Unknown Butler’s dredge-boat, sunk by Confederate shell, James River, VA 1864
Just so you can feel rich for a while longer.
• QE Will Permanently Impair Living Standards For Generations To Come (Guggenheim)
Essentially, monetary authorities around the globe are levying a tax on investors and providing a subsidy to borrowers. Taxation and subsidies, as well as other wealth transfer payment schemes, have historically fallen within the realm of fiscal policy under the control of the electorate. Under the new monetary orthodoxy, the responsibility for critical aspects of fiscal policy has been surrendered into the hands of appointed officials who have been left to salvage their economies, often under the guise of pursuing monetary order. The consequences of the new monetary orthodoxy are yet to be fully understood. For the time being, the latest rounds of QE should support continued U.S. dollar strength and limit increases in interest rates. Additionally, risk assets such as high-yield debt and global equities should continue to perform strongly.
Despite ultra-loose monetary policies over the past several years, incomes adjusted for inflation have fallen for the median U.S. family. With the benefits of monetary expansion going to a small share of the population and wage growth stagnating, incomes have been essentially flat over the past 20 years. In the long run, however, classical economics would tell us that the pricing distortions created by the current global regimes of QE will lead to a suboptimal allocation of capital and investment, which will result in lower output and lower standards of living over time. In fact, although U.S. equity prices are setting record highs, real median household incomes are 9% lower than 1999 highs. The report from Bank of America Merrill Lynch plainly supports the conclusion that QE and the associated currency depreciation is not leading to higher global output.
The cost of QE is greater than the income lost to savers and investors. The long-term consequence of the new monetary orthodoxy is likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity.
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“..Yellen has fallen back on the core concept—that a market economy reaches “equilibrium”—rather than part of the fantasy mechanism by which The Fed believes equilibrium is achieved. Equilibrium. What nonsense!”
• Fed Chases ‘Equilibrium’, Has Not Learnt From The Crisis (Steve Keen)
The Financial Crisis of 2007 was the nearest thing to a “Near Death Experience” that the Federal Reserve could have had. One ordinarily expects someone who has such an experience—exuberance behind the wheel that causes an almost fatal crash, a binge drinking escapade that ends up in the intensive care ward—to learn from it, and change their behaviour in some profound way that makes a repeat event impossible. Not so the Federal Reserve. Though the event itself gets some mention in Yellen’s speech yesterday, the analysis in that speech shows that the Fed has learnt nothing of substance from the crisis. If anything, the thinking has gone backwards. The Fed is the speed driver who will floor the accelerator before the next bend, just as he did before the crash; it is the binge drinker who will empty the bottle of whiskey at next year’s New Year’s Eve, just as she did before she woke up in intensive care on New Year’s Day.
So why hasn’t The Fed learnt? Largely because of a lack of intellectual courage. As it prepares to manage the post-crisis economy, The Fed has made no acknowledgement of the fact that it didn’t see the crisis itself coming. Of course, the cause of a financial crisis is far less obvious than the cause of a crash or a hangover: there are no skidmarks, no empty bottle to link effect to cause. But the fact that The Fed was caught completely unawares by the crisis should have led to some recognition that maybe, just maybe, its model of the economy was at fault. Far from it. Instead, if anything is more visible in Yellen’s technical speech than it was in Bernanke’s before the crisis, it’s the inappropriate model that blinded The Fed—and the economics profession in general—to the dangers before 2007.
In fact, that model is so visible that its key word—“equilibrium”—turns up in a word cloud of Yellen’s speech. “Equilibrium” is the 17th most frequent word in the document, and the only significant words that appear more frequently are “Inflation” and “Monetary”. In contrast, “Crisis” gets a mere 6 mentions, and household debt gets only one. What’s evident, when one compares Yellen’s speech to one to a similar audience by Bernanke in July 2007—the month before the crisis began—is that The Fed is just as much in the grip of conventional economic thinking as it was before the crisis.
