Financial Mirror 2015 10 28

FinancialMirror OREN LAURENT

RICARDO HAUSMANN

Is the world about to get a new reserve currency? PAGE 14

Truth, lies and Venezuela PAGE 16

Georgiades: Cyprus creditworthiness is restored EUR 1 BLN EMTN BOND ISSUE A SUCCESS - SEE PAGE 5

The story of Commandaria: Patrick Skinner goes down memory lane SEE PAGES 8 - 9

Issue No. 1155 â‚Ź1.00 Oct. 28 - Nov. 3, 2015

October 28 - November 3, 2015

2 | OPINION | financialmirror.com

FinancialMirror Fiscal progress is good, but what about the “real” economy?

Published every Wednesday by Financial Mirror Ltd. www.financialmirror.com

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The rating agencies, the Troika of the international lenders and the technocrats at the Finance Ministry are once again patting each other on the back, with words of “good job” blurted out every now and then as Cyprus seems to show “fiscal stability”.

In actual fact, what they all want is the justification to upgrade the sovereign ratings from the ‘junk’ level to one of ‘investment grade’ simply to allow Cyprus to proceed with its mega-bond issue any day now, estimated at 1 to 1.5 bln euros. Naturally, these bonds will be grabbed by incumbent bondholders who have seen yields on their paper go sky high, while the European Central Bank will show its gentlemanly face by buying up some of these bonds as part of its quantitative easing programme.

So far, so good. And it’s about time that Cyprus’ fiscal finances were back on track, undisturbed by exorbitant public sector wages and runaway spending budgets. This good housekeeping is something that should have happened a long while back and could have prevented the economic meltdown in 2012-2013, driven mainly by the corrupt few at the heads of banks and the politicians who supported them. But the rating upgrades, still two to five notches away from exiting ‘junk’ mode, will do nothing to help the real economy, where the SMEs in

the private sector used to drive growth that has now come to a standstill with unemployment stubbornly at the 15-16% range.

While other euro-periphery economies are returning to somewhat normalcy, Cyprus has fallen too far behind, possibly punished by lenders and eurocrats for being too friendly with Russia and for offering tax haven benefits, far below levels of other rivals. The banks are still struggling to cope with finance, as NPLs seem to be rising, instead of falling, no thanks to the incompetent members of parliament who dragged on too long with the insolvencies and property foreclosures bills. As a result, recoveries are way behind and SMEs are unable to secure any sort of micro or major funding to keep their businesses afloat.

What MPs, who do not deserve to get re-elected next May, do not realise, nor the Minister of Finance and his court of advisors, is that if the private sector does not recover, neither will their tax-paying capability, hence, state coffers will be depleted and then any “fiscal stability” will simply go out the window. Evidence of this trend was the Labour Minister rightly calling for those (including many SMEs) who cannot afford to pay their social insurance bills, to be allowed to pay with installments. Rating agencies should not hasten to provide upgrades, relying purely on fiscal fundamentals, otherwise their already-fragile reputations will be blemished even further.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

BOC at a premium on CSE, forex loans soar Bank of Cyprus shares traded at a premium on the Cyprus Stock Exchange compared to the Athens bourse, but this did not help the stock from plunging more than 4% over two days, leading to some consolidation. On the other hand, Central Bank data suggests that Cypriots are turning to forex loans to take advantage of low euro borrowing rates, according to the Financial Mirror issue 642, on October 26, 2005.

BOC premium: Bank of Cyprus shares tumbled 4.24% on the Athens stock exchange to end at EUR

20 YEARS AGO

Copper mining resumes, IMF team arrives Australian investors are investing CYP 10.5 mln to revive the copper mine at Skouriotissa, while a team from the IMF is arriving to review the state of the economy, according to the Cyprus Financial Mirror issue 133, on October 25, 1995.

Copper mine: Golden Plateau NL and Hellenic Mining Industries (EME) have set up the Hellenic Copper Mines joint venture and plan to start mining in July 1996, with a CYP 10.5 mln investment raised

4.56 (CYP 2.61), two cents below the close on the Cyprus bourse, with signs of a rally cool-off and waiting for fundamentals and technicals to catch up when a CYP 100 mln fund raising gets off the ground and better-then-expected nine months profits are announced.

Forex loans: A record number of Cypriots have turned to borrowing in foreign currency during the first nine months of the year, taking advantage of super low euro borrowing rates. Of the CYP 9.56 bln loans in September, some 1.5 bln were in foreign currency, up 188 mln from the star of the year and accounting for 88% of all new loans. Of these, 67% were in euros, 21% in Swiss francs, 8.5% in dollars and 3% in Japanese yen.

Turkish chamber: Ali Erel, the previously unopposed head of the Turkish Cypriot Chamber of Commerce (KTTO) is being challenged by businessman Erdil Nami who has very close ties to community leader Mehmet Ali Talat and his CTP, as well as Serdar Denktash’s Democratic Party of the ruling coalition in the north, while stronger involvement in chamber affairs by Turkey is also one of the key reasons for the change.

JCC monopoly: Retailers are furious credit card clearing house JCC’s monopoly, owned by the cartel of the three leading banks, with complaints of rising charges. Businessmen say that JCC is reaping the benefits from short-term bank deposits, while the POS users are charged high fees and for receiving their funds with a delay of seven days, or more.

And the RadioMarathon, organised by Laiki and CyBC, has raised over CYP 1 mln.

from equity, borrowing from Bank of Cyprus and Hellenic Bank and from NM Rothschild.

Reserves are estimated at 9.2 mln tonnes of high-grade copper and 6 mln tonnes of lowgrade, to be shipped to Italy, Greece or Israel and then marketed by global giant Glencore.

IMF team: A delegation from the IMF is expected for its annual review, focusing on the pace of liberalisations, which Cyprus is not obliged to carry out as the

economy enjoys solid credit rating and does not require IMF-backed funding to cover its budget deficits or needs. Public debts stands at CYP 3.2 bln or 84.9% of GDP and is expected to rise to 87% in 1996.

With a public sector deficit of 4.1% of GDP, the figure is expected to drop to 3% in 1996.

Trade deficit up: The trade deficit for January-July rose 15% to CYP 664 mln as the pace of imports continues to rise faster, up 14.2% to CYP 975 mln, compared to exports of CYP 311 mln.

Hilton prospects: Andreas Kaisis, Chairman of the Cyprus Tourism Dev. Co., owner of the Cyprus Hilton that is 80% owned by the state, said prospects will be better next year, affected in 1994 by construction costs.

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October 28 - November 3, 2015

October 28 - November 3, 2015

4 | CYPRUS | financialmirror.com

NPLs reduction must remain a priority The island’s financial assistance package may have been a success but significant challenges remain with the reduction of the high stock of non-performing loans (NPLs) considered as the top priority, a Bruegel think tank conference heard.

“This financial assistance programme was a success and I would like to stand by that. We’ve seen the economy turning around, we’ve seen better performance that we expected, we’ve seen strong results on the fiscal side, always exceeding fiscal targets but there is still a level of fragility,” Vincenzo Cuzzo, the IMF resident representative told the conference organised in the University of Cyprus.

Describing the reduction of the banking system’s hign NPLs stock, Cuzzo said “NPLs which are approaching 60% of total loan facilities are preventing banks from being banks,” noting that the attention should not only focus on the banks’ capital but also on the broader economy.

PDMO raises €11.8 mln from 6-year retail bonds The Ministry of Finance said it sold EUR 11.78 mln sixyear retail bonds due from Novenmber, mildly oversubscribed above the monthly target of 10 mln.

The Public Debt Management Office, said that for the first eleven series (January-November) the Ministry of Finance sold a total of EUR 194.6 mln worth of the government bonds, of which EUR 61.5 mln to Cypriot investors and EUR 133.1 mln to foreign investors.

The application period for the eleventh series ended on October 19 as 60 applications were received for a total of EUR 11,784,500. From the bids accepted, 56 were submitted by Cypriots and four by foreign individuals. The values ranged from EUR 1,500 to 2.5 mln. EUR 8.6 mln were form foreign investors.

The Ministry also announced that it will proceed with the 12th series, maturing in 2021 with the monthly EUR 10 mln ceiling.

The bonds will be issued on December 1 and the application period will be November 2-20.

President praises RCB Bank expansion plans President Nicos Anastasiades praised RCB Bank saying it is an international bank, which has become an integral part of the Cyprus banking sector and the country’s economy, but, most importantly, has provided tangible and substantial support to our country.

“Now that our economy is recovering and returning to growth, we can only applaud RCB’s expansion plan in the local market with the opening of new branches and the consequent creation of new jobs, as well as the increase in its loan portfolio to Cypriot businesses”, he told an event at the Presidential Palace to mark the bank’s 20th anniversary.

In his address at the event, the Minister of Economic Development of the Russian Federation, Alexey Ulyukaev referred to the very good economic relations between Cyprus and Russia in the fields of trade and investment. He also referred to the very good cooperation and mutual trust existing between the two countries in dealing with the various challenges relating to the global and European economy.

Andrey Kostin, President and Chairman of the board of VTB, the primary shareholder fo RCB Bank, also addressed the event during which RCB announced the donation of 10,000 euros to ten charity organisations.

Retail trade volume up, value down The Turnover Volume Index of Retail Trade for August increased by 4.0% year on year and reached 92.1 units (base 2010=100) on the basis of provisional estimates, the Statistical Service said.

For the January-August period, the index is estimated to have recorded a year on year increase of 2.9%.

The Turnover Value Index for August decreased by 1.2% year on year and reached 90.1 units. For the JanuaryAugust period the index is estimated to have recorded a decrease of 1.1% year on year.

He described the approval of the insolvency framework and the foreclosure regime as a major step but noted this should not be considered as a completed task.

“A major step forward but some elements of the framework perhaps depart from what are regarded as international best practises. Is good legislation better than not having one? It is good to get started but we should monitor and take stock and to try to come back to it in the future,” he added.

Marios Clerdies, former CEO of the Cooperative Central Bank, said that NPL dynamics appears increasing in an adverse banking environment.

“We hear discussion of 60% in NPLs but if they have 100% in provisions is an opportunity, because if you manage to collect, that goes into bank profits,” the economist and former banker said.

He pointed out that low capital, the fact that the banks have entered a conservation mode, the low bank liquidity especially in banks that have to repay emergency funding as well as the private sector overleverage, makes the banks very reluctant to provide new lending.

On his part, UCY professor Michael Michael, stressed that addressing the high NPLs remains the biggest challenge facing the Cypriot economy, but noted that the economic recovery, expected to reach 1.5% of GDP in 2015, along with the stabilisation in the real estate sector will assist the NPL reduction efforts significantly.

“The politicians need to send the right messages,” he said, noting that the Central Bank of Cyprus should also help the banks to accelerate the speed of NPLs restructuring.

“As it is now it could take years to restructure all NPLs and the existing pace is very low,” he concluded.

Economic sentiment improves Economic sentiment improved in October with the Economic Sentiment Indicator (ESI) rising by 0.7 points, according to the Economics and Research Centre of the University of Cyprus (CypERC).

The monthly survey said that this increase is due to the improvement of the business climate in manufacturing and a growing consumer confidence.

In manufacturing, the less negative climate in October was related to the less pessimistic evaluations of the current orders by enterprises and their current reserves. The strengthening of consumer confidence is linked to the more favourable assessments for the prospects of Cyprus economy and the labour market in the next 12 months and the less negative consumer attitudes towards savings over the next year.

The ESI decline in services derives from the most pessimistic assessments of the economic situation and business demand in the last quarter.

The declining sales in the last three months and the less favourable estimates for the activity in the next quarter led to a more negative climate in retail trade. In construction, the more negative estimates for the ongoing projects in line with the intention of enterprises to reduce staff in the next quarter led to a more negative climate in October.

Social benefit payments to rise in 2016, says Emilianidou Labour Minister Zeta Emilianidou said that the social expenditure in the 2016 budget of her Ministry marked an increase.

Speaking in a joint Parliamentary Finance and Budget Committee hearing, Emilianidou said that from the total of EUR 954.2 mn, which is the budget of the Ministry, the EUR 892.2 mln or 94% concern social benefits, including the Guaranteed Minimum Income benefit for low-income households, pensioners and child benefits.

The Minister said that today, 13,000 families who did not receive any support from the state, receive the GMI, at a total cost of EUR 4.5 mln.

She noted that the government has set as a strategic goal, besides tackling of unemployment, to reform the welfare system.

The first phase of the reform of the social welfare system, which was the approval of the beneficiaries, is completed and the Ministry is proceeding to the second phase which is to provide care to those in need. She added that the Ministry will also proceed with the phase of activating the unemployed persons by implementing

projects until those people get back into the labour market.

An amount of EUR 27 mln that is not included in her Ministry’s budget but in the budget of the Directorate General for European Programmes, Coordination and Development concerns the implementation of projects of hiring unemployed persons.

At the same time, she said that the Government offers more benefits to vulnerable group of people, such as the reduction of the cost of electricity by 20%.

As regards unemployment, Emilianidou said that in 2013, when the current government took over, the registered unemployed persons were 46,000, noting that the rate has stabilised.

In particular, she said that in September 2015 a decrease of 10.8% was recorded compared to the same month in 2014.

Today, the registered unemployed are 41,723 and the unemployment rate is 14.7% compared to 15.4% in 2014.

