Euro-zone finance ministers face one big question when they meet in Brussels today and tomorrow: Are they willing to fundamentally change their strategy for solving the debt crisis that has rocked the currency bloc over the past year?
Over the past week, calls to boost the euro zone’s euro750 billion ($1 trillion) bailout fund by expanding its size and — perhaps more importantly — by giving it broader powers have grown louder.
French Finance Minister Christine Lagarde told journalists Friday that she and her counterparts were discussing giving the fund the power to buy government bonds on the open market — a move that would take pressure off countries that have seen bond prices fall and funding costs rise. Belgium’s Finance Minister Didier Reynders, meanwhile, said the size of the fund should be doubled, to euro1.5 trillion ($2 trillion).
Jean Claude Trichet, the head of the European Central bank, and two top officials of the European Union’s executive commission have also thrown their weight behind a new role for the bailout fund, which has so far been limited to providing rescue loans to cash-strapped countries.
The European Commission last week circulated a document among EU member states with some suggestions on how to broaden the scope of the fund beyond bailouts. But an EU official familiar with the document said talks were still at an early stage and that he didn’t expect finance ministers to take big any big decisions next week.
“The meeting will not achieve such a degree of detail,” said the official, who was speaking on condition of anonymity because of the early stage of the discussions.
Most analysts say the euro zone’s current strategy to deal with the crisis has failed. That strategy sees countries bail out their struggling banks to then provide them with expensive rescue loans, conditioned on steep budget cuts, when they run out of money.
A euro67.5 billion bailout of Ireland — necessary after massive capital injections for big banks pushed the country’s budget deficit to almost one-third of economic output — didn’t succeed in containing the crisis. Greece, which received a euro110 billion rescue loan, was last Friday downgraded by another rating agency, reflecting concern about the country’s ability to pay off its debt amid a shrinking economy and falling government revenue.
Most economists expect Portugal to also ask for help soon, while markets are worried about the financial health of much larger Spain. Spain’s economy makes up about 10 percent of the euro zone’s gross domestic product and bailing it out could easily overwhelm the existing facility.
“Maybe now they should see one needs a new approach,” Daniel Gros, director of the Brussels-based Centre for European Policy Studies and a former economist for the International Monetary Fund, said of European policymakers’ scramble to stop the crisis from spreading. “It’s not so much the size of the fund, but what it’s used for.”
Giving the bailout fund broader powers, such as directly intervening in financial markets in times of turmoil, or even providing short-term cash injections to re-capitalise wavering banks could attack the crisis at its roots, analysts say.
One big part of this new approach would be to let banks’ debtors take losses if a firm is actually insolvent, and then quickly spend large sums of money buying up government and bank bonds to stop panic on financial markets, Gros said.
Germany so far has opposed significantly increasing the firing power of the existing bailout fund. But German Finance Minister Wolfgang Schaeuble has raised the option of boosting the lending capacity of the euro zone’s contribution to the fund so it actually reaches the advertised euro440 billion ($580 billion).
Euro-zone governments make their contribution to the euro750 billion fund by guaranteeing loans issued by the so-called European Financial Stability Facility. The remaining euro310 billion of the total fund comes from the EU’s executive Commission and the IMF.
However, because of the way the EFSF provides money to cash-strapped countries, it can actually lend out much less than euro440 billion. Rather than giving direct loans, the facility sells bonds to investors, with the proceeds going to the government in trouble.
To get a triple-A credit rating for those bonds — and make them attractive to wealthy investors — governments committed to guarantee 120 percent of their value, taking the amount it can actually lend out down to about euro367 billion. On top of that, bailed out countries have to deposit a certain portion of the loans they receive “as a cash buffer” with the fund.
Schaeuble said boosting the fund so it can actually lend out euro440 billion would not represent an actual increase and Berlin has ruled out doing anything beyond that.
But analysts warn that the way the crisis had developed, governments might soon be force to go further.
“We do these things only after we have denied even thinking about them,” said Gros.
Eradiri Faults NDDC Leadership Structure Wants Agric As Top Priority
The Special Adviser to the Sole Administrator of the Niger Delta Development Commission (NDDC) on Youths, Udens Eradiri, has faulted the leadership structure of the commission, saying it has not helped the cause of the Niger Delta in the last 25 years.
Describing the leadership structure of the NDDC as faulty, he said that the faulty leadership structure was the reason why President Muhammadu Buhari ordered for a forensic audit in the commission.
Eradiri who is the former president of the Ijaw Youths Council (IYC)
disclosed this while speaking to aviation correspondents, last Friday, shortly on arrival at the Port Harcourt International Airport, Omagwa, from Abuja.
He said the outcome of the forensic audit would be used to do a wholistic reorganisation of the organogram of the commission.
