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TEL AVIV — Whoever wins Israel's election next week must answer demands for relief from soaring housing prices and a high cost of living, but the days of big state spending on social programmes are unlikely to return.

Opinion polls show that more than half of Israelis believe social issues and living expenses, which are much higher than in western Europe or the United States, are their top priorities in selecting a party on
March 17.

By contrast, fewer than 30 per cent say they are most concerned by the security threats facing Israel on which Prime Minister Benjamin Netanyahu, nicknamed "Bibi", has focused his campaign.

But even a centre-left bloc that is promising to ease the economic burden on citizens believes that driving up government spending is not an option.

"No way is that going to happen. That is a thing of the previous century," said Manuel Trajtenberg of the Zionist Union that groups the Labour Party and the centrist Hatnua.

"We have to be extremely careful with the [budget] deficit. We cannot afford to run high deficits," added Trajtenberg, a fiscal conservative whom Zionist Union has designated as finance minister should it lead the next coalition government.

Polls show Zionist Union of Labour's Isaac Herzog, nicknamed "Bougie", and Hatnua's Tzipi Livni is in a tight race with Netanyahu's Likud. However, the incumbent appears better placed to find more allies within a right-wing bloc to form the next coalition.

As in a number of European countries, the consumer price index is actually falling; it was down 0.5 per cent year on year in January. 

But central bank figures for 2013 show a basket of basic products was 12 per cent more expensive in Israel than the average for wealthy nations in the countries grouped in the Organisation for Economic Cooperation and Development (OECD), while gross annual salaries were $10,000 lower.

On top of this, house prices have doubled since 2007, putting home ownership out of the reach of many young Israelis, while rents are also rising sharply.

In the summer of 2011, hundreds of thousands took to the streets in protests first set off by the cost of cottage cheese, a popular staple. Those scenes have not been repeated in the cold winter weeks leading to next Tuesday's election, but candidates have still been making reform promises.

Netanyahu, who is seeking a fourth term as premier, has addressed the cost-of-living concerns despite his focus on opposing a nuclear deal with Iran.

He has promised to eliminate an 18 per cent value-added tax on basic foods. His outgoing government had already begun to allow more food imports to boost competition while passing legislation to break up conglomerates.

One challenger, centrist Moshe Kahlon of the new Kulanu Party, has made no secret that he wants the post of finance minister no matter who forms the next coalition.

Kahlon, responsible for a steep drop in mobile phone rates by boosting competition as communications minister in a previous government, has proposed housing market reforms including freeing up more state-owned land for development, speeding up supply and removing bureaucratic barriers in the hope of lowering prices.

Polls suggest Kulanu will win nine seats in the 120-member parliament. If it breaks into double digits, strengthening its case for a place in the next coalition, this could make waves as Kahlon also wants more banking competition.

"If Kahlon gets double-digit mandates, it will be a short-term shock for capital markets," said Avihay Sorezcky, chief international strategist at IBI Investment House.

Best in the west

Some analysts are confident about the economy, regardless of whether "Bibi" or "Bougie" wins. "The election, no matter how it turns out, should not dampen the healthy growth and stable fiscal trajectory," said Elliot Hentov, director for sovereign credit ratings at Standard & Poor's.

The outgoing government's draft budget, which has now been shelved, set the 2015 deficit target at 3.4 per cent of the gross domestic product (GDP), up from 2.8 per cent last year largely due to higher defence spending. 

Hentov expects this year's target to be only slightly higher under a new government at 3.6 per cent of GDP.

In 2003, when Netanyahu was finance minister, Israel shifted to a free-market economy. State spending was slashed in favour of the private sector driving economic growth, while the public debt burden has dropped.

Since then, Israel's growth has been among the best in the West, but candidates looking to unseat Netanyahu say this has not helped families to make ends meet.

Trajtenberg, who supports a smaller defence budget, has unveiled a 7 billion shekel ($1.7 billion) plan to boost education and healthcare spending from 2016.

He told Reuters that as finance minister he would pursue reform under a housing "czar", something that would not cost the government money. He ruled out new taxes, although he would try to expand the tax base and lower the salary threshold for filing a tax return.

"Regardless of who forms the next coalition, the basic macroeconomic policies such as budgetary discipline, will not really change," said Joseph Bachar, chairman of Israel Discount Bank and a former finance ministry director general.

