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Tuesday, February 14, 2012

Peter Schiff: Furious Greeks set Athens on fire

Cuts & Chaos: Desperation drives Greek clashes


Moody's warns it may cut AAA-rating for UK and France







NEW YORK (Reuters) - Rating agency Moody's warned it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe's debt crisis.

Moody's move was less aggressive than rival agency Standard & Poor's, but its action puts London's prized top credit rating in jeopardy for the first time.

It said it was worried about Europe's ability to undertake the reforms needed to address the crisis and the amount of funds available to fight it. It also said the region's weak economy could undermine austerity drives by governments to fix their finances.

The euro and sterling fell after the announcement, with pound falling 0.4 percent to $1.5703 and the single currency dipping 0.3 percent to $1.3154. European and U.S. equity index futures were also lower.

The U.S. rating agency said it changed the outlooks for the ratings of France, Britain and Austria to negative due to "a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns' balance sheets."

Germany's top-tier rating was described as "appropriate" by Moody's, and it affirmed the triple-A rating on the euro zone's bailout fund, the European Financial Stability Fund (EFSF).

Moody's, which said late last year it was reconsidering its European ratings, cut the ratings of Italy, Portugal, Slovakia, Slovenia and Malta by one notch. It downgraded Spain by two notches.

Moody's said the scope of the downgrades was limited due to "the European authorities' commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence."

The announcement came a day after Greece's parliament approved a deep new round of budget cuts in the hope of securing new bailout funds and avoiding a chaotic default in March.

Bart Oosterveld, managing director at Moody's sovereign risk group, declined to comment on the state of the negotiations between Athens and its creditors, but said that if Greece were to leave the European Union the impact on financial markets and credit ratings "would be quite profound."

And he warned that European credit markets may still deteriorate despite efforts by the European Central Bank to ease financing pressures with its three-year refinancing operations.

"The markets are better in the short term but probably not in the longer term," Oosterveld told Reuters in an interview. "We think the markets remain quite fragile."

The rating outlooks of the nine countries affected by Moody's action was set to negative, "given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness," Moody's said.

BRITAIN, FRANCE UNDER PRESSURE

Britain's finance minister responded by saying the country must keep its promise to slash its large budget deficit.

"This is proof that, in the current global situation, Britain cannot waver from dealing with its debts," Finance Minister George Osborne said. "This is a reality check for anyone who thinks Britain can duck confronting its debts."

The government in Britain has come under increasing pressure to soften its austerity measures to give a stalling economy room to breathe.

The French government said it would press ahead with its policies to improve competitiveness and growth while reducing the government deficit.

"The government is determined to press ahead with its actions to boost growth and competitiveness, notably the reform of the financing of welfare, of employment and the reduction of public deficits," Finance Minister Francois Baroin said in a statement.

The precarious state of European sovereign finances was underlined on Monday, when the head if China's sovereign wealth fund brushed aside an appeal from German Chancellor Angela Merkel to buy European government debt, saying such bonds were "difficult" for long-term investors.

A retreat from European government debt has already been boosting relatively high-yielding Australian and New Zealand debt, as cashed-up Asian sovereign wealth funds and other major bond investors look for safe havens to diversify their holdings.

Reserve Bank of Australia Assistant Governor Guy Debelle said on Tuesday that net purchases of Australian debt by foreigners over the first three quarters of 2011 amounted to more than 3 percent of gross domestic product, markedly larger than Australia's current account deficit.

"Our discussions with market participants suggest that a sizeable share of recent purchases has been by sovereign asset managers," said Debelle.

Moody's move on Monday follows one last month by Standard & Poor's, which stripped France and Austria of their triple-A status, while Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia were downgraded. S&P also cut the EFSF by one notch.

Also in January, rating agency Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain, indicating there was a 1-in-2 chance of further cuts in the next two years.

Yahoo News

EU blocks British justice

White House Economic Adviser: 'We Need a Global Minimum Tax'





“He supports corporate tax reform that would reduce expenditures and loopholes, lower rates for people investing and creating jobs in the U.S., due so further for manufacturing, and that we need to, as we have the Buffett Rule and the individual tax reform, we need a global minimum tax so that people have the assurance that nobody is escaping doing their fair share as part of a race to the bottom or having our tax code actually subsidized and facilitate people moving their funds to tax havens," Sperling said.

The White House adviser then said that more details would be forthcoming, though "not in gory detail."

