NEWS,18.07.2013

China's growth must be sustained - IMF

China needs another round of "decisive measures" to make sure it continues its successful economic growth as its margins of safety are falling amid growing domestic problems, the International Monetary Fund said in its latest report.
The world's second largest economy has been underpinned by a mix of investment, credit and fiscal stimulus, but such a pattern of growth is unsustainable, the fund said in a report on its annual Article 4 meeting with Chinese officials.
"To secure more balanced and sustainable growth, a package of reforms is needed to contain the growing risks while transitioning the economy to a more consumer-based, inclusive, and environmentally-friendly growth path," the report said.
"While China still has significant buffers to weather shocks, the margins of safety are diminishing."
The IMF didn't change its latest forecast for 2013 growth in China of 7.75%, though it noted downside risks to the forecast. Its figure is above the Chinese government's target of 7.5% and also above most private economists' forecasts of between 7% and 7.5%.
China's new leaders have repeatedly indicated that they are prepared to tolerate slower growth to push through reforms and deregulation to wean the economy off a reliance on exports and investment and encourage more consumption.
That resolve has been tested, however, as growth slowed in the April to June quarter to 7.5%, the ninth quarter in the last 10 that expansion has weakened, and exports fell in June for the first time in 17 months.
Analysts have suggested that the government may step in if growth falls to 7% or below in any quarter, though it is unclear where the government's bottom line would lie.
The IMF said that for the near term, a priority is to rein in broader credit growth and prevent a further build up of risks in the financial sector.
It noted the rise of China's shadow banking system, where credit is available outside regular channels to companies that banks won't lend to, but which risks creating piles of hidden bad debts that become a threat to financial stability.
Banks could be vulnerable in future if asset qualities should worsen. The significant expansion of local government debt levels in recent years is another cause for concern.
The IMF said China's agenda should include accelerated financial sector reforms, a revamp of local government finances, a more market-based currency exchange rate with less intervention, opening more markets to competition and liberalising the capital account.
"With a successful transition, China will grow at a healthy pace for years to come," the report said.
"Activity may be somewhat slower, a trade off worth making for the benefit of much higher income in the medium to long run - a growth trajectory that will also be good for the global economy."

Bernanke: Fed flexible on bond buying

Federal Reserve chairperson Ben Bernanke said on Wednesday the US central bank still expects to start scaling back its massive bond purchase programme later this year, but he left open the option of changing that plan if the economic outlook shifted.
While sticking closely to a timeline to wind down the bond buying that he first outlined last month, Bernanke went out of his way to stress that nothing was set in stone.
"Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," he told the House of Representatives Financial Services Committee.
Under the plan Bernanke laid out on June 19, the US central bank would likely reduce its monthly bond buys later this year and halt them altogether by mid-2014, as long as the economic recovery unfolds as expected.
He did not depart from that guidance on Wednesday, but he said the current $85 billion monthly pace of purchases could be reduced "somewhat more quickly" if economic conditions improved faster than expected. On the other hand, it "could be maintained for longer" if the labor market outlook darkened, or inflation did not appear to be rising toward the Fed's 2% goal.
"Indeed, if needed, the (Fed's policy) committee would be prepared to employ all its tools, including an increase (in) the pace of purchases for a time, to promote a return to maximum employment in a context of price stability," Bernanke said.
The remarks lifted US stock prices modestly and government debt prices also rose. The dollar firmed against the euro and the yen.
"There is something in these comments for everybody," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "Bernanke has done a good job of leaving himself plenty of maneuver room in terms of policy."
Bernanke's testimony to Congress on the Fed's semi-anual monetary policy report may be his last if he steps down when his term as chairman ends in January, as many expect, and a number of lawmakers lauded him for his service.
Under Bernanke, the Fed has held overnight interest rates near zero since December 2008 and more than tripled its balance sheet to about $3.46 trillion with bond purchases aimed at driving down longer-term borrowing costs and spurring investment and hiring.
Calming the waters
Bernanke set off a brief but fierce global market sell-off last month when he outlined the Fed's plans to curtail its so-called quantitative easing, and he has joined a slew of officials since then who have spelled out their intention to keep rates near zero well after the bond buying ends.
Bernanke acknowledged that one of his motives in talking about tapering last month had been to head off a possible bubble in financial markets. Many economists had suspected that had been an important reason.
"Not speaking about these issues would have risked a dislocation, a moving of market expectations away from the expectations of the (Fed's policy) committee. It would have risked increased build-up of leverage or excessively risky positions in the market," he said.
While the end of the Fed's bond buying may be in view, Bernanke repeated that officials will keep rates near zero at least until the jobless rate, which stood at 7.6% in June, falls to 6.5%, as long as inflation remains in check.
He also said the Fed would look closely at any decline in unemployment to see whether it was being driven by strength in hiring or a decline in the number of Americans looking for work, in which case the central bank would be more patient before raising rates.
Any rate hike cycle, he said, would be gradual.
"We intend to be very responsive to incoming data, both in terms of our asset purchases - but it's also important to understand that our overall policy, including our rate policy, is going to remain highly accommodative," Bernanke said.
The testimony led traders in futures markets to push back their expectations for when rates will rise to December 2014 from as early October 2014 a day earlier. The Fed said last month that 14 of its 19 policymakers do not believe it would be appropriate to raise rates until sometime in 2015.
As for bond purchases, economists on Wall Street expect the Fed to start reducing them at its meeting in September.
Speaking about the Fed's bloated balance sheet, Bernanke suggested the central bank would hold the government bonds it has bought for a long time, if not to maturity, and reinvest any proceeds to keep its balance sheet from shrinking quickly.
Recovering at a modest pace
Some Fed officials have been concerned about the low level of inflation and have expressed a hesitance to trim bond purchases until inflation quickens. The central bank's preferred price gauge is a full percentage point below its target.
Bernanke repeated his view that transitory factors appeared to be restraining price gains, although he said policymakers were aware that very low inflation raised the risk of an outright deflation, which could sap the economy's strength.
Data on Tuesday showed that inflation firmed last month, and hiring in recent months has been relatively strong.
However, the government said on Wednesday groundbreaking for homes fell to a 10-month low. In addition, retail sales were weak in June, and second-quarter GDP growth is expected to come in at around a dismal 1% annual rate, painting a very mixed picture for Fed policymakers.
Bernanke, who appears for a second day of testimony before the Senate Banking Committee on Thursday, said the economic recovery was continuing at a moderate pace thanks to a generally stronger housing sector, which was helping conditions in the labor market improve gradually.
He also repeated that the Fed felt the risks to the economy had decreased since the fall.
But he said higher taxes and cuts in federal spending could exert a larger drag on growth than expected, and that worsening conditions overseas could hurt conditions back home.
"With the recovery still proceeding at only a moderate pace, the economy remains vulnerable to unanticipated shocks, including the possibility that global economic growth may be slower than currently anticipated," Bernanke said.

