NEWS,17.10.2012

Putin says Russia will not be dictated to on arms sales

President Vladimir Putin said today that only the UN Security Council could restrict Russian weapons sales abroad, a remark that appeared aimed at defending the Kremlin against criticism of its arms supplies to the Syrian government."Only sanctions imposed by the UN Security Council can serve as a basis for limiting weapons supplies," Putin said, according to state-run Itar-Tass news agency."In all other cases, nobody can use any pretext to dictate to Russia on how it should trade and with whom," he was quoted as telling a meeting of a state commission on the arms trade.The West has criticised Russia for vetoing, along with China, three UN Security Council resolutions aimed at putting pressure on Syrian President Bashar al-Assad to end a conflict that has killed an estimated 30,000 people in 19 months.Russia sold Syria $1 billion worth of weapons last year and has made clear it would oppose an arms embargo in the Security Council because of what it says are concerns rebels fighting Assad's government would get weapons illegally anyway.Putin said in June that Russia was not delivering any weapons to Syria that could be used in a civil conflict.Turkey said on October 11 that a Syrian passenger plane grounded en route from Moscow to Damascus was carrying weapons. Moscow said the cargo included radar parts that were of dual civilian and military use but were fully legal.Moscow in 2010 scrapped plans to deliver high-precision air defence missile systems to Iran, citing sanctions imposed by the UN Security Council over Tehran's nuclear programme, a move welcomed by the United States and its European allies.Russia denies trying to prop up Assad, who allows Russia to maintain a naval supply facility in the port of Tartus that is its only military base outside the former Soviet Union.But Moscow says Syria's crisis must be resolved without foreign interference, particularly military intervention.

Greece declares progress as inspectors depart

Inspectors from Greece's international lenders will leave Athens after making substantial progress on talks to unlock aid for the near-bankrupt country but without agreement on crucial labour reforms, officials said today.After months of often heated and testy negotiations, Athens and its European Union and International Monetary Fund lenders appeared to be in the home stretch toward a comprehensive deal on spending cuts and reforms needed to avoid a Greek bankruptcy."I'm confident we're doing everything we have to do in order to get it (a deal) and get it soon, so that we can move towards a recovery," Prime Minister Antonis Samaras said at a meeting of European centre-right parties in Bucharest.A senior Greek government official earlier said the two sides had reached agreement on all issues except labour reforms.In a rare statement to reporters during talks late on Tuesday, the IMF's mission chief for Greece, Poul Thomsen, also declared that the two sides had agreed on "most policy issues", with agreement on the rest expected soon.Thomsen and his European Commission and European Central Bank counterparts are due to depart Athens today in order to brief leaders at a two-day European Union summit, where Greece's future will loom large despite not being the focus of talks.Once a deal on the austerity package and reforms is clinched, the so-called troika of EU, ECB and IMF lenders are due to present a report on Greece's progress in meeting the terms of its bailout and whether it can cut its debt down to sustainable levels.That report is expected to show that Greece is hugely off track on its commitments, which critics blame on a lack of political will, political paralysis during repeat elections this year and a deeper than expected recession.But with Greece due to run out of money next month and Europe determined to avoid fresh market turmoil that drags down bigger economies like Spain and Italy, Athens is expected to ultimately secure its next 31.5 billion euro aid tranche.Still, Athens needs the blessing of the troika on a 11.5 billion euro austerity package as well as a long list of reforms first to be able to unlock that aid.Talks on both fronts have moved slowly since July, with signs of progress tempered by tension and mistrust over the ability of Greece's political brass to push through public sector reform and generate savings."Hard red line" On Tuesday, the two sides resolved differences on the extent of Greece's recession next year and issues related to health spending cuts after hitting an impasse on labour reforms during an earlier round of talks, officials said.They agreed Greece's economy would contract 4.2% next year - a key estimate in calculations to determine whether Greek debt will be viable - after Athens initially predicted a 3.8% tumble and lenders forecast a 5% contraction.Officials also suggested that most of the issues related to the long-discussed spending cuts package had been resolved apart from disagreement over the use of brand name or generic drugs in the state healthcare system."There has been substantial progress on all fronts and only some issues remain open, mainly labour and structural," a second Greek government official said."We are confident these will also be resolved in time."

Wall Street rises on US housing data

Global stocks rose and the euro hit a one-month high today, helped by brighter prospects for resolving Spain's debt woes, while better-than-expected housing data and gains among financials lifted the US equity market.US and German government debt prices fell after Spain avoided a damaging ratings downgrade from Moody's and stronger-than-expected US housing data pointed to an improving economy, which reduced safe-haven demand.Growing speculation that Spain will ask for a bailout next month lifted the euro. A possible line of credit to Spain and some easing of German opposition to aid for Greece and Spain were also likely to support the euro in the near term.Wall Street was mostly higher, putting the S&P 500 on track for a third day of gains, but disappointing results from Intel Corp and IBM weighed on the Dow.Intel slumped 3.0% to $21.68 while IBM lost 5.2% to $200.08. Both were among the biggest drags on the Dow and Nasdaq 100.M&T Bank jumped 5.2% to $102.48 after posting third-quarter results, helping to lift the KBW Bank index 1.5%, while the S&P financial services index rose 1.1%, the biggest gainer among the 10 S&P 500 sectors."It seems like it's a classic earnings period reaction. Either people are too exuberant and expectations are raised too high to beat when the actual number comes out or people are too pessimistic and the earnings are just not as low," said Rick Meckler, president of hedge fund Liberty View Capital Management in Jersey City, New Jersey.The Dow Jones industrial average was down 7.52 points, or 0.06%, at 13,544.26. The Standard & Poor's 500 Index was up 6.30 points, or 0.43%, at 1,461.22. The Nasdaq Composite Index was up 10.01 points, or 0.32%, at 3,111.19.European shares rose for a third consecutive session after Spain clung to its top grade credit rating, bolstering expectations the euro debt crisis can be contained."Spain is in a better place for now," said Richard Robinson, a fund manager at Ashburton who recently bought shares of Spanish bank Bankinter and Italian bank Intesa on prospects of improved euro zone economic problems.The FTSE Eurofirst 300 index of top European shares gained 0.5% to close at 1,118.62. MSCI's all-country world equity index rose 0.8% to 338.24, extending Tuesday's 1.2% gain.The euro was up 0.55% at $1.3124, its highest since mid-September.Bond losses accelerated after data showed that groundbreaking on new US homes surged in September to its fastest pace in more than four years, another sign that the housing sector's budding recovery is gaining traction."The housing starts and permits are both up a ton. The market was already selling off, it started overnight with Moody's affirming Spain's investment grade rating," said James Newman, head of Treasuries and Agency trading at Keefe, Bruyette and Woods in New York.Benchmark 10-year notes fell 19/32 in price to yield 1.79%.Brent crude futures fell further and US crude turned lower in choppy trading after a report from the Energy Information Administration showed US crude oil stocks rose more than consensus expectations last week.December Brent fell 92 cents to $113.08 a barrel. US oil for November fell 21 cents to $92.88.

