Business

NEW DELHI — For Indian business, the government and the central bank, data revisions that have transformed the country's $2.1 trillion economy into one of the world's fastest growing are too good to be true.

Now, the search is on for reliable indicators of underlying activity, vital for Finance Minister Arun Jaitley as he draws up his annual budget and for Reserve Bank of India (RBI) Governor Raghuram Rajan as he weighs whether to cut interest rates again.

"Let's not get carried away — the ground reality is very different," one senior finance ministry official told Reuters after figures on Monday showed that India's economy outgrew China's in the three months to December.

Based on a new calculation method, the statistics department said the Indian economy grew 7.5 per cent year on year in the last quarter and is on track to expand 7.4 per cent in the year through March 31.

It was quite a turnaround for Asia's third-largest economy, which based on the old calculations was struggling to recover from the longest spell of sub-par growth in a generation.

Yet far from vindicating Prime Minister Narendra Modi's stewardship of the economy, the revised growth numbers are at odds with evidence on the ground.

Stalled projects and stretched capacity in the power, infrastructure and housing sectors are having knock-on effects down the supply chain to small- and medium-sized enterprises (SMEs), indicated Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises.

"This is a bit perplexing. The feedback we are getting on the ground is not as positive. SMEs are not getting the orders," Bhardwaj told Reuters. "There is an improvement in business sentiment, in the environment, but unfortunately there is no movement on the ground."

Larsen & Toubro, an industrial group regarded as a bellwether for the wider economy, lowered its order book estimates on Monday and said a recovery in its domestic business was at least a year away.

"India Inc., while it continues to be aspiring, is still on the wait and watch mode," Chief Financial Officer R. Shankar Raman told reporters.

Weak revenues, weak demand

The 2015/16 budget that Jaitley will unveil on February 28 will be based on an expectation that the economy would grow at the roaring pace of 8 per cent or more, one source familiar with the matter told Reuters. Yet revenues will lag.

"Everyone is happy that India's gross domestic product growth has picked up, but we are worried over slower growth in tax collections," the source said.

Indirect tax receipts, which include customs and factory gate duties as well as levies on services, have risen by just 6.7 per cent so far in this fiscal year against a budget estimate of 26 per cent for the full year.

A weak tax take also points to fragile consumer demand. Although a plunge in global oil prices has cooled inflation, that has yet to encourage Indian consumers to buy TVs, cars or appliances.

Households are still not confident of any quick turnaround in their fortunes, according to a monthly survey by ZyFin Research. Weak demand has hobbled New Delhi's efforts to revive sluggish auto sales with tax breaks, leading car makers to scale back sales forecasts.

Govind Shrikhande, managing director at Indian retailer Shoppers Stop, is puzzled by the latest gross domestic product (GDP) estimates.

"Is it a trick or a treat?" he asked. "I haven't understood how they are calculating it, but we are not seeing it reflected in business as yet."

Falling merchandise exports and sluggish non-oil, non-gold imports suggest demand remains weak in domestic and overseas markets. Exports fell 2.3 per cent month-on-month in December, while imports of goods other than oil and gold fell 7.1 per cent.

Statisticians defend the jump in their growth estimates, attributing it to better measurements of improved business efficiency that has boosted profits even as sales stagnate.

The statistical fog, meanwhile, makes it unclear how much room Rajan will have to stimulate investment and consumer demand without fuelling inflation after cutting interest rates last month.

Financial markets expect Rajan to make three more quarter-point cuts by December in the RBI's main policy rate, now at 7.75 per cent.

"The faster pace of growth puts Mr Rajan in an awkward position," UBS economists Edward Teather and Alice Fulwood said in a note, adding that even if the RBI revises up its own GDP estimates there is still room for policy rates to fall.

GENEVA — Secret documents published online alleging banking giant HSBC helped wealthy customers dodge millions of dollars in taxes caused global shockwaves Monday and spotlighted the financial dealings of the world's ultra-rich.

The cache of files made public in the so-called SwissLeaks case included the names of celebrities, alleged arms dealers and politicians, though inclusion on the list does not necessarily imply wrongdoing.

The documents published at the weekend claim the London-based bank's Swiss division helped clients in more than 200 countries evade taxes on accounts containing $119 billion (104 billion euros).

The huge cache of files from Europe's biggest bank was stolen by an IT worker in 2007 and passed to French authorities, but had not been previously made public.

The International Consortium of Investigative Journalists (ICIJ) obtained the files via French newspaper Le Monde and shared them with more than 45 other media organisations worldwide.

The documents showed that HSBC opened Swiss accounts for international criminals, businessmen, politicians and celebrities, according to the ICIJ.

The revelations renewed calls for a crackdown on sophisticated tax avoidance by the wealthy and multinational companies. Tax avoidance is legal, but tax evasion is not.

"HSBC profited from doing business with arms dealers who channelled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws," ICIJ reported.

Famous names 

A range of current and former politicians from Russia, India and various African and Middle Eastern countries, and the late Australian press magnate Kerry Packer were named in the files.

According to the ICIJ, the list included football and tennis professionals, rock stars and Hollywood actors.

Reuters could not independently verify any of the names listed by the ICIJ. Having a Swiss bank account is not illegal and many are held for legitimate purposes.

The client list included royalty such as Morocco's King Mohammed, politicians, corporate executives including former Santander chairman Emilio Botin, who died last year, and wealthy families, the ICIJ said. A spokesman for the Moroccan royal palace declined to comment.

It also listed arms dealers, people linked to former dictators and traffickers in blood diamonds, and several individuals on the current US sanctions list.

