EU leaders tell Britain to exit swiftly, market rout halts

LONDON/BRUSSELS - European leaders told Britain on Tuesday to act quickly to resolve the political and economic chaos unleashed by its vote to leave the European Union, a move the IMF said could put pressure on global growth.

Financial markets recovered slightly after the result of Thursday's referendum wiped a record $3 trillion off global shares and sterling fell to its lowest level in 31 years, but trading was volatile and policymakers said they would take all necessary measures to protect their economies.

British Finance Minister George Osborne, whose attempt to calm markets had fallen on deaf ears on Monday, said the country would have to cut spending and raise taxes to stabilize the economy after a third credit ratings agency downgraded its debt.

Firms have announced hiring freezes and possible job cuts, despite voters' hopes the economy would thrive outside the EU.

European countries are concerned about the impact of the uncertainty created by Britain's vote to leave on the 27 other EU member states. There is little idea of when, or even if, the country will formally declare it is quitting.

"The process for the United Kingdom to leave the European Union must start as soon as possible," French President Francois Hollande said. "I can't imagine any British government would not respect the choice of its own people."

European Commission President Jean-Claude Juncker sent a similar message as he prepared for talks with British Prime Minister David Cameron before an EU summit in Brussels, although he did not anticipate an immediate move.

"We cannot be embroiled in lasting uncertainty," Juncker said in a speech to the European Parliament, which he interrupted to ask British members of the assembly who campaigned to leave the EU why they were there.

Cameron, who called the referendum and tendered his resignation when it became clear he had failed to persuade Britain to stay in the EU, says he will leave it to his successor to formally declare the country's exit.

Arriving for the EU summit, he said: "I'll be explaining that Britain will be leaving the European Union but I want that process to be as constructive as possible, and I hope the outcome can be as constructive as possible.

Holding out hope of maintaining good relations with other European countries, he said Britain wanted "the closest possible relationship in terms of trade and cooperation and security. Because that is good for us and that is good for them."

His party says it aims to choose a new leader by early September. But those who campaigned for Britain's leave vote have made clear they hope to negotiate a new deal for the country with the EU before triggering the formal exit process. European leaders have said that is not an option.

"No notification, no negotiation," Juncker said.

No cherry-picking

After Cameron has addressed EU leaders on Tuesday evening, they will meet the next day to discuss Brexit without him.

Leave campaigners in Britain including Boris Johnson, a likely contender to replace Cameron, suggest the country can retain access to the European single market and curb immigration -- but those goals are mutually incompatible under EU rules.

German Chancellor Angela Merkel said Britain would not be able to "cherry-pick" parts of the EU, such as access to the single market, without accepting principles such as freedom of movement when it negotiates its exit from the bloc.

"I can only advise our British friends not to fool themselves ... in terms of the necessary decisions that need to be made in Britain," she told German parliament in Berlin.

Cameron will meet other European counterparts one-on-one before addressing them all at what promises to be a frosty dinner to discuss what has become known as Brexit.

EU lawmakers say they want him to trigger the exit process at the dinner, but an EU official said that was unrealistic given the political chaos in London, where both Cameron's party and opposition Labour lawmakers are deeply divided.

The ruling Conservative Party is split into pro- and anti-EU camps and Labour Party leader Jeremy Corbyn was facing a no confidence vote on Tuesday from parliamentarians who accuse him of lukewarm support for the EU.

The European Parliament jeered when Nigel Farage, the leader of Britain's euroskeptic UKIP party, said in a scathing speech that Europe had deceived its population and Britain would be its "best friend" if it agreed to extend a tariff-free trade deal.

But the vote has caused new friction in the EU at a time of crises over a mass influx of refugees, economic weakness and tensions on its borders with Russia.

Poland's foreign minister demanded Juncker and other leaders of the executive European Commission quit for not preserving the Union. The prime minister of Greece, enduring austerity measures in return for aid, said Europe must change direction.

Germany's financial market regulator delivered a double blow to London, saying it could not host the headquarters of a planned European stock exchange giant after Britain leaves the EU, and could not remain a center for trading in euros.

