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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to http://pennystockpaycheck.com for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

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UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

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British widow’s house-sale money locked up in Cyprus

Category : Business

Sharon Connor sold her Cyprus house to move back to the UK. The next day the money was frozen – now she fears she has lost much of her cash, and her new home purchase

Sharon Connor lost her husband suddenly when he was struck down by a heart attack, aged just 54, last year. Now, when she had hoped things might be looking up, she has found herself trapped in another nightmare, becoming arguably one of the unluckiest victims of the Cyprus banking crisis.

Connor’s €183,000 (£155,000) – the proceeds from her house sale – is locked out of reach after it landed in her Bank of Cyprus account on the island at lunchtime on Friday 15 March.

In the early hours of Saturday 16 March it was announced that the island’s savers would have to hand over a slice of their cash as a condition of the EU bailout – freezing her account and leaving her money in limbo.

Connor fears she could lose €50,000 (£42,000) as a result of what has been described as a raid on the savings of the island’s most wealthy depositors.

And the clock is ticking, because she has had her offer on a house in Kent accepted and she needs the money tied up in Cyprus to fund the purchase.

Her story shows that it is not just ordinary hard-working Cypriots and wealthy Russian oligarchs being punished by the raid on bank deposits. Britons such as Connor, who lived with her husband Gary on the island for eight years until his death in January 2012, have also been caught up.

She told Guardian Money it was “totally unjust” that she was being penalised when she doesn’t even live in Cyprus now and her funds are not savings, but from the sale of a house – and were in her account for less than a day before the bank levy was announced.

“It’s making me ill,” says the 55-year-old, who has two grown children and five grandchildren and is currently living with her sister in Tonbridge, Kent. “I felt things were moving forward: on 13 March I was offered a job, which I start on Monday; on 14

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Cyprus crisis: fears reach across ‘dead zone’ of divided island

Category : Business

Bankrolled by resurgent Turkey, northern Cypriots have little sympathy for economic troubles in south of the island

From the street in front of his shop not far from the UN-patrolled “dead zone” that runs through Cyprus like a scar, Ozkan Zeki offers his opinion about the great economic crisis that has struck the island’s Greek-controlled south.

At 76, the Turkish Cypriot is among the few who still have memories of mingling with Greeks before war entrenched the two ethnic communities behind a weed-infested no man’s land in 1974. As such, he says, he feels like a

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Spain to sink further, warns central bank

Category : Business

Bank of Spain sees country’s economy shrinking by 1.5% in 2013 following a 1.4% contraction last year

Spain’s economy will sink deeper into recession this year, the Bank of Spain has predicted, sending a stark message to the Spanish government as it prepares to revise its own growth forecast. In its annual update of economic forecasts, the central bank said it saw the economy shrinking by 1.5% in 2013 following a 1.4% contraction last year as austerity measures continue to exacerbate the effects of a burst property bubble.

The bank’s estimate is well below the official forecast for a 0.5% contraction in GDP, although the government is widely expected to revise the 2013 figure downwards in April. The prediction is broadly in line with consensus, with most economists expecting the economy to struggle to return to growth this year on the back of dire domestic demand and a weakening external sector.

The eurozone’s fourth largest economy sank into its second recession since 2009 at the end of 2011, as the fallout from a property bust five years ago continued to weigh on every aspect of economic activity, from its beleaguered banks to high street sales. Unemployment is likely to hit another record high of 27.1% in the course of the year, the central bank said, up from a current 26%, one of the highest rates in the eurozone.

Europe’s flesheaters now threaten to devour us all | Seumas Milne

Category : Business

Cyprus risks deepening the eurozone crisis as austerity is failing across the continent. This is a tide that has to be turned

Europe’s flesheaters are back. The claim that the worst of the eurozone crisis is behind us now looks foolish. The deal forced on Cyprus by the German-led Troika at the weekend isn’t a bailout: it will effectively destroy the island’s economy. Instead of getting a grip on its grossly inflated banks, it will impose a brutal credit contraction, combined with sweeping cuts and privatisations, wiping out perhaps a quarter of Cyprus’s national income. Ordinary Cypriots, not Russian oligarchs, will pay the price.

Of course Cypriot politicians are to blame for having allowed the country to be turned into an adjunct of a bloated financial sector and a refuge for hot Russian money. But what tipped the divided island over wasn’t foreign investors’ sharp practices, but the impact of Europe’s wider crisis on its banks: in particular, their exposure to devastated Greece, currently also in the Troika’s tender care.

Some have hailed the fact the raid was carried out on Cypriot bank deposits over €100,000, rather than the public purse. At last the rich and those responsible for private banking failures are being made to cough up, it’s been said. Which would have been a good thing. But it’s savers, not bankers or shareholders, who are taking the 40% hit. And many of the targeted depositors, such as pensioners, are scarcely rich – or are small businesses which will now go bust.

