NEWS,11.07.2013

China central bank mobbed for free loans

About 1 000 hopeful borrowers overran a branch of China's central bank as a rumour spread that it was handing out zero-interest loans, media said on Thursday, illustrating how Chinese financial know-how badly lags growth in banking products.
Police were called in on Tuesday to disperse the crowd, which had gathered for days outside the central bank in Beihai in the southern province of Guangxi, the Global Times said.
The rumour had spread that the People's Bank of China was distributing interest-free loans of between 50 000 yuan ($8 200) and 500 000 yuan.
"The People's Bank of China is a national financial regulator and does not extend deposit or lending services to individuals," Luo Daofang, the deputy head of the Beihai office, was quoted by Beihai television as saying.
The Beihai city government was not available for comment, and the central bank declined to comment when contacted.
As China frees up its financial markets, authorities must step up education of financial products, said Zhang Zhiwei, an economist at Nomura in Hong Kong.
"I worry more about investors buying wealth management products, thinking that these are risk-free, and finding out later down the road that they are not," Zhang said.
Growth in China's wealth management industry has exploded in the last three years as savers search for alternatives outside low-yielding bank deposits. Sales rose by 12.1trn yuan in the first six months of 2012.

China exports dip in June

China's exports fell 3.1% year-on-year (y/y) in June with imports also declining, the government said on Wednesday, in the latest signs of slowing growth in the world's second-largest economy.
The government recorded exports valued at $174.32bn in June and imports worth $147.19bn, down 0.7% y/y, the General Administration of Customs said.
The fall in monthly exports was the first negative figure since January 2012.
China's total foreign trade grew to almost $2trn in the first six months of this year, up 8.6% y/y, the administration said.
China's annual economic growth slipped from 9.3% in 2011 to 7.8% last year, the slowest expansion since 1999.
The government set targets of 8% for trade growth and 7.5% for growth in gross domestic product this year as it aims to rebalance the world's second-largest economy away from its long reliance on exports and investment in infrastructure.

Retailers unveil Bangladesh safety plan

NEARLY 20 North American retailers including Walmart and Gap  unveiled a five-year safety plan for Bangladesh garment factories on Wednesday that would include inspecting every factory within a year.
The announcement in Washington by the Alliance for Bangladesh Worker Safety on Wednesday comes after 1 129 workers were killed in the collapse of a Bangladesh garment plant in April and another 112 people perished in November fire at a Bangladesh factory.
A separate safety plan including coordinated inspections was announced by a group of mainly European brands on Monday.
A few student protesters were outside the building in Washington, where the plan was announced. The group United Students Against Sweatshops handed out fliers, saying "Gap and Walmart: Bangladeshi Workers Reject Your Fake Safety Plan".
Funding for the North American plan is based on how much production each retailer has in Bangladesh; those at higher levels will pay $1m a year for five years.
So far, $42m has been raised for the project. Ten percent of the funds will be set aside to assist workers temporarily displaced by factory improvements or if a factory closes for safety reasons.
The money will also support a non-governmental organisation chosen to implement it. A decision on the NGO should come within 30 days.
The 17 current members of the alliance include: Canadian Tire Corp; Carter's; The Children's Place Retail Stores; Gap; Hudson's Bay Co; IFG; J C  Penney Co; Jones Group; Kohl's; L L Bean; Macy's; Nordstrom; Public Clothing Co; Sears Holdings; Target; VF; and Walmart.
Hong Kong sourcing company Li & Fung, which does business with many of the companies involved, is serving as an adviser. Additional members are expected to join in the future.
"The safety record of Bangladeshi factories is unacceptable and requires our collective effort," member chief executives said in a joint statement.
"We can prevent future tragedies by consolidating and amplifying our individual efforts to bring about real and sustained progress."
Goals include developing common safety standards within three months, sharing inspection results, and getting factories to support the democratic election and operation of worker participation committees.
An independent board chairperson, set to be named in the next few weeks, will oversee the plan. Four retailers and four others will also be on the board.
The plan, Bangladesh Worker Safety Initiative, was developed with assistance from former U S senators George Mitchell and Olympia Snowe, who acted as independent facilitators at the Bipartisan Policy Center.
The group has asked Mitchell and Snowe to verify the effectiveness of the programme over at least the first two years.
Some companies are also set to offer a combined total of over $100m in loans and access to capital to help factory owners improve safety.
The North American group's plan is being backed by the American Apparel & Footwear Association, Canadian Apparel Federation, National Retail Federation, Retail Council of Canada, Retail Industry Leaders Association, and the United States Association of Importers of Textiles & Apparel.
A larger number of mostly European retailers and brands backed a safety accord put together with the help of labour unions.
The group behind that plan includes the world's two biggest fashion retailers, Inditex SA, owner of the Zara chain, and H&M. A small number of North American companies such as PVH signed onto that accord.

