Banks in Cyprus will not resume work until the country accepts a bailout plan to rescue the local financial market, stated a European Commission spokesperson. In the statement, the official in effect said that the EC supports the position of Germany, which has requested the Cypriot government to stop financing banks by Friday. “At present, the European Central Bank is supplying half the financial resources for the system in Cyprus. If the ECB flow is shut down, banks in Cyprus will default,” added the EC spokesperson.
By the year 2020 China’s satellite navigation system “Beidou” will become global, making it one step closer to becoming a superpower. E. Peitzyan, a member of the All-Chinese Committee of the People’s Political Consultative Congress of China, had made an announcement to this effect. The Chinese Beidou will become a real competitor for the Russian GLONASS and the US GPS. The Beidou system will be able to service its clients all over the world in the area of positioning, navigation and timing with a great degree of precision and reliability.
Argentina has announced a two-month price freeze on supermarket products in an effort to stop spiraling inflation.
The price freeze applies to every product in all of the country’s largest supermarkets – a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies’ trade group, representing 70 per cent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported. The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1.
The U.S. government may default on its debt as soon as Feb. 15, a half-month earlier than widely expected, according to a new analysisadding urgency to the debate over how to raise the federal debt ceiling.
The analysis by the Bipartisan Policy Center says that the government will be unable to pay all its bills starting sometime between Feb. 15 and March 1.The government hit the $16.4 trillion statutory debt limit on Dec. 31 , but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.
A Washington analyst said that the U.S. government now has a one-in-five chance of defaulting on its debt, citing the acrimonious debate in Washington over resolving the fiscal cliff.
“The next fiscal cliff is going to be more toxic and could end with an almost unthinkable conclusion: a technical default on the U.S. debt,” wrote Chris Krueger, a senior political analyst at Guggenheim Partners’ Washington Research Group. “We are raising our odds of a debt default from 10% to 20%.
Last week, Eurogroup head Juncker warned that the situation tiny Cyprus was more worrisome than Greece. While this seemed to be an exercise in hyperbole, sure enough Monday, a Cyprus official was quoted on the news wires warning of an imminent default. Hang on. Didn’t Cyprus reach a memorandum of understanding with the Troika? Indeed, it did. However, it will take some time to deliver the funds. Essentially and in principle, there was an agreement on aid in the neighborhood of 17.5 billion euros.
The venerable Swiss-based institution – almost alone in warning of a global debt crisis in the build-up to the Great Recession – said it is rare for markets to gather steam at a time when the major forecasters are turning gloomy.
The International Monetary Fund and the OECD have downgraded their outlooks for 2012 and 2013, with sharp cuts for much of Europe as well as for Brazil, China, and India.
The credit rating agency Fitch Ratings on Tuesday downgraded Argentina, which is locked in a court battle in New York over its debt, and said the country would probably default.
Fitch cut its long-term rating for Argentina to “CC” from “B,” a downgrade of five notches, and cut its short-term rating to “C” from “B.” A rating of “C” is one step above default.
An American hedge fund has seized a ship owned by the Argentine navy from a Ghanaian port, as part of an attempt to collect on bonds purchased after Buenos Aires defaulted in 2001.
The fund, Elliott Capital Management, has been engaged in a long-running legal battle with the Argentine government. It specialises in what is euphemistically termed “distressed debt” – it buys up bonds held by countries which are extremely likely to default, or which have already defaulted. As a result, it gets them for a pittance, around one fifth of face value.
Russia is on the brink of stagnation and only has limited time to brace for an impending global slump, former Finance Minister Alexei Kudrin told Reuters.
Kudrin, a widely respected fiscal hawk who quit 12 months ago, said “unprecedented” policy action taken by the U.S. Federal Reserve and other major central banks might delay a debt crisis by “maybe a year”.
“As soon as these measures fade, the crisis could resume,” Kudrin said in an interview on Friday before the Reuters Russia Investment Summit, to be held in Moscow from Sept. 24-27.
Spanish consumers are pulling their cash out of banks at record levels, according to figures released on Tuesday.
Private sector deposits fell by nearly 5 percent in July to €1.509, the Telegraph reported, citing European Central Bank data, as public confidence in the banking system reached all-time lows amid a worsening economic situation.
The news comes after bond markets continued to hammer the debt-ridden euro zone nations Spain and Italy last week.
