Which businesses will survive the greatest financial crisis of our lifetime?

Source: RT News

As countries close their borders to contain the corona virus outbreak, the biggest disaster faced by businesses big and small is the shutdown of the global economy.

While Covid-19 has rattled financial markets, the real economy faces even worse problems, as many companies will be unable to survive without a government lifeline.

Which firms will be most seriously hit?

Social distancing is one of the first and, apparently, most effective containment measures the countries have in their arsenal. However, the practice could bury small and medium-sized businesses, clearing the path for big corporations that will enjoy the support of governments and banks.

“Small and medium enterprises are the backbone of any economy, and they’re also likely to be most affected by social distancing,” Professor of Financial Systems Resilience at Bournemouth University, Christopher A. Hartwell, told RT. “They just don’t have the capabilities of an Amazon to keep delivering; they rely on face-to-face interactions, and so any prolonged lockdown can be devastating.”

Those involved in the tourism and entertainment industries, as well as the service industry, could also have tough times due to lockdowns and quarantine measures, according to Sergey Kopylov, a junior partner at consulting company BSC. He says non-essential sectors like the auto industry will probably not get bailed out and will have to cut production.

“Those who are critically dependent on Chinese components will face [the] most serious problems,” Kopylov said. He explained that tech producers and assemblers would be the most vulnerable, as most parts for their products are exported from China, which has not yet fully recovered after the production pause caused by Covid-19.

Who can count on government help?

Airlines were the first to feel the devastating impact of the coronavirus, as they had to dramatically cut capacity amid low demand and border closures. Analysts believe they will be the first in line to receive financial aid.

Airline companies can easily face bankruptcies, which can eventually hamper already strained trade and supply chains, Kopylov believes, while others think that airlines shouldn’t enjoy so much support. According to Professor Christopher A. Hartwell, government bailout is “a disastrous idea,” as the carriers could easily exploit the funds for their own benefit.

“Since deregulation in the 1970s under US President Jimmy Carter... airlines have gone through waves of high competition and improvement in service which then gets crushed under a bailout and some form of re-regulation, which leads to worse service and oligopolistic pricing,” he wrote.

Governments will have to support other critical sectors, such as agriculture, to prevent food shortages. While not all countries, especially those dependent on tourism like Cyprus or Spain, can afford to fund them, they can at least offer tax and credit payment holidays, Kopylov said.

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Dow plunges 3,000 points in biggest single-day drop

Oil prices tank to four-year low, US crude falls below $30 a barrel

Dow plunges 3,000 points in biggest single-day drop

The Dow Jones Industrial Average is displayed after closing bell on floor of the New York Stock Exchange (NYSE) ©  REUTERS/Andrew Kelly

Source: RT News

The Dow Jones plummeted nearly 3,000 points (2,997.1, to be exact) at the close of trading on Monday, finishing down 12.93 percent as markets continued to slide despite tripping a circuit-breaker minutes after opening.

The S&P 500 sank by a whopping 12 percent, while the Dow Jones Industrial Average dropped 13 percent. The Dow has dropped over 30 percent since opening at a high on February 12. This latest Dow drop is the worst since the infamous Black Monday crash in 1987.

While the Federal Reserve has cut rates toward zero in an effort to boost the economy, the continuing closure of schools, restaurants, bars, movie theaters, etc. across the country is affecting the market dramatically, and with no end in sight to the coronavirus panic, it’s an unsure market for investors.

Confidence in the markets was not helped by a Monday afternoon press conference in which President Donald Trump said the federal government could be responding to the coronavirus until “July or August,” possibly longer.

Precious metals have also been sent into free fall, with gold dropping by 1.3 percent to just over $1,500 an ounce. Silver, platinum, and palladium have seen even steeper declines, each falling by over 12 percent on Monday.

Brent and WTI crude tumbled by 9 and 11.3 percent respectively, taking a toll on petrol giants including Chevron, BP, Royal Dutch Shell, and Suncor Energy, each of which saw more than a 15-percent decline in stock price. Apache was among the worst affected, down by over 30 percent.

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Eurozone finance ministers approve bailout deal for Cyprus

 

French minister of Economy, Finances and Foreign Trade Pierre Moscovici (R) and International Monetary Fund chief Christine Lagarde (L) chat next to EU Commissioner for Economic and Monetary Affairs Olli Rehn (C) prior to an extraordinary Eurozone meeting on March 24, 2013 at the EU Headquarters in Brussels (AFP Photo / John Thys)

Source: Russia Today

http://rt.com/news/cyprus-eu-imf-bailout-764/

The Eurogroup has approved a deal on a 10 billion-euro bailout for Cyprus, struck early Monday in Brussels. Cyprus avoids exiting the eurozone, but will have its second largest bank closed with heavy losses expected for big depositors.

“The size of financial assistance will amount to 10 billion euro,” Eurogroup president Jeroen Dijsselbloem has announced at a press conference in Brussels after the eurozone finance ministers swiftly endorsed the plan.

“With this agreement we’ve put an end to the uncertainty that has affected Cyprus and the euro area over the last few days,”he added.

The new deal agreed between Cyprus and the Troika of international lenders - the EU, the ECB and the IMF - will set up a "good bank" and a "bad bank" and will mean that the country’s second largest bank Laiki will effectively be shut down.

