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Spain in Race Against Time to Avert Bailout

By , International business editor

7:39PM GMT 22 Nov 2011

Yields on three-month Spanish notes jumped to 5.11pc at a sale on Tuesday, higher than rates paid by Greece last week.

Mr Rajoy’s team is scrambling to find ways to shorten the paralysing hiatus until mid-December when the new government is finally able to take charge under Spanish law.

“We have to go beyond strictly legal requirements because the markets are not going to wait,” said Miguel Arias Canete head of the Partido Popular’s top body.

Close advisers to Mr Rajoy said the party will have to flesh out exactly how it plans to pull the country out of its downward spiral, and perhaps reach an accord with the outgoing socialist to start implementing emergency measures. The country may need €30bn (£26bn) in fresh cuts to reach its 4.4pc deficit target next year.

HSBC said the country is in a race against time to avoid becoming the fourth EMU country to need a bail-out. “The question now is whether the new government is able to reassure markets that it can deliver quickly enough to beat back the market bears and avoid turning to the (EU-IMF) troika,” said the bank’s strategist Madhur Jha.

HSBC called for “more clarity” on bank policy, labour reforms and budget austerity. “Markets are clearly worried about the Spanish banking sector – bank restructuring and the provisioning of real estate loans on banks balance sheets,” he said.

The bank said the double whammy of surging borrowing costs and a slide back into recession together risk inflicting serious damage to Spain’s debt-dynamics, pushing public debt above 86pc of GDP over the next three years.

“Spain cannot face this crisis by itself. The sovereign crisis is a eurozone problem and needs a eurozone-wide solution. The last few weeks have shown that the window of opportunity is rapidly closing for Spain and other peripheral countries unless some very concrete decisions are taken at the eurozone level to negate all talk of a euro break-up. With governments dragging their feet, the bulk of support over the next few months will have to come from the ECB.”

“What Spain needs is a policy mix similar to that seen in the UK, with the government having a strong medium-term austerity plan in place while the central bank provides the backstop, stimulating the economy through its ultra-easy monetary policy,” said the bank.

There is no sign yet that Germany is willing to drop its vehement opposition to any such action by the ECB.

Bundesbank chief Jens Weidmann repeated on Tuesday that the ECB has no legal mandate to act as a lender of last resort, and compared money printing to the deadly temptation of drinking sea water.

“Whoever believes that the current crisis can be overcome by giving up crucial principles of stability orientation, pushing current legislation aside, is wrong,” he said.

Read the rest here.

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ECONOMIST: Bernanke Is Going To End Up Bailing Out All Of Europe

Federal Reserve Chairman Ben Bernanke’s apologetic take on the Fed’s negative role in causing the Great Depression may translate into a willingness to bail out Europe, writes economics blogger James Pethokoukis.

Bernanke will not be willing to let the European Central Bank’s ineffectiveness infect U.S. banks and destroy the global economy.

He points to statements from well-known independent economist Ed Yardeni to elaborate on that idea:

Given the ECB’s reluctance to act, I suspect that the Fed will spearhead the formation of a Global Liquidity Facility (GLF) to avert a global financial meltdown. Fed Chairman Ben Bernanke demonstrated that he is a master at putting together such emergency measures back in 2008. In effect, it would act as the world’s central bank. Mr. Bernanke is clearly very worried about the prospect that the European sovereign debt crisis is a contagion that could spread to the US, as evidenced by his bizarre town hall meeting with troops returning from Iraq on November 10. The GLF would receive deposits from the Fed and other participating central banks, including the ECB. The funds would be used to buy the bonds of debt-challenged governments that would be required to accept strict supervision of their fiscal and regulatory policies by the IMF.


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Dexia Bailout in Jeopardy

BRUSSELS – Belgium asks France to renegotiate the bailout Dexia Holding, also on the distribution of the state guarantee of 90 billion. The euro crisis plan unfeasible.
From our editors

Coup de théâtre in the Dexia case. While President Jean-Luc Dehaene again yesterday for the special committee appeared to Dexia a clarification of the trap and the dismantling of Dexia, shows a significant proportion of the Belgian-French agreement of October 9 obsolete.

