Monday, July 6, 2015

Eurozone leaders to hold emergency summit on Greece

JUL 7, 201511:31 AM

[BRUSSELS] Eurozone leaders will hold an emergency summit in Brussels on Tuesday to discuss the fallout from Greek voters' defiant "No" to further austerity measures, with the country's Prime Minister Alexis Tsipras set to unveil new proposals for talks.

As the country's economy gasps for air, with banks closed until at least Thursday on fears cash machines are running dry, Germany and France presented a united front, calling on Mr Tsipras to make "precise" proposals in a bid to revive bailout talks.

"The door is open to discussions," said French President Francois Hollande Monday after crisis talks in Paris with German Chancellor Angela Merkel, held a day after Greeks rejected creditors' proposed terms for a new bailout in a historic referendum that was a political victory for Mr Tsipras but plunged Europe into crisis.

"It is now up to the government of Alexis Tsipras to make serious, credible proposals so that this willingness to stay in the eurozone can translate into a lasting programme," Mr Hollande said.

For her part, Dr Merkel said the conditions for a new Greek rescue package "have not yet been met." "And that is why we are now waiting for very precise proposals from the Greek prime minister, a programme that will allow Greece to return to prosperity," said Dr Merkel, adding that eurozone countries had already shown "a lot of solidarity with Greece".

Without any proposals, the European digital commissioner Gunther Oettinger told German media, any new negotiations would be "meaningless".

Greece's new finance minister Euclid Tsakalotos said Greece wants "to continue the discussion".

Mr Tsakalotos, who admitted to having "stage fright" upon assuming the post "not at the easiest moment in Greek history", was thrust into the spotlight Monday after the surprise resignation of his firebrand predecessor Yanis Varoufakis.

Positions among Greece's 18 partners in the eurozone vary ahead of Tuesday's summit.

Germany, Finland, Slovakia and the Baltic states have taken a notably harder line, whereas France, Italy and Spain have adopted a more conciliatory tone.

Despite its tougher approach to debt relief, Germany said on Monday eurozone leaders should discuss humanitarian aid for a country fatigued by years of belt-tightening and chronic unemployment.

The White House urged all parties to seek a compromise that would keep Greece in the euro zone and place its economy "on a path toward debt sustainability but also economic growth".

The special summit is set to begin at 1600 GMT, after a meeting of eurozone finance ministers.

European Commission head Jean-Claude Juncker is also scheduled to speak, for the first time since the Greek vote, during a session of the European Parliament in Strasbourg in the morning.

CASH FEARS

In Sunday's plebiscite, Greeks voted by 61.31 per cent to 38.69 per cent to reject austerity terms in exchange for releasing more funds under an international bailout package.

The result dealt a body blow to the vision of European integration, but elated parties campaigning against austerity and loss of national sovereignty.

Athenians were set to awake yet again Tuesday to the grim reality of closed banks and more lines at cash machines to make their daily withdrawal limit of 60 euros (S$89), as fears grew the ATMs could soon run dry.

"I'm very afraid we will get no cash anymore in the coming days. They really have to fix it, end of this week at the latest, otherwise it (the economy) is collapsing," said pharmacist Lambros Vritios.

The European Central Bank, which has been keeping Greek lenders afloat, meanwhile said it had decided to maintain emergency funding to Greek banks - so-called Emergency Liquidity Assistance (ELA) - at the level set on June 26, keeping it at roughly 89 billion euros.

But it noted that the key financial support can only be provided against sufficient collateral.

"In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA," the statement said, a move that will make it more difficult to access ELA funds in the future.

Late on Monday, a Greek government source said Mr Tsipras had spoken to ECB chief Mario Draghi to stress that Greek banks, closed last week to prevent a run on deposits, needed to reopen with assistance from the Frankfurt-based lender.

Mr Tsipras also spoke to IMF chief Christine Lagarde "on the need to find a viable solution dealing with the real problems of the Greek economy," the source said.

'HIGH CHANCE' OF GREXIT

Greece last week defaulted on a 1.5 billion euro repayment to the International Monetary Fund but Ms Lagarde said her organisation was "ready to assist Greece if requested to do so".

Market reactions to the referendum were mostly muted, suggesting limited contagion from a possible "Grexit", or Greece's exit from the eurozone.

More than three-quarters of Greeks want to stay in the eurozone, according to surveys, but analysts are now putting the chances of a Grexit at "very high".

Mr Tsipras, 40, insists that instead of Grexit, the creditors will now finally have to talk about restructuring Greece's massive 240 billion euro debt.

The last EU-IMF bailout for Greece expired last Tuesday, despite Tsipras's appeals for it to be extended.

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros of Greek loans.

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White House calls on Greece, EU to find compromise

JUL 7, 201510:42 AM

[WASHINGTON] The White House urged Greece and EU leaders on Monday to find a compromise to keep the cash-strapped country in the eurozone, after Greeks voted resoundingly to reject an austerity-based bailout.

"The referendum is over, but our view here at the White House remains the same," said spokesman Josh Earnest.

EU and Greek officials need "to agree to a package of reforms and financing that would allow Greece to be on a path toward debt sustainability but also economic growth," Mr Earnest told reporters.

They should do so "in a way that would allow Greece to remain part of the eurozone," he said.

