NEWS,20.06.2012

Greek coalition takes power

A conservative-led government took power in Greece today promising to negotiate softer terms on its harsh international bailout, help the people regain their dignity and steer the country through its biggest crisis for four decades.The swearing-in of Antonis Samaras as prime minister after elections last Sunday ended weeks of uncertainty that rattled financial markets and threatened to push near-bankrupt Greece out of the euro zone.Samaras, a Harvard-educated economist from a prominent Greek family, will head an alliance of his New Democracy party and Socialist PASOK rivals - the same discredited establishment parties which have dominated politics since 1974."I am fully aware how critical this time is for our nation," Samaras said after he was sworn in at a ceremony conducted by robed Orthodox priests at the presidential mansion."I know very well that Greek people are hurt and need to regain their dignity. I know that the economy must quickly recover to re-establish social justice and cohesion."The coalition parties are in a race to overcome public disgust with their records, face down an emboldened leftist opposition that narrowly failed to win the election, and persuade reluctant euro zone partners to ease the terms of a bailout that has caused deep economic suffering.The cabinet has yet to be named, although a technocrat banker is expected to become finance minister.Party leaders said a team would be formed to renegotiate the terms of the hated 130 billion euro rescue plan with the European Union and IMF, setting up a showdown with the lenders led by paymaster Germany who say they will adjust but not re-write the document.New Democracy and PASOK have little history of cooperation, having alternated in office from the fall of military rule in 1974 until last year, when the economic crisis forced them to share power in a short-lived national unity government.Their coalition will be the first in Greece in decades with an unrestricted mandate - last year's unity government and a coalition that took power in 1989 both had limited powers.The alliance will also be backed by the small Democratic Left party, whose leader Fotis Kouvelis called on the government "to gradually disengage from the terms of the bailout that has bled society".An official from one of the three parties in the coalition said that they had agreed to name National Bank Chairman Vassilis Rapanos as finance minister.Rapanos is an economics professor who worked closely on reforming the economy with a previous Socialist government.Other ministers were expected to be named later.Humiliated People Greece's crisis has left its people not only poorer but feeling humiliated.As the political leaders wrapped up talks on a government, hundreds of Greeks - many until recently members of the prosperous middle classes - gathered under the scorching sun in a big park in Athens for free vegetables offered by a farmers' association from the island of Crete."Not even in my worst nightmares could I imagine that I would end up like this - waiting in line for food," said Eleni Moshidou, 56, a mother of three unemployed sons who was fired from a law firm when the crisis broke out in 2010."I feel humiliated. Our politicians brought us here."Just over a month after an inconclusive election raised fears that Greek would have to leave the euro zone, New Democracy narrowly beat the radical leftist Syriza bloc that wants to scrap the bailout deal which most Greeks blame for worsening a recession which is in its fifth year.Syriza promised yesterday to be a "combative" opposition force that fights on behalf of Greeks struggling through wage cuts and spending cuts that have sent unemployment to record highs.But the new government's first battle is likely to be with foreign lenders as it tries to convince them to sign off on the next instalment of aid and allow more leeway on the austerity pledges.PASOK leader Evangelos Venizelos warned of a "big battle" in Brussels to craft a new bailout deal that would promote growth and contain unemployment."The most critical issue is the formation of the national negotiation team and ensuring that it is successful," he told reporters.Both PASOK and Democratic Left have refused to place senior politicians in the cabinet and could nominate technocrats instead, a move which potentially weakens their commitment to the new government."This government will have a very short life-span. It will disappoint expectations and its support will erode quickly," said independent political analyst John Loulis."It will be a government entirely run by New Democracy; its two smaller partners have already weaseled their way out of it".

