european-union

Vodafone gives up merger plans with Greece’s OTE

by on February 6, 2012

menafn.com…

(MENAFN) UK’s Vodafone Group Plc gave ip merger plans of its Greek unit with rival Wind Hellas following opposition from European Union regulatory, Bloomberg reported. A successful merger would …

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Vodafone gives up merger plans with Greece’s OTE

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Europe’s Top Financial Cop: White House Not Doing Enough To Curb Banker Bonuses

by Shahien Nasiripour on June 1, 2011

Huffington Post…

WASHINGTON — The U.S. isn’t doing enough to curtail excessive banker bonuses, Europe’s top financial regulator told the Obama administration in a recently-disclosed letter. “I think you agree with me that ‘bankers’ bonuses’ is a matter that continues to cause public outrage,” Michel Barnier, the European commissioner overseeing finance, wrote to Treasury Secretary Timothy Geithner. “Getting this matter right is key to restoring our citizens’ confidence in the financial system — and ultimately — their confidence in the public authorities regulating the financial institutions.” Lavish compensation paid to traders and bankers during the housing-driven bubble fueled risk-taking at the nation’s largest financial firms, experts have said. Those risks eventually led to the collapse of storied firms, the near-collapse of the financial system and the most punishing economic downturn since the Great Depression. Yet bonuses were never recouped. Individual traders made off with tens of millions of dollars, and chief executives of failed firms and those rescued by taxpayers left with hundreds of millions. To prevent further occurrences, the European Union moved to restrict cash bonuses for executives and risk-takers at banks and other financial institutions. The U.S., however, has been loathe to do so, and is moving slowly in implementing the resulting rules enacted into law last year, charged Barnier, as the Financial Times first reported. U.S. regulators are leaving “too much latitude” to financial firms, which allows them to potentially “circumvent globally-agreed principles,” Barnier wrote to Geithner. Two years ago, leaders of the 20 leading industrialized nations agreed to curb bonus-fueled risk-taking during a summit in Pittsburgh. But while Europe charged ahead with creating hard rules restricting specific pay packages, the U.S. approach gives bank regulators great latitude in determining what’s appropriate — a power such organizations have held since 1995. Regulators have also lumbered along in creating rules designed to rein in risk-taking, having yet to formally implement pay rules lawmakers called for in passing the financial reform bill known as Dodd-Frank. U.S. bank and securities regulators proposed a rule earlier this year that calls for firms to defer at least 50 percent of executive officers’ annual incentive-based pay (commonly known as bonuses) for at least three years. It also seeks to prohibit pay schemes that lead to “excessive” compensation and packages that “could lead to material financial loss.” Regulators will scrutinize the overall design of those packages, rather than individual packages themselves. But since 1995, bank regulators have had the ability to prohibit risky compensation schemes based on the premise that such packages could be an “unsafe and unsound” practice. It’s unclear whether bank overseers at the Federal Reserve, which oversaw institutions like Countrywide; the Office of the Comptroller of the Currency, which regulated banks like Citibank; and the Office of Thrift Supervision, which was responsible for AIG and Washington Mutual, ever used that authority to rein in excessive bonuses geared towards short-term profit at the expense of long-term risks. In the new proposed rules, excessive pay won’t necessarily be determined by the dollar amount. Dodd-Frank doesn’t require firms to report “the actual compensation of particular individuals as part of this requirement,” regulators wrote in their proposed rule. However, cash bonuses on Wall Street are down 39 percent since their peak in 2006, according to data compiled by New York’s Office of the State Comptroller. In Europe, banks are restricted by law when doling out cash bonuses, and as much as 60 percent of bonus payouts for “risk takers” and other senior employees must be deferred for at least three years. About half of the pay must be in the form of shares. No such requirement exists in the U.S. “Up front cash bonuses that are based on expected rather than actual performance are a key driver of excessive risk taking,” the European Parliament argues on a page of its website devoted to explaining the new rules. “Staggering payments over time and linking them to the bank’s health and actual performance should ensure that these risks are tackled.” Spokeswomen for Barnier didn’t respond to emailed requests for comment. A Treasury spokeswoman declined to comment. ************************* Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 917-267-2335.

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Greece Missed Fiscal Targets Under Bailout

May 29, 2011

(Reuters) – Greece has missed all fiscal targets agreed under its bailout plan, a mission from an international inspection team found, putting further funding for Athens at risk, according to a German magazine. “The troika asserts in its report to be presented next week that Greece had missed all its agreed fiscal targets,” weekly Spiegel magazine reported in a prerelease. The International Monetary Fund, the European Commission and the European Central Bank — known as the troika — currently have a team in Greece assessing how sustainable the country’s debts are. The mission will be holding meetings next week before an expected finalization of the report. “The deficit in the public budget was higher than expected,” the magazine said, referring to the report’s findings. “The reason is that the Greek government still spends more than agreed in the aid programme. On top of that tax income is still lower than demanded.” The IMF has already said it cannot release its part of a 12 billion euro aid tranche to Greece next month if fiscal conditions underpinning the bailout are not met and the European Commission’s top economic official was quoted as saying the EU was setting the same conditions. “We Europeans have the same conditions as the IMF,” EU Economic Affairs Commissioner Olli Rehn was quoted as saying in the same prerelease for Monday’s Spiegel magazine. “We will decide on the next tranche after the troika’s report. The situation is very serious,” Rehn added. At roughly 330 billion euros, or 150 percent of gross domestic product (GDP), Greece’s debt is so high that many economists believe the country will inevitably have to restructure eventually. The ailing euro zone state, which triggered the sovereign debt crisis in 2009, also needs to garner support from opposition parties for fiscal reforms before the European Union and International Monetary Fund free up more payments. EU officials have asked Athens to step up privatizations urgently and suggested setting up a trustee institution to help oversee the process, similar to the body that privatized East German companies after the fall of communism. Spiegel magazine also said the troika’s experts estimated Greece had assets worth 300 billion euros, which it could sell off to meet its targets. (Reporting by Annika Breidthardt; Editing by John Stonestreet) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Japan, EU Set To Talk Free Trade Agreement

May 28, 2011

BRUSSELS — Japan and the European Union agreed at a summit meeting Saturday to begin negotiations on a free trade agreement that would deepen economic ties between two of the world’s largest economies. As a bloc, the EU is the world’s largest economy; Japan is number four. Negotiations will be preceded by what the leaders called a “scoping exercise” to ensure that both side share the same goals and level of ambition for the negotiations. At the summit, held in the picturesque Castle of Val-Duchesse, the leaders also agreed to work toward greater nuclear safety worldwide and to create closer political ties. The meeting was attended by Japanese Prime Minister Naoto Kan; Herman Van Rompuy, president of the European Council; and Jose Manuel Barroso, president of the European Commission. “Radiation does not stop at national borders, and neither should our collective responsibility,” Barroso said at a joint press conference after the meeting. “So when we talk nuclear, we talk global.” Japanese officials are sensitive about being stigmatized by the nuclear accident that followed the devastating earthquake and tsunami of March 11. They believe that some tests on imports of Japanese food are too stringent, even when the food is produced far from the site of the disaster. And they say the loss of tourism, even in areas far from any contamination, will hurt the country’s economy. Barroso sought to allay those concerns Saturday. “We firmly believe that Japan is safe and open for business,” he said. But the negotiations on a free trade agreement may be difficult. The European Union imposes a 10 percent tariff on goods imported from Japan while Japan imposes no tariff on those imported from the European Union. Japanese officials told The Associated Press before the meeting they see the issue as relatively simple. But EU officials see it as more complex, and they insisted successfully that the talks also take into account non-tariff barriers to trade and investment. They say, for example, that in the EU public procurement is open and they want to make sure that is the case in Japan, as well. EU officials also say that, while foreign investment is equal to 30 percent of gross domestic product in the EU, in Japan the figure is only 3 percent, and the reasons for that must be explored in the talks to come. Still, all three leaders said the benefits of successful negotiations would be very significant. Kan said the outcome “would be important for the global markets.” Van Rompuy agreed. “The potential economic and political results are huge, in terms of jobs, growth and a shared destiny,” he said. The leaders said that, in the political sphere, Japan and the European Union share the same values, including support for democracy and human rights, and should work together in resolving problems from Middle East and North Africa to North Korea. They also said they would cooperate in showing leadership on the issue of climate change. Van Rompuy is fond of writing haiku, a form of Japanese poetry, and he ended his post-summit statement with one that referred to the earthquake, the tsunami and the nuclear disaster. “The three disasters/Storms turn into a soft wind/A new humane wind,” Van Rompuy wrote. The Japanese prime minister liked it. “This is a haiku which really touches your heart,” he said.

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Greek Prime Minister: ‘Debt Restructuring Is Not Under Discussion’

