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Thread: Financial problems in Spain , Portugal and Ireland

  1. #1
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    Angry Financial problems in Spain , Portugal and Ireland

    http://www.dw-world.de/dw/article/0,,5516038,00.html

    Quote Originally Posted by dw-world.de
    Spain follows Greece, Portugal down credit rating slide

    The list of European countries with downgraded credit ratings continues to grow, as Spain joins Greece and Portugal.

    International credit rating agency Standard and Poor's has downgraded Spain's credit rating from "AA+" to "AA" with a negative outlook.

    The move comes a day after S&P gave Greece's bonds a junk rating and lowered Portugal's credit rating from "A+" to "A-."

    "In our opinion, Spain is likely to have an extended period of subdued economic growth, which weakens its budgetary position," said S&P in a statement.

    News of the downgrade drove the euro to a one-year low against the dollar, touching 1.3128 in the afternoon on Wednesday.

    Spain's deputy prime minister, Maria Teresa de la Vega, appealed for market calm, saying the government had "a very serious plan of fiscal consolidation and deficit reduction."

    Observers believe more credit downgrades are possible amid fears that Greece's debt problems are spreading to other parts of Europe.

    mz/DPA/afp/AP
    Editor: Susan Houlton
    OK I know this is financial gobbildegook to most of us but this does have some potentially serious implications. When Greece had its credit rating downgraded to A- ( same as Portugal is now ) they had to cut expenditure and raise taxes although they didn't go far enough which is why Greece is now holding out the begging bowl to the IMF.

    The implications for us is that if Portugal and Spain have their credit ratings cut they will have to increase taxes , cut public sector jobs , etc to meet the increased costs of servicing the public debt and to start to pay down the borrowing they already have which means there is a chance the prices for Prawns , Fish and Crabs might drop. The other problem is that a weaker Euro makes it more expensive for EU customers to buy UK fish and shellfish.

    We have to hope the governments in Spain and Portugal will make a better job of managing their debt than Greece did.

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    Default IMF raises fresh concerns about the Spanish economy

    http://news.bbc.co.uk/1/hi/business/10149806.stm

    Quote Originally Posted by BBC
    The International Monetary Fund (IMF) has raised fresh concerns about Spain's economy, saying "far-reaching" reforms are needed to ensure its recovery.

    It said the country faced "severe" challenges, including the need to urgently reform a "dysfunctional" labour market, and its banking sector.

    The IMF's comments came after Spanish authorities had to rescue regional lender Cajasur at the weekend.

    Last week, Spain's government passed austerity measures to cut its deficit.
    Continue reading the main story

    It is not the first time that the IMF has said Spain needs economic reform, but the language has a much greater sense of urgency

    Andrew Walker BBC economics correspondent

    This deficit - the money the administration has to borrow to pay for public services due to insufficient tax returns and other revenues - currently equates to 11% of Spain's economic output.

    This is substantially higher than the eurozone ceiling of 3% and another concern that the IMF has highlighted.

    It also pointed to Spain's property market slump, heavy indebtedness in the private sector, and weak productivity and competitiveness.
    'Bluntly'

    "It is not the first time that the IMF has said Spain needs economic reform, but the language has a much greater sense of urgency," said BBC economics correspondent Andrew Walker.

    "The IMF says bluntly, the Spanish labour market is not working and needs reform of pay bargaining and lower payments for fired workers."

    Last week, the Spanish government approved a 15bn euro austerity plan, including a 5% cut to public sector salaries, as it aims to reduce its deficit.

    Spain is also having to cope with unemployment of more than 20%.

    Concerns about the Spanish economy have to be seen in the light of the recent financial crisis in Greece, which has a deficit amounting to 13.6% of GDP.

    Amid fears that Greece could default on its debt payments and that the crisis could spread to Spain, the 27 member states of the European Union and the IMF joined together to agree an emergency package worth 750bn euros ($975bn; £650bn).

    This includes access to 440bn euros of loan guarantees for struggling nations, and 60bn euros of emergency European Commission funding.

    The remaining 250bn euros comes from the IMF.

  3. #3
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    Default Moody's downgrades Portugal debt

    http://news.bbc.co.uk/1/hi/business/10610673.stm

    Quote Originally Posted by BBC
    International ratings agency Moody's has downgraded Portugal's sovereign debt rating, citing worsening public finances and weak growth prospects.

    It cut the rating by two notches from the maximum AA2 to A1.

