Business

NEW YORK — US health insurance giant Aetna will buy rival Humana for $37 billion (33.3 billion euros), a statement issued Friday by both companies said, creating a group with estimated annual sales of $115 billion.

Aetna, the second-largest US health insurance player in market capitalisation terms, said it will pay $230 per Humana share in a cash and stock deal to create a new entity with around 33 million customers.

According to agreements approved by both boards, the transaction will leave Aetna shareholders owning around 74 per cent of the new group, and investors with Humana stock with 26 per cent.

The Aetna offer was considerably higher than Humana’s $187.50 share price at Wall Street’s close Thursday.

The move followed frenzied activity in the US health insurance market moving towards consolidation under changes made by President Barack Obama’s landmark Affordable Care Act.

At the end of June, Cigna rejected a $54 billion buyout offer by rival Anthem as part of efforts by insurance companies to increase their size as a means of obtaining stronger negotiating positions with healthcare providers.

Aetna Chairman Mark T. Bertolini described the Humana deal as ‘partially reflecting those changes in the sector, but also aiming to provide improved service to clients at affordable prices’.

If the deal is completed as expected during the second half of 2016, Aetna says its debt-to-capital ratio will rise to 46 per cent, a level company directors say they will bring down to 40 per cent within two years.

AMMAN — Factories belonging to the Middle East Complex Engineering Electronics and Heavy Industries (MECE) are now the property of Jordan Commercial Bank (JCB).

MECE, a company registered to produce, trade, distribute, and export electronic and electric home appliances in collaboration with other electronic companies, informed the Jordan Securities Commission (JSC) last month that, based on a court ruling, the factories were registered in the bank’s name on June 18, 2015.

In its disclosure to the JSC, the company said JCB was among 28 banks that agreed and signed a memorandum of understanding for settling MECE’s indebtedness since 2010 when troubles began.

“Terms and privileges obtained by JCB were much better than those given to other creditor banks, with their consent, because JCB held hypothecations in its favour,” the disclosure added.

Noting that JCB was a member of MECE’s board of directors from September 6, 2011, until September 3, 2013, the company stressed that the bank was fully aware all along of the developments and stages of progress with other bank creditors to arrive at a settlement to MECE’s indebtedness.

According to MECE, the bank was also knowledgeable about the restructuring programme slated for implementation in an integrated entirety that guarantees the interest of all stakeholders.

JCB Vice Chairman Ayman Majali told The Jordan Times that for five years, MECE’s management was untrustworthy and unable to deliver despite repeated promises.

“We tried to help the company in various ways but to no avail because the situation was one of indecisiveness and unreliability,” he said, emphasising that the bank was not in the business of seizing and selling properties.

“JCB is now trying to find serious investors who are willing to restart operations because the factories have been idled for months,” Majali added, attributing the company’s troubles to mismanagement.

He noted that MECE’s administration was not focused on the industrial production and the strength of the company which was crippled by over JD100 million of debt. 

MECE said the bank initiated the process to publicly auction the factories on August 21, 2013, while still member of its board of directors and even after the company repaid certain amounts agreed on in a memorandum of understanding.

“Because JCB had a hypothecation in its favour, it unilaterally went to court to initiate the auctioning process and was the only bidder,” MECE added in the disclosure.

Majali said the bank took possession of the factories with a JD23 million bid because, under Jordanian law, it could not exceed 50 per cent of the collateral’s value which was estimated at JD46 million. 

JCB’s vice chairman noted that the cost to the bank was JD25 million when various fees and taxes were taken into consideration.

“JCB continued expropriating the company’s factories and equipment [for a meager amount though within the prevailing law] in settlement of its individual credits instead of cooperating and joining for a group solution comprising all banks as sought,” MECE said.

It added: “Since the crisis started in 2010, there was and still is an actual, practical, moral and legal consensus and common objective among all  the 28 creditor banks that the solution to the crisis be collective.”

The company mentioned in the disclosure that to safeguard all stakeholders, whether shareholders, workers, banks, creditors, investors  (Jordanians, Arab or others), and  public funds, no bank was to act alone against the interests of the company, its assets and progress.

MECE indicated that, within several attempts and meetings with JCB to arrive at an amicable settlement, a written offer was made on May 27, 2015 that was better than all what was previously proposed, discussed or even signed with the bank or agreed on with the other creditor banks.

According to the disclosure, JCB was repaid a certain amount in April 2013, based on a memorandum of understanding dated March 14, 2013, when it impounded specified plots of land, other than those of the factories, because the bank had a priority and an immediate implementation for repayment over others.

Even after this repayment, the company said, JCB unilaterally recovered more funds by debiting MECE’s accounts at subsidiaries without the customary legal procedures, like asking the original borrower or notifying the guarantor.

In the disclosure, MECE Chairman Ayman “Mohammad Ali” Al Khalili described the JCB measures and actions as arbitrary in terms of exercising authority, and unjust to the rights of others.

Al Khalili blamed the JCB for causing considerable harm to the rights of shareholders and damages to the company, its continuity and the workers.

“[JCB conduct] was the main cause behind delaying and obstructing MECE’s restructuring programme and settling its indebtedness to the remaining creditor banks,” he wrote.

The chairman held JCB responsible for harming Arab investment, particularly the Kuwaiti, in Jordan and assured shareholders that MECE will not save any effort to regain its full rights. 

Preliminary data show that MECE generated JD0.4 million operational earnings last year, sharply down from JD2.5 million in 2013.

The loss in 2014 amounted to JD4.1 million compared to JD6.6 million in the previous year. 

WASHINGTON/ATHENS — Greece needs 50 billion more euros ($55 billion) over the next three years, including 36 billion euros from European Union (EU) lenders, to stabilise its finances even under existing creditor plans, the International Monetary Fund (IMF) said Thursday.

