Cyprus Readies for Reopening of Banks

March 27, 2013 by

Global Geopolitics & Political Economy / IPS

AJ Correspondents

DOHA, Qatar, Mar 27 (Al Jazeera) – Cyprus is finalising capital control measures to prevent a run on the banks by depositors anxious about their savings after the country agreed a painful rescue package with international lenders.With banks due to reopen on Thursday, Finance Minister Michael Sarris said he expected the control measures to be ready by noon (1000 GMT) on Wednesday.

"I think they will be within the realms of reason," Sarris said in a Cyprus television interview, without going into details.

Cypriots have taken to the streets of Nicosia in their thousands to protest against the bailout deal they fear will push their country into an economic slump and cost many their jobs.

European leaders said the deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.

A banking official said on Wednesday that new controls will include restrictions on large-scale transfers from Bank of Cyprus and Laiki, two of the country’s largest and troubled lenders, which are both being restructured.

Authorities are looking to increase the daily withdrawal limit from 100 euros to 300 euros, for at least a week until the situation stabilises, according to the official who spoke to AP news agency.

Banks will have heightened security across the island nation for the "comfort of both bank staff and clients, with the police also present", according to John Argyrou, the Cyprus managing director of private security firm G4S, which will deploy 180 of its staff to all bank branches.

"There may be some isolated incidents, but it’s in our culture to be civil and patient, so I don’t expect anything serious," said Argyrou.

Run on banks

"Banks will open on Thursday … We will look at the best way to limit the possibility of large sums of money leaving, and not imposing punitive conditions on the economy, businesses and individuals," Sarris said in the interview.

The central bank governor said earlier that "loose" controls would apply temporarily to all banks.

Earlier, the finance minister said they could be in place for weeks. Banks have been shut since final bailout talks got under way in mid-March.

Russia, whose citizens have billions of euros in Cypriot banks, cautioned Nicosia against imposing onerous controls on healthy banks.

"If there are such measures, this will not foster trust but only provoke additional problems for participants, depositors," Russian Finance Minister Anton Siluanov, in South Africa for a summit of the BRICS emerging powers group, told reporters late on Tuesday.

State-controlled Russian bank VTB has a subsidiary in Cyprus, Russian Commercial Bank, which has not been affected by the bailout deal.

Siluanov cautioned that Russian willingness to restructure and extend a 2.5-billion euro loan to Cyprus in 2011 would depend on the island’s decision on capital controls.

"We will discuss (restructuring of the loan) in the context of the decisions the parliament adopts," he said. "We are prepared to discuss within these parameters."

Bank executive sacked

Meanwhile, the chief executive of the Bank of Cyprus, the island’s biggest lender, was sacked by the central bank governor as part of the bailout deal, state media said.

Yiannis Kypri was fired on the instructions of the so-called troika of the European Union, European Central Bank and International Monetary Fund, the Cyprus News Agency reported.

The terms of the 10-billion euro (13-billion-dollar) rescue have stirred popular anger within Cyprus at the country’s partners in the EU, notably Germany, the bloc’s main paymaster and fiercest advocate of austerity.

On Tuesday, up to 3,000 high school students protested at parliament, in the first major expression of popular anger since the bailout was agreed in the early hours of Monday morning in Brussels.

The deal largely side-stepped parliament, and has triggered opposition calls for a referendum.

"They’ve just got rid of all our dreams," one student, named Thomas, said.

Outside the central bank, about 200 employees of the country’s biggest commercial lender, the Bank of Cyprus, demanded the resignation of central bank governor Panicos Demetriades, chanting "Hands off Cyprus" and "Disgrace".

*Published under an agreement with Al Jazeera.

All rights reserved, IPS – Inter Press Service, 2013.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


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As Cyprus Collapses, It’s a Race to the Mediterranean Gas Finish Line

March 27, 2013 by

By. Jen Alic of Oilprice.com

Cyprus is preparing for total financial collapse as the European Central Bank turns its back on the island after its parliament rejected a scheme to make Cypriot citizens pay a levy on savings deposits in return for a share in potential gas futures to fund a bailout.

On Wednesday, the Greek-Cypriot government voted against asking its citizens to bank on the future of gas exports by paying a 3-15% levy on bank deposits in return for a stake in potential gas sales. The scheme would have partly funded a $13 billion EU bailout.

It would have been a major gamble that had Cypriots asking how much gas the island actually has and whether it will prove commercially viable any time soon.

In the end, not even the parliament was willing to take the gamble, forcing Cypriots to look elsewhere for cash, hitting up Russia in desperate talks this week, but to no avail.