May 22, 2011

ATHENS (Harry Papachristou) – Greece must avoid debt restructuring and push on with budget cuts and privatisations to overcome its debt crisis, the country’s Prime Minister George Papandreou and senior ECB officials said on Saturday. Papandreou must present a fiscal plan next week that is credible enough for the European Union and the International Monetary Fund to continue bankrolling his debt-laden country. But a large majority of Greeks reject more austerity, according to a poll published on Saturday, which also shows the ruling socialists losing their lead versus the conservative opposition for the first time since their 2009 election victory. “Debt restructuring is not under discussion,” Papandreou said in an interview in Sunday newspaper Ethnos. One year into its EU/IMF 110-billion euro bailout, Greece is struggling with weak revenues and deep recession, fuelling speculation that it will have to restructure its debt to pull itself out of the fiscal mess that triggered a euro zone crisis. The chairman of the 17-country Eurogroup Jean-Claude Juncker said on Tuesday Greece may have to move toward a “soft restructuring” of its debt. But the European Central Bank remains strongly opposed to such a move, due to fears that it would destabilise the euro. Greece has no other option but to follow through its fiscal plan, ECB governing council member Ewald Nowotny told Greek newspaper To Vima on Saturday. “For the ECB, the line is one and clear: you have to implement the commitments you have made.” In a separate interview in newspaper Kathimerini, ECB executive board member Juergen Stark said any kind of debt restructuring would thwart the country’s return to bond markets and undermine reforms. “We are at a critical juncture, what it really takes now is action,” Stark said. On Friday, Fitch became the second major ratings agency to warn that it would consider any kind of debt restructuring as a sovereign default — exactly the kind of outcome euro zone governments are trying to avoid. Asked by Ethnos if he would consider a debt “reprofiling” rather than a restructuring, Papandreou said: “We are looking after our job… We do not join the public discussion about such scenarios.” LIMITS OF AUSTERITY, PRIVATISATIONS Greece is considering deeper cuts in public sector wages and further tax increases on a range of products and professions to qualify for more aid, Greek newspapers said on Saturday. The plan may include scrapping bonuses to civil servants and employees in state-run companies, newspapers Ta Nea and Isotimia reported, without citing any sources. The government may also lower or scrap tax-free thresholds on property holdings and the self-employed, raise consumption taxes on soft drinks and certain fuel types or shift a range of products to a higher VAT-bracket, other newspapers said. Papandreou vowed on Saturday to take any measure necessary to secure more funding for his country. “Greece must convince everyone of its determination,” he said. But a large majority of Greeks say they cannot take more austerity as the country enters its third year of recession. Eighty percent of respondents told pollster MRB they refused to make any further sacrifices to get more EU/IMF aid, an MRB poll for paper Realnews showed. The same poll shows Papandreou’s ruling Socialist PASOK neck-and-neck with the opposition conservatives, with both parties scoring 21.5 percent each. In the previous MRB poll in April, PASOK had an 1.8 point-lead. But Papandreou warned that any failure to push through the plan might lead the country straight to default. “At the moment, it does not seem as if Greece can cover its 2012 borrowing needs… from the market,” he said in the interview. Papandreou pledged to speed up a 50 billion euro privatisation programme, a key part of efforts to shore up finances without a debt restructuring. However, he reiterated that the state would keep stakes in firms managing vital public goods and services, such as water and electricity utilities. In an interview with German magazine Der Spiegel, Juncker urged Greece to set up a trustee institution to help privatize state assets, similar to the body that privatised East German companies after the fall of communism. “Henceforth, the European Union will escort Greece’s privatisation programme as if we were conducting it ourselves,” he said. (Editing by Philippa Fletcher) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Spain Protests Rock Nation, Tens Of Thousands Fill The Cities Over Joblessness

May 21, 2011

By Tracy Rucinski and Fiona Ortiz MADRID – Tens of thousands of Spaniards angry over joblessness protested for a sixth day on Friday in cities all over the country, and the government looked unlikely to enforce a ban on the demonstrations, fearing clashes. Dubbed “los indignados” (the indignant), tens of thousands of protesters have filled the main squares of Spain’s cities for six days, in a wave of outrage over economic stagnation and government austerity marking a shift after years of patience. The electoral board ruled on Thursday that protests would be illegal on Saturday, the eve of elections when Spaniards will choose 8,116 city councils and 13 out of 17 regional governments. But Prime Minister Jose Luis Rodriguez Zapatero, who has failed to contain the highest unemployment in the European Union, at 21.3 percent, said he may not enforce the ban. “I have a great respect for the people protesting, which they are doing in a peaceful manner, and I understand it is driven by economic crisis and young people’s hopes for employment,” Zapatero said during a radio interview. He said the Justice Ministry was reviewing the electoral board’s ruling to determine whether it should stand. PROTESTERS WILL STAY “We are not going to budge from here,” said a 44-year-old unemployed man who declined to give his name, during an assembly at Puerta del Sol in central Madrid, where protesters reached an informal consensus to stay in the square despite the ban. The man was among hundreds who have camped out all week at Puerta del Sol. His wife and daughter join him every day and the crowd swells to thousands every evening. “Our next move is to spread this to the rest of Europe,” he said. Many protesters told Reuters that they are scared the police will crack down, but analysts said police action against the protesters would be a disaster for the Socialists. The protesters have called on Spaniards not to vote for the two main parties, the Socialists or the center-right opposition Popular Party. Spain has struggled to emerge from a recession, and the collapse of the construction sector and a slump in consumer spending have hit the young particularly hard — 45 percent of 18- to 25-year-olds are unemployed. “They can’t kick us out. The politicians won’t allow it, it’ll make them look bad right before the voting,” said Virginia Braojos, 32, a logistics technician who has come with three friends to the protests every night this week. NOT A GAME CHANGER The protests have drawn huge media attention, but will not change the outcome of Sunday’s elections, when the ruling Socialist party is expected to suffer heavy losses over its handling of the economic crisis, a prominent pollster said. However, the symbolic impact of the protests is huge and will make things even tougher than they already are for the increasingly lame-duck Zapatero, said Jose Juan Toharia, president of Metroscopia pollsters. “There will be an authentic cataclysm for the Socialists, who are going to head into general elections next year without a single stronghold,” Toharia said. The next general election is due in March, though some analysts say a Socialist rout could lead to an early election. The protest movement has captured the mood of many Spaniards who have been out of work for months and face a bleak future as the economy is not yet growing robustly enough to create jobs. While most protesters are young, organizing themselves through Twitter and social media, middle-aged and older people joined the crowds on Friday, frustrated with stagnation. STICKING TO DEFICIT COMMITMENT The risk premium on Spanish debt, as measured by the difference between yields on Spanish and benchmark German bonds, rose on Friday due to concerns that following the elections, new regional leaders will uncover budget shortfalls. Budget trouble in the regions would rekindle concerns about a fiscal crisis in Spain. Spain has been under intense market scrutiny since Greece, Ireland and Portugal were forced to accept EU/IMF bailouts. It is widely accepted that a bailout for Spain, the euro zone’s fourth largest economy, would stretch the European Union’s resources and political will to breaking point. The Spain/Bund spread traded at its widest since mid-January at around 239 basis points. Zapatero, who slashed government spending this year, promised there would not be a new round of spending cutbacks following the elections, but stressed Spain’s obligation to international markets to stick to its plan to cut the deficit. “I can guarantee there will be no more spending cuts after the May 22 elections (but) we are committed to the budget target. I insist we will meet this obligation because, if we don’t, markets and investors won’t finance us, and that would make things worse.” (Additional reporting by Paul Day; editing by Mark Heinrich) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Video: Grant Says Greece Is Right at Brink of `Going Belly-Up’: Video

May 20, 2011

May 20 (Bloomberg) — Mark Grant, managing director at Southwest Securities Inc., discusses the outlook for Greece’s economy and prospects for debt restructuring. Greece’s credit rating was cut three levels by Fitch Ratings, which said that even a voluntary extension of its bond maturities being studied by European Union policy makers would be considered a default. Grant speaks with Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Antonio Borges: The Emerging Bright Spot in Europe

May 18, 2011

With all the anxiety generated by the troubles of Portugal, Greece and Ireland, it is easy to forget that a different part of Europe was in the spotlight two years ago, facing equally dire predictions of bank runs, fiscal ruin and devaluation. Today, many economies in emerging Europe are quietly staging a strong comeback. Most impressive is the turnaround in the three Baltic countries, which suffered record deep recessions in the wake of the 2008/09 financial crisis. Take Lithuania, which grew an eye-catching 14.7 percent in the first quarter of 2011. But many other countries in the region are seeing strong growth as well. True, it will take a while before most crisis-hit countries will be able to reclaim the economic output that was lost as a result of the crisis. But things are definitely going in the right direction. Most encouragingly, the growth pattern is very different from that in the years leading up to the crisis. During the boom years, emerging Europe grew rapidly, but growth in many countries was unbalanced — real estate, construction and banking boomed while manufacturing languished. Capital inflows were large, but they boosted demand rather than supply, and led to a surge in imports, extremely high current account deficits — 25 percent of GDP in Latvia and almost 30 percent of GDP in Bulgaria — and overheating. Today, growth is driven by exports and manufacturing. Take Estonia, where exports of goods in the fourth quarter of 2010 were 52 percent higher than a year earlier. The old growth engines are spluttering, but others have kicked into gear. And it is not just exports anymore — the recovery is broadening to include investment and even consumption. In 2011, domestic demand is set to become the main growth engine in emerging Europe. What has caused the shift? The answer is both markets and policies. Markets at work. During the boom years, real estate, construction and finance were very profitable — much more so than manufacturing. But profits were artificially inflated by asset price bubbles and the under-pricing of risk. Now that profits have evaporated, investors are moving into other sectors. The adjustment is underpinned by improving competitiveness — the wage explosion of 2007-08 has given way to a decline in labor costs across the region. Policies have delivered. Painful but determined fiscal adjustment put public finances back on track, which has led to a sharp reduction in risk. For instance, Latvia’s credit default swap spread (which measures the cost of insuring debt against default) is 200 basis points today — down from 1100 basis points in 2009. Given this good news, what more can policymakers do to sustain the recovery — and prevent a new boom-bust cycle? Raising the long-term growth trend is key. Good structural policies can raise growth potential. A big push to remove bottlenecks in energy, transportation and communication would boost productivity. Here, funding from the European Union could be used to overcome the current lack of domestic resources. Efforts to upgrade the skills of the labor force would enable industry to climb the quality ladder. Good macroeconomic policies can prevent boom-bust cycles. When the next boom takes off, policies should be much tighter. This will reduce the risk of overheating that pulls resources away from manufacturing and other traded goods into sectors where there is little competition, such as real estate and banking. When revenues are growing strongly, they should not be used to increase spending and public wages, as was done during the boom years. Instead, savings that can stimulate the economy during a downturn should be built up. This means that large, even very large, surpluses may be needed during boom years. Emerging Europe still has a lot of scope for catching up with advanced Europe. But catching-up is not a law of nature — without the right policies, countries can get stuck, as we have seen all too clearly with Greece, Ireland and Portugal. From iMFdirect blog

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EU And IMF Near Agreement On Portugal Bailout

May 3, 2011

LISBON – Portugal is close to reaching an agreement with the European Union and IMF on a bailout for the debt-laden country and there are no disagreements between the donors, the European Commission and the IMF said on Tuesday. Portugal’s caretaker Prime Minister Jose Socrates was set to make a statement at 1930 GMT, his office said. Officials from the European Commission, the International Monetary Fund and European Central Bank have been in Lisbon for almost a month to hammer out an agreement with Portugal on a bailout expected to reach about 80 billion euros ($120 billion). An agreement could come any day, officials have said, but local media have reported that it could be delayed because of disagreements between the European Commission and IMF on the terms of the loan. EC spokesman Amadeu Altafaj, who is in Lisbon, denied any rifts. “There has been progress in talks, and we can expect a deal soon. My feeling is that we are getting close to a deal … There are no divergences among members of the troika,” he said. “Discussions are currently going on and there is good progress, we are getting closer to a staff agreement and we keep a constructive dialogue with the political parties too,” he added. An IMF spokesperson also said there were no divergences between the EC, ECB and the IMF and a deal was close. Portugal became the third country in the euro zone, after Greece and Ireland, to seek a bailout after its government collapsed in late March and borrowing costs soared. Officials said the agreement would be presented to Portugal’s opposition Social Democrats and the caretaker government soon so that they can commit to the terms of the deal ahead of a snap June 5 general election. Social Democrat leader Pedro Passos Coelho said he stood ready to meet with the lenders. The deal is expected to be approved at a meeting of eurozone finance ministers in mid-May, in time for the EU rescue fund to raise money for Portugal by June 15, when the country needs to meet a bond redemption of 4.9 billion euros. Portuguese media have said the European Commission and the International Monetary Fund diverged over whether Portugal should be given more time to meet its budget deficit targets, as well as on the size of the aid package, which Brussels initially put at around 80 billion euros. Diario Economico newspaper said earlier Portugal may need over 100 billion euros in EU/IMF loans, including up to 10 billion euros for its banks, but there were doubts whether Brussels will allow the bailout to exceed its initial target. SIC television said, without citing its sources, the bailout could reach 105 billion euros. (Reporting by Andrei Khalip; Writing by Axel Bugge; Editing by Louise Ireland) Copyright 2011 Thomson Reuters. Click for Restrictions .

