Financial Mirror 2015 11 04

FinancialMirror KENNETH ROGOFF

JEAN PISANI-FERRY

The Fed’s communication breakdown PAGE 17

Social benefits in the age PAGE 18 of Uber

Issue No. 1156 €1.00 November 4 - 10, 2015

CYPRUS HAS RECOVERED, BUT ‘CAN DO BETTER’ -

SEE PAGE 4

Market sentiment for Gold after Fed decision for rate hike delay

By Oren Laurent - SEE PAGE 14

November 4 - 10, 2015

2 | OPINION | financialmirror.com

FinancialMirror Troika is a partner to

the crime being committed

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

EDITORIAL

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If knowledge of a crime makes one an accessory and if tolerance, yet keeping silent, is tantamount to have committed the crime in question, then it is unfortunately true that the government and the Troika are indeed “partners in crime”.

From day one, this newspaper had been supportive of the actions of the Troika for two simple reasons: first, past recommendations of EC and IMF missions to Cyprus (over the last two decades) had been warning us that public spending was out of control, inconsistent with state revenues and reaching a stage of going beyond sustainability, with no government or politician lending an ear to the warnings, hence we had it coming. The second is that some changes or reforms were imposed on us where we had failed to introduce them ourselves, for fear of politicians losing public support, particularly from the civil service elite, as every few months Cyprus has been facing some election or another.

But what cannot be imposed is an attitude change or restructuring our “social fabric” as was a cliché not too long ago.

So, the Troikans have returned and patted us on the back saying “job well done”, not realising that it is not just a matter of black and white or numbers adding up, but what happens the day after, and the

next.

The public sector reform commissioner, just like his boss, keeps on lecturing us about the beautiful work that is being done to modernise the government machine, make it more modern and efficient in an effort to increase productivity. On the other hand, the powers that be (including ruling and opposition political forces) have agreed to reinstate the wage levels of those who got a promotion prior to the bailout freeze, which means that any minor pay cut imposed on, say, teachers, will vanish by February, when their revised payroll will show an increase. Surely, this is exactly what the Troika wanted to avoid when it claimed that it wanted fiscal reforms and spending ton remain in check and viable in the longer-term.

So, if no one has the guts to slap some serious pay cuts in the public service and slash several hundred (if not thousand) more jobs, how can we expect the younger generation to have any faith in the current system, which they see as politically and socially corrupt, hence seeking better fortunes in other lands. And those who stay behind have become lazy and dependent on a foul system that encourages maintaining the status quo in all levels.

The young, the frustrated and the unemployed cannot be blamed for trying to feed on the present grim system, because, as they say, “monkey see, monkey do.”

And they are right.

THE FINANCIAL MIRROR THIS WEEK 10 YEARS AGO

BOC profits up 66%, CAIR rescue plan (moan…)

Bank of Cyprus profits rose 66% to CYP 50 mln in the 9-month period, while Cyprus Airways had a deadline to present a restructuring plan to EU inspectors, according to the Financial Mirror issue 643, on November 2, 2005.

BOC profits: Bank of Cyprus is set to boost profits to CYP 70-73 mln for the year after an impressive third quarter where 9-month profits were up 66% year on year to CYP 50 mln. Chairman Vasilis Rologis said restructuring at home helped with

20 YEARS AGO

Interest rate wars, remove troops says Peres Banks and insurance companies were squabbling over the fallout from lower interest rates, while across the sea in Jordan, Israel’s then-Foreign Minister Shimon Peres said that demilitarisation was the best solution for both Cyprus and the Middle East, according to the Cyprus Financial Mirror issue 134, on November 1, 1995.

Lower rates: The Monopolies Commission was hearing complaints from insurance companies who, as the biggest depositors in banks, claimed to lose

Cyprus profits up 290% at CYP 27 mln.

CAIR plan: Cyprus Airways had until November 3 to submit a revised restructuring plan to the EU to get permission to borrow CYP 58 mln, of which 10 mln will go to redundancies, but the pilots union PASIPY and general staff union CYNIKA rejected the plan. The plan would have seen 343 laoyoffs, 8% pay cuts for pilots and managers, and 5% pay cuts for all other staff. (Ed’s note: We all know how that

turned out!)

Residence Georgio: The Mouskis family, owner/operators of the Four Season in Limassol, celebrated the first anniversary of their Athens property Residence Georgio.

Feissel on Cyprus: Former UN Assistant Secretary General Gustave Feissel repeated comments by Archbishop Makarios by urging Cypriots to “seek what is achievable, rather than what is desirable” in a solution to the Cyprus problem, adding that a solution would be impossible if the Turkish Cypriots “thinned out” in the north.

Hard cheese: Greek dairy companies were celebrating the ECJ ruling in favour of their ‘feta’, despite appeals by Germany and Denmark, while Cypriot dairies were falling over each other in the usual blame game, not realizing the impact it would have on their exports.

millions from the lowering of deposit rates from 8% to 7% in May 1994 and lending rates from 9% to 8.5% in September 1994.

The banks said they were following instructions from the Central Bank.

DMZ solution: Israeli Foreign Minister Shimon Peres told a conference in Amman that demilitarisation could be the answer to the Cyprus problem. “Yes, I know Cyprus is willing to solve the (issue of) demilitarisation which will come in gradual steps,” he said. Asked if he would talk to Turkey to

follow in Israel’s steps and make concessions to bring peace to Cyprus, Peres replied: “We shall offer our experience for this purpose.”

CAIR boost: The government’s decision to pass the operation of the airport duty free shops to Cyprus Airways was welcomed by Chairman Vassilis Rologis, with total revenues of CYP 8.5 mln a year. It has also decided to refrain from a CYP 10 mln rights issue to lower its stake from 80% to 56% and allow a listing on the stock exchange.

Copper prospects: Golden Plateau NL, the Australian company that took a 44& stake in Hellenic Copper Mines, intends to produce 4,000 tonnes of copper cathode a year starting July 1996. With a life of at least eight years, production at Skouriotisa could rise to 8,000 by 2003, boosting exports by US$ 22 mln a year.

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November 4 - 10, 2015

financialmirror.com | CYPRUS | 3

Property off the agenda, breakthrough by May Eide: “Basically we know what it will look like, but it could happen sooner than you think” President Nicos Anastasiades and Turkish Cypriot leader Mustafa Akinci, who have entered an intensive phase of six meetings in November, will not discuss the property issue at their next meeting on Thursday, but will instead focus on “pending issues”, as a momentum builds up for a breakthrough before the parliamentary elections next May. The property issue, one of the thorniest items on the agenda together with the search for and sharing of energy resources, as well as Turkey’s EU aspirations, was already discussed at their meeting on Monday, attended by UN Secretary General’s Special Adviser on Cyprus Espen Barth Eide, where the two leaders agreed to keep their press statements to a minimum.

At Thursday’s meeting, Anastasiades and Akinci are expected to touch upon the two sides’ disagreements, with a view to eliminating them or at least achieving convergences as the two negotiators, Andreas Mavroyiannis and Odzil Nami, will focus their attention on the property criteria.

The property issue will be discussed again during the next meeting on November 18.

Meanwhile, President Anastasiades said he hoped that the UN-led negotiations will

bear fruit before the parliamentary elections next May. Speaking at the Economist conference in Nicosia, Anastasiades said that Cyprus is an example of a successful economic reform. He said that a settlement will serve as a catalyst for economic growth, with great benefits in important fields of the economy, and will constitute “the most important reform for development that we can achieve.”

“I want to believe that Turkey will recognise this prospect and will contribute to efforts for a settlement,” he added.

Speaking at the same conference, Espen Barth Eide said that a solution is “within reach” though hard work is still needed and stressed that all sides need to think about the economics of the settlement and really reap all the opportunities which is not going to happen automatically.

He pointed out that “basically we know what it (the type of settlement) will look like, but you need to prepare for because it could actually happen sooner than you think.”

Replying to a question on the role of outsiders in Cyprus and that if they press too hard it could be counterproductive, Eide said that “we need to be acutely aware of that.”

He reiterated that the ongoing Cyprus reunification process is leader-led. It is done in Cyprus, not in some chateau in Switzerland, he pointed out.

“I often hear about the UN bringing to the table bridging ideas,” he said, adding that “I don’t have to because this is very well done.”

Eide said that “over time the solution will pay for itself”. In the long run, he noted, there will be more growth and more money to distribute, adding that “we need to prepare for potential growth.” The UN official stressed the need for the federal state to have a business friendly climate, modern institutions, competitive, strong, flexible, adaptable and ready to foster innovation. A high degree of adaptability is needed, he said.

“I think it is well understood that we do not lose sight of these issues as we look to solve the political aspects,” he added.

At the same time both Cyprus Chamber of Commerce and Industry (KEVE) President Phidias Pilides and Turkish Cypriot Chamber of Commerce (KTTO) President Fikri Toros reiterated their commitment to helping the reconciliation process and asserted that a solution will not just be for the benefit of businessmen but of Cypriots as a whole.

On his part, Pelides said that a fair, functional and viable solution will generate huge benefits in tourism, shipping, construction, real estate and agriculture, while the importance of Cyprus as an international business centre will increase even further through the improvement of the investment climate and attracting

foreign investments, while allowing Cyprus to reach out to presently unexploited markets across the world, including of course the vast Turkish market.

“The alternative will be to the detriment of both communities on the island but also the wider area in the region encompassing Greece and Turkey.”

Toros called on the two leaders to “demonstrate true, courageous leadership” and to solve matters such as the interconnection of the mobile phone networks. We need to make this vision reachable, he said, and expressed his concerns over the “risks and consequences of yet another failed attempt.” Toros also spoke of the need for the timely involvement of the private sector.

He said that so far, the two chambers have produced a number of documentaries, they have launched bicommunal internship progammes and startup projects.

On her part Miriam Sapiro former US trade representative and now of the Brookings Institution spoke of her experience in the settlement process in Bosnia and highlighted the fact that “there is no perfect solution because negotiated settlement involves compromise.” In the event of a solution she said that the economic benefits for Cyprus could be quite significant for both sides.

November 4 - 10, 2015

4 | CYPRUS | financialmirror.com

Troika is back, NPLs and loan sales a concern A joint mission from the Troika of international lenders (EC, ECB, IMF) was back on Tuesday to conduct its eighth evaluation of economic adjustment programme, aka “bailout plan” that ends in March, three years after the EUR 10 bln rescue was imposed.

During their 10-day stay, the inspectors are expected to focus on the problem of the non-performing loans (NPLs), an issue that was supposed to have been resolved with the passage of new laws on insolvencies and foreclosures.

However, the value of NPLs seems to remain doggedly high and near the 50% of all loans in the Cyprus banking system.

The Troika mission, that arrived a week after the last twonotch upgrade of the Cyprus sovereign ratings by Fitch, based on “improving fiscal fundamentals”, will also look into the issues of the sale of loan portfolios, the continued implementation of structural reforms and the current pace of privatisations.

As part of the EUR 10 bln bailout plan, the Troika had called for the privatisation of major public services, such as telco Cyta, the power company EAC and the ports authority, with only the latter seeing progress as about 30 multinational have submitted bids for the management of the primary port of Limassol by next summer.

The privatisations are expected to reduce the payroll cost

burden on state funds and even raise some EUR 1.4 bln in revenues by 2018.

