Euro services growth slows but factories accelerate

The eurozone’s dominant service sector expanded much slower than expected in December but its manufacturing sector, which led a large part of the economic recovery, grew faster than thought, surveys show.

Worryingly for policymakers, a large part of the strength was on the back of a very positive performance in Germany and a supportive France, which outshone other member states.

“Possibly the divergence is growing wider. Growth in Germany is near a record rate … France has been a strong performer as well as far as PMIs go,” said Chris Williamson at Markit.

“When you strip France and Germany out of the eurozone figures we can see that in December growth of activity across services and manufacturing slowed down almost to stagnation.”

Markit’s Eurozone Flash Services Purchasing Managers’ Index, made up of surveys of around 2,000 businesses ranging from banks to restaurants, slumped to 53.7 in December from November’s 55.4.

The index has now been above the 50.0 mark that divides growth in business activity from contraction since September 2009, but it was well shy of the consensus forecast in a poll for 55.2.

The manufacturing sector saw activity pick up faster than expected, driven by a buoyant Germany and strong new orders.

The flash manufacturing index rose to its highest level since April at 56.8 in December from 55.3 in November, confounding forecasts for a fall to 55.2, while the output index bounced to 57.8 this month from 55.8 in November.

Earlier data from Germany, Europe’s largest economy, showed its service sector slowed more than expected, shy of November’s more than three-year record, but its manufacturing sector expanded much more than predicted.

In neighbouring France both services and manufacturing activity grew at a slower pace than was expected, but Markit said this could be partly due to severe weather and protests over government pension reforms.

The eurozone composite index, made up from the services and manufacturing sectors and often used to predict overall growth, dropped to 55.0 this month from 55.5 in November, missing expectations for 55.4.

Markit said the data pointed to fourth-quarter euro zone growth of 0.5 percent, up from the 0.4 percent growth official figures showed for the third quarter with support from a strong Germany. The economy expanded one percent in the second quarter.

A poll of more than 50 analysts published on Wednesday forecast the economy would grow 0.3 to 0.5 percent per quarter through to the end of 2012.

Optimism, prices rise
While activity may have slowed in the service sector, firms were more optimistic about the longer term outlook, with business expectations rising to 66.5 from 66.3 in November. The index hit a near four-year high of 69.3 in April.

Data showed manufacturers were able to pass on some of the rising raw material costs as the output price index rose to 55.4 in December from November’s 55.2, marking its highest reading since August 2008.

Service sector firms were able to raise prices for the first time since October 2008.

“There is growing evidence that we are seeing a pass-through of cost pressures, certainly among manufacturers. We are finally seeing some improved pricing power in the service sector,” Williamson said.

But companies hired fewer new workers this month, with the composite employment index dipping to 52.3 from November’s 33-month high of 53.1. Manufacturers took on more staff than they have done since July 2007 but this was offset by fewer new hires in the service sector.

Official data showed unemployment in the bloc nudged up to 10.1 percent in October from 10.0 percent in September.

Ireland: Forgetting Keynes?

In the 1990s, Ireland benefited from good economic policy. It was already blessed with a young population, EU subsidies and a location between the UK and US – leading economies with which it shares a common language. To this it added investment in education and science, social partnership agreements to ensure a fair sharing of prosperity while preventing wage-driven inflation, and targeted incentives to attract and bed-in foreign multinationals in sectors like electronics, software, chemicals, pharmaceuticals and biotech. In consequence, GDP grew at six percent.

But from about 2003 boom turned to bubble. Low corporation taxes, having already served their purpose, now just attracted hot money. Having joined the euro, there was no independent monetary policy to tighten in face of asset- or consumer- price inflation. Banking supervision was light-touch to the point of being absent. The result was speculation that pushed housing prices up five-fold in places and saw the balance sheet of the banking sector grow past ten times GDP.

After global credit markets froze from 2007, the Irish bubble burst and GDP started contracting – having now slid by almost a fifth. The government, meanwhile, has enacted a series of ever-harsher austerity packages to trim spending and avoid too large a deficit. Some economists have slammed this as contrary to the Keynesian doctrine that government policy should run counter to the economic cycle – such as by running deficits in recessions and surpluses in booms – to prevent either expansion or contraction from getting out of hand. To them, Ireland is an example of what not to do; with its spectacular fall from grace being largely the result of government austerity undercutting demand and GDP. But is this a fair view?

