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,15.07.2012

Hollande says Peugeot must renegotiate layoff plan

French President Francois Hollande says that Peugeot must renegotiate a plan to lay off 8000 workers to lessen its social impact and accused the carmaker of lying over its intentions and making serious strategic errors.In a television interview yesterday, Hollande said a government rescue plan for the ailing car sector due to be announced on July 25 would include public incentives to encourage consumers to purchase French-made, environmentally friendly cars.He ruled out, however, a return to the scrappage subsidies introduced in the 2009 financial crisis by former conservative President Nicolas Sarkozy, which he said had cost the taxpayer dearly and had often been spent on foreign-made vehicles.However, he admitted he could not halt Peugeot's plant to stop production at the Aulnay assembly plant near Paris in 2014.Hollande, who won power in May with a promise to tackle high unemployment and halt France's steady industrial decline, acknowledged Peugeot had economic reasons for making the cuts.The company said last week its manufacturing arm is losing 200 million euros a month."However, the plan in its current condition is not acceptable. It must be renegotiated," Hollande said, adding he wanted to make sure voluntary redundancy packages or new jobs were found for all workers. "We want to open discussions so that there are no straight firings at Peugeot."Peugeot has so far said it will find jobs within the group for 1500 of the workers concerned, with a further 3600 workers offered voluntary redundancy until 2013.The Peugeot announcement came as Hollande faces scrutiny over billions of euros in tax rises to hit a deficit target this year - with the prospect of worse to come in 2013 - and struggles to fulfil a campaign pledge to bring down France's highest unemployment rate in 12 years.The shock announcement from Europe's second-largest carmaker last week revived memories of former Socialist Prime Minister Lionel Jospin's failure to halt Renault's closure of its Vilvoorde plant in Belgium after winning power in 1997.Jospin's admission "the state cannot do everything" is credited with helping to sink his 2002 presidential bid."The state will not stand idly by," Hollande said, asked if his government would follow Jospin's route.Hollande said the government had means of "exerting pressure" and could provide credit to ensure Peugeot stuck to its commitment to see Aulnay remains an industrial site.He dismissed a call from Peugeot Chief Executive Philippe Varin for the state to cut the heavy social charges weighing on labour costs, which the executive said made manufacturing uncompetitive."It's too easy to blame labour costs. There were bad strategic choices," Hollande said."There were delays in taking difficult decisions and shareholders who were too hungry for dividends when investment should have been the priority."Hollande's government has said it will consider steps such as lowering social charges on labour as part of a competitiveness review headed by former EADS Chief Executive Louis Gallois due to be completed in October.That will come too late, however, to defuse the current crisis in the car sector.The president accused Peugeot of misleading public opinion by concealing its plans until after presidential and legislative elections in May and June. A company spokesman declined comment."There was both a lie - this plan was not announced although it was already on the agenda - and a deliberate delay until after the elections," Hollande said.Prime Minister Jean-Marc Ayrault will announce incentives on July 25 for buying French vehicles as part of a package to support the sector, Hollande said."In France, we have an industry which has taken the lead in making clean vehicles and hybrid vehicles. We should make sure these type of vehicles have the advantage," he said.State and regional governments would buy these vehicles to give them a boost, Hollande said, while credit would be made available for research to boost industrial innovation."We will create a plan which costs as little as possible to the taxpayer and is as effective as possible," said Hollande.

 

