Greece Outside In: 07/19/13

Friday, July 19, 2013

Greek deputies approve bill for new state broadcaster

Greek lawmakers on Friday narrowly approved a bill outlining a new public TV and radio network, more than a month after the government's shutdown of state broadcaster ERT.

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Merkel Begins Beach-Stop Campaign Tour on Former Whaling Station

Wall Street Journal

Merkel Begins Beach-Stop Campaign Tour on Former Whaling Station
Bloomberg
Chancellor Angela Merkel took her election campaign to a former whaling station in the North Sea, offering holidaymakers a pared-down version of her platform as she set out on a six-stop campaign tour of German beach resorts. Addressing a crowd of about ...
Germany 'not a surveillance state', says Angela MerkelTelegraph.co.uk
German Chancellor Merkel renews calls for Morsi's releaseAhram Online
US spy claims hit German relations: MerkelThe Australian
Independent Online -RTT News -gulfnews.com
all 47 news articles »

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Greek Lawmakers Approve Bill to Establish New State Broadcaster

Greek Lawmakers Approve Bill to Establish New State Broadcaster
Bloomberg
The government of Greek Prime Minister Antonis Samaras was shaken last month after the departure of the Democratic Left party, one of two coalition partners, because of a decision to shut down and suspend 2,600 jobs at ERT and create a new, smaller ...

and more »

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Merkel Downplays Rumors of Second Greek Writeoff

Voice of America

Merkel Downplays Rumors of Second Greek Writeoff
Voice of America
LONDON — German Chancellor Angela Merkel has played down speculation that Greece could get a second debt writedown, saying that could destabilize the eurozone. But some analysts say a debt writedown might be exactly what's needed to keep the ...
Germany's Merkel suggests 2nd Greek debt writedown could undo work to ...Fox News
Germany's Merkel Warns New Greek Writedown Would Risk Market TurmoilWall Street Journal
Germany's Merkel: Don't See Another Greek Debt HaircutMNI News
RTT News -Capital.gr (press release)
all 46 news articles »

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FTSE 100 fades at end of positive week, with Arm lower after poor US technology updates

Disappointing results from Microsoft and Google take shine off market buoyed by Bernanke QE comments

A week when the US market reached new peaks ended on a more cautious note after disappointing results from a number of major technology companies.

Markets have been buoyant in recent days as the US Federal Reserve chairman Ben Bernanke suggested to Congress that any slowdown in its $85bn a month bond buying programme was not likely in the immediate future and would depend on the state of the world's largest economy. On top of that came positive results from healthcare groups and banks including Citigroup and Morgan Stanley.

But then Intel, Microsoft and Google all produced results below expectations, which took some of the shine off the week. Microsoft fell around 10% in early trading on Friday and Google nearly 4%, while the poor figures put UK technology companies under pressure, with Arm losing 23.5p to 897.5p ahead of the chipmaker's results next week.

Overall the FTSE 100 finished the day at 6630.67, down 3.69 points but up 86 points on the week. Investors shrugged off the continuing problems in the eurozone, with political uncertainty in Portugal and Spain, and continuing protests in Greece against the cutbacks agreed as part of the country's bailout agreement.

Mining shares had been supported for much of the week by Chinese data which showed GDP growth of 7.5% in the second quarter, in line with forecasts, and by a number of positive production updates. But on Friday profit takers moved in, leaving Rio Tinto 31p lower at 2917.5p and BHP Billiton down 11.5p at 1869.5p.

Among the day's risers IMI added 28p to £14 as Citigroup named the engineer as one of its most preferred stocks. It said:

We see further significant margin upside at IMI, driven by both mix and restructuring. A strong balance sheet and yield are both supportive, too.

National Grid climbed 10p to 774.5p as New York State - where the company has operations - forecast a surge in electricity usage as air conditioners were switched on during the current heatwave.

But Standard Life slipped 5.4p to 385p after rival Aviva, up 0.3p at 372.3p, poached one of its senior executives.

Euan Munro is joining as chief executive of Aviva Investors, which has £274bn assets under management, and leaving his position in the investments division of Standard Life. Aviva was also helped by a positive recommendation from Morgan Stanley:

Aviva is in the earlier stages of its balance sheet repair process. We believe that as it works to improve the fungibility of cash back to the centre in the medium-term the dividend can grow faster than earnings – driving a re-rating.