Deposits below 100,000 euros will be shifted from Laiki to the Bank of Cyprus to create a “good bank.” Deposits larger than 100,000 euros will be frozen and used to resolve debts. It remains unclear how large the write-down on those funds will be.

The decision comes hours before the Monday deadline set by the European Central Bank, following heated talks between President Nicos Anastasiades and the Troika.

Earlier on Sunday the central bank in Cyprus has imposed an ATM withdrawal limit of 100 euros per day for the island's two biggest banks, in order to prevent a run on lenders.

Warren Pollock - market analyst and financial adviser says the financial turmoil in Cyprus is part of a broader crisis.

“In reality this is a global problem which has not been addressed since 2007-2008 and previous to that with the issuance of huge amounts of debt and leverage into the system both in Europe and in the United States,” he told RT.


“And when that debt goes bad, the only recourse which exists is to tap remaining collateral in the system which is the savings.”


Pollock believes that sooner or later this “sort of stealing” of savings may result in popular unrest. “We can definitely see smaller countries being the test to see whether savings could be stolen on a wider scale.”

Cyprus imposes ATM withdrawal limit of €100 per day for island's two largest banks

 

People queue to withdraw their savings at a Cypus Popular Bank (Laiki Bank) ATM in Athens on March 22, 2013. (AFP Photo)

Source: Russia Today

http://rt.com/business/cyprus-bailout-withdrawal-banks-756/

The central bank in Cyprus has imposed an ATM withdrawal limit of 100 euros per day for the island's two biggest banks, in order to prevent a run on lenders.

A spokesman for the country's second largest lender, Cyprus Popular Bank, told Reuters that the new measure began at 1pm local time (11am GMT) and would remain in place until the bank reopens, or until confirmation of continued emergency funding from the European Central Bank. Cyprus Popular Bank had previously limited withdrawals to 260 euros per day.

A government official said the restriction also applied to the Bank of Cyprus.

It was initially reported that the measure was implemented on all banks in Cyprus, although it has now been confirmed that only the island's two biggest banks have been affected.

The news comes after Cypriot President Nicos Anastasiades took part in last-minute crisis talks with international lenders on Sunday, in an attempt to save the country from financial meltdown. The negotiations in Nicosia to seal a bailout from the EU and International Monetary Fund failed to reach a solution.

Anastasiades then headed to Brussels to hold talks with EU, European Central Bank and IMF leaders ahead of a crunch meeting of eurozone finance ministers.

Government spokesman Christos Stylianides said in a statement on Sunday that Anastasiades and his team have a "very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord."

The news comes just one day after Cyprus and the Troika agreed to a 20 per cent tax on deposits over 100,000 euros at the Bank of Cyprus and 4 per cent on deposits held at other banks.

"Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available. Today, there are only hard choices left," European Union Economic and Monetary Affairs Commissioner Olli Rehn said in a Saturday statement.

Cyprus is scrambling to come up with €5.8 billion by Monday, or face being kicked out of the Eurozone. The cash is a prerequisite for a further €10 billion in bailout funds.

Lawmakers' rejection of a previous proposal to tax all bank deposits prompted the European Central Bank to threaten to cut off emergency funding to Cypriot banks unless a deal was reached by March 25. Banks have been shut all week, and are due to reopen on March 26.

On Saturday, at least 1,000 bank workers in Cyprus hit the streets of the country’s capital of Nicosia. The demonstrators marched against the latest bailout measures taken by the country’s central bank.

Protesters carried banners that read, “Hands off provident funds” and “No to the bankruptcy of Cyprus.”

Turkey sends ‘stern warning’ to Cyprus over gas reserves

Meanwhile, Turkey has warned Greek Cyprus against using hydrocarbon reserves off the island to overcome its debt crisis without the consent of Turkish Cypriots. Ankara says such a move could result in an end to efforts to reunite Cyprus’ Turkish and Greek zones.

Turkey has contacted the US and plans to take the issue to the European Union, Today’s Zaman reported.

Ankara “had to issue a stern warning” regarding attempts to offer natural resources in exchange for foreign loans, a Turkish official said on Sunday.

Turkey has repeatedly warned the Greek Cypriot government against unilateral moves to extract natural gas and oil reserves off Cyprus, saying that Turkish Cypriots also have a say on the reserves.

The dispute recently escalated when reports surfaced that hydrocarbon exploration rights were part of Russia-Greek Cyprus talks last week over a possible deal which includes Russian financial help. However, the talks did not produce an agreement.

Russian Prime Minister Dmitry Medvedev expressed doubt on the inclusion of hydrocarbon reserves as a loan deal, saying there are concerns surrounding commercial viability and questions stemming from Turkish objections.

 

Cypriot parliament votes against deposit levy

Cypriot woman shouts slogans as she holds a placard during a protest against an EU bailout deal outside the parliament in Nicosia (AFP Photo / Patrick Baz)

Source: Russia Today

http://rt.com/business/cyprus-against-deposit-levy-501/

The Cypriot parliament has voted against a revised bank deposit levy. The tax was meant to shave 9.9% off any deposits over €100,000 and has since caused uproar in the country.

Thirty six deputies voted against the proposal to tax bank deposits in the 56-member chamber, while 19 abstained. One deputy was not present for the vote.