UK MP's pay rise angers public

Britain's members of parliament will get a 9 percent pay rise under a proposal announced on Thursday that outraged a public struggling with wage freezes, high living costs and a government austerity drive.
The proposal  which, ironically, was made by a panel created to mend parliament's image after an expenses scandal  is uncomfortable for David Cameron, a prime minister seen by many as part of an out-of-touch elite, adrift from the worries of most voters.
Tabled by the Independent Parliamentary Standards Authority (IPSA), created to distance lawmakers from the pay and expenses system, the proposal cannot be blocked by members of parliament (MPs), even if they were to oppose it.
Cameron's spokesperson said the prime minister "doesn't think MPs' pay should be going up when public sector pay is being rightly constrained".
Deputy Prime Minister Nick Clegg said the plan, to increase MPs' annual pay to £74 000 from £66 396, was "incomprehensible".
The proposal is way above the 2.7% inflation rate and comes at a time of job losses, public sector cuts and low wage growth following a deep recession.
"Everyone has to be treated as fairly and equally as possible in the public sector," Clegg told LBC radio.
Public support for parliament was dented by the 2009 scandal when politicians were exposed boosting their income by claiming expenses for everything from pornographic films and dog food to tennis court repairs.
The public has until 20 October to respond to the proposal before the IPSA makes a final decision on what it said it was a package to end years of "fixes, fudges and failures" over MPs' pay.
Appalled
If no changes are made to the plan, MPs' pay will rise in 2015, the year of the next election. They will lose some perks, including money for evening meals and late night taxis home.
Public workers, unions and campaigners were appalled.
"The idea of hiking MPs' pay when everyone else has been suffering such a squeeze on their earnings is totally unpalatable," said Matthew Sinclair, of the TaxPayers' Alliance, which campaigns for lower taxes.
Unions said pay freezes or rises capped at 1% were widespread since the coalition government came to power in 2010.
"The very idea that MPs should enjoy an exemption and take a 9% increase will rightly cause outrage amongst workers up and down the country," said Dave Prentis, head of Unison, Britain's biggest trade union.
Debate over how much MPs should be paid has raged since they first received an annual salary, of £400, in 1911. That was meant to open politics to people without independent wealth.

Iran building new nuclear site - claim

An exiled opposition group said on Thursday it had obtained information about a secret underground nuclear site under construction in Iran, without specifying what kind of atomic activity it believed would be carried out there.

The dissident National Council of Resistance of Iran (NCRI) exposed Iran's uranium enrichment facility at Natanz and a heavy water facility at Arak in 2002. But analysts say it has a mixed track record and a clear political agenda.

In 2010, when the group said it had evidence of another new nuclear facility, west of the capital Tehran, US officials said they had known about the site for years and had no reason to believe it was nuclear.

The latest allegation comes less than a month after the election of a relative moderate, Hassan Rouhani, as Iran's new president raised hopes for a resolution of the nuclear dispute with the West, and might be timed to discredit such optimism.

The Islamic Republic says its nuclear energy programme is entirely peaceful and rejects US and Israeli accusations that it is really seeking the capability to make nuclear weapons.

But its refusal to curb sensitive nuclear activity, and its lack of full openness with the UN nuclear watchdog agency, have drawn tough Western sanctions and a threat of pre-emptive military strikes by Israel.

Satellite images

The NCRI said members of its affiliated People's Mujahideen Organisation of Iran (PMOI) inside the country had "obtained reliable information on a new and completely secret site designated for [Iran's] nuclear project".

The NCRI, which seeks an end to Islamist theocratic rule in Iran, is the political wing of the PMOI, which fought alongside Saddam Hussein's forces in the Iran-Iraq war in the 1980s.

The NCRI said the site was inside a complex of tunnels beneath mountains 10km east of the town of Damavand, itself about 50km northeast of Tehran. Construction of the first phase began in 2006 and was recently completed, it said.

The group released satellite photographs of what it said was the site. But the images did not appear to constitute hard evidence to support the assertion that it was a planned nuclear facility.

A spokesperson for the dissidents said he could not say what sort of nuclear work would be conducted there, but that the companies and people involved showed it was a nuclear site. The group named officials it said were in charge of the project.

"The site consists of four tunnels and has been constructed by a group of engineering and construction companies associated with the engineering arms of the Ministry of Defence and the IRGC Iran's elite Revolutionary Guards force," the NCRI said.

'No link to nuclear programme'

"Two of the tunnels are about 550m in length, and they have a total of six giant halls."

Asked about the report, International Atomic Energy Agency spokesperson Gill Tudor said in Vienna: "The agency will assess the information that has been provided, as we do with any new information we receive."

A Western diplomat accredited to the IAEA told : "I have heard nothing. My first suspicion is that it is like the 2010 revelation a tunnel facility the Iranians are keeping quiet, but no known link to the nuclear programme."

Iran said in late 2009 that it planned to build 10 more uranium enrichment sites on top of its underground Natanz and Fordow plants, but has provided little additional information.

Refined uranium can provide fuel for nuclear power plants, which is Iran's stated aim, but can also be used to make atomic bombs, which the West fears may be Tehran's ultimate goal.

