Share prices fall amid fears fatal weaknesses will be found in at least half a dozen institutions Financial markets are bracing themselves for a nervous weekend amid fears that today’s annual health check of Europe’s banks will find fatal weaknesses in at least half a dozen institutions, piling more pressure on the embattled single currency. Share prices fell and borrowing costs in vulnerable countries such as Italy and Spain rose as dealers awaited the results of the stress tests on 90 European banks, which will be announced once the markets have closed for business on Friday. Amid growing concern that Europe’s policy makers have allowed the debt crisis to spread to the major economies of monetary union, the announcement will provide details of the exposure of individual banks to debt writedowns or defaults. While the UK’s banks are expected to pass the stress tests, there are fears that the results could add to the market jitters rather than provide reassurance. The FTSE100 was down nearly 60 points in London on Thursday amid anxiety that the tests will show banks do not have enough capital to cope with bad debts. Although the tests have been toughened up since last year, they do not include the possibility of a Greek default, seen as increasingly likely by the markets. Italy had to pay record interest rates of 5.9% to persuade investors to buy its bonds, while borrowing costs for Spain also rose. Estimates of how many banks will need extra capital range from nearly a third of the 90 European banks, according to the ratings agency Moody’s, to nine banks needing €29bn, according to the average opinion in a poll of investors by Goldman Sachs last month. Six Spanish banks are expected to fail, although analysts polled by Reuters expect between five and 15 banks to fail. Marie Diron, senior economic adviser to the Ernst & Young eurozone forecast, said: “The stress tests are unlikely to bring much relief to the current tensions that plague the eurozone. They will probably show a small minority of banks failing, mainly in the eurozone periphery, with possibly a few banks in core eurozone countries failing too. But the credibility of the stress tests has been undermined by what is perceived to be too lenient assumptions.” The tests – discredited last year when Ireland’s banks collapsed four months after being given a clean bill of health by the regulators – are already causing controversy as the number of banks being tested was originally 91. However, the German bank Helaba pulled out on Wednesday in a dispute with the European Banking Authority, which is overseeing tests by domestic regulators. The UK’s banks, two of which have already been bailed out, are believed to have passed. The tests are conducted by national regulators across Europe but compiled by the European authority, which requires banks’ crucial core tier one capital to remain above 5% after worst-case scenarios, which include a drop in GDP over two years of 4%, compared with 3% for last year’s tests. Tamara Burnell of M&G Investments said: “In our view it is a bit like taking a driving test: you can pass the test and yet still be a terrible driver. The real test of whether anyone trusts you is whether people are prepared to get in the car with you. So whether or not banks pass the 5% core tier one stress test hurdle, the real test is whether investors and depositors trust them with their money over the long term, and there’s a long way to go before the European banks rebuild their reputation after a series of offences.” While an outright default by a European nation has not been included in the test – despite the fact that officials are now prepared for a Greek default – Christopher Wheeler, banks analyst at Mediobanca, notes that only about 20% of the government bonds held by banks are being stress tested because they sit in their trading books, rather than the banking books where bonds are held to maturity. Making assumptions about the “haircuts” – losses on government bonds across Europe – Mediobanca estimates that €81bn could be knocked off banks’ capital, 9% of the sector, in 2012. It is not just banks’ holdings of government bonds that are important, but also the way that governments have stepped in to support banks during the crisis, making the health of banks and their governments inextricably linked. Burnell said: “What we need to test is the ability of sovereigns to separate themselves from their banks.” Euro Stock markets Banking Currencies Europe Jill Treanor guardian.co.uk
