NEWS,22.11.2012

Summit fatigue leads to bad decisions

The European Union may have won the Nobel Peace Prize this year, but to many EU leaders, officials, diplomats and even journalists, it can feel more like a torture chamber.Increasingly, Europe is governed at night by leaders in an advanced state of exhaustion, disregarding scientific evidence that this can lead to bad decisions, or non-decisions.Over the past three years, the EU has held 25 summits to try to tackle its debt crisis and related economic turmoil, with few of those meetings ending before 3 or 4 am, usually after 12 hours or more of near-fruitless negotiation. Add to that more than 40 finance ministers' meetings, the most recent of which ended at 5 am on Wednesday, again without agreement, and it is easy to see how a set of institutions designed to foster peace and stability in Europe can end up delivering frustration, angst and head-numbing pain."I'll put it this way: I woke up at 5 am or 5:30 am yesterday and we ended in the morning around 4 am," Slovak Prime Minister Robert Fico complained after the last, largely unsuccessful summit in October. "This is how all of us operate, we adopt very serious decisions under pressure," he said, referring to the EU's increasingly weary heads of state and government. The EU's 27 leaders gathered for another summit on Thursday and Friday, this time to try to hammer out an agreement on around €1 trillion ($1.3 trillion) of spending over the next seven years. It promises to be a bruising clash of national interests rather than the model of reconciliation and harmony commended by the Nobel committee, although it will still be "jaw, jaw" rather than "war, war". Gatherings to negotiate the long-term budget only happen every 6 or 7 years and are notorious for running over deadline and for being extremely hard-nosed and ill-tempered affairs. Former British Prime Minister Tony Blair described his experience of it in 2005 as the most difficult negotiation he handled while in office, tougher even than the 1998 Northern Ireland peace talks that led to the Good Friday agreement. Already EU officials are warning that these budget talks could run into Saturday and Sunday, making it what is known in diplomatic circles as a "four-shirt" summit.Staff at the European Council in Brussels, where EU leaders meet, have been told to be ready to work into Saturday at least. British Prime Minister David Cameron has cleared his schedule for the entire weekend, a spokesperson said. French President Francois Hollande has done the same. Journalists, around 1 500 of whom are accredited to cover the meeting, took up residence in the vast glass and steel entrance hall on Thursday morning and will stay encamped there until a deal is done, or negotiations break down. The effect on the EU's public image among its 500 million citizens is unedifying."It's not exactly glamorous and some would say it's downright torture," said one EU diplomat, a veteran of at least 30 EU summits. "Everyone gets extremely fed up."Sweden has organised extra bedding for its diplomats to take a rest in their delegation room if necessary.Bad decision making? The larger issue, though, is whether the pressure-cooker atmosphere and endlessly drawn-out negotiating schedule is conducive to good decision-making.Everyone knows that drivers should take a rest after four or five hours at the wheel to avoid accidents. Shouldn't the leaders of nation states take the same precaution lest they take a bad decision that might run their country off the road?A study published by three academics in the Proceedings of the National Academy of Sciences in the United States last year showed that a judge's willingness to grant parole can depend to a large extent on how tired he or she is and when they last ate.The study examined more than 1 000 parole decisions made by experienced judges over a 10-month period. It found that the more decisions judges have to make, the more difficult it becomes to stay consistent, they get decision fatigue."The theory determines that decision-making capacity is a limited resource, and when many decisions are made in sequence, the mental capacity diminishes," Professor Shai Danziger of Ben-Gurion University, one of the authors, said at the time.That could be a lesson for EU leaders and the political advisers, diplomats and hangers-on who have to help them make the right decisions time and again for days in a row.One experienced EU ambassador, a veteran of multiple foreign postings in high-pressure places, said a lesson could be drawn from how Israel handles Middle East talks.When the Oslo peace accords were being negotiated with the Palestinians in the mid-1990s, Israel would change its negotiating team every six hours or so to avoid fatigue and the risk of mistakes."No one can negotiate at full capacity for more than six hours at a time, you just can't concentrate that long," the ambassador said. "They wanted to make sure they had a fresh team that was at its sharpest."China has employed similar tactics in business and trade negotiations, officials say.By contrast, EU leaders will have at least 12 straight hours of negotiation on each of the next two days and more if the meeting drags on into the weekend.And if that isn't enough, there's another meeting of finance ministers starting on Monday evening.

Lessons of the Gaza War

Now that the cease-fire between Israel and Hamas has begun to take effect (at least for now), it's time to begin to assess the outcome of the war, and where we go from here.

