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Hungary’s New Central Bank Chief Tightens Grip

March 5, 2013 by Leave a Comment

BUDAPEST — Gyorgy Matolcsy, the new governor of Hungary’s central bank, tightened his grip on power during his first day in office Monday, issuing new rules that curb the powers of the bank’s deputy governors.

The bank’s Web site indicated that Mr. Matolcsy issued new articles of association on Feb. 28, when he was still the government’s economy minister, requiring that deputy governors represent the bank only jointly with a new chief director. The deputy governors previously had the right to represent the bank in their own field of expertise.

Prime Minister Viktor Orban on Friday put Mr. Matolcsy in charge of the bank, choosing him over a critic of the prime minister’s go-it-alone economic policies. The appointment is seen as Mr. Orban’s latest move to increase the Fidesz Party’s influence over independent state institutions.

Two of the three deputy governors at the bank were appointed by a previous Socialist-dominated administration, in contrast to the rest of the bank’s policy council, who were nominated by the Fidesz majority in Parliament.

Mr. Matolcsy, the architect of a government policy that has seized private-sector assets for the state and increased taxes on big businesses, will also have direct rights over the hiring, dismissal and pay of all central bank employees and can delegate this power to the new chief director.

Investors fear the appointment will lead the bank to take risky steps with monetary policy to lift the recession-hit economy, which could threaten the country’s already-volatile currency, the forint.

During questioning in Parliament on Friday, Mr. Matolcsy said he supported “conservative, responsible” monetary policy. He said the bank would stay independent and would examine new tools to spur economic growth.

But he added that it must strive for a “strategic partnership” with the cabinet, while also maintaining price stability.

Mr. Orban also nominated a third deputy governor, Adam Balog, to the bank when he appointed Mr. Matolcsy on Friday. In addition, parliamentary documents showed that the economic committee on Monday would hold a confirmation hearing for a new nominee, Gyula Pleschinger, state secretary at the Economy Ministry, to the central bank’s rate-setting Monetary Council.

Article source: http://www.nytimes.com/2013/03/05/business/global/hungarys-new-central-bank-chief-tightens-grip.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Euro Official, in New Role, Aims to Mend Rift Over Austerity

January 21, 2013 by Leave a Comment

BRUSSELS — Jeroen Dijsselbloem, the newly elected president of the group of ministers overseeing the euro, said on Monday he wanted to heal the rift over austerity policies that had bred mistrust between southern and northern nations using the currency.

Mr. Dijsselbloem, 46, the Dutch finance minister, also said he wanted to improve the stature of the group, and the image of the currency, after three years of near-constant crises and moments of deep division.

The only opposition during the vote to elect Mr. Dijsselbloem, held late Monday, came from Luis de Guindos, the Spanish economy minister. Mr. Dijsselbloem, whose term lasts two-and-a-half years, told a news conference that Mr. de Guindos offered no explanation for the decision but he said the Spanish move should not “lead to dramatic consequences.”

Spain is among the countries in southern Europe to have been hardest hit by the austerity policies that northern nations like Finland, Germany and the Netherlands have insisted on as an important solution to the euro crisis.

Spanish officials have been irritated by the preponderance of representatives from so-called Triple-A rated countries, which pay less to borrow than countries with weaker ratings, in top economy jobs in Europe. Spanish officials were particularly angered by a decision last year not to select a Spaniard for a seat on the executive board of the European Central Bank.

In a sign of his concern about fractures in the euro zone, Mr. Dijsselbloem pledged to do what he could to assuage those tensions in his new role coordinating meetings of finance ministers when they make decisions like giving political approval for bailouts and pressing governments to shore up their finances.

“If we are going to approach the euro zone and the euro area as a zone with a harsh line in the middle between Triple-A and non-Triple-A, between the north and the south, there’s no way we’re going to move forward and no way are we going to reach decisions that are so much needed,” Mr. Dijsselbloem said. “So that will definitely not be my approach,” he said.

The French also had concerns about putting a representative from the Netherlands in charge of the group and they insisted that Mr. Dijsselbloem explain to the other 16 finance ministers in the Eurogroup how he intended to carry out the job before the vote was held.

