Euro at risk of collapse, says Treasury watchdog as economic crisis sweeps Continent

Euro at risk of collapse, says Treasury watchdog as economic crisis sweeps Continent


  • Eurozone finance ministers insist £635 billion bailout fund is big enough to deal with debt crisis
  • Irish budget debate begins in Dublin
  • Debt-laden government’s £5 billion cost-cutting package to slash social welfare

The Euro is at risk of collapse as economic crisis sweeps the continent, Britain’s independent Treasury watchdog warned last night.

‘General consensus’ is that currency unions ‘eventually fail’,  Professor Steve Nickell, a senior member of the Office for Budget Responsibility, told MPs on the powerful Treasury Select Committee.

And the OBR’s chairman, Robert Chote, added: ‘We are not assuming a cataclysmic outcome for the eurozone but, as Steve said, monetary arrangements come and monetary arrangements go.’

Destined to fail? Leading economists point out that currency unions have a history of eventually collapsing Destined to fail? Leading economists point out that currency unions have a history of eventually collapsing

The admission by the leading economists came as eurozone finance ministers held an emergency meeting in Brussels to discuss possible measures to shore up the single currency.

Greece and Ireland have already been forced to accept bailouts – with Britain making its own £3.2billion direct loan to Ireland.

Warning: Professor Steve NickellWarning: Professor Steve Nickell

There are fears Portugal and Spain may be next to go cap in hand for assistance from the EU and the International Monetary Fund.

Professor Nickell added: ‘Of course there is a possibility it will collapse, but at the moment it is not something to which I would assign a high probability.’

Both he and Mr Chote warned that the OBR had not incorporated into its forecasts any attempt at working out what would happen to the UK economy if the euro imploded.

Prof Nickell, a former member of the Bank of England’s Monetary Policy Committee which set interest rates, said he ‘would be quite happy’ to do so ‘if we felt it was a real concern’.

The OBR may have to take into account ‘very low’ growth in the eurozone in its next forecasts before the March 23 budget, he added.

Mr Chote also denied that the OBR’s forecasts for the UK economy were too rosy.

In its report last month it revised upwards its prediction for growth for 2010 to 1.8 per cent from 1.2 per cent.

Mr Nickell added that he believed it ‘very unlikely’ there would be further dramatic falls in house prices.

Meanwhile, top European officials yesterday insisted they have enough financial firepower to deal with Europe’s government debt crisis – but they id not rule out increasing the bailout fund in the future.

Jean-Claude Juncker, who chaired a meeting of the eurozone’s 16 finance ministers on Monday, said that there wasn’t any immediate need to increase the £635 billion financial backstop despite concerns that it just isn’t enough.

The fund is for eurozone governments in danger of running out of money.

Relaxed: Chancellor George Osborne, Spanish Finance Minister Elena Salgado and Belgian Finance Minister Didier Reynders in Brussels yesterdayRelaxed: Chancellor George Osborne, Spanish Finance Minister Elena Salgado and Belgian Finance Minister Didier Reynders in Brussels yesterday

‘For the time being, there’s no need to increase,’ Juncker said after the meeting.
The big fear in the markets is that Portugal and Spain will join Greece and Ireland in needing a financial lifeline – and that Europe might not have enough bailout money available to cope.

In May, eurozone governments and the International Monetary Fund set up the giant financial backstop for the currency bloc.

The majority is managed by the European Financial Stability Facility, which can issue up to £332 billion in bonds guaranteed by eurozone governments.

The EU’s executive Commission can lend an additional £50 billion, while the IMF has said it would contribute up to £211 billion.

The idea behind the facility was to reassure bond markets that countries would be able to pay – and halt the selloff of government bonds.

Klaus Regling, who heads the EFSF said that Ireland’s £72 billion bailout agreed last month will use up less than 10 per cent of the total backstop.

‘There are sufficient resources left to deal with other relevant cases,’ Regling said.

