Category Archives: Politics
Japan and the EU Enter Into Free Trade Agreement Talks
“TOKYO (AP) — Japan and the European Union agreed Monday to start negotiations for a free-trade pact encompassing nations that account for nearly a third of the world economy.
Japanese Prime Minister Shinzo Abe, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso spoke by telephone for 30 minutes late Monday, aJapanese government spokesman said. A Japan-EU summit set to begin Monday in Tokyo was shelved because of the financial crisis in Cyprus.
The leaders agreed to launch the negotiations toward a “deep and comprehensive” free-trade deal, with the first meeting set for next month, both sides said in a joint statement. The place for that meeting is not yet decided, Deputy Chief Cabinet SecretaryKatsunobu Kato told reporters.
As global momentum builds for regional trade pacts, Japan has been eager to get started on talks with Europe. Earlier this month, Abe announced Tokyo will join talks on a Pacific trade pact, the U.S.-led Trans-Pacific Partnership. The U.S and EU announced free-trade talks earlier this year aimed at creating the world’s largest free-trade zone.
In the phone conversation, the three leaders exchanged views on Cyprus and reaffirmed their commitment to enhancing economic growth and ensuring financial stability. Cyprus secured an agreement early Monday that paves the way for a 10 billion euro ($13 billion) bailout.
“Today marks a historical juncture,” European Trade Commissioner Karel De Gucht, an official who did not cancel his trip, told reporters after meeting with Japanese government and business officials in Tokyo.
He was delighted the agreement was reached but acknowledged it was hard to predict how long the negotiations might take, adding that autos was one “sensitive” sector for the EU.
“We will do our utmost to come to a critical mass of understanding within one year,” he said.
Although resistance to lower tariffs is high in some Japanese industries, such as long-protected rice farmers, manufacturers and others are concerned about being left behind by the trade agreements that other countries are negotiating…”
Cyprus Passes Bills to Wind Down Insolvent Banks
“Cypriot lawmakers approved capital controls and legislation to wind down banks as they scrambled to secure a European bailout and avert a financial collapse of the Mediterranean island.
The parliament passed nine bills late yesterday after a day locked in talks between Cypriot and international officials in Nicosia. Lawmakers may vote later today on what sort of levy to impose on bank deposits above 100,000 euros ($130,000), four days after rejecting an initial proposal to tax all accounts. Banks have been shut all week and are due to reopen on March 26.
President Nicos Anastasiades is trying to end a week-long impasse that is starting to threaten the country’s membership in the euro. The European Central Bank has imposed a March 25 deadline on Cyprus to come up with proposals that will satisfy international creditors or face the risk of losing access to all emergency funds.
“We cannot fund banks that are bankrupt,” ECB council member Erkki Liikanen told Finland’s YLE TV1 today. “There is now a chance of drawing up a program in which the banks are recapitalized or reorganized to reach solvency. The ball is in Cyprus’s court.” …”
Russia Rejects Cyprus’s Offer of Assets in Lieu of a Bailout
“Russia spurned Cyprus’s offers of assets for a bailout as the island nation’s lawmakers begin debate on legislation to avert a financial collapse.
“I think we aren’t able to get the support that we wanted to get,” Cypriot Finance Minister Michael Sarris said in an interview after checking out of the Lotte Hotel in Moscow. “But we must go back home because things are getting serious.”
Cypriot lawmakers begin debating legislation today to prevent a financial meltdown as the European Central Bank threatens to cut off a lifeline for the country’s banks in three days unless a bailout agreement with the European Union is reached. Russian companies and individuals may have about $31 billion of deposits in Cyprus, which in turn is the biggest source of foreign direct investment in Russia.
“The only thing that Cyprus could hope for is Gazprom buying some reserves from them,” Vladimir Kolychev, head of research at Societe Generale SA’s Rosbank (ROSB) unit in Moscow, said by phone. “It’s not clear what these gas reserves are worth, and apparently Gazprom wasn’t particularly interested.”
Russia has ended talks with Cyprus and will decide on participating in restructuring debt after the so-called troika overseeing euro-area bailouts makes its decision, Finance Minister Anton Siluanov told reporters today. The troika comprises officials from the European Commission, ECB andInternational Monetary Fund.
Door Open…”
The Senate Passes Bill to Fund Gubmint Operations
“The Senate Wednesday passed a bill to keep the government operating through September—a rare bipartisan compromise that is near certain to pass the House and avoid the budget brinkmanship that has often tied Congress in knots in recent years.
