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Fitch Downgrades Italian Debt, Citing Political Turmoil

March 8, 2013 by Leave a Comment

ROME — The Fitch ratings agency cut its assessment of Italy’s sovereign credit by a notch on Friday, citing the abrupt emergence of fresh political turmoil that could push one of the euro zone’s most pivotal economies, already in a deep slump, into a further slowdown.

The lower rating of BBB+, down from A- before, was still within Fitch’s scale of debt considered to be of investment grade for bondholders. But the agency gave Italy’s debt a “negative” outlook.

An inconclusive national election late last month has thrown the government into gridlock, and Fitch said it was “unlikely that a stable new government can be formed in the next few weeks.” As a result, reforms needed to reverse an economic recession that Fitch described as one of the deepest in Europe seemed unlikely to be enacted any time soon.

The downgrade comes after Moody’s, a rival ratings agency, late last month warned that the risk of prolonged political uncertainty in Rome could have implications “well beyond Italy itself,” and could threaten the ratings of other members of the union.

The Italian economy is one of the hardest-hit in the euro currency union. It contracted 2.4 percent in 2012, compared with a 1.3 percent decline in Spain. Only Portugal, which shrank 3.2 percent last year, and Greece, whose economy contracted by 6.4 percent, fared worse.

Without growth, Italy will have a harder time paying down a €2 trillion, or $2.6 trillion, mountain of public debt, which Fitch forecast would rise this year to 130 percent of gross domestic product. That would be its highest level since World War I and one of the highest in the euro zone.

Last year, more than 360,000 Italian businesses closed their doors as banks refused to lend money and austerity measures, in the form of tax increases and spending cuts imposed by the former prime minister, Mario Monti, took a toll.

Italy’s unemployment rate hit a record high of 11.7 percent in January, the government reported Monday, while youth unemployment surged to 38.7 percent. Fitch warned it could downgrade Italy’s sovereign rating further if the recession ran deeper and longer than expected, or if the euro crisis heated up again.

Italy is effectively without a functioning government after the anti-establishment Five Star movement, led by the comedian-turned-activist Beppe Grillo, made stunning electoral gains in both houses of Parliament in last month’s elections. Mr. Grillo’s party has rejected an appeal by the Democratic Party leader Pier Luigi Bersani to work together to lead the country.

Without an alliance, the Italian government could limp along for as long as a year, political analysts say, before a likely collapse would force new elections. President Giorgio Napolitano is scheduled to meet next week with Mr. Grillo, Mr. Bersani and Silvio Berlusconi, the former prime minister who sought a return to power, to determine whether a new government can be formed.

A vote of confidence would then be held, probably later in March.

Italian media have speculated that a new caretaker government could be installed, in a manner similar to the move that put Mr. Monti in power in late 2011. But analysts say such a stop-gap government could not rule for long, nor would it be in a position to carry out painful economic reforms.

Both Mr. Bersani and Mr. Grillo have mostly ruled out joining with Mr. Berlusconi, meaning that an alliance between adversaries could be the main solution. But Mr. Grillo, who rode to victory on a wave of anger against what supporters see as a corrupt government, has instead heaped insults upon his rivals, and talked of razing the current system and replacing it with a more participatory democracy.

This article has been revised to reflect the following correction:

Correction: March 8, 2013

An earlier version of this article misstated the amount of Italy’s public debt. It is 2 trillion euros, or $2.6 trillion, not 2 billion euros, or $2.6 billion.

Article source: http://www.nytimes.com/2013/03/09/business/global/09iht-fitch09.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

News Analysis: Italian Deadlock Rekindles Anxiety About Euro Zone

February 27, 2013 by Leave a Comment

Judging by the panic that seized financial markets on Monday and carried over into European stock and bond trading on Tuesday, the answer seems to be no.

