35 by panniuniu


									                                                                                                                                                                                                                          ARAB TIMES, MONDAY, DECEMBER 5, 2011
    BUSINESS                                                                                                                                                                                                                                                                    35

                                 ‘no deal at EU summit ‘extraordinarily grave’                                                                                                EU at threat without solution: Portugal PM

    Britain’s Deputy Prime Minister            nomic governance.                           selves.                                           Failure to find a solution to the euro    clearly that could represent the end            Portugal became the third euro
    Nick Clegg said Sunday it would be            “It is extraordinarily grave if no          “Those rules were not adhered                  zone crisis could lead to the end of      of the European Union.”                       zone country to seek a bailout, of
    “extraordinarily grave” if no agree-       agreement is reached,” Clegg told           to. That’s the great tragedy. And,                the European Union, Portuguese               He said the crisis had become              78 billion euros ($105 bln), after
    ment was reached on saving the             BBC television. “We need to have a          bluntly, it was the French and                    Prime Minister Pedro Passos               systemic and as a result a “much              Greece and Ireland. Passos Coelho
    eurozone at this week’s EU sum-            clear roadmap towards a stabilisa-          German governments back in 2005                   Coelho said in an interview pub-          stronger response is necessary. In            repeated his determination to meet
    mit.                                       tion and strengthening of the euro-         who signalled that there was going                lished on Sunday.                         spite of various attempts, we have            tough budget goals under the
       European Union leaders gather           zone.”                                      to be a free-for-all.                                “We have to find a response,” to       not been able to find one.”                   bailout, stressing that was his gov-
    in Brussels on Thursday and Friday            He said the eurozone rules                  “If those rules had been stuck to              the crisis, he said in the interview         Passos Coelho said any solution            ernment’s key priority. He said if the
    to thrash out a way to save the 17-        should be toughened up, and                 in the first place, we wouldn’t now               with daily Publico, adding he hopes       to the crisis would have to address           economic situation worsens and
    country single currency bloc, likely       blamed Paris and Berlin for caus-           be in the trouble that we now face.               a solution can be found at a              the need for economic and political           more austerity measures become
    with proposed treaty changes to            ing much of the present woes by                “It’s right that they should be                European Union summit this week.          union within the bloc, to “comple-            necessary “there will be no other
    create closer fiscal union and eco-        breaking the existing rules them-           strengthened.” (AFP)                                 “If we don’t (find a response),        ment” monetary union.                         possibility than to adjust.” (RTRS)

                                                                               Governing council to hold year’s last meeting on Thursday

ECB set to cut rates again as crisis deepens
FRANKFURT, Dec 4, (AFP): The                  ly stressed its fire-fighting role is only    major shock... our view is that, under       analysts said.                                  One possible answer to this could be         ters.”
European Central Bank is expected to          temporary and it is ultimately up to          current circumstances, there is not             Tensions in the sovereign bank mar-       for the ECB to extend the maturity of              Holger Schmieding, chief economist
cut its key interest rates for the second     member countries themselves to get            much merit in delaying rate action.”         kets appear to have eased slightly in the    liquidity-providing operations from             at Berenberg Bank, was not convinced,
time in two months next week as EU            their finances in order.                         With the ECB’s latest staff economic      last few days.                               currently one year to two or three years.       however, seeing only a 1-in-3 chance
leaders battle to find a solution to the         Draghi surprised the markets when          projections, also scheduled for publica-        Nevertheless, signs of strain in the         And the beneficial impact of such a          “that the December summit and a more
long-running debt crisis.                     he took over at the ECB’s helm only           tion on Thursday, expected to be             banking sector “have grown, with             move could be maximised by relaxing             active ECB thereafter can turn senti-
   The ECB’s decision-making govern-          last month with an immediate quarter-         revised downwards significantly, the         interbank interest lending rates rising      the rules on collateral, argued Valli at        ment around for good.
ing council is holding its last monthly       point reduction in borrowing costs as         bank will have ample arguments to jus-       and banks placing more money on              UniCredit.                                         “That leaves a probability of 2 in 3
interest-rate meeting this year on            the 17 countries that share the euro          tify a further rate cut, said                deposit with the ECB instead of lend-           Overall, analysts are convinced the          that the summit will again relieve ten-
Thursday, the same day as European            teeter on the brink of a new recession.       Commerzbank economists Michael               ing to each other,” said Jennifer            ECB is preparing to take more aggres-           sions only temporarily,” Schmieding
Union leaders gather in Brussels to find         And markets and ECB watchers are           Schubert and Ralph Solveen.                  McKeown, senior European economist           sive action. But it likely to make that         warned.
