NEWS,19.08.2012

Greece told to trim further €2.5bn

Greece's creditors say it must cut €14bn from its budget in the next two years, €2.5bn more than they originally demanded, German weekly Der Spiegel reported Saturday.The amount was revised upward as a result of the most recent audit mission by the country's so-called troika of bailout lenders, the European Union, the International Monetary Fund and the European Central Bank, Der Spiegel said.Troika auditors visited Athens recently and are expected to return in September, when they have said they will remain for the entire month.Based on that audit, the EU and IMF will decide whether to release Greece's next loan disbursement of €31.5bn.The Greek government is scrambling to slash its budget in order to access the funds, which it needs to keep it from defaulting on its debt and crashing out of the eurozone.Der Spiegel said the troika had ordered the extra cuts because planned privatisations were not shaping up to be as lucrative as hoped and tax revenues were falling short of forecasts as the economy struggled through its fifth year of recession.The auditors also said in a report that the government had so far been unable to show how it planned to reach the €11.5bn in savings it had already pledged to find for 2013 and 2014.

Obama slams Romney on taxes

President Barack Obama hounded Mitt Romney on Saturday, saying his wealthy rival would pay only 1% in taxes on his vast wealth under a plan authored by his running mate Paul Ryan.Obama escalated his effort to use the pick of the conservative Republican congressman last week to drive votes away from Romney in swing states, including New Hampshire, where he was campaigning Saturday."The centerpiece of my opponent's entire economic plan is a new five-trillion-dollar tax cut, a lot of it going to the wealthiest Americans," Obama said. "His new running mate, Congressman Ryan, he put forward a plan that would let governor Romney pay less than 1% in taxes each year, and here's the kicker - he expects you to pick up the tab."The president is demanding that Romney, a former venture capitalist, release more than the two years of personal tax returns he has already promised, and paints his rival as the epitome of a society tilted toward the rich.On Thursday, Romney insisted that he had always paid at least 13% in taxes, but that figure could still be politically damaging as it is much lower than the rate paid by most middle class Americans.Romney, estimated to be worth around $250m, has his income taxed as investment earnings, rather than as an annual salary, hence the lower rate, complicating his campaign to deny Obama a second term on November 6.In his budget proposal, Ryan would eliminate double taxation on interest, capital gains or dividends, reasoning that greater savings would lead to higher productivity and more investment.Romney has however said he would keep taxes on capital gains, interests and dividends at the current rate, but eliminate them entirely for those earning less than $200 000 a year.Obama cited a study by the bipartisan Tax Policy Centre that said that Romney's policies would result in middle class families paying an extra $2 000 a year, while the wealthiest Americans would get a big tax cut.But the Romney campaign said that after the release of new figures showing a rise in the unemployment rates in 44 states, it was not surprising the president was launching another attack."The fact is President Obama wants to raise taxes on private investment and job creators, which will lead to higher unemployment and fewer jobs," said Romney campaign spokesman Ryan Williams."The Romney-Ryan plan eliminates taxes for the middle class on interest, dividends and capital gains and implements pro-growth policies to deliver more jobs and more take-home pay for middle-class families."

 

