Friday, May 31, 2013

Eurozone joblessness at record high; India growth slowest in a decade; Virus from Middle East threat to world; India's bickering opposition; Bleak future for ageing Chinese

1 Eurozone joblessness at record high (Katie Allen in The Guardian) Official figures showed eurozone unemployment hit a new high last month with young people again the hardest hit – almost one in four are now out of work. Unemployment in the crisis-stricken currency bloc rose to 12.2% for April, according to Eurostat, the statistics office of the EU. At 24.4%, youth unemployment was double the wider jobless rate and up from 24.3% in March. The problem was most extreme in Greece where almost two-thirds of those under-25 are unemployed. The rate was 62.5% in February, the most recently available data.

The numbers come days after eurozone leaders unveiled plans to get more young people into work as they faced warnings about the risks of civil unrest, long-term economic costs and fears that a generation could lose faith in the European project.

While France and Germany responded to growing anger at youth unemployment this week with a new jobs plan, labour market experts warn that any measures will take time to turn the tide after 24 consecutive monthly rises in the jobless level. Economists say things will get worse before they get better for the 19.4 million people in the eurozone out of work.

In the wider EU area unemployment stood at 11%, as the rate rose in all but nine countries compared with a year earlier. The biggest rises in overall joblessness on a year ago were in Greece, Cyprus, Spain and Portugal. Youth unemployment in Spain is 56.4%, in Portugal 42.5%. Italy recorded its highest overall unemployment rate since records began in 1977, at 12%, with youth joblessness at 40.5%. Economists said that the rise in unemployment was fairly broad-based with rises in so-called core countries as well, including Belgium and the Netherlands. The rate in France was 11%.

2 India growth slowest in a decade (BBC) India's economy grew at its slowest pace in a decade during the 2012-13 financial year. The economy grew by 5% over the year, after having grown at an annual pace of 4.8% in the January-to-March quarter. India was recording annual growth of 9% until two years ago, but in recent months it has seen a sharp decline blamed on a slowdown in its manufacturing and services sectors. Foreign investors have also kept away due to delays in key reforms.

Last month, Prime Minister Manmohan Singh said the current downturn was "temporary" and he was confident the country's economy would bounce back to an "8% growth rate". However, the mood has remained pessimistic in the business community with industry leaders worried over high rates of inflation. The slowing economy has also meant that Indian companies are putting less profit back into their businesses.

Annual capital investment growth slowed to 3.5% in the first three months of 2013, down from 4.5% year-on-year in the previous quarter. Meanwhile, complex business regulations are often blamed for driving foreign companies away. Foreign direct investment into India has fallen, while the amount of corporate money leaving the country is on the rise.

3 Virus from Middle East threat to world (Johannesburg Times) The World Health Organisation has branded the SARS-like virus that has killed 27 people - mainly in Saudi Arabia - as a threat to the entire world. The warning came as a new study showed that the Middle East Respiratory Syndrome coronavirus may have an incubation period - the time between infection and symptoms - of nine to 12 days, longer than the one-to-nineday period previously observed.

The disease is a cousin of Severe Acute Respiratory Syndrome, which sparked a global health scare in 2003 when it leapt from animals to humans in Asia and killed about 800 people. WHO's director-general, Margaret Chan, said the virus was her greatest health concern. WHO said the global death toll from the virus had risen to 27, after three patients died in Saudi Arabia in addition to the death in France.

4 India’s bickering opposition (Neeta Lal in Khaleej Times) If India’s opposition BJP has failed spectacularly at the national level, the other opposition outfits have done no better. The Left, which was a formidable force earlier as a UPA ally (till it broke ranks with it in 2008), has all but dismantled. Its credibility has eroded further after its defeat in its two stronghold states — West Bengal and Kerala.

The Samajwadi Party, the Trinamool Congress and the Bahujan Samaj Party (BSP) are busy fighting turf battles. Have they forgotten that they are in the government or supporting it from outside? Down south, the Dravida Munnetra Kazhagham or DMK was a part of the government till very recently. But it pulled out on grounds which seem whimsical at best, and hardly underscore its respect for ethics.

