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Posts Tagged ‘Czech Republic’

Cyber Attacks Force EU to Close Emission Trading System

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, Natural science, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 22.01.11 at 03:15

A series of cyber-attacks on national registries, where carbon permits are stored, have forced the EU to close its emissions trading system (ETS) for at least a week. The European Commission posted the announcement on its website on Wednesday after Czech Republic-based firm Blackstone Global Ventures said about €6.8 million of carbon allowances appeared to have disappeared. Thefts on electronic registries in Austria, Greece, Poland and Estonia have also been reported over the last days.

“They will over time undermine the credibility of carbon trading as a policy measure.”

Kjersti Ulset


After discovering unauthorized trading on its account on Wednesday, Blackstone contacted the Czech registry OTE AS, which promptly closed all operations and began an investigation. The Paris-based BlueNext SA, operator of the world’s biggest spot exchange for permits, followed suit, as did registries in Poland and Estonia, before the EU finally imposed a region-wide shutdown.

It’s not the first time cyber criminal have been trading stolen permits at the international ETS market, but never has the activity been so comprehensive that the regulators have been forced to close the whole market.

“Incidents over the last weeks have underlined the urgent need for enhanced security measures,” the EU commission says in its announcement of the closure.

The bloc’s ETS system will be down, at least until 26 January.

Full statement

Q&A’s

A Criminals Market

According to The Guardian, European Authorities estimate that up to 90% of the whole market volume is plain fraudulent activities.

Belgian prosecutors highlighted the massive losses faced by EU governments from VAT fraud today after they charged three Britons and a Dutchman with money-laundering following an investigation into a multimillion-pound scam involving carbon emissions permits.

The three Britons, who were arrested last month in Belgium, were accused of failing to pay VAT worth €3m (£2.7m) on a series of carbon credit transactions.

European authorities believe the EU has lost at least €5bn to carbon-trading VAT fraud in the last 18 months.

Last month, the European police agency Europol reported that the European Union’s Emissions Trading Scheme had been victim of fraudulent trading activities over the past 18 months, worth €5 billion for several national tax revenues.

Europol, the EU’s law-­enforcement operation, fears the fraud will be used in other areas, especially gas and electricity trading markets, after criminals found VAT fraud was one of the most lucrative financial frauds.

The Most Lucrative Financial Fraud

Wednesday’s announcement and similar cyber-attacks have also damaged the EU initiative, together with reports of tax fraud and the recycling of used credits, the EUobserver.com reports.

“They will over time undermine the credibility of carbon trading as a policy measure,” says Kjersti Ulset, manager at Point Carbon, a company that reports on Europe’s emission trading, carried out in a network of registries across the union.

Despite its pioneering position, Europe’s ETS system has attracted criticism over its six years of operation, with some businesses saying it threatens the bloc’s competitiveness, while NGOs argue emission thresholds have been set too high.

By placing a price on carbon, Europe’s trading system is designed to lower company emissions and therefore protect the environment from global warming. Corporations received emission permits for free under the first phase (2005-2007) of the scheme. Some, however, are forced to pay for a portion of their permits.

The European emission trading system is the world’s largest, as the US plans for a similar cap-and-trade scheme was blocked by the US Senate last year.

Carbon permits are, however, traded as ordinary securities at the Chicago Carbon Exchange.

Brussels wants to see energy companies buy all their permits with their own money from 2013 and onwards, with other heavy industries gradually phased in by 2020.

China experts suggest pilot ETS projects could appear in Beijing’s next five-year plan, set to be approved in March.

Here at The Swapper we have been skeptical to the ETS all along.

It’s an artificial market, created on basis of nice thoughts, without a real supply/demand situation and is regulated in a way the is more similar to a pharmacy than a financial market.

But what is really worrisome, is the sharp increase in this kind of activity.

Just wait till you see the Chicago Board Option Exchange gets hacked!

Related by The Swapper:

EU Member States Disagree On Debt Figures

In Health and Environment, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 19.08.10 at 17:53

I’ve been expecting something this: According to the EUobserver.com,  nine EU member states have proposed that the EU statistics on public debt should reflect which country has already reformed its pension system and therefore has a higher level of borrowing. But Germany warns against the move – of course –  saying it will cause confusion. (As if that is possible…)

“If you give in to nine member states you just water out the Stability and Growth Pact, which could be a huge problem.”

Felix Roth

“Maintaining the current approach to debt and deficit statistics would result in unequal treatment of member states and thus effectively punish reforming countries,” the nine EU members says in a letter last week addressed to the EU’s special task force on economic governance.

