Fiscal Deficit | Green World Investor

Chinese Wind Tower Companies face Dumping Danger after Solar Panel Makers

3 Jan, 2012

Chinese Solar Panel Producers have become a famous target of an anti dumping petition brought on by Solarworld and other companies.Though US Solar Installers have opposed the move as it will increase the solar panel prices in US,ITC has gone ahead with the investigation.Though the charges of subsidies and efficiency can be debated,the fact remains that US Solar Panel Producers can’t compete with Chinese Solar Panels.Massive industrial overcapacity in China has made the prices of products very cheap and made it difficult for Western producers to compete in most areas such as Chemical,Renewable Energy,Textiles etc.The Chinese win because of their low interest rates,cheap labor,free land,massive government support.

Wind Tower makers in the USA are now bringing forth measures to stop Chinese and Vietnamese wind tower producers from selling in the USA as well.With the trade relations between China and USA already quite bad,it remains to get worse still if the wind industry also becomes a focus point.Note Chinese wind turbines producers are already the world’s biggest.The price wars in China have made them look to exports and USA has been targeted by these companies.Sinovel and Goldwind are leading the charge.Its a matter of time before other companies target the wind turbine segment as well.Unlike solar panels ,most wind turbines in USA are made locally.

Read about the pros and cons of wind energy

Local wind tower manufacturers complain about Chinese pricing, sign petition

Claiming unfair pricing practices by Chinese and Vietnamese importers, two wind energy companies with local work sites have signed on to a petition asking trade regulators to investigate possible dumping of wind towers into the U.S. market at less than fair value.The group claims the Chinese government uses subsidies to push wind towers into the U.S. market. The petition asks that duties be placed on Chinese and Vietnamese tower imports by the U.S. Department of Commerce and also seeks an investigation by the International Trade Commission.

Green War between USA and China escalates with acceptance of 301 Filing

The Rise of American Protectionism has its chief enemy in the shape of China.Increasing unemployment and slow economic growth make Currency Wars seem inevitable in the face of shrinking global demand and export loving countries.However Green Wars are something totally new.Clean Technology leadership has been slipping to China,as USA dithers and bickers on climate legislation and energy laws.China has been strategically pumping huge amounts of cash into the new age Green Industries.Other countries like South Korea,Singapore,Malaysia,Japan,Germany,Spain are also making a major push into the Renewable Energy Industry.USA despite its technology leadership has seen Green Jobs melting away towards China and Mexico.With American Public Sentiment turning heavily against China in recent times,the US Congress and Administration have been pressurizing China on multiple fronts

Should India learn from Brazil in reducing Fiscal Deficit and Budget Spending

2 Jan, 2012

Indian Markets

2011 has been a bad year for emerging markets with high inflation,slowing growth and rising interest rates.Most of the problems are a consequence of the 2008 Financial Crisis when emerging countries increasing fiscal spending and reduced interest rates to reduce the affect of the Lehman crisis.Now the Bill is coming due with slowing growth and higher inflation.Most of the BRIC countries have heavily increased interest rates in 2011 to slow inflation as their poor population can ill afford the damaging effect of inflation.

Brazil has reduced its 2012 Budget by $32 billion to control inflation drawing howls of protest from politicians who always want to spend more as if money grows on trees.The country has reined in spending in both 2011 and 2012 to reduce the fiscal deficit and spend more money on productive sectors like infra.

Brazil to cut $32 billion from 2012 budget: Report

Brazil’s government may cut as much as much 60 billion reais ($32 billion) from spending in 2012 in an effort to control its deficit and inflation, the Estado de S. Paulo newspaper reported, citing unnamed Finance Ministry officials.

Brazilian President Dilma Rousseff, who marks one year in office on Sunday, had planned to ease financial controls in 2012 after trimming about 50 billion reais in spending in 2011, the newspaper said.

India on the other hand has not learnt anything.The government is continuing it merry ways of spending and wasting billions of dollars by bringing in more social spending bills which have massive leakages.The fiscal deficit has massively overshot the target of 4.6% of the GDP .This has led to rising interest rates and a falling currency.The government in order to win elections has waived off loans and brought in the Food Security Bill which will lead to more corruption.Note I am big proponent of spending subsidies for the poor in a country of huge inequalities where $2 billion homes co exist with people living on less than $2 day.But the existing schemes are ineffective and corruption ridden.Grains rot in Indian warehouses and middlemen make off with the subsidies.Rather than spending more money the government should have increased the effectiveness of delivery.But I guess spending more is much easier than taking on powerful vested corruption interests.

