Canadian Prime Minister visits Switzerland

On Friday, 22.10.2010, Stephan Harper, the Canadian Prime Minister on his way to the Sommet de la francophonie in Montreux stopped over in Bern for an official visit. According to the Swiss government a protocol was signed amending the Double Taxation Agreement between both countries and it was announced that the bilateral aviation agreement would be expanded:

The discussions served as an opportunity to take stock of bilateral relations between the two countries, which have been enhanced in the
economic field following the entry into force in July 2009 of the free trade agreement between Canada and EFTA. The subjects of international
governance and new rules and standards for finance and trade were also raised. Canada currently chairs the G8 and in June hosted the G20 Summit
in Toronto. Both countries work closely with the International Organisation of La Francophonie; the visit took place on the eve of the
opening of its XIII summit at which Canada will hand over the chair to Switzerland. The partners also discussed regional issues and reform of
the United Nations.

The official discussions concluded with the signing of a protocol amending the double taxation agreement by Finance Minister Hans-Rudolf
Merz and Josée Verner, Minister of Intergovernmental Affairs, President of the Queen’s Privy Council and Minister for La Francophonie. The
amended agreement is expected to come into effect in 2012.

President Doris Leuthard and Prime Minister Stephen Harper also announced the conclusion of negotiations on updating and expanding the
1975 bilateral aviation agreement between Switzerland and Canada. The main effects of the revised agreement will be to liberalise tariffs and
introduce traffic rights for stopovers and destinations via the two countries. The amendments will benefit passengers, airports, airlines
and freight carriers, as well as general economic relations between Switzerland and Canada.

Details about the double taxation agreement can be found here, and the press release of the Canadian government is here.

The 23rd Sommet de la francophonie takes places from Friday, October 22 to Sunday, October 24 in Montreux, which is on lakefront of Lac Léman.



IshAvto (IzhAvto) Avoids Bankruptcy Continues Production

As I mentioned last year, the Russian car maker IzhAvto, which in addition to Russian car models also produces KIAs, had filed for bankruptcy.
Now, in May of this year, the company presented a restructuring plan to creditors that foresees the resumption of industrial activity, i.e. car production, as well as cost cutting and sale of property not related to the primary activity of producing cars. The plan was accepted in a creditors’ meeting on May 4, 2010.
The plan, which was developed by an external entity, also foresees the borrowing of 500 million rubles and furthermore assumes that the company will reach break-even after 18 month and be profitable thereafter. (This info is taken from a press release on the IzhAvto website.)

The first cars were indeed shipped in September 2010 and it will be interesting to see the end-of-year balance sheet of the company.

Greece Receives First Tranche of Financial Help Package from EU

Greece receives first tranche of financial help

Image source:

This is from the Russian newspaper Pravda:

The first tranche of the agreed financial assistance to Greece has been assigned, said the EU Commissioner for Economy and Monetary Policy Olli Rehn.

In his words, Greece’s partners in the euro zone have wired 14.5 billion euros, and an additional 5,5 billion euros from the International Monetary Fund, to Greece.

On May 2,  at an extraordinary meeting in Brussels, the finance ministers of 16 EU countries adopted a package of financial assistance from the EU and the IMF to Greece  in the amount of 110 billion euros. Eighty billion of which to be assumed by the European Union, including 22 billion from Germany, which is the euro zone’s largest economy. Borrowing agreements with member countries of the euro zone will be bilateral in nature and will be issued under a preferential 5 percent.

Following the meeting of finance ministers from 16 countries of the euro zone, chairman of the EU Group, Luxembourg Prime Minister Jean-Claude Juncker told reporters that the meeting participants had unanimously agreed that the Greek government was following the right path.

Source: Pravda

and this is from the Turkish newspaper Sabah (updated for translation errors, my Turkish: bad!):

Since Papandreou came to power in Greece in October, the government has scored its first scandal. Greek Tourism Minister Angela Gerekou, who is the wife of Tolis Voskopuolus, a singer, who is being accused of evading 5 million euros in taxes, has resigned over the allegation. A former actor, Gerekou’s resignation was accepted by Prime Minister George Papandreou. In the attempt to get out of the debt crisis the fight against tax evasion and corruption had been among the priorities of the Greek government. This tax scandal hits the government’s credibility.

Source: Sabah

An E-Mail from Wall Street to the Rest of the World

From The Reformed Broker via Huffington Post (Note it sounds very much like Wall St, but the origin of the mail has not been established so far, so it could be a hoax):

“We are Wall Street. It’s our job to make money. Whether it’s a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn’t matter. We would trade baseball cards if it were profitable. I didn’t hear America complaining when the market was roaring to 14,000 and everyone’s 401k doubled every 3 years. Just like gambling, its not a problem until you lose. I’ve never heard of anyone going to Gamblers Anonymous because they won too much in Vegas.

Well now the market crapped out, & even though it has come back somewhat, the government and the average Joes are still looking for a scapegoat. God knows there has to be one for everything. Well, here we are.

Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours. We get up at 5am & work till 10pm or later. We’re used to not getting up to pee when we have a position. We don’t take an hour or more for a lunch break. We don’t demand a union. We don’t retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we’ll eat that.

