Julius Baer ordered to pay $162m over vanished East German cash

In this file photo taken on February 05, 2010 a man walks past the logo of the Swiss bank Julius Baer group at the headquarters in Zurich. (AFP)
Short Url
Updated 26 September 2020

Julius Baer ordered to pay $162m over vanished East German cash

  • The Zurich-based bank has been fighting a long running legal battle against the payment, but Switzerland’s highest court has now given its final decision, ordering Julius Baer to pay 150 million francs

ZURICH: Swiss private bank Julius Baer could seek to recoup 150 million Swiss francs ($162 million) from UBS after it was ordered on Friday to repay the German government over millions in East German cash that vanished after the fall of the Berlin Wall.
The German government has been seeking money that it says was illegally transferred out of East Germany when the communist regime collapsed.
At that time, large sums were moved from an East German foreign trade company to foreign banks, so the money could not be seized by a reunified Germany.
For more than 20 years the Federal Agency for Special Tasks (BvS) has been searching for the money which has since been withdrawn from the banks.
The agency has also been seeking to make banks involved liable for not preventing these withdrawals.
Julius Baer became involved due its acquisition of the former Swiss Bank Cantrade, which it picked up in 2005 when it bought Bank Ehinger & Armand von Ernst Ltd. from rival Swiss lender UBS.
The matter is related to unauthorized withdrawals between 1990 and 1992 from a Cantrade account of a foreign trade company established in East Germany, Julius Baer said on Friday.

BACKGROUND

German authorities have been trying to recover funds that were allegedly transferred out of East Germany illegally when the communist regime collapsed in 1990.

The Zurich-based bank has been fighting a long running legal battle against the payment, but Switzerland’s highest court has now given its final decision, ordering Julius Baer to pay 150 million francs.
BvS was not immediately available for comment on the decision.
The payment, which includes interest, is fully covered by a provision Julius Baer booked in December 2019, the Swiss bank said.
Julius Baer said it will notify UBS of the final ruling. It previously said it would pursue Switzerland’s biggest bank for payment under the warranties agreed when it acquired Bank Ehinger & Armand von Ernst from it. UBS did not immediately respond to a request for comment.


IMF: Nearly all Mideast economies hit by pandemic recession

Updated 50 min 44 sec ago

IMF: Nearly all Mideast economies hit by pandemic recession

  • The IMF estimates that the global economy will shrink 4.4% this year
  • The IMF projects the Lebanese economy will see one of the region’s sharpest economic contractions this year at 25%

DUBAI: The coronavirus pandemic has pushed nearly all Mideast nations into the throes of an economic recession this year, yet some rebound is expected as all but two — Lebanon and Oman — are expected to see some level of economic growth next year, according to a report published Monday by the International Monetary Fund.
This comes as the IMF estimates that the global economy will shrink 4.4% this year, marking the worst annual plunge since the Great Depression of the 1930s.
Well before the coronavirus swept across the globe, several Mideast countries had been struggling with issues ranging from lower oil prices and sluggish economic growth to corruption and high unemployment.
The IMF projects the Lebanese economy will see one of the region’s sharpest economic contractions this year at 25%. The pandemic has only pushed the country further to the brink after a wave of anti-government anger before the virus struck.
Lebanese demonstrators were protesting government corruption, foreign exchange shortages, hyperinflation, constant electricity cuts and increasing poverty. The currency has dropped by 70% compared to the end of last year, with people struggling to afford basic goods. A devastating explosion at Beirut’s main port in August killed at least 180 people, injured more than 6,000 and destroyed entire neighborhoods. The blast left hundreds of thousands of people homeless.
While Mideast nations have seen fewer confirmed cases and deaths from the virus than countries in Europe and the US, the region still faces challenges in containing the disease.
“Risks of a worse-than-projected scenario loom large, particularly given recent surges in COVID-19 infections in many countries around the world that have reopened,” the IMF warned.
Iran, for example, recorded its highest daily death tolls from the virus last week. Its economy shrank by 6.5% last year and is projected to contract by another 5% this year. The IMF, however, expects Iran’s economy to rebound with 3.2% growth next year, based in part on the government’s future capacity to manage the virus, which it thus far as has struggled to do.
“Iran was among the first countries to become an epicenter of COVID-19 and we are now in the third wave of the pandemic, and this was on top of an economy that has been underperforming because of (US) sanctions,” Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told The Associated Press.
*Meanwhile, wealthy Mideast oil exporters are expected to see their economies contract by 6.6% in 2020, the IMF said. Gulf Arab states, however, are expected to see average economic growth of 2.3% next year. The IMF says it projections are based on assumptions that the price of oil averages $41.69 a barrel in 2020 and will rise to $46.70 a barrel in 2021.*
*The IMF revised its gloomy estimate of Saudi Arabia’s economic contraction down from 6.8% to 5.4%. As one of the world’s largest oil producers and top 20 largest economies, the kingdom took the bold step this year of trying to shore up more revenue by tripling value-added tax to 15% and increasing customs duties.*
Egypt was the sole outlier in the region, experiencing modest growth of 3.5% this year after more than 5% growth annually for past two years as lower energy prices help it as an oil importer. Still, Egypt faces challenges with its massive population and as tourism revenues remain sluggish.
The IMF, known for its bullish stance on taxes and subsidy cuts, has largely suspended its calls for belt-tightening austerity measures as people struggle under the weight of lockdowns and job losses. The IMF said “in general, tax increases would be more effective after the crisis” as such measures “will likely be a drag on the recovery and invite larger fiscal costs in the future.”
The international lender is calling on countries to focus their immediate priorities on ensuring adequate resources for health care and correctly targeting support programs to the most-vulnerable people.
Meanwhile, other Mideast oil exporters like the United Arab Emirates, home to Dubai and Abu Dhabi, will see an economic contraction of more than 6% this year, while Oman’s economy is projected to shrink by 10%. Iraq faces a recession of 12%, the IMF said.
The World Bank estimates the pandemic has thrown between 88 million and 114 million people into extreme poverty, which is defined as living on less than $1.90 a day.
According to the International Labor Organization, working hours in Arab states declined by 1.8% during the first quarter of 2020, equivalent to about 1 million full-time jobs. That number jumped to 10.3% in the second quarter, equivalent to about 6 million full-time jobs.
While Mideast states have rushed to provide various forms of support to their own citizens amid the pandemic, the impact from the virus has been acutely felt by many of the millions of low-wage laborers who hail mostly from South Asia and reside in the region. Their families back home rely on their salaries for survival.
Azour said Gulf Arab states alone provide 18% of global remittances. He said these countries should use the moment “to modernize labor laws” by providing support to all laborers in their countries.