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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Cyprus rejects Russia, EU deadline looming

Cyprus… failed to reach a deal with Russia, as reported very early on this morning, but is said to discuss an EU solution in parliament today. That would include a bailout program for Cypriot bank Laiki, splitting it into a ‘good’ and ‘bad bank’. Jobs would be saved and deposits under €100,000 would be guaranteed, the rest would go towards the bank’s dark side. Besides this proposal, the parliament has six others to discuss. read article

Yesterday…

The US House of Representatives voted to prevent the government from shutting down by the end of the month and supported Paul Ryan’s budget proposal. This means that both government agencies and programs will stay in place until the end of the fiscal year on September 30. Ryan’s budget on the other hands, cuts taxes, healthcare and social costs to lower the budget over the next decade. It is expected that the Democrats’ counter example of a plan will be passed in the Senate today. This has brought us nowhere. read article

In some last minute action, Blackstone, together with Southeastern Asset Management, is considering a bid for computer company Dell. Silver Lake Partners and founder Michael Dell have put in their bid in Feburary, but the official deadline is only todayread article

This morning…

German business confidence, measured by the IFO index, reported a slump after a 10-month high in February. Surprising or not, this is hardly a sign that even Germany is going under, and is following a lower manufacturing PMI as well. read article

Finally, family traits: Raj Rajaratnam’s brother has been accused for insider tradingread article

Weekend reading…

– how Obama is trying to solve the Israel-Palestine conflict, read article

– next up in Venezuelaread article

– Nicholas Sarkozy and elderly women, read article

– Cyprus cartoonsread article

Have a good one.

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Brussels vs Moscow, and Bernanke leaving the Fed

Yesterday…

the Federal Reserve confirmed its asset purchasing program worth $85bn per month to continue until the US economy would improve past the first scarce signs of recovery. read article

Ben Bernanke also alluded to leaving the Fed to pursue other projects, retirement for example. read article

The UK budget saw five more years of spending cuts, right past the 2015 elections to alleviate the country from its £121bn budget deficit and ensure its credit rating. The Office of Budget Responsibility expects 2013 growth to be at 0.6%, followed by 1.8% in 2014read article

Elsewhere, this happened over the course of yesterday: Cyprus’ Finance Minister conferred with Russia, while Angela Merkel said Cypriot banks had to chip in for the bailout, followed by Brussels saying that Cyprus had to present its own refinancing plan after voting against the EU proposal. It all looked like we had a new credible exit candidate until Cyprus asked for more time to come up with a better idea. Now it just looks like Greece. Here are four scenarios that could unfold over the coming days and weeks.

This morning…

The European Central Bank announced that Cyprus had until 25 March, coming Monday, to get its bailout plan ready without losing access to the ECB’s Emergency Liquidity Assistance (ELA) that keeps the island’s banks alive. read article

Finally, China released some promising manufacturing data, showing the sector expand faster than expected and giving the recovery hypothesis more support. read article

So long.

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Central bankers’ secretaries: All about minutes

The minutes from yesterday’s Fed meeting shed doubt on the future of America’s money printing program, showing that “many” (like what, more than four?) Fed officials are uncomfortable with printing all that dough. From MarketBeat:

Fed officials, including Richard Fisher, Charles Plosser, Jeffrey Lacker and Esther George (aha, four…), have previously raised concerns about the Fed’s easy-money policies. The minutes don’t identify participants by name, or specify how many officials expressed a particular view, making it unclear if other more dovish members changed their tunes in the latest Fed meeting.

Maybe someone else should do the minutes next time… At the other end of the spectrum, Bernanke seemed adamant that policies won’t change until the economy shows more convincing signs of recoveryread article

Across the Atlantic, markets are moved by even fewer people. Sir Mervyn King, who is about to leave the Bank of England to spend more time gardening, is pressing for more QE. Or maybe he just wants to take some pressure off of Mark Carney‘s shoulders, who knows. Another £25bn package, would up the Bank’s total easing program to £400bn. read article

Otherwise, the UK saw its budget surplus increasing upon the coupon payment from said QE program, reducing overall net borrowing by £2.6bn. By next the end of the next fiscal year, this number is meant to rise up to £12bn. read article

Elsewhere in Europe, uninspiring data caught on to all those high expectations, with Germany missing estimates and France dropping off the map. This recovery is going super well. read article

In Russia, central bank Governor Sergei Ignatiev, who is stepping down in summer as well, gave an interview saying Russia was losing $49bn a year through untaxed transfers to non-residents to finance illegal activities. read article

So long.