In a new report on Greece’s financing needs, the IMF also cut the country’s economic growth prospects for this year to 0 per cent from 2.5 per cent forecast in April.

That growth estimate was made before Greece broke off talks with official creditors last weekend and ordered capital controls and its banks shut for a week.

The IMF’s new “preliminary draft” debt sustainability analysis for the country said the changes in Greek policies and its financial outlook since early 2015, roughly covering the period that the anti-austerity Syriza Party and Prime Minister Alexis Tsipras have led the country, “have resulted in a substantial increase in financing needs”.

Existing proposals by the Greek side and EU creditors do not address those needs.

“Greece faces a significantly larger financing need going forward than we thought last year,” a senior IMF official told journalists.

The new analysis suggests that “a more comprehensive debt operation will be required to ensure that debt will remain sustainable,” the official said.

On top of the need for more cash, the IMF indicated that creditors need to double the maturity of existing official loans to Greece to 40 years from 20 years.

“This is a dramatic move,” the official added.

Separately, Greece’s dive into financial uncertainty is forcing struggling businesses to take unusual steps to survive, including hoarding euros in cash.

The government’s announcement it was closing banks this week to stem a panicked rush to withdraw money, left many ordinary Greeks high and dry.

“I put aside as much cash as possible” in advance, said an Athens baker Taso Paraskevopoulos, who had expected the controls to be imposed as the country staggered towards a default on a debt repayment to the IMF.

“I sometimes need hundreds of euros a day to pay suppliers and expenses, I cannot allow myself to be caught short,” he added, making it quite clear he blames the radical left ruling party Syriza for the crisis.

Five months of fruitless negotiations between Greece and its EU-IMF creditors ended with the government enforcing strict credit controls to prevent an already weak banking system from hemorrhaging.

In theory, the controls will be lifted following Sunday’s referendum on whether or not Greece should accept the creditors’ conditions in the latest bailout offer, though many here believe the fallout will go further and deeper.

Air Liquide, a gas supply company that employs 130 people, told AFP it paid its employees in advance this month to make sure they could access their money.

“We are lucky we produce locally, sell locally, and work with local people. We’ve told our few foreign suppliers about the government’s decision, asking them to be patient,” a spokesman said.

The capital controls forbid money transfers abroad, except by express permission from the finance ministry.

Businesses which import their raw materials have been the hardest hit, says Vassilis Korkidis, the head of the National Confederation of Hellenic Commerce (ESEE).

Established marble company Moschous, which boasts clients around the world, thought ahead “by ordering machines in advance”, boss Constantin Baxevanakis said.

He is more worried, however, about the future.  Baxevanakis believes the measures “are going to last”.

Cash hunting a national sport 

Stathis Potamitis, the head of a law office which employs around 100 people, agrees. 

“it’s easy to close banks, more difficult to re-open them... A big client called me on Tuesday to say he would pay in 120 days,” he said.

As unease spreads, getting one’s hands on cash has become a sort of national sport, with businesses from restaurants to car mechanics telling customers paying by card is no longer an option.

And what if the crisis drags on? asked Sotiris Papantonopoulos, the head of online insurance broker Insurancemarket, which employs 70 people.

Launched in 2011 despite the financial crisis, the company was in expansion and had intended to take on other 60 people in the coming months, “but now everything is on hold”, said Papantonopoulos, visibly upset after having to ask some of his employees not to come to work this week.

“If the measures remain in place for two months, we’ll close, it’s over. Our turnover has already dropped 70 per cent over the past few days” as clients who were supposed to renew contracts this week failed to do so.

Withdrawals from ATMs are limited to 60 euros ($66) a day, which has severely complicated economic activity in a country where electronic money transactions are far rarer than cash transactions.

Thomas Douzis, 28, the head of the high-end grocers “Ergon”, said it had caused a real headache for many.

“Our supply chain relies on 300 or so small producers from across the country who are not always equipped to take card payments, and in any case want cash,” he added.

Douzis, who has six shops in Greece, was supposed to open a third shop abroad at the end of August, this time in Miami, but may be forced to put that project on hold for the unforeseeable future. 

AMMAN — Capital Bank of Jordan was authorised last week by the Jordan Securities Commission (JSC) to raise its capital from JD181.5 million to JD200 million.

The JD18.5 million capital increase will be carried out through capitalising the amount from the JD44.16 million of retained earnings  and distributing bonus shares at a rate of 10.19 to shareholders registered in the company’s records at the end of July 7, 2015, which is 15th day from the date of the JSC approval, as required.

Chairman Bassem Khalil Al Salem told the shareholders that the board of directors decided to propose the distribution of cash dividends at a rate of 10 per cent and bonus shares at a rate of 8,8 per cent, but the Central Bank of Jordan (CBJ) found it more appropriate that the cash dole out be at a rate of 6 per cent leaving the rate on bonus shares to Capital Bank’s discretion.

Consequently, he said, the board opted to distribute bonus shares so that the bank’s capital would become JD200 million and to distribute JD10.9 million in cash dividends at a rate of 6 per cent as approved by the CBJ.

Asked about the reason behind the CBJ’s request for the change, Salem replied that the central bank was reserved because of the security situation in Iraq and the bank’s large investment there, as it owned 62 per cent of the National Bank of Iraq (NBI).

The stake was 80 per cent until the Central Bank of Iraq asked all commercial banks to raise their capital to 250 billion Iraqi dinars. 

It was for this reason, the chairman elaborated, that Capital Bank sold part of its shares to Cairo Amman Bank (about 10 per cent), Palestine Telecommunications Company (5 per cent) and Fursan Investment Fund (3.5 per cent).  

“It was the [central bank’s] view that we do not broaden our dividend distribution, but rather concentrate on building up a strong capital base and maintain a 14 per cent capital adequacy ratio for Jordan branches as  a kind of safeguard,” the chairman indicated.