"The bill has been rejected," said house speaker Yiannakis Omirou, as thousands of protesters outside the parliament building in Nicosia erupted in cheers.

According to the proposal, a 6.75% rate was to be set for amounts between €20,000 and €100,000. Deposits of up to €20,000 euros were to remain untouched.

Passage of the bill was considered a prerequisite for a €10 billion European Union bailout for the Mediterranean island. EU finance ministers have warned that Cyprus' two biggest banks could go bust if a bailout deal in some form is not forthcoming. The government and opposition parties have scheduled emergency talks on the bailout for Wednesday.

The European Central Bank (ECB) has threatened to end emergency lending assistance for Cypriot banks if a bailout deal was not ensured. However, following the vote, the ECB said it would continue to provide liquidity to Cyprus as needed “within the existing rules,” Bloomberg reports.

Cyprus has discussed the tax with its European creditors. Ministers from the 17 eurozone countries urged protection for savers with €100,000 or less and for them to be spared from the levy, after the prospect brought panic to the markets and had Cyprus dealing with the prospect of Russia withdrawing its rescue loan.

The Cypriot government’s original proposal was to tax all depositors, setting the rate of 6.75% on all deposits under€100,000 and maintaining a 9.9% tax on all deposits above that level.

In the meantime all Cypriot banks have frozen the accounts liable for the tax and stopped all transactions, including electronic and closed for a long weekend until Thursday to prevent panic.

Cyprus needed to raise €5.8 billion euros for its bailout program and was hoping to get the money in the planned bank deposits levy.

Despite the precarious position Cyprus has found itself in, a default might be preferable than a bailout under the present conditions, United Kingdom Independence Party MEP Nigel Farage told RT.

“The EU has been unhappy about so-called tax havens for a very long time. Ironically, whilst continuing to turn a blind-eye to many activities that go on in Luxemburg. I mean Cyprus finds itself right now in a very difficult, desperate position. But I would say that it is better to officially go bankrupt, to default on international bond obligations. And to do that best to keep a banking industry and to keep some confidence in that country,”he said

 

Fed chairman warns US lawmakers on impact of 'fiscal cliff'

 

US Federal Reserve chairman Ben Bernanke

Source: Press TV

http://www.presstv.ir/detail/2012/11/21/273685/us-lawmakers-alarmed-on-fiscal-cliff/

US Federal Reserve chairman Ben Bernanke has once again warned American legislators to ward off the abrupt and severe combination of legislated tax hikes and federal spending cuts, known as ‘fiscal cliff,’ due to take effect by the end of the year.

In a Tuesday speech at the New York Economic Club, Bernanke described fiscal cliff as a “substantial threat” to the country’s economic recovery and urged US lawmakers to put aside partisan political rivalries to avert the massive financial impact on the nation’s already slow economy.

‘‘Uncertainties about the situation in Europe and especially about the prospects for federal fiscal policy seem to be weighing on the spending decisions of households and businesses as well as on financial conditions,’’ he said, adding, ‘‘Such uncertainties will only be increased by discord and delay.’’

According to reported estimates, the impact of the scheduled federal spending cuts and the expiration of temporary tax breaks will take at least USD 500 billion out of the US economy, threatening to push it back into yet another recession.

Citing several outside economic assessments on the enormity of the ensuing tax hikes and spending cuts, Bernanke said ‘‘a fiscal shock of that size would send the economy toppling back into recession.’’

This is while the Obama administration and Congress are still negotiating over an agreement to reduce the government's massive budget deficit, which has exceeded USD 1 trillion for a fourth consecutive year.

The last time the debt limit was about to be reached, Republican lawmakers in the US Congress waited until the very last minute before deciding to raise the limit.

Saying "the deficit is on an unsustainable path," the Fed chairman further added, ‘‘As you will recall, the threat of default in the summer of 2011 fueled economic uncertainty and badly damaged confidence, even though an agreement ultimately was reached.’’

‘‘A failure to reach a timely agreement this time around could impose even heavier economic and financial costs,” he warned.

Japan posts another record trade deficit

 

(Reuters / Toru Hanai)

Source: Russia Today

http://rt.com/business/news/japan-trade-deficit-record-219/

Japan has seen its worst trade deficit for October in over 30 years, renewing September’s record, with dropping exports to China due to the territorial dispute, and easing demand from debt-stricken Europe.

The government data showed that a 549 billion yen ($6.7 billion) visible trade deficit in October far exceeded the 360 billion yen shortfall expected by economists surveyed by Dow Jones Newswires and the Nikkei. This year, Japan posted trade deficits every month except February and June.

Overall, exports fell 6.5% year on year in October to 5.15 trillion yen. Total exports to China were down 11.6% year on year, compared with a 14.1% drop in September due to the growing anti-Japanese sentiment. Exports of automobiles to China were down 82% year on year, and exports of car parts were off 28.1%. The shortfall in car exports to China was the largest since October 2001, according to Japan’s Ministry of Finance.

The territorial dispute with China that sparked anti-Japanese riots in September re-emerged after the Japanese government bought a group of islands that China also claims.

Meanwhile, exports to the European Union dropped 20.1% year on year according to the data. But exports to the US were up 3.1%, supported by a rise in supplies of cars, engines and car parts.