After months of calm, investors are nervous, and not only because Italy again seems to have become ungovernable after an inconclusive political election. They are also worried because voters in Italy, the euro zone’s third-largest economy after Germany and France, soundly repudiated government austerity policies that the region’s leaders have long embraced but that have hampered growth in Italy and elsewhere in the euro currency union.

By supporting a protest-vote candidate, the comedian Beppe Grillo, and backing the return of former Prime Minister Silvio Berlusconi, who has vowed to reject austerity, Italians appear to be embracing a return to nationalism, experts say.

Swept aside by the Italian elections was the technocratic government led for the last 13 months by Mario Monti, who has been crucial to an unwritten accord: the European Central Bank promised to help contain the financial contagion that was threatening the euro zone as long as political leaders like him made headway in improving their economies.

The upheaval in Italy means that other euro zone leaders may no longer have a reliable partner in the drive to create a more durable currency union and that Rome’s voice in making European policy will be diminished, for now at least.

“This brings back all the political risk issues” that had seemed to fade from the euro zone, said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.

On Tuesday, stocks fell across Europe, with the Euro Stoxx 50 index, a barometer of euro zone blue chips, down 3.1 percent. Investors also continued to dump Italian debt, pushing up the yield on the 10-year sovereign bond 40 basis points to almost 4.9 percent. Portuguese, Spanish and Greek bond prices also fell. Perhaps most significant is the role of the European Central Bank in this period of renewed euro zone uncertainty. The bank rode in as a white knight in September by agreeing to buy large amounts of bonds from countries with shaky finances, including Italy, to calm a contagion of fear then sweeping the euro zone. The bank, run by Italy’s former central banker, Mario Draghi, vowed to do “whatever it takes” to hold the euro union together.

The issue now, experts say, is that Mr. Draghi’s promise was based on an implicit trade-off with euro zone governments. If countries agreed to conditions intended to make their economies perform better, the central bank would buy their bonds to hold down market interest rates.

So far, the bank has not bought any bonds. The mere commitment to do so has been enough to reassure international markets. But Italy’s new political turmoil might prompt investors to test the central bank’s resolve. If so, many experts doubt that the bond-buying program is workable — for Italy, at least.

“Without a stable government, it will be hard to qualify” for the program, said Lucrezia Reichlin, a former director of research at the bank who is now a professor at the London Business School. “Draghi has to have somebody to talk to.”

Europe’s debt crisis is not nearly as dire as it once was. Although Italy’s borrowing costs, as measured by its 10-year bond yield, hit a three-month high on Tuesday of nearly 4.9 percent, that is still nowhere near the 6.5 percent danger zone of last summer.

And despite renewed fears of instability, no one is talking about a breakup of the euro zone — as might have happened last year if such political uncertainty had troubled one of Europe’s most crucial economies. A shift in sentiment took hold last autumn after Mr. Draghi and European politicians, led by Chancellor Angela Merkel of Germany, made clear that the euro union was here to stay — no matter what.

But experts said the Italian vote served as a warning shot that a new round of political instability could be coming in the neighboring large economies of Spain and France. Their leaders have also adopted austerity programs to keep the euro debt crisis from engulfing their economies, despite concerns that the programs are impeding the economic rebound that might help them grow their way out of financial distress.

Liz Alderman reported from Rome, and Jack Ewing from Frankfurt.

Article source: http://www.nytimes.com/2013/02/27/business/global/italian-deadlock-rekindles-anxiety-about-euro-zone.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

An Italian Bank Caught in the Vortex of Election Politics

January 28, 2013 by Leave a Comment

MILAN — The chief executive of a regional Italian bank embroiled in a scandal with political and even Europe-wide implications said Monday that recent revelations of past mismanagement and questionable deals would not impede efforts to turn around the beleaguered institution.

“This is still a solid bank,” Fabrizio Viola, chief executive of Monte dei Paschi di Siena, said Monday at a news conference in Milan.