Following the bombshell disclosure, there were calls for a Swiss probe against the bank, which is already facing prosecution in France and Belgium.

"I am angry," former Swiss foreign minister Micheline Calmy-Rey told public broadcaster RTS.

Global fallout on Monday included a Belgian judge said to be considering international arrest warrants for directors of HSBC's Swiss division, while in Britain a political row was triggered, with the main parties blaming each other for not taking action.

Shares in HSBC, whose reputation has been tarnished in recent years by a string of high-profile controversies, were down 1.64 per cent to 610.60 pence at the close of trading in London.

So far, Switzerland has only launched an investigation against HSBC employee-turned-whistle-blower Herve Falciani, who stole the files at the heart of the scandal.

The files were used by the French government to track down tax evaders and shared with other states in 2010, leading to a series of prosecutions.

British tax authorities said Monday they had brought in more than £135 million (181 million euros, $206 million) on the basis of the files.

The Guardian asserted that the files showed HSBC's Swiss bank routinely allowed clients to withdraw "bricks" of cash, often in foreign currencies which were of little use in Switzerland.

HSBC also marketed schemes which were likely to enable wealthy clients to avoid European taxes and colluded with some to conceal undeclared accounts from domestic tax authorities, The Guardian said.

The reports triggered political debate in Britain ahead of a parliamentary election in May. Margaret Hodge, a senior opposition Labour Party lawmaker, said UK tax authorities had done too little.

"All the other countries have collected much more," she told BBC Radio on Monday. "We are never assertive enough, aggressive enough to protect the taxpayer."

David Gauke, a Conservative lawmaker and a junior minister in the finance ministry, criticised HSBC and said the case lifted the lid on poor banking behaviour at the time.

"Clearly HSBC have got questions to answer. Clearly the behaviour that is set out in these disclosures reveal behaviour in 2005 to 2007 that is not what we would expect from a major bank," he said, calling tax evasion "completely unacceptable”.

John Mann, a Labour politician, said HSBC and UK revenue office bosses should be called before lawmakers.

"We acknowledge and are accountable for past compliance and control failures," HSBC said late on Sunday after news outlets published the allegations about its Swiss private bank.

HSBC said that its Swiss arm had not been fully integrated into HSBC after its purchase in 1999, allowing "significantly lower" standards of compliance and due diligence to persist.

HSBC's Swiss banking arm insisted it has since undergone a "radical transformation".

"HSBC's Swiss Private Bank began a radical transformation in 2008 to prevent its services from being used to evade taxes or launder money," Franco Morra, the head of HSBC's Swiss unit, told AFP in an email.

He said the bank had closed the accounts of clients "who did not meet our high standards" and had "strong compliance controls in place", adding that the disclosures were "a reminder that the old business model of Swiss private banking is no longer acceptable".

The Swiss Banking Association said the country's banks had worked hard in recent years to clean up shop and ensure conformity with tax laws.

French Finance Minister Michel Sapin demanded Monday that no mercy be shown to the bank or its tax-cheating clients.

Hidden money? 

Notes in the leaked files indicate HSBC workers were aware of clients' intentions to keep money hidden from national authorities.

Of one Danish account holder collecting cash bundles of kroner, an employee wrote: "All contacts through one of her 3 daughters living in London. Account holder living in Denmark, ie critical as it is a criminal act having an account abroad non declared." 

The files provide details on over 100,000 HSBC clients, including people targeted by US sanctions, such as Turkish businessman Selim Alguadis and Gennady Timchenko, an associate of Russian President Vladimir Putin. 

Alguadis told the ICIJ it was prudent to keep savings offshore, while a spokesman for Timchenko said he was fully compliant with tax matters.

Other individuals named on the list include Rami Makhlouf, cousin of Syrian President Bashar Al Assad, designer Diane von Furstenberg, who told the ICIJ the accounts were inherited from her parents, and model Elle Macpherson, whose lawyers told the ICIJ she was fully in compliance with UK tax law.

Motorcycle racer Valentino Rossi, listed as having $23.9 million in two accounts, said he had regularised his tax situation with Italian authorities.

Switzerland has charged Falciani with industrial espionage and breaching the country's secrecy laws. Falciani could not be reached for comment on Monday but has previously told Reuters he is a whistleblower trying to help governments track down citizens who used Swiss accounts to evade tax.

HSBC said the Swiss private banking industry, long known for its secrecy, operated differently in the past and this may have resulted in HSBC having had "a number of clients that may not have been fully compliant with their applicable tax obligations".

HSBC's Swiss private bank was largely acquired as part of its purchase of Republic National Bank of New York and Safra Republic Holdings, a US private bank.

The ICIJ said details of more than 100,000 clients had been obtained from more than 200 countries. It said 11,235 were based in Switzerland, 9,187 were in France, 8,844 were in Britain, 8,667 were in Brazil and 7,499 were from Italy.

The clients' accounts held more than $100 billion, including $31.2 billion from clients based in Switzerland, $21.7 billion from Britain, $14.8 billion from Venezuela and $13.4 billion from US clients, the ICIJ said. 

HSBC said the number of accounts in its Swiss private bank was much lower, however. It could not explain the difference. HSBC said its Swiss private bank had 30,412 accounts in 2007, which had fallen to 10,343 at the end of last year.

HSBC said it was cooperating with authorities investigating tax matters. Authorities in France, Belgium and Argentina have said they are investigating.