At the same time there was an increase in the employment rate of 0.3%, she added.

October 28 - November 3, 2015

financialmirror.com | CYPRUS | 5

FinMin: Creditworthiness restored €1 bln Eurobond yields 4.25%, 3rd bond issue in just over a year Cyprus raised EUR 1 bln from the 10-year eurobond (EMTN) issued on Tuesday with a yield of 4.25%, the third attempt in the bond markets in a year, prompting Finance Minister Haris Georgiades to declare that Cyprus’ creditworthiness has been restored.

The announcement confirms reports that the government would resort to the markets before the end of the year for a bond issue of EUR 1 bln to 1.5 bln. It also follows the latest upgrade of the sovereign rating by Fitch last Friday, but still three notches away from exiting the ‘junk’ status.

“It’s done. Successful market issuance of new 10-yr bond, 1bln at 4.25%, lowest ever pricing for a 10-yr bond for Cyprus”, Georgiades posted on his twitter account.

Speaking to reporters on the sidelines of an event marking the 20th anniversary of RCB in Cyprus, Georgiades said: “Today we had a successful 10-year bond issuance for the Republic of Cyprus.”

He said that 450 mln from the issue will be used to exchange bonds maturing in the period 2019-2020, while the remaining 550 mln will enhance the state cash reserves and will help the management of public debt for the next period, after Cyprus exits the financial support programme, probably by March 2016.

The maturing bonds are Eurobonds at 4.75%, Notes due 2019 at 4.625%, Notes due 2020 at 6.500% and Notes due May 2020.

“What I want to emphasise is that the creditworthiness the Republic of Cyprus has been effectively restored”, he said, adding that he didn’t use the world “finally” because in the economy nothing is final if not supported by a coherent and credible policy.

He added that the government will continue the policy followed over the past two years that has helped restoring the credibility of

the country’s economy.

This is the first time since the economic crisis that Cyprus has borrowed from the primary market through the sale of 10-year EMTN. The Ministry had also announced an invitation to holders of existing eurobonds to exchange them with the new issue of the Republic.

Meanwhile, President Nicos Anastasiades congratulated the Finance Minister for the successful 10-year bond issuance, noting that after almost four years of contraction, the Cypriot economy is returning to positive economic growth.

In his speech at the RCB Bank event held

at the Presidential Palace, Anastasiades said that the Cypriot economy “is emerging out of its most challenging period to date. The last two years are a prime example of what can be achieved with vision, detailed planning and prudence. Hard work and the common effort of the public and the private sector can turn an economy in distress towards stability and prosperity.”

He noted that “after almost four years of contraction, we are witnessing a return to positive economic growth from the beginning of this year, a growth that is projected to be maintained. The results are already visible. Last week, Fitch Ratings

upgraded Cyprus’ economy by two notches, with a positive outlook, pointing out the positive fiscal performance and the return to growth”.

“We were successful in entering the credit markets today and I congratulate the Minister of Finance”, he added.

He also said that “substantial results have been achieved in the banking sector as well.

The banks have been restructured and recapitalised and are refocusing their operations with a prudent risk-based approach to lending. Today, however, confidence and stability have been restored and all restrictions and capital controls imposed in March 2013 have been abolished earlier than expected”.

“Obviously the banking sector has still challenges to face: the large number of nonperforming loans and consequently the ability of banks to supply new credit to the economy. To this end, the improved legal framework on foreclosures and insolvency is now in force, and it is indeed a critical step towards tackling the high level of nonperforming loans”, he added.

The President stressed that “with a responsible fiscal policy visible through the performance of the public finances, with emphasis on investments, coupled with the targeted structural reforms that we are promoting, we are confident that the economy will be on solid ground in the medium and long term”.

“Such policies, to name a few, involve the fostering of the financial sector and the attraction of strategic partners/investors in the telecommunications and ports industries, the maintaining of a stable tax framework with added incentives for investments and the care for more vulnerable groups”, he concluded.

Fitch hikes ratings 2 notches, closer to non-junk grade Fitch Ratings upgraded on Friday Cyprus’ long term foreign and local currency issuer default ratings (IDRs) by two notches to ‘B+’ up from ‘B-’ with a positive outlook, saying that “Cyprus has established a track record of fiscal consolidation and over-performance on its fiscal targets.”

The rating agency said that Cyprus’ senior unsecured foreign and local currency bonds have also been upgraded to ‘B+’ from ‘B-’ and the country ceiling raised to ‘BB+’ from ‘BB-’, while the short-term foreign currency IDR has been affirmed at ‘B’.

The ratings upgrade is three short of exiting the ‘junk’ status, while the Moody’s rating is at B3, or five notches below the “non-investment grade” and S&P is at BB-, just two notches below junk.

All three agencies are now expected to raise their ratings once again, following this week’s successful issue of a EUR 1 bln 10-year EMTN paper.

Cyprus previously issued a 5-year bond in the summer of 2014 and a 7-year issue this year.

In its review for the economy, Fitch now projects “a deficit of 1% of GDP for 2015 and surpluses of 0.2% and 1% for 2016 and 2017, respectively.”

At the same time it forecasts the general government gross debt (GGGD) “to peak at less than 108% of GDP this year, before falling to around 100% in 2017”.

This, it pointed out, “compares with a peak of over 130% projected by Fitch in June 2013.”

“At more than double the ‘B’ median of 43% for 2015, the GGGD ratio is still high and reduces Cyprus’ fiscal scope to absorb domestic or external shocks”, it said.

Fitch highlighted that deposits have been broadly stable since capital controls were lifted, “although non-resident deposits (30% of total) declined temporarily in the run-up to the Greek crisis this summer.”

“While direct financial links between Greek-owned subsidiary banks and Greece have been reduced significantly, the sector remains vulnerable to Greece mainly via investor confidence”, it noted.

The ratings agency said that there are still significant risks to creditworthiness posed by Cyprus’ continued deep economic and financial adjustment.

It considers that “the environment for banks remains challenging, in particular with regard to exceptionally weak asset quality.”

“The stock of consolidated sector NPEs was 47.4% of gross loans in August, the highest of all Fitch-rated sovereigns. Unreserved problem loans for the sector (ie gross NPEs minus system-wide provisions) stood at EUR 18.8 bln, or 107% of GDP for the same period,” it said.

At the same time it added that “implementation risks around banking reforms remain high as the process is dependent on the political will to confront debtors, which could wane in the run-up to parliamentary elections in May 2016.”

Government Spokesman Nikos Christodoulides welcomed the double-notch upgrade, stressing that the great effort must continue for full economic recovery.

“The government welcomes the double upgrading of the financial and credit ability of our country by the rating agency, Fitch”, he said in a statement.

He pointed out that this “development is the result of the collective effort on the part of the government, the parliament, the social partners but, mainly, of the Cypriot people.” According to Christodoulides “the prudent and consistent economic policy and the effort for reform and modernisation bring about results and are internationally recognized.”

House President Yiannakis Omirou also welcomed the

upgrade, but warned that challenges remain and that a new comprehensive model for growth is necessary.

“The upgrade of the Cypriot economy by Fitch constitutes a positive development”, which has been achieved through the great sacrifice of fellow citizens, Omirou said.

It will enhance Cyprus’ effort to tap the markets but “problems remain and challenges are great”, he noted.

Referring to non performing loans, he pointed out that their percentage is still at a very high level. Resolving this matter while continuing to uphold social cohesion, Omirou said, will safeguard financial stability and will enable the economy to have access to funding.

Finding a solution to the NPLs will mean the return to stable and sustainable growth rates, he added.

According to Omirou there is a need “to create a new comprehensive growth model.” In this regard, he referred to financial services, shipping, energy, tourism, construction, agriculture, research and innovation pointing out that with the right strategic planning these areas can constitute the pillars of economic recovery.

Since 2011, Cyprus had been excluded from international markets due to the dramatic deterioration of its fiscal situation that subsequently led to the adoption of an economic adjustment program in March 2013.

Its exclusion from the markets, largely driven by the dire conditions of its banking system, led to the junk status grading by all three credit agencies.

Since then a remarkable improvement has been witnessed as cited by both Fitch and S&P in their latest reports, that led to the county’s upgrades.

It is expected that Cyprus will exit the adjustment programme as originally planned in May 2016 when the three-year bailout plan expires.

October 28 - November 3, 2015

6 | CYPRUS | financialmirror.com

Stelios to raise bi-communal co-operation cash prize to €500,000 for next year Serial entrepreneur Stelios Haji-Ioannou handed out cash prizes of EUR 10,000 each to 31 pairs of Greek and Turkish Cypriots who have established joint bi-communal projects and declared that his charity, the Stelios Philanthropic Foundation, will boost the grant to EUR 500,000 next year for 50 winning teams.

Speaking at the prize-giving ceremony at the foundation’s bi-communal café in old Nicosia, Sir Stelios said: “This is a charity project, not a political one. This is my way of giving back to the island that my family comes from. Both my parents were born on the island. This project is one of my ways of repaying my debt to society. We are working over the last seven years for lasting peace on the island of Cyprus”.

Stelios said that this year the foundation received four times more applications than previous years and attributed the enthusiasm to the positive political climate, the promotion and publicity of the prize and the operation of the café that also played a key role to bring closer Greek Cypriots and Turkish Cypriots and managed to strengthen the element of trust and cooperation between them.

Another contributing factor this year was the opening up of the bi-communal cooperation, not just to business but also to arts, sport, literature and sciences.

In his address, President Nicos Anastasiades said that the ‘Stelios Bi-Communal Business Awards’ ceremony is an institution, firmly established as an annual celebration of bicommunal co-operation and creative interaction.

He said that “through these actions, the Foundation is playing an invaluable role in facilitating much needed contact and re-building the socio-economic bonds of the two communities of the island, which existed for many decades”.

The President noted that “the remarkable record number of applications that the Foundation has received for this year’s awards is tangible proof of the genuine, tenacious desire of the people of Cyprus, Greek and Turkish Cypriots, to re-establish and further advance their socio-economic ties and cooperation”.

“The impressive outreach and success of these awards should come as no surprise: Greek and Turkish Cypriots collaborated and co-created successfully for decades, proving that their common denominator, their Cypriot identity, and their common desire to prosper together, are strong and lingering”, President concluded.

After the ceremony Sir Stelios, accompanied by winners and participants walked through the Ledra Street checkpoint to the north where a second bi-communal café will open on Ferah Street early next year.

Stelios Haji-Ioannou announced that he will raise the stakes for next year to EUR 500,000 going to 50 bicommunal teams for 2016. The total grants have reached to EUR 2 mln so far.

This year’s 31 prize winning bi-communal teams, each earning EUR 10,000, are: Nikos Pissourios – Ugur Sayilir, kite surfing; Christos Kartsioulis – Ergec Senturk, worldwide PC support; Vasilis Htisti – Zafer Biler, joint restaurant; Michalis Michael – Sukran Ozerdem, married couple; Eleni Melanidou – Kursat Tilki, bicommunal choir for peace; Costas Kafkarides – Yasar Ersoy, theatre; Michalis Theodorou – Niyazi Kizilyurek, publishing house; Aydin Mehmet Ali – Konstantinos Konstantinou, cycling services for people with mobility problems; Themistoclis Mantis – Erdinch Ustenler, gliding group; Pieris Hadjipieris – Yakup Engin Tel, restoration of Apostolos Andreas monastery; Nicos Vassiliou – Mazlum Kortas, study the economic aspect of a re-united Cyprus; Evren Manner – Christina Demetriades, bilingual animated film project; Charalambos Leonidou – Hasan Ekingen, lace products; Melani Pappas-Lemona – Gozde Pehlivan, kindergarden; Hacer Genc – Panayiotis Constantinou, catalogue for traditional woven baskets; Hakan Djuma-Marios Georgiou-Agapios Agapiou, aolar taxi bike; Dr. Prof. Sophia Serghi – Devrim Celal, sailing around Cyprus; Demos Kinigos – Hasan Hasanbulli, fish trading;

Androulla Shati – Samiye Taskin, recycling at schools; Aydin Mehmet Ali – Nicoletta Demetriou, workshops to promote Anglophone literature; Yiannis Papadikos – Tibel Nidai, fish trading; Tania Matsouka – Nazo Canitez, rock climbing and yoga; Anna Argyrou – Gulsen Oztoprak, educational consultants; Tacam Gokboru – Savvas Anastasiou, cycling camps; Antonis Lefconikiatis – Ozfer Ozatay, photo equipment trading and exhibition; Maria Georgiou – Serife Akman, bakery café; Dr. Paul Costeas – Ovgu Ince, Karaiskakio and Kemal Saracoglu Foundations; Sylia Panayiotidou – Erhan Oze, online art gallery; Harris Galazis – Emre Serdar, aluminium business; Larkos Larkou - Hatidje Ardost, “Kyprogenia” bi-communal music group; and, Katie Economidou – Dervish Baha, guided tours.

Minister presents awards to ‘F1 in schools’ students Education Minister Costas Kadis received the six students from the Livadhia District High School in Larnaca, who took part and won prizes at the “F1 in schools” competition in Singapore.

The Cypriot team won two prizes: Team website award supported by fantastic media and Innovative thinking award supported by Lotus F1 team.

Kadis said that the achievement of the Cypriot students, hailing from a school that has the fraction of an operating budget of other schools abroad, reflects the positive aspects of our education system and the good work achieved in several sectors. He said that the ministry will also review the proposals submitted by the students to encourage the participation of students from all schools at similar international competitions and fora.

