U.S. to press Europe on rebalancing economic demand: official

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U.S. Secretary of Treasury Jack Lew in the East Room of the White House in Washington, March 4, 2013.


Credit: Reuters/Larry Downing








By Anna Yukhananov


WASHINGTON | Fri Apr 5, 2013 12:14pm EDT





WASHINGTON (Reuters) – U.S. Treasury Secretary Jack Lew will discuss ways Europe can rebalance its demand to help grow the economy during a trip to the continent next week, a senior U.S. official said on Friday.




“What is very clear is that overall we’re seeing very weak demand in Europe and rising levels of unemployment,” a senior U.S. Treasury official said on a call briefing reporters about the trip.




“There is clearly some capacity for demand rebalancing in the euro area. … Of course there is greater room for the surplus countries to make a contribution.”




Lew will go to France, Belgium and Germany on his first official visit as treasury secretary, meeting with top European officials, finance ministers and the head of the European Central bank to discuss the recent slowdown in European growth and prospects for boosting it.




The euro zone crisis flared up again recently after a bailout of Cyprus’ banks hit depositors for the first time since the crisis started, raising fears of contagion and possible bank runs.




Germany is one of the European countries that has a trade surplus, and some officials have pressed it to contribute more to consumption in order to boost overall growth in the euro zone.




So far, ‘periphery’ countries like Portugal, Spain and Ireland have borne the brunt of fiscal adjustment by cutting back on demand for imports, the U.S. official said.




During his trip, Lew will also discuss a planned free trade agreement between the United States and the 27-nation European Union. The White House in March notified Congress of its plans to formally begin the talks.




The official also said the pace of job growth in the United States is not as fast as would be desired, and “blunt” government spending cuts could hurt the economy further.




American employers hired at the slowest pace in nine months in March, data showed on Friday, a sign that Washington’s austerity drive could be stealing momentum from the economy.




(Reporting by Anna Yukhananov and Lucia Mutikani; Editing by Leslie Adler and Andrew Hay)





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Reuters: Economic News

U.S. to press Europe on rebalancing economic demand: official

Obama budget to offer program cuts, seek deficit deal: official

U.S. President Barack Obama (C) smiles as he prepares to board Marine One to a Democratic fund raiser in San Francisco April 4, 2013.

Credit: Reuters/Kevin Lamarque

Reuters: Economic News

Obama budget to offer program cuts, seek deficit deal: official

Hard slog ahead for Cyprus deal - euro zone official

VIENNA, March 2 | Sat Mar 2, 2013 7:52am EST

VIENNA, March 2 (Reuters) – Striking a deal to bail out Cyprus will be hard but an accord has to be negotiated by the end of this month, a senior euro zone official said.

The remarks from Thomas Wieser, head of the Eurogroup Working Group of senior officials who prepare decisions of euro zone finance ministers, come just before Cyprus tops the agenda at a Eurogroup meeting on Monday.

In an interview with Austrian broadcaster ORF aired on Saturday, Wieser cited the danger that the euro zone’s debt crisis could flare up again.

“Why? We have a series of existing uncertainties. We have Cyprus before us which will be difficult to resolve,” he said.

“We have the uncertainty of how Italy will be governed and how the financial markets could react. That of course has possible contagion effect for other members states.”

Cyprus’s bailout request has been on hold for the past eight months but euro zone officials have said they expect a conclusion by the end of March.

“It’s getting a bit tight,” Wieser said. “The financing of Cyprus is still secured for the coming weeks and months but we have to come to a negotiating result in the course of March.”

Pressed on how long Cyprus was safely funded, he said the country “with some effort” had financing secured into May.

Scenarios have been floated in recent weeks over how Cyprus, one of the euro zone’s smallest economies, could ever afford to repay a bailout bill which could reach 17 billion euros ($ 22.1 billion), almost the same size as its economy.

European policymakers have been split over how to handle a bailout of Cyprus, with Germany and some other countries pushing for bank depositors to bear part of the cost and many other member states worried such a move will cause a bank run.

Cyprus’s new finance minister on Friday ruled out a haircut, or imposed losses, on bank deposits to ease a financial bailout from international lenders, now stalled amid worries about debt sustainability.

Wieser reiterated that Cyprus’s steps to crack down on suspected money laundering will be a precondition for any outside aid but warned against blanket accusations that the country was awash with dubious funds from Russia.

He said it was unfair to suggest all Russian money there was suspect or to assume that other foreigners’ funds in Cyprus were beyond reproach.

On other subjects, Wieser said it might be possible to adjust the timing for some aid recipients’ fiscal consolidation programmes but he did not name any countries.

“Perhaps one or the other country will get an additional year to achieve the 3 percent (deficit) limit, but there is no movement at all in the direction of saying deficits should not be reduced but rather stay the same or even expanded,” he said.

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Reuters: Bonds News

Hard slog ahead for Cyprus deal - euro zone official

Greek Official Sends 2000 Cases of Fraud and Embezzlement of Public Money to Authorities, Zero Results

Reader “Lefteris” from Greece writes …

Hi Mish,

The General Inspector of Public Administration in Greece, Mr. Rakitzis, stated that he has send more than 2000 cases of proven corruption to justice, and none of them has brought any results.

This person, by the way, is considered a highly ethical and effective inspector by all political parties in Greece.

One of the problems is that Greek law considers embezzlement of money in the public sector as a misdemeanor for amounts less than 72,000 euros. Corrupt officials are taken to justice (upon review by a board of their peers) and then they are released and work again normally in the public sector.

Batting Zero for Two Thousand

From Google Translate Rakitzis: “I Sent 2000 Cases to Court and Not One Verdict”

Mr. Rakitzis said that in 8 years in his position he sent to Justice 2000 cases of which not one decision has been rendered.

