Archives for August 2014

Reuters / Olivia Harris

The British government will press other European nations at a meeting in Brussels on Saturday to block Russia from using the SWIFT banking network, Bloomberg reported, in what could be a dramatic expansion of sanctions.

However, according to
Itar-Tass sources within the British government, the EU leaders
are not planning to discuss banning Russia from using the SWIFT,
while the British Prime Minister’s office refused to comment on
the issue.

The Society for Worldwide Interbank Financial Telecommunication,
or SWIFT, is currently one of Russia’s main connections to the
international banking system.

Brussels-based SWIFT has to comply with EU decisions because it
is incorporated under Belgium law.

The UK will put forward the proposal to bar Russia from using
SWIFT at a meeting in Brussels Saturday, according to a
government source, Bloomberg reports.

European leaders are due to meet to try and come up with a united
response after NATO said Russian soldiers and military equipment
crossed into Ukraine.

The UK reportedly wants the EU to bring sanctions into line with
the stricter measures imposed on Russia by the US.

But analysts fear that this could mark a serious escalation in
the sanctions war between the West and Russia.

“Blocking Russia from the SWIFT system would be a very
serious escalation in sanctions against Russia and would most
certainly result in equally tough retaliatory actions by
Russia,” said Chris Weafer, senior partner at Moscow-based
consulting firm Macro Advisory, Bloomberg reported. “An
exclusion from SWIFT would not block major trade deals but would
cause problems in cross-border banking and that would disrupt
trade flows.”

The SWIFT system transmitted more than 21 million financial
messages a day last month between more than 10,500 financial
institutions and corporations in 215 countries.

Blocking Russia from using SWIFT would be disruptive in the short
term, and in the longer term it may create more serious problems.

“There’s no doubt that in the short term restricting Russian
usage of SWIFT would be extremely disruptive to Russian financial
and commercial activities,” said Richard Reid, a research
fellow for finance and regulation at the University of Dundee in
Scotland. “However, it may carry a longer-term downside,
namely the likelihood that large chunks of Russian international
payments flows would move to much less well monitored and
measured financial channels and thus be beyond sanctions at any
future point.”

The EU blocked Iran from using SWIFT in nuclear-related sanctions
imposed on Tehran in March 2012.

The tit-for-tat sanctions between Moscow and Europe currently
include an EU ban on doing business with certain players in
Russia’s financial sector, including all majority Russian-owned
banks, trade restrictions on some Russian energy and defense
firms, and asset freezes and travel bans on certain individuals.

In response, Russia has banned most agricultural products from
all 28 member EU countries.

Article source: http://rt.com/business/183780-uk-eu-swift-ban/

EU Energy Commissioner Guenther Oettinger (R) attends a meeting with Russia’s Energy Minister Alexander Novak (L) on August 29, 2014 in Moscow. (AFP Photo / Kirill Kudryavtsev)

Russian-EU gas talks have progressed, but no solution was reached Friday over Russia and Ukraine’s gas standoff. Moscow says their $100 gas discount to Kiev stands, and the EU doesn’t want gas negotiations to be used to escalate the Ukraine crisis.

The gas situation is
‘critical’ Russia’s Energy Minister Aleksandr Novak said after
meeting with EU energy chief Gunther Oettinger in Moscow on
Friday. The minister expressed concern about Ukraine’s
preparations for the winter months as gas supplies dwindle, and
warned Kiev might siphon off Europe-bound deliveries.

Russia said the will resume gas deliveries to Ukraine if they pay
$1.45 billion of their gas debt, Aleksey Miller, CEO of Gazprom,
said. Naftogaz, Ukraine’s national oil and gas company, has a
total debt of $5.3 billion.

Russia again offered
Kiev a $100 gas price discount, bringing the total price down to
$385 per 1,000 cubic meters, a lower price it charges any of its
European customers. However, before Gazprom can offer the
discount, Kiev has to begin repaying their debt.

In June, Gazprom switched
Ukraine to a prepayment system after Kiev refused to pay its
billion dollar debt
or agree to price negotiations. Russian gas still flows through
Ukraine to Europe, but Kiev cannot take any gas they don’t pay
for up front.