Eldad Tamir, chief executive of brokerage Tamir Fishman, forecast a measured approach to reform whoever wins. "I don't see any government taking any major risks because there won't be a big winner," Tamir said.

"War is something we live with all the time, now all that interests me is keeping the refrigerator full," Levy said at a grocery shop in a market in the Talpiot fruit and vegetable market in the northern city of Haifa.       

Levy, who describes himself as a lifelong Likud voter, is a member of Israel's Sephardic community, Jews of Middle Eastern descent who, attracted by a tough stance towards Arab enemies, have traditionally been the party's backbone.

Political analysts say Sephardim who are disproportionately poorer than Israel's Ashkenazi Jews with roots in Europe, may throw their support elsewhere in the March 17 election, angry over the high cost of living and housing prices.

Netanyahu's battle to preserve Sephardic backing in Israel's lower-income areas is being played out in places such as the Haifa marketplace and Mahane Yehuda market in occupied Jerusalem, where the prime minister himself made an appearance on Monday.

But in a departure from tradition, reporters were not given advance notice of Netanyahu's visit, a sign, some commentators said, of campaign concerns of a lukewarm welcome in what has long been a bastion of Likud support.

Video that emerged from the visit showed shoppers applauding Netanyahu as he promised them a "prosperous Jerusalem" if they voted Likud.

Small change

But one café owner, who served Netanyahu a latte, said she made a symbolic protest by handing him 87 shekels ($22) in a fistful of coins as change for his order, which he paid for with a 100 shekel ($25) bill.

"It was important to remind him that while he invokes the Iranian [nuclear] threat, we, the small business owners, have a daily struggle to earn even small change," she said.

Likud dispatched a fiery Sephardic legislator, Miri Regev, to the market in Haifa to make its case.

"You have to vote for Likud, we've done more than anyone,"  Regev, a former brigadier general and political hardliner of Moroccan origin, shouted through a microphone at shoppers.

Regev, 49, has been visiting far-flung and hardscrabble towns in a trailer emblazoned with her portrait and the Likud logo.

"The more that people from the periphery go and vote, the greater the number of votes there will be for Likud," Regev told Reuters over a spinach turnover, a popular Sephardic dish.

Shmuel Sandler, a political scientist at Bar-Ilan University near Tel Aviv, acknowledged "a traditional vote for Likud among Sephardim". But he added: "It's not totally clear this time how it will go."

In the Haifa market, some shoppers of Sephardic descent said they were weighing whether to switch their vote from Likud to a party with what they hope will be a more economics-minded agenda.

"Bibi has spit in our face. I don't believe in anyone anymore," shopper Shaul Sabag said, as Regev passed a vegetable stall where he stood. Levy, a cleaning materials salesman, said he also preferred not to cast any ballot at all.

Gideon Rahat, a political scientist at the Hebrew University of Jerusalem, said Levy's case was an example of how poorer Israelis were growing more alienated from politics, once a rarer phenomenon in security-minded Israel than elsewhere.

"The ethnic vote doesn't necessarily help Likud anymore, but that doesn't mean they will swing behind Netanyahu's rivals, either," Rahat said. "Anti-Netanyahu sentiment won't necessarily push people to vote for another party; they may just not vote at all."

But Likud may be able to make up for lost votes if it partners with several centrist and religious parties that have been focusing on the Sephardic electorate.

Ultra-Orthodox Shas, or Sephardic Torah Guardians, and Kulanu, a centrist faction advocating economic reform, have signalled they would prefer to join a government headed by Netanyahu rather than by Herzog.

PARIS/BERLIN — Russia's lurch into recession has hit many tourism and luxury goods companies hard, forcing them to cut prices, and in turn costs, in an attempt to limit the damage.

And there are few signs things will get better soon, with a fragile ceasefire in eastern Ukraine doing little to ease international tensions over Moscow's support for pro-Russian separatists in the region.

The ruble lost almost half of its value against the US dollar last year after oil prices crashed and the West imposed sanctions on Moscow. That has crushed Russians' spending power, forcing them to cut back and put pricey holiday plans on hold.

Spending on international travel by Russians fell by 6 per cent in 2014, according to the UN World Tourism Organisation.

Russian tourists are major buyers of luxury goods, particularly in European capitals such as Milan where they are regular customers of brands such as Ferragamo, Moncler  and Kering's Italian tailor Brioni.