The letter is signed by officials of Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Sweden.

The text, seen by the EUobserver, says the introduction of state-funded pension schemes was “critical for enhancing the long-term stability of Europe’s public finances.”

“But the experience of member states that have introduced such reforms is that they have led to a significant deterioration in the … statistics of their general government debt and deficit,” it adds, referring to “fundamental unfairness and inefficiency in the current Stability and Growth Pact.”

The basis of the reforms in central European and Baltic countries lies in transformation of a single distributive pay-as-you-go pension system based on the principle of solidarity between generations to a pre-funded capital-based system.

German Skeptics

The German finance ministry said on Tuesday that it is “very skeptical” about making a change which could make figures from the relevant countries “more difficult to interpret at the EU level.”

“It would also disadvantage governments that have chosen different ways of reforming their pension systems and share the costs of the reform differently,” the German communique noted, according to Bloomberg.

The European Commission, said on the same day that it is mulling over its position on the issue.

“Of course the commission would like the criteria on public debt to be strengthened and to be taken more seriously so it is highly relevant that this matter be raised now,” the body’s spokesman Amadeu Altafaj told reporters.

The EU executive aims to react to the letter ahead of the next meeting of the taskforce on September 6th.

The taskforce, led by EU Council President Herman Van Rompuy, is looking into new EU fiscal rules designed to prevent a repeat of the recent financial crisis.

Felix Roth, a Brussels-based analyst from the Centre for European Policy Studies think-tank, have landed on German side of this debate.

“If you give in to nine member states you just water the Stability and Growth Pact down, which could be a huge problem, as we have seen now during the crisis,” he says to the EUobserver.com.

Anyway – the show will certainly go on for a while more.

Related by the Econotwist:

Internal Wrangles Could Leave EU Without 2011 Budget

EU Wants To Tax Bonds Of Deficit Countries (And Old People)

EU’s Administrative Costs Set To Rise 4,4% In 2011

Warns Against Euro Zone “Elite”

Transantlantic Bailout Buddys Agree To Disagree

Bundesbank: Ireland Will Destroy The Euro Zone

Bundesbank Suspects A French Conspiracy

Secret Plan To Undermine The EU Parliaments Authority?

Germany’s Manic Depression

Citigroup: Euro Zone No Longer A Single Economy

EU-US Top Leaders Agree To Meet In Lisboa On November 19th

E.U. Parliament To Investigate Euro Zone Bailout

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Goldman Sachs: Good Morning Europe!

In Financial Markets, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 21.06.10 at 10:31

Goldman Sachs seem to have found a new wonder-boy, and perhaps a heir to chief economist Jan Hatzius, in its new Europe analyst Erik Nielsen. At least he got style, a sense  of humor and is just as crazy about soccer as most Europeans. He also show some profound insight on the diversified European economy. Here’s Mr. Nielsen’s thoughts on Europe on a fine Saturday evening in Chiswick.

“With no particular reference to Denmark’s fine victory this evening, I am just wondering what European football would look like had it not been for the smaller countries.”

Erik F. Nielsen


“With no particular reference to Denmark’s fine victory this evening, I am just wondering what European football would look like had it not been for the smaller countries – be it Denmark, the Netherlands, Switzerland, or Serbia … Its certainly difficult to see much hope in England, France, Spain or Italy – or in Germany after that last performance.”

Away from football, these are my thoughts on Europe on this fine evening in Chiswick:

We are through another week of good real-economy data releases and (grudgingly) improving markets.

The EFSF has been formally established. Along with the Commission’s and IMF money, I think it’s a serious defence mechanism which ought to help further stabilise markets.

Stress tests for the banking system will be published next month. Good, because that’s what the market demands, but I worry we might be heading into a disappointment because markets might expect testing against extreme tail-end risks considered as absurd by policymakers.

The ECB has now bought €47bn worth of sovereign debt – still peanuts in any reasonable comparison, but I think they may be looking to wind down the purchases once the EFSF is up and running in July.

The IMF spoke this past week on Greece (okay with program); Spain (happy with policy reforms); and France (marginally critical on fiscal – too polite).

G20 meeting this coming week; I wonder if the heat will turn on Germany now that China has announced a re-introduction of some FX flexibility.

We are heading into PMI-week in the Euro-zone; we are looking for slight improvements.

The UK will see the government’s emergency budget on Tuesday; big budget cuts on their way.

The Swiss National Bank will publish its May balance sheet this week confirming their huge FX-interventions.