In previous gas
disputes, Russia has accused Ukraine of stealing gas.

Ukraine will likely run out of natural gas supplies before
winter, as the country only has about 15 billion cubic meters in
storage. Already, the government had to order a 30 percent cut in
gas consumption to save up.

If Ukraine cuts off Russian gas transit, it would hit Europe,
which sources 15 percent of its energy from Russia. Gazprom is
working on strategies to deliver gas without Ukraine. Nord
Stream, a set of twin pipelines that run under the Baltic Sea,
began sending Russian gas directly to Germany in 2011. The pipe
has a 55 billion cubic meter capacity.

Russia is also planning on completing a similar project for
southern Europe, called South Stream.

The country is Europe’s main energy source, supplying 30 percent
of its natural gas. The
most important transit pipeline between Russia and Europe is the
4,451 km ‘Brotherhood’ pipeline which stretches across Ukraine
into Slovakia, and in 2013 delivered more than 50 billion cubic
meters to Europe.

In the winters of 2006 and 2009, similar gas rows between Moscow
and Kiev led Russia to cut off gas to Ukraine.

Ukraine imports nearly 50 percent of its gas from Russia, which
in 2013 amounted to 27.7 billion cubic meters.

Earlier this week Ukraine’s Prime Minister Arseniy Yatsenyuk
claimed that Russia has a master plan to stop gas traveling
through Ukraine to Europe in the winter months, which Novak later
refuted as “groundless.”

Both countries plan on taking separate cases to the Stockholm
arbitration court. Gazprom wants to recover its $5.3 billion in
debt and Ukraine is seeking a $6 billion sum for ‘unfair’ gas
prices and asking the court to review prices that were agreed on
in 2010 under then-Prime Minister Yulia Tymoshenko.

Article source: http://rt.com/business/183596-ukraine-gas-novak-oettinger/

AFP Photo / Andy Buchanan

More than 200 business people have lent their support to the “Yes Scotland” campaign in an open letter published in The Herald Scotland newspaper, just one day after 130 slammed the idea of secession from the UK.

The heads of 200 companies representing about 10 percent of
Scotland’s workforce have backed Scottish independence over
staying with the UK. Similar to the pro-unity bloc’s letter on
Wednesday, all the bosses signed on an individual basis, not as
representatives of their companies.

“We are involved in business and entrepreneurship at
different levels in Scotland and around the world. We believe
independence is in the best interests of Scotland’s economy and
its people,” the letter reads.

Wealth and entrepreneurship will blossom in Scotland once power
and resources are centralized in Edinburgh and not London, the
pro-independence business leaders wrote, hoping to tip the
balance of economic power.

“It will encourage a culture in which innovation, endeavor
and enterprise are nurtured. It will place power in the hands of
Scotland’s people to channel the huge resources of our country in
the interests of those who live and work here,” the letter
states.

“The London-centricity of Britain’s economy is
unsustainable,” wrote Professor Nathu Puri, founder of
Purico, a UK-based industrial manufacturing company with
strong ties to India.

“We must re-industrialize the nations and regions outside of
the South East of England,” Puri said.

In total, the ‘Yes’ campaign says that over 2,500 businesspeople
have joined the pro-independence Business for Scotland
organization, with membership coming from large corporations to
smaller, family-owned businesses.

Tony Banks, the chairman of the group, calls the demographic the
“lifeblood” of Scotland’s economy.

“More and more business people are moving to ‘Yes’ after
looking at the facts and figures. Our members know Scotland’s
balance sheet is relatively stronger than the UK’s but we have
the potential to be stronger. We know Scotland will thrive as an
independent country, because key economic decisions will be made
by those who truly understand and care most about our Scotland’s
distinctive economic needs, that’s the people who live and work
here,” Banks said.

UK Prime Minister David Cameron expected to give a speech later
on Thursday which will focus on the connectedness of the Scottish
economy to England, Wales, and Northern Ireland. Cameron will say
that in some industries, Scottish companies source 90 percent of
their customers from the UK. According to Cameron, trade between
the UK and Scotland supports 1 million Scottish jobs, or about 20
percent of the population.

