NEWS,09.11.2012

obama 'open to compromise' to avoid cuts

Newly re-elected President Barack Obama has offered to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls.He spoke just hours after John Boehner, the Republican Speaker of the House of Representatives, had repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the fiscal crisis.In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan and invited congressional leaders to meet with him next week."I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said.The "fiscal cliff" of steep government spending cuts and tax increases due to be implemented under existing law in early 2013 is Obama's most pressing challenge after winning a second term.Aimed at cutting the federal budget deficit, the planned measures could take an estimated $600 billion out of the economy and severely hinder economic growth.While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans."I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach," he said.Earlier, Boehner called on Obama to play a more active role in addressing the issue and urged the president to take the lead in negotiations."This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.While disagreeing on immediate measures to avert the looming crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of US tax laws.The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9%. The rate is now 7.9%.But it also warned of a crisis ahead if the United States does not stem the growth of its exploding deficit.Partisan squabbling over the budget crisis will also harm the US economy, according to a strong majority of economists polled by Reuters after Tuesday's presidential election.

Argentines flood streets in anti-government protest

Hundreds of thousands of Argentines flooded the streets of the country's biggest cities on Thursday in a broad protest against President Cristina Fernandez's interventionist policies and combative style.The center-left leader won easy re-election a year ago but her approval ratings have slid since. Her government has virtually banned dollar purchases and it limited imports this year, worsening a steep economic slowdown.High crime, inflation of roughly 25% a year, and a possible bid by government allies to reform the constitution to allow Fernandez to run for a third term are also stoking unrest, particularly among middle-class Argentines."We've taken to the streets because we're sick of crime and having our pockets picked. Inflation is killing us, our pensions can't keep up," said Daniel Gonzalez, 70, a retired teacher.Thursday's pot-banging protests conjured memories of the demonstrations staged by angry savers, housewives and students during Argentina's 2001-02 economic and political crisis.Protesters in neighborhoods throughout Buenos Aires waved signs demanding freedom, transparency and an end to crime and corruption. A spokesman for the city's Justice and Security Ministry estimated 700,000 people were rallying in the capital.A similar, smaller protest was staged just two months ago.Local television showed rallies in other cities, including Rosario, Cordoba and Salta. The demonstrations were organised through social media and not by any one political party.Some Argentines even took to the streets abroad with hundreds of demonstrators gathering outside the country's consulates in Italy, Spain and the United States."We're protesting against Cristina's government so she listens to us. She's not infallible like she wants to seem. With this arrogance we won't get anywhere, we're already quite isolated (in the world) because of her policies," said Pedro Dominguez, a 56-year-old doctor protesting in Buenos Aires.Fernandez's government has angered trading partners with import curbs and it riled Madrid when it seized control of energy company YPF from Spain's Repsol earlier this year. The country still has outstanding debts dating back to a financial meltdown a decade ago.Critics say a government drive to break up the media empire run by Grupo Clarin is an assault on free speech. But supporters of the anti-monopoly law that is being enforced say officials are democratising the airwaves.Fernandez won 54% of votes in October 2011, largely due to an economic boom, job growth and expanded social programmes. Her government spends heavily to stoke high economic growth and backs big wage hikes that tend to mirror inflation.Several government officials have been dismissive of the protests and accused organisers of being on the far right.Fernandez told supporters on Wednesday that Argentines enjoyed more freedom of speech than ever before."If there's a sector that is demanding certain things, they have to stand up and say this clearly. Now, please, don't anyone think that I'll start contradicting my own policies," she said.The president's approval rating edged up to 31.6% in October, up 1 percentage point from a month earlier, while her rejection rating dipped slightly to 59.3%, according to a recent poll.Other polls have given her higher approval ratings but they also show a decline of 10 to 15 percentage points this year."The government and Cristina will emerge even weaker than they were (after the protests) but the opposition will show its impotence and its inability to channel these demands," said Sergio Berensztein, director of the Poliarquia political consulting firm.Under the constitution, Fernandez cannot run for a third consecutive term in 2015. Local media report her congressional allies may try to reform the country's charter to change this, but the government has not confirmed any such plan.For now, no opposition leader poses a real challenge to her and the ruling Peronist party still has strong support in the heavily populated working-class outskirts of Buenos Aires."Cristina won with 54% of votes and if there were an election today, she would win again because there are no opposition candidates," said Cesar Pacheco, a 62-year-old shipbuilder protesting outside the presidential palace.

