Qatar: Rich and Dangerous

'The first concern of the Emir of Qatar is the prosperity and security of the tiny kingdom.  To achieve that, he knows no limits.

Stuck between Iran and Saudi Arabia is Qatar with the third largest natural gas deposit in the world.  The gas gives the nearly quarter of a million Qatari citizens the highest per capita income on the planet and provides 70 percent of government revenue.  

How does an extremely wealthy midget with two potentially dangerous neighbors keep them from making an unwelcomed visit?  Naturally, you have someone bigger and tougher to protect you.  

Of course, nothing is free.  The price has been to allow the United States to have two military bases in a strategic location.  According to Wikileak diplomatic cables, the Qataris are even paying sixty percent of the costs.

Having tanks and bunker busting bombs nearby will discourage military aggression, but it does nothing to curb the social tumult that has been bubbling for decades in the Middle Eastern societies.  Eighty-four years ago, the Moslem Brotherhood arose in Egypt because of the presence of foreign domination by Great Britain and the discontent of millions of the teaming masses yearning to be free.  Eighty-four years later, the teaming masses are still yearning.  

Sixty-five percent of the people in the Middle East are under twenty-nine years of age.  It is this desperate angry group that presents a danger that armies cannot stop.  The cry for their dignity, "I am a man," is the sound that sends terror through governments.  It is this overwhelming force that the Emir of Qatar has been able to deflect.

A year after he deposed his father in 1995, Sheikh Hamad bin Khalifa Al-Thani established the Al-Jazeera television satellite news network.  He invited some of the radical Salafi preachers that had been given sanctuary in Qatar to address the one and a half billion Moslems around the world.  They had their electronic soapbox and the card to an ATM, but there was a price. 

The price was silence.  They could speak to the world and arouse the fury in Egypt or Libya, but they would have to leave their revolution outside of Qatar or the microphone would be switched off and the ATM would stop dispensing the good life.

The Moslem Brotherhood, that is a major force across the region, dissolved itself in Qatar in 1999.  Jasim Sultan, a member of the former organization, explained that the kingdom was in compliance with Islamic law.  He heads the state funded Awaken Project that publishes moderate political and philosophical literature.

How Qatar has benefited from networking with the Salafis is illustrated by the connections with Tunisia where Qatar is making a large investment in telecommunications.  Tunisian Foreign Minister Rafiq Abdulsalaam was head of the Research and Studies Division in the Al Jazeera Centre in Doha.  His father-in-law Al Ghanouchi is the head of the Tunisian Muslim Brotherhood party. 

Over much of the time since he seized power, Sheikh Hamad bin Khalifa Al-Thani has followed the policy of personal networking, being proactive in business and neutral on the international stage.  The Emir is generous with the grateful, the Qatar Sovereign Wealth Fund bargains hard in the board room and the kingdom makes available Qatar's Good Offices to resolve disputes.  

Qatar's foreign policy made an abrupt shift when the kingdom entered the war against Qaddafi.  The kingdom sent aircraft to join NATO forces.  On the ground, Qatari special forces armed, trained, and led Libyans against Qaddafi's troops.  

The head of the National Transition Council Mustafa Abdul Jalil attributed much of the success of the revolution to the efforts of Qatar that he said had spent two billion dollars.  He commented, "Nobody traveled to Qatar without being given a sum of money by the government."

Qatar had ten billion dollars in investments in Libya to protect.  The Barwa Real Estate Company alone had two billion committed to the construction of a beach resort near Tripoli.  

While the bullets were still flying, Qatar signed eight billion dollars in agreements with the NTC.  Just in case things with the NTC didn't work out, they financed rivals Abdel Hakim Belhaj, leader of the February 17 Martyr's Brigade, and Sheik Ali Salabi, a radical cleric who had been exiled in Doha.  

If Qatar's investments of ten billion dollars seem substantial, the future has far more to offer.  Reconstruction costs are estimated at seven hundred billion dollars.  The Chinese and Russians had left behind between them thirty billion in incomplete contracts and investments and all of it is there for the taking for those who aided the revolution. 

No sooner had Qaddafi been caught and shot, Qatar approached Bashar Al-Assad to establish a transitional government with the Moslem Brotherhood.  As you would expect, relinquishing power to the Brotherhood was an offer that he could refuse.  It didn't take long before he heard his sentence pronounced in January 2012 on the CBS television program, 60 Minutes by Sheikh Hamad bin Khalifa Al-Thani.

The Emir declared that foreign troops should be sent into Syria.  At the Friends of Syria conference in February, Prime Minister Hamad bin Jassim al-Thani said, "We should do whatever necessary to help [the Syrian opposition], including giving them weapons to defend themselves."  

Why would Qatar want to become involved in Syria where they have little invested?  A map reveals that the kingdom is a geographic prisoner in a small enclave on the Persian Gulf coast.

