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Berlusconi Pledges to Push Through Austerity Bill

July 12, 2011 by Leave a Comment

In his first statement since Friday, when he had disparaged his finance minister, Giulio Tremonti, in a newspaper interview, Mr. Berlusconi said the government was “stable and strong, the majority cohesive and determined” to pass the bill. It calls for €40 billion, or $56 billion, in tax increases and cuts to the public sector.

Italian Senate leaders said they would speed discussion of the bill for approval as early as Thursday, allowing it to pass directly to the lower house. Mr. Tremonti is expected to meet on Wednesday with senators from the government and center-left opposition to discuss the budget bill.

Mr. Tremonti is held up by many investors as being instrumental to Italy’s bid for market credibility. Comments last week by Mr. Berlusconi that he may be on the way out led investors to flee Italian debt, sending yields soaring.

The interest on its 10-year bond rose to nearly 6 percent Tuesday morning, but fell back to 5.56 percent, a decline from Monday, after Mr. Tremonti returned to Rome early from a meeting of euro zone officials to take charge of discussions on the austerity measures, and the government successfully sold one-year Treasury bills.

In a country where the term “austerity” has only entered the national conversation recently and where the government’s rhetoric has often been a remove from economic reality, Mr. Berlusconi’s statement was notable for its tone as well as its contents.

While underlining the strengths of Italy’s economy, Mr. Berlusconi for the first time acknowledged that “for us, for Italy, this moment is certainly not easy.”

“We need to be united and cohesive in our common interest, aware that the efforts and sacrifices made in the short-term will result in permanent and secure gains,” he added.

He said that the “crisis of confidence” had hit not only Italy but also the common currency itself.

“We have Europe by our side and we can count on undeniable points of strength,” Mr. Berlusconi said.

In recent days, the prime minister has been conspicuously absent from television, the medium through which he normally communicates, in a sign that as his era draws to a close, he may now be seen as a liability to Italy’s international credibility.

Mr. Berlusconi also has not appeared with Mr. Tremonti, indicating to some analysts that the tensions within the governing coalition have only been covered temporarily in an effort to pass the budget, but are still boiling beneath the surface.

Despite Italy’s high public debt, low growth and political instability, economists said Italy was objectively in better shape than Greece, Spain, Portugal and Ireland because it did not have a housing bubble, its budget deficit is relatively small compared with the size of its economy, and the majority of its debt is held domestically.

But the worries about Italy have further shaken already fragile global market sentiment. Asian and European stocks fell Tuesday and the euro was also down, although markets in Europe recovered ground during the day, and the market index in Milan rose.

Alessandro Frigerio, a fund manager at RMJ Sgr in Milan, likened market movements to a game of pinball.

“It’s not usual to see a 1,000-point one-day comeback in Italian stocks,” he said. “It’s hard to say what’s going to happen when the ball bounces off the flipper and into the corner.”

One measure of the sharp swing in mood, Mr. Frigerio noted, was the shares of UniCredit, a major Italian bank: They were down by their daily limit of more than 7 percent before turning around to close with a 5.9 percent gain. In the same period, the spread between Italian and German 10-year bonds widened to 3.75 percentage points before shrinking to 2.85 points.

The recovery might have been related to market speculation that the European Central Bank had been buying the bonds of Italy and other countries that have come under pressure.

“I can’t say whether the E.C.B. was buying or not,” Mr. Frigerio said. “What matters, for the speculators, is what you think happened.”

David Jolly reported from Paris.

Article source: http://www.nytimes.com/2011/07/13/business/global/berlusconi-pledges-to-push-through-austerity-bill.html?partner=rss&emc=rss

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U.S. Markets Rise on Home Price Data

June 28, 2011 by Leave a Comment

Home prices increased in April in 13 of the 20 cities tracked by the Standard Poor’s Case-Shiller index.

In afternoon trading on Tuesday the Dow Jones industrial average was up 118 points, or 1 percent, at 12,161. The Standard Poor’s 500-stock index was up 13 points, or 1 percent, at 1,293. The Nasdaq composite index rose 32 points, or 1.2 percent, at 2,721 points.

Global stocks also traded higher as investors awaited a critical Greek parliamentary vote that could go a long way to determining whether the country avoids a default on its debts.

