NEWS,22.07.2012

Spaniards protest as crisis outlook darkens

Thousands of jobless Spaniards marched through Madrid Saturday in the latest angry demonstrations against economic crisis cuts, as fears rose for the country's financial stability.Young people thrown out of work by the recession converged on the capital, many of them having hiked hundreds of miles from around Spain, and walked through the city's central avenues, waving banners and whistling."Hands up, this is a robbery!" they yelled, their regular refrain over recent days of protests."Everyone get up and fight!"It was the latest in a string of protests that have erupted since Prime Minister Mariano Rajoy announced 65 billion euros ($80 billion) in fresh austerity measures on July 11, including cuts to pay and unemployment benefits."I am very disappointed and angry," said Alba Sanchez, 25, who had come by car from the northeastern region of Catalonia to join the demonstration."People cannot allow all these cuts by this government that hates us."The crowd marched peacefully to the sound of drums and trumpets and stopped at the Puerta del Sol square, the symbolic hub of numerous social protests, where demonstrators sat down and held a popular assembly.On Thursday hundreds of thousands of demonstrators massed there after a mostly peaceful protest march that ended with police firing rubber bullets to disperse small groups of protestors.Protestors say the efforts to cut Spain's deficit target the poor unfairly and will depress the recession-hit economy further."They pee on us and tell us it's raining," read one yellow sign waved by the jobless protestors on Saturday."I can't tighten my belt and drop my trousers at the same time," read another.Rajoy's measures raise sales tax (VAT) and cut benefits for the newly unemployed after six months from 70 percent of basic salary to 50 percent. Previously, the reduction had been to 60 percent."That's the final blow. They're cutting benefits to those who aren't working and raising VAT, which affects people who work," said protestor Rafel Ledo, who had walked 500 kilometres (310 miles) from the northern Asturias region.Saturday's protests came as Spain's economic and financial outlook darkened. The government cut its economic growth forecast for 2013 from 0.2 percent growth to a contraction of 0.5 percent.Stricken by the bursting of a construction bubble in 2008, Spain is struggling in its second recession in four years. Unemployment is running at more than 24 percent.Also on Friday Valencia, one of Spain's indebted regional authorities, reached out for emergency aid from a fund of 18 billion euros set up by the central government for struggling regions.In response, the Madrid stock exchange plunged by 5.8 percent.A eurozone rescue deal for Spanish banks finalised by finance ministers on Friday provided no relief.The return on Spanish 10-year bonds jumped above the 7.0 percent danger level and another key measure, the difference between the yields on Spanish and safe haven German bonds, moved dangerously high, topping 600 points.The indicators revived warnings that the banking bailout may not be enough to stabilise Spain's finances, a key concern for the future of the eurozone.

 

Ministers: Bank to pump €1.4bn into Greece

The European Investment Bank will pump around €1.4bn ($1.7bn) by 2015 to fund infrastructure projects in crisis-hit Greece, the ministers of finance and development said on Saturday."I believe the accords will be signed in the coming days. We aim to restart, to re-activate the EIB in the private sector as soon as possible," said Finance Minister Yannis Stournaras after talks with EIB chairman Werner Hoyer.Greece's private sector has been starved of funds as the country grinds through a five-year recession that has cut off bank loans and even state contract payments.EIB loans this year had been limited to just 10 million euros, Stournaras said, as Greece plunged into political uncertainty in May, requiring two elections before a coalition government could be formed to continue EU and IMF-mandated reforms."The agreement is a vote of confidence in Greece. Besides infrastructure projects and support for small and medium companies, the cooperation will be expanded to facilitate foreign investment and privatisation," said Development Minister Costis Hatzidakis, according to the state-run Athens News Agency.There was speculation in April that the EIB would seek to insert drachma clauses into its contracts with Greek firms to ward against a possible Greek euro exit.But Stournaras insisted on Saturday that repayment will be in euros.

