NEWS,22.03.2013

China, Russia eye energy, investment deals

China's new leader Xi Jinping, on his first foreign trip as president, held talks with Russian host Vladimir Putin on Friday which focused on a raft of energy and investment accords. A key deal expected to be signed between the two nations will see Russia ramp up oil supplies to China, which is the world's biggest energy consumer."We are grateful for your decision to make your first foreign trip to our country," Putin said at the start of the Kremlin talks."Russian-Chinese ties are an important factor of international politics."Xi, who arrived in Russia accompanied by first lady Peng Liyuan, said he was eager to boost "strategic cooperation" with Putin, stressing his personal rapport with the Russian strongman."We always treat each other with an open heart," said Xi, who will travel to Africa after his Moscow talks."We are good friends," said Xi, who will preside over the world's second-largest economy for the next 10 years.Putin and Xi first met in 2010 when the Chinese leader, then vice-president, travelled to Moscow for talks.Earlier in the day Russian Deputy Prime Minister Dmitry Rogozin and his Chinese counterpart Wang Yang oversaw the signing of a number of deals.These agreements included a $2bn (€1.5bn) deal involving Russian energy firm En+ Group and China's largest coal company Shenhua Group to develop coal resources in Russia's Far East.Experts say the two leaders will use the symbolic visit to try and map out a cooperation plan for the next 10 years."Essentially we are talking about a new epoch in relations between Russia and China," said Sergei Sanakoyev, a veteran China expert with links to the Russian government.Once bitter foes during the Cold War, Moscow and Beijing have over the past years ramped up cooperation as both are driven by a desire to counterbalance US global dominance.At the UN Security Council, China and Russia have both vetoed resolutions to impose sanctions on Syrian President Bashar al-Assad's regime, which is locked in a two-year conflict with the opposition.Both Syria and North Korea are set to be high on the day's agenda. But the economy is expected to be at the forefront of the talks between Russia, the world's largest energy producer, and China, the world's largest energy consumer.Russia, which wants to diversify its energy markets away from Europe, needs to finalise a potentially huge gas deal which could eventually see almost 70 billion cubic metres of gas pumped to China annually for the next 30 years.The Russian state's natural gas giant Gazprom is likely to sign an agreement although not a firm contract, said company spokesman Sergei Kupriyanov.The commercial contract has so far proved elusive as talks have become mired in pricing disputes.Russia's biggest oil company Rosneft is expected to sign an agreement to boost supplies to China from the current 15 million tonnes a year. A Rosneft spokesperson declined to comment but Rosneft chief Igor Sechin indicated that the firm could increase supplies to China to 50 million tonnes a year."China is a strategic market for Rosneft," he told Russian media. "The goal of 50 million (tonnes a year) is not something that's unattainable."Sanakoyev, general secretary of the Russia-China Chamber for Promotion of Trade in Machinery and Innovative Products, said the two countries will also sign a preliminary agreement allowing Chinese companies to help develop Russia's remote Far East. Xi's first overseas trip will then take him to Africa to shore up his resource-hungry country's soaring influence on the continent with visits to Tanzania, South Africa and the Democratic Republic of Congo.Russia and China are members of the BRICS grouping of emerging economies, which includes Brazil, India and South Africa and which will hold a summit in South Africa next week attended by both Putin and Xi.

Russia rebuffs Cyprus, EU awaits 

'Plan B'

Russia rebuffed Cypriot entreaties for aid on Friday, leaving the island's increasingly isolated leaders scrambling to strike a bailout deal with the European Union by next week or face the collapse of its financial system.In Nicosia, lawmakers considered proposals to nationalise pension funds, pool state assets and split the country's second-largest bank in a desperate effort to satisfy exasperated European allies.The governor of the Central Bank, Panicos Demetriades, warned political leaders the country would face a disorderly bankruptcy on Tuesday unless they approved the bills, an official present at the talks said."The next few hours will determine the future of the country," government spokesman Christos Stylianides said before the parliamentary debate. "We must all assume our share of the responsibility."Even if the measures are approved, there was no confirmation they would raise the €5.8bn demanded by the EU in return for a €10bn bailout to avoid a default.Hundreds of protesters rallied outside the parliament and depositors, who began raiding banks' cash machines last weekend, queued again to withdraw what they could.The clock was running down to a Monday deadline set by the European Central Bank for a deal to be in struck before it cuts funds to Cyprus's stricken banks, potentially pushing it out of Europe's single currency.Nicosia angrily rejected a proposed levy on tax deposits in exchange for the EU bailout on Tuesday and turned to the Kremlin to renegotiate a loan deal, win more financing and lure Russian investors to Cypriot banks and gas reserves."The talks have ended as far as the Russian side is concerned," Russian Finance Minister Anton Siluanov told reporters after two days of crisis talks with his Cypriot counterpart, Michael Sarris.Russians have billions of euros at stake in Cyprus's outsized and now crippled banking sector, a factor in the EU's unprecedented demand that bigger depositors take a hit in the interests of keeping Cyprus afloat.But Siluanov said Russian investors were not interested in Cypriot gas and that the talks had ended without result. Sarris was due to fly home, where lawmakers were locked in yet more crisis talks.New bills submitted to the Cypriot parliament included a "solidarity fund" to bundle state assets, including future gas revenues and nationalised semi-state pension funds, as the basis for an emergency bond issue.JP Morgan likened it to "a national fire sale", and eurozone paymaster Germany indicated it opposed the nationalisation of pension funds.They were also considering a bank restructuring bill that officials said would see the country's second largest lender, Cyprus Popular Bank, split into good and bad assets, and a government call for the power to impose capital controls to stem a flood of funds leaving the island when banks reopen on Tuesday after a week-long shutdown.There was no silver bullet, however, and Cyprus's partners in the 17-nation currency bloc were increasingly unimpressed. It was unclear whether parliament would even vote on the bills on Friday."I still believe we will get a settlement, but Cyprus is playing with fire," Volker Kauder, a leading conservative ally of German Chancellor Angela Merkel, told public television ARD.Merkel told lawmakers that nationalisation of pension funds was unacceptable as a way to plug a hole in finances and clinch the bailout, parliamentary sources said.Two lawmakers quoted the chancellor as saying debt sustainability and bank restructuring would have to be the core of any deal, which she called a matter of "credibility".They also quoted Merkel as saying: "There is no way we can accept that", and "I hope it does not come to a crash".Her finance minister, Wolfgang Schaeuble, said he did not know whether eurozone finance ministers would meet over the weekend. "I can't say in advance if and when Cyprus will deliver results," he said.Cypriots have been stunned by the pace of the unfolding drama, having elected conservative President Nicos Anastasiades barely a month ago on a mandate to secure a bailout.News that the deal would involve a levy on bank deposits, even for smaller savers, outraged Cypriots, who raided cash machines last weekend.While EU lenders, notably Germany, had wanted larger, uninsured bank depositors to bear some of the cost of recapitalising the banks, Cyprus feared for its reputation as an offshore banking haven and planned to spread the levy to deposits under €100000 were covered by state insurance.Senior eurozone officials acknowledged in a confidential conference call on Wednesday that they were "in a mess" and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.Cyprus itself refused to take part in the call. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island's predicament.In Brussels, a senior European Union official told ECB withdrawal would mean Cyprus's biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro."If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency," the EU official said.Cypriot banks have been crippled by their exposure to Greece, the centre of the eurozone debt crisis.On Thursday there were angry scenes outside parliament, where hundreds of demonstrators gathered after rumours spread that Popular Bank would be closed down and its staff laid off."We have children studying abroad, and next month we need to send them money," protester Stalou Christodoulido said through tears. "We'll lose what money we had and saved for so many years if the bank goes down."