Clerks at the menswear department of posh Milan department store Rinascente said Russian clients had virtually disappeared.

According to tax-refund company Global Blue, spending by Russian tourists fell 17 per cent last year, and plunged 51 per cent in January following a 44 per cent fall in December.

Although there was an unexpected spike in sales for some in December as Russians offloaded the fast-depreciating rubles for durable luxury goods such as Cartier watches, many brands are preparing for a tough 2015.

Italian fashion group Roberto Cavalli expects Russian sales to drop 20 per cent this year, while LVMH's watch brand Hublot has already seen sales decline 20 per cent in Russia since January, a source close to the company said.

How best to cope?

Eager to preserve client relationships, some brands have kept a lid on Russian prices at the expense of margins.

Jerome Biard, who exports Swiss watches to Russia through his distribution company LPI and represents brands such as Burberry, Michael Kors, Armani and Raymond Weil, has suffered an extra blow from a surge in the Swiss franc, but has held back from passing the costs on to customers.

"My strategy was to protect my distributors and help them empty their stocks at the end and beginning of the year, so we all agreed to sacrifice our margins," Biard said.

LVMH's Swiss luxury brand Tag Heuer, whose boutique in Ekaterinburg enjoyed record sales in December, said it kept prices relatively unchanged in Russia last year, though now plans to raise prices by around 20 per cent this month.

Several lingerie providers such as Lise Charmel have also made efforts to keep prices affordable in Russia, which has been one of their top export markets.

But some have had to cut costs to cope.

Mid-range French lingerie maker Maison LeJaby, which counts on Russia for 30 per cent of turnover, has had to shed 27 per cent of its staff, or 50 people, this month.

Upmarket watchmaker Ulysse Nardin, recently acquired by Gucci owner Kering, last month put some employees on temporary unemployment, blaming the slump in Russian business. 

Tourism hit

It's been a similar story for airlines, tour groups and hotels with a big exposure to Russia.

Some hotels in Turkey have slashed prices to fill beds after arrivals from Russia dropped by more than 21 per cent in 2014, and by 22 per cent in January.

"We believe that the Russians won't come [to Turkey]," said Markus Daldrup, managing director at German tour operator Alltours, which is offering price cuts of up to 24 per cent on summer trips to Turkey.

Egypt, whose tourism sector gets 30 per cent of its business from Russia, saw a 50 per cent plunge in visits from Russians in December, and another 20 per cent in January year-on-year.

The country waived the $25 visa fee for Russians through the end of April and plans to launch a massive campaign in Russia in the next months to win back customers.

Several airlines, such as Emirates, have responded to the decline in Russian travel abroad by offering fewer flights or seats to the country.

The posh ski resort of Courchevel estimates its Russian clientele has shrunk by 20-30 per cent this year, and those that have come have spent less.

"Before, you would often see Russian clients buying bottles of wine at 6,000 euros, now they only get those for a few hundred euros," said Adeline Roux, head of tourism at the resort.

ISTANBUL — Turkish Central Bank Governor Erdem Basci, a technocrat reluctantly thrust into a standoff with President Recep Tayyip Erdogan, appears to believe he will eventually ride out the storm.

In his shoes, many bank chiefs might already have quit. Erdogan's relentless demands for sharper interest rate cuts, his assertion that the bank is under outside influence, and his equating of high rates with treason have left Basci struggling to restore investors' confidence.

Yet those close to the former professor, who is respected on financial markets for his command of economic theory, say he is optimistic that Erdogan's rhetoric is little more than populist theatre before a parliamentary election in June.

While reluctant to talk politics even in private, Basci has made clear he does not plan to stand down, saying last month that a public duty must be performed for the full period in which it is assigned.

Economic growth, a pillar of the ruling AK Party's electoral strength over the past decade, is flagging. Industrial production fell more than two per cent in January, data showed on Monday, adding weight to Erdogan's case against Basci.

"He is cornered," said Selin Sayek Boke, deputy chairwoman of the main opposition CHP, who, like Basci, taught economics at Ankara's Bilkent University. 

"If he resigns he is going to be blamed for bringing havoc to the financial markets. If he does not resign, he will be blamed [for stalling growth]," she adeed.