There is little doubt that Keynes – who knew markets can behave irrationally and need government to moderate and guide them – would have approved of Ireland’s policies to encourage and channel growth in the 1990s and before. There is likewise little doubt that he would have disdained the near complete lack of any brake on speculation in the 2000s – a situation rare in any developed country.

But his views on Ireland’s response to the collapse might surprise. When the banking sector has been allowed to grow to the point where it dwarfs GDP, there is little hope that government can stem a collapse. If 30 percent of the value of assets is wiped out – not unlikely after a colossal bubble – the state must take on debt equal to a multiple of GDP if it is to recapitalise banks hit by defaults on loans secured against these assets. Markets will probably baulk at this and refuse to finance sovereign deficits – especially for a small country whose bonds lack reserve asset status. There is thus a choice between letting the banks go under; collapsing the economy, or trying to rescue them and having financial markets push the sovereign into default, also collapsing the economy. Even if the country had its own currency to expand and devalue, any stimulatory effect would be lost through markets dumping its bonds as the currency took a nosedive.

The only option may be to trim other areas of government spending while recapitalising the banks in the hope that this will persuade markets to bear with the country long enough to stabilise the financial sector, or long enough for outside help to arrive – which may ultimately be the only way to turn the tide. This is what Ireland has done and, if we interpret Keynesian economics as simply doing whatever you can to stabilise an unstable economy, it may be a very Keynesian solution. Ireland has run deficits of more than 10 percent of GDP in the past three years, in large part to support its banks. Talk of austerity has largely been because this is what the markets needed to hear. These are not the marks of a true anti-Keynesian, who would aim for budgetary balance even in the most straightened times.

The recent EU-IMF bailout of Ireland may or may not succeed in stabilising its economy. Regardless of its success or failure, the current government will deservedly be voted down as architects of the era of lax regulation in the 2000s. But at least, in the moment of crisis, they were as Keynesian as possible – and we can expect their successors to remember his doctrines much better.

Leading execs to attend European summit

The summit will offer the opportunity to network, establish connections, exchange ideas and gain knowledge. As an invitation-only event taking place behind closed doors, the European Tax Summit is a unique interactive forum for leading tax executives worldwide to explore and address principal challenges and the latest trends in their field. The summit will highlight the tax profession’s current objectives and future ambitions through visionary keynote presentations and case studies delivered by some of the most esteemed peers in the tax practitioner community.

The primary objective of the event is to explore the opportunities and challenges for the corporate tax executive. Key topics for 2011 include:

– Utilising sophisticated software to archive and safeguard essential tax documentation;
– Streamlining global tax initiatives to achieve full coordination and maximise divisional output;
– Applying a universal tax strategy to fully incorporate and encompass all novel components following a mergers and acquisitions phase;
– Remaining fully informed on the latest developments in regulation and legislation to avoid severe governmental penalties and legal pitfalls;
– Observing and endorsing universal guidelines at a national level to enhance productivity and facilitate cross-border transactions with foreign nations;
– Reviewing transfer-pricing processes and ratifying the most beneficial tax regimes to minimise tax expenditure and enhance departmental profits;
– Developing a flexible, practical and comprehensive tax risk management framework that will endure in an evolving regulatory environment.

Keynote Speakers include Gottfried Schellmann, Chairman of Fiscal Committee, Confédération Fiscale Européenne; Urs Kapalle, Director Taxation and Fiscal Policy, Swiss Bankers Association; John Christensen, Director of the International Secretariat, Tax Justice Network; Krister Andersson, Chairman Tax Policy Group, Business Europe; Jim Robertson, VP Tax, Eastern Hemisphere & Global Tax Practices, Shell International; Daniel Mitchell, Senior Fellow, Cato Institute and Melchior Wathelet, Minister of State for Belgium, Former ECJ Judge & Professor of European Law, University of Louvain and Liège.

This year’s European Tax Summit audience includes Senior Vice Presidents of International Tax, Vice Presidents of Tax, Chief Tax Officers, Group Heads of Tax, Heads of Transfer-Pricing, Tax Directors, Tax Counsels, International Tax Managers, Heads of Direct and Indirect Tax as well as Sponsors offering a wide range of service categories including Tax Consulting Services, Tax Management, Legal Services, International Tax Planning and Tax Outsourcing.