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FTC Said To Be Making Google ‘The Next Microsoft’

May 2, 2011

The U.S. Federal Trade Commission has reportedly begun to prepare an investigation of Google, according to Bloomberg . The Mountain View web giant has come under scrutiny for its domination of the online search industry. Bloomberg reports that the FTC has allegedly started to tell high-tech companies to get information ready for upcoming inquiry, said “three people familiar with the matter.” Discomfort over Google’s control over search flared following the company’s acquiring ITA Software, a travel data powerhouse. The company outbid other travel sites, who opposed the acquisition . Part of the conditions of the deal, as outlined by the Justice Department mandated that Google must make travel data available to rivals as well as allow the government to look into whether its behavior is unfair. Google already faces antitrust investigations in the European Union . Regulators in South Korea have also been asked to look into the company’s behavior. Officials in Ohio and Wisconsin are considering launching a query for the same reasons, as well. “It could be ‘Google as the next Microsoft,’” Eleanor Fox, a law professor at New York University, told Bloomberg. Microsoft, which itself came under antitrust scrutiny over a decade ago, lodged an official antitrust complaint with the EU. “We have to be careful about letting the current players manipulate the market in such a way that it does tip prematurely [in their favor] and that it hurts rivals,” said FTC commissioner Thomas Rosch in March. “For example, Google is trying to do it though its search methods.” Though Google rules online search and advertising, creating a successful case against the company will hinge upon the determination that the company has used its power to unjustly keep rivals from being able to compete. The senate Subcommittee on Antitrust, Competition Policy and Consumer Rights is scheduled to examine Google for its search dominance in the next session of Congress.

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Video: Goldman, JPMorgan Among Banks Facing EU Probe Over CDS

April 29, 2011

April 29 (Bloomberg) — Goldman Sachs Group Inc., JPMorgan Chase & Co. and other investment banks face a European Union antitrust probe into credit-default swaps for companies and sovereign debt. The European Commission said it will check whether 16 bank dealers colluded by giving market information to financial information provider Markit and also examine whether nine of the firms struck deals with ICE Clear Europe. Bloomberg’s Aoife White talks about the probe with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Greece’s Government Deficit Even Worse Than Predicted

April 26, 2011

BRUSSELS — Greece’s government deficit was significantly bigger than forecast last year, European Union data showed Tuesday, underlining the difficulties the debt-ridden country is having to get its finances under control. Greece’s deficit hit 10.5 percent of economic output in 2010, well above the 9.6 percent the European Commission, the EU’s executive, predicted last fall. The country’s debt swelled to 142.8 percent of gross domestic product, according to data released by EU statistics agency Eurostat – the highest in the eurozone and above the 140.2 percent the Commission had forecast. Greece had to be saved from bankruptcy with euro110 billion ($160 billion) in rescue loans last May, but continues to struggle to raise revenue as its economy shrinks. Most economists expect the country will eventually have to restructure its debt – either by asking creditors to give it more time to repay or even cutting the total amount owed. However, EU officials have so far ruled out a restructuring. The Greek finance ministry attributed the larger deficit to a deeper than expected recession, which cut into tax revenues and social security contributions. “In any case, the Greek government remains committed to achieving its deficit targets under the Economic Adjustment Programme and will take all necessary measures in that direction,” the ministry said in a statement. In its bailout program – which spells out Greece’s path to financial health – Athens promised to get its deficit below the 3 percent maximum allowed by EU rules in 2014. The 17 countries that use the euro had an average deficit of 6 percent last year, double the 3 percent allowed under EU rules. The highest deficit was produced by Ireland – the second country that needed to be bailed out by other EU nations and the International Monetary Fund – reaching a record 32.4 percent of GDP because of expensive bank bailouts, only slightly above the 32.3 percent forecast. Portugal, which is currently negotiating its own package of rescue loans, had a deficit of 9.1 percent, way above the 7.3 percent the Commission had expected last fall, but Lisbon had warned markets of the upward revision on Saturday. There were some good news for Spain, the country that most analyst view as the next weakest link in the eurozone. It’s deficit was 9.2 percent of GDP, slightly below the 9.3 percent forecast by the Commission. Euro newcomer Estonia was the only eurozone country to produce a surplus – 0.1 percent of GDP – last year, but the tiny Baltic nation adopted the common currency this January. Bond markets quickly reacted to the news. The yield – or interest rate – on Greek 10-year bonds hit 15.18 percent, up from 15.06 percent at the open, while Portugal’s rose to 9.54 percent from 9.47 percent. Spain’s 10-year yield meanwhile inched down to 5.47 percent, from 5.48 percent, but remained way above the 4 percent they traded at just last October. The United Kingdom, which is not in the eurozone, recorded a deficit of 10.4 percent of GDP – the third highest in the EU behind Ireland and Greece. However, Eurostat said it had some reservations on the quality of data reported by the U.K. because of the way the country records its military expenditure. Eurostat spokesman Tim Allen said it was too early to tell for which years and by how much U.K. deficit figures would have to be revised to comply with the agency’s rules, but because the issue was only related to the timing of the expenditure rather than the overall amount, any revisions should not affect the U.K.’s debt levels. Overall, the eurozone managed to cut the massive deficits it built up during the financial crisis faster than predicted. The average deficit stood at 6.3 percent in 2009 and the Commission had expected that figure to remain stable in 2010. Apart from the three most troubled countries, Greece, Ireland and Portugal, only Austria failed to undercut the Commission’s autumn forecast. The small Alpine nation’s deficit rose to 4.6 percent in 2010, above the 4.3 percent forecast, due to changes in the way countries have to record debts they take on from public companies. ___ Elena Becatoros in Athens contributed to this story.

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A Year Later, Greece Still Struggles

April 23, 2011

ATHENS, Greece — It’s an anniversary few are celebrating. A year ago Saturday, with its faltering economy days away from bankruptcy, Greece ended months of speculation and requested bailout loans. Prime Minister George Papandreou chose the remote island of Kastelorizo, and its tranquil seaside backdrop, to announce the “urgent national need to formally ask our partners to mobilize the support mechanism.” International solidarity, he said in a televised address, would “send a strong signal to markets that the European Union is not to be toyed with, and it will protect our common interests and our common currency.” Twelve months on, there’s little indication that that signal has been received. Greek bonds have been axed to junk status by the three major ratings agencies. And sky-high borrowing costs have roughly doubled, along with the price of insuring debt. Greece would currently have to pay out 15-percent interest on a 10-year bond, compared with the German benchmark of 3.27 percent. At least 160,000 more people have lost their jobs since April 23, 2010, with government austerity accelerating layoffs and business failures. And the national debt is forecast to exceed the emergency level of 150 percent of gross domestic product in 2011. “At the moment we have a very, very difficult situation which requires a rapid response and tough measures,” economic analyst Vangelis Agapitos said. “Of course the markets also realize that there is political fatigue and political cowardice to fully take the tough measures that are necessary.” Despite daily government denials, 47 percent of Greeks now believe the country will have to restructure its debt, while just 24 percent think it won’t be necessary, according to an opinion poll due to be published Sunday. The survey by the Alco research company for the weekly Proto Thema newspaper used data from 1,000 people interviewed April 15-19. No margin of error was quoted but it would normally be around 3 percentage points for a survey of that size. Support for Papandreou’s Socialists has sunk from 34.7 percent to 21.5 percent in the past 15 months, the poll found, though he still maintains a slim lead over rival conservatives. After Papandreou’s call for help from Kastelorizo, a rescue deal was put together in nine days, just ahead of a critical refinancing deadline. Eurozone countries and the International Monetary Fund agreed to lend Greece euro110 billion – equivalent to nearly half the country’s annual output – through 2013. In return for the bailout loans, Papandreou’s Socialist government slashed euro14 billion off the budget deficit in 2010 using salary and pension cuts and a raft of unpopular measures aimed at reducing waste in the public sector and protective market rules. His government has promised debt inspectors that it will start generating a primary surplus in 2012, but fiscal targets have begun slipping this year due to the ongoing recession. And the sharp rise in public discontent is in growing contrast to calls by Greece’s central bank and analysts for bolder cost-cutting measures. “The (national) debt is 150 percent of GDP and rising. Had it been half that amount, maybe these (austerity) measures would suffice,” Agapitos said. “The number of measures is unprecedented. So in a way, Greece is proving that the effort is there. However, the expectations are much higher and keep rising, because of the mess that Greece is in.” Papandreou is unlikely to get much respite this Easter, with school and hospital closures planned this year and a massive privatization program prompting a general strike on May 11. Many of his countrymen, however, are looking forward to a break from the national gloom this holiday weekend. “I just can’t watch the news anymore – it’s so depressing,” said window cleaner Stratis Dervendlis, who is planning a series of day-trips in and around Athens on his days off. “The bad news is constant. It’s like reminding someone in hospital that they’re sick all the time. Instead, they should be giving us courage and telling us how we’re going to get better.” ___ AP writer Elena Becatoros contributed.

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Video: Italian Banks Boost Capital Ahead of EU Stress Tests

April 19, 2011

April 19 (Bloomberg) — Bloomberg’s Elliott Gotkine reports on efforts by Italian banks to boost capital ahead of European Union stress tests.

