News Archive

Siemens cuts 15,000 jobs in six billion euro savings drive

MUNICH, Germany |
Sun Sep 29, 2013 8:02am EDT

MUNICH, Germany (Reuters) – Siemens is to shed 15,000 jobs over the next year, a third of them in Germany, as part of a 6 billion euro ($8.1 billion) cost cutting program, a spokesman said on Sunday.

The announcement comes two months after the ouster of Chief Executive Peter Loescher who drew up the savings plan late last year.

Europe’s biggest engineering firm, whose products range from hearing aids to gas turbines, is anxious to close the gap with more profitable rivals such as U.S.-based General Electric Co and Switzerland’s ABB.

Siemens and its unions have reached an agreement over about half of the job cuts and a deal on the other half will follow, the spokesman said.

He added that Siemens wanted to end speculation in the market about the number of jobs that are about to be cut.

No workers have been laid off so far and Siemens has said it does not intend to make enforced redundancies, relying instead on attrition and voluntary severance deals.

In Germany, about 2,000 jobs will be cut at the company’s industrial unit and another 1,400 at its energy and infrastructure business, the spokesman said.

Siemens expects to close the current fiscal year on Monday with around 370,000 workers, the same as last year. ($1 = 0.7385 euros)

(Reporting by Jens Hack, writing by Harro ten Wolde; Editing by David Cowell)

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Analysis: Euro zone current account surplus puts Germany in dock

Sun Sep 29, 2013 7:44am EDT

LONDON (Reuters) – A sharp rise in the euro zone’s current account surplus puts the focus firmly on what Germany’s new government can do to boost consumption and revive investment in Europe’s largest economy.

Stronger domestic demand in Germany would suck in more goods from countries on the southern rim of the euro zone and so help them to keep improving their own external payment positions by expanding exports rather than crushing spending.

The austerity policies pursued by the bloc’s weaker economies to reduce unsustainable debts are one reason why the euro zone has swung from a current account deficit of 0.2 percent of gross domestic product (GDP) in 2009 to a surplus of 2.1 percent in the 12 months to the end of July.

But the main reason is Germany, which ran a surplus with non-euro countries last year of 94.93 billion euros ($129 billion), according to Bundesbank data. The surplus for the whole of the currency bloc in 2012 was 122.44 billion euros.

Germany’s overall current account surplus last year was 6.9 percent of GDP – higher even than the 6 percent threshold that the European Commission considers excessive.

Martin Wolf, writing in the Financial Times, said Germany’s ‘beggar-my-neighbor policies’ were exporting bankruptcy and unemployment and were inconsistent with the euro zone’s commitments to the Group of 20 leading economies.

Within the euro zone, Germany’s surplus with other members has halved as a share of GDP since 2007. But the surplus is nevertheless the mechanical counterpart of deficits elsewhere.

Putting the onus of adjustment entirely on the southern rim without any offsetting stimulus measures could threaten the very survival of the shared currency, said Paul de Grauwe, a professor at the London School of Economics.

Unemployment is at a record high in the periphery, where investment has fallen almost three times more than in core countries. “Politically this is not acceptable and therefore these countries will be pushed into default,” de Grauwe said.


Germany is in the dock even though its output is now 2 percent above its pre-crisis peak thanks to increases in private consumption and government spending, whereas the euro zone as a whole is still 3 percent below it. Tight labor markets are feeding through into wage rises and increased purchasing power.

“It’s not that people can point to Germany and say ‘you are suppressing domestic demand’ because conditions are already supporting domestic demand,” said Andrew Benito, an economist with Goldman Sachs in London.

Where critics might have a point is that Germany needs to liberalize parts of its service sector, which would shift resources gradually from export industries and so boost domestic demand, Benito said.

In the shorter term, a revival of capital spending was possible once post-election uncertainty lifted, he added.

Investment subtracted 1 percentage point from growth last year and is still 7.5 percent below its pre-crisis peak. Given that the economy is operating with little slack, Benito said the weakness was puzzling.

Philippe Gudin, an economist with Barclays in Paris, said a recovery in investment was key to Germany’s economic outlook.

If re-elected Chancellor Angela Merkel forges a coalition between her conservatives and the center-left Social Democrats, as is widely expected, Gudin saw a good chance that she would agree to higher public investment, financed through higher taxes, in order to catalyze more private capital spending.

All else equal, an increase in investment would reduce Germany’s savings surplus. “The problem is that because of the size of the current account a rebalancing of growth just means stabilization of the surplus and not a decline,” Gudin said.


Internationally, the euro zone surplus is not big enough to set alarm bells ringing. Indeed, policy makers can take comfort that the imbalances of the world’s two biggest economies have shriveled.