Another food crisis looms - expert

With drought parching farms in the United States and near the Black Sea, weak monsoon rains in India and insidious hunger in Africa's Sahel region, the world could be headed towards another food crisis.Asia should keep a catastrophe at bay with a strong rice harvest while the G20 group of industrialized and emerging economies tries to parry the main threat, soaring food prices."We have had quite a few climate events this year that will lead to very poor harvests, notably in the United States with corn or in Russia with soja," warned Philippe Pinta of the French farmers federation FNSEA."That will create price pressures similar to what we saw in 2007-2008," he added in reference to the last global food alert, when wheat and rice prices nearly doubled.In India, "all eyes will be on food inflation - whether the impact of a weak monsoon feeds into food prices," Samiran Chakraborty, regional head of research at Standard Chartered Bank was quoted by Dow Jones Newswires as saying.Monsoon rains were 15.2% below average in mid-August, according to latest data from India weather bureau, and Asian rice prices are forecast to rise by as much as 10% in the coming months as supplies tighten.India and Thailand are two of Asia's leading rice exporters.Indian Food Minister Kuruppasserry Varkey Thomas told parliament this month that prevailing conditions "could affect the crop prospects and may have an impact on prices of essential commodities."Despite that warning however, the UN Food and Agricultural Organization expects rice output to slightly surpass "excellent results" recorded last year, though the FAO cut its global forecast for production of unmilled rice to about 725 million tons from its previous figure of 732 million.The world is feeling the onset of the El Nino weather phenomenon, which has a natural warming effect, is active in the western Pacific and expected to last until winter in the northern hemisphere, according to Japanese meteorologists.The US farm belt has been ravaged by the most stifling drought since the 1950s, and the country's contiguous 48 states have just sweltered through the hottest July on record.Corn production is probably at the lowest level in six years, the US Department of Agriculture said, and curtailed production will likely send corn and soybean prices to record highs, it added."Cereal prices have shot up, with an increase in (corn) prices of almost 40% since June 1," strategists at the CM-CIC brokerage noted.Commerzbank commodity experts said high temperatures and drought around the Black Sea "have resulted in wheat crop shortfalls on a scale that cannot yet be predicted with any accuracy."US commodities analyst, AgResource Company president Dan Basse told the Australian Broadcasting Corporation last week that the Australian harvest could play a role in easing the food shortage."We need every metric tonne of wheat and grain the Australian farmers can produce," Basse said. "Anything that the Australian farmer can do to assure or boost his production should be profitable in the year ahead."Jean-Rene Buisson, head of France's national association of food industries (ANIA) said: "All products based on cereals, including meat, will be affected by price increases, not necessarily by September, but definitely during 2013."In China, food prices are considered politically sensitive and account for up to a third of a consumer's average monthly budget, government statistics show.China has reined in inflation as its economy slows however, while its grain output stood at 1.3 trillion tonnes in the first half of the year, up 2.8% from the same period a year earlier.The Financial Times (FT) said concerns over the US harvest had prompted senior G20 and United Nations officials to consider an emergency meeting on food supply, with a conference call on the issue scheduled for August 27.The newspaper cited officials as saying the talks were not a sign of panic but rather reflected the need to establish a consensus to avoid a repeat of the riots and tensions sparked in 2007-08 by spiking food prices.Major concerns include hoarding or export restrictions by food producing countries, along with panic buying by others.Also crucial is the balance between the use of grain as a direct source of food and its role as animal feed or as a basis for motor fuels.FAO director general Jose Graziano da Silva of Brazil called in the FT for the United States to suspend biofuel production programmes to ease the pressure on food resources."An immediate, temporary suspension" of a mandate to reserve some crops for biofuels "would give some respite to the market and allow more of the (corn) crop to be channelled towards food and feed uses," he wrote.A region where food is in chronic shortage is the Sahel region of Africa, where the number of malnourished children is estimated to have hit a new high of 1.5 million as cholera and locusts emerge as new threats, UNICEF has warned.The relief agency World Vision Australia said 18 million people need food assistance in Niger, Mali, Chad, Mauritania and Senegal.

NEWS, 13.06.2012.

Cyprus may ask for bailout before Greek elections

 

