NEWS,22.06.2012

Extra cash needed to bailout Spanish banks

 

Independent auditors said Spanish banks may need up to 62 billion euros in extra capital, to be filled mostly by a euro zone bailout, after Spain's medium-term borrowing costs spiralled to a euro-era record on Friday.Euro zone finance ministers met in Luxembourg to discuss how to channel up to 100 billion euros in aid to Spanish lenders weighed down by bad debts from a burst property bubble. Madrid's economy minister said a formal request would be made in days for the bailout, which was agreed two weeks ago.Many in the markets see the package as a mere prelude to a full programme for the Spanish state, which Madrid vehemently denies it will need.Spain's financial plight took centre stage a week before a European Union summit tackles long-term plans for closer fiscal and banking union in a bid to strengthen the euro's foundations, after bailouts for Greece, Ireland and Portugal failed to end a 2-1/2-year old debt crisis.To pave the way, the leaders of Germany, Italy, France and Spain will meet in Rome."We are clearly seeing additional tension and acute stress applying to both banks and sovereigns in the euro area," International Monetary Fund chief Christine Lagarde, who attended the Luxembourg meeting, told reporters."With that in mind, the IMF believes that a determined and forceful move towards complete European monetary union should be reaffirmed."Two independent audits by consultants Roland Berger and Oliver Wyman found that Spanish banks would need between 51 and 62 billion euros in extra capital to weather a serious downturn in the economy and new losses on their books.The Bank of Spain said the 100 billion euros offered to Madrid two weeks ago would give a wide margin of error. Spain's three biggest banks would not need extra capital even in a stressed scenario, it said. The government said it did not expect to shut any banks and would restructure those in trouble.In Luxembourg, the finance ministers decided Spain should initially apply to the euro zone's temporary rescue fund, the European Financial Stability Facility, with the loan taken over by the permanent bailout fund the European Stability Mechanism (ESM) once it is up and running after July 9."The financial assistance will be provided by the EFSF until the ESM becomes available, and then it will be transferred to the ESM," Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference."We would expect the Spanish authorities to put forward a formal request for financial assistance by next Monday," he said.Such a solution should avert a problem which had scared investors: debt issued by the ESM must be paid back first in case of a Spanish default, relegating private creditors lower in the pecking order. Because the new bailout debt will originate from the EFSF it will be issued without that requirement.Earlier on Thursday, Madrid sold 2.2 billion euros in medium-term bonds, drawing strong demand almost entirely from domestic banks. Yields on 5-year paper rose to a 15-year high of 6.07%, a level regarded by analysts as unaffordable for any prolonged period."They raised 2.2 billion versus a 2 billion target, so they can raise the money," said Achilleas Georgolopoulos, a strategist at Lloyds in London."Then the (question is), are the yields threatening for the medium term? And yes, clearly they are much higher than the previous auction ... But still they can continue for a few months to fund at these levels."The finance ministers also signalled there may be some leeway for Greece, following the formation of a coalition of mainstream parties committed to the country's 130 billion euro EU/IMF bailout but determined to renegotiate some of its terms.Athens will ask lenders for two more years to hit fiscal targets and an extension to unemployment benefits as it seeks to soften the punishing terms of the bailout that saved the country from bankruptcy.Greece's euro zone partners, in particular paymaster Germany, have offered modifications but no radical re-write of the conditions attached to the lifeline agreed in March.Juncker said nothing would be decided until the troika of EU, IMF and European Central Bankers had returned to Athens for a look at the books, starting on Monday."We will have a look into the findings of the troika and then we will discuss in detail the different means and instruments which can be used," he said. "It doesn't make sense for the time being to give more precise indications on the content of the programme."

Fuel companies should justify pump prices - AA

 

Fuel companies need to tell the public why their margins are creeping higher though oil costs are dropping, the AA says.AA petrol watch spokesperson Mark Stockdale told  there is a lag between what fuel companies pay for petrol and what consumers pay at the pump."Over time margins are certainly increasing," he said."If the fuel companies are saying historically margins haven't been high enough, then they need to go to the public and explain why they think margins should be rising."Stockdale's comments follow BP's claim that the company gets bad press even though prices have fallen back under $2 for the first time in nearly a year.BP's External Affairs manager Jonty Mills told  yesterday that "there's a bit of scepticism out there and it's hard for us to get a good rap in the media"."However I think we've shown, we've dropped the price six times consecutively in the last month and a half. BP have led four of those," he said.One of BP's rivals, Gull, further cut prices for regular 91 Octane petrol to $1.959 today.But Stockdale said the rise in margin of three to four cents in the last couple of months is "too much too soon" and he does not understand what has happened over that period to justify it.Though petrol cuts have been coming "thick and fast"be paying too much at the pump."We're basing it on the margin as it was in March, and based on those numbers we think there could be a cut of about three cents per litre," he said.Stockdale thinks there should be another price cut within the next week.

