NEWS,21.07.2012

Spain's economy wobbles amid bailout

Concerns about Spain's crippling financial problems flared again Friday as even news that the country had been given the final go-ahead for a bank bailout loan of up to $122.9 billion failed to take the sting out of a further round of bad economic news.Earlier Friday, finance ministers from the 17 countries that use the euro unanimously approved the terms for a bailout loan for Spain's banks, which have been struggling under the weight of toxic loans and assets from the collapse of the country's property market. Investors have been shying away from Spain for months, worried that the country could not keep control of its deficit during a recession while supporting its stricken financial sector.Spain is the 17-country eurozone's fourth-biggest economy, and many market watchers fear that if it asked for a bailout, the rest of the region could not afford to foot the bill. The country and its banks were also locked in a vicious debt spiral, where the shaky banking system has been propped up by the indebted government so that the banks could buy more government debt. The loan facility agreed to on Friday was designed to break that spiral.The bank agreement came as Spain cut its growth forecast and the heavily indebted Valencia region asked for financial help. The news sent the country's borrowing costs soaring and its stock prices plummeting. In afternoon trading, Spain's main IBEX index was down almost 6 percent, while the interest rate on the country's 10-year bond - an indicator of investor confidence in a country's ability to manage its debt - was at 7.2 percent. This is a rate that many market watchers consider too high a price for a country to pay in the long term.Treasury Minister Cristobal Montoro on Friday forecast Spain's recession will drag on into 2013.Unemployment, now at 24.4 percent, will remain about the same next year, Montoro said.Meanwhile, the economy will shrink 1.5 percent this year, a slight improvement from the 1.7 percent drop previously predicted, he added.The government this week passed painful austerity measures - tax increases and cuts to benefits, salaries and pensions - to reduce state debt and strengthen confidence in its finances.Spaniards staged huge anti-austerity protests in 80 cities and towns across the country Thursday.

After PFGBest, 'Crisis' In Commodities Trading Could Impact Everyday Consumers

Experts warn of a crisis in the commodities trade that could impact everyday consumers. First, there was a banking crisis. Now, after the collapse of Peregrine Financial Group, commodities markets may be on the brink of their own emergency, which could reach consumers at the gas pump or the grocery store.The high-profile failure of two commodities brokerage firms in less than a year led to a crisis of confidence among traders of commodity futures agreements to buy and sell basic goods like corn, wheat and oil. If this market stops functioning properly, experts warn, consumer prices could fluctuate wildly.“The futures industry had long been considered a very strong place to put your money,” said John Lothian, a registered futures adviser who runs an industry news and analysis service. The collapse of Peregrine, which does business as PFGBest, has “absolutely caused a crisis,” he said. “It’s going to take a while for the industry to restore its own confidence.”The crisis took root last October with the well-publicized collapse of commodities brokerage MF Global, which lost $1.6 billion in customer funds. That was followed, earlier this month, with the failure of Peregrine, which imploded just before the firm’s founder, Russell Wasendorf, admitted to taking more than $100 million in customer cash over two decades.The failures have caused some traders to lose faith in both of the industry’s regulatory bodies -- the Commodity Futures Trading Commission and the National Futures Association -- and the brokerage firms themselves. “I don’t know where to put my money to trade,” George Papagiannis, a lawyer and futures trader who lost money with Peregrine and MF Global, told The Huffington Post shortly after the PFG collapse. “I love to trade, but I don’t trust any broker now. So I’m not going to until I’m sure there’s good oversight."This sentiment could be bad news for regular consumers of basic commodities like oil and corn. Brokerages like Peregrine provide a platform for trading futures contracts, agreements to buy or sell a commodity like oil or corn at a set price in the future. Often farmers will trade futures to protect crop prices from unforeseeable fluctuations for example, a glut of commodities that causes prices to fall.“A collapse of a firm means that those commercial market participants who have to intelligently hedge their purchases have less and less faith in [the firms] with whom they’re investing,” said Gene Guilford, president of the Independent Connecticut Petroleum Association, a nonprofit association of gas and fuel oil dealers. “What ends up happening with a lack of faith is retailers end up hedging less of their purchases and leaving them open to the vicissitudes of the marketplace.”If farmers or oil dealers pull out of the markets, then there’s nothing to buffer commodity prices against unexpected fluctuations, meaning the everyday price of oil or corn could dip or spike wildly for average consumers, according to Guilford. Futures-trading volume in the first half of 2012 was down nearly 10 percent from the same period last year, according to data from the Futures Industry Association, the industry’s main lobbying group. In June trading volume was down more than 15 percent from June 2011. “We’re not on the cusp of a problem, we’re in a problem,” said Michael Greenberger, former director of trading and markets at the CFTC and current professor at the University of Maryland School of Law. “Nobody wants to trade.”Since the Peregrine collapse, blame also also fallen on regulators for failing to spot that fraud, despite years of audits and the collapse of MF Global only months before. On Wednesday, CFTC chair Gary Gensler told the Senate Agriculture Committee that "the system failed to protect the customers of Peregrine," only days after the CFTC rushed approval of new rules designed to protect brokerage customers. Those rules include a requirement that brokers file daily reports on the state of segregated customer accounts.But the reforms might not address the root of the problem. According to Greenberger, federal regulators simply don’t have the resources to keep up with the brokerage firms, leaving the door wide open to fraud. “The system is weak because it’s not adequately supervised by the CFTC,” he said, adding that the CFTC is being “starved” for cash. In June, congressional Republicans voted to slash the CFTC budget by about 12 percent, or $25 million. Experts warn that without proper regulatory oversight, there’s little chance that confidence will return to the commodities markets. “It would be one thing if it were just one firm, MF Global," said Lynn Turner, former chief accountant at the Securities and Exchange Commission, now managing director at consulting firm LitiNomics. “Now we've had a couple [of brokerage failures], and I can't help but feel there are others out there. But for the grace of God, this could happen again.”

