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Greece sends list of planned reforms to EU and IMF

Posted 29/03/2015

The Greek economic saga continues…

Greece has said it would boost state revenue by € 3 billion this year - though it would not introduce more 'recessionary measures'

Greece has sent its creditors a long-awaited list of reforms with a pledge to produce a small budget surplus this year in the hope that it will unlock badly needed cash.

The European Union and IMF lenders, informally called the Brussels Group, started discussing the list last Friday, a euro zone official said, although a Greek official said the examination would begin on Saturday.

Their approval, followed by the blessing of euro zone finance ministers, will be needed for Athens to unfreeze further aid and stave off bankruptcy.

Athens has not indicated whether the latest list will contain a more far-reaching reform programme than a previous list of seven reforms on broad issues ranging from tax evasion to public sector reforms, which failed to impress lenders.

The new list includes measures to boost state revenues by €3bn this year, but will not include any "recessionary measures" like wage or pension cuts, a government official said.

The list estimates a primary budget surplus of 1.5% for 2015 - below the 3% target included in the country's existing EU/IMF bailout - and growth of 1.4%, the official said.

Prime Minister Alexis Tsipras's left-wing government has previously said the list will include measures to improve investor sentiment, boost tax revenues, and judicial reform.

The government is also expected to address some form of pension reform, though it has already excluded any attempt to raise the retirement age or other sensitive measures that would be viewed as cutting pension payouts for austerity-hit Greeks.

It is also expected to include labour reform aimed at fighting the increase in unregistered workers, and also include commitments to allow privatisations to proceed.

The government has rowed back on pledges made in its early days to roll back asset sales, but it still wants to retain management control after selling off stakes.

Athens needs to show its creditors it is committed to structural reforms and that the measures will not derail its budget.

Though Athens remains at risk of bankruptcy without fresh aid, publicly the mood in talks between Greece and its lenders has improved in recent days after weeks of acrimony that had raised the risk of a Greek euro zone exit.

France's Finance Minister Michel Sapin earlier urged Greece to present detailed reform proposals to allow for a deal with its euro zone peers.
The reforms list submission came as Greece's government denied a report in Germany's Bild newspaper that its outspoken finance minister Yanis Varoufakis was considering resigning.

A prominent figure in the Greek government who has won fans and angered interlocutors with sharp-tongued attacks against austerity, Varoufakis has kept a markedly lower profile in recent days with fewer interviews and public appearances.

He took to Twitter to deny the reports, saying: "Every time the negotiations heat up, some new rumour of my resignation, demise etc. springs up. Somewhat amusing..."

Bundesbank chief Jens WeidmannBundesbank chief Jens Weidmann

Earlier Bundesbank chief Jens Weidmann said he was opposed to giving Greece more emergency loans, accusing the new government in Athens with frittering away a lot of trust.

"Until the autumn, an improvement in the economy had been discernible.     But the new government has gambled away a lot of trust," Weidmann said in an interview with the weekly Focus magazine.

"I am opposed to an increase in the emergency loans," said Weidmann, who as head of the German central bank sits on the European Central Bank's decision-making governing council.



EU proposes tax reforms amid tax avoidance controversies

Posted 18/03/2015

It hopes that there will be greater transparency between member states.

New legislation unveiled by the European Commission hopes to force EU governments to share details of their tax deals with multinational corporations with their European partners.

The Commission hopes that this will lead to self-policing by EU states, as all European tax authorities will be able to review each state's tax systems.

This falls short of campaigners hopes that tax policies would be shared in public documents.

The EU admits that public confidence has been damaged by a series of tax scandals, including the 'LuxLeaks' papers published by The International Consortium of Investigative Journalists (ICIJ).

A series of international news outlets shared stories based on a cache of 28,000 leaked documents that outlined what appears to be industrial scale tax-avoidance in the small EU state.


The document published by the European Commission today acknowledges that EU countries have "contributed to, and encouraged, aggressive tax planning."

The Commission aims to make these rules mandatory by the end of next year - but the draft legislation will need to be endorsed by the 28 EU member states, and the European Parliament.

The EU has committed to publishing more tax initiatives by this summer.

It has also pledged to bring the prospect of harmonised corporate tax rates in the EU back to the table. Such a policy would be likely to be staunchly opposed by the Irish Government.

The European Commission is currently investigating Apple's tax payments in the Republic of Ireland. A ruling on this case is expected in the second quarter of this year.



Goldman Sachs predicts the euro will fall through parity with the dollar within a year

Posted 15/03/2015

Goldman slashes euro forecasts, sees new low $0.80 by end-2017

US investment bank Goldman Sachs today cut its forecasts for the euro.

