Tony Blair is unaccountable over business interests, adviser says

 

More questions have been raised over Tony Blair's lucrative business activities after an adviser in his role as a Middle East peace envoy said the former Prime Minister continued to operate outside a defined code of conduct. Channel 4's Dispatches, due to be broadcast tonight, claims that Mr Blair is not required publicly to disclose his commercial interests as he would if he were an MP. Mr Blair combines a £2m-a-year consultancy with the US investment bank JP Morgan with his unpaid post in Jerusalem, where he is heading international efforts in preparation for a future Palestinian state. He also advises the insurance group Zurich Financial, while his company Tony Blair Associates signed a reported £27m-deal advising the Kuwaiti government. They are among a string of globetrotting business interests that have seen him build an estimated personal fortune of £20m since leaving office in 2007. But a senior French diplomat Anis Nacrour, who advised Mr Blair on security for three years, has fuelled doubts over the former Labour leader's public accountability.

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EU Keeps Bulgaria, Romania Out Of Schengen Free Travel Zone

 

The Netherlands and Finland have blocked the entry of new members of the European Union, Bulgaria and Romania, to the Schengen zone, where travel for citizens are allowed without passports. The decision not to allow Bulgaria and Romania came at the EU interior ministers meeting without a vote, with the main objections from the Netherlands and Finland. The issue of Bulgaria and Romania could possibly be discussed in the summit meeting of EU next month, with the two countries planning to appeal against the decision. Nevertheless, no decision is expected soon until reports show progress on issues raised against the two nations. The Netherlands and Finland believe the new members need to do much more to qualify for inclusion into the Schengen zone, specifically on corruption and judicial functioning. The Dutch Immigration Minister feels it "...a matter of trust and confidence that our collective external borders will be safe and secure." Leers averred that right now there were "significant shortcomings in the field of anti-corruption and the fight against organized crime" in these two countries.

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Palestinian leader Mahmoud Abbas makes UN statehood bid

 

Palestinian leader Mahmoud Abbas has submitted his bid to the UN for recognition of a Palestinian state. To rapturous applause in the General Assembly, he urged the Security Council to back a state with pre-1967 borders. He said the Palestinians had entered negotiations with Israel with sincere intentions, but blamed the building of Jewish settlements for their failure. Israeli PM Benjamin Netanyahu said he was reaching out to Palestinians and blamed them for refusing to negotiate. "I continue to hope that President Abbas will be my partner in peace," he said in his speech in New York. "Let's meet here today in the United Nations. Who's there to stop us?" Mr Netanyahu added that the core of the conflict was not settlements but the refusal of the Palestinians to recognise Israel as a Jewish state. Hours after receiving it, UN Secretary-General Ban Ki-moon transmitted the Palestinian request to the Security Council. Israel and the US say a Palestinian state can only be achieved through talks with Israel - not through UN resolutions. 'Come to peace' President Barack Obama told Mr Abbas on Thursday that the US would use its UN Security Council veto to block the move. Continue reading the main story Analysis Jeremy Bowen BBC Middle East editor, New York Some delegations here at the UN in New York gave Palestinian Authority leader Mahmoud Abbas a standing ovation - they were clapping and even whistling in support. That is significant because if it comes to a vote in the Security Council - and if the Americans veto it - Palestinians have a Plan B. That Plan B is to go to the General Assembly - where there are no vetoes - and get enhanced status, not full membership but something better than they have now. The Palestinians say they want to negotiate but not in the way they have negotiated before - there has to be clear parameters and a timetable. The Palestinian point is that since 18 years of negotiation has not worked, let's try something new. "I call upon the distinguished members of the Security Council to vote in favour of our full membership," he told the General Assembly, in what was for him an unusually impassioned speech. He added that he hoped for swift backing. Many delegates gave him a standing ovation. "I also appeal to the states that have not yet recognised the State of Palestine to do so." "The time has come for my courageous and proud people, after decades of displacement and colonial occupation and ceaseless suffering, to live like other peoples of the earth, free in a sovereign and independent homeland," he said. He urged Israel to "come to peace". And he said the building of Jewish settlements was "the primary cause for the failure of the peace process". A spokesman for the Islamist movement Hamas, which controls the Gaza Strip, criticised the speech. Salah Bardawil said Mr Abbas had deviated from the aspirations of the Palestinian people by accepting the 1967 borders, which he said left 80% of Palestinian land inside Israel. 'Future and destiny' Meanwhile in the West Bank, crowds roared their approval as Mr Abbas demanded UN acceptance of a Palestinian state within pre-1967 borders. Continue reading the main story Middle East viewpoints Analyst Yezid Sayigh argues that US and Israeli policies have forced the Palestinians to resort to requesting full UN membership. Israeli commentator Yossi Klein Halevi argues that the Palestinians need to convince the Israelis that any state would not be a threat. "With our souls, with our blood, we will defend Palestine," they said. Mr Abbas had called for peaceful marches in support of his initiative, but some clashes were reported: One Palestinian was shot dead by Israeli troops during clashes in the village of Qusra, south of Nablus, Palestinian sources say At the Qalandiya checkpoint, Israeli troops fired tear gas on stone-throwing Palestinian youths In the village of Nabi Saleh, protesters burned Israeli flags and pictures of President Obama The process began with Mr Abbas presenting a written request for a State of Palestine to be admitted as a full UN member state to the UN secretary general. The BBC's Kim Ghattas at the UN says that until the last minute Western diplomats tried and failed to stop the Palestinians making the request. Even now, efforts are under way to restart direct talks between the Israelis and Palestinians in an attempt to defuse tensions, our correspondent says. The Security Council will examine it and vote on the request. In order to pass, it would need the backing of nine out of 15 council members, with no vetoes from the permanent members. A Security Council vote could take weeks to come about and the US may not even need to exercise its veto - Washington and Israel have been lobbying council members to either vote against the Palestinian plan or abstain. Continue reading the main story Palestinian UN membership bid Palestinians currently have permanent observer entity status at the UN They are represented by the Palestine Liberation Organisation (PLO) Officials now want an upgrade so a state of Palestine has full member status at the UN They seek recognition on 1967 borders - in the West Bank, including East Jerusalem, and Gaza Enhanced observer member status could be an interim option Q&A: Palestinians' UN statehood plans Why Obama has turned towards Israel French President Nicolas Sarkozy has urged a compromise, suggesting the General Assembly give the Palestinians enhanced status as a non-member state to allow a clear timeline for talks - a month to start negotiations, six months to deal with borders and security and a year to finalise a "definitive agreement". A vote on enhanced status - enjoyed by others such as the Vatican - would not require a Security Council recommendation but a simple majority in the General Assembly, where no veto is possible. Currently the Palestinians have observer status at the UN. The "Quartet" of US, European, Russian and UN mediators has been working on reaching a framework agreement to restart talks, based on Mr Obama's vision of borders fashioned from Israel's pre-1967 boundary, with agreed land swaps.