Leading signatories are Sir Brian Souter, chairman of Stagecoach,
an Australian-based transport giant, Jim McColl, chairman and CEO
of Clyde Blowers, a £1 billion engineering group, and Ralph
Topping, former CEO of gambling site William Hill.

On Wednesday, about 130 pro-UK business leaders signed an open letter stating their case to
keep Scotland a part of the Union, and not seek independence.

The letter argued that Scotland’s business success is directly
correlated to its integration with the UK economy, which is more
than 10 times bigger than the Scottish economy of $250 billion.

The letter argued that Scotland’s recent success, record growth
in investment and high employment are both connected to
integration with the UK, and that separation would put progress
at risk.

Article source: http://rt.com/business/183304-200-business-leaders-scotland-independence/

AFP Photo/Andy Buchanan

​More than 100 business leaders have voiced their skepticism over Scottish independence, arguing a clear case has yet to be made. The heads of UK’s largest businesses said the outcome of the September 18 referendum will affect generations to come.

In an open letter in the Scotsman newspaper 132 businessmen argue that
Scotland, which has a $250 billion economy and a population of
just over 5 million, is better off sticking with Britain’s $2.5
trillion economy and 63 million people.

“Uncertainty surrounds a number of vital issues including
currency, regulation, tax, pensions, EU membership and support
for our exports around the world – and uncertainty are bad for
business,” the letter, signed by a sizable number of
Scottish company heads, says.

The letter argues that Scotland’s recent success; record growth
in investment and high employment are both connected to
integration with the UK, and that separation would put progress
at risk.

“The United Kingdom gives business the strong platform we must
have to invest in jobs and industry. By all continuing to work
together, we can keep Scotland flourishing,” the business leaders
wrote.

The open letter was organized by Keith Cochrane the chief
executive of the Glasgow-based engineering firm Weir Group, who
joins a growing coterie of businesspeople publicly speaking out
on the issue, but in a personal capacity.

“Our conclusion is that the business case for independence
has not been made.”

On September 18 Scotland will vote “yes” or “no” to ending its
more than 300 year union with England.

A second televised debate was held on Monday between First
Minister of Scotland and leader of the Yes Scotland campaign Alex
Salmond and Alistair Darling who leads the Better Together
campaign.

Banks weigh in

The chairman of HSBC Holdings plc – the world’s second largest
bank – Scottish-born Douglas Flint, recently wrote a column in
the Daily Telegraph warning of the financial
dangers of Scotland’s independence

Flint warned of massive capital flight that could ensue after
Scotland is forced to leave sterling, which Flint describes as an
“anchor of financial stability.” HSBC is a British multinational
bank headquartered in London.

However, former Royal Bank of Scotland (RBS) chief Sir George
Mathewson said that independence is an “opportunity not a threat”
to business, and that most “Scottish” banks already have stronger
ties to London.

“Banks such as RBS and Lloyds Banking Group have strong Scottish
connections but they can scarcely be described as Scottish banks.
In reality they are run from London, and that is where they are
regulated. The customers, assets and ownership are global, even
if the holding company happens to be registered in Edinburgh,”
Mathewson wrote in a Financial Times op-ed.

In 2008, the British government bailed out RBS, as well as HBOS –
a direct subsidiary of Lloyds Banking Group – Scotland’s two
largest banks.

Mathewson estimates that the UK government already owns 80
percent of RBS after the bailout. Unconfirmed reports from
bankers at RBS have said it will switch headquarters to London in
the case of a “yes” vote.

If the referendum goes through, an independent Scotland would be
expected to settle its share of government debt and make any
necessary reimbursements, both decisions which would have to be
made by the new Edinburgh government.

Together- Lloyds Banking Group, Royal Bank of Scotland (RBS),
HSBC and Barclays – dominate the UK’s annual £10bn banking
sector.

RBS was founded in Edinburgh in 1727, and before the 2008 crisis,
was one of the largest banks in the world.

Whose oil is it?