1. The big star and game changer is the Iron Dome anti-missile defense system. Without it, there would have been many more Israeli casualties, and the Netanyahu government would undoubtedly have sent ground troops into Gaza. Look for the immediate hot topic in security circles to be anti-missile defense systems, and look for American aid to Israel to increase on this front. President Obama has already indicated his support.
2. Israel often has a hawkish reputation, but it is amazing that it has watched as Hamas and Hezbollah on its southern and northern borders gradually escalated missile capabilities. We Americans wouldn't have done that if some group developed much less of a capability on our Canadian or Mexican borders, let alone both. Look for Israeli hawks and doves to both argue that their analysis was correct, and recommend policies accordingly.
3. Hamas is a big winner. Even in the last hours of the conflict, it was still capable of attacking Israel. Look for an enhanced Hamas prestige among Palestinians and in the Arab world. More troubles for the U.S., Israel, and the Palestinian Authority.
4. But, at least in the short term, look for a longer term truce and the dramatic reduction of missiles from Gaza raining on Israel, and therefore a limit on Israeli retaliations. Look for both sides to declare victories; greater standing for Hamas, and enhanced deterrence for the Israelis.
5. The new Islamist Egyptian government performed well in becoming the main sponsor of the cease-fire agreement, but the Sinai -- the conduit for arms to Gaza -- has become more lethal than ever. Look for pressure to increase on Egypt to do something about Sinai, and for quiet discussions calling for the addition of western advisers to help to regain Cairo's control. Egypt's role in the cease-fire and its weakness in Sinai could and should actually enhance the Israeli-Egyptian peace treaty if it is handled properly.
6. Iran is a big winner. It managed to provide the missiles to Hamas via Sudan and through the Sinai that had the greatest psychological impact on both Israelis and Arabs alike by seeming to threaten Tel Aviv and even Jerusalem.
7. At the same time, the confrontation with Iran becomes more complex, as there will be mixed interpretations of the meaning of the Gaza War. On the one hand, there will be less enthusiasm for an attack on its developing nuclear weapons program among the already wary Israeli public and a significant number of security specialists, reinforced by American and European caution. On the other hand, others will argue that the Hamas arsenal suggests that a nuclear Iran would be even more dangerous. Look for intensified disputes in the months to come about a possible attack on Iran, even tougher sanctions, and more pressure on President Obama to both try to reach a negotiated settlement on that front and to consider American action.
8. Similarly, as suggested in the cease-fire agreement, there will be alleviation of the already-diminished Israeli blockade of Gaza. Look for much greater flexibility on civilian goods entering Gaza and much more attention to the passage of Libyan and Iranian arms (through Sudan to Egypt) to Hamas.
9. The Palestinian Authority under Mahmoud Abbas is a big loser. It will be more difficult than ever to bolster the Fatah leadership on the West Bank as Hamas grows in stature. The United States will be challenged to provide more economic aid and more diplomatic activity on the peace process. Look for much more attention to the Israeli-Palestinian peace process than at any time since mid-2011, when President Obama's initiative at the time quickly fizzled.
10. American efforts will be more complicated than ever because of the imminent Palestinian bid to become a non-member observer state at the UN. At least in the short term, membership will strengthen Abbas, but the missile war with Israel strengthens the possibility of Hamas leadership. The U.S. cannot afford Hamas, an ally of Iran, potentially representing Palestine at the UN, should Abbas weaken further. Look for the U.S. to try to square the circle by increasing its opposition to the Abbas UN initiative, and simultaneously attempting to strengthen Abbas through economic aid and the resumption of diplomacy on the peace process front. That might have the chance of some success if the conflict over the UN bid, now presumed to trigger diminished aid to Abbas, can somehow be resolved.

During the Gaza War, President Obama was traveling in Southeast Asia, as part of the administration's vaunted "pivot" to Asia. It's a good policy, but the Middle East followed him there. As the president contemplates new appointments in the foreign policy arena, he will have to consider that just as the U.S. necessarily begins to pay more attention to the Asian front, the conflicts and problems of the Middle East will stubbornly remain. We will be stuck with a very complex region we cannot ignore for a very long time to come.

NEWS,27.06.2012

Europe's leaders at odds before summit

 

