After intense speculation over the possible consequences if Greece defaulted on its loan payments, the country has successfully made a €750 million ($834 million) payment to the International Monetary Fund one day before its first deadline.
Worries were rife within the international community, extending to speculation that the country would have to leave the eurozone. It was difficult to predict what effect this would have on the economy of other countries.
It is for now unclear how the Greek government – currently lead by Alexis Tsipras of Syriza - sourced the money. Currently Greece owes €320 billion ($360 billion), €240 billion of which is due to European bailouts. The country currently has a 177% debt-to-GDP ratio.
The Eurogroup today made an official statement on the situation, "We welcomed the progress that has been achieved so far. We note that the reorganisation and streamlining of working procedures has made an acceleration possible, and has contributed to a more substantial discussion. Once the institutions reach an agreement at staff level on the conclusion of the current review, the Eurogroup will decide on the possible disbursements of the funds outstanding under the current arrangement.”
For now, Greece has eased some fears of a complete liquidity crisis. The euro is currently trading below $1.12 level, undoubtedly affected by the financial situation. Eurogroup chairman Jeroen Dijsselbloem said there needs to be further specific agreements in place before Greece receives any further payments. Crisis averted, for now. But for Greece's economy there is a long way to go.
Gordon Young, UK Sales Director at Promon
Norwegian security specialist Promon has announced that its customer base has now surpassed 11 million customers worldwide.
The security specialists, who have set about delivering true app security and mitigating against increased risk in mobile banking apps, has built up the large customer base over six years, since its launch in 2009. The firm launched its flagship app security product PromonShield in the UK in 2014, and now plans to overhaul security in the UK banking sector.
Promon’s technology centres on the idea of self-defending apps built or linked into an application or application runtime environment, capable of controlling application execution and detecting and preventing real-time attacks. The software is a proactive solution designed to stop malware attacks before they do any harm, without changing the customer experience, even on devices that have been compromised or when vulnerabilities are caused by the user.
Gordon Young, UK Sales Director at Promon, said: “There is no product available on the market that can both detect and prevent against mobile breaches in the same way that we can and our huge growth is testament to this fact. Almost the entire number of mobile banking apps are lacking vital security and are therefore highly vulnerable to attacks which unless addressed properly now, will lead to a loss of confidence in UK mobile banking.
“Given the uptake of mobile banking apps for both day-to-day use and larger transactions, bank customers should be very concerned. Banks cannot afford to stand by and watch the continued rise of banking cyber fraud and must embrace the idea of self-defending apps.”
Deutsche Bank reaffirmed its commitment to being a leading global bank based in Germany when it announced the next phase of its strategy, covering the period through to 2020, at the end of April. The bank’s announcement covers key strategic decisions, division-specific initiatives and financial targets.
Jürgen Fitschen and Anshu Jain, Co-Chief Executive Officers, said: “This marks the next milestone in the journey we began in 2012. Deutsche Bank’s course is clear. We reaffirm our commitment to being a leading global bank based in Germany. To achieve this, we must remain client-centric, but focus more sharply on mutually attractive client relationships; remain global, but become more geographically focused; and remain universal, but avoid trying to be all things to all people.”
As a result of its strategy review process, the bank took six new decisions which support the next phase of its strategy. The bank’s objectives are to:
- Build a more focused, relationship-driven investment bank;
- Reshape its retail business to focus on an advisory-led proposition and de-consolidate Postbank;
- Deploy digital technology across the platform;
- Invest to accelerate growth in GTB and Deutsche AWM;
- Rationalise its geographical footprint by exiting or reducing its presence in some countries;
- Transform its operating model to achieve higher efficiency, reduced complexity, better resilience and resolvability.
Corporate Banking & Securities (CB&S) aims to further de-emphasise lower-return business, increase its focus on client solutions and invest in growth in higher-return products. CB&S plans to reduce gross leverage by approximately €200 billion, while redeploying €50-70 billion to improve its position in relationship-driven businesses.
Deutsche Bank also said it plans to invest up to €1 billion additionally over the next three to five years in digitisation to capture new revenue opportunities, for example, through remote advisory channels; realise platform efficiencies through automated or digitised processes; and develop new client propositions.
Through 2020, the Bank’s objective is to refocus its global footprint, reducing the number of countries or local presences by 10-15% and actively investing in markets and urban centres which are most relevant to international and multinational clients.