NEWS,09.10.2012

Merkel tells irate Greeks painful reforms will pay off

Tens of thousands of angry Greek protesters filled the streets of Athens to greet German Chancellor Angela Merkel, who offered sympathy but no promise of further aid.Police fired teargas and stun grenades to hold back crowds chanting anti-austerity slogans and waving Nazi flags while Merkel's host, Prime Minister Antonis Samaras, welcomed her on Tuesday as a "friend" of Greece.On her first visit to Greece since the euro zone crisis erupted three years ago, Merkel struck a conciliatory tone.She reaffirmed Berlin's commitment to keep the debt-crippled Greek state inside Europe's single currency but offered Samaras no concrete relief ahead of a new report on Greece's reform progress due by next month."I have come here today in full knowledge that the period Greece is living through right now is an extremely difficult one for the Greeks and many people are suffering," Merkel said at a news conference with Samaras just a few hundred yards from the mayhem on Syntagma Square, outside parliament."Precisely for that reason I want to say that much of the path is already behind us," she added.Samaras, who invited Merkel to Greece during a visit to Berlin in August, promised to press on with economic reforms necessary to restore confidence."The Greek people are bleeding but are determined to stay in the euro," he said. "They are not asking for more money or favours. They only want to get back on their feet as soon as possible and exit this recession."On the other side of the parliament building, tens of thousands of demonstrators defied a ban and gathered to voice their displeasure with the German leader, whom many blame for forcing painful cuts on Greece in exchange for two EU-IMF bailout packages worth over 200 billion euros ($315 billion).Greek riot police clashed with protesters who tried to break through a metal barrier to reach the cordoned-off area where Merkel and Samaras were meeting. Some demonstrators pelted police with rocks, bottles and sticks.At least 30 people were hurt or suffered breathing problems from tear gas and about 300 were detained, police said.Four people dressed in World War Two-era German military uniforms and riding on a small jeep, waved black-white-and-red swastika flags and raised their hands in the Hitler salute.Banners read "Merkel out, Greece is not your colony" and "This is not a European Union, it's slavery"."We know that she is not here to offer favours but she must help us, this is our last chance," said 45-year-old Mari Hanioti, a saleswoman supporting her two children and her unemployed husband."She must be able to see what we are going through, how much we are suffering. She should see the poor neighbourhoods not just the expensive hotels."Some 6000 police officers were deployed for the six-hour visit, including anti-terrorist units and rooftop snipers. German sites in the Greek capital, including the embassy and Goethe Institute, were under special protection.Before departing, Merkel met Greek business people to ask how reforms were progressing and hear how they were affected by an economy that has shrunk by a fifth in five years, leaving 25% of workers out of a job."She said: talk to me as if I wasn't a leader but a good reporter," one attendant said on condition of anonymity.Merkel decided to come to show support for Samaras, a fellow conservative, as he struggles to convince reluctant, leftist coalition partners to impose more austerity on a society fraying at the edges after several rounds of cuts.With a year to go until Germany holds a parliamentary election, Merkel also hoped to neutralise opposition criticism at home that she has neglected Greece and contributed to its woes by insisting on crushing budget cuts.After her government flirted earlier this year with the idea of allowing Greece to exit the euro zone, she now appears determined to keep it in - at least until the German election is out of the way.Greece is in talks with its "troika" of lenders - the European Union, European Central Bank and International Monetary Fund - on the next tranche of a 130-billion-euro ($204 billion) loan package, its second bailout since 2010.Without the 31.5-billion-euro tranche, Greece says it will run out of money by the end of November.Merkel said the aid payment was "urgently needed" but stopped short of promising that the funds would flow."The troika report will come when it is ready. Being thorough is more important than being quick," Merkel said.Ties between Germany and Greece run deep. Thousands of Greeks came to Germany after World War Two as "guest workers" to help rebuild the shattered country and more than 300,000 Greeks currently reside there.But the relationship is clouded by atrocities Greeks suffered at the hands of the Nazis. Samaras's own great grandmother killed herself after Nazi tanks rolled down the streets of Athens and the swastika flew over the Acropolis.Greek President Karolos Papoulias, whom Merkel also met on Tuesday, fought against the Germans as a teenager, before fleeing to escape persecution by the Greek military dictatorship and finding refuge in Germany.

Wall Street falls on IMF report

Equities slumped on both sides of the Atlantic after the International Monetary Fund reduced its forecast for global growth.The global economy will expand 3.3% this year and 3.6% in 2013, the IMF said in its World Economic Outlook. That is down from July forecasts of 3.5% in 2012 and 3.9% in 2013.Meanwhile, the latest round of US earnings-kicked off by Alcoa-is expected to clearly reflect the impact on corporate profits. Earnings reports for S&P 500 companies may show the first quarterly drop in three years, with analysts forecasting a 2.3% decline from the year-ago quarter, according to Thomson Reuters data.To be sure, some say expectations are so low that it leaves plenty of room for good news."There's so much pessimism over earnings that there's room for upside with any positive surprise," Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, told Bloomberg News."Overall I think traders are too pessimistic. Even with the IMF economic numbers we got, those are still pretty good numbers. The IMF is forecasting global growth next year will be above 3%. That's probably higher than what most people are fearing at the moment," Zemsky said.In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.55%, the Standard & Poor's 500 fell 0.74%, while the Nasdaq Composite Index shed 1.29%.It was five years ago that the S&P 500 reached a record high of 1565.15. Today, it was last at 1445.12The IMF's downgrade of expectations for global growth helped demand for US Treasuries-an auction of US$32 billion in three-year notes was met with record demand.Shares of Intel fell, last down 2.55%, after downgrades from Sanford Bernstein & Co and Robert Baird & Co.In Europe, the Stoxx 600 Index ended the session with a 0.5% decline from the previous close.Benchmark indexes also fell in Germany, France and the UK, declining 0.8%, 0.7% and 0.5% respectively.The euro weakened too, dropping 0.9% against the Japanese yen, while falling 0.7% against the greenback.European Union finance ministers met in Luxembourg today, while German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras met in Athens."I want Greece to remain in the euro," Merkel told reporters, according to Bloomberg. "A lot has been done, much remains to be done."Her visit came as the IMF forecast today that Greece will miss the five-year debt reduction goal that underpins the nation's bailout.

