Tag Archives: Czech Republic

Cyber Attacks Force EU to Close Emission Trading System

A series of cyber-attacks on national registries, where carbon permits are stored, have forced the EU to close its emissions trading system (ETS) for at least a week. The European Commission posted the announcement on its website on Wednesday after Czech Republic-based firm Blackstone Global Ventures said about €6.8 million of carbon allowances appeared to have disappeared. Thefts on electronic registries in Austria, Greece, Poland and Estonia have also been reported over the last days.

“They will over time undermine the credibility of carbon trading as a policy measure.”

Kjersti Ulset


After discovering unauthorized trading on its account on Wednesday, Blackstone contacted the Czech registry OTE AS, which promptly closed all operations and began an investigation. The Paris-based BlueNext SA, operator of the world’s biggest spot exchange for permits, followed suit, as did registries in Poland and Estonia, before the EU finally imposed a region-wide shutdown.

It’s not the first time cyber criminal have been trading stolen permits at the international ETS market, but never has the activity been so comprehensive that the regulators have been forced to close the whole market.

“Incidents over the last weeks have underlined the urgent need for enhanced security measures,” the EU commission says in its announcement of the closure.

The bloc’s ETS system will be down, at least until 26 January.

Full statement

Q&A’s

A Criminals Market

According to The Guardian, European Authorities estimate that up to 90% of the whole market volume is plain fraudulent activities.

Belgian prosecutors highlighted the massive losses faced by EU governments from VAT fraud today after they charged three Britons and a Dutchman with money-laundering following an investigation into a multimillion-pound scam involving carbon emissions permits.

The three Britons, who were arrested last month in Belgium, were accused of failing to pay VAT worth €3m (£2.7m) on a series of carbon credit transactions.

European authorities believe the EU has lost at least €5bn to carbon-trading VAT fraud in the last 18 months.

Last month, the European police agency Europol reported that the European Union’s Emissions Trading Scheme had been victim of fraudulent trading activities over the past 18 months, worth €5 billion for several national tax revenues.

Europol, the EU’s law-­enforcement operation, fears the fraud will be used in other areas, especially gas and electricity trading markets, after criminals found VAT fraud was one of the most lucrative financial frauds.

The Most Lucrative Financial Fraud

Wednesday’s announcement and similar cyber-attacks have also damaged the EU initiative, together with reports of tax fraud and the recycling of used credits, the EUobserver.com reports.

“They will over time undermine the credibility of carbon trading as a policy measure,” says Kjersti Ulset, manager at Point Carbon, a company that reports on Europe’s emission trading, carried out in a network of registries across the union.

Despite its pioneering position, Europe’s ETS system has attracted criticism over its six years of operation, with some businesses saying it threatens the bloc’s competitiveness, while NGOs argue emission thresholds have been set too high.

By placing a price on carbon, Europe’s trading system is designed to lower company emissions and therefore protect the environment from global warming. Corporations received emission permits for free under the first phase (2005-2007) of the scheme. Some, however, are forced to pay for a portion of their permits.

The European emission trading system is the world’s largest, as the US plans for a similar cap-and-trade scheme was blocked by the US Senate last year.

Carbon permits are, however, traded as ordinary securities at the Chicago Carbon Exchange.

Brussels wants to see energy companies buy all their permits with their own money from 2013 and onwards, with other heavy industries gradually phased in by 2020.

China experts suggest pilot ETS projects could appear in Beijing’s next five-year plan, set to be approved in March.

Here at The Swapper we have been skeptical to the ETS all along.

It’s an artificial market, created on basis of nice thoughts, without a real supply/demand situation and is regulated in a way the is more similar to a pharmacy than a financial market.

But what is really worrisome, is the sharp increase in this kind of activity.

Just wait till you see the Chicago Board Option Exchange gets hacked!

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EU Member States Disagree On Debt Figures

I’ve been expecting something this: According to the EUobserver.com,  nine EU member states have proposed that the EU statistics on public debt should reflect which country has already reformed its pension system and therefore has a higher level of borrowing. But Germany warns against the move – of course –  saying it will cause confusion. (As if that is possible…)

“If you give in to nine member states you just water out the Stability and Growth Pact, which could be a huge problem.”

Felix Roth

“Maintaining the current approach to debt and deficit statistics would result in unequal treatment of member states and thus effectively punish reforming countries,” the nine EU members says in a letter last week addressed to the EU’s special task force on economic governance.

The letter is signed by officials of Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Sweden.

The text, seen by the EUobserver, says the introduction of state-funded pension schemes was “critical for enhancing the long-term stability of Europe’s public finances.”

