NEWS,26.07.2012

G20 Tax Evasion Crackdown Yields Results But Challenges Remain

 A global campaign to tax trillions of dollars hidden in offshore tax havens has made revolutionary progress, an official leading the drive said, rejecting suggestions that the super rich are running rings around Western authorities.Pascal Saint-Amans, director of a unit at the Organisation for Economic Cooperation and Development, also cast doubt on estimates that the havens are illicitly sheltering wealth equivalent to several hundred times the fortune of Bill Gates.Leaders of the G20 group of leading Western and developing nations launched the campaign three years ago, aiming to claw back billions in lost tax revenue at a time when many governments are trying to cut huge budget deficits.Saint-Amans said his gut feeling was that before the G20's initiative at its 2009 London summit, people could hide their wealth in offshore havens without any risk of legal reprisals."Now you are at risk and that's a major change. That's a revolution," Paris-based Saint-Amans told in a telephone interview. Even if money is transferred abroad, rules improving transparency have made it easier for the taxman to find it, said Saint-Amans, whose unit is tasked with leading the Western efforts to fight tax evasion.The Tax Justice Network, a campaign group, estimated last weekend that as much as $21 to $32 trillion of financial assets are sheltered in offshore tax havens, representing up to $280 billion in lost income tax.That total wealth would dwarf the fortune of Microsoft Corp cofounder and philanthropist Bill Gates. In March Forbes magazine ranked Gates second on its global rich list with total wealth of a mere $61 billion.Saint-Amans suggested the TJN estimates might be overstated. "I was wondering where the equivalent of 450 Bill Gates are hiding from everyone. It looks like the equivalent 20,000 unknown billionaires in the world or 200,000 people with net worth of 100 million," he said.The Scorpio Partnership, a consultancy that analyses the global private wealth management industry, estimates the amount of money held offshore by people worth at least $1 million at a more modest $8-$9 trillion.Saint-Amans, who heads the OECD's Centre for Tax Policy and Administration, acknowledged his organisation makes no equivalent estimate. "I would rather spend the resource improving the legal framework and putting an end to loopholes than trying to find the magic number," he said.In a statement accompanying its research, TJN criticised the OECD and other international bodies for not doing enough to track offshore wealth, saying it was scandalous that institutions devoted so little research to the issue.G20 leaders agreed at their London summit to crack down on tax evasion and banking secrecy, and asked the OECD to publish lists of tax havens according to how cooperative authorities there are on releasing information about offshore wealth holdings.There are now 89 countries on the OECD's "white list" of jurisdictions that have implemented internationally agreed tax standards. These jurisdictions have between them signed more than 800 agreements on exchanging information with authorities other countries, Saint-Amans said."Until 2009, countries said being secretive is justified and fair. The change in the world is nobody says that any more, so that is a big change," he said.Western tax authorities have individually stepped up efforts to net more money hidden abroad by their own citizens through a series of amnesties targeting people with accounts in jurisdictions such as Switzerland and Liechtenstein.At the same time they have turned up the heat on citizens suspected of tax evasion. This has included using details of Swiss accounts originally stolen from HSBC by a former IT employee that found their way into the hands of tax authorities around Europe.Britain's HMRC tax office expects an amnesty offering leniency to people with accounts in Liechtenstein if they come clean to raise about 3 billion pounds, while a similar deal on Swiss accounts will bring in up to 7 billion pounds.Campaigners argue that such initiatives will achieve only limited success because a financial industry designed to ensure confidentiality across multiple jurisdictions makes it impossible to shut down tax fraud or money laundering."Anybody who's serious about holding money offshore ... will hold it through a trust," said Richard Murphy, a chartered accountant and director of Tax Research, a think-tank."You'd have the trust in one territory, the company in another territory, its directors in another territory and its bank account in a fourth territory. So making an application for information is not very simple."Murphy dismissed the OECD's progress in cracking down on tax havens, arguing that implementation of information exchange between territories is limited in practice and the process too complex to be workable."They've set up a system where it's virtually impossible to apply for information ... The OECD claiming they are making progress is like checking the stable door has been shut way after the horse bolted. Not just the horse, the entire stable has bolted," he said.The TJN research on offshore wealth - authored by James Henry, a former chief economist at consultant McKinsey & Co - highlights the "often unsavoury role" played by banks in catering to rich individuals who want to hide money offshore.Large private banks with offshore businesses reject the idea they aid tax evasion."Our Code of Conduct explicitly says not to assist clients in activities intended to breach their tax obligations," said a spokesman for Swiss bank Credit Suisse who declined to comment specifically on the contents of the TJN report But recent crackdowns by tax authorities in countries such as Britain, the United States and Germany have proved embarrassing for Swiss banks.German tax authorities are investigating roughly 5,000 German clients of Credit Suisse while French officials have searched the homes of UBS employees.At least 11 Swiss banks suspected of helping wealthy American clients dodge taxes are currently subject to a U.S. investigation.Saint-Amans said the OECD's efforts have focused on engaging with governments rather than imposing more supervision on financial institutions. The complexity of the industry, he said, meant that greater information exchange was the best way to tackle people using banking secrecy to break the law."I'm not sure that nationalising the banking industry throughout the world is the solution. The fact you have private practitioners being involved in a sophisticated environment is why you need to favour transparency and exchange of information," he said.Efforts to increase disclosure and combat both tax evasion and money laundering by international bodies such as the OECD and the Financial Action Task Force (FATF), a Paris-based inter-governmental body, have focused on self regulation."We've tried to ensure that what we're talking about is not to create some draconian system where we put a policeman in every financial institution which would be impossible to do," said a senior source at the FATF, which was set up to combat money laundering and terrorist financing.Nick Matthews, anti-money laundering and offshore financial industry specialist at Kinetic Partners, said purging the world's financial system is "incredibly difficult"."Clearly tax evasion leads to money laundering and is a crime but you would have money laundering even if there was no tax, because you still have proceeds from crime or corruption polluting the financial system," he said."That is why I say that no bank would ever stand up and claim that they are not being used to launder money. They appreciate that they are only as strong as their weakest link."

