improve its relationship with minorities. He worked with the company to implement its parental patrol program.But Simon never followed through on its promise to hire more black staff, according to Simmons, even though it hired a few contractors during the renovations. "They could do better," he said this week. "Aurora mall would have never changed their culture had they not been taped."The leasing agent is no longer employed at Simon, the company said in its statement Thursday.In 2006, the local chapter of the Association of Community Organizations for Reform Now (ACORN) conducted a survey of 1,000 mall shoppers on discrimination and identified about 50 minority youth who said they were were profiled by mall security, mostly because of their clothing. "There was no clear demarcation [in the dress code] of what was gang attire and what was urban culture," said Ben Hanna, 31, who worked as head organizer for ACORN at the time. The Simon Property Group code of conduct posted on the websites and in the hallways of many of its malls does not mention "gang apparel" but requires shoppers to wear"appropriate" clothing. "Apparel that may provoke a disturbance or incite violence is prohibited," it states.Cinemark never adopted any of the mall's policies such as the dress code or parental patrol, according to Simmons. Still, the theater's clientele was affected as they also patronized the mall, he said. Freddie Hanns, 60, visits the mall almost every week and worked briefly as a contractor there during the renovations. Hanns, like Simmons, is black. "I think the mall has gotten better," he said. "It couldn't get any worse."But Aurora's racial tensions have mounted in the past decade as downtown Denver gentrifies and minorities move to the suburbs, according to Jeremy Nemeth, chair and professor of urban planning at the University of Colorado Denver. In 2000, Aurora was 13.4 percent black, 19.8 percent Hispanic and 68.9 percent white. In 2010, it was 15.7 percent black, 28.7 Hispanic and 61.1 percent white.Massacres like the one on July 20, however, are generally not caused by shifting demographics. Law enforcement officials call people like Aurora suspect James Holmes "active shooters," individuals who open fire in crowded areas and kill at random. Active shooter incidents are on the rise in shopping centers; besides the one in Aurora, there have been at least nine mall shooting sprees in the United States unrelated to gang or personal disputes since 2005."The mall is a victim of individuals who want to inflict as much carnage and get as much publicity as possible," said Malachy Cavanagh, a spokesman for the International Council of Shopping Centers. Like schools and churches, malls become targets because they draw large crowds and are publicly accessible, he said.In Aurora and many other suburbs, malls are also among the few public places teens can congregate. "Libraries close early. Recreation centers, they don't have them in the vicinity. And it's hot, hot, hot," said Simmons. "All they got is the mall."In the past decade, the Department of Homeland Security has partnered with the retail industry to develop training programs for dealing with active shooters, said Cavanagh.One way to deal with recurring crime like gang violence is to make malls more restrictive, as Town Center attempted to do. Unlike true public spaces, privately owned malls for the most part can expel anyone who looks suspicious; they aren't obliged to give patrons a right to free speech. There are a few exceptions: In five states, one of which is Colorado, courts have established rulings requiring mall owners to permit certain political activities like protesting and collecting ballot signatures."Malls are repressive spaces," said Michael Sorkin, an architect and critic who has written on malls and public space. "They have distorted the nature of the way in which one is able to participate in the life of a city as a citizen." This could make malls a target for violence on the part of those disenfranchised by consumer culture, Sorkin says.Yet few mall policies could have helped catch James Holmes. The 24-year-old graduate student at the University of Colorado grew up in a white, upper middle class family in San Diego as close as it gets to one of Town Center's target customers."It doesn't matter if you have 100 parent patrols at the mall or at the movies," said Simmons. "That guy was going to do what he did."

Thursday, July 19, 2012

NEWS,19.07.2012


Border strike threatens to disrupt Olympics

 

