NEWS,12.05.2013

G7 to press on with bank reforms

Group of Seven finance officials agreed on Saturday to redouble efforts to deal with failing banks and gave a green light to Japan's drive to galvanise its economy.
British finance minister George Osborne said the finance ministers and central bankers meeting 40 miles outside London focused on unfinished bank reforms, with signs that plans for a eurozone banking union are fraying.
"It is important to complete swiftly our work to ensure that no banks are too big to fail," Osborne told reporters after hosting a two-day meeting in a stately home set in rolling countryside.
"We must put regimes in place ... to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner," he said.
The emergency rescue of Cyprus after a near meltdown in March served as a reminder of the need to finish an overhaul of the banking sector, five years after the world financial crisis began.
Germany has come under pressure to give more support to a banking union in the euro zone. The plan could help strengthen the single currency area, but Berlin worries it may pay too much for future bank bailouts if it signs up to a scheme to wind up stricken lenders.
While the first step to create a single bank supervisor under the European Central Bank - looks set to be in place by mid-2014, a second pillar, a 'resolution' fund to close failed banks, is in doubt. And there is little prospect that a single deposit guarantee scheme will ever see the light of day.
A senior US Treasury official said the talks at the 17th-century Hartwell House zeroed in on the need not just for better bank supervision but also to clean up balance sheets so lending can pick up.
"There was a sense of urgency among the euro area participants," the official said.
German Finance Minister Wolfgang Schaeuble countered that the eurozone was no longer the main risk to the world economy.
As at previous international meetings, Japan escaped any censure for printing money on a scale that has pushed the yen sharply lower.
Osborne said the G7 - the United States, Germany, Japan, Britain, Italy, France and Canada - reaffirmed that fiscal and monetary policy should be aimed at domestic concerns, not currency manipulation.
"We will not target exchange rates," Osborne said. "I would say that the statement by the G7 of earlier this year was a successful statement and one that has been held to."
The yen hit a four-year low against the dollar on Friday , driven in part by Japanese investors shifting into foreign bonds, a move that had been expected since the Bank of Japan unveiled a massive stimulus plan.
But having urged Tokyo for years to do something to revive its economy, other world powers are not in a strong position to complain now that it is doing so. Then there is the fact that central banks such as the Federal Reserve and Bank of England have printed money in the way the Bank of Japan is.
Japanese Finance Minister Taro Aso said the G7 had levelled no criticism at Japan's monetary policy but Schaeuble said there had been "intense discussions" and that the situation would be monitored carefully.
Growth debate
Debate has also heated up about the need for governments to ease up on austerity, something Germany, Britain and Canada view with caution but Washington, Paris and Rome favour.
Osborne said there was less disagreement about whether governments should focus on debt-cutting or growth-boosting measures than is commonly assumed.
"Everyone is clear that there needs to be credible medium-term fiscal consolidation ... We also agreed that there needs to be flexibility," he said. "Growth prospects remain uneven and we can't take the global recovery for granted."
But his suggestion before the meeting that it should consider what more monetary policy could do to support economic recovery appeared to fall on deaf ears.
"There wasn't any call to do more," European Central Bank chief Mario Draghi told reporters after the meeting.
"It is quite clear that all central banks have done a lot, each one within its own mandate. So (the meeting) was just taking note of this ... All of us have really been active."
Several officials from visiting delegations questioned why Britain had called the gathering just three weeks after they and others met at International Monetary Fund meetings in Washington, but Bank of England Governor Mervyn King said the informal nature of the discussions had paid dividends.
"Freed from burden to agree a communique, the principals engaged more with each than I can recall before and as a result genuinely made real progress in taking forward some of the questions and issues that are facing the G7," he said.

Experts cautious over equities rally

Optimism is blowing through stock markets around the world, lifting many of them to record high levels but this contrasts with widespread economic gloom and leads some analysts to wonder if some of it is just hot air.
Records have been created with increasing speed since the beginning of May.
The main DAX index in Frankfurt has reached a new record high level, and the markets in London and Tokyo have returned to the levels reached in October 2007 just before the financial crisis began.
Wall Street in New York is leading the way and sets a fresh record almost every day.
But the stock market in Paris lags behind. The main CAC 40 index has just risen to the level last reached in the middle of 2011 and is far below the record high level of almost 7,000 points set in October 2000, and still trails the 4,332 points registered just before the collapse of Lehman Brothers bank in the United States in September 2008.
Analysts at Swiss Life private investment managers commented recently that the markets "are swimming in the midst of paradox", questioning the strong rises at a time when the global economic situation is a long way from being stabilised and is even deepening in some places, including in Europe.
In financial circles, experts give various explanations for the rise of stock markets in mature economies.
Some hold that it is an artificial bull market driven by huge amounts of money pushed into economies by central banks. Others say that the rises are justified because investors are anticipating a recovery of the world economy and a recovery of those stocks which have fallen heavily.
"The dichotomy between the real economy and the financial sphere is widening and this is worrying," commented Guillaume Garabedian, a portfolio manager at French brokers Meeschaert Gestion Privee.
He held that that stock markets were rising mainly because central banks had been applying highly accommodating monetary policies, reducing their key interest rates, and pushing huge amounts of liquidity into the financial sector.
All classes of assets have been boosted by this, even the riskiest assets such as debt bonds issued by crisis-hit countries in southern Europe which are able to place their bonds despite still being in difficulty.
The rise of asset prices could even lead to a new financial bubble, some analysts are beginning to warn.
At Capital Spreads, Jonathan Sudeira said that "despite the efforts of the central banks, the volume of trading is falling and the high levels reached by some shares is beginning to look unjustified for traders who are being asked at the same time not to take account of the economic situation."
The "bulls", meaning those who think that share prices will continue to rise on a healthy and justified basis, also have their arguments. At the moment, they seem to have the upper hand.
"Extremely favourable" context
Portfolio managers in dealing rooms say that investors are encouraged by signs that the US economy is recovering, by underlying strength of activity in Germany, encouraging statements by the leaders of big companies about the outlook for the end of the year, and by the removal of the risk that the eurozone might collapse.
At French Natixis bank, economist Philippe Waechter said that apart from the policies of the central banks, the situation in the United States, still the guiding light for stock markets around the world, was satisfactory and explained why optimism had lifted the indices.
"There is growth, certainly it is moderate, but it is there and so there is positive anticipation," he said.
He noted that portfolio managers were looking for good rates of return from the shares they hold and consequently were inclined to go for riskier shares which offered higher returns.
In addition, companies which were cautious about trying to expand their businesses, were buying their own shares which pushed up the value of those stocks.
"Overall, we are in a context which is extremely favourable for stock markets," he said.
Garabedian said that the question boiled down to analysing the fundamental causes of the rise.
"Because if the markets are rising for reasons which are not sufficiently viable, the correction will be severe," he warned.

