Archives for June 2017

“The total resources mobilized could reach a maximum of 17 billion euros – but the immediate cost to the state is a little more than 5 billion,” said Finance Minister Pier Carlo Padoan. He assured Italians that on Monday “there will be normal operations at the teller windows.”

Italian Prime Minister Paolo Gentiloni defended the move as a vital “burden-sharing, not a bail-in,” aimed at saving “account-holders, savers, of these two banks, in favor of those who work in these banks, and in general in favor of the economy of the territory, one of our most important.”

Italy’s Monte dei Paschi bank shortfall reaches $9.2bn

The government made a deal with Italy’s biggest and best-capitalized retail bank, Intesa Sanpaolo, to take over the failing banks’ remaining assets, and agreed to provide further “guarantees” of up to €12 billion. In its turn, Intesa symbolically invested one euro and insisted that its own dividend policy remains intact.

“The government has utilized European rules in the best possible way,” Padoan said, as cited by AFP. “Those who criticize us should say what a better alternative would have been. I can’t see it.”

The European Central Bank pulled the plug on the two banks Friday, declaring that they were “failing or likely to fail,” following two years of supervision after it uncovered a capital hole and a spike in bad loans.

The emergency decree to liquidate the two banks – which has to be voted into law by parliament within 60 days – effectively means that they become part of Intesa, starting Monday.

The Italian finance minister reassured small account holders and “senior shareholders” that their funds would be “100 percent repaid.” However, bank employees are facing the potential risk of mass layoffs.

Article source: https://www.rt.com/business/394061-italy-failing-venetian-banks/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Volkswagen to pay $2.8 bn fine in diesel emissions scandal

According to the Suddeutsche Zeitung newspaper, the five are accused of conspiring to commit fraud and violating US environmental regulations. At least two were reportedly confidants of former VW CEO Martin Winterkorn.

The German daily suggested Berlin will not hand over the accused to the American authorities. It said that if found guilty the suspects would face extremely long jail sentences compared to German sentencing standards. They, however, will be unable to leave Germany due to the risk of being extradited to the United States from a third country.

Former Volkswagen manager Oliver Schmidt was arrested earlier this year in Miami as he was about to fly to Germany. He was charged with conspiracy and other crimes in the company’s scheme to sell around 600,000 vehicles that failed to comply with US pollution standards. Schmidt faces up to 25 years in prison.

In 2015, the world’s largest automaker Volkswagen admitted to US regulators it had cheated on emissions tests using software installed in as many as 11 million diesel vehicles sold worldwide. The scandal forced VW CEO Martin Winterkorn to resign.

The company has settled with the US authorities agreeing to pay a $2.8 billion criminal penalty.

Volkswagen also agreed to pay $1.5 billion in a civil lawsuit brought by the US government, and spend $11 billion to buy back cars and offer other compensation.

Under the terms of the settlement negotiated in January, VW also agreed to the appointment of an independent monitor to observe the company’s compliance and control measures for three years.

Article source: https://www.rt.com/business/393736-us-arrest-warrants-volkswagen/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Saudi King names young son Mohammed bin Salman crown prince, strips eldest of title post

The heir apparent has already been effectively running the country for the past few years, so the move was not entirely a shock. Nevertheless, the effects on the oil market could be profound.

The new crown prince is known to be a bit unpredictable. In the early phase of the oil price meltdown, he said that prices did not matter. But the plunge below $30 per barrel in early 2016 seemed to have changed the calculus. Last year Saudi Arabia became the principle driver behind a return to “market management,” that is restraining output to stabilize prices.

With the OPEC production cuts – which have had to be extended from six to 15 months – still proving to be insufficient at balancing the market, it is not entirely impossible that the crown prince might reverse course yet again at some point and return to a “market share” strategy. Or he could decide to deepen the cuts, an idea floated a few days ago by the Iranian oil minister. For now though, higher prices are surely to be the goal, particularly with the IPO of Saudi Aramco not far off. Either way, after Mohammed bin Salman and King Salman ousted former oil minister Ali al-Naimi last year, they have tighter control over the kingdom’s oil policy.

The IPO is another signature initiative of the young prince. He hopes to sell off 5 percent of Aramco, which he argues could raise around $100 billion (some analysts dispute that figure) in order to finance his Vision 2030, which calls for a diversification of the Saudi economy. The elevation of Mohammed bin Salman is being interpreted in some corners as an effort to accelerate this economic transformation. With low oil prices, a sizable budget deficit, large but dwindling cash reserves, and a restive and young population, time is of the essence.

Meanwhile, the crown prince is also known to be aggressive and bellicose when it comes to Saudi Arabia’s position in the Middle East. As such, his promotion brings ominous possibilities in regards to the simmering conflict between Saudi Arabia and several of its regional rivals. Bin Salman is behind Saudi Arabia’s disastrous and bloody conflict in Yemen, which has been very costly and brought no discernable strategic benefit to the kingdom.

He is also known to be extremely hawkish towards Iran. This is an issue that would certainly push up oil prices if it got out of hand. “[It] is not really a question of if but rather of when a new escalation with Iran starts,” Olivier Jakob, managing director of consultant Petromatrix GmbH, told Bloomberg.

“Under his watch, Saudi Arabia has developed aggressive foreign policies and he has not been shy about making strong statements against Iran.” Iranian state news called the elevation of Mohammed bin Salman a “soft coup.”

