Malaysia taps into the growing importance of the redback:Yuan

The Society for Worldwide Interbank Financial Telecommunication says yuan usage worldwide grew 15.6% between July and August this year.

MALAYSIA’S love affair with the yuan or renminbi is growing, and it is easy to see why.

For one thing, China’s economic clout is rising. It is now the second largest economy in the world, and with ongoing financial reforms by the Chinese government, the yuan is expected to eventually rise to match the country’s economic stature.

For another - and more importantly - China has, in recent years, been growing to be an increasingly significant trading partner to many economies in the world, especially in Asia, including Malaysia.

Bilateral trade between Malaysia and China, for instance, is now seven times higher than it was 20 years ago.
And China has emerged as Malaysia’s largest global trading partner since 2009.

Last year, Malaysia’s total trade with China was valued at RM167bil, up 14% from the preceding year, and accounting for 14% of the country’s total trade.

The Government expects the value of Malaysia’s total trade with China to double in the next five years.

China’s rising prominence, in Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz’s words, presents “a new operating environment” that requires “dynamic response”.

At a recent seminar entitled “Renminbi Trade Settlement and Investment”, Zeti said one of the changes that would shape the international financial system in the years to come was the wider role of the yuan in trade and finance.

As it is, such trend is already taking shape, with yuan usage across the world increasing progressively.

Wider yuan usage 

According to Society for Worldwide Interbank Financial Telecommunication (SWIFT), yuan usage worldwide grew 15.6% between July and August this year, compared with an average decrease of 0.9% across all other currencies. SWIFT further noted the yuan has moved up one position to be the 14th mostly used world currency, with a market share of 0.53%, up from 0.45% in July 2012.

Standard Chartered plc’s report supports claims that the global use of yuan is on the rise, for trade settlement, in particular.

The international bank notes that Asian and European firms, led by those from Singapore and London, are increasingly open to using yuan.

“We see many European and Asian clients shifting away from settlement in US dollars,” Standard Chartered’s Hong Kong-based foreign exchange analyst Eddie Cheung wrote in his report.

Reports by foreign media suggest that yuan trade settlement could run between US$350bil and US$450bil this year, up from US$300bil last year.

It is understood that China is also quietly working on developing new yuan financial centres around the world to expand the international use of the currency.

At present, Singapore and London are the only cities outside Hong Kong that have been allowed to serve as yuan trading centre. China is reportedly planning for the next regional hubs for settling trade deals in yuan to be set up in Latin America and the Middle East.

As part of an initiative to encourage a wider use of its currency and to manage volatility in uncertain economic times, China has been actively seeking to establish ilateral swap agreements with foreign central banks since the onslaught of the global financial crisis in 2008.

To date, China has managed to set up 20 bilateral local currency swap agreements, worth a total of 1.6 trillion yuan (RM780bil), with central banks of countries within and outside of Asia.

This list includes Malaysia, South Korea, Iceland, Argentina, Pakistan, the United Arab Emirates, Turkey and Australia.

China’s bilateral swap agreement with Malaysia is worth 180 billion yuan.

Zeti notes that Malaysia’s trade settlement in yuan is still at a paltry 1% of the country’s bilateral trade with China. “There is, therefore, a significant potential for this to increase,” she says.

Bank Negara is currently on a mission to promote a wider use of yuan for trade settlement and investment among Malaysian corporations as a way to generate cost savings and minimise exchange rate risks.

“A wider use of yuan is only a natural progression, led by China’s rapidly expanding trade volume and its increasing role as the driver of global economic growth,” explains RAM Holdings Bhd group chief economist Dr Yeah Kim Leng.

“For Malaysian businesses with yuan obligations, the shift to the use of yuan will provide a natural hedge and help them reduce risk and lower cost,” he adds.

According to Zeti, Malaysia’s interest in yuan is also notable in the investment option, with yuan deposits in the country’s banking system having tripled within the first seven months of this year.

Focus on Dim Sum bonds

Meanwhile, there is also an ambition to promote Malaysia as the next hub for yuan-denominated debt (or popularly known as “Dim Sum bonds”) in Asean after Singapore. This is led by the growing interest in raising financing in yuan to meet funding requirements.

“Malaysia is well-positioned to realise this growth potential in yuan-denominated bond and sukuk, given our market size and supporting infrastructure,” Zeti argues.

She, however, says the number and timing of yuan-denominated bond and sukuk issuances will depend on the approvals of Bank Negara and the Securities Commission.

