Coming to a country near you?
If you're going to hide money overseas, you should at least do so in a country that's stable enough not to pull
a stunt like this.
Cyprus and its international lenders have agreed to convert 47.5
percent of deposits exceeding 100,000 euros in Bank of Cyprus to equity
to recapitalize it, banking sources said on Sunday.
Under a programme agreed between Cyprus and lenders in March, large
depositors in Bank of Cyprus were earmarked to pay for the
recapitalisation of the bank. Authorities initially converted 37.5
percent of deposits exceeding 100,000 euros into equity, and held an
additional 22.5 percent as a buffer in the event of further needs.
"There was an agreement concluding at a final figure of 47.5 percent
this morning," a source close to consultations told Reuters.
I doubt anyone is ever going to deposit money in Cyprus again. I wonder if the lenders would behave the same way with respect to Spain or England.... You see, this bailout was actually imposed on them by the
European Union's finance ministers.
According to a recent blog by Paul Krugman, the decision imposed by EU finance ministers to force depositors in Cyprus to take a loss, in order to help fund an International Monetary Fund and euro zone bailout, on their deposits may potentially cause a bank run
in other EU countries. Depositors in Spain and Italy and elsewhere may
become concerned that they will also lose their funds and withdraw ahead
of any such impositions. Other economists at leading banks, including
Morgan Stanley and Citigroup, have voiced similar concerns.
Ouch.
Labels: Cyprus, European Union, financial crisis, International Monetary Fund
That sound you just heard was the Egyptian economy going down the toilet
The International Monetary Fund has '
delayed' a $4.8 billion loan to Egypt due to the refusal of Islamist President Mohammed Morsy to raise taxes (Hat Tip:
MFS - The Other News). The 'delay' has put Egypt's economy of the edge of an abyss.
Egypt’s Prime Minister Hesham Qandil defended President Mohammed
Mursi’s recent decision not to increase taxes and called for a “social
dialogue” on the tax measures.
The IMF board was scheduled to meet
to discuss approving the loan on Dec. 19 after a preliminary agreement
was reached during a visit by an IMF team to Cairo last month. The IMF
had said Egypt must keep policy steady for the loan to go through.
"In light of the unfolding developments on the ground, the Egyptian
authorities have asked to postpone their request for a Stand-By
Arrangement with the IMF," a Fund spokeswoman told Reuters in a
statement.
"The Fund remains in close contact with the authorities, and stands
ready to continue supporting Egypt during the ongoing transition and to
consult with the authorities on the resumption of discussions regarding
the Stand-By Arrangement," the spokeswoman said.
"He said the delay would give officials time to explain an economic
reform package after media criticism prompted the government to postpone
measures that were part of the program.
In a televised speech on Tuesday, Prime Minister Qandil, who criticized
the media’s “erroneous” reporting over Mursi’s tax scrap said a “social
dialogue” meeting will take place next week to explain the government’s
tax project.
Read the whole thing.
Last week,
Spengler's David Goldman wrote:
Morsi demanded dictatorial powers last week in large part because the
exigencies of Egypt’s economic position–a $36 billion trade deficit,
equivalent to an astonishing 16% of GDP, and a budget deficit of 11% of
GDP–required cuts in subsidies for necessities, which take up nearly
half of the country’s budget. A $4.8 billion loan from the International
Monetary Fund was supposed to give Egypt breathing room until the Morsi
government could persuade private investors t meet the gap, presuming
that Morsi could get the gigantic deficits under control. It appears
that Morsi’s attempt to gain the political leverage needed to address
the deficits has blown up in his face, and prompted capital flight. The
country’s stock market has fallen by 25% since mid-September. That is a
less than perfect indicator, given that the market capitalization of the
whole Egyptian stock exchange index is less than that of Starbucks.
If Morsi succeeds in crushing the opposition, Egypt is likely to become a sort of North Korea on the Nile in
which a totalitarian one-party state rations a dwindling supply of
food. A more likely outcome is a prolonged period of instability with
spreading hunger.
What should the United States do?
- First, we should recognize that there are some disasters beyond our
capacity to fix. Egypt is the victim of sixty years of mismanagement and
corruption.
- Second, we should not throw good money after bad. American taxpayers are under no obligation to pour money down the drain.
- Third, we should actively support the secular opposition led by
Mohamed al-Baradei. I do not believe that al-Baradei could govern Egypt
more effectively than Morsi, but anything–including prolonged chaos–is
better than the consolidation of a totalitarian state under the Muslim
Brotherhood.