Cyprus knocks German business confidence

German business confidence fell unexpectedly in March, data showed Friday, as weak economic data, political gridlock in Italy and the Cyprus crisis begin to sour business confidence in Europe's top economy.The Ifo economic institute's closely watched business climate index slipped to 106.7 points in March from 107.4 points in February. Analysts had been expecting a modest increase this month to 107.6 points."After rising sharply last month, the Ifo business climate index edged downwards in March," said Ifo president Hans-Werner Sinn. "Companies were slightly less positive about their future business outlook than in February, but assessed their current business situation almost as positively as last month."But he insisted: "The German economy remains on track in a challenging environment thanks to strong domestic demand."Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.The sub-index measuring current business slipped fractionally to 109.9 points in March from 110.2 points in February. And the outlook sub-index fell by one full point to 103.6 points.Cyprus's Parliament overwhelmingly rejected a proposed tax on bank deposits as a condition for aid, pushing the Mediterranean island a step closer to the brink of financial meltdown.The Cypriot Parliament is expected to discuss a new banking bill on Friday. This follows reports that the European Central Bank would withdraw its emergency liquidity assistance programme by next Monday if an agreement has not been agreed.

US congress OKs funding stopgap

US lawmakers approved a funding stopgap on Thursday that prevents a government shutdown, but their clash over budget blueprints signaled a contentious debate over the future of federal spending. A trio of key votes bookended the action in Congress ahead of a two-week congressional recess, the most urgent one being on the so-called continuing resolution, a $1.2 trillion appropriations measure that will keep the doors of federal agencies open through September, the end of the fiscal year. The Senate passed the measure on Wednesday, and with the House following suit and making no changes, it now heads to President Barack Obama's desk for his signature.The CR locks in the $85bn in automatic spending cuts mandated by the so-called sequester, although it cushions the blow by providing some flexibility within the Pentagon and other departments to make more targeted, less reckless cuts.Obama must sign the CR into law by March 27 or the US government will go into partial shutdown.With 2013 funding largely resolved, lawmakers turned immediately to the impasse over future government spending, as well as the looming battle over raising the country's borrowing cap. The House passed the plan crafted by Paul Ryan, the House Budget Committee chairperson and last year's failed Republican vice presidential nominee, along a mostly party-line vote, 221 to 207."We've done the hard work of bringing this plan forward," House Speaker John Boehner told members on the floor.All US budget blueprints are essentially political messaging documents, leaders on both sides acknowledged on Thursday.Still, 10 Republicans voted against the Ryan plan. And when it was brought to a vote in the Democratically-led Senate, it was rejected 40-59, with five Republicans opposed, potentially weakening the Republican bargaining hand during upcoming negotiations.The Ryan blueprint aims to balance the budget over the next 10 years, but Democrats denounce it as a recipe for a decade of austerity marked by slow economic growth and dramatic cuts to social programs, education and training.It would slash federal spending, reform entitlements and repeal Obama's landmark healthcare law. It also insists on no new taxes, despite aiming to pare down the $16 trillion national debt.Chris Van Hollen, top Democrat on the House Budget Committee, criticised the Ryan plan as "an uncompromising ideological approach to our budget issues."The Democrats introduced their own budget this week for the first time in four years, and with the Ryan plan rejected, the blueprint by Senate Budget Committee chair Patty Murray could be voted on as early as Friday.Murray is pushing what she says is a balanced approach to deficit reduction, including targeted spending cuts and new tax revenue."The House Republicans have doubled down on the failed policies" that lost them the 2012 election Murray said.An ideological battle is brewing, with House minority leader Nancy Pelosi accusing Ryan of seeking to line the pockets of the wealthy by hollowing out programs for seniors and the poor like Medicare, Medicaid and Social Security.Pelosi said she was ready to discuss ways to strengthen such entitlements, but warned: "If your goal, though, is to have them wither on the vine or be reduced in a way that does not meet their purpose, then them's fighting words."Boehner hinted that a battle over the debt ceiling loomed too, saying the only way the House would raise the ceiling before it is reached in May would be if Obama agreed to an equal amount in spending cuts."Dollar for dollar is the plan," Boehner told reporters. "The president has been clear that he's not going to address our entitlement crisis unless we're willing to raise taxes. I think the tax issue has been resolved.""So at this point then, I don't know how we're going to go forward."Asked if he saw the debt ceiling as leverage in getting Obama to agree to entitlement reform, Boehner said "there might be some there" but stressed: "I'm not going to risk the full faith and credit of the federal government."Meanwhile the Defense Department, thanks to the CR which tweaked the defense cuts, said it was delaying by two weeks this week's notices to 800 000 civilian workers that they would face rolling furloughs through September.

Airfares climb 25% - report

Airfares to some of the most popular U.S. and international destinations rose by 25% or more last year, and June was the most expensive month to travel, according to the website Kayak.com.The costs of flights from North America to Lima soared 33%, London fares were up 30% and tickets to New Orleans, Madrid, Munich and Sydney jumped 28%.Data compiled by the website, which compares hundreds of travel sites at once, showed a ticket to Paris, Beijing, Key West in Florida and Hong Kong was 25% more last year than in 2011, while the airfare to Toronto slumped 3%."We found that overall airfare increased 17% across the board from 2011 to 2012," said Maria Katime, a Kayak spokesperson."Toronto, of all the popular destinations that we looked at, was the only one where the airfare decreased," Katime added. Kayak did not analyze the reasons for the price increases.Despite the jump in airfare to London, which hosted the Olympics and celebrated Queen Elizabeth's Diamond Jubilee in 2012, was the top international destination for North American travelers, followed by San Juan, Cancun, Paris and Rome.Gambling mecca Las Vegas topped New York, Los Angeles, Orlando and San Francisco as the most popular US city to visit.Destinations that increased in popularity in 2012 but did not have hefty increases in airfare included Punta Cana and Santo Domingo in the Dominican Republic, Tokyo, Mumbai and Nashville.Kayak found that the cheapest flights were in January, February, September and October for domestic flights, and February and March for international fares. January was the least busy month to travel.The cheapest average airfares for domestic trips of up to one week are for flights leaving on Saturday and returning on Monday. For longer stays, leaving on Tuesday and returning on a Wednesday can lower airfares by an average of 10%.The website found the opposite for international trips. Prices were 21% lower than average for passengers on short trip of up to a week if they left on Tuesday and returned on a Wednesday, and 9% lower for longer stays with a Saturday departure and a Sunday return.