Europe edges towards banking union

European Union ministers examined a proposal today to limit planned new powers for the European Central Bank to supervise lenders, in a bid to allay the concerns of countries outside the euro zone over a new banking union.The diplomatic drive came as the President of the ECB and Germany's markets regulator cautioned that setting up a new system of supervision would take up to the end of next year, later than many expected and a potential setback to efforts to help distressed euro zone countries and their banks.Brussels proposed earlier this month that the ECB take charge of supervising all banks in the euro currency zone in stages from January, as a first step towards creating a banking union under which chiefly euro zone countries would eventually jointly back their lenders.Winning broad support for a prompt introduction of the new supervision framework is important because it should allow the euro zone's rescue fund, the European Stability Mechanism (ESM), to directly inject much-needed capital into banks, such as those in Spain.However, the plan has sparked concerns among the 10 EU countries which do not use the euro that they will be indirectly affected by the ECB's new supervisory powers and put at a competitive disadvantage, whether they join the scheme or not.On Tuesday, diplomats from Cyprus, the current holder of the European presidency, delivered a proposal to change the blueprint for banking supervision, a move, in the words of one EU official, to make it more "digestible" for countries outside the euro.In the document, seen by Reuters, they recommend a counterweight to the central bank's authority to withdraw a bank's licence, the ultimate threat a supervisor holds, by giving national regulators a large say in such a decision.They also suggest a way for countries outside the currency area that choose to join the banking union, subjecting lenders to ECB control, to leave it again, by allowing them to "request the ECB to terminate the close cooperation at any time".Speaking to journalists after the meeting, Michel Barnier, the European commissioner in charge of regulating banks, called for "flexibility and imagination" in reaching a "fair" system for those countries outside the euro zone to participate.Barnier is aiming to reach agreement on the new supervisory system by the end of this year. But Mario Draghi, the president of the ECB, cautioned on Tuesday that setting up a new framework of supervision would take longer."The ECB is not supposed to take over supervision in three months' time and do it," Draghi told lawmakers in the European Parliament. "There is a phase-in time. We foresee that one year will be needed to adapt all the structures."Elke Koenig, head of Germany's markets regulator BaFin, also warned that the original deadline to start such supervision by the beginning of next year was unrealistic."I could imagine that we get there in January 2014. That's a guess," she told German television station ARD on Tuesday, advocating a cautious approach."I support the idea of a strong European regulator. But I have not seen a roadmap of how we get there," she said."The last thing we can afford is to have an interregnum between those who are no longer responsible (for supervision) and those who are not yet in a position to act."Word play Others urged quick action.The Dutch central bank said today that policymakers should quickly allow the European Central Bank to supervise major lenders and to enable the ESM to directly recapitalise troubled banks.Gerard Rameix, head of the French markets watchdog AMF, said that he had heard nothing to suggest there would be a change to the timeframe."I think they are playing on words a bit. If they are talking about the utmost end of the process, then they are maybe not wrong," Rameix said.As a first step, the ECB is set to take responsibility for supervising banks which have received state aid beginning 2013. From mid-2013 the ECB will add systemically relevant institutions, before finally overseeing all euro zone banks by 2014.Germany, the euro zone's economic heavyweight, has criticised efforts to allow the ECB to supervise all euro zone lenders, claiming it will be overstretched.In reality, the ECB will not be in day-to-day charge of supervision, which will still lie with national regulators, but will have the power to overrule those authorities.The close ties between some troubled governments and the banks they supervise - and on which they also rely to buy their debt - have dragged both ever deeper into crisis.A banking union would break this link by making the policing of banks supranational and establishing central schemes paid into collectively to cover the costs of closing failed lenders and protecting savers' deposits.

French parliament backs EU budget discipline treaty

France's lower house of parliament voted to ratify a European budget discipline treaty today.A law ratifying the fiscal pact was passed by 477 votes in favour to 70 against, despite a small but noisy revolt from left-wingers and Greens that threatened to embarrass Hollande just before an October 18-19 European Union summit.In all, 45 among the 314 lawmakers that make up Hollande's left-wing parliamentary coalition either voted against the law or abstained, ignoring pleas from Prime Minister Jean-Marc Ayrault in recent days to fall into line.Yet Hollande still rallied 282 left-wing votes in favour, above the 274 required for a majority and sparing him from having to rely on votes from opposition conservatives, who voted largely in favour of ratification."This sweeping majority will give France a bigger voice, that is to say it will enable us to forge ahead with the rebuilding of Europe that I have committed to since my election," Hollande said after the result.When former president Nicolas Sarkozy signed up to it in March, the Socialists had opposed the fiscal pact, which holds governments to meet deficit-cutting goals or face sanctions.Plagued by painful memories of failing to rally his party behind a 2005 referendum on an EU constitution, Hollande persuaded his EU partners at his first summit in June to sweeten the pact with accompanying measures to stimulate growth in Europe.As recalcitrant left-wingers continued to revolt against the pact this month, Ayrault told them voting against it meant putting the euro's future in danger.Still, 20 out of the 264 Socialist Party deputies in the lower house voted against the law on Tuesday, along with 12 Greens. Among opposition parties, 13 radical leftists voted against and 17 conservatives.Shackles Hollande is anxious to show that his party will stand united behind him on steps agreed in June to deepen fiscal and economic integration in Europe, steps opponents on the left view as handing too much control of national affairs to EU authorities."We salute the no vote of a number of Socialist and Green deputies who, like us, reject the shackles this austerity treaty imposes on the people of Europe," said Andre Chassaigne, leader of far-left lawmakers in the National Assembly."It will lead our country, like other EU states, towards the abyss of recession," he said.Hollande is treading a fine line as he tries to convince his EU partners, and investors from London to Beijing, that he is serious about bringing down the public deficit while also battling to restore jobs and growth to a stalled economy.Since his May election Hollande's approval ratings have fallen from 55% to as low as 41%, the fastest drop of any recent president, as unemployment has surged to a 13-year high above 10%.Tuesday's vote came as riot police used teargas to disperse protesters during nationwide demonstrations over mounting job losses and a wave of industrial layoffs.Hollande's economic credibility is being put to the test by the jobs crisis and by a 2013 budget that hinges on an economic growth target of 0.8% that many view as over-optimistic.The International Monetary Fund joined sceptical economists on Monday and halved its growth forecast for France to 0.4% next year. Finance Minister Pierre Moscovici responded by calling the government's outlook "realistic".The president has promised the European Union he will cut the deficit to 3% of gross domestic product in 2013, but the gloomier growth outlook and his decision to make two-thirds of the adjustment through tax rises has raised doubts.The fiscal pact enters into force on January 1 next year or when 12 of the 17 euro zone member countries ratify it, as half a dozen, including Germany, already have.The ratification law passes to the Senate today and should be finally adopted before the end of the week.

