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DealBook: Ireland to Liquidate Anglo Irish Bank

February 7, 2013 by Leave a Comment

An Anglo Irish Bank branch in Belfast, Northern Ireland.Peter Muhly/Agence France-Presse — Getty ImagesAn Anglo Irish Bank branch in Belfast, Northern Ireland.

LONDON – The Irish government passed emergency legislation on Thursday to liquidate Anglo Irish Bank, one of the country’s largest financial institutions.

The legislation, which was signed into law after an all-night parliamentary session, came after negotiations with the European Central Bank over swapping so-called promissory notes, which were used to bail out the Irish lender in 2009, for long-term government bonds.

The move is an effort to reduce Ireland’s debt repayments at a time when the country is still struggling under a cloud of austerity measures and meager economic growth.

The Irish Parliament rushed through the legislation to liquidate Anglo Irish, which was renamed Irish Bank Resolution Corporation after its failure and bailout, because details of the debt-restructuring plan leaked on Wednesday. Politicians had hoped to announce the deal after agreeing on new terms with the European Central Bank.

“I would have preferred to be introducing this bill in tandem with a finalized agreement with the European Central Bank,” the Irish finance minister, Michael Noonan, said in a statement.

The European Central Bank is considering the country’s latest proposals on Thursday, though European policy makers are concerned that a deal with Ireland could set a precedent for other indebted countries, like Spain, whose local banks also are facing mountains of debt.

As part of the deal to save Anglo Irish, Dublin injected more than 30 billion euros ($41 billion) into the local lender, of which around 28 billion euros is still outstanding.

The bailout has saddled the government with 3.1 billion euros in annual interest payments, or roughly the same amount Irish politicians have said they would cut in yearly government spending to reduce the country’s debt levels. The local government has been eager to reduce that multibillion-euro figure by swapping the high-interest debt into long-term government bonds that can be repaid over a longer period.

Ireland racked up huge debts in bailing out Anglo Irish and the rest of the country’s financial industry, eventually requiring a rescue package of 67.5 billion euros from the European Union and the International Monetary Fund in 2010. The authorities have demanded that Irish politicians slash government spending to reduce the country’s debt burden.

Confusion reigned on Thursday at Anglo Irish’s headquarters in Dublin, a day after employees were sent home early in preparation for the government-mandated liquidation.

Some staff members had returned to work, but the atmosphere remained tense, according to a person with direct knowledge of the matter, who spoke on condition of anonymity because he was not authorized to speak publicly.

“People have been told it’s business as usual, but it’s anything but that,” the person said.

The accounting firm KPMG has been appointed to oversee the liquidation.

Under the terms of the liquidation, Anglo Irish’s assets will be transferred to the National Asset Management Agency, the so-called bad bank set up by the government, or sold to outside investors.

Anglo Irish has been at the center of controversy since the beginning of the financial crisis. Three of its former executives, including its former chief executive, Sean FitzPatrick, are facing fraud charges in connection with loans that were improperly administered.

Article source: http://dealbook.nytimes.com/2013/02/07/ireland-to-liquidate-anglo-irish-bank/?partner=rss&emc=rss

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DealBook: Osborne Promises More Regulatory Power to Split Up British Banks

February 4, 2013 by Leave a Comment

Britain's chancellor of the Exchequer, George Osborne, spoke Monday in Bournemouth, southern England.Stefan Wermuth/ReutersBritain’s chancellor of the Exchequer, George Osborne, spoke on Monday in Bournemouth, on the south coast of England.

LONDON – British regulators will have the power to split up banks that fail to separate risky trading activity from retail banking, George Osborne, the country’s chancellor of the Exchequer, said on Monday.

As part of an overhaul over how the country’s banks operate, the British finance minister said regulators would be able to forcibly separate firms that failed to maintain a division between their retail banking and investment banking units.

The so-called ring-fencing of consumer deposits from risky trading activity is an effort to reduce the exposure to the wider British economy if one of the country’s largest banks goes bust.

Many of Britain’s largest banks have been engulfed in a series of scandals, and Mr. Osborne said the public was right to be angry over abuses in the country’s financial industry.

The spotlight is now focused on the Royal Bank of Scotland, which is expected to announce a settlement over the manipulation of a key benchmark rate as early as this week.

