Greeks bonds out as collateral
GENEVA, SWITZERLAND – Portugal will get the nice euros 14 billion of the 78bn allotted to it as part of a european bailout package. The country’s spending cuts and ability to stay on target for reducing its debt were reviewed by a team that visited Monday, from the three agencies providing the funding, the European Union, the European Central Bank and the IMF.
ECB also announced that it will not accept Greek bonds as collateral for loans; the refusal to accept Greek debt for borrowing is upsetting others in the financial world who say it will make it even more difficult for Greece to climb out of its financial mess.
GENEVA, SWITZERLAND – Greeks held two major demonstrations in Athens over the weekend to protest the country’s austerity plan, as their finance minister flew to Brussels for European Union talks on the plan Monday 20 February. The EU’s finance ministers are scheduled to discuss and vote on the plan, which they and the International Monetary Fund have imposed on the country in order to prevent it from defaulting on its loans. It’s Greece’s second emergency plan to avoid the country defaulting and it’s provoked cries from throughout the EU for Greece to leave the eurozone, but Swiss television TSR reports that there is little support in Greece for a return to the drachma.
CANNES, FRANCE – European Union leaders and the IMF, on the sidelines of the G20 meeting in Cannes 3 November, have given Greece an ultimatum, saying that its citizens must decide if the country will remain part of the eurozone: a vote against a recently negotiated bailout would be seen as a vote against Greek participation in the eurozone.
The threat follows what the Guardian describes as “a blunt warning from Jean-Claude Juncker, chairman of the eurogroup, that the sixth tranche of the original €110bn bailout was now in jeopardy.” At risk: €8 billion approved just two weeks ago.
An emergency cabinet meeting was scheduled for 11:00 Thursday morning in Greece. More members of the prime minister’s own party are defecting Thursday morning, saying they will not support him in a confidence vote scheduled for Friday night, with the resulting loss of his majority in parliament.
George Papandreou, prime minister, has called for a referendum next month on the EU bailout plan and, under pressure from EU leaders at a Wednesday night meeting, he agreed to hold it earlier, 4 December.
Links to other sites: Financial Times, Guardian, Le Monde (Fr)
GENEVA, SWITZERLAND – Europe’s politicians reacted with surprise and anger during the day Tuesday to the surprise announcement by Greek Prime Minister George Papandreou that he wants a referendum that will allow Greeks to vote on an EU bailout package. In Greece, there were calls Tuesday evening for the prime minister to resign.
The package was drawn up last week. Ireland also has a bailout package and the Globe and Mail, Canada, reports: “The summit last week was to deal with the uncertainty in the euro zone…and this grenade is thrown in just a few short days later,” European affairs minister Lucinda Creighton said. “‘Legitimately there is going to be a lot of annoyance about it.’” citing Reuters.
Le Monde in France underscores fears that Greece will drop out of the eurozone, triggering a broader crisis. Stock markets around Europe fell, the Paris newspaper notes: Madrid down 4.19 percent, Frankfort down 5 percent, Athens 6.9 percent and Milan 6.8 percent. Markets in London and Switzerland were calmer but nevertheless fell by 2.2 percent and 2.49 percent respectively.
Links to other sites: Financial Times, Reuters
ZURICH / BERN, SWITZERLAND – The Swiss National Bank is showing a consolidated profit of CHF5.8 billion for the first nine months of the year, thanks primarily to gold prices. The profit was achieved despite an over-valued Swiss franc that caused losses of CHF4.7 billion.
Other currency positions resulted in gains of CHF5 billion, giving the central bank a net currency position of CHF0.3b. The over-valued Swiss franc and intervention by the SNB, particularly in August and September, were the main factors in the bank’s currency situation at the end of nine months. The bank notes that at the end of the quarter, the US dollar was trading 3.1 percent lower than at the beginning of the year, and the euro 2.8 percent lower.
