Death Star Economics



Berlusconi creeps back, Citi cuts 11,000 jobs

This morning, Italy’s government was shaking once again, when the Italian upper house voted on Monti’s economic growth package. But Mario Monti prevailed despite Berlusconi’s People of Freedom party walking out on the vote. Italy’s next election is scheduled for March, and Berlusconi has suggested his return again and again. read article

After yesterday’s Autumn Statement, which can probably be summarized as pushing around money in little proactive fashion, the UK’s credit rating is in more danger than it was before. In March, Fitch had put the country on ‘negative outlook‘. But when George Osborne neither announced substantial tax increases nor spending cuts yesterday, the agency concluded that Britain’s way of dealing with its public finances was reason to worry – more. read article

Speaking of rating issues: after Greece announced to buy €10bn of its debt back (estimated to be 32-34 cent on the euro), S&P has reduced the country’s credit grade to ‘stubborn selective default‘.

When Vikram Pandit left his position as CEO of Citigroup, everybody denied that there had been tensions in the bank’s senior management. The 180-degree-turn of the company’s strategy says something quite opposite. Last week, there was the modest announcement that 150 jobs would be cut. Last night, the number of overall job cuts within the company rose to 11,000, more than double of what Pandit had had in mind. According to Fortune Magazine, Citi employed 266,000 people this year. read article

Other news are almost exclusively legal issues: HSBC’s fine for that Mexican money laundering incident could rise to up to $1.8bn, while Standard Chartered has to pay an additional $330m for breaching Iranian sanctions. The bank has already paid $340m in August.

But the gossip of the day comes from Deutsche Bank, which failed to, or chose not, or accidentally didn’t report losses of up to $12bn between 2007 and 2009. So far, it seems like that might have been a good thing. Thanks to Deutsche’s ‘don’t ask don’t tell’ policy, the bank may have avoided a government bailout. Suspiciously, the whistle-blowers are three former employees of the company, and if 2012 has taught us anything it is to take those things with a bucket of salt. read article

So long.


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The advantage of debt in the family

As mentioned yesterday, Greece is going to avoid bankruptcy AGAIN on Monday, when a little over €3bn fall due in debt repayments. Much to Greece’ advantage, the money belongs to the ECB, so the whole thing is a lot more like borrowing money from your parents. Greece sold €4bn worth of 13-week notes yesterday, raising enough money to meet the deadline. On to the next! read article

UK unemployment, including the number of jobless claims, have fallen. At 8%, unemployment rose almost 1.5% since the onset of the 2007 financial crisis. The current ease is considered to be related to job creation through the Olympics. But even though the date is better than expected, it’s not going to lift European markets. see graph

In the US, the picture looks similar. Retail sales and jobless claims, released yesterday and last week respectively, have been better than forecasted. But in the typical fashion of overweighting positive factors, many say there won’t be any government action any time soon, which may be a mistake.

At least, both American and German 10-year bond yields are rising to 1.73% and 1.47% respectively. That is, if you believe Ken Rogoff’s analysis in last Friday’s News Brief, a good thing.

Banking scandal round-up:

After the US Department of Justice dropped its criminal investigation of Goldman Sachs, which could have been turned into a civil fraud case on the coattails of Goldman’s sales of mortgage-backed securitiesNYTimes Dealbook declared the end of financial crisis law suits, almost five years after it erupted.

The new trend, as we’ve learned in the past weeks, is money laundering and rate fixingStandard Chartered has now been fined $340m for the former by the New York State Department of Financial Services. Oh yeah, and then there were transactions worth around $250m with sanctioned Iran. Oops. read article

Otherwise, Australian courts have granted the display of ‘discouraging packaging’ for cigarettes in the scope of its new anti-tobacco marketing laws and India is celebrating 65 years of independence today.

So long.

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