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Croatia Wavers Over European Union as Allure Fades

January 18, 2012 by Leave a Comment

But if Croatians vote to join the European Union next Sunday, Mr. Sluga’s simple business will become a lot more complicated. The cages he keeps his hens in will not meet the group’s rules, requiring expensive upgrades. Italian egg producers, given access to Croatian markets, are likely to undercut his prices. Mr. Sluga believes that his very way of life is a stake. And for what? he asks.

“See what happened to Greece,” he said. “They got billions from the E.U. and it did not work out.”

Much has changed in the decade since Croatia first applied to join the European Union. What was once seen as a rich man’s club — which Croatia was eager to join — no longer looks like such a clear ticket to prosperity. Today’s European Union is mired in a crippling debt crisis, which has pushed some of its members to the brink of bankruptcy and threatened its very essence.

Recent polls show that Croats are still likely to vote yes. Then, the 27 European Union countries are expected to ratify their membership and Croatia will become part of the group on July 1 — in all likelihood, the last new member for many years.

Srdjan Dumicic, the director of Ipsos Puls, a company that has conducted several polls on the subject in recent years, said that support had been dwindling in the past few weeks and could narrow, according to the latest poll that has not yet been published. Some Croatians joke, he said, that joining now is like arriving at the party at 2 a.m. Half the revelers are drunk. Half have gone home.

“It’s not the party it was at midnight,” Mr. Dumicic said.

Even the recently elected prime minister, Zoran Milanovic, talks about the prospect of European Union membership without much fervor.

Mr. Milanovic, a social democrat, says the pluses outweigh the minuses. He emphasizes the benefits of full access to a market of 500 million consumers and of gaining about $2 billion a year in development aid in the next couple of years, though future assistance is less certain.

And he sees progress in the overhaul of Croatia’s legal system, which the European Union insisted on.

But he also says that the events of recent years have proved that membership does not guarantee success and that Croatians need to be ready to work hard in a highly competitive environment.

“The working title could be ‘Curb That Enthusiasm,’ ” Mr. Milanovic said in an interview, slightly mangling the title of Larry David’s HBO series.

Critics go much further. They say that recent events have proved that Germany and France make the big decisions and that a country the size of Croatia, with a population of just 4.5 million, will have little say.

They worry also about joining just in time to pay the bill for Greece and other debt-laden countries. And they worry that Croatia, with a long Adriatic coastline, will find itself confronting a flood of immigrants, as Spain, Italy and Greece have.

“In the European Parliament, we would be 12 members out of more than 740; in the Council of Ministers, 7 votes out of more than 350,” said Marjan Bosnjak, secretary of the Council for Croatia, an association opposing European Union membership. “We will be a statistical error. Who will give a damn about what Croatians think?”

To get this far, Croatia, which could not escape the vicious fighting that broke out in the 1990s after the dissolution of Yugoslavia, had to subject itself to a European Union-style makeover. Once deeply corrupt, the government was forced to pass 350 new laws. No one knows how many documents were exchanged because the Croatians stopped counting after 150,000 pages. About 3,000 Croatians worked on the project, from diplomats to translators.

The reach of the European Union is often underestimated, as it tries to create an even playing field among its members. Take the egg business. No detail seems overlooked. The union’s rules say that the chicken cages must allow at least 750 square centimeters per hen and contain a nest, litter, perch and “clawing board.” These requirements are amusing to Mr. Sluga, the farmer. “The chickens have more rights than humans in the E.U.,” he joked.

Article source: http://www.nytimes.com/2012/01/18/world/europe/croatia-wavers-over-joining-the-european-union.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

In North Las Vegas, New City Hall Is a Reminder of Flush Days

November 21, 2011 by Leave a Comment

It is not hard to spot the vacant strip malls; several were never occupied at all.

For more than a year, the city has teetered on the brink of insolvency. But last week, officials began moving into the gleaming new City Hall, a building that cost roughly $130 million to build. There are marble floors and granite tabletops, solar panels and scores of televisions, in addition to an outdoor concert plaza.

Officials have grand dreams about the grand first floor’s serving as a one-stop shop for people paying their taxes or getting permits for new homes and businesses. But nobody is quite certain when the lines will start to form. Ask the city manager, Timothy Hacker, if North Las Vegas has hit bottom yet and he answers cautiously: “We’re darn near close.”

As cities across the West grapple with huge numbers of foreclosures and dwindling populations, the North Las Vegas City Hall stands as an odd symbol of the shimmery golden past’s contrasting with the murky gray present.

This was once one of the fastest growing cities in the country. It was just two years ago when the Police Department would complain that it did not know of all the new streets (with sunny names like Pink Petticoat and Carefree Beauty). But now the city is perhaps among the most brutally pummeled places.