Last week, the government also successfully raised EUR 1 bl from a 10-year eurobond (EMTN) with a yield of 4.25%.

This was only the third foray into the international markets since 2011, and the Finance Minister said the bulk would be used to redeem higher-interest bonds.

IMF spokesperson Jerry Rice reportedly said last week that as the Cyprus economy recovers and recession recedes, so is the ability of borrowers strengthened to service their debts.

He added that although NPLs is a “serious problem”, unemployment also requires time and systematic effort to circumspect. But he also pointed out that the first signs of decline of NPLs are already showing.

IMF Representative to the island Vincenzo Guzzo, deemed the reduction of high NPLs as a high priority, adding that that attention should not only focus on the banks’ capital but also on the broader economy.

The state-run Cyprus News Agency reported that during the eighth evaluation, the lenders will also focus on the implementation of structural reforms in order to boost growth and employment, but also to secure the sustainability of the public finances.

At the same time, several critical issues are still pending,

including the government bills that will be discussed in parliament regarding the public service reform, the autonomy of public hospitals, the implementation of the long-delayed National Health Scheme, the approval by the Parliament of the bills on sale of loans, as well as the privatisation of Cyta and the separation of EAC activities.

Central Bank of Cyprus Spokesperson Aliki Stylianou said the Troika delegation will have meetings with representatives of the three main commercial banks of Cyprus and will discuss in length the issue of NPLs. They will also review the principal and liquidity situation of the banks and of the implementation of their restructuring plans.

On Tuesday, Troika delegations held meetings at the Directorate General for European Programmes, Coordination and Development (formerly Planning Bureau) to discuss issues related to taxation and tourism.

Troika delegations were also expected to meet with technocrats from the Ministry of Finance in order to discuss public finances and the Guaranteed Minimum Income (GMI) benefit for low-income households.

The head of the international lenders will be in Cyprus on November 8, in order to discuss with the Finance Ministry the final content of the updated memorandum.

Georgiades: Cyprus has recovered but ‘can do better’ Cyprus has been able to recover and confidence has been restored, Finance Minister Harris Georgiades said on Tuesday, noting at the same time that if an ambitious agenda of economic reform and positive change continues to be promoted, Cyprus can do better.

Addressing the 11th Economist Summit in Nicosia, Georgiades said that “Cyprus has been able to recover. And confidence has been restored”. A week ago, he added, “this was demonstrated by a successful issuance of a 10-year bond in the international capital markets.”

Georgiades noted that “even though this was the best pricing Cyprus ever achieved on a 10-year bond, we must and we can make it even better.”

“And if we agree on this, then we should also agree that this will only happen if we continue promoting an ambitious agenda of economic reform and positive change”, he pointed out. If, he added, “we maintain fiscal discipline; if we continue reforming and improving our banking sector.”

The minister continued to say that when it comes to economic performance, “surpassing all expectations, we are expecting growth this year somewhere around 1.5%, which is more or less the Eurozone average.”

But here also, Georgiades added, “I would not be satisfied”, stressing that: “We can do even better.”

“Cyprus can do better”, he said, adding that in fact he believes “that Cyprus has the potential and the capacity to achieve sustainable and healthy growth rates in a long-term horizon.”

Yet again, he explained, “for this to happen we must unleash the productive potential of our economy, with less bureaucracy, more efficiency and renewed competitiveness.”

According to Georgiades “we have seen the worst of the crisis, we shall be completing the support programme early next year, and we shall not be requesting an extension of the programme or a conditional credit line.”

He thanked Cyprus’ partners in the Eurozone and the institutions for their support, pointing out however that “we are ready to take it from here.”

At the same time, he pledged that “we shall maintain the effort with a renewed momentum and renewed confidence.”

“We already have a number of reform bills pending before the House and we shall be keeping everyone busy even after the Troika leaves”, he said.

Georgiades noted that “we shall continue to demonstrate a willingness to cooperate and to find agreeable solutions, but we shall be standing firm against those who simply oppose any step forward.”

“We shall never allow a return to those failed policies, practices and attitudes which are responsible for the derailing of our economy in the first place,” he concluded.

Speaking at the same conference, President Nicos Anastasiades said that Cyprus is an example of successful economic reform.

He noted that Cyprus is entering “a new era of growth and prosperity”, while referring to unemployment, he said that it constitutes one of the most serious problems and that time and systematic effort are required to address it.

With regards to the banks, he noted that they have been re-capitalised and have sufficient liquidity at their disposal, while their reliability and stability have been regained.

Referring to the challenges ahead, he said that the biggest is the restructuring of NPLs that will improve the banks’ potential to provide new credit to the economy.

With regard to the reforms which are underway, he noted that they contribute to the improvement of competitiveness and to the reduction of bureaucracy. He said that attracting investments constitutes a priority of the government, with a view to boost economic activities, to create jobs and to address unemployment.

Anastasiades said that Cyprus has managed to improve its position as a competitive destination, and has recorded

progress as regards the attraction of investments.

Cyprus has fully come out of recession, recording growth, while that state can seek to obtain loans from the markets.

He stressed, however, that “we must remain strict as regards our financial policies and the measures we have adopted to achieve stability and perspective.”

Referring to the energy sector, Anastasiades said that Cyprus can become an important energy hub and referred to a comprehensive regional approach which the government follows in the framework of its foreign policy.

He said that “we will be able to use our natural resources by improving our relations with all neighbouring states.”

“We will continue to build bridges and at

the same time we will intensify efforts to reunite the country,” he added.

Earlier, Dirk Reinermann of the World Bank said that Cyprus this year is among the top ten improvers in the world, and not just in the top ten but number four and he congratulated the government of Cyprus for doing that as it “sends messages to international markets.”

However, he also gave bad news about labour productivity and low efficiency in public sector spending where Cyprus is lagging behind its EU counterparts. He finished on a note of optimism saying that if Cyprus were to rebrand itself from a divided country to a reunited one which would “against the stream at a time of disintegration and division, this would send a very strong message to investors.”

November 4 - 10, 2015

financialmirror.com | CYPRUS | 5

EIB signs €115 mln loans, more by year-end 7 banks benefit so far, Hellenic Bank total reaches €100 mln The European Investment Bank (EIB) signed two finance agreements on Monday worth EUR 115 mln that aim to fund public infrastructure and to boost SMEs in order to achieve economic recovery and the creation of new jobs.

The pair of agreements were signed in Nicosia by Finance Minister Harris Georgiades, EIB Vice President Jonathan Taylor and Hellenic Bank Chairwoman Irena Georgiadou.

The first agreement is for a EUR 100 mln framework loan supporting EU Co-Financing Funds for strategic infrastructure projects to be implemented during the 2014-2020 period, while the second loan was with Hellenic Bank for EUR 15 mln, with the commercial lender matching the amount from own funds for a total distribution to SMEs of EUR 30 mln Present at the signing ceremony was EIB President Werner Hoyer who expressed his optimism that “definitely the worst is behind.”

“Since my last visit, Cyprus has made serious progress and fiscal developments continue to exceed expectations, the financial situation of the banks is showing signs of improvement and we have seen important growth enhancing reforms,” he said.

“Here in Cyprus we currently cooperate with seven banks and I am confident that we will be able to announce additional cooperations before the end of this year”, he noted. This approach, he added, “is performing well and is delivering real benefits to the Cypriot economy.”

He added that “we will continue the financing of large scale investment projects.”

“We are supporting several investments in the transport sector, including the road link between the Limassol port and the LimassolPaphos highway; in the energy sector we are financing several large investments including the Vassilikos powerplant”, he added. The EU bank is “very keen to support the country’s switch from (crude) oil fuel to a more environmental friendly natural gas or to renewable sources of energy.”

Together with fiscal consolidation and putting public finances in order, this agreement allows for a timely implementation of all those which have been planned for the next three years, said Finance Minister Harris Georgiades.

There is no excuse, no fiscal limitation and it is up to the authorities in charge, the government departments, the local administrations and all the other actors to implement what has been planned, he added.

Referring to the second agreement for a EUR 15 mln loan by Hellenic Bank with the government guarantees for funding small and medium size companies, Georgiades said that the agreement extends a funding programme for SMEs, which he called of “strategic importance.”

On his part Jonathan Taylor recalled that in 2014 the EIB together with the Ministry of Finance and several local banks implemented a new scheme for financing smaller companies and projects.

Less than 12 months after the start of the scheme almost half of the EUR 185 mln agreed with the seven participating banks has already been allocated to viable and eligible financial beneficiaries, he said.

“The first agreement with the Hellenic

Latest 13-week T-bill is oversubscribed, yield drops to 1.17% The Cyprus government sold EUR 100 mln worth of 13-week Treasury Bills on Monday, with the Finance Ministry’s Public Debt Management Office saying that bids were six times oversubscribed, pushing yields further down.

The PDMO said that tenders for a total amount of approximately EUR 619 mln were submitted, with a weighted average yield of 1.17%. The accepted yields ranged between 1.00% and 1.25%.

This follows last week’s successful return to the bond markets when Cyprus raised EUR 1 bln from a 10-year

Eurobond (EMTN) with a yield of 4.25%.

This was the government’s third attempt since 2011 when it was shut out of markets due to the economy’s spiralling contraction that prompted a EUR 10 bln bailout rescue by the Troika of international lenders (ERC, ECB, IMF).

The government’s previous 13-week Tbill worth EUR 100 mln yielded 1.58% on October 2, again significantly lower than the previous EUR 100 mln auction on August 31 with a yield of 1.87% and the higher 2.18% for EUR 144 mln of 13week T-bills sold on July 2.

Bank for EUR 35 mln was signed in late 2014 and has been fully allocated,” he added, raising the bank’s funding total to EUR 50 mln.

Such partnerships, Taylor noted, are necessary for the EIB to continue supporting SMEs which are the backbone of the Cypriot and the European economy.

Before the end of this year we have to be in a position to make new announcements extending the scheme both in terms of partner banks and additional investments, he said.

Hellenic bank Chairwoman Irena Georgiadou said that under the agreement, which is guaranteed by the government, EUR 30 mln will be made available in low interest loans to SMEs and mid-cap organisations, of which the bank is putting up EUR 15 mln from own funds.

Irena Georgiadou said that the agreement constitutes another step forward towards the recovery of the Cyprus economy and the

achievement of viable growth rates, adding that within the next 15 months, the cooperation with the EIB will have resulted in EUR 100 mln in low interest loans to businesses; EUR 50 mln from the EIB and EUR 50 mln matched by Hellenic.

The majority of loans from the first phase were absorbed by businesses and organisations in the education, tourism and trade sectors.

Georgiadou said that the aim of the cooperation between Hellenic and the EIB is to add real value to the economy, which has been suffering over the past two years from a liquidity crunch and sluggish business growth.

She emphasised that he bank continues to support the Cypriot economy and is confident that a potential exists, as proven by the doubling of loans granted to households and businesses compared to last year, while at the same time the Group has proceeded to create 200 new jobs.

November 4 - 10, 2015

6 | CYPRUS | financialmirror.com

6-year retail bonds oversubscribed… again The Public Debt Management Office of the Ministry of Finance announced that it has cut short for the second time the monthly sale of six-year retail bonds, due to oversubscription beyond the EUR 10 mln target fro the month.

