spain

Venezuela inks deal with Repsol, Eni to develop gas field

by on December 24, 2011

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(MENAFN) Venezuela’s Energy Minister, Rafael Ramirez, said that the government inked a deal with Spain’s Repsol-YPF and Italy’s Eni SpA in order to develop a gas field, reported AP. Ramirez added …

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Venezuela inks deal with Repsol, Eni to develop gas field

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Spain Q2 growth slows

by on August 27, 2011

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(MENAFN) Ben May, economist at Capital Economics said that the Spanish economy grew at a slower pace in the second quarter than the first of the current year, fuelling concerns Spain could slip back …

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Spain Q2 growth slows

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Euro hikes after Spain bonds sale

June 2, 2011

Euro hikes after Spain bonds sale

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CRU 16th World Aluminium Conference To Be Held On 13-15 June In Barcelona, Spain

May 24, 2011

CRU 16th World Aluminium Conference To Be Held On 13-15 June In Barcelona, Spain

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Video: Ghemawat Says Spain Should Focus on Small Companies

May 16, 2011

May 16 (Bloomberg) — Pankaj Ghemawat, a professor at the IESE Business School, talks about the prospects for Spain and Portugal stimulating economic growth amid the European debt crisis. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

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Spain’s Unemployment Rate Hits New Eurozone Record

April 29, 2011

MADRID — Spain’s unemployment rate rose sharply to a new eurozone high of 21.3 percent in the first quarter of the year, with a record 4.9 million people out of work, the government said Friday. The rate was the highest reported by the country since 1997. Joblessness during the January-March period jumped 1 percentage point from 20.3 percent at the end of 2010, and adds pressure on Spain as it tries to recover from nearly two years of recession and convince investors that it can handle its heavy debt load. The country is struggling to shift away from dependence on the construction sector, which supported growth for years until the financial crisis popped the Spain’s real estate bubble, as well as make the economy more competitive and reduce national debt. The number of unemployed people in Spain stood at 4,910,200 at the end of March, up about 214,000 from the previous quarter, said the National Statistics Institute, or INE. In an unemployment line in a working-class Madrid neighborhood, people grimly waiting to sign up for benefit payments said they saw little hope of finding new jobs for years. Johnny Albuja, 29, was laid off from his job cleaning offices when the company he worked for lost a contract, but only expected to get unemployment benefits for three months since he worked for the company for just one year. Over the past year, his father and brother were laid off from a metal works company as demand plummeted. “The situation is really difficult right now,” Albuja said. “You can’t live well, you still have to pay the mortgage and it’s tough to get by.” The jobless rate is now at its highest since the first quarter of 1997, when it was 21.3 percent, although officials have since changed the way they measure unemployment, said an INE official who spoke on condition of anonymity in keeping with agency policy. But the overall number of people unemployed is a record, the agency said. Jobs were lost across the entire Spanish economy, with services, manufacturing, agriculture and construction all taking hits. Adding to the bad news for households, consumer prices rose sharply, INE said Friday. The consumer price inflation rate jumped to an annual 3.8 percent in April, up two-tenths of a point from March. Higher fuel prices prompted by unrest in the Middle East and North Africa have been pushing the rate up since January. Spain must hold a general election by March 2012, and polls show the governing Socialists trailing badly. Prime Minister Jose Luis Rodriguez Zapatero has stated he will not seek a third term. As much of Europe and Germany in particular recovers from the global recession, Spain is forecasting meager growth of just 1.3 percent for itself in 2011, and even the Bank of Spain says that prediction is too optimistic. The government has said it expects job-creation to improve in the second half of the year. The second and third quarters of the year traditionally boost Spain’s economy as tourists flock to the nation. Spain’s tourism sector accounts for 11 percent of the country’s gross domestic product. Friday’s report said the number of households in which everyone is unemployed rose by 58,000 to about 1.4 million. It is common for young Spaniards to live at home well into their 30s, in part because traditionally it has been so hard for them to find jobs. The numbers came out on the same day the government was expected to approve a plan to crack down on tax evasion by flushing out the country’s vibrant underground economy. Many small- and medium-sized companies have workers whom they pay fully or partially under the counter to skirt tax and social security obligations, and some estimates say the underground economy accounts for 20 percent of Spanish economic output. ___ Alan Clendenning contributed to this report.

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European Stocks decline as Moody slashed Spain’s debt rating

March 10, 2011

European Stocks decline as Moody slashed Spain’s debt rating

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Pound ticks down after BoE’s rate decisions, euro drops on Spain’s downgrade

March 10, 2011

Pound ticks down after BoE’s rate decisions, euro drops on Spain’s downgrade

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Mark Weisbrot: Spain’s Troubles Are Tied to Eurozone Policies

February 11, 2011

It has become fashionable since Spain’s economy began to decline to make comparisons to Germany, which is rebounding strongly. The idea is that the Germans went through their restructuring, got organized labor under control, and thereby made their economy more competitive. According to this narrative, this is the key to their economic success — so Spain should do the same if the Spanish economy is to recover. This fits well with various stereotypes of Germans as disciplined and hard working, willing to do what is necessary to be competitive in the global economy, while their counterparts in Europe’s periphery are seen as undisciplined and indulgent. However, the story does not fit the economic facts very well. Spain’s problems are mostly associated with the euro, combined with some bad economic policy decisions that have nothing to do with “labor inflexibility,” the strength of unions, or government spending. And its recovery is being delayed as a result of decisions made by the European authorities: the European Commission, the European Central Bank, and the International Monetary Fund (IMF). When Spain joined the euro in 1999, its level of productivity in manufacturing was about 63.6 percent of Germany’s. Over the next 10 years, productivity grew at about the same rate in both countries, so that by 2009 the ratio was about the same: 63 percent. Hourly wages in manufacturing also increased by about the same amount in both countries, so Germany kept its large, productivity-based cost advantage over Spain. Of course, this arrangement has worked out much better for Germany — during the upswing from 2002-2007, more than 120 percent of Germany’s growth was due to exports — with most of these exports going to other Eurozone countries. This is the basic problem when a country decides to adopt a common currency with other countries that have much higher levels of productivity. They can’t really be competitive in tradable goods — which includes not only exports but industries that compete with imports. If Spain had its own currency, it could let the value of its currency fall to a level that would make the country’s tradable goods sectors competitive. In a situation where the economy is in recession or is weak — Spain’s economy shrank by 0.2 percent in 2010 — the increased exports and reduced imports from such a devaluation would also help get the economy growing again. Instead, the European authorities have prescribed what is called an “internal devaluation” — shrink the economy and raise unemployment enough so that the country can become competitive, through lower prices and wages, without changing the exchange rate (i.e. keeping the euro). Unemployment in Spain is now 20 percent, and although exports have picked up some over the last year or so, it is not nearly enough to pull the economy out of its slump. Spain needs expansionary fiscal and monetary policy to boost the economy. But monetary policy is controlled by the European Central Bank — which just last week announced that it may raise interest rates, despite Europe’s anemic recovery and crushing unemployment in the Eurozone’s weakest economies (Spain, Ireland, Portugal). Expansionary fiscal policy is prohibited by pressure from the European authorities — who are actually pushing Spain to do the opposite, i.e. cut spending and raise taxes — and the fact that, not having its own monetary policy, Spain cannot engage in “quantitative easing,” as the US has done recently, or Japan has done for decades, to finance government spending without adding to the country’s net debt burden. Now back to Spain’s decade of experience with the euro. The adoption of the euro opened up a period of bubble growth, with big capital inflows from other European countries, and the country experienced a vast run-up in the stock market and a huge housing bubble. Spain’s economy grew by a third between 1999 and 2007, and its net debt fell to just 26.5 percent of GDP in 2007. But it was bubble-driven growth: the stock market peaked at 125 percent of GDP in November 2007 and dropped to 54 percent of GDP a year later. A housing bubble increased construction from 7.5 percent to 10.8 percent of GDP (2000-2006), and housing starts dropped by 87 percent when the bubble burst. It was the bursting of these bubbles, and not any lax spending policies by the government, that crashed Spain’s economy and caused its budget troubles. And it is Spain’s subordination to the European authorities, which prohibits it from using any of the three most important macroeconomic policies — fiscal, monetary, and exchange rate — to get out of its slump. Furthermore, although it was theoretically possible for Spain to have narrowed the productivity gap with Germany — since it was starting out at a much lower level of productivity — the bubble-driven growth of the last decade, spurred by the adoption of the euro and large capital inflows, is not the kind of growth that drives up manufacturing productivity. So the neoliberals have it backwards: it is the neoliberal macroeconomic policies, locked in with the euro, that are the source of both its recession and continuing troubles. Spain should refuse to accept any policies that prolong its slump and prevent it from reducing unemployment. If that means restructuring its debt or even leaving the euro, then these options should be on the table in any negotiations with the European authorities. These choices would better than suffering through many more years of sluggish growth and high unemployment. This column was published by the Guardian Unlimited (UK) on January 29, 2011.

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Mark Weisbrot: Spain’s Troubles Are Tied to Eurozone Policies

February 11, 2011

It has become fashionable since Spain’s economy began to decline to make comparisons to Germany, which is rebounding strongly. The idea is that the Germans went through their restructuring, got organized labor under control, and thereby made their economy more competitive. According to this narrative, this is the key to their economic success — so Spain should do the same if the Spanish economy is to recover. This fits well with various stereotypes of Germans as disciplined and hard working, willing to do what is necessary to be competitive in the global economy, while their counterparts in Europe’s periphery are seen as undisciplined and indulgent. However, the story does not fit the economic facts very well. Spain’s problems are mostly associated with the euro, combined with some bad economic policy decisions that have nothing to do with “labor inflexibility,” the strength of unions, or government spending. And its recovery is being delayed as a result of decisions made by the European authorities: the European Commission, the European Central Bank, and the International Monetary Fund (IMF). When Spain joined the euro in 1999, its level of productivity in manufacturing was about 63.6 percent of Germany’s. Over the next 10 years, productivity grew at about the same rate in both countries, so that by 2009 the ratio was about the same: 63 percent. Hourly wages in manufacturing also increased by about the same amount in both countries, so Germany kept its large, productivity-based cost advantage over Spain. Of course, this arrangement has worked out much better for Germany — during the upswing from 2002-2007, more than 120 percent of Germany’s growth was due to exports — with most of these exports going to other Eurozone countries. This is the basic problem when a country decides to adopt a common currency with other countries that have much higher levels of productivity. They can’t really be competitive in tradable goods — which includes not only exports but industries that compete with imports. If Spain had its own currency, it could let the value of its currency fall to a level that would make the country’s tradable goods sectors competitive. In a situation where the economy is in recession or is weak — Spain’s economy shrank by 0.2 percent in 2010 — the increased exports and reduced imports from such a devaluation would also help get the economy growing again. Instead, the European authorities have prescribed what is called an “internal devaluation” — shrink the economy and raise unemployment enough so that the country can become competitive, through lower prices and wages, without changing the exchange rate (i.e. keeping the euro). Unemployment in Spain is now 20 percent, and although exports have picked up some over the last year or so, it is not nearly enough to pull the economy out of its slump. Spain needs expansionary fiscal and monetary policy to boost the economy. But monetary policy is controlled by the European Central Bank — which just last week announced that it may raise interest rates, despite Europe’s anemic recovery and crushing unemployment in the Eurozone’s weakest economies (Spain, Ireland, Portugal). Expansionary fiscal policy is prohibited by pressure from the European authorities — who are actually pushing Spain to do the opposite, i.e. cut spending and raise taxes — and the fact that, not having its own monetary policy, Spain cannot engage in “quantitative easing,” as the US has done recently, or Japan has done for decades, to finance government spending without adding to the country’s net debt burden. Now back to Spain’s decade of experience with the euro. The adoption of the euro opened up a period of bubble growth, with big capital inflows from other European countries, and the country experienced a vast run-up in the stock market and a huge housing bubble. Spain’s economy grew by a third between 1999 and 2007, and its net debt fell to just 26.5 percent of GDP in 2007. But it was bubble-driven growth: the stock market peaked at 125 percent of GDP in November 2007 and dropped to 54 percent of GDP a year later. A housing bubble increased construction from 7.5 percent to 10.8 percent of GDP (2000-2006), and housing starts dropped by 87 percent when the bubble burst. It was the bursting of these bubbles, and not any lax spending policies by the government, that crashed Spain’s economy and caused its budget troubles. And it is Spain’s subordination to the European authorities, which prohibits it from using any of the three most important macroeconomic policies — fiscal, monetary, and exchange rate — to get out of its slump. Furthermore, although it was theoretically possible for Spain to have narrowed the productivity gap with Germany — since it was starting out at a much lower level of productivity — the bubble-driven growth of the last decade, spurred by the adoption of the euro and large capital inflows, is not the kind of growth that drives up manufacturing productivity. So the neoliberals have it backwards: it is the neoliberal macroeconomic policies, locked in with the euro, that are the source of both its recession and continuing troubles. Spain should refuse to accept any policies that prolong its slump and prevent it from reducing unemployment. If that means restructuring its debt or even leaving the euro, then these options should be on the table in any negotiations with the European authorities. These choices would better than suffering through many more years of sluggish growth and high unemployment. This column was published by the Guardian Unlimited (UK) on January 29, 2011.