The bill, which was approved 73-26, leaves in place the mandate that $85 billion in across-the-board spending cuts take affect across domestic and defense programs over the next six months but would soften the blow for some programs.
The compromise accommodated both House Republicans’ desire to bulk up the Pentagon’s budget for operations and maintenance, as well as Senate Democrats’ desire to shore up domestic programs such as nutrition aid for women and children and Head Start, an early-childhood-education program.
Even in such programs, the bill eases but doesn’t eliminate the impact of the cuts, known as a sequester.
During Senate debate on the bill, lawmakers of both parties sought—largely without success—to offer amendments to undo the effects of the sequester on pet programs. Sen. Jerry Moran (R., Kan.) pushed an amendment to prevent projected furloughs of air-traffic controllers, which he said could threaten to close many airports in rural areas—including seven in Kansas.
Democratic leaders refused to allow most such amendments, fearing that would open the floodgates for sequester exceptions. They said efforts to reverse the sequester would be addressed in Democrats’ 2014 budget resolution—a long-term plan for raising taxes and cutting spending that was brought to the Senate floor after the funding bill passed Wednesday…..”
Tick Tock Goes the Cyprus Debt Clock; ECB Hands Country Ultimatum
“The European Central Bank said it will cut Cypriot banks off from emergency funds after March 25 unless the Mediterranean island agrees on a bailout with the European Union andInternational Monetary Fund.
“The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance, ELA, until Monday, 25 March 2013,” the Frankfurt- based ECB said in an e-mailed statement today. “Thereafter, ELA could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks.”
The Cypriot parliament this week rejected a proposed levy onbank deposits to raise 5.8 billion euros ($7.5 billion), which euro-area finance ministers backed as a condition for the country’s bailout. A bank holiday in Cyprus has been extended to March 25, giving policy makers until Monday to find a compromise to prevent a collapse of the country’s banks.
“With this statement, the ECB put even more pressure on European finance ministers and the Cypriot government to come up with a deal,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “But we’ll have to see whether they’ll actually follow through with their threat if there’s no deal by Monday and policy makers decide to further extend the bank holiday.”
’Poker Game’….”
Elizabeth Warren Floats $22 Minimum Wage
“Tripling the minimum wage to $22 an hour from its current $7.25 an hour has been suggested by Democratic Sen. Elizabeth Warren, who until now had seemed to be keeping a low profile after defeating Republican Scott Brown in November for the Massachusetts seat.
“If we started in 1960, and we said [that] as productivity goes up, that is as workers are producing more — then the minimum wage was going to go up the same. And if that were the case, then the minimum wage today would be about $22 an hour,” said Warren, the administration’s former Special Advisor for the Consumer Financial Protection Bureau.
Warren was speaking at last week’s Education, Labor and Pensions Committee hearing on “Keeping up with a Changing Economy: Indexing the Minimum Wage.”
Warren added: “So my question is . . . What happened to the other $14.75? It sure didn’t go to the worker.”
Panelist Arindrajit Dube, an assistant professor at the Department of Economics at the University of Massachusetts-Amherst, responded to Warren’s inquiry by drawing another comparison that appeared to suggest that the approximately $14 difference between today’s actual minimum wage and Warren’s hypothetical minimum wage was going to the nation’s top 1 percent of earners….”
Cyprus Shoots Down Depositor Tax, Now Investors Worry Over Systemic Failure
“Cyprus’s parliament rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force savers to shoulder part of the country’s bailout in a standoff that risks renewed tumult in the euro area.
Cypriot legislators in the capital Nicosia voted 36 against the proposal with none in favor in a show of hands today. There were 19 abstentions. Hammered out by euro-area finance chiefs at the weekend, the deal had sought to raise 5.8 billion euros ($7.5 billion) by drawing funds from Cyprus bank accounts in return for 10 billion euros in international aid….”
Central Banks Propose Several Rates Over Libor Alone
“LONDON (Reuters) – The tarnished Libor interest rate benchmark should be replaced with a range of reference rates based on actual market transactions by banks, a global group of central bankers said on Monday.
Barclays , Royal Bank of Scotland (RBS) and UBS have all been fined for rigging the London interbank offered rate, which regulators are now reforming.
The rate is compiled by banks submitting quotes for the rates at which they believe they could borrow from another bank. It is used to price products worth trillions of dollars, ranging from home loans to credit cards, but central bankers signaled that its days ought to be numbered.
