NEWS,15.07.2012

Hollande says Peugeot must renegotiate layoff plan

French President Francois Hollande says that Peugeot must renegotiate a plan to lay off 8000 workers to lessen its social impact and accused the carmaker of lying over its intentions and making serious strategic errors.In a television interview yesterday, Hollande said a government rescue plan for the ailing car sector due to be announced on July 25 would include public incentives to encourage consumers to purchase French-made, environmentally friendly cars.He ruled out, however, a return to the scrappage subsidies introduced in the 2009 financial crisis by former conservative President Nicolas Sarkozy, which he said had cost the taxpayer dearly and had often been spent on foreign-made vehicles.However, he admitted he could not halt Peugeot's plant to stop production at the Aulnay assembly plant near Paris in 2014.Hollande, who won power in May with a promise to tackle high unemployment and halt France's steady industrial decline, acknowledged Peugeot had economic reasons for making the cuts.The company said last week its manufacturing arm is losing 200 million euros a month."However, the plan in its current condition is not acceptable. It must be renegotiated," Hollande said, adding he wanted to make sure voluntary redundancy packages or new jobs were found for all workers. "We want to open discussions so that there are no straight firings at Peugeot."Peugeot has so far said it will find jobs within the group for 1500 of the workers concerned, with a further 3600 workers offered voluntary redundancy until 2013.The Peugeot announcement came as Hollande faces scrutiny over billions of euros in tax rises to hit a deficit target this year - with the prospect of worse to come in 2013 - and struggles to fulfil a campaign pledge to bring down France's highest unemployment rate in 12 years.The shock announcement from Europe's second-largest carmaker last week revived memories of former Socialist Prime Minister Lionel Jospin's failure to halt Renault's closure of its Vilvoorde plant in Belgium after winning power in 1997.Jospin's admission "the state cannot do everything" is credited with helping to sink his 2002 presidential bid."The state will not stand idly by," Hollande said, asked if his government would follow Jospin's route.Hollande said the government had means of "exerting pressure" and could provide credit to ensure Peugeot stuck to its commitment to see Aulnay remains an industrial site.He dismissed a call from Peugeot Chief Executive Philippe Varin for the state to cut the heavy social charges weighing on labour costs, which the executive said made manufacturing uncompetitive."It's too easy to blame labour costs. There were bad strategic choices," Hollande said."There were delays in taking difficult decisions and shareholders who were too hungry for dividends when investment should have been the priority."Hollande's government has said it will consider steps such as lowering social charges on labour as part of a competitiveness review headed by former EADS Chief Executive Louis Gallois due to be completed in October.That will come too late, however, to defuse the current crisis in the car sector.The president accused Peugeot of misleading public opinion by concealing its plans until after presidential and legislative elections in May and June. A company spokesman declined comment."There was both a lie - this plan was not announced although it was already on the agenda - and a deliberate delay until after the elections," Hollande said.Prime Minister Jean-Marc Ayrault will announce incentives on July 25 for buying French vehicles as part of a package to support the sector, Hollande said."In France, we have an industry which has taken the lead in making clean vehicles and hybrid vehicles. We should make sure these type of vehicles have the advantage," he said.State and regional governments would buy these vehicles to give them a boost, Hollande said, while credit would be made available for research to boost industrial innovation."We will create a plan which costs as little as possible to the taxpayer and is as effective as possible," said Hollande.

 

France's Hollande vows to fight job cuts

President Francois Hollande marked Bastille day celebrations with a pledge to fight industrial layoffs and clean up French politics, after watching troops parade down the Champs Elysees as jets streamed the national colours overhead.The Socialist leader's first National Day since winning office in May was overshadowed by outcry at mass job cuts announced by carmaker Peugeot and a scandal over his private life threatening to undermine his image as "Mr Normal".Reviving the tradition of a July 14 television interview, scrapped by his predecessor Nicolas Sarkozy, Hollande said France had to make an "effort" to restore its public finances but ruled out the kind of painful austerity causing protests in Spain and Italy."My mission is to help France recover and give it a future. Jobs are my priority," Hollande said in the interview at navy headquarters overlooking the historic Place de la Concorde, where thousands went to the guillotine during the Revolution.Hollande, who pledged during his campaign to curb the highest unemployment level in 12 years, faces a major challenge after Peugeot said on Thursday it would axe 8000 jobs in France.Accusing the company's management of strategic errors and misleading the public over its intentions, Hollande said he could not accept the restructuring plan as it stood and promised public incentives to help French-made cars.During the interview he also said he had told his partner, journalist Valerie Trierweiler, and the wife of his four children, Segolene Royal, to end a public spat.The parade - which ended with parachutists landing before the presidential tribune - came as Paris struggles to pare back one of the highest levels of public spending in Western Europe to meet an EU deficit target of 3% of GDP next year.The government announced 7.2 billion euros in new taxes last week to plug a budget shortfall for this year and needs to find 33 billion euros in 2013 to meet its European deficit targets or risk unnerving financial markets."I knew the state of France before I inherited it. I am not going to pretend that I just discovered it," Hollande said.He said the government was looking at a raft of measures to fill the shortfall, including an increase in the CSG social welfare charge recommended by the state auditor this month, which would hit all households."I'm not going to announce today an extra tax for the majority of the French... A rise in the CSG is one of the things under study, among other measures," he said.With his popularity already hit by voters' fears over austerity, Hollande has also had to deal with simmering tensions between his partner, his four children and their mother, Socialist politician Royal.The affair flared this week when Thomas Hollande, his eldest son, told Le Point magazine he and his siblings wanted no contact with Trierweiler after she backed Royal's rival in a legislative election in the western city of La Rochelle in June.Royal said a tweet from Trierweiler in support of her opponent was partly to blame for her losing the seat, fuelling media reports of bitterness between the two women."Private matters should be handled privately and I told those close to me that they should scrupulously respect this principle," Hollande said in Saturday's interview, promising there would be no repeat of the incident, dubbed "tweetgate".Trierweiler sat in a separate tribune from Hollande to watch Saturday's two-hour parade under cloudy Parisian skies in the Place de la Concorde. Thousands of onlookers packed the tree-lined avenue, decked out in France's Tricolour flag, as troops, cavalry and tanks streamed past from the Arc de Triomphe.