NEWS,04.08.2012

Spain creeping towards full bailout

Spanish Prime Minister Mariano Rajoy inched closer today to asking for an EU bailout for his country, but said he needed first to know what conditions would be attached and what form the rescue would take.His comments, at his first post-cabinet meeting news conference since taking office last December, came a day after the European Central Bank signalled it was preparing to buy Spanish and Italian bonds but only after EU bailout funds were triggered and countries had asked for help.A source said separately that Spain would not decide whether to apply for several weeks.Buying bonds and providing aid would all be designed to bring down what have been prohibitive borrowing costs in the indebted countries.Rajoy said he was ready to do what is best for Spain, going far further than he did on Thursday when, during a press appearance with Italian Prime Minister Mario Monti, Rajoy three times declined to say whether he would seek the aid."I will do, as I always do, what I believe to be in the best interest of the Spanish people," Rajoy said yesterday."We still don't know what these measures are," he said, reference to a comment by ECB President Mario Draghi that the bank was examining non-conventional measures to defend the euro."What I want to know is what these measures are, what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision," he said.A source familiar with Rajoy's thinking confirmed this possibility was actively looked at and that Rajoy was ready to bear the political cost of a request.In a letter to Herman Van Rompuy on Friday, Rajoy urged the president of the European Council to work towards creating a euro zone-wide banking and fiscal union as soon as possible.He said he believed that the outline for a single supervisory system for the banking sector should be ready before the end of this year.Rajoy added he believed granting the European Stability Mechanism (ESM), the permanent bailout fund, a banking licence that would allow it to tap almost unlimited funds from the European Central Bank (ECB)ECB President Mario Draghi on Thursday said the fund was barred by European law from tapping the central bank for funding."In any case, whatever mechanism is put into place should be an umbrella mechanism, one that is applied equally to all the countries that meet its requirements," Rajoy said in the letter.Spain has already asked for aid for its stricken banks."People have said the main reason why he is not seeking help is because he is too proud. But this is not true. He requested an assistance for the banks because it was the adequate instrument to solve a specific problem. There is no opposition to do it again," the source said.An aid request would entail negotiating a memorandum of understanding with other euro zone countries and would likely bear strong conditionality, something Rajoy wants to discuss in detail before moving forward.Although Spain already complies with stringent EU and International Monetary Fund demands to reform its economy and has announced a package of 65 billion euros of tax hikes and spending cuts in July, the government fears it could now be asked to reform further the pension system.The measure is the last campaign pledge Rajoy has not been forced to break so far and could undermine even more the support for the government after it already fell sharply in recent weeks as hundreds of thousands of Spaniards took the streets to protests against austerity steps.A euro zone official told Reuters last week Spain had for the first time conceded at a meeting between Economy Minister Luis de Guindos and his German counterpart Wolfgang Schaeuble it might need a full bailout worth 300 billion euros if it's borrowing costs remain unsustainably high.Rajoy's office however denied that talks on this issue had taken place.People who discussed the question with Rajoy explain that he may still hope to avoid making the request because he thinks by just knowing that the EU rescue funds and the ECB are geared up would be enough to shield Spain from market pressures."The thinking is that the instruments need to be in place and possibly the risk premium will go down so much that there will be no need to go any further," said one senior politician.

Euro Crisis 2012: Greece Reportedly Saved From Bankruptcy By European Central Bank

 

The European Central Bank (ECB) has saved Greece from bankruptcy for the time being by securing it interim financing in the form of additional emergency loans from the Bank of Greece, German newspaper Die Welt said on Saturday.The ECB's Governing Council agreed at its meeting on Thursday to increase the upper limit for the amount of Greek short-term loans the Bank of Greece can accept in exchange for emergency loans, the newspaper said in an advance copy of the article due to appear in its Saturday edition.Until now the Bank of Greece could only accept T-Bills up to a limit of 3 billion euros ($3.70 billion) as collateral for emergency liquidity assistance (ELA) but it has applied to have this limit increased to 7 billion euros, the daily said, citing central bank sources.The ECB Governing Council gave this wish the green light, the paper said.The move should enable the Greek government to access up to an extra 4 billion euros of funds, the paper said, adding that this should ensure the country keeps its head above water until the "troika" of the European Union, the European Central Bank and the International Monetary Fund decide on the disbursement of the next tranche of money from its aid program in September.The ECB declined to comment, the paper said.

NEWS,19.07.2012

Border strike threatens to disrupt Olympics

 

The British government has warned unions that they risk public anger if strikes by train drivers and passport officials, which threaten to cause major disruptions to the London Olympics, go ahead.The Aslef rail union announced on Thursday that 450 of its members in central England would walk out between August 6-8 in a dispute over pensions, affecting passengers travelling from cities such as Sheffield, Nottingham and Derby to the capital.The decision coincided with a move by border officials to strike on July 26, the day before the start of the Games, potentially delaying thousands of visitors arriving for the showpiece event."They are holding a strike on what is one of the key days for people coming into this country for the Olympic Games," Home Secretary Theresa May said."They risk damaging people's enjoyment of coming through into the UK," she told Sky News. "We will of course put contingency arrangements in place to ensure we can deal with people coming into the country as smoothly as possible."The threat of transport chaos added to pressure on the government, which has already had to call in thousands of extra soldiers to guard the Games after a failed private sector recruitment drive left an embarrassing hole in security.The wet weather, too, has dampened spirits ahead of the sporting showcase, which has earned the nickname the "Soggy Olympics" in the British media.Perhaps it was no coincidence that Police lyrics "sending out an SOS", from the song "Message in a Bottle", blared out before the daily news conference at the Olympic Park in east London.Culture Secretary Jeremy Hunt rejected accusations that the buildup to the Games had been a shambles, arguing that for such a major operation preparations had been remarkably smooth."Actually I think it has been a very smooth process," he told reporters, after a barrage of questions on issues ranging from security shortfalls to sanitation at the main Olympic site. "I think it has been an encouraging first week."I think it is very important that people understand that of course you are going to have a few hitches on a project of this scale, but actually things have gone pretty smoothly, and the athletes are getting a fantastic welcome in the village, and I think morale is very high."On the issue of the strikes, he said "It would be completely out of tune with the mood of the British public. This is a moment when Britain wants to show its best face to the world, and that is what the vast majority of the public wants as well."I would strongly counsel any unions thinking of disrupting this very important period, I think they would lose huge amounts of public support if they really tried to do this."The security glitch came after G4S said it could not provide a promised 10,400 security guards to staff Games venues, forcing the defence ministry to call up an extra 3,500 troops to take the armed forces contribution to 17,000.A further 2,000 troops may be required if G4S fails to find a minimum requirement of 7,000 staff, and on Thursday the government said 1,200 soldiers had been put on standby as a precaution.Hunt reiterated government assurances that the Games would be safe in a city where suicide bombers killed 52 people in attacks on the transport system in July 2005.Wednesday's suicide bomb attack on a bus carrying Israeli tourists at Burgas airport in Bulgaria could raise further concerns."Obviously we are monitoring the whole time what's happening with respect to the changing security situation, and we have extremely competent intelligence services who are giving us advice and we are responding to that on an ongoing basis," Hunt said when asked about the Burgas attack."The world can be absolutely certain that we will deliver a safe and secure Olympics. It has always been our number one priority."

