NEWS,04.12.2012

Steel reprieve comes at price for Hollande

Francois Hollande's bid to rescue steel furnaces in France's historic industrial heartland was to be the mark of a president on the side of the workers and a state with the courage to bring a multinational to heel.But the two-month stand-off over steel giant ArcelorMittal's  Florange plant in Lorraine has unnerved investors in the eurozone's second largest economy, confused France's unions and exposed his six-month-old government to international ridicule.The dispute began in September with reports that ArcelorMittal would shut the idled furnaces at the plant, the last survivor in the once bustling northeastern steel region. The government immediately ordered the company to restart the furnaces or put them up for sale. Hollande's Socialist allies have hailed as a victory a late-Friday compromise under which ArcelorMittal agreed to invest €180m to expand the site near the German border over five years and hold off making forced redundancies. But as the European steel sector struggles to cope with over-capacity, the furnaces themselves will remain shuttered for now, and questions remain over the exact fate of the some 630 workers employed there and further funding needed for expansion.With unemployment at 14-year highs of 10% and his popularity ratings at record lows for a president only half a year into his mandate, there was clear political advantage for Hollande to lock horns with Indian steel magnate Lakshmi Mittal.But the result is at best a no-score-draw, and the tactics used - anti-business rhetoric and the threat of nationalisation could damage his wider reform effort.While his pugnacious, micro-managing predecessor Nicolas Sarkozy led from the front, Hollande let his ministers lead the fight, creating confusion over who runs industrial policy.Arnaud Montebourg, the firebrand leftist industry minister who pushed the nationalisation option hardest, declared Mittal a persona non grata in France and revealed he had found an anonymous potential buyer ready to invest in the plant.That was lapped up by international critics including London mayor Boris Johnson, who told executives in New Delhi that the "sans culottes" revolutionaries had taken control in Paris and advised them to bring their investment rupees to Britain.Montebourg later retracted his personal attack on Mittal but then had to watch as aides of Prime Minister Jean-Marc Ayrault, who announced the final accord, briefed media that his putative investor was neither "credible or solid".Facing opposition calls to resign, Montebourg went on local television on Saturday to announce he had Hollande's support and insist he felt "not betrayed, merely let down" by the outcome.But worse than the damage done to the credibility of one of Hollande's most high-profile ministers, many fear the cacophony further shakes France's image as a place to do business just when it needs all the help it can get to avert recession. "It has been a disaster," a senior French banker said last week as the episode unfolded."Even for sophisticated investors who understand that in France there is a difference between the rhetoric and the reality, this is hugely unnerving."Elie Cohen, economist at the CNRS public research institute, told the commercial i Tele television network that by raising the option of nationalisation, Montebourg risked encouraging copy-cat demands by workers at other struggling sites.It is still too early to say whether the Florange wrangling will hurt foreign investment in France, which Bank of France data show has grown modestly since the 2008/2009 global turndown to hit €30bn or 1.5% of output last year.Barely noticed last week, US online giant Amazon  said it was opening a new distribution centre in northern France that will create up to 2 500 jobs - four times the number at the Florange furnaces and a reminder that 80% of France's economy is now in the services sector.Vital to France's long-term prospects is whether Hollande obtains in coming weeks the overhaul of the country's unwieldy and expensive labour regulations which he has tasked employers and unions to achieve in negotiations by year-end.For that, France's trade unions must make unprecedented concessions to allow business more flexibility in hiring and firing. But the government handling of the Florange tussle has left many labour leaders feeling betrayed."Until the last minute, basically, we were made to believe that temporary nationalisation was essentially a given," Edouard Martin, head of the Florange chapter of France's large CFDT union, told RTL radio. "We did not understand this last-minute fix-up in which Jean-Marc Ayrault unveils an option never before discussed ... We get the feeling he was lying to us all along."A big test now will be whether unions have been riled so much that they stonewall in the labour reform talks. It could also make some more prone to protest if the government makes the extra public spending cuts that analysts say could be needed next year to ensure France hits its deficit-cutting target.For now, both sides hope the battle of Florange is over. ArcelorMittal has welcomed a deal that includes commitments on voluntary redundancies and re-deployment of furnace workers elsewhere in its French activities that go little beyond what it would likely have offered without government intervention.Hollande's office concedes he did not manage to get the furnaces re-opened as he promised during his election campaign,  but argue the deal to expand activity in the current poor economic climate is a victory of sorts.Whether the accord goes ahead in its entirety partly depends on variables outside the two parties' control, including €400m worth of European Commission funding.It may not be quite the end of the story.Referring to the nationalisation threat, one Hollande aide noted: "We are still keeping that revolver on the table."

S Korea, US to 'maximise' bid to stop North

South Korea and the United States will "maximise" diplomatic efforts to stop North Korea's planned rocket launch, Seoul's top nuclear envoy said on Tuesday as he left for talks in Washington. Lim Sung-Nam's US trip will be dominated by Pyongyang's announcement on Saturday that it intends to launch a long-range rocket between 10 and 22 December. The United States and its key Asian allies South Korea and Japan have condemned the move as a disguised ballistic missile test that violates UN resolutions triggered by Pyongyang's two nuclear tests in 2006 and 2009.Lim told Yonhap news agency that his talks with US officials would seek to "maximise diplomatic efforts and the co-ordination between South Korea and the US to block North Korea's launch". Lim met in Seoul on Monday with ambassadors from China, Russia and Japan other members of the six-party talks on North Korea to discuss a common response. Pyongyang insists the launch is a "peaceful" and purely scientific mission aimed at placing a satellite in orbit. A previous attempt in April failed when the carrier exploded shortly after take-off. During his three-day visit to Washington, Lim will hold talks with his US counterpart, Glyn Davies, and other senior officials. China, the North's closest ally, has expressed "concern" at the launch plan, with the foreign ministry urging "relevant parties to act in a way that is more conducive to the stability of the Korean peninsula". Russia on Monday added its "regret" at Pyongyang's announcement and noted that North Korea was obliged to abide by UN resolutions. Analysts say the international community is running out of options for pressuring the impoverished but nuclear-armed North, which is already under layers of sanctions. The six-party, aid-for-denuclearisation talks have been at a standstill since Pyongyang walked of the forum in April 2009. It staged its second nuclear test a month later.

