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by Nomad on Mon Feb 20th, 2012 at 02:14:52 PM EST
Hopes pinned on second bailout deal for Greece - GREECE - FRANCE 24
Euro zone finance ministers are expected to approve a second bailout for Greece on Monday to try to draw a line under months of uncertainty that has shaken the currency bloc, although work remains to be done to make the numbers add up.   Diplomats and economists say they do not expect the package to resolve Greece's economic problems. That could take a decade or more, a bleak prospect that brought thousands of Greeks onto the streets to protest against austerity measures on Sunday.   French Finance Minister Francois Baroin said all the elements were in place to reach an agreement and Greek Finance Minister Evangelos Venizelos said he expected a deal. The finance ministers are scheduled to meet at around 1500 GMT.   Euro zone ministers need to agree new measures to make the financing work, given the ever-worsening state of the Greek economy. But they say an agreement on Monday will help restructure Athens' vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone.
by Nomad on Mon Feb 20th, 2012 at 04:22:28 PM EST
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Greece needs extra official, private help to hit debt goals | Reuters

Greece will need additional relief if it is to cut its debts to 120 percent of GDP by 2020 and if it doesn't follow through on structural reforms and other measures, its debt could hit 160 percent by 2020, a debt sustainability report by the IMF, European Central Bank and European Commission shows.

The baseline scenario is that Greece will cut its debt to 129 percent of GDP in 2020 from 160 percent now, well above the targeted 120 percent, the confidential, 9-page analysis prepared for euro zone finance ministers showed.

"The results point to a need for additional debt relief from the official or private sectors to bring the debt trajectory down," said the report, dated Feb. 15 and obtained by Reuters.

The report forms the basis of discussions of euro zone ministers on the conditions under which Greece is to get further financial help from the euro zone and the IMF.

"There is a fundamental tension between the program objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece competitiveness will inevitably lead to a higher debt to GDP ratio in the near term," the report said.

by Nomad on Mon Feb 20th, 2012 at 04:28:06 PM EST
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Stop the Second Bailout Package! EU Should Admit Greece is Bankrupt - SPIEGEL ONLINE - News - International
Greece is bankrupt and will need a 100 percent debt cut to get back on its feet. The bailout package about to be agreed by the euro finance ministers will help Greece's creditors more than the country itself. EU leaders should channel the aid into rebuilding the economy rather than rewarding financial speculators for their high-risk deals.

First things first: this commentary isn't directed against Greece. It's got nothing to do with all the talk in Germany about Greek citizens not paying their taxes, Greek civil servants who don't work or Greek politicians who break their promises. This commentary has a clear and simple message: The second Greek bailout of €130 billion ($172 billion) that euro zone finance ministers are expected to agree on Monday afternoon should not be paid out.

Sure, Greece will need help from the other European Union member states for years, possibly even decades, and Germany shouldn't refuse that help. Europe will likely end up pumping far more money into Greece in the coming years than the fresh aid now being discussed in Brussels.

The mistake isn't the size, but the construction of the bailout package. It isn't geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks.

How else can one explain the fact that around a quarter of the package won't even arrive in Athens but will flow directly to the country's international creditors? The holders of Greek government bonds are to get some €30 billion as an incentive to convert their old paper into new bonds. The aim is to keep alive the illusion that Greece isn't bankrupt -- after all, the creditors are voluntarily forgiving part of the debt. The financial sector is cleverly manipulating the fear that a Greek bankruptcy would trigger a fatal chain reaction.

by Nomad on Mon Feb 20th, 2012 at 04:28:45 PM EST
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EUobserver.com / Economic Affairs / Berlin still against boosting eurozone firewall

Germany has indicated it remains against boosting the eurozone's bail-out funds, despite it being the expected quid pro quo after 24 other EU member states signed up to the Berlin-pushed 'fiscal compact treaty - but its position may change after a key vote in the Bundestag end of February.

Eurozone finance ministers meeting in Brussels on Monday (20 February) are set to discuss the possibility of raising the ceilings of two bail-out funds, the temporary European Financial Stability Facility (EFSF) and the upcoming permanent European Stability Mechanism (ESM).

EU leaders in December agreed to come back to the issue on 1-2 March during a summit, pending the agreement on an inter-governmental treaty on fiscal discipline, demanded by Germany.

EUobserver understands that Germany is still against expanding the funds and is saying it will maintain this position in March, arguing that "market conditions have improved" since December and there is no need to increase the funds' firepower.

by Nomad on Mon Feb 20th, 2012 at 04:33:41 PM EST
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Paris, Berlin to unveil joint corporate tax plan at Ecofin | EurActiv

A meeting of finance ministers in Brussels will see France and Germany present plans to align their national corporate tax regimes, as the European Commission's own attempt at EU-level harmonisation has so far failed to garner the required unanimity among the 27 member states.

France and Germany have taken the lead on fiscal convergence in the eurozone by announcing in August their joint plans to establish a common corporate tax between themselves, as of January 2013.

