By Stefan Wagstyl, East Europe Editor
Published: May 7 2009 19:45 | Last updated: May 7 2009 19:45
The European Bank for Reconstruction and Development, the multilateral bank for eastern Europe, could be set for a big increase in its €20bn capital to help deal with the economic crisis.
The bank’s 60-odd government shareholders, who before the crisis were considering reducing the EBRD’s activities, are now mulling an expanded role to help fill the gap left by the dramatic drop in global capital flows.
EDITOR’S CHOICE
East Europe banks set for €24.5bn loan - Feb-27
EBRD considers stake in Latvia’s Parex Bank - Dec-19
Lex: Central and eastern Europe - Nov-28
Central and E Europe’s growth forecast slashed - Nov-25
EBRD set to fund Turkey - Oct-29
EBRD sees dire effects of borrowing freeze - Oct-14
Word of their discussions has emerged as the bank on Thursday announced its biggest-ever loan of €432m ($579m, £385m) to Italy’s Unicredit, the largest international bank in eastern Europe, and published its latest gloomy forecast for the region. It warned of a 5.3 per cent drop this year in gross domestic product – far worse than the 0.1 per cent contraction it predicted in January.
The possibility of a capital boost is likely to be debated at the bank’s annual meeting in London later this month but any increases would almost certainly not be implemented before the end of the EBRD’s next capital review in 2012.
In a Financial Times interview, Thomas Mirow, EBRD president, said that as well as dealing with the crisis, the bank was concerned by the aftermath, when private capital would not come back quickly into the region, leaving a bigger role for government-controlled international financial institutions.
Mr Mirow said it was “too early to say” whether he would support a capital increase. But he pointed out that the Group of 20 anti-crisis summit in London had backed plans for the EBRD to discuss such moves.
He said the bank could continue to do business at its current level of €7bn or €8bn annually without an increase but added: “If our shareholders want us to do much more, that is something around €10bn, then they would need to put more resources on the table.”
Meanwhile, with private capital scarce and banks in urgent need of funds, there is growing demand from the bank’s 27 countries of operation, including Turkey, which joined the list last year. Pre-crisis, the bank planned to pull out of central Europe by 2010 but has so far withdrawn from only the Czech Republic and has now put other “graduations” on hold.
The US, the bank’s largest shareholder, previously wanted the bank to reduce its activities. But following the crisis and Barack Obama’s election as president, Washington has boosted support for the bank – as it has for international financial institutions generally.
The EBRD is working closely with the International Monetary Fund and the World Bank on a €24bn bank support programme for eastern Europe.
The deal with Unicredit is likely to be followed by similar agreements with other big international banks. The EBRD is making loans to Unicredit subsidiaries in eight countries and aiming mainly at increasing credit to smaller companies.
In its economic forecast, the EBRD said the impact of the crisis was now spreading from the financial sector to companies and consumers.
But it did expect a slight recovery next year, with a 1.4 per cent average GDP increase.
Erik Berglof, chief economist, said: ”There are downside risks to these predictions. But now there is also upside potential. Our underlying outlook assumes continued external engagement, particularly from the western parents of banks in the region.”
Thursday, May 7, 2009
Obama Calls for $17 Billion in Budget Cuts, Resistance Likely
May 7 (Bloomberg) -- President Barack Obama proposes to cut or eliminate 121 federal programs to save almost $17 billion, a budget plan that almost certainly will face obstacles in Congress and resistance from interest groups.
The president today is sending lawmakers a package of proposed reductions for the fiscal year that begins Oct. 1 as he begins to fill out details of a $3.55 trillion budget outline approved by lawmakers last week. He wants to cut or end scores of programs that he deems wasteful or ineffective to help bring spending under control.
“The administration is unlikely to get even the majority of the cuts it’s asking for,” said Marc Goldwein, policy director of the bipartisan Committee for a Responsible Budget, a Washington-based research group. “More serious efforts at deficit reduction are going to require entitlement and tax reform -- that’s where most of the money is.”
White House officials yesterday cited some examples of programs to be reduced or eliminated as part of the administration’s line-by-line review of the budget. Targeted programs include one that paid states to clean up abandoned mine sites, for a savings of $142 million; a Defense Department radio navigation system made obsolete by global-positioning devices, to save $35 million, and Even Start, an early childhood Education Department program, for a savings of $66 million.
The total savings, if accepted by Congress, would represent 0.4 percent of Obama’s $3.55 trillion budget.
‘Positive Step’
Representative Dennis Cardoza, a California Democrat, called the administration’s plan a “positive step” to try to “bring this whole thing into some kind of fiscal balance.” He and other Democratic leaders were briefed yesterday by White House budget director Peter Orszag.
