Ukraine forces prepare for war ...against their own people

Moscow has just announced that it 'respects' the will of the people expressed in yesterday's referendums:

• KREMLIN SAYS RESPECTS WILL OF THE PEOPLE EXPRESSED IN REFERENDUMS IN UKRAINE'S DONETSK AND LUHANSK REGIONS - STATEMENT
• KREMLIN SAYS OUTCOME OF REFERENDUMS SHOULD BE IMPLEMENTED IN A CIVILISED MANNER WITHOUT VIOLENCE
• KREMLIN SAYS IT CONDEMNS USE OF FORCE AGAINST CIVILIANS IN EASTERN UKRAINE AIMED AT HINDERING REFERENDUMS

The EU, in contrast, has already declared that the poll was illegal, and it won't recognize the result.

Analysts say the crisis is weighing on the stock markets today - with Russia's MICEX down 0.4% so far. The other indices are mixed:

• FTSE 100: up 18 point at 6,833
• German DAX: up 21 points at 9,602
• French CAC: down 8 point at 4,469

Mining stocks are leading the risers in London, while BSkyB (-2.5%) is the biggest faller - after confirming it is in talks to buy Sky assets in Germany and Italy

Spanish unemployment could take 10 more years to return to the levels seen before the financial crisis, according to a report that paints a picture of an economy hampered by low wages, low skills and lack of investment in research.

Spanish workers earn 20%-40% less than those in other leading European countries, according to the study by Spain's second-biggest bank, BBVA. The earnings gap is partly explained by very high unemployment, which BBVA said "derives from a labour market that functions substantially worse than in other countries".

The bank found Spanish spending on research and development is 70% below the US or EU average, and said the economy suffered from low skills and a lack of technology in the workplace.

"All of these differences derive from an inadequate legal and institutional system of incentives," the report said. The researchers forecast that even if employment increased at a rate of 2% it would take 10 years to reach 2007 levels.

Calling for long-term "balanced, solid and inclusive" growth to bring per capita income in line with the US and eurozone competitors, the report urged Spain's traditionally small- and medium-sized firms to enlarge and seek international markets. "Large companies are more productive, have more human capital, survive longer, invest more in R&D and export more," it said, adding that this enlargement would only occur if legal, financial and fiscal obstacles were removed.

It noted that for each percentage point fall in unemployment there was a 0.6% rise in GDP, so reducing unemployment also cuts public debt, which is now at record levels.

Figures released on Monday by the Bank of Spain show public debt rose by €8.1bn (£6.7bn) in February, taking the total owed by central and regional government to a record €988bn, equivalent to 95% of the nation's annual GDP.

Meanwhile, protesters from the Mortgage Victims' Platform (PAH) have staged protests against home repossessions. However, in spite of the huge over-capacity in the Spanish housing market, foreign investors continue to find it attractive. Foreign investment in property has increased for the fourth year running, with €6.5bn invested in 2013 – 16% up on the preceding year.

According to the Bank of Spain, this is the first time foreign property investment has risen above €6bn since 2004.

In contrast, Spanish property investment abroad fell to €355m, the lowest level in 12 years and 89% less than in 2007. New mortgages, meanwhile, fell by 27.8% in 2013, the lowest number in the past five years, while average house prices fell by 7.8%, a slower fall than in the preceding two years. Housing sales fell by 2.2%. The average Spanish family spends 34% of their income on their mortgage.

According to the society of property registrars, the biggest number of foreign investors in property are Britons (15.1%), followed by the French (9.8%), Russians (8.6%) and Belgians (7.3%).

 

 

Pro-Russian separatists in Ukraine's two eastern regions are holding "self-rule" referendums - a move condemned by the Ukrainian government and the West.

Self-proclaimed leaders in the Donetsk and Luhansk areas are going ahead with the vote despite Russian President Vladimir Putin's call to postpone it.

The BBC's Richard Galpin visited a polling station in Sloviansk and said there was "no checking about whether people have vote multiple times".

He suggested that "pretty much everyone" was voting in favour of self-determination. Thousands of Ukrainians went to vote at a polling station set up in Moscow - here people hold up their passports

A second round of voting is planned in a week's time, on joining Russia. Organisers also say they will boycott Ukraine's presidential elections on 25 May.

