NEWS,09.11.2012

obama 'open to compromise' to avoid cuts

Newly re-elected President Barack Obama has offered to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls.He spoke just hours after John Boehner, the Republican Speaker of the House of Representatives, had repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the fiscal crisis.In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan and invited congressional leaders to meet with him next week."I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said.The "fiscal cliff" of steep government spending cuts and tax increases due to be implemented under existing law in early 2013 is Obama's most pressing challenge after winning a second term.Aimed at cutting the federal budget deficit, the planned measures could take an estimated $600 billion out of the economy and severely hinder economic growth.While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans."I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach," he said.Earlier, Boehner called on Obama to play a more active role in addressing the issue and urged the president to take the lead in negotiations."This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.While disagreeing on immediate measures to avert the looming crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of US tax laws.The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9%. The rate is now 7.9%.But it also warned of a crisis ahead if the United States does not stem the growth of its exploding deficit.Partisan squabbling over the budget crisis will also harm the US economy, according to a strong majority of economists polled by Reuters after Tuesday's presidential election.

Argentines flood streets in anti-government protest

Hundreds of thousands of Argentines flooded the streets of the country's biggest cities on Thursday in a broad protest against President Cristina Fernandez's interventionist policies and combative style.The center-left leader won easy re-election a year ago but her approval ratings have slid since. Her government has virtually banned dollar purchases and it limited imports this year, worsening a steep economic slowdown.High crime, inflation of roughly 25% a year, and a possible bid by government allies to reform the constitution to allow Fernandez to run for a third term are also stoking unrest, particularly among middle-class Argentines."We've taken to the streets because we're sick of crime and having our pockets picked. Inflation is killing us, our pensions can't keep up," said Daniel Gonzalez, 70, a retired teacher.Thursday's pot-banging protests conjured memories of the demonstrations staged by angry savers, housewives and students during Argentina's 2001-02 economic and political crisis.Protesters in neighborhoods throughout Buenos Aires waved signs demanding freedom, transparency and an end to crime and corruption. A spokesman for the city's Justice and Security Ministry estimated 700,000 people were rallying in the capital.A similar, smaller protest was staged just two months ago.Local television showed rallies in other cities, including Rosario, Cordoba and Salta. The demonstrations were organised through social media and not by any one political party.Some Argentines even took to the streets abroad with hundreds of demonstrators gathering outside the country's consulates in Italy, Spain and the United States."We're protesting against Cristina's government so she listens to us. She's not infallible like she wants to seem. With this arrogance we won't get anywhere, we're already quite isolated (in the world) because of her policies," said Pedro Dominguez, a 56-year-old doctor protesting in Buenos Aires.Fernandez's government has angered trading partners with import curbs and it riled Madrid when it seized control of energy company YPF from Spain's Repsol earlier this year. The country still has outstanding debts dating back to a financial meltdown a decade ago.Critics say a government drive to break up the media empire run by Grupo Clarin is an assault on free speech. But supporters of the anti-monopoly law that is being enforced say officials are democratising the airwaves.Fernandez won 54% of votes in October 2011, largely due to an economic boom, job growth and expanded social programmes. Her government spends heavily to stoke high economic growth and backs big wage hikes that tend to mirror inflation.Several government officials have been dismissive of the protests and accused organisers of being on the far right.Fernandez told supporters on Wednesday that Argentines enjoyed more freedom of speech than ever before."If there's a sector that is demanding certain things, they have to stand up and say this clearly. Now, please, don't anyone think that I'll start contradicting my own policies," she said.The president's approval rating edged up to 31.6% in October, up 1 percentage point from a month earlier, while her rejection rating dipped slightly to 59.3%, according to a recent poll.Other polls have given her higher approval ratings but they also show a decline of 10 to 15 percentage points this year."The government and Cristina will emerge even weaker than they were (after the protests) but the opposition will show its impotence and its inability to channel these demands," said Sergio Berensztein, director of the Poliarquia political consulting firm.Under the constitution, Fernandez cannot run for a third consecutive term in 2015. Local media report her congressional allies may try to reform the country's charter to change this, but the government has not confirmed any such plan.For now, no opposition leader poses a real challenge to her and the ruling Peronist party still has strong support in the heavily populated working-class outskirts of Buenos Aires."Cristina won with 54% of votes and if there were an election today, she would win again because there are no opposition candidates," said Cesar Pacheco, a 62-year-old shipbuilder protesting outside the presidential palace.

