Business

AMMAN — The Amman Chamber of Industry (ACI) is proceeding to implement the second phase of the “Made in Jordan” campaign in cooperation with the Jordan Enterprise Development Corporation. Musa Saket, head of the campaign’s supervising committee, said the campaign will be targeting school students in order to acquaint the new generation with the high quality achieved by national products and the role they play in supporting the economy and employing local workforce. Saket added that the Ministry of Education has directed education departments to cooperate with ACI in arranging campaign teams’ visits to schools. The campaign also includes arranging meetings between factory owners and students to acquaint them with their personal experiences and success stories, in a way that would urge these students enter the industrial sector. 

AMMAN — The private sectors in Jordan and Thailand have to work harder to enhance the volume of trade exchange and establish joint projects, Amman Chamber of Commerce (ACC) President Issa Murad said on Sunday. Inaugurating the Jordanian-Thai Business Forum, Murad described the trade balance between the two countries as still low, with Jordanian exports to Thailand in 2014 reaching $28 million and imports from the Asian country standing at $225 million in the same year. He said that ACC, established in 1923, is one of the most important service institutions in the Kingdom that includes over 46,000 companies with total capitals of JD34 billion. On the sidelines of the forum, an exhibition was held with the participation of 20 Thai companies that produce halal foods. Chemical industries and leathers top Jordan’s exports to Thailand, while the Kingdom imports food, transportation tools, machines, minerals, wood and textile products. 

AMMAN — Jordan will be organising a large delegation from the public and private sectors to participate in the Chinese and Arab Countries Exhibition which will be held in China, Industry and Trade Minister Hatem Halawani said Sunday. He added during a meeting with a Chinese delegation headed by Li Jianhua, Ningxia committee secretary at the Communist Party of China, that Jordan appreciates being chosen as a guest of honour in the exhibition. Halawani continued that the Kingdom's participation will focus on economic achievements achieved during the past few years, in addition to discussing the possibility of cooperation with the Chinese in different sectors, especially investment, industry, trade, health, education, communication, IT and tourism. In a statement sent to The Jordan Times, Halawani called on Chinese businessmen to invest in the Kingdom and benefit from available opportunities in different sectors. For his part, Jianhua said China is interested in developing cooperation with Jordan in small- and medium-sized projects, among others. 

LONDON — With oil prices tumbling and ageing equipment making extraction ever more expensive, Britain's North Sea oilfields face a struggle for survival, threatening a vital source of income and energy.

The oil industry has been hard hit by crude prices falling more than 50 per cent since June to less than $50 a barrel.

Energy giant BP recently announced it was cutting 300 local jobs, mostly in the Scottish city of Aberdeen, Britain's oil "capital" and Europe's oil hub in northeast Scotland.

Others, including Shell, Chevron and Conoco Phillips, warned late last year of similar scale cuts.

The publication of the oil majors' financial results in a few weeks augurs more bad news, with British subcontractors particularly nervous that they may be deemed expendable.

In anticipation, oil services company Wood Group has already cut staff salaries by 10 per cent.

The industry has ridden out previous fluctuations, with prices dropping as low as $38.37 per barrel during the depths of the global economic crisis in 2008.

"We've seen oil prices fall in the past and it has recovered," said Neil Gordon, chief executive of Subsea UK. "There is confidence that it will recover, but that you'll have to go through an amount of pain, until the price recovers."

The recent price fall has only magnified existing problems of high operating costs in the deep offshore fields, with producers desperate to trim budgets even when prices were higher.

Faced with dwindling margins, the majors are beginning to think the unthinkable — abandoning Scotland's oil and gas fields, which have seen a 50 per cent fall in production over the past decade.

The BP-owned "Forties" field, which celebrated its 50th anniversary this year, produced around 500,000 barrels per day (bpd) at its peak, according to Colin Welsh, chief executive officer of the investment bank Simmons & Company. 