NEWS,13.03.2012.

EUROPE FINANCE ministers several NEW conditions fOR Spain

Eurozone finance ministers gave their final approval to a second bailout for Greece yesterday (12 March) and turned their attention on Spain, demanding that it adopt tougher deficit targets this year in order to get back on track in 2013.Greece, the main source of the currency bloc's debt crisis, swapped its privately held bonds  last week for new, longer maturity paper with less than half the nominal value, a move that cut its debt by more than  €100 billion. The exchange paved the way for eurozone ministers to give the final political go-ahead to a €130 billion package that aims to finance Athens until 2014. The decision will be formalised on Wednesday.” As agreed, new official financing of €130 billion will be committed by the euro area and the IMF for the period 2012-2014," Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference. Thanks to a high acceptance of the bond swap offer, Greece's debt would fall below a target of 120% of GDP in 2020, reaching 117%, from 160% now, he said.As Greece's financial problems have lost some urgency, Spain has raised a new challenge. After announcing the previous government had missed its 2011 budget deficit target by a significant margin, the new administration said it would not meet the EU-agreed deficit goal for this year either. Spain was supposed to cut its deficit to 4.4% of gross domestic product this year, but said it would only aim for 5.8% as it heads into recession. Its deficit in 2011 was 8.5%, far above a 6% goal. In a statement, the Eurogroup said Spain should strive for a 5.3% deficit target this year, cutting it some slack from the initial goal but keeping the pressure on.

” The Spanish government expressed its readiness to consider this in the further budgetary process," it said. The eurozone is keen that Spain, a far bigger economy than Greece which has so far avoided the need for a bailout, gives the financial markets no whiff of backsliding after Athens has been taken off the critical list, at least for now.” It will be the responsibility of the Spanish authorities to choose the initiatives that will have to be taken in order to bring down the budgetary deficit in 2012, what is most important is what is the target for 2013," Juncker said.” What is less important, but nevertheless important, are the avenues chosen in 2012."Madrid pledged it would cut the deficit to 3% of GDP next year, in line with the agreed final deadline, but wanted the higher starting point and slower economic growth to be taken into account in determining the path in 2012."Spain's position is that two things have changed. The first: last year there was a deviation of 2.5% in the public deficit and the second: that the circumstances in terms of economic growth have changed significantly," Spanish Economy Minister Luis de Guindos said.” Spain’s commitment to the fiscal rules is absolute.” The European Commission expects Spain's economy to contract 1% this year after growth of 0.7% in 2011, a sharp downward revision from the last forecast for 0.7% growth. Several other eurozone countries have committed themselves to meeting budget targets. Belgium said at the weekend it was sticking to its deficit goals and came up with nearly €2 billion of extra spending cuts to make the target - a move that could add to pressure on Spain to stick to its agreed plan. Portugal and the Netherlands are also fixed on meeting their targets. A stricter EU Stability and Growth Pact, which came into force in December, envisages fines for eurozone countries like Spain which are already running deficits above the 3% of GDP ceiling and missing their deficit reduction targets.