Iranian jets fired on US drone in Gulf

The Pentagon revealed on Thursday that two Iranian fighter jets fired on an unarmed US Predator drone in the Gulf last week but the aircraft was not hit, in an incident that underscored tensions in the region.The incident occurred on 1 November - less than a week before America's presidential election - but the Pentagon kept it quiet until reports of the confrontation leaked out."They intercepted the aircraft and fired multiple rounds," spokesperson George Little told a news conference.The Su-25 Frogfoot fighters, much faster than the slow-moving turboprop drone, fired at least twice and made two passes, he saidIt was unclear whether the Iranians intended to warn off the unmanned drone but Little said: "Our working assumption is that they fired to take it down."The confrontation threatened to derail diplomatic efforts to defuse a mounting crisis over Tehran's nuclear programme, amid a shadow war of cyber attacks, bombings and assassinations.Tough new sanctions led by Washington are squeezing Iran's economy, while the United States and Israel are accused of staging cyber sabotage on Tehran's uranium enrichment plants.The US military drone was "never in Iranian air space" and came under fire from the fighter jets off the Iranian coast over international waters, Little said.The robotic Predator aircraft was conducting "routine surveillance" and the United States has told Iran it has no plans to suspend the flights, he said."The United States has communicated to the Iranians that we will continue to conduct surveillance flights over international waters over the Arabian Gulf consistent with longstanding practice and our commitment to the security of the region," he said.In a warning to Tehran, the Pentagon spokesperson said the United States was prepared to safeguard its forces."We have a wide range of options, from diplomatic to military, to protect our military assets and our forces in the region and will do so when necessary," Little said.The MQ-1 drone was pursued further by the Iranian warplanes but was not fired on again, he said.The Predator later returned safely to an unspecified military base in the region following the incident.The Predator known as the weapon of choice in America's bombing campaign against al-Qaeda in Pakistan was intercepted about 16 nautical miles off the Iranian coast, beyond the Islamic Republic's territorial waters that extend 12 nautical miles off the country's shore.Iranian military speedboats have sometimes swarmed US warships in the Gulf and the strategic Strait of Hormuz, a vital waterway for the world's oil, but the incident last week was the first involving an American drone in a confrontation with Iranian aircraft, officials said.Tensions over Iran's nuclear ambitions prompted the United States to bolster its military presence around the Gulf over the past year, deploying two aircraft carrier battle groups in the area at all times, a squadron of stealthy F-22 fighters to the United Arab Emirates and more minesweeper ships.With America's drawn out election campaign finally over, analysts had predicted President Barack Obama might have more leeway to pursue diplomacy with Iran. But the encounter with the Iranian fighter jets served as a reminder that a single incident or misunderstanding could trigger conflict.A new round of talks between Iran and six world powers, the first since June, is expected by the end of the year or in early 2013.Iran insists its nuclear programme is peaceful and has made clear any deal with the major powers has to offer relief from crippling sanctions.Israel meanwhile maintains time is running out as Iran expands its uranium enrichment work, with Prime Minister Benjamin Netanyahu suggesting his country may stage a unilateral strike next year if Tehran continues on its present course.At the State Department, officials unveiled yet more sanctions on Iran, targeting the communications minister and the culture ministry among others for censoring the media and the internet.

NEWS,26.909.2012

Clashes erupt as thousands of Greeks protest austerity

Greek police clashed with hooded rioters hurling petrol bombs as tens of thousands took to the streets of Athens on Wednesday in Greece's biggest anti-austerity protest in more than a year.Violence erupted after nearly 70,000 people marched to parliament chanting "We won't submit to the troika (of lenders)" and "EU, IMF Out!" on the day of a general strike against a new round of cuts demanded by foreign lenders.As the rally ended, dozens of black-clad youths threw stones, petrol bombs and bottles at riot police, who responded with several rounds of teargas. Police chased the protesters through Syntagma square in front of parliament as helicopters clattered overhead. Smoke rose from small blazes in the streets.About 120 people were detained after angry protesters smashed bus stop kiosks and set fire to garbage cans."We can't take it anymore - we are bleeding. We can't raise our children like this," said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros a month."These tax hikes and wage cuts are killing us."The 24-hour nationwide strike, called by the country's two biggest unions representing half the four-million-strong work force, is shaping up to be the first test of whether Prime Minister Antonis Samaras can stand his ground.Police officials estimated the demonstration was the largest since a May 2011 protest, and among the biggest since near-bankrupt Greece first resorted to aid from international lenders in 2010 - which has come at the price of painful austerity cuts.The traditional summer break has allowed the fragile conservative-led coalition to enjoy relative calm on the streets since narrowly coming to power on a pro-euro, pro-bailout platform, but unions say the lull is over."Yesterday the Spaniards took to the streets, today it's us, tomorrow the Italians and the day after - all the people of Europe," Yiorgos Harisis, a unionist from the ADEDY p u blic sector group told demonstrators."With this strike we are sending a strong message to the government and the troika that the measures will not pass even if voted in parliament, because the government's days are numbered."About 3000 police - twice the number usually deployed - stood guard in the centre of Athens, which last saw serious violence in February when protesters set shops and banks ablaze as parliament approved an austerity bill.Police formed a barricade outside parliament, and officers blocked a pensioner who tried to move towards Samaras's office holding a banner with pictures of Greek prime ministers under the title: "The biggest traitors in Greek history".Ships stayed docked, museums and monuments were shut to visitors and air traffic controllers walked off the job for a three-hour stoppage. Train service and flights were suspended, public offices and shops were shut, and hospitals worked on skeletal staff as part of the general strike."Destroying our lives" Much of the union anger is directed at spending cuts worth nearly 12 billion euros over the next two years that Greece has promised the European Union and International Monetary Fund in an effort to secure its next tranche of aid.The bulk of those cuts is expected from cutting wages, pensions and welfare benefits, heaping a new wave of misery on Greeks who say repeated rounds of austerity have pushed them to the brink and failed to transform the country for the better."We can't just sit by idly and do nothing while the troika and the government destroy our lives," said Dimitra Kontouli, a 49-year-old local government employee whose salary was cut to 1100 euros a month from 1600 euros previously."My husband has lost his job, we just can't make ends meet."A survey by the MRB polling agency last week showed that more than 90% of Greeks believe the planned cuts are unfair and burden the poor, with the vast majority expecting more austerity in coming years.Unions argue that Greece should remain in the euro but default on part of its debt and ditch the current recipe of austerity cuts in favour of higher taxes on the rich and efforts to nab wealthy tax evaders.But with Greece facing certain bankruptcy and a potential euro zone exit without further aid, Samaras's government has little choice but to push through the measures, which have also exposed fissures in his coalition.With Greece in its fifth year of recession and nearly one out of four jobless, analysts say patience is wearing thin and a strong public backlash could tear apart the weak government."What people want to tell Samaras is that they are hurt and Samaras could use this to demand concessions from the troika," MRB polling director Dimitris Mavros said."The people are willing to give the government time, but on certain conditions like cracking down on tax evasion and securing a bailout extension. If the government succeeds in that, its life will also be extended."