To date, there are only two issuances of offshore yuan-denominated sukuk out of Malaysia and a yuan-denominated bond issuance by Malaysian corporations.

“Ultimately, the potential of Malaysia of becoming a regional yuan debt hub will have to be led by natural market forces, that is, supply and demand,” Yeah points out.

At present, Europe, led by Luxembourg, outstrips Asia (excluding Hong Kong) in terms of both the number of issues and the number of issuance locations.

Analysts, however, believe Asia (excluding Hong Kong) will soon catch up.

Anchor currency

According to the Asian Development Bank (ADB), the yuan will eventually become the “anchor currency” for Asia.

This destiny is cemented by the growing use of the currency in the region’s trade and financial markets.

This, however, does not necessarily mean that the yuan will become part of the foreign exchange reserves of Asian countries, most of which still hold US dollar, euro and the Japanese yen, says ADB. Rather, it means that countries that use yuan widely will manage their currencies according to the yuan’s movement.

The consensus view is that there is still some way to go before the yuan can become a reserve currency. That will involve further openness of China’s own financial markets.

At present, the yuan has yet to qualify as a reserve currency due to its lacks of full convertibility as defined by the International Monetary Fund.

Nevertheless, many central banks have already started to diversify their reserves into the yuan. One of these is Bank Negara, which became the first central bank in the world to announce the inclusion of yuan in its foreign reserves in 2010.

It has been five years since China embarked on a plan to internationalise its currency.

Analysts argue that the process of internationalising the yuan is already progressing smoothly, but gradually in a managed way.

In their working paper entitled “Will the renminbi rule?” authors Eswar Prasad and Lei Ye argue that although China still has extensive capital controls in place, they are being “selectively and cautiously dismantled”.

“China’s capital account is becoming increasingly open in actual terms even though by this measure it remains less open than those of the reserve currency economies – the euro area, Japan, Switzerland, the UK and the United States,” they argue.

According to CIMB Research chief economist Lee Heng Guei, China has taken small yet quite successful steps in its quest for internationalisation of the yuan.

However, he says, full-fledged internationsation of the yuan is a still a distant goal.

“China is clearly more influential than in the past and the internationalisation of the yuan has sped up. But it will take many more years, perhaps another five to ten, for the yuan to be fully global and convertible,” Lee argues.

Undervalued or not?

Now, China’s currency policy has for long been a contentious issue with many western developed nations, especially the United States. There has been growing political pressure on China, led mainly by the United States, to increase the value of the yuan.

The United States has been arguing that the yuan is significantly undervalued, hence giving China’s exporters an unfair price advantage over US manufacturers.

The undervaluation of yuan, which, to some, warrants China being tagged a currency manipulator, has even become an important scoring point in the current US presidential campaign between Republican candidate Mitt Romney and incumbent Barack Obama.

A semi-annual report on the yuan by the US Treasury is due to be released on Monday.

It remains to be seen whether the release of the report will be delayed until after the Nov 6 US presidential election, given the political sensitiveness of the issue.

To be fair, since the yuan’s depeg from the US dollar in July 2005, the Chinese currency has appreciated more than 30% against the greenback.

And reaffirming its policy stance of further exchange rate flexibility, the Chinese government in April widened the trading band from +/-0.5% to +/-1% for the yuan against the US dollar.

Peterson Institute for International Economics estimated the yuan four years ago was undervalued by 31.5% against the US dollar. The latest estimate by the Washington think tank in May indicates that the yuan is now undervalued by only 7.7% against the greenback.

CIMB’s Lee contends that the yuan’s appreciation has to be a gradual and longer-term affair to avoid disrupting China’s economic development.

“The gradual and consistent yuan appreciation can be considered a stabilising factor for the (Chinese) economy, especially its export-oriented sector,” he explains.

According to the Royal Bank of Scotland, the yuan’s value is unlikely to change much in the short term, but further medium-term appreciation on account of productivity catch up remains a possibility.

“If the global economic outlook improves in 2013, the yuan is likely to see further medium-term strengthening, with the pace depending on current account developments,” RBS’ Hong Kong-based analyst Louis Kuijs notes.

By CECILIA KOK
cecilia_kok@thestar.com.my


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China and Asian central banks wary of QE3 inflation risks

BEIJING - China's central bank governor has warned that quantitative easing policies worldwide could cause inflationary risks, state news agency Xinhua said on Saturday.