ISTANBUL — The world's 20 biggest economies must focus on higher labour productivity and become more competitive and innovative if they want to deliver on a pledge to boost economic growth, the Organisation for Economic Cooperation and Development (OECD) said on Monday ahead of a Group of 20 (G-20) meeting.

Leaders of the world's top 20 economies (G-20) agreed last year to launch new measures to raise their collective gross domestic product (GDP) growth by an additional 2 percentage points over the next five years above the level projected in 2013.

The pledge, called the Brisbane Action Plan, entails about 1,000 commitments. G-20 finance ministers and central bank governors meeting in Istanbul on Tuesday will discuss ways to prioritise and implement them.

"Labour productivity remains the main driver of long-term growth," the OECD indicated in a report prepared for the meeting.

The OECD, together with the International Monetary Fund (IMF), is likely to be tasked with negotiating with individual countries on which reforms to choose first.

"Priority should be given to reforms aimed at developing skills and knowledge-based capital. Raising the quality and inclusiveness of education systems will underpin this," it said.

"Governments need to improve policy settings in competition and innovation to facilitate the entry of new firms and the smooth reallocation of capital and labour towards the most productive firms and sectors," the report added.

Structural reforms have slowed in most advanced economies in the last two years after a flurry of activity at the height of the financial crisis while big emerging economies were speeding up changes, it said.

Overall, structural reforms implemented since the early 2000s have contributed to raising the level of potential GDP per capita by around 5 per cent on average across countries, with most of the gains coming from higher productivity, the OECD indicated.

"Further reform towards current best practice could raise the long-term level of GDP per capita by up to 10 per cent on average across OECD countries," the report said. "This is equivalent to an average gain of around $3,000 per person."

The OECD said governments should ensure that women, young people as well as low-skilled and older workers also get jobs and earn decent salaries.

The G-20 finance officials look likely to reject a proposal to set countries specific investment targets to spur a global economy which appears increasingly reliant on the United States for growth.

The meeting of finance ministers and central bankers in Istanbul comes as Greece casts a new shadow over Europe, cheap oil plays havoc with inflation and growth forecasts and a strengthening dollar threatens emerging economies.

Deputy Prime Minister Ali Babacan said Turkey, G-20 chair for 2015, preferred to set binding national investment targets and that the idea was under discussion. But it appeared to be struggling to win support.

"It would be quite complicated and a bit theoretical," French Finance Minister Michel Sapin told reporters. "I am pushing for a global objective. Europe can set its own target and deliver on it, but I don't support precise objectives for everyone else."

A G-20 source said the idea had already been taken off the table.

US Treasury Secretary Jack Lew said last week the United States could not be "the sole engine of growth" and a senior US official said Washington's message would again be that Europe is not doing enough.

Germany, with its hefty current account surplus, has come under pressure at successive G-20 meetings to spend more.

Berlin has rejected that suggestion in the past and is likely to argue that its rising domestic demand and plans to increase investment, largely through the private sector, shows it is doing what it can, according to European sources familiar with the G-20 agenda.

Its eurozone peers France and Italy have urged more investment in the struggling single currency bloc.

"We need to be bolder in Europe in terms of risk taking... I hope that policy action will indeed facilitate stronger private sector investments, especially infrastructure investments," Italian Economy Minister Pier Carlo Padoan told a financial gathering in Istanbul ahead of the G-20 meeting.

The Brisbane Action Plan, is now likely to be slimmed down to a more manageable number for each country to deliver on.

"Keep your word, or explain," was how Babacan explained the strategy.

Coming good on those pledges could add more than $2 trillion to the global economy and create millions of new jobs over the next four years, International Monetary Fund chief Christine Lagarde said in a blog post.

German Finance Minister Wolfgang Schaeuble suggested he was worried about the financial market impact if the new Greek leftist leader, Alexis Tsipras, carried out his threat to exit Greece's international bailout agreement.

Canadian Finance Minister Joe Oliver said there had to be compromise.

"It's clear that Greece has got to be prepared to make some changes, and I think a wholesale repudiation of their debt is not on the cards," he told Reuters in an interview.

"But other countries, creditors will have to work with Greece to arrive at a compromise... I don't think anybody wants Greece to leave the currency union," Oliver said.

The G-20 put together a stimulus package that pulled the world back from the brink in 2009 but today's challenge is more delicate, with diverging monetary policies a cause of global turbulence.

The US Federal Reserve looks set to raise interest rates this year, a stark contrast to huge money printing programmes by the European Central Bank (ECB) and Bank of Japan and impromptu rate cuts from India to Australia, Canada to Denmark. China's giant economy is also slowing.

A by-product of that is the dollar being driven higher while other major currencies tumble.

Bank of Japan Governor Haruhiko Kuroda told reporters the slide in global oil prices was a benefit for the world economy and the recent weakness of the yen was not a problem.

Italy's Padoan said lower oil prices and the anticipated impact of an ECB plan to buy around a trillion euros of government bonds had helped improve the economic picture and would push the euro to a more "consistent" level.

Reform fatigue

Bank of England Governor Mark Carney urged the G-20 to mount a "big push" to implement global regulatory reforms, fearing that governments may be tiring of non-stop rule making since the financial crisis six years ago.

Carney was speaking as head of the financial stability board which, since Lehman Brothers crashed in September 2008, has coordinated a raft of new banking and markets rules to make the financial system more resilient.

New York — As the saying goes, everything is bigger in Texas.

For the past five years, the economy of the Lone Star State has outperformed the rest of the United States.

But the collapse in oil prices has left Texas facing its toughest test since the financial crisis.