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Video: Nielsen Says Spain Can Beat Crisis With EU Credit Line

January 21, 2011

Jan. 21 (Bloomberg) — Erik Nielsen, chief European economist at Goldman Sachs Group Inc., talks about the outlook for a resolution to the debt crisis in Spain and Portugal. Nielsen also discusses the appointment of a successor for Jean-Claude Trichet as president of the European Central Bank. He speaks with Francine Lacqua on Bloomberg Television’s “On The Move.”

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IMF mission to visit Spain

January 16, 2011

IMF mission to visit Spain

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Video: Kraemer Says Bond Sales Don’t Mean End to Debt Crisis

January 13, 2011

Jan. 13 (Bloomberg) — Joerg Kraemer, chief economist at Commerzbank AG, discusses bond auctions by Spain, Portugal and Italy. Kraemer speaks from Frankfurt with Erik Schatzker on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Inflation in Spain up to 2.29%

January 3, 2011

Inflation in Spain up to 2.29%

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Parsons Appoints Price as Managing Director, Northern Mediterranean

December 21, 2010

PASADENA, CA–(Marketwire – December 21, 2010) – Parsons announces the appointment of William D. “Bill” Price as Managing Director for the Northern Mediterranean region (Portugal, Italy, Greece, Spain, and Turkey). In this capacity, he will be responsible for overseeing the sales and operations of Parsons’ work in these markets.

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Moody’s Warns It Could Downgrade Spain Banks

December 20, 2010

MADRID — Moody’s rating agency warned Monday that it could downgrade the debt rating of Spanish banks that might need help from the government to help them weather Europe’s debt crisis and the nation’s shaky economy. Moody’s Investor Service issued the warning a week after it put Spanish government debt on review for a possible downgrade amid unemployment of nearly 20 percent and grim growth forecasts following rounds of government austerity cutbacks. Spain’s large international banks have been posting profits, but many smaller banks called “cajas” have been hit hard by a building boom that went bust and left them with billions of euros in bad loans. Some are currently undergoing a government-mandated merger process. The government has vowed to help prop up Spain’s banking system, and Moody’s said its review of the banks “will assess to what extent a potentially lower-rated government will be able to support its banking system in case of need.” The agency gave a gloomy outlook for Spanish banks, saying their “capitalization, profitability and access to market funding will remain weak, driven by the country’s difficult economic conditions, continued asset-quality deterioration and the Spanish government’s fiscal austerity plans.” The Spanish government recently approved new austerity measures and a limited economic stimulus package to ease investor fears about its debt – and insists it is taking strong steps to right its ailing economy. The moves include plans to sell off a 30 percent stake in the government-owned national lottery, the partial privatization of airports, cutbacks to a key jobless benefit, tax cuts for small businesses and an increase in the tobacco tax. Government officials have brushed off investor fears that Spain could need a bailout like those accepted by Greece and Ireland. Spain has the eurozone’s fourth-largest economy and many economists warn that a bailout of the nation could lead to the breakup of the zone itself. Ahead of the announcement by Moody’s, the Organisation for Economic Cooperation and Development said Spain should make tougher pension and labor reforms to revive economic growth and ease the debt load that is putting it at the heart of Europe’s debt crisis. The government says that next month it will approve a highly contested plan to raise the retirement age gradually from 65 to 67, part of a drive to shore up public finances. But the OECD said in a report that Spain should consider raising the retirement age even further by indexing the age to life expectancy increases. The government is considering extending the period of a person’s working life used to calculate retirement pensions – it is now the last 15 years. The OECD says people’s entire working life should be used in the calculation, a move that would reduce the average monthly pension. The OECD, which represents the world’s developed countries, also urged further labor market reforms. It said Spain needs to encourage firms to hire and stimulate an economy struggling to recover from nearly two years of recession triggered by a 2008 property bubble burst. Measures passed in recent months make it easier and cheaper for companies to lay off workers, doing away with a system that provided some of the most generous severance payments in Europe. The Paris-based OECD said that if these do not manage to boost hiring, the government should consider broader measures to make the labor market more flexible. The government said Monday that regional administrations – whose finances are a worry as Spain struggles to reduce its deficit from 11.2 percent of GDP last year to the EU limit of 3 percent in 2013 – are set to meet their targeted cuts this year. Through the third quarter, their combined deficit was 1.24 percent of Spain’s GDP while the forecast for the full year 2010 is 2.4 percent of GDP, Finance Minister Elena Salgado said. The OECD said that if Spain’s deficit-reduction measures fail to meet targets the government should consider raising VAT taxes on some goods and services. ___ Daniel Woolls contributed from Madrid.

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Gold-Dispensing ATM Machine Makes Its Debut In America

December 17, 2010

BOCA RATON, Fla. — Shoppers who are looking for something sparkly to put under the Christmas tree can skip the jewelry and go straight to the source: an ATM that dispenses shiny 24-carat gold bars and coins. A German company installed the machine Friday at an upscale mall in Boca Raton, a South Florida paradise of palm trees, pink buildings and wealthy retirees. Thomas Geissler, CEO of Ex Oriente Lux and inventor of the Gold To Go machines, says the majority of buyers will be walk-ups enamored by the novelty. But he says they’re also convenient for more serious investors looking to bypass the hassle of buying gold at pawn shops and over the Internet. “Instead of buying flowers or chocolates, which is gone after two or three minutes, this will stay for the next few hundreds years,” Geissler told The Associated Press in a telephone interview. The company installed its first machine at Abu Dhabi’s Emirates Palace hotel in May and followed up with gold ATMs in Germany, Spain and Italy. Geissler said they plan to unroll a few hundred machines worldwide in 2011. He said the Abu Dhabi machine has been so popular it has to be restocked every two days. A bank in Vietnam installed its own brand of the machines in a country with a much poorer population but one that values gold more than paper money. The gold-leaf-covered machine at Boca Raton’s Town Center Mall sits outside a gourmet chocolate store and works much like the cash ATM beside it. Shoppers insert cash or credit cards and use a computer touch-screen to choose the weight and style they want. The machine spits out the gold in a classy black box with a tamperproof seal. Each machine, manufactured in Germany, carries about 320 pieces of different-sized bars and coins. Prices are refigured automatically every 10 minutes to reflect market fluctuations. On Friday, a two-gram piece cost about $122, including packaging, certification and a 5 percent markup. An ounce cost about $1,442. Buyer beware: A gram of the heavy metal is much smaller than you think, about the size of a fingernail. An ounce is a little larger than a quarter. Florence Schneider, who checked out the machine Friday, said she might use it, but only if she needed a unique gift. “I can’t see it being successful. Maybe for Christmas as a gimmick,” said the 78-year-old Boca Raton resident. “If I knew someone was having a big birthday coming up I’d buy it for something different.” Owners said the machine, which will hold around $150,000 in cash and gold, will be flanked by an armed bodyguard for now. Several live security cameras are fixed inside and outside the machine. The popularity of gold is cyclical, but it’s riding high these days in part because of fears stoked by financial troubles. Geissler, who plans to open a machine in Las Vegas by the year’s end, said the collapse of the Lehman Brothers investment firm was the impetus for the flashy ATMs. His customers refused to buy bonds, stocks and other funds from the financial industry, so they focused on precious metals. As some investors continued to lose faith in global finance markets, the company worked on the gold-leaf finished ATM, banking that the protection of purchasing power found in gold would lure market leery customers. “Gold always comes back to its real value,” Geissler said. “It’s not diamonds, it’s not silver, it’s not real estate. It’s just gold.” Dave Jones, who brokered the deal to bring the machines to the U.S., predicts gold will become a parallel currency in the next five years. He said they plan to install about 40 more machines at upscale malls and hotels around the U.S. “Gold has a place in everyone’s portfolio,” said Jones, of Boca Raton-based PMX Gold. “It’s a good hedge against inflation and it’s a good comfort level.” ___ Associated Press writer Suzette Laboy contributed to this report. ___ Online: Gold To Go: http://www.gold-to-go.com/en/

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Gold-Dispensing ATM Machine Makes Its Debut In America

December 17, 2010

BOCA RATON, Fla. — Shoppers who are looking for something sparkly to put under the Christmas tree can skip the jewelry and go straight to the source: an ATM that dispenses shiny 24-carat gold bars and coins. A German company installed the machine Friday at an upscale mall in Boca Raton, a South Florida paradise of palm trees, pink buildings and wealthy retirees. Thomas Geissler, CEO of Ex Oriente Lux and inventor of the Gold To Go machines, says the majority of buyers will be walk-ups enamored by the novelty. But he says they’re also convenient for more serious investors looking to bypass the hassle of buying gold at pawn shops and over the Internet. “Instead of buying flowers or chocolates, which is gone after two or three minutes, this will stay for the next few hundreds years,” Geissler told The Associated Press in a telephone interview. The company installed its first machine at Abu Dhabi’s Emirates Palace hotel in May and followed up with gold ATMs in Germany, Spain and Italy. Geissler said they plan to unroll a few hundred machines worldwide in 2011. He said the Abu Dhabi machine has been so popular it has to be restocked every two days. A bank in Vietnam installed its own brand of the machines in a country with a much poorer population but one that values gold more than paper money. The gold-leaf-covered machine at Boca Raton’s Town Center Mall sits outside a gourmet chocolate store and works much like the cash ATM beside it. Shoppers insert cash or credit cards and use a computer touch-screen to choose the weight and style they want. The machine spits out the gold in a classy black box with a tamperproof seal. Each machine, manufactured in Germany, carries about 320 pieces of different-sized bars and coins. Prices are refigured automatically every 10 minutes to reflect market fluctuations. On Friday, a two-gram piece cost about $122, including packaging, certification and a 5 percent markup. An ounce cost about $1,442. Buyer beware: A gram of the heavy metal is much smaller than you think, about the size of a fingernail. An ounce is a little larger than a quarter. Florence Schneider, who checked out the machine Friday, said she might use it, but only if she needed a unique gift. “I can’t see it being successful. Maybe for Christmas as a gimmick,” said the 78-year-old Boca Raton resident. “If I knew someone was having a big birthday coming up I’d buy it for something different.” Owners said the machine, which will hold around $150,000 in cash and gold, will be flanked by an armed bodyguard for now. Several live security cameras are fixed inside and outside the machine. The popularity of gold is cyclical, but it’s riding high these days in part because of fears stoked by financial troubles. Geissler, who plans to open a machine in Las Vegas by the year’s end, said the collapse of the Lehman Brothers investment firm was the impetus for the flashy ATMs. His customers refused to buy bonds, stocks and other funds from the financial industry, so they focused on precious metals. As some investors continued to lose faith in global finance markets, the company worked on the gold-leaf finished ATM, banking that the protection of purchasing power found in gold would lure market leery customers. “Gold always comes back to its real value,” Geissler said. “It’s not diamonds, it’s not silver, it’s not real estate. It’s just gold.” Dave Jones, who brokered the deal to bring the machines to the U.S., predicts gold will become a parallel currency in the next five years. He said they plan to install about 40 more machines at upscale malls and hotels around the U.S. “Gold has a place in everyone’s portfolio,” said Jones, of Boca Raton-based PMX Gold. “It’s a good hedge against inflation and it’s a good comfort level.” ___ Associated Press writer Suzette Laboy contributed to this report. ___ Online: Gold To Go: http://www.gold-to-go.com/en/

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Marc Stoiber: Innovation in a Crisis Economy

