Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Friday, January 4, 2013
Santander to cut 3000 jobs as Spanish job losses in the banking sector continue..... Citigroup opines UK t lose AAA credit rating this year....Banking crisis hits Vatican....UK and Europe service sector data ( UK faces recession , Germany sees growth , France / Italy and Spain still deep in contraction regarding service sector ) .... Greece news of the day - corruption and waste covered , bank deposits rise again , tax bill faces deadline for action next week ,
Three parties forge common line opposite SYRIZA to safeguard cohesion of government
Officials from the three parties in the governing coalition were in talks on Thursday aimed at consolidating a common line vis-a-vis the main leftist opposition SYRIZA, which is on Monday expected to submit in Parliament a proposal that socialist PASOK leader Evangelos Venizelos be investigated along with his predecessor as finance minister, Giorgos Papaconstantinou, in connection with the alleged doctoring of the so-called Lagarde list of Greek depositors.
Coalition officials privately expressed concern at SYRIZA’s insistence that
Papaconstantinou is only partially to blame and that Venizelos be put on the spot too as this could destabilize PASOK and subsequently the governing administration. The official position of all three parties in the coalition remained that Papaconstantinou is the only politician implicated in the affair following the removal from the original Lagarde list of the names of three of his relatives.
By contrast, Venizelos was transparent in his handling of the list, sources said, noting that the data came into his possession after being handled by Papaconstantinou and Ioannis Diotis, the former head of the Financial Crimes Squad (SDOE). The fact that Papaconstantinou appears to have had a motive to tamper with the list – the protection of his relatives – and that he failed to react when a version of the Lagarde list was published in October by Hot Doc magazine publisher Costas Vaxevanis bolsters the coalition’s argument.
But there are fears within the ranks of the government that SYRIZA’s alternative proposal for a broader investigation into Papaconstantinou and Venizelos might lead to the affair dragging on in Parliament.
SYRIZA, for its part, repeated on Thursday that a wide-ranging investigation was the only way of stopping the “perpetuation of corruption between the economic oligarchy and politics.” The party said both former finance ministers should face criminal charges in connection with the Lagarde list.
Prosecutors are to summon Papaconstantinou’s relatives to explain the accounts they held at HSBC in Geneva in the coming days.
Stournaras: tax bill must be approved by next Friday
A new tax bill, which was unveiled last month and aims to raise 2.5 billion euros in revenue over the next two years, must be voted through Parliament by the end of next week, Finance Minister Yannis Stournaras told reporters on Friday following a meeting with Prime Minister Antonis Samaras at the Maximos Mansion.
The talks focused on the government's preparation for the next Eurogroup summit on January 21 when eurozone finance ministers are to assess Greece's reform progress once again before deciding whether to release the next instalment of rescue loans, worth 9.2 billion euros.
Asked by reporters whether Greece was prepared for the Eurogroup summit, Stournaras said, "We must be ready, we must approve the tax bill by next Friday, that's the most important issue."
A report probing the country’s three main agricultural cooperatives points toward the mismanagement of millions of euros of state money with large amounts being spent on trips and rent for senior members of the unions, Kathimerini understands.
The report, which was commissioned by the Agricultural Development Ministry, investigated the fate of 14 million euros given to the three unions, known by their acronyms PASEGES, GESASE and SYDASE, by the Greek Farming Insurance Fund (ELGA) between 2007 and 2011.
Initial findings of the report were presented to Prime Minister Antonis Samaras, who last month announced that ELGA funding would no longer go to the cooperatives but to farmers with large families. The 3 million euros that had been earmarked for the three cooperatives for 2012 will go to such families, Samaras said.
The probe into the unions’ finances hints at the total absence of any legislative framework for the management of the millions of euros that flowed into their coffers. For instance, PASEGES, the country’s largest farming union, was found to have covered the cost of an apartment for its president in Athens, including the 900-euro monthly rent and utility bills, sources revealed.
Deposits at Greek banks continued to rise in November, posting a 643.7-million-euro increase from October’s 155.2 billion to reach 155.9 billion euros, according to Bank of Greece data released on Thursday.
November was the fifth consecutive month of growth for deposits. Compared to last June, deposits have risen by a total of 5.3 billion euros.
BoG figures also showed negative credit expansion of 4.6 percent, as the net flow of total funding to the local private sector shrank by 722 million euros. The decline was smaller than that observed in October, when it had amounted to 4.8 percent.
Funding to companies came to minus 343 million euros (from -614 million in November 2011), i.e. minus 5.4 percent, from minus 5.6 percent in October 2012.
Net funding to the self-employed, farmers and personal companies posted a 12-million-euro decline, after a drop of 147 million euros in November 2011.
Santander, Spain's largest bank, is reportedly planning to cut 3,000 jobs following its merger with its Banesto subsidiary.
The number came from union sources close to the bank cited by financial newspaper Cinco Dias.