Nearly a third of all homes are in foreclosure. The houses that are occupied are worth less than half of what they were two years ago. But people here still focus on what it could have been and maybe, just maybe, what it could still be.

This year, the city was facing a $9 million deficit and the prospect that it might not be able to make payroll. State officials began murmuring that they could move to take over the municipality if it became fiscally insolvent. One official said that unless the city “hit the jackpot,” bankruptcy was imminent. This fall, the city reached a deal with unions to delay cost-of-living raises, averting a crisis for now.

But the future is still grim — the city’s bond rating was downgraded again last month, and officials acknowledge that they could be in the same precarious position next year, when the city faces a $15.5 million budget gap. They hope that a new veterans’ hospital and an outpost of the University of Nevada, Las Vegas, will help the economy, but they know those additions will not provide the same kind of quick cash that property taxes once did.

“It will take us 20 years to get to where we were three years ago in terms of collecting tax revenue,” said Al Noyola, the city’s interim finance director. “We have to get to a point where we aren’t relying on housing to drive our engine.”

When North Las Vegas started to draw up plans for the new City Hall some five years ago, cash flow was no problem. The city was hiring more and more workers to deal with the population influx, and workers were jammed up against one another in several gray, squat, 1960s-era municipal buildings. At the time, the plan was to tear down the existing City Hall and build a new police station.

During the good times, the city created parks filled with features that would make even the wealthiest towns envious — a life-size stegosaurus in one, fully lighted tennis courts in another. It created recreation centers with top-of-the-line equipment and built new libraries in rapidly expanding corners of the community. And it drew up plans for City Hall, with a wellness center where bureaucrats could work out between their civic tasks.

Article source: http://feeds.nytimes.com/click.phdo?i=88cbe77df93fa4fe2d9d27b81a48fe78

Filed Under: Economy News Tagged With: , ,

DealBook: MF Global Is Said to Have Used Customer Cash Improperly

November 18, 2011 by Leave a Comment

MF Global improperly diverted customers’ cash for its own use in the days before its bankruptcy, an act that regulators believe may help explain why $600 million of customer funds remains missing, people briefed on the investigation say.

Investigators have now zeroed in on hundreds of millions of dollars in suspect borrowing at the commodities and derivatives brokerage firm, which at the time of its collapse was run by Jon S. Corzine, the former Democratic governor of New Jersey. At least some of that money was used to cover trading losses at MF Global, regulators suspect, meaning the money may no longer be simply missing. It may be gone.

MF Global, like other brokers, can use customer cash if it puts up sufficient collateral. But the firm did not provide enough backing in late October, essentially taking free loans, said the people briefed on the investigation, who spoke on the condition of anonymity because the inquiry was continuing.

As customers rushed to withdraw money while the firm was teetering on the brink of bankruptcy, that questionable borrowing worsened a liquidity crisis at the firm.

It is unclear what MF Global did with all of the money or whether it can be recovered. The firm may have used some of the cash to keep its own lenders at bay, which means the money could be sitting in an account at another firm.

And some of the $600 million may yet materialize. As a patchwork of federal agencies and the trustee overseeing the firm’s liquidation reconstruct MF Global’s books, they expect to find that in the chaotic last days the firm failed to record when some customers received their money.

But a big chunk will most likely be much harder to recover, the people say, because it was used to pay off losses, rather than back trades.

The search for the missing money has touched the breadth of the commodities futures business, from Wall Street hedge funds to Midwest farmers. As hundreds of examiners pore over records around the clock, comb through 38,000 customer accounts and interview former employees, brief moments of hope have emerged only to later be proved false.

An MF Global spokesman declined to comment. Neither the firm nor Mr. Corzine have been accused of wrongdoing.

A lawyer for MF Global, Marc E. Kasowitz, said the company and its employees were cooperating with regulators as well as the trustee.

“Any characterization at this point of what occurred at MF Global is premature and inappropriate,” Mr. Kasowitz said in a statement.

The failure of the brokerage firm set off a wave of panic among its tens of thousands of customers. Many of them are farmers and small-business owners, who use these markets to protect themselves from swings in the prices of crops and metals.

In a federal bankruptcy court hearing in Lower Manhattan on Thursday morning, a federal judge approved the transfer of about 60 percent of the cash-only accounts sitting at MF Global to its 23,000 rightful owners, totaling about $520 million. The trustee, James W. Giddens, plans to begin dispersing the money before Thanksgiving.

The missing money strikes at the very heart of the futures industry. Brokerage houses and traders have long depended on the promise that customer cash will be kept separate from the firm’s money. This ensured that even if the firm were on the cusp of collapse, customers could safely access their money.

To unravel the mystery, the federal government has dispatched an assortment of regulators and criminal investigators. The Commodity Futures Trading Commission is leading the search for the missing money.

