Archive for the ‘Business’ Category


The Nation November 9, 2011 11:15 am
The government will take prompt action in preventing a repeat of the catastrophic flooding, Deputy Prime Minister Kittiratt Na-Ranong said on Wednesday.

“The only way to restore investors’ confidence is to act instead of talking,” he said.

Kittiratt said the two strategic committees tasked with preventing future flooding would convene in the next few days.

The two – the Strategic Committee for Reconstruction and Future Development (SCRF) and the Strategic Committee for Water Resources Management (SCWRM) – will closely work together to overcome the flooding, he said.

The SCRF is headed by Virabongsa Ramangkura, he said, adding that the SCWRM is led by Prime Minister Yingluck Shinawatra who will delegate him to chair the meeting on her behalf.

In order to improve water management, the SCWRM will involve foreign consultants, particularly those from Japan and the Netherlands, he said.

The government is expected to finance the overhaul of water management by either issuing treasury bonds or borrowing from international financial institutions such as the World Bank and the Asian Development Bank, he said.

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The Big Dry follows the Big Wet

Posted: November 6, 2011 in Business, News

Bangkok Post

The city’s economy is suffering after entertainment venues are hit by declining numbers of patrons and face booze supplies that are quickly drying up

Across the clubs, pubs and tourist areas of the city the message is the same _ as beer supplies begin to dwindle, so too does the number of revellers that help keep the financial lifeblood of Bangkok pumping.
WHERE HAVE ALL THE PUNTERS GONE?: Patpong Road has far fewer visitors than usual. An empty Irish pub around Silom Road, below left. A jazz concert at the Sheraton Grande Sukhumvit goes ahead, but fewer people are in attendance than usual, below right.

“There’s definitely a drop in revenues,” said Denis Hemakom, manager of the popular Q Bar nightclub on Sukhumvit Soi 11. “Almost all the local population are gone; we’re living off tourists now. I’d say [sales are] maybe 30% [of normal] overall. Our good nights are still pretty good, but our slow nights are very, very slow.”

The impact of the floods on tourism and entertainment venues is no small beer to the government. Thailand is likely to lose about 15-25 billion baht in tourism revenues this year as the number of travellers drops because of the floods, according to the Kasikorn Research Centre, even if Suvarnabhumi airport, entry point for 70% of arrivals, continues to function normally.

Tourism Minister Chumpol Silpa-archa said arrivals could be up to one million below the government’s target of 19 million this year. The tourism industry employs more than two million people and accounts for 6% of GDP.

A visit by Spectrum last week to Silom Road, normally bustling with revellers, showed many empty bars and restaurants. A waitress at the nearly empty Molly Malone’s, an Irish pub on Soi Convent, commented that they had plenty of beer but no customers or water.

The part owner and manager of another popular pub nearby said they had virtually no patrons over the past three weeks due to concerns over safety.

“We don’t know whether to applaud the government for handling the situation well or criticise it for overreacting and scaring people away,” he said.

Beer deliveries have been unreliable due to transport problems; however, he added that the situation was now improving.

“We asked for 10 barrels, but I suspect we’ll get one or two. But still, that’s better than nothing.”

He said that breweries still had stock, and it was still possible to buy bottled beer from supermarkets, although his staff were worried they might have to start selling large bottles of beer as small ones become scarce.

Breweries have indicated they are reducing production as a result of declining demand due to the temporary closure of major distribution centres in flooded areas.

Chatchai Wiratyosin, marketing director at Singha Corporation, said production of Singha draught beer has reduced slightly, resulting in a modest decline of beer stocks at pubs and bars.

However, even if the company’s brewery in Pathum Thani is submerged by the floods, Singha’s brewery in Khon Kaen has sufficient capacity to serve demand, he said. Nevertheless, Singha might have problems transporting beer from Khon Kaen to Bangkok as many roads are now impassable.

Sorrakit Lathitham, an executive at Thai Beverage, brewer and distributor of Chang beer, said that many breweries faced not only product shortages but a decline in consumption. However, the company was still able to make deliveries.

Heineken, meanwhile, is slowing production as some of its customers’ distribution centres close due to the floods. These include Tesco Lotus, Big C, Tops and 7-Eleven.