The only difference is that Bernanke’s speech focused on the “inflation expectations” aspect of The Fed’s model—which would be rather hard for Yellen to focus on, given that inflation is running at zero (versus 4% when Bernanke spoke). So Yellen has fallen back on the core concept—that a market economy reaches “equilibrium”—rather than part of the fantasy mechanism by which The Fed believes equilibrium is achieved. Equilibrium. What nonsense! But the belief that the economy reaches equilibrium—that it can be modelled as if it is in equilibrium—is a core delusion of mainstream economics. There was some excuse for looking at the world prior to the crisis and seeing equilibrium—though the more sensible people saw “Bubble”. But after it? How can one look back on that carnage and see equilibrium?
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Poor nations fall first. Nothing has changed.
• Fears Of A New Global Crash As Debts And Dollar’s Value Rise (Guardian)
Greek ministers are spending this weekend, almost five grinding years since Athens was first bailed out, wrangling over the details of the spending cuts and economic reforms they have drawn up to appease their creditors. As the recriminations fly between Europe’s capitals, campaigners are warning that the global community has failed to learn the lessons of the Greek debt crisis – or even of Argentina’s default in 2001, the consequences of which are still being contested furiously in courts on both sides of the Atlantic. As Janet Yellen’s Federal Reserve prepares to raise interest rates, boosting the value of the dollar, while the plunging price of crude puts intense pressure on the finances of oil-exporting countries, there are growing fears of a new debt crisis in the making.
Ann Pettifor of Prime Economics, who foreshadowed the credit crunch in her 2003 book The Coming First World Debt Crisis, says: “We’re going to have another financial crisis. Brazil’s already in great trouble with the strength of the dollar; I dread to think what’s happening in South Africa; then there’s Malaysia. We’re back to where we were, and that for me is really frightening.” Since the aftershocks of the global financial crisis of 2008 died away, the world’s policymakers have spent countless hours rewriting the banking rulebook and rethinking monetary policy. But next to nothing has been done about the question of what to do about countries that can’t repay their debts, or how to stop them getting into trouble in the first place.
Developing countries are using the UN to demand a change in the way sovereign defaults are dealt with. Led by Bolivian ambassador to the UN Sacha Sergio Llorenti, they are calling for a bankruptcy process akin to the Chapter 11 procedure for companies to be applied to governments. Unctad, the UN’s Geneva-based trade and investment arm, has been working for several years to draw up a “roadmap” for sovereign debt resolution. It recommends a series of principles, including a moratorium on repayments while a solution is negotiated; the imposition of currency controls to prevent capital fleeing the troubled country; and continued lending by the IMF to prevent the kind of existential financial threat that roils world markets and causes severe economic hardship.
If a new set of rules could be established, Unctad believes, “they should help prevent financial meltdown in countries facing difficulties servicing their external obligations, which often results in a loss of market confidence, currency collapse and drastic interest rates hikes, inflicting serious damage on public and private balance sheets and leading to large losses in output and employment and a sharp increase in poverty”. It calls for a once-and-for-all write-off, instead of the piecemeal Greek-style approach involving harsh terms and conditions that knock the economy off course and can ultimately make the debt even harder to repay. The threat of a genuine default of this kind could also help to constrain reckless lending by the private sector in the first place.
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“Outflows from equity-based funds in 2015 have reached their highest level since 2009..”
• Investors Flee Market At Crisis-Level Pace (CNBC)
Recent market volatility has sent stock market investors rushing for the exits and into cash. Outflows from equity-based funds in 2015 have reached their highest level since 2009, thanks to a seesaw market that has come under pressure from weak economic data, a stronger dollar and the the prospect of monetary tightening. Funds that invest in stocks have seen $44 billion in outflows, or redemptions, year to date, according to Bank of America Merrill Lynch. Equity funds have seen outflows in five of the last six weeks, including $6.1 billion in just the last week. U.S. equities have been particularly hard-hit, with the group surrendering $10.8 billion last week, BofAML reported.
To be sure, the trend could be interpreted as a buy signal. In 2009, the stock market was in the throes of a 60% Great Recession plunge that led to unprecedented levels of stimulus from the Federal Reserve—and the birth of a huge bull market that has pushed stocks up more than 200%. The moves out of equities come as the S&P 500 has been essentially flat for the year, though getting there has seen numerous dips and spikes. The Dow industrials are off about 0.8% in 2015, while the Nasdaq tech barometer has been the strongest of the three major indexes, gaining 2.7%.
