News Summary

Another calm weekend but Greece is still dominating the news section.

Reuters News confirmed that talks between Greece and its international creditors over a new bailout package will be delayed by a couple of days because of organizational issues. Greek MOF official said talks between the technical teams of the lenders will start on Tuesday, while the mission chiefs will arrive in Athens with a delay of a couple of days for technical reasons (page 6).

FT on Saturday said Athens raised hurdles for negotiators in the Greek capital, forcing them to postpone their arrival amid renewed acrimony. Two of the officials said Greek authorities had also insisted negotiators no longer use the Athens Hilton as their base instead proposing hotels far from the capitals government quarter. One of the creditor officials said negotiating teams were sitting on their suitcases and had no plans to go to Athens until the logistical issues were resolved (page 2).

The same article also reported Greek government on Friday lodged a formal request with the IMF to begin discussions on a new, third bailout programme. The request came after officials at the IMF determined that the current Greek programme, which still has about 16.5bn to disburse and was due to expire in March, had become out-dated. That could lead to political difficulties in Germany, which has fiercely resisted write-downs to levels the IMF has been demanding. It also means Germanys Bundestag is likely to be forced to sign off on a new eurozone bailout for Greece as soon as next month without the IMFs own component being in place (page 2).

There is also an interesting finding by FT that a plot within the Greek Syriza Government to should seize control of the Nomismatokopeion, the Greek mint, where the bulk of the countrys cash reserves are kept. Nomismatokopeion currently hold only about 10bn of cash enough to keep the country afloat for only a few weeks but not the estimated six to eight months required to prepare, test and launch a new currency (page 2).

A good discussion on the privatisation of Greek assets by The Guardian the paper said privatisation remains a vital element of Greeces latest bailout deal. Athens agreed to transfer valuable assets to an independent fund, with the aim of raising 50bn. Half the proceeds will be used to shore up capital reserves at Greek banks; a quarter will be used to repay Greeces creditors, and the remainder will be spent on unspecified investments. However, independent observers fear just that privatisation in Greece right now means a fire sale. Peter Doyle, a former IMF economist, fears Greece could be heading down the path taken by Russia in the 1990s, when valuable state assets were sold at knockdown prices to raise urgently-needed cash, creating a new oligarch class in the process (page 3).

While creditors are preparing for talks on Tuesday, which I doubt will kick-off, PM Tsipras is also struggling to keep a lid on dissent within SYRIZA as a bloc of around 30 of the partys 149 MPs object to his compromise with creditors, which foresees more austerity. It is understood that a party congress should be held in September to refocus SYRIZA. Early elections, which are considered inevitable in view of the upheaval within the party, are expected to take place immediately after the congress, either later in September or in October or even November (page 5).

Finally, Kathimerini said Athens Medical Association reported that an increasing number of Greek doctors, especially those in highly specialized fields, have been leaving for jobs abroad (page 5).

Independent on Sunday has published a report that British PM David Cameron is set to hold the in-or-out referendum on Britains future membership of the European Union in June next year and will announce the fast-tracked date as the centrepiece of his partys annual conference in October. Chancellor George Osborne was believed to be keen for the referendum to be held later rather than sooner but Cameron has now calculated that a 2016 vote will give him a better chance of promoting what may end up being a limited package of EU reforms (page 8).

David Smith in The Sunday Times said GDP figures this week are predicted to show Britain grew by 0.7% in the three months to June, up from 0.4% in the first quarter. A 0.7% figure would suggest that the slowdown in the economy in the first quarter was temporary, and that growth is proceeding at an annual pace of 2.5% to 3% (page 8).

On the topic of UK interest rates, Liam Halligan in The Sunday Telegraph warned that longer we wait before raising rates the higher the risk of a balance of payments emergency, a currency collapse and aggressive rate hikes. He focussed his argument on UK deficit. In 2012, the external deficit was 3.5pc of national income. Then it grew to 4.7pc. Last year, the UKs current account deficit was no less than 5.9pc of GDP. For many years, the UK has run a deficit on visible trade like goods and raw materials. This wont be reversed any time soon. The interesting point is that the UK Government talks a lot about austerity and rather less about massive external deficit (page 9).

In an interview with Sunday Telegraph, Polands Narodowy Bank Polski Governor, Marek Belka said country remains reluctant to join the euro, as he warns that world is running out of ammunition to fight the next financial crisis. Quote, You shouldnt rush when there is still smoke coming from a house that was burning. Belka also said it was crucial that Greece, like Poland in the Nineties, received debt relief from its creditors, as he appeared to urge the bloc to do more to boost growth in the country (page 10).

There are several interesting corporate news check out page 14, Israelis Teva Pharmaceutical is nearing a deal to acquire Allergans generics drug unit for between $40bn and $45bn. If a deal is clinched with botox-maker Allergan, it is unlikely to pursue Mylan any further.

Not good for India. Last Friday the Finance Ministry submitted 188-page draft Indian Financial Code and in it, and one of the proposals included removing the control of interest rates from the central bank (page 18).

News on GreeceRenewed bailout talks between Greece and creditors hit snagsTaken from the FT Saturday, 25 July 2015Talks to agree a new 86bn bailout for Greece ran into trouble on Friday after Athens raised hurdles for negotiators in the Greek capital, forcing them to postpone their arrival amid renewed acrimony.

Alexis Tsipras, the Greek prime minister, agreed last week to fully normalise talks with creditors on the ground in Athens after resisting their presence for months a key demand made by eurozone leaders when they agreed to reopen rescue talks after coming close to pushing Greece out of the eurozone.

Two of the officials said Greek authorities had also insisted negotiators no longer use the Athens Hilton as their base a hotel close to central Syntagma Square and a short drive to the finance ministry instead proposing hotels far from the capitals government quarter.

It is fundamentally more of the same, said a senior official from one of the of bailout monitors, colloquially known as the troika after the three institutions originally involved in the talks, the European Commission, European Central Bank and International Monetary Fund. They dont want to engage with the troika.

Greek officials insisted the renewed stand-off was only a temporary delay and that talks would resume over the weekend or Monday at the latest. George Stathakis, economy minister, said he was confident the negotiations would be finished by mid-August, when Athens needs the bailout cash to pay off a 3.2bn bond held by the ECB.

Mr Stathakis said Greece and its creditors had already found common ground on many of the main issues, including fiscal targets, stabilising the banking sector, liberalisation of product markets and professions, labour market reforms and privatisations of state assets.

We have three weeks, and Im confident that its enough for the existing agenda, Mr Stathakis told the Financial Times. We agree in certain areas. In others, there are different views and some distance needs to be covered. But the last European summit gave a framework that indicates which directions to follow, and thats why I think three weeks will be enough.

Still, one creditor official said negotiating teams were sitting on their suitcases and had no plans to go to Athens until the logistical issues were resolved.

Adding another potential complication, the Greek government on Friday lodged a formal request with the IMF to begin discussions on a new, third bailout programme. The request came after officials at the IMF determined that the current Greek programme, which still has about 16.5bn to disburse and was due to expire in March, had become outdated.

Those negotiations between Athens and the IMF could take months. But the decision to pursue a new IMF programme means eurozone leaders may have to open talks on granting Greece significant debt relief much earlier than originally anticipated, since the IMF will not sign on to a new programme unless eurozone lenders agree to restructure their bailout loans.

That could lead to political difficulties in Germany, which has fiercely resisted writedowns to levels the IMF has been demanding.

It also means Germanys Bundestag is likely to be forced to sign off on a new eurozone bailout for Greece as soon as next month without the IMFs own component being in place something German officials have insisted was necessary to win approval from wavering centre-right MPs.

According to people briefed on IMF thinking, the current rough plan is to begin negotiations on a new IMF programme after Greece completes separate negotiations with eurozone creditors. That would mean the new IMF bailout would not be in place until October or November and could be linked to the completion of a first review of Greeces progress in its eurozone programme.

Despite severe downgrades in Greek growth projections by the IMF and other bailout monitors, Mr Stathakis said he believed that the economy could bounce back quickly once a new programme was agreed.

Despite the circumstances of the past six months, and despite the liquidity problems, the recession is relatively small, said Mr Stathakis. I have a theory that the Greek economy has a strong pro-cyclical tendency. Thats why we may return relatively quickly to a positive growth path.

(Full article click - FT)---

Syrizas covert plot during crisis talks to return to drachmaTaken from the FT Saturday, 25 July 2015Arresting the central banks governor. Emptying its vaults. Appealing to Moscow for help.

These were the elements of a covert plan to return Greece to the drachma hatched by members of the Left Platform faction of Greeces governing Syriza party.

They were discussed at a July 14 meeting at the Oscar Hotel in a shabby downtown district of Athens following an EU summit that saw Greece cave to its creditors, leaving many in the party feeling despondent and desperate.

