October 13, 2011 at 7:46am
UPDATE 1-Slovak parliament gears up for new vote on EFSF
BRATISLAVA Oct 13 (Reuters) - Slovakia’s caretaker
government prepared a new ratification vote for the euro zone’s
EFSF rescue fund on Thursday after forging a deal with the
leftist opposition that will lead to a snap election but remove
a threat to the bailout plan.Prime Minister Iveta Radicova’s government fell on Tuesday
after one of the four parties in her ruling coaltion refused to
support expanding the powers of the European Financial Stability
Fund, agreed by European leaders in July to fight a debt crisis.The government remains in power on a caretaker basis, and
has pledged to ratify the measure with support of the leftist
opposition Smer party no later than Friday.Tiny Slovakia is the only one of the 17 countries using the
euro single currency that has yet to approve giving the rescue
fund more powers, a measure European leaders say is urgently
needed to save the currency zone from financial ruin.”We think that the vote will take place already today….It
is quite possible,” said Michal Lukac, spokesman for Radicova’s
centre-right Slovak Democratic and Christian Union (SDKU).The difficulty ratifying the EFSF expansion in Slovakia is a
sign of the challenges European leaders face responding to the
debt crisis across 17 countries that must all act unanimously.With 5.4 million people, Slovakia accounts for less than 2
percent of the currency bloc’s population and 1 percent of its
output, but its parliament can effectively veto the measure.The delay in enacting the July deal comes even as other
leaders are wrangling over further steps to protect euro zone
banks if Greece defaults on its debts. [ID : nL5E7LC0L7]ELECTIONSlovakia’s cabinet approved a constitutional law at an
extraordinary session on Thursday that will move a general
election originally planned for 2014 to March 10 next year,
meeting Smer’s main demand for its support of the EFSF.That measure can be approved in a swift procedure when
parliament resumes its session at 1300 GMT on Thursday. It will
then vote either later on Thursday or on Friday on the EFSF.European Commission President Jose Manuel Barroso said he
was confident Slovakia would approve the plan, and that this
would not be a problem for EU leaders when they meet on Oct. 23.”I hope that this is going to find a solution, and I am told,
the latest reports we have received from Slovakia, is that there
is now a consensus or a majority in favour of a solution, and I
welcome that,” Barroso told reporters in Brussels.”So I don’t think that this will be a problem for the
European Council. I am anticipating a positive outcome.”The agreement on Wednesday between Smer and the three
governing parties — Radicova’s SDKU, the Christian Democrats,
and the centrist Most-Hid — caused the euro and global stocks
to rally, reversing a selloff that had gained speed on fears
that the measure might not go through.The fourth coalition member, Freedom and Solidarity (SaS),
caused the cabinet to collapse by opposing Tuesday’s confidence
motion. Its leader, free-marketeer Richard Sulik, argued that as
the euro zone’s second poorest member, Slovakia should not have
to bail out richer countries like Greece.The package will boost the EFSF to 440 billion euros and
give it the ability to buy sovereign bonds, extend emergency
lending to countries and recapitalise banks.Slovakia’s portion in guarantees backing up the EFSF is 7.7
billion — about 11 percent of its annual output. Sulik says
that is too much considering Slovak living standards are just 74
percent of EU average, below Greece’s 89 percent.Radicova’s cabinet will remain in office until a new
administration is formed. Smer’s leader Robert Fico said he
would stay in opposition until the March election.Coalition officials have not given details on how the
government will continue to operate. It is possible that
Radicova’s team will stay on in a caretaker capacity.Fico, whose Smer party is Slovakia’s most popular by far
with over 40 percent support, has long pledged support for the
rescue fund but stayed out of Tuesday’s ratification as a
tactical move to topple the government.President Ivan Gasparovic, responsible for appointing the
next prime minister, has cut short a visit to Asia to deal with
the government collapse and was due to return on Thursday.
Radicova was due to meet Gasparovic on Friday. She cancelled a
trip to a summit of central European prime ministers in Prague.Slovaks have been split over the EFSF, but the latest
opinion polls show more people backing the plan to expand it
than opposing it.”This coin has two sides — when we are members of the euro
zone, we need to take measures the way other countries adopt
them, and not distance ourselves,” said Michal Sklenar, 28, a
clerk.
