Showing posts with label Economy. Show all posts
Investors to pay for bank failures – EU
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| Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem talks to journalists during a joint news conference with Portuguese Finance Minister Vitor Gaspar in Lisbon May 27, 2013.(Reuters / Jose Manuel Ribeiro) |
European Union finance chiefs agreed Thursday investors and wealthy depositors will foot the bill for bank bailouts, in a break with the past convention of burdening taxpayers. If pursued, bailout strategy, shareholders, bondholders and depositors with more than 100,000 euro will share the financial strain of saving a bank. Deposits under 100,000 will be protected. Under the new protocol, which would come into effect in 2018, countries would be obliged to absorb 8 percent of a bank’s liabilities, with some leeway thereafter. The next time a big bank fails, governments will make sure “that shareholders and creditors are liable first and foremost,” German Finance Minister Wolfgang Schaeuble told reporters. Rescuing banks will not be less painful for political leaders and institutions, who can now just take bank deposits instead of hiking taxes.
French Finance Minister Pierre Moscovici said France got “what we wanted” from the blueprint, and Danish Economy Minister Margrethe Vestager called the deal a “balanced compromise.” The Irish, whose taxpayers paid nearly $40 billion to bail out Anglo Irish Bank, are happy that the new status quo will be bail-ins, not bail-outs. Banks will have to bail themselves out. Other ministers were happy to have a universal strategy to address dealing with troubled banks.
"If a bank gets in trouble we will now, throughout Europe, have one set of rules on who pays the bill," Dutch Finance Minister Jeroen Dijsselbloem said.
Germany has previously indicated it disagrees with a universal plan to deal with bailouts across the continent, and has warned having such a strong central banking authority goes against standing treaties.
“It took a long time and it was arduous and it was intense,” German Finance Minister Wolfgang Schaeuble said, without publicly voicing Germany’s previous qualms over the structure. It is highly unlikely Chancellor Merkel will agree to such a banking union before the election in September.
The European Central Bank will officially take over supervision of eurozone banks next year. Last year it provided 1 trillion euros of cheap three-year loans to struggling banks.Under the new umbrella, banks will be able to receive direct loans from the European Stability Mechanism, a eurozone bailout fund. The European Banking Authority was set up in 2011 to integrate rules across the EU and has secured a new supervisory function. All 17 currency member states support the motion, but some fear an all-too-powerful central bank. By next week, the 27 member states need to choose a governing body, or executor, to carry out the task.
The legislature’s text grants nations a clear right to nationalize failing banks, if the step is seen as essential to preserve financial stability. Switzerland, Norway, and other non-EU countries within Europe will still have jurisprudence over how to deal with bank failures.
Just like Cyprus
The precedent was set after Cyprus requested an EU bailout and aid was dependent on the country’s agreement to levee account holders with more than 100,000 euro, which will likely result in a loss of 30 percent in savings. The Cyprus scenario marked the first time depositors were forced to contribute to the bank’s bailout and now it is set to become the norm. Many analysts had pointed to Cyprus as an isolated case, as their debt was heavily a result of bad Greek bonds, and a hyper-inflated banking sector, almost eight times as large as the country’s GDP. Tax-payer funded bailouts have been the source of public discontent, and the accord is seen as a move to ameliorate political relations in the EU.
UK austerity: ‘Diverting money from poor to rich under guise of economic crisis’
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| Lawyers and demonstrators listen to speakers during a protest against proposed cuts to legal aid outside the Houses of Parliament, in London May 22, 2013. (Reuters) |
The UK’s austerity policy is ideologically driven and is aimed at diverting finance from the poor to the rich under the pretext of the economic crisis, writer John Wight told RT.
Britain's Chancellor of the Exchequer George Osborne is announcing billions more in the government spending cuts while austerity measures are already biting for many people across the UK.
Osborne claimed that British economy is “out of intensive care.” RT asked Wight if he thinks that is really the case.
John Wight: Only in a fine world of the Tory party would that be the case. The country’s seen 1.1 percent growth in the last three years – the worst level of growth in this country’s economy over the last 100 years. That can by no means be considered a success.
RT: Who's going to be the most affected by these latest cuts?
JW: Clearly the poor are going to be hit harder as a continuation of the mass experiment in human despair, which this coalition government has cheated to describe as an economic policy. It is ideologically driven and we see economics of the madhouse. And it is done with the objective of affecting the transference of wealth from the poor to the rich under the pretext of an economic crisis – not reason, it’s a pre-text. The economic crisis which hit this country in 2007 was their economic 9/11.
RT: Official figures show the deficit has been growing last year, despite previous cuts. So is there any point to them?