"But we will say more, perhaps not in gory detail, but in more detail, before the end of the month. And in terms of the revenues, the president is looking for shared sacrifice. This budget is a Democratic budget that has savings in Medicaid, it has savings from new beneficiaries, Medicare in 2017, it has agriculture civilian retirement savings. It has a lot of very tough choices."

The weekly standard

Russian Army Chief: Iran Crisis to enter new phase





The situation surrounding Iran's controversial nuclear program is likely to come to a head by the summer, Chief of the General Staff of the Russian Armed Forces Nikolai Makarov said.

Washington, which suspects Iran is trying to build a nuclear bomb, says that no options have been taken off the table.

“Iran, of cause, is a sore spot. Some kind of decision should be taken, probably nearer to summer,” Makarov said.

Russia's Defense Ministry is monitoring the situation in Iran and the entire Middle East from a recently created situation center, he said.

“We used to have a general on duty at each main command. Now we have created a situation center that receives all the necessary information in real time,” Makarov said.

RIA Novosti

Spanish banks hit by wave of downgrades






Fitch Ratings on Monday lowered the credit rating of Spain's four largest banks, including Santander, in a move that follows the agency's two-notch downgrade of Spain last month.

The agency cut its rating for Santander, the biggest eurozone bank by market capitalisation, by two notches to A and cut its ratings for BBVA, Bankia and CaixaBank by one notch, it said in a statement.

Standard & Poor's also took the knife to Spain's finance sector, lowering the credit rating of 15 Spanish banks in a move that follows the agency's downgrade of Spain on January 13.

S&P lowered its credit ratings on 10 banks by one notch and it cut its rating on another five by two notches

Spain's biggest financial institutions were hit including Santander, BBVA, Bankia and CaixaBank, the ratings agency said in a statement.

The agency lowered its rating for Santander, the biggest eurozone bank by market capitalisation, to A+ from AA- and lowered its rating for BBVA, Spain's second-largest bank, to A from A+.

Earlier on Monday, Fitch Ratings lowered the credit rating of Spain's four largest banks -- Santander, BBVA, Bankia and Caixabank -- following its downgrade of Spain last month.

"The downgrade of Spain indicates a weakening of its ability to support its largest banks. However, Fitch expects the Spanish authorities to continue to show a high propensity to support these institutions," it said.

"Fitch believes there is a close link between bank and sovereign credit risk (and therefore ratings) and, it is unusual for banks to be rated above their domestic sovereigns.

"Banks tend to own large portfolios of domestic sovereign debt and are highly exposed to domestic counterparties, meaning profitability and asset quality are vulnerable to adverse macroeconomic and market trends.

"Funding access, stability and cost for domestic banks are also often closely linked to broad perceptions of sovereign risk," the agency added.

Last month Fitch downgraded the debt of Spain and four other eurozone countries due to the deteriorating economic outlook in Europe and concerns that European leaders are not acting boldly enough to prevent the debt crisis from worsening.

"Fitch expects no GDP growth for Spain in 2012 and 1.0 per cent growth 2013, for unemployment to remain high at around 23 per cent and for the real estate market to remain a long-term cause for concern," the agency said Monday.

Spain's banking sector is weighed down by a mountain of soured loans and property assets that are losing their value after the bursting of the property bubble, which coincided with the start of a global downturn in 2008.

According to the Bank of Spain, the sector had 176 billion euros ($US232 billion) in problem loans and seized real estate in June 2011 -- a figure which has probably increased since, as the economy has weakened.

The sector has undergone a major restructuring since 2008 but Spain's new conservative government considers it still at risk.

Earlier this month the government launched a major clean-up of the country's troubled banks, approving a law that obliges them to set up a financial safety net totalling 50 billion euros.

Under the reform the level of provisions must increase to 80 per cent of the total value of assets for some troubled banks and a general provision requirement of 7.0 per cent will be imposed on others.

Read more: http://www.smh.com.au/business/world-business/spanish-banks-hit-by-wave-of-downgrades-20120214-1t2m4.html#ixzz1mNAuJHhQ

Iranian boats shadow US aircraft carrier in Gulf







ABOARD THE USS ABRAHAM LINCOLN --

Iranian patrol boats and aircraft shadowed a U.S. aircraft carrier strike group as it transited the Strait of Hormuz on Tuesday.

The passage ended a Gulf mission that displayed Western naval power amid heightened tensions with Tehran, which has threatened to choke off vital oil shipping lanes.

But officers onboard the USS Abraham Lincoln said there were no incidents with Iranian forces and described the surveillance as routine measures by Tehran near the strategic strait, which is jointly controlled by Iran and Oman.

