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September 20, 2011

ATHENS, Sept 20, 2011 (AFP)
Beleaguered Greece was in crisis talks with its EU-IMF creditors for a second day on Tuesday as it prepared to auction more debt and sought to secure loan funds to avert bankruptcy next month.

Finance Minister Evangelos Venizelos will hold a conference call with head auditors from the EU, IMF and European Central Bank at 1600 GMT, with debt-hit Athens under pressure to tighten austerity and speed up asset sales.

Also on Tuesday, the Greek debt management agency will attempt to raise 1.25 billion euros ($1.7 billion) in a sale of three-month treasury bills to bring some badly-needed cash into the country’s coffers.

Unless Athens can come to an arrangement with the ‘troika’ of creditors, its reserves to pay pensions and wages will run out in October.

The first round of talks with the head auditors on Monday was “productive and substantive,” the finance ministry said in an emailed statement.

The audit had been suspended in early September, with sources close to the mission citing lack of progress in reform and placing the release of an eight-billion-euro loan slice at risk.

Greece is under pressure to plug a budget hole of more than 2.0 billion euros ($2.8 billion) under the terms of a 110-billion-euro EU-IMF bailout contracted last year.

The government last week announced a new hefty property tax and is expected to make further cuts in the country’s massive state payroll after the finance minister admitted there was “surplus” staff in the civil service.

And a Greek daily reported on its website late Monday that Prime Minister George Papandreou was considering calling for a referendum on whether Greece should continue to tackle its debt crisis within the eurozone or by exiting the single currency.

The International Monetary Fund has criticised Greece for wasting time and falling behind target with a long-delayed asset sale, while the European Commission is urging Athens to implement the necessary budget cuts and reforms.

The Greek debt crisis has engulfed the eurozone, putting the spotlight on other troubled economies in the single currency area such as Italy.

European stock markets again fell sharply on Monday in response to inconclusive weekend EU talks in Poland on the eurozone crisis and signs of economic slowdown in Europe and the United States.

Cegah Default, Yunani Harus Rampingkan Sektor Publik
Oleh Iwan Subarkah | Selasa, 20 September 2011 | 11:58
investor daily

ATHENA – Guna menghindari gagal bayar (default) utang dalam beberapa pecan ke depan, kreditor internasional meminta Yunani untuk merampingkan sector publik dan meningkatkan penerimaan pajak.

Sementara itu, para investor khawatir dengan kemunduran politik di zona euro dalam mengatasi krisis utang. Akibatnya, mereka melepas aset-aset zona euro yang berisiko.

Beberapa jam sebelum konferensi lewat telepon antara Menteri Keuangan (Menkeu) Yunani Evangelos Venizelos dan para pejabat senior dari Uni Eropa (UE) serta Dana Moneter Internasional (IMF), perwakilan IMF di Yunani, membeberkan langkah-langkah yang harus diambil negeri para dewa itu.

Implementasi langkah-langkah ini menjadi syarat bagi pengucuran porsi dana penyelamatan berikutnya sebesar 8 miliar euro pada bulan depan.

Baca selengkapnya di Investor Daily versi cetak di http://www.investor.co.id/pages/investordailyku/paidsubscription.php

Sept. 19, 2011, 5:16 p.m. EDT
U.S. stocks snap winning streak, but off lows
Choppy session revolves around Greece news; many techs rise

By V. Phani Kumar, MarketWatch

NEW YORK (MarketWatch) — U.S. stocks dropped Monday to snap a five-session winning streak after a choppy session that was again dominated by news related to Greece’s debt woes.

The major stock benchmarks fell more than 2% at their lows of the session as fears that Greece was heading toward a default drowned the optimism that underscored strong market gains last week.

They ended down 1% or less following late-day reports that international lenders were close to an agreement to ensure Athens received the next tranche of its financial aid, though some analysts weren’t convinced that was the end of its financial troubles.
“I think you’ll have to be skeptical about it. We have been at this juncture many, many times before,” said John Brady, a senior vice president at MF Global.