European Central Bank's Head: Euro 'Absolutely Not' In Danger

 

Worries about the 17-nation eurozone's future health have been fueled lately by Greece's persistent troubles and by the financial woes of Spain, the bloc's fourth-biggest economy. European ministers this week signed a rescue package worth up to (EURO)100 billion ($122 billion) for its ailing banks, but concern flared about Spain's prolonged recession and the debts of its regions, and the country's borrowing costs rose.Asked in an interview with French daily Le Monde whether the euro is in danger, ECB President Mario Draghi replied: "No, absolutely not."When outside analysts draw up scenarios for an "explosion" of the eurozone, "that underestimates the political capital that our leaders have invested in this union, as well as the support of European citizens," Draghi said in the interview, which was posted on the ECB's website."The euro is irrevocable," he added.The ECB this month cut its benchmark interest rate to a record-low 0.75 percent but gave little sign of further action soon to ease the crisis. It already has made two rounds of three-year emergency loans to banks, but has shown little appetite to reactivate its government bond-buying program."Our mandate is not to resolve the financial problems of countries, but to ensure price stability and to contribute to the stability of the financial system in full independence," Draghi said in the interview with Le Monde, conducted Wednesday  emphasizing the ECB's primary task of fighting inflation.Asked whether the ECB should do more to ease the economy, Draghi replied: "We are very open. We do not have any taboos."He said the ECB decided to cut interest rates in July because it forecast that inflation would be at its target level – close to or below 2 percent – at the start of 2013."It now seems likely that it will fall sooner than expected, at the end of 2012," he said. "Our mandate is to maintain price stability in order to prevent both higher inflation and a generalized, broadly based fall in prices. If we see such risks of deflation, we will act."As for the eurozone economy, Draghi said that the situation "has gradually worsened, but not to the point of plunging the whole of the monetary union into recession.""We still expect a very gradual improvement in the situation by the end of this year or the beginning of next year," he said.

NEWS,21.07.2012

Spain's economy wobbles amid bailout

Concerns about Spain's crippling financial problems flared again Friday as even news that the country had been given the final go-ahead for a bank bailout loan of up to $122.9 billion failed to take the sting out of a further round of bad economic news.Earlier Friday, finance ministers from the 17 countries that use the euro unanimously approved the terms for a bailout loan for Spain's banks, which have been struggling under the weight of toxic loans and assets from the collapse of the country's property market. Investors have been shying away from Spain for months, worried that the country could not keep control of its deficit during a recession while supporting its stricken financial sector.Spain is the 17-country eurozone's fourth-biggest economy, and many market watchers fear that if it asked for a bailout, the rest of the region could not afford to foot the bill. The country and its banks were also locked in a vicious debt spiral, where the shaky banking system has been propped up by the indebted government so that the banks could buy more government debt. The loan facility agreed to on Friday was designed to break that spiral.The bank agreement came as Spain cut its growth forecast and the heavily indebted Valencia region asked for financial help. The news sent the country's borrowing costs soaring and its stock prices plummeting. In afternoon trading, Spain's main IBEX index was down almost 6 percent, while the interest rate on the country's 10-year bond - an indicator of investor confidence in a country's ability to manage its debt - was at 7.2 percent. This is a rate that many market watchers consider too high a price for a country to pay in the long term.Treasury Minister Cristobal Montoro on Friday forecast Spain's recession will drag on into 2013.Unemployment, now at 24.4 percent, will remain about the same next year, Montoro said.Meanwhile, the economy will shrink 1.5 percent this year, a slight improvement from the 1.7 percent drop previously predicted, he added.The government this week passed painful austerity measures - tax increases and cuts to benefits, salaries and pensions - to reduce state debt and strengthen confidence in its finances.Spaniards staged huge anti-austerity protests in 80 cities and towns across the country Thursday.