The offer for the 12th series, dated December 2015, was terminated on Monday, the first day of the offer. The application period should have ended on November 20.

The next issue is the first series of 2016, with applications accepted from December 1 to 20 for issue on January 4, 2016.

Just a fortnight ago, the Ministry of Finance said it sold EUR 11.78 mln six-year retail bonds due from November, mildly oversubscribed above the monthly target of EUR 10 mln.

The PDMO said at the time 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.

NPLs need to be addressed urgently, says Fiscal Council The issue of non-performing loans (NPLs) needs to be addressed the soonest possible, Fiscal Council Chairman Demetris Georgiades said on Monday, noting that no magic formulas exist, while presenting his office’s Autumn report.

The report includes references to the evaluation of macroeconomic and fiscal projections, the risks of a premature exit from the country’s adjustment programme, reforms and the pension system.

He said that social benefits are distributed better and more efficiently than before.

In his report, Georgiades said that NPLs constitute the most immediate and significant danger to economic recovery and to medium-term fiscal stability.

He also said that according to IMF reports and suggestions, the high number of NPLs results in the commitment of funds in the banks and in their subsequent higher cost. This in turn, has an effect on households and businesses and deters investment.

Georgiades added that no magic formula exists. Some countries, he added, decided to sell NPLs to funds while others are delaying this process.

“The general assumption is that the sooner you solve the problem, the faster the economy will recover, the faster jobs will be created and income will rise,” he concluded.

Interest rates highest in Eurozone Cyprus topped the Eurozone list of high interest rates for deposits and on loans in September, according to data released by the European Central Bank.

The interest rate on loans for house purchase and the interest rate on loans to non-financial corporations for amounts up to EUR 1 mln are the highest among the Eurozone countries.

The interest on deposits of households with an agreed maturity of up to one year decreased to 1.52% from 1.59% in the previous month, and is the third highest among the Eurozone members. The average interest rate on deposits from households with an agreed maturity of up to one year in the Eurozone is 0.68%. The corresponding rate on deposits of non-financial corporations recorded a marginal increase to 1.57% from 1.56% in the previous month and is the highest in the Eurozone. The average corresponding interest rate in Eurozone is 0.25%.

The rate on consumer credit decreased to 4.38% from 4.80% in the previous month and is the lowest in Eurozone, in which the average is 5.20%.

The interest rate on loans for house purchase increased marginally to 3.36% from 3.35% in the previous month.

This is the highest rate in Eurozone where the average is 2.07%.

Reunification an important objective for EU, says Austria’s Fischer Austria’s President Heinz Fischer said that his country is closely following developments on the island and that the reunification of Cyprus is an important objective for the EU and the international community.

Fischer, speaking after a meeting and talks at the Presidential Palace in Nicosia with host Nicos Anastasiades, said that in his country, they “closely monitor developments in Cyprus and that the reunification of Cyprus is an important objective. Negotiations seem to be promising,” he added and expressed optimism that President Anastasiades and Turkish Cypriot leader Mustafa Akinci will reach an agreement for the benefit of the citizens of Cyprus and in the interest of Europe itself.

President Anastasiades said that the EU’s role and active involvement and support is vital, particularly now that the negotiations have entered an intensive phase.

Anastasiades and Fischer had a private meeting and attended official talks where the delegations of the two countries signed a memorandum of understanding in the fields of education, culture and the arts by the Minister of Education and Culture Costas Kadis and the Federal Minister of Education and Women’s Affairs of Austria Gabrielle Heinisch.

During their meeting the two Presidents discussed bilateral relations and cooperation both within the EU and at international level, the Cyprus issue and the role EU can play to resolve it, the unprecedented humanitarian immigration crisis, Ukraine and energy developments in the area.

Welcoming President Fischer President Anastasiades

spoke of a true friend of Cyprus, even saying that their friendship goes back 20 years when the President of Austria as the Head then of an Austrian parliamentary delegation visited Cyprus in the framework of the Conference of the Interparliamentary Union Work.

He referred to the excellent level of bilateral relations, reaffirmed during the contacts between the two Presidents and the excellent cooperation between Cyprus and Austria both within the EU and internationally.

“We agreed to identify new areas of cooperation in order to expand and deepen our relationships - these could be areas such as trade, culture, education,” he said. He also expressed gratitude for the contribution of Austria to UNFICYP for over 50 years.

The Austrian President noted that bilateral relations re very friendly, excellent and reliable, and said that he has visited twice Cyprus and as President of Austria has been here on several occasions, sometimes for holidays with his wife and children because.

VTTV reaches 96% capacity on anniversary VTTV, the fuel and crude oil storage facility at Vassiliko owned by international energy giant VTTI, has already reached 96% of its capacity, just as the terminal prepares to celebrate its first anniversary at the end of this month.

The terminal offers storage capacity of 544,000 cu.m. with 28 tanks for gasoline, diesel, jet fuel, kerosene, naphtha, MTBE and FAME, as well as a jetty that extends 1500m offshore with four berths for ship tankers from 5,000 to 160,000 DWT and capability of loading and discharging vessels at 2500 cu.m. per hour.

Having already invested EUR 300 mln in the project, built by construction giant J&P, the owners intend to expand the facility with future plans expected to expand the terminal, diversify customers’ portfolio and evaluate regional opportunities, such LPG and LNG gas, as well as evaluating the offshore extension with 13 tanks of total capacity 305,000 cu.m. for fuel oil and crude oil.

Already, the government of Cyprus is an important customer, keeping its strategic stocks at the VTTV terminal.

November 4 - 10, 2015

CYPRUS | 7

Marlow and Kherson maritime academy renew training cooperation in Ukraine Limassol-based Marlow Navigation and Kherson State Maritime Academy (KSMA) have renewed their longstanding maritime training cooperation in Ukraine with a new agreement signed by Marlow Chairman Hermann Eden and the Rector of KSMA, Professor V.F. Khodakovsky during the inauguration ceremony of the 2015 new marine cadets.

“Over the last eight years, we have built a solid foundation for excellent collaboration. I am pleased to renew our cooperation, and look towards additional long term projects for upgrading training programmes, and facilities at the academy,” stated Eden.

“These will no doubt help firmly position the Academy as the best maritime institution in Ukraine, and as a leading international maritime centre of excellence,” he added.

As an industry partner to the Academy, Marlow Navigation continues to increase its intake of Ukrainian cadets on board its fleet of managed ships as part of its ‘hands-on’ approach in training and developing maritime officers. At the same time, it is concentrating efforts in modernising and enriching specialised training and educational facilities at the academy, both in shipping and the offshore sector.

“Marlow Navigation has become our reliable partner and an employer for the plenty of our graduates, as well as sufficient investor in the development of our educational and laboratory base,” commented Khodakovsky. “KSMA is listed among the best-known higher educational establishments of our country, according to the Institute of Innovations and Technology, and was recognised as the best among maritime educational establishments of Ukraine,” he added.

To date, Ukraine is the largest provider of deck and engine officers for Marlow Navigation as the ship management company selects students to join its ranks after their second study year as cadets.

These students continue their studies in

designated Marlow classes and return to the company when they have graduated as officers.

“Our role in the preparation of maritime specialists is to assure the necessary support for cadets, right from the very beginning, so that in good time they become marine officers,” said Marlow’s General Manager, Captain Alfred Von Der Hoeh in his address at the ceremony.

“We are committed to continue doing our part for this mutual benefit, and also for the promotion and assistance of Kherson’s cadets – future Ukrainian marine officers,” concluded Von Der Hoeh.

Marlow Navigation, www.marlownavigation.com provides comprehensive third party ship and crew management services, backed by a global network of offices, recruitment agencies and training centres.

Since 1982, Marlow has grown to become a world renowned and trusted name in ship management. Today, the network spans more than ten countries, with 800 shorebased staff and over 14,000 crew on-board managed vessels at any given time.

Maritime management activities, including crew management, technical management, new building supervision, finance and administration, crew training and safety, and offshore crewing are from offices in Limassol, Hamburg and Rotterdam, together with new generation training centres in the Philippines, Ukraine, Russia and Germany, as well as a worldwide network of seafarer recruiting agencies.

November 4 - 10, 2015

8 | COMMENT | financialmirror.com

Out with “Big Macs?”

FOOD, DRINK and OTHER MATTERS with Patrick Skinner

Buttery shrimps… and an Indonesian delight When you reach a mature age, as I have, and you note all the constant media coverage of “healthy eating”, you think of all the stuff that you’ve thrown down your throat over the years. Burgers. Fries. Potato crisps/chips. Battered fish. Desserts, cakes and sweets. Biscuits.

Beer, wines and spirits. Oh, and lots more. And you wonder how you’ve managed to stay healthy. But, times they are a-changing. Consider this extract from an article in the “New Yorker” magazine this week.

“Last month, in keeping with prevailing desires and current nutritional wisdom, McDonald’s abandoned margarine for butter. The company announced recently that it would stop selling chickens that have been raised with antibiotics that could affect human health, and milk from cows that had been treated with growth hormones. They introduced low-calorie ‘artisan grilled chicken’ sandwiches and, this month, began serving breakfast all day—fulfilling a request that the Egg McMuffin crowd has been making for years”.

Just image, in a year or two. When your child asks you to take him or her for a burger, you’ll have to go somewhere other than McDonalds, because they will only be selling food that is “good for you”.

People in Cyprus, of course, as soon as prosperity arrived, took to Burgers, Hot Dogs, French Fries, cream-filled pastries and cakes and everything else that puts on weight.

Cypriots’ waistlines soon expanded considerably, to the point when, as in most western countries, obesity is a major problem today. In the western countries that lead us (often into temptation), we are seeing, on the horizon, the “Post Obesity Age”, in which it will be unhealthy, un-natural, unsociable and probably illegal, to be overweight. It used to take a war to keep us slim.

As a child in wartime (1939 – 1945), we got two ounces (55 grams) of butter per person, per week. Today you can have at least half that in a delicious dish called “Potted Shrimps”, available from a frozen food counter, near you, or even better, made at home. All you need is about 50 -75 grams of baby shrimps per person (if you can find the brown ones, these are the best). Put the shrimps into small ramekins and pour over melted butter in which you have mixed well a pinch or two of Mace (Schwarz is a good brand). They look nice, too.

My picture also shows little ramekins of smoked trout paté, which is very easy to make.

For four starter portions, you will need two smoked trout fillets, about 100 – 120 grams of a good cream cheese (such as “Philadelphia), a dessert spoonful of creamed horseradish (more, or less, to your taste) and a few pinches of black pepper. To make, just put all the ingredients into your food processor and whizz until you have a lovely creamy paté.

These two little bowls of fishy delights can be accompanied by thin slices of brown bread and butter, gherkins or pickled cucumbers, olives, baby tomatoes and slices of cucumber.

With a glass of chilled Xynisteri – superb!

Chicken Satay When only a Stir Fry will do, don’t rush out to a restaurant… . Do your own thing. This lovely chicken satay and vegetables, for instance…

Making the Chicken Satay 2 tablespoons smooth peanut butter 7 tablespoons soy sauce 7 tablespoons lemon or lime juice 1 tablespoon dark brown soft sugar 2 tablespoons curry powder 2 cloves garlic, chopped 1 teaspoon hot sauce, such as Tabasco 6 skinless, boneless chicken breast slices into slivers

Method In a mixing bowl, combine peanut butter, soy sauce, lime juice, sugar, curry powder, garlic and hot sauce. Place the chicken slivers in the marinade, stir well and refrigerate for at least

two hours; overnight is best.