A 50 per cent tumble in oil prices since June has prompted companies such as Royal Dutch Shell and Chevron to slash billions of dollars in worldwide investment. Oil services companies like Schlumberger and Halliburton have announced thousands of job cuts.

So far, only a handful of petroleum companies have filed layoff notices in Texas this year, and the Texas Workforce Commission actually reported an increase in mining jobs in December. 

Yet few doubt what lies ahead for the second-biggest US state, by economic output and population, after California.

There will be "a major-league contraction in oil and gas activity in Texas," said Karr Ingham, owner of Ingham Economic Reporting based in Amarillo in oil-rich West Texas.

"Over the coming months, the industry is going to shed jobs on a regular basis. We're very early in that process," he added.

Boyd Nash-Stacey, senior economist at BBVA Research in Houston, predicted the downturn would cost some 60,000-80,000 mining jobs in Texas, with an additional ripple effect on other sectors such as retail and hospitality.

The oil slump already has begun to cool the real estate market in Houston, the fourth-biggest US city and an economic powerhouse for most of the 2000s due in large part to the surging energy industry.

"It's a question of how bad it's going to get and for how long," said Charles Gordon, a vice chairman of real estate firm CBRE in Houston. "The shock is how fast energy prices fell."

Texas has been outpacing US growth for some time. In 2013, the Texas economy grew at an annual clip of 3.7 per cent compared with 2.2 per cent for the whole economy, and in the prior year its pace was more than double the national rate, according to US commerce department data.

A repeat of 1986? 

The throng of activity into older oil centres like the Permian Basin in West Texas and the newer Eagle Ford shale in southern Texas has been a driver.

Economists agree that matching that flaming growth level will be impossible in 2015, but there is debate about just how bad things will get.

JPMorgan Chase chief US economist Michael Feroli suggested in a December report that the outlook for Texas was comparable to 1986, when a steep drop in oil prices was followed by deep layoffs, big declines in the real-estate market and a banking crisis.

"Texas, will, at the least, have a rough 2015 ahead, and is at risk of slipping into a regional recession," the report said. Given its huge size, "the prospect of a recession in Texas could have some broader reverberations”.

But BBVA's Nash-Stacey said many parts of Texas, including big cities Dallas and San Antonio, have limited exposure to oil and should benefit from the relief of lower gasoline prices.

Moreover, since the 1980s, the state has added a major technology centre in the Austin area, home to Dell, and built out the giant Texas Medical Centre in Houston, which has significant research programmes for cancer and other diseases.

 "It's not a death blow," Nash-Stacey said. "Texas isn't what it was in the 1980s."

The Federal Reserve of Dallas also expects positive economic growth in 2015 in Texas.

"The bottom line is it's going to cause growth to slow, but job growth will remain positive," said Keith Phillips, a senior economist with the central bank division in San Antonio.

Ingham, the Amarillo economist, agreed that Texas will likely lodge some growth in 2015 statewide. 

But Ingham predicted about a 10 per cent contraction in the Midland-Odessa oil region, where some 8,000 oil workers will lose jobs and all businesses are affected by the sector.

Ingham said oil companies will be cautious in the short run before hiring back staff, even if oil prices recover. That could result in departures from oil towns like Midland.

"You're looking at least 18 months out into the future before things start to look a little bit better out there," Ingham added. "Who's in a position to ride that out in terms of not having a job and not having income?"

ATHENS — Greece's new leftist prime minister, Alexis Tsipras, said on Sunday he would not accept an extension to Greece's current bailout, setting up a clash with European Union (EU) leaders, who want him to do just that, at a summit on Thursday.

Tsipras also pledged his government would heal the "wounds" of austerity, sticking to campaign pledges of giving free food and electricity to those who had suffered, and reinstating civil servants who had been fired as part of bailout austerity conditions.

In his first major speech to parliament as premier, the prime minister said he was still optimistic he could reach agreement with Greece's EU partners on a new debt pact and transitional agreement.

"The bailout failed," he said. "The new government is not justified in asking for an extension... because it cannot ask for an extension of mistakes."

Tsipras's speech will have been closely watched by EU leaders who, to date, have shown scant willingness to meet Tsipras's demands, fearing a wholesale backtracking on the fiscal and economic reforms international lenders have demanded in exchange for some 240 billion euros worth of assistance.

Greeks have been severely hit by the austerity imposed on them by the "troika" of European Central Bank (ECB), International Monetary Fund and European Commission lenders. The country is only just coming out of years of economic depression, but roughly one in four Greeks are unemployed.

"The first priority of this government ... is tackling the big wounds of the bailout, tackling the humanitarian crisis just as we promised to do before the elections," Tsipras said.

He added that the main battle would be against corruption and vowed to tackle Greece's long-time struggle with tax evasion.

He also announced a series of cuts to politicians' benefits such as banning ministerial cars and selling one of the prime minister's aircraft.

Tsipras said he would also end property tax and replace it with a tax on high-value property.

Plan for change 

Over the past week, Greek officials have laid out what they see as a transitional plan to keep finances flowing over the next few months while they renegotiate their debt agreement.

Instead of the next tranche of bailout funds, 7.2 billion euros, due pending a suspended review, Greece's new government wants the right to issue more short-term debt beyond a current 15 billion euros threshold. 

It also wants 1.9 billion euros in profits from Greek bonds held by the ECB and other eurozone authorities, something that was agreed previously.

With that as a bridge, Greek officials would then try to renegotiate payment of Greek sovereign bond debt, perhaps by extending payments, only paying interest and getting some respite on the budget surplus it is expected to run.