Clinton did not make Benghazi call

A seasoned diplomat who penned a highly critical report on security at the US consulate in Libya that was attacked last year defended his scathing assessment on Sunday but absolved then-Secretary of State Hillary Clinton.

Thomas Pickering, whose career spans four decades, stood by his conclusion in the report that decisions about the consulate were made well below the secretary's level.
His comments during several television show appearances were unlikely to quiet renewed Republican demands for accountability for the attacks in Benghazi that left four Americans dead, including US Ambassador Chris Stevens. Democrats say Republicans are trying to exploit the Benghazi deaths to undercut Clinton, an early favourite for the Democratic presidential nomination in 2016.
"We knew where the responsibility rested," said Pickering, who headed the Accountability and Review Board that investigated the attack, along with retired Admiral Mike Mullen, the former chair of the Joint Chiefs of Staff.
"They've tried to point a finger at people more senior than where we found the decisions were made," Pickering said of Clinton's critics.
Pickering and Mullen's report released in December found that "systematic failures and leadership and management deficiencies at senior levels" of the State Department meant that security was "inadequate for Benghazi and grossly inadequate to deal with the attack that took place."
The Obama administration has tried to move past the controversy, but a steady drip of new information is fuelling Republican claims that the government initially misled the public about the nature of the assault.
The House Oversight and Government Reform Committee last week heard a riveting minute-by-minute account from a former top diplomat in Libya about the two night time attacks on 11 September, 2012. Gregory Hicks, a former deputy chief of mission to Libya, detailed his phone conversations from Tripoli with Stevens.
Hicks and two other State Department witnesses criticized the Pickering and Mullen's review. Their complaints centred on a report they consider incomplete, with individuals who weren't interviewed and a focus on the assistant secretary level and lower.
Cover-up
The hearing produced no major revelation but renewed interest in the attacks that happened during the lead-up to the November 2012 presidential election.
The top Republican on the oversight committee, Republican Darrell Issa, said he wants sworn depositions with Pickering and Mullen. Issa said his panel has not been provided sufficient details on the State Department review, such as a list of everyone the investigators interviewed or a full transcript of those conversations.
"We want the facts. We're entitled to the facts. The American people were effectively lied to for a period of about a month," Issa said.
Republicans are insisting on exploring what happened at the consulate, what might be done to prevent future such attacks and what political calculations went into rewriting talking points the US Ambassador to the United Nations, Susan Rice, used on news shows the Sunday after the attack.
A series of e-mails that circulated between the State Department and the CIA led to weakened - and, in some cases, wrong - language that Rice used to describe the assault during a series of five television interviews the Sunday after the attacks.
"I'd call it a cover-up," said Senator John McCain, a Republican. "I would call it a cover-up in the extent that there was wilful removal of information, which was obvious."
2016 campaign
"I was surprised today that they did not probe Secretary Clinton in detail," Senator Kelly Ayotte said, of the review board.
One Republican eyeing a White House run, Senator Rand Paul, said at a public appearance that he thinks the Benghazi attack "precludes Hillary Clinton from ever holding office".
Clinton's allies said Republicans were looking to weaken her ahead of a potential 2016 campaign.
"This has been caught up in the 2016 presidential campaign, this effort to go after Hillary Clinton," said Senator Dick Durbin, a Democrat. "They want to bring her in because they think it's a good political show and I think that's unfortunate."