Skewer the chicken, and put under a very hot grill. This will take just a couple of minutes each side.

If you can’t find peanut butter, here is another recipe for your own sauce, from Indonesia.

Peanut sauce Ingredients for 430 ml / 13 fl oz 100g - 3 1/2 oz of ground roasted unsalted peanuts 3 tbsps of sweet soy sauce (Indonesian “Kecap Manis” for preference) or 3 tbsps Chinese soy sauce + 1 flat tsp sugar 1 1/2 tbsps ground coriander 2-3 pinches of turmeric (one-third tsp) 2 tsps chili sauce 1 tsp minced garlic 180 ml / 6 fl oz tin coconut milk 2-3 tsps palm sugar (or substitute brown sugar) Salt Lemon juice

Method Combine all of the ingredients, except salt and lemon juice, in a small pan with sugar and simmer for 2-3 minutes. Cool. Add salt and lemon juice to taste. Use as a dipping sauce or spooned over flattened pieces of grilled or barbecued chicken fillet.

Stir-Fried Vegetables You can stir-fry almost any combination of vegetables. My sliced/chopped combination, pictured, is: leek, mushroom, cabbage, red pepper. The packet by the plate is one of precoked noodles.

Go to www.eastward-ho for more recipes, food and wine news and notes.

This week: French at HHIC training restaurant The Higher Hotel Institute, Cyprus has restarted its Student Training Restaurant in Nicosia as from the end of October, where this week, the serving will be French cuisine.

The restaurant is open to the public for lunch three days a week, on Tuesdays, Wednesdays and Thursdays from 1.30 to 3pm and charges are set at cost price. Potential patrons are advised to reserve a table in advance by calling 22404847, 22404800.

The restaurant is operated by the students under supervision and their “hands on” activities include the full range from setting the table and reception, to serving and clearing. The kitchen staff are trained in health and safety, cooking, service and innovation.

The first two weeks included Scandinavian / Nordic cuisine, followed by Spanish cuisine last week.

Next up are Italian cuisine (November 10-12), western and central European (a tribute to German cuisine) on November 17 and 18, Northeast Asian (November 24-26), Indian (December 1-3), Tex-Mex (December 8-10) and Christmas Gala menu (December 15-17).

November 4 - 10, 2015

November 4 - 10, 2015

10 | COMMENT | financialmirror.com

Average salaries of top execs rise to €1.45 mln worldwide The annual gross compensation for top executives in the world’s largest companies averages EUR 1.45 mln, an increase of 3.8% over the previous year, according to reasearch by executive head hunters Pedersen & Partners.

This compensation comprises an average base salary of EUR 711,600 and an annual bonus of 738,400.

The base salaries of top executives have increased by 4.5% on average, with the variable compensation increasing by 2.7%.

The salary data in the study of 1,800 top executives in 340 companies from 18 countries, was derived from the world’s largest companies with an average of 133,300 employees, an average turnover of EUR 42.7 bln and an EBIT of EUR 4.1 bln.

Table 1: Top executive compensation

Salaries increase with larger scope of responsibility The scope of responsibility is the decisive factor for determining top executive compensation.

Across all industries, the salaries of top executives in larger corporations are much higher than those of their counterparts in smaller companies. On average, the annual compensation of top executives increases by EUR 650,000 for every 50,000 employees.

Company profits determine the annual bonus The short-term bonus is an important component of a top executive’s compensation package, with the target bonus usually worth around as much as the annual base salary.

The bonuses of most top executives are measured against company profits, especially the EBIT. In general, declining company profits lead to substantially lower bonus payments for top executives, while increasing profits result in significantly higher bonuses.

Table 3: Company profits and bonuses

International comparison U.S. executives receive higher increases than Western Europeans “The stagnant economy has meant that the salaries of top executives in most Western countries are only rising moderately, usually from 3-4% per year,” said Conrad Pramboeck, Head of Compensation Consulting at Pedersen & Partners and author of the study.

“U.S. companies are the great exception here, with top executive salaries increasing by an average of 5.6% compared to the previous year. There are no objective reasons for this, because company profits and employee numbers both decreased slightly.”

Table 2: Salary increase

Companies from Western Europe and the U.S. offer similar compensation packages to their executives in terms of base salary and short-term bonuses. On average, the total cash compensation of top executives is between EUR 1.4 and 1.5 mln in most Western European countries and in the United States.

The greatest difference in the remuneration structure is related to long-term incentives, which are usually granted as stock options.

Top executives from U.S. companies received stock options valued at EUR 470,000, while top managers from Western European companies received stock options worth only EUR 109,000.

Table 4: International comparison: Western Europe vs USA

Worldwide, top executive compensation is highest in the USA and Western Europe. On average, the salaries of the top executives in the largest companies in emerging countries such as China, India or South Africa are considerably lower than Western levels, but their salary increases are higher.

“Currently, the salaries of top executives from Western countries are increasing by 3-5% on average, and in emerging markets by 7-10%,” Pramboeck concluded.

November 4 - 10, 2015

financialmirror.com | COMMENT | 11

How Germany deals with 10,000 refugees a day The emergency structures put in place by Berlin to manage the refugee crisis has the huge task of proving Angela Merkel’s “we can do it” claim correct, according to the German liberal daily Der Tagesspiegel.

Crisis? It’s not a word that Emily Haber would use. Crisis denotes catastrophe, and that is not how they want to categorise the influx of refugees into Germany. Haber, the state secretary under German Interior Minister Thomas de Maizière, is a diplomat and was head of a crisis team at the Foreign Office, a post that involved dealing with exceptionally difficult scenarios.

Whether she wants to call it a crisis or not, Emily Haber has managed such a scenario since the end of August.

Initially, it was just her and a handful of people from her ministry and the German regions.

Since the beginning of October, however, there has been a fixed governmental mechanism for dealing with it, in coordination with the regions, the security services and large companies.

Several hundred thousand people have crossed into Germany already and pictures of overcrowded reception centres are a daily occurrence in the news media. Haber’s task is to direct the streams of new arrivals in such a way to bring order to the chaos. At her disposal is the entire bureaucratic machine, with the aim of proving correct the Chancellor’s “we can do it” soundbite.

At the beginning of October, the German government transferred “the operational coordination of the extraordinary refugee situation” from Thomas de Maizière’s ministry to Angela Merkel’s chief of staff.

The decision was widely reported as Merkel attempting to depower or oust de Maizière. After weeks of uncertainty over who was responsible for what, Peter Altmaier was given “overall political coordination” of the crisis.

In practical terms, that means that Altmaier concerns himself with the international and European ramifications of the crisis, as well as ensuring that the various ministries and the 16 regions coordinate and execute their tasks appropriately. Helge Braun, a parliamentary state secretary in

the Chancellery, is particularly responsible for coordinating federal-state relations, a job she has held since before the start of the crisis.

Altmaier seconded Jan Hecker from the Federal Administrative Court to head a newly-created department.

Hecker was at the interior ministry for many years in its “Immigration law” unit.

However, when it comes to special trains, winter quarters and similar practical instruments, the day-to-day workings are still the responsibility of the interior ministry and Emily Haber, whose crisis management team is central to the entire situation.

Wolfgang Lohmann, chief of the regions’ anti-riot police, provides direction for the unit. Hardly anyone else could provide as extensive expertise on these kinds of issues as Lohmann, given that he commands around 15,000 riot police that are on-hand to deal with natural disasters, serious accidents and events that jeopardise the existence of democracy.

Ralf Tiesler, deputy head of the Federal Office of Civil Protection and Disaster Assistance, and his team deal with the 10,000 or so refugees that arrive every day, ensuring they are transported and housed accordingly.

Transporting so many people emphasises how difficult it

is to keep the wheels from falling off the entire operation. In the summer, Haber personally contacted Ronald Pofalla in order to organise special night trains to move refugees that had suddenly arrived.

Pofalla, once CDU general secretary and later the chief of the chancellery, sits on the board of Deutsche Bahn and became the government’s guarantor. Due to the urgency of Haber’s request, it was unclear who was liable for payment.

In the meantime, Pofalla has organised a taskforce that constantly organises four special refugee trains and their scheduling on the regular train timetable. He has since clarified with Werner Gatzer of the finance ministry that the state will cover the costs.

Transportation, however, is just a small part of the problem. Unaccompanied children and how to house them constantly creates new legal problems. Twice a week, on Tuesdays and Thursdays at 1pm, Haber chairs a meeting where the various ministries are briefed.

It is not just the daily chaos in Bavaria that is on the agenda, all other issues are talked about, clarified and instructions given. For officials it is an entirely new experience, hierarchies have been redefined and Haber has access to personnel from other ministries. There is no longer time to request “the opinion of the house”. The crisis takes precedence.

When the members of Haber’s bi-weekly meeting are exhausted or come up short, she is able to call upon the help of a steering committee made up of the state secretaries from every ministry, which she has met with every Friday since October.

Incidentally, it seems that problems mostly emerge on Wednesdays. Additionally, it is not at the highest level, with Peter Altmaier, where the issues reveal themselves, it is at low-level meetings, at the end of the chain of command, in the municipalities, districts and regions, where the refugee crisis is felt most keenly.

The structures put in place by Berlin will ultimately demonstrate whether or not Angela Merkel’s “we can do it” claim becomes a reality or not.

November 4 - 10, 2015

12 | PROPERTY | financialmirror.com

Investor interest in “Imperial Residences” luxury project Investor interest has been very strong for Imperial Residences – a hamlet of luxury properties designed by Aristo Developers. Located at the Venus Rock Golf Resort – the largest golf-integrated seaside resort in the eastern Mediterranean – these lavish and luxurious residences have been a firm favourite amongst investors from China, Russia and the United Arab Emirates.

Nestled on an elevated site commanding sweeping views of the Mediterranean and the well-known “Secret Valley Golf Club”, the owners of the Imperial Residences will reap the rewards of world-class services ranging from sports facilities, up-and-coming shopping centre with a select range of international boutiques, fine dining establishments and coffee houses, and a luxury hotel and beach club, all of which form part of this magnificent resort.

As the largest property developer for over three decades, Aristo Developers boasts an impressive portfolio of over 265 island wide projects. The company’s ongoing and evolving commitment to success encourages the development of unique, landmark developments of international standards, such as the Imperial Residences.

For information, contact Aristo Developers on 8000 2747 or visit www.aristodevelopers.com

Population growth to boost housing markets in UK, Holland and Ireland In the UK, the Netherlands and Ireland, population growth will support housing demand and property prices, Moody’s Investors Service said in a special report.

“In our view, the rising population in these countries combined with a housing supply shortage and robust economic growth will support house prices and therefore help reduce losses on residential mortgage loans,” sais Gaby Trinkaus, an analyst at Moody’s.

“Additionally, the size of the 25-35 age bracket, which forms the core of the firsttime buyer segment, is expected to remain largely stable in the UK and the Netherlands until 2020. While this demographic is projected to shrink in Ireland based on Eurostat data, the economic recovery and improved employment rates will support the market,” observed Trinkaus.