The BSP, whose trump card has been Dalit uplift, did little to promote that cause in Uttar Pradesh when it was in power for five long years. The Samajwadi Party, which came to power on the anti-incumbency factor against the Dalit leader Mayawati with an earnest young chief minister, has also been a flop show with its disregard for addressing the state’s governance deficit.

The Indian Constitution mandates that coalition parties and the opposition become integral to the governance procedure to strengthen the nation. Unfortunately, all they’re doing is bicker, play vendetta politics and make the UPA seem angelic in comparison!

5 Bleak future for ageing Chinese (Tom Orlik & Olivia Geng in The Wall Street Journal) China's elderly are poor, sick and depressed in alarming numbers, according to the first large-scale survey of those over 60, an immense challenge for Beijing and one of the greatest long-term vulnerabilities of the Chinese economy.

The survey of living conditions for China's 185 million elderly paints a bleak picture that defies the efforts of the government to build what it calls a "harmonious society," one dedicated to human welfare rather than simply economic growth. Of the generation that built China's economic boom, 22.9% — or 42.4 million — live in poverty with consumption of less than 3,200 yuan a year ($522).

The fear of being old and poor, which prompts many Chinese to stash away their earnings, also cuts against another of Beijing's priorities: to rebalance the economy toward stronger consumption.

Wednesday, May 29, 2013

Eurozone growth forecast cut; Post-US order for Pakistan; Apple's Cook hints at wearable devices; China's biggest US play

1 Eurozone growth forecast cut (BBC) The OECD has again cut its growth forecasts for the eurozone and called on the European Central Bank to consider doing more to boost growth. The organisation says the eurozone will shrink by 0.6% this year, widening the gap between it and faster-growing economies such as the US and Japan. The UK forecast was revised down to 0.8% growth this year and 1.5% in 2014.

Meanwhile, the European Commission has given France two more years to complete its austerity programme. France fell back into recession in the first three months of the year. Spain, Poland, Portugal, the Netherlands and Slovenia have also been given more time to complete fiscal tightening. The move suggests a shift away from a focus on austerity in Europe.

In its twice-yearly Economic Outlook, the OECD said prolonged economic weakness in Europe could damage the global economy. The organisation, which represents 34 advanced economies, forecast average growth across its members of 1.2% this year and 2.3% in 2014.  It painted a troubled picture of the eurozone economy. The forecast of a 0.6% contraction in GDP is down markedly from the 0.1% contraction forecast just six months ago. It said eurozone unemployment would continue to rise from its current rate of 12%, stabilising in 2014.

The organisation's chief economist, Pier Paolo Padoan, told Reuters that the eurozone remained the dominant area of concern. "Europe is in a dire situation," he told the news agency. "We think that the eurozone could consider more aggressive options. We could call it a eurozone-style QE."

2 The post-US order for Pakistan (Rafia Zakaria in Dawn) Now that the new Pakistani order is on the point of taking over the country, there must be some discussion on the prospects of creating an alternative alignment that is focused away from the US. One of the most promising new economic conglomerations to have emerged in recent years as a foil to American power has been the BRICS platform.

Comprised of Brazil, Russia, India, China and South Africa, BRICS first met as a possible coalition of interests in September 2006 when the foreign ministers of these countries met in New York. Historian Vijay Prashad, whose book The Poorer Nations: A Possible History of the Global South, assesses the possibilities of BRICS in terms of geopolitics and dominance of the global North. According to him, the BRICS platform has certain strengths. Home to 40% of the world’s population, it controls collectively 25% of the entire world’s landmass as well as 25% of the world’s GDP. Three of the five BRICS states are declared nuclear powers and two enjoy permanent seats on the UN Security Council.

At the same time, notes Prashad, BRICS faces significant challenges. The countries have enormous cultural and religious diversity and differences of opinion which may pose a risk to them acting collectively. In addition, they have not yet been able to create institutional challenges to global North-dominated organisations such as the IMF and World Bank and have for the most part not changed the character of policymaking from a neo-liberal model to one that invests more in the uplift of the poor in their own countries.