The bank deposit levy would not have gone down well in Russia, whose citizens use Cypriot banks to store their “offshore” cash. Some of the largest accounts belong to Russians and other foreigners, and the levy scheme would have targeted accounts with over 20,000 euros. So it made sense that Cyprus would then turn to Russia for help, but so far Moscow hasn’t put any concrete offers on the table.

Plan A (the levy scheme) has been rejected. Plan B (Russia) has been ineffective. Plan C has yet to reveal itself. And without a Plan C, the banks can’t reopen. The minute they open their doors there will be a withdrawal rush that will force their collapse.

In the meantime, cashing in on the island’s major gas potential is more urgent than ever—but these are still very early days.

In the end, it’s all about gas and the race to the finish line to develop massive Mediterranean discoveries. Cyprus has found itself right in the middle of this geopolitical game in which its gas potential is a tool in a showdown between Russia and the European Union.

The EU favored the Cypriot bank deposit levy but it would have hit at the massive accounts of Russian oligarchs. Without the promise of Levant Basin gas, the EU wouldn’t have had the bravado for such a move because Russia holds too much power over Europe’s gas supply.

Cypriot Gas Potential

The Greek Cypriot government believes it is sitting on an amazing 60 trillion cubic feet of gas, but these are early days—these aren’t proven reserves and commercial viability could be years away. In the best-case scenario, production could feasibly begin in five years.

Exports are even further afield, with some analysts suggesting 2020 as a start date.

In 2011, the first (and only) gas was discovered offshore Cyprus, in Block 12, which is licensed to Houston-based Noble Energy Inc. (NBL). The block holds an estimated 8 trillion cubic feet of gas.

To date, the Greek Cypriots have awarded licenses for six offshore exploration blocks that could contain up to 40 trillion cubic feet of gas. Aside from Noble, these licenses have gone to Total SA of France and a joint venture between Eni SpA (ENI) of Italy and Korea Gas Corp.

But the process of exploring, developing, extracting, processing and getting gas to market is a long one. Getting the gas extracted offshore and then pumped onshore could take at least five years and some very expensive infrastructure that does not presently exist. The gas would have to be liquefied so it could be transported by seaborne tankers.

The potential is there: Cyprus’ gas discoveries adjoin Israeli territorial waters where the discovery of the massive Leviathan gasfield (425 billion cubic meters or 16 trillion cubic feet) and smaller Tamar gasfield (250 billion cubic meters or 9 trillion cubic feet) have foreign companies in a rush to cash in on this.

There are myriad problems to extracting Cypriot gas—not the least of which is the fact that some of this offshore exploration territory is disputed by Turkey, which has controlled part of the island since 1974.

Gas exploration has taken this dispute to a new level, with Turkey sending in warships to halt drilling in 2011, and threatening to bar foreign companies exploring in Cyprus from any license opportunities in Turkey. The situation is likely to intensify as Noble prepares to begin exploratory drilling later this year in Block 12.

In the meantime, there is no shortage of competition on this arena. Cyprus will have to vie with Israel, Lebanon and Syria—all of which have made offshore gas discoveries of late in the Mediterranean’s Levant Basin, which has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil.

Blackmailing Cyprus?

While Greek Cypriot citizens are not willing to gamble away their savings on gas futures, Russia and the European Union are certainly less hesitant.

This is both a negotiating point for Cyprus and a convenient tool of blackmail for Russia and the EU. Essentially, the bailout is the prop on a stage that will determine who gets control of these assets.

Theoretically, Cyprus could guarantee Russia exploration rights in return for assistance. As much as this is possible, the EU could ease its bailout negotiations if it becomes clear that a Russian bailout of sorts is imminent.

Gas finds in the Mediterranean and particularly across the Levant Basin—home to Israel’s Leviathan and Tamar fields—could be the answer to Russian gas hegemony in Europe. The question is: How much does Cyprus count in this equation? A lot.

Though only half of the estimated resources in the Levant Basin, Cyprus’ potential 60 trillion cubic feet of gas could equal 40% of the EU’s gas supplies and be worth a whopping $400 billion if commercial viability is proven.

Russia is keen to keep Cyprus and Israel from cooperating too much toward the goal of loosening Russia’s grip on Europe before Moscow manages to gain a greater share of the Asian market.

Russia is also not keen on Israel’s plan to lay an undersea natural gas pipeline to Turkey’s south coast to sell its gas from the Leviathan field to Europe. Turkey hasn’t agreed to this deal yet, but it is certainly considering it. This is fraught with all kinds of political problems at home, so for now Ankara is keeping it as low profile as possible.

