Financial Mirror 2015 12 23

FinancialMirror JEFFREY SACHS

MOHAMED EL-ERIAN

A new century for the Middle East PAGE 17

Argentina’s economic ‘big bang’ PAGE 16

Issue No. 1165 €1.00 December 23 - 29, 2015

‘Electricity highway’ gets started EUROASIA INTERCONNECTOR AWARDS PRE-WORKS SURVEYS - SEE PAGES 10-11

Goodwill to All Men (including psychopaths)

By Alan Waring - SEE PAGE 7

December 23 - 29, 2015

2 | OPINION | financialmirror.com

FinancialMirror Co-op delays causing greatest harm Published every Wednesday by Financial Mirror Ltd.

EDITORIAL

www.financialmirror.com Tel. 22 678 666 Fax. 22 678 664 P.O. Box 16077, CY2085 Nicosia Publisher/Managing Editor Masis der Parthogh masis@financialmirror.com Editorial submissions: info@financialmirror.com Advertising inquiries: marketing@financialmirror.com Subscriptions: http://www.financialmirror.com/signup/index.html

COPYRIGHT

©

No part of the Financial Mirror newspaper, the Greeklanguage XÚ‹Ì· & AÁÔÚ¿, the daily XpressOIKONOMIKH electronic PDF edition or any of the contents of the website www.financialmirror.com, may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic, mechanical photocopying, recording or otherwise) without prior permission of the publishers.

Any person or company found in violation will be prosecuted and financial damages will be sought as this implies theft of the intellectual property rights of the publishers, their associates and contributing services or agencies.

The delay to appoint a new leadership at the state-rescued Cooperative Central Bank is causing the greatest harm and fuelling rumours, once again, as depositors and ordinary folk are worried and considering removing their savings from the institution.

Although Chairman Nicholas Hadjiyiannis took off one hat and put on another, that of CEO in July, replacing veteran banker Marios Clerides, this continuity was not enough to ensure stability at the bank, seen as a lender of last resort to the downsized network of 18 Co-op savings institutions.

The government and board members have been at odds for some time, with some replaced, while others, including former senior managers, are venting their anger by undermining the bank itself, that currently has the highest rate of nonperforming loans on the island.

Such sabotage by the same people who spread rumours last year, has to stop. And the only way to do that is for the government to make up its mind on the bank’s future and let the CCB run itself, lending at affordable rates to farmers,

craftsmen and SMEs, in order to get the economy starting again.

The plans announced last week, as part of the European Commission’s approval of a further EUR 175 mln recap, whereby the CCB will gradually return to public hands with share packages of 25% offered to investors and former ‘members’ over the next decade, is the first, albeit small step in the right direction.

However, the CCB has also fallen victim to the pre-election sickness that has spread across the political scene, with every ignorant MP expressing an opinion on how best to solve the economic crisis. This, in turn, has forced the single-party government into a corner, fearing to take any drastic action on any matter that may seem unpopular, just five months from the polls, jeopardising the chances of the ruling DISY party winning a fare share of the seats in the next parliament.

This means that any changes in the workings of the CCB, as with all issues related to privatisations and reforms, will have to be postponed till after the May elections.

Too bad, as these problems will continue to linger on for a further six months, simply to allow a bunch of MPs to get re-elected.

THE FINANCIAL MIRROR THIS WEEK placed with investors at CYP 2.58 a share.

Tourism growth: Tourism is expected to grow 5% in 2006, with the UK remaining the biggest market with a 50% share, said Akis Kelepeshis of the Association of Travel Agents (ACTA). Airlines have also agreed to merge the fule surcharge into ticket prices, while agent commissions may be replaced with a CYP 5

‘service charge’.

CAIR rescue: Cyprus Airways staff (Ed. Remember

them?) have won concessions, as Tourism Minister George Lillikas said the differences with unions in the take-it-or-leave-it deal were still wide, admitting that a rejection of the new rescue plan is unlikely as the government has conceded to most of the “red line” demands.

Cyta regulation: Telecoms Regulator Vassos Pyrgos said that despite liberalisation, state-owned Cyta still holds a massive 93.5% share of the mobile market, 97% of fixed telephony and 94% of Internet customers.

Blaire blunder: Cherie Blaire QC, wife of Prime Minister Tony Blaire, has caused a storm among the Cypriot community in the UK for defending the Orams couple in the property case involving Greek Cypriot land usurped during the 1974 Turkish invasion.

tariff-free import allowances for goods from new EU members Austria and Finland.

Inflation rise: The government’s new Tariff Proposals will dramatically increase the rate of inflation that will affect all sectors, said Consumers’ Association head Christodoulos Miliotis.

He said mostly food items, many of which do not have any tax, will see costs rising by up to 250% due to new levies the government wants to impose.

BOC Factors: The Bank of Cyprus factoring division, the invoice discounting service, has seen turnover rise to CYP 150 mln claiming a 75% market share, according to BOC Factors Manager Athos Kyranides.

SocGen loans: Societe Generale Country Manager Gerard Malhame said the French giant is one of the biggest lenders to the government arranging a USD 100 mln facility.

CA profits: Cyprus Airways expects to make a profit of CYP 5 mln after a decade of losses, Chairman Vasilis Rologis told shareholders, adding that debt has been reduced from CYP 160 mln in 1993 to 110 mln.

The state owns 82% of the shares and with the new stock exchange regulations, must reduce its control to 70%, considering a public issue.

10 YEARS AGO

BOC storms higher, tourism grows 5% Bank of Cyprus shares surged following a successful rights issue, helping push the CSE index higher, while tourism is expected to grow 5% in 2006, according to the Financial Mirror issue 650, on December 21, 2005.

BOC higher: Bank of Cyprus shares surged 5.5% to CYP 2.66 following the successful rights issue for 77.9 mln new shares that helped raise CYP 109 mln (EUR 190 mln). A total of 407 mln rights were exercised for 67.7 mln new shares, a subscription ratio of 87%, while 10 mln shares were

20 YEARS AGO

House to cut new tariffs, inflation set to rise The tariff wars seems to continue as parliament is expected to cut the level of tariffs requested by the government, while the new proposals are expected to boost inflation, according to the Cyprus Financial Mirror issue 141, on December 20, 1995.

Tariff cuts: The EU has expressed reservation over parliament’s desire to cut the tariffs as part of the new Customs agreement, adding that it does not want to flood the Cyprus market with European goods, but the island must also accept the increased

Like us on Facebook

Follow us on Twitter

December 23 - 29, 2015

financialmirror.com | CYPRUS | 3

CobaltAir to launch end-Q1 2016 180-seat Airbus A320 leased, more to follow as route network expands to Asia and Africa CobaltAir, the new Cyprus-based airline that plans to launch full commercial operations by the end of the first quarter of next year, has already rented premises, hired 22 staff and leased an Airbus A320, with more aircraft expected to be added to the fleet.

The low-cost airline’s CEO, Andrew Pyne, with long international aviation experience, said that the initial motivation to start the company was because of the vacuum created by the demise of former national carrier, Cyprus Airways (CAIR).

“It’s bad for the economy when the country does not have a flag carrier,” he said in an interview, adding that since he and his associates arrived on the island at the end of January, their intention was to develop Cyprus as a strong hub.

“We have initially leased a 180-seat A320 and plan to expand the fleet to include A330s to take advantage of commonality, pursuing a number of aircraft initially on lease, while future purchases also depend on the completion of the capital raising, presently underway,” he said.

Of the staff hired so far, 90% are local recruits, some from ex-Cyprus Airways, but hired on new terms.

By the time of the launch at the end of Q1, staff numbers should rise to 100 with a route network of 5-6 destinations, added Chief Commercial Officer Mike Hayden.

“Securing the Air Operator Certificate (AOC) is almost 90% complete, with the main outstanding issues being the inspection of the facilities and approving the flights,” said CEO Pyne.

The fleet expansion depends on the development of markets and in a year after the launch, by the end of 1Q 2017, the plan is to have a network of 8-hour flight routes, reaching

out as far as Asia and Africa.

For now, the company, New Age Airlines Holdings Ltd., is based in Nicosia, but plans are to move to Larnaca.

“After the demise of CAIR, fares have gone up and consumers deserve better deals,” Pyne said, adding that they will be marketing ‘value for money’.

Despite the high costs involved in operating the lucrative Cyprus-Russia route, he said that “we understand the high cost structure of the Russian routes, but we also plan to develop the off-season market, with the promotion of antiquities, inland resorts and the mountains, “not just bucket-and-spade holidays.”

Cyprus needs more aggressive promotion, in cooperation

with the Cyprus Tourism Organisation, to target “traditional” markets such as Germany, Scandinavia and Ireland, to name a few.

As regards airline alliances, CEO Pyne said these “tend to undermine the low-cost model, as the cost is staggering in terms of system integration, up to 30 mln euros, adding that the plan is to develop relationships and “intraairline” cooperation.

CCO Hayden said: “I prefer to get my loyalty awards upfront, with a good deal on the fare,” adding that Cobalt, that takes its name from the deep-blue colour identified with the Mediterranean, will also be looking to serve the business traffic.

“It is unlikely that our fares will be at the lowest end of the low-cost operators, but it will be within the rules of a level playing field,” Pyne said, explaining that airlines such as Ryanair get Cyprus government subsidies to operate certain necessary routes.

The ‘fifth freedom traffic rights’ allocated to other airlines has not given out all of CAIR’s rights to other carriers, making it more suitable for these to be allocated to a genuinely Cypriot carrier such as Cobalt.

December 23 - 29, 2015

4 | CYPRUS | financialmirror.com

Negotiators end 2015 meetings with criteria on property The negotiators of the Greek Cypriot and the Turkish Cypriot sides, Andreas Mavroyiannis and Ozdil Nami, concluded their meetings for 2015 with a discussion on the criteria relating to the property issue.

They talked at length about property, one of the core issues of the Cyprus problem, and about the planned meetings of the leaders of the two communities, President Nicos Anastasiades and Mustafa Akinci who are scheduled to meet on January 7, 14 and 29.

A statement issued after the leaders’ last meeting for the year on Sunday said they “evaluated negotiations since talks began on 15 May 2015 and expressed their satisfaction with the progress that has been achieved to date. While acknowledging that the tasks ahead remain difficult, the leaders are determined to maintain the positive momentum of the talks with their next meetings”.

The leaders, it added, “held constructive deliberations on all of the outstanding issues and provided further guidance to the negotiators”.

Economic collapse investigations progressing Investigations into the collapse of the economy are progressing steadily in a way that could be held up in court, Justice and Public Order Minister Ionas Nicolaou said.

“Investigations are progressing steadily in order to be fully completed in a way that could be substantiated in the courts”, he said assuring that upon completion, the cases will be forwarded for registration in the court, as in the case concerning ex-Laiki bank. He also said that more cases are expected to follow soon.

He added that in cooperation with the Attorney General, defendants abroad will be served a court order and in the event some of them fail to appear in Cyprus, they will take all necessary measures, including the issuance of European Arrest Warrant.

On Monday, the Attorney General’s office filed before Nicosia District Court the first criminal case against Laiki Bank, the island’s second biggest lender which collapsed in March 2013.

According to Police Spokesman Andreas Angelides, the prosecution relates to offenses against the law on market manipulation, false, misleading statements conspiracy to commit felony and keeping false accounts.

Final bids for Limassol Port to be submitted by January 19 The Transport Ministry will send the final documents of the tender for the privatisations of the commercial activities of the Limassol Port and the binding bids will be submitted by January 19, the Ministry’s Permanent Secretary Alecos Mixhaelides said.

The tenders cover three potential services concessions namely the container terminal, marine services and the multipurpose terminal.

“We will be sending the tender’s final documents later today and we will request their final offers on January 19,” said Michaelides, who is also President of the Cyprus Port Authority.

The potential bidders have dropped to 17, from the 33 that initially expressed interest.

Under the terms of the tender, the Ministry will select the highest bidder, while the process is expected to conclude by the first quarter of 2016.

BOCY has reached 80% of restructures, ELA drops further Bank of Cyprus officials have said that the lender has concluded about 80% of is targeted restructuring of nonperforming loans and that the aim is to close the year with EUR 1 bln worth of bad loans.

To date, some EUR 3 bln of bad loans have already been restructured, almost half of its target, that corresponds to about 30 big debtors.

Not among them is the Church of Cyprus, which has offered to put up land as collateral and to restructure some EUR 100 mln of its own NPLs held at the bank, similar tio two deals already concluded at the Hellenic Bank.

Meanwhile, press reports over the weekend suggested that BOCY had reached a deal with major debtors, namely the three property companies Pafilia, Zavos and Tsokkos Hotels, with two more restructuring underway.

The names of the three clients that have successfully restructured their obligations with BOCY had made headlines last year when a confidential list of the Bank of Cyprus’ top-30 borrowers with non-performing loans was leaked to the press, the Cyprus Mail reported, adding that according to the list, which represented a snapshot of outstanding loans in June 2013, the Zavos group had EUR 134 mln in unserviced exposures, Tsokkos had 172 mln and Pafilia had 90 mln.

Earlier this month, Nick Smith, the bank’s head of restructurings and recoveries, had said that the lender was at a “tipping point” in reducing bad loans after the pace of restructurings picked up in the second quarter and is considering reducing its exposure in larger loans through syndication.

“Even though the official nonperforming exposure levels will not change for about a year, those who today dismiss the progress made, will no longer be justified in doing so,” Smith said.

BOCY saw itsNPLs drop to EUR 14.2

bln or 62% of its gross loans in September from almost 15 bln or 63% last December.

Meanwhile, the Bank of Cyprus has reduced in September its dependence on the Emergency Liquidity Assistance (ELA) by EUR 230 mln to 4.17 bln by the end of November, according to figures released by the Central Bank of Cyprus. This was down from 4.40 bln at the end of October.