Continue reading …Share prices fall amid fears fatal weaknesses will be found in at least half a dozen institutions Financial markets are bracing themselves for a nervous weekend amid fears that today’s annual health check of Europe’s banks will find fatal weaknesses in at least half a dozen institutions, piling more pressure on the embattled single currency. Share prices fell and borrowing costs in vulnerable countries such as Italy and Spain rose as dealers awaited the results of the stress tests on 90 European banks, which will be announced once the markets have closed for business on Friday. Amid growing concern that Europe’s policy makers have allowed the debt crisis to spread to the major economies of monetary union, the announcement will provide details of the exposure of individual banks to debt writedowns or defaults. While the UK’s banks are expected to pass the stress tests, there are fears that the results could add to the market jitters rather than provide reassurance. The FTSE100 was down nearly 60 points in London on Thursday amid anxiety that the tests will show banks do not have enough capital to cope with bad debts. Although the tests have been toughened up since last year, they do not include the possibility of a Greek default, seen as increasingly likely by the markets. Italy had to pay record interest rates of 5.9% to persuade investors to buy its bonds, while borrowing costs for Spain also rose. Estimates of how many banks will need extra capital range from nearly a third of the 90 European banks, according to the ratings agency Moody’s, to nine banks needing €29bn, according to the average opinion in a poll of investors by Goldman Sachs last month. Six Spanish banks are expected to fail, although analysts polled by Reuters expect between five and 15 banks to fail. Marie Diron, senior economic adviser to the Ernst & Young eurozone forecast, said: “The stress tests are unlikely to bring much relief to the current tensions that plague the eurozone. They will probably show a small minority of banks failing, mainly in the eurozone periphery, with possibly a few banks in core eurozone countries failing too. But the credibility of the stress tests has been undermined by what is perceived to be too lenient assumptions.” The tests – discredited last year when Ireland’s banks collapsed four months after being given a clean bill of health by the regulators – are already causing controversy as the number of banks being tested was originally 91. However, the German bank Helaba pulled out on Wednesday in a dispute with the European Banking Authority, which is overseeing tests by domestic regulators. The UK’s banks, two of which have already been bailed out, are believed to have passed. The tests are conducted by national regulators across Europe but compiled by the European authority, which requires banks’ crucial core tier one capital to remain above 5% after worst-case scenarios, which include a drop in GDP over two years of 4%, compared with 3% for last year’s tests. Tamara Burnell of M&G Investments said: “In our view it is a bit like taking a driving test: you can pass the test and yet still be a terrible driver. The real test of whether anyone trusts you is whether people are prepared to get in the car with you. So whether or not banks pass the 5% core tier one stress test hurdle, the real test is whether investors and depositors trust them with their money over the long term, and there’s a long way to go before the European banks rebuild their reputation after a series of offences.” While an outright default by a European nation has not been included in the test – despite the fact that officials are now prepared for a Greek default – Christopher Wheeler, banks analyst at Mediobanca, notes that only about 20% of the government bonds held by banks are being stress tested because they sit in their trading books, rather than the banking books where bonds are held to maturity. Making assumptions about the “haircuts” – losses on government bonds across Europe – Mediobanca estimates that €81bn could be knocked off banks’ capital, 9% of the sector, in 2012. It is not just banks’ holdings of government bonds that are important, but also the way that governments have stepped in to support banks during the crisis, making the health of banks and their governments inextricably linked. Burnell said: “What we need to test is the ability of sovereigns to separate themselves from their banks.” Euro Stock markets Banking Currencies Europe Jill Treanor guardian.co.uk
Continue reading …
• Republicans insist on spending cuts without raising taxes • Obama sets 22 July deadline for action • JP Morgan chief warns of severe damage to global economy if US defaults The US faces the prospect of a “catastrophe” as President Barack Obama stands firm against Republican demands for deep spending cuts without any tax increases as the condition for raising the country’s borrowing limit and avoiding a debt default. With Washington gripped by a growing sense that it may be too late to avert a crisis, the president has said he will give the increasingly rancorous negotiations until the end of next week to reach agreement on the terms for raising the US’s $14.3 trillion (£8.9tn) debt ceiling. The White House has said that if there is no agreement by 22 July, then discussion about budget cuts and taxes should be abandoned in favour of legislation dealing solely with raising the debt ceiling before the borrowing limit is reached on 2 August. But the Republicans have rejected legislation without agreement on budget cuts. With European leaders also facing a potentially ruinous debt crisis, a leading Wall Street figure described the prospect of a US default as catastrophic. Jamie Dimon, chief executive of JP Morgan, one of Wall Street’s biggest