 

European Union Working On $120 Billion Spanish Bailout

 

The European Union's bailout fund is working on a (EURO)100 billion ($120 billion) package to prop up Spanish banks, according to a report Saturday by German news weekly Der Spiegel.A confidential draft plan by senior officials at the European Financial Stability Facility proposes an initial (EURO)30 billion payment to Spain at the end of July, the magazine said.Of that, some (EURO)20 billion would go toward shoring up Spanish banks' short-term finances while another (EURO)10 billion would be reserved as a longer-term emergency buffer.Three further payments totaling (EURO)45 billion would be made in November and December of this year, and in June 2013, Der Spiegel said. A Spanish Economy Ministry spokeswoman declined to comment on the report.According to the report, up to (EURO)25 billion would also be made available to create a "bad bank" to buy up hard-to-sell debt.This would be in line with a draft memorandum of understanding agreed by finance ministers from the 17 eurozone countries, which suggests that part of Spain's bank bailout should involve the segregation of billions in problematic assets to an "external asset management agency" to clean up Spanish banks' balance sheets.Investors are becoming increasingly wary of placing money in Spanish banks, which are having to turn to the European Central Bank for financing. In June, Spanish bank borrowing from the ECB rose 17 percent from May. The accrued total as of the end of that month was (EURO)337 billion, 77 percent of all the money owed to the ECB and seven times the figure from June 2011.The government on Friday approved its latest package of measures aimed at cutting (EURO)65 billion ($79 billion) off the budget deficit through 2015, the biggest deficit-reduction plan in recent Spanish history. The sweeping austerity measures include wage cuts and tax increases for a country struggling under a recession and an unemployment rate of near 25 percent.

 

Chavez re-election team reaches out via Twitter

 

Venezuela's verbose Hugo Chavez is offering to send supporters his tweets to their mobile phones as the socialist president fights a vigorous opposition campaign across the Twitter-mad country ahead of an October 7 election.Chavez has had three cancer operations in the last year and his delicate health means he has not been able to travel anywhere near as much as his younger rival, Henrique Capriles.Instead, he has had to focus on making regular state TV appearances - usually for several hours at a time, almost every day of late - and pontificating via his @chavezcandanga Twitter account, which has nearly 3.2 million followers.The president's online persona is an important part of his team's strategy in an election battle that is shaping into the toughest fight of his political life.Spurred by an explosion in Twitter's popularity in Venezuela and annoyed at what he said was the opposition's domination of local electronic media, Chavez began tweeting in early 2010.His account quickly overtook one belonging to Globovision, the main opposition TV station, and he soon said he had needed to hire 200 people to help him read and respond to what he called an "avalanche" of messages from supporters, requests for help, and complaints about faulty services and corruption.Delighted with his cyber success, he even urged Cuba's Fidel Castro and Bolivia's Evo Morales to start tweeting too.The three men are arguably Latin America's most vocal left-wing critics of what they denounce as the US "empire."While the 57-year-old Chavez says he is completely cured of cancer, his recuperation means he has had to watch while Capriles, a 40-year-old former state governor, spent months crisscrossing the OPEC nation on a "house by house" tour.Most opinion polls still give Chavez a double-digit lead, and on Friday he launched a series of campaign events describing his recovery as "a miracle" and seeking to capitalize on the deep emotional ties that even his fiercest critics concede he shares with Venezuela's poor majority.The SMS service was unveiled late on Friday and is aimed at the many Venezuelans who have no easy access to the Web and would like to receive tweets by "el comandante" via SMS message."The initiative will (also) let people without Twitter accounts receive the messages," said state-run news agency AVN.Supporters who register at this Chavez's website can choose to receive his tweets in real time, or avoid being woken up by choosing just those he posts between 7 am and 10 pm. Chavez's number of followers - many of whom must have signed up at least partly out of curiosity about how the former soldier famed for his hours-long speeches works with a 140-character limit - currently puts him at 179th in the world, just behind Jamaican-American hip hop star Sean Kingston.By comparison, the top spot is held by singer Lady Gaga with more than 27 million followers. Capriles, on the other hand, has 1 million - about a third as many as Venezuela's president."Good morning, Patriotic World!" Chavez said in one fairly typical tweet on Saturday, adding that he was on his way to lead what would be another lengthy televised ceremony at a military base in Caracas. "Long live our Soldiers!"