Today, the combined production of all Britain's North Sea fields is estimated at 800,000 bpd.

'Vital industry' 

"They'll have to make the North Sea a lot more attractive, and that involves reducing the tax rates," said Welsh.

The government for too long has treated the oil industry as a "cash cow", argued several officials who highlighted the 60 to 80 per cent tax rates levied on oil companies.

"If you look at Norway, they get very significant tax breaks for drilling exploration wells, which encourage them to deploy that money to do another one and another one," said Graham Stevens, finance director of Plexus, which specialises in wellheads.

"We don't get that kind of money in the UK," he added.

With Britain's general election just months away, politicians have recently been much more keen to show support for the North Sea, particularly in Aberdeen where more than half the jobs depend on oil.

"This is a vital industry," said Labour's Ed Balls, who would likely become Britain's finance minister if his opposition party wins the nationwide vote.

"Labour... will do what it takes to make sure we secure the jobs and the investment which is so important for livelihoods... but also for tax revenues coming in," he added.

The Conservative-led government of Prime Minister David Cameron has promised to include support measures in its budget for the financial year 2015-2016, which will be presented in March.

But in Aberdeen, concern is already growing that there may be no industry to revive if prices remain low for any length of time. 

"We need to make sure the industry is still in a fit state to recover," said Anne Begg, MP for Aberdeen South.

For Jake Molloy, regional organiser of the RMT Union, "it is a very serious situation that Westminster need to address, not only for Aberdeen but for the UK economy".

In 2013-14, tax revenues fell by a quarter to $4.7 billion due mainly to lower production. With prices at $50 a barrel, the wells could soon run dry.

On the docks in Aberdeen, oil workers put a brave face on hundreds of job cuts linked to sinking crude prices while union leaders warn that the worst is yet to come.

"It has happened before and it will happen again. There will probably be job losses but that's the way the industry works," said Tony Maguire, a rig worker.

But for Molloy, workers who lose their jobs face "a lifetime crisis".

Molloy was one of 20,000 people who lost jobs in a downturn in 1986 and said the decline is more dangerous now because North Sea offshore fields are depleting.

"I hope this is just a blip... but I am more concerned now than I was [then]," he told AFP in an interview in the city, which has been built on oil revenues.

At a time when the industry might be facing the biggest crisis in its history, the atmosphere in the Scottish hub has remained strangely calm.

In the port of Aberdeen, where dockers are busy loading equipment for a rig onto massive vessels, workers were trying to stay optimistic.

Robert, who has worked on the dock for 29 years and whose son is doing an apprenticeship in the sector, dismissed the latest fall in prices as "a few blips".

Residents still complain about traffic jams, seen as a positive sign reflecting the city's commercial buzz and the failure of road infrastructure to keep up.

"If things were really bad, the big building outside the airport would stop progressing," said Dave, a taxi driver, referring to a luxurious office complex being prepared for Norwegian oil services firm Aker Solutions. 

'A ghost town' 

Job cuts and their potential consequences on the city have not really sunk in but the warning signs are there.

"Aberdeen could be a ghost town in 10 years' time," indicated Welsh.

Begg remarked that job cut announcements have not resulted in actual layoffs yet.

"There will be a time delay, and there always is, so we could be looking at another six months to a year before it really starts to impact the economy," she said.

The oil and gas industry has made Aberdeen prosperous, salaries in the industry are two and a half times the national average, and the Scottish National Party (SNP) based its failed drive for independence on a prediction of future bountiful revenues from the North Sea.

Local residents, a majority of whom voted against independence, now point out that the SNP had based its budget calculations on a $110 barrel.

"The oil prices have fallen, I did not predict that but nobody else did," said Fergus Ewing, the SNP's regional minister for commerce, energy and tourism.

"In politics, you play the cards as they fall, we respond to the challenges, the challenges are very serious," he added.