Investigators believe that money was transferred from the futures business to its securities brokerage division, according to people with knowledge of the inquiry. The Securities and Exchange Commission is helping to trace where that money went. The Federal Bureau of Investigation, meanwhile, is examining potential criminal wrongdoing, and the United States attorney’s offices in Chicago and Manhattan have issued subpoenas in the matter.

Of interest to authorities are these two main businesses run by MF Global. The futures side of the operation traded contracts for wheat, corn and metals. That is where the customer money went missing. The other side, which focused on securities, was where the firm placed a $6.3 billion bet on the sovereign debt of five European countries. Those wagers alarmed investors when they were disclosed, prompting a crisis of confidence that led to the firm’s demise.

On Oct. 24, Moody’s Investors Service lowered its credit rating on MF Global, citing concerns about its European debt exposure. Trading partners began demanding more collateral.

MF Global held a fire sale that week, reducing its assets to $23 billion from $55 billion, according to a person with knowledge of the matter. But the flood of requests kept coming from both customers and trading partners, and MF Global began to shift money to its securities division.

Like many futures shops, MF Global routinely borrowed money from customers and replaced it with assets like United States Treasury securities. Firms often keep a cushion of cash to protect customer funds, which they are allowed to tap with certain restrictions.

But according to the people briefed on the investigation, MF Global depleted this buffer and then dipped into the customer accounts to the tune of hundreds of millions of dollars. And in the days before the collapse, the firm stopped backing the loans it took from customers.

It is unclear whether MF Global officials knowingly used customer money or if they believed the buffer was intact. If investigators determine that MF Global intentionally tapped the customer funds, they could file both civil and criminal charges.

MF Global’s customers who acted fast got their money back. The rest now must wait in line, and may never fully recover their funds. Bankruptcy experts doubt the trustee will be able to claw back money secured by clients who rushed out the door.

The process will almost certainly be painful. The trustee has transferred some money backing open trades from MF Global to other brokers. And soon, the trustee will begin the transfer of 60 percent of cash accounts back to its owners.

But as proof of how complex and messy these affairs can be, customers with cash as well as open trades do not yet qualify to get any of their cash back.

Jason Skole, an investor in Boca Raton, Fla., had about $200,000 trapped at MF Global when the firm filed for bankruptcy, a fraction in open trades and the majority in cash.

“You don’t worry about any insurance in this industry because your money is protected, but it’s not,” Mr. Skole said. “It’s a terrible situation. It’s doesn’t make for a good Thanksgiving or Christmas.”

Article source: http://feeds.nytimes.com/click.phdo?i=440ce38448cd00fe3052019c7418f6a3

Filed Under: Business News Tagged With: , ,

News Analysis: Greece’s Urgency Challenges European Union Efforts

October 3, 2011 by Leave a Comment

The 17 European Union nations that share the euro don’t have that much time, of course, to convince investors that they have a plan to hold the currency together and prevent a run on the Continent’s banks. Some analysts say they have less than five weeks, until the Group of 20 summit meeting in November; others say a bit longer.

But rapid action comes hard to a union that works in increments, with political agreement required at every step.

In the short term, Greece remains the central problem. Two bailouts have not been enough. Greek public debt continues to mount, and so does the pressure on the government to find more revenue and make more cuts. Europe’s strategy, to the extent it can be discerned, is to put off restructuring Greece’s debt as long as possible and build up enough backing for a bailout fund so that banks with large exposure to the sovereign debt of Greece and other troubled euro-zone countries, like Portugal, Ireland, Italy and Spain, can survive an all-but-inevitable Greek default.

But the austerity-driven recession in Greece has made its budget deficit even worse than experts predicted, and the country has not kept all its promises to the “troika” — the European Union, the International Monetary Fund and the European Central Bank — that is keeping Athens afloat. Experts from the troika left Greece a month ago in unofficial disgust; they returned last week only after getting fresh promises of action.

Athens is again at the brink. Without the next tranche of aid from the troika — 8 billion euros — Greece could immediately default. So the troika is playing hardball, trying to force Athens to make crucial structural changes that lenders think will never happen otherwise.

Still, the consequences of a disorderly default are considered so dire that Athens has cards to play, too. A strike by workers at the national statistics bureau has made it difficult to get up-to-date fiscal data. The government has said it faces default by mid-October without the aid, but “we think they were exaggerating deliberately to put pressure on us,” a senior European official said.

When speaking privately, officials concede that Greece’s debt, trading at only about 40 percent of its face value, is unsustainable and that lenders will probably have to write some of it off. A “haircut” of 50 percent, followed by a recapitalization of banks if necessary, is the outcome most commonly mentioned.

Germany and France are not prepared to consider doing that yet, though, in part because relieving the pressure on Greece would remove its incentive to overhaul its finances and make its economy more competitive. And if Greece gets such a deal, why shouldn’t Portugal, Ireland and the others?