Iranian jets fired on US drone in Gulf

The Pentagon revealed on Thursday that two Iranian fighter jets fired on an unarmed US Predator drone in the Gulf last week but the aircraft was not hit, in an incident that underscored tensions in the region.The incident occurred on 1 November - less than a week before America's presidential election - but the Pentagon kept it quiet until reports of the confrontation leaked out."They intercepted the aircraft and fired multiple rounds," spokesperson George Little told a news conference.The Su-25 Frogfoot fighters, much faster than the slow-moving turboprop drone, fired at least twice and made two passes, he saidIt was unclear whether the Iranians intended to warn off the unmanned drone but Little said: "Our working assumption is that they fired to take it down."The confrontation threatened to derail diplomatic efforts to defuse a mounting crisis over Tehran's nuclear programme, amid a shadow war of cyber attacks, bombings and assassinations.Tough new sanctions led by Washington are squeezing Iran's economy, while the United States and Israel are accused of staging cyber sabotage on Tehran's uranium enrichment plants.The US military drone was "never in Iranian air space" and came under fire from the fighter jets off the Iranian coast over international waters, Little said.The robotic Predator aircraft was conducting "routine surveillance" and the United States has told Iran it has no plans to suspend the flights, he said."The United States has communicated to the Iranians that we will continue to conduct surveillance flights over international waters over the Arabian Gulf consistent with longstanding practice and our commitment to the security of the region," he said.In a warning to Tehran, the Pentagon spokesperson said the United States was prepared to safeguard its forces."We have a wide range of options, from diplomatic to military, to protect our military assets and our forces in the region and will do so when necessary," Little said.The MQ-1 drone was pursued further by the Iranian warplanes but was not fired on again, he said.The Predator later returned safely to an unspecified military base in the region following the incident.The Predator known as the weapon of choice in America's bombing campaign against al-Qaeda in Pakistan was intercepted about 16 nautical miles off the Iranian coast, beyond the Islamic Republic's territorial waters that extend 12 nautical miles off the country's shore.Iranian military speedboats have sometimes swarmed US warships in the Gulf and the strategic Strait of Hormuz, a vital waterway for the world's oil, but the incident last week was the first involving an American drone in a confrontation with Iranian aircraft, officials said.Tensions over Iran's nuclear ambitions prompted the United States to bolster its military presence around the Gulf over the past year, deploying two aircraft carrier battle groups in the area at all times, a squadron of stealthy F-22 fighters to the United Arab Emirates and more minesweeper ships.With America's drawn out election campaign finally over, analysts had predicted President Barack Obama might have more leeway to pursue diplomacy with Iran. But the encounter with the Iranian fighter jets served as a reminder that a single incident or misunderstanding could trigger conflict.A new round of talks between Iran and six world powers, the first since June, is expected by the end of the year or in early 2013.Iran insists its nuclear programme is peaceful and has made clear any deal with the major powers has to offer relief from crippling sanctions.Israel meanwhile maintains time is running out as Iran expands its uranium enrichment work, with Prime Minister Benjamin Netanyahu suggesting his country may stage a unilateral strike next year if Tehran continues on its present course.At the State Department, officials unveiled yet more sanctions on Iran, targeting the communications minister and the culture ministry among others for censoring the media and the internet.