A meeting expected in the coming days between Basci, Erdogan, Prime Minister Ahmet Davutoglu and Deputy Prime Minister Ali Babacan, in charge of the economy and a close Basci ally, could be crucial.

When the central bank lowered its main rate in January to 7.75 per cent, government ministers immediately said the 50 basis point cut was not enough to support growth.

But with the lira tumbling to record lows last week and inflation stubbornly above target, Basci is likely to try to persuade Erdogan of the need to keep monetary policy tight.

"I think Basci is living under an illusion. He's still not resigning. He's assuming Erdogan can be persuaded and the tension can be eased after the parliamentary election," said one source familiar with the thinking inside the central bank.

Others in the institution fear Erdogan's statements will only intensify and "spin out of control".

"[Some] think this is a political manoeuvre by which Erdogan aims to put the blame for the deterioration in growth and rising inflation on somebody else, and claim that the economy got worse because they didn't listen to him," the source added.

‘Creative technician’ 

Basci's fate is seen as closely tied to that of Babacan, a top figure in Turkey's economic management team for more than a decade and respected by foreign investors.

The two were childhood friends, their fathers were both small business owners in Cikrikcilar, a neighbourhood of artisanal workshops and traders in Ankara's old town. They went on to study together at the city's Middle East Technical University.

"Basci is a smart man who's well aware of what's going on. But the reason he's remaining in office is his personal relations with Babacan," said Ugur Gurses, a former central banker and newspaper columnist.

"He thinks that Babacan will have to endure the consequences of his resignation and he's resisting until the end to avoid this," he told Reuters.

Unable to raise rates because of the political pressure, Basci has been trying to support the lira by other means, on Monday cutting foreign exchange deposit rates, the bank's third back-door attempt since last week to prop up the currency.

"[Basci] has been a creative technician... He tried to please the markets together with the politicians," said the CHP's Boke.

His hands had been tied, she added, by the government's failure to undertake structural reforms to reduce a large current account deficit that has left Turkey dependent on volatile foreign capital flows.

"If they want to avoid the depreciation, they're going to have to hike interest rates... We're an open economy, we haven't resolved our structural issues and clearly we need foreign financing," Boke indicated.

Davutoglu and Babacan spent much of last week in New York, trying  to reassure investors that the outlook for Turkey was bright despite the row over monetary policy.

One bank strategist briefed by colleagues said the delegation had emphasised that there would be no "aggressive reshuffle" of the economic team before June.

But after the election, things will be less certain, particularly if Erdogan pursues his battle against the "Cemaat" network of US-based cleric Fethullah Gulen, an ally-turned-foe whom he accuses of plotting against him through influence in state institutions.

"The central bank and the Treasury are the last fortresses of the Cemaat. A considerable number of people think Basci remains in office due to their support," said the source familiar with central bank thinking. "What kind of steps will be taken for these institutions will be clear after the elections."

Pakistani residents shopping at a Pakistan's biggest mall in Islamabad last week (AFP photo)

ISLAMABAD — Pakistan has begun chasing wealthy tax-dodgers who enjoy lives of extravagance and luxury, but revenue officials face huge challenges in trying to force the very richest, and most influential, to pay up.

Pakistan's tax-to-gross domestic product (GDP) ratio of 9.5 per cent is among the lowest in the world and the government is under pressure from foreign donors and lenders, including the International Monetary Fund (IMF), to increase collection to boost the struggling economy.

Revenue authorities say they have identified about a quarter of a million new taxpayers who they project will add around 14 billion rupees ($140 million) to government coffers.

Broadening the tax base and improving the economy after years of drift and sluggish growth under the last government was a key pledge in Prime Minister Nawaz Sharif's 2013 election campaign, when he was swept to power for a third time.

Currently less than 1 per cent of Pakistanis pay income tax and the government collected just $8 billion in total income tax in the 2013-14 fiscal year, barely enough to cover just the country's defence expenditure of $7 billion.

The finance ministry is aiming to boost the tax-to-GDP ratio to 15 per cent in the current fiscal year ending June 30.

As part of those efforts, the Federal Bureau of Revenue (FBR) is compiling lifestyle and vehicle data to try to trace unregistered taxpayers, including wealthy landlords and businessmen zipping between their luxury homes in imported Mercedes.