CEOs from the UKs top oil companies, Anglo-Dutch multinational
Royal Dutch Shell and London-based BP, have both spoken out
against Scottish independence.

Scotland has claimed the nation of 5 million will benefit from
reclaiming North Sea oil and gas reserves, which Alex Salmond has
said would be worth £300,000 for every Scottish resident.

Ben van Beurden, the CEO of Royal Dutch Shell said he prefers Scotland remain part of the
United Kingdom due to the risk and uncertainty it would present
to the energy industry.

BP CEO Bob Dudley warned his company would face higher costs amid
currency uncertainty if the referendum were to pass.

The North Sea oil shelf lies under Scottish waters but is mostly
extracted and operated by UK companies. If Scotland were to gain
independence, Scottish oil and gas groups Cairn Energy, Dana
Petroleum, Britoil, and Wood Group might have a chance to
develop. The lucrative oil and gas industry is estimated to be
worth over £200 billion.

Article source: http://rt.com/business/183056-business-open-letter-scotland-independence/

Russia’s President Vladimir Putin (L) and Ukraine’s President Petro Poroshenko (R) shake hands during a summit in Belarus’ capital of Minsk on August 26, 2014 (AFP Photo / Sergey Bondarenko)

​Leaders of Russia and Ukraine have decided to resume talks on energy issues between the two countries in September, as fears of gas delivery disruptions and Kiev’s unwillingness to settle disputes and pay bills threaten Europe’s energy security.

Following an intense
round of direct talks between President Vladimir Putin and his
Ukrainian counterpart Petro Poroshenko, the head of the Russian
state said that both leaders were able to reach an agreement on
the resumption of consultations on energy and gas.

Yet Putin said, there are “a lot of concrete questions,”
stressing that while Russia fully complies with all the
conditions of the gas contracts with Ukraine, the actions of
Naftogaz create risks for gas transit to Europe.

In June, Russia’s national gas company Gazprom stopped gas
deliveries to Ukraine over chronic late payment and an unpaid
bill of over $5 billion.

“We believe, just as President Poroshenko, too, that it is
essential to resume our dialogue on energy, including gas-related
problems,” Putin said. The gas supply issue is currently
“in a deadlock,” the Russian leader said, “but all
the same it is necessary to discuss it.”

“It has been agreed that the Contact Group must resume its
work as soon as possible,” Putin said, adding the EU is also
interested in the discussions.

Meanwhile, the EU’s Commissioner on Energy, Guenther Oettinger
emphasized the need of “reaching an intermediate agreement on
gas,” without awaiting the verdict from the Stockholm
arbitration court. In June, after Gazprom switched Naftogaz to a
prepayment plan, both companies have filed lawsuits against each
other at the Stockholm Arbitration Court.

However for now, Oettinger stressed, the EU is not worried about
potential problems with gas deliveries to Europe via Ukraine.
“There is no actual concern,” he said on the sidelines
of the Customs Union-Ukraine-EU meeting in the Belarusian
capital.

Ukrainian Energy Minister Yuriy Prodan, however, claims the
reliability of Russian gas supplies to Europe depends solely on
Gazprom, as Ukraine has no transit contracts with European
states.

“At the moment, Gazprom is the only one who is responsible
for the gas transit. Who signed contracts with European
companies? Gazprom did. The Ukrainian gas transit operator has no
contract with Europeans at present,” he said.

Russian Energy Minister Aleksandr Novak said that Moscow is not
planning to discuss amendments to terms of the transit agreement
after the three-party talks resume.

“We have not discussed this today. … But our position is as
follows: the transit contract is in force until 2019 and it
cannot be reviewed at least till that time,” the energy
minister said, noting that Russia does not consider the
possibility of the EU purchasing its gas at the Russian-Ukrainian
border.

The next round of talks on the gas issue will be held in
September, President Poroshenko announced. “It is agreed that
on September 6 the next consultations on energy issues with the
participation of the European Commissioner Oettinger and Minister
of Fuel and Energy of Russia and Ukraine will be held.”

Ukraine imports nearly 50 percent of its gas from Russia, which
in 2013 amounted to 27.7 billion cubic meters. If Ukraine cut off
Russian gas transit, it would hit Europe, which sources 15
percent of its energy from Russia.