After PFGBest, 'Crisis' In Commodities Trading Could Impact Everyday Consumers

Experts warn of a crisis in the commodities trade that could impact everyday consumers. First, there was a banking crisis. Now, after the collapse of Peregrine Financial Group, commodities markets may be on the brink of their own emergency, which could reach consumers at the gas pump or the grocery store.The high-profile failure of two commodities brokerage firms in less than a year led to a crisis of confidence among traders of commodity futures agreements to buy and sell basic goods like corn, wheat and oil. If this market stops functioning properly, experts warn, consumer prices could fluctuate wildly.“The futures industry had long been considered a very strong place to put your money,” said John Lothian, a registered futures adviser who runs an industry news and analysis service. The collapse of Peregrine, which does business as PFGBest, has “absolutely caused a crisis,” he said. “It’s going to take a while for the industry to restore its own confidence.”The crisis took root last October with the well-publicized collapse of commodities brokerage MF Global, which lost $1.6 billion in customer funds. That was followed, earlier this month, with the failure of Peregrine, which imploded just before the firm’s founder, Russell Wasendorf, admitted to taking more than $100 million in customer cash over two decades.The failures have caused some traders to lose faith in both of the industry’s regulatory bodies -- the Commodity Futures Trading Commission and the National Futures Association -- and the brokerage firms themselves. “I don’t know where to put my money to trade,” George Papagiannis, a lawyer and futures trader who lost money with Peregrine and MF Global, told The Huffington Post shortly after the PFG collapse. “I love to trade, but I don’t trust any broker now. So I’m not going to until I’m sure there’s good oversight."This sentiment could be bad news for regular consumers of basic commodities like oil and corn. Brokerages like Peregrine provide a platform for trading futures contracts, agreements to buy or sell a commodity like oil or corn at a set price in the future. Often farmers will trade futures to protect crop prices from unforeseeable fluctuations for example, a glut of commodities that causes prices to fall.“A collapse of a firm means that those commercial market participants who have to intelligently hedge their purchases have less and less faith in [the firms] with whom they’re investing,” said Gene Guilford, president of the Independent Connecticut Petroleum Association, a nonprofit association of gas and fuel oil dealers. “What ends up happening with a lack of faith is retailers end up hedging less of their purchases and leaving them open to the vicissitudes of the marketplace.”If farmers or oil dealers pull out of the markets, then there’s nothing to buffer commodity prices against unexpected fluctuations, meaning the everyday price of oil or corn could dip or spike wildly for average consumers, according to Guilford. Futures-trading volume in the first half of 2012 was down nearly 10 percent from the same period last year, according to data from the Futures Industry Association, the industry’s main lobbying group. In June trading volume was down more than 15 percent from June 2011. “We’re not on the cusp of a problem, we’re in a problem,” said Michael Greenberger, former director of trading and markets at the CFTC and current professor at the University of Maryland School of Law. “Nobody wants to trade.”Since the Peregrine collapse, blame also also fallen on regulators for failing to spot that fraud, despite years of audits and the collapse of MF Global only months before. On Wednesday, CFTC chair Gary Gensler told the Senate Agriculture Committee that "the system failed to protect the customers of Peregrine," only days after the CFTC rushed approval of new rules designed to protect brokerage customers. Those rules include a requirement that brokers file daily reports on the state of segregated customer accounts.But the reforms might not address the root of the problem. According to Greenberger, federal regulators simply don’t have the resources to keep up with the brokerage firms, leaving the door wide open to fraud. “The system is weak because it’s not adequately supervised by the CFTC,” he said, adding that the CFTC is being “starved” for cash. In June, congressional Republicans voted to slash the CFTC budget by about 12 percent, or $25 million. Experts warn that without proper regulatory oversight, there’s little chance that confidence will return to the commodities markets. “It would be one thing if it were just one firm, MF Global," said Lynn Turner, former chief accountant at the Securities and Exchange Commission, now managing director at consulting firm LitiNomics. “Now we've had a couple [of brokerage failures], and I can't help but feel there are others out there. But for the grace of God, this could happen again.”

