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Issue No. 1152 €1.00 October 7 - 13, 2015
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Tsipras ‘is skating on thin ice’ VAROUFAKIS: “TAX AVALANCHE THAT IS AWAITING” - SEE PAGE 17
A paradise without angels? What foreign buyers think of Cyprus
By Antonis Loizou - SEE PAGE 13
October 7 - 13, 2015
2 | OPINION | financialmirror.com
FinancialMirror Double standards for Iranian depositors Published every Wednesday by Financial Mirror Ltd.
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In the light of the growing official ties between Iran and Cyprus, a number of non-political emissaries from Tehran are regularly meeting senior government officials on matters of mutual trade interest. Cyprus is keen to establish some kind of favoured status relationship in the oil and gas area and, no doubt, get something out of increased trade once the sanctions end, probably in the first quarter of 2016. Over the past ten years or so, and despite antiIran sanctions, a significant number of Iranians have also bought property in Cyprus. Some come and go on a ‘holiday home’ basis, others actually live here with residence papers and others conduct international business. However, over the past two years, many have experienced increasing difficulties with the Cyprus banks. Even those with long-standing accounts of more than ten years have found difficulty in getting money transferred in from abroad. Most of these problems may have stemmed from the sanctions, but these Iranians are beginning to wonder if there is something more sinister involved as they are experiencing problems with the banks beyond the actual sanctions. Typically, even when presenting cash sums for deposit, they are being refused, with the most complaints we have received related to one primary bank that seems to be the main offender which is
refusing to accept any deposits (not just electronic) to pay for mortgages that Iranians have on their Cyprus properties. Then, the bank whacks them with hefty penalties for not paying their mortgages, with one case involving so far a bank penalty of 11,000 euros and a threat of repossession. At first glance, it looks like wilful abuse and exploitation by the bank and one can speculate that they are just cynically looking for ways to steal the money of these people. However, this is all happening quite bizarrely at a time when the two governments publicly express so much entente cordiale. Moreover, many of the individual affected are very well connected back in Iran and their anger at this mistreatment is so great that they will register at the highest level their displeasure at their treatment by Cyprus banks. One can envisage this matter spreading rapidly across the highly sophisticated social and business networks in Iran (the message is “avoid Cyprus like the plague”) and for it to be raised at the diplomatic level. Thus, just at a time when President Anastassiades is trying to improve the trade and general relations between Cyprus and Iran, someone high at the banks has directed branches to throw a spanner in the works. Why? When the sanctions are lifted, there will be vast amounts of pent-up money coming out of Iran seeking investments of all kinds. If Cyprus banks continue to treat their existing Iranian customers so badly, it is highly unlikely that much of that new money will end up in Cyprus.
THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO
M&As up in 9M, BOC’s new ‘friendly’ face M&As were up in the first nine months of the year, but at a slow pace, while Bank of Cyprus unveiled its new management team, ten years after the ‘Metamorphosis’ facelift, according to the Financial Mirror issue 639, on October 5, 2005. M&As up: The number of mergers and acquisitions in the first nine months of the year showed a modest increase to CYP 38 mln, at a time when M&A activity in the rest of Europe was sharply
20 YEARS AGO
Cyprialife launched, bank profits up The Popular Bank launched its new life insurance subsidiary, Cyprialife, while all three major banks reported a strong rise in first half profits, according to the Cyprus Financial Mirror issue 130, on October 4, 1995. Cyprialife arrives: Laiki Popular Bank launched its life insurance subsidiary, Cyprialife, with Managing Director Andreas Aloneftis targeting a 20% market
higher, even faster that in the U.S. The biggest deal was CYP 21.6 mln for the 100% takeover of Chris Cash & Carry by Carrefour Marinopoulos, followed by Nasos Ktorides acquiring the remaining 30% of Quantum Corp. for CYP 3 mln. New face at BOC: A decade after Bank of Cyprus launched an ambitious plan to transform the century-old bank into a modern financial group, the new management team headed by CEO Andreas Eliades and flanked by Charilaos Stavrakis and Yiannis Kypri announced changes in the way the bank welcomes customers, with the
motto “The customer is king”. Shipping prospects: The shipping industry has seen two years of very strong growth, thanks to a range of factors, while continued strong demand from China could mean that the outlook continues to be favourable into 2006, but there are plenty of downside risks, Martin Stopford, Director of Clarksons told the Maritime Cyprus conference in Limassol. Turkish embargo: Shipping Council President Andreas Droussiotis said he was hopeful that Turkey would lift the embargo on Cyprus ships and aircraft as early as next March. Property sales down: Property sales declined by 29% y-o-y in the first half of the year to CYP 442 mln, due mainly to the introduction of VAT, higher transfer fees, rising cost of construction material and the slowdown in the economy and income growth.
share in the next 3-4 years, by when the company would also break even, according to Group Chairman Kikis Lazarides. Bank profits: All three publicly traded banks reported strong profit rises in the first six months of the year, with Hellenic enjoying the biggest rise in operating profits (+24.1%), Popular Laiki the highest profits (CYP 16.08 mln) and Bank of Cyprus the biggest rise in pre- and after tax profits (+17.4%). Stocks slide: The KEVE general index fell 0.45 points on profit taking with selling pressure rising as buyers remained on the sidelines. . Ships abducted: A new abduction of a Cyprus-flag ship by pirates off the coast of Vietnam brought the total to six this year, but all crew were released and negotiations were not necessary.
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October 7 - 13, 2015
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Next €500 mln due from ESM
6 . 3 b l n o f €9 9 bln used up so far, to exit bailout plan by March 2016 €6 The Board of Governors of the European Stability Mechanism (ESM) approved on Tuesday the updated Memorandum of Understanding (MoU) with Cyprus, following a positive assessment of the seventh review of the macroeconomic adjustment programme. The Luxembourg-based ESM is now expected to unlock the disbursement of EUR 500 mln on Wednesday morning. “Cyprus has taken another step towards a successful completion of its ESM programme in the first quarter of 2016,” said ESM Managing Director Klaus Regling. “The government has implemented the reform programme and the results are clear: not only with a correction of imbalances and a stabilisation of the financial sector but also a gradual return to growth and reduction in unemployment. This is the same pattern that we have seen in previous successful exits from ESM/EFSF programmes.” “The need for reform does not expire as we reach the final stages of this programme: Cyprus has many challenges ahead, most importantly a pressing need to vigorously reduce the very high level of problem loans which are burdening the banks and limiting their capacity to support to the economy,”
Regling concluded. Once this EUR 500 mln tranche is released, the total amount of disbursed ESM financial assistance for Cyprus will add up to EUR 6.3 bln out of the approximately EUR 9 bln committed by the ESM at the start of the financial assistance programme. Cyprus is expected to end its reliance on the programme in March 2016, three years after the bailout was effected by the Troika of international lenders – the IMF, ECB and the European Commission. The ESM was established in October 2012 and has the mandate to preserve financial stability in the euro area by providing financial assistance to member states with severe financing problems. These may include loans, precautionary credit lines, the purchase of bonds of ESM members in primary and secondary markets, and the recapitalisation of financial institutions directly and through loans to governments. The shareholders of the ESM are the 19 euro area member states, including Cyprus. It has a total subscribed capital of approximately EUR 700 bln, which comprises ?80 bln in paid-in capital and EUR 620 bln in committed callable capital. The ESM’s maximum lending capacity is 500 bln.
October 7 - 13, 2015
4 | CYPRUS | financialmirror.com
Shortlist for Limassol port down to 30 A total of 30 investors have been shortlisted for the privatisation of the three primary services areas of Limassol port. The preselection of investors who submitted an expression of interest began on August 10. Initially, 33 bids were received in the first stage, and the authorities had preselected 12 companies or consortiums interested in the container terminal, 10 for sea services, and 13 for the general cargo terminal. Some companies had submitted bids for more than one service. Transport Ministry Director General and Cyprus Ports Authority Chairman Alecos Michaelides said that the aim is to complete the process by March 2016, after which the
successful bidders will enter a transitional phase with existing staff and contactors. The next round of consultations is expected to begin in 15 days when the documents that will be given to investors will be finalised and the potential investors’ final bids should be presented by December. Based on the government’s plan for the privatisation of the port of Limassol, the CPA will remaintain as a public organisation, and will be the landlord with a regulatory role. As regards the old Limassol port, Michaelides said leasing contracts were expected to be signed this month, with parties interested in using its buildings. He said the interest was mainly for opening restaurants and cafes, which would liven up the area.
The state had included 40 venues in the competition but it only received bids for 18. Eventually, 16 bids were awarded. Michaelides expects that the rest would also be taken in the near future. The restaurants and cafeterias will attract the public and people interested in renting office space or shops, he said. However, the government continues to face stiff resistance from the 31 licensed porter companies who are expected to receive a compensation of EUR 27 mln – 20 mln of which has already been disbursed – and an additional 1 mln to compensate their workers. Trade unions staged a strike, costing the economy millions in unprocessed trade, as they insist on being paid upfront, prior to any deal with private partners.
BOCY covered bonds get “eligible asset” investment grade Bank of Cyprus announced that retained mortgage covered bonds have become eligible assets for Eurosystem credit operations, following a rating upgrade to Baa3 from B1 by Moody’s Investors Service. The rating of the covered bonds is placed at the same level as the Baa3 local currency country risk ceiling for Cyprus. Moody’s raised the rating of the bank’s mortgage covered bonds, following amendments to the bank’s Covered Bond Programme documentation, which converted the covered bonds to conditional-pass-through covered bonds and increased over-collateralisation for the covered bonds on a committed basis. Following the upgrade to an investment grade rating, the covered bonds have become eligible collateral for the Eurosystem credit operations and, therefore, have been placed as collateral for accessing funding from the ECB. Through this transaction, the bank said it has raised EUR 550 mln of ECB funding for the repayment of Emergency Liquidity Assistance (ELA). Prior to the rating upgrade, the covered bonds were used as collateral for ELA. Taking into account the above repayment, coupled with customer deposit inflows experienced during the third quarter of 2015, the bank said it has repaid a total of EUR 1.4 bln of ELA funding since June 30, reducing ELA to a current level of EUR 4.5 bln. With this transaction the bank said the Group reached another milestone in its efforts to restore its financial strength and is part of the Group’s strategy to normalise its funding structure and reduce its reliance on ELA. In total, the reduction in ELA is EUR 6.9 bln since its peak of 11.4 bln in April 2013.
UCy gets €3 mln donation for medical school Dr Artemis Hadjipanayis, a Cypriot physician who left the island in 1951 to study in Greece and later emigrated to the U.S. in 1958, has returned with a donation of EUR 3 mln to the University of Cyprus, that will be used for the new medical and biological sciences classrooms that will carry the donor’s name. The university also decided to name one of the five new amphitheatres in the new building “Kythrea” where the USbased professor was born and raised. Rector Constantinos Christofides said that “at the University of Cyprus we have a plan, which, thanks to our donors will help us realise the City of Learning project by the end of the decade. We are also building up the Diaspora University project where we will be able to attract notable Cypriots scientists who currently excel overseas.”
EBRD stake in Hellenic Bank to help deal with NPLs The European Bank for Reconstruction and Development (EBRD) has taken an equity stake in Hellenic Bank, the second largest commercial bank in Cyprus, investing EUR 20 mln in newly-issued shares. This is the second major investment by the EU growth fund that has already pumped about EUR 120 mln in Bank of Cyprus for a 5% stake when the island’s main lender was twice recapitalised and now includes shareholders controlled by funds managed by investor billionaire Wilbur R Ross Jr. EBRD opened an office in Cyprus last year and announced plans to pump up to EUR 100 mln a year over a 7-year development, mainly in the financial, services and energy sectors, as well as in the privatisation process. In the deal signed on Wednesday, the EBRD will hold 5.4% of Hellenic’s share capital and voting rights and the funds will be mainly used for growth and restructuring of non-performing loans, that presently account for more than 50% of the banking system’s loan portfolio. Present at the ceremony were Finance Minister Haris Georgiades,
Hellenic Bank Chair Irena Georgiadou and EBRD Cyprus Director Libor Krkoska. Hellenic Bank, formerly controlled by the then-wealthy Church of Cyprus, is listed on the Cyprus Stock Exchange and boasts New York-based Third Point and the online gaming company Wargaming.net as its major shareholders. The only other major shareholder with a bigger stake than EBRD is the Demetra Fund, publicly owned with a significant control by the Cooperative movement. During the 2013/14 financial crisis, when Bank of Cyprus sought EUR 4 bln in a depositors’ bail-in to stay afloat after absorbing now-defunct Popular Laiki Bank, and when the Cyprus government rescued the Cooperative Central Bank to the tune of EUR 1.5 bln, Hellenic Bank avoided support or European Central Bank funding, as it’s exposure to toxic Greek government bonds (GGBs) that spelled disastrous to others, was a mere EUR 100 mln, quickly written off. “By becoming a shareholder in Hellenic Bank the EBRD is taking a further important step to stabilise the
Cypriot banking sector,” said Lucyna Staƒczak-Wuczyƒska, EBRD Director for Financial Institutions and EU Banks. ?Our focus will be on NPL restructuring, balance sheet repair and operational efficiencies. Successful NPL management will allow the bank to return to profitability and further develop its business model for the benefit of private and corporate clients.” Hellenic Bank’s CEO Bert Pijls added that the additional capital raised aims to support the bank’s growth and contribute to the resolution of NPLs. The bank’s board announced last week the go-ahead to sign an agreement with the EU’s development bank for the acquisition of 10.7 mln new ordinary shares for a total amount of EUR 20 mln. Back in February, the board had approved increasing the share capital by EUR 35 mln in order to attract new shareholders. The additional capital raised will strengthen the bank’s Common Equity Tier 1 Ratio (CET1) by 50 basis points, taking it to 14%.