China’s surplus crested in 2008 at around 9.3 percent of GDP, while the U.S. deficit peaked at 5.8 percent of GDP in 2006. This year both are set to be less than 3 percent.

Yet Stephen King, chief economist with HSBC, said the global picture was still uncomfortable. “The problem is that the imbalances that have narrowed in those two countries have reappeared elsewhere,” he said.

After all, the global current account must by definition be in balance. Increased savings in some countries must be accommodated by falling savings in others.

So it is that Turkey, India, Indonesia, Brazil and South Africa, for instance, have ended up with worryingly high current account deficits as foreign capital seeking high yields has stoked unsustainable, credit-fueled domestic demand.

Disagreements over how to reduce imbalances has echoes of the debate at the Bretton Woods monetary conference in 1944 when John Maynard Keynes, leading the British delegation, argued unsuccessfully that surplus countries should share the burden.

The United States, in surplus at the time and bankrolling Britain’s war effort, had the power to insist that it was deficit states that must adjust in the post-war order, much as Germany is prevailing with its prescriptions for the euro zone.

Charles Dumas with Lombard Street Research, a London consultancy, said the failure of surplus countries like Germany to adjust along these lines was darkening the economic outlook.

“They’re not taking steps to reduce their saving, which is another way of saying they’re not taking steps to increase their consumption, which means a deficiency, on a global scale, of consumption,” he said.

($1 = 0.7385 euros)

(Editing by Ruth Pitchford)

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France says to negotiate on Sunday trading but not on late-night shopping

Sun Sep 29, 2013 7:31am EDT

PARIS (Reuters) – France’s government is ready to negotiate with retailers on Sunday-trading laws, though not on late-night shopping, after two retailers decided to stay open despite the threat of legal action.

Unions, trying to defend the 35-hour work week, are pitted against some retailers and even some employees who want to increase business at a time of record unemployment and stagnant economic growth. Retailers Leroy Merlin and Kingfisher-owned (KGF.L) Castorama were open Paris and its suburbs this Sunday, defying a court ruling on Thursday.

“The (Sunday-trading) law is a kind of machine that churns out lawsuits,” Budget Minister Bernard Cazeneuve told Europe 1 radio. “Given that there are some employees who want to work and shoppers who today want to shop, could we not try to find some kind of path to an appropriate response?”

His comments echoed those made by a junior minister for trade, Sylvia Pinel. “We have inherited a kind of regulatory ‘millefeuille’,” she told Sunday newspaper Journal du Dimanche, referring to a layered French cake and the different trading regulations that apply in various districts.

“We will now work with sector professionals to address the question of Sunday trading,” she said.

Apparently referring to a separate legal ruling on Monday that ordered LVMH-owned (LVMH.PA) cosmetics store Sephora to close its Champs Elysees outlet at 9 p.m. (2000 GMT) instead of midnight, she said, “Late-night labor must remain the exception in order to preserve the health and free time of employees.”

“Flexibility is possible via employee-management talks but reforming this law is unnecessary… It is always possible to wait till tomorrow to make a purchase,” she said.

No one at Leroy Merlin, Castorama, the prime minister’s office or the Elysee Palace of President Francois Hollande was immediately available to comment.

(Reporting by Lionel Laurent and Yann Le Guernigou; Editing by Louise Ireland)

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U.S. watchdog allows delay to smooth transition to swaps trading

Sat Sep 28, 2013 3:18pm EDT

WASHINGTON (Reuters) – The U.S. derivatives regulator late on Friday gave a new and untested type of trading platform a bit more time to comply with some of its rules, to smooth the transition to regulated trading next week.

The Commodity Futures Trading Commission (CFTC) has been rushing through permits for the platforms – called Swap Execution Facilities – that must open their doors for customers on Wednesday.

The agency wanted to be ahead of a possible U.S. government shutdown next week, but has refused to give in to industry demands to delay the October 2 deadline by which the newly created SEFs have to comply with its rules.

Swaps are complex financial contracts that can be used to offset financial risk, but are predominantly a favorite speculation tool for hedge funds, and were widely blamed for exacerbating the 2007-09 global financial crisis.

The new platforms are one measure to regulate the $630 trillion market – dominated by investment banks such as JP Morgan Chase Co (JPM.N), Bank of America (BAC.N) and Citigroup (C.N) – to make it more transparent and less risky.

Late on Friday, the CFTC issued three letters delaying some of the strict new rules for the SEFs, which are run by large derivative brokers such as ICAP (IAP.L) and GFI (GFIG.N) but also by Bloomberg LP and Thomson Reuters (TRI.TO).

