NEWS,07.01.2013

BoE unlikely to resume printing money

The Bank of England is unlikely to revive its money-printing campaign, a Reuters poll showed on Monday, even though the British economy is teetering on the brink of another recession.Economists in the survey attached a median 45% chance of the central bank resuming the quantitative easing programme which it suspended in November. However, policymakers are likely to pin their hopes on a new scheme to encourage bank lending for reviving the economy as the government makes deep spending cuts."We are going to see a continuation of difficult circumstances of growth remaining weak and inflation staying above target," said Simon Hayes at Barclays Capital.With rates near zero, the BoE has already purchased £375bn of British government bonds meaning approaching half of all conventional gilts belong to the central bank. On top of this exercise to push money into the economy, it has also launched a Funding for Lending Scheme (FLS), providing cheap credit to banks to encourage them to offer loans to customers.While the benefits of the FLS are not expected to filter through to the economy until later this year, data released on Friday showed November mortgage approvals were at their highest monthly total since last January. Banks polled for the BoE's quarterly Credit Conditions Survey said they would increase the availability of mortgages significantly in the first three months of 2013 after a record rise in the three months to December 11. "Signs that the Funding for Lending Scheme is gaining traction hint at some economic recovery over 2013 which we judge makes a further increase in the asset purchase target less likely," said Philip Shaw at Investec.The Bank's hands have been somewhat tied as inflation has held persistently above its 2% target and is not expected to fall below that for a long time. But the poll of 64 economists did not foresee any interest rate rise from the record low 0.5% until July 2014 at the earliest. Only a handful of policy-watchers in the poll, taken over the past week, saw a rate rise before then. One particularly hawkish forecaster is looking for an increase in August but there is no other prediction of higher rates in the poll before the second quarter of 2014.Work in progressGlobal regulators gave banks four more years and greater flexibility on Sunday to build up cash buffers so they can use some of their reserves to help struggling economies grow. Bank of England Governor Mervyn King, who steps down later this year, said the new rules will give the banking system more room to finance a recovery.King will be replaced by Canadian central bank chief Mark Carney in July, who is leaving behind an economy which weathered the global financial crisis quite well to take on one struggling to regain its footing. UK manufacturing activity hit a 15-month high in December, a survey showed last week. However, later figures indicated Britain's dominant service sector shrank for the first time in two years, suggesting the economy as a whole slipped back into contraction in the last three months of 2012. Britain bounced out of its second recession in four years in the third quarter of 2012, supported by London's hosting of the Olympic Games and extra working days, but it is forecast to achieve only tepid growth if any for some time. This is thanks partly to the government spending cuts and tax rises to tackle the budget deficit. The economy has grown little since 2010 when a coalition of Conservatives and Liberal Democrats came to power.Britain has struggled as the chances of recovery in the eurozone, its main trading partner, have faded further into this year. Economists are divided over whether the European Central Bank will cut its policy rate in the next few months.

Sarb appoints Bradlow to head new dept

The South African Reserve Bank (Sarb) said on Monday that it had appointed Daniel Bradlow as the head of the newly-established international economic relations and policy department‚ with effect from February 1.Bradlow’s key responsibilities would include providing strategic direction to the department‚ monitoring and analysing developments in international and regional institutions and forums.Bradlow is currently the South African Research Chairs Initiative professor of international development law and African economic relations at the University of Pretoria and professor of law at American University Washington College of Law.He has worked as a consultant for a number of international and regional development banks‚ international organisations‚ government agencies and foundations and has conducted training programmes for officials from central banks‚ ministries of finance‚ and other government departments from a number of countries in Africa and Asia.His experience includes research and writing about the International Monetary Fund‚ the World Bank‚ G20‚ international financial standard setting bodies‚ the legal aspects of debt and financial management‚ and aspects of negotiating and structuring of international financial and business transactions. He has also served on expert working groups that have been involved in policy-relevant research and advocacy activities related to the governance of various international institutions.He was educated at the University of the Witwatersrand; Northeastern University; Georgetown University; and holds an LLD (international development law) from the University of Pretoria.

French labour deal remains elusive

 

French employers will reject moves to overhaul rigid labour rules unless unions drop demands to tax short-term contracts more heavily than long-term ones, their leader said on Monday, suggesting talks this week could fail.Socialist President Francois Hollande called on employers and unions to strike a deal by the end of 2012 that would grant companies more flexibility in hiring and firing while giving more job security to workers on short-term contracts.Talks between the Medef employers' union and main labour groups spilled into January after talks broke up in December without a deal, with each side accusing the other of making unacceptable demands. The government says it will impose its own deal if the two sides fail to reach an agreement.As talks resume this week, Medef chief Laurence Parisot said employers would be unable to sign a deal imposing higher costs for hiring on seasonal or short-term contracts.French per unit labour costs are currently among the highest in the European Union, above Germany but below Denmark, and are often cited by economists as a brake on growth and a factor in maintaining chronically high unemployment."At this point in our discussions, including talks we had all day yesterday, on Sunday... the Medef will not sign the deal," Parisot said on Radio Classique. "The issue of taxation for short contracts is a vital question."Parisot accused Hollande's Socialist government of indirectly interfering in the talks to the employers' disadvantage.The government is pushing for a deal to address concerns that France has a two-speed labour system, with those on long-term job contracts enjoying too much job security and those on short-term contracts too little.FlexibiltyEmployers want an agreement that will allow companies to adjust their wage burden more nimbly in a downturn, as well as simplifying the rules about firing workers to make the process more predictable and keep costs in check.Two hardline unions reject measures to add flexibility. All five unions represented at the talks want greater job security for workers on flimsy contracts, calling for employers who use them to be penalised by paying higher taxes or more unemployment contributions.Unions reject greater flexibility in work contracts and demand more job security for short-term workers. They want employers using short-term contracts to pay more tax or higher contributions to the national fund that pays out unemployment benefits.Labour Minister Michel Sapin said the government would present a draft law regardless of the talks' outcome. However, he expressed faith in a deal being reached by January 11, when talks are due to conclude."They're negotiating, it's their responsibility, and I'm letting them negotiate," he told Canal+ television.Hollande's government has enough Socialist and allied lawmakers in parliament to pass a labour reform.But without a deal between unions and employers, it will be more exposed to criticism from both sides and unions may influence left-wing lawmakers into watering down any reform.The head of the CGT union, Bernard Thibault, said last week he would oppose more labour flexibility with "all his force".