    And it said it Portugal might need further austerity measures, as well as those already announced.

    The euro fell against the dollar and sterling but market reaction was muted. Rival agency Standard & Poor's already rates Portugal two grades lower at A-.

    The downgrade means that the rating agency is losing confidence in the Portuguese government's ability to meet its financial obligations.
    Tax rises

    A sovereign debt downgrade tends to make it more expensive for a government to raise money on the international markets.

    However, the bonds are still some way from the "junk" status suffered by Greece.
    Continue reading the main story

    The eurozone crisis has caught many people on the hop, but there are those who would say it's been waiting to happen since the euro began

    Stephanie Flanders BBC economics editor Read Stephanie's blog

    The latest available figures show Portugal's total government debt stood at roughly 77% of GDP at the end of 2009.

    This is quite similar to the numbers in countries such as France and Germany, two of Europe's economic powerhouses.

    However, Portugal's economy is significantly smaller in absolute terms and is not expected to revive any time soon.
    POUND STERLING V EURO
    Last Updated at 13 Jul 2010, 19:46 UK *Chart shows local time GBP:EUR intraday chart
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    The European Union has been anxious to see more fragile European economies - including Portugal - impose tougher austerity measures.

    The Socialist government of Jose Socrates has announced a range of measures aimed at cutting the deficit to 7.3% this year and 4.6% in 2011.

    Top earners in the public sector, including politicians, will see a 5% pay cut.

    VAT will rise by 1% and there will be income tax rises for those earning more than 150,000 euros. By 2013, they will face a 45% tax rate.

    By 2013, military spending will have been cut by 40%. The government is also delaying the launch of two high-speed rail links - the Lisbon-Porto and Porto-Vigo routes.

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    Default Moody's downgrades Ireland rating

    http://www.bbc.co.uk/news/business-10681046

    Quote Originally Posted by BBC
    Ratings agency Moody's has downgraded the Irish Republic's sovereign bond rating to Aa2 from Aa1.

    The ratings agency said the move had been driven by the government's gradual but significant loss of financial strength.

    And it expects the country's economic growth to be below its historical trend in the next three to five years.
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    In June, it was revealed the Irish Republic had officially moved out of recession in the first quarter of 2010.

    Ireland has suffered a severe contraction in GDP since 2008, causing a sharp decline in tax revenue.

    And Moody's said the banking and property sectors, which had driven the economy before the global economic downturn, would not contribute strongly to overall growth in coming years.

    It also pointed to the country's swelling levels of debt as a reason for the downgrade.

    "Today's downgrade is primarily driven by the Irish government's gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability," Dietmar Hornung, Moody's senior credit officer and lead analyst for Ireland, said in a statement.

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    Default Irish deficit balloons after new bank bail-out

    http://www.bbc.co.uk/news/business-11441473

    Quote Originally Posted by BBC
    The cost of bailing out the Republic of Ireland's stricken banks has risen to 45bn euro (£39bn), opening a huge hole in the Irish government's finances.

    The increased cost will see the government run a budget deficit equivalent to 32% of GDP this year.

    The cost includes a bill of up to 34bn euro to rescue the worst-hit lender, Anglo Irish Bank.

    The government said it would now have to rewrite its budget to cut borrowing more quickly in the coming years.

    But Irish finance minister Brian Lenihan defended the action, saying Anglo Irish Bank was too big to fail.
    Continue reading the main story
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    The Republic had previously committed to bringing its budget deficit down from 14.3% of GDP last year to 3% by 2014.

    In a statement, Mr Lenihan said he still intended to meet that target, indicating huge fiscal tightening over the next four years.
    'Huge damage'

    Mr Lenihan defended the cost of the bail-out measures, which will cost the Republic's two million taxpayers the equivalent of 22,500 euros each.

    "The bank had grown to half the size of our annual national wealth, so clearly the failure of a bank on that scale would do huge damage to the local economy here in Ireland," he said in an interview with the BBC.
    Continue reading the main story
    “Start Quote

    Ireland's roughly two million taxpayers are picking up the tab for tens of billions of misplaced private bets”

    End Quote
    image of Stephanie Flanders Stephanie Flanders Economics editor, BBC News

    * Stephanomics: The 32% question

    The Irish economy - once known as the Celtic Tiger - grew rapidly on the back of a property boom, fuelled by massive lending from the banks.