Wells Fargo In Analyst Note, 'Does Service Mean Anything?'

A banking analyst suggested that good customer service hurts a bank's profits. Wells Fargo pissed off the wrong customer.Earlier this week, Richard X. 'Dick' Bove, a well-known banking analyst, blasted the bank in a research note entitled "Does Service Mean Anything?" According to Bove, 71, Wells Fargo royally botched his personal account, charging him mystery fees, bungling his mortgage refinance application and basically blowing him off on the customer service front. Bove, who had been a Wachovia customer for around 10 years before Wells Fargo took over, said the changes at the Tampa, Fla., branch where he had been banking were considerable. Gone was the greeter at the door, for example. In place of a friendly 'Hello' were sales desks. He recounts one occasion when he visited his branch to speak with a personal banker but was left waiting in limbo. "The bank officer made me wait a bit; came out of his office and entered a public bathroom; and then left the bank," Bove recounted in his note. "Nothing was solved for me on that visit."Wells Fargo acquired Wachovia in 2008, and former Wachovia locations in Florida were fully rebranded by July 2011, according to Wells Fargo. Bove said all his experiences took place at the same location on North Florida Avenue in Tampa.In his note, he assaults Wells Fargo for paying far more attention to profits than people. He concludes that customer service  the kind of customer service that involves developing a relationship over time  might actually hurt the bank's business strategy. "What my Wells Fargo experience suggests is that a succesful bank is one that keeps seeking new customers and selling them more products and not getting bogged down by offering service," he wrote in his note on July 23. Bove said he has since moved his personal bank account to JPMorgan Chase, although he told his mortgage and several other business accounts are still active with the bank.Wells Fargo did not comment directly on Bove's note when contacted by HuffPost. "We...recognize that we're only as good as our last interaction and we remain committed to putting our customers at the center of everything we do," Mary Eshet, a senior spokeswoman for the bank, said in an emailed statement. Bove's comments come as the disconnect between banks' business strategy and customer experience continues to be an issue for Americans. The banking analyst is not alone in feeling abandoned by bank customer service. A survey released Tuesday from Consumers Union, the advocacy arm of Consumer Reports, reported that nearly one-fifth of all consumers said they considered switching banks in the last year. The survey participants, like Bove, cited high fees and bad customer service.However, actually moving from one bank to another is a complicated process. More than half of the people who said they wanted to switch banks in the survey, said the reason they didn't complete the process was because of difficulty in transferring automatic payments. The survey included 1,157 adults and took place in May 2012.Consumers Union is calling on Congress and the year-old Consumer Financial Protection Bureau to consider reforms that would make it easier for consumers to switch banks. Suzanne Martindale, staff attorney for Consumers Union, said more consumers want to move their money but feel frustrated at the process. “Moving your money takes a lot of time and money and some bank policies make it harder than it should be," she said in a statement released with the poll results. "We need to make it easier for consumers to switch banks so they have a real choice when it comes to where to keep their money.”Bove is known for his independent voice, which has occasionally gotten him into trouble, as The New York Times pointed out in a 2010 story detailing a lawsuit he faced over some of his analysis.