NEWS,21.06.2012

Auditors: Spanish banks need up to $78BN

Spain's troubled banks could need as much as (EURO)62 billion ($78.76 billion) in new capital to protect themselves from economic shocks, according to independent auditors hired by the government to assess the country's struggling financial sector.The Spanish government will use the auditors' report as the basis for their application for a bailout loan from the 17 countries that use the euro.Announcing the reports' findings Thursday, Deputy Bank of Spain Governor Fernando Restoy noted that this worst-case scenario was far below the (EURO)100 billion ($127.04 billion) loan offered by eurozone finance ministers two weeks ago.Spain's banking sector is struggling under toxic loans and assets from the collapse of the country's property market in 2008. Concerns that Spain's economy is so weak that it could not afford the cost of propping up its banks has sent its borrowing costs soaring to levels not seen since it joined the European single currency in 1999. The worry is that Spain could soon find itself unable to finance its debts by itself and join Greece, Ireland and Portugal in seeking a rescue loan for not just the banks but the whole country.The stakes are huge: Spain is the eurozone's fourth-largest economy and would seriously hit the bloc's finances should it need bailing out. The country is struggling through a recession with a 24.4 percent jobless rate. On top of this, government's main customers at its debt auctions are Spanish banks  the sector now being bailed out. In a sign of how reluctant the markets are to invest in Spain, the country had to pay sharply higher interest rates to raise (EURO)2.2 billion ($2.8 billion) in a bond auction Thursday.The audits of Spain's lenders, carried out by consultancies Roland Berger and Oliver Wyman, covered 14 banking groups that account for 90 percent of the sector in Spain. The country will use the reports' findings to decide how big a bailout loan to ask for.Restoy and Deputy Economy Minister Fernando Jimenez Latorre declined to outline individual banks' needs.In the auditors' stress test for the worst-case economic scenario  a fall in gross domestic product of 6.5 percent over the period 2012-2014  most of the banks were deemed to be in a "comfortable" position, Restoy said."We're not talking about the imperative capital necessities of the banks. We're not talking about someone urgently needing such and such an amount of capital to deal with their obligations," said Restoy. "We're talking about the capital that would be needed if we were to see a situation of extreme tension which is very unlikely to come about.""We should keep in mind we are not talking about how much capital an entity needs to survive. We're talking about how much capital an entity will need to confront a situation of extreme stress," he added.Economy Minister Luis de Guindos, in Luxembourg with eurozone colleagues to discuss Spain's aid request, said a formal petition would be made within few days. Eurozone finance ministers offered Spain a bailout loan of up to (EURO)100 billion on June 9. The terms of the loan  for which Spain, rather than banks, will ultimately be responsible for  still have to be negotiated.A more thorough series of audits by four other companies is scheduled to be completed by the end of July.Oliver Wyman Inc, gave a worst-case range of (EURO)51 billion-(EURO)62 billion in new capital needs while Roland Berger Strategy Consultants GmbH gave a single figure of (EURO)51 billion.The release of the audits Thursday will probably not eliminate market nervousness about Spain because more thorough audits of the nation's banks are now being conducted and those results are not expected until September, said Mark Miller, an analyst with Capital Economics in London."At face value it looks as if there is a reasonable safety margin given that up to (EURO)100 billion is potentially available," he said. "Having said that, the extent of the economic situation in Spain could even deteriorate beyond what is being described as an adverse scenario."Some investors will likely still be nervous over whether the auditors' reports discovered most if not all of the toxic assets on the balance sheets of Spain's banks, Miller said. And their fears are compounded by concerns that Greece might still end up having to leave the single currency, further destabilizing the eurozone and especially Spain.The results of the audits are good news for Spain because both companies came up with similar numbers and the overall figures were lower than some estimates of the banking sector's recapitalization needs, said Gayle Allard, an economist with Madrid's IE Business School."I think it's a fantastic result because there was talk of needs of (EURO)70 billion to (EURO)80 billion and that the loan could have been for (EURO)100 billion," she said.Investors could still easily find something to scare them about the results, Allard said, "but I don't think there's any reason to do so."She added: "The audits have come in better than anyone has expected, there's still some uncertainty, but if both of them are coming to the conclusion of those numbers we've got to be in the ballpark."