JW: Well, that’s what I’ve just said: this is ideologically driven. If you are considering these policies on the basis of economics, then clearly it is completely irrational. The US economist Paul Krugman lately described it as “a medieval doctor draining a patient’s blood,” and when that doesn’t work, draining more blood from the patient. This is entirely appropriate to describe this economic policy, this austerity. Austerity historically has been discredited. It doesn’t work in times of recession. At a time of recession the government needs to spend more to reintroduce the man which is contracted as profits stumble. And you must place this along the fact that the Office of Financial Statistics, the government’s own body set up to monitor these things, came up with a figure in April which stated that in the final quarter of last year UK businesses, excluding banks, were sitting on 318 billion pounds of surplus. And that money is money we need in the economy. They are not investing, they spend all the inducements from the government by the way of tax subsidies and tax cuts for the rich that the government has given to the rich over the last three years.
RT: What do you think is the best way that the government can fight the deficit?
JW: It has to start investing in the real economy. It has to start directing banks to lend rather than pleading with banks, especially banks in which we own a majority share, such as RBS. The government should take over RBS’s operations and start lending in the interest of the real economy. The economy needs it. We have a housing crisis in the country, it’s the worst in the world, it’s a scandal. And we need to start investing in affordable homes. Rather than punishing the poor for being poor we should start actually diverting money from the rich to the poor, as befitting a civilized society.
RT: Osborne announced cuts to the police budget. Do you think that will affect the crime rate?
JW: Well, not really, because based on what we know now a lot of criminals are actually in the police. They are also sitting in the boardrooms and in the House of Lords. It may have an effect. But I think they’ve consolidated the police and taken away the regional power from the police. It is yet to be seen. But as I say the cuts in the police budget are minimal compared to the cuts for the poor in terms of benefit cuts and so on.
Au-revoir austerity! France to cut government spending for 1st time since 1958
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| The co-president of the Left Party Jean Luc Melenchon (C) marches on June 2, 2013 against austerity in the southwestern city of Perpignan, France (AFP Photo) |
In their effort to ‘end austerity’, France will cut spending for the first time in over 55 years, by $2 billion.
Prime Minister Jean-Marc Ayrault confirmed on Tuesday that the French Government will decrease spending year on year. The government is facing opposition from lawmakers who claim the deficit will be higher than expected this year.
"This is the first time that we will propose to Parliament such a reduction. It is a structural effort," said Ayrualt.
The central government will cut spending in 2014 by $2 billion to avoid unpopular tax rises and quell unsustainable spending.
750 million euro will be cut from central government support and 750 million euro will be cut from ministry budgets. Ayuralt said the government’s priorities would remain unchanged: job creation, education, and housing.
Opposition lawmakers like Gilles Carrez who heads the finance commission at the national Assembly, said in an interview to Le Figaro the government would miss its targets, and that deficit in the euro zone's second-largest economy could reach 4 percent in 2013. Carrez calculated this to be €20 billion higher than anticipated.
After pledging to cut France's deficit to 3 percent this year, President Francois Hollande and the Socialist government revised their predictions and updated their deficit forecast to 3.7 percent of GDP.
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| Some of the estimated 30,000 demonstrators "against the austerity, against the finance and to ask for a Sixth Republic" on May 5th in Paris. (AFP Photo) |
Hollande has not yet been able to deliver on his promise of 0.1 percent growth, on which he campaigned a year ago.
Hollande isn’t alone. Within the 17 member eurozone, only Germany and Austria have managed to generate positive growth, the rest are left in a similar predicament as France- slow growth, high unemployment, a looming triple dip recession, and a need to somehow cut more.
To reach their budget deficit goal, France should cut the public deficit to 3.9 percent of gross domestic product this year, then 3.6 percent in 2014 and 2.8 percent in 2015.
France’s economy officially slipped back into recession in May, after it shrunk for a second consecutive quarter. The IMF has forecast the economy will shrink 0.2 percent this year, more than the 0.1 percent initially predicted.
Hollande has done all he can to appear to fight the German dictate of austerity, even auctioning off presidential vintage wines to contribute to the endangered budget.
President Hollande at first stood with Merkel on austerity, but after being met by 30,000 protestors on the first anniversary of his inauguration, among slews of other protests, he has shifted his position to resonate with public opinion.
France’s appeal to China
The President has asked China to increase investment in France, to create a balance in employment between the two countries, the head of state said at a speech at the Elysee Palace on Tuesday before members of the China Entrepreneur Club (CEC).
"There is no fear in French society," Mr. Holland assured the entrepreneurs, inviting the Chinese to up their stake in French projects, LePoint reported. Four percent of foreign investors in France are Chinese, and the CEC generates 245 billion euros a year.
