Archives for February 2015

Reuters / Alkis Konstantinidis

Athens and eurozone finance ministers have struck a deal to extend the Greek bailout by another four months with Greece given till Monday to present a list of reform measures they plan to take to ensure they comply with the conditions.

“It’s done! For four months,” one of the officials told AFP right after the meeting in Brussels came to an end. An hour later, the Eurogroup issued a statement confirming the deal.

“The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23,” the statement said.

“The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April.”

Eurogroup statement #greecepic.twitter.com/G1lrJlQt1M

— Emily Purser (@EmilyPurserSky) February 20, 2015

Athens has confirmed the implementation of structural reforms and its obligations to repay the existing debt, Europgroup representative Jeroen Dijsselbloem. A deal has also been reached to provide financial assistance to Greece, which will have access to the EU financial stability mechanisms during the program to recapitalize banks.

“The four-month period will be a time to rebuild new relations with Europe and the IMF,” Greek Finance Minister Yanis Varoufakis told reporters. “Greece has turned the page” and won some time to negotiate a better bailout deal, the official said, emphasizing that Greece had not used any threats or bluffs to reach an interim agreement with the Eurogroup.

READ MORE: ‘Dying out of poverty!’ Thousands gather for anti-austerity rally in Athens (VIDEO)

European officials told Reuters than the deal was reached during preparatory talks involving the Greek and German finance ministers, as well as the managing director of the IMF. After that, it was agreed on by all 19 members of the Eurogroup.

The EU creditors have insisted that any extension of loans should be accompanied by Greece’s commitment to a certain set of budget measures and reforms.

The newly-elected leftist government in Athens initially asked for a six-month loan extension to get more time to renegotiate its €316 billion debt.

The Friday’s agreement removes the immediate risk of Greece running out of money as early as March, which could’ve possibly resulted in the country’s exit from the eurozone. As part of the deal, Greece agreed to submit a list of economic reforms by Monday for the EU’s approval. Athens is expecting an answer by Tuesday.

Greece’s current bailout loan of €240 billion was agreed by the country’s previous government in back 2012. The harsh conditions of the bailout program, which include cuts in government spending, higher taxes are extremely unpopular in Greece.

Article source: http://rt.com/business/234227-greece-eurozone-bailout-agree/

Reuters/Yves Herman

The European Central Bank is preparing a contingency plan for Greece leaving the single currency zone. According to Germany’s Spiegel magazine it looks at ways to keep the rest of the eurozone untouched.

The magazine doesn’t provide any detail, other than saying that ECB is working on plans for Greece’s possible exit from the euro. On Friday, the Eurogroup is holding an extraordinary meeting in Brussels to agree on a loan extension for Greece.

A lack of progress in talks between the new leftist government in Greece, that promised to end austerity, and the troika of international creditors have increased worries that Athens could exit the eurozone and possibly cause a ‘domino effect’, with Portugal, Spain and Italy following suit.

READ MORE: Grexit: Win for both EU and Greece?

“The Greeks have acted like elephants in a China shop,” Guenther Oettinger, German EU Commissioner was cited as saying on Friday by the New York Times. “Now they slowly realize what the real numbers are. But they have already done quite a bit to sap the confidence of their European partners.”

On Thursday, Germany’s Finance Ministry rejected Greece’s request for an extension to its expiring bailout agreement. Greece’s Syriza government asked for a six-month loan extension for more time to renegotiate its €316 billion debt.

At a meeting of eurozone officials on Thursday, German Finance Minister Wolfgang Schauble called the Greek proposal a “Trojan horse, intending to get bridge financing, and in substance putting an end to the current program,” the New York Times reports.

Greece’s economic woes in charts http://t.co/720Wnrmkfd pic.twitter.com/7XQKtQShoZ

— The Economist (@TheEconomist) February 20, 2015

Greece’s current bailout loan was agreed by the previous Greek government in 2012, totals €240 billion. The conditions of the bailout program, which include cuts in government spending, higher taxes are extremely unpopular in Greece.

If the EU and Greece fail to reach an agreement Friday, according to a European Union official talking to Bloomberg, this would mean another round of talks on Sunday or Monday.

