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Markets News Afternoon: Euro dips below $1.40; Greek PM says problems "home grown"; Clinton and O'Brien make special appeal for Haiti in Davos
By Finfacts Team
Jan 28, 2010 - 4:26:32 PM
European Central Bank President Jean-Claude Trichet on Thursday said Greece's present economic troubles are common to other advanced states.
"It's very hard work but not different from the nature of the problems faced by other industrialised countries," said Trichet, speaking at the World Economic Forum today in Davos, Switzerland.
Trichet said the Eurozone, the rest of Europe and the U. remained "under stress" from the financial crisis.
A French Finance Ministry official denied today that EU countries are working on a plan to bail out Greece. The official also said European Union governments aren't planning any bilateral loans to the country.
French daily Le Monde reported Thursday that European states are planning to help Greece in order to avoid a fiscal meltdown.
Speaking on the same panel as Trichet today in Davos, Greek Prime Minister George Papandreou said that Greece has "not asked for money anywhere else." He added: "We are in a jittery time" in which"rumours can create problems."
He was responding to reports that Greece was seeking to sell €25 billion worth of bonds to China.
Papandreou said its problems were "home grown," and promised to put Greece's house in order. "Our first deficit is the credibility gap," Papandreou said. He pledged budget cuts across the board and "huge administrative reforms."
The euro fell today to as low as !.3960 against the US dollar - - teh lowest since July, 14, 2009.
Haiti
In a special session of the 40th World Economic Forum Annual Meeting, former US President Bill Clinton and UN Special Envoy to Haiti made a robust call for immediate aid and sustained investment to assist Haiti as it struggles to build a new and prosperous nation out of the rubble of the devastating earthquake of 12 January. In partnership with the Clinton Global Initiative and the United Nations, the World Economic Forum will work to increase private sector involvement in Haiti for the long term. “We are reminded of the common humanity which we all share,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum
Clinton acknowledged that Haiti faces enormous challenges. The poorest country in the Western Hemisphere even before the quake, Haiti has suffered the loss of some 150,000 lives, with hundreds of thousands more left maimed, homeless and hungry. The country’s needs are immediate. “I spent last weekend on toilets and trucks,” said Clinton. “I need a hundred trucks yesterday.” Food distribution centres, which now number just 15, need to be increased exponentially.
After UN Secretary-General Ban Ki-moon named him special envoy to Haiti last May, Clinton set about leveraging the economic might of the Haitian diaspora and drew investors from many sectors to help the Haitians implement their own growth plan, originally drafted by economist Paul Collier. The earthquake is an enormous setback to the progress of the Haitians. “This is horrible for Haiti. They are virtually in shock now,” said Clinton. “But I still believe they have the same chance to escape their past and build a better tomorrow.”
“I believe a country can rise from the ashes in a very short time,” said Clinton, citing Rwanda’s scorching growth, and Indonesia’s recovery after the tsunami. “Don’t tell me they can’t do this! This is an opportunity for the Haitian people to build a country that they want to become.”
Celso Amorim, Minister of Foreign Relations of Brazil
Helen E. Clark, Administrator, United Nations Development Programme (UNDP), New York
Bill Clinton, Founder, William J. Clinton Foundation; President of the United States (1993-2001); UN Special Envoy to Haiti
Denis O'Brien, Chairman, Digicel Group, Ireland
Klaus Schwab, Founder and Executive Chairman, World Economic Forum
President Obama's proposals to tax large banks would only work if it was agreed globally and financial regulations set out at the G20 summit should be put in place first, UK Chancellor of the Exchequer Alistair Darling told CNBC Thursday:
AIB/Amárach Recovery Indicator shows positive Irish outlook
The AIB/Amárach Recovery Indicator experienced its strongest monthly surge in January, reflecting both a changing national ‘mood’ and a possible ‘seasonal boost’.
The index has increased from 18.3 in December to 27.1 in January. One third of all Irish adults are now in agreement that “the economic situation is bad but has stabilised”, while three in ten agree that “the economic situation is bad but showing a few signs of recovery.”
The consumer research firm Amárach says the AIB/Amárach Recovery Indicator (ARI)is a monthly measure of consumer views on the economy now and in the future. It is designed to help businesses and planners anticipate the timing of economic recovery, especially in relation to consumer spending.
Every month Amárach surveys a nationally representative sample from a combined online and face to face approach. This dual approach is used to achieve a representative reflection of the older population. A total sample of 1,000 Irish adults aged 16+ years is achieved. Consumers are asked to choose from a number of different descriptions of the current state of the economy, and their answers are used to construct the Recovery Indicator.
