Spain's PM says his country has turned a corner

Mariano Rajoy believes his austerity efforts have made sense and that the country can hope for better things in 2014

More than half its young people are unemployed, a double-dip recession has left the economy 7% smaller than it was five years ago, and debt has soared to nearly 100% of GDP. But Spain's prime minister, Mariano Rajoy, believes his country has turned the corner and can hope for better things in 2014, following its worst economic crisis since the Franco era.

In an interview with the Guardian and partner newspapers from Spain,Italy, France and Germany, Rajoy said the incipient turnaround proved that his austerity efforts "have made sense".

"Last year, the debate was over when Spain would get a bailout, and this year the debate is over when Spain will recover," Rajoy said. He based his optimism on recent unemployment figures which showed that the number of jobseekers had fallen in November for the first time, following positive signs in October.

"Since June 2007, the difference in the unemployment numbers for the corresponding month of the year before has been getting worse and worse and worse. There was a moment, in 2009, when comparing January 2009 and January 2008, one million extra people had registered as unemployed," he said.

"But now, for the first time, in October this year, this trend changed, and there is less unemployment than a year ago. And in November, this trend has been maintained," he added, with around 2,500 fewer people registered as unemployed last month.

"Am I satisfied with this? No. I'm not satisfied … but it is very important, because it shows that there is hope and that this country can and will move forward and that all the efforts that have been put in have made sense," said Rajoy.

Not so long ago, there were real fears that Spain could turn into the next Greece – with far greater implications for the euro and EU economy because of its greater size. The impact of the economic crisis is writ large across the nation: in the empty housing estates that were never completed as the construction boom ground to a halt, the pensioners protesting after their life savings were swallowed up by failing banks, and the vast numbers of young people moving abroad to find work.

But Rajoy thinks that the country has finally turned the corner, highlighting Spain's export industry, which has seen shipments abroad increase steadily over the course of the past year. Spain's powerful car industry is getting back on track, and foreign investors are returning, bringing with them the hope that the country can emerge from its recession.

Rajoy has been criticised for imposing strict austerity measures on Spain, which he argues have brought stability to a country that last year came close to a national bailout, but have seen unemployment spiral, particularly among the young, and deep cuts made to public services.

"It's evident that today there are far fewer people working than five years ago, that is to say that since 2008 things have not gone well in terms of employment. Logically, these people are experiencing difficult times, but it's also true that in Spain there is a very important safety net, namely public services, unemployment benefit … which have allowed people to attain a dignified standard of living," said Rajoy. He spoke of his dislike of raising taxes, but said that he had tried to be as fair as possible in doing so. "It's true that times of crisis generate great difficulties, but this crisis has generated problems for everyone," he said.

Many are worried about the kind of Spain that will emerge from the recession, in a country with one of the biggest wealth gaps in Europe, with the rich getting richer while the working and middle classes are left with rising debts, fewer public services, reduced salaries and more precarious employment.

Rajoy's government carried out labour market reforms in 2012 that made it easier for companies to fire staff, and to bring in more part-time contracts, and the prime minister said there were plans to introduce further such changes. But critics say these reforms fail to achieve what they set out to, namely to create jobs.

Rajoy defended the reforms, saying they had helped to stabilise employment. "In difficult times, it is better to go for lower salaries and to maintain the highest number of people in work," he said. "I would prefer full-time contacts, of course … but short-term contracts can help people out."

Not everyone is as hopeful as the prime minister. A report from PricewaterhouseCoopers last week suggested that Spain's economy would not recover for two decades, and would continue to experience high levels of unemployment throughout that time.

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Facebook caught in controversy over earnings exported to Cayman Islands

Irish government collected £4.4m last year from world's largest social media company that earned estimated £645m in UK

Facebook is facing a fresh controversy over its tax contributions after company filings revealed the social network exported an estimated £645m earned in the UK and other overseas markets to the Cayman Islands tax haven last year.

Facebook uses a subsidiary in Ireland to collect advertising revenue from around the world. Accounts filed in Dublin this week show that business is booming, with international earnings rising to £1.5bn in 2012, up from £840m in 2011. But the Irish government collected just £4.4m in tax from the world's largest social media company last year.

Using a complex web of subsidiaries in a tax structure known as the "double Irish", employed by a number of American multinationals, Facebook shelters much of the money it earns outside its home market from governments around the world.

Facebook and Google account for around half of the £6bn expected to have been spent on advertising on the internet in Britain this year, according to eMarketer. But Facebook has put most of this income out of reach of the taxman.