The plans have come to light through interviews with participants in the meeting as well as senior Greek officials and sympathetic journalists who were waiting outside the gathering and briefed on the talks.

They offer a sense of the chaos and behind-the-scenes manoeuvring as Greece nearly crashed out of the single currency before prime minister Alexis Tsipras agreed to the outlines of an 86bn bailout at the EU summit. With that deal still to be finalised, they are also a reminder of the determination of a sizeable swath of Mr Tsipras leftwing party to return the country to the drachma and increase state control of the economy.

Chief among them is Panayotis Lafazanis, the former energy and environment minister and leader of Syrizas Left Platform, which unites a diverse group of far left activists from supporters of the late Venezuelan president Hugo Chvez to old-fashioned communists. He was eventually sacked in a cabinet reshuffle after voting against reforms tied to the bailout.

Obviously it was a moment of high tension, a Syriza activist said, describing the atmosphere as the meeting opened. But you were also aware of a real revolutionary spirit in the room.

Yet even hardline communists were taken aback when Mr Lafazanis proposed that the Syriza government should seize control of the Nomismatokopeion, the Greek mint, where the bulk of the countrys cash reserves are kept.

Our plan is that we go for a national currency. This is what we should have done already. But we can do it now, he said, according to people present at the meeting.

Mr Lafazanis said the reserves, which he claimed amounted to 22bn, would pay for pensions and public sector wages and also keep Greece supplied with food and fuel while preparations were made for launching a new drachma.

Meanwhile, the central bank would immediately lose its independence and be placed under government control. Its governor, Yannis Stournaras, would be arrested if, as expected, he opposed the move.

For people planning a conspiracy to undermine the Greek state, they were pretty open about it, said one reporter who staked out the event.

The plan demonstrates the apparently ruthless determination of Syrizas far leftists to pursue their political aims but also their lack of awareness of the workings of the eurozone financial system.

For one thing, the vaults at the Nomismatokopeion currently hold only about 10bn of cash enough to keep the country afloat for only a few weeks but not the estimated six to eight months required to prepare, test and launch a new currency.

The Syriza government would have quickly found the countrys stash of banknotes unusable. Nor would they be able to print more 10 and 20 banknotes: From the moment the government took over the mint, the European Central Bank would declare Greek euros as counterfeit, putting anyone who tried to buy something with them at risk of being arrested for forgery, said a senior central bank official.

The consequences would be disastrous. Greece would be isolated from the international financial system with its banks unable to function and its euros worthless, the official added.

As the details of the Left Platform meeting have leaked out, some political opponents are demanding an accounting.

Members of this government planned a trip to hell for Greeks, said Stavros Theodorakis, leader of the pro-EU To Potami party. They planned to raid the vaults of the people and invade the mint as if it were a Playmobil game. Alexis Tsipras must tell us the truth about what happened.

Mr Lafazanis did not respond to repeated requests for comment. A spokesman did not deny the plans but called Mr Theodorakis reaction garbage and dismissed it as typical of the countrys political class.

Mr Lafazanis was not alone in suggesting unorthodox ways in which Greece might adopt a new drachma: Just before Mr Tsipras signed up to the bailout, his former finance minister, Yanis Varoufakis, publicly proposed issuing IOUs to cover all payments until a new currency could be formally issued. He also called for the government to take over control of the central bank.

Even before the Oscar Hotel meeting, Mr Lafazanis, a former Greek Communist Party official, was pursuing desperate schemes to address the governments financial woes.

Given the communist past of Mr Tsipras and other leading government figures, Athens believed it would be a simple matter to win $5bn to $10bn in financial backing from Vladimir Putin, the Russian president.

Mr Lafazanis visited Moscow three times as Mr Tsiprass envoy after Syriza came to power in January. In return for signing up to a new gas pipeline project, he hoped for at least 5bn in prepayments of gas transit fees, according to people briefed on the initiative. But the Russians rejected the deal the week before the EU summit.

It was all a fantasy, said a senior Greek banker. The Left Platforms dreams of free gas and a Russian-backed drachma have crumbled away.

(Full article click - FT)---

The great Greece fire saleTaken from the Guardian Saturday, 25 July 2015Greece needs to sell off 50bn worth of state assets such as airports and marinas quickly as part of its third bailout deal. But is such a plan realistic?

In the early days of the Greek debt crisis, two German politicians came up with a radical solution: Greece should sell off some of its uninhabited islands and property to pay back its creditors. Sell your islands you bankrupt Greeks! And sell the Acropolis too! was how the German tabloid Bild summed up their idea.

While selling off ancient monuments was never a serious idea, the privatisation of state assets has always been an integral feature of Greeces international bailouts. Over the past five years, Greece has faltered on promises to sell vital parts of its infrastructure ports, airports, marinas and waterworks in exchange for billions of euros in loans.Privatisation remains a vital element of Greeces latest bailout deal. Under threat of being forced out of the eurozone, Athens agreed to transfer valuable assets to an independent fund, with the aim of raising 50bn (35bn). Half the proceeds will be used to shore up capital reserves at Greek banks; a quarter will be used to repay Greeces creditors, and the remainder will be spent on unspecified investments.

The privatisation fund was the issue that almost forced a Grexit at the marathon 17-hour, all-night summit of European leaders in Brussels earlier this month. It was the only thing discussed at the summit, recalls one diplomat.

At 6am, as Greece teetered on the brink of leaving the euro, the Greek prime minister, Alexis Tsipras, was still haggling over privatisation details with his counterparts, Angela Merkel and Franois Hollande.

The idea of the privatisation fund first emerged in a leaked German government paper which argued Greece should leave the eurozone if it did not agree to put 50bn in a Luxembourg fund as collateral for its debts. Although drafted in Berlin, the plan soon found support among Greeces hardline creditors in central Europe and the Baltics.

Tsipras wrung two concessions: the fund would be run from Athens, not Luxembourg, and a tranche of the cash would be earmarked for investments in Greece.

The privatisation fund is likely to remain one of the most contentious issues as Greece and its creditors strive to conclude bailout talks by mid-August.

From the creditors perspective, Greek privatisation has been failure heaped upon failure. In 2011, international creditors decreed that Athens would raise 50bn by the end of 2015 from selling state assets. By early 2015, only 3.2bn had been raised; none of the most sensitive aspects airports, ports, railways had been sold. Neither officials at the European commission nor the International Monetary Fund are taking the 50bn target remotely seriously.

In a devastating analysis of Greeces debt burden published in July, the IMF said it was realistic to assume asset sales would be worth no more than 500m a year meaning it could take 100 years to raise 50bn.

Gabriel Sterne at Oxford Economics argues that the IMF has failed to learn from its recent history that less is more when it comes to setting numerical targets. It is economics versus faith Somehow we will make this work even if it doesnt add up but the economics really doesnt add up.

When Syriza swept to power in January, one of its first actions was to sack the people in charge of Greeces privatisation agency and cancel plans to sell Greeces electricity transmission operator (ADMIE). The sale of other assets most notably regional airports and the port of Piraeus had almost been completed, but was thrown into doubt. The government is expected to put up little resistance to the sales now being concluded. Venues purpose-built for the 2004 Athens Olympic games, which have sat derelict and rotting for the past decade, will also be among the assets moved to the fund, alongside state utilities, including the water board and ADMIE.

Both Russia and China have expressed interest in snapping up the state-run railway network, one of the biggest encumbrances on public finances before the debt crisis erupted in late 2009. The Greek state is also rich in buildings bequeathed by individuals to municipalities and the Orthodox Church properties that are also expected to be included in the fund. Contrary to popular perception, the public sector owns very few islands. The sale last week to Hollywood star Johnny Depp of the Aegean islet of Stroggilo, for a reputed 4.2m, was conducted privately.

While Tsipras has been forced into a humiliating climbdown over the sale of state assets, he has repeatedly branded the entire bailout plan as a bad deal that he doesnt believe in.

Unions with ties to the governing party have already vowed to wage war to stop the sale of docks in Piraeus, where the Chinese conglomerate, Cosco, currently manages three piers. With the debt-stricken country on its knees, officials have stressed that the prime minister will fight to ensure the denationalisations are not seen as a fire sale.

However, independent observers fear just that. Privatisation in Greece right now means a fire sale, political economist Jens Bastian said.

Bastian was one of the officials responsible for privatisation under the European commissions Taskforce for Greece, a body of experts distinct from the troika. He thinks it was a political mistake to set a target to raise 50bn from asset sales, in the absence of support from Greek politicians across the political spectrum, from the centre-right New Democracy party, to Pasok on the centre-left and Syriza on the left.

We have never had a political majority to embrace the idea of privatisation. How are you going to create the political momentum that has been absent in the past years under more difficult conditions today? he asks.