Climate law could raise gas prices, lobbyists say

California regulations designed to fight global warming could force half of the state's refineries to close, trigger fuel shortages and add $2.70 per gallon to the cost of gasoline, according to a study released Tuesday by an oil industry lobbying group. The study, issued by the Western States Petroleum Association, argues that California's upcoming cap-and-trade system to cut carbon dioxide emissions could wreak havoc with fuel supplies as early as 2015. So could the state's low carbon fuel standard, a policy requiring refiners to lower the carbon intensity of the fuel they sell in California.Oil companies have a history of resisting California's climate change rules. But Catherine Reheis-Boyd, president of the petroleum association, said Tuesday that her group isn't trying to overturn the state's global warming law, known as AB32. Instead, the association wants to change how the state implements the law. If gasoline prices jump due to the fuel standard and cap and trade, she warned, Californians would probably demand that the entire law be scrapped."People could revolt, and if that happens, that's the end of it," Reheis-Boyd said. "If this goes the way we think it will, you won't have a program in 2015."2006 legislationPassed in 2006, AB32 requires California to bring its greenhouse gas emissions back to 1990 levels by 2020. Both the low carbon fuel standard and the cap-and-trade program, which starts this fall, were created to implement that law. Several oil companies that belong to the petroleum association tried to block AB32 in 2010 with a statewide ballot measure, but voters rejected it.Some environmentalists called Tuesday's report a scare tactic aimed at California legislators who are nervous about the state's fragile economy. The state has already endured two gas price spikes this year, with the statewide average for a gallon of regular finally falling below $4 last weekend for the first time since February."One thing I don't understand is, the electric utilities have stepped up, with renewable power and energy efficiency, the car companies have stepped up, with increased fuel efficiency - the oil companies seem to be the only ones who have no way to comply with AB32," said Adrienne Alvord, the California and western states director for the Union of Concerned Scientists. Complex, unpleasantTuesday's report was researched and written by the Boston Consulting Group and focuses on how California's 14 refineries will respond to both the fuel standard and cap and trade. The scenario is both complex and unpleasant.To comply with the low carbon fuel standard, refiners will need to blend more ethanol into their gasoline. But not just any ethanol will do.The process used by most American ethanol producers - distilling fuel from corn - releases too many greenhouse gases, according to California air pollution regulators. So the refiners would need to buy cellulosic ethanol, which is made from woody plants and has a smaller greenhouse gas footprint.Unfortunately, cellulosic ethanol has not yet been mass-produced. So the refineries would most likely buy Brazilian ethanol, made from sugar cane, and ship it here. Even with transportation factored in, Brazilian ethanol has a smaller greenhouse gas footprint than American corn ethanol, according to California's standards.Importing Brazilian ethanol would cost the California refineries money. In order to make a profit, they would most likely start shipping larger amounts of their gasoline to customers in other states or countries, where they wouldn't have to comply with the low carbon fuel standard. That would raise gas prices here.At the same time, the refineries would face an added expense due to the cap-and-trade system. The system will set an overall limit on the carbon dioxide emissions and create a market in which companies buy and sell the right to produce set amounts of greenhouse gases. That could cost refineries dearly, especially if carbon prices in the new market rise much higher than the state expects.Refineries threatenedAs a result, as many as seven California refineries would no longer be profitable, said Brad VanTassel, senior partner of the Boston Consulting Group.Should they close, the state could lose between 28,000 and 51,000 jobs, with the losses occurring not just at the refineries but at businesses frequented by refinery workers. California also could lose $3.1 billion to $3.4 billion in tax revenue. "Even if you lose just 30,000 jobs, that's a big deal to a state that's got 11 percent unemployment," VanTassel said.California has lost oil refineries before. In 1996, the state ordered oil companies to change the formula of fuel sold here in an effort to cut air pollution. It worked, but some refineries closed rather than pay for the necessary upgrades. At the same time, oil companies had been closing smaller California refineries to reduce the state's oversupply of gasoline and boost profits at remaining refineries.

NEWS,19.06.2012

Growth the watchword at G20 summit

 

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

 

Greek leaders poised for coalition deal

 