Since the beginning of the year, the bank reduced its dependence on ELA by EUR 3.2 bln, as at the end of December 2014, the facility stood at 7.4 bln.

CBC revoked FBME license, as owners take legal action The Central Bank of Cyprus announced on Monday that it had revoked the banking operation license of the Cyprus branch of FBME Bank, ending a long dispute over the Tanzania-based bank’s suspected dealing with money laundering, according to the US Treasury conclusions.

But the bank, which had already contested the CBC’s suspension and appealed to the Paris-based International Chamber of Commerce, responded with a statement saying that it will launch a legal fight against the “unfounded CBC license revocation.”

“FBME Limited has announced that immediate legal action is being launched to contest the revocation by the Central Bank of Cyprus (CBC) of FBME Bank’s license for its branch in Cyprus and is challenging this Decision in front of Cyprus Courts,” it said.

“The revocation, communicated in a nine-page declaration (on Monday), blames others for actions caused and taken by the CBC Board over the past 17 months, which stem from CBC’s unilateral takeover and attempted sale of FBME Bank’s branch in Cyprus. FBME rejects this Revocation of Licence in its entirety.”

“CBC’s illegal measures against FBME, of which this is the

latest, have led to lawsuits in Cyprus and abroad, exposing the Cyprus authorities to a spiral of claims for substantial damages and compensation.”

NPLs at 47.79% of all loans in September Non-performing loans (NPLs) at Cypriot banks decreased in September, Central Bank figures showed on Monday.

The Non performing Exposures (according to ECB definition) decreased slightly in September to EUR 27.329 bln from EUR 27.379 bln in August, representing 47.79% of total loans.

Restructured loans amounted to EUR 13.95 bln, of

which EUR 10.40 bln are still considered to be NPLs. Non performing business loans reached 57.02% or EUR 13.80 bln in September from a total of EUR 24.20 bln.

Household NPLs were at 56.08% or EUR 12.76 bln in September from a total of EUR 22.75 bln.

The Central Bank figures showed that the banks have recorded accumulated impairment loss amounting to EUR 9.02 bln.

December 23 - 29, 2015

financialmirror.com | COMMENT | 5

The rocky road to Turkish, Israeli reconciliation

By Barin Kayaoglu www.al-monitor.com On December 17, Israeli media outlets reported that Turkey and Israel will soon normalise relations. While this is good news for a region that only makes headlines for tragic events, actual normalisation in Turkish-Israeli relations may prove elusive.

The five-point memorandum of understanding negotiated between Turkish Foreign Ministry Undersecretary Feridun Sinirlioglu and Israeli Foreign Ministry Director General Dore Gold looks promising: Ankara and Tel Aviv would restore full diplomatic relations and exchange ambassadors; Israel would pay $20 mln to the families of the victims of the May 2010 Mavi Marmara raid; Turkey would pass a law ending all current and future legal cases against Israeli soldiers involved in Mavi Marmara; the two sides would begin negotiations on exporting Israeli natural gas to Turkey; and finally — and perhaps most important — Turkey would expel high-ranking Hamas leader Saleh al-Arouri and curtail the activities of the militant Palestinian group on its territory.

Interestingly, the Israeli blockade of the Gaza Strip seems to be absent from the agreement. Since 2010, the Turkish side has insisted that a full restoration of diplomatic relations with Israel could take place only if the Jewish state lifts the Gaza blockade. Israeli leaders, however, refuse to end sanctions against the Hamas-controlled territory as long as the Palestinian group poses a threat to their country.

Karel Valansi, a Middle East expert and columnist for the Turkish Jewish weekly Salom, thinks “the Gaza issue is still uncertain.”

Valansi told Al-Monitor, “Israel will not lift the blockade but could ease it. Will that be enough for Ankara? That is the real question.”

Gabriel Mitchell called the agreement “very good news,” but he also thinks that Gaza is the sticking point. Mitchell, a doctoral candidate in government and international affairs at Virginia Tech and the US representative of the Mitvim Institute, told Al-Monitor that “there has been some cosmetic easing of the Gaza blockade since Mavi Marmara, in particular for Turkish deliveries.”

He added, “I can’t possibly imagine that [the latest] deal went through without some conversation about Gaza and developing a mechanism to handle future disputes regarding Hamas and the Palestinians. If not, this deal could be very short-lived.”

A former Turkish diplomat, who spoke to Al-Monitor on condition of anonymity, shares that cautious outlook.

“Rather than Israel, for Turkey the big issue is Syria and Russia.” The diplomat said, “[The Turkish] side wants to find new partners against Russia and establish new sources for its natural gas needs.”

Indeed, natural gas could help to warm Turkish-Israeli relations.

Volkan Emre, founder of the World Energy Security Analysis Platform in Washington, told Al-Monitor that “Israel’s total estimated natural gas reserves under the Mediterranean Sea, including the Leviathan and Royee fields, reach 904 billion cubic meters, which far exceeds that country’s consumption.” Volkan added, “Given Turkey’s well-developed technical and institutional infrastructure on the downstream and its desire to become an energy hub, the involvement of skillful US companies such as Noble Energy on the upstream and likely US political and military backing, exporting Israeli gas to Turkey and Europe is a real possibility — despite Ankara’s disagreements with Greece and Cyprus over the latter’s exclusive economic zone.”

Valansi points out that if the Turkish-Israeli deal goes through and establishes trust between the two sides, natural gas could tie Ankara and Tel Aviv more closely to each other.

She said, “[Because] these two countries face similar threats and share mutual interests, they are forced to cooperate in many fields: the Russian presence in Syria, the threat of the Islamic State, and the worry that the nuclear deal could enable Iran to expand its reach and power in the Middle

for Turkish President Recep Tayyip Erdogan and his Justice and Development Party (AKP), Turkey and Israel could go back to where they are now.

The diplomat wants us to remember the maxim “all politics is local,” saying, “In the 1990s and 2000s, the business and political elite of Turkey and Israel were primarily centrist and progressive, and it was these people who drove the relationship. Today, secular liberals are weak and religious conservatives are strong in the two countries, so there is little public demand to improve the relations.”

In fact, some AKP constituents are already opposing a deal with Israel. Quite Turkish Foreign Ministry official Feridun Sinirlioglu addresses the media in Ankara tellingly, news of the Turkish-Israeli deal led to an uproar from the Istanbul-based IHH Humanitarian Relief Foundation, East.” Given Turkey and Israel’s economic, political and security needs, Valansi thinks “normalization is quite the aid organization that organised the flotilla to break the Gaza blockade in 2010. The religious-oriented IHH’s nine possible.”

The former Turkish diplomat is less optimistic. She activists died at the hands of Israeli naval commandoes on certainly does not expect the revival of the friendly spirit that the Mavi Marmara. On December 18, the secular and antidefined Turkish-Israeli relations from the late 1990s through AKP website OdaTV quoted IHH Secretary-General Yavuz Dede, who labeled a deal with Israel “treachery.”

2008.

The road to Turkish-Israeli reconciliation will be neither “Compared to the golden age of the relations,” she told AlMonitor, “there is not much of a relationship.” She argues easy nor pleasant. that pragmatic calculations rather than a genuine desire for reconciliation drive the anticipated thaw. If conditions Barin Kayaoglu is an independent political analyst and change and antagonism becomes more beneficial, especially consultant in Washington, D.C. www.barinkayaoglu.com

December 23 - 29, 2015

6 | COMMENT | financialmirror.com

Spanish election result raises political uncertainty ‘Credit negative’ says Moody’s, as it raises doubts over reforms and fiscal consolidation Spain’s (Baa2 positive) inconclusive parliamentary election has increased political uncertainty and raised doubts about the future government’s ability and willingness to continue with structural reforms and fiscal consolidation, a credit negative, Moody’s Investors Service said in a comment.

Forming a new government is likely to be difficult and a failure to do so would lead to a new round of elections and a prolonged phase of political uncertainty.

“The election outcome is credit negative for Spain,” said Dietmar Hornung, author of the comment.

“It ushers in a period of uncertainty that is likely to persist for several weeks. More generally, it creates an element of uncertainty around Spain’s continued structural reforms and fiscal consolidation.”

The outcome of Sunday’s elections illustrates Moody’s concerns over the Spanish government’s commitment to its ongoing reform efforts.

Notwithstanding significant progress made, recent years have also seen a sequence of missed fiscal targets, the future likelihood of which will only be increased by an uncertain electoral result. The outcome of the forthcoming negotiations will inform Moody’s assessment of the Spanish government’s creditworthiness and the resolution of the positive outlook.

The outcome has delivered a significant change from the post-Franco PP-PSOE political duopoly and from four years of PP majority government. The result also confirms the position of regional nationalist parties which support demands for a greater devolution of responsibilities from the central government to the regions. Those parties’ calls for increased autonomy add to the complexity of the political

issues facing the next government.

The positive outlook on Spain’s Baa2 government bond rating balances the country’s improving economic and credit fundamentals and reform progress against the uncertainty over future reform impetus.

Spain’s credit metrics — including GDP growth expected to peak at 3.2% in 2015, one of the strongest in the euro area this year, and the maintenance of current account surpluses — reflect the government’s efforts to address the key imbalances in the economy.

Qatar: words turned into deeds

By Dr Andrestinos Papadopoulos Ambassador a.h.

Earlier this year, the western media made a big issue about the working conditions for thousands of foreign workers employed in constructing stadia for the 2022 football World Cup in Qatar.

In an interview published in the Sunday Mail on April 19, the Qatari ambassador to Cyprus, Hussain Ahmad AlHomaid, asked to comment on these reports, said: “Qatar undertook to build the necessary infrastructure needed to host the World Cup in 2022, which shall be ready on time, if not even before…

“The Qatari government spares no effort to ensure appropriate and safe working conditions for those who are involved in the construction of the facilities needed for hosting the World Cup.” Now words have been turned into deeds. On Sunday, November 1, the Prime Minister and Minister of the Interior, Sheikh Abdullah Bin Nasser Bin Khalifa AlThani inaugurated the Labour City at Musaismeer, 14 kilometres from Doha centre and 13 km from the Hamad International Airport.

Built over an area of 1,100,000 square metres, the new Labour City can accommodate 100,000 workers and is considered a human and cultural model, which provides a suitable environment with security and safety, care and recreation areas, reflecting the concern of the State of Qatar to provide services for residents.

The Labour City is divided into two sections: the first, the entertainment and business sector comprises a commercial centre and market, a cricket ground, a theatre and four modern cinema halls. The second hosts the residential complexes for workers and contains 55 residential buildings with the capacity to house 100,000 workers, places of worship with two mosques and a large mosque for Friday noon prayer, as well as a medical clinic which was designed to deal with urgent cases and rapid examinations.

The city has also been provided with a number of public telephone booths and Wi-Fi equipped centres, giving

residents the chance to communicate with their families back home. An integrated network of surveillance cameras linked to police centres provides security and emergency response.

Most importantly, in order to strengthen the legal framework concerning the workers the State of Qatar took the necessary measures by amending its labour law.

In particular, the new labour law includes amendments to begin the application of the wages protection system, which aims at guaranteeing the payment of all wages within

the period specified by the law. Ministerial decisions also provide for the setting up of a wage protection department and determine the conditions and specifications of adequate accommodation for the workers with a view to providing more comfort, safety and health standards.

Administrative measures are targeting those who violate the law. In such a case, the granting of any new work permit and all transactions pertaining to the employer at the ministry are cancelled.

Finally, the monitoring of the companies is entrusted to labour inspectors with wide judicial authority. Any violation of the relevant provisions of the law can entail the imprisonment of the employer for a maximum period of six months and/or a penalty between 2,000-6,000 Qatari riyals (EUR 500-1,500), as well as putting his company on the black list.

Hard work over the last three years and the setting up of an adequate legal framework for the protection of the workers involved in this huge enterprise are guaranteeing a successful outcome and a bright perspective for the 2022 World Cup in Qatar.

December 23 - 29, 2015

COMMENT | 7

Goodwill to All Men but look at the scale of destruction, death and misery that he unleashed across Europe.

Some argue that the 2008 global financial collapse is attributable in part to the activities and decisions of psychopaths within the banking and finance industry. A current TV series entitled Meet the Psychopaths on UK’s Channel 5 investigates the phenomenon and among specific cases has examined two corporate CEOs, Robert Maxwell of the British company Mirror Group Newspapers (MGN) and Jeffrey Skilling of the US energy giant Enron.

Following his death in 1991, Robert Maxwell’s gigantic fraud perpetrated on MGN soon became apparent. His menacing and baleful stare and deep, gravelly voice fitted well with his awesome reputation as a bully. Part of his fraud involved share ramping by buying and selling stock between his large network of companies solely to artificially increase the share prices in a merry-go-round fashion. In fact, his corporation overall was short of liquidity and this was a way of inflating its value to impress and convince banks and other outsiders that the business was strong when it was not.

Another string to his fraudulent bow was to ‘borrow’ large amounts from the company pension fund, some GBP 460 mln in total, to pump in to his web of companies. As a result, some 30,000 MGN pensioners lost most of their pensions.

Maxwell’s persona and ruthless ‘end justifies the means’ and ‘what can we get away with?’ behaviour had all the hallmarks of a psychopath.

In November 2001, the energy giant Enron went bankrupt in what was the biggest ever corporate collapse in the USA. Nearly 4,000 employees lost their jobs and many who had retirement plans based on Enron shares also lost their pensions. In the four years leading up to the collapse, Enron shareholders lost US$ 74 bln in stock losses, of which over half was attributable to a mega fraud perpetrated and directed by the three top Enron executives – Kenneth Lay, Jeffrey Skilling and Andrew Fastow. The details of their fraud are complex but in essence it involved inflating the company’s share values and the price of energy by false means, including high risk ‘forward accounting’ mechanisms that treated prospective and predicted future revenues as if they were actual cash flows. The top three executives were convicted of multiple classes of fraud, insider trading, money laundering and conspiracy and sentenced to very long jail terms. In classic psychopathic fashion, none expressed any remorse, guilt or empathy for their victims and sought to pretend that everything they had done was above board and normal business practice.