Fitch joined other credit ratings agencies in downgrading its sovereign debt on Monday, and Osborne said Britain faces tax rises and spending cuts.

"We are going to have to show the country and the world that the government can live within its means," Osborne, who campaigned to stay in the EU, told BBC radio.

Mayor seeks more autonomy for London

The 52-48 percent vote to leave has deepened multiple geographical as well as political and social divisions in the United Kingdom.

Sadiq Khan, the mayor of London, where a majority voted to stay and people fear job losses if the city loses its status as a global financial center, said access to Europe's market was key. "On behalf of all Londoners, I am demanding more autonomy for the capital - right now," he said.

Scotland, where people voted strongly to remain in Europe, is weighing a possible second referendum on leaving the United Kingdom given the vote to leave the EU.

Scottish leader Nicola Sturgeon denounced what she called a vacuum of leadership in London and said three months of political drift until a successor to Cameron is in place would further damage Britain's economy. She said she would meet EU leaders on Wednesday to discuss how Scotland could remain.

The impact looked likely to spread far beyond Britain's borders although European shares rose after a heavy sell-off, partly due to hopes of a more co-ordinated central bank response to financial market losses. Sterling also rose and Wall Street opened higher as investors hunted for bargains.

European Central Bank President Mario Draghi said central banks around the world should aim to align monetary policies to mitigate "destabilizing spillovers" between economies.

Shares in European banks have come under particular pressure, especially those based in Britain, over doubts about future market access, and Italy, with high levels of bad loans.

Brexit creates huge political uncertainty and will put pressure on global growth, the International Monetary Fund (IMF)'s Deputy Managing Director Zhu Min said on Tuesday at the World Economic Forum in Tianjin in northern China.

Asian stocks rose and Chinese stocks, protected by capital controls, hit a three-week closing high. Chinese Premier Li Keqiang sought to reassure investors by saying the country would not allow "roller-coaster" rides in capital markets.

Dutch Prime Minister Mark Rutte said England had collapsed "politically, monetarily, constitutionally and economically".

US President Barack Obama told National Public Radio there had been some hysteria "as if somehow NATO's gone, the trans-Atlantic alliance is dissolving, and every country is rushing off to its own corner. That's not what's happening."

In view of the disarray in Britain, some people questioned whether Brexit would happen at all. Nordea bank analysts gave it a likelihood of 70 percent and a senior EU official involved in the process said he thought the country may find a way never to announce its formal departure to the bloc. (Additional reporting by Alastair Macdonald, Paul Taylor, Gabriela Baczynska, Phil Blenkinsop and Jan-Robert Bartunek in Brussels; Sudip Kar-Gupta and Guy Faulconbridge in London and Alistair Scrutton in Stockholm)

source: interaksyon.com

Angela Merkel lands in India, with trade high on the agenda

NEW DELHI, India - German Chancellor Angela Merkel landed in New Delhi late Sunday for a visit in which she is expected to push for closer trade ties, and during which India's leader hopes to draw investment from the European powerhouse.

Briefly leaving behind a refugee crisis in Europe, Merkel arrived with a delegation including Foreign Minister Frank-Walter Steinmeier and German business leaders for her first visit to India since the right-wing Bharatiya Janata Party stormed to power last year.

"Namaste Chancellor Merkel! Warm welcome to you & the delegation. I look forward to fruitful discussions & strengthening India-Germany ties," Indian Prime Minister Narendra Modi posted on Twitter.

She will meet with Modi, Indian President Pranab Mukherjee and Foreign Minister Sushma Swaraj on Monday before she heads to the southern technology hub of Bangalore for a businness conference the next day.

Modi and Merkel will hold talks on "issues of mutual interest", including trade, defence and renewable energy, according to the Indian foreign ministry.

The two are likely to discuss resuming stalled India-EU Free Trade Agreement negotiations -- a market-opening pact to boost bilateral commerce.

German investments in India stand at 9.7 billion euros with about 1,600 companies in the country.