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,11.07.2012

Swiss bank raided for foreign tax evaders

 

German tax authorities have launched raids into Credit Suisse clients and French officials searched the homes of UBS employees, part of crackdowns on foreigners suspected of evading taxes through the two largest Swiss banks.Switzerland's strict banking secrecy rules, which have helped build a $2 trillion offshore financial sector, have infuriated cash-strapped governments elsewhere as they try to stop tax evasion by wealthy citizens.Roughly 5,000 German clients of Credit Suisse are being probed on suspicion of tax evasion and some had their homes searched, a source at the bank said on Wednesday, as European tax officials broaden their investigation to clients from banks.Meanwhile, the offices of UBS in Lyon, Bordeaux and Strasbourg were raided on Tuesday on suspicion of money-laundering and aiding tax evasion, according to a source at that bank.The private homes of several high-ranking UBS employees in Strasbourg were also searched, the UBS source said.UBS said it was cooperating with authorities. The French prosecutor's office declined to comment because the investigation was ongoing.It was not immediately clear whether the raids in Germany and France were coordinated or in any way connected.Credit Suisse said it was aware that German tax authorities were investigating its clients but gave no further comment.The source at the bank said tax authorities in the German towns of Bochum and Duesseldorf were probing its clients over Bermuda-based life insurance products which may have been used to avoid tax. Tax officials in both towns declined to comment.The Frankfurt prosecutor said one client was searched.The German investigation comes against the backdrop of a deal reached with Switzerland to levy taxes on German assets stashed in Swiss bank accounts that is due to come into effect next year pending German parliament approval.Peter V. Kunz, professor for business law at Berne University, said the new investigation into Swiss bank clients could add to scepticism over the deal, which German opposition politicians say is too lenient on tax evaders."I don't think it will derail the agreement altogether, but it does simplify things for its opponents," Kunz said.Duesseldorf and Bochum are in the German state of North-Rhine Westphalia, where the Social Democrat-led regional government has been one of the most vocal opponents of the deal that would also end prosecutions of Swiss banks and employees."Our tax inspectors must be able to do their work unimpeded, which is to root out criminal evaders. No tax agreement should prevent that," the region's finance minister, Norbert Walter-Borjans, said in a statement.North-Rhine Westphalia bought names of Swiss bank clients from an informant in 2010. Two sources told Reuters the targets for the latest investigation were culled in part from that information.Germany has long been trying to crack down on tax evasion.In 2008, data leaked from Liechtenstein's LGT bank revealed that wealthy citizens including former Deutsche Post chief Klaus Zumwinkel had stashed money in the tiny principality.Zumwinkel received a suspended jail sentence after admitting tax evasion.Credit Suisse struck a deal with German tax authorities last September, agreeing to pay 150 million euros ($183.83 million) to end an investigation over allegations the bank and its employees helped Germans dodge taxes.UBS was forced in 2009 to pay a fine and release the names of 4,500 clients to US officials to end a damaging tax probe. US authorities are still investigating Swiss banks including Credit Suisse and Julius Baer over tax offences.Switzerland is trying to get the US investigations dropped in exchange for the payment of fines and the transfer of names of thousands more US bank clients.

 

Spain banks to minimise hit for investors

 