The European Tax Summit is a closed business event and the number of participants is limited.

For more information contact Daniela Trojakova:

Insurance Awards Winners 2010

Insurance company of the year, Argentina

Insurance company of the year, Austria
Uniqa Sach

Insurance company of the year, Belgium

Insurance company of the year, Brazil

Insurance company of the year, Bulgaria
Allianz Bulgaria

Insurance company of the year, Canada

Insurance company of the year, Caribbean
Guardian Life of the Caribbean Ltd

Insurance company of the year, Chile
ING Seguros de Vida

Insurance company of the year, Colombia
Seguros Bolívar S.A.

Insurance company of the year, Croatia   
Croatia Osiguranje

Insurance company of the year, Czech Republic   
Ceska Pojistovna

Insurance company of the year, Denmark   
Codan Forsikring

Insurance company of the year, Estonia

Insurance company of the year, Finland   

Insurance company of the year, France   

Insurance company of the year, Germany   

Insurance company of the year, Greece       

Insurance company of the year, Hong Kong  
HSBC Insurance

Insurance company of the year, Hungary
Groupama Garancia

Insurance company of the year, India  
Bajaj Allianz

Insurance company of the year, Indonesia   
PT Asuransi Jiwasraya (Persero)

Insurance company of the year, Italy   
Poste Vita S.p.A.

Insurance company of the year, Kazakhstan   
Kazkommerts JSC

Insurance company of the year, Latvia   

Insurance company of the year, Lithuania   
Lietuvos Draudimas

Insurance company of the year, Luxembourg   
Foyer Group

Insurance company of the year, Malaysia   
Great Eastern Life Assurance

Insurance company of the year, Mexico   
Seguros BBVA Bancomer

Insurance company of the year, Middle East   
Abu Dhabi National Insurance Company – ADNIC

Insurance company of the year, Netherlands   
Nationale Nederlanden

Insurance company of the year, Nigeria   
Nicon Insurance Plc.

Insurance company of the year, Norway   

Insurance company of the year, Pakistan   

Insurance company of the year, Peru   
Rimac Seguros

Insurance company of the year, Philippines   
AXA Philippines

Insurance company of the year, Poland   

Insurance company of the year, Portugal   
Caixa Seguros

Insurance company of the year, Romania   

Insurance company of the year, Russia   

Insurance company of the year, Serbia   

Insurance company of the year, Singapore   
NTUC Income

Insurance company of the year, Slovakia   
Allianz Slovenska

Insurance company of the year, Slovenia   

Insurance company of the year, South Africa   
Momentum Group

Insurance company of the year, Spain   

Insurance company of the year, Sri Lanka   
Sri Lanka Insurance

Insurance company of the year, Sweden  
SEB Trygg Liv

Insurance company of the year, Switzerland   

Insurance company of the year, Taiwan   
Cathay Life Insurance Co. Ltd.

Insurance company of the year, Thailand  
Thai Life Insurance Co., Ltd.

Insurance company of the year, Turkey   

Insurance company of the year, Ukraine

Insurance company of the year, United Kingdom   

Insurance company of the year, USA
Chubb Corporation

Insurance company of the year, Venezuela   
Seguros Caracas

Insurance company of the year, Vietnam   
PetroVietnam Insurance Joint Stock Corporation

Oil and Gas Awards 2010

Best Fully Integrated Oil & Gas Company

Best Oil & Gas Exploration Company
Ophir Energy plc

Best Down-Stream Oil & Gas Company

Best Independent Oil & Gas Company
PTT Public Company Limited

Best Oil & Gas Piping Service & Solutions Company
Canadoil Group

Best Oil & Gas Drilling Contractor
OGEC Cracow Ltd

Best Innovation in Refining Technology

Best Innovation in Drilling Technology
Baker Hughes

Best Innovation in Exploration Technology

Best Oil & Gas Clean Energy Company
PTT Public Company Limited

Best Oil & Gas Trading Technology Company
Oil Space Inc

Best Oil & Gas Commodity Traders
CME Group

Best Oil & Gas Investment Company
Avelar Energy

Best Oil & Gas Drilling Joint Venture Company
Green Dragon Gas

Best Oil Project
Sakhalin Oil Project (Sakhalin Energy)

Best Gas Project
Shizhuang North & South Blocks (Green Dragon Gas)

Best Oil Sands Company
Husky Oil Sands

Best Oil Sands Project
Athabasca Oil Sands

Best Oil & Gas Law Firm
Baker Potts

Best Health & Safety Company

Best Oil & Gas EPC Companies:
Western Europe
GE Oil & Gas

Eastern Europe

North America

Latin America

Posh Semco

Uhde Shedden GmbH

Middle East
Al Hassan Group

Mott MacDonald

Euro nations lean on Portugal to seek help

Portugal is under pressure to seek a European bailout due to concerns Lisbon’s debt woes could drag down Spain and trigger an even greater crisis.