In Sweden we’ll get the key KI/NIER economic tendency survey on Wednesday. It’s already at its highest level since August 2007, but we remain shamelessly optimistic.

Poland holds presidential elections tomorrow with a likely second round on July 4. Outcome very important for policies.

The central banks in Norway, Hungary and the Czech Republic will all meet this week to consider their interest rates; we expect all three to leave rates unchanged.

The IMF arrives back in Ukraine on Monday for a week’s talk on how to restart the program. We do not expect agreement this week.

Here’s a copy of the detailed analysis, provided by Zero Hedge.

Related by the Econotwist:

DnB NOR Finds Markets Participants EURNOK Expectations “Remarkable”

Global Economy On Fast Track To Disaster

2010 EU Deficit Exceed 7% – Commission Suggest “Cold Showers”

Fitch: Spanish House Prices To Fall Another 20%

Deficit Crisis: Cyprus, Denmark And Finland Join The Watchlist

Pressure On Spain To Cut More

EU Officials Fears Second Depression And War

EU Prepares For Spanish Bailout, Newspaper Says

EU Deficit Increased By14 Billion Euro In First Quarter Of 2010

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Deficit Crisis: Cyprus, Denmark And Finland Join The Watchlist

In Financial Markets, International Econnomic Politics, National Economic Politics on 17.06.10 at 12:01

Cyprus, Denmark and Finland have joined the ranks of EU member countries with government deficits deemed high enough to pose a threat to the wider European economy. The commission is now recommending they be placed on its list of countries warranting further scrutiny of public finances. Until recently, these countries seemed to be doing well.

“The sudden turnabout shows the severity of the economic crisis, which has wreaked havoc with public spending.”

Olli Rehn


Including the three newcomers, EU’s watchlist now consist of all but one of the 27 member countries. Only Luxembourg is not running a deficit that is well over 3% of gross domestic product – the official EU limit, the EU commission write on its website.

Luxembourg finished 2009 with a shortfall of around 2%.

Cyprus recorded a shortfall of 6.1% of GDP last year.

Deficits are expected to reach 5.4% this year in Denmark and 4.1% in Finland.

Setting Deadlines

As it does with all countries under scrutiny, the commission has proposed deadlines for Cyprus, Denmark and Finland to correct their deficits.

Finland would have until 2011, while Cyprus and Denmark would have until 2012 and 2013 respectively.

So far, 12 member countries have taken what the commission considers to be effective action to close their gaps, cutting government spending and introducing revenue-boosting measures as promised.

The Fab Four

Among them are Ireland, Italy, Portugal and Spain – 4 countries at the center of concern about high national debt looming over the euro zone, the EU commission points out.

Germany, meanwhile, has moved to boost consumer spending – in response to worries that the country’s fat trade surplus is hurting other EU economies.

But the country has also outlined deficit-reduction measures for 2011 and beyond.

The other countries reviewed in the latest commission report are Austria, Belgium, the Czech Republic, France, the Netherlands, Slovakia and Slovenia.

A Sudden Turnaround

Until recently, both Cyprus, Denmark and Finland seemed to be doing well, the EU commission writes.

EU monetary commissioner Olli Rehn says the sudden turnabout “shows the severity of the economic crisis, which has wreaked havoc with public spending.”

The 3% limit on deficits – part of the EU’s stability and growth pact – is meant to prevent imbalances that could undermine confidence in the euro zone, as happened last month during the Greek debt crisis.

More on EU’s excessive deficit procedure

Related by the Econotwist:

EU Deficit Increased By14 Billion Euro In First Quarter Of 2010

Danish Homeowners Are Insolvent

Denmark In Danger Of Becoming The “New Greece”

Pressure On Spain To Cut More

EU Officials Fears Second Depression And War

Finns Outraged By Swedish Plans To Bring Estonian Builders To Finland

Swedbank Buy Greek Bonds With Estonian Money

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Fitch: Credit Markets Still Deteriorating

In Law & Regulations, Learning, Quantitative Finance, Trading software on 20.05.10 at 20:08

Equity markets continued to signal credit deterioration, with the five-year Probability of Default (PD) Index moving out across all sectors, another 3% on average, according to Fitch Ratings.

“Although clearly calmed by EU and IMF bailout efforts, much uncertainty remains in the credit markets, thereby making continued volatility in CDS spread likely.”

