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|Corruption affects all 28 member countries of the European Union and costs their economies about $162.19bn (120bn Euros) a year, according to an European Union report.
The report, the EU’s first on corruption, was issued on Monday by Cecilia Malmstrom, EU Commissioner for Home Affairs, the AP news agency reported.
Malmstrom said in a statement that “corruption undermines citizens’ confidence in democratic institutions and the result of law, it hurts the European economy and deprives states of much-needed tax revenue.
“Member states have done a lot in recent years to fight corruption, but today’s report shows that it is far from enough.”
The report said that an increasing number of EU citizens, who were surveyed as part of the report, thought it was getting worse.
Almost all companies in Greece, Spain and Italy believe it is widespread and, among businesses, belief is widespread that the only way to succeed is through political connections.
Corruption is considered rare in Denmark, Finland and Sweden, according to the report, a finding that reflects the work of Transparency International’s corruption perception index. It named Greece as the worst performer in the EU, sharing 80th place with China. Denmark was seen as the least corrupt.
Construction companies, which often tender for government contracts, are the most affected. Almost eight in ten of those asked complained about corruption.
Overall, 43 percent of companies see corruption as a problem. The cost to the European economy is almost equivalent to the size of the Romanian economy.
Corruption is commonplace
Eight out of ten EU citizens believe that close links between business and politics lead to corruption.
“Europe’s problem is not so much with small bribes on the whole,” Carl Dolan of Transparency International in Brussels, told Reuters. “It’s with the ties between the political class and industry.”
“There has been a failure to regulate politicians’ conflicts of interest in dealing with business,” he said.
“The rewards for favouring companies, in allocating contracts or making changes to legislation, are positions in the private sector when they have left office rather than a bribe.”
The European Commission recommended better controls and a redoubling of enforcement.
The report was published shortly after Romania’s former prime minister, Adrian Nastase, was sent to jail for four years for taking bribes. He was the first prime minister to be put behind bars since the collapse of communism in Europe in 1989.
The EU has repeatedly raised concerns about a failure to tackle corruption at high-level in Romania and Bulgaria, the bloc’s two poorest members. They have been blocked from joining the passport-free Schengen zone over the issue since their entry.
In October 2012, former European Health Commissioner John Dalli was forced to quit after an associate was accused of asking for 60 million euros from a tobacco company in return for influencing EU tobacco law.
The European Central Bank is concerned that national differences in how bad debt is classified could cripple its probe into the health of euro-area banks, according to an internal ECB document.
Bad-debt classification practices across Europe show “material differences that, if not considered, would severely affect the consistency and credibility of the exercise,” according to the undated document obtained by Bloomberg News. A person familiar with the text said it was drawn up in late November and contains the ECB’s latest thinking on the subject. An ECB spokeswoman declined to comment.
The Frankfurt-based ECB is conducting a three-stage assessment of bank assets before it assumes oversight of about 130 lenders across the 18-member euro area this November. Using a strict definition of bad debt could threaten banks in countries hit hardest by Europe’s debt crisis, while a laxer rule may not reveal the true condition of the region’s financial system.
“A more ambitious definition would be consistent with the need to convey to external observers that the AQR is a thorough exercise,” the document said, referring to the Asset Quality Review stage of the Comprehensive Assessment. That’s set to culminate with a stress test run in cooperation with the European Banking Authority before October this year.
The ECB document said that not all countries may be able to comply with simplified definitions of non-performing loans set out in October by the London-based EBA, the EU’s top bank regulator, while saying that alignment to those rules is “of the essence.”
European banks’ bad loans are classified according to a variety of national rules, which makes a comparison among lenders difficult. The European Central Bank is struggling to harmonize the definition of non-performing loans so that it can give more credibility to its assessment of the credit quality of the region’s lenders.
In the first half of last year, total doubtful and non-performing loans as a proportion of lending calculated according to national rules exceeded 21 percent in Greece and were less than 1 percent in Sweden, ECB data show.
“It’s crucial to find common rules and a shared vision to overcome the national lobbies,” Karim Bertoni, a senior analyst on European equities at de Pury Pictet Turrettini & CIE SA in Geneva, said by telephone. “This is the main challenge for the ECB, which would allow a better management of banks and risk control.”
The ECB signaled it would apply the EBA’s simplified definition as a minimum, and where possible increase the level of detail on loans made by banks. The EBA sets financial standards for the 28 nations in the European Union, and is working with the ECB on the final part of the Comprehensive Assessment.
That minimum means the ECB would define as non-performing all exposures, including loans, debt securities, financial guarantees and other commitments, which are past due for more than 90 days. That differs from final, more complex, standards, due to be implemented by EBA by the end of this year, that include data on the likelihood of the borrower repaying. Only half of the countries examined could supply that data, according to the ECB report, while limiting the definition to the 90-day rule “seems feasible for the majority of countries.”
Euro-area lenders from Banco Santander SA (SAN) in Spain to Alpha Bank SA (ALPHA) in Greece will come under ECB supervision, with oversight forming the first pillar of a nascent banking union designed to mitigate future financial turmoil.