The results of the survey are hardly a surprise.
CPA Institute welcomes proposals for state guaranteed SME funding scheme
Cautions that it must not allow banks to substitute private collateral for a public guarantee.
The Institute of Certified Public Accountants in Ireland (CPA) today welcomed the announcement by the Minister of Enterprise Trade & Employment that she is to bring forward a proposal to a Cabinet sub-committee that would see the State guarantee funds lent by banks to small businesses.
The CPA said while details have yet to be finalised, it understands that the Minister and her officials are examining the Fogape Scheme which has proven very successful in Chile. Fogape is a state fund which partially guarantees credit issued mainly by commercial banks to small and microfirms. The fund is managed by Banco Estado, the state-owned commercial bank, who auctions the guarantee among commercial banks and other financial institutions, and decides whether the guarantee is paid when the borrower defaults.
John White, President of the Institute of Certified Public Accountants said: “It has been clear for some time that the SME sector in Ireland is being stymied by a lack of funding from the banking sector. It is also obvious that this situation will not improve in the short term.
“The transfer of bad loans from our banks to NAMA will reveal the true extent of balance sheet weaknesses in the banks and they will most likely require further capital injections from Government., Even after this investment, Irish banks will remain weak and so the hope that normal levels of credit being released to the SME sector in the short term is unlikely.
“Therefore it is critical for the SME sector that the Cabinet sub-committee on economic renewal completes its report as a matter of urgency and that proposals are fast tracked to full Cabinet consideration and to action”.
White said that the structure of the state guarantee scheme for loans to SME must be to support viable new businesses and the growth of existing businesses in the SME sector.
“This scheme is critical to kick-starting growth among SMEs who cannot secure bank funding, but it cannot become a scheme which is abused by the banks and allows them to substitute private collateral for a public guarantee. The tax payer is already footing the bill for the banks irresponsible property based lending practices”.
“CPA Ireland has strongly advocated on the need for government support to assist our entrepreneurial sector with the equity and guarantee requirements that banks are now seeking from businesses looking to secure working capital finance. Such assistance is required to ensure that new business and growth of existing businesses in the SME sector is sustainable.”
Irish Exporter Association pours cold water on planned scheme
The IEA in responding today to the Tanaiste Mary Coughlan‘s comments on a state guarantee loans scheme, said the credit squeeze and its impact on small to medium sized business, particularly those with export and import activity, have been steadily rising over the past 12 months. If the Government is serious about assisting the sector, then a wider brief needs to be taken in arriving at a solution, which should involve both loan guarantee and credit insurance guarantee. Both are locked together, both affect the credit rating of business and the ability of the banks to provide competitive loans.
John Whelan, chief executive of the IEA said: “When you consider the current credit crisis, increasingly businesses in key competitor countries are being aggressive supported by use of credit support, and loan guarantee as well as export promotion tools by our competitors’ governments. It is now very clear that further Irish Government support is urgently needed to prevent major job losses arising out of the growing credit gap, as companies scramble for trade finance to keep going. ‘’
He added: ‘’There are approximately 3800 small businesses exporting from Ireland , giving direct employment to 147,000 people , all of these are being impacted by the cost and availability of trade finance , which involves loans, credit insurance, and currency hedging costs. Urgent real action by Government , not rabbit out of the hat announcements by the Tanaiste is what will help small exporters continue to trade and pull out of the recessionary credit trap they find themselves in. ‘’
CNBC's Steve Liesman and Carl Quintanilla parse President Obama's State of the Union address:
Qualcomm, the biggest maker of mobile phone chips plunged 13% after CEO Paul Jacobs attributed the lower revenue projection to a “subdued” economic recovery.
On the positive side, Ford Motor Co., the only major US carmaker to avoid bankruptcy in 2009, reported annual net income of $2.7 billion after a record 2008 loss and forecast a pretax operating profit for 2010. Excluding one-time costs, fourth-quarter profit was 43 cents a share.
The Dow Jones is down 70 points or 0.69% to 10,166.
The Nasdaq is down 1.23% and the S&P 500 has dipped 0.58%.
"We're living in an artificial economy supported by government bailouts," Robert Shiller from Yale University said Thursday, adding he is concerned about the US economy once the stimulus measures are withdrawn. Andy Green, CEO of Logica, joined the discussion:
On the New York Mercantile Exchange, oil for March 2010 delivery is trading at $73.46 down 21 cents from Wednesday's close. In London, Brent crude for March delivery is trading at $72.07 a barrel.
Currencies
The euro is trading at $1.3960 and at £0.8646.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