The Cypriot government should instead have learned from Iceland: taken over the banks, isolated the bad loans, protected deposits, imposed losses on the wealthy, and used a publicly owned banking sector to rebuild the domestic economy. That would have offered its citizens a better future, almost certainly outside the eurozone. But it would have also encroached on private capital’s privileges and clearly couldn’t be tolerated. Instead, in classic EU style, Cypriots have been given no say, while German MPs vote on the deal. Meanwhile, Cyprus’s banks are still closed and capital controls will start to erode the euro as a genuine single currency. As the Greek economist Costas Lapavitsas argues, Cyprus has “reactivated” the European banking crisis.

Not that it had been resolved. Only last month the Dutch government was forced to nationalise the Netherlands’ fourth biggest bank, SNS Reaal, partly because of its over-exposure to losses in Spain. But since the European Central Bank president Mario Draghi pledged last year to do “what it takes” to save the euro, market fever had subsided.

Now the Troika’s decision to help itself to Cypriot savings has paved the way for a new contagion. In the short term that may be contained because of the island’s minuscule proportion of eurozone output. But the move has demolished confidence in bank deposits – a point rammed home by the Dutch finance minister’s blundering signal that the deal had set a precedent. That could easily turn into bank runs in states likely to need new bailouts, as investors move cash to safer locations. Given the spectacular failure of austerity across the continent to overcome the crisis, rather than deepen it as output shrinks and debts mount, more such breakdowns are clearly on the cards.

The eurozone has now become a zombie zone. And any further deterioration can only deepen Britain’s own crisis. Whatever the focus of the meltdown in each country – banking in Cyprus, property in Spain – all flow from the same crisis that erupted in 2007-8 out of a deregulated profit-hunting credit boom across the western world and has delivered a prolonged depression. In the eurozone, the impact of that systemic failure is made worse by a lop-sided one-size-fits-all currency straitjacket that was always going to come apart under pressure. In Britain, the power and weight of the City of London are a particular block on sustainable recovery.

But across Europe, people are being held to ransom by banks, bondholders and corporations determined to ensure that it’s not they who bear the costs of the crisis they created – and politicians who regard it as their job to oblige them. So even though Britain is facing the threat of a triple-dip recession, George Osborne last week ploughed on with a regressive austerity programme that is manifestly failing in its own terms but offers lucrative corporate opportunities in the spaces opened up by the rolling back of the state.

Next week some of the Cameron coalition’s most brutal cuts will kick in – including the deeply unpopular bedroom tax – just as anyone earning over a million pounds a year gets an annual tax cut of at least £42,295, and local councils face the loss of a third of their budgets by 2015. Resistance to death-spiral economics is hardening across Europe, but so is political polarisation. Alexis Tsipras, leader of Greece’s radical left party, currently leading in the polls, compares the situation to prewar Weimar Germany. Cameron is not the only leader using anxieties over migration to deflect anger at the impact of his own policies.

In Britain, public opinion has long balked at the government’s cuts programme and is now increasingly opposed to attacks on welfare. That mood was reflected in last week’s rebellion by 44 Labour MPs against their leaders’ decision not to oppose retrospective legislation imposing benefit sanctions on unemployed people refusing private “workfare” schemes. Today unions and community groups launched a national “people’s assembly” to mobilise against austerity. One way or another, resistance has to get stronger – or they’ll devour us all.

Twitter: @SeumasMilne

Cyprus bailout: Dijsselbloem’s U-turn creates chaos in the markets

Category : Business

The island has been left in a near-impossible situation by the terms of its rescue, and is likely to require another bailout

The good news for the eurozone was that the markets reacted well to the bailout deal for Cyprus. The bad news was that the rally lasted barely until lunchtime. By then investors were running scared at the prospect that the terms imposed on one of the single currency’s smaller members would be the template for rescue packages for bigger countries.

Credit for the change of mood goes to Jeroen Dijsselbloem, who chairs meetings of eurozone finance ministers and who decided it would be a good idea to go public with the idea that Cyprus was not such a special case after all.

For the past week the message has gone out that there are no comparisons between a country that allowed itself to become the tax haven of choice for high-rolling Russians and other, better-managed, members of the eurozone.

Then, in a couple of interviews, Dijsselbloem said Cyprus would be used as the model for future bailouts.

The comments were an open invitation to any investor with more than €100,000 in a eurozone bank to remove it without delay, which some then did.

By the end of the day shares in Europe were tumbling, the euro was dropping against the dollar and the cost of insuring European banks against default was rising, forcing Dijsselbloem to issue a clarification of his earlier remarks. Confirming that European politicians could not organise a booze-up in a brewery, Cyprus was back to being a special case once again.

Very much business as usual, in other words. Confusion reigns as the eurozone stumbles from crisis to crisis, with the markets already bracing themselves for the next bailout.