One Heineken executive, who asked not to be named, said the company’s production and inventory of raw materials had not yet been affected by the floods. But it started reducing production last week due to shrinking orders. Heineken has a production capacity of two hundred million litres of beer per year.

Nevertheless, Heineken was preparing for a worst-case scenario, the source said, with the possibility of importing beer from neighbouring production facilities. In Asia, the company has breweries in Malaysia, Singapore, Vietnam, Indonesia and China.

Patpong Road last week had many empty bars but no shortage of men touting “ping-pong” shows and “full body” massages. The problem for them is one of demand rather than supply, although many bar girls have returned to the provinces, said one manager.

PHOTOS: EZRA KYRILL ERKER

“Stick” of Stickmanbangkok.com, a popular website keeping tabs on the capital’s seedy underbelly, told Spectrum that “Halloween [last Monday] is usually a big night but this year it was the worst in memory with fewer staff in the bars and even fewer customers. Generally, trade seems to be down and some bars have run low on certain products, notwithstanding that customary numbers are down, as are sales.”

On Silom Soi 11, Bed Supperclub went ahead with its Halloween party and the turnout for a Monday night was quite good.

Mr Hemakom, on the other hand, said that Q Bar’s Halloween party was cancelled. They were experiencing some beverage shortages, mainly of Singha soda water and Coca-Cola, though these have now eased.

He also commented on the cost of sandbags and flood safety preparations. “We spent good money raising electronics off the ground floor.

“The main effect has been on the customer though,” he added.

“For the most part, I think the effect has been on the confusion people have over whether or not flooding is coming. It puts a downer on the party mood when you think your house might be underwater.”

A centrally located five-star hotel’s public relations manager told us that at this time of year they would normally expect full occupancy, but that numbers were down significantly with many cancellations. “Luckily, half our clientele are business travellers, and business for them has to continue regardless.”

Concert promoters are also feeling the pain. At the time of writing, David Foster’s Oct 31 concert was cancelled. Yesterday’s Jason Mraz concert was cancelled. Tuesday’s X Japan concert at Impact Arena, however, and Pitbull’s Nov 28 concert, are going ahead. The World Film Festival of Bangkok has been postponed until Jan 20.

Sukhothai’s famous Loy Krathong festival will go ahead this week but the Royal Flora Ratchaphruek Fair 2011 in Chiang Mai has been postponed until Dec 16.

Countless events and promotions have had to be rescheduled or dropped, as residents flee and travel advisories discourage visitors.

Kittitouch Srivimolwattana of Universal Music, Thailand, said the music industry was “definitely affected by the flood crisis. Many of our stores have closed and of course sales have dropped. That’s the key factor really while consumers are more concerned about the floods than our new releases.”


THE NATION November 4, 2011 3:09 am

Urgent govt recovery plans demanded

Local business associations have urged the government to launch rehabilitation packages without delay to restore the country after the massive flood.

The Thai Retailers Association yesterday called on the government to accelerate its rehabilitation plan, which should be conducted by the end of this month, with two key campaigns – “Thailand Shopping Destination” to stimulate foreign tourist arrivals and “Cheque Chuay Chart” to promote domestic consumption.

Busaba Chirathivat, president of the Thai Retailers Association, said the flooding situation was expected to improve significantly next month. However, the disaster has caused billions of baht in damage to the retail sector in the areas of products, logistics and distribution, labour, buildings and assets.

“The government should urgently launch the rehabilitation plan before Thailand loses trade and investment opportunities to |neighbouring countries,” Busaba said.

She said the flood water was expected to be drained by the second or third week of this month, and the rehabilitation plans should be executed by early December.

“The government should revise its tax structure to benefit the prices of products to promote Thailand as a major shopping destination in competition with other shopping markets in the region, such as Hong Kong, Singapore and Malaysia.

“Shopping is a key mechanism to drive consumption.”

She added that previously successful campaigns such as “Cheque Chuay Chart”, a cheque-handout scheme, could be used again to stimulate domestic consumption.

Meanwhile, the Federation of Thai Capital Market Organisations (FeTCO) will propose to the government a plan to restore capital-market confidence.