The company paid no tax in Britain last year, despite earning an estimated £223m in one of the Europe's biggest advertising markets. Facebook takes full advantage of London's status as a hub for European advertisers. Its European vice president, Nicola Mendelsohn, formerly chair of the well-respected Karmarama ad agency, is based in the capital, near to the headquarters of WPP, the world's largest buyer of advertising space.

A Facebook spokesman said: "Facebook complies with all relevant corporate regulations including those related to filing company reports and taxation. We have our international headquarters in Ireland that employs almost 400 people and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multilingual hi-tech operation serving the whole of Europe."

Facebook's UK operating company employs more than 120 staff, many in advertising sales, but advertisers are actually billed via the Dublin-based subsidiary, Facebook Ireland Ltd. Accounts show the business employed 382 staff last year, some of them in Ireland and some abroad.

The subsidiary collected revenues of £1.5bn last year, but this was wiped out by two items – the cost of sales and payments made to other group companies. Large sums go directly to the US, with £670m being paid to the listed parent company last year. But £645m was paid to Facebook Ireland Holdings for use of the platform.

This second subsidiary is based in Ireland but does not file full public accounts. This means the final destination of any payments out of Facebook Ireland Holdings is untraceable. However, there are clues to its ownership – filings show Facebook Ireland Holdings is owned by a number of Facebook subsidiaries based in the Caymans, a jurisdiction that does not levy corporation tax.

The ownership structure suggests Facebook may be diverting much of its international income to the tax haven. The company declined to comment on this aspect of its accounts.Margaret Hodge, who chairs Parliament's influential Public Accounts Committee, has criticised Facebook's tax record, accusing the company of apparently "deliberate manipulation of accounts of economic activity to deprive the British taxpayer of a rightful tax contribution".

Political leaders around Europe have urged Dublin to do more to tackle tax avoidance scheme. The G20 group of countries and the OECD are working to close loopholes, while prosecutors in Italy have initiated proceedings against Apple for similar arrangements to those being used by Facebook.

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Nokia shareholders approve sale of handset business to Microsoft

Gathering in Helsinki's Ice Hall pays their last respects to a business that once dominated European phone manufacturing

Nokia shareholders have approved the sale of its mobile phone division to Microsoft after some 5,000 people braved icy rain in Helsinki to cast their vote and pay their last respects to a business that once dominated European phone manufacturing.

In the capital's Ice Hall, usually home to the national ice-hockey team, crowds witnessed a landmark moment in Finnish history. By a 99% majority, the emergency general meeting ratified the €5.44bn (£4.6bn) sale of Nokia's handset division. Nokia's chairman, Risto Siilasmaa, said he was aware the sale "would raise deep feelings" among Finns.

"On the board of directors we understood that, as the decision-makers, we would also be heavily criticised. However, we are convinced that continuing with the old strategy would have most likely led to great difficulties for Nokia, its shareholders and employees," Siilasmaa said.

When the sale concludes early next year, Nokia will be left with a telecoms network equipment business, its online mapping division, and a trove of valuable patents, only 10% of which have been licensed, according to executives. The company will continue to employ 6,000 people in Finland.

In a marathon four and a half hour meeting, much of the backlash from small shareholders was reserved for Stephen Elop, the chief executive hired from Microsoft who guided Nokia's sale to Microsoft before stepping down in September with an €18.8m severance package. Shareholder Hannu Virtanen said Nokia's board of directors had acted naively and Elop had been a "triple-A flop" who "drove the company to ruin". Finns have watched in despair as the 150 year old company closed factories, cut tens of thousands of jobs and cancelled its dividend.

Elop, who reportedly attended the meeting but did not speak, will transfer with the phones business back to Microsoft and is among those tipped to succeed Steven Ballmer as chief executive of the American software group.

The alliance Elop founded with Microsoft while at Nokia has begun to bear fruit, with the Lumia handsets that run Windows software helping to push Microsoft's market share up to 10% in Europe, where Apple and Android still dominate.

Siilasmaa, who has stepped in as interim chief executive, defended his predecessor, saying: "I have never met anyone who had done as much work as Stephen has done."

He revealed that other companies had expressed an interest in buying Nokia at the time of Microsoft's approach, but that the board considered the American group's offer to be the best option for shareholders.

Speaking from the public gallery, Marko Mannfors argued Nokia was being sold at a discount, and that a more appropriate purchase price would have been €15bn.

Nokia's stockmarket value stands at €22.5bn. The shares have doubled in price since the deal was announced, rising to a high of €6 on Monday before falling back to €5.82 by Tuesday's close.