THE RISK WATCH COLUMN

By Dr Alan Waring ‘Honi soit qui mal y pense’. This Old French motto meaning ‘may he be shamed who thinks evil of it’ is written into the coat of arms of Her Britannic Majesty’s Government on the front cover of every British passport. The motto implies that it is incumbent on each individual not to harbour evil thoughts (and, by extension, do evil acts) otherwise they bring shame on themselves. But, is the sanction of shame always enough in itself to deter evil?

Moreover, how easy is it to spot an evil person and what can be done realistically to thwart them?

Meet the Psychopaths In essence, evil is the hallmark of a psychopath. The term ‘psychopath’ conjures up images of diabolical, murderous individuals throughout history such as the Roman emperor Caligula, Adolf Hitler, Pol Pot and Saddam Hussein, gangsters such as Al Capone and The Krays, and serial killers such as Dennis Nilsen, Ted Bundy and Peter Sutcliffe.

Although violence, torture and murder do feature in many of these high profile cases, whether by their own hand or through control of other perpetrators, it is not true that all psychopaths engage in or direct physical violence.

Individuals with psychopathic personality disorders are all around us in all sectors of society, walks of life and workplace. Very few ever display any violence or threats of violence and may go unnoticed, save perhaps for their tendency to be ruthless, manipulative, pushy and lacking in any kind of integrity or conscience. A psychopath is anyone who causes harm to others without self-recognition of his or her harmfulness, no empathy for those harmed, and no conscience, remorse or guilt about it.

Many individuals in society display some of the characteristics of psychopathy. But, is the obnoxious loudmouth, for example, who bulldozes his way through all objections to secure what he wants, necessarily a psychopath? Forthright, assertive and determined individuals are not all psychopaths. Big business, political parties and their supporters adore such people. Just take a look at some of the current political demagogues, such as Donald Trump in the US, Nigel Farage in the UK and, recently in Greece, Yanis Varoufakis. Without a doubt, all three are forthright, assertive and determined. However, the more relentless, manipulative, domineering, grandiose, controlling, ruthless and devoid of conscience is the behaviour, the more likely it is that the individual is psychopathic. Are persistent assertions, coupled with selective facts and fictitious data, about the alleged threat from all muslims to the United States, or from all migrants to the UK or from all foreign creditor governments to Greece, merely normal political exaggeration or the product of something psychopathic?

Persistently lying or creating fictions without conscience or concern about the harmful consequences is one of the defining characteristics of psychopathy.

Dr Robert Hare is an acknowledged expert on psychopathy who has produced a 20-point list of characteristics. If an individual exhibits more than half of these persistently, they are likely to be a psychopath and the more they exhibit the more certain is the diagnosis. High on the list are displaying a glib and superficial charm, shallow insincere emotions, confidence trickery and manipulativeness, pathological lying, grandiose self-worth and narcissism, scapegoating and blaming others for their own failings, and reacting badly to rejection. Add to these a callous disregard and lack of empathy for others, and a lack of any sense of remorse, conscience or guilt for their appalling behaviour and the harm it has caused, and the person is well on the way to a textbook diagnosis.

Corporate Psychopaths Undetected and unchecked, psychopaths are likely to cause others, often large numbers of others, significant if not great harm. One of my associates, Dr Mike Walton, has made a special study of toxic leadership in corporations and what

Social Media Psychopaths

Top to bottom - Current political demagogues, such as Donald Trump, Nigel Farage and recently Yanis Varoufakis are forthright, assertive and determined. However, the more relentless, manipulative, domineering, grandiose, controlling, ruthless and devoid of conscience is the behaviour, the more likely it is that the individual is psychopathic.

may be termed ‘boardroom psychopaths’. Dare any government or organisation take a risk that a particular forthright, assertive and determined ‘wunderkind’ in their ranks is not in fact masking an underlying psychopathy?

Psychological profiling may be essential to avert disaster.

Remember, Hitler was only in power for a paltry twelve years

Social media and the internet have given rise to the blog and twitter phenomena, whereby large numbers of individuals post their views on just about anything. Some posters include ‘trolls’ i.e. those who use the facility to vent their anger and frustrations and, in particular, to attack the integrity of other posters and vilify them in every way possible. In some cases, victims have been driven to suicide.

Moreover, the vile rants that can be read on almost any of these facilities are often generalised attacks on whole classes of person whom the poster hates for some reason. Nowadays, for example, muslims are being vilified wholesale on blog columns and being blamed for all the world’s problems.

Those who vilify and promote hatred of and harm to others, especially people they have never met, display a strong degree of abnormal behaviour and personality disorder. There is a close association between psychopathy and ethnic and religious bigotry and extremism. The sheer hatred vented in their relentless blog outpourings has revealed a whole class of psychopaths previously hidden from view. These may well be the mirror images of those other psychopaths, the terrorists such as Daesh/IS. Goodwill to all men is thus a fragile and elusive goal until and unless effective ways are found to control and treat all manner of psychopaths.

Dr Alan Waring is an international risk management consultant who has written the Risk Watch column since 2004. He is a Fellow of the Royal Society for Public Health.

His latest book Corporate Risk and Governance is at www.gowerpublishing.com/isbn/9781409448365. Contact waringa@cytanet.com.cy. ©2015 Alan Waring

December 23 - 29, 2015

8 | COMMENT | financialmirror.com

Patrick Skinner’s CHRISTMAS MISCELLANY

FOOD, DRINK and OTHER MATTERS with Patrick Skinner

At this time of the year when we talk of “Peace and Goodwill to All Men”, one is all too aware of conflicts close at hand, with little hope of settlement. In my lifetime, it was actually considered praiseworthy to give up a comfortable existence in England to go and fight in “somebody else’s war” for altruistic reasons. The last of these may well be the Spanish Civil war of 1934 – 1939. The renowned writer Laurie Lee wasn’t one of the romantics who went to fight, he simply happened to be travelling in Spain when it started.

Lee is probably best known for his three autobiographical books: “Cider with Rosie” (1959); “As I Walked out one Summer Morning” (1969) and “A Moment of War” (1991). The first is an account of rural life in Gloucestershire after World War I; the second covered his journeying to London and thence to Spain, where in 1934 the Civil War started. The third volume concerns his time in that terrible war. All three were re-published by Penguin in an excellent edition in 2014 at GBP 14.99.

Lee was a marvellous writer whose ability to provide a sense of place is to be admired – and envied by other writers. His eye witness accounts of Spain in turmoil are writing of the highest order; absolutely riveting. His life was extremely interesting and there is an authorised biography by Valerie Grove, “Laurie Lee: The Well-loved Stranger” (Viking GBP 20, pp560), which, with style, puts into factual correctness some of the somewhat embellished accounts of his life.

Laurie Lee was more than an Hispanophile, he loved France, too, and its wines. Burgundy was his thing and he expressed his feeling in this piece of seasonal poetry, entitled “Corkscrew Carol”: Blest bright names of Burgundy, Light the candles on my tree.

Meursault, Chablis, Chambertin, Raise in me the Christmas man.

Raise in me love dead and gone Pommard, Beaujolais and Beaune.

Ashes crowned, with cloth of sack on, Let me now rejoice in Macon.

I’ll rejoice and hang the holly, Hang expense and melancholy.

Hang your bright Burgundian names Round the tree in bottled flames.

Holy Night and nuit si jolie, Nuits St. George and sweet Vin Volnay

“Christmas comes but once a year” So goes the old saying. Perhaps it is just as well, what with the huge array of feasting on offer in the hotels, restaurants and tavernas. Getting through it without putting on weight or having severe indigestion (to say nothing of hangovers) is the problem. But it wasn’t always like this.

As a person of, shall we say, mature years, I remember Cyprus when the life was simple, and there was not a lot of money about. Christmas was a modest festival, mainly religious (and at that a very secondary celebration to Easter). Such Father Christmases as there were, were the work of British service people, a practice regarded with amusement and resignation

by Cypriots.

A Cyprus Mezze cost a pound and the wine that went with it, out of a large jug, was a shilling or two a litre.

If you made further visits to the same taverna and you became family. The hospitality was boundless, and the more remarkable because the providers weren’t rich.

There were no supermarkets or Woolworth stores. The first modern hotel in Paphos was not even a thought in the minds of the Michaelides family. Coral Bay was the preserve of sheep, goats and a shepherd or two. Moving your wine drinking up-market meant Othello and a few others at less than 50 cents a bottle.

I don’t think anyone could have foreseen the day when, for a New Year’s Eve dinner at a leading hotel, you would pay 100 euros or more, per person, for a huge choice of dishes. Not a display of Mezedes, but an array of international delicacies, created and prepared by internationally experienced chefs lured from great hotels and restaurants around the world.

Nor could anyone have foreseen, even twenty years ago, some of the finest wines, from all the major wine producers of the New World and the Old, coming in to Cyprus. Or of more than one hundred good wines of Cyprus, getting better every year and competing not only with imports, but in markets overseas as well.

Festive Eating at Home For those of us on a budget, or with a lot of people to cater for, simple recipes of food-thatfills are welcome. The fresh, tasty, pig’s liver which we enjoy in our tavernas is the basis of this very enjoyable dish.

Patrick’s Party Paté – it’s a Terrine, really….

This is a good, meaty affair, with the ingredients coarsely minced/chopped.

Ingredients to fill a Paté terrine or 30 cm long bread/cake tin.

225 g streaky bacon 450 g pig’s liver 450 g of pork sausage meat 150 g of Cyprus lountza, ham or bacon, chopped 1 onion and 2-3 garlic cloves, finely chopped 1 egg, beaten Pinch of thyme and sage, half tsp powdered ginger 1 tbsp Fino sherry or brandy Salt and pepper

Method 1. Heat oven to 180C Line the terrine dish, or tin with the streaky bacon.

2. Mince or blend quickly the liver. Transfer to a large mixing bowl.

3. Add all the other ingredients and mix well with a wooden spoon.

4. Transfer the mixture to the bacon-lined terrine and cover tightly with aluminium foil.

Put a heavy lid on top.

5. Fill a large baking tray half way up with water and stand the terrine in it.

6. Place the tray in the centre of the oven and cook for about one and half hours.

7. Remove from the oven, take off lid and put a heavy weight on top of the foil (I use a clean brick) and leave to cool.

8. When cool, you may remove the foil, decorate the top with bay leaves, thin slivers of red pepper and some peppercorns or juniper berries. Then dribble over a little warmed thick stock or aspic which will cool and jellify.

Serve as a starter or party opener with dishes of green and black olives, gherkins, a dip with potato crisps and a glass of chilled Fino, or a fruity red wine. Then, modestly, accept the praise.

HAM IN CREAM SAUCE Ingredients 450g (1 lb) cooked ham, sliced 175 ml (6 fl oz) dry sherry 25g (1 oz) butter 1-2 teaspoons of flour 150 ml (1/4 pint) single cream Pepper 110g (1/4 lb) grated Cyprus Tilsit or Cheddar cheese

Method 1. Marinate the ham in the sherry for three or four hours.

2. Take it out of the marinade, pat it dry and warm it in the hot butter. Remove it from the pan and keep it warm.

3. Add the flour to the pan and stir it well, off the heat, to make a smooth paste.

4. Add the sherry and return the pan to the heat.

5. Stir in the cream and some freshly-ground pepper.

6. Stir the sauce well and spoon it over the ham.

7. Sprinkle the grated cheese on top and brown it under the grill for a moment or two.

Serve with a glass of good red wine, like a Cyprus Cabernet Sauvignon such as AES Ambelis, or Fikardos. Imported: Louis Eschenauer, from France’s Pays d’Oc, or Chilean.

I wish all my readers a very Happy Christmas. See you once more this year!

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

December 23 - 29, 2015

financialmirror.com | COMPANY NEWS | 9

Cigar Lounge opens at Limassol Marina Luxury goods retailer EK Luxury Group has opening its Cigar Lounge at Limassol Marina.

The lounge has distinctive elements designed to offer a tranquil sanctuary, where cigars and quiet conversation can be enjoyed by visitors. Hardwood floors, luxury seating, a state of the art ventilation system and soothing colours are a few of the features.

The 10 square metre walk-in humidor, with top of the line offerings of premium cigar brands, includes Cohiba, Montecristo, Partagas, Trinidad, Romeo Y Julieta, Davidoff. A range of wines and spirits is also displayed on the second floor.

The Cigar Lounge is staffed by welltrained personnel and operated by EK Luxury Group that recently opened the shops of Graff jewellery, Halcyon Gallery, Zilli fine garments for men and Shiraz carpets at the waterfront development.

Limassol Marina is the first superyacht marina in Cyprus, combining dining, shopping, spa, fitness and cultural facilities with elegant residences in the heart of a vibrant city. Luxury apartments are ready to move into and the first exclusive villas with private berths or direct access to the beach have been delivered to their owners.

For the Cigar Lounge, call 357 25 051 270.

Cyprus Shipping Chamber donation to “One Dream, One Wish” charity The Cyprus Shipping Chamber has donated EUR 10,500 to the “One Dream, One Wish” charity which provides assistance to the children suffering from cancer and related illnesses, an amount raised from the proceeds of the “Beach Volley” Charity Tournament organised by the Shipping Chamber among members in September.

New Taco Bell opens in Nicosia The PHC Franchised Restaurants Group has oponed the fourth Taco Bell outlet in Cyprus, this time on the busy Themistocles Dervis street in Nicosia. The other three, serving the popular Burritos, Tacos, Nachos, Quesadillas and Crunchwraps are in My Mall Limassol, the Mall of Cyprus in Nicosia and the Kings Avenue Mall in Paphos.

