Greece votes in referendum with future in euro in doubt

ATHENS - Greece votes on Sunday on whether to accept more austerity in exchange for international aid, in a high-stakes referendum likely to determine whether it leaves the euro-currency area after seven years of economic pain.

Staged against a backdrop of shuttered banks and threats of financial apocalypse, the vote is too close to call and may not produce the clear mandate for negotiations that Athens' creditors seek.

Greeks are split on whether to accept an offer by creditors that Prime Minister Alexis Tsipras calls a "humiliation" and is urging people to reject. Investors and European policymakers say a rejection would set Greece on a path out of the euro, destabilizing the global economy and financial markets.

"On Sunday we should all send a message of democracy and dignity to the world," Tsipras told tens of thousands of Greeks rallying for a 'no' vote before campaigning ended.

Voting on whether to accept more taxes and pension cuts would be divisive in any nation, even at the best of times.

In Greece, the choice is faced by an angry and exhausted population who, after five years of crippling austerity, have now suffered through a week of capital controls imposed to prevent the collapse of the nation's financial system.

Pensioners besieging bank gates to claim their retirement benefits, only to leave empty-handed and in tears, have become a symbol of the nation's dramatic fall over the past decade.

Eleven years ago, in the early morning of July 5, 2004, Greeks poured into the streets, united in celebration of their country's victory in the European Cup soccer tournament. Today, Greece is divided -- and scared -- as rarely before.

"There is an atmosphere of fear. You can just feel it," said Sarafianos Giorgos, a 60-year-old teacher in Athens, who says he will vote in favour of the creditors' proposals.

Polls open at 7 a.m. local (0400 GMT) and shut at 7 p.m, with the first official projection of the result expected at 9 p.m.

Four opinion polls published on Friday showed the 'Yes' vote marginally ahead. A fifth put the 'No' camp 0.5 percentage points in front. All were well within the margin of error.

Anxious Greeks rallying for a 'Yes' vote agree Greece has been handed a raw deal but say the alternative, a collapse of the banks and a return of the old drachma currency, would be worse.

Those pledging to deliver a rousing 'No' to tax hikes and pension cuts in return for more loans say Greece cannot afford more of the austerity that has left one in four without a job. They agree with Tsipras that Europe is "blackmailing" Greece.

"As a Greek woman, I am embarrassed at those who are going to vote 'Yes' for fear of leaving the euro. They are asking us to accept unending slavery. I am offended," said Tenekidou Ermioni, a 54-year-old teacher.

NIGHTMARE RESULT

Greeks are likely to face more financial and political turmoil in the days and weeks ahead.

"All in all, Prime Minister Alexis Tispras' early exit from office is still more likely than Grexit," wrote Wolfgang Piccoli of Teneo Intelligence.

"Regardless of Sunday's result, significant levels of political volatility are here to stay."

Finance Minister Yanis Varoufakis promised Greeks on the eve of the vote that European creditors would immediately have to grant Athens better terms, including massive debt relief and less austerity, if they voted 'No'. EU ministers and officials have warned that his pledge is a cruel illusion.

If Greeks vote 'Yes' to the bailout, both Tsipras and Varoufakis are expected to resign -- triggering a new chapter of uncertainty as political parties try to cobble together a national unity government to keep talks with lenders going until elections are held.

European creditors have said a 'Yes' vote will resurrect hopes of aid to Greece. But capital controls, and default last week to the IMF, have undermined Greece's economic standing and creditworthiness, so a new bailout package would probably entail harsher terms than those on offer even last week.

A 'No' vote would bring even greater uncertainty, and the prospect of a sudden financial collapse.

European policymakers have openly warned such a result would be read as a rejection of talks with creditors and the euro, leaving Greece to fend for itself without any realistic prospect of funds to avoid bankruptcy.

Much would depend on the European Central Bank, which will review on Monday morning its policy on emergency liquidity, which Greek lenders rely on.

The ECB could decide to freeze the liquidity or cut it off altogether if Greeks vote 'No', or if Athens subsequently defaults on a bond redemption to the ECB on July 20.

There is concern that an inconclusive result might sow further confusion, and possibly lead to violent protests, rather than sending a clear signal about Greek intentions.

"The nightmare result would be 51-49 percent in either direction," a senior German official said. "And the chances of this are not insignificant."

(Additional reporting by Noah Barkin in Berlin and Lefteris Karagiannopoulos; Writing by Deepa Babington; Editing by Alessandra Galloni and Andrew Roche)

source: www.abs-cbnnews.com

S&P raises Philippine credit rating to a notch below investment-grade

After weeks of talking up the country's stellar first-quarter economic performance, the Aquino government got what it wished for: a credit rating upgrade from one of three major international debt watchers.

In a statement, Standard & Poor's Ratings Services on Wednesday said it lifted the Philippines' long-term foreign currency rating to 'BB+' from 'BB.' The agency also affirmed its 'BB+' long-term local currency rating on the Philippines. Both ratings were assigned a stable outlook.