Greek protests cast shadow over the euro

Protests in Spain and Greece put the European sovereign debt crisis centre stage, renewing investors' worries about the risk the euro zone's problems pose to global growth and corporate profits.Those concerns are underpinning demand for fixed-income securities including US Treasuries, and helped fuel appetite for today's auction of US$35 billion of five-year bonds. "It was a good auction," Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, which as a primary dealer is obliged to bid in US debt offerings, told Bloomberg News. "It is suggesting more and more fear - that things could spiral out of control in Europe. The demand for dollars and Treasuries continues to rise."All eyes are on Spain, which is scheduled to announce its budget tomorrow. And on Friday, Moody's will publish its latest review of the nation's credit rating. In contrast to rising demand for US government bonds, the yield on Spain's 10-year bond surged more than 30 basis points back through the 6% mark.Figures released on Tuesday suggested Spain will miss its public deficit target of 6.3% of gross domestic product this year, and on Wednesday the Bank of Spain said the economy continued to shrink markedly in the third quarter, according to Reuters.Spain's prime minister, Mariano Rajoy, has so far resisted the calls to ask for an EU financial bailout but may not be able to hold out much longer. In a speech in New York earlier today, Rajoy said all Spaniards were going to have to make sacrifices.Europe's Stoxx 600 Index ended the session with a 1.8% slide. National benchmark indexes in Germany, France and the UK dropped. So did Spain's IBEX 35 Index, closing 3.9% lower. In late afternoon trading in New York, the Dow Jones Industrial Average shed 0.16%, the Standard & Poor's 500 declined 0.38%, while the Nasdaq Composite Index fell 0.62%. Meanwhile, the latest indicator on the US housing market continued to underwrite the view that at least this part of the economy is gaining forward momentum.Sales of new homes eased 0.3% to a 373,000 annual pace in August after a revised 374,000 rate in July that was better than previously estimated and the strongest since April 2010, according to Commerce Department data. And the average price of a home in the US has now risen to its highest since March 2007."There are increased signs that the housing recovery is now on a more sustainable path, though its impact on overall economic activity will remain relatively modest at best over the near-term.

Spain unveils austerity budget

Squeezed by financial markets and denounced in the streets, Spain's government will adopt on Thursday a 2013 austerity budget which could be a precursor to a full-blown bailout.The final step before a rescue is likely to come a day later, analysts say, when Madrid unveils an independent audit of its limping banks to determine how much capital they need.Spain's eurozone partners have agreed to provide a rescue loan of up to €100bn to help the banks recover from bad loans built up after a 2008 property crash.But Madrid insists €60bn will be enough.Once that matter is dealt with, the eurozone's fourth-largest economy will have all the data it requires to seek a broader, sovereign rescue from the eurzone's bailout funds.If Spain bends to the will of the markets and some of its eurozone partners by formally requesting the bailout, it would trigger a bond-buying programme for troubled states outlined by the European Central Bank on September 6.That would have the effect of curbing Spain's borrowing costs.Before making the leap, however, Prime Minister Mariano Rajoy wants to know what the conditions would be.The conservative leader likely wanted to make progress on the budget for next year, also, before making the request.The basic outline for the budget has been known since July: the plan to be adopted by the cabinet on Thursday is expected to enact spending cuts and tax increases worth a combined €39bn.The government aims to claw back a total of more than €150bn between 2012 and 2014: €62bn this year, €39bn next year and €50bn in 2014.On the austerity menu for 2013: an increase in sales tax and other taxes is expected to rake in €15bn and nearly seven billion euros will be found from cuts in the regions, which manage health and education.Other savings come from lowering unemployment benefits and social assistance, as well as a freeze in public sector hiring.But Spain will probably have to go further, said Juan Ignacio Conde Ruiz, deputy director of the Foundation of Applied Economic Studies (FEDEA)."To be credible with the markets, which is the government's ultimate goal, it would seem hard to avoid touching retirement pensions, which account for 25 percent of total spending," he said.Rajoy's election campaign promise to maintain pensions by inflation would cost €3bn - €3.5bn, Conde Ruiz said."There won't be the means to do it"That, he said, would make it impossible for Spain to meet its commitment to slash the public deficit to 6.3% of gross domestic product this year from a runaway 8.9% last year."There won't be the means to do it," added Jesus Castillo, southern European specialist at French bank Natixis. "So we should not be surprised by a freeze in pensions," he said, or even a cut so as to stay on track with the 2013 target of a deficit equal to 4.5%.Despite the analysts' doubts, Spain's Popular Party government insists pensions are going up, not down, as it faces growing protests to the austerity measures including hundreds taking to Madrid's streets Tuesday.Deputy Prime Minister Soraya Saenz de Santamaria said the new level for pensions would be decided in November."Will pensions go up? Yes, pensions are going to go up. Pensions will obviously be adjusted for the cost of living," she said.At the Spanish investment bank Inversis, analysts predict the public deficit forecasts will be revised higher for 2012 and 2013 in line with a deeper than expected recession.On Thursday, a new package of reforms negotiated with Brussels to stimulate business activity and exports also will be announced, "which could be the stage prior to a bailout request", said a report by Spanish brokerage Renta4.If Spain fails to take convincing action, the verdict could come quickly.Moody's Investors Service has until Sunday to decide whether to downgrade Spain's debt after a review. If it does so, it could be the first agency to rate the nation's debt at the equivalent of a junk bond.Spain's hesitation before seeking a rescue could be "highly risky", European Competition Commissioner Joaquin Almunia warned on Monday in an interview with AFP.The country's budget and economic reform announcements on Thursday are aimed at addressing just those concerns, said Conde Ruiz."The idea is to anticipate the conditions the aid would impose, and thus to introduce them now in the budget," he said, adding that this would ease the political sting.