He mentioned several past and present challenges in the Iraqi market such as liquidity shortage due the security situation, government decisions and the halt to opening letters of credit, but he still stressed that the country remained promising with big opportunities, especially in the south of the country where the volume of different investments is very large and where many companies from various countries are operating.  

Noting that Capital Bank was the only Jordanian bank that owns a local bank in Iraq, Salem pointed to companies operating in the oil and gas sector in south Iraq as examples of such opportunities.

He also pointed to the relationship that was established with Citibank  through NBI, noting that when the transfer business started with it two years ago, the amount was $3 million but last month exceeded $50 million.

The chairman noted that Capital Bank, whose workforce comprises 557 employees,  was taking all the necessary precautions to protect its interests and keep risks to a minimum, indicating that it focuses mainly on transfers, letters of credit, and letters of guarantee, and on working with major corporations, and international banks, such as Citibank.

The bank also supervises a number of investment projects, he remarked.

“Iraq is going through a transitory period that will pass away, and this investment will bring forth its aspired yield,” the chairman said.

Salem added that Capital Bank will continue to build a base in Iraq through NBI and its branches in Basra, Um Qasr, Najaf, Karbala, Baghdad, Al Mansour, Erbil and Al Suleiymaniyeh, and through focusing on building a solid base of clientele.

He responded to shareholders’ questions indicating that Dunes Club was expropriated as a result of around JD5 million lawsuit and that the home of Hussein Kubbah, a former chairman of Capital Bank who was ousted for misconduct after six months in the position, was also expropriated.

The chairman said that Kubbah’s indebtedness at a certain stage about JD35 million, JD11 million of which was not covered with guarantees.

Noting that the bank was able to place a lien on a factory owned by Kubbah, Salem expected this issue to be settled before the end of this year.

According to the notes attached to the bank’s financial statements as of December 31, 2014, the balance of assets under the bank’s possession in settlement of overdue loans amounted to JD64.5 million. Other impounded real estate was valued at JD16.1 million.

In the 2014 annual report, Salem wrote in a  foreword that the rate of non-performing loans to the total portfolio of credit facilities dropped to 5.8 per cent from 6.7 per cent at the end of 2013.

However, at the end of the first quarter of this year, the rate rises again to 6.1 per cent, or JD54.7 million after deducting suspended interest.

The balance sheet at the end of March 2015 shows non-performing loans at JD81.4 million, 8.7 per cent of total direct credit facilities, before deducting suspended interest.

Net credit facilities amounted to JD870.2 million on March 31, 2015 compared to JD794.4 million at the end of March 2014.

A breakdown of the lending, before deducting suspended interest and an  impairment provision related to direct credit facilities,  indicated that JD110.9 were credits to government and public sector, JD525.4 million to corporations, JD116.8 million to individuals (retail), JD55.2 million to small- and medium-sized enterprises, and JD128.8 million were classified as real estate loans.

By type of credit, real estate and construction accounted for JD210.9 million, trade JD125 million and industry JD116 million. 

Total liabilities at the end of this year’s first quarter stood at JD1.7 billion, JD1.2 billion of which were customer deposits.

Time deposits totaled JD760.9 million, savings JD60.5 million, JD374 million current accounts, and JD52.1 million were certificates of deposit.

Non-interest bearing deposits amounted to JD284.9 million or 22.8 per cent of the total, down from JD403 million or 32.7 per cent at the end of 2014.

The deposits of the Jordanian government and public sector came at JD84.4 million or 6.8 per cent of total deposits.

The chairman indicated in the foreword that last year’s net profit before tax reached JD50.1 million, compared to JD48.7 million in 2013.

Net profit after tax came at JD36.3 million, down from JD37 million.

During the general assembly meeting, attended by eight board members out of 11 and 111 shareholders out of 2,218, Omar Akram Emran Al Bitar and Reem Haitham Jamil Qussous joined the board of directors after the number was expanded to 13 members. 

AMMAN —  After heated discussions lasting about seven hours, Amwal Invest's general assembly of shareholders ratified three settlements and reconciliation agreements with several adversaries. 

Chairman Qasem Newashi last week told the Jordan Securities Commission in a disclosure that shareholders in possession of  13,569,492 million shares voted in favour and others holding 7,678,694 shares voted against.

The ordinary general assembly meeting on June 6, 2015 was attended by six out of the seven board members and 87 shareholders, out of 7,954, who carried 22.5 million shares representing 49.9 per cent of the JD45 million capital. 

Because the meeting was the second, after a previous one was postponed due to lack of quorum, it was considered legal with those present and  the decisions binding to all shareholders after the company followed the necessary procedures required to hold the meetings in both times.

"The general assembly decided in a majority vote to approve all the articles of the settlement agreements as tabled and formulated between the board of directors and the parties mentioned hereunder…"  according to the minutes of the meeting.

The disclosure listed the following  three settlements and reconciliation agreements that were ratified by the shareholders.

First: The case, labeled Al Ahlia Company Shares Agreement, under number 56/2012 at the Anti-Corruption Commission, between the company on the one hand and, on the other, Fayez Faouri, Mutassem Fayez Faouri, Muntasser Fayez Faouri, Muayyad Fayez Faouri, and the Faouri Group Company.      

Second: The case, labelled Amwal Invest Company Agreement, under number 1479/2012 at the Amman Criminal Court, between the company on the one hand and, on the other, Fayez Faouri, Mutassem Fayez Faouri, Muntasser Fayez Faouri, Muayyad Fayez Faouri, and the Faouri Group Company.

Third: The case, under number 1479/2012 at the Amman Criminal Court, between the company on the one hand and, on the other, Ousama Mohammed Khatir, Tareq Mohammed Khatir, Modern International Company for Shares, Bonds and Securities, Nabil Samir Makahleh and  Zakaria Mohammed Musleh. 