And finally, we should severely reduce military aid to a country
whose political leadership cannot be expected to act responsibility in a
crisis.
But instead, the Obama administration has decided to
give Morsi 20 more F-16's. Am I missing something behind this stroke of brilliance? Maybe parts of them are edible? What could go wrong?
Read the whole thing.
Labels: Egyptian economy, International Monetary Fund, Mohammed Morsy, Muslim Brotherhood
Business is business at the IMF
When I worked in New York, and probably still to this day, the phrase 'business is business' was used to justify all sorts of behavior that ranged from nasty and despicable to morally reprehensible. The only similar phrasing that comes to mind is 'boys will be boys,' which was used to justify all sorts of sexist treatment of women.
At the International Monetary Fund, business is business. Despite the flash of 'morality' that led to Dominique Strauss-Kahn losing out as managing director (because he may or may not have had sex with a maid who may or may not have consented in his New York hotel room), when it comes to things that make money for the fund, it digs in its heels and does what's best for business - morality be damned. And so, the fund, and its new managing director Christiane Lagarde, are resisting attempts by United Against a Nuclear Iran (UANI) to
have Iran's central bank expelled from membership in the IMF.
In a letter to Ms. Lagarde dated April 26, Mr. Wallace, a former American diplomat at the United Nations, said the I.M.F. should close what he described as an I.M.F. account worth more than $1 billion held in the central bank, which has been penalized by the United States and European Union. Mr. Wallace said the bank had been shown to be untrustworthy, violating the I.M.F.’s own standards and safeguards.
“I don’t have a grudge with the good people of the I.M.F.,” Mr. Wallace said in a telephone interview. But, he said, “it can’t be business as usual anymore.”
William Murray, a spokesman for the I.M.F. in Washington, said in a statement that the fund’s holdings in Iran’s central bank are part of the arrangements made with any member, and that the account is denominated in Iranian currency, not dollars.
“There is nothing in the E.U. or U.S. sanctions regimes that is inconsistent with these arrangements,” he said. As for the call for Iran’s suspension, Mr. Murray said, “This is a matter that is best taken up with the fund’s member countries. We have no comment.”
Under Article 26 of the I.M.F. Articles of Agreement, suspension of an I.M.F. member’s voting rights requires approval from a 70 percent majority of the total voting power among the other members, which is weighted partly according to their economic size.
A Treasury Department spokesman in Washington, John Sullivan, said that the United States regarded the I.M.F. as exempt from sanctions on Iran’s central bank. Michael Mann, a spokesman for the European Union’s foreign policy chief, Catherine Ashton, was quoted by Bloomberg News as saying the I.M.F. is not subject to E.U. sanctions.
YNet adds:
The advocacy group United Against Nuclear Iran, a group of US ex-diplomats and government officials, said that the IMF needed to shut down its account with Bank Markazi, a specific target of the sanctions, or suspend Iran's membership in the fund.
It also criticized the IMF managing director, Christine Lagarde, for meeting with Bank Markazi's chief during the IMF's spring meeting last month in Washington, and for allegedly "lavishing praise on Iran and Bank Markazi."
"The IMF must also stop treating the Iranian regime like a responsible government in good standing at a time when the international community is trying to isolate it."
But IMF spokesman William Murray said the IMF's account at Iran's central bank is simply there to hold the Iranian funds committed to the IMF as an obligation of its membership in the crisis lender.
"According to our constitution... the IMF's holdings of each member's currency are maintained with the central bank of the relevant member, including Iran," Murray said.
So business is business at the IMF... unless you conduct it with your hotel maid.
Labels: International Monetary Fund, Iran sanctions regime, Iranian nuclear threat
Iran sanctions working great, economy grows faster than US economy
In Iran, those sanctions that are designed to stop the country's nuclear program are going just great according to the International Monetary Fund. The economy grew at a rate of 3.2% in 2010-11. That's a better rate than the United States....
The International Monetary Fund gave a rosy portrayal of Iran's economy in a report issued Wednesday, saying it grew by 3.2 % in 2011, contradicting its earlier assessment and surprising Iran analysts who contend that the economy is shrinking.
The new IMF report is based mainly on official Iranian data, independent economists said—rather than on a second set of economic statistics in Iran that is made by independent economists. The IMF's April regional report on the Middle East and Central Asia, which was based on the independent analyses, predicted a 0% growth rate for Iran.
