Brazilian government economic planners have been served the first warning this year that the Latin American country’s commodities-fueled economy may be slowing.
Data released by the state development bank BNDES indicated the sluggish growth wasn’t only a reality but one that had gained momentum in recent months.
Reports of the continent’s largest economy slowing contrast with projections that continue to indicate healthy activity in most sectors of Brazilian economy. The slowdown prognosis is based on lower lending figures, which indicate momentum in economic activity, the data showed.
The bank said its loan disbursements in 2011 will miss their initial target for the year, reflecting a shortfall of $2.95 billion-$4.14 billion. The estimated total loan disbursements for the year are likely to be no more than $83 billion against estimates of up to $87 billion.
The drop is partly the result of corporate borrowers changing their minds about making new credit requests but it represents the first annual decline in the figure since 2008, when Brazil was battling the global economic downturn.
The financing slump comes amid forecasts that Brazil’s economic growth this year may be less than half that in 2010. Last year’s economic growth, recorded at 7.5 percent, was the fastest in 24 years of economic activity in Brazil and attracted investors from all over the world.
At least part of the drop in borrowing from BNDES stems from conservatism among Brazilian corporate entities that have been buffeted by investor speculation and worries over the possible ramifications of the eurozone crisis.
Talks on building new business bridges with the European Union have been stalled for more than a year and discussions on reaching a free trade deal with Europe within the framework of Latin America’s Mercosur trade bloc have been inconclusive.
Officials say the eurozone crisis may encourage European negotiators to drop their objections to Mercosur, which is seen by the EU agriculture sector as a potential threat. EU analysts have said a deal with Mercosur will help EU to forge new trade links and find new sources of revenue at a time of adversity.
Several Mercosur member countries are doing well and Brazil in particular has a vast surplus that promises EU exporters a potential bonanza if a trade deal is realized.
Mercosur member countries are Argentina, Brazil, Paraguay and Uruguay as full members, Venezuela as a full member awaiting confirmation and Bolivia, Chile, Colombia, Ecuador and Peru as associates.
Analysts said the news of a potential economic slowdown in Brazil will likely cause a ripple effect in the rest of the Mercosur region, which has a gross domestic product of $2.895 trillion.
European Union chiefs are drawing up plans for a single “Treasury” to oversee tax and spending across the 17 eurozone nations.
London Telegraph
October 23, 2011
The proposal, put forward by Herman Van Rompuy, the European Council president, would be the clearest sign yet of a new “United States of Europe” — with Britain left on the sidelines.
The plan comes as European governments desperately trying to save the euro from collapse last night faced a new bombshell, with sources at the International Monetary Fund saying it would not pay for a second Greek bail-out.
It was also disclosed last night that British businesses are turning their back on Brussels regulations to give temporary workers full employment rights, with supermarket chain Tesco leading the charge.
Meanwhile, David Cameron is attempting to face down a rebellion tomorrow by Tory MPs in a vote over staging a referendum on Britain’s membership of the EU.
Ministers expect 60 or 70 MPs to defy the party’s high command and back the call for a referendum, while some rebels claim the final toll could be up to 100 — about a third of the parliamentary party.
Downing Street has upped the stakes dramatically. Last night, No 10 sources insisted they would impose a three-line whip — effectively ordering all Tory MPs to fall in line.
Mr Cameron, who yesterday took personal charge of the effort to persuade MPs to back the Government, has come under intense pressure from Cabinet colleagues to try to defuse the revolt by offering concessions or a way out to rebels. Sources say a handful of parliamentary private secretaries — the lowest rung on the government ladder — might resign.
The single Treasury plan emerged in Brussels yesterday as Europe’s finance ministers tried to find a way out of the crisis engulfing the eurozone. A full-scale rescue plan could cost about £1.75 trillion.
British sources said Mr Van Rompuy, who is regarded as being close to the German government, suggested plans for a “finance ministry” to be based either in Frankfurt or Paris. The EU already has its own “foreign ministry”, headed by Baroness Ashton, the former British Labour minister, and based in Brussels.