Modi officially visited Germany in April when he sought to attract more industries to set up shop in Asia's third-largest economy for his flagship "Make in India" campaign and boost the manufacturing sector.

source: interaksyon.com

Greece does about-face, pledges big privatization push

ATHENS — Work was supposed to begin next year on a 7 billion euros ($7.6 billion) waterfront urban renewal project almost twice the size of New York's Central Park that could have poured nearly a billion euros into Greece's depleted coffers. The plans stalled late last year after the far-left Syriza party took power and promised to halt attempts at putting the private sector in control of state assets, both on ideological grounds and because leaders believe rampant corruption must be addressed before any sell-off.

Now, in an attempt to get a third European bailout and prevent the Greek economy from collapsing, the ruling party has done an about-face. It has pledged to fast-track the waterfront project, plus sell government assets and allow for private development of state-owned property, all to generate cash that will help reduce Greece's 320-billion-euro national debt and pay back money lent by European nations to prop up ailing banks.

Experts say the goal set by Greece's European counterparts for the country to raise 50 billion euros in privatizations and private use of state property is probably impossible — but that Greece must make a better effort than it has in the past.

"There can be absolutely no backpedaling or unwinding with the privatization effort," said Mujtaba Rahman, European director for the Eurasia Group political and business risk consulting firm. "This is about testing the government's appetite to liberalize the economy and move forward with pro-market reforms."

Big money assets that Greece could sell include state-owned stakes in Athens' new airport, energy company Hellenic Petroleum and electrical utility Public Power Corp., plus offshore oil or natural gas drilling parcels. Greece also has stock in banks valued at 7.5 billion euros, but the true value of the stake is unknown because the Athens stock market stopped trading at the end of June as the country descended into financial chaos.

The Hellenic Republic Asset Development Fund, charged with matching state assets in deals with the private sector, also has parcels of land on beautiful islands available for long-term leases and a castle on the island of Corfu, plus buildings throughout Athens and across the country.


It was formed in 2011 following demands by Greece's creditors to embark on a privatization wave, but has collected only 3.5 billion euros so far. Efforts have been complicated by constantly changing laws for asset sales, court challenges, local opposition, financial upheaval that makes it difficult to value assets, and criticism that prices have dropped so much that assets aren't worth selling.

Proponents of privatization say it can help boost investment and the economy flourish by unleashing market forces. It was particularly popular in countries like the United Kingdom in the 1980s, when Margaret Thatcher sold state-owned assets including water and gas. Though privatizations have taken place elsewhere in Europe, they've been far less prevalent.

But over the past few years during Europe's debt crises, privatizing assets has been a key demand placed on countries being bailed out. Greece notably failed to meet initial targets.

The privatizations have met with varying degrees of resistance, with some arguing that stressed governments such as Greece's are selling assets at below-market prices. Opponents also say privatization reduces job security and transfers wealth to a rich elite.

Greece's development fund doesn't publicly disclose the estimated value of assets it has to offer, but the deal it negotiated for the waterfront renewal project would give Greece 950 million euros in return for a 99-year lease on the property.

A Greek company with backing from Chinese and Arab investors would then build a huge park, a shopping center, a marina, 1,000 hotel rooms and a skyscraper apartment building on what's billed as Europe's largest undeveloped waterfront tract. Multimillion-euro yachts dock at a marina within the parcel that was built for the 2004 Olympics, but a crumbling, two-block-long building with a leaky roof bakes in the sun. It was built for athletes but never used after the games.

The project has been held up by a delay in approval from Parliament, which angers Jiorgos Kourtelis, a boat captain who sees money lost every time he drives by the unused buildings where he'd like to open a coffee shop for marina workers and boat crews.

"Right now it's a waste," said Kourtelis, 45. "They've been trying to solve this and they haven't done very much."

Conflicts between local and state authorities frequently block privatization projects. The Hellenic fund has been unable to sell an 800-slip facility nearby, in part because local officials and a businessman raised objections.