The bank, in which the government holds an 82 percent stake after providing a bailout, is said to be facing a fine of more than $650 million and a guilty plea against an Asian subsidiary related to the manipulation of the London interbank offered rate, or Libor.

Mr. Osborne said troubling behavior by those in Britain’s financial industry was unacceptable.

“Irresponsible behavior was rewarded, failure was bailed out, and the innocent – people who have nothing whatsoever to do with the banks – suffered,” Mr. Osborne said in a speech in Bournemouth, on the south coast of England.

During the recent financial crisis, a number of British banks, including the Lloyds Banking Group and Northern Rock, received multibillion-dollar bailouts after they ran into trouble because of exposure to risky assets.

To reaffirm the separation between retail and investment banking divisions, Mr. Osborne said on Monday that banks would have to appoint different senior managers to oversee each division. The new powers to forcibly split up banks are in response to fears that firms would try to find ways around dividing their retail and investment banking operations.

“No more rewards for failure. No more too big to fail. No more taxpayers forking out for the mistakes of others,” Mr. Osborne said.

Critics of the planned changes, however, say the separation of banks’ operations will make it harder for them to raise capital and provide financial support to British companies.

“This will create uncertainty for investors, making it more difficult for banks to raise capital, which will ultimately mean that banks will have less money to lend to businesses,” Anthony Browne, chief executive of the British Bankers’ Association, a trade body criticized for its role in the Libor scandal, said in a statement.

The changes, which form part of new banking legislation being submitted to Parliament on Monday, mirror similar efforts in the United States and Europe to reduce the effect of banks’ risky trading operations on the broader economy. The so-called Volcker Rule, which forms part of the Dodd-Frank Act and would prohibit banks from making risky bets with their money, is also nearing regulatory approval in the United States.

In Britain, authorities are going a step further by dividing the Financial Services Authority, the country’s financial regulator, into two separate units, as part of the widespread reforms.

In April, oversight of the country’s banks will be returned to the Bank of England, the central bank, while a new consumer protection agency will monitor market abuse.

The changes come after a series of recent settlements by British banks over illegal activity.

HSBC and Standard Chartered have agreed to pay a combined fine of more than $2 billion to American authorities related to money laundering allegations. Barclays reached a $450 million settlement with United States and British regulators in June related to the manipulation of Libor. And, in total, many of Britain’s largest banks have been required to pay billions of dollars of penalties after inappropriately selling loan insurance to customers.

“Our country has paid a higher price than any other major economy for what went so badly wrong in our banking system,” Mr. Osborne said on Monday.

Article source: http://dealbook.nytimes.com/2013/02/04/osborne-promises-more-regulatory-power-to-split-up-big-banks/?partner=rss&emc=rss

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‘Robin Hood’ Trading Tax Nudged Forward in Europe

January 22, 2013 by Leave a Comment

BRUSSELS — A hotly contested tax on financial trades took a major step forward on Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan.

The so-called Robin Hood tax would apply a levy to trading in stocks, bonds and derivatives, complex financial products tied to underlying assets like oil prices or interest rates. Although the tax would probably be small — one-tenth of a percentage point or less on the value of a trade — it could earn billions of euros for cash-strapped European governments.

Algirdas Semeta, the European commissioner in charge of tax policy, called the decision “a major milestone in tax history” and said the levy could be imposed from next year. But deep concerns about how the initiative would work in practice still could mean delays.

The European Commission, the Union’s policy-making arm, will still need to draft the final legislation and the states in favor of the law will have to give their unanimous approval before it becomes law in the eleven countries that have agreed to send the proposal forward — two more than the minimum required for legislation to be drafted.

A significant complication is stiff opposition to the tax by Britain, which has the largest trading hub in Europe in the City of London. But because Britain has decided to stay outside the group of states applying the tax, its resistance probably would not stop the plan from moving ahead.

The session Tuesday was the second day of a meeting that began here Monday with a session by the Eurogroup of ministers from the 17 members of the euro zone. On Monday evening, in a nearly unanimous vote, the Eurogroup elected Jeroen Dijsselbloem, the Dutch finance minister, to be its new president.

Mr. Dijsselbloem, 46, a social democrat, has been finance minister of the Netherlands for only three months. In the Eurogroup, he succeeded Jean-Claude Juncker, the prime minister of Luxembourg, who had held the post since 2005 and announced his intention to step down last year.

