World  Business and Economic Analysis 

Germany hails Iran’s win-win policy in nuclear issue

       

                Germany hails Iran’s win-win policy in nuclear issue        

       

A top German lawmaker has hailed the “win-win” approach adopted by Iran on its nuclear issue, urging the country to pursue the same policy in order to help settle Mideast issues.

       

 

Chairman of the German Bundestag Foreign Affairs Committee Norbert Rottgen told IRNA on Monday that the agreement reached between Iran and the P5+1 on Tehran’s nuclear program in July was a step forward toward resolving political issues between Tehran and Berlin.

On July 14, Iran and the P5+1 countries – the United States, Britain, France, China and Russia plus Germany – finalized the text of a nuclear agreement dubbed the Joint Comprehensive Plan of Action (JCPOA) in the Austrian capital, Vienna.

Under the JCPOA, limits will be put on Iran’s nuclear activities in exchange for, among other things, the removal of all economic and financial bans against the Islamic Republic.

In a related development, Iranian Foreign Minister Mohammad Javad Zarif and European Union (EU) foreign policy chief Federica Mogherini on Sunday announced in a joint statement that the EU had “adopted the legislative framework for the lifting of all nuclear-related economic and financial sanctions against Iran.” Sunday marked the “adoption day” of the JCPOA.

With the lifting of the sanctions, said Rottgen, Germany will be ready to export modern and high-quality industrial goods to Iran.

The senior German legislator further touched upon Tehran-Berlin relations, and said Iran enjoys great potential in its economy and industry sectors.

Rottgen said his country is keen to forge closer ties with Iran on all fronts, especially in the fields of energy, industry and infrastructure.

Iran-Germany trade balance stood at € 5 billion in 2005, which dropped to € 2.7 billion in 2014, according to the German Chambers of Commerce. Now, with the lifting of the sanctions, the figure is expected to bounce back and rise even further.

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IME weekly trade reaches $203m

       

                IME weekly trade reaches $203m        

       

Iran Mercantile Exchange (IME) announced that around commodities valued at $203 million weighing over 403,116 tons were traded in its domestic trading and exports halls in the past working week (October 10-14).

       

The exchange said that its trading halls transacted 308,953 tons of oil and petrochemical products, including 162,986 tons of bitumen, 40,349 tons of polymer products, 10,000 tons of lube cut, 21,268 tons of chemical products, 1,090 tons of insulation and 7,100 tons of sulfur valued at $123 million in the last working week, Fars News Agency reported.

Its metals and minerals hall dealt in 87,193 tons of metal and mineral products, including 71,930 tons of steel products, 4,560 tons of copper, 140 tons of molybdenum sulfur, 10,560 tons of aluminum and 3 tons of concentrates worth more than $77 million in the previous week.

In addition, the IME agricultural trading hall sold 1,650 tons of sugar, 3,100 tons of maize, 150 tons of oilseeds, 500 tons of crude vegetable oil and 600 tons of rice during the last week.

The IME was set up on September 20, 2007 in accordance with Article 95 of the new law of Securities Market of the Islamic Republic of Iran following the merger of the agricultural and metal exchanges of Tehran. The merger marked a new chapter in Iran capital market providing endless trading opportunities for customers both at home and abroad.

Various sectors of economy and national industry benefit from the exchange. The IME currently offers various services, including:

Performing as the first market providing access to the initial offering of the listed commodities in the IME,

Price discovery and price making for Iran's over-the-counter (OTC), secondary markets and end users,

Providing venue for government sales and procurement purchases,

Providing trading platform and user interface,

Providing clearing and settlement services,

Risk management,

Technology services,

Training market participants.

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The IMF got it wrong when it came to Greece’s government debt crisis

                   

                   

                                                           

The IMF’s participation in the effort to rescue the eurozone may have raised its profile and gained it favour in Europe, yet its failure, and the failure of its European shareholders, to adhere to its own best practices may eventually prove to have been a fatal misstep.

