David Broonstroron writes:  U.S. Secretary of State John Kerry said he believed that, with effort and good faith on both sides, it would be possible to implement the Minsk agreements on Ukraine in coming months to allow for a lifting of sanctions on Russia.

Kerry said he and U.S. Vice President Joe Biden had met with Ukrainian President Petro Poroshenko to help ensure full implementation of the agreements.

“And I believe that, with effort and with bona-fide legitimate intent to solve the problem on both sides, it is possible in these next months to find those Minsk agreements implemented and to get to a place where sanctions can be appropriately, because of the full implementation, removed,” Kerry said.

Sanctions on Russia’s banking, energy and defense sectors, imposed in July 2014, are part of the West’s efforts to pressure Russia to help end the crisis in eastern Ukraine, in which more than 9,000 people have been killed since April 2014.

The United States has repeatedly linked a lifting of the sanctions to full implementation of the Minsk accords, which were agreed last February by Ukraine, Russia, France and Germany after the collapse of a ceasefire between Ukrainian forces and pro-Russian separatists.

The terms of the deal provide for a ceasefire, a pull-back of heavy weapons, prisoner exchanges, local elections in rebel-held areas and greater autonomy for these regions.

A U.S. State Department official, citing data from the International Monetary Fund, said this month that EU and U.S. restrictions imposed on Moscow had shaved about 1.5 percent off Russian economic output in 2015.

Russian President Vladimir Putin told Germany’s Bild newspaper this month that the sanctions were “severely harming Russia”, although the fall in global oil prices was having a bigger impact.

Goldman Sachs quickly saw the merits of owning its own mortgage firm so that it could bundle ever more lucrative mortgages, although the mortgages were being issued, like Bear Sterns, to people who had no income and no assets.

Criticism of US government leniency on Wall Street legal transgressions is now being covered widely – even by the National Mortgage Professional Magazine. On January 18, the trade publication ran an article about Sen. Elizabeth Warren (D-Massachusetts) condemning the most recent US government settlement with a “too-big-to-fail” financial firm, in this case Goldman Sachs, for illegal abuse of the mortgage market:

Sen. Warren denounced the agreement, noting that the settlement sum was “barely a fraction of the billions investors lost” while arguing that Goldman Sachs was not properly penalized for its actions.

“That’s not justice – it’s a white flag of surrender,” she wrote. “It’s time to end this farce. These companies think they’re above the law – and too many government officials go along with them. A first step would be to pass the bipartisan Truth in Settlements Act to shine more light on these backroom deals. A second step would be to get government officials who have the backbone to fight back.”

Warren’s comments were echoed by the nonprofit U.S. Public Interest Research Group.

The publication, which is geared toward professionals in the mortgage industry, also tellingly noted, “In announcing the [$5.1 billion] settlement, Goldman Sachs made no admission of guilt or error, and no executive from the New York-based financial giant will face criminal or civil charges.”

As we have noted in this space many times, the seemingly large financial penalties levied on Wall Street firms for illegal activity are not so large, in the context of those firms’ budgets: The fines are generally less than the revenue that the firms generated by engaging in the often fraudulent practices in the first place.

About $2.4 billion of the settlement is in the form of a government penalty. The bank has said that it securitized about $125 billion of home loans between 2005 and 2008, of which about $23 billion eventually soured. The penalty represents about 10 percent of investors’ losses.

Goldman can deduct the rest of the settlement, about $2.7 billion, from its future tax bills, according to a person familiar with the accord. The bank said the settlement will reduce its fourth-quarter profit by about $1.5 billion. It reports earnings next week.

Goldman Sachs is being let off the hook for 90 percent of the investor losses for which it was primarily responsible. Furthermore, as is consistent with past settlements with Wall Street firms by the Department of Justice and other executive agencies, much of the fine is tax-deductible. As BuzzFlash has noted before, this rewards Wall Street financial companies by allowing them to factor in settlements with the government for illegal behavior as nothing more than the cost of doing business.

The former Attorney General Eric Holder has said: I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy.

Apparently, under new Attorney General Loretta Lynch current that legal exemption for too-big-to-fail financial firms and their executives has not changed.