Investors were hoping that Prime Minister George Papandreou of Greece will muster enough votes to get the 28 billion euro ($40 billion) austerity bill through Parliament in a vote Wednesday.

A majority of the 300 deputies must approve the spending cuts and tax increases for the country to get its next batch of bailout funds — worth 12 billion euros — from last year’s 110 billion euro bailout package. But the measures are proving unpopular, and Greek unions began striking Tuesday in the hopes of pressuring lawmakers to vote against the package.

If the package fails, Greece will face a default on its debts even though French banks are planning to accept slower repayment of their holdings of Greek bonds.

“Despite today’s general strike, there still seems to be an optimistic tone that the austerity measures will be passed tomorrow and the bailout can move to the next stage,” said David Jones, chief market strategist at IG Index. “There is still a lot that could go wrong, but with the way markets have performed over the last couple of days, some are hoping that finally sentiment has turned a corner and it is time for a recover.”

A calmer mood over the Greek debt crisis has helped shore up the euro over the past few sessions. It was trading higher Tuesday afternoon, up 0.5 percent to $1.4349.

Earlier in Asia, Japan’s Nikkei 225 climbed 0.7 percent to close at 9,648.98 but shares on South Korea’s Kospi fell 0.4 percent to 2,062.91. Hong Kong’s Hang Seng gained 0.1 percent to 22,061.78. Australia’s S. P./ASX 200 closed 0.3 percent higher at 4,474.30.

Mainland Chinese shares rose too with the Shanghai Composite Index edging up less than 0.1 percent higher to 2,759.20 while the Shenzhen Composite Index gained 0.3 percent to 1,152.00.

Oil prices clawed back some ground lost in the wake of last week’s decision by the International Energy Agency to release 60 million barrels of crude over 30 days. Benchmark oil for August delivery was up $1.05 to $91.66 a barrel on the New York Mercantile Exchange.

Article source: http://feeds.nytimes.com/click.phdo?i=6248f0f9175a9ebdc4febe2ef856b299

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Spain’s Building Spree Leaves Some Airports and Roads Begging to Be Used

June 25, 2011 by Leave a Comment

To justify the grand opening, Carlos Fabra, the head of Castellón’s provincial government, argued that it was a unique opportunity to turn an airport into a tourist attraction, giving visitors full access to the runway and other areas normally off-limits. This Sunday, it will be used as the starting point for part of Spain’s national cycling championships, featuring the three-time Tour de France champion Alberto Contador.

Castellón Airport, built at a cost of 150 million euros ($213 million), is not the only white elephant that now dots Spain’s infrastructure landscape. Spain’s first privately held airport — in Ciudad Real in central Spain — was forced to enter bankruptcy proceedings a year ago because of a similar lack of traffic.

Across the country, nearly empty toll roads are struggling to turn a profit. Other projects are surviving only with continued public financing, which has been cast into doubt by Europe’s sovereign debt crisis.

Over the last 18 months, Spain has been in investors’ line of fire after permitting its budget deficit to balloon during a long property bubble, which finally burst alongside the worldwide financial crisis. To clean up the mess, the Socialist government of José Luis Rodríguez Zapatero introduced austerity measures last year that, among other things, shrank spending on infrastructure. That has left some projects in limbo, despite political pledges to keep them alive.

Over the last two decades, Spain built transportation networks at a rate that few other European countries approached.

Having opened its first high-speed train connection between Madrid and Seville in 1992, Spain overtook France last December as the country operating Europe’s biggest high-speed rail network, covering just over 2,000 kilometers, or 1,200 miles.

Growth in road and air transport has been just as spectacular. Between 1999 and 2009, Spain added over 5,000 kilometers of highways — the biggest road construction endeavor in Europe. And its 43 international airports handle more cross-border passengers than any other country in Europe.

Such expansion has been a source of intense national pride. It has also brought major economic benefits to some previously isolated and impoverished regions.

Yet like Castellón Airport, not all the projects were necessarily well thought out. Some experts suggest that Spain’s approach to development during the boom years placed speed ahead of risk assessment.

Joseph Santo, logistics and transportation director in the Iberian subsidiary of the consulting firm Booz Company, said there were differences between Spain and Britain, for example, when it came to forming so-called public-private partnerships in transportation.