For more watch Irina Galushko’s report:

Video:
/files/news/2c/ae/00/00/english_international_2014-08-27_15_00_44_480p.mp4

Article source: http://rt.com/business/183008-gas-negotiations-putin-poroshenko/

Russia’s President Vladimir Putin.(RIA Novosti / Alexey Druzhinin)

Switching over to EU trade standards and nixing duty-free trade with Russia will cost Ukraine €165 billion over the next 10 years, President Putin warned at a meeting with President Petro Poroshenko in Minsk on Tuesday.

Russia will be forced to cancel all preferential trade agreements
for Ukraine’s imports and switch to a standard regime when it
ratifies its EU trade association agreement in September, the
President said.

“In full accordance with the terms of agreement with the CIS
free trade zone and WTO standards, we will be forced to cancel
preferential imports from Ukraine,” Putin said.

Russia will cancel
its duty-free relationship with Ukraine, which will lead to
import tariffs of up to 8 percent affecting 98 percent of
commodities.

Russia insists it needs to protect domestic markets from the
flood of European goods on the Ukrainian market, which will in
turn make Ukrainian goods less competitive. If the trade corridor
of Ukraine is left wide open, Russian, Belarusian, and Kazakh
products are at risk.

In response, Ukrainian President Petro Poroshenko said that he
would like to establish a monitoring group to assess the actual
damage of Ukraine’s association with the EU.

“Today we can agree to set up a monitoring group that will
assess real and not hypothetical potential damage,” said
Poroshenko. “After this damage is calculated we can put in
protection mechanisms.”

Moscow has warned Kiev that signing the Association Agreement
(AA) with the EU would be economic suicide, and Moscow is also poised
to suffer a €2 billion blow, according to Putin.

“Entire sectors of industry and agriculture business will be
hugely impacted, and there will be negative implications on the
pace of economic growth and employment,” the Russian
President said.

Losses will not only be absorbed by Russia, but also by Customs
Union members Belarus and Kazakhstan, he added.

The Minsk talks are the first meeting between Putin and
Poroshenko since early June when the two informally met
on the sidelines of the World War II commemoration ceremony in
Normandy.

Controversy over Association Agreement

The AA sits at the heart of the Ukrainian conflict, as people
first began protesting in Maidan Square in Kiev after the
then–President Viktor Yanukovich decided against signing the
deal.

However, in June the new Kiev government signed the economic part of the Association
Agreement, about a month after Russia, Belarus, and Kazakhstan
sealed their Eurasian Economic Union on May
29 in Minsk. President Poroshenko said the EU association
document will be ratified in September.

Ukraine has strong economic ties with both the EU and Russia,
which is why it wants to forge trade relations with both the
European Union and the Russian-led Eurasian Union. It is Europe’s
second largest country by landmass, has a $176 billion economy,
and a population of 45 million.

The perceived threat is that EU goods will illegally make their
way to Russia via Ukraine. Russia has an agreement with Belarus
to deter such smuggling, but not with Ukraine.

“Even within the Customs Union, EU goods banned from entering
the Russian Federation are now being delivered to us, in this
case, unfortunately through Belarus,” Putin said.

“We are looking at the country of origin – Belarus. A sticker
torn away saying Poland.”

Russia-Ukraine economic standoff

Russia suspended alcohol imports from Ukraine
shortly after it imposed the import ban on agricultural
products from the EU, US, Canada, Norway, and Australia.

Ukraine’s Parliament has also moved closer towards sanctions,
adopting a law that would allow sanctions
against Russia, and most importantly, halt Russian energy imports
through Ukraine.

Energy is a large wedge between Moscow-Kiev relations. In June,
Gazprom Russia’s national gas company said it was stopping deliveries to Ukraine
after chronic late payment and an unpaid bill of over $5 billion . Ukraine imports nearly 50 percent
of its gas from Russia, which in 2013 amounted to 27.7 billion
cubic meters. If Ukraine cut off Russian gas transit, it would
hit Europe, which sources 15 percent of its energy from Russia.

