NEWS,15. AND 16.02.2013

Foreign investors set to sue Spain

Foreign investors in renewable energy projects in Spain have hired lawyers to prepare potential international legal action against the Spanish government over new rules they say break their contracts.It is unclear how much claims might be worth, but international funds have more than €13bn of renewable energy assets in Spain and say that the government has reneged on the terms of their investment.The Spanish Parliament approved a law on Thursday that cuts subsidies for alternative energy technologies, backtracking on its push for green power.That measure, along with other recent laws including a tax on power generation that hit green energy investments especially hard, will virtually wipe out profits for photovoltaic, solar thermal and wind plants, sector lobbyists say.International commercial law firm Allen & Overy on Thursday that it is representing a group of investors in concentrated solar power plants in relation to potential claims under the international Energy Charter Treaty."International investment funds are consulting with legal advisers on how to proceed with action. There will be various lawsuits," Luis Crespo, secretary general of Spain's solar thermal association.He said that investors from the United States, Japan and the United Arab Emirates are among those pursuing action through the Brussels-based Energy Charter, an internationally ratified treaty that binds members to rules on energy and arbitration.Allen & Overy is already handling an earlier claim against Spain, filed in 2011 on behalf of photovoltaic investors. The investors it is representing for potential new claims are in the solar thermal industry.Spain's Industry Minister Jose Manuel Soria defended the law in Parliament on Thursday, saying that the measures were necessary to eliminate the accumulated €28bn tariff deficit in the electricity system.That deficit, built up through years of the government holding down electricity prices at a level that would not cover regulated costs including renewables premiums, is at the heart of Spain's energy sector woes.A spokeswoman for the ministry said that its policy was not to comment on legal issues."I don't know why anyone would put another penny in investment in the sector in Spain," said one leading investor whose firm is studying possible claims.The same source, who asked to remain anonymous, said that the reforms could drive some solar industry projects, particularly ones that are highly leveraged, into bankruptcy.Foreign investors poured money into Spanish wind and solar projects, drawn to generous subsidies during a decade-long economic boom that helped the country to become one of the biggest markets for investments in green energy.The problem was that the cost of the subsidies were not passed on fully to consumers because that would have pushed prices to unprecedented highs.Spanish companies such as Acciona and Abengoa have also been hit hard by the new rules, but because it is passed as a decree by the government, Spain-based companies have virtually no form of appeal and will not join the claims being studied by foreign investors.Listed foreign companies with investments in the sector include Germany's E.ON and Japan's Mitsubishi and Mitsui, several sources from the energy sector said.Some of the funds planning legal action are also among the 11 investors who sent a letter to Prime Minister Mariano Rajoy in July to complain of another energy reform with a retroactive impact on investments, the sources said.

 

EU finance trade tax applicable globally

A financial transactions tax to be adopted by 11 EU states should raise €30-35bn each year but the levy will apply worldwide, the European Commission said Thursday, sparking a sharp reaction from opponents led by Britain.The Financial Transaction Tax (FTT) imposes a tax of 0.1% on a trade in shares and bonds, and of 0.01% for derivative instruments.The Commission said that if any of these investments originate in one of the 11 FTT states, then they can be taxed wherever they are traded, giving them a global reach.The British government, which led opposition to the original 2011 proposal on concern over its impact on the giant London financial centre, said this "unilateral (tax) ... will hit growth for the countries taking part, which is why Britain was right not to participate in such a measure."Business organisation the Institute of Directors in London was scathing, rejecting any suggestion the 11 EU states could enforce the tax in Britain, which like all EU members, retains full national control over taxation."This is a daft idea which will throw grit in the wheels of the market, catching not just banks but also customers, pension funds and businesses," said Simon Walker, head of the group."Any attempt to extend it to the UK by the back door would violate the (EU) single market. We are fully entitled to transact business in financial products issued in France, Germany or the other countries on our own terms, under our own tax regime," Walker added.After failing to get support from all 27 EU states, France and Germany pushed ahead with the tax under the EU's Enhanced Cooperation procedure and they were joined by Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.EU finance ministers last month cleared the tax, seen as a way of clawing back state money spent in propping up the banking sector during the debt crisis.EU Tax Commissioner Algirdas Semeta said the FTT "is an unquestionably fair and technically sound tax, which will strengthen our Single Market and temper irresponsible trading."Asked by reporters how the FTT could apply to countries refusing to sign up, Semeta said he saw no problem and that discussions would resolve such issues.The FTT has three main objectives, Semeta said in a statement, firstly strengthening the EU Single Market by "reducing the number of divergent national approaches to financial transaction taxation."Secondly, it will ensure that the financial sector makes a fair and substantial contribution to public revenues. "Finally, the FTT will support regulatory measures in encouraging the financial sector to engage in more responsible activities, geared towards the real economy," he said, highlighting the political drive to make the financial sector pay for some of the excesses blamed for causing the debt crisis.The statement said the FTT will to be based on a "residence principle" which could have far-reaching implications"This means that the tax will be due if any party to the transaction is established in a participating Member State, regardless of where the transaction takes place," it said.The "residence principle" is expressly aimed "to safeguard against the relocation of financial transactions," according to background notes provided.The tax will also incorporate an "issuance principle" as a further safeguard against avoidance of the tax, the statement said. "This means that financial instruments issued in the 11 Member States will be taxed when traded, even if those trading them are not established within the FTT-zone."Supporters of the tax such as Oxfam pressed for speedy adoption of the FTT."The smart design and the scope of the FTT ... will make it difficult for financial institutions to avoid or evade the tax," the charity said in a statement."It is vital that this proposal is adopted in full to ensure the financial sector contributes its fair share to the costs of the crisis, which is hurting hundreds of millions around the world."

The FTT proposals now go to the European Parliament and EU leaders for approval.