2012 London jobs nosedive

The number of new jobs created in the City of London fell by more than a third last year as financial firms focused on cost-cutting, research by recruitment agency Astbury Marsden shows.The agency estimates that 35 115 new City jobs were created in 2012, down 35% on the year before. Only about 800 new jobs were created in December, it said, compared with 1 490 in December 2011.Banks worldwide are shedding jobs as stricter regulations and eurozone worries take their toll on trading income and investment banking operations."2012 was a busy year for HR departments across the City as cost-cutting remained a key focus for senior management and board members throughout the year," Mark Cameron, chief operating officer at Astbury Marsden, said."Tighter regulation including higher capital requirements forced up costs at a time when revenues dipped due to a number of factors, including a continued weak economy and less trading activity," he added.Cameron said that cuts had been particularly significant in 2012 because banks had implemented major restructuring, including the winding down of entire business units. Swiss bank UBS axed 10 000 staff and wound down its fixed-income business. On a more optimistic note, Cameron said that most of the obvious and immediate cuts have already been made and the worst may be over.The recruitment company also said that hiring prospects could be improved by signs that lawmakers are getting to grips with the euro zone crisis and by the deal struck by US politicians to delay budget spending cuts and avoid hefty tax increases.

China starts building nuclear power plant

A Chinese state news agency says the country has begun building a new nuclear power plant after lifting a construction moratorium imposed following Japan's Fukushima disaster.The Xinhua News Agency says the 3 billion yuan ($475m) power plant in Rongcheng, an eastern coastal city in Shandong province, will incorporate advanced safety features developed by Chinese researchers. China is the world's biggest energy consumer and nuclear power is a key element in official efforts to curb surging demand for fossil fuels.Beijing suspended approval of new nuclear power plants to carry out safety reviews following the Japan's 2011 earthquake and tsunami that wrecked the Fukushima plant. That moratorium was lifted in October.

 

Liquidity rules for banks eased

The world's top banking regulatory body on Sunday eased the first global liquidity rules scheduled to start applying to banks in 2015 and aimed at improving their ability to survive financial crises.The Basel Committee on Banking Supervision said at a press conference here that it had widened the definition of the easy-to-sell assets that banks will have to hold to survive periods of stress.The Basel III standards had been initially proposed in 2010 but banks and financial institutions have since lobbied intensely to make the rules more flexible and result in lower costs for the sector. The details of the Liquidity Coverage Ratio (LCR), which was drafted to avoid a repeat of the 2008 banking crisis and unanimously endorsed on Sunday by the Basel group's top oversight body, give the banks a reprieve. Its provisions include a much broader definition of the minimum assets every bank needs to hold, making it less costly for them to maintain the required buffer. "The changes to the definition of the LCR, developed and agreed by the Basel Committee over the past two years, include an expansion in the range of assets eligible as HQLA (high quality liquid assets)," the committee said. The new LCR's full details will also be fully implemented only in 2019, instead of 2015 as initially proposed."Specifically, the LCR will be introduced as planned on 1 January 2015, but the minimum requirement will begin at 60%, rising in equal annual steps of 10 percentage points to reach 100% on 1 January 2019," the Basel group announced. Mervyn King, Chairman of the Basel group's top oversight body and Governor of the Bank of England, described the agreement announced Sunday as "a very significant achievement.""For the first time in regulatory history, we have a truly global minimum standard for bank liquidity," said King.The Basel Committee brings together representatives regulators from 27 nations."Importantly, introducing a phased timetable for the introduction of the LCR, and reaffirming that a bank's stock of liquid assets are usable in times of stress, will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery," King said.Stefan Ingves, chairperson of the Basel Committee and of Sweden's Sveriges Riksbank, said the global regulator could now focus on the Net Stable Funding Ration, another pillar of the Basel III reforms."The completion of this work will allow the Basel Committee to turn its attention to refining the other component of the new global liquidity standards, the Net Stable Funding Ratio, which remains subject to an observation period ahead of its implementation in 2018," he said.

Big banks pay billions over foreclosures

Ten mortgage servicers agreed on Monday to pay $8.5bn to end a case-by-case review of foreclosures required by US regulators. Banks including Bank of America, Citigroup, JPMorgan, Wells Fargo and six others will pay $3.3bn directly to eligible homeowners, and will also pay $5.2bn in loan modifications and forgiveness, regulators said. The Office of the Comptroller of the Currency and the Federal Reserve Board said they accepted the agreement to get relief to consumers more quickly than through the reviews. In April 2011 the agencies required the servicers to review foreclosure actions from 2009 and 2010 to evaluate whether borrowers had been unlawfully foreclosed on or otherwise suffered financial harm due to errors in the foreclosure process.