It relies upon the export of LNG, because it is restricted by Saudi Arabia from building pipelines to distant markets.  In 2009, the proposal of a pipeline to Europe through Saudi Arabia and Turkey to the Nabucco pipeline was considered, but Saudi Arabia that is angered by its smaller and much louder brother has blocked any overland expansion. 

Already the largest LNG producer, Qatar will not increase the production of LNG.  The market is becoming glutted with eight new facilities in Australia coming online between 2014 and 2020. 

A saturated North American gas market and a far more competitive Asian market leaves only Europe.  The discovery in 2009 of a new gas field near Israel, Lebanon, Cyprus, and Syria opened new possibilities to bypass the Saudi Barrier and to secure a new source of income.  Pipelines are in place already in Turkey to receive the gas.  Only Al-Assad is in the way.

Qatar along with the Turks would like to remove Al-Assad and install the Syrian chapter of the Moslem Brotherhood.  It is the best organized political movement in the chaotic society and can block Saudi Arabia's efforts to install a more fanatical Wahhabi based regime.  Once the Brotherhood is in power, the Emir's broad connections with Brotherhood groups throughout the region should make it easy for him to find a friendly ear and an open hand in Damascus.

A control centre has been established in the Turkish city of Adana near the Syrian border to direct the rebels against Al-Assad.  Saudi Deputy Foreign Minister Prince Abdulaziz bin Abdullah al-Saud asked to have the Turks establish a joint Turkish, Saudi, Qatari operations center.  "The Turks liked the idea of having the base in Adana so that they could supervise its operations" a source in the Gulf told Reuters.

The fighting is likely to continue for many more months, but Qatar is in for the long term.  At the end, there will be contracts for the massive reconstruction and there will be the development of the gas fields.  In any case, Al-Assad must go.  There is nothing personal; it is strictly business to preserve the future tranquility and well-being of Qatar.'

Source: http://oilprice.com/Energy/Energy-General/Qatar-Rich-and-Dangerous.html 

By Felix Imonti for Oilprice.com

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Rajoy soundinke like Cristina Fernandez, desperate and thrashing around for a political straw

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India : Slump in FDI flows forces volte-face on rules / GAAR

Foreign investors now have a window of opportunity over the next two years to pour money into projects they wish to establish in India using the same elaborate cross-border corporate structures, investment trails and other stratagems they have employed since 1991 to avoid having to pay huge taxes on repatriation of profits, and the payment of royalties and dividends.

It has taken just one fortnight for the pieces of the UPA government’s carefully-crafted strategy to fall into place as it tries hard to reassure foreign investors that they will continue to have an easy ride into India — as long as it is in power.

On September 1, the Parthasarathi Shome committee recommended that the dreaded General Anti-Avoidance Rule (GAAR) should be kept in abeyance for the next three years. The government had earlier planned to kick off GAAR from April 1 next year. But at a time when it wants to soothe foreign investors’ fears, it will readily accept the Shome committee’s recommendations — and that means that the next government, formed after the general elections in 2014, will have to grapple with the intricacies of the contentious tax rule.

Source: http://www.telegraphindia.com/1120917/jsp/business/story_15985117.jsp#.UFgnXY3iaPQ

http://www.investorseurope.com

Libya - Doomed from Day One

People often ask me why the West doesn't attempt a Libya-style intervention in Syria. After all, things are going so well in Libya. Oil production is up. But oil production is merely a mirage, as is security in Libya, which was doomed from the day one PG (post-Gaddafi) because of the way it was "liberated". 

Last Wednesday, US envoy to Libya Christopher Stevens was killed along with three other American diplomats in a rocket attack on the US consulate in Benghazi. 

What about the oil, that global elixir? Well, the violence will not bode well for Libya's production ambitions, coming at a time when the country looked prepared for a boost in output and was banking on this for economic growth. 

Security was already dubious at b est, and now international oil companies will be more reluctant than ever. Those that are already there-Germany's Wintershall AG, Italy's Eni and France's Total-will be seeking to beef up security and have already started sending some of their workers home.

If the picture was not clear from the onset of the post-Gaddafi atmosphere, it certainly came into focus earlier this summer when protests over parliamentary elections forced the temporary closure of the el-Sider oil terminal, the country's biggest.   

Anyone who thinks that Libya will be a secure oil frontier after the formation of a new government next summer is mistaken. The road to destruction runs from Afghanistan to Benghazi (incidentally, the oil-producing region), branching off to southern Iraq and Pakistan's tribal regions. 

So, you ask, what about the controversial anti-Islamic movie apparently put together by an Israeli-American real estate developer with too much time on his hands? 