Microsoft had been forced to act because of the money it was losing in supporting Lumia marketing efforts, Siilasmaa claimed. For every handset sold, Nokia paid Microsoft a $10 licence fee to use its software, but Microsoft paid Nokia $20 to support its marketing efforts. "From Microsoft's point of view, the equation does not work," the chairman said.

Nokia's handset arm lost €86m in the most recent quarter. Although that is an improvement from a €672m loss a year earlier, the company is a long way from recovering the market share taken by Apple's iPhone and Samsung's Android handsets.

The remaining networks business now faces a battle with activist shareholders led by Daniel Loeb's Third Point capital, which believes the company will have €8bn in cash once the sale completes, and that it expects a "meaningful portion" to be handed to shareholders as dividends.

Article Source : http://www.guardian.co.uk
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Tesco's profits sliced by almost a quarter in past six months

UK's biggest supermarket experiences falling sales in every country in which it operates and sells fewer property assets

Tesco's profits crashed by nearly a quarter in the last six months as the UK's biggest supermarket suffered falling sales in every country in which it operates. Underlying sales slipped back as the grocer struggled to cope with widespread economic problems and a worldwide shopping shift away from the large hypermarkets, historically favoured by Tesco, to local corner shops and the internet.

A large slice of the decline was the result of Tesco selling fewer property assets than a year ago, but even excluding that, profits fell more than 7% to £1.4bn. The biggest decline was in Europe, where profits fell by more than 70%. Analyst Clive Black at Shore Capital described that decline as "atrocious".

Tesco admitted it faced "continuing challenges" as it attempts to improve its image with British shoppers and reshape its international business after an ambitious expansion programme.

"There's a massive shift in retail," said Philip Clarke, the chief executive, as he revealed that Tesco was now operating online grocery stores in 50 cities in nine markets outside the UK and planned to focus on opening smaller stores in nearly all its territories.

The profit slump in Europe, excluding the UK, is particularly painful. Slovakia, Hungary and the Czech Republic face continuing economic pressures and Tesco admitted it had got its strategy wrong in Poland and Turkey, where underlying sales dived by 6.4% and 12.8% respectively over the last six months compared with the same period a year before.

There were further problems in Asia, with profits in South Korea dented by £40m as a result of tighter government rules on trading hours.

Yesterday Tesco confirmed plans to put its 134 Chinese stores into a joint venture with the state-backed China Resources Enterprise. The UK retailer will pay £345m for a 20% stake in the joint venture, which will require state approval.

The move is a humiliating reversal for Tesco, which had huge ambitions to expand in China. Clarke revealed that its underlying sales in the fast-growing market had declined by 3% and the venture lost £72m in the past six months alone. The company said it had spent more than £1.3bn on assets in China and had made trading losses of more than £70m in each of the last two years as it tried to forge a role in the massive market.

The Chinese joint venture is part of Clarke's strategy to stem mounting overseas losses. He has also pulled out of Japan and has axed the US business, which has cost £1.7bn in investment and trading losses. Tesco is selling its California-based Fresh & Easy chain to billionaire Ron Burkle.

Tesco is reviewing its operations in the Turkey and India, but Clarke said the company was committed to its other international operations. "We chose to exit Japan and the US because we had small market shares in markets with very strong competitors. The path to profitability would have taken far too long. They were developed markets, but developing markets bring with them good market growth," he said. Clarke added that the European businesses had strong market shares and would pick up when the economic environment improved.

"Tesco's chief executive must be thinking about entering the Rio Olympics' weightlifting competition given the amount of 'heavy lifting' that he has had to engage in over the last three years," said Clive Black. "More training is going to be required before the corporate bar feels less heavy."

Finance director Laurie McIlwee said Tesco would "start to approach" its aim of about 5% growth in profits next year as trading improved in the UK, which is by far its most important market.

He said profits in the UK would improve as it moved out of shop space devoted to electrical products and concentrated on more profitable items such as toys, health and beauty, and stationery. "I don't think it's getting worse. We are making the right moves and will make strong progress in the second half of the year," McIlwee said.

Tesco is battling to stem falling market share and underlying sales in the UK by investing more than £1bn in revamping stores and improving customer service. Yesterday, however, it admitted that so far, underlying sales remained poor – down 0.5% for the half-year as the supermarket faces tough competition from upmarket rivals such as Waitrose and Marks & Spencer as well as discounters such as Aldi and Lidl.

But Clarke insisted sales were improving, as they had been flat in the second quarter. He said food sales had risen 1% as customers welcomed improvements to 8,000 products over the past 18 months and the Price Promise promotion, under which shoppers receive vouchers if they could have bought a basket of items cheaper at any of Tesco's three main rivals.