December 23 - 29, 2015

10 | ENERGY | financialmirror.com

EuroAsia Interconnector enters final Three studies awarded that pave the way for implementation phase 2,000MW capacity from Israel to Europe via Cyprus and Crete The EuroAsia Interconnector, the 1,518 km subsea power cable connecting the Israeli, Greek and Cypriot power grids to continental Europe, entered its final stage on Friday with the project promoter awarding three studies that will pave the way for the pre-works phase, leading to its implementation and commissioning.

During a ceremony at the European Parliament Office in Nicosia, the EuroAsia Interconnector officially awarded the three studies to two Italian companies, CESI S.p.A. and G.A.S. S.r.l, both leaders in their respective fields. The studies are for the technical design, the reconnaissance study for the optimum route and an environmental impact study. All of them are expected to be complete during 2016.

A total of 35 expressions of interest were submitted while the final selection took place in September after a thorough and transparent process, as defined by the terms and conditions of the competition.

The project was initially announced in January 2012 and will have a capacity to transmit 2,000 megawatts in either direction, ending the electricity isolation of Israel and Cyprus and parts of Greece, enhancing the Trans-European network of electricity grids, while contributing to the better utilisation of renewable and low-carbon emission sources of energy.

The discovery of vast natural gas deposits in the eastern Mediterranean within Cyprus, Israeli and Egyptian maritime zones that are expected to be on stream by the end of the decade, has also contributed to the importance of this TransContinental project that will effectively help reduce the carbon emission rates of the producer and consumer

Seated from left: Gianluca Marini (CESI S.p.A), George Killas, Project Director; Nasos Ktorides, CEO; Athanasios Stivaros, Technical Director; Enrico Sasi, Sales Manager (GAS S.r.l). Standing from left: Elias Fotopoulos, Ambassador of Greece; Andreas Kettis, Head of the EP Office; Transport Minister Marios Demetriades; Virginia Manassakis, Deputy Energy commissioner of Crete

national grids linked to this “energy highway” project.

On November 18, the European Commission released a revised list of 195 Projects of Common Interest (PCI) across the EU that included the EuroAsia Interconnector, based on their “significant benefits in market integration and enhancing competition, improve security of energy supply and reduce CO2 emissions.”

This project also offers significant economic and geopolitical benefits to the involved countries and

contributes to the European Union’s target for 10% of electricity interconnection between Member States.

During a ceremony held in cooperation with the European Parliament Office in Nicosia, held in the presence of Cyprus Transport Minister Marios Demetriades, the project’s CEO, Nasos Ktorides, and Project Director, George Killas, signed the commissioning contracts for the three surveys on the environmental impact, technical design and route of the project to the winning companies.

Prosperity and security of three countries and an entire continent

By George Killas Project Director, EuroAsia Interconnector This is a special moment. A moment that marks four years of intense planning, hard work and determination. Today, the countries of Israel, Cyprus and Greece and the European Union celebrate another decisive step towards the realisation of a dream. A dream that in January of 2012 began as just three connecting lines on a map.

Since the EuroAsia Interconnector project was publicly announced, we have had to deal with many challenges. This is an enormous, multidimensional project that stretches the limits of technology, therefore necessary estimate adjustments and modifications of our original planning were dealt with several times. But we kept our determination, we focused on our goal and here we are today; acknowledged by the European Union as a Project of Common Interest (PCI). With the European Union’s support we have reached today’s milestone by assigning these three important studies to two world-known organisations.

We are happy to acknowledge that the

EuroAsia Interconnector may become famous for its magnitude and advanced technology, but what is at the heart of this project is the prosperity and security of three countries and an entire continent.

The project benefits are real and tangible.

They are in line with the European and national energy policy and targets. They include a significant reduction in CO2 emissions, integration of Renewable Energy

Sources and increased security of supply.

Most importantly, the project ends the energy isolation of Cyprus, the only member of the European Union that remains fully isolated without electricity interconnection.

At the same time, it is important to note that the EuroAsia Interconnector ends the energy isolation of Crete and Israel.

The project will essentially create an electricity highway between Israel-CyprusCrete-Attica, with an uninterrupted, multidirectional flow of energy.

From early on, the European Union acknowledged the significance of the project by including it in the first list of PCIs. Furthermore, the positive assessment of the project’s socioeconomic benefits by ENTSOE lead to the project’s inclusion in the European Ten-Year Network Development Plan 2014-2020. We are very proud that the EuroAsia Interconnector has been included in the second PCI list and is among the few projects suggested for inclusion in the Electricity Highway programme.

Carrying out a project of this magnitude demands a team of people dedicated, committed and well organised. It also requires close cooperation with all involved organisations, authorities and highly specialised external consultants. The Project Team and I are grateful for this close and

smooth cooperation and their support which enabled us bring the project to this maturity level. I can assure you that, we will continue implementing this project with appropriate diligence and a high level of responsibility respecting the European and National Regulations.

Following the approval for funding from the Connecting Europe Facility an international competition was announced and uploaded to the EU’s website. The competition carried out with complete transparency and attracted the interest of 35 International well known organisations. We are grateful and would like to thank each and every one of them.

We would like to congratulate Gianluca Marini, Solutions and Services Division Director of CESI for the technical and technological study and the environmental studies, and Pietro Basciano, CEO of G.A.S. for the reconnaissance survey .We are certain that these companies will not only meet our standards but also add considerable value to this project as they have previous experience in the area of HVDC submarine interconnections.

After the completion of these studies we can proceed forward to the pre-works phase which leads to the implementation of this project. This will be our next move.

December 23 - 29, 2015

financialmirror.com | ENERGY | 11

stage prior to pre-works phase Also present were Andreas Kettis, Head of the European Parliament Office in Cyprus and the ambassadors and diplomats from Greece, Israel and Italy.

The ambassador of Greece to Cyprus, Elias Fotopoulos, conveyed the message of the Minister of Energy Panos Skourletis underlining the significance of the EuroAsia Interconnector for the country and he emphatically stated that the Greek government wholeheartedly supports the project.

The contract for the “Technical/Technological Study for the Design of the EuroAsia Interconnector” was signed by George Killas and Gianluca Marini, Solutions & Services Division Director (CESI S.p.A).

The contract for the “Reconnaissance Survey to Determine the Preferred Route for the EuroAsia Interconnector” was signed by Athanasios Stivaros, Technical Director of the EuroAsia Interconnector and Pietro Basciano, CEO (GAS S.r.l).

The contract for the “Environmental Studies / Environmental Impact Assessment Study (EIA) for the Construction of the EuroAsia Interconnector” was signed by Nasos Ktorides and Gianluca Marini, Division Director (CESI S.p.A).

After the signing ceremony, Gianluca Marini said that “we are excited to be involved with this ‘electricity highway’ that will help the united European energy market cope with an increasingly variable and decentralised electricity supply and flexible electricity demand. The technical survey for the design of the EuroAsia Interconnector, as well as the environmental impact study awarded to CESI S.p.A will also prove the capability of European-made innovation and selfreliance in a highly competitive global market.”

Pietro Basciano of GAS S.r.l added that “the reconnaissance study to determine the preferred route of the EuroAsia Interconnector involves one of the most challenging sub-sea terrains of the Mediterranean. And so, this in itself is a challenge to us and we thank the project promoters for choosing us for this vital aspect of the Interconnector.”

The cable is expected to be laid at a depth of up to 2612

Seated from left: Gianluca Marini (CESI S.p.A), George Killas, Project Director; Nasos Ktorides, CEO; Athanasios Stivaros, Technical Director; Enrico Sasi, Sales Manager (GAS S.r.l). Standing from left: Dr. Vladimir Podshivalov, Senior Specialist Business Development, Israel Electric Corp.; Dr. Tal Katz Head of the Planning, IEC; Andreas Kettis, Head of the EP Office; Marios Demetriades, Minister of Transport; Sami Abu Janeb, Counselor and Deputy Head of Mission, Embassy of Israel

metres below the sea and the partners are considering expanding the project after its completion in order to double its capacity.

Nasos Ktorides, the driving force behind the project, said that “the fact that the EuroAsia Interconnector fulfils the general criteria of the Projects of Common Interest (PCI) plan and has been proposed by the European Commission to be labelled as an electricity highway, proves the significance of the project and the beneficial impact it will have on future generations of European consumers seeking cheaper, efficient and low-carbon emission energy.” It is estimated that the expected social economic benefit from the EuroAsia Interconnector will be 10 bln euros.

George Killas added that the project has been assessed by ENTSO-E based on the predefined methodology for Cost

Benefit Analysis (CBA) with positive results, and has thus been included in the Ten-Year Network Development Plan (TYNDP) 2014-2020. The positive assessment of the project is an important condition for further support for its implementation by the EU, since significant benefits arise from the implementation.

Work on the initial 329-kilometre cable link between Israel and Cyprus is expected to begin in 2017 and be completed in 2019. The second phase will connect the island of Crete to Attica in mainland Greece in 2020 and the third and final phase will connect the cable from Cyprus to Crete with a view of full implementation of the “electricity highway” by 2022.

The expected cost of step one and step two of the project is 1.5 bln euros and will be undertaken in full by EuroAsia Interconnector.

This project was born out of an urgent necessity and love for one’s country

By Nasos Ktorides Chief Executive Officer, EuroAsia Interconnector Even though the EuroAsia Interconnector cable is going to be piercing Poseidon’s kingdom as deep as 2,000 meters and over a distance of more than 1,500 kilometers, it does not seek to compete but to help countries and people connect and prosper.

This project was born out of an urgent necessity and love for one’s country. This is why when it was first announced it may have sounded like a romantic idea. In January 2012, we simply said that we wanted to connect three countries lacking the necessary infrastructure, with an electrical cable buried in the sea. The skeptics and the cynics, justifiably, were exclaiming “How are you going to get over this obstacle and then the next and then all the other obstacles you are bound to face?”

But we knew that as long as we kept our sights fixed on our goal, each obstacle will become a learning experience and just another stepping stone. Today’s event is a testament of our determination to keep moving forward.

I am extremely happy and proud to be here at this historic juncture of human

intelligence and creativity. Our ambitious idea, which during these four years became

the leading project of the European Union, is about to take one more step towards realisation.

The assignment of these three studies signifies the final stage before implementation. I congratulate the two successful, globally renowned, companies GAS and CESI. I am certain you will exceed our expectations.

Such an enormous project requires an orchestrated collaboration between many institutions. Therefore it was critical that we join forces only with the best. We know that these two companies possess a high level of expertise, proven hands-on experience and an excellent track record.

I would like to thank the European Union for embracing this project as its own and the governments of Cyprus, Greece and Israel for their constant support and encouragement. I also would like to express my deepest appreciation to all our international consultants for infusing the project with their expertise and care.

Much deserving kudos to the European Parliament Office in Cyprus for being such a gracious co-organiser.

And last but most definitely not least, I am grateful to my colleagues George Killas, our tireless Project Director, and Athanasios Stivaros, our diligent Technical Director.

December 23 - 29, 2015

12 | PROPERTY | financialmirror.com

House price boom accelerates Surge led by Europe, North America, and some parts of Asia-Pacific

The world’s housing markets continued to surge during the year to Q3 2015, and the boom now includes most of Europe, North America, and some parts of Asia.

The five strongest housing markets in Global Property Guide quarterly survey were Qatar (+16.42%), New Zealand (+14.86%), Hong Kong (+12.64%), and two European countries: Sweden (+11.26%) and Iceland (+9.24%).

The biggest y-o-y house-price declines were in UAE (-14.1%), Russia (-13.38%), and Egypt (-12.48%).

During the year to Q3 2015, house prices rose in 28 of the 41 world’s housing markets which have so far published housing statistics, using inflation-adjusted figures.

The more upbeat nominal figures, more familiar to the public, showed house price rises in 30 countries, and declines in 11 countries.

During the year to Q3 2015, 22 housing markets showed stronger upward momentum, while 19 housing markets showed weaker momentum. Momentum is a measure of the “change in the change”; simply put, momentum has increased if a property market has risen faster this year than last (or fallen less).

Inflation-adjusted figures were used throughout this survey, which covers the period till end of the third quarter of 2015.

Europe’s price boom continues Four of the ten strongest housing markets in the survey at www.globalpropertyguide.com were in Europe. Overall, 15 of the 20 European housing markets for which figures are available in Q3 2015 showed rising house prices compared to the same period in the previous year.

Sweden’s housing market continued to soar, with house prices surging by 11.26% during the year to Q3 2015, the highest y-oy rise since Q2 2006. This can be attributed to very low interest rates and a shortage of housing supply. House prices increased 3.83% q-o-q in Q3 2015.

During Sweden’s housing boom from 2000 to Q2 2008, house prices skyrocketed

by 71%, inflation-adjusted. After a short-lived decline from Q3 2008 to Q1 2009 due to the global financial meltdown, residential property prices started to rise again in Q2 2009. There was a dip from Q4 2011 to Q3 2012 amidst a sharp slowdown in economic growth, but house price growth resumed in Q4 2012 and price rises have been continuous since then. The Swedish economy is expected to grow by a modest 2.75% this year, up from growth rates of 2.3% in 2014, 1.3% in 2013, a decline of 0.3% in 2012, and growth of 2.7% in 2011, according to the IMF. Ireland’s residential property prices rose by 9.24% during the year to end-Q3 2015, down from y-o-y increases of 14.52% in Q3 2014. On a quarterly basis, Irish house prices increased 4.93% in Q3 2015.

The Irish economy is now the fastestgrowing economy in the EU, with GDP growth of 5.2% last year, after lacklustre growth of 1.4% in 2013, 0.15% in 2012, 2.6% in 2011, and 0.4% in 2010. The Irish economy is expected to grow by a healthy 4.8% this year. Ireland is considered by some to be Europe’s austerity star performer, having introduced structural reforms early in the crisis and it is, according to this narrative, now reaping the benefits.

