NEWS,24.07.2012

Germany's credit rating downgraded

Germany's Aaa credit rating outlook has been lowered to negative by Moody's.The rating agency cited "rising uncertainty" about Europe's debt crisis.Risks that Greece may leave the euro and the "increasing likelihood" of help for Spain and Italy also caused the downgrade."Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form," Moody's said. Germany's vulnerable banking system, which Moody's deems exposed to the most stressed euro countries, could leave them open to further deepening of the crisis.However, it will retain its Aaa rating because of the country's "advanced and diversified economy" with high productivity and strong demand for German products.Finland held on to its top ranking, getting a stable outlook from Moody's.

 

Deutsche Bank's Internal Libor Investigation Finds Deutsche Bank Mostly Innocent

 

Great news, you guys. We can go ahead and scratch at least one bank off the list of egregious interest-rate manipulators. That's because this bank has heroically determined that it is totally innocent. Almost totally, anyway.Deutsche Bank, the biggest German bank, has carefully investigated its own role in the habitual, fraudulent, global rigging of Libor, the most important interest rate in the world. And you might want to sit down for this, but Deutsche Bank has determined, to what we can only imagine is its own profound relief, that Deutsche Bank was only barely involved in the scandal. Hardly any involvement, really. If you blur your eyes a bit, it even kind of looks like Deutsche Bank wasn't involved at all. Certainly not in its top executive ranks. That's the way Deutsche Bank would like you to see it, anyway.Hmm, one small problem, though: Handelsblatt is reporting that Deutsche Bank is bracing for "a huge fine" in the Libor scandal, setting aside between $300 million and $1 billion -- the middle point of which would be higher than the $450 million Barclays paid. Does that sound like a bank that really expects to get out of this without any mud getting splashed on the C-suite?Anyway, we can only imagine that if Deutsche Bank is indeed planning on paying such a huge fine, then it is only doing so out of the goodness of its heart, a sense of civic duty really. Because it turns out, according to Deutsche Bank's investigation, that every bit of Deutsche Bank's involvement in the constant, gleeful rigging of Libor for years came down to just two very bad Deutsche Apples, who were fired last year. Both of those, let's call them, slimeballs apparently were part of the global Libor-rigging cartel that involved nearly every large bank in the world. But they're gone now, and we can only imagine that their desks have been taken out back and chopped into dust, that their pictures have been photoshopped out of all the company's birthday-party photos, and that their names are no longer spoken around Deutsche Bank's offices in any tones other than scorn or maybe shame.A Deutsche Bank internal probe has found that two of its former traders may have been involved in colluding to manipulate global benchmark interest rates but there was no indication of failure at the top of the organization, three people close to the investigation said.No indication of failure at the top of the organization! This will be a tremendous relief to spanking-new Deutsche Bank chief Anshu Jain, who is already on thin ice with the Germans because he came up from the bank's investment-banking arm. Germans don't much like investment bankers. To make matters worse, it was Jain's investment-banking arm that happened to be in charge of these bad-apple traders that were fiendishly rigging Libor. A major scandal that originated in Mr. Jain's area of the bank could damage his chances to continue on as sole CEO of the bank after co-head Jürgen Fitschen's contract expires in three years.Thank goodness for Jain that such a risk is apparently all gone now, according to Deutsche Bank's unflinching review of its own leadership. In fact, Reuters seems to imply that Deutsche Bank will likely avoid the sort of unpleasantness that beset Barclays, where the chairman, CEO and chief operating officer all walked the plank as a result of that bank's admitted Libor manipulation. And we can only imagine that the ongoing investigations by "regulators and governmental entities" in the U.S. and Europe, including German markets regulator BaFin, are now a mere formality. All that's needed now is to bring those two pesky scapegoats to justice, and Deutsche Bank can get back to doing the Lord's work.