Weaker exports have hit Japanese corporate majors such as Sharp, Panasonic, and Nissan, which heavily rely on foreign trade. Panasonic forecast a $9.5bln loss this year, 30 times bigger than analyst estimates, while Hitachi Construction Machinery Co. and Nissan Motor Co. cut their full-year profit forecasts.

Experts say Japan’s economy would experience its fifth technical recession in 15 years as it is expecting a fall in October-December, after dropping by 3.5% in Q3, which is below analysts’ expectations.

On Tuesday the Bank of Japan announced it has no plans for further stimulus measures, but experts suppose that weak figures would force them to change their mind. "With weak trade data, and likely a weak result to the BOJ's December Tankan survey, the BOJ could very probably ease in December," said Daiwa Securities senior economist Maiko Noguchi.

 

Japan in doldrums as export shrinks

 

(AFP Photo / Yoshikazu Tsuno)

Source: Russia Today

http://rt.com/business/news/japan-economy-debt-contraction-490/

While investors are focused on the eurozone crisis Japan’s economy is showing signs of contraction as its GDP fell last quarter by 3.5%, the most since the earthquake and tsunami in early 2011, while exports and consumer spending slumped.

­The results fell below analysts’ expectations, which predicted Japan’s GDP to decline 3.4 % in the Q3, according to a Bloomberg News survey last week. It was expected to be the third technical recession since 2008.

“The GDP figures were grim," Japanese PM Yoshihiko Noda told parliament after the data was released. Noda is preparing for an election and has pledged to speed up government efforts to boost the economy. Weaker results could undermine his efforts including a crucial plan to raise the national sales tax from 2014 to boost revenues. The proposed measure would be the first tax rise in more than a decade and is considered politically controversial.

“Today’s bad economic numbers deliver unpleasant news for Noda,” Hiroshi Shiraishi, senior economist at BNP Paribas SA in Tokyo, told Bloomberg. “It will take a while for Japan to get back to a sound recovery, considering a modest pick-up in the global economy at best and the country’s damaged relationship with China.”

Japan suffered the worst September trade result in more than 30 years amid the territorial row with China. The long running dispute re-emerged after the Noda administration’s bought a group of islands that China also claims. Exports to China – Japan’s biggest trading partner – sank 14% from a year earlier to 953.4 billion yen ($12.2 billion). Meanwhile the spreading crisis in Europe also hurt Japanese exports.

Weaker exports have hit Japanese corporate majors such as Sharp, Panasonic, and Nissan, which heavily rely on foreign trade. Panasonic forecast a $9.5bln loss this year, 30 times bigger than analyst estimates, while Hitachi Construction Machinery Co. and Nissan Motor Co. cut their full- year profit forecasts and cosmetics major Shiseido Co. plans spending cuts.

At the end of October the Bank of Japan expanded its asset-purchase program by 11 trillion yen ($137bln) to 91 trillion yen for the second time in two months. With the new weak figures the BoJ is likely to continue its supporting policy under political pressure, experts believe.

High debt burden is another problem of the Japanese economy. Earlier this year the US-based Fitch rating agency cut Japan's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'A+' from 'AA' and 'AA-' respectively. The move reflects “growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios,” according to Andrew Colquhoun, Head of Asia-Pacific Sovereigns at Fitch.

Japan's general government debt is expected to hit 239% of GDP by the end of 2012, compared to the average 39% for OECD economies and 8% for 'A' –rated economies. Even Greece has a debt of 178% of GDP. This debt ratio has risen by 61% since the global financial crisis broke out.

However, Fitch considers that broader private sector savings, official foreign reserves worth $1.3 trillion and the fact that the Japanese yen is a global reserve currency will help the country’s economy to stay firm.

Post-election report shows record surge in Americans using food stamps

 

AFP Photo / Spencer Platt

Source: Russia Today

http://rt.com/usa/news/post-election-food-stamps-476/

The number of Americans relying on food stamps to stay fed has been steadily on the rise, hitting an all-time record this year, with more than 47.1 million Americans using government assistance to obtain food.

The US Monthly Data report, released by the Department of Agriculture (USDA), is normally issued at month's end. But the most recent report, which shows the record-breaking surge in food stamp dependence, was published on November 9 – three days after the presidential election.

About 15 percent of all Americans, or 47,102,780 people, are now enrolled in the federal government’s Supplemental Nutrition Assistance Program (SNAP). This is the highest number on record, and surpasses the number of unemployed Americans who found jobs during the same time period.

Dave Gibson of the Examiner attributes the delayed release to the Obama re-election campaign, claiming the agency waited to release the dreary data, which could have cast a negative light on the president.

“Obviously, this dose of reality would have harmed the Democratic Party’s false narrative of a ‘recovering economy,” he wrote.

When President Obama was first elected in November 2008, 30.8 million Americans were on food stamps. As of August 2012, 47.1 million were – a rise of about 50 percent.

The Washington Post reports that many of the new food stamp users are college students struggling to pay tuition and living expenses. Rather than pay for expensive campus meal plans, college students are increasingly applying for food stamps, “an option that once carried a social stigma on campus but no longer does,” writes Post reporter Breanna Hogan.

“I am receiving about $200 worth of food stamps per month, and I can’t imagine living without them,” said Sheena Vails, a sophomore at the University of Missouri.