In Ireland, the Government unveiled the most feared budget in living memory.

The massive £5 billion cost-cutting package slashed social welfare, including jobseekers and child benefit.

A man walks past fresh graffiti in Dublin against the IMF Bailout as Ireland braces itself for today's budgetA man walks past fresh graffiti in Dublin against the IMF Bailout as Ireland braces itself for today’s budget

Government ministers’ salaries will be cut as the government takes on a four-year battle to restore the state’s crippled finances.

Public spending will be reduced by £3.8 billion while taxes will raise an extra £1.3 billion.

Prime minister Brian Cowen’s shaky coalition will try to impose the cuts with only a two-seat majority.

But the embattled government received a boost yesterday after an independent TD, whose support is crucial, said he would back the cuts.

Michael Lowry, Tipperary North TD, said he would put the country first despite a potential backlash from his constituents.

The veteran politician said that after talks with the government he was satisfied that the old-age pension would be protected, along with free travel and electricity for the elderly.

Mr Lowry said his fellow backbench independent, Kerry’s Jackie Healy-Rae, was also expected to back the budget, due to be unveiled in the Dail by finance minister Brian Lenihan mid-afternoon.

The potentially savage package comes just over a week after the government revealed it was taking an £72 billion bailout from the International Monetary Fund/Europe.

Irish budgetIrish Independent MP Michael Lowry outside Leinster House last night, where he gave a crucial press statement supporting the Government in today’s budget

Mr Cowen’s crippled coalition government has suffered widespread criticism for the move by a public angry at the perceived surrender of the state’s hard-won economic sovereignty.

The six billion euro package is the first phase of a four-year budgetary road map to raise  £13 billion and plug the gap in the beleaguered economy.

Opposition party Sinn Fein accused Mr Lowry and Mr Healy-Rae of engaging in the worst kind of parochial politics.

Any potential excise and duty changes, including the price of petrol and alcohol will come into force from midnight and will have to be voted on in the Dail after the budget is unveiled.

The Social Welfare Bill, which gives legal effect to any budget changes in the dole or child benefit, is expected to be voted on by the end of the week while the finer details of the plan will be debated in the Finance Bill in the new year.

The budget marks the fourth time since October 2008 that the Fianna Fail/Green Party coalition government has been forced to introduce harsh measures to tackle the black hole in the public finances.

Lobby groups made a last ditch plea to Mr Lenihan to either save or make specific cuts, with the Irish Heart Foundation calling for a hike in the price of cigarettes.

But businesses said any price jump would lead to a corresponding increase in smuggling and damage retailers.

The beginning of the MAS and the AUC of Magdalena Medio (1981-1991)

The beginning: the years of the MAS and the AUC of Magdalena Medio (1981-1991)

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Although self-defense or paramilitary groups were, in principle, protected by law, in its evolution are leaving the service of large landowners and drug traffickers interested in protecting their territories.

The origin of these groups, as known today, dates from the early eighties, with the creation of the group Death to Kidnappers (MAS) by the drug trade sectors affected by the guerrilla kidnappings.

Pablo Escobar, one of the creators of the MAS drug trade. Photo WEEK

The MAS emerged in 1981 when there had been no war between the cartels of Medellin and Cali. The background is the increasing pressure from the guerrillas, drug traffickers and the fact that the justification given for its formation was the kidnapping of Martha Nieves Ochoa, sister of several members of the cartel in Medellin, the Ochoa brothers, occurred November 12, 1981.Drug traffickers like Pablo Escobar Gaviria and Gonzalo Rodriguez Gacha, who led the massive purchase of rural land, created the first groups to defend their properties, for example, the MAS in the Magdalena Medio, especially in Puerto Boyacá.

