Sources: AFP, Bloomberg
The U.S. House of Representatives, in conjunction with the Bush Administration, has passed an “economic stimulus package” in an attempt to jumpstart the struggling US economy. The final vote tally in the House was 385-35, with wide bipartisan support. Nevertheless, the bill is expected to face some difficulty in making it through the U.S. Senate. House Speaker Nancy Pelosi (D-CA), along with President Bush, has encouraged the Senate to pass the measure. The Senate has a counter-proposal, which may slow down the bipartisan and compromise measure that has passed through the House.
The plan is a $146 billion package, intended to jumpstart the economy. This will be done by cutting taxes and sending rebate checks to over one hundred million US taxpayers. Individuals could receive up to $600 per person, with $1,200 for couples, and $300 per child for families. Furthermore, there are additional measures in the package to alleviate the mortgage crunch. Critics of the plan include Hillary Clinton and some Democratic lawmakers in the House. Senator Clinton would like to include additional measures for transportation projects, and Representative Jim Cooper balked at the measure because it continues to roll up debt. Moreover, other critics contend that the bill gives more tax rebates to higher income earners. Senator Harry Reid, Democratic leader in the Senate, has stated “We should not spend an extra $5 billion so I can get a rebate. Warren Buffet should not receive a rebate.”
Question: Will the tax rebate be enough to stimulate the sagging economy? How will such a bill survive in the Senate?
Wednesday, January 30, 2008
Japan To Securitize
Sources: FT, Bloomberg
Japan is prepared to sell over 100 billion yen (US$ 963 million) of government-backed bonds to state agencies in order to alleviate some of the public debt load. This is part of a broader plan to eventually “securitize” nearly 400 billion yen (US$ 3.74 billion) to hospitals, schools, and other government agencies. This scheme is aimed at shrink government assets by 140 trillion yen, and to cut debt in half by 2015. Japan currently holds 707 trillion yen in assets—including 233 trillion yen of government-backed loans. Japan has some of the highest proportion of assets to GDP.
The bonds will be priced sometime between the 22nd and 25th of February, and analysts predict the price will be “key.” A slowing economy requires a “higher premium” on these bonds. Nevertheless, S&P has rated the bonds AAA (the highest rating), and other pundits believe that this process will be highly attractive. John Richards, of the Royal Bank of Scotland, predicts that these bonds would be “well-received” because of the “scarcity of [attractive] bonds in Japan. Japan is likely keen to securitize some of its assets because this will allow for better refinancing of the national debt at lower interest rates.
Question: If the bond prices are too low, how will the Japanese government cope with less than expected demand? Furthermore, Japan was one of the latecomers to the “securitization” movement. Why might that be?
Japan is prepared to sell over 100 billion yen (US$ 963 million) of government-backed bonds to state agencies in order to alleviate some of the public debt load. This is part of a broader plan to eventually “securitize” nearly 400 billion yen (US$ 3.74 billion) to hospitals, schools, and other government agencies. This scheme is aimed at shrink government assets by 140 trillion yen, and to cut debt in half by 2015. Japan currently holds 707 trillion yen in assets—including 233 trillion yen of government-backed loans. Japan has some of the highest proportion of assets to GDP.
The bonds will be priced sometime between the 22nd and 25th of February, and analysts predict the price will be “key.” A slowing economy requires a “higher premium” on these bonds. Nevertheless, S&P has rated the bonds AAA (the highest rating), and other pundits believe that this process will be highly attractive. John Richards, of the Royal Bank of Scotland, predicts that these bonds would be “well-received” because of the “scarcity of [attractive] bonds in Japan. Japan is likely keen to securitize some of its assets because this will allow for better refinancing of the national debt at lower interest rates.
Question: If the bond prices are too low, how will the Japanese government cope with less than expected demand? Furthermore, Japan was one of the latecomers to the “securitization” movement. Why might that be?
Tuesday, January 29, 2008
IMF warns of global slowdown
Source: IMF slashes US growth forecast
In a somewhat expected turn of events, the IMF slashed its optimistic forecast of a US growth and warned that no country is immune from a “global slowdown.” The Fund announced that global growth would fall from 4.7% in 2007 to a mere 4.1% in 2008, an entire 0.3 percentage points lower than its forecast in October. US growth will fall from 2.2% in 2007 to 1.5% in 2008, while the eurozone will slow from 2.6% to 1.6%.
