NEWS,14.07.2013

Kenya raises price of petrol, diesel

Kenya's energy regulator raised retail prices for petrol and diesel on Sunday due to rising global oil prices and a weaker local currency, while decreasing the price of kerosene.

Fuel prices have a big impact on the rate of inflation in the east African economy. The rate rose to 4.91% in June from 4.05% a month earlier.

The economy heavily depends on diesel for transport, power generation and agriculture. Kerosene is used in many households for lighting and cooking.

The Energy Regulatory Commission (ERC) reviews domestic energy prices every month, with adjustments made depending on fluctuations in international energy prices and foreign exchange fluctuations.

The cost of importing super petrol and diesel in June rose, while that of kerosene fell, while at the same time the Kenyan shilling weakened to 85.65 per dollar from 84.30 per dollar in the previous month the ERC said in a statement.

The regulator raised the maximum price of a litre of super petrol in Nairobi by 1.34 shillings to 109.52 shillings, and increased the price of diesel by 3.70 shillings to 102.86 shillings per litre.

The price of kerosene will fall by 2.03 shillings to 79.49 shillings, the commission said.

The new prices will take effect on July 15, and will be in force for a month.

Hollande rules out shale gas exploration

French President Francois Hollande ruled out exploration for shale gas during his presidency on Sunday, dousing hopes that a ban on hydraulic fracturing could be reviewed following a legal challenge by a US firm.
France's top court said this week it will examine the challenge to the ban by Schuepbach Energy, which held two exploration permits that were cancelled when the law was passed in 2011.
Industry Minister Arnaud Montebourg stirred debate when he suggested creating a state-backed company to examine exploration techniques. But he was promptly overruled by Prime Minister Jean-Marc Ayrault.
"As long as I am president, there will be no exploration for shale gas in France," Hollande told France 2 TV in a live interview after Bastille Day celebrations.
The International Energy Agency has named France as a European country with some of the most plentiful underground reserves of shale gas.
But Hollande's government, which comprises members of the Greens Party, has kept in place the 2011 ban and said it should remain in effect due to concerns that hydraulic fracturing can pollute underground water sources.
Scheupbach Energy challenged the ban in the local court of Cergy-Pontoise near Paris, which forwarded the case to France's highest administrative court, which then passed it on to the Constitutional Council.
"The debate on shale gas has gone on for too long," Hollande said.

EU to probe German energy law - report

The European Union plans an investigation into Germany's renewable energy law due to concerns that exemptions for some firms from charges levied on power users breaches competition rules, a German magazine reported on Sunday.
Without citing sources, Der Spiegel weekly said lawyers in Brussels had looked at the law which provides a framework for Germany's push to renewable energy, and that Commissioner Joaquin Almunia had concluded it may breach EU rules.
The Commission would open proceedings on Wednesday, it said.
The officials criticised exemptions made for energy intensive companies in Germany, reported the magazine, adding this may lead to companies having to pay millions of euros in back payments.
A spokesman for the Commission declined to comment on the report.
The EU said in March it would investigating power grid charge exemptions which have been granted to big steel, chemicals, glass, cement and building materials companies.
Chancellor Angela Merkel has set out ambitious goals for Germany to wean itself off fossil fuels, phase out nuclear power and switch to renewable energy sources but it is costly.
Households are paying for subsidies to renewable energy producers and have been hit by sharp increases in the last few years. Yet fears that German industry will become uncompetitive if it has to pay too much for energy has led to exemptions from these charges for many firms.
The debate about the cost of the energy transition and energy prices could become an issue in the September election.
Merkel has said she intends to rein in renewable subsidies and reduce the costs of the green revolution on consumers if she is re-elected in September.