S&P cuts Cyprus rating

Ratings firm Standard & Poor's dealt a further blow to reeling Cyprus on Thursday, cutting its credit rating as the eurozone country struggles to avoid a banking sector meltdown.S&P lowered Cyprus's rating to 'CCC' from 'CCC+' as the country raced under a tight deadline to formulate an acceptable rescue plan with the European Union.The lowered credit rating would make it more costly for Cyprus to borrow, further exacerbating the stricken nation's woes.The US ratings firm warned the outlook was negative for the country, and that the rating could be lowered further if critical financing was not secured "soon."While a bailout deal is possible, S&P said, "In light of building economic and financial stability pressures, the terms of any support package are likely to be unpopular and challenging to implement in the context of a severe, protracted economic downturn and an extended bank holiday.""As a consequence, we believe that risks of a sovereign default are rising."S&P said that neither Cyprus's government nor bank shareholders appeared capable to meet the pressing capital needs of its teetering banks."In the absence of foreign private or official capital injections into the Cypriot banks, we see few means to recapitalise the distressed portion of the system without converting bank liabilities, including deposits, into equity claims," it said in a statement.The S&P downgrade came as the Cyprus cabinet, meeting in a crisis session, was attempting to approve an alternative bailout plan after parliament rejected an agreement with the EU and International Monetary Fund because it included a heavy tax on bank deposits.The European Central Bank, ratcheting up the pressure, said that Cyprus must agree a bailout deal by Monday or it will withdraw emergency financing of Cypriot banks.Standard & Poor's warned: "We would likely lower the rating if Cyprus's government fails to obtain a financing program soon."The CCC rating is three notches above sovereign default.S&P discounted speculation that the crisis may force Cyprus to exit the eurozone."Our baseline expectation is that Cyprus will remain a member of the European Economic and Monetary Union," it said.

Eurozone ready to discuss Cyprus bailout

Eurozone finance ministers extended a Cypriot olive branch late on Thursday, as their leader said currency partners were willing to work with Nicosia on new plans to make work a bailout that re-draws the island's stricken banking sector."The Eurogroup stands ready to discuss with the Cypriot authorities a draft new proposal, which it expects the Cyprus authorities to present as rapidly as possible," Eurogroup chairperson and Dutch Finance Minister Jeroen Dijsselbloem said in a statement after a two-hour conference call with peers.As the ministers huddled around their video screens, the Cyprus cabinet was in crisis session bidding to approve a "Plan B" after an earlier agreement with the EU and IMF collapsed amid anger over a weekend raid on savers that Dijsselbloem says should have been understood as a "wealth tax" aimed principally at mainly Russian oligarchs' investments.The European Central Bank has given Cyprus until Monday to find a way out of a crisis that has left Moscow furious over frozen government agency accounts with banks in the offshore finance centre shut for a full week, the worst affected imposing radically lowered cash withdrawal limits.With EU sources semi-openly floating a willingness to cut Nicosia loose if it doesn't clobber a finance industry Germany and others associate openly with the onward eurozone circulation of ill-gotten money-laundering gains, and a nervous crowd gathered outside the Cypriot parliament, Dijsselbloem's remarks served as an inducement to lawmakers there."The Eurogroup would subsequently, on the basis of a Troika analysis that needs to be undertaken, be prepared to continue negotiations on an adjustment programme," Dijsselbloem added, teeing up a tense weekend of negotiations from Moscow to Nicosia and Brussels or Berlin.However, in what analysts have warned is a dangerous game of Russian roulette, he also underlined that any new plan to fill a €6bn hole and so unlock up to €10bn in eurozone and IMF loans between now and 2016 would need to "respect" other demands already made by creditors.Rapid passing of legislation then provides a further hurdle in a race against time to prevent a collapse in the island's banking sector - one heavily based on deposits rather than credit, and so potentially more vulnerable than other victims during the debt crisis to runs on weak banks.As the political point-scoring continued, Dijsselbloem finished by insisting that ministers "reaffirmed the importance of fully guaranteeing deposits" below the sensitive threshold of €100 000 - the cut-off point for European Union legal protections.

NEWS,21.03.2013

US auto sales could rise 8% in March

US auto sales in March are expected to rise 8 percent and the annual sales pace should top 15 million for the fifth straight month as consumers shake off worries about the economy, according to research firms J.D. Power and Associates and LMC Automotive.Sales of new cars and trucks in March are expected to rise to 1 465 100 vehicles, while the annual sales pace is forecast to hit 15.3 million vehicles, J.D. Power and LMC said in a joint report released on Thursday. Since November, the annual rate has ranged from 15.3 million to 15.5 million. Auto sales are an early indicator each month of economic health. The industry has so far proven stronger than the overall US economy as the record high age of cars and trucks on the road has reached more than 11 years, and easier availability of credit have pushed consumers into the market. "We expect the economic environment to improve throughout 2013, as the likelihood of a dark cloud slowing the recovery pace diminishes," LMC senior vice president Jeff Schuster said in a statement. "Consumers do not appear phased by headwinds from Washington, as growth in auto sales are outperforming earlier expectations.”The US auto sector is scheduled to report March sales results on April 2. In February, sales rose nearly 4 percent, delivering a better-than-expected performance on strength in the US housing market. Many executives and analysts have forecast 2013 US industry sales to finish in the 15 million to 15.5 million range.J.D. Power and LMC said the average retail transaction price in March rose 3% from last year to $28 504 per vehicle.

Cyprus sets up investment fund

Cyprus politicians Thursday agreed to set up an investment fund as part of a Plan B to secure a bailout deal with eurozone lenders, while ruling out a tax on bank deposits that sank an earlier deal."Following a proposal by (President Nicos Anastasiades), there was a consensus reached and a unanimous decision was taken for the setting up of an Investment Solidarity Fund," government spokesman Christos Stylianides said in a statement.Other political leaders emerging from a crisis meeting with Anastasiades to hammer out a revised bailout plan said the subject of a "haircut" on bank deposits had been ruled out completely. Stylianides said the proposal for the fund was being processed by government lawyers, while Averof Neophytou, acting leader of the ruling Disy party, said that if it is ready, "certainly it will be before (parliament) this afternoon". Parliament was to meet at 14:00 GMT for its weekly scheduled meeting."I want to believe we will find a solution to avoid bankruptcy of this country and we will manage this," Neophytou said. European Party leader Demetris Syllouris told reporters after the meeting that "a haircut is not even on the margins", while parliamentary speaker Yiannakis Omirou said, "The haircut was not discussed, it was not on the table."No details were released of how the fund would be constituted but media had earlier reported it would comprise proceeds from the nationalisation of state and private provident funds and from bonds issued against future natural gas revenues.Phileleftheros newspaper said this would raise around €3.5bn of the €5.8bn Cyprus is required to amass to secure the eurozone bailout. It was not immediately clear how the remaining funds would be raised.Cyprus is seeking ways to secure funding for its banks after lawmakers on Tuesday flatly rejected a highly unpopular measure that would have slapped a one-time levy of up to 9.9% on bank deposits as a condition for an EU-led €10bn loan.The €5.8bn the proposal would have raised was crucial to Nicosia getting the full rescue. With that now in doubt, Cyprus must find other ways to raise cash to repay its debts.The revised plan was hastily drawn up after Finance Minister Michalis Sarris failed to make any progress in Moscow talks to secure aid, as a tough-bargaining Russia sought lucrative assets in exchange for more help.

