The FT.
Standard & Poor’s, the US credit rating agency, turned negative on 16 of Spain’s largest banks on Monday as the government holds talks to segregate problematic property loans into one or more asset management companies to relieve the burden on struggling lenders, according to officials and bankers.Markets were cheers slightly, however, after official data showed that the Spanish economy shrank less than forecast in the first quarter of 2012, contracting 0.3 per cent as opposed to the Bank of Spain’s 0.4 per cent prediction last week.
The Guardian.
Social unrest is expected to grow in Europe as governments impose steep welfare cuts and fail to implement policies to reduce unemployment, according to a report by the International Labour Organisation. As German engineers embarked on a wave of strikes in pursuit of a 6.5% pay increase and Spanish workers took to the streets of 50 towns to protest at welfare cuts and a jump in unemployment, the ILO said the situation in the 27 EU countries was becoming more unstable. It said: “Society is becoming increasingly anxious about the lack of decent jobs. In 57 out of 106 countries, the Social Unrest Index increased in 2011 compared with 2010.” The report highlighted Europe, the Middle East, North Africa and sub-Saharan Africa as the areas most affected by strikes and protests.
The Times.
David Cameron today warned the Eurozone’s debt crisis was not even halfway through as he blamed the Continent for Britain’s double-dip recession. The Prime Minister said economies struggling across the Channel, which receive 40% of all UK exports, were harming the UK’s prosperity. He said: “I don’t think we are anywhere near halfway through it because what’s happening in the Eurozone is a massive tension between the single currency that countries are finding very difficult to adapt to. “It’s going to be a very long and painful process in the Eurozone as they work out do they want a single currency with a single economic policy and all the things that go with it, or are they going to have something quite different?”
The multibillion-pound defence industry could fall into terminal decline, with the loss of thousands of jobs, unless the Government adopts a clear strategy to nurture the sector, business leaders and experts have warned. They argue that defence exports will shrink because of a drop in investment in homegrown equipment such as armoured vehicles and fighter jets, making them harder to sell overseas. Mike Turner, the chairman of Babcock International, said: “It just can’t go on like this. What the Ministry of Defence is doing is killing our indigenous defence industry. You can see it all the time. Every day that goes by we are in decline.” The Government’s willingness to buy cheaper equipment off the shelf from a foreign supplier was often a false economy, Mr Turner said, as the Ministry of Defence could end up paying more on spare parts and maintenance.
A consortium of airlines has increased its valuation of a stake in Britain’s air traffic control system by 10%, delivering a much-needed boost to the Government’s coffers. The latest accounts of the Airline Group value its 42% stake in Nats at £227m, up from £206m a year earlier and implying a valuation of £540m for the partly state-owned company. This suggests that the Government would receive about £65m more than analysts had estimated if it sold its 49% share in Nats. George Osborne said in 2010 that the Government wanted to reduce its stake in Nats, but the sale has been delayed until at least the end of this year while the coalition considers its options. Several buyers, including Serco, Lockheed Martin and Global Infrastructure Partners, which owns Gatwick, have expressed an interest in buying a stake in Nats.
The Telegraph.
Losses on corporate loans will hit their highest level since the 1990s recession this year, fuelled by a weak consumer sector and further crippling lending according to a leading group of economists. The Ernst & Young ITEM Club said lending to businesses would not return to pre-crisis levels until 2016, exacerbating the funding squeeze faced by small and medium-sized companies. It also forecast a 7.6pc fall in consumer credit this year, which would be the sharpest on record. ITEM’s report on the outlook for financial services predicted write-offs will increase to 1.9pc of business loans in 2012 from 1.6pc in 2011, as a weak economy triggers company failures.
A senior BP executive alleged to have taken cash payments in return for giving multi-million pound contracts to a shipping magnate has been suspended pending the outcome of the inquiry. BP’s global chartering manager, Lars Dencker Nielsen, has been put on leave of absence since The Daily Telegraph broke the story about the bribery allegations. The Danish national is alleged to have offered favourable terms to one of BP’s shipping suppliers for cash. In a letter to BP chief executive Bob Dudley, copied in to the Serious Fraud Office, the whistleblower set out what he claimed was a five-year catalogue of bribery and corruption within the oil giant’s tanker chartering department.
It didn’t go unnoticed that the best news for the beleaguered Indian economy last week came not from the markets but the Gods via the weatherman. As India’s once ‘miraculous growth’ story took a dark twist – Standard & Poors downgraded its outlook to ‘negative’ while Moody’s blamed the ruling Gandhi family for the political paralysis behind faltering growth – the country’s Met Office offered one silver lining. It ruled out the possibility that the monsoon rains would fail. While Dr Manmohan Singh’s government has lurched from one crisis to another and serious differences within his coalition have placed almost all reforms on hold, fear of a failed monsoon is the one thing which unites his fractious cabinet and Indian business leaders alike.