On Friday, the interest rate on a 10-year loan to the Spanish government briefly topped 6 percent — a level that forced Greece into a default earlier this year, despite massive financial support from international sources — before settling back to 5.96 percent.
Belize is in danger of defaulting on its debt after it missed a $23m (£14.6m) bond payment due on Monday.
The government still has a 30-day grace period to pay the interest, but said it was unlikely to be able to do so.
Creditors accuse Belize of trying to force a Greek-style debt restructuring on holders of the $550m bond, which represents half its public debt.
The row has drawn attention to Caribbean countries’ growing debt burden amid falling tourism revenues.
Monday marks a significant anniversary in recent economic history for it was on this day in 1982 that Mexico announced a moratorium on its international debts. The default marked the start of what became known as the third world debt crisis.
Three decades later that crisis is now the first world debt crisis. For Mexico read Greece. For American, British and Japanese banks recycling the 1970s windfall profits of oil producers to sub-prime Latin American governments read US and European banks pumping out cheap credit to sub-prime mortgage holders.
Municipal bond defaults occur with a frequency at least 36-fold greater than reported by credit raters, Federal Reserve Bank of New York researchers say.
When including unrated debt not covered by the firms, 2,521 issuers in the $3.7 trillion market for state and local bonds defaulted from 1970 to 2011, authors Jason Appleson, Eric Parsons and Andrew Haughwout wrote today in a blog posting. That compares with 71 reported by Moody’s Investors Service for issues it rated over the period.
“Although the low default history of municipal bonds has played a key role in luring investors to the market, frequently cited default rates published by the rating agencies do not tell the whole story,” the researchers wrote.
Greece is in a “Great Depression” similar to the American one in the 1930s, the country’s Prime Minister Antonis Samaras told former U.S. President Bill Clinton on Sunday.
Samaras was speaking two days before a team of Greece’s international lenders arrive in Athens to push for further cuts needed for the debt-laden country to qualify for further rescue payments and avoid a chaotic default.
Athens wants to soften the terms of a 130-billion euro bailout agreed last March with the European Union and the International Monetary Fund, to soften their impact on an economy going through its worst post-war recession.
People’s Republic of California Does It Again: City of Compton may declare bankruptcy by September: officials
The City of Compton, a city of 93,000 people located on the outskirts of Los Angeles, must decide by September 1 whether to seek bankruptcy, according to its two most senior financial officials.
Such a move would see it join a growing number of deficit-hobbled California cities that have used the filing to restructure onerous debt loads.
De la Rúa had declared a ‘state of siege’ after thousands marched throughout Argentina banging pots and pans – in what is now termed the cacerolazo.
The social unrest triggered further political turmoil: four presidents held office in 10 days after De la Rúa’s resignation. Following an emergency session at Congress, Eduardo Duhalde was sworn in on January 2, 2002, providing some stability.
This was the fallout from the collapse of Argentine economy, which led the South American nation to default on $100bn (£64bn) of debt – the biggest sovereign default in history until Greece’s partial restructuring three months ago.
Spain’s bailout was a failure – an abject flop that was supposed to buy the country credibility, but instead bought only four hours of peace before investors continued to panic.
And perhaps Americans should start panicking too. It seems at least plausible now that the euro zone’s leaders will bumble their way into the worst-case scenario, where a destitute Spain or Italy finally chooses to leave the currency union, leading to its inevitable breakup. The economic carnage could easily drag our fragile economy down too.
Policymakers and firms across Europe are making preparations to cope with a break-up of the single currency as the president of the Swiss central bank became the latest senior figure to admit to contingency plans for a “collapse” of the eurozone.
“We must be prepared just in case the currency union collapses, although I don’t expect that to happen,” said Swiss National Bank boss Thomas Jordan.
Mr Jordan added that his objective if it did come to the worst would be to prevent funds flooding into the safe haven of the Swiss franc, which could damage his country’s export sector.
Greece will leave the euro zone next year and the country’s new currency will “immediately fall by 60 percent,” according to Citi chief economist Willem Buiter.
Greek officials have repeatedly stressed that the country will be running out of cash by the end of June, after which it would be unable to make debt payments and pay civil wages and pensions. An election is scheduled for June 17 after inconclusive results of the May 6 polls meant a government could not be formed.
Moody’s Investors Service downgraded the debt ratings of 26 Italian banks Monday as they struggled with the effect of the weak economy and government austerity measures.