Wind of austerity chills turbine industry

Wearing face masks and wielding sanders, two workers smooth the surface of a massive fan for a wind turbine at the Gamesa factory in Aoiz, a town in Navarre, northern Spain.
But in hard times, it will be winds in Finland, not Spain, that make the finished product spin.
Last year, the plant delivered a wind turbine park to Malaga in southern Spain and another to Burgos, in the north, said factory manager Javier Trapiella.
"Now we don't produce for Spain," he added.
"It has all stopped."
For green energy producers, Spain has changed from a paradise with generous public support to a markedly less agreeable home.
Prime Minister Mariano Rajoy's conservative government is imposing an austerity regime to plug an accumulated energy sector deficit of €26bn ($34bn).
On Friday, the horizon darkened further with the approval of reforms cutting annual state aid for renewable energies by more than €1bn.
The change is enough to place at risk huge strides in the Spanish wind energy industry.
Spain ranks as number four globally in terms of installed wind energy but has dropped to seventh place in terms of new projects, according to the Global Wind Energy Council.
"For Spain, wind energy has really been an energy revolution. In 20 years we have gone from producing zero kilowatts to producing 20% of national demand today," said Heikki Willstedt Mesa, director of energy policy at the Spanish Wind Energy Association.
In the fourth largest economy of the eurozone, wind is often the main source of electricity.
"Unfortunately, since 2009 the government has slowed the development of wind energy in Spain with various regulatory measures," he said.
Cuts in state aid of 35%, removing subsidies for new turbines since the start of 2013, and then the latest changes announced on Friday: the sector has been hit hard and manufacturers are the first to feel the pain.
In February, French group Alstom closed two factories in Spain and laid off 373 employees.
"The economic crisis and the absence of a stable regulatory framework have slowed domestic demand," the group said, stressing the lack of activity in its Spanish sites.
Spain's Gamesa, which is among the industry's world leaders, gave the same reasons as it laid off 606 of its 4,800 staff in Spain and closed two blade factories in recent months.
Gamesa notably pointed to the "regulatory uncertainty" , the persistent economic crisis and financial problems in the sector, especially in southern Europe.
Making a wind turbine is almost a work of craftsmanship, said Gamesa's Trapiella. "You need good hands," he said. The fibreglass and carbon fibre blades measure 62.5 metres (205 feet) and weigh 15 tonnes each.
When finished they will leave by truck overnight for the port of Bilbao to be shipped by sea to Finland. About 40 blades are scheduled for delivery by February.
"If 90% of our sales were in Spain 10 years ago, it is the exact opposite today with 90% of sales coming from abroad," said Jose Antonio Cortajarena, Gamesa's corporate managing director.
"We are in more than 50 countries," he said, citing Mexico, Brazil and India as key markets.
"Even if our corporate headquarters are in Spain, the risk, our dependance on the Spanish market, is limited."
The Spanish Wind Energy Association is not so reassured.
"We have destroyed 25 jobs a day in the wind energy sector since the start of the year and the industry is on the borderline, it cannot take any more cuts," it said.
The industry has already suffered heavily.
"Of the 43 000 jobs we had in the wind industry in 2009, there are only 23 000 left, said Sergio de Otto, secretary general of the business group Fundacion Renovables (Renewables Foundation).

Snowden could cause 'more damage'

US intelligence leaker Edward Snowden on Sunday marked three weeks stuck in an airport transit lounge since he arrived in Russia, as a supporter warned the fugitive possessed even more secrets that could damage the US government.

Snowden, wanted by the United States for revealing sensational details of its surveillance operations, flew into Russia from Hong Kong on 23 June and has languished ever since in the transit zone in Moscow's Sheremetyevo airport.

Breaking cover for the first time since he arrived, Snowden told a group of activists on Friday that he was applying for asylum in Russia until he could travel on to Latin America.

But Russian officials have yet to confirm receiving such an application which, if approved, would risk further straining Russia's already tense relations with the United States.

Meanwhile, the journalist first who published Snowden's revelations based on the sweeping US surveillance programmes said he possesses data that could prove far more "damaging" to the US government.

Glenn Greenwald told Argentina's La Nacion paper that Snowden, aged 30, had chosen not to release this information.

Damaging information

Russian President Vladimir Putin had said last week that Snowden could claim asylum in Russia only if he stopped harming US interests, a remark that prompted the fugitive to withdraw a previous application for asylum in Russia.

"Snowden has enough information to cause more damage to the US government in a minute alone than anyone else has ever had in the history of the United States," Greenwald told the paper.

"But that's not his goal," said Greenwald.

Russia was still waiting on Sunday for the promised request for asylum from Snowden, who had said that application would be made on Friday. It was not clear whether the hold-up was simply due to the weekend.

The head of Russia's Federal Migration Service (FMS) Konstantin Romodanovsky said on Saturday that "there is for the moment no application from E Snowden". If one was made, it would be examined "according to normal legal procedures", he added.