Greeces creditors share such scepticism. Their answer is tighter controls. The privatisation fund will be managed by Greeks under the close watch of creditors.

The privatisation fund has few precedents, although it has been compared to the Treuhandanstalt, the German agency created in the dying days of the GDR to privatise East German assets shortly before reunification. Greeces former finance minister, Yanis Varoufakis, was one of the first to draw the parallel, although others offer the comparison unprompted. Peter Doyle, a former IMF economist, says the Treuhand offers the closest parallels: the agency had full control over government ministries to sell assets quickly. The principal task was to sell these things to somebody for cash.

Greek government officials and opposition politicians said it was too early to know how the Greek fund would operate.

Weve got a long way to go before we have a clear picture of what this fund and the privatisation scheme will entail, Anna Asimakopoulou, shadow finance minister with the main opposition New Democracy party, told the Guardian. But the entire privatisation process will feature large in negotiations because Tsipras is so opposed to them and creditors see them as a good way to raise revenues.

Greece has an urgent need for cash: although the eurozone bailout is meant to be worth up to 86bn, only 50bn is on the table, via the eurozones bailout fund, the European Stability Mechanism.

Doyle thinks Greeces bailout is underfunded. The Europeans just dont have enough cash ... and a major way to fill that gap is through privatisation. Officials at the Greek privatisation agency are going to find their arms very strongly twisted to provide needed cash, he says.

The privatisation agency is facing a trade off between doing something that is fair and open and following judicial procedures, or something that is going to deliver needed cash.

He fears Greece could be heading down the path taken by Russia in the 1990s, when valuable state assets were sold at knockdown prices to raise urgently-needed cash, creating a new oligarch class in the process.

The very thing we all think that Greece needs to get rid of its oligarchy will in fact be entrenched by privatisation done this way, argues Doyle, who worked on privatisations in the Czech Republic, Slovakia and Poland in the 1990s. The difference between those countries and Greece, he thinks, is that the population and political class in central Europe accepted the idea of privatisation, despite the short-term hardships.

He is convinced the current privatisation plan for Greece is doomed to fail. The programme was set up to encourage Greece to leave the euro and that plan didnt work, so now we are stuck with the privatisation arrangement that nobody, not even the original creditors, ever intended to happen.

Up for sale

Helliniko Olympic complex

Ports of Piraeus and Thessaloniki

14 regional airports

PPC power company, including ADMIE, the electricity transmission operator

DEPA natural gas company

Hellenic Petroleum

Hellenic Post

Athens Water Supply and Sewerage Company

Xenia Hotels in Rhodes

Marinas of Chios, Pylos and other locations

Source: Hellenic Republic Asset Development Fund(Full article click - Guardian)---

Tsipras briefs party leaders as ground laid for creditorsTaken from the Kathimerini Saturday, 25 July 2015As Prime Minister Alexis Tsipras and other party leaders met with President Prokopis Pavlopoulos for talks on upcoming negotiations with Greeces creditors and on the prospect for early elections, Greek and foreign officials sought to solve procedural and logistics issues to allow auditors to return to Athens.

On Friday evening Finance Minister Euclid Tsakalotos sent a letter to the International Monetary Fund, requesting a new loan facility in line with IMF demands. IMF spokesman Gerry Rice had indicated on Thursday that an official request must be made to the Fund before it can join talks. With that obstacle apparently overcome, Greece and its creditors must now agree on where and how talks with foreign officials will take place. The SYRIZA-led government had previously objected to auditors accessing ministries, preferring that work be done in hotels.

Some groundwork has been prepared by Greek and European officials by telephone. There is even talk of a Eurogroup summit on August 11. But Greeces creditors are said to want the government to draft more legislation, with more prior actions, over the next two weeks. Government officials, however, have indicated that no new prior actions will be necessary and are aiming to finalize an agreement and bring it to Parliament by August 18, two days before a scheduled repayment to the European Central Bank.

Tsipras on Friday spoke by telephone with French President Francois Hollande who congratulated him for promptly adopting the prior actions as set out in the written document of the eurozone summit, the premiers office said. Both leaders confirmed the importance of commitments... being honored mutually and to the letter, the statement continued. It was referring to commitments agreed to at a July 12 eurozone leaders summit. There was no mention of any further measures which Tsipras is keen to avoid.

Upcoming negotiations with creditors topped the agenda of talks on Friday between Tsipras and other party leaders who met at the presidential mansion with Pavlopoulos for a lunch intended to convey a picture of unity. According to sources, Tsipras said he was seeking debt relief from creditors and was determined to bring a deal to Parliament by August 18. Efforts would be made to put back the tougher measures being sought by lenders, he is said to have told fellow party leaders. As for early elections, he said they were a real prospect in view of the current upheaval within SYRIZA but that they would not happen before an agreement is reached. One of the SYRIZA rebels that has caused the biggest headaches for Tsipras is parliament speaker Zoe Constantopoulou. PASOK leader Fofi Gennimata on Friday sent a letter to Tsipras calling for him to dismiss her for overreaching her authority in violation of the Constitution and for a lack of respect.

Meanwhile, prominent conservative Vangelis Meimarakis, who took over as interim leader of New Democracy when Antonis Samaras resigned after the July 5 referendum, was approved by the partys political committee as NDs eighth president.(Full article click - Kathimerini)---

Crazy Zoe rouses hard left against TsiprasTaken from the Sunday Times 26 July 2015THE Greek prime minister, Alexis Tsipras, is locked in a bitter power struggle with the parliaments hardline Speaker, Zoe Konstantopoulou the one rival who can match his charisma on the national political stage.

If he cannot put down the rebellion, Tsipras may be forced to call an early general election in September.

The beleaguered Greek leader has suffered two big revolts against austerity led by Konstantopoulou and dozens of MPs from the radical Left Platform of the governing Syriza party.

Legislation spanning VAT and other tax rises and judicial and banking reforms passed only with the support of the pro-European opposition. Up to 39 Syriza members refused to toe the line.

Konstantopoulou, vehemently opposed to the bailout, denounced the deal as a coup and blackmail and lambasted criminal behaviour by Greeces eurozone partners.

Tsipras responded by accusing the Speaker, nicknamed Crazy Zoe for her radical views, of creating institutional discord, an exchange many interpreted as laying the grounds to oust his rival.

Zoe Konstantopoulou is the quintessential loose cannon, smashing into everything around her, said Antonis Papagiannidis, a political analyst. There is even a danger that her unpredictable behaviour may cause terminal damage to Mr Tsipras.

The dispute between the two former allies is part of a wider divide between the main part of Syriza and members of Left Platform, who are anti-Europe, anti-troika and anti-bailout, he said. The result could be that rebels leave or are even ejected from the government benches.

A limited cabinet reshuffle saw Tsipras sack some hardliners who had voted against austerity, including Panagiotis Lafazanis, the former energy minister and head of the Left Platform.

In a further twist, Lafazanis was yesterday reported to have plotted to seize the Greek mint and use the countrys cash reserves to break away from the euro after an EU summit at which Tsipras caved in to Greeces creditors.

Participants in a meeting of Left Platform members at a shabby Athens hotel on July 14 said Lafazanis claimed the reserves would keep Greece afloat until a new drachma currency was printed.

There was a real revolutionary spirit in the room, one of those present told the Financial Times. Lafazanis has not commented on the report.

Yanis Varoufakis, the former finance minister, meanwhile, announced plans yesterday for a European alliance to revitalise politics.

If early elections were held, Tsipras who is still riding high in public opinion polls would still be likely to come first, even if Syriza splits in two.

The Greek economy remains in crisis. Banks have reopened but withdrawals are limited to 420 (297) a week.(Full article click - Times)---

Gov't braces for talks with creditors amid upheaval in SYRIZATaken from the Kathimerini Sunday, 26 July 2015Even as Prime Minister Alexis Tsipras grapples with serious divisions within SYRIZA, government officials are bracing for the launch of face-to-face negotiations with representatives of the countrys creditors which are expected to begin next week.

The government is hoping to seal a deal with creditors by mid-August and certainly before August 20 when a 3.2-billion-euro debt repayment to the European Central Bank is to come due. Greece does not have the money to repay the debt and is hoping for a deal to be reached, allowing the partial disbursement of some funding, either from a new program or from residual funding from the recapitalization of Greek banks.

But sources indicate that creditors are less optimistic about a deal being finalized so soon. As a result officials are said to be considering the possibility of a second bridge loan to Greece, which would allow it to cover the ECB debt and other obligations, before an agreement on a third bailout is finalized.

Although officials from countries that have taken a hard line opposite Greece, including Germany and some north European states, reportedly want Athens to commit to more prior actions, European Economy and Monetary Affairs Commissioner Pierre Moscovici has indicated that this will not be necessary.