“In the U.K, they try to get everything into the agreement ahead of time and think of every contingency, so that it can take years to negotiate the deal,” Mr. Santo said. “In Spain, they do the reverse. They make the deal in six months and then if something comes up, they see how they can fix it.”

In separate interviews, the heads of some of Spain’s largest construction and infrastructure management companies conceded that spending had gotten out of control before the crisis. But they also predicted that most building projects, particularly in transport, would eventually yield profits.

“The problem is that such projects are generally conceived at a time when everything seems bound to succeed — even sometimes badly conceived projects — and there were no doubt some planning problems,” said Salvador Alemany, the chairman of Abertis, an infrastructure management company that is based in Barcelona. “At the same time, such projects have to live with the realities of an economic cycle that brings lows as well as highs, and there are plenty of examples of highways around the world that had difficult takeoffs.”

Baldomero Falcones, chairman and chief executive of FCC, a builder, recalled the painful opening of toll roads in the region of Catalonia in the 1970s — roads that have recently required expansion to cope with soaring traffic.

“I have never seen any transport infrastructure that at the end of the day has not proved profitable,” he said.

Article source: http://www.nytimes.com/2011/06/25/business/global/25iht-transport25.html?partner=rss&emc=rss

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Overbuilding in Spain Leaves Many White Elephants

June 24, 2011 by Leave a Comment

To justify the grand opening, Carlos Fabra, the head of Castellón’s provincial government, argued that it was a unique opportunity to turn an airport into a tourist attraction, giving visitors full access to the runway and other areas normally off limits. This Sunday, it will be used as the starting point for part of Spain’s national cycling championships, featuring the three-time Tour de France champion Alberto Contador.

Castellón Airport, built at a cost of €150 million, or $213 million, is not the only white elephant that now dots Spain’s infrastructure landscape. Spain’s first privately held airport — in Ciudad Real in central Spain — had to enter bankruptcy proceedings a year ago because of a similar lack of traffic.

Across the country, nearly empty toll roads are struggling to turn a profit. Other projects are surviving only with continued public financing, which has been cast into doubt by Europe’s sovereign debt crisis.

Over the past 18 months, Spain has been in investors’ line of fire after allowing its budget deficit to balloon during a long real estate bubble, which finally burst alongside the worldwide financial crisis. To clean up the mess, the Socialist government of José Luis Rodríguez Zapatero introduced austerity measures last year that, among other things, shrank spending on infrastructure. And that has left some projects in limbo, despite political pledges to keep them alive.

Over the past two decades, Spain built transport networks at a rate that few other European countries came close to.

Having opened its first high-speed train connection between Madrid and Seville in 1992, Spain overtook France last December as the country operating Europe’s biggest high-speed rail network, covering just over 2,000 kilometers, or 1,200 miles.

Growth in road and air transport has been just as spectacular. From 1999 to 2009, Spain added over 5,000 kilometers of highways — the biggest road construction endeavor in Europe. And its 43 international airports handle more cross-border passengers than any other country in Europe.

Such expansion has been a source of intense national pride. It has also brought major economic benefits to some previously isolated and impoverished regions.

Yet like Castellón Airport, not all the projects were necessarily well thought out. Some experts suggest that Spain’s approach to development during the boom years had placed speed ahead of risk assessment.

Joseph Santo, logistics and transportation director in the Iberian subsidiary of the consulting firm Booz Co., said there were differences between Spain and Britain, for example, when it comes to forming so-called public-private partnerships in the transport sector.

“In the U.K, they try to get everything into the agreement ahead of time and think of every contingency, so that it can take years to negotiate the deal,” Mr. Santos said. “In Spain, they do the reverse. They make the deal in six months and then if something comes up, they see how they can fix it.”

In separate interviews, the heads of some of Spain’s largest construction and infrastructure management companies conceded that spending had gotten out of control before the crisis. But they also predicted that most building projects, particularly in transport, would eventually yield profits.

“The problem is that such projects are generally conceived at a time when everything seems bound to succeed — even sometimes badly conceived projects — and there were no doubt some planning problems,” said Salvador Alemany, the chairman of Abertis, which is based in Barcelona. “At the same time, such projects have to live with the realities of an economic cycle that brings lows as well as highs, and there are plenty of examples of highways around the world that had difficult takeoffs.”

Baldomero Falcones, chairman and chief executive of FCC, another builder, recalled the painful opening of toll roads in the region of Catalonia in the 1970s — roads that have recently required expansion to cope with soaring traffic.

