Top Economics News

Belgium, Luxembourg and France came Thursday to the heart of the negotiations on their respective participation in the rescue of a new Franco-Belgian bank Dexia, expected to lead discussions in a few days to a dismantling of the group ordered.

The Belgian government has warned Paris that Belgium did not intend to bear alone the financial burden of the rescue of the old world leader in financing local authorities, the first victim of the banking crisis of sovereign debt in the eurozone.

"It is clear that a very sensitive and crucial element in the negotiations, it is fair burden sharing," said Yves Leterme, Belgian Prime Minister in charge of current affairs, radio RTL.

If he declined to go into details of the negotiations, he recalled the nature "systemic" Dexia for the banking system.

His finance minister Didier Reynders also stressed the need for a balanced sharing of effort."Yes, we do not want to be alone with the whole group on our hands," he told reporters before a meeting of a small cabinet in Brussels.

"Do not forget that not only support the Belgian bank but it must continue to fund all the past, and we will not do it alone," said Didier Reynders, stating that it would begin negotiations with France after obtaining a government mandate.

In France, neither the Ministry of Finance or the Treasury or the Bank of France was immediately available to comment on the progress of negotiations on Dexia, whose board of directors to be held Saturday .

REDEMPTION FOR DEXIA BIL

Luxembourg has for its part that it was negotiating the acquisition of the Luxembourg subsidiary of Dexia, Dexia Banque Internationale à Luxembourg, with the help of an international investor.

The Minister of Finance of the Grand Duchy, Luc Frieden, said that negotiations on the resumption of Dexia BIL were in an advanced stage and could be finalized before the end of October, without specifying the identity of the investor.

With the statements of the Luxembourg authorities, the Dexia has suddenly turned down.

At 13:00, the action gave up 0.90% to 11.66 euros after

open up like other European banking shares.The European banking index progressed by 3.2%.

"This should generate a capital gain, which is positive.However, Dexia BIL is certainly rich in deposits, the sale of the blow will not ease the problems of financing the group, "said one trader in Paris.

The rescue plan could weigh on public finances of France and Belgium, already undermined by the crisis, and trigger negative reactions in public opinion.

The scenario being considered involves a backing of the main activities of Dexia in France at the Caisse des Depots (CDC) and the Postal Bank.

In Belgium, the plan could be realized by a partial nationalization of the retail or split it into a separately listed entity.

For the rest of the group, a "bad bank" would be set up to manage a large bond portfolio and an asset disposal program would be launched.

France and Belgium must commit to provide guarantees for the financing of the bond portfolio.

French household consumption of goods increased by 0.2% in August after a decline of similar magnitude in July, show statistics released Friday by INSEE.

Economists polled by Reuters on average expected a stable consumption in July and up 0.3% in August. The growth in consumption in June was revised down to 0.9% against 1.2% originally announced.

"The slight decline in July due mainly to a decline in purchases of cars and housing equipment," INSEE said in a statement."The recovery in consumption in cars and rising energy costs contributed to the slight increase in consumption in August."

Spending on durable goods rose 0.8% in July but remained stable in August. Purchases of automobiles rose 0.9% last month after falling 1.5% in July, according to Insee attributable decline in second-hand market.

"However, note INSEE, after the sharp increase in June (+3.9%), purchases of equipment housing down again in July (-0.7%) and August (-1.7% ).The decrease concerns in particular the purchase of furniture. "

Purchases of textiles and leather rose 1.0% in July after rising 3.6% in June but fell 2.3% in August.

Consumer spending in other manufactured goods rose 0.2% in July but fell even in August.

Meanwhile, household consumption of energy has accelerated markedly in August (+2.6% after +0.2% in July), a movement linked in particular to fuel costs.

Job creation increased this summer and the growth of the wage bill is expected to exceed 3.6% this year. Good news for Social Security accounts. A turnaround is not excluded. Officers, employees

Not everything is black on the employment front. Although the number of registered unemployed at employment center is rising considerably and the last three months. But several indicators released today by ACOSS (the agency responsible for collecting contributions for Social Security) have shed light on this first day of autumn.

After a slight dip in May and June, reports of recruitment of more than a month in the private, non-temporary, considered a leading indicator of labor market, rose 4.6% in August compared in July, to 648,000, an increase of 10.6% over the year. Declarations of hiring on permanent contracts are also up: 290 000 in July.Levels comparable to those before the crisis, during the period 2002-2007.

This flow of hiring has drawn the net job creation on the rise (+0.2% over three months in July, 1.6% yoy). Other indicators on the financial health of companies also are facing: the default rate, requests for payment deadlines and the number of bankruptcy remained broadly stable.

"Our data are quite encouraging" while "the overall context is excellent," said during a press briefing Pierre Burban, the President of ACOSS. "There was the first half of job retention and maintenance of payroll," he said. Indeed, the wage bill increased by 0.9% in the second quarter compared to the first and 3.8% year-over-month rolling.Growth consistent with the long-term average over the decade 2000-2008.

1.5 billion of revenue in addition to the social security

The really good news is that even if the wage stagnation for the next six months, the growth overhang already reached 3.55%. According to ACOSS, the annual increase should exceed 3.6%, 0.4 points above the government's latest forecast in the supplementary budget in June. Good news for Social Security should be able to save at least 1.5 billion euros in additional revenue.

