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Tuesday, March 11, 2008

January in economics

EU 'big four' tell banks to increase transparency

30 January 2008

The heads of the EU's four largest economies have told banks and other financial institutions to reform or face increased regulation, saying the level of confidence in the economy must be maintained in order to avert a return to protectionism.

British Prime Minister Gordon Brown last night (29 January) hosted French President Nicolas Sarkozy, German Chancellor Angela Merkel, Italian Premier Romano Prodi and European Commission President José Manuel Barroso in London for talks regarding the ongoing turbulence in international financial markets.

In a joint communiqué, the leaders told credit rating agencies to improve the information they provide to their customers and called for the "prompt and full disclosure" of losses by banks and other financial institutions in order to better predict global financial downturns.

They warned of regulatory action if no improvement is seen. "If market participants prove unable or unwilling to rapidly address these issues, we stand ready to consider regulatory alternatives," said the communiqué.

But France is not the only country whose banks have been facing troubles lately. In the UK, the country's fifth largest mortgage lender Northern Rock had to be bailed out as clients started massively withdrawing their cash deposits, while Germany's state-owned bank WestLB has just revealed a net loss of around €1 billion owing to its exposure to defaulting US mortgages as well as fraudulent stock trades by some of its staff.

Meanwhile, US economic woes have led to growing concern that an American recession could spread to the rest of the world. The International Monetary Fund yesterday cut its growth forecast for the second time in less than six months, saying it now expects global GDP growth to reach 4.1% this year, down from 4.4%.

For the US, the forecast is now just 1.5% for 2008 and IMF Chief Economist Simon Johnson warned that the risk of contagion to other regions is real. "Reports of decoupling have been greatly exaggerated," he said, highlighting Europe's strong "trade and financial linkages" with the US.

While the US has chosen to react to the turbulence with an economic stimulus package, including the injection of hundreds of billions of dollars into the market and a steep lowering of interest rates by the Federal Reserve, EU leaders insisted the European economy is strong enough to withhold a crisis without such interventions.

Instead, the communiqué calls on the International Monetary Fund to put forward proposals on how to strengthen its international economic oversight and put in place a better "early warning system". source

My comment: It was high time to see some action from governments on this issue. Though I really don't understand why banks in USA cut the credit burden and here they increase it. There should be a reason, right? Right?

Industries already affected by water stress, warns UN

31 January 2008

The water challenge has climbed up the corporate agenda as nuclear power plants in Europe and the US face shutdown due to lack of cooling water supplies. What's more, the push for biofuels is consuming increasing amounts of water, warned Kaveh Zahedi from the UN Environment Programme.

"The challenge of water has been with us for a long time. So why has it suddenly propelled itself onto the radar of senior industry figures and in the past few days become a top agenda item for multi-national corporations?," asked Zahedi at a meetingPdf external of the European Parliament Climate Change Committee on 29 January 2008.

The committee's thematic session gathered MEPs and experts to discuss the links between global warming, water scarcity and sustainable economic development.

Answering his own question, Zahedi said that the sudden interest comes from previously experienced and predicted economic impacts and the financial implications of the water challenge for corporations.

"Currently, at least 24 nuclear plants in the south-eastern United States face shutdown or drastically limited operations because severe drought conditions have lowered the levels of lakes and rivers that supply cooling water - that's 23% of the nation's 104 nuclear power plants. Last year in Italy, the River Po ran so low there were plans to shut down power plants there," he said, listing examples. "Only a few weeks ago, big ships marooned as a result of the drought in China," he added.

Regarding the contribution of biofuels to water stress, Zahedi said that even though some consider them to be a "silver bullet in terms of combating global warming [...], biofuels urgently need sustainability criteria". He noted that it can take 1,000 litres of water to make a litre of biofuel.source

My comment: It's obvious water would be a problem with Global Warming closing on to us. Hopefully that would be one more stimuli to fight it.

Conference hears EU energy supply anxieties

6 February 2008

Russia and Gazprom were on everyone's lips at the annual conference of the French Institute of International Relations (IFRI) in Brussels last week, which focused on the EU's external energy policy.

The objective of the conference was to take stock of the European Union's external energy policy and examine perspectives for the future.

SpeakingPdf external at the closing session on 1 February, EU foreign policy chief Javier Solana admitted that Europe still had a long way to go before getting a credible external energy policy.

"In Europe, we have seen real progress on tackling climate change; some progress on the internal energy side; but rather less progress on the external side. Too often, we see mixed messages and the defence of narrow, national interests at the expense of broader, European interests."