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Gadhafi spotted as rebels capture parts of south Libya town

 

Fugitive Libyan leader Muammar Gadhafi was spotted in the southern city of Sabha a few days ago, the regional daily Asharq al-Awsat reported on Tuesday, citing an eyewitness. The witness claimed that Gadhafi was living in the city, located around 750 kilometers south of the capital Tripoli. Anti-Gadhafi fighters firing a cannon near Sirte, the hometown of deposed leader Muammar Gadhafi, September 17, 2011. Photo by: Reuters Gadhafi's whereabouts have been unknown since rebels took over Tripoli in August. However, he continues to send statements and voice messages through the Syria-based al-Rai channel. The report comes after the anti-Gadhafi rebels said they took over parts of Sabha city as well as its airport. "The airport of Sabha has been liberated by our fighters," a military spokesman, Colonel Ahmed Bani, said in Tripoli on Monday. "Also two villages near Sabha have been liberated." For around a week the rebels have been fighting pro-Gadhafi fighters, who have put up stiff resistance in his birthplace of Sirte and the desert town of Bani Walid, south-east of Tripoli. Almost a month after they overran Tripoli, the rebels are at pains to take control of the two strongholds before their leaders can declare all of the North African country "liberated."

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UBS raises rogue equity trade losses to $2.3 billion

 

Swiss bank UBS on Sunday increased the amount it said it had lost on rogue equity trades to $2.3 billion and alleged a trader concealed his risky deals by creating fictitious hedging positions in internal systems. UBS stunned markets on Thursday when it announced unauthorised trades had lost it some $2 billion. London trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008. "The loss resulted from unauthorised speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months," UBS said in a brief statement. "The loss arising from this matter is $2.3 billion. As previously stated, no client positions were affected." Global stock markets have been extremely volatile in recent months, plunging on concerns over euro zone and U.S. debt crises and then rebounding on hopes for their resolution. The loss is a disaster for the reputation of Switzerland's biggest bank, which had just started to recover after it almost collapsed during the financial crisis and faced a damaging U.S. investigation into aiding wealthy Americans to dodge taxes. "Loss even more. Reads like they're making excuses," said Helvea analyst Peter Thorne of the UBS statement. The new scandal has prompted calls for its top managers to step down and for its investment bank to be split into a separate unit from its core wealth management business. Chief Executive Oswald Gruebel, who was brought out of retirement in 2009 to turn the bank around, was quoted in a newspaper on Sunday as saying he is not considering quitting over the crisis, but said it was up to the board to decide. In a memo to staff on Sunday, he said: "Ultimately, the buck stops with me. I and the rest of senior management are responsible for dealing with wrongdoing." Swiss newspapers quoted unnamed insiders as saying the UBS board and important shareholders such as the Singapore sovereign wealth fund were still backing Gruebel, with immediate changes at the top the last thing the bank needed. Gruebel is widely expected to present plans to drastically cut back the investment bank at an investor day in November. INDEPENDENT INVESTIGATION The bank, whose three keys logo symbolise "confidence, security, discretion," has pulled its "We will not rest" global advertising campaign for now, that was designed by advertising agency Publicis to try to rebuild its image. Meanwhile, UBS client advisers have been writing to customers to reassure them of the underlying financial strength of the bank despite the trading loss, a spokesman said. "That we now suffer this setback at this point in our efforts to improve our reputation is very disappointing. This incident also sets us back somewhat in our capital-building efforts," Gruebel said in his memo. "However, I wish to remind you that our fundamental strengths as a firm remain intact... we remain one of the best capitalized banks in the industry. UBS said its board of directors had set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and the bank's control systems. The bank said it had covered the risk resulting from the unauthorised trades, and its equities business was again operating normally within previously defined risk limits. It said the trader had allegedly concealed the fact his trades violated UBS risk limits by executing fake exchange-traded fund (ETFs) positions. "Following inquiries directed to him by UBS control functions that were reviewing his positions, the trader revealed his unauthorised activity," the bank said. "The positions taken were within the normal business flow of a large global equity trading house as part of a properly hedged portfolio," UBS said. "However, the true magnitude of the risk exposure was distorted because the positions had been offset in our systems with fictitious, forward-settling, cash ETF positions." The Sunday Times cited unnamed insiders saying the trader placed bets worth $10 billion before his losses were detected. ETFs are index funds listed on an exchange and can be traded just like regular stocks. They try to replicate index performances and offer lower costs than actively managed funds, but regulators have warned about risks from some complex ETFs. In the past three months, DAX futures have fallen 22 percent, Eurostoxx 50 futures have dropped 20 percent and S&P 500 futures have dipped 4 percent. The instruments involved in the UBS case are similar to those that Jerome Kerviel, the rogue trader at Societe Generale, traded when he racked up a $6.7 billion loss in unauthorised deals in 2008. Christoph Blocher, vice-president of the right-wing Swiss People's Party (SVP) -- the country's biggest -- renewed his calls for a splitting off of the investment bank. "One has to seriously examine a ban on investment banking for commercial banks," he told the SonntagsZeitung, adding his party might team up with the center-left Social Democrats to push for such a move.