But the French finance minister, Pierre Moscovici, told a news conference that he was satisfied with the outcome because he expected Mr. Dijsselbloem to act fairly. “It’s a Dutchman who is president; it’s not a Dutch presidency,” Mr. Moscovici said.

Mr. Moscovici said he expected other top finance jobs, including the job of overseeing a new banking supervisor based at the European Central Bank, would be allocated to French candidates. But he insisted that was not a reason he voted in favor of Mr. Dijsselbloem’s appointment.

Allies of Mr. Dijsselbloem also have sought to ease fears that his presidency would be divisive, saying that his membership of a left-leaning social democratic party could help him mediate between nations like France with different views to many in the Netherlands on how to stabilize the euro.

“Jeroen should be able, within financial sound limits, to bridge the debate between those who criticize budget cuts and those who emphasize the need to enforce the treaties on budgetary controls,” Thijs Berman, the leader of the Dutch social democrats in the European Parliament, said Monday.

Another goal of Mr. Dijsselbloem is to reform the way the group operates to cut down on the need for emergency sessions and all-night meetings.

In a letter sent to ministers on the eve of the vote, Mr. Dijsselbloem suggested that the group hash out their views in “discussion papers” to make decision-making smoother. He also said he wanted a “clear mandate” to represent the Eurogroup “on an international stage,” including at Group of 20 meetings and in international financial institutions.

“Our focus needs to shift from crisis management to delivering and implementing sound medium-term policies,” Mr. Dijsselbloem said in his letter to ministers.

Article source: http://www.nytimes.com/2013/01/22/business/global/a-call-to-raise-stature-of-euro-overseers.html?partner=rss&emc=rss

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U.S. Judge Orders Argentina to Pay Holdout Bondholders

November 22, 2012 by Leave a Comment

BUENOS AIRES — Argentina has finally run out of wiggle room in a billion-dollar showdown over foreign debts unpaid since the country’s world-record default a decade ago.

Late Wednesday, a federal judge in New York ordered Argentina to pay immediately and in full everything it owes to what the Argentine president calls “vulture funds” that she blames for much of her country’s troubles. That adds up to $1.3 billion, due Dec. 15.

The judge also barred Argentina from paying other bondholders until it satisfies this judgment, putting the president’s back against the wall: if President Cristina Fernández doesn’t reverse her longstanding position and pay up, she risks setting off another Argentine debt default, this time totaling more than $20 billion.

“It is hardly an injustice to have legal rulings which, at long last, mean that Argentina must pay the debts which it owes,” Judge Thomas P. Griesa of Federal District Court concluded. “After 10 years of litigation, this is a just result.”

Argentina’s government did not immediately respond to Judge Griesa’s orders, delivered just before the Thanksgiving holiday.

Senator Agustín Rossi, who leads the ruling party’s bloc in the Argentine Congress, said in a local radio interview on Thursday that he believed Argentina’s government would be within its rights to reject the order, “on behalf of all the Argentines, after we’ve made such an enormous effort to get out of default.”

Argentina’s president and economy minister insisted earlier this week that they would not pay a single dollar to the plaintiffs, and said they would appeal to the Supreme Court of the United States.

But the judge gave President Fernández no room to maneuver in the interim, ordering that the money be put in an escrow account for the plaintiffs to collect.

“These threats of defiance cannot go by unheeded,” the judge wrote. “The less time Argentina is given to devise means for evasion, the more assurance there is against such evasion.”

If the president refuses to pay, the judge said that the Bank of New York, which processes Argentina’s bond payments, will find itself in violation if it does not hold up payments to all other bondholders.

“It’s a mess. This does not help Argentina. Default could happen,” Alberto M. Ramos, a Goldman Sachs analyst in New York, said on Thursday. “The markets will react negatively to this.”

The remedy also sent jitters through the legal departments of the most powerful financial institutions in the United States.

The Federal Reserve and the Clearing House, a trade group representing the world’s largest commercial banks, told the judge to make sure his order would not affect the funds transfer system, which automatically moves an average of $2.6 trillion a day in half a million transfers between more than 7,000 banks.