“I have never seen any transport infrastructure that at the end of the day has not proved profitable,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=38c5c770e85945e95597356145254a37

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Stock Markets Rise on Greek Developments

June 17, 2011 by Leave a Comment

Prime Minister George Papandreou of Greece appointed a longtime rival, Evangelos Venizelos, as finance minister and deputy prime minister. The hope in the markets is that the move brings an end to a damaging 48-hour political crisis that raised fears that Greece could run out of money in less than a month.

Investors want assurances that Mr. Papandreou has done enough to get austerity measures through Parliament, which are necessary for the country to get more bailout funds.

Further relief came from news that Germany may be backing off from its tough stance that private creditors bear some of the burden if a second bailout of Greece is necessary.

In a news conference with President Nicolas Sarkozy of France, Chancellor Angela Merkel of Germany agreed that private investors should be part of the solution but that their participation had to be on a “voluntary” basis.

“Markets are currently taking this as a positive step,” said Chris Walker, a UBS analyst.

In the opening minutes of trading on Wall Street, the Dow Jones industrial average was up 79.55 points, or 0.7 percent, to 12,041.07. The broader Standard Poor’s 500-stock index was up 8.94 points, or 0.7 percent, and the technology-heavy Nasdaq composite gained 13.15 points, or 0.5 percent.

In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 5,718.04 while Germany’s DAX rose 1.4 percent to 7,212.08. The CAC 40 in France was 1.3 percent higher at 3,840.55.

Greek stocks were doing particularly well, with the main ATHEX index up 5.1 percent.

Bond yields rose early Friday after encouraging economic news drew capital into higher-risk investments, like stocks and riskier bonds.

The yield on the benchmark 10-year Treasury note rose to 2.944 percent on Friday, a gain of .016 percentage points. Bond yields rise when prices fall.

The euro was also a big gainer, climbing 0.3 percent on the day to $1.4271. On Thursday, it had fallen below $1.41 for the first time in three weeks as investors fretted about a possible Greek debt default.

Greece’s debt crisis has been the main driver in markets this week, but with a seemingly calmer mood Friday, investors may turn to economic data out of the United States later for more direction. A run of weak news on the American economy has weighed on stock markets over the past few years.

The University of Michigan’s monthly consumer confidence survey could well be a catalyst to how markets end the week. The consensus in the markets is that the headline index will rise modestly to 74.5 points in June from the previous month’s 74.30.

“Any signs of improving demand from U.S. consumers would have wide reaching implications and the hope is that with oil prices tumbling, lower petrol costs will free up cash for discretionary spending,” said Ben Critchley, senior sales trader at IG Index.

Oil prices continued to push lower Friday, with the benchmark rate on the New York Mercantile Exchange down another $1.64 to $93.31 a barrel.

Earlier in Asia, before the reshuffle and the German comments, stocks pushed lower.

Japan’s Nikkei 225 index closed 0.6 percent lower at 9,351.40 while Hong Kong’s Hang Seng index fell 1.2 percent to 21,695.26.

Mainland Chinese shares fell to their lowest level so far this year as investors reacted to news of a rise in the rate for Chinese central bank’s three-month bills on Thursday, seen as a cue that an interest rate increase may be in the offing.

The Shanghai Composite Index fell 0.8 percent to 2,642.82, while the Shenzhen Composite Index fell 1.1 percent to 1,085.11.

Article source: http://feeds.nytimes.com/click.phdo?i=e68cd5b2f3f7475651530a650f349d8c

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Stocks & Bonds: Markets Falter as Worry Rises in Greek Crisis

June 16, 2011 by Leave a Comment

Thousands took to the streets in Athens to protest austerity measures, and Prime Minister George Papandreou said he would reshuffle his cabinet and request a vote of confidence in Parliament. At stake is the prospect of a new bailout plan for the debt-ridden country.

Anxious investors feared the situation could spin out of control, igniting a series of crises in other heavily indebted euro zone countries, like Portugal, Ireland and Spain. That, in turn, could threaten Europe’s banks and even reach into the United States financial system.

“We are pretty much giving back everything we got yesterday and more,” said Lawrence R. Creatura, a portfolio manager at Federated Investors, noting the rise in the main American indexes of more than 1 percent Tuesday. “Today the market just can’t escape the undertow of deteriorating economic data and political events.”