NEWS,07.10.2012

Chavez's socialist rule at risk as Venezuelans vote

Venezuelans have voted with President Hugo Chavez's 14-year socialist revolution on the line as the leftist leader faced youthful rival Henrique Capriles in his toughest electoral challenge yet. Henrique Capriles, a centrist state governor, edged toward the still popular Chavez in final polls thanks to a vigorous campaign that united the opposition and made him its best chance of ending Chavez's 14-year rule.Chavez has used record oil revenue to support ideological allies around the world, while preaching a fiercely anti-US line, so the election will be watched eagerly from the United States to Belarus and Iran.Across the poor neighbourhoods where the flamboyant former soldier draws his most fervent following, loyalists prepared to blow bugles and trumpets in a predawn wake-up call for voters.Opposition sympathizers banged pots and pans in a protest against Chavez on Saturday night, creating a racket in the upscale neighbourhoods of eastern Caracas. In the city centre, which is more pro-government, the noise was drowned out by supporters playing his campaign music and shouting his name."I ask political actors from the left, right and centre to prepare emotionally to accept tomorrow's results. It's not going to be the end of the world for anyone," Chavez said at a last- minute news conference at the presidential palace.The 58-year-old president staged a remarkable comeback from cancer this year. But he could not match the energy of past campaigns - or the pace set by his 40-year-old basketball-loving opponent.Most well-known pollsters put Chavez in front. But two have Capriles just ahead, and his numbers have crept up in others.There is a risk of violence if the result is contested.There will be no formal international observers, although Venezuela invited a delegation of the UNASUR group of South American nations to "accompany" the vote.Local groups will be monitoring and both sides say they trust the electronic, fingerprint vote system. The opposition says it will have witnesses at all of the 13,810 polling centres from tiny Amazon villages to tough Caracas slums.Capriles geared up on Saturday for the vote by hiking a mountain trail at the edge of Caracas that is popular with athletic Venezuelans. He donned running clothes and mirrored sunglasses, and posed for pictures with supporters.Chavez spent about half an hour in the evening speaking to reporters alongside members of the UNASUR delegation, headed by an Argentine politician. Asked by one reporter if he wanted to stay in office beyond 2018, he glibly replied, "Twenty years is nothing," in reference to a popular Argentine tango song.Capriles shot back via Twitter. "Right now some people continue with the same nonsense and the same stories as always, the difference is this time they're on their way out!"In a politically polarised country where firearms are common and the murder rate is one of the highest in the world, tensions have risen alongside weeks of tough campaign rhetoric, and both camps are vowing to "defend" their votes.Capriles would face big challenges Chavez accuses the opposition of plotting violence and planning to "reject the people's triumph" when he wins, but says that effort will be defeated. Some opposition activists fear he could refuse to step down if the result goes against him.Victory for Capriles would remove the most vocal critic of the United States in Latin America, and could lead to new deals for oil companies in an OPEC nation that pumps about 3 million barrels a day and boasts the world's biggest crude reserves.Capriles wants to copy Brazil's model of respect for private enterprise with strong social welfare programs if he is elected - but he would face enormous challenges from day one.For a start, he would not take office until January 2013, meaning Chavez loyalists might throw obstacles in the way of the transition.He also would have to develop a plan to tackle entrenched high inflation, price distortions and an over-valued currency, while surely butting heads with the National Assembly, judiciary and state oil company PDVSA - all dominated by Chavez loyalists.Another big task would be to figure out the real level of state finances. Last month, a Reuters investigation found that half of public investment went into a secretive off-budget fund controlled by Chavez and had no oversight by Congress.The president has denounced his foes as traitors and told voters they plan to cancel his signature social "missions," which range from subsidized food stores to programs that build houses and pay cash stipends to poor women with children.Tens of thousands of new homes have been handed over this year, often to tearful Chavez supporters at televised events.If Chavez wins, he can consolidate his control over Venezuela's economy and continue his support for leftist governments across Latin America, as well as allies farther afield such as Iranian President Mahmoud Ahmadinejad, Syria's Bashar al-Assad, and Alexander Lukashenko of Belarus.

Spain faces fresh street protests

Thousands of Spaniards have marched in cities across the country to decry tough austerity measures, part of a growing protest movement that shows no signs of abating and could culminate in a general strike in November.Hundreds of thousands of Spaniards took to the streets yesterday, creating a headache for the centre-right government as it faces regional elections and tries to assure investors the country is stable.Spanish labour unions said they would call a general strike if the government did not hold a referendum on unpopular spending cuts. Prime Minister Mariano Rajoy unveiled 13 billion euros in additional savings in a tough budget last month."It's up to the government whether there's a general strike or not. If they were going to hold a referendum things would be completely different," said Ignacio Fernandez Toxo, leader of Spain's biggest union, Comisiones Obreras. Spain is now at the eye of the euro zone storm, with expectations mounting that the government will soon seek European aid to keep its borrowing costs under control."It's shameful - we're losing everything," said Carmen Lopez, a department store worker at Sunday's protest in the capital. "Pensions, salaries, public healthcare and education. They're taking everything."Some 60,000 people attended the union-organised march in the centre of Madrid. "How can there be peace without bread?" and "Their plunder, my crisis", placards read."I'm a teacher and they've really cut back in education - there are fewer resources, fewer teachers and more students," said Agustin Moreno, who teaches in the Madrid neighbourhood of Vallecas."We will do everything we can. We will keep protesting," he added.Protesters were decked out in the colours of various unions, and many wore T-shirts saying "I used to have social and labour rights"."They're taking away help for people who are unemployed, just at the time when people most need the help," said primary school teacher Francisca Valverde.Protests were taking place in dozens of cities on Sunday, but there were no reports of any violence.Under pressure Rajoy's People's Party (PP) faces regional elections in Galicia, the Basque Country and Catalonia - increasingly vocal about its desire to break away from Spain - in the coming weeks.In the wake of violence during a protest in Madrid on September 25, Rajoy urged a business audience in New York last week to focus on the "silent majority" of Spaniards who do not protest.But a survey in El Pais newspaper on Sunday showed 77% of Spaniards support the protesters, while more than 90% think protests will become more frequent.The government is increasingly unpopular at home and must convince uneasy investors that it can keep a lid on social unrest and carry out its austerity policies.The right to protest has become a topic of fierce debate in Spain since the September 25 demonstration ended in 35 arrests and left 64 people injured.Last week politicians from the ruling People's Party (PP) said laws surrounding protests should be tightened up, with Madrid's local government chief Ignacio Gonzalez saying the capital was in "a constant state of collapse" because of demonstrations.But a Spanish court on Thursday threw out a police case against the organisers of the protest, saying people had a right to express their opinion. The court will also investigate police brutality at Madrid's Atocha station during the demonstration.