ways out of a crisis that is threatening      pencilling in a similar move again this          This “should prompt the ECB to cut        at Capital Economics.                        conditional on EU leaders adopting a               “Our central case remains that the
the very existence of the single curren-      month, bringing borrowing costs in the        its refi rate from currently 1.25 percent       Another sign that banks are increas-      much tighter fiscal framework, possi-           crisis will escalate again thereafter
cy.                                           euro area down to just 1.0 percent.           to 1.0 percent,” they predicted.             ingly hoarding liquidity came when the       bly at their December 8-9 summit in             until, probably some time in January,
   Many governments and analysts see             While Marco Valli at UniCredit                Thus, with such a move already            ECB failed to “sterilise” or mop up the      Brussels, analysts argued.                      the ECB and the Bundesbank (the
the ECB as the sole institution capable       believed that such a move was “not a          widely priced in, the focus of attention     extra liquidity it has pumped into the          That certainly appeared to be                German central bank) finally realise
of putting out the fires of the crisis in     foregone conclusion, because in the           will be on the so-called “unconvention-      markets via its controversial pro-           Draghi’s message when he said in                that they have no further option but to
the immediate term. But the bank’s            past the ECB rarely moved at two con-         al measures” that Draghi will announce       gramme of buying the bonds of dis-           Brussels last week: “Other elements             intervene (much more) aggressively,”
new chief, Mario Draghi, has repeated-        secutive meetings without facing a            to try and get the crisis under control,     tressed countries.                           might follow, but the sequencing mat-           he concluded.

Decision time for EU leaders,                                                                                                                                                                               ‘The situation is grave’

                                                                                                                                                                                          Italy rushes to approve
with euro’s ‘future’ at stake                                                                                                                                                             crisis-busting measures
                                                                                                                                                                                          ROME, Dec 4, (Agencies): Italy’s
                                                                                                                                                                                          under-pressure cabinet met Sunday a
                                                                                                                                                                                                                                      a debt blow-up in Italy, the euro-
                                                                                                                                                                                                                                      zone’s third largest economy, could
                                              Wrangling over treaty change to dominate                                                                                                    day ahead of schedule to launch a
                                                                                                                                                                                          package of far-reaching budget cuts
                                                                                                                                                                                                                                      kill off the entire 17-nation euro area
                                                                                                                                                                                                                                      and observers say Italy is “too big to
                                                                                                                                                                                          and pension reforms aimed at resolv-        bail” in case of a default.
                                                                                                                                                                                          ing the financial crisis threatening the       Angelino Alfano, the leader of
PARIS, Dec 4, (RTRS): The                                                                                                                                                                 eurozone.                                   Berlusconi’s People of Freedom
euro faces a decisive week as                                                                                                                                                                The cabinet’s adoption of the            party, the biggest party in parliament,
European Union leaders,                                                                                                                                                                   measures had been scheduled for             also put the situation in stark terms:
                                                                                                                                                                                          Monday but Prime Minister Mario             “The choice is between a harsh plan
urged on anxiously by the                                                                                                                                                                 Monti brought the meeting forward in        today and the risk of bankruptcy
United States, seek agree-                                                                                                                                                                a bid to finalise the budget before the     tomorrow.”
ment on a convincing rescue                                                                                                                                                               markets open early Monday.                     Emma Marcegaglia, one of Italy’s
                                                                                                                                                                                             Monti was scheduled to outline the       top business leaders, said the reforms
plan that has eluded them for                                                                                                                                                             24 billion euro ($32 billion) package,      were “fundamental for Italy and to
two years.                                                                                                                                                                                expected to include housing and lux-        save the euro.”