Funds focused on cash and investment-grade and government bonds gathered $12 billion in assets last week. Money market funds have just shy of $2.7 trillion in assets despite their promise of basically zero yield, according to the Investment Company Institute. That number has stayed essentially flat over the past year. Bond funds have seen 12 straight weeks of inflows; those focused on higher-quality debt have had 66 straight weeks of inflows. Trends in the $2.1 trillion exchange-traded fund industry help show investors’ mentality.
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China has a plan. The US only has neocons.
• China Banks on Sharing Wealth to Shape New Asian Order (WSJ)
President Xi Jinping sketched out China’s vision for a new security and economic order in Asia, offering to spread the benefits of Chinese prosperity and cooperation across the region. In a speech to a regional forum Saturday, Mr. Xi presented China as a partner willing to “jointly build a regional order that is more favorable to Asia and the world.” He highlighted a new China-led infrastructure bank and other initiatives designed to leverage hundreds of billions of dollars to finance railways, ports and other development projects, and foster regional economic integration. Throughout the 30-minute speech, Mr. Xi stressed that China’s vision, while centered on Asia, was open to participation by all countries.
He was careful not to place China at the center of this emerging order, as some regional politicians and security experts have warned could happen. But Mr. Xi said given China’s size, it will naturally play a larger role. “Being a big country means shouldering greater responsibilities for the region, as opposed to seeking greater monopoly over regional and world affairs,” Mr. Xi told the Boao Forum for Asia, an annual China-sponsored conference named for the southern seaside town where it is held. The speech was the latest by Mr. Xi to articulate his government’s plans to use China’s growing power to reshape economic and security arrangements in the region—a change from recent decades when Beijing largely worked within a U.S. and Western-dominated international system.
At the center of these efforts is the new Asian Infrastructure Investment Bank and plans to build infrastructure across Asia and along the maritime routes that historically connected China to the Middle East, Africa and Europe. The plans have been welcomed by many countries and companies throughout the region, which the Asian Development Bank estimates is in need of trillions of dollars of infrastructure. Close U.S. allies and other governments have signed on to the infrastructure bank, despite concerns from Washington about the way the bank will be run.
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“..Beijing has a much bigger game plan of scattering the U.S.’ containment strategy.”
• China Wants To Compel US To Engage It As An Equal Partner In AIIB (ATimes)
The AIIB Charter is still under discussion. The media report that China is not seeking a veto in the decision-making comes as a pleasant surprise. Equally, China is actively consulting other founding members (who now include U.K., Germany, France, Italy, etc). These would suggest that Beijing has a much bigger game plan of scattering the U.S.’ containment strategy. Clearly, the Trans-Pacific Partnership free-trade deal is already looking more absurd if China were to be kept out of it. The point is, AIIB gives financial underpinning for the ‘Belt and Road’ initiative, which now the European countries and Russia have embraced, as they expect much business spin-off. China has said that its Silk Road projects are not to be confused as a latter-day Marshal Plan for developing countries, and that, on the contrary, the projects will be run on commercial terms.
Which opens up enormous opportunities for participation by western companies. In geopolitical terms, therefore, China hopes that the ‘win-win’ spirit that permeates the AIIB and ‘Belt and Road’ will render ineffectual the American attempts to hem it in on the world stage and compel Washington to revisit a ‘new type of relations’ with China. As for Bretton Woods, to my mind, China hopes that AIIB will force the pace of IMF reforms (which are stalled at the U.S. Congress for the past 4 years). China’s intention is not to destroy the current financial system but to seek a greater role for it in the decision-making and running of the institutions such as World Bank and IMF. China hopes to force a rethink on the part of the US as regards the IMF (ie, expand and reform the institution, accommodate the renminbi and so on.)
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“I would like to inform you about the decision to participate in the AIIB..”