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

NEWS,18.06.2012

Greek leaders seek coalition, want to ease bailout

Greece's conservative leader has pushed for a new coalition government after a narrow election victory, pledging to soften the debt-laden country's punishing austerity programe despite opposition from Germany.A brief relief rally on international financial markets after Sunday's Greek vote quickly fizzled out as it became clear that Antonis Samaras's New Democracy had failed to win a convincing popular mandate to implement the deep spending cuts and tax increases demanded by the European Union and the IMF.Radical left-wing bloc SYRIZA and a host of smaller parties opposed to the punishing conditions attached to the $206 billion bailout won around half the votes cast, though fewer seats because the electoral system rewards the first placed party disproportionately.Samaras received a mandate to form a coalition government from the president today, but talks looked set to run into at least tomorrow. He said the country would meet its commitments under a bailout saving the country from bankruptcy and a dramatic exit from the euro zone.But Samaras added: "We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships."Samaras met with SYRIZA's charismatic leader Alexis Tsipras, who ruled out joining the government, and with the third-placed PASOK Socialists, who did not commit. PASOK leader Evangelos Venizelos said negotiations "must be wrapped up" on Tuesday.The small Democratic Left party indicated it would be ready to support Samaras if the bailout deal could be softened.Greece's economy is forecast to contract 5% this year after shrinking 7% last year. Protests regularly choke the centre of Athens, some hospitals are running short of medicines, thousands of businesses have closed and beggars and rough sleepers are multiplying.During the election campaign, Samaras called for cuts in taxes, hikes in unemployment benefits, pension rises and two more years to meet fiscal targets.But Germany, already irritated at what it sees as the slow pace of Greek reform, ruled out more than minor delays to some targets in the rescue package - Greece's second since 2010.Chancellor Angela Merkel, speaking at a meeting of G20 leaders in Mexico, said any loosening of Greece's agreed reform pledges would be unacceptable and reiterated that Athens had to stick to the commitments it had already made.Germany says deal "not negotiable" Samaras voted in 2010 against the first $174 billion rescue because he thought it was too harsh. He now said Greece should have until 2016, not 2014, to meet fiscal targets set by under the bailout. Venizelos wants a further year to reform.German Foreign Minister Guido Westerwelle said the substance of the bailout agreement was "not negotiable", but he said creditors might be willing to offer some flexibility on timing for some of the targets, given the time lost in campaigning."We're ready to talk about the time frame as we can't ignore the lost weeks, and we don't want people to suffer because of that," he told German radio today.There was frustration in Berlin that Samaras had campaigned on a promise to renegotiate the bailout, given the scale of resistance among those stumping up the cash.European Central Bank Executive Board member Joerg Asmussen warned that extending the 2014 deadline for Greece to cut its budget deficit to below three percent of GDP would mean fresh money for Athens."I can only generally point out that if one is pressing to shift fiscal targets, one should be so honest to also say that as long as a country is running a primary deficit, extending the fiscal targets will automatically mean that there will be an additional external financing need," Asmussen said.With an emboldened SYRIZA bloc led by former communist student leader Tsipras at the head of a powerful opposition, the new government could face protests soon after taking office. SYRIZA almost doubled its share of the vote since a previous election on May 6, which produced stalemate.

US and EU haggle over trade barriers

The United States and the European Union, stung by past failures to liberalize trade, are struggling over how to tackle regulatory barriers in areas ranging from financial services to chemicals that pose the biggest obstacle to a transatlantic free trade pact.A joint US-EU working group is due to deliver interim recommendations this month on how to leverage one of the world's largest trade relationships to create more jobs on both sides of the Atlantic and bolster economic growth.Businesses both in the United States and Europe want Washington and Brussels to strike a deal that removes trade hurdles by requiring both to accept each other's consumer- and environmental-protection standards.They envision an agreement in which a car tested for safety in the United States would not have to be tested again in Europe, or a drug deemed safe by Brussels would not have to be approved by US government experts.There's a good chance the upcoming report from the team led by US Trade Representative Ron Kirk and European Union Trade Commissioner Karel De Gucht will be no more than a "stock-taking" of the talks so far, with the real meat of the recommendations in a final report near the end of the year.Peter Rashish, vice president for Europe and Eurasia at the US Chamber of Commerce, said he hopes for a forward-leaning document that sets the stage for ambitious talks that would begin when the final report is put out."We need a strong statement that a US-EU trade deal would be a big boost to jobs and growth, given the challenges both the US and the EU economy face right now," Rashish said.The United States and the EU have proven records of sealing bilateral free trade agreements, including deals each has struck with South Korea that some have suggested be used a template for a transatlantic pact.Also, tariffs on manufactured goods traded between the two economic blocs are generally low, and there are few sectors where dismantling the remaining tariffs would create political opposition to a pact. That has raised hopes a deal to eliminate the remaining duties could be struck quickly once talks begin.Drag on for years Even so, US and EU officials worry about launching negotiations that could drag on for years without success, such as the Doha round of world trade talks, which started in 2001 and never reached an agreement.A joint effort late in the administration of former President George W. Bush to eliminate European barriers to US poultry exports flopped so badly that the United States in frustration filed a case against the EU at the World Trade Organization."What you've got is a deep-seated suspicion on each side that the other side can't deliver," said Bill Reinsch, president of the National Foreign Trade Council, which represents major US exporters like Boeing, Caterpillar and Microsoft.Reinsch noted that the United States has disappointed the EU in recent talks on allowing foreign firms to bid on more US state and local government contracts."So there's this extensive poking around to figure what can be delivered," Reinsch said.Recent consultations have driven home how difficult it could be to address regulatory differences that impede trade in areas from food to chemicals to financial services, although both sides see a potentially big payoff from achieving that."What is really bothering companies on both sides of the Atlantic right now is not so much tariffs, but the duplication of regulatory requirements," a European official said.Those are harder to tackle because they involve regulators such as the US Food and Drug Administration, the European Medicines Agency and the European Food Safety Authority that are outside the purview of typical trade agreements."I think the regulatory piece is certainly the most challenging and I think we have to agree on what success would look like on regulatory matters" within the 18 to 24 months both sides hope it will take to reach a deal, Rashish said.That would probably require a recognition that some issues will still need further work after an initial free trade agreement is signed, he said.The US Chamber of Commerce has proposed starting with areas, such as autos, chemicals and pharmaceuticals, where the two sides have comparable, high-level standards to protect consumers and the environment but different specific requirements for The idea would be that after determining that US and EU regulatory regimes produce similar levels of protection, agreements would be reached to recognize each other's requirements in those areas as essentially equivalent, thereby removing them as barriers to trade, and setting a foundation for moving into additional areas, Rashish said.