Wall Street: US companies 'blaming' weakness in Europe

Wall Street may be bracing for a pullback as US season begins next week - if the clouds of profit warnings from bellwethers ranging from FedEx to Hewlett-Packard lead to a downpour of lower profits - or even losses.Thanks to aggressive stimulus plans from central banks around the world, the Standard & Poor's 500 index. SPX gained 5.8% over the third quarter.That sharp rally occurred even as companies were struggling. Earnings for that period are forecast to fall 2.4 percent from the year-ago quarter. If that happens, this would be the first earnings decline in three years..Market strategists and investors say US stock valuations are broadly out of sync with earnings estimates.They forecast a pullback in stocks in the coming weeks as more companies report results and reduce expectations for the fourth quarter and beyond.Fourth-quarter estimates for S&P 500 companies show a 9.5% gain in profit from a year ago, according to Reuters data. Analysts say that outlook is too high, given what investors are already hearing from the corporate world."It's a divergence right now where the valuations as far as equity prices (are concerned) have soared, and are really putting in place a stronger economy and stronger fundamentals," said Alan Lancz, president of Alan B. Lancz & Associates, an investment advisory firm in Toledo, Ohio."But earnings will be the telltale sign," Lancz added. "And if the guidance isn't particularly strong, the market might be setting itself up for a little disappointment. I don't see a major correction, but I do see a pullback."The earnings season will kick off on Tuesday with results from after the bell.Analysts expect Alcoa's third-quarter results to show it broke even, down from a profit of 15 cents per share a year earlier.JPMorgan Chase & Co and Wells Fargo, the first big financial names to report, are also on tap next week.Blame Europe Nearly half of S&P 500 companies guiding lower for third- quarter earnings blamed weakness in Europe, according to a Thomson Reuters survey.Another 11% blamed the weak global economy, 8% cited strength in the US dollar, and 6% cited the slowdown in China, the survey showed.Weakness in the US economy has not helped. The final read on US second-quarter gross domestic product last month showed growth of just 1.3%, weaker than an expected 1.7%.On Thursday, software maker Informatica issued a profit warning and said business conditions were worsening in Europe. The software company is considered a bellwether because its products are used alongside those made by larger software companies."Parts of Europe aren't just in recession, they're in depression," said Jeff Kleintop, chief market strategist at LPL Financial in Boston. "I think (analysts) underestimated the extent of the global slowdown, and maybe are still underestimating it."Tech feels chill from China While estimates have come down sharply in all 10 S&P 500 sectors since the start of the year, technology is one area where the lower expectations are most notable. Slower growth in China is a big factor in that trend.Earnings growth in the tech sector is expected to be just 2.3% for the quarter, compared with a July 1 forecast of 13.1%.Apple is a big driver of those gains.Technology's profit growth has been crucial for the S&P 500. Minus technology, S&P 500 earnings are expected to be down 3.4%.The tech sector is where the slowdown in China's economy is having the biggest impact, Kleintop said."They consume a lot of US technology products," he said.Recent data shows that the pace of growth in China, the world's second-largest economy, may slow for a seventh quarter, straining earnings in the tech and materials sectorsApplied Materials lowered its third-quarter estimates in August, citing China and Europe. On Wednesday, the chip gear maker said it planned to cut its global work force by 6% to 9%.FedEx, the world's second-largest package delivery company, cut its fiscal 2013 forecast on September 18, saying a weakening global economy gives its customers a reason to switch to less expensive and slower shipping options. FedEx said its earnings could drop as much as 6% for its fiscal 2013 year, which will end in May.On Wednesday, shares of Hewlett-Packard fell a whopping 13% to a nine-year low after it forecast a far steeper-than-expected drop in 2013 profit.The slide in HP's stock price sharply cut the Dow industrials' gains for the day.The S&P 500 sectors showing the biggest projected earnings decline are materials, forecast down 24%, and energy, expected down 18.8%, data show, with those declines tied largely to the global slowdown.In contrast, consumer discretionary stocks are expected to have the strongest profit growth for the quarter data showing a gain of 7.7%.

NEWS,30.09.2012

Wall Street: Spain, central bankers, US jobs

Wall Street will open October with a busy week, highlighted by low expectations for global manufacturing data and the US jobs report. Any positive surprises may help lift the market.Spain is the wild card. And if it's played well, then the bulls might dance.The S&P 500 finished its third positive quarter in the last four on Friday, despite suffering its largest weekly percentage decline since June. For the past three months, the S&P 500 gained 5.9% - its best third quarter since 2010. In contrast, the index was down 1.3% for the week.The benchmark S&P 500 earlier this month reached its highest level since late 2007. Yet uncertainty remains over whether stocks can hold their gains against the headwinds of a struggling economy. That explains, in part, the retreat over the last several days.The S&P 500 hit a high of 1474.51 in mid-September before pulling back by a bit more than 2%. A run at 1500 seems possible, but the flurry of economic and world events ahead probably will prevent a major advance in the coming week.Bulls are betting that last week's Spanish budget proposals will be a preamble to a bailout request by Mariano Rajoy's government. The move would be seen as a first step to get the finances of the euro zone's fourth-largest economy in order and would clear some of the market uncertainty regarding the euro zone crisis.Monetary policy is also on the list of market catalysts this week. Federal Reserve Chairman Ben Bernanke is scheduled to speak today and the minutes of the latest FOMC meeting are set for release on Thursday. The week's agenda includes meetings of the European Central Bank, the Bank of England and the Bank of Japan.Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, said he believes "we could see a rebound" this week "if we get some of the stars aligning and have Spain ask for a bailout, the ECB announcing favourable terms for that bailout, and if we see the Bank of Japan announce further monetary intervention."If Spain and the ECB don't deliver, we could set ourselves up for a further lateral move in the markets," Jacobsen added. "A negative would be if Rajoy flat-out denies that they need a bailout."The ECB and BOJ are set to meet on Thursday, with the Bank of Japan's meeting extending until Friday.Factories, jobs and the US election Chinese factory and business conditions data will kick off a numbers-heavy calendar for markets. Manufacturing PMI, due on Monday, is expected to show a second straight month of contraction.A snapshot of US manufacturing activity will be provided today when the Institute for Supply Management releases its September index. The September ISM reading is expected to show another month of contraction, but at a slightly slower pace than in August. On Wednesday, the ISM will release its US services-sector Purchasing Managers' Index, which could show a slight deceleration in the pace of growth in the non-manufacturing sector."We have Chinese economic data over the weekend, and we'll see how markets react on Monday," said Wasif Latif, vice president of equity investments at San Antonio, Texas-based USAA Investment Management."It seems like the market is bracing for bad numbers, meaning if they're not as bad, it could be market-positive," Latif said.Non-farm payrolls for September, due on Friday, are forecast to gain 115,000, while the US unemployment rate is seen ticking up 0.1% from August to 8.2% in September.The jobs data will come on the heels of the first of three US presidential debates, scheduled for Wednesday night.With just one month to go before election day on November 6, Wall Street will watch the economic data more closely than it usually does. In a year when the incumbent president is campaigning for a second term, the country's economic numbers tend to become more positive as election day approaches.The US stock market also tends to gain in years when incumbents are re-elected, according to the Stock Trader's Almanac.For the year, the Dow Jones industrial average is up 10%, while the Standard & Poor's 500 Index is up 14.6% and the Nasdaq Composite Index is up 19.6%.Recent poll numbers point to a strengthening lead by President Barack Obama, but a weak payrolls reading could give some hope to Republican challenger Mitt Romney."If Romney doesn't turn the ship with a very strong (debate) performance, the president is going to win," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.He said the trend in the polls has taken away some of the market uncertainty regarding the presidential election. He added that an ECB- or Spain-related headline out of Europe on Thursday could overcome almost anything that would happen Wednesday night during the debate."I think the market is coming to terms with the fact the president is ahead, and unless something significant changes, (he) will prevail.