Although U.S. warships have passed through the strait for decades, the trip comes during an escalating showdown between Iran and the West over the Islamic Republic's nuclear program. The last time an American carrier left the Gulf _ the USS John C. Stennis in late December _ Iran's army chief warned the U.S. it should never return.

The Lincoln was the centerpiece of a flotilla that entered the Gulf last month along with British and French warships in a display of Western unity against Iranian threats. There was no immediate comment by Iran about the Lincoln's departure.

Iran's Revolutionary Guard has said it plans its own naval exercises near the strait, the route for a fifth of the world's oil supply. But Iran's military has made no attempts to disrupt oil tanker traffic _ which the U.S. and allies have said would bring a swift response.

Two American warships, one in front and one in the rear, escorted the Abraham Lincoln on its midday journey through the strait and into the Arabian Sea after nearly three weeks in the Gulf, which is frequently visited by U.S. warships and includes the headquarters of the U.S. 5th Fleet in Bahrain. The strait is only about 30 miles (50 kilometers) across at its narrowest point.

On one side, the barren, fjord-like mountains of Oman were visible through the haze. Iran's coast was just beyond the horizon on the other side of the ship, but too far away to be seen.

Gunners in red jerseys manned the 50-caliber machine guns as the ships moved out of the Gulf. An Iranian patrol boat pulled nearby.

Later, just after the Lincoln rounded the "knuckle" _ the nub of Oman jutting out at the southern end of the strait _ an Iranian patrol plane buzzed overhead. Another patrol boat was waiting further down the coast, said Rear Adm. Troy Shoemaker, commander of the Abraham Lincoln Carrier Strike Force.

Besides Iran's regular patrol boats, the Revolutionary Guard operates a large number of small, fast-attack boats. Some are armed with only a machine gun, while others also carry anti-ship missiles. They can be difficult to spot because they resemble the swift-moving smuggling boats that ply the strait.

Shoemaker said none of those fast boats appeared Tuesday, likely deterred by the rough seas.

He predicted before the transit that the Iranians would likely keep a close eye on the Lincoln throughout its passage, including with ground-based radars. He wasn't surprised by the attention from Iranian forces.

"We would do the same things off the coast of the United States ... It's more than reasonable. We're operating in their backyard," he said. "We've been doing it for years."

Several U.S. choppers flanked the carrier group throughout the transit, watching out for potentially hostile vessels and relaying real-time pictures back to the Lincoln's crew.

Dozens of F/A-18 strike fighters and other planes in Lincoln's embarked air wing sat parked silently on deck throughout the trip. Today was a no-fly day for their crews, though some fighters were prepped and armed, ready to launch in as little as 15 minutes should things go wrong.

Officers on board were eager to describe the transit, in which the Lincoln was accompanied by the cruiser USS Cape St. George and destroyer USS Sterett, as a routine maneuver despite the growing speculation that Israel could launch a military strike against Iran's nuclear program.

The U.S. and allies fear Iran's uranium enrichment program could eventually lead to the production of weapons-grade nuclear material. Iran claims it only seeks reactors for energy and medical research.

"I wouldn't characterize ... us going through the strait as: 'Hey, this is a huge show of force, we're coming through.' It's an international strait to transit. We're going from one body of water to the other," said Capt. John Alexander, the Lincoln's commanding officer, as preparations for the trip got under way late Monday.

The Lincoln is expected to provide air support for the NATO mission in Afghanistan starting Thursday. Navy brass in the Gulf say another American carrier is due back through the strait soon, but gave no firm timetables.

Bay News

Muslim Brotherhood Warns U.S. Aid Cut May Affect Egypt’s Peace Treaty With Israel





(CNSNews.com) – A top Muslim Brotherhood official has warned that any cuts in U.S. aid to Egypt could affect Cairo’s peace treaty with Israel – the latest sign that Egypt’s emerging political forces intend to call Washington’s bluff over the diplomatic dispute triggered by a crackdown on non-governmental organizations.

Egyptian judges have referred 16 Americans and 27 others linked to NGOs for trial, accusing them of using foreign funds to encourage disruptive protests. Among the targeted NGOs whose assets and funds have been seized are the U.S. government-funded International Republican Institute and National Democratic Institute.

On Capitol Hill, the chorus of senior lawmakers calling for aid to Egypt to be suspended over the affair is growing, and Secretary of State Hillary Clinton has warned that the funds could be in jeopardy.