 

Gold demand losing its glitter

Demand for gold fell last year for the first time since 2009 as Asians bought less jewellery and Western investment dipped, the World Gold Council said in a report.Gold output fell by 21.2% in volume terms in December, Statistics South Africa said on Thursday.The WGC, which is funded by the gold industry, said on Thursday that gold consumption was expected to be steady this year but added that it may be some time before it revisits the high levels seen in the worst of the financial crisis."It's hard to see a major move up in demand (this year). I know there are bears out there who are starting to call the end of the bull market in gold, but we don't agree," said the WGC's managing director for investment, Marcus Grubb. "Demand will remain high, but we're talking small single-digit (percent) numbers in terms of growth from the current tonnage level," he said.In 2012 demand was down 4% from the previous year's total, the WGC report said. "The tonnage last year was 4 405 tonnes for consumer demand, and if you add in over-the-counter demand, it's another 100 tonnes higher," Grubb added. "We would expect 2013 to be quite similar."Grubb said he saw gold prices, which have traded between $1 625 and $1 695 an ounce this year, staying in their current trading range, although events that could destabilise the market, such as US budget talks, could push them higher.The gold price is down 1.4% so far this year after posting its biggest quarterly drop since 2008 in the last three months of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in gold's bull cycle this year."Unless something major changes in the macro landscape, this (report) does back up the idea that investors' attention is much more focused elsewhere at the moment," Credit Suisse analyst Tom Kendall said. Jewellery demand fell 3% last year to 1 908.1 tonnes, with the biggest absolute drop noted in India, the largest gold consumer, where a weak rupee led to record-high local prices.In the fourth quarter it rose 11%, however, helped by a 35% rebound in Indian jewellery demand. "Jewellery could have a good year in 2013," Grubb said. "Western demand might at last improve as the US economy and others improve."China, the second-biggest gold buyer behind India, saw a 1% drop in jewellery demand to 510.6 tonnes, its first annual decline since 2002.Overall demand was flat in China in the full year and fell 12% in India, although buying rose in the final quarter as buyers scrambled to avoid a widely anticipated rise in import duty that was announced in January."Provided we see no more increases in import duty, we still think we will see India continue to recover from what was a difficult year in 2012 overall," Grubb said. He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would probably favour the metal.When you look at the full year, we're anticipating that we'll see 865-965 tonnes of demand," he said. In China, demand is expected to recover to between 780 and 880 tonnes this year, against 776.1 tonnes last year."The jury's out on a major re-acceleration of growth in Chinese gold demand," Grubb said. "Last year we saw the first significant slowdown in the Chinese economy in years. That did affect these numbers. What you're seeing in January and February is a re-acceleration in the Chinese economy."Buying by various central banks continued its upward trend to hit a 48-year high at 534.6 tonnes. Grubb said he expected the official sector to match last year's buying in 2013, partly because monetary easing by developed countries was undermining confidence in the value of currencies."Emerging country central banks regard quantitative easing policies as divisive and (believe they) affect the value of the assets that they hold - the dollar and euro, for example," he told at the Global Gold Forum."They are diversifying away from traditional currencies and buying gold as a hedge." Bar and coin investment fell sharply in the United States and Europe last year, with US offtake dropping by more than a third and European buying down 29%. Overall investment demand last year fell 10% to 1 534.6 tonnes. Investment via gold-backed exchange-traded funds rose, however, with ETF demand up by more than half at 279 tonnes."Overall for the year (coin and bar demand) was weak, and it reflects the fact that in Europe the announcements by the European Central Bank took away tail risk in the mind of the investor," Grubb said."The announcement of (bond-buying) in Europe and quantitative easing in the United States also mitigated fears of a near-term crisis, and I think that's why bar and coin demand fell. Institutional investors and private wealth took a different view you see the ETF tonnages went up 51 percent and over-the-counter (demand) had a strong year." He said while more optimism over the outlook for the global economy was likely to encourage investment in other assets like stocks, the fact that much of that was driven by extremely loose monetary policy meant gold investment was unlikely to fall."Investors are trying to call a turn in the asset cycle," Grubb said. "The jury's still out on whether this will be the year when it actually happens. Even if you do start to look at the world more optimistically in 2013, it doesn't mean there isn't a role for gold in your portfolio."

US jobless claims drop

The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to a continued steady improvement in labour market conditions.Initial claims for state unemployment benefits dropped 27 000 to a seasonally adjusted 341 000, the Labour Department said on Thursday. The prior week's claims figure was revised to show 2 000 more applications received than previously reported.Economists  had expected claims to fall to 360 000.A Labour Department analyst said claims for Illinois and snowstorm-hit Connecticut had been estimated.Nevertheless, because most claims are filed online, the blizzard that slammed the East Coast appeared to have little effect on the broader claims data, he said.While companies are no longer aggressively laying off workers, they appear to be in no hurry to step-up hiring against the backdrop of still lackluster demand.The economy has struggled to grow much more than 2% since the 2007 to 2009 recession ended.ob gains averaged 181 000 per month in 2012, far less than the at least 250 000 that economists say is needed to significantly reduce the ranks of unemployed.The four-week moving average for new claims, a better measure of labour market trends, rose 1 500 to 352 500.The prior week's drop to a near five-year low was probably exaggerated by difficulties at the start of the year smoothing out the data for seasonal fluctuations.The number of people still receiving benefits under regular state programs after an initial week of aid dropped 130 000 to 3.11 million in the week ended February 2. That was the lowest level since July 2008 and could reflect people exhausting their benefits.So-called continuing claims had hovered around 3.2 million since late November and economists had viewed that as an indication of little change in the unemployment rate. The jobless rate rose 0.1 percentage point to 7.9% in January.