IMF chief economist Simon Johnson said that emerging markets will continue to be an “engine of global growth” but expects that these, too, will slow, with expected growth decreasing from 7.8% in 2007 to 6.9% in 2008. He also stated that “reports of decoupling have been greatly exaggerated” and that because the US slowdown is spilling over into Europe, the fate of linked economies will largely depend on the US. “It is going to be a story of how are you linked to the US and to what extent can your policies deal with the repercussions.” Johnson projects that emerging markets will feel the effects of classic “trade linkages” but will remain insulated from “financial linkages.” European markets, however, will feel the effect of both trade and financial linkages.
Johnson warned that all economies need to remain “alert to signs of a sharper global downturn” and that nations with sound structural positions should be prepared “to apply counter-cyclical policies if conditions warrant.” He defended the European Central Bank’s decision not to cut the interest rate, stating that there was a serious risk that such a cut would result in “second round” effects on wage and prices in the eurozone. In addition, although house prices continue to decline in the UK, Spain and Ireland, he said there is no evidence that these economies will suffer a US-style housing bust in the near future.
Questions for Discussion
1. If the US is unable to avoid an arguably inevitable recession, how extensive is the worldwide ‘ripple effect’ likely to be? To what degree, if any, did the European Central Bank’s decision to stay the interest rate insulate them from the effects of a US recession?
In a somewhat expected turn of events, the IMF slashed its optimistic forecast of a US growth and warned that no country is immune from a “global slowdown.” The Fund announced that global growth would fall from 4.7% in 2007 to a mere 4.1% in 2008, an entire 0.3 percentage points lower than its forecast in October. US growth will fall from 2.2% in 2007 to 1.5% in 2008, while the eurozone will slow from 2.6% to 1.6%.
IMF chief economist Simon Johnson said that emerging markets will continue to be an “engine of global growth” but expects that these, too, will slow, with expected growth decreasing from 7.8% in 2007 to 6.9% in 2008. He also stated that “reports of decoupling have been greatly exaggerated” and that because the US slowdown is spilling over into Europe, the fate of linked economies will largely depend on the US. “It is going to be a story of how are you linked to the US and to what extent can your policies deal with the repercussions.” Johnson projects that emerging markets will feel the effects of classic “trade linkages” but will remain insulated from “financial linkages.” European markets, however, will feel the effect of both trade and financial linkages.
Johnson warned that all economies need to remain “alert to signs of a sharper global downturn” and that nations with sound structural positions should be prepared “to apply counter-cyclical policies if conditions warrant.” He defended the European Central Bank’s decision not to cut the interest rate, stating that there was a serious risk that such a cut would result in “second round” effects on wage and prices in the eurozone. In addition, although house prices continue to decline in the UK, Spain and Ireland, he said there is no evidence that these economies will suffer a US-style housing bust in the near future.
Questions for Discussion
1. If the US is unable to avoid an arguably inevitable recession, how extensive is the worldwide ‘ripple effect’ likely to be? To what degree, if any, did the European Central Bank’s decision to stay the interest rate insulate them from the effects of a US recession?
Plan to guard UK savings
Source: Post-Rock revamp to guard savings
In the aftermath of the Northern Rock collapse, UK lenders face the real possibility of having to put billions of pounds into a new system designed to guard and compensate individuals in the event of a banking collapse. Chancellor Alistair Darling will launch a three-month consultation on legislation that includes, among other things, the idea that banks fund the compensation scheme for depositors in advance.
This plan is very unpopular with banks because it forces them to create a significant compensation fund when existing capital is incredibly tight. Mr. Darling admits that the plan has “significant disadvantages. ” One banking executive described the plan as “a very significant IOU the government is handing to the banking sector.” MPs on the Treasury select committee feel banks should pre-fund the scheme to reassure customers and immediately compensate them in the event of a banking collapse. An alternate plan would allow banks to retain the “pay as you go” approach where banks rely on loans to finance compensation in the event of a collapse.
Mr. Darling’s consultation will consider whether the current level of compensation (100% for the first £ 35,000) should be extended to include sums as high as £ 100,000. Banks want to keep the figure at £ 35,000, reasoning that this amount will cover approximately 97% of consumers.
In addition, the consultation plan includes requiring banks to have a system in place to inform the Financial Services Authority at “short notice” of their liquidity situation. In the event that a bank is failing, there are proposals for a banking insolvency regime that will allow authorities to remove the failing bank from the market, protecting depositers’ money and redistributing parts of the failing business to another bank.