• Russia To Apply For China-Led Infrastructure Bank AIIB (RT)
Russia decided to apply to join the China-led Asian Infrastructure Investment Bank (AIIB), the country’s Deputy Prime Minister Igor Shuvalov said on Saturday. “I would like to inform you about the decision to participate in the AIIB,” which was made by Russian President Vladimir Putin, Shuvalov said at the Boao Forum for Asia. Shuvalov added that Russia welcomes China’s Silk Road Economic Belt initiative and is happy about stepping up cooperation. “We are delighted to be able to step up cooperation in the format of the Eurasian Economic Union (EEU) and China…the free movement of goods and capital within the EEU brings economies of Europe and Asia closer. This is intertwined with the Silk Road Economic Belt initiative, launched by the Chinese leadership,” he said. Britain and Switzerland have been formally accepted as founding members of the AIIB, China’s Finance Ministry confirmed Saturday.
This comes a day after Brazil accepted an invitation to join the bank. “We should push forward with the creation of a regional hub for financial cooperation,” Chinese President Xi Jinping said Saturday, Reuters reported. China should “strengthen pragmatic cooperation in monetary stability, investment, financing, credit rating and other fields,” Xi said. AIIB has 30 founding members with applications still coming in, according to China’s Finance Ministry. Australia has recently applied to join the bank. The application deadline has been set for March 31. Other nations will still be able to join the AIIB after the deadline expires, but only as common members, Chinese Finance Minister Lou Jiwei said last week. China wants to see the AIIB operational before the end of 2015.
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The Netherlands is home to a disproportionately large number of international construction companies..”
• Netherlands Seeks To Join Asian Infrastructure Investment Bank (Reuters)
The Netherlands intends to join the Asian Infrastructure Investment Bank (AIIB), Prime Minister Mark Rutte said on Saturday, becoming the latest U.S. ally to seek membership in the China-led institution despite Washington’s misgivings. Rutte announced the decision on his official Facebook page during a visit to China and after a meeting with President Xi Jinping. “There is a great shortage of financing for infrastructure in Asia,” Rutte said. “An investment bank such as the AIIB can meet this demand, and the Netherlands has much expertise in this area”. The United States had warned against the new institution, but after Britain announced it would join, European allies France, Germany and Italy quickly followed suit this month.
South Korea has said it will join, while Japan is still deciding. The AIIB has been seen as a challenge to the World Bank and Asian Development Bank, and a significant setback to U.S. efforts to extend its influence in the Asia Pacific region to balance China’s growing financial clout and assertiveness. Rutte said joining is in the Netherlands’ interests as a trading nation, and said he hoped it would ultimately create jobs. The Netherlands is home to a disproportionately large number of international construction companies, including many with a focus on dredging and maritime construction such as Boskalis , VolkerWessels, Ballast Nedam, Van Oord and BAM, among others.
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“We want this bank to be the best possible bank with the best possible structure..”
• Australia to Join China-Led Development Bank, Says Finance Minister (WSJ)
Australia intends to join the new Asian infrastructure bank China is setting up, becoming the latest U.S. ally to announce its participation despite Washington’s concerns about the way the bank may operate. Australian Finance Minister Mathias Cormann said Saturday that Prime Minister Tony Abbott will make an announcement Sunday about Australia’s application for membership in the Asian Infrastructure Investment Bank. Mr. Cormann, speaking at a conference in China, said the decision comes after “very good” discussions on Friday with Chinese Finance Minister Lou Jiwei. He said Australia had been urging that the bank adopt best practices in lending and operations. “We want this bank to be the best possible bank with the best possible structure,” Mr. Cormann said.
Australia’s decision was expected. China had set a deadline for the end of March for countries to become founding members of the bank. Chinese officials have said that founders’ status that would allow some say over setting rules for the bank, which is expected to start operating by the end of the year with $100 billion in capital. Australia had come under pressure from Washington last year not to join the bank, according to U.S. and Australian officials. Washington has expressed concern that the bank, if not governed properly, would contribute to corruption and indebtedness and supplant institutions such as the World Bank and the Asian Development Bank. But with the March deadline looming, other U.S. allies, from Britain and Germany to South Korea, have in recent weeks gone ahead and announced their intention to join.
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EU countries will never give up independence. So they might as well stop pretending this union thing.