NEWS,25.09.2012

Spain prepares further austerity measures

Protesters clashed with police in Spain's capital today as the government prepares a new round of unpopular austerity measures for the 2013 budget that will be announced tomorrow. Thousands gathered in Neptune plaza where they planned to form a human chain around parliament, surrounded by barricades, police trucks and more than 1500 police in riot gear.Television images showed the police beating some protesters with truncheons, in a brief, tense stand-off one block from parliament as police trucks tried to divide the crowd in two.The protest, promoted over the Internet by different activist groups, was younger and more rowdy than recent marches called by labour unions. Protesters said they were fed up with cuts to public salaries and health and education."My annual salary has dropped by 8000 euros and if it falls much further I won't be able to make ends meet," said Luis Rodriguez, 36, a firefighter who joined the protest. He said he is considering leaving Spain to find a better quality of life.With this year's budget deficit target looking untenable, the conservative government is now looking at such things as cuts in inflation-linked pensions, taxes on stock transactions, "green taxes" on emissions or eliminating tax breaks.The 2013 budget is the second one conservative Prime Minister Mariano Rajoy has had to pass since he took office in December. Spain must persuade its European partners that it can cut the budget shortfall by more than 60 billion euros by 2014.Rajoy has already passed spending cuts and tax hikes worth slightly more than that over the next two years, but half-year figures show the 2012 deficit target slipping from view as tax income forecasts will not be hit due to economic contraction.Spain is at the centre of the euro zone debt crisis on concerns the government cannot control its finances and those of highly indebted regions, bitten by a second recession since 2009 which has put one in four workers out of a job.Running out of options Half-year deficit data indicate national accounts are already on a slope that will drive Spain into a bailout. The deficit to end-June stands at over 4.3% of gross domestic product, including transfers to bailed out banks, making meeting the 6.3 percent target by the end of the year almost impossible.Yesterday, the treasury ministry said the central government deficit to end-August had reached 4.77% of GDP, already above its year-end target of 4.5% of GDP."Its going to be difficult keeping the deficit to around 2% in the second half, when the first half was closer to 4%, especially since traditionally, the second half deficit is higher than the first," said Juan Ignacio Conde-Ruiz, economist at Madrid's Complutense University.For 2012, the measures aim to reap savings of over 13 billion euros, but economists see the deficit missing the target by almost 1 percentage points implies further saving needs of up to 10 billion euros for this year alone.Rajoy has been careful to highlight the importance of next year's deficit target of 4.5% of GDP though any shortfall this year will weigh on 2013's accounts.After slashing civil servants' wages, raising value added tax by 3 percentage points - the main VAT has gone from 16% to 21% since 2010 - and cutting health and education spending, Rajoy is running out of options.More than 60% of government spending goes to pensions, unemployment benefits and servicing debt, making further cuts on the revenue side difficult without hitting 6 million jobless people.

Spain's parliament on protest alert

Spain's parliament took on the appearance of a heavily guarded fortress on Tuesday, hours ahead of a protest against the conservative government's handling of the economic crisis.The demonstration, organised behind the slogan "Occupy Congress", is expected to draw thousands of people from around Spain and was due to start around 17:30 GMT.Madrid's regional interior ministry delegation said some 1 300 police would be deployed though protesters say they have no intention of storming the chamber, only of marching around it.They are calling for fresh elections, claiming the government's austerity measures show the ruling Popular Party misled voters to get elected last November.The protest comes as Spain struggles in its second recession in three years and with unemployment near 25%.Spain has introduced austerity measures and economic reforms in a bid to convince its euro partners and investors that it is serious about reducing its bloated deficit to 6.3% of gross domestic product in 2012 to 4.5% next year.Concerns over the country's public finances was evident earlier when the Treasury sold €3.98bn in short-term debt but at a higher cost.It sold €1.39bn in three-month bills at an average interest rate of 1.2%, up from 0.95% in the last such auction on August 28, and €2.58bn in six-month bills on a yield of 2.21%, up from 2.03%.The government is expected to present a new batch of reforms on Thursday as it unveils a draft budget for 2013. A day later the results of bank stress tests carried out by an international auditing company are to be released.Spain has already been granted a €100bn loan by its 16 partner nations using the euro currency to help bail out those of its banks worst hit by the collapse of the country's real estate sector in 2008.Spain has yet to tap the fund and initial estimates say the banks will need some €60bn.