Questions for discussion
1. Is a prefunded compensation plan the best idea, or does it place too large of a burden on an already strained banking industry?
In the aftermath of the Northern Rock collapse, UK lenders face the real possibility of having to put billions of pounds into a new system designed to guard and compensate individuals in the event of a banking collapse. Chancellor Alistair Darling will launch a three-month consultation on legislation that includes, among other things, the idea that banks fund the compensation scheme for depositors in advance.
This plan is very unpopular with banks because it forces them to create a significant compensation fund when existing capital is incredibly tight. Mr. Darling admits that the plan has “significant disadvantages. ” One banking executive described the plan as “a very significant IOU the government is handing to the banking sector.” MPs on the Treasury select committee feel banks should pre-fund the scheme to reassure customers and immediately compensate them in the event of a banking collapse. An alternate plan would allow banks to retain the “pay as you go” approach where banks rely on loans to finance compensation in the event of a collapse.
Mr. Darling’s consultation will consider whether the current level of compensation (100% for the first £ 35,000) should be extended to include sums as high as £ 100,000. Banks want to keep the figure at £ 35,000, reasoning that this amount will cover approximately 97% of consumers.
In addition, the consultation plan includes requiring banks to have a system in place to inform the Financial Services Authority at “short notice” of their liquidity situation. In the event that a bank is failing, there are proposals for a banking insolvency regime that will allow authorities to remove the failing bank from the market, protecting depositers’ money and redistributing parts of the failing business to another bank.
Questions for discussion
1. Is a prefunded compensation plan the best idea, or does it place too large of a burden on an already strained banking industry?
Sunday, January 27, 2008
U.S.-inspired aggression toward Venezuela denounced
SOURCE: 2001com.ve—“Ortega advierte a Colombia que ALBA responde si ‘toca’ a Venezuela”
Nicaraguan President Ortega joined Venezuela’s President Chavez this week on his radio and television program, “Alo Presidente”, in denouncing United States-incited Colombian aggressions directed towards Venezuela.
Ortega stated that “To touch Venezuela is to ignite the region. We will not stand by.” He also asserted that members of Alternativa Bolivariana para la Americas, or ALBA should unite their military strategies and defense forces to protect against manipulation by the United States. He promised that members of ALBA would assist Venezuela in responding if Colombia attacks.
ALBA, whose members include Venezuela, Cuba, Nicaragua, Bolivia, and the Dominican Republic, is Latin America’s answer to the United States-proposed Free Trade Agreement of the Americas, or FTAA. Concerns raised about the United States’ history of interference in Central American politics and economies sparked suggestions that ALBA’s alliance include not just trade, but military components.
Nicaraguan President Ortega joined Venezuela’s President Chavez this week on his radio and television program, “Alo Presidente”, in denouncing United States-incited Colombian aggressions directed towards Venezuela.
Ortega stated that “To touch Venezuela is to ignite the region. We will not stand by.” He also asserted that members of Alternativa Bolivariana para la Americas, or ALBA should unite their military strategies and defense forces to protect against manipulation by the United States. He promised that members of ALBA would assist Venezuela in responding if Colombia attacks.
ALBA, whose members include Venezuela, Cuba, Nicaragua, Bolivia, and the Dominican Republic, is Latin America’s answer to the United States-proposed Free Trade Agreement of the Americas, or FTAA. Concerns raised about the United States’ history of interference in Central American politics and economies sparked suggestions that ALBA’s alliance include not just trade, but military components.
South Africa reeling from energy crisis
Source: The Sydney Morning Herald—“South Africa Declares Energy Emergency”
South Africa, the continent’s largest economy, has spent the last two weeks suffering from an energy shortage causing rolling blackouts throughout the country and all but crippling major industries, including the nation’s gold mines.
South Africa recently announced that it considers the problem an “electricity emergency” and plans to begin rationing energy, instituting quotas, and shifting to solar power. In the meantime, the emergency threatens not only the economy of South Africa, but also neighboring nations such as Botswana and Namibia that rely on energy exports from South Africa.
Officials have asserted that the problem finds it source in the surge in demand for energy in South Africa's growing economy. At the same time, they expect that energy prices will increase as much as 14% this year and again next year. High energy costs could be as detrimental to the South African economy as a shortage of energy.