European leaders sound unusually divided before a high-stakes summit, with Germany's Angela Merkel saying total debt liability would not be shared in her lifetime and giving little support to Italian and Spanish pleas for immediate crisis action. Rome and Madrid have seen their borrowing costs spiral to a level which for Spain at least would not be sustainable as it battles to recapitalise banks ravaged by a burst property bubble and cut a towering government deficit. Spanish Prime Minister Mariano Rajoy said on Wednesday he would ask other European Union leaders to allow the bloc's bailout funds or the European Central Bank (ECB) to stabilise financial markets. Speaking in parliament before a meeting of European heads in Brussels on Thursday and Friday, Rajoy warned that Spain would not be able to finance itself indefinitely with 10-year bond yields near 7%. "The most urgent issue is the one of financing. We can’t keep funding ourselves for a long time at the prices we’re currently funding ourselves,” he told parliament. Even when there are profound disagreements, EU leaders have been burned by the markets enough times to generally make sure they sound united before major gatherings. But divisions have been exposed by the ousting of Nicolas Sarkozy by socialist Francois Hollande as French president and the fact that Rome and Madrid have muscled into the traditional Franco-German axis. The leaders held an unusually discordant news conference in Rome on Friday. Hollande said there must be more solidarity in Europe before countries hand over more sovereignty over their national budgets, while Merkel said she would not accept extra liabilities without overarching budget control. The pair will have a working dinner in Paris on Thursday evening, an opportunity to repair the damage. An initial attempt to smooth over differences came at a meeting of the four countries' finance ministers late on Tuesday after which nothing was said. In Rome, Italian Prime Minister Mario Monti said he would not simply rubber stamp conclusions at the EU summit and said he was ready to go on negotiating into Sunday evening if necessary to agree on measures to calm markets. With Hollande's support, Monti is pushing for the eurozone’s rescue funds to be used to help limit the spreads over German Bunds on bonds issued by countries that respect EU budget rules. Rajoy would settle for that or the ECB doing the same job by reviving its bond-buying programme. The proposal has run into stiff opposition from Germany, the largest economy in the EU and the bloc’s effective paymaster, and has been rejected by Jens Weidmann, the powerful head of the German central bank, the Bundesbank. Stock markets perked up last week on the hope that the 20th EU summit since the bloc’s debt crisis exploded into the open in Greece would come up with dramatic measures. Investors have since thought better of that view. European shares edged up on Wednesday and the euro was flat, with many investors out of the markets before the Brussels meeting. “People are waiting for the inevitable - which is that policymakers will probably fail to do what is necessary,” said Neil Mellor, currency analyst at Bank of New York Mellon.Borrowing costs Merkel stomped on the idea of mutualising debt - favoured by France, Italy and Spain - at a meeting of lawmakers from her Free Democratic coalition partners in Berlin on Tuesday, according to people who attended the closed-door session. “I don’t see total debt liability as long as I live,” she was quoted as saying, a day after branding the idea of euro bonds “economically wrong and counterproductive”. The words may have been carefully chosen and do not at face value rule out mutualising some portion of eurozone members’ debts as the end point of a drive towards fiscal union. Merkel finds herself in a dwindling minority but holds the eurozone’s purse strings and therefore nearly all the cards. German opposition SPD leader Sigmar Gabriel told the Financial Times that urgent measures were needed to lower eurozone sovereign borrowing costs, otherwise the currency bloc could “simply explode”. Italy and Spain argue that they are stretching every sinew to cut their debt mountains and need some support from their currency area peers to keep the markets at bay. Monti won the first two of four confidence votes on Tuesday called to accelerate the passage of his labour reform that has been criticised by both by labour unions and the business establishment. The final two votes, and definitive approval, are due on Wednesday. Spain which has been offered loans of up to €100bn to recapitalise its banks but is determined not to ask for a sovereign bailout - is considering raising consumer, energy and property taxes. Spanish Economy Minister Luis de Guindos said he had talked with the finance ministers of Germany, France and Italy already on Wednesday with further discussions planned. Eurozone finance ministers will also hold a conference call on the bailout of Spanish banks and this week’s request for aid from Cyprus, EU officials said. The request made Cyprus the fifth of the eurozone’s 17 states to seek aid from EU rescue funds after Greece, Ireland, Portugal and Spain. Underlining the parlous state of Spanish finances, figures showed the central government’s deficit had already reached 3.41% of annual gross domestic product through just the first five months of the year, close to its target for the whole year of 3.5%. Spain’s central bank said on Wednesday it expected recession to deepen in the second quarter of the year. The Brussels summit is expected to agree on a growth package pushed by France worth around €130bn in infrastructure project bonds, reallocated regional aid funds and European Investment Bank loans. Leaders will also discuss proposals for a banking union, but while they are likely to agree to give the ECB power to supervise big cross-border banks, Merkel is resisting any joint deposit guarantee or common bank resolution fund.

Italy to pass new labour laws ahead of EU forum

Italy’s Parliament is on Thursday set to approve a controversial labour market reform so Prime Minister Mario Monti can go to a key Brussels summit with it in hand to reassure his EU partners.The reform, which Mr Monti’s government says is key to restarting growth in the recession-hit economy, was to get final approval the day before the summit, as Italy races to prove it is doing what it takes to stave off the debt crisis. The summit starts on Thursday, June 28.Rome had called on Parliament to make sure the reform is approved in time, but Prime Minister Monti whose technocratic government depends on the support of bickering coalition parties has had to compromise on the details.Addressing Parliament on Wednesday, he said it was “important that Italy arrives at the summit with the force of a parliament-government tandem.”The project, which was unveiled in March after months of bitter disputes with trade unions, is based on the Danish “flexicurity” model, which aims to ensure both flexibility and security in the labour market.It includes incentives for employers to hire workers but also eases the procedure for letting them go in case of a downturn, and will help young people get jobs though apprenticeships, in a country hit by high youth unemployment. Workers will also all be eligible for a modernised welfare scheme from 2017.Greater labour flexibility is one of the so-called structural reforms that the European Commission, International Monetary Fund and Organisation for Economic Cooperation and Development have long advised Italy to adopt to invigorate its economy.Watered downBut Mr Monti’s original package was watered down as parties, trade unions and employer groups fought to defend their turf, leaving many economists fearing the reform is too timid to shake up the labour market.The centre-right insisted businesses be left wiggle room to give people shorter-term contracts, while the left demanded greater measures be included to protect workers.The country’s biggest union, the left-wing CGIL, says the reform risks increasing unemployment, while the Confindustria association says it does not go far enough in strengthening employers’ rights.

NEWS,19.06.2012

Growth the watchword at G20 summit

 

