European Stocks Drop Before Italy, Germany Sell Debt - Businessweek European Stocks Drop Before Italy, Germany Sell Debt - Businessweek

Wednesday, June 13, 2012

European Stocks Drop Before Italy, Germany Sell Debt - Businessweek

European Stocks Drop Before Italy, Germany Sell Debt - Businessweek

European stocks swung between gains and losses as Italy’s borrowing costs increased at a sale of Treasury bills and investors awaited an American report on retail sales in the world’s largest economy. U.S. index futures were little changed, while Asian shares gained.

J Sainsbury Plc (SBRY) paced declining shares after sales missed forecasts.

The Stoxx Europe 600 Index (SXXP) slipped 0.1 percent to 243.19 at 10:24 a.m. in London, after earlier rising as much as 0.4 percent and dropping as much as 0.5 percent. Futures on the Standard & Poor’s 500 Index expiring in September slid 0.1 percent, while the MSCI Asia Pacific Index added 0.4 percent.

Italy’s borrowing costs surged at the sale of 6.5 billion euros ($8.1 billion) of Treasury bills after the 100 billion- euro bailout of Spain’s banking system failed to stop contagion from the region’s debt crisis.

The Rome-based Treasury sold the one-year bills at 3.972 percent, 1.6 percentage points more than the 2.34 percent at the previous auction on May 11. Investors bid for 1.73 times the amount offered, down from 1.79 times last month.

A U.S. report at 8:30 a.m. in Washington may show retail sales in the world’s largest economy fell 0.2 percent in May, the first decline in a year, according to the median economist forecast. A separate report may show prices paid to producers fell for a second month.

Sainsbury dropped 2.9 percent to 282.8 pence after the company said revenue at stores open at least a year rose 1.4 percent in the 12 weeks ended June 9, excluding gasoline sales. That missed the 1.8 percent median estimate of nine analysts compiled by Bloomberg and was less than the prior quarter’s 2.6 percent increase.

To contact the reporter on this story: Sarah Jones in London at

To contact the editor responsible for this story: Andrew Rummer at

Mobile money plan stumbles at start in Haiti - Jamaica Gleaner

Getting money in Haiti can be a harrowing experience: Bank branches are few, most of them are in the capital and a simple transaction can take half a day.

Cash machines are scarce as well, and often broken or empty. And then there are the thieves who often wait nearby in hopes of finding a mark.

So aid agencies trying to remake Haiti after a catastrophic earthquake are promoting a new way to bypass banks altogether: easy money transfers by cellphone.

The United States government and the Bill & Melinda Gates Foundation have pumped millions of dollars into the plan, which lets people save and move money in mobile phone accounts and quickly withdraw it at a network of retail stores around the country.

As yet, though, few Haitians are buying the idea, which has become one of many post-quake projects to fall short of expectations and a reminder of how hard it is to change a society that has been repeatedly set back by political upheaval and natural disasters.

"I'm not going to invest my money in something I don't see," said James Alexis, a 33-year-old truck driver, as he stood in line at a bank in downtown Port-au-Prince, a wait he expected would take two hours. "It could be a trick."

Backers admit adoption has been slower than expected, though they remain optimistic it will expand, in part because so many Haitians rely on cellphones, often to find jobs.

Some 800,000 people initially registered for the service, even if only about 22,000 people regularly use it.

The service "has gone on in the face of political violence, political instability, cholera, gas shortages, you name it, and we're this far," said Greta Greathouse, director of a US Agency for International Development programme to improve financial services in Haiti.

"Does it mean we're there yet? No. We want it to be sustainable and there's a lot of work that needs to be done."

A spokesman for the Gates Foundation in Seattle, Chris Williams, said by telephone that the project is a "work in progress" but that it's going well.

"It's not a huge surprise to find some disconnect between the number of registered users and currently active users," Williams said. "It takes some time to build up to scale."

The project began months after the January 2010 earthquake when the Gates Foundation announced that it was creating the Haiti Mobile Money Initiative with a US$10 million donation.

USAID contributed another US$5 million for technical assistance.

The idea was to help the 90 per cent of Haitians who don't use banks by replicating a mobile money-transfer system that has gained popularity in countries such as Kenya, Uganda and the Philippines.