The British government has warned unions that they risk public anger if strikes by train drivers and passport officials, which threaten to cause major disruptions to the London Olympics, go ahead.The Aslef rail union announced on Thursday that 450 of its members in central England would walk out between August 6-8 in a dispute over pensions, affecting passengers travelling from cities such as Sheffield, Nottingham and Derby to the capital.The decision coincided with a move by border officials to strike on July 26, the day before the start of the Games, potentially delaying thousands of visitors arriving for the showpiece event."They are holding a strike on what is one of the key days for people coming into this country for the Olympic Games," Home Secretary Theresa May said."They risk damaging people's enjoyment of coming through into the UK," she told Sky News. "We will of course put contingency arrangements in place to ensure we can deal with people coming into the country as smoothly as possible."The threat of transport chaos added to pressure on the government, which has already had to call in thousands of extra soldiers to guard the Games after a failed private sector recruitment drive left an embarrassing hole in security.The wet weather, too, has dampened spirits ahead of the sporting showcase, which has earned the nickname the "Soggy Olympics" in the British media.Perhaps it was no coincidence that Police lyrics "sending out an SOS", from the song "Message in a Bottle", blared out before the daily news conference at the Olympic Park in east London.Culture Secretary Jeremy Hunt rejected accusations that the buildup to the Games had been a shambles, arguing that for such a major operation preparations had been remarkably smooth."Actually I think it has been a very smooth process," he told reporters, after a barrage of questions on issues ranging from security shortfalls to sanitation at the main Olympic site. "I think it has been an encouraging first week."I think it is very important that people understand that of course you are going to have a few hitches on a project of this scale, but actually things have gone pretty smoothly, and the athletes are getting a fantastic welcome in the village, and I think morale is very high."On the issue of the strikes, he said "It would be completely out of tune with the mood of the British public. This is a moment when Britain wants to show its best face to the world, and that is what the vast majority of the public wants as well."I would strongly counsel any unions thinking of disrupting this very important period, I think they would lose huge amounts of public support if they really tried to do this."The security glitch came after G4S said it could not provide a promised 10,400 security guards to staff Games venues, forcing the defence ministry to call up an extra 3,500 troops to take the armed forces contribution to 17,000.A further 2,000 troops may be required if G4S fails to find a minimum requirement of 7,000 staff, and on Thursday the government said 1,200 soldiers had been put on standby as a precaution.Hunt reiterated government assurances that the Games would be safe in a city where suicide bombers killed 52 people in attacks on the transport system in July 2005.Wednesday's suicide bomb attack on a bus carrying Israeli tourists at Burgas airport in Bulgaria could raise further concerns."Obviously we are monitoring the whole time what's happening with respect to the changing security situation, and we have extremely competent intelligence services who are giving us advice and we are responding to that on an ongoing basis," Hunt said when asked about the Burgas attack."The world can be absolutely certain that we will deliver a safe and secure Olympics. It has always been our number one priority."

China bolsters Africa ties with $20bn loans

 

Chinese President Hu Jintao on Thursday offered $20bn in loans to African countries over the next three years, boosting a relationship that has been criticised by the West and given Beijing growing access to the resource-rich continent.The loans offered were double the amount China pledged for the previous three-year period in 2009 and is the latest in a string of aid and credit provided to Africa's many poverty-stricken nations.The pledge is likely to boost China's good relations with Africa, a supplier of oil and raw materials like copper and uranium to the world's most populous country and second-largest economy.But the loans could add to discomfort in the West, which criticises China for overlooking human rights abuses in its business dealings with Africa, especially in Beijing's desire to feed its booming resource-hungry economy.Hu brushed off such concerns in his speech at the Great Hall of the People, attended by leaders including South African President Jacob Zuma and Equatorial Guinea's Teodoro Obiang Nguema, a man widely condemned by rights groups as one of the world's most corrupt leaders."China wholeheartedly and sincerely supports African countries to choose their own development path, and will wholeheartedly and sincerely support them to raise their development ability," Hu said.China will "continue to steadfastly stand together with the African people, and will forever be a good friend, a good partner and a good brother", he added at the summit held every three years since 2000.Hu also pledged to "continue to expand aid to Africa, so that the benefits of development can be realised by the African people". He did not provide an amount.Hu said the new loans would support infrastructure, agriculture, manufacturing and development of small and medium-sized businesses in Africa. Critics say China supports African governments with dubious human rights records as a means to get access to resources.The EU has rejected what they call China's "cheque book" approach to doing business with Africa, saying it would continue to demand good governance and the transparent use of funds from its trading partners. Such criticism draws rebukes from China that the West still views Africa as though it were a colony. Many African countries say they appreciate China's no-strings approach to aid."Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other countries," Zuma told the forum."We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain," Zuma added."We certainly are convinced that China's intention is different to that of Europe, which to date continues to intend to influence African countries for their sole benefit."China's friendship with Africa dates back to the 1950s, when Beijing backed liberation movements in the continent fighting to throw off Western colonial rule.Chinese state-owned firms in Africa also face criticism for using imported labour to build government-financed projects like roads and hospitals, while pumping out raw resources and processing them in China, leaving little for local economies. "Certainly quite a number of us are thinking we need to move into more value addition," South African's Trade and Industry Minister Rob Davies told Reuters."We need to export mineral products in a more processed form ... We need to bite this bullet very seriously." Trade has jumped in the past decade, driven by Chinese hunger for resources to power its economic boom and African demand for cheap Chinese products.China's trade with Africa reached $166.3bn in 2011, according to Chinese statistics. In the past decade, African exports to China rose to $93.2bn from $5.6bn.Industrial and Commercial Bank of China, for example, the world's most valuable lender, has invested more than $7bn in various projects across the continent.