About 15 million additional Americans have enrolled in SNAP since Obama took office. And the number could continue to rise, especially since Hurricane Sandy left thousands homeless across New York and New Jersey.

After the storm devastated New York City, Governor Andrew Cuomo ordered $65 million in new food stamp money to be automatically placed into the cards of displaced families who live in storm-affected areas. There are 77 zip codes in the region whose residents are eligible to apply for food stamps as they struggle to put their lives back together.

While the data for November food stamp usage will not be released for some time, the additional applicants could close 2012 with a much higher, record-breaking number of SNAP members – a number that clashes with rising job figures and the narrative of an improving economy.

Cuts and more cuts Athens passes 2013 budget

 

Demonstrators stand outside the Greek Parliament protesting against austerity measures in Athens on November 11, 2012 (AFP Photo / Panayiotis Tzamaros))

Source: Russia Today

http://rt.com/news/greece-government-austerity-budget-439/

The Greek government has passed a 2013 budget stipulating new rounds of harsh budget cuts. It comes just after Greece announced the passage of more austerity measures, triggering violent clashes in Athens.

The budget was approved with 167 voting in favor and 128 opposed, while 5 abstained.

The recent austerity package, passed in a narrow vote, was apparently insufficient to appease eurozone finance ministers into granting the cash-strapped nation another tranche of much-needed bailout money.

Without the rescue loan, Greece would effectively default on November 16, the date it must repay a three-month treasury bill worth €5 billion.

Greek trade unions called for another demonstration outside Parliament on Sunday ahead of the lawmakers’ vote on the budget.

Earlier in the week, around 70,000 demonstrators rallied as Parliament voted on the new austerity program.

On Saturday, MPs began debating the 2013 budget. It was the second budgetary test the Greek government has faced in less than a week.

Athens is planning further spending cuts totaling 9.4 billion euro, mainly in state wages, pensions and benefits, all of which have already seen drastic reductions over the past two years.

Several hundred Greek civil servants staged a protest on Saturday in front of parliament, where initial discussions over the 2013 draft budget were held ahead of the vote. The protesters railed against the reduction of 125,000 civil servant jobs by 2016, part of the new austerity package that squeezed through parliament on Wednesday.

 

Protesters demonstrate outside the Greek parliament against the new austerity measures in Athens on November 11, 2012 (AFP Photo / Aris Messinis)

Cutting it close

Greece's 2013 budget predicts that the economy will shrink by a worse-than-expected 4.5 percent next year, and that the country's debt will swell to 346 billion euro ($434.3 billion), or 189 percent of the country's gross domestic product.

Athens is hoping to securing a further 31.5 billion euro of desperately needed international aid. Even then, it would still need to borrow over 68 billion euro next year, the draft budget says

This is in addition to the new austerity package, which includes 18.5 billion euro ($23.6 billion) in cuts and labor law reforms.

Greece has so far avoided default by introducing a series of austerity measures needed to secure two huge bailout loans from a 'Troika' of creditors: The EU, the International Monetary Fund and the European Central Bank.

The recent push for further austerity has sparked popular anger in a country facing its sixth year of recession, while unemployment rose above the 25 percent mark in July.

Meanwhile, the government admits that the program is unfair, and will probably drive the country deeper into recession, Dimitris Yannopoulos, an Economist and Editor at the Athens News newspaper told RT.

According to Yannopoulos, the only benefit the new set of austerity measures will bring is the long-awaited rescue package – which Germany is in no hurry to release.

“Berlin implies that we want more conditions attached to the program dealing with the control of these funds as well as the control of the budgetary administration [in Greece],” he explained.

 

Riot police guard the Parliament building during a demonstration against austerity measures as Greek deputies consider a budget vote (AFP Photo / Panayiotis Tzamaros)

 

Demonstrators march to the Greek Parliament protesting against austerity measures in Athens on November 11, 2012 (AFP Photo / Panayiotis Tzamaros)

 

S&P downgrades 15 Spanish lenders

AFP Photo/Emmanuel Dunand

Source: Russia Today

http://rt.com/business/news/s-and-p-spain-banks-rating-529/

The US-based Standard & Poor’s rating agency has cut credit ratings of 15 Spanish banks including the country’s largest Banco Santander SA and Banco Bilbao Vizcaya Argentaria (BBVA), following the national rating cut last week.

“The sovereign downgrade has direct negative rating implications on those banks that we rated higher than the 'BBB-' long-term rating on Spain, and on all banks where we factored extraordinary government support into the ratings,” the S&P said in a statement.

The S&P has lowered long-term ratings on 11 banks and the short-term ratings on four. Santander saw its long-term counterparty credit rating lowered by two levels from A- to BBB with a negative outlook. The S&P has also cut by one notch the ratings on CaixaBank, and its parent company Caja de Ahorros y Pensiones de Barcelona (La Caixa), Banco de Sabadell, Banco Popular Espanol, Bankia, and Banco Financiero y de Ahorros (BFA).

The ratings for six banks such as BFA, and Ibercaja have been put on Creditwatch negative, the agency said in a statement Tuesday. The S&P will continue reviewing the sovereign downgrade’s implications, and is going to conclude the process next month, the company said. “For Santander and BBVA, we don’t anticipate that we would lower” its ratings further, if at all, the S&P said after the review.