Article source: http://rt.com/business/234127-ecb-greece-eurozone-bailout/

Hungarian Prime Minister Viktor Orbanю (Reuters/Kacper Pempel)

Efficient cooperation between the EU and Russia will define the future of Europe. That’s why the EU shouldn’t waste any opportunity to unite with Russia in pursuance of a “prosperous future,” said Hungarian Prime Minister Victor Orban.

Hungary backs Russia’s initiative of economic cooperation and free trade between the EU and the Eurasian Economic Union; Orban said in an interview to Kommersant published Friday, adding that in his view Europe cannot be competitive without Russia.

“We have to find a mutual interest in each other’s economies,” he said. “We have to create the overall ‘tissue’ between Russia and the European Union, which will hold us on the way to peace.”

Talking about the geopolitical tension between the West and Russia, he said that giving up an opportunity of peaceful cooperation would be a grave mistake.

READ MORE: Ukraine peace deal: Ceasefire starting February 15, removal of heavy weapons

“I do not want to live in a Europe that leads to a new Cold War with Russia, which makes Europeans enemies of Russia, which wastes a fantastic opportunity to unite Russian energy and the tremendous economic opportunities with European technological knowledge and culture,” Orban said. “If we link these two things, we will have a bright fantastic future in front of us.”

READ MORE: EU sanctions like ‘shooting oneself in the foot’ – Hungary PM

Hungary has suffered from both the EU sanctions and the reciprocal steps taken by Russia, he said, adding that the trade war mostly hurts Hungarian agricultural and investment sectors. Orban explains the reason for an outflow of Russian investment by the fact that Russia isn’t willing to fund a country that joined Western sanctions.

Russia is Hungary’s largest trading partner outside of the EU, with exports worth $3.4 billion in 2013. Russia supplies 80 percent of the oil products and 70 percent of the natural gas consumed by Hungary.

Stepping towards progress requires generosity, but it is a rare thing in Europe, Orban said, adding that EU countries should unite, but at the same time each of them should have its own vision on economic development.

“We told the International Monetary Fund not to meddle. We said: ‘Your plan doesn’t suit us. We will solve our problems ourselves.’ And yet we’ve solved them! Hungary’s economy is now one of the most successful in Europe,” he said.

Talking about South Stream, Orban said the projects’ cancellation turned out to be a great loss for the Hungarian economy, as the initial plan envisaged that gas transit went through the territories of Greece, Macedonia, Serbia and Hungary.

Russia suspended South Stream in December 2014 over the EU’s unwillingness to support the pipeline. Instead, Gazprom will build an alternative 63 billion pipeline to the Greek border via Turkey.

READ MORE: Gazprom to build new 63 bcm Black Sea pipeline to Turkey instead of South Stream

Article source: http://rt.com/business/234111-hungary-russia-eu-cooperation/

Reuters/Jason Reed

The Visa international payment system, which has the biggest share of the Russian market, will process domestic payments through Russia’s newly created National Payment System.

“On 18 February 2015, JSC NPCS and VISA Payment System LLC concluded a bilateral agreement on operating and clearing services on domestic VISA payment system card transactions to be provided by the NPCS [National Payment Card System – Ed.] processing center,” the Central Bank of Russia (CBR) said Thursday.

The transfer of Russian domestic transaction processing to NPCS will be implemented in stages, and should be complete by March 31, 2015.

Russia stepped up its effort to become more financially independent after both Visa and MasterCard, which together have more than 90 percent of the market, disrupted operations in Russia. MasterCard and Visa suspended service to Russian banks in Crimea as part of US sanctions over the Ukrainian crisis.

READ MORE: Sanctioned: Visa, MasterCard suspend servicing Russian banks in Crimea

In January MasterCard signed a similar agreement along with five Russian banks, including Gazprombank and Bank Rossiya, and started to carry out card transactions via the NPCS processing centre and settling through the Bank of Russia.

READ MORE: Domestic MasterCard: 5 Russian banks begin new National Payment System

Processing localized transactions is one of the principal terms for Visa and MasterCard to become nationally important payment systems in Russia. Such a status relieves Visa and MasterCard from paying a security fee to the Central Bank, which would have cost the two payment systems $3 billion, according to estimates by Morgan Stanley.