NEWS,20.07.2012

12 killed, 59 wounded in Colorado theater shooting

A gunman in a gas mask barged into a crowded Denver-area theater during a midnight showing of the new Batman movie Friday, hurled a gas canister and then opened fire, killing 12 people and injuring at least 50 others in one of the deadliest mass shootings in recent U.S. history.When the smoke began to spread, some moviegoers thought it was a stunt that was part of the "The Dark Knight Rises," one of the most highly anticipated films of the summer. They saw a silhouette of a person in the haze near the screen, pointing a gun at the crowd and then shooting."There were bullet (casings) just falling on my head. They were burning my forehead," Jennifer Seeger said, adding that the gunman, dressed like a SWAT team member, fired steadily, stopping only to reload."Every few seconds it was just: Boom, boom, boom," she said. "He would reload and shoot and anyone who would try to leave would just get killed."The suspect was taken into custody near a car behind the theater and was identified by federal law enforcement officials as 24-year-old James Holmes.Holmes was studying neuroscience in a Ph.D. program at the University of Colorado-Denver, university spokeswoman Jacque Montgomery said. Holmes enrolled a year ago and was in the process of withdrawing at the time of the shootings, Montgomery said.Authorities gave no motive for the attack. The FBI said there was no indication of ties to any terrorist groups.Police said 71 people were shot. Another 59 adults and children were wounded. Aurora police Chief Dan Oates said the suspect wore a gas mask, a ballistic helmet and vest as well as leg, groin and throat protectors. He said he had an AR-15 military-style, semi-automatic rifle, a shotgun and two pistols.FBI agents and police used a hook and ladder fire truck to reach Holmes' apartment in Aurora, Oates said. They put a camera at the end of a 12-foot pole inside the apartment and discovered the unit was booby-trapped. Authorities evacuated five buildings as they tried to figure how to disarm the flammable and explosive material."It's something I've never seen before," Oates said.At least 24 people were being treated at Denver-area hospitals, some of them for chemical exposure apparently related to canisters thrown by the gunman. Some of those hurt were children, including a 4-month-old baby, who was treated a hospital and released.Police released a statement from Holmes' family: "Our hearts go out to those who were involved in this tragedy and to the families and friends of those involved."The movie opened across the world Friday with midnight showings in the U.S. The shooting prompted officials to cancel the red-carpet premiere in Paris, with workers pulling down the display at a theater on the Champs-Elysees. Around the U.S., police and some movie theaters stepped up security for daytime showings of the movie, though many fans waiting in line said they were not worried about their safety.President Barack Obama said he was saddened by the "horrific and tragic shooting," pledging that his administration was "committed to bringing whoever was responsible to justice, ensuring the safety of our people, and caring for those who have been wounded."It was the worst mass shooting in the U.S. since the Nov. 5, 2009, attack at Fort Hood, Texas. An Army psychiatrist was charged with killing 13 soldiers and civilians and wounding more than two dozen others.In Colorado, it was the deadliest since the Columbine High School massacre on April 20, 1999, when two students opened fire in the Denver suburb of Littleton, killing 12 classmates and a teacher and wounding 26 others before killing themselves. Columbine High is about 12 miles from the theater.Friday's attack began shortly after midnight at the multiplex theater.The film has several scenes of public mayhem  a hallmark of superhero movies. In one scene, the main villain Bane leads an attack on the stock exchange and, in another, leads a shooting and bombing rampage on a packed football stadium.The gunman released a gas that smelled like pepper spray from a green canister, Seeger said. "I thought it was showmanship. I didn't think it was real," she said.Seeger said she was in the second row, about four feet from the gunman, when he pointed a gun at her face. At first, "I was just a deer in headlights. I didn't know what to do," she said. Then she ducked to the ground as the gunman shot people seated behind her.She said she began crawling toward an exit when she saw a girl of about 14 "lying lifeless on the stairs." She saw a man with a bullet wound in his back and tried to check his pulse, but "I had to go. I was going to get shot."Witness Shayla Roeder said she saw a teenage girl on the ground bleeding outside the theater. "She just had this horrible look in her eyes. .... We made eye contact and I could tell she was not all right," Roeder said.Police, ambulances and emergency crews swarmed on the scene after frantic calls started flooding the 911 switchboard. Officers came running in and telling people to leave the theater, Salina Jordan told the Denver Post. She said some police were carrying and dragging bodies.Hayden Miller told KUSA-TV that he heard several shots. "Like little explosions going on and shortly after that we heard people screaming," he told the station. Hayden said at first he thought it was part of a louder movie next door. But then he saw "people hunched over leaving theater."