In the past week revelations of transactions that may have disguised the extent of the bank’s losses during the global financial crisis have become political fodder ahead of Italy’s national elections next month.

And the disclosures have raised questions about the degree of scrutiny given Monte dei Paschi di Siena by Mario Draghi, who was still head of Italy’s central bank when the problems developed. Mr. Draghi, of course, is now president of the European Central Bank.

At issue is whether Monte dei Paschi di Siena, or M.P.S. as it is known, hid losses it incurred after acquiring the Italian bank Antonveneta in 2008, for €9 billion — a price that even at the time was widely derided as far too high. Now under scrutiny are two complex transactions M.P.S. conducted with Deutsche Bank and Nomura that critics say enabled M.P.S. to mask some of its losses.

Mr. Viola, part of the new management that came to the bank last year, said Monday that an investigation now under way would produce findings by mid-February, ahead of national elections scheduled for Feb. 24 and 25.

With M.P.S. based in Siena, in a part of northern Italy that is a stronghold of the leftist Democratic Party, the conservative former prime minister Silvio Berlusconi, who is trying to be a spoiler in next month’s elections, has been trying to lay blame for the scandal at the Democratic Party’s doorstep. Meanwhile, the current prime minister, Mario Monti, has had to defend his government’s decision to bail out the banks with loans granted last year.

More broadly, though, the problems at M.P.S. provide an extreme example of an old-line banking pattern that analysts say is still disturbingly commonplace in Europe. As with most Italian banks, M.P.S.’s primary shareholder is a local foundation, which receives dividends that are to be used to pay for social projects as well as cultural and charitable enterprises. That gives M.P.S. an extensive veil of political relationships that can be hard for any national overseer to peer through.

The same combination of local political influence and lax control has also afflicted many banks in Germany and Spain, with taxpayers left suffering the consequences. Indeed, grave lapses by national regulators are among the main reasons European leaders have decided to put the European Central Bank in charge of bank regulation.

But now there is a possible snag in the plan: Mr. Draghi, who is expected to lead that overhaul, was at least nominally the overseer of M.P.S. while it was digging itself into a deep hole.

Many analysts, though, question whether Mr. Draghi — or any Italian regulators — would have had enough information to recognize the bank’s problems, since there appears to have been a deliberate attempt to conceal losses. And in any case, the Bank of Italy may not have had legal power to prevent M.P.S. from making bad decisions.

But at the very least Mr. Draghi’s proximity to the scandal is untimely as the E.C.B. and euro zone leaders finally seemed to be rebuilding credibility in the common currency. The decision to create a centralized banking supervisor at the E.C.B. is a big part of the effort to restore confidence in the euro zone.

“Italy is a country where even national regulators can have a trouble getting a grip on what is happening at the local level,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. Mr. Véron stressed that there was no evidence Mr. Draghi deserved any blame for the Monti dei Paschi scandal.

But Mr. Véron said, “It clearly does create perception problems, because there’s a question mark about the appropriateness of the Bank of Italy’s response at the time.”

“At this point it’s only a question mark,” Mr. Véron said. “We don’t have any facts.”

A spokesman for the E.C.B. declined to comment Monday.

Article source: http://www.nytimes.com/2013/01/29/business/global/an-italian-bank-caught-in-the-vortex-of-election-politics.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Frenchwomen Weigh Impact and Fallout of Strauss-Kahn Case

July 3, 2011 by Leave a Comment

“He’s lied a lot in his life,” said Ms. Mansouret, whose daughter, Tristane Banon, has signaled that she would file a criminal complaint in France against Mr. Strauss-Kahn. “I know exactly what he is.”

“We question automatically this young woman’s testimony,” she said. “But we don’t question a man who lied extravagantly.”

Mr. Strauss-Kahn and his male allies, she said, “don’t want a world where you can’t force a woman” to perform sex acts.