In December the Central Bank announced a move to an alternative international payment clearing system to the SWIFT global system of interbank payments, as relations worsened with the West. Russia feared the West might cut it off from the SWIFT system as part of sanctions.

However, SWIFT said it wouldn’t bend to EU pressure and close services in Russia.

READ MORE: SWIFT: ‘No authority’ to suspend Russia, Israel from intl payments over sanctions

Article source: http://rt.com/business/234003-visa-russia-payment-system/

Reuters / Toru Hanai

Finally some good news for Japan. The Nikkei Stock Average hit its highest level since 2000 on the back of a 17 percent boost in exports in January. Exports soared on the weak yen, which lost more than 14 percent against the dollar this past year.

The Nikkei reached a peak of 18,322.50, the highest since May 2000, during the intraday session on Thursday after Japan’s Ministry of Finance announced exports had increased 17 percent year-on-year in January, a 5th consecutive monthly increase. Outbound trade was boosted by shipments of cars to the US and electronics across Asia, according to the customs data.

Abenomics at work? Japan’s benchmark #Nikkei index closed at its highest level since May 2000. pic.twitter.com/vfRlIIknXE

— James Flynn (@JamesAFlynn) February 19, 2015

Most of Japan’s brandname companies- like Toyota Motorcorp, Honda, Mitsubishi, Nissan, Hitachi, and Panosonic are all components of the Nikkei 225.

As some social media users reminded, the feat was impressive, but nothing compared to the record high levels of the ‘boom’ era in the late 1980s, when the Nikkei was nearly twice its current value.

Yes, Japan’s #Nikkei is at a 15 year high but it’s still 53% below its 1989 record… pic.twitter.com/Xv2R0yQDkl

— Mark Barton (@markbartontv) February 19, 2015

The world’s third-largest economy has been plagued by slow growth, which the government has combated with a very loose monetary policy, which has sent the yen to record lows against the dollar and other hard currencies.

“Yen depreciation has really made Japanese products more competitive, particularly within Asia, where exports are often transacted in yen,” Tomo Kinoshita, chief Japan economist at Nomura, told CNBC.

The country is export dependent, so boosting output will help stave a recession.

READ MORE: Japan escapes recession, growth weaker than forecast

In 2013, the currency lost 20 percent of its value against the dollar, igniting the so-called ‘currency wars’ of countries devaluing currencies to gain an edge on exports.

The Bank of Japan launched a trillion dollar US-style quantitative easing program in April 2013 to help get markets and investing back on track, but now faces deflation, with inflation a full one percent below the Central Bank’s two percent goal.

Article source: http://rt.com/business/233811-japan-stocks-15-year-high/

Reuters / Beawiharta

Coca-Cola Hellenic (HBC), the second biggest bottler of Coca-Cola products, has announced an 11.4 percent drop in fourth quarter profit, warning of further severe market decline in its biggest market Russia.

Although Wednesday’s earnings report praised the “good performance” in Russia, as well as Nigeria, Poland, Austria, and Greece, the company’s boss is unsure about the year to come

“The market will decline, and we are working to hold the decline [in Russia and Ukraine] to mid-single digits,” Dimitris Lois, CEO of the Swiss-based bottler said, as quoted by the Financial Times.

Sluggish demand coupled with political turmoil in Ukraine has killed sales in Russia. The Swiss-based company missed profit expectations largely due to the depreciating ruble, which lost more than 45 percent against the dollar in 2014. The company recorded a currency hit of more than $150 million for 2014, led by the weak ruble and euro. However, low oil prices make up for much of the currency loss.

Overall, Lois said 2014 had been “difficult.” Last week, Coca-Cola HBC announced a $40 million loss in Russia in 2014.

Russia’s economy is forecast to decline between 2.5 and 5 percent in 2015, according to estimates by the Russian Central Bank

In March 2014, Coca Cola announced it was closing down a third of its juice production in Russia by shutting down two of its total four plants because of weak demand. One of the plants is in the Moscow region, and the other in Siberia.