The only formal opposition came from Luis de Guindos, the Spanish finance minister, who said his country and others with comparatively vulnerable economies — compared with those like Germany and the Netherlands — did not hold enough top jobs in the Union’s institutions.

At a news conference late Monday, Mr. Dijsselbloem emphasized the need to ease mistrust between Southern and Northern European countries over austerity policies, which many experts say have worsened economic pain in countries like Spain but have done too little to resolve the euro zone’s problems.

As for the proposed tax on financial transactions, among the 27 members of the full European Union it has firm backing from Germany, France and nine other countries. Others might still eventually support the proposal, which is an idea closely associated with James Tobin, a U.S. economist and Nobel laureate who suggested a version of it in the 1970s.

Britain, as well as Malta, Luxembourg and the Czech Republic, abstained from the vote on Tuesday.

Although Britain would not be required to assess the tax because of a special European procedure allowing it to opt-out, the law still could have an effect on its financial sector by raising the costs of transactions that also involve institutions based inside the tax zone.

The decision to move forward with the tax was “regrettable and likely to serve as another brake on economic growth,” Richard Middleton, a managing director at the Association for Financial Markets in Europe, an industry group based in London, said on Tuesday.

Backers of the tax originally expected the proceeds to go to humanitarian and environmental causes. But the debt crisis that exploded three years ago and the meltdown in the banking sector have adjusted priorities. Nowadays governments are keener to use the revenue to help prop up shaky banks and help finance the budget for running the Union.

The initiative could generate about €57 billion annually, or about 0.5 percent of E.U. output, if it were applied across the entire bloc, according to the European Commission. But that amount is likely to be significantly less without Britain’s participation.

The next stage is for Mr. Semeta, the European tax commissioner, to propose legislation. He has already suggested a levy of 0.1 percent of the value of stocks and bonds traded, and of 0.01 percent of the value of derivatives trades.

One challenge is formulating the law so it does not prompt traders to move to non-taxed jurisdictions.

Another is deciding who pays the tax when traders in cities like Frankfurt and Paris, where the tax would apply, conduct business with traders in cities like London or New York, where it would not.

Article source: http://www.nytimes.com/2013/01/23/business/global/robin-hood-trading-tax-nudged-forward-by-europe.html?partner=rss&emc=rss

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Brazil Registers Anemic Growth in 3rd Quarter, Surprising Economists

November 30, 2012 by Leave a Comment

Gross domestic product grew just 0.6 percent from the previous quarter, stunning economists who had forecast double that rate. Brazil’s economy is now expected to grow only about 1 percent in 2012, delivering a challenge to President Dilma Rousseff, who has tried to increase growth through an array of huge stimulus projects.

Even economists with favorable views of Ms. Rousseff’s policies of assertively directing large government banks and other state-controlled enterprises to promote growth expressed surprise over the figures, which reflect a sharp departure from 2010, the last year of Luiz Inácio Lula da Silva’s presidency, when Brazil’s economy grew 7.5 percent.

Antônio Delfim Netto, an influential former economy chief, called the G.D.P. figures “a tragedy” in comments to reporters here on Friday. Under Ms. Rousseff, who has been president since 2011, Brazil is on track to deliver its weakest two-year period of growth since the early 1990s, before a stabilization program that radically restructured the economy. Finance Minister Guido Mantega contends that Brazil is on the cusp of a recovery, forecasting 4 percent growth next year.

While growth has declined considerably from the boom years, the slowdown has been blunted by state-supported projects aimed at creating jobs, like a shipbuilding sector conceived to support the oil industry. Brazil’s unemployment rate, 5.3 percent, is still hovering around historic lows.

Authorities are also financing broadly popular antipoverty programs. Federal spending surged 9 percent in October compared with October 2011, partly a result of outlays for an moderate-income housing program called Minha Casa Minha Vida (My House My Life). As millions of poor Brazilians are shielded from the slowdown, Ms. Rousseff’s approval ratings remain high.

Still, critics are growing more vocal about the need for Brazil to become more energetic in addressing complex structural dilemmas weighing the economy down, including its byzantine bureaucracy and woeful public schools. Ms. Rousseff is moving to address these issues; she altered an oil royalties bill on Friday, shifting 100 percent of future proceeds to an education fund.