One key lesson ignored in the Greece debacle is that when a bailout becomes necessary, it should be done once and definitively. The IMF learned this in 1997, when an inadequate bailout of South Korea forced a second round of negotiations. In Greece, the problem is even worse, as the €86bn ($94bn) plan now under discussion follows a €110bn bailout in 2010 and a €130bn rescue in 2012.

At the time of the crisis, the fund was floundering once more in the aftermath of the east asian crisis

Under pressure
On its own the IMF is highly constrained. Its loans are limited to a multiple of a country’s contributions to its capital, and by this measure its loans to Greece are higher than any in its history. Eurozone governments, however, face no such constraints, and were thus free to put in place a programme that would have been sustainable.

Another lesson that was ignored is not to bail out the banks. The IMF learned this the hard way in the 1980s, when it transferred bad bank loans to Latin American governments onto its own books and those of other governments. In Greece, bad loans issued by French and German banks were moved onto the public books, transferring the exposure not only to European taxpayers, but also to the entire membership of the IMF.

The third lesson that the IMF was unable to apply in Greece is that austerity often leads to a vicious cycle, as spending cuts cause the economy to contract far more than it would have otherwise. Because the IMF lends money on a short-term basis, there was an incentive to ignore the effects of austerity in order to arrive at growth projections that imply an ability to repay.

Meanwhile, the other eurozone members, seeking to justify less financing, also found it convenient to overlook the calamitous impact of austerity. Fourth, the IMF has learned that reforms are most likely to be implemented when they are few in number and carefully focused. When a country requires assistance, it is tempting for lenders to insist on a long list of reforms. But a crisis-wracked government will struggle to manage multiple demands.

In Greece, the IMF, together with its European partners, required the government not just to cut expenditures, but to also undertake far-reaching tax, pension, judicial, and labour-
market reforms.

And, although the most urgently needed measures will not have an immediate effect on Greece’s finances, the IMF has little choice but to emphasize the short-term spending cuts that boost the chances of being repaid – even when that makes longer-term reforms more difficult to enact.

Lessons learnt
A fifth lesson is that reforms are unlikely to succeed unless the government is committed to seeing them through. Conditions perceived to be imposed from abroad would almost certainly fail. In the case of Greece, domestic political considerations caused European governments to make a show of holding the government’s feet to the fire. The IMF, too, sought to demonstrate that it was being as tough with Greece as it has been on Brazil, Indonesia, and Zambia – even if doing so was ultimately counterproductive.

The sixth lesson the IMF has swept aside is that bailing out countries that do not fully control their currencies carries additional risks. As it learned in Argentina and West Africa, such countries lack one of the easiest ways to adjust to a debt crisis: devaluation.

A fighting fund
Having failed to forewarn Greece, Portugal, Ireland, and Spain about the perils of joining a currency bloc, the IMF should have considered whether it was proper or necessary for it to intervene at all in the eurozone crisis. Its rationale for doing so highlights the risks associated with its decision.

The most obvious reason for the IMF’s actions is that Europe was failing to address its own problems, and had the power and influence to drag in the fund. The IMF’s managing director has always been a European, and European countries enjoy a disproportionate share of the votes on the IMF’s board. Equally important, however, is the fact that the IMF made its decision while facing an existential crisis. Historically, the biggest threat to the IMF has been irrelevance. It was almost made redundant in the 1970s when the US floated the dollar, only to be saved in 1982 by the Mexican debt crisis, which propelled it into the role of global financial lifeguard.

Struggling for power
A decade later, the IMF’s relevance had started to wane again, but was revived by its role in the transformation of the former Soviet-bloc economies. At the time of the euro crisis, the fund was floundering once more in the aftermath of the East Asian crisis, as its fee-paying clients did anything they could to avoid turning to it. The IMF’s participation in the eurozone crisis has now given powerful emerging economies another reason to be disenchanted.

After the US stymied their demands for a greater say within the fund, they now find that the organisation has been doing Europe’s bidding. It will be difficult for the IMF to regain the trust of these increasingly prominent members. Unless the US and the EU relinquish their grip, the fund’s latest bid for relevance may well turn out to be its last.

Ngaire Woods is Dean of the Blavatnik School of Government

© Project Syndicate 2015

                       

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