NEWS,27.09.2012

Spain announces tough economic reforms

Spain announced a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts today in what many see as an effort to pre-empt the likely conditions of an international bailout.Government ministries saw their budgets slashed by 8.9% for next year, as Prime Minister Mariano Rajoy's battle to reduce one of the euro zone's biggest deficits was made harder by weak tax revenues in a prolonged recession.However, the conservative government said tax revenue would be higher in 2012 than it had been originally budgeted for and would grow 3.8% next year from this year.Spending cuts would be worth 0.77% of gross domestic product in 2013, while adjustment in revenue would be worth 0.56% of GDP."This is a crisis budget aimed at emerging from the crisis ... In this budget there is a larger adjustment of spending than revenue," Deputy Prime Minister Soraya Saenz de Santamaria told a news conference after a marathon six-hour cabinet meeting.Spain, the euro zone's fourth largest economy, is at the centre of the crisis. Investors fear that Madrid cannot control its finances and that Rajoy does not have the political will to take all the necessary but unpopular measures.Madrid is talking to Brussels about the terms of a possible European aid package that would trigger a European Central Bank bond-buying programme and ease Madrid's unsustainable borrowing costs.Economy Minister Luis de Guindos reiterated that the government was still analysing potential conditions for aid.Uncertainty over Spain's ability to control its economy, and especially the regional governments which make up around half of total spending, has been further rattled by rising demands for independence in the wealthy northeastern state of Catalonia.The deputy prime minister said today the region was not permitted to hold a referendum on independence before consulting with the rest of the country.Economic reform timetable Saenz de Santamaria said the government would detail 43 new laws to reform the economy over the next six months, including a reform of the pension system, one of the state's most expensive costs, before the end of the year.Spain's detailed timetable for economic reforms goes beyond what the European Commission has asked of Spain and is an ambitious step forward, the EU's top economic official said on Thursday in response to the government announcements."The reforms are clearly targeted at some of the most pressing policy challenges," EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.Market reaction was cautious."The first impression (of the announcements) are good, heading towards a major adjustment in spending rather than in revenues," said Jose Luis Martinez of Citigroup, in Madrid."However, we see as too optimistic the macroeconomic assumption of 0.5% recession for the next year. We see a scenario with a deeper recession and if this were the case, further spending cuts will be needed".De Guindos' statement that the 2012 budget deficit target would be met this year due to a solid increase in revenues will also be viewed with suspicion with many economists expecting the government to miss its deficit target of 6.3 percent of GDP.The measures continue to heap pressure on the crisis-weary population and are likely to fuel further street protests, which have become increasingly violent as tensions rise and police are given the green light to use force to disperse crowds.

EU wants $12bn US sanctions in Boeing row

The European Union has asked the World Trade Organisation (WTO) for the right to impose annual trade sanctions worth up to $12bn on the United States in retaliation for illegal US subsidies to planemaker Boeing.The EU request is the latest legal move in the world’s biggest trade dispute. The wrangling over subsidies given to Boeing and its European rival Airbus stretches back more than seven years.“This follows the EU’s assessment that the United States had not lived up to its obligation to remove its illegal subsidies in the aircraft sector, as required by the WTO rulings that clearly condemned US subsidies to Boeing,” the EU said in a statement.The figure of $12bn was “based on estimates of the damage suffered by the EU due to unfair and biased competition from the US industry”, it added. Airbus, which is owned by aerospace group EADS, said the figure was justified by the WTO’s finding that the effect of the “particularly pervasive” subsidies was significantly larger than their face value. It also said that the launch of Boeing’s 787 aircraft would not have been possible without illegal subsidies.“It is the largest WTO penalty ever requested and it follows the worst loss a party has seen in the history of the WTO,” Airbus said in a statement.In two parallel legal disputes, the WTO has ruled that both companies have received billions of dollars in illegal subsidies to support their large civil aircraft programmes. In Boeing’s case, the deadline for the United States to comply with the WTO ruling was last Sunday, but the EU has rejected US assurances that the handouts have stopped.  The European demand for sanctions mirrors a US claim to the right to impose up to $10bn of sanctions on the EU.  Both claims are effectively frozen until other legal avenues have been exhausted, and many experts expect the two sides will settle the dispute outside the courtroom rather than let the tit-for-tat litigation drag on for years.“We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement. We made offers time and again but are ready to fight it through if the other side wishes to do so,” Airbus spokesperson Maggie Bergsma said.There was no immediate reaction from the US Trade Representative’s office. However, US ambassador to the WTO Michael Punke, speaking to reporters in Geneva on Wednesday, said the EU was much more at fault than the United States.“Here is the key figure to keep in mind, for those who are keeping score at home on the Boeing-Airbus discussion: through the WTO dispute resolution process there have been identified $19bn of illegal financing by Airbus. The equivalent number that has been identified for Boeing is $3bn to $4bn. So that’s the starting point for our discussion,” Punke said.“Beyond that, it is very much our contention that many of the types of subsidies that have been identified in the European context are very much still at play, including, for example, in the launch of the (Airbus) A350 and the A380.” 