   Despite short-term market opti-                                                                                                                                                        ury goods taxes, at a press confer-            The populist Northern League
mism about a possible deal to tackle                                                                                                                                                      ence.                                       party is the only major opposition to
Europe’s sovereign debt crisis and                                                                                                                                                           Final approval by parliament is          Monti in parliament. Its leader
underpin the survival of the single                                                                                                                                                       expected by the start of the Christmas      Umberto Bossi on Sunday said: “Italy
                                                                                                                                                                                          recess on Dec 23.                           has lost.”
currency, the outcome is far from cer-                                                                                                                                                       Italy is under intense pressure from        The Northern League is scoring
tain as the EU gears up for a summit                                                                                                                                                      the international community and             political points with a strong
in Brussels on Thursday and Friday.                                                                                                                                                       investors to introduce measures to          Europhobic message and has said it
   “This week, the stable future of the                                                                                                                                                   rein in public finances ahead of a cru-     will call a referendum against pension
euro and thus the economic recovery in                                                                                                                                                    cial European Union summit on               reforms.
Europe and employment are at stake,”                                                                                                                                                      Thursday and Friday.                           An EU summit this week is expect-
EU Economic and Monetary Affairs                                                                                                                                                             “We’re faced with an alternative         ed to sketch out a new vision for the
Commissioner Olli Rehn told Reuters.                                                                                                                                                      between the current situation, with         17-nation eurozone with deeper inte-
“This calls for a convincing package of                                                                                                                                                   the required sacrifices, or an insolvent    gration accompanied by more puni-
measures from the European Council                                                                                                                                                        state, and a euro destroyed perhaps by      tive measures and interventions for
(summit).”                                                                                                                                                                                Italy’s infamy,” Monti said ahead of        weaker eurozone states.
   Portuguese Prime Minister Pedro                                                                                                                                                        the cabinet meeting.
Passos Coelho went further.                                                                                                                                                                                                                        Defences
                                                                                                                                                                                             “The situation is grave and the
   “We have to find a response” to the cri-                                                                                                                                               Italian situation is being followed in         With Italy, the euro zone’s third-
sis, he told the daily Publico. “If we                                                                                                                                                    Washington, Beijing and Tokyo,” the         largest economy, close to a debt emer-
don’t, clearly that could represent the end                                                                                                                                               mayor of the city of Bari, Michele          gency that would destroy Europe’s
of the European Union.”                                                                                                                                                                   Emiliano, quoted Monti as saying            financial defences, EU leaders will
                 Treaty                                                                                                                                                                   during talks on Sunday.                     meet in Brussels this week hoping to
                                                                                                                                                                                             Monti’s package is set to include        agree steps to bind the bloc more
   If all goes according to plans being                                                                                                                                                                                               closely with tougher fiscal rules.
hatched in Berlin and Paris, the EU will                                                                                                                                                  an increase on housing tax that would
                                                                                                                                                                                          bring in up to 12 billion euros as well        Sources present at discussions on
have taken a step towards fiscal union by                                                                                                                                                                                             the new fiscal measures said they
Friday night, agreeing on a treaty change                                                                                                                                                 as a tax on luxury goods such as high-
                                                                                                                                                                                          performance cars and yachts.                would total around 20 billion euros
to anchor coercive budget discipline for                                                                                                                                                                                              ($27 billion). An extra 4 billion euros
the 17-nation currency area.                  The head of Italy’s industrial lobby Confindustria, Emma Marcegaglia, gestures as she briefs the media after meeting                                        Cards                       would come from automatic cuts to
   The European Central Bank will             Italian Premier Mario Monti in Rome, Dec 4. Marcegaglia said Sunday the future of the common euro currency depends                             Another increase in value-added          tax breaks and welfare measures out-
have cut interest rates on Thursday to                               on Italy’s coming up with very strong austerity and growth measures. (AP)                                            tax, which was raised by one percent-       lined but not clearly identified in the
counter a looming recession and taken                                                                                                                                                     age point to 21 percent in September,       austerity package presented by the
new measures to provide longer-term           impossible for many countries to refi-        public backing in referendums.               brought forward to Sunday a cabinet              is also on the cards.                       previous government.