Article source: http://rt.com/business/182868-russia-ukraine-europe-trade/

Russia’s President Vladimir Putin.(RIA Novosti / Alexey Druzhinin)

Switching over to EU trade standards and nixing duty-free trade with Russia will cost Ukraine €165 billion over the next 10 years, President Putin warned at a meeting with President Petro Poroshenko in Minsk on Tuesday.

Russia will be forced to cancel all preferential trade agreements
for Ukraine’s imports and switch to a standard regime when it
ratifies its EU trade association agreement in September, the
President said.

“In full accordance with the terms of agreement with the CIS
free trade zone and WTO standards, we will be forced to cancel
preferential imports from Ukraine,” Putin said.

In response, Ukrainian President Petro Poroshenko said that he
would like to establish a monitoring group to assess the actual
damage of Ukraine’s association with the EU.

“Today we can agree to set up a monitoring group that will
assess real and not hypothetical potential damage,” said
Poroshenko. “After this damage is calculated we can put in
protection mechanisms.”

Moscow has warned Kiev that signing the Association Agreement
(AA) with the EU would be economic suicide, and Moscow is also poised
to suffer a €2 billion blow, according to Putin.

“Entire sectors of industry and agriculture business will be
hugely impacted, and there will be negative implications on the
pace of economic growth and employment,” the Russian
President said.

Losses will not only be absorbed by Russia, but also by Customs
Union members Belarus and Kazakhstan, he added.

The Minsk talks are the first meeting between Putin and
Poroshenko since early June when the two informally met
on the sidelines of the World War II commemoration ceremony in
Normandy.

Controversy over Association Agreement

The AA sits at the heart of the Ukrainian conflict, as people
first began protesting in Maidan Square in Kiev after the
then–President Viktor Yanukovich decided against signing the
deal.

However, in June the new Kiev government signed the economic part of the Association
Agreement, about a month after Russia, Belarus, and Kazakhstan
sealed their Eurasian Economic Union on May
29 in Minsk. President Poroshenko said the EU association
document will be ratified in September.

Ukraine has strong economic ties with both the EU and Russia,
which is why it wants to forge trade relations with both the
European Union and the Russian-led Eurasian Union. It is Europe’s
second largest country by landmass, has a $176 billion economy,
and a population of 45 million.

The perceived threat is that EU goods will illegally make their
way to Russia via Belarus, as has already been attempted. Russia has an agreement with
Belarus to deter such smuggling, but not with Ukraine.

Russia-Ukraine economic standoff

Russia suspended alcohol imports from Ukraine
shortly after it imposed the import ban on agricultural
products from the EU, US, Canada, Norway, and Australia.

Ukraine’s Parliament has also moved closer towards sanctions,
adopting a law that would allow sanctions
against Russia, and most importantly, halt Russian energy imports
through Ukraine.

Energy is a large wedge between Moscow-Kiev relations. In June,
Gazprom Russia’s national gas company said it was stopping deliveries to Ukraine
after chronic late payment and an unpaid bill of over $5 billion . Ukraine imports nearly 50 percent
of its gas from Russia, which in 2013 amounted to 27.7 billion
cubic meters. If Ukraine cut off Russian gas transit, it would
hit Europe, which sources 15 percent of its energy from Russia.

Russia will cancel its duty-free relationship with
Ukraine, which will lead to higher import tariffs of up to 8
percent affecting 98 percent of commodities.

Russia insists it needs to protect domestic markets from the
flood of European goods on the Ukrainian market, which will in
turn make Ukrainian goods less competitive. If the trade corridor
of Ukraine is left wide open, Russian, Belarusian, and Kazakh
products are at risk. President Putin also warned of the illegal
re-export of European goods disguised as Ukrainian goods.

Article source: http://rt.com/business/182868-russia-ukraine-europe-trade/

Reuters / Konstantin Chernichkin

The Fitch ratings agency has downgraded Ukraine one step closer to default grade, as the Ukrainian currency the hryvnia hits a record low, and the economy balances on the brink of a collapse.