The leaders of the world's major economies embarked on the final day of the G20 summit Tuesday determined to kickstart growth and pull the eurozone back from the brink of disaster.European members were under extraordinary pressure from their international counterparts to loosen the straitjacket of their austerity programs and to allow the European Central Bank to open the lending floodgates.Beyond the summit conference center in the Mexican resort of Los Cabos, bond markets jacked up rates on Spanish and Italian debt amid self-fulfilling fears that the debt crisis that sank Greece was spreading once again.Germany's Angela Merkel remains the driving force behind the eurozone's austere determination to privilege deficit busting over stimulus spending, although US officials say her position is softening."Discussion here has been balanced: we need the right mix of consolidation and growth stimulus at the same time," Merkel told reporters on Tuesday, saying the previous night's showpiece dinner had been a "very frank and honest exchange."A draft version of the G20 final statement, which was to be finalized and published by the leaders on Tuesday, suggested that a formulation would be found that would commit the leaders to a pro-growth agenda."All G20 members will take the necessary actions to strengthen global growth and restore confidence," it said, vowing that eurozone members would safeguard the stability of the single currency in the face of volatile markets.The version seen by AFP allowed no hint that Merkel or her allies might crumble and allow the ECB to pump out cash or to pool German debt with that of the weaker eurozone members in order to create low-interest eurobonds.But it opened up the possibility of more lending and spending if the European economy continues to struggle."Should economic conditions deteriorate significantly further, those countries with sufficient fiscal space stand ready to coordinate and implement discretionary fiscal actions to support domestic demand," the draft reads.There was also an indication that Merkel was coming round to the idea of a more integrated EU banking system that would allow joint supervision and a unified system to pay back depositors in any failing institutions."We support the intention to consider concrete steps towards a more integrated financial architecture, encompassing banking supervision, resolution and recapitalization, and deposit insurance," the draft statement said."Markets expect that we work together more closely," Merkel told reporters on Tuesday morning, without specifically mentioning unifying the banking system.EU Commission chairman Jose Manuel Barroso bristled at hostile questioning over why his rich continent needed so much support from abroad, declaring: "We are certainly not coming here to receive lessons from nobody."US President Barack Obama cancelled a planned meeting with European G20 members after the official dinner hosted by Mexico's President Felipe Calderon ran long."Everything that could have been said at the Obama meeting had been said at dinner, so we were done with the topic," Merkel said.Obama called for Greece to be given more time to get its affairs in order, after parties committed to honoring the terms of its bailout agreement won a majority of seats in Sunday's parliamentary election.But Merkel -- fast becoming a hate figure among Greeks -- remained unmoved. "Elections cannot call into question the commitments Greece made. We cannot compromise on the reform steps we agreed on," she told reporters on Monday.Progress was made in Los Cabos in boosting the resources available to the International Monetary Fund to help protect vulnerable countries from the backwash of the eurozone crisis.IMF chief Christine Lagarde thanked emerging powers, led by China, for pledging enough to bring her pool for emergency loans up to $456 billion (361 billion euros) in exchange for a greater say in Fund affairs.In addition to summit sessions, the leaders were to hold a series of side meetings on Tuesday, notably a two-way between Obama and Chinese President Hu Jintao, and a possible reschedule of the cancelled US-EU talks.The summit was due to draw to a close with a ceremony at 2330 GMT, after which Calderon was to address the press.Next year's G20 summit will be held September 5-6 in Saint Petersburg, Russia.

 

Greek leaders poised for coalition deal

 

Greece's conservatives expect to be able to form a coalition Government with the Socialists today, allowing the two parties that dominated politics for decades to share power despite a major anti-establishment election vote.Conservative New Democracy leader Antonis Samaras has promised to negotiate less punishing terms for Greece's international bailout, after only narrowly beating a radical left-wing party that campaigned to scrap the austerity deal entirely.A senior New Democracy official expected agreement soon on a new cabinet with the PASOK Socialists and possibly another smaller centre-left party following Sunday's election, the second in as many months.Speaking late last night, he said a deal would be reached today that would involve more than a symbolic involvement by PASOK in the Government."They will participate actively," said the official, who declined to be identified.New Democracy and PASOK alternated in power from the fall of military rule in 1974 until last year, when Greece's economic crisis forced the arch rivals to share power in a pro-bailout national unity Government."Political leaders should be aware of the fact that this Government is Greece's last chance to remain in the eurozone," the centre-left daily Ta Nea said in an editorial."The Greek people are ready to reward the parties that manage to ease austerity and punish those that raise voices of dissent," it said.The comment underscored the widespread expectation in Greece that a new Government will be able to negotiate an easing in the tough conditions of the European Union and International Monetary Fund bailout despite resistance from Germany.Many Greeks hold both parties responsible for the nation's near bankruptcy, which forced it to take bailouts from the EU and IMF in 2010 and again this year.New Democracy narrowly won the election, averting the immediate risk of a Greek euro zone exit but raising doubts on whether the new Government can impose austerity cuts on a nation deeply divided over the price for bailout funds.After claiming victory over the radical leftist SYRIZA party to jubilant crowds, Samaras began yesterday the more sobering task of talking to rivals to cobble together a coalition.The greatly weakened PASOK, which finished third in Sunday's vote, has yet to commit to supporting Samaras, but its leader Evangelos Venizelos said talks must be wrapped up by today - signalling a deal would be agreed by then.The smaller, moderate Democratic Left party, which opposed the bailout backed by the conservatives and the Socialists, has also suggested it will offer conditional support to a Government led by Samaras.Venizelos was due to meet the head of Democratic Left, Fotis Kouvelis in the morning to gauge support for a three-way alliance with their traditional conservative rivals.With Greece just weeks away from running out of cash and a new government needed to negotiate the next instalment of funds from lenders, Greek political leaders appeared determined to avert the deadlock that followed an inconclusive vote on May 6."I am optimistic that this time they will agree to form a Government," a Greek banker who declined to be named told Reuters."They have realised that there is no margin of error or further delays. A third election would be a disaster."With New Democracy taking a 50-seat bonus under Greek electoral law for coming first, a New Democracy-PASOK alliance would have 162 seats, a majority in the 300-seat parliament.Adding the Democratic Left would give it 179 seats.Nation in crisis A difficult road lies ahead for Samaras, a US-educated economist who went to college with former Socialist Prime Minister George Papandreou.He inherits a nation in deep social and economic crisis, with an economy in its fifth year of a recession that has left one in five workers out of a job.A rising number of businesses are closing down, the number of homeless on the streets is growing and anger at austerity cuts is at boiling point.Samaras promised Greeks and prospective partners that he would water down the painful terms of the EU/IMF bailout."We will simultaneously have to make some necessary amendments to the bailout agreement in order to relieve the people of crippling unemployment and huge hardships," he said.Samaras campaigned on promises to cut taxes as well as raising unemployment benefits and pensions.The New Democracy official said the new Government would aim to accelerate and broaden a privatisation programme to top up state coffers, but also ask its creditors to spread 11.7 billion euros of further austerity cuts over four years instead of two.But any attempt to veer off the prescribed austerity path would not sit well with European partners already irritated by what they see as the slow pace of Greek reform.Germany, Europe's paymaster, has ruled out more than minor delays to some targets in the 130-billion-euro rescue package.Chancellor Angela Merkel said at a meeting of G20 leaders in Mexico that any loosening of Greece's agreed reform promises would be unacceptable and reiterated that Athens had to stick to its commitments.With an emboldened SYRIZA bloc led by former communist student leader Tsipras at the head of a powerful opposition, the new government could face protests soon after taking office.SYRIZA almost doubled its share of the vote since the previous election on May 6.