The entire system depends on transfers being “immediate, final and irrevocable” when processed. Requiring intermediaries to identify, stop and divert payments according to court orders “would impede the use of rapid electronic funds transfers in commerce by causing delays and driving up costs.”

The judge dismissed these concerns Wednesday night, saying among other things that “if Argentina complies with the rulings of the Court of Appeals, there will be no problem.”

As with so many other things involving Argentina, this case is rooted in the bloody dictatorship that ruled from 1976 to 1983. The military junta more than tripled the country’s foreign debts. By 2001, the burden had become unsustainable and the economy collapsed. Argentina’s $95 billion default still stands as a world record.

Sovereign debt is supposed to be paid no matter who runs a country, but President Fernández has always considered this defaulted debt to be illegitimate, forced onto the Argentines by dictators acting in concert with international financial speculators. She and her late husband and predecessor, Néstor Kirchner, who took office in 2003, have never made any payments on the defaulted bonds.

Article source: http://www.nytimes.com/2012/11/23/business/global/us-judge-orders-argentina-to-pay-holdout-bondholders.html?partner=rss&emc=rss

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Long-Ago Affair Might Damage Turkish Candidate’s Chances to Lead I.M.F.

May 20, 2011 by Leave a Comment

Currently a vice president at the Brookings Institution, he was Turkey’s economy minister from 2001 to 2002 and was widely credited with bringing Turkey out of a severe financial crisis by privatizing state assets and slashing budget deficits amid fierce political opposition.

He speaks fluent French, German and English and is a veteran of I.M.F.-style bureaucracies like the World Bank and the United Nations.

But, Mr. Dervis, it turns out, has a secret that could disqualify him from being considered for the job. Years ago, while a senior executive at the World Bank, he had an affair with a female subordinate who now works at the I.M.F., according to a person with direct knowledge of the affair.

This person’s account was confirmed by Stanislas Balcerac, a former World Bank staff economist who worked on the same floor with Mr. Dervis and the woman.

In a brief interview Thursday, Mr. Dervis declined to discuss the details of his personal life. But after Mr. Strauss-Kahn’s departure over allegations of a sexual assault, questions of past impropriety could be enough to hurt a candidate’s chance.

Mr. Dervis, 62, was not married at the time of the affair, but the woman was, according Mr. Balcerac, who says he bears no ill will toward either person. In fact, he praises Mr. Dervis as one of the brightest, most adept and bureaucracy-beating executives at the World Bank at the time.

“He was not your standard bureaucrat,” he said. He made “decisions quickly and was extremely dynamic.”

Indeed, the professional talents of Mr. Dervis are a reason he has been widely mentioned this week as a possible candidate for the top job at the I.M.F. He would represent a potential bridge between the European establishment from which the I.M.F. chief has traditionally been chosen, and the emerging-economy countries that are now demanding to play a bigger role in global financial institutions. Turkey, with its 9 percent growth rate last year and its ambition to become a major regional actor in the Middle East, would certainly fit that bill.

Most intriguingly, perhaps, Mr. Dervis is a close friend of George Papandreou, the prime minister of Greece, whom he has been informally advising over the last two years.

The two men became acquainted in 2001 when Mr. Dervis was in charge of the Turkish economy and Mr. Papandreou was foreign minister for his government. Since then, Mr. Dervis has provided counsel in a variety of ways.

He has been an active participant in Mr. Papandreou’s annual summer ideas conference held on different Greek islands each year. He has huddled with him at the Brookings Institution in Washington. And he has, insiders say, shared many late-night phone calls with the Greek prime minister.

Book makers in London have been giving Mr. Dervis the second-best chance to get the I.M.F. job after Christine Lagarde, the finance minister of France. And Mr. Dervis has many professional admirers.

“He is the man for the job,” said Dani Rodrik, an expert on globalization and development at the John F. Kennedy School of Government at Harvard. “He would be a truly meritocratic appointment.”

But Mr. Dervis said Thursday that he was in no way prepared for this sudden burst of publicity.

“Look, I have not put my name forward, nor has anyone called me about the job,” Mr. Dervis said. “I am flattered, of course, but that is all I can say at the moment.”