EU plans airline industry shake-up

The EU will get tougher rules to ensure fair competition and protect its airline companies as it seeks to boost an industry vital to the wider economy, the European Commission said on Thursday."Archaic ownership and control restrictions" must also go as part of an international effort so as to ensure airlines get easier access to needed new capital, EU Transport Commissioner Siim Kallas said in a statement.The European Union would negotiate "new and more effective EU instruments to protect European interests against unfair practices," he said.Standard "fair competition clauses" would be included in current bilateral air services agreements between EU and non-EU countries, he added.Most countries apply control restrictions - foreign ownership in US airlines is limited to 25% and in the EU 49% - but these deny carriers access to new capital and prevent consolidation, Kallas said, adding: "It is now time to address this issue more vigorously."Kallas said European aviation had suffered badly in the economic downturn and it needed a shake-up to make it more competitive given the rise of fast growing airlines in Asia and the Middle East targetting a global market."We urgently need a step change. Faced with the dramatic changes in global aviation, Europe must respond and adapt rapidly or be left behind," he said.To help carriers access to new markets, the commissioner said he wanted to negotiate EU-level air service agreements with countries such as China, Russia, the Gulf States, Japan, India and southeast Asian countries.In addition, accords were needed with neighbouring countries such as Ukraine, Azerbaijan, Tunisia, Turkey and Egypt, Kallas said, claiming the agreements would produce annual benefits of €12bn.

NEWS,24.07.2012

Germany's credit rating downgraded

Germany's Aaa credit rating outlook has been lowered to negative by Moody's.The rating agency cited "rising uncertainty" about Europe's debt crisis.Risks that Greece may leave the euro and the "increasing likelihood" of help for Spain and Italy also caused the downgrade."Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form," Moody's said. Germany's vulnerable banking system, which Moody's deems exposed to the most stressed euro countries, could leave them open to further deepening of the crisis.However, it will retain its Aaa rating because of the country's "advanced and diversified economy" with high productivity and strong demand for German products.Finland held on to its top ranking, getting a stable outlook from Moody's.

 

Deutsche Bank's Internal Libor Investigation Finds Deutsche Bank Mostly Innocent

 