The rating action came a few days after Spain was downgraded by two notches to BBB-, one level above junk by the S&P after Madrid announced a fifth austerity package in less than a year and published details about stress tests of its banks. The Spanish government's options for averting a financial crisis are limited by a grinding recession, high unemployment and social unrest, S&P said in a statement.

Earlier this year Moody’s rating agency downgraded 28 Spanish banks and the Fitch credit agency has cut ratings of 18 lenders following Spain's sovereign rating downgrades.

 

Coca Cola HBC move, questions viability of Athens exchange

 

Scott Olson/Getty Images/AFP

Source: Russia Today

http://rt.com/business/news/coca-cola-athens-london-532/

While Coca Cola Hellenic Bottling shifting from the Athens exchange to London will help the company avoid massive losses, the move could drag the Greek economy deeper into recession, ringing alarm bells for investors across the world.

“The fact that a very well-known and established international company is moving away from the Athens Stock Exchange is a negative situation,” Theodore Krintas, who helps oversee€80mln euro ($104 million) as managing director of Attica Wealth Management in Athens, told Bloomberg.

“Although the Athens Stock Exchange is considered to be a developed market, it has become more like developing than developed when you lose this kind of company,” Krintas added.

Coca-Cola HBC, Greece’s largest company by market value, said last week it was leaving the Athens stock exchange.The move will eat more than $8bln off the total value of equities listed in Athens – to about $31bln, driving the market value below that of the Vietnam; ($35.2bln) , Bloomberg calculated. Greece’s bourse is already the smallest among 24 developed markets tracked by Bloomberg.

The world’s second- largest bottler of Coca Cola products accounts for 23% of the keyASE Index’s weighting,with the company’s departure adding to the pain the Greek market has already suffered. Its value shrank 86% since its peak of $273bln fixed in November 2007. The downturn was largely the result of the skyrocketing borrowing costs of Greece, underpinned by the bailouts the country has taken up.

The growing budget deficit made the country agree to accept a 110 billion-euro rescue package in May 2010. Later, in March 2012, the 17 nations that share the single European currency approved the second package worth €130bln.

 

Hundreds of police storm Brazilian slums (PHOTOS)

 

Source: Russia Today

http://rt.com/news/brazil-slum-raid-rio-420/

Brazilian policemen deploy to pacify Jacarezinho shantytown, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

Brazilian troops and police swept through Rio’s most infamous slums in a pre-dawn raid, backed up by helicopters and tanks. The “pacification” mission is intended to bring the crime-ridden favelas to heel before the 2014 World Cup and 2016 Olympics.

Over 2,000 troops participated in the crack operation in the northern favelas of Jacarezinho and Manguinhos. They began moving through the shanty towns at 5:00 am local time, searching houses and making arrests.

The slums are renowned for the trafficking of crack cocaine and weapons, which police confiscated during the operation. Despite the favelas’ reputations, police said that the raid went without a hitch.

Around 800 officers entered into the favelas flanked by armored vehicles while the rest patrolled the perimeter.

Brazilian policemen deploy by a barrage set ablaze by traffickers, as they deploy to pacify Jacarezinho shantytown, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

CORE civilian police tactical unit personnel inspects a homeless man during a deployment to pacify the Manguinhos and Jacarezinho shantytowns, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

“The situation is very calm, there have been no incidents,” Colonel Federico Caldas, head of public relations for the military police, to Globo News. “At the moment we are carrying out a meticulous search for drugs and weapons.”

He went onto say that the police will continue to maintain a presence in the area and hope to construct a "pacification unit" in the slums by the end of the year.

The shanty town's inhabitants watched on as officers patrolled the streets for the first time in decades.

“I think that it’s great that peace has finally arrived in Jacarezinho,” said 35-year-old Paulo Cesar, on his way to church.

Around 75,000 people inhabit Jacarezinho and Manguinhos, slums recognized as Rio's most dangerous. Drug trafficking is rife in the favelas, where the trading of crack cocaine is an everyday activity.

The Sunday operation included members of a municipal organization that fights crack addiction; its workers took around 70 people to rehabilitation centers.

A paramilitary police helicopter overflies the area during a police deployment to pacify the Manguinhos and Jacarezinho shantytowns, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

­Paving the way for ‘pacification’

Rio’s elite police force killed five suspected drug cartel bosses in a nearby neighborhood on Saturday and mounted a search for another ten. According to police figures, criminal activity in the favelas has fallen by 60 per cent because of the increased police activity.

The “pacification” project was launched in 2008 with a view to improving city security ahead of the 2016 Olympics. Thus far the authorities have installed 29 "police pacification units" and aim to have 40 in place by 2014.

Although the pacification operation has largely been praised for establishing law and order in Rio's crime-ridden areas, which had previously been controlled by armed drug cartels, in some areas there have been complaints of police corruption and abuses.

A Brazilian marine armoured AAV7 Amphibious Assault Vehicle giving support to police blocks a street during a deployment to pacify the Manguinhos and Jacarezinho shantytowns, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

A BOPE paramilitary police elite unit officer sits on the back of a pickup during a police deployment to pacify the Manguinhos and Jacarezinho shantytowns, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

Crack (L) and cocaine apprehended during a police deployment to pacify the Manguinhos and Jacarezinho shantytowns, known as "Crackland", in Rio de Janeiro, Brazil.(AFP Photo / Christophe Simon)

Global Noise takes on austerity: 'We are not going to be silent'

 

People make noise as they take part in a casserole march to protest against government's austerity reforms and the public payment of bank's debts on October 13, 2012 in Madrid. (AFP Photo / Pedro Armestre)

Source: Russia Today

http://rt.com/news/global-noise-demonstrations-378/

Demonstrators across the world are calling for an end to austerity as Global Noise protests kick off in more than 30 countries, including many in the Nobel Peace laureate European Union.