NEWS,15. AND 16.02.2013

Foreign investors set to sue Spain

Foreign investors in renewable energy projects in Spain have hired lawyers to prepare potential international legal action against the Spanish government over new rules they say break their contracts.It is unclear how much claims might be worth, but international funds have more than €13bn of renewable energy assets in Spain and say that the government has reneged on the terms of their investment.The Spanish Parliament approved a law on Thursday that cuts subsidies for alternative energy technologies, backtracking on its push for green power.That measure, along with other recent laws including a tax on power generation that hit green energy investments especially hard, will virtually wipe out profits for photovoltaic, solar thermal and wind plants, sector lobbyists say.International commercial law firm Allen & Overy on Thursday that it is representing a group of investors in concentrated solar power plants in relation to potential claims under the international Energy Charter Treaty."International investment funds are consulting with legal advisers on how to proceed with action. There will be various lawsuits," Luis Crespo, secretary general of Spain's solar thermal association.He said that investors from the United States, Japan and the United Arab Emirates are among those pursuing action through the Brussels-based Energy Charter, an internationally ratified treaty that binds members to rules on energy and arbitration.Allen & Overy is already handling an earlier claim against Spain, filed in 2011 on behalf of photovoltaic investors. The investors it is representing for potential new claims are in the solar thermal industry.Spain's Industry Minister Jose Manuel Soria defended the law in Parliament on Thursday, saying that the measures were necessary to eliminate the accumulated €28bn tariff deficit in the electricity system.That deficit, built up through years of the government holding down electricity prices at a level that would not cover regulated costs including renewables premiums, is at the heart of Spain's energy sector woes.A spokeswoman for the ministry said that its policy was not to comment on legal issues."I don't know why anyone would put another penny in investment in the sector in Spain," said one leading investor whose firm is studying possible claims.The same source, who asked to remain anonymous, said that the reforms could drive some solar industry projects, particularly ones that are highly leveraged, into bankruptcy.Foreign investors poured money into Spanish wind and solar projects, drawn to generous subsidies during a decade-long economic boom that helped the country to become one of the biggest markets for investments in green energy.The problem was that the cost of the subsidies were not passed on fully to consumers because that would have pushed prices to unprecedented highs.Spanish companies such as Acciona and Abengoa have also been hit hard by the new rules, but because it is passed as a decree by the government, Spain-based companies have virtually no form of appeal and will not join the claims being studied by foreign investors.Listed foreign companies with investments in the sector include Germany's E.ON and Japan's Mitsubishi and Mitsui, several sources from the energy sector said.Some of the funds planning legal action are also among the 11 investors who sent a letter to Prime Minister Mariano Rajoy in July to complain of another energy reform with a retroactive impact on investments, the sources said.

 

EU finance trade tax applicable globally

A financial transactions tax to be adopted by 11 EU states should raise €30-35bn each year but the levy will apply worldwide, the European Commission said Thursday, sparking a sharp reaction from opponents led by Britain.The Financial Transaction Tax (FTT) imposes a tax of 0.1% on a trade in shares and bonds, and of 0.01% for derivative instruments.The Commission said that if any of these investments originate in one of the 11 FTT states, then they can be taxed wherever they are traded, giving them a global reach.The British government, which led opposition to the original 2011 proposal on concern over its impact on the giant London financial centre, said this "unilateral (tax) ... will hit growth for the countries taking part, which is why Britain was right not to participate in such a measure."Business organisation the Institute of Directors in London was scathing, rejecting any suggestion the 11 EU states could enforce the tax in Britain, which like all EU members, retains full national control over taxation."This is a daft idea which will throw grit in the wheels of the market, catching not just banks but also customers, pension funds and businesses," said Simon Walker, head of the group."Any attempt to extend it to the UK by the back door would violate the (EU) single market. We are fully entitled to transact business in financial products issued in France, Germany or the other countries on our own terms, under our own tax regime," Walker added.After failing to get support from all 27 EU states, France and Germany pushed ahead with the tax under the EU's Enhanced Cooperation procedure and they were joined by Austria, Belgium, Estonia, Greece, Italy, Portugal, Slovakia, Slovenia and Spain.EU finance ministers last month cleared the tax, seen as a way of clawing back state money spent in propping up the banking sector during the debt crisis.EU Tax Commissioner Algirdas Semeta said the FTT "is an unquestionably fair and technically sound tax, which will strengthen our Single Market and temper irresponsible trading."Asked by reporters how the FTT could apply to countries refusing to sign up, Semeta said he saw no problem and that discussions would resolve such issues.The FTT has three main objectives, Semeta said in a statement, firstly strengthening the EU Single Market by "reducing the number of divergent national approaches to financial transaction taxation."Secondly, it will ensure that the financial sector makes a fair and substantial contribution to public revenues. "Finally, the FTT will support regulatory measures in encouraging the financial sector to engage in more responsible activities, geared towards the real economy," he said, highlighting the political drive to make the financial sector pay for some of the excesses blamed for causing the debt crisis.The statement said the FTT will to be based on a "residence principle" which could have far-reaching implications"This means that the tax will be due if any party to the transaction is established in a participating Member State, regardless of where the transaction takes place," it said.The "residence principle" is expressly aimed "to safeguard against the relocation of financial transactions," according to background notes provided.The tax will also incorporate an "issuance principle" as a further safeguard against avoidance of the tax, the statement said. "This means that financial instruments issued in the 11 Member States will be taxed when traded, even if those trading them are not established within the FTT-zone."Supporters of the tax such as Oxfam pressed for speedy adoption of the FTT."The smart design and the scope of the FTT ... will make it difficult for financial institutions to avoid or evade the tax," the charity said in a statement."It is vital that this proposal is adopted in full to ensure the financial sector contributes its fair share to the costs of the crisis, which is hurting hundreds of millions around the world."

