January - June 2012

Sharing the Burden of the Greek Crisis
28 May 2012 – Businessweek
In an interview with the Guardian, the IMF’s Managing Director Christine Lagarde had lined out the importance of a fair share of the economic crisis consequences in Greece. She described the taxation of the whole Greek public as fundamental. According to Lagarde, “everybody should pay their fair share”; also the wealthy. While the option of a Greek exit out of the Eurozone is not yet out of question, Lagarde expressed her sympathy with the indebted country and its people.  Currently, the Greek economy forecast includes a shrinking of the economy by 4, 7% in the next year what might have contributed to increase of votes for the bailout opposing party. (Read More)

India and Myanmar are Seeking Closer Cooperation
28 May 2012- NY Daily News
Both countries, India and Myanmar want to improve their trading sector through a better connection with one another. The common aim is to raise the potential for better trade through an "economic and development partnership”. Apart from trade and investment, the two heads of government -Manmohan Singh and Thein Sein- are in agreements in the fields of resource development, transportation, and security. Numerous agreements were already signed including a million dollar agreement for air service and border development; rail and shipping links are intended to be explored, too. By 2015 India wants to have its trade profits doubled. (Read More)

High Youth Unemployment in Africa
28 May 2012 – The Guardian
Research presented in the African Economic Outlook (AEO) shows, that 60% of the unemployed in Africa are between 15 and 24. The events of the Arab Spring had temporarily slowed down economic growth in Africa, but it had speeded up recently. The African Economy is predicated to grow 4, 8 % in the next year and its GDP per capita is supposed to rise by about 2- 2, 5%. As growth does not necessarily bring about more jobs the AEO is demanding more diversification between the different African states. Additionally, an adaption of education to demanded skills is required to address the problem of a growing young population without employment.  (Read More)

EU Member States Plan a New Growth Pact
24 May 2012 – The Washington Post
During the recent EU summit in Brussels, the Heads of Government have argued for keeping Greece in the Eurozone. The drop of European stocks is another indicator for the urgency of active policy to tackle the economic problems that have already affected the global markets. The EU is planning on creating a new growth pact which is intended to stimulate all the economies that are immensely affected by the crisis. This pact would require the Greek Government, which will be newly elected in mid-June, to take responsibility for new national fiscal reforms. The approach of jointly backed credits is another measure to be discussed on the next meeting in the end of June.  (Read More)

OECD Provides Data on Australia’s Economy and Living Standards
24 May 2012 – The Wall Street Journal
Australia made it to the top of the newly released OECD Better Life Index, which analyses countries in regards to its job, income, health, and other related characteristic. Australia’s economy had been benefiting from the resource boom. Rising inquiry of coal and iron ore resulted in a lowering of unemployment rates, which by April of this year, were 6% lower than in the Eurozone. Additionally, the country is attracting numerous immigrants as well as tourists. Eventhough living costs are high on the continent, the employment rates are above average, and its net debt remains below 10% of GDP even at periods with rising tendency. (Read More)

Burma Sanction Easing
May 24 2012 – Voice of America
The State Department declared that Burma`s efforts towards a better relationship with the West are justifying the easing of European and U.S. sanctions. Burma’s political aims become increasingly democratic, as the membership of the pro-democracy advocate Aung Sung Suu Kyi shows. Government Officials in Burma consider the easing of the sanctions a supporting force for new political reforms. Burma intends to keep it close ties with China and aims at preventing an impoverishment as it is the case in North Korea from happening in the economically recovering country. The United States will re-tighten the sanctions if Burma does not continue its efforts. (Read More)

EU Parliament favors Financial Transaction Tax Proposal
23 May 2012 – The Parliament
In a recent parliamentary meeting the financial transaction tax (FTT) had been supported by the majority of MEP votes. The Greek socialist Anni Podimata had suggested the implementation of the FTT which would charge financial institution for certain transactions undertaken in the EU financial sectors. To Podimata, the tax gives an opportunity of “fairer distribution of weight of the crisis”, and eventually leads to more financial resources. The European Parliament’s support does not necessarily result in the FTT’s implementation. First, the strong opposition amongst which there is the UK needs to be convinced that worries about consequences for consumers and clients are not reasonable. (Read More)

Indonesia Criticizes Role of G8
23 May 2012 – The Jakarta Globe
With the end of the G8 summit at Camp David a number of negative statements from emerging economies were expressed in regard to the group’s relevance. An Indonesian economist argued for the G20 as a better global representation. The G20 is composed of numerous large economies, including Indonesia, whose economy is growing immensely despite the crisis elsewhere. Asia generally does not compliment the group of eight like the U.S. and Europe tend to do it. An OECB Bank economist on the other hand described the G8 as group that is still of high importance, even though many consider their motives superficial. (Read More)

Generation of Uneducated and Unemployed Youth
23 May 2012 – The Globe and Mail
Statistics Canada published a new analysis showing that 13% of the Canadian youth between 15 and 29 were neither attending school nor working during the last year. The data also indicates that the majority of the young people included in the rate do not actively seek work. In contrast to Europe where worries are rising about a whole young generation of uneducated and unemployed, the outlook is more positive in Canada, said analyst Katherine Marshall. According to a spokesperson of Statistics Canada, the Analysis should encourage communication with employers and search for opportunities to gain experience abroad. (Read More)