“It is clear that central banks must play an important role in supporting the development of alternative reference rates,” Bank of England Governor Mervyn King said in a statement.
King chairs a committee of central bankers at the Bank for International Settlements, which on Monday published a report on the role central banks could play in creating a choice of rates….”
Republicans To Vote on Keystone XL Pipeline as They Refuse to Wait for W.H.
“U.S. House Republicans won’t wait for President Barack Obama to issue a decision on the Keystone XL pipeline. They plan to vote by the end of May on legislation that would sidestep the White House and offer congressional approval to the TransCanada Corp. (TRP) project.
House Energy and Commerce Committee Chairman Fred Upton said today that the bill would be on the House floor by Memorial Day.
The measure sponsored by Nebraska Republican Lee Terry is being designated H.R. 3, using one of the numbers held in reserve by Republican leadership for their top-priority bills.
“There is no reason for us to not only refine that oil, but also to keep most of it in the U.S.,” Upton, a Michigan Republican, told a press conference.
The project would cross six states and link the tar sands inAlberta, Canada, to Texas refineries along the Gulf Coast. It requires a presidential permit because it crosses an international border.
In January 2012 the Obama administration rejected a proposed route for the pipeline after concerns were raised about the impact of the project on an ecologically sensitive area inNebraska. The route now under consideration was submitted in May 2012.
‘Political Statement’…”
EU Policy Makers Highlight Flexibility Over Cyprus Depositor Tax as Outrage Could Destroy the Bailout
“European policy makers signaled flexibility on the application of an unprecedented bank tax in Cyprus, seeking to overcome outrage that threatened to derail the nation’s bailout. European shares and the euro fell.
While demanding that the levy raise the targeted 5.8 billion euros ($7.6 billion), finance officials said easing the cost to smaller savers was up to Cyprus. A vote on the tax, needed to secure 10 billion euros in rescue loans, was delayed for a second day. Banks may not reopen tomorrow after a holiday today, state-run broadcaster CYBC reported.
“If the government wants to change the structure of the solidarity levy for the banking sector, the government can decide as such,” European Central Bank Executive Board member Joerg Asmussen said today in Berlin. “What’s important is that the planned revenue of 5.8 billion euros remain.”
While Cyprus accounts for less than half a percent of the 17-nation euro economy, the raid on bank accounts risks triggering new convulsions in the financial crisis that began in 2009 inGreece. Moody’s Investors Service said that the move is a significant step toward limiting support for bank creditors across Europe and shows that policy makers will risk financial- market disruptions to avoid sovereign defaults.
The tax is “a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future,” Joachim Fels, chief international economist at Morgan Stanley (MS) in London, wrote in a client note.
On Line…”
Beppe Grillo Just Picked Up 5% in a Recent Poll
“A new poll (Tweeted by Fabrizio Goria) shows surging support for Grillo. The election only added to his momentum, and he’s now at 30 percent. Almost as worrisome for Europe: Berlusconi’s PDL has also gained since the election.
These both represent protests aimed at austerity and Brussels. Remember, Italy has gotten its borrowing costs down, because it;s engaged in austerity/reforms that the ECB likes. If Italy goes back on them, the ECB backstop becomes less politically tenable, and then you could have surging borrowing costs in Europe’s largest debt market….”
Hungary May Be Thrown Out of the EU
“Hungary’s increasingly aggressive moves against media, judiciary and central bank independence will be discussed by European Union heads of states on Friday, raising the possibility that Hungary could be thrown out of the EU.
The European Union is concerned Hungary may be flouting EU rules on human rights, after its parliament voted this week to amend its constitution to allow legislation to bypass approval from the constitutional court. Hungary had defied calls from the European Commission to delay the vote.
The move means European laws designed to protect the freedom of the media and the independence of the judiciary could be compromised, if not violated. Following the vote, the European Commission said it would investigate whether Hungary’s new laws are anti-democratic and violate the bloc’s rules on human rights and EU treaties.
Martin Schulz, president of the European Commission, told CNBC on Thursday evening that a country could be thrown out of the EU if it did not respect European rules and rights, but added that he was wary of passing judgement prematurely.
“Before you blame a country for not respecting the fundamental values of a community to which it belongs, you must have 100 percent safe proof and so far, the proof is not on the table,” he told CNBC, speaking from Brussels, where EU leaders are holding a two-day summit predominately focused on the sovereign debt crisis…”
Beppe Grillo Will Present a Prize Fight for Seats in Italy’s Government
“Italy’s incumbent lawmakers, who united last year to impose austerity on taxpayers, are bracing for a fight over their own privileges as the upstart movement led by Beppe Grillo enters parliament and vies for key roles.