France's Hollande faces protests over EU fiscal pact

Thousands have marched through Paris to protest against a European fiscal pact, the first major display of public anger to face President Francois Hollande since his May election.The march organised by the Left Front coalition drew trade unionists, far-left sympathisers and other opponents of the EU accord, two days before lawmakers start to debate a draft law of the budget pact in the lower house of parliament.The budget discipline pact, which Hollande supports, is expected to pass in both houses of parliament thanks to support from Socialist lawmakers helped by advocates of fiscal discipline in the centre-right opposition.But the vote has exposed rifts in Hollande's ruling coalition, with far-left allies and Greens planning to vote against it in a challenge to the increasingly unpopular Socialist leader's authority.If Hollande has to rely on opponents to pass the pact, the vote could deepen the rift in his alliance and embolden left-wing allies seeking a change of course from strict adherence to European deficit targets."To him (Hollande), this vote was a formality that simply needed to be rushed through," said Jean-Luc Melenchon, a fiery leftist orator who ranked fourth in an April presidential vote."Now he will understand this is not the case, that in France and in the rest of Europe there is an organised opposition to this pact and to all austerity policies."Wearing his signature red scarf, Melenchon marched at the head of protesters among giant banners bearing slogans such as "Francois Hollande, We Don't Want Your Treaty" and "In Greece and in France, Let's Fight Against Finance".It was the latest in a series of protests across southern Europe this week as tens of thousands took to streets in Spain, Italy, Greece and Portugal to voice their anger over hardship imposed by austerity policies.For Hollande, the outcry from many people who voted him into power highlights the difficulty of pleasing a largely left-wing support base even as he shuns painful cuts to welfare programmes.A 2013 budget unveiled on Friday shaves 30 billion euros off the public deficit, largely through tax increases on big businesses and the wealthy. But it avoids the type of painful austerity measures imposed elsewhere in Europe.Efforts to preserve the generous public safety net have done little to preserve Hollande's approval rating, which has plummeted since his election, hitting a low of 43 percent in one poll last week."This treaty will considerably worsen the situation in the European Union and in France," said one protester, Pierre Khalfa. "We can already see that austerity policies in Europe are leading to recession, so we need to start a movement against these policies, which will lead our country into a wall."Left Front organisers said some 40,000 people joined the Paris protest. Police declined to provide an estimate.

Economic protests in Spain, Portugal

Tens of thousands of Spaniards and Portuguese rallied in the streets of their countries' capitals on Saturday to protest enduring deep economic pain from austerity measure, and the demonstration in Madrid turned violent after Spaniards enraged over a long-lasting recession and sky-high unemployment clashed with riot police for the third time in less than a week near Parliament.The latest violence came after thousands of Spaniards who had marched close to the Parliament building in downtown Madrid protested peacefully for hours. Police with batons later moved in just before midnight to clear out those who remained late because no permission had been obtained from authorities to hold the demonstration.Some protesters responded by throwing bottles and rocks. An Associated Press photographer saw police severely beat one protester who was taken away in an ambulance.Spain's state TV said early on Sunday that two people were hurt and 12 detained near the barricades erected in downtown Madrid to shield the Parliament building. Television images showed police charging protesters and hitting them with their batons, but the violence did not appear as severe as a protest on Tuesday when 38 people were arrested and 64 injured.Earlier, the boisterous crowds let off ear-splitting whistles and yelled "Fire them, fire them!" referring to the conservative government of Prime Minister Mariano Rajoy, and venting their anger against tax hikes, government spending cuts and the highest unemployment rate among the 17 nations that use the euro currency.Freezing salariesOn Friday, Rajoy's administration presented a 2013 draft budget that will cut overall spending by $51.7bn, freezing the salaries of public workers, cutting spending for unemployment benefits and even reducing spending for Spain's royal family next year by 4%.Pablo Rodriguez, a 24-year-old student doing a master's in agricultural development in Denmark, said the austerity measures and bad economy mean most of his friends in Spain are unemployed or doing work they didn't train for.He doubts he will put his education to use in Spain until he is 35 or 40, if ever, will probably get job abroad and stay."I would love to work here, but there is nothing for me here," Rodriguez said. "By the time the economy improves it will be too late. I will be settled somewhere else with a family. One of the disasters in Spain is they spent so much to educate me and so many others and they will lose us."Madrid authorities put the number of protesters at 4 500 though demonstrators said the crowd was larger. In neighbouring Portugal, tens of thousands took to the streets of Lisbon on Saturday afternoon to peacefully protest against even deeper austerity cutbacks than Spain has imposed.Retired banker Antonio Trinidade said the budget cuts Portugal is locked into in return for the nation's $101bn bailout are making the country's economy the worst he has seen in his lifetime. His pension has been cut, and he said countless young Portuguese are increasingly heading abroad because they can't make a living at home.Robbing the people"The government and the troika controlling what we do because of the bailout just want to cut more and more and rob from us," Trinidade said, referring to the troika of creditors -the European Commission, the European Central Bank and the International Monetary Fund. "The young don't have any future, and the country is on the edge of an abyss. I'm getting toward the end of my life, but these people in their 20s or 30s don't have jobs, or a future."In Spain, Rajoy has an absolute majority and has pushed through waves of austerity measures over the last nine months - trying to prevent Spain from being forced into the same kind of bailouts taken by Portugal, Ireland and Greece. But the country has an unemployment rate of nearly 25%, and the jobless rate is more than 50% for those under age 25.Investors worried about Spain's economic viability have forced up the interest rate they are willing to pay to buy Spanish bonds.Finance Minister Cristobal Montoro said on Saturday that the budget cuts for next year were necessary to ease market tensions and try to bring down high interest rates Spain must pay to get investors to buy its bonds.

NEWS,21.09.2012

What Business Is Wall Street In? 