“I am not going to agree with all of it,” said Cardoza, a member of his party’s fiscally conservative Blue Dog coalition. “I certainly applaud their looking at government waste and trying to eliminate” unnecessary spending.
House Majority Leader Steny Hoyer, a Maryland Democrat, and House Appropriations Committee Chairman David Obey, a Wisconsin Democrat, declined to discuss details of the proposal.
The administration’s budget-cutting efforts aren’t new and often aren’t successful. In 2008, then-President George W. Bush, working with a Democratic Congress, proposed ending or reducing 141 federal programs. Of those, 29 were terminated or trimmed for a savings of about $1.6 billion, the White House budget office said.
“Every government program -- no matter how wasteful -- will be defended by its recipients and congressional champions,” said Brian Riedl, a budget expert at the Heritage Foundation, a Washington-based research group. “Unless Obama puts the weight of the White House behind his spending cuts, Congress will ignore them.”
Budget Outline
Lawmakers on April 29 adopted a $3.55 trillion outline for the 2010 budget that embraces Obama’s top agenda items, including a health-care overhaul, a push for renewable, clean- energy sources and changes in education funding.
White House officials, who briefed reporters on a conference call, said yesterday about half the program cuts or eliminations called for in the administration’s detailed proposal are in defense and the rest are spread throughout the government. Some programs to be reduced or ended were previously announced by Defense Secretary Robert Gates, though about 80 weren’t disclosed before, an administration official said.
The official said the White House doesn’t expect the belt- tightening effort to be easy.
Think Bigger
“To really get the deficit under control, we’re going to have to start thinking bigger,” said Goldwein, of the Committee for a Responsible Budget. “That means paying for any tax cut or spending program” and “addressing Social Security and Medicare before they become unaffordable.”
Those two programs account for more than 40 percent of government spending.
Representative John Larson, a Connecticut Democrat, said Congress “may have a slightly different point of view on areas” where Obama is proposing cuts. Still, he said Congress and the president “will both get to the same goal” of improving the economy and reducing the budget deficit.
House Speaker Nancy Pelosi, a California Democrat, has asked lawmakers to compile their own list of potential program terminations or cuts, an administration official said.
The Congressional Budget Office projects the deficit will be $1.85 trillion this year, about four times the previous record, and $1.38 trillion in fiscal 2010.
Asked whether cuts of less than $20 billion will make a dent in the deficit, Larson said, “It depends on what it means over the scope of five and 10 years.” From the “deep, cavernous hole where we have been left, we’re looking a long way up but it’s a steady climb” under the budget plan agreed to by Obama and Congress, he said.
Representative Jim Clyburn of South Carolina, the House’s third-ranking Democrat, said he will “reserve judgment” on the proposed cuts until he has a chance to read the proposal.
The president today is sending lawmakers a package of proposed reductions for the fiscal year that begins Oct. 1 as he begins to fill out details of a $3.55 trillion budget outline approved by lawmakers last week. He wants to cut or end scores of programs that he deems wasteful or ineffective to help bring spending under control.
“The administration is unlikely to get even the majority of the cuts it’s asking for,” said Marc Goldwein, policy director of the bipartisan Committee for a Responsible Budget, a Washington-based research group. “More serious efforts at deficit reduction are going to require entitlement and tax reform -- that’s where most of the money is.”
White House officials yesterday cited some examples of programs to be reduced or eliminated as part of the administration’s line-by-line review of the budget. Targeted programs include one that paid states to clean up abandoned mine sites, for a savings of $142 million; a Defense Department radio navigation system made obsolete by global-positioning devices, to save $35 million, and Even Start, an early childhood Education Department program, for a savings of $66 million.
The total savings, if accepted by Congress, would represent 0.4 percent of Obama’s $3.55 trillion budget.
‘Positive Step’
Representative Dennis Cardoza, a California Democrat, called the administration’s plan a “positive step” to try to “bring this whole thing into some kind of fiscal balance.” He and other Democratic leaders were briefed yesterday by White House budget director Peter Orszag.
“I am not going to agree with all of it,” said Cardoza, a member of his party’s fiscally conservative Blue Dog coalition. “I certainly applaud their looking at government waste and trying to eliminate” unnecessary spending.
House Majority Leader Steny Hoyer, a Maryland Democrat, and House Appropriations Committee Chairman David Obey, a Wisconsin Democrat, declined to discuss details of the proposal.
The administration’s budget-cutting efforts aren’t new and often aren’t successful. In 2008, then-President George W. Bush, working with a Democratic Congress, proposed ending or reducing 141 federal programs. Of those, 29 were terminated or trimmed for a savings of about $1.6 billion, the White House budget office said.
“Every government program -- no matter how wasteful -- will be defended by its recipients and congressional champions,” said Brian Riedl, a budget expert at the Heritage Foundation, a Washington-based research group. “Unless Obama puts the weight of the White House behind his spending cuts, Congress will ignore them.”