Up for grabs as the legislature convenes today are the speakerships of the Senate and Chamber of Deputies, followed by appointments to budget committees and commission chairmanships. The posts could give Grillo’s Five Star Movement, which took a quarter of the votes in elections last month, enough leverage over the bodies’ more than 2 billion euros ($2.6 billion) in annual operating expenses.
“The costs could be cut in half,” said Elio Lannutti, a consumer advocate, ex-senator and a friend of Grillo’s. “If they keep these people out, the revolution is just going to get bigger.”
Five Star was swept into the legislature with a mandate to cut taxes, curb public spending and shove career politicians from power. The party’s power is still up in the air, as no political force emerged from the Feb. 24-25 election with a majority. It’s now up to President Giorgio Napolitano to nominate a figure to form a government.
Still, Five Star has already used its electoral gains to push its version of an austerity agenda.
Lawmakers make about 20,000 euros a month in salary and benefits, including train and air travel. Yesterday, Grillo called on Pier Luigi Bersani, head of the largest parliamentary force, to persuade his members to give up more than half of their pay. Monthly salaries, at about 11,000 euros, should be reduced to 5,000 euros, Grillo said. There are 945 elected seats in the Senate and Chamber. That compares to 635 in the U.S. Congress.
‘The Caste’…”
Upcoming German Elections Will Be Tested Given Sovereign Debt Crisis Plaguing Europe
“A resurgence of the debt crisis that scarred the euro-area over the past 3 1/2 years is the biggest threat facing Germany in an election year, policy makers and leading economists said.
With sovereign bond yields declining in countries such as Italy and Ireland, governments acrossEurope cannot be lulled into thinking they can let up on their budget-cutting efforts, economists including Deutsche Bank AG senior adviser Thomas Mayer and Holger Schmieding of Berenberg Bank said during Bloomberg’s first Germany Day conference in Berlin yesterday.
“No nonsense,” Schmieding said during a panel discussion at the event, urging governments not to “backtrack in any way on the achievements” made so far. “If any country tried now to undo austerity, it would likely shatter confidence, it would probably spark another row in Europe, another wave of the euro crisis, and that wave of crisis would leave us all with less business investment, less jobs across the euro area.”
Policy makers including Chancellor Angela Merkel, Europe’s dominant political leader, risk complacency as they use a period of relative market calm to shift from crisis-fighting to longer- term efforts to bolster economic growth and combat record levels of unemployment in countries such as Spain andGreece. Leaders resume a two-day summit in Brussels today that was due to tackle Cyprus, the fifth euro country to call for outside aid.
Cyprus ‘Bail-In’….”
Samurai Abe Gets Kuroda Confirmed, More Easing to Come
“Japanese Prime Minister Shinzo Abe’s initiative to end two decades of economic stagnation took its biggest step yet as Parliament confirmed his picks for a new Bank of Japan (8301)leadership team.
Haruhiko Kuroda, who advocated an inflation target more than a decade before the central bank set one, won a majority of votes in the upper house a day after his nomination as governor was endorsed by the lower body. Abe’s picks for two deputies were also approved, with BOJ critic Kikuo Iwata prevailing after being opposed as too radical by some lawmakers.
Kuroda, the outgoing Asian Development Bank chief, has repeatedly said monetary policy alone can end the deflation that has afflicted the world’s third-largest economy for 15 years. His next task is corralling the nine-member board behind fresh stimulus, with options ranging from accelerating bond-purchase plans to setting a target for expanding the monetary base.
“The next focal point is whether Kuroda will hold an emergency meeting,” before the scheduled April 3-4 board gathering, said Shuichi Obata, senior economist at Nomura Securities Co. inTokyo. “The BOJ is likely to extend the maturity of assets it buys and expand bond purchases.”
Japan’s stocks climbed after the confirmation votes, with theNikkei 225 Stock Average (NKY) closing up 1.5 percent, double the gain in the MSCI Asia Pacific Index. The Nikkei closed at its highest since before the Lehman Brothers Holdings Inc. bankruptcy in 2008….”
The Dems Will Introduce $1 Trillion in New Taxes, No Balanced Budget Proposal
“…..The Democrats will introduce their first formal “budget” in 4 years at a press conference at 10:30.