The bank predicted that the euro will fall through parity with the dollar within a year and plunge to a new record low of $0.80 by the end of 2017.

Goldman's outlook for the euro is now the gloomiest of all major financial institutions.

It comes at the end of a week that saw the European Central Bank launch its "quantitative easing" bond-buying stimulus programme and several banks slash their forecasts for the single currency.

Goldman now sees the euro at $0.95 within 12 months.

This compares with $1.08 at the time of its last published forecasts in late January, $0.85 by the end of next year compared with $1, and $0.80 by the end of 2017 compared with $0.90.

The euro's current all-time low is $0.8225, hit in October 2000.

Goldman cited mounting portfolio outflows from the euro zone and the "normalisation" of US monetary policy as the main reasons behind the anticipated fall.

"We continue to believe that euro/dollar will significantly undershoot, reflecting diverging growth and monetary policy outlooks," Goldman's currency strategists said.


The euro fell to 12-year lows this week after the ECB began its QE bond-buying on Monday.

It has slumped 12.5% so far this year, well on track for the biggest quarterly loss since its launch in 1999.

Several major banks cut their euro forecasts this week, including Credit Suisse, Bank of America Merrill Lynch and Deutsche Bank.

Meanwhile, the dollar continued to power higher today, pressuring some stocks and commodities, on expectations of a US Federal Reserve interest rate hike that stand in contrast to easing monetary policy actions by most other major central banks.

The dollar index was on track for a back-to-back weekly gain of more than 2%, setting up its strongest two-week performance in almost five years.

Stocks fell on Wall Street this evening, with the S&P 500 set to fall for a third week in a row.

Energy stocks were among the biggest losers, falling along with a steep decline in crude oil.

Investors are now looking ahead to the Federal Reserve's policy meeting on Tuesday and Wednesday, hoping that it will yield clues about the timing of a rate increase.

The dollar rallied today even after disappointing US inflation and consumer sentiment data, which normally would weaken the currency.



Majority of Germans say Greece should leave euro

Posted 13/03/2015

More than half of Germans believe Greece should leave the eurozone, according to a poll published this morning.

The Politbarometer survey released by public broadcaster ZDF found 80% believe Greece is not acting in a reliable manner in its negotiations with eurozone partners.

The proportion of respondents who think Greece should stay in the currency union has fallen to 40% from 52% two weeks ago, while 52% now believe it should leave, up from 41%.

Only 11% now think the left-wing government in Athens is behaving in a trustworthy way in talks with its EU partners, and only 14% believe the Greek government will actually implement the austerity and reform measures it has committed to, while 82% doubt it. 80% believe Greece should get no more bailout funds if it fails to follow through on its pledges, according to the survey conducted by the Mannheim Research Group.


The poll also confirmed Chancellor Angela Merkel as the country's most popular politician, followed in second spot by Finance Minister Wolfgang Schäuble.

Ms Merkel and Mr Schäuble have championed tough austerity and reform demands in return for aid to Greece, making them hate figures for many in Greece as the country has chafed under cutbacks and high unemployment.

Politbarometer surveyed by telephone 1,266 randomly selected voting-age Germans between Tuesday and yesterday.

EU Commission chief Jean-Claude Juncker said this morning that he was unhappy with a lack of progress in talks on Greece's bailout. 

However, he insisted there was no chance of a failure that could drive the country out of the eurozone. "I am not satisfied by the developments in the recent weeks. I don't think we have made sufficient progress, but we will try to push in the direction of a successful conclusion of the issues we have to deal with," he said ahead of talks with Greek Prime Minister Alexis Tsipras.

Greece's economy grew by 0.8% in 2014, the country's statistics service ELSTAT said today in its first estimate for the full year. GDP in real terms amounted to €186.5 billion compared with €185.1 billion in 2013.

Athens and its EU/IMF lenders had projected growth of 0.6% for 2014 as a whole. The official estimate by the previous government's finance minister was 0.7%.


German Finance Minister Wolfgang Schäuble said today that Greece's government needs "a bit of time" but is committed to implementing necessary reforms to resolve its debt crisis. 

"The new Greek government has strong public support," Mr Schäuble said in an interview with German newspaper Bild am Sonntag.

"I am confident that it will put in place the necessary measures, set up a more efficient tax system and in the end honour its commitments.     You have to give a little bit of time to a newly elected government," he told the Sunday paper. "To govern is to face reality."

Mr Schäuble also insisted that his Greek counterpart Yanis Varoufakis, despite their policy differences, had "behaved most properly with me" and had "the right to as much respect as everyone else."

It was a marked change in tone for Mr Schäuble, who has repeatedly exchanged barbs with Mr Varoufakis, his virtual opposite in both style and politics, since January's watershed Greek elections brought in an anti-austerity government.