NEWS,13.07.2012

Spain Protests: Civil Servants Protest Wage Cuts

 

Spanish civil servants, many dressed in mourning black, took to the streets Friday in angry protest as the government approved new sweeping austerity measures that include wage cuts and tax increases for a country struggling under a recession and an unemployment rate of near 25 percent.Spain is under pressure to get its public finances on track amid concerns in the markets over the state of the country's banks and the wider economy."Spain is going through one of its most dramatic moments," Deputy Prime Minister Saenz de Santamaria said after a Cabinet meeting at which sales tax hikes and spending cuts were approved.Admitting that the austerity measures were "neither simple, nor easy, nor popular," she said the government would try to enact the measures "with the maximum justice and equity."The conservative government has come under mounting criticism that the austerity measures are hitting the middle and working classes the hardest."The government should go after the big companies that don't pay tax and bankers that have committed fraud and have run this country to the ground," said Pablo Gonzalez, 52, who works for the Madrid regional government. "Instead, we have to pay."The aim of the latest package of measures is to chop (EURO)65 billion ($79 billion) off the budget deficit through 2015, the biggest deficit-reduction plan in recent Spanish history.Though the increase in sales taxes, which risks slowing consumption and worsening Spain's recession, will take effect Sept. 1, other reforms will be left for later in the year, including a plan to speed up the gradual raising of the retirement age from to 65 to 67.Meanwhile, Economy Minister Luis de Guindos announced the creation of a new mechanism to help Spain's 17 regions finance themselves more easily. Some, such as Valencia in the east, are finding it increasingly difficult to tap capital markets for much-needed cash.The latest bout of austerity is prompting widespread opposition, not least from civil servants. In Madrid, several hundred government workers blocked traffic briefly in different parts of the city. In Valencia, several hundred Justice Ministry workers shouted "hands up, this is a stick-up" at a protest rally.The civil servants  whose wages were cut 5 percent on average in 2010 in the first round of austerity cuts –are usually paid 14 times a year. The government is now axing an extra payment made just before Christmas. The prime minister, his cabinet and lawmakers will also suffer the cut. At the local, regional and central level, there are around 3 million public servants in Spain.In the Puerta del Sol in downtown Madrid, about 500 civil servants gathered, about half dressed in black. Some women wore veils, as if at funerals. Protesters blew whistles and horns. Civil servants are often ridiculed in Spain and seen as lazy, clock-in and clock-out types with the luxury of lifetime jobs. But many earn as little as (EURO)1,000 a month.Isabel Perez, a 40-year-old librarian, said "our wages have already been cut and now they take away the Christmas payment. I don't make it to the end of the month as it is. The extra payment gave some relief. We're not exactly millionaires." She earns (EURO)1,300 a month and had already faced a yearly (EURO)330 euro wage cut by the Madrid regional government.The latest austerity package has come after Spain won approval from the other 16 countries that use the euro for the first (EURO)30 billion tranche of a bailout of up to (EURO)100 billion for its troubled banking sector. Spain also managed to secure an extra year to meet a European deficit reduction target of 3 percent of GDP. The size of Spain's economy in 2011 is estimated to have been $1.5 trillion.Investors' response has been lukewarm, and the yield on Spain's benchmark 10-year bonds, a measure of investor wariness of a country's debt, remains very high at 6.61 percent, up 4 basis points for the day.Investors are also becoming increasingly wary of placing money in Spanish banks, which are having to turn to the European Central Bank for financing.In June, Spanish bank borrowing from the ECB rose 17 percent from May. The accrued total as of the end of that month was (EURO)337 billion, 77 percent of all the money owed to the ECB and seven times the figure from June 2011.A draft memorandum of understanding agreed by eurozone finance ministers for Spain's bank bailout suggests billions in problematic assets should be segregated into an "external asset management agency" to clean up Spanish banks' balance sheets.It also says that by the end of the year certain areas of jurisdiction  sanctioning and licensing  should be transferred from the Spanish economy ministry to the Bank of Spain.This is seen as paving the way for Europe having a single bank supervisory body that will oversee central banks and be empowered to recapitalize Spanish and other troubled banks directly instead of via debt-laden government.

 

Europe shows chocolate not recession-proof

 

An assumption that chocolate is a recession-proof treat that consumers continue to buy despite the grim economic outlook was proven wrong today by the sharpest fall on record in Europe's quarterly cocoa grind - an indicator of demand.Analysts said worsening economic conditions in the euro zone had prompted a sharp slowdown in European demand for chocolate, and the outlook could deteriorate further if the crisis deepens.The Brussels-based European Cocoa Association (ECA) reported that Europe's second-quarter cocoa grind tumbled 17.8% from the same period last year to 292,551 tonnes, far worse than even the most pessimistic predictions of a fall of up to 12%."We think the current slowdown in grindings reflects worsening economic conditions in the euro area. If contagion spreads to Spain and Italy, this would have undoubtedly an impact on demand for indulgence products like chocolate," said Francisco Redruello, senior food analyst at Euromonitor International.In Switzerland, the world's top chocolate consumer, domestic chocolate consumption dropped about 8% by volume in the first four months of the year, said Franz Schmid, managing director of the association of Swiss chocolate manufacturers Chocosuisse.Swiss chocolate exports - of which around two thirds are destined for Europe - also fell about 12% in the January to April period. Schmid said the strong Swiss franc also had hurt exports.In Germany, one of the world's largest chocolate consumers, retail sales of chocolate bars by tonnes fell 7.3% on the year in the first four months of 2012, according to the association of German confectionery producers BDSI.Following the grindings data, benchmark ICE September cocoa futures fell 5% to $2,177 per tonne 1516 GMT."It is by far the worst ever result in a quarter since the ECA began reporting these figures. It is reflecting the reality of the demand picture in Europe," said Javier Almela, head of cocoa purchasing at Spanish cocoa processor Natra Cacao.In Spain, where unemployment is high and consumers are feeling the pinch, chocolate consumption is expected to suffer.According to market research firm Mintel's June chocolate confectionary report, only 44% of Spaniards agree that chocolate is value for money, while 43% claim that they will cut back on purchasing chocolate if the value of their favourite bars rises."Given these responses it is not unreasonable to assume that consumers are likely to be cutting back on purchasing some forms of chocolate," said Marcia Mogelonsky, global food and drink analyst at Mintel.Cocoa demand growth typically tracks GDP growth, and with many European countries in recession plus cocoa processing margins being squeezed, analysts had expected a negative grind number - just not of this magnitude.Some are adjusting their global supply and demand balance sheet accordingly."This transforms a flat supply and demand picture into looking like a meaningful surplus for the year. We are now looking at a 2011/12 surplus of over 100,000 tonnes," said Jonathan Parkman, joint head of agriculture at broker Marex Spectron.In May, the International Cocoa Organization (ICCO) forecast a 2011/12 global cocoa deficit of 43,000 tonnes.Until now, growing global demand was attributed to strong cocoa powder demand from emerging markets including Brazil and China, but Parkman said the weak grind data throws this into question.When cocoa beans are ground, they produce roughly equal parts of butter, which makes chocolate melt in the mouth, and powder, used to flavour products including cakes and biscuits."Everyone is aware that powder demand has been holding grindings up and yes margins were negative, and that's what caused this slowdown in grindings, but the European grind also suggests the powder demand story has been exaggerated. Powder demand certainly doesn't seem to be growing," said Parkman.