Two local cellphone companies, Digicel Group Limited and Voila, rushed to compete for the money by setting up their own mobile money transfer systems, and so far have been awarded a total of US$6.8 million from the foundation.

Linked to phone

The system is essentially an account linked to the telephone.

Users can transfer up to US$250 at a time to another subscriber, who can then withdraw the money from a network of shops ranging from auto-parts stores to Internet cafes.

As much as US$1,500 can be transferred in a month. So far, international transfers are not allowed.

Digicel Haiti's former CEO, Maarten Boute, said at a Barcelona conference in February that it wasn't easy to explain the system.

"Our main lesson learned is how difficult it is to educate customers," said Boute, who is now a senior adviser to the Jamaica-based company.

"When we launched the service we assumed it would be something like selling a mobile phone, where you stick a mobile phone into someone's hand and almost anyone can start using it quite quickly because it's very easy to understand. With a mobile banking service or a mobile money service, it's not quite that easy."

The Christian charity World Vision joined the programme, seeing it as a simple, cash-free way to pay small rental subsidies to help people move out of the gloomy settlements that sprang up after the earthquake.

But many people didn't understand how to use the technology and were leery of it, said Keith Chibafa, who oversees the project for World Vision. The non-profit registered 6,000 subscribers for the service, but only 1,000 actually use it.

Confidence was undermined on one occasion when residents of a camp in the city of Croix-des-Bouquets, outside the capital, went to collect their payments and were told there was no money.

"We did have an agent running out of cash," Chibafa said. "It was a problem, a serious problem."

Cab driver Ernst Figaro said he doesn't trust the new service any more than the banks, which are not known for their customer service.

"The electronic system in Haiti is not standing on its feet yet," Figaro said while taking a break from work on a park bench. "I just don't trust putting my money in this system."

Others, such as Wilner Destina, have become converts.

The 40-year-old street painter signed up six months ago because he was eager to avoid the frustrating hourlong lines at commercial banks.

"It allows us to do (money) transfers with ease," Destina said outside a Digicel store in downtown Port-au-Prince after sending the equivalent of US$50 to a friend in Gonaives, a port city 110 kilometres (68 miles) northwest of Haiti's capital.

David Sharpe, Digicel's director of products and services, hopes to find more people like Destina, attracting them with features such as a lottery played on the cellphone and, later, international wire transfers.

More users will arrive through a new government programme that will use the service to make transfers to as many as 100,000 mothers who keep their children in school.

With the recent acquisition of Voila by Digicel, Sharpe joked in an interview that mobile banking will take off in the coming years.

"I'll put 10 bucks down that we beat all of your expectations."

- AP


World stocks struggle as crisis fears weigh - The Guardian


AP Business Writer= HONG KONG (AP) — World stocks struggled to stay above water in choppy trading on Wednesday, as persistent worries over Europe's ability to contain a simmering debt crisis tempered optimism following talk of more stimulus for the U.S. economy.

Some markets zigzagged between gains and losses as investors weighed comments by a Federal Reserve official in support of more measures to stimulate the economy against the situation in Europe.

In early European trading, the FTSE 100 index of leading British companies rose 0.3 percent to 5,488.84 while Germany's DAX was nearly flat at 6,161.24. France's CAC 40 retreated 0.1 percent to 3,043.97 after briefly turning positive.

U.S. stocks were poised to fall. Dow futures lost 0.1 percent to 12,500.00 while broader S&P 500 futures dropped 0.2 percent to 1,317.70.

In Asia, Japan's Nikkei 225 index gained 0.6 percent to close at 8,587.84, after machinery orders rose 5.7 percent to the highest level in four years, Kyodo reported.

South Korea's Kospi swung temporarily into negative territory in early trading before closing 0.2 percent higher at 1,859.32. Hong Kong's Hang Seng also briefly dipped before rising 0.8 percent to 18,026.52.

Australia's S&P/ASX 200 fell 0.2 percent to 4,063.80. Benchmarks in New Zealand and Singapore fell but Taiwan's rose.