On the divisive issue of Russia, Solana advocated a pragmatic approach based on mutual recognition of interdependence. "Consumers need to buy but producers need to sell. It is worth recalling that all the existing infrastructure in Russia runs West, not East."

But he also defended the "justified concern across Europe" about Russia's leveraging of energy as a political tool, saying that there is "in principle nothing that stops us, the Europeans, from matching their determination with our own discipline."

In particular, he insisted that the EU "should also stick to our insistence that there has to be reciprocity in terms of investments upstream and downstream" as proposed in the Commission's third package of energy liberalisation directives in September last year (EurActiv 20/09/07).

A session on the EU's energy supply and geopolitics focused heavily on Russia, with Central Asia, China, the Middle East and Africa adding to a picture dominated by anxieties over fossil fuel supplies.

Thomas Gomart, director of the Russia/NIS Centre at IFRI, pointed to the "securitisation" of Russia's energy rhetoric, making three main observations:

  1. Energy has become an issue of tension between the EU and Russia. According to Gomart, the EU is currently "incapable" of deciding whether it considers Russia to be a threat or a partner because of the perception that groups such as Gazprom are following instructions from the Kremlin.
  2. The EU did not anticipate Russia's quick " return" to the world stage as mounting inflows of petrodollars allowed the country to repay its debt and propel itself to third place worldwide in terms of currency reserves.
  3. Energy relations between the two are based on "heavy interdependence", with the EU absorbing 85% of Russia's gas exports (Russian imports cover 25% of total EU gas consumption).

Gomart pleaded for a "de-dramatisation" of EU-Russia energy relations, saying that the EU should get used to the idea of future "massive Russian investments" in the European energy sector as illustrated by Gazprom's recent attempts to get a foothold in the UK energy market.

Valérie Niquet, director of the Asia Centre at IFRI, gave an overview of the energy situation in China, saying the country was currently "in a learning phase" due to its rapid economic development. The Chinese strategy, Niquet said, is to:

  • Develop its own oil and gas resources, including offshore - a strategy which is causing tensions with neighbouring countries in the South China and East China Seas.
  • Decrease its oil consumption (import dependency is set to rise from 50% now to 80% in 2030, according to the IEA).
  • Diversify its energy resources with increased use of gas and nuclear power (coal, which currently covers 70% of China's energy needs, is not expected to fall below 60%, Niquet said).

Niquet said there were two conflicting schools of thought in China on energy, both of which are heavily marked by fears about China's "vulnerability" to external suppliers:

  • The economic approach (supported by a minority but gaining ground) which argues in favour of a rapprochement with other big energy-consuming nations in the IEA and weighs more heavily on the world's major energy suppliers, notably Saudi Arabia and Russia.
  • The classical security approach (currently favoured by a majority), closer to the "military-industrial lobby", which uses the rhetoric of "survival" and portrays China as being under siege from external forces (for example, US influence in Taiwan). The result is a "go-out" policy turned towards Central Asia and Africa (the latter accounting for 30% of China's oil imports).

Turning to the implications for Europe, Niquet said the EU needed to strengthen its energy dialogue with China, including on environmental issues and relations with third countries.source

My comment:I completely agree on the de-dramatization o the relation between EU an Russia. It's hight time Europe to understand Russia is a vital economical partner and Russia to understand that EU is the greatest market it could reach and thus to treat EU respectfully.

Study: eHealth strategies focus 'too much' on ICT

5 February 2008

Preliminary findings of an EU-backed study assessing financing needs for eHealth reveal an over-emphasis on ICT to the detriment of organisational change and real benefits for health systems.

The preliminary findings, sent to the Commission in January 2008, also highlighted "inadequate financing for the whole eHealth investment life-cycle". Instead, "financing opportunities address a limited and often insufficient time period of the life-cycle," said the European Commission, commenting on the initial results.

"Financing ICT projects and ICT only does not deliver any benefits. We need to finance organisational change as well," explained Tom Jones, a member of the 'Financing eHealth' project's study team.

According to Jones, organisational change can be achieved by freeing up medical staff's time for eHealth purposes and training, as well as re-designing current working and clinical practices. Furthermore, "we need clinical executive leadership and effective engagement of doctors and nurses."

Regarding the eHealth investment life-cycle, Jones admitted that "the financing is often right at the beginning". He complained that "no long-term financial plan exists. Those involved think that 'just getting the thing started' is enough, whereas getting the thing through is far more important."

Jones conceded that changing eHealth financing was important, but insisted "financial change will not be enough. We need to convince the whole eHealth user chain of the benefits of eHealth."

The project's final report and results will be published in September 2008. It will provide specific recommendations on effective and efficient management of eHealth investment for both the Commission and EU member states to follow.source

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