The remarks by People's Bank of China (PBOC) Governor Zhou Xiaochuan come even as analysts credit policy easing from G4 central banks - the US Federal Reserve, the European Central Bank (ECB), the Bank of Japan and the Bank of England - in the third quarter of the year as underpinning business confidence.

Chinese data on Saturday offered a sign that G4 policy easing was being felt in the world's second biggest economy, with trade numbers showing exports grew at roughly twice the rate expected in September while imports returned to the path of expansion.

"The data shows both imports and exports are improving - especially a rebound in export growth reflects a rising confidence after the U.S. and European countries launched further easing policies last month," said Xue Hexiang, an analyst at Guotai Junan Securities in Shanghai, after the trade numbers were released.

Across Asia, central banks are wary about the potential inflationary impact of the Fed's latest quantative easing, dubbed QE3, as well as policy stimulus unveiled by the ECB.

Central banks "should consider draining excessive liquidity injected into the market and eliminate inflationary pressure in the long-term", Zhou was quoted as saying by Xinhua, which cited the Journal of Public Research, a magazine published by the People's Bank of China.

China's central bank said in September that it would "fine tune" policy to cushion the economy against global risks while closely watching the possible impact from recent policy loosening in the United States and Europe.

China's economy has slowed for six successive quarters and economists expect that Q3 growth data due on Oct. 18 will confirm the slide extended for a seventh. The consensus forecast in a Reuters poll is for annual growth of 7.4 percent in Q3, down from Q2's 7.6 percent.

Under the banner of policy fine-tuning, China's central bank cut interest rates twice in June and July and lowered banks' reserve requirement ratio (RRR) three times since late 2011, freeing an estimated 1.2 trillion yuan for boosting loans.

But it has refrained from cutting interest rates or RRR since July. Instead, it has opted to inject short-term cash via its open market operations into money markets to ease credit strains.

China's annual rate of inflation was 2 percent in August, half the 4 percent targeted by the central bank, though nudging higher from July's 1.8 percent rate. The PBOC has fought hard to bring inflation down from a three year peak of 6.5 percent hit in July 2011 and is determined to contain price pressures.

Consumer price data for September is due to be published on Oct. 15 and the benchmark Reuters poll has a consensus forecast for annual inflation of 1.9 percent.

Meanwhile China's long-term inflationary pressure could be alleviated by the slowing rate of acquisition of foreign exchange reserves, Zhou said.

China's official reserves, the world's largest at US$3.29 billion as at the end of September, have been relatively steady this year as global trade has slowed and Chinese exports along with it.

Foreign reserves are a key component of money supply. A slowdown in accumulation implies a reduction in the rate of monetary expansion and consequently easing inflation pressure.

Zhou, writing in the official China Financial Research Journal, said reserves would not keep growing endlessly as the share of the current account surplus in the country's economy was already very high and would drop in future, according to a report in the Security Times newspaper. REUTERS

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Golf clubs in Malaysia face closure with new tax

Golf industry cries foul over new form of taxation and there is definitely a cause for concern.

Golf clubs in Malaysia face an uncertain future with the new tax issue hanging over their heads.

THE Malaysian golf industry has come under threat of closure again and this time it comes from the Inland Revenue Board.

The IRB now wants to tax all the 180 proprietary clubs (private commercial clubs) on the advance licence fees since the clubs were set up.

The advance fee is the collection of 80% of membership fees that they collect when folks first sign up.

This amount is collected in advance and slowly released into the balance sheet of the companies for the period of the trust deed.

While the industry disputes that the money was taxable as it was a sum that they had to refund if there was a breach of the trust deed, the IRB said it was income to the club and thus is taxable.

The total amount the authorities want the clubs to cough up is more than RM600mil – a sum the golfing industry cannot afford to pay and this could spell the end of many clubs in the country.

A spokesman for the Malaysian Association of Golf & Recreational Club Operators (Magro) said it was not as if the clubs had not been paying taxes or had been hiding the advance fee from the IRB.

He said that the clubs had been in touch with the IRB from the start and had proposed the normal way of taxation based on services.

“This was accepted until 2010 when the IRB wrote to a few clubs and after conducting field audits, decided that the advance fee was taxable.

“The total bill is over RM600mil and they wanted to back tax us all the way to the day the very first member signed up,” the spokesman said.

However, the IRB after several rounds of discussion agreed to cap the backdate of taxation and allow the amount owed to be paid over three years.

A club manager of a popular club in Petaling Jaya said even that concession by the board is totally unacceptable because it will mean the effective end of the golf industry in Malaysia.