AMMAN — Jordan Industrial Estates Corporation (JIEC) Chief Executive Ali Madadha on Saturday underlined the corporation's commitment to removing obstacles investors face in Muwaqqar Industrial estate. During a meeting with investors in the estate, which is considered the latest industrial incubator to be established by the JIEC in the east Amman region, he noted that the new investment law will enable investors to benefit from many incentives and benefits. Launched in 2010, the occupancy rate in the estate stands at 70 per cent, having 49 industrial companies.  

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad called for eliminating obstacles hindering the penetration of Jordanian commodities' to the Russian market. During a meeting with a delegation from the Russian customs department on Thursday, he called for addressing challenges to ensure the flow of commodities between the two countries. Murad noted that the Kingdom's exports to Russia witnessed a "noticeable" decline, going down by 57 per cent between 2010 and 2013, adding that imports from Russia also declined by 49 per cent during the same period. Moreover, he cited the "modest" Russian investments in the Kingdom, which he said do not exceed JD280, 000 and are only concentrated in the industrial sector. The ACC president called on Russian businesspeople to explore investment opportunities in Jordan.

MOSCOW — Russia may have to spend more than $40 billion this year to avert a banking crisis, as the growing likelihood of a sharp recession threatens to pile extra costs on a sector suffering from Western sanctions over Ukraine and a plunge in the ruble.

Russian banks are seeing a deterioration in their loan quality, a rise in their risk management costs and increase in their cost of funding, and banking executives and analysts predict things are going to get worse.

This represents a major challenge to President Vladimir Putin, who took power 15 years ago in the ashes of a crisis that wiped out the financial system, and whose popularity partly rests on his reputation for restoring stability.

"We expect a contraction in the number of small, medium and large banks this year," Mikhail Zadornov, head of VTB 24, the retail arm of No. 2 bank VTB, said on Thursday. "It will be hard for all banks. The weakest will leave the market." 

Russia's central bank has already relaxed regulation of banks, and the government has pledged support of more than 1.2 trillion rubles ($19 billion) this year after spending more than 350 billion rubles in 2014. But analysts say this is a fraction of what is needed.

The anti-crisis measures will significantly add to pressures on Russia's international reserves and the budget, which is already forecast to run a deficit of up to 3 per cent of the gross domestic product this year, hurt most by a collapse in oil prices which is withering the country's export revenues.

"To preserve the status quo, banks may need far more capital than 1 trillion rubles," said Yaroslav Sovgyra, associate managing director for Moody's ratings agency in Russia.

"One trillion would boost their capital [adequacy ratio] by about 200 basis points. But on the other hand, because of credit losses you'll see a reduction in capital by roughly 500 basis points," she added.

One further problem is that the government's planned capital injection comes with strings attached: Russian banks are being asked to increase lending to core sectors of the economy by around 12 per cent. That could further stretch their capital.

Slippery slope

The government is soon to distribute up to 1 trillion rubles of OFZ treasury bonds issued late last year to banks including VTB, Gazprombank and Rosselkhozbank, all state-controlled and under sanctions imposed by Western countries to punish Russia for its involvement in Ukraine.

VTB and Gazprombank are also expected to receive money from the National Wealth Fund, a sovereign fund originally intended to support the pension system, of over 200 billion rubles.

Top bank Sberbank could also attract a subordinated loan of up to 600 billion rubles from the central bank, its main shareholder, or extend an existing loan from the regulator. It has said it is too early to talk about a new loan for now.

BNP Paribas estimates that Russian banks could need up to 2.7 trillion rubles ($42 billion) in additional capital to support lending and absorb credit losses.

Such figures would amount to almost 20 per cent of planned federal budget expenditure this year.

Sberbank Chief Executive German Gref said this month that Russian banks would need to create about 3 trillion rubles of provisions this year should oil prices average around $45 a barrel.

Last month, the state spent 130 billion rubles to bail out the first major bank to fall victim to the ruble crisis, mid-sized lender Trust Bank, then ranked 15th biggest by retail accounts and 32nd by assets.