NEWS, 21.05.2012.

Markets regain ground

 

Markets recovered some ground on Monday on value hunting after last week's heavy losses, but investors remained wary over the eurozone despite world leaders calling for Greece to stay in the monetary union and for Europe to balance austerity with growth. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5%, buoyed by its technology sector which by far outperformed its peers with a 1.3% gain. Investors scooped cheapened blue chips, helping to lift tech-heavy Korean equity market above a key chart level. The pan-Asian index fell to a 2012 low on Friday, having lost about 6% in the week for its worst weekly performance in nearly eight months. European shares were likely to be even more cautiously traded than Asia, with financial spreadbetters predicting that major European markets would open down as much as 1%. US stock futures were up 0.5%, reflecting a lack of market direction. "Investors saw some attractive valuations in the big tech stocks, which was the most heavily-hit sector during last week's market plunge, but that's about as much additional risk that investors are willing to take on at this point," said Park Suk-hyun, an analyst at KTB Securities. Japan's Nikkei stock average gained 0.4%, after logging a seventh straight week of losses last week, its longest such losing streak since the third quarter of 2011. Leaders of G8 major industrialised nations meeting at the weekend vowed to take steps to combat financial turmoil and revitalise a global economy threatened by Europe's debt crisis, but they offered no specific prescription for debt-crippled Greece which holds fresh elections on June 17. "Today's move is merely a rebound from sharp losses on Friday and it doesn't have momentum to rise strongly. The G8 outcome lacked the punch to give much incentive for markets," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo. Currently, many market players see the main scenario as Greece staying in the euro and European leaders making some compromises to maintain financial lifelines for the country. But deepening banking sector instability in Spain heightened concerns about contagion from Greek political turmoil, keeping investors' risk-aversion intact at least until the Greek election makes clear whether the nation will stay or leave the euro, traders and analysts said. "There's a lot of talk and no substance. Until you get some certainty about Greece and the fear of contagion eases, the volatility is here to stay," said Savanth Sebastian, an economist at CommSec. Growth and fiscal austerity The euro inched up 0.1% to $1.2793, moving away from a four-month low of $1.2642 reached on Friday, which was not far from its trough of 2012. But investor nervousness prevented the yen, widely perceived as a safe haven, to ease significantly from its three-month high against the dollar of ¥79.001 hit on Friday. The yen stood at ¥79.18 on Monday. With a steadying euro, spot gold added 0.4% to $1 598.46 an ounce, after rising more than 1% on Friday. The G8 suggested mounting global support for highly indebted eurozone economies to be allowed to take less strict austerity measures and put more priority on stimulating growth. Reports also suggested Greece's anti-austerity forces could soften their stance to avoid a catastrophic outcome for the nation. Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo, said the G8 comments were positive, but it did not offer a buying incentive for the euro. Rather, he was eyeing whether the yen would breach its 200-day moving average, currently at ¥78.50, and trigger the yen's further climb. Saito said markets were turning to an upcoming European summit on May 23 and comments about the Greece election. The May 23 summit will focus attention on whether European leaders can strike a new balance between growth and the fiscal reforms deemed vital to fixing the eurozone's debt crisis and regaining market confidence in the single currency. Recent opinion polls show Greek voters are returning to the establishment parties that negotiated its bailout, offering potential salvation for European leaders. Alexis Tsipras, the Greek leftist who polled strongly in the inconclusive May 6 election, says he wants talks to keep Greece in the euro. He is looking to forge ties with likeminded European figures such as French President Francois Hollande. Oil prices recovered on Monday, with US crude up 0.5% at $91.90 a barrel, after falling more than 1% on Friday. Brent crude, which closed at its lowest in 2012 on Friday, rose 0.7% at $107.89 a barrel. China's premier called for additional efforts to support growth on Sunday, raising hopes for more stimulus steps to lift demand in the world's second largest economy. He also vowed to maintain his campaign to cool down its property market."Fear index" rising As risk aversion intensified on Friday, the CBOE VIX Volatility index, a gauge of investor anxiety that measures expected volatility in the Standard & Poor's 500 index over the next 30 days, rose 2.5% to close above 25 for the first time since mid-December. Asian credit markets stabilised on Monday on short covering after the G8 meeting, but underlying sentiment was defensive, traders said. The spread on the iTraxx Asia ex-Japan investment-grade index was little changed from Friday, when it reached its widest level since early January.

