Italy a bigger threat to UK than Greece

Giving evidence to the Treasury Select Committee on Tuesday, Lord Turner said that while the direct exposure of British banks to Italy was not large, the country's financial crisis, if it got worse, would be more damaging to the UK than those of Greece, Ireland and Portugal.

"Italy is the most concerning. That is the most important thing for us to focus on," he said.

The Italian government is currently looking at ways to cut the country's public sector debt of close to €2 trillion (£1.8bn) as well as sales of state assets.

Speaking on Tuesday, a senior Italian banker told The Telegraph that he thought it was "highly unlikely" Italy's problems would ever get as bad as those in Greece, where the government on Monday called for a referendum to vote on a multi-billion euro bailout package.

Lord Turner's comments will add to fears about the strength of the British financial system to stand up to a new crisis.

Speaking at the same hearing, he told MPs that investors should no longer think of bank shares as "high return" investments and that the days of large payouts were over.

"An investment in banks should not be a high-risk, high-return investment. The banks have adjusted this but not enough," he said.

On Monday, Robert Jenkins, a former City banker and a member of the Bank of England's Financial Policy Committee, said that banks should stop using return on equity to measure their performance as it led them to seek high returns without accounting for risk.

The Telegraph

Greece on brink of collapse in euro crisis

Uncertainty in Greece raised fresh fears that the single currency crisis will spread. European stock markets plunged and the Italian government’s borrowing costs hit record highs as investors warned that efforts to save the euro were “unravelling”.

George Papandreou, the Greek prime minister, faced calls by members of his own government to step down amid fears that Greeks will vote against the bail-out package and the deep cuts in public spending its sponsors are demanding. As Greek politics grew ever more chaotic, there were strong political protests as the government moved to replace military chiefs with officers seen as more supportive of Mr Papandreou.

A No vote could mean Greece is forced to withdraw from the single currency, raising doubts about the euro’s value and wiping trillions off the value of shares and loans across the continent.

The renewed global turmoil overshadowed the release of better than expected economic figures in Britain. The economy grew by 0.5 per cent over the summer, almost double the increase expected by economists. Growth is expected to slow and possibly even slip back into recession because of the eurozone crisis.

At a Cabinet meeting, Mr Cameron told ministers to “roll up their sleeves” and do more to implement plans to boost growth.

Yesterday, at least two members of Mr Papandreou’s Pasok party threatened to defect, which could cost him his parliamentary majority. The collapse of the Papandreou government could mean elections next month, raising fresh doubts about the bail-out deal and delaying any final approval still further.

Opposition parties accused the government of trying to politicise the military leadership amid threats to Mr Papandreou’s position. Greece was run by a military junta between 1967 and 1974. Local reports said the government had been panicked by residents posting portraits of top generals in parts of Athens.

The Greek crisis is likely to dominate tomorrow’s G20 meetings of world leaders after markets panicked. The FTSE 100 index of British shares fell yesterday by more than two per cent, the French stock market was down 5.4 per cent, the German market dropped by five per cent and Italian shares by almost 7 per cent.

David Cameron and other world leaders are understood to have learned of the referendum call from news reports on Monday night. Senior Government sources described the Greek move as “extraordinarily reckless”.

George Osborne, the Chancellor, told MPs that the referendum had added to “instability”, harming the UK. The White House urged European leaders to urgently introduce reforms to cut their debts as President Barack Obama prepared to fly to France this evening for talks with French and German leaders.

The Telegraph

New suspected nuclear complex exposed in Syria

The UN's International Atomic Energy Agency also has obtained correspondence between Khan and a Syrian government official, Muhidin Issa, who proposed scientific cooperation and a visit to Khan's laboratories following Pakistan's successful nuclear test in 1998.




Satellite image of suspected nuke site in Al-Hasakah (Photo: AP)

The complex, in the city of Al-Hasakah, now appears to be a cotton-spinning plant, and investigators have found no sign that it was ever used for nuclear production. But given that Israeli warplanes destroyed a suspected plutonium production reactor in Syria in 2007, the unlikely coincidence in design suggests that Syria may have been pursuing two routes to an atomic bomb: uranium as well as plutonium.

Details of the Syria-Khan connection were provided to the AP by a senior diplomat with knowledge of IAEA investigations and a former UN investigator. Both spoke on condition of anonymity because of the sensitivity of the issue.

The Syrian government did not respond to a request for comment. It has repeatedly denied pursuing nuclear weapons but also has stymied an investigation into the site bombed by Israel. It has not responded to an IAEA request to visit the Al-Hasakah complex, the officials said.

The IAEA's examination of Syria's programs has slowed as world powers focus on a popular uprising in the country and the violent crackdown by the government of President Bashar Assad.

Syria never has been seen as being close to development of a nuclear bomb. There also is no indication that Damascus continues to work on a secret nuclear program. If the facility in Al-Hasakah was indeed intended for uranium production, those plans appear to have been abandoned and the path to a plutonium weapon ended with the Israeli bombing.

But Mark Hibbs, an analyst at the nuclear policy program at the Carnegie Endowment for International Peace, who has spoken to IAEA officials about the Al-Hasakah complex, said it is important to learn more details about the buildings.

"What is at stake here is the nuclear history of that facility," Hibbs said. "People want to know what did they intend to do there and Syria has provided no information."

"A nuclear weapon would give Syria at least a kind of parity with Israel and some status within the region," says Anthony Cordesman, a national security analyst at the Center for Strategic and International Studies.

For years, there has been speculation about ties between the Syrian government and Khan.