October 7 - 13, 2015
financialmirror.com | CYPRUS | 5
Third bond issue below €1.5 bln by year-end Finance Minister Haris Georgiades said on Tuesday that the government will return to the international markets for the third time in one and a half year and will borrow less than EUR 1.5 bln. ?It won’t be EUR 1.5 bln or more,” he told CyBC radio responding to a Financial Times report according to which the government plans to issue a EUR 1.5 lbn 10-year bond before the end of the year. “It will be less. We don’t have such needs”, he said, as the has a refinancing need of EUR 1 bln next month, as well as 3 bln in maturing bonds next year. “The exact amount, the maturity and when we will exactly attempt this issue will be decided later,” he added. “We have announced the selection of four large investment banks who will underwrite a possible new issue.” The four underwriting banks are Barclays, HSBC, Goldman Sachs and Nomura. The minister’s comments came after the the European Stability Mechanism board of governors announced the payment of a EUR 500 mln tranche to Cyprus as part of the 10 bln bailout plan. However, Cyprus has used up only two third of that amount and may considering utilising those funds for other
13-wk T-bills oversubscribed at 1.58% The weighted average yield during Friday’s 13-week Treasury Bills auction was 1.58%, with the issue four times oversubscribed, according to the Public Debt Management Office. The Finance Ministry’s PDMO said that tenders for a total amount of EUR 412 mln were submitted, out of which, 100 mln had been accepted with a weighted average yield of 1.58% based on a range of 1.50%-1.64%.
PDMO sees return to growth in 2015, amid improving business environment The Finance Ministry’s Public Debt Management Office (PDMO) forecasts a return to growth as from 2015, according to its monthly newsletter for October, taking into account the improved business operating environment. The newsletter said that in the second quarter of 2015, the rate of growth (in seasonally adjusted terms) accelerated to 0.8% compared with a rate of growth of 0.1% in the first quarter on an annual basis. “Having regard that, the business operating environment exhibits signs of growth amid improving conditions given a marginal positive lending to nonfinancial corporations in conjunction with falling interest rates, we assume a return to growth as from 2015”, says the newsletter. As regards to fiscal developments the general government budget balance (GGBB) was in surplus during the period January-August 2015.
Reg unemployed continues to fall The number of registered unemployed fell for the tenth consecutive month in September to the lowest level since March 2013, according to the Statistical Service Cystat. The number of registered unemployed at the end of September was 38,365 compared to 40,988 in August and 43,017 in September last year. Based on the seasonally adjusted data that shows the trend of unemployment, the number of registered unemployed for September decreased to 41,917 persons from 42,561 in the previous month and 46,799 in September 2014. This is the lowest number of registered unemployed recorded since March 2013, when unemployment stood at 41,100. Cystat data suggests that the number of unemployed people has been declining on a monthly basis since December 2014. Compared to September 2014, a drop of 4,652 persons or 10.8% was recorded mainly in the construction sectors, trade, manufacturing, financial and insurance activities, education and in the number of newcomers in the labour market. The largest number of unemployed by economic activity in September was in the wholesale and retail trade sector, followed by newcomers to the labour market. The majority are Greek Cypriots at 30,960, while there are 5,128 EU nationals, 2,084 people of other nationalities and 193 Turkish Cypriots.
projects, such as finance of development projects, as it has stated its intention to exit the three-year bailout programme by March next year. Government spokesman Nicos Christodoulides said that
“such moves will indicate that the economy’s credibility is restored at international level” “Confidence has been restored and market access reestablished. Market conditions permitting, we are planning a new bond issuance by the end of the year in line with our annual funding programme, but the exact timing and details have yet to be determined,” Georgiades had told the FT. Cyprus will be able to borrow at a rate of 3.5%, the newspaper said, with yields on the existing 10-year bond (2021) having dropped from 5.75% in February to 3.69% at present. In April, the government had sold EUR 1 bln in seven-year bonds, with the yield set at 4.0%, below initial expectations. Last year, it sold EUR 750 mln in five-year debt at a lower than expected rate of 4.85%. Since then, its credit rating has been upgraded by Standard and Poor’s and its deficit appears to have stabilised at levels much lower than expected. The reason is the better than expected macroeconomic environment as the ministry estimates that growth will reach 1% this year. The Ministry hopes that the 10-year bonds will maintain yields significantly below 4%.
Retail bonds pick up again, €28 mln sold, says PDMO Interest has recovered in the monthly issue of 6-year retail bonds, the government’s alternative financing method after the economy crashed two years ago, with EUR 28.4 mln sold in the October series, having plunged to their lowest level in September series when interest rates were lowered substantially. The Public Debt Management Office of the Ministry of Finance said that the tenth series attracted 61 bids for a total of EUR 28,424,600, nearing the year’s highs of EUR 30 mln in the August issue and EUR 31 mln the month before. The October series bids ranged from EUR 1,500 to EUR 5 mln, with the majority EUR 25.5 mln from foreign investors. Previous issues attracted non-EU foreign investors, keen to pump in at least EUR 300,000 to secure a residence
permit or more EUR 3 mln to qualify for citizenship. The PDMO said that the year-to-date figure has now reached EUR 182.8 mln, of which EUR 58.3 mln from Cypriot investors and EUR 124.5 mln from foreign nationals. The reason for the drop in the September series to just EUR 3.8 mln was the reduction in the average 6-year yield to 2.79%, down from the 4% average at the launch of the programme. Bids for the eleventh series for November will open from October 2 to 20 and will be issued on November 1. The retail bond offer, that is restricted to individuals and supposed to have a monthly cap of EUR 10 mln, with the aim of raising EUR 100-120 mln a year, has raised EUR 243 mln for the government since the programme was launched in 2014 that has only this
year returned to the markets following an austere bailout programme imposed the Troika of international lenders in 2013. The interest rate for the 2015 series had been adjusted downwards by 0.25 percentage points and ranged from 2.50% for the first year to 5.50% in the final year. These are subject to 3% tax on interest, far more attractive than the 30% tax imposed on bank deposit interest. In May, the PDMO said it was lowering the interest rate on future bonds starting from the September series, to 2.5% for the first 24 months, 2.75% for 24-48 months, 3.00% for 4860 months and 3.25% for 60-70 months. The annual coupon rate when the series was first launched in May 2014 started from 2.75% and averaged at an attractive 4% over a six-year period.
HICP: Deflation continues in Sept The Harmonised Index of Consumer Prices (HICP) for September recorded a -1,9% rate of inflation, the Statistical Service said. The rate for September was the same as in August, while the inflation rate for September 2014 was flat at 0%.
October 7 - 13, 2015
6 | CYPRUS | financialmirror.com
Aeroflot will continue Transaero flights to December Troubled Russian carrier Transaero will continue to fly to and from Cyprus until October 15 after which statecontrolled Aeroflot has pledged it will take over Transaero flights scheduled until December 15, according to the Russian ambassador in Cyprus. He reassured Energy and Tourism Minister Giorgos Lakkotrypis that the flights would continue and Cyprus would not be affected by a loss of some 30,000 pre-booked holidaymakers. A Ministry official briefed the parliamentary trade committee that from September until November, Transaero was scheduled to carry 32,000 passengers from Russia to Cyprus, while Costas Koumis, Vice Chairman of the Cyprus Tourism Organisation said that the closure of Transaero was a cause for concern, especially after takeover talks with Aeroflot did not proceed. “We are concerned about developments, but we can deal with the situation,” he told MPs, noting that “the situation is changing.” According to Koumis, there was a 16% increase is in arrivals from the UK while tourists from Germany increased by 70%, both of which compensate for the lsos of tourist arrivals from Russia. He that the CTO never abandoned the promotion effort in Germany and that “we continue to invest in that market”. He added that there is also an increase of tourists from the Dutch market and from Israel. Koumis added that the number of tourist arrivals from Israel was 96,000 while a 50% increase in arrivals from France is expected in 2016. On Friday, Transport Minister Marios Demetriades had said that the potential collapse of Transaero, Russia’s second biggest airline, will have a “minimal” impact on Cyprus, as only 30,000 are scheduled to arrive on the island until the end of the year, with 350,000 already carried this year. Trasaero is the primary carrier to Cyprus for BiblioGlobus, the tour operator that accounts for 70% of all Russian arrivals on the island. Rival state-controlled Aeroflot, with whom takeover talks failed on Thursday, will probably take over this added traffic for the rest of the year, until a second scheduled airline is designated for next year in accordance with bilateral treaties between the two countries. Association of Cyprus Travel Agents (ACTA) chairman Dinos Kakkouras said that Transaero flights were continuing as normal, also confirmed by Adamos Aspris, spokesman for airports operator Hermes. “We are waiting to see how the Russian government will handle the development and we are waiting to be briefed by tour operators about what happens next,” Kakouras said. Some 40 weekly Transaero flights between 18 Russian regional airports and Cyprus are carried out every week, with
Russian now accounting for the second biggest tourism market of the 2.5 mln arrivals, following the U.K.’s 1 mln tourists. Despite the economic crisis in Russia, due to sanctions and spiralling inflation hurting consumer spending, Russian airlines carried 63.9 mln passengers during the first eight months of the year, up 0.4% year-on-year, while in August passenger numbers grew 2.3% to 11.5 mln, continuing a trend of the previous months. International traffic was down 13.6% compared to a year ago to 28.2 mln, according to Russia’s Federal Air Transport Agency. In January-August, Aeroflot carried 17.3 mln, up 10.2% yo-y, Transaero carried 9.4 mln, up 3.6% y-o-y, Saint Petersburg-based Rossiya, an Aeroflot Group member, carried 3.4 mln, down 0.9% y-o-y, S7 Airlines carried 5.5 mln, up 1% y-o-y, while Globus Airline, a member of S7 Group, carried 1.6 mln passengers, up 18.9%. UTair carried 3.8 mln, down 38.7% y-o-y. All these carriers fly to Larnaca and Paphos, but have not clearly expressed a desire to take over Transaero’s capacity. On Thursday, Aeroflot dropped its offer for a controlling stake of just over 75% of Transaero. It said that Transaero didn’t submit a formal proposal for the deal by the agreed deadline and that its board of directors wouldn’t extend the deadline for talks. The government-brokered deal was aimed at staving off bankruptcy at the heavily indebted Transaero, which has curtailed aircraft purchase deals to save money. The collapse of talks could have ramifications beyond Russia as Transaero is a buyer of Boeing and Airbus jetliners. Airbus had already delayed delivery to Transaero of the
first of the carrier’s A380 superjumbos, originally due this year, because of weakness in the Russian airline sector. Transaero had ordered four A380s. Airbus has been struggling to sell A380s which retail for more than $400 mln at list price, though customers typically get discounts. The airline also had orders four Boeing 747-8 jumbo jets, which remain to be delivered. The acquisition of Transaero would have bolstered the Aeroflot Group’s share of Russia’s airline market beyond 50%, according to the Wall Street Journal. The management of Russia’s dominant airline was apprehensive about the deal, though, because of Transaero’s financial situation, Russian airline experts have said. Aeroflot Chief Executive Vitaly Saveliev said Aeroflot would ensure Transaero passengers won’t be impacted by the collapse of talks. “Passengers will be guaranteed transportation or a refund in the event that a flight is cancelled,” he said. Aeroflot effectively took over operational control of Transaero already last month. Founded in 1990, Transaero had a fleet of 97 airplanes and an outstanding debt of 67.5 bln roubles ($1.03 bln) at the end of the first half of 2015. Herman Gref, head of Russian lender Sberbank, which lent money to Transaero, said earlier this year that the company’s debt issue was “serious.” Cyprus Tourism Organisation Deputy Director Annita Demetriadou said that she expects no disruptions in October, in which more arrivals are expected compared to November and December. Transport Minister Marios Demetriades said that a probable failure of Transaero could create a gap in Cyprus’s connectivity to Russia affecting the tourism industry.