Fitch Ratings

“Globally, CDS spreads tightened 7.4% last week after widening substantially the week before. Despite the CDS tightening, CDS IR downgrades outnumbered upgrades 4.5 to one, as four consecutive weeks of CDS widening resulted in 168 issuers establishing wider trading patterns. Although clearly calmed by EU and IMF bailout efforts, much uncertainty remains in the credit markets, thereby making continued volatility in CDS spread likely,” the rating agency says.

Equity markets continued to signal credit deterioration, with the five-year Probability of Default (PD) Index moving out across all sectors, another 3% on average.

Telecommunications, sovereigns, and financials saw the most CDS firming after having led the CDS widening over the past several weeks. Despite outperforming the broader market last week, all three sectors continue to price wide of historical trading levels.

The oil and gas industry lagged the CDS tightening last week. Credit protection on oil and gas companies is now pricing widest relative to historical trading patterns.

And technology underperformed across both the debt and equity markets, according the research.

More Sovereign Volatility To Come

“After tightening 17.5% last week on news of bailout funds pledged by the EU and IMF, CDS on European sovereigns resumed widening on Monday, 3.6% on average. On average, CDS on European sovereigns continue to price 22% wide of historical trading levels, indicating that much concern remains over existing debt levels and the countries’ ability to carry out necessary fiscal reforms. The table below highlights the 10 European sovereigns that underwent the most CDS widening on Monday, May 17. Despite undergoing tightening last week, CDS on Greece, Portugal, France, Belgium, and Spain continue to price well wide of their historical trading levels. Furthermore, CDS IRs for Portugal, Ireland, and Spain remain five to six notches below their Fitch agency ratings. The Czech Republic stands out as an outperformer, pricing tight of its established trading pattern and maintaining a CDS IR one notch above its Fitch agency rating,” the analysts writes.

“For each entity, the CDS IR, daily change in the CDS IR, relative differential, and the gap between its CDS IR and agency rating are included. Based on historical analysis, notch differentials between the CDS IR and agency rating are highly predictive of future rating agency actions,” they add.

Here’s a copy of the latest update from Fitch.

Related by The Swapper:

Killing My CDS Softly

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Hackers Steal CO2-emission Permits Worth $4bn

In Financial Markets, Health and Environment, International Econnomic Politics, National Economic Politics on 06.02.10 at 14:46

Emissions trading registries in a number of EU countries were shut down this week as a result of a phishing scam, tricking traders into giving away their emissions allowances. A handful of firms fell for the trap and ended up giving away their CO2 emissions allowances to the crooks, who will now be able to sell the permits worth a total of USD 4 billions.

“This happens to banks, Visa, Mastercard about once or twice a month. And this is the same sort of thing. It’s not something intrinsic to the ETS. This could happen to anyone.”

Barbara Helfferich


The European Commission told EUobserver that illegal transactions so far had only been reported in Germany and the Czech Republic. Brussels says that the registries will re-open once they have taken the appropriate measures to deal with the scam, including warning users and resetting passwords.


Although emissions trading was still able to continue via the European Emissions Exchange, registries in nine member states – Belgium, Denmark, Spain, Hungary, Italy, Greece, Romania and Bulgaria Germany – closed to prevent any further losses, according to reports in the German press. Other national registries, notably those in Austria, the Netherlands and Norway, were quicker to react and while registration was suspended in these countries as well, they reopened on Tuesday.

The European Commission told EUobserver that illegal transactions so far had only been reported in Germany and the Czech Republic. Brussels says that the registries will re-open once they have taken the appropriate measures to deal with the scam, including warning users and resetting passwords.

Similar to online banking scams in which an email directs you to a website that is a copy of your own bank’s webpage, and then asks for your bank details, these criminals reproduced the sites of the German and Czech registries. The criminals sent emails last Thursday to firms in Europe, Japan and New Zealand, asking them to offer up their registration details.

A handful of firms fell for the trap and ended up giving away their CO2 emissions allowances to the crooks, who will now be able to sell them on. Financial Times Deutschland on Wednesday reported that one firm had lost €1.5 million as a result.

The European Commission, like any bank or online shop facing the same situation, is caught between the need to get out the word to firms to prevent them falling for the trap and undermining confidence in the Emissions Trading Scheme (ETS) by publichising the fact.

“We have to be careful not to blow this out of proportion,” EU environment spokeswoman Barbara Helfferich told EUobserver. “This happens to banks, Visa, Mastercard about once or twice a month. And this is the same sort of thing. I receive these emails all the time. I just delete them.”

“It’s not something intrinsic to the ETS. This could happen to anyone.”

Well, the good news must be that emission trading finally seem to be taken seriously.

Link to original article.


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