 

France's Hollande steals show in début

 

In his début in international summitry, Francois Hollande has made a splash - and held his ground on some sharply defined positions.France's new leader grabbed attention at both the weekend's Group of Eight summit in Camp David and at the Nato summit in Chicago ending on Monday, parleying his mandate from voters in a May 6 election and showing he has his finger on the pulse of the public back home.An informal European Union summit on Wednesday will cap his whirlwind first week as French president.Hollande first sped to Berlin to meet Germany's chancellor, he then painstakingly formed a Socialist-led French Cabinet. He jetted to Washington, where he mused about his cheeseburger fetish in an Oval Office get-to-know with President Barack Obama that helped replace memories of Hollande's America-friendly predecessor, Nicolas Sarkozy.Hollande held firm on his two trenchant positions at the summits: His call for pro-growth measures to juice up Europe's lagging economy overshadowed the G-8 meeting, and his promise to break with Nato by pulling French troops out of Afghanistan ahead of other alliance members weighed heavily on the summit in Chicago."There was no embarrassing moment for him, despite the fact that he came right out of the election," said Dominique Moisi, a political analyst with the French Institute of International Relations, IFRI. "The difficulty starts when he comes home... but we all know there won't be any miracles."So far, it's mostly been style over substance. Hollande offered few details about how he would put his plans into practice.The Socialist French president fills a seat that was occupied by Sarkozy, who was often dubbed "Sarko the American" and whose support for a hard line in Iran and Nato's intervention in Libya drew plaudits from US leaders - including Obama. But at home, Sarkozy's brash, in-your-face demeanour in part led to his fall from grace at the ballot box.CharmingSo far, Hollande has ushered in a more inclusive style as French president, and the charm offensive has borne fruit. The timing of the summits also played in his favour: Obama, whose re-election hopes hinge in large part on the American economy's prospects, echoed Hollande's call for pro-growth policies at Camp David on Friday and Saturday.That gave Hollande some momentum going into the Nato summit, where some allies frowned on his early-pullout promises both privately and publicly.Post-electoral honeymoons don't last forever. Much of the questioning that Hollande faced by his trailing press corps centred on his persona, such as his travels in America in 1974 to study a nascent fast food phenomenon and his rapport with other world leaders. Obama playfully teased him for wearing a tie to the casual-dress summit in the Camp David woods and called Hollande his "translator" for French journalists.When one reporter at a French press scrum outside Hollande's Chicago hotel on Monday asked the president if he felt "American," Hollande replied that "I don't know how to take the compliment, if that is one"."But I try to be a Frenchman, who discusses with the Americans - in the hope of making them understand that we have common interests," he said. "I don't try to play the American, and I don't need to play the Frenchman: Be myself."It was aw-shucks charm like that that helped put Hollande, a national lawmaker from rural central France, into the presidential Elysée Palace. Hollande made his name nationally for his quick-witted criticism against a string of conservative governments in France over the last decade, while leader of the Socialist Party.ArticulateAs president, he's morphing from critic to cheerleader. At the summits he subtly claimed credit for France putting on the agenda such ideas as growth, European-supported recapitalisation of ailing Spanish banks or eurobonds to help revive Europe's finances. But he's maintained his sober mindset about Europe's big economic problems.But his personal international rapports are being tested. For all their seeming comity in Berlin last week, Hollande and Chancellor Angela Merkel have lined up against one another politically on both Afghanistan and their prescriptions for European economic health. She champions austerity, he wants pro-growth policies; in Chicago, she reiterated her "in together, out together" mantra for Nato's Afghan mission.Hollande came to the US summits a virtual unknown and benefiting from relatively low expectations. He had first-time introductions to Obama, Merkel, prime ministers Dimitri Medvedev of Russia and Britain's David Cameron all this week. An aide to one of the other G-8 summit attendees, who declined to be identified so as to speak freely about inside details, said that Hollande came across as firm, articulate, and knowledgeable about the agenda items."So far, so good," the political analyst, Moisi, said of Hollande's début on the world stage. "I think what he had to prove was that he was a credible president of France. People had thought that he wasn't: Not just 'Mr Normal'" - an image Hollande campaigned on - "but banal."

NEWS,16.05.2012.

Judge to lead Greece in emergency Government

 