Europe’s Economic Crisis Affects the World Economy
22 May 2012 – Bloomberg
Pier Carlo Padoan, who is Chief Economist at the OECD, has recently declared that the entity of consequences of the euro crisis is not yet exposed. The Eurozone’s sovereign indebtedness creates spillovers outside of the EU and slows down economic growth e.g. in China. To Padoan, the risks of more vicious circles as well as the inability of stronger economies to support the most indebted countries necessitate an effective policy response with ECB involvement.  The OECD already advised the ECB to prepare itself for the buying of more government bonds. Apart from that, Padoa describes the creation of confidence in the market as the most important step towards proper crisis management. (Read More)

IMF Report Puts Pressure on UK
22 May 2012 – Seattle Times
Since the takeover of the coalition government in 2010 the UK’s policy had focused mainly on national deficit reduction. Together with the “threat” originating from Britain’s largest export partner, the EU of 17, the latest policy approaches have created a weak economy. To get the country out of recession the IMF has advised the Bank of England to stop quantitative easing as well as cutting of interest rates, so that the inflation rate is able to adjust. The labor party also called for new policy implementations to create economic boosts. At this point, neither the inflation nor the growth outlooks are predictable.  (Read More)

New EU-US Trade Agreement
22 May 2012 – Bloomberg Businessweek
The recent need to tackle the problems of unemployment and slow growth unite the EU and the US in their interest to improve economic relations. EU Trade Commissioner De Gucht hopes for the completion of trade agreement negotiations between both parties by the middle of 2014. A free trade accord is widely favored in Europe, said De Gucht. The trade flow between the United States and the European Union amounts to $4.4 trillion a year. U.S. Trade Representative Kirk remarked the States’ interests in “full liberalization of market access in all categories of goods”. The problem remains that so far agreements in in certain policy fields like agriculture, health, safety standards and regulations have not been achieved. (Read More)

IMF Considers UAE Foreign Funding Dependency a Risk
21 May 2012 – The Daily Star
The United Arab Emirates government related entities (GREs) are currently facing the problem of rising debt. The IMF regards the country as economically vulnerable due to its input through foreign funds, as the current global economic situation is not safe. Amongst others, the UAE is receiving large stabilizing funds from its neighbor Abu Dhabi. According to the IMF, future economic shocks as well as a higher debt than the $68 billion that are expected to be added to the current debt in 2013-2015 must be prevented. The IMF shields the country’s banking system to prevent an increase in indebted GREs. (Read More)

G8 urges Europe on Consensus
21 May 2012 – Reuters
The G8 is aiming for more “growth and jobs” in Europe, but seem to be helpless considering the constant withdraw of Greek savings from domestic accounts. The exit of Greece out of the euro is not unlikely, and markets react to that. Although, upcoming elections for the Government in Athens might manage to balance the pressure EU member states are now needed to actively respond to the crisis. The eight economies want Greece to stay in the Eurozone, and the U.S. hopes for Germany to further compromise on its austerity demands as Hollande is expected to argue for euro bonds.  (Read More)

Eurozone
21 May 2012 – Chicago Tribune
Last Monday ECB policymaker Jörg Asmussen referred to the common fiscal union as the right step towards “more Europe”. He also spoke up for new reforms and the inclusion of both: austerity and growth measures. The ECB considers the lowering of interest rates a temporary measure and wants to establish a new growth pact. Asmussen’s suggestion is to focus on strengthening the member states in the euro and to include new reforms in the fiscal pact. At the moment, Greek banks rely on emergency liquidity assistance. This week Eurozone member state officials will meet to agree on new fiscal measures. (Read More)

EU Mulls ‘Marshall Plan’ for Europe
30 April 2012- EurActiv
According to leading Spanish newspaper, El País, the plan aims to raise funds valued at €200 billion for investments in infrastructure, renewable energies and advanced technologies with the involvement of the private sector, in a bid to kick-start economic growth without raising public debt in member states.  The plan, which takes into consideration ideas of the French Socialist François Hollande, namely leveraging the European Investment Bank (EIB) to boost growth and jobs, will be presented after the French election. Responding to widening criticism of austerity-led reforms, European Commission President José Manuel Barroso said on Friday (27 April) that the EU already had an agenda for growth, but that this agenda could be ‘updated’. Barroso referred to his proposal for ”project” or “investment” bonds the idea for reinforcement of the capital of the EIB as potential upgrades. Meanwhile, European Council President Herman Van Rompuy sent a letter to EU leaders on Friday (27 April) warning them that “we must generally strengthen the governance of the Single Market and open new areas of growth.”  (Read More)