Mainland Chinese shares rose on hopes authorities would bring in more economy-boosting measures. The benchmark Shanghai Composite Index added 1.3 percent to 2,318.92 while the smaller Shenzhen Composite Index gained 1.8 percent to 959.11. Shares in biotechnology, insurance and power-related companies led the gains.

"There is some room for gains after the earlier losses, and investors are expecting more positive monetary policies in the short term, even if the outlook is not so good in the longer term," said Zhang Yang, an analyst at Sinolink Securities, based in Shanghai.

Speculation that regulators may ease limits on insurers' investments helped buoy China Life Insurance, China's biggest insurance company, which gained 7.2 percent.

Huaneng Power International, one of several big electricity generators, gained 5.7 percent on expectations that lower coal prices will boost utilities' profits, Zhang said.

Conditions in Europe continued to weigh.

In Spain, ratings agency Fitch downgraded 18 banks and the government's borrowing costs rose again Wednesday after peaking the day before at the highest level since adopting the euro currency. Investors are worried that a European bailout for Spain's banks won't solve the country's problems amid fears that the contagion could spread to Italy. In Greece, investors are nervously looking ahead to an election on Sunday to see if a party that has vowed to throw out the country's bailout agreement will win.

U.S. stocks, meanwhile, staged one of their strongest rallies of the year after Charles Evans, president of the Fed's Chicago bank, told Bloomberg News he supported action to produce faster job growth.

"Even though the U.S. market rose strongly overnight because of the anticipation of quantitative easing, the market still in Asia is not convinced of the recovery," said Francis Lun, managing director of investment firm Lyncean Holdings Ltd. "So investors are very timid and dare not buy in the market right now."

Esprit Holdings Ltd. plummeted 21 percent in Hong Kong trading before being suspended after the clothing chain said chief executive Ronald van der Vis resigned for personal and family reasons. It's another sign of trouble at Esprit, which has been struggling amid shrinking demand in its biggest market, Europe.

Benchmark oil for July delivery was up 19 cents to $83.52 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 62 cents to finish at $83.32 on Tuesday.

In currencies, the euro strengthened to $1.2519 from $1.2498 late Tuesday in New York. The dollar rose to 79.56 yen from 79.49 yen.


AP researcher Fu Ting in Shanghai contributed to this report.

US-India hold talks as business climate worsens in Delhi - BBC News

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I told EFCC about bribe money in April – Lawan Farouk - Vanguard

Emma Ujah, Abuja Bureau Chief
LAGOS — Farouk Lawan who is at the centre of the $3 million bribery scandal in the House of Representatives, yesterday revealed in Abuja, that he reported the bribe to law enforcement agents as far back as April 24.

Documents released by National Assembly sources to the media, yesterday, showed that Lawan reportedly intimated the House Committee on Financial Crimes in a letter dated April 24, 2012, of pressures to offer him bribe to influence the outcome of the investigation into the fuel subsidy scheme.

In a letter to the leadership of the House, Lawan also said his “life has been under constant threat since the fuel probe begun.”

Hon. Lawan reported the bribe to the police following which the Inspector-General in a letter dated, May 9, 2012, directed a task force on investigation to meet him.

The IGP in the letter with reference number CR:3000/IGP.SEC/STF/FHQ/ABJ/VOL 2/309 called Lawan’s attention to an interview he granted a national newspaper on April 28, 2012 and directed, “a discreet investigation into the matter.”

The letter was signed by the Commissioner of Police, Special Task Force, Ali Amodu.

He said that in another letter dated May 16, 2012 with reference number CR:3000/IGP.SEC/STF/FHQ/ABJ/VOL 2/319, and signed by Amodu, the IGP requested money exhibit, names of witnesses and other material evidence from him.

Hon. Lawan explained that in a letter dated May 31, 2012, he told the IGP that the matter (bribe offer) had been referred to the relevant committee of the House for legislative actions.

After the correspondence between the IGP and Hon. Farouk, the IGP in a letter to the Speaker of the House, Rt Hon. Aminu Tambuwal, dated June 4, 2012, stated that a detailed criminal investigation had been ordered into the matter.