 Greece put a senior judge in charge of an emergency Government yesterday to lead it to new elections on June 17.In a sharp blow to confidence, sources at the European Central Bank it had halted liquidity operations with some Greek banks because their capital had been too far depleted.The move would mean those banks are no longer able to park assets at the ECB in return for cash, and would have to seek costlier emergency financing from the Bank of Greece.It was not clear which banks, or how many of them, were affected. One person familiar with the matter said the capital of four Greek banks was so depleted they were operating with negative equity capital.Greeks have been withdrawing hundreds of millions of euros (dollars) from banks in recent days as the prospect of the country being forced out of the European Union's common currency zone seems ever more real - although there has so far been no sign of a run on bank branches in Athens.European leaders who once denied vociferously that they were fretting over Greece leaving their currency union have given up pretence.Asked if he was concerned about a Greek exit, European Central Bank chief Mario Draghi said simply: "No comment".Political leaders failed to form a government following an inconclusive parliamentary election on May 6, leaving the state with its coffers almost empty and no elected cabinet in place to satisfy lenders it deserves the money needed to stay afloat.President Karolos Papoulias, whose powers as head of state are limited, named supreme administrative court head Panagiotis Pikrammenos as caretaker prime minister.He will have no power to take political decisions, only to carry Greece into the vote.The parliament that was elected on May 6 will convene today and be immediately dissolved, a presidency source said.The interim leader is little known. State television said he was born in 1945 and studied law in Athens and Paris. A court source said he would name as few ministers as possible."Thank you for your trust, and I believe that I am worthy of this mission," Pikrammenos said at a meeting with the president. "This is purely a caretaker government. However, it escapes no one that our country is going through difficult times."He repeated a joke he said he had read in the press, that his own name, which translates as "sorrowful" in English, made him suited to be the last prime minister of a political era.Leftists lead A new poll confirmed what other surveys have shown: that radical leftists who reject a bailout agreed with the EU and IMF are poised for victory, and the two establishment parties that agreed the rescue are sinking further after an historic wipeout 10 days ago.The leftists argue they can tear up the bailout and keep the euro, but European leaders say if Greece fails to meet promises to them, lenders will pull the plug on financing, driving Athens to bankruptcy and a swift exit from the EU single currency.On Monday, according to an official account, the president told party chiefs that figures from the central bank headed by George Provopoulos showed savers had withdrawn up to 800 million euros ($1 billion) from banks."Mr. Provopoulos told me there was no panic, but there was great fear that could develop into a panic," the president was quoted as saying in minutes of a meeting that failed to yield agreement on a cabinet."Withdrawals and outflows by 4 pm when I called him exceeded 600 million euros and reached 700 million euros," he said. "He expects total outflows of about 800 million euros, including conversions into German Bunds and other such things."Several banking sources told Reuters similar amounts had also been withdrawn on Tuesday. Nevertheless, there was no sign of panic or queues at bank branches in Athens on Wednesday. Bankers dismissed suggestions that a bank run was looming.A senior executive at a large Greek bank: "There is no bank run, no queues or panic. The situation is better than I expected. The amount of deposit withdrawals the president mentioned referred to three days, not one."Still, some were taking no risks. A 60-year-old textiles store owner who gave his name only as Nasos said he had transferred 10,000 euros over the phone to a bank in fellow eurozone state Cyprus on Tuesday afternoon."Any way you see it, things are difficult. If they call elections on June 17 - then everyone will take their money out on the Friday." That June 17 date was later confirmed.Charles Dallara, chief negotiator for the body representing private sector holders of Greek bonds, said there had been "a pickup in deposit flight from Greece".Dallara, who as head of the International Institute of Finance spent months negotiating the largest ever sovereign debt restructuring, said a Greek exit from the euro zone would be "somewhere between catastrophic and Armageddon" for Europe.

Merkel, Hollande promise joint growth strategy

 

 New French President Francois Hollande and German Chancellor Angela Merkel have acknowledged differences over how to boost growth in recession-plagued Europe, but pledged to forge a joint approach in time for an EU summit next month.The Socialist Hollande jetted to Berlin yesterday only hours after being sworn in to meet Merkel, a conservative, for the first time, arriving over an hour late after his plane was hit by lightning and he was forced to return briefly to Paris.The meeting was being closely watched for signs the leaders of Europe's biggest economies will be able to move beyond a war of words over how to resolve the debt crisis that now threatens to tear apart the 13-year-old currency bloc.Hollande sharply criticised Merkel during his election campaign for insisting on tough austerity to bring down suffocating debt levels across the euro zone. She in turn had backed Hollande's rival, conservative incumbent Nicolas Sarkozy.Supported by others in southern Europe, Hollande has vowed to shift the focus to growth and reopen a tough new set of budget rules that Merkel and other EU leaders agreed to adopt earlier this year - a step considered taboo in Berlin."I said it during my election campaign and I say it again now as president that I want to renegotiate what has been agreed to include a growth dimension," Hollande told a joint news conference with Merkel at the Chancellery in the German capital.Merkel's five-year double act with Sarkozy earned the duo the moniker "Merkozy" for their close cooperation during Europe's debt crisis. The new Franco-German couple - referred to by some as "Merkollande" - took care to play down their differences on Tuesday, hoping to send a signal of unity at a time when speculation is growing that Greece may have to exit the euro zone and return to the drachma."Growth has to feed through to the people. And that's why I'm happy that we'll discuss different ideas on how to achieve growth," Merkel said.They said the goal was to present joint proposals at a European Union summit in late June.Growth pact Instead of reopening Merkel's "fiscal compact", they are expected to complement it with a new "growth pact".Berlin has already signalled it is open to several ideas favoured by Hollande, including more flexible use of EU structural aid, a bigger role for the European Investment Bank and the introduction of "project bonds" to foster investments in infrastructure like transportation and energy networks.But most economists agree that these steps will make little difference to countries like Greece, which is in its fifth year of recession and has seen unemployment surge to 22 percent.That means Germany is likely to come under pressure to take additional steps, like giving struggling euro countries more time to reduce their deficits, a step it has so far resisted for fear of spooking jittery financial markets.Although the reserved Merkel learned over time to work with the impulsive Sarkozy, her advisers often complained about his erratic behaviour and some believe she will ultimately form a closer bond with the more outwardly cautious Hollande.The two were born less than a month apart, grew up in religious households and both scorn the flashy styles of their more charismatic predecessors, Sarkozy and Gerhard Schroeder.Hollande noted that French and German leaders of different political stripes had a long history of working well together to promote the common European project, referring to Schroeder and Jacques Chirac, as well as to Helmut Kohl and Francois Mitterrand, and Helmut Schmidt and Valery Giscard d'Estaing.After the news conference, the two leaders dined on lamb schnitzel and asparagus on the eighth floor of the Chancellery, overlooking the Tiergarten park and the Reichstag parliament building. Aides said they had a broad conversation on topics ranging from economic and foreign policy to bilateral issues.Hollande later flew back to Paris. He is due in Washington later in the week to meet US President Barack Obama ahead of G8 and NATO summits at Camp David and Chicago.Hollande finds himself in the hot seat from day one. Earlier on Tuesday, Greece abandoned a nine-day hunt for a government and called a new election that could hand victory next month to leftists opposed to the terms of the country's EU/IMF bailout.A growing number of policymakers in Europe have warned over the past week that if Greece does not stick to the budget cuts and structural reforms agreed with its international lenders, it may have no future in the currency bloc.Both Merkel and Hollande said they wanted Athens to remain a part of the euro project and stood ready to explore ways to support the Greek economy so it could return to growth: "Like Mrs. Merkel, I want Greece to remain in the euro zone," Hollande said.