Euro-Zone Inflation Slows as Oil Gains Weaken
30 April 2012- Bloomberg Businessweek
European inflation slowed in April as energy costs increased at a weaker pace than a year ago. The inflation rate in the 17-nation euro area fell to 2.6 percent from 2.7 percent in March. Economists forecast consumer prices to rise 2.5 percent. European Central Bank President Mario Draghi softened his tone on the euro region’s inflation outlook on April 25, calling risks “broadly balanced.” Growth in loans to households and companies weakened in March, the ECB said today. With oil prices retreating and the region’s economic slump deepening, economists forecast the central bank would keep its benchmark interest rate at 1 percent when council members meet on May 3.  The euro was little changed after the report, trading at $1.3235 at 11:06 a.m. in Frankfurt. The Stoxx Europe 600 Index slipped 0.1 percent.  (Read More)

EU Commission wants Budget Increase Amid Crisis
25 April 2012- Bloomberg Businessweek
The European Union head office said Wednesday it wanted to see an increase in the overall budget to boost growth at a time when the financial crisis is forcing the 27 member states to tighten their belts. Commission President Barroso said he was seeking a 6.8% increase in payments to meet financial commitments the EU members previously made and spur growth and jobs. Overall, the budget of the EU institutions is small; representing only 1% of the bloc's GDP, but it has gained increasing political importance as national capitals have tightened their own budgets. The EU budget is largely used to fund agriculture and aid programs to poorer regions to boost a unified single market with cross-border investment initiatives. The proposal would set the 2013 budget at 138 billion euros ($182 billion). Barroso said his proposal freezes future expenditure at the level of inflation and keeps the rise of administrative spending below inflation. (Read More)

Spanish Banks ‘Vulnerable’ and May Need Public Help, says IMF
25 April 2012- Washington Post
The IMF has said that despite extensive restructuring, Spain’s banking sector “remains vulnerable.” It needs more capital and a strategy for quickly clearing away the legacy of a collapsing property bubble.  Spanish officials have shut down or forced the merger of most of the country’s “cajas” — the savings banks that lent heavily for real estate projects, but the level of bad loans is now a $185 billion burden weighing on the capacity of banks to make loans. The ability of banks to absorb those losses may be limited, the IMF said, and “greater reliance on public funding may be needed.” With three smaller European countries already receiving bailouts, the larger economies of Spain and Italy have become the critical test of whether the euro region can revive its economy and avoid dragging down global trade and economic growth.  (Read More)

EU's Poorest Countries Join Plea for Regional Funds
25 April 2012- EurActiv
Twelve member states asked yesterday (24 April) for a halt to “unfair” cuts in cohesion funding, as EU foreign ministers on the same day launched negotiations over the EU's next multi-annual budget for 2014-2020. The group fears that increased conditionality and cuts in the regional budget will lead to a shift of EU funds from the poorest to the wealthiest member states, according to a written statement seen by EurActiv. The letter was signed by Bulgaria, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia. Croatia, which is set to join the EU in the summer of 2013, also backed the statement. (Read More)

EU Parliament Backs Mandatory CCCTB
25 April 2012- Tax News
The European Parliament has voted in favor of making mandatory the implementation of a Common Consolidated Corporate Tax Base (CCCTB) among European Union member states despite sustained opposition. The CCCTB system would give companies a single set of rules for calculating their taxable profits, rather than having to comply with differing accounting rules in each member. Among its benefits, a CCCTB would significantly reduce transfer pricing requirements between member states.  The CCCTB is fiercely opposed by certain member states, notably Ireland, who sees it as an attack on its fiscal sovereignty and the first step towards full corporate tax harmonization. Studies also suggest that, far from leveling the corporate tax playing field in the EU, it would distort investment and effectively redistribute tax revenues between member states.  (Read More)

OECD'S Gurria: Funding Measures are enough to Contain Europe Crisis
25 April 2012- Reuters
The doubling of the IMF's firepower, an increase in Europe's bailout fund, and liquidity injections should be enough to contain Europe's sovereign debt crisis, the head of the OECD said Wednesday. The IMF last weekend secured commitments of over $430 billion in funding, more than doubling its lending power to help it safeguard economies from Europe's two year debt crisis.  The funding boost follows Europe's agreement last month to boost its bailout fund to $1 trillion and the European Central Bank's move to pour more than 1 trillion euros of ultra-cheap, three-year funds into the banking system since the end of December.  (Read More)

ECB Officials Resist Nudge from IMF, US to do more
23 April 2012- Fox News
Officials from the European Central Bank are pushing back against calls from the US and the International Monetary Fund to offer more support to the struggling economies of the 17 countries that use the euro and indebted governments.  Jens Weidmann, Germany's top central banker and a member of the ECB's governing council that sets interest rates, said Monday that steps such as lower interest rates and more central bank credit for the financial system were not the solution to the debt burdens weighing on national governments.  In recent days, the IMF, which loans money to countries in financial trouble, and the Organization for Economic Cooperation and Development, a group of mostly rich countries, have urged the ECB to take further steps to ease the crisis. (Read More)