If Pakistan truly seeks a turn from the crushing policies of the IMF and World Bank that have routinely exacerbated poverty in developing countries, then building an alliance with BRICS nations may prove a fruitful avenue. If the new leaders of Pakistan wish to chart a course away from geopolitical subjugation, they must also make a visible move away from all sorts of neo-liberal interventions, including the economic basis that always lets the rich win and ensures that the poor will lose.

3 Apple’s Cook hints at wearable devices (Shira Ovide & Evelyn M Rusli in The Wall Street Journal) Apple Chief Executive Tim Cook, defending the company's prowess as a tech trend-setter, hinted that wearable devices may play a role in future product plans. He also disclosed that the company had hired Lisa Jackson, who served a controversial stint as head of the Environmental Protection Agency, to oversee the company's environmental policies.

Most of Mr. Cook's speech was dedicated to defending Apple's prowess as a tech trend-setter, amid recent complaints that the Silicon Valley company has failed to introduce any groundbreaking products lately. "We have several more game changers in us" that the company has been "working on for a while," Mr. Cook said at the event.

The Wall Street Journal reported in February that Apple is experimenting with designs for a watch-like device that would perform some functions of a smartphone, according to people briefed on the effort. Mr. Cook opened his on-stage interview with a barrage of statistics regarding the performance and user satisfaction of Apple's products like the iPhone and iPad, and also hinted that the company has more offerings in TV up its sleeve.

The Apple chief, closing in on two years as CEO, said the company ended last year with an "unprecedented number of new products," including a smaller version of the iPad tablet computer, a new type of Mac laptop with a high-resolution screen, and an overhauled version of its iTunes digital-entertainment software.

4 China’s biggest US play (Dana Mattioli, Dana Cimilluca &David Kesmodel in The Wall Street Journal) China's largest meat processor struck a surprise $4.7 billion agreement to acquire Smithfield Foods Inc., a deal that would mark the biggest Chinese takeover of an American company and underscores the Asian nation's renewed determination to scoop up overseas assets.

Shuanghui International Holdings Ltd. agreed to pay $34 a share for Smithfield, the world's largest hog farmer and pork processor. Including debt, the deal values the Smithfield, Va., company at $7.1 billion. People involved in the deal said the purpose of the tie-up is to export more of Smithfield's output to feed rising demand in China.

Tuesday, May 28, 2013

Concern for post-crisis generation; Sony's bread and butter isn't electronics; 'Big four' banks cut 1,89,000 jobs in five years; China anger at 'handcuffing' girl; Online firm 'laundered' $6 bn; India IPOs shunned

1 Concern for post-crisis generation (Rupert Neate & Graeme Wearden in The Guardian) European leaders warned that youth unemployment – which exceeds 50% in some countries – could lead to a continent-wide catastrophe and widespread social unrest aimed at member state governments. The French, German and Italian governments joined forces to launch initiatives to "rescue an entire generation" who fear they will never find jobs.

More than 7.5 million young Europeans aged between 15 and 24 are not in employment, education or training, according to EU data. The rate of youth unemployment is more than double that for adults, and more than half of young people in Greece (59%) and Spain (55%) are unemployed. Francois Hollande, the French president, dubbed them the "post-crisis generation", who will "for ever after, be holding today's governments responsible for their plight".

"Remember the postwar generation, my generation. Europe showed us and gave us the support we needed, the hope we cherished. The hopes that we could get a job after finishing school, and succeed in life," he said at conference in Paris. "Can we be responsible for depriving today's young generation of this kind of hope?"
Hollande outlined a series of measures to tackle the problem, including a "youth guarantee" to promise everyone under 25 a job, further education or training. The plan, which has been discussed by the European commission, will be supported by €6bn of EU cash over the next five years. Another €16bn in European structural funds is also set aside for youth employment projects.