Eurozone in reverse, China speeds up

The eurozone's economic downturn deepened this month, even before Cyprus' bailout troubles, but China's factories took a completely different path and moved up a gear, business surveys showed on Thursday.Figures due later from the United States are expected to show a pick up by factories in the world's largest economy.The eurozone survey results will add to the headache of policymakers battling to revive the currency bloc's fortunes and now to deal with the potential default of one of its members.Most responses were received before Cyprus's parliament rejected a bailout deal that including an unprecedented levy on all bank deposits leaving the country perilously close to financial collapse.Data also showed leading economy Germany with signs of fatigue. French businesses turned in their worst performance in four years, probably plunging the eurozone's second-biggest economy into a recession."The sharp decline in the flash composite PMI in March pours cold water on hopes of an imminent end to the eurozone recession," said Martin van Vliet, economist at ING."If the situation surrounding Cyprus spirals out of control the onset of recovery might well be delayed."Markit's Flash Eurozone Composite Purchasing Managers' Index (PMI), which makes up around 85 percent of the final reading and is seen as a reliable economic growth indicator for the bloc, fell to 46.5 in March from February's 47.9.That was lower than all forecasts in a Reuters poll of 23 economists and far short of median expectations for a small rise to 48.2. The index has been below the 50 mark that separates growth from contraction for all but one of the past 19 months.The positive news came from China, where factories increased their pace after a holiday dip, pointing towards solid but not spectacular first-quarter growth in the world's second-largest economy.The HSBC China PMI for March revived to 51.7 in March from 50.4 in February, but remained below a two-year high of 52.3 reached at the beginning of the year.The pullback in February had raised concerns in financial markets that China's recovery was losing steam. Indeed, official data earlier in March suggested the economy had started 2013 with only tepid growth after a burst in the fourth quarter.But the latest data should allay some of those fears."Current readings ... seem to us to be consistent with GDP (gross domestic product) growth close to 8 percent year-on-year," wrote Dariusz Kowalczyk of Credit Agricole-CIB in Hong Kong.Survey compiler Markit, which released the preliminary data and will issue final figures at the start of April, said the picture could be even worse by then."Events that hit business confidence can have a very rapid effect on the data and so there is good reason to believe that responses we collect this week will on average be more negative," said Chris Williamson, Markit's chief economist.Having already contracted since the second quarter of last year, Markit said the latest PMI data suggested the eurozone economy would shrink 0.3 percent in the current quarter.That is worse than the 0.1 percent contraction predicted in a Reuters poll taken last week that also forecast negligible growth next quarter and only then because of German strength.Germany's composite PMI fell in March, although it held above 50 for the fourth month, suggesting some strength in Europe's largest economy. But France's sank to a four-year low.Some of the factory activity in the eurozone was generated by running down order books and incoming new business for services firms dropped at the fastest pace since October, suggesting next month's PMI will also be weak."The only bright spots are in the backwards looking indicators, like employment, holding up a bit better than expected. But the worry is these surveys were collected before the bad news on Cyprus really hit, so you have to wonder what impact that will have on business sentiment," Williamson said.

Obama: Israel at a crossroads

US President Barack Obama warned on Thursday that Israel was at a "crossroads" and should choose peace with Palestinians because it was necessary for its own ultimate security and was morally just.Obama argued that though the Palestinian issue had receded as Israelis felt safer in their own homes, it was necessary to solve the decades-old dispute so the Jewish state could fulfil its destiny."Today, Israel is at a crossroads," Obama said in a major speech, adding that although Israelis felt safer under Iron Dome missile defences and barriers to thwart suicide bombers, "peace is the only path to true security".Obama made his most explicit case yet for Israelis to re-engage in peace talks which foundered two-and-a-half years ago in the speech at a Jerusalem convention centre that formed the centrepiece of his three-day visit to Israel.The president said he realised that many Israelis did not share his views and that many observers were sceptical at the prospect of another US-sponsored peace drive, but said: "I want you to know that I speak to you as a friend who is deeply concerned and committed to your future."First, peace is necessary. Indeed, it is the only path to true security," Obama said, hours after returning from a five-hour visit to see Palestinian leaders in the West Bank."Second, peace is just," Obama said, again seeking to show he understood the reticence of Israelis who believed Palestinian leaders had missed "historic opportunities".Finally, he concluded: "Peace is possible," but acknowledged "there will always be a reason to avoid risk and there's a cost for failure."Negotiations will be necessary, but there is little secret about where they must lead - two states for two peoples."There will be many voices that say this change is not possible," Obama said in the speech, which was in some ways a bookend to his historic 2009 address to the Muslim world in Cairo."But remember this: Israel is the most powerful country in this region. Israel has the unshakeable support of the most powerful country in the world."Obama also used the speech to seek to bolster a sense of security among Israelis, and to touch on regional turmoil raging around the Jewish state.He demanded that foreign governments blacklist Hezbollah as a "terrorist organisation", slamming the Shi'ite Lebanese militia for attacks on Israelis."Every country that values justice should call Hezbollah what it truly is - a terrorist organisation," Obama said, in remarks aimed at the EU which has declined to put the group on a blacklist of terrorist movements. Obama also issued a new call for Syrian President Bashar Assad to leave power amid a bloody uprising that has claimed 100 000 lives."America will also insist that the Syrian people have the right to be freed from the grip of a dictator who would rather kill his own people than relinquish power," he said.Obama has angered critics who say his rhetoric is not enough on Syria and dispute his insistence that arming rebels battling Assad could make the problem even worse.The US leader issued a fresh warning to Iran, saying a nuclear-armed Islamic Republic would be a danger to the entire world, as he sought to convince Israelis he takes seriously Tehran's threat to the Jewish state.Obama said he favoured a diplomatic resolution to the nuclear dispute but warned Iran's time was not unlimited: "I have made the position of the United States of America clear: Iran must not get a nuclear weapon. This is not a danger that can be contained."

Obama, Netanyahu show solidarity on Iran

Seeking a fresh start to a strained relationship, President Barack Obama and Israeli Prime Minister Benjamin Netanyahu on Wednesday demonstrated solidarity on the key issues that have stirred tensions between them. The US president vowed he would do "what is necessary" to prevent Iran from obtaining a nuclear weapon, while Netanyahu reaffirmed that his newly formed government seeks a two-state solution to Israel's decades-long dispute with the Palestinians.Obama, in Israel for the first time in his presidency, also pledged to investigate reports that Syria had used chemical weapons for the first time in its two-year civil war. And he sternly warned Syrian leader Bashar Assad that use of such weapons would be a "game-changer," one that could potentially draw the US military into the conflict for the first time."The Assad regime must understand that they will be held accountable for the use of chemical weapons or their transfer to terrorists," Obama said, standing alongside Netanyahu at a nighttime news conference.Expectations were low for a breakthrough during Obama's visit on any of the major issues roiling the region. Instead, the president was focused on reassuring anxious Israelis that he is committed to their security, and on resetting his rocky relationship with Netanyahu.The two leaders have been at odds over Israeli settlements and Iran's disputed nuclear programs, and Netanyahu famously lectured Obama in front of the media in the Oval Office on Israel's right to defend himself.Compared with past encounters, there was a noticeable lack of uneasiness Wednesday, the first time the two leaders have met publicly after both survived elections that will leave them stuck with each other for the foreseeable future. They traded jokes throughout a day of side-by-side appearances. And they repeatedly referred to each other by their first names, Obama calling his Israeli counterpart by his nickname, "Bibi".On Iran in particular, the two leaders sought to show they were united in their desire to prevent the Islamic republic from developing what Obama called "the world's worst weapons."Although preventing Iran from developing a nuclear weapon is a priority of both countries, Netanyahu and Obama have differed on precisely how to achieve that goal. Israel repeatedly has threatened to take military action should Iran appear to be on the verge of obtaining a bomb, while the US has pushed for more time to allow diplomacy and economic penalties to run their course.Obama said he continues to prefer a diplomatic solution and sees time to achieve it. Whether that works, he said, will depend on whether Iran's leaders "seize that opportunity".