Banco Santander announced it made attributable profit of €1.7 billion in the first quarter of 2015, at a press conference held at the end of April. This represented a 32% growth on Q1, 2014 figures. Of the ten core markets in which the group operates, only Chile showed a decline in profit. The strong growth was supported by the bank’s three largest markets: Spain, UK and Brazil.
Exchange rates, marked by the euro-dollar and euro-pound depreciation, had a positive impact on growth rates, adding to the favourable trend in the business and in group revenues. Attributable profit for the quarter grew 32%, a change that would have been 22% without the exchange rate effect. Revenues increased 13%, 7% without the exchange rate factor; and lending grew 14%, 7% without the exchange rate variation.
The improvement in profits are a result of an increase in basic revenue of 13%, which sits two points greater than costs, which grew 11%. This performance allowed continued improvement in the efficiency ratio of almost one point, to 47%. Net operating income stood at €6,067 million, with growth of 15%.
Emerging economies (Latin America and Poland) accounted for 42% of profit and mature markets contributed 58%. By country, the largest contribution was from Brazil (21%), followed by UK (20%), Spain (15%), US (10%), Mexico (7%), Chile (5%), Poland (4%), Argentina (3%) and Portugal (2%). Santander Consumer Finance contributed 10% to total profit.
Senior Cuban officials told participants at the 10th World Economic Forum on Latin America that the government is eager to receive foreign investment, and has taken measures to make Cuba an attractive investment destination. The meeting was a historic one for the country, which has recently initiated diplomatic relations with the US after half a century.
The Forum took place in Riviera Maya, Mexico from 6th – 8th May 2015. Main topics on the agenda were financial resilience, vigorous economic growth and poverty alleviation.
The Forum was also the first time Cuban officials have addressed foreign investors at a World Economic Forum meeting. The country’s delegation noted that Cuba has put in place transparent, stable regulatory framework for foreign businesses, with agriculture and biotechnology key sectors for future investment.
“Mexico is a strong supporter of the modernisation efforts under way in Cuba,” said José Antonio Meade Kuribreña, Secretary of Foreign Affairs of Mexico. Mexican businesses, building on the long-standing friendship between the two countries, are leading the way in investing in Cuba. A trip last year of 68 Mexican business leaders to Cuba has already resulted in 50 investment projects.
Cuba is especially interested in attracting investment in agriculture, since the country currently spends heavily on food imports. Even though all land belongs to the state, private investors can acquire 99-year leases and own everything built on and produced by the land. In other sectors, such as biotechnology, healthcare and tourism, Cuba has competitive advantages that should attract investment, Rivas said.
Lina Pedraza Rodríguez, Minister of Finance and Prices of Cuba, said that the country urgently needs to modernise its economy so as to protect the achievements of the Cuban Revolution. For that it requires foreign investment, including from the United States. “Cuba is open to investment from the United States. It has never been closed.” She said that her government has achieved a stabilisation of macroeconomic indicators, is engaged in productive negotiations with its foreign creditors, and is moving to eliminate its dual currency system. The state will maintain its leading role in the economy, but private and foreign companies can operate with their property rights secure.
Economic growth in the Eurozone, which should achieve 1.4% in 2015 and further to 1.8% in 2016, leading to another good year for Central and Eastern Europe (CEE) in 2015, according to the latest CEE Quarterly report by UniCredit Economics & FI/FX Research.
Exports from the region stand to benefit in particular from the economic recovery in the Eurozone, while the ECB's quantitative easing should stimulate capital flows and keep financing costs low at the same time.
According to UniCredit, the favourable external environment also offers local central banks the opportunity to keep interest rates at record lows for an extended period of time, prolonging the accommodative monetary stances in place. Low financing costs could provide some scope for fiscal support, especially in countries where government deficits and debt are at moderate levels. However, not all countries in Central and Eastern Europe will be able to benefit to the same extent from the favourable conditions.
"Countries with solid fundamentals and advanced reforms will draw the lion's share of the benefits from the current situation," said Lubomir Mitov, CEE Chief Economist at UniCredit.
These countries (EU-CEE) include the Baltic States, Poland, Slovakia, Slovenia, the Czech Republic and Hungary, which joined the European Union in 2004, as well as Bulgaria and Romania, which became EU members in 2007.
