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Daily Digest 6/20 - Spain Forced To Pay 5% For Short Term Debt, Crisis Leading To Crop Theft, EU Rules Could Push Up Cost Of Retirement

Wednesday, June 20, 2012, 10:50 AM
  • Spain forced to pay more than 5 pct interest on short term debt, highlighting investor fears
  • Banks' borrowing at ECB rises as Spain stress grows
  • Soaring UC pension costs raise pressure for more cuts, tuition hikes
  • Gold climbs to record highs at Rs. 30,750 on seasonal demand (India)
  • Spain pharma sounds alarm on regional debt threat
  • Crisis has barely begun-GLG hedge fund manager Baz
  • French President: EU, U.S. to Discuss Tools for Fighting Speculation on Sovereign Debt
  • Spain crisis leading to crop theft
  • Eastern Michigan University hikes tuition 3.95%, sets $290.6M operating budget
  • State Universities Want Maximum Tuition Increase
  • Number of jobless Britons in a decade surges to 900%
  • Italy Home Sales Fall Most on Record Amid Recession
  • Germany to allow Europe funds to buy debt: reports
  • EU rules could push up cost of retirement
  • Germany says did not discuss EU bond buying plan at G20 summit
  • European Parliament Votes Through Credit-Rating-Company Rules

Economy

Spain forced to pay more than 5 pct interest on short term debt, highlighting investor fears

Spain can survive the current high interest rates for weeks or even months, analysts say, but not in the longer term.

If it becomes clear that the borrowing rates will not come back down, Spain will likely have to ask for a European bailout _ money that would come at lower interest rates than those offered by bond markets. The problem is that Spain's (EURO)1.1 trillion economy is the eurozone's fourth-biggest and larger than those of bailed-out Greece, Ireland and Portugal combined.

Banks' borrowing at ECB rises as Spain stress grows

Bank borrowing from the European Central Bank rose on Tuesday as turmoil in the euro zone government bond markets pushed more banks to take up the ECB's regular offering of seven-day loans. Demand for the funds, currently used largely by banks who can no longer borrow money affordably elsewhere, rose by 36 billion euros to 167 billion euros. The number of banks bidding at the auction rose to 101 from 94.

Soaring UC pension costs raise pressure for more cuts, tuition hikes

The UC system, including medical centers and national laboratories, is scrambling to shore up its pension fund as it prepares for a wave of retirements and tackles a roughly $10 billion unfunded liability.

The UC Retirement Plan's huge deficit was created by investment losses during the global economic crisis – and the nearly two decades when campuses, employees and the state did not contribute any money toward pensions.

Gold climbs to record highs at Rs. 30,750 on seasonal demand (India)

Weakening Indian rupee against the American currency also made the dollar-priced metals costlier, they said. On the domestic front, gold of 99.9 and 99.5% purity surged by Rs. 325 each to set a new peak level of Rs. 30,750 and Rs. 30,550 per 10 gm, respectively, while sovereign remained flat at Rs. 24,400 per piece of eight grams.

Spain pharma sounds alarm on regional debt threat

The future of Spain's drug industry could be in jeopardy if the government does not prevent overspending regions from racking up more piles of unpaid medical bills in a sector bearing the brunt of austerity measures. Madrid said in February it would clear the regions' debts accumulated by end-2011, and expects to do so this month. Hospitals owed more than 6.3 billion euros ($8 billion) to drug companies at the end of last year, according to lobby group Farmaindustria.

But payments of around 1.5 billion euros for debt run up this year remain outstanding and many regions are piling up debt at a faster pace than in 2011, Jordi Ramentol, president of Farmaindustria, said.

Crisis has barely begun-GLG hedge fund manager Baz

Baz said that total debt to GDP in G7 countries as well as Spain, Portugal, Ireland and Greece had risen over the past five years from 380 percent to 420 percent. To get to debt to GDP levels below 200 percent, at a rate of deleveraging of 10 percent a year, there will be "at least 20 years of deleveraging, assuming countries can do it diligently year in, year out, at great risk to their political and social stability", he said.

French President: EU, U.S. to Discuss Tools for Fighting Speculation on Sovereign Debt

European leaders at the meeting of the Group of 20 leading economies will meet with U.S. President Barack Obama on Tuesday to discuss mechanisms to fight speculation on sovereign debt, French President Francois Hollande said Tuesday.

Spain crisis leading to crop theft

Drop those cherries, you're under arrest. Crops and cops are converging along Spain's journey through economic crisis: People enduring hardship are stealing the earth's bounty from farmers to help get by from day to day.

Police have added the patrolling of farmland - sometimes on horseback - to their list of daily tasks. Farmers in some areas are teaming up to carry out nighttime patrols on their own.