In all likelihood, that will be another rescue for Cyprus, which has been left in a near impossible position by the terms of its rescue. The €10bn (£8.5bn) loan from the European Union, the European Central Bank and the International Monetary Fund means Cyprus will have a debt-to-GDP ratio of 140% and an economy that is on course to shrink by at least 20% in the next two or three years. In those circumstances an already unsustainable debt ratio will continue to increase. Ultimately the country’s creditors will either write down a good chunk of the debts or Cyprus will leave the euro.

In truth, leaving the single currency looks the better option. Cyprus previously had a flawed economic model; now it has no economic model at all. The financial services industry will be wiped out and membership of the euro means there can be no boost to the only alternative source of revenue – tourism – through a cheaper currency. Cyprus was, in many respects, the eastern Med’s version of Iceland, another small island that allowed its banks to balloon in size. But Iceland is not a member of the euro, and its recovery from financial crisis has been aided by devaluation.

For the time being, though, Cyprus remains shackled to the eurozone, which increasingly resembles a zombie economy. There has been no growth for the past 18 months, there is little inclination to address monetary union’s structural weaknesses and the sort of cathartic crisis that might occasion change is prevented by the ECB’s willingness to pump unlimited amounts of cash into Europe’s enfeebled banks.

Dijsselbloem has a point when he says it is unfair that Europe’s taxpayers should be continually asked to foot the bill for bank losses, and Cyprus has certainly been used as the laboratory mouse for a different approach.

But the botched rescue and its messy aftermath have done nothing to draw a line in the sand. On the contrary, investors big and small now have the sneaking feeling that their savings could be at risk in the event of a future crisis. Dijsselbloem did little to persuade them otherwise.

Cyprus makes frantic effort to prevent run on its banks

Category : Business

Fears that cash will flood out of country when banks re-open as eurozone ministers discuss plan B in emergency conference call

Cyprus is embarking on emergency efforts to restructure its second largest bank and considering new rules to stop money flooding out of the country’s banks when they reopen next week after being shut for ten days.

As eurozone finance ministers held an unscheduled conference call at which they agreed to discuss a “plan B” for Cyprus, the Nicosia government submitted a bill to its parliament that could allow its finance minister or central bank governor to impose capital controls in cases of “public order or security”.

The central bank governor Panicos Demetriades set out measures to restructure the second-largest bank, Laiki, and protect savers with deposits up to €100,000, the level of guarantee on bank savings across the EU.

“By establishing this legal framework, resolution measures will be imposed on Popular Bank (Laiki) so that it will be in a position to continue to offer banking services to its clients next Tuesday,” when banks are due to reopen, Demetriades told reporters.

Under a new plan being developed, Cyprus also appears to wants to create an “investment solidarity fund” to raise fresh cash to help fund its €17bn bailout – the same size of its economy, which is weighed down by a banking sector eight times the size of the economy and containing up to $19bn of deposits from wealthy Russians.

The European Central Bank had piled pressure on the Cyprus government earlier in the day, warning that it would halt all emergency funding to the country’s collapsing banks unless a €17bn bailout deal was agreed with Nicosia’s eurozone creditors by Monday. The threat of the ECB withdrawing support appeared to exacerbate the situation in Cyprus, where queues formed at ATMs despite government efforts to dispel what officials quickly described as “groundless rumour” about over what the rescue package would entail.

Laiki announced that it had scaled back withdrawals to €260 a day – from €800 – and its spokeswoman Aliki Sylianou was forced to deny widespread reports it had been closed. Cypriots were far from convinced, however, with huge queues forming outside local Laiki branches.

At branches in Nicosia, the divided capital, Cypriots queued for hours in the hope of withdrawing cash with lines frequently moving at a snail’s pace because of the inability of cash machines to dispense more than €40 at a time. “I’ve had to use my card ten times to get €400,” said Maria Gika, stuffing wads of cash into the pockets of her jeans before Laiki announced the €260 euro limit late on Thursday. “I’m entitled to withdraw €800 a day. It’s disgusting that I’m unable to access my own money.”

Under the latest plan being promised, Laiki would be split into a good and bad bank where, according to reports, the larger savings accounts would be placed and face losses of up to 40%.

The original deal, agreed in the early hours of Saturday morning, involved €5.8bn being taken from bank accounts through a tax at a rate of 6.75% on deposits under €100,000 and 9.99% on any accounts larger than that.

The move had caused outrage as the levy was imposed on accounts smaller than the €100,000 guarantee, although reports that the unpopular levy was being dropped prompted Russia’s prime minister, Dmitry Medvedev, to interrupt a conference in Moscow to read the news from his iPad. The announcement was met with applause and shouts of “hurrah!” from delegates.

There are concerns that Russians will race to move their money once the banks reopen. A copy of a bill presented to the Cypriot parliament was obtained by Reuters, which indicated that measures were being put in place to stop billions of euros leaving the country.

“The purpose of this law is, in case of an emergency for purposes of public order or security, to assign powers to the (finance) minister, or the (Central Bank) governor to take and impose temporary restrictive measures, including restrictions on capital controls,” the bill said.