The Dow Jones Industrial Average (DJI:DJIA) fell 108.08 points, 0.9%, at 11,401.01, retracing losses after dropping more than 250 points.

The S&P 500 index (SNC:SPX) closed down 11.92 points, or 1%, at 1,204.09, while the Nasdaq Composite index (NASDAQ:COMP) recovered a part of the day’s losses and finished down 9.48 points, or 0.4%, at 2,612.83.

President Barack Obama‘s $3.6 trillion deficit reduction plan, which the White House said would allow the country to start reducing its debt level by 2017, provided little support as the Republicans’ reacted coolly to the proposals.
“The Republican response suggested there will be further bickering in Washington and very little is going to get done,” said Brady.

Banking and financial stocks were hard hit by uncertainty over Greece, with Bank of America Corp. (NYSE:BAC) leading the Dow lower with a 3.3% drop. American Express Co. (NYSE:AXP) , also on the Dow, lost 2.9%. Morgan Stanley (NYSE:MS) was the worst performer on the S&P 500 with a 7.9% drop.

“It’s almost impossible for [financials] to take a leadership role when Europe is flailing between default and rescue,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

The market breadth was also quite weak, with more than three stocks falling on the New York Stock Exchange for every gainer.

On the Nasdaq, nearly four stocks declined for every advancer, but Apple Inc. and some other large-capital technology firms advanced to support the recovery in afternoon trading.

“Technology continues to benefit from their overseas operations and overseas sales. With the global economy stronger than the domestic economy, technology stocks are going to outperform,” said Brady.

Shares of Apple Inc. (NASDAQ:AAPL) finished 2.8% higher at $411.63, after hitting a 52-week of $413.23 during the session.

Among Dow constituents, International Business Machines Co. (NYSE:IBM) finished 0.1% higher, while chip giant Intel Corp. (NASDAQ:INTC) narrowed losses to end 0.2% lower.

Energy sector shares also cut the day’s losses as crude-oil prices , down 3% at one point, finished off the day’s lows. Exxon Mobil Corp. (NYSE:XOM) fell 1.1% and Chevron Corp. (NYSE:CVX) dropped 0.9%.

Alcoa Inc. (NYSE:AA) fell 3.3% and Boeing Co. (NYSE:BA) dropped 1.9% amid worries about the global demand outlook.

Some retail, consumer and pharmaceutical shares also fared better than the broader markets as investors looked for defensive plays, with Wal-Mart Stores Inc. (NYSE:WMT) down 0.4% and McDonald’s Corp. (NYSE:MCD) rising 0.6%.

Cantor Fitzgerald’s Pado said the relative outperformance in retail and technology sectors suggested that last week’s buying in those industries was “real” and that investors “aren’t ready to dump them at the first hint of trouble.”

Shares of General Motors Co. (NYSE:GM) rose nearly 2% after the company and United Auto Workers reached a tentative agreement over the weekend on what would be a new four-year labor contract.

Tyco International Ltd. (NYSE:TYC) added 2.4% after its board approved a plan to split the company three ways and issue tax-free stock dividends to shareholders. (NMN:CL1V)
U.S. Stock Futures Extend Losses After Italy Cut
bloomberg
By Nikolaj Gammeltoft and Rita Nazareth – Sep 20, 2011 6:42 AM GMT+0700

U.S. stock futures extended losses after Italy’s credit rating was cut one level to A by Standard & Poor’s, reinforcing concern Europe’s debt crisis will spread.

Standard & Poor’s 500 Index futures expiring in December slumped 0.7 percent to 1,189.10 at 8:38 a.m. Tokyo time. The measure retreated 1 percent today, following last week’s 5.4 percent advance that was the third-biggest rally since 2009.