S&P's action lifts the country's credit score to a notch below investment-grade, putting it at par with the score affirmed last week by another major agency, Fitch Ratings.

This leaves Moody's Investors Service as the only other key rater that has yet to raise its score on the Philippines to the same level.

A higher rating allows the Philippines to borrow abroad at a cheaper rate, thus enabling the government to set aside more money for addressing infrastructure bottlenecks and helping the poor.

"The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability, as the government's fiscal consolidation improves its debt profile and lowers its interest burden," said Agost Benard, S&P credit analyst.

"A high, albeit declining, interest burden constitutes an additional rating constraint. The interest burden of 13 percent of general government revenues is high, largely because revenues remain low relative to the size of the economy," Benard said, citing the need to widen the tax base and improve compliance.

"Notably, the government's foreign-currency debt stands at a relatively high 42 percent of total, rendering debt service costs and fiscal outturns susceptible to adverse exchange rate movements," he added.

Data the Bureau of Treasury released on Wednesday showed that debt servicing last May rose nearly eight percent from a year ago, but the year-to-date figure had fallen by 12.4 percent.

The Philippines' key debt ratios have been on a downtrend, hitting decade lows in 2011. In the first quarter of this year, the country's external debt ratio - foreign debt as a percentage of the country's gross domestic product - eased to 27.4 percent from a year ago's 29.5 percent. This ratio is a measure of solvency, and so indicates the Philippines' capacity to pay down debt in the long run.

The country's external debt service ratio likewise fell to eight percent this year from 8.2 percent in 2011, and is way below the 20 to 25 percent international benchmark. This ratio measures the sufficiency of foreign exchange to meet maturing debt.

The Philippines has enjoyed ample foreign exchange inflows so far this year, causing the peso to hit a four-year high on Tuesday. Part of that liquidity helped fuel a stock market rally that saw the Philippine Stock Exchange index hitting a new record close of 5,365.7 also on Tuesday.

Despite the global uncertainty caused by the euro zone debt crisis and the slowdown in the US and China, the Bangko Sentral ng Pilipinas still expects the country to register a $2.7 billion balance of payment surplus this year.

Current account surplus forecast at 2% of GDP

"The rating action also reflects the country's strengthening external position, with remittances and an expanding service export sector continuing to drive current account surpluses," Benard said.

"We project ongoing current account surpluses of about two percent of GDP, based on remittance inflows from a large and well-diversified expatriate labor force, and a fast-expanding business process outsourcing industry," he added.

Communications Secretary Ramon Carandang said the upgrade to BB+ "is an affirmation of the fiscal management of the Aquino administration."

"At a time when countries around the world are debating austerity versus stimulus, we have had the fiscal space to provide stimulus without weakening our fiscal position. The President and the economic team have worked hard to win ratings upgrades and we're now another step closer to investment grade status," he said.

Separately, Finance Secretary Cesar V. Purisima said the Philippines "can now clearly make our case for an investment grade status."

"This is the eight positive credit ratings action under the Aquino administration and this only gives us more confidence to continue with the work that we have started towards macroeconomic stability, fiscal sustainability and inclusive economic growth," he added.

On Tuesday, the Cabinet economic cluster, meeting with President Benigno Aquino III, forecast GDP growth in the second quarter exceeding the better-than-expected 6.4 percent in the first quarter. The Philippines' first-quarter growth was Asia's second fastest after China.

Budget Secretary Florencio Abad said he already cleared for disbursement 91 percent of the infrastructure outlay falling under the Department of Public Works and Highways, laying the ground for more government spending in the coming months.

source: interaksyon.com

WTO chief calls for 'European growth budget'

PARIS - World Trade Organization chief Pascal Lamy backed calls for a rethink of European economic policy on Tuesday, calling for a "European growth budget".

In an opinion piece published on the website of French newspaper Le Monde, Lamy and former European Bank for Reconstruction and Development head Jacques Attali called for deeper integration to combat the eurozone debt crisis.

"In the months and years to come, the countries of the eurozone are facing a major political and social crisis if they do not go through an additional step in integration," the two wrote.

Both men are closely linked with France's Socialists, whose candidate Francois Hollande defeated Nicolas Sarkozy Sunday to become France's president and who has called for a refocus in Europe on growth instead of austerity.

"The survival of the eurozone depends on an economic government and a European growth budget. Only federalism is capable of avoiding the disastrous consequences of its (the euro's) collapse on our standard of living," they wrote.

The two called for pooling some European debt the creation of "project bonds" to generate more than a billion euros ($1.3 billion) in financing for investment projects in industry and infrastructure.

They also called for Europe-wide carbon and financial transaction taxes and reforms to deepen political integration.

"Europe cannot emerge from this crisis without a change in logic. If the current situation continues... (the euro's) disappearance is only a question of time," they wrote. "Another exit path is possible.

source: interaksyon.com