South Africa, the continent’s largest economy, has spent the last two weeks suffering from an energy shortage causing rolling blackouts throughout the country and all but crippling major industries, including the nation’s gold mines.
South Africa recently announced that it considers the problem an “electricity emergency” and plans to begin rationing energy, instituting quotas, and shifting to solar power. In the meantime, the emergency threatens not only the economy of South Africa, but also neighboring nations such as Botswana and Namibia that rely on energy exports from South Africa.
Officials have asserted that the problem finds it source in the surge in demand for energy in South Africa's growing economy. At the same time, they expect that energy prices will increase as much as 14% this year and again next year. High energy costs could be as detrimental to the South African economy as a shortage of energy.
Monday, January 21, 2008
Kenya: Post-Election Violence Sparks Humanitarian, Economic Crisis
Sources:
The New Vision (Uganda): “Economic Impact of Kenya Crisis”
Associated Press: “Kikuyus and Luos Clash in Nairobi Slum as Kenyan Turmoil Persists”
Voice of America: “Kenya Crisis—Thousands Flee to Uganda”
Reuters: "Kenya Poll Delay Sparks Ethnic Violence"
Kenya has long been considered among the largest, most stable, and vibrant economies on the African continent. However, a recent humanitarian crisis has been sparked by political and ethnic violence that has killed six hundred people, turned thousands more into refugees, and is threatening the Kenyan economy.
At the heart of this conflict is the contested election of Mwai Kibaki of the Party of National Unity (PNU). Opposition leader Raila Odinga and his supporters, who form the Orange Democratic Movement (ODM) claim the election was stolen. They point to delays in the vote count that resulted in an almost miraculous comeback by Kibaki and the fact that Odinga’s party swept the parliamentary elections as proof of this allegation.
Ethnic strife is also implicated as observers note that Kibaki, the incumbent and a member of the Kikuyu ethnic group, had used his powerful position to benefit the Kikuyu at the expense of other groups. Opposition leader Odinga is a member of the Luos ethnic group. Post-election strife has often pitted groups against each other, with whatever group happens to be in the minority in a particular area being targeted for violence. Thousands of refugees have already fled to Uganda.
Observers have expressed concern that this unrest, which has now continued for almost a month, could hurt tourism in Kenya, which is one of the cornerstones of that nation’s economy. Additionally, reports indicate that economic troubles spurred by post-election violence pose a regional threat. One report notes the adverse economic effects felt by Uganda at the inability to access the Kenyan port of Mombasa.
FOR DISCUSSION:
What role—if any—should multinational organizations as well as other countries play in crises like that currently unfolding in Kenya? Does assisting at the humanitarian level necessitate picking sides in this kind of dispute? Is it ethical to pick sides or would doing so be a slight against national sovereignty?
The New Vision (Uganda): “Economic Impact of Kenya Crisis”
Associated Press: “Kikuyus and Luos Clash in Nairobi Slum as Kenyan Turmoil Persists”
Voice of America: “Kenya Crisis—Thousands Flee to Uganda”
Reuters: "Kenya Poll Delay Sparks Ethnic Violence"
Kenya has long been considered among the largest, most stable, and vibrant economies on the African continent. However, a recent humanitarian crisis has been sparked by political and ethnic violence that has killed six hundred people, turned thousands more into refugees, and is threatening the Kenyan economy.
At the heart of this conflict is the contested election of Mwai Kibaki of the Party of National Unity (PNU). Opposition leader Raila Odinga and his supporters, who form the Orange Democratic Movement (ODM) claim the election was stolen. They point to delays in the vote count that resulted in an almost miraculous comeback by Kibaki and the fact that Odinga’s party swept the parliamentary elections as proof of this allegation.
Ethnic strife is also implicated as observers note that Kibaki, the incumbent and a member of the Kikuyu ethnic group, had used his powerful position to benefit the Kikuyu at the expense of other groups. Opposition leader Odinga is a member of the Luos ethnic group. Post-election strife has often pitted groups against each other, with whatever group happens to be in the minority in a particular area being targeted for violence. Thousands of refugees have already fled to Uganda.
Observers have expressed concern that this unrest, which has now continued for almost a month, could hurt tourism in Kenya, which is one of the cornerstones of that nation’s economy. Additionally, reports indicate that economic troubles spurred by post-election violence pose a regional threat. One report notes the adverse economic effects felt by Uganda at the inability to access the Kenyan port of Mombasa.