François Baroin and Wolfgang Schäuble, the two finance ministers, will report progress on those plans at a meeting of the EU's 27 finance ministers in Brussels on Tuesday (21 February).

"Europe goes forward at 27 but it is not forbidden to have smaller groups that go a little bit faster," argues a national diplomat in Brussels, explaining that "the Franco-German couple is bringing forward a number of technical solutions to overcome divergences in fiscal regimes."

The diplomat said the initiative, although bilateral for now, could be seen as a Franco-German contribution to an EU attempt to introduce a Common Consolidated Corporate Tax Base (CCCTB), hoping it will inspire others.

"From this presentation we are expecting to create a dynamic on the issue of fiscal convergence on a subject which requires unanimity," the diplomat said, adding that a European consensus on tax issues was "sometimes difficult to find."

Britain is the staunchest opponent to a European Commission proposal, presented in March last year, to introduce a CCCTB. Ireland has also rejected any change to the corporate tax rate for companies on its soil, which at 12.5% is among the lowest in Europe, but said it was ready to "participate constructively in discussions on the CCCTB and fiscal policy in the framework of the Euro Plus Pact," adopted last March

by Nomad on Mon Feb 20th, 2012 at 04:33:47 PM EST
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Five Reasons Europe Looks Less Disastrous - Businessweek

Optimism has not been an emotion experienced by too many Europeans of late. Yet that positive feeling is creeping into the markets. The big stock exchanges in Europe are all off to strong starts this year: The Dax index of German stocks is up 16 percent. Even the Athens stock exchange is up 21 percent. The bond markets, meanwhile, are easing borrowing costs for Spain and Italy, with yields below 6 percent on 10-year bonds. An impressive performance, considering the euro crisis is far from over and a risk still exists that Greece won't have the money to pay bondholders come March 20.

So why the sunnier feelings? Investors have a lot of reasons, some of them contradictory. They all show how far Europe's markets have come since the onset of the crisis in late 2009. There are five in particular:

  • Despite the risks, the odds are mounting that Greece will get its 130 billion euro ($170 billion) bailout before March 20. The Germans, long the heavies in talks with the Greeks, have signaled a willingness to get the deal done. Angela Merkel's government is showing signs of flexibility on the aid and the writedown of Greek debt by private bondholders. If the Germans sign off, the Greeks get the rescue and a default is avoided. That's no guarantee Greece will crawl out of its hole. But avoiding a default for now means all kinds of unforeseen consequences are avoided as well.
  • The European Central Bank's newfound willingness to lend banks as much money as they want for three years is proving very effective in supplying Europe's financial system with extra liquidity. The longer-term refinancing operations (LTROs) allow Europe's banks to post iffy collateral--like the banks' holdings of Greek sovereign debt--with the ECB, which provides cheap loans in return. The three years are long enough to bridge the crisis, and the money gives the banks time to improve their balance sheets and boost their own lending, the ECB hopes.
by Nomad on Mon Feb 20th, 2012 at 04:33:51 PM EST
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Apple faces its 'Nike moment' over working conditions in Chinese factories | Technology | The Guardian

Apple is facing a "Nike moment" which hit the shoe company in the 1990s when its use of cheap labour in the Far East was revealed, one of the inspectors of Apple's Chinese suppliers has said.

Speaking to ABC News' Nightline program, Ines Kaempfer of the US Fair Labor Association, which is inspecting the Foxconn assembly plants used by Apple in China, said that "There was a moment for Nike in the '90s, when they got a lot of publicity, negative publicity. And they weren't the worst. It's probably like Apple. They're not necessarily the worst, it's just that the publicity is starting to build up." Kaempfer said "We call it the 'Nike moment' in the industry."

Foxconn, the Taiwan-owned manufacturer which is one of Apple's main contractors, said on Monday it has raised wages by up to 25% after a spate of suicides last year and reports of long hours for the hundreds of thousands of staff.

It is the second significant salary increase in less than two years at the world's largest electronics contract manufacturer, where workers' conditions have come under intense scrutiny. The inspection by a team from the US Fair Labor Association came at the prompting of Apple, the first technology company to join it. The FLA's stated aim is to end sweatshop conditions in factories.

by Nomad on Mon Feb 20th, 2012 at 04:36:45 PM EST
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And the Fair Labor Team reported "first class conditions" at FoxConn.

Align culture with our nature. Ot else!
by ormondotvos (ormond.otvosnospamgmialcon) on Mon Feb 20th, 2012 at 05:28:37 PM EST
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Early Praise in Foxconn Inspection Brings Doubt - NYTimes.com
The president of a nonprofit group hired by Apple to inspect its suppliers' factories has begun praising the Chinese plants of Foxconn, Apple's largest supplier, just days after his group began inspections there.

According to reports by several news organizations, Auret van Heerden, president of the Fair Labor Association, said Foxconn's "facilities are first-class" and "Foxconn is really not a sweatshop."