NEWS,17.06.2012

Greeks vote in election that could decide euro's fate

Greeks have gone to the polls in an election that could decide whether their heavily indebted country remains in the euro zone or heads for the exit, potentially unleashing shocks that could break up the single currency.In an election fought over the punishing austerity package demanded by international lenders as the price of keeping Greece from bankruptcy, opinion polls showed the radical leftist SYRIZA party, which wants to scrap the deal, running neck and neck with the conservative New Democracy, which broadly backs it.The European Union and International Monetary Fund have insisted that the conditions of the 130 billion bailout accord agreed in March must be accepted fully by a new government or funds will be cut off, driving Greece into bankruptcy.All parties say they will keep Greece in the single currency, but SYRIZA leader Alexis Tsipras believes the agreement can be renegotiated without Greece having to leave, betting that European leaders cannot afford the turmoil that would be unleashed by cutting a member of the euro zone loose.On the right, establishment heir and New Democracy leader Antonis Samaras says rejection of the EU/IMF bailout would mean a return to the drachma and even greater calamity, although he, too, wants to renegotiate some aspects of the package.Opinion polls show Greeks, weary after five years of deep recession, overwhelmingly favour remaining in the euro, but there is bitter anger over repeated rounds of tax hikes, slashed spending and sharp cuts in wages.Many voters are also furious with New Democracy and the other traditional ruling party, the now severely weakened PASOK, blaming them for decades of corruption, waste and inefficiency."It's the first time I feel depressed after voting, knowing that I voted again for those who created the problem, but we don't have another choice," said 66-year-old English teacher Koula Louizopoulou."I voted for the bailout because these are the terms that will keep us in Europe," she said.A win for Greece's national soccer team in a game on Saturday at the Euro 2012 championships provided some lift for voters but there was little sign of enthusiasm at the polling booths, which close at 7pm. Exit polls will follow soon after voting ends.'Staring into the abyss' "It's obvious the country is now staring into the abyss," leading Greek daily Kathimerini said in a front-page editorial on Sunday, calling for the creation of a New Democracy-led "unity" coalition to keep the country in the euro.The party gaining the most votes wins an automatic 50-seat advantage but neither New Democracy or SYRIZA is expected to win an outright majority and whoever emerges as top party will have to hold coalition negotiations with smaller groups.European leaders weighed in on the eve of the vote - a re-run of an earlier election on May 6 that produced no clear winner - some of them openly urging Greeks to reject SYRIZA or risk undermining the very foundations of the single currency.But whoever wins power may find their tenure is short-lived and, despite the insistence of EU politicians, some adjustment of the bailout terms may be inevitable if Greece is to cut a public debt amounting to 165 percent of gross domestic product."It is a scenario I see as likely and if that is the condition presented for Greece to stay and then move on, I would say it is probably something that should be attempted," Angel Gurria, head of the Organization for Economic Cooperation and Development.Central banks from Tokyo to London are readying arsenals to defend banks and national currencies against any post-election turmoil. The result will dominate a meeting of the Group of 20 world economic powers on Monday and Tuesday in Mexico.Finance officials in the euro zone have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario.Euro zone officials have hinted they might give a new Greek government someleeway on how it reaches debt targets set by the EU/IMF bailout package, but there would be no change to the targets themselves.Euro zone paymaster Germany warned Greeks on Saturday the bailout would not be renegotiated."That's why it's so important that the Greek elections preferably lead to a result in which those that will form a future government say: 'Yes, we will stick to the agreements'," Chancellor Angela Merkel told a party conference of her Christian Democrats.A Greek exit from the single currency would heap further pressure on two far larger European economies - Spain has already received up to 100 billion euros to save debt-riddled banks and Italy could be next to seek a bailout.German warning Anger with the establishment parties New Democracy and PASOK propelled SYRIZA and its youthful leader, a former Communist student protest organiser, from the obscure radical fringe to a shock second place on May 6.The far-right Golden Dawn party also won seats in the first election, underscoring the fragmentation of a stressed society wrestling with unemployment of almost 23 percent and plummeting living standards.Five years of recession and more than two years of acute crisis have started to fray the edges of Greek society, undergoing its severest test since the overthrow of the military dictatorship in 1974.The streets of central Athens are scarred by repeated waves of protests, some hospitals are short of vital medicines and reports of suicides caused by the crisis have become routine.Five opinion polls published before a blackout two weeks ago put New Democracy narrowly ahead. Two other polls had SYRIZA leading.But analysts say Samaras, 61, will find it hard to govern for long with an empowered SYRIZA protesting at the gates. Tsipras, if he wins, will inherit a country on the verge of bankruptcy.He has ruled out a government of national unity and promised to nationalise banks and halt privatisations.Some global businesses and banks are already in retreat.Europe's biggest retailer Carrefour said on Friday it was selling up in Greece, a day after French bank Credit Agricole moved to take direct control of its Albanian, Bulgarian and Romanian units from its Greek bank Emporiki.