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Central control of Europe's borders proposed

 

The European Union's executive branch proposed Friday that national borders in Europe's visa-free travel zone be controlled by officials in Brussels, the EU capital, rather than by individual governments -- a plan already opposed by Germany, France and Spain. The proposal by the European Commission follows a call for stronger economic governance within the area that uses the euro currency, and reflects a push toward more centralized decision-making to protect the European Union's two proudest achievements, the free movement of both people and capital. It is unclear at this point whether either of those achievements will survive, said Paul de Grauwe, an economics professor and EU expert at the Catholic University of Leuven, in Belgium. "I would say we are at a road, and suddenly there is a bifurcation and we have to make choice," de Grauwe said. "One road is more integration to save the project, to save the Schengen zone and the monetary union. But there is a lot of opposition. It's also possible that we take the other road, no further integration, and then we risk the collapse of these two experiments." In June, EU leaders agreed to set up new rules underpinning the principle of free travel throughout much of the continent after Italy, Denmark and France all took action to roll back visa-free travel. Most of the details of the proposed centralized governance of the 25-country Schengen zone -- named for the town in Luxembourg where the visa-free treaty was negotiated in 1985 -- had already emerged. National governments would retain the right to re-institute border checks in unforeseen emergencies that threaten public order or internal security, but only for five days. Beyond that, approval of the European Commission and a committee of technical experts from the Schengen countries would be needed. And as a last resort, if a country failed persistently to adequately police the Schengen zone's external borders despite help from EU headquarters, the commission with the consent of the committee could impose checks along that country's borders with other Schengen countries. "It is a common European project," EU Home Affairs Commissioner Cecilia Malmstrom said of the visa-free zone. "We need to work jointly on joint projects to defend them." But there has long been a push and pull between officials who believe the European project can only work with greater integration and those opposed to the weakening of national sovereignty. Even before the Schengen proposal was unveiled Friday, it met with opposition from Germany, France and Spain, who said border control, public order and internal security were matters for national governments, not EU headquarters. Given that opposition, it is unclear whether the proposal in its current form will take effect. Meanwhile, plans to admit two more EU countries -- Romania and Bulgaria -- to the Schengen visa-free zone hit a snag Friday when Dutch Immigration Minister Gerd Leers said his country plans to block their entry. Approval of new Schengen countries must be unanimous. "The trust isn't there," said Leers' spokeswoman, Elaine de Boer. She said Leers "wants to see more work in the fight against corruption" in both countries. Bulgaria's President Georgi Parvanov insisted his country was being unfairly singled out despite meeting the criteria set out by the 17-member bloc for joining the visa-free zone. "I don't think it is right to use any other criteria in solving this matter," he said at a meeting with foreign ambassadors in the capital Sofia.

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UBS Has $2 Billion Trading Loss; Police Arrest Man in London

 

UBS AG, Switzerland’s biggest bank, may be unprofitable in the third quarter after a $2 billion loss from unauthorized trading at its investment bank. London police arrested a 31-year-old man on suspicion of fraud. UBS management aims to “get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened,” the bank’s group executive board, led by Chief Executive Officer Oswald Gruebel, said in a memo to employees today. “While the news is distressing, it will not change the fundamental strength of our firm.” The bank tumbled as much as 9.6 percent in Swiss trading following the announcement, which deals a blow to Gruebel’s attempts to revive the investment bank after the division recorded 57.1 billion Swiss francs ($65 billion) in cumulative pretax losses in three years through 2009. The trading loss may revive calls for Gruebel to shrink or shut the unit. “How many times do we have to see huge UBS losses?” said Simon Maughan, head of sales and distribution at MF Global Ltd. in London. “It looks unreformed, unwieldy and ultimately unsustainable. This could be a critical tipping point for UBS’s strategy.” UBS fell 79 centimes, or 7.2 percent, to 10.14 francs by 11:43 a.m. in Zurich, bringing the drop this year to 34 percent. UBS said in a statement the matter is still under investigation, and that the “current estimate of the loss on the trades is in the range of $2 billion.” No client positions were affected, UBS said, declining to comment further. Arrest in London An unidentified 31-year-old man was arrested in central London at 3:30 a.m. on “suspicion of fraud by abuse of position,” the police said in a statement. The man remains in custody and an investigation has been started, the statement said. Switzerland’s Neue Zuercher Zeitung newspaper, citing the bank, reported that the trading loss took place in the equities unit in London, and was discovered yesterday afternoon. UBS spokeswoman Tatiana Togni declined to confirm or deny the report. UBS had to raise more than $46 billion in capital from investors, including the Swiss state, to make up for the record losses during the credit crisis. The investment-banking unit had pretax earnings of 1.21 billion francs in the first half of 2011, while UBS as a whole had net income of 2.82 billion francs in the period. The bank’s tier 1 capital at the end of the second quarter was 37.39 billion francs, giving it a tier 1 capital ratio of 18.1 percent, compared with 14 percent at Deutsche Bank AG, Germany’s biggest bank. Risk Management While the loss is “manageable” for UBS, it’s “obviously not helpful for sentiment and confidence in the bank’s risk management following the near-death experience of 2008-2009,” said Andrew Lim, a London-based analyst at Espirito Santo Investment Bank, in a note. Lim had estimated third-quarter net income of 1.1 billion francs for UBS. UBS last month said it will eliminate about 3,500 jobs, with about 45 percent of the reductions coming from the investment bank, as stricter capital requirements and market turmoil hurt the earnings outlook. The bank in July scrapped the target of doubling pretax profit from last year’s level to 15 billion francs by 2014. Gruebel, 67, and Carsten Kengeter, 44, who runs the investment bank, have been trying to revive earnings at the division for two years. They hired more than 1,700 people across the investment bank and brought in new business heads to replace those that left or were fired. They’ve also increased risk- taking to improve earnings opportunities. Kerviel, Leeson The investment bank last had a pretax loss in the third quarter of 2010 when what Gruebel called “very low levels of client activity” and a charge related to the bank’s own debt hurt revenue at the division. Gruebel, who formerly ran Credit Suisse Group AG, was brought out of retirement by UBS in February 2009 to take over from Marcel Rohner after the company posted the biggest annual loss in Swiss corporate history. A former bond trader, Gruebel doubled profit at Credit Suisse between 2004 and 2006. UBS isn’t alone in suffering from unauthorized trading. Societe Generale SA of Paris said in January 2008 that the bank lost 4.9 billion euros ($6.7 billion) after trader Jerome Kerviel took unauthorized positions on European stock index futures. Credit Suisse, Switzerland’s second-biggest bank, had a loss in the first quarter of 2008 in part because of writedowns on debt securities that were intentionally mispriced by a group of traders. Nick Leeson piled up $1.4 billion of losses that brought down Barings Plc in 1995. --With assistance from Paul Verschuur and Carolyn Bandel in Zurich and Gavin Finch in London. Editors: Frank Connelly, Stephen Taylor