A senior Coalition source told The Sunday Telegraph: “I am well aware of arguments in Brussels and elsewhere in favour of a single Treasury. You’d get any number of different versions of ‘Europe’ all running at very different speeds.”
A series of meetings are due to be held over the next few days on the eurozone crisis that will involve the leaders of EU member states.
They were overshadowed last night as senior sources at the International Monetary Fund indicated privately that it is not willing to further bail out Greece, whose economy has an outstanding debt of about £232 billion.
The IMF, with the EU and the European Central Bank, is assessing Greece’s debt crisis, and a joint report yesterday suggested lenders might have to agree losses of up to 60 per cent in a Greek default.
Any suggestion that the IMF would not be part of a new bail-out of Greece could spark panic in the markets and worsen the eurozone crisis.
Eurosceptic Tories, meanwhile, are arguing in favour of “repatriating” powers from the EU to Britain, including the Agency Workers Directive, imposed last year at an annual cost of £1.8 billion, which is putting at risk 28,000 temporary job contracts for those aged between 16 and 24. Tesco has asked one of its suppliers to take advantage of a loophole in the law which allows workers to “opt out”.
As Mr Cameron led the drive this weekend to neuter the Tory rebellion, Nigel Farage, the leader of Ukip, indicated his party might not field candidates at the next election against MPs who vote for a referendum.
However, there is no danger of Mr Cameron losing the non-binding vote. He can count on the “payroll vote” of more than 100 ministers, most if not all Lib Dams and nearly the entire bloc of 258 Labour MPs.
On Saturday Tory rebels were among speakers at a “People’s Pledge” pro-referendum rally in Westminster. They included David Davis, the former shadow home secretary, who called the EU a “nascent superstate”.
While the Greek government surrendered to the IMF and World Bank demands for more spending cuts, the streets of Athens saw an increase in protests with thousands of citizens taking on police.
Associated Press
June 29, 2011
Greece’s lawmakers approved a key austerity bill Wednesday needed to avert default, despite a second day of rioting on the streets of Athens that left dozens of police and protesters injured.
The passage of the bill was a decisive step for the country to get the next batch of bailout loans from international creditors due from last year’s financial rescue. Another bill has to be passed Thursday for the government to secure the money.
The bill to cut spending and raise taxes by euro28 billion ($40 billion) over five years has provoked widespread outrage, coming after a year of deep cuts that have seen public sector salaries and pensions cut and unemployment rise to above 16 percent.
While deputies voted, stun grenades echoed across the square outside the Parliament building and acrid clouds of tear gas hung in the streets. Authorities and emergency services said 21 police and 15 protesters were injured and transferred to hospitals, while 26 people were detained.
The European Union and International Monetary Fund have demanded both bills pass before it releases euro12 billion of bailout funds — without the money, Greece was facing defaulting on its debts by the middle of next month, potentially triggering a banking crisis, particularly in Europe, and turmoil in global markets.
“We must avoid the country’s collapse with every effort,” Prime Minister George Papandreou said in his speech prior to the vote. “Outside, many are protesting. Some are truly suffering, other are losing they privileges. It is their democratic right. But they and no one else must never suffer the consequences and for their families of a collapse. We must do everything so that there is no freeze in payments.”
The Greek vote was greeted by a sense of relief in Europe’s capital cities, who have been fretting about the impact of a potential Greek default both on their banking systems and on the future of the euro currency itself.
“That’s really good news,” German Chancellor Angela Merkel said when told of the outcome of the vote on her way out of an economic forum in Berlin. Germany is Greece’s biggest creditor.
Equally, relief was the main response in markets too. Soon after the vote, the euro was trading at a fairly elevated level around the $1.44 mark while stock markets around the world were posting big gains.
In Greece, the main Athens stock market closed up 0.5 percent at 1,264, while borrowing costs eased some 80 basis points from a morning high, with the yield on 10-year bonds settling at the still high 16.55 percent.
“The fact that the Greek parliament has passed the government’s medium-term fiscal plan clearly reduces the chances of a near-term disaster,” said Ben May, European economist at Capital Economics.
