NEWS,20.06.2012

Greek coalition takes power

A conservative-led government took power in Greece today promising to negotiate softer terms on its harsh international bailout, help the people regain their dignity and steer the country through its biggest crisis for four decades.The swearing-in of Antonis Samaras as prime minister after elections last Sunday ended weeks of uncertainty that rattled financial markets and threatened to push near-bankrupt Greece out of the euro zone.Samaras, a Harvard-educated economist from a prominent Greek family, will head an alliance of his New Democracy party and Socialist PASOK rivals - the same discredited establishment parties which have dominated politics since 1974."I am fully aware how critical this time is for our nation," Samaras said after he was sworn in at a ceremony conducted by robed Orthodox priests at the presidential mansion."I know very well that Greek people are hurt and need to regain their dignity. I know that the economy must quickly recover to re-establish social justice and cohesion."The coalition parties are in a race to overcome public disgust with their records, face down an emboldened leftist opposition that narrowly failed to win the election, and persuade reluctant euro zone partners to ease the terms of a bailout that has caused deep economic suffering.The cabinet has yet to be named, although a technocrat banker is expected to become finance minister.Party leaders said a team would be formed to renegotiate the terms of the hated 130 billion euro rescue plan with the European Union and IMF, setting up a showdown with the lenders led by paymaster Germany who say they will adjust but not re-write the document.New Democracy and PASOK have little history of cooperation, having alternated in office from the fall of military rule in 1974 until last year, when the economic crisis forced them to share power in a short-lived national unity government.Their coalition will be the first in Greece in decades with an unrestricted mandate - last year's unity government and a coalition that took power in 1989 both had limited powers.The alliance will also be backed by the small Democratic Left party, whose leader Fotis Kouvelis called on the government "to gradually disengage from the terms of the bailout that has bled society".An official from one of the three parties in the coalition said that they had agreed to name National Bank Chairman Vassilis Rapanos as finance minister.Rapanos is an economics professor who worked closely on reforming the economy with a previous Socialist government.Other ministers were expected to be named later.Humiliated People Greece's crisis has left its people not only poorer but feeling humiliated.As the political leaders wrapped up talks on a government, hundreds of Greeks - many until recently members of the prosperous middle classes - gathered under the scorching sun in a big park in Athens for free vegetables offered by a farmers' association from the island of Crete."Not even in my worst nightmares could I imagine that I would end up like this - waiting in line for food," said Eleni Moshidou, 56, a mother of three unemployed sons who was fired from a law firm when the crisis broke out in 2010."I feel humiliated. Our politicians brought us here."Just over a month after an inconclusive election raised fears that Greek would have to leave the euro zone, New Democracy narrowly beat the radical leftist Syriza bloc that wants to scrap the bailout deal which most Greeks blame for worsening a recession which is in its fifth year.Syriza promised yesterday to be a "combative" opposition force that fights on behalf of Greeks struggling through wage cuts and spending cuts that have sent unemployment to record highs.But the new government's first battle is likely to be with foreign lenders as it tries to convince them to sign off on the next instalment of aid and allow more leeway on the austerity pledges.PASOK leader Evangelos Venizelos warned of a "big battle" in Brussels to craft a new bailout deal that would promote growth and contain unemployment."The most critical issue is the formation of the national negotiation team and ensuring that it is successful," he told reporters.Both PASOK and Democratic Left have refused to place senior politicians in the cabinet and could nominate technocrats instead, a move which potentially weakens their commitment to the new government."This government will have a very short life-span. It will disappoint expectations and its support will erode quickly," said independent political analyst John Loulis."It will be a government entirely run by New Democracy; its two smaller partners have already weaseled their way out of it".