Friday, July 6, 2012

NEWS,06.07.2012



Cyprus urges fair eurozone debt-sharing

 

Financially troubled Cyprus, which this week took over the EU helm, complained on Friday of falling "unfairly" foul to Europe's debt crisis and urged eurozone nations to share debt according to size.Speaking days after applying for an EU-IMF bailout, Finance Minister Vassos Shiarly complained that his tiny island nation went into the red only after paying "a very heavy price" to enable Greece to write off more than 100 billion euros of debt owed to private banks.The March "haircut" deal, known as private sector involvement (PSI), was negotiated in months of talks among private, public and global players to slice around 50% off monies owed by Greece to the banks, to lighten its crippling debt.Because Cypriot banks held massive amounts, Cyprus lost €4.2bn euros, amounting to 24% of its gross national product, Shiarly said."This was not a fair way to deal with it," the minister told a news conference held as the country takes the six-month rotating presidency of the European Union."It was a European problem," he added. "I believe we should have shared that loss fairly on a level playing field."Given that Cyprus accounts for 0.2% of the total economies of the 17 nations sharing the euro, the country would have lost only 200 million euros under a fair share-out, amounting to "petty cash," he said.The minister said he would likely raise this issue in talks to negotiate an EU-IMF loan for the country.Shiarly refused to put a figure on a rescue being sought by Cyprus from the eurozone bailout fund until the completion of an inquiry in Cyprus by the "men-in-black" inspectors of the European Commission, European Central Bank and International Monetary Fund.He denied that Cyprus had officially asked for loans from Russia or China but confirmed it had been in contact and said: "If and when it comes we will discuss it with our parTners in Europe and deal with it then."President Demetris Christofias said this week that the country was looking at loans both from Russia and the eurozone to see it through tight times.He also suggested that a loan from Moscow was likely to come with far more favourable conditions than any rescues agreed by the EU and IMF, which come with assorted demands for economic change and reform.The finance minister brushed aside worries that the troika could demand Cyprus increase its attractively low 10 percent corporate tax to levels practised in other eurozone nations, in exchange for a loan.Recalling that Ireland, one of four other eurozone nations to call for a rescue, had managed to maintain its corporate tax rate at 12.5 percent, Shiarly said "I'm very confident that no such requirement or conditionality will be raised."He also voiced confidence that the troika would take into account Cyprus's huge PSI loss and denied that it faced a short-term cash crunch, saying it could refinance short-term treasury bills using local funds.Asked who might be the next victim of Europe's debt crisis, which has claimed Greece, Portugal, Ireland, Spain and Cyprus, Shiarly said "there should be no stigma" attached to asking for help from the eurozone's bailout funds, the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM)."One should not demonise an application," he said. "Specially not to a fund like the ESM or EFSF, which is a fund to which all countries contribute."

Finland will not cover the eurozone debt tab


Finland has no intention of footing the bill to cover the debt of other countries in the eurozone, Finnish Finance Minister Jutta Urpilainen said in a newspaper interview on Friday."Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for," Urpilainen told financial daily Kauppalehti.The newspaper interpreted her comments as an indication that Finland would consider leaving the eurozone instead of agreeing to pay down the debt of other countries in the currency bloc."Finland will not hang itself to the euro at any cost and (is) prepared for all scenarios," Kauppalehti wrote.Urpilainen's spokesman Matti Hirvola rejected that interpretation, insisting to AFP that "all claims that Finland would leave the euro are simply false."Urpilainen herself stressed in Friday's interview that "Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland."However, amid the deepening debt crisis in the bloc, she told Kauppalehti that Finland, one of only a few EU countries to still enjoy a triple-A credit rating, would not agree to an integration model in which countries are collectively responsible for member states' debts and risks.She also insisted that a proposed banking union would not work if it was based on joint liability.Urpilainen acknowledged in an interview with the Helsingin Sanomat daily on Thursday that Finland "represents a tough line" when it comes to the eurozone bailouts."We are constructive and want to solve the crisis, but not on any terms," she said.As part of its tough stance, Finland has said it will begin negotiations with Spain next week in order to obtain collateral in exchange for taking part in a bailout for ailing Spanish banks.And last year, Finland created a significant stumbling block for the eurozone's second rescue package for Greece, only agreeing to take part after striking a collateral deal with Athens in October 2011.