Online sales also continued to grow strongly, up 13% in the half, as Tesco rolled out drive-through collection points to nearly 200 locations.

Rival's success
Sainsbury's 'quality and service' underpin improved sales growth

While Tesco has problems in almost every part of its empire, rival Sainsbury's unveiled a step up in sales growth over the summer.

The UK's third largest supermarket said underlying sales – which exclude benefits from new store space – were up 2%, excluding fuel, in the 16 weeks to 28 September, as it successfully fought off competition from discounters and larger rivals Tesco and Asda.

Enjoying his moment of glory over rival Tesco, chief executive Justin King said that Sainsbury's was out-performing the market because of "great standards of service and availability in stores" and its investment in high-quality own-label products.

He conceded that virtually all of the supermarket's shoppers were likely to visit discounters such as Aldi and Lidl, which have been enjoying rapid growth in the past few years. But he said that some of Sainsbury's best-performing stores were situated close to Aldi outlets as the supermarket was able to offer prices that were "pretty sharp" on the same quality of goods.

The retailer's in-house brands such as Taste the Difference and By Sainsbury's grew at twice the rate of third-party brands as shoppers looked to save money. Clothing sales were also strong, growing at twice the pace of food.

Sales growth at convenience stores stepped up from 15% to 20%, which King attributed to the warm summer weather. However, online sales growth slipped back from 20% to 15% and King suggested that shoppers had preferred to be out in the sunshine rather than waiting at home for deliveries.

Sainsbury's position in the fast-growing online and convenience-store sector as well as its emphasis on quality – which kept it out of the horse-meat scandal – has ensured that the chain is the only one of the UK's "big four" grocers to increase market share in the past year.

Looking forward, King said he was encouraged by signs of economic recovery, but added: "The reality is household budgets are under pressure. Inflation is 3% and wage rises are barely 1%.

"We know by listening to customers that they continue to find challenges in their weekly budget, and shopping habits they developed in the downturn are likely to persist."

In that environment, Sainsbury's is expecting shoppers to switch to own-label and enjoy a "stay at home" Christmas as they continue to try and save money in a tough market.

Mike Coupe, Sainsbury's commercial director, said: "We think it will be a stay-at-home Christmas. Because Christmas is on a Wednesday we think people will have an extended holiday and spend time with their family."

King said he still expected strong spending in December as shoppers were saving money on their weekly shop so that they could splurge on special occasions.

Price competition between the supermarkets remains stiff and Sainsbury's is continuing to pursue a complaint about Tesco's Price Promise promotion, which claims to compare the cost of goods at rival chains, even own-label items.

The advertising watchdog has ruled that it is not unfair for Tesco to compare its own-label bananas with Sainsbury's Fairtrade ones, but the ruling is being appealed.

King said: "We think there is an important principle here, that it should not be for any individual retailer to determine whether they consider what they sell to be comparable. We believe the comparisons Tesco are making ignore the quality difference between our products."

Article Source : http://www.guardian.co.uk

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Silvio Berlusconi makes humiliating climbdown in Italian parliament

Prime minister Enrico Letta wins confidence vote after retreat by Il Cavaliere in face of MPs' rebellion

Even before he'd started to speak, the signs were of a performance that lacked his usual panache. To begin with, the microphone that Silvio Berlusconi picked up to address the senate didn't work properly. Once it did, his speech was uncharacteristically flat. There were no histrionics or garrulous jokes – just a final sentence which, in a few rather sheepish words, spoke volumes.

The man who had dominated Italian politics for two decades had been forced into a humiliating climbdown by a rebel faction of his own MPs. Outfoxed, out of luck and abandoned as never before, he looked tired and downcast. But he brought a smile and incredulous chuckle to the face of Enrico Letta, the prime minister.

"Italy needs a government that can carry out structural and institutional reforms which the country needs to modernise," said Berlusconi, his hands clasped in front of him, an Italian flag pin on his lapel. "We have decided, not without internal strife, to vote in confidence."

There was a burst of applause. But Il Cavaliere, as the Italian media like to call the billionaire former prime minister and convicted tax fraudster, had nothing to cheer about.

In a fittingly dramatic denouement to a political saga that a former minister likened to a tragicomedy and an MP said was more like a farce, Italy's government crisis – a week of mounting dread and trembling markets that had risked scuppering the grand coalition and plunging the eurozone heavyweight into turmoil – was over, just like that.

Letta, the centre-left leader of a government which since its inception has been plagued with tensions and ideological splits, went on to win the senate confidence vote with a sweeping majority. Only 70 of 305 MPs voted against; 235 MPs voted for. Berlusconi – the man who triggered the crisis and spent days clamouring for the government's downfall – was one of them.