One government official suggested that not everything had to happen at once.

"The pace of the implementation of our promises is 'within four years'," the official said.

Separately, Greek Finance Minister Yanis Varoufakis said on Sunday that if Greece is forced out of the eurozone, other countries will inevitably follow and the currency bloc will collapse, in comments which drew a rebuke from Italy.

In an interview with Italian state television network RAI, Varoufakis said Greece's debt problems must be solved as part of a rejection of austerity policies for the eurozone as a whole. 

He called for a massive "new deal" investment programme funded by the European Investment Bank.

"The euro is fragile, it's like building a castle of cards, if you take out the Greek card the others will collapse." Varoufakis said according to an Italian transcript of the interview released by RAI ahead of broadcast.

The eurozone faces a risk of fragmentation and "de-construction" unless it faces up to the fact that Greece, and not only Greece, is unable to pay back its debt under the current terms, Varoufakis added.

"I would warn anyone who is considering strategically amputating Greece from Europe because this is very dangerous," he continued. "Who will be next after us? Portugal? What will happen when Italy discovers it is impossible to remain inside the straitjacket of austerity?"

Varoufakis and Tsipras received friendly words but no support for debt re-negotiation from their Italian counterparts when they visited Rome last week. But Varoufakis said things were different behind the scenes.

"Italian officials, I can't tell you from which big institution, approached me to tell me they backed us but they can't tell the truth because Italy also risks bankruptcy and they are afraid of the reaction from Germany," he said.

"Let's face it, Italy's debt situation is unsustainable," he added, a comment that drew a sharp response from Italian Economy Minister Pier Carlo Padoan, who said in a tweet that Italy's debt was "solid and sustainable”.

Varoufakis's remarks were "out of place", Padoan added, noting that Italy was working for a European solution to Greece's problems, which requires "mutual trust".

Italy's public debt is the largest in the eurozone after Greece's and Italian bond yields surged in 2011 at the height of the eurozone crisis. They have since fallen steeply and have so far come under little pressure from the renewed tensions in Greece.

Varoufakis said his government would propose a "new deal"  for Europe like the one enacted in the United States in the 1930s. This would involve the European Investment Bank investing ten times as much as it has so far, Varoufakis indicated.

If Europe continues to pursue counterproductive austerity policies the only people who will benefit will be "those who hate European democracy", he added, citing the Golden Dawn Party in Greece, the National Front in France and the United Kingdom Independence Party in Britain.

According to Alan Greenspan, the former head of the United States central bank, Greece will have to leave the eurozone sooner or later.

"It is a crisis and I don't see it being resolved easily, in fact I don't see it being resolved without Greece leaving the eurozone," the former chairman of the US Federal Reserve told BBC radio.

"I don't see that it helps them to be in the euro and I certainly don't see how it helps the rest of the eurozone. And I think it's just a matter of time before everyone realises that parting is the best strategy."

Greenspan, who was head of the Federal Reserve from 1987 to 2006, said that the eurozone could not continue in its current form without political integration.

SYDNEY — Australia faces a A$17 billion ($13.3 billion) exodus of investment from its windfarm industry because of a political deadlock, threatening to deal the country a major economic blow and kill hopes of meeting a self-imposed clean energy target.

Some 44 Australian windfarm projects, about half overseas funded, have been shelved since a new conservative government said it wanted to cut state support for the industry a year ago, with investors and operators saying they are considering either downscaling or leaving the country altogether if it succeeds.

Even Australian windfarm companies such as Infigen  and Pacific Hydro have effectively shelved their Australian operations, with Infigen saying it plans to pour all its financial muscle into the more amenable US market.

"It's a difficult time at the moment, and the policy uncertainty is the main cause of it," said Shaq Mohajerani, an Australian spokesman for wind farm company Union Fenosa, owned by Spanish energy giant Gas Natural.

"We're still considering all options on how to proceed. The parent company will provide us with the strategy," he added.

A Gas Natural spokesperson said the firm had an "attractive backlog" in Australia but "we are waiting for the whole development of the new framework for renewable energy and hope our presence... in the country can be maintained".

Wind power in Australia is not the only renewable energy sector to be affected by uncertainty over government subsidies or actual cuts. In Europe, Germany has scaled back support for solar power over the past few years, leading to a flood of insolvency filings by solar firms and a shrunken market.

Italy's plans to cut subsidies for solar power firms have prompted an investor exodus. Retroactive solar subsidy cuts have also happened in Spain, Greece, Bulgaria and the Czech Republic over the past couple of years, putting off new investors as governments try to rein in energy costs and cut debt.

Windfarms are Australia's No. 2 renewable energy source, behind hydropower but ahead of solar, providing a quarter of the country's clean energy and 4 per cent of its total energy demand. But while households can collect rebates for installing their own rooftop solar panels, windfarms rely on "certificates", or tradeable securities handed out by the government, to offset costs.

That support hit a roadblock a year ago when new conservative Prime Minister Tony Abbott ordered a review of the country's target for clean energy use by 2020, which ultimately recommended slashing it by a third, in line with falling overall energy demand. A lower target would mean a lower certificate price.

The centre-left Labour opposition, whose support the government needs to lower the target, refused to budge on the higher target it set when in power in 2009, resulting in an impasse that has effectively seen the industry grind to a halt.

A spokeswoman for US-owned GE Australia & New Zealand, which has stakes in several renewable energy projects, said further investment "will only occur once investor confidence in the policy environment is restored. For this to happen, bipartisan support regarding the future of the renewable energy target is essential."