Wednesday, July 4, 2012

NEWS,04.07.2012


Monti: Italy does not need a bailout




  • German Chancellor Angela Merkel and Italian Premier Mario Monti arrive for a bilateral meeting at Villa Madama in Rome, Wednesday, July 4, 2012. Merkel is traveling to Rome for a regular meeting of the senior officials from the two countries along with several of her top ministers, including the economy and finance ministers
Italian Premier Mario Monti insisted Wednesday the country doesn't need a European bailout because its public finances will improve, but acknowledges work still needs to be done to cut government spending, boost economic growth and create jobs.Monti spoke at a press conference with German Chancellor Angela Merkel after meeting about Europe's debt crisis. It was their first encounter since European leaders in Brussels last week agreed to use the continent's bailout fund to funnel money directly to struggling banks and let countries following budget rules apply for financial aid without stringent conditions attached.Monti, who had pressed for such a deal, insisted Italy didn't need a bailout to help it pay its government debt because its budget deficit was low compared with many other European countries and forecast to improve.As of the end of 2011, official European statistics put Italy's deficit at 3.9 percent, just above the EU limit of 3 percent. Spain's, by contrast, was much higher at 8.5 percent.Italy's big problem is the economy is in recession and it has a high public debt load equivalent to 120 percent of GDP. Investors fearing Italy may have trouble repaying that debt have been asking for high interest rates to lend to the country.The measures announced by European leaders last week have helped relieve the fear that Italy may default. In particular, making it easier for countries to access European bailout funds has convinced investors that Italy has a credible financial backstop should it run into trouble financing itself.Agreeing to loosen the conditions for bailouts was not easy, however, and was the source of heated debated between Monti and Merkel in recent weeks and at the summit.Going into the summit, Monti had issued a thinly-veiled jab at Merkel over her opposition to allowing European governments to share debt obligations. Sharing debt is another way to spread individual countries' debt risk across Europe, but Merkel continued to oppose them at the summit.With debt-sharing ruled out, Monti pushed for the European leaders at the summit to agree to other measures that might increase confidence in Italy's finances. Easing conditions for countries to take bailouts was one of them.Monti has lamented that Italians have endured the effects of government spending cuts and tax hikes, but that Italy's government borrowing rates remained high in financial markets.By Wednesday, the two leaders were downright chummy, with Monti calling Merkel by her first name and emphasizing their "excellent" relations.Merkel, for her part, praised the speed with which Monti's government has pushed through structural reforms and insisted that it was in Germany's interest to keep Italy from failing."If our neighbors in Europe aren't well, eventually we Germans won't be in good shape," she said.Monti nevertheless acknowledged a rough road ahead: the government is embarking on a program of public spending cuts after having pushed divisive labor market reforms through parliament last week.And new unemployment figures have made clear that the recession and the impact of austerity measures are hitting home: Monti termed "unacceptable" that youth unemployment had now hit 36 percent."Reducing the weight of the public sector in the markets, including the financial markets, will give us greater possibilities for productivity and work for young people," he said when asked how much more austerity Italians can take before growth measures kick in.Both leaders stressed the need for Italian and German companies to collaborate more, particularly in manufacturing, to boost economic growth.