Spanish banks in line for European aid are looking at ways to minimise losses for small savers who will be forced to take a hit on certain bonds and shares they bought in the ailing lenders, under conditions enforced by Brussels.Although no overall figure for losses is yet clear due to uncertainties about the eurozone bailout of banks stricken by a housing bust and recession, retail investors are reckoned to hold some €30bn ($37bn) in subordinated debt and stock in Spain's small and medium-sized banks.Only a portion of that would be facing losses as banks able to comply with new capital requirements on their own or to pay back public money by June 2013 would escape the rule.This means investors at Santander, BBVA, Caixabank and Popular as well as other smaller sound banks would be safe as these lenders have already a core tier one capital ratio above the 9% required by European authorities. Furthermore, four nationalised banks - Bankia, NovaCaixaGalicia, CatalunyaCaixa and Banco de Valencia - are discussing formulas with the European Commission to minimise the cost to customers, many of them elderly, who were often sold these complex financial instruments as savings products."We're currently negotiating the amount of the hit. The Commission wants it rather high but we're confident we can obtain something lower," said a source at one of those banks."Several options are on the table. Convert the preference shares into bonds, into deposits, or into other instruments."Other banking sources said such options were being actively looked at and implemented with individual clients in some cases.Once the principle of a haircut has been agreed with Brussels, the government has the possibility to pay compensation for the losses.Last month, EU Competition Commissioner Joaquin Almunia said conditions on the aid for the banks forbade the use of European funds to compensate bondholders, so holders of preferential shares should accept losses at market value. But he stressed that national or local governments had the right to do so.Although using scarce public money to compensate investors might be unpopular, the first banking source said the option was still on on the table. "It's one thing to compensate for a loss and break competition rules, but it's quite another thing for the state to make a sovereign political choice," the banker said.Spain will require banks receiving state aid to enforce losses on hybrid capital and junior debt holders, according to a European Union document obtained by Reuters. It will modify existing legislation by end-August to allow these losses to be enforced, the draft Memorandum of Understanding said. Spanish banks have €65bn ($80bn) of subordinated debt outstanding, or €47bn excluding the country's two healthy big banks Banco Santander and BBVA, according to Barclays.Of this, retail investors hold 62% in instruments such as preferential shares that can pay a dividend, a much higher proportion than in countries like Ireland where junior bondholders were also forced to share losses in a bank bailout.The selling of preferential shares to retail investors, many of them elderly bank customers with little financial knowledge, has outraged Spaniards in a long-running scandal pre-dating the €100bn rescue package.Bankia, the nationalised bank likely to receive the largest share of European funds when they materialise later this year, has €3.1bn in preferential shares outstanding.The lender, which has asked for €19bn in rescue money, is in talks with the EU, the Bank of Spain and the stock market regulator to find a way to compensate investors, a spokesman for the bank said.Listed banks in the past have converted preferential shares into equity while non-listed savings banks have opted to swap them for term deposits. Barclays Capital suggested in a note on Wednesday that retail debt holders could be compensated by a national fund, but other experts said this would be difficult. Prime Minister Mariano Rajoy announced a package of new taxes and spending cuts on Wednesday aiming to slash €65bn more from the budget deficit by 2014. In this climate, public compensation for investors will be politically unsavoury.Bank clients stung by losses on preferential shares harangued the new chief executive of rescued lender Bankia at a shareholders' meeting last month."My wife and I had some money in a deposit and (the bank) took it out of the fixed deposit and put it in preferential shares, shamefully duping me with lies," said 85 year old retiree Miguel Garcia Tribaldo.New Bankia chief Jose Ignacio Goirigolzarri warned at the meeting that his options were limited in finding a solution for investors.The market price of these instruments varies from around 40% of face value to practically zero in some extreme cases, experts said. The central bank will discourage any bank in receipt of state aid from compensating junior bondholders with more than 10% of market price, the EU document said.NovaGalicia, a savings bank in northeastern Spain in line for state aid, has €960m of preferential shares held by retail clients, while CatalunyaCaixa has €480mBanco Valencia, the fourth bank almost certain to receive European funds, has €100m in subordinated debt held by retail investors but no preferential shares held by this kind of customer, a spokeswoman for the bank said. NovaGalicia is subject to a court probe into alleged misselling of these instruments to retail clients. El Pais daily cited a purchase form for €6,000 worth of shares signed by an 86-year-old woman's fingerprint.

Spanish miners hurl rocks at cops in protest

Coal miners threw rocks, bottles and firecrackers at riot police who fired rubber bullets in the Spanish capital on Wednesday as tens of thousands protested mining subsidy cuts.Clashes between young protesters and charging police resulted in 23 light injuries, including 12 demonstrators, six police, three onlookers and two journalists, emergency services officials said.A band of demonstrators rained down projectiles including firecrackers, glass bottles and rocks on riot police who protected themselves with their shields.Police could be seen chasing some of the protesters and firing rubber bullets into the air to disperse others."There was a police charge in front of the industry ministry," said a Madrid police spokesperson. Officers backed by dozens of police vans were seen deployed outside the building.Five people were arrested, police said.A few hundred metres way, another group of several dozen protesters outside Real Madrid's Bernabeu stadium were seen throwing stones and drinks cans at riot police.Police charged to try to detain one of them."Out, out," shouted protesters. "These are our weapons," they cried, raising their hands to the sky.Jeffrey Fernandez Sanchez, 27, a miner from Leon, said he saw the violence. "The police provoked them so there would be trouble," he charged.Hundreds of miners who had hiked more than 400km over two weeks from northern coal regions were joined by masses of workers from other sectors, the vast majority of whom were peaceful."Join all our struggles with the miners," read one banner hoisted in the crowd outside the Industry Ministry.Some of the miners at the rally had emerged the previous day from more than a week spent underground in the pits to protest the drastic cuts to state support on which the industry depends.Violent clashes had already broken out between miners and police in more than a month of protests in the northern mining towns over Madrid's decision to slash coal industry subsidies this year to €111m from €301m last year.Unions say the cuts will destroy coal mining, which relies on state aid to compete with cheaper imports, and threaten the jobs of around 8 000 coal miners and up to 30 000 other people indirectly employed by the sector.Carlos Marcos, 41, a miner from the town of Ponferrada in Leon who came on one of the hundreds of coaches that brought protesters into the Spanish capital, welcomed the broad support from other workers."It is impressive because the government never pays us any attention. The real cancer in this country is the politicians," Marcos said.Like other miners, he criticised Prime Minister Mariano Rajoy's conservative government for refusing to help miners more, even as it doles out rescue money to crisis-hit Bankia and other lenders."For the miners they can't find €200m but for Bankia there is €23bn," Marcos said.As the miners rallied, Rajoy announced to parliament a €65bn austerity package to rein in spiralling debt, including a rise in value added sales tax.Vicente Nunez, a 42-year-old steel worker, said he came from Asturias to demonstrate in support of the miners as he walked with a group in black shirts and the Asturias flag, which is light blue with a yellow cross."We work in the metal industry. It is all a chain, we all depend on each other," Nunez said."I have never seen a situation like this. We had crises in '92 and '98 but this time there is no future, no solutions. This schism in society is going to be bigger, more conflictual," he predicted.