“All our profits for the next few years will be wiped out just paying this back taxes. Our club owners will definitely want to exit this business.

“Most of the land we sit on are worth a lot of money and it will make sense for the owners to close down the club and build residential units instead.

At the most, the value of a golf course is only about RM200 per square foot but the houses, condominiums and shops built on top of these land will be worth thousands of ringgit per square foot,” he added.

Already there are several clubs in the Klang Valley, which have either been closed down like Kajang Hill GCC or downsized like KGSAAS, because it is so much more profitable to develop the land into residential and commercial projects.

The owners could also go the way of Palm Garden Golf Club where the owners bought back all the sold membership and turned it into a “premier public course” and thus paying taxes only on income earned from services.

There are about 500,000 members to the 180 proprietary clubs (this ruling by the IRB does not affect members club, at least, not yet) who will eventually lose out in terms of facilities.

There is also the 50,000 direct and indirect workers who will be jobless once the clubs close down.

There is also a tremendous loss of tourism dollars. A total of 120,000 foreign golfers play in Malaysia each year.

They spend an average of four hotel room nights per visit translating into 480,000 room nights. Each of them spend an average of RM300 per night for accommodation and a further RM1,500.

This means that if the golf industry collapsed the country’s economy would lose RM864,000,000 annually.
Let’s not be pound wise penny foolish. The tax dollars can be found through other means and let’s hope the authorities realise this.

CADDY MASTER By WONG SAI WAN

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Cost of vehicle ownership in Malaysia

MALAYSIA is perceived to be one of the costlier countries in the region when it comes to vehicle prices. But industry observers believe that this is compensated by the fact that the country’s fuel prices are heavily subsidised, and that it also enjoys the lowest interest rates in South-East Asia.

“One should not compare vehicle cost of ownership in the region purely based on the price of the car alone,” says Malaysian Automotive Association president Datuk Aishah Ahmad.

According to data by the Malaysia Automotive Institute (MAI), the average interest rate in Malaysia for a loan tenure of between 60 months and 108 months is between 2.5% and 3.6% - which is the lowest in Asean.

Interest rates in Vietnam is the highest, which has a flat rate of 16% per annum for loans that range between 12 months and 60 months.

“Given the fact that Malaysia’s interest rates are the lowest in the region, as well as the fact that fuel prices are subsidised, the total cost of vehicle ownership is one of the lowest in Asean,” says MAI chief executive officer Madani Sahari. The cost of interest rates used in MAI’s calculations is over 5 years.

The MAI is the think-tank for the Malaysian automotive industry.

Madani notes also that the price of subsidised RON 95 in Malaysia was one of the lowest in the region at RM1.90 per litre. Comparatively, the cost for the fuel in Thailand is RM3.80 per litre, Indonesia (RM3.35 per litre), Singapore (RM5.10 per litre), Vietnam (RM3.60 per litre) and the Philippines (RM3.20 per litre).

“In terms of road tax, we are also quite competitive in Asean. Malaysia is still cheaper compared with countries such as Thailand and Indonesia and comparative to Vietnam and the Philippines,” he says.

Perusahaan Otomobil Kedua Sdn Bhd managing director Datuk Aminar Rashid Salleh says Malaysians are blessed to have their fuel subsidised.

“We have low fuel prices and interest rates. All of these factors have contributed to Malaysia’s low cost of vehicle ownership.”

Madani points out that over a five-year period, the average road tax and insurance in Malaysia was among the lowest in the region, costing RM1,990 and RM15,310 respectively.

The five-year cost of road tax and insurance in Singapore was the highest at RM13,779 and RM39,806 respectively, compared with Indonesia (RM9,186 and RM22,965), Thailand (RM2,297 and RM33,682) and the Philippines (RM1,531 and RM14,238).

When comparing vehicle prices, especially those of popular international marques such as Toyota, Honda and BMW, Madani points out that prices in Malaysia were still lower compared with countries such as Singapore and Vietnam.

According to data from the MAI, a 1.5-litre Toyota Vios (as at September 2012) costs RM87,313 in Malaysia but costs RM88,456 and RM303,136 in Vietnam and Singapore respectively. The Vios is cheapest in the Philippines at RM60,271.

A brand new 1.5-litre Honda City meanwhile retails for RM88,443 locally and costs RM106,090 and RM295,800 in Vietnam and Singapore respectively and lowest in the Philippines at RM61,472.