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Euro zone banks in the grip of funding squeeze

 

Funding through interbank markets remained scarce and expensive for euro zone banks on Tuesday as concerns about a Greek default and rising pressure on Italian bonds increased the focus on heavily exposed French institutions. The cost of insuring senior French bank debt against default rose according to data from Markit, while a media article suggesting BNP Paribas had no access to dollar funding was cited by equity and currency market participants. Money market traders said that while access to dollar loans remained difficult for French banks -- under close scrutiny owing to their large holdings of peripheral government bonds -- the situation was not one of rapid deterioration. "The stress levels have always been there and they're certainly not getting any less... but there's no sense of panic from the banks as they can fund themselves through central bank cash," a trader said. Fiscal slippages have threatened to cut off Greek aid, raising the prospect of a default by year end, while a weak Italian debt auction showed investors remain reluctant to buy new debt from the heavily-indebted state. The cost of dollar funding, measured by three-month Libor interbank rates , edged higher to 0.34711 percent and access to dollars via cross currency basis markets was close to its most expensive levels since late 2008 at -111 basis points.

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Millions of Hotmail users cut off by Microsoft 'cloud' failure

 

As well as Hotmail, the outage affected Office 365 and the Skydrive online storage service. Microsoft said the cause appeared to be related to the Domain Name System, the computer network that ensures that web addresses are connected to websites. “Preliminary root cause suggests a DNS issue,” the firm said on its office 365 Twitter feed. The problems lasted for at least two-and-a-half hours, beginning at around 4AM British Summer Time. On a company blog, Microsoft said it had fixed the problem at 5.45AM, but the repairs took some time to “propagate” through the DNS network.  "We are working on propagating the DNS configuration changes and so it will take some time to restore service to everyone. Again we appreciate your patience," the firm said. For Office 365, Microsoft’s subscription-only competitor to Google Apps, which went live earlier this year, it was the second major technical failure in less than a month. Such incidents are likely to give pause to organisations considering migration to online “cloud” services, whereby software is delivered from vast data centres, over the internet.

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The alleged killers of a British teenager stabbed to death at a holiday resort in the Costa Brava have been extradited to face justice in Spain.

Andrew Milroy, 15, died of a single knife wound to the chest in the seaside town of Lloret de Mar on July 17.

Police named the suspects only as Remi Romai A. and Jeremy P. - a plumber and a mechanic both aged 21.

Andrew Milroy and two friends had tried to break up a 3.30am brawl between a gang of young French tourists. 

But instead, the youths turned on them in a shopping centre in the resort popular with thousands of British holidaymakers every year, it is alleged.

A nearby hotel security guard called police after being alerted by the boys' friends. 

When ambulance workers arrived, they found Mr Milroy lying in a pool of blood in an alleyway by a clothes shop.

He died after being rushed to Sant Jaume Hospital in the nearby town of Blanes, 25 miles north of Barcelona.

His attackers had fled before emergency services reached the scene.
Spanish police later identified two of the youths from CCTV footage, and then managed to find their names from local hotel bookings.

 

They passed the information on to French police, who swooped on the pair in their home town of L'Isle-d'Abeau, near Lyon, ten days ago.

Tourist spot: Andrew was a resident of Lloret de Mar in Costa Brava, which is popular with holidaymakers

A French judicial source said: ‘The Spanish police were able to identify the three youths through witness statements and video surveillance cameras.

‘Their names were then established from the bookings they had made for accommodation in resort.

‘This information was passed to us and arrests were made.’ 

Lyon prosecutor Jacqueline Dufournet confirmed today: ‘The two young men have been transferred by plane to Spain.

'They are now in the hands of the authorities there and the Spanish legal process will now run its course.' 

Michel Tallent, the lawyer for the mechanic, added: ‘It seems there was a fight on the night in question, but it is not clear who started it.' 

Andrew was born in Spain after his parents Jackie and Andy Milroy emigrated there 26 years ago.

The family run a popular US-style diner called Route 66 in the resort.
Mrs Milroy, originally from Richmond, Surrey, told French daily Le Parisien after learning of the arrests: ‘We are devastated at the loss of our son, but now very relieved at the arrests.  

'Of course my son will not be coming back but at least those responsible have been caught.

'The police have done very well considering how few leads they had to go on.

'I now await their trial and believe they should each go to prison for at least 30 years.'

Mr Milroy's death sparked outrage among locals, who said that children should have been protected from increasingly violent holidaymakers on cheap package tours.

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Ailing Spanish bank CAM posts massive first-half loss

 

Spain's struggling Caja Mediterraneo (CAM), under state control since in July, Monday posted first-half losses of 1.136 billion euros ($1.602 billion). It also reported a non-performing loan ratio of 19 percent, far above the average of 6.416 percent for the sector in June. The Bank of Spain announced on July 22 that it would take control of the CAM through an injection of 2.8 billion euros and the opening of a 3.0 billion euro line of credit. It now plans to sell-off the ailing savings bank. On Friday, the business daily Cinco Dias said the CAM may need about 1.0 billion euros in additional public funds. The CAM was one of five Spanish banks that failed new European stress tests on July 15 to see if they can survive a major crisis. Spain's lenders, especially its regional savings banks which account for about half of all lending in the country, have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008. The government and Bank of Spain have forced a wave of consolidation in the sector this year and are requiring banks to quickly increase the proportion of core capital they hold to above international norms. CAM, based in the eastern coastal region of Alicante which was one of the worst hit by the bursting of the property bubble, had been set to merge with three other savings banks but the deal fell through earlier this year.