Under the first settlement and reconciliation agreement, Jordan Invest  and its 19 subsidiaries agreed to relinquish around 9 million shares, or 23 per cent of the equity, they possess in the Ahlia Projects Company to the other party which is interested in turning Ahlia and into a limited liability entity owned by it (Faouri (s)).

In exchange, the Faouri(s) undertook to settle Jordan Invest's debts and other obligations to financial brokerages, initially estimated at around JD11.6 million, and any extra amount that may arise.

An appendix lists the 15 brokerage companies, engaged in share and bond trading at the Amman Stock Exchange, and gives a breakdown of the  JD12.9 million owed by Jordan Invest and its subsidiaries to each of these entities.

A number of brokerages have a lien on all 9 million shares of Ahlia Projects, a company that owns the Ahlia Plaza superstore.  

Responding to a shareholder's question, the chairman revealed that the amount lost as a result of speculation on the share of Ahlia Projects was about JD18.5 million based on a report by a committee of experts.

This settlement also covers a reconciliation between Awtad for Diversified Investments, a subsidiary of Amwal Invest, and the Faouri(s).   

Under the second settlement and reconciliation agreement, Fayez Faouri agreed to repay the obligations and indebtedness of Amwal Invest towards the Housing Bank, Union Bank and Jordan Commercial Bank. The amount is initially estimated at JD12.2 million.

He is also to pay Amwal Invest JD7.75 million.

In lieu of closing all obligations and dues of Mutassem Fayez Faouri towards Amwal Invest and its subsidiaries, and cancelling all cheques issued  by Mutassem in favour of these entities, the Faouri(s) agreed to give up any rights, claims or entitlements they hold in Amwal Invest.

Moreover, Fayez Faouri agreed to pay JD1.8 million to Sura for Development and Investment Company in order to cancel a deal related to shares of Awtad for Diversified Investments and involving Amwal Invest.

Under the third settlement and reconciliation agreement, Ousama Mohammed Khatir agreed to pay  JD5.7 million to Jordan Ahli Bank to settle dues and obligations demanded from Amwal Invest. He also agreed to pay JD200,000 to Amwal Invest to cover various costs and expenses.

The three accords entail dropping all lawsuits and prosecutions, and settling all legal disputes in order to allow the implementation of the deals.

Newashi answered several questions during the general assembly meeting telling the shareholders that the overall losses of Amwal Invest would be between JD60-61 million after the proposed modifications mentioned in the report of experts. 

The chairman estimated the damage that befell Amwal Invest from the Faouri(s) and Khatir as well as others at approximately JD54 million based on the criminal lawsuit now in court, and around JD60 million based on the civil lawsuit.

Khader Hneiti, a member of the board and representative of the Social Security Investment Fund, said the violations resulted in JD62 million of losses, JD52 million of which were caused by Faouri who provided JD28 million of guarantees to the court.

Hneiti added that based on the terms of the settlement, "Faouri will pay us about JD22 million, of which JD15 million to banks and JD7 million real estate”.

Noting that the Social Security Corporation wrote three times to the Companies Comptroller asking him not to liquidate the company, he indicated that the settlements were reached with the concerned parties after several months of negotiations and may or may not achieve the interests of the company.

Amid various arguments debating the advantages and disadvantages of the settlements, the chairman said that the board did not save any effort to collect as much as possible and has no capability to enter new negotiations.

The chairman and other members of the board were accused by some shareholders of destroying the company with settlements they considered weak.

Many shareholders lamented the loss of valuable real estate properties in Abdoun and Byader Wadi Al Seer to banks which put them to public auction.    

"Honestly, are you satisfied with these settlements?" a shareholder asked the chairman.

Newashi replied: "Personally, as shareholder Qassem Newashi, and not as board chairman, I am not satisfied. I wanted and still want a better deal but we could not achieve better than this."

The following are subsidiaries of Amwal Invest:

Hazmieh for Diversified Investment 

Raiat AlWatan for Administrative Investments 

Alezddhar for Diversified Investment 

Awtad for Diversified Investments

Rmowoz Alnanjah for Real Estate Investments 

House money for Investment 

Almyina for Diversified Investment 

Third Sura for development of hotels 

Kunoz Albhaar for investment 

Amwal Brokerage and financial services 

Almarom for Trade and Investment Company 

Jordanian Finance House 

Qasim Dahamshe- Investment Rababena for Trade and Investment Company 

Sworaa Real Estate Development 

Awtad for Diversified Investments PLC. 

Al Ahlia Commercial Centres 

ATHENS — Stunned Greeks faced shuttered banks, long supermarket lines and overwhelming uncertainty on Monday as a breakdown in talks with international lenders plunged their country deep into crisis.

With Greece's bailout expiring on June 30 and an International Monetary Fund (IMF) payment falling due at the same time, Prime Minister Alexis Tsipras pleaded in vain by phone with European officials to extend the programme until a referendum on July 5 on its future terms.

The frantic efforts to secure Greece's place within the eurozone followed a dramatic weekend. Tsipras' decision, early on Saturday, to put the aid package to a popular vote took the lenders by surprise and sent Greeks rushing to cash machines.

It also pushed Greece towards defaulting on 1.6 billion euros ($1.77 billion) due to the IMF on Tuesday, which would take it closer to an exit from the eurozone. A Greek official confirmed to Reuters that the payment would not be made.

Greeks, used to seeing lengthy talks with creditors end with an 11th hour deal, were shocked by the turn of events. Queues snaked outside ATMs and inside supermarkets while fears of disruptions to fuel and medicine supplies grew.

Drugmakers said they would continue to ship medicines to Greece in coming weeks despite unpaid bills, but warned that supplies could soon be in jeopardy without emergency action.

The breakdown of talks has pushed the European Union (EU) and eurozone into uncharted terrain. The Athens stock exchange was  closed like the banks, but other share markets fell on fears that Greece could be heading out of the euro.