NEWS,21.02.2012.

Medvedev hosts Russia’s protest leaders

President Dmitry Medvedev hosted leaders of Russia’s protest movement Monday, in a rare move after an outburst of rallies against Vladimir Putin’s likely return to the Kremlin.Medvedev discussed ideas for reforming Russia’s “far from ideal” political system at a meeting that would have been almost unthinkable before mass opposition protests broke out in the aftermath of December parliamentary polls. Leftist radical Sergei Udaltsov, ex-Cabinet Minister Boris Nemtsov and liberal politician Vladimir Ryzhkov – leaders of the movement that organized mass rallies against the authorities – were all present at the meeting.” Our political system is far from ideal and most of those present here subject it to criticism and sometimes very harsh criticism,” Medvedev said at the meeting at his Gorky residence outside Moscow. “There are people here with different political opinions and that is good because we have to understand in what direction our political system will develop,” he said in comments broadcast on state television.Udalstov, Nemtsov and Ryzhkov – whose faces were virtually invisible in state media in the last few years – were shown on state television attending the meeting along with other leaders of unregistered political parties. However state television had not by Monday evening broadcast any of their comments to the Russian president.Nemtsov said ahead of the meeting that he intended to press Medvedev for the release of 37 “political prisoners” and demand constitutional changes barring all presidents from serving three terms. Russian news agencies said that Medvedev discussed his proposals – already submitted to parliament – to bring back elections for regional governors and simplify the procedures for registering parties. However the demands for the protest movement go far beyond this and its leaders have called for the annulment of fraud-tainted Dec. 4 parliamentary election results and far-reaching political reforms.Putin, president from 2000-08, is seeking to reclaim the Kremlin in a March 4 vote after his four-year stint as prime minister. Medvedev would then become prime minister in a job swap vehemently criticized by the opposition. Opinion polls are predicting that Putin will win the election but the opposition has vowed to hold multiple protests afterward to protest his domination of Russian politics. According to a state pollster, Putin will be elected president in the first round of March’s election with more than half the vote, avoiding a run-off that would dent his authority on the eve of his planned return to the Kremlin’s top job.Putin is likely to win 58.6 percent of the vote, far ahead of his closest rival, said Russia’s Public Opinion Research Center (VTsIOM), which has a history of accurately predicting the results of Russian elections.“Putin will gain victory,” the pollster’s general director, Valery Fedorov, told reporters in Moscow. The forecasts were based on a poll of 1,600 people carried out across Russia this month. Second place will go to veteran Communist leader Gennady Zyuganov, who is likely to win 14.8 percent, the pollster said. A mood change against Putin among voters in major cities has stoked speculation that the former KGB spy might face the humiliation of winning less than half of the vote, undermining his claims of majority support and triggering a second round.Putin even conceded this month that he may face a second round, though he warned such a step would stoke infighting and undermine Russia’s political stability. But the poll indicates that though Putin is facing the biggest protests of his 12-year rule, his aides believe the former KGB spy can still bring in enough votes to secure another six years as Kremlin chief.Putin’s former chief of staff, Alexander Voloshin, said the latest forecasts for the elections indicated Putin could win 59-61 percent of the vote. The news, he said on Twitter, would make many “sleep more soundly.”VTsIOM forecast that nationalist leader Vladimir Zhirinovsky would win 9.4 percent followed by billionaire financial whizz kid Mikhail Prokhorov with 8.7 percent and former upper house Speaker Sergei Mironov with 7.7 percent. Opponents such as Communist leader Zyuganov and blogger Alexei Navalny say that the election will not be legitimate as officials are bound to falsify the results in Putin’s favor.Putin was clearly taken aback by the scale of the protests against the Dec. 4 parliamentary elections, initially dismissing opponents as the pawns of the West and even branding them chattering monkeys. But as the seriousness of the challenge became evident, Russia’s most popular politician changed track, reshuffling his team and approving some planned changes to open up the tightly controlled political system he still dominates. During the parliamentary election, VTsIOM forecast Putin’s United Russia party would win 48.5 percent of the vote.