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World Banks Face $3.6 Trillion "Wall Of Maturing Debt," IMF Warns

April 13, 2011

WASHINGTON (By Emily Kaiser) – The world’s banks face a $3.6 trillion “wall of maturing debt” in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday. Many European banks need bigger capital cushions to restore market confidence and assure they can borrow, and some weak players will need to be closed, the International Monetary Fund said in its Global Financial Stability Report. The debt rollover requirements are most acute for Irish and German banks, with as much as half of their outstanding debt coming due over the next two years, the fund said. “These bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources,” the IMF said. Overall, the IMF said global financial stability has improved over the past six months. The most pressing challenges in the coming months will be funding of banks and sovereigns, particularly in vulnerable euro area countries, it said. The IMF and European Union bailed out Greece and Ireland, and are in talks with Portugal on a lending program as sovereign borrowing costs surge. Many investors have questioned whether Spain can avoid a similar fate, but the IMF said Spanish authorities were taking the right steps to address the country’s debt problems. “The actions that have been taken in Spain recently have managed to decouple, in the views of markets, the fortunes of Spain relative to those of Portugal” and Ireland, said Jose Vinals, director of the IMF’s Monetary and Capital Markets Department. European banks hold large amounts of euro zone sovereign debt, making them vulnerable to losses if countries are forced to restructure. Vinals said lending programs in Greece and Ireland were built on the assumption there would be no such restructuring, and the programs needed time to work. Still, worries about bad debt exposure have heightened investor concerns about bank balance sheets, making it even more important for firms to shore up their capital. U.S. banks built up capital buffers in 2009, when regulators completed a set of stress tests that revealed some large holes. But European banks still need to raise a “significant amount of capital” to regain access to funding markets, the fund said. “It is … imperative that weak banks raise capital to avoid a pernicious cycle of deleveraging, weak credit growth, and falling asset prices,” it warned. LIVING DANGEROUSLY The European Central Bank’s upcoming stress tests provide a “golden opportunity” to improve bank balance sheet transparency and reduce market uncertainty about the quality of assets on banks’ books, the IMF said. European banks won’t be able to obtain all the necessary capital from markets, and public money may have to fill some of the gaps, it added. Banks could also cut dividends and retain a larger portion of earnings. “Overall, a comprehensive set of policies — including capital-raising, restructuring and where necessary resolution of weak banks, and increased transparency about banking risks — is needed to solve banking system vulnerabilities,” it said. “Without these reforms, downside risks will re-emerge.” The IMF said banks’ exposure to troubled sovereign debt is “uncertain,” which adds to the funding strains. It said government debt was generally high and on a worrying upward path in many advanced economies. It repeated its warning that the United States and Japan faced particularly dangerous debt dynamics. Advanced economies were “living dangerously” with high debt burdens, and faced the difficult task of trying to pare deficits without choking off the economic recovery. The fund said government interest bills would likely rise, although the burden should generally remain manageable provided countries proceed with deficit reduction plans. For 2011, Japan and the United States face the largest public debt rollovers of any advanced economy at 56 percent and 29 percent of gross domestic product, respectively. “While the United States and Japan continue to benefit from low current (borrowing) rates, both are very sensitive to a potential rise in funding costs,” it said. (Additional reporting by Pedro Nicolaci da Costa; Editing by Neil Stempleman) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Jane White: Did the American Dream Emigrate to Europe?

April 6, 2011

Mickey D’s recent announcement that it’s hiring 40,000 workers bodes ill for the future of job growth in America. According to the National Employment Law Project , while 40% of the jobs lost in the recession were in high-wage industries only 14% of new jobs created were, with 49% of new jobs paying less than $15 an hour. In other words, Mickey D’s job growth is very likely driven by laid-off factory workers who need to grab McMuffins on the way to their new lousy jobs at Wal-Mart that they were forced to take when their unemployment benefits ran out. When globalization is discussed it’s usually focused on the outsourcing of factory and service jobs to low-wage emerging markets such as China and India. But the bigger news that’s rarely covered is that high-wage Europe is not only overtaking the U.S. as the global leader but as a leader whose corporate chieftains actually pay its rank and file decently, provide them generous benefits and tend not to “divorce them,” i.e., lay them off when economic times are challenging. Americans can smugly dismiss the European Union’s role as merely the bailer-outer of dysfunctional countries, i.e., Portugal, Ireland and Greece. But the more significant news isn’t just that the New York Stock Exchange has been bought by NYSE Euronext and Deutsche Borse, but that as of 2007 the value of the European stock market surpassed that of the U.S., according to the excellent book Europe’s Promise: Why the European Way in the Best Hope in an Insecure Age , by Steven Hill. Not surprisingly, the rising value is reflective of the fact that the European Union is now the world’s wealthiest trading bloc, accounting for nearly a third of the world’s economy — almost as large as the U.S. and China combined, says Hill. From 2000 to 2005, Europe added jobs faster than the U.S., posting higher productivity gains and enjoyed a $3 billion trade surplus. Oh, and these Europeans pay high sales and income taxes. Take that, Rep. Paul Ryan! Not only did Germany overtake the U.S. as the world’s largest exporter in 2005, as pointed out in a 2006 Newsweek article entitled “Europe is a House Divided,” but it did so by selling high-quality/cost goods produced by generously compensated workers — its average hourly wage is $48, compared to $32 in the U.S. A little-discussed feature of the European Union is that it’s a partnership between large employers and their workers, not just between countries. Since 1994 when the EU issued a directive on works councils, defined as “composed of both employer and employees convened to discuss matters of common interest,” every multinational company with at least 1,000 workers within the EU and 150 workers in each of two or member states must negotiate agreements with works councils if employees petition the employer to create one, Susan Ladka writes in a June 2005 HRMagazine article entitled ” Working Together .” Works councils not only enjoy veto power over job losses but have the right to meet with management to discuss mergers and the introduction of new technologies, says Hill in Europe’s Promise . In fact, works councils existed long before the EU did. According to a 2001 article in The Economist , ” Europe: You’re Fired ,” Germany had them after the Weimar Republic and after 1945 required any company with more than 500 employees to have a “supervisory board, in which workers hold one third of the seats. A few decades later, other countries in Europe followed suit, including Austria, France, Belgium, the Netherlands, and Sweden. While the UK resisted the notion at first, because, as The Economist put it, the British approach is “sack ‘em now and argue afterwards” — it ultimately passed local works council legislation a few years ago to meet a 2005 EU deadline, Ladka writes. Incredibly, as far as I can tell, no discussion or debate about creating works councils has ever taken the place within “sack-’em-now” American workplaces, much less on Capitol Hill. So our counterparts in Europe are enjoying American-style prosperity while continuing to receive European style benefits, including health care, a free or cheap college education, pensions, and generous unemployment benefits. Our biggest French fan, Alexis de Tocqueville, once said that , “The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults.” Ironically enough, she need to rip some pages from the European playbook to figure out how to restore the American dream.

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Video: Kedrosky Says Microsoft May Expand Google Complaint

March 31, 2011

March 31 (Bloomberg) — Bloomberg News contributor Paul Kedrosky talks about Microsoft Inc.’s antitrust complaint to European Union regulators against Google Inc. which may expand an existing EU probe beyond Internet searches to online video and mobile phones. Kedrosky speaks with Emily Chang and Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Ruling Coming On Legality Of Boeing’s ‘Massive’ Subsidies

March 30, 2011

A long-running transatlantic trade dispute over illegal state handouts for Airbus and Boeing comes to a head Thursday with the latest ruling from the World Trade Organization. The United States and European Union, both trading superpowers, have been fighting cases against each other in the WTO for more than six years over each other’s subsidies for manufacturers of large passenger aircraft. Thursday’s document will contain the WTO’s 1,000-page findings on European Union claims that U.S. planemaker Boeing won billions of dollars in unfair U.S. support. The trade bloc brought the case after the United States protested against subsidies benefiting European planemaker Airbus. The WTO found parts of the financing for Airbus planes was illegal in its report on that case last year. The two cases represent the world’s largest trade dispute and could help determine how not only Airbus and Boeing, but potential future competitors in China, Russia, Brazil, Japan and Canada, run their growing aircraft sectors for years to come. However, analysts say it could be months or even years before appeals and possible compliance procedures are exhausted. DISAGREE STRONGLY EADS subsidiary Airbus said the final report on the case against the United States over Boeing subsidies would damage its rival’s past claims that it was market-funded. The EU says NASA, states and the Pentagon all pumped in funds unfairly. “Boeing can no longer hide they received massive illegal subsidies that have severely harmed Airbus. Despite years of denial and attempts to minimize the research grants and state subsidies it receives, the public report will show the contrary,” spokeswoman Maggie Bergsma said. Boeing has acknowledged that the WTO backed some of the EU claims. However, the two sides disagree strongly over the amount of condemned Boeing subsidies and how they compared in size and effect with those given to Airbus. “We are fully confident that the WTO will reveal tomorrow the massive market advantage Airbus has enjoyed from illegal government subsidies for more than 40 years,” Boeing spokesman Charlie Miller said. “From media reports quoting people who have seen the ruling, it is clear that the WTO has rejected the vast majority of the EU’s claims in sharp contrast to last year’s ruling that Airbus had received illegal subsidies totaling more than $20 billion.” After an interim confidential report was delivered to the parties in January, Airbus said it showed Boeing had received at least $5 billion in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Boeing denied the assertions and said Airbus had in any case received a much larger boost from taxpayers. The two sides also disagree over whether the WTO’s findings in the earlier case will automatically disqualify possible future government loans for the Airbus A350, an aircraft which is being developed to compete with the Dreamliner. Both sides appealed aspects of the WTO’s verdict on the original U.S. case and U.S. sources say the WTO’s appeals body is expected to insist next month that Airbus remedy about $5 billion worth of illegal aid given in preferential public loans. European sources say both cases should be considered together and say the best outcome would be political compromise. Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: GLC’s Bell Says Portugal Can’t Survive Without Bailout

March 25, 2011

March 25 (Bloomberg) — Stephen Bell, chief economist at GLC Ltd., talks about the prospects for a European Union bailout of Portugal. He speaks with Francine Lacqua on Bloomberg Television’s “On The Move.”

