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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

months ago

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

was then.

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.



-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











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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.

Sovereign International Ltd .As independent Financial Advisers, we can arrange virtually any investment that may be of interest to you. With thousands of investment products on the world markets, we do not go into the specifics of any one investment product on this site. What we do however, is give you an example of the differing areas of financial planning that we can help you with, along with some calculator tools to enable you to get an idea of what would be required to meet your desires or needs. We strive to offer you, our prospective clients, a personal service, so we will need you to let us know who you are, what information/advice you are looking for and most importantly, how to contact you with our replies. We understand that with so many companies in the market place, arranging your investments/financial planning can be a daunting task, we hope therefore to be able to help you with this by making sure that we get rid of all the 'industry jargon' and communicate with you in understandable plain English.

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Sovereign International Newsletter ISSUE 01 October 2012