Among the mid-caps, software group Micro Focus International fell 8p to 759p after disappointing results from SAP. Analyst Roger Phillips at Sanlam Securities said:

The problem area remains Asia-Pacific, where revenues declined by 15% in headline terms. The main exposure within our coverage universe to Asia (Japan specifically) is Micro Focus (sell, target price:600p) with around 15% of group revenues from this region, due to the group being the number two player in the Cobol industry against Fujitsu. SAP and Micro Focus are both "horizontal" enterprise software players addressing multiple vertical markets and so we see some degree of read across. Micro Focus commented that Japan had been challenging at its full year results in June, and the year on year comparative for the first half of 2014 is extremely tough due to a one-off licence fee of $4m that buoyed up the first half of 2013. As a result, we see this as a weak spot that could get weaker for Micro Focus.

Defence group Chemring closed 22.9p lower at 298.2p after UBS moved from buy to neutral and cut its price target from 360p to 330p. Analyst Charles Armitage said:

We believe the implementation of the restructuring plan by the new management team is likely to drive an improvement in Chemring's profitability and cash flow, despite the headwinds from tough defence markets. We estimate there is further upside of around £5m-£10m to earnings, above the targeted £10m cost savings, from an improvement in execution across the businesses.

We are concerned about the continued uncertainty on the short term outlook for US defence budgets as sequestration has not been fully implemented. This presents a challenge to management efforts to restructure Chemring in the short term because of the short cycle nature of many of Chemring's businesses.

Finally Sirius Minerals had a bad week, with its shares subsiding 4p to 18.5p on Friday to make a 33% fall since Monday. The company wants to mine for polyhalite, a potash salt, on the North York Moors national park, but has been forced to delay seeking planning approval while it deals with growing environmental objections. An independent report by consultants at Amec was finally published, which said there was no economic benefit from the proposed development. Sirius objected, saying the report made no mention of the jobs to be created and the prospect of sales to China. But analysts at SP Angel said:

This is quite a damning review from Amec and the basis for their criticism seems to be the lack of an economic case for polyhalite – something we have been saying for some time.

There has also been a lack of clarity and certain degree of complacency from the company on the planning process where they have not been explicit that they need to demonstrate a fundamental requirement to show an exceptional need for this project because of being sited in a national park. The environmental impact assessment is also found to be lacking in fundamental baseline information.

There remains a lot of work to be done to convince the regulators with some basic work found lacking so far.

Nick Fletcher

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We Germans don't want a�German Europe

Germany has no taste for shaping others in its image – but we want a European Union that can compete

Where do we in Europe stand today? Three years after the start of the first assistance programme for Greece, and about three months after we agreed on a programme for Cyprus, the picture is mixed. On the plus side, there are many encouraging signs from the crisis-hit countries in the eurozone. Labour markets and social security systems are being reformed; public administration, legal structures and tax regimes are being modernised. These efforts are already bearing fruit. There is more competitiveness. Economic imbalances are shrinking. Investor confidence is returning.

Institutional improvements in Europe have increased the likelihood of sound budgets in future years. We have introduced more binding fiscal rules, brakes on national debt and a robust crisis-resolution mechanism that gives us time to pursue the necessary reforms. The next step is the banking union, which will further reduce risk, both for the financial sector itself and for taxpayers. Our efforts to regulate financial markets will ensure that those who make high-risk investment decisions are liable for any ensuing losses. In other words, we are restoring the link between opportunity and risk.

But there is also a negative side. There is widespread uncertainty among people in our countries. Young people in parts of Europe face a dearth of opportunity. People are losing their jobs because their country is undergoing a profound economic transition. And too often public discourse about the crisis is dominated by mutual recriminations and populist commentary. National clichés and prejudices, which we believed to be long overcome, are rearing their ugly heads again.

This debate is full of contradictions, not least where Germany's role in tackling the crisis is concerned. There is little consensus in Europe, either about what Germany is doing or about what it should be doing. Some commentators even claim that the notorious "German question" is back. It has been said that Germany is "too strong" to fit in, but also that it is "too weak" to lead the continent. Germany has been simultaneously accused of wanting to reshape Europe in its own image and of refusing to show any leadership. And even those calling for more German leadership seem to be doing so for contradictory reasons. Some want Germany to drop its resistance to debt-financed stimuli, claiming that this would help us to overcome the crisis. Others want even more fiscal solidity in exchange for Germany's solidarity.