After having lost more than 200 points earlier Wednesday, the Dow Jones industrial average closed down 178.84 points, or 1.5 percent, to 11,897.27. The markets rallied earlier this year on confidence about the economic recovery, and at one point the Dow was poised to break through the 13,000 mark. But stocks have been falling week after week on a drumbeat of dismal economic news from soft job creation to falling housing prices.

The market has surrendered almost all of its gains for this year, falling 7 percent since its peak at the end of April. It may be nearing what is known as a market correction, a sort of miniature bear market characterized by a 10 percent decline in a short period of time.

Greece needs to pass a new round of austerity measures by the end of the month in return for new loans from the International Monetary Fund and the European Union.

In Athens, thousands joined a nationwide strike as Parliament prepared to debate a second round of sharp cuts in government spending. The measures are unpopular with Greeks, who have already suffered deep salary and pension cuts.

Although many analysts expect that a default by Greece on its debts will eventually be averted, the political uncertainty in Greece is providing an unsettling backdrop for investors. In addition, they are fretting because the United States this summer faces its own fractious negotiations over raising the federal debt ceiling.

The European Central Bank said on Wednesday in a report on financial risk that it would be a big mistake for Greece to be allowed to miss its debt payments, either by delaying payments to a later date, or by paying back less than the full amount. Germany, the biggest economy in the 17-member euro zone, is proposing that private sector bondholders accept some form of a loss on their Greek bonds.

This could prove damaging to Greek banks, requiring them to mark down the value of their holdings of government debt at a time when they are struggling with bad loans in their home market. And it could have similar dire repercussions for other European banks that hold Greek debt.

“The concern is that a default by Greece would not only hurt European banks but could also spread to U.S. banks,” said Bernard Baumohl, an economist at the Economic Outlook Group in Princeton, N.J. “Should there be a default, it can only have a delaying effect on the recovery, hurting American exports and the banks’ ability to lend.”

Pointing to a slowing United States economy, a Federal Reserve regional report for New York State showed a decline in both manufacturing activity and optimism for June. Also Wednesday, a government report showed consumer prices crept up again, though they were held in check by a decline in energy prices.

The recent economic data has prompted economists to steadily downgrade their forecasts for economic growth in the second quarter of this year. Macroeconomic Advisors, a prominent forecasting firm, on Wednesday lowered its annualized second-quarter gross domestic product forecast to 1.9 percent, compared with the 3.5 percent growth it was expecting when the quarter began.

Contributing reporting were Christine Hauser, Rachel Donadio, Niki Kitsantonis, Matthew Saltmarsh and Jack Ewing.

Article source: http://feeds.nytimes.com/click.phdo?i=63eb3c11599aab0691e70277dce53350

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New Rescue Package for Greece Takes Shape

May 31, 2011 by Leave a Comment

While the agreement for as much as €60 billion, or $86 billion, would, in theory address Greece’s need for cash this year and next, it puts off for the time being a restructuring, hard or soft, of Greece’s mammoth debt burden.

At the deal’s heart would be an informal understanding that the private sector holders of Greek government bonds might be persuaded to roll over their debts, or extend new loans at the time their older obligations come due.

By taking on more dubious Greek risk — backed by new funds from Europe and the International Monetary Fund — exposed banks would not just step back from the precipice of a “haircut,” or a forced loss on their bonds, they might also hope that in another two years, Greece will be in a better position to repay its debts in full.

The expectation that Europe will again come to Greece’s rescue bolstered both the euro and equity markets on Tuesday. Yields on Greek 10-year bonds have dropped sharply, to 15.7 percent Tuesday from a high of 16.8 percent last week.

“Restructuring is off the table,” said a senior official in the Greek Finance Ministry. “For now it is all about growth, growth, growth.” This person, who spoke on condition of anonymity while the talks continued, said an announcement from the European Union, the I.M.F. and the European Central Bank could come as soon as Friday or early next week.

Later in June, the E.U. first and then the I.M.F. would approve the additional financing, thus clearing the way for €12.5 billion to be disbursed to Athens at the end of the month.

The new loans, however, will only be forthcoming if more austerity measures are introduced.

Along with faster progress on privatization, Europe and the fund have been demanding that Greece finally begin cutting public sector jobs and closing down unprofitable entities.