Italy pushes for Sicilian recovery plan

Italian Prime Minister Mario Monti imposed a compulsory plan to restore financial stability to the cash-strapped Sicily region and overhaul its bloated public administration, a government statement said today.The statement, issued after a meeting between Monti and regional governor Raffaele Lombardo, said the leaders had agreed "a plan for financial recovery and reorganisation of the region's public administration, with a binding timeframe and objectives".The statement stopped short of saying that Sicily would be placed under special administration but made it clear that the programme would be monitored from Rome and that it would insist on cuts to the region's notoriously swollen payroll."The programme is to be finalised in the coming weeks and will be formally signed by the regional and national governments," the statement said.Sicily, which accounts for about 5.5% of Italy's gross domestic product, has been at the centre of growing concerns over the financial stability of Italy's regional and city governments after Monti said last week there were serious concerns about the possibility that it could default.The autonomous island region has some 5.3 billion euros in debt, a long history of waste and mismanagement and an outsized public sector payroll that critics say has been used by successive governments to buy votes.Officials have since played down fears of an immediate crisis with Interior Minister Annamario Cancellieri saying on Monday that there was no risk either of default or of a special government administrator being appointed.Worries about Sicily come as Italy itself moves to the forefront of concerns in the euro zone crisis, with the cost of servicing huge debts jumping on contagion fears for the bloc's third biggest economy linked to the worsening plight of Spain.Following the meeting, Lombardo repeated his own insistence that Sicily had sound and sustainable finances and dismissed talk of default as "rubbish" but confirmed he would resign by the end of the month as previously agreed.He also said the government had released 240 million euros to help cover funding gaps in the health system, one of the regional administration's key responsibilities.While the plight of Italy's regional and municipal authorities has not reached the levels seen in Spain, where several regions have been reported to be close to asking for state aid, there have been growing signs of strain from successive cuts to government transfers.On Tuesday, mayors from around Italy held a demonstration outside the Senate to protest against the cuts which they say will force them to curtail vital local services.The Corte dei Conti, Italy's top public finance watchdog, has made a damning series of criticisms of the regional administration in Sicily, which has overseen a steady deterioration in the island's finances over the past decade.With an unemployment rate of 19.5%, almost twice the national average, Sicily is among the regions hardest hit by the recession but its public sector payroll has been constantly increased, particularly in the health sector.

NEWS, 01.06.2012.

Irish say yes to EU pact, now seek EU growth deal

 

Ireland's voters have agreed to ratify the European Union's deficit-fighting treaty with a resounding 60.3 percent "yes," vote final referendum results Friday showed, but government leaders and pro-treaty campaigners alike expressed relief rather than joy because of the stark economic challenges ahead.The treaty's approval, after weeks of nervousness in Dublin and Brussels, relieves some pressure on EU financial chiefs as they battle to contain the eurozone's debt crisis. But critics said the tougher deficit rules would do nothing to stimulate desperately needed growth in bailed-out Ireland, Portugal and Greece, nor stop Spain or Italy from requiring aid too.And a stern-faced Irish Prime Minister Enda Kenny agreed, stressing in his victory speech that Ireland's decision would strengthen his hand as he seeks, with many other European nations, to shift Germany in its stubborn resistance to more aggressive measures to boost growth through government spending."I have consistently argued that budget rules alone will not be enough to overcome the economic crisis that faces Europe. They must go hand in hand with a real and concrete growth program for Europe," Kenny said in a nationally televised press conference on the steps of his central Dublin office.Kenny said EU and European Central Bank chiefs must agree on a European-wide new system for managing the toxic banking debts that brought Ireland to the edge of bankruptcy in 2010 and now threaten to do the same to Spain. Ireland long has pressed EU partners, particularly Germany, in vain to permit partial writedowns of Irish banking debts that could ultimately cost Irish taxpayers an estimated (EURO)68 billion ($85 billion) and have already given Ireland the worst deficits in Europe.Kenny later spoke with German Chancellor Angela Merkel, Europe's leading champion of austerity. Merkel welcomed Ireland's willingness to vote yes to more cuts as an outcome that "deserves particular recognition and respect." And she mirrored Kenny's call for new growth initiatives, saying debt and deficit reduction "must go hand in hand with the strengthening of forces for growth and competitiveness in the economies of the eurozone. "German Foreign Minister Guido Westerwelle said all EU nations should follow Ireland's example and speedily ratify the treaty, which 25 nations signed in February and which is supposed to come into force by early 2013."The fiscal compact stands for long-term financial policy good sense. If all of Europe decisively commits itself to this course, we will be rewarded with new confidence," he said.The result of Thursday's referendum represented a surprisingly strong victory for Kenny, who courted unpopularity by insisting that Ireland already four years into a brutal austerity program that has slashed 15 percent from many workers' incomes had no choice but to vote in support of yet more cuts and tax hikes.And when the official result was announced in Dublin Castle, victorious campaign officials engaged in none of the cheers, shouts and hugs normally associated with the occasion."There was nobody from the `yes' camp jumping up and down," observed Gerry Adams, leader of the Irish nationalist Sinn Fein party, which campaigned against the deal.Government ministers emphasized that voters' anxiety about the parlous state of the economy with unemployment stuck on 14.3 percent and hundreds of thousands of households trapped in negative equity colored their every step on the campaign trail."The astonishing thing about this campaign was that lots of people voted yes with a heavy heart, and many voted no with a heavy heart. Both sides were really concerned about growth and employment," said Ireland's minister for social protection, Joan Burton, who has overseen cuts in many welfare payments.