• Eurozone Can’t Survive In Current Form, Says PIMCO (Telegraph)
The eurozone is “untenable” in its current form and cannot survive unless countries are prepared to cede sovereignty and become a “United States of Europe”, the manager of the world’s biggest bond fund has warned. The Pacific Investment Management Company (PIMCO) said that while the bloc was likely to stay together in the medium term, with Greece remaining in the eurozone, the single currency could not survive if countries did not move closer together. Persistently weak growth in the eurozone had led to voter unrest and the rise of populist parties such as Podemos in Spain, Syriza in Greece, and Front National in France, said PIMCO managing directors Andrew Bosomworth and Mike Amey. “The lesson from history is that the status quo we have now is not a tenable structure,” said Mr Bosomworth.
“There’s no historical precedent that this sort of structure, which is centralised monetary policy, decentralised fiscal policy, can last over multiple decades.” PIMCO said the rise of populist parties demonstrated how uneasy some people had become about the euro. “[Persistently low growth] manifests itself in a lack of support in the common currency, so then it leads to the rise to power of political parties that want to end it,” said Mr Bosomworth. “That’s what we seen in the last few years. [Populist parties have] risen from zero to be a considerable force. In Greece’s case to form a government. ‘This means we’re in a critical situation, because you cannot just plaster over these people’s concerns, there needs to be a political response as well, which involves addressing the question: what is the ultimate future of the monetary union?”
PIMCO used the example of the Latin and Scandinavian unions in the 19th century, which lasted an average of 50 years before breaking up, to illustrate how monetary unions were incompatible with sovereignty. “You need to reach some sort of political agreement about how to share fiscal resources around the zone. We’re a long, long, long way from designing that and getting the political backing for it,” he said. “So while you’re waiting for that and you’ve got low growth, and high unemployment, you run the risk of letting these anti-euro parties to the forefront.” “Will we get the United States of Europe? It’s not impossible, but Europe could also spend many decades in a hybrid form of a political and fiscal federation. While there might not be one government, one passport and one army, we could be moving closer towards that – but not yet.”
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“No list should go over the will and sovereignty of the people..”
• Greek Energy Minister To Visit Moscow, Hits Out At Germany (Reuters)
Greece’s Energy Minister Panagiotis Lafazanis will meet his Russian counterpart and the CEO of energy giant Gazprom in Moscow on Monday, as he hit out at the EU and Germany for tightening a ‘noose’ around the Greek economy. Outspoken Lafazanis, on the left wing of Greece’s co-ruling Syriza party, will meet Russian Energy Minister Alexander Novak and Gazprom Chief Executive Alexei Miller as well as other senior government officials, the energy ministry said on Saturday. But as Athens battles to have a list of reforms accepted by its EU partners in order to secure much-needed funds to stave off bankruptcy, Lafazanis criticized Berlin and said the government must not roll back on its commitments.
“No list should go over the will and sovereignty of the people,” he told Kefalaio newspaper in an interview on Saturday. “The Germanized European Union is literally choking our country and tightening week by week the noose around the economy,” he said. Greece will run out of money by April 20, a source familiar with the matter told Reuters on Tuesday, unless it manages to unlock aid by agreeing on a list of reforms with EU-IMF partners with Lafazanis opposed to several energy privatizations.
The previous center-right government had planned to accelerate the sale of a 65% stake in gas utility DEPA, after an initial attempt to sell to Gazprom in 2013 failed. Within days of Syriza taking power in January, Lafazanis said he would scrap the sale. DEPA has previously negotiated with Gazprom in a bid to get cheaper gas supplies and was one of the first European companies to obtain a rebate in 2011. Lafazanis’ visit will come just over a week before Tsipras is due to meet Russian President Vladimir Putin in Moscow although the Greek government has stressed it is not seeking funding from the Kremlin.
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“..we want a solution, but if things don’t go well you have to bear the bad scenario in mind as well. That is the nature of negotiations.”
• Greece Submits Reform Proposals To Eurozone Creditors – With A Warning (Guardian)
Greece submitted a long-awaited list of structural reforms to its creditors on Friday as its leftist-led government warned it would stop meeting debt obligations if negotiations failed and aid was not forthcoming. As officials from the EU, the ECB and the IMF prepared to pore over Athens’s latest proposals, the country’s international economic affairs minister, Euclid Tsakalotos, raised the stakes, saying while Greece wanted an agreement it was prepared to go its own way “in the event of a bad scenario”. He told the Guardian: “We are working in the spirit of compromise, we want a solution, but if things don’t go well you have to bear the bad scenario in mind as well. That is the nature of negotiations.” The government, dominated by the anti-austerity Syriza party, had assembled a package of 18 reforms in the hope of unlocking £7.2bn in financial assistance.