A hero to many in Pakistan for developing the country's nuclear bomb, Khan is considered the world's most prolific nuclear merchant. He supplied Iran with the basics of what is now an established uranium enrichment program that has churned out enough material to make several nuclear weapons. Libya also bought equipment and a warhead design from Khan for a secret nuclear program that it renounced in 2003.

Ynet

Prophecy of eclipse to the Earth

Home prices heading for triple-dip

NEW YORK (CNNMoney) -- The besieged housing market has even further to fall before home prices really hit rock bottom.

According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.

Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment,explained David Stiff, Fiserv's chief economist.

Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.

The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.

In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.

Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.

Earlier this month, RealtyTrac reported the first quarterly increase inforeclosure filings in three quarters. Even more discouraging: new default notices were up 14%.

Home prices: Check your local real estate market forecast

There's also a "shadow inventory" of homes in foreclosure that have yet to go back onto the market.

The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. "That's the elephant in the room," he said, noting that there are 6 million home currently in shadow inventory.
Biggest losers

Many of the regions that will be hardest hit were already beaten up during the previous two dips.

Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.

Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).

CNN

Israel warns West: Window of opportunity to thwart Iran nuclear program is closing

Israeli ambassadors in Western countries have been instructed to inform high-ranking politicians that the window of opportunity for imposing effective sanctions on Iran is closing, as part of a renewed diplomatic offensive aimed at using new sanctions to stop Tehran from developing a nuclear bomb.

The Foreign Ministry campaign, which began in mid-September, seeks to convince the United States, European Union member states and other Western countries to impose the sanctions immediately because Iran is continuing to develop its nuclear program.

"The significant progress that has taken place on all the components of the Iranian nuclear program should be emphasized, especially uranium enrichment," said a classified cable sent to Israeli ambassadors in several dozen countries. "The Iranian program is military, and in light of International Atomic Energy Agency reports, there is an increased fear that the Iranians are developing a nuclear warhead for ballistic missiles."

The ambassadors were asked to tell the equivalent of the foreign ministries and prime minister's offices in the countries where they are serving that there isn't much time left to stop the nuclear program through diplomatic means.

The sanctions campaign comes ahead of the planned November 8 release of an IAEA report, which is expected to reveal new details about the scope of Iran's nuclear program. The IAEA is reportedly preparing to bring proof that Iran is attempting to build a nuclear bomb.

Israel and the U.S. are planning to use the report in a worldwide campaign to push for isolating Iran. Sanctions suggested by Israeli representatives in recent talks with the U.S., France, Britain and Germany include banning contact with Iran's central bank and banning the purchase of Iranian crude oil. Israeli officials also suggested imposing additional sanctions on Iranian airlines and ships.

Israeli officials noticed last month that international interest in stopping Iran was flagging, said a senior Foreign Ministry official. "International and Israeli attention was focused on the Arab Spring, on flotillas to Gaza and on the Palestinian move in the UN," he said.

Foreign Ministry officials were concerned that the reduced attention Iran was receiving made its pursuit of a nuclear program seem less urgent.

"There's a feeling that even though the sanctions are harming Iran, the technological timetable is faster than the diplomatic timetable," said another Foreign Ministry official. "Now is the time to intensify the steps against Iran. The pressure influences Iran, and the present circumstances require us to increase that pressure. The Iranians are preparing a technological infrastructure that will enable them to have a breakthrough as they head for nuclear weapons within a short time span. If Iran passes this technological threshold, the ramifications will be severe - especially in light of the weakening of regional stability following the Arab Spring."

A few days ago, the ambassadors received another cable, directing them to highlight the alleged Iranian plot to assassinate the Saudi ambassador to Washington. "You should emphasize that this incident indicates the need to isolate Iran," the cable said.

The Israeli ambassadors were also informed that Iran is boosting arms smuggling to Syria, Hamas, Islamic Jihad and Hezbollah.

According to Israeli intelligence information, Iran has been carrying out low-level uranium enrichment at a stable pace, despite the existing sanctions. Iranian officials have been outspoken about their interest in tripling the pace of producing uranium enriched to 20 percent, moving the centrifuges from a non-reinforced facility in the central Iranian city of Natanz to an underground enrichment facility in Qom. At the same time, Iran is continuing to build a heavy water reactor in Arak, which would enable them to produce the plutonium needed for a nuclear bomb.

One of the Foreign Ministry officials said Israel wants Western countries to impose the sanctions on their own because domestic politics and leadership changeovers in Russia and China in 2012, along with the U.S. and French presidential elections, will make it impossible to secure another UN Security Council resolution approving sanctions.

Although Israel's latest push for sanctions is new, diplomatic efforts to thwart the Iranian nuclear program are ongoing, one of the Foreign Ministry officials said. An interministerial task force headed by Yaakov Amidror, the national security adviser, meets every few weeks to coordinate the diplomatic efforts. Other members of the task force include representatives of the foreign and defense ministries, the IDF and the Mossad.

Haaretz

US Treasury Estimates It Will Have to Borrow More

The U.S. Treasury Department said on Monday it will sharply increase its estimated borrowing over the next two quarters due to expected lower receipts and higher outlays.

woodleywonderworks Treasury Building

Treasury said it expects to issue $305 billion in net marketable debt for the October-December quarter, an increase of about $21 billion from estimates issued on Aug. 1.

Treasury said it expected to issue $541 billion in net marketable debt securities in the January-March 2012 quarter, marking the second-highest quarter on record.

The highest was the October-December quarter of 2008, when the Treasury Department sold $569 billion in debt to fund bailouts of the financial sector and automakers during the depths of the financial crisis.

CNBC