With all of this in mind, Russia is doing its best to get in on the Levant largesse itself. While it’s also courting Lebanon and Syria, dating Israel is already in full force. Gazprom has signed a deal with Israel that would give it control of Tamar’s gas and access to the Asian market for its liquefied natural gas (LNG). Tamar will probably begin producing already in April at a 1 billion cubic feet/day capacity.

In accordance with this deal, which Israel has yet to approve, Gazprom will provide financial support for the development of the Tamar Floating LNG Project. In return, Gazprom will get exclusive rights to purchase and export Tamar LNG. It is also significant because Tamar is a US-Israeli joint venture—so essentially the plan is to help Russia diversify from the European market.

What does this mean for Cyprus? The chess pieces are still being put on the board, and both fortunately and unfortunately, Cyprus’ gas potential will be intricately linked to its bailout potential.

Source: http://oilprice.com/Energy/Natural-Gas/Cypriot-Bailout-Linked-to-Gas-Potential.html

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Tenants in Spain Win First Battle against Evictions

February 17, 2013 by

Global Geopolitics & Political Economy / IPS

spain_protest_640-629x472

The ILP calls for “payment in kind", meaning that a person’s debts are written off once they have surrendered their home. Credit: Inés Benítez

Inés Benítez

MALAGA, Spain, Feb 15 (IPS) – Public outcry against evictions this week led Spain’s parliament to accept a popular initiative against mortgage-related evictions for unpaid debts, which in the past seven days have led to four suicides."The banks chase me to pay every cent," while they are rescued with public money, complained Benigno, a 47-year old unemployed man, who with his three children has for nearly a year occupied one of 29 vacant apartments in a building project in the southern city of Malaga, which closed down when the developer went bankrupt.

Benigno has had two houses foreclosed on. He spent three years working for a company with an open-ended contract when he decided to take out a loan to buy a bigger second home, offering the first as collateral.

"Everybody did it (bought property)," he told IPS. "But overnight I was fired. I’ve lost everything and I owe 102,000 euros (135,000 dollars), payable in 28 years."

The Popular Legislative Initiative (ILP), promoted by the citizen movement Plataforma de Afectados por la Hipoteca (PAH) (Platform for those Affected by Mortgage), is backed by nearly a million-and-a-half signatures.

It calls for “payment in kind,” meaning that a person’s debts are written off once they have surrendered their home, and wants this to apply retroactively. It also wants a moratorium on evictions, and the creation of social housing with homes confiscated by banks.

"We are the European country with the most evictions, and at the same time the one with the largest millions of accumulated empty homes," PAH spokesman, Ada Colau, said in a televised interview earlier this month.

Between 2007 and the third quarter of 2012, there were 400,000 foreclosures in Spain, according to data from the General Council of the Judiciary.

"I heard that there were empty houses and I came. I had no other choice. I could not pay rent," said Antonio, a 22-year-old living with his wife Encarni, 19, and their two-year-old daughter. The little he earns as a street vendor, he spends on food.

"I have no electricity and water, but at least I don’t have my daughter on the street," said Antonio, who is a neighbor of Benigno and 20 other families, who make up for the lack of electricity with candles and generators, and fill containers with drinking water from nearby pumps.

The debate over the ILP, which given the social pressure was accepted "in extremis" by the ruling right-wing Popular Party (PP) with a parliamentary majority, "is a first step", said Antonio Alarcón, a core activist of the Malaga PAH, which in four years has stopped more than 500 evictions. It negotiates payments in kind and relocates families into affordable rental schemes.

It remains to be seen whether the measures proposed in the ILP will be incorporated unchanged into a bill on the same subject which is already passing through the parliament.

If by law the banks apply payment in kind retroactively, many people who have lost their homes would avoid facing lifelong debts. "They will save me from a 28-year trap,” said Benigno.

Some in economic circles oppose payment in kind, arguing it will make credit more expensive and hurt the financial system.

"But the fact is that today there is no credit for anyone and the financial system is already broken," Sara Vásquez, an attorney for the PAH in Malaga, told IPS.

For Vásquez, the admission of the ILP project was the result of "arm-twisting " and “marks a milestone in this country". It shows that "the only way out is pressure" by of citizens, who increasingly feel less represented by institutions, and are outraged by the corruption charges shaking the PP and members of the royal family.

"They receive envelopes with money and we receive envelopes with bills," said Azahara, another resident of the occupied building, referring to the alleged illegal payments to members of the PP, as reported by the national newspaper El País.

