Negative growth

IMF slashes growth forecast for Greece

IMF report likely to fan financial market fears over debt default as Greece struggles to cope with austerity and recession

the Guardian,

13 December, 2011

The International Monetary Fund slashed its growth forecasts for Greece and warned that ever-deepening recession was making it harder for the debt-ridden country to meet the tough deficit reduction targets under its austerity programme.

In a report likely to fan financial market concerns about a possible debt default, the regular health check by staff at the Washington-based Fund said the situation in Greece had "taken a turn for the worse".

Poul Thomsen, deputy director of the IMF's European department and its mission chief to Greece, said: "We have revised growth down significantly to -6% in 2011 and -3% in 2012. We expected 2011 to be an inflection point when the recession bottomed out, followed by a slow recovery. But the economy is continuing to trend downwards. The hoped for improvement in market sentiment and in the investment climate has not materialised."

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France stokes eurozone row with call for UK credit downgrade

Britain's credit status should be cut before France is downgraded, says its central bank governor, Christian Noyer

Bank of France govenror Christian Noyer said the UK had a bigger deficit than France and deserved to lose its triple A status first. Photograph: Roslan Rahman/EPA

the Guardian, 

16 December 2011

Tensions between London and Paris were heightened further on Thursday after the head of France's central bank suggested that the UK was a candidate for a credit rating downgrade.

France is bracing itself for the potential loss of its coveted AAA rating after two credit agencies last week indicated they were considering marking down countries in the eurozone.

But Bank of France governor Christian Noyer said they should instead be looking at the UK because of the scale of debt and inflation and the poor levels of growth and bank lending on this side of the Channel.

His comments came a day after French president Nicolas Sarkozy was quoted as branding David Cameron an "obstinate kid" for refusing to sign up to a treaty to rescue the euro last week.

Noyer told Le Telegramme newspaper that a downgrade for France – which would drive up the interest Paris pays to borrow and make loans in the wider economy more expensive – "doesn't strike me as justified based on economic fundamentals".

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Debt crisis: Brussels accord on the verge of collapse

Some of the world’s most powerful investment banks were downgraded by ratings agency Fitch as Germany’s cherished European fiscal compact appeared to be unravelling.

the Telegraph,

15 December, 2011

The banks that were downgraded last night include US banks Bank of America and Goldman Sachs, Barclays and France’s BNP Paribas. Switzerland’s Credit Suisse and Germany’s Deutsche Bank were also cut. The downgrade could raise the cost of borrowing for these banks.

Fitch cut the “issuer default ratings” at the banks to “reflect challenges faced by the sector as a whole”. The ratings agency said: “These challenges result from both economic developments as well as a myriad of regulatory changes”.

Credit ratings of the world’s biggest lenders have come under pressure as weak economic growth and concerns about whether European politicians have done enough to end the Eurozone debt crisis.

Long-term issuer default ratings for Bank of America, Citigroup and Goldman Sachs were cut to A from A+. Barclays, Deutsche Bank and Credit Suisse were downgraded to A from AA- while BNP Paribas fell to A+ from AA-.

Meanwhile, Germany’s attempt to save the Eurozone was hanging in the balance as Hungary and the Czech Republic claimed it would be damaging and protesters in Warsaw demanded Poland stands firm against Angela Merkel.

Amid fresh warnings that Europe is triggering a 1930s-style global depression, the German chancellor faced open rebellion against the key plank of her Brussels accord. The leaders of Hungary and the Czech Republic told a joint conference in Budapest they were ready to reject the planned treaty changes

and implied move towards a centralised tax system. Czech prime minister Petr Necas said he was “convinced that tax harmonisation would not mean anything good for us”.

Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe.

“The only kind of co-operation we can have with the eurozone is one which does not damage Hungary’s competitiveness,” he said.

Poles marched under banners that read: “We want sovereignty, not the euro.” They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralised spending laws. Britain used its veto in Brussels, sparking an intense backlash. Ireland and Sweden are also nervous about the fiscal pact, but Germany and France still expect the other 26 members, minus the UK, to approve it.

Mario Draghi, the head of the European Central Bank (ECB), doused the other big hope, for radical ECB support, warning that the bond-buying programme was “neither eternal nor infinite”. He said there was little he could do to restore growth. “I will never be tired of saying that the first response ought to emanate from the country. There is no external saviour for a country that doesn’t want to save itself ... sustainable growth can be achieved only by undertaking deep structural reforms that have been procrastinated [upon] for too long.”

Separately, Christine Lagarde, head of the International Monetary Fund (IMF), said the debt crisis is not yet over: “No country or region is immune. All must take action to boost growth. 

Work must start in the eurozone countries and must continue relentlessly. The risks of inaction include protectionism, isolation and other elements reminiscent of the 1930s depression.”

However, markets took comfort from a successful Spanish bond auction and better-than-expected economic data. The Stoxx Europe 600 index and the German Dax both gained 1pc, while the French CAC rose 0.8pc. In London the FTSE closed up 0.6pc. Madrid sold €6bn (£5bn) of debt at an average yield of 4.02pc, lower than the 5.276pc of two weeks ago

Manufacturers set to cut production

the Independant,

16 December, 2011

Factory bosses are preparing a cut in production in the new year after the eurozone crisis left exports at their weakest in two years, the CBI said today.

The lobby group's industrial trends survey found 32% of manufacturers expected to reduce output over the next three months, compared to 24% of firms who believe that production will rise in the quarter.

The downturn comes amid weakened export order books, with 44% of firms reporting them below normal and contributing to the worst month for business with overseas customers in nearly two years.

For article GO HERE