Loans in CHF: Yet another banking sector scandal? By George Mountis and Costas Zeniou Swiss franc denominated loans started blooming in Cyprus in 2006, when the Republic was a candidate for euro area membership. At the time, Swiss franc loans lured in consumers on the premise of a significantly reduced cost of borrowing. Around 11,000 of borrowers will be affected by the parliamentary Finance committee should they reach a decision on the CHF loans. Currently, borrowers in Swiss francs have seen their loans inflate as a result of the Swiss currency gaining significant strength against the euro. At present, a euro trades at less than 1.1 Swiss francs, whereas some borrowers have borrowed at rates above 1.6. On September 21, Members of Parliament asked the Central Bank of Cyprus (CBC) to investigate the cost to local banks to convert mortgages in CHF to euros at their original exchange rates. The CBC has just two weeks to communicate with the banks and provide its opinion and parliament warned that legislation regarding the case would follow even without an answer from the CBC. The significant volume of CHF denominated loans in the Cyprus is suggestive of the banks’ foreign currency loan selling practices in previous years. It’s not too difficult to estimate the full extent of the
damage. The billion euro question concerns the legality of these loans, particularly whether Cypriot banks were transparent in communicating risks involved. There is already a precedent set for CHF loans in Croatia, Greece and Hungary, where the banks bear the FX hit. This is not the only case where a European court has ruled in favour of the consumer when it comes to foreign denominated loans. A recent court decision in Athens called for the banks to pay for the full extent of the foreign currency hit. The court cases stress that European consumers are protected against dubious selling practices that banks evidently engaged in. From our perspective, some banks have handled the CHF
issue more responsibly than others. Most banks are willing to share at least some of the burden of foreign currency loans and our restructuring practice has forced banks to negotiate up to 100% of the foreign exchange loss, especially in the case of mortgages or personal loans. Whereas some banks deal with each case individually, others employ universal policies of 5-12% write-offs. The Greek subsidiaries appear to be more advanced at dealing with these types of cases, settling at much higher write-offs. In most cases, however, this will require significant negotiating and even the threat of legal action. Most consumers will be unable to resist the banks’ negotiating tactics. Moreover, as a general rule banks are willing to write off just 5-12% of the hit, arguing that the borrowers were well aware and informed of the risks. Additionally, the borrowers are required to sign off their rights to any further claims. It should be clear that consumers are protected against mountains of non-transparent lending. There is no arguing that banking practices regarding foreign currency loans have been dubious in the past. Although an authoritative decision on foreign currency loans should force the banks to accept responsibility, it will take a significant toll on an already fragile financial sector. Dr. George Mountis is Managing Partner and Costas Zeniou is Senior Analyst at Delfi Partners restructuring@delfipartners.com www.delfipartners.com
October 7 - 13, 2015
CYPRUS | 7
Blue Career 2015 looks at maritime job prospects “Blue Career 2015”, a two-day event which aims to raise awareness amongst the younger generation for jobs in the marine and maritime industry, including oil and gas, will be held on Thursday at newly established Maritime Academy (Intercollege building), in Larnaca and on Friday at the Cyprus University of Technology in Limassol. This the third annual event and is being co-organised by the Cyprus Shortsea Promotion Centre (www.shortsea.org.cy), the Cyprus University of Technology, the Maritime Institute of Eastern Mediterranean (www.marinem.org) and the newly founded Cyprus Maritime Academy. This year’s event will see participants from secondary schools, universities, unemployed graduates and other
professionals and includes presentations by experts from both the private and public sectors. The guest speakers will also highlight the specific qualifications required for each discipline, what their duties and responsibilities will be, as well as their future employment opportunities and career development. The event will be held in Greek and entrance will be free. Speakers include Zacharias Siokouros, Lloyd’s Register Marine Business Manager Cyprus – President of MarInEM; Stelios Mavromoustakos, Executive Director, Cyprus Maritime Academy; Panikos Giorgoudes, Senior ∂ducation Officer, Ministry of Education and Culture; Alessia Clocchiatti, Administrative Coordinator, DG MARE, European Commission; Yiannis Mourouzides, Acting
Director of Research and Planning, Human Resource Development Authority; Kyriacos Kyriacou, Marine Surveyor, Seafarers Division, Department of Merchant Shipping; Anastasis Filippou, Association Merchant Marine Officers; Ionas Koulentros, Marine Engineer; Demetris Charalambous, Senior Manager - Hotel Operations & Onboard Revenues, Celestyal Cruises; as well as representatives from the Cyprus Shipping Chamber, Cyprus Naval Architects & Marine Engineers Association, the University of Nicosia, the University of Cyprus, Columbia Shipmanagemet Ltd., diving instructors, accounting and ship-management firms, and the Ports Authority. For further information, contact info@shortsea.org.cy /admin@marinem.org or call +357 2502 5531.
BSM celebrates 40 years in Cyprus shipping Bernhard Schulte Shipmanagement, one of the leading service providers to the Cyprus shipping industry, celebrated over 40 years’ presence with a special stand and hospitality event during the “Maritime Cyprus” conference in Limassol that attracted distinguished speakers and over 700 shipping delegates to discuss and debate this year’s theme, “Game Change”. Visitors to the BSM included Transport Minister Marios Demetriades, the General Secretary of the International Maritime Organisation, Koji Sekimizu, a number of highlevel representatives from BSM’s worldwide offices, associates and partners. BSM Cyprus and Hanseatic Chartering also hosted a hospitality event at the new BSM Maritime Training Centre close to the new marina, with the participation of over 300 guests. The reception was addressed by BSM Cyprus Managing Director Arthur McWhinnie, and was attended by Minister Demetriades, Limassol Mayor Andreas Christou, officials from the Department of Merchant Shipping of Cyprus, the
Cyprus Shipping Chamber, the Cyprus Union of Shipowners, and representatives from shipping and management companies.
October 7 - 13, 2015
8 | COMMENT | financialmirror.com
IN A PAN QUICKLY
FOOD, DRINK and OTHER MATTERS with Patrick Skinner
Speedy Supper Suggestions
I hope your week has gone well. Mine has been considerably inconvenienced by the unwillingness of my laptop to fire up. I am not very efficient at “backing up” my data on to a disc or a memory stick, so haven’t access to a lot of recent pictures, recipes and other files. “So?”, I hear someone say. So – this week, courtesy of my wife’s laptop and my camera, you get two pictures I happened to take a couple of days ago, and the recipes, which I was working on. The first one takes advantage of the wonderful Cyprus potato (I am not surprised at the stories of the success of local potato farmers with young women visiting Ayia Napa) which has no peer in the world in my opinion.
Potato Cakes Ingredients for 4 servings 4 medium potatoes, skins scrubbed or removed 1 medium onion Several sprigs of parsley, chopped Salt and pepper to taste Oil for frying Method 1. Cut each potato into four and cook in boiling water until almost cooked through. 2. When done, remove from pan and set aside. 3. Peel and slice the onion thinly. 4. In a non-stick frying pan, heat a couple of tablespoons of sunflower oil and fry the onion stirring from time to time, until cooked through and a little golden at the edges. Remove from pan. Cool. 5. Chop the parsley. 6. Put the cooked potato into a bowl and mash coarsely. 7. Add onion, parsley, salt and pepper. Mix well. NOTE: I find that usually this mixture is sufficiently malleable to form into balls for frying, but if not, some beaten egg may be added as binding. 8. Anyway, form the mixture into about eight to ten patties, as in my picture, and cool in the refrigerator for a good hour. 9. Then, when you’re stamping the ground with hunger, remove them and fry gently on both sides (about eight to ten minutes)
This dish can be elaborated in several ways. You can dredge each patty in flour, dip in beaten egg and then dip again into breadcrumbs before frying. This is good. Potato cakes are very good with fresh grilled fish, with griddled chicken fillets or seafood. For any of these I would have a dry, chilled white or rosé to hand.
“One meatball, without the gravy” Whenever I make these I sing, totally untunefully, the words of a classic 1940s pop song called “One Meatball”. Google the lyrics, they’re a work of art I tell you. I like my meatballs fairly coarse (“Like your jokes”, my wife tells me), as my picture shows. Ingredients for 4-6 portions 450 g lean beef, chopped by hand or coarsely minced (be careful if using a food mixer not to make it too fine). 1 medium onion, peeled and finely chopped. One cup of medium-sized breadcrumbs. Half tsp beef stock powder (if you only have cubes, use half a cube, chopped and mixed with a tiny tad of boiling water). A couple of pinches of Herbes de Provence. Half tsp of mustard powder (optional). Some beaten egg to bind. Salt and Pepper.
Method 1. Put all ingredients, except beaten egg, into a bowl. 2. Mix well, adding a little of the egg until you have a nice mix that can be shaped into balls. 3. With a dessert spoon, take a spoonful of mixture and form into a ball. 4. Put all your meat balls on to a plate, cover with cling-film and leave in the refrigerator for at least one hour. 5. When you are ready to cook, roll each meatball in flour and gently put into hot oil in your frying pan. 6. Cook gently, turning from time to time until nice golden-brown all over. 7. Serve with warm pitta (they are very nice served in pairs, with cooking juices, inside a pitta or a bread roll). Serve with a chopped Arab or Greek salad, yogurt or hummus and a fruity young red wine. By all means substitute lamb or pork for the beef. Scandinavians like their meatballs a mix of beef and pork.
Garlic meatballs This is an Algerian dish called Muththawin. If you are a garlic buff, like me, you will like this take on the traditional meatball. It is interesting, too, because it is meatballs cooked in a meat stew.
Sauté of Beef Ingredients for 4-6 portions 4 tablespoons butter. 1 large onion, finely chopped. 450 g beef cut into very small (2.5 cms / half inch) cubes. At least 1 clove of garlic, peeled and crushed (you may increase this as much as you wish!) Salt and pepper to taste. 1 teaspoon cinnamon. A pinch of cayenne. The meatballs 450 g / 1 lb ground beef. 1 cup of Easy-Cook rice, rinsed. 1 bunch parsley, finely chopped. 1 egg beaten. 4 tablespoons tomato paste. 1 can chickpeas (400g) undrained. Method 1. In a saucepan, melt the butter and sauté the onions until they begin to brown. 2. Add the cubed meat, half the garlic, salt and pepper, ? teaspoon of the cinnamon, and the cayenne. 3. Sauté for a few minutes. 4. Add water to a depth of 2.5 cms (one inch) and bring to a boil; then cover and simmer over medium heat for 45 minutes. 5. In the meantime, thoroughly mix the ground beef, rice, parsley, egg, and the remaining garlic, salt, pepper, and cinnamon. 6. Form into small meatballs; then gently place them in the simmering saucepan. 7. Bring to a boil, and simmer for about 15 minutes. Add the tomato paste and the chickpeas with their liquid; then simmer over a medium heat until the meatballs are done.
Go to www.eastward-ho for more recipes, food and wine news and notes.
October 7 - 13, 2015
financialmirror.com | COMPANY NEWS | 9
Altius Insurance launches rebranded image
French week at Lidl stores Lidl stores, marking their fifth anniversary in Cyprus, will introduce French products, charcuterie and desserts during the ‘French Week’ from October 12 to 18. Branded under the Duc de Coeur range, these include macaroons with various filling, walnut flavoured salami and chocolate mini-cakes with orange and berry filling.
Cyprus wines at La Sélection Swiss awards La Sélection, an independent, open wine competition for all Swiss wine merchants and producers held on August 31 and September 1 at the Congress Centre Basel chose three Cyprus wines for the Gold and Silver awards - two Commandarias from Etko Olympus and a Red Maratheftiko from Zambartas. In all, 752 wines from the major producing regions of the world were sampled, of which two wines were awarded with the “Sélection de l’année”, 57 the “Medaille d’Or” (Gold) and 183 with the “Medaille d’argent” (Silver). “The foreign wines were particularly impressive from Spain. From 50 samples, almost half took an award, six with the Medaille d’Or and 18 with the medal d’argent,” the organisers said, adding that “this year’s award also saw excellent wines from lesser-known wine-producing countries such as Bulgaria, Lebanon, Hungary and Cyprus.” The winning wines will be presented at the Basel Wine Fair from October 27 to November 4. The winning Cyprus wines were: Gold - Commandaria Centurion 2000, Etko Olympus Winery. Silver - Commandaria St. Nicholas 2010, Etko Olympus Winery; and, Red Maratheftiko 2013, Zambartas Winery. The two wines that won the “Sélection de l’année” were: Red - Vino Nobile di Montepulciano 2007, Poliziano, Toscana, Italy; White - Ambassadeur des Domaines Diego Mathier blanc 2013, Adrian & Diego Mathier, Wallis, Switzerland.
The King is back! BK opens Larnaca store, more soon Burger King is back in Cyprus, having opened its first restaurant in the King’s Mall in Paphos and the second restaurant on the popular Phinikoudes seafront in Larnaca, replacing the Goody’s restaurant in the same location. Operated by Wow Burgers Ltd., an affiliate of the PHC Franchised Restaurants Public Ltd. that already has the Pizza Hut, KFC, Taco Bell, Wagamama, Caffé Nero and Derlicious brands, as well as the Hobo Café and Restaurant, the company said that the aim is “to give Burger King the presence and market share it deserves.” Burger King had failed under its previous management that saw the international company withdraw the license and return now with the more reliable PHC family.