In the past four months there have been seven suicides of people who were to be evicted, including four in just the last seven days. On Feb. 13, the judicial commission that was to carry out the eviction of a man found him hanging at his home in the southeastern city of Alicante.

Unemployment is now affecting a whopping 26.2 percent of the workforce in Spain, even as there are drastic cuts in key areas such as health and education.

"(The government) is not rescuing people, but the banks," said Alarcon, referring to public money allocated to clean up the financial institutions and the creation of a so-called "bad bank", a manager of unpaid property loans or unsold homes that the banks took from bankrupt construction companies to whom they had lent money.

During the housing boom, "everything in this country was pushing you to buy a home instead of renting… and the banks themselves drafted the mortgage contracts," Colau recalled in the interview.

The PAH has called for demonstrations this Saturday "for the right to housing and against financial genocide".

The Court of Justice of the European Union declared last November that the Spanish foreclosure system is incompatible with the laws of the EU bloc.

In a preliminary ruling, which will serve as a basis for judgment, the court granted national judges the power to suspend evictions until the terms of credit have been reviewed to see whether or not they are abusive.

The debtors come to the PAH with "complete ignorance" about their situation: they don’t know how to negotiate with the bank or how their lawyer can help them, said Alarcon, who criticised the lack of training of lawyers in charge of defending the interests of those affected.

"None of us live here today because we want to," said Benigno. With the help of the PAH, they want to negotiate with the owner and continue to stay in the building, in exchange for its maintenance, for which each of them provides 20 euros per month, according to a list attached to an elevator that never functioned.

All rights reserved, IPS – Inter Press Service, 2013.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Economic Crisis, Europe, Human Rights, Lead, Social Justice Tagged With: , , ,

Argentina Pins Hopes on Bumper Grain Harvest

February 11, 2013 by

Global Geopolitics & Political Economy / IPS

Marcela Valente

BUENOS AIRES, Feb 09 (IPS) – Argentina has better prospects in 2013 after modest growth in 2012, thanks to an excellent grain harvest and the recovery of Brazil, its main market.But high inflation remains an unsolved challenge.

Since the government took control of the National Statistics and Census Institute (INDEC) in 2007, its inflation figures have been called into question, locally and internationally. INDEC reported inflation last year as 10.8 percent, but estimates from the private sector and the parliamentary opposition put it at 25.6 percent.

"There was a sharp economic slowdown in 2012, partly because of the international crisis and partly because of internal imbalances," economist Luciana Díaz, director of the fiscal policy programme at the Centre for the Implementation of Public Policies Promoting Equity and Growth (CIPPEC), an NGO, told IPS.

CIPPEC carries out constant monitoring of the public policies of the centre-left government of President Cristina Fernández.

According to INDEC’s latest figures, GDP grew 1.8 percent in the first three quarters of 2012, a poor result compared to GDP growth of 8.9 percent for the whole of 2011.

"The fiscal situation is being patched up with band-aids instead of developing comprehensive solutions. This affects monetary policy, increases inflation, blocks imports and creates expectations of a devaluation, which has repercussions on the level of economic activity," Díaz said.

This expectation is reflected at present in a widening gap between the official value of the dollar (not available for savings) at 4.99 pesos, and the black market dollar (or "blue rate" as it is termed locally), which in the first few days of February was valued at between 7.60 and 8.00 pesos.

Díaz said this scenario is a disincentive to private investment. The government is trying to compensate with greater public investment, "but then the vicious circle is intensified," she said.

In Díaz’s view, if adjustments had been made two years ago to limit public spending and inflation, growth would have been lower in 2010 and 2011, but higher in 2012. "We would have avoided these fluctuations that create uncertainty," she said.

The government is forecasting a recovery in 2013, with GDP growth of 4.4 percent, according to this year’s budget. Payments due on external debt will also be lower this year than in 2012.

Private analysts concur with the forecast of higher economic activity, which is attributed mainly to recovery in Brazil, which had 1.2 percent GDP growth in 2012 and this year is predicted to have four percent.

Data on Brazil are provided by the Preliminary Overview of the Economies of Latin America and the Caribbean 2012, released in December by the Economic Commission for Latin American and the Caribbean (ECLAC).

The ECLAC overview reports growth of 2.2 percent of GDP for 2012 in the Argentine economy, and 3.9 percent in 2013, because of Brazil’s greater dynamism and a bumper grain harvest, a key element in Argentina’s economy.

Automobile production and sales in 2012 compared with projections for 2013 show the extent to which Argentina depends on Brazil’s prospects. Eighty-two percent of Argentine car exports are sold to Brazil.