The SNB’s currency investments are 55 percent in euros, 25 percent in dollars, 9 percent in the yen, 4 percent in sterling, 4 percent in Canadian dollars and 3 percent in other currencies.
The price of gold at the end of September accounted for the bulk of the profit: it was around CHF47,089 per kilo, giving the bank a valuation gain of CHF5.0 billion. But the bank noted in a statement issued Monday 31 October that “the SNB result depends largely on developments in the gold, foreign exchange and capital markets. Consequently, strong fluctuations are normal, and only provisional conclusions are possible as regards the annual result.”
UBS bailout fund loan down by CHF4b to outstanding CHF7.9b
The stability fund, created for the government’s bailout of bank UBS in 2008, contributed CHF573 million in interest payments, to the central bank’s profits. “The loan to the stabilisation fund was reduced from CHF 11.8 billion (USD 12.6 billion) to CHF 7.9 billion (USD 8.8 billion), and the total risk exposure decreased from almost CHF 14 billion to around CHF 8.7 billion.”
GENEVA, SWITZERLAND – Iceland’s president, Ólafur Ragnar Grímsson, is making waves by saying Europe bullied the country into bailing out Icesave bank, which had large numbers of UK and Dutch investors, a bailout that was hugely unpopular at home, while the US was “absent” and India and China were helpful as the country faced serious debt problems. His remarks were initially made at the end of last week in an interview with the Financial Times following news that Iceland’s government has agreed to allow a Chinese investor to buy a large chunk of the island for an eco-tourism resort. He then repeated his remarks during a key radio broadcast Sunday, and he is asking the European Union to investigate the role of the UK and The Netherlands in the bank bailout.
The IMF has been involved in helping sort out the country’s debt problems and Iceland is eyeing European Union membership.
Links to other sites: China Post, The Financial Express, VOA blog
The strong showing of Finland’s nationalist True Finns party in elections Sunday 17 April have put a damper on Portugal’s bid for a European Union financial bailout. The party zoomed from 6 to 39 seats in parliamentary elections, taking third place after the Conservative party, with 44 seats and the opposition Social Democrats with 42 seats.
The True Finns party turned the election into a vote over Finland’s willingness to back a rescue package for Portugal, which is currently negotiating one with the EU. Any such package requires a unanimous vote from the 17-member eurozone countries. The Conservatives will have to invite at least one of the other two parties to a coalition, reports Reuters, and while the Social Democrats are not against rescue packages, they oppose the current arrangements for funding them.
Links to other sites: Euronews, Reuters/The Globe & Mail, Guardian
Zurich, Switzerland (GenevaLunch) – Swiss bank UBS moved back into profitability in 2010, ending the year with net profits of CHF7.2 billion, a turnaround from 2009 when it had a loss of CHF2.7b, and the first time since 2006 that the bank has been profitable for a full year.
The bank published its Q4 and 2010 results Tuesday 8 February.
A significant change is that the bank has begun to attract new money, after a period of outflows in the wake of the bank’s bailout by the Swiss government in December 2008, but also the bank’s problems with the IRS, the US tax authority. The US Treasury dropped charges against UBS in October 2010, after a review of more than 4,000 accounts by Swiss authorities under a US-Swiss treaty.
Net new money was CHF7.1b in the last quarter of the year, the second quarter in a row with a net inflow.
The Irish government is accepting a massive EU (European Union) and IMF (International Monetary Fund) bailout, it announced late 21 November. The rescue package, in the form of multi-year loans, may amount to over €90 billion. Details of the aid will be worked out over the coming weeks, Prime Minister Brian Cowne says. The loans come with a pledge by the government to allow outside supervision of government economic policies. The aid will go in part towards restructuring Ireland’s big banks.
Ireland’s 12.5 percent corporate tax was not part of the bargain, Cowen said. The United Kingdom may provide Ireland with additional loans.