Budget Outline
Lawmakers on April 29 adopted a $3.55 trillion outline for the 2010 budget that embraces Obama’s top agenda items, including a health-care overhaul, a push for renewable, clean- energy sources and changes in education funding.
White House officials, who briefed reporters on a conference call, said yesterday about half the program cuts or eliminations called for in the administration’s detailed proposal are in defense and the rest are spread throughout the government. Some programs to be reduced or ended were previously announced by Defense Secretary Robert Gates, though about 80 weren’t disclosed before, an administration official said.
The official said the White House doesn’t expect the belt- tightening effort to be easy.
Think Bigger
“To really get the deficit under control, we’re going to have to start thinking bigger,” said Goldwein, of the Committee for a Responsible Budget. “That means paying for any tax cut or spending program” and “addressing Social Security and Medicare before they become unaffordable.”
Those two programs account for more than 40 percent of government spending.
Representative John Larson, a Connecticut Democrat, said Congress “may have a slightly different point of view on areas” where Obama is proposing cuts. Still, he said Congress and the president “will both get to the same goal” of improving the economy and reducing the budget deficit.
House Speaker Nancy Pelosi, a California Democrat, has asked lawmakers to compile their own list of potential program terminations or cuts, an administration official said.
The Congressional Budget Office projects the deficit will be $1.85 trillion this year, about four times the previous record, and $1.38 trillion in fiscal 2010.
Asked whether cuts of less than $20 billion will make a dent in the deficit, Larson said, “It depends on what it means over the scope of five and 10 years.” From the “deep, cavernous hole where we have been left, we’re looking a long way up but it’s a steady climb” under the budget plan agreed to by Obama and Congress, he said.
Representative Jim Clyburn of South Carolina, the House’s third-ranking Democrat, said he will “reserve judgment” on the proposed cuts until he has a chance to read the proposal.
Tuesday, May 5, 2009
Australian Dollar Slips From 7-Month High as Equities Decline
May 6 (Bloomberg) -- The Australian dollar fell from near a seven-month high as concern stress tests will show some of the U.S.’s biggest banks need more capital sapped demand for higher- yielding assets.
New Zealand’s currency weakened for the first day in four as its Treasury Department said the cash budget deficit was wider than the government forecast in March and would continue until at least June. Australia’s dollar extended declines after retail sales and exports rose in March by more than economists estimated.
“What really is concerning us today in currency markets is the stress tests and the resulting uphill battle U.S. banks will face to raise funds,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “That hurts the Australian dollar by undercutting risk appetite as the rally in U.S. stocks fades.”
Australia’s currency slumped 0.9 percent to 73.62 U.S. cents as of 11:51 a.m. in Sydney from 74.26 cents in New York yesterday, when it touched 74.79 cents, the strongest since Oct. 6. The currency declined 1.5 percent to 72.26 yen.
New Zealand’s dollar weakened 0.5 percent to 57.73 U.S. cents from 58.04 cents yesterday, when it touched 58.65 cents, the most since April 14. It bought 56.67 yen from 57.34 yen.
New Zealand Jobless
New Zealand’s dollar also fell before a report tomorrow forecast to show the jobless rate climbed to 5.3 percent in the first quarter, the most since September 2002. A report in Australia the same day will likely show the unemployment rate there grew in April to 5.9 percent, the most since July 2003, according to the median estimate in a Bloomberg News survey.
“The Australian dollar looks like it’s at the top of the range and won’t break much above 75 U.S. cents in the short- term,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The currency will “struggle” to rise above 74.40 cents and may decline toward 73.40 today, he said. the new Zealand dollar will likely trade between 57.70 U.S. cents and 58.30 cents today, he said.
Australia today sold A$700 million ($517.4 million) of securities maturing April 2020 at a weighted average yield of 5 percent. The so-called bid-to-cover ratio at the auction was 3.2.
The rate Australian banks charge each other for three-month loans advanced seven basis points to 3.14 percent, Australian Financial Markets Association data show. The difference between that rate and the overnight swap rate was 27 basis points. A basis point is 0.01 percentage point.
Australian government bonds advanced for the first day in six. The yield on 10-year notes fell one basis point, or 0.01 percentage point, to 4.80 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.09, or A$0.90 per A$1,000 face amount, to 103.47.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.48 percent from 3.45 yesterday.
New Zealand’s currency weakened for the first day in four as its Treasury Department said the cash budget deficit was wider than the government forecast in March and would continue until at least June. Australia’s dollar extended declines after retail sales and exports rose in March by more than economists estimated.
“What really is concerning us today in currency markets is the stress tests and the resulting uphill battle U.S. banks will face to raise funds,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “That hurts the Australian dollar by undercutting risk appetite as the rally in U.S. stocks fades.”