According to the Asociación de Fábricas de Automotores (ADEFA), the industry association, in 2012 production fell by 7.8 percent compared to 2011, while exports fell by 18.4 percent.

If Brazil experiences a recovery, as it already has in the last quarter of 2012, production volumes of Argentine cars will increase, as well as sales, ADEFA said.

The grain harvest this year is forecast to be larger than last season’s. "It may even be one of the best harvests we have ever had," Gustavo López, an analyst with Agritrend, a consultancy, told IPS.

López said the sum of the expected harvests of soybean and maize – the main export crops – together with the completed harvests of wheat, barley, sorghum and sunflower, will reach a total of between 105 and 110 million tonnes.

"The best season so far was in 2010/2011, when the harvest was 103 million tonnes," he said. However, he preferred to err on the side of caution, especially as much depends on the level of rainfall in the next few weeks.

The 2011/2012 agricultural cycle produced a harvest of only 90 million tonnes, due to drought which reduced crop yields. This year, in spite of a lower cultivated area, volumes are expected to be higher, López said.

On its own, soybean, the star crop, accounts for half of the total harvest.

"If the forecasts are fulfilled, some 80 million tonnes will be exported, representing earnings of 36 billion dollars, out of which 10 billion dollars will go into the state coffers because of (the tax known as) ‘export retentions’," López said.

With these improved prospects, the issue on the government’s economic agenda that is the greatest irritant at the start of this year is inflation, a variable for which official figures are nearly 15 percentage points lower than those of the private sector and those presented in Congress by the opposition.

On Feb. 1 the International Monetary Fund (IMF) took the unprecedented step of issuing a "declaration of censure" against Argentina because the measures taken to correct its economic statistics "have not been sufficient."

The IMF gave the country until Sep. 29 to address the inaccuracies in its consumer price index and GDP growth figures.

The government responded through the economy ministry, blaming the IMF for allegedly contributing to the 2001-2002 Argentine banking crisis and attributing the motion of censure to the IMF’s hostility to Argentina’s determination to reduce its external debt.

However, the government did say it was working on a new price index which will come into force in the last quarter of the year.

ECLAC’s overview said the official inflation rate of 10.8 percent was the second highest in the region after Venezuela. If the opposition’s figure is adopted, Argentina’s inflation is the highest in Latin America.

In spite of its reluctance to openly admit the difference between official and unofficial inflation rates, the government is approving wage and pension increases that are closer to the unofficial consumer price index than to the government’s own.

Meanwhile, the domestic trade secretariat is temporarily freezing prices in supermarket chains and also on household appliances. But according to Díaz, "price controls are increasingly ineffective."

All rights reserved, IPS – Inter Press Service, 2013.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Economic Crisis, Economic Policy, Economy, Latin America, Lead Tagged With:

Davos Puts Protests Behind

February 6, 2013 by

Global Geopolitics & Political Economy / IPS

Ray Smith

DAVOS, Feb 05 (IPS) – Barbed wire and safety fences are dismantled, the police and army are withdrawn and freedom of movement is restored. The 43rd annual meeting of the World Economic Forum (WEF) ended last month with negligible protests against the ‘global leaders’.Every year in late January, the Swiss mountain town Davos is temporarily turned into a fortress. On the streets, policemen, soldiers and bodyguards outnumber unarmed citizens by far.

More than 2,500 ‘global leaders’ met in Davos this year “to improve the state of the world.” as the WEF claims. It’s difficult to make much sense of this year’s motto ‘Resilient Dynamism’. Nevertheless, a lot was discussed, much optimism spread but no decisions taken; at least in front of the cameras.

Even though temperatures were frosty, sunshine reigned at this year’s annual meeting. At least from the business perspective, the global economic crisis is receding. “The worst is behind us. The optimism for recovery is there,” Axel Weber, chairman of the board of directors of the scandal-ridden bank UBS proclaimed.

Meanwhile Davos mayor Tarzisius Caviezel couldn’t stop raving about the WEF’s economic importance for Europe’s highest city: “The pictures broadcast throughout the world are invaluable advertising for Davos.”

Indeed, visual publicity was much worse a decade ago – trashed fast food restaurants, broken windows, a martial police presence, clouds of tear gas, peaceful protesters beaten and showered by water cannons.

This year, barbed wire was cleverly covered by large white canvas. The security personnel’s only challenge was to guide the countless SUVs and limousines through the town’s narrow streets.

A decade ago, thousands of protesters challenged the ‘global leaders’, threatening to shut down the World Economic Forum. It wasn’t just about expressing alternative opinions in Davos, but about chasing the rich and powerful out of town. “Wipe out WEF” was their slogan.