 

China's economic growth slows

 

China's economy expanded at its slowest pace since the depths of the global financial crisis more than three years ago, official data showed on Friday, fuelling expectations of more stimulus moves.The world's second-largest economy grew 7.6% from April to June year-on-year, the National Bureau of Statistics said, the worst performance since 6.6% in the first quarter of 2009.The slowdown "was mainly due to the continued deterioration in the international environment, which further dampened foreign demand," statistics bureau spokesperson Sheng Laiyun told reporters."Domestic demand eased also as macro-economic tightening, particularly controls on the real estate sector, continued."The weak second-quarter expansion dragged down growth to 7.8% for the first half of the year.Sheng expressed confidence that the economy would stabilise and China would meet its full-year growth target of 7.5%."I believe China's economy will continue moderate and steady growth in the second half of the year," he said, citing the potential for investment, consumption and exports to propel expansion the rest of the year."We are very confident in achieving the full-year growth target."Nevertheless, the target growth rate of 7.5% is well down on the 9.2% achieved last year, and 10.4% in 2010.Market reaction in China to Friday's data was muted. Chinese stocks turned slightly into negative territory after initially rising following the release of the figures.The Shanghai Composite Index, which covers both A and B shares, was down 0.15%, or 3.30 points, to 2,182.19 in late morning.Tang Jianwei, economist at Bank of Communications in Shanghai, said the second-quarter result was in line with expectations and that China's planners would be able to speed up the economy."We expect economic conditions in the second half of the year will be slightly better than the first half," Tang said. "We've already seen stabilisation in investment from June's data thanks to government stimulus policies."The government last week took the rare step of slashing interest rates for the second time in a month. That came after three cuts since December in banks' reserve requirements, or the amount of money they must keep on hand.Such cuts are meant to free up funds for lending and thus boost the economy.Chinese leaders have vowed to take further measures. Premier Wen Jiabao this week called stabilising economic growth the government's "top priority".Slowing growth in China is also casting a further cloud over the broader global economy, which is still suffering the effects of the 2008-2009 financial crisis.Employment figures in the United States, the world's biggest economy, remain weak and Europe is struggling to overcome its sovereign debt crisis.Ren Xianfang of IHS Global Insight said in a report that China's second-quarter figure marked the sixth straight three-month period of slower growth, and highlighted that the country's economy risked losing momentum. Still, she said that the government retained ample tools - including another interest rate cut, more loosening in bank reserve requirements and exchange rate stability - to spur activity."We are expecting about 7.9% growth this year," she said.Besides the growth figures, the bureau released a slew of other economic statistics on Friday that backed up the broader slowdown.Growth in retail sales, the main gauge of consumer spending, continued to slow in June, rising 13.7% in June compared with the same period a year earlier, marginally down from growth of 13.8% in May.Output from China's millions of factories and workshops also continued to slow, growing by 9.5% year-on-year in June, the bureau said, down from 9.6% in May.However, indicating that some government measures to revive growth were starting to kick in, China's urban fixed asset investments rose 20.4% in the first half of 2012 compared with a year earlier, the bureau said.The investments for the half year compared with growth of 20.1% in the first five months of the year, signalling a slight increase in June.Fixed asset investments are a key measure of government spending on infrastructure.

 

NEWS,12.07.2012

South China Sea Dispute Addressed In Meeting Between U.S. And China

 