Australia’s currency slumped 0.9 percent to 73.62 U.S. cents as of 11:51 a.m. in Sydney from 74.26 cents in New York yesterday, when it touched 74.79 cents, the strongest since Oct. 6. The currency declined 1.5 percent to 72.26 yen.
New Zealand’s dollar weakened 0.5 percent to 57.73 U.S. cents from 58.04 cents yesterday, when it touched 58.65 cents, the most since April 14. It bought 56.67 yen from 57.34 yen.
New Zealand Jobless
New Zealand’s dollar also fell before a report tomorrow forecast to show the jobless rate climbed to 5.3 percent in the first quarter, the most since September 2002. A report in Australia the same day will likely show the unemployment rate there grew in April to 5.9 percent, the most since July 2003, according to the median estimate in a Bloomberg News survey.
“The Australian dollar looks like it’s at the top of the range and won’t break much above 75 U.S. cents in the short- term,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The currency will “struggle” to rise above 74.40 cents and may decline toward 73.40 today, he said. the new Zealand dollar will likely trade between 57.70 U.S. cents and 58.30 cents today, he said.
Australia today sold A$700 million ($517.4 million) of securities maturing April 2020 at a weighted average yield of 5 percent. The so-called bid-to-cover ratio at the auction was 3.2.
The rate Australian banks charge each other for three-month loans advanced seven basis points to 3.14 percent, Australian Financial Markets Association data show. The difference between that rate and the overnight swap rate was 27 basis points. A basis point is 0.01 percentage point.
Australian government bonds advanced for the first day in six. The yield on 10-year notes fell one basis point, or 0.01 percentage point, to 4.80 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.09, or A$0.90 per A$1,000 face amount, to 103.47.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.48 percent from 3.45 yesterday.
UK economy shrinking at fastest since 1931
The economy is expected to decline more sharply in 2009 than at any time since 1931 and is already contracting faster than in the early 1930s, according to the National Institute for Economic and Social Research.
The NIESR, issuing its quarterly economic outlook for the year, predicts that national income will decline by 4.3 per cent this year – much more than the 3.5 per cent forecast by Alistair Darling, the chancellor, in last month’s Budget, and even more than the 3.8 per cent estimated by the European Commission.
The gloomier assessment – the NIESR predicted contraction of 2.7 per cent for 2009 just a few months ago – is due to the unexpectedly sharp fall in global trade, which is hitting UK manufacturing with particular ferocity.
The NIESR’s central projection is for successively lower levels of contraction for the second and third quarters of this year, with modest growth in the final months. Consumer spending is likely to be brought forward somewhat by households hoping to beat the deadline when value added tax will revert to its higher level, it says.
“World trade has collapsed by more than forecast,” said Simon Kirby, economist at the NIESR. “If net trade fails to pick up, we could see a second year of economic contraction.”
Government debt would rise to about 100 per cent of gross domestic product – much more than the Treasury was projecting – and output would be permanently scarred by 4-5 per cent.
National output was not likely to return to its peak in the first quarter of 2008 until the first three months of 2012, with a peak-to-trough decline of 5.5 per cent. On a per capita basis – adjusted for population – this means the contraction in output will be sharper even than that seen in the recession of 1979-81.
Unemployment, however, while likely to peak at more than 3m in 2011, would remain lower than during the recession of the early 1980s when population growth was taken into account. That was because wages have fallen sharply in order to preserve jobs.
The NIESR’s estimates cast doubt on the chancellor’s fiscal projections, which require much higher levels of economic activity than the institute expects. For example, in order for the chancellor’s forecasts of tax revenues to prove accurate, housing activity would have to return to its levels of 2002-03 at the height of the housing boom.
The NIESR no longer expects to see deflation this year as measured by the consumer price index. A weaker pound was driving up prices of imported goods, it says, and recent rises in oil prices were likely to prop up prices.
The NIESR, issuing its quarterly economic outlook for the year, predicts that national income will decline by 4.3 per cent this year – much more than the 3.5 per cent forecast by Alistair Darling, the chancellor, in last month’s Budget, and even more than the 3.8 per cent estimated by the European Commission.
The gloomier assessment – the NIESR predicted contraction of 2.7 per cent for 2009 just a few months ago – is due to the unexpectedly sharp fall in global trade, which is hitting UK manufacturing with particular ferocity.
The NIESR’s central projection is for successively lower levels of contraction for the second and third quarters of this year, with modest growth in the final months. Consumer spending is likely to be brought forward somewhat by households hoping to beat the deadline when value added tax will revert to its higher level, it says.
“World trade has collapsed by more than forecast,” said Simon Kirby, economist at the NIESR. “If net trade fails to pick up, we could see a second year of economic contraction.”