Altius Insurance, formerly Alpha Insurance, has rebranded its head and regional offices, marked by a special ceremony officiated by Archbishop Chrysostomos II. Board Chairman Doukas Palaiologos and CEO Avangelos Anastasiades said that the company continues with the same sales force and network that it has had over the past 22 years and will continue with the same insurance products in the life and general sectors. Despite being managementowned, Altius maintains an exclusive representation with Alpha Bank for bancassurance products and services.
October 7 - 13, 2015
10 | COMMENT | financialmirror.com
EP calls for inquiry into VW scandal Skoda, Audi and Volkswagen. “We will find out if these engines are Euro 4. Maybe we will be surprised that they are even Euro 3,” the minister said. “Romanians would not have to pay this extra tax. This will be assigned to those who have misled the good-faith owners,” she said. Asked to comment on reports that the total sum could reach EUR 1 bln, Gavrilescu said that whatever the amount is, Romania would ask Volkswagen to pay. “Since this is a matter of fraud, and since we are obliged to defend the rights of the car owners and of the Romanian state, we will do it,” Gavrilescu said. In the US, the Environmental Protection Agency (EPA) said that the software deceived regulators measuring toxic emissions, adding that Volkswagen could face fines of up to $18 bln as a result. The carmaker could face penalties of $37,500 for each car not in compliance with federal emissions regulations.
By Aline Robert EurActiv France The presidents of four parliamentary committees have asked the European Commission to open an inquiry into the Volkswagen emissions scandal. Several European Parliament committees have asked about the past role of the European executive in car emissions testing, and called for an inquiry into the Volkswagen scandal. The presidents of the Environment, Transport, Internal Market and Industry committees have decided to investigate how Volkswagen cars could have cheated the testing system without the fraud being picked up at any stage. While Volkswagen’s cheat device was discovered in the United States, the majority of the 11 mln cars affected are in circulation in the European Union. This is the substance of the question submitted to the Commission by the four committee presidents. “What role has the Commission played so far? How can the independence and accountability of national type-approval and testing authorities be ensured?” the MEPs asked. A petition launched by the European Parliament’s Green group asking the Commission to open an inquiry into the pollution test fraud has gained over 110,000 signatures in under a week. But even the Greens cannot agree to adopt one position. German lawmakers have been fairly reserved, while French and Spanish MEPs have shown real fervour in taking up the issue. Other German legislators, from across the political spectrum, appear to be deeply concerned about the plight of their national champion. But the European Parliament has a history of difficult relationships with groups that lobby for diesel fuel, or resist stricter emissions tests. The chamber has long been calling for laboratory emissions tests to be replaced by tests under real-world driving conditions.
ON-GOING INQUIRIES IN FRANCE A number of inquiries have already been opened in France, including two criminal
El˝bieta Bieƒkowska is the Polish European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs
investigations, and an administrative inquiry into the suppression of fraud. But the European Commission seems reluctant to open any kind of inquiry. Elzbieta Bieƒkowska, the Internal Market Commissioner, has upset MEPs by saying that the executive intends not to act until the member states have conducted their own national investigations. EU lawmakers addressed their questions directly to Bieƒkowska in Tuesday’s plenary session. If the European Commission refuses to open an inquiry into the matter, MEPs still have the option to ask for the establishment of a parliamentary committee of inquiry; the preferred option of many Green members. But while possible in theory, this is no easy task: the Conference of the Presidents (an assembly of the European Parliament president and the leaders of the political groups) this year refused the creation of a committee of inquiry on tax rulings, agreeing instead on a less powerful special committee. Only three committees of inquiry have ever been opened since the inauguration of the European Parliament in 1979: on the Community Transit Regime, the Equitable Life Assurance Society and mad cow disease.
Environmental standards: The Transatlantic divide The Volkswagen emissions scandal has continued to rumble on, spreading outside U.S. borders. Nearly 1.2 mln vehicles have also been affected in the United Kingdom. Interestingly, there is an immense transatlantic divide when it comes to perceptions of environmental safety standards. Pew Research analysed the views of Americans and Germans on environmental safety, finding that people in both countries have more trust in their own standards. It will be interesting to see if Germans change their views and put more faith in American environmental safety standards in the wake of Volkswagen’s “diesel dupe”. (Source: Statista)
ROMANIA PREPARING TAX CLAIM Meanwhile, Romania’s Minister of Environment, Gratiela Gavrilescu, said that her country will bill VW for additional environmental tax, and that it would impose a fine. It isn’t fair for the state to ask Romanian citizens, who have bought Volkswagen cars in good faith, to pay additional environmental taxes, Gavrilescu said. Car owners in Romania pay an environmental tax calculated according to their vehicle’s specifications. The Volkswagen scandal has revealed that the carmaker designed software for diesel cars that gave false emissions data. Eight million cars sold worldwide were equipped with the software. Gavrilescu referred to the fact that Volkswagen was going to inform the Romanian government on October 7 of the engine data of cars sold in the country. Based on this, the authorities were going to reevaluate the amount of environmental taxes levied on consumers. An estimated 105,000 cars from VW Group, with Euro 5 Diesel pollution standards, are registered in Romania, 56,000 of which were purchased new. They are Seat,
Cyprus: 1349 VW diesel engines affected Volkswagen AG distributors Unicars Ltd. said that in Cyprus a total 1349 engines carry the altered software for emission controls. These affect 480 Volkswagen cars, 598 Audis, 103 Skodas, 119 Seats and 49 VW commercial vans. These models use the EA 189 engine (1.2lt.,1.6lt 2.0lt), while Unicars said that these engines remain technically safe and roadworthy. The recent uproar does not involve new models that have the EU6 engines, nor the petrol engines. Information is available at www.vw.com.cy , www.audi.com.cy , www.skoda.com.cy , www.seat.com.cy or may contact customercare@unicars.com or call 80077560. The company said that during this month they will indicate to the authorities any measures that need to be taken.
October 7 - 13, 2015
financialmirror.com | COMMENT | 11
IMF confirms slower global GDP growth targets in 2015 and 2016 When Christine Lagarde of the International Monetary Fund (IMF) spoke last week, it had all the hallmarks of a precursor to a downgrade of the IMF’s global growth targets. Now we have a confirmation that the IMF did in fact downgrade its global growth views ahead in the October version of the World Economic Outlook. There actually may be some good news here despite the direction of the move. Global GDP growth is moderate and uneven, and the new IMF forecast is for global GDP growth of 3.1% for 2015 and 3.6% in 2016. That growth was 3.4% in 2014. Again, think of the severity (or lack thereof) rather than the direction and think about those numbers versus how the markets were reacting to slowing economic numbers in August and September. A focal point of the IMF, as you would expect, is that there are disparate fortunes between the advanced and emerging market and developing economies. The other point made was that lower commodity prices are weighing on commodity exporters — a move that may not end any time soon. Three forces were cited for the formal growth downgrade: - China’s economic transformation that is away from export-led and investment-led growth and manufacturing, in favour of a greater focus on consumption and services; - The fall in commodity prices; - The impending increase in U.S. interest rates, which can have global repercussions and add to current uncertainties. The IMF noted that the recovery in advanced economies is staying its course. It said: “Growth in advanced economies is projected to increase modestly to 2% this year and 2.2% next. This year’s pickup reflects primarily a strengthening of the modest recovery in the euro area and a return to positive growth in Japan, supported by declining oil prices, accommodative monetary policy, and improved financial conditions, and in some cases, currency depreciation… While growth is expected to increase in 2016, especially in North America, medium-term prospects remain subdued, reflecting a combination of lower investment, unfavorable demographics, and weak productivity growth.” What the world needs to be more concerned about than anything is a slower growth in emerging and developing economies. The IMF’s outlook in 2015 is generally weakening, with growth for emerging and developing economies as a group projected to decline to 4.0% in 2015 from 4.6% in 2014. This would be the fifth straight year of slowing growth. Weaker oil export from oil nations, the woes of China, Latin American weakness and geopolitical tensions and domestic strife in a number of countries were all also noted for a slower global growth story. The IMF said: “External conditions are becoming more difficult for most emerging economies. The prospect of rising U.S. interest rates and a stronger dollar has already contributed to higher financing costs for some borrowers, including emerging and developing economies. And while the growth slowdown in China is so far in line with forecasts, its cross-border repercussions appear larger than previously envisaged, including through weaker commodity prices and reduced imports.”
By Jon C. Ogg
The projected rebound in growth in emerging market and developing economies in 2016 therefore reflects not a general recovery, but mostly a less deep recession or a partial normalisation of conditions in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East), spillovers from the stronger pickup in activity in advanced economies, and the easing of sanctions on the Islamic Republic of Iran. Growth in low-income developing economies is expected to slow to 4.8% in 2015, from 6% in 2014, in large part due to weak commodity prices and the prospect of tighter global financial conditions. Some countries (e.g., Kyrgyz Republic,
Mozambique) have been running large current account deficits, benefiting from easy access to foreign savings and abundant foreign direct investment, especially in resourcerich countries, and hence are particularly vulnerable to external financial shocks. Frankly, none of this should be surprising to anyone who has been paying attention to the financial media. Another consideration, a problem that has existed with the other economic watchdog groups (including our own Federal Reserve), is that everyone’s global growth targets seem to have been too high routinely. (Source: 24/7 Wall St.com)
Cyprus: IMF sees “modest” recovery, 0.5% in 2015, 1.4% in 2016 The International Monetary Fund’s World Economic Outlook said that the recovery of the Cypriot economy this year will remain “modest” with an estimated growth rate of 0.5% for the whole of 2015, after shrinking by 2.3% in 2014, while for 2016 it maintains its growth estimate of 1.4%. Unemployment is expected to remain at the high levels of 16% in 2015, from 16.1% in 2014, while for 2016 it is expected to decline to 15%. Inflation is expected to reach 1% this year from a deflation of -0.3% in 2014, while in 2016 it is expected to reach 0.9%. The IMF expects the current account deficit to fall to
4.2% of GDP this year from 4.5% in 2014, while for 2016 it is expected to fall further to 3.8%. The eurozone is expected to grow by 1.5% this year and by 1.6% in 2016, while in Greece, the economy is expected to shrink by 2.3% this year following a growth of 0.8%, and in 2016 decline is seen at 1.3%. For the global economy, the IMF notes that six years after the world emerged from its broadest and deepest post-war recession, a return to robust and synchronised global expansion remains elusive. The US economy is forecast to grow by 2.6% in 2015 and 2.8% next year, while Russia is expected to shrink by 3.8% this year and by 0.6% in 2016.