The country's central bank, a government entity, hasn't issued an economic growth report since 2008, prompting criticism from Iranian lawmakers recently that the bank was hiding the data under the order of President Mahmoud Ahmadinejad.
Iran had blasted the April report, calling it "politicized" and saying the IMF was acting under Western influence. After the criticism, the IMF sent a group of experts to Iran to review its report and "correct" it, Iran's deputy economy minister Mohamad Reza Farzin said in June after part of the new report was released.
The IMF wasn't available for comment. The fund didn't say how much of the new report was based on official statistics and how much it had obtained independently.
The new report surprised Iran analysts, who said these figures didn't reflect the dire reality of Iran's economy, weighed down by strict international sanctions, mismanagement and inefficiencies. Economists inside and outside of Iran, as well as European governments, have also questioned the accuracy of the IMF's economic data for Iran. One European official said, "We think they're overly optimistic."
"IMF's new report is a big puzzle," said Paris-based economist and Iran expert Fereydoun Khavand, saying it "relies on figures from the Islamic Republic which are even disputed inside the country."
The report said the country's economic growth has rebounded from a cyclical downturn in 2008-09, "spurred by a recovery in agriculture production, and higher oil prices." Even so, the gross domestic product growth of 3.2% in 2010-11 was slightly lower than the 3.5% recorded in 2009-10, according to the IMF.
By comparison, here's a chart showing US GDP growth from January 2009 to June 2011.
Someone please remind me again which country is under sanctions.
What could go wrong?
Labels: GDP, International Monetary Fund, Iran, Iran sanctions regime, United States
Ready for 'statehood'?
You will recall that about ten weeks ago, the World Bank told us that the 'Palestinian Authority' is not ready for 'statehood,' while the International Monetary Fund told us that the 'Palestinian Authority'
was ready. The International Monetary Fund may want to rethink that issue. If 'Palestine' were to become a state tomorrow, it would have no economy, and would be totally dependent upon the generosity of the nations of the World. Most of the World has apparently tired of
financially supporting the 'Palestinians' with handouts.
The Palestinian Authority is facing a financial crisis because funds pledged by donor nations are not arriving on time, Prime Minister of the West Bank government Salam Fayyad said Tuesday.
Speaking at a press conference with Japan's representative to the Palestinian Authority, Fayyad said the slow delivery of promised aid was putting pressure on the government.
"The financial crisis continues until now, to varying degrees, and has continued alongside the work of the Palestinian Authority since mid-2010," Fayyad warned, saying the government was facing a serious shortfall.
"We need to see an acceleration in the receipt of aid that has been committed," he added, stressing that the Palestinians "are not asking for anything more than what we need."
Maybe Fayyad needs to stop the unproductive payments to terrorists in Israeli jails and consider building an economy that can sustain itself. Of course, since Fayyad is about to be fired anyway, he may not be very interested in building an economy for the long term, and his successor will be even less likely of being capable of doing so.
What could go wrong?
Labels: International Monetary Fund, Palestinian economy, Palestinian state RIGHT NOW syndrome, World Bank
Stanley Fischer disqualified due to age
Bank of Israel governor Stanley Fischer has been disqualified from running for the number one position at the International Monetary Fund. The IMF has an
age limit of 65. Fischer is 67.
In a statement, Fischer expressed regret that the IMF board decided not to change its rules to allow him to run.
He said his experience had made him a natural candidate to head the IMF at a time of ongoing challenges for the global economy. He called the age limit “irrelevant today.”
“The governor is convinced that the age issue is a technical one and a neglibible detail compared with the need to choose the most suitable candidate to lead the fund at the present time,” the statement said.
Fischer’s candidacy had been considered a long shot, primarily because the fund historically has been led by a European.
In a statement from Washington on Monday, the IMF said it would consider two candidates — front-runner Christine Lagarde, the French finance minister, and Agustin Carstens, Mexico’s central bank chief.
I guess that's the kind of moronic, unthinking decision one should expect from an organization that decides that the 'Palestinian Authority' is
ready to "conduct the sound economic policies expected of a future well-functioning Palestinian state," while said 'Palestinian state' has no economy of which to speak and is totally dependent on international aid.
Labels: International Monetary Fund, Stanley Fischer
Stanley Fischer in the running to be IMF chief
Bank of Israel chief
Stanley Fischer is considered a leading candidate to head up the International Monetary Fund.