The Financial Times Deutschland said some states wanted Portugal to seek aid in order to avoid Spain, the fifth largest EU economy, from having to follow suit.

“If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal,” the FT Deutschland quoted a source in Germany’s finance ministry as saying.

“This news article is completely false, it has no foundation,” said a government spokesman.

A recent Reuters poll shows 34 out of 50 analysts surveyed believe Portugal will be forced to ask for help.

A rescue aimed at meeting Spain’s financing needs for two and a half years would cost €420bn according to a Capital Economics estimate, the lion’s share of the €440bn European Financial Stability Facility (EFSF) reserve set up by the eurozone after the Greece bailout.

But two separate EU funds, augmented with IMF backing, could provide loans worth €750bn in total.

German Bundesbank chief Axel Weber, a powerful member of the ECB’s governing council, said that the EFSF and other EU rescue funds had enough money, if needed, to cover the borrowing needs of stretched euro zone members Greece, Ireland, Portugal and Spain.

Markets are still acutely worried by the threat of debt crises in Greece and Ireland spreading further and have pushed the borrowing costs of Portugal and Spain to record highs.

Top EU officials have stressed that there was no risk of the eurozone breaking up after Ireland caved into pressure and requested a bailout.

Angela Merkel, who unsettled markets by her comment that the euro was in an “exceptionally serious” situation, said she was confident the euro area would emerge stronger from the crisis.

The chairman of eurozone finance ministers, Jean-Claude Juncker said in an interview he was not worried.

And Klaus Regling, chief of the euro’s financial safety net, was even more emphatic when asked by German daily Bild about the risk of the euro area falling apart: “There is zero danger. It is inconceivable that the euro fails.”

Merkel agreed with Nicolas Sarkozy that the mechanism set up to protect the euro should not be changed before it expires in mid-2013 – another attempt to convince spooked investors they would not be made to share the cost of any sovereign default before then.

German proposals for “haircuts” for bond holders have raised peripheral eurozone states’ borrowing costs yet higher.

In another effort to shore up confidence, ECB policymakers brushed off the flare-up in debt market turmoil and said the bank’s plans to scale back its crisis support remained on track.

Greece received a three-year €110bn EU/IMF bailout in May, leading to the creation of the EFSF, which Ireland has now applied to tap to cope with the enormous cost of bailing out its banks.

The Irish government said it was confident it would be able to pass the toughest budget in the country’s history to meet the terms of an EU/IMF rescue under negotiation.

PM Brian Cowen’s €15bn in spending cuts and tax increases unveiled will form the basis for an IMF/EU rescue package worth about €85bn. But the plan failed to impress markets amid doubts the fragile coalition will be able to push it through.

Investors circle Turkmenistan for energy openings

Western energy firms are poised to strike deals in Turkmenistan as the Central Asian state opens up its lucrative oil and gas reserves after years of isolation.

Chevron Corp, Total and TXOil Ltd, a company chaired by a younger brother of former US president George W. Bush, are among those pursuing deals in the desert nation, home to the world’s fourth-largest natural gas reserves.

Few, however, expect an instant bonanza. Competition will be tough and analysts predict the next influx of foreign investors will be restricted to offshore blocks in the Caspian Sea and service contracts at prized onshore gas fields.
“Turkmenistan’s policy is to invite foreign companies for offshore and service contracts. I’m not sure this will change,” said Najia Badykova, who worked in the Turkmenistan government before founding Washington DC-based company Antares Strategy.

Turkmenistan, a former Soviet republic bordering Afghanistan and Iran, plans to triple gas production to 230 billion cubic metres (bcm) over the next two decades and forecasts a more than sixfold increase in oil output, to 67 million tonnes per year.