According to Jellyfish Operations - a private intelligence and analysis boutique that has spent much time dissecting the intervention in Libya and the conflict in Syria-the anti-Islamic movie is a red herring in all of this.

Speaking to Oilprice.com, Jellyfish President Michael Bagley said that while the movie is being upheld as the root cause of the intensifying protests and the death of the US envoy to Libya, it has only served to give added momentum to another more important development. 

"The key to all of this is al-Qaeda's second in command, Abu Yahya al-Libi, who was killed by a US drone attack in Waziristan on 4 June," Bagley said. "The real catalyst for the attack in Libya and the unrest that has spread to Yemen, was a lengthy video released by al-Qaeda leader Ayman al-Zawahiri, marking the anniversary of 9/11 and admitting to the death of al-Libi, who is Libyan."

"This was a very powerful call to avenge al-Libi's death," Bagley said, "and it came only 24 hours before the attack on the US consulate in Benghazi." 

To put this into perspective, let's reminisce a bit about al-Libi, whose past is a roller coaster, enemy-foe ride with the US.

Al-Libi was captured in the "war on terrorism" in Afghanistan in 2002 and held for three years in Kabul's high-security Bagram prison. Against all odds, he escaped in 2005.

In 2011 he resurfaced again, but this time as a friend to Washington who had decided that it was no longer friends with Gaddafi, despite all the efforts leading up to this to rebuild relations after that nasty Lockerbie business and all the sanctions. So here is al-Libi again, but this time around his terrorist inclinations are a bonus rather than a liability: He fights alongside intervention forces to oust Gaddafi. 

With Gaddafi gone, al-Libi once again became a liability so he was taken out by a drone in Pakistan.  

This brings us back to the present, with al-Zawahiri on the rampage and Libyan's wise to their liberators. 

"This is a cut and dry example of the backfire of the US intervention strategy," Bagley said. "Let's hope it isn't attempted in Syria." 

The post-Gaddafi Libya is not real. It's a dangerous fabrication of materials stuck together by the glue of dubious alliances with jihadists who are cut loose with their weapons once the immediate goal (Gaddafi's demise) was achieved. Forget about the oil for now. 

 

Source: http://oilprice.com/Geopolitics/Africa/Libya-Doomed-from-Day-One.html 

By. Jen Alic of Oilprice.com

http://www.investorseurope.com

Spain's Economic Nightmare Has Gotten So Bad That Catalonia Wants To Secede

Spain's Economic Nightmare Has Gotten So Bad That Catalonia Wants To Secede

What started out as a celebration that marked marking Catalonia's "National Day" turned into one of the biggest gatherings the city has ever seen.

 

Over a million Catalonians descended upon Barcelona yesterday, protesting current economic conditions, tax policies, and what they see as an unequal distribution of wealth.

Their solution?

"Catalonia: a new European state"

Catalonians have long viewed themselves as culturally distinct from the rest of Spain. They have their own history, traditions, and a distinct language native to their region. But now, the economic climate has driven a huge amount of people to favor full independence.

And even though Catalonia needed a €5 billion bailout package from Madrid last month, it still transfers up to 9 percent of its GDP to Madrid annually.

Source : http://www.businessinsider.com/catalonia-an-independent-state-2012-9#ixzz26GwK0bOB

http://www.investorseurope.com

The Pauperization Of Europe

The Pauperization Of Europe

'....It started on Monday. “Poverty is returning to Europe,” said Jan Zijderveld, head of Unilever’s European operations, in an interview. The British–Dutch consumer products company, third largest in the world, was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world. Now the stars of the industry are affirming it. “The logic of pauperization,” L’Oréal CEO Jean-Paul Agon called it on Wednesday.

“If Spaniards are down to spending on average €17 per shopping trip, I can’t sell him detergent for half of his budget,” Zijderveld explained. “In Indonesia we sell individual packages of shampoo for 2 to 3 cents and still earn a fair amount.”

That this strategy was widespread in Asia I found out in Vietnam in 1996. I cut my finger at a table at a café in Hué as we were getting up. So, walking down the dirt street, I licked my finger to keep the blood from dripping on my clothes. The girl I was with, shocked by my barbaric behavior, took me to a street stall and bought me one singled Band-Aid, which cost as close to nothing as you could get. [My overland solo adventure from the Mekong Delta across Asia and Europe is the topic of a forthcoming book. The first in the series, Big Like: Cascade into an Odyssey—a “funny as hell non-fiction book about wanderlust and traveling abroad,” a reader tweeted—is available on Amazon.]

By looking at Europe, particularly Southern Europe, as a market with the characteristics of developing countries, Unilever has transitioned from seeing the debt crisis as a temporary event to seeing it as a trend to which it had to adjust its strategies. So now in Spain, it sells its “Surf” detergent in packages that are good for five loads. In Greece, it sells mashed potatoes and mayonnaise in small packages. And in Great Britain (!), it’s implementing the same strategy. Because people are running out of money. And it’s been successful. Since they started this in 2011, sales have stopped falling; and in the first half of the year, they edged up 1.1%. But higher input prices have exerted pressures on margins and profits.