Climate law could raise gas prices, lobbyists say

California regulations designed to fight global warming could force half of the state's refineries to close, trigger fuel shortages and add $2.70 per gallon to the cost of gasoline, according to a study released Tuesday by an oil industry lobbying group. The study, issued by the Western States Petroleum Association, argues that California's upcoming cap-and-trade system to cut carbon dioxide emissions could wreak havoc with fuel supplies as early as 2015. So could the state's low carbon fuel standard, a policy requiring refiners to lower the carbon intensity of the fuel they sell in California.Oil companies have a history of resisting California's climate change rules. But Catherine Reheis-Boyd, president of the petroleum association, said Tuesday that her group isn't trying to overturn the state's global warming law, known as AB32. Instead, the association wants to change how the state implements the law. If gasoline prices jump due to the fuel standard and cap and trade, she warned, Californians would probably demand that the entire law be scrapped."People could revolt, and if that happens, that's the end of it," Reheis-Boyd said. "If this goes the way we think it will, you won't have a program in 2015."2006 legislationPassed in 2006, AB32 requires California to bring its greenhouse gas emissions back to 1990 levels by 2020. Both the low carbon fuel standard and the cap-and-trade program, which starts this fall, were created to implement that law. Several oil companies that belong to the petroleum association tried to block AB32 in 2010 with a statewide ballot measure, but voters rejected it.Some environmentalists called Tuesday's report a scare tactic aimed at California legislators who are nervous about the state's fragile economy. The state has already endured two gas price spikes this year, with the statewide average for a gallon of regular finally falling below $4 last weekend for the first time since February."One thing I don't understand is, the electric utilities have stepped up, with renewable power and energy efficiency, the car companies have stepped up, with increased fuel efficiency - the oil companies seem to be the only ones who have no way to comply with AB32," said Adrienne Alvord, the California and western states director for the Union of Concerned Scientists. Complex, unpleasantTuesday's report was researched and written by the Boston Consulting Group and focuses on how California's 14 refineries will respond to both the fuel standard and cap and trade. The scenario is both complex and unpleasant.To comply with the low carbon fuel standard, refiners will need to blend more ethanol into their gasoline. But not just any ethanol will do.The process used by most American ethanol producers - distilling fuel from corn - releases too many greenhouse gases, according to California air pollution regulators. So the refiners would need to buy cellulosic ethanol, which is made from woody plants and has a smaller greenhouse gas footprint.Unfortunately, cellulosic ethanol has not yet been mass-produced. So the refineries would most likely buy Brazilian ethanol, made from sugar cane, and ship it here. Even with transportation factored in, Brazilian ethanol has a smaller greenhouse gas footprint than American corn ethanol, according to California's standards.Importing Brazilian ethanol would cost the California refineries money. In order to make a profit, they would most likely start shipping larger amounts of their gasoline to customers in other states or countries, where they wouldn't have to comply with the low carbon fuel standard. That would raise gas prices here.At the same time, the refineries would face an added expense due to the cap-and-trade system. The system will set an overall limit on the carbon dioxide emissions and create a market in which companies buy and sell the right to produce set amounts of greenhouse gases. That could cost refineries dearly, especially if carbon prices in the new market rise much higher than the state expects.Refineries threatenedAs a result, as many as seven California refineries would no longer be profitable, said Brad VanTassel, senior partner of the Boston Consulting Group.Should they close, the state could lose between 28,000 and 51,000 jobs, with the losses occurring not just at the refineries but at businesses frequented by refinery workers. California also could lose $3.1 billion to $3.4 billion in tax revenue. "Even if you lose just 30,000 jobs, that's a big deal to a state that's got 11 percent unemployment," VanTassel said.California has lost oil refineries before. In 1996, the state ordered oil companies to change the formula of fuel sold here in an effort to cut air pollution. It worked, but some refineries closed rather than pay for the necessary upgrades. At the same time, oil companies had been closing smaller California refineries to reduce the state's oversupply of gasoline and boost profits at remaining refineries.

NEWS, 08.06.2012.

EU agrees on border checks in visa-free area

 

European Union nations agreed Friday they can temporarily restore border checks within the visa-free Schengen area in case of a surge of illegal migrants, despite opposition from Brussels.Officials from Denmark, which currently holds the rotating EU presidency, said home affairs ministers from the 27-nation bloc had unanimously agreed to the move."Disappointed by lack of European ambition among member states", said the EU's home affairs commissioner Cecilia Malmstroem, who opposed the move.The agreement will enable the 26 countries in the travel-free Schengen area to restore border controls for up to a year under "exceptional circumstances".Those circumstances, according to demands made by France and Germany earlier this year, are problems related to illegal immigration, which has emerged as one of Europe's most sensitive political issues amid the debt crisis, slow growth and mounting unemployment.Going into the talks, Malmstroem had said: "We cannot accept what is on the table today."She has repeatedly argued that Schengen was never designed to control migration but to ease freedom of movement.The EU's Frontex agency that mans borders said in a report that registered illegal crossings on the outer borders of the Schengen area shot up by 35 percent in 2011.Numbers rose from 104,000 in 2010 to 141,000 the following year, largely due to flows across the Mediterranean from the Arab Spring upheavals.But the second biggest hot-spot was the border between Greece and Turkey, which saw 55,000 detections last year.With low-cost flights to Turkey on the increase as war, chaos and poverty send people fleeing hot-spots from Afghanistan and Pakistan to Somalia, the flow is forecast to increase.Responding to the rise in anti-immigrant sentiment, France and Germany in April sent Schengen counterparts a joint letter calling for drastic change.But that was before the May election of socialist President Francois Hollande, who stepped into the shoes of conservative Nicolas Sarkozy.The new French Interior Minister Manuel Valls made no statement on arriving for the talks, but was in a tight spot. Should he have rejected the previous government's stand, his Socialist party would face the ire of the right just as the country heads into parliamentary elections June 10 and 17.Sarkozy, chasing the far-right vote, had threatened to pull out of the Schengen zone within a year failing improved action to keep out illegal migrants.Currently, the Schengen treaty allows renewal of border controls in the case of a terror or security threat thrown up by sports or other events.But the draft approved by the ministers would allow a state within the Schengen area to reimpose border controls for six months, renewable for another six "when the control of an external border is no longer ensured due to exceptional circumstances".