Eurozone falls deeper into recession

The eurozone slipped deeper into recession in the last three months of 2012 after its largest economies, Germany and France, shrank markedly at the end of the year.It marked the currency bloc's first full year in which no quarter produced growth, extending back to 1995. Economic output in the 17-country region fell by 0.6% in the fourth quarter, the EU's statistics office Eurostat said on Thursday, following a 0.1% drop in output in the third quarter.The drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4% drop in a poll of 61 economists. For the year as a whole, gross domestic product (GDP) fell by 0.5%.Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia. The big economies set the tone. Germany contracted by 0.6% on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.France's 0.3% fall was also slightly worse than expectations. Worryingly for Berlin, it was export performance the motor of its economy that did most of the damage although economists expect it to bounce back quickly. "In the final quarter of 2012 exports of goods declined significantly more than imports of goods," the German Statistics Office said in a statement.The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full eurozone figures. Back revisions to the French figures showed its output fell by 0.1% in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.While the European Central Bank's pledge to do whatever it takes to save the euro has taken the heat out of the bloc's debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government's deficit goal for 2013 out of reach.Economists say the eurozone may also shrink in the first quarter of 2013 although more resilient Germany is expected to rebound."The chances that the (German) economy will return to growth at the beginning of this year are very good. The early indicators are all pointing upwards," said Andrea Rees, chief German economist at UniCredit."The question is how strong the first quarter will be. We expect growth of 0.3% but it could be more."Dutch GDP dropped 0.2% over the quarter, keeping it in recession, while the Austrian economy shrank at the same rate.For the more embattled members of the currency bloc, matters are of course worse.Italy suffered its sixth successive quarterly fall in GDP his time by a sharp 0.9% putting it into a longer slump than it suffered in 2008/2009.Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.With an election due on February 24/25, all sides in a three-way race between Monti's centrist bloc, Pier Luigi Bersani's centre-left coalition and Silvio Berlusconi's centre-right are pledging to cut taxes to try to kickstart economic growth.Spain, the eurozone's fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7% contraction in the fourth quarter.Madrid is also pressing on with harsh austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.There are signs that countries like Spain are starting to benefit from harsh internal devaluations marked by wage falls and job losses aimed at making companies leaner and more productive.The ECB predicts the eurozone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.More recent data for January have already suggested some upturn in the first months of 2013, in the bloc's stronger members at least, and if improvement comes it is likely to be seen in Germany first."The debt crisis has ebbed significantly and the global economy has turned up," said Joerg Kraemer at Commerzbank. "Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

Dubai to build giant Ferris wheel

Dubai's ruler approved a $1.6bn island development project that would be home to what's billed as the world's biggest Ferris wheel.The project reflects a renewed appetite in Dubai for extravagance as the economy rebounds from a debt-driven slump during the past three years.The official WAM news agency said Wednesday that the Ferris wheel, dubbed the Dubai Eye, will stand 210 meters (688 feet), exceeding the London Eye's 135 meters (443 meters). Construction is set to begin this year.Dubai has proposed a series of mega projects reminiscent of its boom years before the downturn hit in 2009. The projects include theme parks and a satellite city named for Dubai's ruler, Sheik Mohammed bin Rashin Al Maktoum.

Strikes cripple German airports

A strike by security staff over pay hit two key regional airports in Germany for the second day in a row on Friday and was set to resume next week.At Hamburg airport, 147 flights were cancelled out of a total of 358 scheduled for Friday, a spokesperson for the northern German airport told AFP.The day before some 117 departures and arrivals had been cancelled in Hamburg.At Cologne/Bonn airport in the west of Germany, 107 flights were scrapped, or more than half of those scheduled for the day, according to a statement on its website.The Verdi services union called the strike for security staff responsible for checking passengers and hand luggage, in a dispute with management over pay deals.The union said the strike would be suspended over the weekend before resuming Monday.On Thursday, Duesseldorf airport had also been affected by the walkouts.

Luhabe: World needs economic revolution

In a world rife with inequality and unemployment there is a crying need for a new breed of entrepreneur who can combine profit with a social conscience, said acclaimed author and social entrepreneur Wendy Luhabe.Speaking at the Entrepreneurs Unite conference which took place in Stellenbosch this week, Luhabe said: "The global economy is at a crossroads in most parts of the world."We are experiencing an explosion of extreme wealth and inequality, and the confluence of these two factors is making it impossible to tackle poverty and address many vested interests in the economy."Luhabe pointed out that the widening gap between the top 1% and the rest of society - as well as the inequality of resource allocation and opportunity - are at their highest levels since the time of the Great Depression. Little wonder then that the World Economic Forum identified inequality as a global risk for 2013.But market forces, said Luhabe, do not exist in a vacuum. "We shape them by the decisions that we make... we shape them with poor leadership or we even shape them with moral bankruptcy."She lauded Brazil one of the world's fastest-growing economies for shaping market forces "in ways that have lowered inequality while creating more opportunities and higher growth".The worldwide trend of shrinking employment is not likely to change, said Luhabe. "We need an economic revolution therefore that can produce a new dynamic and innovative generation of entrepreneurs, but who in addition to creating great enterprises is prepared to determine a new socioeconomic contract. "The education system worldwide, said Luhabe, is "totally out of alignment with the reality of the 21st century". She identified inequality, unemployment and education as this century's biggest timebombs. "Time is running out," cautioned Luhabe. "The world needs a different economic logic where human capital, social and environmental objectives become a top priority. "Turning to Africa, Luhabe said the International Monetary Fund believes the economy of the continent has the potential to outstrip Brazil's growth over the next five years. "Much of that growth will come from startups which will bring the mobile internet to consumers" and businesses which until recently have not had internet access, said Luhabe. She further identified e-commerce, health and education as areas primed for growth."There is an entirely new generation of entrepreneurs that are changing the face of Africa.... Moral of the story is therefore that the future of the global economy will be shaped by entrepreneurs who are sensitive to the social challenges that exist in their environment."They will have the ability to create sustainable businesses which are profitable yet at the same time address social challenges, said Luhabe.