NEWS,24.11.2012

Fiscal Cliff Raises Questions On Reality Of Debt Deal

 

President Barack Obama and leaders of the lame-duck Congress may be just weeks away from shaking hands on a deal to avert the dreaded "fiscal cliff." So it's natural to wonder: If they announce a bipartisan package promising to curb mushrooming federal deficits, will it be real?Both sides have struck cooperative tones since Obama's re-election. Even so, he and House Speaker John Boehner, R-Ohio, the GOP's pivotal bargainer, have spent most of the past two years in an acrid political climate in which both sides have fought stubbornly to protect their constituencies.Obama and top lawmakers could produce an agreement that takes a serious bite out of the government's growing $16 trillion pile of debt and puts it on a true downward trajectory.Or they might reach an accord heading off massive tax increases and spending cuts that begin to bite in January that's the fiscal cliff while appearing to be getting tough on deficits through painful savings deferred until years from now, when their successors might revoke or dilute them.Historically, Congress and presidents have proven themselves capable of either. So before bargainers concoct a product, and assuming they can, here's a checklist of how to assess their work:

OVERALL DEFICIT CUTS

The House and Senate have four weeks until Christmas. Their leaders and the president want a deal before then. Bargainers are shooting for a framework setting future debt-reduction targets, with detailed tax and spending changes to be approved next year but possibly some initial savings enacted immediately.Obama has suggested 10-year savings totaling around $4.4 trillion.Passing a framework next month that sets deficit-cutting targets for each of the next 10 years would be seen as a sign of seriousness. But look for specifics. An agreement will have a greater chance of actually reducing deficits if it details how the savings would be divided between revenue increases and cuts in federal programs, averting future fights among lawmakers over that question.Better yet would be including a fast-track process for passing next year's tax and spending bills if they meet the savings targets so they can whisk through Congress without the possibility of a Senate filibuster, in which 41 of the 100 senators could kill a measure they dislike.Another sign of sincerity: An enforcement mechanism that imposes savings automatically if lawmakers gridlock over details. Legislators' efforts now to avert January's combination of automatic tax boosts and spending cuts underscores the effectiveness of forcing them to act.Less impressive would be verbal pledges by the White House and congressional leaders to meet deficit-cutting goals without passing legislation inscribing the figures into law.

TAXES

A deal that specifies where revenue would come from would lay important groundwork for next year's follow-up bill enacting actual changes in tax laws.The biggest clash has been over whether to raise income tax rates on earnings over $200,000 annually for individuals, $250,000 for families. Obama wants to let them rise next year to a top rate of 39.6 percent but has suggested he would compromise. Boehner and other Republicans oppose any increase above today's top marginal rate of 35 percent. Instead, they advocate lower rates and eliminating or reducing unspecified deductions and tax credits. Settling that would resolve the toughest impediment to a deal.Raising money from higher rates, closing loopholes or a combination of the two would create real revenue for the government. The problem is many tax deductions and credits , such as for home mortgages and the value of employer-provided health insurance, are so popular that enacting them into law over objections from the public and lobbyists would be extremely difficult.With the price tags of tax and spending laws typically measured over a decade, delaying the implementation date can distort the projected impact of a change on people and the government's debt.Tax cuts written to expire in a certain year can put future lawmakers under political pressure to extend it. That is what Obama and Congress face today with the January expiration of tax cuts, including many enacted a decade ago under President George W. Bush.Even more questionable are assumptions that overhauling tax laws will boost economic activity and thus produce large new revenues for the government. Many Republicans and ideologically conservative economists contend that's the case, but most economists say there is no sound way to estimate how much revenue can be generated from strengthening the economy by revamping the tax system. Many believe the amount is modest.

SPENDNG

A serious agreement should specify how much savings would come from entitlements, meaning those big, costly benefit programs such as Social Security and Medicare. It also should say how much would come from discretionary spending, which covers federal agency budgets for everything from the military and national parks to food safety inspections and weather forecasts.Why the need for specificity?Because spending for entitlements occurs automatically, accounts for nearly two-thirds of federal spending and is the fastest growing part of the budget. Discretionary spending has been shackled by past budget deals and, according to the nonpartisan Congressional Budget Office, is moving toward falling below 6 percent the size of the economy by 2022, the lowest level in at least 50 years.A sincere effort to control expenditures would focus on entitlements, the true source of the government's spending problem. An agreement that envisions deep discretionary cuts risks a reliance on savings that future lawmakers could find unbearable and rescind.Savings that come from weeding out waste, fraud and abuse, which sounds good but are difficult to find, or rely on one-time sales of federal assets should be treated with suspicion.Deep cuts that take effect in the future, say after Obama leaves office in 2017, might be better than imposing them now and hurting an already weak economy by reducing spending.But delayed cuts also open the door for Obama's successors and future Congresses to roll them back. In 1997, Congress voted for cuts in Medicare reimbursements to doctors; those cuts have grown so large that lawmakers now vote annually to restore the money.Postponing the implementation of spending increases already scheduled to take effect, such as federal health insurance subsidies under Obama's health care overhaul, saves money upfront but makes no permanent changes that would ease future spending pressures.Another debatable source of deficit reduction would be the hundreds of billions of dollars the Obama administration says the government is saving by winding down wars in Iraq and Afghanistan. While there is no question those expenditures are dropping, the government has run huge deficits while those wars were waged, so there's no money being left unspent as those wars end.

Allies help UK's Cameron prevail in EU showdown

British Prime Minister David Cameron has gained allies in his fight against EU spending rises to avoid having to wield a solitary veto that would have further isolated Britain and fuelled questions about its future in the 27-nation bloc.The collapse of talks in Brussels to agree a 1 trillion euro ($US1.30 trillion) budget also meant Cameron for now will avoid having to present a deal to a fractious parliament that defeated him last month in a vote calling for European Union spending cuts.That undermined Cameron's authority and raised doubts about how he would appease anti-EU rebels in his Conservative Party without upsetting partners in Europe, Britain's biggest trading partner.Last December, Cameron angered many EU neighbours when he became the first British prime minister to veto an EU treaty, blocking plans for stricter fiscal rules in the euro zone. He warned he was prepared to do it again.There was talk of the other 26 countries reaching a budget deal without Britain, while the opposition Labour Party said Britain under Cameron risked "sleepwalking" out of the EU."There might have been (attempts) to say let's just put the British in a box over there and do a deal without them," Cameron said after the talks ended."That didn't work because there are other countries that I worked with very closely."Cameron, who wants a budget freeze, said Germany, Sweden, the Netherlands, Finland, and Denmark supported tighter spending controls. Attempts to find a 2014-2020 budget will resume early next year.Cameron faced a difficult balancing act. Trailing in opinion polls, he had to appear tough to the growing chunk of voters who would vote to leave the EU, seen by critics as a wasteful super-state that threatens British sovereignty.He also was squeezed by anti-EU Conservatives, a group that unseated former leader Margaret Thatcher and wants to use the euro zone crisis to rethink Britain's EU role.However, Britain had to be careful to avoid upsetting its main trading partner at a time of austerity. London also wants to retain influence before a critical summit next month on plans for a European banking union.Cameron's pro-European coalition partners, the Liberal Democrats, had warned him to tone down the anti-EU talk.According to one EU diplomat, Cameron "played it well", defying expectations he would be the "bad guy", and winning the support of Germany's Chancellor Angela Merkel.The Labour-supporting Guardian newspaper said the scale of the divisions among the other countries had helped Cameron."With no one in Europe agreeing on anything, he could strike a moderate tone," it said in an editorial.

