Bank of Italy forecasts sharper recession in 2012

AFP - The Bank of Italy forecast Tuesday an economic contraction of between 1.2 and 1.5 percent this year depending on borrowing costs, a much sharper decline than the government's estimate of 0.4 percent.

"The uncertainty that surrounds the medium-term perspectives of the Italian economy ... are extraordinarily high and are directly linked to the evolution of the eurozone debt crisis," the central bank said in its economic bulletin.

The bank advanced two scenarios, each based on interest Italy must offer to borrow on sovereign bond markets.

The first scenario was calculated with a rate of about 7.0 percent currently demanded by investors for 10-year Italian debt and widely considered to be unsustainable.

Under these circumstances, the bank said, the Italian economy would contract by 1.5 percent in 2012 and would remain stalled in 2013.

In a second scenario, under which borrowing prices fell by 2.0 percentage points from current levels, the economy would contract by a 1.2 percent in 2012 before rebounding by 0.8 percent next year.

Italy, the eurozone's third largest economy, saw economic activity contract by 0.2 percent in the third quarter of 2011, according to official data.

The central bank expected it to have shrunk by an additional 0.5 percent in the last three months of the year, which would give an annual growth rate of 0.4 percent.

Italy's debt pile of more than 1.9 trillion dollars ($2.4 billion), equivalent to about 120 percent of gross domestic product, has policymakers and investors on edge.

It must borrow around 450 billion euros this year, in large part to honour payments related to that debt.

Meanwhile, the central bank noted that a pick-up in employment that began in late 2010 "stopped in the final months of last year."

It said that "the priority is now the creation of conditions to relaunch the Italian economy" following several austerity plans designed to reduce the public deficit and debt, the last of which was adopted in late December.

The government of Prime Minister Mario Monti is expected to approve Friday a programme designed to increase economic competition and reform labour laws.

Finally, the 2011 public deficit should be close to Rome's target of 3.8 percent, the central bank said.

That nonetheless still exceeds the eurozone target of no more than 3.0 percent.

France 24

Treasury dips into pension funds to avoid debt

WASHINGTON (Reuters) - The Treasury on Tuesday started dipping into federal pension funds in order to give the Obama administration more credit to pay government bills.

"I will be unable to invest fully" the federal employees retirement system fund beginning Tuesday, Treasury Secretary Timothy Geithner said in a letter to Democratic and Republican leaders in Congress.

The House of Representatives is expected to vote on Wednesday on the Obama administration's request to raise the country's legal debt limit to $16.394 trillion.

However, unless the lower chamber and the Senate are able to shore up enough votes to block the White House request, the debt limit will be increased by $1.2 trillion next Friday and a repeat of last year's debt ceiling debacle will be averted.

Geithner said Treasury started suspending reinvestments in a federal pension fund known as the G-Fund -- a tool Treasury has had to employ six times over the past 20 years in order to keep the country below the statutory debt limit.

The Treasury Department has already tapped another seldom-used fund in order to allow the government to continue borrowing without running afoul of the country's laws.

Chicago Tribune

Did Israel postpone joint drill with US?

WASHINGTON – The postponement of a major US-Israel drill planned for the coming weeks was initiated by Jerusalem, according to US media reports.

Israel reportedly asked to put off the exercise because of defense budget cuts, Jewish news agency JTA reported Tuesday. Meanwhile, Yahoo News, quoting US defense officials, said the postponement request came directly from Defense Minister Ehud Barak.

"Minister Barak called Secretary Panetta and asked if we could take the exercise off the calendar. The Israelis were concerned that they did not have the resources in place to carry it out effectively," a US official was quoted as saying by Jeffrey Goldberg of The Atlantic.

The postponed drill was slated to be held within weeks, yet now it appears it will not be held before the second half of the year, at the earliest.