The state-owned marina hadn't paid trash collection fees to the local government for decades, Kourtelis said, so the local government was allowed to build a public swimming pool on the marina's grounds. When the fund tried to sell the marina, local officials didn't want to give up the pool and a businessman with several nightclubs on the premises didn't want to leave either.

Even if Greece could resolve the conflicts that prevent assets from being privatized, the total amount revenue would probably be in the 15-20 billion euros range, said Manos Giakoumis, chief analyst at the Macropolis economic and political analysis website in Athens.

"You have to take into account that market conditions at the moment are very unfavorable," he said. "Even if you say the value of an asset was worth 300 million euros this does not mean this is the actual value of the asset. There are a lot of real estate properties that could be privatized but no one knows the amount that can be raised from this."

Giakoumis believes Greece's need for European financing is now so dire that it will be forced to step up privatizations and deals to allow the private sector use government land and assets.

"If you asked me the same question five months ago I said it would be difficult," he said. "Now I think there is no way for the current government to continue opposing these privatizations. They need to accelerate the final process of approval."

source: philstar.com

Europe tensely awaits Greek voters' decision

BERLIN - German Chancellor Angela Merkel and other EU leaders await with trepidation the outcome of a referendum in Greece Sunday that is already dividing opinion in Europe and could even shape its future.

After months of fruitless talks with its creditors, Greece's dramatic bid to place a bailout decision in the hands of its people will have an impact far beyond the heavily-indebted country's borders, analysts warn.

The vote on whether to support Greece's radical left-led government in its tough anti-austerity line is a "signpost" for future negotiations, said Julian Rappold of the German Council on Foreign Relations.

With fears a "No" vote could lead to Greece exiting the eurozone -- a so-called "Grexit" -- Pawel Tokarski of the German Institute for International and Security Affairs said its impact would reach much further.

It will "determine the future trajectory of European integration," he said.

Merkel, seemingly sanguine last week in remarking that Europe could "calmly" await the result of the referendum because the bloc was "strong," has been at the forefront of efforts to resolve the crisis.

Now, the head of Europe's biggest economy is "faced with a dilemma," Rappold said.

If Greece were to leave the euro, it would signify the failure of Europe's crisis management that Merkel has championed though years of economic turbulence.

"She would not like it to be said that she pushed Greece out of the euro," Rappold added.

She also fears unforeseen economic consequences, a boost for anti-euro groups in some countries and that a "No" vote would be seen as a sign of weakness by nations such as Russia or China, he added.

But if Greek voters defy Tspiras and vote "Yes," Merkel must win parliamentary approval for negotiations on a new aid program for Greece amid growing dissent within her conservative party on the Greece issue.

She would also have to win over a bailout-weary public tired of picking up a lion's share of the bill.

'Nein', 'Oxi'

But the referendum is not just dividing Greeks.

Germany's Bild mass-market daily, which has taken a tough line with Athens since the start of the crisis, held its own referendum, asking readers if they wanted to go on supporting Greece with billions of euros.

It said the response indicated that 89 percent of the 200,000 people who took part said "Nein."

Thousands of Greece supporters meanwhile took to the streets of Barcelona, Paris, Dublin, and Frankfurt to show solidarity with the Greek people and hit back at European policies.

Merkel was greeted by placards stating "Oxi" (no, in Greek) at an event in Berlin Saturday for her Christian Democratic Union party's open day.

In Spain, which has endured its own economic crisis, allies of Greece's Syriza party see the referendum as an historic opportunity to change Europe, months before the country holds its own polls.

Parties on the political right however fear a spread of radical leftist policies.

If Italians were called to vote like the Greeks, 51 percent would support tough measures imposed by Europe to avoid crashing out of the euro, while 30 percent would vote against, according to a recent poll by Ipsos.

And Britain, too, where voters will be called to decide on its future in Europe, sees a particular resonance in the Greek bid.

Different interpretation

Elsewhere among Europe's leadership, European Central Bank chief Mario Draghi will also dread a "No" vote.

He is not accountable to voters but nevertheless is in "an extremely difficult situation," Tokarski said.