2 Sony’s bread and butter isn’t electronics (Hiroko Tabuchi in The New York Times) Sony is best known as a consumer electronics company, making PlayStation game consoles and televisions. And it loses money on almost every gadget it sells. Sony has made money making Hollywood movies and selling music. That profitable part of the business is what Daniel S. Loeb, an American investor and manager of the hedge fund Third Point, wants Sony to spin off to raise cash to resuscitate its electronics business.

But as Mr. Loeb pressures Sony executives to do more to revive the company’s ailing electronics arm, some analysts are asking, Why bother? Sony, it is suggested, might be better off just selling insurance. Or just making movies and music. But not electronics. A new report from the investment banking firm Jefferies delivered a harsh assessment of Sony’s electronics business. “Electronics is its Achilles’ heel and, in our view, it is worth zero,” wrote Atul Goyal, consumer technology analyst for Jefferies, in the report, released this week. 

The maker of the Walkman and the Trinitron without electronics? What would it do? Although Sony sells hundreds of products as varied as batteries and head-mounted 3-D displays, it so happens that Sony’s most successful business is selling insurance. While it doesn’t run this business in the US or Europe, Sony makes a lot of money writing life, auto and medical policies in Japan. Its financial arm accounts for 63% of Sony’s total operating profit last year. 

3 ‘Big four’ banks cut 1,89,000 jobs in five years (Jennifer Rankin in The Guardian) By the end of this year, Britain's four biggest banks will have axed 189,000 jobs around the world in the five years since the financial crisis broke, according to new calculations. The figures, compiled by Bloomberg, show that Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC will have cut their global headcount by 24% to a nine-year low of 606,000, compared with their pre-crisis peak of 795,000 in 2008.

The figures come after three of the four banks reported sharply improved profits. Last month, Lloyds posted first quarter profits of £2bn, up from £288m at the same time a year ago. HSBC this month said it made a quarterly pre-tax profit of $8.4bn, almost double the $4.3bn it reported at the same time last year. RBS swung to a £826m profit after a £1.4bn loss last time. Barclays last month reported adjusted first quarter profits had fallen 25% to £1.8bn, partly due to the cost of the bank's restructuring programme.

4 China anger for ‘handcuffing’ girl (BBC) Two Chinese officials have been suspended after being accused of handcuffing and parading a 13-year-old girl down a street for spilling a drink on a government car, state media say. The officials - a Communist Party chief and a police officer - reportedly forced the teenager to walk up and down for 20 minutes. The incident has caused uproar on Chinese social networking sites.

A post on a micro-blogging site claimed the girl got into an argument with local officials in the county of Hezhang, Guizhou province, in April after accidentally splashing water onto a government car, according to China's state-run news agency Xinhua. She was then reportedly handcuffed and paraded up and down a street. It comes as part of a growing phenomenon of Chinese internet users exposing information about officials perceived to have done wrong.

5 Net firm ‘laundered’ $6 bn (BBC) The Liberty Reserve digital money service that was shut down laundered more than $6bn (£4bn) in criminal cash, US authorities have said. Weekend police raids in 17 countries scooped up Liberty Reserve's owners, operators and its computer hardware. The Department of Justice said it was the "largest international money-laundering prosecution in history".

Liberty had about a million users and processed more than 55 million illegal transactions, said DoJ court papers. The documents allege that seven people involved in running Liberty Reserve set up the digital cash service as a "criminal business venture" designed specifically to "help criminals conduct illegal transactions and launder the proceeds of their crimes". Liberty Reserve was so successful that it became a "financial hub of the cyber crime world", whose users were involved in credit card theft, investment fraud, hacking, child pornography and drug trafficking.

6 India IPOs shunned (Ashutosh Joshi & Shefali Anand in The Wall Street Journal) India is on pace for its worst year for initial public offerings since the global financial crisis, largely because two key groups of investors—foreign institutions and the Indian public—are staying away.

It has certainly been a slow year thus far. Including search engine Just Dial Ltd., which raised $166 million last week in the country's biggest IPO of the year, three companies have raised a total of $234 million—the lowest since 2009, according to data provider Dealogic. By comparison, there were 26 IPOs through May 28, 2010, that raised $2 billion.