The eurogroup of finance ministers issued a statement after their conference call in which they agreed to discuss new proposals – stressing the importance of maintaining the €100,000 guarantee.

Following the conference call of eurozone finance ministers on Thursday evening, the governments backed away from the agreement they reached with Cyprus at the weekend, stating that there should be no raid on savings of Cyprus bank depositors holding less than €100,000.

The ministers called on the Cypriot government to come up with an alternative way of raising the €5.8bn following the collapse of the weekend agreement and said they were prepared to discuss it, but that the “troika” of European Commission, European Central Bank, and International Monetary Fund official would need to scrutinise and endorse any new bailout scheme.

It was not clear what would happen if these procedures extended beyond the Cypriot banks’ emergency financing deadline set for Monday by the ECB.

Amid continuing recriminations about who had designed a plan that would involve hitting savers Jeroen Dijsselbloem, the Dutch finance minister, who chairs the committee of eurozone finance ministers, accepted responsibility for the botched agreement. Dijsselbloem said that the situation in Cyprus represented a “systemic risk” to the euro and spoke of the dangers of contagion spreading elsewhere, putting himself at odds with Berlin which has regularly played down the perceived risks from such a small economy as Cyprus.

Minutes of a meeting of eurozone officials on Wednesday, obtained by Reuters suggested that it was mulling the possibility of a banking collapse on the island.

The German government official taking part in the call demanded information on capital flowing out of Cyprus to Britain and Russia, while there was also talk of Cyprus being forced to quit the euro. Cyprus’s finance minister, Michael Sarris, and his Russian counterpart held talks for a third day about providing assistance to Cyprus, although analysts played down ideas that Russia’s state owned gas giant Gazprom is likely to be interested in operating Cypriot gas fields.

Eurozone economies slow as major industry activity declines

Category : Business

Figures fuel concern that austerity imposed by Brussels forcing countries to cut their debts will prolong the recession

The economic malaise afflicting the eurozone deepened in March after figures for activity across all major industries declined, a survey showed on Thursday.

Ahead of what could be worse figures for April as fallout from the Cyprus situation begins to bite, Markit’s Flash eurozone composite Purchasing Managers’ Index, seen as a reliable economic growth indicator for the bloc, fell more than expected to 46.5 in March from 47.9 in February.

The figures will fuel concerns that austerity measures imposed by Brussels that force eurozone countries to cut their debts will prolong the recession. In contrast, manufacturing in the US and China improved, which will be important for overall global growth.

“The sharp decline in the flash composite PMI in March pours cold water on hopes of an imminent end to the eurozone recession,” said Martin van Vliet, economist at ING.

“If the situation surrounding Cyprus spirals out of control, the onset of recovery might well be delayed.”

French businesses had their worst month in four years, likely pushing the eurozone’s second-biggest economy into recession. Germany also showed signs of fatigue.

Markit’s Flash US Manufacturing Purchasing Managers Index rose to 54.9 this month from 54.3, and the pace of hiring in the sector increased.

A separate Philadelphia Federal Reserve Bank report showed factory activity in the mid-Atlantic region grew in March.

“With manufacturing a reliable bellwether of the rest of the economy, gross domestic product will have risen at a much improved rate” over the first three months of 2013, said Chris Williamson, chief economist at Markit.

The US economy grew at 0.1% in the fourth quarter of 2012, but economists are forecasting first-quarter growth of about 2%.

Another hopeful sign for the US: sales of existing homes hit a three-year high in February and prices rose.

In China, factories increased their output after a holiday dip, suggesting solid, if not spectacular, first-quarter growth in the world’s second biggest economy.

The HSBC China PMI for March rose to 51.7 from 50.4, but remained below a two-year high reached at the start of the year.

The super-rich who have made Cyprus their home

Category : Business

Foreign tycoons who took citizenship in search of favourable tax regime likely to be among hardest hit by deposit tax

A band of super-rich foreign tycoons who took Cypriot citizenship in recent decades – lured by a favourable tax regime – are expected to be among the hardest hit by the island’s surprise deposit tax as several are believed to have been required to deposit at least €17m of their fortunes on the island to qualify for citizenship.

Billionaires attracted to the island by the controversial citizenship scheme, designed to court super-rich figures, include Norwegian-born oil tanker tycoon John Fredriksen, Israeli internet gambling entrepreneur Teddy Sagi, and Alexander Abramov, the Russian steel magnate who chairs FTSE 100 group Evraz.

Cyprus’s then interior minister, Neoclis Sylikiotis, explained the rules to local newspaper Cyprus Weekly in 2010: “Cypriot nationality is given in special cases, following approval from the council of ministers … on the basis of specific criteria, including the applicant being over 30, having no criminal record, owning a permanent home in Cyprus and travelling to the island.”

Further criteria include depositing at least €17m with a local bank over five years, direct investments of €30m, or registering a large business on the island.