Great news, you guys. We can go ahead and scratch at least one bank off the list of egregious interest-rate manipulators. That's because this bank has heroically determined that it is totally innocent. Almost totally, anyway.Deutsche Bank, the biggest German bank, has carefully investigated its own role in the habitual, fraudulent, global rigging of Libor, the most important interest rate in the world. And you might want to sit down for this, but Deutsche Bank has determined, to what we can only imagine is its own profound relief, that Deutsche Bank was only barely involved in the scandal. Hardly any involvement, really. If you blur your eyes a bit, it even kind of looks like Deutsche Bank wasn't involved at all. Certainly not in its top executive ranks. That's the way Deutsche Bank would like you to see it, anyway.Hmm, one small problem, though: Handelsblatt is reporting that Deutsche Bank is bracing for "a huge fine" in the Libor scandal, setting aside between $300 million and $1 billion -- the middle point of which would be higher than the $450 million Barclays paid. Does that sound like a bank that really expects to get out of this without any mud getting splashed on the C-suite?Anyway, we can only imagine that if Deutsche Bank is indeed planning on paying such a huge fine, then it is only doing so out of the goodness of its heart, a sense of civic duty really. Because it turns out, according to Deutsche Bank's investigation, that every bit of Deutsche Bank's involvement in the constant, gleeful rigging of Libor for years came down to just two very bad Deutsche Apples, who were fired last year. Both of those, let's call them, slimeballs apparently were part of the global Libor-rigging cartel that involved nearly every large bank in the world. But they're gone now, and we can only imagine that their desks have been taken out back and chopped into dust, that their pictures have been photoshopped out of all the company's birthday-party photos, and that their names are no longer spoken around Deutsche Bank's offices in any tones other than scorn or maybe shame.A Deutsche Bank internal probe has found that two of its former traders may have been involved in colluding to manipulate global benchmark interest rates but there was no indication of failure at the top of the organization, three people close to the investigation said.No indication of failure at the top of the organization! This will be a tremendous relief to spanking-new Deutsche Bank chief Anshu Jain, who is already on thin ice with the Germans because he came up from the bank's investment-banking arm. Germans don't much like investment bankers. To make matters worse, it was Jain's investment-banking arm that happened to be in charge of these bad-apple traders that were fiendishly rigging Libor. A major scandal that originated in Mr. Jain's area of the bank could damage his chances to continue on as sole CEO of the bank after co-head Jürgen Fitschen's contract expires in three years.Thank goodness for Jain that such a risk is apparently all gone now, according to Deutsche Bank's unflinching review of its own leadership. In fact, Reuters seems to imply that Deutsche Bank will likely avoid the sort of unpleasantness that beset Barclays, where the chairman, CEO and chief operating officer all walked the plank as a result of that bank's admitted Libor manipulation. And we can only imagine that the ongoing investigations by "regulators and governmental entities" in the U.S. and Europe, including German markets regulator BaFin, are now a mere formality. All that's needed now is to bring those two pesky scapegoats to justice, and Deutsche Bank can get back to doing the Lord's work.

Italy pushes for Sicilian recovery plan

Italian Prime Minister Mario Monti imposed a compulsory plan to restore financial stability to the cash-strapped Sicily region and overhaul its bloated public administration, a government statement said today.The statement, issued after a meeting between Monti and regional governor Raffaele Lombardo, said the leaders had agreed "a plan for financial recovery and reorganisation of the region's public administration, with a binding timeframe and objectives".The statement stopped short of saying that Sicily would be placed under special administration but made it clear that the programme would be monitored from Rome and that it would insist on cuts to the region's notoriously swollen payroll."The programme is to be finalised in the coming weeks and will be formally signed by the regional and national governments," the statement said.Sicily, which accounts for about 5.5% of Italy's gross domestic product, has been at the centre of growing concerns over the financial stability of Italy's regional and city governments after Monti said last week there were serious concerns about the possibility that it could default.The autonomous island region has some 5.3 billion euros in debt, a long history of waste and mismanagement and an outsized public sector payroll that critics say has been used by successive governments to buy votes.Officials have since played down fears of an immediate crisis with Interior Minister Annamario Cancellieri saying on Monday that there was no risk either of default or of a special government administrator being appointed.Worries about Sicily come as Italy itself moves to the forefront of concerns in the euro zone crisis, with the cost of servicing huge debts jumping on contagion fears for the bloc's third biggest economy linked to the worsening plight of Spain.Following the meeting, Lombardo repeated his own insistence that Sicily had sound and sustainable finances and dismissed talk of default as "rubbish" but confirmed he would resign by the end of the month as previously agreed.He also said the government had released 240 million euros to help cover funding gaps in the health system, one of the regional administration's key responsibilities.While the plight of Italy's regional and municipal authorities has not reached the levels seen in Spain, where several regions have been reported to be close to asking for state aid, there have been growing signs of strain from successive cuts to government transfers.On Tuesday, mayors from around Italy held a demonstration outside the Senate to protest against the cuts which they say will force them to curtail vital local services.The Corte dei Conti, Italy's top public finance watchdog, has made a damning series of criticisms of the regional administration in Sicily, which has overseen a steady deterioration in the island's finances over the past decade.With an unemployment rate of 19.5%, almost twice the national average, Sicily is among the regions hardest hit by the recession but its public sector payroll has been constantly increased, particularly in the health sector.

NEWS, 01.06.2012.