Pan Pylas writes:  Worries over a British exit from the European Union weighed on participants at the the World Economic Forum with France’s prime minister warning that it would be a “tragedy” that could prove an inspiration to populists around the region at a time when many countries are contending with massive numbers of refugees.

British Prime Minister David Cameron said he’s in no hurry to hold a referendum on his country’s future in the EU, if a deal on his reform proposals doesn’t emerge at a summit of European leaders in February. But he insisted that his aim is to “secure” Britain’s future in a reformed EU, a stance that he says is the best outcome for both sides.

Cameron’s Conservative Party, which won a governing majority in last May’s general election, was a pledge to hold a referendum on Britain’s future in the EU by the end of 2017 after a renegotiation process.

Britain’s future in the EU is set to be the main discussion point a summit of the EU’s 28 leaders on Feb. 18-19. The thinking until very recently was that an agreement would emerge then, paving the way for a referendum in the summer.

The refugee crisis that has engulfed Europe over the past few months as people leave conflict zones, notably from Syria, has raised worries that a deal may not be achieved in time — for one thing a referendum date will need time to legislate. Many European issues are up in the air at the moment, including what to do with the Schengen Agreement that allows borderless travel across much of the continent.

Cameron laid out his four reform proposals, which he insisted were “not outrageous asks.” He said he wants to “hard-wire” competitiveness into the EU’s DNA, make sure non-euro countries like Britain aren’t discriminated by the 19 EU countries that use the euro currency, get Britain out of the idea of an “ever-closer union” and curbs on migration and benefits.

Since joining what was then known as the European Economic Community in 1973, Britain’s membership has often been strained. Over the past few years, a groundswell of opinion in the country thinks exiting the EU is the best option, especially at a time when many of its members are getting closer together, notably with the creation of the euro currency.

While Britain has been at the forefront of efforts to create the European single market and led a series of foreign policy and development initiatives, there have been growing concerns of late over high levels of immigration particularly from eastern Europe and over the influence of the 19-country eurozone.

The Dutch prime minister whose country holds the rotating presidency of the EU, said he’s “fairly optimistic” that a deal can emerge in February but that’s he’s “not absolutely sure.”

And French Prime Minister went further, saying a Brexit would be a “tragedy and I’m saying this as a Frenchman.”

Valls said France will do everything it can so that Britain stays — but not under any condition.

“Nothing could be worse than to see a member state to leave because it would be a signal to others and pave the way for more populism so we have a collective responsibility at this historic moment,” Valls said.

Image by Marian Kaminsky

Lagarde has confidence in China’s economy despite current bumps.

Lagarde said that she’s not concerned about volatility in China’s markets, which have suffered wild swings in recent weeks.

“Having a certain degree of volatility is alright” as the country’s markets mature, Lagarde said at the World Economic Forum.

Lagarde said that if volatility becomes excessive, some intervention by regulators is legitimate and understandable. Investors should have patience during bumpy times, she added.

The benchmark Shanghai Composite has shed nearly 19% since January 1.

Lagarde remains confident that Chinese authorities will be able to guide the country during its transformation from an economy based on investment and exports, to one driven by consumption.

“We believe they will deliver,” she said. “When the authorities actually put their mind [to it … there is] an unbelievable determination and ability to deliver.”

Christine Lagarde, managing director at the IMF, is optimistic about China’s ongoing economic transformation.

Chinese authorities recently made changes to how the country’s currency is managed in order to meet strict IMF guidelines. The changes helped convince the IMF to include China’s yuan in its elite basket of reserve currencies in late 2015. The inclusion was a major vote of confidence in Beijing’s economic reforms.

Jack Lew, the U.S. Treasury Secretary, largely echoed Lagarde on Thursday, saying that he has “been following China very closely” and doesn’t see “the situation today as being so dramatically different” than at the end of 2015.

“It’s bumpy days in the markets, but you do have to look at some of these underlying things in a longer term way,” he said.

Lagarde gets crucial backing for second term.

While Lagarde has been widely praised for her leadership role at the organization, which has coordinated bailouts for countries and monitors reforms globally, developing countries have increasingly opposed an informal arrangement by which a European heads the IMF. The sister organization, the World Bank, has until recently typically been led by an American.