Eurozone Crisis Causing 'Deeper And More Broad-Based' Economic Downturn

The downturn in the euro zone's private sector is becoming entrenched, business surveys showed on Thursday, as falling new orders and employment levels dent confidence.June is the fifth consecutive month activity across the 17-nation bloc has declined, dragging down heavyweights Germany and France and likely increasing calls for the European Central Bank to take action to support the economy.Markit's Eurozone Composite Purchasing Managers' Index, a combination of the services and manufacturing sectors and seen as a guide to growth, held steady at 46.0 this month, the lowest since June 2009 when the bloc was mired in a deep recession.That was better than a slide to 45.5 predicted by economists but the index has been below the 50 mark that divides growth from contraction in all but one of the last 10 months."It is a worryingly steep downturn we are seeing and it is spreading from the periphery, which has been falling at an increased rate, through to Germany. It is becoming deeper and more broad-based," said Chris Williamson, chief economist at Markit.The data pointed towards a second quarter contraction of around 0.6 percent, Markit said.Having held steady at the start of the year, the bloc's economy will contract 0.2 percent in the current quarter and narrowly escape recession by stagnating again in the next, according to economists.While the ECB is not seen cutting interest rates from their record low of 1.0 percent anytime soon, a growing and significant minority are saying the bank will be forced to act as the outlook worsens.The danger of Greece crashing out of the euro zone eased after pro-bailout parties won weekend elections, but risks are mounting that Spain, the euro zone's fourth-largest economy, will need a full-blown international rescue.The two-and-a-half year old crisis has hobbled the global economy, and world leaders meeting in Mexico piled pressure on the euro zone to move towards a fiscal and banking union to fix the crisis that now threatens to engulf Spain.With uncertainty reigning, optimism among survey participants dwindled to its lowest level since March 2009. The business expectations index for services firms slumped to 50.8 from May's 57.4, the biggest one month drop since the aftermath of the Lehman Brothers collapse in late 2008."Companies are getting increasingly rattled by the crisis that is engulfing the region, and there are clear knock-on effects for the real economy," Williamson said.COUNTING THE COSTThe PMI for the dominant service sector nudged up to 46.8 from May's 46.7, beating expectations for 46.4, but chalking up a fifth straight sub-50 reading.It was a similar picture in the manufacturing sector, which drove a large part of the bloc's recovery from the last recession, where activity declined for the 11th straight month.Its 44.8 reading was the lowest since June 2009 and missed the 44.9 forecast. The output index for the sector fell to 44.4 from 44.6, the lowest since May 2009.And things are unlikely to improve anytime soon as composite new business declined for the 11th month, with the index coming in at 45.2, just up from May's 44.6. The survey also showed that firms have been running down old orders for a year.To reduce costs, and giving an indication of their prospects, factories reduced headcount for the fifth month, with the employment sub-index falling to 46.5 from 47.1, its lowest since January 2010."It's a sign that companies are expecting things to get worse and not better," Williamson said.Earlier data from Germany, Europe's largest economy, showed its manufacturing sector contracted at its fastest pace since June 2009 while its service sector barely expanded, posting its lowest reading in seven months.In neighbouring France activity declined in both sectors, albeit it at a more moderate pace than last month.

NEWS, 10.06.2012.

Euro zone agrees to lend Spain up to $162b

 

