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FRIDAY, SEPTEMBER 23, 2011
Merkel, Pope discuss financial crisis, Europe BERLIN: Pope Benedict XVI and Chancellor Angela Merkel discussed the turmoil on the financial markets, Germany’s leader said yesterday after meeting the pontiff on his first state trip to his native country. In a brief statement after the talks, Merkel said: “We talked about the financial markets, about the fact that politicians need the power to lead for the people rather than be led, which is a very, very difficult task in the current period of globalization.” Merkel’s comments came on another day of turbulence on the markets, with
stocks and the euro plunging amid concerns over the global economy. “Obviously, the topic of Europe, which interests the pope, was also discussed. I made very clear that European unity is indispensable for us Germans, that for us it means prosperity, democracy and freedom,” she added. In reply, the pope welcomed the “solidarity” of Germany in the European debt crisis, Vatican spokesman Federico Lombardi told reporters after the 20-minute meeting. Merkel has come under fire both at home and abroad for what critics say is a
hesitant response to the debt crisis, amid a row in the country over German contributions to the rescue fund for Greece and the debt-wracked eurozone. The chancellor, the daughter of a Protestant pastor, said she was “delighted” to welcome the pope. Merkel greeted the pope dressed in black and supported by a rare public appearance from her publicity-shy husband, scientist Joachim Sauer. Benedict was due to make a landmark speech to the Bundestag lower house of parliament-his first address to a national legislature-later, with several
dozen leftist deputies threatening to boycott the event. Organizers also expect an eclectic group of around 20,000 to protest against the visit, demonstrating against a range of issues from the Vatican’s views on gay rights to the sexual abuse scandal that erupted last year in Germany. On the plane from Rome to Berlin, the pope said he could understand those who protested against him, saying it was “normal in a free society marked by strong secularism.” “One can’t object” to such protests, he added. “I respect those who speak out.”—AFP
Italy banking association plays down downgrades Italy lowers growth forecasts for 2011, 2012 MILAN: Italy’s Banking Association yesterday played down Standard and Poor’s decision to downgrade the credit ratings for seven of the country’s banks, denying the move would have “serious consequences.” “We consider that these seven banks had relatively high ratings and thus this downgrading will not have serious consequences,” the association’s head Giuseppe Mussari told Italian radio. On Wednesday, Standard & Poor’s downgraded the long-term ratings of Mediobanca, Findomestic, Intesa Sanpaolo and their units Banca Imi, Cassa Risparmio Bologna and Biis were downgraded to A from A+. Their shortterm ratings remain unchanged at A-1. Unicredit, Italy’s biggest bank, escaped a ratings downgrade for the moment but was put on negative outlook. The country’s banks hold a large quantity of Italian bonds and have seen their stocks pummeled over the past few months as investor fears over Italy’s economic stability and vast debt sent shock waves through the markets. Mussari said that Italy must now “give the markets a clear sign that we have understood the seriousness of the situation and are in a position to face it.” Italy must escape “the logic of austerity plans and urgency, and begin to think seriously about growth,” he added. Despite passing an austerity package of 54.2 billion euros ($73.0 billion) to balance the budget by 2013, Italy has not been able to reassure investors, who balk at the country’s vast debt-about 120 percent of gross domestic product. As well as downgrading the
banks, Standard & Poor’s ratings agency lowered Italy’s credit rating level on Tuesday on the grounds that a weak coalition was trying to govern an economy with weak growth prospects. The Italian government lowered its growth forecast sharply yesterday, while insisting that the austerity plan adopted last week is sufficient to balance the country’s budget by 2013 as planned. Italy now forecasts a 0.7 percent growth in 2011, 0.6 percent in 2012 and 0.9 percent in 2013, compared to previous forecasts in April of 1.1 percent, 1.3 percent and 1.5 percent, the finance ministry said. Despite “weaker growth,” the “austerity plan is amply sufficient to balance the budget in 2013,” it said, contradicting claims by many experts that more measures will be necessary if the government’s target is to be reached. The figures are still more positive than the forecasts announced on Tuesday by the International Monetary Fund, which put growth in 2011 at 0.6 percent and 2012 at 0.3 percent. Despite passing a 54.2 billion euros austerity plan aimed at balancing the budget by 2013, Italy has not been able to reassure skittish investors, who balk at the country’s vast debt-around 120 of the Gross Domestic Product. Standard & Poor’s ratings agency lowered Italy’s credit rating level on Tuesday on the grounds that a weak coalition was trying to govern an economy with weak growth prospects-increasing fears that the third largest economy in the eurozone may be next to succumb to the economic crisis.— Agencies