France's Hollande vows to fight job cuts

President Francois Hollande marked Bastille day celebrations with a pledge to fight industrial layoffs and clean up French politics, after watching troops parade down the Champs Elysees as jets streamed the national colours overhead.The Socialist leader's first National Day since winning office in May was overshadowed by outcry at mass job cuts announced by carmaker Peugeot and a scandal over his private life threatening to undermine his image as "Mr Normal".Reviving the tradition of a July 14 television interview, scrapped by his predecessor Nicolas Sarkozy, Hollande said France had to make an "effort" to restore its public finances but ruled out the kind of painful austerity causing protests in Spain and Italy."My mission is to help France recover and give it a future. Jobs are my priority," Hollande said in the interview at navy headquarters overlooking the historic Place de la Concorde, where thousands went to the guillotine during the Revolution.Hollande, who pledged during his campaign to curb the highest unemployment level in 12 years, faces a major challenge after Peugeot said on Thursday it would axe 8000 jobs in France.Accusing the company's management of strategic errors and misleading the public over its intentions, Hollande said he could not accept the restructuring plan as it stood and promised public incentives to help French-made cars.During the interview he also said he had told his partner, journalist Valerie Trierweiler, and the wife of his four children, Segolene Royal, to end a public spat.The parade - which ended with parachutists landing before the presidential tribune - came as Paris struggles to pare back one of the highest levels of public spending in Western Europe to meet an EU deficit target of 3% of GDP next year.The government announced 7.2 billion euros in new taxes last week to plug a budget shortfall for this year and needs to find 33 billion euros in 2013 to meet its European deficit targets or risk unnerving financial markets."I knew the state of France before I inherited it. I am not going to pretend that I just discovered it," Hollande said.He said the government was looking at a raft of measures to fill the shortfall, including an increase in the CSG social welfare charge recommended by the state auditor this month, which would hit all households."I'm not going to announce today an extra tax for the majority of the French... A rise in the CSG is one of the things under study, among other measures," he said.With his popularity already hit by voters' fears over austerity, Hollande has also had to deal with simmering tensions between his partner, his four children and their mother, Socialist politician Royal.The affair flared this week when Thomas Hollande, his eldest son, told Le Point magazine he and his siblings wanted no contact with Trierweiler after she backed Royal's rival in a legislative election in the western city of La Rochelle in June.Royal said a tweet from Trierweiler in support of her opponent was partly to blame for her losing the seat, fuelling media reports of bitterness between the two women."Private matters should be handled privately and I told those close to me that they should scrupulously respect this principle," Hollande said in Saturday's interview, promising there would be no repeat of the incident, dubbed "tweetgate".Trierweiler sat in a separate tribune from Hollande to watch Saturday's two-hour parade under cloudy Parisian skies in the Place de la Concorde. Thousands of onlookers packed the tree-lined avenue, decked out in France's Tricolour flag, as troops, cavalry and tanks streamed past from the Arc de Triomphe.

 

European Union Working On $120 Billion Spanish Bailout

 

The European Union's bailout fund is working on a (EURO)100 billion ($120 billion) package to prop up Spanish banks, according to a report Saturday by German news weekly Der Spiegel.A confidential draft plan by senior officials at the European Financial Stability Facility proposes an initial (EURO)30 billion payment to Spain at the end of July, the magazine said.Of that, some (EURO)20 billion would go toward shoring up Spanish banks' short-term finances while another (EURO)10 billion would be reserved as a longer-term emergency buffer.Three further payments totaling (EURO)45 billion would be made in November and December of this year, and in June 2013, Der Spiegel said. A Spanish Economy Ministry spokeswoman declined to comment on the report.According to the report, up to (EURO)25 billion would also be made available to create a "bad bank" to buy up hard-to-sell debt.This would be in line with a draft memorandum of understanding agreed by finance ministers from the 17 eurozone countries, which suggests that part of Spain's bank bailout should involve the segregation of billions in problematic assets to an "external asset management agency" to clean up Spanish banks' balance sheets.Investors are becoming increasingly wary of placing money in Spanish banks, which are having to turn to the European Central Bank for financing. In June, Spanish bank borrowing from the ECB rose 17 percent from May. The accrued total as of the end of that month was (EURO)337 billion, 77 percent of all the money owed to the ECB and seven times the figure from June 2011.The government on Friday approved its latest package of measures aimed at cutting (EURO)65 billion ($79 billion) off the budget deficit through 2015, the biggest deficit-reduction plan in recent Spanish history. The sweeping austerity measures include wage cuts and tax increases for a country struggling under a recession and an unemployment rate of near 25 percent.

 

Chavez re-election team reaches out via Twitter

 