 

Big Banks Release 'Living Wills,' Say They Can Be Broken Up Without Bailouts


Nine of the largest global banks on Tuesday expressed confidence they can be salvaged or dismantled without taxpayer bailouts if they became insolvent, as U.S. regulators released public portions of these banks' "living wills".The documents, required by the 2010 Dodd-Frank financial reform law, aim to end too-big-to-fail bailouts by mapping out ways that, in theory, mortally-wounded banks could go out of business without wrecking the financial system.If regulators find that the resolution plans are not credible, they could force the banks to sell off business lines and restructure to become less complex.But some experts doubt how hard regulators will push the banks for changes or how useful hypothetical resolution plans will be in major financial crisis.The public portions released on Tuesday and are a few dozen pages per bank summarizing thousands of pages submitted confidentially to regulators.The banks argued in the public documents that their resolution plans will work, with no cost to taxpayers or great consequence to the financial system. They used technical generalities in their conclusions without specifically addressing the unpredictable and vicious nature of a credit crisis.Bank of America Corp, for example, said in its plan that "certain assets and liabilities would be transferred to a bridge bank that would, subject to certain assumptions, emerge from resolution as a viable going concern."JPMorgan Chase & Co concluded that its plan "would not require extraordinary government support, and would not result in losses being borne by the US government." And, Goldman Sachs Group Inc said it would find a broad range of potential buyers for its assets, including global financial institutions, private equity funds, insurance companies or sovereign wealth funds.The other banks which submitted wills were Barclays , Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley and UBS.The Federal Reserve and Federal Deposit Insurance Corp released the plans without commenting on them.Other large banks will have until July and December of next year to hand in their plans, according to the FDIC. Eventually about 125 banks are expected to submit plans.The first plans come almost four years after the financial crisis unleashed a panic in which no institution seemed safe from a bank run and markets withdrew credit in what appeared to be inexplicable fashion. The U.S. government, in quick order, arranged a fire sale of investment bank Bear Stearns to JPMorgan and then allowed Lehman Brothers to fail, touching off a global market meltdown. Blanket government guarantees for the financial system and a $700 billion taxpayer bailout followed to ease the panic.The disclosures on Tuesday give a glimpse of the kind of the kind of interconnections and complicated corporate structures that could still make governments fear letting big banks fail.JPMorgan named 25 "material" legal entities and 30 "core business lines," as required by Dodd-Frank and listed 18 clearing or financial settlement systems in which it is a member or participant, half of which are outside of the United States.The full-length plans are believed to include the most comprehensive maps of the insides of bank holding companies ever created. They are intended to give regulators confidence that they understand enough of the consequences of bank failures to allow more to happen.WOULD PLANS WORK?Bert Ely, a banking consultant in Alexandria, Virginia, said he is skeptical that the overall process could work because there would likely be a lot of turmoil in the markets when the plans were needed, raising doubt about who might buy any assets."The presumption of a one-off event is not realistically valid," he said. "You can have one company blow itself up, but more often than not there are systemic problems."Banks emphasized that they did not believe the resolution plans would ever have to be used. Morgan Stanley said that its "hypothetical failure" would have to be caused by "an idiosyncratic stress" that might occur while the economy and financial markets are under severe stress.Guggenheim Partners financial policy analyst Jaret Seiberg said he doubts regulators will use their reviews of the plans to force big changes on the institutions."Our initial review suggests there is little real risk that regulators could reject one of these plans," Seiberg said in a note. "That is important because regulators could break up a financial firm that fails to submit a credible plan."The regulators plan to give feedback to the banks on the initial plans by September.Congress called for the plans in Dodd-Frank to ease concerns that some banks are so big and interconnected that taxpayers will inevitably bail them out to avoid a threat to global markets.The FDIC gained new powers in Dodd-Frank to use the plans to dismantle failing financial giants if the bankruptcy process would not work.Citigroup found a special reason to argue that its resolution planning would work: its wrenching experience in the 2007-2009 financial crisis.To recover from the crisis, Citigroup separated businesses to be sold or gradually liquidated from those it is keeping as its "core" pursuits. The company said that process meant its "personnel would be well equipped to assist regulators" if the company had to be divided up into pieces to be sold or closed."Citi is today a fundamentally different institution than it was before the crisis: smaller, leaner, safer, sounder, and completely focused on our core mission," it said in the summary of its resolution plan.Bank of America, used its 42-page public document to emphasize steps it has taken in recent years to streamline the company, build capital and improve risk management."Bank of America has strengthened its risk culture as evidenced by improvements in consumer and commercial credit quality and decreases in market and counterparty risk," it said.Bank of America has lagged its rivals in recovering from the financial crisis, largely due to mortgage losses tied to its 2008 Countrywide Financial purchase.INTERNATIONAL FRAMEWORKSome of the foreign banks outlined resolution strategies for both home and U.S.-based regulators.Deutsche Bank imagined high levels of international cooperation, noting it could be dismantled "in an orderly manner with minimal systemic disruptions, and that any cross-border issues arising from financial, operational or other interconnections could be adequately addressed without significant difficulties," it said.Barclays said effective resolution plans are "an integral component of eradicating 'too big to fail' for the largest global financial institutions."It also noted how critical cooperation will be among international regulators.Barclays submission, dated July 2012, was already out of date. It listed Marcus Agius as chairman and Robert Diamond as CEO. Both have resigned in response to a Libor interest rate rigging scandal.Mitchell Glassman, a director at Deloitte Consulting who has worked with big banks on the living will issue, said he was impressed how much senior executives and directors were involved in preparing the plans. Still, he said, the question remains whether the plans on paper would work effectively in real-life."Will this help Main Street? Will we be better off with this approach than we were in the last crisis?" Glassman said.
 

