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Daily Digest 9/26 - Greece Near Boiling Point, USPS Moves Closer To Insolvency

Wednesday, September 26, 2012, 8:37 AM

Economy

Greece nears boiling point in face of deeper austerity measures

The impasse has elevated tensions here as Greece braces for a nationwide general strike planned on Wednesday that threatens to bring public services to a halt. The Greek people are increasingly angry over the prospect that public salaries and pensions will be cut again in a last-ditch bid to secure a new loan installment of 31.5 billion euros, or $40.7 billion, from Greece's creditors.

Spaniards rage against austerity near Parliament

Spain's government was hit by the country's financial crisis on two fronts Tuesday as thousands of protestors enraged with austerity cutbacks and tax hikes marched on Parliament while its borrowing costs increased in an auction of its debt.

More than 1,000 riot police blocked off access to the Parliament building in the heart of Madrid, forcing the bulk of protesters to stay in a nearby square. Police used batons to push back some protesters at the front of the march as tempers flared.

The demonstration, organized with an "Occupy Congress" slogan, drew protesters weary of nine straight months of painful measures imposed by Prime Minister Mariano Rajoy. Thousands of angry marchers yelled toward parliament, 250 meters (yards) away, "Get out!, Get out! They don't represent us! Fire them!"

Catalonia calls vote as Spain crisis deepens

Mas called an early vote for November 25, a de facto referendum on his demands for greater independence for the big northeastern region, which is fiercely proud of its distinct language and culture.

"It is time to take the risk," Mas told the regional parliament, after Rajoy last week rejected his proposals for greater powers of taxing and spending. "If Catalonia were a state we would be among the 50 biggest exporting countries in the world," he said.

Spain's Andalucia may seek 4.9 bln euros central gov't aid

If Andalucia was to make official this aid request, it would be the fourth Spanish region to tap an 18-billion-euro mechanism set up by the central government to ease funding problems in Spain's 17 autonomous communities. Catalonia, Valencia and Murcia have already said they would seek emergency funds.

Portugal set for weekend protest against tax plans

The leader of Portugal's CGTP union confederation has called a protest for the coming weekend after a disappointing meeting with coalition Prime Minister Pedro Passos Coelho on Monday.

Armenio Carlos said that austerity is choking the country and picking workers' pockets was no solution. He had met the PM with bosses' representatives but came away with answers that satisfied nobody.

Fed’s Williams: QE3 asset buying may be expanded

The Federal Reserve could expand its stimulus package to include assets other than mortgage-backed securities if the U.S. economy fails to respond to its latest effort to jump-start the economy.

“Unlike our past asset-purchase programs, this one doesn’t have a preset expiration date,” said San Francisco Fed President John Williams at a speech at the City Club on Monday. “Instead, it is explicitly linked to what happens with the economy.”

India likely to miss deficit target this fiscal, borrowings to mount

India will likely borrow an additional Rs 500 billion (USD 9.34 billion) for the year ending in March and miss its fiscal deficit target, a poll showed, raising doubt about the fiscal discipline of a country whose credit ratings are under threat.

Global bacon shortage "inevitable"

The Pig Association says in a release that the US government has started a pork-buying program in order to keep pig farmers in business, while Chinese officials are putting pork into cold storage in order to help stave off shortages during 2013.

The release insists prices could go up around the world by more than 30 percent

Bundesbank castigates IMF for saving Europe

Germany's central bank has launched a blistering attack on the International Monetary Fund, accusing officials of spraying around money like confetti and overstepping their legal mandate.

ECB rejects easing Greek debt: board member

Executive board member Joerg Asmussen told the Die Welt daily: "The ECB could not take part in such a debt restructuring because this would be forbidden monetary financing."

Asmussen called on the Greek government to close the gap in their finances identified this year and next with "robust measures on the expenditure and income side". "Even if Greece closes the budgetary gap, there might be a need for an additional external financing, because the growth and privatisation revenues are lower than expected," the official noted.

Postal Service to move closer to insolvency

At the end of this month, the U.S. Postal Service takes another step toward insolvency. On Sunday, the service is required by law to pay the federal government $5.6 billion to fund health care benefits for retirees. But it won't do it, because it doesn't have the money. It will be the second time that the service has defaulted on a payment, the first occurring on Aug. 1.

For the time being, the default means little. "This default will have no effect on the processing or delivery of mail, and employees and suppliers will continue to be paid," said David Partenheimer, a spokesman for the Postal Service. But if Congress does nothing, come next spring, the Postal Service will truly start running out of cash.

Forex focus: Bank of Japan jostling for weaker currency

A starting pistol may now have been fired in a race to the bottom in currencies. The Bank of Japan (BoJ) took the markets by surprise, announcing it was pumping money into the economy by expanding its asset-buying and loan programme by 10 trillion yen ($127.21bn) to 80 trillion yen. The aim is to boost its export-driven economy as it struggles with flagging global demand.

The BoJ intervention is only the latest in a series by central banks around the world to “support” their economies.

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