Archive for October, 2011

Polish PM’s party expected to win Sunday election

Sunday, October 9th, 2011 | Finance News

WARSAW (Reuters) – Poles are voting in a parliamentary election on Sunday, likely to give the ruling center-right Civic Platform four more years in power to press on with gradual economic reforms and closer ties with the European Union.

Prime Minister Donald Tusk's Civic Platform led the final opinion polls but outspoken former premier Jaroslaw Kaczynski's conservative-nationalist Law and Justice party narrowed the gap in some polls at the end of campaigning.

No party is expected to be able to rule alone and Tusk is likely to turn to his current coalition partners, the Peasants' Party, if he wins. But opinion polls show Palikot's Movement, a new party which supports gay rights, abortion and legalization of soft drugs, could emerge as a potential partner.

Tusk, who steered the country of more than 38 million people safely through the 2008-09 global financial crisis, has portrayed himself as a guardian of stability and said he will continue his cautious approach to economic reforms if he wins.

Law and Justice has promised more state involvement in the economy, including a bank tax and higher taxes for the rich, and vowed to wind down large-scale privatization carried out since Civic Platform took power in late 2007.

"For me the choice really is about living standards, especially for the poor," Wanda Kalisz said, while having a cigarette outside a polling station in downtown Warsaw, shortly before it opened.

"I'm close to retirement and I just hope somebody would take care of me. So Kaczynski is a better choice, though for the younger and wealthier, maybe it's Tusk," she added.

Even if Law and Justice wins the most votes, it would be likely to struggle to put together a coalition.

More than 30 million people are eligible to vote. They will elect 460 lawmakers in the lower house, the Sejm, and 100 to the upper chamber, the Senate.

Voting started at 7 a.m. (0500 GMT) and ends at 9 p.m. (1900 GMT), when the first exit polls will be released. The official result will take several hours to come in.

ECONOMIC CHALLENGES

Poland's main immediate challenge is to curb the public debt and deficit, which ballooned during the financial crisis.

Ratings agencies have said they could downgrade Poland if it

does not swiftly act to reduce the budget deficit, expected to reach 5.6 percent of gross domestic product this year, and the public debt, expected to reach 53.8 percent of GDP this year.

Economists doubt Law and Justice would be able to meet the challenge and a short-term sell-off would be likely on Polish financial markets if it won.

The current coalition, however, has failed to deliver on the far-reaching liberal market reforms Tusk originally vowed.

Civic Platform is likely to woo the Peasants' Party again, and Tusk has said he would not want to rule in a tri-party coalition. Sources in his party have said it might try to win over individual leftist lawmakers if it is close to a majority.

But the new libertarian party led by Janusz Palikot, a wealthy businessman and former Civic Platform lawmaker, has emerged as a potential partner after a late surge in opinion polls. It has criticized Poland's powerful Catholic Church.

The outcome could depend heavily on how many people vote as a low turnout is likely to favor Law and Justice, whose core electorate is traditionally loyal.

Any prolonged uncertainty over the shape of the coalition could unsettle financial markets in Poland, which holds the EU presidency until the end of this year, a largely formal role.

FOREIGN POLICY AGENDA

At stake also is Poland's international agenda. Tusk, who is strongly pro-EU despite the euro zone debt crisis, differs on foreign policy with Kaczynski, who deeply distrusts Poland's largest neighbors, Germany and Russia.

Tusk made improving ties with Germany, which occupied Poland during World War Two, a priority after relations sank under Poland's previous government, led by Kaczynski. Kaczynski raised eyebrows in Germany again this week by repeating in a new book his view that Berlin is trying to subdue Poland.

Tusk also has embarked on a cautious rapprochement with Moscow, which held sway in Poland for decades until the collapse of communist rule in Poland in 1989.

This policy, however, suffered following a plane crash in Smolensk in western Russia which killed then-President Lech Kaczynski, Jaroslaw Kaczynski's twin, and all 95 others on board

Moscow says mistakes by Polish pilots were the sole cause of the crash in April 2010. Warsaw says it believes Russian ground controllers also played a role in the tragedy.

Kaczynski accuses Tusk of betraying Poland's national interest in Warsaw's dealings both with Berlin and Moscow and believes Tusk and Russian Prime Minister Vladimir Putin bore some responsibility for his brother's death.

Kaczynski's combative rhetoric on that issue has enabled Civic Platform to highlight the risks it says would stem from any return to power of Law and Justice by deepening social divisions and antagonizing Poland's allies.

(Writing by Gabriela Baczynska; Editing by Michael Roddy)

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Business jet industry looks to 2012 for growth

Saturday, October 8th, 2011 | Finance News

(Reuters) – The business jet industry is expecting 2012 to mark its first year of growth in deliveries since the financial downturn, but more pain could still be ahead for the low end of the segment that has been hardest hit.

"2011 did not play out as we expected to see the growth and orders being placed, so we're shifting our hopes to 2012," said Jens Hennig, vice president of operations at the General Aviation Manufacturers Association, a Washington, D.C.-based international group that tracks noncommercial aviation.

Honeywell International (HON.N), maker of avionics and engines, also thinks better times are coming.

"We believe 2011 will be the low point," said Rob Wilson, president of Honeywell's business and general aviation unit.

Unit deliveries will rise 3 to 5 percent in 2012 as new models such as the long-range Gulfstream G650 enter service, Honeywell projected in its annual business aviation outlook released on Saturday.