funding for Europe’s teetering banks.         nance. That indicates how urgent it is to        European Council President Herman         meeting to approve rigorous austerity               Italy has already adopted two aus-          Monti will have to balance the
   And new prime ministers in Italy,          take measures now,” Frans van Houten,         Van Rompuy, who chairs the crucial           measures and economic reforms                    terity packages this year and is aiming     competing needs of showing budget
Greece and Spain will have demon-             CEO of electronics giant Philips told         end-of-week summit in Brussels, will         designed to save Rome from requiring             to restore a balanced budget by 2013        rigour while not choking off growth,
strated their commitment to tough aus-        TV programme Buitenhof.                       present options for stricter budget con-     the next international bailout. And              in line with EU demands.                    without which it will be impossible to
terity measures and structural econom-           Underlining Washington’s vital inter-      trol without touching the treaty, as well    bailed-out Ireland will be presenting               The pension reform will reportedly       reduce a 1.8-trillion-euro debt moun-
ic reforms to tackle their debt problems      est in averting a euro zone meltdown, US      as steps that would require amend-           an eye-watering 2012 austerity budget.           increase the number of years that           tain.
and restore investor confidence.              Treasury Secretary Timothy Geithner           ments, aides said.                             Italy has become the centre of the             Italians have to pay their dues to             About half of the overall package
   World financial markets rallied last       will visit Frankfurt, Berlin, Paris,             European Parliament President Jerzy       debt crisis since yields on its 10-year          receive a full pension from the current     is expected to be used to cut the
                                              Marseille and Milan from Tuesday —            Buzek warned last Friday that treaty         bonds shot up above 7 percent, levels at         40 years and bring forward an               budget deficit and help balance the
week on the prospect of such a master-                                                                                                                                                    increase in the women’s pension age.        budget by 2013 despite the economic
plan after ECB chief Mario Draghi sig-        his fourth trip to Europe since early         change could be divisive and “danger-        which Greece, Ireland and Portugal                  Monti’s technocratic, unelected          downturn and rising borrowing costs.
nalled that in response to a new “fiscal      September – to urge key European offi-        ous”. But diplomats say it is a political    were forced to seek EU/IMF help.                 government was installed after his             The other half will free up
compact” in the euro zone, the central        cials to take decisive action.                must for Merkel.                               Government sources say Monti’s                 flamboyant       predecessor      Silvio    resources to try to regenerate Italy’s
bank could act more decisively to fight          Sources close to German Chancellor            Veteran former German Chancellor          mix of cuts and tax rises will total some        Berlusconi was forced out by a parlia-      chronically stagnant economy, which
the crisis.                                   Angela Merkel say she is prepared,            Helmut Schmidt, 92, urged Germans            20 billion euros ($27 billion) over two          mentary revolt from his own party’s         is widely expected to go into reces-
   A convincing show of political deter-      despite hostility from the German             on Sunday to soothe growing fears of         years. About half will go to reduce the          ranks and a wave of panic on finan-         sion next year.
mination to stand behind the euro and         Bundesbank, to see the ECB step up            German dominance in Europe and help          deficit and balance the budget by 2013           cial markets.                                  Changes to pensions will be key in
surmount the crisis through closer euro       buying of troubled states’ bonds as a         rescue debt-stricken euro zone part-         despite an economic downturn and ris-               The former top European Union            the new reform plan, with eligibility
zone integration could prompt the ECB         short-term bridging measure until             ners, warning that Berlin faced isola-       ing borrowing costs.                             commissioner, who is a widely-              requirements toughened up for so-
to do more to support Italian and             stricter budget controls take hold.           tion otherwise.                                           Regenerate                          respected free-market economist, has        called seniority pensions which are
Spanish bonds, cementing that reversal           But things may not go entirely                For British Prime Minister David                                                           raced to shore up support for his           based on a combination of workers’
of market sentiment.                          according to plan.                            Cameron, the choice is between                  The rest will free up resources to try        reforms from across the political           age and the years for which they have
   “It all comes down to what the ECB            Merkel visits French President             enraging eurosceptics at home by let-        to regenerate Italy’s recession-bound            spectrum and from Italy’s powerful          paid contributions.