Greece Referendum on European Bailout – 5 Points you Want to Know

6 Jul, 2011

World Economy and Markets

Greece Referendum is set to become the hottest media topic related to the European Debt Crisis in the coming months.In a totally surprising move Greek Prime Minister George Papandreou called a referendum and a parliamentary confidence vote on 31st October just a week after the European leaders had agreed on a package to .Papandreou’s personal and government popularity have plunged amid fresh austerity measures that sparked a wave of social unrest.The PM is calling this vote probably to bolster his government as it loses support of the masses.Mr Papandreou, whose ruling Socialist party has suffered several defections as it pushes waves of austerity measures through parliament while protesters rally outside, said he needed wider political backing for the fiscal measures and structural reforms demanded by international lenders.

a) Recapitalize the Eurozone Banks

b) Agreed on a €100bn loan to Athens and Offered a 50% haircut on Greek Debt

c) Promised to increased the size of EFSF to almsot 1 Trilion Euros

This new Referednum promises to set the cat amongst the piegons once again and set off a new wave of crisis.

Here are some points that you need to keep in mind with this referendum

1) The confidence vote will conclude late on Nov. 4, while the referendum will likely be held after the details of the European accord are tied up.The Referendum is supposed to occur early next year.It will be only Greece’s second in almost 40 years,the first being to oust the Monarchy.Referendum Legality is also being questioned since it can be only held for matters of national importance and not for Economic Matters.

2) The chances of the referendum passing are low as Most Greeks oppose last week’s European deal to address the country’s debt crisis.According to the poll, 58.9% of Greeks judge the new European deal as “negative” or “probably negative” for Greece, while nearly two-thirds said they felt unease, fear or rage at the decisions reached by European leaders.54.2% of Greeks thought a national referendum should be called to approve the new aid deal, compared with 40% who said Parliament should decide.

3) Total Default on Greek Bonds could occur if the Bailout Referendum Occures resulting in a Lehman style Event though probability of that happening is low.What is certain is that till the Referendum happens the Global Financial Markets will be plunged in Volatility

4) The popularity of all major political parties is low with 14-22% approval ratings.Nobody knows whether such unpopular politicians can convince the public of anything let alone a complex referendum which will be decided by emotional appeals rather than a logical cost benefit analysis

5) European Leaders were blindsided by this sudden decision of the Greek government and many consider it a betrayal after going through such painstaking negotiations over the past few months to hammer out a deal.Some consider it as Blackmail by Greece to the whole European Union.Sarkozy is “dismayed” by the Greek plan, Le Monde newspaper reported, citing unnamed people close to Sarkozy.

Bailout, Balance Sheet, Bank, CDS, Crisis, Currency, Debt, EU, Euro, Fed, Fiscal Deficit, Government, Greece, Greece Pension Funds, Greek CDS, Greek Debt Deal, Loan Guarantee,Quantative Easing, Real Estate, Sovereign Debt, Stock Market, Stress Test

Greek Debt Deal – Bondholders take 50% Loss- Who Wins and Loses

5 Jul, 2011

Europe,Italy,Spain

According to reports coming from Europe where the summit of major European leaders took place to resolve the growing debt crisis,a deal has been reached on Greek debt.The Euro 350 billion debt which dwarfs the size of the negatively growing Greek economy has been a major source of instability in the last 2 years.The private holders of the Greek government bonds have agreed to take a 50% writeoff on their holdings.This means that if they hold Euro 100 of bonds they have become Euro 50 now as the rest has been written off as bad debt.Not that it was not apparent as Greek CDS and Greek bonds were touching all times lows in the secondary market.In fact the only buyers of Greece bonds were the European Central Bank and the Greek banks.The capital markets had been going up in the last month in the hope of some sort of resolution.The deal does not look like a win win as there will be some big losers in this deal (though they were already losing for some time).Nicolas Sarkozy announced the deal which would be voluntary in nature so that the CDS would not be invoked.Here are the winners and losers from this deal

Losers

1) Greek CDS Holders – They would be one of the biggest losing part as ISDA will not invoke that this is a credit event in which the Greek bonds have defaulted despite the 50% haircut

2) Greek Citizens – They would have been better off if a more sustainable path had been paved since the estimates still call for Greece to have 120% debt to GDP ratio by 2020.This means that they will have to live in a generation of austerity and poverty

3) Greece Pension Funds and French Banks – The French Banks like BNP Paribas,Credit Agricole have the biggest holdings of the debt.So also Pension Funds in Greece and other places which will be suddenly seeing a big hole in their assets column

Winners

1) Euro – The currency has managed to survive this phase of the crisis and has managed to surge at least till now.