Iran threatens Israel retaliation

Iran will "annihilate" the Israeli cities of Tel Aviv and Haifa if it comes under attack by the Jewish state, supreme leader Ayatollah Ali Khamenei warned on Thursday."Every now and then the leaders of the Zionist regime threaten Iran with a military attack," Khamenei said in a live televised speech from the north-eastern holy city of Mashhad, referring to Israel."They should know that if they commit such a blunder, the Islamic republic will annihilate Tel Aviv and Haifa," he said.Iran is said to possess ballistic missiles capable of reaching Israel. It also has close relations with Israel's foes in the region, including Lebanon's Hezbollah and Palestinian militants in the Islamist-ruled Gaza Strip.Khamenei spoke with little sign of an easing in Tehran's position in its confrontation with the West over its disputed nuclear programme of uranium enrichment.Israel, widely believed to be the Middle East's sole but undeclared nuclear power, suspects that Tehran is seeking atomic arms, a fear shared by the US and Western powers, and has not ruled out a military strike.Washington has also refused to rule out the military option, but insists it prefers a diplomatic solution to the nuclear stand-off.US President Barack Obama in Israel on Wednesday accepted that the Jewish state would not cede its right to confront Iran's nuclear threat to the US.

Venezuela cuts off talks with US

Venezuela said Wednesday it has suspended a "channel of communications" with Washington as it ratchets up tension ahead of elections to replace the late president Hugo Chavez.Foreign Minister Elias Jaua said the move was a response to "interventionist statements" by US assistant secretary of state Roberta Jacobson, who called for "open, fair and transparent" elections on 14 April."This channel of communication is suspended at this time, deferred until there is a clear message on what type of relationship the United States wants with Venezuela," Jaua said. "It makes no sense to continue wasting time," he added.Venezuela's acting President Nicolas Maduro is running against opposition leader Henrique Capriles, who lost to Chavez in October elections and is regarded as facing an uphill battle against Maduro as well. Chavez, who dominated Venezuela during his 14 years of power, died of cancer on 5 March after a long illness that unsettled the political landscape. Maduro said in January that he had had contacts with Washington in late 2012 through the Venezuelan ambassador at the Organization of American States, which he said were authorized by Chavez.

NEWS,20.03.2013

UK budget overshadowed by leak

Details of Britain's market moving budget were published on the Internet by a reporter at a London newspaper minutes before the finance minister stood up to give his speech in parliament on Wednesday, prompting calls for an investigation from lawmakers.

A copy of the front page of the London Evening Standard, containing details of economic forecasts, tax changes and borrowing, was published on Twitter at least fifteen minutes before George Osborne rose to his feet.

Some opposition lawmakers waved copies of the page, which had been compiled with embargoed details of the speech, at Osborne while he spoke in the lower chamber of parliament, the House of Commons.

"He almost needn't have bothered coming to the House because the whole budget, including the market sensitive forecasts, were in the Standard before he rose to his feet," Ed Miliband, leader of the opposition Labour party, told Osborne.

"I'm sure he'll investigate and report back to the House," Miliband said.

Osborne's ministry was unavailable for immediate comment.

The newspaper's editor, Sarah Sands, apologised and said the paper's journalists were "devastated" that an embargo had been breached.

"An investigation is immediately underway into how this front page was made public and the individual who tweeted the page has been suspended while this takes place," Sands said.

Sands told the BBC that a young journalist had tweeted a copy of the front page.

The budget is supposed to be kept secret until the chancellor of the exchequer, as the finance minister is known in Britain, briefs parliament on its contents.

In 1947, Labour finance minister Hugh Dalton resigned after divulging details of his budget to a newspaper journalist before his statement to parliament.

Britain sticks to austerity in budget

British finance minister George Osborne stuck firmly to the government's controversial austerity plan as he presented his annual budget to parliament Wednesday, despite a promise to spend on infrastructure to boost a weak economy.

Chancellor of the Exchequer Osborne, whose is facing calls from within his own Conservative party to change course, told MPs that Britain "must hold to the right track" as he outlined his tax and spending plans for 2013/14.

"We are slowly but surely fixing our country's economic problems," Osborne told the nation.

"We have now cut the deficit, not by a quarter but by a third. Despite the progress we have made there is much more to do and today I am going to level with people... It is taking longer than anyone hoped but we must hold to the right track."

This referred to sticking to his so-called Plan A of driving down the record budget deficit inherited from the previous Labour administration in 2010, despite calls from both inside and outside the coalition government to curb massive spending cuts to kick-start the economy.

Osborne's insistence on driving down the deficit comes despite the chancellor announcing that the government was halving its economic growth forecast for 2013.

Gross domestic product (GDP) was expected to grow by just 0.6% this year compared with a previous forecast of 1.2%, according to estimates issued by the Office for Budget Responsibility (OBR).

Economic growth guidance for 2014 was also cut to 1.8% from the previous estimate of 2% that was given in December.

Osborne added that Britain was on course to avoid sinking into its third recession since the 2008 global financial crisis, despite its economy contracting by 0.3% in the final three months of 2012.

In better news, Osborne said infrastructure plans would be backed by €3.5bn a year from 2015-2016, to ensure that the "economic arteries of every part of this country" could benefit.

On the eve of the budget, Prime Minister David Cameron's Downing Street office said some government departments would be made to cut their budgets to save 2.5bn over the next two years.

The money saved between now and 2015 -- the time of the next general election -- would be used on infrastructure spending, a spokesperson said.

The decision is at odds with Business Secretary Vince Cable, who has called on the government to consider borrowing more to stimulate economic growth.

Cable, a leading member of the Liberal Democrats which shares power with the Conservatives, said that the danger of slow growth may now be more damaging than the loss of confidence through increased borrowing.

But Cameron earlier this month insisted that his government, which passed the mid-term mark in January, would stick to the path of austerity despite a turbulent few weeks that saw Britain stripped of its top-level AAA credit rating.

In a further blow to the prime minister, civil servants were Wednesday holding a 24-hour strike in a row over pay and other working conditions.

The Public and Commercial Services union said up to 250 000 of its members would join the walkout, hitting government departments, jobcentres, tax offices, border patrols and courts.

On Tuesday meanwhile, a pool showed that more than four out of 10 voters believe Osborne should be sacked.

Cyprus in limbo after bank levy rejection

Cypriots faced uncertainty on Wednesday after parliament rejected a controversial levy on savings that had been agreed with international creditors as part of a bailout deal.

Lawmakers on Tuesday evening overwhelmingly rejected plans to apply a one-off tax of up to 10% on people's bank deposits, leaving decision makers scrambling on how to avert the Mediterranean island's bankruptcy or exit from the eurozone.

The euro was slightly down on the dollar, while the German stock market lost 0.6% during early morning trading Wednesday.

"The decision was the right one to take, but I would be lying if I said I am not worried - we need help and we need it now," said 50-year-old Michalis Michael, a shopkeeper in central Nicosia.

Banks across the island remained closed as the government and the country's central bank were working on an alternative proposal to find €5.8bn in funds, as requested by the European Union and the International Monetary Fund.

The eurozone, together with IMF, has asked the Cypriot government to raise the amount as part of negotiations for a €10bn package to bail out its banks and shore up the country's public finances.

Banks were not expected to reopen until Tuesday, according to news reports, although no official decision had yet been taken by the central bank.