"For the moment, we do not know anything" about an asylum application, Kremlin spokesperson Dmitry Peskov told the Interfax news agency.

Human rights in the transit lounge

The United States wants the former National Security Agency (NSA) contractor returned to them to face trial over the leaks. Moscow has so far rejected that demand, saying it has no extradition treaty with Washington.

Washington has reacted sharply to the possibility that Moscow might offer Snowden a safe harbour.

"We would urge the Russian government to afford human rights organisations the ability to do their work in Russia throughout Russia, not just at the Moscow transit lounge," White House spokesperson Jay Carney said.

"Providing a propaganda platform for Mr Snowden runs counter to the Russian government's previous declarations of Russia's neutrality," he added.

US President Barack Obama spoke to Putin by telephone on Friday on issues including the Snowden affair, the Kremlin and White House both said, but no further details were forthcoming.

The United States has already rebuked China for allowing Snowden to leave for Russia from Hong Kong.

Asylum offers from the left

At his meeting with activists, Snowden vowed he did not want to harm the United States but it was not clear however whether this meant he was prepared to stop leaking intelligence in order to stay in Russia.

The leftist governments in Venezuela, Bolivia and Nicaragua have all offered Snowden asylum, but Snowden said that Western governments would prevent him from travelling to the region.

A summit of the Latin American Mercosur trade bloc issued a statement on Friday reaffirming the right to asylum and rejecting "any attempt at pressure, harassment or criminalisation by a state or third parties".

The bloc, meeting in the Uruguayan capital Montevideo, denounced four European countries that denied airspace to a plane carrying Bolivian President Evo Morales back from Moscow earlier this month.

They apparently suspected that Snowden was on board.

Mercosur leaders said they would recall their ambassadors from Spain, France, Italy and Portugal for consultations in protest at the incident.

In a statement, they rejected "any attempt at pressure, harassment or criminalisation by a state or third parties" in response to a decision to grant asylum.

Flight attendants praised for heroism

Before Asiana Flight 214 crash-landed in San Francisco, the last time the Korean airlines' flight attendants made news it was over an effort by their union earlier this year to get the dress code updated so female attendants could wear trousers.