They also have been pushing Greek politicians to unite behind the new austerity package to help ensure it sticks, and are discussing a decrease in the value-added tax as a concession to win support from the right-of-center opposition, which wants more tax relief to help the moribund economy.

A team of bankers and technical experts from the international institutions have been on the ground in Athens for close to a month, attempting to reconcile the essential conundrum of Greece’s financial condition.

Harsh austerity measures have taken a severe toll on the economy, resulting in missed financial targets and the need for more public money.

Adding to the urgency has been the persistent flow of deposits out of the banking sector. Since the crisis began, €60 billion in deposits have been withdrawn from Greek banks, about a quarter of the country’s output. Bankers in Athens said that outflows were particularly severe last Thursday and Friday following comments — later described as rhetorical — by a Greek politician about Greece leaving the euro.

With great reluctance, European governments have come to the conclusion that an additional €60 billion now, while politically unappealing, would be less costly than the unquantifiable public funds that would be needed if a restructuring of Greece’s debt produced a Lehman Brothers-like contagion that spread not just to Portugal and Ireland but possibly Spain and the financial system as a whole.

But how an economy already in free fall will generate the growth to produce the needed budgetary surplus to start paying down its debt remains unanswered.

“Greece’s G.D.P. is already declining and now the government will need to cut another €7 billion in spending,” said Jason Manolopoulos, who manages a hedge fund based in Athens and Geneva and is the author of “Greece’s ‘Odious’ Debt: The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community.”

“That is only going to make the debt to G.D.P. figures worse,” he said. “There is no getting around it: Greece is insolvent.”

With a debt of 150 percent of gross domestic product, or G.D.P., that may well be so. But while skeptics like Mr. Manolopoulos are keeping the cash levels in their funds high, convinced that Greece will be required to default sooner rather than later, such a sense of pressing gloom has not yet become contagious.

Article source: http://feeds.nytimes.com/click.phdo?i=ec01ab5fb2cc96bd0996a980b5631a48

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U.S. Stocks Higher as Report Shows Rise in Personal Income

May 27, 2011 by Leave a Comment

Before trading began, the Commerce Department said that both personal income and spending rose 0.4 percent in April, in line with what economists expected. Higher food and gas prices accounted for most of the spending increase.

A cut in the amount withdrawn from paychecks for Social Security has given incomes a boost this year. But that extra take-home pay has been pinched by higher prices for gasoline.

The Dow Jones industrial average was up 56.99 points, or 0.5 percent. The Standard and Poor’s 550-stock index rose 6.73 points, or 0.5 percent. The Nasdaq composite index was up 11.23 points, or 0.4 percent.

Trading is expected to be light before the long weekend. Markets are closed Monday for Memorial Day.

European and Asian stock markets mostly rose Friday as a recovery in commodity shares helped investors look past weak economic data from the United States and worries about Greece’s debt troubles.

Sentiment has been dented in recent weeks by fears that the American economy, the world’s largest, is running out of steam. In a revised look at economic growth, the Commerce Department reported Thursday that the economy grew at a tepid annual rate of 1.8 percent in the first quarter, lower than many economists expected. Gasoline prices that reached $4 a gallon and sharp cutbacks in government spending hindered growth. The Labor Department also said more people applied for unemployment benefits last week.

Traders have also been shaken by worries that Greece may not get its next rescue loan installment, with a top European Union official reportedly warning that the International Monetary Fund may hold back on its part of the bailout. Those jitters hurt the euro and stocks on Thursday, and on Friday Greek politicians, meeting in a cross-party crisis meeting, failed to reach a consensus on new austerity measures, as demanded by the European regulators, to convince investors it can help finance its debt for the next year.

The euro recovered from a sell-off on Thursday, rising to $1.4247 from $1.4140 the day before.

European shares posted solid gains in early trading. Britain’s FTSE 100 was 1 percent higher; Germany’s DAX rose 0.4 percent and France’s CAC 40 was 1 percent higher.

Commodities stocks led the gains, with Rio Tinto and Antofagasta up 1.8 percent and 2.4 percent.

In Asia, most indexes rose, though Japan’s Nikkei 225 index drifted down to close 0.4 percent lower at 9,521.94.