Overall, about half of Ireland's 3.13 million registered voters participated in Thursday's referendum, a typical turnout in an officially neutral country that is constitutionally required to hold a referendum on each European treaty.Public rejection could have blocked Ireland from receiving new EU loans once its 2010 bailout money runs out next year. It also would have sent political shockwaves through other eurozone members, where anger against austerity and bank bailouts runs similarly high but citizens are denied the chance to vote on the treaty. The other 24 signatories are ratifying it through their parliaments.During the campaign, Kenny warned that rejection would mean even worse austerity, because Ireland would suffer more credit downgrades and lose its key EU source of funding.The treaty proposes that all members who ratify it should reduce their annual deficits to no more than 0.5 percent of gross domestic product. The current eurozone limit is 3 percent of GDP. Ireland is committed to cutting its way back to that level by 2015.Opponents of the treaty argued that the new 0.5 percent deficit limit would force Ireland to keep cutting until perhaps 2020, when greater state investment to stimulate the economy was required. The government countered that much would depend on whether Ireland could keep growing its economy against the tide of austerity.Ireland, unlike much of Europe, has recorded a faint pulse of growth over the past year thanks to strong exports by nearly 1,000 foreign high-tech companies based in Ireland. But the domestic economy  with consumers reducing their own debts and salting away savings after a decade of Celtic Tiger extravagance  has shrunk for four straight years.Ireland has posted the EU's worst deficits since 2009, including an EU-record 32.4 percent in 2010 and 13.1 percent last year. Both figures were greatly inflated by the exceptional costs of Ireland's decision to nationalize five of its six banks rather than see any collapse. That debt burden overwhelmed Ireland's national finances and pushed the nation into the bailout zone in 2010. Ireland's expected repayments to international bondholders and central banks, plus decades of related interest charges, represent (EURO)19,000 ($23,500) for every man, woman and child.

NEWS,10.04.2012.

North Korea readies for controversial rocket launch

 

Isolated and impoverished North Korea says it is ready to go ahead with its proposed long-range rocket launch in a move that has sparked immediate condemnation from South Korea and Russia and a plea from China, its main ally, for calm.The launch of the Unha-3 rocket, which North Korea says will merely put a weather satellite into space, breaches UN sanctions imposed to prevent Pyongyang from developing a missile that could carry a nuclear warhead."We are expecting to complete the assembly by today," said Ryu Kum-chol, vice director of the space development department of the Korean Central Space Committee."The launch of Kwangmyongsong-3 satellite is the gift from our people to our great leader, comrade Kim Il-sung, on the occasion of his 100th birthday, so this cannot be a missile test," he added.The launch, due between Thursday and next Monday, will coincide with the anniversary celebrations of the country's founder and North Korea says that it is its sovereign right to launch the rocket.The West says it is a disguised ballistic missile test by a country which walked out of so-called six-party disarmament talks three years ago.South Korea, which remains technically at war with the North after their 1950-53 conflict ended with a truce, not a treaty, warned Pyongyang it would deepen its isolation if it went ahead with the launch.Security sources in Seoul, citing satellite images, have said that North Korea is also preparing a third nuclear test following the rocket launch, something it did in 2009, a move bound to trigger further condemnation from the West."It is disappointing that the North is forcing its people to endure sacrifices with this provocative action and is bringing isolation and sanctions to itself from the international community," the South's Unification Ministry said in a statement. Russia, a former backer of North Korea which has boosted economic ties with Pyongyang recently, condemned the launch."We consider Pyongyang's decision to conduct a launch of a satellite an example of disregard for UN Security Council decisions," state-run news agency RIA quoted Russian Foreign Ministry spokesman Alexander Lukashevich as saying.The rocket will bisect a sea that separates South Korea and China and its flight path will take it towards the Philippines where a second stage of the rocket is due to come down in waters close to the archipelago.China, which backs North Korea economically and diplomatically, reiterated its pleas for calm and said it had "repeatedly expressed its concern and anxiety about the developments", Foreign Ministry spokesman Liu Weimin told a press briefing in Beijing.The prospect of a North Korean rocket launch has alarmed Japan, which was overflown by an earlier rocket and said it would shoot it down if it crossed its airspace."If North Korea launches a missile, Japan will consider the next step in cooperation with international society including the UN Security Council," Japanese Prime Minister Yoshihiko Noda said.Airlines have re-routed flights to avoid the rocket's path.