Now, with half of the 12-person cabin crew having suffered injuries in the accident and the remaining attendants receiving praise for displaying heroism during the emergency evacuation, the focus has shifted from their uniform looks to their heroic actions.
In the 6 July crash three members of the crew were ejected from the planes sheared off tail section while still strapped in their seats. Those who were able, meanwhile, oversaw the emergency evacuation of nearly 300 passengers using knives to slash seatbelts, slinging axes to free two colleagues trapped by malfunctioning slides, fighting flames and bringing out frightened children.
'Muscle memory'
"I wasn't really thinking, but my body started carrying out the steps needed for an evacuation," head attendant Lee Yoon-hye, 40, said during a news conference on Sunday night before federal safety investigators instructed the airlines not to let the crew discuss the accident.
"I was only thinking about rescuing the next passenger."
Such conduct has given a measure of pride to members of a profession who often are recognised only for their appearance and customer service skills.
"In the face of tremendous adversity and obstacles, they did their job and evacuated an entire wide-bodied aircraft in a very short period of time," said Veda Shook, international president of the Association of Flight Attendants and an Alaska Airlines flight attendant.
"It's such a shining reflection, not just of the crew, but of the importance of flight attendants in their roles as first responders," Shook said.
Along with training in first aid and firefighting, flight attendants every year are required to practice the moves needed to get passengers off a plane in 90 seconds or less, Shook said.
They go through timed trials, practicing skills that include shouting over pandemonium and engine noise, communicating with people frozen in fear and opening jammed doors and windows, she said. The goal is to make performing these tasks automatic.
"We have the muscle memory," Shook said.
It's a significant departure from the days when flight attendants were always women and known as stewardesses or air hostesses. In that era decades ago, members of the cabin crew weren't expected to play much of a role in emergencies.
Laura Brentlinger, who spent 31 years as a United Airlines flight attendant, recalled having no idea how much danger everyone was in during one of her first emergency landings in 1972. She didn't realise the severity of the situation until it was over and she saw the pilot's face.
"In those days, it was like pat you on the head, just go back and keep the people nice and smile. That's how far we've come, thank the Lord," Brentlinger said. "We were just little Barbie dolls back there."
Roles expanded
The role of flight attendants in the US expanded significantly in 1989 after Air Ontario Flight 1363 crashed after taking off in Canada. An investigation revealed that a flight attendant had seen ice on a wing but did not speak up, assuming the pilots knew and would not welcome the information from her.
Since then, FAA rules have required that cabin crew members be incorporated into the communications system known as "crew resource management" that empowers all airline personnel to voice concerns to the cockpit even if it means challenging senior pilots.
The philosophy also authorises flight attendants to order emergency evacuations.
Hearing that the pilots of Asiana Flight 214 told the flight attendants to delay an evacuation for 90 seconds after the crash landing in San Francisco, giving the order only after a flight attendant spotted flames outside, made Brentlinger wonder whether Asiana Airline's attendants have the same authority.
"I'm sure they have a very different hierarchy and can't do anything without the pilot's permission," she said. "There is no doubt in my mind I would have evacuated that aircraft immediately."
'After the dust settles'
Brentlinger said her heart aches when she thinks about what Asiana's flight attendants are going through now and are likely to go through in the months to come.
She was aboard a 747 that lost a cargo door at 6 600 metres, sucking nine passengers to their deaths over the Pacific Ocean in 1989.
After the disaster aboard United Flight 811, Brentlinger said she suffered severe post-traumatic stress disorder and was unable to get back on a plane for more than four years.
Handling the emergency itself was "the easiest part of the whole process... because you train for it and you just do it", she said.
She went on to say that "after the dust settles, so to speak" and one tries to get on with life, "it's horrific, at least it was for me".
The Flight 214 cabin crew consisted of 11 women and one man, ranging in age from 21 to 42, according to the airline.
Spokesperson Lee Hyomin said Asiana is not sharing information on emergency training hours of its flight attendants because the National Transportation Safety Board asked it not to share any information related to the accident while it's being investigated.
Rigorous training
Jean Carmela Lim, 32, a Sydney-based travel consultant, spent a year working as an Asiana flight attendant eight years ago and posted pictures from her experience on her travel blog, Holy Smithereens, this week. She recalls her weeks-long safety training as rigorous.
"We needed to be able to swim while dragging another human - dead weight - in one hand, and hoist ourselves and the dead weight onto the safety raft," Lim said.
The appearance standards were almost as demanding. Lim, who was 23 when she applied for the job, initially was told she was too old. During the interview, she was required to wear a short skirt without stockings.
Flight attendant school included sessions on hair, makeup and comportment. During flights, the cabin manager inspected the attendants to make sure they were wearing the right colour of nail polish and had their aprons properly ironed.
Lim said that appearance is important, but seeing pictures of Flight 214's attendants outside the burned-out aircraft in skirts made her hope their union prevails on the pants issue.
"If there's evidence that wearing a skirt will enable you to save more lives than wearing pants, then by all means keep them in skirts," she said. "If I'm trapped in a burning aircraft , I doubt I'll notice if the cabin crew saving me had lipstick on her teeth or had a tuft of hair out of place."

