Varoufakis urges 'intelligent' debt restructuring

2 Mar6:58 PM

[FRANKFURT] Greek Finance Minister Yanis Varoufakis called Monday for "intelligent" restructuring of Greece's debt, while acknowledging that a write-down would be unacceptable for the country's creditors.

"A 'haircut' is a dirty word. I've learned that," Mr Varoufakis told the German business daily Handelsblatt.

"Just as we don't want to hear the word 'troika', our creditors don't want to hear the word 'haircut'. I understand that," the minister said, referring to visits by the trio of creditors that have overseen Athens's finances through two bailouts.

"There are more intelligent solutions - swaps, for example," Mr Varoufakis said.

Under that mechanism, Greece could transform part of the loans it has received from the European financial support system (EFSF), or bailout fund, into bonds.

The interest and repayment rates Athens pays on these bonds could then be pegged to Greece's rate of economic growth, Mr Varoufakis argued.

Last month, Greece's eurozone partners agreed to extend the bailout programme until the end of June to give both sides time to hammer out a new deal.

In return, the Greek government was required to draw up a list of proposed reforms.

"I don't want Greece to pile up more debt. The new deal we want to agree on by the end June must be a growth pact, based on private-sector investment," Mr Varoufakis said.

"If we can return to growth and restructure parts of our debt intelligently, without changing the nominal amount, then the debt problem can be resolved," he said.

AFP

      

ECB won't agree to Greece issuing more short-term debt

8 Mar6:16 AM

[BERLIN] The European Central Bank will not agree to Greece issuing more short-term debt because that would be tantamount to it illegally financing the Greek government, ECB Executive Board member Benoit Coeure said in an German newspaper interview on Saturday.

Echoing comments from ECB President Mario Draghi, Mr Coeure told the Frankfurter Allgemeine Sonntagszeitung in comments to be published later on Sunday, the ECB would not allow Greece to raise a limit on issuance of short-term debt so that leftist Prime Minister Alexis Tsipras can avert a funding crunch.

"The ECB cannot finance the Greek government," Mr Coeure said. "We're not allowed to do that. That is illegal." On Thursday, Mr Draghi said the ECB will resume normal lending to Greek banks only when it sees Athens is complying with its bailout programme and is on track to get a favourable review.

He also made clear the euro zone bank would not raise a limit on Athens' issuance of short-term debt to help the Tsipras government since the EU treaty barred monetary financing of governments.

The tough line, spelled out after the ECB's policymaking Governing Council met in Cyprus, added to pressure on Greece's radical new rulers to implement promised reforms under a bailout they had vowed to scrap but were forced to extend for four months to avoid running out of money.

Mr Coeure also told the German newspaper that the ECB would not accept more T-bills as collateral as long as Greece has no market access. "If, in the current situation in which Greece has no market access, we were to accept more Greek (short-term) T-bills as collateral, that would clearly be state financing. We won't do that. We can't violate our treaty for Greece."

Lenders in Greece were forced to draw 5.2 billion euros in Emergency Liqudity Assistance (ELA) from the Bank of Greece in January after nearly zero in December. ELA is expected to have increased sharply in February after the ECB stopped accepting Greek government bonds as collateral for funding on Feb 4, shifting the burden onto Greece's central bank to finance its lenders.

REUTERS

  