does, and whether political leaders pro-      Nicolas Sarkozy in Paris on Monday to         ting treaty change go ahead without          economy.                                         trade unions.                                  The minimum number of years
duce a sufficiently convincing plan to        outline joint proposals on economic           winning a return of key powers to               On Tuesday, the Greek parliament is              He has emphasised the need for           workers have to pay contributions is
give the ECB a basis to intervene,” a         governance, but Berlin and Paris still        London, or seeing the 17 euro zone           due to give final approval to a dracon-          “sacrifices” but also says he will aim      set to go up to 42 years for men and 41
                                                                                            states reach a separate agreement out-       ian 2012 austerity budget that is a con-         for “social equity” and want to ensure      years for women from its current level
senior EU government source said,             have significant differences about how                                                                                                      the reforms help boost economic             of 40 years. Inflation indexing will be
speaking on condition of anonymity to         the euro zone would control national          side the treaty that could cement a          dition for a second bailout package still
                                                                                            two-speed Europe.                            under negotiation with private credi-            growth including possible infrastruc-       cut back, leaving only the lower
respect the independence of the central       budgets.                                                                                                                                    ture projects and lower taxes on            brackets of pensions fully indexed.
bank.                                            Merkel wants to empower the execu-            Germany and France want to short-         tors, euro zone governments and the
                                                                                                                                         IMF.                                             labour. Economists are worried that            Susanna Camusso, leader of Italy’s
                                              tive European Commission to veto              circuit the complex treaty amendment
              Confidence                                                                    procedure by wrapping the new budget            On Wednesday and Thursday, cen-               the toxic mix of high borrowing costs,      biggest union CGIL, said the reforms
                                              national budget plans that breach EU                                                                                                        massive debt and low growth could           would be an “extremely heavy blow”
   However, if the 27-nation EU is            limits before they go to parliament,          procedures into a single amended pro-        tre-right leaders who control most EU
unable to agree, or settles for another                                                                                                                                                   push Italy towards insolvency within        for pensioners and said she would
                                              with automatic sanctions for deficit          tocol 14 on the euro zone. They hope to      governments meet in Marseille,                   months.                                     propose that parliament make some
half-measure after months of dithering,       sinners and the possibility to take seri-     avoid a parliamentary convention and         France. That will provide the platform              The government has denied per-           amendments.
the flight from euro zone bond markets        al offenders to the European Court of         spare most, if not all, countries the need   for incoming Spanish Prime Minister              sistent rumours that it is preparing to        Planned cuts to the national health
may accelerate, confidence may ebb            Justice for punishment.                       for a referendum on ratification.            Mariano Rajoy to outline his commit-             accept a credit line from the               service budget are expected to be
further and the crisis could become                                                            That has outraged some lawmakers          ment to radical budget cuts and eco-             International Monetary Fund (IMF),          accelerated by one year, to reduce
acute in January, when Italy has to start                     Powers                        who say the EU’s major powers are            nomic reforms to restore Madrid’s par-           following in the wake of bailouts for       spending by 2.5 billion euros in 2012
a massive refinancing campaign.                  Sarkozy, struggling to win re-elec-        sidelining national parliamentary budg-      lous public finances.                            fellow eurozone members Greece,             and 5 billion euros from 2013, a local
   The chief executives of leading            tion next May, wants euro zone leaders        et sovereignty without any democratic           It will also give “Merkozy” — as the          Ireland and Portugal.                       government source said.
Dutch multinationals published a joint        to have the final say, with no new            accountability.                              Franco-German leadership team has                   But the IMF and the EU have been            Graziano Delri, head of Italy’s
newspaper ad warning it was now “one          supranational powers for EU institu-             In their defence, Paris and Berlin        become known — a last chance to                  keeping Italy under special surveillance    local government association, said
minute to midnight” for the euro zone.        tions.                                        argue the debt crisis is an emergency        lobby reticent partners, with Geithner           through teams of auditors to ensure it      10-11 billion euros would be raised
   “There is almost 1,000 billion euros          Several other governments, notably         that requires swift executive action to      in the wings, to accept treaty change as         implements long-delayed reforms and a       from property taxes, with the reintro-
in refinancing that needs to be done          Britain, Ireland and the Netherlands, do      avert disaster, and that member states       a crucial part of the long-term plan to          reduction in a debt mountain equivalent     duction of a tax on principal resi-
next year, while the risk premium on          not want treaty change at all because of      already signed up to the budget rules in     secure the euro before the summit                to 120 percent of output.                   dences that was scrapped by
interest rates is increasing strongly.        the domestic political risks. Some fear       the 1992 Maastricht Treaty.                  starts with a dinner on Thursday                    France and Germany have said that        Berlusconi.
That means that it will be almost             it would be hard if they have to win             New Prime Minister Mario Monti            evening.

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