Bank bailout fails to ease fears for Spain

 

Concerns about Spain's crippling financial problems flared again Friday as even news that the country had been given the final go-ahead for a bank bailout loan of up to €100 billion ($122.9 billion) failed to take the sting out of a further round of bad economic news.Earlier Friday, finance ministers from the 17 countries that use the euro unanimously approved the terms for a bailout loan for Spain's banks, which have been struggling under the weight of toxic loans and assets from the collapse of the country's property market. Investors have been fighting shy of Spain for months, worried that the country could not keep control of its deficit during a recession while supporting its stricken financial sector.Spain is the 17-country eurozone's fourth-biggest economy and many market-watchers fear that if it asked for a bailout, the rest of the region could not afford to foot the bill. The country and its banks were also locked in a vicious debt spiral, where the shaky banking system has been propped up by the indebted government so that the banks could buy more government debt. The loan facility agreed to on Friday was designed to break that spiral.The bank agreement came as Spain cut its growth forecast and one of the country's heavily indebted regions asked for help. The news sent the country's borrowing costs soaring and its stock prices plummeting. In afternoon trading, Spain's main IBEX index was down almost 6 per cent while the interest rate on the country's 10-year bond an indicator of investor confidence in a country's ability to manage its debt was at 7.2 percent. This is a rate that many market-watchers consider is too high a price for a country to pay in the long term.Treasury Minister Cristobal Montoro on Friday forecast Spain's recession will drag on into 2013, although the economy will not be quite as weak as it now. According to the latest figures, the country's gross domestic product is expected to contract 0.5 percent in 2013,compared with the previous forecast for it to grow by 0.2 percent.Unemployment, which is now at 24.4 percent, will remain about the same next year, Montoro said.Meanwhile, the economy will shrink 1.5 percent this year, a slight improvement from the 1.7 percent drop previously predicted, he added.Also Friday, the region of Valencia that it would become the first to tap a fund designed to help out Spain's 17 semi-autonomous regions. Many Spanish regions are so heavily in debt due to overspending and the burst real estate bubble that they cannot raise money at affordable rates. As a result, they are struggling to repay creditors and settle contract bills.The fund for the regions was created only last Friday and will have €18 billion ($22 billion) in capital. A third of that is a loan from the state-owned company that runs Spain's many lotteries.The government this week passed painful austerity measures tax hikes and cuts to benefits, salaries and pensions  to reduce state debt and strengthen confidence in its finances.Spaniards staged massive anti-austerity protests in 80 cities and towns across the country Thursday night. Police say 15 people were arrested and 39 people injured overnight in central Madrid after tens of thousands of people took part in a demonstration.Across Europe, markets tumbled on concerns about Spain. In France, the CAC 40 index dropped 2.14 per cent while the German DAX index was off 1.9 percent. The euro fell to a two-year low of $1.2165.

Here is a round-up of what else is happening around Europe:

BRUSSELS

Finance ministers from the 17 countries that use the euro unanimously approved the terms for a bailout loan for Spanish banks of up to €100 billion ($122.9 billion).

As part of the deal the "eurogroup" of ministers called Friday for strict monitoring of the banks that receive the aid. It also requires the Spanish government to present this month plans to reduce its budget deficit to under 3 percent of the country's €1.1 trillion ($1.34 trillion) gross domestic product by 2014."The eurogroup is convinced that the reforms attached to this financial agreement will contribute to ensuring a return of all parts of the Spanish banking sector to soundness and stability," the finance ministers said in a statement.Christine Lagarde, the head of the International Monetary Fund, welcomed the agreement."The implementation of these measures will contribute to significantly strengthen Spain's financial system, an essential step in restoring growth and prosperity in the country," she said in a statement.The agreement, which will be signed in the next few days, calls for an initial disbursement of €30 billion ($36.9 billion) this month. The full amount of money needed to shore up Spain's banks will not be known until September, after individual banks have been assessed."The aim of this program is very clear: to provide Spain with healthy, effectively regulated and rigorously supervised banks, capable of nurturing sustainable economic growth," Olli Rehn, the European monetary affairs commissioner said in a statement.