­The worldwide demonstrations on Saturday passed without incident, and Caleb Maupin from the International Action Centre explained what's driving the public to take to the streets.

RT: A year ago Occupy Wall Street spread across the world, and now it’s Global Noise. What is Global Noise all about? How is it different?

Caleb Maupin: Basically, Global Noise is saying we are not going to be silent. Because right now the banks are coming for us – they are cutting all of the programs. There is mass unemployment. There is cutting in government spending and the governments of the world are just having to pay back the banks.

And in the process, our future is being destroyed. It is impossible to get an education in this country without a rising debt. What we are saying is that we are going to be a global noise. We are the next generation, the youth part of the working class as our future is being destroyed. We are not going to silently sit back and let them destroy our future. We are going to be loud. We are going to be confrontational and we are going demand that this stop.

Austerity is a crime against the people. These cuts are a crime against us, and we are going to demonstrate and we are going to oppose it.

RT: America has not seen austerity cuts as of yet. But in Europe this is precisely what the Global Noise rallies were aimed against. Is it merely a show of support for Europe, or is there, say, a message in the demonstrations for the US presidential candidates?

CM: There are plenty of austerity cuts in the United States. Food stamps, a program which many millions of people depend on so they can have food, is being cut. College prices are going up. They had kind of halted it because they are planning after the elections to have austerity. All the major cuts are going to happen after the election.

But even with these latest debates, you see Romney and Ryan, Obama and Biden, they are all debating how much to cut. How responsibly can you get rid of Social Security, how responsibly can we do it? It is austerity, it is global austerity. Because, you know, Lenin spoke of it in his book – imperialism is the highest stage of capitalism, because the banks kind of become the center of capitalism, its monopoly stage.

And right now it is a revolt against banks. Instead of people having to take all these cuts, why don’t they simply start the cuts to the banks? The government of the United States has the ability to do that. They can pass legislature saying that the banks have to be delayed, but instead they keep paying back the banks with these loans that have taken from the government, and programs that people need to survive on are being cut.

At a time of mass unemployment, millions of youth have great anger on what’s going on, and it is exploding into a global anti-capitalist rebellion. It is here in US. The phrase "we are the 99%" represents what millions of people understand, which is that a small elite, the bankers, capitalists, they own the world and the rest of us just get to live in it.

Well, it is time that we are heard. We are a global noise and we are going to rise up and demand a change to that situation.

RT: Presidential elections are coming up in the US and the Obama administration is criticized for the bailout, while Republicans are promising austerity. And what do you think the policy should be for the US here?

CM: I think whoever wins this election, it is very clear that after the election, it's over. They are going to begin an extreme amount of mass austerity. And the terms of the debate are sickening – the terms of the debate are essentially how much to cut. Some people say, we should just cut everything; others say we should just cut a little bit. No! The people don’t have to pay for the crisis the bankers created.

But that message is not part of the discourse in this country right now. The discourse is limited to one form of cutting or one form of cutbacks, and that is frightening. And that is why the Occupy movement came in. We are the 99%, or as the labor movement and progressive forces have said for a long time – class against class.

It is not Republicans versus Democrats. It is about the bankers versus the people – the people who sell their labor to survive and those who own the world.

US fiscal cliff, eurozone crisis threaten global economy: IMF

 

The headquarters of the International Monetary Fund (IMF) in Washington, the United States (file photo)

Source: Press TV

http://www.presstv.ir/detail/2012/10/09/265689/imf-warns-of-global-econ-deterioration/

The International Monetary Fund (IMF) has warned that the global economy could get worse due to the eurozone crisis and the US fiscal cliff in the future.

The warning came in an IMF report on Tuesday, ahead of the meeting of finance officials from the world’s leading economies, which will be held in Tokyo later this week.

"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component…The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges," the report read.

"In the United States, it is imperative to avoid excessive fiscal consolidation (the fiscal cliff) in 2013, to raise the debt ceiling promptly, and to agree on a credible medium-term fiscal consolidation plan,” it added.

The report also shows that the IMF has cut its growth forecast for global output in 2012 to 3.3 percent, down from a July estimate of 3.5 percent, with Asia still leading the group of expanding regions while the countries in the euro area witness a contraction this year by 0.4 percent.

IMF chief economist Olivier Blanchard has also criticized European leaders and the US policymakers for the way they have handled the crisis.

"Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of US policymakers to agree on a fiscal plan surely play an important role, but one that is hard to nail down," Blanchard said.

Experts say 90 percent of American families are facing unprecedented tax increases because the country is headed toward the edge of what's being described as a fiscal cliff.

Meanwhile, various eurozone member states have been struggling with deep economic woes since the bloc's financial crisis began roughly five years ago.

The worsening debt crisis has forced EU governments to adopt harsh austerity measures and tough economic reforms, which have triggered incidents of social unrest and massive protests in many European countries.