The “F1 in schools” is an international contest where participants must design, build and participate in races using miniature F1 vehicles, made of solid balsa and plastic and using a single bottle of compressed CO2 gas must achieve a top speed of 90kph over a distance of 25 metres. The vehicles must not weigh more than 53gr and should be no longer than 24cm.

The winning students were Nicholas Vatis, Damianos Papas, Fanis Mahmalat, Yiorgos Mousoulou, Odysseas Psaras and Stephanos Kyriakou.

They were accompanied by Yiorgos Protopapas.

October 28 - November 3, 2015

COMMENT | 7

The European Union, a reality and an opportunity for French chartered accountants and their clients

By Stefan Petrovski Over time and through its evolution the European Union has increasingly become the new area for the development of French chartered accountants’ activities. It affects and alters their professional lives as well as that of their firms and more generally how the profession of chartered accountant functions in France and in other European Member States.

How do we understand the evolution of a regulated profession following the establishment of European directives impacting it? How do we best advantage and accompany our clients in this new economic area?

The construction of the European project has been long and winding, born long before the middle of the 20th century but which only actually materialized after the World War II. The influence of the European Union, with its motto “United in Diversity”, has never been so influential on our professional or personal life, than since introduction and adoption of the Euro currency on 1 January 2002.

The European Union (EU) is the first economic power in the world, ahead of the United States, China and Japan, with a 2014 GDP of 13 900 billion constant Euros. Five European member states (Germany, United Kingdom, France, Italy and Spain) are responsible for 71.4% of the EU’s GDP. Despite this, the European Union is in the midst of an internal crisis marked by a rise of Euroscepticism during the 2014 European election campaigns where the EU often

served as a scapegoat for this crisis.

The implementation of the “Services”, “Recognition of professional qualifications”, “Accounting” EU Directives and their transpositions into French law, have altered the regulatory landscape of French chartered accountants.

Should this be a source of concern or of opportunity?

Chartered accountants have chosen.

The impacts of EU legislation are negative and positive for Chartered accountants.

On one hand, they may feel competition from other European chartered accountants following the recognition of European diplomas and the opening of their firms to outside capital funding. This competition can cause a decrease in the rates of services provided to clients and an increased concentration of firms at the expense of smaller firms.

However at the same time, with this new European market, they may develop their activities, leave the country, increase their professional mobility and become more intellectually and culturally diverse, and notably be able to develop EU wide based firms or networks. This European opening allows the profession to diversify in order to better adapt to the globalized economy of the 21st century.

Small and medium-sized companies constitute the majority of Chartered accountant’s clients in the 28 EU member states. In 2013, the majority, 99.8%, of the companies were in the non-finance sector of the market economy, representing 21.6 mln companies. They employed 66.8% of European employees, i.e. 88.8 mln people and contributed to 58.1% of value added at factor cost, or 3 666

bln Euros (28% of EU GDP). To offer the best assistance and services to clients in the EU, some adaptations are necessary and desirable, among them: strengthening or learning other European languages and having a computer and digital ecosystem that resembles that of the clients and their markets. In fact, digital technology has abolished European borders and distances. Now is the time to seize this opportunity! The combination of effective and inexpensive communication systems and easy air and train transportation, make affluent and good European markets more and more accessible to professionals.

Thus, the major and “only” obstacles seeming to block Chartered accountants from servicing SMEs in the EU are: social law, tax law, national languages and psychological barriers which are all surmountable as long as accounting professionals are motivated, have confidence in their ability to open up to others, and view the European Union as our common living space and national territory.

Once these barriers are overcome, everything becomes simple and possible: Let’s go!

And thus, a French company that sells in Germany will no longer be “exporting” but simply trading.

But one last question arises: How can we conceive of serving a client in the European Union, a Union which actually puts into question its very founding principles?

Stefan Petrovski is a French Chartered Accountant (Expertise-Comptable) stefan.petrovski@netc.eu

Remote working and business Momentum is growing for better public sector apps growing hand-in-hand With a growing number of professionals working outside the main office, at least some of the time, use of remote working tools has also radically increased. In fact, a staggering 86% of workers have used at least one tool enabling remote working in the previous month, according to a survey of over 44,000 senior business people across more than 100 countries by global workplace provider Regus.

Some 85% of respondents also highlight that the needs of remote workers are strongly driving take up of ‘cloud’ applications that provide them with cost-effective access to office tools wherever they are.

But online tools are also helping to ease some of the other pain traditionally associated with remote working especially through the proliferation of efficient and secure document sharing services.

The research shows that Dropbox is the most commonly used online file-sharing service, used by 56% globally, followed by Google Drive 43% and TeamViewer 25%.

Another challenge remote workers face is that of getting overlooked when they are not in the office. Instant Messaging tools and VoIP, however, are revolutionising the way workers communicate and helping remote workers show they are available, connected and immediately responsive. The research found that the most popular VoIP Messaging

application is Skype, used by 60% of global respondents in the previous month; Facebook Messenger 48% and Viber 13% followed.

“With more businesses offering staff the opportunity to work remotely at least

occasionally, online tools are helping to overcome some of the hurdles traditionally associated with working from outside of the office,” explained Katerina Manou, Regus Regional General Manager – Balkans and Cyprus.

“From feeling out of touch with colleagues, to being unable to access documents on the company server, technology is bridging the gap. The growth in instant messaging applications and document-sharing services in particular is playing an enormous role in helping more people to work flexibly, by enabling more reliable and secure ways of communicating with colleagues and sharing files, from wherever people may be working. This means that they can be fully operative even when they are not in the office.”

accounting, says PwC survey Governments around the world are increasingly taking steps to improve their accounting and achieve greater transparency and better public finance management - amidst growing recognition that the accounting framework traditionally used by the public sector isn’t fit for the 21st century, according to a PwC survey conducted in 120 countries.

“It is important that governments which regulate accounting in the private sector – lead by example and have a high standard in their accounting system. This is not the situation today, but we see great interest in seeking improvement,” said Jean-Louis Rouvet, PwC Global Public Finance and Accounting leader.

Accrual accounting principles reflect the long-term economic impact of political decisions in the financial statements. This results in a comprehensive view of a government’s assets and liabilities, and of its financial performance and cash flows.

Some seven in ten governments intend to use accrual accounting in five years’ time, with IPSAS (International Public Sector Accounting Standards) being often taken as a reference point, the survey found.

“There is now growing recognition of the importance of appropriate accounting and financial management in the public sector as a key means of achieving sustainable public finances. Governments need to step up and adopt sound and transparent accounting and reporting rules, as part of the democratic accountability process and the wider public finance management,” added Patrice Schumesch, PwC Global Public Finance and Accounting Partner.

While in Europe, the European Commission is progressing with its plan to

adopt harmonised accrual accounting standards for all EU member states, the research shows that the biggest shift to accrual accounting is expected in Africa and Latin America, followed by Asia. Among the non-OECD countries surveyed, 50% plan to transition to accrual accounting in the next five years.

“Transitioning to accrual accounting is not an end in itself, it is an enabler.

Adoption of high-quality accrual accounting also lays the basis for developing better management information systems, which should also contribute to better decision making and a better use of public money,” Jean-Louis Rouvet added.

“Performance management should help governments to measure the achievement of their service delivery objectives and in so doing add value for citizens. The end goal is to deliver a better public service and to achieve sustainable public finances, therefore creating a positive legacy for the next generation.”

The governments surveyed also indicated their priorities for the next five years include one or several of the following projects, depending on their position along the government finance maturity spectrum: accrual accounting (based on IPSAS or similar standards) implementation, modernisation and greater integration of IT systems, capacity building and improvement of management information systems.

The report ‘Towards a new era in government accounting and reporting’ (2nd edition) is available to download at www.pwc.com/gx/en/industries/governmen t-public-services/public-sector-researchcentre/publications/second-edition-globalsurvey-government.html

October 28 - November 3, 2015

8 | COMMENT | financialmirror.com

CYPRUS WINE – A HISTORICAL PERSPECTIVE

FOOD, DRINK and OTHER MATTERS with Patrick Skinner

Lift a glass of red or white Cyprus dry table wine to your lips and you’re trying a modern wine with very little inherited local tradition.

BUT, if it is a drop of Cyprus Commandaria in the glass it is another thing altogether. This is history in a bottle.

There has probably been a commercial wine industry in Cyprus longer than anywhere else in the world. Whilst this may give rise to romantic promotional gambits like “Four thousand years of tradition”, it is no guarantee of good wine today.

Thankfully, though, today there is plenty of good wine to drink in Cyprus; but this is due to the skill of modern wine-makers and their equipment rather than inherited traditions.

The wild vine from which our modern grape varieties descended (a very long time ago) undoubtedly grew in Cyprus and the bitter small fruits were probably collected and dried by man. The cultivation of vines for The much reproduced 1868 engraving from the English “Illustrated News” (hand coloured in 2006) purporting to be dessert fruit and wine is relatively recent.

“The Vintage at Cyprus”. From the dress, the location is more likely to be Crete – there would be few, if any, In fact, it seems that the grape was first brought near man’s home and readers able to contradict the article. The beast of burden is interesting, it is a Hinny (a cross between a male horse cultivated in the Black Sea area around 8,000 years ago. From there it spread slowly south-eastwards to Mesopotamia, Syria and Egypt, from and a female donkey – the more usual is donkey male and female horse, creating the sturdier, stronger mule) whence it travelled across the Mediterranean to Greece, on to Italy, and so on.

There is much evidence to suggest that the country which had the greatest wine industry were accustomed to.

Because of problems with sealing vessels to protect the wine from oxidisation from the air, for the longest period was Syria, from around 3000 BC or before, until about 1000 AD, when Islam held sway and banned the production of alcohol. most early wines would have been sweet and the tradition of such wines in Cyprus was born.

It is known that in that early period, 5,000 years ago, Syrian farmers came to Cyprus and, Sweet wines not only oxidise more slowly, but they travel better then dry wines. So, callers although there is no evidence to prove it, I am convinced they would have brought their wine- to the Cyprus of old would have stocked their boats with the sweet wines of Cyprus. producing grapes with them.

Not a lot of historical evidence exists to describe the wines of Cyprus between the GrecoAnd so, when the Greeks and Romans came to Cyprus several millennia later, I think they Roman periods and the Middle-ages, when Cyprus endured drought, pestilence and regular would have found wine already here, but probably of a very different style to the wines they wars, invasions and incursions.

In the 11th century, when the Crusades commenced, Cyprus wines became recorded and praised. The most noted proponent, at least insofar as legend and wine promotion have it, The legendary was Richard the Lion Heart. meeting of From his sojourn here and those of the various Orders of Knights, came the generic five kings, in description of the sweet wines of Cyprus: “Commandaria” the City of Commandaria, by law, today has certification of origin, which stipulates types of grapes, London in regions of production and methods. For such a delicious sweet wine it is a remarkable 1363, which bargain. took place in As the centuries passed, writers, priests, explorers, soldiers and rulers praised the sweet the building wines of Cyprus, bought them, shipped them, drank them. Invasion followed invasion. Four that was then hundred years of Lusignan rule, ending in 1489, was followed by the Venetians (1489-1571), and is now who found the place bankrupt. that of the The Ottomans invaded in 1571 and stayed until 1878, when they ceded the island to Vintners’ Britain.

Society.

In all this period there was not a lot done for the vine-grower, especially under the Turks, who extracted iniquitous triple taxes from vine-growers and wine-makers.

Apart from taxes, one aspect of the Turkish period was that they allocated the better land They were to people of their faith, leaving the Cypriots of the Orthodox Church the higher, less fertile Peter I of ground, whose only useful cropper was the hardy vine.

Cyprus; During the Dark Ages, the Defenders of the Faith, the Monasteries, all over Europe were Edward III of also “Defenders of the Grape”, protecting the heritage if the vine left by the Roman Empire, England; and ensuring that the making of good wines, spirits and liqueurs carried on. There is no David II of doubt that this tradition held true in Cyprus. There are records of a winery at Scotland; John Chrysorioyiatissa Monastery in the 18th century and, no doubt, wines and liqueurs have been II of France; made elsewhere over the centuries. and Valdemar But it is in the 19th century that the foundations of the modern industry were laid. The IV of House of Haggipavlu was founded in 1844, when the company made the purchase of a second sailing vessel, the “Saint Peter” to add to the first, the “Alexander” bought in 1825.

Denmark.

These vessels took exports of wine in barrels all over the eastern Mediterranean.

By the early 1870s, it seemed that exports could rocket to colossal levels, when the Phylloxera beetle struck and decimated every vine-growing area in Europe except Cyprus. The We do not French, and others, demanded thousand of barrels from Cyprus to meet demand for wine and know what the Cypriots thought their bonanza days had come. they discussed But the French quickly passed laws restricting imports, to force the local industry to reor what they build and Cyprus’ boom time faded away. ate, but we do In 1875, the British leased Cyprus from Turkey and it seemed better days would come. But know what there were still taxes, and little investment for this small part of the Great British Empire. In they drank: 1889 the Cypriots sent a delegation to London to lobby for a reduction in import duties on the sweet, Cyprus wines, but without success. dark wine of But the local industry proceeded undeterred. In 1893, the Haggipavlu family, by then Cyprus. making spirits as well as wines, built the first modern winery, in Sanaja in the Limassol

October 28 - November 3, 2015

financialmirror.com | COMMENT | 9

The Cyprus Mail marks 70 years district, with proper presses and fermentation tanks of stone.