The move means Moody’s now ranks Italy’s banks lower than most of their Western European peers.
The ratings agency said the banks are suffering because Italy is back in recession and government measures are cutting demand for loans. Banks are facing more loan losses, limited access to funding and weaker profits.
Moody’s noted, however, that support from the European Central Bank lowered the default risk of many of the banks.
A new armed group on Friday tightened its grip on the Malian city of Timbuktu as the Tuareg rebels reached the center.
Members of the National Liberation Front of Azawad (FLNA), which was set up this month, on Thursday arrived in vehicles and seized control of entries to the east and south of the ancient city.
On Friday the group, which says it has neither a secessionist nor Islamist agenda, moved into Timbuktu’s central area.
“Around 100 vehicles full of armed FLNA fighters came today to the (central) Sans Fil area of Timbuktu. They are armed to the teeth,” said a Malian security source in the town.
For the first time in the history of the European Union, the collapse of the EU has become a realistic scenario. This was stated by the Chairman of the European Parliament, Martin Schulz. Speaking before the board of commissioners, Schulz drew their attention to the fact that the leaders of EU member states are not satisfied with the method of communitarian decision-making in favor of their “re-nationalization”.
Schultz expressed concern over the calls in France and Germany to restore border controls in the Schengen area and the growth of xenophobia in the EU.
Financier George Soros also predicted the imminent end of the euro and the European Union in general. In an interview with the French Le Figaro, Soros has compared the crisis in the European Zone with the collapse of the Soviet Union.
On April 25, Azeri troops shelled the village of Doveg, Armenia’s Tavush province.
As a village administration representative Manya Sarukhanyan, told PanARMENIAN.Net Azeri troops have been shelling the village from 11 am to 12 pm local time.
Local school and kindergarten students were immediately evacuated; the incident was reported to commanders of a regional regiment, who’ve already arrived at the site to take necessary measures.
Sudanese forces killed hundreds of South Sudanese during a day-long battle for Sudan’s most important oil field Heglig, a senior official said on Sunday.
Nafie Ali Nafie, a top aide to President Omar al-Bashir, said the “death toll within the SPLA and mercenaries in [the] Heglig battle amounted to 400″, according to the Sudanese Media Centre which is close to the security apparatus.
It did not say how many Sudanese troops died and the army itself has released no casualty figures for either side.
The crisis-hit euro is teetering on the brink of collapse, the International Monetary Fund (IMF) has said.
In a significant vote of no-confidence, Tuesday’s report from the global financial organisation admitted the troubled European single currency had “flaws” and was at risk of a “disorderly default and exit by a euro area member”.
And it warned that a euro meltdown could be even more devastating for the world economy than the 2008 credit crunch, the express.co.uk reported.
The admission in the World Economic Outlook from the IMF came amid renewed fears that Spain could soon follow Greece, Portugal and Ireland in accepting a multi-billion pound international bail-out.
America’s swelling ranks of fallen municipal borrowers have been blamed in the past year on ‘what-were-they-thinking’ causes, be it a Taj Mahal sewer system in Alabama or an overpriced trash incinerator in Pennsylvania’s capital city of Harrisburg.
But the next series of major cities and counties in danger of defaulting on their debt can hardly point to one single decision for their malaise. Whether it be Detroit, Miami or Providence, Rhode Island, their problems have a lot more to do with financial policies that put them on course to live well beyond their means.
Several Israeli firms are competing for the purchase of Greek state assets as the debt-stricken country pushes ahead with its world-record 50-billion-euro divestment program.
Mekorot Israel National Water Co. is in informal discussions to purchase the Athens and Thessaloniki water and sewage companies. One Israeli group is among 17 anonymous foreign bidders for natural-gas company DEPA. Another has expressed interest in buying weapons manufacturer Hellenic Defense Systems.
Hellenic Republic Asset Development Fund CEO Costas Mitropoulos revealed the above to reporters in Tel Aviv on Sunday, in between meetings with about 50 different potential Israeli investors.
Last week, controversial politician Bo Xilai, whose relatively open campaigning for a seat on China’s top ruling council shocked China watchers (and possibly his elite peers, as well), was removed from his post as Chongqing’s party secretary. He hasn’t been seen since. Rumors of a coup, possibly coordinated by Bo’s apparent ally Zhou Yongkang, are in the air.