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Portugal Government May Collapse Ahead Of Austerity Vote

March 23, 2011

LISBON, Portugal — Portugal’s government could collapse Wednesday after opposition parties withdrew their support for another round of austerity policies aimed at averting a financial bailout. The expected defeat of the minority government’s latest spending plans in a parliamentary vote will likely force its resignation and could stall national and European efforts to deal with the continent’s protracted debt crisis. The vote comes on the eve of a two-day European Union summit where policymakers are hoping to take new steps to restore investor faith in the fiscal soundness of the 17-nation eurozone, including Portugal. Last year, both Greece and Ireland had to accept massive rescue packages after markets lost faith in their governments’ efforts to deal with their debt burdens. The political tension fueled a rise in Portugal’s borrowing rates, just as it is trying to cut spending. The yield on the country’s 10-year bond, for example, was up to 7.57 percent Tuesday – just shy of its euro-era record level. The interest rate has been above 7 percent for several weeks despite the government’s earlier austerity measures which, its political rivals say, failed to quell investor fears. As in Greece, the austerity policies – including tax hikes and pay cuts – have prompted an outcry from trade unions and numerous demonstrations and strikes. Train engineers walked off the job during the morning commute Wednesday, causing widespread travel disruption. By most measures, Portugal is one of the eurozone’s smallest and feeblest economies but its financial collapse would likely trigger a fresh bout of nerves over other debt-heavy – and bigger – euro countries such as Spain, Belgium and Italy. “Portugal seems very likely to become the third … eurozone country to need a bailout,” Emilie Gay, European economist at Capital Economics said. The governing Socialist Party’s parliamentary leader Francisco Assis made an 11th-hour appeal for opposition rivals to negotiate changes to the latest austerity package and ensure the government’s survival. Prime Minister Jose Socrates, who heads the government, has said he will no longer be able to run the country if the package is rejected. “This is a decisive moment,” Assis said Tuesday. Finance Minister Fernando Teixeira dos Santos has said failure to enact the package – the fourth set of measures in 11 months – would push Portugal closer to needing financial assistance. But opposition parties say the center-left government’s latest austerity plan goes too far because it hurts the weaker sections of society, especially pensioners who will pay more tax. The package also introduces further hikes in personal income and corporate tax, broadens previous welfare cuts and raises public transport fares. The leader of the main opposition center-right Social Democratic Party, Pedro Passos Coelho, said the political deadlock made an early election “inevitable.” Markets have heaped pressure on Portugal over the past year as investors demanded ever higher returns for lending it money, driving the country’s borrowing costs to intolerable levels. Even so, the government has insisted it can weather the current difficulties and doesn’t need a bailout. The government’s austerity measures have won praise from other European countries, but they are only half the story: Portugal urgently needs to generate fresh growth. The economy is in deep trouble, with a double-dip recession expected this year and unemployment standing at a record 11.2 percent. Moody’s recently downgraded the country’s credit rating, and Standard & Poor’s has warned it may follow suit. Portugal’s plight stems from a decade of miserly growth. While growing at the tepid rate of 1 percent a year, it ran up debt to finance its western European lifestyle. Its economy is hobbled by old-fashioned practices, especially outdated labor laws which protect jobs, and has failed to keep pace with more flexible competitors. Tullia Bucco, an analyst at Unicredit in Milan, says investors who have risked their money on Portugal can take some heart from the fact that the Social Democratic Party also espouses debt reduction and increased economic competitiveness. The Social Democrats have been ahead in recent opinion polls. Even so, the winner of any election is unlikely to get an extended honeymoon period. “They could be very tough times ahead,” Bucco said.

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Ann Pettifor: If Japan Can Address Her Crises, Then the U.S. Can Address Job and Energy Insecurity

March 21, 2011

The disaster in Japan is almost beyond comprehension. Without minimizing the scale of the humanitarian tragedy, it is already possible to discern the emerging economic debate. Stock markets immediately anticipated the potential benefits to Japan’s construction industries and their suppliers. Policy makers in the U.K. and Europe, who are busy implementing austerity measures to curb budget deficits, should take note. The valuable argument coming from the ashes of this crisis is simple: Japan can afford to rebuild. The Bank of Japan is clear about this. In asserting this point, and calming markets with massive liquidity injections, the central bank is basing its Keynesian policy on a wholly different analysis from that of economists and politicians promoting austerity measures in Europe and the U.S. The economic possibilities of nations don’t depend on financial resources, but rather on human, technological and organizational power. The banking industry relies on these productive resources. The stability of banks hinges on lending for projects that will generate revenue streams for their own repayment. Power of Banking Japan is replete with all the human ingenuity and dedication that reconstruction and rebirth demands. The power of modern banking can enable Japanese society to deploy all of these resources, irrespective of the condition of Japanese public finances. The domestic banking system can circumvent the naysayers of international finance in a manner that should be understood by all financial authorities and economists. Japan can address this natural and man-made disaster without handing a begging bowl around to other nations. The same logic that enables Japan to solve its multiple crises defies European Union and American politicians who have reacted to the 2007-09 financial crisis with austerity policies. Their doctrine holds that because public finances are in disrepair we can’t address the energy or food insecurity threatening our economies, or to reduce the unemployment that jeopardizes economic, social and political stability. This diagnosis puts the cart before the horse: There is an energy and jobs crisis, not a public-finance one. Affordable Work The state of public finances is primarily a consequence of the financial crisis, the increase in insolvencies and unemployment, and the resultant decline in revenue. If there is reconstruction work that can be done by the people of Japan — and there are people to do it — it is affordable. The marvel of the domestic-banking systems that have existed since the 18th century is to permit this economic process to be stimulated. New work will generate all the public revenue necessary to repay any loans from the banking industry. The nuclear tragedy unfolding in Japan has its roots in faulty logic applied by international financiers and their “hired guns”‘ in the economics profession. Society has been convinced that nuclear power is necessary because it is the only affordable option. But all energy technologies are affordable. The real test of affordability isn’t cheapness but the most effective use of the real resources of society, taking into account threats like climate change and the risks associated with particular technology choices. Man-Made Hazard To have built nuclear power plants in the so-called Ring of Fire was to create an entirely unnecessary, man-made hazard. Decisions as to whether nuclear power is the most appropriate response to energy shortages and the threat of climate change is a question for society — not for business or finance. This is most clearly illustrated in the demonstrations and debates surrounding the forthcoming elections in Germany’s Christian-Democrat-dominated state of Baden-Wuerttemberg. It is our tragedy that policy makers permit a glimpse of these lessons only in times of war. Unemployment in peacetime, combined with risky and reckless investment, is imposed on nations by ignorance, greed and special interests. May the legacy of this appalling and destructive crisis in Japan be the abandonment of such faulty and brutal doctrines, so that the people of Japan and of the world may now turn to the possibilities of what can be achieved to restore financial stability as well as energy and job security.

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Video: Kenny Says Ireland’s Corporate Tax Rate to Remain Intact

March 17, 2011

March 17 (Bloomberg) — Irish Prime Minister Enda Kenny talks with Bloomberg’s Margaret Brennan about the country’s corporate tax rate and his desire to win changes to the rescue package for the nation’s banks by the European Union and the International Monetary Fund. They spoke in Washington yesterday. (This is an excerpt of the full interview. Source: Bloomberg)

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Microsoft Rated More Ethical Than Google, Facebook, Apple

March 17, 2011

Ethisphere has rated Microsoft among the most ethical companies in the world, a distinction not granted to tech giants Apple, Facebook or even “don’t be evil” Google. According to the Ethisphere Institute , “the World’s Most Ethical Company designation is awarded to those companies that have leading ethics and compliance programs, particularly as compared to their industry peers.” This list of decidedly reputable companies spans a wide range of industries, including computer software, food stores, telecom services, banking and aerospace. Companies are evaluated based on corporate citizenship and responsibility, corporate governance, innovation that contributes to the public well being, industry leadership, and several other categories. “Microsoft started to make a big ‘corporate citizenship’ push in the early 2000s following the negative fallout from its antitrust trials, and has since donated millions to non-profits, invested in programs for economic development, and tightened up its internal reporting processes. All of this was apparently enough to get the company on the list this year,” writes Business Insider. This year, Ethisphere honored 110 companies with its do-gooder award. eBay, Adobe Systems and Whole Food Market also qualified. As noted by Forbes , this list is not a ranking system, and all companies are considered equal. Litigation and ethics violations generally keep companies off the list, according to Ethisphere. CNET reports that Google has made the World’s Most Ethical list in the past, but that it may have been passed over this year because of the European Union’s antitrust investigation against the company. Google also faces antitrust scrutiny from the U.S. government. Visit Ethisphere’s website to view all 110 of the World’s Most Ethical Companies .

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Video: Callow Says EU Summit Won’t Yield `Breathtaking’ Results

March 11, 2011

March 11 (Bloomberg) — Julian Callow, chief European economist at Barclays Capital, talks about the outlook for today’s meeting of European Union leaders in Brussels. Callow speaks from London with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Dan Dorfman: On the Trail of the Next Revolution

March 2, 2011

From Tunisia to Egypt to Libya. So where does the parade of revolutions head next? Did I hear someone blurt out Bahrain, Yemen or maybe Oman? Sounds reasonable to me since all three have been stung by recent protests and riots. Or maybe, suggests Jordan militant and trader Caise Hassan, even Saudi Arabia, the world’s biggest oil exporter, whose stock market slumped to a nine-month low on a hefty 11.6 percent loss in just the past three days alone on fears the demonstrations in Libya could spread there. But wait. Bryan Rich, editor of the World Currency Trader, a Florida-based investment newsletter that tracks the action in currencies around the globe, offers another perspective. “Don’t rule out Europe, especially Ireland and Greece,” he says. Surprisingly, he thinks the social unrest could also strike China and India, the planet’s two fastest growing economies. Why so? Because despite the growth, he feels both countries are vulnerable to such strife as they have the world’s largest poor populations where the distribution of wealth has become increasingly disparate. Russia and Brazil are also included in his candidates for social unrest. “But before we see social unrest in China and India choke off global growth, Europe may derail the world’s economic recovery first,” says Rich. His warning about fresh European unrest sounds like old news, since riots and demonstrations have already happened there. What’s more, they’ve been widely reported. Rich, though, looks at it as new news. In essence, he sees a resumption of the protests and riots that occurred in a number of Eurozone countries during the past few years as a result of the sovereign debt crises, possibly within the next three months. “Unrest begets more unrest; it’s contagious,” he says. Judging from last year’s $1 trillion rescue package from the European Union and the nonstop climb in stock prices here, Wall Street is clearly viewing future European risks as ho-hum. Rich, though, isn’t yawning. In contrast, he expresses concern, essentially arguing that Europe’s financial dilemma remains serious and explosive and could resurface in a major way at any time. Why could we see renewed chaos in Greece and Ireland (Rich also tosses in Spain and Portugal)? Because all the ingredients in Europe are there, explains Rich, such as high unemployment, stagnant growth, austerity measures, and little hope of restoring the standards of living of three to five years ago. He also points to Europe’s fractured fiscal policies, flawed structures and the lack of a unified monetary policy. Given the massive $2 trillion exposure European banks have to Eurozone sovereign debt, “government defaults,” warns Rich, “could easily send the global financial system back into a dangerous tailspin.” He also believes that if people in the weak Eurozone countries get fed up with the reality of austerity and rising food costs, they could well stand up to their governments and scream “no more.” That implies, as well, a call for a reduction of the interest on their debt and the need for bondholders to be willing to accept losses. What does all all of this mean? Some of the ominous possibilities, as Rich sees them, economic shocks that threaten stability, runs on European banks, which we’re already seeing to some degree in Ireland and Greece, the withdrawal from the European Union of some PIIGS (Portugal, Ireland, Italy, Greece and Spain), a big decline in the Euro and a massive sell off of equities around the globe, including the U.S. Viewed as yet another likely result: a flight into the dollar as a safe haven. What do you think? E-mail me at Dandordan@aol.com.

