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ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

The world according to the IMF

Christine Lagarde is worried. After some sort of a post-summer break from public appearances and comment, this week has been all about her and the IMF’s view on the world. On Tuesday, the IMF cut its global growth forecast to 3.3% in 2012 and 3.6% in 2013. The main threats to growth is the eurozone crisisaccording to the report, and Lagarde stressed the need for increased fiscal integration in the EU to keep European banks from offloading assets. That, in turn, was the primary concern on Wednesday. The IMF is currently expecting European banks to offload a total of $2.8bn by the end of 2013. The number has increased by $200m since the April estimate. Worried Largarde even sees the number increase to $4.5bn, in case European authorities fail to deliver said fiscal integration.

Today, Lagarde is taking it a step further. During meetings with the World Bank in Tokyo (during which World Bank president Jim Yong Kim was asked to perform ‘Gangnam Style’), Lagarde said Greece should get another two years to meet its budget targets as set at the time of the first bailout. A ballsy move, as she’s walking straight into Angela Merkel’s fight club of European debt management. Let’s see how that pans out. read article

S&P downgraded Spain by two notches to BBB- (previously BBB), causing 10-year yields to rise and panic to strike. The downgrade is S&P’s way off telling Spain to get it together. Following the ESM approval on Monday, capital is in place to facilitate at least some sort of a bailout, but Spain still hasn’t filed an official request. Besides its borrowing costs and questionable budget proposal, the country is knee-deep in a political crisis (-> Catalonia) that could turn pretty ugly once the high unemployment rates meet the expected rise of food prices next year. read article

In other news, Cambridge University issued a 40-year £350m bond (it’s first) to fund a stem-cell research lab and new student accommodation and Brazil’s central bank has cut interest rates to an all-time low of 7.25%. Following the IMF’s growth cut, the country needs to stimulate the economy, but its 5.28% inflation rate is almost 1% above target. read article

In the case of regulatory authorities vs banks of the world, the US department of justice is suing Wells Fargo for $600m for irresponsible lending, while J.P. Morgan was fined $18m for “grossly negligent and reckless” handling of a client’s trust fund on the grounds that the 75-year old oil heiress who died in 1996, had not understood the derivatives she was sold.

And finally, stolen from Alphaville due to entertainment factor.

Our favourite paragraph today: “Goldman responded by launching an investigation into what was nicknamed internally “the muppet hunt”. The investigators interviewed dozens of staff and sifted through millions of emails, finding about 4,000 “muppet” references. But they said 99 per cent of those referred to last year’s movie of the same name.

Well, that was time and money well spent.

So long.

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