Mr Schäuble last week warned that Greece would not receive "a single euro" until it meets the pledges of its existing € 240 billion bailout programme.

But he put his weight behind a four-month extension, to the end of June, approved overwhelmingly by the German parliament on Friday after a complex compromise reached between eurozone finance ministers and Athens.

In exchange, Greece has pledged to implement reforms and savings.

Mr Schäuble reiterated the ground rules for the aid programme extension, stressing that "Greece must meet its commitments. Only then will it receive the promised aid payments."

When asked about repeated comments from the new Greek government against austerity measures and for a debt haircut, Mr Schäuble said that "contracts are more important than statements."



EU makes possible Russia-Ukraine deal on gas delivery

Posted 08/03/2015

Moscow and Kiev have agreed on a gas delivery deal to ensure Ukrainian gas consumption until the end of March, with Ukraine guaranteeing an undisputed transit of gas to the EU, after an EU-brokered trilateral gas talks in Brussels.


"am satisfied that we managed to safeguard the full application of the Winter Package for the supply needs in Ukraine," European Commission Vice President responsible for energy Maroš Šefčovič , who chaired the trilateral talks, said in a statement this week.

Russia asked Ukraine on Friday to complete payment for Russian gas on the day to guarantee gas supplies in March, warning that in line with last October's agreements reached in Brussels, supplies will stop if no money is received.

"We also agreed to take up trilateral negotiations on the follow-up to the Winter Package. I am reassured that the supply of gas to the EU markets remains secure," said Šefčovič.

According to the gas delivery deal, Ukraine's national oil and gas company Naftogaz will pre-pay and order from Russia's Gazprom sufficient quantities of gas to ensure covering all domestic consumption by Ukraine in March, and Naftogaz continues to guarantee an undisrupted transit of gas to the EU.

Russia and Ukraine also agreed to hold further talks in order to agree on the follow-up to the gas delivery, he said.

On the issue of supplies to certain areas of Donetsk and Lugansk regions, the statement said the two parties acknowledged that further discussion are needed, as it is "highly complex in legal, technical and political terms."

Šefčovič said the European Commission will propose a draft agenda and invite the parties to a meeting before the end of March.

Gas deliveries between Russia and Ukraine resumed last December according to the Winter Package deal reached after lengthy negotiations and bargaining. The package allowed the resumption of Russian gas supply to Ukraine till the end of March 2015 on the condition that by the end of 2014 Ukraine repay in two tranches 3.1 billion dollars of its outstanding debt of over 5 billion U.S. dollars.


Vice-President Mr Maroš Šefčovič today chaired trilateral talks on energy between the EU, Ukraine and the Russian Federation. The Russian Federation was represented by the Minister for Energy, Mr Alexander Novak. Ukraine was represented by the Minister for Energy and Coal Industries, Mr Vladimir Demchyshyn. Vice-President Šefčovič said: "I am satisfied that we managed to safeguard the full application of the Winter Package for the supply needs in Ukraine.

We also agreed to take up trilateral negotiations on the follow-up to the Winter Package. "I am reassured that the supply of gas to the EU markets remains secure". High Representative/Vice-President Federica Mogherini underlined: "The outcome of today's meeting on energy issues can help bridge differences over the supply of gas between Ukraine and Russia. These efforts are part of the concrete support of the European Union to the implementation of the Minsk Agreements."


1) The Chair summed up the outcome of the trilateral meeting in the following way:Winter Package: The parties confirm the intention to fully implement the Winter Package. In this regard the following obligations from the Winter Package were highlighted:


    • Naftogaz will pre-pay and order from Gazprom sufficient quantities of gas to ensure covering all domestic consumption by Ukraine in March,
    • Naftogaz continues to guarantee an undisrupted transit of gas to the EU,
    • Gazprom will deliver up to 114 mcm per day of pre-paid and ordered gas quantities to mutually agreed delivery points.


By living up to these obligations the Parties will demonstrate their reliability respectively as an important supplier of natural gas to the EU and as a key transit country for Russian gas to the EU.

2) Supply to certain areas of Donetsk and Lugansk regions: The Parties acknowledged that the issue of supplies to certain areas of Donetsk and Lugansk regions is highly complex in legal, technical and political terms. This issue will be further discussed.

3) Trilateral discussions of the follow-up gas package: The Parties have also stated their willingness to continue their trilateral talks in order to agree on the follow up to the gas Winter Package, as called for in the Declaration of Minsk of 12 February 2015.

The European Commission invites the Parties to submit their proposals for possible agenda points for the next trilateral meeting. On this basis the European Commission will propose a draft agenda and invite the Parties to a meeting before the end of March 2015.