China bolsters Africa ties with $20bn loans

 

Chinese President Hu Jintao on Thursday offered $20bn in loans to African countries over the next three years, boosting a relationship that has been criticised by the West and given Beijing growing access to the resource-rich continent.The loans offered were double the amount China pledged for the previous three-year period in 2009 and is the latest in a string of aid and credit provided to Africa's many poverty-stricken nations.The pledge is likely to boost China's good relations with Africa, a supplier of oil and raw materials like copper and uranium to the world's most populous country and second-largest economy.But the loans could add to discomfort in the West, which criticises China for overlooking human rights abuses in its business dealings with Africa, especially in Beijing's desire to feed its booming resource-hungry economy.Hu brushed off such concerns in his speech at the Great Hall of the People, attended by leaders including South African President Jacob Zuma and Equatorial Guinea's Teodoro Obiang Nguema, a man widely condemned by rights groups as one of the world's most corrupt leaders."China wholeheartedly and sincerely supports African countries to choose their own development path, and will wholeheartedly and sincerely support them to raise their development ability," Hu said.China will "continue to steadfastly stand together with the African people, and will forever be a good friend, a good partner and a good brother", he added at the summit held every three years since 2000.Hu also pledged to "continue to expand aid to Africa, so that the benefits of development can be realised by the African people". He did not provide an amount.Hu said the new loans would support infrastructure, agriculture, manufacturing and development of small and medium-sized businesses in Africa. Critics say China supports African governments with dubious human rights records as a means to get access to resources.The EU has rejected what they call China's "cheque book" approach to doing business with Africa, saying it would continue to demand good governance and the transparent use of funds from its trading partners. Such criticism draws rebukes from China that the West still views Africa as though it were a colony. Many African countries say they appreciate China's no-strings approach to aid."Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other countries," Zuma told the forum."We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain," Zuma added."We certainly are convinced that China's intention is different to that of Europe, which to date continues to intend to influence African countries for their sole benefit."China's friendship with Africa dates back to the 1950s, when Beijing backed liberation movements in the continent fighting to throw off Western colonial rule.Chinese state-owned firms in Africa also face criticism for using imported labour to build government-financed projects like roads and hospitals, while pumping out raw resources and processing them in China, leaving little for local economies. "Certainly quite a number of us are thinking we need to move into more value addition," South African's Trade and Industry Minister Rob Davies told Reuters."We need to export mineral products in a more processed form ... We need to bite this bullet very seriously." Trade has jumped in the past decade, driven by Chinese hunger for resources to power its economic boom and African demand for cheap Chinese products.China's trade with Africa reached $166.3bn in 2011, according to Chinese statistics. In the past decade, African exports to China rose to $93.2bn from $5.6bn.Industrial and Commercial Bank of China, for example, the world's most valuable lender, has invested more than $7bn in various projects across the continent.

NEWS,10.07.2012

Russia to ratify agreement to join WTO

 

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

Eurozone offers Spain €30bn for banks

 

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

Eurozone in freefall?

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

NEWS, 11.06.2012.

Spain's 'shortsighted crisis management' - Swedish PM

 