In past years the police did everything possible to keep protesters away from Davos, and put up with riots in other Swiss cities. Whoever tried to travel to Davos was stopped; trains and coaches were blocked in the lowlands.

About 50 people joined a rally in Davos. Rolf Marugg, secretary of the local Green Party was pleased, though he had expected more. “It’s important that we as locals protest against the meeting, the order of the globalised economy and the often dirty doings of the WEF participants,” Marugg said.

Pointing at the WEF’s rather vague motto, the Green politician said that the world doesn’t need dynamism and resilience but a slowdown and change. “The current crisis proves that those self-appointed global leaders’ only ability is to drive economy, society and the environment against the wall. ‘Resilient Dynamism’ therefore only means to keep up the current crisis system by any means possible.”

Over the last few years, small demonstrations are tolerated in Davos; they no longer constitute a threat. The rally went almost unnoticed. Additionally, Greenpeace temporarily shut down a Shell gas station, criticising the company for planning to drill for oil in the Arctic. In another token protest, three activists approached the congress centre with smoke flares to protest against the exploitation of women in the global economy.

A decade ago going up to Davos in late January was on every left-wing activist’s agenda. David Böhner, now in his forties, was a leading figure in Switzerland’s anti-globalisation movement. “Our protest was fundamentally anti-capitalist and directed against the increasingly powerful multinational corporations,” he said.

“Any social movement needs some kind of point of reference. In our case, the World Economic Forum provided a suitable projection screen.” At that time, no meeting of the G8, the European Union or the WTO was safe from resistance protests.

Böhner didn’t travel to Davos this year. “The demonstrations against the WEF don’t interest me any more.” The political capacity to ignite has long gone, he said, and a ritualised form of protest carries little potential.

It was in the early 2000s that opposition was loudest and most radical. Even though the authorities were quick to deflect from political content by nurturing a debate on violence at the protests, it was then when the activists’ arguments were most heard.

“Another major reason for the decline of the anti-WEF movement surely was the police repression,” David Böhner added. The turning point was in 2004, when 1,082 demonstrators were held in the freezing cold in the town Landquart, 40 kilometres from Davos, after violently being pulled out of a train by the police.

The authorities succeeded, because disputes flared up within the movement. Mobilising for demonstrations in Davos became senseless, unwise and unattractive. In the following years, increasingly smaller rallies were held in other Swiss cities.

Meanwhile, the WEF facilitated media access and invited ‘civil society leaders’ to their debates to counter critique. The Open Forum to run parallel to the WEF was invented.

But despite its polished image, the World Economic Forum remains a dubious platform for politicians and business leaders to consult behind closed doors, far from any accountability. The official programme is just one side of the coin.

On behalf of the World Economic Forum, Nicholas Davis argues that if every meeting was made public, nothing would get decided. “Some conversations – over delicate or sensitive issues – frankly have to be held behind closed doors. Our aim is to be as open as possible without jeopardising our mission to improve the state of the world.”

All rights reserved, IPS – Inter Press Service, 2013.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Analysis, Diplomacy, Economic Crisis, Economic Policy Tagged With: ,

Debt Crises, a Damocles Sword

February 4, 2013 by

Global Geopolitics & Political Economy / IPS

Martin Khor

MKhor

Martin Khor

GENEVA, Jan 29 (IPS) – The issue of foreign debt has made a major comeback due to the crisis in Europe, in which many countries had to seek big bailouts to keep them from defaulting on their loan payments. Before this, debt crises have been associated with African and Latin American countries. In 1997-99, three East Asian countries also joined the indebted countries’ club.

This year, European countries, notably Germany, insisted that private creditors share the burden of resolving the Greek crisis. They had to take a “haircut” of about half, meaning that they would be repaid only half the amount they were owed.

It is increasingly clear that bailouts – where new loans are given to indebted countries to enable them to keep paying their old loans in full – are not enough and may be counterproductive, when the countries are facing a problem of insolvency and not just a temporary lack of liquidity. The restructuring of some of Greece’s debt that was owed to private creditors is an example of what needs to be done.

However, the ad hoc restructuring undertaken in the Greek case is not enough. A more systematic framework needs to be made available to countries on the verge of debt default, with principles agreed to internationally. In the absence of this, unilateral debt restructuring will probably be messy, as when a country is forced by desperate circumstances to declare a default and propose its own debt restructuring, which may or may not succeed in getting its creditors to agree to the terms.

And even if a majority of creditors agree to take the “haircut” proposed, a minority may hold out against the restructuring and this may disrupt the whole exercise. The current court case taken by a “vulture fund” that is holding out against Argentina’s debt restructuring is a clear example.