Yet as economic growth slows to a snail’s pace, smaller Latin American countries are doing better, calling into question Brazil’s ambitions of exerting more influence in the region. Panama is set to grow 8.5 percent this year, according to the International Monetary Fund, while Peru should grow 6 percent and Mexico 3.8 percent.

Article source: http://www.nytimes.com/2012/12/01/world/americas/brazil-registers-slow-economic-growth-in-3rd-quarter-shocking-economists.html?partner=rss&emc=rss

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Cyprus Bailout Seen as Near, but Not Yet a Done Deal

November 24, 2012 by Leave a Comment

Seeking to stave off financial collapse, Cyprus said Friday that it had negotiated a multibillion-euro bailout with international lenders, only to have the claim contradicted later by a formal statement from those creditors.

The European Commission, European Central Bank and International Monetary Fund, collectively known as the troika, said there had been “good progress toward agreement on key policies to strengthen public finances, restore the health of the financial system, and strengthen competitiveness.”

It added that “preliminary results of a bank due-diligence exercise, expected in the next few weeks, will inform discussions between official lenders and Cyprus” on the details of a bailout.

Those comments suggest that Cyprus has agreed to the austerity measures that will accompany the loans. But a lack of clarity over how much capital the country’s stricken banks may need is holding up a final agreement.

Cyprus is expected to receive about 16 billion to 17 billion euros ($20.6 billion to $22 billion), a small amount by comparison with other European rescues but a sum roughly equal to the country’s annual gross domestic product.

Talks are continuing on how to unlock a 31.5 billion euro installment of loans for Greece from its international bailout program, money it needs to stave off bankruptcy. Euro zone finance ministers, who failed to reach a deal earlier this week, will resume discussions Monday.

The deterioration of Greece’s finances in the midst of a recession has made the deal elusive; the economic slowdown is preventing the country from hitting its financial targets.

Greece’s finance minister, Yannis Stournaras, said Friday that a compromise was near in which the I.M.F. would agree that Greece’s debt could fall to 124 percent of G.D.P. by 2020 as opposed to a previous target of 120 percent.

Euro zone finance ministers have already agreed on measures that would reduce Greece’s debt to 130 percent of G.D.P. by 2020, Mr. Stournaras said. He said that a further 10 billion euros of savings would need to be found to bring debt down to the level desired by the I.M.F. by 2020.

The austerity measures Greece has undertaken in exchange for its bailouts have pushed Cyprus to seek alternative forms of financial assistance from outside the European Union, including from Russia.

Before the lenders issued their statement Friday contradicting Cyprus, Cypriot officials said that a deadline set by the European Central Bank to recapitalize the country’s banks had forced them to agree to a bailout.

“The bailout deal includes unpleasant measures,” the government spokesman, Stefanos Stefanou, said without elaborating.

The conditions of the bailout have caused friction between government officials and international lenders in recent weeks, though financial markets have been relatively relaxed about the negotiations.

“In other circumstances this issue might have garnered more attention from markets, but it has been swamped by events elsewhere, including in Spain and Greece in particular,” said Kenneth Wattret, co-head of European economics in London for BNP Paribas.

Mr. Wattret said that one reason for the lack of market reaction was that Cyprus seemed to be heading toward an agreement. A failure by politicians to reach a deal would have worried investors more than a bailout, he said, as it would have called into question the effectiveness of Europe’s crisis response.

“Still, once a deal has been struck, one potential source of event risk is removed,” he added.

Fitch Ratings said Friday that it was cutting its credit ratings on three of the island’s banks — Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank — which together have assets of 77.2 billion euros, equal to about 430 percent of G.D.P. The ratings agency said it thought that the failure of Bank of Cyprus and Cyprus Popular Bank was “imminent” and that the two would require “sizable” injections of capital.

The agency pointed out that the precedents set in other euro zone bailouts meant that the investments of senior bank creditors were likely to be protected.

On Wednesday, Fitch downgraded Cyprus’s rating for its long-term sovereign debt to BB- from BB+, adding that the outlook was negative.

If Cyprus does reach a bailout agreement, it will follow in the footsteps of Greece, Ireland and Portugal, all of which had to be rescued by Europe and the International Monetary Fund. In addition, Spain has been offered up to 100 billion euros in aid for its crippled banking sector and may seek more help.