Financial market euphoria over an EU bailout for Spain's troubled banks faded today as investors sounded the alarm over its impact on public debt and worried whether Greek elections will deepen the euro zone crisis.Madrid insisted it would stick to its borrowing plans this year after the European Union agreed to the bailout of up to 100 billion euros ($125 billion), which is aimed at rescuing banks battered by a property market collapse and recession rather than helping the Spanish state finance its budget deficit.But yields on Spanish government debt rose as Sunday's deal failed to calm concerns that Madrid may end up locked out of funding markets like the three other euro zone countries already forced into bailouts - Greece, Ireland and Portugal.With this weekend's Greek elections overshadowing that country's future in the euro zone, EU officials said they had discussed limiting the size of withdrawals from cash machines, imposing border checks and introducing capital controls as a worst-case scenario should Athens leave the bloc.Underlining how problems in one euro state can rapidly spread to others, Cyprus strongly hinted today it may become the fifth member of the bloc to apply for an international bailout before the end of this month to help its banks, which are heavily exposed to Greece."Short-sighted" Swedish Prime Minister Fredrik Reinfeldt, whose country remains outside the euro zone, said Europe was still not doing enough to tackle the fundamental causes of its economic stress."Spain and many other countries have a lot of reforms they need to do to become competitive, to get order in public finances, to recapitalise and get a sound banking sector, and if they don't do this, you can never solve it through shortsighted crisis management,".The European Commission's top economic official, Olli Rehn, told that the pre-emptive action to support Spain "is critical for calming down market turbulence in Europe and (ensuring) the proper functioning of the financial system in Spain".However, European stocks ended flat after leaping to a four-week high earlier in the day, while yields on the bonds of fellow euro zone struggler Italy rose sharply with Spain's."The bailout for Spain is a good short-term fix, not a long-term solution," Nicola Marinelli, portfolio manager at Glendevon King, said. "In this environment of short-term plasters, there are going to be periods of rallies and panic."An early rally in Spanish debt petered out, and 10-year bond yields ended the day 25 basis points higher at 6.5 percent - on course for their worst day since early April and within 30 basis points of euro-era highs.The Spanish Treasury said it would continue with regular debt auctions after Saturday's deal. While bailout funds should cover the cost of rescuing the banks, Madrid still has 37 billion euros to raise this year for its budget."Accepting aid for recapitalisation of the banking sector means it will have to finance itself on capital markets for its deficit and it's getting harder with yields climbing," said Viola Julien, a strategist at Helaba Landesbank Hesse-Thueringen.Fitch Ratings cut the long-term credit ratings for Spain's two biggest banks, Banco Santander and Banco Bilbao Vizcaya Argentaria to BBB-plus from A. However, neither is expected to take bailout funds which will go instead to weaker institutions, and Monday's announcement was a technical move following Fitch's three-notch cut Spain's sovereign rating last week.Bondholders are worried that the rescue will weigh on Spain's fast-rising public debt. They also fear that if the euro zone's future permanent bailout fund, the European Stability Mechanism, is used for the rescue, they will be subordinate to official creditors and face losses in any debt restructuring.However, a senior euro zone official said the euro zone's temporary EFSF bailout fund could be used to allay these worries.Supervision Greece's general election next Sunday, the second in as many months, could further sour markets if radical leftists hostile to the austerity terms of the country'sEU/IMF bailout outperform the mainstream conservative and centre-left parties that signed the deal, or the vote ends in another deadlock.European finance officials have held a series of conference calls in recent weeks on contingency plans should Greece leave the euro, officials said. However, they emphasised this was merely about being prepared for any eventuality rather than planning for something they expect to happen."It is sensible planning, that is all, planning for the worst-case scenario," one source said.The Bank of Greece said it was not aware of any plans such as for capital controls in the euro zone.Spanish Prime Minister Rajoy said on Sunday Madrid had scored a victory by securing aid from euro zone partners without having to submit to a full state rescue programme, saying Spain's rescue had "nothing to do" with the procedures imposed on Greece, Ireland and Portugal.But EU Competition Commissioner Joaquin Almunia and German Finance Minister Wolfgang Schaeuble said that as in those other bailouts, a "troika" of officials from the International Monetary Fund, the European Commission and the European Central Bank would oversee the financial assistance."Of course there will be conditions," Almunia told Spain's Cadena Ser radio. "Whoever gives money never gives it away for free."Schaeuble told Deutschlandfunk radio: "The Spanish state is taking the loans, Spain will be responsible for them ... There will likewise be a troika. There will of course be supervision to ensure that the programme is being complied with, but this refers only to the restructuring of the banks."Under surveillance Spanish state finances are already under European Commission surveillance under the EU's excessive deficit procedure.The bank rescue package will add up to 10 percentage points to Spain's debt-to-gross-domestic-product level, taking it close to 90 percent, while the country faces a grinding recession, with nearly one worker in four unemployed.Some economists believe Spain will eventually need a full state bailout, and that Italy may be next in line because of a similar combination of high debt and no economic growth, despite reforms initiated by Prime Minister Mario Monti.Italian Industry Minister Corrado Passera dismissed the idea that Rome might need external help at some point."Italy has done what was necessary to save itself in past months," Passera, a former banker, told reporters in Milan, saying austerity measures taken so far had positioned Italy as "among countries better placed to deal with the financial turmoil Europe finds itself in".China, to which Europe has looked largely unsuccessfully for financial support, said on Monday that the euro zone deal for Spain was a useful short-term fix, but urged the bloc to take more decisive action to safeguard longer term stability."This can be of great use in controlling short-term risk," Vice Finance Minister Zhu Ghuangyao told a news conference. "But, in the interests of mid- or long-term stability, we hope the euro zone will improve consensus and take more decisive action."The Chinese critique of Europe's slow-moving steps mirrored comments by US officials worried that the euro zone debt crisis is hurting world economic recovery and President Barack Obama's prospects of re-election in November.US Treasury Secretary Timothy Geithner welcomed the euro zone support for the recapitalisation of Spanish banks as "concrete steps on the path to financial union, which is vital to the resilience of the euro area".European Union leaders will discuss longer-term plans for deeper euro zone fiscal and banking union at a summit on June 28-29, as well as measures to revive growth. The more ambitious reforms would require treaty change that would take months, if not years, to approve and implement.

Spanish banks queue up to tap European rescue funds

 