Though the debt crisis now has Europe as its epicentre, many developing countries may soon also be facing the same predicament.

Due to the effects of the global economic slowdown, with export prices and earnings beginning to take a significant hit, many developing countries are becoming vulnerable to a debt crisis. An increasing number have dwindling foreign reserves that can only pay for less than three months of the value of their imports.

There are many weaknesses in the present situation of voluntary systems such as including an element of burden sharing in collective action clauses in loan agreements, or in unilateral workouts that countries seek.

These voluntary methods can be either inadequate or unpredictable in design and effect as they do not have the benefit of an internationally agreed system. There should thus be new efforts to find an international solution such as a statutory debt workout mechanism.

For the past three decades the United Nations Conference on Trade and Development (UNCTAD) has analysed the features of such an international sovereign debt workout system. The pioneering UNCTAD model is mainly based on the principles of the U.S. bankruptcy law. The elements of such a system are as follows.

First, a country facing debt difficulties can declare a temporary standstill on its external debt servicing. This gives some breathing space to formulate a proper debt servicing plan. The plan should cover all debt servicing, whether the difficulty is due to solvency problems, in which the debt has to be reduced, or liquidity problems, in which case the debt has to be rolled over.

Second, there is an automatic stay on litigation by creditors during the standstill. This is to avoid problems to both debtor country and its creditors. The stay on litigation is to prevent a situation where many creditors are scrambling for an exit or lining up to sue the country.

Third, an independent panel of legal and economic experts would be established to address the issues arising from the standstill, including assessing the countries’ debt situation. The independence of the panel is important, in that creditors should not be on the panel as they have a direct interest in the case.

Fourth, the country undertaking a temporary standstill would have to also undertake selective capital controls to prevent capital flight that can result from the standstill on debt payments.

Fifth, new loans should be provided to the debtor country, in a situation known as lending into arrears, in order that the country can continue to implement policies for economic and social development.

Sixth, the new loans contracted after the standstill should be given seniority status. This is to facilitate the emergence of new creditors and new loans.

Seventh is the debt restructuring exercise. The terms should be the result of negotiations between the debtor country and creditors. In the negotiations, the operationalising of the Collective Action Clauses (CACs), where they exist, could be a part of the exercise. Therefore there can be a combination of voluntary CACs and statutory debt workout. If creditors and the debtor country cannot reach agreement, then they can seek arbitration through an independent arbitration panel.

The United Nations is well placed to take the lead in this whole exercise of establishing a statutory debt workout mechanism.

All rights reserved, IPS – Inter Press Service, 2013.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Commentary, Economic Crisis, Economy, Finance Tagged With:

This Is What a Humane Economy Looks Like

February 3, 2013 by

Global Geopolitics & Political Economy / IPS

Inés Benítez

MÁLAGA, Spain, Feb 02 (IPS) – The severe crisis crippling Spain is also sparking some creative responses, such the Okonomía project, a teaching initiative that helps individuals and communities to understand the workings of the economy and make more informed decisions to manage their finances."Things have gotten so bad, with people out of work, losing their homes and watching their savings vanish, that something has to be done to economically empower people," said activist Raúl Contreras, one of the academics behind this initiative that in February will open its first school in Benimaclet, a multicultural neighbourhood in the southeastern city of Valencia.

Contreras – an economist who also heads the company Nittúa, which sponsors this project – spoke with IPS about the powerlessness and fear that is taking hold of many people who do not understand how the economy works and how it affects their lives, and are thus made vulnerable to manipulation.

"Doubts, ignorance and fear – in some cases spread intentionally – lead to mistakes, anxiety and difficult situations that could be avoided if people are better informed and equipped to make decisions or choices," Nittúa’s website reads.

One out of every four economically active persons is currently unemployed in Spain, where dozens of families are evicted daily from their homes for failure to meet their mortgage payments, and the measures implemented by the right-wing government of Mariano Rajoy to address the crisis involve huge cuts to health, education and other basic services.

Hundreds of thousands of people in Spain fell prey to "preferential shares" and other financial product schemes and lost all their savings. As the crisis deepened and banks became desperate for cash, they convinced more and more savers to buy these products, taking advantage of their lack of understanding of the ins and outs of investment, and using misleading and distorted sales pitches.

Okonomía – which is financing its start-up needs through a crowdfunding campaign – calls itself a "popular economics school" that "develops dialectical educational processes, building on the reality and economic knowledge of each participant, to enable participants to understand their economic situation so that they can make informed and conscious decisions, both individually and collectively, that will lead to the transformation of society through economic empowerment."