 

Thai police fire tear gas in clash with hundreds of protesters

Thai police have fired tear gas in clashes with hundreds of protesters in Bangkok ahead of a rally seeking to overthrow the government of Prime Minister Yingluck Shinawatra in the largest demonstration yet against her administration.The protest highlights tensions which have been simmering since Yingluck's Puea Thai party swept to victory in July 2011 and could herald another period of unrest in Thailand.Anti-riot police wielding plastic shields fired gas canisters at protesters who tried to climb over cement and barbed wire barriers blocking entry to the rally site. Police said "between 300 and 400 protesters" clashed with police.At least seven police were wounded and up to 132 protesters arrested in the clash near the United Nations headquarters in Bangkok, a stone's throw away from the main rally site.Pitak Siam, a new anti-government group, has attracted the support of various royalist groups including 'yellow shirt' members of the People's Alliance for Democracy (PAD) who helped destabilise governments either led or backed by former premier Thaksin Shinawatra, Yingluck's brother, in 2006 and 2008.Authorities have deployed 17,000 police at the rally site and the government has invoked the Internal Security Act allowing police to detain protesters and carry out security checks and set up roadblocks.Police said they have seized various weapons, including knives and bullets, as protesters arrived at the protest area."We used tear gas because protesters were blocking police and did not comply with the security measures we put in place," police spokesman Piya Uthaya told a local TV station.Thailand has seen frequent bloody street protests in recent years including a rally that lasted more than two months by supporters of the present government in 2010.Those protests sparked a military crackdown that left at least 91 people dead and more than 1700 injured.The royalist Pitak Siam group, led by retired military general Boonlert Kaewprasit, accused Yingluck's government of corruption and being a puppet of former premier Thaksin.Thaksin remains a deeply divisive figure in Thailand. He was ousted in a 2006 military-backed coup and fled the country in 2008 shortly before being found guilty of abuse of power."I'm telling Thaksin that if he wants to return to Thailand he needs to bow before the king and serve his prison sentence," Boonlert told the thousands of protesters at the rally site.Some held pictures of Thailand's revered King Bhumibol Adulyadej as Boonlert shouted "Yingluck, get out" to cheers of his supporters.Thailand has seen a series of political protests since 2006 with pro-Thaksin and anti-Thaksin groups taking turns to challenge various administrations' right to rule.