December 10, 2010

I recently spoke at a marketing conference in Athens, Greece. Predictably, the conference theme was creativity in the face of austerity. Although the mood was dour, it was fascinating to hear delegate perspectives on what would heal the economy. I asked many for their take on green innovation. Most thought it was a luxury for more prosperous times. Few made the connection between sustainability and cost savings, although they knew the story of Wal-Mart’s rise to green fame with eco-efficiency. That said, I unearthed some great innovation stories, like the imaginative (and popular) subsidies Piraeus Bank was offering customers for everything from solar power to organic farming. There were also rumblings that ‘old school’ public officials were being drummed out in favor of younger, more innovative thinkers. But on this front, the opinions seemed to reflect wishes more than facts. The feeling overall was surreal. Although everyone sensed a pending emergency, nobody could paint a picture of the future or see the innovation opportunities the coming upheaval might bring. Greece’s situation is anything but unique. Ireland has signed up for EU bailouts, with Spain and Portugal on the brink. Closer to home, Detroit’s demise and reinvention has been the subject of a yearlong reportage by TIME Magazine. Throughout North America, there is an incredible sense of uncertainty. What will the new normal be? Less Is More Necessity is the mother of invention. Desperate times breed desperate measures. Diamonds form under pressure. If these old saws are to be believed, innovation should accelerate in bad economies. After all, teams with tight budgets and tough goals make critical decisions more quickly than teams with abundant resources and no pressing agenda. Recessions are also wonderful for clearing the forest of competitors. Large, cumbersome companies fall, while small wily upstarts gain ground. And recessions lead to rethinking. When the status quo fails, it makes you question your beliefs. Should my product even be a product? Or should it be a new business model, or service? The examples of recession success are legion. Instead of boring you with them, I’ll simply guide you to some examples that will make every recession-weary entrepreneur smile. Lessons From Detroit While it’s too early to say how economies like Greece and Ireland are going to react to austerity, Detroit provides a successful example of radical rethinking. As TIME writers Daniel Okrent and Steven Gray write , “Detroit once thrived on bigness, but now it has to leave that idea behind. The secret of Rust Belt urban revival: smaller is better. If you want a healthy, bustling city, huddled masses are better.” Necessity has forced Detroit to abandon sprawl — servicing vast, deserted suburbs simply isn’t viable. Instead, the city is focusing on building density. Tighter, interconnected communities that are easy to navigate on foot are bringing a flourish of small business with them. And big business. Drawn by the reinvigoration, Quicken Loans chairman Dan Gilbert moved 1,700 employees into downtown Detroit. Gilbert’s business incubator Bizdom U was launched in Detroit in 2007. Detroit’s rebirth warrants a closer look for more than economic reasons. Abandoned suburbs are quickly turning into green corridors, with the promise of urban agriculture. And smaller live/work hubs mean fewer cars — and a healthier pedestrian populace. Of course, the transformation is messy, and there are casualties. School systems need to be overhauled to draw young families. And people isolated in the suburbs can’t simply be abandoned. But Detroit is proof that innovation does flourish in a crisis economy. Innovation Learnings There are consistent innovation themes that can be seen in examples like Detroit. For example, the key to innovation is getting outside your personal comfort zone, your status quo, your jar. Outsiders have an incredible power of perception when it comes to spotting root problems, consumer needs, and potential solutions. It’s one of the reasons clients turn to us for solutions, instead of working exclusively with in-house innovation teams. It’s also the reason companies like P&G mandate 50% of their innovations come from outside sources. Another learning is that innovation needs champions as much as great thinkers. Working in green business innovation, I have seen again and again that the mandate for change needs to come from the top. Otherwise, challenging new ideas will be killed by the defenders of the status quo, and progress logjammed. Finally, innovation should not be expected to turn a crisis economy into a utopia. In fact, idealists and utopians are often the worst agents of change . A crisis can’t be solved through social engineering — instead, the process involves co-creation, brainstorming and support from a wide swath of constituents. Yes, it could get messy. But economies and communities are living, organic things… not intellectual theories.

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EU Finance Ministers Confident in Portugal & Spain, Ruled Out Aid Increase

December 7, 2010

EU Finance Ministers Confident in Portugal & Spain, Ruled Out Aid Increase

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The 15 U.S. Cities Hit Hardest By The Recession

December 4, 2010

LAS VEGAS (AP) — An international study says Las Vegas has one of the worst economies in the world, and prospects for a rapid recovery appear dim. The Brookings Institution and London School of Economics study ranked Las Vegas fifth from the bottom in a ranking of 150 metropolitan areas, citing a limited economy that relies heavily on tourism and construction. Las Vegas fared better than only Dublin; Dubai, United Arab Emirates; Barcelona, Spain; and Thessaloniki, Greece. The rankings weigh jobs, job growth and income. Las Vegas was ranked the world’s 14th best economy from 1993 through 2007, according to a report by the Las Vegas Sun published Tuesday. Sin City’s decline began during the recession in 2008, when it fell to 128th place. The report said the gradual recovery that has played out in most U.S. cities in recent months eluded Las Vegas. The city’s income levels declined 1.2 percent despite an increase nationally, and the employment rate dropped 3 percent, much greater than the national decline of 0.7 percent. “If the first year (of recovery) is any indication for Las Vegas, it could be a long, slow road ahead,” Alan Berube, senior fellow and research director at Brookings Metropolitan Policy Program, told the Sun. The report also refers to Las Vegas’ record foreclosure rates. The area has the second highest share of bank-owned homes in the country and more than two-thirds of residential mortgage holders owe more than their homes are worth. The strongest growth during the recovery has taken place in highly educated regions such as Washington, D.C.; Minneapolis; Austin, Texas; and San Francisco, Berube said. Highly educated people tend to work in industries that haven’t been hit very hard, and if they do become unemployed, they have an easier time finding a new job compared to someone who’s less skilled and educated, he said. Check out the other U.S. cities hit hardest by the downturn:

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Jeffrey Rubin: Irish and Greek Defaults Will Reshape Europe

November 30, 2010

German and British taxpayers are beginning to realize the downside of our economic interdependence in the global economy. When British banks have too much exposure to Irish banks, all of a sudden Dublin’s property crash becomes the UK’s problem. Similarly, when German taxpayers have to bail out bankrupt governments in Athens and Dublin, Greece and Ireland’s problems become Germany’s. How long will that model of international economic interdependence last? Probably not too much longer, particularly if Portugal and Spain have to join the bailout queue, too. What’s increasingly obvious, as I noted in my May 25th blog post , is that the European monetary union is no longer feasible. A monetary union between similar economies, like those of Germany, France and the Benelux countries, is. But clumping fiscally wayward economies with much lower per-capita incomes, like Portugal, Spain, Ireland and Greece, into a common currency union with Northern Europe is no more sustainable than is a monetary union between Mexico and its North American free-trade partners, the US and Canada. It might have taken an oil-induced financial shock to unravel it, but the euro was an accident waiting to happen. By not allowing their loosely regulated banks to fail, countries themselves are failing as a result. So while Irish banks keep their doors open, schools and hospitals will soon close as the country tries to cope with a public-sector deficit one third the size of its economy. (Curiously, these are the very same banks that only recently passed financial stress tests.) German taxpayers, who must shoulder the lion’s share of the financing burden for the 85 billion euro bailout package for Ireland, are understandably increasingly irate that they have to dish out billions so that Ireland can maintain a 12.5 per cent corporate tax rate that steals jobs and production from their own economy. And they weren’t any happier when even more of their hard-earned tax dollars were being sent over as welfare checks to Greece, a country where tax evasion is a national pastime. Taxpayers in creditor countries are starting to ask themselves the same question that bond holders have been troubling themselves over. The burden of reducing a deficit as large as one third of GDP means that the Irish economy, like the Greek one, will be shrinking for the foreseeable future. And shrinking economies, riddled by growing social unrest, are not economies that are able to service gargantuan debt loads. That’s why the bond market was already charging Ireland as much as three times Germany’s borrowing rate. Chances are that Ireland and Greece (and likely Portugal and Spain) are going to default, unraveling the monetary union. What will follow: a born-again drachma, Irish pound and perhaps escudo and peseta. And as those currencies plunge in value against what’s left of the euro (likely still to be traded in Germany, France and the Benelux nations), even the free trade zone may be up for grabs.

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Dan Dorfman: Market Shifts to the Turkey Trot

November 25, 2010

The Christmas holiday season is often a harbinger of happy events, but only partly this past week, which for investors turned out to be a week of gobblydegook. On Tuesday, for example, there were of a couple of external shockers–artillery fire between the Koreas and signs of a spreading European debt crisis (notably involving Ireland, Spain and Portugal). In response, it turned out to be a terrible Tuesday for investors as the Dow tumbled 142 points. As a result, the following day’s market showing–the day before Thanksgiving–should have been a turkey, or a wicked Wednesday, in continuing response to those shockers, as well as to recent revelations of October declines in new and existing home sales. But wicked Wednesday never came. Call it the case of the missing turkey. Instead, we had a turkey trot, as the Dow went on a tear that day, more than offsetting the previous day’s loss with a solid gain of nearly 151 points. This jump largely reflected a tasty news entree of growing personal income, strengthening positive consumer sentiment, the fourth consecutive month of consumer spending gains and lower than expected weekly jobless claims. So where does that leave the nation’s more than 80 million stock players? In good stead, according to some market pros, who see flickering green lights that we’re entering a period of renewed economic zip. In addition, some suggest, instead of the usual merry month of May, change that, at least for investors, to the merry month of December. One of them is Fred Dickson, the chief investment strategist of regional Northwestern brokerage biggie D.A. Davidson & Co. of Great Falls, Mont. “I would absolutely be a buyer of stocks now,” says Dickson, a former strategist at Goldman Sachs, who thinks it’s the wrong time for investors to be chicken and views the European debt problems and the current trouble between the Koreas as “passing thunderstorms that will move on.” He figures a year from now European debt problems will be about where they are today. “I’d guess Europe has four of five years of debt workouts to go,” he says. He also thinks China has too much to lose not to try to aggressively influence North Korea from doing something incredibly stupid, and, as such, he expects the Chinese to take action in this respect. A revival of positive economic momentum (also reflected in the recent upgrade of third-quarter GDP growth from 2% to 2.5%) and low interest rates are the chief reasons for Dickson’s market enthusiasm. “The economy,” he observes, “is like a car going 25 miles an hour in a 40-mile speed zone, but sooner or later it will shift into a faster gear.” It’s not a robust recovery, he says, but a slowing improving one. Given this outlook, he expects an essentially rising market for the balance of the year, with the Dow (now at 1187) wrapping up 2010 at around 11,500 and then following up with about another 10% or so advance in 2011. His favorite stocks are companies which have increased dividends for at least the past 10 years and sport above-average dividend yields. In this context, he favors PepsiCo., Procter & Gamble, AT&T, United Technologies, Emerson Electric, Kimberly-Clark and Automatic Data Processing. What about gold, the planet’s hottest investment? It has had a huge run, and appears to be expensive, Dickson says. He sees a continuing modest pullback near term, but he figures it’s likely to be higher a year from now. San Francisco money manager Gary Wollin, who manages a bit above $100 million of assets under the banner, Gary Wollin & Co., echoes some of Dickson’s bullish thoughts, especially on the economic front. As for those external shockers, Wollin thinks “we could see some war games and a lot of unrest in Europe, both of which could drive away potential buyers.” But he expects them to have a short shelf life in impacting the market, and predicts an 11,500-12,000 Dow by year-end. Still, he believes there’s always a chance “things could spiral out of control in Europe” via more riots in the streets. Another plus for the stock market–traditional muscle-flexing in December–is noted by Sam Stovall, the chief investment strategist at Standard & Poor’s. Since 1945, he points out, the S&P 500 registered its strongest monthly advance in December, rising 1,7%, versus 0.6% for all 12 months. What’s more, the market rose in 77% of all Decembers, versus 59% for the average of all 12 months. In other words, look for a merry Christmas for investors. What do you think? E-mail me at Dandordan@aol.com.