Trade deficit more than doubles on oil price slump

David Ljunggren, Reuters
8:53 AM, E.T. | March 6, 2015
Economy

Tags: Oil, Trade

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Canada's trade deficit in January more than doubled to a near-record $2.45 billion ($1.96 billion US), Statistics Canada said on Friday, amid a slump in oil prices that has crimped the resource-dependent economy.
The deficit - considerably wider than the $1 billion shortfall expected by analysts - was the second highest after the $2.87 billion recorded in July 2012.
Statscan revised December's deficit to $1.22 billion from an initial $649 million.
Exports fell by 2.8 percent as the value of energy shipments dropped 14.7 percent, the eighth consecutive monthly decrease. Export prices shrank by 1.5 percent and volumes dropped by 1.3 percent. Overall imports were flat.
Crude prices have roughly halved since last June, cutting revenues of major oil-producing nations such as Canada. Energy products accounted for 16.5 percent of all Canadian exports in January, sharply down from 26.6 percent in January 2014.
Overall exports to the United States, which took 74.5 percent of all Canadian exports in January, fell 3.1 percent while imports edged down by 0.1 percent.
As a result, the trade surplus with the United States almost halved to $1.21 billion from $2.20 billion in December. It was the lowest monthly surplus with the United States since the C$1.03 billion recorded in September 1992.

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Rachel Evans, Bloomberg
1:12 PM, E.T. | March 4, 2015
International

Tags: Euro, European Central Bank (ECB), euro zone

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The euro slid to the weakest level since 2003 as reports showed Europe’s economic-growth outlook diverging from the U.S. as the European Central Bank prepares to add more monetary stimulus through bond purchases.
The 19-nation currency fell for a fifth day as traders waited for the ECB to provide more details on its quantitative- easing strategy at a meeting Thursday. Services growth in the euro area fell short of analysts’ estimates last month. A gauge of the dollar rose as data showed U.S. service businesses expanded and American companies added more than 200,000 jobs for a 13th straight month.
“The U.S. is probably a little further ahead in the economic recovery curve than the euro zone is,” said Jennifer Vail, head of fixed-income research in Minneapolis at U.S. Bank Wealth Management, which manages $122 billion in assets. “There’s been a lot of optimism about even the concept of QE and it driving growth in the euro zone, and then you get the data today.”
The euro dropped 0.9 percent to $1.1077 at 12:10 p.m. New York time and reached $1.1062, the lowest since September 2003. The dollar was little changed at 119.75 yen.
The Bloomberg Dollar Spot Index rose 0.4 percent to 1,179.88, on track for its highest close in more than 10 years.
U.S. economic reports are being scrutinized by traders and policy makers alike as the Fed moves toward raising borrowing costs for the first time since 2006. The central bank will look at data to inform its decision on the timing of any interest- rate increase, Chair Janet Yellen told Congress last week.
RATE SPECULATION
The odds of a higher rate by the Fed’s December meeting were about 77 percent, according to futures data, versus a 63 percent chance that was seen at the end of January. The target for the federal funds rate has been at virtually zero since 2008 to support the economic recovery.
The Institute for Supply Management’s non-manufacturing index rose to 56.9 from January’s 56.7, the Tempe, Arizona-based group said Wednesday. A gauge above 50 shows growth, and the median estimate in a a Bloomberg survey called for 56.5.
U.S. companies added 212,000 jobs last month, according to Roseland, New Jersey-based ADP Research Institute, versus a forecast of 219,000 in a Bloomberg survey. January’s figure was revised to 250,000, from 213,000.
“That’s mildly positive,” Daniel Brehon, a New York-based strategist at Deutsche Bank AG, said in a phone interview. “The whole point of looking at this kind of data is to see what the Federal Reserve is going to be thinking about in March.”
EUROPEAN ECONOMY
In the euro region, a purchasing managers’ index for services industries was 53.7 in February, compared with the 53.9 estimate, Markit Economics confirmed. Earlier releases showed the sector in Spain grew at a slower pace than predicted. Italy’s was at the 50 level.
Europe is preparing to inject further monetary stimulus into the economy, fueling a spate of central-bank easing around the world.
Poland became the latest central bank to lower interest rates Wednesday, cutting its benchmark seven-day reference rate by a half-percentage point to 1.5 percent. India earlier reduced its key rate for the second time this year in an unscheduled move.
The Bank of Canada refrained from cutting rates Wednesday, sending the nation’s dollar higher for a second day. Policy makers unexpectedly lowered borrowing costs in January.
ECB President Mario Draghi unveiled a 1.1 trillion-euro ($1.2 trillion) bond-buying plan in January, pledging to purchase securities until there’s a “sustained adjustment” in inflation. Policy makers have reduced rates to record lows.
“It’s worth noting that the market may want to increase their short-euro exposure ahead of the ECB actually starting their QE program,” said Sam Lynton-Brown, a currency strategist at BNP Paribas SA in London. “While the announcement led to euro weakness, we also think the flow impact of QE is going to be very important.” A short position is a bet that the price of an asset will decrease.