Seven former savings banks in Spain, already patched up with state aid, will be first in line to tap European rescue funds requested by the country, though the queue for financing could grow to include all but the very biggest banks.Spain's banks lent heavily to real estate developers during a decade-long property boom which ended in 2008, leaving creditors with bad loans to housebuilders, unfinished apartment complexes and brownfield sites.The euro zone's fourth largest economy is unable to raise funds on the international markets to cover these losses at reasonable prices and had to ask on Saturday for up to 100 billion euros ($125 billion) from the euro zone to shore up its financial system.The International Monetary Fund said in a report on Friday that the most troubled former savings banks, accounting for around 22 percent of the country's financial system, faced the biggest challenge due to their high real estate exposure.The IMF did not name the entities, but seven savings banks have received state help to cope with losses and absorb mergers. Spain now has around 10 savings banks, less than a quarter of their number two years ago after the government forced a programme of consolidation.The seven banks are Catalunya Caixa; Unnim - now part of BBVA ; Espana-Duero - merged with Unicaja; NovaCaixaGalicia; Bankia ; Banco Mare Nostrum; and Banca Civica - which belongs to CaixaBank.Of those, the most problematic are fourth-biggest lender Bankia, nationalised in a 23.5 billion euro ($29.3 billion)rescue last month, and the two former savings banks struggling with capital shortfalls - mid-sized NovaCaixaGalicia and CatalunyaCaixa.Both these banks were created by combining savings banks in autonomous regions - Galicia and Catalonia - partly to placate local politicians. The state took them over last year when it became clear they could not handle their losses.These two lenders require around 9 billion euros to cover the latest government demands for capital to cushion against real estate loan defaults, the Bank of Spain told a closed-door parliamentary committee hearing, according to a political source present at the briefing.Small listed lender Banco de Valencia is another potential black spot. It was also taken over by the government with an intent to auction it off with guarantees against future losses.The lender is based in the region of Valencia, home to savings bank CAM which was called the 'worst of the worst' by a former central bank governor after losses began to soar when exposure to real estate at the bank was properly recognised.Along with its fellow Valencian lenders - CAM and Bancaja, which ended up as part of Bankia - Banco de Valencia lent unsustainably to property developers who threw up block after block of holiday apartments along Spain's Mediterranean coast.Grandiose projects The savings banks or cajas were originally set up to provide loans to people suffering in the aftermath of the Peninsular War with Napoleonic France in the early nineteenth century. Often founded by the Roman Catholic Church, they aimed to give farmers loans at reasonable interest rates during times of poor harvest.However, having a savings bank in fiercely regional Spain became a sign of autonomy. Many got hijacked by local governments who put politicians on their boards and hived off funds to pay for grandiose construction projects.Nowhere was this more evident than in the eastern region of Valencia, where the cajas bankrolled huge loss-making projects aimed at increasing the status of the region such as art centres, film studios and airports.Reports that former directors at NovaCaixaGalicia and Alicante-based CAM had awarded themselves handsome severance pay packages after they were taken over by the state provoked public outrage last year.Now Spain could even be considering folding all its rescued banks into one nationalised bank if planned auctions were not successful, a senior Economy Ministry source has said.Some mergers and sales are still happening. Former savings banks Ibercaja and Caja 3 are beginning a three-way merger with Liberbank. Together they hold toxic real estate assets of around 11.8 billion euros, around a quarter of the amount held by Bankia and parent company BFA.Beyond real estate woes There are also concerns about the mid-sized and small listed lenders, with the IMF saying these entities could record losses in 2012 due to increased provisioning requirements against performing real estate loans.Citi forecasts 2012 losses for Popular, CaixaBank and Banesto as a result of the extra provisioning.Popular has high exposure to real estate loans. It said on Wednesday it would set aside more capital to cover potential losses beyond real estate, on mortgages and loans to businesses - something other banks may have to contend with too after an independent audit of the sector is completed this summer.A recession in Spain threatens to deepen the problems for the troubled lenders."Unless the government maintains its current spending, incomes in Spain will fall and the sustainability of the private sector debts will be undermined," said analysts at CreditSights, pointing out that at the same time Spain was trying to cut its big budget deficit.Standard &Poor's downgraded mid-sized bank Sabadell , buyer of CAM, to junk status in April.

NEWS, 29.05.2012.

Greek Socialist leader slams IMF chief’s tax comments

 Greece's socialist leader Evangelos Venizelos accused the IMF chief Christine Lagarde on Sunday of trying to humiliate the country. His comments come after Lagarde had urged Greece to "help themselves" by "paying their taxes". 

Greece's Socialist party leader accused IMF chief Christine Lagarde of trying to "humiliate" the crisis-hit country by saying Greeks dodge taxes as he campaigned Sunday for crucial June elections."Nobody can humiliate the Greek people during the crisis, and I say this today addressing specifically Ms. Lagarde... who with her stance insulted the Greek people," Evangelos Venizelos told an election rally.Lagarde told Britain's Guardian newspaper in an interview published Friday that Greeks must "help themselves collectively" by all paying their taxes, saying she was more concerned about sub-Saharan Africans in poverty than Greeks hit by the economic crisis.Her comments came as Venizelos's Pasok and other Greek parties squared off for a June 17 election that could determine whether it continues to receive IMF funds and stays in the eurozone.Lagarde's remarks drew thousands of comments on her Facebook page, many from annoyed Greeks.On Saturday the IMF chief responded: "I am very sympathetic to the Greek people and the challenges they are facing. That's why the IMF is supporting Greece in its endeavour to overcome the current crisis.""An important part of this effort is that everyone should carry their fair share of the burden, especially the most privileged and especially in terms of paying their taxes."Venizelos told a news conference on Sunday, the morning after his campaign rally: "Ms. Lagarde had to revise her comments. I am glad she did it because that means she takes into account a proud nation."Greece made a deal in 2010 to receive hundreds of billions of euros (dollars) from the IMF and the EFSF, a European Union bailout fund, to rescue it from financial collapse.The country will head to the polls for a second time in six weeks on June 17 since political parties failed to form a coalition after an inconclusive election on May 6.In that election, voters fed up with salary and pension cuts demanded by the bailout terms handed second place to radical left-wing party Syriza, which has threatened to renege on the bailout accords.Former prime minister Lucas Papademos warned on May 11 that Greece may run out of money by the end of June if international bailout funds are cut off following the election, To Vima newspaper reported Sunday.That could lead Greece to default on its debt and leave the eurozone."From late June onwards, the ability of the government to fund its obligations fully depends on the approval of the subsequent instalments of loans from the EFSF and the IMF," To Vima quoted Papademos as saying in a leaked memo."The available funds in the Greek government will be reduced gradually from about 3.8 billion euros on May 11 to about 700 million euros on June 18 and from June 20 will enter negative territory at the level of around one billion euros."Ahead of the June 17 election, Syriza has led at times in the opinion polls, but a series of polls published Sunday indicated conservative party New Democracy had taken the lead.Campaigning on Saturday, New Democracy leader Antonis Samaras said a victory for Syriza would cause "catastrophe" and drag Greece out of the euro.The new surveys by five separate polling groups forecast a New Democracy victory ranging between 23.3 percent and 25.8 percent, a result that would still require the party to join up with allies to form a viable government.Syriza polled in second place ahead of Pasok, which like New Democracy defends the bailout agreement while proposing to amend it.Venizelos said he wants to extend the loan repayments."The country needs a government that will unite the people and revise the loan agreement, but assure we stay in the euro," he said Sunday.One survey by pollster Marc, carried out on 1,075 households on May 22-24, showed that 82.4 percent of Greeks wished to stay in the eurozone.

