NEWS,20.09.2012

China to help resolve eurozone crisis

Chinese Premier Wen Jiabao said on Thursday that Beijing will maintain its efforts to help resolve the eurozone debt crisis, after months of investing in European sovereign bonds."China will continue to play its part in helping resolve the European debt issue through appropriate channels," Wen told a business summit after political talks with European Union leaders in Brussels."In the past few months China has continued to invest in bonds of European governments... and discussed ways of cooperation with the ESM," Wen said, referring to the European Stability Mechanism, a new €500bn rescue firewall set up by eurozone leaders and due to become operational next month."Europe is on the right track in tackling its debt issue," Wen told the audience. "What is crucial now is to fully implement the reforms" it has agreed on economic governance, he said.Wen's remarks saw a shift in tone from the "serious concerns" about spillover effects hurting China that he had expressed just three weeks earlier when German Chancellor Angela Merkel visited Beijing.Almost half of all European exports to China come from Germany, and a quarter of all European imports from China are into Germany.Wen highlighted that China had pumped tens of billions of dollars into the International Monetary Fund this summer, as global economies joined forces in a bid to limit the damage from a global economic downturn.And he said this was done for "strategic" reasons, saying the "essence" of China's "stable" relationship with the EU bloc was "long-term" and "not affected by ideological differences or temporary setbacks."Having visited 18 EU member states since 2003 to cement a trading relationship worth a €1bn a day, Wen said the present challenges also presented "huge opportunities" on both sides.While the economic picture was at a "critical juncture," China and the EU were working on a host of levels to "scale-up" trade.The levers through which this would be achieved, Wen said, involved two-way investment with a "need to expand cooperation in infrastructure development" that could see Beijing invest in new EU project bonds.Likewise investment in technological innovation, where he cited nuclear energy or the information technology sector, or European offers of expertise whether in smart cars or sewerage as China steps up urban planning.

Mixed reaction to rate decision

 

SA Reserve Bank (SARB)'s decision to keep interest rates unchanged on Thursday afternoon met with a mixed reaction."From a household sector point of view, the SARB arguably made the right decision not to cut rates further," said FNB property economist John Loos.Given rising household indebtedness, SARB's decision was a good one, as it would preserve longer term residential market health.The household sector carried a high debt risk, and more rapid growth in credit to this group should not be encouraged, said Loos.The sector had improved its payment performance significantly, with insolvencies dropping. But the sector had relied on the SARB to maintain interest rates, which were at historically low levels.It had not made significant financial improvements itself, he said.The Independent Municipal and Allied Trade Union (Imatu) said it was disappointed by bank's decision to keep interest rates unchanged."An interest rate cut would have given our financially strapped members some much needed economic reprieve, and encouraged an increase in consumer spending," said Imatu spokesman Johan Koen in a statement.While the latest consumer inflation figures indicated only a mild increase in food, housing and transport costs, sharp increases in the cost of petrol and diesel would undoubtedly affect prices in the near future.The cost of a basic food basket had increased on average by 16% per year for the last five years. Electricity had effectively increased by 82.3% in the last three years and petrol prices by 11% per year on average for the last decade. Metrorail's ticket prices had effectively increased by 69% in the last three years."An interest rate cut would have given people the much-needed economic breather that is being afforded to other emerging economies," Koen said.The Monetary Policy Committee opted to leave interest rates unchanged, the bank's governor Gill Marcus said on Thursday."The monetary policy committee is of the view that a further reduction in the repo rate would not be appropriate at this stage," she said at a televised press conference in Pretoria.The repo rate would be left unchanged at 5% a year.This is the rate at which commercial banks can borrow money from the SARB. It is used to calculate the prime rate, which banks give their best customers.Marcus said the global growth outlook remained weak.South Africa's trade deficit in the balance of payments posed a risk to the exchange rate. If the rand weakened further, inflation was likely to increase as a result. Although consumer demand was unlikely to impact on inflation, supply-side shocks were possible.Higher food prices and resilient international oil prices could not only impact on inflation, but act as a drag on growth in the near term."This is a combination which poses enormous challenges for monetary policy," she said.The United Democratic Movement said the SARB had made a prudent decision."The SARB had to consider a number of economic performance indicators such as the slight increase in the inflation rate, an improved economic growth performance together with the Eurozone crisis, to keep the South African economy on a steady course," it said in a statement.