NEWS,28.09.2012

Netanyahu speech dampens war speculation

Prime Minister Benjamin Netanyahu's UN speech about Iranian nuclear advances has dampened speculation in Israel that he could order a war this year.Analysing Thursday's address in which Netanyahu literally drew a "red line" on a cartoon bomb to show how close Iran was to building nuclear weaponry, commentators saw his deadline for any military action falling in early or mid-2013, well after US elections in November and a possible snap Israeli poll."The 'decisive year' of 2012 will pass without decisiveness," wrote Ofer Shelah of Maariv newspaper on Friday.Without explicitly saying so, Netanyahu implied Israel would attack Iran's uranium enrichment facilities if they were allowed to process potential weapons-grade material beyond his red line.Maariv and another mass-circulation Israeli daily, Yedioth Ahronoth, said spring (northern hemisphere) 2013 now looked like Netanyahu's target date, given his prediction that by then Iran may have amassed enough 20%-enriched uranium for a first bomb, if purified further.But the front pages of the liberal Haaretz and pro-government Israel Hayom newspapers cited mid-2013 - Netanyahu's outside estimate for when the Iranians would be ready to embark on the last stage of building such a weapon, which could take only "a few months, possibly a few weeks".Reluctant to eleborateIran, which denies it is seeking nuclear arms, said Netanyahu's speech made "baseless and absurd allegations" and that the Islamic Republic "reserves its full right to retaliate with full force against any attack". Israel is widely assumed to have the Middle East's only atomic arsenal.Israeli diplomats were reluctant to elaborate on Netanyahu's speech, saying its main aim was to illustrate the threat from Tehran.Asked on Israel's Army Radio whether Netanyahu had signalled he would strike in the spring if US and European Union sanctions fail to curb Iran's nuclear work, Foreign Minister Avigdor Lieberman said: "No, no, I would not go that far.""The prime minister clarified a message to the international community [that] if they want to prevent the next war, they must prevent a nuclear Iran," Lieberman added.Netanyahu's increasingly hawkish words on Iran in recent weeks and months strained relations with US President Barack Obama, who has resisted the calls to set Tehran an ultimatum while fending off charges by his Republican rival, Mitt Romney, that he is soft on Israel's security.Netanyahu praised Obama's resolve in his UN address, which the prime minister described as advancing their "common goal" - a strong signal that Israel would not blindside Washington with a unilateral attack on Iran.Netanyahu's political worriesIsrael Hayom pundit Dan Margalit said the speech constituted "an almost explicit acknowledgment that he [Netanyahu] is declaring a truce in the public argument between him and the president. At least, until after the [US] election".Netanyahu has political worries too, given deadlock in his coalition government over the 2013 budget which, if not ratified by December, could trigger an early Israeli election next year.In a broadcast editorial, Army Radio depicted war with Iran as no longer an imminent dilemma troubling the prime minister.Instead, the station said, Netanyahu would have to decide "whether he is going to elections sooner, in January, February, or maybe March, or whether he will be able to pass the budget, take care of the Iranian issue and then go to elections in October [2013] as scheduled".US Defence Secretary Leon Panetta said this month that Washington would have "about a year" to stop Iran should it decide to cross the threshold of producing nuclear weaponry - a more expansive timeline than that put forward by Israel.That could spell fresh clashes between the allies over Tehran's continued 20% uranium enrichment, a process the Iranians say they need for medical isotopes but that also brings the fissile material much closer to weapons grade.An Israeli official briefed on the government's Iran strategy cautioned against interpreting dates Netanyahu gave at the United Nations as deadlines, saying the preparations had already been made for military strikes."When he says Iran will have a bomb by this-or-that point in time, that in no way means the war option must wait until then," the official said. "There are other considerations to the timing - operational and strategic."