Euro zone finance ministers have agreed to lend Spain up to 100 billion euros ($162 billion) to save its stricken banks and try to avert a broader financial catastrophe.Fellow finance ministers in the 17-nation euro zone accepted a plea from Spain in a statement released after a conference call lasting around two and a half hours.The Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts."The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to 100 billion euros in total," Eurogroup said in a statement.Spain said it wanted aid for its banks but would not specify the precise amount until two independent consultancies Oliver Wyman and Roland Berger - deliver their assessment of the banking sector's capital needs some time before June 21."The Spanish government declares its intention to request European financing for the recapitalisation of the Spanish banks that need it," Economy Minister Luis de Guindos told a news conference in Madrid.He said the amounts needed would be manageable, and that the funds requested would amply cover any needs.A bailout for Spain's banks, beset by bad debts since a property bubble burst, would make it the fourth country to seek assistance since Europe's debt crisis began.With the rescue of Greece, Ireland, Portugal and now Spain, the EU and IMF have now committed around 500 billion euros ($811b) to finance European bailouts.Washington, which is worried the euro zone crisis could drag the US economy down in an election year, welcomed the announcement."These are important for the health of Spain's economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area," Treasury Secretary Timothy Geithner said.Heated debate Officials said there had been a heated debate over the International Monetary Fund's role in Spain's bank rescue, which Madrid wanted kept to a minimum. It will not provide any of the money.In the end it was agreed that the IMF would help monitor reforms in Spain's banking sector, while EU institutions would ensure Spain stuck to its broader economic commitments.IMF Managing Director Christine Lagarde said the euro zone's plan was consistent with the IMF's estimate of the capital needs of Spain's banks and should provide "assurance that the financing needs of Spain's banking system will be fully met".Sources involved in the talks said there had also been pressure applied on Madrid to make a precise request right away, but Spain had resisted.Euro zone policymakers are eager to shore up Spain's position before June 17 elections in Greece which could push Athens closer to a euro zone exit and unleash a wave of contagion. Spain's auditors could report back after that date.Nonetheless, analysts said financial markets may be calmed by the announcement when they reopen on Monday."The figure of up to 100 billion ($162 billion) is more encouraging and pretty realistic; it's an attempt to cap the problem," said Edmund Shing, European head of equity strategy at Barclays."The issue, however, is there is still a lack of detail about where the money's coming from, which is crucial. The market will treat it with some caution until they see how it will be funded."The Eurogroup said the funds could come from either from the euro zone's temporary rescue fund, the EFSF, or the permanent mechanism, the ESM, which is due to start next month. Finland said that if money came from the EFSF, it would want collateral.EU sources said there was a preference to channel money to Spain through the ESM, rather than the EFSF. Under the ESM, an approval rate of 90% or less is needed to trigger aid, and the fund also has more flexibility in how it operates."That's why it's so important that the ESM ... be ratified quickly," German Finance Minister Wolfgang Schaeuble said.The Spanish government has already spent 15 billion euros ($24b) bailing out small regional savings banks that lent recklessly to property developers. Spain's biggest failed bank, Bankia, will cost 23.5 billion euros ($38b) to rescue and its shareholders have been wiped out."Whatever the formula being used, we need to say two things: first the innocent should not suffer for the guilty, second public money should come back to public coffers," said Socialist opposition chief Alfredo Perez Rubalcaba after speaking with Prime Minister Mariano Rajoy on Saturday morning.Light conditions The race to resolve the banks' troubles comes after Fitch Ratings cut Madrid's sovereign credit rating by three notches to BBB, highlighting the Spanish banking sector's exposure to bad property loans and to contagion from Greece's debt crisis. It said the cost to the Spanish state of recapitalising banks stricken by the bursting of a real estate bubble, recession and mass unemployment could be between 60-100 billion euros ($97-162b). Italy could yet get dragged in too. Its industry minister, Corrado Passera, said the economic situation in Italy had improved since the end of 2011, but remained critical. "Europe was more disappointing than we had expected, it was less capable of tackling a relatively minor problem such as Greece," Passera told a conference on Saturday.While Spain would join Greece, Ireland and Portugal in receiving a European financial rescue, officials said the aid would be focused only on its banking sector, without taking the Spanish state out of credit markets.That would be crucial to avoid overstraining the euro zone's rescue funds, which would struggle to cover Spanish government borrowing needs for the next three years plus possible additional assistance for Portugal and Ireland.Conditions in the plan did not appear to add to the austerity measures and structural economic reforms which Rajoy's government has already put in place."Since the funds being asked for are to attend to financial sector needs, the conditionality, as agreed in the Eurogroup meeting, will be specifically for the financial sector," de Guindos said.EU and German officials have cited national pride in the euro zone's fourth largest economy as a barrier to requesting a full assistance programme.The European Commission and Germany both agreed in principle last week that Spain should be given an extra year to bring its budget deficit down below the EU limit of 3% of gross domestic product because of a deep recession.The Eurogroup also said money could be funnelled to Spain's FROB bank fund although the government would "retain the full responsibility of the financial assistance".Irish Finance Minister Michael Noonan said the funds would be provided through the EFSF or ESM at the same interest rates which apply to funds provided to other bailout countries.

