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Tuesday, June 05, 2012

Hey, Malaysians wake up -- don't you believe the PM the EUROZONE CRISIS..


Here's what scribe-lawyer Tan Siok Choo has cautioned in her column in the today:~~~

Eurozone crisis - an immediate threat to Malaysia

WHEN Bill Clinton campaigned for the US presidency in 1992, he coined a catchphrase that is now part of America’s political lexicon – “It’s the economy, stupid!”
Clinton used this phrase to remind himself and his staffers the key issue for then American voters was a US economy stunted by escalating unemployment: from 5.5% in 1990 to 6.7% in 1991 and a high of 7.4% in the election year.
Given expectations Malaysia’s 13th General Election (GE13) could be held this year, politicians in this country instead of continually harping on undoubtedly significant political governance issues – should emulate Clinton and re-focus on the Malaysian economy.
For Malaysia, an immediate threat is the more than two-year Eurozone crisis that could also threaten the fragile US economy.
To be sure, Malaysia’s economy remains resilient. Bank Negara announced last week in the first quarter of this year (1Q 2012), Malaysia’s gross domestic product (GDP) expanded by a better than expected 4.7%.
This economic outperformance shouldn’t prompt politicians to prematurely conclude the Eurozone crisis’ impact on this country will be negligible. Moreover, Malaysia’s export data suggests caution is warranted.
In the same quarter, exports to two major markets fell – by 3.2% in China and by 5.1% in India. Although the magnitude is small, the downtrend is an amber warning signal.
On a year-on-year basis, China’s 1Q GDP cooled by 8.1% with government economists forecasting the worst is yet to come.
In India, GDP growth in the January to March quarter (the 4Q for fiscal year 2011-2012) tumbled, bringing the full-year figure to a nine-year low of 6.5%.
Two factors make the Eurozone crisis challenging. First, the Eurozone has no provision in its legal charter for any member to secede.
Second, the Eurozone is currently afflicted with top-level policy paralysis.
A major hurdle is Germany’s resistance to proposals that require German taxpayers to underwrite the cost of fully troubled Eurozone countries’ debt problems.
Additionally, the Eurozone crisis lacks a catalytic event like the Lehman Brothers’ bankruptcy in October 2008 that galvanised American policy makers into implementing two rounds of quantitative easing (QE).
By purchasing government securities and other assets, QE enabled the US Federal Reserve to increase money supply and boost financial institutions’ capital.
Some analysts believe a trigger point in the Eurozone crisis could happen on June 17 – the day Greek voters go to the polls just weeks after the inconclusive May 6 election.
In the May polls, voters punished the previously dominant New Democracy and Pasok for supporting austerity measures, resulting in both parties failing to win enough votes collectively to form the government.
An opinion poll shows about 65% of Greeks disagree with the austerity measures. This has prompted fears the anti-austerity Syriza party could emerge victorious in the forthcoming elect-ion – an outcome that could lead to Greece exiting the Eurozone, a likelihood dubbed “Grexit”.
Yet another worry is Spain. Nearly 25% of the population of the Eurozone’s fourth largest member is unemployed while its banks are overburdened by bad debt, following the bursting of a housing and credit bubble.
Recently, Madrid bailed out its biggest troubled lender, Bankia, and was forced to agree to a humiliating proposal – that outside auditors, rather than the Bank of Spain, should assess the country’s banks.
Analysts suggest the impact of a messy Grexit could be both catastrophic and widespread.
Since March alone, Europe’s travails have caused US stocks to fall by 6%, wiping out US$1 trillion (RM3.2 trillion) in America’s household wealth, JP Morgan says.
This loss, coupled with a strong US dollar has sliced roughly 50 basis points from US GDP growth this year, the report said. Searching for safe haven assets, panicked investors have abandoned the euro for the US dollar, causing the greenback to strengthen.
UBS analysts estimate Grexit’s total direct cost at €225 billion (RM893.8 billion), DekaBank suggests €50 billion (RM1.4 trillion) while Douglas McWilliams from the UK-based Centre for Economics and Business Research indicates the Eurozone’s unplanned breakup could exact a toll of US$1 trillion (RM3.2 trillion).
Economics professor Peter Morici predicts Grexit could shave as much as one percentage point off US growth and tip the American economy back into recession.
Furthermore, European banks could slash their lending worldwide. They have lent more than US$6 trillion (RM19.2 trillion) to the rest of the world, a sum twice as much as US banks, David Wessel wrote in the Wall Street Journal. The US wouldn’t be immune: European loans to the US amount to about 10% of US GDP, he adds.
“A sharp pullback by Euro area banks …would impede credit creation around the world, with the most acute pain felt in emerging economies,” JP Morgan economists point out.
In a globalised world, Malaysian politicians should realise only hermit countries like Bhutan can claim they will be immune to the Eurozone crisis.
Opinions expressed in this article are the personal views of the writer and should not be attributed to any other organisation she is connected with. She can be contacted at:

DESIDERATA: At mamak stall BF todie, I also read another THREE updates on the Eurozone Crisis, so wait for me to work heART -- probono man&woman! -- for Thee because I won't want ye to become victims  to the clueless PM and his cohorts' fool-of-good-news handing out Ang-Pows everywhere they go, and they believe they can buy/bye thy vote for GE-13. Even MCA prez, also quite clueless following that sex-tape EPICsode, is asking for more/aMore -- another round of RM500 ang-pow under BR1M -- did I hear my ER whisper "Bribe 1 Malaysia"?