Eurozone Cuts Deficits, Total Debt Rises

23 April 2012- USA Today
The 17 eurozone countries still face an uphill struggle to control their debt in spite of managing to slash government deficits to 4.1%, official data show.  Figures reported Monday by the European Union's statistics office confirmed the effects of harsh austerity programs on eurozone members' economies, which in 2010 ran an overall deficit of 6.2% of gross domestic product. Yet despite these efforts, overall debt rose from 85.3% of GDP to 87.2% — the highest level since the euro was created in 1999.  After a financial crisis that has dragged on for nearly five years, Monday's figures underscore how difficult it will be for the eurozone to bring its deficits and debts below the EU-stipulated limits of a deficit of 3% or less and debt of 60% or less of GDP.  This task will become even harder as the eurozone economy falls back into recession. (Read More)

Poland, Switzerland Help Boost IMF Fund
19 April 2012- EurActiv
The IMF said yesterday it had raised $320 so far in a bid to boost its firepower to deal with the eurozone debt crisis, with Poland and Switzerland joining the effort.  IMF Managing Director Christine Lagarde said she had received commitments of $34 billion on Wednesday, including $8 billion (€6.1 billion) from Poland and "a substantial amount" from Switzerland.  Lagarde is hoping to secure at least $400 billion in commitments from around the globe. The issue has taken on new urgency given increased borrowing costs in Spain and Italy that have reignited fears that the eurozone crisis could flare again, and that the fallout could imperil the global economic recovery.  The United States has declined to provide fresh funds, saying it had done its part by ensuring dollar liquidity for banks in Europe.  (Read More)

Barroso Unveils Jobs and Growth Plan
18 April 2012- BBC
European Commission chief Jose Manuel Barroso has presented a package of initiatives to the European Parliament designed to boost jobs and growth in the crisis-hit eurozone area. Addressing MEPs in Strasbourg on 18 April 2012, Mr Barroso said the measures would help release the potential of Europe's internal market which "is probably the largest engine for growth within the European Union". "It gives European business unfettered access to other companies and half a billion consumers and allows them to develop the scale to compete globally," he said. But Barroso blasted the failure of national governments to implement European growth laws. Barroso said the proposals agreed by the Commission could boost growth on the continent by up to 1.5%. (Read More)

Small-Firm Loans Lagged in the U.S.
18 April 2012- Wall Street Journal
The Organization for Economic Cooperation and Development examined small-business lending across 17 countries from 2007 to 2010. It found that during the recession, lending to small- and medium-size businesses generally declined as a percentage of all business loans. In many countries, small-business loans continued declining even after the recession ended in the summer of 2009, the OECD said. Lending to small and medium-size businesses after the recession recovered more slowly in the U.S. than in other countries such as Canada, France and Italy, according to a report expected to be released on April 18 by the OECD. (Read More)

Lagarde Seeks Additional IMF Commitment from G20
17 April 2012- IFA
International Monetary Fund (IMF) manager Christine Lagarde continues to hope to increase the organization’s resources and receive about another 400bn dollars (approximately 250bn pounds) in commitments from the G20 this week.  Lagarde spoke while the IMF and World Bank are holding their spring meetings this week and before the G20 finance ministers get together in Washington to discuss the issue.  Opinions are mixed on whether the G20 will actually come to a decision. In January the IMF had said it was looking for $600bn, but Lagarde indicated last week that the need had diminished.  G20 officials had told Reuters that they would agree to provide $400-500bn this week, but not even the IMF chief is overly optimistic about securing commitments.  (Read More)

U.S. says EU Must do What it Takes to Solve Debt Crisis
17 April 2012- Reuters
Europe must commit to long-term reforms that strengthen its currency union, a senior U.S. Treasury Department official said on Tuesday, but she repeated the U.S. will not contribute more to the International Monetary Fund to contain the eurozone debt crisis.  Speaking ahead of a G20 finance ministers' meeting on Friday, Under Secretary Lael Brainard said Europe will have to be flexible and ready to move toward greater fiscal integration in future.  The G20 meets on the sidelines of the semiannual gathering of the International Monetary Fund and World Bank for a weekend of talks that Brainard said would focus largely on Europe's ongoing debt problems. (Read More)

Brussels to Push for EU-wide Minimum Wage
17 April 2012 – EurActiv
The European Commission will propose introducing a minimum wage in countries where it does not exist, and increasing wages where they are considered too low.  Most EU countries have already introduced a minimum wage, but these vary significantly. In Romania, it can be as low as one-fourth of the average wage. In Ireland, it is over half the normal wage.  What's more, an important group of countries, comprising Germany, Italy, Austria and the Scandinavian states, have no minimum wage at all. While Italy and Austria have a minimum salary through collectively agreed sector contracts, nearly one-third of workers in Germany have no right to a minimum salary.  The Commission can urge member states to review their employment and social policies, but the ultimate decision lies with national governments.  (Read More)

IMF Credits Gold as a Safe-Haven Asset
16 April 2012 – Fox Business
The International Monetary Fund recently said that it expects commodity prices to fall this year as the global economy remains weak. In the organization’s World Economic Outlook, it said, “Sizable downside risks to global growth also pose risks of further downward adjustment in commodity prices.” The ongoing European debt crisis is slowing creeping back into focus as Spain faces rising interest rates. While safe-havens in the current financial system are limited, the IMF recognizes gold as an option for investors seeking portfolio protection.  On Monday, fears about a weakening Spanish economy and its ability to finance its debt pushed the yield on the Spanish 10-year bond above 6 percent. It is the highest level on the 10-year bond since the European Central Bank launched its first Long Term Refinancing Operation last year. Concerns also spilled over into Italy, where bond yields increased to 5.65 percent.  (Read More)