China's Xi vows to rule by law

China's newly appointed leader Xi Jinping pledged on Tuesday to implement rule of law, in comments that appeared aimed at rising social discontent over government corruption and police brutality.In a speech at the Great Hall of the People that marked the 30th anniversary of China's 1982 constitution, Xi spoke of curbing the near-dictatorial powers of the ruling party.His comments appeared to be the strongest yet by a Chinese leader on the need for legal restraints on the party and come amid a series of graft scandals and reports of the unbridled wealth of China's top communist families."We must firmly establish throughout society the authority of the constitution and the law and allow the overwhelming masses to fully believe in the law," Xi said in comments carried by China Central Television. "To fully implement the constitution needs to be the sole task and the basic work in building a socialist nation ruled by law."Xi was last month named as the head of the ruling Communist Party and is slated to take over the state presidency from current President Hu Jintao in March as part of China's once-a-decade leadership transition.This year's transition was badly rocked by the case of disgraced politician Bo Xilai, whose wife was convicted in August of murdering a British businessman, in a scandal that has revealed rampant graft and lawlessness at the pinnacle of political power.Bo is awaiting trial for corruption and abuse of power after allegedly using police in Chongqing city where he ruled to remove political opponents and dissidents, practices that are routine in China.Since becoming party head, Xi has repeatedly pledged to fight graft and on Tuesday he further vowed to rein in China's top leaders. "We must establish mechanisms to restrain and supervise power, power must be made responsible, power must be supervised, violations of law must be investigated," he said."We must ensure that the power bestowed by the people is constantly used for the interest of the people.""No organisation or individual has the special rights to overstep the constitution and law, any violation of the constitution and the law must be investigated."China's current constitution has enshrined the basic freedoms of speech, press, religious belief and association, but such rights are routinely sanctioned and violated, rights groups say.Xi also appeared to address such alleged rights violations."To ensure the implementation of the constitution, is to ensure the realisation of the basic rights of the people," he said."By defending the dignity for the law, we are defending the will of the party and the people for dignity."

NEWS,16.08.2012

Beyond Money

The hole was too deep; these words couldn't fill it. But there they remain, floating on the regret, vibrant with the possibility of a different kind of world. We've always been in the process of building that world, but the process has lacked a central cohesion... a god, if you will, to bless it and keep it. Antonis Perris, an unemployed musician from Athens, found himself at age 60 living in a world where the love of his community didn't matter and probably wasn't even noticeable: He had lost his means to earn a living. Until Europe's economic crisis hit, he had sustained himself and his elderly mother performing at local taverns. He had done well. Then business dried up. Finally, he reached a point where he saw no way to keep on living. The brief story of his death last May one more "economic suicide" was reported recently in the Post:” The next morning, Perris took the hand of his ailing 90-year-old mother. They climbed to the roof of their apartment building and leapt to their death."Europe has had thousands of economic suicides in the last few years. They always shock the community. In Greece, which has been reeling in economic crisis for five years now, "The suicide notes left in coat pockets or on desks," the Post writes, "... are being passed around on the Internet and studied like the final treatises of revered scholars."Everyone loved him," a local café owner said. People would have helped him out, and helped his mother, who suffered from Alzheimer's. But they didn't know how badly the two were doing. Now their deaths are a gash across the community, across the country and perhaps all of Europe and perhaps large parts of the so-called First World, where the middle class is crumbling. The poverty and despoliation the dark side of capitalism are no longer contained, relegated to the Third World and the Third World pockets of the First.The situation has gotten so bad that the idea of debt forgiveness is gaining mainstream cachet. Erik Kain, writing last October in Forbes, brought up "the old biblical idea of a jubilee  a national cancellation of private debts.” In many ways," he observed, "rather than creating a sustainable economy built around steadily rising middle and working class wages, we've built an unsustainable economy built on consumer debt. That debt has propelled the growth we've seen in recent years, acting as a sort of perpetual Keynesian injection into the economy. Now we're paying the price.” While I see debt forgiveness as a move in the right direction -- an acknowledgment that debt isn't simply a moral failing, and that the wealth of creditors, who have in so many ways rigged the game in their favor, isn't all the matters I wince at the provincialism of those who limit their concern to the American middle class, or would do no more to fix the system than increase wages for the working and professional classes. Better wages that are the result of devastated environmental regulations or that come at the expense of the Third World or future generations? The economic crisis is global in nature and the flaws of the system are deep and profound. "The economy's only valid purpose is to serve life," David Korten wrote this month in Yes! Magazine. The economy should not be an end in itself, an irresistible force that we fail to serve at our peril yet that's the conventional attitude. The economic suicides of Europe and, indeed, of every country on the planet, are testimony to the prevalence of this belief. We serve money as though it were God. When it disappears from our life, the most honourable alternative, as we stare into the abyss, is suicide. We live within an economic system that is cruel and impersonal, divorced from gratitude, empathy, compassion, love and nurturance. (Money, whatever else it is, is the root of all cynicism.) This system is also voracious. It's eating the planet: eating, i.e., privatizing and selling back to us, what was once the human and environmental commons, the context of all life. "Real capital assets," writes Korten in his excellent essay, "have productive value in their own right and cannot be created with a computer key stroke. The most essential forms of real capital are social capital (the bonds of trust and caring essential to healthy community function) and bio system capital (the living systems essential to Earth's capacity to support life). We are depleting both with reckless abandon.” Trapped within the present economic system, so many people have limited patience for what they value most deeply, e.g., the happiness and loving growth of children, the glorious fecundity of the earth, the peace that passes all understanding. Who has time? We all loved him, but...As the system crashes; we have the opportunity to look beyond it. Let's dig deeply to establish the foundation of its replacement. 