Between 2007 and 2010 some 30 foreign nationals, mostly Russians, were reportedly granted Cypriot citizenship. Most prominent among them was Abramov. “Mr Abramov is considered to be offering high level services to the Republic of Cyprus, taking into account his business activities,” explained Sylikiotis. “Therefore, reasons of public interest justify his naturalisation as a special case.”

Abramov is a close business associate of Chelsea FC owner Roman Abramovich, and together with fellow Russian Alexander Frolov they hold controlling interests in FTSE 100 steel group Evraz, through Cyprus investment vehicle Lanebrook Ltd. Abramov is chairman and, according to Companies House, lists his nationality as Russian — so he may hold joint citizenship. A spokesman for Evraz could not be reached for comment.

Forbes magazine’s list of the world’s richest people puts Abramov’s fortune at $4.6bn, which does not come close to making him Cyprus’s wealthiest naturalised citizen. That honour goes to 68-year-old Fredriksen, who made his first fortune during the Persian Gulf “tanker wars” that accompanied the 1980s Iran-Iraq conflict. According to his biographer, Fredriksen’s operations were “the lifeline to the Ayatollah.”

Like Abramov, he oversees his global empire from London, but he is said to keep homes in Oslo and Marbella as well as Cyprus. For many years, Fredriksen was Norway’s richest man, but in 2006 is said to have given up Norwegian citizenship in favour of the Mediterranean island, reportedly because it offered his family better tax arrangements. Today he ranks 87th on the Forbes list, worth an estimated $11.5bn. In the last decade his business interests have expanded into deepwater drilling. He could not be reached for comment.

Other billionaires attracted to Cyprus include controversial online gambling entrepreneur Teddy Sagi, who owns close to half of Playtech, the £1.6bn gaming software group he founded and partially floated on the London stock exchange.

Sagi, whose fortune is estimated at $1.8bn, has been based in Cyprus for some years, though he lists his nationality as Israeli in corporate filings and regularly features on lists of Israel’s wealthiest individuals.

He is reported to have invested considerable sums in Cyprus, sponsoring a school in Larnaca which bears his name and establishing the island’s first synagogue. Local press reports at one stage suggested Sagi might not qualify for Cypriot citizenship because of a conviction for securities fraud in 1996. A spokesman for Playtech could not be reached.

One wealthy tycoon with Cypriot roots who will definitely not be affected by the tax is easyJet founder Sir Stelios Haji-Ioannou. He told the Guardian: “Personally, I don’t think I am affected by the measures but obviously have friends and family who are.”

Born in Athens, Monaco-based Stelios inherited his parents’ joint British and Cypriot citizenship, but he has never lived or worked on the island. He does however have charitable activities there.

In Jerez, sherry and flamenco has turned to soup and indignados

Category : Business

With the city’s famous drink losing fans and crushing debts at the town hall, the jobless rate has risen to 40%

Ana Candón has not been paid since December. The 50-year-old home help, who works for social services with elderly and infirm people, and her mostly female co-workers, are now owed five months’ pay, about €4,000 (£3,490).

“Many workmates have lost their houses, so as well as working for the social services they now depend on them too,” Candón says.

Candon works in Jerez de la Frontera, southern Spain, a city with a population of 215,000, famous overseas for its sherry and flamenco festivals (below) but notorious in Spain for its crushing debts amounting to more than €1bn.

The council is attempting to balance its budget by slashing wages, jobs and services. But more redundancies are due and many employees, like Julian Calvo, a police officer, are paid in dribs and drabs, as and when the town hall has money in its coffers.

“I’ve been paid €450 for last month,” says 47-year-old Calvo, who has a partner and a nine-year-old son. “The priority is the mortgage, because you can’t fob off the bank. How do we live? With help from friends and family, granny’s pension, and punishing the plastic.”

The eurozone crisis has taken a hefty toll on jobs. Across the single currency region, 12% are out of work now.

In Spain, the worst-hit country in the zone in terms of unemployment, the jobless rate stands at 26%.

But in Jerez de la Frontera more than 40% are now officially jobless. It could be more, because welfare benefits are halted after two years.

There are queues outside charity-run soup kitchens. Those who are still in work live in fear of eviction as employers like Candón’s go for months without paying wages. The editor of the local newspaper describes the city as “the vanguard of disaster”.

Francisco Domouso, director of the local branch of the Catholic charity Caritas and an economist by profession, says: “We have an avalanche of requests to pay electricity, water and gas bills. Mortgage payments are making matters worse. It’s the mother of all storms.

“It’s disheartening to open the doors and find a queue of people who need everything, but mainly support. Many are falling into despair, they see no way out.”

Caritas has witnessed an 88% jump in requests for help in Jerez in a year, and the organisation estimates that “poverty has become more extensive, more intense and is getting chronic”. Requests typically come from couples aged 30 to 40, with children but without jobs or income, and who are in danger of losing their homes.

As elsewhere in Spain, Jerez is littered with unfinished buildings bearing witness to a property bubble that burst in 2008. But the decline of the world-famous sherry industry has aggravated the crisis here and pushed unemployment rates in this corner of Andalusia to the highest in the country.