NEWS,16.06.2012

Greece election 'euro versus drachma'

 

Conservative leader Antonis Samaras has told Greeks they face a stark choice between staying in the euro or a "nightmare" return to the drachma in an election that threatens to send shockwaves through the single currency.Samaras's New Democracy party is neck and neck with the radical leftist SYRIZA going into Sunday's pivotal vote, with SYRIZA leader Alexis Tsipras threatening to tear up the punishing terms of the 130 billion euro bailout that is keeping Greece from bankruptcy.Addressing supporters at his final campaign rally, Samaras pledged again to renegotiate the bailout's punishing terms in order to promote growth and jobs, but said that to go head to head with the country's European partners would mean the end of Greece's euro membership."We are going into an election to decide the future of Greece and of our children," Samaras, 61, told the crowd of several thousand waving Greek and EU flags in the capital's central Syntagma square."The first choice the Greek people must make is: euro versus drachma.""There are some outside Greece who want the country to be the black sheep and push it out of the euro. We will not please them," Samaras said, in a speech laced with the anti-immigrant rhetoric on the rise in Greece as the economy flounders.Neither party is expected to win outright, and negotiations will follow to create a pro- or anti-bailout coalition government.Nightmare Euro zone officials have hinted they might give a new Greek government some leeway on how it reaches debt targets set by the EU/IMF bailout package, but there would be no change to the targets themselves.Greece's lenders say they will turn off the taps if the country rejects the bailout. Tsipras says Europe is bluffing - it cannot afford to cut Greece loose and risk the contagion for the much larger economies of Spain and Italy, he argues.Greeks say overwhelmingly that they do not want to leave the euro, but neither do they want the pension, job and wage cuts arising from the bailout which have helped condemn the country to five years of record-breaking recession."I'm optimistic because I hope people will think as Greeks when they vote and not give in to anger," 61-year-old pensioner Anthi Zoitou said during Friday's rally."I voted for another party ... in the previous election," said 32-year-old economist Antonis Kargas, "but will vote for New Democracy now. The dilemma facing Greece is whether it holds onto its European prospects."Sunday's vote is a re-run of a May 6 election that produced stalemate.Tsipras has rejected forming a government of national unity, but Samaras said the country could not afford a third election."We cannot withstand it," he said. "We are in favour of renegotiating (the bailout) for jobs and to remain in the euro; this is what the Greek people want.""Should young people have opportunities to work or will we allow today's incredible unemployment to become a nightmare?"