‘Threemonths to save euro’ 

>BillionaireGeorge Soros namesGermany as authority toendeurozone crisis 

NEWYORK: Europe has three months to save the euro, billionaire investor George Soros said this weekend amid global pressure to end eurozone turmoil rocking financial markets and creating deep economic uncertainty. 

“In my judgment, the authorities have a three months’ window during which they could correct their mistakes and reverse the current trends,” Soros said Saturday at an economics festival in Trento, Italy, naming those authorities as Germany and the Bundesbank. “In a crisis, the creditors are in the driver’s seat and nothing can be done without German support,” he said, noting that public opposition to austerity in the eurozone “is likely to grow until the policy is reversed”. 

The remarks were posted on his website. Greece is heading to the polls for a second time in sixweeks after an inconclusive vote on May 6. And with the radical leftist Syriza party , chief opponent of a massive EU-IMF bailout accord, tipped towin this time, the election could lead to Greece quitting the single currency. 

“I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the European  Union that it will give a narrowmajority of seats to a coalition that is ready to abide by the current agreement,” Soros said, referring to June 17 polls in the debt-stricken state.

The “crisis is liable to come to a climax in the fall” of the year, he said. “By that time the German economy will also be weakening so that Chancellor (Angela) Merkel will find it evenmore difficult than today to persuade the German public to accept any additional European responsibilities,” said Soros. 

“That is what creates a threemonths’ window.” Soros, a Hungarian-American investor and philanthropist, said austerity measures were having a disastrous effect on the global economy. “The authorities didn’t understand the nature of the euro crisis; they thought it is a fiscal problem while it is more of a banking problem and a problem of competitiveness,” he added. “And they applied the wrong remedy: you cannot reduce the debt burden by shrinking the economy, (but) only by growing your way out of it.” – AFP 


Greek euro exit not ruledout if loan deal broken: France 

PARIS: A Greek exit from the eurozone will be on the agenda if Athens fails to impose austerity measures required in its EU-IMF bailout deal, French Finance Minister Pierre Moscovici said Sunday. 

Commenting on Spain’s refusal to accept foreign aid to help it through its debt crisis, he said the sovereignty of the Madrid administration should be respected. Moscovici was responding to questions about Greece’s radical leftist leader Alexis Tsipras who said Friday he wanted to scrap the bailout deal if he won the June elections. Moscovici said he hopedGreece would remain in the eurozone. 

But commenting on Tsipras’ position, he told French television: “That poses a problem. “If the Greeks themselves do not respect their commitment, then we would find ourselves in a situation which would be infinitely more complicated,” he added. 

Asked if his ministry was working on a scenario in which Greece quit the eurozone, he stressed that while they might have looked at it “here and there” they were working on plans to avoid it rather than anticipate it. – AFP


Spanish PM tries to send
'message of calm'

MADRID: Spanish Prime Minister Mariano Rajoy tried to play down fears the country would need an international bailout, saying that Spain would eventually find its way out of the financial crisis on its own. 

After a dismal week that saw the country’s borrowing costs soar, Rajoy, speaking at an economic forum in Sitges in eastern Spain, said he was sending a “message of calm”. 

“Spain is a very solid country, although right now, no one seems to remember this,” he said. 

Doubts about Spain’s solvency rocked global markets this week and saw the interest rate on 10-year government bonds hit a record 5.48 percentage points on Friday, as Spanish markets slumped to lows not seen since April 2003. 

But Rajoy insisted the country “will get through the storm through its own efforts and with the support of our European partners”. “Because what’s at stake isn’t just the economic future of Spain but the very future of European monetary union,” he said. 

Rajoy’s message echoes similar messages from the Spanish budget minister and other officials told reporters on Friday that the government was confident of the country’s solvency. 

In an interview with German magazine Der Spiegel out yesterday, German Chancellor Angela Merkel said she doubts Spain has the resources to cope with its crisis. She has suggested Spain should make use of European rescue funds. 

Spain is the eurozone’s fourth-largest economy and has been battered by a crash in the property market and record unemployment of about 25%. Plunging housing values saw private and banking assets drop and eradicated a source of plentiful income for the Spanish regions. 

Spanish bank Bankia has asked the state for€19 billion (RM76.7 billion) to repair its books, in addition to€4.5 billion already injected, the biggest rescue in Spanish banking history. But Rajoy said “I have no doubts about the vast majority of financial institutions in Spain." -- AFP

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