The Obama administration now has a taste of the difficult diplomacy necessary to sharpen the focus of American power on Asia, seeking investment opportunities alongside reforms from rights-abusing governments and working with China while defending U.S. interests.From democratic Mongolia to once-hostile Vietnam and long-isolated Laos, Secretary of State Hillary Rodham Clinton this week faced governments eager to embrace the United States as a strategic counterweight to China's expanding military and economic dominance of the region, while still lukewarm about American demands for greater democracy and rule of law.And after meeting face-to-face with China's foreign minister Thursday as she began to wrap up a weeklong tour of Asia, Clinton lauded Washington's cooperation with Beijing even as she took up the case of several Southeast Asian nations threatened by the communist government's expansive claims over the resource-rich South China Sea.In the discussions across the world's most populous continent, U.S. officials outlined their belief in greater democracy and freedom for Asian nations. The vision is part of a larger Obama administration effort to change the direction of U.S. diplomacy and commercial policy and redirect it to the place most likely to become the center of the global economy over the next century.It is also a reaction to the region's slide toward undemocratic China as its economy has boomed and America's has struggled."As we've traveled across Asia, I've talked about the breadth of American engagement in this region, especially our work to strengthen economic ties and support democracy and human rights," Clinton told reporters Thursday. "This is all part of advancing our vision of an open, just and sustainable regional order for the Asia-Pacific."Clinton will meet Friday with Myanmar's reformist President Thein Sein and introduce him to American business leaders looking for investment opportunities. The U.S. eased sanctions on the once reclusive military dictatorship this week, opening up new opportunities for the administration as it seeks to double American exports.Still, Clinton said she would urgeThein Sein to do more. "Political prisoners remain in detention," she said. "Ongoing ethnic and sectarian violence continues to undermine progress toward national reconciliation, stability and lasting peace. And fundamental reforms are required to strengthen the rule of law and increase transparency."The tour started in Japan, where Clinton assured a long-time ally the U.S. was committed to its security. From there, she visited four countries in China's backyard, part of a larger economic area among the world's most dynamic. Up to now, however, China has taken the most advantage.In each place, Clinton was careful to make the case for American values alongside American business aspirations. It's unclear, however, if both messages were received.In Ulan Bator, she credited Mongolia with liberalizing economically as well as politically, holding it up as a foil to the Chinese model of growth without freedom. And she offered deeper U.S. partnerships with communist governments in Vietnam, Laos and Cambodia, which have looked to Washington for fear of being swallowed up by China's expanding power.But while two-way trade between Vietnam and the U.S. has soared by 40 percent in the last two years, there has been little improvement in the Vietnamese government's respect for dissidents. Laos may seek similar business relations with the U.S., but has yet to show any willingness to rectify its poor labor rights record.What Washington doesn't want with these countries is what it has with Beijing, a partnership of unprecedented economic integration that stops when the discussion turns to human rights, democracy or sharing a vision for the world. It's a relationship that neither side appears able to change, both equally reliant on the other's goods and consumers, while mistrustful of the other's intentions."We are committed to working with China within a framework that fosters cooperation where interests align, and manages differences where they don't," Clinton said.In probably her most difficult work of the week, Clinton pressed Beijing on Thursday to accept a code of conduct for resolving territorial disputes in the South China Sea, a U.S. mediation effort that has faced resistance from China..Meeting on the sidelines of the Association of Southeast Asian Nations' annual gathering, Clinton stressed the different ways Washington and Beijing are cooperating, while Chinese Foreign Minister Yang Jiechi spoke of building even closer U.S.-Chinese ties.Neither side mentioned the South China Sea while reporters were in the room. Afterward, according to U.S. officials, they got into the sensitive talk of the South China Sea, an issue that has caused grave concerns among China's neighbors and the wider world as tensions have threatened to boil over amid standoffs between Chinese and Philippine ships and competing Chinese and Vietnamese claims.While China's claim over the entire area has driven countries closer to Washington, countless hours of talks between U.S. and Chinese officials haven't led to progress on a lasting solution. The waters host about a third of the world's cargo traffic, rich fishing grounds and vast oil and gas reserves – economic opportunities the U.S. would be locked out of if China were to seize total control.Clinton, however, again framed it as a question of principles."The United States has no territorial claims there and we do not take sides in disputes about territorial or maritime boundaries," she told foreign ministers gathered in Cambodia's capital. "But we do have an interest in freedom of navigation, the maintenance of peace and stability, respect for international law and unimpeded lawful commerce in the South China Sea."She singled out "confrontational behavior" in the disputed Scarborough Shoal off northwestern Philippines, including the denial of access to other vessels. The actions she cited were China's, though she didn't mention the offending country by name."We have seen worrisome instances of economic coercion and the problematic use of military and government vessels in connection with disputes among fishermen," she said. "There have been a variety of national measures taken that create friction and further complicate efforts to resolve disputes."Despite publicly exhorting both China and Southeast Asian nations to diplomatically settle their disputes, a State Department release made no mention of the issue and instead spoke of Sino-American cooperation on everything from disaster relief to tiger protection. The issues were clearly secondary, but reflected an effort to compartmentalize any confrontation with Beijing and paint a larger picture of collaboration.

Will The European Debt Crisis Affect Me?

 

With headlines like these, it's easy to get caught up in the frenzy of what's going on in Europe. But before you do, here's a little background. Causes of the crisis differ from country to country. Essentially, it is becoming increasingly difficult for countries such as Greece, Portugal, Spain, Cyprus and Italy to restructure their debt. These countries owe a lot in relation to what they are making, and asked countries who were more financially stable, like Germany, to back up their debts. The hope was that these countries could get better terms on their loans because the loans would be less risky with a second backer (like parents cosigning a mortgage). The terms are still being negotiated. Because no one knows how the debt crisis will play out, there is a risk that our economy will be affected. In the meantime, however, we may be affected by something called headline risk. News headlines are constantly filled with doom and gloom. News stories can have a negative impact on investments, even if they are unsubstantiated. This is known as headline risk.The predictions in these headlines might be very real; however, we really can't predict the outcome of current negotiations. One common example of headline risk is when a company's shares drop due to negative media coverage of an executive scandal. These headlines and other media hype can encourage people to sell their investments and push prices down even further. This sounds very grim indeed. We might assume that our economy will be adversely affected and that we shouldn't invest in international bonds. These are distinct possibilities, but let's look at some facts in order to make an informed decision. 

1. Exports: The United States' total exports comprise 14 percent of GDP. Exports to the eurozone represent only 14 percent of this total. 

2. Investments: At the end of 2011, 30 percent of worldwide mutual fund investments were based in Europe.

3. More than 50 percent of the sales of American-owned foreign affiliates are in Europe.

4. Germany is the sixth largest economy in the world with a budget deficit below 3 percent of its GDP. This is in comparison to the U.S. budget deficit at 12 percent of its GDP. The U.S. is the world's largest economy though the entire EU economy is larger as a group.