FeTCO president Paiboon Nalinthrangkurn said it was urging members, including the Association of Investment Management Companies, the Association of Securities Companies and the Thai Listed Companies Association, to help formulate long-term plans to restore foreign investors’ confidence after the flood disaster. These plans, expected next week, will be combined by FeTCO into one, which will be forwarded to the government. Domestic and foreign investors are waiting to see the long-term direction for the country’s rehabilitation, he said.

He conceded that Thailand’s floods and the European debt crisis weighed on investment sentiment in the Stock Exchange of Thailand.

“[We] believe that investors have accepted the flooding situation. Now, they are concerned whether the economy will recover next year,” Paiboon said.

“It also depends on the government. Japan suffered a tsunami disaster and has taken a short while to restore confidence. The government has to see this through, as all are affected.”

Tisco Securities, of which Paiboon is chief executive officer, has lowered this year’s target for the SET Index to 1,000 points from 1,180 |on the increasing impacts from |the floods, he said. The brokerage house also slashed Thailand’s 2011 economic growth estimate to 2.9 per cent from the previous forecast of 4 per cent.

The Real Estate Information Centre (REIC) said spreading flood waters had now damaged up to 700,000 residential units in Bangkok and its suburbs, an increase from the 400,000 homes found destroyed last week.

Of the damaged houses, property firms developed 100,000 units, while the remainder were designed and built by individual owners.

According to the REIC, the property market this year will drop by 10-20 per cent on average. In addition, it said that the registration of new residences in Bangkok and its suburbs would drop by 15-25 per cent from last year’s 107,000 units to between 80,000 and 90,000 units this year.


The New York Times

ATHENS — European markets slid dramatically on Tuesday after Prime Minister George A. Papandreou stunned the continent’s leaders with a surprise announcement late Monday that his government would hold a referendum on a new aid package for Greece.

The proposed ballot measure would put Greek austerity measures — and potentially membership in the euro zone — to a popular vote for the first time, risking Mr. Papandreou’s political future and threatening even greater turmoil both among the countries that share the single currency and further afield.

His announcement sent tremors through Europe’s see-sawing markets on Tuesday, with bank stocks taking a particular hammering because of their exposure to Greek debt. At midday, the German DAX index was down by 5.3 percent while the French CAC 40 had slipped by roughly 4.2 percent. In Britain, which is not a member of the euro zone but trades heavily with continental Europe, the FTSE 100 index was down by around 3.2 percent.

Markets in the United States opened lower, declining by around 2 percent.

President Nicolas Sarkozy of France was expected to speak with Chancellor Angela Merkel of Germany by phone during the day on Tuesday to discuss the referendum, which took both leaders by surprise, Agence-France Presse reported. The French president was said to be “dismayed,” according to Le Monde, citing an unnamed confidant of Mr. Sarkozy.

The German Finance Ministry deflected questions in a statement early Tuesday, saying that the call for a referendum “is a domestic political development on which the German government has no official information yet and which therefore it will not comment on.”

But Rainer Brüderle, a senior member of Ms. Merkel’s governing coalition and a former finance minister, said in a radio interview on Tuesday that he was “irritated” by the move, which he called “a strange thing to do.”

“This sounds to me like someone is trying to wriggle out of what one has agreed to,” he was quoted by Der Spiegel as saying.

Mr. Papandreou’s surprise promise of a vote on the austerity package introduced a note of uncertainty in what had seemed to be a done deal, threatening a comprehensive agreement reached by European leaders last week to shore up the euro zone. A rejection by the voters would also be likely to be treated as a vote of no confidence in the government and lead to early elections.

The anxiety stirred up by those fears hammered United States financial markets on Monday, showing once again how the domestic politics of even the smallest members of the European Union can create troubles that not only threaten the currency but also reverberate around the globe.

Addressing lawmakers on Monday evening, Mr. Papandreou said the decision on whether to adopt the deal, which includes fresh financial assistance, debt relief and deeply unpopular austerity measures, properly belonged to the Greek people.

“Let us allow the people to have the last word, let them decide on the country’s fate,” he said.

It was unclear how the referendum would be worded, but Mr. Papandreou said it would be a vote on whether or not Greeks supported the debt deal and the program of austerity measures in exchange for foreign aid.

The stakes are extremely high. A no vote could break the deal between Greece and its so-called troika of foreign lenders — the European Union, the European Central Bank and the International Monetary Fund — which have demanded structural changes and austerity measures in exchange for aid.