    But when this collapsed, and lenders were unable to repay, the Irish banking system was plunged into crisis.

    The cost of bailing out Anglo Irish could now cost between 29.3bn euros and 34bn euros in a worst-case "stress scenario", the government said.

    That is up from the estimate of 22-25bn euro given last month.

    The BBC's business editor, Robert Peston, said the equivalent of about a third of the Irish economy had gone into supporting the banks:

    "If you added together all the capital provided to Ireland's banks by various arms of the state, taxpayer support to those banks in the form of capital injections is around 30% of GDP."

    He said that would compare with around 6% of GDP in the UK for the equity injected into Royal Bank of Scotland, Lloyds and Northern Rock.

    There will also be up to 7.2bn euros of additional support for Allied Irish Banks (AIB), which will in effect be nationalised.

    Further help - of 2.7bn euros - will also be given to the Irish Nationwide Building Society.

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    Finance Minister Brian Lenihan said Anglo-Irish was a 'systemic threat'

    The Bank of Ireland was not deemed to need any extra support.

    Despite the size of the numbers involved, the latest news on the bail-out was welcomed by some market analysts.

    Padhraic Garvey, rate strategist at ING, said: "I think the market needs to know and here it is."

    This reassurance was reflected in a slight fall in the Republic's cost of borrowing, which had hit record levels earlier in the week.

    However, others doubted this would be the last such announcement.

    "Alas I don't think we have final figures. We've had about four 'final figures' for Anglo [Irish]," said Brian Lucey, economics professor at Trinity College Dublin.
    'Better health'

    The Irish economy has faced one of the deepest recessions in the eurozone, with its economy shrinking by 10% in 2009.

    The latest GDP figures showed it contracted by 1.2% for the second quarter. Greece's GDP dropped by 1.5% in the same period.
    Irish economy

    In an interview with the Financial Times, Mr Lenihan stressed that the country's financial health was better than other peripheral eurozone economies, saying it had borrowing already lined up to service debts and cover public services until the middle of 2011.

    "We are not obliged to go to the markets. We are not under a clear and present constraint," he told the paper.

    Mr Lenihan said the country would cancel its bond auctions in October and November and would not return to the bond markets until early in 2011.

    The European Union's monetary commissioner, Olli Rehn, said he doubted that Ireland would need emergency aid from the fund established earlier this year by the EU and the International Monetary Fund to save Greece from bankruptcy.

    There had been speculation that the Irish government would need such help - a suggestion rejected by the government.

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    Default Moody's downgrades Spain's credit rating

    http://www.bbc.co.uk/news/business-11442190

    Quote Originally Posted by BBC
    Spain has lost its last triple-A credit rating with the major rating agencies, following a downgrade from Moody's.

    The agency downgraded Spanish debt by one level to Aa1, following similar moves by Fitch and Standard & Poor's earlier this year.

    Moody's said the downgrade reflected the "considerable deterioration" in Spain's public finances.

    The slow growth in the Spanish economy would also present challenges, it said.

    Spain has been among the European countries to introduce tough austerity measures to tackle the problems in its public finances.

    On Wednesday, Spanish unions held a general strike in protest against the cuts.
    Growth worries

    Despite the downgrade, Moody's said its outlook for Spain's creditworthiness was "stable", with the government expected to meet its deficit reduction targets over the next two years.

    But the slow growth of the Spanish economy would make repairing the public finances more difficult, Moody's said.

    Spain's economic growth is expected to average 1% a year over the next few years, Moody's lead analyst for Spain, Kathrin Muehlbronner said.

    That compares with growth rates of 2% for the UK, and between 1.5% and 2% for German and France.

    Spain's borrowing costs are currently nearly two percentage points higher than the borrowing costs for Germany - seen by lenders as Europe's safest economy.

    But following the downgrade Spain's cost of borrowing on 10-year bonds actually fell slightly to 4.1%, reflecting relief among investors that the downgrade was not more severe.

    However Spain's borrowing costs remain more than double their average rate for 2009, before this year's European debt crisis hit confidence.

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    Default Irish PM Brian Cowen to call New Year election

    http://www.bbc.co.uk/news/world-europe-11816740

    Quote Originally Posted by BBC
    Irish Prime Minister Brian Cowen has said he will call a general election in the New Year following a day of political turmoil over an EU-led bail-out of the country's ailing economy.

    He rejected opposition calls for a snap election, saying the country's crucial budget had to be passed first.