Bank of Israel Governor Stanley Fischer announced he was in the race to become the next head of the International Monetary Fund.
Fischer, 67, is a widely respected economist credited with successfully guiding Israel's economy through the global crisis.
He is nevertheless something of a dark-horse candidate, as France's Christine Lagarde and Mexico's Agustin Carstens are generally considered the leading contenders.
Israel's Finance Minister Yuval Steinitz said he would be backing Fischer's candidacy.
"A unique, unplanned and possibly and once-in-a-lifetime opportunity has arisen to run for the head of the International Monetary Fund, which after consideration, I decided I wanted to pursue," Fischer said in a statement.
"I believe I can contribute to the IMF and to the global economy in this period after the crisis," he said a day after the deadline for nominations closed.
How strong a candidate is Fischer?
Consider this (Hat Tip:
Gary P).
Based on professional qualifications and cultural fit, Stanley Fischer is the perfect candidate for managing director of the IMF. He would likely prevail in an open, transparent and merit-based selection process. The question is whether European attempts to preclude this can still be overcome by countries that care about the legitimacy of the institution and the beneficial role it should play in the global economy.
I worked closely with Mr. Fischer at the IMF in the 1990s, and followed his careers both before and after that – as a brilliant member of MIT’s renowned economics faculty, as a thoughtful and inspirational chief economist at the World Bank, and as a successful governor of Israel’s central bank. On this basis I strongly believe that he ticks every box when it comes to IMF suitability – professional, cultural and personal.
Mr Fischer is a world-class economist, and among the very few that applies a sharp, and well-trained analytical mind to both policy and academic challenges. He is exceptional in another, and even more unusual way. He uses his brilliance to engage rather than intimidate. Indeed, he starts his interactions with other people on the assumption that they can enlighten him; and they feel at ease sharing their insights and interacting with him.
...
Indeed, Mr Fischer’s professional integrity is beyond doubt; and he commands great respect. Just witness his standing among Palestinians during his successful tenure as Israel’s central bank governor and despite a period of considerable tensions in Arab-Israeli relations.
Oh, by the way, the writer's name is Mohamed El-Erian.
So why might Fischer not get the job? Back to the first link.
But while he is eminently qualified for the IMF post, his candidacy would be a long shot, as the job traditionally goes to a European, which of course makes Lagarde the favourite.
The resignation of Strauss-Kahn however has sparked calls for someone from the emerging economies to be appointed, which would favour the bid of Carstens, Mexico's central bank chief.
Two other candidates, Kazakhstan's Grigory Marchenko and Trevor Manuel of South Africa, pulled out ahead of Friday's nomination deadline -- a move that underscored the widespread belief that Europe already had a done deal.
You don't expect the Europeans to give up what they see as an entitlement for the sake of the rest of the world, do you?
Labels: International Monetary Fund, Stanley Fischer
Ready for prime time?
Are the 'Palestinians' ready for prime time? Are they ready to run a 'state' of their own? The
World Bank doesn't think so.
Economic growth in the West Bank and Gaza Strip is largely driven by donor donations and is not likely to be sustainable, the World Bank said on Thursday.
The Palestinian Authority should focus on developing its trade regime and infrastructure and improving the employability of the labor force to create growth that can be maintained, the organization said in a report to donor countries. It also said that industry won’t increase significantly as long as Israeli limitations on movement are in place. The report said that according to initial estimates based on labor surveys, the Palestinian economy expanded 9.3 percent last year.
“The growth is mostly confined to the non-tradable sector and reflects the importance of donor aid in driving the Palestinian economy -- though recent easing of restrictions by the government of Israel has probably had a positive impact as well,” the World Bank said in its report.
If only they had an export other than terror....
But fear not: The
International Monetary Fund believes there's no problem with a 'Palestinian state' going live (Hat Tip:
Shy Guy).
Palestinian financial institutions are ready for statehood, an International Monetary Fund report praising Palestinian fiscal reform said Tuesday.
"The PA is now able to conduct the sound economic policies expected of a future well-functioning Palestinian state,'' the report said.
...
The Palestine Monetary Authority now fulfills the core functions of a central bank in terms of supervision and regulation, the report said.
It lauded increased fiscal transparency and discipline of Palestinian institutions.
Can you have a state without a functioning economy? I doubt it.
Labels: International Monetary Fund, Palestinian state RIGHT NOW syndrome, World Bank