The FTT proposals now go to the European Parliament and EU leaders for approval.

 

Gold demand losing its glitter

Demand for gold fell last year for the first time since 2009 as Asians bought less jewellery and Western investment dipped, the World Gold Council said in a report.Gold output fell by 21.2% in volume terms in December, Statistics South Africa said on Thursday.The WGC, which is funded by the gold industry, said on Thursday that gold consumption was expected to be steady this year but added that it may be some time before it revisits the high levels seen in the worst of the financial crisis."It's hard to see a major move up in demand (this year). I know there are bears out there who are starting to call the end of the bull market in gold, but we don't agree," said the WGC's managing director for investment, Marcus Grubb. "Demand will remain high, but we're talking small single-digit (percent) numbers in terms of growth from the current tonnage level," he said.In 2012 demand was down 4% from the previous year's total, the WGC report said. "The tonnage last year was 4 405 tonnes for consumer demand, and if you add in over-the-counter demand, it's another 100 tonnes higher," Grubb added. "We would expect 2013 to be quite similar."Grubb said he saw gold prices, which have traded between $1 625 and $1 695 an ounce this year, staying in their current trading range, although events that could destabilise the market, such as US budget talks, could push them higher.The gold price is down 1.4% so far this year after posting its biggest quarterly drop since 2008 in the last three months of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in gold's bull cycle this year."Unless something major changes in the macro landscape, this (report) does back up the idea that investors' attention is much more focused elsewhere at the moment," Credit Suisse analyst Tom Kendall said. Jewellery demand fell 3% last year to 1 908.1 tonnes, with the biggest absolute drop noted in India, the largest gold consumer, where a weak rupee led to record-high local prices.In the fourth quarter it rose 11%, however, helped by a 35% rebound in Indian jewellery demand. "Jewellery could have a good year in 2013," Grubb said. "Western demand might at last improve as the US economy and others improve."China, the second-biggest gold buyer behind India, saw a 1% drop in jewellery demand to 510.6 tonnes, its first annual decline since 2002.Overall demand was flat in China in the full year and fell 12% in India, although buying rose in the final quarter as buyers scrambled to avoid a widely anticipated rise in import duty that was announced in January."Provided we see no more increases in import duty, we still think we will see India continue to recover from what was a difficult year in 2012 overall," Grubb said. He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would probably favour the metal.When you look at the full year, we're anticipating that we'll see 865-965 tonnes of demand," he said. In China, demand is expected to recover to between 780 and 880 tonnes this year, against 776.1 tonnes last year."The jury's out on a major re-acceleration of growth in Chinese gold demand," Grubb said. "Last year we saw the first significant slowdown in the Chinese economy in years. That did affect these numbers. What you're seeing in January and February is a re-acceleration in the Chinese economy."Buying by various central banks continued its upward trend to hit a 48-year high at 534.6 tonnes. Grubb said he expected the official sector to match last year's buying in 2013, partly because monetary easing by developed countries was undermining confidence in the value of currencies."Emerging country central banks regard quantitative easing policies as divisive and (believe they) affect the value of the assets that they hold - the dollar and euro, for example," he told at the Global Gold Forum."They are diversifying away from traditional currencies and buying gold as a hedge." Bar and coin investment fell sharply in the United States and Europe last year, with US offtake dropping by more than a third and European buying down 29%. Overall investment demand last year fell 10% to 1 534.6 tonnes. Investment via gold-backed exchange-traded funds rose, however, with ETF demand up by more than half at 279 tonnes."Overall for the year (coin and bar demand) was weak, and it reflects the fact that in Europe the announcements by the European Central Bank took away tail risk in the mind of the investor," Grubb said."The announcement of (bond-buying) in Europe and quantitative easing in the United States also mitigated fears of a near-term crisis, and I think that's why bar and coin demand fell. Institutional investors and private wealth took a different view you see the ETF tonnages went up 51 percent and over-the-counter (demand) had a strong year." He said while more optimism over the outlook for the global economy was likely to encourage investment in other assets like stocks, the fact that much of that was driven by extremely loose monetary policy meant gold investment was unlikely to fall."Investors are trying to call a turn in the asset cycle," Grubb said. "The jury's still out on whether this will be the year when it actually happens. Even if you do start to look at the world more optimistically in 2013, it doesn't mean there isn't a role for gold in your portfolio."

US jobless claims drop

The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to a continued steady improvement in labour market conditions.Initial claims for state unemployment benefits dropped 27 000 to a seasonally adjusted 341 000, the Labour Department said on Thursday. The prior week's claims figure was revised to show 2 000 more applications received than previously reported.Economists  had expected claims to fall to 360 000.A Labour Department analyst said claims for Illinois and snowstorm-hit Connecticut had been estimated.Nevertheless, because most claims are filed online, the blizzard that slammed the East Coast appeared to have little effect on the broader claims data, he said.While companies are no longer aggressively laying off workers, they appear to be in no hurry to step-up hiring against the backdrop of still lackluster demand.The economy has struggled to grow much more than 2% since the 2007 to 2009 recession ended.ob gains averaged 181 000 per month in 2012, far less than the at least 250 000 that economists say is needed to significantly reduce the ranks of unemployed.The four-week moving average for new claims, a better measure of labour market trends, rose 1 500 to 352 500.The prior week's drop to a near five-year low was probably exaggerated by difficulties at the start of the year smoothing out the data for seasonal fluctuations.The number of people still receiving benefits under regular state programs after an initial week of aid dropped 130 000 to 3.11 million in the week ended February 2. That was the lowest level since July 2008 and could reflect people exhausting their benefits.So-called continuing claims had hovered around 3.2 million since late November and economists had viewed that as an indication of little change in the unemployment rate. The jobless rate rose 0.1 percentage point to 7.9% in January.