    Earlier, the Green Party - junior partners in the governing coalition - called for a January election.

    The government has accepted up to 90bn euros (£77bn; $124bn) in loans.

    In return, the government is to publish a four-year economic plan on Wednesday and is drawing up an austerity budget, to be unveiled on 7 December.

    "We believe that there is a clear duty on all members of Dail Eireann (lower house of parliament) to facilitate the passage of these measures in the uniquely serious circumstances in which we find ourselves," said Mr Cowen after an emergency meeting of cabinet members.

    "The political and financial stability of the state require no less. It is my intention, at the conclusion of this budgetary process with the enactment of the necessary legislation in the New Year, (to) then seek a dissolution of Dail Eireann and to enable the people to determine who should undertake the responsibilities of government in the challenging period ahead thereafter."

    He called for MPs to support the budget and the four-year plan - aimed at bringing stability to the economy.

    However, the BBC's Mark Simpson in Dublin says that, despite Mr Cowen's statement, MPs could still force him from office before the budget is agreed.

    The Labour Party and Fine Gael - the Republic of Ireland's two main opposition parties - earlier called for the immediate dissolution of parliament.

    Fine Gael leader Enda Kenny said in a statement: "What is needed now is an immediate general election so that a new government, with a clear parliamentary majority, can prepare the four-year economic plan, complete negotiations with the EU and IMF, and frame a budget for 2011".

    Labour leader Eamon Gilmore said it was "essential that we have a new government elected as soon as possible".
    Continue reading the main story
    “Start Quote

    The past week has been a traumatic one for the Irish electorate”

    End Quote John Gormley Green Party leader

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    Mr Cowen's statement came at the end of a day of commotion in Irish politics.

    There were violent scenes in Dublin when police removed demonstrators from the grounds of Government Buildings in Dublin, who then tried to hold a sit-down protest.

    Next month's austerity budget will set out 4.5bn euros of spending cuts and new or increased taxes designed to raise 1.5bn euros.

    Adding to the government's woes on Monday, two independent MPs helping to prop up Mr Cowen's crumbling coalition said they could not give a commitment to support the budget unless the opposition had a hand in drafting it.

    Even with Green Party support, the coalition has just a three-seat majority in parliament and faces a by-election in one of those seats on Thursday.

    Green Party leader John Gormley did not say the party was pulling out of the coalition but he made a number of demands and said a general election date should be set for the second half of January.
    Continue reading the main story
    What went wrong in the Irish Republic

    The 1990s were good for the Irish Republic's economy, with low unemployment, high economic growth and strong exports creating the Celtic Tiger economy. Lots of multi-national companies set up in the Republic to take advantage of low tax rates.

    At the beginning of 1999, Ireland adopted the euro as its currency, which meant its interest rates were set by the European Central Bank and suddenly borrowing money became much cheaper.

    Cheap and easy lending and rising immigration fuelled a construction and house price boom. The government began to rely more on property-related taxes while the banks borrowed from abroad to fund the housing boom.

    All this left Ireland ill-equipped to deal with the credit crunch. The construction sector was hit hard, house prices collapsed, the banks had a desperate funding crisis and the government was receiving much too little tax revenue.

    The economy has shrunk and the government has bailed out the banks. A series of cost-cutting budgets have cut spending, benefits and public sector wages and raised taxes. But there are still doubts about future government funding.

    The main concern for the Republic's economy is its banks, most of which are now controlled by the government. They have had to borrow at least 83bn euros (£71bn) from the European Central Bank because other banks will not lend to them.

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    Mr Gormley, the current environment minister, stressed the election should only be held after the 2011 budget had been passed.

    Our correspondent says the most likely shape of the next government is a right-left coalition between Fine Gael and Labour.

    European shares and the euro both fell following the election call from the Green Party.

    They had risen in earlier trading after the announcement of the bail-out, final details of which are yet to be worked out.

    The UK is expected to contribute about £7bn (8bn euros) of the bail-out. Chancellor George Osborne said: "Ireland is a friend in need, and we are here to help."

    The crisis in the Irish Republic has been brought on by the recession and the almost total collapse of the country's banks.

    Once known as the Celtic Tiger for its strong economic growth - helped by low corporate tax rates - the country has experienced a property bubble burst, leaving its banks with huge liabilities and pushing up the cost of borrowing for them and the government.
    Well guys I hope your next government is a hell of a lot better than this shower you've had to put up with

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