October 12, 2011 at 10:46am
UPDATE 1-Greek tax inspectors to strike, protests spread
* Budget deficit widens in first nine months despite new
taxesBy Harry Papachristou and Renee MaltezouATHENS, Oct 12 (Reuters) - Greek tax inspectors will go on
strike next week to protest against planned wage and pension
cuts, threatening more disruption to revenue collection efforts
that are already falling behind budget targets imposed by
international lenders.With much of Greece expected to be shut down by a general
strike on Oct. 19, finance ministry officials have called a
two-week stoppage from Oct. 17 while tax offices will remain
closed from Oct. 17-20 and customs officials will stay away from
their desks from Oct. 18-23.On Wednesday, the finance ministry in Athens was shuttered
with a black banner reading “Occupied” hanging down the front of
the building, which faces parliament across the central Syntagma
Square.”Everything is falling apart, we are suffering along with
everyone else in the public sector,” said Nikos Klouvatos, head
of the union representing workers at the statistics agency. “We
would not have reached this point if the government had taken
the right measures in time.”Greece is trapped in deep recession and fighting to control
a public debt mountain expected to reach 162 percent of GDP this
year, and there has been growing doubt over whether the
austerity measures will be enough to prevent default.Data on Wednesday showed the central government budget
deficit widened by 15 percent in the first nine months of the
year as the shrinking economy produced less tax revenue despite
a rise in sales tax in restaurants and a one-off income tax
surcharge.On Tuesday, officials from the EU-IMF-ECB “troika” said that
Athens would miss its 2011 fiscal targets and needed to take
additional steps to get back on track to meet objectives beyond
2012.But the measures imposed so far have strained Greek society
severely and raised questions over how much more pain workers
would accept.”We’ll continue with labour action and occupations next week
when the general strike takes place,” said Despina Spanou, a
senior leader of the ADEDY union, which represents half a
million public sector workers.”We expect it to be the biggest walkout so far,” she told
Reuters, adding that her salary had been cut by 70 percent since
2009. “We cannot live like this,” she said.EU SUMMITParliament is debating a sweeping package of measures,
ranging from wage and pension cuts to tax rises and large-scale
public sector layoffs, which Finance Minister Evangelos
Venizelos said must be approved before an Oct. 23 EU summit.”This law needs to be approved before the EU summit so that
the prime minister can stand up and argue that Greece is
fulfilling its obligations,” Venizelos told lawmakers at a
reading of the legislation in parliament on Wednesday.Analysts expect the law to pass despite discontent among
ruling Socialist party lawmakers.Prime Minister George Papandreou discussed the euro zone
debt crisis late on Tuesday with IMF chief Christine Lagarde,
but his office gave no details of their talks.The government has already admitted it will miss initial
2011 deficit targets and Venizelos has warned that if citizens
fail to back new tax measures, the 2011 deficit could reach 9
percent of GDP, above the new 8.5 percent goal.The conservative opposition, which opposes the austerity
measures and is leading the Socialists in opinion polls, said
the government had failed.”The ‘rescue plans’ are collapsing, one after another — the
budget execution figures confirm this”, the party’s economy
spokesman Christos Staikouras said. “This is a bottomless pit,
the fiscal holes get wider and wider.”Outside parliament, a couple of thousand demonstrators took
part in what have become daily protests against the measures.Garbage piled up in some areas as municipal workers stopped
work, and a 48-hour strike starting on Thursday will halt public
transport in Athens, adding to the misery of Greeks facing the
deepest cuts in postwar history.The walkouts by tax and customs officials are expected not
only to disrupt badly needed tax payments, but also to disrupt
fuel supplies, as petrol deliveries from refiners to filling
stations usually require customs clearance.Crowds of foreign tourists were barred from entering the
Acropolis in Athens because of a strike by archaeological
service workers, responsible for running sites which bring in
much-needed tourist revenue.Athens has promised tough new civil service wage cuts to
convince the European Union and the International Monetary Fund
that it will meet new budget deficit targets of 8.5 percent of
GDP this year and 6.8 percent in 2012.The planned strike, by workers who will suffer from the
austerity measures, underlines the difficulty of pushing through
the tax collection drive demanded by the EU and IMF inspectors.Disgruntled power workers have threatened to boycott a
planned property tax, designed to be collected through utility
bills as a means of bypassing the notoriously inefficient tax
authority.Many public servants have lost a fifth of their salaries
since the start of the crisis and now face further cuts of up to
20 percent. Some 30,000 are also being assigned to a so-called
labour reserve, a step towards redundancy.