Demand for business jets fell in 2009 after five years of growth in deliveries as companies clamped down on spending after the global financial crisis peaked in 2008 and tighter credit made purchases difficult.

Business jet shipments fell again in 2010 and were down about 27 percent through the first six months of this year, according to GAMA data on worldwide deliveries.

(For a graphic of shipments click on http://link.reuters.com/pyq34s )

Volatile financial markets and fears that the economy could get worse are weighing on buyers.

"The classic indicator for business jet deliveries is corporate profits, which are at record levels," said Richard Aboulafia, an aerospace analyst with Teal Group. "The problem is that people are reluctant to spend."

Larger jets, used by bigger companies and extremely wealthy individuals, have fared better than smaller ones whose chief clients include small business customers that have been pinched in the downturn.

Deliveries of large jets rose 13 percent from 2008 to 2010, while light-jet shipments fell 61 percent during that time, according to data from the manufacturers' association.

Companies that offer larger business jets include General Dynamics' (GD.N) Gulfstream unit. Those that cater to the smaller end of the market include Textron Inc's (TXT.N) Cessna and privately held Hawker Beechcraft.

"The larger the jet, the more positive the market feeling is," said Eddy Pieniazek, director at the global aviation consultancy Ascend. "That small end is bouncing along the bottom and requires some more consistent economic growth to push it forward."

The lower end of the market could see more restructurings or consolidation if a recovery takes longer to play out, some said.

"There's too much private jet manufacturing capacity, and I don't think it all survives," said Kenneth Ricci, principal at Directional Aviation Capital, a private investment firm. "I don't think we have all this production capacity five years from now."

Slumping orders and rising cancellations led smaller-jet makers such as Cessna, Hawker and Bombardier (BBDb.TO) to cut U.S. jobs in recent years. GAMA said its members have laid off 20,000 people in the United States since the fall of 2008.

Companies that specialize in smaller aircraft will have difficulty in the longer term and could see significant structural changes, Ricci said.

"I think there'll be mergers, there'll be consolidation," said Ricci. "The net result will be less manufacturing capacity for the private aircraft business, less supply and I think ultimately that will then drive the recovery."

Teal Group's Aboulafia also said the smaller-jet sector could be in for more pain.

"If there isn't some kind of recovery, then something needs to happen," said Aboulafia. "Either you'll see growth or someone needs to go."

(Reporting by Karen Jacobs; Editing by Tim Dobbyn)

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IMF mission chief says Greece is at crossroads

Saturday, October 8th, 2011 | Finance News

BERLIN (Reuters) – Greece is at a crossroads and will need to implement "much stricter structural reforms" than seen so far, IMF mission chief to Greece Poul Thomsen was quoted as saying by a German paper on Saturday.

The gloomy comments suggested the IMF was still unsure whether current talks on a vital aid tranche for Athens would conclude positively, given doubts over Greece's willingness to reform and the impact of Greek strikes and riots.

"Greece is at a crossroads," he was quoted as saying by Welt am Sonntag. "It is clear the programme will not work if the authorities do not take the path that requires much stricter structural reforms than those that we have seen so far."

The IMF on Friday dismissed a statement by the Greek government that the deal on aid was already completed.

"It is going two steps forward, and one backwards," Thomsen said. "The Greek government understands that many of the most difficult changes lie ahead. At the same time, the political and social fatigue is growing."

Athens could run out of cash as soon as mid-November without the new eight billion euro aid installment, increasing the risk of a default that would drag the euro zone deeper into a debt crisis already shaking financial markets worldwide.

Inspectors from the IMF, the European Commission and the European Central Bank -- known as the troika -- resumed last week their review of Greece's progress under a multi-billion euro bailout, after leaving Athens four weeks before over disagreements on how to put its finances back on track.

"The Greeks believe it is enough to make laws," the EU Commission's Matthias Mors told the Welt am Sonntag. "But it takes time to implement. And often the right structures are lacking, for example in tax administration."

A senior troika official told Reuters on Wednesday that the inspectors were likely to give the green light to the aid but that it was not assured.

The EU and IMF first want to receive more details on the implementation and impact of plans announced last month to slash the public sector workforce and increase taxes to plug a bigger-than-targeted fiscal gap, the official said.

Talks between Greece and the troika will continue on Sunday, focusing on the country's deficit cut plan for 2013 and 2014, a finance ministry official said on condition of anonymity after a further, four-hour negotiating round between Finance Minister Evangelos Venizelos and the EU/IMF inspectors.

Athens shocked financial markets by announcing that it would miss 2011 deficit targets set as conditions of a bailout aimed at staving off bankruptcy, despite a series of tax hikes and spending cuts.

Thomsen said he had never seen riots against austerity measures as intense as in Greece.

"People express their frustration sometimes in very unpleasant ways," he said. "That is one of the ugly aspects of my work. And the intensity of it here is new for me."

EU leaders will meet in Brussels on October 17-18 to discuss revising a July 21 deal to provide Greece with a second rescue package. They may ask investors to accept losses on their holdings of Greek debt even larger than the 21 percent write-down set out in the July deal.

A leading member of German Chancellor Angela Merkel's conservatives told a paper on Saturday Greece was near bankruptcy and must give up part of its sovereignty to obtain the large debt forgiveness it needs to survive.

Michael Fuchs, a deputy parliamentary floor leader for Merkel's Christian Democrats (CDU), also told Greek newspaper "Real News" that the debt-laden country might be better off outside the euro zone.

(Additional reporting by Harry Papachristou; Editing by Alison Birrane)

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