ACTA Faces Another Setback in Europe

16 April 2012- Forbes
In another blow to the troubled Anti-Counterfeiting Trade Agreement (ACTA), the European Parliament’s rapporteur on the trade agreement, David Martin, (UK, Socialists and Democrats Group) indicated in a public event Thursday that he would recommend against the Agreement.  MEP Martin also observed that, as many critics noted at the time, that ACTA’s “initial lack of transparency clearly backfired; rumor, wild speculation and paranoia abounded leading to the European Parliament adopting a resolution condemning the secretive approach of the Commission and EU Council of Ministers and resulting in the release of the negotiating documents in April 2010,” and pointed out that a cloud remains over the agreement.  (Read More)

Mercantilism is a State of Mind
16 April 2012 – Foreign Policy – Clyde Prestowitz
In Foreign Policy, Clyde Prestowitz argues that German trade policy has become too mercantilist to continue to tolerate as it is severely impacting the European recovery (or lack of recover). Essentially, he argues that Germany fully embraced export-led growth to non-EU countries and it has also forced crippling austerity measures on EU periphery countries, mainly Greece, Italy, Spain and Portugal, although it is not limited to those countries. While this policy is not uncharacteristic of rapidly developing countries such as Brazil, India and South Africa, it is not in line with EU principles of solidarity and one Europe. (Read More)

Spain Bond Yields Jump Above 6%, Raising Bailout Fears

16 April 2012 – BBC News
The cost of borrowing for Spain rose above 6% and increased the fears of a bailout. The yield on Spain’s 10 year bonds reached 6.1%, with auctions of debt on Tuesday and Thursday set to be costly for the country. Investors are concerned with data showing that Spanish banks being completely reliant on emergency ECB loans. In comparison German 10 year bonds are only 1.73%. Spain’s increasing unemployment also worries many, the Bank of Spain announced recently that the country’s economy contracted in the first quarter of the year but without saying by how much. (Read More)

EU Lawmakers May Seek Ban on Bank Bonuses That Top Salary
12 April 2012- Bloomberg Business Week
Lawmakers in the European Parliament may seek a ban on banker bonuses that exceed fixed pay as part of a draft law on Basel capital rules. “We are looking at a set limit” on the size of bonuses compared with fixed salary, said Othmar Karas, the lawmaker leading work on the rules. This limit should be set at “100 percent, so one-to-one,” he said today. Some bankers are receiving bonuses about 10 times larger than their base salary, according to a European Banking Authority survey released today. The ratios of variable to fixed pay that lenders use “tend to be high” and “the criteria by which institutions decide on the ratios in practice are not always clear,” the EBA said.  (Read More)

Eurozone Crisis: Fear Returns
11 April 2012- BBC
The eurozone is once again rattling financial markets. The main reason is that Spain’s borrowing costs have shot up to close to 6% - levels not seen since January. The EU had set Spain the target of reducing its deficit to 4.4% this year. The new government in Spain said such a reduction could not be achieved. It suggested 5.8%. After some arm-twisting from Brussels the figure of 5.3% was settled on. But the word was out there - the Spanish government doubted the targets could be achieved this year, let alone the more ambitious target of 3% by 2013. For the second time in three years Spain is in a recession. The economy is expected to shrink by 1.7% this year. Even at the best of times, cutting spending during a recession would be difficult, but Spanish banks hold around 180bn euros of troubled property assets. They are desperately trying to offload property, but house prices are still going down.  (Read More)

US, EU Agree On Open, Transparent, and Non-Discriminatory Investment Policies

10 April 2012- RTT News
On Tuesday, the United States and the European Union (EU), under the auspices of the Transatlantic Economic Council, announced an agreement on Shared Principles for International Investment, which reaffirms their commitment to open, transparent, and non-discriminatory international investment policies.  International investment, both by American companies abroad and by foreign companies in the United States, benefits U.S. companies and American workers by creating high-paying jobs, boosting exports, and spurring innovation in the United States. (Read More)

Monti’s Overhaul Can’t Stop Pain from Spain: Euro Credit
10 April 2012- Bloomberg
Prime Minister Mario Monti’s efforts to overhaul the economy and protect Italy from the region’s debt crisis may be overwhelmed by Spain’s deepening fiscal woes and the fading effect of European Central Bank three-year lending.  Monti sent parliament last week a plan to revamp the labor markets, which represents the most ambitious of his four major legislative efforts to make the Italian economy more competitive. The draft law was greeted on April 4 by a 9 basis point increase in the country’s 10-year bond yield to 5.43 percent as Spain’s debt slumped on renewed concern the country would need a bailout.  (Read More)