Ukraine's interim President Olexandr Turchynov has admitted many in the east supported pro-Russian militants, but warned the referendums were "a step towards the abyss".

Voting in separatist-controlled cities and towns of Donetsk and Luhansk

• Some 3,000,000 ballot papers ask: "Do you support the Act of State Self-rule of the Donetsk People's Republic?"
• Second round on joining Russia planned for 18 May
• Vote deemed illegal by Kiev government and international community

The EU and US have also condemned the referendums, amid fears Ukraine could be sliding to civil war.

A Pew Research Centre survey suggested a majority even in eastern Ukraine - 70% - wanted to remain in a united country, despite concerns about governance.

Russia annexed Ukraine's southern autonomous republic of Crimea, after a March referendum.

Bill Taylor, a former US ambassador to Ukraine, said results from Sunday's vote should be treated with caution after what happened in Crimea.

 

A senior adviser to Putin said that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off loans to U.S. banks.  As newswires reported the comments from Putin’s senior aide Glazyev, the USD Index fell marginally to session lows and broke below 80.00 before recovering.

Russia could reduce to zero its economic dependency on the United States if Washington agreed sanctions against Moscow over Ukraine, politician and economist Glazyev said, warning that the American financial system faced a “crash” if this happened.

Sergei Glazyev, a senior adviser to President Putin, added that if Washington froze the accounts of Russian businesses and individuals, Moscow will recommend to all holders of U.S. treasuries to sell their U.S. government debt.

Glazyev is often used by the authorities to stake out a hardline stance. He does not make policy but has the ear of Putin and would be aligned with the more hawkish elements in the Russian government and military. “We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said Kremlin economic aide Sergei Glazyev. He told the RIA Novosti news agency Russia could stop using dollars for international transactions and create its own payment system using its “wonderful trade and economic relations with our partners in the East and South.”

Russian firms and banks would also not return loans from American financial institutions, he said. “An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system,” he added.

Late Monday, U.S. President Barack Obama said the U.S. plans to impose penalties on Russia unless it withdraws its military forces, and on Tuesday, Russia reportedly called troops on military exercises back to their bases.

Glasyev’s comments were likely sanctioned by the Kremlin and by Putin himself. They would appear to be a warning to the U.S. regarding isolating Russia politically and imposing economic sanctions.

If diplomacy does not prevail, then trade wars and currency wars will ensue with attendant consequences for the already vulnerable financial system and global economy.

It's time to put an end to the subterfuge and insanity. It is time for a judicious political process and for cooperation in the Ukraine crisis. The scenes of the past week couldn't have been more contradictory. A civil war is raging in eastern Ukraine, yet Gerhard Schröder met with Vladimir Putin for a night out to celebrate the former German chancellor's 70th birthday. At the same time, German soldiers, part of the OSCE monitoring mission in Ukraine, were being held hostage by a self-appointed "people's governor." Schröder's gesture struck many as obscene and it is certainly not the correct way to deal with a man who is threatening peace in Europe. Dialogue, yes. But that kind of open embrace is unacceptable. But what should such a dialogue focus on? And which steps would be the most reasonable to take? To embark on such a path, Germany and the West must adopt a unified posture, a common goal and a roadmap for achieving it.

There are two fundamental aspects that must define Germany's position in the Ukraine crisis: There should be no war and no equidistance, but rather a clear affiliation with the Western alliance. On the issue of Ukraine, an asymmetrical resolve is currently prevailing. Vladimir Putin is prepared to deploy his military, but the West, correctly, is not. German and other NATO soldiers shouldn't be asked to die for Ukraine. That is an advantage for Putin; he knows that no one will try to stop him militarily. The West must accept this, for it also has other options at its disposal.

Many Germans have indulged Russia thus far. It seemed as though a Cold War desire for equidistance had returned in recent weeks, the yearning for a neutral position between the West and the East. With all due respect for Russia and its interests, however, Germany belongs to the West, to the other democracies -- even if the positions of the United States are sometimes difficult for Germans to swallow. Our security and sense of political and cultural belonging comes exclusively through our ties with our partners in NATO and the European Union. A German Sonderweg, or special path, would be tantamount to surrendering to Russia, just as Schröder surrendered himself and now appears to be Putin's puppet.