Around the same time, an English family, the Chaplins, built a large wine-making plant at the village of Pera Pedhi, just below Platres and started to make wine in fairly large quantities.

Both these wineries would have made dry wines, from the local grapes, “Xynisteri” (white) and “Mavro” (red) which were from vines that had been in Cyprus for many hundreds, if not thousands, of years.

This excellent photograph was taken in 1906 and shows the grape harvest being brought in.

These were the years of the British Empire, with a strong presence in the Middle East, especially after World War I, from 1918 onwards. So the wine and spirits industry of Cyprus prospered with exports to all the places where the British were present: Palestine, Egypt, Sudan, even to the Arabian Gulf, as well as to the French in Lebanon and Syria As the new century started there were the two up-to-date wine-making plants in Cyprus, the Chaplin family’s at Per Pedhi and the Haggipavlu’s at Sanaja, both in the Limassol district. However, Haggipavlu were developing a big distilling business based on brandy, and wine became rather secondary.

But sales of products based on the grape grew steadily.

On November 2, the Englishlanguage Cyprus Mail, the oldest published newspaper on the island, will celebrate its 70th anniversary, a remarkable achievement for a tightly knit, family-run publication that prides itself on its independence and objectivity.

When Jacovos ‘Jaco’ Jacovides published the first issue of the Cyprus Mail – then, just a tiny, twopage tabloid – on November 2, 1945, World War II had just ended.

In a time of paper rationing, power cuts and an increasingly repressive British colonial government, he took a big financial gamble.

For the paper’s readers it was a gamble that paid off. Through the pages of the Mail, they were kept informed of the profound impact of the post-war years on Cyprus.

Events ranged from the detention in Cyprus of thousands of Jewish refugees trying to break the British blockade and reach Palestine in the late 1940s, to the rise of EOKA and its demand for Enosis in the 1950s.

From the flawed independence of The first issue of the Cyprus Mail 1960 to the intercommunal troubles of 1960s, and from the coup and Since his two sons took over, the Cyprus Turkish invasion of 1974 to the tortuous attempts to stitch the country back Mail has had to enter a whole new world, first with together ever since, the Cyprus Mail has publishing stayed true to its readers and provided computerisation and more recently with the internet. The paper’s print edition is still objective news coverage.

Its editorial and comments sections have a source of pride but, like all newspapers, long been hugely popular. The paper’s the Cyprus Mail is also focusing on its web independence means that nothing is above edition and meeting the needs of its everscrutiny, however controversial. The expanding number of readers worldwide Cyprus Mail has never been scared to who expect constantly updated news.

The Cyprus Mail has met these new criticise, whether it’s a government, a political party or a company. This has challenges head-on so successfully that it is earned it some enemies down the years, but the number one English language news website in Cyprus. Aside from its loyal also a lot of respect and readership loyalty.

Few professions have changed more in Cyprus-based readers, the paper’s reach is the last 70 years than the newspaper truly global. People in Britain, Australia, the industry. When Jaco published his first United States and South Africa, for issue in 1945, his concern was about lines example, now rely on the Mail for their of lead print, paper availability and buying a news and views on Cyprus.

As part of the paper’s 70th anniversary printing press that could produce a whopping six page newspaper. Even when celebrations, the Cyprus Mail has been he died, more than 40 years later in 1988, uploading highlights from its archives those concerns had not changed (www.cyprus-mail.com click on ‘70 Years’). significantly.

To be continued

Jacovos Jacovides, the founder of the Cyprus Mail in 1950

October 28 - November 3, 2015

10 | GREECE | financialmirror.com

Tsakloglou: Greece should not waste another opportunity May return to positive growth rates by 2H 2016 Andrew Shouler spoke with Professor Panos Tsakloglou, chairman of Greece’s Council of Economic Advisors in 2012-14, negotiating with the Troika (Eurogroup, IMF and European Central Bank).

Looking back on the creation of the euro and its forerunner the ERM, there was some academic doubt whether the result would be economic convergence within Europe, or alternatively divergence. Of course, politics prevailed, but pressures undoubtedly arose. How do you review that debate?

Until the mid- to late-2000s there was convergence, but that process broke down with the current crisis. The big question now is what will happen in future, which is related to the underlying theoretical issues. Namely, can we have a monetary union without fiscal union — which in theory can happen only in an optimal currency area — and synchronisation between economies?

The original thinking was that a common currency would help achieve a common business cycle, subject to the differential impact of external shocks across countries.

However, that did not turn out to be the case, creating a new situation.

If you look at historical precedents, the only successful monetary unions are those that were also fiscal unions. But a fiscal union requires a common budget, and a common budget requires some form of common state entity.

Currently, this is not feasible, as in many European countries eurosceptic parties seem to be in the ascendant.

Yet we may still see some form of common fiscal policy emerging in the near future, in the form, firstly, of Eurobonds financing large pan-European infrastructure projects. Another possibility along this route could be a common unemployment insurance scheme. Without those kinds of initiatives we could be heading for the end of the road.

There is also a need for steps in the direction of further economic integration, some of which in fact have already taken place, such as the European Stability Mechanism (a kind of IMF for the euro region). The banking union is also such a step, despite the fact that it does not include a common deposit guarantee scheme. Nevertheless, overall, the system we have now is still quite loose.

There used to be a sense that policy adjustments to keep harmony between the member countries should be two-sided. But that symmetry as envisaged was lost somewhere along the way? Do the corrective processes within the eurozone work properly now?

In theory, there should have been processes not only for the deficit countries but for the surplus countries, too. In practice, this is not, currently, the case.

Can we, anyway, all be Germanys running large current account surpluses? Clearly, we cannot, because, as Nobel laureate economist Paul Krugman says, for us to all have export surpluses we would need to find a colony on Mars to trade with.

Of course, that does not mean that large persistent deficits are desirable; prudence is needed there. But coordination within the eurozone cannot be just for the deficit side. If that continued to be so, there would be two problems arising for Germany itself, through the dangers posed to the very existence of the euro.

Prof Tsakloglou: We cannot all run large surpluses like Germany

The first is economic. If the eurozone were to break up, the German currency would rise to stratospheric levels. For an export-oriented economy, the ensuing loss of competitiveness would be a very serious blow.

The second is political. Germany is currently rightly perceived as a global power. This is because it is at the helm of the EU, of which the core is the euro. Jeopardising the euro endangers that pre-eminent status, especially in a longterm perspective, taking into account demographic trends.

Since Germany’s principles appear immovable in key respects, doesn’t that critical faultline render the outlook for the euro project prohibitively difficult?

Necessity is the mother of invention. Many things have been accomplished in a short period of time during the crisis period, and I hope that this process will continue and, eventually, lead to genuine economic integration in the eurozone.

European integration has always been an elitist project that depended on delivering progress to help maintain the public’s support. Will there in future be more emphasis and spending on policies that boost productivity, as is necessary, on skills, training and infrastructures? As it stands, given Europe’s ageing societies, we will need some kind of superproductive labour force in order to maintain high living standards.

From a Greek perspective, the current political climate worries me. Greece suffered a lot under German occupation during WW2, and anti-German feeling was riding high for some years after. Then they subsided, and when I was younger we tended to view Germany as a prosperous and peaceful partner. Unfortunately, sour feelings have resurfaced, while anti-Greek stereotypes have developed in a number of European countries.

How about the most recent developments and prospects? It seems extraordinary to an outsider that the Tsipras administration called a dramatic referendum, which shocked Europe, then won the national vote to resist austerity, but then accepted a harsh austerity

deal, and was then nevertheless re-elected!

The amazing thing is that in 2014 the economy was turning around. The growth rate was positive, unemployment was declining from horrendously high levels, the budget was in a healthy primary surplus and our current account was in surplus too. Moreover, within just two years of the largest debt restructuring in history, Greece was back in the international capital markets.

But, then, there were elections, and historians in future may find it hard to understand what happened next.

Under the first Syriza government, political capital was wasted. There was a chance to align with both the Greek people and the pressure from Europe, by cleaning out the ancien regime, which was perceived as pretty corrupt and unreconstructed. Instead, PM Tsipras and especially then Finance Minister Yianis Varoufakis were sending confusing messages giving everyone lectures about democracy, as if the rest of our eurozone partners were not democratically elected. That brinkmanship led to increased uncertainty, economic slowdown, deposit outflows, capital controls and eventually a third programme. The result of this policy was an increase in our debt of some EUR 40-45 bln, relative to trend, within just seven months.

Nevertheless, politically, with Syriza returned to office in this environment, PM Tsipras cuts a dominant figure. The third bailout programme that he signed is extremely frontloaded, with almost all the fiscal measures expected to be delivered in the first six months.

If the first review of the new programme is completed successfully, there are many benefits waiting to be reaped: banks’ recapitalisation, discussion about measures to be adopted for easing further the Greek debt, participation in the ECB’s QE programme, etc.

Hence, it is not unimaginable that the programme will succeed. In fact, if the fear of Grexit with its devastating consequences is significantly diminished, Greece may return to positive growth rates in the second half of 2016.

Andrew Shouler is a freelance journalist © Andrew Shouler

October 28 - November 3, 2015

financialmirror.com | GREECE | 11

Schauble’s gathering storm

By Yanis Varoufakis

Europe’s crisis is poised to enter its most dangerous phase. After forcing Greece to accept another “extend-and-pretend” bailout agreement, fresh battle lines are being drawn. And, with the refugee influx exposing the damage caused by divergent economic prospects and sky-high youth unemployment in Europe’s periphery, the ramifications are ominous, as recent statements by three European politicians – Italian Prime Minister Matteo Renzi, French Economy Minister Emmanuel Macron, and German Finance Minister Wolfgang Schauble – have made clear.

Renzi has come close to demolishing, at least rhetorically, the fiscal rules that Germany has defended for so long. In a remarkable act of defiance, he threatened that if the European Commission rejected Italy’s national budget, he would re-submit it without change.

This was not the first time Renzi had alienated Germany’s leaders. And it was no accident that his statement followed a months-long effort by his own finance minister, Pier Carlo Padoan, to demonstrate Italy’s commitment to the eurozone’s German-backed “rules.” Renzi understands that adherence to German-inspired parsimony is leading Italy’s economy and public finances into deeper stagnation, accompanied by further deterioration of the debt-to-GDP ratio. A consummate politician, Renzi knows that this is a short path to electoral disaster.

Macron is very different from Renzi in both style and substance. A banker-turned-politician, he is President Francois Hollande’s only minister who combines a serious understanding of France’s and Europe’s macroeconomic challenges with a reputation in Germany as a reformer and skillful interlocutor. So when he speaks of an impending religious war in Europe, between the Calvinist Germandominated northeast and the largely Catholic periphery, it is time to take notice.

Schauble’s recent statements about the European

The biggest losers in the financial crisis A report by the European Central Bank has revealed that Irish people lost more of their personal wealth than any other European country during the financial crisis. The research shows that the average net worth of Irish households plummeted EUR 18,474 in the four years up to and including 2013.

During the same time frame, average household net worth fell EUR 16,909 in Greece and EUR 12,780 in Spain.

As the Irish, Greeks, Spanish, Italians and Portuguese got poorer during the economic slump, other countries prospered. Dutch households had a per capita gain of EUR 33,621 for the four years to the start of 2015, while German wealth went up to the tune of EUR 19,277. The European Central Bank also published more recent data showing that income is generally increasing across the euro zone and that countries struggling in the aftermath of the financial crisis are set for economic improvement.

(Source: Statista)

economy’s current trajectory similarly highlight Europe’s cul-de-sac. For years, Schauble has played a long game to realise his vision of the optimal architecture Europe can achieve within the political and cultural constraints that he takes as given.

The “Schauble plan,” as I have dubbed it, calls for a limited political union to support the euro. In brief, Schauble favours a formalised Eurogroup (composed of the eurozone’s finance ministers), presided over by a president who wields veto power – legitimised by a Euro Chamber comprising parliamentarians from the eurozone member states – over national budgets. In exchange for forfeiting control over their budgets, Schauble offers France and Italy – the primary targets of his plan – the promise of a small eurozone-wide common budget that would partly fund unemployment and deposit-insurance schemes.

Such a disciplinarian, minimalist political union does not go down well in France, where elites have always resisted forfeiting sovereignty. While politicians like Macron have moved a long way toward accepting the need to transfer powers over national budgets to the “center,” they fear that Schauble’s plan asks too much and offers too little: severe limits on France’s fiscal space and a macroeconomically insignificant common budget.

But even if Macron could persuade Hollande to accept Schauble’s plan, it is not clear whether German Chancellor Angela Merkel would consent to it. Schauble’s ideas have so far failed to persuade her or, indeed, the Bundesbank (which, through its president, Jens Weidmann, has been hugely negative toward any degree of fiscal mutualisation, even the limited version that Schauble is willing to trade for control over the French and Italian budgets).

Caught between a reluctant German chancellor and an indisposed France, Schauble imagined that the turbulence caused by a Greek exit from the eurozone would help persuade the French, as well as his cabinet colleagues, of his plan’s necessity. Now, while waiting for the current Greek “programme” to collapse under the weight of its inherent contradictions, Germany’s finance ministry is preparing for the battles ahead.