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G20 and currencies: off the record, we’re not friends

The G20 are meeting today and the biggest topic on the agenda is currencies. Since the G7 issued a statement saying they would refrain from using currency targets to revive economic growth on Tuesday, the message has become less consistent by the day. Most politicians still stick to the chant that a race to debase is bad for everyone involved, and on the record nobody wants to point their finger at Japan. Well, until today. read article

In Europe, banker bonuses will be capped at 100% of fixed salary, unless approved by two-thirds of the institution’s shareholders. This decision came in yesterday, initially proposed by Ireland, which currently holds the Presidency of the Council of the European Union. Needless to say, the UK is opposing such plans, suggesting that there could be a different (but probably similar) set of rules for the City of London. read article

And in general, there was a lot of uninspiring news out of Europe yesterday, including eurozone GDP falling 0.6% in Q4, contracting economies in Italy (-0.9%), Portugal (-1.8%) and Germany (-0.6%), and Greek youth unemployment reaching 62%. Today, the UK reported poor January retail sales, down 0.6% from December, and blamed it on the Britain’s very own snow “disaster” earlier this year. read article

In other news, BlackBerry co-founder Jim Balsillie, who used to be co-CEO, sold his entire 5.1% stake in the firm yesterday. Seems like someone isn’t so keen on the Blackberry 10. Meanwhile, Airbus decided to stop using lithium-ion batteries in its jets to avoid the crisis that arose (I want to say ‘ignited’) at Boeing last month, and Warren Buffet partnered up with private equity firm 3G Capital Management [although he likes to publicly hate on said investors] to buy ketchup brand Heinz for $23bn.

In the background, negotiations on a US-EU transatlantic trade and investment partnership started. Such an agreement could add 0.6% to European GDP and 0.4% to American GDP by 2027. read article

Weekend reading
– the designated tumblr page for the FT’s 125 year anniversary

– The Sun‘s and the Oscar Pistorius story, read article

– the deal with off-shore tax havensread article

– the physics of mosh pitsread article 

Have a good one.

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Pope to resign; China beats US as biggest global trader

First things first, the Pope will resign on 28 February due to health issues. NYTimes op-ed tomorrow, leaving drinks Friday. Here the odds on who’s up next.

China has become the world’s largest trading nation in 2012, surpassing the US by $50bn with $3.87tn. Overall, however, the US economy dwarves that of China, being almost double in size. In 2011, America’s GDP totalled $15bn, while China only reached $7.3bn. For 2012, China expects inflation-adjusted GDP to reach $8.3bn. read article

In the old world, the Eurogroup is meeting in Brussels today. On the agenda: Cyprus and Greece and Italy and Spain. Later this week the G-20 will meet in Moscow and discuss further action.

With regard to Cyrpus, a new rescue plan may even be decided at today’s meeting, according to a confidential memo that made it into the hands of the FT.

The proposal for a “bail-in” of investors and depositors, and drastic shrinking of the Cypriot banking sector, is one of three options put forward as alternatives to a full-scale bailout. The ministers are trying to agree a rescue plan by March, to follow the presidential election sin Cyprus later this month.”

If foreign depositors and investors chip in, the size of the bailout could be reduced from €16.7bn to €5.5bn. By nation, Russia is one of the largest foreign depositors in Cyrpus, Russia’s personal Guernsey. Although the G-20 meeting is held in Moscow due to the current Russian presidency, this makes the choice of location more interesting than usual.

Last week Friday, President re-elect Hugo Chavez announced the devaluation of the Venezuelan Bolivar by 32%, causing a buying frenzy over the weekend. One result: Venezuela’s mountain of debt shrunk from $42.9bn to $29.3bn. Another one: home appliances are more or less equivalent to gold now. Yet, some say the currency remains overvalued and the government intervention would have needed to be more drastic. read article

In other news, Obama is giving the State of the Union address tomorrow, which will be centered around unemployment and economic issues. read article

Have a good week.

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Politics is about expectations: a referendum, taxes and inflation

Brace yourselves, it’s a Europe-heavy news day.

The big news of today is David Cameron’s EU speech, announcing a UK membership referendum sometime between now and 2017. Britons are applauding, while the rest of the EU is in a state of frustration. With the words of Laurent Fabius, Foreign Minister of tax hell France: “If you join a football club, you can’t say you want to play rugby.” Well, no. But was that what he was doing? Not really. Good analogy nonetheless. It set the tone for European politics this yearread article 

Eleven European countries (Germany, France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia) have proceeded to drafting legislation for a financial transaction tax on the trading of stocks, bonds and derivatives. That sounds specific, but really isn’t, as Brussels hasn’t decided on specifics at all. So one of the best reasons not to go on a rant of the ineffectiveness of the policy that is meant to generate €57bn for various rescue vehicles, is that it might be stuck in parliaments across the continent for a while, despite its scheduled implementation of January 2014read article

In Israel, Benjamin Netanyahu has been re-elected, though not exactly by a landslide. In the sobering words of the BBC:

It was relief more than real jubilation. The simple truth was that the combined list of candidates headed by Prime Minister Benjamin Netanyahu had performed disappointingly. But politics is about expectations.