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China signals "new normal" with higher spending, lower growth target

Koh Gui Qing and Kevin Yao, Reuters
7:35 AM, E.T. | March 5, 2015
International

Tags: China

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China plans to run its biggest budget deficit in 2015 since the global financial crisis, stepping up spending as Premier Li Keqiang signalled that the lowest rate of growth in a quarter of a century is the "new normal" for the world's No.2 economy.
Speaking at the opening of the country's annual parliamentary meeting on Thursday, Li announced a growth target of around 7 percent for this year, below the 7.5 percent goal that was narrowly missed in 2014.
"The downward pressure on China's economy is intensifying," Li told around 3,000 delegates gathered at the Great Hall of the People to the west of Beijing's Tiananmen Square.
"Deep-seated problems in the country's economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year."
Outlining the government's policy priorities for 2015 in a Chinese equivalent of the U.S. State of the Union address, Li said there would be no let-up in an anti-corruption drive and vowed to fight pollution, which he called "a blight on people's quality of life and a trouble that weighs on their hearts".
Stressing the need to put the economy on a more sustainable footing after three decades of breakneck growth, Li said priorities included pushing ahead with reforms of the giant state-owned enterprises that still bestride the economy and liberalising the banking system and financial markets.
"In order to defuse problems and risks, avoid falling into the 'middle income trap', and achieve modernization, China must rely on development, and development requires an appropriate growth rate," said Li. "At the same time, China's economic development has entered a 'new normal'."
The annual full meeting of the largely rubber-stamp National People's Congress is a colourful event, drawing delegates from all over China, some in traditional ethnic costumes, to the vast hall, a monument to 1950s Communist architecture.
Its role is largely to endorse policy decisions already agreed by the party hierarchy.
FISCAL BOOST

In the short-term, China's top policymakers are grappling to sustain an economy weighed down by a cooling property market, high debt levels and excess factory capacity. Over the longer run, they are seeking to boost consumption to relieve overdependence on export markets and cut wasteful investment.
Underscoring the challenges faced in striking that balance, the People's Bank of China cut interest rates at the weekend for the second time in three months.
Adding a fiscal boost to the central bank's monetary support, Beijing plans to lift government spending to 17.15 trillion yuan ($2.74 trillion US) in 2015, an increase of 10.6 percent on 2014.
That will mean raising the budget deficit to 1.62 trillion yuan, or around 2.3 percent of GDP, compared with 2.1 percent last year and the widest since 2009, when Beijing unleashed a stimulus splurge in response to the financial crisis.
Some of the extra money will be spent on railway and water projects and modernising agriculture, although the chairman of the government's economic planning agency, Xu Shaoshi, said its investment plans should not be seen as a "massive stimulus".
China's economy grew 7.4 percent last year, robust by global standards but still the slowest in 24 years.
With deflationary pressures mounting after a tumble in commodity prices, Li said China would also lower its 2015 inflation target to around 3 percent from 3.5 percent in 2014.
MARKET REFORMS, SOCIAL STABILITY