Major Banks Say Eurozone Should Ease Austerity
9 April 2012- Financial Post
A major global banking group said Monday that excessive spending cuts across the euro area are dragging the region’s economy down and called for more spending by countries like Germany.  The Institute of International Finance, which played a central role in the restructuring of Greece’s debt, also assailed a eurozone firewall — designed to stop market contagion — as still inadequate and called for it to be expanded as soon as possible.  “The emphasis so far on fiscal austerity, while to a degree necessary for the countries facing market funding difficulties, is excessive when carried out across the board,” IIF chief Charles Dallara said in a letter addressed to the IMF and the World Bank.  Instead, he said, government fiscal policies should be differentiated between weaker eurozone members and those with surpluses and fiscal flexibility.  (Read More)

EU: Portugal Reforms On Track, No Need for a Second Bailout
4 April 2012- EurActiv
Portugal is making progress with reforms aimed at bringing its finances back to health and should be able to return to markets in 2013 as planned, the European Commission said yesterday (3 April).  Portugal received a 3-year, €78 billion bailout from the European Union and the International Monetary Fund last year after its borrowing costs on the markets rose to unsustainable levels on concerns about the country's large debt and low growth, caused by poor competitiveness.  Some investors remain concerned that it will have to follow Greece in seeking a further bailout that could involve losses for private sector creditors.  This time, the Commission, which together with the IMF and the European Central bank reviews Lisbon's progress, praised Portugal.  (Read More)

IMF Director Lagarde: Recovery Still Fragile, Warns Against ‘Self-Defeating’ Cuts in Spending
3 April 2012- Washington Post
IMF managing director Christine Lagarde said Tuesday that the global recovery is growing stronger but still is very fragile, calling on the international community to give her organization “more firepower” to help keep tottering economies from going under.  Lagarde said the global economy is making some advances in digging itself out of the worst downturn in decades, but that the recovery remains particularly frail in Europe. She suggested cutting government spending too quickly in developed countries like the United States and larger European nations could make things worse, not better. Policymakers on both sides of the Atlantic need “breathing space to finish the job,” she said. (Read More)

US, Canada Lead G7 Nations in Economic Recovery, Says OECD
March 29 2012 – Global Post – Alexander Besant
In a new report released by the Organization for Economic Cooperation and Development (OECD), the US and Canada will almost certainly recover faster than their European brethren. Just a few years ago, the estimated 2.9 and 2.5 percent growth rate during the second quarter in the US and Canada respectively would have been scoffed at. Germany, whose economy was looked at with envy as recently as 2009, could only hit 1.5 percent or almost half of the US estimate. During an US election year, such a development almost certainly supports the US policy of strong, decisive action in dealing with the Great Recession as contrasted to Europe’s continued dithering. (Read More)

Global Insider: EU-US FTA Will Take Tough Negotiations but Offers Big Potential Wins
March 29 2012 – World Politics Review
Once seen as controversial, NAFTA may soon be dwarfed by a possible US-European Union free trade agreement. The EU and US are the two largest economies in the world and according the Fredrik Erixon, the director of the European Center for International Political Economy, conduct roughly 700 billion in two way trade, a substantial part of 17.7 trillion and 15.2 trillion of the EU and US respectively. Erixon warns that any signed agreement would gut the capacity and support multi-lateral trade through the WTO. Once signed, the pact would be open to any other country that desired to join, arguing that this formed the basis for previous multi-lateral trade agreements.   (Read More)

EU to Cut Off Funds to Hungary, OECD Sees Recession

13 Mar 2012 – Atlantic Council 
After weeks of dialogue and rhetoric, European Union finance ministers are prepared to formally punish a member state for ignoring budget rules. The EU would stop half a billion euros in aid. While Hungary was attempting to block the move, the OECD concluded that the country would return to recession as a result. It showcases the EU's power to try to make an example of the undemocratic policies of Hungarian right wing leader, Prime Minister Viktor Orban. As Hungarian bonds are rated "junk" level by Moody's, it is more important than ever that the country receive development aid. Yet, Obran and the EU are content to play a game of chicken with Hungary's 10 million residents in order to try to impose each other's will.  (Read More)

WRAPUP 3-EU, US, Japan Launch Rare Earth WTO Case Against China
13 March 2012 – Reuters
In a remarkable show of unity, the EU, US and Japan have filed a WTO complaint against China's rare earth metals policy. US President Barack Obama charges the Chinese with interfering with the market and said that the case is only the first of addition cases of unfair trade practices. First, the four parties would attempt to settle their differences during a 60 day process. Should that fail, the EU, US and Japan would ask the WTO to create a dispute-settlement panel. Interestingly, the EU, US and Mexico recently won a similar WTO case yet the Chinese have not complied with the ruling. The US is expected to establish a new agency that tries to enforce trade rules. (Read More)

IMF Moves Toward New Power Reform: Source

8 March 2012 – Agence France-Presse – Hugues Honore
The International Monetary Fund has signaled that it would move toward restructuring voting to give more clout to burgeoning economies such as Brazil and China. The details are still being worked out. However, it is likely that Europe will concede some power in the organization to burgeoning economies which is a direct result of its current economy doldrums. The IMF is expected to raise some 0.5 trillion dollars and while some will come from Europe, the cash rich burgeoning economies are expected to be large contributors. (Read More)