NEWS,04.07.2012

Monti: Italy does not need a bailout

• German Chancellor Angela Merkel and Italian Premier Mario Monti arrive for a bilateral meeting at Villa Madama in Rome, Wednesday, July 4, 2012. Merkel is traveling to Rome for a regular meeting of the senior officials from the two countries along with several of her top ministers, including the economy and finance ministers

Italian Premier Mario Monti insisted Wednesday the country doesn't need a European bailout because its public finances will improve, but acknowledges work still needs to be done to cut government spending, boost economic growth and create jobs.Monti spoke at a press conference with German Chancellor Angela Merkel after meeting about Europe's debt crisis. It was their first encounter since European leaders in Brussels last week agreed to use the continent's bailout fund to funnel money directly to struggling banks and let countries following budget rules apply for financial aid without stringent conditions attached.Monti, who had pressed for such a deal, insisted Italy didn't need a bailout to help it pay its government debt because its budget deficit was low compared with many other European countries and forecast to improve.As of the end of 2011, official European statistics put Italy's deficit at 3.9 percent, just above the EU limit of 3 percent. Spain's, by contrast, was much higher at 8.5 percent.Italy's big problem is the economy is in recession and it has a high public debt load equivalent to 120 percent of GDP. Investors fearing Italy may have trouble repaying that debt have been asking for high interest rates to lend to the country.The measures announced by European leaders last week have helped relieve the fear that Italy may default. In particular, making it easier for countries to access European bailout funds has convinced investors that Italy has a credible financial backstop should it run into trouble financing itself.Agreeing to loosen the conditions for bailouts was not easy, however, and was the source of heated debated between Monti and Merkel in recent weeks and at the summit.Going into the summit, Monti had issued a thinly-veiled jab at Merkel over her opposition to allowing European governments to share debt obligations. Sharing debt is another way to spread individual countries' debt risk across Europe, but Merkel continued to oppose them at the summit.With debt-sharing ruled out, Monti pushed for the European leaders at the summit to agree to other measures that might increase confidence in Italy's finances. Easing conditions for countries to take bailouts was one of them.Monti has lamented that Italians have endured the effects of government spending cuts and tax hikes, but that Italy's government borrowing rates remained high in financial markets.By Wednesday, the two leaders were downright chummy, with Monti calling Merkel by her first name and emphasizing their "excellent" relations.Merkel, for her part, praised the speed with which Monti's government has pushed through structural reforms and insisted that it was in Germany's interest to keep Italy from failing."If our neighbors in Europe aren't well, eventually we Germans won't be in good shape," she said.Monti nevertheless acknowledged a rough road ahead: the government is embarking on a program of public spending cuts after having pushed divisive labor market reforms through parliament last week.And new unemployment figures have made clear that the recession and the impact of austerity measures are hitting home: Monti termed "unacceptable" that youth unemployment had now hit 36 percent."Reducing the weight of the public sector in the markets, including the financial markets, will give us greater possibilities for productivity and work for young people," he said when asked how much more austerity Italians can take before growth measures kick in.Both leaders stressed the need for Italian and German companies to collaborate more, particularly in manufacturing, to boost economic growth.