ECB officials rebuff FX targeting

The head of the European Central Bank and its two German policymakers pushed back against political pressure to target the euro's exchange rate ahead of meeting of Group of 20 financial leaders on Friday.Speaking ahead of the meeting in Moscow, ECB President Mario Draghi said recent loose talk on currencies was "inappropriate, fruitless and self-defeating".Bundesbank chief Jens Weidmann, a strong voice on the ECB's 23-man Governing Council with whom Draghi in the past has been at odds, earlier weighed in to say the euro was not seriously overvalued and that the ECB would not change monetary policy based on its impact on inflation alone."All this chatter that has been undertaken in the past few weeks is either inappropriate or fruitless in all cases it's self defeating," Draghi said in opening remarks at a news conference after meeting with Russian central bank officials.The Italian head of the bank had said last Thursday that the ECB would monitor the economic impact of the strengthening euro, feeding expectations the climbing currency could open the door to an interest rate cut.Both Weidmann and Joerg Asmussen, the German member of six-member Executive Board that forms the nucleus of the Governing Council, said the ECB would not target the euro's exchange rate."I don't think that Mario Draghi was trying to talk the euro up or down," Weidmann said, adding that the ECB "will abstain from manipulating or directly targeting the exchange rate."French President Francois Hollande last week raised the possibility of political interference in exchange rate policy when he called for a medium-term target for the euro's value, a move to counter its recent appreciation."I fear a politicization of the exchange rate," Weidmann told news agency Bloomberg in an interview."I saw indications of that in Japan but you could as well refer to recent statements by European politicians not too far from here," he added in a thinly veiled rebuff of Hollande's call for a currency target.The G20 forum, which put together a huge financial backstop to halt a market meltdown in 2009, is back in the spotlight after a week in which the Group of Seven rich nations tried, and spectacularly failed, to speak on currencies with one voice. The G7 issued a joint statement on Tuesday reaffirming "our longstanding commitment to market determined exchange rates". Yet the show of unity was quickly undermined by off-the-record briefings critical of Japan."In the last couple of days the Group of Seven biggest industrial nations made clear once again that currency exchange rates should be market-based and that we have no exchange rate targets and that's true for us at the ECB too," Asmussen told Germany's Deutschlandfunk radio.The euro hit a 15-month peak of $1.3711 on Feb. 1, before easing slightly. The euro's strength "is one factor among many in determining future inflation rates", Weidmann, who heads Germany's Bundesbank said in the Bloomberg interview conducted on Feb. 13.He added: "We will certainly not justify any monetary policy decision with one single factor".

NEWS,27.11.2012

OECD: Eurozone crisis to hamper recovery

The OECD cut growth forecasts for most countries in the European Union's eastern wing on Tuesday and urged Hungary to do a deal with international lenders even as most analysts give such a deal less than even odds of happening.The Organisation for Economic Cooperation and Development said the euro zone crisis and austerity drives by emerging Europe's governments would sap recovery in most of the region.In a regular report, the group said the economies of Poland, Slovakia, and Estonia would grow both this year and next.It said inflationary pressure implied monetary easing was on the cards for Poland, but interest rate cuts in Hungary could destabilise price stability and undermine policy credibility.

Hungary

The OECD said closing an aid deal with the European Union and IMF was "critical to growth" because it would lower Budapest's borrowing costs, improve investor confidence and boost domestic lending.Under the assumption that a deal will materialise, the organisation forecast economic contractions of 1.6% this year and 0.1% in 2013.In May, the OECD forecast shrinkage of 1.5% for 2012 and growth of 1.1% next year. Analysts give only a 30% chance that Prime Minister Viktor Orban will sign a deal.The OECD said the fiscal deficit would narrow from 3% of gross domestic product (GDP) this year to 2.7% in 2013 and 2014.It said recent interest rate cuts by the central bank risked upsetting price stability and undermining policy credibility, and it added that rate setters should ease monetary policy only once inflation fell back below the bank's 3% target."Failure to conclude a financial agreement with the multilateral organisations could undermine already weak confidence, endanger fiscal sustainability and destabilise the exchange rate," the OECD said.

Poland

The weak European economy and fiscal consolidation will hit Poland, according to the OECD, which cut its growth forecast for the region's biggest economy to 2.5% this year, from 2.9% in May. It saw growth of 1.6% in 2013.It said headline inflation would fall to the lower end of the central bank's 1.5% to 3.5% target band. Along with the slowdown in growth, that implies that rate setters should ease policy to support the economy, the OECD said.The fiscal deficit should fall to 3.5% of gross domestic product  in line with the government's target  before falling to 2.9% next year.The organisation also said the government should push on reforms to sell state owned assets, improve the tax structure, reduce red tape for businesses, end special pension schemes and reform farmers' health and pension systems to boost growth.

Czech Republic

The OECD deepened its forecast for a Czech economic contraction to 0.9%, from an estimate of 0.5% in May. It sees a recovery emerging in 2013 with 0.8% growth, expanding to 2.4% in 2014.The organisation said the public finance deficit should stagnate at 3.3% of gross domestic product this year and next, above the European Union's 3% ceiling.It will fall to 2.7% of GDP in 2014, it said, because of structural improvements in the budget and stronger growth.

Estonia

Estonia should lead EU OECD countries with growth of 3.1% in 2012, the OECD said, raising its forecast from 2.2% in May. That should accelerate to 3.7% next year.The country's public finances should fall into a deficit of 1 percent of GDP this year, but then creep closer to a balanced result over the next two years.