In particular, the rescue plan that Belgium, France and Luxembourg have agreed in early October for Dexia Holding (the remaining bank, save), stands on the slope. And this includes the much talked about 90 billion state guarantee on bank financing of the rest – especially the more massive historical bond portfolio and the daughters of Dexia remain unsold.

Belgium took France by persuading the majority (60.5 percent) of financing the rest with a Belgian bank Dexia state guarantee to cover. This guarantee, Dexia to enable the next year to 54 billion euros from the Belgian bond market to pick up. This would come in direct competition with Belgium itself, that money needs to get his debt and deficit financing.

The Belgian bond market is quickly drying up. This makes it impossible for the coming years tens of billions of Dexia to retrieve. Specialists estimate that for Dexia ‘only’ room for 20 to 25 billion euros from the Market. Since the agreement Dexia Belgium mistrust of financial markets, allowing long-term rates has increased dramatically: the beginning of October is 3.6 percent in Belgium paid ten-year loan, now it is 4.9 percent. And that has consequences for the rest of the financing bank. “Dexia becomes intolerable as it is such high interest rates on the market to pay, insiders warn.

French way

Belgium, France and the European Commission has therefore already stated that the bailout Dexia Holding need re-negotiation. As a possible way a new agreement in which the French, backed by Belgium, one additional share of the funding to take on.

Much time is not. For the euro crisis threatens not only Belgium in need of money to bring the whole bailout for Dexia falters.

Dexia Holding should not only pay high long-term market, it needs also a costly fee for the state guarantee. Total (financing) costs of the massive bond portfolio in the rest thereby threaten the bank proceeds to beat. Allowing the remaining banks are structurally unprofitable.

All parties involved are treated with the hands in the hair. “What now?” The remaining bank fail let go is not an option, it reads. The consequences for Dexia Bank Belgium (DBB) could not be foreseen. “The Belgian state bank to the rest Dexia Bank overdraft – no guarantees, so – given 20 to 25 billion euros, and then we lost all that money.”

Belgium sees the only solution is that France itself the bulk of the money that the rest Dexia bank needs from the French bond market gets. Belgium would be the part that France collects on behalf of our country, with guarantees covering.

But the French are not designed for jumping. They believe that Belgium commits perjury. Paris itself is under great pressure. The credit agency Moody’s yesterday put pressure on France once again by openly to question the sustainability of the French AAA credit rating. In addition, in the spring French presidential elections.

Dexia Belgium ruin.

Source: De Standaard

h/t: @zerohedge

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DMND Director Commits Suicide

Herb Greenberg reported:
More $dmnd: Just talked to the company regarding the director’s suicide. A spokesman said Silveiri had recused himself from the audit committee’s investigation into accounting quesitons for certain payments to walnut growers because he managed walnut properties. The company would not disclose more, saying that personal info is not the company’s to divulge. It’s unclear whether he was battling other issues unrelated to the company.

Full article

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New Credit Facilities From the IMF Stops the Bleeding in U.S. Equity Markets

Despite the IMF announcement the markets only stopped selling off. A Raly failed twice after the news. Commentators on the news are saying the credit line is not enough to tackle the $2 trillion problem.

The news broke as the S&P was resting on the 1183 support level. Uncanny timing …no ?

DOW off 51

NASDAQ off 1.8

S&P off 4.8

Light volume overall today.

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Maritime stocks tank

Tanking tankers…

NEW YORK (AP) — A dour quarterly report from the ocean shipping company Frontline sent a wave through the entire sector Tuesday and shares in some of the biggest operators tumbled sharply.

There were fears that shipping magnate John Fredriksen may have to step in once again to save Frontline, a company he founded, which said it would need to restructure or run out of money early next year.

The company posted third-quarter losses of $166.2, compared with a net income of $12.2 million during the same period last year.

Rates in the tanker market have been stagnant for years as a global economic funk settles across most developed countries, particularly in the West. Frontline warned that the tanker industry is likely to experience major financial problems if the market remains weak.

There is no quick recovery in sight.

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Will Thanksgiving be unspectacular?

I don’t know how much store can be taken in anecdotal pieces like this (I’ve heard this all before, and sometimes it means nothing as people talk depressed but spend away), but here it is:

Some are holding potluck dinners instead of springing for the entire feast. Others are staying home rather than flying. And a few are skipping the turkey altogether.