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Video: Mortimer-Lee Says Ireland Can Learn From Korea in 1990s

November 24, 2010

Nov. 24 (Bloomberg) — Paul Mortimer-Lee, global head of market economics at BNP Paribas SA, talks about the Irish bank bailout and the prospects for Portugal or Spain following the same route. He speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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Eric J. Weiner: Why We Should Fear A China Crash

October 27, 2010

The stock market’s been on quite a roll lately, today’s decline notwithstanding. In October alone the Dow Jones Industrial Average has gained more than 300 points, or around three percent. The other major stock market indices are up similar amounts as well. On Wall Street, the performance has been a powerful elixir to a dolorous summer. Look at a chart of the market’s performance over the past month and you’ll see a fairly steady upward climb. The only real hiccup was a single significant down day, October 19, last Tuesday. Of course, that was just one fluky trading day out of 252 in a year. But as is so often the case in the financial markets, it’s the one-day anomaly that people really should be paying close attention to. On October 19, the Dow fell 165 points, or 1.48 percent. The Nasdaq composite index and S&P 500 both lost more than 1.5 percent. The price of oil plummeted four percent and the value of numerous other commodities sank along with it. And the yield on the benchmark 10-year Treasury note tanked as well. What happened to spook the financial markets? Simple. China’s central bank said it was planning to raise interest rates. Slightly. And the mere prospect of this act triggered fears that China’s government was ratcheting down its country’s economic growth. So traders and investors freaked out. Since then, the markets have resumed their rally and many Wall Streeters describe the episode as an overreaction to Beijing’s statement. And in a sense they’re right. The reality is the effects of any long range fiscal tightening in China wouldn’t be felt over here for a while. So knee-jerk investors who automatically dumped their holdings out of fear that China’ central bank was about to wreck the global financial markets might want to rethink that strategy. However, from a long-term financial perspective it would be unwise for Americans to dismiss this episode. Instead, the U.S. should pay careful attention to what happened on that day because it spotlights a fundamental misunderstanding of America’s relationship with China. The primary metaphor used to describe the tangled web of financial and economic connections between China and the U.S. is codependency . Traditionally, Americans have viewed this codependency as a levee holding back the full weight of China’s economic heft. The idea being that China owns so much U.S. debt and so many dollars that it only would be hurting itself if harmed the U.S. However, it turns out this codependency cuts both ways. As last Tuesday showed, the U.S. economy has become so reliant on China’s meteoric growth that any slowdown would have dire effects over here. Clearly America’s financial markets believe that the U.S. economy needs an aggressive China with companies and consumers ready to step in and fill the gaps in demand left by the battered West. And what’s more, Chinese officials know this as well. All of which helps explain why China has become so belligerent lately on a host of economic issues that American leaders are trying to press. For instance, U.S. officials have persistently accused China of manipulating the value of its currency, the renminbi, to keep the prices of its exports low. To head off a full-scale trade war the G20 over the weekend quickly put together a deal to avoid “competitive currency devaluations.” Meanwhile, The New York Times reported that China has started secretly embargoing shipments of rare earth minerals to the U.S., Europe, and Japan. So far Beijing’s response has been to deny all allegations and allow the value of the renminbi to rise slightly . It also has turned the currency manipulation accusations back on the U.S. by accusing Washington of unfairly using monetary policy to stimulate the American economy. And when the White House accused China of illegally subsidizing its clean energy industry a senior Chinese official sternly warned the U.S. that it “cannot win this trade fight.” Clearly China’s economic stances and rhetoric indicate that it’s no longer prepared to just go along with what the U.S. wants. Not surprisingly, China also is working the inside financial channels to make sure that America has a hard time putting together diplomatic coalitions to block its activities. For example, in July Chinese officials visited Greece and signed 14 business deals worth several billion dollars . And since then China also has offered to create a $5 billion fund to upgrade the Greek merchant shipping fleet. China also bought $558 million worth of bonds issued by Spain , and is in talks to make similar investments in troubled countries like Ireland and Portugal . In the “what have you done for me lately” global economy, China’s willingness to spread its cash around is creating goodwill where it never existed before. And it’s undercutting the West’s unity on crucial economic issues. But perhaps most importantly, Chinese central bankers now know that they hold an economic bomb that they can detonate whenever they want. All they have to do is temporarily slam the breaks on growth and watch financial markets in the U.S. and around the world grind to a standstill. That’s a very powerful position. So if codependency is going to remain the overarching metaphor for the entangled relationship between China and the U.S., America probably should reexamine the fine print in the arrangement. Because from here it looks like one side of the partnership is far more dependent than the other.

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Fernando Espuelas: Want Economic Growth? Legalize 12 Million People

October 8, 2010

A job-less recovery, ballooning deficits, fraudulent foreclosures, middle class anxiety — let’s face it, we are feeling the mother of all hang-overs from the Great Recession. But there is one major catalyst, an economic engine that we’ve ignored, for igniting robust, sustainable economic growth that will lift all boats: comprehensive immigration reform that brings 12 million undocumented immigrants fully into the economy. Call it the “12 million people stimulus bill” project. As Americans, we need to be strategists that are thinking about the next 100 years of American global leadership.  Comprehensive immigration reform, if the law is intelligently conceived and executed, will be a significant step in increasing our global competitiveness.  Its passage will spark economic growth across broad sectors of the American economy, from manufacturing to retail. Fully integrated into the economy, immigrants will add to both the financial and human capital of the country. New businesses will be created by these immigrants, their kids will be able to plan college educations, money now squirreled away will be invested in productive activities, the tax base will expand. In fact, several studies have projected a more rapid growth in GDP because of the effect of immigration. According to the Center for American Progress report “Raising the Floor for American Workers: The Economic Benefits of Comprehensive Immigration Reform”: “The historical experience of legalization under the 1986 Immigration Reform and Control Act indicates that comprehensive immigration reform would raise wages, increase consumption, create jobs, and generate additional tax revenue. Even though IRCA was implemented during an economic recession characterized by high unemployment, it still helped raise wages and spurred increases in educational, home, and small-business investments by newly legalized immigrants. Taking the experience of IRCA as a starting point, we estimate that comprehensive immigration reform would yield at least $1.5 trillion in cumulative U.S. gross domestic product over 10 years. This is a compelling economic reason to move away from the current “vicious cycle” where enforcement-only policies perpetuate unauthorized migration and exert downward pressure on already low wages, and toward a “virtuous cycle” of worker empowerment in which legal status and labor rights exert upward pressure on wages.” Objective economic evidence strongly suggest that immigration in not only needed for the long-term economic health of the United States, it is in fact today an important driver of growth in the overall American economic pie. This is growth, moreover, to the benefit of all Americans . Getting this part of our national strategy is critical.  A recent study undertaken for the Federal Reserve showed the net positive effect of immigration for native-born American workers.  As the study states: “…[A] net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.” Sadly, this is an issue that has become violently partisan. The Arizona anti-immigrant law, for example, was passed on a straight party vote. It is a fundamental mistake to filter immigration reform through a partisan lenses. I think a more accurate context through which to view immigration is as a national security issue.  America must look forward to a changing world and be sure that we will have the human resources needed to maintain our economic and military supremacy. Our global competitors are not sitting still — we should not either. As history has shown us, countries that have failed to keep these factors in balance tend to fade as global powers. The Chinese Empire, Spain, France and Britain are just some of the examples of former world powers brought low by bad policy decisions. We should not join them. If this issue is properly and responsibly handled by political leaders — leaders that transcend petty party concerns to become statesmen and stateswomen — it is an opportunity to bring the country together with a smart, strategic reform that is pro-economic growth. Leaders of both parties must rise to the occasion — America needs you to do the right thing. America needs a “12 million people stimulus bill” now.

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Dan Dorfman: Funeral For a European Myth

October 8, 2010

Here we go again — the death of another myth, namely the one that Europe’s worrisome sovereign debt crisis has run its course. Far more likely, the evidence shows, we’re in for a rerun. To put it in perspective, let’s turn the clock back about six months when the U.S. stock market was repeatedly getting battered on a daily basis in response to news of swelling debt woes in Europe. Adding to the market’s shellacking at the time were riots in Greece over proposed austerity measures. Then came Superman to the rescue, the European Union, with a promise of a $1 trillion bailout package to stabilize Europe and drive away the bond vigilantes who were selling the debt of the weakest European countries, causing interest rates to rise. In response, the euro, aided by Chinese purchases, proceeded to strengthen, and fears of a debt crisis in Europe greatly diminished, so much so that many market pros have eliminated this risk from their radar screens. Judging though from the recent downgrade of Ireland’s credit by the Fitch rating agency, which came on the heels of earlier downgrades of Spain’s and Portugal’s debt, it’s pretty clear that only Rip Van Winkle would dismiss the danger of a fresh outbreak of European debt problems, which has ominous implications for the world’s financial markets. That’s also the thinking of currency tracker Bryan Rich, editor of the World Currency Alert newsletter in Jupiter, Fla., who says “a higher euro may have instilled some investor confidence, but nothing has changed. Not only does a debt problem exist,” he says, “but it’s getting progressively worse and a default by a European country is only a matter of time.” Addressing the trillion-dollar rescue package, Rich describes it as “nothing more than bold shock and awe, a promise that’s a figment of someone’s imagination.” He notes that a number of the more financially muscular European countries, among them Germany, are already balking at the idea of anteing up funds to help bail out their weaker brethren. London money manager Raymond Stahler of Stahler Dearborn, Ltd., concurs. He describes the $1 trillion promise of aid to the struggling European nations, such as Portugal, Ireland, Greece and Spain, as a farce. “Handouts are wonderful,” he says, “but not if nobody is handing out.” Rich views the European financial situation as especially scary in Ireland, which he views as most vulnerable to a default. The European Union’s guidelines prohibit its member nations from having their budget deficits, as a percentage of GDP, exceeding 3%. That’s a meaningless number, though, since no one is paying any heed to it. For example, the 2010 estimates call for Ireland to top the limit by more than 10-fold at 32%, followed by Spain at 9.3%, Portugal at 8.8%, Greece at 8.1%, and Italy at 5%. The EU’s limit on total debt, as a percentage of GDP, is 60%. Here again, Ireland strikes out badly. Its 2010 projection had called for 65%; it’s now projected at 110%. Against this background, a massive amount of debt in the European nations has to be rolled over. A dilemma here is that the governments and the banks will be competing for capital, which will drive interest rates higher. That, in turn, will make it difficult for the governments to raise money at rates they can afford, which, in turn, could cripple the ailing economies. At the same time, Rich notes that the European Central Bank, which has been snapping up government debt of struggling countries to keep them solvent, has acquired a lot of crappy debt. A related problem, as he sees it, is the threat of another major wave of risk aversion. That is when capital flees riskier investments and assets. The chief implications, as Rich sees them: Stocks will go lower, the same for commodities, except gold, and it all bodes well for the dollar. What does all of this mean? Rich’s view: “We’re in a crisis period, a deleveraging phase for the world’s economy, so look for more shocks, such as government defaults, bank failures, currency devaluations and rising protectionism.” He doesn’t say it in so many words, but the word from Rich is clear: Watch out — you could get poor! What do you think? E-mail me at Dandordan@aol.com

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Video: Juckes Says Euro May Rally Further After Spanish Budget

September 24, 2010

Sept. 24 (Bloomberg) — Kit Juckes, head of foreign-exchange research at Societe Generale SA, talks about the announcement of Spain’s new budget and the outlook for the euro. He speaks with Linzie Janis on Bloomberg Television’s “Countdown.”

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Spain’s housing market still in trouble

September 23, 2010

House prices in Spain continue to trend downwards. In August prices were down 4.53% on the year, and down 1.63% on the quarter, according to TINSA, a real estate valuation company.

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Vycor Medical Continues to Build Its Sales and Marketing Infrastructure for Its ViewSite(TM) Neurosurgery Retraction Devices

September 21, 2010

Vycor Medical Appoints a National Sales Director and New Distributors for Its ViewSite Brain Access Systems in the US and Internationally — Now Part of the Company’s Global Distribution Network That Encompasses the US, Canada, the Benelux, Spain, Italy, Greece, Scandinavia, China, Hong Kong, Taiwan and South Korea

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European stocks bounce by midday on bond selling by Ireland and Spain

September 21, 2010

European stocks bounce by midday on bond selling by Ireland and Spain

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The 11 Wealthiest Countries In The World By Financial Assets: Allianz (PHOTOS)

September 15, 2010

Global wealth imbalances are actually shrinking in the of the wake financial crisis, according to a new report that measures data from 50 countries which make up 87 percent of global GDP. At the end of 2009, the financial assets of private households in rich countries had plunged by 7.4 percent since before the crisis. Per capita financial assets in poor countries, by contrast, grew through 2008 and by the end of 2009 were almost 25 percent higher than they were before the crisis, says the 2010 Global Wealth Report by German insurer Allianz . “The financial crisis dealt a particularly savage blow to the financial assets of highly-developed industrial countries,” Allianz says in the report. Per capita wealth in Greece — the “biggest loser” of the financial crisis — has plummeted 14 percent since 2007. Right behind them is the United States, with a 12 percent loss, and Spain, with a nine percent loss since 2007. This is not to say that the financial crisis closed the income gap between rich and poor countries. Rich countries, according to the report, still account for around 90 percent of overall global financial assets. Which explains why, overall, global financial assets — that is, stocks, bank accounts and insurance — at the end of 2009 were still about four percent lower than they were in 2007. But, whereas at the beginning of the decade financial assets in the rich countries were 135 times higher than in the poor countries — this number has now fallen to 45, says Allianz. Still, in absolute terms, the global prosperity gap is huge, and a very small number of countries command a very large share of the world’s financial assets. The following are the eleven countries that own the largest share of global financial assets:

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The 11 Wealthiest Countries In The World By Financial Assets: Allianz (PHOTOS)