Through its emergency funding, the ECB is keeping Greek banks afloat. If it were to stop these loans, it would risk pressing the "Grexit" button -- a decision its chief wants to leave to the politicians.

For now though, the post-referendum scenario is far from clear, especially as the question being posed is open to wide interpretation.

Athens argues it means saying "No" to new austerity measures proposed by creditors in return for aid.

But this proposal has in the meantime expired, leaving others to interpret the referendum as a vote for or against the euro.

"Whatever the result, it will be interpreted differently by political forces in Greece and in the eurozone," Tokarski warned.

source: interaksyon.com

European leaders seek Asian support on debt crisis

VIENTIANE - Dozens of European and Asian leaders will gather in impoverished Laos on Monday for a major summit set to be dominated by the eurozone debt crisis and growing territorial tensions in the region.

Top European officials including French President Francois Hollande and Italian Prime Minister Mario Monti are due to spearhead efforts to reassure Asia that the long-running eurozone crisis is finally coming under control.

The diplomatic offensive is seen as a sign of the growing importance that debt-laden Europe places on Asia's fast-growing economies, and its desire to counter increased US engagement in the region.

"We believe Asia is more important every day in terms of economic development," European Commission chief Jose Manuel Barroso told reporters in Bangkok ahead of the summit.

"Europe is one of the most important partners in Asia in terms of investment and trade," he said. "We want to discuss the possibility of trade and investment but also the challenges of stability and security in the region."

European Union president Herman Van Rompuy is also among those converging on Laos, a landlocked country of just six million people on the verge of joining the World Trade Organization as it opens up its fast-growing economy.

But German Chancellor Angela Merkel -- who warned over the weekend that it would take more than five years to overcome the euro debt crisis -- will not attend, sending her foreign minister instead.

The Asia-Europe Meeting, held every two years, provides an opportunity to boost links between two regions that together account for about half of the global GDP.

Europe "should be looking to Asia for greater economic activity", Philippine Foreign Secretary Albert del Rosario told AFP in the Laos capital Vientiane ahead of the two days of talks.

"We are able to offer many areas of investment and trade for them. I think the opportunity is there for both sides," he added.

Europe's leaders may also lobby Chinese Premier Wen Jiabao to deploy some of Beijing's trove of about $3 trillion in foreign exchange reserves -- the largest in the world -- to invest in EU bailout funds.

Asian leaders for their part are expected to press Europe to take swift action to calm a crisis that has battered the world economy and set back efforts to reduce global poverty.

"A stronger Europe, the sooner the better, is good for everybody around the world," Indonesian Trade Minister Gita Wirjawan told reporters in Vientiane.

Some Asian participants, including the Philippines, also want to put Asia's maritime sovereignty disputes on the table, but China is likely to resist.

China claims sovereignty over nearly all of the South China Sea, home to vital shipping lanes and believed to be rich in oil and gas deposits. The Philippines, Brunei, Malaysia, Vietnam and Taiwan also claim parts of the sea.

Separately, China, Japan and South Korea are embroiled in various territorial disputes that have stoked tensions in the region.

About 50 leaders or their representatives -- including Myanmar President Thein Sein -- are due to attend the gathering, which comes against a backdrop of improving ties between Europe and Southeast Asia thanks to a series of dramatic political reforms by the country formerly known as Burma.

Outrage in the West over the former junta's human rights abuses -- including the longtime detention of Nobel laureate Aung San Suu Kyi and other political prisoners -- soured the atmosphere of past ASEM meetings.

But since a reformist government took power last year, overseeing the release of political detainees and Suu Kyi's election to parliament, the West has begun rolling back sanctions and foreign firms are lining up to invest.

In recent months, however, deadly Buddhist-Muslim clashes in western Rakhine state have cast a shadow over the reform process, and European leaders may use the summit to call for an end to the bloodshed.

Security concerns including Iran, North Korea and Syria are also believed to be on the agenda, along with global terrorism, climate change and sea piracy.

source: interaksyon.com