Erik Wasson at The Hill reports on what will be in it:
The first budget from Senate Democrats in four years includes nearly $1 trillion in new taxes but would not balance the budget….”
Paul Ryan’s Budget Plan Unlikely to Pass
“Republicans on Tuesday debuted their full 2014 budget, an ambitious proposal that would seek to balance the budget within a decade, but which is also almost certain to never become law.
Rep. Paul Ryan, R-Wis., the Republican budget chief and 2012 vice presidential nominee, called his third budget an “invitation” to President Barack Obama and Senate Democrats to begin bargaining toward a deal to balance the budget.
“This is not only a responsible, reasonable, balanced plan,” Ryan said, “it’s also an invitation. This is an invitation to the president of the United States, to the Senate Democrats to come together to fix these problems.”
But just as Obama has made new overtures to Ryan and other Capitol Hill Republicans in hopes of breaking the fiscal logjam in Congress, Ryan produced a new budget that offers up few concessions to Democrats, and doubles down upon many of the policies on which Republicans campaigned during last fall’s election….”
Paul Ryan: US Budget Compromise With Obama Possible
“The Republicans’ point person on fiscal issues in Congress said on Sunday that compromise with President Barack Obamais possible on taxes and spending even though his soon-to-be-unveiled budget plan faces certain rejection from Obama’s Democrats.
Rep. Paul Ryan, the chairman of the House of Representatives Budget Committee, acknowledged that Democrats who control the Senate are likely to defeat his proposal to repeal Obama’s signature health-care law and other elements of his plan to balance the budget within 10 years.
But Ryan, whose ideas on taxes and spending gained national prominence when he was selected as the Republican vice presidential candidate last year, said Democrats and Republicans might be able to agree on less dramatic steps that would narrow budget deficits in coming years….”
EU Leaders to Discuss Bailing Out Cyprus This Week
“European leaders grappling with political deadlock in Italy and spiraling unemployment in Francewill turn to a financial rescue for Cyprus in an effort to stave off a return of market turmoil over the debt crisis.
European Union leaders will meet for a March 14-15 summit in Brussels to discuss terms for Cyprus, including the island nation’s debt sustainability and possibly imposing losses on depositors. That comes as Italy struggles to form a government after an inconclusive Feb. 24-25 election and as concern over the French economy mounts with unemployment at a 13-year high.
“We haven’t turned the corner yet, but we’re on a good path,” German Finance Minister Wolfgang Schaeuble told Austria’sDer Standard newspaper in a March 8 interview. “It would be wrong at this point to change course.”
The European Central Bank’s pledge to intervene in bond markets and the prospect of an economic recovery by the end of the year are holding the three-year-old sovereign debt crisis in check. Still, gridlock in Italy has raised the specter of renewed turmoil in the euro area’s third-largest economy, while growth has ground to a halt in France, the second-largest.
European bonds held steady last week, with Spanish debt advancing for a fourth week and Italian yields sliding. Spanish10-year yields declined for the ninth straight day, sliding 3 basis points to 4.73 percent at 9:12 a.m. in Madrid. Italian yields with the same maturity climbed 3 basis points to 4.63 percent.
Euro’s Retreat…”
Merkel Looks to Eastern Block Nations for Allies
“German Chancellor Angela Merkel is turning east as she pushes plans for a more competitive Europe, seeking to bring on board the leaders of Poland and other eastern countries as allies elsewhere prove hard to find.
Merkel and French President Francois Hollande, the key players in the euro-area debt crisis, travel to Warsaw today for talks on closer European Union integration with Polish Prime Minister Donald Tusk and his peers from the Czech Republic, Slovakia and Hungary. The six leaders are due to hold a joint news conference at about 4 p.m. Warsaw time.
As southern Europeans vilify Merkel for her austerity-led solution to the debt crisis, the head of Europe’s biggest economy is looking for support to the countries of the east she knows from childhood growing up in communist EastGermany. It’s the first time that French and German leaders are jointly attending the four-country forum.
“Germany’s allies in the sovereign-debt crisis are not too numerous,” Kai-Olaf Lang, an analyst at the Berlin-based German Institute for International and Security Affairs, said by telephone. In contrast, Central Europe is “mainly like-minded in economic and financial matters” with the German government.
Forging eastern alliances might help Merkel outmaneuver the U.K. as it seeks to shield the City of London and allow her to sidestep efforts to block closer integration in Europe, including her latest push on competitiveness.