Bernanke hearing turns into 'eulogy'

With a smile periodically playing across his face, Ben Bernanke almost looked pleased to face questions from members of the US House of Representatives on Wednesday, but that might be because he knows that it was for the last time.
During a hearing described several times as more like a eulogy than testimony on monetary policy, the Federal Reserve chief received bi-partisan thanks for his service as successive members said they had heard he may not be in the job next year.
Bernanke has kept silent about his future plans, but he is widely expected to depart when his current term as Fed chairperson expires on January 31. Nor has he pushed back against perceptions that he is ready to return to private life.
That impression was reinforced last month by President Barack Obama, who said Bernanke had already stayed in office "a lot longer than he wanted".
"I feel a little bit like Bette Midler, the very last guest on the very last episode of The Tonight Show that Johnny Carson hosted. She famously quipped to Carson, 'You are the wind beneath my wings," said Washington state Democrat Denny Heck.
"There's some application to that ... as it relates to the economy and I thank you for your service," he said.
Another Democrat, Al Green from Texas, pleaded with him not to go, while it was suggested that T-shirts for his retirement party be printed with the logo "$34 trillion" to celebrate the amount of US household wealth restored on his watch.
Democrats have been staunch supporters of Bernanke, even though he is a Republican originally appointed by former president George Bush. Obama tapped the one-time Princeton professor for a second four-year term in 2009, thanking him for his aggressive efforts to combat the deep 2007-09 recession and virulent financial crisis.
The Bernanke-led Fed cut overnight interest rates to near zero in late 2008 and launched an unconventional policy of buying longer-term government and mortgage-backed debt to drive other borrowing costs lower.
Many Republicans privately blame Bernanke for helping Obama get re-elected in 2012 and have been outspoken public critics of the aggressive policies he has championed.
Some Republicans repeated their complaints on Wednesday, but they also spent time warmly acknowledging his service, while noting this could be his last appearance before the House.
Indeed, the atmosphere in the crowded hearing room was a great deal lighter than during the dark days of the financial crisis when Bernanke had to endure a heavy barrage of critiques, and the Fed chief looked more at ease.
One lawmaker asked him if now would be a good time for a friend to refinance his mortgage. Bernanke cheerfully responded: "I am not a qualified financial adviser."
However, there were moments when he looked as if he might be relieved he would not have to endure long-winded congressional hearings for much longer, although he does address the Senate banking panel on Thursday.
His smile thinned when committee chairperson Jeb Hensarling, a Texas Republican, announced three hours into the hearing that Bernanke would have to sit through another 10 minutes of questioning.
And he slumped visibly, head on hand, as he listened to Michele Bachmann, a Republican from Minnesota, wonder aloud whether the US Treasury was cooking the books on the federal budget, before politely deflecting her question.
Likewise, his final words to the committee, in response to a question from New Mexico Republican Steve Pearce about whether there was a level of immigration into the United States that could hurt the economy, sounded unapologetically dismissive: "I don't know."