 

How One Disappearance Case May Prove China's Commitment to Rule of Law Post-Transition

 

A key question about the Chinese government's leadership transition later this year is whether as a rising power China can achieve internationally agreed-upon standards to respect and implement the rule of law for the benefit of its people. For all of the attention paid to the Bo Xilai scandal and circumstances involving government critics Ai Weiwei and Chen Guangcheng, one ongoing, largely unnoticed case may serve as a barometer for China's future in this area.Gendun Choekyi Nyima was just six years old in 1995 when he and members of his family were detained in Tibet and taken into "protective custody" by the Chinese government. Earlier that year the Dalai Lama declared the child to be the reincarnation of the Panchen Lama, the second-most influential leader in Tibetan Buddhism, following the death of the previous Panchen Lama in 1989.His whereabouts remain a closely guarded state secret. No reliable outside source knows where he is or what his condition is, apart from a few cryptic statements issued over the years by China's government, who most recently claimed Gendun Choekyi Nyima now 23 is in mainland China and doesn't want to be disturbed. "It's a reminder about how exceptionally efficient and capable the Chinese state is when it has a security priority, when it wants to hide someone away or keep something secret," said Robert Barnett, director of Columbia University's Modern Tibetan Studies program. The Panchen Lama, like the Dalai Lama, is a crucial figure to Tibetans, and plays a key role in identifying candidates to be the next Dalai Lama. Lobsang Nyandak Zayul, the Dalai Lama's representative for the Americas, expressed to me that the whereabouts and condition of Gendun Choekyi Nyima "are of great concern to the Tibetan people," whose right to interact with their spiritual leader has been taken away. Soon after detaining Gendun Choekyi Nyima and his family, China's government identified another Tibetan boy as the "official" Panchen Lama, whose rare and carefully managed public appearances to date have been punctuated with public statements supportive of China and state stability. Why did the Chinese government, which is officially atheist, get involved in a case of religious leadership succession? China views the Dalai Lama spiritual leader of Tibetan Buddhism and, until last year, head of Tibet's government in exile as a separatist threat. Less about religion, according to the Economist, "China has its eyes on a complex struggle that will play out" once the current aging Dalai Lama dies. "With the endorsement of its own Panchen Lama, China wants to choose a successor to the current Dalai Lama and seek to control him." Beijing is concerned that the Dalai Lama and his exile supporters will support another candidate perceived as Tibetans' spiritual leader. It’s a complicated story rooted in China's claims of historic sovereignty over Tibet. The implications are enormous, but the basic facts are simple: The Chinese government detained a six year-old and his family 17 years ago and nobody has seen them publicly since. By virtually any national or international standards this is illegal and morally outrageous. What does it say about the rule of law in China if people can be disappeared so easily? Meanwhile, circumstances for Tibetans worsen. Chinese authorities aggressively put down major riots in 2008, and in the last 18 months 45 Tibetans monks, nuns, and ordinary people have self-immolated in protest of China's harsh policies. Earlier this year China installed government monitors in nearly every monastery in Tibet in an effort to prevent separatist activities, and last month Human Rights Watch reported restrictions on news and information accessible by Tibetans inside China, to prevent views about the Dalai Lama and his followers not controlled by the Chinese government. According to Columbia's Barnett, "This is much deeper than just the issue of how to control the mechanics of appointing the next Dalai Lama," explaining that in attempting to establish stability in Tibet, on the one hand the "Communist Party recognizes that it can't win over Tibetans just by argument, ideology, or economic benefit. They believe they have to have a major traditional or religious leader as a puppet figure who will endorse their claims to the Tibetan people.” The greater political value for the Chinese government in having a quasi-official Panchen Lama is that he can be paraded around "not for Tibetan audiences but for Chinese audiences," Barnett said. The government, ever concerned with stability, "can use the army to control or suppress the six million or so Tibetans if they don't agree with China's choice for the Dalai Lama, but they can't use an army to force a billion Chinese to agree.” According to Michael Davis, visiting professor of law at Hong Kong University, China appears to believe "the Tibet problem will just go away if they grind down the Tibetans." But the unrest will continue because "Tibetans will continue to mobilize opposition to the Chinese policies and China will continue to bear foreign policy cost.” He added, "People figure if China treats its border Tibetan community like this, how will it treat other neighbours it dominates?” A spokesperson for China's United Nations mission in New York did not respond to repeated requests for comment, and calls to Beijing's embassy in Washington, D.C. went unanswered. While no one with whom I spoke had any information about the condition of Gendun Choekyi Nyima, it is possible the Chinese government may view him as a bargaining chip in stalled talks with Tibet's government in exile.” It would be extraordinary for China not to realize that they need to have that missing boy alive in order to get more concessions out of the exiles, if they ever go so far as to have serious talks," said Barnett. "But at the same time, they'll have to make some kind of compromise with the Tibetans' Panchen Lama, which would mean recognizing him in some secondary role.” What’s in it for China?” I think the upside is enormous," said Davis. The Dalai Lama, who has called for autonomy for Tibet but not independence from China, "is surely the most reasonable representative of the Tibetan community they are likely to encounter," he said. "They should take advantage of this while they can. The Dalai Lama is also peculiarly suited to gain popular Tibetan support for any settlement.” From the exiles' perspective, Lobsang Nyandak Zayul noted that "most of us have given up hope with the present administration in Beijing." Reengagement with the Chinese government may be possible "once they have established the next generation of leaders," he said. If Gendun Choekyi Nyima is alive and well, one of the following moves by China post-transition could send strong signals to its people, its neighbours, and to outside powers: Unconditionally release Gendun Choekyi Nyima, as the Dalai Lama's representatives have called for. Or at least allow a neutral party to actually meet with him and verify his well-being. The new leadership in China could seize an opening and signal a policy shift on talks with exiles, and quietly raise whether Gendun Choekyi Nyima could be released as a possibility in any talks. Of course, sustained media focus on the case could make China consider reputation impacts abroad. Broader factors involved in China's treatment of its peripheral communities unsettles China's neighbours, as well as powers like the United States and the EU, so the status quo seems to carry significant costs. If China is ready to assume its role as a major power on the world stage, with new political leadership it should accept the associated responsibilities -- including respect for the rule of law at home. China can start with credible information about Gendun Choekyi Nyima.