Slovakia

The OECD sees Slovakia's car-export-driven economy expanding by 2.6% this year, unchanged from a May forecast. It said a weak labour market and fiscal retrenchment would squeeze growth to just 2% in 2013, down from an earlier estimate of 3%. The following year, however, growth should pick up to 3.4%, the OECD said.

Slovenia

Austerity measures and deleveraging by foreign-owned banks and companies will hit Slovenia's economy next year, the OECD said, predicting a contraction of 2.1%. It saw the fiscal deficit hitting 4.3% of GDP in 2012 and falling to the EU's 3% ceiling only by 2014.

Israel

The OECD said growth should slow from 3.1% this year to 2.9% in 2014, while an acceleration in price growth that should begin in the second quarter of next year would require monetary tightening.It added that the government's deficit targets of 3% and 2.75% for 2013 and 2014 would be hard to hit, and instead forecast shortfalls of 4.1% and 4%.

 

OECD warns of downward spiral in Portugal

Portugal's economy will contract twice as much as previously expected in 2013 and the bailed-out country risks falling into a fiscal and financial downward spiral, the OECD said on Tuesday.The Paris-based Organisation for Economic Cooperation and Development also warned in its economic outlook that further budget tightening will "likely" be needed to meet deficit targets set out under the €78bn EU/IMF bailout.The OECD now forecasts a 1.8% contraction in 2013, more than the 0.9% it forecast in July and far more than the -1% predicted by the Portuguese government."If the demand effects of the required fiscal retrenchment turn out higher than expected, this could lead the economy into a downward spiral of worsening economic, financial and fiscal conditions," the OECD wrote.It said Portugal will only return to growth late next year as export growth eventually offsets weak domestic demand.The economy contracted 1.7% last year and is expected to fall 3.1% in 2012, marking debt-burdened Portugal's worst recession since returning to democracy in 1974.Lisbon has slashed spending and raised taxes since it received the bailout last year but economists have warned of a recessive spiral which could mean the country needs more aid.The Portuguese face the biggest tax hikes in their modern history in 2013, which the OECD said could drag on growth and private consumption, which it forecast would fall by 3.5% next year, more than the 2.2% the government estimates."Compliance with the headline deficit targets of 4.5% and 2.5% of GDP for 2013 and 2014, respectively, are likely to require additional consolidation measures due to the weak economy," the OECD wrote.Record unemployment will also rise further, it said.Besides updating its macroeconomic scenario, the OECD said deleveraging of Portugal's financial sector was inevitable but that it should work to prevent credit from contracting too fast."The economy will remain sensitive to a further deterioration in credit conditions and worsening conditions in other euro area economies," it said.

 

Parking spots become latest investment

Ivestors looking for new places to park their cash in Hong Kong are driving up prices for parking spaces, sparking fears of a bubble in the Asian financial center.Prices for parking spots in Hong Kong are nearing historic highs, the side effect of government curbs to cool the housing market amid worries of overheating following the latest round of monetary stimulus in the US two months ago.There are "a lot of speculators in the market, especially for car parks," said Buggle Lau, senior analyst with Midland Realty. A bubble is "definitely forming."Over the weekend, a developer sold about 500 parking spots at a new suburban apartment complex at prices up to 1.3 million Hong Kong dollars ($167 000) per space.In a commercial building near the city's financial district on Hong Kong Island, an investor has put 34 parking spaces on sale for HK$100m ($12.9m), according to a report last week in the Ming Pao newspaper. A parking spot in the exclusive Repulse Bay neighborhood sold for HK$3m, the paper also said, citing Land Registry data.On Thursday, a single parking spot in a building in the popular Mid-Levels residential neighborhood will be auctioned off with the opening bid at HK$680 000.Second-hand parking spaces changed hands in the third quarter for an average of HK$640 000. That's up 16.4% over the year before, according to research by property company Centaline. It's also not far off the record HK$660 000 in the fourth quarter of 1997, shortly before the city's property market collapsed.The rising prices are a side-effect of recent measures to cool Hong Kong's housing prices, which have doubled since the end of 2009 and are among the highest in the world.Hong Kong's government has introduced three separate sets of curbs on property purchases since the summer in a bid to cool the market. US policymakers' continuing efforts to stimulate the economy by keeping interest rates at an ultralow level and buying tens of billions in bonds each month has raised concerns in Hong Kong about money flooding into the southern Chinese city, pushing asset prices higher as investors chase profits in the property market.The latest curbs don't cover nonresidential properties such as parking spots so investors have been piling in as they look for higher returns. Hong Kong had the world's third-highest monthly parking charges last year, according to real estate company Colliers International."In some car parks, especially in urban areas where supply is limited, the sales price of some car parks can be as high as two to three million (Hong Kong) dollars" each, said Lau of Midland Realty.Nearly 8 400 parking spaces worth HK$5.6bn changed hands in the first 10 months of this year, compared to 8 300 such transactions worth HK$5.4bn for all of 2011, according to Land Registry data compiled by Midland.Some of that increase comes from developers like Cheung Kong Holdings, Sun Hung Kai Properties and Chinachem Group selling off parking spaces at their apartment complexes. It's a break from the usual practice of renting them out to residents, and is a sign that the developers realize it's a "pretty good time" to sell because of the prices they can get, Lau said.Because Hong Kong's currency is pegged to the US dollar, policymakers cannot take conventional measures to cool property prices like raising interest rates.So the government tightened restrictions on property purchases, including bringing in a new stamp duty on foreign buyers. But parking spots and other non-residential property are exempt."The latest overseas buyers' stamp duty will just put some fuel onto that fire, and is making the whole parking space investment market go out of control," said Josh Wong, whose Hong Kong City Parking owns about 200 parking spots at eight lots around Hong Kong.Many investors who buy spaces rent them out to car owners. Wong said he typically looks for an annual yield, or return, of 5% to 6%, but because prices have risen, yields have been falling to about 4% to 5%. He said has even heard of investors making as little as 1.8% on their investment.Wong, who also runs Parkinghk.com, a website for buyers and sellers of parking spots, said the market was heating up because investors didn't need a lot of money to get started."One million Hong Kong dollars ($129 000) cannot buy anything in Hong Kong. You cannot buy a shop, you cannot buy anything except car parking and that would help the car park investment go even more crazy," he said.