No doubt, the affair in question is very old news. Mr. Balcerac points out that years ago the culture at the World Bank was looser and it was not uncommon for senior executives to have affairs with those working for them.

All of this changed in 2007, when the World Bank had its own, more minor scandal: Its president at the time, Paul D. Wolfowitz, promoted a woman he was involved with.

The I.M.F. has not said publicly who it is considering to succeed Mr. Strauss-Kahn.

John Lipsky, an American, has taken control as acting managing director and while there had been an expectation that Mr. Strauss-Kahn would leave before his term ended in October 2012 to run for the French presidency, it is not clear what type of short list, if any, the fund board has drawn up. 

Article source: http://www.nytimes.com/2011/05/20/business/20dervis.html?partner=rss&emc=rss

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Japan Ponders Its New Normal

May 11, 2011 by Leave a Comment

Their boats washed away by the tsunami, fishermen in the town of Higashi-Matsushima say they will start over, but on a smaller scale.

And with electricity still in tight supply from the Fukushima Daiichi nuclear crisis, a landmark building in Tokyo has dimmed its famous lights.

Across Japan, there is a shared realization that the natural and nuclear disasters unleashed on March 11 have exposed the fragility of Japan’s postwar economic order — and that a recovery will not be a return to the status quo.

The disasters have dealt another blow to a manufacturing sector already battered by cheaper rivals, deepening fears of a “hollowing out” of Japanese industry long feared in this country. Japan’s aging, shrinking population will also make an energetic bounce-back more difficult. And Japan’s economy relies heavily on precarious nuclear energy, for which alternatives are likely to be more expensive.

Rebuilding will require a national rethinking if Japan is to achieve an economic rebirth, rather than sink further into the stagnation that has plagued it for two decades, many experts say. And reconstruction will define the nation’s place in a global order where Japan is no longer the rising economic star of a generation ago.

“We cannot have recovery for recovery’s sake,” said Hiroko Ota, a former economy minister and vice president at the National Graduate Institute for Policy Studies. “We must make this the starting point for a new economy.”

Japan is no stranger to disasters and rebuilding. Its economy largely shook off the effects of a disastrous quake that struck the city of Kobe in 1995, thanks to an all-out recovery effort.

But even compared with the Kobe crisis, Japan is a weaker nation that now faces the task of reconstruction.

The average age for the population has advanced since then by about six years — to 44.6 years in 2009, which weighs on economic growth and means mounting medical and pension payouts. And the Japanese government is saddled with a public debt more than twice the size of its economy, limiting its spending options.

“In many ways, this is an unprecedented disaster,” said Takayoshi Igarashi, a professor in politics at Hosei University in Tokyo and a member of a council the government has asked to draft a long-term reconstruction plan. “Japan is at a crossroads.”

So, it seems, is Japanese manufacturing.

Take Meiko Electronics, which supplies circuit boards to some of the world’s biggest makers of smartphones. Soon after the quake and tsunami ravaged Meiko’s circuit board factory here in Ishinomaki, mangling machines and sweeping a mountain of debris onto the factory floor, officials at the company knew its days of manufacturing in its home country were limited. A second Meiko factory was also damaged.

Meiko already makes 80 percent of its parts overseas. With the damage to two of its five Japanese factories — and the uncertainties of Japan’s power supply — it does not make sense to rebuild in the country, said Hidetaka Maruyama, a company spokesman.

“Without a doubt, there will be a shift toward production overseas,” he said. A new factory in Wuhan, China, completed in April, has already started producing many of the most sophisticated Meiko circuit boards once made in Japan.

To be sure, government surveys show that many manufacturers have rebounded quickly in the quake’s aftermath. But analysts warn that even a short hiatus in Japanese output, and electricity disruptions, are enough to give overseas competitors an opportunity. And the disaster has shown that even some of the country’s biggest multinationals remain dangerously dependent on domestic suppliers, a realization that could spur more corporations to move production offshore.

Article source: http://feeds.nytimes.com/click.phdo?i=c5b4281b7bb072b8fb718e2943b38f30

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