The Australian arm of Spanish infrastructure group Acciona, the world's largest renewable energy firm, has frozen about A$750 million of windfarm projects because of the stalemate, said local managing director Andrew Thomson.

"When you're a subsidiary [of a global business], you're competing for capital, you're competing for your budget allocation next year," he said.

"If the parent company can't see that there's a stable environment it becomes really difficult to get traction. For us at the moment, it's a really difficult sell," he added.

If the renewable energy target is cut, "it's the type of jolt to industry that basically would create such an upheaval that you would have a mass exodus", said Alex Hewitt, managing director of Bulgarian-Polish-US-backed windfarm operator CWP Renewables, which has A$1.5 billion of projects on ice.

"I can't say whether we'd completely exit the country, but you would be looking at such a level of reduction in the level of investment into people in the company that it would be very significant," Hewitt added.

HAVANA — US agricultural exports to Cuba fell below $300 million last year for the first time since 2003 as the communist-led island's financial woes continued and it purchased food on credit elsewhere, a trade group said on Friday.

The United States created an exception to its trade embargo of Cuba in 2000 to allow food and medicine sales, but it still denies Cuba credit, forcing it to pay cash up front.

Although the United States and Cuba are seeking to restore diplomatic relations after more than five decades of confrontation, the embargo on Cuba remains largely in place.

With Cuba increasingly turning to suppliers who extend credit, American farmers have argued for normalising trade with Cuba so they can better compete.

US food sales of $291 million in 2014 were down from $349 million in 2013 and far from the $710 million peak in 2008, the New York-based US-Cuba Trade and Economic Council indicated in a report.

It attributed the decline to a cash shortage, Cuba purchasing on credit and from government entities, and a desire to pressure the United States to lift trade restrictions.

President Raul Castro, who took over from his ailing brother Fidel in 2008, has introduced austerity measures, including significant cuts in imports and a push for trade credits with payments due in 365 days or more.

A new private agricultural organisation backed by US Secretary of Agriculture Tom Vilsack is likely to seize on the report as an argument for ending US sanctions against Cuba.

The US Agriculture Coalition for Cuba was formed after the announcement December 17 that the United States and Cuba would restore diplomatic relations.

"Although agricultural exports to Cuba are legal, the financing and trade restrictions have hampered the ability of American farmers to compete with other countries, such as Argentina and Brazil, which do not face the same restrictions," the National Corn Growers Association said last month when it  joined the coalition of more than 30 US farm organisations and businesses.

"Corn exports to Cuba have decreased from nearly 800,000 tonnes in 2008 to 200,000 tonnes in 2013," it indicated.

Cuba imports between 60 per cent and 70 per cent of its food. It buys chicken, corn, soy, wheat, animal feed and other products from the United States but most purchases come from Asia, Europe and Latin America and are made on credit.

Cuba's food imports were $2 billion in 2014 and are expected to increase by $200 million this year, the government said.

TUNIS — Tunisian Prime Minister Habib Essid promised quick reforms to stimulate growth as he took office on Friday at the head of a coalition government combining secular and Islamist parties.

Four years after toppling autocrat Zine El Abidine Ben Ali and inspiring Arab Spring uprisings in nations like Egypt, Libya and Syria, Tunisia is widely praised as a model for the region, having held free elections last year and adopted a new constitution.

But it faces pressure from its international lenders to curb high public spending, including by cutting politically sensitive subsidies on basic foods and fuel. 

Jobs, high living costs and economic opportunities are the main worry for most Tunisians.

"After the success of the democratic transition, now we must make a successful economic transition, stimulate growth, fight poverty and open new windows of hope to desperate youths," Essid said.

"We must immediately start structural reforms of the economy and new development schemes because temporary solutions are no longer appropriate," he added.

Essid, an independent, will lead a coalition between the secular Nidaa Tounes Party, which won the most seats in elections in October, its Islamist rival Ennahda and other smaller parties. 

It took a month to negotiate the line-up of the new cabinet, in which Ennahda will lead the employment ministry and hold three other junior ministerial posts.

The government sees economic growth accelerating to 3 per cent in 2015 from an estimated 2.5 per cent in 2014, while the budget deficit is expected to narrow to 5 per cent of the gross domestic product from 5.8 per cent.

The International Monetary Fund agreed in 2012 to support Tunisia  with a two-year credit programme worth $1.74 billion, of which Tunis is still waiting for the final installment. 

In exchange, it agreed to keep its deficit under control and make the foreign exchange market more flexible.

KIEV — Ukraine's hryvnia currency plunged about 30 per cent against the dollar on Thursday, traders said, after the central bank abandoned the foreign currency auctions that had effectively pegged the exchange rate.

The central bank scrapped the daily auctions, which had set an unofficial peg for banks to follow, and also raised its main interest rate to 19.5 per cent on Thursday as it sought to avert a Ukrainian financial collapse, brought ever closer by fighting in the country's east and a lack of foreign funding.

With the hryvnia declining even before Thursday's drop, and Ukraine's foreign exchange reserves falling to $6.4 billion, barely enough to cover five weeks of imports, the bank has a few ways to revive an economy on the brink of bankruptcy.

The scrapping of the auctions was aimed at closing the gap between the black market exchange rate and the official rate, which the central bank noted would eliminate market uncertainty.

But following the announcement, the hryvnia was trading at 24-25 against the dollar, down about 30 per cent from Wednesday's close, traders indicated.

According to Reuters data, the hryvnia was trading at 23.9  at about 1300 GMT.