France's economy grinding to a halt

France's economy posted no growth in the first quarter and there are no signs of a strong recovery in activity in the coming months, according to a Bank of France survey today.In its monthly report, the Bank of France indicated that the euro zone's second largest economy avoided a recession, after it grew by 0.2% in the fourth quarter.However, it said that activity was likely to remain stable in the coming months, a picture confirmed by soft manufacturing data today from the INSEE national statistics office.The Bank of France said that its business sentiment indicator for industry was unchanged in March at 95, a 3-month low it reached in February.It noted that industrial activity improved, with rises in pharmaceuticals and chemicals, transport equipment and hi-tech goods. "Forecasts suggest that activity will remain stable in the short term," the bank said.Economists said that w ith fiscal tightening across Europe weighing on external demand for French goods and with rising domestic unemployment likely to peak next year above 10%, it was no surprise the growth outlook was weak."The figures are a little bit disappointing," said Michel Martinez, economist at Societe Generale in Paris, who forecasts modest 0.5% growth in France for the year as a whole."They are in line with the cyclical picture of the French economy which stalled in the fourth- and the first-quarter and where the recovery will be weak," he said. "You cannot have a tough fiscal adjustment over two years and expect strong growth at the same time."President Nicolas Sarkozy, who trails his Socialist rival in polls ahead of next month's crucial presidential runoff, has made cutting France's deficit a top priority. His government cut the deficit to 5.2% of GDP last year, below its target of 5.7%, and has pledged to balance the budget by 2016.The Bank of France said industrial capacity utilization was unchanged in March and remained below its long-term average. Order books were close to normal levels while inventories were slightly above target.For the services sector, meanwhile, the business sentiment level was also unchanged at 93, while the Bank of France said activity here had grown at a faster pace on the back of transport and engineering.In a separate survey, INSEE said that manufacturing output fell by 1.2% in February after slipping a revised 0.1% in January.For industry as a whole, output increased by 0.3%, in line with economists' forecasts, helped by a rise in gas and electricity consumption amid a cold snap.Industrial output rose a revised 0.2% in month-on-month in January, in line with the euro zone average."Industrial production has been on a downward slope since mid-2011," wrote Fabrice Montagne, an economist at Barclays Capital."We will need to see stronger signs in terms of business sentiment, demand and competitiveness before we can expect a clear upswing in the French industrial sector," he said.Economists said that the data confirmed the picture of an economy in the doldrums."Today's industrial production data support our forecast for flattish GDP in the first quarter," wrote Tullia Bucco, an economist at Unicredit in Milan.Insee had also forecast last month that France's 2 trillion euro economy would post no growth in the first quarter.For the last three months as a whole, manufacturing output fell by 1.1%. It stood 1.6% below its level of a year earlier.Hit by the closure of the Petit-Couronne plant, owned by insolvent oil refiner Petroplus, refining activity plunged by 13% in February.The Purchasing Managers' index (PMI) data last week showed the biggest decline in factory activity for 33 months in March, after briefly stabilizing in February.

NEWS,29.03.2012.