More analysis from Israel, here: read article

In Davos, where the World Economic Forum [attended by both Merkel and Cameron – awkward] has begun, Russian Deputy Prime Minister Arkady Dvorkovich has admitted that Russia’s perception abroad is bad for foreign investments and is holding the country back. watch video

Overseas news bring us the policy decision of the Bank of Japan, which is braced to do what new PM Abe talked about all January: pump money in the economy to meet the 2% inflation target. In fact, Japan has never had a firm inflation target like that, so you’d expect it to be big news. Yet, nobody, from analysts to the IMF’s Christine Lagarde, seems overly impressedread article

In the background, Deutsche Bank has to simulate a breakup of its consumer and investment banking units. read article

So long.

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Leadership: Obama’s 2nd term and maybe Merkel’s last

There won’t be a newsletter tomorrow, Tuesday, 22 January 2013.

In the US, which is closed for Martin Luther King day today, President Obama has officially been sworn in againcommencing his second term in the Oval Office. read article

Overall, this week is full of high profile meetings, with the Eurogroup coming together in Brussels today and tomorrow and the World Economic Forum kicking off in Davos on Wednesday. Also on Wednesday, David Cameron will hold his long anticipated speech on the UK’s future in the EU.

There will also be some economic data out of Spain, where Prime Minister Mariano Rajoy just celebrated his anniversary in office. One of the figures likely to emerge, 26% unemployment, with 6 million Spaniards out of work. read article

As a taster for the general elections scheduled for September, the German state of Lower-Saxony held elections on Sunday. The coalition of social democrats and the Green Party defeated the incumbent conservative-liberal coalition by just one seat. For Angela Merkel, who is running for a third term to lead the EU Germany, this means a much harder campaign than she might have hoped for. read article

In other EU matters, Cyprus bailout package has been delayed again, and while the Cypriot government says it’s due to a review of capital needs conducted by PIMCO, it now becomes apparent that the IMF demands more debt relief before doing a thing (or Halloumi as collateral). So far, Cyprus’ clockwork hasn’t stopped because Russia has agreed to a delayed repayment of a €2.5bn loan. Thanks Russia, maybe you’d like to launder some money here in return. read article

And while Starbucks is offering cheap mediocre coffee on this morning’s free London newspapers, the company continues to serve as the scapegoat for corporate tax avoidance in the UK, which, according to HMRC, has risen by 48% in 2012. read article

In other news, Bejing is trying to get its air pollution problem under control by targeting the real culprits: outdoor BBQers, and Mario Monti has launched his re-election campaign in Italy.

So long.

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A new hope: lifting the debt ceiling a 76th time

It’s T-52 days until the United States may or may not bump its head on the debt ceiling, ‘may not’ being the more likely option. Since 1960, the US debt ceiling, the limit of how much it can borrow, has been lifted 75 times, last in August 2011. So why is this still front page news? Probably because of the drama it brings and the attention that it diverts from Spain and Italy. So let’s be appreciative and talk about it for a bit. Now more than ever, Republicans are opposed to any new tax increases. And now more than ever, Democrats think that not enough has been done. Hmm. Technically, the US hit the borrowing limit that’s currently at $16.4tn on 31 December, but some miracle accounting postponed the deadline to March. read article

Thanks to Gerard Depardieu, who is a Russian citizen now, Francois Hollande is apparently reconsidering his 75% tax. He’s busy arguing about gay marriage with the Catholic Church anyway. read article

And in Japan, businesses will profit from almost $5bn in various government stimuli, including lending schemes for technology R&D, low-interest loans for SMEs and support for acquisitions of foreign companies. read article

In a perfect example of lobbying, the banks have convinced the truly unbiased Basel Committee on Banking Supervision to lower their super strict post-global-blow-up liquidity requirements. Someone [Scott Talbott] has done their job right. Lower liquidity standards mean that the  requirements for what qualifies as a suitable high quality liquid asset has been loosened  When Basel III first came up, the assets allowed were cash, T-bills, medium to fantastic corporate debt. This list is a lot longer now. Additionally, the full implementation of the new rules has been delayed until 2019 (originally 2015), meaning that banks will only need to comply with 60% of the requirements by 2015. read article

News from the same category: in a last cleanup after the US mortgage crisis, 14 major banks agreed to a $10bn settlement deal for “flawed paperwork and botched loan modifications“. Money from the deal will be used as cash relief for Americans whose homes were subject to foreclosure during 2009 and 2010. read article

Meanwhile, Google Executive Chairman Eric Schmidt and Bill Richardson, Governor of New Mexico, are in North Korea. Although Schmidt said this wasn’t a work trip, not even his co-traveller believes that his motives are that pure. After all, don’t be evil doesn’t mean don’t do business. read article

So long.