Investors seek shelter before Greek vote

Traders and investors are taking all bets off the table before this weekend’s Greek elections, which may decide whether Athens stays in the eurozone. Greece votes on Sunday in a second attempt to choose a government that will decide whether to back the terms of its international bailout. G20 officials say central banks are ready to act to calm markets if needed. But investors are not taking any chances. “People are just totally hands off, they don’t want to know. Why would anyone want to deal this side of the weekend?” said Steve Larkins, head of sales trading at Seymour Pierce. “With the Greek elections coming up, Monday morning could be a disaster for someone taking a big bet over the weekend.” Hedge funds, typically among the most aggressive market players, are also wary, taking on only 10%-30% of their maximum permitted bets on risky assets, said Gerry Fowler, global head of equity and derivative strategy at BNP Paribas. “There are so many risks that just can’t be modelled... it really creates a market where no one can do anything with conviction and it’s a matter of wait and see,” he said. Global fund managers’ cash balances have jumped to 5.3% this month, their third-highest level on record, according to a Bank of America Merrill Lynch survey. Equities investors have been reluctant to roll over, or replace, options contracts which expire on Friday, as they opt for neutral positions. Some 1.4 million futures contracts on Euro STOXX 50 index of eurozone blue chips are yet to be rolled over, according to Eurex data. Shake out The shaking out of positions has led to high volumes. Monday was the Euro STOXX 50 index’s most active day of 2012 and this has been one of the year’s most active weeks. In currency markets, the euro has rallied versus the dollar  - arguably a counter-intuitive move given the eurozone crisis. Traders say the rebound has been driven by investors’ desire to unwind the large number of net short bets built up in the single currency. “As far as the euro/dollar is concerned, I am going square into the Greek elections. I have a feeling, either way, things will drag on for a while and that gives us enough reaction time,” Stuart Frost, head of Absolute Returns and Currency at fund manager RWC Partners. Position squaring was a factors behind a selloff this week in safe haven German government debt, which had been a favourite place for investors to sit out the crisis, even if that meant paying Berlin for the privilege. “Positioning is pretty square,” said one London-based bond trader. “People might still be a little bit long in longer-dated bonds but that’s probably because they haven’t been able to get out... A lot of bets have come off the table.” Another trader said the moves in the Bund futures signalled “that a lot of desks are either taking less risks themselves or have been told (to) stop taking risk until after the election”. Most sellers of insurance against a default on Greek government debt, known as credit default swaps (CDS), declined to quote before the weekend, dealers said. “I’d be surprised if anyone would want to dive in before the election with (Greek) bonds trading at 10 cents on the euro. "If we get some stability with the election then we’d expect trading to pick up again,” said one head of European credit trading at a major US bank. Ready for rollercoaster Investor nervousness is evident in the big gap between actual volatility on the Euro STOXX 50, which has fallen to two-month lows below 20, and the implied volatility as measured by the VSTOXX which has stayed stubbornly high around 32. “The spread between realised and implied volatility has gone up in a way that would explain the market is pricing in some Greek weekend risk,” said Abhinandan Deb, European head of equity derivatives research at Bank of America Merrill Lynch. Implied volatility reflects options pricing and is a measure of expected price swings. In the currency market, one-week implied volatilities have jumped to around 15.40%, the highest in six months and almost double the level of realised volatility. “Expect a rollercoaster in the markets,” said Stefan Angele, head of investment management, Swiss & Global Asset Management, although he advised keeping some positions, such as an "underweight" stance on the financial sector. With so much nervousness and so much money off the table, the markets could be poised for wild swings come Monday morning. “There is a gigantic number of shorts in euro/dollar so any headline that comes out over the weekend that indicates that Europe is safe will create the scope for a massive squeeze up on Monday,” said Jeremy Batstone-Carr, director of private client research investment strategy at Charles Stanley.

NEWS,15.06.2012.

Euro zone won't let Greece go easily - economist

 

If Greece leaves the euro zone it could send a signal to other struggling European economies they are better off leaving too economists says. As Greece heads to the polls this weekend, the world waits to see which way the population votes on austerity measures.But University economist Professor Christoph Schumacher says Greece is too big to fail.He that on top of the 1 trillion euros it will cost the region in the event of a Greek exit, it will send the wrong message to other struggling euro zone economies."Imagine Greece doing well leaving the euro zone - that would send the message to countries like Portugal, Spain, Italy that if we devalue our currency and boost our economy, I believe Greece might send the signal of the end of the euro," he said.Schumacher said he does not think the euro zone will allow Greece to leave easily.He said the people of Europe want to be united and will not let someone go just because they are struggling."But the solution with the austerity measures at the moment may not be the right way to go because it will not give Greece the chance to recover," Schumacher said.He has said so far austerity has not helped the Greek economy.According to Schumacher, in the past two years Greece's GDP has fallen by 20%, its unemployment has risen to 24%, and for people under 25 years old the unemployment rate is over 50%.And if it does leave, "the whole world will feel it", according to the economist."They already see the effects right The Official Cash Rate, said it is "monitoring Europe closely" and if things seriously deteriorated, would re-introduce liquidity facilities it made available during the global financial crisis.Schumacher said even if the socialist party wins the election, austerity measures will be challenged but they may not necessarily leave the euro zone.The mood in Greece Greeks are "pretty amped" about the election this weekend. The leaders of the pro and anti-austerity parties are holding rally."I guess it's really the last hurrah to fire up the base and get people to turn out,the event is a "bit of a black box" because no polling has been allowed days out from the election.