Eastern Michigan University hikes tuition 3.95%, sets $290.6M operating budget

“We are all deeply concerned about the cost of education for these students, we truly are,” Regent Mike Morris said, adding that EMU is more “aware than most of the amount of debt that students” incur through college. “We just can’t keep zero forever, 3.95 (percent) is well within the bounds of what we need to do to upgrade,” he continued

State Universities Want Maximum Tuition Increase (Florida)

Nearly every state university plans to ask the Florida Board of Governors for the maximum tuition increase this year of 15 percent.

The University of Florida sought only a nine percent increase in tuition and the University of South Florida initially wanted a 15 percent increase, but later decided to ask for just an 11 percent increase.

Number of jobless Britons in a decade surges to 900%

The number of 18 to 24-year-old Britons who have remained jobless for over a year has rocketed from 6,260 in 2000 to 60,955 this year -- an astounding 900 percent, the Trades Union Congress has said.

Italy Home Sales Fall Most on Record Amid Recession

Home sales in Italy fell the most in at least eight years in the first quarter as real estate owners in the recession-hit country faced the prospect of a new property tax.

With about 110,000 transactions in the three months through March, home sales declined 20 percent from a year earlier, the Finance Ministry’s Agenzia del Territorio said in a report posted on its website today. That was the biggest drop since data collection began in 2004. Total sales fell an annual 18 percent.

Germany to allow Europe funds to buy debt: reports

Germany is going to end its opposition to the euro zone’s bailout funds buying the sovereign debt of troubled European nations, according to reports in British news outlets including the Guardian and Sky News, without attribution. The money would come from the 500 billion euro European Stability Mechanism and the 250 billion euro European Financial Stability Facility, the reports, coming from the Group of 20 meeting in Los Cabos, Mexico.

EU rules could push up cost of retirement

PENSIONERS could face a reduction in income of up to 20 per cent if new European Union rules on capital requirements are implemented, according to accountancy firm Deloitte.

The Solvency II reforms are set to shake-up the continent’s insurance business by setting common standards and increasing capital requirements. But this could have the side effect of forcing annuity providers to hold significantly more reserves, causing them to switch from investing in corporate bonds to lower-yielding assets such as government debt.

Germany says did not discuss EU bond buying plan at G20 summit

There was no discussion at a G20 summit in Mexico this week about using Europe's rescue funds to buy up the bonds of stricken members of the euro zone, a German government official said. British media reports on Tuesday said German Chancellor Angela Merkel was poised to use Europe's dual bailout funds, known as the EFSF and ESM, to buy up the debt of countries like Italy and Spain and had discussed the plans at the summit.

European Parliament Votes Through Credit-Rating-Company Rules

"The debt crisis in the euro zone has shown that credit rating agencies have gained too much influence, to the point of being able to influence the political agenda," said Leonardo Domenici, the member of the European Parliament in charge of pushing the legislation through parliament.

"In response, we have strengthened rules on sovereign debt ratings and conflicts of interest," he added. The draft legislation, approved by the Economic and Monetary Committee, aims to regulate sovereign ratings, reduce investor reliance on ratings and restrict the scope for conflicts of interest.

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8 Comments

saxplayer00o1's picture
saxplayer00o1
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UselessEater
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UselessEater's picture
UselessEater
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Stockton has nothing on Chi town

Chicago Homicide Rate Worse Than Kabul

http://www.huffingtonpost.com/2012/06/16/chicago-homicide-rate-wor_n_1602692.html

saxplayer00o1's picture
saxplayer00o1
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affert's picture
affert
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Title is wrong...

Number of jobless Britons in a decade surges to 900%

This should read "by 900%".   As it currently stands, it says that for every 1 person in the country, there are 9 people without a job...

Johnny Oxygen's picture
Johnny Oxygen
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Who bought JP Morgans Derivatives?

So JP Morgan sold off a large share of its derivatives.

Well who bought them? I can't find this info anywhere.

saxplayer00o1's picture
saxplayer00o1
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Wendy S. Delmater's picture
Wendy S. Delmater
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Posts: 1988
ratings wrecking ball

Moody‘s Investors Service lowered the credit ratings of 15 the world’s largest banks late Thursday, including Bank of America, JPMorgan Chase, Citigroup, and Goldman Sachs, saying their long-term prospects for profitability and growth are shrinking.

“Citi strongly disagrees with Moody’s analysis of the banking industry and firmly believes its downgrade of Citi is arbitrary and completely unwarranted,” the bank said in an angry response to downgrade.

The ratings agency said it was especially concerned about banks with significant financial markets businesses because those markets have become so volatile. Some of the largest European banks were also downgraded, including Barclays, Deutsche Bank, and HSBC.

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