Since 1982, deaths increased dramatically in this region. The complaints of the affected sectors originated at the beginning of the administration of Belisario Betancur (1982-1986), an investigation by the Attorney General’s Office, in coordination with the National Directorate of Criminal Investigation. (See report and conclusions of the Attorney)The findings of the first investigations, revealed to the public by the Attorney Carlos Jiménez, pointed to the paramilitaries as the main responsible for the escalation of violence, with the support of active Army and Police.(Listen to audio of Nelson Lesmes, Pablo Emilio Guarín, Luis Rubio)

After expelling the guerrillas from the south of Magdalena Medio, using a tactic that prevented the most direct confrontation with the armed forces and have instead attacked the weakest link, represented in the support networks of selected groups paramilitary groups operating there, helped to train other similar Córdoba, Urabá, Putumayo and Ariari region in Meta. With the expansion of Puerto Boyacá model to other regions of the country, paramilitary groups had their first big boost, as reflected in the high number of murders and massacres carried out.

* To enlarge click

By the mid-eighties, the agreements of convenience between the guerrillas and the drug trade, which for a long time remained in coca producing areas, located mainly in the southeast of the country, were broken by the contradictions that arose in the process of strengthening the military apparatus of the Revolutionary Armed Forces of Colombia, FARC. The guerrilla group tried to impose its terms for drug traffickers, the payment of “taxes” and recognition of its prevalence.

Disputes over the coca, which they had joined the site to neutralize the extortion and kidnapping by the guerrillas, largely explain the strengthening of paramilitary groups under the umbrella of drug trafficking in recent years. While the background is a clash between illegal armed groups must take into account that the drug through the paramilitaries did not fight directly to the guerrillas but did so by attacking sectors of the population felt their support. Thus, in areas where the disagreements were stronger, the waves of violence unleashed true.

Jacobo Arenas, the FARC’s historic leader. Photo WEEK

In areas where drug traffickers have invested in land, sought to avoid the economic demands of the guerrillas and kidnapping attempts. This coincided with the spread of MAS in rural areas and in essence this scheme was appropriate for a wing of the Medellin cartel when there was a break and subsequent war with the Cali cartel, led by Gonzalo Rodriguez Gacha.By the late eighties it clear That WAS the paramilitaries Had Profound undergone a transformation in conjunction with the rise of Drug Trafficking, a factor That Is Expressed in a huge offensive power. An investigation by the Administrative Department of Security, DAS, in 1987 ESTABLISHED That the massacres in the region of Urabá, Executed by an organization based in the Middle Magdalena, in alliance with Another Located in the department of Cordoba, the authors Had Recognized intellectual “bosses” of drug trafficking.

Slaughter of La Rochelle, Which Occurred in 1989. Photo WEEK

On the Other Hand, the slaughter of La Rochelle, Which Occurred in January 1989 under Simacota, where ‘n Attack and Killed Armed group members of a judicial commission Investigating the massacres and killings Had Been Committed in the Middle Magdalena Eichmann That the action of the self Could Be Directed Against Officials state.In the Barco administration (1986-1990), in the Midst of Persecution Against Drug Trafficking, the Government Realized the Danger Posed by These structures, Which Have Become hosts of the mafia in the process of expansion. Consequently, in 1989, President Barco by the Repeal of Decree 3398 of 1965, outlaw paramilitaries. Earlier this year, is Killed by police Gonzalo Rodriguez Gacha, one of the main Perpetrators of Violence in the eighties.

Between 1988 and 1991 Imposed an upward trend in the killings of Civilians. Among the Victims Are Government Officials, Leaders, Activists and supporters of the Patriotic Union (UP), the traditional parties, members of trade unions and social Organizations. The Perpetrators of These killings Were A clear source of Structures associated with the drug.

* To enlarge click

To Understand this chart is important to note while in MOST That Murders Committed by Organized players is Not Known with Certainty the author, The Relationship Between Higher registers of Deaths and the times That the paramilitary groups gain more prominence is evident.