FRANCE

France's corporations and wealthy people were in the line of fire Friday, when the country's lower house of parliament passed a revised 2012 budget on Friday to raise €7.2 billion ($8.8 billion) in new revenue.The bill, drawn up by President Francois Hollande's Socialists, reverses many of the measures passed under the former conservative president, Nicolas Sarkozy, including: tax breaks on overtime, a lower wealth tax and a reduction in the social charges that employers pay into the state benefit system.The measures were necessary if Hollande's administration is going to stick to a strict schedule for reducing the deficit while growth continues to slip. The amendments assume the country will grow just 0.3 percent this year. The Socialists have said they are committed to reducing the deficit to 4.5 percent of France's gross domestic product this year and 3 percent next.France's €2 trillion ($2.4 trillion) economy is the second largest after Germany's among the 17 countries that use the euro.

ITALY

Italy's Premier Mario Monti admitted Friday that the eurozone debt crisis had spread to Italy and that the country must try to avoid taking a bailout.He emphasized that Italy does not need further budget measures to raise revenue and shore up public finances.Monti was asked to form a government late last year after weeks of market turmoil over Italy's stagnant growth and high public debt  which at €1.9 trillion ($2.6 trillion) is nearly 120 percent of GDP  forced the previous Prime Minister, Silvio Berlusconi out of office.Italy's borrowing costs have risen steadily in recent weeks due to fears that the government will not be able to handle this high debt load as the country's economy stagnates.Many of the country's debts are due soon, with Italy having to roll over more than €300 billion ($410 billion) of its debts next year alone. On Friday, the 10-year bond yield was up 0.25 percentage points at 6.15 percent, while the FTSE MIB stock index dropped 4.38 percent.

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, 11.06.2012.

Spain's 'shortsighted crisis management' - Swedish PM

 