FOR DISCUSSION:
What role—if any—should multinational organizations as well as other countries play in crises like that currently unfolding in Kenya? Does assisting at the humanitarian level necessitate picking sides in this kind of dispute? Is it ethical to pick sides or would doing so be a slight against national sovereignty?
Bank of America and Countrywide
Sources: BBC, Wall Street Journal
Leading U.S. banking company, Bank of America, offered to purchase the US’s largest mortgage broker Countrywide earlier in January, for an estimated $4 billion. The recent mortgage crisis has hit Countrywide hard—Countrywide suffered a 44% drop in December, while suffering high levels of foreclosures. In August 2007, B of A invested $2 billion dollars. Countrywide shareholders will receive 0.1822 B of A shares per Countrywide share. This deal has been described as a “lifeline” for the besieged home mortgage lender, and is expected to close in the third quarter.
However, this deal has hit some snags. Details of the deal give Bank of America lots of freedom to walk away from the deal, and Countrywide’s shares dropped 10% on Friday on word that Bank of America may not complete the deal. Countrywide closed on Friday at $4.96, down from $5.48. Countrywide’s closing price on Friday was 24 percent less than the Bank of America offer prices, and now, some investment experts believe that the Countrywide deal will be renegotiated with lower share prices. Paul J. Miller Jr., an analyst at Friedman, Billings, Ramsey & Co., has stated that there may be renogiations if the mortgage market continues to fall and if Countrywide's losses exceed expectations. Neither entity has commented on the rumors.
Based on information from the public documents filed with the SEC, Bank of America has lots of room to walk away. Countrywide must have its 2007 financials audited, and there must be an "unqualified opinion" on the 2007 financials. There is also no contractual clause that would "force" Bank of America to purchase Countrywide. Furthermore, the contratual clause that allows Bank of America to walk away if there are "materially adverse changes" also gives Bank of America lots of room.
Other offers to purchase mortgage companies have already fallen through in 2007.
Question: If this deal falls through—and in light of other collapsed purchase offers for mortgage companies—what sort of impact will the general public see?
Leading U.S. banking company, Bank of America, offered to purchase the US’s largest mortgage broker Countrywide earlier in January, for an estimated $4 billion. The recent mortgage crisis has hit Countrywide hard—Countrywide suffered a 44% drop in December, while suffering high levels of foreclosures. In August 2007, B of A invested $2 billion dollars. Countrywide shareholders will receive 0.1822 B of A shares per Countrywide share. This deal has been described as a “lifeline” for the besieged home mortgage lender, and is expected to close in the third quarter.
However, this deal has hit some snags. Details of the deal give Bank of America lots of freedom to walk away from the deal, and Countrywide’s shares dropped 10% on Friday on word that Bank of America may not complete the deal. Countrywide closed on Friday at $4.96, down from $5.48. Countrywide’s closing price on Friday was 24 percent less than the Bank of America offer prices, and now, some investment experts believe that the Countrywide deal will be renegotiated with lower share prices. Paul J. Miller Jr., an analyst at Friedman, Billings, Ramsey & Co., has stated that there may be renogiations if the mortgage market continues to fall and if Countrywide's losses exceed expectations. Neither entity has commented on the rumors.
Based on information from the public documents filed with the SEC, Bank of America has lots of room to walk away. Countrywide must have its 2007 financials audited, and there must be an "unqualified opinion" on the 2007 financials. There is also no contractual clause that would "force" Bank of America to purchase Countrywide. Furthermore, the contratual clause that allows Bank of America to walk away if there are "materially adverse changes" also gives Bank of America lots of room.
Other offers to purchase mortgage companies have already fallen through in 2007.
Question: If this deal falls through—and in light of other collapsed purchase offers for mortgage companies—what sort of impact will the general public see?
Korea Railway Talks Stall
Sources: BBC, Bloomberg
Talks between North and South Korea regarding a national railway connecting the divided countries stalled. Officials in Pyong’yang sought a delay, claiming that “time constraints” and “lack of preparation” prevented useful talks. The talks were supposed to take place between Jan 22-23 in Gaesong.
South Korea has sought stronger ties with their Northern neighbors, and has seen some limited success. For example, in December 2007 a daily freight train service was launched between South Korea and the Kaesong Industrial Area in the North. South Korea has also requested passenger services to North Korea, but this offer has been rebuffed by Pyong'yang.