Strikes against retail reform rock India

Shopkeepers, traders and labourers in India blocked railway lines and closed markets on Thursday to protest against reforms allowing in foreign retail giants such as Walmart and Tesco.Opposition parties and trade unions called the strike after Prime Minister Manmohan Singh last week announced a raft of reforms designed to revive India's slowing economy, a move that has sparked a furious backlash.Thousands of policemen were deployed in Kolkata in West Bengal state to prevent violence as shops, markets and offices shut down for the 24-hour strike."Train services have come to a halt across West Bengal as strikers squatted on railway tracks," Samir Goswami, regional public relations officer, said by phone.Protesters demonstrated throughout Kolkata in support of the strike, with large rallies planned later in the day in New Delhi and many other cities.Police said that protesters also blocked some national highways.Activists from the main opposition Bharatiya Janata Party (BJP) and its allies gathered at railway stations across Bihar state in north India and forcibly stopped train services, leaving thousands of passengers stranded."Protesters have tried to target trains and bus stations and (we expect) they will also target shops and business establishments," Ravinder Kumar, a senior police officer in Patna, the capital of Bihar, said.All private schools in the state were closed because of the strike, but government schools and offices remained open.The Confederation of All India Traders (CAIT) forecast that 50 million people would participate in the protest against retail reforms unveiled by Singh.Many small business owners and workers fear that the arrival of large-scale foreign supermarket chains will lead to drastic job losses as India's supply chains and shopping habits are transformed.Singh has been buffeted by reaction to the reform package and a sharp rise in diesel prices, with a key West Bengal-based coalition party quitting the government and demanding the policies are reversed.The arrival in India of chains such as Walmart, Tesco and Carrefour is expected to herald a consumer revolution with shoppers moving from small, neighbourhood stores to large, out-of-town supermarkets.The government and many industry leaders argue that a modern retail system would improve value and choice for Indian consumers, create new jobs and enable farmers to reduce wastage.But Singh, weakened by the worst quarterly GDP figures in three years and a series of corruption scandals, faces a major challenge to push through the reforms and boost the economy before elections due in 2014.Truck and bus drivers are also expected to strike on Thursday over a 12% hike in subsidised diesel prices as the government tries to tackle its widening fiscal deficit.Mumbai, the country's financial capital, was largely unaffected by the strike as local political parties declined to support the action.

NEWS,22.07.2012

Spaniards protest as crisis outlook darkens

Thousands of jobless Spaniards marched through Madrid Saturday in the latest angry demonstrations against economic crisis cuts, as fears rose for the country's financial stability.Young people thrown out of work by the recession converged on the capital, many of them having hiked hundreds of miles from around Spain, and walked through the city's central avenues, waving banners and whistling."Hands up, this is a robbery!" they yelled, their regular refrain over recent days of protests."Everyone get up and fight!"It was the latest in a string of protests that have erupted since Prime Minister Mariano Rajoy announced 65 billion euros ($80 billion) in fresh austerity measures on July 11, including cuts to pay and unemployment benefits."I am very disappointed and angry," said Alba Sanchez, 25, who had come by car from the northeastern region of Catalonia to join the demonstration."People cannot allow all these cuts by this government that hates us."The crowd marched peacefully to the sound of drums and trumpets and stopped at the Puerta del Sol square, the symbolic hub of numerous social protests, where demonstrators sat down and held a popular assembly.On Thursday hundreds of thousands of demonstrators massed there after a mostly peaceful protest march that ended with police firing rubber bullets to disperse small groups of protestors.Protestors say the efforts to cut Spain's deficit target the poor unfairly and will depress the recession-hit economy further."They pee on us and tell us it's raining," read one yellow sign waved by the jobless protestors on Saturday."I can't tighten my belt and drop my trousers at the same time," read another.Rajoy's measures raise sales tax (VAT) and cut benefits for the newly unemployed after six months from 70 percent of basic salary to 50 percent. Previously, the reduction had been to 60 percent."That's the final blow. They're cutting benefits to those who aren't working and raising VAT, which affects people who work," said protestor Rafel Ledo, who had walked 500 kilometres (310 miles) from the northern Asturias region.Saturday's protests came as Spain's economic and financial outlook darkened. The government cut its economic growth forecast for 2013 from 0.2 percent growth to a contraction of 0.5 percent.Stricken by the bursting of a construction bubble in 2008, Spain is struggling in its second recession in four years. Unemployment is running at more than 24 percent.Also on Friday Valencia, one of Spain's indebted regional authorities, reached out for emergency aid from a fund of 18 billion euros set up by the central government for struggling regions.In response, the Madrid stock exchange plunged by 5.8 percent.A eurozone rescue deal for Spanish banks finalised by finance ministers on Friday provided no relief.The return on Spanish 10-year bonds jumped above the 7.0 percent danger level and another key measure, the difference between the yields on Spanish and safe haven German bonds, moved dangerously high, topping 600 points.The indicators revived warnings that the banking bailout may not be enough to stabilise Spain's finances, a key concern for the future of the eurozone.