banks, said: “No one can tell me with certainty that a US default wouldn’t cause catastrophe and wouldn’t severely damage the US or global economy. And it would be irresponsible to take that chance.” On Wednesday, Ben Bernanke, the chairman of the Federal Reserve, warned of a “huge financial calamity” if a political agreement is not reached. He told Congress a default would “send shockwaves through the entire financial system”. Hours later, the credit ratings agency Moody’s warned that it may downgrade the US’s AAA credit rating, saying there is a “rising possibility” that no deal will be reached by next month’s deadline. On Thursday, Moody’s threatened to downgrade the AAA ratings of government lenders Fannie Mae, Freddie Mac, Federal Home Loan Banks and Federal Farm Credit Banks, illustrating the vulnerability of the already depressed housing market to a government default. China, the US’s biggest creditor, added to the pressure (on Thursday by publicly urging Washington to protect investors’ interests. The dollar continued its fall as investors shifted to other assets such as gold, which hit a record high on Thursday. At the heart of the political wrangling is a determination by each side to blame the other for a stagnant economy, with unemployment remaining stubbornly high at above 9%. The latest economic figures showed only a 0.1% increase in retail sales and a minor drop in the number of new jobless claims – by 22,000 to 405,000 last week – suggesting the rate at which companies are laying off workers is falling. If the debt ceiling is not raised by 2
Continue reading …
Click here to view this media Rachel Maddow takes the inside the beltway conventional wisdom to task that the “tea party”– or as I like to call them the astroturf Republican re-branding effort — were somehow going to be all about the economy and fiscal issues. As she clearly shows in her chart with just how many anti-abortion laws have been passed since the election, it’s still all just guns, gays and god with these people. They may have managed to get the Bush-name-stink off of them by latching onto this phoney third party movement, but it’s still the same old GOP and it’s now controlled by its TeaBircher rabid right-wing base.
Continue reading …
Attempt to resist order that they should face same reforms as other public sector workers risks backlash MPs are to fight attempts to make them pay more into their pension pots, risking a backlash from the 4 million public sector workers facing increases in their contributions. MPs who run the parliamentary pension scheme are to defy a government order set out yesterday that they should face the same reforms to their pensions as other public sector workers, arguing that they are already among the highest contributors in the public sector – paying 11.9% of their salary – and saw a rise in contributions only two years ago. The leader of the Commons, Sir George Young, told parliament on Thursday he would pass the issue to the Independent Parliamentary Standards Authority, completing a process to remove responsibility for parliament to set its own pay and remuneration following the expenses crisis. “Given the failure of self-regulation, which so damaged parliament’s reputation, this represents a significant step in drawing a line under the problems of the past and rebuilding public confidence,” he said. “We have consistently made clear that parliamentary pensions must be reformed in the light of the [Hutton Report's] findings and subsequent application to other public service schemes. “There is no case for MPs being treated differently from other public servants.” But Brian Donohoe MP who chairs the trustees of the parliamentary scheme said they would argue for less than the suggested 5%. “There’s an awful lot to be negotiated,” he said. “MPs have already paid an additional 1.9% and that was increased about 25 months ago. If people know how much we pay compared with elsewhere I think we can make a case,” he said. “We have to set an example to the country but we don’t have to capitulate to unreasonable demands. My job is to represent members of the scheme.” The government has said it is to increase pension contributions by an average of 3.2 percentage points for public sector workers, but those earning under £18,000 will be protected, meaning high earners will pay more. The chief secretary to the treasury, Danny Alexander, has said the highest increases would be capped at five percentage points, which under current conditions would probably be applied to MPs, who earn £65,738 a year. They will also move from a final salary scheme to to a “career average” scheme. In practice this will only affect ex-ministers, as ordinary MPs have a flat-rate salary. The government has already accepted that a special case may have to be made for members of the local government scheme which, like the MPs scheme, is self-funded and has a large investment fund. The MPs’ fund, however, is about to go into the red because so many MPs retired at the last election and began drawing their pensions. Mark Serwotka, general secretary of the PCS union, which has been at the forefront of the strikes against the pension reforms, said: “While the unreconstructed Tory millionaires in the cabinet are seeking to force public sector workers to pay more and work longer for much less in retirement, it seems MPs remain reluctant to see their own pensions cut. “If this was out of empathy for public servants it would be welcome, but I suspect it has more to do with protecting their very generous arrangements that so far have received little scrutiny.” House of Commons Public sector pensions Public services policy Polly Curtis guardian.co.uk