"If banks from the top 30 get into trouble, the government will have to save them at any price," said Armen Gasparyan, a banking analyst at Renaissance Capital. 

"It would be very painful for such a bank to go under, as it could spark a crisis of confidence in which the population withdraws deposits en masse and interbank lending rates spike," he added.

Russian central bank deputy governor, Mikhail Sukhov, told Reuters he did not expect a wave of banking insolvencies, but that the current financial crisis could force those engaged in high-risk financial operations to leave the market.

So far, the central bank says non-performing loans were just 3.8 per cent of banking sector assets at the beginning of December. But Moody's, which uses a different methodology, puts them at 7.5 per cent already and says they could roughly double this year.

During the last financial crisis in 2008-2009, there was a time lag before the proliferation of bad loans appeared on balance sheets: At the start of 2009, they made up 3.8 per cent of Russian banks' loan portfolios, but a year later this figure had risen to 9.6 per cent. 

Separately, former finance minister Alexei Kudrin said Russia is starting to see a wave of mass layoffs as a result of the plunging economy and needs to rethink where and how fast it spends its reserves.

Kudrin resigned from the government in 2011 to protest against soaring military spending, but is believed to still have the respect of and access to President Putin.

The ruble has lost half of its value against the dollar since the start of last year as a result of plunging oil prices and Western sanctions, making it very difficult for Russia to borrow from Western capital markets.

"I was predicting tough times, but I had not expected them to be so tough," Kudrin told Reuters on the sidelines of the World Economic Forum in Davos.

"Consumer prices have risen sharply. Large layoffs have begun. The Moscow construction sector has seen 100,000 people being laid off. We see signs of crisis in the auto industry. There will be also a serious slowdown in modernisation and deployment of Western technology," he said.

He added that the economy would shrink by over 4 per cent this year if oil prices remain low. Russia has a relatively small unemployment rate of over 5 per cent.

Under Kudrin, Russia accumulated more than $500 billion in reserves, including around $160 billion in two reserve funds which can be used in difficult times to protect the ruble and the economy.

Last week, Russia's central bank said its gold and foreign exchange reserves had dropped below $380 billion as it continued to protect the currency and authorities spent money on bailing out banks and companies.

With social spending representing a third of the overall budget and military expenditure at 35 per cent, Russia is poised to exhaust its two reserve funds in 18 months if oil prices stay at around current levels of $50 a barrel.

Kudrin stressed that Russia needed to urgently cut outlays to make sure it had enough funds to protect the economy for longer.

"If oil stays at $50, our reserve fund shall be spread over three years, while we switch to lower spending and conduct reforms," he said. A huge military modernisation programme should be carried out over 15 years rather 10, which would also save money, he added.

Some European politicians and businessmen have in recent weeks called for a re-engagement with Russia and the easing of sanctions. But Kudrin said the majority of Western business people and public opinion were still against this idea, making the removal of sanctions an unlikely prospect.

CARACAS — President Nicolas Maduro shook up complex currency controls on Wednesday and also prepared Venezuelans for a rise in the world's cheapest fuel prices in response to a recession worsened by plunging oil revenue.

The socialist-run economy shrank 2.8 per cent in 2014 while inflation topped 64 per cent, the socialist leader announced in a speech to parliament, in what is almost certainly the worst performance in Latin America.

With oil prices down by more than half since mid-2014, Venezuela's economic mess has hit Maduro's popularity hard and threatened the future of the ruling "Chavismo" movement named for his charismatic predecessor Hugo Chavez.

The 52-year-old Maduro blamed political foes for Venezuela's dismal data, but he also announced the most concrete changes in months to try to shore up the economy.

Carefully avoiding the word devaluation and without giving much detail, Maduro said he was modifying existing complex currency controls to combat the black market for dollars while sticking to a complex three-tier model.