Later, in the lower house of parliament, a vindicated Letta said it was time to call a halt to the threats and ultimatums which had dominated the coalition since Berlusconi's first definitive criminal conviction on 1 August.

"Italy needs there to be no more blackmail of the 'do this or the government falls' sort," he said. "Italy doesn't need any old government, but a government at the height of its abilities with a clear majority supporting it."

The prospect of more stability was music to the markets' ears. The FTSE MIB was the best-performing stock market index in Europe, up 0.7%, while Italian debt strengthened in value, pushing down borrowing costs and sending the yield on Italy's 10-year bonds to 4.37% from as high as 4.74% on Monday morning. They were not the only ones to be relieved. Ever since ominous drumbeats started sounding last week, concern had grown not only among Berlusconi's opponents but large parts of Italian society about what lengths he was prepared to go to in order to – in Letta's words – "protect his personal interests".

Facing imminent expulsion from the senate and the enforcement of his commuted one-year sentence, the recently convicted People of Freedom (PdL) party chief had insisted that his motive for suddenly withdrawing his ministers from the government was a sales tax hike imposed by the coalition that he had vehemently opposed.

Even by Berlusconi's standards, however, this was hard for Italians to swallow – even, it transpired, for most of the very ministers he had ordered to resign. One by one, four of them lined up to voice their misgivings. Their exact status was unclear; La Repubblica, translating the uncertainty into punctuation, referred to one of them as an "ex(?) minister". By Tuesday night, however, in the latest step in an increasingly bizarre political dance, Letta made an announcement to the effect that the five could resign all they liked; he was not accepting their resignations.

In the senate on Wednesday, the stage was set not only for a showdown between Berlusconi and - as Il Sole 24 Ore wrote – "the whole world – Europe, the United States, the markets, the [semi-official Vatican newspaper] Osservatore Romano". It would also be a vital test of whether the leader of what has always been a personal party built around Berlusconi the man - his success, his power and his bravado - still called the shots.

As it turned out, he did not – not, at least, in the way he once would have done. With his family newspaper condemning the flabbergasting "patricide" of Angelino Alfano, the PdL secretary widely seen as Berlusconi's heir who emerged as leader of the rebels, the 77-year-old arrived at the senate around 25 minutes into Letta's make-or-break speech

"Italy is running a risk that is potentially fatal, without remedy," the prime minister told MPs, warning them of the damage to the country's economy and image that a government collapse and eventual fresh elections would inflict. "Thwarting this risk, to seize or not seize the moment, depends on the choices we will make in this chamber. It depends on a 'yes' or 'no'."As he sat in Palazzo Madama, his expression grim, Berlusconi, the longest-ruling prime minister Italy has known since the second world war, was greeted by a succession of supporters, many of them among the so-called PdL "hawks". One of them, a former MP named Daniela Santanchè, a loyalist so fierce she is known as "the pythoness", was reported to have offered on Sunday to give Alfano her "head on a platter" if it helped her boss.

But as the day wore on it became clear that a significant portion of Berlusconi's party was going to defy his wishes and vote for the government to continue. Arithmetic on a scribbled piece of paper that Alfano displayed had 32 senators voting with their leader, 24 absenting themselves, and 25 against him. With such numbers, Letta was home and dry. And Berlusconi, not long after the party line was voted and confirmed to be for the "sfudicia", then got up in parliament and performed a screeching U-turn.

The prime minister, perhaps, could be forgiven a small smile. Later, the editor of La Stampa, tweeted him reminding him that, on Sunday, Letta had likened Italian politics to Groundhog Day, the film in which every day turns out the same. After all that, Mario Calabresi seemed to suggest, Italy had ended up with exactly the same government, with the same problems, as before.

But, said Vincenzo Scarpetta, an analyst at Open Europe, it would be a mistake to think that Wednesday's vote changed nothing. On the one hand, the set-up that Letta has been left with is still far from ideal and "there are still doubts about this government's ability to push forward with painful, unpopular measures," he said. Many suggested Letta would have preferred to have kept Berlusconi out of the majority altogether, thus giving himself a more unified government.

On the other, Scarpetta said, Berlusconi's ability to pull strings and dictate events had definitely been compromised. "He clearly comes out weaker from this. The initial situation when they formed the government was that he would be able to pull the plug on it whenever he wanted, because the government depended on his support. But now, that's exactly what he tried to do … and it didn't work," he said. Analysts said that what happens to the centre-right now will be key in determining whether this is the beginning of the end for Berlusconi, or just a major setback. On Wednesday night, in the lower house, a group of 26 PdL deputies had reportedly signed up to a new centre-right group led by Alfano. Berlusconi loyalists were expected to stay with him under the relaunched Forza Italia party name. "Of course, he remains the leader of the party," said Scarpetta. "We will just have to see what happens to the party."