It is believed that North Korea suspended these talks in light of the new incoming president. North Korea is wary of the new president because he intends to conduct inter-Korea relations through the foreign ministry instead of the Unification ministry. New President Lee Myung Bak has also made some comments suggesting he will take a more tough stance against North Korea.
Question: How much will an inter-Korea railway service affect reunification efforts? Do you think President Lee, in light of his comments, can work with the North Koreans to promote peace and increased ties?
Talks between North and South Korea regarding a national railway connecting the divided countries stalled. Officials in Pyong’yang sought a delay, claiming that “time constraints” and “lack of preparation” prevented useful talks. The talks were supposed to take place between Jan 22-23 in Gaesong.
South Korea has sought stronger ties with their Northern neighbors, and has seen some limited success. For example, in December 2007 a daily freight train service was launched between South Korea and the Kaesong Industrial Area in the North. South Korea has also requested passenger services to North Korea, but this offer has been rebuffed by Pyong'yang.
It is believed that North Korea suspended these talks in light of the new incoming president. North Korea is wary of the new president because he intends to conduct inter-Korea relations through the foreign ministry instead of the Unification ministry. New President Lee Myung Bak has also made some comments suggesting he will take a more tough stance against North Korea.
Question: How much will an inter-Korea railway service affect reunification efforts? Do you think President Lee, in light of his comments, can work with the North Koreans to promote peace and increased ties?
Sunday, January 20, 2008
Ukraine reaches agreement aiding its WTO membership efforts
source: Ukraine steps closer to WTO entry
EU trade commissioner, Peter Mandelson, reached an agreement with the Ukraine to cap export duties on a number of products including metals, animal hides, live cattle and other agricultural goods. This agreement brings the Ukraine, a highly productive agricultural and steel economy, one step closer to joining the World Trade Organization. Once the EU and Ukraine negotiate a free trade agreement, export duties will cease. Until then, the Ukraine will not increase existing duties.
Prior to this agreement, the EU felt that export duties on metals constituted a hidden subsidy to Ukraine’s own metal-processing industry because it made it considerably more expensive to export the raw materials to metallurgical factories outside the country. This sentiment was problematic because WTO regulations allow a member country to block new members from joining if they refuse to make certain trade reforms.
The Ukraine may gain admission to the WTO as early as the first week of February at which time it would gain the power to demand concessions from Russia, who first applied for admission to the organization in 1993. The western integration efforts of Kiev President Viktor Yushchenko were derailed last year by the Moscow-leaning government of Viktor Yanukovich. However, these efforts, including plans to join the WTO, NATO and at some point in the future, are expected to resume under pro-western premier Yulia Tymoshenko. To date, Russia’s desire to join the WTO has been held up by objections from the EU and the US, particularly with respect to the implementation of laws protecting intellectual property rights. The US music and movie industry contend that counterfeiting is rampant in Russia and that the judicial system is both unable and unwilling to control it. Despite these barriers, Moscow aims to join the WTO by the middle of 2008, a goal Mandelson describes as “ambitious but doable.”
Mandelson also noted that farmers in member countries should not fear competition from Ukranian farmers. Although the Ukraine is one of the world’s largest wheat growers, Mandelson notes that “as far as wheat is concerned there is plenty of demand to go round at the moment.”
EU trade commissioner, Peter Mandelson, reached an agreement with the Ukraine to cap export duties on a number of products including metals, animal hides, live cattle and other agricultural goods. This agreement brings the Ukraine, a highly productive agricultural and steel economy, one step closer to joining the World Trade Organization. Once the EU and Ukraine negotiate a free trade agreement, export duties will cease. Until then, the Ukraine will not increase existing duties.
Prior to this agreement, the EU felt that export duties on metals constituted a hidden subsidy to Ukraine’s own metal-processing industry because it made it considerably more expensive to export the raw materials to metallurgical factories outside the country. This sentiment was problematic because WTO regulations allow a member country to block new members from joining if they refuse to make certain trade reforms.
The Ukraine may gain admission to the WTO as early as the first week of February at which time it would gain the power to demand concessions from Russia, who first applied for admission to the organization in 1993. The western integration efforts of Kiev President Viktor Yushchenko were derailed last year by the Moscow-leaning government of Viktor Yanukovich. However, these efforts, including plans to join the WTO, NATO and at some point in the future, are expected to resume under pro-western premier Yulia Tymoshenko. To date, Russia’s desire to join the WTO has been held up by objections from the EU and the US, particularly with respect to the implementation of laws protecting intellectual property rights. The US music and movie industry contend that counterfeiting is rampant in Russia and that the judicial system is both unable and unwilling to control it. Despite these barriers, Moscow aims to join the WTO by the middle of 2008, a goal Mandelson describes as “ambitious but doable.”