Spaniards strike against 'unstoppable' job reforms

Spanish workers have staged a general strike to protest against labour reforms which the government declared "unstoppable" but many ignored the action, fearing for their jobs in a country with the EU's highest unemployment rate.Factories across the nation were silent and ports closed, while television and transport were disrupted by the strike against the austerity policies of Prime Minister Mariano Rajoy - whom Spaniards elected by a landslide only four months ago.Police arrested a number of protesters in Madrid while small-scale violence flared in Barcelona, Spain's second city. Tourists were locked out of the Alhambra, a 14th-century Moorish palace in the southern city of Granada which is one of Europe's great cultural monuments.Strikers promised a wave of protests to confront Rajoy's conservative government over reforms making it cheaper for companies to fire staff and dismantling a nationwide system of collective pay bargaining."We don't have much hope, but this is just the beginning," said Trini Cuesta, a 58-year-old employee at a public hospital in Barcelona. "It's not just about labour reform, we're against policies that are provoking social and economic ruin. Social protests must rise."Spain is tipping into its second recession since the end of 2009 and some observers expect at least another million people to join already swollen unemployment lines. The jobless rate is already 23% and almost half of under 25-year-olds are out of work.Rajoy's government said it was committed to making labour reforms which it argues will help to reduce unemployment by making the labour market more efficient. "The agenda for reform is unstoppable," Labour Minister Fatima Banez said.Police presence was particularly heavy around parliament where politicians were putting in a longer work day than usual as Rajoy sought approval for five different measures, including funding for indebted local governments to pay suppliers.Spaniards have so far been tolerant of Rajoy's efforts to reform the labour market and meet strict European Union-imposed deficit goals to ensure it avoids a Greek-style debt crisis.But the general strike, the first since September 2010, showed that patience may be wearing thin. The largest union put support for the strike at 77% while the government said the work day was proceeding normally but gave no overall tally.Spain's blue chip index fell 0.87%, its eighth consecutive session of declines as concerns over the country's finances returned.There were pockets of violence in Barcelona, where protesters set garbage bins on fire and threw chairs from the famed outdoor cafes of Spain's second largest city onto the street, but no injuries were reported.Union members waving red flags gathered in major cities where they plastered stickers on shop windows reading "Closed for Strike", though many remained open for business.Police barricaded parliament and arrested 58 people in Madrid, many of whom were trying to stop people going to work.Many workers crossed the picket lines, saying they feared losing their jobs or unwilling to lose the average of around 100 euros which will be docked from the pay cheques of the strikers.While many Spaniards are fighting to preserve protection for their jobs, others are on short-term contracts of typically six months with little protection.These workers fear their employers could punish strikers by failing to renew their contracts when they expire, and give the job instead to one of the army of unemployed.Fewer than a fifth of Spanish employees are currently affiliated with the country's two biggest unions and many feel they don't represent the wider workforce."A lot of people actually blame the unions in part for the rigidity in the labour market and lack of competitiveness, so they aren't exactly in the position to rally a lot of people and the support for the strike reflects that," said David Bach, political analyst at IE business school in Madrid.

 However, union members are ready for a long fight. "This is the largest cut of (workers') rights since anyone can remember. There has to be a better way to get out of this crisis," UGT union employee Marta Lois, 40, said on Madrid's main street Gran Via, where protesters blocked traffic."Don't forget this is just the first major event of what is likely going to be a long year of demonstrations against government policies," Antonio Barroso, political analyst with Eurasia Group said.Rajoy said on Tuesday his administration would pass a "very, very, austere budget" on Friday. His goal of cutting the deficit this year to 5.3% of gross domestic product implies nominal cuts of at least 35 billion euros ($57 billion).The cuts are meant to keep borrowing costs down as well as working towards meeting the EU's 3% deficit limit next year, but some economists say they will deepen the looming recession.The strike halted overnight production at factories from Barcelona in the north to Cadiz in the south, with unions reporting full stoppages at General Motors Espana, Renault, ArcelorMittal and Acerinox.Transport employees provided a basic level of service, meaning one in four buses and about a third of metro and local trains were expected to run. Most domestic and European flights were grounded although long-haul services continued."We're offering the government a chance to start a different path (of reform) in search of wider consensus," Ignacio Fernandez Toxo, head of Spain's largest union Comisiones Obreras said. "If not there will be rising social conflict."Despite the promises to push on with reforms aimed at winning approval from Brussels, Rajoy's People's Party suffered a surprise setback in a regional election on Sunday, meaning he must measure his steps to avoid provoking wider discontent.A high turnout is expected at an evening march in Madrid that will end at the central Puerta del Sol square, cradle of last year's anti-austerity "Indignant" movement.National grid operator REE estimated electricity demand - a key indicator of economic activity - for Thursday as a whole would drop by 14.8% from Wednesday to 571 gigawatt-hours, a level comparable to a public holiday or a weekend.During the last general strike in September 2010, demand fell by 12.6% from the day before.