Tag: the eurozone crisis

Turkey could help kick-start Cyprus

EUROZONE CRISIS

Turkey could help kick-start Cyprus

Turkey supports northern Cyprus while Greece backs the southern Republic of Cyprus. While Greece is bankrupt, Turkey could help the island bounce back. But only a round of extreme diplomacy could make it happen.

The financial crisis has hit the southern part of divided Cyprus with full force. While a bailout package was finally agreed on at the last minute, the Republic of Cyprus now has to begin the painful process of adapting to the economic situation – just like Greece has had to do. Yet in Cyprus’ Turkish-controlled north, the financial crisis is barely noticeable.

It’s not surprising as Turkey is booming economically, with money regularly flowing across the Mediterranean to the northern part of the island. Without these subsidies, the Turkish Republic of Northern Cyprus, which is not recognized by the international community, could not survive. Yet many Turkish Cypriots would like to liberate themselves from dependence on Turkey, and even voted for reunification with their island neighbors in 2004. Had Greek Cypriots not rejected the plan by a large margin, northern Cyprus would now be a part of the European Union – and thus also a part of the eurozone crisis.

No gloating over Cyprus’ failed economy

The crisis in the Turkish-controlled northern part of the island can mainly be felt in the gaming sector. Since gambling if off limits to citizens of the north, they rely on income from tourists from the southern part of the island. Mesut Sahin, who owns Saray Casino, said revenues have dropped 50 percent since the start of the financial crisis. He added, with sincerity, that he hopes the south will recover quickly.

Ilke Gürdel, a Turkish Cypriot, said there is no reason for Turks in the north to gloat. He said the situation in the north may be better than the south, but it’s still not brilliant, adding that he feels sorry for Greek Cypriots struck by the crisis.

Capital controls limited withdrawals to 300 euros

Turkish Cypriots are now happy not to be a part of the eurozone, placing their confidence in the Turkish lira. But that has not always been the case, said Turkish publicist and Cyprus expert Ayla Gürel.

“The southern part of the island always used to be financially better off than the Turkish north; that’s why the north would always look longingly at the southern standard,” she pointed out. “But since Cyprus’ bankruptcy, this attitude has changed drastically. Now we are quite happy that the island was not reunited in 2004. Otherwise, we would have plunged into the crisis as well.”

Turkey’s role

Despite strained relations between the north and the south, there have also been times when the two parts of the island have cooperated – such as after the explosions at an ammunition depot in 2011. At the time, the Greek Cypriots had to deal with regular power outages. In response, northern Cyprus agreed to temporarily provide electricity. This kind of cooperation is essential during times of crisis, said Harry Tzimitras, director of the Peace Research Institute Oslo, which mediated between the two parts of the island as the peace plan was being drafted for Cyprus in 2004.

Tzimitras said strained diplomatic relations between northern and southern Cyprus are no answer for the indebted south. He observed that the south is under pressure to reconsider its “friendships” after some countries left it in the financial lurch. This could possibly lead to closer relations with Turkey, he said, but Ankara would also have to show its willingness by opening up harbors and airports to the island’s south. Both sides would have to put in a lot of diplomatic effort, but such cooperation would not be easy and is still a long way off, Tzimitras said.

Trucks loaded with money ensured banks had cash for customers

Common interests

Potential for conflict clearly exists, as one recent episode demonstrated. One suggestion for saving Cyprus’ teetering economy is exploiting the Aphrodite gas field in Cypriot waters. But Turkey has said Cyprus may not go it alone and is demanding a say in the matter. Officials in the south do not agree. “It’s one of the most difficult matters to solve, yet cooperation between southern Cyprus and Turkey could bear the most fruit,” Tzimitras stressed.

Another possibility, which Irsen Kücük, Prime Minister of the Turkish Republic of Northern Cyprus, has repeatedly proposed, is the construction of a water pipeline slated for 2014. In the future, water is to be pumped from Turkey to the northern part of the island. The dry south could also use more water, but the southern Cypriot government does not want it to come from Turkey.