Creditors are expected to seek additional measures at some point, however, to plug a widening fiscal gap. Tsipras is also struggling to keep a lid on dissent within SYRIZA as a bloc of around 30 of the partys 149 MPs object to his compromise with creditors, which foresees more austerity.

The premier has indicated that a party congress should be held in September to refocus SYRIZA. Early elections, which are considered inevitable in view of the upheaval within the party, are expected to take place immediately after the congress, either later in September or in October or even November. In comments on Saturday, State Minister Nikos Pappas acknowledged that the country cannot continue indefinitely with a minority government, referring to the mass defections by SYRIZA MPs in recent parliamentary votes.

A meeting of SYRIZAs political secretariat is due on Monday.(Full article click - Kathimerini)---

Greek doctors, nurses leaving in droves for jobs abroadTaken from the Kathimerini Sunday, 26 July 2015An increasing number of Greek doctors, especially those in highly specialized fields, have been leaving for jobs abroad, according to the Athens Medical Association (ISA), which warns of major staffing shortages in the years to come.

ISA figures show that from 2010 and to the present, more than 7,500 doctors have emigrated from Greece, when the average up until 2009 was at around 550 per year. In the first six months of this year alone, it issued 790 certificates of competence (one of the papers needed for medical staff to work abroad).

One of the biggest losses in the crisis has been that of great minds, ISA chief Giorgos Patoulis told Kathimerini. In a short time the national healthcare system will have an aged personnel and will be unable to staff services.

Qualified nurses around 8,000 of whom are unemployed are also having trouble finding work, with the Greek Nurses Union saying that it issued 74 certificates in 2010, 357 in 2012 and 349 last year.(Full article click - Kathimerini)---

Government seeks alternatives to grid operator saleTaken from the Kathimerini Sunday, 26 July 2015Greece will look to alternatives to privatizing its power grid operator ADMIE as part of a new bailout deal with its lenders, Energy Minister Panos Skourletis told the weekly Agora newspaper in an interview published on Saturday.

As part of measures Greece agreed with its creditors to start talks on a new bailout deal, Athens has committed to selling ADMIE unless replacement measures that would also open up competition in the market can be found.

We will follow the path of alternative, equivalent measures, as has been the case in other European countries, Skourletis, who took over as energy minister following a reshuffle last week, told the paper.

He said the strategic importance of the power grid meant it should stay in public hands.

A previous conservative government had launched the sale of a 66 percent stake in ADMIE, a unit of the countrys dominant electricity utility PPC, and four investors had been shortlisted as buyers.

But the leftist government of Alexis Tsipras halted the privatization along with other state asset sales after it came to power in January.

We should realize that PPCs role and its assets managed by ADMIE are priceless, Skourletis said, adding that he was also against privatizing PPC.

Under a previous plan agreed with its lenders, Greece would spin off PPC and sell part of its production capacity to investors.(Full article click - Kathimerini)---

Greek bailout talks pushed back by a few days on logistics-officialTaken from the Reuters News Sunday, 26 July 2015Talks between Greece and its international creditors over a new bailout package will be delayed by a couple of days because of organizational issues, a finance ministry official said on Saturday.

The meetings with officials from the European Commission, European Central Bank and International Monetary Fund were supposed to start on Monday after being delayed for issues including the location of talks and security last week.

A finance ministry official, who declined to be named, said talks between the technical teams of the lenders will start on Tuesday, while the mission chiefs will arrive in Athens with a delay of a couple of days for technical reasons.

"The reasons for the delay are neither political, nor diplomatic ones," the official added.

Greeks have viewed inspections visits by the lenders in Athens as a violation of the country's sovereignty and six months of acrimonious negotiations with EU partners took place in Brussels at the government's request.

Another finance ministry official denied earlier on Saturday that the government was trying to keep the lenders' team away from government departments and had no problem with them visiting the General Accounting Office..

Asked if the government would now allow EU, IMF and ECB mission chiefs to visit Athens for talks on a new loan, State Minister Alekos Flabouraris said: "If the agreement says that they should visit a ministry, we have to accept that."The confusion around the expected start to the talks on Friday underlined the challenges ahead if negotiations are to be wrapped up in time for a bailout worth up to 86 billion euros to be approved in parliament by Aug. 20, as Greece intends.

Already, Prime Minister Alexis Tsipras is struggling to contain a rebellion in his left-wing Syriza party that made his government dependent on votes from pro-European opposition parties to get the tough bailout terms approved in parliament.

CALL FOR CLEAR SOLUTION

One of Tsipras' closest aides said that the understanding with the opposition parties could not last long and a clear solution was needed, underlining widespread expectations that new elections may come as soon as September or October.

"The country cannot go on with a minority government for long. We need clear, strong solutions," State Minister Nikos Pappas told the weekly Ependysi in an interview published on Saturday.

Apart from the terms of a new loan, Greece and its lenders are also expected to discuss the sustainability of its debt, which is around 170 percent of GDP. Greece has repeatedly asked for a debt relief and the IMF has said this is needed for the Greek accord to be viable.

European Commission Vice President Valdis Dombrovskis told Italy's La Stampa daily in an interview that a recent analysis on the issue "justified some concerns". He added a Greek exit from the euro was "certainly out of the question now".Tsipras, who is by far the most popular politician in Greece according to opinion polls, has said his priority is to secure the bailout package before dealing with the political fallout from the Syriza party rebellion.

According to a poll by Metron Analysis for Parapolitika newspaper on Saturday, 61 percent of Greeks had a positive view of Tsipras against 36 percent who disapproved. An overwhelming majority - 78 percent - still wanted Greece to stay in the euro zone against 19 percent in favor of going back to the drachma.

Tsipras insists there is no viable alternative to the bailout but has been wary of striking out against his party opponents in a bid to keep it together, at least while talks proceed.

Flabouraris called on Syriza rebels to drop their opposition."They are still my comrades and I urge them to get back to their senses even at the last moment," he told Skai television. "They should realize that the Left movement is now in power. It's not an opposition party. Now we have to discuss the new landscape."(Full article click - Reuters)

Other European NewsGermany open to discuss euro zone budget with own tax: SpiegelTaken from the Reuters News Saturday 25 July 2015Germany is willing to discuss the creation of a euro zone finance minister who would have his own budget and raise extra taxes, the German magazine Der Spiegel reported on Saturday.

European Commission President Jean-Claude Juncker last month laid out a vision for tighter joint control over the currency zone's economies, including a common euro zone treasury one day.

German Finance Minister Wolfgang Schaeuble is open to the idea to transfer "substantial financial resources" from his tax revenues to a separate budget of the monetary union, sources in the finance ministry told the magazine.

One option could be that the 19-Euro zone member countries would transmit parts of their national revenues from income and value-added tax to such a euro zone budget, the report said.

The euro zone finance minister could also get the right to put a surcharge on taxes, which would amount to the creation of a "euro tax", it added.

"We are ready to discuss these issues seriously", the magazine quoted a German finance ministry source as saying.

A spokeswoman for Schaeuble neither confirmed nor denied the report, saying the discussion on the creation of such a separate fiscal capacity for the euro zone was just beginning.

"Individual elements under discussion have to be seen in the overall context and they would also require changes to the European treaties," the spokeswoman said.

"In this regard, the talk of a 'euro tax' is completely misleading," she added.

European Parliament lawmaker Elmar Brok, a leading member of German Chancellor Angela Merkel's conservative party, told the magazine: "The euro zone has to think about its own tax."

In a report issued in cooperation with the European Central Bank and other EU bodies, Juncker last month proposed more help for states in distress, combined with tougher discipline for countries that miss fiscal targets.

The so-called "Five Presidents' Report" recommended "quick fix" steps that could be introduced in the next two years, such as setting up a common bank deposit insurance system and promoting competitiveness, as well as longer term ideas such as a common euro zone treasury.(Full article click - Reuters)---

UK premier faces criticism over Malaysia visit during scandalTaken from the FT Saturday 25 July 2015Politicians in Malaysia have criticised David Cameron for his decision to visit the country in the midst of a national scandal over alleged corruption.

The UK prime minister will lead a business delegation next week to south-east Asia, the first of a series of high-profile meetings with Asian political leaders designed to promote British trade outside Europe.

But next weeks trip has already run into trouble, with opposition MPs in Malaysia saying Mr Camerons visit could damage Britains reputation in that part of the world.

Mr Cameron is due to meet Najib Razak, his Malaysian counterpart, just weeks after allegations surfaced that more than $600m linked to an indebted state development fund was transferred to a bank account in Mr Najibs name.

The Malaysian premier has denied receiving money for personal gain and has denounced the claims against him as a political plot. The allegations, which the Financial Times has not been able to verify, are being investigated by a special task force.