 

Wall Street doesn't know what business it is in. Regulators don't know what the business of Wall Street is. Investor/shareholders don't know what business Wall Street is in.The only people who know what business Wall Street is in are the high frequency and automated traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It's a platform to be exploited by every technological and intellectual means possible.The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, high frequency traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade or the rebate they are getting from the exchange because they provide liquidity to the market.I recognize that one is illegal, the other is not. That isn't the important issue.The important issue is recognizing that Wall Street is no longer serving the purpose that it was designed to. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days?I started actively trading stocks in 1992. I traded a lot. Over the years I've written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.Over just the past five years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF. Combine that with the leverage of derivatives tracking companies, indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game that I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.So back to the original question. What business is Wall Street in?Its primary business is no longer creating capital for business. Creating capital for business has to be less than one percent of the volume on Wall Street in any given period. (I would be curious if anyone out there knows what percentage of transactions actually return money to a company for any reason). It wouldn't shock me that even in this environment that more money flows from companies to the market in the form of buybacks (which I think are always a mistake), than flows into companies in the form of equity.My two cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether it's through a use of taxes on trades (hit every trade on a stock held less than one hour with a 10 cent tax and all these problems go away), or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for one year or more, and no tax on dividends paid to shareholders who have held stock in the company for more than five years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won't come from traders trying to hack the financial system for a few pennies per trade.And solutions won't come from bureaucrats trying to prevent the traders from hacking the system. The only certainty when bureaucrats step in is that the law of unintended consequences will smack us all in the head and the trader/hackers will find new ways to exploit the system that makes them big money and even more money for the big institutions that develop products for the other institutions that are desperate to play the game.Regulators have got to start to recognize that traders are not investors and vice versa and treat them differently. Different regulations. Different tax structure. Different oversight. Individual investors and the funds that just invest in stocks and bonds are not going to crash the market. Big traders who are always leveraging up and maximizing the number of trades/hacks theymake will always put the system at risk. We need to recognize that they do not serve much of a purpose other than to add substantial risk to the global economy. That their stated value add of liquidity does not compensate the U.S. and world economy nearly enough for the risk of collapse they introduce into the system.Wall Street as a whole needs to be in the business of creating capital for companies and selling shares to investors who believe they are shareholders. The government needs to create simple and obvious incentives for this business and extract compensation from the traders/hackers for the systemic failure risk they introduce.There will be another flash crash, and probably a crash far worse than the May 2010 flash crash simply because there are too many players looking for the trillion dollar score. They can't all win, yet how many do you think wouldn't risk everything, even what is not theirs, for that remote chance to score big? Put another way, there is zero moral hazard attached to any trade. So why wouldn't traders take the biggest risk possible? There is value to trading automation. It is here to stay. There is absolutely NO VALUE to high frequency trading. None. We need to bring our markets back to their original goals of creating capital for business. It's impossible to guess how many small to medium size companies have been held back from growing and creating jobs and wealth because of lack of access to capital from the stock market. It's not impossible to know that our economy has suffered because Wall Street equity markets are no longer a source of equity for helping companies grow, it is not a platform for hackers and that needs to change. Quickly.

Iran parades military, warns Israel

Iran warned Israel and the United States against any aggression, as it proudly paraded its troops and military hardware on Friday under the gaze of President Mahmoud Ahmadinejad and top brass.The Tehran parade, involving thousands of military personnel, dozens of tanks and missiles borne on trucks, marked the anniversary of the start of the 1980-1988 Iran-Iraq war.Ahmadinejad, in a speech broadcast on state television, said that Iran was using "the same spirit and belief in itself" shown in that war to "stand and defend its rights" today against pressure from world powers.Top Iranian generals said the show of military might should be digested by Israel, which in recent weeks has ramped up threats that it could hit Iranian nuclear facilities."We do not feel threatened by the nonsense uttered by that regime's leaders," the chief of Iran's armed forces, General Hassan Firouzabadi, told the Fars news agency, adding that Iran's response to any attack would be "immediate and unstoppable".General Ataollah Selehi, the commander of Iran's army, told the ISNA news agency that "us holding a military parade is for deterrence and not a threat".US Navy war games He and other military leaders renewed their pledge that Israel would be annihilated if attacked.The head of the Revolutionary Guards' aerospace division in charge of missile defence, Brigadier General Amir Ali Hahjizadeh, repeated Iran's promise to close the strategic Strait of Hormuz if the Islamic republic were attacked or Western sanctions halted its crude exports."If one day the Strait of Hormuz has no benefit for us, then we will deprive others from benefiting from it," he said.However he added that "under current conditions, there is no problem".Hahjizadeh also dismissed navy war games currently being held by the United States and 30 other nations in the Gulf as "no threat to us".Iran is locked in a showdown with the UN Security Council over its controversial nuclear programme.Ahmadinejad on anti-Islam filmThe West, led by the United States, has tightened the vice on Iran by implementing crippling economic sanctions, while Israel - the Middle East's sole if undeclared nuclear weapons state - has underlined its threats of possible air strikes on Iranian atomic facilities, with or without US help.In his speech, Ahmadinejad also touched on an anti-Islam film made in America by an extremist Christian group that has fuelled violent protests in parts of the Muslim world.He said US government claims it could do nothing to censor the film was a "deception" exploiting the pretext of freedom of expression.He called the film an Israeli-hatched plot "to divide [Muslims] and spark sectarian conflict".Ahmadinejad implicitly referred to his often expressed opinion that the Holocaust never happened to lambast the West for perceived selective censorship."They stand against a question about a historical incident... they threaten and put pressure on nations for posing the question while at the same time in regards to the obscenest insults to the human sanctities and prophets... they shout adherence to freedom [of expression]," he said.Ahmadinejad's stance challenging the facts surrounding the killing of six million Jews by the Nazi regime during World War II is shared by Iran's supreme leader, Ayatollah Ali Khamenei, who is the country's commander-in-chief.Early this week, Khamenei told naval cadets: "In some Western countries, no one dares to question the unknown incident of the Holocaust or for that matter some of the morally obscene policies like homosexuality... but insulting Islam and its sanctities under the pretext of freedom of expression is allowed."

 

 

 

NEWS,31.07.2012

Cyprus taxes set for hike to pay for bailout

International lenders negotiating a bailout for cash-strapped Cyprus are likely to seek cutbacks in its public payroll and some increases in taxation, the Cypriot finance minister said today.Officials from the International Monetary Fund, European Commission and European Central Bank held inconclusive talks in Cyprus last week. Cypriot officials said discussions would continue, with a new visit by the team, known as the "troika", possibly in September."From our side, there are certain issues which are not acceptable from the outset and require further discussion," said Vassos Shiarly, Cyprus's finance minister.He did not elaborate on the differences with lenders - the troika's insistence on scrapping wage indexation has been widely reported as a point of dispute - but implied that cutbacks in salaries in an inflated public sector could be an option.Cyprus, one of the smallest of 17 nations sharing the euro, became the fifth member of the currency bloc to seek a bailout last month, in its case from a banking sector burdened by the debt restructuring European leaders agreed for Greece."Based on the experience of Portugal and Spain, we believe the troika will expect cutbacks in state spending, which include the payroll, and an increase in taxes which will not impact the economy," Shiarly, a former top banker, told the semi-official Cyprus News Agency.He said however that the decision on what measures to take would be up to Cyprus, and not lenders."Since we are trying to find a considerable amount, that won't be achieved by cutting back on electricity or telephone bills," he said.Authorities introduced staggered cuts in public sector salaries last year, a two-percentage point rise in value-added tax this year, and increased tax on private-sector earnings.Glafcos Hadjipetrou, who heads Cyprus's main civil servants union Pasydy, said any measures should be balanced. "It is not possible for some people to finger-point and target public sector workers at every opportunity," he told reporters.Cyprus's two largest banks booked considerable losses on the writedown in Greek sovereign debt this year, diluting their regulatory capital and forcing them to seek government aid to recapitalise. Combined, the banks seek 2.4 billion euros, the equivalent of more than 10 percent of Cyprus's GDP.Shut out of international financial markets for more than a year in part because of fiscal slippage, Cyprus had little option but to seek aid from its EU partners.It has also asked Russia, which lent Cyprus 2.5 billion euros last year, for another 5 billion euro loan.It is not clear how much Cyprus will require from the troika. Authorities say the bailout will be comprehensive, and not limited to recapitalising banks.