NEWS,18.10.2012

Clashes erupt at Greek anti-austerity protests

Greek police clashed with anti-austerity protesters hurling stones and petrol bombs on the day of a general strike that brought much of the near-bankrupt country to a standstill.In the second major walkout in three weeks, almost 40,000 protesters marched in Athens in a bid to show EU leaders meeting in Brussels that new wage and pension cuts will only worsen their plight after five years of recession.Tensions mounted when a small group of protesters began throwing pieces of marble, bottles and petrol bombs at police barricading part of the square in front of parliament, prompting riot police to fire several rounds of teargas to disperse them.A 65-year old protester died of a heart attack, hospital sources. Another three people were injured. Police detained about 50 protesters suspected of attacking them.Most business and public sector activity ground to a halt at the start of the 24-hour strike called by the country's two biggest labour unions, ADEDY and GSEE."Enough is enough. They've dug our graves, shoved us in and we are waiting for the priest to read the last words," said Konstantinos Balomenos, a 58-year-old worker at a water utility whose wage has been halved to 900 euros and who has two unemployed sons.It was the third time since late September that tens of thousands of Greeks have taken to the streets holding banners and chanting slogans to show their anger at austerity policies imposed by EU and IMF lenders in exchange for aid.Some were carrying Greek, Spanish and Portuguese flags and shouted: "EU, IMF out"."Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will then be indefinite," said Yannis Panagopoulos, head of the GSEE private sector union, one of two major unions that represent about 2 million people, or half of Greece's workforce.Greece is stuck in its worst downturn since World War Two and must make at least 11.5 billion euros of cuts to satisfy the "troika" of the European Commission, European Central Bank and IMF, and secure the next tranche of a 130-billion-euro bailout.Lenders demand austerity European Union leaders will try to bridge their differences over plans for a banking union at a two-day summit which starts on Thursday. No substantial decisions are expected, reviving concerns about complacency in tackling the debt crisis which exploded three years ago in Greece.The austerity policies being pursued in Europe's indebted Mediterranean countries at the behest of Germany and other rich euro zone members will drive the euro apart, protesters warned."This can't go on. We sure need measures but not as tough as the ones (German Chancellor Angela) Merkel is asking for," said Dimitris Mavronassos, a 40-year-old shipyard worker who has not been paid for six months.The strike emptied streets and offices in Athens. Ships stayed in port, Athens public transport was disrupted and hospitals were working with emergency staff, while public offices, ministries, bakeries and other shops were shut.Newspaper kiosk owners, lawyers, taxi drivers and air traffic controllers were among those protesting over the cuts, which include further drastic reductions in welfare and health spending.Opinion polls show rising anger with the terms of the bailout keeping the economy afloat, and Greeks becoming increasingly pessimistic about their country's future."The new, painful package should not be passed," the ADEDY public sector union said in a statement."The new demands will only finish off what's left of our labour, pension and social rights."During Hundreds of youths pelted riot police with fire bombs, bottles and chunks of marble Thursday as yet another Greek anti-austerity demonstration descended into violence, less than a month after more intense clashes broke out during a similar protest.Authorities said around 70,000 protesters took to the street in two separate demonstrations in Athens during the country's second general strike in a month as workers across the country walked off the job to protest new austerity measures the government is negotiating with Greece's international creditors.Thursday's strike was timed to coincide with a European Union summit in Brussels later in the day, at which Greece's economic fate will likely feature large.Riot police responded with volleys of tear gas and stun grenades in the capital's Syntagma Square outside Parliament as protesters scattered during the clashes, which continued on and off for about an hour. Another general strike in late September had also seen limited, but much more intense, clashes between protesters and police.A 65-year-old protester suffered a fatal heart attack during the demonstration but efforts to revive him failed. The organizers of the protest march he participated in said the man had fallen ill before any rioting had broken out.Four demonstrators were injured after being hit by police, volunteer paramedics said. The Health Ministry said two of the protesters were treated in hospital and that their injuries were not serious. Three policemen also required hospital treatment.Hundreds of police had been deployed in the Greek capital ahead of the demonstration. Police said seven people were arrested Thursday, out of more than 100 detained.The strike grounded flights, shut down public services, closed schools, hospitals and shops and hampered public transport in the capital. Taxi drivers joined in for nine hours, while a three-hour work stoppage by air traffic controllers led to flight cancellations. Islands were left cut off as ferries stayed in ports.Athens has seen hundreds of anti-austerity protests over the past three years, since Greece revealed it had been misreporting its public finance figures. The country has been surviving since then with the help of two massive international bailouts worth a total (EURO)240 billion ($315 billion). To secure them, it has committed to drastic spending cuts, tax hikes and reforms, all with the aim of getting the state coffers back under some sort of control.But while significantly reducing the country's annual borrowing, the measures have made the recession worse. By the end of next year, the Greek economy is expected to be around three quarters of the size it was in 2008. And with one in four workers out of a job, Greece has, along with Spain, the highest unemployment rate in the 27-nation European Union."We are sinking in a swamp of recession and it's getting worse," said Dimitris Asimakopoulos, head of the GSEVEE small business and industry association. "180,000 businesses are on the brink and 70,000 of them are expected to close in the next few months."The country's four-month-old coalition government is negotiating a new austerity package with debt inspectors from the EU, International Monetary Fund and European Central Bank. The idea is to save (EURO)11 billion ($14.4 billion) in spending largely on pensions and health care and raise an extra (EURO)2.5 billion ($3.3 billion) through taxes."In 2011, only 20 percent of businesses were profitable," Asimakopoulos said. "So these new tax measures present small businesses with a choice: Dodge taxes or close your shop."After more than a month and a half of arguing, a deal seems close. On Wednesday, representatives from the EU, International Monetary Fund and European Central Bank, said there was agreement on "most of the core measures needed to restore the momentum of reform" and that the rest of the issues should be resolved in coming days.

Why Spain's Economic Doldrums Could Be Good For Startups

 

Spain is having a rough month. Again.Standard & Poor's downgraded its rating on the country by two notches last week, which has brought Spain close to junk status. On Saturday, thousands of people marched through the streets of Madrid, where they protested the Spanish government's latest austerity cuts. And the country's hiring situation remains bleak, with unemployment hovering around 25 percent.But could this kind of sour environment ultimately turn out to be a sweet one for start-ups?"This landscape is perfect for entrepreneurship," says Josemaria de Churtichaga, associate dean for IE School of Architecture in Madrid. "I'm not defending the crisis but in some way the crisis is helping to change or should help to change the attitude within the young people, which I think is the mass that is suffering more -- and, at the same time, is the mass that has been living too well for the last decades, too protected from their parents, too protected by the state."Certain universities in Spain are more aggressively pushing for the creation of homegrown entrepreneurs who could launch and oversee new ventures and the Spaniards who might work there. One tactic, besides teaching courses on entrepreneurship: getting students from business schools as well as engineering or science departments to participate in startup or acceleration labs, and prepping recent grads to pitch their business plans in front of potential investors. But the academic efforts may also mean students both those wanting to launch a business, and others seeking a job at an existing organization need to be taught to become much more competitive as a way to survive in Spain's uncertain economy. "I sometimes wonder whether we should emphasize more some facets of managerial personality, like competition," says Santiago Iniguez de Onzono, dean of IE Business School in Madrid. "Should we make our graduates more fierce, more willing to compete in a really tough way as some others do?"Companies are also playing a nurturing role in the growth of new startups. Everis, a technology consultancy that is headquartered in Madrid, hosts speed dating-like meetings between entrepreneurs and investors, who boast more than 40 million euros in funds to help grow startups during the first stage of operation. The initiative could spur innovation and job creation in the country's tech sector, says David Garcia Hernandez, a director at Eversis.Creative minds have also carved out a space in an old garage near Madrid's CaixaForum Museum for entrepreneurs who want to start or nurture enterprises with a socially driven mission. Known as Hub Madrid, which launched three years ago, it is designed to be a shared working space where member entrepreneurs "are challenging you, provoking you, inspiring you to do what it is you're passionate about and also makes an impact," says Max Oliva, a Hub Madrid co-founder. Around 300 members have been paying between 15 to 300 euros a month to garner access to this shared space. It encourages collaboration through rounded desks, where there is no hierarchical "head" of the table, as well as non-ergonomic seats that regularly "encourage" people to get up and mingle near the kitchen or a library built of old wine cases. A second floor is being completed, where giant holes punched through the walls are supposed to encourage more discussion flow and better opportunities for eavesdropping, which could lead to new collaborations. "It's an ever-changing space to provoke sparks, to provoke accidents, to provoke failures that are positive failures," says Churtichaga, who helped design Hub Madrid.Other companies are working closely with local universities to provide additional training to students who are looking for a leg up in a tough hiring climate. Emzingo, for one, sends MBA candidates from Spain and other countries from around the world to South Africa and Peru, where students work with NGOs to improve and expand operations through mini-consulting projects. The for-profit social enterprise provides students with leadership development training as part of the experience and is a growing network of alumni (more than 75 so far), including some who have landed jobs at companies such as McKinsey, PwC, Bayer and Johnson & Johnson. "We're working now [on] placement after the MBA, so that's an extra benefit that you get for going through the program," says Pablo Esteves, who is based in Madrid and works as Emzingo's director of branding and partnerships.