September 15, 2010

Global wealth imbalances are actually shrinking in the of the wake financial crisis, according to a new report that measures data from 50 countries which make up 87 percent of global GDP. At the end of 2009, the financial assets of private households in rich countries had plunged by 7.4 percent since before the crisis. Per capita financial assets in poor countries, by contrast, grew through 2008 and by the end of 2009 were almost 25 percent higher than they were before the crisis, says the 2010 Global Wealth Report by German insurer Allianz . “The financial crisis dealt a particularly savage blow to the financial assets of highly-developed industrial countries,” Allianz says in the report. Per capita wealth in Greece — the “biggest loser” of the financial crisis — has plummeted 14 percent since 2007. Right behind them is the United States, with a 12 percent loss, and Spain, with a nine percent loss since 2007. This is not to say that the financial crisis closed the income gap between rich and poor countries. Rich countries, according to the report, still account for around 90 percent of overall global financial assets. Which explains why, overall, global financial assets — that is, stocks, bank accounts and insurance — at the end of 2009 were still about four percent lower than they were in 2007. But, whereas at the beginning of the decade financial assets in the rich countries were 135 times higher than in the poor countries — this number has now fallen to 45, says Allianz. Still, in absolute terms, the global prosperity gap is huge, and a very small number of countries command a very large share of the world’s financial assets. The following are the eleven countries that own the largest share of global financial assets:

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Richard Herman: Time to Think Like an Immigrant

September 9, 2010

Carmen Castillo once fit the popular image of the daring entrepreneur. She arrived from Spain young, single and ambitious. Knowing nothing about computers, Castillo launched her high-tech consulting agency from a one-bedroom apartment, with little more than a phone book and chutzpah. Her humble start-up, Superior Design International, grew into a global consulting agency with more than $200 million in annual revenues. While young dreamers like Castillo helped to launch the New Economy, a new generation is taking the driver’s seat. Today’s entrepreneurs are more likely to bring maturity and experience to a start-up, twinning hard-earned skills with bravado. Research by Vivek Wadhwa, one of the leading chroniclers of the New Economy, found that the majority of entrepreneurs today are middle-class, middle-aged and married. It’s the mini-van set who are taking career leaps and chasing dreams, especially in high-growth industries. Wadhwa’s research team surveyed 549 company founders in a broad range of industries and found that they launched their companies at an average age of 40. Most came to entrepreneurship from the middle to lower middle class, married (70 percent), and with children (60 percent). Nearly half had worked for a company for at least 10 years, but sometimes more than 20, before striking out on their own. The findings “contradict some prevailing stereotypes,” the researchers concluded. “Entrepreneurs typically are well-educated and experienced…they largely come from the existing workforce and not from college.” This new generation of entrepreneurs listed a keen idea and a desire to get rich among their leading motivations. No doubt the Great Recession will encourage others to follow their path. Of the 8 million-plus jobs lost to the recession — in fields like manufacturing, real estate and financial services — many are not coming back, economists warn. Suddenly, joining the likes of Bill Gates or Sergey Brin takes on a new allure. There may never have been a more tempting time to plunge into America’s start-up culture. All the more important, then, to look before you leap. Entrepreneurship is fraught with anxiety and challenges, many of them unforeseen. Add the extra burden of family responsibilities, and the new entrepreneurs face new pressures. Where can they look for guidance, for an example to follow? How can they succeed at a quest that requires not only the right idea but the right attitude? They can start by studying the New Economy pioneers. They can start by thinking like an immigrant. In researching our book, “Immigrant, Inc.,” we met dozens of people who shaped a dream into a business success, despite having to cross a cultural gulf to do it. They were part of the wave of high skill immigrants who fell into the New Economy like seeds into the good earth. As Wadhawa and others have documented, immigrant founders were behind more than half the high technology companies to rise in Silicon Valley and about a quarter of the high-tech companies nationwide. In learning their stories, we found that the high-achievers typically parlayed immigrant skills into entrepreneurship skills. To succeed in business, they tapped personality traits that propelled them to immigrate, starting with dreaming big. “First of all, you believe in the American dream thing,” said Ric Fulop, one of the founders of Boston battery-maker A123 Systems. “You get here and you say, ‘OK, I have to make some happen.” Immigrant entrepreneurs know well the kinds of pressure that middle-aged entrepreneurs will face. Castillo held an expiring visitor’s visa when she launched her company in the early 1990s. To obtain an immigrant visa, she needed a job. Her start-up had to succeed. She became a highly-motivated, one-woman sales force. “The time was crushing for me,” she explained. “I wanted to stay in America.” She and others say they were often aided by an advantage unique to outsiders. Looking at the landscape with fresh eyes, they could spy opportunity the natives missed. To grow Transtar Industries into the largest transmission parts supplier in the world, Monte Ahuja introduced just-in-time delivery to neighborhood repair shops. Before him, “Everyone just kept doing things the same old way, waiting four days for parts.” Immigrants also benefit from cultural cohesion, what an experienced professional might call a contacts list. They use family to staff the business. Cultural kin become mentors, customers and suppliers. And they reach out to strangers. Time and again, the immigrant entrepreneurs expressed surprise at how often people helped them to keep going with an encouraging word, a key contact–until success became almost inevitable. But beware. Now closer to the age of a typical entrepreneur, Castillo has not escaped the pace she set at 21. “When you run your own business, it’s 24 hours a day, non stop,” she said. “At the top of Mt. Ranier, I’m thinking of my business. Once you start, there’s no way out.” Herman and Smith are co-authors of “Immigrant, Inc.: Why Immigrant Entrepreneurs are Driving the New Economy,” published by John Wiley & Sons, 2009. www.ImmigrantInc.com

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Experts See Trouble Ahead For Developed World

September 4, 2010

CERNOBBIO, Italy — Is the global economy out of the woods? Two years after near-meltdown, with the U.S. looking sluggish, equity markets groggy and Europeans fighting a debt crisis, experts gathered in Italy offered a generally gloomy outlook – especially for the United States and much of the industrialized world. The doomsayers were led by New York University economist Nouriel Roubini, who warned in booming tones that “there is a significant risk of a double-dip recession in the United States” as well as in Japan and many European countries. Some of the assembled experts and leaders at the annual Ambrosetti Forum on the shores of Lake Como were somewhat more upbeat: economist Edwin Truman, a senior fellow of the Peterson Institute for International Economics, predicted that “the most likely global outlook is subpar growth.” But most appeared to agree on a sobering array of basic problems standing in the way of true recovery: _ Many of the growth drivers in place since the collapse of Lehman Brothers are winding up or have ended, including not only the massive stimulus spending but tax breaks, schemes such as the “cash for clunkers” program and – for some countries like Russia – high commodity prices. _ The stimulus deemed necessary to jump-start moribund economies soon causes deficits and debt, upsetting the markets enough to spur austerity – which undermines growth. _ Most of the world’s growth stems from a developing world led by China – which is so dependent on exports that it needs the West to continue to buy, and so will suffer if recovery in the rich world proves short-lived. _ Europe continues to lose competitiveness partly because of the euro, which – for all the fretting over its dip earlier this year at the height of the Greek debt crisis – remains high in purchasing price parity terms versus the U.S. dollar. _ The sector that is widely seen as the spark of the global recession – U.S. real estate – has not recovered, with house-buying flat and the mortgage market, with its related financial instruments, essentially still in ruins. _ The jobs picture is not improving and in parts of the developed world – such as Spain, with some 20 percent unemployment – it is disastrous. The warnings come amid mixed news on indicators. The European Central Bank raised its growth projections Thursday and its president, Jean-Claude Trichet, said recession was “not in the cards.” But the bank said the situation remained uncertain and that it would keep measures to supply banks with additional credit in place until the end of the year. The U.S. unemployment rate rose in August for the first time in four months as hiring by private employers proved insufficient to keep pace with a large increase in the number of people looking for work. The Labor Department said Friday that companies did add a net total 67,000 new jobs last month, down from July’s upwardly revised total of 107,000. But more than a half-million Americans resumed their job searches, which drove up the jobless rate to 9.6 percent from 9.5 percent in July – a figure above the rate in Britain and Germany. “I see a very weak labor market,” said Roubini, who gained celebrity for predicting the global collapse of 2008 when others were still celebrating the boom times. He noted noting unemployment is close to 10 percent and almost 17 percent when including discouraged workers or partially employed ones. He puts the chance of recession at 40 percent or more – a position he has staked in recent weeks – and said even weak growth would still feel like a recession. “The U.S. has to create 150,000 every month in the private sector just to stabilize the rate and prevent it from rising,” he said. “We’d have to create 300,000 jobs every month for the next three years just to bring back the level of employment to before this recession started,” Roubini said. “Nobody … believes the U.S. is going to create any time any amount of jobs like that,” he said. And even that wouldn’t be enough when taking into account the young people entering the labor market, he said. Harvard University historian Niall Ferguson noted that since 2001 the United States has seen its debt-to-GDP ratio double to 66 percent and that it may well be headed toward the danger zone of 100 percent. “This is a completely unsustainable fiscal policy,” said Ferguson. “Pretty soon the U.S. will be spending more on debt service than national security. … That’s a tipping point for any global power.” Americans “just have to go down in their living standards” after years in which their living standards soared in part based on foreign credit which is no longer there,” said University of Munich economics professor Hans-Werner Sinn. Jacob Frenkel, Chairman of JP Morgan Chase International, urged the United States to rein in entitlements as part of a “political deal” that recognizes reality. Chairing a panel, CNBC anchor Maria Bartiromo drew laughs by challenging the scowling Roubini to come up with “any good news.” He offered that “emerging economies have high potential growth.” But even that comes with a caveat: Roubini warned that world growth leader China was too dependent on exports to the struggling West and predicted that within a year its economic growth will be overtaken by India, a huge nation much more reliant on its domestic market for development. The leading Chinese delegate to the forum, Cheng Siwei, seemed to agree with the criticism. “We must change our investment pattern from investment driven to relying more on domestic consumption,” said Cheng, a former top Chinese official who chairs the China Soft-Science Research Society among other positions. What about Greece, whose near-default four months ago rattled the nerves of investors around the globe? “Greece will not make it,” said Sinn. He said the world can either subsidize Athens indefinitely, force a degree of austerity that actually risks “civil war,” or – in what he suggested was the least bad option – encourage Greece to restore its drachma currency despite the domestic banking collapse that could well result. Sinn noted that bond spreads – the difference between the cost of borrowing for troubled countries such as Greece and solid ones such as Germany – have swiftly returned to the startling levels that preceded the Greek bailout in May. Truman ended his remarks on a high note, noting that in recent quarters’ “U.S. productivity increase has been significant.” In the second recent quarter, productivity dropped 1.8 percent. But higher productivity, while good for companies’ bottom lines, is also a reflection of the stagnant labor market and the shrinkage of payrolls as firms hope to produce as much as before with fewer and more productive staff. In perhaps an illustration of that psychology, several hundred business leaders at the forum were asked for their projections on their own companies’ prospects. Voting electronically, some 70 percent predicted a rise in turnover by the end of 2010 and almost half predicted a rise in their firms’ investment. But less than a third saw a chance for new hiring; almost half saw no change – and about a quarter predicted even more reductions.

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Video: U.S. Stocks Fall on Spain Concern, Slowing Manufacturing: Video

August 26, 2010

Aug. 26 (Bloomberg) — Bloomberg’s Courtney Donohoe reports on the performance of the U.S. equity market today. Stocks fell, sending the Dow Jones Industrial Average below 10,000 for the first time in seven weeks, as concern about Spain’s fiscal stability and a slowdown in manufacturing wiped out early gains triggered by a drop in jobless claims. (Source: Bloomberg)

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Video: Spain’s Basque Lawmakers Seek Agreement Over New Budget

August 26, 2010

Aug. 26 (Bloomberg) — Bloomberg’s Elliot Gotkine reports on the role of regional lawmakers in the approval Spain’s budget announcement next month. Socialist Prime Minister Jose Luis Rodriguez Zapatero is lagging in opinion polls as he cuts public-sector wages by 5 percent to reduce the euro-region’s third-largest budget gap and tries to overhaul the labor market. The country’s two biggest unions have called a general strike for Sept. 29.