Greenbacks would still be available for essential food and medicine at the current, strongest rate of 6.3 bolivars to the dollar, he added, but two weaker central bank rates of around 12 and 50, respectively, would be merged.

A third new system would be created to offer dollars via private brokers to vie with the black market where the rate is 177 bolivars, Maduro continued, noting that economic officials would give further details.

Assuming the merged rate, known as Sicad, and the third level would be weaker than the current rates, those changes would give the government more bolivars for its dollar oil revenue and, essentially, represent the "stealth devaluation" many economists had been predicting.

That could add to pressure on Venezuela's inflation, already the highest in the Americas.

While economists were waiting to see fine print, some feared it could be another quick fix. 

"Overall, the historical record is quite extensive and clear that multitier exchange rate systems are very difficult to administer and eventually collapse," said Alberto Ramos of Goldman Sachs. 

'If you want, crucify me!'

On the touchy subject of domestic fuel prices, Maduro said he favoured a rise this year, a measure recommended by many economists to lessen distortions and boost revenue.

Venezuelans currently fill up for less than $0.02 a litre, thanks to a roughly $12 billion annual government subsidy. But Maduro is mindful of the infamous "Caracazo" riots in which hundreds died in 1989 over fuel price increases.

"If you want, crucify me, kill me," he said, announcing a national debate on the subject. "The price is a distortion... I think the time has come... to do it this year. I assume the responsibility and the criticisms."

Opponents say 15 years of misguided socialist policies and corruption since Chavez took power have wrecked Venezuela's economy and heaped suffering on its 30 million inhabitants who are facing unprecedented shortages of basic products.

"They've destroyed production," opposition leader Henrique Capriles tweeted during Maduro's three-hour speech. "That's the cause of the queues, not the lies they're telling."

According to UN estimates, Argentina is the only other country in Latin America whose economy was seen contracting last year, though by less than Venezuela which is a member of the Organisation of Petroleum Exporting Countries.

In one of the grimmest forecasts yet, an International Monetary Fund official estimated on Wednesday that Venezuela's economy will shrink 7 per cent this year.

Maduro said on Wednesday that Venezuela's crude, which trades at a discount to other benchmarks due to its greater heavy-oil content, was at $38 a barrel versus $99 in June.

"It will not return to $100... We have less foreign currency... But God will provide," he said, sounding a note of resignation after a nearly two-week tour of oil producers around the world to seek ways to boost the price of crude.

Venezuela's opposition coalition called on people to bang pots and pans in a traditional form of protest during Maduro's speech. That could be heard in some neighbourhoods of Caracas, though not as loud as on occasions last year.

Maduro repeatedly lashed his political opponents for trying to sabotage the economy via hoarding and disruption.

"In 2014, we again faced the script of destabilisation and violence," he said, referring to four months of protests that caused major disruption and killed 43 people, including demonstrators, government supporters and security officials.

The government still maintains popular Chavez-era welfare programmes, such as subsidised food and free health clinics, that benefit millions.

Maduro said unemployment was at a new low of 5.5 per cent, and announced a 15 per cent minimum wage increase next month as well as new housing projects and scholarships.

With a vicious blame-game under way over Venezuela's economic shortages and parliamentary elections due later this year, the government plans to mobilise supporters in a rally on Friday, and the opposition has called a march for Saturday.

Even though his popularity has dropped to 22 per cent, according to one leading pollster, Maduro predicted his ruling Socialist Party would win the National Assembly vote by 10 percentage points.

Flanked by a giant photo of Chavez twice his own size, Maduro confidently predicted, "2015 will be the year of victory and economic rebirth". 

At the same time, scores of opponents took to Twitter across Venezuela predicting he would not last the year in power and his "Chavismo" movement was dying.

FRANKFURT — The European Central Bank (ECB) took the ultimate policy leap on Thursday, launching a government bond-buying programme which will pump hundreds of billions in new money into a sagging eurozone economy.