Financial market euphoria over an EU bailout for Spain's troubled banks faded today as investors sounded the alarm over its impact on public debt and worried whether Greek elections will deepen the euro zone crisis.Madrid insisted it would stick to its borrowing plans this year after the European Union agreed to the bailout of up to 100 billion euros ($125 billion), which is aimed at rescuing banks battered by a property market collapse and recession rather than helping the Spanish state finance its budget deficit.But yields on Spanish government debt rose as Sunday's deal failed to calm concerns that Madrid may end up locked out of funding markets like the three other euro zone countries already forced into bailouts - Greece, Ireland and Portugal.With this weekend's Greek elections overshadowing that country's future in the euro zone, EU officials said they had discussed limiting the size of withdrawals from cash machines, imposing border checks and introducing capital controls as a worst-case scenario should Athens leave the bloc.Underlining how problems in one euro state can rapidly spread to others, Cyprus strongly hinted today it may become the fifth member of the bloc to apply for an international bailout before the end of this month to help its banks, which are heavily exposed to Greece."Short-sighted" Swedish Prime Minister Fredrik Reinfeldt, whose country remains outside the euro zone, said Europe was still not doing enough to tackle the fundamental causes of its economic stress."Spain and many other countries have a lot of reforms they need to do to become competitive, to get order in public finances, to recapitalise and get a sound banking sector, and if they don't do this, you can never solve it through shortsighted crisis management,".The European Commission's top economic official, Olli Rehn, told that the pre-emptive action to support Spain "is critical for calming down market turbulence in Europe and (ensuring) the proper functioning of the financial system in Spain".However, European stocks ended flat after leaping to a four-week high earlier in the day, while yields on the bonds of fellow euro zone struggler Italy rose sharply with Spain's."The bailout for Spain is a good short-term fix, not a long-term solution," Nicola Marinelli, portfolio manager at Glendevon King, said. "In this environment of short-term plasters, there are going to be periods of rallies and panic."An early rally in Spanish debt petered out, and 10-year bond yields ended the day 25 basis points higher at 6.5 percent - on course for their worst day since early April and within 30 basis points of euro-era highs.The Spanish Treasury said it would continue with regular debt auctions after Saturday's deal. While bailout funds should cover the cost of rescuing the banks, Madrid still has 37 billion euros to raise this year for its budget."Accepting aid for recapitalisation of the banking sector means it will have to finance itself on capital markets for its deficit and it's getting harder with yields climbing," said Viola Julien, a strategist at Helaba Landesbank Hesse-Thueringen.Fitch Ratings cut the long-term credit ratings for Spain's two biggest banks, Banco Santander and Banco Bilbao Vizcaya Argentaria to BBB-plus from A. However, neither is expected to take bailout funds which will go instead to weaker institutions, and Monday's announcement was a technical move following Fitch's three-notch cut Spain's sovereign rating last week.Bondholders are worried that the rescue will weigh on Spain's fast-rising public debt. They also fear that if the euro zone's future permanent bailout fund, the European Stability Mechanism, is used for the rescue, they will be subordinate to official creditors and face losses in any debt restructuring.However, a senior euro zone official said the euro zone's temporary EFSF bailout fund could be used to allay these worries.Supervision Greece's general election next Sunday, the second in as many months, could further sour markets if radical leftists hostile to the austerity terms of the country'sEU/IMF bailout outperform the mainstream conservative and centre-left parties that signed the deal, or the vote ends in another deadlock.European finance officials have held a series of conference calls in recent weeks on contingency plans should Greece leave the euro, officials said. However, they emphasised this was merely about being prepared for any eventuality rather than planning for something they expect to happen."It is sensible planning, that is all, planning for the worst-case scenario," one source said.The Bank of Greece said it was not aware of any plans such as for capital controls in the euro zone.Spanish Prime Minister Rajoy said on Sunday Madrid had scored a victory by securing aid from euro zone partners without having to submit to a full state rescue programme, saying Spain's rescue had "nothing to do" with the procedures imposed on Greece, Ireland and Portugal.But EU Competition Commissioner Joaquin Almunia and German Finance Minister Wolfgang Schaeuble said that as in those other bailouts, a "troika" of officials from the International Monetary Fund, the European Commission and the European Central Bank would oversee the financial assistance."Of course there will be conditions," Almunia told Spain's Cadena Ser radio. "Whoever gives money never gives it away for free."Schaeuble told Deutschlandfunk radio: "The Spanish state is taking the loans, Spain will be responsible for them ... There will likewise be a troika. There will of course be supervision to ensure that the programme is being complied with, but this refers only to the restructuring of the banks."Under surveillance Spanish state finances are already under European Commission surveillance under the EU's excessive deficit procedure.The bank rescue package will add up to 10 percentage points to Spain's debt-to-gross-domestic-product level, taking it close to 90 percent, while the country faces a grinding recession, with nearly one worker in four unemployed.Some economists believe Spain will eventually need a full state bailout, and that Italy may be next in line because of a similar combination of high debt and no economic growth, despite reforms initiated by Prime Minister Mario Monti.Italian Industry Minister Corrado Passera dismissed the idea that Rome might need external help at some point."Italy has done what was necessary to save itself in past months," Passera, a former banker, told reporters in Milan, saying austerity measures taken so far had positioned Italy as "among countries better placed to deal with the financial turmoil Europe finds itself in".China, to which Europe has looked largely unsuccessfully for financial support, said on Monday that the euro zone deal for Spain was a useful short-term fix, but urged the bloc to take more decisive action to safeguard longer term stability."This can be of great use in controlling short-term risk," Vice Finance Minister Zhu Ghuangyao told a news conference. "But, in the interests of mid- or long-term stability, we hope the euro zone will improve consensus and take more decisive action."The Chinese critique of Europe's slow-moving steps mirrored comments by US officials worried that the euro zone debt crisis is hurting world economic recovery and President Barack Obama's prospects of re-election in November.US Treasury Secretary Timothy Geithner welcomed the euro zone support for the recapitalisation of Spanish banks as "concrete steps on the path to financial union, which is vital to the resilience of the euro area".European Union leaders will discuss longer-term plans for deeper euro zone fiscal and banking union at a summit on June 28-29, as well as measures to revive growth. The more ambitious reforms would require treaty change that would take months, if not years, to approve and implement.