The rating agency’s research compares the impact of population forecasts for the UK, Dutch, Spanish, Italian and Irish residential mortgage-backed securities

(RMBS) markets, based on data from Eurostat.

The UK is projected to experience population growth of 3.2% until 2020, with 1.5% growth in the Netherlands, which will support housing markets in the context of a strong economic environment.

While Ireland’s population growth is set to slow down to 0.2% over the next five years, Moody’s considers that the strong economic recovery will draw recent expatriates back and eventually support a rise in population, supporting housing demand. Moody’s says Spain’s economic recovery could counteract the effect of a shrinking population (based on a -1.3% decline until 2020), reducing downward pressure on house prices. The economy’s recovery will determine how long house prices will stay flat and how long it will take to alleviate the stock of unsold new houses.

“A fall of the 25-35 segment in Ireland and Spain may weaken housing demand in and of itself. However, this segment will

UK buy to let RMBS continues to improve

benefit the most from improved income prospects in future and increased mortgage lending activity, which could lighten the pressure on house prices and subsequently RMBS collateral performance,” said Greg Davies, an Assistant Vice President at Moody’s.

“Better employment and income prospects in Spain and Ireland will improve first-time buyers’ affordability, while house prices are still low and banks are increasing their focus on mortgage lending,” observed Davies.

Italy’s 1.7% projected population increase (2015 to 2020) is markedly slower than the 3.0% rise over the past five years (2010 and 2015). A slower population increase and muted economic growth will weigh on housing demand. These factors, combined with Moody’s assessment of an oversupplied housing market, indicate that house prices will remain steady in Italy, underpinning stable loss severities and RMBS collateral performance.

The performance of the UK buy-to-let (BTL) residential mortgage-backed securities (RMBS) market improved slightly in the three months ended August, according to the latest indices published by Moody’s Investors Service. In August, 90+ day delinquency rate decreased to 0.60% of the current portfolio balance from 0.64% in May, a 6% drop.

Outstanding repossessions decreased to 0.08% in August from 0.09% in May, representing a 10% decrease. Meanwhile, cumulative losses increased to 0.88% in August from 0.83% in May, representing a 5% increase.

Moody’s annualised total redemption rate increased to 10.91% in August from 8.57% in May. “We expect that the reduced demand for BTL properties resulting from the restriction of mortgage interest relief for landlords in this sector will soothe the UK house price growth. Nonetheless, 2015 is currently on track in becoming the best year for BTL mortgage deal issuance since the credit crunch,” the Moody’s report said.

“We forecast that the UK house prices will rise by up to 5% in 2015, although at a slower pace than in 2014.”

LA’s elite ‘Platinum Triangle’ to get new luxury home project Domvs London, a developer of ultra-prime residential property, has formed a joint venture with Junius Real Estate Partners, a real estate investment unit within J.P. Morgan Private Bank, to acquire a prime 11-acre site within lower Bel Air known as The Park Bel Air. The venture seeks to deliver the finest living experience in the world for a select few, through the creation of three grand estates. The estates, located at the heart of Los Angeles’ prestigious ‘Platinum Triangle’ (Bel Air, Beverly Hills, and Holmby Hills), will accommodate personalised turnkey homes permitted for up to 61,000 sq.ft. each, offering privacy, security, and Pacific Ocean, city and canyon views.

“Estates of this calibre in Los Angeles rarely come to market, let alone a collection of three in old Bel Air presented as thoughtfully as The Park Bel Air. Demand for properties at this end of the market, both domestic and offshore, continues to outstrip supply. No one should be surprised to see the trend for prime property sales above $50 million in the Platinum Triangle continue,” said Kurt Rappaport, Co-founder and Owner, Westside Estate Agency.

“When compared to other ultra prime property markets such as New York, London or Monaco, properties of this quality, specification and demonstrable value are surprisingly rare at the highest end of the Los Angeles

residential market,” said Jon O’Brien, Founder and CEO, Domvs London.

Having secured final permits just prior to the adoption of new City of Los Angeles restrictions on large home

developments, The Park Bel Air represents possibly one of the last remaining opportunities to develop homes of this quality and scale in Bel Air. www.TheParkBelAir.com

November 4 - 10, 2015

financialmirror.com | PROPERTY | 13

Young people to be proud of – Fysco Lotus Plaza initiative µy Antonis Loizou Antonis Loizou F.R.I.C.S. is the Director of Antonis Loizou & Associates Ltd., Real Estate & Projects Development Managers

I have often referred to the situation of unemployed graduates and promising young scientists who are out of work, and have also criticised the Technical Chamber ETEK for its positions on the matter, raising objections about the motives behind the plans that claim to increase employment.

And yet, there is hope. Allow me to mention the initiative of a group of 25-30 university graduates, including planners, engineers, architects and others who undertook to revive the Fysco Lotus Plaza in Limassol. This group of young people, armed with brooms and mops, undertook to clear this dilapidated and ugly site, that had become a second home to pigeons, drug addicts and others. Without any financial gain and the only purpose to implement nice ideas of how this dump could be revived for the benefit of Limassol and certainly the wider region, and at the same time act as an example for others.

Admittedly, although I have been in the profession over the last 40 years, this initiative has not only our surprised many of us, but it has also been touching, considering that I had been involved with this project more than 30 years ago with all the data and plans pointing to a successful project.

However, several things started to go wrong, both when people stopped paying common expenses and maintenance charges, and the lack of incentive to attract new. Now, the trend with shopping malls has changed, offering some hope to this particular project.

These young people have an idea of how this project could be revived and kudos to Mayor of Limassol, as well, who admittedly is a strong supporter of this effort (as are the members of the Municipal Council) suggesting that this idea to transform the project into a magnet for young entrepreneurs can succeed.

The plan is to transform the project into a centre for youth entrepreneurship, which will includes offices, a common reception and administration, conference facilities, small

restaurants, cafes, bars and even a mini-market. Certainly the work will eventually develop according to the use, as well as demand. Small bars and cafes, as we have seen in Saripolou street, fast food and fashion outlets, all will be categorised according to the level and will differentiate without any one “bothering” the other.

The problems these youngsters face are numerous, both as regards legal and other obstacles, such as unlawful possession, parking lots (a matter that will be handled by Municipality) and in general the smooth operation of the project as a whole unit.

This is where the support of the State is imperative, through subsidies and other incentives, while both the Ministries of Labour and Internal Affairs should take the initiative to strengthen the “vision” of these young people, and not keep it at a theoretical level. The Ministry of Labour could probably contribute by providing grants both from government funds and from EU sources that encourage such entrepreneurship.

As my office is already engaged in the project, and despite some of our own reservations, it would be wrong not to mention the enthusiasm, time, effort and manual labour that is being invested, and the Ministry of Labour’s involvement should be evident as it will help to encourage young people with new ideas and visions.

It would be a huge mistake to let these young people down and I firmly believe that the government should embrace them with love, and go the extra mile that will show a practical dedication, not just to Limassol, but the whole of Cyprus in general, and of course to the youth.

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Apart from using various European funds, there could also be initiatives by the municipality to attract new tenants and owners, such as zero tax for municipal fees, zero tax on immovable property tax, etc, for a period of, say, ten years, similar to the tax discounts offered by industrial countries and cities, simply to lure big-name brands.

The biggest problem that such joint ownership projects have is the “curse” of the common expenses and administrative charges, where, unfortunately, the law protects the bad payers to the detriment of consistent tenants or owners. And what would it mean for the consistent tenants to sue these bad debtors? Higher costs and lengthy legal processes. Both in the case of this project, as well as many others that are similar, this is the reason why many have fallen into disarray or are crumbling. In the end, this “curse” that plagues the common-owned buildings allows for them to fall into a poor state, thus also resulting in the gradual devaluation of the property, and hence for the landlord.

Congratulations, then, to the enthusiastic young cleaning crews who are giving this eyesore and much needed facelift, with smiles returning to the neighbours as well. And thumbs up to the Limassol Municipality that has wholeheartedly supported this project.

Perhaps, us older generation people should roll up our sleeves and not only ensure the success of this project, but also to encourage other young people with new ideas.

Well done to all. www.aloizou.com.cy - ala-HQ@aloizou.com.cy

November 4 - 10, 2015

14 | MARKETS | financialmirror.com

Market sentiment for Gold after the Fed’s decision for a rate hike delay

By Oren Laurent President, Banc De Binary

Traders and investors are often in two minds about precious metals, notably gold. Now that the recent Federal Reserve decision has been announced and an interest rate hike is off the cards, a little uncertainty has pervaded the gold market. When the September decision of the Fed FOMC was made, the statement released by the authorities explained why a rate hike was disingenuous at the time. Emerging market weakness, declining demand in China and the counsel of the International Monetary Fund (IMF) all cautioned against hiking interest rates at the time.

Despite this, Janet Yellen alluded to the possibility of a rate hike before the end of 2015. Fast forward to the October FOMC decision; the same decision was reached but with one important difference. The Fed statement made no reference to global economic weakness. This implies several things, notably: the Fed is likely to move swiftly to increase interest rates before the end of the year at the December 15/16 meeting, and the Fed is less concerned about the potential impact on the US economy vis-a-vis China and emerging market economies when it comes to hiking interest rates.

Gold Shines When Anxiety Looms Typically, a decision not to hike interest rates would be perceived positively by gold traders. Since gold has no ability whatsoever to earn interest, it loses its appeal as the go-to financial asset during times of rising interest rates. In other words there is more to be gained by investing money in Treasury notes, bonds, CDs and other interest-bearing funds.

Equity markets tend to move in an inverse relationship to interest rates since rising interest rates imply rising costs on long-term debt for companies. This ultimately leads to a decrease in overall profitability, dividends and share prices.

There is the likelihood that increased costs will be passed on to consumers in the form of higher prices.

In any event, gold does not benefit from a market where interest rates are rising, and this is evident in the declining gold price in the lead up to the recent Fed decision.

Consider for a moment the following scenario: Gold was trading as high as $1,182 per ounce, with many analysts anticipating a rise towards the $1,200 level. However, within a half hour after the Fed decision to retain interest rates at the current rate of 0% - 0.25%, the price of gold dropped by $30 an ounce. This resulted in the weakest gold price in two weeks, down to $1,152 per ounce. We will likely see the price of gold moving in a much narrower range between $1,000

and $1,100 before the end of the year.

Gold Moves Contrary to Real Interest Rates The gold price and the US real interest rate tend to move in opposite directions over the long-term. As the interest-rate increases, so the gold price decreases and vice versa. This is not a fixed trend, and it certainly fluctuates over time. In recent years, we have seen the gold price soaring as the interest rate declined. On Wednesday, October 28, the price of gold dropped by 1% to its lowest level for the month. By contrast, the USD was trading at its highest level in some 75 days. The global headwinds that have become such an important part of the Fed’s decision not to hike rates did not even come into play in the last meeting.

That the central bank declined to discuss the global economic risks of China and emerging market economies is an important omission. It confirms the Fed’s opinion that what happens in global markets is of little consequence to the US markets at this juncture.