In the letter titled, “Investigation activities: Letter of invitation in a case of criminal conspiracy and attempt to pervert the course of justice by offering gratification,” the office of the IGP stated that “the Inspector General of Police has directed a detailed criminal investigation into the matter.”

Mr. Otedola, had in an interview with a national newspaper, yesterday alleged that Hon. Farouk and the Secretary of the Committee, Boniface Emenalo, had collected a total $620,000 from him in a sting operation masterminded by the security agencies.

He said that during the probe, Zenon told the committee that it had nothing to do with the subsidy regime because it was not importing petrol, which is being subsidized but that Hon. Farouk insisted on being bribed to leave his company’s name out of the report which prompted him to offer him marked currency notes.

China money rates rise on big banks money demand - Reuters

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Down-Under Greeks Send Money as Crisis Stirs Homeland Ties - Businessweek

Half a century after leaving Greece and more than 12,000 kilometers (7,500 miles) from Athens, Paul Afkos says there’s no escaping the calling of his motherland.

With Greek unemployment four times higher than in his adopted Australia, the 59-year-old head of Afkos Industries, a maker of mining components based near Perth, has plowed A$18 million ($17.9 million) into a 109-bed hotel in northern Greece that opened in April.

“I see it as a duty,” Afkos says, after bringing forward by eight months the opening of the Afkos Grammos Hotel Resort in Kastoria. “I can’t be seen as a hypocrite, not helping my fellow Greeks. I wanted to open early to provide some assistance to these people who are in need of a job.”

Australia’s Greek population has grown from seven pirates dispatched by Britain in 1829 to a diaspora of about half a million, making Melbourne the third-largest Greek city behind Athens and Thessaloniki. Armed with patriotism and the best- performing currency against the euro since late-2008, Australia’s Greeks are deploying wealth amassed in the fastest growing major developed economy to a nation that’s needed 240 billion euros ($300 billion) in bailouts. Greece votes June 17 in an election set to decide its future in the euro zone.

John Tripidakis, a Greek lawyer with an Athens practice who splits his time between Sydney and Melbourne, said half his clients are interested in buying property in Greece, up from less than 10 percent two years ago.

“They are looking for a bargain,” he said in an interview from Sydney. “Yet they are still connected to the sentimental criteria of buying something near the village of their father or grandfather.”

Prices Plunge

Beachfront summerhouses or suburban bargains in Athens are among the most-desired properties, said Tripidakis, a lawyer for 30 years who was born in the Greek capital.

Apartment prices in Greece fell 3.7 percent in 2009, 4.7 percent the following year and 5.1 percent in 2011, and house values have declined even further, the central bank said in April. The real-estate market is “without any signs of recovery,” the bank said.

“What better time than the present to buy?” Tripidakis said. “Cash is king.”

The Australian dollar has surged 66 percent against the euro since October 2008 as Lehman Brothers Holdings Inc.’s failure drove up credit costs, slowed global growth, and exposed the stretched finances of European nations such as Ireland and Greece. Spain last week asked euro-region governments for as much as 100 billion euros to rescue the country’s banking system.

Home Buyers

“Anecdotally, pretty much every person from my parents’ generation or their children are going over there and purchasing property in the town or area where they grew up,” said George Boubouras, 44, the Melbourne-based head of investment strategy at UBS AG’s wealth management unit in Australia and a Greek citizen.

“They are very strong and passionate about it, and it’s very much not with the brain, it’s with the heart,” said Boubouras, who was born in South Australia and inherited property in Greece, where his cousins and extended family live. Many properties change hands only for cash, he said.

Greece has at least a one-in-three chance of leaving the 17-country euro area within months of this weekend’s election, Standard & Poor’s said in a June 4 report. Greek deposit outflows have accelerated before the vote, two bankers familiar with the situation said, on concern the nation may move closer to abandoning the region’s currency.

Family Ties

The crisis dominates conversation in the Greek-owned shops, cafés and accountancy firms in Melbourne’s eastern suburb of Oakleigh, the heartland of the city’s Greek community.

“The majority of people I speak to have family back home,” 36-year-old butcher Tom Droutsis said in his father’s shop, where posters of the historical Greek town of Nafpaktos, his mother’s birthplace, hang on the walls. “I feel for them.”