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Eurozone woe fuels fresh market chaos as banks bear the brunt of a global stock rout

 

Britain's banks bore the brunt of a global stock market rout amid escalating concerns over the eurozone debt crisis and further signs of strain in wholesale money markets. More than £10bn was wiped off the value of Britain’s five biggest lenders as key inter-bank borrowing costs climbed to levels not seen since the height of the 2008 crash. Royal Bank of Scotland lost an eighth of its value, tumbling 3.06p to 21.78p, amid fears that it could be facing a bill of as much as £3.7bn from US sub-prime mortgage lawsuits. Plunge: More than £10bn was wiped off the value of Britain’s five big banks Lloyds slumped 2.47p or 7.5pc to 30.65p while Barclays tumbled 11.05p to 154.15p. Following yesterday’s bloodbath, taxpayers are now sitting on a £37.6bn paper loss from their 83pc and 40pc stakes in RBS and Lloyds. Josef Ackermann, the chief executive of Deutsche Bank, warned that the current turmoil was reminiscent of the panic triggered by the collapse of Wall Street giant Lehman Brothers.

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Athens, Rome Hold Europe to Ransom

 

Europe is engaged in a high-stakes game of brinkmanship that poses grave risks to the global economy. At last weekend's Villa d'Este Forum in Italy, European policy makers didn't hide their fury at Greece's back-sliding over promised structural reforms and spending cuts. At the same time, Italian ministers undermined the remaining credibility of Silvio Berlusconi's government with a series of complacent speeches. Given such a dangerous breakdown in trust within Europe, investors are right to fear the worst. Germany and its Northern European allies believe only intense market pressure can force weak economies to cut spending and improve competitiveness. But Greece has learned that whenever the crisis in Europe's periphery threatens to overwhelm the core, Europe will ignore previous broken promises and step up with a fresh bailout. Italy now appears to be making the same calculation. The government insists it will fulfill its commitment to balance the budget by 2013, but ministers show no appreciation of the urgent need for structural reforms to address the chronic weakness of an economy that grew on average 0.3% between 2001 and 2010 and experienced a 25% increase in unit labor costs relative to Germany over the same period. Instead, they talk incessantly of euro-zone bonds as a solution to misfortunes they blame largely on external forces. But Italy's dream of euro-zone bonds is likely to remain a fantasy until trust between member states is restored. This no longer depends simply on implementing austerity budgets. Structural reforms have now taken center stage because they are a test of whether the euro zone is worth saving at all: If countries refuse to improve competitiveness, then any attempted solutions to the immediate sovereign-debt crisis will prove short-lived. So what can be done about Greece and Italy? Athens rejects accusations it is dragging its feet but has promised to use a 10-day hiatus in talks with the European Central Bank and International Monetary Fund over progress toward its bailout targets to speed up reforms. If it fails to deliver again, European policy makers now talk darkly of a total loss of fiscal sovereignty. How this might work in practice isn't clear. As for Italy, some now believe its best hope lies with the ECB, which last month threw Rome a life line by agreeing to buy its bonds. If the ECB were to stop buying bonds, the subsequent rise in yields might bring down Mr. Berlusconi's administration, paving the way for President Giorgio Napolitano to appoint a technical government with the constitutional authority to make tough decisions. Then, at least, the long process of rebuilding the credibility of the euro zone's third-biggest economy could begin in earnest.

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US recession fears savage world financial markets

 

World stock markets took a beating Monday over fears that the U.S. economy was heading back into a recession just as the European debt crisis was heating up and the eurozone's economic indicators were slumping. A trader works on the floor of the New York Stock Exchange on Friday, Sept. 2, 2011 in New York. The jobs report was the weakest in almost a year. It renewed fears that the U.S. might slip back into recession. (AP Photo/Jin Lee) A man looks at an electronic stock board of a securities firm in Tokyo, Monday, Sept. 5, 2011. Asia-Pacific stocks took a beating early Monday after jobs data out of the U.S. last week revived fears of a recession in the world's largest economy. (AP Photo/Koji Sasahara) More business news In tough economy, multi-job holders grateful for balancing act Delta at center of FAA debate Turkish hackers hit UPS Recession over, jobs still elusive New owner for Atlanta Dream Delta Air Lines news, links Coca-Cola Co. news Health Care Reform coverage Read Henry Unger's Biz Beat blog Any troubles in the world's largest economy cast a long shadow over the markets, and a report Friday that the U.S. economy failed to add any new jobs in August caused European and Asian stock markets to sink sharply Monday. But the news from Europe was also discouraging. Wall Street, which was closed Monday due to the Labor Day holiday, braced for losses Tuesday after the yields in so-called peripheral eurozone countries — Greece, Italy and Spain — rose sharply against those of Germany, whose bonds are widely considered a safe haven. Although retail sales in the 17-nation eurozone rose unexpectedly in July, a survey of the services sector Monday showed a slowdown across the continent for the fifth consecutive month. The purchasing managers' index for the eurozone showed the services sector was still growing — unlike the manufacturing sector — but only barely. That will add pressure on the European Central Bank to keep interest rates on hold when it meets this week. "There's so much uncertainty, so much fear, that investors don't know what to do," said David Kotok, chairman and chief investment officer at Cumberland Advisors. "I don't remember the last time stocks were so cheap and nobody wanted them." Investors were also shaken by signs that the Italian government's commitment to its austerity program is wavering. Prime Minister Silvio Berlusconi's government has backtracked on some deficit-cutting measures, prompting EU officials to urge Italy to stick to its promised plan. The difference in interest rates between the Greek and benchmark German 10-year bonds, known as the spread, spiraled to new records on Monday, topping 17.3 percentage points. Yields on the Greek bonds were above 18 percent. Mario Draghi, the incoming chief of the European Central Bank, told a conference in Paris that among the common currency's problems was a lack of coordinated fiscal policies and that the solution was more integration. He dismissed the idea of eurobonds — debt issued jointly by the eurozone countries. Some have argued this would help weaker countries borrow more easily because they wouldn't have to pay such high interest rates. But stable countries like Germany would likely see their rates rise. Instead, Draghi suggested the eurozone should adopt rules that would require more budget discipline. Renewed jitters over the eurozone debt crisis also contributed to the slump in financial stocks amid concerns the banks would need to raise new capital. Deutsche bank closed down 8.9 percent in Frankfurt, while Societe Generale in Paris shed 8.6 percent. The U.S. unemployment crisis has prompted President Barack Obama to schedule a major speech Thursday night to propose steps to stimulate hiring. Until then, however, traders coming back from the U.S. holiday weekend will have little to hold onto. The August jobs figure was far below economists' already tepid expectations for 93,000 new U.S. jobs and renewed concerns that the U.S. recovery is not only slowing but actually unwinding. U.S. hiring figures for June and July were also revised lower, only adding to the gloom. Many traders have already pulled out of any risky investments — such as stocks, particularly financial ones, the euro and emerging market currencies — and pile into safe havens: U.S. Treasuries, the dollar, the Japanese yen and gold. With Wall Street closed, investors focused their selling in Asia and Europe, where the equity losses Monday were some of the heaviest this year. "We've got some rough riding ahead," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, adding he was "concerned that we could see a second wave of selling when most traders are back at their desks." Dow futures were down 1.8 percent at 11,010 points while the broader S&P 500 futures were 2.0 lower at 1,145.70. After Asian indexes closed lower, with the Japan's Nikkei 225 shedding 1.9 percent, European shares booked sharp losses. Britain's FTSE 100 closed the day down 3.6 percent to 5,102.58. Germany's DAX slumped a massive 5.3 percent to 5,246.18, and France's CAC-40 tumbled 4.7 percent to 2,999.54. The health of the U.S. economy is crucial for the wider world because consumer spending there accounts for a fifth of global economic activity. The U.S. imports huge amounts from Japan and China and is closely linked at all levels with the European market. The U.S. has seen a slump in consumer and business sentiments. Traders were hoping for signs that the Federal Reserve might take action at its September meeting to support the economy — perhaps a third round of bond purchases, dubbed quantitative easing III or QE3, analysts said. "Right now the possibility has increased," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "I think they have to do something. The markets are expecting QE3." Banking stocks were among the hardest hit Monday, partly because the U.S. government on Friday sued 17 financial firms for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed. Among those targeted by the lawsuits were Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., and Goldman Sachs Group Inc. Large European banks including The Royal Bank of Scotland, Barclays Bank and Credit Suisse were also sued. In Asia, Australia's S&P/ASX 200 followed the broaden trend to close down 2.4 percent and South Korea's Kospi slid 4.4 percent. Hong Kong's Hang Seng slid 3 percent. Benchmarks in Singapore, Taiwan, New Zealand and the Philippines also were down. Shanghai's benchmark Composite Index down 2 percent to 2,478.74, its lowest close in 13 months. The Shenzhen Composite Index lost 2.4 percent. In currencies, the euro weakened to $1.4100 from $1.4187 in New York late Friday. The dollar was roughly flat at 76.87 yen. Last month, the dollar fell under 76 yen, which was a new post-World War II high for the Japanese currency. Benchmark oil for October delivery was down $2.12 to $84.33 a barrel in electronic trading on the New York Mercantile Exchange. Crude fell $2.48 to settle at $86.45 on Friday. In London, Brent crude for October delivery was down $1.63 at $110.70 on the ICE Futures exchange.