Mandelson also noted that farmers in member countries should not fear competition from Ukranian farmers. Although the Ukraine is one of the world’s largest wheat growers, Mandelson notes that “as far as wheat is concerned there is plenty of demand to go round at the moment.”
Russia defeats EU for new gas pipeline
Source: Russia trumps EU with new oil deal
In a deal signed Friday, Bulgaria and Russia reached an agreement to build a natural gas pipeline (South Stream) that will cross from Russia under the Black Sea to Bulgaria and then branch off to allow for delivery deeper in Europe. This agreement undercut a rival project (Nabucco) supported by the U.S. and the European Union.
The agreement required a great deal of concentrated negotiations on the part of Putin, who had to overcome Bulgaria’s wariness that the agreement gave Russia a disadvantageous influence. Russia initially insisted on a 51 percent stake in the project, but agreed to an equal sharing at the last minute to preserve the project.
Late this week it was not completely clear who Bulgaria would select. In a speech on Thursday, Bulgarian President Georgi Parvanov stated that his nation supported the EU’s efforts to diversify energy supply routes via Nabucco. After Parvanov’s speech, Putin, visibly annoyed, announced that Bulgaria was free to choose its direction but warned that is should make the decision which “works to its benefit.”
Gazprom, Russia’s state-controlled gas monopoly, set up a joint venture with Italy’s ENI SpA to develop a feasibility study for the 900 kilometer (550 mile), $10 billion pipeline. This pipeline is a direct rival to the Nabucco pipeline endorsed by the U.S. and the EU. Although ENI CEO Paolo Scaroni attempted to minimize the rivalry between South Stream and Nabucco, asserting that demand could necessitate both projects, it appears that Bulgaria took advantage of the clashing pipeline offers, choosing to side with Russia as opposed to the U.S. and EU. It is not clear if both projects will proceed, or if Nabucco will be abandoned.
In a deal signed Friday, Bulgaria and Russia reached an agreement to build a natural gas pipeline (South Stream) that will cross from Russia under the Black Sea to Bulgaria and then branch off to allow for delivery deeper in Europe. This agreement undercut a rival project (Nabucco) supported by the U.S. and the European Union.
The agreement required a great deal of concentrated negotiations on the part of Putin, who had to overcome Bulgaria’s wariness that the agreement gave Russia a disadvantageous influence. Russia initially insisted on a 51 percent stake in the project, but agreed to an equal sharing at the last minute to preserve the project.
Late this week it was not completely clear who Bulgaria would select. In a speech on Thursday, Bulgarian President Georgi Parvanov stated that his nation supported the EU’s efforts to diversify energy supply routes via Nabucco. After Parvanov’s speech, Putin, visibly annoyed, announced that Bulgaria was free to choose its direction but warned that is should make the decision which “works to its benefit.”
Gazprom, Russia’s state-controlled gas monopoly, set up a joint venture with Italy’s ENI SpA to develop a feasibility study for the 900 kilometer (550 mile), $10 billion pipeline. This pipeline is a direct rival to the Nabucco pipeline endorsed by the U.S. and the EU. Although ENI CEO Paolo Scaroni attempted to minimize the rivalry between South Stream and Nabucco, asserting that demand could necessitate both projects, it appears that Bulgaria took advantage of the clashing pipeline offers, choosing to side with Russia as opposed to the U.S. and EU. It is not clear if both projects will proceed, or if Nabucco will be abandoned.
Saturday, January 19, 2008
Can you say Si se puede in Portuguese?
Source: Inter Press Service, “DEVELOPMENT BRAZIL: Solidarity Economy Combats Exclusion
In Brazil, a company called Catende-Harmonia provides a model for economic projects that are driven by people, not profits. Originally a typical private enterprise focused on sugar production, the company began to experience financial difficulties in 1995. The workers’ union approached management and negotiated a deal wherein the company declared bankruptcy and was taken over by the workers. Now known as Catende-Harmonia, it maintains its sugar operations and has diversified to include other commodities through “a family farming system based on agricultural cooperatives.”