Government debt would rise to about 100 per cent of gross domestic product – much more than the Treasury was projecting – and output would be permanently scarred by 4-5 per cent.
National output was not likely to return to its peak in the first quarter of 2008 until the first three months of 2012, with a peak-to-trough decline of 5.5 per cent. On a per capita basis – adjusted for population – this means the contraction in output will be sharper even than that seen in the recession of 1979-81.
Unemployment, however, while likely to peak at more than 3m in 2011, would remain lower than during the recession of the early 1980s when population growth was taken into account. That was because wages have fallen sharply in order to preserve jobs.
The NIESR’s estimates cast doubt on the chancellor’s fiscal projections, which require much higher levels of economic activity than the institute expects. For example, in order for the chancellor’s forecasts of tax revenues to prove accurate, housing activity would have to return to its levels of 2002-03 at the height of the housing boom.
The NIESR no longer expects to see deflation this year as measured by the consumer price index. A weaker pound was driving up prices of imported goods, it says, and recent rises in oil prices were likely to prop up prices.
Australian Bank Stocks Gain on Westpac Earnings; BHP Declines
May 6 (Bloomberg) -- Australian bank shares rose on earnings from Westpac Banking Corp., outweighing declines by the country’s mining companies on lower copper and oil prices. South Korean shipping stocks advanced as cargo rates climbed.
Westpac, Australia’s biggest lender by market value, climbed 2.6 percent as it reported a 6 percent drop in first- half profit and as bond risk fell. BHP Billiton Ltd., the world’s biggest mining company, fell 1.2 percent.
“I think this result will be taken well for Westpac for sure, as there were no real surprises,” said Prasad Patkar, who helps manage the equivalent of about $800 million at Platypus Asset Management in Sydney. “It is also likely to be seen as good for the banking sector as a whole.”
Australia’s S&P/ASX 200 Index advanced 0.1 percent to 3,892.90 at 10:57 a.m. in Sydney. New Zealand’s NZX 50 Index gained 0.5 percent, while South Korea’s Kospi added 0.1 percent. Japan’s market is closed for a holiday. The MSCI Asia Pacific excluding Japan Index was little changed, having risen 20 percent since the start of the year.
Futures on the U.S. Standard & Poor’s 500 Index declined 0.2 percent. The gauge lost 0.4 percent yesterday as speculation grew that government stress tests will show some banks need more capital.
Westpac climbed 2.6 percent to A$20. The bank said cash earnings dropped to A$2.29 billion ($1.7 billion) in the six months ended March 31, from A$2.44 billion a year ago, using pro-forma numbers adjusted to reflect last year’s takeover of St. George Bank Ltd. Bad debts for the half totaled A$1.61 billion.
Baltic Dry
BHP fell 1.2 percent to A$34.08. Rio Tinto Group, the world’s third-largest mining company, slid 1.9 percent to A$69.61. Copper futures in New York dropped 2.9 percent to $2.0825 a pound yesterday.
Harvey Norman Holdings Ltd., Australia’s largest electrical retailer, lost 3.6 percent to A$3.21. The stock was cut to “underweight” from “neutral” at JPMorgan Chase & Co.
STX Pan Ocean Co., South Korea’s biggest bulk carrier, rose 2.5 percent to 12,400 won. Korea Line Corp., the second biggest, climbed 3.6 percent to 81,000 won.
The Baltic Dry Index, which measures commodity-shipping rates, gained the most in almost three months on demand to haul coking coal and iron ore to make steel. The gauge surged 5 percent yesterday, according to the Baltic Exchange, the biggest leap since Feb. 10.
Westpac, Australia’s biggest lender by market value, climbed 2.6 percent as it reported a 6 percent drop in first- half profit and as bond risk fell. BHP Billiton Ltd., the world’s biggest mining company, fell 1.2 percent.
“I think this result will be taken well for Westpac for sure, as there were no real surprises,” said Prasad Patkar, who helps manage the equivalent of about $800 million at Platypus Asset Management in Sydney. “It is also likely to be seen as good for the banking sector as a whole.”
Australia’s S&P/ASX 200 Index advanced 0.1 percent to 3,892.90 at 10:57 a.m. in Sydney. New Zealand’s NZX 50 Index gained 0.5 percent, while South Korea’s Kospi added 0.1 percent. Japan’s market is closed for a holiday. The MSCI Asia Pacific excluding Japan Index was little changed, having risen 20 percent since the start of the year.
Futures on the U.S. Standard & Poor’s 500 Index declined 0.2 percent. The gauge lost 0.4 percent yesterday as speculation grew that government stress tests will show some banks need more capital.
Westpac climbed 2.6 percent to A$20. The bank said cash earnings dropped to A$2.29 billion ($1.7 billion) in the six months ended March 31, from A$2.44 billion a year ago, using pro-forma numbers adjusted to reflect last year’s takeover of St. George Bank Ltd. Bad debts for the half totaled A$1.61 billion.