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."

NEWS,08.03.2012..

Greece seals bond swap deal

Greece closed a bond swap offer to private creditors today after clearing the minimum threshold of acceptance to push the deal through, moving closer to unlocking funds it needs to avoid a dangerous debt default. Government officials said before the final deadline for declaring interest passed that more than 75% of eligible bonds had already been committed. The biggest sovereign debt restructuring in history will see bond holders accept losses of some 74% on the value of their investments in a deal that will cut more than 100 billion euros from Greece's crippling public debt. Preliminary results from the offer are expected to be announced officially at the weekend before a conference call with euro zone finance ministers in the afternoon. One of the chief negotiators for the bondholders, Charles Dallara, forecast a "very high" final take-up, though he was unsure if it would hit the 90% Greece is aiming for. Athens had said that it would abandon the deal if it did not receive at least 75% participation in the offer and it required two-thirds take-up to deploy a legal device to force recalcitrant creditors to accept the terms. The private sector involvement (PSI) deal is a key element in a broader international bailout aimed at averting a chaotic default by Greece and a potentially disastrous banking crisis across the euro zone. The European Union and International Monetary Fund have made a successful bond swap a pre-condition for final approval of the 130 billion euros ($170 billion) bailout agreed last month.” If all goes well, tomorrow we will be able to announce that a debt burden of 105 billion euros has been lifted from the Greek people," Venizelos told parliament earlier in the day. "For the first time we are cutting debt instead of adding to it.” Despite the optimism, the deal will not solve Greece's deep-seated problems and at best it may buy time for a country facing its biggest economic crisis since World War Two and staggering under debt equal to 160% of its gross domestic product. However financial markets rose strongly as the threat of an immediate and uncontrolled default receded. Bank stocks rose sharply and the risk premium on Italian and Spanish government bonds fell as investors hoped a Greek deal would curb the likelihood of any contagion spreading to other weaker euro zone economies. Euro zone ministers could decide whether to clear the overall bailout package in a conference call this weekend although they may leave the final decision until a face-to-face meeting on Tuesday. Greece must have the funds in place by March 20 when some 14.5 billion euros of bonds are due, which it cannot hope to repay alone. With over 75% take-up secured, well above the required two thirds threshold, Athens should be able to apply collective action clauses (CAC) imposing the deal on all holders of 177 billion euros in bonds regulated by Greek law.Venizelos is expected to discuss that option on the euro zone ministerial call over the weekend. Athens faces a more complex problem with some 18 billion euros in bonds regulated under international law with a number of hedge funds expected to try to fight a deal in the courts. It also remains to be seen whether credit default swaps (CDS) which some investors have taken as insurance against a forced restructuring of the debt will be paid out. Greece has staggered from deadline to deadline since the crisis broke two years ago and several of its international partners have expressed open doubts about whether its second major bailout in two years will be the last. Underlining the severe problems facing Greece after five years of deep recession, data on Friday showed unemployment running at a record 21% in December, twice the euro zone average, with 51% of young people without a job. There has been growing resentment over the austerity medicine ordered by international creditors which has compounded the pain from a slump which has seen the economy shrink by a fifth since 2008.But Greece, totally reliant on international support to stave off bankruptcy, has also infuriated both the EU and the IMF with its repeated failure to push through promised reforms.” We have shown a lot of solidarity with Greece," German Finance Minister Wolfgang Schaeuble said late on Wednesday. "Everyone knows that the real problems of Greek society are in Greece and not abroad."

NEWS,25.01.2012

            The $100 billion question of 2012

IF it ever happens, Facebook will be the frenzied float of 2012, with a possible valuation of $100b (£64.4bn).
But as Mark Zuckerberg considers the options on whether to publicly list the social media site which has 800m users, senior technology figures are asking how much Facebook will learn from the flotation of another internet giant in 2004. The question on everyone’s lips is will Facebook “do a Google” – largely shunning the Wall Street banking community and creating a retail offer via an auction?
Facebook is considering a flotation in New York that would raise about $10bn (£6.5bn) and value the company at $100bn, making it the largest initial public offering (IPO) by an internet company in history and one that’s likely to be accompanied by a record amount of hype.
Should anything close to these numbers be reached, an IPO will make Zuckerberg one of the world’s richest men and many of Facebook’s 3,000 employees exceedingly wealthy. “Zuckerberg has sought to delay an IPO for as long as possible.”      

