Monday, October 3, 2011
Qatari wealth fund plans $10bn gold buying spree
The fund is seeking to invest in a range of natural resources, but gaining access to physical gold is its top strategic priority.
On Sunday, Qatar Holdings, which controls the wealth of the Middle East state's royal family, confirmed it would invest about $1bn in European Goldfields, a London-listed miner currently developing the largest gold-mining project in Greece.
"Qatar Holdings have done a systematic and detailed study of the gold sector," said Ken Costa, who put the deal together. "They chose European Goldfields because [chairman] Martyn Konig is very experienced – a 30-year veteran in the gold market."
While Mr Costa would not comment on future likely targets, the Qataris are known to have been focusing in particular on opportunities in Africa and Russia. The valuation of North American gold miners was said to be too high.
The gold price has increased every year for the past 10 years as investor concern about the devaluation of global currencies, particularly the dollar, mounts.
The price is up by 14pc this year, despite a recent correction, and currently sits at $1,623.97 an ounce after it hit a record high of $1,923.70 on September 5.
However, shares in listed gold miners have underperformed this year, with European Goldfields shares down 41pc in the year to date. This is despite the company receiving the long-awaited approval for its mines from Greek authorities in July.
The Qatari fund has acquired a 9.9pc stake in European Goldfields from Greek construction group Ellaktor and one of its directors, Dimitrios Koutras. Qatar Holdings will also provide a $600m loan facility at an interest rate of 7pc.
Athens will be celebrating the bold investment move, as the Southern European country teeters on the edge of default, because the deal represents a vote of long-term confidence in the troubled Greek economy.
After securing the investment, about 1,500 jobs will be created in Greece. The deal was agreed by George Papandreou, Greek prime minister, and Sheikh Hamad Bin Khalifa Al-Thani, the ruling Emir of Qatar, on Saturday.
Qatar Holding was advised by Credit Suisse, with Lazard and Liberum Capital advising European Goldfields.
The Telegraph
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Germany 'won't give more to EU bail-out fund'
AFP - German Finance Minister Wolfgang Schaeuble ruled out Germany contributing any more money to the beefed-up EU bail-out fund than the 211 billion euros approved by parliament, in an interview published Saturday.
"The European Financial Stability Facility has a ceiling of 440 billion euros ($590 billion), 211 billion of which is down to Germany. And that is it. Finished," he told the magazine Super-Illu.
He also suggested the European Stability Mechanism, which is due to replace the EFSF by 2013 at the latest, would be smaller.
"Then it will be only a matter of 190 billion in total, for which we will be guarantors, including interest," he explained.
Germany's lower house of parliament, the Bundestag, on Thursday approved the beefing up of the eurozone bailout fund, which cleared its final hurdle on Friday when it was rubber-stamped by the Bundesrat (upper house).
The vote had been seen as a crucial test of Chancellor Angela Merkel's authority amid fears of a backbench rebellion. However she secured an overwhelming majority of her own deputies to back the move.
A majority of Germans (58%) consider it was a mistake to boost the EFSF, according to a poll to be published Sunday in the weekly Bild am Sonntag.
German Foreign Minister Guido Westerwelle said he wanted the debt-ridden countries put under tighter surveillance in an interview given to Saturday's Sueddeutsche Zeitung.
"A right to scrutiny and make recommendations isn't enough. The states, which in the future will benefit from the solidarity of the rescue fund, should give the European authorities the right to intervene in their budgetary decisions," the minister said.
France 24
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Greece will miss 2011 and 2012 budget deficit targets
Greece will miss 2011 and 2012 budget deficit targets set by the EU and the IMF, according to figures published by the finance ministry on Sunday after the cabinet adopted the draft 2012 budget.
The budget deficit will reach 8.5% of GDP this year, missing a 7.6% target. It will be brought down to 6.8% of GDP next year but will still miss the bailout target of 6.5% of GDP.
“Three critical months remain to finish 2011, and the final estimate of 8.5% of GDP deficit can be achieved if the state mechanism and citizens respond accordingly,” the Greek Finance Ministry said in a statement.
Since the deficit targets were set just months ago in a massive bailout package, missing the targets is a setback in Europe’s efforts to stave off the country’s bankruptcy.
The dire forecasts come while inspectors from the International Monetary Fund, EU and European Central Bank, known as the troika, are in Athens scouring the country’s books to decide whether to approve a loan tranche, without which Greece could run out of cash this month.
European Union officials say the troika’s assessment of Greece’s future prospects could determine whether it needs to demand more debt relief from private creditors, a measure that could effectively amount to default.
European officials are scrambling to avert an abrupt Greek bankruptcy, which would wreck the balance sheets of European banks, jeopardise the future of the single currency and potentially plunge the world into a new global financial crisis.
GDP is predicted to fall by 5.5% this year and 2.0-2.5% next year. Those numbers are in line with recent forecasts by the IMF, but much worse than predictions used to calculate a 109-billion euro (US$146-billion) bailout in July, which anticipated Greece posting a 0.6% growth next year.
The shortfall in the 2011 deficit target means Greece would need almost 2 billion extra euros just to finance its expenses for this year. It also means emergency tax hikes and wage cuts announced in the past two months to hit the target have not been enough to put Greece’s finances back on track.
To persuade the troika to release the loans, Greece has promised to raise taxes, cut state wages and speed up plans to reduce the number of public sector workers by a fifth by 2015.
The Greek cabinet also approved a measure on Sunday to begin reducing the number of state workers. The plan creates a “labour reserve” allowing state workers to be placed on partial pay and be dismissed after a year. The government has said it would put 30,000 workers in the reserve by the end of this year.
“The labour reserve measure was approved unanimously,” a deputy minister who participated in a cabinet meeting told Reuters on condition of anonymity while the cabinet meeting was still under way.
Euro zone finance ministers are expected to discuss Greece at a meeting in Brussels on Monday, but will be waiting for the troika inspectors’ report before taking any new decisions.
The inspectors are widely expected to give a green light to the release of the next 8-billion euro tranche of aid to avoid plunging the euro zone deeper into turmoil. But all eyes will be on their forecasts for 2012-2014.
If the inspectors conclude that Greece’s recession will continue to be worse than predicted, EU officials have suggested that banks that agreed to write off 21% of the value of their Greek debt holdings in July may be forced to take deeper losses.
The austerity measures are deeply unpopular, and public sector unions hope that strikes and demonstrations can wreck the Socialist government’s resolve to enact them. Striking civil servants have disrupted the talks with the troika over the past days by blockading ministries.
The government has a majority of just four seats in parliament and could be forced into elections if a handful of lawmakers balk. But disgruntled legislators have toed the party line over the past weeks and analysts expect them to continue to do so and pass the new austerity package.
No part of the package is more contentious than the plan to lay off state workers — who make up a fifth of the Greek workforce and are guaranteed jobs for life under a constitution that bans firing them under nearly all circumstances.
The government has yet to announce how the “labour reserve” plan would work. If most workers placed in the reserve are near pension age and planning to retire soon anyway, the savings would be negligible and the inspectors are likely to be unimpressed.
The inspection visit, which is expected to go well into next week, also focuses on budget plans for 2012-2014 and commitments to raise 50-billion euros from privatizations by 2015 and open up the country’s heavily-regulated economy.
Financial Post
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