On this the fourth Thanksgiving since the economy sank, prices for everything from airline flights to groceries are going up, and some Americans are scaling back. Yet in many households, the occasion is too important to skimp on. Said one mother: “I don’t have much to give, but I’ll be cooking, and the door will be open.”

Thanksgiving airfares are up 20 percent this year, and the average price of a gallon of gas has risen almost 20 percent, according to travel tracker AAA. Still, about 42.5 million people are expected to travel, the highest number since the start of the recession.

But even those who choose to stay home and cook for themselves will probably spend more. A 16-pound turkey and all the trimmings will cost an average of $49.20, a 13 percent jump from last year, or about $5.73 more, according to the American Farm Bureau Federation, which says grocers have raised prices to keep pace with higher-priced commodities.

In Pawtucket, R.I., Jackie Galinis was among those looking for help to put a proper meal on the table. She stopped at a community center this week seeking a donated food basket. But by the time she arrived, all 300 turkeys had been claimed.

So Galinis, an unemployed retail worker, will make do with what’s in her apartment. “We’ll have to eat whatever I’ve got, so I’m thinking chicken,” she said.

Then her eyes lit up. “Actually, I think I’ve got red meat in the freezer, some corned beef. We could do a boiled dinner.”

Galinis has another reason to clear out her apartment’s freezer: Her landlord is in the process of evicting her and her 3-year-old son. The unemployment rate in Pawtucket, a city struggling with the loss of manufacturing jobs, is 12.1 percent, well above the national average.

Carole Goldsmith of Fresno, Calif., decided she didn’t need to have a feast, even if she could still afford it.

Goldsmith, an administrator at a community college in Coalinga, Calif., said she typically hosts an “over-the-top meal” for friends and family. This year, she canceled the meal and donated a dozen turkeys to two homeless shelters. She plans to spend Thursday volunteering before holding a small celebration Friday with soup, bread “and lots of gratitude.”

“I think everybody is OK with it,” she said. “They understand. Everybody is in a different place than they were a year ago.”

In suburban Chicago, the Oak Park River Forest Food Pantry got rid of turkey altogether. Last year, the pantry had a lottery in October to distribute 600 turkeys between almost 1,500 families.

The pantry’s management has decided to give all of its families a choice between other kinds of meat — ground turkey, sliced chicken, fish sticks and hamburger patties — along with the other trappings of a Thanksgiving feast. The decision will save $16,000, money that can go to feeding the hungry for the rest of the year.

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Merck to pay up $950 million to settle Vioxx dispute

Seriously either our drug industry is blatantly corrupt or the FDA demands more “protection” money than a prohibition mob boss.

Maybe both, actually?

NEW YORK (AP) — The U.S. Department of Justice says Merck will pay $950 million to resolve investigations into its marketing of the painkiller Vioxx.

The agency says Merck will pay $321.6 million in criminal fines and $628.4 million as a civil settlement agreement. It will also plead guilty to a misdemeanor charge that it marketed Vioxx as a treatment for rheumatoid arthritis before getting Food and Drug Administration approval.

Merck stopped selling Vioxx in 2004 after evidence showed the drug doubled the risk of heart attack and stroke. In 2007 the company paid $4.85 billion to settle around 50,000 Vioxx-related lawsuits.

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Debtor’s prison back in vogue?

Read here:

As if life wasn’t already tense enough for Americans who can’t pay their debts, collection agencies are now taking advantage of archaic state laws to have some debtors arrested and sent to jail.

More than one-third of US states allow debtors to be arrested and jailed, says Jessica Silver-Greenberg in the Wall Street Journal.

Judges typically grant arrest warrants when the debtors have failed to show up for court dates or failed to make court-ordered payments.

Of course, the reason debtors have failed to make court-ordered payments is often the same reason they didn’t pay their debts in the first place: They don’t have any money.

In September, a 53 year-old woman named Vivian Joy was stopped for a broken tail-light in Champaign, Illinois. And then, because the cops discovered that she still hadn’t paid $2,200 to a collection agency, she was cuffed and carted off to jail.

Joy’s excuse?

She doesn’t have any money.

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