ATMs have been dispensing cash, while credit and debit cards were working normally, although electronic transfers continued to be blocked, bank officials confirmed to dpa.

For the time being, the European Central Bank has vowed to continue to provide liquidity to the island's banks.

Cyprus' influential Orthodox Church has offered to help, with Archbishop Chrysostomos II saying the church was willing to mortgage its properties to invest in government bonds.

Nicosia was looking to renegotiate its bailout deal, with President Nicos Anastasiades due to meet creditors later in the day.

Meanwhile, Finance Minister Michalis Sarris was in Moscow to see if an existing loan of €3bn taken out in 2011 with Russia could be extended or increased to €5bn.

"We had a good meeting  no decision has been made - discussions will continue later in the day," Sarris said after he emerged from the talks in Moscow.

Anastasiades had a telephone conservation the night before with Russian President Vladimir Putin, whose country holds billions of euros in Cypriot banks.

Reports said Cyprus would attempt to also strike a deal with Moscow for the sale of troubled Popular Bank of Cyprus, known as Laiki, as well as the Bank of Cyprus.

Cypriot state broadcaster RIK said Russia would likely seek compensation for such an investment, possibly in the form of a naval port in Cyprus for the Russian fleet, and access to the country's natural gas reserves.

Anastasiades is also believed to be looking at the option of making use of social security fund reserves, which amount to €5bn, and offering depositors with more than €100 000 natural gas-indexed bonds in return for voluntarily paying a levy.

India's billionaires slow to share riches

They may build skyscraper mansions, travel by private jet and throw sumptuous wedding parties, but it seems India's super-rich are much slower at opening their wallets for charity.

India now has 55 dollar billionaires, the fifth-biggest number in the world, according to a Forbes ranking this month.

But like other emerging economies such as China, its charitable giving still lags markedly behind that in the West where the tradition of wealthy businessmen donating chunks of their fortunes is much more deeply ingrained.

High net worth Indians gave up an average 3.1% of their income to charitable causes in 2011 - up from 2010 but far behind the 9.1% average in the United States, according to global consultancy Bain & Company.

But analysts say the upturn in giving as more Indians get seriously rich is going at a snail's pace.

"The pace for corporate India and especially the new rich giving up its wealth is excruciatingly slow," said Manjeet Kripalani, executive director at Gateway House, a Mumbai-based think tank.

"Corporate philanthropy needs to look at a thoughtful way of scaling up giving," she said.

While impressive growth in the past decade has created a swathe of Indian tycoons, the more recent economic slowdown has compounded the slow take-up of philanthropy, despite a pressing need to tackle widespread poverty.

"Giving is impacted by sentiment, which remains weak at the moment. It is likely to be flat or extremely moderate in terms of growth," said Arpan Sheth, author of Bain's annual Indian study.

The latest report released this month did not give fresh statistics, but said donors were "putting a higher bar on understanding the impact of their giving, before they commit to causes" in the tough business environment.

India's richest man Mukesh Ambani, chief of Reliance Industries and owner of a billion-dollar, 27-storey family home, has criticised Western corporate charity as a "disempowering tool" that "increases dependency".

India does not lack a culture of giving.

Reliance has followed the lead of large industrial groups such as Tata and Aditya Birla, which donate heavily to charity through their own trusts, with projects ranging from healthcare and education to rural infrastructure.

Azim Premji, chief of software giant Wipro, last month gave $2.3bn from his own pocket to the education charity he controls, and he is now considered "Asia's most generous man" by Forbes.

He was the first Indian to join the "Giving Pledge" club, set up by Microsoft co-founder Bill Gates and billionaire investor Warren Buffet to encourage the world's wealthiest to donate at least half their fortunes to charity.

But the scale of Premji's donation has renewed the debate on why the richest are not giving away more of their wealth.

"Many others haven't demonstrated the same kind of generosity," said business journalist Anand Mahadevan in an Economic Times column.

One explanation from businessmen, Mahadevan said, is that wealth creation is still a recent phenomenon in India compared with countries such as the United States, and philanthropy usually comes further down the road.

Also, Indian charity often takes a more informal form: people might donate to local schools or hospitals in kind, or "give money, hair, gold, to our temples as charity", said Kripalani.

India currently ranks a lowly 133rd out of 146 countries in the latest World Giving Index - down from 91st position in 2011 - based on surveys of charitable behaviour around the globe.

Its far poorer neighbours Pakistan and Bangladesh came in respectively at 85 and 109 in the same survey.

Analysts say a major barrier to giving is not knowing whether donations will produce sustainable results, given the lack of accountability, transparency and impact assessments.

"When we met philanthropists, the message we got was: show us the impact, we will give more," said Anant Bhagwati, co-author of the Bain report, at a conference in Mumbai this month to encourage a greater philanthropic culture.

The trends may be encouraging: last year's Bain survey found more than 70% of donors had less than three years of philanthropic experience and more than a third were 30 or younger.

Manas Ratha, director of the non-profit Dasra group which helps to pair donors with charities, said willing philanthropists were there but needed more guidance.

"A lot of work needs to be done. There is good reason to be optimistic, but we are losing time and opportunity," he said.

Ripples from Cyprus

ONE of the most interesting banking countries in the world is Cyprus, as technically it is still a country at war with its northern neighbour, making it an unlikely candidate for a safe haven.

Cyprus also has the highest private sector debt to gross domestic product (GDP) ratio in the world, which should have set alarm bells ringing to any savers - let alone Russians - who are taking their money to the island.

The Russians too are an interesting bunch in this picture, as many of them are hiding money in Cyprus due to the Russian taxman. President Vladimir Putin is out fighting the European Union for Russian private interests, and not to collect rightful Russian taxes.

A friend said this of Russian money in Cyprus: “I believe that there is a lot of money from Russia that was stolen by members of the previous communist regime and banked in Cyprus.

"There are many exceptionally wealthy Russians living in Cyprus. I wonder what Putin's agenda is.”

Nothing is what it seems in Cyprus as the overall €15bn bailout is very, very small in the bigger €16 trillion EU picture.

Yes, the bailout is less than 7% of the size of that of Greece and would be the smallest country bailout in the EU by far - smaller than some private bank bailouts in 2008. 

Something changed here, and that is that Germany - which has been the major financier of the bailouts -  has an election in September. The citizens are worried that their country’s debt to GDP is staying high at 80%, and that they are picking up the tab for everyone else.

That is one thing; the other is that the never-ending bailouts are starting to get northern Europe in a tangle as country after country in the south has a problem but does not want to fix it.

Italy had an election and those newly elected do not want to fix state overspending; neither actually did the Greeks. The Spanish are also feeling pain, but much is done to avert future social spending cuts which are still needed.

So enter Cyprus: a small EU member which allowed its banking system to rise and rise until it was out of all proportion to its economic size.

It paid 4% plus interest while European Central Bank rates are under 1%, and savers in Germany only get 0.75% a year.

Germany started taxing social pensions to help pay for all the problems, and people with savings in the bank also get hammered as interest rates are very low.

The Finns and the Dutch have also been complaining in recent years about their payments to others, and with the Russians not part of the EU and some making use of guarantees in EU banking systems while evading taxes back home, Cyprus was never going to be such an important country for the EU to bail out.

Britain is not part of the eurozone but is seen by richer members as shouting solutions while not helping to pay for them.

The English are subscribers to the EU with a discounted subscription and many solutions northern Europeans have to pay for via taxes.

They are very, very unpopular at present and you can bet your bottom dollar that the most sane English advice is at least ignored in public.