Even if such proposals are not welcomed wholeheartedly, at least Cypriots are considering them. That was unheard of in the past, said Tzimitras, who is Greek. “Even with solutions that would work and be acceptable for both sides, things would have to be taken one step at a time,” he noted. “A nearly 40-year-old history cannot be changed overnight.”

Cyprus – like other EU nations – has felt the eurozone crunch

The crisis bringing people closer?

Something positive could come out of the financial crisis for southern Cypriot-Turkish relations, said Turkish Cypriot Gürdal – such as the realization among Greek Cypriots that reunification would have been the smarter solution for the island. For him, it’s clear that “if we had reunited back then, the South would not be in the hole it’s in. Perhaps it will motivate southern Cypriots to negotiate with Turkey.”

But the central condition for Turkey agreeing to improve relations with the southern part of the island is the recognition of the Turkish Republic of Northern Cyprus by the South. Both sides are a long way off from that, with national pride on the part of the Greeks being a hurdle, said Gürel. After all, she pointed out, the Greeks still see the Turks as occupiers of their island.

DW.DE

March 29, 2013
Children ‘dumped in streets by Greek parents who can’t afford them’

Children ‘dumped in streets by Greek parents who can’t afford to look after them any more’

Children are being abandoned on Greece’s streets by their poverty-stricken families who cannot afford to look after them any more.

Youngsters are being dumped by their parents who are struggling to make ends meet in what is fast becoming the most tragic human consequence of the Euro crisis.

It comes as pharmacists revealed the country had almost run out of aspirin, as multi-billion euro austerity measures filter their way through society.

Abandoned: Children are being dumped on Greece’s streets by their poverty-stricken families who cannot afford to look after them any more (file picture)

Abandoned: Children are being dumped on Greece’s streets by their poverty-stricken families who cannot afford to look after them any more (file picture)

Athens’ Ark of the World youth centre said four children, including a newborn baby, had been left on its doorstep in recent months.

One mother, it said, ran away after handing over her two-year-old daughter Natasha.

Four-year-old Anna was found by a teacher clutching a note that read: ‘I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.’

Save the Children – Greece is becoming a third world country

Now even Germany’s economy slips into reverse as expert warns it is likely to enter recession in first months of 2012

EU threatens Hungary over refusal to implement austerity policies and ‘authoritarian’ new constitution

Mario Monti warns Germany it must show more support for austerity measures or face increased hostility from Italy

And another desperate mother, Maria, was forced to give up her eight-year-old daughter Anastasia after losing her job.

She looked for work for more than a year, having to leave her child at home for hours at a time, and lived off food handouts from the local church.

She said: ‘Every night I cry alone at home, but what can I do? It hurt my heart, but I didn’t have a choice.’ She now works in a cafe but only make £16 per day and so cannot afford to take her daughter back.

Sold out: Greece is quickly running out of medicines as austerity measures start to filter through society

Sold out: Greece is quickly running out of medicines as austerity measures start to filter through society

Centre founder Fr Antonios Papanikolaou told the Mirror: ‘Over the last year we’ve had hundreds of parents who want to leave their children with us. They know us and trust us.

‘Over the last year we’ve had hundreds of parents who want to leave their children with us. They know us and trust us.’

– Fr Antonios Papanikolaou

‘They say they do not have any money or shelter or food for their kids, so they hope we might be able to provide them with what they need.’

Further evidence of Greeks feeling the pinch of austerity measures is the lack of aspirin and other medicines now available in the country.

Pharmacists are struggling to stock their shelves as the Greek government, which sets the prices for drugs, keeps them artificially low.

This means that firms are turning to sell the drugs outside of the country for a higher price – leading to stock depletion for Greeks.

Mina Mavrou, who runs one of the country’s 12,000 pharmacies, said she spent hours each day pleading with drug makers, wholesalers and colleagues to hunt down medicines for clients.

And she said that even when drugs were available, pharmacists often must foot the bill up front, or patients simply do without.

Meanwhile, talks about private sector creditors paying for part of a second Greek bailout are going badly, senior European bankers said tonight.

That raises the prospect that euro zone governments will have to increase their contribution to the aid package.