Romania’s housing market also turned around strongly, despite the ongoing political crisis which led Prime Minister Victor Ponta to resign amidst corruption scandals. The average selling price of apartments rose by a record 7.57% during the year to Q3 2015, in sharp contrast with the decline of 1.41% during the year to Q3 2014. House prices increased 3.76% q-o-q in Q3 2015.

Demand is rising fast. The value of real estate transactions almost quadrupled in 2014 to EUR 1.2 billion from the previous year, according to PwC Romania. Residential construction activity is also recovering, with residential building permits rising by 5.2% during the first three quarters of 2015 from the same period last year, according to the National Institute of Statistics (NIS). The Romanian economy is expected to grow by 3.4% this year and by 3.9% in 2016, after GDP growth of 2.8% last year, 3.4% in 2013, and o.6% in 2012, according to the IMF. Estonia saw the average price of dwellings in Tallinn rise by 6.26% during the year to Q3

2015, after y-o-y increases of 15.4% in Q3 2014. House prices in Tallinn increased 0.56% q-o-q in Q3 2015.

Other strong European housing markets included Iceland, with house prices rising by 5.27%, Norway (4.04%), UK (3.64%), Netherlands (2.75%), and Lithuania (2.43%).

All, except Norway, saw positive quarter-onquarter growth rates in the latest quarter. Of these, only in Norway did housing prices rise more y-o-y to Q3 2015. European housing markets with minimal house price rises included Latvia, up 1.95% during the year to Q3 2015, Zagreb, Croatia (1.73%), Slovak Republic (1.43%), Cyprus (0.52%), Spain (0.49%), and Portugal (0.03%). All saw positive quarterly growth during the latest quarter.

Europe’s weakest markets Russia remains the second weakest housing market in the survey and experienced Europe’s biggest annual house price decline. Residential property prices plunged 13.38% y-o-y to Q3 2015, worse than last year’s decline of 5.68% during the year to Q3 2014. House prices dropped 3.26% during the latest quarter.

Russia’s housing market continues to suffer from the country’s financial crisis, ultimately unleashed by the Ukraine conflict and by falling oil prices. Russia’s currency has collapsed, and interest rates are high.

Russia’s economy has entered its first recession since the 2009 financial crisis, with GDP contracting by 4.1% in Q3 2015 after declines of 4.6% and 2.2% the previous two quarters, according to the Federal State Statistics Service (Rosstat). Overall, the economy is projected to contract by 3.8% this year, after growth of 0.6% in 2014, 1.3% in 2013, 3.4% in 2012 and 4.3% in 2011, according to the IMF. From the perspective of a US$ buyer the price decline has been much greater, since the Rouble has lost half of its value against the U.S. dollar, from an exchange rate of RUB 33.12 = US$1 in November 2013, to RUB 66.28= US$1 in November 2015.

In Ukraine’s Kiev, the average prices of new residential properties fell by 5.5% during the year to Q3 2015, a sharp improvement from the decline of 36.12% y-o-y to Q3 2014.

Quarter-on-quarter, house prices fell slightly, by 0.61% in Q3 2015.

In an effort to curb inflationary pressures, Ukraine’s central bank raised the benchmark interest rate from 19.5% to 30% in March 2015, the world’s highest. However, the central bank has recently reversed its monetary policy by cutting the key rate to 27% in August 2015 and to 22% in September 2015, amidst a faltering economy.

The hryvnia has lost almost two-thirds of its value against the U.S. dollar in recent months, from an exchange rate of UAH8.2507 = US$1 in January 2014, to UAH21.6765 = US$1 in October 2015.

Inflation stood at 46.4% in October 2015, having peaked at 60.9% in April 2015 after a plunge in the national currency and an

increase in household utility bills. The economy is expected to shrink 9% this year, after contracting by 6.8% in 2014 and 0.03% in 2013, according to the IMF. Other weak European housing markets included Greece, with house prices falling by 4.35%, Macedonia (-4.02%) and Finland (0.20%). Both Greece and Finland performed better y-o-y to Q3 2015 than the previous year.

Asia saw strong price rises House prices rose in six out of ten Asian markets, and seven showed an improved performance on the previous year.

Hong Kong had the highest housing price rises in Asia and was the third strongest housing market in the global survey, with residential property prices surging by 12.64% during the year to Q3 2015, a sharp improvement from the 1.76% y-o-y increase during the previous year to Q3 2014.

Housing prices rose by 1.12% q-o-q during the latest quarter.

December 23 - 29, 2015

financialmirror.com | PROPERTY | 13

further in Q3 2015 rules, an improvement from the annual rise of 2.15% during the year to Q3 2014 and the biggest y-o-y rise in the past seven years.

House prices increased by 0.72% q-o-q during the latest quarter.

Half of Asia continues to lose steam.

House prices fell in four of the ten Asian markets for which figures were available in Q3 2015.

Singapore’s housing market continues to struggle, with house prices falling by 3.62%, its eighth consecutive quarter of house price falls. House prices fell by 1.06% q-o-q during the latest quarter.

Taiwan’s nationwide house prices dropped 2.95% during the year to Q3 2015, the second consecutive quarter of y-o-y price falls since Q2 2009, due to the government’s recent housing market cooling measures.

This was in sharp contrast with the increase of 3.42% y-o-y to Q3 2014. House prices dropped 2.4% during Q3 2015.

Indonesia’s housing market remains weak, with residential prices in the 14 largest cities falling by 1.49%, the third consecutive quarter of y-o-y price falls since Q3 2012, and contrasting with the annual rise of 2.77% a year earlier. House prices fell by 0.67% during the latest quarter.

Vietnam’s housing market has been stabilising, with house prices falling by just 0.06% y-o-y to Q3 2015. House prices were unchanged during the latest quarter.

North America remains strong

Japan’s house price rises continue to be spectacular, with the average price of existing condominiums in Tokyo rising by 8.97%, up from the meagre growth of 0.39% the previous year. Residential property prices rose by 1.98% q-o-q in Q3 2015.

The Philippines’ housing market remains strong. The average price of 3-bedroom condominium units in Makati CBD rose by 5.41% during the year to Q3 2015, compared to 3.58% during the year to Q3 2014.

Housing prices increased 1.27% q-o-q during the latest quarter.

China’s housing market has made a strong comeback, with the price index of second-hand houses in Shanghai rising by 5.07% during the year to Q3 2015, in contrast to a y-o-y decline of 0.45% the previous year. During the latest quarter, house prices in Shanghai rose by 2.21%.

Thailand’s housing prices rose by 3.4% during the year to Q3 2015, a slight improvement from the annual growth of 2.15% the previous year. House prices increased 3.15% during the latest quarter.

South Korea’s nationwide housing purchase price index rose by 3.4% amidst low interest rates and relaxed mortgage lending

The U.S. housing market had healthy growth, with the S&P/Case-Shiller seasonally-adjusted national home price index rising by 4.96% during the year to endQ3 2015, after a rise of 3.02% during the year to Q3 2014. Also stronger was the Federal Housing Finance Agency’s seasonallyadjusted purchase-only U.S. house price index, which rose by 5.6% y-o-y in Q3 2015, up from an annual increase of 2.95% in Q3 2014. Both indices were adjusted for inflation, as are other figures used in this survey.

Canada’s housing market remains robust, despite repeated market cooling measures.

House prices in the country’s eleven major cities rose by 4.57% during the year to Q3 2015, up from a y-o-y rise of 3.31% during the same period last year, and the biggest annual increase since Q3 2010.

During the latest quarter, house prices increased 2.89% q-o-q.

Rest of the world Both the world’s strongest (Qatar) and weakest (Dubai) housing markets in the survey are from the Middle East.

Qatar’s property market is booming, supported by rapid economic and population growth, and a construction boom in preparation for the 2022 FIFA World Cup. The nationwide real estate price index skyrocketed by 16.42% during the year to Q3 2015, after a rise of 37.2% y-o-y to Q3 2014.

Property prices rose by 4.23% q-o-q during the latest quarter.

In contrast, Dubai remains the world’s weakest housing market. Residential property prices plunged by 14.1%, the third consecutive quarter of house price falls, and

the biggest y-o-y drop since Q1 2011. House prices dropped 3.79% during the latest quarter.

Dubai’s property market has been one of the world’s most volatile. Dubai saw one of the world’s worst housing crashes with house prices plunging by 53% from Q3 2008 to Q3 2011. The housing market started to recover in 2012, recording double-digit house price increases from Q2 2012 to Q4 2014. The property market started to show weakness in the second half of 2014, amidst housing oversupply, subdued demand and slower economic activity.

Despite this, demand is rising. The total number of apartment transactions in Dubai rose by 6.6% y-o-y in the first nine months of 2015, according to Cluttons. About 20,170 dwelling units are expected to be delivered this year, almost double the annual average of 11,600 units in the past three years, according to REIDIN. House prices in Dubai are expected to fall further amidst tighter government regulations, rising inflation, and a strong dirham, according to Jones Lang La Salle.

This was supported by global credit rating agency Moody’s, which predicted that Dubai property prices are likely to fall by 10%-15% this year. However, Moody’s sees the house price correction as a sign of maturity in the market, with no repeat of the great housing crash seen in 2009.

The UAE’s economy is projected to expand by only 3% this year, due to falling oil prices, after GDP growth of 4.6% in 2014, 4.3% in 2013, 7.2% in 2012 and 4.9% in 2011, according to the IMF. Dubai, which has a more diversified and less oil dependent economy, is expected to grow by about 5% this year.

Israel’s housing market is slowing again, with the nationwide average price of owneroccupied dwellings rising by just 2.33% during the year to Q3 2015, after annual increases of 5.94% in Q3 2014. House prices fell 3.15% q-o-q in Q3 2015.

Property demand continues to surge in Israel. New dwelling sales soared by 66% y-oy in Q3 2015, to 8,467 units, according to the Central Bureau of Statistics (CBS). The number of new dwellings for sale increased slightly by 1.6% to 27,333 units.

Israel’s economy is expected to grow by 2.5% this year. Economic growth stood at 2.6% last year, its slowest pace in five years, mainly due to the July-August conflict with

Palestinian militants in Gaza, according to the Bank of Israel. The Bank of Israel kept its benchmark interest rate at a record low of 0.1 in December 2015, after cutting it by 15 basis points in February 2015.

Egypt’s nationwide real estate index plunged by 12.48% during the year to Q3 2015, the biggest y-o-y decline since Q3 2013. However, house prices increased slightly by 0.35% q-o-q in Q3 2015.

In an effort to buoy the property market, President Abdel Fattah el-Sisi recently ratified Law 17/2015, removing the last remaining restrictions on foreign ownership of land and property in Egypt, and introduced rules allowing the government, the biggest landowner in Egypt, to contribute land to the private sector as part of public-private partnership schemes against a share of the revenue.

Egypt’s economy is expected to expand by 4.2% this year, up from 2.2% in 2014, 2.1% in 2013, 2.2% in 2012, and 1.8% in 2011, on the back of a more stable political environment, large donations from Gulf Cooperation Council (GCC) allies and improving business sentiment, according to the IMF. New Zealand saw spectacular growth, with the nationwide median house prices surging by 14.86% during the year to Q3 2015, after annual rises 3.93% to Q3 2014.

House prices soared by 7.1% q-o-q during Q3 2015.

South Africa’s housing market remains weak, with the price index for medium-sized apartments falling slightly by 0.19% during the year to Q3 2015, in contrast with a y-o-y increase of 2.89% during the same period last year. House prices increased 0.69% q-o-q in Q3 2015.

Latin America is mixed. Brazil’s housing market continues to fall, amidst a worsening economic and political situation. In Sao Paulo, house prices fell by 5.54% during the year to Q3 2015, the second consecutive quarter of y-o-y price falls and in contrast to the annual rise of 3.29% a year ago. Quarteron-quarter, house prices dropped 1.11% in Q3 2015.

Mexico’s housing market is rising, buoyed by strong demand in resort communities.

The nationwide house price index rose by 5.45% during the year to Q3 2015, up from an annual increase of 0.01% during the year to Q3 2014. House prices rose 2.98% during the latest quarter.

December 23 - 29, 2015

14 | MARKETS | financialmirror.com

Investors gear up for challenging times in 2016 manufacturing PMI data. The data tends to support the reality that as manufacturing PMI decreases, so too does services – services have very rarely, if ever dragged up the manufacturing sector. At present, corporate confidence and consumer confidence in the US is really high, and failing a geopolitical shock to the US economy this is unlikely to change. Jobs growth has been robust in 2015 and this has helped to bring about a Fed decision in favour of a rate hike.

By Oren Laurent President, Banc De Binary

The global economic landscape presents myriad opportunities to traders and investors. Already, history has been made with the first Federal Reserve rate hike in nine years. The 0.25% increase in interest rates now brings the Fed Funds Rate to 0.50%, with further upward momentum expected to drive the interest rates to 1% by the end of 2016.

This has far reaching implications for the US economy, emerging market economies, and various asset categories.

That the US economy has peaked, and is slowly retreating off of its highs is evident.

Investors are under no illusions about the impact of a Fed rate hike. The European Central Bank (ECB) has opted to decrease the deposit rate by 10-basis points to -0.30%, and increase the period of asset repurchases for an additional 6 months valued at EUR 60 bln per month. This divergence in central bank policy is as clear as the distinction between day and night. Strangely, the actions taken by the ECB’s Mario Draghi ad the opposite effect on the euro: it rallied after analysts were convinced that the ECB took less dramatic action than it was capable of taking. The double-whammy that the euro was expected to endure simply did not come to pass: The Fed interest-rate hike did not cause a massive depreciation in the euro either.