 

If you have a business catering to European tourists you may feel the burn. If you have all your money invested in European bonds, the crisis will have a negative impact on your net worth. The debt crisis will most likely have an impact on us, but how large will it be? The effect the European debt crisis will have is a matter of degrees and exposure. It's hard to discern how these unfortunate events will affect us and what actions we should take. In other words, what do we have control over and when are we just being reactive?It is important to have a financial plan in place that you understand and have confidence in. That way you can stick to it, so it can meet your needs over time. We also want to differentiate between headline risk versus a real problem with the investment. The difficulty in this is that there is no way to predict how investments will perform in the future. Headline risk generally has short term effects causing prices to dip, but the effects do not persist in the long run. Could you lose money if part of a mutual fund you own is invested in these assets? Of course, but that doesn't mean you necessarily want to make a rash or reactive decision.It is critical to understand the extent of your exposure and the purpose of your investments. You should also make note of the reason you chose them and potential circumstances when you should make adjustments. This can all be documented in the form of an investment policy statement. There are a lot of moving parts in our global economy that affect our investments. It's hard to know how to react and what the ramifications will be for events like the European debt crisis, as well as subsequent market fluctuations. However, if we put an investment plan in place, we are better prepared to SaveUp in the long run.

 

Public Debt in France and Europe

 

All European countries find themselves confronted with debt problems that impact sustainable public finances. The crisis has not spared France, the world's fifth largest economic power, something that makes private banks quite happy.No European nation has been spared the problem of public debt, even if the severity of the crisis varies from one capital to another. On the one hand, there are the "good students," such as Bulgaria, Romania, the Czech Republic, Poland, Slovakia, and the Baltic and Scandinavian states, all of which enjoy a debt lower than 60 percent of their GDP. On the other hand, there are the four "dunces" whose public debt surpasses 100 percent of their GDP: Ireland (108 percent), Portugal (108 percent), Italy (120 percent), and Greece (180 percent). Between the two extremes are found the rest of the European Union countries, such as France (86 percent), whose debt oscillates between 60 percent and 100 percent of GDP. Conservative European governments, exemplified by Angela Merkel's Germany, believe in the importance of lowering public debt through the application of austerity measures. Similarly, Pierre Moscovici, despite being Finance Minister in François Hollande's new socialist government, has set "deficit reduction" as a priority and is attempting to reduce the deficit to 3 percent of GNP by, among other means, cutting public spending. Still, it is common knowledge that the austerity policies promoted by the European Union, the European Central Bank and the International Monetary Fund that are currently being applied across the Old World, are economically inefficient. In fact, they result in the opposite of what was intended. Rather than restarting growth, reducing expenditures; depressing salaries and retirement benefits; dismantling public services, including education and health care; destroying the work code and social benefits -- in addition to the catastrophic social and human consequences that this causes -- inevitably lead to a reduction in consumption. Inevitably, companies cut production and wages and lay off workers. As a logical consequence, the resources that flow from the state are cut back, while the entities dependent upon the state explode, creating a vicious cycle, for which Greece is the poster boy. Because of this, several European countries now find themselves in recession.In 1973, France did not have a debt problem and the national budget was balanced. Indeed, the state could borrow directly from the Bank of France to finance the building of schools, road infrastructure, ports, airlines, hospitals and cultural centers, something that it was possible to do without being required to pay an exorbitant interest rate. Thus, the government rarely found itself in debt. Nonetheless, on January 3, 1973, the government of President George Pompidou -- Pompidou was himself a former general director of the Rothschild Bank -- influenced by the financial sector, adopted Law no.73/7 focusing on the Bank of France. It was nicknamed the "Rothschild law" because of the intense lobbying by the banking sector which favored its adoption. Formulated by Olivier Wormser, Governor of the Bank of France, and Valéry Giscard d'Estaing, then Minister of the Economy and Finance, it stipulates in Article 25, that "the State can no longer demand discounted loans from the Bank of France." As a result, the French state is now prohibited from financing the public treasury through zero interest loans from the Bank of France. Instead, it must seek loans on the open financial markets. Therefore, the state is forced to borrow from and pay interest to private financial institutions, when until 1973, it could create the money it used to balance its budget through the Central Bank. With this quasi-monopoly, commercial banks now have been granted the power to create money through credit, whereas previously this had been the exclusive prerogative of the Central Bank, that is to say of the state itself. As a result, commercial banks are getting rich off the backs of taxpayers.Furthermore, thanks to the fractional reserve banking system, private banks can lend up to six times more than the amount they actually have in reserve. Thus, for every euro they possess, they can loan six euros through the system of money creation through credit. As though this were not enough, they can also borrow as much money as needed from the Central Bank at a rate of 0 percent to 18 percent, as we see in the case of Greece. Today, money creation through credit accounts for 90 percent of all money in circulation in the euro zone.This situation has been denounced by the French economist and Nobel laureate, Maurice Allais, who wished to see money creation reserved to the state and the Central Bank. "All money creation must be the prerogative of the state and the state alone: Any money creation other than that of the basic state-created currency should be prohibited in a way that eliminates the so-called 'rights' that have arisen around private bank creation of money. In essence, the ex nihilo money creation practiced by the private banks is similar -- I do not hesitate to say this because it is important that people understand what is at stake here -- to the manufacture of currency by counterfeiters, who are justly punished by law. In practice both lead to the same result. The only difference is that those who benefit are not the same." Today, French debt has grown to over 1,700 billion euros. Between 1980 and 2010, the French taxpayer paid more than 1400 billion euros to private banks in interest on the debt alone. Without the 1973 law, the Maastricht Treaty and the Lisbon Treaty, the French debt would be hardly 300 billion euros. France pays 50 billion euros in interest annually, making this the largest item in the national budget, coming even before education. With that kind of money, the government would be able to build 500,000 public housing units or create 1.5 million jobs in the public sector (education, health, culture, leisure), each with a net monthly salary of 1,500 euros. In this way, French taxpayers are robbed of over 1 billion euros weekly, money that accrues to the benefit of the private banks. Clearly, the state has given the richest group of people in the country the fantastic privilege of enriching themselves at taxpayers' expense. And it has asked for nothing in return, and has not made the slightest effort to do so.Moreover, this system allows the financial world to subject the political class to its interests and dictate economic policy through the rating agencies, which are in turn financed by private banks. Indeed, if a government adopts a policy contrary to the interests of the financial market, these agencies lower the rating scores awarded to states, something that has the immediate effect of increasing interest rates.Meanwhile, when the state and the European Central Bank bail out ailing private banks, they do so with interest rates lower than those same financial institutions charge the state. In reality they are conducting de facto nationalizations without receiving the slightest benefit, for example, being granted decision-making authority within the banks administrative councils.The credit system established in France in 1973, and since ratified by the treaties of Maastricht and Lisbon, has but a single goal: to enrich private banks off the backs of taxpayers. It is unfortunate that a debate on the origins of public debt is not occurring in the media or in Parliament itself, even though resolving the debt problem would require nothing more than restoring the exclusive right of money creation to the Central Bank.