So when Barclays shouted “fire” about Cyprus, that made the situation worse politically for Angela Merkel.

Yes, the wrong medicine was prescribed - “you get a third of the money from your depositors and we will present the rest”. Savers get hammered, even if Russian, and that makes other weak countries' savers very nervous.

Already, I suppose many in Italy are putting their money in German banks because they now fear a “Cyprus” in their own country. This policy was a mistake.

The problem is that the banking system in Cyprus could now be allowed to collapse, as parliament decided that this savers' tax option was not on. This too would make the rest of southern Europe nervous.

The banks are intertwined and I suspect that this may be a small problem that turns big, like Iceland, the Lehman Brothers, etc. Each of the banks allowed to fail would have assets in other banks, and so the situation would broaden.

But that would still be a small problem  the real issue however is the idea that a country goes back to the Middle Ages, as no money in the banks would result in a cash and barter economy and having all savings tied up for decades would also hurt.

Imagine you are have saving in Italy or Spain or worse, in Greece where banks are dicey and confidence is just coming back. The confidence in southern Europe could go up in smoke again - big time - with knock-on effects into the Middle East, Russia and other weaker European states.

Again, some world growth could get taken away.

The EU has drawn a line in the sand and said to governments and banks"'we will let you fail or make you pay a price".

This actually should have been worked out before the eurozone was established so everyone knew what the rules were, but it is human to make rules up in a crisis.

My feeling is that this was not the time for it, as the world economy was just getting back to slightly faster expansion and better prospects.

If commodity prices fall again as a result of weaker growth if confidence slips again, then I am afraid South Africa’s current account will again get exposed. The rand may dip yet again and inflation will go another few basis points higher, exposing our already extremely low rates. 

Raising rates is something the South African Reserve Bank would be loath to do, but it creeps in and confidence and growth decline here again.

With ongoing wildcat strikes in the Post Office and parts of agriculture, the economy may also stall just as the first signs of higher growth showed up on the BankservAfrica Economic Transaction Index.

How ironic that another small situation is allowed to get big. Policy makers are looking at too many interest groups to make the right decisions.

Is this 2008 all over again? No, please no.

Britain awaits tough new budget

Britain's government was on Wednesday set to unveil plans to grow the country's recession-threatened economy, despite insisting on greater state savings as it struggles to meet its deficit-reduction target.

Finance minister George Osborne unveils his latest tax and spending plans in an annual budget likely to stick firmly to the coalition government's austerity drive, even though the country's economy is sailing close to another recession.

Chancellor of the Exchequer Osborne, whose Conservative party heads a coalition government with the Liberal Democrats, will present his 2013-14 budget to parliament at 12:30 GMT on Wednesday.

Analysts expect Osborne to stick to his so-called Plan A of driving down the record budget deficit inherited from the previous Labour administration in 2010 - despite calls from both inside and outside the government to curb massive spending cuts.

On the eve of the budget announcement, Prime Minister David Cameron's Downing Street office said some government departments would be made to cut their budgets to save €2.5bn over the next two years.

The money saved would be used to on infrastructure spending, a spokesperson said.

"All unprotected departmental resource budgets will be reduced by a further 1.0% a year for the next two years," the spokesman told reporters.

"That will help fund further investment in capital spending which will be announced" in the budget.

He added that spending on health, schools and overseas development aid would be protected, while defence would benefit over the next two years from €1.6bn in underspend in its previous budget allocation.

UniCredit Research economist Mauro Giorgio Marrano said that "any new measures implying an increase in expenditure... will need to be funded by spending cuts and/or higher taxes in other areas, leaving little scope for a significant stimulus to the economy."

Cameron earlier this month insisted that his government, which passed the mid-term mark in January, would stick to the path of austerity despite a turbulent few weeks that saw Britain stripped of its top-level AAA credit rating.

But Business Secretary Vince Cable has called on the government to consider borrowing more to stimulate economic growth.

Cable, a leading Liberal Democrat, said that the danger of slow growth may now be more damaging than the loss of confidence through increased borrowing.

Also on Wednesday, Osborne was expected to revise the government's growth and budget-deficit forecasts to better illustrate Britain's present economic woes.

Markets were also waiting to see whether Osborne uses the budget to announce changes to the Bank of England's inflation target to boost an economy at risk of its third recession since the start of the global financial crisis five years ago.

The chancellor traditionally uses the budget to state the central bank's policy mandate, which for many years has been to meet an inflation target of 2.0%.

Incoming Bank of England governor Mark Carney, the Canadian central bank chief who takes up his role in July, has suggested that economic output might be a better target measure than inflation.

The BoE uses interest rates as a tool to try and keep inflation close to the government-set target, but in recent years it has spiked above 5.0%, hampering economic recovery.

British 12-month inflation rose to 2.8% in February from 2.7% in January, official data showed on Tuesday.

NEWS,19.03.2013

Cyprus deal on brink of collapse

Cyprus on Tuesday dropped a controversial levy on bank savings below €20 000, sparking a warning by the central bank governor that the crucial eurozone bailout deal was now in danger of collapse. Panicos Demetriades's warning came as International Monetary Fund chief Christine Lagarde urged Cyprus to meet its commitments under the €10bn ($13bn) deal sealed with eurozone partners at the weekend.The revised plan, drafted in response to an angry backlash at home and jitters that roiled global markets, sees a one-time levy being dropped on bank savings below €20 000 but retained at 6.75% on deposits of €20 000 to €100 000 and at 9.9% for amounts above €100 000.Given the amendments to the bill, the tax which was originally to have applied to all bank deposits "will not yield the estimated €5.8bn agreed by the Eurogroup", Demetriades told parliament's finance committee."If we secure €5.5bn it will be considered in breach of the agreement and perhaps will not be accepted," he said, as cited by the Cyprus News Agency.The bill was to be voted on later on Tuesday by parliament, whose stamp of approval is crucial for the bailout deal to go ahead.President Nicos Anastasiades has called on all parties to back the bailout, warning that the island faces bankruptcy if it is rejected.Fearing a run on accounts, Cyprus has shut its banks until at least Thursday, with the local stock exchange closed for the same period.The planned levy on bank savings was agreed during the negotiations for the sovereign bailout deal for Cyprus.Under the original accord, Cyprus agreed to impose a levy of 6.75% on bank accounts up to €100 000 and 9.9% for larger deposits. The move was aimed at raising €5.8bn for the government.But faced with a public backlash that spooked global markets, eurozone finance ministers told Cyprus on Monday to take another look at the proposal.Eurogroup President Jeroen Dijsselbloem of The Netherlands said ministers "continue to be of the view that small depositors should be treated differently from large depositors".The Eurozone finance ministers said there would be re-negotiations to "introduce more progressivity in the one-off levy", in other words increasing the tax rate on bigger holdings to ensure the same €5.8bn return.However, the Cypriot authorities, wary of seeing a flight of capital from the debt-hit Mediterranean island, opted to leave the maximum tax at 9.9%, according to an amended tax bill seen by AFP. Lagarde, speaking in Frankfurt before the revised bill was made public, said the IMF was "extremely supportive of the Cypriot authorities' intentions to introduce more progressive rates" on taxing bank deposits.She said it was now up to Cyprus to make good its commitments."It's time to deliver," Lagarde told a financial congress.Adding to the pressure on the newly-elected Cyprus leaders, a German government spokesperson said on Tuesday that chancellor Angela Merkel had called Anastasiades to stress that his country should hold talks only with international creditors on its bailout deal."The chancellor once again emphasised that the negotiations are to be conducted only with the troika," the spokesperson told AFP, referring to the term used for the European Union, the European Central Bank and the International Monetary Fund.The comment was made as the Cypriot Finance Minister Michalis Sarris headed to Moscow after an explosion of anger in Russia at the EU bailout deal for the island that could see Russian investors lose billions of euros.Moscow, which has an outstanding €2.5bn loan to Cyprus and billions more in deposits in the island's banks, reacted angrily to the EU levy.Russian President Vladimir Putin slammed the "dangerous" move and turmoil hit stock and currency trades on Monday amid concerns that a precedent had been set for bigger debt-saddled eurozone economies such as Italy and Spain.Estimates vary but the Moody's rating firm estimates that Russian companies and banks keep up to $31bn in Cyprus, which accounts for between a third and half of all Cypriot deposits.After markets suffered losses on Monday, Asian bourses rebounded on Tuesday as news spread that Cyprus was reworking the controversial savings levy.Tokyo stocks led the way, closing 2.03% higher. However, Hong Kong suffered a late sell-off to end 0.19% lower.The euro also rebounded in Asia, fetching $1 2961, up from $1 2957 in New York on Monday.