Eurozone falls deeper into recession

The eurozone slipped deeper into recession in the last three months of 2012 after its largest economies, Germany and France, shrank markedly at the end of the year.It marked the currency bloc's first full year in which no quarter produced growth, extending back to 1995. Economic output in the 17-country region fell by 0.6% in the fourth quarter, the EU's statistics office Eurostat said on Thursday, following a 0.1% drop in output in the third quarter.The drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4% drop in a poll of 61 economists. For the year as a whole, gross domestic product (GDP) fell by 0.5%.Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia. The big economies set the tone. Germany contracted by 0.6% on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.France's 0.3% fall was also slightly worse than expectations. Worryingly for Berlin, it was export performance the motor of its economy that did most of the damage although economists expect it to bounce back quickly. "In the final quarter of 2012 exports of goods declined significantly more than imports of goods," the German Statistics Office said in a statement.The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full eurozone figures. Back revisions to the French figures showed its output fell by 0.1% in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.While the European Central Bank's pledge to do whatever it takes to save the euro has taken the heat out of the bloc's debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government's deficit goal for 2013 out of reach.Economists say the eurozone may also shrink in the first quarter of 2013 although more resilient Germany is expected to rebound."The chances that the (German) economy will return to growth at the beginning of this year are very good. The early indicators are all pointing upwards," said Andrea Rees, chief German economist at UniCredit."The question is how strong the first quarter will be. We expect growth of 0.3% but it could be more."Dutch GDP dropped 0.2% over the quarter, keeping it in recession, while the Austrian economy shrank at the same rate.For the more embattled members of the currency bloc, matters are of course worse.Italy suffered its sixth successive quarterly fall in GDP his time by a sharp 0.9% putting it into a longer slump than it suffered in 2008/2009.Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.With an election due on February 24/25, all sides in a three-way race between Monti's centrist bloc, Pier Luigi Bersani's centre-left coalition and Silvio Berlusconi's centre-right are pledging to cut taxes to try to kickstart economic growth.Spain, the eurozone's fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7% contraction in the fourth quarter.Madrid is also pressing on with harsh austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.There are signs that countries like Spain are starting to benefit from harsh internal devaluations marked by wage falls and job losses aimed at making companies leaner and more productive.The ECB predicts the eurozone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.More recent data for January have already suggested some upturn in the first months of 2013, in the bloc's stronger members at least, and if improvement comes it is likely to be seen in Germany first."The debt crisis has ebbed significantly and the global economy has turned up," said Joerg Kraemer at Commerzbank. "Therefore all the important early indicators for Germany are pointing upwards. I expect noticeable economic growth again in the first quarter."

Dubai to build giant Ferris wheel

Dubai's ruler approved a $1.6bn island development project that would be home to what's billed as the world's biggest Ferris wheel.The project reflects a renewed appetite in Dubai for extravagance as the economy rebounds from a debt-driven slump during the past three years.The official WAM news agency said Wednesday that the Ferris wheel, dubbed the Dubai Eye, will stand 210 meters (688 feet), exceeding the London Eye's 135 meters (443 meters). Construction is set to begin this year.Dubai has proposed a series of mega projects reminiscent of its boom years before the downturn hit in 2009. The projects include theme parks and a satellite city named for Dubai's ruler, Sheik Mohammed bin Rashin Al Maktoum.

Strikes cripple German airports

A strike by security staff over pay hit two key regional airports in Germany for the second day in a row on Friday and was set to resume next week.At Hamburg airport, 147 flights were cancelled out of a total of 358 scheduled for Friday, a spokesperson for the northern German airport told AFP.The day before some 117 departures and arrivals had been cancelled in Hamburg.At Cologne/Bonn airport in the west of Germany, 107 flights were scrapped, or more than half of those scheduled for the day, according to a statement on its website.The Verdi services union called the strike for security staff responsible for checking passengers and hand luggage, in a dispute with management over pay deals.The union said the strike would be suspended over the weekend before resuming Monday.On Thursday, Duesseldorf airport had also been affected by the walkouts.