At the end of January, the world’s fourth largest brewer Carlsberg shut down 2 of its 10 breweries in Russia citing similar difficulties as Coca-Cola. Carlsberg entered the Russian market in 2008 and owns the country’s best-selling Baltika brand.

Dutch beer maker Heineken saw sales fall by double digits in 2014 as beer became more expensive due to the economic slowdown as well as increased taxes on alcohol.

The Russian market aside, Coca-Cola HBC is experiencing problems across the board, as weak demand continues to shrink the beverage giant. The company experienced weakness in the first nine months especially in Italy and Switzerland.
Good news came from Greece, where sales were up two percent from the previous year, the first time in the last six years.

However, the company may face more problems should Athens and Brussels not successfully re-negotiate the country’s debt package.

Article source: http://rt.com/business/233739-coca-cola-russia-loss/

Reuters / Yannis Behrakis

Germany rejected Greece’s 6-month bailout extension request, according to German Finance Ministry spokesman. The two sides have until Friday to agree on a deal, otherwise, Greece runs out of money.

German Finance Ministry spokesman Martin Jaeger told Bloomberg News in an emailed statement that the terms proposed by Greece do not meet the earlier agreed conditions of providing financial aid.

However, the European Commission sees the request as a good omen showing the Greek government’s willingness to reach a compromise on stabilizing the economic situation in the eurozone.

“President Juncker sees this letter as a positive sign, which, in his assessment, could pave the way for a reasonable compromise in the interest of the financial stability in the euro area as a whole,” Commission spokesman Margaritis Schinas told a news briefing.

“The detailed assessment of the letter and the response is now up to the Eurogroup,” he said, referring to the meeting of eurozone finance ministers in Brussels on Friday.

Athens’ request for an extension to the so-called “Master Financial Assistance Facility Agreement” has been confirmed Thursday by the head of the Eurogroup Jeroen Dijsselbloem.

Received Greek request for six months extension.

— Jeroen Dijsselbloem (@J_Dijsselbloem) February 19, 2015

The newly elected Greek government envisages extending the current agreement from the end of February to August. Thus, Greece will be able to buy its bonds from the ECB during this transitional period before signing a new agreement that Athens insists should be different from the existing one. Greece has maintained it shouldn’t follow the austerity policy, however key EU economy Germany insists it needs to stick to its obligations.

READ MORE: Grexit: Win for both EU and Greece?

The request boosted optimism that Greece might reach a deal with its international creditors, but so far it remains unclear if the Athens plan is acceptable to the EU, as it has so far resisted any change to the current plan which is due to expire at the end of February.

The Greek government is optimistic about reaching a compromise with the troika of creditors with Finance Minister Yanis Varoufakis saying that even the eurozone’s driving force Germany cannot make Greece give up its attempts.

“We are on the right path, I am optimistic it will end well tomorrow or the next day,” Varoufakis told reporters on Wednesday.

“Our proposition will be written in such a way that it will cover both the demands of the Greek side and the head of the Eurogroup,” he said.

Article source: http://rt.com/business/233691-greece-eurozone-debt-extension/

READ MORE: 10 dramatic videos from Ukraine’s Maidan riots in 2014

READ MORE: IMF aid package pushes Ukraine gas prices up 280%

The amendments are part of an austerity strategy that Kiev adopted to secure IMF loans. The international creditor announced a new $17.5 billion lifeline for Ukraine which raises the total bailout to $40 billion. Yatsenyuk hailed the austerity-for-loans deal as a major victory for his cabinet.

Amid the economic problems Ukraine announced a six-fold increase in military spending, which would reach an all-time record in 2015. Kiev says the money would be spent to reform its army to fight “Russian intervention” in Eastern Ukraine. The Ukrainian government says the rebels in Donetsk and Lugansk regions, who rejected the coup-imposed government in Kiev, are Russian proxies fighting with Russian arms alongside Russian regular troops. Moscow denies the allegations.

So far the military crackdown in Eastern Ukraine devastated the industrial hub, with Kiev estimating that half of the Donetsk and Lugansk mines and factories had been destroyed. The regions also saw massive decrease in the workforce, with people either fleeing the violence or joining the militias.

