Archive for European Financial Crisis
Financial Crisis No Excuse For Inaction On Climate Change: EU
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AARE, Sweden (AFP) – The global financial crisis is not a sufficient reason for inaction on tackling climate change, Swedish Environment Minister Andreas Carlgren said on Friday.
His comments came at a meeting of European environment and energy ministers organised by the Swedish EU presidency in Aare, central Sweden.
The Swedish environment minister told delegates that the current economic turmoil is “the deepest which we will experience during our lifetime.”
“(But) as you know, we should not be naive. There are those really arguing that this should make us more reluctant, should make us hesitate and maybe wait for real action,” Carlgren said.
EU Environment Commissioner Stavros Dimas echoed Carlgren’s views, saying the crisis was “no reason to slow down” but more of an “opportunity for decisive action.”
Dimas said moving towards low-carbon economy would allow the 27-member bloc to take advantage of “the fast-growing markets for environment technologies, services and products.”
“We would also increase the security of our energy supplies,” he said.
It is under the Swedish presidency that the EU will finalise its joint position for international talks on climate change in the Danish capital Copenhagen in December.
The goal is to forge a global deal to tackle global warming after the existing Kyoto Protocol expires in 2012.
EU nations in 2007 committed to reducing greenhouse gas emissions by 20 percent by 2020, compared to their 1990 levels.
Emerging economies such as India and China, however, have refused to commit to carbon emission cuts until developed nations, particularly the United States, present sufficient targets of their own.
They say any new global climate pact should not hinder the economic growth of developing countries.
Italy’s Mafia Thrives In Global Financial Meltdown
Posted by: | CommentsNAPLES, Italy – While businesses around the world are hunkering down for survival, the Italian mob is living a golden moment.
Italy’s various organized crime syndicates — often lumped together colloquially as Mafia Inc. — are gobbling up gas stations, muscling in on supermarket franchises, making loans to cash-starved businesses, taking over trattorias and acquiring buildings in swank neighborhoods in Rome and Milan, investigators say.
These mobsters have lots of what is in short supply for many businesses these days — liquidity — as well as centuries-honed expertise in preying on the vulnerable, whose ranks are swelling in the current financial crisis.
It all means the mob is free to sink cash into two areas that lie at the heart of the global meltdown: real estate and credit markets.
The crime syndicates are flush with billions of euros from extortion rackets, drug trafficking and booming sales in fake designer clothing made in China expressly for the Italian mob — an increasingly lucrative trade as hard-hit consumers search for bargains, prosecutors and police said in recent interviews.
For the mob bosses, the global economic meltdown “is only an advantage,” said anti-mafia prosecutor Franco Roberti, in his office in Naples, the chaotic port city that is home to the Camorra, one of the Italy’s major crime syndicates.
Italy has scored some spectacular successes in its decades-long fight against the Mafia, capturing top bosses, persuading turncoats to testify, and encouraging ordinary citizens to resist shakedowns.
But the mob keeps growing — and its drive in recent years to grab chunks of legitimate business is paying off big time in the financial crisis.
In Rome, in the high-rent neighborhoods around the Spanish Steps, Piazza Navona and Trevi Fountain, mobsters are snapping up real estate, anti-Mafia prosecutor Giancarlo Capaldo said in a courthouse interview.
In probes of what Capaldo described as “indications” that mobsters have taken over hotels, restaurants and cafes in Rome, police seized assets of some of these businesses, although the establishments remain open.
“These places are well run because they want to make money,” Capaldo said. He declined to identify the establishments because the probe is still being conducted, saying only that “you’ll find some of them in tourist guide books.”
Capaldo’s office also confiscated auto dealerships in Rome from suspected Camorristi or their allies.
“The Camorra makes the money here in the south, but it invests it in legal activities up north,” customs and tax police Gen. Giovanni Mainolfi said in his Naples office.
If the mobsters built posh places in the largely undeveloped south “they would stand out, but do it in Milan … and they blend right in,” Mainolfi said.