"We are collecting information from the vehicle registration authority, car manufacturers, utility companies, telecom companies and property registration offices and tracing people who are not paying any tax," FBR spokesman Shahid Hussain told AFP.

Taxpayer profiles 

The data is used to generate profiles of potential taxpayers, after which demands are issued for them to pay income tax.

"FBR has already issued notices to 261,250 potential tax payers," Hussain indicated, noting that new taxpayers have paid 570 million rupees since the crackdown started.

It is not just dodgy businessmen who have been caught, several lawmakers have been found paying either no tax or very little and not filing their mandatory annual tax statements.

The FBR has taken punitive measures against some "chronic defaulters", freezing nearly 300 bank accounts, seizing more than 100 vehicles, putting 78 properties up for sale and issuing arrest warrants in 40 cases.

"Employing information technology, the FBR is creating a central database which would contain information about all taxpayers and nobody will be left undetected," Hussain said.

A new FBR department tasked with broadening the task net started working in July 2013 and within one year it started showing results, he added.

But Pakistan is a country where wealth and political influence go hand-in-hand. 

For generations, landowners and industrialists have given patronage to political parties and scant attention has been paid to their assets by the taxman.

Changing this privileged arrangement is a tricky proposition.

Umar Cheema, an investigative journalist for Pakistani daily The News who has done several major exposes on tax-dodgers, describes the FBR's commitment as encouraging, but does not expect the campaign to net any big fish.

'War on tax cheats' 

"FBR is after those who can't influence them," Cheema said, citing several well-known tycoons considered among Pakistan's richest whose names were missing from a list of the country's top 100 taxpayers.

"It can be done only by waging a war against tax cheaters without discrimination of good and bad cheaters," he added.

Pakistan's central bank said in a recent report that tax revenue growth was not keeping up with budget targets.

The tax take grew 11.7 per cent in the first quarter of the current fiscal year, against an annual target of 26.9 per cent, but this was only half the growth of the same period during the previous fiscal year, according to the State Bank of Pakistan (SBP).

The central bank has urged the government to simplify tax procedures and do more to increase the documentation of the economy.

A vast amount of business in Pakistan is done off the books, making transactions hard to trace and levy dues on.

"Although FBR has taken a number of measures to increase tax collection, these focused more on deductions at source, and/or increasing the tax rates," a recent SBP report said, warning such measures had enjoyed "limited success" in the past.

The IMF, though, has said the government's reform programme, tied to a $6.6 billion loan from the Washington-based lender, was on track, and expects growth to accelerate to 4.3 per cent in the 2014-15 fiscal year from 4.1 per cent previously.

But even with growth quickening and officials insisting they are making inroads, challenges to the government's efforts to gather taxes remain considerable.

KUWAIT CITY — World crude prices are expected to gain this year or at least stabilise at between $50 and $60 a barrel, Kuwaiti Oil Minister Ali Al Omair was quoted as saying.

"Forecasts for the oil price this year indicate that it will gain or at least stabilise between $50 and $60 a barrel," the official KUNA news agency quoted Omair as saying late on Saturday in Bahrain.

The minister indicated that prices are currently supported by conflict in Iraq and Libya and by a drop in sand oil and shale oil output. But that is counterbalanced by slow global economic growth, which is dampening demand, Omair said.

World prices dropped at close on Friday as the dollar rose sharply, making dollar-priced crude more expensive for buyers using weaker foreign currencies.

West Texas Intermediate for delivery in April slid $1.15 to $49.61 on the New York Mercantile Exchange, ending near its week-ago level. Brent North Sea crude for April, the international benchmark, dropped 75 cents to $59.73 a barrel in London.

AMMAN — The finance lease volume in the Kingdom is estimated at JD1.2 billion, 80 per cent of which is directed to the real estate sector, Amjad Saeh, president of the Jordan Association of Finance Lease Companies, said Saturday.

At a workshop on finance lease and its importance to the national economy, Saeh noted that there are 16 finance lease companies in Jordan, seven of which are owned by commercial banks, four by Islamic banks and five are owned by non-bank institutions.

Participants discussed all articles in the finance lease law to raise awareness on how to complete transactions at the Land and Survey Department.

Muein Sayegh, director of the department, highlighted the importance of organising such workshops, in cooperation with the department’s partners, for their role in acquainting employees with the law and explaining how the mechanism transactions are carried out.