Venezuela's verbose Hugo Chavez is offering to send supporters his tweets to their mobile phones as the socialist president fights a vigorous opposition campaign across the Twitter-mad country ahead of an October 7 election.Chavez has had three cancer operations in the last year and his delicate health means he has not been able to travel anywhere near as much as his younger rival, Henrique Capriles.Instead, he has had to focus on making regular state TV appearances - usually for several hours at a time, almost every day of late - and pontificating via his @chavezcandanga Twitter account, which has nearly 3.2 million followers.The president's online persona is an important part of his team's strategy in an election battle that is shaping into the toughest fight of his political life.Spurred by an explosion in Twitter's popularity in Venezuela and annoyed at what he said was the opposition's domination of local electronic media, Chavez began tweeting in early 2010.His account quickly overtook one belonging to Globovision, the main opposition TV station, and he soon said he had needed to hire 200 people to help him read and respond to what he called an "avalanche" of messages from supporters, requests for help, and complaints about faulty services and corruption.Delighted with his cyber success, he even urged Cuba's Fidel Castro and Bolivia's Evo Morales to start tweeting too.The three men are arguably Latin America's most vocal left-wing critics of what they denounce as the US "empire."While the 57-year-old Chavez says he is completely cured of cancer, his recuperation means he has had to watch while Capriles, a 40-year-old former state governor, spent months crisscrossing the OPEC nation on a "house by house" tour.Most opinion polls still give Chavez a double-digit lead, and on Friday he launched a series of campaign events describing his recovery as "a miracle" and seeking to capitalize on the deep emotional ties that even his fiercest critics concede he shares with Venezuela's poor majority.The SMS service was unveiled late on Friday and is aimed at the many Venezuelans who have no easy access to the Web and would like to receive tweets by "el comandante" via SMS message."The initiative will (also) let people without Twitter accounts receive the messages," said state-run news agency AVN.Supporters who register at this Chavez's website can choose to receive his tweets in real time, or avoid being woken up by choosing just those he posts between 7 am and 10 pm. Chavez's number of followers - many of whom must have signed up at least partly out of curiosity about how the former soldier famed for his hours-long speeches works with a 140-character limit - currently puts him at 179th in the world, just behind Jamaican-American hip hop star Sean Kingston.By comparison, the top spot is held by singer Lady Gaga with more than 27 million followers. Capriles, on the other hand, has 1 million - about a third as many as Venezuela's president."Good morning, Patriotic World!" Chavez said in one fairly typical tweet on Saturday, adding that he was on his way to lead what would be another lengthy televised ceremony at a military base in Caracas. "Long live our Soldiers!"

NEWS,24.06.2012

Greece outlines plan to ease bailout burden

 

Greece wants tax cuts, extra help for the poor and unemployed, a freeze on public sector lay-offs and more time to cut its deficit under a plan likely to run into strong opposition at a European Union summit next week.The new coalition government's programme, reflected public pressure to ease the terms of a 130 billion euro bailout saving Greece from bankruptcy but only at the cost of harsh economic suffering.If implemented in full, the new programme would undo many austerity measures the country agreed in February to clinch the bailout package, its second since 2010.Euro zone partners have offered adjustments but no radical rewrite of the bailout conditions, with paymaster Germany particularly resistant to Greek calls for leniency.Greece's programme includes a call for the recapitalisation of the country's fifth-largest lender, ATEbank - a state-owned agricultural bank that EU sources said this month was among several lenders the European Commission wanted to be wound down. The finance ministry has denied that report.The programme, agreed by leaders of the three-party coalition after a June 17 election, faces its first test at a two-day EU summit starting next Thursday and sure to be dominated by the debt crisis that started in Greece and is now threatening to engulf Italy and Spain, the euro zone's third and fourth-largest economies, respectively.Inspectors from Greece's "troika" of lenders  the EU, European Central Bank and International Monetary Fund  were due in Athens on Monday Tuesday  to review the country's progress.Euro zone officials have said the bailout package should be revised only to reflect time lost on two elections since early May and a deeper than expected recession."The general target is for there to be no further reductions in wages or pensions and no more taxes," the Greek government programme said.It called for a cut in the 23-percent value-added tax (sales tax) rate for restaurants and farmers, a freeze on lay-offs in the bloated public sector and for unemployment benefit to be paid for two years rather than one.The government will also ask for two more years, until 2016, to cut its budget deficit to 2.1% of national economic output from 9.3% in 2011, an extension that would require extra foreign funding.The lowest income tax threshold should be raised, the document said, and the minimum wage  cut by 22 percent in February  revised in line with agreements between employers and workers.The programme also calls for the accelerated payment of 6 billion euros of government debt to suppliers.The coalition brings together the conservative New Democracy, Socialist PASOK and Democratic Left in an alliance that will face constant pressure from an opposition led by the radical leftist Syriza bloc.Led by charismatic ex-communist Alexis Tsipras, Syriza surged into second place in the election on a vow to tear up the terms of the bailout.Conservative Prime Minister Antonis Samaras, a Harvard-educated economist who switched from opposing the first bailout to reluctantly supporting the second, has promised to soften the terms without jeopardising Greece's place in the euro zone."Though the troika will be in Athens on Tuesday, the crunch test will be Thursday's EU summit," the centre-left Ethnos daily wrote in an editorial on Saturday.