UK to flood banking system with 100b pounds

 

The UK government and central bank will flood Britain's banking system with more than 100 billion pounds ($155.43 billion), seeking to pump credit through an economy struggling to escape recession under the "black cloud" of the euro zone crisis.In his annual Mansion House policy speech to London financiers on Thursday, Bank of England Governor Mervyn King said Britain would launch a scheme to provide cheap long-term funding to banks to encourage them to lend to businesses and consumers.He also said the bank would activate an emergency liquidity tool.Treasury officials said the government plan could support an estimated 80 billion pounds in new loans, while the central bank's separate scheme will provide monthly 5 billion pound tranches of six-month liquidity to banks.King said the case for pumping more money into the economy via further purchases of government bonds had increased as the outlook for the economy had worsened, although he again rejected calls for the central bank to buy private assets.King said the euro zone's woes were leading to a crisis of confidence in Britain which was leading to a self-reinforcing weaker picture of growth."The black cloud has dampened animal spirits so that businesses and households are battening down the hatches to prepare for the storms ahead," he said.Britain's action comes just before cliffhanger Greek elections this weekend that could determine the fate of the euro zone, as well as a meeting of the leaders of the world's major economies next week to find ways to tackle the currency bloc's crisis and spur the global economy.British finance minister George Osborne warned of the huge dangers from a collapse of the euro area. He again urged euro zone leaders to fix the crisis and said Britain was taking action to protect its own economy."We are not powerless in the face of the euro zone debt storm," Osborne said in his speech at Mansion House. "Together we can deploy new firepower to defend our economy from the crisis on our doorstep."Britain is still reeling from the 2007-2009 financial crisis that has left many Britons poorer and forced the country to bail out big banks with tens of billions of pounds of taxpayers' money.The government on Thursday announced a sweeping reform of bank regulations aimed at making financial institutions safer, and avoiding a re-run of the crisis which has pushed Britain into recession twice in the last four years.Cash boost Britain slid back into recession around the turn of this year, piling pressure on Osborne's embattled Conservative-led coalition government to come up with new ways to boost growth.The government has pinned its fortunes on a tough austerity plan of tax hikes and spending cuts to erase a budget deficit which still comes in at around 8% of GDP.Osborne defended his debt-cutting measures, arguing that they gave the Bank of England the leeway to keep monetary policy loose, and said there was still more the central bank could do.BoE Governor Mervyn King said the central bank would complement its quantitative easing asset purchase scheme with new steps to encourage bank lending and reduce their funding costs, which have rocketed as a result of the euro zone crisis.The BoE and finance ministry have designed a new scheme, to be launched in a few weeks, that would offer banks loans with a maturity of possibly 3-4 years at below current market rates.The loans would be made available on condition that banks increase their lending to businesses and households.In addition, the central bank will activate its Extended Collateral Term Repo facility, created in December, to provide six-month liquidity to banks against a wide range of collateral.King said now was the right time to activate the scheme, which is aimed at helping banks through phases of exceptional stress.King hinted that the central bank may also restart its QE programme, which it halted in May having bought 325 billion pounds of British government bonds, and countered accusations that the scheme had lost its effectiveness."With signs of a deterioration in the outlook, especially in world markets, the case for a further monetary easing is growing," King said.

NEWS, 14.06.2012.

Greeks pull cash from banks before election

 