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Video: Munchau Says Italy’s Draghi Is Front-Runner to Head ECB

February 14, 2011

Feb. 14 (Bloomberg) — Wolfgang Munchau, co-founder of the Eurointelligence website, talks about potential successors to Jean-Claude Trichet at the European Central Bank. Munchau also discusses proposals to expand the European Financial Stability Facility, the European Union’s bailout mechanism. He speaks from Brussels with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

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Ireland Credit Rating Slashed Again

February 2, 2011

DUBLIN — Ratings agency Standard & Poor’s cut its credit grade for Ireland on Wednesday and warned it could fall further because of doubts about the true scale of defaulting loans yet to surface in the country’s largely state-owned banks. S&P joined fellow agencies Moody’s and Fitch in dropping Ireland’s credit score following the nation’s November negotiation of a potential euro67.5 billion ($93 billion) credit line from the European Union and International Monetary Fund. Ireland already has drawn down euro8.4 billion ($11.6 billion) this year from that rescue fund – and plowed much of it straight into the cash-strapped coffers of Dublin banks. Still, S&P’s reduction Wednesday was just one notch to A minus, one step above the multi-grade cuts imposed last month by Moody’s and Fitch. Both dropped Ireland into the higher-risk BBB tier in the immediate wake of the EU-IMF bailout deal. The BBB level is considered the lowest investment-grade rating, whereas BB and lower indicate “junk bond” status. S&P senior analyst Frank Gill warned the agency could also drop Ireland’s rating somewhere into the BBBs in April, once a new Irish government settles in and the impact of the current infusion of EU-IMF cash into Dublin banks can be assessed. The S&P announcement coincided with Wednesday’s formal launch of campaigning for Ireland’s Feb. 25 election. The free-market government of Prime Minister Brian Cowen – who presided over the country’s spectacular collapse from Celtic Tiger success in 2007 to a bank-crippled debtor today – is universally forecast to be ousted from power in favor of a left-leaning coalition. The two parties expected to form the next coalition government, Fine Gael and Labour, are both campaigning on promises to reopen negotiations with the EU and IMF to loosen some of the strings attached to the aid deal. Both question Cowen’s determination to slash euro15 billion ($21 billion) from the economy over the next four years through spending cuts and tax hikes. Troublingly, the two would-be government partners criticize Cowen’s brutal austerity effort from opposite extremes, with Fine Gael favoring more cuts and Labour insisting on more taxes for the rich. Gill warned that Ireland’s economic forecasts presume that the total bank-bailout bill funded by taxpayers won’t top euro50 billion ($70 billion) while the current unemployment rate of 13.4 percent – near a 17-year high – will stabilize in 2011 and decline in 2012. He noted the total debts of the six Irish banks – Allied Irish Banks, Bank of Ireland, Irish Life & Permanent, Anglo Irish Bank, Irish Nationwide and Educational Building Society – actually approach euro275 billion ($375 billion), more than 170 percent of Ireland’s gross domestic product. “Irish domestic banks currently depend almost entirely on the (European Central Bank) to refinance expiring market debt,” Gill said. “Were the labor market to deteriorate further, a rise in the level of delinquencies in the domestic banks’ mortgage books could result in higher new capital requirements than we presently assume,” Gill said. On the flip side, he said Ireland’s prospects would be boosted if European Union leaders agree to change its bailout rules, which currently require donors to tack a profit margin on its loans of approximately 3 percentage points. That means Ireland’s EU-IMF loan package comes with an average interest rate of 5.8 percent rather than the donors’ actual financing costs of 2.8 percent. This premium will add tens of billions to Ireland’s annual deficits, which last year soared to a modern European record of 32 percent of GDP. European leaders are also planning to discuss this week possible bailout-rules reforms that would make it easier for governments to negotiate hefty discounts on repayments to a bank’s foreign creditors. Ireland so far has repaid tens of billions to those banks and hedge funds rather than risk poisoning the country’s credit worthiness with a major default. Ireland’s government and main opposition parties remain publicly committed to a goal of slashing the deficit to just 3 percent of GDP by 2014, the limit that eurozone members are supposed to observe. But that plan presumes Ireland’s economy will grow by at least 2 percent each year, whereas the most recent forecasts from the Irish Central Bank and the Economic and Social Research Institute, Ireland’s main think tank, expect much weaker growth if any in 2011.

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Video: Almunia Says WestLB Must Meet Deadline for Restructuring

January 28, 2011

Jan. 28 (Bloomberg) — European Union Competition Commissioner Joaquin Almunia talks about the bloc’s dispute with WestLB AG over restructuring necessary to compensate for government aid. WestLB was ordered by the EU in 2009 to shrink its balance sheet and reduce risk. Almunia speaks with Francine Lacqua on Bloomberg Television’s “On The Move” from the World Economic Forum meeting in Davos, Switzerland.

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Video: Halpenny Says EU Needs Weaker Euro to Stem Crisis

January 14, 2011

Jan. 14 (Bloomberg) — Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., discusses the outlook for the European Union’s sovereign debt crisis. Halpenny speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Video: Pope Commits Vatican to European Money-Laundering Rules

December 30, 2010

Dec. 30 (Bloomberg) — Pope Benedict XVI committed the Vatican to upholding European Union rules against money laundering and financial fraud amid an Italian probe into the Holy See’s banking operations. Bloomberg’s Lorenzo Totaro reports. (Source: Bloomberg)

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China To Cut Crucial Rare Earths Export Quotas

December 29, 2010

BEIJING — China said it is reducing the amount of rare earths it will export for the first half of the year by more than 10 percent – likely to be an unpopular move worldwide since the minerals are vital to the manufacture of high-tech products. China accounts for 97 percent of the global production of rare earths, which are essential to devices as varied as cell phones, computer drives and hybrid cars. Countries were alarmed when Beijing blocked shipments of the minerals to Japan earlier this year amid a dispute over islands claimed by both countries. Concerns over China’s grip on rare earths has led countries on a hunt for alternative sources. A number of companies in North America – notably Molycorp Inc. in the U.S. and Thompson Creek Metals Co. in Canada – are hurrying to open or reopen rare earth mines. Two Australian companies are also preparing to mine rare earths. China has been reducing export quotas of rare earths over the past several years to cope with growing demand at home. A Commerce Ministry spokesman has also said that China is cutting its exploration, production and exports out of environmental concerns. Numbers released Tuesday by China’s Commerce Ministry show export quotas of the rare minerals will be down 11 percent next year as compared to the same period this year. China usually issues a second batch of quotas during the year, and it is not known how the figures will change later in 2011. The new numbers say China is allocating 14,446 tons (13,105 metric tons) of rare earths among 31 companies. China allocated 16,304 tons (14,790 metric tons) among 22 companies in the first batch of quotas this year. The ministry said in a online statement late Tuesday that the quotas for the rest of the year were still under discussion and would be released later. The statement also cautioned that it wasn’t appropriate to guess the trend of future quotas based on the first allocation. Earlier this month, state media reported that China plans to raise duties on some rare earth exports starting next year, but it did not say which minerals would be affected or how much the tax would be. A state media report Tuesday said China is preparing to set up a rare earths association that would include nearly all of the country’s leading rare earth companies, and could help them to coordinate their negotiating position. The report posted on the Sina Corp. portal said the association should be set up in May. The United States last week threatened to go to the World Trade Organization with its concerns over China and rare earths. When asked for comment during a regular press briefing Tuesday, China Foreign Ministry spokeswoman Jiang Yu declined to answer. But China has had to address the global concerns numerous times since the spat with Japan. “China is not using rare earth as a bargaining chip,” Wen Jiabao, China’s top economic official, told a China-European Union business summit in Brussels in October.

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Could China’s Latest Decision Lead To More U.S. Mining?

December 28, 2010

BEIJING — China said Tuesday it is reducing the amount of rare earths it will export next year by more than 10 percent – likely to be an unpopular move worldwide since the minerals are vital to the manufacture of high-tech products. China accounts for 97 percent of the global production of rare earths, which are essential to devices as varied as cell phones, computer drives and hybrid cars. Countries were alarmed when Beijing blocked shipments of the minerals to Japan earlier this year amid a dispute over disputed islands. Concerns over China’s grip on rare earths has led countries on a hunt for alternative sources. A number of companies in North America – notably Molycorp Inc. in the U.S. and Thompson Creek Metals Co. in Canada – are hurrying to open or reopen rare earth mines. Two Australian companies are also preparing to mine rare earths. Numbers released Tuesday by China’s Commerce Ministry show export quotas of the rare minerals will be down 11 percent next year as compared to the same period this year. China usually issues a second batch of quotas during the year, and it is not known how the figures will change later in 2011. The new numbers say China is allocating 14,446 tons (13,105 metric tons) of rare earths among 31 companies. China allocated 16,304 tons (14,790 metric tons) among 22 companies in the first batch of quotas this year. China has been reducing export quotas of rare earths over the past several years to cope with growing demand at home. A Commerce Ministry spokesman has also said that China is cutting its exploration, production and exports out of environmental concerns. Earlier this month, state media reported that China plans to raise duties on some rare earth exports starting next year, but it did not say which minerals would be affected or how much the tax would be. A state media report Tuesday said China is preparing to set up a rare earths association that would include nearly all of the country’s leading rare earth companies, and could help them to coordinate their negotiating position. The report posted on the Sina Corp. portal said the association should be set up in May. The United States last week threatened to go to the World Trade Organization with its concerns over China and rare earths. When asked for comment during a regular press briefing Tuesday, China Foreign Ministry spokeswoman Jiang Yu declined to answer. But China has had to address the global concerns numerous times since the spat with Japan. “China is not using rare earth as a bargaining chip,” Wen Jiabao, China’s top economic official, told a China-European Union business summit in Brussels in October.