NEWS,18.07.2012

Bulgaria Bus Blast: 7 Dead, 25 Wounded As Explosion Hits Bus Carrying Young Israeli Tourists

 

Israel's Foreign Minister says the deadly bus explosion in Bulgaria that has killed at least six people was caused by a bomb placed on the vehicle.Avigdor Lieberman says he was briefed by his Bulgarian counterpart Wednesday evening. He said seven people died, but Bulgarian authorities have placed the death toll at six.At least 32 people were wounded in the blast, which Israeli Prime Minister Benjamin Netanyahu called "an Iranian terror attack."A bus carrying Israeli youth exploded Wednesday in a Bulgarian resort, killing at least six people and wounding 32, officials said. Israeli Prime Minister Benjamin Netanyahu called it "an Iranian terror attack" and promised a tough response.The explosion took place in the Black Sea city of Burgas, some 400 kilometers (250 miles) east of the capital, Sofia. TV images showed smoke billowing from the scene – a parking lot at the local airport where the Israeli tourists had apparently just landed. Several buses and cars were on fire near the shell of the exploded vehicle.It was not yet certain what caused the blast in the eastern European nation – whether it was the result of a suicide bomber or a device remotely detonated – and no group immediately claimed responsibility.But Israelis often have been targeted in attacks outside their country, and Wednesday's bombing coincided with the 18th anniversary of the bombing of a Jewish community center in Argentina that killed 85 people.Israel suspects Iran of being behind several of those assaults. The two nations have long been in dispute over the nature of Iran's nuclear program. Israel has warned it will use military force to curb Iran's program if it must because it believes Tehran wants atomic weapons – a charge Iranian officials deny.The Israeli premier noted that Wednesday's attack followed similar attacks or attempted attacks in India, Georgia, Thailand and Kenya and Cyprus in recent months. He said that once again, "all signs point to Iran," though he did not offer any evidence to back up the claim."This is an Iranian terror attack that is spreading across the world," Netanyahu said. "Israel will react strongly to Iran's terror."The White House, which has preferred to pursue sanctions and diplomatic pressure against Iran in the nuclear dispute, also strongly condemned the attack. Press Secretary Jay Carney said President Barack Obama's "thoughts and prayers are with the families of those killed and injured."Tehran did not immediately issue any comment.Bulgaria, a country of 7.3 million bordering Greece and Turkey, is a popular tourist destination for Israelis. In recent years, Burgas has become popular as an inexpensive haven for groups of Israeli teenagers taking trips after finishing high school and before their military service.Israeli Foreign Ministry spokesman Jonathan Rosenzweig said a flight from Tel Aviv had landed at 4:45 p.m. and that the blast took place about 40 minutes later. The tourists were apparently boarding the buses to go to their hotels.Witness Gal Malka told Israel's Channel 2 TV that she saw someone board the bus just before it exploded. Malka, who was lightly wounded, said the bus was full of Israeli teenagers. "We were at the entrance of the bus and in a few seconds we heard a huge boom," she said. Bulgarian Interior Minister Tsvetan Tsvetanov told Bulgarian national TV from Burgas that a person died in the hospital, bringing the death toll to four. Prior to that announcement, a doctor at the Burgas city hospital told Bulgarian radio that there were 27 people hurt – and at least three had severe injuries. He was not identified.The Burgas airport was closed and traffic redirected. In Sofia, meanwhile, Mayor Yordanka Fandakova ordered a stronger police presence at all public places linked to the Jewish community. There are some 5,000 Jews in Bulgaria and most live in the capital.Iran, which insists its nuclear program is peaceful, has in the past accused Israel of being behind deadly attacks on Iranian nuclear scientists.Israel has not admitted a role in those strikes, but it and others have accused Iran of alleged reprisal missions, including a February bombing in New Delhi that wounded an Israeli diplomat's wife and the discovery of a cache of explosives in Bangkok that Thai officials claim was linked to a plot to target Israeli diplomats. Iran has denied involvement.In Azerbaijan's capital, Baku, security officials in March announced the arrest of 22 suspects allegedly hired by Iran for terrorist attacks against the U.S. and Israeli embassies and other Western-linked sites.Wednesday's attack also coincided with the 18th anniversary of the bombing of a Jewish community center in Buenos Aires that killed 85 people. An Argentinian magistrate has concluded Iran was behind that attack.Israeli officials also have long feared that the Iranian-backed Hezbollah guerrilla group would try to attack Israelis abroad. Hezbollah has accused Israel of assassinating a top leader in Damascus in 2008 and vowed to avenge the killing. Israel has never admitted involvement in the mysterious explosion.Deputy Foreign Minister Danny Ayalon on Israel's Channel 2 TV said there was no advance intelligence on an attack in Bulgaria.But counterterrorism expert Boaz Ganor said Iran and Hezbollah were the most likely culprits. He told  that all the indications pointed toward them. He also cited the arrest of a Hezbollah operative in Cyprus in recent days who was suspected of preparing a similar attack."This is probably a parallel operation and likely not the last in a series," he said. "All this looks like Hezbollah, Iran or a combination of the two."

 