The price of spot gold dropped to $1,155.86 (-0.9%) and gold futures for delivery in December rose by 0.9% to close at $1,176.10 per ounce. Oftentimes the actual decision is less important than the explanation for that decision in the

statement. That the FOMC statement did not include anything substantive about weaker Chinese data, emerging market currency weakness, commodity price weakness and so forth, was instrumental in causing the price of gold to reverse direction. Many institutional traders and fund managers had set up stop losses for gold at $1,160, and that accelerated the decline to a multi-week low after the Fed decision.

A Rate Hike Before 2015 is Over?

Whether the doves or the hawks win out with the Fed decision to raise interest rates remains to be seen. However, the likelihood of a December 15/16 rate hike appears to have grown given the sentiment expressed in the FOMC statement. That interest rates have not been raised in nine years is an important point, but it does not preclude the possibility of a rate hike before the end of the year.

Investors and traders have taken a measured approach to precious metals like gold, platinum and silver, with plenty of short positions being covered by long positions.

The recent Fed statement was intentionally designed to leave the door open to a December rate hike, while not expressly guaranteeing that it would take place. Already we have seen the price of precious metals seesawing, with silver declining to $15.80 per ounce and palladium dropping to $672.50. For its part, gold is staring down the barrel of its biggest drop in nine weeks. Already the price of this precious metal is at 3-week low, with further drops likely.

It is precisely this type of uncertainty that generates anxiety among speculators in the world market. Gold tends to thrive in times of uncertainty, but not when the uncertainty relates to an interest rate hike that adversely affects the price of gold. It is clear that the gold price is falling beneath its 200-day moving average, which will only accelerate short positions on the precious metal. It is not only gold that has seen sharp declines in recent weeks; it is also palladium and silver.

Please note that this column does not constitute financial advice.

November 4 - 10, 2015

financialmirror.com | MARKETS | 15

The Fed and the US Dollar Marcuard’s Market update

by GaveKal Dragonomics Now that the Federal Reserve has calmed down about the risk of a financial meltdown in China, only one further condition appears to be necessary for a December rate hike: October’s payroll figures, out on Friday, must show an appreciable reversion towards this year’s mean monthly growth of 198,000. That would imply September’s surprisingly weak number was a statistical aberration, which seems a reasonable expectation, since most high-frequency indicators of US employment conditions remained fairly

are still jumpy. Their nervousness is hard to justify. The start of this rate hike cycle will be one of the most predictable — and predicted — events in financial history, in contrast to the first rate hikes of 1994 and 2004, whose timing surprised investors and caused severe market volatility. For this technical reason, currencies and equities should be no more vulnerable than bonds.

For fundamental economic reasons too, equity and currency investors should have little reason to worry. In principle, equities are influenced by rate hikes in two main ways: through economic activity, and through the discount rate used to value future earnings streams. A 25bp move in short rates will not damage economic activity, and may even boost confidence in the sustainability of the expansion. As for

February 1994 and June 2004 — the only two events in financial history broadly comparable to the situation in December if the Fed does start to move — we find that the US dollar strengthened in the six months leading up to each initial rate hike, and then weakened significantly in the six months that followed.

Of course, two episodes do not make a statistically significant sample. The fact that the US dollar weakened after the last two occasions the Fed began to hike does not prove we are right to expect the US dollar to weaken next year. It does prove, however, that we are not obviously wrong in expecting a weaker US dollar. And in this business, it is a good start not to be obviously wrong.

Putting all these arguments together, it makes sense that the US dollar should rise strongly before, not after, the first Fed rate hike, in a classic case of “buy the rumour, sell the news.”

If this turns out to be correct, then fears about a global US dollar shortage, of a squeeze on international borrowers with US dollar liabilities, and of further downward pressure on emerging market currencies may turn out to be the stories of 2015, not of 2016. If so, then the reaction of emerging markets to the Fed’s first rate hike, especially in commodityimporting economies in Asia, should be much better than generally expected.

WORLD CURRENCIES PER US DOLLAR CURRENCY

CODE

RATE

EUROPEAN

strong through the summer, including weekly unemployment claims, non-manufacturing PMIs and small business and consumer surveys.

Even last Friday’s 3Q GDP report showed no real evidence of a summer slowdown, since the 1.5% headline figure included 1.4pp of inventory liquidation, while final demand and consumption continued to grow robustly, by 2.9% and 3.2% respectively.

Combining this decent data with the Fed’s slightly more hawkish than expected comments, markets are right to price the probability of a December rate hike at over 50%. A strong payroll report on Friday could easily boost that probability to 80% or even 90%. In any case, the important question is not whether the Fed will make its first move in December, January or March, but what effect we should expect from the start of the rate hike cycle.

In terms of direct impact on the US economy, the answer must be “very little”. It is hard to imagine any economic model in which the difference between short rates of 0.25% and 0.5% significantly affects decisions on consumption, savings or investment. What matters to US economic activity and employment is not the timing of the first rate hike, but the speed and duration of the tightening cycle, and — especially — its expected end-point. For all these reasons, it would be better for tightening to start earlier, rather than later. The Fed’s repeated promises of an exceptionally shallow and gradual cycle will become even more credible once it starts to display this gradualism in practice.

But what about the impact of the first Fed move on financial markets and emerging economies? Long-term bond yields have remained remarkably steady as the speculation about a December rate hike has ebbed and flowed, presumably because bond investors expect the yield curve to flatten once the Fed shows it is willing to tighten, but tighten more gradually than ever before. By contrast, equity investors, currency traders and international policymakers

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valuations, they depend on long-term bond yields, not on overnight rates. So if bond markets are calm at the prospect of the first rate hike, equity markets should be too.

That leaves currencies. The consensus view is that the US dollar is sure to appreciate once the Fed begins to tighten, especially as the European Central Bank and the Bank of Japan continue to print money. However this conventional wisdom may be misplaced for at least five reasons: 1) The divergence of monetary policies between the US and Europe and Japan has already been thoroughly priced into currency values, as shown by the almost unprecedented cheapness of the yen and the near 14-year high in the US dollar (adjusted for inflation), as shown in the chart.

2) Although monetary policy settings and relative interest rates are among the most important determinants of currency values, they are not the only ones. Trade balances also matter, as do prospects for economic growth and corporate profits. On these grounds, relative to the US, Europe and Japan are now looking more attractive than before.

3) The US dollar has been in a bull market for seven years; the typical length of currency cycles since the 1972 end of the Bretton Woods regime. Following this pattern, the US dollar started rising in April 2008, and looks as if it peaked in the first quarter of 2015.

4) While market analysts almost universally assume a strong correlation between monetary expansion and currency weakness, in reality the evidence for this correlation has been very mixed. While the yen weakened dramatically in 2013 and again in early 2015 in response to the BoJ’s quantitative easing, the euro has shown very little response to the ECB’s enormous QE programme, while the US dollar and sterling generally strengthened as their central banks expanded QE. 5) Looking at the two episodes of Fed tightening after long periods of exceptionally easy money that began in

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.

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

17430 1.5417 1.7809 24.668 6.7927 14.2501 1.0979 2.395 285.48 0.64008 3.1446 0.391 19.886 8.5075 3.864 4.0357 63.235 8.5503 0.989 23.11

AUD CAD HKD INR JPY KRW NZD SGD

0.7179 1.3106 7.7502 65.635 120.82 1132.65 1.4892 1.3998

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

0.3773 8.0065 29957.00 3.8760 0.7080 0.3028 1512.75 0.3850 3.6395 3.7500 13.8496 3.6729

AZN KZT TRY

1.047 283.37 2.8358

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

November 4 - 10, 2015

16 | MARKETS | financialmirror.com

The Gavekal Ethos Marcuard’s Market update

by GaveKal Dragonomics

By Charles Gave In recent days a number of our readers have expressed surprise — even bewilderment — at the difference of opinions within Gavekal on some important topics.

“What,” they ask, “is the Gavekal house view?”

This is a perfectly legitimate question, and as chairman of the firm, it is my duty to explain our position.

The simple answer is that as a firm, we try to avoid “group-think”, always encouraging individuals — whether partners or analysts — to present well-reasoned, argued, and documented points of view on their own merits. The reason for this is simple: we believe that through debate and by challenging each other’s views we can best refine our own arguments, and so present more interesting ideas to our clients. Occasionally this process can lead to public disagreements that may disconcert some readers. But, as Anatole Kaletsky likes to say: “Our clients are not children, and we are not their parents. We needn’t feel obliged not to fight in front of them”.

The present, as our clients have observed, is one of those times of disagreement. The divergence of views has been building for a while. Until a year or so ago, although we may have differed on the fundamentals, we were able to agree easily enough on the structure of the portfolios that we would recommend: overweight the US, expecting the US dollar to rise, the price of oil to fall, inflation to remain either low or very low, and long rates to decline. Those days are over.

As I wrote in June, quoting the great Yogi Berra: “When you come to a fork in the road, take it!”

So, what is the fork now in front of us? To the right, we have what I would call the return to a normal cycle. The great disturbance of 2008-2009 has finally been absorbed. The US economy continues to grow, albeit more slowly than before.

The US dollar has made its high, and long yields their lows, together with US inflation. If the world follows this road, it is now time to underweight America and move capital out of the US. By contrast, to the left we have the risk of something unexpected: a massive rise in the value of the US dollar, similar to the one which followed the last great Keynesian experiment initiated in the 1970s by Federal Reserve chairman Arthur Burns. Most of the time, people analyse

www.marcuardheritage.com

currencies on a flow basis, looking at differences in interest rates, current accounts, capital flows, purchasing parities, and so on. For 90% of the time this approach works.

However, once in a while, a problem of stock arises. By 1981 the short position on the US dollar — the dollars borrowed internationally — was greater than the US money supply.

Technically the market had been cornered, and the dollar went ballistic. In 1985, in what amounted to the first great quantitative easing in history, the Fed extended massive swaps to the world’s major central banks to allow them to break out of the corner. Something similar happened in 2008.

My concern is that we could be in a similar situation again today. If we are, then the US dollar will go through the roof, US interest rates will fall by at least half, and US inflation will turn negative. I am not saying that the world economy definitely will take this left hand fork; I am saying that it could. So, for investors, the solution is not to bet on one or other outcome, but to build a portfolio which will deliver acceptable performance whichever happens.

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.

This is difficult, because the two scenarios are clearly not compatible with each other. The only hedge against the second scenario, which would devastate countries and companies with US dollar debts and negative cash flows, is for investors to hold a sizable proportion of their assets in US zero coupon bonds, with a preference for constant durations of seven years or more, which would rally even as equity markets tanked. In parallel, investors should buy far out of the money US dollar calls to protect their portfolios against a six sigma event, praying that these calls never move into the money.

On the equity front, if we are moving into deflation, investors should own only the shares of companies selling goods and services elastic to prices. These are easily identified, because today they are the ones with rising sales.

Investors should eliminate companies which have falling sales from their portfolios, as these companies are obviously selling goods and services which are inelastic to price. In the second scenario, they would get killed. During the latest earnings season fewer than half US companies reported rising sales, so equity portfolios investing only in companies selling goods and services elastic to prices will have massive tracking errors against the indexes. This is the price you will have to pay if you want to survive.

At best, this is a compromise portfolio. In scenario two, it will not get destroyed; but in scenario one, it will underperform. It is, however, the product of Gavekal’s ethos of free and open debate.