In 1980, 22,000 worked for the city’s sherry and brandy producers. But beer and red wine are now more popular tipples, and after 30 years of falling sales, mergers and automation, those now working for the famous drinks labels number less than 1,000.

Agriculture, too, has declined. The area once had cotton producers and sugar refineries, but they too closed.

The town hall is now the city’s biggest employer, with 2,200 on its payroll, but it has cut public services to the bone amid austerity measures imposed by central government under pressure from the EU. Tourism offers the only short-term lifeline.

Domouso says that Caritas is trying to help the unemployed by retraining electricians and surveyors to work in tourism. “It’s declined but is still on its feet. Unfortunately, it’s the only alternative there is,” he says.

Many people, he says, rely on the informal economy. “We don’t approve but it’s a fact. Someone says ‘I’ll paint your house for €200′. With that, and food from Caritas, they survive.”

Many residents are learning English in the hope of emigrating, although some see a ray of long-term hope in agribusiness – growing food and flowers, produce with which Spain is still a big international player.

Manuel Corrales, 44, is at risk of joining more than 400,000 Spaniards who have lost their homes since Spain went swiftly from having the eurozone’s fastest rate of economic growth to suffering a prolonged slump and teetering on the brink of a bailout.

When Corrales and his partner took out a mortgage in 2005, they both worked full-time, he as a computer technician, while she had an office job. Today, she is on the dole and he does odd jobs. The pair have been unable to meet their mortgage payments for two months and are in tense negotiations with their bank.

To get help and advice Corrales has approached local members of the “indignados” movement, a group that emerged in May 2011 to protest against Spain’s political system.

Since their initial emblematic camp-outs across the country, the indignados have moved on to campaign against austerity measures, cuts in social spending, and mortgage foreclosures, which are impoverishing thousands of Spaniards, while banks receive multibillion euro bailouts.

A wave of suicides by people who have been evicted has fuelled public anger and led one and a half million people to sign a petition calling for the reform of mortgage laws dating back to the time of the dictator General Franco.

Spain’s parliament has agreed to consider making the petition into a bill.

“The first option the bank offers is to take advantage of you. They have other options, but they don’t tell you,” Corrales says, standing in the main square of the city.

“For Sale” and “To Let” signs are dotted around the square. Some of the buildings are derelict and people begging sometimes approach customers for leftover food in the almost deserted pavement cafes.

Unions complain that in the recent past the council gave jobs on the nod, paying in excess of €100,000 a year (far more than the prime minister earns) and sank money into costly projects such as shopping centres – where there are now few or no shoppers.

The problem for Candón is that her employer is a non-profit organisation and it has a debt of €2.4m with the regional government of Andalusia. Even full-time workers now earn less than €800 a month – when they get paid.

Her employer has cut its workforce to 380 from 450 and is reducing the number of people it cares for too. It now tends to about 1,000 people, 500 fewer than two years ago.

“They want … to privatise us, so that whoever can pay will have the service, and whoever can’t will go without,” Candón says.

Firefighters complain that they, too, are stretched to the limit. Jerez has 62 in its fire brigade, but only 12 are on duty at any given time to cover an area of 1,200sq km (463 square miles).

“Politicians are lucky we haven’t had to fight two fires at any given time,” says José Manuel Vázquez, a firefighter.

Francisco Silvestre, who is the Jerez branch secretary of the CSIF union, does not see the situation in the city getting better soon. “The problem is there is no industry, and no plans to promote it. English-language schools are full up because anyone who can wants to go abroad.”

Domouso believes agribusiness is the only answer. “We won’t get any car assembly plants, but we do have the resources for agro-industry. We have the soil, superb climate and great communications. It’s the only way out.”

Does Britain’s destiny lie at the heart of Europe? | Will Hutton and Ruth Lea

Category : Business

With David Cameron’s speech on Britain and its relationship with Europe reverberating throughout the continent, the Observer commentator and pro-European Will Hutton goes head to head with economist and Eurosceptic Ruth Lea on an issue that will define our country’s place in the world

Dear Ruth…

I know that as a long-standing pro-European I was meant to feel down-cast by David Cameron’s speech – the triumphant moment for Britain’s Europhobes and Eurosceptics. But instead I felt relieved.

If this is the worst that can be thrown at us, Britain will still be in the EU in the decades ahead. Thinking Conservative sceptics are not adopting the careless nativist nationalism of the ultra Europhobes and Ukip. Rather, they are entering into a serious argument about what kind of political and economic Europe we want to build and share with our neighbours. That is important.

I don’t agree with them and wouldn’t risk exit from the EU to have the argument, but I can see that the political dynamic on the right of British politics forces this unnecessary promise of a referendum. Yet importantly, serious Tory Eurosceptics are also recognising that Britain has crucial economic and political interests that cannot easily be put to one side. Geographically and culturally, even they concede we are part of this continent and share its destiny.