Spanish banks queue up to tap European rescue funds

 

Seven former savings banks in Spain, already patched up with state aid, will be first in line to tap European rescue funds requested by the country, though the queue for financing could grow to include all but the very biggest banks.Spain's banks lent heavily to real estate developers during a decade-long property boom which ended in 2008, leaving creditors with bad loans to housebuilders, unfinished apartment complexes and brownfield sites.The euro zone's fourth largest economy is unable to raise funds on the international markets to cover these losses at reasonable prices and had to ask on Saturday for up to 100 billion euros ($125 billion) from the euro zone to shore up its financial system.The International Monetary Fund said in a report on Friday that the most troubled former savings banks, accounting for around 22 percent of the country's financial system, faced the biggest challenge due to their high real estate exposure.The IMF did not name the entities, but seven savings banks have received state help to cope with losses and absorb mergers. Spain now has around 10 savings banks, less than a quarter of their number two years ago after the government forced a programme of consolidation.The seven banks are Catalunya Caixa; Unnim - now part of BBVA ; Espana-Duero - merged with Unicaja; NovaCaixaGalicia; Bankia ; Banco Mare Nostrum; and Banca Civica - which belongs to CaixaBank.Of those, the most problematic are fourth-biggest lender Bankia, nationalised in a 23.5 billion euro ($29.3 billion)rescue last month, and the two former savings banks struggling with capital shortfalls - mid-sized NovaCaixaGalicia and CatalunyaCaixa.Both these banks were created by combining savings banks in autonomous regions - Galicia and Catalonia - partly to placate local politicians. The state took them over last year when it became clear they could not handle their losses.These two lenders require around 9 billion euros to cover the latest government demands for capital to cushion against real estate loan defaults, the Bank of Spain told a closed-door parliamentary committee hearing, according to a political source present at the briefing.Small listed lender Banco de Valencia is another potential black spot. It was also taken over by the government with an intent to auction it off with guarantees against future losses.The lender is based in the region of Valencia, home to savings bank CAM which was called the 'worst of the worst' by a former central bank governor after losses began to soar when exposure to real estate at the bank was properly recognised.Along with its fellow Valencian lenders - CAM and Bancaja, which ended up as part of Bankia - Banco de Valencia lent unsustainably to property developers who threw up block after block of holiday apartments along Spain's Mediterranean coast.Grandiose projects The savings banks or cajas were originally set up to provide loans to people suffering in the aftermath of the Peninsular War with Napoleonic France in the early nineteenth century. Often founded by the Roman Catholic Church, they aimed to give farmers loans at reasonable interest rates during times of poor harvest.However, having a savings bank in fiercely regional Spain became a sign of autonomy. Many got hijacked by local governments who put politicians on their boards and hived off funds to pay for grandiose construction projects.Nowhere was this more evident than in the eastern region of Valencia, where the cajas bankrolled huge loss-making projects aimed at increasing the status of the region such as art centres, film studios and airports.Reports that former directors at NovaCaixaGalicia and Alicante-based CAM had awarded themselves handsome severance pay packages after they were taken over by the state provoked public outrage last year.Now Spain could even be considering folding all its rescued banks into one nationalised bank if planned auctions were not successful, a senior Economy Ministry source has said.Some mergers and sales are still happening. Former savings banks Ibercaja and Caja 3 are beginning a three-way merger with Liberbank. Together they hold toxic real estate assets of around 11.8 billion euros, around a quarter of the amount held by Bankia and parent company BFA.Beyond real estate woes There are also concerns about the mid-sized and small listed lenders, with the IMF saying these entities could record losses in 2012 due to increased provisioning requirements against performing real estate loans.Citi forecasts 2012 losses for Popular, CaixaBank and Banesto as a result of the extra provisioning.Popular has high exposure to real estate loans. It said on Wednesday it would set aside more capital to cover potential losses beyond real estate, on mortgages and loans to businesses - something other banks may have to contend with too after an independent audit of the sector is completed this summer.A recession in Spain threatens to deepen the problems for the troubled lenders."Unless the government maintains its current spending, incomes in Spain will fall and the sustainability of the private sector debts will be undermined," said analysts at CreditSights, pointing out that at the same time Spain was trying to cut its big budget deficit.Standard &Poor's downgraded mid-sized bank Sabadell , buyer of CAM, to junk status in April.