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No growth for Europe, Starbucks wants your love back

German central bank has cut its economic growth forecast for 2013 from 1.6% (June estimate) to 0.4%. Estimates for 2014 are back at 1.9%. Oh well, so we’ll wait another year and pour more money into Europe’s open wounds. No biggie. Yesterday, the ECB said if the recovery was to kick in in the second half of 2013 as hoped [Draghi would have said ‘expected’], the eurozone will grow 1.2% in 2014read article

Also in Germany, financial regulator BaFin sat in on Deutsche Bank’s audit committee meetings during the financial crisis and should therefore have known about the skewed numbers that may have saved the bank from requiring a government bailout. The SEC, who’s investigating the derivative mis-valuations, is bound to be pissed off. read article

When Starbucks started to write your name onto its white paper cups, that was an effort to make you feel more at home, more individually loved in each stock-standard store. Then the company was part of a tax avoidance case worth millions of pounds. Today, Starbucks issued an open letter from its UK managing director, promising to pay up to £20m more in corporate tax just to be nice. Of course, that is an image-protecting half-truth, because Starbucks, Google and Amazon had become the poster children of tax avoidance in the UK. Yet, paying so much money for a one-page add just to remind me that there will always be a barrister barista waiting for me, almost got me walking into a Starbucks this morning. Then I remembered that the coffee’s not that good.

In fiscal cliff news, everybody has returned to the negotiation table, or so it seems. On that note, a depressing visualization of US debt.

The US is also awaiting jobs data that will be completely distorted by Sandy. Meanwhile, Hillary Clinton is convinced that Russia is planning a new Soviet Union and must be stopped. read article

And finally, bidding farewell to the Financial Times Deutschland.

Weekend reading

– The New Yorker goes for lunch with Warren Buffetread article

– The FT got balls: In this opinion piece on the Autumn Statement, George Osborne became G-Dawgread article (click here for a picture of the print version)

– Why Dilma Rousseff needs a new economic advisorread article

– The US could create jobs by building a Death Starread article

Have a good one.

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More stimulus for Japan, more consolidation for Europe (ex-Turkey)

Japan isn’t messing around. Today, the government announced a new stimulus package of almost double the size of the last one in October. With JPY880.3bn ($10.74bn), Japan is now living off all its savings to avoid having to sell more government bonds. The government expects the new stimulus to push GDP by 0.2%. JPY161.2bn will be put towards reconstruction of areas hit hardest by 2011 earthquake. read article

In Europe, the day starts with decisive words from the IMF and the ECB, demanding for Europe’s nations to consolidate their budgets and create a European banking union, also to oversee all banks within the union. The IMF also claimed that France needed to revisit its stubborn views on reform, as Italy and Spain could surpass the country by taking the necessary steps. read article

The German parliament has approved the latest Greek bailout shenanigans. Next up are the parliaments of France and the Netherlands. In the latter, prime minister Mark Rutte said he wants tighter European control over financial issues, while reconsidering powers that currently lie with Brussels but could be handed back to nationsread article

Otherwise, data for German and Greek retail sales (read German retail sales), Italian unemployment, Italian, Spanish and eurozone-wide CPI and Swiss industry, retail and wholesale all missed estimates. Happy days. Eurozone unemployment seems to be the only thing that came in as expected – at a record high of 11.7%.

Meanwhile, Turkey is still holding a grudge against Brussels for not having been able to join the EU yet. Prime Minister Tayyip Erdogan, who recently said the EU had to make a decision on Turkey’s accession by 2023, before the country will turn east, has now commissioned a “giant mosque that will be visible from all across Istanbul.” According to the plan, it would hold 30,000 people. According to Reuters

It is symbolic of Turkey’s tilt to the east under Erdogan, who has chipped away the founding secularism of the modern republic and presided over its emergence as a power in the Middle East.

In other news, the UN assembly has granted Palestine nonmember observer state” status, same as the Vatican. read article

Dominique Strauss-Kahn and Nafissatou Diallo, formerly housekeeper at the Sofitel hotel in New York, have reached a settlement deal, after she had pressed sexual assault charges against the former head of the IMF in 2011. Ka-ching.

Weekend reading

– The Leveson inquiry and modern journalism, read article

– The FT and your flash player explain the UK’s Autumn Statementread article

– More interaction with PBS explaining the web of betrayal behind David Coleman Headleyread article

– Vladimir Putin‘s battle against corruptionread article

– More on corruption, India prepares for cash handout programread article

– Why plan C for Greece isn’t better than any before, read article

Have a good one.

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