Continue reading …
Cover used by US intelligence to spy on Bin Laden in Pakistan ‘threatened immunisation work around the world’ Médecins Sans Frontières has lashed out at the CIA for using a fake vaccination programme as a cover to spy on Osama bin Laden on Thursday, saying it threatened life-saving immunisation work around the world. The international medical aid charity said the ploy used by US intelligence, revealed this week in the Guardian, was a “grave manipulation of the medical act”. The CIA recruited a Pakistani doctor and health visitors before the operation in May that killed Bin Laden in Abbottabad in northern Pakistan, to try to ascertain whether the al-Qaida leader was living in the compound. The doctor, Shakil Afridi, set up a vaccination drive for Hepatitis B in the town in order to try to gain entry to the Bin Laden compound and obtain DNA samples from those living there. On Thursday night, a senior US government official defended the practice, saying it had been intended as “an actual vaccination campaign conducted by real medical professionals”. He said the team was supposed to deliver the full course of three vaccinations to those treated in Abbottabad. The official, who spoke on condition of anonymity, added: “And it’s not as if this kind of campaign is something the CIA runs every day.” However, on the ground in Abbottabad the Guardian discovered that while the vaccine doses themselves were genuine, the medical professionals involved were not following procedures. In an area called Nawa Sher, they did not return a month after the first dose to provide the required second batch. Instead, according to local officials and residents, the team moved on, in April this year, to Bilal Town, the suburb where Bin Laden lived. “The risk is that vulnerable communities – anywhere – needing access to essential health services will understandably question the true motivation of medical workers and humanitarian aid,” said Unni Karunakara, MSF’s international president. “The potential consequence is that even basic healthcare, including vaccination, does not reach those who need it most.” Afridi was arrested in late May by Pakistani intelligence, for working for a foreign spy agency. The United States is pressing Pakistan to let him go and allow the doctor and his family to be resettled in the US. Islamabad is infuriated by the CIA’s activities inside the country, which were kept secret from their Pakistani counterparts. “It is challenging enough for health agencies and humanitarian aid workers to gain access to, and the trust of, communities, especially populations already sceptical of the motives of any outside assistance,” said MSF. “Deceptive use of medical care also endangers those who provide legitimate and essential health services.” The impact of the fake vaccination drive may be keenly felt in Pakistan, where the public already sees an American conspiracy everywhere. Polio campaigns could be at particular risk, as Pakistan has the biggest polio problem in the world. The US official said: “The vaccination campaign was part of the hunt for the world’s top terrorist, and nothing else. If the United States hadn’t shown this kind of creativity, people would be scratching their heads asking why it hadn’t used all tools at its disposal to find Bin Laden.” The CIA has not publicly admitted that it used the doctor. A CIA spokesman, George Little, would only say: “Finding Osama Bin Laden is a major victory for the United States and Pakistan.” Vaccines and immunisation CIA Pakistan Osama bin Laden Aid United States Saeed Shah guardian.co.uk
Continue reading …
Agency to investigate claims Rupert Murdoch’s News Corp sought to hack into phone of victims of 9/11, reports say The FBI has opened an investigation into allegations that media mogul Rupert Murdoch’s News Corporation sought to hack into the phones of September 11 victims, a law enforcement official has said. The decision to investigate was made after US Congressman Peter King, a Republican, wrote to FBI director Robert Mueller demanding an investigation, said the official, who spoke to the Associated Press on condition of anonymity. The FBI had received letters from King and other members of Congress. News Corporation, which is based in New York, has been in crisis mode because of a scandal that forced the News of the World to close last Sunday. The Guardian reported last week that the News of the World had hacked into the phone of Milly Dowler in 2002 and may have impeded a police investigation into her disappearance. More possible victims soon emerged: other child murder victims, 2005 London