Telegraph
"The European Central Bank (ECB) is to double its capital base to cope with "credit risk" stemming from the eurozone debt crisis, paving the way for direct action to shore up the Spanish debt markets if necessary. "
Friday, 17 December 2010
Tuesday, 14 December 2010
Non-jobs are out to ruin George's Christmas
Telegraph
"The curious case of the Treasury Christmas tree sounds like a cheery festive fable, but is in fact the stuff of financial nightmares. It began when George Osborne, the Chancellor, ordered his civil servants to buy a £40 tree to adorn their office in Whitehall. They discovered, however, that this was not allowed under the terms of a Public Finance Initiative (PFI) contract, signed by Gordon Brown when he was Chancellor to raise cash to refurbish the Treasury building. Dozens of public infrastructure projects, such as hospitals and schools, have been built or renovated using PFIs, which typically spread repayments over 20 or 30 years.
Doubtless this method of public financing sounded like a good idea at the time; but the country has been landed with costs that far exceed the value of the assets. It is estimated that £260 billion is owed for the provision of £60 billion of investment. In addition, decisions about spending on fixtures and fittings are taken by contractors. So when the Treasury asked for a Christmas tree to be delivered, it was presented with a bill for £875 – at which point Mr Osborne stepped in and demanded something cheaper. After much huffing and puffing, the supplier agreed to donate a tree for free, but declined to decorate it."
"The curious case of the Treasury Christmas tree sounds like a cheery festive fable, but is in fact the stuff of financial nightmares. It began when George Osborne, the Chancellor, ordered his civil servants to buy a £40 tree to adorn their office in Whitehall. They discovered, however, that this was not allowed under the terms of a Public Finance Initiative (PFI) contract, signed by Gordon Brown when he was Chancellor to raise cash to refurbish the Treasury building. Dozens of public infrastructure projects, such as hospitals and schools, have been built or renovated using PFIs, which typically spread repayments over 20 or 30 years.
Doubtless this method of public financing sounded like a good idea at the time; but the country has been landed with costs that far exceed the value of the assets. It is estimated that £260 billion is owed for the provision of £60 billion of investment. In addition, decisions about spending on fixtures and fittings are taken by contractors. So when the Treasury asked for a Christmas tree to be delivered, it was presented with a bill for £875 – at which point Mr Osborne stepped in and demanded something cheaper. After much huffing and puffing, the supplier agreed to donate a tree for free, but declined to decorate it."
Monday, 13 December 2010
Euro has 'one in five chance' of survival, warns CEBR
Telegraph
"In a research paper published today, the Centre for Economics and Business Research (CEBR) claims that keeping "the euro alive will require cuts in living standards greater than the UK faced in the Second World War" for weaker eurozone members.
"There is no modern history of falling living standards in peacetime on the scale necessary to keep the euro in its current form. This is why I think there is at best a one-in-five chance that the euro will survive as it is," Douglas McWilliams, CEBR chief executive, said.
His warning came as the Ernst & Young eurozone forecast raised the prospect of a severe recession in the eurozone to one-in-10. Its "central" prediction is for GDP to grow 1.4pc next year, against 1.7pc in 2010, and an average of 1.9pc for the following three years. Following the resurgence of sovereign debt fears, though, there are now "greater downside risks".
"In a research paper published today, the Centre for Economics and Business Research (CEBR) claims that keeping "the euro alive will require cuts in living standards greater than the UK faced in the Second World War" for weaker eurozone members.
"There is no modern history of falling living standards in peacetime on the scale necessary to keep the euro in its current form. This is why I think there is at best a one-in-five chance that the euro will survive as it is," Douglas McWilliams, CEBR chief executive, said.
His warning came as the Ernst & Young eurozone forecast raised the prospect of a severe recession in the eurozone to one-in-10. Its "central" prediction is for GDP to grow 1.4pc next year, against 1.7pc in 2010, and an average of 1.9pc for the following three years. Following the resurgence of sovereign debt fears, though, there are now "greater downside risks".