Sony fell 3.2 percent, a day after reporting a 259.6 billion yen ($3.2 billion) loss for the fiscal year ended March 2011 and its third straight year of losses. Costs of online security breaches around the world and the March 11 earthquake in northeastern Japan battered the electronics and entertainment giant.

Hong Kong’s Hang Seng gained 1 percent to 23,118.07. South Korea’s Kospi finished 0.4 percent higher at 2,100.24. Australia’s S. P./ASX 200 added 0.5 percent to 4,684.

Mainland Chinese shares sank to their lowest level in nearly eight months as investors, succumbing to gloom over the outlook for the latter half of the year, unloaded shares.

The benchmark Shanghai Composite Index lost 1 percent to 2,709.95, its lowest close since Sept. 30. The Shenzhen Composite Index fell 2 percent to 1,101.11. Shares in coal companies advanced while agricultural-related and textile shares fell sharply.

Benchmark oil for July delivery was up 25 cents to $100.48 per barrel on the New York Mercantile Exchange.

The dollar fell to 81.09 yen from 81.30 yen.

On Wall Street, all three indexes are down for the week. Stock markets took a hard fall Monday with a batch of bad news from Europe. Another downgrade of Greece’s weak credit rating, a warning on Italy’s debt and a major defeat of Spain’s ruling party over the weekend deepened worries about Europe’s debt crisis. But strong earnings and a plea to push Microsoft’s chief executive officer aside helped push stocks higher Thursday. The report pointing to a weaker economic recovery sent government bond yields to their lowest levels this year.

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Euro Crisis Looms for Group of 8

May 26, 2011 by Leave a Comment

As the leaders meet on Thursday and Friday in the French seaside resort of Deauville for what is normally more of an informal session on security issues, the continuing problems of the euro and the divisions it is causing inside Europe are threatening to harm the West’s uneven recovery.

The European Union and the I.M.F. have tried for the last year to calm the bond markets. But demonstrations against harsh austerity measures in Spain, Portugal and Greece; bickering among European leaders over Greece’s financial problems; and the European Central Bank’s fierce opposition to any restructuring of Greek debt have all conspired to send bond rates soaring in the last week.

Some analysts, like Bruce Stokes of the German Marshall Fund in Washington, suggest that the problems of the euro could put the recovery of the United States at risk. “If the European crisis gets worse again, the United States will have fewer tools to fight off the contagion,” he wrote in The National Journal.

“For the United States, the euro is a big concern,” said Nicolas Véron, a senior fellow at Bruegel, an economics research institute in Brussels, and a visiting fellow at the Peterson Institute in Washington. “The Americans want to avoid systemic instability.”

For that reason, Mr. Véron suggested, the Europeans want a new head of the I.M.F. in place quickly, and in keeping with tradition they want a European. They have largely united around the French finance minister, Christine Lagarde, 55, an English-speaking lawyer, who announced her candidacy on Wednesday.

American officials have called for an open process and praised both Ms. Lagarde and a Mexican candidate, Agustín Carstens, as “credible,” Treasury Secretary Timothy F. Geithner said on Wednesday. But he also said that Washington was working with all partners to ensure that the fund “reflects the balance of power in the world today.”

The Group of 8 has been overshadowed by the larger and more economically oriented Group of 20, in which fast-growing emerging nations like China, India, Brazil and South Africa also sit at the table, reflecting the shifting balance of power in the global economy.

“The competition for global leadership is bigger than before the financial crisis,” said Jan Techau, the director of Carnegie Europe, the European office of the Carnegie Endowment for International Peace. Similarly, David Shorr of the United States-based Stanley Foundation, said that “the G-8 bears a burden of proof to show its relevance and influence in today’s world of shifting political and economic power.” As a “club of the Western old guard,” he asked, “does it have enough key global players at the table to tackle the big challenges?”

In addition to economic matters — including questions about how President Obama intends to reduce Washington’s giant budget deficit — the leaders will face new challenges concerning nuclear safety after the meltdowns at the Fukushima Daiichi power plant in Japan and how to help along the Arab Spring in North Africa and the Middle East, even as the NATO-led war in Libya drags expensively and bloodily toward stalemate.

One of the biggest issues will be how to invigorate Arab economies and create jobs in the face of a large demographic bulge of unemployed young people and continuing instability.

