Daily Digest 7/25 - Spain Feels Debt Heat, In-State College Tuition Rising
United Parcel Service Inc. (UPS) predicted the U.S. economy will grow 1 percent in the rest of 2012 as slowing volume growth prompted the world’s largest package- delivery company to conclude average forecasts are too high. The projection by UPS, an economic bellwether because it moves goods from financial documents to pharmaceuticals, contrasts with a 2.2 percent growth rate predicted by economists in a Bloomberg survey.
Spain paid the second highest yield on short-term debt since the birth of the euro at an auction on Tuesday, and EU officials said Greece had little hope of meeting the terms of its bailout, casting fresh doubt on its future in the euro zone.
Spain's increasingly desperate struggle to put its finances right has seen its borrowing costs soar to levels that are not manageable indefinitely, reflecting a growing belief that it will need a sovereign bailout that the euro zone can barely afford. It has become the recent focus for investors, but Greece - where the sovereign debt crisis began - remains a powder keg. If Athens were to default or exit the euro zone, the knock-on effects could push Spain and even Italy over the edge.
DEBT DEPENDENCY The bank bailout has only made investors more worried about Spain's financial position. Two-thirds of Spain's government bonds are held by the country's banks, pension funds and insurance companies — that's 50 percent higher than last year. This sharp increase is a sure sign that foreign demand for Spanish debt is falling fast.
Market-watchers are concerned that Spain and its banks are dependent on each other: the government is issuing debt, the majority of which is being bought by its banks, only to use the funds from the sale to prop up its banks so that they can buy more government debt.
Italian cities risk having to write down around 580 million euros ($702.8 mln) in revenues they are unlikely to ever collect, an Italian daily reported on Tuesday citing calculations based on data from the statistics office. Under a new rule introduced this month as part of the government's austerity measures, a city must write down at least 25 percent of revenues that have been on its balance sheet for more than five years but which it has yet to cash in.
Greece will probably not be able to face its obligations and more debt restructuring is likely to be necessary, according to a Reuters exclusive that cites three unidentified EU officials. Inspectors from the European Commission, the ECB and the IMF arrived to Athens on Tuesday to assess Greek debt-sustainability , and even though the analysis will be completed next month, "the conclusions were already becoming clear". According to the report, Greece is seen missing troika's targets.
"Greece is hugely off track," told one unnamed official to Reuters. "The debt-sustainability analysis will be pretty terrible."
France's government on Tuesday said an increase in the size of the European Union bailout funds or European Central Bank intervention may be needed to tackle a worsening crisis in Spain, as it called jointly with Madrid and Rome for a quick implementation of far-reaching deals reached in a summit last month. The comments made by France's Foreign Minister Laurent Fabius, on French television channel France 2, are supportive of growing calls from Madrid for the ECB to act to lower Spanish borrowing costs--political code for massive bond-buying along the lines of that conducted in recent years by the likes of the U.S. Federal Reserve or the Bank of Japan.
Students at the University of Washington are preparing to pay $11,782 in this coming academic year, along with some additional fees not included in the prepaid tuition calculations, up about 15 percent from the year prior. Future projected increases mean by the 2019-20 school year, tuition could be $20,249, plus additional fees.
Among other findings:
•38% of Americans live paycheck to paycheck, vs. 31% in 1997.
•48% of families with college-bound children are saving for their education, down from 56% in 1997.
•55% are worried about losing money if they invest it, compared with 45% in 1997.
•About half of Americans are behind in retirement savings, compared with 38% in 1997.
•34% of Americans say they can retire at 65, vs. 50% in 1997.
The Italian Treasury will auction 1.5 billion euros to EUR2.5 billion ($1.82 billion to $3.03 billion) of zero-coupon notes, or CTZ, at an auction July 26, it said Tuesday. However, it has cancelled an auction for inflation-linked bonds, or BTPei. It didn't give an explanation for the cancellation but the move was widely expected in the market following Moody's Investors Service's downgrade of Italian ratings
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