NEWS,28.01.2013

Sweden directs jobless youth to Greece

Sweden's government-funded employment agency on Monday launched a campaign encouraging unemployed Swedish youths to look for summer jobs in crisis-stricken Mediterranean countries including Spain and Greece.The jobs, most of them in the hotel and entertainment sectors, will mainly serve Swedish tourists."We hope our Swedish youths will get every single one of these jobs. These companies have had good experience of young Swedish workers," said Kristina Gaerdebro Johansson, a European Employment Services (EURES) advisor at the Swedish agency.Hundreds of jobs in Greece, Spain, Italy and Cyprus - all popular tourist destinations for Swedes - will be marketed at a special event organised by the country's employment agency and EURES in the southern city of Malmoe next week.The positions include football coaches, aerobics instructors and dancers at hotels and resorts around the Mediterranean. Some of the jobs require Scandinavian language skills, but not all of them, said Gaerdebro Johansson.Youth unemployment in Greece and Spain currently stands at more than 50%.Although Sweden's export-driven economy is beginning to feel the effects of Europe's economic woes, it has posted strong growth since making a quick recovery from the 2008 recession. It also has a low level of government debt.But youth unemployment has remained above the European average, reaching a seasonally adjusted 23.9% in December.Sweden's employment agency is offering to reimburse those who want to travel to the Mediterranean job fair from other parts of the country."This is a great opportunity if you want to enter the job market," Gaerdebro Johansson said.

WTO to probe Argentina trade disputes

The World Trade Organization on Monday established a dispute resolution panel to probe allegations of unfair trade practices lodged against Argentina by the United States, the EU and Japan.It also created a panel to look into Argentina's claim that the United States has imposed unfair barriers to its meat exports.In the first case, the three complainants have attacked Argentina's import licencing rules, which among other things require firms eager to export goods to the country to import Argentinian goods in exchange.One of the most well-known examples is that of German car maker Porsche, which was forced to commit to purchasing Argentinian wine and olive oil in order to get around 100 of its cars into the country.Canadian mobile phone maker RIM, which makes Blackberry, was meanwhile forced to open a production unit in southern Argentina in order to continue selling its phones.On Monday, Argentina told the WTO's Dispute Settlement Board that it had taken measures since January 25 to calm the tensions, stressing that it had repealed "all non-automatic import licences".The complainants however told the board they were "not convinced" by the measures taken by Argentina, a source close to the matter said. The WTO's dispute settlement board also established a second panel Monday to look into Argentina's claims that Washington has blocked meat imports.Buenos Aires has accused the United States of imposing measures over the past 11 years that have in effect closed off the US market to Argentinian beef.Argentina has also criticised the US for not recognising that the Patagonia region is free of the foot and mouth disease, despite a clean bill of health from the World Organization for Animal Health.The United States meanwhile insisted Monday that it was fully compliant with its obligations under the WTO agreements, but said US authorities were in the process of evaluating sanitary issues related to Argentinian products.According to WTO rules, the panels each have up to six months to report their findings.

Eurozone break up fades - survey

The prospects of a country being forced to leave the euro zone have all but vanished since the middle of last year, a survey released on Monday showed. The poll of 956 investors by research group Sentix showed just 17.2% expected one or more states to leave the 17-state bloc over the next 12 months.This was down from 25% in December, and a high of 73% in July 2012, a month after the index began."A euro breakup is almost no issue anymore," Sentix said in a statement. Since the start of the index, the European Central Bank has unveiled a plan to buy the bonds of stricken euro members, and Greece successfully completed a debt buyback, easing financial market tension and prompting policymakers to say the worst was over. Greece remained the country deemed most likely to exit the eurozone in the survey but the percentage of those who expect a "Grexit" within the next year fell to 13.9% from 22.5%  in December. For Cyprus, which applied for a bailout in June last year, the percentage fell by 2% points to 7.5%.

 

