Posts Tagged ‘IMF’
Europe’s Mounting Reluctance to Bail Out Cyprus
There is growing resistance in Europe to the planned aid program for Cyprus, because it would also benefit illegal Russian money parked in bank accounts in Cyprus. The government in Nicosia is willing to make concessions, but Brussels is demanding more reforms.
It was a long way to go to deliver a short message. German Chancellor Angela Merkel flew almost four hours last Friday to Cyprus, where she spent a few minutes campaigning for the conservative presidential candidate in the February 17 election, Nikos Anastasiades. Speaking in the city of Limassol, Merkel praised Anastasiades, saying that she had known him for a long time and valued his openness to change, and that the country urgently needed “structural reforms.”
After smiling for the cameras, Merkel returned to wintry Berlin.
Her destination in the eastern Mediterranean has a smaller population than the little German state of Saarland, but that hasn’t stopped it becoming one of the biggest trouble spots in global politics at the moment. The question of whether the government in Nicosia should be allowed to bolster its ailing banks with more than €17 billion ($22.7 billion) from Europe’s bailout funds is dividing the euro zone, causing uncertainty in international markets and adding to the woes of the coalition government of Chancellor Angela Merkel, made up of her center-right Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the business-friendly Free Democratic Party (FDP). Now that the center-left Social Democratic Party (SPD) and the Green Party have announced their opposition to the plan, Merkel’s coalition could for the first time fail to muster a parliamentary majority on an important decision relating to the euro crisis.
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Fund file: Bullish on Russia?
Investors should look before they leap into investing in Russia, according to a report in Monday’s FTfm, but it is very unlikely that many will do so.
On the face of it, huge strides that have been made in the last year or so will make Russia a more friendly place for overseas investors.
“Right now we’re going through a period of moderate liberalisation,” says Jan Dehn, chief strategist with Ashmore, an emerging markets specialist.
He can see evidence of this in recent measures to allow greater flexibility of the rouble and in moves to encourage foreign ownership of local currency bonds. Until recently, he explains, foreign ownership of rouble-denominated Russian sovereign debt was about 3 per cent. It is now 5.4 per cent and Dehn expects the proportion to rise to something closer to the emerging market average, which is 20 per cent.
There is also a ministry of finance proposal that will require any listed company with majority state ownership to pay out 25 per cent of its profits in dividends to shareholders from next year. By next year, also, Russian companies will have to follow IFRS international accounting standards.
Small wonder that Dehn, along with many other emerging market fund managers, reports being overweight Russia.
Bill Browder, founder and chief executive of Hermitage Capital Management, thinks they have either foolish optimism or very short memories, or both.
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