NEWS,27.03.2012.

Japan goes off script at nuclear summit

 

Japan steered off the agenda at a nuclear security summit to hit out at North Korea's plans for a rocket launch next month, as US President Barack Obama cautioned against complacency in dealing with the threat of nuclear terrorism.The summit was briefly interrupted on Tuesday by a dispute between Argentina and Britain, which went to war in 1982 over the Falkland Islands, over suggestions Britain had sent a submarine capable of carrying nuclear weapons to the South Atlantic.A communique issued at the end of the two-day meeting of more than 50 world leaders in Seoul was light on specifics on how to reduce the risk of atomic materials falling into bad hands, loosely calling for all vulnerable material to be secured in four years.The world's biggest nuclear concerns, those surrounding the weapons programmes of North Korea and Iran, were not on the agenda at the summit, and neither country was invited.The secretive North has been widely criticised on the sidelines of the meeting, including by main ally China, but host South Korea has explicitly stated the North's weapons of mass destruction programmes were off the table during the summit itself.The forum is meant to deal only with safeguarding nuclear material and facilities and preventing trafficking.Japanese Prime Minister Yoshihiko Noda ignored protocol and urged the international community to strongly demand North Korea exercise self-restraint over next month's planned rocket launch."The planned missile launch North Korea recently announced would go against the international community's nuclear non-proliferation effort and violate UN Security Council resolutions," Noda said in an opening speech.No other major leaders mentioned North Korea's nuclear ambitions or the ballistic missile launch which Pyongyang says will carry a weather satellite into orbit. The West says the launch is a disguised test of a long-range missile designed to reach the American mainland.North Korea said last week it would consider it a "provocation" if its "nuclear issue is placed on the agenda at the Seoul summit" and if any statement was issued against the North for pursuing such a programme.On Tuesday, it said there was no reason to fire a missile after February's agreement to suspend nuclear and missile tests in return for food aid with the United States.Obama has said the destitute North could be hit with tighter sanctions if it goes ahead with the rocket launch, but experts doubt China will back another UN Security Council resolution against it.A row erupted during the main session of the summit when British Deputy Prime Minister Nick Clegg hit back at accusations levelled by Argentinian Foreign Minister Hector Timermanan that an "extra-regional power" had sent a submarine capable of carrying nuclear weapons to the South Atlantic.In front of the world's leaders, Clegg fired back his own missive, calling the remarks "unfounded, baseless insinuations".Tension between Britain and Argentina is rising as the 30th anniversary approaches of Argentina's invasion of the Falklands that was repulsed by a British task force after a 10-week conflict that killed 650 Argentine and 255 British troops.Obama told leaders the world was safer because of the steps taken to improve nuclear security, but warned that the threat of the wrong people getting hold of the materials to make a crude atomic bomb was real."Nuclear terrorism is one of the most urgent and serious threats to global security," he said.The communique issued at the end of the summit reaffirmed states' commitment to minimising stockpiles of highly enriched uranium and plutonium, safeguarding nuclear facilities, and preventing illicit trafficking of nuclear and radioactive material.The long and vaguely worded document, however, offered nothing in the shape of measurable targets and did not single out any state for criticism.Critics say the summit is no more than a talking-shop, and warn that even though its mandate was extended to include safety after the Fukushima crisis in Japan last year, the next summit in the Netherlands could be the last.Miles Pomper of the Washington-based Center for Nonproliferation Studies said the Seoul agenda was "underwhelming to say the least"."You got a lot of juice out of the process the first time because it was a new thing and Obama had just come off the Prague speech," he said, referring to a 2009 address when he declared it was time to seek "a world without nuclear weapons"."There were a lot of things already in the pipeline, but now we're losing momentum ... we (need to) start being more ambitious."But heralding the progress made in two years since the first such gathering of world leaders, which he hosted in Washington, Obama said the "security of the world" depended on success."It would not take much - just a handful or so of these materials - to kill hundreds of thousands of innocent people. And that's not an exaggeration. That's the reality that we face."Former Cold War adversaries have cooperated to lock down weapons-grade uranium and plutonium, some countries have agreed to remove all such material from their soil and poorer nations have received financial help to secure nuclear facilities."We've come a long way in a very short time, and that should encourage us (but) that should not lead us to complacency," said Obama in an appeal for further collaboration.Noda, representing a country mired in the world's worst nuclear crisis in 25 years, also said that Tokyo has learned from the Fukushima disaster and was reinforcing power supply devices and increasing security measures at its plants. An earthquake and tsunami last March knocked out external and on-site power supplies at the nuclear power plant, 240 km northeast of Tokyo, causing the failure of cooling systems and triggering fuel meltdowns, radiation leaks and mass evacuations.