Cuba's new stiff taxes on imported goods

Cuba has announced the imposition of stiff new import taxes that could substantially affect private entrepreneurs trying to get new businesses off the ground and many others who rely on informal shipments of merchandise from overseas.Starting in September, Cubans who come in and out of the country more than once a year will have to pay the equivalent of $4.50 a pound or more for imports, a fortune in a country where salaries average the equivalent of about $20 a month. Non-Cuban residents of the island, as well as Cuban Americans visiting relatives, would have to pay the new rates even if they only make one trip to the island.About a quarter of a million Cubans have started new businesses under free-market reforms instituted by President Raul Castroat the end of 2010. Many have opened cafes, repair shops, clothing stalls and outdoor stands that rely on products brought in from abroad.Cubans with permission to travel often fund their trips by acting as mules, coming back with bags stuffed with clothes, electronic goods, diapers and other things that are hard to find on the island. Until now, they would pay only about 25 cents per pound in import duties, with set fees for big-ticket items like televisions and microwave ovens. Food imports were free until earlier this year, when the government began charging duties.The new fees were posted quietly on the website of the government's Official Gazette and are dated July 2.Some details of the new law were confusing, given that the decree was published in dense legalese and appeared to contradict itself, and that no government officials were available to make sense of it. At times the decree refers to taxes being imposed based on weight, and at times on the value of merchandise.Either way, it was clear to private business owners that they would be paying much more, and they were not happy about it."It's a disaster," said Luis Carlos Espinosa, a 42-year-old who has set up a small stand in central Havana selling jeans, colorful blouses and children's clothing, and who had heard rumors of the new taxes but had not yet seen the published law. "It hurts us in every way. Where are we going to get the merchandise? There is no wholesale market here."Castro has ushered in dramatic changes like the legalization of a real estate and used car market, the granting of licenses for 181 types of private sector jobs, micro-loans for small business owners, the loosening of rules limiting independent restaurants, and a program to turn fallow government land over to small time farmers.But the momentum has undoubtedly waned this year, with no major reforms announced since December. Two promised high-profile changes, the creation of mid-size cooperative businesses and the elimination of travel restrictions that keep most Cubans from leaving the island, have yet to materialize, despite repeated assurances they are in the works.The reforms are part of a five-year plan to shed a million state workers and turn more than 40 percent of the economy over to the private sector, compared to about 15 percent today.

EU says Romania's gov't undermines rule of law

 

The European Union sharply criticized Romania's government on Wednesday, saying it has undermined the rule of law and independence of the judiciary as it tried to remove the president.President Traian Basescu was impeached by Parliament last month on grounds he overstepped his authority by meddling in government business and the judicial system. Critics accuse Prime Minister Victor Ponta of orchestrating the move as part of a power grab, and the political turmoil has dented Romania's credibility, with the United States and the EU expressing doubts about the left-leaning government's respect for the independence of the judiciary.A referendum will be held on July 29 to determine whether Basescu should be removed from office.The EU said in a report Wednesday that recent steps by the government raise concerns about its respect of fundamental democratic principles and it urged Bucharest to take urgent action to demonstrate its commitment.EU officials have been particularly concerned about the speed of the impeachment process and that the government tried to pass emergency decrees to change the referendum law to make it easier to remove Basescu.The EU allowed Romania and Bulgaria to join the bloc in 2007 despite delays in reforming their judicial systems and combating corruption and organized crime. Since then, it has been issuing regular annual reports on their progress.Jose Manuel Barroso, the president of the European Commission, said "exceptional events" in Romania had been a source of major concern."Politicians must not try to intimidate judges ahead of decisions or attack judges after decisions they don't like," Barroso told reporters Wednesday. He said an additional report would be prepared on Romania before the end of 2012."In this report we will look whether our concerns have been addressed," Barroso said.Romania's interim President Crin Antonescu said in a televised address later Wednesday that the government "categorically agreed" with the principles of "an independent justice system, respect for the constitution, laws and constitutional court."He said that he had some reservations about the report, but did not specify. "Romania is not isolated" he said. It will become "more and more European, and more connected to European standards."The EU has no provision to expel members, yet continued negative reports could contribute to a cutting of EU funds. The EU could also sanction Romania by refusing to give it passport-free travel within the EU anytime soon.

NEWS,14.07.2012

JPMorgan Traders May Have Hidden Losses, Could Face Criminal Charges

 

JPMorgan Chase & Co said its traders may have deliberately hidden losses that have since climbed to $5.8 billion for the year, in a development that may result in criminal charges against traders at the bank.The losses came from bets on corporate debt now known as the "London Whale" trades made at JPMorgan's Chief Investment Office. Chief Executive Jamie Dimon said that in the worst-case scenario the derivatives trades would lose another $1.7 billion, and that the bank has fixed the CIO problems.Investors cheered the bank for capping losses and taking steps to ensure it avoids similar bad bets in the future. JPMorgan's shares rose nearly 6 percent on Friday.Even with the trading losses, JPMorgan earned nearly $5 billion overall in the second quarter, thanks to its strong performance in areas such as mortgage lending.The trading losses may be mostly over, but with the disclosure that traders may have lied about their losses, regulatory and legal consequences will linger for some time. Blame for the problems at the CIO office may go further up the management chain to some of the most senior executives at the firm, lawyers said.A source said that federal criminal investigators are looking at people at JPMorgan in London, where the CIO's risky bets were placed. The criminal investigation began in earnest in the past few weeks after JP Morgan's internal investigation uncovered that CIO traders may have intentionally masked losses, the source said."I see little doubt that someone is going to get charged with fraud," said Bill Singer, a lawyer at Herskovits in New York who provides legal counsel to securities industry firms, and publishes the BrokeandBroker website.Authorities ranging from the FBI to the U.S. Securities and Exchange Commission are probing the bank. The SEC could charge JPMorgan with weaknesses in oversight and internal controls, said James Cox, a securities law expert at Duke University."I think the SEC will continue to look at 'What exactly did Jamie Dimon know and when did he know it?'" Cox said.An internal review found that some of the CIO traders appear to have deliberately ignored the massive size of their trades - and the difficulty in liquidating them - when valuing their positions. The result was not reporting the full declines in the value of positions, which is forcing JPMorgan to restate its first-quarter results. The bank is cooperating with authorities.The trading losses and possible deception from traders are a black eye for Dimon, who was respected for keeping his bank consistently profitable during the financial crisis. Dimon, who has criticized regulators for meddling too much with banks, has lost credibility because of difficulties in his own house."How do we know there are not more roaches in the kitchen?" said Paul Miller, an analyst at FBR Capital Markets, referring to the maxim that seeing a single roach typically means there are far more hiding in the woodwork.The Chief Investment Office became infamous in May when JPMorgan said bad derivatives bets had triggered about $2 billion of paper losses, a figure that turned into $4.4 billion of actual losses in the second quarter.One trader in the CIO, Bruno Iksil, took big enough positions in the credit derivatives markets to earn the nickname "The London Whale." He made at least some of the big bets that caused trouble for the bank, and has since left JPMorgan, a source said on Friday.Ina Drew, who headed the CIO, has also left, and offered to give back as much of her pay as the bank was contractually entitled take back, said Dimon, whose pay could be taken back as well. A spokesman for the bank said JPMorgan had accepted Drew's offer.The bank said it had moved the bad trades from the CIO, which invests some of the company's excess funds, to its investment bank. JPMorgan was one of the inventors of credit derivatives, and its investment bank is one of the biggest traders of the product on Wall Street.The CIO will now focus on conservative investments, JPMorgan said. The bank has taken a number of other steps to prevent these types of losses from repeating, including changing the way it limits risk taking in the CIO's office."People feel good that the loss is largely contained at this point," said Nancy Bush, a banking analyst at independent research firm NAB Research.JPMorgan said later on Friday that its former CIO risk officer, Irvin Goldman, had resigned. Goldman "behaved with integrity and we wish him well," JPMorgan said.JPMorgan's shares rose $2.03 to close at $36.07 on the New York Stock Exchange.THE TEMPEST LEAVES THE TEAPOT The bank posted second-quarter net income of $4.96 billion, or $1.21 a share, compared with $5.43 billion, or $1.27 a share, a year earlier.The derivative loss after taxes reduced earnings per share by 69 cents, the company said.JPMorgan said it expected to file new, restated first-quarter results in the coming weeks, reflecting a $459 million reduction of income because of bad valuations on some of its trading positions. The bank found material problems with its financial controls during the period.The bank said its internal investigation combed through over a million emails, tens of thousands of taped conversations, and other evidence. It learned that some traders may have intended not to value their trading positions at the proper levels.In particular, the traders recorded the value of their trades at current market prices, rather than prices they would get if they liquidated their large positions, in an effort to avoid reporting their full paper losses.The bank made trades that were intended to protect it against the credit markets tanking, but allowed those positions to morph into bets on credit markets getting better.Friday's financial report came three months to the day after Dimon, 56, told stock analysts that news reports about Iksil and looming losses in London were a "tempest in a teapot."That remark, which Dimon told Congress last month was "dead wrong," added to the damage the loss has done to his reputation and his argument that his bank is not too big to be managed safely.A host of international regulators and agencies are probing the trading mishap. Besides the FBI and the SEC, they the UK's Financial Services Authority, the U.S. Federal Deposit Insurance Corp, the U.S. Commodity Futures Trading Commission, the U.S. Treasury's Office for the Comptroller of the Currency, and the Federal Reserve Bank of New York.