The blue-chip Euro STOXX 50 index fell more than 4 per cent, with bank shares down sharply. By midday, all three major US stock indexes were down more than 1 per cent.

"I can't believe it," said Athens resident Evgenia Gekou, 50, on her way to work. "I keep thinking we'll wake up tomorrow and everything will be OK. I'm trying hard not to worry."

After months of talks, Greece's exasperated European partners have put the blame for the crisis squarely on Tsipras for rejecting a package they consider generous. 

The Greek side argues that pension cuts and tax hikes demanded of it would only deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

A snap Reuters poll of more than 70 economists and traders taken on Monday put the probability of Greece leaving the eurozone at 45 per cent, up from 30 per cent a week ago.

Personal betrayal

Emotions were unusually raw among Europe's leaders. EU Commission President Jean-Claude Juncker said he felt personally betrayed and told Greeks a "No" vote would be seen as signalling an exit from the euro, a position that other European leaders lined up to echo.

"I will say to the Greeks, who I love deeply: you mustn't commit suicide because you are afraid of death," Juncker told a news conference.

Despite the acrimony over the weekend, the creditors said the door to negotiations remained open.

French President Francois Hollande appealed to Tsipras to return to the negotiating table and German Chancellor Angela Merkel said she was ready to restart talks with Athens after the referendum, including on how to ease its debt burden.

Hollande spoke to US President Barack Obama, and Hollande's aide said they had agreed to work together for a resumption of talks and a solution to the crisis to ensure Greece's financial stability.

Greece's banks were shut after the European Central Bank (ECB) rejected its request for 6 billion euros of additional emergency funding on Sunday to cope with massive withdrawals, though the ECB is expected to allow Greek banks to keep using existing funds until the referendum, people with knowledge of the matter told Reuters.

As Tsipras announced the closure of banks and the stock exchange late on Sunday, long queues grew outside ATMs and petrol stations as people raced to take out cash before it was too late.

On Monday, cash machines remained closed until midday, and then opened for withdrawals of no more than 60 euros a day.

"I've got five euros in my pocket, I thought I would try my luck here for some money. The queues in my neighbourhood were too long yesterday," said plumber Yannis Kalaizakis, 58, outside an empty cash machine in central Athens on Monday.

"I don't know what else to say: It's a mess," he added.

‘Dramatic hours’

Pensioners hoping that they, at least, would be allowed to receive money were turned away from banks.

"I've worked all my life, only to wake up one morning to a disaster like this," said one shop owner queueing at a branch of the National Bank of Greece hoping to collect his wife's pension.

Businesses complained that they could not pay salaries or suppliers and had had to halt imports, while agricultural production was also expected to be affected.

"The worst has been confirmed by the nightmarish developments," said retail lobby chief Vassilis Korkidis.

Despite the financial shock, parts of daily life went on as normal, with shops, pharmacies and supermarkets opening and Greeks meeting to discuss their country's fate at cafés and restaurants. 

Tourists gathered as usual to watch the changing of the presidential guard outside parliament.

Tsipras' Syriza Party called a rally for Monday evening to protest against austerity measures and urge citizens to vote "No" on Sunday.

The referendum poses a simple question: "Should the proposal which was submitted by the European Commission, the European Central Bank and the International Monetary Fund at the Eurogroup of June 25, 2015, which consists of two parts that together constitute their comprehensive proposal be accepted?"

The "No" box appears as the first option, above the "Yes" box. The says a "No" will strengthen its hand at the negotiating table, though other European leaders say it will instead push Greece out of the euro.

No public opinion polls were available, but the Economist Intelligence Unit said a "No" vote was more likely, raising the probability of Greece leaving the eurozone to 60 per cent.

ATHENS — Greeks took to beaches, cafes and churches on Sunday, just like they do every week, but the mood was downbeat as the country teetered on the brink of a default that could see it crash out of the euro.

“Everyone is very sad, very upset and depressed,” said 42-year-old Anna Apostolopoulos as she sipped a coffee on the terrace outside the trendy Balux cafe in Glyfada, a well-heeled resort half an hour from Athens.

It will be a “miracle”, she added, if Greeks vote in favour of the creditors’ bailout proposal when it goes to a referendum next Sunday, and she blasted her government as “immature children” for putting it to a public vote in the first place.

“They are terrible negotiators,” she indicated. “The prime minister is very, very irresponsible. He was elected to make decisions.”

Greeks were nevertheless refusing to let the crisis ruin their weekend entirely, and all the deckchairs on the beach were occupied.

“Yesterday I didn’t want to go to the beach,” Apostolopoulos said. “I watched TV all day and I felt down. But I promised my son we would go, so we went.”

A short stroll away, laboratory chemist Joanna Avayanos said she was worried by talk of a return to Greece’s former currency, the drachma.

There have been queues at some ATMs amid growing signs of a bank run, and like other jittery compatriots worried that the government may introduce capital controls, Avayanos has been trying to withdraw cash.

“Yesterday with my mother we went to two cash machines and it said there was a problem,” added Avayanos as she walked her daughter along the beach in a stroller. “In the supermarket, we could not use our card. That made me suspicious. I don’t know what is going on.”

‘Cash running out at ATMs’ 

Since Prime Minister Alexis Tsipras announced the referendum early Saturday, about 1.3 billion euros ($1.45 billion) have been withdrawn from Greek banks, according to the head of the bank workers’ union Stavros Koukos.

According to an anonymous banking source in Greece, only 40 per cent of the nation’s cash machines currently have money in them, purely because they cannot be restocked with banknotes quickly enough.

Tsipras’ governing radical left party Syriza, which rose to power in January on an anti-austerity ticket, slammed the creditors’ latest offer, arguing it would hurt workers, pensioners, young people and farmers, and has urged Greeks to vote against it in the referendum on July 5.

But Andreas Nikolopoulos, waiting outside a church in Athens with her young daughter, described the referendum issue as “tricky”.