In September, Schauble distributed to his Eurogroup colleagues an outline of three proposals for preventing a new euro crisis. First, eurozone government bonds should include clauses that make it easy to “bail in” bondholders.

Second, the European Central Bank’s rules ought to be altered to prevent commercial banks from counting such bonds as ultra-safe, liquid assets. And, third, Europe should

ditch the idea of common deposit insurance, replacing it with a commitment to let banks fail when they no longer fulfill the ECB’s collateral rules.

Implementing these proposals in, say, 1999, might have limited the gush of capital to the periphery immediately following the single currency’s introduction. Alas, in 2015, given the eurozone members’ legacy public debts and banking losses, such a scheme would cause a deeper recession in the periphery and almost certainly lead to the monetary union’s breakup.

Exasperated by Schauble’s backtracking from his own plan for political union, Macron recently vented his frustration: “The Calvinists want to make others pay until the end of their life,” he complained. “They want reforms with no contributions toward any solidarity.”

The most troubling aspect of Renzi’s and Macron’s statements is the hopelessness they convey. Renzi’s defiance of fiscal rules that push Italy further into an avoidable debtdeflationary spiral is understandable; but, in the absence of proposals for alternative rules, it leads nowhere. Macron’s difficulty is that there seems to be no set of painful reforms that he can offer Schauble to persuade the German government to accept the degree of surplus recycling necessary to stabilize France and the eurozone.

Meanwhile, Germany’s commitment to “rules” that are incompatible with the eurozone’s survival undermines those French and Italian politicians who were, until recently, hoping for an alliance with Europe’s largest economy. Some, like Renzi, respond with acts of blind rebellion. Others, like Macron, are beginning gloomily to accept that the eurozone’s current institutional framework and policy mix will ultimately lead either to a formal breakup or to a death by a thousand cuts, in the form of continued economic divergence.

The silver lining in the gathering storm cloud is that minimalist proposals for political union, like Schauble’s plan, are losing ground. Nothing short of macroeconomically significant institutional reforms will stabilize Europe. And only a pan-European democratic alliance of citizens can generate the groundswell needed for such reforms to take root.

Yanis Varoufakis, a former finance minister of Greece, is Professor of Economics at the University of Athens. © Project Syndicate, 2015 www.project-syndicate.org

October 28 - November 3, 2015

12 | PROPERTY | financialmirror.com

Cities with the highest rents for prime office space Hong Kong is the most expensive city worldwide to rent prime office space, according to Knight Frank’s Skyscraper Index. The annual rent for a square foot of office space in one of Hong Kong’s towers amounts to $255.50. In second placed New York City, renting a square foot of high-rise office space would cost $153 – over $100 less than in Hong Kong.

Even though rents are expensive in Hong Kong and New York, they grew at a rate of only 2% in the six months to June. In London, on the other hand, rent for prime office space grew 11% during the same period of time, driven by the completion of several new towers as well as a buoyant occupier market. The annual cost of renting a square foot of office space in a high-rise building in London comes to $122. (Source: Statista)

Handy’s launches alarm monitoring service Handy’s Security Systems has launched a high tech 24/7 alarm monitoring service for immediate response to emergencies that can also be connected to any alarm or security system of any provider. The central service offers the possibility of receiving and responding to signals of burglar and safe alarms, fire, personal threat, medical emergency, system violation or failure, detection of temperature changes, humidity levels or water and gas leaks and pressure, and access control.

Once the signal is received by the 24/7 station, the operators will call the premise in order to confirm that the alarm was not triggered by mistake. If the owner is unreachable or it is confirmed that it is a real alarm then the central station will notify the appropriate service or person (police, fire department, hospital) as well as the contact list that the subscriber has provided.

The central station is housed in a building that has all the necessary security systems as well as the mechanical, electronic and telecom facilities that enables the station to operate on a 24/7 basis (uninterruptible power system - UPS, electric generator and independent large-capacity batteries).

“Combining cutting-edge technology and highly trained staff, we took full advantage of the technical capabilities of our alarm systems and we provide high quality security services, for the benefit of the client,” said Andy Sofroniou, CEO of Handy’s Security Systems.

The new service costs EUR 179 a year plus VAT, with an early-bird reduced rate until January 4 of EUR 142 plus VAT. For information call 77778787.

Cost falls for new residential buildings in Greece The construction cost for new residential buildings in Greece in the third quarter saw a decrease of 3.1%, compared with the same quarter last year, according to ELSTAT data.

The previous year, the index had recorded a decrease of 3.3%. The quarter-on-quarter prices recorded a decrease of 0.4%, while last year the 12-month average index had also recorded a decrease of 3%.

Material costs in construction in September saw a year-on-year fall of 1.9%, while the material costs index saw a month-on-month decrease of 0.2%. The average costs for the 12-month period from October 2014 to September 2015, compared with the same index for the previous 12-month period, decreased by 2.0%.

Russia’s weakening economy may increase mortgage arrears Houses are losing value in dollar terms, says Moody’s report If a further drop in oil prices exerts downward pressure on Russia’s weakened economy, arrears in structured mortgage deals could accelerate at a faster rate, according to Moody’s Investors Service.

“Russian property values are decreasing significantly in US dollar terms due to the rouble’s devaluation. This will increase the loss severity on defaulting loans denominated in foreign currencies. On the other hand, losses will be more contained for rouble-denominated mortgage loans, owing to low loan-to-value ratios in loan portfolios and stable nominal house prices in rouble terms,” said Maria Divid, an analyst at Moody’s and coauthor of the report.

“The low proportion of US dollar-denominated mortgages alleviates the impact of the rouble’s depreciation on Russia’s housing market. Having said

that, macroeconomic pressure may cause borrowers’ real incomes to fall, unemployment may increase and borrowers’ ability to pay their debt will weaken, which may increase mortgage arrears”, explained Divid.

Moody’s said the weak economy has pushed up arrears in deals backed by Russian mortgages (residential mortgage-backed securities; RMBS) and in other assetbacked securities (ABS). Delinquencies of 60 days and above increased by 10% or more in the first half of 2015 in about two-thirds of the outstanding RMBS transactions Moody’s rates (based on reported delinquency levels, which do not include repurchased loans). Moody’s rates 39 outstanding Russian RMBS and two Russian ABS deals. The rating agency’s research says that RMBS deals from less creditworthy originators that comprise loans denominated in US dollars are more

susceptible to performance pressure. Moody’s observes that deals from less creditworthy originators will suffer more, and the disparity in deal performance will become more pronounced.

While Moody’s current expected loss assumptions capture default and loss projections, particularly weak performance from less creditworthyoriginators might prompt the rating agency to revisit its assumptions.

“Our overall expected loss assumptions still reflect our expectations regarding defaults and losses in Russian mortgage deal portfolios. But for weaker originators, the worsening performance of the portfolios may impact our assumptions. However, most of the outstanding transactions have benefited from deleveraging that may offset the effect of an assumption increase,” concluded Divid.

October 28 - November 3, 2015

financialmirror.com | PROPERTY | 13

In search of investments – Patience is virtue µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

It is obvious that the government’s efforts to attract foreign investors in Cyprus and the president’s travels (but not with his entire family) are proving helpful.

However, an obvious observation keep on getting from different investors is that “we hear about attracting foreign investors, but we never see anything,” which is why I would like to submit the following: • The 2013 haircut of deposits is still fresh in our minds, as is the persistence of the international media about the tragic situation of the Cyprus economy. Who, then, can be attracted with all these facts?

• Bureaucracy still rules and requests for investments take years to be considered and processed, particularly in the property sector. A project for an international standard rehabilitation centre has yet to be reviewed, despite having submitted three months ago, while a Swedish bank took two years to get a permit.

• The increase in the construction coefficient rate of 20% in tourist areas has hit a brick wall over the consultations by entire government departments and in the end a potential investor may settle for a factor increase of just 10%.

• The oncology centre in Limassol has been dragging on for too long and the generous offer of Mr. G. Mouskis made ten years ago to become the benefactor seems to have been withdrawn because of the unnecessary delays.

• Several other large-scale projects by local and foreign investors, such as the technology park in Pentakomo, as well as the convention centre with the ‘Business Angel’ from a Russian company, would have been an ideal conference venue that Limassol needed, but it seems the project had an “optical” problem and did not “beld in” with the surrounding environment.

• Various other large-scale projects by private investors are also being held back, such as the relaxation of state land for use by golf courses, the prime state-owned that remain unsold but are being rented, new concepts such as the crocodile and dolphin parks, have been getting some bad publicity, and even the Ayia Napa marina almost never got off the ground because some wise guy mentioned the “possibility” of antiquities in the sea, stirring up similar reactions to what was said about the Limassol Marina at the time, which, fortunately, were not heeded.

• As regards the Limni near Polis Chrysochous, there seems to be rabid reaction from the so-called environmentalists, while the Photiades proposal for Akamas has not even been discussed although it is a brilliant project.

And let’s not forget the Chinese investor who was interest to build a mall at the old Larnaca airport and so many more ideas that were never implemented because of some noise or

unnecessary reactions.

So, why should a foreign or even a local investor choose Cyprus when he is being begged by other government agencies or ventures to invest in that country? Bulgaria dynamically entered the game to attract foreign investors, as did other more remote countries such as Azerbaijan, Armenia, etc.

Attracting foreign investors under the current circumstances is not an easy task, while the time to implement such projects is far too long, as the time between the expression of interest and the final execution of the venture. Until the investor investigates various aspects of the deal through a due diligence, and the public service department decides if and when the relevant license will be granted, we have lost the golden opportunity, as has already been declared by Christodoulos Angastiniotis, the Chairman of the Cyprus Investment Promotion Agency tasked with attracting these investors and then trying to keep them here.

And then there is our ‘wise’ House of Representatives – where members think they are above us all and generally live in a different world – grappling with anything other than the economy, while we have not seen any MP who declared the

“heroic NO” during the initial days of the crisis provide us with any apology; they seem to keep to their own tune and there is obviously no real concern on their part to attract foreign investors, but only the need to criticise anything and everything.

Despite all this, there is some initial interest and solid examples are the banking sector, investor interest to buy offices for rent, investment in major department stores by foreign funds and demand for high cost housing on the rise at rates of EUR 10,000 / sq.m., mainly in Limassol.

On the other hand, a senior executive at a Russian multinational company was seen sitting in the waiting room of the relevant government office together with other “artistes” in order to get the necessary work visa and permit.

How insulting for the calibre of people we want to attract to live here and spend their earnings by investing on this island.

The various announcements by the President on his policy to attract investors may sound nice, but the rest of us it seems need to be more patient if we ever want to see things getting done. www.aloizou.com.cy ala-HQ@aloizou.com.cy

Aristo shows premium portfolio at London expo Aristo Developers’ participation in London’s “Property Investor & Homebuyer Show” created excellent opportunities to continue its path of global business development and product awareness, the company said in an announcement, adding that the property event in early October, provided the platform for Aristo to showcase its property portfolio to a large audience of potential real estate buyers and large-scale investors.

The event, which attracts thousands of real estate investors from Europe and abroad, welcomed an international mix of over 120 participants.

Aristo Developers boasts an impressive portfolio of over 250 island-wide developments and is committed to developing unique new projects of international standards, such as the Venus Rock Golf Resort – the largest golfintegrated beachfront resort in the southern Mediterranean.

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.

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October 28 - November 3, 2015

14 | MARKETS | financialmirror.com

Is the world about to get a new reserve currency? endorse the Chinese renminbi provided it meets all of the requirements as set out by the IMF. By including China as part of the fund, a major component of the global economy now has representation in an elite club. What is likely to happen as a result of this pending decision is a migration of $1 trln in global financial reserves to China. This has been laid out by the management at AXA Investment and Standard Chartered Plc. As soon as the CNY joins ranks with the SDR, managers of central banks the world over will be looking to rack up as many CNY-denominated asset holdings as possible. From its perspective, China will do well to welcome as many different issuers as possible in the Chinese onshore market.

By Oren Laurent President, Banc De Binary

The International Monetary Fund (IMF) created what is known as Special Drawing Rights (SDRs) back in 1969. This serves as an official global reserve asset used for the purposes of supplementing the reserves of a country’s money supplies.

The Special Drawing Rights reserve asset is based upon the values of 4 major currencies: GBP, EUR, USD and JPY. This exclusive group of currencies has heretofore enjoyed status as the world’s official reserve currencies. Now, another currency is likely to join the ranks and it is none other than the Chinese yuan – CNY. IMF representatives have intimated that China will likely become the fifth in a basket of currencies with SDRs.

How will SDRs affect the CNY? SDRs afford each of the member countries the right to draw any of the required currencies in the basket in order to meet the needs of their balance of payments. Each of the four currencies in the SDR is weighted according to specific requirements. For example, in August, the United States reported that it had approximately $50 bln in SDR holdings.

In September 2015, an equivalent value of some $280 bln in SDRs was disseminated to IMF members. The Chinese government is particularly fond of the idea that it is now being included as part of the elite group of currencies with SDR status.