‘Governments are mulling an increase of their share of the burden,’ said one banker, while another said ‘Nothing is decided yet, but the bigger the imposed haircut the less appetite there is for voluntary conversion.’

A third senior banker told Associated Press: ‘Private sector involvement is going badly.’

There are suggestions in euro zone government circles that ministers are coming to the realisation they may need to bolster Greece’s planned second bailout worth 130 billion euros if the voluntary bond swap scheme, which is a key part of the overall package, falls short of expectations.

Stumping up yet more money would be politically difficult in Germany and other countries in the northern part of the currency bloc.

via Children ‘dumped in streets by Greek parents who can’t afford them’ | Mail Online.

January 13, 2012
French credit downgrade could come ‘within days’

Standard & Poor’s expected downgrade could create panic in the financial markets and make eurozone crisis even worse

Richard Wachman, City editor, Toby Helm and Kim Willsher

Standard and Poor's is expected to cut France's triple A credit rating 'within days' Photograph: Justin Lane/EPA

France could be stripped of its triple-A credit rating before Christmas, raising new doubts about the survival of the euro, analysts have predicted.

Standard & Poor’s – one of the three top rating agencies – is expected to cut France’s rating within days, in a move that would weaken its ability to raise funds on financial markets.

The move would raise doubts over the future of the single currency at a time when questions abound as to whether the deal thrashed out in Brussels represents the breakthrough hoped for in advance of the summit. Andrew Tyrie, chairman of the Commons Treasury select committee, raised the spectre of Greece leaving the eurozone, saying it was unlikely Athens could afford to pay its way if it stayed in the zone. “Few people believe that Greece can remain solvent within the eurozone,” he said. “Should Greece have to leave, the recapitalisation of a number of continental banks would be necessary.”

David Cameron and George Osborne have stressed that their top priority is for the eurozone to survive the crisis because the consequences of a disorderly breakup would be devastating for the UK as well as the European economies. However, most Tory MPs now doubt that it can survive in its current form. Bill Cash, the veteran Eurosceptic MP, said: “The entire European Union project is unravelling as the euro itself unravels.”

The imminence of a ratings decision by S&P may explain why France has sought to deflect attention by lashing out against Britain, claiming the UK’s financial position is weaker than its own. Last week the Bank of France suggested the credit rating agencies train their fire on London, even though there seems no imminent danger of Britain losing its premier rating.

After days of angry exchanges between Paris and London, both sides called for a ceasefire. A senior British diplomatic source said: “I hope all this calms down soon, as it is not in anyone’s interest for it to continue. That, I believe, is why the French prime minister called Nick Clegg on Friday afternoon [to build bridges].”

The diplomat added: “We can only guess that what’s behind it is that they’re so nervous about losing the triple-A rating, nervous not just for political and economic reasons, but because there’s an election coming up.”

Analysts said that if France’s rating was slashed its borrowing costs would rise, making it more expensive for Paris to refinance its debt burden in the new year. A downgrade would also hit France’s ability to contribute to the European financial stability facility, set up by members of the eurozone to combat the eurozone’s sovereign debt crisis, and provide emergency funding. Traders in London said the price France has to pay to borrow has already risen, indicating that markets have partially discounted the possibility of a lower credit rating.

France has to pay more to borrow relative to fellow triple-A rated Germany: when France borrows over 10 years it pays an interest rate that is at least a percentage point higher than what Berlin pays.

One analyst said: “The overall perception is that French finances are weaker than Germany’s and this imposes significant extra costs on France.”

Adding together repayments of existing debt, interest owed and new borrowing, France needs to find €400bn (£335bn) next year just to stay afloat. An extra 1% would cost French taxpayers €4bn a year. European leaders are under pressure to boost the firepower of the EU’s multibillion bailout package after Belgium’s credit rating was cut by Moody’s, another of the top three ratings agencies. Moody’s warned that indebted eurozone countries such as Belgium would find it increasingly hard to fund their debts or achieve economic growth in the face of Europe’s austerity drive. “The fragility of the sovereign debt markets is increasingly entrenched and unlikely to be reversed in the near future,” warned Moody’s.