The U.S. was the first country to adopt quantitative tightening after multiple years of quantitative easing.

Everyone remains convinced that deflation is the numberone bugbear in the global economy. However, even the most obvious signs of deflation – plunging crude oil prices – have resulted in increased savings and increased retail expenditure by consumers. This is proving to be an important hedge against deflation. Whether or not the United Kingdom will follow suit is anyone’s guess. However, analysts at Banc De Binary expect the Bank of England to seriously consider raising interest rates from their current level of 0.50% by the end of 2016.

But the big problem remains China. There is growing concern that the Chinese economic meltdown will result in a further deepening of problems in emerging market economies. This is already evident in plunging commodity prices, falling revenues, job losses, the shuttering of mines, and so forth. The currencies of emerging market countries remain precariously balanced, and their exchange rates against the USD have fallen to all-time lows. This is particularly true of the South African Rand, the Brazilian real, the Turkish lira, the Venezuelan Bolívar and others.

The FTSE 100 index has taken a huge hit on the back of the commodity price plunge, as evidenced by BHP Billiton, Glencore, Anglo American, Rio Tinto, et al.

WHAT ABOUT OTHER MARKETS? Typically, rising interest rates are a bad omen for bond markets. However, we may see investors switching to value investing en masse. The 2016 presidential election is one of the most hotly anticipated events in recent history. Not only that, Britain will be making a decision via the referendum as to whether it wishes to remain a part of the European Union.

WHAT ABOUT CHINA?

The so-called Brexit is an important topic that has pundits deeply concerned about the unity of the Eurozone.

While it is foolhardy to suggest that Donald Trump will become the next US president, the implications of such an option need to be considered. What is more likely is that if Donald Trump is elected as the GOP candidate, he may very well hand the election to the Democrats and Hillary Clinton.

He is seen as a polarising force with a very limited appeal in US political circles.

In the U.K., there are many concerns about pensions, the property market and so forth. Presently, the property market in London is highly overvalued, and there is concern among many in the real estate sector that the property bubble will have to burst in order for accurate pricing to come to pass.

The good news for those who are measuring the performance of the US economy versus the EU economy is that the gap between them is closing. The US economy is growing at a rate of up to 2.5% and the EU economy is growing at a rate of 1.8% per annum. A caveat is in order though: various credit ratings agencies are expecting the US economy to undergo a recession within the next two year period.

BUYING USD AS A SAFE-HAVEN INVESTMENT When it comes to anticipating the strength of the US dollar moving forward, it is difficult to say where we are on the cycle at present. Typically, a rate hike results in an appreciation of the USD and nobody can really foresee a weakening of the dollar at this point in time. People who are concerned about China weakness or general emerging market currency weakness are generally long on the USD and this is precisely what is happening.

There are analysts who believe that the Fed acted to give itself wiggle room so that when the inevitable downturn in the economy does take place they will have the option of cutting interest rates once again.

The problems in the US are not in the services sector, but in the manufacturing sector. This is clearly evident with

China is the proverbial elephant in the room, but this time around everyone is talking about China. The IMF expects China’s GDP to grow at 6% for 2016. Many analysts are not as concerned about China as they are about a recession in the US. The Chinese government retains tremendous control over the economy and it has substantial scope to stabilise markets if indeed a recession were to take place. The only problem that we saw in 2015 with China was government interference in the equities markets to try and stabilise them, which only resulted in a $5 trln equities rout overall. The corporate sector in China is heavily indebted, with massive borrowings plaguing the growth prospects of the equities markets. A rebalancing certainly needs to take place. The big change in emerging market economies will occur when China moves towards a services-oriented economy as opposed to a production-oriented economy.

A long and drawn-out process of adjustment is going to take place in China, but the good news is this is already underway. There is tremendous excess capacity available in multiple energy, metals and other sectors that was otherwise consumed by China.

Emerging markets are going to feel the pinch in 2016, and many of these commodities will be dumped on the markets en masse at prices that will depress revenues and profitability.

Back in the US, when it comes to commodity prices, cheap oil has increased the personal disposable incomes of consumers, with much of the available funding going into savings and retail expenditure. Restaurant revenues have been going through the roof, as people simply don’t have enough money to move out of rental accommodations and buy their own properties so they are spending their excess income on entertainment and leisure. Many of these trends will continue moving forward, and it’s difficult to pinpoint with any certainty what outcomes will impact on markets at what time.

Please note that this column does not constitute financial advice.

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

0.42 0.50 -0.20 0.05 -0.81

0.51 0.54 -0.16 0.07 -0.79

0.59 0.59 -0.13 0.08 -0.77

0.81 0.75 -0.04 0.12 -0.71

1.13 1.06 0.06 0.22 -0.62

CCY/Period USD GBP EUR JPY CHF

2yr

3yr

4yr

5yr

7yr

10yr

1.10 1.03 -0.04 0.11 -0.72

1.33 1.22 0.04 0.10 -0.65

1.52 1.37 0.16 0.13 -0.56

1.67 1.49 0.30 0.16 -0.42

1.91 1.70 0.59 0.25 -0.16

2.14 1.91 0.95 0.42 0.15

Exchange Rates Major Cross Rates

CCY1\CCY2 USD EUR GBP CHF JPY

Opening Rates

1 USD 1 EUR 1 GBP 1 CHF 1.0931 0.9148

100 JPY

1.4882

1.0090

0.8264

1.3614

0.9230

0.7560

0.6780

0.5553

0.6720

0.7345

0.9911

1.0834

1.4750

121.01

132.28

180.09

0.8190 122.10

Weekly movement of USD

CCY\Date

24.11

01.12

08.12

15.12

22.12

CCY

Today

USD GBP JPY CHF

1.0572

1.0532

1.0801

1.0971

1.0860

0.6986

0.6976

0.7179

0.7232

0.7296

129.63

129.30

132.85

132.43

131.56

GBP EUR JPY

1.0757

1.0795

1.0786

1.0768

1.0773

CHF

1.4882 1.0931 121.01 0.9911

Last Week %Change 1.5170 1.0971 120.71 0.9815

+1.90 +0.36 +0.25 +0.98

December 23 - 29, 2015

financialmirror.com | MARKETS | 15

New economic realities Marcuard’s Market update

by GaveKal Dragonomics

As we close the book on 2015, it is worth sifting through our research to find the patterns that are likely to influence events in 2016 and beyond.

Three stand out.

The first and most important is that growth trend in the United States — the world’s core economy — has moved permanently lower from the 3.25% rate that was considered normal between the end of World War II and the 2008 global financial crisis, to about 2.25%.

This decline results neither from misguided central bank policies (as Austrians like Charles Gave argue) nor from needless fiscal austerity (as Keynesians like Anatole Kaletsky contend).

It stems instead from demographics: an aging population, and a workforce that can no longer grow through increased participation by under-employed women.

Second, growth in the rich economies of the US and Europe is driven ever less by physical production and ever more by intangible services.

This is a long-running theme of post-industrial development, but it is amplified by demographics: as people get older, they buy less stuff, and more services such as entertainment and healthcare. One consequence is that merchandise trade volumes, after several decades of growing much faster than global GDP, have slowed to about the same growth rate as the global economy. This is likely to be a very durable adjustment.

Finally, the growth trend in the world’s second-biggest economy, China, is also slowing, and more important, the composition of growth is changing. The scale and nature of these shifts is, if anything, still underestimated.

Real growth in local currency terms averaged 10% from 1978 to 2013; over the next decade it may average around 5%, assuming the government delivers on at least some of its structural reform agenda.

That is a big enough move, but it understates the global impact, which is better measured by the nominal growth rate in US dollar terms Between 2003 and 2011 this averaged a staggering 21% annually, as China’s economy quintupled in a mere eight years.

This year, it will struggle to exceed 3%, as weak nominal growth combines with a currency decline.

Optimistically, over the next decade China’s nominal US dollar GDP might grow by 6% a year, a decline of more than two thirds from the 2003-11 rate. The sustainable growth in China’s international purchasing power is far, far lower than it was during the boom years.

Now granted, 6% growth in a US$ 11 trln economy delivers a bigger incremental punch than 21% growth in a US$ 2 trln economy.

But the effects of that punch are determined by the composition of growth.

And here, the central fact is that after 15 years during which commodity prices were defined by ever-expanding Chinese demand, we have now entered an era of secular decline in Chinese demand for most commodities, including its key fuel, coal. Conversely, international spending by Chinese tourists quadrupled between 2009 and 2014, and is on track to rise another 65% in 2015, to

www.marcuardheritage.com

US$ 271 bln.

Outbound tourism spending is now almost half as big as China’s mammoth merchandise trade surplus.

As China gradually lowers capital controls, more of its pent-up consumer surplus will make its way abroad, and a fair bit of this saving will find its way into financial assets. The party is over for commodity producers, but China’s impact on global financial prices has only just begun.

What are the implications of the three big trends of slower US growth, the increased service intensity of global growth, and slower and more consumer-intensive Chinese growth?

First, slower growth and abundant savings almost certainly mean the natural rate of interest is quite a bit lower than in the past. Low rates are not a temporary artifact of global crisis and central bank response; they are a long-lasting condition.

Second, the move from tangible to intangible production, and the reduced role of merchandise trade, means we are moving from a “Ricardian” growth era characterised by shifts of physical production in line with comparative advantage, to a “Schumpeterian” era in which the key driver is innovation that creates new value in non-tradable services. Ricardian shifts of production will of course continue; but in relative terms their importance will decline. One consequence is that China’s rise relative to the US will slow markedly. China’s fast ascent after 2000 was driven almost entirely by a Ricardian re-allocation of production. In an age of innovation China is severely handicapped by its repressive politics, addiction to state ownership of assets, and mistrust of markets.

Finally, we should reject the “secular stagnation” label.

Slower growth is not stagnation; it’s just slower growth.

This is not cause for despair.

Slow growth does, though, carry major policy implications. In high-growth eras, governments can rely on a rising tide to lift all boats, and deflect demands for redistribution.

In a slow-growth era, demands for redistribution become more insistent. Anyone who imagines these demands will be silenced by an election or two is in for severe disappointment.

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.

WORLD CURRENCIES PER US DOLLAR CURRENCY

CODE

RATE

EUROPEAN

Belarussian Ruble British Pound * Bulgarian Lev Czech Koruna Danish Krone Estonian Kroon Euro * Georgian Lari Hungarian Forint Latvian Lats Lithuanian Litas Maltese Pound * Moldavan Leu Norwegian Krone Polish Zloty Romanian Leu Russian Rouble Swedish Krona Swiss Franc Ukrainian Hryvnia

BYR GBP BGN CZK DKK EEK EUR GEL HUF LVL LTL MTL MDL NOK PLN RON RUB SEK CHF UAH

18336 1.4879 1.7895 24.7233 6.8274 14.3195 1.0926 2.385 287.05 0.64319 3.1598 0.3929 19.64 8.734 3.8742 4.1326 71.0966 8.4727 0.9914 22.85

AUD CAD HKD INR JPY KRW NZD SGD

0.7233 1.3935 7.7531 66.33 121.06 1173.01 1.4663 1.4058

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

0.3772 7.8077 29980.00 3.8966 0.7080 0.3035 1512.90 0.3850 3.6415 3.7528 15.1072 3.6729

AZN KZT TRY

1.52 333.4 2.9200

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

December 23 - 29, 2015

16 | WORLD | financialmirror.com

Argentina’s economic ‘big bang’

By Mohamed A. El-Erian Αuthor of When Markets Collide

Last week, the government of newly elected Argentine President Mauricio Macri launched a bold plan to revitalise a bruised and beleaguered economy plagued by high inflation. At a time of daunting crisis conditions, one should not underestimate the importance of this move not just for Argentina, but also for other countries, where leaders are watching closely for clues about how to deal with their own economic woes.

Thanks to years of economic mismanagement, Argentina’s economy has been badly underperforming for decades.

Previous governments sought to avoid difficult policy choices and obfuscate fundamental issues by implementing inefficient controls that grossly misallocated resources and undermined Argentina’s ability to generate the foreign-exchange earnings needed to cover its import bill, resulting in domestic shortages. The recent drop in commodity prices has exacerbated the situation, depleting what little growth dynamism the economy had left, while fueling inflation, deepening poverty, and spreading economic insecurity and financial instability. In theory, governments in such a situation have five basic options to contain crisis conditions, pending the effects of measures to reinvigorate growth and employment engines: - Run down the financial reserves and wealth that were accumulated when the economy was doing better.

- Borrow from foreign and domestic

lenders.

- Cut public-sector spending directly, while creating incentives to induce lower private-sector expenditure.

- Generate revenues through higher taxes and fees, and earn more from abroad.

- Use the price mechanism to accelerate adjustments throughout the economy, as well as in trade and financial interactions with other countries.

Through careful design and sequencing, these five measures can help not only to deal with immediate economic and financial problems, but also to create the conditions for higher growth, job creation, and financial stability in the longer term. In this manner, they can contain the spread of economic hardship among the population, protect the most vulnerable segments, and put future generations on a better footing.

In practice, however, governments often face complications that undermine effective implementation of these measures. If policymakers are not careful, two problems, in particular, can reinforce each other, potentially pushing the economy over the precipice.

The first problem arises when specific factors, real or perceived, block some options

from the adjustment menu. Some measures may already have been exhausted: the country may not have any wealth or reserves left to tap, and there may be a shortage of willing lenders. Other measures, such as fiscal adjustment, must be implemented very carefully, in order to avoid torpedoing the growth objective.

The second problem is timing, with governments struggling to ensure that the measures take effect in the right sequence.

Effective implementation requires understanding key features of economic and financial interactions, including not just feedback effects, but also the behavioral aspects of private-sector responses. And all of this must be closely coordinated with the pursuit of supply-side reforms that promote robust, durable, and inclusive growth.