LONDON — The euro tumbled through the $1.09 level to strike a fresh 11.5-year low Friday as the ECB nears the launch of its massive stimulus package and strong US jobs data raises the possibility of a US rate hike soon.

The single currency sank to $1.0845 as European markets closed, the lowest since September 2003, after strong non-farm payrolls data increased expectations that the US Federal Reserve (Fed) may move to begin hiking interest rates in the coming months.

But with the European Central bank (ECB) to begin its 1.1 trillion-euro quantitative easing stimulus on Monday, most eurozone stock markets pushed higher.

Frankfurt's benchmark DAX 30 index of top companies closed up 0.41 per cent to 11,550.97 points after reaching an intra-day record high of 11,600, while in Paris the CAC 40 rose 0.02 per cent to 4,964.35 points.

On the downside, London's FTSE 100 index ended the day down 0.71 per cent to 6,911.80 points, having posted a record closing high on Thursday after the ECB announced its bond purchases will start this week.

The euro tanked against the dollar after the US Labour Department said Friday that the US economy pumped out a stronger-than-expected 295,000 net new jobs in February.

Analyst Craig Erlam said the good jobs numbers "will only feed into expectations for a rate hike from the Federal Reserve in June".

"The rally in the dollar immediately after the release clearly supports this view...," he added.

Higher interest rates will make the dollar attractive, while the ECB's stimulus programme will flood the economy with euros and weaken its value.

ECB throws
'kitchen sink' 

Some analysts predict the eurozone unit could reach parity against the dollar amid a growing policy divergence between the ECB and the Fed.

The Frankfurt-based central bank is battling deflation risks across the 19-nation eurozone, while its US counterpart exited its own QE programme in October, and is mulling an interest rate hike later this year amid optimism over the American economy.

"Diverging policy stances between the Fed and ECB look set to persist for some time, pushing the euro towards parity over the medium-term as the search for yield drives euro area investors to increase exposure to overseas assets," RIA Capital Markets analyst Nick Stamenkovic told AFP.

However, Rabobank analyst Jane Foley cautioned that the Fed was mindful of weak US inflation.

"The ECB has indicated that it is prepared to throw the kitchen sink in with its attempts to beat deflationary risk and the resultant weakness of euro/dollar will undoubtedly help with the policy's success," she said.

She added: "We do not think that the Fed will hike [rates] until December, based on weak inflation. Consequently we think that euro/dollar will avoid parity."

NICOSIA/FRANKFURT — The European Central Bank (ECB) will launch into quantitative easing (QE) next week having increased its economic growth forecasts for this year and next.

President Mario Draghi said the first bond purchases with new money would take place on March 9.

The eurozone's central bank has said it will buy 60 billion euros a month until September 2016 or until inflation is pushed back towards a target of close to but below 2 per cent.

The ECB, which left interest rates on hold at record lows just above zero at its meeting off-base in Cyprus on Thursday, lifted its growth forecast to 1.5 per cent for this year, from the 1 per cent it predicted in December.

For 2016, growth of 1.9 per cent is now expected, up from a previous 1.5 per cent.

"The latest economic data, and particularly survey evidence available up to February, point to some further improvements in economic activity at the beginning of this year," Draghi told a news conference.

"Looking ahead, we expect the economic recovery to broaden and strengthen gradually," he said.

An analysis of Reuters polls shows more than half the most important economic data reports from the eurozone since the start of the year have beaten the consensus forecast and many have topped the highest prediction.

Germany, Europe's largest economy, has led the way.

Inflation, now running at 0.3 per cent, is forecast at zero  this year rising to 1.8 per cent in 2017. That is sufficiently close to the ECB's target to suggest money printing will not run beyond September 2016.

The bank has a long way to go to convince markets its plans will be effective. Only half of the economists polled by Reuters think bond buying will help inflation rise towards the target of close to but below two per cent and half think the purchases will be extended.

There are tentative signs inflation has bottomed out.

The February reading of 0.3 per cent was above forecasts, oil prices have rebounded from January lows, growth is picking up and the euro hit a fresh 11-year low against the dollar overnight, boosting prospects for higher imported inflation.

"The risks surrounding the economic outlook for the euro area remain on the downside but have diminished following recent monetary policy decisions and the fall in oil prices," Draghi said.

