New Greek government opposes Canadian gold mine

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Angeliki Koutantou
8:29 AM, E.T. | January 30, 2015
International

Tags: Greece

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Greece’s new left-wing government will cancel plans to sell the state natural gas utility and is firmly opposed to a Canadian gold mine that is among the biggest foreign investment projects in the country, the energy minister told Reuters on Friday.
The comments by Panagiotis Lafazanis further reinforces early signs that the government is sticking to campaign pledges that have chilled investment and unnerved financial markets.
The gold mine operated by Vancouver-based Eldorado Gold in northern Greece was the flagship project of the last government’s foreign investment drive and considered a test case that would reveal whether Greece could protect foreign investors despite local opposition.
“We are absolutely against it and we will examine our next moves on it,” Lafazanis, the 63-year-old former Communist told Reuters at his new ministerial office, declining to say if the government would try to block the project from going ahead.
The new minister was even more categorical on gas utility DEPA, saying the planned sale of a 65 per cent stake would be scrapped. “In no way will we privatise gas utility DEPA and sell it to anyone, no matter who the interested party is,” Lafazanis said.
But he struck a more moderate tone on the 400-million-euro ($452-million) sale of Greek natural gas grid operator DESFA to Azerbaijan’s state oil firm SOCAR, a deal agreed in 2013.
He said the government would act on the project only after the European Commission, which is investigating whether the deal violates competition rules, makes it decision later this year.
“We will wait for the EU Competition Commission’s decision and then we will decide our own moves,” he said.

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Greek government set for first talks with eurozone partners

Greece's new anti-austerity government is set to hold its first talks on Friday with its eurozone partners about its ambitions to secure a reduction in the massive debts linked to its 240-billion-euro (S$364 billion) international bailout. 

PHOTO: REUTERS   www.google.com/+EricAu118

30 Jan12:26 PM

[ATHENS] Greece's new anti-austerity government is set to hold its first talks on Friday with its eurozone partners about its ambitions to secure a reduction in the massive debts linked to its 240-billion-euro (S$364 billion) international bailout.

But the talks come hot on the heels of a warning by the European Union and Germany that there is little support for reducing the debts, which the radical new government is hoping to cut in half.

Prime Minister Alexis Tsipras is set to meet Jeroen Dijsselbloem, the current head of the eurozone group of finance ministers, which Athens said would mark the start of Greece's negotiations on revising the conditions of its bailout deal.

Ahead of the meeting, Greek bank stocks rebounded on Thursday after plunging the day before on concerns about the dramatic first moves of Tsipras's radical new administration.

European Parliament chief Martin Schulz on Thursday became the first foreign dignitary to meet Tsipras' government, and said the prime minister had assured him that Greece would seek "common ground" with its EU peers.

Schulz added that Tsipras had assured him Athens would not seek a "unilateral solution" to the renegotiation of its multi-billion-euro bailout.

Elected on Sunday, the new government has already begun to roll back years of austerity measures demanded by the EU and the International Monetary Fund in return for the huge bailout granted to avoid a financial meltdown in 2010, and says it will negotiate to halve the debt.

But European Commission chief Jean-Claude Juncker said a reduction of the 315-billion-euro debt linked to the bailout "is not on the radar".

"I don't think there's a majority in the Eurogroup... for a reduction of the debt," he told Germany's ARD television, referring to the eurozone's finance ministers.

Sigmar Gabriel, Germany's vice-chancellor and also its economy minister, said he expected Greece to "stick to its commitments" for fiscal and economic reform made in exchange for the bailout.

He was critical of a decision by the new government to scrap the privatisation of major ports and power companies, decisions which have also drawn a rebuke from China.

Greece said negotiations would start in earnest with Dijsselbloem's visit on Friday, with the finance ministry saying it hoped talks could lead to "a viable, comprehensive agreement to rebuild our social economy".

Dijsselbloem, the Dutch finance minister, will meet Tsipras and his outspoken Finance Minister Yanis Varoufakis, a maverick economist who regularly shares his thoughts on his personal blog.

Varoufakis will ramp up Greece's efforts to rally support for a renegotiation when he visits Britain, France and Italy next week.

Greek bank stocks rebounded by nearly 13 per cent on Thursday after plunging by more than a quarter a day before.

The Athens market had taken fright after the new government announced it was abandoning the privatisation of the major ports of Piraeus and Thessaloniki, main electricity provider PPC and petroleum refiner HELPE.

China, which already has a major investment in the Piraeus port, said it was "highly concerned" after Tsipras's government abandoned plans to put the privatisation of the docks - one of Europe's busiest - out to tender.

The Athens market closed 3.16 per cent higher on Thursday, driven by the banks' partial recovery.

The Greek central bank said 4.0 billion euros in private deposits had been withdrawn from banks in December.

Daniele Nouy, head of the European Central Bank's Supervisory Board, said despite the post-election turbulence, Greek lenders were "pretty strong".

Tsipras' government was also embroiled in its first foreign policy row after it complained to Brussels over allegedly not being consulted when the EU threatened new sanctions against Russia over the war in Ukraine.

EU foreign ministers eventually overcame Greece's reluctance and agreed Thursday to extend the sanctions against Russia.

Tsipras' Syriza party has been seen as pro-Russian, with Moscow's ambassador becoming the first foreign official to be received by the prime minister after his election victory. Many of the party's members have deep leftist roots.

Tsipras, who ousted the conservatives of former prime minister Antonis Samaras, has said Greece is no longer prepared to bow to the "politics of submission", in a clear swipe at its international creditors.

Finance Minister Varoufakis has said the government wants "a pan-European New Deal" to encourage growth and help the continent deal with Greece's crisis.