Brazil Moves Up the Ranks
7 March 2012 – Advisor – Katie Kier
In 2011, Brazil passed Great Britain to become the world’s sixth largest economy, highlighting just how much the power of the original G7 has diminished. However, Brazil’s GDP growth has slowed significantly to only to just 2.7%, an almost 5 point drop year over year. Indeed, Real GDP growth was only 0.3% as fixed investments and government consumption continued to be depressed. As investment and private consumption growth slowed, government expenditure growth also slowed. (Read More)

Germany Launches EU Fiscal Pact Ratification, Will Need Opposition Help in Parliament
7 March 2012- Huffington Post
Chancellor Angela Merkel’s Cabinet on Wednesday launched the process of ratifying the new European Union fiscal-discipline pact in Germany, and will now need the opposition’s help to secure a two-thirds majority in Parliament. Merkel pushed hard for other European countries to agree to the so-called fiscal compact, designed to limit government overspending, and 25 national leaders signed it last week. Officials say it needs a two-thirds majority because the pact turns the so-called “debt brake,” or balanced-budget rule, in the German constitution into an internationally binding commitment — making it much more difficult to German lawmakers to change it in future. Merkel’s center-right coalition holds 330 of the 620 seats in the lower house, or Bundestag. That means she needs at least the support of the biggest opposition party, the center-left Social Democrats, to get the fiscal pact passed. (Read More)

EU Summit to Avoid Contentious Issues
1 March 2012- Euractiv
An EU summit starting today (1 March) will avoid several contentious issues against the background of the French election campaign. Instead, leaders are poised to give speeches about "growth", congratulate themselves for the re-election of Herman Van Rompuy as Council president and sign the 'fiscal compact' treaty. Commission President José Manuel Barroso is expected to deliver the message that the EU needs to invest in order to get out of the crisis. Growing public hostility in Germany to eurozone bailouts could make it harder for Chancellor Angela Merkel to agree an increase in the currency bloc's financial firewall, which major economies are demanding as a condition for giving the International Monetary Fund more money to fight the fallout from the European crisis. (Read More)

Germany May Support Euro Firewall Increase
1 March 2012- Spiegel International
German newspaper Süddeutsche Zeitung reported on Wednesday that Merkel was considering dropping her opposition to an increase in the euro backstop fund. Sources in Berlin said that, although Merkel still did not think that an increase was necessary "in concrete terms," the "rest of the world" had become so fixated on the issue that it was now necessary for "psychological reasons." The European Commission and the majority of euro-zone members are pushing for the €250 billion ($330 billion) left over from the current, temporary bailout fund, the European Financial Stability Facility (EFSF), to be combined with the €500 billion allocated to its successor, the permanent European Stability Mechanism (ESM), which is due to come into operation in July. (Read More)

Eurozone Unemployment Continues to Rise
1 March 2012 - BBC News
The jobless rate in the 17 countries that use the euro rose to 10.7% in January, while December's figure was revised up from 10.4% to 10.6%. Italian unemployment had stood at 8.9% in December, but it is now at the highest rate since the first quarter of 2001 at 9.2%, as the country finds itself in a second recession in four years. Spain continues to have the highest unemployment rate in the euro area at 23.3%, while Austria has the lowest at 4%. A total of of 24.3 million people in the eurozone are out of work. (Read More)

European Council Agrees On Second Economic Governance Package
22 February 2012- RTT News
The European Council has set out its position with a view to negotiations with the European Parliament on two draft regulations aimed at further strengthening economic governance in the euro area. The first draft is for enhanced monitoring and assessment of draft budgetary plans of euro area member- states, especially those subject to an excessive deficit procedure; the second is a regulation on enhanced surveillance of euro area member-states that are experiencing severe financial disturbance or request financial assistance. This second package of proposals was presented by the European Commission in November following adoption of the so-called "six-pack" of economic governance proposals. (Read More)

Eurozone Reaches Deal on Second Greece Bailout After All-night Talks
21 February 2012 – The Guardian – Graeme Wearden and Helena Smith
All night negotiations yielded results early this morning as Eurozone finance ministers approved a second, €130bn ($171.9bn) bailout for Greece. It will prevent Greece from defaulting as early as next month. Greece’s creditors will take a further haircut on the value of their holdings as it was required to bridge the new funding gap. Most importantly, the measure outlays a plan for Greek debt to shrink to approximately 120.5% of GDP, which is near where the IMF has deemed sustainable. However, Greek parliament will have to pass additional austerity measures which have already proved terribly unpopular. (Read More)

Eurozone Approves Second Greek Bailout
21 February 2012- Al Jazeera
Eurozone finance ministers have approved a 130bn euro ($170bn) second bailout package for Greece to resolve the debt-ridden nation's immediate repayment needs. The deal will bring government debt in Athens down to "120.5 per cent" of gross domestic product (GDP) by 2020, a eurozone governmental source told the AFP news agency. Analysts say the deal may only delay a deeper default by a few months. Greece has been in recession for the last five years and it is unlikely to do well in the next one decade with huge spending cuts. Greece will have around 100 billion euros of debt written off as banks and insurers will swap bonds they hold for longer-dated securities that pay a lower coupon. (Read More)