“I agree, there is a movement of very sharp pauperization in Southern Europe,” Michel-Edouard Leclerc said on Wednesday—they’re now all coming out. He’s the CEO of E.Leclerc, the number one retailer in France with a market share of 18% and 556 semi-independent hypermarkets, supermarkets, and specialty stores. It also has numerous stores in Italy, Spain, Portugal, and other countries. And the company is adjusting to the new reality. In Italy, for example, where the stores used to sell yoghurt only in multipacks, they’ve started to sell them as single items.

Jean-Paul Agon, CEO of L’Oréal, the world’s largest cosmetics and beauty products company, countered with a mixed message. No, the company wouldn’t adjust its products around the growing poverty in Europe, he said. The race to the lowest price was “not our strategy.” Unlike the others, his company wouldn’t follow “the logic of pauperization and commoditization of products.” Rather he wanted to build on “innovation and added value,” which would allow the company to raise prices over time, “but reasonably.”

Which makes sense in light of L’Oréal’s earnings announcement Wednesday morning, a debacle which caused its stock to plummet 4.4%, the second worst performer of the CAC40—due to disappointing margins! Instead of smaller packages, it had tried heavy discounting, Agon admitted, “to adjust our strategy to the environment”—namely the pauperization of Europe. Even L’Oréal.

Meanwhile, a hullabaloo flared up in Germany over squashing democratic discussions on whether or not taxpayers should endlessly pay to keep Greece in the Eurozone. Read.... Gagging The “Hardliners” As The Economy Tanks And Future Exports Drop Into The Red Zone.

 

Source: http://www.testosteronepit.com/home/2012/8/29/the-pauperization-of-europe.html

Author : http://www.testosteronepit.com/home/author/wolfrichter

http://www.investorseurope.com

Foreign Secretary expresses disappointment to Israeli decision

UK : Foreign Secretary expresses disappointment to Israeli 

Foreign Secretary William Hague spoke after the Israeli Cabinet approved the upgrading of Ariel College, creating the first university in a settlement illegal under international law. The Foreign Secretary said:

“I am very disappointed by last night’s decision by the Israeli Cabinet to approve the potential upgrading of Ariel College. This would lead to the creation of Israel’s first university beyond the Green Line, in a settlement illegal under international law. It would further entrench the presence of settlements in the Occupied Palestinian Territories and create an additional barrier to peace with the Palestinians.

“This move is particularly regrettable because it comes at a time of rapidly expanding co-operation between UK and Israeli universities, and when the British Government has taken a firm stand against those who seek to undermine Israel’s legitimacy by boycotting educational and cultural institutions. I call on the Government of Israel to reconsider its approach as a matter of urgency.”

Please click on the link to view the article: here 

Merkel Races the Clock to Save the Euro

Financial clocks run faster than political clocks. European politicians have been behind the euro crisis curve for two years running, with policies that are always a bit short and a bit late. And now financial markets are nervously eyeing several events next week that could trigger a panic sell-off of euro zone assets, or build on recent stirrings of confidence. 

Investors face a European policy trifecta on September 12: European Commission President Jose Manuel Barroso is due to unveil his draft for a unified banking supervision system; the German Constitutional Court will rule on whether the European Stability Mechanism can legally buy sovereign debt; and Dutch voters will go to the polls in an election that could produce big parliamentary gains for anti-European parties. Just two days later, European Union Finance ministers will meet to figure out what to do about Greece — again.

In contrast to the urgency of these events, Chancellor Angela Merkel’s political plan to preserve the euro zone with “more Europe” will take months, or possibly even years, up to and beyond the German parliamentary elections in September 2013. Like all trained physicists, Dr. Merkel knows that time isn’t a constant like the speed of light: clocks can and do shift relative to each other. She knows that she needs to speed up the political clock and slow down the financial clock. What are the odds she can pull it off? “Just because it is in the best, long-term interests of the euro area to preserve the single currency doesn’t mean that it will happen that way,” says Tom McGlade of Prologue. “It is difficult to rationalize with voters who are experiencing anger, fear and national pride.

Most but not all of Europe hopes the financial clocks give her enough time to pull off the politics. The British and the City of London are doubtful, and not just the euro skeptics, of which there are plenty in Whitehall. Brussels is nervous about the timing problem, but pleased that Merkel is advancing greater European unification, which the Eurocrats believe she will subcontract to them to manage, in order to keep the euro zone together. “We’re supposed to have a banking regulation plan in place by January 2013. That’s just four months from now,” one Brussels-based euro expert marveled to me. “Nothing has ever happened that quickly in the European Commission. Never.”