This is important given the massive global uncertainty that has rocked the markets since 2009. At critical junctures like that, the global monetary system is heavily reliant on currencies like the USD. Now that China holds the official status as the #2 economy in the world, it is befitting for the Asian giant to be included in this elite club. For China there is a degree of prestige involved in this latest decision. That China has been invited, and endorsed by several countries to join the IMF’s SDR is a notable achievement. This is being hailed by some as a just reward for moving towards a more market-based economic system. Despite the fact that the CNY was rejected for inclusion in the SDR in 2010, the widespread usage of this currency has surged in the five years since. As at August, a total of 2.79% of all global payments

What tests does China need to pass? processing was conducted with this currency. That places the CNY above the JPY. The Chinese government has rejected the use of SWIFT for money transfer purposes. This cross-border payment system is responsible for handling most of the world’s payments transfers, but China uses its own system known as CIPS (China International Payment System). The Chinese cross-border CNY payments transfer system is modelled after the US Clearing House Payment system, and the reason why China established its own is because it doesn’t want to use Western-based ones. In the event that sanctions are imposed on China, it wants to be in control of the money payments system – not to leave it in the hands of Western countries.

The IMF makes use of several measures to determine how freely usable a particular currency is. This is how it determines a currency’s eligibility for inclusion in the SDR. There have been reports by members of IMF committee stating that the Chinese yuan is lagging many other currencies in terms of currency trading, forex reserves and debt holdings. However, the executive directors of the IMF will be the ones making the final decision as to whether to include the CNY as part of the IMF’s SDRs. Just recently, the Chinese premier travelled to London to agree to a multibillion pound deal between China and the UK. This will cover multiple sectors (150 companies) such as aircraft manufacturing, cars and others. China is increasingly moving towards enhanced relations with the UK, and this bodes well for the currency.

The world’s most successful economies including the UK, the US, Germany, France and others see no reason not to

When the IMF holds its official meeting in November, the issue of China’s admission will come to the fore. There are, however, several criteria that need to be met before China gains acceptance to the SDR. These include the CNY being a freely usable currency – no problems there, and China must be a major trading country – no problems there either. The Chinese are not idly sitting around waiting for the IMF decision without taking action into their own hands. China has now opened up its bond markets to foreigners with what is known as the Panda bond market. By 2020, this could be worth as much as $50 bln according to analysts.

The fact that the Chinese government is seeking greater transparency in its business dealings is certainly helping it to gain approval with the IMF. A freely-floating exchange rate is also warmly welcomed by the US, UK, Germany and Japan.

That’s precisely what the Chinese are allowing vis-a-vis demand/supply of their currency. Other economic data released by China such as gold reserves, forex holdings, PMI, GDP and the like are further evidence of China’s move towards a more market-based economy with greater transparency of economic data.

Please note that this column does not constitute financial advice.

Sterling spikes down, as UK GDP misses estimates Markets Report b

By Lukman Otununga, Research Analyst at FXTM

The Sterling spiked to the downside across the currency markets as a result of UK GDP printing below expectations at 0.5%. The currency has suffered for an extended period of time as a result of a risk-off environment mixed with escalating fears of a slowdown in economic momentum in the UK. It seems that BoE Governor Mark Carney’s statement suggesting the ‘possibility’, rather than the ‘certainty’ of a UK rate hike has pushed back expectations deep into 2016. Economic data in October from the UK has lost its robust touch and with this GDP figure failing to meet expectations on Tuesday, Sterling has been left vulnerable. The GBPUSD, which had four consecutive days of declines last week, remains under pressure; a break below 1.5300 on this pair may open a path to the next relevant support at 1.5200.

The Dollar Index encountered an aggressive appreciation last week as a result of the ECB hinting of further QE in the future. Despite the index surging to 10-week highs, Dollar vulnerability still remains the main theme in the global currency markets.

This upside momentum may be short-lived as with only a slim chance that the US rates will be hiked in the FOMC statement this week, this currency will be left vulnerable which should result in the bears taking control once again.

Sentiment remains bearish for the Dollar and the creeping

fears of a potential slowdown in economic momentum in the States combined with the mounting concerns that GDP growth in the US for Q3 has shrunk, add to the already diminishing expectations of a rate hike in 2015.

Even though Gold has experienced a technical decline which started from the second week of October, it still remains fundamentally bullish. Whilst the sharp appreciation of the USD played a part in capping any upwards momentum in this precious metal, the renewed fears about the decelerating growth in China should provide a foundation for the Gold bulls to take centre stage once more.

The FOMC statement this week, which most are

expecting to conclude with no action being taken by the Fed to hike US rates, may inspire upward momentum on the yellow metal, resulting in prices trading back above the 1170.00 resistance.

EURCHF: The EURCHF is technically bearish. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. As long as the 1.0900 resistance holds, there may be a decline to the next relevant support at 1.0700.

EURJPY: The EURJPY is technically bearish. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. A breakdown below the 133.00 support may open a path to the next relevant support at 131.00.

CADJPY: The CADJPY becomes technically bearish once a breach below the 91.00 support is achieved. Prices are currently trading below the daily 20 SMA and the MACD is in the process of crossing to the downside. The next relevant support is based at 89.00 AUDCAD: The AUDCAD is technically bullish on the daily timeframe. A break above the 0.9580 resistance may open a path to the next relevant resistance based at 0.9650.

Technical indicators such as the 20 SMA and MACD point to the upside.

For information, disclaimer and risk warning note, visit: www.ForexTime.com FXTM is an international forex broker, FXTM Limited is regulated by the Cyprus Securities and Exchange Commission (CySEC), and FT Global Limited is regulated by the International Financial Services Commission (IFSC)

October 28 - November 3, 2015

financialmirror.com | MARKETS | 15

The danger of further BoJ easing Marcuard’s Market update

by GaveKal Dragonomics There is growing speculation that the Bank of Japan may follow the European Central Bank, which last week signalled additional easing, and the People’s Bank of China, which cut rates on Friday, and surprise the markets with further credit easing.

But while extra action from the BoJ could be a short term shot in the arm for the equity market (or not, given the underwhelming response to China’s easing), it is doubtful whether additional easing will further the cause of Japanese

reflation, while any resulting yen weakness could do more harm than good. In its board meeting on Friday, the BoJ is expected to downgrade the growth and inflation forecasts it issued in July to reflect the slowdown in emerging markets and continued low oil prices.

With headline inflation at just 0.2% in August, it could be argued that the central bank should do “whatever it takes” to hit its 2% inflation target. However, there are also reasons why the BoJ may prefer to stick with its current “quantitative and qualitative easing” programme. Most notably, headline and core — ex-food — inflation have been weighed down by lower fuel prices. On a seasonally-adjusted six-month annualised basis excluding the one-off effect of last year’s sales tax hike, “core core” inflation — ex-food and energy — is running at a decade high of 1.4%. So, with the oil price appearing to have found a bottom, the BoJ can reasonably point to Japan’s tightening labour market as a signal of a likely pick-up in inflation expectations.

www.marcuardheritage.com

The BoJ is also running up against the technical limits of its QQE programme. The central bank is already the largest holder of Japanese government bonds, with a 30% share of all outstanding issues. Facing the prospect of diminishing returns from further purchases, it is keen to conserve its ammunition to ensure that any additional action it is forced to take has the greatest possible impact.

As a result, in the absence of an exogenous shock, the BoJ is likely to be reluctant to expand QQE ahead of fiscal consolidation currently planned for April 2017, when a further consumption tax hike should be implemented.

What’s more, enthusiasm among government officials and business leaders for a further weakening of the yen has cooled lately after the last round of depreciation failed to boost export growth as much as hoped. The impact was muted in part because Japanese exporters chose to take advantage of the yen’s weakness to rebuild their profitability rather than to increase shipment volumes, and partly because Japanese manufacturers are more linked in to the global supply chain than before, with fewer of their costs denominated in yen and more of their production offshore.

As a result, the central bank’s policy of easing-induced currency depreciation has attracted criticism for exacerbating economic inequality by boosting exporters’ profits at the expense of domestic consumers, whose purchasing power has been reduced, which in turn has hit smaller companies’ earnings.

Having said that, Japanese exporters have changed their behaviour since the beginning of this year by starting to cut their prices. As a result, in contract currency terms Japan’s export prices have fallen -6% over the last 12 months (see the chart).

However, rather than boosting Japan’s market share, the price cut triggered currency depreciation across Asia, with the Korean won and Taiwanese dollar also weakening.

That shouldn’t have been too surprising, given that reflation policies have generally been a zero sum game. Their effect has been to redistribute nominal growth among economies rather than to boost overall aggregate demand. As a result, when one export-oriented economy devalues, the currencies of others also come under pressure, even if that means tighter financial conditions as the cost of servicing foreign currency liabilities rises.

In consequence, at this point additional easing leading to

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.

further yen depreciation could end up doing more harm than good. Although a stable yen implies a cyclical deceleration in exporters’ earnings growth, the easing policies pursued to date have helped overcome the entrenched deflationary mindset of Japanese corporations, encouraging them to invest more and increase compensation.

Meanwhile, structural reforms are gaining traction, holding out the prospect of margin expansion in domestically-orientated sectors. If the BoJ were to introduce more aggressive easing now, it would risk jeopardising this fragile equilibrium as additional yen weakness would further depress demand both at home and among Japan’s trading partners—a beggar thy neighbour effect which would eventually come back to haunt the Japanese economy.

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

17330 1.534 1.769 24.5005 6.7483 14.1539 1.1054 2.38 281.94 0.63576 3.1234 0.3883 19.9 8.4073 3.8635 4.012 63.995 8.4868 0.9843 22.8

AUD CAD HKD INR JPY KRW NZD SGD

0.7248 1.319 7.75 64.97 120.34 1130.7 1.4726 1.3918

BHD EGP IRR ILS JOD KWD LBP OMR QAR SAR ZAR AED

0.3772 8.0073 29956.00 3.8732 0.7070 0.3026 1505.40 0.3850 3.6410 3.7499 13.6880 3.6729

AZN KZT TRY

1.0474 279.32 2.8965

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

Swap Rates

CCY

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

USD GBP EUR JPY CHF

0.19 0.51 -0.14 0.04 -0.77

0.25 0.54 -0.10 0.06 -0.76

0.32 0.58 -0.07 0.08 -0.73

0.53 0.74 0.00 0.13 -0.69

0.84 1.03 0.10 0.23 -0.59

0-0.25% 0.50% 0.05% 0-0.10% -0.75%

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

0.75 0.92 -0.04 0.10 -0.82

0.99 1.07 0.02 0.10 -0.80

1.20 1.25 0.12 0.13 -0.67

1.39 1.40 0.24 0.17 -0.54

1.69 1.62 0.50 0.28 -0.27

1.98 1.83 0.86 0.47 0.07

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.1055 0.9046

100 JPY

1.5339

1.0157

0.8310

1.3875

0.9188

0.7517

0.6622

0.5418

0.6519

0.7207

0.9845

1.0884

1.5101

120.33

133.02

184.57

0.8182 122.22

Weekly movement of USD

CCY\Date

29.09

06.10

13.10

20.10

27.10

CCY

Today

USD GBP JPY CHF

1.1209

1.1123

1.1310

1.1278

1.1012

0.7390

0.7335

0.7384

0.7286

0.7171

133.82

133.86

135.41

134.63

132.63

GBP EUR JPY

1.0882

1.0844

1.0880

1.0770

1.0791

CHF

1.5339 1.1055 120.33 0.9845

Last Week %Change 1.5479 1.1278 119.37 0.9550

+0.90 +1.98 +0.80 +3.09

October 28 - November 3, 2015

16 | WORLD | financialmirror.com

Truth, lies, and Venezuela

By Ricardo Hausmann Venezuelan President Nicolás Maduro has a problem with me again. The government-controlled national television station recently broadcast an illegally taped private phone conversation in which I proposed a study to explore how to rescue the Venezuelan economy by leveraging the support of the international community. The government unsuccessfully edited the recording to make what was said sound nefarious, lied about the conversation’s meaning and about me, and plans to prosecute me.

This got me thinking about the eternal problem of evil. Is it entirely relative, or are there objective grounds to characterise a behaviour or act as evil? Do all confrontations occur between legitimate parties – with, say, one person’s terrorist being another’s freedom fighter – or can we say that some fights really are between good and evil?

As the son of Holocaust survivors, I have always had an intuitive aversion to moral relativism. But what objective grounds are there to say that the Nazis were evil? As Hannah Arendt famously pointed out, people like Adolf Eichmann were plentiful and “neither perverted nor sadistic”; rather, “they were, and still are, terribly and terrifyingly normal.” A similar normality emerges from Thomas Harding’s portrait of Rudolf Höss, the commandant of Auschwitz, a man proud of having excelled at his assigned task.

So what do we mean by evil in the first place?

Moral philosophy has taken two very different approaches to this question. For some, the goal is to find universal principles from which to derive moral judgments: Kant’s categorical imperative, Bentham’s utilitarian principle, and John Rawls’s veil of ignorance are some of the best-known examples.

For others, the key is to understand why we have moral sentiments in the first place. Why have our brains evolved to generate feelings of empathy, disgust, indignation, solidarity, and pity? David Hume and Adam Smith pioneered this way of thinking, which eventually spawned the fields of evolutionary and moral psychology.

According to this latter view, moral sentiments evolved to sustain human cooperation. We are programmed by our genes to feel concern for babies and empathy for people in pain. We seek others’ recognition and avoid their rejection.