The rating for Italy, which has Europe’s second-largest debt load, was lowered from A+, S&P said. The firm said Italy’s net general government debt is the highest among nations with A ratings, and the amount will peak later and at a higher level than previously anticipated.

“Italy’s downgrade adds to fears of a domino effect,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “It’s definitely not good timing especially because of the lack of positive news. That’s enough to make investors nervous.”

Equities slumped yesterday, halting a five-day rally for the S&P 500, amid concern Greece will fail to qualify for more financial aid needed to avoid default. During the trading session that ended at 4 p.m., Bank of America Corp. and JPMorgan Chase & Co. slid at least 2.8 percent, following a slump in European lenders. Alcoa Inc. lost 3.3 percent, pacing declines in commodity producers. Hewlett-Packard Co. dropped 2.6 percent as companies most-dependent on economic growth fell.

Spain, Ireland

Italy follows Spain, Ireland, Portugal, Cyprus and Greece as euro-region countries having their credit rating cut this year. Prime Minister Silvio Berlusconi passed a 54 billion-euro ($73 billion) austerity package this month that convinced the European Central Bank to buy its bonds after borrowing costs surged to euro-era records in August. The plan to balance the budget in 2013 wasn’t enough to sway S&P.

Unlike Ireland and Portugal, which followed Greece in seeking bailouts from the European Union and the International Monetary Fund, Italy until July had managed to skirt the worst of the fallout from the debt crisis. While its budget gap was 4.6 percent of GDP in 2010, lower than France and Germany, debt will reach 120 percent this year.

“Italy’s debt problem is unsustainable,” George Feiger, chief executive officer of Contango Capital Advisors Inc., a San Francisco-based wealth management firm with about $3.4 billion in assets, said in a telephone interview. “The equity investors are spooked by the fact that the banks hold the government debt, which will fall in value and reduce the banks’ ability to lend out money in the economy, which in turn can spur a recession if the banking system is not functioning.”

Calls for eurozone unity
By Ian Wishart
16.09.2011 / 15:19 CET
Eurozone finance ministers meet in Poland; US treasury secretary criticises member states for ‘loose talk’.

Finance ministers from the 17 countries that use the euro held talks in Poland today amid criticism that their failure to provide a co-ordinated response to the crisis had destabilised financial markets.

Timothy Geithner, the US treasury secretary, who took the unprecedented step of joining this morning’s meeting, criticised “loose talk” among member states when he spoke to reporters after leaving the talks.

He was joined in his call for unity by Jean-Claude Juncker, Luxembourg’s prime minister who chaired the meeting, who said that “verbal discipline” needed to improve.
Under pressure

The talks, in Wrocław, come at a crucial stage in the ongoing turmoil that is gripping the sovereign debt markets. Most member states have still not approved a deal reached on 21 July to increase the firepower of the eurozone’s bail-out fund, arguments remain about whether Greece should provide collateral for its bail-out, and Greek authorities have failed to implement all their pledged austerity measures.

Furthermore, Olli Rehn, the European commissioner for economic and monetary affairs, presented to the meeting a grim forecast of a sharp economic slowdown in the months ahead.

Speaking after the meeting, Rehn said that the issue of the 21 July deal had been discussed and that finance ministers realised that it was crucial that all member states approved the changes to the European Financial Stability Facility (EFSF) by the beginning of October.

But with only five member states, Belgium, France, Italy, Luxembourg and Spain, having done so, and with continued wrangling in some countries, that deadline looks like being difficult to meet.

“The decisions of the eurozone summit in July must be finalised, ratified and implemented,” Rehn said. “I call on all the other member states to do so by the end of September, early October so we can indeed conclude this important milestone.”

all member states were committed to approving the deal, which will allow the EFSF to buy sovereign bonds in the secondary market, to extend credit lines to countries in difficulty and recapitalise banks.

Juncker said that all member states were committed to approving the deal, which will allow the EFSF to buy sovereign bonds in the secondary market, to extend credit lines to countries in difficulty and recapitalise banks.