 

Big Banks Release 'Living Wills,' Say They Can Be Broken Up Without Bailouts

Nine of the largest global banks on Tuesday expressed confidence they can be salvaged or dismantled without taxpayer bailouts if they became insolvent, as U.S. regulators released public portions of these banks' "living wills".The documents, required by the 2010 Dodd-Frank financial reform law, aim to end too-big-to-fail bailouts by mapping out ways that, in theory, mortally-wounded banks could go out of business without wrecking the financial system.If regulators find that the resolution plans are not credible, they could force the banks to sell off business lines and restructure to become less complex.But some experts doubt how hard regulators will push the banks for changes or how useful hypothetical resolution plans will be in major financial crisis.The public portions released on Tuesday and are a few dozen pages per bank summarizing thousands of pages submitted confidentially to regulators.The banks argued in the public documents that their resolution plans will work, with no cost to taxpayers or great consequence to the financial system. They used technical generalities in their conclusions without specifically addressing the unpredictable and vicious nature of a credit crisis.Bank of America Corp, for example, said in its plan that "certain assets and liabilities would be transferred to a bridge bank that would, subject to certain assumptions, emerge from resolution as a viable going concern."JPMorgan Chase & Co concluded that its plan "would not require extraordinary government support, and would not result in losses being borne by the US government." And, Goldman Sachs Group Inc said it would find a broad range of potential buyers for its assets, including global financial institutions, private equity funds, insurance companies or sovereign wealth funds.The other banks which submitted wills were Barclays , Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley and UBS.The Federal Reserve and Federal Deposit Insurance Corp released the plans without commenting on them.Other large banks will have until July and December of next year to hand in their plans, according to the FDIC. Eventually about 125 banks are expected to submit plans.The first plans come almost four years after the financial crisis unleashed a panic in which no institution seemed safe from a bank run and markets withdrew credit in what appeared to be inexplicable fashion. The U.S. government, in quick order, arranged a fire sale of investment bank Bear Stearns to JPMorgan and then allowed Lehman Brothers to fail, touching off a global market meltdown. Blanket government guarantees for the financial system and a $700 billion taxpayer bailout followed to ease the panic.The disclosures on Tuesday give a glimpse of the kind of the kind of interconnections and complicated corporate structures that could still make governments fear letting big banks fail.JPMorgan named 25 "material" legal entities and 30 "core business lines," as required by Dodd-Frank and listed 18 clearing or financial settlement systems in which it is a member or participant, half of which are outside of the United States.The full-length plans are believed to include the most comprehensive maps of the insides of bank holding companies ever created. They are intended to give regulators confidence that they understand enough of the consequences of bank failures to allow more to happen.WOULD PLANS WORK?Bert Ely, a banking consultant in Alexandria, Virginia, said he is skeptical that the overall process could work because there would likely be a lot of turmoil in the markets when the plans were needed, raising doubt about who might buy any assets."The presumption of a one-off event is not realistically valid," he said. "You can have one company blow itself up, but more often than not there are systemic problems."Banks emphasized that they did not believe the resolution plans would ever have to be used. Morgan Stanley said that its "hypothetical failure" would have to be caused by "an idiosyncratic stress" that might occur while the economy and financial markets are under severe stress.Guggenheim Partners financial policy analyst Jaret Seiberg said he doubts regulators will use their reviews of the plans to force big changes on the institutions."Our initial review suggests there is little real risk that regulators could reject one of these plans," Seiberg said in a note. "That is important because regulators could break up a financial firm that fails to submit a credible plan."The regulators plan to give feedback to the banks on the initial plans by September.Congress called for the plans in Dodd-Frank to ease concerns that some banks are so big and interconnected that taxpayers will inevitably bail them out to avoid a threat to global markets.The FDIC gained new powers in Dodd-Frank to use the plans to dismantle failing financial giants if the bankruptcy process would not work.Citigroup found a special reason to argue that its resolution planning would work: its wrenching experience in the 2007-2009 financial crisis.To recover from the crisis, Citigroup separated businesses to be sold or gradually liquidated from those it is keeping as its "core" pursuits. The company said that process meant its "personnel would be well equipped to assist regulators" if the company had to be divided up into pieces to be sold or closed."Citi is today a fundamentally different institution than it was before the crisis: smaller, leaner, safer, sounder, and completely focused on our core mission," it said in the summary of its resolution plan.Bank of America, used its 42-page public document to emphasize steps it has taken in recent years to streamline the company, build capital and improve risk management."Bank of America has strengthened its risk culture as evidenced by improvements in consumer and commercial credit quality and decreases in market and counterparty risk," it said.Bank of America has lagged its rivals in recovering from the financial crisis, largely due to mortgage losses tied to its 2008 Countrywide Financial purchase.INTERNATIONAL FRAMEWORKSome of the foreign banks outlined resolution strategies for both home and U.S.-based regulators.Deutsche Bank imagined high levels of international cooperation, noting it could be dismantled "in an orderly manner with minimal systemic disruptions, and that any cross-border issues arising from financial, operational or other interconnections could be adequately addressed without significant difficulties," it said.Barclays said effective resolution plans are "an integral component of eradicating 'too big to fail' for the largest global financial institutions."It also noted how critical cooperation will be among international regulators.Barclays submission, dated July 2012, was already out of date. It listed Marcus Agius as chairman and Robert Diamond as CEO. Both have resigned in response to a Libor interest rate rigging scandal.Mitchell Glassman, a director at Deloitte Consulting who has worked with big banks on the living will issue, said he was impressed how much senior executives and directors were involved in preparing the plans. Still, he said, the question remains whether the plans on paper would work effectively in real-life."Will this help Main Street? Will we be better off with this approach than we were in the last crisis?" Glassman said.