The desire was for a positive outcome, Tsakalotos said, but Athens’s new administration was not willing to abandon its anti-austerity philosophy. Two months after assuming office, the government’s priority remained to alleviate the plight of those worst affected by Greece’s catastrophic five-year-long crisis. The British-trained economist said: “Our top priority remains payment of salaries and pensions. If they demand a 30% cut in pensions, for example, they do not want a compromise.” mThe reform-for-cash deal, the latest twist in Greece’s battle to keep bankruptcy at bay, did not – and would not – include any recessionary measures, a government official said, adding it was hoped the proposals would bolster state coffers with €3bn (£2.2bn) in badly needed revenues.
“The actions proposed though the reforms list foresee revenues of €3bn for 2015, which under no circumstances will come from wage or pension cuts,” he said. “The list does not include recessionary measures.” [..] With the country shut out of international capital markets, economists and officials have warned Athens could run out of money by 9 April, when it must pay €450m to the IMF. “The government is not going to continue servicing public debt with its own funds if lenders do not immediately proceed with the disbursement of funds which have been put on hold since 2014,” said government aides. “The country has not taken receipt of an aid instalment from the EU or IMF since August 2014 even though it has habitually fulfilled its obligations.”
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“Lack of market access, uncertain prospects of timely disbursement from official institutions, and tight liquidity conditions in the domestic banking sector..”
• Fitch Downgrades Greece Amid Bailout Uncertainty (AP)
Ratings agency Fitch has downgraded Greeces sovereign rating amid growing uncertainty over the new government’s pledge to overhaul reforms needed to restart bailout loan payments and avoid default. The agency late on Friday said it had lowered the country’s rating deeper into non-investment grade status from B to CCC, citing «extreme pressure on Greek government funding.” Rescue lenders are expected this weekend to start reviewing reforms overhauled by Prime Minister Alexis Tsipras’s new left-wing government. The government has promised to ax austerity measures that cut chronic deficits but kept Greece in a punishing recession for six years. “Lack of market access, uncertain prospects of timely disbursement from official institutions, and tight liquidity conditions in the domestic banking sector have put extreme pressure on Greek government funding,” Fitch said.
“We expect that the government will survive the current liquidity squeeze without running arrears on debt obligations, but … the damage to investor, consumer, and depositor confidence has almost certainly derailed Greece’s incipient economic recovery.” Greece has been unable to borrow on international markets since 2010 due to high borrowing rates that reflect a lack of investor confidence in the country. It has relied since then on funds from a €240 billion bailout from other eurozone countries and the IMF. But its creditors are refusing to release the last installments, worth more than €7 billion, unless the government produces an acceptable list by Monday of reforms aiming to restore the country’s tattered economy.
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Tsipras doesn’t care about the old guard.
• Opposition Tells Tsipras To Get Control Of His Party (Kathimerini)
Opposition parties called on Prime Minister Alexis Tsipras over the weekend to get a firmer control on his party, claiming that some sections of SYRIZA are seeking a confrontation with lenders. With talks between technical teams from Greece and the institutions under way in Brussels, Tsipras was due to hold a cabinet meeting on Sunday night to brief his ministers about the content of the government’s proposals and the course of discussions in the Belgian capital. However, opposition parties had earlier expressed concern about Tsipras’s apparent inability to get his party to support a compromise with creditors.
“He does not want to cause a rift because he does not have a mandate from voters for such a move and he knows the consequences would be catastrophic,” PASOK leader Evangelos Venizelos said in an interview with Agora newspaper. “On the other hand, he does not have the parliamentary majority needed to support a clean and honest turn toward responsibility.” To Potami also voiced its concern about the comments from some government members after Energy Minister Panayiotis Lafazanis claimed in an interview with Kefalaio weekly that the only way for Greece to exit the crisis is through “a tough confrontation, if not a clash with German Europe.” “Mr Tsipras has to advise his ministers not to play with fire just so they are liked by the minority within his party and the drachma lobby,” said the centrist party in a statement.