Without the aid, Greece would not be able to meet its expenses and would default on its debt, sending shock waves through the euro zone and the world economy.

A yes vote, on the other hand, would move the package forward, effectively shifting responsibility for the nation’s painful economic choices from Mr. Papandreou’s Socialist Party onto the public. That outcome would help Mr. Papandreou shore up his political position and avoid the instability of early elections.

The center-right opposition has opposed the bulk of the austerity program, and the prime minister’s popular support has dwindled as Greeks have been hit by a seemingly endless series of tax increases and wage and pension cuts. On Sunday, the center-left newspaper To Vima reported that a majority of Greeks viewed the deal negatively.

The leader of Greece’s main conservative opposition party New Democracy, Antonis Samaras, told reporters in Athens on Tuesday that his party would do whatever it took to force early elections and accused Mr. Papandreou of acting selfishly by calling for a referendum.

“Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma,” Mr. Samaras said following talks with President Karolos Papoulias.

The Greek government was plunged into chaos on Tuesday and faced an imminent collapse, as lawmakers rebelled against Prime Minister George Papandreou’s surprise call for a popular referendum on a new debt deal with Greece’s foreign lenders.

Such a collapse would not only render the referendum plan moot, it would likely scuttle — or at least delay — the debt deal that was agreed on in Brussels last week, putting Greece on a fast track to default and possible exit from the monetary union of countries sharing the euro currency.

Analysts said that Mr. Papandreou’s call for a referendum was a last resort, meant to gain broader political support for the unpopular austerity measures in the deal without forcing early elections that would only worsen the country’s political and economic turmoil.

But after weeks of mounting pressure, one Socialist lawmaker quit the party to become an independent, reducing Mr. Papandreou’s majority to 152 seats out of 300 in Parliament, and another six Socialists wrote a letter calling on Mr. Papandreou to resign and schedule early elections for a new government with greater political legitimacy. Together, the developments made it doubtful whether his government would survive a confidence vote planned for Friday.

Meanwhile, the center-right opposition New Democracy party on Tuesday stepped up its calls for early elections. Its leader, Antonis Samaras, has opposed most of the austerity measures the government accepted in exchange for foreign financial aid. Mr. Samaras has said that if he were in power, he would try to renegotiate the terms of Greece’s arrangement with its principal foreign lenders, known as the troika: the European Union, the European Central Bank and the International Monetary Fund.

“Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma,” Mr. Samaras said on Tuesday. “New Democracy is determined to avert, at all costs, such reckless adventurism.”

Mr. Samaras declined to say whether he would ask his 85 members of Parliament to resign, a move that would lead to the dissolution of Parliament and a snap election. The next general election was not due until 2013, when the Socialists’ four-year-term expires. Mr. Samaras is expected to clarify his stance at a meeting of his party’s parliamentary group on Wednesday.

European leaders have repeatedly dismissed Mr. Samaras’s notion of renegotiating Greece’s deal with its lenders, saying that trying to do so would be damaging and would throw away months of work on a plan to keep Greece from defaulting.

Mr. Papandreou’s announcement of a referendum took Greek lawmakers by surprise, just a s it did political leaders and investors across Europe. On Tuesday, the state television channel Net reported that even the finance minister, Evangelos Venizelos, had not been informed in advance about the referendum, although he was aware of plans for a confidence vote.

Mr. Venizelos was taken to a hospital Tuesday morning, complaining of stomach pain. Doctors said he had an inflamed appendix. He is the latest in a string of governing party officials to be rushed to hospitals in recent weeks. One Greek negotiator had a heart attack in Brussels last week.

On Tuesday, European leaders said the deal reached last week to write down 50 percent of some Greek debt was the best available way to build a financial “firewall” that would keep Greece’s troubles from causing a damaging run on other shaky European economies like that of Italy.

The political instability in Greece has long dismayed European officials. In a statement, the president of the European Commission, Jose Manuel Barroso, and the president of the European Council, Herman Van Rompuy, said that Europe’s plans to protect other vulnerable members were “more necessary than ever, without delay.”

“We are convinced that this agreement is the best for Greece,” they added. “We fully trust that Greece will honor the commitments undertaken in relation to the euro area and the international community.”