The Financial Markets Interest Rates Base Rates

LIBOR rates

CCY USD GBP EUR JPY CHF

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

Swap Rates

CCY/Period

1mth

2mth

3mth

6mth

1yr

USD GBP EUR JPY CHF

0.19 0.51 -0.14 0.05 -0.77

0.25 0.54 -0.10 0.06 -0.76

0.33 0.58 -0.07 0.08 -0.73

0.56 0.74 0.00 0.12 -0.69

0.87 1.05 0.09 0.23 -0.59

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

0.87 1.02 -0.02 0.10 -0.79

1.14 1.21 0.05 0.11 -0.76

1.35 1.38 0.16 0.13 -0.66

1.54 1.53 0.28 0.18 -0.53

1.82 1.75 0.56 0.29 -0.24

2.10 1.95 0.93 0.49 0.09

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.0979 0.9108

100 JPY

1.5419

1.0113

0.8277

1.4044

0.9211

0.7539

0.6559

0.5368

0.6486

0.7120

0.9888

1.0856

1.5246

120.82

132.65

186.29

0.8184 122.19

Weekly movement of USD

CCY\Date

06.10

13.10

20.10

27.10

03.11

CCY

Today

USD GBP JPY CHF

1.1123

1.1310

1.1278

1.1012

1.0965

0.7335

0.7384

0.7286

0.7171

0.7107

133.86

135.41

134.63

132.63

132.18

GBP EUR JPY

1.0844

1.0880

1.0770

1.0791

1.0810

CHF

1.5419 1.0979 120.82 0.9888

Last Week %Change 1.5356 1.1012 120.44 0.9799

-0.41 +0.30 +0.31 +0.91

November 4 - 10, 2015

financialmirror.com | WORLD | 17

The Fed’s communication breakdown

By Kenneth Rogoff Nothing describes the United States Federal Reserve’s current communication policy better than the old saying that a camel is a horse designed by committee. Various members of the Fed’s policy-setting Federal Open Markets Committee (FOMC) have called the decision to keep the base rate unchanged “data-dependent.” That sounds helpful until you realise that each of them seems to have a different interpretation of “data-dependent,” to the point that its meaning seems to be “gut personal instinct.”

In other words, the Fed’s communication strategy is a mess, and cleaning it up is far more important than the exact timing of the FOMC’s decision to exit near-zero interest rates. After all, even after the Fed does finally make the “gigantic” leap from an effective federal funds rate of 0.13% (where it is now) to 0.25% (where is likely headed soon), the market will still want to know what the strategy is after that.

And I fear that we will continue to have no idea.

To be fair, deciding what to do is a very tough call, and economists are deeply divided on the matter. The International Monetary Fund has weighed in forcefully, calling on the Fed to wait longer before raising rates. And yet central bankers in the very emerging markets that the IMF is supposedly protecting have been sending an equally forceful message: Get on with it; the uncertainty is killing us.

Personally, I would probably err on the side of waiting longer and accept the very high risk that, when inflation does rise, it will do so briskly, requiring a steeper path of interestrate hikes later. But if the Fed goes that route, it needs to say clearly that it is deliberately risking an inflation overshoot.

The case for waiting is that we really have no idea of what the equilibrium real (inflation-adjusted) policy interest rate is right now, and as such, need a clear signal on price growth before moving.

But only a foaming polemicist would deny that there is

The global pyramid of wealth How is wealth distributed across the world? This pyramid shows that 3.4 bln people (71% of the world’s adults) have a wealth of less than $10,000 in 2015. Another billion people (21% of the world’s adults) have financial assets between $10,000 and $100,000. At the very top of the pyramid, 34 mln people have a fortune of $1 mln of higher, and they collectively control a whopping $113 trln. By contrast the 3.4 bln people at the base control just $7.4 trln, according to the Global Wealth Report from Credit Suisse.

(Source: Statista)

also a case for hiking rates sooner, as long as the Fed doesn’t throw random noise into the market by continuing to send spectacularly mixed signals about its beliefs and objectives.

After all, the US economy is at or near full employment, and domestic demand is growing solidly.

While the Fed tries to look past transitory fluctuations in commodity prices, it will be hard to ignore rising consumer inflation as the huge drop of the past year – particularly in energy prices – stabilizes or even reverses. Indeed, any standard decision rule used by central banks by now dictates that a hike is long overdue.

But let’s not make the basic mistake of equating “higher interest rate” with “high interest.” To say that 0.25%, or even 1%, is high in this environment is pure hyperbole. And while one shouldn’t overstate the risks of sustained ultra-low rates to financial stability, it is also wrong to dismiss them entirely.

With the decision about raising rates such a close call, one would think that the Fed would be inclined to do it this year, given that the chair and vice chair have pretty much told the market for months that this will happen. The real reason for not hiking by the end of the year is public relations.

Let’s suppose the Fed raises interest rates to 0.25 basis points at its December meeting, trying its best to send a soothing message to markets. The most likely outcome is that all will be fine, and the Fed doesn’t really care if a modest equity-price correction ensues. No, the real risk is that, if the Fed starts hiking, it will be blamed for absolutely every bad

thing that happens in the economy for the next six months to a year, which will happen to coincide with the heart of a US presidential election campaign. One small hike and the Fed owns every bad outcome, no matter what the real cause.

The Fed of course understands that pretty much everyone dislikes interest-rate hikes and almost always likes rate cuts. Any central banker will tell you that he or she gets 99 requests for interestrate cuts for every request for a hike, almost regardless of the situation. The best defense against these pressures is to operate according to utterly unambiguous criteria.

Instead, however good its intentions, the net effect of too much Fed speak has been vagueness and uncertainty.

So what should the Fed do? My choice would be to have it explain the case for waiting more forthrightly: “Getting off the zero bound is hard, we want to see inflation over 3% to be absolutely sure, and then we will move with reasonable speed to normalise.” But I also could live with, “We are worried that if we wait too long, we will have to tighten too hard and too fast.”

Throwing out the rulebook made sense in the aftermath of the 2008 financial crisis. It doesn’t anymore. And today’s lack of clarity has become a major contributor to market volatility – the last place the Fed should want to be.

It’s wrong to vilify the Fed for hiking, and it’s wrong to vilify it for not hiking; if it is such a close call, it probably doesn’t matter so much. But, at this critical point, it is fair to ask the Fed for a much clearer message about what its strategy is, and what this implies for the future. If Fed Chair Janet Yellen has to assert her will over the FOMC for a while, so be it. Somebody on the committee has to lead the camel to water.

Kenneth Rogoff, a former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University. © Project Syndicate, 2015 - www.project-syndicate.org

November 4 - 10, 2015

18 | WORLD | financialmirror.com

Social benefits in the age of Uber

By Jean Pisani-Ferry When it comes to compensation, the company you work for often matters more than how good you are at what you do. In 2013, the average employee of Goldman Sachs, the investment bank, earned $383,000 – much higher than what the best-performing employee in most firms can hope to take home. Pay differences across companies are considerable. Research by Jason Furman, US President Barack Obama’s top economic adviser, and Peter Orszag, Obama’s former budget director, has found that rising pay differentials are the prime cause of widening US wage inequality in recent decades. They account for a larger part of the rise in overall income inequality than wage differences within companies or capital income.

At the other end of the spectrum, many labor-force participants are on temporary contracts, work for small firms, or are selfemployed. Some combine different jobs at the same time. If, as expected by many, the socalled sharing economy develops, their number is bound to grow. These workers do not benefit from job security and generally earn much less.

Emerging countries offer the example of blatant inequality between employees in the formal sector – companies like Petrobras in Brazil and Infosys in India – and those who work in the informal economy. But even in advanced economies, where social protection is broad in scope, access to benefits is far from equal. Employees of large, profitable firms tend to enjoy better health-care coverage, more generous pensions, and easier access to training. Moreover, some benefits – for example, parental leave – are conditional on seniority within a company.

These are disturbing facts. Talent and effort should be rewarded, but two people of equal capabilities and dedication should not be treated differently just because one happens to be an insider, with a secure job in a big,

The countries generating the most municipal waste Municipal waste includes household waste and similar waste from commercial activities, offices, institutions and small business, according to the OECD. Despite the fact that it represents a mere 10% of total waste generation, municipal waste accounts for at least a third of all public sector expenditure aimed at curbing pollution.

According to a recent report, Denmark produces the most municipal waste of any OECD country. Every year, Danes produce an average of 751 kg of municipal waste per capita, of which 515 kg is household waste. The United States and Switzerland are close behind, generating 725 and 712 kg per capita of municipal waste, respectively. (Source: Statista)

successful company. Such differences are questionable not only in terms of fairness; they are also economically inefficient, because they tend to limit labor mobility across firms and sectors. Employees may think twice before leaving a company if they are set to lose valuable perks as a consequence. This prevents potentially positive matching of the skills needed by employers and the available supply of them. It also makes hiring first-class talent excessively difficult for small companies.

Public policy should not prevent successful companies from paying more and offering better working conditions. But it should ensure that all participants in the labor force, whatever their status, enjoy equal access to essential benefits; and it should aim at minimising the losses that impede mobility across firms, sectors, and types of employment. Obama’s health-care reform was an important step in this regard. But socialwelfare reforms should go much further. For fairness as well as for efficiency reasons, rights and benefits should be attached to individuals, not to companies or employment status, and should be fully portable across sectors and jobs.

To attune its social-welfare system to a changing economy and reduce inequality among individuals, France is currently considering a system of so-called Individual Activity Accounts (IAAs). My colleague Selma Mahfouz chaired a committee that prepared a

blueprint for such a system.

Put simply, every new labor-force entrant would be equipped with a lifelong individual account, thereby accumulating points in the same way airline travelers accumulate miles.

They would earn them by working in both the private and public sector. Physically strenuous jobs would yield more points than office jobs.

Pro bono community service would also generate points – perhaps more than paid jobs.

Points earned could be spent on lifelong education and professional training, which would thus become independent from employment status. Every person could decide to draw on her IAA to prepare for, or when making, a job change.

Other financing could also be mobilised toward the same end. For example, an employee could decide to shorten the duration of his unemployment benefits and invest the corresponding points to benefit from better education opportunities.

But financing education should not be the only purpose. Points could also be used to help finance volunteerism or care for elderly family members. Points earned through hard toil could be spent on retiring earlier. Many more examples of partial fungibility could be imagined.

Such a system would have three additional benefits. First, it would help improve access to information. Employees nowadays are often lost in the complexity of the various social

benefits to which they are entitled. The creation of IAAs and the adoption of a single unit of account would go a long way toward making things simpler, especially if all relevant individual information is available to users via a single smartphone app. Second, IAAs would empower employees, especially the least skilled, who often perceive themselves as being in a state of subjection.

Together with information, the possibility to invest their social benefits, rather than only consuming them, would strengthen their autonomy and freedom of choice.

Finally, the same accounts could serve as vehicles for public policy. For example, early school-leavers could be endowed with points for later use in professional training. More broadly, instead of assisting people only when social risks materialise, public policy could support individuals throughout their working life, by adopting a more effective bespoke approach that fits peoples’ needs better than coarsely tailored schemes. This may sound utopian; in a way, it is. But at a time when every digital service becomes more and more personalized, why should social policy remain confined to the philosophy and solutions of the twentieth century?