IMF chief tells Greeks to ‘pay their taxes’

 IMF chief Christine Lagarde told Greeks on Friday to pay their dues and help drag their country out the crippling economic crisis. Lagarde said Greeks could "help themselves" by "all paying their taxes". 

The head of the International Monetary Fund on Friday urged Greeks to pay their taxes, saying she is more concerned about sub-Saharan Africans in poverty than Greeks hit by the economic crisis.Christine Lagarde told the Guardian newspaper in an interview published online Friday, "As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."The IMF managing director said Greeks should "help themselves collectively" by "all paying their tax", adding that she thought "equally" about those deprived of public services by the crisis and those involved in tax avoidance.Caught in a fifth straight year of recession, Greece is struggling to apply a tough austerity overhaul in return for EU-IMF loans, but has already made drastic cuts to public services.On children affected by the cuts, Lagarde said their parents needed to take responsibility."Parents have to pay their tax," she was quoted as saying."I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education," she added."I have them in my mind all the time. Because I think they need even more help than the people in Athens."Asked whether it was "payback time" for Greece and other debt-ridden eurozone economies, she responded, "That's right", the newspaper said.Greece in 2010 committed itself to a reform programme in return for hundreds of billions of euros (dollars) in bailout funds from the EU and the International Monetary Fund to prevent a default.Many of the reforms are currently in limbo, however, as Greece awaits a new general election on June 17 after an inconclusive vote on May 6.The IMF, along with European leaders, has said it will not bend on tough conditions attached to its loans to Greece, with fears rising that the debt crisis could culminate in a Greek exit from the eurozone.

NEWS,15.05.2012

Euro zone saved from recession

 

Germany pulled the euro zone's economy back from the brink of recession at the start of 2012 but stagnation in France and contraction in southern Europe underlined sharply differing fortunes in a bloc labouring under the effects of austerity.Overall gross domestic product was unchanged in the first quarter following a dip at the end of last year, data showed today, meaning that the euro zone missed slipping officially into recession by the narrowest possible margin.But a surprisingly strong showing from Germany, whose exporters are helping it to cope with the euro zone crisis, flattered dismal performances in most of the other major economies."Germany is leading the bloc, but this doesn't mean we will have a strong rebound. Austerity is not going away and southern European economies are really struggling," said Mads Koefoed, a senior economist at Saxo Bank. "We are looking at stagnation to very mild growth in the year to come."Most euro zone governments are imposing austerity policies, often at great cost to their electorates and the chances of economic growth, hoping to counter the debt crisis by cutting their budget deficits. However, new French President Francois Hollande is heading to Berlin today to argue for adding measures to boost growth to the formula.Today's data showed a two-speed euro zone, with Italy's recession deeper than feared and Greece suffering something akin to a depression."There's a growing divergence in the euro zone, with particularly sharp contractions in the peripheral countries that need to do the most structural reforms, while Germany is the outperformer," said Joost Beaumont at ABN Amro in Amsterdam.GDP in Germany, Europe's biggest economy, rose 0.5 percent on the quarter, confounding expectations of a more modest rise and lifting the rest of the 17-nation currency bloc.While the euro zone's stagnation offered little cheer, it was still better than the 0.2 percent contraction most economists had expected. Two successive quarters of falling GDP would have marked the second recession since 2009.Germany's strong showing initially bolstered markets which were battered on Monday by growing fears that Greece will deepen the crisis by leaving the euro zone.The FTSEurofirst of top European shares climbed in response, safe haven German government bond futures dipped and the euro recovered some poise.Even Germany suffers But even in Germany, the crisis is holding back a true revival, and analyst and investor sentiment fell sharply in May, separate figures showed. That ended a run of strong data for the economy as political uncertainty took its toll on confidencGermany's biggest steelmaker, ThyssenKrupp, also said there was no sign of a quick recovery in Europe after the steel industry operated at reduced capacity in recent months due to weak demand and sliding prices.Italy's heavily indebted economy shrank more than expected in the first quarter, with GDP falling 0.8 percent and marking the third consecutive quarter contraction.After a decade of falling productivity in Italy, the debt crisis has highlighted how barriers to competition, heavy regulation and bureaucracy are dragging on the economy, discouraging investment and prosperity.Data two weeks ago showed Spain, which is struggling to reduce a huge deficit and rebuild its banking sector following a burst property bubble, is already in recession, after GDP shrank 0.3 percent in the first quarter.Even in the wealthy Netherlands, economic output contracted for a third consecutive quarter, shrinking 0.2 percent in the first quarter of 2012 compared with the previous three months, underscoring just how damaging the crisis has become.Greece is in its fifth consecutive year of recession, which is tantamount to a depression.Greek GDP contracted 6.2 percent year-on-year in the first quarter of 2012.Popular resistance EU leaders have been unable to find a way back to growth, while many southern Europeans are turning against the austerity measures, holding huge street protests in Madrid and backing radical political parties in the Greek elections.Hollande wants new growth measures and while German Chancellor Angela Merkel has not disagreed in principle, she is unlikely to accept anything that pushes government debt up further.Italian Prime Minister Mario Monti is also pressing for a growth strategy. He won support from an unlikely source when credit ratings agency Moody's sharply downgraded 26 Italian banks, saying budget-cutting measures and an Italian recession had hit demand and increased the level of bad loans.A hefty defeat for Merkel's conservatives in a German state election on Sunday, meted out by the Social Democrats who have argued against austerity for austerity's stake, will add to the pressure on the chancellor.

