When prime minister Jose Socrates formally requested a bailout for Portugal on April 6, it left just two of the five PIIGS countries standing. While the details of Portugal's expected €80bn facility from the EFSF have yet to be hammered out, it left only Italy and Spain still able to refinance their sovereign debt - albeit with significant support from the ECB - from the markets without external assistance. So which of these two Mediterranean countries is likely to be the next domino to fall?
Part one considered IMF Chief Economist Olivier Blanchard’s view that one of the central lessons from the global crash of 2008 was the complete discrediting of the idea that all central banks have to do to ensure economic stability is to target stable prices by focusing on a two percent inflation target. Blanchard was speaking at a high-powered two day conference in Washington, entitled “Macro and Growth Policies in the Wake of the Crisis".
On March 24 Moody’s Investors Services downgraded the senior debt and deposit ratings of the 30 Spanish banks below the big three (Banco Santander, BBVA, and La Caixa). This follows an earlier downgrading of Spanish sovereign debt by Moody's on March 10 and was, in a sense, a logical corollary of that earlier downgrading.
The report into the audit profession published by the House of Lords economic affairs committee last week signals a major turning point for the accountancy profession. In a previous blog, I wrote that accountancy firms had become "so big, so conflicted, so self-interested, so obsessed with growing revenues and profits ... that they had become a danger to capitalism itself."
A few weeks before the fall of Lehman Brothers precipitated the most cataclysmic destruction of wealth since the Great Depression, the European Central Bank famously raised its base rate, believing that the economy was overheating and inflation was a problem. It then took the ponderous ECB, with its fixation on price stability, months to grasp that it what it should actually be doing under the prevailing circumstances was to cut interest rates to the bone to prevent the EU economy from going into free fall.
Bringing to you the top finance and business news stories of the week. This week, the Libya crisis, the global supply chain, and Chinese Walls.
I am hugely indebted to Jim Fink’s Investing Daily newsletter for picking up on an absolutely daft confrontation between Warren Buffett’s Berkshire Hathaway and SEC accounting branch chief Gus Rodriguez. The nub of the matter concerns an obscure Financial Accounting Standards Board (FASB) ruling, namely Accounting Standards Codification (ASC) Section 320-10-35-33.
No one can look on as Japanese nuclear engineers struggle to prevent further radioactive leakage from the damaged reactor cores of the Fukushima nuclear plants without recognising that some serious questions have been raised over the future of nuclear power. Yet for some countries nuclear provides either the dominant base load generation capacity or such a significant portion of it that moving away from nuclear generation risks paralysing their electricity output, with huge potential costs to industry.
The chief executive’s statement that accompanies a listed company's annual results is often so laced with corporate spin and disingenuousness that it's as good as useless. The document is increasingly being used to puff (embellish) the past year's performance, to present a distinctly rose-tinted vision of the future, and of course to shy away from telling investors anything about the true risks and challenges the business and its sector face.
Enmeshed as he is in present and pending court cases, the Italian Prime Minister Silvio Berlusconi probably doesn’t have that much time to reflect on whether or not his jolly relationship with Colonel Gaddafi – now admittedly soured beyond salvation - was ever altogether wise. What is certain is that the very substantial bet that Italy placed on Libya is in the process of coming spectacularly unglued at a point in time where the Italian economy really does not need further shocks.