Here is where the Macri government’s approach is an historical exception. Macri took over the presidency with a bang, launching an audacious – and highly risky – strategy that places aggressive price liberalisation and the removal of quantitative controls front and centre, ahead of the five measures relating to demand management and financial assistance. Already, most export taxes and currency controls have been

scrapped, income taxes have been cut, and the exchange rate has been freed up, allowing for an immediate 30% depreciation of the peso. Historically, few governments have pursued this type of sequencing, much less with such fervour; indeed, most governments have hesitated, especially when it comes to full currency liberalisation. When governments have taken similar steps, they usually have done so after – or at least alongside – the provision of financial injections and efforts to restrain demand.

The reason is clear: by taking time to set the stage for liberalisation, governments hoped to limit the initial spike in price inflation, thereby avoiding a wage-price spiral and curbing capital flight. They worried that, if these problems emerged, they would derail reform measures and erode the public support needed to press on.

To revive the Argentine economy in a durable and inclusive manner, Macri’s government needs to act fast to mobilise sizeable external financial assistance, generate additional domestic resources, and implement deeper structural reforms. If it does, Argentina’s bold economic strategy will become a model for other countries, both now and in the future. But if the approach falters – whether because of incorrect sequencing or a surge of popular dissatisfaction – other countries will become even more hesitant to lift controls and fully liberalise their currencies. The resulting policy confusion would be bad for everyone.

Mohamed A. El-Erian is Chief Economic Adviser at Allianz, the corporate parent of PIMCO, where he served as CEO and co-CIO (2007-1014). He is also Chairman of US President Barack Obama’s Global Development Council. © Project Syndicate, 2015. www.project-syndicate.org

Education in an uncertain world

By Andreas Schleicher Until the Industrial Revolution, neither formal education nor advances in technology made much of a difference for the vast majority of people. But as technological progress accelerated, education failed to keep pace, leaving vast numbers of people struggling to adapt to a rapidly changing world and contributing to widespread suffering.

It took a century for public policy to respond with an effort to provide universal access to schooling. In recent decades, remarkable strides have been made toward realising that ambition worldwide. But in an era when technological innovation is once again outpacing education, the effort to provide everybody with an opportunity to learn must not only be redoubled; it must also be retooled for an increasingly unstable and volatile world.

Access to education has been significantly broadened.

The world is no longer rigidly divided between rich, welleducated countries and poor, badly educated ones. The quality of schooling remains a powerful predictor of national income over the long term, and many low-income countries have begun leveraging education in the service of economic development. As a result, among 80 countries with comparable data on the quality of learning, GDP per capita now explains only 6% of the variation in performance.

Much work remains to be done – even in high-income countries. Many oil-producing countries, in particular, have succeeded in converting their natural wealth into physical capital and consumption; but they have failed to build the human capital that can sustain their economies in the future. If the high-income non-OECD countries equipped their students at least with very basic skills, they would, as a group, benefit from added economic value equivalent to almost five times their current GDP. Even with their abundant natural resources, far greater wealth lies untapped

in their populations’ undeveloped skills.

Education has a much wider impact than simply improving earnings or employment opportunities, which is why it is a component of the human development index. In all countries with comparable data, adults with lower literacy skills are far more likely to report poor health, have less trust in their fellow citizens, and perceive themselves as objects – rather than actors – in the political process. For countries that fail to equip their residents with the proper skills, technological progress is unlikely to translate into economic growth, and large swaths of the population risk languishing on the margins of society.

And yet, formal education alone is not enough to ensure greater opportunity and prosperity. In many economies, too many unemployed graduates coexist with a large number of employers who cannot find workers with the skills they need. If individuals and countries are to continue to reap the benefits of education, policymakers must focus on the skills required to prosper in a rapidly changing world.

In the past, education was about imparting knowledge.

Today, it is about providing students with the tools to navigate an uncertain, volatile world. Unfortunately, the skills that are easiest to teach and test are also the easiest to automate or outsource. State-of-the-art knowledge remains important. But the global economy no longer rewards workers for what they know (Google knows everything); it rewards them for what they can do with what they know.

Education needs to focus on improving how students think, work, and embrace technology, and on providing the social and emotional skills needed to collaborate with others.

In the past, educators imparted knowledge by breaking problems into manageable pieces and then teaching techniques to solve them. Today, value is often created by synthesizing disparate bits of information. And for that, workers need more than technical knowledge; they must be

imbued with curiosity, open-mindedness, and the ability to make connections between seemingly unrelated ideas.

In the traditional education system, students typically learned on their own and were judged individually. But as technology progresses and once separate economies become interdependent, working with others is becoming increasingly important. Today, innovation rarely results from individuals working in isolation; far more often than not, it is the product of sharing and collaboration. Schools need to incorporate this new reality into their curriculums, preparing their students to work across cultures and equipping them for a world shaped by issues that transcend national boundaries. Part of the policy answer is promoting skills-oriented learning throughout workers’ lives, rather than focusing on education that ends when work begins.

Developing skills is easier when learning is integrated into the workplace. Doing so also allows young people to develop hard skills on modern equipment and learn soft skills through real-world experience.

Retooling education for the modern economy will require the involvement of every sector of society. Governments will have to design smarter financial incentives. Education systems will have to pivot to foster entrepreneurship and offer better vocational training. Employers will have to invest in their workforces. And labor unions can contribute to ensuring that training translates into better jobs.

Education is increasingly a collective enterprise, and this must be reflected in the skills it provides to graduates.

Ultimately, however, the future of education will depend on individuals and their willingness to take advantage of learning opportunities and invest in their own futures.

Andreas Schleicher is Director for Education and Skills and Special Adviser on Education Policy to the OECD’s Secretary-General.

December 23 - 29, 2015

financialmirror.com | WORLD | 17

A new century for the Middle East

By Jeffrey D. Sachs The United States, the European Union, and Westernled institutions such as the World Bank repeatedly ask why the Middle East can’t govern itself. The question is asked honestly but without much self-awareness. After all, the single most important impediment to good governance in the region has been its lack of selfgovernance: The region’s political institutions have been crippled as a result of repeated US and European intervention dating back to World War I, and in some places even earlier.

One century is enough. The year 2016 should mark the start of a new century of homegrown Middle Eastern politics focused urgently on the challenges of sustainable development.

The Middle East’s fate during the last 100 years was cast in November 1914, when the Ottoman Empire chose the losing side in World War I. The result was the empire’s dismantling, with the victorious powers, Britain and France, grabbing hegemonic control over its remnants. Britain, already in control of Egypt since 1882, took effective control of governments in today’s Iraq, Jordan, Israel and Palestine, and Saudi Arabia, while France, already in control of much of North Africa, took control of Lebanon and Syria.

Formal League of Nations mandates and other instruments of hegemony were exercised to ensure British and French power over oil, ports, shipping lanes, and local leaders’ foreign policies. In what would become Saudi Arabia, Britain backed the Wahhabi fundamentalism of Ibn Saud over the Arab nationalism of the Hashemite Hejaz.

After World War II, the US picked up the interventionist mantle, following a CIA-backed military coup in Syria in 1949 with another CIA operation to topple Iran’s Mohammad Mossadegh in 1953 (to keep the West in control of the country’s oil). The same behaviour has continued up to the present day: the overthrow of Libya’s Muammar el-Qaddafi in 2011, the toppling of Egypt’s Mohamed Morsi in 2013, and

the ongoing war against Syria’s Bashar al-Assad. For almost seven decades, the US and its allies have repeatedly intervened (or supported internally-led coups) to oust governments that were not sufficiently under their thumb.

The West also armed the entire region through hundreds of billions of dollars in weapons sales. The US established military bases throughout the region, and repeated failed operations by the CIA have left massive supplies of armaments in the hands of violent foes of the US and Europe.

So, when Western leaders ask Arabs and others in the region why they can’t govern themselves, they should be prepared for the answer: “For a full century, your interventions have undermined democratic institutions (by rejecting the results of the ballot box in Algeria, Palestine, Egypt, and elsewhere); stoked repeated and now chronic wars; armed the most violent jihadists for your cynical bidding; and created a killing field that today stretches from Bamako to Kabul.”

What, then, should be done to bring about a new Middle East? I would propose five principles.

First, and most important, the US should end covert CIA operations aimed at toppling or destabilising governments anywhere in the world. The CIA was created in 1947 with two mandates, one valid (intelligence gathering) and the other disastrous (covert operations to overthrow regimes deemed “hostile” to US interests). The US president can and should, by executive order, terminate CIA covert operations – and thereby end the legacy of blowback and mayhem that they have sustained, most notably in the Middle East.

Second, the US should pursue its sometimes-valid foreign-policy objectives in the region through the United Nations Security Council. The current approach of building US-led “coalitions of the willing” has not only failed; it has also meant that even valid US objectives such as stopping the Islamic State are blocked by geopolitical rivalries.

The US would gain much by putting its foreign-policy initiatives to the test of Security Council votes. When the Security Council rejected war in Iraq in 2003, the US would have been wise to abstain from invading. When Russia, a veto-wielding permanent member of the Council, opposed the US-backed overthrow of Syrian President Bashar alAssad, the US would have been wise to abstain from covert operations to topple him. And now, the entire Security Council would coalesce around a global (but not a US) plan

to fight the Islamic State.

Third, the US and Europe should accept the reality that democracy in the Middle East will produce many Islamist victories at the ballot box. Many of the elected Islamist regimes will fail, as many poorly performing governments do.

They will be overturned at the next ballot, or in the streets, or even by local generals. But the repeated efforts of Britain, France, and the US to keep all Islamist governments out of power only block political maturation in the region, without actually succeeding or providing long-term benefits.

Fourth, homegrown leaders from the Sahel through North Africa and the Middle East to Central Asia should recognise that the most important challenge facing the Islamic world today is the quality of education. The region lags far behind its middle-income counterparts in science, math, technology innovation, entrepreneurship, small business development, and (therefore) job creation. Without high-quality education, there is little prospect for economic prosperity and political stability anywhere.

Finally, the region should address its exceptional vulnerability to environmental degradation and its overdependence on hydrocarbons, especially in view of the global shift to low-carbon energy.

The Muslim-majority region from West Africa to Central Asia is the world’s largest populous dry region, an 8,000 km swath of water stress, desertification, rising temperatures, and food insecurity.

These are the true challenges facing the Middle East. The Sunni-Shia divide, Assad’s political future, and doctrinal disputes are of decidedly lesser long-term importance to the region than the unmet need for quality education, job skills, advanced technologies, and sustainable development. The many brave and progressive thinkers in the Islamic world should help to awaken their societies to this reality, and people of goodwill around the world should help them to do it through peaceful cooperation and the end of imperial-style wars and manipulation.

Jeffrey D. Sachs is Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University. He is also Director of the UN Sustainable Development Solutions Network. © Project Syndicate/Mohammed Bin Rashid Global Initiatives, 2015. www.project-syndicate.org

December 23 - 29, 2015

18 | WORLD | financialmirror.com

A fair, efficient, and feasible climate agreement How should one evaluate the agreement reached in Paris this month at

By Jeffrey the United Nations climate change Frankel conference? No sooner was the deal announced on December 12 than the debate erupted.

Some avid environmentalists were to finance disappointed that the agreement did not commit firmly to countries limiting global warming to 1.5 degrees Celsius above pre- emissions reductions in poor countries. This is industrial levels by 2050.

But such a commitment would not have been credible. important because it is What emerged in Paris was in fact better, because the cheaper to pay a poor negotiators were able to agree on practical steps in the right country to refrain from direction. Individual countries pledged to limit their building new coal-fired emissions in the near term, with provisions for future power plants than it is to monitoring and periodic reviews of targets. This is far better shut down an existing than setting lofty goals for the distant future while giving plant in a rich country. And little reason to think that they would be met. The important achieving the first period’s INDCs at low cost will be thing is to get started.

In four key respects, the agreement is a good one for those an important determinant who regard global climate change as an important problem of countries’ willingness to take further steps in future and want to take feasible steps to address it.

First, and most important, participation is periods.

Achieving more aggressive environmental goals, comprehensive, with 188 countries offering individual commitments, called Intended Nationally Determined particularly limiting warming to 1.5C, or zero greenhouseContributions (INDCs). In the past, only rich countries were gas emissions in the second half of the century, would of expected to reduce their greenhouse-gas emissions; course be desirable in terms of minimising the risk of disaster developing countries were explicitly spared that within the scenarios. In fact, the first INDCs, by themselves, are UN Framework Convention on Climate Change. That had to nowhere near enough even to limit warming to 2C (the change, partly because it is in developing countries, not the global goal that was agreed in Cancún in 2010).

But proclaiming ambitious targets is very different from advanced economies, that emisssions are growing the fastest.

Furthermore, countries like the United States would not achieving them. It is almost beside the point that the agree to limit their emissions if they feared that carbon- economic cost of pursuing a goal of 1.5C would be very high. emitting industry would simply migrate to developing In any case, leaders can’t make credible commitments 35 years into the future. And the plan needs to be credible if it is countries.

Second, the agreement includes a process of future to influence myriad business decisions made today.

Some developing-country leaders may be displeased for assessment and revision of targets. Every five years, the parties will take stock and renew the commitments. Targets another reason: the figure of $100 bln in finance from rich can be adjusted in light of future developments to be more or countries does not appear in the legally binding body of the less aggressive, (probably more, if the scientists’ predictions agreement. The rich countries did admit their moral are borne out). Negotiations on the INDC revisions are to responsibility to help small island states, for example, cope begin in 2018, even though the first set of targets is with “loss and damages” from sea-level rise. But they rejected demands for formal acceptance of legal liability. scheduled to take effect in 2020.

This was a reasonable outcome in a difficult situation.