"This is a European challenge to solve." It was the first official US comment on Sunday's referendum, in which Greeks voted by a 61 per cent majority to reject a bailout deal from the European Union that required more austerity and reform, handing a victory to the ruling radical Syriza party.

President Barack Obama spoke by phone with French President Francois Hollande about keeping Greece in the eurozone.

"The two leaders agreed on the importance of finding a path forward that will allow Greece to resume reforms and return to growth and debt sustainability within the Eurozone," the White House said.

Mr Obama and Mr Hollande also noted the effort will "require difficult compromises from all sides." Meanwhile, US Treasury Secretary Jacob Lew spoke by telephone with Greek Prime Minister Alexis Tsipras and with new Finance Minister Euclid Tsakalotos.

He called for multiparty talks and a "constructive outcome that will allow Greece to make difficult but necessary fiscal and structural reforms, return to growth, and achieve debt sustainability within the eurozone," a statement said.

AFP

Brazil unveils plan to encourage cutting hours rather than jobs

JUL 7, 20157:42 AM

[RIO DE JANEIRO] Brazil's government unveiled a job-protection plan that will supplement employee income if employers stung by the country's economic slowdown cut workers' hours rather than firing them, the presidency said in a statement.

It is the latest measure from a Brazilian government struggling to reduce spending, increase revenue, fight inflation and kick-start a rapidly slowing economy.

Budget cuts, changes to social security and other measures introduced in recent months face stiff criticism from the union allies of President Dilma Rousseff's Workers' Party-led coalition. The plan aims to ease those concerns.

Under the plan, employers will be able to cut the regular hours of employees by up to 30 per cent, with an equivalent reduction in their wage bill. The government will use a labor-stimulation fund known as FAT to make up half of the workers' lost salary, up to a limit of 900.84 reais (S$387.31) Employers will also see payroll-tax obligations, such as for the FGTS unemployment and housing fund and for social security, fall to 85 per cent of the previous level, the government said.

The decree, the government said, will allow Brazilian companies to reduce wages without resorting to layoffs. Under Brazilian law, firing employees can bring heavy severance payments, making layoffs, even in economic downturns, prohibitively expensive.

Workers will be able to maintain their jobs and work less with only a slight decline in wages.

While the plan was issued as a presidential decree, Congress must approve the measures for the decree to remain in force.

REUTERS

Britain faces first Conservative budget in two decades

JUL 7, 20159:35 AM

[LONDON] British Prime Minister David Cameron's government will this week unveil the first Conservative budget in almost 20 years, targeting deep welfare cutbacks to honour a campaign pledge to slash spending.

Finance minister George Osborne, boosted by a surprise May 7 vote giving his centre-right Conservative Party an outright majority, will present his latest spending and taxation plans before parliament on Wednesday.

Mr Osborne will have a free hand with public finances after five years of coalition with the centrist Liberal Democrats, while the summer budget comes amid mounting global concern over the debt crisis in anti-austerity Greece.

Chancellor of the Exchequer Osborne has already vowed that his second budget so far this year will unleash more austerity to raise another £12 billion (S$25.3 billion).

"You do have to look at the benefits system, the welfare system, and make sure that it is fair for working people," Mr Osborne said Sunday.

"It is not fair that people out of work can earn more than people in work so we are going to cut the benefit cap." He will seek to cap annual welfare payments at £23,000 per household in London, against the current level of £26,000. The amount will be lower still outside the capital.

Mr Osborne has also said that Britons on higher incomes in subsidised council housing will have to pay closer to the market level of rent.

The Conservatives want to lower the tax burden, but also address concerns that the welfare system encourages a culture of state handouts.

'ENVIABLE COMBINATION'

Wednesday's budget will seek to build upon Mr Osborne's 2015/2016 annual budget that was presented under the previous coalition administration in March.

It will also be Britain's first Conservative budget since 1996, when former premier John Major was in power.

During the coalition years, Mr Osborne was forced to soften some of his austerity measures in the face of fierce pressure from the Lib Dems.

However, Mr Osborne's priority remains tackling Britain's total debt, which stands at about £1.5 trillion, with a deficit of around 4.0 per cent of GDP in the current 2015/2016 financial year.

The Chancellor also plans to save another £650 million per year by forcing the state-funded BBC to foot the bill for the provision of free television licences for Britons aged over 75.

"The BBC is also a publicly funded institution and so it does need to make savings and contribute to what we need to do as a country to get our house in order. So we are in discussion with the BBC," he added on Sunday.

In addition, Mr Osborne will announce new laws in this week's budget to force governments to run a surplus.

The Conservative-Liberal Democrat coalition, which rose to power in 2010, oversaw billions of pounds of cuts to state spending to slash a record deficit inherited from the previous Labour government.

The coalition had already promised the public purse would reach a surplus by 2018/2019.

The economy is meanwhile forecast to grow by 2.5 per cent this year and 2.3 per cent in 2016, bringing higher taxation revenues.

"The UK economy is showing an enviable combination of decent growth, low inflation and falling unemployment," said Deloitte chief economist Ian Stewart.

"The government has an ambitious target for debt reduction and for cutting public expenditure.

"The July budget will map how Mr Osborne intends to meet those plans by specifying how cuts to departmental and welfare spending will be financed." AFP

Monday, July 6, 2015