Irish say yes to EU pact, now seek EU growth deal

 

Ireland's voters have agreed to ratify the European Union's deficit-fighting treaty with a resounding 60.3 percent "yes," vote final referendum results Friday showed, but government leaders and pro-treaty campaigners alike expressed relief rather than joy because of the stark economic challenges ahead.The treaty's approval, after weeks of nervousness in Dublin and Brussels, relieves some pressure on EU financial chiefs as they battle to contain the eurozone's debt crisis. But critics said the tougher deficit rules would do nothing to stimulate desperately needed growth in bailed-out Ireland, Portugal and Greece, nor stop Spain or Italy from requiring aid too.And a stern-faced Irish Prime Minister Enda Kenny agreed, stressing in his victory speech that Ireland's decision would strengthen his hand as he seeks, with many other European nations, to shift Germany in its stubborn resistance to more aggressive measures to boost growth through government spending."I have consistently argued that budget rules alone will not be enough to overcome the economic crisis that faces Europe. They must go hand in hand with a real and concrete growth program for Europe," Kenny said in a nationally televised press conference on the steps of his central Dublin office.Kenny said EU and European Central Bank chiefs must agree on a European-wide new system for managing the toxic banking debts that brought Ireland to the edge of bankruptcy in 2010 and now threaten to do the same to Spain. Ireland long has pressed EU partners, particularly Germany, in vain to permit partial writedowns of Irish banking debts that could ultimately cost Irish taxpayers an estimated (EURO)68 billion ($85 billion) and have already given Ireland the worst deficits in Europe.Kenny later spoke with German Chancellor Angela Merkel, Europe's leading champion of austerity. Merkel welcomed Ireland's willingness to vote yes to more cuts as an outcome that "deserves particular recognition and respect." And she mirrored Kenny's call for new growth initiatives, saying debt and deficit reduction "must go hand in hand with the strengthening of forces for growth and competitiveness in the economies of the eurozone. "German Foreign Minister Guido Westerwelle said all EU nations should follow Ireland's example and speedily ratify the treaty, which 25 nations signed in February and which is supposed to come into force by early 2013."The fiscal compact stands for long-term financial policy good sense. If all of Europe decisively commits itself to this course, we will be rewarded with new confidence," he said.The result of Thursday's referendum represented a surprisingly strong victory for Kenny, who courted unpopularity by insisting that Ireland already four years into a brutal austerity program that has slashed 15 percent from many workers' incomes had no choice but to vote in support of yet more cuts and tax hikes.And when the official result was announced in Dublin Castle, victorious campaign officials engaged in none of the cheers, shouts and hugs normally associated with the occasion."There was nobody from the `yes' camp jumping up and down," observed Gerry Adams, leader of the Irish nationalist Sinn Fein party, which campaigned against the deal.Government ministers emphasized that voters' anxiety about the parlous state of the economy with unemployment stuck on 14.3 percent and hundreds of thousands of households trapped in negative equity colored their every step on the campaign trail."The astonishing thing about this campaign was that lots of people voted yes with a heavy heart, and many voted no with a heavy heart. Both sides were really concerned about growth and employment," said Ireland's minister for social protection, Joan Burton, who has overseen cuts in many welfare payments.

Overall, about half of Ireland's 3.13 million registered voters participated in Thursday's referendum, a typical turnout in an officially neutral country that is constitutionally required to hold a referendum on each European treaty.Public rejection could have blocked Ireland from receiving new EU loans once its 2010 bailout money runs out next year. It also would have sent political shockwaves through other eurozone members, where anger against austerity and bank bailouts runs similarly high but citizens are denied the chance to vote on the treaty. The other 24 signatories are ratifying it through their parliaments.During the campaign, Kenny warned that rejection would mean even worse austerity, because Ireland would suffer more credit downgrades and lose its key EU source of funding.The treaty proposes that all members who ratify it should reduce their annual deficits to no more than 0.5 percent of gross domestic product. The current eurozone limit is 3 percent of GDP. Ireland is committed to cutting its way back to that level by 2015.Opponents of the treaty argued that the new 0.5 percent deficit limit would force Ireland to keep cutting until perhaps 2020, when greater state investment to stimulate the economy was required. The government countered that much would depend on whether Ireland could keep growing its economy against the tide of austerity.Ireland, unlike much of Europe, has recorded a faint pulse of growth over the past year thanks to strong exports by nearly 1,000 foreign high-tech companies based in Ireland. But the domestic economy  with consumers reducing their own debts and salting away savings after a decade of Celtic Tiger extravagance  has shrunk for four straight years.Ireland has posted the EU's worst deficits since 2009, including an EU-record 32.4 percent in 2010 and 13.1 percent last year. Both figures were greatly inflated by the exceptional costs of Ireland's decision to nationalize five of its six banks rather than see any collapse. That debt burden overwhelmed Ireland's national finances and pushed the nation into the bailout zone in 2010. Ireland's expected repayments to international bondholders and central banks, plus decades of related interest charges, represent (EURO)19,000 ($23,500) for every man, woman and child.