NEWS,10.07.2012

Russia to ratify agreement to join WTO

 

Russia's parliament is expected to ratify on Tuesday an agreement to join the World Trade Organisation (WTO) in a move that will push Moscow to open up its economy.Russia, the largest economy outside the global trade organisation, has spent 18 years trying to negotiate its entry into the body. Now that the talks are over, the Russian government, which has strongly advocated the entry, is facing criticism from many businesses and opposition politicians that the WTO membership would hurt domestic producers by flooding the market with cheaper imports.Activists including several dozen Communist Party deputies staged a protest outside the State Duma (lower house of the Russian parliament) on Tuesday morning to protest Russia's accession, which is considered a done deal since the Duma is controlled by President Vladimir Putin's party."The WTO is death to Russia!” one of the posters held by a protester.Thousands of Russian businesses are wary that the low import duties and caps on subsidies that are a condition of joining the WTO will hurt their businesses. The government, however, insists that the WTO rules will help weed out inefficient players from the market and make Russian companies and their products more competitive abroad.Russia's Economic Development Minister Andrei Belousov sought to play down those fears in a debate with lawmakers on Tuesday.He said that the government would still be able to prop up agriculture and machinery companies with subsidies and businesses would have five to seven years before Russia cuts down duties and subsidies to WTO-assigned levels."Who would want to invest in a country which wouldn't play by international rules?" Belousov said at the Duma hearing. "The WTO is a guarantee that Russian business will have the same rules to go by at home and abroad."

Eurozone offers Spain €30bn for banks

 

Eurozone finance ministers agreed on Tuesday to offer Spain €30bn this month to help its distressed banks as they raced to stay ahead of market scepticism.After nine hours of talks, Jean-Claude Juncker, the Luxembourg premier who also heads the Eurogroup, said a memorandum of understanding for Spain would be formally signed "in the second half of July," with €30bn available by the end of the month.Juncker, who has been in the job since 2005, was reappointed by the 17 ministers during talks Monday which ended well after midnight.Spain, under increasing pressure as sceptial markets pushed its borrowing costs dangerously high again, had called for up to €100bn in direct aid at a June 28-29 "breakthrough" EU summit.Aiming to keep the momentum going, ministers also agreed to extend a deadline for Spain to cut its public deficit to the EU 3.0% limit by one year to 2014 because of the difficult economic conditions Spain faces.At the same time, however, Juncker stressed that Madrid must implement measures needed to bring its public finances into line with EU norms.EU economic affairs commissioner Olli Rehn said Spain's public deficit - the shortfall of revenue to spending - was now expected at 6.3% of Gross Domestic Product this year, 4.5% in 2013 and then 2.8% in 2014.Spain in May revised its 2011 public deficit figure, saying that it stood at 8.9%, up from 8.51% reported earlier and way above the original 6.0% target for the year.Spanish Prime Minister Mariano Rajoy announced on Saturday that he would take additional steps soon to cut the public deficit and said "Europe must fulfil the accords as swiftly as possible."Juncker, widely seen as one of the founding fathers of the euro, confirmed he would stay on as head of the Eurogroup but would not serve a full two-and-a-half year term, expecting to step down early next year.In another key appointment, Germany's Klaus Regling, head of the eurozone's temporary EFSF bailout fund, was named to run its permanent successor, the European Stability Mechanism.The June summit agreed that the ESM will be able to inject funds directly into needy banks, conditional on a new European bank regulator being put in place, so as to avoid adding to the debt burden of the affected state.Asked if such a state would have to provide guarantees on such bank funding, Juncker answered with a simple "No."Rehn confirmed that position, a key issue for nervous investors, but also highlighted the importance of getting the new regulator - to be built around the European Central Bank - in place quickly.The European Financial Stability Facility (EFSF) was set up in 2010 after a first Greek bailout but it became clear after Ireland and Portugal also had to be rescued that a more powerful backstop was needed.The ESM has funds of €500bn and was supposed to be operational from this month but it has been delayed, with final ratification still pending in several member states.French Finance Minister Pierre Moscovici said the meeting had been able to make progress on several fronts and had established a heavy timetable through to the end of the year.ESM direct funding for struggling banks will "allow us to tackle the roots (of the debt crisis) by breaking the link between the banking crisis and the sovereign debt crisis," Moscovici added.The Spanish bank accord should be concluded by end-July and ultimately run up to €100bn, he said, also highlighting the need for Madrid to implement tough reforms of the sector.Juncker and Rehn said the meeting had also discussed the situation in Greece, taking note of what its newly elected government has planned, and had also reviewed the position in Cyprus, which has just asked for EU aid.Cyprus, current holder of the EU's rotating presidency, blames its problems on its banks' heavy exposure to Greece, and its aid programme is expected to be completed by September.The finance ministers' conclusions will be submitted later Tuesday to a meeting of all 27 EU finance ministers who will have initial market reaction to help focus their minds.The June summit pledges to help Spain's banks, set up a new banking regulator and ease the way for the ESM to play a greater role, were hailed as a "breakthrough" which sparked sharp market gains.But in the past week, sentiment has turned negative again, with analysts dismissive and expecting little follow-up to sustain the summit momentum.