Exhibition explores love, hate of money

New York - How does money make you feel? Fearful, stressed, happy?

US financial guru Suze Orman has teamed with the producer of the popular Body Worlds exhibits for a new traveling show to look at how we relate to and understand money.Orman, media star and author of best-selling books on personal finance, described the finance-themed exhibit as "an extension of my life's work as a financial educator, and an innovative way to teach people about money".The interactive, multi-media exhibit, "Economia: Money Matters," will begin a five-year, nationwide next year, starting in Chicago. The admission-charging show will move on to other venues that include science and natural history museums.Gail Vida Hamburg, who designed and developed the exhibition, said she hit on the idea several years ago."I found a study about worry, stress and depression and their links to money or rather the lack of money ... I realized that I could synthesize all of this information into a designed exhibition with multimedia and interactives (displays)," said Hamburg, who designed the Body Worlds traveling exhibition of preserved human corpses that has toured Europe, North America and Asia.The Money Matters exhibit spans 7 000 square feet with galleries on phases of life ranging from College Road to Third Phase, or retirement. It aims to meet national and state financial literacy goals for children and adults.Hamburg, who founded museum exhibit firm Rainworks Omnimedia in 2010, believes the show's appeal is universal because money is something that everyone has a relationship with throughout life.Orman has described the show as a walk through the life of money, and the effect it can have on you."It will be entertaining," she said in a statement, "and when you're having fun learning, the lessons stay with you."Hamburg said she addressed finance's fear factor by engaging people with various exhibits and displays."How do you make it easy for visitors to understand the power of compounding?" she asked, adding that it has traditionally been taught with graphs or charts or calculators.She decided to approach it differently using visitor prompts, and entry into a computer terminal and to show the results through the growth of actual physical objects."We should all be so smart with money and channel our inner Suze Orman. But we're not and we don't. Unless you're an MBA or an economist or a freak, you don't want to read about SEP-IRA or social security or student loan interest rates."The goal of the exhibition "is to give visitors the tools and resources for financial self actualization," she added.

NEWS,17.09.2012

Billionaires score over millionaires

Many millionaires got poorer in the last year, but billionaires did just fine, using their heavyweight money management teams to ride out market and economic turmoil that hit the lesser rich, research company Wealth-X said on Monday.The ranks of people with at least $30m edged up to 187 380 but their total wealth fell 1.8% to $25.8 trillion - still a sum bigger than the combined size of the US and Chinese economies, Wealth-X said in a report.Hardest hit globally were those in the $200m to $499m range, whose numbers dropped 9.9% and whose fortunes shrank 11.4%, the World Ultra Wealth Report said, using data for the year through July 31.But the really, really rich got even richer as the number of billionaires rose 9.4% to 2 160 people and their wealth grew 14% to $6.2 trillion."Even at a billion or two billion, they have a much larger entourage, they have much more in the way of investment advice. They certainly get the attention of every major bank," Mykolas Rambus, Wealth-X's chief executive officer, told Reuters. "This was the issue about that mid tier, the $100m to $500m risk land. I don't think it appears these guys employ enough talent to help their own portfolios plus their holding companies to be successful."As Europe struggles and the US economy recovers fitfully, the affluent are shifting away from speculative investments into private companies, commodities and property, said Wealth-X, a Singapore-based firm that provides intelligence on the ultra-rich to banks, fundraisers and luxury retailers.Asia suffered the worst regional loss of wealth, with a fall of 6.8% to $6.25 trillion due to weaker equity markets and lower export demand from the West, it said.While wealth also shrank in Europe, Latin America and the Middle East, the rich saw their fortunes grow in North America (up 2.8% to $8.88 trillion) and Oceania (up 4.4% to $475bn) - much of that in Australia.But Asia's rich cannot be discounted, Wealth-X said, as the fall in wealth in Japan, China and India - home to 75% of ultra high net worth (UHNW) Asians - will reverse, based on the strength of the region's financial systems and economies."Total Asian UHNW wealth is forecast to surpass the US combined wealth by 2020," it said.

Private banks target the super rich

 