Nurul Izzah Anwar, an MP and the daughter of Anwar Ibrahim, the Malaysian opposition leader jailed this year for sodomy, said she feared Mr Camerons visit would send a negative perception that the UK government was not concerned about the current scandal-ridden ground on which Najib treads.

Tony Pua, national publicity secretary for the opposition Democratic Action party, said that any support shown by Mr Cameron for Mr Najib would taint [the] UKs international reputation as a country which supports democratic principles and good governance.

Mr Cameron has forged ties over the past few years with Mr Najib and Muslim-majority Malaysia, particularly over the fight against Islamist extremism. This week, the UK prime minister launched his new counter-terrorism strategy, promising to empower moderate and reforming Muslim voices.

Downing Street has not confirmed the prime ministers itinerary. But one official said: The prime minister thinks that we should engage with countries and leaders around the world. He has said that the way to talk about issues is to have an engaging relationship and try and work with countries.

Malaysia is a longstanding partner of the UK and the relationship is important for our prosperity and security.

The main reason for the trip is to promote British trade. Mr Cameron wrote in the Daily Mail newspaper on Friday: We need to go to the ends of the earth to sell our wares.

Britain has been keen to sell Eurofighter Typhoon military jets, manufactured by a joint venture 33 per cent owned by BAE Systems, to Malaysia. Ministers have been disappointed in recent years to see the aircraft lose out to rivals in the United Arab Emirates, Singapore and India.

Politics have thrown up further obstacles to Mr Camerons trip. He is not due to visit Thailand, a south-east Asian hub that is also investing in infrastructure and is an obvious place to try to develop British commercial interests. Western heads of government have tended to avoid visiting Bangkok because of the military coup in Thailand in May last year.

The British prime ministers visit to Vietnam, meanwhile, is likely to be seen in part as an effort to woo the Communist-ruled state towards the west, at a time when Hanoi and Beijing are clashing over disputed territories in the South China Sea. Ashton Carter, US defence secretary, visited Vietnam last month.

Vietnam has a tempting consumer market of 90m people, but its income levels are still well below those of Malaysia and Indonesia.

Mr Cameron is likely to be warmly received in Indonesia, however, where the country is keen to find ways to make up for the slumping price of global commodities, which comprise more than half of its exports.

At this point, Jokowi [President Joko Widodo] is desperate for any kind of trade, especially if the British do have something good on the table, said Yohanes Sulaiman, a political analyst based in Jakarta. The economy is in a really bad shape, so if [Mr Cameron] comes in and says, I have opportunities for trade that can be helpful for Jokowi, I think he will take it.

As Mr Cameron sets off for Asia, so will Nicola Sturgeon, Scotlands first minister, who is due to travel to China and Hong Kong. But unlike the prime minister, Ms Sturgeon will not meet any heads of state.

Scottish first ministers have often travelled separately from ministers in Westminster as a way of drumming up Scottish exports, of which whisky is the largest. Those visits are organised by the Foreign Office and UK Trade and Investment, but this has occasionally caused friction between the two governments.

Scottish ministers were irritated last year when pro-unionist politicians claimed that Alex Salmond, the former first minister, would not have been able to travel to China without the help of the UK Foreign Office.

(Full article click - FT)---

EU referendum: David Cameron fast-tracks vote on Britain's membership of European Union to June 2016Taken from the Independent on Sunday 26 July 2015David Cameron is set to hold the in-or-out referendum on Britains future membership of the European Union in June next year and will announce the fast-tracked date as the centrepiece of his partys annual conference in October.

Although the Queens Speech in May promised the British electorate would be given its first chance since 1975 to have a say on EU membership, the Government did not name a date for the vote, only that it would be held before the end of 2017. Chancellor George Osborne was believed to be keen for the referendum to be held later rather than sooner to maximise chances of securing the best possible deal for Britain, but the Prime Minister has now calculated that a 2016 vote will give him a better chance of promoting what may end up being a limited package of EU reforms, and of highlighting the economic risks Britain could face if it left the EU.The Independent on Sunday has learned that Mr Cameron has decided to pencil in June of next year. The source insisted that the 2016 date, and the parliamentary bill to approve it, would not prove to be a barrier in the House of Lords.

The recent turmoil in Greece, and the concerted efforts by member states to keep Greece in the euro and inside the EU, were also described as being influential over Downing Streets recalculation of the referendum date. The reluctance in Brussels to allow a member state to leave the European project has encouraged government leaders to believe that the reforms they are seeking will be granted. However, the Prime Minister has, according to senior sources, now accepted there is only a limited chance of securing changes to the EUs governing rules contained in the Lisbon treaty.

Downing Street sources confirm Mr Cameron is now confident that European leaders are embracing the need for change and want Britain to continue playing a leading role in the eurozone. One senior source said: Polls show that support for remaining inside the EU is the highest its been for a quarter of a century. The PM has already made his case to all 27 EU leaders and a vote held next year or the year after will not affect the outcome.Advisers have told Mr Cameron that he could copy a so-called unionist vow which preceded last years Scottish referendum in which voters were promised a package of reforms provided they voted in favour of the union. Using this approach the PM would tell British voters that the EU will make good on reforms and exemptions if there is a vote to remain in the EU.The Governments wish list for EU reform includes an opt-out from closer nation-state union inside the EU, changes to the way work benefits apply to EU migrants and an easing of the way Brussels enforces EU legislation on member-state parliaments.

The announcement of the 2016 date is planned to be a high-profile part of Mr Camerons keynote speech to the Tory conference in Manchester in October.

There are fears inside Downing Street that if the referendum date is allowed to drift into late 2017, Britains bargaining power would suffer. But holding the poll within a year would stop Britains demands becoming a divisive political issue in the French presidential and German federal elections, both in 2017.Mr Osborne may foreshadow the 2016 referendum date today when he kicks off a two-day visit to Paris in the first of a series of tours to European capitals over the next six months. The Chancellor is expected to hold meetings with members of Franois Hollandes administration, including his finance counterpart, Michel Sapin and the Foreign Minister, Laurent Fabius.

Mr Osborne is expected to repeat Mr Camerons assertion that there is rising public support among EU member states for the reforms Britain has asked for. He will tell French ministers that the UK referendum is an opportunity to make the case for reform across the EU.

The Chancellor is also expected to call for a more competitive and dynamic continent to ensure it delivers prosperity and security for all of the people within it, not just for those in Britain. As well as meeting leading figures in the Hollande government, Mr Osborne will appear on French media in an effort to, as the Treasury bills it, take Britains case for reform to the French people.

No 10 said that the vote would be before the end of 2017.(Full article click - IOS)---

David Smith: Britains growth picks up againTaken from the Sunday Times 26 July 2015THE economy accelerated in the second quarter of the year. Gross domestic product figures this week are predicted to show Britain grew by 0.7% in the three months to June, up from 0.4% in the first quarter.

The improvement will have been driven by the service sector, analysts say, and a rise in industrial output thanks to higher North Sea production. Manufacturing and construction where there are doubts about the official data are expected to have been weak.

While the preliminary estimate of GDP growth in the second quarter will be based only on the output side of the economy . . . consumer spending was seemingly healthy as it was supported by improved earnings growth and negligible inflation, said Howard Archer at the financial analyst IHS Global Insight.

A 0.7% figure would suggest that the slowdown in the economy in the first quarter was temporary, and that growth is proceeding at an annual pace of 2.5% to 3%.

The stronger picture is supported by the latest profit warnings monitor from the accountancy firm EY. It shows there were 57 warnings from UK companies in the second quarter, a 26% drop on the first quarter and the lowest since the third quarter of 2013.

Just 4% of quoted companies issued profit warnings in the second quarter. However, there were problems in the software and computer services industry, where the 17 warnings issued were the most for any FTSE sector. General retailers issued five warnings, the highest since 2011.

Stronger growth will fuel speculation that the Bank of Englands monetary policy committee is preparing to raise interest rates.(Full article click - Times)---

Liam Halligan: Watch out when attention turns to Britain's huge deficitTaken from the Sunday Telegraph 26 July 2015The longer we wait before raising rates the higher the risk of a balance of payments emergency, a currency collapse and aggressive rate rises

The pound rose sharply last Wednesday on speculation that the Bank of England will soon raise UK interest rates.

The nine-strong Monetary Policy Committee (MPC) was unanimous in its decision to keep rates at 0.5pc, the newly published minutes of its July meeting showed. That was as expected. The UKs bank rate has been on hold, after all, for no less than 76 consecutive months.