According to him, the wholistic review of the organogram of the NDDC will help in putting the leadership structure in order, and enable things to function properly.
“The leadership structure of NDDC in the past years had been faulty, and that was why the President said there should be forensic audit, which would be used to do a wholistic review of the organogram of NDDC, so that it can function properly.
“The new board is coming soon, but the whole process will pass through the National Assembly to be cleared”, Eradiri said.
On the achievement of the present NDDC management, the special adviser said that the Effiong Akwa led administration had recorded some landmark achievements compared to the last 25 years.
He said that the present interim management within two years completed and commissioned the headquarters of the NDDC, which had been left for over 25 years.
He also said that the completion of the East-West road project had intensified under the present management, adding that NDDC has also supported states on sanitation through donation of trucks.
Eradiri, however, admitted that the present interim management had not taken a firm stand on agricultural development even though it has been working with the Central Bank of Nigeria on the Anchor Borrowers Scheme.
“I believe that the only tool to use and get ourselves out of the quagmire we find ourselves is agriculture, and I think that the NDDC can design its own scheme on how to grow agriculture as a deliberate policy.
“This will bring change that will grow the region’s economy. We must talk about agricultural processing, and we can put palm oil into sachet, and even students can be buying them,” he said.
By: Corlins Walter
Nigeria Lost N851bn To Oil Theft, Sabotage – NEITI
Nigeria lost N851.84bn ($2.78bn) to oil theft and pipeline sabotage in 2019, the Nigerian Extractive Industry Transparency Initiative (NEITI) has said.
NEITI said this in its latest oil and gas industry audit report.
NEITI stated that it arrived at the estimate after using an average price of $65.61 per barrel and an average exchange rate of N306.42/$ .
It, however, noted that there was a significant reduction of 21 per cent from the previous year, where 53.28 million barrels were lost.
Losses such as these are recorded by companies whose crude volumes are carried through pipelines easily compromised by saboteurs.
The report also stated that some oil terminals recorded no production. These included Aja operated by Bayelsa Oil, whose license was revoked by the government.
Others were Asaramatoru and Oyo managed by Prime and Allied/CAMAC who were reportedly inactive for the year.
Nigeria earned a total of N10.49tn ($34.22bn) from crude oil and gas sales. This was a marginal 4.88 per cent increase from 2018 revenues of N9.99tn ($32.63bn).
The total crude oil production recorded was 735.24 million barrels, a 4.87per cent increase from 701.10 million barrels reported in 2018.
A total of N2.145tn ($7.011bn) was the domestic sales proceeds in 2019 from 107.24 million barrels of crude oil. This was 0.36 per cent lower than the domestic crude sales of 107.63 million barrels in 2018.
Residents Task New Council Chairmen On Dev, Agric Policies
Some residents in the 23 local government areas of Rivers State have urged the newly sworn-in council chairmen in the state to come up with good agricultural and developmental policies that will transform the grassroots.
They also urged the council boss to take pragmatic steps and actions towards tackling security challenges to encourage business activities thrive in their domains.
Some of the residents who spoke with The Tide at the weekend, noted that the local government administration in the state had not faired well in terms of real development in recent times, and urged the new council helmsmen to change the narratives.
A resident of Emohua Local Government Area, Mr Charles Amadi, noted that no real development had taken place in the area, lamenting the dearth of companies and small scale industries in the area.
He, therefore, called on the new chairman, Dr. Chidi Lyoid, not to solely depend on the monthly allocation, but to go all out to attract small scale companies to the area so as to create employment opportunities as well as generate revenue for the council.
He also urged the new chairman to invest in agriculture, especially farming and fishing.
On his part, Mr Ebenezer Otamiri who lives in Etche, urged the Etche council boss, Obinna Ayanwu, to consolidate on the achievements recorded in his first tenure, especially by building more markets for the people, as well as initiate good agricultural policy to drive the economy of the area.
He also urged the council boss to tackle the issue of electricity and security in the area, saying electricity and security are key to the development of the area.
In his own charge, Mr Mene Geoffrey Dekaa who hails from Bori in Khana Local Government Area of the state, called on his new council chairman, Bariere Thomas, to show capacity and competence in the area of security.
He noted that the issue of security has left native imprint in the development of the area, saying many investors have left Bori, the headquarters of the council, for other places.
“Because of security challenges, many people have left Bori to build houses and invest in Nonwa- Tai, and Eleme.
“Areas like Kono-Boweeh communities are no go areas, as people there can hardly sleep. So if the chairman can work with government recognised traditional rulers and security agents, security issues will be tackled, and people’s confidence will be restored, and business activities will move on”, he said.
By: Residents Task New Council Chairmen On Dev, Agric Policies
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