Greeks pulled their cash out of the banks and stocked up with food ahead of a cliffhanger election on Monday (NZ time) that many citizens fear will result in the country being forced out of the euro.Bankers said up to 800 million euros ($US1 billion) were leaving major banks daily and retailers said some of the money was being used to buy pasta and canned goods in case of shortages, as fears of returning to the drachma were fanned by rumours that a radical leftist leader may win the election.The last published opinion polls showed the conservative New Democracy party, which backs the 130-billion-euro ($US160 billion) bailout that is keeping Greece afloat, running neck-and-neck with the leftist SYRIZA party, which wants to cancel the rescue deal.As the election approaches, publishing polls is now legally banned and in the ensuing information vacuum, party officials have been leaking contradictory "secret polls".Yesterday, one rumour making the rounds was that SYRIZA was leading by a wide margin."This is nonsense," one reputable Greek pollster said, on condition of anonymity. "Our polls show the picture has not changed much since the last polls were published. Parties may be leaking these numbers on purpose to boost their standing."The pollster said there was some consolidation, with voters turning to New Democracy and SYRIZA from smaller parties but the pool of undecided voters remained unusually large so close to the election and the result was impossible to predict.Both parties say they want Greece to remain in the single currency but SYRIZA has pledged to scrap the bailout agreement signed in March which has imposed some of the toughest austerity measures seen in Europe in decades.The European Union and International Monetary Fund have warned that Greece, which has only enough cash to last for a few weeks, must stick to the conditions of the bailout deal or risk seeing funds cut off.Euro or drachma dilemma New Democracy has been telling voters they must choose between the euro or the drachma, while SYRIZA promises to end the austerity measures imposed by Greece's international lenders, such as salary and pension cuts, that have driven many Greeks into poverty.Fears that Greece will collapse financially and leave the euro have slowly drained Greek banks over the last two years. Central bank figures show that deposits shrank by about 17%, or 35.4 billion euros ($US44.4 billion) in 2011 and stood at 165.9 billion euros ($US208.1 billion) at end-April.Bankers said the pace was picking up ahead of the vote, with combined daily deposit outflows from the major banks at 500-800 million euros ($US625 million to $US1 billion) over the past few days, and 10-30 million euros ($US12-36 million) at smaller banks."This includes cash withdrawals, wire transfers and investments into money market funds, German Bunds, US Treasuries and EIB bonds," said one banker, who spoke on condition of anonymity.Retailers said consumers were stocking up on non-perishable food while almost all other goods were seeing a huge drop in sales as cash-strapped Greeks have no money to spare in the country's fifth year of recession."People are terrified by the prospect of returning to the drachma and some believe it's good to fill their cupboard with food products," said Vassilis Korkidis, head of the ESEE retail federation."It's over the top, we must not panic. Filling the cupboard with food doesn't mean we will escape the crisis," he said.Supermarkets said they did not see a rise in profits as people spend less money. But sales of staples like pasta have gone up.A generation that suffered the deprivations of the Nazi occupation of Greece has traditionally raided supermarkets ahead of any impeding crisis, for fear people will go hungry. Their children have picked up the habit and are stocking up on basics."It's fear that is motivating people," said Anastassia Tzorbatzidou, mother of three, who says she has her shelves full. "When you have kids, it's better to have something."

Italy, France find common ground on crisis

 

The Italian and French leaders on Thursday found common ground on how to confront Europe's worsening debt crisis, emphasizing that budget discipline should not come at the expense of economic growth and calling for a region-wide move to boost market confidence.The leaders held their first bilateral meeting since President Francois Hollande took office last month as Italy's borrowing costs skyrocketed on concerns the country may be the next, after Spain, to need financial aid.The positions outlined by Italian Premier Mario Monti and Hollande, however, were at odds with those espoused by Chancellor Angela Merkel.Europe's crisis response `'has not been enough to protect the euro from market turbulence," Monti said. "We need to reinforce the weak points of the system" in both the real economy and finance. The two leaders agreed that focusing on growth does not mean abandoning budgetary discipline.`'But public account discipline is not enough to have growth, foster development and create jobs," Monti said.The two men also discussed launching eurobonds, jointly issued bonds that would spread debt risk that both support. Germany opposes the bonds out of concern they will lead to fiscal laxity.Monti pointedly noted that Italy and France have together contributed 40 percent of the eurozone's bailout funds to date, staking a claim for the legitimacy of their views.The need for action to boost market confidence in the euro was evident in the bond market movements on Thursday.Italy paid 5.3 percent to raise (EURO)3 billion ($3.76 billion) in three-year bonds from financial markets, up from 3.91 percent last month and the highest level since December.The high rate underscores how investors are increasingly worried Italy will be destabilized by market turmoil in Spain and might run into trouble servicing its debt as it wallows in a deep recession. Political wrangling over reforms has also raised questions over the government's ability to overhaul the economy.To boost confidence in the euro, Hollande said a solution must be forged not just between France and Italy, but with other countries ahead of a European summit on June 28."Growth is the first thing, the second is stability ... the third point is deepening euro monetary union," Hollande said.Monti's technocratic government came to power in November with broad, bipartisan support from political parties to reform the economy. However, lawmakers have in recent weeks shown signs of returning to the old Italian ways of political jockeying. Lobbies and some parties have pushed to water down some reforms.The lower house of Parliament passed a package of anti-corruption measures aimed at making Italy a more just society  something that Monti, a former EU competition commissioner, believes will help encourage more risk-taking and enterprise-building. After being bruised on labor reforms, Monti's government attached the package to three votes of confidence on the most contentions passages, all of which easily passed lower house votes. Despite the passage, there were many calls for changes when the Senate takes up the package  an indication of more political gridlock