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Nice negotiating partners.
• Troika Expects Greece To Miss Primary Surplus Target This Year (Reuters)
The three institutions or troika representing Greece’s official creditors expect Athens could miss its goal of a primary budget surplus this year, German magazine Der Spiegel reported on Saturday citing a source within the group of lenders. Greece’s former conservative government said last year it would achieve a primary surplus of 3.0% of GDP in 2015, but the magazine quoted the source as saying: “Probably nothing will remain from that.” It added Greece’s financial situation had worsened since January due to a lack of reforms under leftist Prime Minister Alexis Tsipras. A spokesman for German Finance Minister Wolfgang Schaeuble declined to comment on the report, that also estimated Greece’s funding gap had grown to up to €20 billion.
Greece has sent its creditors a long-awaited list of reforms with a pledge to produce a small budget surplus this year in the hope that this will unlock badly needed cash, Greek government officials said on Friday. The list estimates a primary budget surplus of 1.5 pct for 2015, below the 3% target included in the country’s existing EU/IMF bailout, and growth of 1.4%, the official said. The Greek finance ministry recently revised last year’s primary budget surplus to 0.3%, from 1.5% of GDP as estimated by the former conservative government and agreed with the country’s international lenders. The finance ministry said its estimate was based on preliminary data and was partly due to a shortfall of €3.9 billion in state revenue late last year. Greece’s deputy prime minister was quoted as saying by China’s official Xinhua news agency that Greece will sell its majority stake in the port of Piraeus within weeks, a u-turn by the government as it seeks funds from its creditors.
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“If the debt is considered official, it will breach the terms of providing financial assistance..”
• Ukraine’s $3 Billion Debt To Russia Puts IMF Package At Risk (RT)
Ukraine’s $3 billion debt to Russia could undermine the IMF’s four-year multibillion dollar bailout program. If the debt is considered official, it will breach the terms of providing financial assistance, said IMF spokesperson William Murray. The Ukraine debt includes $3 billion in Eurobonds lent by Russia to the country’s previous government in December 2013. IMF rules say a bailout cannot be provided to a country if it defaulted on a loan from a state institution. “We have a non-tolerance policy,” William Murray told reporters at a news conference on Thursday, adding that Ukraine’s debt to Russia should be considered state debt. “If I’m not mistaken, the $3 billion Eurobond comes from the Russian sovereign wealth fund, so it’s official debt,” he said.
However, the IMF hasn’t yet clarified its attitude towards the whole matter, Murray said. If Russia rejects the possibility of restructuring Ukraine could face imminent default, placing the IMF in an awkward situation. Russia’s Finance Minister Anton Siluanov said Friday he considers Ukraine’s $3 billion debt official. “Russia is definitely acting as the official creditor in this case,” Siluanov said. Siluanov also said that Russia isn’t ready to restructure the Ukrainian debt, as “it is in a difficult situation itself.” Talking about the possibility of settling Ukraine’s debt to lenders through the Paris club of creditor nations, he said that Russia received no official information about Ukraine talking to the club.
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“After international banks cut off links, withdrawals were capped at €2,500 a week, a limit many people are maxing out.”
• Andorra On The Brink Of Europe’s Next Banking Crisis (Telegraph)
Andorra, the tiny Catalan principality nestling in the foothills of the Pyrenees between France and Spain, tends to conjure up images of scenic ski resorts, medieval churches and duty-free shopping. The country has for many years enjoyed the benefits of European borders without the restrictions of EU membership, allowing light-touch regulation that has brought in tourism and wealthy expats from its bordering countries. However, in the last three weeks, the state has been gripped by a banking crisis that threatens to take it to the brink. Bankers have been thrown in jail, savers’ deposits have been restricted, and the country’s government is scrambling to convince powerful regulators thousands of miles away that the country is not a haven for tax evasion.