The economic crisis in Greece has spilled over to Cyprus. Cyprus’s economy, particularly its banking sector, is heavily exposed to Greece and Greek institutions.

David Jolly contributed reporting.

Article source: http://www.nytimes.com/2012/11/24/business/global/cyprus-bailout-seen-as-near-but-not-yet-a-done-deal.html?partner=rss&emc=rss

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France’s Treasury Chief Works to Guard Credit Rating

January 3, 2012 by Leave a Comment

Mr. Fernandez, the head of the Treasury within the Ministry of the Economy, Finance and Industry, has already been through a similar crisis-management exercise. That came in early August, when Standard Poor’s cut the top credit rating of the United States government while most of the French elite was on vacation.

Within hours on a summer Saturday morning, Mr. Fernandez helped organize a series of emergency calls with his boss, Finance Minister François Baroin, and others in Paris’s circle of policy makers, to prevent the American crisis from sending a financial tsunami across the Atlantic.

Later that day, Mr. Baroin appeared on French television to question the validity of the United States downgrade. President Sarkozy interrupted his vacation in a show of engagement. But behind the scenes, Mr. Fernandez did much of the heavy lifting.

It was not the first time in the two-year-long European crisis that Mr. Fernandez has quietly kept things moving. And it probably will not be the last.

As France and Germany take the lead in trying to hold the euro currency union together, Mr. Fernandez has emerged as one of Paris’s top power brokers — whether in promoting the French position on the banking sector’s participation in a Greek bailout, or the creation of a rescue fund for troubled countries, or the recent deal by most European Union governments to shore up the foundations of the euro zone.

So much confidence has been placed in Mr. Fernandez that the French news media have started calling him the “guardian of the triple-A.”

But Mr. Fernandez, at 44 a youthful technocrat whose soft blue eyes belie an inner sang-froid, chuckles about the moniker with an almost embarrassed air.

“I’m a civil servant,” he said demurely. “I do what I have to do.”

What he must do now could prove crucial to how well France weathers the country’s seemingly inevitable debt downgrade. Because the demotion has been widely telegraphed by the three major credit rating agencies, Mr. Fernandez and other officials do not expect the impact to be devastating.

Still, a lower credit rating will probably make it more expensive for France to service its debt, and more difficult for the Europewide rescue fund — of which France is a major backer — to operate. That, in turn, could renew tensions between France and Germany over how to manage the euro crisis.

For every photo op in which Mr. Sarkozy and Chancellor Angela Merkel of Germany trumpet a new step forward, Mr. Fernandez has spent countless hours behind the scenes with an influential man in the presidential cabinet, Xavier Musca, Mr. Sarkozy’s powerful chief of staff, and Berlin’s point man, Jörg Asmussen, to smooth and soothe the sometimes testy French-German relationship.

Mr. Fernandez also exchanges e-mails frequently with officials at the Treasury Department to keep up on developments across the Atlantic. And his ability to parse mind-numbing financial issues better than nearly any other French civil servant helped French leaders look smart during the Group of 20 meetings to which France played host in 2011.

Doing all this largely below the public radar is apparently the way Mr. Fernandez prefers to work. In a country where discretion is a highly prized commodity, his effectiveness comes from operating in the shadows.

“Ramon is the right man in the right place,” said Christine Lagarde, who worked with Mr. Fernandez until last summer, when she resigned as France’s finance minister to become the managing director of the International Monetary Fund.

“He is smart, experienced, a good negotiator, but also a critical part of a close-knit network of advisers to the leading political figures,” Ms. Lagarde said.

For Mr. Fernandez’s efforts, he was made a chevalier of the French Legion of Honor in December, in a ceremony under the gilded ceilings of the Élysée Palace. Mr. Sarkozy cited Mr. Fernandez as a pillar in the management of France’s future.

Yet such moments are rare. Mr. Fernandez generally eschews the elitist trappings embraced by most other government dignitaries.

He rides a motor scooter to work, for example. The idea of being chauffeured around “gives me a headache,” he said. On the scooter, “you take some fresh air, and you are forced to focus on just one thing.”