So far, the defiant response from Cairo has been attributed mostly to government figures with links to the deposed Mubarak regime, including the anti-Western minister for international cooperation, Fayza Abul-Naga. The military-appointed Prime Minister Kamal el-Ganzouri – who also served during the Mubarak era – told reporters last Wednesday that the authorities “won’t change course because of some aid.”

But now the Muslim Brotherhood (MB), which won almost 50 percent of the seats in recent legislative elections and dominates parliamentary committees, is making its position clear, too.

Any U.S. aid cut to Egypt, top MB lawmaker Essam el-Erian told the pan-Arabic al-Hayat newspaper, would violate the U.S.-brokered 1979 peace agreement with Israel.

The Jerusalem Post quoted Erian as saying that if the U.S. cuts aid to Egypt, the MB would consider changing the terms of the peace treaty. He is warning that the U.S. should understand that “what was acceptable before the revolution is no longer.”

Erian chairs the parliamentary foreign affairs committee and is deputy leader of the MB’s political wing, the Freedom and Justice Party (FJP).

The FJP was an early critic of the crackdown on the NGOs (although it also said Egyptian NGOs should get their funding from Egyptians). But threats to cut U.S. aid appear to have rallied various factions behind the government, feeding into long-held suspicion of and hostility towards the West.

“This is only the beginning of the anti-American populism/nationalism/Islamism we are going to be seeing in Egypt from now on,” Mideast expert Barry Rubin, director of the Global Research in International Affairs Center in Israel, wrote in a column Sunday.

“What’s amazing is that nobody is pointing out that if an Egyptian government is willing to risk U.S. aid and have a confrontation on this small issue, what are they going to do regarding big issues?’ Rubin said. “What happens when the Egyptian government moves toward Islamism or helps Hamas fight Israel on some level? We have been told that fear of losing U.S. aid will constrain Egypt. But we are now seeing that this simply isn’t true.”

Egyptians don’t want US aid

Among the biggest uncertainties sparked by the toppling of Mubarak a year ago was the future of the peace treaty. After four wars involving the two neighbors – in 1948, 1956, 1967 and 1973 – the treaty negotiated at Camp David led to Israel handing back to Egypt the Sinai Peninsula, an area three times bigger than Israel itself, which it had captured in the 1967 Six Day War.

Although never particularly popular in Egypt, the agreement kept the peace between the former foes for three decades and secured Egypt more than $1.3 billion in U.S. military and economic aid each year.

Legislation signed into law last December ties the provision of $1.3 billion in military aid to Egypt in fiscal year 2012 to certification that the government in Cairo “is supporting the transition to civilian government including holding free and fair elections; implementing policies to protect freedom of expression, association, and religion, and due process of law.”

Sen. Patrick Leahy (D-Vt.), chairman of the Senate Appropriations Committee’s foreign operations subcommittee, inserted the language. He warned this month that the NGO clampdown would affect the certification requirements.

Other lawmakers who have warned the aid is in jeopardy include House Foreign Affairs Committee Chairman Rep. Ileana Ros-Lehtinen (R-Fla.); Rep. Kay Granger (R-Texas), who chairs the House Appropriations Committee’s foreign operations subcommittee; and Sens. John McCain (R-Ariz.), Kelly Ayotte (R-N.H.) and Joe Lieberman (I-Conn.).

A Gallup poll, released last week, but conducted before the furor over the NGO prosecutions, found that a large majority of Egyptians – 71 percent – are opposed to U.S. aid.

About half of the poll respondents said they supported Egypt receiving aid from international institutions, and 68 percent were in favor of aid from other Arab countries.

James Lindsay, senior vice president of the Council on Foreign Relations, argued that while Americans would naturally be upset if the recipients of their hard earned money are ungrateful, “gratitude isn’t the primary objective of U.S. foreign aid”

“Washington doles out aid primarily based on calculations about how to advance U.S. strategic interests. And the United States certainly has great interests at stake in how Egypt’s political transition plays out even if it doesn’t have a lot of influence over where it ends up.”

Over the past year, Americans’ views of Egypt have deteriorated significantly. A Gallup poll a year ago found favorable ratings had dropped from 58 percent in 2010 to 40 percent a year later, with more Americans having a negative than a positive view of Egypt for the first time since Gallup began polling the issue in 1991.

The trend was borne out in a survey by the Arab American Institute (AAI), released on Thursday, in which only 33 percent of respondents said their attitudes regarding Egypt were favorable, compared to 34 percent who said they viewed Egypt unfavorable light.

The AAI said Egypt’s favorable ratings among Americans in polls since the 1990s had been much higher – between 55-65 percent.

CNS News