Third, the Paris deal takes steps toward transparency in monitoring, reporting, and verifying countries’ progress. Rich countries can’t deny that their past emissions have Starting in 2023, countries are to report every five years on inflicted harm on the world. In a domestic legal system, an compliance with their emissions targets. The US and Europe entity whose land was, say, flooded would have a claim to had to push China and India to agree to this. But without compensation from the entity that had caused the damage.

But sovereign countries are not operating in such a system. transparency, the INDCs would not be credible.

Fourth, the agreement contains mechanisms to facilitate The $100 bln in finance has always seemed problematic. The international linkage, including scope for residents of rich developing countries fear that the rich countries won’t

deliver the money, at least not cash; and they are right. The rich countries fear that such “reparations” would disappear into the pockets of local elites; and they, too, are right. So it is better not to make promises.

The poor countries do have a strong case. The average American still accounts for ten times the emissions of the average citizen of India, and India should not be deprived of the right to develop economically. But the best way to address these fairness concerns is through the agreed emissions targets. The efforts that richer countries promised should be – and generally are – greater than the efforts of poor countries. The richer a country is, the earlier the date at which its emissions should peak. The richer it is, the more sharply its target should cut emissions relative to the baseline. With targets that take into account their stage of development, poor countries can be paid for additional emissions cuts under the international linkage mechanisms.

In such ways, the Paris agreement ensures both fairness and efficiency. Achieving it was a daunting challenge, and more challenges lie ahead. But the negotiators’ success in converging on a plan that offers hope of practical progress is an unambiguous triumph.

Jeffrey Frankel is Professor of Capital Formation and Growth at Harvard University. © Project Syndicate, 2015 - www.project-syndicate.org

Climate action after Paris

By Jim Yong Kim

At the United Nations climate conference in Paris, courageous and visionary leaders recognised that people rarely change the world when they work within the constraints of what they think is possible. The world hoped for an agreement, but most of us did not dare to dream of a deal that aspires to limit temperatures to 1.5 degrees Celsius above pre-industrial levels. Paris delivered for the planet and for the poor.

Five important steps must come next.

First, we need to approach development differently. Climate change must be considered in all of our work – from building cleaner cities to producing more food on less land – with a much stronger focus on adapting to changing climate patterns. This means that when we build a road in a country like Mozambique, we are also ensuring that it is resilient to the floods that

accompany incessant rains. To this end, the World Bank unveiled a new climate action plan in Paris to help Sub-Saharan Africa in the years ahead.

Second, we need a clean-energy transformation at the speed and scale of the digital revolution. The Paris talks sent a clear signal to markets, public officials, and investors that low-carbon growth is the future. Market forces will drive this agenda forward, and there will be greater potential to invest in renewable energy in developing countries than ever before. Dramatic decreases in the cost of low-carbon technologies also support an ambitious global transition toward renewable energy.

One example is Bangladesh’s innovations in increasing the sale of solar-power systems for homes in rural areas. Our low-cost financing helped to attract tremendous interest from the private sector, and today Bangladesh has the fastest-growing solarhome programme in the world. More than 18.5 million people in rural areas now have reliable access to solar-powered electricity.

Third, businesses must immediately become climate literate. In Paris, CEOs from various industries – ranging from cement to technology companies – made clear pledges

to decrease carbon footprints, invest in renewables, and manage resources sustainably. This transition will require more partnerships across all levels of government, civil society, and the private sector.

Fourth, world leaders must push harder for carbon pricing. Carbon dioxide emissions from the burning of fossil fuels carry a hefty price. It’s a bill that comes to all of us in the form of public-health costs, damage to the environment, and adverse weather effects.

While about 40 countries and 23 cities, states, and regions are using a carbon price, this covers only 12% of annual greenhousegas emissions. More than 90 developed and developing countries included carbonpricing schemes among the actions they intend to take after the Paris deal. This is a welcome step.

Finally, finance will be critical. National climate action plans – submitted by more than 180 countries – identify trillions of dollars of climate-related needs. This global economic transition holds tremendous investment opportunities for the private sector. The risks of carbon are high, but the opportunities to de-carbonize are even greater. For our part, we recently pledged to increase the World Bank Group’s climate

financing to as much as $29 bln annually by 2020.

Every country will take a different path to deliver on its commitments. National leaders must honor the timetable for adaptation and emissions reductions. We are here to support them. We have plans that focus on climatesmart agriculture, building greener cities, increasing access to renewable energy, improving energy efficiency, and leveraging our finance for greater private investment.

All are designed to lower greenhouse-gas emissions and help people adapt to the world’s changing climate.

The conference in Paris produced an agreement that went beyond our expectations. We must now move with ambition that matches this historic deal – one supported by nearly 200 countries. We are at a remarkable moment in the long battle to reduce harmful emissions, and we must capitalize on this global commitment to preserve our planet for future generations.

Jim Yong Kim is the president of the World Bank Group. © Project Syndicate, 2015. www.project-syndicate.org

December 23 - 29, 2015

financialmirror.com | WORLD | 19

Greece’s other deficit

By Alessandro Galli and Mathis Wackernagel For the past decade, much attention has been paid to Greece’s public finances. And when, in November, the country faced the first review of its reform progress under its latest agreement with its creditors – an exercise required to obtain a new infusion of bailout funds – its budget deficit was put under the microscope once again.

But Greeks would do well to consider another type of deficit – one that has received far less public scrutiny, but could have economic consequences that are just as serious.

Like the rest of the Mediterranean region (and indeed the entire world), Greece is not just running a fiscal deficit; it is also running an ecological one.

According to our analysis, Mediterranean countries currently use 2.5 times more ecological resources and services than their ecosystems can renew. Greece, for example, would need the total ecological resources and services of three Greeces in order to meet its citizens’ demand on nature for food, fiber, timber, housing, urban infrastructure, and carbon sequestration. Athens alone demands 22% more from nature than the entire country’s ecosystems can provide. And, after years of recession during which pressure on Greece’s natural resources declined, demand has begun to rise again, as GDP growth has shown some improvement.

To enable lasting economic progress, we need to break this link between GDP growth and overuse of the environment. Ecological deficits can jeopardise energy sources and threaten food security, with direct social and economic consequences. If Greece and other countries are to ensure the health and prosperity of their citizens in the decades to come, they will have to find a way to prevent current economic activity from increasing an already unsustainable burden of environmental debt.

For that to happen, ecological resources must come to be viewed as valuable endowments to be managed wisely. The Mediterranean region’s unique, breathtaking natural capital is one of its greatest assets – the reason why more than 200 million tourists flock to the region each year, feeding the region’s economy. Overusing resources, or even failing to

manage them carefully, inevitably saps the region’s economic strength.

Of course, countries with ecological deficits can often fill part of the gap through global trade – if they can pay for the necessary imports. But, as Greece has recently learned, countries dependent on external natural resources can experience economic shocks when commodity prices increase or their ability to pay otherwise declines. According to our calculations, a mere 10% increase in commodity prices would result in a $7.6 bln hit to Greece’s trade balance – equivalent to 0.3% of its GDP. In any case, reliance on global trade is not an adequate solution to the problem. Some ecosystem services – including clean air and water, mitigation of extreme climate events such as floods or droughts, and recreational uses of nature – simply cannot be imported.

More important, if a country is importing natural resources, another country must be exporting them. And just as governments cannot run huge financial deficits

indefinitely, countries cannot continue to run large annual ecological imbalances without depleting their natural capital – and thus weakening their economic health.

Fortunately, countries like Greece are not powerless to act. Cities offer particularly promising opportunities for improvement, especially in areas like transportation and housing.

Athens, for example, is an obvious target for policy changes. The average ecological footprint of an Athenian is higher than the national average (and higher than the average footprint of residents in other Mediterranean cities such as Barcelona, Izmir, Palermo, and Valencia).

Transportation is the biggest source of this disparity, which means that policy interventions favoring public transport or walkability can reduce Athens’ ecological deficit.

Another area in which Greece should consider taking action is food.

The world-famous Mediterranean diet – heavy in vegetables, fruits, and olive oil – is not only healthy; it is less taxing on the environment. As consumption of meat and processed foods rises around the Mediterranean, a renewed focus on the region’s culinary heritage could help lighten the load on the world’s natural resources – and boost people’s health.

As Greece’s government works to revive an economy flattened by fiscal disaster and improve the wellbeing of all, the path it forges toward long-term prosperity must not lead to further environmental degradation. Greece cannot afford to address one of its deficits at the expense of the other.

Alessandro Galli is a senior scientist and the director of the Mediterranean and MENA Initiative at Global Footprint Network. Mathis Wackernagel is the co-creator of the Ecological Footprint and co-founder and President of Global Footprint Network. © Project Syndicate, 2015 - www.project-syndicate.org

December 23 - 29, 2015

20 | BACK PAGE | financialmirror.com

The polio heroes

By Bill Gates The world’s progress in fighting polio might be one of the best-kept secrets in global health. Indeed, my heroes for 2015 are the men and women on the front line in the fight against the disease.

Since 1988, the number of annual cases of polio worldwide has dropped more than 99.9%. The disease used to paralyse an estimated 350,000 children every year; in 2015, the number of cases is likely to be fewer than 100.

Moreover, the year 2015 marked another important milestone in our mission to wipe out this debilitating scourge: For the first time in human history, Africa marked a year without any wild polio cases.

Yet I’m often surprised to hear how many people don’t know about this mind-blowing progress.

The credit goes to an international coalition of visionary people: the leaders who make polio eradication a high priority in their countries and the funders who underwrite the work of combating the disease. For example, support from the United Arab Emirates has been indispensable to vaccinating children in Pakistan – along with Afghanistan, the only two countries that have never been polio-free.

But the stunning progress we’ve seen over the last three decades would not be possible without the volunteers and frontline health workers who go out – sometimes at the risk of their own lives – to make sure

every child is protected. Whether navigating floods, hiking up treacherous mountains, or working in some of the world’s most conflict-ridden areas, 13 million children are alive and walking today because of these inspiring individuals.

That’s why I’m proud that the Gates Foundation has created a partnership with the UAE to honour these courageous people through the Heroes of Polio Eradication (HOPE) Awards. The ceremony with Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, was one of the most uplifting events on a trip I made recently to the Middle East.

It was great to meet with the recipients and celebrate their amazing work. There is Freeda, a Lady Health Worker in Baluchistan, Pakistan, who has supported the polio eradication programme for more than 15 years across often-dangerous parts of the province. Last year, Freeda was injured and a family member was killed in an attack during a vaccination drive. But her commitment to helping to vaccinate kids never wavered.

Atta Ullah is a community leader and activist in Khyber Pakhtunkhwa, Pakistan, who mobilises support from local leaders and health workers for polio eradication activities. He also works to expose fallacies and debunk rumors about polio vaccines.

I had already met the third recipient, Misbahu Lawan Didi, a couple of years ago in Nigeria. It was great to see him again and to see him recognised for his efforts. A polio survivor himself, Lawan Didi founded the Para-soccer game – an innovative programme focused on building the selfreliance and self-confidence of 3,000 paraplegics.

Then there was Constant Dedo, a polio consultant for the World Health

Organisation in Nigeria, who has worked for almost a decade across South Sudan, Pakistan, Nigeria, and Afghanistan.

Constant’s story is one of true dedication to polio eradication. While stationed in Pakistan, Constant was shot and required major surgery, but still continues with his work.

Finally, we honoured Bibi Malika, who is not only an important advocate for polio eradication, but also a community leader and a go-to source for medical wisdom in her hard-to-access community in Helmand, Afghanistan. She has been an inspiring example to other women in her area.

All of these amazing individuals have my admiration and gratitude. Thanks to their efforts – and the endeavours of hundreds of thousands of people like them – we are

achingly close to eradicating polio. Now we need to finish the job.

I am optimistic that we will get there soon, through the diligence of those fighting the disease and the generosity of countries like the UAE that make their work possible.

And on that day, when we come together to celebrate the end of polio, the world will know that it was possible only because of these heroes.

Bill Gates is Co-Chair of the Bill & Melinda Gates Foundation. © Project Syndicate/Mohammed Bin Rashid Global Initiatives, 2015. www.project-syndicate.org

Sapienta Country Analysis Cyprus - In March 2013 Cyprus suffered its worst economic shock since 1974, leaving the economy with high corporate, household and government debt and an illiquid banking system. There are many uncertainties going forward but also potential new prospects, including exploitation of gas and a possible solution of the Cyprus problem.

fiscal and structural policy, and macroeconomic and sectoral trends; tables and charts of quarterly recent economic trends and medium-term forecast. €9950 ex VAT per year for up to 5 users within a single organization if paid in advance; €1,100 ex VAT if paid in instalments.

- Premium subscription (monthly analysis and critical updates): Analyst will alert you by email of critical - Sapienta Country Analysis Cyprus is an unrivalled monthly service that not only keeps you abreast of these developments developments as they occur and include two to three lines of comment. €11,250 ex VAT per year for up to 5 users within a but helps you anticipate and plan for what is coming next. single organization if paid in advance; €1,400 ex VAT if paid Written in a concise, easy-to-read format, Sapienta Country in instalments.

Analysis Cyprus provides you with comprehensive monthly analysis and forecasts of domestic and international politics, - Bespoke service: Aimed at institutional investors, premium budget and debt performance, the banking sector, sectoral subscribers enjoy a 20% discount and standard subscribers a policies including oil and gas, and macro-economic trends.

10% discount on bespoke services such as personal and - The reports are written by Fiona Mullen, a renowned Cyprus telephone briefings. Check our website for further details. analyst with 20 years’ experience producing clear, reliable and independent analysis for an international audience.

Contact Check our website for sample issues. research@sapientaeconomics.com, Tel +357 99 338 224, - Standard subscription (monthly analysis and forecast): w ww.sapientaeconomics.com Analysis and outlook for domestic and international politics,

Comprehensive monthly analysis of politics, economic policy and the economy