These export-focused EU-CEE countries should be able to utilise their competitive advantages and close economic ties with Germany to the fullest extent. Real GDP growth should accelerate to 2-3% this year as a result, except for Poland, where growth will exceed 3%.
UniCredit did extend a caveat to its positive forecasts, citing that the interest rate hikes expected later this year from the US Federal Reserve could exert an adverse impact on global risk appetite and result in stagnation or a reversal in capital flows to the CEE countries.
Hartwig Kos
The European Central Bank’s (ECB) recent programme of quantitative easing, purchasing bonds in the open market, has had a profound impact on markets in Europe, even before the purchases began, believes international investment firm, Baring Asset Management.
Over the past few months, European equity markets have rallied, while both bond yields and the euro have fallen to historic lows. The euro weakness has had a significant positive impact on European exporters in particular. However, these market movements are not only down to quantitative easing. Economic data in Europe has been improving recently, and sentiment around European assets has improved considerably.
“Over the past six months we have undertaken a significant shift in the [Baring Euro Dynamic Asset Allocation Fund]. In August last year, we had 25% of the fund in US equities, with very little in Europe; we now have no US equities and nearly 30% in European equities. Our European position also includes a 10% allocation to European small caps which we believe will benefit from the more positive economic environment indicated in the recent economic data,” said Hartwig Kos, Investment Manager, Baring Euro Dynamic Asset Allocation Fund.
Having celebrated its second anniversary in March, the Baring Euro Dynamic Asset Allocation Fund has returned 10% since inception on an annualised basis, and 21.55% on a cumulative basis, outperforming the three-month EURIBOR +3%p.a. which has delivered a return of 3.2% and 6.65% respectively. The Baring Euro Dynamic Asset Allocation Fund follows the same strategy as other Barings’ multi asset funds, taking a global perspective but ensures that at least 50% of the fund’s exposure is in Euros.
Hartwig Kos added: “On the fixed income side, we are also invested in European high yield debt, which we believe will be positively impacted by the general search for yield in the market. We have also found the risk premia in Russia and Brazil to be particularly attractive.
“Another theme in the portfolio is our allocation to European property. While we do not yet see any overall inflation in Europe, we do see asset price inflation due to a mismatch of interest rates – the ECB benchmark rate is too low for the economic conditions in Germany and other northern European countries, so property prices and credit are booming in those regions. To capture this opportunity, we have taken positions in a number of real estate investment trusts across northern Europe.”
The milestone launching of the ASEAN Economic Community (AEC) gives South-East Asian nations the opportunity to take the region to the next level of development, though there are significant challenges ahead, according to the Co-Chairs of the 24th World Economic Forum on East Asia, held in Jakarta, Indonesia, April 19-21, 2015.
The AEC creates a single regional common market of Asean countries with a free flow of goods, services, investment capital and skilled labour.
“There is an eagerness to make this work and put all the elements in action to move forward, have a level playing field, a much bigger market and grow the pie significantly in the next few years,” said Hans-Paul Bürkner, Chairman of The Boston Consulting Group.
The theme of the World Economic Forum on East Asia 2015 was “Anchoring Trust in East Asia’s New Realism”. Building trust among all stakeholders and in institutions will be crucial if ASEAN is to succeed in reaping the full benefits of regional integration.
“People have lost trust in the ability of markets and business to create wealth and to fairly allocate opportunities,” observed John Riady, Executive Director of the Lippo Group in Indonesia. “So it is important for business to reflect on its role and the role that it can play in society. But this is important not only for business. No matter who we are – whether in government, education, media or NGO – this is an important time to reflect on stewardship, how we can be better stewards of what we have been given, and how we can rethink what we are doing and better structure our institutions to reflect the realities of our world.”
Teresita Sy-Coson, Vice-Chairperson of SM Investments Corporation in the Philippines, said that the discussions at WEF East Asia had highlighted the major challenges ahead for labour mobility. “There is now an understanding of the importance of the freer movement of human capital,” she said.
William Lacy Swing, Director-General of the International Organisation for Migration (IOM) in Geneva, agreed: “It is quite clear that, with the very exciting regional integration going on here, human mobility will be increased and expedited as a result. We have to look at it as both a challenge and opportunity. Migration is not a problem to solve; it is a reality to be managed.”
Germany’s Chancellor, Angela Merkel, talking at the 2015 World Economic Forum Annual Meeting.