For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? We’re going to take your cushy jobs with tenure and 4 months off a year and whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime and double time and a half. I’ll be hitting grounders to the high school baseball team for $5k extra a summer, thank you very much.

So now that we’re going to be making $85k a year without upside, Joe Mainstreet is going to have his revenge, right? Wrong! Guess what: we’re going to stop buying the new 80k car, we aren’t going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We’re going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.

The difference is, you lived off of it, we rejoiced in it. The Obama administration and the Democratic National Committee might get their way and knock us off the top of the pyramid, but it’s really going to hurt like hell for them when our fat a**es land directly on the middle class of America and knock them to the bottom.

We aren’t dinosaurs. We are smarter and more vicious than that, and we are going to survive. The question is, now that Obama & his administration are making Joe Mainstreet our food supply…will he? and will they?”

In Spain Unemployment Reaches 20 Percent

From El Pais:

In the end, and as become a habit during the current crisis, the worst predictions on the labour market have materialised. The unemployment rate in Spain has surged during the three first month of the year and has at the end of March reached 20% for the first time since 1997, according to data of the Encuesta de la Población Activa which were released yesterday by error by the INE [National Institute of Statistics] on their web site and were published today in ABC [another Spanish newspaper].

The National Institute of Statistics confirmed in a publication this morning that “there was an incident” during the validation processed and readied for distribution, and that “some of the data was temporarily visible on the web.”

Note: The official data will be released as planned on Friday this week.

This is the data and visualisation from ABC:

How Serious are Chinese-US Tensions?

Recent news can make you believe that there is a serious rift or even a coming rupture in relations between the PRC and the US.
Yves Smith of Naked Capitalism writes that:

Relations between the US and China have been deteriorating. Although both sides have poked each other in various ways (Obama meeting with the Dalai Lama, China dissing Obama in Copenhagen by standing him up for a meeting, some tit for tat on tariffs), the major, unresolved bone of contention is China’s pegging of its currency, the renminbi, at a level most experts deem to be undervalued. This has widespread ramifications: a continuation of global imbalances (one of the causes of the financial crisis) and preserving Chinese employment at the expense of its trading partners.

Yves analysis is very good. However, let me add two new angles which I think are important as well.

First, lets note that this sort of verbal sabre rattling is actually good for business, at least if you are in the business of selling arms. According to a SIPRI fact sheet, the largest exporters of arms are the US and Russia, by far. They are followed by Germany and France. In all, Europe, Russia and the US make up  88%  the suppliers. China is only 2%.
So, who, then profits from such “news”? The arms manufacturers, obviously. Which in turn means jobs in the respective countries. After all, we are talking here about people who manipulate the market for a living, so it would not be surprising, if these news were manipulated as well.
Besides, I don’t think the PRCs elite and the US elite have any major disagreements. They share the same ideology – corporatism – and  are dominated by the same personality types.

Second, the PRC, or rather the communist corporatist party of China, is in a bind. Being a single party dictatorship, there is, obviously, no alternative this one party. That means, it must succeed at all costs otherwise,  it will lose power and turmoil will result.
Now, this party promised to make the lives of the Chinese population better. If the party doesn’t succeed in doing that, it will be considered a failure by the Chinese population (or a part thereof). Since China does not have an alternative to the party, this might spell trouble for the Chinese elite – they might lose power and influence, something they would try to avoid at all costs? We will see.

SNB’s Monetary Policy Assessment March 2010

The SNB states in its most recent monetary policy assessment:

The signs of an economic recovery are becoming more tangible. The improvement is beginning to assist the Swiss export sector, while the domestic sector is performing well. For 2010, the SNB is now expecting real GDP growth of about 1.5%. However, the revival remains fragile and is associated with uncertainties.

Since December, the SNB’s conditional inflation forecast has remained almost unchanged at an average of 0.7% for 2010 and 0.9% for 2011. This forecast shows that short-term price stability is not threatened.

This sounds like good news doesn’t it. On we go:

Economic recovery is also underway in Switzerland. In the fourth quarter of 2009, real GDP was up by 0.7% compared to the previous quarter. This growth was driven by both domestic demand and exports. Particularly strong advances were recorded by retail and wholesale trade, the financial industry and construction. Signs of recovery were increasingly evident in the manufacturing sector – which had been hardest hit by the recession – and were recorded in a considerable number of these industries.

So far it seems that we have come out of the crisis and are on our way to recovery. But are we? The SNB is being cautious (emphasis mine):

Low interest rates are leading to an acceleration in mortgage lending. In January, the growth rate attained 5.3%.

The SNB is warning banks and borrowers to be extremely cautious, in view of the growth in mortgage loans and the continuing increase in residential real estate prices. It is reminding them that in assessing the viability of carrying the debt burden the fact that interest rates are exceptionally low by historical standards must be taken into account. Great caution is needed when setting the loan-to-value ratio.

The SNB is currently conducting an in-depth survey of banks, the purpose of which is to provide more information on banks’ practices when granting mortgages for residential real estate. On the basis of the insights obtained, the SNB will work closely with the bank supervisory authority to assess whether there is any need for action.

Hhmph. Don’t tell me they are starting again with ‘giving mortgages to people that can’t afford them’?

Finally, the SNB’s inflation forecast as of March 2010: Continue reading