 

NEWS,17.06.2012

Greeks vote in election that could decide euro's fate

Greeks have gone to the polls in an election that could decide whether their heavily indebted country remains in the euro zone or heads for the exit, potentially unleashing shocks that could break up the single currency.In an election fought over the punishing austerity package demanded by international lenders as the price of keeping Greece from bankruptcy, opinion polls showed the radical leftist SYRIZA party, which wants to scrap the deal, running neck and neck with the conservative New Democracy, which broadly backs it.The European Union and International Monetary Fund have insisted that the conditions of the 130 billion bailout accord agreed in March must be accepted fully by a new government or funds will be cut off, driving Greece into bankruptcy.All parties say they will keep Greece in the single currency, but SYRIZA leader Alexis Tsipras believes the agreement can be renegotiated without Greece having to leave, betting that European leaders cannot afford the turmoil that would be unleashed by cutting a member of the euro zone loose.On the right, establishment heir and New Democracy leader Antonis Samaras says rejection of the EU/IMF bailout would mean a return to the drachma and even greater calamity, although he, too, wants to renegotiate some aspects of the package.Opinion polls show Greeks, weary after five years of deep recession, overwhelmingly favour remaining in the euro, but there is bitter anger over repeated rounds of tax hikes, slashed spending and sharp cuts in wages.Many voters are also furious with New Democracy and the other traditional ruling party, the now severely weakened PASOK, blaming them for decades of corruption, waste and inefficiency."It's the first time I feel depressed after voting, knowing that I voted again for those who created the problem, but we don't have another choice," said 66-year-old English teacher Koula Louizopoulou."I voted for the bailout because these are the terms that will keep us in Europe," she said.A win for Greece's national soccer team in a game on Saturday at the Euro 2012 championships provided some lift for voters but there was little sign of enthusiasm at the polling booths, which close at 7pm. Exit polls will follow soon after voting ends.'Staring into the abyss' "It's obvious the country is now staring into the abyss," leading Greek daily Kathimerini said in a front-page editorial on Sunday, calling for the creation of a New Democracy-led "unity" coalition to keep the country in the euro.The party gaining the most votes wins an automatic 50-seat advantage but neither New Democracy or SYRIZA is expected to win an outright majority and whoever emerges as top party will have to hold coalition negotiations with smaller groups.European leaders weighed in on the eve of the vote - a re-run of an earlier election on May 6 that produced no clear winner - some of them openly urging Greeks to reject SYRIZA or risk undermining the very foundations of the single currency.But whoever wins power may find their tenure is short-lived and, despite the insistence of EU politicians, some adjustment of the bailout terms may be inevitable if Greece is to cut a public debt amounting to 165 percent of gross domestic product."It is a scenario I see as likely and if that is the condition presented for Greece to stay and then move on, I would say it is probably something that should be attempted," Angel Gurria, head of the Organization for Economic Cooperation and Development.Central banks from Tokyo to London are readying arsenals to defend banks and national currencies against any post-election turmoil. The result will dominate a meeting of the Group of 20 world economic powers on Monday and Tuesday in Mexico.Finance officials in the euro zone have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario.Euro zone officials have hinted they might give a new Greek government someleeway on how it reaches debt targets set by the EU/IMF bailout package, but there would be no change to the targets themselves.Euro zone paymaster Germany warned Greeks on Saturday the bailout would not be renegotiated."That's why it's so important that the Greek elections preferably lead to a result in which those that will form a future government say: 'Yes, we will stick to the agreements'," Chancellor Angela Merkel told a party conference of her Christian Democrats.A Greek exit from the single currency would heap further pressure on two far larger European economies - Spain has already received up to 100 billion euros to save debt-riddled banks and Italy could be next to seek a bailout.German warning Anger with the establishment parties New Democracy and PASOK propelled SYRIZA and its youthful leader, a former Communist student protest organiser, from the obscure radical fringe to a shock second place on May 6.The far-right Golden Dawn party also won seats in the first election, underscoring the fragmentation of a stressed society wrestling with unemployment of almost 23 percent and plummeting living standards.Five years of recession and more than two years of acute crisis have started to fray the edges of Greek society, undergoing its severest test since the overthrow of the military dictatorship in 1974.The streets of central Athens are scarred by repeated waves of protests, some hospitals are short of vital medicines and reports of suicides caused by the crisis have become routine.Five opinion polls published before a blackout two weeks ago put New Democracy narrowly ahead. Two other polls had SYRIZA leading.But analysts say Samaras, 61, will find it hard to govern for long with an empowered SYRIZA protesting at the gates. Tsipras, if he wins, will inherit a country on the verge of bankruptcy.He has ruled out a government of national unity and promised to nationalise banks and halt privatisations.Some global businesses and banks are already in retreat.Europe's biggest retailer Carrefour said on Friday it was selling up in Greece, a day after French bank Credit Agricole moved to take direct control of its Albanian, Bulgarian and Romanian units from its Greek bank Emporiki.

