Politeía Digest

Quis custodiet ipsos custodes?

Daily News – April, 28th.

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Gov’t could ask IMF for third derogation from budget arrears target

During talks occasioned by the fourth evaluation of the stand-by agreement, the government will ask the IMF for a new derogation from the arrears that the state has to pay, Mediafax reported quoting government sources. “Q1 indicators agreed with the IMF were attained, with the exception of the level of budget arrears, namely the sums that the state has to pay and whose payment deadline was surpassed by 90 days. There will probably be a new derogation from the Fund provided we prove that we have made progress in this regard,” the quoted sources said.

The general consolidated budget’s arrears climbed to RON 1.5 bln in December 2009 from RON 1.08 bln in 2008 and have to be lowered to RON 480 M by the end of the year. The timetable negotiated with the IMF in February consisted of reducing arrears to RON 1.27 bln by the end of March, to RON 1.09 bln by mid-2010, to RON 810 M after the first nine months and to RON 480 M by the end of the year. Since the start of the programme, the government asked for derogations from those targets during each evaluation, failing to fall within the quarterly values it had committed itself to observing. Budget arrears have to be completely eliminated by the end of April 2011 when the programme with the IMF is scheduled to end. Another subject to be discussed consists of the lump-sum tax. In the first round of talks, IMF experts touched on the situation of budget revenues in Q1, revenues that were smaller than estimated. Authorities were planning to introduce the lump-sum tax in 2010 in order to replace the minimum tax introduced in May 2009.

The first members of the IMF delegation of experts have already arrived in Romania while Jeffrey Franks, head of the evaluation mission, will arrive in Bucharest today. The fourth evaluation mission will end on May 7. The IMF board will discuss the evaluation report in the second half of June and will decide whether to release the fifth tranche worth EUR 850 M. Romania has a two-year loan agreement with the IMF for EUR 12.95 bln, with the total external loan package from the Fund, the European Union, the World Bank and the EBRD set to top EUR 19.95 bln. Fin Min Sebastian Vladescu said yesterday that he is cautious when considering the IMF prognosis on Romania’s economic growth for 2010 of 0.8 per cent of GDP, although it was reduced from 1.3 per cent. Vladescu said the prognosis might be too optimistic. ‘I hope IMF’s prognosis is not too optimistic,’ he said. On the other hand, PM Emil Boc said, during a TV talk-show on Monday evening that Romania would have registered a 17 per cent budget deficit if his government did not take supportive measures to cut expenditures.

British nationals – reluctant to invest in Romanian infrastructure

British companies are reluctant to invest in Romanian road infrastructure because of the difficulties with which they are paid for their services, Nick Anstee, Lord Mayor of the City of London, stated yesterday. Nevertheless, he did point out that a part of Romania’s future success will consist of investments in infrastructure and of the development of transport, water systems and hospitals.

‘This could represent a struggle for the budget deficit but Romania has significant European structural funds of approximately EUR 30 bln until 2013,’ Anstee said during a business breakfast organized by the British-Romanian Chamber of Commerce. Thus, Anstee stated that the public-private partnerships could play a significant role in supporting the financing of these investments. He appreciated the fact that Romania wants to improve its legislation in this domain. The Lord Mayor underlined that in Great Britain 10-15 per cent of the total capital investments are earmarked through public-private partnership since 1996.

‘We’ve done mistakes too but we want to have the opportunity to pass on the lessons we learned from those mistakes,’ Anstee said, pointing out that educating the civil servants is essential. Likewise, he added that there are a multitude of other domains that can be explored in Romania, such as private management, insurances, risk management, education and professional training and qualification. In what concerns the Romanian companies, Anstee pointed out that the best thing for them would be to be listed on the London Stock Exchange. Source: Nine O’Clock

Goldman Sachs executives face senators investigating role in financial crisis

Summoned to a Senate panel examining the firm’s role in the financial crisis, Goldman executives endured a 11-hour excoriation that crystallized the wide gulf between Washington’s view of the storied investment bank and Goldman’s view of itself.

The seven men, including chief executive Lloyd C. Blankfein and Executive Director Fabrice Tourre, subject of a fraud lawsuit by the Securities and Exchange Commission, at times struck a humble tone with the committee but gave no ground on the concerns raised by senators, offering technical responses and eating up time looking for documents in a 900-plus-page binder.

But for the lawmakers, who seldom engaged the finer points the executives made about the markets, the question of Goldman’s conduct on the eve of the financial crisis was not primarily one of law or finance.

The SEC and the courts will resolve the legal question of whether Goldman’s actions broke the law. The question for us is one of ethics and policy,” said Sen. Carl M. Levin (D-Mich.), chairman of the Senate Permanent Subcommittee on Investigations. “Were Goldman’s actions in 2007 appropriate? And if not, should we act to bar similar actions in the future?”

But for Goldman’s executives, it was a narrower question of what the firm was legally required to do to serve its clients and protect itself as the financial markets declined.

Blankfein, the public face of Goldman, began his testimony more than seven hours into the hearing, receiving a more gentle line of questioning than several of his lieutenants. First to testify were four current and former mortgage executives — Tourre, Daniel Sparks, Michael Swenson and Joshua Birnbaum — who all wore dark jackets and white shirts and had worked extensively to prepare for questions the committee might ask.

Goldman hired lawyers who formerly worked on the committee to prepare the executives; one of those lawyers once told a trade journal that the best strategy is “long, thoughtful pauses followed by rambling non-responsive answers.” The executives practiced the technique. Read more in Washington Post.

Europeans Fear Greek Debt Crisis Will Spread

Increasingly, investors wonder if Portugal, Spain and even Ireland may not be able to borrow the billions of dollars they need to finance their government spending.

It’s like Lehman Brothers and Bear Stearns,” said Philip Lane, a professor of international economics at Trinity College in Ireland, referring to the Wall Street failures that propelled the financial crisis of 2008. “It is not so much the fundamentals as it is the unwillingness of the market to fund you.”

A major ratings agency cut Greece’s debt to junk level on Tuesday, warning that bondholders could face losses of up to 50 percent of their holdings in a restructuring. The agency also downgraded Portugal’s debt by two notches.

Leading stock indexes across Europe plunged by 2.5 to 6 percent, and the euro fell to a recent low, for a 13 percent decline against the dollar since December. The Dow Jones industrial average slumped 213.04 points, to 10,991.99, a fall of 1.9 percent, and markets continued dropping into Wednesday, with Japan’s Nikkei index falling more than 2 percent.

The downgrades, by Standard & Poor’s, pushed up the interest rates that Portugal must pay on its 10-year bonds to a high, and Spain’s costs rose, too. Investors are already demanding nearly 10 percent in returns on Greek’s 10-year bonds. The cost of insuring all three countries’ debt against a default are also at record levels — a clear sign that investors are shunning them. Read more in New York Times.

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Written by Theophyle

April 28, 2010 at 9:39 am

One Response

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  1. […] First to testify were four current and former mortgage executives Tourre, Daniel Sparks, Michael Swenson and Joshua Birnbaum who all wore dark jackets and white shirts and had worked extensively to prepare for questions the …More […]


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