Article source: http://feeds.nytimes.com/click.phdo?i=89d4e3e22c8c3d4a7241cd5fae9e99f3

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New Spanish Leader Asks Banker to Fix State Finances

December 22, 2011 by Leave a Comment

The official, Luis de Guindos, the new economics minister, had most recently been director of the Center for the Financial Sector, an institute in Madrid run by PricewaterhouseCoopers and the IE Business School. Before that, however, he was secretary of state for the economy until 2004, when Mr. Rajoy’s Popular Party was last in power.

He returned to investment banking and ended up confronting the financial crisis from the frontline as head of the Spanish subsidiary of Lehman Brothers in the two years before its bankruptcy.

A month after the Popular Party routed the Socialists in the Nov. 20 general election, Mr. Rajoy read out his list of ministers in a televised address on Wednesday night, without making any further comment. The government will have 14 members, compared with 16 in the previous Socialist administration of José Luis Rodríguez Zapatero.

Mr. Rajoy had refused to discuss his ministerial choices until his presentation to King Juan Carlos earlier in the day. In the end, the prime minister opted for a team containing several party veterans, including some, like Mr. de Guindos, who already formed part of the government of José María Aznar, Spain’s last conservative prime minister, a decade ago.

In contrast, two other countries with troubled economies now have governments that are led by respected — albeit unelected — technocrats: Lucas Papademos in Greece and Mario Monti in Italy. In Portugal, which is also struggling, a third of the ministerial portfolios in the center-right government that won a snap election in June were given to independents with no party affiliation, including Vítor Gaspar, the finance minister.

“This is a government that is very solid and predictable and will stick to the austerity line drawn by Mr. Rajoy,” Arturo Fernández, vice president of the CEOE, the employers’ federation, told Spanish television. “De Guindos already did a very good job during his time” in the Aznar government, he added.

Mr. Rajoy is taking charge after eight years as opposition leader and two losses to Mr. Zapatero, in 2004 and 2008.

Alberto Ruiz-Gallardón, the mayor of the capital, Madrid, will become justice minister. His departure paves the way for Ana Botella, the wife of Mr. Aznar, to take charge of the city.

Mr. Rajoy’s deputy will be Soraya Sáenz de Santamaría, one of his closest allies within the Popular Party.

Miguel Arias Cañete is Spain’s new agriculture minister, returning to take charge of a portfolio that he had in Mr. Aznar’s government.

The Socialists are leaving office discredited by the downturn of a once seemingly robust economy that, since the onset of the world financial crisis, has been shredded by the collapse of the property sector and debt obligations that are also now consuming the other South European economies that use the euro.

Article source: http://feeds.nytimes.com/click.phdo?i=6cf3d0ae5760a26ed28d36d1594df8cd

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Wal-Mart Hears a Familiar Complaint in India

December 6, 2011 by Leave a Comment

Late last month, as part of a push to modernize his nation’s notoriously inefficient retail economy, Prime Minister Manmohan Singh announced that for the first time big foreign companies like Wal-Mart and the British company Tesco could open retail stores in India.

Until now, foreign companies have been restricted to serving only as wholesalers in India. That has already helped create more modern distribution networks, often while generating better prices for farmers and other producers, and giving customers better deals, too.

But expanding the foreign presence to retailing has been seen as the necessary next step for modernists like Mr. Singh, who has been urging the move for years. Praise for his announcement came from India’s corporations and some of its 175 million farmers, who see the move as part of a wave of changes that might help jolt a slowing economy.

And opponents — representing the 34 million people who work in retail and wholesale businesses, as well as left-leaning politicians — were just as loud.

On Monday, leaders of two opposition parties said Mr. Singh’s finance minister, Pranab Mukherjee, had agreed to a delay. Mr. Mukherjee is expected to make a statement in Parliament on Wednesday.

All of this places Wal-Mart in a position hardly new to the company: at the center of a raging debate that pits the multinational giant from Bentonville, Ark., against local mom-and-pop businesses.

For more than a year, Wal-Mart has been operating a wholesale outlet in this northern city known for its fertile farms and hearty food. Local businessmen like Ravi Mahajan, whose family has had a wholesale general store in the narrow alleys of the Imam Nasir market for 40 years, say their sales have been cut in half as their customers — retail shopkeepers — stock up at Wal-Mart.

If the government eventually lets foreign firms expand beyond wholesaling to open retail stores, Mr. Mahajan said, many of his retail customers would be forced out of business, while squeezing out traders like himself who have long served as the crucial middleman in Indian commerce.