Baltic Dry
BHP fell 1.2 percent to A$34.08. Rio Tinto Group, the world’s third-largest mining company, slid 1.9 percent to A$69.61. Copper futures in New York dropped 2.9 percent to $2.0825 a pound yesterday.
Harvey Norman Holdings Ltd., Australia’s largest electrical retailer, lost 3.6 percent to A$3.21. The stock was cut to “underweight” from “neutral” at JPMorgan Chase & Co.
STX Pan Ocean Co., South Korea’s biggest bulk carrier, rose 2.5 percent to 12,400 won. Korea Line Corp., the second biggest, climbed 3.6 percent to 81,000 won.
The Baltic Dry Index, which measures commodity-shipping rates, gained the most in almost three months on demand to haul coking coal and iron ore to make steel. The gauge surged 5 percent yesterday, according to the Baltic Exchange, the biggest leap since Feb. 10.
Monday, May 4, 2009
Europe jobs crisis poses social order ‘threat’
Social tensions and a rise in political extremism could rise to dangerous levels unless Europe’s leaders tackle rising joblessness, the EU’s top employment official has warned.
Vladimir Spidla, commissioner for social affairs, said a tide of school leavers with few job prospects posed a “latent threat” to European social order.
EDITOR’S CHOICE
End to Europe’s recession in sight - May-04
Analysis: Optimism builds - May-04
Hopes for end to inventory cuts grow - May-04
Brussels sees UK economy contracting 3.8% - May-04
Wolfgang Münchau: Europe must learn from Japan’s experience - May-03
Focus on stimulus - May-03
His comments come days ahead of what was meant to be a high-profile “jobs summit” involving the EU’s 27 national leaders, but which has been quietly downgraded over recent weeks as politicians balked at giving more power over social policy to Brussels.
Few national leaders wanted to be associated with a special summit on jobs while unemployment is rising, diplomats say.
Despite the snub, Mr Spidla told the FT that Europe had to focus on the social aspect of the financial crisis if it wanted to avoid a rise in strife.
“If you are in a situation where lots of people are excluded from work, this will of course create social tensions,” he said. “The consequences can be limited, but they can also prove dangerous: we’ve all seen what happened in the banlieues in France, we’ve seen also the rise of extremism in central Europe and elsewhere.”
Unemployment and lack of opportunity for second-generation immigrants were widely seen as contributing to large-scale riots in France in 2005. A state of emergency was declared after an estimated 8,000 vehicles were burnt over three weeks.
Mr Spidla has blamed “political populism, hate speech and media hype” for a perceived increase in attacks on members of the Roma community in Hungary and the Czech Republic among others.
The situation is set to worsen in the coming months as young people graduate and look for work, Mr Spidla added.
“The number of people finishing their studies won't change, but the ability of the job market to give them employment will.”
Mr Spidla, one of the most left-leaning members of the commission, said the crisis highlighted the importance of “social Europe”, a concept that was all-but dismissed at the start of the current commission five years ago.
Preparations are afoot for the jobs summit in Prague on Thursday, shortened to a single morning ahead of other European business. The meeting now will consist of a far more conventional engagement between Brussels politicians, trade unionists and employers' representatives, and is likely to attract little publicity.
The scaling down of the summit is being interpreted as a snub by trades unions, which had hoped to use the limelight to push their “social Europe” agenda.
John Monks, head of the European trade union confederation, said: “It’s disappointing, it started with great ambition. The impression is that unemployment is a lower-order issue.”
Mr Spidla insisted “the diplomatic format of the meeting may have changed, but not its ambition”.
Vladimir Spidla, commissioner for social affairs, said a tide of school leavers with few job prospects posed a “latent threat” to European social order.
EDITOR’S CHOICE
End to Europe’s recession in sight - May-04
Analysis: Optimism builds - May-04
Hopes for end to inventory cuts grow - May-04
Brussels sees UK economy contracting 3.8% - May-04
Wolfgang Münchau: Europe must learn from Japan’s experience - May-03
Focus on stimulus - May-03
His comments come days ahead of what was meant to be a high-profile “jobs summit” involving the EU’s 27 national leaders, but which has been quietly downgraded over recent weeks as politicians balked at giving more power over social policy to Brussels.
Few national leaders wanted to be associated with a special summit on jobs while unemployment is rising, diplomats say.
Despite the snub, Mr Spidla told the FT that Europe had to focus on the social aspect of the financial crisis if it wanted to avoid a rise in strife.
“If you are in a situation where lots of people are excluded from work, this will of course create social tensions,” he said. “The consequences can be limited, but they can also prove dangerous: we’ve all seen what happened in the banlieues in France, we’ve seen also the rise of extremism in central Europe and elsewhere.”