It traditionally sends its gas north to its Soviet-era master Russia, but is diversifying export routes to meet growing demand in China, Iran and Europe. Turkmen gas will be crucial to the European Union-backed Nabucco pipeline project.

A dispute last year with Moscow over a ruptured pipeline, which cost Turkmenistan $1bn for every month that delivery was disrupted and ultimately led to a sharp fall in Turkmen gas supplies to Russia, has increased its appetite for new markets.

Western executives say Turkmenistan’s ambitious growth plans will not be possible without foreign capital and expertise.

“The desired production growth will take a large amount of capital investment on a sustained basis over a number of years,” said Douglas Uchikura, president of Chevron Nebitgaz B.V.

“The president definitely has an objective to open up for what he would consider mutually beneficial opportunities,” he said. “Their opening will be very measured.”

Opening up?
Turkmenistan forecasts its economy, dependent largely on gas and cotton, will grow by 7.5 percent this year. The outlook of the International Monetary Fund is even rosier, at 9.4 percent.

Privately, officials express frustration that the perception of the country has changed little since the death four years ago of Turkmenistan’s first post-Soviet leader, Saparmurat Niyazov.

The marble palaces and grand fountains of the capital, Ashgabat, are a monument to Niyazov – the self-styled Turkmenbashi, or Leader of the Turkmen — and the formidable personality cult that characterised his often eccentric rule.

Since then, several Internet cafes have opened in Ashgabat. Satellite dishes battle for roof space on three- and four-storey apartment blocks in the older neighbourhoods of the city, where residents say they can tune in to more than 700 channels.

Turkmenistan even ranked 18th of 155 countries in a Gallup World Poll of the world’s happiest places this year.

But it ranks much lower on most other surveys. Only Eritrea and North Korea scored worse in the 2010 press freedom index compiled by media watchdog Reporters Without Borders.

Its few vocal opposition figures have long fled the country and those who remain dare not speak out against the government.

Foreign diplomats in Ashgabat say it is too early to say whether Niyazov’s personality cult will be replaced by that of his successor, qualified dentist Kurbanguly Berdymukhamedov.

A larger-than-life portrait of the current president, pen poised in his right hand, loomed over the foreign executives who spoke at a recent energy conference in the capital, each with an eye on the ultimate prize: his signature on their proposals.

“Things don’t change overnight, otherwise it’s called a revolution,” said one diplomat. “But the government is increasing its level of economic interaction with the world. That simply wasn’t done in the past.”

State partnerships
So what is the secret to doing business in Turkmenistan? Dubai-based Dragon Oil plc has been there for more than a decade and has invested almost $2bn to date.

It has a Production Sharing Agreement to operate the Cheleken contract area and employs nearly 1,000 Turkmen staff.

“You have to be a partner with a state agency, follow all their regulations and help the local economy,” Emad Buhulaigah, Dragon Oil’s general manager for petroleum development, said.

Dealing with the state has been a stumbling block for some Western companies. State-run Chinese firms have the advantage of being able to strike deals quickly with the Turkmen government.

“It can sometimes be difficult to explain that a Western government cannot tell a private company what to do,” said a second foreign diplomat.

Layers of bureaucracy and concern in the West over Turkmenistan’s human rights record have also made it awkward for some private investors to commit to business in the country.

A third diplomat recalled a recent conversation with a high-ranking member of the Turkmen government. “Do you know what he said? ‘It takes the European Union 14 months to draft a memorandum. It takes China 14 months to build a pipeline’.”

A 1,833-km (1,139-mile) pipeline to China, ready to pump 40 billion cubic metres of gas eastward by 2013, opened last year.

China has supplied billions of dollars in loans and state firm CNPC was among four Asian companies to win contracts last December for development of the jewel in Turkmenistan’s energy crown: the South Iolotan gas field.

European and US firms, however, are unlikely to miss out, a fact reinforced by recent Turkmen assurances it would soon have another 40 bcm of gas to send westward under the Caspian.

Enrique Nunez Escudero | Shirebrook Commodities | Video

Starting in 1994 as a small company offering professional training in commodities derivatives, Shirebrook Commodities has grown to a nine-company group, providing training, risk management and compliance verification for institutions from banks and insurers to their regulators and commissions. Enrique Escudero discusses the strength of Mexico’s economy and the challenges facing the country’s new president.