Links to other sites: BBC, Guardian, Irish Times
The Los Angeles Times looks at the absence of small investors when General Motors shares go on sale Thursday 18 November in an IPO (initial public offering) that follows GM’s 2009 bailout by the government. Washington owns 61% of the company after spending nearly $50 billion to keep it together and help it through bankruptcy proceedings. It is expected to reduce its holding to 43% according to the LA Times. GM has repaid some of the debt. The company announced Tuesday 16 November that it plans to raise $12 billion from the IPO, making it the second largest in US history, according to Bloomberg.
The European Union’s finance ministers have agreed to a generous package of €500 billion in aid for Greece and the eurozone, the bulk of it in the form of loan guarantees. The European Commission will provide f €60b in emergency funding for members having “difficulties caused by exceptional circumstances beyond their control”, said Elena Salgado, Spain’s finance minister, who announced the deal. The IMF has agreed to provide an additional €250b package.
Stock markets rose on the news, with analysts saying it will stabilize the euro.
Links to other sites: BBC, Financial Times, Reuters, Wall Street Journal
Country should be able to avoid becoming first euro zone default
Greek Finance Minister George Papaconstantinou said after weekend talks with the IMF (International Monetary Fund) and other European countries, which he described as having gone well, that Greece should receive funds in May, in time to avoid defaulting on its loans. The country faces a 19 May deadline for payments. The amount of the full bailout package is not yet known but it appears likely that it will be larger than the figure of 45 billion mentioned before Greece formally applied for aid Friday 23 April.
Asian stocks rose strongly on the news, as worries diminished over the impact of Greece’s situation on global economic growth.
Links to other sites: Bloomberg, Financial Times, Reuters, UK
© Chappatte, distributed by Globe Cartoon. More cartoons on Chappatte’s web site. Geneva-based Patrick Chappatte works for the International Herald Tribune, for Geneva newspaper Le Temps, and for NZZ am Sonntag. All cartoons reproduced with permission.
Bern, Switzerland (GenevaLunch) - The Swiss Federal Council Wednesday afternoon 14 April formally asked Parliament to approve the treaty signed with the United States in August 2009. The treaty is an agreement whereby Switzerland will provide judicial assistance to the IRS, the US tax authority in the case of 4,450 UBS clients suspected of tax fraud.
The message goes to Parliament as the country’s left and centre political parties appear to be lining up to approve the treaty, although the right-wing People’s Party insists that it flies in the face of Swiss banking secrecy law.
Bern, Switzerland (GenevaLunch) - The finance commission of the Swiss Parliament’s lower house agreed Thursday 21 January to set up a special investigative commission to review decisions made by Swiss authorities concerning UBS. The new commission will review decisions made by the Swiss Federal Council, the Swiss National Bank and Finma, the financial system supervisory body, in three areas: the UBS bailout in the contect of the financial markets crisis, changes to supervisory regulations covering UBS and the decision by Finma for UBS to release client data to US tax authorities.
Tax revenues were down by €7.7 billion, or 19 percent, in Ireland for 2009, Department of Finance figures published Tuesday 5 January show. The drop in revenue combined with a €4b government bailout of Anglo Irish Bank pushed the national debit €11.9 billion higher.
Ireland’s high debt and the problems of Iceland, still trying to recover from the collapse of its economy a year ago, are likely to add to Eurozone woes in 2010, argues Ralph Atkins in the Financial Times.
Links to other sites: Financial Times, Irish Times
Shares in Japan Airlines fell by 24 percent Tuesday 29 December, a second straight day with a sharp drop, after the government announced that it would not put any more money into the airline. It has debts of 1.5 trillion yen and has been bailed out four times since 2001.
Wells Fargo and Citigroup announced Monday 14 December that they will be repaying their debts to the US government, which bailed them out a little over a year ago. They were included in Tarp (Troubled Asset Relief Program) following the collapse of Lehmann Brothers in 2008, with its subsequent chaos in financial markets. They are now the last banks to leave the programme, which forced banks to accept greater regulation in exchange for reduced risk.