On Tuesday March 10, the US Treasury Department’s financial crime body, FinCEN, accused Banca Privada d’Andorra (BPA), the country’s fourth-largest bank, of money-laundering. The authority said “corrupt high–level managers and weak anti–money-laundering controls have made BPA an easy vehicle for third–party money-launderers”. Three senior managers at the bank accepted bribes to help criminals in Russia, Venezuela and China, to funnel money through the Andorran system, according to FinCEN. The next day, the state took charge of BPA, dismissing three directors. On the Friday, the bank’s chief executive, Joan Pau Miquel, was arrested and detained. Mr Miquel remains in a jail cell in La Comella, the country’s only prison, with a capacity of 145.
At BPA, the Andorran authorities have installed new management. After international banks cut off links, withdrawals were capped at €2,500 a week, a limit many people are maxing out. Banco Madrid, the Spanish subsidiary of BPA acquired as part of an expansion spree in recent years, filed for administration on Wednesday. The Andorran government insists that BPA is an isolated case, saying it is committed to transparency and that the rest of the sector is clean. For its sake, it had better be right, but many experts fear this is not the case. The state’s banks have assets under management 17 times bigger than the economy, and the sector accounts for a fifth of GDP – almost all of the rest is from tourism.
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“..he understands Moscow’s foreign policy concerns and sees no reason to fear a possible Russian threat in Eastern Europe..”
• Ex-Chancellor Schroeder Criticizes Merkel’s Russia Policy (RT)
German ex-Chancellor Gerhard Schroeder has slammed Angela Merkel’s policy towards Russia, saying he understands Moscow’s foreign policy concerns and sees no reason to fear a possible Russian threat in Eastern Europe. Schroeder, the chancellor of Germany from 1998-2005, fully recognized Russia’s concerns, which are linked to the growing isolation of the country. “The Warsaw Pact ceased to exist with the end of the Soviet Union, while NATO not only survived, but also has extensively expanded to the East,” he said in a Saturday interview to Der Spiegel. Schroeder said he knows “no one, not even in Russia, who would be so mad as to just consider placing in question the territorial integrity of Poland or the Baltic states,” he said, seeking to lessen the fears of Russia’s Eastern European neighbors.
The Social Democrat also criticized the attitude of Chancellor Angela Merkel towards Russia. He pointed out that Berlin shouldn’t let the EU Commission “have talks about the EU-association only with Ukraine, and not with Russia,” also stressing that “Ukrainian culture is split itself.” Schroeder has insisted that the attempt of the international isolation of Russia is “wrong,” as responsibility for the Ukraine crisis is “on all parties.” He said that “in this conflict, mistakes have been made by all the sides, and they have led to a spiral of threats, sanctions and the resort to force.” However, he said that Crimea joining Russia last year was a “violation of the international law.” Still, commenting on the expulsion of Russia from the G8 group in 2014, he said that “during a crisis talks are absolutely necessary.”
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And you thought your country was corrupt.
• Brazil Police Arrest Businessmen Linked to Petrobras Scandal (Reuters)
Brazilian police on Friday arrested two businesspeople in connection to corruption probe focused on state-owned oil firm Petroleo Brasileiro SA (Petrobras). Dario Galvao, chief executive of a construction group, and Guilherme Esteves, a lobbyist who is being investigated for funneling bribe money, were taken to federal police headquarters in the southern city of Curitiba, a court spokesperson said. Federal judge Sergio Moro ordered the arrests after a request by investigators looking into the Petrobas scandal. Investigators said they were led to Galvao by Shinko Nakandakari, an import figure implicated in the scandal who has been cooperating with the investigation.
Judge Moro called Galvao the mastermind of his company’s criminal activity and said he posed a risk of committing more crimes. “There is evidence of crimes for extended periods, starting at least from 2008 to 2014,” Moro wrote in a court decision. Moro said that a search of Esteves’ home “revealed evidence of corruption crimes and money laundering, with the use of secret accounts abroad by Guilherme Esteves de Jesus to make bribe payments… to leaders of Petrobras and (oil rig maker) SeteBrazil.” In a statement, Grupo Galvao said Galvao’s arrest was “without legal grounding” and he had “not committed any crime.” It also said that Galvao Engenharia, its building subsidiary which filed for bankruptcy this week, rejects vehemently any accusations of being part of a corrupt cartel.
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