At least once a week, a visitor from Greece comes to the shop or he fields an inquiry about work or other opportunities in Melbourne from someone caught up in the crisis, he said.

Australia’s 2006 census counted 365,145 people of Greek ancestry in Australia and 109,980 Greek-born migrants among Australia’s population of 19.9 million at the time. Greece was home to 10.8 million at the end of 2011.

In Australia, the seven young sailors from Hydra transported when the colony was still accepting convicts from Britain were followed by exiles from Ottoman rule, then other Greeks seeking riches during Australia’s Gold Rush. Emigration increased in the 20th century amid conflict with Turkey, depression and civil war.

Plato, Olympics

According to a New South Wales state government website, between 1947 and 1982, almost 250,000 arrived in Australia from mainland Greece, its islands and Greek communities outside the nation that gave the world Plato and the Olympic Games.

“For Greeks living abroad, Greece is not a country, it’s a cultural ideology,” said Anastasios Tamis, author of “The Greeks in Australia,” published in 2005. “It’s what she has offered the world from the classical perspective. This has perpetuated love and patriotism.”

Almost half of Australia’s Greek community lives in the nation’s second-biggest city of Melbourne, and about 30 percent in Sydney, according to the NSW government site. More than a quarter of Australia’s Greek community returns to Greece for the northern hemisphere’s summer, Tamis said.

Still, some question the merit of investing in Greek property when the country’s immediate future is undecided.

Uncertain Times

“Greek Australians may be looking, but how many are actually proceeding?” Yannis Perrotis, managing director of CBRE Atria, a unit of real estate company CBRE Group Inc. (CBG) (CBG), said in an interview in Athens. “Nobody, and I mean nobody, knows what is going to happen to this country.”

Con Berbatis, a Perth-based pharmacist and a partner at the Holiday Inn Hotel in the city, said he sees opportunities in Greece but isn’t buying assets yet. Instead, he has met Greek consular officials in Australia to discuss how to donate as much as A$50,000 of medical supplies as the crisis cripples Greece’s healthcare system.

“A number of things need to stabilize before I put my money in there,” said Berbatis, born in Australia in 1946, 20 years after his father left Greece. “The prerequisites for me are a stable currency and a stable political structure.”

Stephen Koukoulas, managing director of Canberra-based Market Economics Pty, said a Greek exit from the euro would see investors “badly burnt” by currency depreciation as the nation returned to the drachma.


“Investments should be related to risk-reward trade-offs, and if they’re done for reasons of the heart, not of the head, you can get buried if things move against you,” said Koukoulas, a third-generation Greek Australian whose grandfather arrived in Sydney in 1920.

Afkos said he’s “optimistic” that Greece, which has a jobless rate of 22 percent, won’t exit the euro. The former co- owner of the Perth Glory soccer team said the resort he built in Kastoria has given work to 25 local families.

“That’s the kind of help we Australian Greeks can do,” said Afkos, who followed his father to Australia in 1964 with his sister and mother. “I have a warm feeling for the people.”

To contact the reporter on this story: Angus Whitley in Sydney at

To contact the editors responsible for this story: Daniel Hauck at; Philip Lagerkranser at; Andreea Papuc at

Encouraged by the Fed's positive comments, stocks rise sharply - The Christian Science Monitor

Stocks staged one of their strongest rallies of the year Tuesday, erasing a big decline from the day before, after a Federal Reserve official said he supported more measures to stimulate the economy.

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The Dow Jones industrial average shot up 162 points, and every major category of stock in the U.S. market closed higher.

Charles Evans, president of the Fed's Chicago bank, told Bloomberg News that he supported action to produce faster job growth, including having the Fed commit to super-low interest rates until unemployment falls significantly.

Last week, Fed Chairman Ben Bernanke told a committee of Congress that he was ready to act if the economy needs it, but he laid out no immediate steps.

Investors have been worried about an escalating crisis in Europe over government debt and the health of banks, and job growth in the United States has been slower over the past three months than it was earlier in the year.