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Another EU Country Has Its Debt Downgraded

December 23, 2010

LONDON — Portugal had its credit rating downgraded Thursday by the Fitch Ratings agency amid mounting concerns over the country’s ability to raise money in the markets to finance its hefty borrowings. Fitch said it was reducing its rating on the country’s debt by one notch to A+ from AA- and warned that further downgrades may be in the offing by maintaining its negative outlook. “The downgrade reflects an even slower reduction in the current account deficit and a much more difficult financing environment for the Portuguese government and banks than incorporated into Fitch’s previous rating (in March), as well as a deteriorating near-term economic outlook,” Fitch said in a statement. Fitch’s downgrade follows a warning earlier this week from rival Moody’s Investor Services that it may cut its A1 rating on Portugal by a notch or two because of uncertain economic growth, the high cost of borrowing on global markets and worries about the banking sector. Fitch’s reasoning is very similar and is likely to stoke renewed speculation that Portugal could well be the next country using the euro in need of financial help from its partners in the European Union and the International Monetary Fund – Greece and Ireland have already suffered the ignominy of being bailed out. The agency said the Portuguese government would likely meet its target of reducing its budget deficit to 7.3 percent of national income this year, but voiced concerns that this is heavily dependent on one-time measures, which don’t make a dent on the long-term state of the public finances. As a result, Fitch said the government will find it “extremely challenging” getting the budget into shape, especially if, as the agency expects, the economy falls into recession next year. The Portuguese government aims to reduce the budget deficit to 3 percent of GDP by 2012 and to just 2 percent of 2013, which would be extremely difficult if the eurozone’s smallest economy starts to contract again – in effect, lower growth means lower tax receipts and higher social spending, hardly conducive to budgetary health. “Failure to meet its 2011 budget headline and structural deficit targets would erode confidence in the medium-term sustainability of public finances that underpins Portugal’s current sovereign ratings,” Fitch said.

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Another EU Country Has Its Debt Downgraded

December 23, 2010

LONDON — Portugal had its credit rating downgraded Thursday by the Fitch Ratings agency amid mounting concerns over the country’s ability to raise money in the markets to finance its hefty borrowings. Fitch said it was reducing its rating on the country’s debt by one notch to A+ from AA- and warned that further downgrades may be in the offing by maintaining its negative outlook. “The downgrade reflects an even slower reduction in the current account deficit and a much more difficult financing environment for the Portuguese government and banks than incorporated into Fitch’s previous rating (in March), as well as a deteriorating near-term economic outlook,” Fitch said in a statement. Fitch’s downgrade follows a warning earlier this week from rival Moody’s Investor Services that it may cut its A1 rating on Portugal by a notch or two because of uncertain economic growth, the high cost of borrowing on global markets and worries about the banking sector. Fitch’s reasoning is very similar and is likely to stoke renewed speculation that Portugal could well be the next country using the euro in need of financial help from its partners in the European Union and the International Monetary Fund – Greece and Ireland have already suffered the ignominy of being bailed out. The agency said the Portuguese government would likely meet its target of reducing its budget deficit to 7.3 percent of national income this year, but voiced concerns that this is heavily dependent on one-time measures, which don’t make a dent on the long-term state of the public finances. As a result, Fitch said the government will find it “extremely challenging” getting the budget into shape, especially if, as the agency expects, the economy falls into recession next year. The Portuguese government aims to reduce the budget deficit to 3 percent of GDP by 2012 and to just 2 percent of 2013, which would be extremely difficult if the eurozone’s smallest economy starts to contract again – in effect, lower growth means lower tax receipts and higher social spending, hardly conducive to budgetary health. “Failure to meet its 2011 budget headline and structural deficit targets would erode confidence in the medium-term sustainability of public finances that underpins Portugal’s current sovereign ratings,” Fitch said.

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Video: Winkler Says Bloomberg Sues ECB Over Swaps Disclosure

December 22, 2010

Dec. 22 (Bloomberg) — Matthew Winkler, editor-in-chief of Bloomberg News, discusses the news agency’s lawsuit against the European Central Bank. The lawsuit, filed by Bloomberg Finance LP, the parent of Bloomberg News, asks the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose documents that show how Greece used derivatives to hide its fiscal deficit. Winkler speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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Video: Winkler Says Bloomberg Sues ECB Over Swaps Disclosure

December 22, 2010

Dec. 22 (Bloomberg) — Matthew Winkler, editor-in-chief of Bloomberg News, discusses the news agency’s lawsuit against the European Central Bank. The lawsuit, filed by Bloomberg Finance LP, the parent of Bloomberg News, asks the European Union’s General Court in Luxembourg to overturn a decision by the ECB not to disclose documents that show how Greece used derivatives to hide its fiscal deficit. Winkler speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (Source: Bloomberg)

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Pfizer Withdraws Blood Pressure Drug Over Fatal Liver Damage

December 10, 2010

NEW YORK — Pfizer Inc. said Friday it is pulling its blood pressure drug Thelin off the market and stopping all clinical trials because the drug can cause fatal liver damage. Thelin is sold in the European Union, Canada, and Australia as an oral treatment for severe pulmonary arterial hypertension, or high blood pressure in the pulmonary artery. Pfizer said a review of data from clinical trials and post-marketing reports showed a new link to liver injury. It also consulted with experts about the link between Thelin and the deaths of two patients. Liver damage was a known side effect of Thelin and similar drugs, the company said. Pfizer said the withdrawal was voluntary and added that it has withdrawn its filing for marketing approval in the U.S. Since there are other treatment options, Pfizer said the benefits of Thelin don’t outweigh the risks. It is stopping all studies of the oral drug, which Pfizer acquired in 2008 when it bought Encysive Pharmaceuticals Inc. Encysive had been trying to win marketing approval for Thelin since 2005, but the Food and Drug Administration said it was not effective enough. Other agencies only approved the drug for hypertension that was so debilitating that patients’ physical activity was severely limited. The chemical name of Thelin is sitaxsentan. In premarket trading, shares of Pfizer shed 9 cents to $16.67 from Thursday’s close of $16.76.

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Spain Approves New Austerity Measures, Limited Stimulus

December 4, 2010

MADRID — The Spanish government approved new austerity measures and a limited economic stimulus package to ease investor fears about its debt – and insisted again it was taking strong steps to right its ailing economy. Markets responded positively to Friday’s actions after weeks of turmoil, but the country was thrown into chaos again after air traffic controllers unexpectedly staged a massive sickout just hours after top government officials endorsed a move to partially privatize key airports. At least 200,000 travelers were stranded on the eve of a long holiday weekend. Prime Minister Jose Luis Rodriguez Zapatero ordered the military to take over air traffic control, but there was no immediate information when flights would resume. Zapatero himself canceled a trip to an Iberoamerican summit in Argentina so he could preside over the cabinet meeting where plans were also approved to sell off a 30 percent stake in the government-owned national lottery, cutbacks to a key jobless benefit, tax cuts for small businesses and an increase in the tobacco tax. “We believe we are contributing to the momentum of the country’s economic activity with this reform package,” said Economy Minister Elena Salgado. “We are eliminating obstacles and reducing costs.” The latest measures, first announced Wednesday by Zapatero, were welcomed by both markets and the European Union after weeks of speculation that Portugal and Spain could follow Greece and Ireland in needing a massive financial bailout. Spanish and Portuguese stocks recovered Friday for the third consecutive day, reversing severe losses last week. Spain’s benchmark index closed 0.7 percent higher, while Portugal’s ended the day with a similar gain. Borrowing costs in countries also eased Friday, a day after the European Central Bank said it would keep helping the continent’s banks and amid speculation it may also be quietly buying the bonds of debt-burdened eurozone countries. The yield on Portuguese 10-year bonds fell below 6 percent for the first time in three months, while Spanish yields hovered around 5 percent after reaching 5.7 percent earlier this week. Germany’s 10-year bonds, a benchmark of global lending safety, stood at 2.8 percent. But just after the markets closed, Spain was forced to shut down the eight airports and airspace around Madrid because the controllers left their posts or didn’t show up to work. The head of Spain’s air traffic authority, Juan Ignacio Lema, called the sickout “intolerable” and apologized to Spaniards. Monday and Wednesday are holidays in Spain, and many Spaniards take advantage of the days off for a five-day weekend or a week of vacation. Airlines told passengers that many flights would not leave Saturday, and Spanish government officials did not immediately say when the military would be able to restore air travel order. Spain’s air traffic controllers have been involved in a long negotiation process with officials over wages, working conditions and privileges. The dispute intensified in February when the government restricted overtime and thus cut average pay of controllers from euro350,000 ($464,000) a year to euro200,000 ($265,000). In less than three years, Spain has tumbled from being Europe’s top job creator to having a eurozone high unemployment rate of nearly 20 percent, with nearly 5 million people out of work. Spain – limping out of nearly two years of recession triggered by a collapse in its real estate sector – is hoping to slash its deficit from 11.2 percent of GDP in 2009 to within the EU limit of 3 percent by 2013. In May, when markets were spooked by the near-bankruptcy of Greece, Spain cut wages for civil servants, froze most retirement pensions, and made it easier and cheaper for companies to lay people off. Zapatero’s Socialist government also pledged to reform the pension system by Jan. 28, and is likely to raise retirement age from 65 to 67, an unpopular move that sparked a nationwide strike in September. The government hopes to raise euro9 billion ($11.9 billion) by selling a 49 percent stake in Spain’s airports in a deal that would also shift the management of Madrid’s Barajas and Barcelona’s El Prat airports to the private sector. Selling the lottery stake would give Spain up to euro5 billion ($6.6 billion). The lottery, famed for its Dec. 22 “El Gordo” (The Fat One) game, brings some euro3 billion ($3.9 billion) into the state’s coffers annually. Meanwhile, some 40,000 small and medium-size companies are expected to benefit from the tax cut. The measures also include a reduction in costs and bureaucracy for people setting up new companies, making it possible to incorporate a new small business in a day for around euro100 ($132). A special subsidy of euro426 ($564) for people whose unemployment benefits have run out will not be renewed beginning in February. ___ Ciaran Giles and Harold Heckle in Madrid contributed.

