Sovereign International Newsletter Your monthly financial news ISSUE 01 October 2012
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Latest News Tuesday 2 October 2012 Greece debt in worse state now than six
2020 for the situation to be manageable
and concluded the goal was achievable under certain optimistic assumptions.
BRUSSELS: Every step Greece takes to shore up its finances seems to make it
But as so often with the Greek econo-
harder for Athens to make the numbers
my in the past three years, most of the
add up in the long-term, especially when
assumptions are already way off-target
it comes to its spiralling debt.
and the likelihood of Athens meeting the 2020 goal is now even slimmer than it
Monday's 2013 budget plan contained
some positive news - for example, the expectation that Greece will have a pri-
That makes it all the more likely that
mary budget surplus, before debt financ-
Athens will have to go through another
ing costs, for the first time since 2002 - as
debt restructuring, involving further loss-
well as some more alarming forecasts.
es for bondholders, if it is to return to solvency. And this time it is the official
Chief among those was an acknowledge-
sector -- mostly European governments
ment that the economy will shrink again
and their taxpayers -- who will have to
next year, by 3.8 per cent, the sixth annu-
take a hit rather than the private sector.
ROYAL BANK SCOT EVRAZ PLC LLOYDS BNK GRP CRODA INTL SCHRODERS
-2.92% -2.38% -2.16% -1.84%
al contraction in succession, and that the debt-to-GDP ratio will rise to 179.3 per
That would be a major blow to German
cent in 2013, a dauntingly high figure.
Chancellor Angela Merkel, whose country is the biggest contributor to euro zone
The bottom line is that Greece is in a
rescue funds, and diplomats say she
worse state now than even the most pes-
would be eager to avoid such an event
simistic forecast just six months ago.
before a September 2013 German general election.
The relationship between growth and debt is the focus of the European Com-
"Debt reduction will still require a hercu-
mission, the European Central Bank and
lean domestic fiscal adjustment," JP Mor-
the International Monetary Fund -- the
gan said in an analysis of Greece's deteri-
troika of inspectors currently in Athens
orating debt predicament back in July.
poring over the government's projections. "The upshot of this arrangement is that In the coming 4-6 weeks, the troika will
the inevitable decisions on burden-
publish its latest report assessing whether
sharing that lie ahead will relate to offi-
Greece's debt is sustainable in the longer-
cial creditors and Greek citizens," it said,
term, something many private sector
noting 70 per cent of Greek debt would
economists have already concluded is not
be in official sector hands by 2014.
the case. In its last analysis published in March, the troika said Greece needed to get its debts down to 120 per cent ofGDP by
Light Reading Friends Provident International Introduce Premier Advance and Ultra Advance
Separate risky financial activities from retail banking, EU report recommends The EU has unveiled proposals that would
Lawyers said Liikanen's proposals – which
force banks to separate their risky trading
Barnier has now put out to six weeks' con-
activities from their high street operations in
sultation – could have implications for the
the latest effort by policymakers to prevent
UK's coalition government, which is working
a rerun of the 2008 banking crisis. The high level report for European commis-
a loyalty bonus
towards implementing the ringfencing pro-
improved premium bands
posals set out by Sir John Vickers' Independ-
clearer minimum fund value
ent Commission on Banking.
senior bankers should have part of their bo-
Paul Edmondson of law firm CMS Cameron
nuses paid in bonds, which could ultimately
McKenna, said: "If Brussels goes down the
be used to prop up ailing banks and a lid be
route of separating bank trading books the
put on the total amounts that can be handed
UK won't be able to prevent that being en-
out to staff. One proposal is that bonus pay-
forced here. What happens now to the pro-
ments to staff should not be greater than
posed UK ringfence?".
dividends paid to shareholders. He also sugsalaries be limited.
Liikanen presented his proposals from Brussels just hours before Labour leader Ed Miliband refuelled the debate on the struc-
The report by the Finnish central bank gover-
ture of British banking by threatening to go
nor, Erkki Liikanen, is intended to prevent
further than Vickers and break them up. "Of
taxpayers needing to bail out banks again
course, this government promised change
and is published at a time when politicians
but things aren't really changing. So I've got
around the world are continuing to grapple
a message for the banks. We can do this the
with the issue of how to make banks safer.
easy way or the hard way," Miliband said at the Labour party conference in Manchester
Among Liikanen's others suggestions are that loans to property companies should
Liikanen insisted he was not trying to com-
have different rules about the amount of
pletely to break up "universal" banks which
capital that banks must hold to support the
unite investment banking and retail banking
lending so that banks are not destabilised by
– such as Barclays, Deutsche bank in Germa-
a property crash. The report also calls for
ny and BNP Paribas in France – despite his
"more attention" to be given to the ability of
demand for a "legal" separation between
management and bank directors to run
some of the riskier investment banking activ-
large, complex banks and calls for "fit and
ities and high street banks.
proper" tests for boardroom candidates.
Building on the success of the original Premier products these new variants introduce:
sioner Michel Barnier also proposes that
gests that the size of bonuses relative to
new regular premium savings plans, Premier Advance and Ultra Advance, are available now.
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Sovereign International Newsletter ISSUE 01 October 2012
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