 

Euro Commission wants Greece to close banks

The European Commission is pressing Greece to wind down certain banks, possibly including its fifth-largest lender ATEbank, European Union sources said. Although it is the responsibility of Greece's central bank to close a struggling lender, the EU's executive also has a say under state-aid rules, which allow it to refuse a request to rescue a bank if the commission considers it too costly to save - effectively forcing the bank to be wound up. Throughout the crisis, the commission has rarely used the full extent of its state-aid powers and few European banks have been closed. If it were to use them in Greece, it would mark a more aggressive stance in tackling weak European banks at the heart of the crisis. It could use the same powers to wind up banks in Spain and Portugal, one of the sources said.A balancing act"We are moving into a new phase with Greece, Portugal and Spain," said one of the sources, who spoke on condition of anonymity because of the sensitivity of the matter. "Some banks are going to be squeezed. Some are going to be closed down. "It is always a balance," the source said, explaining that if a bank is central to a country's financial stability it might need rescuing, but otherwise it may have to be let go. "If you have a financial stability component, then you could be prepared to rescue a bank, but we are beyond that point now in a number of countries," the official said. "ATEbank will have to be closed or wound down over time." ATEbank and the Greek central bank declined to comment. Having declined to comment, the Greek finance ministry later denied the report. ATEbank management has in the past proposed merging all state-controlled banks, including the Hellenic Postbank, into one. If ATEbank were shuttered, it would not mean that the whole of Greece's banking system was collapsing. Other key Greek banks are not in the same danger and could benefit from any refocused capital. No decision till after electionsNo decision will be taken until after Greece holds elections on June 17. The outcome of the vote, which polls suggest could be won by a far-left coalition opposed to Greece's EU/Internationl Monetary Fund bailout, could fundamentally change Greece's ties to the EU. Last month, Greece's four biggest banks  National Bank , Alpha, Eurobank and Piraeus Bank  received €18bn in capital under the joint EU/IMF bailout, a €130bn programme that involved writing down the value of Greece's privately-owned debt, including sovereign bonds held by Greek banks. ATEbank, a state-owned agricultural lender founded in 1929, did not get money under the bailout after failing to present a plan for its own longer-term commercial viability. It is now the focus of concern, the sources said. The Greek authorities have started to make early preparations to wind down ATEbank, a process of liquidation that would not mean immediate closure but which is expected to begin in the second half of the year, one of the sources said. A Greek government source said shutting down the bank was a likely scenario, but reiterated the importance of the elections and said it would be some time before a decision was taken. A spokesperson for Joaquin Almunia, the EU's competition commissioner, said a restructuring plan for ATEbank, approved last year, envisaged further steps to restore the bank to health. This could include recapitalisation measures. "We expect new aid measures to be notified to the commission. When this is the case we will assess the situation of the bank," the spokesperson said. No major banksUnder any winding-up depositors, who had more than €17bn at the bank as of September last year, would be protected by the country's deposit guarantee scheme, which protects the first €100 000 of any deposit. The resources to pay for the winding down, which could include setting up a bad bank for risky loans, would come from the Hellenic Financial Stability Fund, at least in part. The fund was set up in July 2010 to help restabilise Greece's banking system. Any closure of a bank in Greece, whose future could determine the survival of the euro, would be highly sensitive. None of the country's major banks were wound up in the crisis. But officials believe the money left in the country's aid programme  around €7bn currently, with the possibility of €25bn more from the EU/IMF bailout funds  is insufficient to recapitalise all banks and that some must be sacrificed to secure the most important lenders. Greek banks suffered heavy losses on the government bonds they own when the country negotiated a writedown of its debt, known as private sector involvement (PSI), earlier this year. "This is such a dire situation," said another source. "PSI left Greek banks with huge write-downs and many have negative capital as a result. Wecannot recapitalise all the banks." Failed stress testSome in the Greek administration fear that closing a bank could send an unwelcome signal. "At this particular moment, you have the issue that the closing of a bank can trigger higher depression because of the perception," said one Greek official. "They are going to create even more destabilisation in the economy." ATEbank, which failed a Pan-European stress test last July, had customer loans of more than €20bn in September 2011, the most recent records available. The bank, which expanded beyond its agricultural roots into mainstream commercial banking between 2000 and 2009, racked up heavy losses on bad loans to farmers and consumers and suffered a large write-down in the value of its Greek government bond holdings. In the absence of a Pan-EU framework to wind down banks, the commission's power under the state-aid regime has made it the bloc's de facto resolution authority for troubled lenders. Winding up a bank in Greece would be left chiefly to the country's central bank and the European Central Bank. While the US has closed hundreds of banks since the sub prime mortgage crisis, European countries have been reluctant but there has been a gradual shift in this thinking. "In Europe, weak banks one way or another have been taken over by bigger banks," said a central bank source. "However, I think there are some cases where this is difficult because the condition of the banks is such that it doesn't make sense to keep the bank alive." Ireland's Anglo Irish Bank and Germany's WestLB are among the rare examples of banks that were shuttered in the crisis. Denmark also closed a number of small lenders.