The European meltdown

Spanish banks need €60bn, independent auditors say

Spanish banks need a combined capital injection of almost €60bn, according to a report that Madrid claimed showed the nation’s finances were more sound that the market fears.

The Telegraph,

29 September, 2012

Despite scepticism from analysts, the results are a rare boost for Mariano Rajoy, Spain’s embattled prime minister who is struggling to contain regional rebellions as well as the financial crisis. He had promised the figure would be “far below the €100bn” Brussels has provided for.

Seven out of 14 of Spain’s biggest banks failed stress-tests conducted by consultants at Oliver Wyman, who assessed the strength of 115,000 loans.

The consultants, who were helped by the Big Four auditors and supervised by the European Central Bank (ECB) and International Monetary Fund (IMF), said Bankia Group, the lender that requested €19bn of state aid in May, now had a capital shortfall of €24.7bn.

Banco Popular, Spain’s sixth biggest bank by assets, has a shortfall of €3.2bn - almost as much as its €3.58bn market value - suggesting that it will almost certainly need state aid. Three big lenders, Banco Santander, BBVA and La Caixa were given a clean bill of health, even under the toughest senario. “The results confirm that the Spanish banking sector is mostly solvent and viable, even in an extremely adverse and highly

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UK could lose prized AAA debt rating, Fitch warns

Britain is edging closer to losing its gold-plated sovereign credit rating due weak growth and ballooning government borrowing, ratings agency Fitch has warned.

The Telegraph,

29 September, 2012

“The likelihood of a downgrade has increased,” Fitch said as it reconfirmed the UK’s “negative outlook” but slashed its forecast for 0.8pc growth this year to a 0.3pc decline and warned that international debt will hit almost 100pc of GDP.

The Chancellor will also miss one of his two cast-iron fiscal rules, the ratings agency added, but it did not call for more austerity measures to plug the gap.

Fitch’s decision to tolerate a breach of the debt reduction target without immediately downgrading the UK amounted to an implicit green light for the Chancellor to abandon the rule. It echoed comments this week by Sir Mervyn King, Bank of England Governor, who said that breaking the pledge would be “acceptable” if it was due to the global downturn.

The Government was quick to flag Fitch’s response as an “endorsement” of its austerity measures. “They stress that deliberately going out to add more to the nation’s credit card bill would threaten our international credibility and increase the chances of a downgrade,” the Treasury said in a statement.

Fitch said that “global economic headwinds, including those from the eurozone, have compounded the drag on UK growth from private sector deleveraging and fiscal consolidation”.

For article GO HERE

Italy's South Is Headed For Economic Meltdown

Italy's blighted south is heading for social and economic meltdown as a result of job losses, a massive exodus of people and "industrial desertification", according to an alarming new report.

BusinessInsider,

27 Sepetember, 2012

Unemployment in the "Mezzogiorno" is around 25pc compared with the national average of 10pc, according to Svimez, a think tank on economic development for the region.

Less than one in four women work, 147,000 jobs were lost between 2007 and 2011 and 1.35m southerners fled the region in the last decade in search of better opportunities.

Many of them came from the region’s big cities, including Palermo and Catania in Sicily, Naples in Campania and Bari in Puglia.

They headed for more prosperous parts of Italy, notably Rome, Milan and the Emilia Romagna region, a powerhouse of food production and medium-sized businesses.

Consumer spending in the south has been stagnant for the last four years and GDP per capita is around half of that in the wealthy north of Italy.

A string of bitter industrial disputes, involving a steel works in Puglia and a coal mine and aluminium plant in Sardinia, have focussed attention in recent weeks on the south’s industrial decline and lack of investment.

The sobering report was released as Mario Monti, the prime minister, tries to reassure Europe and the United States that Italy is no longer at risk from eurozone contagion and that the fundamentals of the economy are sound.

During a visit to New York, the former European Commissioner said he was “quite sure” that Italy would no longer be a source of turmoil in the eurozone.

For article GO HERE

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As Spain sinks, many in Catalonia want out

This historic region on the Mediterranean -- a center of European industrial design and tourism -- has special status as an autonomous district of Spain known as Catalonia.

USA Today,

29 September, 2012

And as financial problems mount for Spain, many here want to get a whole lot more autonomous.

Spain is entering its second recession in four years and some Catalans say they are getting little for the river of tax revenue they send to Madrid annually. The solution they say is an independent nation.

"Financially speaking, Catalonia is perfect for Spain," said Osvald Calzada, 32, a copywriter from Lleida, in the western part of the region. "Catalonia is the cow they constantly milk, only giving her enough grass to survive."

On Thursday, the Catalan parliament voted in favor of holding a referendum on independence after November elections whether allowed by the Spanish government or not (under current law, only Madrid can call a legal referendum.)

Spain is taking secession talk seriously in the current financial climate. Even King Juan Carlos, who last spoke publicly on politics during a coup attempt in 1981, appealed for restraint.

For article GO HERE

Euro Gold Prices Hit Record as "Debt Crisis Escalates" and Spain "Lays Groundwork" for a Bailout

GoldNews,

28 September, 2012

Gold Prices hovered near seven-month highs above $1780 per ounce for most of Friday morning in London – a few Dollars up on where they started the week – while stocks failed to hold early gains after a analysts interpreted Spain's budget as "laying the groundwork" for a formal bailout.

Silver Prices eased to $34.73 per ounce after failing to breach $35, while other commodities were broadly flat and US Treasury bonds gained.

Euro Gold Prices meantime remained close to all-time highs hit yesterday.

"The debt crisis in the Eurozone has escalated again," says today's commodities note from Commerzbank.

"Gold should therefore remain in high demand as a store of value and alternative currency. Silver has also been pulled upwards in gold's slipstream."

For article GO HERE