Luhabe: World needs economic revolution

In a world rife with inequality and unemployment there is a crying need for a new breed of entrepreneur who can combine profit with a social conscience, said acclaimed author and social entrepreneur Wendy Luhabe.Speaking at the Entrepreneurs Unite conference which took place in Stellenbosch this week, Luhabe said: "The global economy is at a crossroads in most parts of the world."We are experiencing an explosion of extreme wealth and inequality, and the confluence of these two factors is making it impossible to tackle poverty and address many vested interests in the economy."Luhabe pointed out that the widening gap between the top 1% and the rest of society - as well as the inequality of resource allocation and opportunity - are at their highest levels since the time of the Great Depression. Little wonder then that the World Economic Forum identified inequality as a global risk for 2013.But market forces, said Luhabe, do not exist in a vacuum. "We shape them by the decisions that we make... we shape them with poor leadership or we even shape them with moral bankruptcy."She lauded Brazil one of the world's fastest-growing economies for shaping market forces "in ways that have lowered inequality while creating more opportunities and higher growth".The worldwide trend of shrinking employment is not likely to change, said Luhabe. "We need an economic revolution therefore that can produce a new dynamic and innovative generation of entrepreneurs, but who in addition to creating great enterprises is prepared to determine a new socioeconomic contract. "The education system worldwide, said Luhabe, is "totally out of alignment with the reality of the 21st century". She identified inequality, unemployment and education as this century's biggest timebombs. "Time is running out," cautioned Luhabe. "The world needs a different economic logic where human capital, social and environmental objectives become a top priority. "Turning to Africa, Luhabe said the International Monetary Fund believes the economy of the continent has the potential to outstrip Brazil's growth over the next five years. "Much of that growth will come from startups which will bring the mobile internet to consumers" and businesses which until recently have not had internet access, said Luhabe. She further identified e-commerce, health and education as areas primed for growth."There is an entirely new generation of entrepreneurs that are changing the face of Africa.... Moral of the story is therefore that the future of the global economy will be shaped by entrepreneurs who are sensitive to the social challenges that exist in their environment."They will have the ability to create sustainable businesses which are profitable yet at the same time address social challenges, said Luhabe.

ECB officials rebuff FX targeting

The head of the European Central Bank and its two German policymakers pushed back against political pressure to target the euro's exchange rate ahead of meeting of Group of 20 financial leaders on Friday.Speaking ahead of the meeting in Moscow, ECB President Mario Draghi said recent loose talk on currencies was "inappropriate, fruitless and self-defeating".Bundesbank chief Jens Weidmann, a strong voice on the ECB's 23-man Governing Council with whom Draghi in the past has been at odds, earlier weighed in to say the euro was not seriously overvalued and that the ECB would not change monetary policy based on its impact on inflation alone."All this chatter that has been undertaken in the past few weeks is either inappropriate or fruitless in all cases it's self defeating," Draghi said in opening remarks at a news conference after meeting with Russian central bank officials.The Italian head of the bank had said last Thursday that the ECB would monitor the economic impact of the strengthening euro, feeding expectations the climbing currency could open the door to an interest rate cut.Both Weidmann and Joerg Asmussen, the German member of six-member Executive Board that forms the nucleus of the Governing Council, said the ECB would not target the euro's exchange rate."I don't think that Mario Draghi was trying to talk the euro up or down," Weidmann said, adding that the ECB "will abstain from manipulating or directly targeting the exchange rate."French President Francois Hollande last week raised the possibility of political interference in exchange rate policy when he called for a medium-term target for the euro's value, a move to counter its recent appreciation."I fear a politicization of the exchange rate," Weidmann told news agency Bloomberg in an interview."I saw indications of that in Japan but you could as well refer to recent statements by European politicians not too far from here," he added in a thinly veiled rebuff of Hollande's call for a currency target.The G20 forum, which put together a huge financial backstop to halt a market meltdown in 2009, is back in the spotlight after a week in which the Group of Seven rich nations tried, and spectacularly failed, to speak on currencies with one voice. The G7 issued a joint statement on Tuesday reaffirming "our longstanding commitment to market determined exchange rates". Yet the show of unity was quickly undermined by off-the-record briefings critical of Japan."In the last couple of days the Group of Seven biggest industrial nations made clear once again that currency exchange rates should be market-based and that we have no exchange rate targets and that's true for us at the ECB too," Asmussen told Germany's Deutschlandfunk radio.The euro hit a 15-month peak of $1.3711 on Feb. 1, before easing slightly. The euro's strength "is one factor among many in determining future inflation rates", Weidmann, who heads Germany's Bundesbank said in the Bloomberg interview conducted on Feb. 13.He added: "We will certainly not justify any monetary policy decision with one single factor".