In an operation code-named “Easy Money,” police this year seized a hotel in the exclusive Tuscan sea resort of Punta Ala, as well as a supermarket, two Ferraris, a gas station in the wealthy northern Reggio Emilia region and other properties, altogether totaling euro30 million (about $40 million). All were believed to be owned by the Camorra, flush with drug profits.
The revenues raked in by Italy’s crime syndicates would be more than respectable for many a stock market-listed company these days — although, of course, the mobsters hardly issue annual reports.
The Rome-based Eurispes think tank has estimated that in 2008, “Mafia Inc.” earned euro130 billion (then $167 billion), or about 8 percent of Italy’s GDP, from its criminal activities, nearly half of that from drug trafficking.
Eurispes, which analyzes social, economic and criminal trends, said loansharking brought in an estimated euro12.6 billion ($17 billion) of that income. It calculated that some 180,000 merchants and other businessmen got their loans, directly or indirectly, through organized crime in Italy.
With much of the world financial crunch making its impact in Italy in the first months of this year, it’s too early to tell how much more profit organized crime might make.
Government probes have found that as they launder illicit revenues, mob bosses are increasingly moving their money out of the underdeveloped south where the syndicates are rooted and into affluent central and northern Italy.
In March, Italy’s intelligence services warned in a report that rising unemployment and the credit crunch could help crime syndicates tighten their tentacles around vast swaths of the nation’s business sector, including supermarkets, real estate and tourism.
A main engine of the mob’s recent strength — the age-old practice of loan-sharking — is thriving as banks hoard cash, allowing the Mafia to elbow in on legitimate businesses.
The mobsters are poised to “acquire control of businesses in difficulty, especially through their consolidated practice of loan-sharking,” as well as to “snap up assets put on the market by enterprises experiencing liquidity crises,” the intelligence report said.
The dire predictions seem borne out by businessmen’s complaints.
SOS Impresa, an Italian business lobby dedicated to fighting organized crime, estimated in a report late last year that in the Camorra has “multiplied by 10, 100, perhaps 1,000 times, its penetration of the economic and social fabric, stepping up its business presence in our country, in Europe and the world.”
In Rome, Camorra men or those in their employ have been spotted hanging out at pawnbrokers’ auctions to learn which businesses might be in financial straits, said Carabinieri Lt. Col. Roberto Casagrande. Those businesses would then be approached — and offered a loan they could scarcely refuse.
The Camorra offers shaky businesses attractive interest rates, calculating that the businesses will end up part of its economic empire if the owner falls behind on payments, Roberti said. The mobsters sometimes leave the original owner as a figurehead to thwart suspicion, police said.
The ‘ndrangheta crime syndicate — based in Calabria, the “toe” of Italy’s boot — is also brazenly taking over struggling businesses and snapping up prime northern Italian property at a bargain during the real estate slowdown, investigators say.
Genoa Mayor Marta Vincinzi told a rally against organized crime in Naples late this spring that Mafia bosses, particularly from the ‘ndrangheta, were “gobbling up entire neighborhoods” and pressuring merchants to pay “protection money” in the gritty, northwestern port city.
Investigators believe that flourishing ties with Colombian cocaine cartels have helped the ‘ndrangheta to surpass Sicily’s Cosa Nostra in international drug dealing.
Cosa Nostra has taken blows in recent years. Longtime fugitive bosses have been captured and a rebellion by island businessmen against paying “protection money” is starting to take root. But the anti-extortion revolt is not widespread enough to significantly reduce the Sicilian Mafia’s coffers, the intelligence services’ report noted.
Particularly tempting to the mob is Italy’s recent explosion of supermarkets, a boon to consumers long frustrated by the often limited hours and selection offered by mom-and-pop stores.
In Sicily last year, authorities seized euro$700 million (then worth $900 million) in assets, including supermarket outlets, from a businessman who was known as the island’s “king of supermarkets” and was suspected of letting Cosa Nostra use his businesses to launder money.
Prosecutors in Palermo said the owner’s name turned up on handwritten notes scribbled by Bernardo Provenzano, the longtime fugitive “boss of all bosses” who was captured in 2006.
The intelligence services report predicts that mobsters would step up production of counterfeit name-brand goods given consumers’ apparently increased appetite for fake designer items. The Eurispes think tank estimated this growing business earned the mob euro6.3 billion ($8.5 billion) last year.