What caught the headlines was Cameron’s call for an in-out referendum on renegotiated terms – apparently a Rubicon. But who would not want their cake and eat it?

Any deal in which the terms are unilaterally reset to favour us is bound to be attractive. The open question is whether such a deal can be negotiated with big enough concessions to bear scrutiny. I doubt it and I wouldn’t put so much at risk to achieve such a scant outcome. For what has become obvious during the long years of Eurosceptic ascendancy is that too much that is positive about the EU has been left unsaid, which is now surfacing.

For example, Britain is the home to the European headquarters of 469 multinationals compared with 86 for Germany and 77 for France. Part of the reason they are here is because they can freely access the European Union. Having so many decision-makers based here is a fantastic market for our knowledge service industries. Then there is agriculture, the City, the car industry and even our universities – I could continue. All one way or another have come to depend on EU markets, connectedness or support.

David Cameron knows he has to fight heart and soul to keep Britain at the heart of this network. The pity is that he feels he has to go through the pantomime of renegotiating terms in order to argue for it. But that is what ultimately, one way or another, he will do. Will you?

Will

Dear Will…

I welcomed the prime minister’s promise of an in-out referendum on British membership of the EU. The last time the electorate had an opportunity to vote on European membership was in 1975. But “Europe” has changed out of all recognition since then. A vote on EU membership is long overdue.

There are problems with Mr Cameron’s promised referendum. It depends on a Conservative victory in 2015 about which there have to be doubts. But Mr Miliband may yet match Mr Cameron’s bold move, hugely enhancing his democratic credentials. Equally challenging is the prime minister’s strategy of negotiating a “new settlement” with a reformed Europe that is “more flexible, more adaptable, more open”. Despite Angela Merkel’s emollient words, there is little appetite on the continent for Mr Cameron’s agenda. The focus of attention in the EU’s corridors of power is building the machinery to enable the eurozone to survive and prosper. Yet the choice Mr Cameron offered us was staying in the EU on the basis of the “new settlement”, for which he would campaign, or leaving. If there is no “new settlement”, it is unclear what his position would be.

The prime minister’s speech was interesting in other ways. He commented that changes to the EU “to help fix the currency” have profound implications for “all of us” – how very true. As the eurozone unifies, power and influence will inevitably leach from EU27 institutions to eurozone institutions, such as the European Central Bank. Short of joining the euro, which I don’t expect, Britain will struggle not to be marginalised. He also commented on Europe’s inexorable shrinking in terms of relative size and power. For “globalists” such as myself, this truth highlights the need for Britain, unfettered by membership of the EU’s Customs Union, to develop trade agreements with fast-growing countries in the global economy.

The EU’s global significance is fading and, coupled with the existential challenge of holding the eurozone together, EU membership is an increasingly unappealing option for Britain in the 21st century. Britain needs a new relationship with the EU based on trade and co-operation – not political union. As the prime minister acknowledged, “Britain could make her own way in the world, outside the EU” – why not indeed?

The virtues of the single market are greatly exaggerated. According to the commission, the costs may be double the benefits, acting as a drag on most British businesses and the economy more generally. And remember, most great trading countries trade with each other without feeling the need to belong to it.

Ruth

Dear Ruth…

I find that a strangely abstract reply in which you deploy slogans rather than argument – and don’t address my points. Your self-definition as a “globalist” dodges every difficult question.

Any country is obviously part of the globe, but that does not excuse it from the realities of geography, how it lives with bordering countries, the need for a framework of agreed rules to govern trade and how to manage the economic and political interdependencies created by trade.

The more any country relies on others for key goods and services the more intertwined and interdependent with them it becomes. I am very wary about too much interdependency with authoritarian China – much less so with countries that share common values and institutions.

The point about the European single market, however incomplete, is that EU member states actively try to promote more interdependence through trade because they trust each other – and build accompanying political institutions to entrench and extend that trust. This is the so-called Brussels “bureaucracy” from which we need to be “unfettered”.

But why is this “bureaucracy” not holding back, say, German exports that are growing so much more rapidly than ours? Brussels “bureaucracy” has got nothing to do with British economic and trading weakness. That is home-made, rooted in profoundly dysfunctional economic institutions biased against investment, innovation and long-termism.

The EU single market is our saving grace, allowing us to attract more foreign direct investment and the headquarters of many more multinationals that we could otherwise expect. Lose them and we would be even worse off – or do you disagree? You seem prepared to put it all at risk for a chimera.

Will

Dear Will…

Come on, fair’s fair. You had your opportunity to express your untrammelled views on Cameron’s speech and the least you can expect is that I have mine. And I’m amazed that you had difficulty with my use of the term “globalist”, which was innocently used to refer to the globalisation of international trade.