There is no way to predict how a confrontation between the two countries would play out, but any prospect of oil supply disruption would ripple through the oil market even as it currently remains oversupplied.

Most recently, according to the WSJ, Mohammed bin Salman has pushed for the sudden blockade of Qatar. The former Crown Prince Mohammed bin Nayef wanted to resolve the dispute through diplomacy, and the different stances between the two are said to have been the catalyst for latter’s ouster. The country needed unity and stability behind one policy, analysts say, which, in this case, was a more hardline approach to Qatar. Bin Salman won the argument, and was elevated to become crown prince.

The royal succession reshuffling is viewed as “a much more assertive, insistent domineering”approach to its neighbors, Chas Freeman, former U.S. ambassador to Saudi Arabia under President George H.W. Bush, told the WSJ. “Some of the neighbors regard it as a drive for Saudi hegemony in the region,” he said.

But absent a more overt conflict involving some sort of military engagement, the repercussions of the new line of succession will hinge much more on the country’s oil policy. On that front, most analyst expect Saudi Arabia to stick to, or even deepen, the OPEC production cuts, despite the sacrifice it would entail.

The IPO of Aramco is too important to the country, an offering that really needs higher oil prices. So, at least for the short-term, it is probably business-as-usual in Riyadh.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/393711-saudi-reshuffle-oil-markets/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Denmark other EU members may soon be forced into the euro

According to Rusnok, one of the reasons the country is committed to joining the euro is that the Czech crown is now floating and not pegged. The Czech central bank scrapped its cap on the crown in April, allowing it to float freely to stronger levels against the euro for the first time since 2013.

Last week Rusnok said he thought Czechs would not be adopting the euro for five to ten years. He added that while wage rises in some of the leading European economies are almost zero, the average salary increase in the Czech Republic is currently around five percent so that the trend was positive.

Czech President Milos Zeman said on Friday the country has been ready to join the eurozone for almost ten years but that the public was irrationally afraid to do that.

“We have been fulfilling the Maastricht criteria, but there is a mental barrier to its adoption. A mere 30 percent of Czechs are in favor of entering the eurozone,” he said.

Eurozone labor market in much worse shape than official data indicates – ECB

Statistics showed the nominal rate of wage rises in the Czech Republic was 5.3 percent in the first quarter of the year. Currently, average Czech wages are around €10 an hour. Across the EU the figure is around €25 while in some eurozone countries it’s around €30.

According to an unnamed economist cited by Radio Praha, even if there were a real five percentage point difference in the wage rises, it would take 15 years at that rate for average Czech wages to catch up with those of neighboring Germany.

“For us to remain at the core of the European Union, sooner or later we will have to respond to the question of not whether, but when the Czech Republic is capable of adopting the single European currency, ʺ said Czech Prime Minister Bohuslav Sobotka.

The Czech officials’ announcements follow recent media reports the European Commission wants all 27 members of the bloc to adopt the euro by 2025.

Officials from the EU are reportedly seeking to draw up a euro budget able to incorporate a fixed tax payment from all the member states. The raised cash would be invested across the bloc.

The euro is the sole currency for 19 members of the bloc. The nine remaining countries, including Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom, that is currently in the process of quitting the EU, do not use the euro as the main national currency.

Article source: https://www.rt.com/business/393703-czech-republic-euro-adoption/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Denmark other EU members may soon be forced into the euro

According to Rusnok, one of the reasons the country is committed to joining the euro is that the Czech crown is now floating and not pegged. The Czech central bank scrapped its cap on the crown in April, allowing it to float freely to stronger levels against the euro for the first time since 2013.

Last week Rusnok said he thought Czechs would not be adopting the euro for five to ten years. He added that while wage rises in some of the leading European economies are almost zero, the average salary increase in the Czech Republic is currently around five percent so that the trend was positive.

Czech President Milos Zeman said on Friday the country has been ready to join the eurozone for almost ten years but that the public was irrationally afraid to do that.

“We have been fulfilling the Maastricht criteria, but there is a mental barrier to its adoption. A mere 30 percent of Czechs are in favor of entering the eurozone,” he said.

Eurozone labor market in much worse shape than official data indicates – ECB

Statistics showed the nominal rate of wage rises in the Czech Republic was 5.3 percent in the first quarter of the year. Currently, average Czech wages are around €10 an hour. Across the EU the figure is around €25 while in some eurozone countries it’s around €30.

According to an unnamed economist cited by Radio Praha, even if there were a real five percentage point difference in the wage rises, it would take 15 years at that rate for average Czech wages to catch up with those of neighboring Germany.

“For us to remain at the core of the European Union, sooner or later we will have to respond to the question of not whether, but when the Czech Republic is capable of adopting the single European currency, ʺ said Czech Prime Minister Bohuslav Sobotka.

The Czech officials’ announcements follow recent media reports the European Commission wants all 27 members of the bloc to adopt the euro by 2025.

Officials from the EU are reportedly seeking to draw up a euro budget able to incorporate a fixed tax payment from all the member states. The raised cash would be invested across the bloc.

The euro is the sole currency for 19 members of the bloc. The nine remaining countries, including Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom, that is currently in the process of quitting the EU, do not use the euro as the main national currency.

Article source: https://www.rt.com/business/393703-czech-republic-euro-adoption/?utm_source=rss&utm_medium=rss&utm_campaign=RSS