“We’ll be destroyed,” Mr. Mahajan said last week, minutes after he and dozens of other traders burned an effigy with a bloated belly and a crudely drawn face, meant to represent multinational marauders.

But Indian business is far from united in opposing foreign retailers.

Farmers like Avtar Singh Sidhu, who sells potatoes to PepsiCo for its Lays chips and has sold baby corn and other vegetables to Wal-Mart’s local partner, the Indian conglomerate Bharti, argues that foreign retailers will be a boon to India’s struggling agricultural sector. The multinationals, he said, will buy directly from farmers and pay better prices than local wholesalers.

Already, he said, PepsiCo is offering 6 rupees per kilo (or 11 cents) for his potatoes, while local traders offer only 3 rupees (6 cents). “We need more competition,” Mr. Sidhu said.

Policy makers are looking for ways to stimulate economic growth, which fell to an annual pace of 6.9 percent in the three months that ended in September. It was the first time India’s growth rate had fallen below 7 percent in two years.

The announcement by Mr. Singh’s administration on Nov. 24 called for allowing foreign companies like Wal-Mart to team up with Indian partners to open retail stores in metropolitan areas with more than one million people. Jalandhar has 2.1 million people.

The plan ran counter to the views of many politicians who say a slower approach is needed to protect indigenous firms and the rural poor.

But Mr. Singh and his backers have argued that foreign retailers could help reduce chronically high food inflation — which has run around 10 percent for the last year, on top of 20 percent increases the year before. The retail proposal, proponents say, could improve the lot of the more than a half billion Indians still tied to the land, by improving the supply system from farms to consumers. An estimated one-third of some types of vegetables and fruits rot before ever reaching retail shelves.

Article source: http://feeds.nytimes.com/click.phdo?i=42ee9193e6a316a7e9dd66e14cc1c1ec

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Euro Zone Finance Ministers Try to Deliver on Promises

November 29, 2011 by Leave a Comment

But the talks highlighted the contrast between Europe’s tortuous decision making and the breakneck speed with which financial markets are pushing the currency zone toward a moment of truth.

While proposals have been working their way through Europe’s convoluted procedures, risks have grown that the debt crisis will plunge Europe back into a steep recession or lead to a fragmentation of the currency union.

On Tuesday the borrowing costs of Italy, the euro zone’s third-largest economy, after Germany and France, reached nearly 8 percent, a record since the inception of the common currency in 1999. An Italian newspaper reported Tuesday that because of the economic slowdown, the European Commission now believes the Italian government will need to adopt more stringent measures to reach its financial targets.

The Dutch finance minister, Jan Kees De Jager, said Tuesday that help might be needed from the International Monetary Fund to bolster the euro zone bailout fund, the European Financial Stability Facility. “We have to look for other solutions to complement the E.F.S.F. and that in my mind will be the I.M.F.,” he said as he arrived for the meeting in Brussels.

A month after E.U. leaders announced a plan to resolve the crisis, most of those decisions have either been delayed or overtaken by events, said Nicolas Véron, a senior fellow at the Bruegel economic research institute in Brussels. Plans to increase the power of the bailout fund, now expected to fall short of the target of €1 trillion, or $1.3 trillion, were now “too little too late,” Mr. Véron said, adding that Europe’s policy errors were caused by a “systemic failure of our institutional framework.”

France and Germany say they planned to break the downward spiral by outlining a new push towards a fiscal union, with stricter rules against budget “sinners,” before a meeting next week of E.U. leaders in Brussels. But the detail of how these ideas will be pushed through remains highly uncertain.

Germany is determined to toughen the euro zone rules significantly before it will contemplate any more far-reaching changes to help shore up the currency. So far Berlin has resisted any larger intervention by the European Central Bank that might stoke inflation, or the short-term introduction of common euro zone bonds.

Some officials hope that agreement in principle on new fiscal rules can encourage the E.C.B. to intervene more actively to help Italy and Spain without risking criticism from Berlin. In recent days senior figures in Austria, Finland and the Netherlands have declined to rule out an enhanced role for the central bank.

Plans to expand the bailout fund, and allow it more freedom, were agreed to in July, and a decision was made in October to leverage its power to around €1 trillion. Because of changed market conditions and declining confidence, which means investors may need more insurance to be tempted to buy bonds, it now appears that the total firepower will fall short of €1 trillion.