October 7 - 13, 2015
12 | PROPERTY | financialmirror.com
Virtual reality: A powerful design and decision making tool in the construction industry By John Bellos The level of civilisation of a country in a certain historical period is represented by the level of its construction capabilities and standards. This stands because the cultural level, the architectural aesthetics, the scientific knowledge and the technological development of the people reflect upon the quality of the various structures. The decision making on selecting architectural forms, materials and construction methods proved to be immensely decisive through the ages. Of course, it was strongly influenced by the local environmental conditions, as sun and clouds, hot or cold
weather, mountain or sea, rocky or muddy grounds. In some parts of the world certain natural causes, such as seismic events and floods, have also played a significant role in the evolution or annihilation of various civilisations, emphasising the importance of correct decision making in construction. Nowadays, the dissemination of science, the evolution in the material properties, the innovative construction methods, the constructional industrialisation and the impressive technological advancements in hardware and software allow building designers and construction engineers to make decisions with prudence but without fear. In fact, any proposed changes towards new architectural forms can predominate before these forms prove themselves of being earthquake resistant, economical, sustainable or harmonically fit to the environment. A three-dimensional world built in a computer virtual environment, escorted by an optimal decision making algorithm and assisted by experience in construction accumulated through the ages, enables building designers and construction managers to foresee and analyse the structural difficulties before these even appear. The building design process is subdivided into three parts: the preliminary design, the final design and the detailing. The building designers usually have the time to go through an iterative process and, after analysing all data and parameters, to come out with an optimal and more or less error free solution. On the other hand, the construction process is separated into six stages: the structural framework, the gross-beton layering, the brickwork, the frame fitting for windows and doors, the plastering and the final detailing. Secure decision making at any stage is extremely difficult because each action taken usually affects processes in more than one stage. The construction managers usually deal with
a wide range of multistage problems and must take fast decisions under pressure without being fully aware of what side effects might be created. The effects of decision making in construction are not easy to be accounted for and surely not sufficiently exploited in current building design practice. This stands not only when traditional construction methods are used, as for example in small scale buildings in many Mediterranean countries, but also when highly industrialised procedures of either open or closed construction systems are followed, as those in large scale structures and massive developments. Before developing any decision making scheme, suitable building digital models should be chosen to represent the physical, functional and technical characteristics of the building. The total structural model follows the Building Information Model (BIM) scheme in order to allow a flawless integration with some virtual reality (VR) software. In this way the data of the physical and mathematical models of the building are handled successfully. Furthermore, if industrialised production is implemented, the structural components follow the Industry Foundation Classes (IFC) scheme. These data handling schemes, assisted by computer graphics, lead to an ultimate 3D representation of the building components whereas the continuous frame projections (approximately 60 frames per second) help to maintain a constant visual contact and thus generate of a virtual world. The formulation of the building physical model is based on the following: Like any solid object, the building itself consists of solid structural components and layers, as beams,
columns, slabs, footings, walls, doors and windows, railings, insulation, plaster, tiles, etc. Each solid component is formed by a set of surrounding surfaces and each surface is broken down into triangles paired by common edges. Especially when we observe the responses of the load bearing structure as deflections and stresses, or unusual structural geometries as hyperbolic roofs and parabolic walls, the number of triangles must increase in the intensive areas. The more triangles used for the surfaces the greater the accuracy of the image is, but at the same time this leads to increased computational time and therefore much slower decision making process. The snapshots of modeshapes participating in the overall seismic response of the building are shown in the figures here. These are actually animated in real time structural modeshapes, giving to the decision makers, designer engineers or construction managers, a qualitative perception of seismic behaviour of the building while the quantitative values result from modal superposition. All the above take place in real time, in an environment formed by continuous frame projections, maintaining a constant three-dimensional visual contact with the detailed building model and providing stereoscopic visualisation (via stereoscopic glasses), human interface, animating capability, speech response and all the technological features that any contemporary multimedia may offer. This article points out how modern multimedia technologies can be used in the critical area of the construction industry for eliminating erroneous, misleading and sometimes catastrophic decisions. The innovative, straightforward and highly technological techniques presented add value to optimal design and decision making processes. After all, if the Chinese saying “one picture is equivalent to 1000 words” is true, then viewing 60 such pictures per second is equivalent to condensed human experience facilitating scientific observation and verification. Dr. John Bellos j.bellos@nup.ac.cy is Assistant Professor of Structural Design and Construction Technology at the School of Architecture, Land and Environmental Sciences, Neapolis University Pafos http://www.nup.ac.cy
Property prices start to stabilise in Q2 Property prices seem to be stabilising, according to Central Bank of Cyprus data, despite a continued decrease in the value of the relevant index for the 22nd successive quarter. However, in all areas, the annual declines in the second quarter were smaller than those of the previous quarter. The property price index fell at a decelerated pace of 0.4% in the second quarter of 2015 compared to a 1% decrease in the first quarter. House and apartment prices fell by 0.4% and 0.6%, respectively. On an annual basis, house prices
declined by 5% in the second quarter of the year, registering a decelerating annual decline rate for the fifth consecutive quarter. “The economy as a whole is showing signs of recovery as GDP in 2015 is registering a positive growth, while demand for real estate continues to show annual increases. These developments are expected to aid in stabilising property prices,” the central bank said in its quarterly report. The general house price index recorded the biggest quarterly decline in Paphos (1.3%), so far the main driver of property sales, thanks mainly to holiday home buyers
and investors taking advantage of the residency scheme for purchases of at least EUR 300,000. Quarterly decreases were also observed in Nicosia (0.6%), Limassol (0.2%) and Larnaca (1%). Famagusta was the exception as a marginal increase of 0.1% was registered for the second successive quarter. The largest annual decrease in the general house prices index was recorded in Larnaca (6.3%) and the smallest in Famagusta (1.7%). The decrease in Nicosia was 5.7%, in Limassol 4.3% and in Paphos 3.8%.
Despite the declines, prices are still 6.7% higher than in the first quarter of 2006. Prices have declined by 30.3% since 2008 when they reached their highest level since the central bank started publishing the data. Observers suggest that the recently voted foreclosures legislation is expected to help the overall financial situation with the banks and the housing market, as the new set of laws encourage people who can actually afford to pay back their loans to start doing so, while banks are now more willing to restructure loans and provide facilities to high net worth individuals.
October 7 - 13, 2015
financialmirror.com | PROPERTY | 13
A paradise without angels? µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers
“We should consider ourselves very fortunate that God and fate brought us to live in this country,” a British property buyer in Paphos told us, who after a year of permanent residence, is delighted with both the place, and the friendliness of the locals and his neighbours. Because, if we don’t praise our own home it will fall and crush us, as the old saying goes, written by this gentleman in a lengthy letter oto our office. That is good to know, but we should also realise how foreigners view us, since the real estate market depends to a large extent on foreign buyers (2013: 27%, 2014: 26%, 2015: 27%). Let’s see what these comments are: • “The weather says it all. Do you know what it means to have nine months of summer weather and wake up every day watching the sea? It makes your day.” • Safety, according to foreign buyers, is the second major benefit for Cyprus after the weather. Even though the rate of theft is growing, however serious crimes are few, limited mainly in tourist areas and at inappropriate hours, while thefts may be prevented by some basic precautions by tenants. • The cost of living, that has a slightly upward trend, is not so tragic once you learn where to shop and what commercial centres you visit (especially outside of the tourist areas), albeit more expensive than in the UK and Greece • Roads are at acceptable level and transport is relatively easy, even though local drivers need to learn better driving skills and the use of the traffic code, including parking. • There are some foreign schools in all towns of an acceptable to high level, while local universities have yet to enjoy international reputation, with a mixture of EnglishGreek teaching, while the quality of teachers, mainly in public schools, is not the best. • Cyprus does not have extreme natural or weather phenomena with flooded roads and boats crashing under huge waves, while the rate of forest fires has seen a downward trend. • Locals are friendly to the point that sometimes you might be exhausted from their hospitality and their uninvited visits, even though they often bring gifts with them. • “Neighbours are an important part of the ‘quality of life’ and offer us any help we may ask, even if several times they might be noisy.” • The health and almost free medical care offered in the government hospitals is of a satisfactory level, despite all the “failures” published in the local press from time to time. “But, the same also happens in the UK.”
• “Bureaucracy can lead you to despair,” with unanswered letters and indifference to your problem that irritates people more, even though this affects to a greater extent mostly foreign residents, which is an unacceptable discrimination. • Local events, concerts, festivals, involvement in charities, joining various associations, fill the time very pleasantly for foreign residents with many of them gaining new friends. “Your difficult language, however, does not help, since the local dialect is quite different from the Greek language and the locals in an effort to help us answer in pigeon-Greek or Grenglish. How are we expected to learn the language, at our advanced age, even though we may have a teacher on a weekly basis?” • “Police, although not the best, depends, in our experience on individuals you might meet and this varies from one officer to the other, rather than a general standard.” • “Local English-language newspapers, the various English-speaking radio stations including that of the Bases, local channels with English films keep us well informed about local news and more.” • Praise also comes in the form of transparency. “Because you yourselves have raised the issue of corruption as seen in a number of recent cases, this is the best for the future, and do not think that we British are any better. We too have similar problems.”
COMMERCIAL BUILDING PLOT FOR SALE IN NICOSIA Suitable for retail/office construction. Located in a very desirable location, opposite Marks & Spencer and within 50 mtrs of Acropolis Park. Plot Area: 556 sq.m. Max. Building Cover: 50% Max. Building Height: 24 meters Max. No. of Floors: 6 Road Frontage: Approx. 24 meters Price: €650,000 For more info please contact us at: 99317468
• After the closure of Cyprus Airways, although some said there would be a decline in tourism, the numbers have actually risen. This is an example of privatisation that will help employment of the new generation and increase local commerce and quality of life. • The taxes are tolerable although foreign residents often protest that they pay for public services they have not seen such as charging for sewerage (not available), cleanliness (incomplete), street lighting (great delay in repairs), etc. • Courts is the worst, according to foreign residents and expats, not so much for the decisions taken, but the long time it takes to try cases and implement decisions, which defeats the whole purpose of ‘swift’ justice. What is needed is great care and vigilance. Another retired lawyer from Britain wrote to us saying “in love with Cyprus” an in comparison with other expat destinations, such as France, Spain and Italy, he concludes “as a place Cyprus is paradise, but there may be fewer angels than we would expect.” We listed them in order to feel a little bit better and encouraged, despite the sadness and troubles we see everyday. www.aloizou.com.cy ala-HQ@aloizou.com.cy
October 7 - 13, 2015
14 | MARKETS | financialmirror.com
Guarding against equity market bears by investing in volatility By Oren Laurent President, Banc De Binary
Investors with multi-asset financial portfolios have been put to the test in recent months. What began with the Greek debt crisis soon ballooned into a Chinese equities meltdown, which became a global financial catastrophe in the making. Equities markets are unstable around the world, and investors are looking to shore up their portfolios by diversifying into traditional safehaven assets such as US Treasuries, the US dollar, and gold. From 2013, equities markets have been characterised by low levels of volatility in the US. As an asset class, volatility is grossly undervalued, particularly when it comes to Asian equities. That Asia is now ground zero for all the financial turmoil in equities markets has refocused attention on the importance of volatility. Several issues have been responsible for increasing global volatility of late, including Puerto Rico’s default, the restructuring of the Greek economy and the devaluation of the Chinese CNY. This begs the question: Should we be focusing on diversifying financial portfolios at this juncture?
UNDERSTANDING VOLATILITY Asian markets have seen trillions of dollars of value erased from their bourses in recent months. As a case in point, the Hang Seng China Enterprises Index has plunged almost 39% from its May high. Once equities markets face this kind of turmoil, market participants scramble for cover. Traditional safe-haven financial assets include things like government bonds and gold. The US dollar has also proven to be a preferred safehaven asset during these tumultuous times. That the dollar is strong vis-a-vis a basket of currencies is also part and parcel of a longer term trend that has precipitated weakness in
emerging market economies such as Brazil, Russia, India, China and South Africa. Nonetheless, investors are holding on to their dollars and short selling EM currencies. History has shown us that weak equities markets and high volatility go handin-hand. This knowledge can be used to great effect for investors with broad-based financial portfolios.
TRADING WITH THE TREND We are seeing changes in the way that safe haven assets are being perceived. Many of the world’s largest investment banks are buying high volatility instruments such as Chinese equity volatility. By purchasing volatility instruments, investors are hedging against sharp declines in equities. In order to profit off of volatility in the financial markets, one has to be able to identify and isolate it accordingly. Volatility instruments are distinct asset categories in the financial markets. In other words, traditional diversification methodology is being challenged by groups of investors ploughing their money into volatility assets. Sometimes this takes the form of opposite ends of the spectrum within the same asset class. You may go short on Asian equities and long on US equities, as an example. Alternatively, if you’re trading in currency pairs, you may decide to short the CNY and go long on the USD. Trading with the trend is especially important during times of high volatility, since trends represent long-term patterns, especially where high volume is involved. It is not necessary to trade within the same asset class on opposite ends of the spectrum – one can do so across different asset classes by going long on US government bonds and short on US equities, for example.
WHAT’S DRIVING US EQUITIES INTO THE RED? The goal with regards to volatility investments is to boost the overall value of a financial portfolio by taking opposite positions on assets. By going long on equity markets volatility at this point, and short on equities, one can protect an investment portfolio to greater effect. A caveat is in order with respect to volatility instruments: these do not function as a substitute for
diversification into other assets. As such, volatility instruments are best perceived as accoutrements to your overall financial portfolio. They are especially useful to have in times where market uncertainty results in plunging equities markets. The mere presence of volatility instruments warrants careful consideration and evaluation by investors. One can never be too cautious when it comes to these instruments, and the advice and counsel of market experts is always a step in the right direction. The markets can never escape volatility – it is the one constant across all asset classes – currencies, commodities, indices and stocks. We need to be focused not on eradicating it, but on managing it for our own benefit.
SAGE FINANCIAL ADVICE More and more, investors are feeling uncomfortable when it comes to long-term equities. The sheer scope of recent market meltdowns has effectively erased many of the gains that equities markets have racked up over the years. For example, the Dow Jones Industrial Average has a year-to-date return of -7.58%, and a 1-year return of -0.79%. The S&P 500 has a ytd return of -5.22% and a 1year return of 1.23%, and the NASDAQ has a ytd return of -0.60% and a 1-year return of 6.57%. These figures suggest that in 2015 US equities markets – the world’s biggest economy – are losing money. This is
increasing the volatility in the markets which drives equities prices lower. It is clear that many investors are selling when they should be buying equities (better value). Rebalancing of financial portfolios is another important task that must be done. In other words you take assets from a strong performing asset class and move them into a weaker performing asset class. During times of high volatility the worst thing to do is to panic. Corrections are a normal market phenomenon and even bear markets turn around. Do not be lulled into a false sense of security by selling when the market is at its nadir – wait for the upturn. Successful investors always stay the course. To prosper during times of uncertainty diversified portfolios are an absolute necessity. One does not buy an asset that is performing well – the best technique is to strategise about which assets are likely to do well in the future and invest accordingly. Please note that this column does not constitute financial advice.