Unemployment and lack of opportunity for second-generation immigrants were widely seen as contributing to large-scale riots in France in 2005. A state of emergency was declared after an estimated 8,000 vehicles were burnt over three weeks.
Mr Spidla has blamed “political populism, hate speech and media hype” for a perceived increase in attacks on members of the Roma community in Hungary and the Czech Republic among others.
The situation is set to worsen in the coming months as young people graduate and look for work, Mr Spidla added.
“The number of people finishing their studies won't change, but the ability of the job market to give them employment will.”
Mr Spidla, one of the most left-leaning members of the commission, said the crisis highlighted the importance of “social Europe”, a concept that was all-but dismissed at the start of the current commission five years ago.
Preparations are afoot for the jobs summit in Prague on Thursday, shortened to a single morning ahead of other European business. The meeting now will consist of a far more conventional engagement between Brussels politicians, trade unionists and employers' representatives, and is likely to attract little publicity.
The scaling down of the summit is being interpreted as a snub by trades unions, which had hoped to use the limelight to push their “social Europe” agenda.
John Monks, head of the European trade union confederation, said: “It’s disappointing, it started with great ambition. The impression is that unemployment is a lower-order issue.”
Mr Spidla insisted “the diplomatic format of the meeting may have changed, but not its ambition”.
Asia Day Ahead: S&P 500 Erases 2009 Loss; Citi May Seek Capital
May 5 (Bloomberg) -- U.S. stocks rose, erasing the Standard & Poor’s 500 Index’s 2009 loss, after home sales beat estimates and manufacturing in China increased for the first time in nine months, boosting confidence the global recession is easing. Citigroup Inc., girding for results of the Federal Reserve’s bank stress test, may try to wring capital from private investors instead of U.S. bailout funds as a way of bolstering equity without ceding control to the government, people briefed on the matter said.
TOP STORIES/MOST READ ON BLOOMBERG
Obama Seeks End of Corporate Tax Break to Raise $190 Billion
President Barack Obama proposed raising about $190 billion over the next decade by outlawing three offshore tax-avoidance techniques used by U.S. companies such as Caterpillar Inc. and Procter & Gamble Co.
Buffett Lambastes Bankers, Insurers for ‘Stupidity’
Berkshire Hathaway Inc. Chairman Warren Buffett lambasted bankers, insurers and regulators for being blind to the possibility home prices could fall, and said their shortcomings caused the worst recession in half a century.
Taxpayers Lose $310 Million in Build America Profits
State and local public finance officials from New Jersey to California rewarded investors with $310 million of instant profit by selling debt through the government’s Build America bond program.
Citigroup May Seek Capital That Averts U.S. Control
Citigroup Inc., girding for results of the Federal Reserve’s bank stress test, may try to wring capital from private investors instead of U.S. bailout funds as a way of bolstering equity without ceding control to the government, people briefed on the matter said.
MAIN ECONOMIC RELEASES TODAY Reserve Bank of Australia Seen Leaving Key Rate Unchanged at 3% Indonesia Central Bank May Cut Interest Rate to 7.25% From 7.5% Australian March Building Approvals Seen Rising 2.8% Vs February Australia Performance of Services Index for April Is Released Philippine April Consumer Prices Seen Rising 4.7% From Year Ago Taiwan’s Consumer Prices Report for April Is Due to Be Released Singapore’s Purchasing Managers’ Index for April Due for Release
MAIN ANALYST UPGRADES/DOWNGRADES *CHINA COSCO CUT TO ‘UNDERPERFORM’ AT CREDIT SUISSE *SINA CUT TO ‘PERFORM’ AT OPPENHEIMER *DOOSAN INFRACORE RAISED TO ‘BUY’ AT BNP PARIBAS
ASIAN MARKETS
The Nikkei 225 futures contract due in June fell 20 points to 9,020. The Hang Seng Index futures for May gained 840 to 16,227. The S&P/ASX 200 Index futures contract due in June rose 75 to 3,939 at 6:59 a.m. in Sydney.
U.S. Stocks Advance as S&P 500 Index Erases Decline for Year
U.S. stocks rose, erasing the Standard & Poor’s 500 Index’s 2009 loss, after home sales beat estimates and manufacturing in China increased for the first time in nine months, boosting confidence the global recession is easing.
Treasuries Little Changed as Fed Buyback Tempers Supply Concern
Treasuries were little changed as the Federal Reserve bought $8.5 billion in debt, the largest amount since the central bank began purchasing government securities in March to drive borrowing rates lower.
Yen, Dollar Drop as Signs Slump Easing Spur Higher-Yield Demand
The yen declined to the lowest level in almost three weeks versus the euro while the dollar dropped after an unexpected gain in U.S. pending home resales encouraged investors to buy higher-yielding assets.
