Three new developments have put huge pressure on EU governments to come to a unanimous decision at the two-day debt summit on Thursday and Friday. Cyprus became the fifth eurozone country to ask for a bailout to help its banks yesterday, after announcing it has only four days to find €1.8bn to protect its second-largest bank, Cyprus Popular Bank, which is heavily exposed to the Greek financial system. The Cypriot government said it required assistance after “negative effects from Greece had spilled over in to its economy.” While they did not give a specific amount, AFP has reported local media are estimating they will ask for around €...
The plan was announced after the Fed decided it would not use further quantitative easing to counteract slow market growth, but instead make it easier for households and businesses to cut their long-term costs of borrowing. Operation Twist involves the selling of short-term bonds for long-term ones, and is bought in to try and depress bond yields, in order to get a decent rate of return on investment. “This continuation of the maturity extension programme should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” a Fed statement said. In a news conference, Federal Reserve ...
Italian prime minister Mario Monti suggested using the European Financial Stability Facility’s (EFSF) €440bn rescue subsidy to buy open market peripheral bonds in an attempt to counteract the rising cost of government bond yields in Spain. “The idea is to stabilise borrowing costs, especially for countries who are complying with their reform agendas, and this should be sharply distinguished from the idea of a bailout,” he said. Angela Merkel has been opposed to the bailout rescue fund for quite some time, but she found herself under pressure yesterday to commit to a deal, as analysts maintain that borrowing cost levels will soon becom...
The group will continue discussions to focus on breaking the link between banks and sovereigns, and tackle other problems like employment growth in the region. The lack of progress being made is said to have frustrated some: “We are waiting for Europe to tell us what it’s going to do,” said World Bank chief Robert Zoellick. Jose Manuel Barroso, president of the European Commission, said the financial crisis originated in North America but wasn’t putting the blame on his partners: “Our financial sector was contaminated by unorthodox practices by some sectors in their financial markets. We must work together when we have a global prob...
“Uncertain,” “Paralysing,” and “Pessimistic.” Those were the words Sir Mervyn King used to describe the effects the eurozone crisis has had on the UK economy at his annual Mansion House speech on Thursday evening. The Bank of England Governor was joined by UK Chancellor George Osborne as he addressed an assembly of the city’s most prominent players in the banking world. He warned the outlook for the country looked bleak thanks to ongoing austerity in Europe and stifled growth, and outlined his emergency measures to boost UK banks with an £80bn cash injection to provide cheap credit to banks. The plan, to be launched jointly wit...
The country’s credit rating now teeters barely above junk status, amid growing fears it will sink still further after being shut out of international markets. The borrowing interest rates currently stand at the highest they’ve been since the euro’s inception, with the yield on Spain’s 10-year bonds shooting up to 6.86 percent. Last weekend, eurozone finance ministers announced they were prepared to lend up to €100bn to pull Spain out of the financial abyss, but Moody’s announced the plan will only increase the country’s massive debt burden. The investment services firm downgraded Spain’s Fondo de Reestructuración Ordenada Ban...
The predictions come as the trade evolves beyond its entrepreneurial, private roots to meet investor and regulator demands for greater transparency and more robust operations. A recent Citigroup survey predicted that hedge funds could lure $2trn in new money to investment vehicles long associated with mutual-fund companies and other institutional managers including “long-only” funds that buy and hold stocks. The poll of investors, consultants and money managers concluded further growth will come from institutional investors such as pension funds and endowments, and may also earmark an additional $1trn as they grow more assured and comfort...
In an unexpected reversal of course, Rajat Gupta, the former Goldman Sachs director accused of insider trading, will not testify in his trial according to a letter to the presiding judge. The letter is in direct contradiction to a statement made on Friday afternoon by Gary Naftalis, Gupta’s lawyer, in which he said it would be ‘highly likely’ that his client would testify. Gupta, the former worldwide head of McKinsey, is accused of revealing corporate secrets to his former business partner Raj Rajaratnam, founder of Galleon hedge fund. Prosecutors estimate that Galleon made $13.5m and avoided $3.8m in taxes based on Gupta’s alleged ti...
The Indian government decided to defer implementing GAAR for another year after a visit from the US Treasury Secretary in April. General Anti-Avoidance Rules were established to fight tax avoidance by enforcing the country’s tax regulations. The GAAR regulations were part of the proposed Direct Tax Code 2010 to deter sophisticated means of ducking income taxation through legal means. As a result, the regulations were specifically designed to impact multinational corporations that shift assets to tax-free locales and force them to pay tax on these assets. GAAR was originally intended to be instituted in April 2011, but was deferred to April ...
Fitch sliced its rating on government debt three notches from A to BBB, barely above junk status, blaming the enormous projected cost of cleaning up the country’s troubled banking sector, the deep recession and soaring national debt. The downgrade came after it emerged European officials were weighing up a bailout programme for Spain that would aid its banking sector while imposing only limited conditionality on Madrid. “Spain’s high level of foreign indebtedness has rendered it especially vulnerable to contagion from the ongoing crisis in Greece,” Fitch said in a statement. A leaked IMF report showed the country needs an immediate ...