Eurozone in freefall?

Signs are growing that Europe's economic and monetary union may be fragmenting faster than policymakers can repair it. Eurozone leaders agreed in principle on June 29 to establish a joint banking supervisor for the 17-nation single currency area, based on the European Central Bank (ECB), although most of the crucial details remain to be worked out. The proposal was a tentative first step towards a European banking union that could eventually feature a joint deposit guarantee and a bank resolution fund, to prevent bank runs or collapses sending shock waves around the continent. The leaders agreed that the eurozone's permanent bailout fund, the €500bn European Stability Mechanism, would be able to inject capital directly into banks on strict conditions once the joint supervisor is established. But the rush to put first elements of such a system in place by next year may come too late. Deposit flight from Spanish banks has been gaining pace and it is not clear a eurozone agreement to lend Madrid up to €100bns in rescue funds will reverse the flows if investors fear Spain may face a full sovereign bailout. Many banks are reorganising, or being forced to reorganise, along national lines, accentuating a deepening north-south divide within the currency bloc. An invisible financial wall, potentially as dangerous as the Iron Curtain that once divided eastern and western Europe, is slowly going up inside the euro area. The interest rate gap between north European creditor countries such as Germany and the Netherlands, whose borrowing costs are at an all-time low, and southern debtor countries like Spain and Italy, where bond yields have risen to near pre-euro levels, threatens to entrench a lasting divergence. Since government credit ratings and bond yields effectively set a floor for the borrowing costs of banks and businesses in their jurisdiction, the best-managed Spanish or Italian banks or companies have to pay far more for loans, if they can get them, than their worst-managed German or Dutch peers. The longer that situation goes on, the less chance there is of a recovery in southern Europe and the bigger will grow the wealth gap between north and south. With ever-higher unemployment and poverty levels in southern countries, a political backlash, already fierce in Greece and seething in Spain and Italy, seems inexorable. ECB president Mario Draghi acknowledged as he cut interest rates last week that the north-south disconnect was making it more difficult to un a single monetary policy. Two huge injections of cheap three-year loans into the eurozone banking system this year, amounting to €1 trillion, bought only a few months' respite. "It is not clear that there are measures that can be effective in a highly fragmented area," Draghi told journalists. Conservative German economists led by Hans-Werner Sinn, head of the Ifo institute, are warning of dire consequences for Germany from ballooning claims via the ECB's system for settling payments among national central banks, known as TARGET2. If a southern country were to default or leave the euro, they contend, Germany would be left with an astronomical bill, far beyond its theoretical limit of €211bn liability for eurozone bailout funds. As long as European monetary union is permanent and irreversible, such cross-border claims and capital flows within the currency area should not matter any more than money moving between Texas and California does. But even the faintest prospect of a Day of Reckoning changes that calculus radically. In that case, money would flood into German assets considered "safe" and out of securities and deposits in countries seen as at risk of leaving the monetary union. Some pessimists reckon we are already witnessing the early signs of such a process. Any event that makes a euro exit by Greece - the most heavily indebted member state, which is off track on its second bailout programme and in the fifth year of a recession - look more likely seems bound to accelerate those flows, despite repeated statements by EU leaders that Greece is a unique case. "If it does occur, a crisis will propagate itself through the TARGET payments system of the European System of Central Banks," US economist Peter Garber, now a global strategist with Deutsche Bank, wrote in a prophetic 1999 research paper. Either member governments would always be willing to let their national central banks give unlimited credit to each other, in which case a collapse would beimpossible, or they might be unwilling to provide boundless credit, "and this will set the parameters for the dynamics of collapse", Garber warned. "The problem is that at the time of a sovereign debt crisis, large portions of a national balance sheet may suddenly flee to the ECB's books, possibly overwhelming the capacity of a bailout fund to absorb the entire hit," he wrote in 2010, after the start of the Greek crisis, in a report for Deutsche Bank. European officials tend to roll their eyes at such theories, insisting the euro is forever, so the issue does not arise. In practice, national regulators in some EU countries are moving quietly to try to reduce their home banks' exposure to such an eventuality. The ECB itself last week set a limit on the amount of state-backed bank bonds that banks could use as collateral in its lending operations. In one high-profile case, Germany's financial regulator Bafin ordered HypoVereinsbank (HVB), the German subsidiary of UniCredit, to curb transfers to its parent bank in Italy last year, people familiar with the case said. Such restrictions are legal, since bank supervision is at national level, but they run counter to the principle of the free movement of capital in the EU's single market and to an integrated currency union. Whether a single eurozone banking supervisor would be able to overrule those curbs is one of the many uncertainties left by the summit deal. In any case, common supervision without joint deposit insurance may be insufficient to reverse capital flight. German Chancellor Angela Merkel, keen to shield her grumpy taxpayers, has so far rejected any sharing of liability for guaranteeing bank deposits or winding up failed banks. Veteran EU watchers say political determination to make the single currency irreversible will drive eurozone leaders to give birth to a full banking union, and the decision to create a joint supervisor effectively got them pregnant. But for now, Europe's financial disintegration seems to be moving faster than the forces of financial integration.