NEWS,14.01.2012.

Nine eurozone countries have had credit ratings cut


Nine eurozone countries have had their credit ratings cut in another massive blow to the single currency, it was confirmed last night.

European leaders had hoped the single currency area was starting to stabilise but France has lost its gold-plated AAA status in the Standard & Poor’s ratings.
Austria, Malta, Slovakia and Slovenia also slipped by one notch while Portugal, Cyprus, Italy and Spain were downgraded by two.
 The downgrade is a serious blow to French President Nicolas Sarkozy who is fighting for re-election this spring.
Mr Sarkozy has staked his reputation on France keeping its triple-A credit rating and had even boasted that Britain’s credit rating was in a worse state.
Deputy Prime Minister Nick Clegg said the French downgrade underlined the “urgency” of solving the debt crisis in the eurozone. He called for a more “concerted effort” by all 27 EU members to boost growth and productivity.
EU leaders will meet on January 30 for the latest emergency summit aimed at saving the single currency from collapse.
Germany has retained the triple A rating and Chancellor Angela Merkel last night made a veiled swipe at Mr Sarkozy for avoiding budget cuts to win votes.
She said: “Every member of the eurozone must have a debt brake in its constitution, so leaders don’t use elections or other opportunities according to their mood to live beyond their means.”
World markets fell as news emerged that the downgrade was about to be announced.
At one point the FTSE 100 Index was down more than 1% though it rallied to 0.5% down. Frankfurt’s Dax fell 0.6%, and the Dow Jones in New York was down 0.8%. Reports of a breakdown in talks between Greece and its banks to restructure its debts fuelled fears of a default and drove markets lower.
UK Independence Party leader Nigel Farage said Standard & Poor’s announcement could mean “the beginning of the end” for the eurozone.
He said: “Now that France has been downgraded I expect the bond yields of countries like Italy and Spain to rise, leading to a need for a bailout and more trouble for the euro currency.
“The euro, the ultimate federalist fantasy, has become a nightmare for those caught in its embrace.
“This downgrade of France’s credit rating will make its debt more expensive and may prove to be the beginning of the end for eurozone as we know it.”
The leader of Britain’s Tory MEPs Martin Callanan said the downgrade, coupled with fresh difficulties for Greece, increased pressure on EU leaders to “stop fiddling with treaties and start tackling the immediate crisis”.

Twenty-six member states are trying to finalise a new “fiscal compact” to tighten controls on eurozone debt and deficit levels but Mr Callanan said: “If European leaders really want to save the euro, they need to listen to what the markets have already told them. It is time for some countries to leave the single currency.
"The longer we dither, the worse the crunch will be.” He said the negotiations on the new pact had done little to calm markets.
He added: “While European leaders have been gazing at their collective navel, market confidence has continued to decline. We take one step forward and five steps backwards in this crisis.”
And he warned: “We can’t afford to keep buying time with taxpayers’ money. Eurozone leaders must face up to the reality the eurozone disease will not begin to be cured until we remove the infected limb.
“The EU summit at the end of this month really is the last chance saloon for an injection of realism from EU leaders.
“If we see yet more discussion of treaties, bailout mechanisms and attacks on financial services then I fear we will soon pass the mark where we can salvage anything from the wreckage.”
A statement from Standard & Poor warned: “The outlook on the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, indicating there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013.”
In an attack on EU leaders, it went on: “Today’s rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone.”
Austria’s economy has been partly hit because it is a big exporter to struggling Italy, while its banks are facing losses on subsidiaries they own in troubled Hungary.