The world’s most valuable startups Within the last few months, tech startup Uber could once more raise its equity funding to $7.4 bln. Its worth has now risen to $51 bln, according to its latest valuation. That is double the worth of Airbnb, which is third in the ranking of the world’s top ten startups. However, this period of soaring growth might come to an end, as voices like that of venture capitalist Bill Gurley or Satya Nadella, Chief Executive Officer of Microsoft, advocate more caution with investments in this area. Both say corrections are overdue in the market.

This could well lead to changes in the list of billion dollar startups. (Source: Statista)

We feel better about ourselves when we do good and worse when we do bad. These are the underpinnings of our unconscious moral sense.

As a consequence, I doubt that any modern society has ever broadly supported what they saw as evil. Events like the Holocaust or the genocides in Ukraine (1932-1933), Cambodia (1975-1979), or Rwanda (1994) have been based either on secrecy or on the dissemination of a distorted worldview designed to make evil appear good.

Nazi propaganda blamed Jews for everything: Germany’s defeat in World War I, universal moral values that prevented the Aryan race from exerting its superiority, and both communism and capitalism. Ukrainians were accused of being Polish spies, kulaks, Trotskyites, and whatever else Stalin could invent.

The spread of evil requires lies, because lies form the basis of the worldview that makes evil seem good. But the dependence of big evil on big lies gives us a chance to fight back.

The biologist Martin Nowak has argued that the only way humans have been able to sustain cooperation is by developing cheap ways to punish misbehaviour. To discourage A from hurting B, the reaction of C can be important, because if A knows that C will punish him for what he does to B, he might think twice before hurting B. But if punishment is risky or costly for C, she may not do much to A, making A feel unconstrained. But if C can punish A in a cheap and even enjoyable way, the threat to A may be more substantial.

According to this view, the need to solve this conundrum is the evolutionary basis of gossip and reputation. Humans love to gossip, and gossip can harm our reputation, which in turn affects how others treat us. So punishment through

gossip is both cheap and pleasant – and A’s fear of becoming the subject of gossip by C may be enough to deter bad behaviour toward B. This opens an important avenue for the control of evil. As US Senator and Harvard professor Daniel Patrick Moynihan put it, “Everyone is entitled to his own opinions, but not to his own facts.” So one way to contain evil is by attacking the lies on which it is based and condemning those who propound them.

In the US, there is a natural tendency to punish political candidates when they lie, but mostly about their personal peccadillos. It would be great, for example, if Donald Trump’s calumnies about Mexicans made him unelectable. If a country’s political culture is such that all agree on condemning intentional lies and liars, especially when their goal is to promote hatred, a country may avoid big evil.

But this is not the case in Venezuela. Its government has run the country’s economy and society into the ground, overseeing the world’s steepest decline in output, highest inflation rate, and second highest murder rate, not to mention shortages beyond compare. And now it is systematically lying about the causes of the mess it created and inventing scapegoats.

Maduro’s government blames its economic collapse on an “economic war” led by the US, the oligarchy, and international financial Zionism, of which I am supposedly an agent. The problem is that the government has paid almost no cost for its systematic lies, even when these involve scapegoating poor Colombians for Venezuela’s shortages, and illegally expelling hundreds of them, and destroying their homes. While Latin American former presidents have spoken out against this outrage, important leaders such as President Dilma Rousseff of Brazil and President Michelle Bachelet of Chile have remained quiet. They should heed Albert Einstein’s warning: “The world is in greater peril from those who tolerate or encourage evil than from those who actually commit it.”

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is Professor of the Practice of Economic Development at Harvard University, where he is also Director of the Center for International Development. © Project Syndicate, 2015 - www.project-syndicate.org

October 28 - November 3, 2015

financialmirror.com | WORLD | 17

Big polluters, it’s time to pay up

By Stephen Leonard Earlier this year in Myanmar, torrential rain caused mudslides that wiped out hundreds of houses and caused large-scale crop destruction. More than 1.3 million people were affected, and over 100 died. In Vietnam, the same deluges caused toxic slurry pits from coal mines to overflow and run through villages, and into the World Heritage-listed Ha Long Bay; the death toll was 17. As such weather events become increasingly frequent and intense, the need to mitigate and adapt to climate change is becoming more urgent than ever.

And make no mistake: These events are, at least partly, the result of climate change. As the climate scientist Kevin Trenberth of the US National Centre for Atmospheric Research points out, nowadays, “[a]ll weather events are affected by climate change, because the environment in which they occur is warmer and moister than it used to be.”

International climate negotiators recognise this, to some extent. The effects faced by the people of Myanmar and Vietnam are considered unavoidable costs of failing to adapt to climate change, which officials classify as “loss and damage.” But such language fails to capture the full scale of the consequences – especially their impact on human lives.

The people who died in Myanmar and Vietnam are not just “unavoidable costs,” and their loved ones cannot simply “adapt” to losing them.

This kind of bloodless rhetoric reflects the inadequacy of the responses to climate change that international negotiations have so far produced. In fact, if the industrialised world had done what was needed to stop climate change, as promised a generation ago, Myanmar and Vietnam most likely would have been spared their recent “loss and damage.”

The so-called advanced economies failure to fulfill their commitments means that Myanmar and Vietnam are hardly the most vulnerable developing countries today. The tiny island states of the Pacific, for example, have been unable to erect adequate defenses against the “king tides” that are encroaching on their land and causing the freshwater “lenses” beneath their atolls to become brackish. Their populations – among the world’s poorest people – are paying for climate change with their lives and livelihoods. And According to a recent study on the use of tax havens in 2014, the 500 largest American companies hold more than $2.1 trillion in accumulated profits overseas to avoid U.S. taxes. About one quarter of that amount (549.7 billion) is hoarded abroad by ten tech companies alone, as our chart illustrates.

Among them Apple has parked the largest amount of cash outside the United States.

The iPhone maker hoards a whopping $181 billion overseas. That is almost twice as much as second-ranked Microsoft ($108.3b) and roughly three times the total of IBM, which ranks third in the tech-list with foreign cash holdings of $61.4 billion. Cisco, ranked fourth, stands out with as many as 59 tax haven subsidiaries. The study, conducted by Citizens for Tax Justice and the U.S. PIRG Education Fund, notes that the number of tax haven subsidiaries is not directly connected to the amount of taxes dodged by a company. On the contrary, some companies now report fewer subsidiaries in tax haven countries than they did in 2008 while reporting significant increases in the amount of cash they hold abroad. The study offers two possible explanations for this occurrence: First of all some companies may choose not to report all of their subsidiaries because the SEC’s penalties for failing to do so are pretty lax and secondly companies could simply consolidate more income in fewer offshore subsidiaries, often in structures dubbed “Double Irish”. (Statista)

without the resources to adapt, they will continue to suffer.

But it gets even more perverse. Those behind the problem – the world’s biggest polluters – continue to reap billions in profits, while receiving huge energy subsidies from governments (projected to reach $5.3 trln in 2015, or about $10 mln per minute).

So who are these polluters? According to a 2013 study by the scientist Rick Heede, nearly two-thirds of carbon dioxide emitted since the 1750s can be traced to just 90 of the largest fossil fuel- and cement-producing entities, most of which still operate. Fifty are investor-owned companies, including ChevronTexaco, ExxonMobil, Shell, BP, and Peabody Energy; 31 are state-owned companies, such as Saudi Aramco and Norway’s Statoil; and nine are states like Saudi Arabia and China.

Recognising the blatant injustice – not to mention the destructiveness – of this state of affairs, a new initiative, launched by the Carbon Levy Project and supported by a growing number of individuals and organisations, has emerged to demand compensation for vulnerable developing countries from the big polluters. Specifically, the Carbon Levy Project proposes a tax at the point of extraction for fossil fuels.

Such a tax is consistent with international law, including the “polluter pays” principle, and would provide a new and predictable source of finance – amounting to billions of dollars – for the communities that need it most, without letting governments off the hook for providing public sources of finance. And, by raising the cost of extracting fossil fuels, it would contribute to the eventual phase-out of a sector that has no place in a climate-safe world.

Fortunately, the world will not have to wait for moral suasion to carry the day. Fossil-fuel companies and governments are already facing intensifying legal pressure.

Typhoon survivors in the Philippines delivered a complaint to the country’s Commission on Human Rights, calling for an investigation into big fossil-fuel companies’ responsibility for causing climate change. The Dutch group Urgenda and nearly 900 co-plaintiffs successfully sued the Dutch government, forcing it to adopt more stringent climate policies.

A Peruvian farmer now intends to sue the German coal company RWE to cover the costs of protecting his home, which lies in the flood path of a glacial lake. And the signatories of the Peoples’ Declaration for Climate Justice from Pacific island countries are committed to bringing a case against big polluters for activities resulting in the destruction of their homes.

If no action is taken, such lawsuits will only become more frequent and difficult to defeat. Big Oil, Big Gas, and Big Coal need to accept responsibility for climate change and start making real contributions to adaptation, or prepare to battle for their own survival – a battle that, in the long term, they simply cannot win.

Stephen Leonard is President of the Australia-based Climate Justice Programme. © Project Syndicate, 2015. www.project-syndicate.org

October 28 - November 3, 2015

18 | WORLD | financialmirror.com

Militant Islamism and vaccine skepticism

By Jonathan Kennedy Domna Michailidou

We know how to eradicate polio. Since the 1980s, an international vaccination effort led by the World Health Organisation has driven the virus to the cusp of extinction. A disease that killed or paralysed a half-million people annually now infects only a few hundred.

What is standing in the way of the virus’s eradication is not medical or technical constraints, but political resistance to the vaccination effort. Indeed, the few areas where the virus continues to hold out share worrying similarities. Since 2012, 95% of polio cases have occurred in five countries – Afghanistan, Pakistan, Nigeria, Somalia, and Syria – all of which are affected by Islamist insurgencies. In order to eradicate polio, we must understand this linkage.

Islamist opposition to vaccination programmes is often attributed to the belief that vaccines are a Western conspiracy to harm Muslims, and that the vaccines sterilise children, are infected with HIV, or contain pork. But it is important to note that jihadists in Syria and Afghanistan have been largely supportive of polio vaccination campaigns. If the virus is to be defeated, we will have to move beyond caricatures of Islamists as violent zealots opposed to Western science and look closely at the specific political contexts in which the eradication effort has so far been unsuccessful.

In Nigeria, for example, the extremist group Boko Haram’s animosity toward vaccination campaigns stems from an intra-Muslim conflict rooted in the colonial era, when the United Kingdom ruled northern Nigeria indirectly through a pro-British indigenous elite. The descendants of the colonial elite continue to dominate the region’s state governments, which are responsible for implementing the vaccination programmes. Boko Haram’s opposition to the effort reflects its broader antipathy to what it regards as a corrupt and Westernised political class.

Similarly, in southern Somalia, attempts by outsiders to impose a stable centralised government have generated resentment toward polio vaccination programs. Since the

“The importance of local politics – rather than religious ideology – can be seen in the response to polio vaccination programmes” early 1990s, interventions by the United Nations and the African Union in Somalia have included troops from the United States and from the country’s predominantly Christian neighbours, Kenya and Ethiopia. This has resulted in widespread discontent and has fueled support for Islamist militants, whom many Somalis view as the main bulwark against foreign interference. In recent years, al-Shabaab militants have attacked aid workers, making it very difficult to undertake public-health programmes in insurgentcontrolled areas. Médecins Sans Frontières, for example, had to close its Somali programmes in 2013.

In Pakistan, opposition to the vaccination effort has its roots in Pashtun communities’ resistance to the national government. Broadly speaking, the Pakistani Taliban is a Pashtun movement, concentrated in the semi-autonomous Federally Administered Tribal Areas in the northwest of the country. This mountainous region was never ruled directly by the British, and the Pashtun have fiercely resisted attempts by the Pakistani state to expand its power. Thus, external interventions like the vaccination program are viewed as a stalking horse for deeper government encroachment into Pashtun areas.

The Pakistani Taliban’s hostility has been further hardened by US interventions in the country, including the use of a fake hepatitis vaccination campaign to gather DNA from Osama bin Laden’s relatives prior to his assassination.

For Islamist militants, this confirmed that polio immunisation efforts are a cover for gathering intelligence to identify targets for drone attacks.

The importance of local politics – rather than religious ideology – can be seen in the response to polio vaccination

programmes on the other side of the Durand Line. In Afghanistan, the Taliban is also a largely Pashtun movement, but its attitude toward the polio eradication effort could not be more different. When the Taliban ruled Afghanistan, from 1996 to 2001, it supported the vaccination effort, and indeed it continues to do so; a recent Taliban statement urged its Mujahedeen to provide polio workers with “all necessary support.”

This difference reflects the political position of Pashtuns in the two countries. In Afghanistan, Pashtun are the majority; as a result, they have a much stronger influence in national politics than their counterparts in Pakistan – and thus view the state with less suspicion.

In Syria, the biggest obstacle to the vaccination effort has been the central government. The refusal of President Bashar al-Assad’s regime to allow WHO to carry out vaccination programmes in insurgent-controlled areas directly resulted in a polio outbreak in 2013. Moderate opposition groups like the Free Syrian Army, with the help of the Turkish authorities and local non-governmental organisations, have organizsed their own vaccination programme in areas outside Syrian government control. Islamist militants, including the Islamic State and the al-Nusra Front, have allowed these immunisation programmes to operate in areas under their control as well, as they are not associated with the Assad regime.