In Greece, Mr. Papandreou’s referendum proposal seemed to be his last, best hope. His political capital has dried up, and he faces intense anger from voters who have been squeezed to the breaking point by the austerity measures demanded by Greece’s foreign lenders.

“Papandreou could not take more political punishment,” said George Kirsos, a political analyst and the owner of the Athens City Paper. “We have a strange situation: Everyone’s cursing the government, and everyone expects the government to do the job by itself — to reorganize the economy, to cut the deficit, to make a deal with the Germans — but at the same time, nobody helps him.”

“All parties and all media criticize the government,” Mr. Kirstos added. “So Papandreou, in a sense, tried his best to do the referendum to force the parties, the media and the citizens to undertake their own responsibility. The referendum is a yes or no issue: Either you are in favor, or you decide that you say goodbye to the euro zone.”

Charged by Europe with dismantling the welfare state they helped create, many of Mr. Papandreou’s Socialist members of Parliament feel they too have reached their breaking points.

Vasso Papandreou, a prominent member of parliament and a former minister who is not related to the prime minister, called on Greek President Karolos Papoulias to order the formation of a unity government ahead of early general elections. “Bankruptcy is imminent,” she said. Earlier this month, Ms. Papandreou said she would vote for a new raft of austerity measures, but that it would be “the last time” she supported the government unconditionally.

“The current government has none of these necessary prerequisites. Today’s government policy is asphyxiating. Day by day the country is experiencing collapse, lawlessness and absence of government,” they added.

If Mr. Papandreou’s government falls, it would not be the first one in Europe to be toppled by the austerity demanded by European debt relief. In Ireland and Portuga,l governments that accepted bailouts from the European Union and the International Monetary Fund fell, and last month the Slovakian government fell over whether to participate in the European Union’s rescue package.

Niki Kitsantonis reported from Athens and Rachel Donadio from Rome. Stephen Castle contributed reporting from Brussels.

Qantas ordered to end labor dispute

Posted: October 31, 2011 in Business, News

http://i.cdn.turner.com/cnn/.element/apps/cvp/3.0/swf/cnn_416x234_embed.swf?context=embed_edition&videoId=bestoftv/2011/10/29/idesk-seg-allen-qantas-shutdown.cnn

Sydney (CNN) — Australia’s Qantas Airways said it plans to resume flights Monday afternoon after a government labor board ordered it to end a dispute with its unions that grounded the airline over the weekend.

Qantas jets will resume service over the next 24 hours in a “safe and phased approach,” company CEO Alan Joyce told reporters Monday morning.

Labor relations tribunal Fair Work Australia ordered an end to the labor dispute “to avoid significant damage to the tourism industry” after Qantas grounded its jets Saturday afternoon.The airline grounded 447 flights since Saturday and announced it would be locking out its unionized pilots, engineers, ramp, baggage and catering crews effective Monday evening amid a dispute with the unions that has dragged on for 14 months, the board said.

Qantas argued that the unions’ demands would leave the airline “seriously impaired or destroyed.” The labor board gave the two sides three weeks to reach an agreement, with a possible three-week extension if talks were making progress.

The decision “provides certainty for Qantas passengers,” Joyce said in a statement following the decision. He apologized to passengers and said flights would resume as early as Monday afternoon.

The Australian and International Pilots Association said it hoped for a “positive outcome” from the talks, calling the decision to ground the airline a “gross overreaction” to its demands. “It is a sign that the current management has lost touch with the traveling public, its workers and the basic Australian ethos of free speech,” the union said in a statement.

At Sydney airport, columns of “canceled” illuminated the departure board. Throngs of weary passengers crowded the help desk to rebook with other airlines, as suitcases lay scattered all over the floor.

“It makes me wonder whether I would book with Qantas again,” said Isabelle Storer, who was stuck at the airport with her husband after a visit to the United States.

Their connection to Adelaide was canceled, leaving her frustrated because her husband needed medical treatment, she said.

Passenger Ron Fuller waited at the airport, albeit more optimistic.

“For a month or two, everyone will be anti-Qantas, there’s no doubt about that,” Fuller said. “But emotion probably gets in the way sometimes.”

The labor dispute involves three unions representing air and ground staff of Australia’s largest domestic and international airline.

Union officials have accused the airline of planning to outsource ground jobs at a cost of thousands of Australian jobs and of putting profits first. Pay and working conditions have also been at the center of the disputes.

