In an interview with The Daily Telegraph, Mr Cameron says that he now expects the crisis in the eurozone to drag on for years, blighting the British economy. He indicates that the programme of spending cuts, initially planned to take five years, is now likely to last for the entire decade. Mr Cameron insists that he still wants to cut tax but that any reductions would have to be funded by even greater public spending reductions. Asked whether the austerity programme would now last a decade until 2020, the Prime Minister replies: “I think it’s going to be…this is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off.
Italian premier Mario Monti is mulling emergency action to take direct control of Sicily’s regional government before the island spirals into a full-blown financial crisis, fearing contagion to the rest of Italy. Mr Monti held an “urgent” meeting with the country’s president Giorgio Napolitano on Wednesday to grapple with the constitutional issue after it emerged that the region faces a deficit of up to €7bn (£5.49bn) this year and is in danger of default without sweeping cuts. Sicily’s regional councillor Andrea Vecchio warned that the island has run out of money. “I’m afraid we will soon no longer be able to pay civil servants’ salaries,” he said. “The developments in Sicily are very serious,” said Prof Giuseppe Ragusa from Luiss University in Rome. “It is just the sort of negative shock we don’t want right now. Everything has to go perfectly for Italy to pull through,” The Telegraph writes.
BP was facing a tactical headache last night after four Russian billionaires in the oil group’s TNK-BP joint venture crashed in on its plan to sell its stake. Alfa Access Renova (AAR) said yesterday that it had formally notified BP that it was interested in increasing its 50% ownership in TNK-BP. The move means that BP must spend the next 90 days in “good faith” negotiations with AAR about offloading a stake that the Russians value at between $16bn and $20bn. BP is understood to value the stake considerably higher and has attracted interest from two other buyers — a Russian government entity and a possible Chinese bidder. However, it cannot seal a deal until it has concluded talks with its Russian partners, The Times reports.
Regulators are focusing on at least four of Europe’s biggest banks as they investigate the attempted manipulation of the region’s benchmark interest rate, suspecting that Barclays’s traders were the ringleaders of a circle that included Crédit Agricole, HSBC, Deutsche Bank and Société Générale. Evidence of links between traders at all four banks and Barclays’ former euroswaps trader Philippe Moryoussef is under scrutiny, people involved in the process have told the Financial Times.
Sir Mervyn King has invited the heads of the world’s leading central banks to make proposals to reform Libor, the flawed series of interest rates at the heart of the financial system. The Governor of the Bank of England has written to members of the Economic Consultative Committee, which he heads, suggesting a dinner on September 9 in Basel, Switzerland, as a forum for exchanging ideas on addressing Libor’s shortcomings. His proposal came after the US Government declared that it wanted to take reform of the bank interest-rate setting process out of the hands of Threadneedle Street after British officials appeared to ignore warnings about the scale of the rate-rigging scandal, according to The Times.
Chinese President Hu Jintao has pledged African governments $20bn in credit over the next three years and called for more China-Africa coordination in international affairs to defend against the “bullying” of richer powers. China has emerged as Africa’s main trading partner and a major source of investment for infrastructure. But its presence has also sparked concerns about labour abuses and corruption. Hu made the lending pledge on Thursday during the opening ceremony of the Forum on China-Africa Cooperation in Beijing. Hu also said China and African countries, as developing nations, should better coordinate their response to international affairs to counter the practices of “the big bullying the small, the strong domineering over the weak and the rich oppressing the poor,” The Telegraph writes.
The trade minister, Lord Green, has been drawn in to the HSBC money laundering scandal after Labour warned he had “serious questions” to answer about the way the bank laundered money for drug cartels, terrorists and pariah states while he was at the helm. Green was chief executive of Britain’s biggest bank between 2003 and 2006 and was its chairman until 2010 when he resigned to take up a position of trade minister in the coalition government. A damning Senate report – which concluded the bank had a “pervasively polluted” culture – covers the period 2004 to 2010 and shows that HSBC subsidiaries moved billions of dollars around the financial system from countries such as Iran and Syria as well moving cash for Mexican drug cartels, The Guardian says.