Libor Scandal May Hit U.S. Banks Harder Than Their British Counterparts

 

Barclays Plc and other UK banks may escape lighter than their U.S. rivals if shareholders seek damages in the wake of an interest rate-rigging scandal, because such cases are costlier and harder to win in Britain.Cases pursued in America by investors alleging they suffered a loss because of the wrongdoing of a financial institution, will often be deemed ineligible to be heard in U.S. courts when the bank in question is foreign, legal experts said.But if investors opt to take their cases to UK courts, they will find Britain's legal structures make such claims harder to win, costlier and riskier."Would we like to sue Barclays in the New York courts weknow well and we're very good at prosecuting in? Sure. But we're not going to because this is a UK situation," said Dominic Auld, a litigation expert at U.S. law firm Labaton Sucharow.Since Barclays admitted its role in manipulating the London interbank offered rate (Libor), lawyers on both sides of the Atlantic are taking calls from investors."I did take a call this morning from an institutional investor who is interested in looking at litigation both from a UK perspective and the U.S ... I expect there will be a good deal of similar interest," said Owen Watkins, a barrister in the corporate department of London law firm Lewis Silkin.More than a dozen banks are being investigated for their roles in setting Libor, including Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc , UBS and Royal Bank of Scotland..Morgan Stanley analysts have calculated the litigation risk to each of the 16 banks involved in setting Libor, an estimate of the rate at which banks could lend to each other and a benchmark for setting many other types of loans, at between $60 million to $1.1 billion. But lawyers say that while it was once commonplace for European investors to issue proceedings in the States, this transatlantic "legal tourism" was brought to an effective end in 2010 by a Supreme Court ruling in the United States.In a case brought against National Australia Bank, the court ruled U.S. securities laws do not have jurisdiction over so-called "F cubed" cases involving foreign investors and a foreign company traded on a non-U.S. market In the case of Barclays, only about 4 percent of its market capitalisation is traded in the U.S. in the form of American Depository Receipts. Any pursuit of meaningful damages from investment losses related to falls in Barclays' share price caused by the scandal will have to be carried out in Britain."Bringing proceedings here is not easy because there are various questions about causation. But most importantly Barclays would fight hard and you take a substantial risk in relation to costs that you would have to pay if you lost," said David Greene, senior partner at London-based law firm Edwin Coe.Furthermore, proceedings by institutional investors are rare and run against the traditions of the City of London financial district which had in part prompted disgruntled investors to make claims in the United States until it was halted by the F-cubed ruling."I don't think that sort of thing would be held in a UK court. I think they would just say the nature of the capital markets is shares go down as well as up. It's the guiding principle here," said one institutional investor who declined to be named because he is a major Barclays shareholder.