October 11, 2011 at 1:29pm
China’s runaway bosses spotlight underground loan market
Many cash-strapped firms are unable to borrow from banks amid a credit clampdown by Beijing, and some have turned to China’s underground lending market — which pools money from individuals and firms — at annual interest rates as high as 100 percent.The staggering rates, at more than 15 times China’s benchmark lending rates, have pushed some firms to the limit.In just one day last week, Chinese media reported that nine bosses of small-sized firms in China’s entrepreneurial capital of Wenzhou, in eastern Zhejiang province, had skipped town after realizing they could not repay their corporate loans.”The private lending craze has fueled an economic bubble, and the ‘runaway episode’ in Wenzhou is a landmark event in the bursting of such a bubble,” the official Financial News, a paper run by China’s central bank, said in a report on Wednesday.Among the bosses who have reportedly gone into hiding is the chairman of one of Wenzhou’s prominent spectacles makers, Zhejiang Center Group Co. Ltd.The well-known firm had harbored ambitions of a public stock listing, the China Business News said, but problems started in 2008 when it was squeezed by falling overseas orders, rising raw material costs and a firmer yuan.Citing sources with knowledge of the matter, the newspaper said Zhejiang Center owes its suppliers between 50 and 100 million yuan ($7.8 million to $15.6 million). Calls by Reuters to the company’s main number went unanswered.”Seven days after his (the board chairman’s) disappearance, a few company managers are still reporting for work,” China Business News reported after a visit to Zhejiang Centre’s Wenzhou office.”But they are at a loss as to what they should do now.”Zhejiang Centre’s website says it employs around 3,000 workers and has annual export sales of 500-600 million yuan.Chinese officials have said repeatedly that they have detected no large-scale collapses among small firms in the country and that they do not face extreme credit shortages.That point was reiterated on Wednesday by Lu Zhongyuan, vice head of Development Research Center, a cabinet think-tank.”Difficulties that small companies face are not mainly caused by tight credit,” Lu said. “The biggest problem faced by small firms is the rise in costs.”LUCRATIVE LENDINGFor the wealthy in China, lending their savings to firms at annual rates starting at around 36 percent is more lucrative than putting their money in banks that give negative returns.China’s one-year deposit rate stands at 3.5 percent, under the central bank’s 2011 inflation target of 4 percent and significantly below actual inflation which recently has exceeded 6 percent.A thriving underground lending market has bloomed amid savers’ zeal to put their money to better use. The central bank estimated the market was worth 2.4 trillion yuan as of the end of March 2010, or 5.6 percent of China’s total lending.”Speculative private lending has increased this year and has deviated from actual credit needs of the economy,” said Fu Bingtao, an analyst at Agricultural Bank of China.Fu said the risks to China’s economy, the world’s second largest, could be contained since the rampant lending is outside of the banking system and such loans are generally not used to fund speculative bets.However, in its annual survey of Chinese banks released this month, accounting firm KPMG noted that credit woes faced by one small firm can affect its peers through “debt triangles.”This happens when a firm that is short of cash delays payments to its suppliers, causing suppliers to suffer cash flow problems which in turn can affect others higher up the supply chain.Banks are also not entirely insulated. Savers’ reluctance to put their money in banks has sparked a “war for deposits.”To win deposits, banks are paying for depositors’ holidays within the country or their children’s education, and offering job opportunities to their relatives, the Financial News said.Yet for cash-rich savers, times are sweet.An investment consultant in Beijing, who only gave his surname Bai, told Reuters he remits his salary back to the northern Chinese province of Hebei each month for his mother to lend to businesses.”The money that I lent at the start of the year had annual interest rates of 10 percent. Now rates have risen to 50 percent,” he said. “My 100,000 yuan of savings has grown to nearly 150,000 yuan.”But firms cannot afford such sky-high rates, said Zhou Dewen, head of the association for small- and medium-seized enterprises in Wenzhou. Many earn profit margins of between 3-5 percent so loan defaults may spike if rates do not ease next year.Even Bai is worried for his borrowers.”My neighbors at home are lending at annual rates of 150 percent,” he said. “Which industry can enjoy such high profit margins? It’s not like they are trafficking drugs.” ($1 = 6.394 Chinese Yuan)
12:46pm
Less foreign news in UK papers – should we care?
A newspaper seller organises British papers in his shop
12:46pm
Less foreign news in UK papers – should we care?
A newspaper seller organises British papers in his shop