AFP

      

MORE

• Greek banks rebound as Athens clarifies remarks
• Greece needs a debt service holiday
• Greek government reverses austerity policies, stocks hit
• Greek PM Tsipras freezes privatisations, markets tumble
• Greece won't bow to 'politics of submission'
• Greek PM Tsipras names anti-austerity cabinet, port sale halted

  

US Senate approves controversial Keystone pipeline 

PUBLISHED ON JAN 30, 2015 5:21 AM

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Republican Senator Lisa Murkowski speaks while flanked by Majority Leader Mitch McConnell on Jan 29, 2015 at the US Capitol in Washington, DC. The US Senate on Thursday approved the immediate construction of the controversial Keystone XL oil pipeline, a Republican priority that faces the threat of a presidential veto.  -- PHOTO: AFP www.google.com/+EricAu118

WASHINGTON (AFP) - The US Senate on Thursday approved the immediate construction of the controversial Keystone XL oil pipeline, a Republican priority that faces the threat of a presidential veto.

The Republican Bill passed with 62 votes to 36, with support from eight Democrats who defied President Barack Obama, after weeks of fierce debate.

Russia faces $50 billion battle to stave off banking crisis PUBLISHED ON JAN 24, 2015

Russia faces $50 billion battle to stave off banking crisis

PUBLISHED ON JAN 24, 2015 12:03 AM

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A fragment of a monument to Soviet state founder Vladimir Lenin is on display, with the advertising logo of VTB Bank seen in the background, in Stavropol, southern Russia, Jan 22, 2015. Russia may have to spend more than US$40 billion (S$53 billion) this year to avert a banking crisis, as the growing likelihood of a sharp recession threatens to pile extra costs on a sector suffering from Western sanctions over Ukraine and a plunge in the rouble. -- PHOTO: REUTERS

MOSCOW (REUTERS) - Russia may have to spend more than US$40 billion (S$53 billion) this year to avert a banking crisis, as the growing likelihood of a sharp recession threatens to pile extra costs on a sector suffering from Western sanctions over Ukraine and a plunge in the rouble.

Russian banks are seeing a deterioration in their loan quality, a rise in their risk management costs and increase in their cost of funding, and banking executives and analysts predict things are going to get worse.

This represents a major challenge to President Vladimir Putin, who took power 15 years ago in the ashes of a crisis that wiped out the financial system, and whose popularity partly rests on his reputation for restoring stability.

"We expect a contraction in the number of small, medium and large banks this year," Mikhail Zadornov, head of VTB 24, the retail arm of No. 2 bank VTB, said on Thursday. "It will be hard for all banks. The weakest will leave the market,"he said.

Russia's central bank has already relaxed regulation of banks, and the government has pledged support of more than 1.2 trillion roubles (S$25 billion) this year after spending more than 350 billion roubles in 2014.

But analysts say this is a fraction of what is needed.

The anti-crisis measures will significantly add to pressures on Russia's international reserves and the budget, which is already forecast to run a deficit of up to 3 per cent of gross domestic product this year, hurt most by a collapse in oil prices which is withering the country's export revenues.

"To preserve the status quo, banks may need far more capital than 1 trillion roubles," said Yaroslav Sovgyra, associate managing director for Moody's ratings agency in Russia.

"One trillion would boost their capital (adequacy ratio) by about 200 basis points. But on the other hand because of credit losses you'll see a reduction in capital by roughly 500 basis points."

One further problem is that the government's planned capital injection comes with strings attached: Russian banks are being asked to increase lending to core sectors of the economy by around 12 per cent.

That could further stretch their capital.

SLIPPERY SLOPE

The government is soon to distribute up to 1 trillion roubles of OFZ treasury bonds issued late last year to banks including VTB, Gazprombank and Rosselkhozbank, all state-controlled and under sanctions imposed by Western countries to punish Russia for its involvement in Ukraine.

VTB and Gazprombank are also expected to receive money from the National Wealth Fund, a sovereign fund originally intended to support the pension system, of over 200 billion roubles.

Top bank Sberbank could also attract a subordinated loan of up to 600 billion roubles from the central bank, its main shareholder, or extend an existing loan from the regulator.

It has said it is too early to talk about a new loan for now.

BNP Paribas estimates that Russian banks could need up to 2.7 trillion roubles in additional capital to support lending and absorb credit losses.

Such figures would amount to almost 20 per cent of planned federal budget expenditure this year.

Sberbank chief executive German Gref said last week that Russian banks would need to create about 3 trillion roubles of provisions this year should oil prices average around US$45 a barrel.

Last month, the state spent 130 billion roubles to bail out the first major bank to fall victim to the rouble crisis, mid-sized lender Trust Bank, then ranked 15th biggest by retail accounts and 32nd by assets.

"If banks from the top 30 get into trouble, the government will have to save them at any price," said Armen Gasparyan, a banking analyst at Renaissance Capital.

"It would be very painful for such a bank to go under, as it could spark a crisis of confidence in which the population withdraws deposits en masse and interbank lending rates spike."

Russian central bank deputy governor Mikhail Sukhov told Reuters he did not expect a wave of banking insolvencies, but that the current financial crisis could force those engaged in high-risk financial operations to leave the market.

So far, the central bank says non-performing loans were just 3.8 per cent of banking sector assets at the beginning of December.

But Moody's, which uses a different methodology, puts them at 7.5 per cent already and says they could roughly double this year.

During the last financial crisis in 2008-2009, there was a time lag before the proliferation of bad loans appeared on balance sheets: at the start of 2009, they made up 3.8 per cent of Russian banks' loan portfolios, but a year later this figure had risen to 9.6 per cent.

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