Fitch cut the long-term local currency Issuer
Default Rating (IDR) of Ukraine from B-,signifying a default
risk, to CCC, where default is a real possibility, and affirmed
its long-term foreign currency IDR at CCC, it said in a statement
on Friday.

The downgrade came amid deteriorating economic outlook due to the
ongoing military conflict in Ukraine.

“Although the government has recaptured territory from the
rebels, conflict may persist or intensify, delaying economic
revival and damaging productive assets,” says Fitch’s
statement.

The Ukrainian currency has lost 39 percent against the US dollar
this year, on Friday reaching an all-time low at 13.7 hryvnia to
the dollar. Last week the hryvnia lost 3.1 percent, while in
August the currency fell by 9.4 percent.

Exports to Russia,
Ukraine’s largest export market, and source of energy imports
plunged by 24 percent in the first half of 2014. Gas supplies
from Gazprom were cutin June in a payment dispute
threatening energy shortages.

Fitch forecasts the real GDP to shrink at least 6.5 percent by
the end of the year; a figure much worse than the agency expected
in February. The growth forecast for 2015 and 2016 is assumed to
be zero.

Among all the 104 countries that are rated by Fitch, only
Argentina which could not pay the interest on the debt and
declared a default the last month is lower than Ukraine.

The current year has been disastrous for the Ukrainian economy.

The government sought help from the International Monetary Fund
(IMF), which promised to provide a loan of $17 billion to stave off bankruptcy.

The first $3.2 billion tranche was provided in May, but
the decision to provide the second is still pending.

The second tranche of financial aid will promote the
stabilization of the hryvnia, Ukraine’s Prime Minister Arseniy
Yatsenyuk said on August 19.

The Washington-based lender said Ukraine qualifies for the $1.4
billion disbursement, which may be approved by August 29,
according to Yatsenyuk.

READ MORE: War in east Ukraine to leave economy
in ashes. Who will pay for recovery?

In February, another rating agency SP downgraded Ukraine’s
rating to CCC, meanwhile Moody’s Investors Service rating is at
Caa3 (poor quality and very high credit risk) which is two steps
above default.

Article source: http://rt.com/business/182592-ukraine-step-away-default/

AFP Photo / Daniel Roland

Business confidence in Germany, which has led the EU economic revival over the last year, declined for a fourth month in August, which further clouded prospects of a broader recovery across the EU.

Germany’s Ifo Business Climate Index in manufacturing, which
looks at the confidence of the country’s 7,000 firms, fell to
106.3 in August from 108 in July.

It’s the lowest figure since last July, marking the longest
successive monthly decline since 2012, the report said.

Monday’s figures come after frustrating economic data for the
second quarter. It showed Europe’s biggest economy contracted 0.2
percent during the period, after it grew 0.7 percent in the first
quarter. Much of the unexpected drop is attributed to the effects of the crisis in
Ukraine that has led to a tough ‘sanctions war.’ Even after the
disappointing second quarter, Germany believes it will achieve
1.8 percent growth this year. By contrast, the UK, which is not
part of the euro currency zone, showed its strongest quarterly
economic growth in 6 years, with 0.8 percent in the second quarter.

In July German businesses began to send clear signs they are
suffering from the political standoff with
Russia – one of its key economic partners.

German Chancellor Angela Merkel has confirmed that the growth of
the country’s economy has been hit by the crisis in Ukraine.

“There are, however, some uncertainties – I don’t want to
conceal that – the whole Ukraine-Russia situation shows that we
of course have a big interest in our international relations
being constructive again,” Merkel is cited by Reuters.

But the Chancellors stressed that she still thought the overall
annual growth rate of the economy would be “good, if nothing
dramatic happens.”

German sports retailer Adidas said it would speed up efforts to
close stores in the Russian and CIS markets in 2014 and 2015.
Carmaker Volkswagen, that’s also Europe’s biggest manufacturer,
said it sold eight percent fewer vehicles in Russia in the first
two quarters compared to last year.

Russia is Europe’s third-largest trading partner, in 2013 trade
between Germany and Russia was €76.5 billion.

Germany’s exports to Russia may go down by 25 per cent this year,
the union of leading associations representing German businesses
said in a statement.