According to Yahoo, American sources expressed concerns that Israel's request to put off the aerial defense exercise was a warning that Jerusalem is keeping all options open, including a possible strike on Iran's nuclear facilities in the spring.

Pentagon spokesman, John Kirby, said the exercise was canceled for routine reasons of wanting “optimum participation” by both sides, JTA reported.

“It is not at all uncommon for routine exercises to be postponed,” Kirby said. “There were a variety of factors at play in this case, but in general, leaders from both sides believe that optimum participation by all units is best achieved later in the year. We remain dedicated to this exercise and naturally want it to be as robust and as productive as it can be.”

According to earlier reports, Israeli officials said the Americans asked to delay the drill so as not to heighten tensions with Iran over its nuclear program.

Ynet

'SOPA turns anyone who runs a site into policeman'

If this law passed I will no be able to post any more, at least as Im been doing it now

Greece Running Out of Time as Debt Talks Stumble

Greece is running out of time to avoid becoming the first euro nation to default after talks with lenders stalled ahead of a March 20 bond payment that will cost 14.5 billion euros ($18 billion) the country doesn’t have.

Prime Minister Lucas Papademos is due to meet tomorrow with a group representing private Greek bondholders after a five-day break to discuss forgiving at least half of the nation’s debt in the euro area’s first sovereign restructuring. Greece’s official creditors begin talks Jan. 20 on spending curbs and budget cuts that will determine whether to disburse additional aid. Edward Parker, a managing director at Fitch Ratings in London, said today Greece is unlikely to make next month’s bond payment.

“The next few weeks will be the most difficult in the Greek program,” said Athanasios Vamvakidis, a foreign-exchange strategist at Bank of America Corp. in London. “All this needs to be completed by mid-March to avoid a disorderly default. Not an impossible task, but clearly very challenging with very much at stake.”

Until the debt swap and loan accord are in place, the country faces “acute economic risks,” Papademos said on Jan. 13. Greece sold 1.625 billion euros of 13-week Treasury bills today at a yield of 4.64 percent, with short-maturity debt sales the only source of market financing available for the nation. Bonds repayable in 2022 are worth about a third of their face value.
Tough Talking

Greece and its creditors are “running out of time,” Moritz Kraemer, the head of sovereign ratings at Standard & Poor’s Corp., said in an interview yesterday with Andrea Catherwood on Bloomberg Television’s “Last Word.” Kraemer said he can’t say “whether there will be a solution at the end of the current rocky negotiations. There’s a lot of brinkmanship going on right now.”

Concern that Papademos won’t have domestic backing to achieve spending cuts needed to win more funds or that they will further hamper growth helped drive Greek two-year yields to an all-time high of 185 percent on Jan. 10. The yield on Greek benchmark debt maturing in October 2022 fell 46 basis points to 33.55 percent today, after hitting a record of 36.14 percent on Dec. 21.

Greece plans to pay lenders 50 cents for each euro the government borrowed under the terms of a bailout plan agreed on Oct. 26. Its 4 percent notes due in August 2013 trade at about 27 cents. Fitch says an agreement would amount to a “default event” once implemented, while the International Swaps and Derivatives Association says it won’t trigger credit-default swaps bought by investors as insurance against the country failing to meet its obligations.

Bloomberg

Spanish Home Prices Decline for 13th Quarter as Economy Slowed

Spanish home prices fell for the 13th quarter as the economy probably contracted and an increase in bad loans discouraged lenders from granting mortgages.

The average price of houses and apartments declined 6.8 percent in the three months through December from a year earlier, the Ministry of Public Works said today on its website. Prices dropped 1.5 percent from the previous quarter, the 15th quarterly decline.

Residential mortgage lending in Spain, which has the highest unemployment rate in the European Union, fell by 43.6 percent in October as banks reined in lending amid a surge in borrowing costs and bad loans, the National Statistics Institute said on Dec. 28.

Bloomberg

Dr Deagle Show Jan 12, 2012 Lindsey Williams