Naples anti-organized crime prosecutor Roberti said the Camorra has pumped up what once was a kind of cottage industry, with crime clan bosses knitting closer ties with mobsters in China, where fake designer clothing, shoes and accessories are now churned out in factories for the mob.
Trafficking in fake designer goods — which investigators suspect the Camorra is also peddling in the United States, France, Britain and Germany — is now becoming more profitable for the Neapolitan syndicate that dealing in cocaine and hashish, said Mainolfi, the customs and tax police general.
He has calculated that for every euro it costs to manufacture the counterfeit designer goods, the Camorra earns 10 euros, while for every euro spent to run drug trafficking, it earns six or seven euros.
The fakes, sold in street stalls and clothing shops in the Naples and Rome areas, arrive by the tons in Naples’ sprawling, chaotic port, where custom officials manage to check only some 5 percent of the shipping containers being unloaded, Mainolfi said.
Global Economic Crisis Hits German Sex Industry
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It did not take long for the world financial crisis to affect the world’s oldest profession in Germany.
In one of the few countries where prostitution is legal, and unusually transparent, the industry has responded with an economic stimulus package of its own: modern marketing tools, rebates and gimmicks to boost falling demand.
Some brothels have cut prices or added free promotions while others have introduced all-inclusive flat-rate fees. Free shuttle buses, discounts for seniors and taxi drivers, as well as “day passes” are among marketing strategies designed to keep business going.
“Times are tough for us too,” said Karin Ahrens, who manages the “Yes, Sir” brothel in Hanover. She told Reuters revenue had dropped by 30 percent at her establishment while turnover had fallen by as much as 50 percent at other clubs.
“We’re definitely feeling the crisis. Clients are being tight with their money. They’re afraid. You can’t charge for the extras any more and there is pressure to cut prices. Everyone wants a deal. Special promotions are essential these days.”
Germany has about 400,000 professional prostitutes. Official figures do not distinguish between the sexes and the number of male prostitutes is not known, but they account for a small fraction of the total and are treated the same under the law.
In 2002, new legislation allowed prostitutes to advertise and to enter into formal labor contracts. It opened the way for them to obtain health insurance, previously refused if they listed their true profession.
Annual revenues are about 14 billion euros ($18 billion), according to an estimate by the Verdi services union. Taxes on prostitution are an important source of income for some cities.
Prostitution is also legal and regulated in the Netherlands, Austria, Switzerland, Hungary, Greece, Turkey and in some parts of Australia, and the U.S. state of Nevada.
In other countries, such as Luxembourg, Latvia, Denmark, Belgium and Finland, it is legal but brothels and pimping are not.
“CREATIVE SOLUTIONS”
Berlin’s “Pussy Club” has attracted media attention with its headline-grabbing “flat rate” — a 70-euro admission charge for unlimited food, drink and sex between 10 a.m. and 4 p.m.
“You’ve got to come up with creative solutions these days,” said club manager Stefan, who requested his surname not be published. “We’re feeling the economic crisis, too, even though business has fortunately been more or less okay for us so far.
“Our offer might sound like it’s too good to be true, but it’s real. You can eat as much as you want, drink as much as you want and have as much sex as you want.”
Stefan, who runs other establishments in Heidelberg and Wuppertal besides the Berlin club, said the flat rate had helped keep the 30 women working in each location fully employed.
Other novel ideas used by brothels and prostitutes include loyalty cards, group sex parties and rebates for golf players. Hamburg’s “GeizHaus” is especially proud of its discount 38.50 euro price. The city has Germany’s most famous red-light district, the Reeperbahn, in the notorious St. Pauli district.
Anke Christiansen, manager of the “GeizHaus,” said the effects of the economic crisis were clear. “The regular customers who used to come by two or three times a week are only coming by once or twice a week now.”
A “GeizHaus” client, who gave his name as Pascal, said: “Naturally we’re all feeling the effects of the crisis.” He added that he could no longer afford his usual two or three visits a week.