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Posted in: US recession fears savage world financial markets

Spanish Shares Open Higher As Bond Yields Collapse

Spain's stock market rose in early trading Monday, despite losses elsewhere across the world, amid expectation the European Central Bank may purchase Spanish and Italian government bonds.

A Madrid-based trader said the ECB news, which has resulted in a collapse in Spanish bond yields, is the main reason for the bounce after last week's selloff. At 0710 GMT, the country's blue-chip index was up 2.2% at 8,862.7.

Spanish bank stocks, among the worst losers in recent days, led the rebound. The shares of the country's two largest banks, Banco Santander SA (STD) and BBVA SA (BBVA.MC), were both over 4% higher in heavy-volume trading. More than 11 million Santander shares had been traded at that point, compared with just two million shares of Telefonica SA (TEF), Spain's largest company by market value.

The ECB said late Sunday it would actively implement its government bond-buying program, signaling it may purchase Italy's and Spain's government bonds. European traders said the central bank has already been spotted buying Italian bonds.

 

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Posted in: Spanish Shares Open Higher As Bond Yields Collapse

ECB intervention brings early relief to European stock markets

European stock markets shrugged off fears of panic on Monday morning, with the Spanish and Italian stock indices rising as their government's debt costs fell.

The Italian FTSE MIB index was up 2.8% this morning, while Spain's Ibex 35 rose 2.6%, defying predictions of a heavy selloff following S&P's downgrading of the US credit rating on Friday night.

In the City, the FTSE 100 fell 66 points at the start of trading this morning, but swiftly reversed as traders become more confident. By 8.25am the blue chip index was in positive territory by 8:25, up 18 points at 5,265 as widespread fears of further panic selling on the markets failed to materialise.

Italy and Spain's borrowing costs also fell, after the European Central Bank said it would intervene by buying up the two countries' debt. Bond yields were down to 5.6% for Italy and 5.7% for Spain, though traders suggested the falls may not last.

Yields on 10-year Italian and Spanish bonds had spiked last week, rising above 6%, as Eurozone debt fears spread from the currency area's peripheral states towards the centre.

The French CAC index rose 1%, while the German Dax was up 0.1%. There had been fears that the US debt downgrade late on Friday night might accentuate last week's sell-off in global markets.

 

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Posted in: ECB intervention brings early relief to European stock markets