NEWS,24.01.2013

Britain reaches out to world leaders

British Prime Minister David Cameron insisted on Thursday he was not turning his back on Europe as he came face to face with world leaders for the first time since unveiling plans for a referendum.In a speech to the World Economic Forum in Davos, Cameron said he would use his country's chairmanship of the G8 to counter tax avoidance by corporations and urged action to curb the threat of terror attacks. But the global elite gathered in the snowy Swiss ski resort only had ears for Cameron's comments on the European Union, a day after he unveiled his proposal to let the British public vote on whether to stay in the bloc.He held talks with German Chancellor and EU powerbroker Angela Merkel and the prime ministers of Ireland, Italy and the Netherlands on the sidelines of the annual forum to seek support for his plans."This is not about turning our backs on Europe quite the opposite," Cameron told the audience of business leaders, top politicians and journalists from around the world."It's about how we make the case for a more competitive, open and flexible Europe, and secure the UK's place within it."His announcement on Wednesday that he wants to renegotiate Britain's relationship with Brussels and then hold an "in-or-out" referendum on membership by the end of 2017 has delighted his increasingly anti-EU party at home.European leaders in Davos called on Britain to stay in the 27-nation group and made encouraging noises, in public at least, in support of Cameron's calls for reforms to make the EU more competitive.Cameron will need allies in Europe to back his quest to renegotiate Britain's relationship with Brussels before holding a referendum on the new terms.Dutch premier Mark Rutte warned that without the EU, Britain would be "an island somewhere in the middle of the Atlantic Ocean, somewhere between the United States and Europe".Irish Prime Minister Enda Kenny said the EU would be "stronger if Britain is part of it."Merkel meanwhile sidestepped the topic but reached out to Cameron by vowing more action on one of the key reforms he wants for Europe boosting competitiveness."I say this expressly to my colleague David Cameron. You too have addressed competitiveness, see this as a central issue to ensure Europe's prosperity for the future," she said.Foreign policy guru and former US secretary of state Henry Kissinger told the forum that the "idea of European unity needs to be resolved" if the continent is to make a lasting recovery from the three-year eurozone debt crisis.But Cameron rejected any idea of a European superstate or of Britain ever adopting the euro and added that he did not agree that "there should be a country called Europe".Britain's Finance Minister George Osborne backed up the message when he appeared at Davos later, saying: "I'm arguing for reform in Europe and Britain being part of a reformed Europe."Cameron said in his speech that Britain's presidency of the Group of Eight leading world economies Britain, Canada, France, Germany, Italy, Japan, Russia and the United States would focus on tackling tax avoidance and increasing transparency in a bid to boost the global economy.He said corporations must "pay their fair share" of taxes and that too many businesses were abusing tax schemes, after Britain last year announced a crackdown on multinationals such as Starbucks, Google and Amazon.UN Secretary General Ban Ki-moon, Microsoft tycoon Bill Gates and Jordan's Queen Rania are due to share the stage with Cameron on Thursday evening to speak on issues affecting the global economy.The crisis in Mali, where French forces are helping African troops fight Islamist militants, was also being discussed.No formal decisions are taken at Davos but corporate deals are often sewn up on the sidelines and presidents and prime ministers huddle to thrash out pressing issues.

Concern over currency manipulation at WEF

German Chancellor Angela Merkel expressed concern on Thursday about the risks of currency manipulation, specifically mentioning Japan, where the central bank has decided to quicken the pace of money-printing."I am not completely without worry. We have a much higher sensitivity through the discussion in the G20 for currency manipulation or political influence," Merkel said at the World Economic Forum in Davos."I don't want to say that I look towards Japan completely without concern at the moment. And it will be important for Europe as well that the ample liquidity that was given out to banks last year is collected back again."

EU carbon market plunge 'a wake-up call'

A carbon market price fall to less than €3 on Thursday must serve as a wake-up call to EU member states to back a Commission plan to prop up the European Union's Emissions Trading Scheme (ETS), the EU climate commissioner said.The cost of carbon allowances on the ETS hit a low of €2.81 a tonne on Thursday after a European Parliament committee in a preliminary, non-binding vote, rejected proposals for market reform. The price later climbed back above €4."It must be clear to all that when the Commission warned that the ETS price could drop dramatically it was not a false warning but a real possibility," Climate Commissioner Connie Hedegaard said in a statement."This should be the final wake-up call both to governments and to the European Parliament."Thursday's vote was only an advisory step in the tortuous EU process of trying to agree a plan to remove temporarily some of the surplus allowances that have depressed the market.A more decisive vote in the European Parliament's environment committee is expected next month, to be followed by a vote of member states.Hedegaard said there was widespread agreement an ETS was "the most cost-efficient tool in EU climate politics" and world-wide the idea was catching on.The European Union is working on linking up with other schemes in Switzerland and Australia, for instance.As the rest of the world moves towards coherent carbon pricing, which many in business say they need to plan investment, Hedegaard said the EU was in danger of a messy patchwork of policies, different for each of the 27 member states."The alternative to a well-functioning carbon market is hardly that the EU member states will make it cost nothing to pollute," she said."The alternative is a re-nationalisation of climate tools, meaning a future patchwork of up to 27 different systems and taxes, instead of one market creating a level playing field internally in Europe."

NEWS,23.1.2013

Emerging world challenges multinationals

The battle in emerging markets is heating up as competition between multinational companies and firms from the developing world increases, a report said.According to a report published by the Boston Consulting Group found that a new generation of global challengers consisting of 100 fast-growing and fast-globalising companies from the developing world, is on track to becoming global leaders in their respective industries. To keep up, Western conglomerates will have to know when to compete and when to work together with the new kids on the block. The report said the global challengers were not "mere curiosities operating in distant regions" but rather were "full-fledge competitors that would shape the global economy in the next decade".  These global challengers includ South African media giant Alibaba, China's largest e-commerce company; Trina Solar, the fourth-largest solar panel manufacturer in the world; Indian carmaker Tata Motors and software group Infosys; Russian firms Lukoil and Gazprom as well as Chile's Latam Airlines.  "If ever there was a wake-up call for business leaders in the West, this is it," David C Michael, coauthor of the report, was quoted as saying. "We have been monitoring the rise of global challenger companies for nearly a decade, and the ambition of these companies - what we call the accelerator mindset - has never been stronger," said Michael.  The report goes on to say that global challengers already outpace their competitors from the developed world in growth, job creation and productivity.  Their average revenue was $26.5bn in 2011, compared with $21bn for the S&P 500 nonfinancial companies.  In addition, in the last five years global challengers added 1.4 million jobs, while employment at nonfinancial S&P 500 companies remained flat, the report said.  Chinese and Indian companies dominate the list of global challengers but companies from Egypt, South Africa, Saudi Arabia and Qatar are fast catching up, with the span of industries also widening.  The rise of emerging market companies presents opportunities that could be mutually beneficial to both sides, the report said.