The IMF’s recent downgrade of growth forecasts and Lagarde’s future are on many minds at this week’s World Economic Forum gathering in Davos, Switzerland where she is a prominent presence.

British finance chief George Osborne issued a statement Thursday saying his government nominated her to stay in the post.

“At a time when the world faces what I’ve called a dangerous cocktail of risks, I believe Christine has the vision, energy and acumen to help steer the global economy through the years ahead,” he said.

The German government quickly followed, with a finance ministry statement saying Lagarde “was a circumspect and successful crisis manager during the difficult period after the financial crisis.”

For the IMF post, individual countries normally nominate their preferred candidate before the individual declares their intention to run.

.The World Economic Forum meeting of business leaders and public figures has been overshadowed by turmoil in global markets and geopolitical security issues.

Speaking about China’s economic slowdown, she said the country needed to refine its communication on reforms it was taking and its market policies.

A Chinese market regulator said the concerns over growth were overstated. He said China has no option but to support growth this year, using its large financial reserves if needed.

“We cannot afford to let the growth rate to fall too sharply, because that would ignite a lot of financial problems inside China. So we will have appropriately expansionary fiscal and financial policy this year,” said Fang Xinghai, from China’s Central Leading Group for Financial and Economic Affairs.

Ray Dalio, the chairman of Bridgewater Associates, said the biggest concern was China’s currency. As it weakens, that will weigh on the global economy by hurting trade, among other things.

The World Economic Forum at Davos is focussed on technology this year and among the first discussions was the possibility of new currencies.

At the annual meeting of the world’s economic titans in Davos, Switzerland, the heads of Morgan Stanley, Deutsche Bank and the International Monetary Fund played down suggestions that digital currencies like bitcoin could soon shake the foundations of the finance industry.

Some aspects of the investment banking industry could be impacted by the march of digitalization and cryptocurrencies — including securities trading and cash transfers.

The discussion came during a World Economic Forum confab whose theme — “the Fourth Industrial Revolution” — centers on the potential of automation and connectivity to revolutionize markets and society.

For bankers, the timing is apt. In 2015, digital currency technologies made unprecedented incursions into the mainstream of the financial world, with top industry players staking out positions in the booming market. Goldman Sachsjoined a $50 million financing round for bitcoin startup Circle Internet Financial. The Nasdaq stock exchange began using a blockchain-based platform to settle trading in private startup shares.

But at present, Lagarde noted, digital currencies have a relatively puny market value of $7 billion, the equivalent of less than 0.1 percent of the current $12.3 trillion U.S. money supply.

Technological changes beyond bitcoin, however, gave the finance executives some pause. From the digitization of monetary transactions to the increasing importance of security in a connected world, panelists saw deep changes ahead in the way banking operates.

PayPal CEO Dan Schulman, the sole “disrupter” on the panel, emphasized the security risks that financial firms face online. “Everybody’s password has been compromised,” Schulman said. “That’s just the reality.”

“Financial markets are going to be hacked,” he added, echoing fears among financial regulators that increasingly digitized securities exchanges and global banking hubs could become the targets of belligerent parties on the world stage.

The financiers noted that the industry began moving into cyberspace decades ago, long before bitcoin reared its head. “On the stockbroking side, we’re really just trading electrons anyway,” said Cryan, who predicted that physical cash would follow suit within a decade.

But the bank executives didn’t see those seismic changes knocking them from their roosts at the top of the financial pecking order. Panel moderator Gillian Tett of the Financial Times put the question bluntly, asking whether Wall Street could be like “rabbits in the headlines of the train” of blockchain technologies.

“Look at how we actually make money,” answered Gorman, whose company participated in the largest-ever initial public offering with Chinese online retailer Alibaba last year. “Is blockchain going to stop us from bringing Alibaba to market?”

George Soros on the state of the world and the impact of Orban and Putin on the EU. Interview with Gregor Peter Schmitz.