In Berlin, the late-summer atmosphere was serene, with people flocking to the trendy bars and restaurants of the Mitte district in the former East German sector, but there was plenty of hard-edged politicking going on behind the scenes between the Chancellor, her coalition in the Bundestag, the German opposition (which controls the Bundesrat, or upper chamber of parliament) and the Bundesbank. There was also some polite but steely diplomacy with the French, the Spaniards, the Greeks and the Italians.

A widely circulated Reuters photo showed Merkel and the Italian prime minister, Mario Monti, on the terrace of the Chancellery building, cordially sipping sparkling water after their bilateral meeting. In an amusing journalistic error, the Financial Times’s European edition the next day ran the photo with the caption, “A quiet word: Angela Merkel, German chancellor, and Mario Draghi, ECB president, talk in Berlin yesterday.” Like many readers, I took a double take and then laughed out loud. As one of my German friends quipped, “Ah, the English: they see Monti and they think Draghi.”

First, the political clock.  Merkel’s calculus is pretty clear. And it’s breathtakingly ambitious.

In a weeklong visit to London, Brussels and Berlin, roughly 80 percent of my interlocutors expressed a confident belief that Merkel has a carefully thought out plan to advance banking supervision and fiscal integration (or at least fiscal discipline) to keep the euro zone intact. Another 10 percent or so think she has a rough idea but would abandon “more Europe” in a heartbeat if it threatened to bring down her government, just as she reversed her government’s nuclear energy policy after Japan’s Fukushima disaster. The other 10 percent think she has no strategy at all and is simply reacting to events.

I think she’s sincere when she says she wants more Europe. And now I think she’s ready to bet her government on it. This will be her legacy. “Who wants to be remembered in history as the Chancellor who sank the Euro?” one Brussels official suggested to me over an espresso near the European Parliament.

But the Bundeskanzlerin needs to keep her CDU/CSU coalition intact to make these critical next steps. So far, what the Germans call Fraktion Disziplin is tight with regard to her European strategy. Few party members are willing to cross her ahead of next year’s election. Just take a look at the homepages of Bundestag members, including some who are privately skeptical of Germany footing the bill for “more Europe.” The vast majority of content is posted from CDU/CSU headquarters and toes the party line perfectly. If there is a comment about the euro crisis, it’s usually Merkel’s latest press release. 

As for the opposition SPD, they are ideologically more in favor of more Europe than Merkel’s party, so the odds of being blocked by them, even in the Bundesrat, are slim. The German public is restive but still on board. Opinion polls show support for more Europe slipping, however. She has time, but it is not moving in her favor.

Always reasonable and measured, Merkel hasn’t told the public in plain language just what’s at stake for Germany. “Why doesn’t she just go on TV and explain how terrible it would be if the euro broke up?” asked one German official friend. But there is a very good reason for that ambiguity. In fact, there are three good market reasons.

Sharp movements in three asset markets could upset Merkel’s plan. “Explicit talk by the Germans about default and euro zone breakup would surely scare the market sheep,” observes a Connecticut-based trader friend. 

The most important market is the one for sovereign debt. Government bonds yields have fallen significantly since Draghi announced in a late July London speech that the ECB would do “whatever it takes to preserve the euro.” He fleshed out that promise last week by announcing a new mechanism, called Outright Monetary Transactions, under which the ECB would be prepared to buy unlimited amounts of short-term debt from any country as long as that the country reached an agreement with EU authorities that provided aid from European bailout funds in exchange for economic policy reforms. Draghi is clearly determined not to preside over the euro’s demise, given that the ECB was created expressly to manage the single currency. Yields on ten-year Spanish bonds, which had flirted with the crippling 7 percent level recently, tumbled 39 basis points the day after the announcement, to 5.64 percent. Italian bonds also rallied, dropping ten-year yields to 5.18 percent. Still, some really big auctions are coming in the next month, and these markets could go south (and yields soar) very quickly.

The second market to watch is the one for household deposits, which are fleeing the Mediterranean euro periphery in unsettling amounts. Spanish bank deposits fell by 5 percent in July alone. The ECB is keeping this in check with the Target 2 payments system, which recycles deposits removed from a Spanish bank and placed with a German bank. The system keeps the cash flowing even as faith in peripheral banking systems slides. But Germany’s claims on the Target 2 system, which some economists fear could  be devalued massively if the euro breaks up, is massive and growing on a daily basis.  

The third market to watch is the interbank funding market itself — short-term lending, repos and so forth — which is rapidly drying up. U.S., British and Asian lenders have been scaling back their exposure to euro zone counterparties for more than a year now. So interbank funding, too, is being propped up by the ECB, by means of its long-term refinancing operations, which have pumped €1 trillion in liquidity into the banks, and by a host of other indirect measures. This clock is accelerating, and European banks’ cross-border lending books are shrinking on a monthly basis. A full-scale crisis could shut down what’s left of the interbank funding market completely.