Article Source : http://www.guardian.co.uk

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New European law to clamp down on market price-rigging

Life bans on rogue traders and large company fines as Financial Conduct Authority and Ofgem launch investigations

The European parliament is expected this week to vote through tough new legislation that would allow Brussels – and London – to crack down much harder on rogue traders in financial and energy markets.

The move comes as competition regulators from the European commission widen their inquiry into the oil trading activities of BP and price reporting agency Platts, while a senior Brussels politician urged British financial and energy watchdogs to undertake a deeper investigation into alleged manipulation of the British wholesale gas market.

Arlene McCarthy, vice-chair of the committee on economic and monetary affairs inside the European parliament, said on Sunday she was confident a vote on Wednesday would ensure benchmarks such as the London interbank offered rate (Libor) plus others in the oil and gas sector would be classed as financial instruments, allowing lifetime bans on those trying to rig the markets.

"I am hopeful we will close the loophole in the Libor and energy markets so that regulators in Europe can take appropriate action on abuse. Consumers need to know the prices they pay are fair and I don't want a situation where every time we have a case of manipulation we have to extradite people to the US to face justice [rather than deal with the issue in local courts]," said McCarthy, who is an MEP for the North West of England and chairwoman of the European parliament's committee on internal market and consumer protection.

Under the proposed legislation, Britain and other member states will be able to impose life bans on traders and fine companies 15% of their annual turnover if they are caught abusing the markets. The laws are being brought in after a wave of scandals involving banks manipulating the rates at which they could lend each other money.

But there has also been deep disquiet in Europe about the relatively unregulated British commodity markets after the Guardian published the concerns of a whistleblower, Seth Freedman, from the wholesale gas market about possible manipulation last autumn that triggered an inquiry by energy watchdog Ofgem and the City regulator, the Financial Conduct Authority (FCA).

Fears grew when the competition authorities instigated a series of dawn raids on the offices of BP, Statoil and Platts in May, saying they feared companies may have "colluded in reporting distorted prices to a price reporting agency [PRA] to manipulate the published prices for a number of oil and biofuel products".

Sources in Brussels say the investigators have broadened the scope of their inquiries and have opened up "high level contacts" in the US with the department of justice and the powerful commodity futures trading commission (CFTC).

Alan Duncan, a former oil trader and now international development minister, told the Financial Times last month that the European commission's review was illogical and baseless.

Ofgem and the FCA say they are still in the middle of a preliminary review of the evidence and have yet to decide whether to undertake a full investigation.

"Ofgem continues to look at allegations relating to trading on 28 September 2012, working closely with the Financial Conduct Authority," said an Ofgem spokesman. "We take any allegations of market abuse very seriously. We are also looking at the role of price reporting agencies in relation to the gas and electricity markets and reviewing the information which we have received as part of our call for evidence which closed over the summer."

The FCA declined to comment.

McCarthy said she felt that 10 months on from starting those initial investigations it was time to clarify the situation: "A full investigation is necessary. It is in the public interest because there is not enough transparency and accountability that leaves many people feeling they get ripped off by energy companies.

"If there proves to be nothing there then it will have cleared the air."

Ofgem said it always took seriously its oversight of the energy markets and has received enhanced powers to intervene already after the UK implemented new powers under Brussels-derived wholesale energy market integrity and transparency (Remit) legislation.

A spokesman for the regulator said: "We keep the precise details of our monitoring confidential. But it brings together information on the physical market, trading and other news commentary including any specific reports of suspicious trades we may have received under Remit."

Article Source : http://www.guardian.co.uk

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Strong services data signals UK growth is on track to outstrip rest of Europe

PMI survey's all-sector reading hits 15-year high, with order books growing at fastest pace since Tony Blair became PM

Britain's recovery is on track to outstrip the rest of Europe following a strong performance by the services sector in August.

The purchasing managers index, published by Markit, jumped to a new post-financial-crash high of 60.5 in August, up from 60.2 in July and its highest level since December 2006.

Markit said the latest survey of the all-important sector, which accounts for around 78% of the economy, sent the all-sector PMI to its highest level since the series began in 1998.

Chris Williamson, the data provider's chief European economist, said growth was now accelerating in manufacturing, services and construction, and that GDP growth could exceed 1.0% in the third quarter of the year.

The broad-based nature of the recovery will encourage George Osborne, who in public has remained careful to highlight the risks to the recovery.