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EU Agrees To $89 Billion Bailout For Ireland

November 28, 2010

BRUSSELS — European Union nations agreed to give euro67.5 billion ($89.4 billion) in bailout loans to Ireland on Sunday to help it weather the cost of its massive banking crisis, and sketched out new rules for future emergencies in an effort to restore faith in the euro currency. The rescue deal, approved by finance ministers at an emergency meeting in Brussels, means two of the eurozone’s 16 nations have now come to depend on foreign help and underscores Europe’s struggle to contain its spreading debt crisis. The fear is that with Greece and now Ireland shored up, speculative traders will target the bloc’s other weak fiscal links, particularly Portugal. In Dublin, Irish Prime Minister Brian Cowen said his country will take euro10 billion immediately to boost the capital reserves of its state-backed banks, whose bad loans were picked up by the Irish government but have become too much to handle. Another euro25 billion will remain in reserve, earmarked for the banks. The rest of the loans will be used to cover Ireland’s deficits for the coming four years. EU chiefs also gave Ireland an extra year, until 2015, to reduce its annual deficits to 3 percent of GDP, the eurozone limit. The deficit now stands at a modern European record of 32 percent because of the runaway costs of its bank-bailout program. Cowen said the accord – reached after two weeks of tense negotiations in Brussels and Dublin to fathom the true depth of the country’s cash crisis – “provides Ireland with vital time and space to successfully and conclusively address the unprecedented problems that we’ve been dealing with since this global economic crisis began.” However, in a surprise accounting move, European and IMF experts decided that Ireland first must run down its own cash stockpile and deploy its previously off-limits pension reserves in the bailout. Until now Irish and EU law had made it illegal for Ireland to use its pension fund to cover current expenditures. This move means Ireland will contribute euro17.5 billion to its own salvation. The three groups offering funds to Ireland – the 16-nation eurozone, the full 27-nation EU, and the global donors of the International Monetary Fund – each have committed euro22.5 billion ($29.8 billion). Extra bilateral loans from Sweden, Denmark and Britain are included within the EU contribution totals. Ireland’s finance ministry said the interest rates on the loans would be 6.05 percent from the eurozone fund, 5.7 percent from the EU fund and 5.7 percent from the IMF. That’s higher than the 5.2 percent being paid by Greece for its own May bailout. Ajai Chopra, deputy director of the IMF’s European division who oversaw the Dublin negotiations, confirmed Ireland’s government would have freedom to set its own spending and tax plans. He said Ireland will have 10 years to pay off its IMF loans, and that the first repayment won’t be required until 4 1/2 years after a drawdown. Greece, in contrast, has three years to repay its loans. Chopra said Ireland’s decision to use its pension reserve fund had helped win the confidence of those who offered help. He declined to say if negotiators had demanded Dublin use its reserves under terms of the deal. “It makes total sense to use them at this time. I think this is quite unique in this type of arrangements and it will be taken as a sign of underlying strength,” he said. Embattled Prime Minister Cowen told a press conference that Ireland had no choice but to take help, because international investors had decided that lending to Ireland was too risky and were demanding unreasonable returns. The yield on 10-year Irish bonds rose Friday to a euro-era high of 9.2 percent. “If we didn’t have this program, we would have to go back to the markets, which as you know are at prohibitive rates,” Cowen said. “We would pay far more.” Still, analysts and opposition leaders in Ireland warned that the country of 4.5 million was taking on a bill it couldn’t afford to repay at rates exceeding 5 percent. Michael Noonan, finance spokesman of the main opposition Fine Gael party, said he believed that fellow EU members – particularly Germany, the eurozone’s bankroller – didn’t want to give money too cheaply to Ireland, for fear that Dublin would grow addicted to it. Noonan said the loans were “pitched high to drive us back into the market,” and would encourage Ireland to pursue maximum austerity measures in hopes of reassuring the bond markets. Cowen told reporters there had been no support in talks to ask senior bondholders to lose part of their stake on loans made to Ireland’s debt-crippled banks. “There was no agreement from the European Union for such a proposal, because of the impact it could have in the relation to the stability of the entire banking system,” he said. Ireland in recent days committed to slashing euro10 billion from spending and raising euro5 billion in new taxes over the coming four years, with the harshest steps coming in the 2011 budget to be unveiled Dec. 7. Cowen has only a two-vote majority in parliament. Last week he pledged to dissolve parliament for early elections next year – but only after the budget is fully enacted. Opposition leaders won’t say if they will support the budget, leaving Cowen vulnerable to losing a key budget-related vote within the next two months. To shore up longer-term confidence in the euro, EU finance ministers also agreed on a permanent mechanism that from 2013 would allow a country to restructure its debts once it has been deemed insolvent. Jean-Claude Juncker, the head of the Eurogroup, which represents the 16 euro nations, said private creditors would be forced to take losses only if ministers agreed unanimously that the country had run out of money. He said that if a country is merely facing a crisis of liquidity, it would get financial help similar to the bailout agreed for Ireland. European Central Bank chief Jean-Claude Trichet said making senior bondholders – chiefly banks that loan to other banks – suffer losses when a nation’s finances head toward bankruptcy would be “fully consistent” with existing IMF policies. ___ Pogatchnik contributed from Dublin. David Stringer in Dublin also contributed.

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Irish Official: Bailout Deal Coming Sunday

November 28, 2010

DUBLIN–Irish Communications Minister Eamon Ryan said Saturday that talks between the EU and the International Monetary Fund on an €85 billion ($112.5 billion) Irish aid package will conclude Sunday, and he described as “inaccurate” speculation that the interest rate on loans would be as high as 6.7%. European Union finance ministers will meet Sunday in Brussels for talks on the bailout package, the U.K. treasury confirmed. U.K. Chancellor of the Exchequer George Osborne will travel to the event. It is understood the original push for the meeting came from France. It had previously been thought the finance ministers would speak by telephone on Sunday to discuss the package. “There’s got to be some clarity on our deal before Monday because what we’ve seen is a real uncertainty affecting markets, affecting this country, affecting other countries,” he told state broadcaster RTE Radio. He is a member of the Green Party, the junior coalition partner.

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Ireland Applying For Bailout From European Union, IMF

November 21, 2010

DUBLIN — Ireland’s finance minister said Sunday that he would back a move to ask the international community for tens of billions of euros in loans and guarantees to keep his country’s crisis-hit finances afloat. Brian Lenihan said that the country was running a deficit of 19 billion euros which it could not afford to finance at current market rates and was going to the European Union and International Monetary Fund to ask for help. Lenihan also confirmed that officials were seeking a mammoth contingency fund to provide “firepower” to back the country’s debt-ridden banks. In an interview with RTE radio, he refused to be drawn on the size of the fund, although he said the figure would not reach100 billion euros. Lenihan’s statement came as the government gathered to finish a four-year plan for slashing euro15 billion ($20.5 billion) from its annual deficits, an unprecedented austerity push designed to keep the country from bankruptcy. The office of Prime Minister Brian Cowen said the 15-member Cabinet would put the finishing touches on the austerity plan. It has been in the works since September, runs to 160 pages and is expected to be publicly unveiled Tuesday. The government says the still-confidential plan has been endorsed by dozens of experts from the International Monetary Fund, European Commission and European Central Bank, who descended Thursday on Dublin to begin poring over the accounts of the government, treasury and banks. Speaking before Sunday’s meeting, Cowen stressed that Ireland would not raise its 12.5 percent rate of tax on business profits, its most powerful lure for attracting and keeping 600 U.S. companies based here. France, Germany and other eurozone members have repeatedly criticized the rate as unfair and say it should be raised now given the depth of Ireland’s red ink. Cowen said he wouldn’t be budged by such arguments, calling the 12.5 percent rate – less than half the eurozone average – “a cornerstone of our industrial strategy.” Eurozone governments launched the IMF-EU mission after the European Central Bank – the ultimate arbiter of the 16-nation euro currency area – expressed private misgivings about the flight of corporate deposits from Ireland’s banks since the summer. In recent weeks Dublin banks have reported losing 10 percent to 17 percent of their deposits, and the Frankfurt-based ECB had to fill the gap with its own loans totaling a reported euro130 billion, one quarter of the central bank’s entire loan book.

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Video: McCarthy Says Ireland Won’t Increase Corporation Tax

November 19, 2010

Nov. 19 (Bloomberg) — Tom McCarthy, chief executive officer of the Irish Management Institute, talks about the prospects for Ireland raising its corporate tax rate as part of a European Union and International Monetary Fund bailout of the country’s banks. He speaks with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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Video: McCarthy Says Ireland Won’t Increase Corporation Tax

November 19, 2010

Nov. 19 (Bloomberg) — Tom McCarthy, chief executive officer of the Irish Management Institute, talks about the prospects for Ireland raising its corporate tax rate as part of a European Union and International Monetary Fund bailout of the country’s banks. He speaks with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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Video: Ireland Says Corporation Tax Rate Not Up for Negotiation

November 19, 2010

Nov. 19 (Bloomberg) — Bloomberg’s Elliott Gotkine reports from Dublin on the start of loan negotiations with European Union and International Monetary Fund officials that may threaten the country’s low-tax policies.

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Video: Blanchflower Says Irish Crisis May Lead to Contagion

November 17, 2010

Nov. 17 (Bloomberg) — David Blanchflower, an economics professor at Dartmouth College and a former Bank of England policy maker, discusses Ireland’s talks with the European Union about a possible bailout for the country’s banks. Neel Kashkari, head of new investment initiatives at Pacific Investment Management Co., also speaks. They speak with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Video: Choudry Says Euro Zone Isn’t Sustainable `In Long Run’

November 17, 2010

Nov. 17 (Bloomberg) — Moorad Choudhry, head of business treasury, global banking and markets at Royal Bank of Scotland Group Plc, talks about the outlook for the euro zone as Ireland seeks a European Union bailout for the country’s banks. He speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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Video: Halpenny Says Corporate Deposits at Irish Banks Dropping

November 17, 2010

Nov. 17 (Bloomberg) — Derek Halpennny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ, talks about Ireland’s talks with the European Union about a possible bailout for the country’s banks. He speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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Video: Chatwell Says EU Debt Woes Need `Shock And Awe Tactics’

November 16, 2010

Nov. 16 (Bloomberg) — Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank, talks about the prospects of Ireland accepting a European Union bailout. He speaks with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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