Anticipation of the QE programme has driven eurozone borrowing costs down to the point where Spain can borrow for 10 years at under 1.3 per cent and investors actually pay for the privilege of lending to Germany for five years. Yields in Italy, Spain and Portugal dropped to record lows this week.

Some analysts have suggested the ECB would distort the bond market by buying bonds with negative yields. Draghi said it would only steer clear of bonds yielding less than the ECB's 0.2 per cent deposit rate.

Another concern is whether the ECB will find enough bonds to buy as the market is flush with uninvested cash while banks are under obligation to hold top tier assets, like government debt.

"There may be complexities. We think they are not relevant," Draghi said, noting that more than half eurozone sovereign bonds were held outside the currency area.

Draghi added that the ball was now in the court of eurozone governments who must contribute "decisively" to economic recovery with structural economic reforms.

"Decisive implementation of product and labour market reforms and actions to improve the business environment for firms need to gain momentum in several countries," he indicated. "It is crucial that structural reforms be implemented swiftly, credibly and effectively."

Draghi said the ECB will resume normal lending to Greek banks only when it sees Athens is complying with its bailout programme and is on track to receive a favourable review.

He also made clear the eurozone bank would not raise a limit on Athens' issuance of short-term debt to help leftist Prime Minister Alexis Tsipras avert a funding crunch, since the European Union treaty barred monetary financing of governments.

The tough line, spelled out after the ECB's policymaking Governing Council met in Cyprus, added to pressure on Greece's radical new rulers to implement promised reforms under a bailout they had vowed to scrap but were forced to extend for four months to avoid running out of money.

"The ECB is a rule-based institution. It is not a political institution," Draghi told a news conference in Nicosia.

"The ECB is the first to wish to re-start the financing to the Greek economy provided the conditions are in place, and the conditions are that a process which suggests a successful completion of the review be put in place quickly. That is the condition and we will certainly welcome such a development," he said.

The required measures include pension reform, privatisations and a streamlining of value added tax to which Tsipras' hard left Syriza Party is bitterly opposed.

The troubled sell-off of state assets suffered another blow on Thursday when Greece's top administrative court blocked the sale of a luxury seaside resort outside Athens to an Arab-Turkish fund, court officials said.

The judges ruled the sale of the prime Astir Palace hotel complex and the development of the site breached planning rules and would harm the natural, cultural and urban environment.

Greek unemployment rose slightly to 26 per cent in December, while jobless totals are falling in other eurozone countries that have been through bailout programmes such as Ireland, Spain and Portugal.

Draghi said the central bank had doubled lending to Greece to 100 billion euros in the last two months, equivalent to 68 per cent of the heavily indebted country's economic output, but could not buy Greek bonds under its new asset-buying programme.

Lifeline raised

The ECB increased the ceiling on emergency lending assistance for Greek banks, introduced last month when it stopped accepting Greek government bonds as collateral for funds, by 500 million euros to nearly 69 billion euros.

Draghi said the ECB could only go on authorising this liquidity line as long as the banks were solvent with adequate capital, which remained the case despite massive capital outflows in the last two months due to political uncertainty.

The ECB had asked eurozone members keep a 10 billion euro recapitalisation fund on standby "to face any sudden negative contingency that might materialise now", he added.

Finance Minister Yanis Varoufakis reached a deal with the eurozone, the ECB and the International Monetary Fund (IMF) last week on a four-month extension of a 240 billion euro financial rescue which had been due to expire at the end of February.

However, the creditors have blocked avenues suggested by Athens for temporary state funding in a drive to ensure Greece complies with the deal before any more aid is released.

With tax revenues falling, Varoufakis is trying to scrape together cash from government reserves and state pension and health funds to meet a crucial repayment to the IMF this month.

TEL AVIV — Israel will start buying some fruit and vegetables from the Gaza Strip next week, a partial resumption of imports halted when the Islamist group Hamas took over the Palestinian territory in 2007, Israeli officials said on Thursday.

They said the measure was designed to help a Gaza economy devastated by last year's war with Israel, and to make up for a shortfall in produce from Israeli farmlands left fallow during the current Jewish lunar calendar year in accordance with biblical law.

The move was welcomed by Jamal Abu Al Naja, director of the Gaza Vegetable Production and Export Association, who xpressed hope it would help make up farmers losses and eventually encourage working farms to seek bank funding to expand their production.