 

French unemployment hits 14-year high

The number of people out of work in France soared again in October to hit its highest level in 14 and a half years, piling pressure on Socialist President Francois Hollande who has promised to halt the relentless rise by the end of 2013.Labour Ministry data showed the number of jobseekers in mainland France rose by 45,400, or 1.5%, to hit 3.103 million, marking the 18th consecutive monthly increase and taking the total to its highest level since April 1998.The increase was only slightly smaller than in October which saw the biggest jump in jobless rolls since April 2009, showing the deterioration in the job market is accelerating as recession in the broader euro zone hits demand.France's 1.9 trillion euro ($2.99 trillion) economy has been virtually stagnant since grinding to a halt at the end of last year, and many economists expect it to contract in the months ahead despite a surprise 0.2% rise in the third quarter.With the economy still struggling, the Labour Ministry said there was a risk the figures could get even worse.But it noted that new measures to bolster company investment and the youth job market that will kick in from next year have yet to produce results."This run of negative figures on employment only increases our resolve to do something to reverse the trend between now and the end of next year," Labour Minister Michel Sapin said in a statement.Hollande won power in May on a pledge to cut unemployment, but has since had to grapple with a wave of layoff announcements that have damaged his popularity and sapped public morale.The government unveiled a set of measures at the start of November, including sweeping tax rebates for companies, aimed at boosting industrial competitiveness and safeguarding jobs.French business newspaper Les Echos said Hollande was now planning a faster rollout of the rebates so that they reach full speed within two years instead of the three year build-up initially envisaged.Meanwhile, Industry Minister Arnaud Montebourg has been increasingly vocal in his criticism of companies mulling job losses. He shocked steelmaker Arcelor Mittal this week, fanning tensions over two threatened blast furnaces, by saying its CEO was no longer welcome in France.With the pace of job losses rising steadily, surveys show the public wants more than promises to save the economy, and economists want deeper structural reforms.The Labour Ministry data is the most frequently reported domestic jobs indicator for France, although it is not prepared according to widely used International Labour Organisation (ILO) standards nor expressed as a rate of the number of job seekers compared with the total work force.

Thousands march in Rio over oil dispute

As many as 200 000 people demonstrated in Rio de Janeiro on Monday to urge Brazilian President Dilma Rousseff to veto a bill that local officials say could cost Rio state billions of dollars in lost oil revenue and cripple plans to host the World Cup and Olympics.Late on Monday, a person familiar with the president's plans said Rousseff is planning to veto at least part of the bill, particularly a portion that redefines royalty payments for existing oil production in Brazil. The president, the person added, instead will propose that Rio and Espirito Santo, the two states with most of Brazil's oil output, continue to get a level of royalties from current production similar to what they received last year. The partial veto would not change parts of the bill that redefine oil royalties from production at new fields.For Rousseff, the protest raised the stakes on what may be the most sensitive decision she has faced in her nearly two-year-old government: How to distribute tens of billions of dollars in expected revenues from a massive offshore oil field that Brazil discovered in 2007.The bill, passed by Congress this month, would spread the windfall more evenly to Brazil's 26 states and federal district. As submitted for her approval, however, it would also alter royalties on existing production, angering Rio and other southeastern states where most of Brazil's oil is located.Rousseff has until Friday to veto the bill, but is expected to decide on the partial veto on Thursday, the person said.Monday's event had attracted about 200 000 demonstrators by early evening, according to police calculations.The protest began with a march through Rio's colonial centre and was followed by a series of speeches, concerts, and impromptu revelry that at times gave it a festive air. In recent days, state officials plastered streets and buildings with banners advertising the protest in large black and white lettering and a command in red for the president: "Veto, Dilma."Rio is spending tens of billions of dollars to build stadiums and other infrastructure for the 2014 soccer World Cup and the 2016 Summer Olympics - two marquee events expected to attract hundreds of thousands of visitors.Rio Governor Sergio Cabral, an ally of the president, led the protest. He has cast the debate in dire language that analysts say may exaggerate the financial stakes but has nonetheless intensified political pressure on Rousseff.The bill "would devastate the state budget and compromise the future of Rio. The state would be inviable," Cabral told journalists after the protest.He urged Rousseff to veto parts of the bill dealing with royalties for existing production, which he said would cost producer states and cities 6.5bn reais ($3.1bn) in 2013 alone.Approving the bill could hurt Rousseff's relations with Cabral's PMDB party, a large and ideologically shape-shifting group that is a linchpin of the broad coalition that supports her ruling Workers' Party.Rousseff has vowed to further Brazil's efforts to reduce poverty, in part by redistributing the windfalls from its growing commodity exports - from oil and iron ore to foodstuffs.Throughout the day on Monday, police had cordoned off large swaths of Rio's centre, along the river-like bay that gives the city its name. State and municipal officials facilitated attendance by waiving subway and ferry fees and providing buses from far-flung towns outside the capital.