Banks that were perceived to have heavy exposure to Greece were penalized

“Banks that were perceived to have heavy exposure to Greece were penalized,” said John Stopford, the London-based head of fixed income at Investec Asset Management Ltd., which manages more than $90 billion. “Now, maybe people will be more worried about exposure to other parts of Europe.”
A benchmark index of credit-default swaps on European banks and insurers climbed as much as 23 percent last week to a record 218.5 basis points on Aug. 5, according to JPMorgan Chase & Co. The extra yield investors demand to buy bank bonds instead of benchmark German bunds is now 231 basis points, or 2.31 percentage points, the most since Jan. 20, Bank of America Merrill Lynch data show.
Bondholders are assigning a higher perceived risk to bank debt on concern that last month’s second Greek bailout won’t prevent the sovereign crisis from engulfing Spain and Italy, deepening lenders’ losses on government securities. The ECB, which last week broke an 18-week hiatus by buying Irish and Portuguese securities, said yesterday it will “actively implement” its bond-purchase program, and said it welcomed pledges from Italy and Spain to reduce their deficits.
“There’s a lot of volatility around sovereigns, which leads to uncertainty for banks and warrants a premium,” said Hans Stoter, head of credit investments at ING Investment Management in the Hague, Netherlands, which manages 218 billion euros of fixed-income assets.
Societe Generale (GLE) SA said last week it may miss its 2012 earnings target after discounting the value of its Greek notes, following similar writedowns by institutions including Deutsche Bank AG and BNP Paribas SA. Analysts have cited concern that banks don’t have sufficient capital to endure further writedowns as a motivation for EU leaders to bolster sovereign debt values in the region.
Sales Stutter
Bank bond sales slowed to about 7.7 billion euros ($11 billion) since the beginning of July, the lowest this year and less than half the 27 billion-euro monthly average for 2011, according to data compiled by Bloomberg.
Greece’s second rescue package proposed that banks accept a 21 percent writedown on the value of their Greek debt. Europe’s 90 biggest lenders hold about 98 billion euros of the country’s notes, the European Banking Authority said July 15.
In a statement issued in the name of President Jean-Claude Trichet after an emergency teleconference meeting of policy makers yesterday, the Frankfurt-based ECB said “a decisive and swift” implementation of reforms by both governments is “essential.” It also called on all euro-area governments to follow through on the measures agreed at a July 21 summit, including allowing the European Financial Stability Facility to purchase bonds on the secondary market.
Greece’s bailout terms may set a “precedent” for future restructurings, according to Fitch Ratings and Moody’s Investors Service. Last week, Standard & Poor’s removed its AAA rating for U.S. Treasuries, citing a political impasse that cannot reduce the deficit of the world’s biggest economy.
SocGen, France’s second-largest bank, reported a 31 percent drop in second-quarter profit because of a 395 million-euro writedown on Greek government debt. Deutsche Bank took a 155 million-euro hit and BNP Paribas (BNP) marked down 534 million euros of Greek IOUs. Royal Bank of Scotland Group Plc said Aug. 5 that it lost money in the first half after writing down Greek holdings by 733 million pounds ($1.2 billion).
Crisis Contagion
Speculation that other countries will succumb to the crisis drove yields on Italian and Spanish government debt to euro-area records and closer to the 7 percent level that presaged the rescues of Greece, Ireland and Portugal than the 2.34 percent borrowing cost of Germany, which has set the benchmark lending rate since the inception of the common currency.
“If Italy is sucked into the peripheral crisis then it starts to become a systemic issue for European banks because Italian government debt is quite widely held,” said Roger Doig, a London-based analyst at Schroders Plc, which manages 36.5 billion pounds of fixed-income assets. EU agencies may have to purchase as much as 850 billion euros of Italian and Spanish debt, or about half of the amount actively traded, according to a note published yesterday by strategists at Royal Bank of Scotland Group Plc.
European banks outside Italy held $233.5 billion of the country’s public-sector debt at the end of March, while foreign lenders held $90.3 billion of Spanish state obligations, according to the Bank for International Settlements in Basel, Switzerland.
Swaps Surge
The Markit iTraxx Financial index of credit-default swaps on the senior debt of 25 banks and insurers climbed to 211 basis points, the highest since March 2009, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. That’s 71 basis points more than the Markit iTraxx Europe Index of investment-grade companies, the biggest gap in five months.
The 10-year euro swap spread, which shows the difference between the swap rate and the yield on German bunds and is used as a measure of perceived risk, has climbed 78 percent in the past five weeks to 69.93 basis points. The spread reached an 18- month high of 73.34 basis points Aug. 4.
European governments’ deteriorating finances contrast with the relatively robust balance sheets of the region’s non- financial companies, which have been “hoarding liquidity,” according to Dagmar Kent Kershaw, head of credit fund management at Intermediate Capital Group Plc in London, which manages 12 billion euros of assets.
Corporates Safer
Yield premiums on non-financial corporate bonds are rising at a slower pace than on bank debt, with spreads increasing 11 percent since the end of June to 139 basis points, according to Bank of America’s EMU Corporates Non-Financial index of bonds issued by companies including BP Plc and Daimler AG.
Non-financial corporate securities returned 0.6 percent this month, compared with 0.3 percent from bank bonds, Bank of America index data show.
“Non-financials might be viewed as a safer-haven investment, but spreads here are widening too,” said Suki Mann, head of credit strategy at SocGen in London.
The European Central Bank restarted its bond-purchase program to prop sovereign debt markets last week following a four-month hiatus, though it limited itself to buying the debt of Ireland and Portugal. World stock markets lost more than $4.4 trillion since July 26 as speculation mounts that the global economy faces a recession that would send more countries begging for international bailouts.
Italian lenders UniCredit SpA and Banco Popolare SC (BP) led Bank of America’s Euro Banking index of bond spreads wider since the start of July. Relative yields on the debt of UniCredit, Italy’s biggest bank, surged 189 basis points to 444 on Aug. 4 and Banco Popolare bond spreads widened 179 basis points to 463, the index data show.

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Posted in: Banks that were perceived to have heavy exposure to Greece were penalized

Greek default virtually 100 per cent

Moody's downgraded Greece's bond ratings by a further three notches Monday and warned that it is almost inevitable the country will be considered to be in default following last week's new bailout package.

The agency said the new EU package of measures implies "substantial" losses for private creditors. As a result, it cut its rating on Greece by three notches to Ca -- one above what it considers a default rating. It also put eight Greek banks on review for a possible downgrade.

Though Moody's said a Greek debt default is "virtually certain," it noted that the new measures will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden.

It also said the package also benefits other eurozone countries by "containing the near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt."

In recent weeks, financial markets have been rocked by fears that much bigger economies like Spain and Italy may get dragged into Europe's debt crisis mire, which has also seen Ireland and Portugal bailed out alongside Greece.

Eurozone countries and the International Monetary Fund last week agreed to give Greece a second bailout worth C109 billion ($155 billion), on top of the C110 billion granted in rescue loans a year ago.