Some Wall Street mavens suggest Merkel is willing to let Greece go as the price of ring-fencing Spain and Italy, but all of the European experts I consulted with dismiss that thought. First, they point to all the financial gear-grinding such a move would cause, especially the shock it would impart to the European banking system, which is at the core of the problem. Until European leaders can break the link between the sovereign debt problem and bank solvency, Europe’s economic recovery is on indefinite hold. In addition, they note that Germany is now in so deep as a creditor to the euro periphery that the cost of a default would be much higher than just putting more money into the game.

So for now Berlin and Paris appear to be on the same page: No sovereign default, no forced Greek exit. Official statements after Greek prime minister Antonis Samaras visited both capitals recently used similar, clearly coordinated language. With Germany and France in apparent agreement, much of the treaty and legal machinery to advance the banking supervision and fiscal integration process is already in place. It is not widely appreciated in the U.K. and the U.S. how much the commitment for more Europe has already been made by EU governments meeting in the European Council. Finance Ministers likes Germany’s Wolfgang Schäuble rarely approve Council bills that would fail a vote in their home parliaments.

Merkel and Monti politely disagreed on whether the ESM should get a banking license from the ECB to get more fire-power for sovereign market intervention, but otherwise read from the same general script about “collaboration and fiscal discipline.” Schäuble politely disagreed with Barroso on whether the Europe-wide bank supervisory system should cover all 6,000 euro zone banks or just the two dozen systemically important banking institutions, but otherwise agrees that Europe must “get the next step right — the creation of a truly effective European banking supervisor to enforce a robust single rule book for the sector,” as he argued in an op-ed in the Financial Times.

Draghi has skillfully complemented Merkel’s narrative to the German public. In a carefully crafted op-ed in Die Zeit, Draghi laid out the case for expanded ECB intervention in financial markets while preserving fiscal discipline, in language tailored to ease the fears of the German public and the arguments of conservative German economists.

“The challenges of having a single monetary policy but loosely coordinated fiscal, economic and financial policies have been clearly revealed by the crisis,” he wrote. “As Jean Monnet said, ‘coordination is a method which promotes discussion, but it does not lead to a decision.’ And strong decisions have to be made to manage the world’s second most important currency.”

After invoking that classic phrase by Jean Monnet, the revered father of the European Project, Draghi went on to narrow the policy sphere that requires European level actions, in the process cleverly situating ECB policy within Angela Merkel’s broad political strategy.

“We do not need a centralization of all economic policies. Instead, we can answer this question pragmatically: by calmly asking ourselves which are the minimum requirements to complete economic and monetary union,” he wrote. Those minimum requirements include “true oversight over national budgets” and European supervision to limit excessive risk-taking by banks.

Then he justified ECB sovereign debt purchases with the most persuasive case that resonates with German voters — economic growth with price stability: “Fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools. When markets are fragmented or influenced by irrational fears, our monetary policy signals do not reach citizens evenly across the euro area. We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens.”

Reaction in Germany to Draghi’s column was generally positive. Even some thoughtful observers in London liked it. “Euro governments cannot print `gold’ so they must live within their means, but the single market means there are spillover effects onto the neighbors,” says London-based financial commentator Graham Bishop. “So I agree with Draghi’s op-ed statement that 'Where necessary, sovereignty in selected economic policy fields can and should be pooled and democratic legitimation deepened.’ The core of the debate is now about what is 'necessary’, and we have already gone a very long way — much further than most investors realize.”

Draghi’s announcement of the bond-buying mechanism stirred some criticism in Germany that the central bank would be monetizing government deficits, something the Maastricht Treaty prohibits. Bundesbank president Jens Weidmann cast the sole vote against the plan for that very reason. But Merkel robustly defended the ECB, indicating that she and Draghi were singing very much from the same hymn sheet. “The ECB is an independent and very strong institution,” she told reporters in Vienna. “Conditionality is a very important point. Control and help, or control and conditions, go hand in hand.”

So for good or for ill, “resolution of the euro zone crisis is now firmly in the hands of the politicians,” says Michael Hintze, chief executive of London-based hedge fund firm CQS.  “The good news is there appears to be acknowledgement among policymakers that the euro zone is structurally challenged. The question is whether politicians in a democratic system where they must seek re-election will be able to demonstrate the leadership required to take the tough decisions to address the euro’s structural flaws.“  

Draghi’s use of the phrase “democratic legitimation” is a code word for the unpleasant reality facing Merkel and other euro zone politicians: that many citizen-voters are waking up to the amount of money at stake in keeping the system together. “A group of political, central bank and policy elites have been managing the euro crisis ineffectively for two years. During this period, the magnitude and reality of the austerity required of the peripheral, and the hard currency costs to the core states has steadily become apparent to the general public,” says Prologue’s McGlade. “The sacrifices required of both the periphery and the core, especially the transfer payments to the periphery to correct imbalances in a single currency system with unequal economic members, are going to inflict real pain on the man on the street.”