Davos heads seek trillions in new revenue

Business leaders in Davos have plenty to worry about, from the eurozone to global geopolitical upheavals, but at heart their problem is simple: how to find new revenue in a low-growth world.Half a decade on from the financial crisis, investors want to see earnings driven by more than just cost cutting. Their focus now is on a return to sales growth, which presents the world's largest corporations with a $5 trillion challenge.That is the amount of extra revenue the 1 200 top global companies need to find each year simply to meet analysts' expectations, according to consulting firm Accenture. "The trouble is that stock markets' expectations of the ability of companies to grow far exceeds the underlying macroeconomic growth rates," said Mark Spelman, Accenture's global head of strategy. "So companies need to get beyond just thinking about emerging markets and rising middle classes and start to look at those segments where you are seeing significant consumer change, because there is a lot of latent growth in those segments." Increasingly, companies are seeking specific pockets of opportunity for sales growth. They remain cautious about major new investments, however, with confidence among managers in the near-term outlook for their businesses still weak. The annual PricewaterhouseCoopers survey of more than 1 300 chief executives worldwide found only 36% were "very confident" of their firm's prospects for revenue growth in the next 12 months, down from 40% a year ago.    The mismatch between the sputtering global market for goods and services predicted by macroeconomists and the lofty numbers forecast by analysts following individual companies is striking. In all regions, analysts' forecasts for company revenue growth are well above prevailing views on underlying economies. While the World Bank last week cut its 2013 global growth forecast to 2.4% - and just 1.3% in advanced economies - analysts see company revenues expanding by 7.8% in Asia outside Japan, 3.8% in the United States and 2.4 in the eurozone, according Thomson Reuters data. And consensus forecasts call for 2014 sales to pick up even further, especially in the US, where a recovery, it is hoped, could be spurred by rapid growth in shale oil and gas supplies. Companies in the middle of the current hoped-for recovery are wary, as reflected in results from two of Europe's biggest manufacturers on Wednesday. Siemens warned that industrial demand was weakening, while Unilever said economic conditions were "tough", though it had countered this by faster innovation in its products.  Longer term, CEOs are more optimistic, but there are bound to be questions over delivery, given that only around a tenth of companies in the S&P Global 1200 index have seen revenue growth outstrip economic growth in each of the past three years. In the fight to buck the slow-growth trend, nimbleness is key as companies move away from broad-based bets to more targeted strategies that they hope will win market share. "Uncertainty is itself becoming more of a certainty," said Jonas Prising, who heads Manpower's operations in the Americas and southern Europe. "In this new environment, strategic flexibility becomes all important."    Mergers and acquisitions would be one way for corporations to buy growth but CEOs remain reluctant to undertake large-scale deals, despite cheap credit and relatively low valuations. In fact, the focus of CEOs on M&A is at the lowest level in six years, according to the executives surveyed by PwC. "M&A activity is going to be very focused, very targeted and certainly nowhere near the levels that we saw over the past several years," said PwC International chairperson Dennis Nally. The calamitous nature of some bold deals from the recent past, such as those of miner Rio Tinto, whose CEO was sacked last week, will do nothing to encourage boldness by other business leaders. An important focus for companies now is on smarter ways to serve sections of their existing markets, while placing selective bets on new openings. For many, this involves embracing digital technology to keep pace with changes in how consumers buy goods and services - from shifting more resources to online sales to greater use of new tools to analyse behaviour. But new opportunities come in many guises. Luxury goods companies, for example, are aggressively growing their retail networks, especially flagship stores, particularly in growth markets, while companies in many sectors are chasing new service contracts that can lock in profits for years. Geography, too, remains a vital lever for managers to pull as they chase new sales. For Spanish companies struggling with a dire home market, Latin America has become a prime target because of their language advantage, helping the likes of telecoms giant Telefonica. Others are betting that the US market will indeed surge back this year, including German carmaker BMW and fashion house Hugo Boss. With $5 trillion to find, the world's business leaders can afford to leave no stone unturned.  

Swiss aims to ban 'mercenary' firms

The Swiss government said on Wednesday it aims to ban any companies offering mercenary services in conflict areas, in a bid to preserve Switzerland's cherished neutrality and ensure it respects international law. "The Federal Council wants to ban from Switzerland companies offering mercenary services," it said in a statement."The new law would make it illegal for security companies based in Switzerland to directly participate in hostilities within the context of an armed conflict abroad," it added.In the proposed law, which will need parliamentary approval before it can take effect, all companies headquartered in Switzerland would be required to declare all their security-linked activities abroad, the government said.This would allow Swiss authorities to determine whether the activities fell within the law or whether they should be banned, it said.The new rule would apply not only to companies that offer security services in Switzerland and abroad but also holding structures of firms that only do their business overseas."Security companies will not be permitted to carry out activities susceptible to enabling serious human rights violations," the government said, adding that firms would for instance be blocked from running prisons in countries known to use torture.The Swiss government had said it was necessary to regulate private security firms after Britain's Aegis Group Holdings, one of the world's biggest security companies operating in crisis or conflict zones, moved its headquarters to Basel in 2010.Around 20 security companies in Switzerland offer similar services.It will likely take another two to three years before the new law passes through both houses of the Swiss parliament, and it could take another year or so after that before it goes into effect, government spokesperson Luzius Mader told AFP.