The ECB said it would purchase sovereign debt from this March until the end of September 2016, despite opposition from Germany's Bundesbank and concerns in Berlin that it could allow spendthrift countries to slacken economic reforms.

Together with existing schemes to buy private debt and funnel hundreds of billions of euros in cheap loans to banks, the new quantitative easing (QE) programme will release 60 billion euros ($68 billion) a month into the economy, ECB President Mario Draghi indicated.

By September next year, more than 1 trillion euros will have been created under the QE, the ECB's last remaining major policy option for reviving economic growth and warding off deflation. 

The flood of money impressed markets: The euro fell more than two US cents to $1.14108 on the announcement, and European shares hit seven-year highs.

"All eyes were on Mario Draghi and he has delivered a bigger bazooka than investors were expecting," said Mauro Vittorangeli, a fixed income specialist at Allianz Global Investors, adding that the news marked "an historic crossroads for European markets".

The ECB and the central banks of eurozone countries will buy up bonds in proportion to its "capital key", meaning more debt will be scooped up from the biggest economies such as Germany than from small member states such as Ireland.

The prospect of dramatic ECB action had already prompted the Swiss central bank to abandon its cap on the franc against the euro. Denmark cut its main policy interest rate on Thursday for the second time this week after the ECB announcement, aiming to defend the Danish crown's peg to the euro.

Draghi has had to balance the need for action to lift the eurozone economy out of its torpor against German concerns about risk-sharing and that it might be left to foot the bill.

Will it work?

Economists noted that Draghi had said only 20 per cent of purchases would be the responsibility of the ECB. This means the bulk of any potential losses, should a eurozone government default on its debt, would fall on national central banks.

Critics say this casts doubt over the unity of the eurozone and its principle of solidarity, and countries with already high debts could find themselves in yet deeper water.

"It is counterproductive to shift the risks of monetary policy to the national central banks," said former ECB policy maker Athanasios Orphanides. "It does not promote a single monetary policy. This path towards Balkanisation of monetary policy would signal that the ECB is preparing for a break-up of the euro."

Tensions broke out as the ECB's meeting got under way with French Finance Minister Michel Sapin firing a broadside at Berlin. 

"The Germans have taught us to respect the independence of the European Central Bank," he told France Info radio. "They must remember that themselves."

A German lawyer who has been prominent in attempts to halt eurozone bailouts said he was already preparing a legal complaint against the bond-buying programme.

Draghi said the ECB's Governing Council had been unanimous in agreeing that the step to print money was legally sound. There was a large majority on the need to trigger it now, "so large that we didn't need to take a vote".

"There was a consensus on risk-sharing set at 20 per cent and 80 per cent on a no-risk-sharing basis," he added.

One eurozone central banking source said five policy makers opposed the expanded asset-purchase plan: The central bank chiefs of Germany, the Netherlands, Austria and Estonia, along with executive board member Sabine Lautenschlaeger, a German.

Guntram Wolff, head of the Bruegel think tank, said the plan's size was impressive. "But the ECB has given the signal... that its monetary policy is not a single one. That's a bad signal to markets and a bad signal to everybody in the eurozone."

The ECB is trying to push eurozone annual inflation back up to its target of just below 2 per cent; consumer prices fell last month, raising fears of a Japanese-style deflationary spiral. But there are doubts, and not only in Germany, over whether printing fresh money will work.

Most eurozone government bond yields are at ultra-low levels and the euro had already dropped sharply against the dollar. Lower borrowing costs and a weaker currency could both help to boost economic growth but there is a question about how much further either can fall.

Asked if the ECB had a Plan B, Draghi responded: "We just presented Plan A, and we have Plan A. Period."

The ECB could create the basis for growth, he said, but he put the onus on governments to follow. 

"For growth to pick up... you need structural reforms," he stressed. "It's now up to the governments to implement these structural reforms. The more they do, the more effective will be our monetary policy."