Cyprus' Finance Minister warned Wednesday that the eurozone country could seek a European Union bailout to help recapitalize its banking sector before crucial elections in Greece this Sunday.Vassos Shiarly said that the Greek elections — seen as a vote on whether the debt-wracked country stays or leaves the eurozone — are a key factor to Cyprus' decision whether to become the fifth eurozone member to ask for EU bailout money."The chosen time (to seek a bailout) will be decided in cooperation with all European Union partners, either within the eurozone or the Union as a whole," Shiarly told a business forum in the capital, Nicosia."We also know that the deadline by which the recapitalization of banks has to be completed is very, very close ... But because the problem that may arise from the (Greek) elections this coming Sunday is perhaps of the highest importance, this is also taken into account in our overall assessment."Shiarly cited the example of Spain, which last weekend asked for a loan lifeline of up to (EURO)100 billion ($125 billion) from the 17 countries that use the euro to shore up Spanish banks."In most cases action is taken and the appropriate moment, meaning when the markets are closed," he said.Unable to borrow from international markets because of its junk credit rating, Cyprus has until June 30th to come up with (EURO)1.8 billion ($22.5 billion) — a tenth of its budget — to support Cyprus Popular Bank, its second largest lender which is most exposed to Greek debt and is unlikely to raise the money on its own.Shiarly and other Cypriot officials have said that the money could either come from the EU bailout fund, or through a loan from another country.Either way, time is running out for the tiny country of 850,000 people with strong cultural and business ties to Greece as the possibility over an anti-bailout party victory in Sunday's vote could further harm Cyprus' economy.Greece is holding the June 17 repeat election following an inconclusive May 6 ballot in which voters turned to smaller, mainly anti-bailout groups that have promised to renege on Greece's austerity commitments that were made in exchange for international bailout money.France's new President Francois Hollande on Wednesday warned that the election outcome could see them pushed out of the eurozone if anti-bailout parties emerge victorious.Fitch ratings agency on Wednesday warned that Cypriot banks would suffer most from a Greek euro exit given their direct exposure to Greek loans and the country's economy through their large branch networks there.Cyprus has vowed to stick to a 2012 deficit target of 2.5 percent of gross domestic product and is drafting additional spending cuts and tax rises to fix a 1 percent deviation. More importantly, Cyprus wants to be seen by its EU partners as living up to its promises in the hope of clinching favorable terms on a possible EU bailout, such as protecting its low 10 percent corporate tax — a key selling point for its large services sector.Cyprus President Dimitris Christofias repeated Wednesday that the measures won't come at the expense of wage earners or pensioners.

ITALIAN FEARS OVER SPAIN CONTAGION

 

Italian premier Mario Monti has seen nearly seven months of confidence-building efforts by his government wiped out as a debt auction revealed that the country's borrowing rates are back near levels last seen in December.A sale of 12-month bonds, a warm-up for Thursday's weightier long-term debt auction, demonstrated the speed with which market jitters spread from Spain following Madrid's weekend concession that its banks need a bailout.Italy paid an interest rate of 3.972% - up from 2.34% in a similar auction last month - to borrow 6.5 billion euro (£5.23 billion) in 12-month money from bond markets. Though demand was strong, the high rate suggests investors worry Italy may need a rescue of its own if Spain takes one.
"Contagion is back with a vengeance, and Italy is bearing the brunt of the fallout from Spain's request for external assistance," said sovereign debt expert Nicholas Spiro. Markets, he noted, are no longer differentiating fiscally-stronger Italy from Spain, "which is a sign that panic has set in".Just before the sale, Mr Monti urged politicians to speed the pace of reforms in a bid to persuade sceptical investors - whom he referred to as "observers that don't nurture an innate sympathy for our country"- that Italy was willing to make the necessary sacrifices to escape the debt crisis.Although Italy's deficit is relatively low, at 3.6% of GDP compared with Spain's 8.5%, the economy is not growing and overall debt is huge, at 1.9 trillion euro (£1.5 trillion). To lower that debt, the economy needs to become more competitive.That has been Mr Monti's task since taking office in November. His technocratic government passed a package of tax rises and spending cuts in December, and has been moving ahead with structural reforms but has found resistance from both lobbies and politicians alike.
The premier also made it clear that a broad European action plan is needed to avoid a spread of market panic from Spain to other countries like Italy, calling for concrete measures to be agreed at a June 28 EU summit.Mr Monti backed measures such as eurobonds, jointly issued European debt that would spread risk across countries, but which Germany has firmly opposed.He said they would not need to be introduced this year, but plans should be put in place.