Jean Pisani-Ferry is a professor at the Hertie School of Governance in Berlin, and currently serves as Commissioner-General for Policy Planning for the French government. © Project Syndicate. www.project-syndicate.org

November 4 - 10, 2015

financialmirror.com | WORLD | 19

Navigating the energy revolution Abdullah Al-Shehri and Julian Popov For decades, the international energy landscape has been relatively stable, with producers like Saudi Arabia, Iran, and Algeria selling oil and gas to consumers in the United States and Europe. In a few years, however, the energy terrain is likely to be unrecognisable, as dramatic technological, economic, and geopolitical changes reshape commercial relationships worldwide.

What is needed is a new governance structure, one that moves beyond traditional bilateral relationships between producers and consumers. In a rapidly evolving world, guaranteeing energy security will require the careful management of multiple, interlocking relationships. Only an inclusive international forum, in which complex ideas can be shared and debated, is likely to prove adequate to the task of navigating the new era of energy use, production, and consumption.

The ongoing changes are profound. In many energyexporting countries, domestic consumption is rising steeply.

Historically, these countries have treated energy as a cheap resource. Today, they are increasingly taking steps to remove subsidies, introduce market prices, and increase efficiency – policies that are more typically associated with energyimporting countries. BP predicts that in the Middle East, with its extensive fossil-fuel reserves, primary energy consumption will grow 77% by 2035.

At the same time, some traditional importers are tapping new sources of energy and becoming producers, changing the direction of energy flows. The shale-energy revolution in

the US is perhaps the best-known example of this shift, but it is not the only one.

The rapidly growing renewable-energy industry is another factor disrupting traditional relationships between producers and consumers. In the first half of 2014, 13% of electricity in Germany came from wind energy alone. Denmark, a country that in the 1970s was almost entirely dependent on energy imports, is now the European Union’s only net energy exporter, often generating more than 100% of its electricity needs from wind power.

Meanwhile, advances in energy efficiency are also reducing demand for traditional producers’ exports. Highly efficient buildings often can be easily heated with locally produced renewable electricity and supplied with hot water from solar collectors. The introduction of the Near Zero Energy Buildings standard for new buildings in the EU is set to reduce drastically dependence on gas for heating.

The risk is that these rapid changes will combine with destabilising geopolitics to trigger a retreat from global energy markets. If countries began to define energy security as energy independence and try to supply all their own needs, the result could be expensive overcapacity, massive price distortions, slower technological progress, and weaker economic growth.

With the need to maintain trust in the competitive, politically charged, and often unpredictable energy sector both greater than ever and more difficult than ever to meet, an international forum dedicated to addressing concerns and easing tensions could be a powerful tool. But it must have the right focus. For example, it should not aim at producing legally binding decisions. Plenty of bodies, such as the World Trade Organisation, the Energy Charter, and the Energy Community, already do an excellent job of developing rules or enforcing compliance in the energy sector.

Moreover, though such a body should be inclusive, it need

not have global ambitions; it would be impractical to try to bring everybody to the table. And while its founders should take care that it not be led or dominated by a single country or bloc of countries, there is no harm if it starts small, with only a few countries, before beginning to expand.

Indeed, the European Commission, which is working toward creating an energy union, is well placed to initiate an open dialogue with non-EU countries on long-term energy policies. The EU is the largest energy importer in the world, and it would be well served to join the discussion of its energy strategy to a conversation with the world’s main exporters. As the EU revises both its energy and foreign affairs policies, it should not miss the chance to integrate an open energy policy dialogue into its planning.

In this context, one of the commission’s traditional weaknesses – that foreign and energy policies are usually decided by individual member states – could serve as an important advantage. The commission will be seen as a facilitator of the discussion, rather than a leader or a dominant player.

Given a proper forum for ironing out disagreements, the rapidly changing energy landscape could be a source of new prosperity. The alternative is a world at risk of tensions and misunderstandings – ones that could easily jump out of the realm of energy policy into international relations and security.

Abdullah M. Al-Shehri is Governor of the Electricity & Cogeneration Regulatory Authority of the Kingdom of Saudi Arabia. Julian Popov, a former Bulgarian Minister of Environment and Water, is Chairman of the Buildings Performance Institute and a Fellow at the European Climate Foundation. © Project Syndicate, 2015 - www.project-syndicate.org

Putting public health on the map

By Christopher J.L. Murray Twenty-five years ago, the state of public health for large populations was like that of a doctor trying to treat a patient without a proper diagnosis. The diseases and injuries that cut lives short and caused widespread suffering were not rigorously tracked.

Back then, well-meaning advocates for different diseases published death tolls that helped them make the case for funding and attention. But when all the claims were added up, the total was many times greater than the number of people who actually died in a given year. And even when policymakers had accurate data, it usually included only causes of death, not the illnesses that afflicted the living.

To address this problem, Alan Lopez and I launched the Global Burden of Disease project (GBD) in 1990. Decision-makers need information about the world’s biggest health threats and how they have changed over time, across age groups, and by sex, so they can ensure that everyone has the opportunity to live the longest, healthiest life possible.

By ensuring that each death is counted just once, and by providing comprehensive statistics on the causes of ill health, the GBD can compare the impact of cancer to that of lower back pain or depression. It also enables

comparison of health-care performance among countries.

GBD’s 1990 study and subsequent revisions raised the bar for population health measurement, providing decision-makers with more reliable and useful information. It also opened the international development community’s eyes to the importance of overlooked afflictions, such as mental illness and road injuries. Donors such as the World Bank and the Bill & Melinda Gates Foundation use GBD data to guide their investments, and more than 30 countries have conducted their own burden-of-disease studies.

Countries such as Australia, Botswana, China, Mexico, Norway, Rwanda, Saudi Arabia, and the United Kingdom are using GBD findings to inform health policies. In China, the results of the GBD project, launched at a policy summit in 2013, raised awareness about the deadly impact of air pollution on the country’s population. Those findings helped shape the Chinese government’s efforts to curb the negative effects of pollution on health, and Chinese researchers are now key members of the global collaborative effort.

In Rwanda, when the GBD study revealed that indoor air pollution from cooking with solid fuel was a leading cause of death, the government launched a programme to distribute one million clean stoves to the most vulnerable households. Rwandan scientists and officials from the Ministry of Health – including the minister herself – are important contributors to the GBD. Today, the GBD is constantly improving, thanks to the efforts of more than 1,300 collaborators in 114 countries. These collaborators improve the models on which the project is built, vet the study results,

contribute new data sets, and communicate the results to media outlets, educational institutions, and decision-makers. The latest GBD study revealed that another disease seldom discussed in international development circles, lower back and neck pain, is the fourth largest cause of health loss globally. It also highlighted the rapid pace of epidemiological transition in middle-income countries and the persistence of communicable, maternal, newborn, and nutritional disorders in Sub-Saharan Africa.

But the GBD could do more to inform policy debates and spur action to improve health if it were able to provide more detailed breakdowns of data. Policymakers are accountable, first and foremost, to their constituents, whose unique needs they must meet. Estimates of local disease burdens will be essential for combating afflictions like Ebola, checking the rising toll of noncommunicable diseases in middle-income countries, and meeting the Sustainable Development Goals relating to maternal and child health in Sub-Saharan Africa.

To help decision-makers make better use of their data, the Institute for Health Metrics and Evaluation, which I head, is creating geospatial maps of disease burdens with a groundbreaking level of resolution. Creating these maps is possible thanks to methods developed by the Malaria Atlas Project, which has produced a better spatial understanding of malaria than we have for any pathogen.

Geospatial maps can pinpoint areas that are making outstanding progress, allowing us to identify communities that have done things differently from their neighbors.

These case studies can empower communities to replicate one another’s successes. One example is Cali, Colombia, which drove down homicide rates in the

1990s after the city’s mayor, Rodrigo Guerrero, tightened alcohol restrictions, introduced community-development programs in the most impoverished neighborhoods, and imposed temporary gun bans in public places.

The mayor of Colombia’s capital, Bogota, learned about the program in Cali and implemented similar measures, which have helped reduce homicides steadily in the city.

Since then, Guerrero has worked with the Inter-American Development Bank to develop programmes that help other Latin American countries reduce violence in their communities. In 2014, Guerrero won the Roux Prize for his use of data to improve health, further elevating awareness of his work. Geospatial mapping will help us identify more Rodrigo Guerreros and champion their achievements.

As the international community comes together to agree on the tools needed to finance and monitor progress toward the MDGs’ successor framework, the Sustainable Development Goals, geospatial mapping will be critical for tracking progress and indicating where course corrections might be needed. We are far beyond where we were in 1990 in terms of health measurement.

With focused effort and further innovation, we can make even more progress in the next 25 years to help the world make the most of our collective health investments.

Christopher J.L. Murray is Professor of Global Health at the University of Washington and Director of the Institute for Health Metrics and Evaluation. © Project Syndicate, 2015. www.project-syndicate.org

November 4 - 10, 2015

20 | BACK PAGE | financialmirror.com

Firm UK construction PMI offers support to Sterling Markets Report b

By Lukman Otununga, Research Analyst at FXTM

Sterling bulls gained some stability as Tuesday’s solid construction PMI announcement negated some of the fears regarding the potential slowdown in economic momentum in the UK. Despite economic data in October from the UK losing its robust touch, November has started strong and this secure construction PMI of 58.8 may add to the mounting expectations that growth in Q4 for the UK may exceed forecasts. This week’s focus for the Sterling will be the Bank of England (BoE) meeting on Thursday in which the possibility of a UK November rate hike remains slim.

Sentiment for the GBP drifts towards bullish regions and a hawkish BoE Governor Mark Carney may invite GBP bulls to challenge the 1.5500 resistance on the GBPUSD. Last week’s hawkish FOMC statement instilled WTI bulls with some upwards momentum. This commodity has enjoyed an appreciation of over $3 as expectations escalate that demand for oil may increase on the back of a hawkish Fed. Regardless of this upsurge, the central theme of oversupply will continue to enforce downwards pressures on the price of WTI in the long term. With Russia increasing oil output to post-Soviet highs of 19.78 mln barrels a day and concerns of China growth lingering on in the global markets, sentiment for WTI remains bearish. WTI bulls are already threatened and prices will most likely remain depressed as the dominant theme of a reduction in demand for oil pulls prices back to the $44.00 support.

In the late part of Tuesday’s trading session, the focus was directed to the dovish ECB chief Mario Draghi. Market participants may use his speech to sift for any additional information concerning the decision the central bank may take in December. Even though the stance in the previous ECB conference suggested that the central bank may implement further QE in December, there could be a possibility that the ECB is in standby mode in wait for the Fed to act before moving forward in 2016.

CADJPY: The CADJPY is technically bullish. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. A breakout above the 92.50 resistance may open

a path to the next relevant resistance at 94.20.

GBPJPY: The GBPJPY is technically bullish. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. As long as prices can keep above the 184.00 support, there may be an incline to the next relevant resistance at 187.50.

GBPCHF: The GBPCHF is technically bullish. Prices are trading above the daily 20 SMA and the MACD has crossed to the upside. As long as prices can keep above the 1.5100

support, there may be an incline to the next relevant resistance at 1.5400.

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)

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