 

Ministers: Bank to pump €1.4bn into Greece

The European Investment Bank will pump around €1.4bn ($1.7bn) by 2015 to fund infrastructure projects in crisis-hit Greece, the ministers of finance and development said on Saturday."I believe the accords will be signed in the coming days. We aim to restart, to re-activate the EIB in the private sector as soon as possible," said Finance Minister Yannis Stournaras after talks with EIB chairman Werner Hoyer.Greece's private sector has been starved of funds as the country grinds through a five-year recession that has cut off bank loans and even state contract payments.EIB loans this year had been limited to just 10 million euros, Stournaras said, as Greece plunged into political uncertainty in May, requiring two elections before a coalition government could be formed to continue EU and IMF-mandated reforms."The agreement is a vote of confidence in Greece. Besides infrastructure projects and support for small and medium companies, the cooperation will be expanded to facilitate foreign investment and privatisation," said Development Minister Costis Hatzidakis, according to the state-run Athens News Agency.There was speculation in April that the EIB would seek to insert drachma clauses into its contracts with Greek firms to ward against a possible Greek euro exit.But Stournaras insisted on Saturday that repayment will be in euros.

European Central Bank's Head: Euro 'Absolutely Not' In Danger

 

Worries about the 17-nation eurozone's future health have been fueled lately by Greece's persistent troubles and by the financial woes of Spain, the bloc's fourth-biggest economy. European ministers this week signed a rescue package worth up to (EURO)100 billion ($122 billion) for its ailing banks, but concern flared about Spain's prolonged recession and the debts of its regions, and the country's borrowing costs rose.Asked in an interview with French daily Le Monde whether the euro is in danger, ECB President Mario Draghi replied: "No, absolutely not."When outside analysts draw up scenarios for an "explosion" of the eurozone, "that underestimates the political capital that our leaders have invested in this union, as well as the support of European citizens," Draghi said in the interview, which was posted on the ECB's website."The euro is irrevocable," he added.The ECB this month cut its benchmark interest rate to a record-low 0.75 percent but gave little sign of further action soon to ease the crisis. It already has made two rounds of three-year emergency loans to banks, but has shown little appetite to reactivate its government bond-buying program."Our mandate is not to resolve the financial problems of countries, but to ensure price stability and to contribute to the stability of the financial system in full independence," Draghi said in the interview with Le Monde, conducted Wednesday  emphasizing the ECB's primary task of fighting inflation.Asked whether the ECB should do more to ease the economy, Draghi replied: "We are very open. We do not have any taboos."He said the ECB decided to cut interest rates in July because it forecast that inflation would be at its target level – close to or below 2 percent – at the start of 2013."It now seems likely that it will fall sooner than expected, at the end of 2012," he said. "Our mandate is to maintain price stability in order to prevent both higher inflation and a generalized, broadly based fall in prices. If we see such risks of deflation, we will act."As for the eurozone economy, Draghi said that the situation "has gradually worsened, but not to the point of plunging the whole of the monetary union into recession.""We still expect a very gradual improvement in the situation by the end of this year or the beginning of next year," he said.