Moody’s cuts Citi, BofA and Wells Fargo ratings NEW YORK: Three of the nation’s top banks are likely to start paying more to borrow money. Moody’s Investors Service on Wednesday lowered its debt ratings for Bank of America, Wells Fargo and Citigroup. The ratings agency said it has become less likely that the US government would step in and prevent the three lenders from failing in a crisis. “The probability of government support for the banks is less now than during the financial crisis,” said David Fanger, senior vice president at Moody’s. The downgrades were widely expected after the ratings agency placed the three banks on review in June. The cuts also stem partly from new laws taking effect under the DoddFrank Wall Street Reform Act. The new law ended the possibility of the government bailing out a large financial firm and created a process
that would allow a financially troubled bank to fail and liquidate its assets. Bank of America Corp was hit worst. Moody’s downgraded its key long-term debt ratings two notches, to Baa1 from A2. Wells Fargo & Co.’s long-term debt rating fell one notch to A2 from A1, while Citigroup Inc.’s rating remained the same at A3. Moody’s did downgrade Citi’s short-term debt. Bank of America’s ratings are the lowest among the three. All of the banks are rated investment grade. A downgrade is a warning to buyers of debt that the chance that they won’t get their money back has increased, however slightly. Downgrades usually lead to higher borrowing costs for the issuer because investors want more interest if they’re taking a bigger risk. Long-term debt includes bonds that come due in more than one year.—AP
ATHENS: Students and teachers protest in front of the Greek parliament yesterday. —AFP
Greece sharpens austerity Cabinet agrees pension cuts, layoffs, new taxes ATHENS: Greece adopted yet more austerity measures on Wednesday to secure a bailout installment crucial to avoid running out of money next month, as the IMF warned that Europe’s sovereign debt crisis risks tearing a giant hole in banks’ capital. The Greek cabinet agreed to cut high pensions by 20 percent, put 30,000 civil servants in a “labor reserve” on a road to redundancy, lower the income threshold for paying tax and extend a real estate tax, a government spokesman said. “The measures taken today allow us to comply with the bailout plan through 2014,” the spokesman, Ilias Mossialos, said. The new package is designed to ensure Greece gets an 8 billion euro rescue loan vital to pay state salaries and bills in October. Senior European Union and International Monetary Fund officials are to arrive in Athens early next week to review progress, Mossialos said. Greece is on the front line of the euro zone debt crisis that has engulfed Ireland and Portugal and now threatens Italy, Spain and some of Europe’s biggest banks, risking plunging the West back into recession. BANK EXPOSURE The International Monetary Fund on Wednesday said the crisis had increased European banks’ exposure by 300 billion euros, and they need to recapitalize to ensure they can weather potential losses. “Risks are elevated and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery,” the IMF said in its Global Financial Stability Report. Officials said European governments are now looking seriously at ways to shore up banks’ capital after ini-
tially rejecting an IMF call last month for urgent action, and signs of progress began emerging late on Wednesday. Qatar is in talks with BNP Paribas on investing in France’s biggest listed bank, and the Gulf state has held similar talks with other French banks, a source close to the deal in Qatar said. Several banking sources also said they had heard private rumblings that France was discussing an injection of preference shares, a departure from its earlier position that its banks were well capitalized. In Washington, South Africa’s Finance Minister Pravin Gordhan said an IMF official told a meeting of developing nations that a solution to the euro crisis was “coming in the next few days.” Fears of another credit crunch or recession due to Europe’s inability to overcome the debt crisis are expected to dominate the IMF/World Bank and Group of 20 meetings of finance chiefs that formally begin on Thursday in Washington. A senior US Treasury official, briefing reporters before those talks, said European sovereign and banking stress posed the most serious threat to the global economy. “The challenge they have before them is pretty clear. It is to be able to unequivocally ensure that sovereigns with sound fiscal plans have access to affordable financing. It is to unequivocally assure that European banks have the requisite liquidity and are sufficiently capitalized,” the official said. Canada’s finance minister, Jim Flaherty, added his voice, calling on Europe to make absolutely clear its firm commitment to Greece and monetary union and to provide resourcesas much as 1 trillion euros-to backstop banks and nations . — Reuters