Western media has extensively covered the political turmoil: Bloomberg reported on how coup rumors helped spark a jump in credit-default swaps for Chinese government bonds; the Wall Street Journal opinion page called Chinese leadership transitions an “invitation, sooner or later, for tanks in the streets.” The Financial Times saw the removal of Bo, combined with Premier Wen Jiabao’s strident remarks at a press conference hours before Bo’s removal as a sign the party was moving to liberalize its stance on the Tiananmen square protests of 1989. That Bo staged a coup is extremely unlikely, but until more information comes to light, we can only speculate on what happened.
We’ve known, or at least some of us have asserted, for some time now that the best thing for Greece would be a default and exit from the euro. The country simply cannot pay its current debt burden so default of some kind is the only option. And my view has been that growth won’t return until they are outside the euro and thus able to depreciate the currency.
However, we’ve all also been assuming that the powers that be (the IMF, the ECB, the EU itself) want to keep Greece inside the euro. And it may be that that assumption either has been wrong or is becoming so. For there’s an increasing suspicion that the negotiations are being manipulated to makeGreece default and leave rather than prevent it from doing so.
Greece is already bust — and its default is already priced into the market. But Portugal is in precisely the same position, just on a longer fuse. It too is sliding toward an inevitable default on its debts — and when it does so, it will deliver a terminal political blow to the single currency, and inflict damage on the European banking system that may well prove catastrophic.
The World Economic Forum’s annual gathering of global and corporate leaders has commenced in Davos. Tracy Corrigan, Editor-in-Chief, The Wall Street Journal Europe, tells us what the big themes are at the conference.
The bleak outlook at the start of this year is shared by a majority of 345 respondents from business, government, international organisations and academia.
“A major geopolitical disruption early in the new year would certainly tip the global economy in the wrong direction given current confidence levels,” said Lee Howell, the managing director at the WEF responsible for the Forum’s Global Risks Report 2012.
“The possibility of a geoeconomic disruption, such as sovereign default, is to some degree reflected in the market, but a major geopolitical disruption clearly is not,” added Howell.
Fitch Ratings sees no quick fix to the euro zone crisis ahead of a crucial meeting of European leaders in Brussels on Wednesday and amid worrying signs that a European recession will set in this winter.
“There is no quick fix, no matter what comes from the summit on Wednesday,” said Tony Stringer, Fitch΄s global head of sovereign ratings by teleconference.
The derivatives market is valued at more than $600 trillion and 95.9% of it is held by four banks: JPMorgan Chase, Bank of America, Citigroup and Goldman Sachs. Of this amount between $2 trillion and $8 trillion remain uncollateralized, and experts warn that the entire market represents a financial bomb with an unpredictable fuse. There is simply not enough capital available to cover the projected losses if a failure in the derivative market should occur, and such a failure would cause the global market to spin out of control.
GREECE may be unable to avoid defaulting on its sovereign debts and Europe should prepare for that event to ease reaction in financial markets, billionaire investor George Soros said.
“Greece needs to do everything it can to avoid default, but it may not be able to,” Soros said on a panel at the IMF and World Bank meetings in Washington.
If I borrow £1,000 from you and then, because of spectacular bad luck cannot pay it back, but I come to you and say, “here is £750, can we call it quits?” – that is a controlled default.
If I borrow £1,000 from you and you ring me up and you get directory inquiries in the Dominican Republic – that is an uncontrolled default.
Right now, Greece’s fate hangs in the balance somewhere between these two. It has already received what economists called a “haircut”. That is a voluntary agreement from its creditors to take 79 cents in the euro and extend the loans for up to 30 years. Ninety per cent have signed up to this.
Anything more than that should trigger a “credit event” allowing those who have insured themselves against losses on Greek debt to start calling in their money. That is what politicians fear will shoot the Greek debt issue like a sabot anti-tank round straight through the hull of the global economy.
The best example we have of an uncontrolled default is Argentina in 2001.
Alabama’s largest county began laying the groundwork Tuesday for what would be largest U.S. municipal bankruptcy after three years of trying to work out a solution with Wall Street to more than $3 billion in debt linked to a massive sewer rehabilitation project tainted by corruption.
Source: Business Week President Nicolas Sarkozy has been a key player in shaping Europe’s response to the debt crisis that has so far infected Greece, Ireland, and Portugal. Yet the most important thing he can do to shore up the euro may be to deal with the mounting economic problems in his own country. “On [...]