The industrial action is aimed at ensuring Qantas will not have enough funds to set up overseas operations that will jeopardize job security, union officials said.

The move comes at an embarrassing moment for Australia, which is hosting dozens of heads of government and their staffs for the Commonwealth meeting in Perth.

Qantas CEO Joyce has come under fire for grounding the fleet, which was preceded by weeks of tension between the airline and its workers.

It’s “a maniacal overreaction,” said Richard Woodward, vice president of the Australian and International Pilots’ Union.

The decision to ground the Qantas fleet, stranding thousands of passengers around the world, was unnecessary and grossly irresponsible, he said in a statement.

In a statement, the Transport Workers Union of Australia described the cancellations as “disgraceful” and aimed at destroying the airline.

Qantas, which has its headquarters in Sydney, is the second oldest airline in the world, and marked its 90th anniversary last year.

It employs about 32,500 people and flies to more than 180 destinations worldwide, according to the company website.


BBC
…..

Klaus Regling: ”These are regular consultations at an early stage and there will be no conclusions”
The head of the eurozone’s bailout fund is beginning attempts to persuade China to invest in a scheme to help rescue member countries facing debt crises. 

After meeting Chinese leaders, Klaus Regling said there were no formal negotiations and would be no deal now.

It is thought China may pay about 70bn euros ($100bn) into the fund, which is expected to be boosted to 1tn euros.

Meanwhile French President Nicolas Sarkozy said debt-ridden Greece’s entry to the eurozone was a mistake.

Greece was “not ready” when it joined in 2001, he said, adding that it could be rescued thanks to a new deal on the debt crisis.

European leaders worked into the early hours of Thursday in Brussels to secure an agreement aimed at preventing the crisis from spreading to larger eurozone economies.
The deal triggered a worldwide shares rally.

‘Regular buyer’
 
Beijing has made it clear that it will demand strong guarantees on the safety of any contribution it might make.

Analysis

With more than $3tn in foreign reserves there are European hopes that China could ride to the rescue.

As the EU’s biggest trade partner Beijing would also be hard hit by any downturn in Europe.
But like other investors, China will want guarantees.

And Beijing may push for other concessions, such as market economy status – a move that would make it harder for European companies to press trade complaints against Chinese rivals.

Any investment will also be fraught with political risk.

China’s fund managers have faced criticism after earlier overseas investments soured.
Despite being the world’s second economy, more than 200m Chinese live in poverty.

China’s leaders won’t want to be seen giving “charity” to countries richer than their own.

Mr Regling, who is chief executive of the European Financial Stability Facility (EFSF), said he was not negotiating with China as a potential investor but holding consultations to decide the terms for raising the money.

“Don’t expect any precise outcome of our talks,” he said, quoted by AFP news agency.
“I cannot say today, and it’s certainly far too early to say what kind of amounts might be envisaged.”

He said China had been a regular buyer of EFSF bonds in the past.

He would present the fund’s bonds as a potential commercial investment to China, he said, adding that Beijing regularly needed to find safe investments for its trade surpluses.

“I am optimistic that we will have a longer term relationship,” he said.

Chinese Vice Finance Minister Zhu Guangyao said there was work still to be done.

“We need to wait for the technicalities to be clear and also to carry out serious studies before we can decide on investment,” he said, quoted by AFP.

Start Quote

Xu Juan

If we have the ability to help them then we should, but there is no feeling of pride in that”

Xu Juan International trade firm employee in Beijing

 
“We hope that all these technical and specialised arrangements can be thrashed out at an early date and can be implemented and feasible. That will be very important for the effectiveness” of the fund.

The President of the World Bank, Robert Zoellick, has said he believes China will invest in Europe only if there are incentives for it to do so.

“I don’t think that China will just come in as a white knight to try to provide money just to bail out Europeans,” he told the BBC.

But investor Jim Rogers said China was prepared to help.

“From China’s point of view, it’s cheap foreign aid. They’ll buy goodwill. I guess they’ll put up some money,” he said on BBC Radio 4’s Today programme.

The suggestion that China should use its financial clout to assist the eurozone met with mixed reactions on the streets of Beijing.