2) Italy,Spain and Portugal – The contagion to the bonds of these countries will be contained since Greece has not done a messy default.The yeilds on the bonds of these countries might go down at least temporarily

Greek bondholders to take 50% haircut – Marketwatch

French President Nicolas Sarkozy said at a press conference in Brussels that the 50% haircut will be a voluntary agreement.An involuntary writedown could have potentially constituted a “credit event” that would have required the payout on billions of euros in credit default swaps, instruments used to insure debt against non-payment.

Thursday’s deal means that Greece’s debt burden will fall by around €100 billion ($140 billion). Media reports earlier this week had put a possible haircut on Greek government bonds at between 40% and 60%.Sarkozy also announced that the European Financial Stability Facility will see an increase in firepower by four- or five-fold.

An expanded bailout fund is seen as crucial in ensuring that the debt crisis doesn’t engulf Spain and Italy.

European Carbon Trading Market goes into a Huge Slump on Greek concerns,post 2012 Kyoto uncertainity

28 Jun, 2011

Climate Change,Europe

The European Carbon Trading Market which is the biggest cap and trade market in the world has gone into a monster slump with carbon credit prices having fallen to around 10 euros which is the lowest since March 2009 when almost every global asset had fallen to multi year lows.The trigger for the correction in prices is the future of the EUA scheme in which major carbon emitters in Europe are restricted to quotas and have to buy carbon credits if they exceed their limits.A huge amounts of United Nations CERs are sold into this market as they are allowed to to so.This has led to the mushrooming of a huge growth of carbon consultancies in India and China which help projects in obtaining these lucrative CERs.Note this has recently become highly controversial with a number of frauds happening in trading of these carbon credits.Top investment banks have been convicted of fraud and big sellers of CERs like the HFC producing companies have made ludicrous windfalls of hundreds of millions of Euros.Some of these companies have now started focusing in winning these CERs which are much more profitable than their core operations.

With the global talks on climate change failing and none of the major countries interesting in doing anything about global warming what will happen to the post 2012 Kyoto Framework which allowed the United Nations Clean Development Mechanism (CDM) is a big question.This plus the upcoming debt default/restructuring of Greece has thrown the entire future of carbon trading in Europe into major uncertainity.This has led to a 33% fall in the price of carbon credits in the last month as fear grips the major participants.Note in my opinion CDM and Carbon Trading are one of the worst thought out mechanism to control climate change and have given risen to profiteering and frauds and not much to tackle climate change.

Carbon offsets fall below 10 euros, new 2-year low

International carbon offsets fell below 10 euros per metric ton for the first time since March 2009 early on Monday morning, but traders were unsure whether carbon prices were poised to drift lower or stage a rally.

The ultimate fear is for the robustness of the whole EU project in the event of a possible Greek and other sovereign defaults, given that emissions trading is a creation of EU states.

Why did it take Spain 3 years to stops/changes subsidies to Solar Power Plants getting Feed in Tariff through Fraud

15 Apr, 2011

Solar Energy,Spain

Spain has started cracking down on Solar Power Plants which are making huge profits through illegal Feed in Tariffs which they should not get.Note Spain had seen a massive boom in solar installations in 2008 due to unusually large ROI driven by high Feed in Tariffs.FIT are electricity rates which are higher than wholesale electricity rates paid to renewable energy power plants in order to make them competitive with cheaper fossil fuel power plants.Seeing a huge increase in the subsidy burden Spain has pretty much killed the solar market in 2009,however the problems of Fiscal Deficit has made Spain reconsider the tariffs being given to even older solar power plants.After a lot of controversy,Spain changed the FIT rules in the middle of the game through a retroactive FIT Law drawing howls of protest from solar investors like pension funds which have sued the government.

Spain is now also pursuing the solar industry by cracking down on power plants which connected after 2008 but got the FIT for 2008 power plants.Almost 304 solar power plants have been deemed illegal.Spain is reviewing the all the 9000 plants and till now almost 30% of the plants being reviewed have had their subsidies stopped or FIT changed.Don’t know why it took Spain 3 years to crack down on subsidy fraud when everyone knew that massive solar fraud had taken place during the boom as everyone rushed to put up a solar power plant during the solar gold rush.

Spain watchdog halts premiums for 304 solar plants

Spain’s energy watchdog ruled on Thursday to provisionally suspend paying premiums to 304 solar plants which failed to show they were up and running before subsidies were capped in 2008.

The National Energy Commission (CNE) recalled in a statement that it had provisionally suspended another 347 solar plants on March 29.Last year the CNE began investigating 9,041 photovoltaic plants, of which 840 have waived a premium of 475 euros ($683.9) per megawatt-hour and accepted one of 326 euros/MWh.Spain’s benchmark wholesale power market price on Thursday was 44.43 euros/MWh.Of the remainder, 2,021 plants have been examined and 651 suspended. The government has the final say on suspensions.