NEWS,06.07.2012

Cyprus urges fair eurozone debt-sharing

 

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

Finland will not cover the eurozone debt tab

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

NEWS,02.07.2012

Eurozone Woes Could Be Contaminating US And Chinese Economies As World Markets Slide

Markit said the collapse to a three-year low reflected the increasing weakness of the UK domestic market, with overall order books shrinking at a faster rate than export orders.There was a similar weak performance from European manufacturers, while unemployment across the 17 countries that use the euro remained at 11% in April - the highest level since the single currency was introduced in 1999.The wave of grim data knocked more than 1% off London's leading shares index, which endured its worst month in three years in May.The Dow Jones Industrial Average was off 1.5% following the latest jobs figures, while declines were even heavier on markets in Germany and France, with the Dax down 3% and the CAC 40 off 2%.Employers in America created the fewest jobs in a year in May 2012, 69,000, as the country's unemployment rate ticked up."Business sentiment has turned sour," Ellen Zentner, an economist at Nomura Securities"Companies are concerned about contagion from Europe."Jason Conibear, a director at forex specialists Cambridge Mercantile, said: "A few months ago the feeling was that a strong China and resurgent US would steer the eurozone through its current plight."Now the fear is that these economies could themselves be sucked into the rapidly spiralling eurozone vortex."The global economy is in a seriously bad way and we're running out of options to turn things around."It comes as the British Chamber of Commerce urged the government to introduce growth-creating measures such as increased infrastructure spending. Its director general John Longworth said the country needs growth "and we need it now.""If the government works together with the private sector to create the right environment over the long term, we'll be able to prove once and for all that bold businesses can propel us forward out of stagnation and firmly on the road to recovery."

Eurozone Debt Crisis: Unemployment Stays At Record 11 Per Cent; Spain, Greece Worst Off

Unemployment across the 17 countries that use the euro stayed at 11 per cent in April  the highest level since the single currency was introduced back in 1999, piling further pressure on the region's leaders to switch from austerity to focus on stimulating growth.The eurozone's stagnant economy left 17.4 million people out of an active population of around 158 million people without a job. Unemployment rates are also continuing to climb in struggling Spain, Portugal and Greece. The EU's Eurostat office said 110,000 unemployed were added in April alone. In the U.S. the unemployment rate stands at 8.2 per cent for May.Menawhile, in recession-hit Spain, unemployment spiked to 24.3 per cent, the worst rate in the EU. It was up 0.2 points since March, and 3.6 percentage points compared to last year. Youth unemployment ballooned to a 51.5 per cent, up from 45 per cent last year.Friday's seasonally adjusted figures follow on from last week's European Union summit, where leaders including the new socialist President of France Francois Hollande called for measures to boost growth and employment to offset the impact of stringent austerity policies. Experts argue that targeted measures could help get people, especially youngsters, off the unemployment lines.Austerity has been the main prescription across Europe for dealing with a debt crisis that's afflicted the continent for nearly three years and has raised the spectre of the breakup of the single currency. Three countries Greece, Ireland and Portuga have already required bailouts because of unsustainable levels of debt.Investors are concerned that Spain, which is the eurozone's fourth-largest economy and is currently struggling to contain a banking crisis in the middle of a recession, may soon be joining them in seeking international assistance.Financially shaky countries such as Spain are facing rapidly rising borrowing costs on bond markets, a sign that investors are nervous about the size of their debts. Austerity was intended to address this nervousness by reducing a government's borrowing needs, but there has been a side effect: Economies are shrinking across the eurozone as governments cut spending and raise taxes to reduce deficits.This has prompted economists and politicians to urge European policymakers to dial back on short-term budget-cutting and focus on stimulating long-term growth. Pro-growth measures can include reducing red tape for small businesses, making it easier for workers to find jobs across the eurozone and breaking down barriers that countries have created to protect their own industries. Some economists go a step further and say governments should actually increase spending while economies are so weak  and make reining in deficits a longer-term goalOne area for growth could be the better use of the resources already at the European Union's disposal. The EU has a pot of so-called "structural funds", many of which are going unused even though several countries are in desperate need of cash.One source of funds to get growth started in Europe could be the issue of so-called "eurobonds" jointly issued bonds that could be used to fund anything and could eventually replace an individual country's debt. Eurobonds would protect weaker countries, like Spain and Italy, by insulating them from the high interest rates they now face when they raise money on bond markets. Those high interest rates are ground zero of the crisis: They forced Greece, Ireland and Portugal to seek bailouts.According to the Eurostat figures for April, Greece is the bloc's second worst performer after Spain with unemployment creeping further upwards to 21.7 per cent in February, the last month for which figures are available. It compares to a rate of 16.1 per cent a year earlier. The economy in Greece has been contracting far more than expected late last year, taking employment with it in a downward spiral.Athens is facing June 17 elections where jobs are a key issue together with the fundamental question of whether the country wants to stay in the currency zone.Like Greece, Ireland has been forced to rely on an international bailout but its economy returned to growth last year. It is beginning to show in the statistics since overall unemployment fell to 14.2 per cent, when it stood at 14.7 only in December.Unemployment was lowest in Austria, whose economy has been outperforming the European Union average, with 3.9 per cent, followed by Luxembourg and the Netherlands with 5.2 per cent.