Merkel hopes Draghi’s ECB can slow down the financial clock even as she speeds up the political timeline. When push comes to shove, I think the Germans will give the ECB more firepower and more latitude to intervene, especially in sovereign debt markets. There are many moving parts in the decision-making machinery, a shifting cast of politicians — all facing elections — and a complex timeline. And as Bishop observes, the euro zone political process further advanced than the markets realize. But so are the stresses testing the financial system.

“It’s been decades since the markets tested and broke a central Bank,” mused a trader friend of mine in London on Monday. “Nobody is looking forward to really testing the ECB. Even if you make money on the big short, it will be armageddon for the rest of your portfolio. Let’s just hope the Germans know what they’re doing.”

James Shinn (jshinn@princeton.edu) is a lecturer at Princeton University’s School of Engineering and Applied Science, and chairman of Teneo Intelligence.  After careers on Wall Street and in Silicon Valley, he served as the national intelligence officer for East Asia at the Central Intelligence Agency and then as assistant secretary of Defense for Asia at the Pentagon. He sits on the advisory boards of Oxford Analytica and CQS, a London-based hedge fund firm.

Source : http://www.institutionalinvestor.com

http://www.investorseurope.com

(BN) RBS Said to Be in Talks With U.K. Regulators Over Libor

Royal Bank of Scotland Group Plc is in talks with the U.K.’s Financial Services Authority to settle accusations that some of its employees conspired to manipulate Libor interest rates, a person familiar with the matter said.

The bank’s efforts to resolve the matter have been slowed down by concern at RBS (RBS) over what happened at Barclays Plc (BARC) in June, when its settlement of allegations related to the London interbank offered rate led to the ouster of Chief Executive Officer Robert Diamond, said the person, who asked not to be named because the matter wasn’t public.

The amount that RBS has been discussing as a settlement would probably be greater than $290 million pounds ($462 million), the amount agreed to by Barclays, because of the belief among regulators that the conduct at RBS was worse, the person said.

UBS AG (UBSN), based in Zurich, is also trying to reach a settlement with regulators in the U.S. and U.K. over its role in a scheme to manipulate Libor, said another person familiar with the talks who also asked not to be named because the matter wasn’t public.

Ed Canaday, a spokesman in the U.S. for Edinburgh-based RBS, declined to comment on the talks.

Confidence in Libor, a benchmark for financial products valued at $360 trillion worldwide, was dented by Barclays’ admission that it submitted false London and euro interbank offered rates.

Lawsuits

Diamond, who built Barclays’s investment bank into the world’s biggest global bond underwriter, resigned in July after the bank was fined by U.S. and U.K. regulators for attempting to rig Libor. Antony Jenkins replaced Diamond as CEO. Barclays also faces class-action investor lawsuits related to Libor.

Libor is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. Lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs. After a set number of quotes are excluded, those remaining are averaged and published for each currency by the BBA before noon.

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Greg Farrell in New York at gregfarrell@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

(BN) Hu Says China Growth Is Facing ‘Notable Downward Pressure’

Chinese President Hu Jintao said a slowdown in exports is putting downward pressure on the world’s second-biggest economy, and he pledged to boost domestic demand and promote more balanced growth.

“Economic growth is facing notable downward pressure, some small and medium enterprises are facing a hard time and exporters are facing more difficulties,” Hu said today at the Asia-Pacific Economic Cooperation CEO Summit in Vladivostok, Russia. “We have an arduous task of creating jobs for new entrants to the labor force.”

The slowdown is increasing pressure on Hu as China tries to ensure a smooth transition of power to a new generation of leaders at a once-in-a-decade Communist Party Congress this year. Europe’s debt crisis and anemic U.S. growth may hinder a rebound in exports while at home a slump in earnings is deterring companies from spending and banks face rising debts.

Asia’s biggest economy expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years, after the government moved to counter inflation and surging property prices after its 2009 stimulus. Exports in July rose 1 percent from a year earlier and shipments in the first seven months rose 7.8 percent, compared with a 23.4 percent rise in the same period in 2011.

UBS AG and ING Groep NV yesterday cut their full-year forecasts for economic expansion to 7.5 percent, which would be the slowest pace in 22 years.

Property Bubble

“They’ve screamed from the rooftops for three years they are trying to slow things down to kill inflation and to kill the property bubble,” Jim Rogers, chairman of Singapore-based Rogers Holdings, said in a Sept. 7 interview in Vladivostok. “Now it’s happened.”