"If there's really bad news, it creates a heightened sense of anticipation that the Fed is going to ride to the rescue," said Jeff Lancaster, a prinicpal at the wealth advisory firm Bingham, Osborn & Scarborough in San Francisco.

"It's almost like you've crashed your car and you've got a $500 deductible, and you take the car to the body shop and you just have this perverse desire for the damage to be well over $500," he said.

Rob Lutts, president and chief investment officer of Cabot Money Management, said investors were looking for an excuse to buy.

"The question for Bernanke is should he add more medicine when he's already doped up the patient enough already," he said.

Materials companies, industrial companies and banks rose the most, but each of the 10 major categories of stock in the Standard & Poor's 500 climbed. Energy stocks also had an impressive day after the price of oil rose from an eight-month low.

Over the weekend, European countries committed to lend Spain up to $125 billion to save its failing banks. But on Monday, the Dow fell 142 points. Investors fretted that they did not know enough about the details.

The big rally in U.S. stocks on Tuesday came despite more discouraging signs from Europe. Spain's borrowing costs jumped for a second day, to the highest level since Spain adopted the euro currency.

The interest rate, or yield, on Spain's 10-year bond rose 0.20 percentage point to 6.67 percent. It rose as high as 6.81 percent earlier in the day. At 7 percent, economists say, countries generally can no longer finance their own debt.

The rescue loan will be funneled through the government of Spain, and investors are also worried about whether Spain will have to repay that loan before it pays its other debt.

That makes bondholders less willing to buy Spain's debt, and makes them demand a higher interest rate to compensate for the added risk that they will not be paid back first if Spain is unable to pay all its debt.

"The market needs some confidence and foreign buyers won't buy Spanish debt if they won't get paid first," said William O'Donnell, head of U.S. Treasury strategy at Royal Bank of Scotland.

Borrowing costs for Italy, which analysts fear will be the next European country to seek some kind of rescue, rose even more. They jumped 0.47 percentage point to 6.02 percent.

Investors are also nervous ahead of an election in Greece this weekend that may determine whether that country cuts itself free from the euro.

Stocks slipped early in Madrid, then turned positive and were up 0.1 percent after U.S. markets opened. France's CAC-40 rose 0.1 percent, and Germany's DAX gained 0.3 percent.

In the U.S., the Dow rose 162.57 points, or 1.3 percent, to close at 12,573.80. The Standard & Poor's 500 index gained 15.25 points to 1,324.18, and the Nasdaq composite rose 33.34 to 2,843.07. Trading was light for a second day.

Investors sold U.S. government debt, an indication that they were willing to move money into riskier assets. The yield on the benchmark 10-year U.S. Treasury note climbed 0.08 percentage point to 1.67 percent.

Michael Kors Holdings, a high-end clothing company, rose $2.06, or 5 percent, to $40.24 after reporting that its fourth-quarter profit more than tripled on strong demand grew for its luxury clothing and accessories.

The company also boosted its earnings forecast for the quarter and the year. Luxury spending has recovered from the recession faster than other consumer spending. Stocks of other upscale retailers, like Nordstrom, also rose.

Among other stocks making big moves:

VeriFone Systems, an electronic payments company, fell $2.02, or 6 percent, to $31.92. A jury ruled against it last week in a patent dispute, and VeriFone said late Monday that it was booking $18 million in expenses.

A123 Systems, which makes batteries for electric cars, jumped 54 cents, or 52 percent, to $1.58 after saying it had developed new lithium ion technology capable of operating in extreme heat or cold. Heat generated by powerful next-generation batteries is one of the biggest hurdles in developing cars that do not use fossil fuels.

Textron, which makes planes, rose 94 cents, or 4 percent, to $24.52, one of the biggest gains in the S&P 500. Business jet operator NetJets said it plans to spend up to $9.6 billion on planes from Textron's Cessna unit and from Bombardier.

— First Solar, the world's largest maker of a type of solar panel, rose $2.62, or 21.2 percent, to $14.95. It reported strong demand from Europe and will delay the closing of a German plant.

Exclusive: Syria prints new money as deficit grows: bankers - Reuters

AMMAN | Wed Jun 13, 2012 5:25am EDT

AMMAN (Reuters) - Syria has released new cash into circulation to finance its fiscal deficit, flirting with inflation after violence and sanctions wiped out revenues and led to a severe economic contraction, bankers in Damascus say.