NEWS,29.03.2012.

Spaniards strike against 'unstoppable' job reforms

Spanish workers have staged a general strike to protest against labour reforms which the government declared "unstoppable" but many ignored the action, fearing for their jobs in a country with the EU's highest unemployment rate.Factories across the nation were silent and ports closed, while television and transport were disrupted by the strike against the austerity policies of Prime Minister Mariano Rajoy - whom Spaniards elected by a landslide only four months ago.Police arrested a number of protesters in Madrid while small-scale violence flared in Barcelona, Spain's second city. Tourists were locked out of the Alhambra, a 14th-century Moorish palace in the southern city of Granada which is one of Europe's great cultural monuments.Strikers promised a wave of protests to confront Rajoy's conservative government over reforms making it cheaper for companies to fire staff and dismantling a nationwide system of collective pay bargaining."We don't have much hope, but this is just the beginning," said Trini Cuesta, a 58-year-old employee at a public hospital in Barcelona. "It's not just about labour reform, we're against policies that are provoking social and economic ruin. Social protests must rise."Spain is tipping into its second recession since the end of 2009 and some observers expect at least another million people to join already swollen unemployment lines. The jobless rate is already 23% and almost half of under 25-year-olds are out of work.Rajoy's government said it was committed to making labour reforms which it argues will help to reduce unemployment by making the labour market more efficient. "The agenda for reform is unstoppable," Labour Minister Fatima Banez said.Police presence was particularly heavy around parliament where politicians were putting in a longer work day than usual as Rajoy sought approval for five different measures, including funding for indebted local governments to pay suppliers.Spaniards have so far been tolerant of Rajoy's efforts to reform the labour market and meet strict European Union-imposed deficit goals to ensure it avoids a Greek-style debt crisis.But the general strike, the first since September 2010, showed that patience may be wearing thin. The largest union put support for the strike at 77% while the government said the work day was proceeding normally but gave no overall tally.Spain's blue chip index fell 0.87%, its eighth consecutive session of declines as concerns over the country's finances returned.There were pockets of violence in Barcelona, where protesters set garbage bins on fire and threw chairs from the famed outdoor cafes of Spain's second largest city onto the street, but no injuries were reported.Union members waving red flags gathered in major cities where they plastered stickers on shop windows reading "Closed for Strike", though many remained open for business.Police barricaded parliament and arrested 58 people in Madrid, many of whom were trying to stop people going to work.Many workers crossed the picket lines, saying they feared losing their jobs or unwilling to lose the average of around 100 euros which will be docked from the pay cheques of the strikers.While many Spaniards are fighting to preserve protection for their jobs, others are on short-term contracts of typically six months with little protection.These workers fear their employers could punish strikers by failing to renew their contracts when they expire, and give the job instead to one of the army of unemployed.Fewer than a fifth of Spanish employees are currently affiliated with the country's two biggest unions and many feel they don't represent the wider workforce."A lot of people actually blame the unions in part for the rigidity in the labour market and lack of competitiveness, so they aren't exactly in the position to rally a lot of people and the support for the strike reflects that," said David Bach, political analyst at IE business school in Madrid.