Spain unveils price of banking rescue

Spain unveils on Friday the full cost of rescuing its stricken banks, seen by investors as one of the final steps before a looming sovereign bailout.An independent audit, to be released after markets close, will serve as the basis for the release of up to €100bn from a eurozone rescue loan agreed in June.It comes a day after Spain announced a tight-fisted budget for 2013, which squeezes out €39bn in austerity measures, sparing only retirement pensions, to rein in the public deficit.Broad, savage cuts including in education and health have sparked fierce protests, leading to clashes outside parliament this week between police and anti-austerity demonstrators.Analysts say Prime Minister Mariano Rajoy is hoping the budget and banking audit will satisfy the conditions of any sovereign bailout, saving it the political humiliation of bowing to outside demands."The suspicion is that Rajoy is hoping these new measures will be enough to prevent the imposition of even tougher terms when Spain applies for its bailout," said a report by London-based foreign exchange firm Moneycorp."Whatever his citizens might have thought, investors were impressed by the prime minister's policy. They saw it as a step closer to the bailout which, they still believe, will solve the problems of Spain and the eurozone."The banking audit, led by US financial consultants Oliver Wyman, examines each of Spain's 14 major banking groups making up 90 percent of the struggling financial system.A huge swathe of the system is bogged down with bad loans from a 2008 property market collapse. Only a few, such as Santander, the eurozone's biggest in terms of market value, have solid balance sheets.The audit will also help to determine the price of toxic assets held by the banks, government sources said.A first group of banks, which have already been nationalised and whose capital requirements are expected to be confirmed by the audit, are to receive rescue money from November.Among them is state-rescued lender Bankia, the country's fourth biggest bank, whose request for more than €23bn in capital forced Madrid into the arms of its eurozone partners.Whatever the price tag placed on the rescue, Rajoy's right-leaning Popular Party government has stressed that not all the cash need come from the rescue loan; some may be able to find private financing.But signs are mounting that Madrid, despite all its manoeuvring, may end up picking up the tab for the financial sector rescue, boosting its overall debt level and heightening the urgency of a sovereign bailout.The rescue loan is to be funnelled through Spains's state-backed Fund for Orderly Bank Restructuring (FROB).But Spain's government had hoped that a new European Stability Mechanism would eventually be empowered by Brussels to inject the loan directly, keeping the debt off Madrid's books.A June summit of European leaders had in fact agreed to set up a European banking union with a single supervisor by the year's end, allowing the ESM to take such action.On Tuesday, however, Germany, the Netherlands and Finland laid down a series of new conditions, and said the ESM should only act on new problem loans, not "legacy assets" such as those being dealt with in Spain.If Spain does formally request a broader sovereign bailout, it would become eligible to benefit from a bond-buying programme for troubled states that was outlined by the European Central Bank on September 6.Such a programme would curb Spain's borrowing costs but to qualify Madrid would have to formally apply for help from the ESM and submit to its conditions.As Spain's borrowing costs remain high, with the yield on 10-year bonds only just below six percent on Friday morning, the odds on a sovereign bailout seemed to be shortening daily.Political tensions are rising between Madrid and the northeastern Spanish region of Catalonia, an economically powerful state that has called snap elections on November 25 in a drive for more independence.The debt-struck region's parliament Thursday voted for referendum on Catalonia's "collective future". Spain's central government has vowed to thwart any attempt to hold a poll on Catalan independence. Investors fear these tensions could make it harder for Madrid to rein in deficits in the regions, which account for half of Spanish expenditure with responsibilities for health and education.The regions' debt situation is perilous, forcing many to apply for help from an €18bn central government liquidity fund. Castilla-La Mancha asked for €848m on Thursday, adding to earlier requests from Catalonia, Valencia, Andalusia and Murcia that already amount to a total of about €15bn.

NEWS,30.07.2012

Draghi under pressure to deliver euro pledge

European Central Bank (ECB) President Mario Draghi must back up his pledge to do what it takes to protect the euro when the bank's policymakers meet on Thursday or else face deep disappointment from investors hungry for, and expecting, immediate action. In his boldest comments to date, Draghi said last week that, within its mandate, the ECB was ready to do whatever it takes to preserve the euro, fuelling expectation it could revive its bond purchase programme as it did a year ago when it started buying the government debt of Spain and Italy.But that is far from certain. The ECB might instead explore new policy tools such as outright asset purchases, or quantitative easing, something its peers in Britain, the United States and Japan are already using to stimulate growth.There have also been recent suggestions that it could empower national central banks to broaden their asset buying abilities.The ECB is under intense pressure from within and outside the euro zone to intervene and bring those governments' soaring borrowing costs under control as the debt crisis deepens and increasingly poses a risk to the global economy. Reflecting the increased tension, U.S. Treasury Secretary Timothy Geithner is travelling to Germany, the euro zone's biggest economy and key to any euro rescue plan, on Monday to meet Germany's finance minister and Draghi. The ECB chief will also meet Bundesbank President Jens Weidmann, a strong opponent of the ECB's mothballed government bond purchase programme, ahead of Thursday's ECB meeting, a central bank source said. Italian and Spanish bond markets rallied after Draghi's comments last week, but fresh turmoil is on the cards if Draghi fails to persuade investors on Thursday that the ECB stands behind its pledge. "With expectations running high, the scope for disappointment at Thursday's ECB policy meeting has increased considerably," said Nicholas Spiro at Spiro Sovereign Strategy.The August meeting usually draws little attention and in fact the ECB used to skip the summer month's meeting until 2006 - the last year in which it took policy action in August.The ECB could well break with tradition this year.Huw Pill, economist at Goldman Sachs and a former senior ECB official, said the ECB could decide on Thursday to buy unsecured debt of bank or firms via the national central banks to spare its own balance sheet. "We forecast the announcement of measures to permit national central banks to purchase private-sector assets under their own risk to implement 'credit easing', within a general framework approved by the Governing Council," Pill said. Another cut in interest rates seems less likely as the ECB assesses the impact of its July rate cut to a new record low at 0.75%. At that meeting, the bank also decided to stop paying banks interest on their overnight deposits with it.A poll showed 44 out of 69 economists expect the ECB to cut rates again by the end of the year, with seven saying the bank would cut already in August. Draghi's remarks last Thursday left many in the market wondering whether his message had been intended and if so how far the ECB would be prepared to go before it reaches the limits of its mandate."If you had just landed from planet Mars, and this was the first time that you had heard the ECB speak on this issue, you might think that it was about to fire a big bazooka at sovereign bond markets," said David Mackie, economist at J.P. Morgan."But, having listened carefully to the central bank over the last two and a half years, we don't think that is about to happen," he added. Germany's Bundesbank doused hopes for renewed bond purchases on Friday, saying it still opposed the programme. Instead the ECB would rather see Europe's permanent ESM bailout fund start buying the bonds of euro zone strugglers, but the fund's limited fire power could make its intervention less effective. One solution would be to give the ESM access to ECB funding and Austrian policymaker Ewald Nowotny last week broke ranks with his colleagues, saying such a step had merits. Draghi's candid remarks took some of his fellow Governing Council members by surprise, having not agreed with them before hand on the message he would send. This has prompted concerns Draghi may have raised false hopes in the market."Nothing new has been discussed (on action ECB could take), but Draghi is not a man to make comments lightly and at the end of the day he is the one calling the shots," said a euro zone central bank source. "There was always going to be a time when Draghi decided he had to act," the source said. Draghi did not have a pre-written speech when he spoke in front of an investment conference in London on Thursday and only much later that day did the ECB publish the transcript online.Another source said Draghi was not flagging an imminent move, and any action would likely come only in September or October, in conjunction with euro zone governments, and with a request from Spain for a bailout programme, which Madrid was still trying to avoid.