Four Damascus-based bankerssyria

told Reuters that new banknotes printed in Russia were circulating in trial amounts in the capital and Aleppo, the first such step since a popular revolt against President Bashar al-Assad began in 2011.

The four bankers said the new notes were being used not just to replace worn out currency but to ensure that salaries and other government expenses were paid, a step economists say could increase inflation and worsen the economic crisis.

The United Nations says Assad's forces have killed at least 10,000 people in a crackdown, and the government says more than 2,600 members of its security forces have died.

The four bankers, along with one business leader in touch with officials, said the new money had been printed in Russia, although they were not able to give the name of the firm that printed it. Two of the bankers said they had spoken to officials recently returned from Moscow where the issue was discussed.

"(The Russians) sent sample new banknotes that were approved and the first order has been delivered. I understand some new banknotes have been injected into the market," said one of the bankers. All requested anonymity.

Two other senior bankers in Damascus said they had heard from officials that a first order of an undisclosed amount of new currency had arrived in Syria from Russia, although they were unable to confirm whether it had entered circulation.

Outgoing Finance Minister Mohammad al-Jleilati said last week that Syria had discussed printing banknotes with Russian officials during economic talks at the end of May in Moscow. He said such a deal was "almost done", without going into details.

However, the central bank later denied through state media that any new currency had been circulated.

Goznak, the state firm that operates Russia's mint and has exclusive rights to secure printing technology, regularly prints money for other countries. It declined to comment.


Russia is one of Syria's major political backers and a close trading and economic partner. There are no sanctions in place that would bar a Russian firm from printing money for Syria.

Syrian money was previously printed in Austria by Oesterreichische Banknoten- und Sicherheitsdruck GmbH, a subsidiary of the Austrian central bank. That order was suspended last year because of European Union sanctions, an Austrian central bank spokesman said.

One of the four bankers described the decision to use newly printed money from Russia to pay the deficit as a "last resort" after several months of consideration.

Syria's deficit has swollen because of declining government revenues and loss of oil exports hit by sanctions. The government is loathe to impose unpopular measures to fight the deficit, like cutting subsidies or raising taxes.

"The deficit is there and it is already increasing and increasing quickly. And to finance it they have decided to print currency," said the senior businessman, who is familiar with the subject and in touch with monetary officials.

Bankers say a priority has been to continue salary payments for over 2 million state employees among a workforce of 4.5 million in a country of more than 21 million people.

"You cannot allow the public sector to collapse," said one of the bankers.‮‮‮‮‮‮‮‮‮‮ ‬‬‬‬‬‬‬‬‬‬"People are getting their wages and there are no complaints if they are paid at the end of every month. If we reach a stage where they are not paid there will be a crisis."

Syria's $27 billion 2012 budget was the biggest in its history, taking many by surprise. Bankers say the spending surge was motivated by a desire to create more state jobs and maintain subsidies to help ward off wider discontent.

The private sector has suffered large scale layoffs, but workers in the public sector have kept their jobs and had steady wages despite a salary freeze.

Financing the spending has proven difficult. The central bank has exceeded borrowing limits from public banks, and private banks are reluctant to buy government bonds, one of the bankers said.

Inflation is already running at 30 percent, although the central bank considers it manageable.

Authorities have spent state funds on subsidies to keep the prices for household utilities and petrol unchanged, and have announced planned price controls on basic commodities. However, electricity prices for big industries have risen by 60 percent and the price of subsidized diesel fuel has also risen.

The authorities plan to inject only a small amount of new currency to prevent runaway inflation, said one of the bankers.

"But there is a limit to how much fresh money could be injected into the economy in such highly uncertain times. Reckless printing of money as a way of buying short term reprieve could be economic suicide," the banker added.

(Additional reporting by Fredrik Dahl in Vienna; Editing by Oliver Holmes and Peter Graff)

1 comment:

Stocks and investments said...

This is definitely a topic that's close to me so Im happy that you wrote about it. I'm also happy that you did the subject some justice. Not only do you know a great deal about it,