The eurozone is in bad need of an undertaker
Telegraph
"What the German people are being asked to do is to surrender fiscal sovereignty and pay open-ended transfers to Southern Europe, taking on a burden up to six times reunification with East Germany.“If we pool the debts of the countries in the south-west periphery of Europe, we are blighting our children’s future: the debt levels are astronomic,” said Hans-Werner Sinn, head of Germany IFO institute.Any attempt to prop up the status quo will cement the current account imbalances of EMU’s North and South, to the detriment of both sides.“I doubt that the current leaders of Europe fully understand the economic implications of their decisions. They are repeating the mistakes that Germany made over reunification,” he told the Handelsblatt.Transfers to the East are still running at €60bn a year two decades after the fall of the Berlin Wall. There has been no meaningful East-West convergence for the last 15 years. "
"What the German people are being asked to do is to surrender fiscal sovereignty and pay open-ended transfers to Southern Europe, taking on a burden up to six times reunification with East Germany.“If we pool the debts of the countries in the south-west periphery of Europe, we are blighting our children’s future: the debt levels are astronomic,” said Hans-Werner Sinn, head of Germany IFO institute.Any attempt to prop up the status quo will cement the current account imbalances of EMU’s North and South, to the detriment of both sides.“I doubt that the current leaders of Europe fully understand the economic implications of their decisions. They are repeating the mistakes that Germany made over reunification,” he told the Handelsblatt.Transfers to the East are still running at €60bn a year two decades after the fall of the Berlin Wall. There has been no meaningful East-West convergence for the last 15 years. "
Saturday, 11 December 2010
Joseph Stiglitz: America's QE2 poses 'considerable' risks
Telegraph
"Nobel Prize-winning economist Joseph Stiglitz has said the US government's second bout of quantitative easing poses 'considerable' risks to global economies.
“Unintentionally, QE2 is leading to a fragmentation of global financial markets because each country takes actions to protect itself,” Mr Stiglitz said. “As more and more do that, it puts more and more pressure on those that don’t, and they will eventually be forced to take some form of action.”
"Nobel Prize-winning economist Joseph Stiglitz has said the US government's second bout of quantitative easing poses 'considerable' risks to global economies.
“Unintentionally, QE2 is leading to a fragmentation of global financial markets because each country takes actions to protect itself,” Mr Stiglitz said. “As more and more do that, it puts more and more pressure on those that don’t, and they will eventually be forced to take some form of action.”
Friday, 10 December 2010
Petrol prices hit record £1.22 a litre... but oil giants deny claims of profiteering
Daily Mail
"Motorists faced renewed misery today as petrol prices hit a new record high of £1.22 a litre.After a week of traffic chaos in the Big Freeze, the cost of filling up at the pumps has soared - adding almost £25 to the monthly bill of a two-car family.It comes as families across Britain struggle with higher food and energy bills.Escalating oil and wholesale fuel prices - and alleged profiteering by oil giants and retailers - are blamed for the increases in the price of petrol.Prices are likely to rise even higher in the New Year when the VAT rate goes up another 2.5 per cent - to 20 per cent.The AA, which has accused oil giants and fuel retailers of profiteering, has predicted highs of up to 124p in the coming weeks."
"Motorists faced renewed misery today as petrol prices hit a new record high of £1.22 a litre.After a week of traffic chaos in the Big Freeze, the cost of filling up at the pumps has soared - adding almost £25 to the monthly bill of a two-car family.It comes as families across Britain struggle with higher food and energy bills.Escalating oil and wholesale fuel prices - and alleged profiteering by oil giants and retailers - are blamed for the increases in the price of petrol.Prices are likely to rise even higher in the New Year when the VAT rate goes up another 2.5 per cent - to 20 per cent.The AA, which has accused oil giants and fuel retailers of profiteering, has predicted highs of up to 124p in the coming weeks."
Tuesday, 7 December 2010
Euro at risk of collapse, says Treasury watchdog as economic crisis sweeps Continent
Daily Mail
# Eurozone finance ministers insist £635 billion bailout fund is big enough to deal with debt crisis
# Ireland braced for 'the most feared budget in living memory'
# Dublin government's £5 billion cost-cutting package to slash social welfare and cap public workers' wages
# Eurozone finance ministers insist £635 billion bailout fund is big enough to deal with debt crisis
# Ireland braced for 'the most feared budget in living memory'
# Dublin government's £5 billion cost-cutting package to slash social welfare and cap public workers' wages
Human rights laws cost Britain £42bn in rulings and payouts
Daily Mail
"Membership of the European Court of Human Rights has cost UK taxpayers more than £42billion, according to a report.The bill for complying with its judgments has seen money thrown at litigation and diverted from essential services, it is claimed.The court, based in Strasbourg, France, has even forced Parliament to overturn a number of UK laws. It even made the government give prisoners the vote – despite strong opposition from ministers and the public."