For Ms. Mansouret, who for years had urged her daughter not to speak out because it might damage her career, and other women here, Mr. Strauss-Kahn’s arrest in New York in May seemed to be a turning point, a chance to break the code of silence about sexual harassment and aggression by powerful figures. But the question in France after his release without bail on Friday was whether that moment was turning yet again.

Many women took it as a pointed slap when senior figures in the Socialist Party — the mainstream progressive organization in French politics — immediately began speaking of how Mr. Strauss-Kahn might yet run for the presidency even though the felony charges against him had not been dropped.

Lionel Jospin, a Socialist and former prime minister, said Mr. Strauss-Kahn had been “thrown to the wolves” by the Americans. The Socialist legislator Jean-Marie Le Guen, who considers Mr. Strauss-Kahn to be the victim of a plot, said, “I hope he will soon be free and able to look the French people in the eyes once again.”

François Pupponi, a Socialist mayor, said Mr. Strauss-Kahn should now run for president: “Before May 15 everybody considered him the best candidate. He was accused of terrible things. If it turns out he is cleared, why wouldn’t he have the right to be a presidential candidate?”

But Sylvie Kauffmann, the first female editor of Le Monde and a former Washington correspondent for that newspaper, said that there had been a “D.S.K. moment” that would last well beyond the machismo of the political elite.

“I think he’s damaged so badly now, he won’t be able to recover in the minds of voters, especially women voters,” she said. “I wouldn’t vote for him now, but I would have before.”

There is a tendency among men “to pretend that nothing has happened,” she said. “In the establishment mind, this issue is not very important. The political class considers this issue of women and political attitudes toward women not so relevant. But I would bet that the average voter may feel differently.”

Ms. Kauffmann was skeptical about any instant revolution in sexual attitudes in France.

“But this has opened the way to a lot of discussion and debate,” she said.

“There’s an awareness and a willingness to speak out that wasn’t there before. Even if D.S.K. manages to come back and run, it will be part of the discussion,” she said. “He’s still a guy who had a sexual encounter with a maid at noon in a luxury suite before having lunch with his daughter and flying back to his wife.”

Even if the sex was consensual, as Mr. Strauss-Kahn’s lawyers say, “we’re back to the Bill Clinton problem,” Ms. Kauffmann said. “D.S.K. might be the brightest guy on the political scene, but it showed a part of his character that is a problem in a campaign and in a presidency.”

Like Ms. Kauffmann, Hélène Périvier, co-director of the gender program at the Institut d’Études Politiques in Paris, agreed that a deeper soul-searching had started about gender relations.

“It raised questions that went well beyond his particular case and that of his guilt,” she said. “People have started raising questions about the relations between men and women in France, and those questions won’t go away.”

But Ms. Périvier, like others, warned that the inconsistencies that have apparently emerged in the account of Mr. Strauss-Kahn’s accuser risked discrediting future reports of sexual violence.

Maïa de la Baume and Romain Parlier contributed reporting.

Article source: http://www.nytimes.com/2011/07/03/world/europe/03france.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

For $1,000, Site Lets Celebrities Say It Ain’t So

March 28, 2011 by Leave a Comment

Suing is too stressful and quixotic. Besides, it’s the Internet: how can anyone erase the inerasable? But courtesy of a new Web site called ICorrect, people who feel unhappy about “obvious misinterpretations, misinformation and what some might call total lies,” in the words of the site’s founder, Sir David Tang, can now attempt to set the record straight.

“The superhighway is jampacked with stops where at every place you’ll have mud thrown at you,” said Sir David, 56, a businessman, socialite and celebrity friend extraordinaire who is best known for founding the department store chain Shanghai Tang. “Can you afford to have it all stick and not try to clean it up?”

People concerned about their reputations can use the site to post as many corrections as they want, for $1,000 a year. Luckily, browsing through the posts is free.

Here is the actor Stephen Fry, rebutting a report that he dislikes Catholics. Here is the businessman Richard Caring, noting that he did not rudely fail to turn up at an important luncheon (it was a misunderstanding). 