“But the experience of member states that have introduced such reforms is that they have led to a significant deterioration in the … statistics of their general government debt and deficit,” it adds, referring to “fundamental unfairness and inefficiency in the current Stability and Growth Pact.”

The basis of the reforms in central European and Baltic countries lies in transformation of a single distributive pay-as-you-go pension system based on the principle of solidarity between generations to a pre-funded capital-based system.

German Skeptics

The German finance ministry said on Tuesday that it is “very skeptical” about making a change which could make figures from the relevant countries “more difficult to interpret at the EU level.”

“It would also disadvantage governments that have chosen different ways of reforming their pension systems and share the costs of the reform differently,” the German communique noted, according to Bloomberg.

The European Commission, said on the same day that it is mulling over its position on the issue.

“Of course the commission would like the criteria on public debt to be strengthened and to be taken more seriously so it is highly relevant that this matter be raised now,” the body’s spokesman Amadeu Altafaj told reporters.

The EU executive aims to react to the letter ahead of the next meeting of the taskforce on September 6th.

The taskforce, led by EU Council President Herman Van Rompuy, is looking into new EU fiscal rules designed to prevent a repeat of the recent financial crisis.

Felix Roth, a Brussels-based analyst from the Centre for European Policy Studies think-tank, have landed on German side of this debate.

“If you give in to nine member states you just water the Stability and Growth Pact down, which could be a huge problem, as we have seen now during the crisis,” he says to the EUobserver.com.

Anyway – the show will certainly go on for a while more.

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EU’s Administrative Costs Set To Rise 4,4% In 2011

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Bundesbank: Ireland Will Destroy The Euro Zone

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Secret Plan To Undermine The EU Parliaments Authority?

Germany’s Manic Depression

Citigroup: Euro Zone No Longer A Single Economy

EU-US Top Leaders Agree To Meet In Lisboa On November 19th

E.U. Parliament To Investigate Euro Zone Bailout

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Goldman Sachs: Good Morning Europe!

Goldman Sachs seem to have found a new wonder-boy, and perhaps a heir to chief economist Jan Hatzius, in its new Europe analyst Erik Nielsen. At least he got style, a sense  of humor and is just as crazy about soccer as most Europeans. He also show some profound insight on the diversified European economy. Here’s Mr. Nielsen’s thoughts on Europe on a fine Saturday evening in Chiswick.

“With no particular reference to Denmark’s fine victory this evening, I am just wondering what European football would look like had it not been for the smaller countries.”

Erik F. Nielsen


“With no particular reference to Denmark’s fine victory this evening, I am just wondering what European football would look like had it not been for the smaller countries – be it Denmark, the Netherlands, Switzerland, or Serbia … Its certainly difficult to see much hope in England, France, Spain or Italy – or in Germany after that last performance.”

Away from football, these are my thoughts on Europe on this fine evening in Chiswick:

We are through another week of good real-economy data releases and (grudgingly) improving markets.

The EFSF has been formally established. Along with the Commission’s and IMF money, I think it’s a serious defence mechanism which ought to help further stabilise markets.

Stress tests for the banking system will be published next month. Good, because that’s what the market demands, but I worry we might be heading into a disappointment because markets might expect testing against extreme tail-end risks considered as absurd by policymakers.

The ECB has now bought €47bn worth of sovereign debt – still peanuts in any reasonable comparison, but I think they may be looking to wind down the purchases once the EFSF is up and running in July.

The IMF spoke this past week on Greece (okay with program); Spain (happy with policy reforms); and France (marginally critical on fiscal – too polite).

G20 meeting this coming week; I wonder if the heat will turn on Germany now that China has announced a re-introduction of some FX flexibility.

We are heading into PMI-week in the Euro-zone; we are looking for slight improvements.

The UK will see the government’s emergency budget on Tuesday; big budget cuts on their way.

The Swiss National Bank will publish its May balance sheet this week confirming their huge FX-interventions.

In Sweden we’ll get the key KI/NIER economic tendency survey on Wednesday. It’s already at its highest level since August 2007, but we remain shamelessly optimistic.

Poland holds presidential elections tomorrow with a likely second round on July 4. Outcome very important for policies.

The central banks in Norway, Hungary and the Czech Republic will all meet this week to consider their interest rates; we expect all three to leave rates unchanged.

The IMF arrives back in Ukraine on Monday for a week’s talk on how to restart the program. We do not expect agreement this week.

Here’s a copy of the detailed analysis, provided by Zero Hedge.

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2010 EU Deficit Exceed 7% – Commission Suggest “Cold Showers”

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