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Sunil Sharan: Deregulation, the Forsaken Panacea for Climate Change

August 23, 2010

Congress has abandoned yet another climate bill. Gridlock in the august body looms large come November, dampening hopes of effective energy legislation in the foreseeable future. America is stuck. Yet deregulation, a concept all but renounced by the country a decade back in the wake of California’s energy crisis, holds the potential to unlock the gates to climatic heaven. Many American utilities have for long operated as virtual monopolies in their respective jurisdictions so much so that the service territory itself is quite often ingrained into their name. Georgia Power, Southern California Edison, Detroit Edison, Nevada Power, the list is seemingly endless. Aspiring utilities have traditionally found it prohibitive to enter the domain of incumbents. In such an uncompetitive environment, customers are relegated as “rate-payers,” with little choice of suppliers or services. Deregulation would herald competition and break down the bastions of utility protectionism. The European Union mandated liberalization (their term for deregulation) throughout the region four years ago. The fear of a behemoth like EDF of France coming into Italy and snatching a chunk of its customers made the Italian utility Enel roll out the largest grid modernization project in the world five years ago. It thereby transformed its one-trick energy delivery pipe into a multi-faceted platform for customer care. Countries like Germany and Spain have become global leaders in renewable energy. Competition has driven industry consolidation, with big fish such as EDF, Enel, E.ON, and Vattenfall snapping up smaller utilities and improving productivity through economies of scale. Choice now on tap, customers are finally able to dump dirty energy purveyors and switch to greener providers. No wonder Europe is far ahead of the rest of the world in deploying almost every type of clean energy. Currently only about a dozen states in the U.S. allow consumers a mostly-restricted form of choice of electricity providers, with Texas, the largest electricity market in the country, being the most free-wheeling. Deregulation there was phased in beginning in 2002 and is now implemented in over half the state. It is ascribed to have instigated large-scale deployments of smart-grid and wind-energy technologies. Companies like Green Mountain Energy that sell power generated purely from renewable sources have sprung up. Electricity prices in the state, after many years of hovering substantially above the national average, are trending downward, almost touching the mean this year, allaying the fear held by some that deregulation causes prices to rise unsustainably. Texas has become the bellwether for the rest of the country to open up electricity markets. What a contrast from how California went about deregulating itself in the late nineties. In fact, to even call its half-baked experiment as deregulation is a misnomer. The state allowed new entrants into electricity wholesaling while freezing consumer rates, setting the stage for wholesale prices to be manipulated by the likes of Enron when demand for electricity outstripped supply. For deregulation to succeed, both the retail and wholesale ends of electricity have to be opened up, just as Texas has done, so that demand and supply can track one another. Things went so awry for California that the entire nation stood spooked, effectively putting the idea of deregulation in cold storage. Some states still tinkered with the notion but Bush-era feds all but washed their hands off it. The Obama administration decided that clean energy in the country needed a jump start and proceeded to offer utilities a generous stimulus package. Deregulation would still remain off the agenda. Many utilities, already flush with cash, were now able to double dip into two set of pubic funds, the stimulus as well as “rate case” dollars, to enhance their operational infrastructure, without touching their own money. (A rate case transfers the cost of approved capital expenditure to rate-payers, typically as an ongoing monthly charge.) Most other industries have no such luxury; they have to leverage their cash flow for operational upgrades. With hopes fading for another round of clean energy stimulus, and other carbon-reduction schemes such as a capping of emissions or a federal standard for renewable energy generation subject to the vagaries of a squabbling Congress, America’s greening could soon grind to a halt. The stimulus provided utilities with a carrot, now it is time to pull up their socks. Deregulation, in effect, competition, would move the onus from already-strapped tax-payers squarely onto cash-rich utilities, and without the opprobrium that something like cap-and-trade seems to provoke. As has happened in Europe, deregulation in the US will make utilities more efficient, responsive, and hungry. It will release pent-up market forces, incentivizing fleet-footed utilities to thrive and forcing the dead-beats to mend their ways. It will transform rate-payers into customers, who would demand to be treated as such now that they would have the option of taking their custom elsewhere. With such obvious benefits, is it not high time that the US shed its fear of deregulation and brings it out of the closet? Europe, and at home, Texas, have both proven that it works, and that too on a large scale.

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Sunil Sharan: Deregulation, the Forsaken Panacea for Climate Change

August 23, 2010

Congress has abandoned yet another climate bill. Gridlock in the august body looms large come November, dampening hopes of effective energy legislation in the foreseeable future. America is stuck. Yet deregulation, a concept all but renounced by the country a decade back in the wake of California’s energy crisis, holds the potential to unlock the gates to climatic heaven. Many American utilities have for long operated as virtual monopolies in their respective jurisdictions so much so that the service territory itself is quite often ingrained into their name. Georgia Power, Southern California Edison, Detroit Edison, Nevada Power, the list is seemingly endless. Aspiring utilities have traditionally found it prohibitive to enter the domain of incumbents. In such an uncompetitive environment, customers are relegated as “rate-payers,” with little choice of suppliers or services. Deregulation would herald competition and break down the bastions of utility protectionism. The European Union mandated liberalization (their term for deregulation) throughout the region four years ago. The fear of a behemoth like EDF of France coming into Italy and snatching a chunk of its customers made the Italian utility Enel roll out the largest grid modernization project in the world five years ago. It thereby transformed its one-trick energy delivery pipe into a multi-faceted platform for customer care. Countries like Germany and Spain have become global leaders in renewable energy. Competition has driven industry consolidation, with big fish such as EDF, Enel, E.ON, and Vattenfall snapping up smaller utilities and improving productivity through economies of scale. Choice now on tap, customers are finally able to dump dirty energy purveyors and switch to greener providers. No wonder Europe is far ahead of the rest of the world in deploying almost every type of clean energy. Currently only about a dozen states in the U.S. allow consumers a mostly-restricted form of choice of electricity providers, with Texas, the largest electricity market in the country, being the most free-wheeling. Deregulation there was phased in beginning in 2002 and is now implemented in over half the state. It is ascribed to have instigated large-scale deployments of smart-grid and wind-energy technologies. Companies like Green Mountain Energy that sell power generated purely from renewable sources have sprung up. Electricity prices in the state, after many years of hovering substantially above the national average, are trending downward, almost touching the mean this year, allaying the fear held by some that deregulation causes prices to rise unsustainably. Texas has become the bellwether for the rest of the country to open up electricity markets. What a contrast from how California went about deregulating itself in the late nineties. In fact, to even call its half-baked experiment as deregulation is a misnomer. The state allowed new entrants into electricity wholesaling while freezing consumer rates, setting the stage for wholesale prices to be manipulated by the likes of Enron when demand for electricity outstripped supply. For deregulation to succeed, both the retail and wholesale ends of electricity have to be opened up, just as Texas has done, so that demand and supply can track one another. Things went so awry for California that the entire nation stood spooked, effectively putting the idea of deregulation in cold storage. Some states still tinkered with the notion but Bush-era feds all but washed their hands off it. The Obama administration decided that clean energy in the country needed a jump start and proceeded to offer utilities a generous stimulus package. Deregulation would still remain off the agenda. Many utilities, already flush with cash, were now able to double dip into two set of pubic funds, the stimulus as well as “rate case” dollars, to enhance their operational infrastructure, without touching their own money. (A rate case transfers the cost of approved capital expenditure to rate-payers, typically as an ongoing monthly charge.) Most other industries have no such luxury; they have to leverage their cash flow for operational upgrades. With hopes fading for another round of clean energy stimulus, and other carbon-reduction schemes such as a capping of emissions or a federal standard for renewable energy generation subject to the vagaries of a squabbling Congress, America’s greening could soon grind to a halt. The stimulus provided utilities with a carrot, now it is time to pull up their socks. Deregulation, in effect, competition, would move the onus from already-strapped tax-payers squarely onto cash-rich utilities, and without the opprobrium that something like cap-and-trade seems to provoke. As has happened in Europe, deregulation in the US will make utilities more efficient, responsive, and hungry. It will release pent-up market forces, incentivizing fleet-footed utilities to thrive and forcing the dead-beats to mend their ways. It will transform rate-payers into customers, who would demand to be treated as such now that they would have the option of taking their custom elsewhere. With such obvious benefits, is it not high time that the US shed its fear of deregulation and brings it out of the closet? Europe, and at home, Texas, have both proven that it works, and that too on a large scale.

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Video: Spain’s Campa Sees Stress Tests Helping Boost Confidence: Video

July 23, 2010

July 23 (Bloomberg) — Spanish Deputy Finance Minister Jose Manuel Campa talks with Bloomberg’s Manus Cranny about the results of the European Union’s bank stress tests. Campa says the publication of Spain’s stress tests would help build confidence, even as he doesn’t expect a big market reaction to the data. Campa speaks on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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EU Bank Stress Tests: 7 Banks Fail

July 23, 2010

LONDON — All but 7 of 91 European banks passed the much-anticipated “stress tests” aimed at showing Europe’s banking system is sound enough to weather the continent’s debt crisis – an outcome that officials hoped would forestall further market turmoil. It had been thought that some banks needed to fail for the exercise to be accepted as credible, and some analysts still argued that the results showed the tests weren’t rigorous enough – the euro was trading flat on the day after the release of the results at just below $1.29. If financial markets take the view that the tests were not tough enough when European trading resumes Monday, then the exercise could make matters worse – and further expose the EU to charges that it has failed to rise to the debt crisis within its borders. “The stress tests do not seem that stressful and it is looking more like a political whitewash rather than a genuine attempt to reassure financial markets that eurozone banks have balance sheets that could really withstand sovereign risk shocks,” said Neil MacKinnon, global macro strategist at VTB Capital. “They are delaying the day of reckoning,” said MacKinnon. Policymakers in Europe hope the results will reassure markets worried about hidden bank losses from the crisis. They were quick to laud the results as a resounding vote of confidence in Europe’s banking system. The European Union said the results “confirm the overall resilience” of the continent’s banking system. Christine Lagarde, France’s finance minister, said the tests were “tough” and “very comprehensive and as a result I would suggest that those results should be very credible and should raise the confidence in European banks.” The Committee of European Banking Supervisors, the little-known regulator charged with conducting the stress tests, said the seven banks would see their capital positions fall too low for them to weather a steep fall in the price of government bonds many of them hold. This worst-case scenario dubbed “sovereign shock” still stopped short of an outright debt default by an EU government and has made the tests less convincing to some, since many analysts still predict Greece will eventually have to restructure its debt – a polite word for default, under which creditors are paid over a longer period of time. The bank examiners said government default was precluded by an EU rescue fund to backstop countries in financial difficulty. Germany’s already-nationalized lender Hypo Real Estate Holding AG failed the strength test, but that had been widely expected. So far, the bank, which does not expect to return to profit before 2012, has received capital injections worth euro7.7 billion ($10 billion) from the German government’s bank rescue fund and loan guarantees of more than euro100 billion. There had been speculation in the run-up to the publication of the results that some of Germany’s regional banks – the landesbanken – would fail to clear any stringent hurdles. As it was, only NordLB came close to joining Hypo but barely scraped by. As expected, Spain notched up the most casualties, with five of its small savings banks – the so-called cajas – deemed as having insufficient capital to deal with future adverse shocks following the collapse of the country’s property boom. The five Spanish banks – none of them listed on stock markets – were Diada, Unnim, Espiga, Banca Civica, and Cajasur, which was bailed out by the Bank of Spain in May. Greece’s ATE bank failed and confirmed it would go ahead and proceed with a capital increase, which will involve the highly indebted Greek government itself, the main shareholder. In total the seven banks have to raise euro3.5 billion to shore up their finances, CEBS said. That’s far lower than some analysts had been predicting. But the supervisors said Europe’s banks have, over the past couple of years, gone a long way to shoring up their balance sheets. Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS, is unconvinced by the whole process, contrasting it with the United States, where similar tests last year resulted in ten of the 19 banks being tested requiring to raise $75 billion. “After economists, journalists, credit rating agencies and officials spend the weekend analyzing the results, the currency markets are likely to react negatively on Monday,” said Mohi-uddin. Anxiety about Europe’s banks mounted in tandem with the government debt crisis, which eventually led to euro110 billion ($142 billion) international bailout of Greece and a $1 trillion backstop for other troubled governments if they need it. The worry was the banks were holding government bonds from the likes of Greece, especially as their finances had already been battered by the recession. Banks became more reluctant to lend to each other and many of Europe’s banks became more dependent on emergency funds from the European Central Bank for much of their day to day needs. ____ Associated Press Writers Juergen Baetz in Berlin, Greg Keller in Paris, Elena Becatoros and Derek Gatopoulos in Athens, Barry Hatton in Lisbon, and Ciaran Giles in Madrid contributed to this story.