Gas drilling boon for ordinary US folks

Private landowners are reaping billions of dollars in royalties each year from the boom in natural gas drilling in some US states, transforming lives and livelihoods even as the windfall provides only a modest boost to the broader economy.In Pennsylvania alone, royalty payments could top $1.2bn for 2012, according to an analysis by The Associated Press that looked at state tax information, production records and estimates from the National Association of Royalty Owners.For some landowners, the unexpected royalties have made a big difference."We used to have to put stuff on credit cards. It was basically living from paycheck to paycheck," said Shawn Georgetti, who runs a family dairy farm in Avella, about 50 kilometers southwest of Pittsburgh.Natural gas production has boomed in many states over the past few years as advances in drilling opened up vast reserves buried in deep shale rock, such as the Marcellus formation in Pennsylvania and the Barnett in Texas.Nationwide, the royalty owners association estimates, natural gas royalties totaled $21bn in 2010, the last year for which it has done a full analysis. Texas landowners received the most in gas royalties that year, about $6.7bn, followed by Wyoming at $2bn and Alaska at $1.9bn.Exact estimates of natural gas royalty payments aren't possible because contracts and wholesale prices of gas vary, and specific tax information is private. But some states release estimates of the total revenue collected for all royalties, and feedback on thousands of contracts has led the royalty owners association to conclude that the average royalty is 18.5% of gas production."Our fastest-growing state chapter is our Pennsylvania chapter, and we just formed a North Dakota chapter. We've seen a lot of new people, and new questions," said Jerry Simmons, director of the royalty owners association, which was founded in 1980 and is based in Oklahoma.Simmons said he hasn't heard of anyone getting less than 12.5%, and that's also the minimum rate set by law in Pennsylvania. Simmons knows of one contract in another state where the owner received 25% of production, but that's unusual.By comparison, a 10 to 25% range is similar to what a top recording artist might get in royalties from CD sales, while a novelist normally gets a 12.5% to 15% royalty on hardcover book sales.Simmons added that for oil and gas "there is no industry standard," since the royalty is often adjusted based on the per-acre signing bonus a landowner receives. While many people are lured by higher upfront bonuses, a higher royalty rate can generate more total income over the life of a well, which can stretch for 25 years.Before Range Resources drilled a well on the family property in 2012, Georgetti said, he was stuck using 30-year-old equipment, with no way to upgrade without going seriously into debt."You don't have that problem anymore. It's a lot more fun to farm," Georgetti said, since he has been able to buy newer equipment that's bigger, faster and more fuel-efficient. The drilling hasn't caused any problems for the farm, he said.Range spokesman Matt Pitzarella said the Fort Worth, Texas-based company has paid "well over" $1bn to Pennsylvania landowners, with most of that coming since 2008.One economist noted that the windfall payments from the natural gas boom are wonderful for individuals, but that they represent just a tiny portion of total economic activity.For example, the $1bn for Pennsylvania landowners sounds like a lot, but "it's just not going to have a big impact on the overall vitality of the overall economy," said Robert Inman, a professor of economics and public policy at the University of Pennsylvania's Wharton business school."I think the issue is, what difference does it make for the individual families? "Pennsylvania's total gross domestic product in 2011 was about $500bn, according to the US Department of Commerce.Inman noted that total gas industry hiring and investment can have a far bigger effect on a state or region, and companies have invested tens of billions of dollars just in Pennsylvania on pipelines, infrastructure, and drilling in recent years.For example, in North Dakota the shale oil and minerals boom contributed 2.8% of GDP growth to the entire state economy in 2011, according to Commerce Department data.Another variable in how much royalty owners actually receive is the wholesale price of gas. That has dropped significantly over the past two years even as production has boomed in Pennsylvania and many other states. Average wholesale prices went from about $4.50 per unit of gas in 2010 to about $3 in 2012. For many leaseholders, that meant a decline in royalties.The boom in natural gas royalties has even led to niche spinoff companies that look for lease heirs who don't even know they're owed money.Michael Zwick is president of Assets International, a Michigan company that searches for missing heirs."It was an underserved niche," Zwick said of oil and gas leases. When a company can't find an heir to lease royalties, the money often goes to state unclaimed property funds.Zwick said he has found a few dozen people whose gas lease money was being held in escrow, including one who was owed about $250 000 in drilling royalties. But the average amount, he said, is far lower.