European Stocks Rise for Third Day; ArcelorMittal, Fiat Climb
European stocks advanced for a third day as manufacturing in China expanded and U.S. pending home resales and construction spending increased, reinforcing optimism the worst of the global recession is over.
European Bonds Fall as Stock Gains Sap Demand for Safer Assets
European government bonds fell as signs the global economy may be emerging from its worst recession since World War II pushed stocks higher, damping demand for the safest assets.
Gold, Silver Gain as Dollar Falls, Pending Bank Stress Results
Gold climbed for the first time in three sessions on surging demand for the metal as a store of value while the dollar fell and investors prepared for the release later this week of U.S. bank stress tests. Silver rose.
Crude Oil Rises to 5-Month High as Pending Home Sales Increase
Crude oil rose to a five-month high as the number of Americans signing contracts to buy previously owned homes jumped along with spending on U.S. construction projects, signaling energy demand may improve with the economy.
TOP STORIES/MOST READ ON BLOOMBERG
Obama Seeks End of Corporate Tax Break to Raise $190 Billion
President Barack Obama proposed raising about $190 billion over the next decade by outlawing three offshore tax-avoidance techniques used by U.S. companies such as Caterpillar Inc. and Procter & Gamble Co.
Buffett Lambastes Bankers, Insurers for ‘Stupidity’
Berkshire Hathaway Inc. Chairman Warren Buffett lambasted bankers, insurers and regulators for being blind to the possibility home prices could fall, and said their shortcomings caused the worst recession in half a century.
Taxpayers Lose $310 Million in Build America Profits
State and local public finance officials from New Jersey to California rewarded investors with $310 million of instant profit by selling debt through the government’s Build America bond program.
Citigroup May Seek Capital That Averts U.S. Control
Citigroup Inc., girding for results of the Federal Reserve’s bank stress test, may try to wring capital from private investors instead of U.S. bailout funds as a way of bolstering equity without ceding control to the government, people briefed on the matter said.
MAIN ECONOMIC RELEASES TODAY Reserve Bank of Australia Seen Leaving Key Rate Unchanged at 3% Indonesia Central Bank May Cut Interest Rate to 7.25% From 7.5% Australian March Building Approvals Seen Rising 2.8% Vs February Australia Performance of Services Index for April Is Released Philippine April Consumer Prices Seen Rising 4.7% From Year Ago Taiwan’s Consumer Prices Report for April Is Due to Be Released Singapore’s Purchasing Managers’ Index for April Due for Release
MAIN ANALYST UPGRADES/DOWNGRADES *CHINA COSCO CUT TO ‘UNDERPERFORM’ AT CREDIT SUISSE *SINA CUT TO ‘PERFORM’ AT OPPENHEIMER *DOOSAN INFRACORE RAISED TO ‘BUY’ AT BNP PARIBAS
ASIAN MARKETS
The Nikkei 225 futures contract due in June fell 20 points to 9,020. The Hang Seng Index futures for May gained 840 to 16,227. The S&P/ASX 200 Index futures contract due in June rose 75 to 3,939 at 6:59 a.m. in Sydney.
U.S. Stocks Advance as S&P 500 Index Erases Decline for Year
U.S. stocks rose, erasing the Standard & Poor’s 500 Index’s 2009 loss, after home sales beat estimates and manufacturing in China increased for the first time in nine months, boosting confidence the global recession is easing.
Treasuries Little Changed as Fed Buyback Tempers Supply Concern
Treasuries were little changed as the Federal Reserve bought $8.5 billion in debt, the largest amount since the central bank began purchasing government securities in March to drive borrowing rates lower.
Yen, Dollar Drop as Signs Slump Easing Spur Higher-Yield Demand
The yen declined to the lowest level in almost three weeks versus the euro while the dollar dropped after an unexpected gain in U.S. pending home resales encouraged investors to buy higher-yielding assets.
European Stocks Rise for Third Day; ArcelorMittal, Fiat Climb
European stocks advanced for a third day as manufacturing in China expanded and U.S. pending home resales and construction spending increased, reinforcing optimism the worst of the global recession is over.
European Bonds Fall as Stock Gains Sap Demand for Safer Assets
European government bonds fell as signs the global economy may be emerging from its worst recession since World War II pushed stocks higher, damping demand for the safest assets.
Gold, Silver Gain as Dollar Falls, Pending Bank Stress Results
Gold climbed for the first time in three sessions on surging demand for the metal as a store of value while the dollar fell and investors prepared for the release later this week of U.S. bank stress tests. Silver rose.
Crude Oil Rises to 5-Month High as Pending Home Sales Increase
Crude oil rose to a five-month high as the number of Americans signing contracts to buy previously owned homes jumped along with spending on U.S. construction projects, signaling energy demand may improve with the economy.
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