Meanwhile, Cherie Blair, wife of former Prime Minister Tony Blair, did not appear at a party wearing the same dress as the actress Hayden Panettiere; did not go shooting with Col. Muammar el-Qaddafi’s son; and never declared that a burqa “is no more a threat than a nun’s habit.”

Sienna Miller would like to make it clear that she is not on Twitter. Tommy Hilfiger  never said that he did not want black people to wear his clothes. And, despite what you may have heard, Viscount and Viscountess Linley were not sulking in a maritally discordant way after a recent wedding (they were, the viscount writes, “just waiting for our car”).

ICorrect went live this month and has about 35 founding members, or correctors, as they are called, plucked mostly from the pages of Sir David’s very thick book of contacts. Anyone can join, with payment and proof that he is who he claims to be; the site does not post items from nonmembers. 

Sir David said that the site, apparently helped by a positive Twitter message from Mr. Fry, had 225,000 hits its first weekend. “It’s minimally designed to make sure that even the most stupid person can work it and understand it,” he said.

Although Sir David admits that it has been “quite a path to persuade people to join,” he has high hopes that someday ICorrect will be the world clearinghouse for corrections. “It’s my fervent desire to have NGO’s and big corporations like BP,” he said.

The new venture has been greeted with some skepticism in the British media world, in part because some people thought at first that it was a joke, and in part because many journalistic commentators are not naturally sympathetic to offended celebrities.

“As images of human desolation were beamed into our homes this week,” wrote Brian Reade in the Daily Mirror tabloid, referring to the Japanese tsunami, “rich and famous people were hunched over laptops alerting us to the grotesque injuries caused to their reputations.”

Stephen Pritchard, the ombudsman at The Observer of London, which has an actual corrections column, said in an interview that people who joined ICorrect risked drawing unnecessary attention to the very items they wished would go away. Also, he added, who is to say whether their corrections are in fact themselves correct, rather than fake alternatives they wish were true?

That is not the point. “We’re not here to police it or prove the veracity of what you post,” Sir David explained, “although we do make sure you don’t commit crimes by defaming people or inciting others to violence.”

The beauty of the site, he said, is that it allows the offending items to be viewed next to the offended person’s response, so that even lazy Internet users will be exposed to both sides of any given story.

”A lot of people simply look up Google and press a finger and lift whatever is in front of them,” Sir David said.

For example, he added, “If you say that Henry Kissinger bombed Cambodia illegally, you will have to do a bit of research before you find where he defends himself. But if he joins the site, he can say, ‘This was my reason, and it’s more fully explained on pages 85 and 86 of my autobiography.’ ”

Meanwhile, Mrs. Blair, who became a popular target for tabloid tales when her husband was prime minister, said that in a country where some newspapers made little effort to “get the basic facts of a story right,” the site was a welcome antidote.

”Anything which allows people publicly to correct factual inaccuracies in stories about them is a good idea,” she said in an e-mail message.

Of course. But on the other hand, one of ICorrect’s members  is Bianca Jagger, and all you can do in reading her entries is sit back in dismay as the myths fall.

No, Ms. Jagger says, she did not go out with Pierre Trudeau, the former prime minister of Canada. No, Billy Joel’s song “Big Shot,” about a woman riding in a limousine with “the Dom Perignon in your hand and the spoon up your nose,” is not based on a bad date he had with her.

She also addresses the business about herself, the horse and Studio 54, revealing that, unfortunately, it was not as exciting as everyone thought.

As one visitor to the site, Laura LaRue, said on Twitter: “ICorrect is making me a little sad. Bianca Jagger did not ride a white horse half-naked in Studio 54. Sometimes a lie is more fun?”

Article source: http://feeds.nytimes.com/click.phdo?i=747795c2658c61525cadf7273e18157c

Filed Under: Business News Tagged With: , ,