NEWS,21.07.2012

Spain's economy wobbles amid bailout

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

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

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

NEWS,10.03.2012.

Sarkozy says will bow out if French don't pick him

French President Nicolas Sarkozy said on Thursday he would fight with everything he has to win a second term but will bow out of politics if he loses an April-May election.Riot police using teargas were sent in to clear a crowd of 200 mostly young protestors in a town ahead of a campaign rally he was due to hold in the central French town of Saint-Just-Saint-Rambert just a few weeks from election day.Sarkozy, who is badly lagging Socialist challenger Francois Hollande in opinion polls six weeks before the first round of voting, said Hollande's lack of ministerial or international experience was a problem at a time of economic turmoil.I worry when I look at the Socialist candidate's programme ... and I worry about this dearth of experience in such a troubled period. But if the French people do not put their faith in me, do you really think I would carry on in politics? The answer is no," Sarkozy told .Hollande widened his lead slightly this week, advancing 2 points to 30 percent support for the April 22 first round, while Sarkozy gained only 1 point to 28 percent.The survey, by pollster CSA, saw Hollande beating Sarkozy by 56 percent to 44 percent in a May 6 runoff."I will fight with all my strength to win your confidence, to protect and lead you and build a strong France, but if that is not your choice I will bow out, that's the way it is, and I will have had a great life in politics," he said.His wife, former model-turned singer Carla Bruni, said Sarkozy had devoted himself entirely to his job and would continue to do so if he won a second term, but if he lost he would have little choice but to change direction."What do you expect him to do after being president of the Republic? Do you want him to go back to being a minister or a mayor?" she told French talkshow "C a Vous", adding that she worried about his health and his long working hours.Sarkozy said on a three-hour televised debate on Tuesday that he was not discouraged by his weak poll scores and that one of his characteristics is that he never gives up.But French media are reporting that his campaign team is starting to worry that Sarkozy's efforts to overcome a widespread dislike of his personal style and anger over three years of economic gloom are not working.A week after protestors pelted his escort with eggs in the southwest of France, Sarkozy's impending arrival in Saint-Just-Saint-Rambert triggered a protest by some 200 youths waving banners with slogans such as "no to the president" or "Sarkozy, you're the security problem".A reporter saw riot police move in to clear the crowd and prevent them nearing the rally location.Campaign spokeswoman Nathalie Kosciusko-Morizet - who was lambasted as out of touch after she was unable to tell a radio presenter the price of a Paris metro ticket - lamented this week that the race had descended into distracting polemic.Sarkozy launched his campaign in mid-February, several weeks after Hollande, and has opted for a strategy of unveiling his ideas - such as a new minimum tax on company profits, making the unemployed sign up to training to get their benefits and holding policy referendums - week by week. After a strong start that saw him trim the gap with Hollande by a few points, he suffered setbacks in his second week, including being jostled by left-wing militants while out on the campaign trail, and has now lost his initial bounce. Meanwhile Hollande has consolidated his lead position after announcing a surprise 75 percent tax rate on annual income above 1 million euros, a move nearly two in three voters support. On Thursday's radio show, Sarkozy proposed a new household fund for women abandoned by fathers of their children, a new renovation programme for city suburbs and said he would cut the number of lawmakers by 10 to 15 percent to trim public spending.Socialist politician Bernard Cazeneuve said the raft of measures smacked of a last-minute panic, and mocked Sarkozy for diverting attention with talk of life after the presidency.

"We don't care what he does if he loses, what we want to know is what he'll do if he's elected," he told.Sarkozy, whose main focus is on structural reform and tighter immigration rules, is expected to give his first real campaign overview at a big campaign rally on Sunday in the Paris suburb of Villepinte.