Rival ratings agency Fitch said it could cut Belgium’s credit rating, along with those of Spain, Italy, Slovenia, Cyprus and Ireland. Fitch kept France’s AAA credit rating intact, although it revised its outlook for the country down to “negative”.

The latest credit rating changes came as the EU released details of the “fiscal compact” deal designed to rescue the euro.

www.guardian.co.uk, 17 December 2011

December 18, 2011
UK strikes back at French criticism

By George Parker in London and Hugh Carnegy in Paris

Britain has described as “simply unacceptable” attacks on the UK economy by French ministers and central bankers, as tensions over the eurozone crisis brought relations between the two countries to a new low.

Amid fears in Paris that France could lose its triple A sovereign debt rating, François Baroin, French finance minister, on Friday said: “The economic situation in Britain today is very worrying, and you’d rather be French than British in economic terms.”

His comments follow remarks by Christian Noyer, head of the Bank of France, who said credit rating agencies should be more worried about Britain, which had “bigger deficits, more debt, higher inflation and less growth than us and where credit is shrinking”.

Initially the attacks were shrugged off by Downing Street. British officials saw the comments as an attempt to deflect attention from the possible downgrade and from new figures showing France had slipped into recession during the fourth quarter.

Nick Clegg, UK deputy prime minister, told François Fillon, French prime minister, that the comments were “simply unacceptable” and steps should be taken to calm the rhetoric.

Mr Fillon had earlier talked about “our British friends who are even more indebted than us”. He told Mr Clegg he had intended to illustrate what he believed was the rating agencies’ inconsistency.

France is irritated it has been threatened with a downgrade despite its budget deficit, at 5.7 per cent of gross domestic product this year, being lower than Britain’s at more than 9 per cent. Mr Fillon told Mr Clegg he had not meant to question Britain’s triple A rating.

Downing Street said the comments coming from Paris were “not the most helpful contribution”. David Cameron’s spokesman said the coalition government’s deficit reduction plan – one of the most aggressive of any big economy – had reassured the rating agencies.

But Conservative MPs were less diplomatic. Neil Parish, a Tory MP and former MEP, said: “I suggest the French keep their mouths shut and put their own house in order.”

Tensions between Britain and France have been rising for weeks and were inflamed when George Osborne, UK chancellor, compared market concerns over French debt with the situation in Greece.

David Cameron’s use of the veto in last week’s European Union treaty negotiations provoked attacks from Nicolas Sarkozy, although the blockade delivered to the French president precisely the looser intergovernmental deal on eurozone fiscal discipline he had wanted.

In an attempt to make an agreement more palatable to non-eurozone countries, a first draft said they would not be forced to comply with tough budget rules until they adopted the single currency.

Mr Cameron and Mr Sarkozy have not spoken since the summit, in contrast to attempts by Angela Merkel to patch up relations with the UK prime minister. On Friday the German chancellor phoned Mr Cameron to discuss negotiations on the new eurozone treaty.

Eurozone bond markets mostly rallied on Friday despite worries over downgrades of the region’s sovereign debt. Fitch placed Belgium, Cyprus, Ireland, Italy, Slovenia and Spain on watch for a ratings downgrade.

In thin markets, French and Spanish yields fell as some investors speculated that buying could have been sparked by banks looking to use the bonds as collateral for cheap loans from the European Central Bank next week. Gilt yields were also close to fresh record lows, while US Treasuries were heading for their biggest weekly gains in six weeks.

“A lot of funds and clients are no longer trading because of year-end and uncertainty in these markets,” said one trader at a European bank. “But yields for Spain and Italy are still very high and it is difficult to see them coming down much before Christmas, particularly with worries over sovereign downgrades.”

The euro traded more or less flat with sterling. The pound touched 10-month highs this week as fears around the eurozone started to prompt some sellers in the single currency. European equities were also more or less flat as they lacked clear direction.

Additional reporting by David Oakley and Joshua Chaffin

www.ft.com, 16 December 2011

December 18, 2011