NEWS,18.11.2012

Netanyahu: Israel Ready To Widen Offensive

 

Israel bombed Palestinian militant targets in the Gaza Strip from air and sea for a fifth straight day on Sunday, preparing for a possible ground invasion while also spelling out its conditions for a truce.Palestinian fire into Israel subsided during the night but resumed in the morning, with rockets targeting the country's commercial capital Tel Aviv for a fourth day. The two missiles were shot down by Israel's Iron Dome air shield.Speaking shortly after the attack, Prime Minister Benjamin Netanyahu said Israel was ready to widen its offensive."We are exacting a heavy price from Hamas and the terrorist organisations and the Israel Defence Forces are prepared for a significant expansion of the operation," he said at a cabinet meeting, giving no further details.Some 51 Palestinians, about half of them civilians, including 14 children, have been killed since the Israeli offensive began, Palestinian officials said, with hundreds wounded. More than 500 rockets fired from Gaza have hit Israel, killing three civilians and wounding dozens.Israel unleashed intensive air strikes on Wednesday, killing the military commander of the Islamist Hamas movement that governs Gaza and spurns peace with the Jewish state.Israel's declared goal is to deplete Gaza arsenals and press Hamas into stopping cross-border rocket fire that has bedevilled Israeli border towns for years and is now displaying greater range, putting Tel Aviv and Jerusalem in the crosshairs.Air raids continued past midnight into Sunday, with warships shelling from the sea. Two Gaza City media buildings were hit, witnesses said, wounding six journalists and damaging facilities belonging to Hamas's Al-Aqsa TV as well as Britain's Sky News.An employee of Beirut-based al Quds television station lost his leg in the attack, medics said.An Israeli military spokeswoman said the strike had targeted a rooftop "transmission antenna used by Hamas to carry out terror activity". International media organisations demanded further clarification.Three other attacks killed three children and wounded 14 other people, medical officials said, with heavy thuds regularly jolting the small, densely populated coastal enclave.Egyptian President Mohamed Mursi said in Cairo, as his security deputies sought to broker a truce with Hamas leaders, that "there are some indications that there is a possibility of a ceasefire soon, but we do not yet have firm guarantees".Egypt has mediated previous ceasefire deals between Israel and Hamas, the latest of which unravelled with recent violence.A Palestinian official told Reuters the truce discussions would continue in Cairo on Sunday, saying "there is hope", but that it was too early to say whether the efforts would succeed.At a Gaza news conference, Hamas military spokesman Abu Ubaida voiced defiance, saying: "This round of confrontation will not be the last against the Zionist enemy and it is only the beginning."Israel's military also saw action along the northern frontier, firing into Syria on Saturday in what it said was a response to shooting aimed at its troops in the occupied Golan Heights. Israel's chief military spokesman, citing Arab media, said it appeared Syrian soldiers were killed in the incident.There were no reported casualties on the Israeli side from the shootings, the third case this month of violence that has been seen as a spillover of battles between Syrian President Bashar al-Assad's forces and rebels trying to overthrow him.With tanks and artillery poised along the Gaza frontier for a possible ground operation, Israel's cabinet decided on Friday to double the current reserve troop quota set for the offensive to 75,000. Some 30,000 soldiers have already been called up."If there is quiet in the south and no rockets and missiles are fired at Israel's citizens, nor terrorist attacks engineered from the Gaza Strip, we will not attack," Israeli Vice Prime Minister Moshe Yaalon wrote on Twitter.Israel's operation so far has drawn Western support for what U.S. and European leaders have called its right to self-defence, but there was also a growing number of appeals from them to seek an end to the hostilities.Netanyahu, in his comments at Sunday's cabinet session, said he had emphasised in telephone conversations with world leaders "the effort Israel is making to avoid harming civilians, while Hamas and the terrorist organisations are making every effort to hit civilian targets in Israel".Israel withdrew settlers from Gaza in 2005 and two years later Hamas took control of the slender, impoverished territory, which the Israelis have kept under blockade.British Prime Minister David Cameron "expressed concern over the risk of the conflict escalating further and the danger of further civilian casualties on both sides", in a conversation with Netanyahu, a spokesperson for Cameron said.Britain was "putting pressure on both sides to de-escalate," the spokesman said, adding that Cameron had urged Netanyahu "to do everything possible to bring the conflict to an end."Ben Rhodes, a deputy national security adviser to President Barack Obama, said the United States would like to see the conflict resolved through "de-escalation" and diplomacy, but also believed Israel had the right to self-defence.Diplomats at the United Nations said Secretary-General Ban Ki-moon was expected to visit Israel and Egypt in the coming week to push for an end to the fighting.A possible move into the Gaza Strip and the risk of major casualties it brings would be a significant gamble for Netanyahu, favoured to win a January election.The last Gaza war, a three-week Israeli blitz and invasion over the New Year of 2008-09, killed 1,400 Palestinians, mostly civilians. Thirteen Israelis died in the conflict.The current flare-up around Gaza has fanned the fires of a Middle East ignited by a series of Arab uprisings and a civil war in Syria that threatens to spread beyond its borders.One significant change has been the election of an Islamist government in Cairo that is allied with Hamas, which may narrow Israel's manoeuvring room in confronting the Palestinian group. Israel and Egypt made peace in 1979.In attacks on Saturday, Israel destroyed the house of a Hamas commander near the Egyptian border.Casualties there were averted however, because Israel had fired non-exploding missiles at the building beforehand from a drone, which the militant's family understood as a warning to flee, witnesses said. Israeli aircraft also bombed Hamas government buildings in Gaza on Saturday, including the offices of Prime Minister Ismail Haniyeh and a police headquarters.Israel's "Iron Dome" missile interceptor system has destroyed more than 200 incoming rockets from Gaza in mid-air since Wednesday, saving Israeli towns and cities from potentially significant damage.However, one rocket salvo unleashed on Sunday evaded Iron Dome and wounded two people when it hit a house in the coastal city of Ashkelon, police said.