Euro shares buoyed by debt support

 

European share markets began the trading week on an upbeat note on Monday as the momentum from the breakthrough in the euro debt crisis at last week's EU summit continued to underpin investor confidence.While the eurozone's blue-chip Stoxx 50 index rose 1.34% to 2,295.03 points in morning trading, the euro slipped 0.14% to $1.2555 and borrowing costs for Spain edged up.The yield on Spanish 10-year bonds climbed to 6.34% from 6.33%. At the same time, the risk premium measuring the difference with German bonds rose by five basis points to 480 basis points.Analysts were cautious about Friday's strong gains in the euro as representing a change in direction for the common currency, which has recently come under pressure amid mounting concerns about the eurozone's outlook."We can still not speak a change in the trend," wrote the foreign exchange analysts from Germany's Helaba bank in a note to clients.Monday's increase in European stocks also followed the release of better-than-expected manufacturing indicators from Asia's two biggest economies - Japan and China.However, Asian investors appeared to take the indicators in their stride with stocks markets in Japan and China ending the day barely changed.Monday's share market performance came after a good week for global shares with the Stoxx 50 index up 7.7% on the week after European leaders agreed to a series of short-term measures to address the eurozone debt crisis.The pickup in European shares also came ahead of this week's meeting of the European Central Bank with analysts expecting the Frankfrurt-based bank to announce a rate cut to help spur growth in the eurozone.

NEWS,01.02.2012

Four admit plotting London bombings

  London Stock Exchange 

Four radical Islamists have admitted in court plotting to bomb the London Stock Exchange as part of a campaign of al Qaeda-inspired attacks across the British capital in the run-up to Christmas 2010.The conspiracy included plans to post bombs to the United States Embassy and the home of London Mayor Boris Johnson. Police foiled the plot at an early stage before firm dates were agreed or explosive devices assembled. The plan was to cause "terror, economic harm and disruption" rather than injury, prosecutor Andrew Edis told London's Woolwich Crown Court.However, "their chosen method meant there was a risk people would be maimed or killed," he said. The four, with five other men, admitted a range of terrorism offences after changing their pleas shortly before their trial had been due to begin, the Press Association reported. The defendants, all British nationals with Bangladeshi or Pakistani backgrounds, had been inspired by al Qaeda and the late radical Muslim cleric Anwar al-Awlaki, Edis said.Al-Awlaki, a US citizen linked to al Qaeda's Yemeni branch, was killed last year in a CIA drone strike.Undercover officers had followed two of the conspirators in November 2010 as they made observations of London landmarks including the Big Ben clock tower, parliament, Westminster Abbey and the London Eye ferries wheel.The two men, Mohammed Chowdhury, 21, and Shah Rahman, 28, both from east London, admitted preparing for acts of terrorism by planning to plant an improvised bomb in the toilets of the London Stock Exchange.Brothers Gurukanth Desai, 30, and Abdul Miah, 25, both from Cardiff in Wales also pleaded guilty to the same charge.Some of the defendants had also discussed leaving home-made bombs in the toilets of pubs in Stoke, in the English midlands.The judge told Chowdhury he could expect to receive 18.5 years and Rahman 17 years, although the actual time spent in jail would be shorter, around six years, taking account of time already served and parole. The five other men, one from Cardiff and four from Stoke, admitted lesser terrorism offences including attending operational meetings and fundraising. All will be sentenced next week.

                          Belgium slides into recession

Belgium fell back into recession in the second half of last year, data showed today, the first euro zone member not subject to a bailout programme to do so.It paved the way for what is expected to be a very difficult 2012 for the 17-member bloc, both core economies and those in the debt-ridden periphery. Gross domestic product (GDP) in Belgium, the bloc's sixth largest economy, shrank by 0.2% in the fourth quarter, following a quarterly contraction of 0.1% in the July-Sept period. Two consecutive quarters of contraction is generally accepted by economists as the minimum for an economy to be considered in a recession. Belgium is often cited as a harbinger of things to come in Europe and many countries in the region are already sliding towards recession, hit by the euro zone debt crisis and a wave of austerity required to cure it.Final quarter figures for the euro zone, which grew by 0.2% in the third quarter, will be published on Feb. 15.Germany, France, Italy and the Netherlands are also due to release their GDP estimates on that day. Spain said on Monday its economy had shrunk in the fourth quarter. Greece and Portugal, which with Ireland are being bailed out by the European Union and others, are both struggling in recession. A Reuters poll in January predicted that the euro zone as a whole will contract 0.3% in the coming year. Economists said today it had come as no surprise to see Belgium's recession confirmed. Indeed the 0.2% contraction was slightly better than some had expected. Few also expect any improvement in the first three months of 2012, notably after the new Belgian government imposed austerity measures in December designed to save 11.3 billion euros ($US14.8 billion).Private households in particular are downbeat, the consumer sentiment index falling to a two-and-a-half year low in January.” In order to sell the measures our politicians have had to talk a different language ... They have to say the situation is serious. Saying this makes people feel less comfortable," said Etienne De Callatay, economist at Bank Degroof.Economists broadly expected growth in the second quarter, the rate dependent on the health of trade partners. Belgium is among the most open economies in the world."There could be some upward potential coming from outside," said Steven Vanneste of BNP Paribas Fortis. "Financial tensions are easing so I think the worst of the economic crisis should be behind us. We see stabilisation right now but its still in a very fragile state."Year-on-year on Belgium grew 0.9% in the fourth quarter for a 1.9% total growth in 2011.