"Membership of the European Court of Human Rights has cost UK taxpayers more than £42billion, according to a report.The bill for complying with its judgments has seen money thrown at litigation and diverted from essential services, it is claimed.The court, based in Strasbourg, France, has even forced Parliament to overturn a number of UK laws. It even made the government give prisoners the vote – despite strong opposition from ministers and the public."
Sunday, 5 December 2010
Cadbury goes Swiss to avoid British tax: Move by U.S. bosses will cost Treasury £60 million a year
Daily Mail
"The US owners of Cadbury are to switch control of the company to Switzerland in a move that could deprive Britain of more than £60 million in tax every year.The plan has been hatched by food giant Kraft, which took over the iconic British chocolate manufacturer earlier this year after a bitter £11 billion bid battle.It will see ownership of much-loved Cadbury brands including Dairy Milk, Crunchie and Twirl handed to a holding company in Zurich, where Kraft already has a major base."
"The US owners of Cadbury are to switch control of the company to Switzerland in a move that could deprive Britain of more than £60 million in tax every year.The plan has been hatched by food giant Kraft, which took over the iconic British chocolate manufacturer earlier this year after a bitter £11 billion bid battle.It will see ownership of much-loved Cadbury brands including Dairy Milk, Crunchie and Twirl handed to a holding company in Zurich, where Kraft already has a major base."
Friday, 3 December 2010
Nearly 60% of Germans want their Deutschmark back instead of ailing euro
Daily Mail
"The latest poll for the ARD TV broadcaster also showed that 66 percent of Germans fear that the current financial crisis will torpedo their savings.While 57 percent want the D-mark back, only 32 percent said they found anything positive about the common currency.The last euro survey earlier in the year - before Greece and Ireland meltdowns - showed 51 percent wanting the mark back.And seventy five percent believe that it is the financial markets and not the politicians who will decide the eventual fate of the troubled euro.This is the highest percentage of Germans wanting the D-mark to return since several polls in the 1990's showed close to 70 percent of them wanted to retain the currency of the 'economic miracle.'The zone's financial stability is still far from certain and many analysts believe the crisis will worsen before it gets better."
"The latest poll for the ARD TV broadcaster also showed that 66 percent of Germans fear that the current financial crisis will torpedo their savings.While 57 percent want the D-mark back, only 32 percent said they found anything positive about the common currency.The last euro survey earlier in the year - before Greece and Ireland meltdowns - showed 51 percent wanting the mark back.And seventy five percent believe that it is the financial markets and not the politicians who will decide the eventual fate of the troubled euro.This is the highest percentage of Germans wanting the D-mark to return since several polls in the 1990's showed close to 70 percent of them wanted to retain the currency of the 'economic miracle.'The zone's financial stability is still far from certain and many analysts believe the crisis will worsen before it gets better."
Thursday, 2 December 2010
Will it work? No. What can Ireland do? Remove the bank guarantee and default
irishtimes.com
"If the analysis concludes that Ireland is insolvent, the Government should waste no time, and restructure the debt. Massive pressure from the EU will be brought on Ireland not to do so. But the right answer to insolvency is default – not liquidity support. Let the German government pay for the German banks, and for the recapitalisation of the European Central Bank, which may need to be refinanced under such a scenario as well.
A default would cause havoc, no doubt, and would cut Ireland off from the capital markets for a while. But I would suspect that the shock would only be temporary. With a more sustainable level of debt, and the benefit of a real devaluation, Ireland should be able to pull through this. Once the market recognises that solvency is assured, I would bet international investors would once again be willing to lend. Even Argentina was able to gain funding from investors a few years after its default."
"If the analysis concludes that Ireland is insolvent, the Government should waste no time, and restructure the debt. Massive pressure from the EU will be brought on Ireland not to do so. But the right answer to insolvency is default – not liquidity support. Let the German government pay for the German banks, and for the recapitalisation of the European Central Bank, which may need to be refinanced under such a scenario as well.
A default would cause havoc, no doubt, and would cut Ireland off from the capital markets for a while. But I would suspect that the shock would only be temporary. With a more sustainable level of debt, and the benefit of a real devaluation, Ireland should be able to pull through this. Once the market recognises that solvency is assured, I would bet international investors would once again be willing to lend. Even Argentina was able to gain funding from investors a few years after its default."
Wednesday, 1 December 2010
Europe pins hopes on ECB as crisis fears spread
(Reuters) - The European Central Bank is under pressure to unveil new steps to stabilise the euro zone when it meets on Thursday as the bloc battles a crippling debt crisis that has stoked contagion fears in the U.S. and Asia.
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