"The market is increasingly active, but from the side of buyers [of foreign currency]. There are not many sellers. The true level now is 24 or 25. I cannot say if there are real deals, but they were the live quotes," said one trader.

"The official rate does not yet reflect the real picture, it's far from it," he added.

The central bank raised its key refinancing rate to 19.5 per cent from 14 per cent, to take effect on Friday, as it seeks to curb annual inflation which hit almost 25 per cent in December.

Announcing the measures, central bank governor Valeriia Gontareva told a news conference: "There is still panic on the market, connected with ongoing fighting."

The former Soviet republic desperately needs funds from donors to fill an estimated $15-billion funding gap to withstand the financial crisis, deepened by a surge in fighting in eastern regions where pro-Russian rebels have seized new ground.

But analysts say the renewed fighting, which has all but buried a September ceasefire, makes it more difficult for lenders such as the International Monetary Fund (IMF) to offer funds.

"If there is any worsening of the situation, the National Bank is ready with the tools needed to calm the foreign exchange market," Gontareva said.

She added that the bank was forecasting consumer price inflation this year of 17.2 per cent and warned that inflationary and currency devaluation risks would continue in the near term. 

IMF talks tough 

Gontareva, a former top executive at Western banks who was appointed soon after President Petro Poroshenko was elected last May, said the bank had agreed terms with the IMF to boost financial aid but gave no figures.

However the terms are unclear, and an IMF team is still in the capital Kiev after extending its mission beyond January 29, a move seen by some analysts as a sign that talks on boosting its financial support are tough.

Ukraine has already received $4.6 billion from the IMF as part of a $17 billion aid programme, but is seeking to extend that programme in terms of time and money.

Some analysts said that without a ceasefire, any foreign financing from the IMF and others would be difficult to secure.

Kiev has said it wants to restore the ceasefire agreed with the Moscow-backed rebels last September in the Belarussian capital Minsk and accuses Russia of sending new troops and arms to help the separatists take ground in eastern Ukraine.

Moscow denies arming the rebels and says it too wants the ceasefire to hold.

Tim Ash, head of emerging markets research at Standard Bank, said Russian President Vladimir Putin was betting that no amount of Western financing would work unless the conflict was halted.

"This is just finger-in-the-dyke stuff. The conflict has to be halted, period," he added in a note.

US Secretary of State John Kerry arrived in Kiev on Thursday for talks with Poroshenko and government leaders. A senior State Department official said Kerry would offer US support for efforts by Ukraine to negotiate a new ceasefire.

Kerry also intends to provide an additional $16.4 million in humanitarian aid to help civilians in eastern Ukraine, US officials said.

Analysts said continued fighting ensured any move by the central bank to secure the economy would fail.

"It's more about economic failings and the war situation at this stage. Interest rates won't make any difference, just as they are not [making a difference] in Russia," said Simon Quijano-Evans head of emerging market research at Commerzbank in London.

ATHENS — Greek Prime Minister Alexis Tsipras tore into his European Union (EU) allies on Thursday, pledging to "put an end once and for all" to the EU's austerity policies.

In a defiant first speech to his left-wing parliamentary group after returning empty-handed from a European tour, Tsipras said Athens was no longer open to being told what to do.

"Greece won't take orders any more, especially orders through emails," he stressed. "Greece is no longer the miserable partner who listens to lectures to do its homework. Greece has its own voice."

In an apparent reference to the tough stance taken by the European Central Bank (ECB) and others, Tspiras said: "Greece cannot be blackmailed because democracy in Europe cannot be blackmailed."

Tsipras and his Finance Minister, Yanis Varoufakis, have been crisscrossing Europe to win support from partners for their plan to win debt relief and end austerity policies but have so far received little other than warnings to avoid reneging on commitments under the country's existing bailout programme.

But they have received little if any concrete support.

"We did not even agree to disagree", Varoufakis said on Thursday after a meeting with German Finance Minister Wolfgang Schaeuble, actually contradicting his host.

Tsipras, however, said he did not return from the trip without anything to show for it.

"In only a week, we won allies that we haven't won in the last five years of the crisis," he said.

The maiden meeting between Greece's iconoclastic new finance minister from the Marxist left and his 72-year-old conservative German nemesis was never going to be easy. It turned out even worse than expected.

Varoufakis, notoriously casual in his dress, wore a dark shirt and jacket but no tie to meet the veteran Schaeuble. Not only did they look awkward together, they could not even agree on how much they had disagreed.

The German minister glared stony-faced through their joint news conference. Outside, a few dozen unionists and supporters of Germany's Left party, which backs Tsipras' far-left Syriza, held banners saying: "Mr Schaeuble, stop strangling Greece!"

Schaeuble, whose passion for European integration is second only to his zeal for balanced budgets, said they had agreed to disagree. He was promptly contradicted by his younger visitor, who spoke in English.

"We didn't reach an agreement. It was never on the cards that we would. We didn't even agree to disagree, from where I am standing," said Varoufakis, a 53-year-old economist and blogger.

Schaeuble looked particularly uncomfortable when Varoufakis referred to Germany's Nazi past, which some Greek anti-austerity protesters have recalled by lampooning Merkel in a Nazi uniform.

Germany should understand Greece because its own depression in the early 20th century gave rise to the Nazis and now "Nazism is rearing its ugly head in Greece", said Varoufakis, apparently referring to the far-right Greek political party Golden Dawn.

Newspaper cartoonists have depicted the clash of ideologies as an unstoppable force, Tsipras and his Syriza party, meeting an immovable object, in the form of Chancellor Angela Merkel's austere conservatives.