“In view of the continued severe strains in a number of financial markets, we reconfirmed our full determination to fully implement the decisions,” Juncker said.
Greek austerity measures

The finance ministers also discussed the situation in Greece and warned Evangelos Venizelos, the country’s finance minister, that Greece needed to implement agreed austerity measures and economic reforms if it was to receive further international funding.

“What we need is full and rapid implementation and the keeping of the political will to implement the agreements,” said Rehn.

Juncker said that the European Commission, the International Monetary Fund and the European Central Bank would decide in October whether Greece would receive the next tranche of its emergency loans.

Communication concerns

The question of undisciplined communication was taken up by Geithner, who left mid-way through the meeting. Speaking to reporters afterwards, he said that it was “damaging” to see “the ongoing conflict between governments and the central bank”.

He added that governments had to avoid “loose talk about dismantling the institutions of the euro”.

“We don’t want to see Europe weakened by a prolonged crisis, [it is] better for us if Europe is stronger,” he said. “We will continue to do as much as we can to help Europe manage these challenges.”

Sources close to the talks suggested that Geithner wants the eurozone to consider enlarging the EFSF, but this was dismissed by Juncker.

“We don’t discuss increasing or expanding the EFSF with a non-member of the euro area,” he said.

On the general economic outlook, Rehn said: “Clearly, financial market conditions have deteriorated sharply in recent weeks and months due to the debt concerns, outlook for growth and fiscal sustainability. Uncertainties and stress in financial markets is having negative ramifications in the real economy and it is hampering our growth prospects.”
Finnish deal

Ministers also discussed the bilateral agreement that would see Finland receive collateral from Greece in return for its participation in the Greek bail-out. Other member states have criticised the deal, which needs approval by all 17 countries. No agreement has yet been reached but ministers indicated that a deal was not far off.

The 17 finance ministers of the eurozone are being joined by the 10 other finance ministers of the EU and central bank governors for further discussions later this afternoon.

Europeans doubt added value of the euro
Published 19 September 2011
euractiv
euro eurozone crisis

Only Slovaks and Italians think that the euro is good for their country’s economy, according to a recent poll by the German Marshall Fund. While most EU citizens from the 12 member states surveyed said that EU membership is beneficial for their country, only a minority has a positive view of the common currency.

Recent eurozone member Slovakia gathered a majority of 55% of respondents saying that the euro’s effect on their country’s economy is “good”, while 31% say it is “not good”. Second is Italy, where 49% believe that the euro is “good”, against 46% who have a more negative assessment.

The survey covered 12 countries, among which the six largest EU countries, as well as EU newcomers Romania and Bulgaria.

Public opinion in Germany was almost evenly divided with 48% having a positive opinion and 49% negative. The Netherlands is also split at 47-47%, while in France 39% have a positive opinion and 54% take a negative view. The two EU members most ‘negative’ toward the euro are non-eurozone members the United Kingdom, with 18% positive opinion and 77%, followed by Sweden, with 26% positive and 67% negative.

In EU newcomer Bulgaria, 30% have a positive and 46% a negative opinion. Romania is much more euro-optimistic, with 46% positive opinion and 30% negative. Poland, one of the six largest EU members and the largest country of the fifth EU enlargement, is among the sceptics, with 33% positive opinion and 52% negative. The average for the twelve EU countries surveyed is 40% positive opinion and 53% negative regarding the added value of the euro.

However, most Europeans think that EU membership is beneficial for their countries. As much as 67% take the view that membership is positive for them, as against 24% who see it as something negative.

Asked if they think that more EU governance is needed over national finances, Germany scored high with 54% of respondents answering “yes” and 44% “no”. Not surprisingly, the most negative country is again the UK, with 12% positive opinion and 84% negative.