Williamson said the latest data showed that growth was principally supported by a rise in new business.

Order books at companies ranging from banks to restaurants rose at the fastest pace since May 1997, the month Tony Blair first became prime minister.

"There were many reports of an ongoing strengthening of market confidence which helped companies convert enquiries into hard contract wins. Marketing and an improvement in the housing market were also noted as reasons for higher sales volumes," he said.

However, hopes that growth would bring a quick end to persistently high unemployment were dashed after the survey of services firms showed a slowdown in hiring.

The sector reported a net increase in employment for an eighth month in a row, but the rate of growth was described as "marginal".

Markit said: "A number of panellists attributed the slowdown to the non-replacement of leavers or cost considerations."

The lack of jobs growth will dash expectations that the Bank of England will raise rates earlier than expected in 2016.

The Bank of England governor, Mark Carney, said last month that he wanted to wait until the economy created an extra 750,000 jobs before considering a rise in base rates.

Martin Beck, UK economist at Capital Economics, said the services survey "adds to the relentlessly good news on the UK economy".

He said: "Following surprisingly strong gains in August's manufacturing and construction surveys, today's services result at face value points to quarterly GDP growth in Q3 not far off a rip-roaring 2%.

"However, this does not necessarily indicate that interest rates will have to rise earlier than the MPC expects. In common with the manufacturing and construction surveys released earlier this week, the expansion in services output suggested by the CIPS survey was accompanied by a softening in the survey's employment balance, which dropped from 53.6 to 50.6.

"This supports our, and the MPC's, view that rising productivity will accommodate much of the recovery in demand, with the unemployment rate taking a stubbornly long time to fall to the Bank's 7% threshold."

Across Europe's major economies services firms signalled that a year-long recession was coming to an end, with the exception of Italy, which failed to improve on July's poor performance.

The Italian services PMI improved only slightly on the previous month following a rise from July's 48.7 to 48.8. The August figure means another monthly contraction, in an economy that is already expected to shrink steadily this year. The City had hoped for a number close to 50, the cut-off between growth and contraction.

Article Source : http://www.guardian.co.uk

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If Greece needs a third bailout, Europe had better find a formula that sticks

A better approach would see Greece's lenders take more pain up-front – but is Germany prepared to support that?

So, Greece will soon need a third bailout. German finance minister Wolfgang Schäuble admitted as much on Tuesday – and was even prepared to say so during the pre-election period in Germany. One assumes Schäuble deemed it safe to dive into these politically contentious waters only because he also stuck to the party line that Athens would receive no more debt forgiveness.

What a shame. If a third bailout is required the time has come for the euro-powers to find a formula that sticks. A small loan package, to fill the hole already identified by the International Monetary Fund, would represent another dose of medicine that isn't working. The Greek economy, weighed down by austerity measures, would stumble along for a while – but a fourth package would loom sooner or later.

Germany's finance minister Wolfgang Schäuble.

A better approach would see Greece's lenders take more pain up-front – get the debt down to manageable levels and hope to see economic growth reduce the burden further. Is Germany, after the election, prepared to support that idea? If it's not, we'll be talking about a fresh eurozone crisis by the end of the year.

Article Source : http://www.guardian.co.uk

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Angela Merkel: youth unemployment is most pressing problem facing Europe

In interview with the Guardian, chancellor promotes merits of Germany's dual system of schooling and work experience, and says she regrets impact of eurozone crisis on young people

Angela Merkel has said youth unemployment is the biggest crisis facing Europe and urged other governments to do more to copy the German system – concentrating on apprenticeships and not simply academic study – to prevent the emergence of a "lost generation".

In an interview before a summit to tackle joblessness among young Europeans, the German chancellor said her country's tried and tested dual system – a mix of classroom learning and on-the-shop-floor work experience – was the best way forward at a time when almost six million under-25s in Europe are out of work.

"Youth unemployment is perhaps the most pressing problem facing Europe at the present time," she told the Guardian and five other European newspapers. "We in Germany have learned a lot from successfully reducing unemployment by means of structural reform since reunification and we can now bring that experience to bear."

Twenty European Union heads of state and all of the bloc's 28 labour ministers have descended on Berlin to hammer out concrete measures to deal with the problem. Economists say the young generation faces the very real prospect of ending up worse off – materially, professionally and socially – than their parents because of the evaporation of jobs in Europe.

Hundreds of twentysomethings have told the Guardian of their endless job frustrations: receiving rejections because they are overqualified, writing scores of unanswered letters, unable to build a life without a job to structure it around.