Kiev’s other economic measures which appear to be motivated by the ideologies of its current regime rather than economic considerations include severing trade ties with Russia, a failed attempt to replace coal mined in the breakaway areas with that imported from South Africa, a continued conflict with Russia over transit of natural gas to Europe which forced Moscow to announce a total end of the transit in three years.

European countries stated their reluctance to offer Ukrainians visa-free entrance, not to mention EU membership. Meanwhile in Ukraine journalists are being charged with treason for publicly rejecting the war effort, the same political talk shows that gave air to Yatsenyuk in the Maidan days has been kicked off the TV after interviewing a Russian public figure. Judges refused to try a case against the Ukrainian Communist Party, which was accused of encouraging separatism by the new authorities.

A Ukrainian political joke says that somebody painted “Viktor, you bastard, come back!” on the wall of Yanukovich’s former residence.

Article source: http://rt.com/business/233667-ukraine-economic-crisis-depression/

Looks as if markets becoming a bit more nervous. #Greece‘s 3yr yields jumps by 194bps to 19.5% as #Grexit risk rises. pic.twitter.com/JkFtUXtjES

— Holger Zschaepitz (@Schuldensuehner) February 17, 2015

Greece and the EU have less than 48 hours to reach a new bailout deal, and neither side seems prepared to make concessions. Greece doesn’t want more austerity, but the new Syriza government also doesn’t want the country to retain its massive €316 billion debt.

“No solution is on the table unless someone gives up,” Jakobsen said, adding that no one wants to lose.

READ MORE: No deal: Greece-EU bailout talks break down, Athens given 1 week ultimatum

The threat of a ‘Grexit’- a scenario in which Greece leaves the eurozone- has been on the rise since the new Syriza government won the general election in late January. The party campaigned on the promise of ending the terms of austerity the previous governments agreed with a Troika of lenders- the International Monetary Fund, the European Commission, and the European Central Bank.

“It’s not the Greek government or Greece that they are playing with, but Europe, and its future,” Greek Prime Minister Alexis Tsipras said on Wednesday.

Now, however, the banks are out of money, and the European Central Bank isn’t planning on dolling out more for free, but will charge high interest rates if banks, and the people of Greece, wants euro.

If Greece doesn’t accept what the EU offers – high interest loans – it will have to leave the euro and print its own currency to support Greek banks in desperate need of liquidity. This would put the country at a much greater risk of default, which is the reason it accepted EU aid in the first place.

“It will create short-term volatility in the marketplace… this is the beginning of something better for Greece and Europe,” Jakobsen said.

Doomed by Debt

Greece is buried in nearly €320 billion of debt. The EU came to Greece’s rescue in 2010 and 2014 with two bailouts totaling €240 billion, but not without any conditions.

Germany has warned no more disbursements will be released until Greece accepts the bailout terms.
Austerity measures, or less spending, have been the EU’s solution to fixing Greece’s heavily indebted economy.

The situation in Greece has become worse, not better, since the 2009 debt crisis, and only in 2014 began to show signs of economic growth after six years of recession.

#Grexit, meet #Brexitpic.twitter.com/hXljMoub9q

— Peter Spiegel (@SpiegelPeter) February 13, 2015

In the last five years, the economy has lost a quarter of its value, and more than one in three Greeks live below the poverty line. Unemployment continues to hover near 30 percent, and nearly double for the young.

Syriza campaigned on the promise to end the EU bailout, and Germany, the biggest contributor to the bailout, as well as a number of other EU countries, want Greece to stand by the plan their predecessors agreed to.

German Finance Minister Wolfgang Schauble has openly blamed Greece for its own failed banks, and has threatened the European Central Bank can switch off emergency funding.

“At the end of the day, Germany cannot go back to its voters and ask for money for a country that doesn’t even want to sign the legal document already embedded in the talks,” Jakobsen said.

In 1981, Greece became the tenth country to join the European Union, and less than 20 years later; it switched from the drachma to the new euro, which it now shares with 18 other countries.

Article source: http://rt.com/business/233459-grexit-eu-euro-saxo/