Wall Street execs fret about talent drain

As the titans of Wall Street banks gathered to network, gossip and consider the future of their beleaguered industry in Davos over the past week, one common worry emerged: who is going to take over when we leave?Some of the most ambitious minds in finance are leaving the industry after years of losses, scandals, bad press - and perhaps most importantly new regulations that have curbed some previously free-wheeling ways. The issue, executives say, is not pay, but how much scope there is to innovate and build businesses, which is why more bankers and traders are leaving the big Wall Street firms for Silicon Valley, joining private investment partnerships like hedge funds and private equity funds, or going into energy and other industries. David Boehmer, head of financial services in the Americas for the recruiting firm Heidrick & Struggles, said he hears this message from Wall Street employees looking to leave the industry. "I get people saying, 'I'm bored and I need to do something about it - this isn't a challenge anymore,'" he said. The problem is particularly acute for big banks such as Goldman Sachs Group or JPMorgan Chase & Co, several senior bank chief executives, managers and consultants told Reuters in interviews at the World Economic Forum here. "There is a massive talent drain in our business," said a senior Wall Street executive, who declined to be identified. For some of Wall Street's harshest critics this is likely to be perceived as good news. Former US Federal Reserve chairperson Paul Volcker and other experts have argued for years that innovation has little place in the financial sector, and having more conservative bankers and fewer heavy risk takers running Wall Street will reduce the chances of another blow-up like the financial crisis. It will also help to increase wealth generation in more important parts of the economy, such as manufacturing and software, they argue. The financial implosion in 2008 was partly triggered by the best and the brightest on Wall Street engineering products that helped inflate a massive housing bubble, and then magnified the losses that resulted. The financial sector globally received trillions of dollars of government support during the worst of the crisis, and new regulations are designed to ensure that bailouts are not necessary in the future. But many of the biggest global banks have gotten only bigger, making them potentially even more dangerous to the financial system. And having talented executives who understand complicated financial products and know how to control risks will become even more important, executives say. "It will become more of a problem five or 10 years down the road, but ultimately someone is going to have to manage these beasts," the Wall Street executive said. It isn't difficult to find examples of the exodus from big banks. After nearly 15 years in finance- with stints at American International Group, Barclays Capital and PineBridge Investments- Jacques-Philippe Piverger left Wall Street in 2011 to launch a company called Micro Power Design, which makes solar-powered lamps. Piverger's ultimate goal is to get the devices into the hands of poor people in developing countries whose access to electricity is limited. "Isn't it cool?" he asked as one of the lamps was placed on the bar of the posh Belvedere Hotel in Davos. Piverger was well-paid in finance but said his career had left him wanting. His startup gives him the ability to "address business and societal and environmental imperatives from under one roof," he said. Another example is the Twitter-linked tech startup Dataminr, which is staffed by ex-employees from Wall Street firms, including Mark Dimont, who left Morgan Stanley last year to head a business development team there. Of course, there have been previous waves of departures to hedge funds as bankers and traders have sought to strike out on their own - or to make more money - but this time the departures appear to be broader in nature. The departure of employees may force Wall Street to consider a wider range of people for positions. Heidrick & Struggles' Boehmer gave a presentation to a group of young professionals in Davos about his biggest challenge recruiting for big banks these days: getting executives to think creatively when filling positions. In the presentation - called "Hiring an oddball" - Boehmer described how hard it is to get bank executives to hire creative and "quirky" leaders who do not "fit in" with the prototypical suited-up Wall Street mold, but who could help revolutionise the industry. Instead, those quirky types are sought by Silicon Valley, and they may be happier there. Many prefer the laid back atmosphere, not to mention the challenges of building a business, and the promise of lucrative rewards at companies like Google, Facebook and smaller startups, Boehmer said. "Banks are not getting top-level talent out of universities anymore, so in 10 to 15 years, there could be a big problem when it comes to leadership at the senior level of these firms," Boehmer said. "They're seeing big gaps in talent." Boehmer said he performed a search for a technology position at a major investment bank, calling on candidates from Silicon Valley who might be lured to New York with mega-paychecks. He was denied by everyone he approached, he said. On the flip side, Heidrick & Struggles also did a search for a mobile-payments company on the West Coast that was looking for someone with financial expertise but offered just one-quarter of the pay. In that case, "we got tons of applicants," said Boehmer. Jack Dunn, president and CEO of FTI Consulting, recalled a recent conversation with a friend's son who is about 35 years old and works at a major Wall Street bank. Despite having a lucrative pay package and senior title, all the son talked about was finding an exit strategy, Dunn said. "When I was young and didn't know any better, I would have thought it was a dream job," said Dunn, a former investment banker. "It's a problem because we're going to need someone to pick up the pieces, and a lot of the best people are leaving these firms."

Japan forecasts 2.5% growth in 2013

Japan on Monday said the world's number three economy was on track to expand 2.5 percent in the fiscal year starting in April, thanks to fresh stimulus and a recovery in overseas markets.Prime Minister Shinzo Abe's cabinet approved the forecast higher than an estimate of one-percent growth for the current year to March on Monday morning, government officials said.The estimate is slightly higher than those from economists who have also upped their outlook on the back of a weaker yen and new stimulus measures, Dow Jones Newswires reported."We are forecasting that the economy will recover as the global economy is expected to pick up gradually, while we're also expecting a steady recovery in demand and an increase in jobs" at home, Chief Cabinet Secretary Yoshihide Suga told a press briefing.The government's top spokesman warned that several factors could impact the final growth figure, including swelling public debt and fluctuations in the yen, a key factor for the country's trade picture.But Economic revitalisation minister Akira Amari said he was confident the new target would be hit, telling Jiji Press: "Overseas risks are decreasing."Last week, the Bank of Japan raised its growth forecast for the same fiscal year to 2.3 percent from a previous 1.6 percent estimate, as it announced an open-ended asset buying programme and new inflation target aimed at ending the deflation that has haunted the economy for years.Abe, who took office late December after a landslide national election victory, unveiled a 20.2 trillion yen ($222 billion) stimulus package this month in the latest bid to stoke growth in the limp economy. The figure also includes local government and private-sector spending.Tokyo's new forecast will be used to produce a fresh budget, with Abe's cabinet set to endorse 92.6 trillion yen in spending on Tuesday, Japanese media reported.