NEWS,03.04.2012.

Crazy gas prices driving German consumers mad

A price board at a petrol station in Berlin, Germany on March 30. The price for "super" at 1.71 euro per liter is approximately $8.56 a gallon.  “Oh nein,” there is another traffic jam at my local gas station.Normally, German drivers only encounter severe congestion on their famed autobahns, where traffic flow is often hampered there by the large number of construction sites regularly installed by the German government to keep its state-of-the-art highways "in order."These days, though, it is not unusual for gas prices to change up to five times per day at German gas stations, a phenomenon which traffic experts refer to as the “yo-yo effect.” When prices are lowered, many inner-city gas stations in Germany see drivers pull up in hordes.Given costs of up to 1.70 Euro (and more) per liter of unleaded fuel  the equivalent of $8.56 per gallon – it should come as no surprise that Germany's drivers have become bargain hunters. (One gallon is equal to 3.78 liters).Critics say that the yo-yo phenomenon is fueled by the highly competitive market and dominance by leading suppliers in the German market, like Aral, Jet or Shell.Retailers and consumers, who see a lowering of prices during lower-demand times and a hike during rush hours or school holidays, are increasingly calling for prices to be directed by supply and demand."When the prices are high in the morning during rush hour and then suddenly drop when most people are at work, our customers often get upset and complain heavily," said Ferdinand Raker, who has been running an independent gas station in the town of Molbergen since 1998."On some days, we see a lowering or raising of the prices by up to 14 euro cents ($0.18) per liter," said Andreas Hoelzel from German automobile club ADAC in Munich. "We understand that there is a competitive market situation, but the extent of price fluctuation is just enormous."It is all about a plethora of petrol pumps in Germany, representatives from the industry argue."This shows that we have a functioning business competition in the German petroleum market, which in comparison to other European countries has an above-average volume of gas stations with its nearly 14,700 outlets nationwide," said Karin Retzlaff from the Association of the German Petroleum Industry, known as MWV.This argument, however, has neither satisfied the average driver nor officials from automobile clubs, who represent Germany's now grumpy motorists.Reports about illegal price fixing among multinationals could not be proven in recent investigations by Germany’s Federal Cartel Office, but experts and media reports are still accusing oil firms of implementing “methods of systematic confusion.“On Monday, weekly “Der Spiegel” news magazine headlined its cover “The Fuel Cartel – How Oil Firms Manipulate the Fuel Prices” and argued in its seven-page analysis that the leading gas companies are using their power in the market to deliberately inflate fuel prices.Frustration over high fuel costs has also set off a high level of fuel thefts across the country, officials say.According to police in Germany's most populous state, Northrhein-Westphalia, diesel thefts, for example, have increased over the course of the past year. (More than 40 percent of German cars are powered by diesel.) An internal survey, which listed all cases with diesel thefts above 100 liters, showed 111 cases in January and 83 in February in this local state alone.The statistics indicate that criminals are mainly targeting fuel depots, heavy construction machines and large trucks. In 2011, state police in Northrhein-Westphalia recorded 986 cases with a total of 344,000 liters (90,875 gallons) stolen.Thieves have become increasingly creative. Police have recorded incidents in which criminals have drilled holes into gas tanks of private cars or used stolen or fake licence plates so that they can remain unidentified at gas stations when they drive off without paying the bill."Last month, I lost 10,000 liters of fuel after thieves signed up for a special debit card with false identifications and then pulled up numerous times with different vehicles to steal my petrol," says Raker, the Molbergen gas station owner. “Police caught the culprit," he said, "but he was broke and I was left with the damage.”With anger on all sides, the mass-circulation BILD newspaper offered a sign of possible relief soon with the headline "Finally! A law against fuel rip-off.“ The article referred to a meeting of Germany's upper house of parliament last Friday, where politicians debated proposals for a new law, which could help calm down fluctuating gas prices.Politicians in Berlin suggested that oil firms should be required to warn of new fuel prices by 2 p.m. on the day before the change, and the altered prices would have to remain unchanged for at least 24 hours.Prices could also be stored in a central public database under a new law, which would give motorists the ability to check the cheapest pump prices in their vicinity with the help of the Internet or modern smart phones.Yet, a decision on a possible new law is not expected before the end of the summer (or, as some believe, might not come at all).And, despite the fact that there now appears to be light at the end of Germany's tunnels in regard to regulations that could stop the rollercoaster ride at the pump, the underlying price for crude oil on the world market is unlikely to fall dramatically any time soon.