A key plank of China's reform agenda is tackling overcapacity in polluting heavy industries and moving its factories up the global value chain.
"Manufacturing is traditionally a strong area for Chinese industry," said Li.
"We will implement the 'Made in China 2025' strategy, seek innovation-driven development, apply smart technology, strengthen foundations, pursue green development and redouble our efforts to upgrade China from a manufacturer of quantity to one of quality."
Li promised a greater role for private business in the economy, which he said would be further opened up by halving the number of industries in which foreign investment is restricted.
A draft foreign investment catalogue issued in November trimmed the number of sectors where China limits foreign investment to 35 from 79, but foreign business lobbies said that cut fell short of expectations.
"We look forward to seeing details of the revised catalogue and streamlining measures, and share the premier's hopes for a stable, fair, transparent and predictable business environment in China," James Zimmerman, chairman of the American Chamber of Commerce in China, said in response to Li's remarks.
With Communist Party leaders ever mindful of social stability, Li said China aimed to create more than 10 million new jobs in 2015 and would ensure the jobless rate does not exceed 4.5 percent. China targeted a registered urban unemployment rate of 4.6 percent last year.
The fight against pollution and corruption have contributed to the slowing economy, as Beijing has clamped down on dirty industries, and the fear of being caught in the anti-graft net has had a chilling effect on some business activity.
But in the longer term, the Communist Party leadership regards tackling the twin side-effects of China's decades-long dash for growth as vital to maintaining its grip on power.
"Our tough stance on corruption is here to stay," said Li. "Our tolerance for corruption is zero, and anyone guilty of corruption will be dealt with seriously."

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Fraud office probes Bank of England auctions

PUBLISHED ON MAR 5, 2015 8:46 AM

The Bank of England, seen with a statue in the foreground, in London on Dec 16, 2014. -- PHOTO: REUTERS

LONDON (AFP) - Britain's Serious Fraud Office is investigating auctions by the Bank of England designed to inject cash into the banking system during the financial crisis, the central bank said on Wednesday.

The bank said it had commissioned an inquiry into "liquidity auctions during the financial crisis in 2007 and 2008", and had referred the results to the Serious Fraud Office (SFO) in November.

"Given the SFO investigation is ongoing, it is not appropriate for the Bank to provide any additional comment on the matter at this time," the bank said in a statement.

In November, Britain's Financial Times reported that the central bank was probing whether staff knew of or were involved in manipulating liquidity auctions.

Singapore to see world's fastest growth of super rich individuals: Knight Frank survey

PUBLISHED ON MAR 5, 2015 11:04 AM

Singapore's Central Business District by night. -- PHOTO: ST FILE

BY WONG WEI HAN

SINGAPORE - Singapore is set to have the world's fastest growth in the number of super rich individuals within the next 10 years, Knight Frank forecast in its latest annual wealth report.

Between 2014 and 2024, the number of ultra-high-net-worth individuals (UHNWI) - who have a net US$30 million (S$41 million) in assets - will rise by another 1,752, the property consultancy firm said in its Wealth Report 2015 released on Thursday.

This puts the Republic at the No. 1 spot in terms of growth of UHNWIs, ahead of Hong Kong, New York, London and Mumbai, in descending order.

Currently, Singapore also has the world's third-largest concentration of the ultra rich, behind Monaco and Luxembourg. There are now 60 super rich people for every 100,000 residents here. Switzerland came in fourth in this ranking, with 54 ultra-rich per every 100,000 people.

The trend reflects the rapid growth of Asia's wealth, with the region overtaking North America to see the second-fastest increase in UHNWIs in the world. Last year some 1,419 people moved past the US$30 million mark in Asia, Knight Frank said, behind only Europe's 1,834.

The ultra-rich in Asia also hold more in total wealth with combined net assets of US$5.9 trillion, 7 per cent more than North America's US$5.5 trillion.

-- GRAPHIC: KNIGHT FRANK

In a separate survey, Singapore lost out to its regional rival Hong Kong in a ranking of most important cities to UHNWIs in 2015. Hong Kong came in third in the ranking, behind London and New York and followed by Singapore.

But Mr Nicholas Holt, Knight Frank's head of Asia Pacific research, said the jury is still out on the perennial competition between Singapore and Hong Kong as Asia's top spot for wealth and investments.

"Singapore continues to diversify its economy and attract large multinational businesses. Commercial property in both cities has been targeted by UHNWI investors looking for an income return and potential capital appreciation upside."