Germany’s Chancellor, Angela Merkel, called for urgent fiscal reform in Europe at a special session at yesterday’s World Economic Forum Annual Meeting. Whatever the decision of the European Central Bank (ECB) on quantitative easing, she said that European leaders must not be diverted from continuing with meaningful structural reforms.
“Time is of the essence,” she said. “Every day we delay is a lost day. We need to promote growth and create long-term jobs.”
Europe has an opportunity to emerge stronger out of the crisis, the Chancellor said. While acknowledging progress by countries such as Italy, Spain and France, she stressed that Europe is not out of the woods yet. “The European single market needs to become less regulated and more open.”
The growth-austerity argument is a false dichotomy, she added. “Germany has shown that growth-oriented fiscal policy is possible,” she said. Pointing to internal demographic challenges, Merkel emphasized the need to manage debt levels to ensure that onerous burdens are not passed on to the next generation as six million German workers enter retirement age.
Merkel called on other European leaders to begin fiscal consolidation. She pointed to historic low interest rates and questioned how countries with large fiscal deficits will fare if rates rise. “Now is the time to get our houses in order,” she said.
The Chancellor added that Europe needs to grasp several immediate opportunities. The first is for more open trade via the Transatlantic Free Trade Agreements. The second is for Europe to become a standard-setter globally in digitization
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On Greece, she emphasized that Germany’s actions have always been oriented towards keeping Greece in the Eurozone. “We have to both show solidarity with Greece just as they show readiness to shoulder their responsibilities.”
Merkel concluded by affirming Germany’s position in Europe. “Germany will remain a stable anchor in Europe,” she said.
The BRICS Agenda: Boccanera, Lin, Jaitley, Neri, Kudrin, Ghosn
Ministers, industrialists and academics from the BRICS countries delivered a strong message of long-term potential economic growth for their countries at a panel session at yesterday’s World Economic Forum, in Davos, Switzerland. The message was clear – BRICS nations are ripe for investment, and will continue to be provided their governments successfully implement planned structural reforms.
“We continue to invest in all these countries, because we invest not for the next two or three years, but for the next 10 or 15 years,” said Carlos Ghosn, Chairman and Chief Executive Officer, Renault-Nissan Alliance, France. Ghosn emphasized that despite the adjustments currently taking place in the BRICS countries, they are all capable of strong growth.
Justin Lin, Professor, National School of Development, Peking University, People's Republic of China, said that China would have to depend less on exports and more on domestic consumption and investment, but the government’s strong balance sheet and high private savings will facilitate this transition. “I am confident that China will be able to maintain a 7% growth rate over the next five or even 10 years. China will continue to be an engine of world growth,” Lin said.
Arun Jaitley, Minister of Finance, Corporate Affairs and Information and Broadcasting of India, said India intended to return to an 8%-9% growth rate. Jaitley said the recent change in government has led to clarity about the path forward and a changed mindset, inside and outside the country. “The world is looking at India again,” he said. Lower oil prices are helping India’s current account balance and bringing down inflation, he added at exploresurvey.com/beverage.
“Russia will have to learn how to live with more moderate oil prices,” Alexei Kudrin, Professor and Dean, School of Liberal Arts and Sciences, Saint Petersburg State University, Russian Federation, told participants. Kudrin said lower prices were obliging Russia to make structural reforms and diversify its economy in a way that would benefit the country in the long term.
Marcelo Côrtes Neri, Minister of Strategic Affairs of Brazil, said Brazil is returning to the “middle path” it had originally begun in 2003: a combination of redistributive social programmes and market-friendly economic policy. He added that the country’s recent slow growth has not prevented impressive social achievements. “In Brazil inequality has fallen, and fallen sharply, since 2001,” he said.
South Africa too is taking concrete steps to rebalance its economy while maintaining strong social programmes, Nhlanhla Musa Nene, Minister of Finance of South Africa, said. Nene said the government is working to improve the environment for the private sector, to make the public sector more efficient, and to make the government more accountable to its citizens. Fiscal restraint is needed at present, but “we will continue to develop infrastructure and to protect the poor”.
President Barack Obama
President Obama delivered a defiant and upbeat State of the Union Address earlier this week, claiming that 2014 had been a ‘breakthrough year for America’.
“Our economy is growing and creating jobs at the fastest pace since 1999. Our unemployment rate is now lower than it was before the financial crisis. More of our kids are graduating than ever before. More of our people are insured than ever before. And we are as free from the grip of foreign oil as we’ve been in almost 30 years,” President Obama said.