Guenter Krull, manager of the “FKK Villa” in Hanover, concurred. “The girls are complaining, too, because business is bad and I worry that it’s all going to get even worse.
CONTINGENCY PLANS
Ecki Krumeich, manager of upmarket Artemis Club in Berlin, said he resisted pressure to cut prices, although senior citizens and taxi drivers get a 50-percent discount on the 80-euro admission fee on Sundays and Mondays.
“Naturally, we’re keeping an eye on the overall economic situation and making contingency plans,” said Krumeich, who said his “wellness club” is one of the largest in Europe with about 70 prostitutes.
“Our philosophy is: we provide an important service and even in a recession there are some things people won’t do without. Other downmarket places might cut prices but we decided we won’t do that. In fact, we raised prices by 10 euros in January.”
Stephanie Klee, a prostitute in Berlin and former leader of the German association of sex workers, said even if a few luxury brothels were weathering the storm because of their wealthy regular clientele, many were struggling.
“Just about everyone’s turning to advertising in one form or another,” she said. “If the consumer electronics shop and the optician come out with rebates and special promotions, why shouldn’t we try the same thing?”
While she and her colleagues might have had five or six clients per day a year ago that had fallen to one or even none.
Klee worries, however, that the crisis has led to “price dumping” in some cities — fees have fallen as low as 30 euros in some parts of Berlin and elsewhere, she said.
“You’ll find a lot of customers trying to negotiate prices down now,” said Klee. “A 30-year-old came up to me and said ‘I lost my job so will you give me a discount?’.”
She and others said they were alarmed that amateur prostitutes — mostly women with low-paid careers — were increasingly turning to prostitution to make ends meet.
“More and more women are moonlighting on the weekends,” said Ahrens. “They’re not able to get by with their main job and are in pretty dire straights. For some it works out okay but it’s tough for some others and they often don’t stay very long.
Europeans look To Welfare, Not Stimulus, In Crisis
Posted by: | CommentsAcross a continent long accustomed to big government and high taxes, many Europeans are counting on generous welfare benefits to shield them from the worst of the meltdown. Others worry that loosening interest rates would lead to devastating inflation.
In the American view, the economic house is on fire, and only quick and decisive action will put out the flames. Europe is not quite as ready to pull the alarm.
“The social security system is definitely better in Europe than in the States,” Florian Schnabl, a 32-year-old financial consultant in Vienna, said Wednesday. But he was hedging his bets: “Who knows if countries here will react as well as the U.S. to the crisis.”
For all their talk of coming together at this week’s summit of the G-20 economic powers in London, European leaders have been openly skeptical of corporate bailouts and massive U.S.-style stimulus spending.
As the G-20 leaders gathered, two new projections forecast more economic turmoil worldwide. The World Bank predicted the global economy will contract by 1.7 percent this year. A separate outlook by the Organization for Economic Cooperation and Development was even more bleak, projecting a 2.75 percent slump worldwide.
And economists warn this is probably just the beginning. Some analysts, such as former International Monetary Fund chief economist Simon Johnson, worry that if Europe keeps dragging its feet it could risk a rerun of the Great Depression or worse.
Still, in much of the European Union, there are fears of taking on yet more public debt — and having to rescue neighbors in addition to foundering banks and struggling industries.
Germany in particular is still bailing out what was once an entire country: the former communist East, which is reeling from high unemployment despite billions spent in the two decades since the Cold War ended.
And German Chancellor Angela Merkel pointed out Wednesday her nation had already approved programs worth $106 billion to get the economy moving. “We have made a gigantic contribution,” she said.
France and Germany are leading a European drive to tighten the regulation of financial markets in an effort to prevent the kinds of excesses that pushed banks worldwide into insolvency.
Looming at the London summit, French Foreign Minister Bernard Kouchner warned, was a confrontation between “two worlds: one that wants more regulation, and the other that wants less.”
Yet at the heart of the rift between the U.S. and Europe over how best to dig out of the crisis is a long-standing clash of economic philosophies.
Europeans historically have enjoyed comprehensive social safety nets that offer jobless workers years of unemployment benefits and uninterrupted health insurance.