“It [would be] a yes to Europe, not a yes to austerity measures,” she indicated.

She said that a Greek exit from the eurozone would be “painful, very painful. I have family in Australia, Canada... I have a job opportunity in Munich. But the neighbours, my friends, my family, are trapped.”

Among other demands, Greece’s creditors want public sector wage cuts and higher taxes on food and restaurant meals, in return for five-month, 12-billion-euro ($13.4-billion) extension of the bailout programme.

Retired nurse Fotini expressed anger at six years of economic downturn and painful austerity measures demanded by previous European Union (EU)-International monetary Fund (IMF) bailouts, including cuts to her pension.

“We have had too much [of the] bad times,” the 76-year-old told AFP as she sat on a bench in Syntagma Square in central Athens, waiting for a friend.

“The money the government gives me is down every month,” she said in reference to her pension, a key area which creditors had targeted for state cutbacks. “Greek people want good lives, work... We have too many men and women without jobs. It is not right.”

By the time Greeks vote next Sunday on whether to back the proposed bailout package, Greece may have already defaulted on the IMF payment that is due Tuesday.

Marina Stoianovitch, 17, said people would simply have to put on a brave face.

“We are going to be a different country. We are going to control our economy,” she said as she stood outside a church in Athens. “This is not good, but I don’t see another way. We will find a way.”

Separately, Alexis Kalaitzoglou makes a swift gesture to describe what he thinks about Tsipras: the shopkeeper in Paros, a busy tourist island, pulls his leg back and swings it forward as if to give Greece’s leader a good kicking.

Kalaitzoglou is angry because his family’s shop of jams, honeys and wooden handicrafts, part of a wider tourism industry that is the only bright spot of Greece’s struggling economy, may be in for a rough ride.

A rise in consumer taxes on Greek islands’ goods and services such as the ones Kalaitzoglou sells is one of the sacrifices creditors are seeking from Athens to unlock bailout funds that will allow Greece to remain in the euro. 

The tax hike is one of the sticking points thwarting a deal and prompting Tsipras to call a July 5 referendum on the bailout terms.

Yet even before the vote, Greece is likely to default on a debt payment, setting off a financial crisis that could damage an upcoming tourist season expected to be one of the most vibrant in years.

The creditors want to raise VAT rates for services such as restaurants and hotels as well as ending the tax breaks for islands like Paros in the Cyclades.

The tax breaks are intended to make resorts more attractive and also shield poorer, more remote communities from the higher costs of transporting goods. Raising them would force businesses to jack up their prices at the risk of driving customers away, or face a sharp drop in revenues.

“If the VAT rises to 23 per cent in all goods, we better jump in the sea and be done with it,” said the 62-year-old Kalaitzoglou. 

On Paros and other islands, VAT rates are 30 per cent lower than on the mainland. For example, they pay a VAT rate of 9 per cent on food that could be raised to 23 per cent.

“The sea and the tourism are the backbone of our economy, if we touch that too, there is no future anymore,” he indicated.

The anger of Kalaitzoglou and others underscores Greece’s dilemma as it flirts with an exit from the euro single currency.

“We all know, the biggest importer of currency is tourism. If tourism is hurt, it will have a knock-on effect on the economy, a recessionary spiral, and then how will lenders be repaid?” said Paros hotel owner George Mbafitis.

One bright spot

One in four Greeks is out of work and an average of 59 businesses are closing daily, according to the National Confederation of Hellenic Commerce.

But tourism, which accounts for nearly a fifth of Greek’s yearly output, has shrugged off the gloom. The Association of Greek Tourism Enterprises reported a provisional 15.4 per cent increase in tourism arrivals through international airports in the country in 2014.

Year to date data by the association put arrivals up by 17.5 per cent in the first quarter of 2015.

Proposals for tax hikes have emerged after a months-long tug of war with the Greek government over where to find cost cuts.

Tsipras’s junior coalition ally has threatened to pull the plug on the government if any tax hikes on islands materialise.

Critics argue the tax rises are a lazy way to raise revenue at the expense of real reforms to the Greek economy, such as tackling corruption and tax evasion, overhauling labour regulations and cutting down a bloated pension system.

“They don’t want to touch the privileged, which are mostly public workers, who are the customers of the political parties,” said Nicolas Stephanou, who runs a tourism web portal in Paros.

Beyond the tax hikes, heightened uncertainty over whether Greece will stay in the eurozone is also beginning to hurt tourism business. Some companies have reported a drop in bookings from such travellers, partly perhaps because of scare stories of possible bank runs and street protests.

On Sunday, Germany’s foreign ministry advised tourists travelling to Greece to take plenty of cash with them in case of problems with local banks.

“I had customers this morning asking me what was happening, what they should do,” said Dimitris Stavrakis, a hotelier from Paros. “This thing has gone on for too long. Will they sign, won’t they sign. Now a new round of uncertainty might start with the referendum.”

Some economists argue that returning to a sharply devalued drachma, the prospect Greece faces it if does exit the euro, could boost tourism and other service sectors by making them cheaper.

But for Paros hotelier Stavrakis, it’s not worth the risk:

“There are so many unanswered questions on how it would work if we did return to the drachma, what it would cost now, I’m not sure. Definitely it would make holidays cheaper but I don’t think that it is a realistic option,” he added

Kalaitzoglou of the jam and handicraft shop says life is already difficult enough. His wife, who works at a travel agency, has seen her salary reduced by 200 euros. And the shop, run by his daughter, could struggle.

“We can’t be wishing to buy an ice cream for our grandchildren and start having second thoughts about it,” he added.

ATHENS/BRUSSELS — The eurozone got ready to deal with a Greek debt default this week after refusing to extend credit following Prime Minister Alexis Tsipras’s surprise announcement of a referendum on an offer from creditors that his leftist government rejected.