He attributed much of the blame for delays, obstruction, and problems of public administration in the poor performance of local government in action and trade union circles.

Mr. Michael, the president of the Central Union of Chambers of Commerce and Industry of Athens said the fight against corruption is a matter of survival. “The misery of wage workers in the public sector is one factor that exacerbates the problem” commented Mr. Michael.

Reforms are needed to tackle the roots of the problem: legislative complexity and ambiguity in the laws, excessive state intervention in the economy, bureaucracy, poor utilization of new technologies, and the culture of impunity.

Culture of Impunity

Politicians on the take have no interest in strengthening the law that defines embezzlement of money in the public sector under 72,000 euros, a misdemeanor. Extortion, graft, and fraud is seen as a benefit of public “service”.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Greek Official Sends 2000 Cases of Fraud and Embezzlement of Public Money to Authorities, Zero Results

The Spending Crunch Is Official: "We Are Confident There Is An Issue With The Consumer"

Think the Walmart “disastrous” sales memo was a one-off event, which net of Walmart’s damage should be completely ignored (something the market has been perfectly happy to oblige with)? Then listen to a separate perspective on the US consumer, this time from a very different angle: that of Town Sports International which operates such gyms as New York Sports Club, and specifically its CEO David Gallagher, who in last night’s conference call just confirmed what everyone knows: “As we moved into January membership trends were tracking to expectations in the first half of the month, but fell off track and did not meet our expectations in the second half of the month. We believe the driver of this was the rapid decline in consumer sentiment that has been reported and is connected to the reduction in net pay consumers earn given the changes in tax rates that went into effect in January.“

It goes on:

Based on how broad-based the slowdown has been quarter-to-date, we are confident there is an issue with the consumer. We were going to do everything in our power to make up for this January member shortfall, we continue to see softness and expect to net less than half the net member gain that was achieved in Q1 of 2012. Unfortunately, we are also seeing the softness in our ancillary revenue.

And on:

While the consumer has recently turned much more cautious again, we were hoping that it will be temporary, and we are confident that the foundation and ability to execute at a very high level that we now have in place will serve us well. We have worked very hard to rebound from the recession and rebuild our membership base from the low we experienced in 2009.

And on:

So we’re seeing the behavior very similar and we’re very confident that it is coming from the consumer. As I mentioned earlier in my script part portion, when we look at our business there are really 3 components that we’re watching closely all the time. The first is execution and how we delivering our product and services. Second is, what the competition looks like how it has changed mark-to-market, year-on-year and then in terms of consumer behavior. We’ve seen consumer sentiment change drastically within the last couple of months. We saw that after the first really payroll period in January, which is about the second week of January, we really start seeing a slowdown in Ancillary, Personal Training and membership sales. And our sort of increase that we’ve seen on the cancellation side is directly related to the members that are non-users. So it really does go to the consumer side of the business.

And on:

We believe that once consumers understand our average member is probably losing somewhere in the area of about $ 1,500 a year once our members understand the impact they have on their daily living with the rising cost of gas and the lower income from social security or the taxes that they’re seeing now.

But there may be hope:

We estimate close to half of this loss is membership attributable to Hurricane Sandy.

Luckily, in a centrally-planned, command economy, who needs such meaningless fundamental staples as cash flow, consumption or even trade…

Source: CLUB earnings call transcript

Zero Hedge

The Spending Crunch Is Official: "We Are Confident There Is An Issue With The Consumer"

UPDATE 1-Report to call for Detroit emergency manager -city official

Tue Feb 19, 2013 2:43pm EST

DETROIT Feb 19 (Reuters) – A review team appointed by Michigan Governor Rick Snyder to scour Detroit’s finances will recommend the appointment of an emergency financial manager, City Council President Charles Pugh said on Tuesday.

“They are recommending an emergency manager. That’s what Andy Dillon said,” Pugh said, referring to Michigan’s treasurer, who is a member of the review team. Pugh spoke to city council members during a meeting.

The review team is scheduled to announce its recommendations at a press conference later on Tuesday in Detroit.

Snyder assembled the six-member team in December after slow progress on restructuring Detroit’s sagging finances and operations under an April 2012 consent agreement between the city and Michigan.

No other American city in recent decades has faced a decline in population as steep as Detroit’s. Once the fifth largest U.S. city that shined as the birthplace of the U.S. automotive industry and Motown music, it now ranks 18th with about 700,000 people. With the exodus of residents and jobs, the city has suffered from declining tax revenue and rising crime while saddled with the infrastructure and labor costs of a bygone era.

Reuters: Bonds News

UPDATE 1-Report to call for Detroit emergency manager -city official

US hopes to finalize IMF vote reforms soon - US official

MOSCOW | Sat Feb 16, 2013 11:28am EST

MOSCOW Feb 16 (Reuters) – The Obama administration is hoping to move ahead shortly with legislation to finalize IMF voting reforms agreed in 2010, which will make China the third-largest voting member in the global financial institution, a senior U.S. official said on Saturday.

The official, speaking at the end of a Group of 20 meeting of finance ministers in Moscow, said the administration was actively discussing legislation with relevant members of Congress.

The 2010 package cannot be finalized until it gets the go-ahead from the United States, which has effective veto power over the historic deal that was meant to have been approved by all IMF member countries in October last year, but was stalled by the U.S. presidential election.

It is part of a broader plan by the IMF to give emerging market powers greater voting clout in the organization.

China, Brazil and other large emerging market economies have long contended that the IMF’s voting set-up unfairly benefits Europe and the United States, which dominated the IMF since its founding after World War Two.

Reuters: Bonds News

US hopes to finalize IMF vote reforms soon - US official