 

Greece says cash reserves drying up

 

Near-bankrupt Greece is fast running out of cash while it waits for its next installment of aid from international lenders, a deputy finance minister said on Tuesday, sounding the alarm on the country's precarious financial position. Greece's European partners have repeatedly promised the country will be funded through August, when it must repay a 3.2 billion euro bond, but the details of the funding have yet to be disclosed.In the absence of that money, Greece would run out of funds to pay everyday public expenses ranging from police and other public service wages to pensions and social benefits. The country is wholly reliant on aid from its European partners and the International Monetary Fund, who have turned up the pressure in recent weeks by withholding further aid until an assesment of Greece's compliance with reforms is complete."Cash reserves are almost zero. It is risky to say until when (they will last) as it always depends on the budget execution, revenues and expenditure," Deputy Finance Minister Christos Staikouras told state NET television."But we are certainly on the brink, we did not receive the aid tranche we were supposed to and we have the pending issue of an ECB bond maturing on Aug. 20." Greece has narrowly dodged bankruptcy several times before, with the government carrying out a juggling act of holding off on paying some suppliers and issuing T-bills until the next tranche of aid from lenders arrives. The assessment of Greece's progress in meeting the terms of its bailout by EU/IMF inspectors, who are currently on a visit to Athens, is not expected until September. Adding to the uncertainty, Greek political leaders have been wrangling over €11.5bn of cuts that are crucial to appeasing the lenders.

 

Obama: Eurozone must take decisive steps

 

US President Barack Obama said on Monday that the eurozone is not buckling under the weight of the debt crisis, but that "decisive steps" have yet to be taken.Speaking at an event for campaign donors, the Democratic incumbent in the November 6 presidential election noted that the US economy is still unsteady, and warned of "some continued headwinds over the next several months.""Europe is still a challenge, and a lot of people in this room who have business in Europe understand that," he said to some sixty people, including Wall Street CEOs. "I don't think ultimately that the Europeans will let the euro unravel. But they're going to have to take some decisive steps. And I'm spending an enormous amount of time trying to work with them - and Tim Geithner is spending a lot of time working with them - to recognise that the sooner they take some decisive action, the better off we're going to be," Obama added, referring to the US treasury secretary.Obama spoke of the US's own "decisive action," referring to the $800bn stimulus package his administration pushed for in 2009."Despite it's unpopularity, (the plan) avoided this chronic bleeding wound that has been an enormous problem not just for Europe now, but for the entire global economy," he said.Obama's campaign for reelection suffers in the the polls from voters' attitudes on the wavering economy. Unemployment is at 8.2%, still 3% higher than before the 2008 crisis, and the White House does not expect the rate to dip below 7.9% before the end of the year.

NEWS,20.04.2012.

A five-point checklist to help you prepare for another global crisis

The IMF just downgraded growth in Europe and projects a recession of -0.3 per cent in 2012. Imagine you are minister for finance in an average developing country. You survived the 2008-2009 global crisis, presided over more than five years of respectable economic growth, a boom in commodity prices fills your treasury with cash, and your central bank does not quite know how to keep your currency from appreciating. Old problems persist — too many young people are unemployed, your industrial sector is small and aging, and plenty of public money is wasted or simply missing. But, all in all, you feel pretty good about how things are going under your watch. Suddenly, you learn that a new global crisis may be looming on the horizon. Think of another rich country defaulting on its debt, pulling other rich countries’ banks into trouble. East Asia can no longer find avid consumers in the West for its exports, so it cuts back on its own consumption of raw materials. Commodity prices begin to fall, and your politicians start to worry aloud. What do you do then? Or better, what can you do now to prepare for all that? Five key measures may help. First, secure your financing — for at least the next 24 months. The last thing you want in the middle of a storm in international finance is to default on your payments. If you do, already-nervous investors — foreign and local — will rush for the door. Not to speak of what soldiers, teachers and civil servants would do if they were unpaid. So, calculate your cash needs as if all your expenditures were untouchable, and sign today the loans you know you will need tomorrow. (With interest rates currently at rock-bottom, this is smart debt management anyway.) While you are at it, assume that a good 10 per cent of those grants that developed nations regularly give you will no longer come in. It would also be nice if public companies that manage your oil, gas or minerals could buy insurance against their prices falling too much (this is called “hedging” in financial jargon); unfortunately, if they have not done it before, it is probably too late now. Second, prioritise your investments. Decide now which project you will slow down, postpone or drop, if you were to run out of money. In a way, you are looking for projects that are not “shovel ready”, that is, those that cannot be quickly implemented. Rule of thumb: if it involves massive, never-done-before, pride-of-the-nation construction, it probably can be put on hold. Remember, cutting investment expenditures is always tricky — the interest of the politically-connected are usually affected. You don’t want to have that discussion during a crisis. Third, audit your social safety nets. There will be plenty of people in need as jobs disappear and incomes fall. Poor families will respond in ways that may hurt them, and your country, in the long run — pulling teenagers from high school is the typical example. You will then be called upon to fund temporary employment programmes, feed children in schools, and pay for direct cash transfers. Fourth, stress test your banks. Your financial system is probably small and isolated from the sub-prime sophistication of Wall Street. It is made up mostly of banks that hold the deposits of the urban middle class and handle the remittances of the Diaspora. What would happen to your banks if, all of a sudden, foreign currency became expensive and scarce? Are their loans concentrated on a few construction or trading companies that would go belly up if the commodity boom came to an end? And are banks lending to each other? To each others’ owners? Your central bank should be able to answer all these questions — it is supposed to supervise banks in real time. So it can alert you early. And, fifth, identify who will suffer when crisis strikes. Who are the winners and losers? (Yes, there are winners in this.) Will the impact be felt in a single, remote rural area where your commodities are produced or extracted, or will it be primarily an industrial affair, hurting middle classes across cities? Will the affected belong to a specific racial, religious or regional group? Whose consumption will get more expensive? And whose assets will lose most value? This kind of “political economy analysis” is invaluable because it will highlight the roadblocks in your decision-making. One final point that may not depend entirely on you as finance minister. It would help to decide who, when the time comes, will speak for the government and what the message will be. Typically, in days of turbulence, cabinets tend to become dissonant and perceptions of policy paralysis — if not incompetence — make things worse. That would be a pity. All told, it is possible — and not too difficult — to get ready, at least for the first wave of impacts from a potential new global crisis. And if the crisis never comes, so much the better.