Crisis Fear over UK Economy
As governor of BoE warned earlier this week, Britain might be facing the most serious financial crisis ever.
It is widely belived that the policymakers had learnt enough lessons from the Great Depression. It is expected that the bad days are over and won’t be seen again.
However, there is little double whether the governor’s statement really make sense, as it is quite ironical that his announcement followed a string of what passes for relatively optimistic reports from purchasing managers showing expansion in new orders.
Eurozone Crisis Freezes Dealmaking
In the past few weeks, due to the deepening in the Europe’s sovereign debt crisis, the market for private equity deals has been dried up with some transactions collapsing or being delayed.
According to private equity dealmakers, it is said that the market has deteriorated rapidly as banks are giving out less debt on much more expensive terms, while the price expectations of the sellers have refused to turn downwards.
Black Hole of £12bn in Public Finances
In a forecast that threatens to derail the coalition’s deficit reduction strategy and prolong austerity well into the next parliament, UK’s ministers are set to be informed that there is a black hole of £12bn in the public finances.
The structural deficit in 2011-12 is now £12bn higher than expected, which is a rise of 25%.
Italy Agrees to Liberalise Economy
On Friday, Italy’s centre-right prime minister–Silvio Berlusconi, and finance minister–Giulio Tremonti, held several hours of emergency talks in which they agreed to speed up a package of measures to liberalize the nation’s economy.
The measures were announced, following the spread between Italian and German 10-year bonds overtook the one of Spain, placing Italy at the centre of the sovereign debt crisis.
Italy’s plans were welcomed in Berlin, where action in both Rome and Madrid has been taken as top priority to restore both countries’ credibility in the debt markets.
SocGen Profit Warning on Greek Debt
Chairman and chief executive–Frédéric Oudéa warned by SocGen that its profit target of €6bn net income for 2012 will be hard to achieve as a writedown linked to its Greek exposure weighed on quarterly results.
However, Mr Oudéa also said that second-quarter results demonstrated the “resilience” of Société Générale, in spite of the inclusion of a €395m pre-tax writedown due to Greek government bonds held by the second-biggest bank in France.
Interbank Loan Probe Focuses on Yen Rates
Regulators, who are probing alleged manipulation of interbank lending rates, have now expanded the investigation into yen rates in London as well as a separate rate-setting process in Tokyo.
Led by the US Department of Justice, regulators from the European Union, the UK, the US and Japan have been examining whether the London interbank offered rate was rigged at the height of the financial crisis.
Lawyers involved in the case have already warned their clients, including the biggest names in banking, to get ready for possible dawn raids by regulators.
In Europe, an Outline of Options
European finance ministers has promised to lighten lending terms for struggling nations such as Greece and suggested that the existing bailout fund be expanded and allowed to pay for the purchase of sovereign bonds.
After more than 6 hours of talks in Brussels, the ministers issued a statement, which outline a range of options for cutting down the debt burden on nations that have accepted loans, including reducing their interest rates and extending loan maturities, as well as helping them to buy back bonds.
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