October 7 - 13, 2015
financialmirror.com | MARKETS | 15
The big winner from the TPP deal Marcuard’s Market update by GaveKal Dragonomics After a tough summer with little to cheer about, investors finally got some good news on Monday. After five years of negotiations, culminating in six days of round-the-clock talks in Atlanta, the US, Japan and ten other Pacific Rim economies finally struck a deal on the Trans-Pacific Partnership. If ratified by the signatories’ parliaments, the TPP will be the biggest liberalisation of global trade since China’s entry into the WTO, and the largest multilateral trade
agreement since 1994 when Nafta took effect and the Uruguay Round brought agriculture, textiles, services and intellectual property rights into the global trade regime. That makes the TPP a very big deal. But even if the pact passes the US Congress — which is by no means certain — it is unlikely to have the momentous impact of those earlier deals for one simple reason: it leaves out the world’s largest trading economy, China. Whether because the US designed the TPP as a counterweight to growing Chinese influence (which US officials deny), or because including China would have delayed the agreement by years, the omission means Monday’s agreement rates two cheers rather than three. Nevertheless, there will still be clear winners among the 12 member countries. Small economies and those with high initial trade barriers should gain the most in relative terms (think Vietnam). However, the greatest absolute gains are
www.marcuardheritage.com
likely to accrue to Japan. The TPP is by far the most significant trade liberalisation deal Japan has ever struck, and promises to advance key domestic structural reforms just as the economic agenda of Prime Minister Shinzo Abe appears to have got bogged down. Recently, investors have started to lose faith in Japan’s reform programme. As the China-led slowdown has damped global activity and threatened to push Japan into a technical recession, foreigners have turned net sellers of Japanese stocks for six consecutive weeks, the longest such streak since the summer of 2012. At the same time, the passage of Abe’s controversial defense acts has eroded much of the prime minister’s political capital, which means the lack of progress this year towards drawing up and implementing the next round of domestic market reforms has raised serious doubts about whether Japan can successfully reflate its way out of what could end up to be the country’s fifth technical recession in ten years. In the face of these concerns, the Bank of Japan is taking flack for sitting on its hands as the economy has deteriorated. To be fair, however, the central bank is reluctant to ease further while food inflation, which directly affects consumers, continues to run high, while it also wants to retain ammunition should global demand get even worse. The truth, even if the BoJ does not admit it openly, is that quantitative easing (QE) has proved to have little reflationary effect, except by weakening the yen, and at this point additional currency weakness would only damage global trade and industrial production further. Against this gloomy backdrop, the TPP offers real hope. With the government’s credibility hinging on its ability to “do something” to get Japan back onto a growth track, and the BoJ constrained by the risk that further monetary easing may do more harm than good, the market opening measures required by TPP membership promise to be just the catalyst required to kick-start the structural reforms Tokyo needs to deliver renewed growth. By dismantling antiquated, high cost barriers within Japan’s economy, and especially in its huge service sector, TPP membership will encourage productivity-enhancing investment—from foreign as well as domestic players. According to the latest comparable data, the stock of foreign direct investment in Japan amounts to just 6% of GDP, compared with 17% in the US, 22% in China, and 72% in Europe.
Disclaimer: This information may not be construed as advice and in particular not as investment, legal or tax advice. Depending on your particular circumstances you must obtain advice from your respective professional advisors. Investment involves risk. The value of investments may go down as well as up. Past performance is no guarantee for future performance. Investments in foreign currencies are subject to exchange rate fluctuations. Marcuard Cyprus Ltd is regulated by the Cyprus Securities and Exchange Commission (CySec) under License no. 131/11.
Of course, the economic benefits of the TPP will take a long while to materialise. However, the timing of the agreement could hardly be more fortuitous. With Upper House elections nine months away, the agreement comes at the right time to resuscitate sentiment in the equity market, which has been the engine of Prime Minister Abe’s approval ratings. Such a positive impact on asset markets will take some of the pressure to act off the BoJ, leaving it free to hold more balanced internal discussions about the merits and demerits of further monetary easing, which will hopefully lead to a more rational policy decision, allowing the central bank to set realistic economic forecasts later this month without jeopardising either inflation expectations or corporate sentiment.
WORLD CURRENCIES PER US DOLLAR CURRENCY
CODE
RATE
EUROPEAN
Belarussian Ruble British Pound * Bulgarian Lev Czech Koruna Danish Krone Estonian Kroon Euro * Georgian Lari Hungarian Forint Latvian Lats Lithuanian Litas Maltese Pound * Moldavan Leu Norwegian Krone Polish Zloty Romanian Leu Russian Rouble Swedish Krona Swiss Franc Ukrainian Hryvnia
BYR GBP BGN CZK DKK EEK EUR GEL HUF LVL LTL MTL MDL NOK PLN RON RUB SEK CHF UAH
17600 1.5166 1.7448 24.1837 6.6573 13.9618 1.1207 2.37 278.78 0.62713 3.0809 0.3831 19.93 8.3748 3.79 3.939 64.9321 8.3142 0.9754 21.28
AUD CAD HKD INR JPY KRW NZD SGD
0.7111 1.309 7.75 65.385 120.37 1165.98 1.5416 1.4266
BHD EGP IRR ILS JOD KWD LBP OMR QAR SAR ZAR AED
0.3773 7.8135 29956.00 3.8737 0.7081 0.3023 1512.75 0.3850 3.6412 3.7501 13.6777 3.6729
AZN KZT TRY
1.0483 272.87 2.9881
AMERICAS & PACIFIC
Australian Dollar * Canadian Dollar Hong Kong Dollar Indian Rupee Japanese Yen Korean Won New Zeland Dollar * Singapore Dollar MIDDLE EAST & AFRICA
Bahrain Dinar Egyptian Pound Iranian Rial Israeli Shekel Jordanian Dinar Kuwait Dinar Lebanese Pound Omani Rial Qatar Rial Saudi Arabian Riyal South African Rand U.A.E. Dirham ASIA
Azerbaijanian Manat Kazakhstan Tenge Turkish Lira Note:
* USD per National Currency
The Financial Markets Interest Rates Base Rates
LIBOR rates
CCY USD GBP EUR JPY CHF
0-0.25% 0.50% 0.05% 0-0.10% -0.75%
Swap Rates
CCY/Period
1mth
2mth
3mth
6mth
1yr
USD GBP EUR JPY CHF
0.19 0.51 -0.12 0.04 -0.79
0.26 0.54 -0.08 0.06 -0.76
0.32 0.58 -0.04 0.08 -0.73
0.52 0.75 0.02 0.12 -0.67
0.83 1.03 0.13 0.24 -0.56
CCY/Period USD GBP EUR JPY CHF
2yr
3yr
4yr
5yr
7yr
10yr
0.72 0.94 0.05 0.10 -0.70
0.97 1.11 0.12 0.10 -0.64
1.19 1.28 0.22 0.13 -0.55
1.39 1.42 0.35 0.18 -0.44
1.72 1.64 0.62 0.29 -0.15
2.04 1.85 0.98 0.49 0.16
Exchange Rates Major Cross Rates
CCY1\CCY2 USD EUR GBP CHF JPY
Opening Rates
1 USD 1 EUR 1 GBP 1 CHF 1.1210 0.8921
100 JPY
1.5163
1.0256
0.8307
1.3526
0.9149
0.7410
0.6764
0.5478
0.6595
0.7393
0.9750
1.0930
1.4784
120.38
134.95
182.53
0.8099 123.47
Weekly movement of USD
CCY
Today
133.86
GBP EUR JPY
1.0844
CHF
1.5163 1.1210 120.38 0.9750
CCY\Date
08.09
15.09
22.09
29.09
06.10
USD GBP JPY CHF
1.1156
1.1259
1.1142
1.1209
1.1123
0.7286
0.7298
0.7180
0.7390
0.7335
132.63
135.06
134.07
133.82
1.0822
1.0889
1.0817
1.0882
Last Week %Change 1.5168 1.1209 119.39 0.9708
+0.03 -0.01 +0.83 +0.43
October 7 - 13, 2015
16 | WORLD | financialmirror.com
The Trans-Pacific free-trade charade By Joseph E. Stiglitz and Adam S. Hersh As negotiators and ministers from the United States and 11 other Pacific Rim countries met in Atlanta in an effort to finalise the details of the sweeping new Trans-Pacific Partnership (TPP), some sober analysis is warranted. The biggest regional trade and investment agreement in history is not what it seems. You will hear much about the importance of the TPP for “free trade.” The reality is that this is an agreement to manage its members’ trade and investment relations – and to do so on behalf of each country’s most powerful business lobbies. Make no mistake: It is evident from the main outstanding issues, over which negotiators are still haggling, that the TPP is not about “free” trade. New Zealand has threatened to walk away from the agreement over the way Canada and the US manage trade in dairy products. Australia is not happy with how the US and Mexico manage trade in sugar. And the US is not happy with how Japan manages trade in rice. These industries are backed by significant voting blocs in their respective countries. And they represent just the tip of the iceberg in terms of how the TPP would advance an agenda that actually runs counter to free trade. For starters, consider what the agreement would do to expand intellectual property rights for big pharmaceutical companies, as we learned from leaked versions of the negotiating text. Economic research clearly shows the argument that such intellectual property rights promote research to be weak at best. In fact, there is evidence to the
contrary: When the Supreme Court invalidated Myriad’s patent on the BRCA gene, it led to a burst of innovation that resulted in better tests at lower costs. Indeed, provisions in the TPP would restrain open competition and raise prices for consumers in the US and around the world – anathema to free trade. The TPP would manage trade in pharmaceuticals through a variety of seemingly arcane rule changes on issues such as “patent linkage,” “data exclusivity,” and “biologics.” The upshot is that pharmaceutical companies would effectively be allowed to extend – sometimes almost indefinitely – their monopolies on patented medicines, keep cheaper generics off the market, and block “biosimilar” competitors from introducing new medicines for years. That is how the TPP will manage trade for the pharmaceutical industry if the US gets its way. Similarly, consider how the US hopes to use the TPP to manage trade for the tobacco industry. For decades, USbased tobacco companies have used foreign investor adjudication mechanisms created by agreements like the TPP to fight regulations intended to curb the public-health scourge of smoking. Under these investor-state dispute settlement (ISDS) systems, foreign investors gain new rights to sue national governments in binding private arbitration for regulations they see as diminishing the expected profitability of their investments. International corporate interests tout ISDS as necessary to protect property rights where the rule of law and credible courts are lacking. But that argument is nonsense. The US is seeking the same mechanism in a similar mega-deal with the European Union, the Transatlantic Trade and Investment Partnership, even though there is little question about the quality of Europe’s legal and judicial systems. To be sure, investors – wherever they call home – deserve
protection from expropriation or discriminatory regulations. But ISDS goes much further: The obligation to compensate investors for losses of expected profits can and has been applied even where rules are nondiscriminatory and profits are made from causing public harm. The corporation formerly known as Philip Morris is currently prosecuting such cases against Australia and Uruguay (not a TPP partner) for requiring cigarettes to carry warning labels. Canada, under threat of a similar suit, backed down from introducing a similarly effective warning label a few years back. Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice – first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product. It should surprise no one that America’s international agreements produce managed rather than free trade. That is what happens when the policymaking process is closed to non-business stakeholders – not to mention the people’s elected representatives in Congress.
Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. Adam S. Hersh is Senior Economist at the Roosevelt Institute and Visiting Scholar at Columbia University’s Initiative for Policy Dialogue. © Project Syndicate, 2015 - www.project-syndicate.org
Leaving our children nothing By Johan Rockstrom Our generation has a unique opportunity. If we set our minds to it, we could be the first in human history to leave our children nothing: no greenhouse-gas emissions, no poverty, and no biodiversity loss. That is the course that world leaders set when they met at the United Nations in New York on September 25 to adopt the Sustainable Development Goals (SDGs). The 17 goals range from ending poverty and improving health to protecting the planet’s biosphere and providing energy for all. They emerged from the largest summit in the UN’s history, the “Rio+20” conference in 2012, followed by the largest consultation the UN has ever undertaken. Unlike their predecessor, the Millennium Development Goals, which focused almost exclusively on developing countries, the new global goals are universal and apply to all countries equally. Their adoption indicates widespread acceptance of the fact that all countries share responsibility for the long-term stability of Earth’s natural cycles, on which the planet’s ability to support us depends. Indeed, the SDGs are the first development framework that recognises a fundamental shift in our relationship with the planet. For the first time in Earth’s 4.5-billion-year history, the main factors determining the stability of its systems are no longer the planet’s distance from the sun or the strength or frequency of its volcanic eruptions; they are economics, politics, and technology. For most of the past 12,000 years, Earth’s climate was relatively stable and the biosphere was resilient and healthy. Geologists call this period the Holocene. More recently, we have moved into what many are calling the Anthropocene, a far less predictable era of human-induced environmental change. This fundamental shift necessitates a new economic model. No longer can we assume – as prevailing economic thinking has – that resources are endless. We may have once been a small society on a big planet. Today, we are a big
society on a small planet. And yet, far from being utopian, the SDGs are achievable by 2030. Some countries, including Denmark, Finland, Norway, and Sweden are well on the way to achieving many of them, and much progress is being made elsewhere around the world. In the last few decades, poverty has been halved. Despite the headlines, violent conflict is on the wane. Diseases are being eradicated. The global population is set to stabilize. The ozone layer is showing signs of recovery. And the digital revolution is disrupting entire industries in ways that could benefit the planet. Eradication of extreme poverty is well within our reach. Today, about 800 mln people live on less than $1.25 a day. According to a recent World Bank report, about 30% of them live in India, a sleeping giant about to industrialise, given the right incentives. Poverty is declining in other countries as well, including Nigeria (where 10% of the poorest live), China (home to 8%), and Bangladesh (6%). The main source of doubt concerns wealthy countries’ commitment to help developing countries cut greenhousegas emissions as they end poverty. Without the proper assistance, poor countries risk becoming locked into reliance on coal and oil for at least another generation, putting the
entire planet in danger of out-of-control climate change. World leaders need to realise that the cost of transforming the global energy system is far less than coping with the consequences of burning the planet’s remaining fossil fuels. Research published this month concluded that consuming all remaining hydrocarbons would result in the melting of the entire Antarctic ice sheet, potentially raising sea levels by 58 meters. And higher sea levels are just one potential threat. Drought and crop failure resulting from climate change, for example, could trigger violent conflict. Fortunately, there is abundant evidence that countries and industries can thrive without contributing to climate change. By 2030, several countries are likely to have freed themselves from fossil fuels, with Sweden, France, and Germany probably in the lead. These countries will have less air pollution, improved health and wellbeing, and thriving economies. Companies such as Ikea and Unilever are leading the way with genuine efforts to assume responsibility for the planet’s climate, resources, and ecosystems. One reason is that rising consumer awareness makes ecosystem degradation bad for business. At the same time, all industries, from information technology to agriculture, depend on services provided by nature. Managing forests, rivers, grasslands, and coral reefs in sustainable ways makes them more resilient and increases their ability to absorb greenhouse gases, which is good for business. We are the first generation that can make an informed choice about the direction our planet will take. Either we leave our descendants an endowment of zero poverty, zero fossil-fuel use, and zero biodiversity loss, or we leave them facing a tax bill from Earth that could wipe them out. Johan Rockström is Professor in Global Sustainability and Director of the Stockholm Resilience Centre at Stockholm University. © Project Syndicate, 2015 - www.project-syndicate.org
October 7 - 13, 2015
financialmirror.com | WORLD | 17
Greece without illusions By Yanis Varoufakis
“The costliest minor government reshuffle in Greece’s history.” That is at least one way to describe the result of the Greek general election on September 20. Indeed, with few exceptions, the same ministers have returned to the same offices as part of an administration backed by the same odd pair of parties (the left-wing Syriza and the smaller rightwing Independent Greeks), which received only a slightly lower share of the vote than the previous administration. But the appearance of continuity is misleading. While the percentage of voters backing the government is relatively unchanged, 0.6 mln of the 6.1 mln Greeks who voted in the July 5 referendum on continued “extend-and-pretend” loans with stringent austerity strings attached did not turn out. The loss of so many voters in little more than two months reflects the electorate’s dramatic change in mood – from passionate to glum. The shift reflects the mandate that Prime Minister Alexis Tsipras sought and gained. Last January, when I stood with him, we asked voters to back our determination to end the “extend-and-pretend” bailouts that had pushed Greece into a black hole and operated as the template for austerity policies across Europe. The government that was returned on September 20 has the opposite mandate: to implement an “extend-and-pretend” bailout programme – indeed, the most toxic variant ever. The new Tsipras administration knows this. Tsipras understands that his government is skating on the thin ice of a fiscal programme that cannot succeed and a reform agenda that his ministers loathe. While voters wisely prefer that he and his cabinet, rather than the conservative opposition, implement a programme that an overwhelming majority of Greeks detest, the reality of the austerity agenda will test public patience. The Tsipras government is committed to enacting a long list of recessionary measures. Three highlight the tax avalanche that awaits: More than 600,000 farmers will be asked to pay additional back taxes for 2014 and to pre-pay over 50% of next year’s estimated tax. Some 700,000 small businesses (including low-wage workers who are forced to operate as private service providers) will have to pre-pay 100% (yes, you read that right) of next year’s taxes. As of next year, every merchant will face a 26% turnover tax from the
first euro they earn – while being required to pre-pay in 2016 a full 75% of their 2017 taxes. In addition to these ludicrous tax hikes (which also include substantial increases in sales taxes), the Tsipras government has agreed to pension cutbacks and fire sales of public assets. Even most reform-minded Greeks balk at the agenda imposed by the “troika” (the European Commission, the International Monetary Fund, and the European Central Bank). Tsipras is attempting to erect two lines of defense against the coming tsunami of pain (and thereby minimise popular discontent). The first line is to press the troika to make good on its promise to enter into debt-relief negotiations once its recessionary agenda has been fully implemented. The second line of defense is based on the promise of a “parallel” agenda aimed at ameliorating the worst effects of the troika program. But both lines are porous, at best, given the harsh realities of Greece’s economic circumstances. There is little doubt that the Greek government will gain some debt relief. An unpayable debt is, one way or another, a haircut. But Greece’s creditors have already had two haircuts, first in the spring of 2012, and another that December. Alas, those haircuts, while substantial, were too little, too late, and too toxic in terms of their financial and legal parameters. The question facing the Tsipras government is thus whether the next haircut will be more therapeutic than the last. To help the Greek economy heal, debt relief must be both sizeable and a lever for eliminating most of the new austerity measures, which merely guarantee another spin of the debt-deflation cycle. More precisely, debt reduction must be accompanied by a reduction in the target for the mediumterm primary budget surplus, from the current 3.5% of GDP
to no more than 1.5%. Nothing else can allow the Greek economy to recover. Is anything like this politically possible? One clue recently emerged in an article in the Financial Times in which Klaus Regling, the head of Europe’s bailout fund, the European Stability Mechanism, returned to the troika’s mantra that Greece does not need substantial debt relief. Regling may not be a major player in his own right, but he never speaks out of turn or contradicts the ECB and the German government. Of course, there is the IMF, whose staff tell anyone willing to listen that Greek debt must be cut by approximately onethird, or EUR 100 bln. But if the recent past is any guide to the near future, the IMF’s views will be trumped. This leaves Tsipras with only his second line of defense: the “parallel” programme. The idea here is to demonstrate to the electorate that the government can combine capitulation to the troika with its own agenda of reforms, comprising efficiency gains and an assault on the oligarchy that may liberate funds for the purpose of lessening austerity’s impact on weaker Greeks. This is a worthy project. If the government can pull it off, it is a potential game changer. To succeed, however, the government will have to slay two dragons at once: The incompetence of Greece’s public administration and the inexhaustible resourcefulness of an oligarchy that knows how to defend itself – including by forging strong alliances with the troika. Yanis Varoufakis, a former finance minister of Greece, is Professor of Economics at the University of Athens. © Project Syndicate, 2015 - www.project-syndicate.org
Monday really is the longest day
Workers most likely to stay on late, but don’t stick around Friday night
New research by global workplace provider Regus has revealed that workers globally are most likely to carry out overtime on Monday and that while most do 2-4 hours more each week, a committed two fifths put in a full extra day or even more. This latest research, surveying over 44,000 business people from more than 100 countries, revealed that working long hours has become the norm with most workers putting in at least a small amount of overtime every week. More than one in seven (14%), however, is teetering close to burn-out and putting in over 15 hours, basically working the equivalent of a seven-day week. The survey also found that 38% work a full extra day or more, confirming that daily overtime is the norm for many workers globally. The day workers are most likely to stay on longer is Monday (16%) when workers catch up from the weekend and try to get ahead, while towards the middle of the
week on Wednesday only 9% do overtime. Workers are also keen to get out early on Friday when only 9% commit to regularly
doing overtime. “While the commitment of workers globally is admirable, it is worrying that a
small proportion is working the equivalent of a seven day week. While it can’t be healthy to carry out so much overtime, it is also true that the location this work is carried out in plays an in important role in contributing to worker wellbeing,” said Katerina Manou, General Manager REGUS in the Balkans. “If workers are able to carry out an acceptable amount of overtime from a location closer to home, they will benefit from a shorter commute at the end of the day and a more efficient use of their time. If instead, punitively long hours are combined with gruelling commutes, workers could be facing burnout all too soon,” Manou added. In its network of 2,500 locations in 106 countries and 900 cities, Regus operates two premises in Cyprus, one in Nicosia (Jacovides Tower, Grivas Digenis Ave), and one in Limassol (Victory House, Archb. Makarios Avenue). A new property is expected to open soon in Larnaca.
October 7 - 13, 2015
18 | WORLD | financialmirror.com
The clean-energy moonshot By Jeffrey D. Sachs In May 1961, President John F. Kennedy stirred America and the world with these words: “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth.” Just eight years later, NASA did just that – with astounding benefits for science, technology, and the world economy. Now, a group of leading scientists, innovators, and economists has identified our era’s moonshot: to replace fossil fuels with clean-energy technologies within this generation. Since a group of policy leaders from the United Kingdom initiated the Global Apollo Programme to Combat Climate Change earlier this year, I and many others have enthusiastically signed on. The programme, named after the NASA moon mission, is built on the idea of “directed technological change.” In other words, through a conscious effort, backed by public funds, we can steer the development of the advanced technologies needed to ensure humanity’s safety and wellbeing. At the top of the list is clean energy, which will enable us to head off the global warming caused by the combustion of massive amounts of coal, oil, and gas worldwide. The Deep Decarbonisation Pathways Project (DDPP) has demonstrated that a low-carbon future is within reach, with huge benefits at a very modest cost. In the United States, for example, cutting emissions by 80% by 2050 is not only feasible; it would require added outlays of only around 1% of GDP per year. And the benefits – including a safer climate, smarter infrastructure, better vehicles, and cleaner air – would be massive. Pathways to a low-carbon future focus on three main actions: improving energy efficiency, producing electricity from low-carbon energy sources (such as solar and wind energy), and switching from petroleum to low-carbon energy
for powering vehicles (such as electric or fuel-cell vehicles) and heating buildings. These are clear and achievable goals, and the public sector should play a major role in advancing them. Politicians need to end subsidies for coal, oil, and gas, and start taxing emissions from their use. Moreover, they must meet the need for new power lines to carry low-carbon solar, wind, geothermal, and hydroelectric power from remote areas (and offshore platforms) to population centres. But meeting these requirements presupposes advances in technologies that will enable low-carbon energy systems to compete with the alternatives. That is where the Apollo Programme comes in, with its bold goal of reducing the cost of renewable energy to below that of coal, oil, and gas. Of course, renewable energy is sometimes already cheaper than fossil fuels – when the sun is shining bright or the wind is blowing strong and consistently. The main challenge with renewables is energy storage, in two senses. First, we need to store renewable energy for use in vehicles in a low-cost and efficient way. While we already have high-quality electric vehicles, they require improvements in range and cost to be able to outcompete conventional vehicles. The highest technological priority is to develop batteries for transport that are cheaper, longerlasting, faster-charging, and lighter. Second, we need to store intermittent energy for times when the wind is not blowing, the sun is not shining, and rivers are not flowing strongly enough to turn hydroelectric turbines. Many energy-storage technologies are already in use or in development. One example is pumped hydropower, in which excess wind and solar energy is used to pump water uphill into reservoirs that can later produce hydroelectric power. Another is the conversion of renewable energy into hydrogen (by splitting water molecules) or a synthetic liquid fuel made with carbon dioxide from the air. Others include compressed air and large-scale battery storage. Given the trillions of dollars of potential losses from human-induced climate change, and the trillions of dollars invested annually in global energy systems, the world’s governments would be wise to invest tens of billions of dollars each year in the research and development needed to