NEWS,23.06.2012

EU ministers focus on banking unioN

European finance ministers examined ways to strengthen their banking sectors and break the link between troubled banks and indebted countries on Friday, with concerns about Spain’s stricken banking system top of their minds. IMF managing director Christine Lagarde has urged the eurozone to channel aid directly to struggling banks rather than via governments, but Germany and others are opposed to such direct lending, which is not possible under current rules. The discussion is part of a broader debate about how the European Union can move towards a so-called banking union, including a Pan-EU deposit guarantee scheme and a fund to resolve bad banks, to try to get on top of the two-and-a-half year sovereign debt crisis. Lagarde said on Thursday that allowing the eurozone’s rescue scheme - the European Stability Mechanism (ESM) - to aid stricken lenders directly rather than using a programme of aid to a government would stop bank problems from exacerbating the difficulties of countries. Arriving at Friday’s meeting Spain’s Economy Minister Luis de Guindos said such a possibility may be open to Spain, which is set to receive up to €100bn of aid from the eurozone for its troubled banks. “I think (direct bank recapitalisation) is a possibility,” he told reporters. “It is one of the fundamental elements to break the link between bank risk and sovereign risk.” “This possibility is absolutely open to Spain if there is progress in the next few months (on the issue). The process of recapitalisation is not instantaneous,” he said. Throughout the crisis, countries in the eurozone have been left to resolve problems at their banks themselves. For those for whom the burden was too great, such as Ireland, the government received aid from the IMF and the EU to do it. But after years in crisis, the problems in banks show no sign of abating and Europe’s leaders are under pressure to form a united front to shield struggling lenders rather than leave countries to cope with such problems alone. At a summit in Brussels next week, EU leaders will examine establishing a banking union that envisages a single supervisor for big banks, a fund to wind down cross-border lenders in trouble and the deposit guarantee scheme to protect savers. "Poisonous link" Central to this is the idea is that stronger countries in the eurozone such as Germany ultimately stand behind the lenders of countries too weak to manage alone, although Berlin does not want any such step in the short term because it is opposed to bearing any liability for other countries. “We need to break the poisonous link between sovereigns and banks,” said one EU diplomat close to discussions. “It’s about solidarity. It can’t happen overnight. It is difficult stuff." A banking union is also contentious because it will likely shift power from national regulators to a higher authority, such as the European Central Bank (ECB). France and Germany want the ECB to take charge of major systemic banks, rather than leaving oversight with the European Banking Authority. One of the biggest divisions in the debate about such a union is whether it will apply only to countries in the eurozone, or to all 27 member states in the European Union. Britain has said it will not join such a scheme, which it believes should be limited to the single currency area. The European Commission, the EU's executive, wants the union to apply to all countries, because of concerns that scaling it back would undermine the bloc's borderless single market. Michel Barnier, the EU commissioner in charge of financial regulation, will attend Friday’s meeting to appeal again for all countries to join. In Luxembourg, ministers will also discuss warnings issued to countries by the European Commission to countries on improving the management of their economies to reach spending goals laid down in EU law. Spain may receive more time to reach the goal of cutting its budget deficit to 3% of economic output, although one senior diplomat said this would only be discussed next week at an EU leaders' summit in Brussels. Germany will also push for the introduction of a tax on financial transactions, a move demanded by the country’s opposition socialists in order to secure their backing in parliament to sign off on the ESM.

NEWS,03.04.2012.

Crazy gas prices driving German consumers mad

A price board at a petrol station in Berlin, Germany on March 30. The price for "super" at 1.71 euro per liter is approximately $8.56 a gallon.  “Oh nein,” there is another traffic jam at my local gas station.Normally, German drivers only encounter severe congestion on their famed autobahns, where traffic flow is often hampered there by the large number of construction sites regularly installed by the German government to keep its state-of-the-art highways "in order."These days, though, it is not unusual for gas prices to change up to five times per day at German gas stations, a phenomenon which traffic experts refer to as the “yo-yo effect.” When prices are lowered, many inner-city gas stations in Germany see drivers pull up in hordes.Given costs of up to 1.70 Euro (and more) per liter of unleaded fuel  the equivalent of $8.56 per gallon – it should come as no surprise that Germany's drivers have become bargain hunters. (One gallon is equal to 3.78 liters).Critics say that the yo-yo phenomenon is fueled by the highly competitive market and dominance by leading suppliers in the German market, like Aral, Jet or Shell.Retailers and consumers, who see a lowering of prices during lower-demand times and a hike during rush hours or school holidays, are increasingly calling for prices to be directed by supply and demand."When the prices are high in the morning during rush hour and then suddenly drop when most people are at work, our customers often get upset and complain heavily," said Ferdinand Raker, who has been running an independent gas station in the town of Molbergen since 1998."On some days, we see a lowering or raising of the prices by up to 14 euro cents ($0.18) per liter," said Andreas Hoelzel from German automobile club ADAC in Munich. "We understand that there is a competitive market situation, but the extent of price fluctuation is just enormous."It is all about a plethora of petrol pumps in Germany, representatives from the industry argue."This shows that we have a functioning business competition in the German petroleum market, which in comparison to other European countries has an above-average volume of gas stations with its nearly 14,700 outlets nationwide," said Karin Retzlaff from the Association of the German Petroleum Industry, known as MWV.This argument, however, has neither satisfied the average driver nor officials from automobile clubs, who represent Germany's now grumpy motorists.Reports about illegal price fixing among multinationals could not be proven in recent investigations by Germany’s Federal Cartel Office, but experts and media reports are still accusing oil firms of implementing “methods of systematic confusion.“On Monday, weekly “Der Spiegel” news magazine headlined its cover “The Fuel Cartel – How Oil Firms Manipulate the Fuel Prices” and argued in its seven-page analysis that the leading gas companies are using their power in the market to deliberately inflate fuel prices.Frustration over high fuel costs has also set off a high level of fuel thefts across the country, officials say.According to police in Germany's most populous state, Northrhein-Westphalia, diesel thefts, for example, have increased over the course of the past year. (More than 40 percent of German cars are powered by diesel.) An internal survey, which listed all cases with diesel thefts above 100 liters, showed 111 cases in January and 83 in February in this local state alone.The statistics indicate that criminals are mainly targeting fuel depots, heavy construction machines and large trucks. In 2011, state police in Northrhein-Westphalia recorded 986 cases with a total of 344,000 liters (90,875 gallons) stolen.Thieves have become increasingly creative. Police have recorded incidents in which criminals have drilled holes into gas tanks of private cars or used stolen or fake licence plates so that they can remain unidentified at gas stations when they drive off without paying the bill."Last month, I lost 10,000 liters of fuel after thieves signed up for a special debit card with false identifications and then pulled up numerous times with different vehicles to steal my petrol," says Raker, the Molbergen gas station owner. “Police caught the culprit," he said, "but he was broke and I was left with the damage.”With anger on all sides, the mass-circulation BILD newspaper offered a sign of possible relief soon with the headline "Finally! A law against fuel rip-off.“ The article referred to a meeting of Germany's upper house of parliament last Friday, where politicians debated proposals for a new law, which could help calm down fluctuating gas prices.Politicians in Berlin suggested that oil firms should be required to warn of new fuel prices by 2 p.m. on the day before the change, and the altered prices would have to remain unchanged for at least 24 hours.Prices could also be stored in a central public database under a new law, which would give motorists the ability to check the cheapest pump prices in their vicinity with the help of the Internet or modern smart phones.Yet, a decision on a possible new law is not expected before the end of the summer (or, as some believe, might not come at all).And, despite the fact that there now appears to be light at the end of Germany's tunnels in regard to regulations that could stop the rollercoaster ride at the pump, the underlying price for crude oil on the world market is unlikely to fall dramatically any time soon.