They can now delay trade reporting by one month for foreign exchange swaps, and by two months for equity and other commodity swaps, one of the letters said.

CFTC Chairman Gary Gensler said on Friday that there would be no delay for data reporting for fixed income and credit swaps, the bulk of the market.

The companies can also delay certain documentation and technological connectivity requirements, collectively known as onboarding, by up to a month.

A spokesman for Gensler said the onboarding delay would be for two weeks, but Commissioner Bart Chilton pushed for a two-month delay and the period was then extended at the last minute.

The delay in onboarding will be welcomed by SEF clients such as large asset managers who had complained there wasn’t enough time to go through all the rule-books and make an informed choice who they wanted to do business with.

The third letter granted swap counterparties the same reporting delay as the SEFs, because the reporting by the former can depend on that by the latter.

The SEF rules ban the practice of privately negotiating swap deals – something that was largely done over the phone and was therefore hard to control.

Deals must now be entered into systems that are more like stock exchanges, though negotiating over the phone will still be allowed as long as buyers and sellers can prove that they have spoken to more than one counterparty.

(Editing by Christopher Wilson)

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German government dismisses report Schaeuble may raise top income tax to woo left

Sat Sep 28, 2013 1:24pm EDT

BERLIN (Reuters) – The German government has dismissed a report that Finance Minister Wolfgang Schaeuble is considering raising the top rate of income tax to help Angela Merkel co-opt the opposition Social Democrats (SPD) in a possible “grand coalition”.

Weekly news magazine Spiegel reported that Schaeuble had asked experts days after the election to draw up plans on raising the top tax rate – currently at 45 percent on income over 250,000 euros – to between 46 and 48 percent.

“Minister Schaeuble has frequently and clearly rejected tax increases. This position has not changed. All other media speculation is unfounded,” said a finance ministry spokeswoman.

Chancellor Merkel’s Christian Democrats (CDU) emerged as the dominant party from last Sunday’s election, but her conservatives fell short of a majority, leaving her in search of a new partner among the SPD or Greens. The SPD agreed on Friday to enter exploratory talks on a possible coalition.

The CDU had ruled out any tax increases in its election program, whereas the SPD said it planned to raise the tax rate on incomes over 100,000 euros to 49 percent from 42 percent.

Merkel is expected to have to make steep concessions to the SPD in order to persuade it to join a coalition. These could include offering it the post of finance minister in her future cabinet. The SPD decided on Friday that it would put any decision on entering a “grand coalition” to a poll of its 472,000 grassroots members.

(Reporting by Alexandra Hudson; Editing by Hugh Lawson)

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JPMorgan nears multibillion-dollar mortgage settlement: NY Post

Sat Sep 28, 2013 1:11pm EDT

CHICAGO (Reuters) – JP Morgan Chase Co (JPM.N) could reach a multibillion-dollar deal as early as Tuesday, putting an end to the bank’s woes from mortgage securities related investigations, the New York Post reported on Saturday.

The bank and government officials met earlier this week to try to negotiate a settlement in the $11 billion range to resolve many of the probes into how it sold mortgage bonds before the financial crisis, a source familiar with the matter told Reuters.

Negotiations have involved the possibility of JP Morgan paying up to $7 billion in cash and $4 billion in consumer relief – a large sum, but representing little more than half the bank’s 2012 profit of $21 billion.

JP Morgan CEO Jamie Dimon met with U.S. Attorney General Eric Holder on Thursday. While it is unusual for a company CEO to meet with the head of the U.S. Justice Department, the bank is seeking to tamp down its legal difficulties.

The settlement, if it goes ahead, would likely include claims from the regulator of Fannie Mae and Freddie Mac, which has sought some $6 billion from the bank over risky mortgage securities sold to the government-sponsored entities, according to two people familiar with the matter, Reuters reported.

JPMorgan was saddled with about 70 percent of the debt in nonperforming home loans during the financial crisis.

(Reporting by Christine Stebbins; editing by Gunna Dickson)

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Norwegian Air takes Dreamliner out of service after breakdowns

Sat Sep 28, 2013 10:17am EDT

OSLO (Reuters) – Budget airline Norwegian Air Shuttle (NWC.OL) is taking one of its brand new Dreamliners out of long-haul service and demanding that Boeing (BA.N) repair the plane after it suffered repeated breakdowns, the carrier said on Saturday.

Boeing said the repairs would take “a matter of days”.

Norwegian Air Shuttle will instead lease an Airbus (EAD.PA) A340 from HiFly to keep its long-haul business going, a spokesman said.

“The aircraft’s reliability is simply not acceptable, our passengers cannot live with this kind of performance,” spokesman Lasse Sandaker-Nielsen told Reuters.