“It is possible that by the end of the year our exports to
Russia will decline by 20-25 per cent. It will affect some 50,000
workplaces in Germany,” Eckhard Cordes, the chairman of
Germany’s Committee on Eastern European Economic Relations,
stressed.

The main reason for the Eurozone’s poor GDP growth are the
sanction imposed by the EU against Russia, Michael Mross, chief
editor of MMNews.de website, told RT.

“When you take, for example, the big German companies –
almost every big German company has close business ties with
Russia… Everybody is suffering more or less. In the end of the
day, this has not only psychological effect, but a business
effect,” he said.

Russia is a large market for not only Germany, but for all
European markets, which is why it is important to keep relations
functional.

“We have a enough problems here in the Eurozone. And this is
something we don’t need. And if you speak to business leaders
behind closed doors – they’re all against these sanctions,”
Mross added.

‘Stunningly destructive’ austerity policies

Many have voiced concerns over Germany’s push towards economic
austerity, a Spartan-spending effort to re-balance the eurozone.
In the spring, many of the so-called ‘Euro-skeptics’ won in the European parliamentary elections.

On Monday, the French government resigned just four months after it was formed
after the May elections.They quit after ministers attacked
President Francois Hollande’s plans for taxation and cuts, and
over a major disagreement with Germany’s austerity program.

France, which as long stood with Germany politically, decided to put an end to unpopular austerity
policies back in May.

Not only politicians doubt the direction over the 18-nation
currency union. Europe is still shaking off its seven year
recession, which has brought economic growth to a standstill and
unemployment to record levels. Recovery has been described by Nobel Prize winning economists
as both “stunningly destructive” and a “dismal
failure.”

Article source: http://rt.com/business/182672-german-business-confidence-low-august/

Data from earlier this month shows that
economies have broken down, and growth has come to a standstill.
The three largest economies- Germany, France, and Italy- all
failed to grow.

Nobel laureate and Princeton University economist Christopher
Sims warns that the euro countries hit worst by the crisis may be
looking for an exit from the failed currency experiment.

“If I were advising Greece, Portugal, and Spain, I would tell
them to prepare contingency plans to leave the euro,” the
2011 Nobel Prize winner said.

Economist and Professor at Columbia University Joseph Stiglitz
called the eurozone’s efforts to recover from the debt crisis a
“dismal failure” in an interview with Bloomberg TV on
the sidelines of a conference in Lindau, Germany

“Now we see the enormous price that Europe is paying,”
Stiglitz said, adding, “hopefully the reality of this failed
policy will strike.”

Stiglitz is especially critical of the European Central Bank’s
monetary policy which has done little to tackle deflation and
continues to dither on changing interest rates.

In June, the central bank
cut its main refinancing rate to 0.15 percent from 0.25
percent, and the deposit rate from zero to -.10 percent, the
first time the ECB has seen a negative rate and the first time a
major central bank has crossed the zero threshold.

Stiglitz also suggests the eurozone needs to speed up its
creation of its banking
union so debt can be borrowed on a mutual, and not
individual, basis.

As early as 2014, over 6,000 banks across the eurozone will be
united under the supervision of the Frankfurst-based European
Central Bank.

Inflation has dropped dangerously low to 0.4 percent sparking
fears about deflation, or falling prices. The European Central
Bank’s goal is to have 2 percent inflation. Unemployment in the
eurozone is down slightly, but at 11.5 percent still near the
record 12 percent figure from last year.

MIT Economics Professor Peter Diamond, who won the Nobel Prize in
2010 – warns that work may be more and more difficult to come by.

“It is a terrible outcome, and it is surprising how little
uproar there has been over policies that are so stunningly
destructive,” Diamond said.

The stagnation is attributed to the failed recovery from the
eurozone crisis, and is also in part affected by the local
Ukraine-Russia crisis.

Sanctions and trade wars between Russia and the EU could cut 2
percent off eurozone GDP in the next two years, according to
Gabriel Sterne at Oxford Economics.

Article source: http://rt.com/business/182112-eurozone-recovery-failure-nobel/