The views on Germany's actual policies are no less contradictory. For example, voices outside the country have called for Germany to relax its "draconian" austerity policies while, in Germany, the government has been accused of not saving nearly enough, or even at all. As is so often the case, the truth is somewhere in between. We are working to achieve a reasonable degree of consolidation, to build confidence and thus to lay the foundations for sustainable growth in Germany and in Europe as a whole.

The idea that Europe should be – or even can be – led by a single country is wide of the mark. Germany's restraint does not just reflect the burden of its history. The truth is that the unique political structure that is Europe does not lend itself to a leader–follower dynamic. Europe signifies the equal coexistence of its member states. At the same time, however, Germany does feel a special responsibility towards the mutually agreed strategy for resolving the crisis in the eurozone. We are taking on this leadership responsibility in a spirit of partnership, especially with our French friends. Like the other countries in the eurozone, both big and small, we know how fundamentally important it is to co-ordinate our efforts closely if we want to overcome the crisis.

From the very beginning of the crisis we Europeans have pursued a joint strategy. This strategy aims to achieve the overdue consolidation of public budgets. But even more, it aims to overcome economic imbalances by improving the competitiveness of all eurozone countries. This is why the adjustment plans for countries that are receiving financial support call for fundamental structural reforms that aim to put them back on track towards long-term growth and thus secure sustainable prosperity for all. Sound public finances create confidence.

But sound public finances are not enough to ensure sustainable growth. In addition, we need to reform and modernise our labour markets, our welfare state, and our legal and tax systems. We have to make sure that all citizens of Europe enjoy working and living conditions that are not based on artificial growth bubbles.

These reforms will not take effect overnight. We Germans know this better than anyone. Ten years ago Germany was the "sick man of Europe". We had to tread a long and painful path to become today's engine of growth and anchor of stability in Europe. We too had extremely high levels of unemployment, even long after we started to adopt urgently necessary reforms. But without these reforms there can be no sustainable growth. Stimulus programmes based on even more government debt will only shift higher burdens on to our children and grandchildren, and will have no lasting benefits.

To create new jobs in Europe, we need businesses that offer innovative and attractive products that people want to buy. European companies can do this only if governments create the right conditions to help companies to achieve success in our increasingly globalised world. That applies not just to German businesses, but to French, British, Polish, Italian, Spanish, Portuguese and Greek companies as well.

The idea that Germans want to play a special role in Europe is a misunderstanding. We do not want a German Europe. We are not asking others to be like us. This accusation makes no more sense than the national stereotypes that lurk behind such statements. The Germans are joyless capitalists infused with the Protestant work ethic? In fact, some economically successful German regions are traditionally Catholic. The Italians are all about dolce far niente (delicious idleness)? The industrial regions in northern Italy would not be the only ones to bristle at that. All of northern Europe is market-driven? The Nordic welfare states, with their emphasis on social solidarity and income redistribution, certainly do not fit this caricature.

Those who nurture such stereotypes should look at recent surveys that show a clear majority of people – not just in northern Europe, but also in the south – in favour of combating the crisis through reforms, public spending cuts and debt reduction.

The Germans themselves are the last people who would want to put up with a German Europe. We want to put Germany at the service of the European community's economic recovery – without weakening Germany itself. That would not be in anybody's interests. We want a Europe that is strong and competitive, a Europe where we plan our budgets sensibly, and where we do not pile up more and more debt.

The key task is to create conditions that are conducive to successful economic activity, in the context of global competition and demographic trends that pose a challenge for the whole of Europe. None of these things are German ideas. They are the tenets of forward-looking policies.

Sound fiscal policies and a good economic environment are the only ways to gain the confidence of investors, businesses and consumers and thus achieve sustainable growth. All international studies confirm this, as do the European Central Bank, the European commission, the OECD and the International Monetary Fund – organisations headed, incidentally, by an Italian, a Portuguese, a Mexican and a Frenchwoman respectively.

And the policies of European governments are geared towards these objectives. Those European countries currently grappling with complex adjustment processes deserve our highest appreciation for the way they are reforming their labour markets and social security systems, modernising their administrative structures, legal systems and tax systems, and consolidating their budgets. We should have the deepest respect for the efforts they are making. Our reward – everyone's reward – will be a strong and competitive Europe.

Wolfgang Schäuble

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Greece Portugal Stuck With Failed Austerity

Greece's austerity program is satisfying international lenders but it has also created record rates of unemployment, homelessness and suicides. Once again a fragile Greek government has pushed delayed reforms through Parliament at the behest of the European Union and the IMF even as angry protesters in the square outside demand its resignation. At stake was a desperately needed EUR6.8 ...