NEWS,15.10.2012

Softening stance on Greece, Merkel rules out default

Chancellor Angela Merkel has ruled out letting Greece default on its debt, in the latest sign Berlin is softening its stance towards Athens ahead of an eagerly awaited report on its reform progress from the "troika" of international lenders.The German leader signalled that she would be taking a more conciliatory approach towards Greece by visiting the country last week for the first time since the euro zone crisis erupted there three years ago.And over the weekend, comments by several conservative allies of the chancellor provided further evidence that the government has embarked on a delicate policy pirouette.Finance Minister Wolfgang Schaeuble, one of Greece's harshest critics, told a meeting of business leaders in Singapore on Sunday that the country would not go bankrupt - an acknowledgement that Athens will get the 31.5 billion euro aid tranche it needs next month to avert a default.Merkel told a news conference with Panama's president on Monday that she was in total agreement with Schaeuble, and explicitly ruled out any steps  including a Greek insolvency or euro zone exit that might unleash "uncontrollable developments" in the single currency bloc.The change in tone, which helped push down Greek bond yields to their lowest levels in over a year, reflects a reassessment by Merkel of the costs and benefits of her tough public stance towards the euro zone's most vulnerable member.The hard line served two main purposes: it ensured that reform pressure on Greek Prime Minister Antonis Samaras remained high, and it convinced sceptical conservative allies of Merkel in parliament to support her.Now the calculation has changed. With a US election less than a month away and a German vote due one year from now, reducing the risk of turmoil has become the top priority, even if it complicates Merkel's domestic dance.She now looks set to grant Samaras the two extra years he is seeking to hit deficit reduction targets. This will be a tough sell at home, in part because it would tear a new hole in Greece's funding plan.But it is seen as workable as long as Merkel can avoid going to parliament to seek approval for additional loans, on top of those set out in the country's second bailout package."There is a recognition, not just in Germany, that we need to avoid going back to national parliaments for Greece," a senior German official told Reuters, requesting anonymity.Bundling aid an "illusion" Ideas under consideration range from front-loading the loans in the second bailout, to using left-over EU budget funds to plug a Greek hole that sources say could total as much as 30 billion euros.Governments and the European Central Bank have ruled out accepting losses on their existing loans to Greece a solution favoured by the International Monetary Fund (IMF) to fill the Greek gap.Merkel also seems to have cooled on the idea, floated by some German officials, of bundling aid for Greece, Spain and Cyprus together in one final package towards the end of this year."It's an illusion to think we can align these three countries in one package," a second senior German official said. "Things just don't work that way in Europe."Working in Merkel's favour is the support of the main opposition party, the Social Democrats (SPD), for a softer stance on Greece.Her SPD challenger in the 2013 election, Peer Steinbrueck, has come out in favour of giving Greece more time to make savings, reducing the domestic risks for Merkel of that course.There are also signs that doubters in her own coalition are prepared to go along if a divisive debate in the Bundestag can be avoided. Rainer Bruederle, leader of the Free Democrats (FDP) in parliament, said on Monday that there was a readiness within the government to give Greece another chance.Until he struck a softer tone in Singapore, Schaeuble was seen by many outside of Berlin as the biggest obstacle to agreement on a range of euro zone issues - from aid for Greece and Spain, to European banking supervision and direct recapitalisation of banks via the ESM rescue fund."There have been several instances when he was clearly speaking for himself and not for the German government," one senior EU official said. "He seems to be trying to limit Merkel's room for manoeuvre."Two senior German officials agreed with that assessment, saying Schaeuble was worried about Merkel making too many compromises, and therefore felt the need to come out strongly in public to defend what he saw as German interests."If Merkel wants to give Greece additional money without new steps in return, then she will have to give Schaeuble a clear order to do it," one official close to the minister told Reuters earlier this month.Whether that order has indeed come down is unclear, but Schaeuble now seems to have got the message.

Brics 'need political reform for growth'

The world's five emerging economic powerhouses will experience significantly slower growth if they delay in implementing key political reforms, according to a report released on Monday by Germany's Bertelsmann foundation. The report said the five Brics countries Brazil, Russia, India, China and South Africa must focus on creating competent and stable political institutions and improving their education, health and judicial systems in order to achieve sustainable growth. Brazil, which the report says has halved incidences of extreme poverty and moved 20 million people into the middle class in the last decade, was called "the most promising of the Brics states" because of its institutional reforms and infrastructure improvements. The "worst-performing" country in the comparative study was Russia, which suffers from "a unilateral economic strategy, patronage and the lack of involvement of civil society." It said Russia must diversify its economy by overcoming its reliance on natural resources. The Bertelsmann report, titled "Sustainable Governance in the Brics," said the results for China were "ambivalent" as the country grapples with problems related to demography, social inequality and pollution. India too is plagued by "enormous regional and social imbalances," as well as infrastructure shortfalls and widespread corruption, which hinder growth. The report lauded South Africa for its economic stability, reduction of state debt and strengthening of social welfare policies, but said it held a "middling" position within the Brics, due in large part the poor performance of its education system and labour market. It has the highest level of social inequality in the grouping. The five countries are home to 42% of the world population and make up some 18% of global gross domestic product (GDP). Goldman Sachs, the investment group that coined the Brics acronym in 2001, forecasts the countries to account for some 40% of global GDP by 2050