Gold sinks nearly 3% to 3-mth lows after US jobs data

Gold fell nearly 3 per cent to a three-month low on Friday after stronger-than-expected US non-farm payrolls fueled expectations the Federal Reserve will raise rates sooner rather than later, and the dollar jumped to an 11-1/2 year high. 

PHOTO: REUTERS

7 Mar7:42 AM

[NEW YORK] Gold fell nearly 3 per cent to a three-month low on Friday after stronger-than-expected US non-farm payrolls fueled expectations the Federal Reserve will raise rates sooner rather than later, and the dollar jumped to an 11-1/2 year high.

US employers stepped up hiring in February and the unemployment rate fell to nearly a seven-year low, putting further pressure on the Fed to raise interest rates in June.

Spot gold was down 2.6 per cent at US$1,167.40 by 2.38 pm EST (1938 GMT), on track for its biggest daily drop since October 2013. The metal was heading for a fifth straight session of losses and the biggest weekly drop in a month.

US gold for April delivery settled down US$31.90, or 2.7 per cent, at US$1,164.30 an ounce.

An increase in US interest rates would further boost the value of the dollar, in turn hurting demand for non-interest-bearing assets such as gold. "The market may be reading too much into one data release,"said Frances Hudson, global thematic strategist at Standard Life Investments in Edinburgh. "When the central bank tells you the move is going to be data dependent, I'm pretty sure they're not going to say that particular data release will be the tipping point because payroll figures are quite often subject to pretty substantial revisions." A stronger US currency makes dollar-denominated gold more expensive for holders of other currencies, while a rise in yields on US bonds is negative for the metal, whose holders earn no interest. "We continue to forecast a further strengthening of the US dollar, which will keep gold under pressure," Deutsche Bank said in a note.

On the physical market, prices on the Shanghai Gold Exchange suggested physical demand for gold in China, the second biggest bullion consumer, remained at healthy levels.

Chinese gold prices were about US$4 to $5 an ounce higher than the global benchmark.

Spot silver was down 2 per cent at $15.84 an ounce, after falling to a two-month low of US$15.74. Palladium was off 1.1 per cent at US$815 an ounce, and platinum dropped 1.7 per cent to US$1,154.75 an ounce.

REUTERS

    

China pledges to boost clean energy, industrial restructuring

China's top state planning agency pledged on Thursday to accelerate policies to promote cleaner and renewable sources of energy and tackle overcapacity in polluting industrial sectors. 

PHOTO: AFP

5 Mar9:28 AM

[BEIJING] China's top state planning agency pledged on Thursday to accelerate policies to promote cleaner and renewable sources of energy and tackle overcapacity in polluting industrial sectors.

The National Development and Reform Commision (NDRC) in its annual report published at the opening of the full session of parliament said that it would implement policies aimed at reducing coal consumption and controlling the number of energy-intensive projects in polluted regions.

It also said that it would take action to boost the proportion of cleaner fuels, encourage the development and utilisation of natural gas, and aggressively develop renewable wind, solar and biofuel energy sources.

China is trying to strike a balance between improving its environment, suffering from more than three decades of breakneck growth, and keeping its economy running at the pace required to maintain employment and stability.

While trying to cut the consumption of polluting fossil fuels to ease choking smog, the NDRC said it would also take action to "turn the coal sector around", with prices at low levels and more than 70 per cent of miners said to be facing losses.

Beijing alredy implemented a series of measures last year aimed at propping up coal prices by curbing imports and controlling output.

Overcapacity remains a problem in a number of sectors, such as steel and cement, and the NDRC said it would introduce more measures to encourage mergers and close outdated capacity.

According to the government work report to be delivered to parliament by Premier Li Keqiang, China will aim to cut energy intensity - the amount of energy used per unit of GDP growth - by 3.1 per cent in 2015.

The rate fell by 4.8 per cent in 2014, and the government is on course to meet a 16 per cent drop over the 2011-2015 period.

REUTERS