Spanish economy shrinks faster

Spain slid deeper into recession in the second quarter as a tough new round of austerity to head off the budget crisis that threatens the euro took effect both on overall demand and the price consumers have to pay for goods. The first official numbers on gross domestic product showed the economy shrank 0.4% from the previous quarter after contracting 0.3% in the first three months of the year. The economy was 1.0% smaller than a year earlier. Consumer prices according to both Spanish and EU methodology rose 2.2% year-on-year, with the EU-harmonised increase above forecasts being due to medicine price hikes put in place by the government to save money and deflate the deficit. Economists warned price hikes, and especially a 3-point rise in value-added tax due to come into effect in September, would distort consumer prices while the deepening recession reflected slower domestic demand. That will further weaken the government’s efforts to get the economy growing again - vital if it is to meet targets on reducing its budget shortfall and halting a market-inspired crisis in how it finances its debt. “To properly follow Spain's economic reality, I would look at domestic service inflation, which is where we’ll see stagnation and even deflationary pressures. Consumption remains very weak,” economist at Madrid-based broker Intermoney Jose Carlos Diez said. Spain slipped into the second recession since 2009 in the first quarter and is expected to continue to shrink until well into 2013 as consumers and businesses rein in spending and the eurozone debt crisis saps investor confidence. Fears over the health of Spain’s economy as it fights to reduce its public deficit has lifted funding costs to euro-era highs in recent weeks leading many to think an application for a full-bailout could soon become inevitable. A full breakdown of the growth data will be published August 28, while the final price data will be available August 14.

NEWS,03.04.2012.

Crazy gas prices driving German consumers mad

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

NEWS,12.03.2012.