Thus the Emergence of paramilitary groups in the 80 coincides with the Opposition of “regional Leaders associated with drug trafficking” for the peace process and Follow Betancur administration by the Government liniamientos boat.


  • Fernando Cubides (1998). “From Private to Public Violence in Colombia: paramilitaries”, in: Arocha, Jaime, et al. (Eds.), Violence: Increasing inclusion, Bogotá, Universidad Nacional de Colombia.
  • Carlos Medina (1990). AUC, paramilitary and Drug Trafficking in Colombia. Origin, Development and consolidation. The case of Puerto Boyacá, Bogotá, Editorial journalistic document.
  • Alejandro Reyes. (1991). “paramilitaries in Colombia: context, partners and consequences”, in: Political Analysis, no. 12, January-April.
  • Dario Betancourt and Martha Garcia Smugglers, marimba, and Mafioso. Social history of the Colombian Mafia (1965 – 1992). Bogotá, Siglo XXI Ed
  • Daniel Pecaut. “Colombia in the Storm.” In:. Chronicle of Four Decades of Colombian politics. Grupo Editorial Norma, Bogotá, 2006.
    Mauricio Romero. Paramilitary AUC, 1982-2003. Bogotá: Editorial Planeta – IEPRI, 2003.
  • Mauricio Romero. Political Democratization and counter-reform in Colombia paramilitary. In: Bull. Inst Fr Etudes Andean Vol 3., No. 29. (2000)
  • Mauricio Romero. Regional elites, identities and paramilitaries in the Sinu. In: Peñaranda, Ricardo y Guerrero, Javier (eds.). From Weapons to politics. Bogotá: IEPRI-TM Editores, 1999.

Colombian Oil in the War Zone

* Existing fields, heavy oil, key to output growth – govt

* Security improvements allowing more exploration

* Colombia has goal of 1.4 mln bpd in coming years

* Big question: can Colombia find new crude reserves?

By Jack Kimball

BOGOTA, Dec 6 (Reuters) – Half a century ago, Colombia helped plant the first inklings of a theory that became known as “peak oil” — the idea that conventional oil extraction has crested.

Today, Latin America’s No. 4 crude producer is defying expectations by increasing its output. But experts say the Andean country must now find new reserves to keep up production levels and sustain its ambitious growth targets.

The cause of Colombia’s rebound has less to do with geological maturity than with politics and security — which, in many emerging markets from Iraq to Nigeria are perhaps a greater constraint to boosting production.

The story plays out in miniature at the remote Rubiales oilfield in eastern Colombia’s Llanos Basin, at a now-bustling camp torched by Marxist guerrillas a decade ago.

After languishing for years with production at a trickle, the molasses-like crude output from the field — run since 2007 by Pacific Rubiales — is set to hit 200,000 barrels per day (bpd) by the end of the year, a 5,000 percent rise since 2003, company data shows.

“There’s a clear relation between the (security) improvements in Colombia and the increase in activity and the investments that came to be able to generate important yields at this field,” said Ernesto Borda of risk consultancy Trust.

Analysts and officials say most of Colombia’s increased production over the last few years is a result of better security and improved terms and regulation — not major new discoveries that would be a blow to the theory that conventional oil output is reaching its limit.

Although discussion of “peak oil” has subsided over the past two years as alternative fuels and recession dampen demand for petroleum products, fears that existing fields could fail to maintain production are never far from the surface.

“This late-stage surge (in Colombia) is not very natural,” said Colin Campbell, one of the chief proponents of peak oil, whose years working as a geologist in Colombia in the 1960s first drew him to the issue of resource depletion.

“I’d see this particular surge as something artificial with perhaps the previous low levels being artificially constrained,” he told Reuters from his home in Ireland.

“This isn’t a technological breakthrough of any particular significance. It is much more politically inspired.”


Once dismissed as a failing state, Colombia is slowly turning its image around by battering leftist rebels and attracting foreign investment through loosened regulations, creating a streamlined hydrocarbons agency and lowering taxes.