The two ministers did not discuss details of Greece's debt repayment schedule or the possibility of a debt "haircut", which Merkel and Schaeuble emphatically rule out. Varoufakis presented proposals for a "bridging programme" until May.

He tried to convince Germany, whose taxpayers are weary of  funding bailouts for what they see as spendthrift southerners, the new Greek government would be a reliable partner, saying Berlin could expect "a frenzy of reasonableness" from Athens.

But he also made an emotional plea for Greece's partners to respect the outcome of its election, saying treaties must be upheld "without crushing the fragile flower of democracy with a sledgehammer", referring to criticism from German politicians.

"Schaeuble Brushes Off Greek Minister," was the verdict of Germany's top-selling daily Bild, which has been critical of Greece throughout the eurozone debt crisis.   

Separately, the head of Germany's powerful Bundesbank warned Greece against using emergency funding to prop up its banks long-term and said countries must bear the impact of their decisions, further isolating Athens after it all but ditched a reform-for-aid deal.

Jens Weidmann's remarks follow the ECB's statement that it would no longer accept Greek government bonds as collateral for funding, shifting the burden onto Athens' central bank to finance its lenders.

The ECB's move means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks.

However, Weidmann's remarks call into question Athens' freedom to use this emergency liquidity assistance (ELA). The ECB governing council can restrict such funding if a two-thirds majority agrees.

"ELA should only be awarded for the short term and to solvent banks," Weidmann, who also sits on the ECB's Governing Council of decision makers, told business daily Boersen Zeitung.

"As the banks and the state are closely bound in Greece, the economic and fiscal policy course that the Greek government follows plays an important role in this assessment," he said.

"Governments and parliaments must take decisions about whether and how to keep banks afloat, or wind them up," Weidmann added.

Speaking later in Venice, Weidmann upped the ante, demanding that countries bear the consequences of their own fiscal decisions and warning that any move to bail out a eurozone peer could lead to the spread of solvency doubts.

Singling out Greece's refusal to cooperate with the troika of inspectors from international lenders, he said there could be no sharing of fiscal responsibility without first ceding sovereignty.

"Member states remain fully responsible for the consequences of their own autonomous fiscal decisions," Weidmann said in Venice.

"If market participants tend to see the monetary union as a system of mutual financial assistance in the event of serious trouble, doubts about a country's solvency could spread more quickly to the other member states," he added.

By taking a tough line on Greece, the ECB is sending a signal that while it has repeatedly charged to the eurozone's rescue in the past, it is no longer willing to do governments' work for them, analysts said Thursday.

"The ECB has drawn a line. It is an attempt to remain independent," said Bert Van Roosebeke from the Centre for European Policy in Freiburg. 

During the long years of crisis, the ECB has never hesitated to take on the role of firefighter, cutting its key interest rates time after time and taking a series of controversial and increasingly bolder unconventional policy decisions to prop up the eurozone economy.

Nevertheless, all through such action, ECB chief Mario Draghi has consistently argued that in order to solve the crisis, governments must get their finances and economies in order and not hide behind the ECB. 

Hence, the ECB's announcement late Wednesday that it would no longer accept Greek government bonds, currently rated as junk, as collateral for loans would offer a taste of the ECB's bitter medicine, analysts said.

The ECB announcement came all the more as a surprise because it was issued just hours after Varoufakis had met Draghi in Frankfurt, talks which Varoufakis himself had described as "fruitful" and "encouraging".

But despite the immediate shock, analysts said there was no danger, at least for now, of Greek banks facing a liquidity crisis.

Greek debt has a junk credit rating and, under ECB rules, should not qualify as collateral for loans, anyway.

A special waiver to that rule, accorded to Greece as long as it was deemed to be in compliance with the terms of its 240-billion-euro ($270 billion) EU-International Monetary Fund (IMF) bailout, had been scheduled to expire on February 28. 

So the ECB, which argued that it was "currently not possible to assume a successful conclusion of the programme review", had therefore merely pulled the plug two weeks earlier.

But it insisted that Greek banks still had other means of financing at their disposal, such as the ELA facility. 

No liquidity crunch  

Analysts were therefore confident that Greek banks would still be able to finance themselves.

"It is not likely that Greek banks will face immediate liquidity problems. Greek government debt can still be used to access ELA," said Natixis economist Jesus Castillo.

Greek banks had significantly reduced their holdings of government bonds and did not heavily rely on them as a source for collateral to secure ECB funding, anyway, the analyst noted.

Nevertheless, "the risk is that the ECB's decision will undermine the confidence in the Greek banks, which have already suffered significant deposit withdrawals before and after the January election," Castillo warned.

Outside ECB's remit?  

Bruegel economist Silvia Merler was also concerned that "even if the liquidity consequences could be manageable, the political consequences could be less so”.

The move might "formally protect the ECB's independence, but it also forces the political game... well beyond the limit of a central bank's remit", she said.

Credit Agricole's Frederik Ducrozet saw the ECB decision as a "risky, albeit calculated political move (aimed at) pressuring the Greek government and eurozone policymakers to find an agreement within the next couple of weeks." 

Berenberg Bank economist Christian Schulz said the ECB was sending "a strong signal. Instead of the ECB, the Bank of Greece and thus the Greek taxpayer will now be the lender of last resort for banks." 

And the ECB decision had dealt a blow to Greece's negotiating position, Schulz said. 

"Greece can hope for some face-saving compromises and modest adjustments at best, but not for a wholesale renegotiation of the adjustment programme," he added.