“If we have the ability to help them then we should, but there is no feeling of pride in that,” said Xu Juan – a 27-year-old employee of an international trade firm.

Eurozone deal key points

Greek debt
Private banks holding Greek debt will accept a write-off of 50% of their returns

Bailout fund

Bailout fund set up earlier this year to be boosted from the 440bn to 1tn euros

Banks

European banks will be required to raise about 106bn euros in new capital by June 2012
“We need to focus on doing a good job on developing our own country.”

Wang Xiaodong, a 23-year-old univeristy student, said “With the global economy everybody prospers together or becomes weaker together, so we just have to endure this tough time together.”

The framework for the new EFSF bailout fund is to be put in place in November.

Germany, as the largest economy in eurozone, is expected to be the largest contributor.

Asian markets rose for a second day on Friday and bank stocks in Europe continued to rally, a day after the deal was reached.


The Nation October 27, 2011 9:04 am

SET gains 2.29% as Europe agrees Greek deal

The Stock Exchange of Thailand rallied today, on good news that European leaders reached a number of measures to ease the financial crisis.

As of 4.40pm, the composite index gained 21.49 points or 2.29 per cent to 960.17 points, despite escalating water level in the capital city of Thailand. Turnover was Bt30.2 billion. All Asian stocks jumped today on the good news.European leaders successfully persuaded bondholders to take a voluntary haircut of 50 per cent on Greek debt and expanded the eurozone rescue fund to 1 trillion euros ($1.4 trillion).

International Monetary Fund Managing Director Christine Lagarde welcomed the steps taken today by the Eurozone leaders toward establishing a comprehensive framework to address the crisis facing the region. In a statement, she said she was encouraged by the substantial progress made on a number of fronts.

On Greek debts, the leaders agreed to involve private sector in the solution for burden sharing. Bondholders agreed to a voluntary haircut of 50 per cent on Greek debt aiming for a debt/GDP ratio of 120 per cent by the end of the decade.

“More immediately, I intend to recommend approval to the IMF’s Executive Board of disbursement of the next tranche of our loan under the current programME. The continued commitment of the Greek authorities to implement agreed economic reforms remains, of course, paramount.

The leaders also expanded the capacity of the European Financial Stability Facility (EFSF), including through the use of new Special Purpose Vehicles (SPVs).

To Lagarde, this can strengthen Europe’s defenses against contagion and help ensure the proper functioning of the sovereign debt market. In the period ahead, it will be important to detail further the modalities of how this enhanced EFSF will operate and deliver the scale of support envisaged.

There is also a compulsory increase of 106 billion euro of bank capital and an unified approach to guarantee bank bonds to support senior unsecured term funding markets.
“Restoring growth depends on a financially sound banking sector and reinforcing the banks’ capital buffers is key. This should be achieved mainly through the provision of additional capital and not by lower lending within or across countries,” Lagarde said

According to Barclays Capital, warm welcome by the markets is not surprising. But this is merely a relief rally rather than the start of a prolonged period of outperformance of European and cyclical currencies due to four mail reasons.

First, there remain significant uncertainties. We do not know a lot of the details, these measures may need to be agreed by national parliaments, the bank capital needs to raised and we will not know how much will come from the private sector, and therefore how much will need to be financed from governments and the EFSF for some time.

Second, the negotiations demonstrated the deep differences between countries and different interest groups. This was inevitable but given the extreme ongoing difficulties facing the euro area economies they are likely to come back into focus from time to time. Politics is a fractious business even on a week-to-week basis and, at best, the resolution of the problems will take years.

Third, linked to that, the agreement helps stabilise the symptoms of the problems. The underlying causes are even more difficult to address. Structural reform measures have been announced to some extent in the peripheral economies, but most still need to be put in place. The ability of the euro area as a whole to monitor individual states’ fiscal plans remains limited. And the basic requirements of a currency area – a reasonably homogenous economy, flexible markets for the factors of production (especially labour), and fiscal flexibility – are not in place and will take a long time to establish. These are all long-term issues, but long-term issues have to have effects in the short term at some point, and they all matter for the current situation.

Fourth, even if confidence increases as a result of the agreements already announced and the information that we will presumably get over the next few weeks, euro area growth looks likely to be extremely weak. The weaker it is, the harder it will be to sort the problems out, and the looser ECB policy is likely to be.