China and Japan (and U.S.) Island Dispute: It's All About Oil

The dispute over the territory known as the Senkaku Islands in Japan (and the U.S.) and as the Diaoyu Islands in China has all the makings of a Tom Clancy thriller. The 73-year-old Japanese Finance Minister, Tadahiro Matsushita was found hanged  not death by seppuku  in his home on suicide prevention day. The newly appointed Ambassador to China for Japan was found dead on a street in Japan at age 60 before he could take up his duties in China. The wife of Bo Xilai, a top contender for the top seat in the Chinese Politboro, is in prison facing a death sentence for the murder of a British businessman. The murder was revealed when one of his top aides, now sentenced to 15 years in prison, tried to defect to the United States and revealed his role in the cover-up. Governor of Tokyo, Shintaro Ishihara (79) and author of the controversial late 1980s book The Japan That Can Say No: Why Japan Will Be the First Among Equals (irreverently known as "get lost America, we can covertly rearm, develop nuclear capabilities, close U.S. bases, and handle our own defense") inflamed relations between China and Japan by engineering the government's purchase of the Senkaku Islands from a private Japanese citizen. Isihara's son Nobuteru (55) is the one of the candidates for leadership of Japan's Liberal Democratic Party, and if the party wins the election, he could possibly become Prime Minister of Japan if he can win out over Ishiba and Abe, the former Prime Minister of Japan.The car of the U.S. Ambassador to China was swarmed by protesters, and the melee was quickly broken up by Chinese security forces.U.S. Presidential candidates are silent on Asian tensions, seemingly engrossed in an adolescent battle of embarrassing sound bites.Riots have broken out in China over the disputed Islands, even though the islands were never under Chinese rule. The Japanese believe the islands belong to Japan. The Japanese Defense Minister takes comfort from U.S. Assistant Secretary of State Kurt Campbell's acknowledgement that the islands fall under the umbrella of the U.S.'s security pact with Japan.All this is happening when there's a power vacuum in China (between elections), a power vacuum in Japan (same reason), and a power vacuum in the U.S. (our elections are in November).Oil Islands As it happens, it appears that the dispute is really all about the right to explore for potential oil reserves around the islands' waters. The Japanese Finance Minister had prostate cancer and was investigating insider trading. He may or may not have had a say in whether the government should buy the islands. But his alleged suicide seemed to stem from an extra-marital affair he had with a 70 year-old Ginza bar hostess. She was retired, asked him for money, and when he refused, she sold her story to the tabloids.The death of the newly appointed ambassador to China for Japan appears for now to be just a sad coincidence of timing.China's Bo Xilai scandal is a tawdry story of corruption and greed.Sentiment within Japan's business community seems to be (based on my limited and unscientific sampling) that provoking war with China is insane, and the purchase of the islands was an unnecessary irritant. Yet the Japanese government provoked tensions with the purchase of the Islands, and the political spin in China is that this is about national integrity rather than oil exploration rights. If the Chinese invade the islands, Japan will likely fight for them, and the U.S. would be dragged into the conflict.If there is a conflict, it won't matter whether you call them the Senkaku Islands or the Diaoyo Islands. The important thing to remember is that everyone hopes they are the Oil islands.

NEWS,11.07.2012

Swiss bank raided for foreign tax evaders

 

German tax authorities have launched raids into Credit Suisse clients and French officials searched the homes of UBS employees, part of crackdowns on foreigners suspected of evading taxes through the two largest Swiss banks.Switzerland's strict banking secrecy rules, which have helped build a $2 trillion offshore financial sector, have infuriated cash-strapped governments elsewhere as they try to stop tax evasion by wealthy citizens.Roughly 5,000 German clients of Credit Suisse are being probed on suspicion of tax evasion and some had their homes searched, a source at the bank said on Wednesday, as European tax officials broaden their investigation to clients from banks.Meanwhile, the offices of UBS in Lyon, Bordeaux and Strasbourg were raided on Tuesday on suspicion of money-laundering and aiding tax evasion, according to a source at that bank.The private homes of several high-ranking UBS employees in Strasbourg were also searched, the UBS source said.UBS said it was cooperating with authorities. The French prosecutor's office declined to comment because the investigation was ongoing.It was not immediately clear whether the raids in Germany and France were coordinated or in any way connected.Credit Suisse said it was aware that German tax authorities were investigating its clients but gave no further comment.The source at the bank said tax authorities in the German towns of Bochum and Duesseldorf were probing its clients over Bermuda-based life insurance products which may have been used to avoid tax. Tax officials in both towns declined to comment.The Frankfurt prosecutor said one client was searched.The German investigation comes against the backdrop of a deal reached with Switzerland to levy taxes on German assets stashed in Swiss bank accounts that is due to come into effect next year pending German parliament approval.Peter V. Kunz, professor for business law at Berne University, said the new investigation into Swiss bank clients could add to scepticism over the deal, which German opposition politicians say is too lenient on tax evaders."I don't think it will derail the agreement altogether, but it does simplify things for its opponents," Kunz said.Duesseldorf and Bochum are in the German state of North-Rhine Westphalia, where the Social Democrat-led regional government has been one of the most vocal opponents of the deal that would also end prosecutions of Swiss banks and employees."Our tax inspectors must be able to do their work unimpeded, which is to root out criminal evaders. No tax agreement should prevent that," the region's finance minister, Norbert Walter-Borjans, said in a statement.North-Rhine Westphalia bought names of Swiss bank clients from an informant in 2010. Two sources told Reuters the targets for the latest investigation were culled in part from that information.Germany has long been trying to crack down on tax evasion.In 2008, data leaked from Liechtenstein's LGT bank revealed that wealthy citizens including former Deutsche Post chief Klaus Zumwinkel had stashed money in the tiny principality.Zumwinkel received a suspended jail sentence after admitting tax evasion.Credit Suisse struck a deal with German tax authorities last September, agreeing to pay 150 million euros ($183.83 million) to end an investigation over allegations the bank and its employees helped Germans dodge taxes.UBS was forced in 2009 to pay a fine and release the names of 4,500 clients to US officials to end a damaging tax probe. US authorities are still investigating Swiss banks including Credit Suisse and Julius Baer over tax offences.Switzerland is trying to get the US investigations dropped in exchange for the payment of fines and the transfer of names of thousands more US bank clients.