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EU Bank Stress Tests: 7 Banks Fail

July 23, 2010

LONDON — All but 7 of 91 European banks passed the much-anticipated “stress tests” aimed at showing Europe’s banking system is sound enough to weather the continent’s debt crisis – an outcome that officials hoped would forestall further market turmoil. It had been thought that some banks needed to fail for the exercise to be accepted as credible, and some analysts still argued that the results showed the tests weren’t rigorous enough – the euro was trading flat on the day after the release of the results at just below $1.29. If financial markets take the view that the tests were not tough enough when European trading resumes Monday, then the exercise could make matters worse – and further expose the EU to charges that it has failed to rise to the debt crisis within its borders. “The stress tests do not seem that stressful and it is looking more like a political whitewash rather than a genuine attempt to reassure financial markets that eurozone banks have balance sheets that could really withstand sovereign risk shocks,” said Neil MacKinnon, global macro strategist at VTB Capital. “They are delaying the day of reckoning,” said MacKinnon. Policymakers in Europe hope the results will reassure markets worried about hidden bank losses from the crisis. They were quick to laud the results as a resounding vote of confidence in Europe’s banking system. The European Union said the results “confirm the overall resilience” of the continent’s banking system. Christine Lagarde, France’s finance minister, said the tests were “tough” and “very comprehensive and as a result I would suggest that those results should be very credible and should raise the confidence in European banks.” The Committee of European Banking Supervisors, the little-known regulator charged with conducting the stress tests, said the seven banks would see their capital positions fall too low for them to weather a steep fall in the price of government bonds many of them hold. This worst-case scenario dubbed “sovereign shock” still stopped short of an outright debt default by an EU government and has made the tests less convincing to some, since many analysts still predict Greece will eventually have to restructure its debt – a polite word for default, under which creditors are paid over a longer period of time. The bank examiners said government default was precluded by an EU rescue fund to backstop countries in financial difficulty. Germany’s already-nationalized lender Hypo Real Estate Holding AG failed the strength test, but that had been widely expected. So far, the bank, which does not expect to return to profit before 2012, has received capital injections worth euro7.7 billion ($10 billion) from the German government’s bank rescue fund and loan guarantees of more than euro100 billion. There had been speculation in the run-up to the publication of the results that some of Germany’s regional banks – the landesbanken – would fail to clear any stringent hurdles. As it was, only NordLB came close to joining Hypo but barely scraped by. As expected, Spain notched up the most casualties, with five of its small savings banks – the so-called cajas – deemed as having insufficient capital to deal with future adverse shocks following the collapse of the country’s property boom. The five Spanish banks – none of them listed on stock markets – were Diada, Unnim, Espiga, Banca Civica, and Cajasur, which was bailed out by the Bank of Spain in May. Greece’s ATE bank failed and confirmed it would go ahead and proceed with a capital increase, which will involve the highly indebted Greek government itself, the main shareholder. In total the seven banks have to raise euro3.5 billion to shore up their finances, CEBS said. That’s far lower than some analysts had been predicting. But the supervisors said Europe’s banks have, over the past couple of years, gone a long way to shoring up their balance sheets. Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS, is unconvinced by the whole process, contrasting it with the United States, where similar tests last year resulted in ten of the 19 banks being tested requiring to raise $75 billion. “After economists, journalists, credit rating agencies and officials spend the weekend analyzing the results, the currency markets are likely to react negatively on Monday,” said Mohi-uddin. Anxiety about Europe’s banks mounted in tandem with the government debt crisis, which eventually led to euro110 billion ($142 billion) international bailout of Greece and a $1 trillion backstop for other troubled governments if they need it. The worry was the banks were holding government bonds from the likes of Greece, especially as their finances had already been battered by the recession. Banks became more reluctant to lend to each other and many of Europe’s banks became more dependent on emergency funds from the European Central Bank for much of their day to day needs. ____ Associated Press Writers Juergen Baetz in Berlin, Greg Keller in Paris, Elena Becatoros and Derek Gatopoulos in Athens, Barry Hatton in Lisbon, and Ciaran Giles in Madrid contributed to this story.

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Octopus Paul tips Spain, Germany for third

July 10, 2010

Octopus Paul tips Spain, Germany for third

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Video: FT’s Lex Columnist Stovin-Bradford on Spain’s Banks: Video

July 9, 2010

July 9 (Bloomberg) — Richard Stovin-Bradford of the Financial Times’ Lex commentary team talks with Bloomberg’s Deirdre Bolton about Spain’s decision to allow its troubled savings banks to sell up to 50 percent of their equity to private investors under a package of sweeping overhauls. (Source: Bloomberg)

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Robert L. Borosage: The Grip of the Old Economy

July 7, 2010

President Obama touted his National Export Initiative this week, boasting that in the first quarter of this year, exports were up 17% from a year ago. Increased exports abroad generate jobs at home. Given the failure of the Senate to pass badly needed jobs bills, the collapse of consumer confidence, plunging home sales, declining factory orders, continuing layoffs at the state and local level, and the weak June jobs numbers, a little good news comes as welcome relief. At a time when jobs are in short supply,” Obama said Wednesday , “building exports is an imperative.” And give the president some credit for beginning to focus government on the question of exports. But don’t break out the spirits. Exports are a delectable appetizer, but the full meal is less digestible. Imports count too. Buying stuff abroad that could be made here displaces jobs. What matters is the balance of trade, not simply the rise or fall of exports. With consumers tightening their belts, businesses sitting on over a trillion in retained profits, and government slated to cut back its spending, we would need record trade surpluses to generate jobs And there is the rub. Exports are up from early last year when the economy was still in freefall and, not surprisingly, so too are imports. The problem is that the latter are much greater than the former, and our trade deficits are on the way back up. As reported by the Bureau of Economic Analysis, the trade deficit in goods and services is up to $115.3 billion in the first three months of 2010, or back over one billion a day. The current account deficit — which adds in financial flows — is up to $109 billion. In the airless prose of the BEA , this represents the “third consecutive quarterly increase since the deficit of $84.4 billion in the second quarter of 2009, which was the smallest deficit since the third quarter of 1999.” We were running deficits of over two billion a day before the economy tanked. The Great Recession more than halved those deficits, but now they are steadily rising once more. The grip of the pre-recession economy is reasserting itself. Why is this important? Because, as President Obama correctly said in his economic Sermon on the Mount at Georgetown , we cannot “recover” to the old economy and should not want to. That economy was built on bubbles and debt, borrowing $2 billion a day from abroad, with American consumers taking on ever more debt while serving as the world’s consumer of last resort. We were shedding manufacturing jobs when the economy was growing. The global imbalances contributed directly to the economic collapse. Obama put the case most clearly earlier this year: We can’t go back to that kind of economy. That’s not where the jobs are. The jobs of the 21st century are in areas like clean energy and technology, advanced manufacturing, new infrastructure. That kind of economy requires us to consume less and produce more; to import less and export more. Instead of sending jobs overseas, we need to send more products overseas that are made by American workers and American business. And we need to train our workers for those jobs with new skills and a world-class education. The president has urged the US to act boldly to capture a leading role in the new green industrial revolution — centered on renewable energy — that surely will drive global markets of the next decades. He called for new investment in education and training, in 21st century infrastructure, in research and development. “The fight for American manufacturing,” he said,” is the fight for America’s future.” In addition to ending our addiction to oil, any effort to create more balanced trade requires challenging Chinese mercantilism, and getting surplus countries like Germany to rely less on export-led growth. One of the president’s first global victories was to get the G-20, including China, to agree that the imbalances in the global economy were a problem that had to be dealt with by both countries with large trade deficits like the US and countries with large surpluses like Germany and China. But addressing these imbalances requires wrenching changes — and little progress is in evidence. The Chinese have agreed formally to let their currency float, a bit, but US companies now complain that they are getting worse, not better treatment from the Chinese government. The Germans, reaping the benefits of a declining Euro, are ginning up exports, while instituting greater austerity at home. The imbalances are headed back up, limited only by the faltering revival of economic growth. The president now presents the bilateral trade accord with South Korea — negotiated during the Bush years — as illustrative of his agenda. The treaty is an archetype of the old order, an imbalanced “free trade” treaty advertised as creating jobs that will do little to affect the oligopolistic structure of Korean markets that systematically disadvantages US exports. The president would have been wise to start over, and use the Korean negotiations as a precursor for how to deal with China. Instead, the president’s endorsement, a dutiful recitation of free trade pieties, is a tribute to the free trade priesthood that has hounded him to return to the faith. Like Galileo prosecuted by the Church, he avows that the sun does revolve around the earth. We’ve witnessed over and over again the grip of the old economy — and the strength of entrenched interests in frustrating the change Obama called for. The “drill, baby, drill” crowd filibusters the energy and climate bill in the Senate. Financial reform will leave the big banks more concentrated than ever, with financial profits headed back over 30% of all corporate profits. Trade deficits are going back up. China, Germany, Spain and other nations with industrial policies are capturing the lead in the emerging green industries. Inequality in America is growing, even as the middle class is sinking. Some have given up in despair. Some on the left write Obama off as hapless or a stooge. Imploring the president to show passion has become a media fixation. If elections were held today, the party of obstruction brandishing the same ideas that led us into the Great Recession has an even chance of winning control of the House of Representatives. But it is still early. The fight has only been joined. The special interests and a mobilized right stand in the way. The question now is less what Obama will do than how citizens will respond.

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Jonathan Littman: Innovation World Cup Style

July 6, 2010

The world’s biggest sporting event has been a case study in how big organizations struggle to innovate. Soccer, or football, as the rest of the globe calls the game you play with your feet, head, and heart is the world’s most popular game. In its vast sphere of influence, soccer is equivalent to Microsoft Windows of a decade ago, a fearsome international franchise with little competition. The old men of FIFA (the International Federation of Association Football) rule the sport with an iron fist, and have long ago made it clear that they believe change is for the weak. Why mess with the tried and true formula of a game that can draw an audience of nearly a billion people for the final? But nothing lasts forever. Despite the vast worldwide popularity of soccer, the organization responsible for carrying this great game into the future increasingly resembles two formerly great companies that have come to be synonymous with mediocrity — Dell Computers and Microsoft. There was a time in the 1980′s and 1990′s when Microsoft appeared to have a lock on the desktop. The company owned Corporate America. IT managers knew they wouldn’t be fired for buying the latest version of Windows, or for that matter, inexpensive Dell machines. The same could be said of World Cup soccer. While virtually every other sport has adjusted its rules to embrace faster, more athletic athletes and found successful ways to integrate technology, FIFA has essentially shipped the same creaky old product for decades. Clout means you don’t have to adapt. Since Microsoft possessed what critics might call market power there were few competitive brands available for business customers. Even if Windows was dull and cloudy, Apple and other upstarts didn’t have a chance in hell of cracking the corporate marketplace. As in the game of monopoly, Microsoft used its market sway to keep many players off the board. Then suddenly the game changed. Microsoft didn’t get the Internet or the Web or Web 2.0. It didn’t have to. It could continue selling bloated operating systems and cumbersome suites of programs because of the rubber stamp purchases of thousands upon thousands of lemming-like corporate IT managers. Similarly, the runaway success of international soccer made it possible for FIFA to ignore how technology and the Internet were making its blunders ever more visible. And then, something wonderful happened. One by one, IT managers found the courage to say no. Today, corporations all over the world are beginning to reject Microsoft’s iron hold on their data and operations. They are seizing upon superior alternatives. This spring, Apple Computer passed Microsoft to become the world’s most valuable technology company. Individuals adore iPhones, iPods, Macintoshes, and iPads, and corporations are belatedly realizing that men and women don’t like to be forced to use tools at work that they find mediocre. Meanwhile, the once celebrated Dell model of “efficiency, outsourcing and tight inventories,” has come under attack, as the New York Times recently revealed that the company “shipped at least 11.8 million computers… that were at risk of failing because of the faulty components.” Dell did not help its case, according to the New York Times , because its “employees went out of their way to conceal these problems.” Which leads us back to FIFA and the World Cup. Like the once all-powerful, dominating Microsoft, FIFA appears to have soccer fans in the palm of its hand. Even Americans have been enthralled by the dazzling athletes and their spirited play. But that attention has only made it more apparent that the quality control of this World Cup is not far above Dell’s computers. U.S. fans watched a game where we scored a legitimate winning goal, and then saw the ref pull it back. Against Algeria, Clint Dempsey was called offside. Replays showed he was clearly onside. Argentina was gifted a phony offside goal against Mexico. England scored the equalizer against Germany — the ball was a yard within the goal — and although everyone in the stadium knew it was a goal, the ref blundered on. Next Paraguay scored the opening goal against Spain in the quarterfinal, only to have the marvelous strike pulled back by yet another questionable offside call. At the stadium FIFA didn’t dare allow the showing of a replay, having already been embarrassed by earlier ref blunders. Burying your head in the sand is no solution. The hardware of soccer is malfunctioning. Goal line technology is desperately needed. Is that too much to ask in 2010, for the World Cup? As for the anachronism known as offside, experts in physiology say the human eye frequently cannot call offside accurately (try simultaneously tracking the ball and two or more sprinting players separated by 20 to 30 meters). The offside rule is wired for failure, and unless FIFA wants to continue to run the risk of critical games upended by systemic errors — luck and bad calls will define the World Cup. The solution is not the stay-the-course, plodding Microsoft-style endorsed by the FIFA’s president Sepp Blatter, but instead to recognize that soccer is a business that desperately needs innovation. Brainstorm a new, better offside rule, for instance, one that stops players from hanging around the goal (the intent of the rule) yet one that can be enforced equally. Rule that goal line cheating — as in the ugly intentional handball by Uruguay that stole marvelous Ghana’s victory — is goaltending (basketball figured this out decades ago). And honestly, why couldn’t there be at least one instant replay per side a game? A thoughtful, forward-looking exploration would take a deeper look at what makes a good game great. No one wants more zero-zero overtime penalty kick snoozefests. Quite simply it’s too hard to score. Goalies have gotten bigger and more acrobatic, defenses tighter, while the size of the goal has remained unchanged. Multiple goals light up games. Scores of 2-1 or 3-1 tend toward the dramatic, as teams are forced to take more risks. In contrast, playing for a tie is no different than shipping the same old product over and over again. Apple has shown brilliantly how to engage people through well-designed experiences and immersion, and there’s much to be learned from its success. If FIFA wants to innovate and turn contests into thrillers — instead of hapless statistical exercises in the random role of luck — all it has to do is raise goal posts about 6 inches and make them about a foot wider. Those few inches will crowd out bad rules and bum refs. Dull, defensive strategies will rarely succeed if the net is a little more inviting. That change alone would transform a lot of 1-0 contests into dramatic 2-1 affairs. Purists may scream, but FIFA made a far more sweeping change by introducing the gimmicky Adidas Jabulani ball for this World Cup. The wacky ball has sent countless shots awry, while penalizing goalies with freak shots that didn’t deserve to be rewarded. Change alone is not innovation. The best soccer, like the best computers or software, is an artful blend of function and design. Let’s hope the old men of FIFA are wise enough to see where the future lies. Not in the illusion of safety represented by the status quo, but in creating richer, more engaging contests. Fans deserve games decided by talent and heart, not a random blast from an official’s whistle.