World's best paying jobs

What jobs offer the highest pay? Investment banking is up there. So is specialist surgery. But consider this. Slightly over twenty years ago, Johnathan Roberts started work on an oil rig at $5 an hour. Today, the newly appointed operations manager of Norway's Standard Drilling makes about half a million dollars a year.Even accounting for inflation, it's a huge jump for the 45-year-old American. Salaries on oil rigs have soared because of a global boom in offshore drilling.Managers and workers are scarce in this specialised industry, where the work is intense and the job involves living on a platform in remote seas for weeks. For new players in Asia, where the energy demands of booming economies are driving a foray into offshore drilling, the costs and availability of skilled workers will be a big restraining factor."The amount of money they are making an hour is just mind-boggling now, just five years ago they were making just half that," said Roberts, who moved to Singapore this year from Texas. He said his pay more than doubled in 1999 when the industry faced a labour shortage like the one that appears to be emerging.The increasing demand for oil and gas is pushing energy companies to explore frontier areas like the Arctic and new offshore zones given that output from accessible fields is declining. Global oil demand has risen 14% in total to 88 million barrels per day (bpd) in 2011 from 2001, according to the BP annual statistical review. Rapidly growing economies have accounted for much of the increase - consumption in China doubled in the same period to 9.76 million bpd. Energy and mining offer good salaries, said Wyn James, a Singapore-based Briton who left a career in banking this year to open Zhen Global, a firm that recruits and places workers in mining and oil extraction."What we are seeing now is an acute shortage of people actually with applied skills, from engineering or chemical backgrounds," James said. "Even if the skills do exist globally, they don't necessarily exist in the place that is needed. So what we are doing is we are picking up people from all corners of the world and we are sticking them into projects, whether it's short-term or medium-term, but where they can earn reasonable money, live in a different country, live offshore, whatever that may be."Global trendDeepwater drilling, one of the most difficult but most lucrative parts of the extraction business, has mainly been centred in the Gulf of Mexico. But in the past decade, Brazil has become a key player, exploring untapped reserves in the Santos basin as far away as 300 km southeast of Sao Paulo, and at depths of over 1,500 metres. That drive is sucking in hundreds of rig operators, drillers, engineers and other technicians.On the other side of the world, China National Offshore Oil Corp (CNOOC) aims to build capacity to produce one million barrels per day of oil equivalent in deep waters offshore China by 2020.India, Asia's third-biggest oil consumer, is also expanding into the deep waters of the Bay of Bengal. There were 540 offshore oil rigs in the world last year and, by the end of 2012, the number should rise by 51 to 591, says Faststream Recruitment, a UK-based firm that specializes in hiring for the shipping, oil and gas industry.It is the biggest jump for any year in the past decade, said Mark Robertshaw, managing director of Faststream. In 2013, the number will grow by 28 to 619.The increase would mean more than 11 000 new jobs over the next 12 to 18 months from a total of 117 000, based on an average need of about 184 jobs on one rig, he said."If you consider that over the past 10 years, the annual number of rigs under contract has grown to average 539 during 2011, it becomes apparent that offshore employment for workers actually housed on floaters and jackups will spike significantly," Robertshaw said.Roustabouts and roughnecksThe labour crunch has already seen pay for a roustabout, the least skilled worker on a rig, nearly double in the past five years to $18-$20 an hour. A roughneck, a rank higher, earns about $27-$28, said Roberts, the US rig manager. "When the rousta gets a raise it doesn't just stop there," he said. "It goes all the way to the top."A rig operates on 12-hour shifts and typically workers do 14 days and then rotate out for a break for another 14 days.The schedule puts off many and with salaries in IT and other industries growing, an engineering graduate or technician has other options."Skilled labour is becoming difficult to find," said Scott Kerr, chief executive of Norwegian deepwater drilling company Sevan Drilling.The salary increases show up on balance sheets. For Keppel Corp., the world's largest rig builder, wages and salaries surged 27% to $1.43bn by 2011 from 2007, while the number of employees increased 5.7% over the same period, according to its annual reports. Nearly 90 percent of staff work in the oil rig division. Besides pay, companies try to attract talent with career opportunities."An engineer does not need to stay an engineer all his life. I was trained as a naval architect and I practised for a few years, but beyond that I was in management," said Choo Chiau Beng, chief executive of Keppel Corp."In some respects, being a highly paid CEO has attracted people to Keppel, because it shows you don't need to be a lawyer to be highly paid, you can be an engineer and be highly paid."For rig men like Roberts, the money is not to be sneezed at."After clearing taxes, my first check after one week was $167," he said. "My first apartment was very small, it was a little bitty one bedroom studio."Today, Roberts owns a home in a community in Texas that has manicured lawns, landscaped gardens and four golf courses. He is saving to buy a $2m ranch."I didn't come up with a silver spoon in my mouth, I came up working through the ranks," he said.

NEWS, 31.05.2012.