Now the largest worker-run company in Brazil, Catende-Harmonia is part of a growing trend that has been dubbed the “solidarity economy.” It has been successful and popular enough to merit government attention and support through the creation of Brazil’s National Secretariat for the Solidarity Economy and the Brazilian Solidarity Economy Forum (FBES) in 2003.
Experts assert that the support for a solidarity economy in Brazil stems from the struggle against unemployment in that country and the drive for a model of economic inclusion. The FBES states that one of the goals of the solidarity economic model is to make “human beings the active agents and the final purpose of economic activity, instead of private accumulation of wealth.”
FOR DISCUSSION:
Do you think innovations like the solidarity economic model in Brazil and microcredit in Bangladesh are stepping stones on the way to more traditional (read U.S.-style) economic systems or do you believe that these trends could be harbingers of a new approach to economics that could spread to developed nations?
In Brazil, a company called Catende-Harmonia provides a model for economic projects that are driven by people, not profits. Originally a typical private enterprise focused on sugar production, the company began to experience financial difficulties in 1995. The workers’ union approached management and negotiated a deal wherein the company declared bankruptcy and was taken over by the workers. Now known as Catende-Harmonia, it maintains its sugar operations and has diversified to include other commodities through “a family farming system based on agricultural cooperatives.”
Now the largest worker-run company in Brazil, Catende-Harmonia is part of a growing trend that has been dubbed the “solidarity economy.” It has been successful and popular enough to merit government attention and support through the creation of Brazil’s National Secretariat for the Solidarity Economy and the Brazilian Solidarity Economy Forum (FBES) in 2003.
Experts assert that the support for a solidarity economy in Brazil stems from the struggle against unemployment in that country and the drive for a model of economic inclusion. The FBES states that one of the goals of the solidarity economic model is to make “human beings the active agents and the final purpose of economic activity, instead of private accumulation of wealth.”
FOR DISCUSSION:
Do you think innovations like the solidarity economic model in Brazil and microcredit in Bangladesh are stepping stones on the way to more traditional (read U.S.-style) economic systems or do you believe that these trends could be harbingers of a new approach to economics that could spread to developed nations?
Sunday, January 13, 2008
Eastern European Population to Dramatically Decrease In Future
Source: BBC News, “Eastern European population to plummet”
A fall in the birth rate in Eastern European counties will likely cause population levels in former Communist countries to drop by 33% by 2050. The United Nations Commission for Europe believes the main factor in the decline is that less money means fewer children. On a related note, Eastern European countries have very low fertility rates compared to the rest of the world. The commission believes only a dramatic recovery can reverse the trend, which has marked the transition economies since the fall of Communism.
The report from the UN commission states the fall in the birth rate in eastern Europe mirrored the collapse of communism. Illustrating the problem, women in Western Europe have 1.6 children on average; but, women in Eastern Europe have 1.3 children on average. Many countries in Eastern Europe have even lower birth rates, Latvia and Bulgaria are an example.
Despite financial recoveries in the Czech Republic, Hungary, and Poland, the birth rate in Eastern Europe has continued to fall. The UN commission believes that lifestyle changes may be countering any positive effect of financial recoveries. In short, the UN believes governments should create financial and tax benefits for those with children.
Questions: (1) Do you think the concern about the decreasing population is justified? (2) What steps can be taken to remedy the problems of the potential decrease in population throughout the region?
A fall in the birth rate in Eastern European counties will likely cause population levels in former Communist countries to drop by 33% by 2050. The United Nations Commission for Europe believes the main factor in the decline is that less money means fewer children. On a related note, Eastern European countries have very low fertility rates compared to the rest of the world. The commission believes only a dramatic recovery can reverse the trend, which has marked the transition economies since the fall of Communism.
The report from the UN commission states the fall in the birth rate in eastern Europe mirrored the collapse of communism. Illustrating the problem, women in Western Europe have 1.6 children on average; but, women in Eastern Europe have 1.3 children on average. Many countries in Eastern Europe have even lower birth rates, Latvia and Bulgaria are an example.
Despite financial recoveries in the Czech Republic, Hungary, and Poland, the birth rate in Eastern Europe has continued to fall. The UN commission believes that lifestyle changes may be countering any positive effect of financial recoveries. In short, the UN believes governments should create financial and tax benefits for those with children.
Questions: (1) Do you think the concern about the decreasing population is justified? (2) What steps can be taken to remedy the problems of the potential decrease in population throughout the region?
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