achieve a low-carbon energy future. With this in mind, more than one politician should have already followed in JFK’s footsteps, stepping forward to announce this generation’s critical moonshot, and to offer the public finances needed to make it happen. So far, none has. In the US, for example, the government allocates around $31 bln per year to biomedical research (with great returns to health), and roughly $65 bln per year for military R&D, but only about $7 bln per year for nondefense energy, and, of that, less than $2 bln per year for renewable-energy R&D. This is a shocking lapse on two counts: first, the US and the world are losing time on decarbonisation; and, second, the US is squandering the chance to develop its own future high-tech industries. Together, the Apollo Programme and the DDPP point the world’s governments toward the agreement they should reach at the United Nations Climate Change Conference in Paris this December. First, governments should pledge to decarbonise their economies in order to keep global warming below the extreme danger zone of two degrees Celsius. Second, they should promise to unveil, in the next couple of years, national “pathways” to deep decarbonisation by 2050. And, third, they should join together to fund the new global moonshot for clean energy. The pooled financing should start with a minimum of $15 bln per year, and rise sharply thereafter, as key, high-return technology breakthroughs come into view. As JFK showed, great progress begins with a great goal, one that is bold yet feasible. The goal today, backed by the Apollo Programme, is deep decarbonisation. It is time for world leaders to commit to the planet-saving clean-energy moonshot. Jeffrey D. Sachs, Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University, is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals. © Project Syndicate, 2015 - www.project-syndicate.org
Ending rogue fishing By Maria Damanaki, Yoriko Kawaguchi, and Jane Lubchenco Seafood is by far the most highly traded commodity globally, feeding billions of people worldwide. Unfortunately, however, the industry is plagued by illegal, unreported, and unregulated fishing, which undermines conservation efforts and handicaps honest fishers and businesses that follow the rules. It is high time to address the problem. Rogue fishing accounts for up to one-fifth of all ocean fish caught globally. And while there have been encouraging signs of reform in some countries’ industrial-scale fisheries, the problem remains widespread, discouraging others from following suit and impeding the reform of small-scale fisheries that supply food and livelihoods for millions of families. Rules do exist, but they need to be clearer and more specific, effectively enforced, and implemented across national borders. If not, unscrupulous operators will continue to take advantage of the lack of regulation and monitoring, with huge implications for those who depend on coastal fisheries for their sustenance and livelihoods. A recent study found that 20-32% of seafood imported into the United States was likely from illegal, unreported, and unregulated sources. This alone accounts for 4-16% of the value of the total illegal fish catch worldwide, which has an estimated value of $15-23 bln a year. Collaboration among the US, the European Union, and Japan has the potential to underpin great strides in addressing the problem. The US imports more than 90% of
its seafood. Japan is the second-largest seafood importer after the US. And the EU is the world’s largest single market for seafood products, importing about 60% of the fish it consumes. The potential power of these three markets’ joint action is immense. In late 2011, the EU and the US agreed to collaborate to combat illicit fishing. A little less than a year later, the EU and Japan agreed to prevent imports of illegally caught seafood, share information, and work together at regional fisheries-management organizations. They all agreed to encourage other countries to ratify and implement the Port State Measures Agreement (PSMA), which will make it harder for dishonest fishing operations to operate. Adopted in 2009 by the UN Food and Agriculture Organisation, the PSMA requires parties to implement stricter controls on foreign-flagged fishing vessels. To date, 13 countries have ratified the agreement; another 12 must do so for it to enter into force and be globally effective. Encouragingly, rogue fishing is no longer viewed as an orphan policy issue in some countries. In March, the US Presidential Task Force on Illegal, Unreported, and Unregulated Fishing and Seafood Fraud
released an “all of government” action plan. The fact that the issue made it to the desk of the US president underscores the need for governments to mobilise their resources and collaborate internationally. A variety of approaches is called for. The EU’s regulations are perhaps the strongest suite of measures to stop illicitly caught fish from entering the market. Early implementation shows great promise. European regulators have already introduced sophisticated monitoring and surveillance programs, blocked market access to countries with a record of illegal fishing, penalised European rogue operators, and helped support “yellow or red carded” countries reform their fisheries laws. The EU, Japan, and the US would be even more effective if they aligned their policies to prevent criminals from accessing their markets and enabled legitimate operators to benefit from a “supercharged” level of access. Working together could enable the use of affordable, sophisticated technology for seafood traceability – data and intelligence gathering that helps pinpoint exactly where seafood comes from, and when and by whom it was caught. Such efforts – for example, the electronic documentation scheme for the
Atlantic bluefin tuna catch– represent one of the most effective tools to eliminate illicit fishing. Eliminating rogue fishing will help replenish marine life and secure food and livelihoods for billions of people. This must be accompanied by increased efforts, from the Arctic to the Antarctic, to protect key species affected by fishing practices and establish fully protected marine reserves or “regeneration zones” to help restock and restore habitats. Countries must also enact and implement laws ending overfishing within domestic and international waters. Illegal, unreported, and unregulated fishing is a problem that can be solved through leadership, action, and international cooperation. We are pleased to see Chile – which is hosting this year’s Our Ocean Conference – demonstrate leadership and commitment to action by ratifying the PSMA and standing up to illicit fishing operations. We remain optimistic that others will continue to take the steps needed to end the scourge of rogue fishing and work together to regenerate ocean life globally. Maria Damanaki, former EU Commissioner for Maritime Affairs and Fisheries, is Global Oceans Director at The Nature Conservancy. Yoriko Kawaguchi, former Japanese Minister for Foreign Affairs and former Japanese Minister of the Environment, is Commissioner at the Global Ocean Commission and Professor at Meiji University. Jane Lubchenco, a former administrator of the US National Oceanic and Atmospheric Administration, is University Distinguished Professor at Oregon State University.
October 7 - 13, 2015
financialmirror.com | WORLD | 19
Making higher education pay Laura Tyson and Lenny Mendonca Higher education is a great investment, with each additional year of post-secondary education yielding a 1015% return, on average. For university graduates, that means hundreds of thousands of dollars over a lifetime. Unfortunately, students aspiring to a higher education, especially those from low-income families and underperforming secondary schools, lack the information they need to make wise choices about where to go and what to study to maximise the return on their investment. In the United States, President Barack Obama’s administration is trying to close that information gap with the College ScoreCard, a free, easily searchable database that offers unbiased information about the performance and costs of US public and private institutions providing postsecondary education. Instead of proposing an overall ranking of institutions based on some composite measure of key indicators, the database offers detailed data covering five broad categories: costs, student debt and repayment, degree completion rates, post-enrollment earnings, and access for disadvantaged students. Making federal data readily available to the private sector and encouraging open innovation platforms to address social challenges are hallmarks of Obama’s government. Journalists are already crunching the numbers in the College ScoreCard to propose rankings and recommendations. Ideas for new business opportunities are sure to follow. The College ScoreCard is a big step forward for transparency. It will not only help students and their families make better choices; it will also spur a dialogue that encourages research and innovation by educators and state policymakers, and puts pressure on underperforming institutions to improve. For students, this information can prove to be invaluable. As Isabel Sawhill and Stephanie Owen of the Brookings Institution found, there are large variations in returns by institution and major. While the average four-year college degree delivers $570,000 in additional lifetime earnings, the returns on investment are actually negative for one in five of the institutions in their 853- institution sample. Likewise, the University of Pennsylvania’s Peter Cappelli estimates that as many as one in four college programs yield negative returns for their students. There is also large variation in the returns among programmes offering associate degrees (generally two years of post- secondary education) and vocational training. At the same time, tuition costs are climbing much faster than median family incomes across the board. Student loan debt has quadrupled since 2010, now totaling more than $1 trln. Worse yet, many of the more expensive colleges –
U.S. deaths from gun violence and terrorism compared Nine people were killed and seven injured in a shooting at a college in Oregon, according to the police. The Washington Post reported that so far in 2015, the U.S. has seen 294 mass shootings (incidents where 4 or more people are killed or injured by gunfire) in 274 days. A clearly agitated President Obama made his 15th statement on mass shootings since taking office, challenging the media to compare the number of Americans killed by terrorism and gun violence. According to Justice and State Department data published by Vox, over 10,000 Americans are killed by gun violence every year. Since 9/11, the number of U.S. citizens killed in terrorist attacks each year has never surpassed 75. Obama has pointed out that while the U.S. rightfully pours trillions of dollars into protecting its citizens from terrorism, Congress is unwilling to take even the most minor steps to eradicate gun violence. (Source: Statista)
especially private, for-profit institutions – have low graduation rates. Researchers at the US Treasury Department and the Brookings Institution recently found that 70% of students who defaulted after leaving college in 2011 came from “non-traditional” institutions – mostly for-profit universities. These problems raise the imperative of developing new models of education delivery. In that effort, “progressive” federalism – whereby the federal government sets goals for performance, affordability, and access; demands accountability by providers; and spurs private and public institutions at the state and local levels to innovate – can play a critical role. Conservative skeptics argue that higher education is a matter for the states, not the federal government. But the federal government already plays a major financial role in higher education. Indeed, while states account for the bulk of public spending on higher education, the federal government finances a big share of that spending via guaranteed loans and grants to students. The problem is that the institutions of higher education – both public and private – that have been receiving significant levels of federal support have not been subject to much accountability. Meanwhile, many states have slashed public spending on higher education and tried to make up the difference by raising tuition and forcing students to take on more federally financed debt. A well-designed progressive federalist policy for higher education would set goals for key performance indicators – based on the measures highlighted in the College ScoreCard – and reward states that advance toward those goals. It would encourage and finance state efforts to test new approaches to expand access, increase graduation rates, and improve students’ lifetime outcomes. Presidential candidate Hillary Clinton’s higher-education
reform proposals embody such a progressive federalist approach. Her “College Compact” would grant federal subsidies to states if they commit to – and succeed in – containing the costs of higher education, including by providing free enrollment at two-year community colleges. Many institutions of higher education are already testing new models. Arizona State University has deployed an array of online technologies, as well as mentoring programmes, to keep students on track. Since 2008, ASU’s cost per graduate (which includes both state spending and tuition) has fallen from $68,000 to $56,000. Last year, ASU teamed up with Starbucks to allow the company’s employees to complete their college degrees for free online. Meanwhile, the school’s overall graduation rate has climbed from 33% to 49%. Another promising innovator is Western Governors University, a private nonprofit online institution founded by 19 state governors that serves about 58,000 students spread across the US. WGU offers accredited college-degree programmes in fields from teaching and nursing to business. By focusing on the attainment of specific competencies, rather than on the amount of time spent in a classroom, WGU has been able to offer flexibility at bargain rates; a fulltime program, including textbooks and a mentor, costs about $6,000 a year. Progressive federalism can also build on state and local innovations to expand access. Tennessee, a Republican-led state, has attracted nationwide attention with a programme to offer all high school graduates free tuition at any community college. The programme is funded by the state’s lottery, and brings Tennessee closer than any other state to making community college as universal as high school. Indeed, Obama cited Tennessee as inspiration for his proposal to make community college tuition-free nationwide. Progressive federalism offers a way to tap into and build on these innovations. The federal government can and should set the strategic direction, establish measurable goals, and foster new models wherever they might arise to build an educational system fit for the twenty-first century. Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley, and a senior adviser at the Rock Creek Group. Lenny Mendonca is a former director of McKinsey & Company. © Project Syndicate, 2015. www.project-syndicate.org
October 7 - 13, 2015
20 | BACK PAGE | financialmirror.com
Renewed risk-off promotes GBP vulnerability Markets Report by Forextime Ltd By Lukman Otununga, Research Analyst at FXTM
The currency markets continue to look jittery, with pairs currently alternating between gains and losses. Dollar sensitivity continues to take centre stage as market participants systematically reduce their bets on a US rate hike in 2015. Sentiment towards the USD remains bearish and a declining ISM Non-Manufacturing PMI release in Monday’s US session reinforced further pressure within the USD. The weak NFP release, in addition to a decline in manufacturing in the US, offers a compelling argument for the Fed to hold off a rate hike until 2016. What appears to be a resumption of a risk-off environment from investors has once again punished the Sterling. The Service PMI from October missing expectations widely has impacted on investor sentiment, and made the GBP exposed to pressures. These soft economic data releases from the UK have acted as factors which have resulted in expectations for an interest rate hike by the BoE pushed back, contributing to more pressure on the GBP. Technically, GBPUSD remains bearish with many seeing the 1.5100 level as a probable bottom. Any additional GBP weakness may enact a further decline past the 1.5100 level to the next relevant support at 1.5000. Despite the renewed fears about the state of global economies, European equities experienced a positive day with most venturing back into green territory. Glencore’s 20% share increase on Monday resulted in the FTSE100 concluding the trading session +2.76% higher. Even though the bulls are currently lifting the FTSE100 higher, any additional pressures from weak China data this month or selling in the commodity markets may result in further upside momentum within this index curbed. Looking at the Eurozone, EU economic sentiment has suffered another step back following the economy returning to deflation last month. With the Eurozone inflation returning to negative, there are increased chances the ECB will at least continue to threaten further QE for the EU economy.
GOLD: Dollar weakness instilled Gold with an upside momentum. This precious metal remains technically bullish as long as prices can keep above the 1100.00 support. Prices are above the 20 daily SMA and the MACD has crossed to the upside. The next relevant resistance is based at 1155.00. SILVER: Silver is technically bullish. Prices trade above the 20 daily SMA and the MACD has crossed to the upside. The daily close above the 15.550 resistance may open a path to the next relevant resistance at 16.00. A move back below the 15.00 level suggests some bullish weakness. CADJPY: The CADJPY currently resides in a wide range. Prices are trading above the 20 daily SMA and the MACD is in the process of crossing to the upside. A break above the 92.50
resistance may open a path to the next relevant resistance at 94.00. AUDNZD: The AUDNZD is technically bearish. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. A break below the 1.0900 support may open a path to the next relevant support based at 1.0700. For information, disclaimer and risk warning note visit: www.forextime.com FXTM is an international forex broker regulated by the Cyprus Securities and Exchange Commission (CySEC), and FT Global Limited is regulated by the International Financial Services Commission (IFSC)
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