ECB policy makers have said the central bank will provide more information on the treatment of non-performing loans and the parameters of the concluding stress test by the end of January.
While the simplified EBA rules should be adhered to in the Comprehensive Assessment as a minimum, adding further detail to the assessment could be possible since ECB officials will already be in contact with bank staff, the document said.
“Given the possibility to perform more granular analysis during the on-site visits, it is proposed that this analysis takes into account a more ambitious definition including the unlikeliness to repay criterion,” according to the document.
The ECB said that as there are so many variations between countries on the definition of forbearance — where banks shift the terms of a loan to account for a change in the debtor’s own income — the only possibility is to accept national definitions where they exist, as well as loans that were considered in that category until the end of 2012 but have since been recategorized.
For countries where no standard definition exists, the ECB said it may ask states to report all loans for which concessions have been granted as forborne.
Danish central bank GovernorLars Rohdesaid most of the nation’s households would survive a jump in interest rates or a loss of income as Denmark tops world debt rankings.
An investigation into household borrowing revealed that high indebtedness curbed spending and economic growth during the financial crisis, the Copenhagen-based Systemic Risk Council, which Rohde chairs, said yesterday. Still, those findings aren’t grounds for alarm, according to Rohde.
“By far the major part of Danish households’ debt is carried by families who are robust enough to be able to handle shocks to interest rates or incomes,” Rohde said yesterday in a written reply to questions. “The threat to financial stability from that corner is therefore not serious in the current situation.”
Danish households owe their creditors 321 percent of disposable incomes, according to the Organization for Economic Cooperation and Development. That’s the highest ratio in the world and a level that has prompted warnings from both the OECD and the International Monetary Fund to rein in borrowing. Danish authorities have argued that households aren’t at risk thanks to high pension and household equity levels.
In neighboring Sweden, central bank GovernorStefan Ingves has suggested capping household indebtedness, not adjusting for assets, at 180 percent of disposable incomes. In Norway, the central bank has cautioned against further private borrowing after households owed their creditors about 200 percent of disposable incomes.
The Paris-based OECD said in November that policy makers in Scandinavia need to do more to stem risks posed by household debt growth.
Referring to its Dec. 20 meeting, Denmark’s Systemic Risk Council said an analysis suggested that households with high debt levels as of 2007 were prone to spend less during the crisis.
“That has probably contributed to a weaker development in private spending and economic activity in recent years, and has affected the financial industry. The council will return to this matter,” it said.
Denmark emerged as Scandinavia’s weakest economy after a housing boom that peaked in 2007 burst a year later. As many as 62 community banks failed during the ensuing slump, according to a September report by a government-appointed committee.
The nation’s AAA-rated government debt load is less than half the euro-zone average, helping keep mortgage borrowing costs low and supporting households. The central bank, which uses monetary policy to defend the krone’s peg to the euro, resorted to negative rates in 2012 to counter a capital influx. Denmark’s benchmark deposit rate, now minus 0.1 percent, has stayed below zero since July 2012.
Gross domestic product contracted 0.4 percent in 2012 and grew just 0.3 percent last year, the European Commission said in November. Growth is set to accelerate to 1.7 percent in 2014, compared with a rate of 2.8 percent in Sweden, according to the commission.
Data today showed that Danish seasonally adjusted bankruptcies declined to 382 in December from 417 the previous month, while adjusted forced sales of homes were at 334 last month, compared with an average of 428 in 2012.
The reports show that the crisis is “loosening its grip” on Denmark, Helge Pedersen, chief economist at Nordea Bank AB, said in a note.
Denmark’s Systemic Risk Council was created last year with a view to advising lawmakers on financial imbalances that may warrant a legislative response. The council also said yesterday it will examine potential risks to financial stability posed by the repo market.
“Increased use of repos and re-use of collateral can in some situations render the financial system more vulnerable,” the council said. It has therefore “decided to do more work on the subject,” it said.
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It wasn’t a tsunami but it had the same effect: A huge cluster of jellyfish forced one of the world’s largest nuclear reactors to shut down — a phenomenon that marine biologists say could become more common.
Operators of the Oskarshamn nuclear plant in southeastern Sweden had to scramble reactor number three on Sunday after tonnes of jellyfish clogged the pipes that bring in cool water to the plant’s turbines.
By Tuesday, the pipes had been cleaned of the jellyfish and engineers were preparing to restart the reactor, which at 1,400 megawatts of output is the largest boiling-water reactor in the world, said Anders Osterberg, a spokesman for OKG, the plant operator.
All three Oskharshamn reactors are boiling-water types, the same technology at Japan’s Fukushima Daiichi plant that suffered a catastrophic failure in 2011 after a tsunami breached the facility’s walls and flooded its equipment…
- Wave of jellyfish shut down nuclear power plant… (nypost.com)
- Large wave of jellyfish forces shutdown of Swedish nuclear reactor (ctvnews.ca)
- Oskarshamn Jellyfish: Swedish Nuclear Plant Swarmed (+Photo) (theepochtimes.com)
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