Foreign investors have, in fact, poured money into Indian stocks this year, but they have been more selective about IPOs. Market experts say these investors are still potential buyers of new offerings, but only by profitable companies with strong cash flow and proper corporate governance.

Looking ahead, many investors expect India's central bank to further cut interest rates to promote growth, a move seen as bullish for stocks—at least those already listed. Analysts say it will take more than rate cuts to revive the IPO market. "Big IPOs will come only when companies are confident of retail participation," said Mr. Gupta of Globe Capital Market.

Monday, May 27, 2013

Swedish riots should worry the world; China, Germany as economic dream team; Brazil's largesse for Africa; Pakistan struggles to keep lights on; Australia is happiest nation; India's struggle with Maoists

1 Swedish riots should worry the world (Aditya Chakrabortty in The Guardian) You probably haven't seen much about it in the papers, but for the past week Sweden has been racked by rioting. The violence began in a suburb of Stockholm, Husby, and spread around the capital's edge before other cities went up in flames. Such prolonged unrest is remarkable for Stockholm, as those few reporters sent to cover it have observed. Naturally enough, each article has wound up asking: why here?

It's a good question. Don't surveys repeatedly show Sweden as one of the happiest countries? Isn't it famous for its equality, its warm welcome to immigrants? We all know the cliches, but the reality is they no longer fit the country so well. Whether it's on the wealth gap, or welfare, or public services, Sweden is less "Swedish" than it has ever been. As in other continental capitals, the Stockholm version of the "European social model" is an increasingly tattered thing. So, a better question, surely, is: if such instability can happen here, what might unfold elsewhere – including Britain?

The first thing to observe about Sweden is how rapidly a gulf is opening up between rich and poor. Between 1985 and the late 2000s, according to the OECD thinktank, Sweden saw the biggest growth in inequality of all the 31 most industrialised countries. It's important not to overstate this: the country remains one of the most egalitarian in the world – but it is taking big steps in the wrong direction. Swedes used to pride themselves on their sense of moderation.. Prime ministers were supposed to live as modestly as school teachers. Compare that with the recent craze in for vaskning. It means sinking, and refers to a practice adopted by young, gilded Swedes of buying two bottles of champagne and then ordering the barman to pour one down the plughole.

The second observation to make about Sweden is that parties of all persuasions have drifted rightwards over the past few years. It was the left that, in 2005, abolished inheritance tax, so that a Swede will now pay no duty on being left a million kronor, but will face a tax of 67% for starting their own business. And when it comes to privatising public services, Stockholm is way out in front of Westminster.

2 China, Germany as economic dream team (Straits Times) China is ready to open up new sectors of its economy to German investors, Chinese Premier Li Keqiang said, in comments that highlight Beijing's drive for a special bilateral partnership with Berlin bypassing the European Union.

Mr Li urged closer cooperation in manufacturing - an area where German firms increasingly see China as a competitor as it moves up the value chain - and he singled out logistics, education and healthcare as sectors for German investment. "China is willing to open up this space preferentially to Germany," said Mr Li, an economist, without elaborating.

3 Brazil’s largesse for Africa (Khaleej Times) The African Union summit in Ethiopia had something to cheer for. Brazil, the world’s seventh largest economy, surprised all by announcing it would write off the entire debt of the African continent to the tune of $900 million. This is genuine leadership and state-of-art diplomacy, to say the least. The Dark Continent, of late, has increased its trade volume with the South American industrialised giant almost fivefold.

The decision announced by Brazil’s President Dilma Rousseff will benefit around 12 trading nations of Africa, including Congo, Tanzania, Zambia, Ivory Coast, Gabon, Guinea, Guinea Bissau, Mauritania, Senegal and Sudan. These poor African countries, which sit on the treasures of minerals but are unable to exploit them fully because of poor infrastructure and political instability, could hope for a shot in the arm as their outstanding debts are cancelled or restructured.