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‘The European Way’ May Be Coming To End As Debt Crisis Mounts

July 2, 2010

MADRID — In the ashes of Europe’s debt crisis, some see the seeds of long-term hope. That’s because the threat of bankruptcy is forcing governments to implement reforms that economists argue are necessary to help Europe prosper in a globalized world – but were long viewed as being politically impossible because of entrenched social attitudes. Changes such as making it easier for companies to fire workers or stare down unions were until recently dismissed as simply not being the “European way.” Similarly, many were skeptical that European governments would or could tackle bloated public payrolls, trim entitlements or force people to retire later. When it became clear earlier this year that Greece’s debt crisis was rattling markets everywhere and dragging down Europe’s common currency, it was business as usual: European governments seemed to dither, disunited. Germany came in for particular criticism, appearing to hold up a bailout of Greece because it was unpopular with German voters. But over two months of hectic activity a new narrative has started to settle in, to the surprise of many a euro-skeptic: When the chips were truly down, the countries of the European Union found a way to strike hard and fast – and together. European leaders first joined with the International Monetary Fund in May and agreed on a $1 trillion rescue fund for financially troubled countries. Then Greece announced deep budget cuts, Spain cut employer costs and France raised its retirement age. France also joined Germany and the U.K in imposing harsh budget cuts. To Marco Annunziata, the London-based chief economist for Unicredit, those are signs that Europe is finally facing the reality that it must make structural changes. “Governments are reluctantly acknowledging that reforms are needed and there is no more room for delays and excuses,” he said. “It looks like perhaps we are past the longest stage of denial, which in Europe has lasted at least 20 years.” Annunziata said governments now face a crucial test of political will: Can they implement the reforms they have announced? Already in Italy, Premier Silvio Berlusconi has suggested he will reconsider some of the austerity measures he announced last month to trim the deficit after facing opposition and seeing his popularity dip. And France will have to steel itself for strikes. Still, there are signs that Europe may muster passing grades. In Spain, employers had long moaned that laying off workers is so expensive that they were wary of hiring in the first place. Political leaders felt no urgency as the economy grew at a healthy clip, buoyed by a construction boom and cheap credit. Nor did they when the boom ended and the jobless rate soared to 20 percent. Then came the May 28 decision by the credit rating agency Fitch to downgrade Spanish debt. Facing a growing risk of a debt default, the Spanish parliament quickly passed measures that make firing cheaper and even let companies talk their way out of collective bargaining agreements if times go bad. The changes were imposed by Prime Minister Jose Luis Rodriguez Zapatero’s government almost overnight, after nearly two years of state-sponsored talks between unions and management finally collapsed a few weeks ago. Sandalio Gomez, a professor of management at IESE Business School in Madrid, noted that the government also has enacted euro15 billion ($18.7 billion) in spending cuts to slash the deficit. The cuts reduce civil servants’ wages and public investment and freeze retirement pensions. “If we were not in the midst of a sovereign debt crisis they wouldn’t be doing it,” said Stephen Lewis, chief economist at Monument Securities. “They wouldn’t be inviting the negative reaction from their own labor forces.” Spain’s workplace package was passed as a fast-track decree and is now subject to amendments by Parliament over the next month or so. Under the old law, many workers have contracts that give 45 days of severance pay per year worked. These will remain for old contracts, but for new ones the figure goes down to 33 days of severance per year of work. Also, companies in economic trouble can now negotiate with workers to lower salaries and reduce shifts or other terms of employment, and call in an arbitrator for a binding ruling if the talks hit a deadlock. That’s still generous, compared with practices in the U.S. and other less regulated economies, but a start. Spanish unions are furious and have called a general strike, but not until Sept. 29, after the sacrosanct monthlong summer vacation ends. Like Spain, Greece is shaking up its stodgy, rule-bound practices on hiring and firing. The hope is to encourage hiring and stimulate economic growth that will be needed to help pay down a swollen debt load. Last year, the newly elected government revealed that its predecessors had fudged the country’s deficit numbers. Prohibitively high interest rates soon followed, prompting Greece to accept a euro110 billion ($138 billion) EU and IMF bailout, with policed austerity as the price. Last month, Greece announced that it would allow companies to lay off more people and make lower severance payments. The maximum notice period, if Parliament approves, would be reduced from 24 months to six months. The short-term response to those moves has been a wave of strikes and riots. Demonstrations also have been held in Spain and France. In fact, such measures were called for by the European Union in its Lisbon Strategy, an ambitious blueprint adopted in 2000 whose goal was to make Europe the world’s most competitive economic bloc. Little got done. One reason: the courage to enact change can be costly. Then-Chancellor Gerhard Schroeder loosened Germany’s heavily regulated labor market as part of social spending reforms he undertook in 2003 and implemented for the most part by 2005. Economists say the changes helped get the German economy on track before the recent financial crisis. But they hurt Schroeder and his Social Democrats politically – in 2005, voters dumped him and Angela Merkel became chancellor. Not everyone has the same sense of urgency. While Italy’s debt totals 115 percent of gross domestic product, higher than Spain’s, few structural reforms are being discussed there. One reason is that its unemployment rate of 8 percent is far better than in Spain, thanks to government-sponsored jobs support programs. Interest rates on Italy’s long-term debt also haven’t spiked as they did in Spain and Greece – at least not yet. ___ AP Business Writer Barry contributed from Milan.

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‘The European Way’ May Be Coming To End As Debt Crisis Mounts

July 2, 2010

MADRID — In the ashes of Europe’s debt crisis, some see the seeds of long-term hope. That’s because the threat of bankruptcy is forcing governments to implement reforms that economists argue are necessary to help Europe prosper in a globalized world – but were long viewed as being politically impossible because of entrenched social attitudes. Changes such as making it easier for companies to fire workers or stare down unions were until recently dismissed as simply not being the “European way.” Similarly, many were skeptical that European governments would or could tackle bloated public payrolls, trim entitlements or force people to retire later. When it became clear earlier this year that Greece’s debt crisis was rattling markets everywhere and dragging down Europe’s common currency, it was business as usual: European governments seemed to dither, disunited. Germany came in for particular criticism, appearing to hold up a bailout of Greece because it was unpopular with German voters. But over two months of hectic activity a new narrative has started to settle in, to the surprise of many a euro-skeptic: When the chips were truly down, the countries of the European Union found a way to strike hard and fast – and together. European leaders first joined with the International Monetary Fund in May and agreed on a $1 trillion rescue fund for financially troubled countries. Then Greece announced deep budget cuts, Spain cut employer costs and France raised its retirement age. France also joined Germany and the U.K in imposing harsh budget cuts. To Marco Annunziata, the London-based chief economist for Unicredit, those are signs that Europe is finally facing the reality that it must make structural changes. “Governments are reluctantly acknowledging that reforms are needed and there is no more room for delays and excuses,” he said. “It looks like perhaps we are past the longest stage of denial, which in Europe has lasted at least 20 years.” Annunziata said governments now face a crucial test of political will: Can they implement the reforms they have announced? Already in Italy, Premier Silvio Berlusconi has suggested he will reconsider some of the austerity measures he announced last month to trim the deficit after facing opposition and seeing his popularity dip. And France will have to steel itself for strikes. Still, there are signs that Europe may muster passing grades. In Spain, employers had long moaned that laying off workers is so expensive that they were wary of hiring in the first place. Political leaders felt no urgency as the economy grew at a healthy clip, buoyed by a construction boom and cheap credit. Nor did they when the boom ended and the jobless rate soared to 20 percent. Then came the May 28 decision by the credit rating agency Fitch to downgrade Spanish debt. Facing a growing risk of a debt default, the Spanish parliament quickly passed measures that make firing cheaper and even let companies talk their way out of collective bargaining agreements if times go bad. The changes were imposed by Prime Minister Jose Luis Rodriguez Zapatero’s government almost overnight, after nearly two years of state-sponsored talks between unions and management finally collapsed a few weeks ago. Sandalio Gomez, a professor of management at IESE Business School in Madrid, noted that the government also has enacted euro15 billion ($18.7 billion) in spending cuts to slash the deficit. The cuts reduce civil servants’ wages and public investment and freeze retirement pensions. “If we were not in the midst of a sovereign debt crisis they wouldn’t be doing it,” said Stephen Lewis, chief economist at Monument Securities. “They wouldn’t be inviting the negative reaction from their own labor forces.” Spain’s workplace package was passed as a fast-track decree and is now subject to amendments by Parliament over the next month or so. Under the old law, many workers have contracts that give 45 days of severance pay per year worked. These will remain for old contracts, but for new ones the figure goes down to 33 days of severance per year of work. Also, companies in economic trouble can now negotiate with workers to lower salaries and reduce shifts or other terms of employment, and call in an arbitrator for a binding ruling if the talks hit a deadlock. That’s still generous, compared with practices in the U.S. and other less regulated economies, but a start. Spanish unions are furious and have called a general strike, but not until Sept. 29, after the sacrosanct monthlong summer vacation ends. Like Spain, Greece is shaking up its stodgy, rule-bound practices on hiring and firing. The hope is to encourage hiring and stimulate economic growth that will be needed to help pay down a swollen debt load. Last year, the newly elected government revealed that its predecessors had fudged the country’s deficit numbers. Prohibitively high interest rates soon followed, prompting Greece to accept a euro110 billion ($138 billion) EU and IMF bailout, with policed austerity as the price. Last month, Greece announced that it would allow companies to lay off more people and make lower severance payments. The maximum notice period, if Parliament approves, would be reduced from 24 months to six months. The short-term response to those moves has been a wave of strikes and riots. Demonstrations also have been held in Spain and France. In fact, such measures were called for by the European Union in its Lisbon Strategy, an ambitious blueprint adopted in 2000 whose goal was to make Europe the world’s most competitive economic bloc. Little got done. One reason: the courage to enact change can be costly. Then-Chancellor Gerhard Schroeder loosened Germany’s heavily regulated labor market as part of social spending reforms he undertook in 2003 and implemented for the most part by 2005. Economists say the changes helped get the German economy on track before the recent financial crisis. But they hurt Schroeder and his Social Democrats politically – in 2005, voters dumped him and Angela Merkel became chancellor. Not everyone has the same sense of urgency. While Italy’s debt totals 115 percent of gross domestic product, higher than Spain’s, few structural reforms are being discussed there. One reason is that its unemployment rate of 8 percent is far better than in Spain, thanks to government-sponsored jobs support programs. Interest rates on Italy’s long-term debt also haven’t spiked as they did in Spain and Greece – at least not yet. ___ AP Business Writer Barry contributed from Milan.

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Video: Ghana Seeks to Give Africa Reason to Cheer at World Cup

July 2, 2010

July 2 (Bloomberg) — Bloomberg’s Rachel Brookes reports from Johannesburg on the quarterfinal matches at the soccer World Cup. Netherlands plays Brazil in Port Elizabeth and Uruguay takes on Ghana in Johannesburg in matches today, while tomorrow sees Argentina clash with Germany in Cape Town and Paraguay versus Spain in Johannesburg.

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