Merkel has been blamed for compounding the situation by insisting that southern European economies balance their books rather than spend money on job-creating policies. But she dismissed the suggestion that her jobs drive was a way of boosting Germany's poor public image abroad three months before she faces a general election.

She said the Berlin conference on Wednesday was about best practice, pointing out that Germany had halved its youth unemployment since 2005. "We are now in a position to offer a place on a [dual system] training programme to every young person who wants one," she said. "That wasn't always the case … One thing that experience taught us is that there is of course no need for any country to introduce the whole dual system straight away. Inter-company vocational training can be an alternative.

"We should not just try to make our young people more academic," she said. "Germany is seeing the positive effects of skilled workers and master craftsmen having an excellent reputation too."

Angela Merkel is hosting summit in Berlin to tackle joblessness among young EuropeansMerkel exhorted young Europeans as well as employers to become more flexible, calling for greater mobility in Europe. She said that with language barriers often preventing mobility, she wanted to open up the Erasmus exchange programme to include vocational training.

Five years of economic crisis have prompted thousands of Europeans to migrate in search of work. Southern Europeans are now coming to Germany in record numbers, and Merkel quipped that while not all of them would enjoy the conditions offered to the Spaniard Pep Guardiola as Bayern Munich's new coach, they would be given good chances in Germany.

"We have no intention of expanding the low-wage sector, as there is a great demand for skilled workers, which cannot always be met by Germans, although they remain of course our first priority. To reiterate, Europe needs a more mobile labour market. To that end, the way students and academics move around the single market as a matter of course could be better reflected among skilled workers."

Last week Europe earmarked an extra €6bn to tackle youth unemployment. However, Merkel said: "Money alone won't be enough. We will need intelligent reform."

She stressed that contrary to widespread accusations that Germany was trying to impose its ideals and economic models on souther European countries, she did not expect everyone to conform to the strict German model.

"It's absolutely fine for a country to want to structure its economy in a completely different way to Germany's," she said. "I'm always pleased to see different roads leading to success. But what nobody can negate is the need to be competitive and to work for and earn prosperity. When I look at Italy, Spain or Greece I do see very different, successful industries.

"What is crucial is that we all realise how much the world has changed. China, India, Brazil, South Korea and many other countries have been competing with us [Europe] for quite some time in areas we used to dominate … We either offer those parts of the world attractive and innovative products, or we resign ourselves to losing market shares and therefore prosperity, which is precisely what I do not want, either for Germany or for Europe".

Speaking on the sixth floor in the cuboid chancellery in Berlin, with its sweeping views over the Tiergarten park and the sea of cranes that continue to reconstruct the German capital almost 23 years since reunification, Merkel said it was up to governments to solve the problems so as to prevent the social unrest that has been increasingly visible on the streets of southern European towns and cities in recent years.

"When things start to become dysfunctional, it is the job of politicians to remedy the situation. Youth unemployment has been much too high in some countries for many years and now the crisis has driven it even higher. That is unsustainable in a continent with an ageing population. We must not allow there to be a lost generation".

Merkel said the plight of young people was one of her major regrets about the crisis. "I am sorry that it is often those who had absolutely nothing to do with those wrong turnings, the young or the poor, who bear the brunt of the hardship today … It is highly regrettable that parts of the economic elite assume so little responsibility for the deplorable situation."

Highlighting another cultural difference between the approaches taken to the crisis by Germany and other parts of Europe, Merkel said the word "austerity" had entered her vocabulary for the first time only after the crisis had been well under way, as she preferred the term "sound budgeting".

"I see no dichotomy between sound budgeting and growth," she said. "The road we have now started on is therefore the right one, with budget consolidation on one side and fundamental structural reform on the other. That is what will bring sustainable growth."

Asked whether she had ever personally faced the worry of being out of work, Merkel – the daughter of a protestant pastor who moved his family to communist East Germany when she was six weeks old – said: "Fortunately not. In the first few years when I became a politician, I did sometimes think about what I would do if my political career suddenly came to an end.

"I imagined running a jobcentre," she said. "It's a pleasant task to help people find work."

She said her experience as an MP since 1990 in the northern state of Mecklenburg-Vorpommern, where the unemployment rate has dropped from 25% to 10% in recent years, had taught her how important it was to have experienced advisers on hand helping young people on a local level. "The [young people] need both to be given hope and to be pushed into investing their own energies … that can't be done centrally by Madrid or Berlin."

So has she now, on a far grander scale than she might ever have imagined, finally fulfilled her wish by becoming Europe's jobs tsar?

"No," she answered, appearing faintly annoyed by the question. "My task is to set the right political course in Germany and alongside my colleagues in Europe."

Article Source : http://www.guardian.co.uk

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