World economy slides deeper into slump

 

By: Andre Damon

Source: Global Research

http://www.globalresearch.ca/world-economy-slides-deeper-into-slump/

A string of negative reports coinciding with the start of the fourth quarter has revealed a significant deterioration in the global economy, with world trade slowing, manufacturing contracting, and the number of unemployed workers in the euro zone hitting a record high.

Despite these disastrous figures, stock prices in Europe and the United States rose on Monday, fueled by new central bank injections of cash into the global financial system, an intensification of austerity measures against the working class and expectations of new bank bailouts.

Eurostat, the European Union statistics agency, reported Monday that the unemployment rate in the 17-member euro zone remained at record highs in August, while the ranks of the unemployed grew by 34,000, bringing the total of jobless workers to a new high of 18.2 million. The jobless rate was 11.4 percent, the same as in July. A year ago, the region’s jobless rate was 10.2 percent.

In the 27-nation European Union as a whole, 25.5 million people were out of a job in August. The EU unemployment rate was 10.5 percent.

The unemployment rates of Spain, Greece and Portugal, the countries hardest hit by the euro crisis, all rose. Spain’s unemployment rate reached 25.1 percent, that of Greece hit 24.4 percent, and Portugal’s rose to 15.9 percent.

The unemployment rate for Italy stayed at 10.7 percent and France’s remained at 10.6 percent. Last week, the French government said the number of unemployed had hit a new record of 3 million.

Youth unemployment in the euro zone likewise worsened, hitting 22.8 percent in August, up more than 2 percentage points from a year ago, according to the Eurostat report. In Spain, 52.9 percent of people under 25 were without work.

The jobs crisis in Europe is likely to get even worse. Markit Economics reported Monday that its euro zone purchasing managers’ index (PMI), a key measure of manufacturing output, was 46.1 in August. As a reading below 50 indicates contraction, the August report marked the fourteenth consecutive month of decline in the manufacturing sector.

PMI figures released last week for both Germany and France, the core countries of the euro zone, showed sustained contraction. France’s PMI showed one of the biggest one-month falls in the survey’s 14-year history.

Chris Williamson, chief economist at Markit, said that “manufacturers across the euro area suffered the worst quarter for three years in the three months to September. Output, order books and exports all continued to fall at steep rates … causing firms to cut their staffing levels once again.”

JPMorgan Chase’s global manufacturing purchasing managers’ index for September, at 48.9, remained below the 50 level.

The euro zone economy contracted by 0.2 percent in the second quarter of 2012, and economists have predicted that it will show a further decline for the third quarter. The New York Times quoted Jennifer McKeown, an economist with Capital Economics in London, as saying the euro zone economy would contract by 2.5 percent next year.

The economy of the entire European Union contracted by 0.1 percent in the second quarter.

The ongoing downturn in Europe continues to drag down the export-dependent Asian economies. China’s official manufacturing purchasing managers’ index was below 50 for a second consecutive month, coming in at 49.8 for September after a reading of 49.2 in August. The Chinese economy has already slowed for six consecutive quarters, and a seventh quarter of slowdown now looks likely.

Japan is in a similar state. The country’s central bank said Monday that the Tankan report, a measure of business confidence, fell to minus 3 in July from minus 1 in June. Japan’s manufacturing purchasing managers’ index reading of 48 likewise indicated contraction.

Last Friday, the Japanese government released figures showing that industrial production fell by 2.9 percent in September and 1.3 percent in August. Exports from South Korea, meanwhile, fell in September for the third consecutive month.

In the US, economic growth for the second quarter was revised downwards last week and a new report showed that durable goods orders had tumbled. The Commerce Department said Thursday that US gross domestic product grew by only 1.3 percent in the second quarter, a downward revision from its earlier estimate of 1.7 percent and significantly less than the 2.0 percent growth rate in the first quarter of the year. Orders for long-lasting manufactured goods (durable goods) fell by 13 percent in August, the largest fall since 2009.

The deepening global downturn is weighing heavily on international trade. The volume of global trade is expected to grow only 2.5 percent this year, down from a 5.0 percent in 2011 and 14.0 percent in 2010, according to a survey released Monday by the World Trade Organization. A separate report by an agency of the Dutch government estimates that world trade actually contracted in June and July.

Global stock markets responded to the dismal news by staging a rally. The German DAX rose by 1.53 percent and the British FTSE by 1.37 percent. The response of stocks in the US was more muted, but still positive, with the Dow rising 0.58 percent and the S&P 500 by 0.27 percent.

The ongoing rise of stock prices despite the marked deterioration of the real economy is a reflection of the immense attacks that are being carried out against workers in Europe, the United States and Asia, including job cuts, the slashing of wages, and austerity measures impacting social programs, pensions, health care and other benefits.

Banking and corporate profits are surging as a result of the lowering of working class living standards and intensification of the rate of exploitation of labor. At the same time, stocks and other speculative assets are being inflated by the injection of hundreds of billions of dollars into the financial markets by the central banks, particularly the US Federal Reserve, which announced last month a plan to inject $40 billion into the financial markets every month for an indefinite period.

These measures are being carried out by capitalist governments around the world, whether social democratic or conservative, to make the working population pay for the crisis of the world capitalist system.