Greece Will Suffer Less If It Leaves Euro Now

The mood on the ground in Athens has shifted palpably over the past few months. Everyone has firsthand stories of sorrow and bitterness to tell, as austerity measures bite. They speak of retired parents on rapidly shrinking pensions struggling to meet higher taxes and prices, or of young siblings with multiple masters degrees forced to work in call centers or cafés. Despite this clear sense of despair and anger, the vast majority of Greek citizens and politicians continue to think that the alternative to austerity — default and a euro-area exit — would be far worse. But this will — and should — change because leaving the euro is the lesser evil for Greece. Returning to the drachma would be ignominious, an admission of political failure. But, contrary to popular belief, it need not destroy the country and may be the only realistic way of spurring the kinds of structural reforms that are essential if Greece is to make a lasting recovery. Greece faces a stark choice about how to return to growth. It can continue along its current path of endless austerity aimed at engineering an internal devaluation. For a country that cannot control its exchange rates, this is the only way to regain competitiveness relative to other countries. This option would probably involve a decade of depression and is therefore likely to be politically untenable. Greece has a relatively recent history of profound civil unrest, which could return. The protests currently being staged in Syntagma Square are not nearly the caliber of those Greece knew during its period of military dictatorship. Reforms would be fought at every turn and things could get much worse. The alternative to internal devaluation is for Greece to default on its debts and abandon the common currency. A new drachma would depreciate massively, boosting Greece’s competitiveness almost overnight. Exiting the euro area is not an easy option. It would spark a sovereign default, a run on banks, bank defaults and capital controls. But increasingly, these things look like they may happen in Greece whether the country sticks with the euro or not. gIf all the worst effects of abandoning the euro are likely to happen regardless, then Greece may as well benefit from a nominal devaluation. Many Greeks argue that their country does not have any export industries that could gain from such nominal currency devaluation. The biggest industry — shipping — books almost all of its profits offshore, so making shipping cheaper would hardly benefit the Greek economy.

 Still, Greece has a vibrant tourism industry that contributes about 18 percent of gross domestic product and has lost business to cheaper holiday destinations in Turkey and North Africa. Agriculture, manufacturing and pharmaceuticals are also sizeable Greek export industries. All of these sectors — and therefore GDP growth generally — would benefit if relative prices on Greece’s products and services were to plummet. In addition, there’s no reason to believe Greece would be left without a financial lifeline if it exited the euro area. Its departure would be handled like a divorce, in which Greece and the so-called troika — the European Central Bank, the European Commission and the International Monetary Fund — acknowledge that their relationship no longer works. The troika would provide some bridge financing to ease the turmoil that an exit would inevitably entail for Greece. This financing would continue to be conditional on the same structural reforms that the three institutions are currently demanding. After a default and euro-area exit, however, the Greek government would have much greater incentives to deliver. Currently, the cost of failure to reform is criticism from the troika and demands for more austerity. After a default and euro exit, failure to reform would probably mean a loss of bridge financing at a time when it was urgently needed to cushion a financial shock. That could trigger dire consequences. Greece could succumb to severe social unrest. The country is not self-sufficient in food – - if hyperinflation were allowed to set in, food shortages and malnutrition could ensue. The threat of such a prospect might finally provide the impetus for a Greek government to get down to doing the hard work of structural reform, not because outsiders are telling them to, but because Greeks themselves see the options and commit to reforms. This process is crucial if Greece aspires to healthy and sustained rates of economic growth. Too much of the economy is tied up in red tape. Doing business has to be made easier. One example of the bureaucracy involved in running an enterprise in Greece is a new bookstore-cafe I visited recently in Athens. The owner had spent almost a year jumping through the hoops required to open her business, now a month old. I ordered a coffee at the cafe and the waitress walked immediately over to the bar across the street to pick one up. Despite months of trying, the owner had been unable to get a license to make coffee on the premises. Shortly after, I watched a customer get turned away when she tried to purchase a book. It was 6:05 p.m., and it is illegal to sell books after 6 p.m. in Athens. I was in a bookstore-cafe that could neither make coffee nor sell books. Doing business in Greece involves layers of bureaucracy, which provides guaranteed incomes for cushioned professions such as notaries, lawyers, tax collectors, architects and inspectors, but produces little value. At least half of the members in the Greek parliament hail from these professions and consequently are incentives to perpetuate a status quo that impedes launching, running or finding investment for businesses. On my recent visit to Athens, a number of bright, young, foreign-educated Greeks spoke to me about their hopes of forming new political movements, untainted by the main Pasok and New Democracy parties. When I asked why this has yet to happen, they responded that Greece must sink further before it will be ready to revive itself.” We are all on the sidelines, waiting for Greece to hit bottom,” one young man said to me. “We do not want to mobilize and get involved now because the house of cards could come crashing down on top of us. We will wait until the collapse has happened and then we can finally start rebuilding anew.” It is hard to imagine Greece’s current political class facing up to the country’s huge problems without the threat of economic collapse as the alternative. Nor are there obvious signs of new blood coming through the established ranks. But a Greek default and exit may trigger the emergence of a desperately needed new breed of politicians.