 

EU in trouble as summit faces collapse

The European Union looks set for fresh trouble this week as an extraordinary summit called to agree a long-term trillion-euro budget heads for an ugly showdown, possibly even failure.Already weakened by three years of economic crisis, the 27-nation bloc of half a billion people faces new trauma at the two-day summit starting Thursday after weeks of talks that have exposed stark divisions between pro- and anti-austerity nations, as well as between the haves and have-nots."It's a lose-lose summit," said a senior EU diplomat. "Absolutely no one will leave this summit content if by chance we reach a solution.""We don't exclude a breakdown," another diplomat told AFP on condition of anonymity.Europe's leaders begin the talks on the EU's next seven-year budget at 19:00 Thursday, with Britain's premier David Cameron in the role of leading spoiler though most governments are putting national interest well above shared concerns."Cameron will come with a big knife to get spending cuts and to defend the British rebate," said an EU diplomat.In the face of Britain's austerity-minded determination to secure a cut of up to €200bn in the 2014-2020 budget, EU president Herman Van Rompuy, who will broker the talks, last week suggested a €75bn cut to the proposed €1.047 trillion budget. But that made no one happy.Spain said it would lose €20bn of EU aid, Italy complained of losing €10bn.And a group of Nobel laureates flew to Brussels waving a petition signed by dozens of Nobel winners urging Van Rompuy and other EU officials not to strip funds for research and innovation."Fortunately, we only have these summits every seven years," Van Rompuy said Friday after coming under fire from all sides.His plan left Britain having to pay in part for its cherished yearly rebate of €3.6bn, while diminishing Sweden's rebate, and failing to address Denmark's demand to have a discount too.The three are among the 11 net contributors to the EU budget who in times of economic strain and domestic cutbacks are tired of bearing the brunt of the financial burden.Eight of the net contributors Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden have banded together to demand spending cuts, though they are far from being on the same page on what should go or by how much.France for instance, along with Italy, is refusing any decrease whatsoever in the budget's biggest item, the subsidies paid to farmers, big and small."There can be no question of withdrawing even one euro from the Common Agricultural Policy (CAP)," said French Premier Jean-Marc Ayrault, whose government is pushing for the EU to raise new revenues through new taxes, such as one on financial transactions.In the other corner are 15 nations from Europe's east and southern fringe who are net recipients, most often of the so-called "cohesion funds" used to help poor regions catch up economically and socially with the rest. This is the second biggest budget item after the CAP.Chaired by Poland and Portugal, the group includes Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Romania, Slovakia, Slovenia and most recently, once mighty Spain.Cameron, who is under intense euro-sceptic pressure to wrest an agreement in Brussels, has been shuttling back and forth to raise support, travelling to the Netherlands, Italy and Germany in search of allies.Chancellor Angela Merkel of Germany, which is the biggest contributor to the EU budget, has promised to do her utmost to ensure the summit would not end in collapse."Even if we are net contributors and people could perhaps think that we can live with a non-agreement, that is not our goal," Merkel said. "We want an agreement and we will talk exactly in this spirit with all countries."Meanwhile, there is a growing exasperation with France, whose recently elected Socialist President Francois Hollande has urged Brussels to push for growth, rather than austerity, but whose obsession with maintaining the CAP will lead to cuts in programmes to help growth."He wanted to re-orient Europe towards employment and growth. It's a political choice. He must be consistent," said an EU official who asked not to be named.

Spain rejects proposed budget cut

Spanish Prime Minister Mariano Rajoy on Saturday rejected as "unacceptable" a proposal from EU President Herman Van Rompuy to cut the bloc's 2014-2020 budget by €75bn."The government does not like this budget and we have made that known to the (European) institutions and we hope that there will be another proposal that will be more reasonable," Rajoy said.Rajoy said Spain objected to Van Rompuy's proposed spending cuts to agriculture funding, money for Spain's regions and the EU's development budget, known as the Cohesion Fund.Spain stands to lose almost €20bn in funds from Brussels in the next budget, with a 30% cut in funding for its regional governments and a 17% cut in its agriculture funding, according to an EU source.Van Rompuy on Wednesday proposed hefty budget cuts including €29.5bn from Cohesion Fund payments and €25.5bn from agriculture spending proposals already rejected by several countries, including France, Poland and Romania.

Owner, union talks go down to wire

The troubled Scandinvian airline says that negotiations between owners and unions have so far failed to yield an agreement that could save the troubled carrier from bankruptcy.Owners and creditors of the tri-nation SAS have drafted a program to slash costs and jobs, but the plan needs the approval from pilot and cabin crew unions.The airline said Sunday talks over the past week were "intense" and would continue in the hope of reaching an agreement before a key board of director meeting scheduled later Sunday.SAS managers are hoping to renegotiate employment terms and pensions for its staff and slash about 800 jobs as part of a $440m annual saving plan. Thousands of other jobs would be outsourced.

Chinese house prices on the rise

More Chinese cities reported rises in house prices in October than in September, data showed Sunday, the first gain in three months as the government works to keep the property market in check.Prices in 35 out of 70 cities tracked by the government rose month-on-month, the National Bureau of Statistics said in a statement, up from 31 cities in September, and the first increase since July.Prices of new homes dropped in October in 17 cities and remained unchanged in the remaining 18 cities, it said.China has implemented measures to control property prices for more than two years, including prohibitions on buying second homes, requiring higher minimum down-payments and levying property taxes in some cities.Officials have said that property control measures are aimed at bringing down home prices to a "reasonable" level.China's slowing economy has recently exhibited signs of a turnaround, with exports, retail sales and industrial production data all showing renewed vigour.Expansion in the world's second-largest economy has slowed for seven straight quarters through the end of September, but economists are expecting growth to accelerate during the current three-month period through December.Beijing expects gross domestic product to grow 7.5% in 2012, a marked slowdown from the 9.3% recorded in 2011 and 10.4% in 2010.The government is aiming to rebalance China's economy away from reliance on exports and more towards domestic demand in coming years in hopes it can steer growth onto a stable and sustainable track.