However, let’s get on with the nub of the argument – the point of the single market. I worked in the DTI in the 1980s when the single market was being negotiated. From the British perspective, the objective was to encourage trade by removing the non-tariff barriers to trade as the Customs Union had removed the tariff barriers (which had been high). Suffice to say, the British were somewhat taken aback when they were attacked in the 1990s by French prime minister Edith Cresson, among others, for “social dumping” because they had not signed up to the social chapter at Maastricht. Britain, in its naivety, has simply failed to appreciate the political, regulatory and social implications of the single market, believing it to be all about free trade.

No one disputes the EU countries are an important market for us, but we can trade with these countries without being in the single market. Switzerland’s notably internationalist economy is more closely integrated with the EU than ours is. And, as I mentioned in my previous post, the single market brings more costs in aggregate than benefits. Perhaps multi-nationals benefit, but the vast majority of the economy does not trade with the EU (85%) and so bears the costs without the benefits. I also doubt there would be a major haemorrhaging of investment if we withdrew from the single market.

There are more important reasons for investing in the UK than access to the single market. UK Trade and Investment, for example, places the “springboard to Europe” just sixth in its top eight reasons. And, yes, I admire Germany’s economy hugely.

Ruth

Dear Ruth…

Trade has political and social ramifications. It was ever thus and British officials must have been very naive to have thought otherwise. What follows from a deep single European market are both the economic benefits of being able to produce at scale and to specialise, but also a willingness to welcome the opportunity to manage the political and social fallout by developing pan-EU institutions and rules. And once in place they need to be held to account, hence the European parliament.

The participants are happy to do this because they want to express that they share a continent, values and a destiny and to build institutions to express that. The logic goes further still – to climate change, tax avoidance and bank supervision. These are pan-European issues requiring pan-European responses.

Interestingly, David Cameron’s speech accepted that logic, but he wants a new settlement that would freeze Britain’s economic participation within some yet to be determined limits, but he still seemed to want a role in determining foreign and security policy. I don’t think you can cherry pick like that.

I think the EU project stands or falls as a whole. If anything, it needs to go further, which it will, especially in the eurozone. I would like Britain to play its part in shaping our continent – a prospect I find inspiring.

Am I right to understand you as a “globalist” who essentially wants out of an EU, whose costs in your view exceed the benefits? If so, although I profoundly disagree, it has more integrity than Cameron’s half-way house. But at least reality has made him seek a halfway house. What left me relieved was the realisation that your arguments don’t wash even with Cameron and that the Brits will either vote for the status quo or some Cameronian fudge. One way or another, we will be in rather than out.

Will

Dear Will…

I am indeed a “globalist” who wishes to leave the EU. The economic costs of the EU are considerable, many and various. The net costs of single market membership are just the start. The UK’s budgetary contributions are significant and especially pertinent in times of austerity; the common fisheries policy has arguably wrecked the industry and the common agricultural policy is protectionist and costly. There are also the opportunity costs of membership of the Customs Union, well past its sell-by date, relating to our inability to negotiate our own trade deals with favoured countries while part of the bloc. Free of the EU, Britain would be better positioned to realign its trade patterns towards fast-growing economies, thus stimulating economic growth, than it is now.

Hugo Young in his book This Blessed Plot reminds us that “… the Treasury … remained officially against British entry. That is to say, its judgment of the economic consequences was negative, and it submitted a paper to that effect”.

So the economic disadvantages of EEC (EU) membership were identified from the very start. But it’s not just the economics that persuades me we should leave. I regard the EU as profoundly anti-democratic. The French and Dutch electorates both voted against the constitution and were ignored. Why should Europe’s political elite listen to the people?

The EU is an important bloc, but its influence is inexorably waning. And the issues you quote (climate change, tax avoidance and bank supervision), if I may say so, don’t require pan-European responses, they require global responses. We shall not decide the future of Britain’s relationship with the EU. This will be up to the British people if/when we have an in-out referendum. Suffice to say, I shall be voting for freedom.

Ruth

Dear Ruth…

There is a danger of utopian myth in this, rather like the Labour left and shop steward movement in the 1960s. I don’t believe in earthly paradises or that there are EU shackles from which we have to break free. Instead, whether conserving fish stocks or reducing carbon emissions, we have to act together.

That is hard enough to achieve in the EU – impossible globally. “Globalist” freedom is the one-way, Tea Party freedom of the already strong to exploit the rest of us free from public obligation or responsibility to others. But for some on the right this is powerful karma.

I can’t see you compromising ever – David Cameron and the Tories are in more trouble than they know.

Will

Dear Will…

As you may know, I was civil service trained and, as such, told to stick to the issues, however “strangely abstract” (in your words) they may be, and never indulge in wild and unsubstantiated personal comment, however enticing that may be. Such has been the stuff of dark propagandists throughout the centuries.

Let me sum up the debate. Come the referendum, I shall vote for a more prosperous and more democratic Britain free of the shackles of the EU, which I believe to be anti-democratic, dysfunctional and declining in influence. I shall vote to leave the EU. You, presumably and if I understand you correctly, would vote to stay in.

Ruth