What do you get the client who has everything? An evening at a sleep school to get tips on how to beat insomnia? A chance to play cricket with former England star Andrew Flintoff? Advice on finding the right school?These are just some of the services offered by Barclays in its "Little Book of Wonders," underscoring the lengths to which the bank is prepared to go to win the custom of the super-wealthy at a time when its traditional businesses are struggling with weak economies and tougher regulators."There is more to wealth than managing one's assets," said David Hughes, Head of Affinity Partnerships at Barclays, which oversees the Little Book of Wonders. "This is a complement to the financial advice we give clients and a recognition of the world in which our clients exist."Attracting the business of wealthy clients, worth an estimated $42 trillion globally, is critical for banks seeking not only to maintain their profitability, but also to diversify their sources of funding and reduce their reliance on capital markets."Private banking, given the relatively lower capital requirements and the fee based nature of revenue is an area of growth and competition which is expected to increase," Jill Zucker, a partner at McKinsey's, told Reuters.Private clients pay on average 1 percent of assets under management in fees to their wealth managers each year, estimates specialist wealth management consultant Scorpio Partnership.Banks are keen to attract such fees as profits remain squeezed in other parts of their business, from high street lending to commercial and investment banking.For example, Barclays reported a 38 percent rise in adjusted pre-tax profit in its wealth and investment management division in the first 6 months of the year compared with a 15 percent rise in its retail and business banking and 11 percent rise in corporate and investment banking.Coutts, the 300-year old British bank which counts Britain's Queen Elizabeth among its clientele, is beefing up its non-financial services to hold onto elite customers.Ian Ewart, head of product, services & marketing, said the bank still loved to whisk away clients on horseracing jaunts and to a welter of events hosted in the social calendar of the glitterati - including the Cowes Quarter Ton sailing regatta and annual British Academy of Film and Television Arts awards bash.But as entrepreneur clients start to outnumber heirs and heiresses, who tend to have a different outlook, Coutts is spending more time, effort and money satisfying a thirst for intellectual "entertainment" and high-level networking in a business world where success increasingly depends as much on 'who you know' as 'what you know'.A new thought leadership series called Futurescope has been designed to help the bank's entrepreneurial customers analyse future macroeconomic issues and identify moneymaking opportunities in this decade and the next."Our clients can buy whatever they want for the most part. What they cannot buy - which is also what they really need - is to connect with people like them, to hear new ideas. The experience is far (more) important than a luxury freebie," he said.Tale of two millionaires But in expanding the breadth and depth of services offered, private banks will have to make sure the extra cost is worth their while as profit margins in wealth management buckle under the increasing cost of regulation, compliance and technology.The global wealth management industry is now paying $8 to generate every $10 of income, calculates Scorpio Partnership in its closely watched annual health check of the global private banking sector in July."The question of how you can continue to cater for clients that might be less profitable for you in the future is a difficult one," Coutts' Ewart said.In the case of its Little Book of Wonders, Barclays declined to disclose the cost of building and maintaining the online portal, saying it was part of its overall investment in its wealth management platform.In an attempt to offset the costs of providing the service, the bank has offered the luxury brands the opportunity to advertise, for a fee, on its Little Book of Wonders portal.Banks will pitch services such as Futurescope or the Little Book of Wonders to a select set of clients depending on their wealth and how they've made their money rather than offering blanket invites, to preserve the exclusivity of the offers.But as clients question the fees they pay, especially in an environment where investment assets are delivering lacklustre returns due to ongoing economic uncertainty, additional services not seen as essential to business needs might raise eyebrows."If there are fancy chandeliers and teacups, some clients might assume they are paying too much in fees," said Zucker.Such services are often tailored to the ultra high net worth individuals, with assets greater than $25 million, who are not only costing the banks more but are also not necessarily the most profitable.So-called 'Core Millionaires', with assets of between $1 million and $10 million, generate investment revenue margins on average two to three times higher than their wealthier counterparts, making greater use of more profitable banking and lending products, a survey by McKinsey estimates.These Core Millionaires are also projected to generate 60 percent of asset growth amongst all households with more than $1 million in assets by 2015."They're a bit of a lost set of clients," said Zucker. "Banks need to tailor their offering so there is growth in different market segments."So, where does this leave the Little Book of Wonders?A junior member of one of Britain's most successful entrepreneurial families, whose mother recently switched private banking allegiance, was sceptical that affluent individuals would be tempted to change banks based on free offers."Would clients be impressed by that? No way," said the family member, who declined to be named. "They just want to make sure that their banking is done, that their transfers happen, that they can speak to someone when they need to," he said.

NEWS,23.08.2012

Global economy slips into dire straits

The eurozone is on track for its second recession in three years, China's once booming manufacturing sector is contracting at a faster pace than previously reported, and the United States is widely seen as struggling to keep up its pace of growth.Business surveys released on Thursday painted a global picture of economic malaise from Beijing to Berlin.The eurozone economy will shrink around 0.5% in the current quarter as the economic rot is even spreading through Germany, the region's largest and strongest economy, Markit's Purchasing Mangers' Index (PMI) suggested.It came on the heels of the HSBC Flash China manufacturing PMI falling to 47.8 for August, its lowest level since November and well down from July's final figure of 49.3.Growth in the United States manufacturing sector is also expected to have slowed in August. U.S. data due at 12:58 GMT."The indicators taken as a whole indicate a material slowdown in the pace of the world economy," said economist Philip Shaw at Investec.The eurozone composite PMI, which measures manufacturing and services together, was actually slightly better than a month earlier, nudging up to 46.6 and just pipping forecasts for it to hold steady at July's 46.5. But was still its seventh month in a row below 50, the dividing line between contraction and growth."August's flash eurozone PMI does nothing to challenge the notion that the single currency area is now firmly in recession," said Jonathan Loynes, chief European economist at Capital Economics.More worryingly, the downturn in smaller eurozone economies is clearly taking root in the core. The flash composite PMI for Germany fell to a three-year low, a fourth straight month of contraction.German economic growth slowed to 0.3% in the second quarter on a sharp drop in investment, adding to evidence that it can no longer be relied on to pull the eurozone out of a deep slump, data showed earlier on Thursday. "Another reminder that a chronic lack of economic growth in the eurozone will continue to impede efforts to bring the debt crisis to an end," Loynes said.The eurozone economy shrank by 0.2% in the three months to June, according to official data. Economists polled by Reuters last week predicted a similar outcome for the current quarter, with no growth until the start of next year. Falling demand from debt-ridden Europe, China's single biggest export market, has put the Chinese economy under pressure, with the ripples now being felt across the world."It's very hard to put a positive spin on anything within the (China) data. Bottom line - a very poor update," said Robert Rennie, chief currency strategist at Westpac Bank In Sydney.Japan said on Wednesday that exports slumped the most in six months in July as shipments to Europe and China tumbled. Exports from Taiwan, a key part of the global technology supply chain, fell for a fifth straight month in July and South Korea, home to major car makers, computer chip and flat-screen producers, recorded its sharpest export fall in July in nearly three years.Six consecutive quarters of slowing Chinese growth have also taken a toll on commodities markets, with falling prices and an uncertain outlook prompting miner BHP Billiton to shelve a $20bn expansion project in Australia."Today's PMI report is a clear reminder that the slowdown is not yet over and that the Chinese economy is still too shaky to recover without ongoing policy stimuli," said Nikolaus Keis at UniCredit. "The pressure on the Chinese authorities to further step up their policy accommodation is therefore growing."China has been fine tuning policies to keep growth on track without releasing curbs on the property sector.In contrast central banks in the developed world have slashed interest rates to near zero and injected trillions of dollars into the money supply in efforts to support growth.The European Central Bank is expected to cut rates by 25 basis points to a new record low of 0.5% when it meets next week, but analysts say that will do little to stimulate lending. The U.S. Federal Reserve is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from the U.S. central bank's latest meeting suggested.