Links to other sites: Financial Times, Reuters
The Financial Times reports that Goldman Sachs executives are likely to come under fire from US lawmakers over the sale of $700 million in stock by senior executives last September, when the investment company was still benefiting from a $10 billion bailout from the government. The company is now expected to show a profit for the second quarter of 2009.
US Treasury Secretary Timothy Geithner announced 17 March that the US government will require insurer AIG, which has received the largest ever aid to a US company, to repay an amount equal to the money it paid out in bonuses to managers in 2008, $165 million according to Bloomberg. The bonuses were paid after the company received bailout funds of $173 billion. The money must be repaid as part of the next government payment of $30 billion in aid. BBC
US President Barack Obama Monday was sharply angry over $185 million in management bonuses that are scheduled to be paid to insurer AIG, which is receiving $165 billion in federal aid, the largest amount ever paid to a US company. Obama said he intends to do everything possible to stop the payments, asking “How do they justify this outrage to the taxpayers who are keeping the company afloat?” Reuters
American insurance company AIG, which Bloomberg says is “the insurer deemed too important to fail,” has posted a fourth quarter 2008 loss of $61.7 billion, prompting the US government to put up to $30 billion into the company in a revised bailout plan.
Zurich, Switzerland (GenevaLunch) – UBS will get $35 billion in help from the Swiss National Bank (SNB) through the stabilization fund (SNB StabFund) established in October 2008 rather than the $60 b figure given at the time. The SNB refers to greater financial stability in its Tuesday 10 February press release, “Developments since then have shown that, from a financial stability perspective, certain financial instruments will not need to be transferred to the fund.” The total amount in the StabFund will be $39.1 b, with UBS responsible for the cost of transferring 10% of the assets into the fund.
The Chinese government is pumping another Rmb130 billion ($19 b) into the economy, more than doubling an earlier injection of Rmb100 b, the government-owed Xinhuanet reported Tuesday, citing as its source an anonymous official at the National Development and Reform Commission. The report confirms figures mentioned in a Financial Times interview 1 February with Premier Wen Jiabao during his visit to London. Details about how the money will be spent are still sketchy, but it will go to mainly to building China’s infrastructure – roads and housing are high on the list, says Xinhua.
The Bank of America Friday has been given $20 billion in bailout money from the US federal government, in addition to the $25 billion it received in October, making it the second largest recipient of aid to banks in the US, after Citi Group. Bank of America has also been given guarantees against toxic assets up to nearly $100 billion, reports Reuters
US President George W Bush said Thursday that he was concerned about the impact on the economy that “idsorderly” bankruptcies in the auto industry would have, and he is considering “orderly” bankruptcies as part of a plan that could be announced as early as Friday 19 December. Reuters Meanwhile, the wire service reports, it looks as if GM and Chrysler are close to deals that would involve bridging loans for several months and major restructuring.
Bern, Switzerland (TSR, Fre) – The upper house of Parliament and lower finally agreed late Monday on a financial package to help UBS, with “stabilize” as the key word.
The US Senate late Thursday dropped its efforts to give the US auto industry a government bailout and the “specter of a financial collapse for General Motors and Chrysler” is looming. The Senate had refused to accept the package passed by the House, insisting that unions accept sharp drops in pay in 2009, but the unions would not agree to the cuts. GM and Chrysler may not have enough money to make it through December. CNN, New York Times Asian stocks, the US dollar and US futures index all tumbled on the news, reports Bloomberg.
Bern, Switzerland (RSR, Fre) – The upper house of the Swiss Parliament surprised the country late Tuesday with a tie-breaker vote to insist that large bonuses paid to UBS executives for the past five years be returned to the bank. Monday, 8 December, the lower house had refused the same clause, also in a time-breaker vote. The votes were part of the package to officially approve the CHF6 billion bailout package for the bank.
Zurich, Switzerland (GenevaLunch) – The Swiss National Bank (SNB) has released details of its bailout package fund for ailing UBS, which will be registered in Bern, and not in the Cayman Islands as originally suggested.