Draghi was echoing the view of German Chancellor Angela Merkel, who said: "Regardless of what the ECB does, it should not obscure the fact that the real growth impulses must come from conditions set by the politicians."

A plunge in the price of oil has thrown central bankers into a spin worldwide. Canada cut the cost of borrowing out of the blue on Wednesday while two rate setters at the Bank of England dropped calls for tighter monetary policy as inflation has evaporated in Britain.

The ECB has already cut interest rates to record lows. Earlier, it left its main refinancing rate, which determines the cost of eurozone credit, at 0.05 per cent.

Greece and Cyprus, which remain under European Union (EU)/International Monetary Fund (IMF) bailout programmes, will be eligible for the ECB programme but subject to stricter conditions. 

"Some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme," Draghi said.

The move comes just three days before an election in Greece where anti-bailout opposition party Syriza is on track to gain roughly a third of the vote.

PARIS — New car sales in Europe rose by nearly 6 per cent in 2014, ending a long slump in activity that began in 2007, but analysts warn the sector has not yet turned the corner in the region.

The European Automobile Manufacturer's Association (ECEA) said last week that 2014 new car sales grew by 5.7 per cent, but noted current volumes of activity remain significantly lower than they were before the global financial crisis that drove the sector into six years of decline.

Europe's continuing economic sluggishness means carmakers are unlikely to be able to repeat 2014's performance, with analysts expecting sales growth to be limited to 1 to 3 per cent this year.

A recovery to pre-crisis levels is most likely still years away.

Carlos Da Silva, an auto industry expert at IHS consultants, said that "2014 should be taken with relief and satisfaction".

"However, by any means, this growth should not be misinterpreted: The foundations for a flourishing car market are yet to be built," he added. "Right now, the patient is still limping, not starting to run on both legs!"

The European car sector's convalescent state is clear in comparing the 12.5 million units sold last year to the 16 million which rolled off dealer's lots in 2007 before Wall Street unleashed a global financial crisis.

IHS said it does not expect the market to approach those levels until the end of the decade.

Moreover, activity across Europe varied greatly by market, lacking the generalised effervescence needed to drive enduring growth across the industry.

Among the largest markets, Spain led the sales growth at 18.1 per cent, in part due to a new government incentive programme.

Britain followed with 9.3 per cent growth, Italy at 4.2 per cent, Germany 2.9 per cent.

France managed only 0.3 per cent growth.

"The situation in Europe is still quite contrasted, but it's much better than we expected at the beginning of the year, when we forecast 2 to 3 per cent," said Jean-Francois Belorgey, an analyst with consultants EY.

"[There is] a rather clear relationship between [national] economic health and market activity," he added.

Britain has been a bright spot in the region, with its economy expected to have grown 3 per cent in 2014.

But with the Europe-wide economic outlook remaining mostly subdued through 2015, hopes that 2014 might mark a definitive rebound for carmakers are equally guarded.

"The European economy is still ailing, with weak growth and high unemployment," said Belorgey. "It's more a case of 2014 having been a nice surprise." 

Volkswagen European leader  

The Volkswagen (VW) group remained Europe's largest car producer in 2014, with sales rising by 7.2 per cent to 3.2 million units.

It was followed by Peugeot maker PSA, which managed a 3.7 per cent increase to 1.4 million vehicles.

But No. 3 Renault posted a much larger 13.3 per cent increase to 1.2 million units.

Ford moved into fourth place, with sales rising by 5.8 per cent to 927,861 vehicles.

General Motors (GM) fell into fifth place as sales dropped by 4.3 per cent to 905,444 vehicles, due largely to the withdrawal of its Chevrolet line from Europe.

Renault said this week that low-cost models are now three of its top-five selling vehicles worldwide.

Sales of its low-cost Dacia brand rose by 23.9 per cent last year in the countries the ECEA tracks. Renault sells the vehicles under its own symbol in numerous countries around the world.