Hungarian Parliament Agrees to EU Fiscal Pact
21 February 2012-People Daily
The Hungarian parliament voted on Monday to approve Hungary’s support to the new EU fiscal pact aiming to impose tougher fiscal discipline, although Hungary is not a eurozone member. The final version of the pact is expected to be signed in the first days of March at a meeting of the European Council. Under the new pact the Eurozone members agree to keep their structural deficits to a maximum of 0.5% of their gross domestic products unless their national debt ratios are less that 60% of their GDPs, in which case their deficits would be permitted to go up to 1% of GDP. (Read More)

Greece Stumbles Defiantly Towards Default
14 February 2012 – The Guardian– Ian Traynor and Helena Smith
Although the Greek parliament passed additional austerity measures last weekend, Jean-Claude Juncker, the Prime Minister of Luxembourg, and head of the Eurogroup canceled a snap meeting in response to his concerns that Greece will actually implement the measures. Thus, the chances of Greek defaulting on its debt as early as next week have dramatically increased. Juncker and his colleagues are demanding additional guarantees that despite widespread discontent amongst its domestic constituency, the parliament will carry out the conditions of the bailout deal. It appears that the Greeks have decided to run down the clock in order to prevent additional the imposition of additional austerity conditions with the hope that the Europeans would be more concerned with a sovereign default than Greece’s ability to implement their demands. (Read More)

 

Despite Riots, Greece Pushes Ahead with Austerity
13 February 2012 – Christian Science Monitor– Nikolia Apostolou
Late last night, Greece’s parliament passed additional austerity measures in order to access a second round of bailout funding from the troika; the European Union, the European Central Bank and the International Monetary Fund. This occurred despite widespread opposition and violence in Athens and elsewhere to a 20% cut in the minimum wage and drastic cuts to government payrolls. In parliament itself, LAOS, one of the three major coalition partners, declined to vote for the measures. This is in addition to seven government officials who resigned and the 45 MPs removed by their parties because of their vote against the measures. Difficult as the vote was, it clears the way for members of the troika to approve the second bailout measures on Wednesday. (Read More)

IMF’s Cottarelli: Some Governments May Be Trying to Cut Debt Too Quickly

8 February 2012- The Wall Street Journal
Some governments may be trying to cut budget deficits too quickly, which may put the ecomomic recovery at risk, according to Carlo Cottarelli, the head of IMF’s fiscal affairs. The IMF estimates that average budget deficits in developed economies will fall by two percentage points of gross domestic product in 2011 and 2012, and three percentage points on the euro zone. “In a reasonably good growth environment this pace of adjustment would be fine,” Cottarelli wrote. “But in the current weaker macroeconomic environment, bringing deficits down this quickly could pose a risk for the economic recovery.” (Read More)

Monti Says Italy to Work Closely With OECD on Economic Overhaul

6 February 2012- Business Week
Prime Minister Mario Monti said Italy will work closely on economic reforms with the Organization for Economic Cooperation and Development (OECD). The organization will help Italy set up legislation to spur economic growth. (Read More)

USAID Now Free to Buy Goods from Companies in Poor Countries
6 February 2012 – The Guardian – Claire Provost
USAID revamped its procurement regulations to follow a less stringent “Buy America” policy, allowing recipient countries to provide most goods and services. In addition to saving US taxpayers money through simplified regulation, aid dollars are stretched further as locally sourced goods and services are often cheaper than its US based counterparts. While UK DfID updated their regulations similarly more than a decade ago and the US Congress even passed legislation giving USAID extensive freedom to update its regulations in 1993, it is only now that those highly conservative rules have been replaced. Still required to buy US products are food aid contracts, vehicles, and pharmaceuticals. Timed during an era of budget austerity, this relaxation of regulations should allow for greater competition for foreign aid contracts and for implementation at a lower cost. (Read More)

László Andor EU Commissioner Speaks On "The Jobs Challenge In The EU And The US – What Can We Learn From Each Other"
6 February 2012 – eGovMonitor
In speaking to the Johns Hopkins University's Center for Transatlantic Relations, EU Commissioner László Andor discussed the similarities between employment challenges in the US and EU. He pointed out that the EU could learn from the US’s higher productivity and labor mobility. He goes further to discuss the European Social Model and its impact upon unemployment and workforce development, which contrasts the US’s more disjointed socio-economic policies. Ultimately, he concludes that job growth is most important towards future European prosperity. (Read More)

Investors Welcome Europe’s Fiscal Pact
31 January 2012- CNN
European leaders agreed to implement the European Stability Mechanism, a permanent rescue fund of 500 billion euros, in a meeting in Brussels on Monday. 25 of the 27 EU members also agreed to sign a fiscal pact, which will prevent governments from running excessive deficits. Solutions for the debt crisis in Greece still remain unsolved, and the country may not be able to make a debt payment of 14billion euros.


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