The unpopular package of spending cuts and tax hikes passed by 155 votes to 138, with five opposition deputies voted “present” — a vote which backs neither side.
A sole deputy from the governing socialists, Panayotis Kouroublis, dissented over government plans to sell a further stake in Greece’s state electricity company and was soon expelled from the parliamentary group by Papandreou.
In a dramatic vote, socialist deputy Alexandros Athanassiadis, who had previously vowed to vote against the bill, overturned his decision at the last minute and backed the package, saying he had been swayed by the prime minister’s comments in parliament.
A conservative deputy broke ranks with her party’s line to also vote in favor, bolstering the government’s majority of five seats in the 300-member parliament.
In the run-up to the vote, violence engulfed the square outside for the second day, while services across the country ground to a halt in the last day of a 48-hour general strike. Riot police fired volleys of tear gas at swarms of young men who were hurling rocks and other debris as well as setting fire to trash containers.
After a lull in the fighting around the time of the vote, the riot started up again with intensity.
Protesters threw flares and orange and green smoke bombs, and a few sprayed fire extinguishers at police, who picked up rocks and tossed them back. Heavy clouds of tear gas wafted over the chaotic scene in front of parliament.
Thousands of Greeks arrive at the Parliament’s building to press their representatives to reject the new austerity package.
Reuters
June 28, 2011
Anti-austerity protests turned violent in Athens on Tuesday as the European Union warned Greek lawmakers the country faces immediate default unless they back an unpopular economic plan this week.
Hooded youths throwing stones and wielding sticks set fire to garbage bins and a telecoms truck outside parliament and riot police fired teargas to disperse them. Trade unions began a 48-hour strike against the EU/IMF-imposed measures.
Progress was meanwhile reported in talks to persuade European banks and insurers to voluntarily roll over maturing Greek debt under a planned second rescue package designed to give the euro zone country a breathing space.
Growing market confidence that the Greek parliament will approve the austerity program and that a French plan to roll over Greek sovereign bonds will help avert a default lifted global stocks and the euro despite the mayhem in Athens.
The EU’s top economic official, Olli Rehn, stressed that any further assistance for the debt-crippled nation hinged on parliament adopting a raft of spending cuts, tax rises and privatizations in crucial votes on Wednesday and Thursday.
“The only way to avoid immediate default is for parliament to endorse the revised economic program … They must be approved if the next tranche of financial assistance is to be released,” he said in a statement.
“To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default,” Rehn said, dismissing widespread reports that Brussels was working on a fallback plan to keep Greece afloat.
The blunt alternative was underscored by Bank of England Governor Mervyn King, who told British parliamentarians that policymakers were working on ways to limit the damage from a potential default on Greece’s 340 billion euro debt pile.
“What we’re doing is to say there is sufficient concern in the market about the possibility of default for us to think about contingency plans and the consequences of this event,” King said.
He urged greater transparency about sovereign exposures to prevent a sudden, broad-based loss of confidence in European banks in the event of a Greek default, which could trigger a new credit crunch.
By nightfall, several hours of clashes involving hundreds of youths had subsided and central Athens had been reclaimed by thousands of peaceful protesters denouncing measures they say hit salaried workers and the unemployed while sparing the rich.
Some 5,000 police were drafted in, mostly to protect the colonnaded parliament building on Syntagma Square, focal point of weeks of mass demonstrations, some modeled on the encampment of unemployed Spanish “indignados” in Madrid.
ROLLOVER PROGRESS
The EU and IMF have said Greece must enact both the five-year austerity plan, with 28.6 billion euros in savings, and key implementing laws for structural reforms and state asset sales to secure the next 12 billion euro slice of aid in July.
Without that, Athens would run out of money within weeks unless it received some outside lifeline.
Risk premia on lower-rated euro zone government debt fell on news that German banks had agreed in principle to use a French proposal as a basis for negotiating private-sector participation in a Greek debt rollover.
The euro also hit a session high against the dollar, with fears of a Greek default offset by signs that European authorities and banks are making progress on a debt rollover.