Some Palestinian farmers stopped cultivating their fields altogether or sold their land to housing developers after Israeli markets were closed to them in 2007.

Israel, which has been facing international calls to ease its blockade of Gaza, has been gradually relaxing restrictions on commerce across its fortified border since the July-August war which caused widespread destruction in the enclave.

It has allowed Israeli transit of Gaza-produced vegetables and Palestinian merchants to the occupied West Bank, and for Gaza farmers to bring tractors in via Israel since November.

COGAT, the Israeli military agencies that oversees civilian interaction with Gaza, said a shipment of tomatoes and eggplants would be brought in from the territory on Sunday.

"Future stages are expected to include a wider variety of vegetables, totalling 1,000 to 1,500 tonnes. Each tonne is valued at approximately 3,000 shekels ($750)," COGAT indicated in a statement, noting that the imports were scheduled to run the duration of the Jewish calendar year that expires in September.

COGAT deals with civilian authorities but shuns Hamas.

"The steps taken are meant to support the Palestinian population while segregating the Hamas organisation, which is an entity that prevents the reconstruction of Gaza and uses its resources," COGAT head Major-General Yoav Mordechai said.

Abu Al Naja said Israeli authorities had already carried out quality tests on tomato, eggplant, cucumber and zucchini samples.

"If implemented, it will help farmers make up for their losses, increase the number of workers and encourage investment in the agricultural sector," he told Reuters.

Separately, the Hamas-run energy authority said Thursday that Gaza Strip's sole power plant has halted production, following a dispute with the West Bank-based Palestinian Authority (PA) over fuel tax.

Hamas pays the PA for fuel imported to besieged Gaza, but is short of cash and had been unable to cover the additional costs in tax.

In December, Qatar stepped in and donated $10 million (nine million euros) to the PA to cover the tax, effectively exempting Hamas from paying it.

But that money has dried up, and the PA is insisting Hamas begin paying the tax again, the Islamist movement says.

"The power plant stopped producing electricity during the night, after funds from Qatari donations to cover fuel costs ran out," the energy authority said. "We are unable to pay for the fuel because of the taxes on purchasing it."

Gaza is blockaded and controlled by Israel on two of its crossings, and isolated by Egyptian closure of a third.

Israel facilitates the entry of fuel supplies.

A crisis-hit Hamas is unable to pay its own government and security employees due to the blockade and Egypt's closure of the border, with financial restraints hurting the group.

The plant requires 550,000 litres of fuel per day to produce at capacity, the energy authority says.

Even with the plant running, Gaza suffers 12 hours of power outages each day, and that is expected to increase to 18 hours after the plant's shutdown.

Many individual homes have their own generators, and households can purchase, expensively, fuel that comes into Gaza for private consumption.

Hamas and the Palestine Liberation Organisation, which dominates the PA, signed a unity deal in April that was to see the West Bank-based government take over administration and security of the Gaza Strip.

But pending various disputes, including over the payment of Hamas's security forces, the deal has yet to be implemented, and Hamas remains in control of Gaza.

The two sides agreed on a government of independents in June, but progress on reconciliation to fix a years-old split was further delayed by Hamas's war with Israel in July and August.

VIENNA — Vienna, Austria's elegant capital on the Danube River, has again been commended as offering the best quality of life of any city in the world; Baghdad, once more, was deemed the worst to live in.

The consulting firm Mercer said German and Swiss cities also performed well in its annual quality of living rankings. Zurich, Munich, Duesseldorf and Frankfurt remained in the top 10.

Mercer's survey helps companies and organisations determine compensation and hardship allowances for international staff. It uses dozens of criteria such as political stability, healthcare, education, crime, recreation and transport.

With a population of 1.7 million, Vienna topped the survey for the sixth year in a row, boasting a vibrant cultural scene alongside comprehensive healthcare and moderate housing costs.

The Austrian capital's extensive public transport system costs just 1 euro a day for an annual pass. Its Habsburg-era coffeehouses, architecture, palaces, operas and other cultural institutions make it a prime tourist destination.

Europe has seven of the world's top 10 cities in the 2015 survey. New Zealand, Australia and Canada each have a city in the top 10.

Baghdad, the Iraqi capital, was again ranked lowest in the world. Waves of sectarian violence have swept through the city since the American-led invasion in 2003.