The BMW 3 series, a popular premium model that is represented in most Asean countries, costs RM238,800 in Malaysia. It costs RM248,200 and RM541,200 respectively in Vietnam and Singapore. It costs the least in Indonesia, retailing at RM191,900.

However, when taking into account the vehicles’ selling price, down payment and loan repayment (including interest rates), road tax and insurance, as well as the fuel prices of the different countries, the total vehicle cost of ownership for a 1.5-litre Toyota Vios is RM130,382, which is the second lowest in the region after Philippines, where the total vehicle cost of ownership is RM128,933.

Total vehicle cost of ownership for the Toyota Camry (2.5-litre) in Malaysia is also second lowest in the region at RM243,182. The total vehicle cost of ownership for the Toyota Altis (1.8-litre) in Malaysia is however the cheapest in the region at RM163,973.

After the Philippines, Malaysia also boasts the second lowest total vehicle cost of ownership for the Honda City (1.5-litre), Civic (1.8-litre) and Accord (2.4-litre) models in the region. Malaysia also has the lowest total vehicle cost of ownership for the BMW 3 series.

By EUGENE MAHALINGAM eugenicz@thestar.com.my

IMF aid to Europeans stirrings of resentment

Members feel Eurozone countries aren't willing to swallow the necessary tough medicine

Critical role: Last month, European Central Bank president Mario Draghi (right) gave the International Monetary Fund, headed by Christine Lagarde (left), an important new task: requesting that the Fund keep an eye on the behaviour of countries like Spain if the bank took measures to contain their borrowing costs. - PHOTO: REUTERS

IT IS one of the ironies of the eurozone crisis: the Europeans who have long dominated the International Monetary Fund (IMF) are now the ones borrowing its money and swallowing its advice.

The IMF, traditionally a lender to poor countries, now devotes more than half of its financial resources to the eurozone. Moreover, the fund and its managing director, Christine Lagarde, have emerged as the taskmasters that European leaders seem to need to flog them towards a solution to the crisis.

The Fund's critical role in Europe has revitalised the organisation's claim to relevance in world affairs. Last month, Mario Draghi, president of the European Central Bank (ECB), gave the Fund an important new task: requesting that it keep an eye on the behaviour of countries like Spain if the bank took measures to contain their borrowing costs.

"The ECB wants an independent observer," said Manuela Moschella, an assistant professor at the University of Turin who studies the IMF. ''They want someone who can blow the whistle and say what is going on.''

But there is also resentment among some of the 188 countries that belong to the fund and supply its financial firepower. These discontents are likely to surface in Tokyo when the I.M.F. and the World Bank hold their annual meetings, which were to start Tuesday.

The United States and Canada, among others, have objected to the shift of resources to Europe at the same time that European countries have blocked changes that would give emerging countries a greater voice in making I.M.F. decisions.

Tough pill to swallow

Canadian leaders, in particular, have said that countries whose people live on a few dollars a day should not be asked to help maintain the European welfare state.

''The feeling is that the Europeans don't want to swallow the tough medicine,'' said Bessma Momani, a professor of political science at the University of Waterloo in Ontario. There is, she said, ''a more general sense that European society and way of life are passé.

''Before the beginning of the financial crisis in 2008, the fund provided almost no financial assistance to Europe. Now resources committed to the European Union, including Greece and Portugal, account for 56 percent of the I.M.F. total - (EURO)110 billion, or $143 billion.

The first European countries to seek I.M.F. help in recent years were former Soviet Bloc countries, like Latvia and Hungary in 2008, both of which are members of the European Union. The I.M.F. also played a main role in the Vienna Initiative in 2009, in which the European Union and commercial banks cooperated to prevent the collapse of the financial systems in Eastern Europe.

Management of the I.M.F. has long been dominated by Europeans, leading to accusations that the region is now getting preferential treatment. Since its founding in 1946, all of the fund's managing directors have been European.

''There is at least the suspicion that the European members will get easier terms'' for financing, Ms. Moschella said.

''This is really a threat to the credibility of the organization. I think the I.M.F. has behaved correctly, but the suspicion is there.

''European countries continue to contribute more money to I.M.F. coffers than they take back in loans. Germany's quota, or maximum financial commitment, is $14.6 billion, while France's is $10.7 billion. The largest contributor is the United States, with a quota of $42.1 billion out of a total for the fund of $238 billion.

Officials at the fund argue that the euro zone crisis has become a threat to the global economy, including poorer countries, and it is in everyone's interest to fix it. As members of the I.M.F. and financial contributors, European countries have as much right to ask for help as other members.