Cyprus scraps tax on smaller deposits

Cyprus's revised draft bill for a levy on bank deposits scraps the measure for savings under €20 000 but does not compensate for the resulting lost revenue by raising it for the wealthy.The draft, did not say if the new structure for the levy raises the required €5.8bn European officials have demanded in return for €10bn in aid. The bill sets a zero percent levy on deposits of up to €20 000, a 6.75% rate for amounts between €20 000 and €100 000 and maintains a 9.9% tax on all deposits above that level. Under a previous agreement struck by euro group finance ministers on Saturday, all deposits below €100 000 would have been taxed at 6.75% and everything above at 9.9%. After an outcry in Cyprus and abroad against the move, eurozone finance ministers urged Cyprus on Monday to scrap the levy below €100 000 to spare small savers, and raise it instead for richer bank clients, to 15.6%. But Nicosia was reluctant to agree to such a move because it fears it would scare away foreign depositors, mainly from Russia, and undermine the country's banking-based business model.

Cyprus 'unlikely' to pass bank tax law

Cyprus's parliament is unlikely to pass legislation taxing deposits which has prompted turmoil in its banking system, falling short on a condition for an international bailout, government spokesperson Christos Stylianides said on Tuesday.Cypriot President Nicos Anastasiades briefed German Chancellor Angela Merkel and EU economics affairs commissioner Olli Rehn on Monday evening.While Anastasiades said he was ready to stand by what was agreed at a euro zone finance ministers' meeting last week, he "insisted that EU partners offer some additional help," Stylianides told state radio.Parliament was due to convene at 16:00 GMT. No single party has a majority in the 56-member chamber.Stylianides said Anastasiades was also likely to talk to Russian President Vladimir Putin during the day. A decision to tax bank deposits has far-reaching consequences not just for locals but for thousands of Europeans and Russians with business interests on the island.

India's central bank cuts interest rate

India's central bank cut its main interest rate by 25 basis points on Tuesday  its second such reduction this year in an effort to jumpstart the slowing economy.After meeting in the financial capital Mumbai, the Reserve Bank of India (RBI) said that the benchmark repo rate, at which it lends to commercial banks, would fall to 7.50%, as predicted by most economists. The cash reserve ratio - the percentage of deposits banks must keep with the central bank has been kept unchanged. The RBI's rate-cut decision was widely expected by economists and business leaders, who have been calling for lower borrowing costs to help the economy, which grew at just 4.5% in the quarter to December.Despite ongoing concerns about inflation, the RBI's latest cut comes after measures from India's finance minister P. Chidambaram in his budget last month.He pledged to cut a gaping fiscal deficit in a bid to avert a damaging credit ratings downgrade and help revive sustained growth, and this week he said the bank should "take comfort" from the government's efforts.

European gangs find new ways to earn

Europe's economic crisis has made underworld criminal gangs move into new kinds of illegal activities ranging from the counterfeiting of food and medicine to illicit waste trafficking and fraud in the energy markets, Europol said on Tuesday. Economic crimes including fraud and corruption cost European governments, companies, and individuals billions of euros in lost taxes and revenues a year and hamper the region's economic recovery, the European crime-fighting agency said in a new report on serious and organised crime. An estimated 3 600 organised crime groups are active in the European Union (EU), it said, operating mainly in traditional areas such as international drug trafficking, cybercrime, human trafficking and money laundering. "Many organised crime groups are flexible in their illicit business activities and capable of quickly identifying new opportunities that have arisen during the current economic crisis," Europol said." In response to reduced consumer spending power, counterfeiters have expanded their product ranges. In addition to the traditional counterfeit luxury products, organised crime groups now also counterfeit daily consumer goods such as detergents, food stuffs, cosmetic products and pharmaceuticals. "Europol said law enforcement sources and energy regulators in the EU have warned of an emerging threat of fraud related to the electricity and gas markets. Organised crime groups such as the mafia, or cosa nostra, are already involved in alternative energy, such as wind and solar, as well as waste management businesses as a way of laundering profits, Europol said. "Businesses trading on energy exchanges and transmission system operators are noticing increasing interest from companies with little experience in these markets, but eager to enter them as wholesale traders," it said in the report. "This mirrors developments observed during the emergence of... frauds with carbon credits, in which fraudsters managed to defraud large amounts of VAT and to almost monopolise carbon trading with 90% of the trading in CO2 credits driven by fraud," it said without giving further details.

Drug trade is Europe's biggest problem

An estimated 3 600 organised crime gangs are active in Europe, the continent's policing agency revealed on Tuesday, mainly trading in illegal drugs including supplying some 124 tons of cocaine annually. "International drug trafficking remains the most active organised crime activity," Europol said in a statement as it released its "Serious and Organised Crime Threat Assessment" report from its headquarters in The Hague.Around 30%, or 1 080, of criminal groups were involved in drug trafficking to the continent, but other crimes linked to the ongoing economic crisis and the Internet were also on the rise, Europol said. Cannabis was the most popular drug in Europe with 23 million users smoking an estimated 1 300 tons of cannabis resin and 1 200 tons of herbal cannabis every year.Cocaine remained second-most popular, with an estimated 4 million users consuming 124 tons of powder every year, Europol said. The 46-page report which Europol said was its most detailed study ever into organised crime - warned of a new breed of criminal gang on the rise, spurred on by the eurozone crisis and online activity."These groups are no longer defined by their nationality or specialisation in one area of crime but by an ability to operate on an international basis, with a business-like focus on maximising profit and minimising risk," Europol's chief Rob Wainwright said."They are the epitome of our new globalised society," he said. The economic crisis has seen gangs shifting their activities from counterfeiting luxury items to daily consumer goods including food, detergents, cosmetics and pharmaceuticals. It has also given rise to increased human trafficking as "growing demand for cheap products and services stimulates the expansion of a shadow economy in which migrant labour is exploited". Wainwright warned that cost-cutting as a result of the cash crunch, especially when it came to law enforcement, will allow organised crime groups to operate more easily and remain undetected for longer. Europol's latest report will be sent to its 27-member states to help it define crime-fighting priorities in the coming four years, the organisation said.