Equally important, Germany and France want to delay any Greek default, orderly or not, until they have bolstered the rescue fund and taken other steps to protect Italy, the biggest economy in southern Europe.

So for now, the European Union is focused on its own struggle to ratify the bailout deal struck on July 21. It would expand the effective lending capacity of the rescue fund to 440 billion euros ($589 billion) and give the fund new powers to buy bonds on secondary markets, lend to nations and recapitalize banks.

The deal still needs ratification by Malta, the Netherlands and Slovakia. Despite doubts about even more loans to Greece, they are likely to go along, while Finland, another skeptic, still wants Greek collateral. In the meantime, the European Central Bank is buying large amounts of Spanish and Italian paper to try to keep those countries’ borrowing costs down.

In the medium term comes another challenge. There is consensus that while 440 billion euros can cover Greece, Portugal and Ireland, it will not be enough if Italy, Spain and the banks are in play. So the next debate is over how to enlarge or leverage the fund. At least five new models are under consideration, European officials say.

Jack Ewing contributed reporting from Frankfurt.

Article source: http://www.nytimes.com/2011/10/03/world/europe/greeces-urgency-challenges-european-union-efforts.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Chicago News Cooperative: Expenses, Lender Games and Illness Added Up

October 2, 2011 by Leave a Comment

A bank lent her $142,000, which covered the sale price and loan fees, and provided $20,000 to fix up the place. To Ms. Carter, it seemed as if the bank was paying her $20,000 to take the loan. She did not even have to come up with a down payment.

After the deal closed, Ms. Carter discovered the house needed structural work that would cost far more than $20,000. Then the man she married about a year after moving in received a diagnosis of late-stage cancer.

Ms. Carter soon fell behind on her mortgage. After a bank advised her that the best way to settle her mortgage debt was to evacuate and let a lender sell the house, the couple moved out. Instead, banks let the house deteriorate, and now it is an eyesore in its Englewood neighborhood — the kind of house that devastates nearby property values.

“This place is a disaster,” said a neighbor, Ernest Hearny, surveying the trash-strewn yard of the boarded-up home. “There’s nothing inside. Gangbangers got in there and got high, had sex. The odor is so bad. They took the pipes, the plumbing, everything. It started going downhill when the people moved out. ”

Ms. Carter’s story is more than an all-too-familiar tale about the ravages of predatory lending. It is also an example of why the Woodstock Institute, a nonprofit research group specializing in housing issues, just reported that Chicago’s inventory of foreclosed homes continues to be at record levels. Red tape, clogged courts, victimized borrowers and overwhelmed banks have created a glut of abandoned homes mired in a foreclosure nightmare.

The federal government and big banks have offered programs to mitigate the damage for overwhelmed borrowers.  But as Ms. Carter and her husband struggled to stay in their home they tried to tap into the tools, only to be driven to the brink of bankruptcy as their home descended into blight.      

“It was my first time buying a house by myself,” said Ms. Carter, 60. “I did a poor job. I’m telling everyone I know not to do this. I wanted a place of my own so bad that I didn’t follow the proper steps.”

Ms. Carter’s financial quagmire began when a friend in the mortgage business told her about a distressed two-flat on South Morgan. A bank had foreclosed on the property and was looking for a buyer.  

“We thought it was a good deal even though it needed repair,” said Ms. Carter, who did not hire a home inspector. She and her husband-to-be Morgan Carter, a former WVON-AM radio host and newspaper publisher, planned to live on the first floor and convert the second into rental property.

At the suggestion of a mortgage service company that is now defunct, Ms. Carter obtained the $142,000 loan from Washington Mutual Bank. (Years later, WaMu was accused by a United States Senate investigative committee of igniting a “mortgage time bomb” by making thousands of subprime loans that were destined to go bad.)

After she agreed on the price, John Ptak of the Westland Group in Crystal Lake issued an appraisal that valued the property at $142,000, a perfect match to her WaMu loan. The Westland Group’s telephone has been disconnected, and Mr. Ptak did not respond to an e-mail.

In December 2004, the couple moved in, confident that the $20,000 would cover the repair work.

“I called heating, plumbing contractors, an electrician, to come in and tell me what I had to do,” she said, “and they started telling me they didn’t know how anyone could have sold the house to me because it wasn’t up to code.” The contractors’ estimates totaled $50,000.

The couple married. Then in late 2005, Mr. Carter became ill. “He was going in and out of the hospital, and our income fell,” Ms. Carter said. She was soon missing mortgage payments.

joshea@chicagonewscoop.org

boshea@chicagonewscoop.org

Article source: http://feeds.nytimes.com/click.phdo?i=eca2d75e58e86f8260f241f6f0983505

Filed Under: Economy News Tagged With: , ,