The stance Islamist insurgents take toward polio vaccination campaigns has less to do with anti-Western zealotry than with the specific dynamics of the conflict in which they are involved. This has important implications for public-health policy. Only by understanding the political context in which vaccination programmes operate will those committed to eradicating polio succeed.

Jonathan Kennedy teaches at the UCL School of Public Policy and is a research associate in the Department of Sociology at the University of Cambridge. Domna Michailidou works for the Economics Department of the OECD and teaches at the Center for Development Studies at the University of Cambridge and the UCL School of Public Policy. © Project Syndicate, 2015. www.project-syndicate.org

The case for ‘externships’

By Ayesha Khanna The industries of the future will require people creative and innovative enough to work with technology, not be replaced by it.

And workers will need resilience and grit, because failure, more often than not, is part of the innovation process.

Unfortunately, secondary schools today are not providing a platform for imparting the skills necessary for their graduates to compete in the workplaces of the future.

With some notable exceptions, mainstream schools in most countries remain insulated from the demands of industry, which all too often means they are cut off from rapid evolution in the economy at large. In order for students to be better prepared, schools and companies will have to learn to cooperate more closely than ever before in the formation of the workforce.

Several American companies are already working to close the gap. General Electric and IBM have both opened schools where students can benefit from a focus on math, engineering, and science. Udacity, the online education start-up founded by Stanford professor Sebastian Thrun, delivers certified courses in partnership with companies, giving students an edge over applicants who have undertaken only classroom study.

According to The Economist, more than 70 companies, including Microsoft, Verizon, and Lockheed Martin – all struggling to find innovative and tech-savvy skilled employees – are working on similar models with schools.

Schools thinking of collaborating with industry naturally think of internships. But for secondary-school students in particular, this approach can be problematic.

Opportunities for placing young interns are rare, because they lack the skills and knowledge companies want. And companies are reluctant to have teenagers in their offices for many other reasons. (For example, in Singapore, no one under 18 years old may sign a non-disclosure agreement.)

Those secondary-school students who do manage to get an internship often find the experience unrewarding; instead of learning anything of value, they are often relegated to making photocopies and performing other menial tasks. Meanwhile, university admissions committees know that internships are not productive experiences, and therefore do not give interns precedence over other applicants.

‘Externships’ offer students a better way to acquire skills, because students are given an opportunity to help a company solve a real-world problem from the classroom.

Examples include tackling innovation challenges related to delivering services in different markets, developing technology

apps to optimise operations and cut costs, and producing prototypes for new products.

In many ways, externships are a close cousin of the apprenticeship programmes that are common in secondary schools in Europe. What makes them different are the students’ requirements: less technical knowledge and greater emphasis on foundational skills like entrepreneurship, leadership, communication, and the basics of technology.

One solution is to create programmes that allow secondary-school students to tackle innovation challenges for companies without leaving their classrooms. Rather than working on-site at the company, students learn the skills to solve the tasks with their teachers and present their ideas to companies at formal meetings. Companies can oversee students for as little as six hours per externship.

Externships can last from one to four months, and they follow a three-stage learning path. At the first stage, students try to solve the challenges faced by small or medium-size companies (SMEs). Then they grapple with difficulties troubling Fortune 500 companies. Finally, they work on identifying problems themselves, forming teams, and competing in international venues.

Learning to communicate the process by which students arrive at their solutions is central to any externship. Students must be

able to make proposals to company leaders and learn to accept failure and criticism productively. Externships lie precisely at the intersection of play and rigour, which is where innovation thrives. For SMEs, externships provide much-needed creative manpower. For larger companies, they are avenues for corporate citizenship and innovation.

When properly integrated into a student’s education, externships can provide the competitive edge on college application essays and at campus or alumni interviews, which admissions committees increasingly use to distinguish 21st century leaders from the competing hordes of top-scoring testtakers. Externships offer transparency and accountability for educators and imbue a spirit of fearlessness in students.

Our education system can no longer afford to wall itself off from the world of industry. Its goal should be to cultivate the kind of students that the organisational theorist John Seely Brown calls “entrepreneurial learners.” By helping companies solve their real-world problems, students can prepare themselves to meet the challenges of the future.

Ayesha Khanna is Co-Founder and CEO of The Keys Academy. © Project Syndicate, 2015. www.project-syndicate.org

October 28 - November 3, 2015

financialmirror.com | WORLD | 19

Alexievich’s achievement

By Nina L. Khrushcheva It was 1985, and change was in the air in the Soviet Union. Aging general secretaries were dropping like flies.

Elem Klimov’s cinematic magnum opus “Come and See” depicted World War II without the heroics on which we were reared, highlighting the tremendous human suffering instead. Klimov’s approach echoed that of Svetlana Alexievich – this year’s Nobel laureate in literature – in her first book, War’s Unwomanly Face, published the year before.

But, whereas many rushed to see Klimov’s film, Alexievich’s book did not seem to excite readers. The Soviet Union, supposedly progressive, remained rooted in patriarchy. Women had jobs, but rarely careers. Women writers wrote exquisite poetry and prose, and they were officially recognised as the equals (well, almost) of their male peers; but they tended to avoid certain topics – and war was a man’s business. And thus Alexievich begins War’s Unwomanly Face, “There had been more than 3,000 wars in the world, and even more books. But all we know about war is what men told us.”

And men told us a lot. “We always remembered the war,” Alexievich recalled, “at school, at home, at weddings and christenings, during holidays and funerals.

War and post-war lived in the home of our soul.” Indeed, I had heard so much about the war by the time War’s Unwomanly Face came out, I had little interest in hearing more about it – whether the suffering and sacrifice or the heroism and triumph – from any perspective.

Fast-forward almost a decade. America was big on gender politics, and, as a graduate student there, I was embarrassed to be

behind. So I finally read War’s Unwomanly Face.

To my surprise, it was not WWII that I learned about; rather, I got my first glimpse into the emotions that my own relatives experienced, as they fought and survived the war. People like my grandmother had recounted only the oft-repeated male story, completely denying her own experience. But her experience mattered, and Alexievich recognised that. I was so inspired by War’s Unwomanly Face that a few years ago I wrote my own book detailing the endurance of women in my family in the war-ravaged Soviet Union.

Other books by Alexievich were similarly inspiring. Zinky Boys: Soviet Voices from the Afghanistan War (1991) spoke of a distant fight – the nine-year Soviet war in Afghanistan – that eroded Russian culture and humanity, while Voices from Chernobyl: The Oral History of a Nuclear Disaster (1997) meditated on the global significance of the nuclear disaster. Public reaction to both was mixed. Neither the state nor the people quite knew how they felt about Afghanistan or Chernobyl – one a lost war, the other an incomprehensible catastrophe.

Alexievich has described herself as “an ear, not a pen.” She listens and builds a story, before writing it down. Her talent is to make

Female billionaires: Nowhere comes close to China for self-made success stories 49 out of the 73 self-made richest women in the world come from China, according to the latest edition of the Hurun report. Altogether, those 49 women have a combined wealth of $95 bln.

Zhou Qunfei, founder of touchscreen company Lens Technology, is the richest self-made woman in the world - her wealth comes to $7.8 bln. The United States is in second place with 15 female self-made billionaires who have a total combined wealth of just under $29 bln.

(Source: Statista)

the private public, to expose the thoughts that people are afraid to think.

Alexievich does not shy away from the horrific aspects of her subject matter, exemplified in a passage from War’s Unwomanly Face: “We didn’t just shoot [prisoners]… we pinned them up, like pigs, with ramrods, cut into pieces. I went to observe… I waited for that moment when their eyes would start bursting from pain.”

While this brutally matter-of-fact tone can make readers uneasy (indeed, it was one reason why I took so long to read the book), we cannot afford to be ignorant of the truth, even – or perhaps especially – if it makes us squirm.

Honest, daring, and sad, Alexievich’s books – containing stories in which life, broken and stolen, is worse than death – show how a woman’s perspective can humanise world problems and make them understandable to all. In some ways, Alexievich’s literary contribution, which the Nobel committee called “a monument to suffering and courage in our time,” is equal to that of the Austrian novelist and playwright Elfriede Jelinek, whom the committee recognised in 2004 for her work’s feminist critique of Austria’s Nazi past and patriarchal present.

Now, like Jelinek, whose work was largely

unknown to non-German readers until she won the Nobel, Alexievich is finally being recognised for her profound impact. Her award sends a powerful message – not only about her talent, but also about the importance of the female perspective in the public sphere.

To be sure, Alexievich was far from invisible before. Her books have been translated into 20 languages, with millions in circulation. And, like many other Nobel laureates, including Jelinek, she has played an active role in civil society, most recently taking a stand against Russia’s annexation of Crimea.

Interestingly, the frequency with which Nobel Prizes have been awarded to women has been increasing. In 1991, Nadine Gordimer was the first woman in more than a quarter-century to receive the literature prize; now, women receive it every 2-3 years.

Moreover, this summer, the writer and literary critic Sarah Danius became the first woman in 200 years to serve as the permanent secretary of the Swedish Academy, which chooses the Nobel laureate in literature.

But the patriarchal culture from which Alexievich emerged is far from dead.

Recognising the ways in which she has enriched people’s thinking about difficult – and historically masculine – subjects can only be good, not only for the women she inspires, but also for the men she influences.

I have just finished Alexievich’s latest dreadful masterpiece, Secondhand Time, a brutal account of the chaotic Russian capitalism of the 1990s. In recent interviews, Alexievich has said she is working on two more books – one about love, the other about aging. I don’t want to read either of them, but I will.

Nina L. Khrushcheva, a senior policy fellow at the World Policy Institute, is Professor of International Affairs and Associate Dean for Academic Affairs at The New School. © Project Syndicate, 2015. www.project-syndicate.org

October 28 - November 3, 2015

20 | BACK PAGE | financialmirror.com

Somalia’s new pirates

By Hassan Sheikh Mohamud Somalia is blessed with the largest coastline in continental Africa. Our rich marine waters are some of the most productive in the world, teeming with schools of yellowfin tuna, blue marlin, dolphinfish, and sardines. For more than 30 years, however, this bountiful marine wilderness has also been a source and site of conflict, as foreign illegal, unreported, and unregulated (IUU) fishing vessels have plundered our waters – stealing our fish and selling their catches at distant ports.

Just a few years ago, the encroachment of illegal, unreported, and unregulated fishing vessels sparked a wave of piracy in Somalia that cost the global maritime shipping industry billions of dollars in lost revenue. As illegal foreign fishing vessels fled our waters, Somali pirates quickly shifted their focus toward more lucrative vessels, such as cargo ships and oil tankers. And, now that piracy has mostly been eliminated, there is growing evidence that foreign fishing vessels have returned to plunder our waters once again.

A new report by the group Secure Fisheries, called Securing Somali Fisheries unveils new satellite data showing that foreign IUU fishing vessels are now catching three times more fish than Somalis. They are targeting some of the highest-value fish in our waters, leaving their Somali counterparts to compete over lower-value fish.

The report shows that, making matters worse, these foreign fleets have contributed to overfishing our swordfish, snapper,

marlin, and shark populations. Foreign bottom trawlers have fished recklessly and acted with impunity, dragging heavy nets, razing the bottom of our seafloor, and damaging an astounding 120,000 square kilometers of important marine habitat. The damage is so extensive that even if trawling were stopped today, this area may need many years to recover.

This pillaging of our marine ecosystem is taking place even as Somalia has made great strides over the last 18 months toward better management of our waters. In June 2014, my government laid claim to Somalia’s 200nautical-mile exclusive economic zone (EEZ), in line with the United Nations Convention on the Law of the Sea. This past December, we also passed the Somali Fisheries Law, which explicitly outlaws bottom trawling. This groundbreaking legislation calls for improved monitoring of fish landings, an ecosystem-based approach to fisheries’ management whereby the area would be managed holistically, and the protection of threatened and endangered fish species.

But, despite all our progress in strengthening fisheries’ management domestically, we lack the ability to police our vast waters. The international community could make a significant difference in this area, by helping my government monitor and control Somalia’s EEZ, as well as through improved sharing of the critical intelligence gathered by international naval patrols.

According to the Secure Fisheries’ report, eliminating IUU fishing today would enable Somalia to begin to license and sell commercially valuable tuna sustainably, generating up to $17 mln per year. These funds could then be reinvested into better

infrastructure – such as port construction, improved cold storage, and modern processing facilities – to support our artisanal and industrial fishing fleets.

The elimination of IUU fishing would also allow our overfished stocks to recover and help build a prosperous Somali domestic fishery, along with increased government support and funding for data collection and resource management. The report shows that healthy fish stocks could provide significantly greater amounts of resources than they currently do. In fact, almost half of our managed fisheries are currently exploited at sustainable levels. But we need more investment in better infrastructure to realise our industry’s full potential.

Fishing in Somali waters must not be allowed to remain a free-for-all, where farflung foreign fleets exploit the ecosystem in

unsustainable ways. I call upon the international community to collaborate with my government to ensure that IUU fishing in Somali waters is stopped for good.

Doing so would improve maritime security and promote a vibrant domestic fishing industry that benefits and helps sustain all Somalis. A sustainable, dynamic fishing industry would help us build a more stable and prosperous Somalia. Given our country’s great potential and its strategic location, that is an outcome that everyone should be willing to support.

Hassan Sheikh Mohamud is the President of Somalia. © Project Syndicate, 2015. www.project-syndicate.org

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