The school is formed by professionals from the fields of economics and education and its activities include training multiplying agents who will spread their newly-acquired knowledge in their immediate social environment.

"The school won’t solve people’s problems, but it will provide a toolbox to help individuals make more informed decisions based on their specific needs," Contreras explained, highlighting the project’s cross-cutting approach to solidarity economy, as it emphasises sustainable alternatives.

While the head of Nittúa stresses the solidarity aspect of this economic model, he says it is not the school’s intent to preach any one model or solution. Rather it seeks to give participants an understanding of economics in general, including a range of economic alternatives, such as ethical banking, responsible consumption, fair trade and the cooperative model.

"A large part of society has realised that a different way of teaching economics is needed," Carlos Ballesteros, a lecturer on consumer behaviour at Madrid’s Comillas Pontifical University, told IPS. "Ninety-nine percent of the world’s business schools stick close to the neoliberal paradigm," which is profit-driven and based on maximising earnings.

Ballesteros said that while Okonomía’s target public is civil society as a whole and its main objective is to teach and inform, on the understanding that "the economy is everyone’s responsibility," it also aims to gather and systematise knowledge on solidarity economy practices that may prove useful to people working in that field.

Okonomía offers semester courses, with in-person classes held every two weeks. The methodology is based on the popular education model developed by Brazilian educator Paulo Freire (1921-1997), who believed that "to teach is not to transfer knowledge but to create the possibilities for the production or construction of knowledge."

In each session an issue is presented and material is provided to facilitate reflection. "The learning process is a group activity. The classes are not lectures, but rather dialogue-based and interactive," Contreras said.

He added that after each session the conclusions drawn from the group’s discussions are published online and posted in an intranet, which will form a database of the school’s results, a sort of "Wikipedia of Popular Economy".

Economist Arcadi Oliveres, one of Okonomía’s advisers, said this project is valuable because it "seeks to reveal to the people the underlying workings of the economy" and "because we’re really in the dark" when it comes to the financial world, he told IPS.

Oliveres, a professor of applied economics at the Autonomous University of Barcelona, believes that "people don’t know that there are alternatives to the traditional economic system" and calls for critically aware citizens who can make informed decisions.

Independently of how financial markets and governments behave, the actions of common citizens also have an impact on the economy, so that people must be conscious that they too can make irresponsible choices as consumers or that their deposits can go to financing environmentally-harmful corporate activities, the economist argued.

"We have to start asking ourselves where our money goes – what do I do with my savings, where do I deposit them and why? – and learn to take control of our finances," Contreras said.

The aim of the school is to help people "understand and then make free, but conscious decisions," he added.

The expert noted that he has not found similar projects anywhere else in the world and that Okonomía, which combines a methodology inspired by Paulo Freire with social innovation methods, has the potential to be replicated outside of Spain "with the support of the social fabric of neighbourhoods and communities".

All rights reserved, IPS – Inter Press Service, 2012.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Economic Crisis, Education, Europe, Poverty, Report Tagged With: , ,

Jumping the Abyss: Marriner S. Eccles and the New Deal, 1933-1940

December 27, 2012 by



By Mark Nelson
We capitalists have got to decide how much we are going to pay for capitalism.[1]
Marriner S.


See on neweconomicperspectives.org


Filed Under: Economic Crisis, Economic Policy, Economy, Finance, Headlines, History Tagged With: , , ,

Alexis Tsipras: ‘We are the great hope for change’

December 27, 2012 by



Greece’s young leftist firebrand held the future of his country in his hands for a few days in June. He may do again in 2013

“He came from Greece‘s political wilderness – yet for a few days in June Alexis Tsipras held the future of the euro in his hands. Six months on, the fast-talking firebrand who took the world by storm in the runup to the Greek elections may no longer be in the spotlight, but he has not faded into history. “We may have narrowly lost the battle,” Tsipras says of the failure of his radical left Syriza party to clinch power. “But we have not lost the war.”"


See on www.guardian.co.uk


Filed Under: Economic Crisis, Economy, Elections, Europe, Headlines, Politics, Unrest Tagged With: , , ,

Crisis in the Eurozone: Costas Lapavitsas: 9781844679690: Amazon.com: Books

December 26, 2012 by



Crisis in the Eurozone [Costas Lapavitsas] on Amazon.com. *FREE* super saver shipping on qualifying offers. A controversial call to break up the Eurozone and stop the debt crisis.


See on www.amazon.com


Filed Under: Economic Crisis, Economic Policy, Economy, Europe, Headlines Tagged With: , , ,
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