Prime Minister George Papandreou’s Socialists hold a narrow majority with 155 seats in the 300-member legislature, but a handful of lawmakers have defected and others are threatening to vote against some or all of the measures, putting the outcome in doubt.
One possible scenario that could cause trouble would be if parliament approved the five-year austerity plan but voted down some of the implementing bills, for example on privatizations.
Conservative opposition leader Antonis Samaras underlined his opposition to the economic plan despite massive pressure from fellow center-right European leaders to back it.
“This policy is wrong, it has exhausted the Greek people and Greek society,” he told parliament. “If we perpetuate this mistaken policy we will only make things worse, both for Greece and for Europe.”
If Greece approves the legislation, euro zone finance ministers meeting in Brussels on Sunday are likely to agree to release the next aid tranche, with the IMF following on July 5.
Attention will then switch to putting together a second rescue package for Greece of about the same magnitude as the initial 110 billion euro bailout agreed last year.
The new program would involve some 30 billion euros in private sector participation via a “voluntary” rollover of maturing debt, a similar sum from privatization revenues and an expected 55 billion euros in new official funding.
Euro zone banks and insurers are considering a French plan outlined by President Nicolas Sarkozy on Monday under which private bondholders would reinvest half of the proceeds of maturing Greek debt in new 30-year bonds paying 5.5 percent interest plus a bonus linked to Greece’s GDP growth rate.
Of the other half, 30 percent would be cashed out and 20 percent would be invested in zero-coupon AAA securities with deferred interest that might be issued or guaranteed by the euro zone rescue fund, officials and banking sources said.
French banks have the largest foreign private sector exposure to Greece, followed by Germany.
Two sources close to the negotiations told Reuters that German banks had agreed to use the “French model” as a basis for talks with the German Finance Ministry on Thursday. German Deputy Finance Minister Joerg Asmussen also called the French plan a good basis for discussions.
Credit ratings agencies withheld comment pending details of the scheme.
Standard & Poor’s said on Monday it was too soon to judge the ratings impact of the private debt rollover being put together for Greece, which it had not yet seen, but did not rule out avoiding a downgrade to default.
Asked if he could imagine a solution in which private creditors voluntarily contributed to a Greek rescue package without triggering an S&P downgrade, Moritz Kraemer, head of European sovereign ratings, told Austrian television:
“It is conceivable depending on the situation. That is why I say it is not possible at all to draw a final conclusion on this in the current situation.”
In Berlin, visiting Chinese Prime Minister Wen Jiabao said Beijing had faith in the European economy and the euro and was optimistic that Europe could overcome its temporary challenge.
As in the past, he gave a vague commitment to buying euro zone debt without specifying countries or amounts.
According to Max Keiser, people of the kinds of Forbes are already in Greece to get its assets for pennies on the Euro.It is now clear the rest of the countries will come next. That is the plan.
Reuters
June 18, 2011
A restructuring of Greece’s 340 billion euro ($481.5 billion) debt is not on the agenda and would damage the country’s credibility on bond markets, the European Union’s internal markets commissioner said on Saturday.
Forcing Greece’s private creditors to take part in an upcoming aid package would count as a restructuring and is not being considered either, Michel Barnier told Europe 1 radio.
“This question of a restructuring … is not on the table,” he said. “It would only postpone the problem and in the wake of a restructuring Greece would face exactly the same difficulties and would no longer have any credibility to borrow.”
Greece’s embattled prime minister on Friday sacrificed his finance minister to force through an unpopular austerity plan and avert bankruptcy, while EU powers Germany and France promised to go on funding Athens.
Citing German and French backing for a plan to involve private bondholders such as banks on a purely voluntary basis, Barnier said: “To impose an effort would be to acknowledge a restructuring and that is not on the agenda.”
Describing Greece as a country that had been badly run and had lived above its means, Barnier said the solution was a “collective” effort to successfully thrash out the details of a new rescue plan in the coming weeks.
“We don’t have the right to draw blank cheques on the back of future generations,” he said. “The work is to continue over the coming weeks.”
Bond markets remain spooked by fears of a Greek default and most economists are overwhelmingly sceptical that Greece can ever repay its debts in full.