In terms of the goal in Ukraine: Peace must trump unity and unity must be decided by the majority in each region. It would be good if the Ukrainians remained one cohesive country because that would offer them the best prospects for prosperity. But if the people in the eastern part of the country determine they absolutely want to declare their independence or become part of Russia, they should also be given the possibility to do so. If a majority determines it wants to remain part of Ukraine, then everything possible must be done to ensure that the country remains intact. The people shouldn't be forced into a hurried vote under pressure as happened in Crimea. It should be done in an orderly manner.

The path to that end begins with trust. The West loses nothing by making it clear that Ukraine will not become a member of NATO or the EU in the foreseeable future. Such a pledge would assuage Russian fears of the two alliances moving even closer to Russian territory and would stabilize their sense of security.

Barclays is considering a retrenchment from continental Europe which could include the sale of its business in France, Spain, Italy and Portugal as part of its strategic review to be unveiled this week.

Antony Jenkins, chief executive, is expected to announce that most of the bank’s retail operations in western Europe could be put up for sale as part of the cost-cutting and restructuring exercise, according to reports in The Sunday Times. The strategic review, due on Thursday, is the second in Mr Jenkins’ two-year tenure.

He hopes it will relieve some of pressure Barclays is under at the moment from shareholders and the City, as well as politicians. Tomorrow the bank is due to deliver first quarter results and has already warned that profits will be hit due to a slowdown in fixed-income trading. This weekend, it emerged that Ros Stephenson, chairman of investment banking at Barclays, has quit to join UBS. The departure followed the resignation last week of Hugh “Skip” McGee, chief executive of Barclays Americas and one of the bank’s best known dealmakers. Separately, Robert Morrice, chairman of Barclay’s Asia-Pacific business, is retiring after 17 years.

Two weeks ago Barclays suffered a protest vote at its annual shareholder meeting over an increase in bonuses at its investment bank. Analysts said the bonuses were needed to avoid a “death spiral” of US staff quitting amid poaching attempts from rival banks. Mr Jenkins in under shareholder pressure to cut costs, including pay deals, and come up with a long-term strategy for its investment bank. The high-profile division has struggled to generate returns above its cost of capital.  As part of the strategic review, Barclays is expected to create a “bad bank” to house non–core assets in a move designed to revive the rest of the investment bank.  

The division is expected to take on large parts of the non-performing assets, including the bank’s commodities operation.

Barclays has considered selling its operations in France and Italy before but has apparently failed to find buyers. Mr Jenkins knows the bank’s continental operations well having been involved in buying its credit card operations in Portugal and Italy.

Although the divisions are not failing, Mr Jenkins is thought to have decided that their profits are too low.

Barclays declined to comment.

Pro-Russian activists in eastern Ukraine have said they will not postpone a referendum on independence planned for Sunday.

The decision comes one day after Russian President Vladimir Putin urged delaying the vote to create the conditions necessary for dialogue.

But Ukrainian authorities said "anti-terror" operations would continue regardless of the rebels' decision.

Millions of ballot papers have been prepared for the vote.

In what appeared to be a further shift in Russian policy, Mr Putin also said on Wednesday that this month's presidential elections in Ukraine were a move "in the right direction".

His remarks came days after his spokesman said holding such an election would be absurd.

Moscow has vowed to protect the rights of the largely Russian-speaking people in the south and east against what it calls an undemocratic government in Kiev.

But Ukrainian interim Prime Minister Arseniy Yatseniuk dismissed Mr Putin's calls as "hot air".

Ukrainian authorities have rejected activist demands for greater autonomy and troops have been battling to regain official buildings occupied by rebels in the east.

On Thursday Ukraine's national security council confirmed military operations would continue.

"The counterterrorist operation will go on regardless of any decisions by any subversive or terrorist groups in the Donetsk region," the council's secretary Andriy Parubiy said.