Those welfare programs are expensive — in Austria, individual income tax runs as high as 50 percent — but they already do much of what the Obama administration is proposing to achieve through fiscal stimulus.
And Europeans differ from Americans in other key ways: They save far more cash, and generally don’t max out on their credit cards.
That helps explain why Czech Prime Minister Mirek Topolanek, whose country holds the rotating presidency of the 27-nation EU, last week denounced Washington’s deficit spending as “the road to hell.”
“The Europeans think there’s a danger of overdoing it,” said Johnson, the former IMF chief economist, now a professor at the Massachusetts Institute of Technology’s Sloan School of Management.
“Their feeling is, `We’ll get through this,’” he told The Associated Press in a telephone interview. “Germans, for instance, are just not that worried about unemployment. They think their fiscal system can take care of it.”
Poorer countries such as Greece, Portugal and Spain are much more vulnerable, Johnson added.
Johnson and other experts suggest Europeans are too preoccupied with the long view when the global economy needs urgent action, specifically lower interest rates to stimulate growth.
“What’s amazing to me is that the real key to this crisis is monetary policy — and it’s not even being discussed” at the summit, Johnson said.
French President Nicolas Sarkozy has been more receptive to the idea of deeper public spending — in part because more than 1 million workers have taken to the streets in recent weeks to demand it.
But Germans are wary of spending money they don’t have, said Stefan Schneider, an analyst at Deutsche Bank AG.
Merkel’s “grand coalition” of conservatives and center-left Social Democrats has long made a top priority of balancing Germany’s budget and reining in the budget deficit.
Germany, Europe’s biggest economy, is leery of losing control of its national deficit, feeding its hesitancy to expand stimulus spending, Schneider said.
“You have to tackle the question of whether it’s enough. You have to look at how the future economic trends pan out,” he said.
And even though inflation is at an all-time low in Europe, many Germans fear a return of the kind of hyperinflation that took hold after World War I, which people were forced to use barrels of cash to buy basic necessities.
In the back of many Germans’ minds, Johnson said, “almost every year is 1923.”
“The Germans are very afraid of inflation,” Roman Fuertig, 34, a government worker, said Wednesday while walking through a Berlin park. “It already happened here. It’s clear when we are very indebted the only option is inflation.”
“We’re not as hard-hit at the moment as the U.S. or England or many other countries. But we’ll be hit harder later on indirectly because we’re an export nation,” he added. “Raising taxes or shrinking social benefits would be hard.”
On the streets of the Austrian capital, there was an air of uncertainty despite a generous welfare system that kicks in when things go wrong.
Spain Makes First Crisis Bank Takeover
Posted by: | CommentsMADRID (AFP) – Spain’s central bank took over a struggling savings bank on Sunday and prepared to pour in emergency cash, its first rescue in the financial crisis.
The central bank said in a statement that it placed the Caja de Ahorros Castilla La Mancha (CCM) under special administration, and the government met to discuss a cash injection of up to nine billion euros (12 billion euros).
CCM “faces problems of liquidity that can only be resolved through financing from the Bank of Spain,” Economy Minister Pedro Solbes told reporters after an urgent government meeting.
“It is not an injection of public capital or a nationalisation,” but a measure to get liquidity from the central bank flowing to buoy up the regional savings bank, he said.
Solbes and the deputy head of the government Maria Teresa Fernandez de la Vega said the central bank and the government would guarantee customers’ savings. Solbes said no other banks were at risk of needing public support.
The Spanish banking sector had so far been spared much of the turmoil that has hit banks in other parts of the world. No bank had had to be recapitalised and state aid had been limited to loan guarantees or some asset purchases.
It was the first time the central bank had stepped in to take over a struggling lender since it took control of Banco Espanol de Credito in 1993.
But Spain‘s small regional savings banks, which specialise in looking after customers’ deposits and funding mortgages, have been hit hard by the busting of the country’s decade-long construction boom.
The struggling Caja savings bank in the Castilla La Mancha region had been in talks on a possible takeover by another regional bank, Unicaja.
Spanish media reported on March 19 that the government was preparing a rescue plan for the banking sector that would see the state take a stake in some banks while allowing others to go bust.