Athens asked for an extension of Greece’s bailout programme beyond Tuesday, the day it must pay 1.6 billion euros to the International Monetary Fund (IMF) or go bust.

But the other 18 members of the eurozone unanimously rejected the request, freezing Greece out of further discussions with the European Central Bank (ECB) and IMF on how to deal with the fallout from a historic breach in the European Union’s (EU) 16-year-old currency.

The swift rejection was a startling demonstration of the degree to which Tsipras had alienated the rest of the currency bloc with a final-hour announcement that upended five months of intense talks.

The Eurogroup of finance members shut Greece’s Yanis Varoufakis from a meeting in Brussels and issued a statement without him, accusing Athens of breaking off negotiations unilaterally.

“The current financial assistance arrangement with Greece will expire on June 30, 2015, as well as all agreements related to the current Greek programme,” it said, making clear its refusal of a grace period to hold the vote.

Varoufakis said the refusal to provide an extension “will certainly damage the credibility of the Eurogroup as a democratic union of partner member states”.

“I’m very much afraid that that damage will be permanent,” he added.

The offer from creditors requires Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

But voters in other eurozone states, including economic powerhouse, other southern states which have suffered harsh austerity in return for EU cash and poor eastern countries with living standards much lower than Greece, have lost patience.

Jeroen Dijsselbloem, the Dutch finance minister and chair of the Eurogroup, said Greek lawmakers should think about whether the referendum was wise before agreeing to hold it, essentially appealing directly to the Greek parliament to defy Tsipras.

Worried the country could default and even leave the eurozone, some Greeks queued up at cash machines to withdraw funds, though there were no signs of panic in Athens. Many sounded defiant, saying Tsipras had offered them an important chance to determine their own fate.

The eurozone finance ministers met in Brussels for what had been intended as a final negotiation for a deal.

But after they were blindsided by Tsipras’ surprise middle-of-the-night announcement that he rejected their offer and would put it to voters only after Tuesday’s deadline, one after another said all that remained to discuss was “Plan B” — how to limit the damage of default.

“We have no basis for further negotiations,” German Finance Minister Wolfgang Schaeuble said ahead of the meeting. “Clearly we can never rule out surprises with Greece, so there can always be hope. But none of my colleagues with whom I’ve already spoken see any possibilities for what we can now do.”

Finland’s Alexander Stubb called it “potentially a very sad day, specifically for the Greek people. I think with the announcement of this referendum we’re basically closing the door for any further negotiations”.

With most Greek banks closed for the weekend, there was no sign of panic on the streets of Athens. Government officials said there was no plan to impose capital controls that would limit withdrawals.

But police tightened security around bank teller machines as lines formed at some in the darkness almost as soon as Tsipras’ early hours televised speech was finished.

The Bank of Greece said it was making “huge efforts” to ensure the machines remained stocked.

One branch of Piraeus bank that is normally open on Saturdays was shut, with around 100 people queued outside. A senior executive said the plan was to open the branch but staff were weighing security concerns because of the queue.

After months of wrangling with the lenders, Tsipras announced that he would put the terms of the creditors’ “humiliating” offer to a popular vote on July 5.

Tsipras said he would respect the outcome of the vote, but he argued the lenders demands “clearly violate European social rules and fundamental rights”, would asphyxiate Greece’s flailing economy and aimed at the “humiliation of the entire Greek people”.

Greece’s stricken banks depend on emergency liquidity from the ECB to stay open, and the banking system faces at the very least a further flood of withdrawals after billions have left in recent weeks.

Long lines were reported in some supermarkets in Athens as people stocked up with supplies.

However, along with the worry, there were also signs of defiance and almost relief after years of relentless austerity and seemingly endless rounds of crisis meetings with lenders.

“The referendum, I think, is necessary in the sense that we must send a message to Europeans that the Greek people are not enslaved, we are no longer under occupation,” said Elias Papachadzis, a 49-year-old Athenian resident.

WASHINGTON () — The US House of Representatives on Thursday voted to renew assistance for American workers hurt by liberalised trade, an important step in President Barack Obama’s drive for a massive Pacific Rim trade deal.

Without action by Congress, the worker aid programme would have expired on September 30, just as the Obama administration could be trying to wrap up a 12-nation Trans-Pacific Partnership (TPP) trade deal encompassing 40 per cent of the world’s economy and ranging from Chile to Japan.

The Senate passed the legislation on Wednesday. With House passage, it now goes to Obama for signing into law.

By a vote of 286-138, the House approved a renewal of the Trade Adjustment Assistance (TAA) programme, which has been in place for decades to ease the domestic impact of free trade deals such as the North American Free Trade Agreement between the United States, Canada and Mexico in 1993.

Democrats have long been fierce defenders of the programme that Republicans mostly oppose.

But on June 12, Democrats voted to defeat the worker aid programme. It was a ploy, which ultimately failed, to block so-called fast-track authority that allows Obama to more easily complete TPP without fear that Congress could amend the pact.

In debate on the worker aid bill on Thursday, Democratic Representative Louise Slaughter said, “The very fact of passing this bill is an admission of knowing we are going to lose jobs.”

The conservative Heritage Foundation, which is influential among congressional Republicans, has called the programme “ineffective and wasteful” and complained that its benefits are more generous than those received by unemployed people who do not lose their jobs as a result of trade deals.

In a December 2014 analysis, Heritage argued that the money spent on TAA “appears to do little to improve displaced workers’ job prospects”.

The White House, however, has said 2.2 million workers have benefited from the programme since 1974.

According to the US Department of Labour, thousands of those displaced workers were veterans who used the aid to earn education degrees or industry-recognised certifications. In 2013, 71 per cent of programme participants returned to work, the department has said.

Many of the workers who lost their jobs and participated in the trade assistance programme have come from the manufacturing sector, according to government figures.

DUBAI — The cost of construction materials in Qatar is likely to jump as the host nation intensifies infrastructure building ahead of the 2022 World Cup, and other building projects could finish late as a result, industry experts say.