Santander will open talks with unions on 9 January, but has already warned of gradual but heavy job losses. The merger will see 110 year old Banesto bank fully absorbed into its parent, with the closure of 700 branches helping to cut costs.
Nationalised lender Bankia will also begin talks with unions on 9 January over previously announced plans to shed 6,000 of its 20,000 strong workforce.
Spanish unemployment its already at a record high of 25%.
UK will lose its AAA credit rating this year - Citi
The UK will lose its first class credit rating in 2013, economists at Citi bank have declared following Friday's downbeat economic indicators.
Citi has revised its growth forecast down to 0.4% from 0.8% for the year, well below the 1.1% consensus, and expects growth to stay weak in 2014, at only 0.5% to 1%. The bank's Michael Saunders predicted in a note:
Even if the economy does not suffer a treble dip recession, we expect that real GDP will not regain its prerecession peak until 2016, with real GDP per head not regaining its prerecession peak even by the end of this decade.
With the public debt/GDP ratio set to surge further in coming yeras, we think the uK will lose its AA rating in 2013.
Saunders forecasts that the government debt to GDP ration will balloon to 95% by the end of 2013, up from 44% at the end of 2007, with no prospect of cuts big enough to redress the balance before the next general election.
With the next election due no later than June 2015, and Labour ahead in the polls, there inevitably are doubts as to whether a new government would actually deliver post-2015 spending cuts unless constrained by market pressure. As a result, we have argued previously that the UK will probably lose its AAA rating in the next 12-18 months — indeed, with the weaker economic outlook, we now expect this downgrade will occur in 2013.
Citi pushed back its forecast for the first UK interest rate hike from 2016 to mid-2017, a full 8 yeras after rates fell to half a percentage point in early 2009.
Earlier Friday, Reuters reported that the UK's borrowing costs briefly overtook those of France, raising questions about how long the nation can retain its AAA credit rating.
Borrowing costs for 10 year UK Gilts rose above France's in early morning trading, hitting an 8 month high of 2.132 at 8:39. The UK retains its first class credit score, but France was stripped of its AAA last year.
Banking crisis reaches the Vatican
Card transactions have been suspended within the Vatican City because of concerns about compliance with international banking regulations, including those concerning money laundering, the Guardian's Lizzy Davies reports from Rome. She writes:
If there's one thing more annoying than queueing for hours for the Sistine Chapel, it's queueing for hours only to be told that the marvels of Michelangelo's ceiling are off limits unless you have cash in your wallet.
Tourists and pilgrims flocking to the Vatican City since New Year's Day found that they had to pay for all purchases by cash or cheque after electronic transactions were suspended following concerns over the city state's compliance with international banking regulations, including those concerning money laundering.
The move – which left the Holy See embarrassed and scrambling for a solution – affected customers at the Vatican's well-stocked pharmacy, as well as at its several shops and post office, and, most significantly, its museums – home to the Sistine Chapel and other masterpieces. A notice on the museums' website apologised for any inconvenience caused by the problem, which it blamed on "reasons beyond [its] control".
Triple dip recession fears mount on shock service sector contraction
The UK services sector suffered its first contraction in two years in December, suggesting the economy as a whole slipped back into recession in the last quarter of 2012.
Markit's purchasing managers' index shows the service sector fell below the 50 mark which separates growth from contraction last month, registering 48.9, down from 50.2 in November and below the 50.5 that had been forecast.
The service sector accounts for three quarters of the British productivity, and a decline in conditions has major repercussions for the economy.
Markit economist Chris Williamson said:
The first fall in service sector activity for two years raises the likelihood the the UK economy is sliding back into recession. The services PMI follows an equally disappointing construction survey for December, leaving manufacturing - which accounts for just 10% of the economy - as the only bright spot.
Composite data from the three most recent months shows the UK posted its worst performance for three and a half years, and suggest the economy contracted by 0.2% in the fourth quarter.
German service sector indicators point to growth
A mixed bag of service sector results for the eurozone, with Germany crossing the threshold into growth but the single currency block remaining in recession, just.
The Markit survey of purchasing managers for the service sector shows the eurozone's largest economy surging above the 50 threshold which divides growth from contraction. Germany indexed 52.0, as forecast, an improvement on November's 49.7.
The eurozone as a whole saw service sector conditions improve, indexing 47.8, up from 46.7 in November.
The mood was upbeat in Spain and Italy, but deteriorated in France.
Spain produced a better than expected index of 44.3, hitting a nine month high and beating a forecast 42.6 as well as the previous month's 42.4. Italy rose to 45.6 in December, up from 44.6 the month before.
France fell to 45.2, down from 45.8 last month and lower than the forecast 46.0.
Ireland edged down slightly but remained well above the 50 mark which separates contraction from growth, posting 55.8 in December compared to 56.1 in November.
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