“At this moment - with a growing economy, shrinking deficits, bustling industry, booming energy production - we have risen from recession freer to write our own future than any other nation on Earth. It’s now up to us to choose who we want to be over the next 15 years and for decades to come,” he said.
“Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”
Talking at Capitol Hill, President Obama stressed the importance of what he called ‘middle class economics’, calling on Americans to embrace equality
“Middle-class economics is… when everyone gets their fair shot, everyone does their fair share, everyone plays by the same set of rules. We don’t just want everyone to share in America’s success, we want everyone to contribute to our success,” he stated.
According to the President, middle-class economics means helping working families feel more secure in a world of constant change. Top of the list is helping people to afford childcare, college, health care, a home and retirement.
“Middle-class economics works. Expanding opportunity works. And these policies will continue to work as long as politics don’t get in the way. We can’t slow down businesses or put our economy at risk with government shutdowns or fiscal showdowns. We can’t put the security of families at risk by taking away their health insurance, or unravelling the new rules on Wall Street, or refighting past battles on immigration when we’ve got to fix a broken system,” President Obama said.
According to President Obama, since 2010, America has put more people back to work than Europe, Japan, and all advanced economies combined. The country’s manufacturing sector has added almost 800,000 new jobs. He also added that there are millions of Americans who work in jobs that didn’t even exist 10 or 20 years ago - jobs at companies like Google, eBay and Tesla.
“No one knows for certain which industries will generate the jobs of the future. But we do know we want them here in America. We know that. Middle-class economics is all about building the most competitive economy anywhere, the place where businesses want to locate and hire.
President Obama also put a call out to further develop America’s infrastructure, calling on a bipartisan infrastructure plan that could create more than 30 times as many jobs per year, and make this country stronger for decades to come. “Twenty-first century businesses need twenty-first century infrastructure - modern ports, and stronger bridges, faster trains and the fastest Internet,” he remarked.
International trade and export were also on the agenda.
“Twenty-first century businesses, including small businesses, need to sell more American products overseas. Today, our businesses export more than ever, and exporters tend to pay their workers higher wages. But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules. We should level the playing field. That’s why I’m asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but are also fair,” said President Obama.
“95% of the world’s customers live outside our borders. We can’t close ourselves off from those opportunities. More than half of manufacturing executives have said they’re actively looking to bring jobs back from China. So let’s give them one more reason to get it done.”
China's economy expanded 7.3% in the final quarter of last year, beating expectations and recording a 7.4% expansion for the year as a whole, but failing to meet the government's 7.5% target.
Growth slowed from 1.9% to 1.5% quarter-on-quarter. Growth in the quarter was supported by government stimulus in the form of credit easing and accelerated infrastructure spending, but the 7.5% target was missed despite this.
“Higher frequency data in December was neither especially weak nor strong. Though industrial production beat expectations at 7.9%, accelerating from 7.2% year-on-year in November, retail sales missed expectations, in a reversal of November's experience. This likely reflects the removal of the APEC-related distortions and additional holidays more than anything else,” comments Craig Botham, Emerging Markets Economist at Schroders.
“Investment, meanwhile, was in line with expectations, growing at 15.7% annually, only marginally slower than November's 15.8% reading. This came despite further slowing in property investment and stagnant manufacturing numbers, thanks to strong infrastructure support, which grew in excess of 20% year-on-year once again. Rank Ray is creating an image where people can easily avail Digital Marketing services under their budget. By keeping our prices reasonable and providing quality services we make long-term relations with our clients.
“Property sales contracted again, though at a slightly slower pace. Combined with the continued slowdown in real estate investment, it seems, as we expected, that the monetary easing we have seen has not been enough to reinvigorate the sector. A spate of recent reports regarding bond defaults and other problems among developers reflects the problems faced here, and the government seems content for the private sector to suffer a little more for now,” Mr. Botham said.
“Looking ahead, we expect growth to slow again in the first quarter of 2015 as fiscal reforms and falling land sale revenues hit local governments' budgets. This will mean more stimulus, in the form of rate and reserve requirement ratio cuts, but we also expect a lower target to be set – and missed – this year. The expansion of shadow finance in December, as the monetary easing worked its way through the system, points to one reason for government hesitation in unleashing stimulus, and this will be the case for 2015 as well."