Qatar is set to spend more than $200 billion on the soccer tournament as part of a 2030 development plan, although tough contract terms and state bureaucracy have left some contractors in difficulties.

Corruption allegations at soccer’s governing body FIFA have put renewed media focus on Qatar, although Qatari officials say they are confident the 2022 tournament will go ahead as planned.

The high level of construction activity, predominantly in the capital Doha, is already making it hard for contractors to get workers and materials to sites.

“The pinch point will likely be in 2017-19 when the construction work peaks, but the government can take measures to mitigate that,” said Nick Smith, partner at engineering consultants Arcadis in Qatar. 

He predicted materials inflation would be about 3 per cent in 2015.

“This will include early supply chain engagement, standardisation of products and direct procurement of certain items. Qatar is already pursuing some of these initiatives.”

Materials inflation could surge to 15-20 per cent from 2018, said Steven Humphrey, a director at infrastructure specialists AECOM.

Qatar witnessed a similar phenomenon ahead of hosting the Asian Games in 2006. Also, construction inflation fluctuates more than general inflation and small markets such as Qatar are less able to absorb changes in workload, a report by Arcadis unit EC Harris states.

“Qatar, like most other Gulf states, has suffered from projects being delivered late, sometimes over budget and usually because the scope has changed from what was originally set out,” said AECOM’s Humphrey.

“With a fixed deadline like 2022 these attitudes will not be permitted. As prices get squeezed, contractors who bid at the incorrect prices will shy away from doing the projects and move their resources into more profitable projects,” he added.

Qatar will import many of the building materials it needs from neighbouring United Arab Emirates. Doha’s limited port facilities mean these goods must travel on small barges or via truck through Saudi Arabia, adding to supply chain pressures.

“Contractors pick and choose what their priorities are, so there’s a real danger, looking at bids today where they seem very competitive, that these are projects that may not be able to be delivered on time,” added Humphrey.

Commodity prices have dipped, helping to mollify materials inflation in the short term, with spot iron ore prices slumping to a near four-week low last week as slow Chinese steel demand kept steel futures near their weakest since their 2009 launch.

Separately, sources say that Qatar Investment Authority (QIA), one of the world’s most aggressive sovereign wealth funds, will set asset allocation targets for the first time and restructure internal decision-making, in response to a drop in oil prices that has crimped available funds as competition for assets grows.

In a cryptic reference on QIA’s website, a tab saying ‘QIA Review — Coming Soon’ leads to a page which does not yet exist. The sources, who all either work in Qatar or for foreign institutions which work with the QIA, said the review process was currently ongoing.

They spoke on condition of anonymity as they did not want to jeopardise working links with the secretive fund.

A spokesman for the QIA, which is estimated by industry tracker the Sovereign Wealth Centre to have $304 billion of assets, declined to comment.

QIA, set up in 2005 by the Supreme Council of Economic Affairs, a body chaired by Emir Tamim Bin Hamad Al Thani, was one of few sources of capital available to stressed sellers during the global financial crisis and thus snapped up, at rock bottom prices, many indiscriminate assets like ownership of the Shard skyscraper in London and Harrods department store, and stakes in Credit Suisse and Volkswagen.

Now, however, as the global economy recovers, QIA faces competition from other funds again as it seeks to diversify its hydrocarbon-centric economy. On top of that lower oil prices have reduced new investment funds available to it — though they still stand at tens of billion of dollars.

It’s also faced criticism for extreme secrecy because the fund doesn’t disclose its performance or total assets under management.

“As any organisation grows up, it makes much more sense to take a more institutionalised approach, and this is something which has happened at other sovereign funds in the past,” said a senior Gulf-based banker. 

Formal targets

The review would enshrine formal asset allocation targets for geographies and sectors for the first time, according to a senior Doha-based banker and a private equity source, ending the scattergun approach that marked the fund’s early years as it prioritised fast growth.

The fund was run between 2008 and July 2013 by Sheikh Hamad Bin Jassim Al Thani , a charismatic dealmaker who was also prime minister and foreign minister for most of his tenure and often used the QIA as a foreign policy tool, deploying its cash into areas which would help boost Qatar’s power and prestige.

Setting targets now could result in the fund exiting areas like food and mining where it overlaps with specialist funds such as Hassad Food and Qatar Mining. QIA is already evaluating its investments in some mining assets, sources told Reuters last week.

The review could also see tens of billions of dollars flow into new geographies to diversify a fund which in late-2013 was believed to be around 80 per cent invested in European assets.

That would crystallise a recently-announced shift towards the developed markets of Asia and North America. The fund said in April it would open an office in New York in light of its growing portfolio in the United States and last November announced plans to invest $20 billion in Asia over the next five years.

Those funds are likely to flow in particular to sectors where QIA has a penchant such as financial services, real estate and consumer goods, said a second source, a senior Doha-based banker.

Consensus

The other major shift expected to emerge from the review is a greater use of consensus in decision-making.

Its current director Sheikh Abdullah Bin Mohamed Bin Saud Al Thani, chairman of telecommunications firm Ooredoo for 14 years prior to joining the QIA, is heavily involved in most matters and asks to be briefed on everything going on, according to a Doha-based lawyer.

“There now seems to be a greater ethos of valuing all opinions, which makes people feel they are bringing their value added to the fund,” said the senior Doha-based banker.

It remains to be seen whether the review will advocate greater transparency for a fund rated in October by political risk group GeoEconomica as the only SWF not complying with the Santiago Principles, a voluntary code of practice meant to govern these often highly-secretive funds.

“Transparency is not an end here,” said the first source, a senior Gulf-based banker.

“There are always shades of grey when it comes to SWFs, especially when they are still evolving like the QIA, so it’s more of a case of gradual, steady progress and not just flipping a switch,” he added.