 

Spain banks to minimise hit for investors

 

Spanish banks in line for European aid are looking at ways to minimise losses for small savers who will be forced to take a hit on certain bonds and shares they bought in the ailing lenders, under conditions enforced by Brussels.Although no overall figure for losses is yet clear due to uncertainties about the eurozone bailout of banks stricken by a housing bust and recession, retail investors are reckoned to hold some €30bn ($37bn) in subordinated debt and stock in Spain's small and medium-sized banks.Only a portion of that would be facing losses as banks able to comply with new capital requirements on their own or to pay back public money by June 2013 would escape the rule.This means investors at Santander, BBVA, Caixabank and Popular as well as other smaller sound banks would be safe as these lenders have already a core tier one capital ratio above the 9% required by European authorities. Furthermore, four nationalised banks - Bankia, NovaCaixaGalicia, CatalunyaCaixa and Banco de Valencia - are discussing formulas with the European Commission to minimise the cost to customers, many of them elderly, who were often sold these complex financial instruments as savings products."We're currently negotiating the amount of the hit. The Commission wants it rather high but we're confident we can obtain something lower," said a source at one of those banks."Several options are on the table. Convert the preference shares into bonds, into deposits, or into other instruments."Other banking sources said such options were being actively looked at and implemented with individual clients in some cases.Once the principle of a haircut has been agreed with Brussels, the government has the possibility to pay compensation for the losses.Last month, EU Competition Commissioner Joaquin Almunia said conditions on the aid for the banks forbade the use of European funds to compensate bondholders, so holders of preferential shares should accept losses at market value. But he stressed that national or local governments had the right to do so.Although using scarce public money to compensate investors might be unpopular, the first banking source said the option was still on on the table. "It's one thing to compensate for a loss and break competition rules, but it's quite another thing for the state to make a sovereign political choice," the banker said.Spain will require banks receiving state aid to enforce losses on hybrid capital and junior debt holders, according to a European Union document obtained by Reuters. It will modify existing legislation by end-August to allow these losses to be enforced, the draft Memorandum of Understanding said. Spanish banks have €65bn ($80bn) of subordinated debt outstanding, or €47bn excluding the country's two healthy big banks Banco Santander and BBVA, according to Barclays.Of this, retail investors hold 62% in instruments such as preferential shares that can pay a dividend, a much higher proportion than in countries like Ireland where junior bondholders were also forced to share losses in a bank bailout.The selling of preferential shares to retail investors, many of them elderly bank customers with little financial knowledge, has outraged Spaniards in a long-running scandal pre-dating the €100bn rescue package.Bankia, the nationalised bank likely to receive the largest share of European funds when they materialise later this year, has €3.1bn in preferential shares outstanding.The lender, which has asked for €19bn in rescue money, is in talks with the EU, the Bank of Spain and the stock market regulator to find a way to compensate investors, a spokesman for the bank said.Listed banks in the past have converted preferential shares into equity while non-listed savings banks have opted to swap them for term deposits. Barclays Capital suggested in a note on Wednesday that retail debt holders could be compensated by a national fund, but other experts said this would be difficult. Prime Minister Mariano Rajoy announced a package of new taxes and spending cuts on Wednesday aiming to slash €65bn more from the budget deficit by 2014. In this climate, public compensation for investors will be politically unsavoury.Bank clients stung by losses on preferential shares harangued the new chief executive of rescued lender Bankia at a shareholders' meeting last month."My wife and I had some money in a deposit and (the bank) took it out of the fixed deposit and put it in preferential shares, shamefully duping me with lies," said 85 year old retiree Miguel Garcia Tribaldo.New Bankia chief Jose Ignacio Goirigolzarri warned at the meeting that his options were limited in finding a solution for investors.The market price of these instruments varies from around 40% of face value to practically zero in some extreme cases, experts said. The central bank will discourage any bank in receipt of state aid from compensating junior bondholders with more than 10% of market price, the EU document said.NovaGalicia, a savings bank in northeastern Spain in line for state aid, has €960m of preferential shares held by retail clients, while CatalunyaCaixa has €480mBanco Valencia, the fourth bank almost certain to receive European funds, has €100m in subordinated debt held by retail investors but no preferential shares held by this kind of customer, a spokeswoman for the bank said. NovaGalicia is subject to a court probe into alleged misselling of these instruments to retail clients. El Pais daily cited a purchase form for €6,000 worth of shares signed by an 86-year-old woman's fingerprint.