''When there are systemic crises that affect other countries in the world, it is natural for the fund to be involved,'' said Reza Moghadam, director of the fund's European department.

''The fund has huge depth of expertise in crisis management,'' Mr. Moghadam added. ''We have dealt with a lot of crises in the past, and there is huge institutional knowledge.

''Many analysts agree that there is no other organization with the clout, money or expertise to serve as outside arbiter to quarreling euro zone members.

''Expertise and impartiality - that's what they bring to the table,'' said Carl B. Weinberg, chief economist at the research firm High Frequency Economics in Valhalla, New York. ''They know how to walk into a government treasury and look at the books and know what they're seeing.'' Mr. Weinberg, as a banker earlier in his career, worked with the I.M.F. on debt restructuring programs in Mexico and other countries.

Ms. Lagarde has helped Mr. Draghi and U.S. leaders put pressure on European officials to move more aggressively to fight the crisis.

 European firewall

During a speech in Washington late last month, Ms. Lagarde beseeched European leaders to ''implement the European firewall - notably the European Stability Mechanism; implement the agreed plan for fiscal union; and, at the country level, implement the programs that are essential for growth, jobs and competitiveness.

''If, as expected, Spanish leaders ask for help from the European Central Bank, the I.M.F. would monitor whether the country kept promises to overhaul the economy and contain government spending. The E.C.B. does not want to take the risk of buying Spanish bonds, a way of lowering the country's borrowing costs, without such conditions.

The euro zone crisis has also presented the I.M.F. with unprecedented organizational challenges. Instead of dealing with one country, it must deal with the 17 members of the European Union that use the euro. They frequently do not agree, and decision-making is slow. In overseeing lending and restructuring programs in Greece, Ireland and Portugal, the fund has shared authority with the E.C.B. and the European Commission, with the three having come to be known as the troika.

''The fund's relationship with Europe is more complicated than anything it has ever been involved in,'' said Edwin M. Truman, a senior fellow at the Peterson Institute for International Economics in Washington.

While he said the fund had done a ''reasonable job'' in Europe, Mr. Truman also called the I.M.F.'s involvement on the Continent a ''political subterfuge'' because the euro zone countries were effectively outsourcing responsibilities they should be taking on themselves.Some observers say that European countries made the fund's task more difficult because they hesitated too long to ask for help, for reasons of pride.

''We should have let the I.M.F. in earlier in Greece,'' said Erik Berglof, chief economist at the European Bank for Reconstruction and Development. ''We could have maybe had an earlier solution to the Greek problem and not allow it to grow in magnitude before it was addressed.

''There is a risk that European leaders will repeat the same mistake in Spain, waiting to call in the I.M.F. until the crisis is acute. No national leader likes to take orders from an outside institution, especially in Europe, where countries are not used to being charity cases. The stigma and loss of sovereignty are likely reasons that Prime Minister Mariano Rajoy of Spain has delayed asking for help.The fund has learned from its own mistakes in places like Asia that too much austerity can be counterproductive, but was not always able to apply that experience. In Greece, for example, Germany and other northern countries insisted on a strict austerity program.''The I.M.F. has learned a lot how to design programs and structural reform measures and how to embed them in the local political system,'' Mr. Berglof said. ''That experience the European institutions didn't have from the beginning.

''Though the I.M.F.'s presence in Europe may not please everyone, it is likely to continue growing. No other institution, even the E.C.B., has the political independence or expertise needed to oversee restructuring programs in a country like Spain. Canada and other countries that resent paying for a European bailout are not likely to block one altogether.

Said Mr. Berglof of the E.B.R.D., ''There is a broader constituency that has a very strong stake in the resolution of the economic problems in Europe.

Political uncertainty

''The International Monetary Fund is cutting its global economic forecast yet again, calling the risks of a slowdown ''alarmingly high,'' primarily because of policy uncertainty in the United States and Europe, Annie Lowrey reported from Washington.

It foresees global growth of 3.3 percent in 2012 and 3.6 percent in 2013, down from 3.5 percent this year and 3.9 percent next year when it made its previous report in July. New estimates suggest a 15 percent chance of recession in the United States next year, 25 percent in Japan and more than 80 percent in the euro area.

Financial market stress, government spending cuts, stubbornly high unemployment and political uncertainty continue to hamper growth in high-income countries, the fund said. At the same time, the emerging-market countries that fueled much of the recovery from the global recession, like China and India, have continued to cool off, with global trade slowing.

By Jack Ewing, The International Herald Tribune