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Feb 21st, 2012 at 05:02:24 AM EST
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I think it's the hours and imprisonment culture that disgust me more than the wages.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Tue Feb 21st, 2012 at 03:09:32 AM EST
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There's an irony that having established churches in Europe historically helped push a wedge for worker's rights. Employers had to at least concede Sunday morning... and you could move from there.

In China, 24/7 is where the employers start the negotiation. Getting enough time to sleep is a victory for those organising the workers in some factories.

I think this is the most damaging thing about the influence of economists, after all, in economics, where is the sense that humans exist to live, rather than work?

by Metatone (metatone [a|t] gmail (dot) com) on Tue Feb 21st, 2012 at 05:55:31 AM EST
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Japan registers record deficit in January - Asia-Pacific - Al Jazeera English
Japan has posted a record trade deficit in January, as fuel imports rose sharply following last year's Fukushima nuclear disaster and exports were hit by a stronger yen and a slump in demand in Europe.

According to data released on Monday, the January deficit touched 1,475bn yen ($18.5bn), the highest since the nation began record-keeping in 1979, the finance ministry said.

The latest figure was more than triple the year-before shortfall of 479.4bn yen and far exceeded the previous monthly record of 967.9bn yen in January 2009 during the financial crisis.

The record figure comes after Tokyo registered an annual trade deficit in 2011, its first in 31 years.

"We expect this trend of deficit to continue until early 2013" as fuel demand for thermal power generation remains strong while slow global demand and the high yen hurts exports, said Yuichiro Nagai, an economist at Barclays Capital.
by Nomad on Mon Feb 20th, 2012 at 04:49:11 PM EST
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Eurointelligence: Hurrah, Crisis over! Or Not! (21.02.2012)
The case for ECB debt certificates

FT Alphaville has a very interesting technical article referencing a comment by Guy Mandy of Nomura, who makes the case for ECB debt certificates. Mandy says that LTRO's have given rise to excess liquidity that is seeking some long-term returns. The ECB's reverse liquidity operations to sterlise the SMP are subject to significant overbidding. If the ECB were to introduce debt certificates at varying maturities, it would be able to stabilise the money market situation, which has still not recovered, since banks now have the choice a riskless ECB deposit facility, as opposed to risky lending in the interbanking-market. Debt certificates would provide a useful collateral for use in inter-bank repo operations.

Comments: These ECB debt certificates would

  1. compete with German Bunds in the bond markets; Financially, since Germany intends to shrink its outstanding debt (since it intends to run a balanced budget) this might be a good thing. Politically, I would expect some hysterics from Germany.
  2. drain cash from the financial system. What is the point of loaning out wads of cash at the LTROs just to take it back with debt certificates? The net effect on the private banks' balance sheets is a swap of the toxic waste collateral of the LTROs for pristine ECB debt certificates.
  3. compete with "productive investment into the real economy" if you believe in loanable funds.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Tue Feb 21st, 2012 at 04:52:55 AM EST
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Re (3), besides the loanable funds fallacy, even if businesses were looking to borrow, banks would currently rather hoard than lend. So the sweet deal you outline in (2) would be the heart of the action.
by afew (afew(a in a circle)eurotrib_dot_com) on Tue Feb 21st, 2012 at 05:13:49 AM EST
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Yes, this looks like an exercise in wiping the slate clean for various banks... which in the wider sense may not be a wholly bad thing, because then they may get back to actually lending to the rest of the economy.

Still, it's grim that ordinary people will likely end up footing the bill.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Feb 21st, 2012 at 05:59:09 AM EST
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Lending to the rest of the economy can happen after the financial position of the rest of the economy improves so they are creditworthy again and this requires expansionary sovereign fiscal policy.

At present "the rest of the economy" is saving, not investing. "The rest of the economy" will only start investing only if consumption picks up. There can only be credit to "the rest of the economy" if earnings pick up. Earnings and consumption are in a feedback look. That feedback loop is the one that drives investment and credit, not the other way around.

I guess since there's no fiscal authority in the Eurozone, what we have to wait for is the increased consumption by the very wealthy or something like that.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker

by Migeru (migeru at eurotrib dot com) on Tue Feb 21st, 2012 at 06:09:11 AM EST
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Yes, you're right.

Interesting that in the UK, at least in circles that I move (anecdote alert!) there are still a fair number of small businesses who could expand if they could get lending...

But they can't, so they won't, so there won't be any expansion from that direction...

by Metatone (metatone [a|t] gmail (dot) com) on Tue Feb 21st, 2012 at 11:04:00 AM EST
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How to Get the Rich to Share the Marbles - NYTimes.com
Pretend you're a three-year-old, exploring an exciting new room full of toys. You and another child come up to a large machine that has some marbles inside, which you can see.  There's a rope running through the machine and the two ends of the rope hang out of the front, five feet apart. If you or your partner pulls on the rope alone, you just get more rope. But if you both pull at the same time, the rope dislodges some marbles, which you each get to keep. The marbles roll down a chute, and then they divide: one rolls into the cup in front of you, three roll into the cup in front of your partner.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Tue Feb 21st, 2012 at 06:05:12 AM EST
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