Spanish miners hurl rocks at cops in protest

Coal miners threw rocks, bottles and firecrackers at riot police who fired rubber bullets in the Spanish capital on Wednesday as tens of thousands protested mining subsidy cuts.Clashes between young protesters and charging police resulted in 23 light injuries, including 12 demonstrators, six police, three onlookers and two journalists, emergency services officials said.A band of demonstrators rained down projectiles including firecrackers, glass bottles and rocks on riot police who protected themselves with their shields.Police could be seen chasing some of the protesters and firing rubber bullets into the air to disperse others."There was a police charge in front of the industry ministry," said a Madrid police spokesperson. Officers backed by dozens of police vans were seen deployed outside the building.Five people were arrested, police said.A few hundred metres way, another group of several dozen protesters outside Real Madrid's Bernabeu stadium were seen throwing stones and drinks cans at riot police.Police charged to try to detain one of them."Out, out," shouted protesters. "These are our weapons," they cried, raising their hands to the sky.Jeffrey Fernandez Sanchez, 27, a miner from Leon, said he saw the violence. "The police provoked them so there would be trouble," he charged.Hundreds of miners who had hiked more than 400km over two weeks from northern coal regions were joined by masses of workers from other sectors, the vast majority of whom were peaceful."Join all our struggles with the miners," read one banner hoisted in the crowd outside the Industry Ministry.Some of the miners at the rally had emerged the previous day from more than a week spent underground in the pits to protest the drastic cuts to state support on which the industry depends.Violent clashes had already broken out between miners and police in more than a month of protests in the northern mining towns over Madrid's decision to slash coal industry subsidies this year to €111m from €301m last year.Unions say the cuts will destroy coal mining, which relies on state aid to compete with cheaper imports, and threaten the jobs of around 8 000 coal miners and up to 30 000 other people indirectly employed by the sector.Carlos Marcos, 41, a miner from the town of Ponferrada in Leon who came on one of the hundreds of coaches that brought protesters into the Spanish capital, welcomed the broad support from other workers."It is impressive because the government never pays us any attention. The real cancer in this country is the politicians," Marcos said.Like other miners, he criticised Prime Minister Mariano Rajoy's conservative government for refusing to help miners more, even as it doles out rescue money to crisis-hit Bankia and other lenders."For the miners they can't find €200m but for Bankia there is €23bn," Marcos said.As the miners rallied, Rajoy announced to parliament a €65bn austerity package to rein in spiralling debt, including a rise in value added sales tax.Vicente Nunez, a 42-year-old steel worker, said he came from Asturias to demonstrate in support of the miners as he walked with a group in black shirts and the Asturias flag, which is light blue with a yellow cross."We work in the metal industry. It is all a chain, we all depend on each other," Nunez said."I have never seen a situation like this. We had crises in '92 and '98 but this time there is no future, no solutions. This schism in society is going to be bigger, more conflictual," he predicted.

NEWS,31.03.2012.

US to press on with Iran sanctions

President Barack Obama vowed today to forge ahead with tough sanctions on Iran, saying there was enough oil in the world market - including emergency stockpiles - to allow countries to cut Iranian imports.In his decision, required by a sanctions law he signed in December, Obama said increased production by some countries as well as "the existence of strategic reserves" helped him come to the conclusion that sanctions can advance."I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran," he said in a statement.Obama had been expected to press on with the sanctions to pressure Iran to curb its nuclear program, which the West suspects is a cover to develop atomic weapons but which Iran says is purely civilian.The overt mention of government-controlled stockpiles may further stoke speculation that major consumer nations are preparing to tap their emergency stores this year."I do think it was interesting that it was laid out there," said David Pumphrey, an analyst at the Center for Strategic and International Studies."It was sort of like a reminder that yes, this is part of the tool kit," said Pumphrey, a former Energy Department official.Oil markets remain tight, the White House said. Surging gasoline prices have become a major issue in the presidential election campaign."A series of production disruptions in South Sudan, Syria, Yemen, Nigeria, and the North Sea have removed oil from the market," the White House said in a statement.France is in talks with the United States and Britain on a possible release of strategic oil stocks to push fuel prices lower, French ministers said on Wednesday.Senior Obama administration officials told reporters that the United States views releasing emergency stocks as an option, but said no decision has been made on specific actions.Oil prices briefly rallied by about 70 cents on the announcement, but later reversed gains to end almost flat as traders turned mindful of the possible use of reserves."There's been a shift from focus on a threat (by Iran) to close the Strait of Hormuz to whether or not reserves are going to be released," said Dominick Caglioti, a broker at Frontier Trading Co. in New York.Going forward, Obama is required by law to determine every six months whether the price and supply of non-Iranian oil are sufficient to allow consumers to "significantly" cut their purchases from Iran.The law allows Obama, after June 28, to sanction foreign banks that carry out oil-related transactions with Iran's central bank and effectively cut them off from the US financial system."Today, we put on notice all nations that continue to import petroleum or petroleum products from Iran that they have three months to significantly reduce those purchases or risk the imposition of severe sanctions on their financial institutions," said Senator Robert Menendez, co-author of the sanctions law.Obama can offer exemptions to countries that show they have "significantly" cut their purchases from Iran, and recently exempted Japan and 10 EU countries from the sanctions.A senior administration official told reporters that talks continue with China, India, South Korea and other importers."Each day I think really we see a number of positive indicators from a broad range of countries," the official said, citing an announcement by Turkey today that it would cut imports of oil from Iran by 10% as an example.Obama faces a delicate balancing act on Iran, leading up to November US general election. On the one hand, he must show voters he is being tough on the Islamic state.But with oil and gasoline prices surging in response to geopolitical risks, he must also avoid steps that would unduly rattle oil markets. That could threaten the global economy and hurt voters already angered by the rising cost of fuel.Obama also faces pressure from some lawmakers in Congress who want to make sanctions on Iran even tighter. The House of Representatives has already passed additional sanctions, and a bill is pending in the Senate.Senior administration officials briefing reporters declined comment on the proposed new sanctions."We welcome the president's determination and applaud the administration's faithful implementation of the Menendez-Kirk amendment," said a spokesman for Senator Mark Kirk, a Republican who has pushed for additional measures."To build on this momentum, we hope the Senate will consider amendments to the pending Iran sanctions bill that would continue to increase the economic pressure on the Iranian regime," Kirk's spokesman said.