Mr. Obama has pledged to forgive as much as $1 billion in Egyptian debt and guarantee another $1 billion in financing for infrastructure and new jobs, even as Congress seeks to cut spending to deal with America’s own ballooning deficit.

Article source: http://www.nytimes.com/2011/05/26/world/europe/26g8.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

A Fragile Moment for the I.M.F. as It Manages Europe’s Debt Crisis

May 16, 2011 by Leave a Comment

Sinking under a mountain of debt, Greece is on the verge of requesting more help from the European Union and the international fund. Ireland’s economic recovery from its banking crisis remains a distant prospect at best. And once an international aid deal is concluded for Portugal, the question shifts to whether Spain’s much larger and increasingly stagnant economy may need a financial lifeline.

Indeed, the most bitter twist for Dominique Strauss-Kahn is that his personal crisis comes at a time that the I.M.F.’s influence globally is at a many-decades peak, especially within Europe, his own stomping ground.

During his tenure as managing director of the fund, Mr. Strauss-Kahn is widely credited with expanding the fund’s resources after the financial crisis, improving its governance and essentially restoring its relevance by replacing orthodoxy with pragmatism.

Before being taken into custody in New York on Saturday afternoon on charges related to sexual assault, Mr. Strauss-Kahn had boarded a flight to Europe to meet the German chancellor, Angela Merkel, to discuss in detail how Europe and the I.M.F. would respond to the deteriorating economic situation in Greece.

Mr. Strauss-Kahn was known to be a powerful voice arguing that continuing austerity measures in Greece would only make the situation worse. The Greek economy has shrunk by as much as 4 percent this year from a year ago, after the international community laid out guidelines for reducing its debt, raising taxes and reining in spending.

Mr. Strauss-Kahn’s view contrasts with a harder line in northern Europe, where voters are opposed to another bailout package for Greece. Northern politicians, as a result, have pushed to exact a higher price from Greece if more money were extended.

“The Greek government is concerned that a headless I.M.F. translates into a diminished bargaining power for the Greek side,” said Yanis Varoufakis, an economics professor and blogger at the University of Athens. “Despite the official unity between the I.M.F. and the E.U. on the Greek crisis, Dominique Strauss-Kahn has consistently showed greater sympathy for the plight of George Papandreou and a better grasp than the E.U. of the importance of not putting more pressure on Greece than the country can bear.”

Trailing after Hungary, Latvia and Iceland, Greece was one of the first euro zone countries to seek outside financial aid after the worldwide financial crisis. It proved to be a grand stage on which Mr. Strauss-Kahn would prove that the fund, after more than a decade of not doing much, could reinvent itself as a powerful global actor.

Former I.M.F. employees described Mr. Strauss-Kahn as a micromanager on European matters, especially on the three European bailouts that he oversaw — Ireland, Greece and Portugal.

Greek newspapers have reported recently that for many months before the Greek bailout last May, Prime Minister George Papandreou sought the counsel of Mr. Strauss-Kahn.

Mr. Strauss-Kahn, a French economist who was often cited for his deft political touch, also worked closely with Europe’s top leaders on the rescue plans, leveraging his relationships with leaders like Jean-Claude Trichet at the European Central Bank and France’s president, Nicolas Sarkozy — despite their political differences.

In restoring stature to the I.M.F., Mr. Strauss-Kahn managed to push his personal missteps into the background, including a 2008 affair with a co-worker at the fund, after which he acknowledged he had shown bad judgment. His success also allowed people to look past some inherent contradictions: a French socialist dedicated to solving global economic problems even as he favored the high life of elegant homes in Paris and Washington, fancy cars and lavish hotel rooms.

Simon Johnson, the former chief economist of the I.M.F., who is now a professor at M.I.T., said Mr. Strauss-Kahn had been revived by the global financial crisis. “The Europeans had been late in waking up to the economic problems,” he said. “But he coaxed rather than bullied them into action. In so doing, he used the crisis as an opportunity to rehabilitate the I.M.F.’s reputation, and put it front and center in a way that it had not been before.”

Indeed, finding someone with the kind of boardroom muscle in Europe that Mr. Strauss-Kahn displayed will be challenging.

Graham Bowley and Dan Bilefsky contributed reporting from New York.

Article source: http://feeds.nytimes.com/click.phdo?i=9d62da283d6b074d613891a4fbab090d

Filed Under: Business News Tagged With: , ,
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