“Colombia has definitely done it right by changing the fiscal terms … It’s a combination … Colombia has done things right as well as better security,” said Frederick Kozak, energy analyst with Canada-based Canaccord Genuity.

Now, national oil production has surged to 10-year highs of around 800,000 bpd mainly due to better security, heavy crude and incremental production at existing fields, experts say, rather than major new discoveries.

Analysts say Colombia will have to work hard to reach its target of 1.4 million bpd by 2015 by tapping new fields and investing in older ones, as well as battle even more to maintain those high levels for any amount of time.

“Increases in recent years have been fundamentally from better output in mature fields, more production of heavy crudes, primary and secondary recovery … 10 to 12 percent has come from new finds,” Energy Minister Carlos Rodado said.

“Production growth in the coming four years will come actually from greater recovery from mature fields and the exploitation of heavy crudes,” he said at Camp Rubiales.

Output rose from 1995 to highs of more than 800,000 bpd in the late 1990s due to increases at BP’s Cusiana and Cupiagua fields, which began to decline in 1999. National production plateaued at 500,000-615,000 bpd until last year.

Colombia’s security situation prevented a lot of new exploration and saw production rises mainly at large companies’ fields with better security, analysts say. That was until a 2002 U.S.-backed offensive against rebels opened up new areas.

That is reflected in the data. Proven reserves rose from the mid-1980s to a peak of 3.2 billion barrels in 1992, then made a slow decline to 2007 before creeping up to current levels of around 2 billon barrels.

The average number of wells drilled annually was 40 in 1980-1992, 15 in 1993-2004 and 67 in 2005-2009.

Colombia received $1.3 billion in oil sector investment in the first half of 2010, central bank figures show, and in 2007 and 2008 it hit records of $3.3 billion and $3.4 billion. That compares with only $449 million in 2002.

“One thing is the increase in oil activity, another thing is the rise in petroleum production,” Trust’s Borda said.


Analysts say Colombia’s output target of 1.4 million bpd in coming years may be possible. It is unlikely to be sustainable in the long term, though, unless more reserves are found.

“If they are to then maintain that sort of production for any length of time, one or two big, heavy oil-prone blocks close to Rubiales would probably have to come in fairly majorly,” said David Thomson, Latin America upstream analyst at Wood Mackenzie.

“There is still some significant under-explored acreage, they still have potential offshore that hasn’t been tapped into … They are finding fields, but it’s nothing to the scale of offshore Brazil or even what is potentially available up in Venezuela, where you’re talking about billions of barrels.”

Colombia — which has auctioned dozens of oil blocks over the last three years to try to boost exploration and production — is expected to account for 8.37 percent of Latin American oil supply by 2014, Research and Markets says.

State-run Ecopetrol has dominated the oil scene in Colombia while Rubiales, Gran Tierra, Alange Energy and others have also invested heavily in the nation, where around 120 firms are working in oilfields.

Ecopetrol expects to invest $20 billion in exploration and $44 billion in production in 2011-2020.

“With what we have in proven reserves, we can have peace of mind until a little after 2020. We’ll keep searching for oil in an incessant, continuous and daily way,” Rodado said.

Bogota says oil reserves could soar to 6 billion barrels over the next decade, and in May the country certified 3.1 billion barrels in proven, probable and possible reserves, double its average.

“With the country’s proven reserves-to-production ratio at end-2009 standing at just 8.1 years, the country does need to boost its reserves in order to put its energy security on a more stable footing over the long term,” said Juliette Kerr, an energy analyst with IHS Global Insight.

“There is some room for optimism as there have been several finds announced in the past three years that are worth watching, while the signing of new contracts with foreign companies and Ecopetrol’s ambitious business plan will ensure additional investment in exploration in the coming years.” (Editing by Daniel Wallis and Dale Hudson)