The deceleration in China’s economic growth will probably extend into a seventh quarter, with ING estimating a slowdown to 7.1 percent and Bank of America Corp. projecting 7.4 percent for the three months ending September.

Data due tomorrow may show industrial output growth slowed to 9 percent in August from a year earlier, the slowest pace this year, according to the median estimate in a Bloomberg News survey of 35 economists. Exports last month probably rose 2.9 percent from a year earlier, according to a separate survey before a Sept. 10 report. Overseas shipments climbed 24.5 percent in August last year.

Hu said China’s economy was characterized by a “lack of balance, coordination and sustainability” and that the country would promote “inclusive growth” to improve people’s lives.

Rising Inequality

China’s Gini coefficient, a measure of inequality, has risen more than any other Asian economy in the last two decades, Murtaza Syed, the International Monetary Fund’s resident representative in Beijing, said in February. The government hasn’t released an overall Gini figure since 2000 although Bo Xilai, the ousted former Communist Party secretary of Chongqing, said in March it had exceeded 0.46, above the point that triggers social unrest.

“The route we’ve taken is to allow a portion of the population to grow wealth before everyone else,” China Construction Bank Corp. Chairman Wang Hongzhang said in a panel discussion at the APEC summit today. “By 2050 we hope to have a society where a large part of the population can share in that equitably.”

Hu’s standing with international investors has suffered ahead of the leadership change later this year. In a quarterly Bloomberg Global Poll published yesterday, two in five voiced pessimism about the impact of his policies on the investment climate in China. That’s up from less than one in three in May and is the highest negative reading since the poll began asking that question two years ago.

Subway Expansion

China this week announced approvals for infrastructure spending, including 800 billion yuan ($126 billion) in new subway and rail projects, to support growth as Europe’s debt crisis crimps exports and a property crackdown damps domestic demand. The National Development & Reform Commission, the top planning agency, said Sept. 6 it approved plans to build 2,018 kilometers (1,254 miles) of roads, a day after it backed plans for subway projects in 18 cities.

Chinese shares surged on the news, with the benchmark Shanghai Composite Index (SHCOMP) closing 3.7 percent higher yesterday, the biggest advance since Jan. 17.

By focusing on infrastructure spending to boost growth, Hu and Premier Wen Jiabao may risk exacerbating the imbalances they have pledged to combat.

‘Unintended Consequences’

Spending on roads, bridges, subways and other public-works projects surged in 2009 and 2010 as much of a 4 trillion yuan ($586 billion at the time) stimulus, and an unprecedented expansion in bank lending, was directed toward local government projects. That led to a rise in debt at the local level to at least 10.7 trillion yuan as of 2010, according to an official audit.

“The unintended consequences of this are legion,” Tim Condon, chief Asia economist at ING in Singapore, wrote in a note yesterday, referring to the infrastructure spending. “They include corruption scandals -- for example, the railways minister was sacked and expelled from the Party over corruption charges -- poor quality construction -- the collapse of a section of the Yangmingtan bridge in Harbin city is emblematic - - and stretched local government finances.”

Ma Kai, a State Councilor and general secretary of the State Council, China’s Cabinet that’s headed by Premier Wen Jiabao, said today that China’s economic growth is sustainable and has “great potential.”

“We will turn the huge potential demand of 1.3 billion residents into real demand,” he said at an international investment forum in the eastern city of Xiamen. “I believe the unprecedentedly large and rapidly growing China market will bring more opportunities to foreign investors.”

To contact Bloomberg News staff for this story: Michael Forsythe in Vladivostok at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Gibraltar in a Pickle with HMG ?

http://www.panorama.gi/localnews/headlines.php?action=view_article&article=9253&offset=0 

'From mid-September, the glamorous superyachts at Gibraltar’s Ocean Village will have some competition on their hands in the shape of HMS Pickle. The 73ft twin-masted tall ship, an exact replica of the 1799-built original, will become a permanent fixture and tourist attraction for the marina.

Brian Stevendale, Commercial Director for Ocean Village, is thrilled ...'

Source :  http://www.panorama.gi 

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QROPS Pops in Gibraltar as New Government sweeps clean

http://www.iexpats.com/2012/09/qrops-its-all-go-for-gibraltar-after-three-years/ 

'New government paved the way

HMRC were asked to comment on the Gibraltar announcement, but declined, saying: “We can’t comment on individual jurisdictions.”

The difficulties between Gibraltar QROPS providers and HMRC started in September 2009, when the providers froze transfers in while negotiations went on over whether 0% was a tax rate for pension payments...'

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Gibraltar GX11 1AA

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Stock Brokers: http://boulle.co/client_ie     http://boulle.co/demoplatform  

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