If all goes to plan, banks and other private investors will contribute some C50 billion ($71 billion) to the rescue package until 2014 by swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value, or selling the bonds back to Greece at a low price

"The support package incorporates the participation of private sector holders of Greek debt, who are now virtually certain to incur credit losses," Moody's said in a statement. "If and when the debt exchanges occur, Moody's would define this as a default by the Greek government on its public debt."

Despite Greece's new package, which was more comprehensive than many in the markets had predicted, Moody's said it's going to take many years of hard graft for Greece to get complete control of its debts.

"Greece will still face medium-term solvency challenges -- its stock of debt will still be well in excess of 100 per cent of GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," Moody's said.

The agency added that it will reassess Greece's rating once the bond exchange has been completed "to ensure that it reflects the risk associated with the country's new credit profile, including the potential for further debt restructurings."

On Friday, ratings agency Fitch also said Greece faced a default but that it would reassess the rating once the new bonds are issued -- implying that the bad rating might only last for a few days.

While Greece's brush with default will be a first for a euro country, the immediate practical consequences of the rating for Greece should be limited.

For weeks, the overriding fear was that, because of the bad rating, already struggling Greek banks would be frozen out of the European Central Bank's emergency liquidity operations.

However, last week eurozone leaders found a way around that threat by promising to temporarily deposit C35 billion with the ECB to boost the creditworthiness of defaulted bonds used as collateral by Greek banks, until the default rating has been lifted.

Crucially for Greece and Europe as a whole, the International Swaps and Derivatives Association, a trade association, said the new rescue deal is not expected to trigger payment of bond insurance because private sector involvement is voluntary.

Greek government spokesman Elias Mossialos brushed off Moody's downgrade as of "no practical value," arguing that domestic lenders can count on secure credit lines under the terms of the new bailout.

"Unfortunately for them, (ratings agencies) won't have anything to work on for many years," he said in a radio interview. "Perhaps the finance ministry should cancel its subscriptions, because I think the Greek government pays subscriptions to these agencies to receive their results ... I don't think we need them any longer."

 

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Posted in: Greek default virtually 100 per cent

George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

Taxpayers will have to fork out more than £1billion in a second Greek bailout – at the same time as losing millions in loan interest repayments from Ireland.


George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

But because of the UK’s multi-billion pound stake in the International Monetary Fund, the Government cannot escape contributing to the £96billion agreement.

The UK holds a 4.5% stake in the IMF, which is expected to make up around 30% of the bail-out to Greek PM George Papandreou’s debt-laden nation. The other 70% will come from countries in the Eurozone, led by Germany under Angela Merkel.

The agreement, thrashed out by EU leaders on Thursday, is the second time in a year British taxpayers have had to contribute £1billion to bail out the Greeks.




British banks are also exposed to Greece’s £298billion overall debt – which is 60% more than its annual Gross Domestic Product.

But there was good news yesterday as shares rose over the new rescue package.

UK and French markets gained more than 1% in morning trading, before slipping slightly, with the FTSE 100 index ending up 0.6% and the Cac 0.7% higher.

But last night it emerged Britain has been forced to slash the interest we charge Ireland for the £3.26billion loan made in November as part of the complex debt deal. Mr Osborne insisted easing the pressure on our near neighbours was in the UK’s “national interest”. The Chancellor said “We stayed out of the Greek bailout as promised. But, for Britain, Ireland is a special case. Our loan will help them and is in our national interest.”

He vowed the interest, which was fluctuating at around 5.9% would not fall below the 3% cost to Britain of making the loan.




The Irish government came away from the crisis summit with another victory, after Eurozone leaders announced they would continue lending it money beyond 2013 – if it is not able to borrow on the markets. Experts said this was another bailout. Despite the financial markets welcoming the deal, some critics claim it was the first step to a United States of Europe. Tory MP Douglas Carswell said it was “very bad news” and likened membership of the euro to being stuck in a “burning building with no exit”. Euro leaders also failed to dampen concerns that they were using the crisis to increase the EU’s power.

French President Nicolas Sarkozy revealed his ambition was “to seize the Greek crisis to make a quantum leap in eurozone governance”.

The latest international bail-out is seen as an attempt to finally ensure the stability of the single currency and stave off worries the debt crisis will spread to Italy and Spain.

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Posted in: George Osborne claimed the UK would be kept out of the latest Brussels deal to prop up the struggling Mediterranean country.

Alleged Norwegian spree killer has EDL links

The rightwinger allegedly responsible for the Mumbai-style massacre and bombing in Norway appears to have ties with UK-based “counter-jihad movement” the English Defence League.

In online rants, alleged murderer Anders Behring Breivik describes himself as a rightwing conservative opposed to “Eurabia”, the “Islamisation of Europe” and the erosion of Christian values.

In a post on Norwegian website document.no he describes his admiration for the English Defence League, his contacts with the group and aspiration to set up a Norwegian sister organisation:

Quote:
I strongly doubt that your theory is correct. The whole conflict between GDP and EDL started with a change of leadership in the EDL for a few months ago. They threw out the racist and denounced the BNP. They chose instead SIOE's ideological basis that is more or less mainstream view on the right side in Western Europe now (Vienna School of Thought).
Nick was very offended and began to demonize the EDL. Although they are now attacking each other as they compete not at all as these are two quite different fronts. 90% of all votes in the EDL continued GDP (Since this is the only alternative to multikulti in the UK) and 90% of GDP supports EDL regardless of what Nick had to think.

Second, Labour governs intelligence service. They had never in his life supported the EDL as these create a lot of positive attention for the cultural conservative movement in the UK.

I have on some occasions discussed with SIOE and EDL and recommended them to use conscious strategies.

The tactics of the EDL is now out to "entice" an overreaction from Jihad Youth / Extreme-Marxists something they have succeeded several times already. Over The reaction has been repeatedly shown on the news which has booster EDLs ranks high. This has also benefited GDP. WinWin for both.

But I must say I am very impressed with how quickly they have grown but this has to do with smart tactical choice by management.

EDL is an example and a Norwegian version is the only way to prevent Flash / SOS to harass Norwegian cultural conservatives from other fronts. Creating a Norwegian EDL should be No. 3 on the agenda after we have started up a cultural conservative newspaper with national distribution.

 

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Posted in: Alleged Norwegian spree killer has EDL links