A number of members, though, are now considering an increase, the latest minutes revealed. And that was what moved the needle, with the pound up over half a cent against the euro the day the minutes were published.For months, market expectations have pointed to a rate increase in mid or late 2016. In recent weeks, though, there have been widespread predictions the balance of opinion on the MPC will swing towards a rise much sooner. One reason is that the UK economy, having grown no less than 2.9pc during the first quarter, is now officially expected to chalk up a buoyant 2.5pc expansion during 2015. Bank of England Governor Mark Carney has fuelled the rate-rise speculation, suggesting we could see an upward movement as early as the turn of the year.The MPCs latest minutes go further, reporting that the committee now thinks inflation, which fell back to 0pc in June, is anyway likely to pick up notably towards the end of 2015. Were it not for the unusually low contributions to the inflation rate from energy, food and imports, the minutes noted, inflation would already be around 1.5pc approaching the 2pc targeting.

Weve recently learnt the UK saw wage growth of 3.2pc during the three months to May the fastest rise in pay since April 2010. The MPC is also mindful that the sharp drop in oil prices over the last year will soon drop out of the annual numbers, again causing the headline inflation rate to rise.

At previous MPC meetings, the decision to keep rates on hold has been finely balanced for two committee members. The latest minutes, though, suggest a number of members are now close to voting for a rise. Thats been interpreted to mean that three or four rate-setters could opt for an increase as soon as the August or September MPC meetings perilously close to the five-vote, balance-tipping majority.For those finely balanced, the situation in Greece has been a very material factor in their decisions, said the minutes. In other words, concerns about Grexit, and related turmoil on financial markets, have so far convinced them its too early to raise rates. But now fresh emergency finance has been extended, and the danger of Grexit has passed, the chances of an early rate increase in both the UK and America are stronger.

Thats the official narrative. As I wrote last week, I dont buy it. For one thing, the possibility of Grexit is in no way behind us, and sits alongside several other systemic dangers not least an extremely precarious Chinese stock market. The economies of both the UK and America, meanwhile, their upturns mainly consumption-driven and debt-fuelled, remain rather weak. Its that combination of ongoing systemic danger and economic fragility that leads me to conclude both the Bank of England and Americas Federal Reserve remain quite a long way from raising rates.

On the currency markets, though, the pound reflects the growing sense that UK rates will soon rise. Carneys recent verbal intervention sent sterling above 1.44 to the euro, a seven-year high. Over the last year, as the prospects of a British rate increase have risen, and the eurozone has launched fully blown quantitative easing, hosing down its addled bond markets with virtually printed money, the pound has risen by over 11pc against the single currency.

That is worrying. The eurozone is the UKs biggest trading partner by far accounting for half our overseas commerce. An 11pc currency shift will have seriously dented or even wiped out the entire profit margin of many British exporters. While hindering our manufacturers, a stronger currency, by making imports cheaper, also results in an even greater share of UK growth being reliant on consumption.

Such concerns arent lost on the MPC. Sterling has appreciated markedly over the previous

12 months, reported the minutes, while noting that the appreciation of the exchange rate could have an adverse impact on the balance of growth in the economy.

Despite that, the markets remain fixated on the notion that either the UK or America will be the first major central bank to raise interest rates, which keeps both sterling and the dollar strong against the euro. With the European Central Bank and Bank of Japan in the throes of QE and the Bank of China on emergency alert given the dangers of a domestic equity meltdown, that would seem to make sense even if Im right and the Anglo-Saxon banks do indeed take longer than is widely expected to make their first move.

In the meantime, a rising pound by encouraging imports and undermining the sale of UK goods and services abroad will continue to damage an already extremely weak UK external balance.

While its unfashionable to talk about the current account these days, now that sterling is no longer a fixed exchange rate, I make absolutely no apology for pointing out that the UK is currently sporting a huge balance of payments shortfall.

In 2012, the external deficit was 3.5pc of national income. Then it grew to 4.7pc. Last year, the UKs current account deficit was no less than 5.9pc of GDP the worst performance on record. As the eurozone has tanked, a weaker euro and stronger pound have pulled apart our exports and imports. This year, as long as the rate-rise speculation continues and sterling keeps rising against the euro, our external deficit could get even worse.

For many years, the UK has run a deficit on visible trade like goods and raw materials. This wont be reversed any time soon, seeing as our last surplus on manufactured goods was in the early 1990s and were now a net oil importer.In recent decades, our deficit on visibles has been offset, and some years more than offset, by a surplus on both services (in particular financial services), plus investment income from abroad. Now, though, while our service surplus remains, our investments are deeply in deficit in part because the Government is paying large sums to holders of UK sovereign debt based abroad.

For now, while Britain is projecting an image of strong growth and the eurozone is a mess, sterling is seen as a safe haven. Our Government talks a lot about austerity and rather less about our massive external deficit or that our budget deficit remains close to 5pc of GDP. So the pound is strong and getting stronger, of course, given speculation that UK rates will soon rise.

In the end, though, and no one can tell when, the markets attention will shift, and it will become apparent that the UK, in fact, has a huge double deficit. That would result in the pound dropping fast, causing import prices and inflation to spike and forcing the Bank of England to take nasty emergency action.

Im not saying this scenario will play out and I sincerely hope it doesnt. But the longer we wait before raising rates, and the more the pound spirals upward, the higher the risk of a balance of payments emergency, a resulting currency collapse and a series of aggressive rate rises.

(Full article click - Telegraph)---

Poland will never join a 'burning' eurozone, says central bank governorTaken from the Sunday Telegraph 26 July 2015Marek Belka says country remains reluctant to join the euro, as he warns that world is running out of ammunition to fight the next financial crisis

Poland will not join the euro while the bloc remains in danger of burning, its central bank governor said.

Marek Belka, who has also served as the countrys prime minister, said the turmoil in Greece had weakened confidence in the single currency.

You shouldnt rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, dont expect us to be enthusiastic about joining, he said.

In a stark warning, Mr Belka also said the world was running out of ammunition to fight the next financial crisis.

We dont have the option of decreasing interest rates. Much fewer countries have fiscal space to intervene so we are less prepared, he said.

The governor suggested that Poland, which is obliged to join the euro as part of its EU membership, would not become a member for many years. He said interest would wane further if the political environment continued to shift to the Right.Mr Belka, a former head of the International Monetary Funds European division, said the eurozone was at risk of becoming trapped in a vicious circle where closer fiscal integration became more difficult because of splits over structural reforms and austerity.

As long as there is divergence or as long as we have problems in some countries, its more difficult to build up a solid foundation for the real fiscal union in the eurozone. So this is a little bit of a vicious circle, he said.

He said closer union was needed within a generation to prevent the bloc from lurching from crisis to crisis.

Mr Belka also said it was crucial that Greece, like Poland in the Nineties, received debt relief from its creditors, as he appeared to urge the bloc to do more to boost growth in the country.

I think that what has been achieved [with the debt deal] provides temporary respite but not a solution. The real problem for Greece is how to reinvigorate sustainable growth. Without sustainable growth Greece will periodically fall into problems, he said.The full interview

What do you think about the situation in Greece?

Quote: I think that what has been achieved provides temporary respite but not a solution. The real problem for Greece is how to reinvigorate sustainable growth. Without sustainable growth Greece will periodically fall into problems. But of course we expect that the reforms are going in a good direction. The problem is that normally it takes a lot of time for these reforms to have positive consequences.

Do you believe that Greece needs debt relief?

Quote: I would call it a debt reprofiling, rather than debt relief which is the same but sounds better and politically more acceptable. Either way, I think at one point sooner or later Greece needs it.

What are the chances of Poland joining the euro?

Quote: You shouldnt rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, dont expect us to be enthusiastic about joining.

Does the eurozone need fiscal union to ensure it survives?

Quote: I think it does. I dont think the euro area is solid enough without some elements of fiscal union. The only problem is, the more divergent the euro members are, the more difficult it is politically and economically to build such a union. Im sure there will be no problem in setting up a fiscal union of some sort between countries of the north, so as long as there is divergence or as long as we have problems in some countries, it's more difficult to build up a solid foundation for the real fiscal union in the eurozone. So this is a little bit of a vicious circle, but this is how we see it from our side.

What needs to happen in the eurozone to make it attractive for Poland to join?

Quote: The eurozone needs to grow solidly and build up a solid foundation for its currency, including elements of fiscal union and common economic policy. This is something that we cannot say fully determine upfront. Its more of a moving target.

What is the mood music like in Poland for joining the euro?

Quote: The situation around Greece does not increase confidence in the euro, thats for sure, and if we have a political change more into the right, then the enthusiasm to join the euro is going to be even weaker.

How long will it take for the eurozone to fix its problems? Can it be done within a generation?

Quote: We dont have as much time as a generation. But it will take a while.

What does your time working at the IMF tell you about its role in the debt crisis?