bombing victims, the families of dead soldiers and former prime minister Gordon Brown. The FBI’s New York office did not immediately comment. There was no immediate response to a phone message left for News Corp. The US attorney’s office in Manhattan referred a call to the Department of Justice, which declined immediate comment. On Thursday, Murdoch bowed to pressure from parliament as he and son James first declined – and then agreed – to appear next week before politicians investigating phone hacking. Paul Wallis, a former News of the World executive editor, became the seventh person arrested by Scotland Yard relating to the inquiry into phone hacking at the now-defunct tabloid, whose closure was seen as an attempt to keep alive a bid for the highly profitable network BSkyB. FBI Phone hacking News Corporation United States Rupert Murdoch Media business Newspapers & magazines National newspapers Newspapers guardian.co.uk
Continue reading …Lou Dobbs thinks President Obama is ‘beneath contempt’ for warning that debt-ceiling vote will hit Social Security payments
July 14, 2011 No Comment
Click here to view this media The usual cast of right-wing pundits was all worked up yesterday on Fox about President Obama’s simple observation that if House Republicans refuse to raise the debt ceiling, he won’t be able to guarantee that he can write Social Security payment checks come Aug. 3. He’s fearmongering! Scaring old people! How disgraceful! This, of course, from the people who brought you “death panels.” Moreover, it’s coming from the same people who then turn around and try to make seniors fearful that Obama is going to take away their Medicare coverage. The apotheosis of this miscreancy was Lou Dobbs on Bill O’Reilly’s show last night, unleashing a relentlessly vicious assessment of every Obama step, culminating in his complaint that Obama’s remarks were “so low as to be contemptible” and indeed were “beneath contempt”. Of course, Lou Dobbs knows “beneath contempt”: That pretty aptly describes his nasty and ultimately derailed career at CNN, when no lie directed at Latino immigrants was too disgusting or vicious to transmit to his audience of millions. It’s why he’s been such a good fit at Fox News . It’s doubtful, though, that Dobbs can recognize it when he sees it.
Continue reading …
High court rejects Alstom claim that tender process was ‘ineffective’ Siemens will keep a €600m (£527m) train order from Eurostar after the high court rejected claims from French rival Alstom that the bidding contest was flawed. The victory comes weeks after the German manufacturing group beat Bombardier’s Derby factory to a £3bn contract for the Thameslink route, prompting political and trade union protests that the government was not doing enough to protect Britain’s industrial base. Eurostar, whose largest shareholder is the French national rail operator, has also found itself embroiled in a row over indigenous manufacturers in France. With implicit backing of the French government throughout the dispute, Alstom has argued that Eurostar in effect shifted the goalposts during the competition by awarding a contract to Siemens that contained substantial differences from the original tender. The high court rejected that stance in a ruling this week. Justice Mann found there were no grounds for Alstom to claim that the tender was “ineffective”, ending the French group’s hopes that Eurostar would be forced to run the contest again. Alstom had also exceeded the time limit for bringing the claim, the high court found. “I therefore find that this ineffectiveness claim should be struck out.” An Alstom spokesperson admitted the contract award will not be overturned. However, the group said it will continue to pursue a multimillion pound compensation claim. “There are flaws in the way that Eurostar managed the tendering process and that is why we will continue to pursue our claim for damages.” Siemens has also survived a flurry of political and trade union lobbying over the contract for making 1,200 carriages for the Thameslink route. The transport secretary, Philip Hammond, discussed the Thameslink decision with a delegation from the TUC and rail unions this week but made clear that he could not strip Siemens of its status as preferred bidder . Even if he wanted to, the Department for Transport would be over-ruled under European Union procurement rules, Hammond said. Bombardier said the Thameslink loss contributed to the announcement this month that it is cutting more than 1,400 jobs at its Derby plant. Hammond and the business secretary, Vince Cable, wrote to the prime minister with concerns that other European nations appear to defend their manufacturing interests better during tender contests. Steve Scrimshaw, head of Siemens’ UK rolling stock division, said the Eurostar decision, and its award to a non-French company, underlined the fairness of EU procurement guidelines. “This shows that it was a fair and transparent procurement process and it shows that it was evaluated fairly.” Siemens Rail transport Manufacturing sector Bombardier Europe Transport policy Germany Dan Milmo guardian.co.uk
Continue reading …