In Hungary, Orban has won hands down. More disturbingly, he is also winning in Europe. He is challenging Merkel for the leadership of Europe. He launched his campaign at the party conference in September 2015 of the Christian Social Union of Bavaria (the sister party of Merkel’s Christian Democratic Union) and he did so in cahoots with Horst Seehofer, the German party chairman. And it is a very real challenge. It attacks the values and principles on which the European Union was founded. Orbán attacks them from the inside; Putin from the outside. Both of them are trying to reverse the subordination of national sovereignty to a supranational, European order.

Putin goes even further: he wants to replace the rule of law with the rule of force. They are harking back to a bygone age. Fortunately, Merkel has taken the challenge seriously. She is fighting back and I support her not only with words but also with deeds. My foundations do not engage only in advocacy; they seek to make a positive contribution on the ground. We established a foundation in Greece, Solidarity Now, in 2013. We could clearly foresee that Greece in its impoverished state would have difficulty taking care of the large number of refugees that are stuck there. Soros Interview

Madhya Pradesh government has inked a pact with IFC, member of the World Bank Group, to set up the world’s largest solar energy plant with a capacity of 750 MW.

The Rewa Ultra-Mega Solar Power Project will be set up in Gurh tehsil of Rewa district over an area of 1,500 hectares at an estimated cost of Rs 4,500 crore.

The project will be the largest single-site solar power project in the world, a release said.

The Memorandum of Understanding (MoU) was signed between Madhya Pradesh Renewable Energy Development Corporation and IFC.

“Successful implementation of the Rewa Ultra-Mega Power project will be a key milestone for Madhya Pradesh’s outstanding efforts and leadership in renewable energy and the Centre’s remarkable vision on solar power,” the state’s Energy Minister Rajendra Shukla said.

IFC, which is working with the Union government to assist in meeting its large-scale solar energy generation goals, is also supporting the state government for the project.

Moreover, IFC will extend its global expertise to structure and implement the transaction to help attract private investments of about USD 750 million.

Madhya Pradesh Urja Vika Nigam Limited (MPUVN) and the Solar Energy Corporation of India have created a joint venture company — Rewa Ultra-Mega Solar Power Limited — to implement the project.

“With this project, India can demonstrate to the world that innovative business models and partnerships to build scale can help achieve challenging goals.

“IFC is privileged to be part of India’s and Madhya Pradesh’s determined approach to build a sustainable future,” IFC’s Regional Director for South Asia Mengistu Alemayehu said.

French President Francois Hollande pledged Monday to redefine France’s business model and declared what he called “a state of economic and social emergency,” unveiling a 2-billion-euro ($2.2 billion) plan to revive hiring and catch up with a fast-moving world economy.

The measures he proposed, however, are relatively modest, and he said they would not “put into question” the 35-hour workweek. With his country under a state of emergency since extremist attacks in November, Hollande did not seek to assume any new emergency powers over the economy.

In an annual speech to business leaders, Hollande laid out plans for training half a million jobless workers, greater use of apprenticeships, and aid for companies that hire young workers.

Hollande’s Socialist government has struggled to boost long-stagnant French growth or reduce chronic unemployment, which has been around 10 percent for years. His chances of winning a potential second term may hinge on whether jobs pick up before next year’s presidential vote.

Hollande stressed the urgency of updating France’s labor-friendly business model in an increasingly border-free, online economy. The measures included a loosening of France’s rigid working time rules, and a bonus of 2,000 euros to small businesses that hire young people.

He stressed the need to integrate youth from France’s troubled suburbs, including minorities who face job discrimination, into the global economy. High unemployment in France’s North African and African communities is seen as one of the factors driving some youths to violent extremism or the drug trade.

Some measures will be included in draft economic reform laws the government is presenting to parliament in the coming weeks.

The IMF reports:  In 2015, global economic activity remained subdued. Growth in emerging market and developing economies – while still accounting for over 70 percent of global growth – declined for the fifth consecutive year, while a modest recovery continued in advanced economies. Three key transitions continue to influence the global outlook: (1) the gradual slowdown and rebalancing of economic activity in China away from investment and manufacturing toward consumption and services, (2) lower prices for energy and other commodities, and (3) a gradual tightening in monetary policy in the United States in the context of a resilient U.S. recovery as several other major advanced economy central banks continue to ease monetary policy.