Greece aims to stem layoffs - policy plan

 

Greece's new coalition government will seek to stem layoffs and extend by two years the application period of a tough recovery plan imposed in return for EU-IMF loans, an official document said on Saturday.The policy document released by the conservative-led coalition government said an upcoming effort to "revise" Greece's EU-IMF bailout deal in talks with creditors includes "the extension of the fiscal adjustment by at least two years" to 2016.The aim would be to meet fiscal goals "without further cuts to salaries, pensions and public investment," it said, announcing a freeze on further civil service layoffs and a boost to unemployment benefits."The aim is to avoid layoffs of permanent staff, but to economise a serious amount through non-salary operational costs and less bureaucracy," the document said.The new government said it wanted to review minimum wage cuts and measures taken earlier this year to facilitate private-sector layoffs, arguing that collective labour agreements would "return to the level defined by European social law" and what Europeans have agreed on.It said employers and unions should be allowed to set the private sector minimum wage, which was cut by 22 percent to 586 euros ($736) in February among additional austerity measures taken to clinch a new rescue deal.Greece remains under intense international pressure to implement the terms of the EU-IMF bailout package that has kept the indebted country's economy afloat for two years.European Commission, IMF and European Central Bank inspectors return to Athens on Monday to resume discussions suspended because of Greece's two-month political deadlock brought to an end by elections last Sunday.

NEWS,23.05.2012.

Euro zone to prepare for Greek exit scenario say sources

 

Each euro zone country will have to prepare a contingency plan for the eventuality of Greece leaving the single currency, euro zone sources said today.Officials reached the consensus on Monday afternoon during an hour-long teleconference of the Eurogroup Working Group (EWG).As well as confirmation from three euro zone officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.The EWG consists of officials who prepare meetings of finance ministers and also form the board of the temporary bailout fund, the European Financial Stability Facility (EFSF).It consists mostly of deputy finance ministers and senior treasury officials."The EWG agreed that each euro zone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro," said one euro zone official familiar with what was discussed on the call."Nothing was prepared so far on the euro zone level for now, for fear of leaks," the official said.A second official confirmed the EWG agreement. The situation in Greece, which faces elections on June 17, seems certain to be discussed at an EU summit later today.The Greek finance ministry denied in a statement that there was agreement to prepare contingency plans."The Ministry of Finance categorically denies the reports stating that during the teleconference of the Euro Working Group on May 21st 2012, it was agreed that each eurozone country should prepare contingency plans for the potential consequences of a departure of the Hellenic Republic from the single currency area," the statement said.But Belgian Finance Minister Steven Vanackere, asked by reporters ahead of the EU summit, said:"All the contingency plans (for Greece) come back to the same thing: to be responsible as a Government is to foresee even what you hope to avoid.""We must insist on efforts to avoid an exit scenario but that doesn't mean we are not preparing for eventualities. I believe many countries have their contingency plans for the things they want to avoid at all cost, like terrorist attacks, and to say that we don't have a contingency plan would be irresponsible," Vanackere said.The Greek election, the second in two months, is widely seen as a referendum on whether the debt-laden country should stay in the euro zone and undertake painful reforms and austerity, or leave and try its luck with its own currency.Polls suggest the vote could go either way.50-billion-euro goodbye? The document detailed the potential costs to individual member states of a Greek exit and said that if it came about, an "amiable divorce" should be sought.It also said that if Greece were to decide to leave, the EU/IMF could give it up to 50 billion euros to ease its path.The document said Athens would bear huge costs if it decided to abandon the currency, while other euro zone countries would have more limited costs.But the paper said that the risk of knock-on effects that could hit other euro zone countries under market scrutiny now was underestimated."The markets will definitively distrust the euro," the paper said.Germany's Bundesbank said yesterday a Greek exit from the euro would be "manageable".The German central bank also said euro zone states should have a say on further payments of aid to Greece under its 130 billion euro bailout programme.So far the euro zone has disbursed 38.4 billion euros from the second bailout programme to Greece.The emergency lending is linked to conditions of tough reforms, which most Greeks oppose.The euro zone also lent Greece 34.5 billion euros to help Athens complete a debt restructuring in which private investors had to write off almost three quarters of what Greece owed them."Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes," the Bundesbank said."This jeopardises the continued provision of assistance. Greece would have to bear the consequences of such a scenario."