NEWS,19.2.2012

Greek cabinet backs extra austerity measures

      

A make-shift devise explodes during an anti-austerity demonstration in central Athens

 

Greece's cabinet has approved a final set of austerity measures sought by the EU and IMF as a condition for a 130-billion euro ($171 billion) rescue package, raising the chances of a deal next week to avert a chaotic default on its debt. The approval was largely a formality after Athens last week unveiled details of the extra budget and public sector wage cuts worth 325 million euros to euro zone partners. Lingering doubts over whether Greece can bring its mountain of debt down to more manageable levels in coming years could still hold up the rescue package. Some officials in the 17-nation currency union warn chances of a deal at a euro zone meeting on Monday are little higher than 50-50."The 325 million euros worth of measures were approved unanimously," said one minister, speaking on condition of anonymity, about the cuts, part of a 3.3-billion-euro package of austerity measures that have triggered riots in Athens. A government official said cabinet had also agreed to launch by March 8 a debt swap for private creditors with the aim of completing it by March 11. The swap is intended to accompany the rescue deal and will mean that creditors take a 70% cut in the real value of their holdings. After months of often acrimonious negotiations, Greek hopes are rising that Monday's meeting in Brussels will endorse the rescue which Athens needs to avoid bankruptcy on March 20 when major debt repayments fall due.” The Greek people have done everything they can and we are determined to make good on our commitments," Public Order Minister Christos Papoutsis said before the meeting. In a statement, Prime Minister Lucas Papademos regretted that extra pension cuts could not be avoided, but said the impact was limited because it would only affect the part of the pension above a monthly threshold of 1,300 euros.” We all agree the immediate support of economic activity is a priority of the government's economic policy," he added, while not detailing what growth measures were under consideration. A survey by pollster MRB for Sunday's Realness newspaper showed 72.7 percent of Greeks want the country to stay in the euro, but only about half believe it will manage to do so. On Friday, German Chancellor Angela Merkel, Italian Prime Minister Mario Monti and Papademos all voiced optimism about a Greek accord during a three-way conference call, Monti's office said. However, Jean-Claude Juncker, who will chair Monday's meeting of the Euro group in Brussels, made clear that urgent work was still needed to get a programme to reduce Greece's crippling debts back on track. At stake is a target of lowering the debt from the equivalent of 160 percent of annual Greek economic output now to a more manageable 120% by 2020."All the discussions I will have ... until Sunday night will try to move the figure nearer to the target," Junker said. At the moment, EU and IMF officials believe that target - which assumes that Greece will run a budget surplus next year, excluding the massive cost of its debts - will be missed. Under the main scenario of an analysis by the European Commission, the European Central Bank and the International Monetary Fund, Greek debt will fall to only 129 percent of gross domestic product in 2020, one official said. The euro zone is therefore looking at modifying the deal negotiated over many months with private creditors under which they would accept a cut of around 70 percent in the real value of their Greek bond holdings. Senior euro zone finance officials meet on Sunday to discuss the analysis and find ways to bring the debt closer to the 120% target before the finance ministers gather on Monday.” If you do a number of things you can bring the 129 close to 120," one euro zone official familiar with the document said. These might include changes to interest accrued on privately held bonds, but the EU and its national institutions might also play their part, the official said. Interest rates on EU loans to Greece could be cut, and those national central banks in the euro zone which hold Greek bonds might accept similar terms to the private creditors on some of their holdings. The national central banks own an estimated 12 billion euros of Greek debt. The European Central Bank has refused to take part in the complex deal for the private creditors - involving swapping old bonds for new ones with a lower face value, lower interest rates and longer maturities - and would need to approve the national central bank decision. Officials are also considering a cut in the cash "sweetener" which would be offered to the private creditors in return for accepting the cut in the value of their bond holdings. With Greek morale near rock bottom, the national mood darkened further after armed thieves looted a museum on Friday in Olympia, birthplace of the Olympic Games. They stole bronze and pottery artefacts weeks after the National Gallery was burgled. A Greek newspaper suggested the state could no longer look after the nation's immense cultural heritage. "The Greek state has gone bankrupt, let's face it," the daily Kathimerini said."If the state cannot guard the country's great cultural heritage for financial or other reasons it must find other ways to do it," the conservative daily said."It could, for example, turn to large foundations and ask them to assume the cost of security at the country's important museums in the next two to three difficult years."