 However, union members are ready for a long fight. "This is the largest cut of (workers') rights since anyone can remember. There has to be a better way to get out of this crisis," UGT union employee Marta Lois, 40, said on Madrid's main street Gran Via, where protesters blocked traffic."Don't forget this is just the first major event of what is likely going to be a long year of demonstrations against government policies," Antonio Barroso, political analyst with Eurasia Group said.Rajoy said on Tuesday his administration would pass a "very, very, austere budget" on Friday. His goal of cutting the deficit this year to 5.3% of gross domestic product implies nominal cuts of at least 35 billion euros ($57 billion).The cuts are meant to keep borrowing costs down as well as working towards meeting the EU's 3% deficit limit next year, but some economists say they will deepen the looming recession.The strike halted overnight production at factories from Barcelona in the north to Cadiz in the south, with unions reporting full stoppages at General Motors Espana, Renault, ArcelorMittal and Acerinox.Transport employees provided a basic level of service, meaning one in four buses and about a third of metro and local trains were expected to run. Most domestic and European flights were grounded although long-haul services continued."We're offering the government a chance to start a different path (of reform) in search of wider consensus," Ignacio Fernandez Toxo, head of Spain's largest union Comisiones Obreras said. "If not there will be rising social conflict."Despite the promises to push on with reforms aimed at winning approval from Brussels, Rajoy's People's Party suffered a surprise setback in a regional election on Sunday, meaning he must measure his steps to avoid provoking wider discontent.A high turnout is expected at an evening march in Madrid that will end at the central Puerta del Sol square, cradle of last year's anti-austerity "Indignant" movement.National grid operator REE estimated electricity demand - a key indicator of economic activity - for Thursday as a whole would drop by 14.8% from Wednesday to 571 gigawatt-hours, a level comparable to a public holiday or a weekend.During the last general strike in September 2010, demand fell by 12.6% from the day before.

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,11.03.2012.

Greek FOCUS TO economy kick-start

After the success of a debt cut plan which paves the way for a 130-billion euro ($170.55 billion) international bailout, attention in Athens is shifting to politics and on how to kick-start debt-laden Greece's stricken economy, officials said over the weekend. Greece averted the immediate threat of an uncontrolled default on Friday when it successfully concluded a bond swap deal under which private sector creditors agreed to accept deep cuts in the value of their holdings. The deal, which cuts about 105 billion euros of the country's privately-held debt, more than half of the total, was offering Greece a second chance to slowly regain investors' and markets' trust, its central banker George Provopoulos said.” This is a new opportunity... to gradually restore confidence in the economy's prospects," he was quoted as saying in financial newspaper Imerisia.European Central Bank policymaker Ewald Nowotny shared the cautious optimism. "A clear success has been achieved here," Nowotny said in an interview aired by Austrian radio, adding he saw no need at the moment for any talk about a further bailout. Once the debt swap is completed on April 12, when a smaller tranche of bonds worth at least 20 billion euros will be exchanged, Greece can go ahead with new elections, an official said."I imagine it (the elections) will be somewhere then," government spokesman Pantelis Kapsis told Skai television when asked if the polls would take place on April 29 or on one of the following Sundays.

 Formed in November, Greece's coalition government under technocrat Prime Minister Lucas Papademos had a narrow mandate to complete bailout and debt cut talks and then hold elections as soon as possible. But austerity measures associated with the policies have plunged the Greek economy into its longest and deepest slump since World War Two. Gross domestic product shrank by a record 7% in 2011, data showed on Saturday. Investment slumped by 21% after a 15% slide in 2010.Greece hopes to get 1 billion euros in financing from the European Investment Bank (EIB) this year as a stimulus to encourage investment, a senior official said on Saturday. Greece and the European Commission are pushing the EIB, the European Union's long-term investment arm, to disburse the funds, said Gikas Hardouvelis, top economic adviser to Papademos."The faster we do it, the better. The economy is sinking and everyone is too scared (to invest)," Hardouvelis told Mega television. But the EIB was still worried about getting too exposed to Greece and a solution to overcome its reluctance might be to disburse the funds using local banks as intermediaries, he said. As a way to help boost Greek growth, the European Union has already increased its share of financing in certain EU co-financed projects and said it would help Greece cut red tape to make more efficient use of EU funds earmarked for it. Greece is entitled to a total 20 billion euros in so-called EU structural funds for the period 2007-2013. It has only used 8 billion euros so far, EU Commission President Jose Manuel Barroso said on February 29.