Belorgey noted that while much of Renault's growth was driven by the surge of its Dacia brand, the wider segment is not uniformly booming, as witnessed by modest activity for rivals like Kia, which posted just a 4.4 per cent advance.

By contrast, virtually all players in the premium luxury segment saw robust sales increases, including 30.1 per cent for Lexus, 12.3 per cent for Volvo, 4.8 per cent for Audi, and a whopping 70.6 per cent for Jeep.

"The automobile industry is one where the offer is a means of stimulating demand," Belorgey said.

"Cars are products that make people want them, which is reassuring for manufacturers. Rolling out new attractive models is a way... to come out ahead," he added.

Toyota sells 10.23mn vehicles in 2014, still world's top automaker

Separately, Toyota kept its title as the world's biggest automaker on Wednesday as it announced record sales of 10.23 million vehicles last year, outpacing GM and VW, but a shaky outlook for 2015 could see it lose the crown to its German rival.

The worldwide annual sales figure beat Volkswagen, which logged sales of 10.14 million vehicles, and US-based GM, which said it sold 9.92 million cars last year.

But Toyota also said sales would decline this year to an expected 10.15 million vehicles, as demand falls off in its home market.

That will likely mean VW will be in pole position this year as the German automaker rides momentum in emerging economies that could see it take the lead in global auto sales for the first time.

"Their focus is not No. 1," Peggy Furusaka, an auto-credit analyst at Moody's Investors Service, told Bloomberg News, referring to the Japanese firm.

"Toyota is more concerned about keeping profitability than chasing numbers. So for coming years, I wouldn't be surprised to see Toyota selling fewer cars than VW," she said.

Toyota broke GM's decades long reign as the world's top automaker in 2008 but lost the crown three years later as Japan's earthquake-tsunami disaster hammered production and disrupted the supply chains of the country's automakers.

However, in 2012 it once again overtook its Detroit rival, which sells the Chevrolet and luxury Cadillac brands.

Toyota boosted its fiscal year through March profit forecast to 2 trillion yen ($16.97 billion), and said revenue would come in at 26.5 trillion yen, as it saw strong results in North America while a sharply weaker yen inflated its bottom line.

But it earlier warned over a downturn in some other key Asian markets including Indonesia and Thailand, which has been hammered by political unrest.

There are also growing fears about the entire industry's prospects in China owing to concerns about the health of the world's number-two economy.

Fuel-cell cars 

Toyota's upbeat announcement on Wednesday comes despite the firm struggling to recover its reputation for safety after the recall of millions of cars around the world for various problems, including an exploding air bag crisis at supplier Takata.

The maker of the Camry sedan and Prius hybrid has frozen the building of new plants for the three years until early 2016, and a Toyota executive at the Detroit auto show told AFP last week that the giant automaker is emphasising quality of sales rather than volume.

Among the moves, Toyota is pushing further into the fast-growing market for environmentally friendly cars, especially in China where officials are struggling to contain an air pollution crisis.

Toyota said this month it had been swamped by domestic orders for its first mass market hydrogen fuel-cell car, with demand in the first month nearly four times higher than expected for the whole year.

The company received more than 1,500 orders for its "Mirai" sedan since its launch in mid-December. It had planned to sell 400 in Japan over 12 months.

It has also announced plans to develop components for hybrid vehicles with two Chinese automakers in an unprecedented technology-sharing deal aimed at increasing green car sales in the world's biggest vehicle market.

The deal marked a shift away from Japanese carmakers' traditional reluctance over such deals for fear of losing their competitive edge.

Previously, Toyota would make key components such as batteries and motors in high-cost Japan and then ship them to joint ventures overseas. But that drove up the price of models such as its Prius, which has seen sluggish sales in China.

Toyota shares slipped 0.93 per cent to close at 7,588.0 yen in Tokyo, as the broader market fell into negative territory.