“We are taking it out of long-haul service.”

The Dreamliner was expected to be a game-changer for the aviation industry, but there have been delays getting it into service and setbacks including the grounding of all the planes due to battery problems.

The aircraft concerned is in Bangkok after a hydraulic pump failure this week and will be flown back to Stockholm.

“In consultation with Norwegian, the decision has been made to implement a number of enhancements to improve the airplane’s in-service reliability following its return to Stockholm,” Boeing said in a statement.

“As a result, it is expected the airplane will be out of service for a matter of days.”

Norwegian launched long-haul operations this year and hoped to capitalize on Dreamliner’s lower operating cost as the jet’s lighter-weight engines promised a 20 percent savings on fuel.

But its first two Dreamliners, part of a planned fleet of eight, broke down over half a dozen times in September, forcing it to lease back-up planes on short notice or cancel flights.

Norwegian summoned Boeing’s management this week and the aircraft manufacturer promised to locate spare parts centers at all of the airline’s long-haul destinations and send a team of engineers to the Nordics to monitor the planes.

(Reporting by Balazs Koranyi; Editing by Hugh Lawson)

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EU watchdog wants to charge foreign clearing houses

Sat Sep 28, 2013 9:20am EDT

LONDON (Reuters) – The European Union’s markets watchdog wants to charge foreign clearing houses seeking to cash in on new derivatives rules being introduced across the 28-country bloc, an EU document showed on Saturday.

The move is a sign of how hard-pressed regulators are struggling to implement on time a welter of reforms called for by world leaders during the financial crisis.

One set of new rules being phased in aims to make derivatives like credit default swaps and interest rate swaps safer after taxpayers were forced to bail out banks in 2008 that held large amounts of them.

But the Paris-based European Securities and Markets Authority (ESMA), has asked the European Parliament in a letter seen by Reuters if it could levy an undisclosed fee on clearing houses, also known as central counterparties or CCPs, from outside the EU.

Clearers ensure that derivatives and other financial transactions are completed, even if one side of a deal goes bust, and are core to making the opaque $630 trillion swaps market more transparent and safer.

Regulators are forcing banks and others to channel swaps transactions through clearing houses, raising the prospect of a big new revenue stream.

ESMA Chairman Steven Maijoor said in the letter dated September 24 that the watchdog will have to vet each foreign clearing house that wants to operate in the EU.

But this task will be “much more burdensome than originally expected” and with “significant budget implications”, the letter said.

It had anticipated seven foreign clearers to request authorization during this year and next but the watchdog has already received applications from 34 non-EU clearing houses, none of which was named in the letter.

Europe’s top EU-based clearers include LCH.Clearnet (LSE.L) and Eurex Clearing (DB1Gn.DE) but are set to face competition from foreign rivals seeking to benefit from the new clearing requirements now being phased in.

Maijoor said this will involve a “significant amount of work”, about 45 days per application, or about 7 extra officers.

“European taxpayers should not pay for allowing third country CCPs to freely offer their services within the EU,” Maijoor said.

“Fees dis-incentivise unsubstantiated applications, that is incomplete, inaccurate and spurious applications.”

European clearing houses are generally subject to fees when they apply for authorization abroad, Maijoor added.

(Reporting by Huw Jones; editing by David Evans)

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Metro CEO says Kaufhof doing well, still wants to sell: report

Sat Sep 28, 2013 9:13am EDT

FRANKFURT (Reuters) – German department store chain Kaufhof is doing well but its owner Metro (MEOG.DE) wants to sell it, the group’s chief executive Olaf Koch told WirtschaftsWoche magazine.

“Kaufhof clearly has a better valuation compared to early last year when we were in talks to sell the chain,” Koch was quoted as saying. “The company has made some fantastic progress.”

Despite the improvement, Koch still intends to sell the chain, he said.

“The department store business cannot be internationalized in the same way as the wholesale or consumer electronics business. Return on investment is substantially lower.”

He ruled out a merger with German rival Karstadt, which earlier this month sold a stake in its luxury and sports stores to Austrian investor Rene Benko.

“At the moment we don’t seen a reason to look into that option,” the Metro executive was quoted as saying.

Metro, the world’s No.4 retailer, in early-2012 suspended the sale of its Kaufhof department stores, which at the time were valued at 2-3 billion euros ($2.7-4.1 billion), saying potential buyers were struggling to raise funds.

Businessman Nicolas Berggruen, who rescued Karstadt from insolvency in 2010, has been an advocate of a merger between the two department stores. ($1 = 0.7385 euros)

(Reporting by Harro ten Wolde and Martin Zwiebelberg; Editing by Janet Lawrence)

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