The second most pro-European economic governance country is Italy, followed by Spain and Portugal. All these countries are currently facing economic difficulties, Portugal having benefited from a bailout program put in place by the EU and the IMF. France has 40% positive opinion and 55% negative, close to the average among the twelve countries surveyed, which is of 39% positive opinion and 56% negative.

The support for contributing to an EU special fund such as the European Financial Stability Fund (EFSF) was also measured. When asked whether they approve of their country-making contributions to a fund to assist member states that find themselves in budgetary difficulty, 60% of EU respondents thought it acceptable that their countries contribute to this fund while only 36% disapproved.

The majority of respondents approved of this in all countries except for the UK (43%) and Slovakia (38%). In Germany, likely to be the largest contributor to any such fund, respondents were more divided, with 50% approving of such a contribution and 47% disapproving.

Economist: ECB ‘underestimated risk of a double-dip’
[fr]
Published 19 September 2011

euractiv

In its fight against inflation and calls for fiscal consolidation, the European Central Bank has overestimated the strength of the economic recovery and underestimated the threat of a second recession, economist Barry Eichengreen said in an interview with EurActiv.

The University of California at Berkeley professor argued that Europe had moved quickly towards austerity measures “partly due to economics,” in the case of heavily indebted countries like Greece and Ireland, but also due to “a political phobia of budget deficits, because there is a political phobia of inflation”.

The average public deficit for eurozone countries in 2010 was 6%, two thirds that of the United States’ at 9%. Whereas the US Federal Reserve has set its main interest rate for loans at 0%, the lowest possible so as to encourage investment, the European Central Bank (ECB) increased its equivalent rate to 1.5% last July for fear of inflation.

Eichengreen claimed that “the ECB made a mistake” here.

‘Stimulus now, austerity later’

“Specifically, it overestimated the vigour of the recovery and underestimated the danger of a double dip [recession].” Instead, he argued that “Europe would have been better served by a more accommodating policy, given how inflationary pressures earlier this year were largely transitory and the recovery is now stalling out”.

He added that “a somewhat weaker currency would have flowed from that policy, and that might have helped to sustain the recovery”. One euro is currently valued at 1.37 US dollars or 0.86 British pounds.

Instead, Eichengreen favours “stimulus now, austerity later”.

“It is hard to imagine how a clear-eyed observer of current circumstances could see a different answer. I guess the implication is that too many policymakers have failing vision.”

Towards a ‘tripolar’ international financial system

In the medium term, however, Eichengreen was optimistic about the euro’s role in a “tripolar” international financial system also founded on the dollar and the yuan.

“With the US accounting for only 20% of the world economy, it is no longer obvious that the dollar should be involved in 85% of all foreign exchange transactions or account for more than 60% of foreign exchange reserves,” he argued.

Last May, the World Bank published a report predicting that a financial system based on the dollar, euro and yuan would exist by 2025.

Eichengreen also claimed there was less of a need for a single dominant international currency due to technological changes, saying “the costs of comparing prices in different currencies has come down courtesy of smartphones and the Internet. The costs of changing money have come down courtesy of the same electronic platforms”.

“Where two decades ago, technology left room for only one dominant international currency, today’s technologies make it easy for multiple international currencies to coexist,” he added.

He argued that since 1945 the dollar’s position had eased business for internationally-oriented US banks and firms, as well as allowing the US government to borrow more cheaply.

“The US can run modestly larger currently account deficits than otherwise, and American consumers correspondingly enjoy modestly higher living standards. I add all this up, and I conclude that US living standards are 1-2% higher than they would be otherwise,” he said.

However, Eichengreen warned that the failings of European policymakers were stalling the euro’s rise, arguing that their inability to “resolve the crisis and the questions now being asked about the future of the euro certainly limit its attractions as an international currency”.

“The incoherence of the European policy response is the main thing working in favour of the dollar’s continued international role,” he said.

Asked why Europeans were facing such difficulties today, the professor suggested further study would be needed. “Answering that question would require a book. And no doubt there will be books,” he said.

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