Quote: I think it was quite unusual for the IMF to be part of a team of three, rather than doing it on its own. The programme was a compromise between what the IMF thought was most proper and the exigencies of European integration. So this is an uneasy alliance in the sense that the priorities of Brussels might be slightly different than the priorities of Washington. So its an uneasy task and unusual task. But on the other hand how can the IMF ignore the situation in Greece and other European countries? This would make the IMF less relevant in the world. So this is the product of certain circumstances and compromises.

What is the biggest risk to the global economy?

Quote: The next crisis, because we have used so much of our war chest to fight the former crisis that it would be difficult to fight another one. We dont have the option of decreasing interest rates. Much fewer countries have fiscal space to intervene so we are less prepared. If we get into a next crisis, we have less weaponry to fight it.(Full article click - Telegraph)---

Jaguar drives for plant in PolandTaken from the Sunday Times 26 July 2015JAGUAR LAND ROVER is closing in on Poland as the site for a factory in eastern Europe.

Executives have been sifting through bids from Slovakia, Hungary, the Czech Republic and Turkey for the plant, which will make about 200,000 cars a year.

Senior industry sources said Poland had offered huge incentives.

Jaguar produced about 450,000 vehicles last year, but plans to expand to 1m. The huge expansion drive has seen its three British factories in Solihull, Castle Bromwich and Halewood pushed to capacity. The company opened a factory in China last year and another is under construction in Brazil.

A decision on Poland could be announced within weeks, although sources said Slovakia remained an outside possibility. Local reports suggested the plant could be built in Krakow at a cost of about 1.2bn.

Next on the list is expected to be a factory in America or Mexico. The overseas drive reflects Jaguars desire to increase production while keeping a tight lid on costs.

Poland offers a source of skilled but affordable labour, a ready-made supply chain and a government prepared to offer significant launch aid. The company said: Jaguar Land Rover continues to evaluate opportunities around the world. Europe is just one of the places under consideration. No decisions have been taken.(Full article click - Times)---

Glaxo chief cuts prices in bid to boost salesTaken from the Sunday Times 26 July 2015GLAXO SMITH KLINE will this week make a first step towards the ambitious sales goals it set out in the spring, including 6bn annual turnover from new drugs by 2020.

Britains biggest pharmaceuticals maker is expected to report second-quarter sales of about 5.8bn on Wednesday, an improvement on the same period last year but lower than previous estimates. Expectations have been carefully managed in recent weeks, bringing a number of downward revisions from analysts.

A bright spot will be ViiV Healthcare, dedicated to HIV treatment, which Glaxo will say performed strongly in the first half of the year.

In May, the chief executive Sir Andrew Witty unveiled a new strategy to reassure investors that the company could cope with declining sales of Advair, the blockbuster respiratory drug. It included 3bn of cost cuts and a focus on volume over price in an attempt to cope with price pressure in America.

The market has not taken to Glaxos new direction. Its share price has fallen 12% since the strategy update. Its time for Glaxo to reverse negative earnings momentum, wrote analysts at Barclays.

Investors will also be looking for reassurance on the integration of the vaccines business received from Swiss rival Novartis as part of a $20bn asset swap.

Glaxo said last week that the worlds first malaria vaccine had been given the green light by European regulators. The product has been in development for 30 years. Glaxo is not planning to make any profit from it.

Astra Zeneca, Britains second-largest drug maker, will post a 10% fall in second-quarter revenue on Thursday, with the squeeze in America the main cause for concern.(Full article click - Times)---

Permira buys debt collector for 1.1bnTaken from the Sunday Times 26 July 2015ONE of Britains biggest debt collectors is on the verge of a 1.1bn private equity buyout, torpedoing plans for a stock market float later this year.

Leeds-based Lowell Group is set to be taken over by buyout giant Permira, City sources said this weekend.

Lowell is owned by TDR, the private equity firm that owns a controlling stake in the David Lloyd gyms empire. City sources said TDR had elected to sell to a rival as it was keen to cash in on its investment in one deal, rather than listing.

A deal is expected to value Lowell at about 1.1bn. The sale has not yet been done and talks could still fall through at this stage, insiders said.

The move comes nearly 18 months after Lowell was first primed for a float. The deal is likely to disappoint a handful of City advisers that were hired to manage the listing, including Wall Street giants Goldman Sachs and JP Morgan. TDR and Permira declined to comment.

Lowell, which employs more than 1,000 in Leeds and at an office in Surrey, buys credit card and current account debt, and manages repayment plans with consumers. It has 14m credit accounts on its books, and specialises in data analytics to detect the likelihood of consumers paying up on unpaid loans and mortgages.

Under TDR, profits have soared. In 2012, Lowell explored a merger with Manchester rival Arrow Global, which floated later.

Last year, Lowell made a pre-tax profit of 117m, up 8% on the previous year. It has performed strongly so far this year, making a pre-tax profit of 34.8m in the second quarter, a 10% increase on the same period last year.

The sale is expected to net a windfall for TDR. The Ontario Teachers Pension Plan, which bought a minority stake last summer, could also sell its holding, sources added.(Full article click - Times)---

Economist shareholders in talks to buy out PearsonTaken from the FT Sunday, 26 July 2015Pearson is in negotiations to sell its 50 per cent stake in the Economist Group, publisher of the Economist magazine, to other shareholders in the group including the investment vehicle of Italys Agnelli family.

The talks, which come in the same week as Pearsons 844m sale of the FT Group to the Nikkei Group of Japan, could in effect complete the British companys transformation from a diversified family conglomerate to a business focused solely on education. Its only large non-education interest would be a 47 per cent stake in Penguin Random House, the book publisher.

Exor, which is run by John Elkann, scion of the Agnelli family, said its role in the talks that may lead to the possibility of increasing its investment in the group.

It added: Were it to proceed, Exors increased investment would in any event represent a minority shareholding in the the Economist...also reflecting Exors strong commitment to the editorial independence that lies at the heart of the Economists ethos and success. Mr Elkann is on the Economist Groups board and the group already owns 5 per cent.

A person close to Exor said, it would not be seeking the full stake being sold by Pearson.

Pearsons stake would be worth about 400m, two people close to the situation said. That would give the Economist Group a similar valuation to the FT Group, even though its operating profits are more than double.

The Economist Group which includes information providers the Economist Intelligence Unit and CQ Roll Call had operating profits of 60m last year, compared with the FT Groups 24m.

Other potential buyers include the three families that have long controlled most of the 50 per cent of the Economist that Pearson did not own: the Schroders, the Cadburys and the Rothschilds, one person close to the situation said. Lynn Forester de Rothschild and her husband Sir Evelyn de Rothschild control about 22 per cent of the Economist Group.

A deal is not imminent, but is expected to be agreed over the summer, the person added.

For Exor, the move comes during a period in which it is transforming its portfolio from a previously heavily industrial business to one that also includes financial services and a larger presence in media.

Fiat Chrysler Automobiles, the carmaker controlled by the Agnellis, is the biggest shareholder in RCS Mediagroup, publisher of Italian newspaper Corriere della Sera. FCA has its headquarters in the same building as the Economist magazine. Exor is also in talks to acquire reinsurance group PartnerRe for $6.8bn after a long-fought battle to scupper that companys existing merger with another reinsurer.

Any deal would have to be approved by the four trustees of the Economist Group, including former Conservative minister Lady Bottomley and former Cabinet secretary Lord ODonnell. The trustees role is to preserve the continued independence of the ownership of the company and the editorial independence of the Economist.

In a statement, Pearson said it was in discussions with the Economist Group board and trustees regarding the potential sale of our 50 per cent share in the group. There is no certainty that this process will lead to a transaction. Media groups Bloomberg, Thomson Reuters and Axel Springer were also approached about the stake, two people close to the situation said. But those companies declined to pursue an acquisition, because owning it would not give them control of the group, the person said.

Pearson acquired half of the Economist in 1957, as part of its acquisition of the Financial Times. But its stake, constituted of B shares, entitle it to name only six of the 13 members of the groups board. The majority of the board are named by the holders of the A shares, as well as some current and former employees.

The Economists editorial independence is safeguarded by the fact that the trustees must approve any transfer of A or B shares, and the appointment of each new editor.

In recent years the Economist Group has been seeking to diversify away from sales of print advertising, which fell 18 per cent in 2014, by launching a foreign-language edition and a new video venture.

In January the Economist appointed Zanny Minton Beddoes as its first female editor in its 172-year history, succeeding John Micklethwait who joined Bloomberg as editor-in-chief.

Unlike the Financial Times, the magazines editorial independence is formally enshrined in its corporate set-up.

So strong is the magazines editorial department that, while most of the group has moved to Canary Wharf, it has remained in its offices in Mayfair. Managers have now all but given up on the journalists joining them in the Docklands, with one alternative to relocate the whole company somewhere else, a senior employee at the Economist Group said.