Luc Frieden, Luxembourg’s finance minister, said the €1 trillion figure “will be very difficult to reach, in view of the changed market circumstances.”

“I think the E.F.S.F. alone will not be able to solve all the problems,” Mr. Frieden said. “We have to do so together with the I.M.F. and with the E.C.B., within the framework of its independence.”

The decision on whether to release an international loan of €8 billion to Greece was also made in October, but implementation was held back when the former Greek prime minister, George A. Papandreou, suggested holding a referendum on the bailout package. The idea was later scrapped and Mr. Papandreou resigned. Bank recapitalization, the third pillar of the October meeting, was not a main area of discussion Tuesday, but there are worries that this requirement may impose burdens on banks that make them less likely to lend.

Article source: http://feeds.nytimes.com/click.phdo?i=e2fb4e96eb311b604fa61e1a8de99323

Filed Under: Business News Tagged With: , ,

Greek Leader, Papandreou, Wins Vote in Push to Save Debt Deal

November 5, 2011 by Leave a Comment

Mr. Papandreou pledged to form a unity government with a broader consensus, regardless of whether he would lead it.

The moves ended a frenetic week that began with Mr. Papandreou’s surprise call for a referendum on Greece’s new debt agreement with the European Union, which threw financial markets into disarray and even threatened to spread the financial contagion to Italy. He was then forced to back away in a humiliating about-face and saw his domestic support crumble rapidly, even within his own party.

In the 300-member Parliament, Mr. Papandreou received 153 votes. His total included the support of all members of his Socialist Party, known as Pasok, and an independent; several members who had said they would oppose the prime minister ultimately rallied to support him. Mr. Papandreou had widely been expected to step down after the confidence vote, but he said early Saturday that he would explore the composition of a transitional unity government in a meeting with President Karolos Papoulias later in the day. Finance Minister Evangelos Venizelos said the interim government would govern until the end of February, with early elections expected in March.

The confidence vote was essentially cast as a vote on the debt agreement reached with European leaders in Brussels last week, and its passage suggested that Parliament was likely to formally approve the deal. It also appeared to clear the way for Greece to receive the next installment of aid, $11 billion, next month; Greek officials have said that without the additional funds, the country would run out of money to cover expenses by mid-December.

Had Mr. Papandreou lost the vote, his government would have been brought down, throwing the debt agreement into jeopardy and possibly leading to a Greek default and its departure from the euro zone, the 17 nations in the European Union that use the currency. The prime minister’s volatile moves during the week appear to have succeeded in averting those events, at least for now.

But the vote did not resolve the continuing political drama in Greece, including what will be the composition of the next government. Amid growing social unrest in a country whose economy has been decimated by the debt crisis and austerity measures, a new government will have the difficult task of getting formal approval of the debt deal and carrying out the structural changes to which Greece has already pledged itself, including dismissing government workers.

A few hours before the vote, Mr. Papandreou offered a final appeal to Greek lawmakers, declaring his willingness to open immediate talks on a coalition government and to step aside for the good of the country. “The last thing that interests me is my seat,” he said. While the prospect of Greece’s leaving the euro zone, however remote, has been set aside for now, the country is likely to face a caretaker government increasingly seen as beholden to the European Union and the International Monetary Fund, Greece’s foreign lenders.

Mr. Papandreou told the lawmakers that he had viewed a referendum as a form of “direct democracy,” a nod to protesters who have been calling for a greater say in their country’s future amid a growing sense that Greece was no longer in control of its own affairs. 

The idea of a referendum not only caused market turmoil, but it also infuriated European leaders, who gave Mr. Papandreou a serious dressing down in Cannes, France, on Wednesday. It also provided political leverage for the prime minister; Mr. Papandreou dropped the idea only after the conservative opposition, the New Democracy Party, altered its position and said it would support the debt deal.

The New Democracy leader, Antonis Samaras, who has said he would not join a coalition government if it was led by Mr. Panapndreou, repeated his demand for early elections after the confidence vote. On Thursday, he accused Mr. Papandreou of deception and “blackmailing” the Greek people by proposing a referendum.

Niki Kitsantonis contributed reporting from Athens.

Article source: http://www.nytimes.com/2011/11/05/world/europe/greek-vote-european-debt.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
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