Saturday, June 23, 2012

NEWS,23.06.2012

EU ministers focus on banking unioN


European finance ministers examined ways to strengthen their banking sectors and break the link between troubled banks and indebted countries on Friday, with concerns about Spain’s stricken banking system top of their minds. IMF managing director Christine Lagarde has urged the eurozone to channel aid directly to struggling banks rather than via governments, but Germany and others are opposed to such direct lending, which is not possible under current rules. The discussion is part of a broader debate about how the European Union can move towards a so-called banking union, including a Pan-EU deposit guarantee scheme and a fund to resolve bad banks, to try to get on top of the two-and-a-half year sovereign debt crisis. Lagarde said on Thursday that allowing the eurozone’s rescue scheme - the European Stability Mechanism (ESM) - to aid stricken lenders directly rather than using a programme of aid to a government would stop bank problems from exacerbating the difficulties of countries. Arriving at Friday’s meeting Spain’s Economy Minister Luis de Guindos said such a possibility may be open to Spain, which is set to receive up to €100bn of aid from the eurozone for its troubled banks. “I think (direct bank recapitalisation) is a possibility,” he told reporters. “It is one of the fundamental elements to break the link between bank risk and sovereign risk.” “This possibility is absolutely open to Spain if there is progress in the next few months (on the issue). The process of recapitalisation is not instantaneous,” he said. Throughout the crisis, countries in the eurozone have been left to resolve problems at their banks themselves. For those for whom the burden was too great, such as Ireland, the government received aid from the IMF and the EU to do it. But after years in crisis, the problems in banks show no sign of abating and Europe’s leaders are under pressure to form a united front to shield struggling lenders rather than leave countries to cope with such problems alone. At a summit in Brussels next week, EU leaders will examine establishing a banking union that envisages a single supervisor for big banks, a fund to wind down cross-border lenders in trouble and the deposit guarantee scheme to protect savers. "Poisonous link" Central to this is the idea is that stronger countries in the eurozone such as Germany ultimately stand behind the lenders of countries too weak to manage alone, although Berlin does not want any such step in the short term because it is opposed to bearing any liability for other countries. “We need to break the poisonous link between sovereigns and banks,” said one EU diplomat close to discussions. “It’s about solidarity. It can’t happen overnight. It is difficult stuff." A banking union is also contentious because it will likely shift power from national regulators to a higher authority, such as the European Central Bank (ECB). France and Germany want the ECB to take charge of major systemic banks, rather than leaving oversight with the European Banking Authority. One of the biggest divisions in the debate about such a union is whether it will apply only to countries in the eurozone, or to all 27 member states in the European Union. Britain has said it will not join such a scheme, which it believes should be limited to the single currency area. The European Commission, the EU's executive, wants the union to apply to all countries, because of concerns that scaling it back would undermine the bloc's borderless single market. Michel Barnier, the EU commissioner in charge of financial regulation, will attend Friday’s meeting to appeal again for all countries to join. In Luxembourg, ministers will also discuss warnings issued to countries by the European Commission to countries on improving the management of their economies to reach spending goals laid down in EU law. Spain may receive more time to reach the goal of cutting its budget deficit to 3% of economic output, although one senior diplomat said this would only be discussed next week at an EU leaders' summit in Brussels. Germany will also push for the introduction of a tax on financial transactions, a move demanded by the country’s opposition socialists in order to secure their backing in parliament to sign off on the ESM.

Wednesday, June 6, 2012

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.