NEWS,16.03.2012.

Greece receives second multibillion-dollar bailout

The euro zone's temporary bailout fund, the European Financial Stability Facility, will contribute 109.1 billion euros to the second Greek bailout after covering the costs of the Greek debt swap. The IMF will contribute 28 billion euros on top of the 109.1 billion, which the Fund will pay to Greece over four years, rather than the three years envisaged in the euro zone financing plan. The 109.1 billion figure includes 48 billion euros that the EFSF will provide, in the form of its own bonds, to recapitalise Greek banks, over the next few weeks, Regling told several international news agencies.” That means 61 billion euros is left for normal programme financing," he said in comments for release on Friday. The EFSF figure does not include the 30 billion euros that the euro zone has provided as a sweetener for investors in the privately held debt restructuring, or the 5.5 billion euros of repayment of accrued interest. Regling said the EFSF has provided 26.6 billion euros of the sweetener for investors holding debt governed by Greek law.” Once the debt exchange offer has been completed on Greek sovereign bonds issued under international law and Greek corporate and municipal bonds, guaranteed by the Greek state, the amount of the PSI (private sector involvement) contribution could increase to a total of 30 billion euros," Regling said. Investors holding Greek bonds issued under international law have until March 23 to accept or reject a debt swap offer already widely accepted by those holding Greek-law bonds. The EFSF, which has a total lending capacity of 440 billion euros thanks to guarantees from euro zone governments, has issued 6-month bills worth 4.6 billion euros to repay accrued interest on Greek debt out of the 5.5-billion-euro total. If holders of Greek debt under international law decide to accept the debt swap too, they will get the remaining 900 million euros. The second bailout for Greece, financed by the EFSF, comes on top of the fund's commitments to Ireland and Portugal, the two other euro zone countries that have been cut off from the markets and need euro zone loans to avoid bankruptcy.” Overall the EFSF has committed 192 billion euros for the three programmes of Ireland, Portugal and Greece. This leaves 248 billion euros of uncommitted resources," Regling said. Under a preliminary funding plan, which is subject to market conditions, the EFSF expects to raise a total of 8.1 billion euros for Ireland in 2012 and 2 billion euros in 2013.For Portugal, the EFSF wants to raise 13.9 billion euros in 2012, 3.6 billion euros in 2013 and 1.7 billion euros in 2014.To service the Greek programme, the EFSF's preliminary funding plan envisages 32.2 billion euros in 2012, 32.3 billion euros in 2013 and 32.1 billion euros in 2014.Next week, the fund may issue its longest bond so far of between 20 and 30 years in maturity in an auction of 1-to-1.5 billion euros, depending on market conditions. The EFSF also plans to sell 2 billion euros' worth of 6-month bills on March 20 and is considering the sale of a benchmark 5-year bond on March 22.

'Dummy' journalist annoys Sarkozy

French President Nicolas Sarkozy was caught on camera calling a journalist a "dummy", in an outburst his Socialist election rival Francois Hollande condemned as vulgar and undignified. Sarkozy has earned a reputation for blunt speaking during his five-year presidency. In the run-up to April's first round presidential vote, he appears to have been at pains to shed that image. But during a visit to Chalons-sur-Marne, east of Paris, he appeared to lose patience with a young journalist when questioned about clashes between police and striking steel workers in the capital on Thursday.” Do you think I give a damn about what you say? What do you expect me to say?" he says, adding: "What a dummy!” He then turned back smiling to the journalist and slapped him on the shoulder, apologizing for the comment and saying: "He's nice really. He's young.” Socialist candidate Francois Hollande blasted Sarkozy in the wake of the incident accusing him of slipping back into the "excesses" and "vulgarity" that had marked his five-year term."Do you think that's the best way to conduct a dignified public debate?" he said on France 2 television. Some 150 workers from the Arcelor Mittal steel mill at Floranges in eastern France gathered outside Sarkozy's campaign headquarters in Paris earlier in the day to protest at the threatened closure of the plant and push for a solution. The protest turned violent as workers tried to break through a police line, prompting riot police to fire tear gas to put an end to the demonstration. Sarkozy's comments came only hours after he had himself criticized his rival Hollande for losing his temper, referring to the Socialist candidate's heated campaign speech in Marseilles a day earlier.” There’s no need to get angry, tense up, to be nasty or aggressive," he told journalists on the side lines of an earlier visit to a metal factory.Sarkozy has been dogged by a reputation for inflammatory language since he captured the headlines during his 2007 presidential campaign with a call to rid the Paris suburbs of young "scum”. In 2008 he was caught on camera telling a man at an agricultural fair to "get lost, jerk", a phrase that would haunt him throughout his presidency. That, combined with his whirlwind romance with model-turned-singer Carla Bruni and his friendships with wealthy businessmen, alienated many voters.Sarkozy has consistently trailed Hollande in polls of voting intentions, but overtook his arch-rival in the first-round vote in an IFOP poll this week. Second-round polls still show Hollande as the outright winner. The latest daily rolling poll of voting intentions by IFOP for magazine Paris Match, showed Sarkozy taking 28% of the vote in the first round on April 22, against 26.5%  for Hollande.Hollande would still win in a second-round runoff, with 53.5% of votes.