Selling the FT Group and the Economist Group stake would leave Pearson with nearly 1bn in net proceeds strengthening its balance sheet at a time when its credit rating has a negative outlook from Moodys, due to uncertainty in the education sector.

Pearsons chief executive John Fallon has pledged to prioritise investments in the companys existing education business ahead of pursuing further acquisitions.

He has also underlined Pearsons reluctance to return cash to shareholders through buybacks or special dividends, although the company does have a policy of increasing dividends faster than the rate of inflation.

(Full article click - FT)

News AmericasFed Economic Forecasts Released EarlyTaken from the WSJ Saturday, 25 July 2015Lawmakers express concern as staff projections posted five years ahead of scheduleSensitive internal economic forecasts have been available on the Federal Reserves website for nearly a monthyears before their planned releasethe central bank said Friday in a disclosure that drew criticism from lawmakers.

Staff projections prepared before the June 16-17 policy meeting were inadvertently included in a computer file that was posted to the Feds website on June 29, the Fed said in a statement. Normally, staff projections are released to the public after a five-year lag.

A Fed spokeswoman said the release went unnoticed at the central bank until Tuesday. The Fed on Thursday referred the matter to its inspector general and on Friday alerted financial-market regulators. The Fed on Friday also notified its congressional overseers, the Senate Banking Committee and the House Financial Services Committee, committee aides said.

In an additional complication, the Fed said late Friday that some of the projections posted online in late June differed from the actual staff projections prepared ahead of the June policy meeting. The Fed released the actual staff projections and said it was looking into the source of the incorrect information.

The forecasts for key economic indicators, as well as the central banks benchmark short-term interest rate, offered some insights ahead of its policy meeting next week. For instance, Fed staff last month predicted a lower path for rates over the next few years than did the officials who set the rates.Fed Chairwoman Janet Yellen and other Washington-based Fed governors rely on the staff projections in making their own forecasts for the U.S. economy. Presidents of the Feds 12 regional reserve banks have their own stables of economists to help them prepare projections.

The staffs projections typically are also fairly accurate, at least compared with other economic forecasts, said Tara Sinclair, associate professor of economics at George Washington University and chief economist at Indeed. She said of the staff, Theyre really good forecasters of what their boss is going to do, particularly with the Feds benchmark federal-funds rate, which has been held near zero since December 2008.

The incident is the latest in a series of high-profile problems involving the Feds handling of sensitive internal information. It comes as the central bank is embroiled in multiple investigations over the disclosure of internal deliberations in 2012.

It regrettably appears once again that proper internal controls are not in place to safeguard confidential Federal Reserve information, said House Financial Services Committee Chairman Jeb Hensarling (R., Texas). To say these recurring leaks at the Fed are troubling is a serious understatement and points to the urgent need for accountability reforms.

The Fed spokeswoman said the release of the projections is a different situation from prior incidents and didnt involve privileged access to private information. Still, it could give critics on Capitol Hill more ammunition to press for changes to the central banks governance and oversight.For those wanting to bash the Federal Reserve to score political points, this is pure gold, said Jaret Seiberg, an analyst with Guggenheim Securities. It fuels the perception of some that the Federal Reserve cannot be trusted with the economy.

The House Financial Services Committee plans to vote Tuesday on a bill that would curb the Feds powers and permit audits of its monetary-policy decisions, among other things.

A spokeswoman for Senate Banking Committee Chairman Richard Shelby (R., Ala.) said the committee would like to know more about any negative consequences that resulted from the informations release. If there was no damage done, it raises questions about whether the Fed should be more transparent with such information, the spokeswoman said.

The Federal Reserve needs to get its house in order, in more ways than one, said Rep. Scott Garrett (R., N.J.), one of the central banks toughest critics, on Friday. This is another troubling development for an agency that is in dire need of oversight and reform.

A spokesman for Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee, said the incident raises serious questions, which will require more information.

The Fed said the early release was an accident. An employee in the central banks economic-research division uploaded the projections on June 29 with other files related to FRB/US, an economic model used by the Fed, the spokeswoman said.

The package of files was available on the Feds website and downloaded many times after June 29, but the Fed cant tell how often the specific files containing projection information were accessed, the spokeswoman said. In addition, some of the projections for gross domestic product growth, inflation and other variables were different from the actual staff projections prepared in June, the central bank said.

The Fed inspector general, the Securities and Exchange Commission and the Commodity Futures Trading Commission all declined to comment Friday.

It wasnt the first time in recent years that the Fed has had trouble with sensitive information.

The Justice Department, the Feds inspector general and House Republicans are investigating the disclosure of confidential information from a Fed policy meeting in 2012. Mr. Hensarling issued a subpoena to the Fed for documents related to the incident, but the Fed has said turning over all the information to lawmakers now could threaten the separate criminal investigation.

In 2013, the Feds inspector general concluded central bank staffers violated their own internal rules for handling minutes from policy meetings before release, after a staff member in the Feds congressional liaison office emailed a copy of the potentially market-moving information a day early to about 150 individuals. The recipients included officials at some of the biggest banks and investment firms on Wall Street and congressional staffers. The inspector general said in August 2013 the Fed had taken a number of steps to prevent a similar occurrence in the future.

The Fed in October 2013 also made several changes to its procedures for releasing market-moving information to tighten security amid concerns that high-frequency traders were getting faster access to Fed releases than other investors.

Most Fed officials expect to start lifting the fed funds rate from near zero this year, but havent decided when to start or how far to raise it this year and in following years.

The staff in June saw the federal-funds rate averaging 0.35% in the fourth quarter of 2015, then rising to 1.26% in the fourth quarter of 2016 and 2.12% in the fourth quarter of 2017.

That implies a more gradual path of rate increases than the one suggested by policy makers June projections, which showed a median fed-funds rate of 0.625% at the end of 2015, 1.625% at the end of 2016 and 2.875% at the end of 2017.(Full article click - WSJ)---

Richard NelsonWhy the Fed Needs to Get Off the DimeTaken from the WSJ Saturday, 25 July 2015There is a lot of discussion about what level of unemployment the Federal Reserve should seek to fulfill its mandate to promote maximum employment and stable prices. This key unemployment rate is called either the natural rate, or Nairuthe non-accelerating inflation rate of unemployment.

Yet there seems to be an assumption among many policy makers, analysts and market participants that the Fed should wait until the natural rate of unemployment is reached before it begins to raise interest rates. That would be a huge mistake, greatly increasing the chances of significant inflation beginning sometime next year.

The problem is that the Fed has to finish normalizing monetary policy by the time unemployment falls to its natural rateand that may take more than a year once it begins. If the Fed waits until the natural rate of unemployment is reached, there will be many months when interest rates are too low. These low rates can cause the economy to overheat, putting pressure on prices.According to economic projections by the Federal Open Market Committee (FOMC) at its June 16-17 meeting, 3.5% to 3.75% is the likely level of the federal-funds rate after monetary-policy normalization is completed. Currently the Feds target range for this key interest rate is 0% to 0.25%. The Fed historically has increased the federal-funds rate by 25 basis points (0.25 percentage points) at each of its monthly meetings. All indications are that the Fed would like to move even more slowly this time around, so it can gauge the impact of its actions on economic activity. That implies it could take 14-15 months or more to complete monetary policy normalization.

The Fed has no time to spare. In the FOMCs March 2015 economic projections, committee members estimated that over the longer run the unemployment rate would settle in the range of 5% to 5.2%. However, a recent study by Federal Reserve staff suggests that Nairu may have fallen much lower, perhaps to 4.3%, and the FOMC may well modify its views in this direction. But over the past 15 months, employment growth has been strong and unemployment has fallen by 1.3 percentage points, to 5.3% from 6.6%.

If unemployment continues to fall at this pace, the unemployment rate will fall to around 4%below the Fed staffs 4.3% estimate of full employment, and well below the current estimate of the FOMC members, before monetary normalization is complete. This analysis suggests that the Fed is risking inflation beyond its 2% target by waiting to begin raising rates, and will face an increasing risk the longer it waits.

It is true that longer-term interest rates are likely to rise quickly as financial markets anticipate the Feds next moves. And so higher short-term and longer-term interest rates could impede employment growth and the achievement of full employment. Still, the FOMC could monitor the movements of interest rates and employment monthly, making appropriate adjustments as needed.

On the other hand, the risks of delayhigher and perhaps rising inflationare not likely to emerge until we are closer to full employment. By then adjustments would likely be too late. The best course for the Fed is to begin raising rates very soon, if cautiously.

Mr. Nelson, a former chief economist at the Federal Home Loan Bank of San Francisco and manager of banking research at the New York Federal Reserve, is th