As 2012 begins, the clock has almost stopped ticking for Facebook’s 27-year old founder to delay further.
Facebook will have to disclose its financial results by the end of April to comply with a US regulation requiring any company with more than 500 shareholders to do so.
While an IPO isn’t a legal requirement of disclosing results, most expect a Facebook float to follow shortly after the company opens its results up to the world.
Whatever a flotation means for Facebook’s long-term future, the company’s far more pressing challenge will be to execute the IPO without any hitches. That’s where David Ebersman, who joined Facebook as its chief financial officer from US biotechnology company Genentech in 2009, stepped in.
The early noises suggested that a Facebook IPO would consign Wall Street banks to a supporting role at best, echoing what Google did almost a decade earlier.
Facebook isn’t yet believed to have picked advisers, and Ebersman is said to have drafted the S-1 registration form, a critical document usually produced by banks, that doubles as a disclosure form for regulators and a marketing brochure for the company selling shares.
“There’s a tendency in the aggregate for Silicon Valley to be sceptical and cynical about Wall Street,” says Lise Buyer, who helped Google organise its IPO when she worked there and now advises companies that are going public on their relations with banks. “A banker’s seal of approval can help persuade an investor but if you’re Facebook you don’t need that.”
The muscle that Facebook brings to the table - the users themselves and revenues estimated to be close to $4bn this year - has led to predictions that Facebook might follow the example Google set in 2004 and sell shares by auction.
The idea, in part, would be to open the sale up to retail investors and sell the shares at a price that reflected true demand, rather than engineering a first day surge for those investors – who are also often clients of the banks – lucky enough to buy the shares at the IPO.
As speculation intensifies about when Facebook will file its S-1 – the moment when the public starting gun on the IPO process is fired – there would be considerable risks in completely avoiding Wall Street.
For a start, Google’s flotation is not seen as an unequivocal success. Google’s shares surged almost 20pc on the first day of trading, prompting accusations the auction system failed to accurately match the amount of shares sold with demand from investors.
Also, Facebook has already used banks to raise funds. In December 2010, Goldman Sachs drummed up $1bn for the company from its wealthiest clients. Even those technology bankers who believe the IPO process needs improving say you need very strong motivation to go public using a system every banker on Wall Street is hoping blows up.
“If you begin to introduce that [the auction] as a mechanism, you erode the value that Wall Street thinks it adds,” said Eric Risley, who was a technology banker at Bank of America and is now a partner at boutique adviser Architect Partners in Silicon Valley. “Wall Street was very pleased that the Google auction failed.”
It will be a surprise if Sheryl Sandberg, Facebook’s chief operating officer, doesn’t use her annual trip to the World Economic Forum at Davos at the end of the month to meet the Wall Street bankers who will also be at the gathering of business leaders in the Swiss ski resort.
The fees generated from taking technology companies public was a rare bright spot for Wall Street in 2011, with Morgan Stanley, Bank of America, JPMorgan Chase and Goldman Sachs making up the four biggest earners, according to Dealogic.
But analysts say that the flotation of video game pioneer Zynga in early December holds cautionary lessons for Facebook. Best known for the games Farmville and Cityville that are played on Facebook, Zynga’s shares ended their first day down 5pc and have yet to reach the $10 mark they were sold for.
Some put the blame on Zynga trying to sell too many shares. It sold 15pc of its stock, almost double the amount offered by professional networking site Linked-In last May. LinkedIn’s shares are now 40pc higher than the $45 they were first sold for.
“A busted Facebook IPO that trades underwater would seriously harm Facebook’s momentum and reputation, with everyone from major advertising agencies to valuable talent Facebook wishes to hire,” says Sam Hamadeh, managing director of PrivCo, a US firm that analyses privately held companies.