Brazil’s move, nonetheless, has come at an opportune time when the continent’s league, the African Union, is celebrating its 50th anniversary. African leaders as well as world financial pundits strongly believe that the continent has come a long way in resurrecting its image as a developing icon, and made great strides in undoing poverty and freeing itself from deadly diseases to a great extent. 

Brasilia’s precedent should be emulated by other rich nations in the West. It is worth recalling that the International Monetary Fund and the World Bank were asked at the height of monetary crisis in Africa and Asia to write off bad debts, and rejuvenate the respective economies with fresh loans. But that prescription fell on deaf ears. The outcome was another vicious circle of abject poverty and stagnation. Bailing out Africa from its non-performing loans could be the way to begin with. 

4 Pakistan struggles to keep lights on (Declan Walsh and Salman Masood in The New York Times) A week before he is to be sworn in as Pakistan’s prime minister for the third time, Nawaz Sharif has secured one form of power, yet now faces a fierce battle to find another. Electricity shortages, bad for years, have reached crisis proportions. Lights go out for at least 10 hours a day in major cities, and up to 22 hours a day in rural areas. 

In a bid to quell discontent, Pakistan’s interim government, which is running the country until Mr. Sharif takes over, has ordered civil servants to switch off their air-conditioners and stop wearing socks — reasoning that sandals were more appropriate in such hot conditions. The crisis is the product of multiple factors, from decrepit power plants to crumbling transmission lines to decades-old policy mistakes. One reason, however, stands above the others: most Pakistanis will not pay their bills.

The system is paralyzed by $5 billion in “circular debt” — basically, a long chain of unpaid bills that cuts across society, from government departments to wealthy politicians to slum dwellers. At its worst, this leaves power providers with no funds to pay for fuel, so their plants slow or shut down entirely.

5 Australia is happiest nation (Sydney Morning Herald) Australia is still the world's happiest nation based on criteria including income, jobs, housing and health, despite some signs of a slowing economy, according to the Organisation for Economic Co-operation and Development.

Australia kept the top spot for the third straight year, leading Sweden and Canada, the Paris-based group’s Better Life Index showed, when each of 11 categories surveyed in 36 nations is given equal weight. More than 73% of people aged 15 to 64 in Australia have a paid job, above the OECD average of 66%, while life expectancy at birth in Australia is almost 82 years, two years higher than the OECD average, the survey showed.

6 India’s struggle with Maoists (Medha Chaturvedi in The Wall Street Journal) The deadly ambush by suspected Maoist rebels in India’s Chhattisgarh state on a convoy carrying members of the ruling Congress party on Saturday came after a lull in the violent insurgency that has blighted central India for decades.
One of the victims of the land-mine blast on the convoy was Mahendra Karma, a senior Congress party politician in Chhattisgarh and architect of a state policy to arm militia to fight the Maoists.  The militia group, known as Salwa Judum, was made up of armed young tribal men. The Chhattisgarh government  had seen a recent lull in Maoists activity as a sign the rebels were on the back foot due to the militia’s ability to provide intelligence about their activities.

The Maoists, also known as Naxalites, last mounted a headline-grabbing action just over a year ago, kidnapping two Italians and a local politician in the eastern state of Orissa and another politician in Chhattisgarh. All four hostages were released after the state government agreed to free a number of insurgents from jail.

The Naxalite rebels, inspired by Chinese revolutionary leader Mao Zedong, are named after Naxalbari, the town in the state of West Bengal where the movement began as a peasant uprising in the late 1960s. Their objective is to overthrow the Indian government in a people’s war, but their aims at state level are more focused on local issues facing tribal Indians to generate grassroots support. Many observers say authorities need to focus on raising living standards in Maoist-controlled areas to combat the insurgency. Decades of poor governance and corruption in these states, they say, have fueled the insurgency.

The national government has even mulled using the army to counter the insurgency and in 2009 Finance Minister P. Chidambaram, who was then home minister, said he supported this idea as a last resort. But in other areas where this has happened, like Kashmir, the result has been to harden anti-government feeling and deepen separatist violence.