 Spain debt woes spur flight from risk

 

Asian shares and commodities slid while the euro fell to its lowest in almost two years against the dollar on Thursday, as surging borrowing costs in troubled Spain raised fears that it could fail to rescue its banks and may need to seek a bailout. Investors fled from risk assets to US government bonds, with the benchmark 10-year Treasury yield falling below 1.6% in early Asian trade on Thursday, its lowest in at least 60 years. The 10-year Japanese government bond yield  hit a nine-year low of 0.810%. The dollar and the yen were also beneficiaries of escalating risk aversion although gold, a traditional safe-haven asset, struggled in the face of the greenback’s strength.     MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled as much as 1.6%, and was set for its worst month in eight months with a drop of nearly 12%. The pan-Asia index was down 0.3% for the year.   The index was dragged down as some key Asian bourses - Hong Kong, Australia and Korea - temporarily fell to negative territory for t h e year. Japan’s Nikkei was down 1.4% on the day and  on track for its biggest monthly drop in two years. European shares were likely to tread lower, with spreadbetters predicting major European markets    would open down as much as 0.2%. US stock futures were nearly unchanged.   "The situation in Spain at the moment is untenable, not only is there concern over the state of its banking sector but there is little confidence its government will actually be able to bail them out,” said Michael Creed, an economist at the National Australia Bank. A caution by Spain’s central banker that Madrid will miss deficit targets for this year pushed Spanish 10-year yields  above 6.7%, close to 7%, a level seen as unsustainable and which could push Spain to seek a bailout just as Greece, Portugal and Ireland have done. The cost of insuring against a Spanish default scaled a record high near 600 basis points while Italy, which is also struggling with huge public debt, saw its 10-year yield  top 6% for the first time since January. Yields on all German bond maturities hit record lows on Wednesday, pushing the premium investors demand to hold Spanish debt over German debt to its highest since the launch of the euro at around 543 basis points. Firm dollar slams commodities Oil prices extended losses and copper hit 2012 lows near $7 422 a tonne on Thursday. US crude futures eased 0.3% at $87.59 a barrel and were set for their worst month since late 2008. Brent crude fell 0.3% at $103.15 a barrel, on track for its worst month in two years.     “Investors were already exposed to the problems in Spain, but what really disturbed the market were oil prices and US bond yields which broke out of range to hit long-period lows,” said Lee Seung-wook, an analyst at Kiwoom Securities. The dollar index, measured against a basket of major currencies, extended its rally to 83.11, its highest since September 2010.   The strong dollar and intensifying risk aversion sent the Thomson Reuters-Jefferies CRB index, a global benchmark for commodities, tumbling 1.7% to its lowest levels since September 2010 on Wednesday. A stronger dollar typically weighs on dollar-based commodities. The dollar index was on the verge of closing above its 100-month moving average at 81.82, which would generate a buy signal which in turn could spur a sustained period of dollar strength for the next couple of years to as high as 101.00-106.00, some analysts said. The index has in the past 30 years generated four successful buy signals which have resulted in significant dollar moves, they added.Euro under fire     The euro fell to a 23-month low of $1.2358 and a four-and-a-half month low against the safe-haven yen at ¥97.36. “There is no exit in sight currently for the euro to get out of this downtrend because there is no shortage of negative news,” said Hisamitsu Hara, chief FX manager at Bank of Tokyo-Mitsubishi UFJ. “Problems in Spain, a large eurozone economy, heighten fears while the risk of Greece leaving the euro bloc raises contagion concerns. The euro remains depressed, with players  cautiously testing the downside”. Hara added that the euro could weaken until support at the$1.19 level. The euro last dipped below $1.19 in June 2010. The yen rose to a three-and-a-half month high against the dollar at ¥78.71. Hara said wariness over Japanese authorities intervening to prop up the dollar was likely to prevent the US currency from falling sharply further.The European Commission threw Spain two potential lifelines, offering more time to reduce its budget deficit and offering direct aid from a eurozone rescue fund to recapitalise distressed banks. But any relief from the news was quickly offset by the latest Greece polls showing parties for and against a bailout neck-and-neck or very close to each another, ahead of a June 17 election that may decide whether Greece remains in the euro. Asian credit markets weakened, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 8 basis points.  

Oil prices extend losses

 

 Oil extended losses in Asian trade on Thursday, with prices hitting multi-month lows as Spain's banking woes intensified worries about the eurozone, analysts said.New York's main contract, West Texas Intermediate crude for delivery in July was down nine cents to $87.73 per barrel while Brent North Sea crude for July shed 29c to $103.18 in the afternoon.Prices had slumped Wednesday as the dollar rose to two-year highs against the European single currency, making dollar-priced oil more expensive and hurting demand.WTI crude had plunged $2.94 on Wednesday to its lowest level since October, while Brent declined $3.21, its lowest close since December 16."Right now, the market is wide open. There is still scope for more downside pressure on prices if the bearish sentiment about the eurozone's future keeps up," said Nick Trevethan, senior commodities strategist at ANZ Research.Spain's economic woes were sharply in focus as its 10-year borrowing rates approached the 7% mark considered too high for governments to be able to service their debts.Economists fear Madrid will have to seek an international bailout - following Greece, Ireland and Portugal - despite assurances from Prime Minister Mariano Rajoy.The European Commission weighed in on Wednesday, placing the debt-wracked country at the head of a critical list of 12 economies ordered to carry out sweeping reforms this year to try to stabilise the eurozone debt crisis."Concerns about a possible Greek exit and the risks of contagion from the periphery remain and in the absence of a policy response, oil prices are likely to remain under pressure," said Barclays Capital in a commentary.