Spain announces deep cuts amid public protest

Spain has announced deep cuts to its central government budget as it battles to convince European partners and debt markets it can rein in its budget deficit in the face of growing complaints from the public.The government said it would make savings of 27 billion euros for the rest of 2012 from the central government budget, equivalent to around 2.5% of gross domestic product. The figure includes tax rises and spending cuts of around 15 billion euros announced in December.The cuts come despite popular resistance - a general strike on Thursday disrupted transport, halted industry and saw some minor violence - and against a grim economic backdrop; Spain is thought to have fallen back into recession in the first quarter and has the highest unemployment rate in the European Union."Everyone knows the difficult problem we face in this country, and it calls for special efforts in fiscal consolidation and structural reforms to grow and create employment," Deputy Prime Minister Soraya Saenz de Santamaria said after the weekly cabinet meeting.The centre-right government, which swept to power in November with the largest parliamentary majority in 30 years, has already passed labour market and banking sector reforms that it says can improve competitiveness and reduce wage costs.EU partners have agreed to let Prime Minister Mariano Rajoy aim for a total 2012 deficit at 5.3% of gross domestic product, a less demanding goal than the 4.4% originally suggested but substantially less than last year's 8.5%.Speaking in Copenhagen after an EU ministerial meeting, Spanish Economy Minister Luis de Guindos said the measures would be implemented as soon as possible, adding that any suggestions that Madrid needed emergency international funds was "absurd".Spain is trying to assure its EU partners that it is in control of slashing its deficit and to avoid needing a bailout package like that of smaller neighbour Portugal."What comforts markets are domestic policies. If we don't do what is needed, then there will be no rescue fund that is big enough," de Guindos said. Finance ministers agreed on Friday to increase a financial firewall to 700 billion euros to ward off fears the euro zone debt crisis could spill over to Spain or Italy, much larger economies than those bailed out previously.The Spanish government said it was aiming for a central government deficit equivalent of 3.5% of GDP, a deficit of 1.5% of GDP coming from Spain's regions and a balanced social security budget. Smaller local authorities expect a deficit equivalent to 0.3% of GDP.The regions announced a deficit of 2.9% of GDP in 2011, meaning they would have to cut around 15 billion euros to meet the 2012 target.Details were scarce, with the government due to set the budget before parliament on Tuesday, but some economists are concerned that deep austerity measures could hurt already weakened growth and further endanger the deficit targets.The government said it would slash spending by 16.9% across the ministries, with spending at the Foreign Ministry cut by more than half, and the Industry, Energy and Tourism Ministry taking a cut of more than 30%.Total cuts of over 42 billion euros, between the central administrations and the regional authorities, could be tough for an economy struggling to grow, economists warn."This is as austere as it gets. It's a tightening of fiscal policy until the pips squeak. There can be no doubting the government's willingness to curb Spain's excessive budget deficits," said Nicholas Spiro at Spiro Sovereign Strategy.Rajoy can ill afford to upset nervous bond market investors, who pushed the yield premium for Spanish 10-year debt on Thursday close to their highest levels since early January.The premium investors demand to hold Spanish over German debt dipped slightly after the budget announcement to around 356 basis points, suggesting a cautious welcome for the plan intended to improve Madrid's ability to service its debt.Investors fear, however, that the government may fail to deliver the budget cuts it is promising or will need to announce new measures before the end of the year which could hurt growth."I suspect that the government could be forced to implement further austerity measures later this year, with lingering economic downturn set to place additional strains on an already perilous budget deficit reduction plan," said IHS Global Insight economist Raj Badiani. "The main risk is that the government's tax revenue projections for 2012 look too optimistic."