Venezuela Elections 2012: Chavez Has Money Edge In Presidential Race

Opposition candidate Henrique Capriles typically runs his presidential campaign by jogging through Venezuela's small towns, reaching out to supporters with both hands and climbing aboard the back of a flatbed truck to speak to hundreds of people.By contrast, President Hugo Chavez brings large sound trucks, a production team and a fleet of buses that carry supporters and government employees to plazas to cheer him on by the thousands.A little more than a month ahead of Venezuela's Oct. 7 election, Chavez enjoys clear advantages over his challenger in campaign funding and media access. While neither campaign has revealed how much it's spending, Capriles says he is in a "David vs. Goliath" contest, facing a well-financed incumbent backed by an even richer government."We're fighting against two checkbooks. There's no way to compete economically speaking," said Rafael Guzman, who is in charge of finances for the opposition coalition. He accused the government of using money from the state oil company, Petroleos de Venezuela SA, and a separate development fund, Fonden, to support Chavez's campaign and bankroll projects aimed at boosting his support.Chavez's allies say Capriles is being backed by business tycoons including fugitive bankers who have fled the country and oppose the president. Chavez's camp hasn't provided details of those accusations.The law does not limit individual campaign contributions, though Guzman says the Capriles campaign caps donations it receives at a maximum of 2,000 bolivars ($465), even though people can make many such donations. He said all have come from individuals, none from companies."We aren't receiving anything from businesses," Guzman said.So far, Capriles' campaign doesn't look like it's rolling in wealth. It has even taken to holding raffles, fundraising dinners and weekend street fairs selling used clothes and donated food.Judith Beltran recently browsed through stands selling landscape paintings, handbags, underwear and used baby clothes at Caracas' Petare slum, holding a bagful of clothes she'd just purchased."I came because they're selling everything cheap and also to help out Capriles," she said.Meanwhile, Chavez's face smiles down from innumerable billboards and signs festooned on lampposts throughout Caracas and other cities, far more than Capriles' campaign has managed.There's no spending limit on such advertising, but the law limits campaigns to just three minutes of paid TV ads a day, and Capriles' backers say there's no clear line between Chavez's campaign ads and the much more frequent government promotional spots showing the president doling out apartments to the needy.The law doesn't prevent Chavez from using his power as president to take over programming on all of the country's TV channels and radio stations for his speeches, something he does regularly.Chavez and his allies say he's merely governing, not wielding any campaign edge that could be considered unfair."Hugo Chavez's advantage (is) in his power of communicating with his people," his campaign manager, Jorge Rodriguez, said last month.Rodriguez on Wednesday also denied that Chavez has an edge in airtime, saying much of the coverage by private TV channels and radio stations favors Capriles.In a recent televised appearance for the opening of a state-run supermarket, Chavez tried to differentiate his roles as president and candidate. "I'm complying with an obligation to inform the public," he said."I am going to say what I'm going to say very carefully. It shouldn't be interpreted as campaigning," Chavez said. Chavez then responded to criticism by Capriles and other adversaries that he is giving away Venezuela's oil wealth through preferential deals with allies.Chavez's socialist party, for its part, insists it uses no public funds and gets its money from supporters. It held a raffle last week with prizes that included a new car, motorcycles and appliances. Some Chavez opponents called for electoral officials to investigate that raffle, saying public employees had reported that they were forced to buy tickets.Venezuelan election law requires candidates to provide detailed monthly financial reports to electoral officials, but the National Electoral Council generally doesn't publicly release financial figures during the campaign.Neither the Chavez nor Capriles campaign revealed how much money they've raised when asked. Chavez's campaign didn't respond to requests for comment, and officials in Capriles' campaign said it was unable to provide a figure.Venezuelan election law also prohibits campaign donations from government entities, foreign donors and companies that are contracted to provide public services.Venezuela is atypical in Latin America in that it doesn't provide public financing for campaigns or political parties, said Jennifer McCoy, director of the Americas program at the Carter Center. She has directed past election-monitoring missions in Venezuela and other countries."Because there's no regulated public financing, then that means that all of the sources of money are private or undisclosed, and so it's very difficult to assess how much each side is spending and where the money comes from," McCoy said in an interview during a visit to Caracas."I really have no idea how much each side is spending," she said, "but in terms of the opportunities particularly for the media presence and the opportunities for providing benefits to voters, certainly an incumbent government – and this incumbent government – has an advantage."The opposition has complained that Chavez has abused his presidential authority by taking over the airwaves, but the National Election Council has taken no action on the matter. Four of the council's five members are Chavez allies or widely perceived as favoring the president.Vicente Diaz, the one council member often openly critical of the government, said in an interview that a candidate such as Capriles is essentially running "against the state.""It's not fair," Diaz said, but added that "the popular will is respected, and the one who has the votes is going to win."

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.