But all is not rosy either. The second quarter was marked by a slowdown in the dynamics of the curve of employment. Thus, the increase in job creation was twice as high in the first quarter (+0.5%), and the amount of overtime, which had been buoyant in recent months has slowed sharply in July, 1.1%.In addition, temporary employment, considered a leading indicator of the labor market, fell by 0.6% while it rose by 5% per quarter in recent months.

These indicators are perhaps the first signs of a turnaround in the labor market, timely adjustment of enterprises to the economic impact varies from one to three months. Or the stock market crisis erupted in late July and has been a really dramatic turn for the banks in August. It is also the end of August the government took note of the slowdown in the French economy and revised its outlook for 2011 and 2012 downwards.

European shares opened lower Wednesday, following Wall Street, the proposals announced yesterday by Angela Merkel and Nicolas Sarkozy to find solutions to the debt crisis in Europe is not successful in convincing investors.

Around 9:30, the CAC 40 was down 0.86% to 3203.06 points. Other major European markets, London and Frankfurt, respectively, dropping 1.13% and 1.67%, Milan 1.32% yield.Of the European indices, the EuroStoxx 50 fell by 1.38% and 1.04% Eurofirst 300 loses.

Paris and Berlin have certainly proposed Tuesday the creation of an economic government of the eurozone and the adoption by all countries of the single currency, a "golden rule" of good management of public finances.

But most investors hold the postponement of some decisions such as the issuance of Eurobonds and the idea of ​​a tax on financial transactions.

"He has not had a scoop, these proposals had already been raised in recent days and the lack of project Eurobonds market was not convinced," said a stock dealer based in Paris.

As for values, the possibility to implement a tax on all financial transactions hanging over the financial sector, analysts point out. BNP Paribas shows the largest drop in the CAC 40, with a decline of 2.11%, 1.8% Societe Generale loose and Credit Agricole 1.19%.Stoxx index of bank lost 1.73%.

"Assuming that the proposed tax is based on the current proposal of the European Commission, a fee of 10 basis points (bps) on stocks and bonds and derivatives on a pdb, multiply it by 10 to 20 the transaction costs, "said UBS in a note.

Similarly, the stock exchange operators are affected by this proposal, noting that UBS in the 1990s Sweden had introduced such a tax had seen the volumes of the stock market melt of 85%.

The Swiss bank said this could influence the proposed mergers and acquisitions and reduce premiums for this type of operation.

NYSE Euronext loses 6.21% 3.14% Deutsche Börse and London Stock Exchange Group 3.45%.

On the foreign exchange market, traders were not convinced either by the Franco-German proposals, the euro falling by 0.12% against the greenback at 1.4378 dollar.

After a week of trading the most volatile memory, the New York Stock Exchange finished up Friday, raising hopes that the worst is over regarding the massive sales of securities that have been observed day funds.

The rebound Friday has not helped to erase the losses of the week, and U.S. markets are on track to achieve their largest decline over three weeks since March 2009.

The Dow Jones gained 1.13% or 125.71 points to 11,269.02 points and the S & P 500 has been 0.53% or 6.17 points to 1178.81 points.

The Nasdaq was awarded for its 0.61% (15.30 points) to 2507.98 points.

For the week, the three indices yield respectively 1.5%, 1.7% and 1%.

Sign that investor anxiety has subsided somewhat, the volume of trade Friday was much lower than in the previous four sessions, and changes in the rating were less violent.

"The decline in volume today clearly indicates that the current market a little less worried," commented Ken Polcari of ICAP Equities prior to closing.

He said that if the economic indicators next week are in line with expectations, the trend may continue.

"Before you go higher, the market needs to repair itself a little and to rebuild a database.This is what happens now. "

The rise in European markets, due to the ban on short selling some financial stocks, has helped to support Wall Street.

The U.S. economic indicators have meanwhile been blowing winds in the markets.

The numbers of consumer sentiment have molested standing at their lowest since 1980 but the July retail sales showed their biggest increase in three months.

As for values, title Nvidia fell 3.95% to 12.88 dollars, offsetting the strong gains made last after the announcement that the group included a higher than expected its quarterly revenue.

The government promises to reform disaster to try to curb the movement, which denounced the surge in housing prices and widening social inequalities. A young Israeli is taking part in a protest against rising property prices, which brought together tens of thousands in Tel Aviv July 30, 2011.

Undermined by social unrest on a scale unprecedented in Israel, the right-wing government of Benjamin Netanyahu had promised to forward the reforms. At the opening Sunday of the Cabinet, the Prime Minister announced that he would appoint an "inter-ministerial team responsible for presenting a plan to ease the economic burden [hanging] on citizens," said an official.This decision, following the measures taken in disaster last week, came a day after massive demonstrations across the country that brought together 150,000 Israelis according to media reports, more than 100,000 according to police.

The demonstrators, mostly Jews but also Arabs, marched Saturday in ten cities under the slogan "The people want social justice, not charity." The protest, which was initially soaring house prices, deals more generally with the increase in social inequality and the deterioration of public services, particularly in the field of health and education.The challenge is first part of the middle class crushed by the ever increasing cost of living, the result of a market controlled by a few families.

For now, it is not threatening to bring down the government, which has a strong majority in Parliament, based on the alliance between right and extreme right and religious parties. And Benjamin Netanyahu, whose popularity has fallen sharply, there is no reason to provoke early elections ahead of schedule in 2013. "The prime minister is aware of a genuine discontent in sections of the population who fail not make ends meet month, "he told public radio the spokesman of the Prime Minister Gideon Schmerling. He said that Benjamin Netanyahu was considering a reduction in indirect taxes and wanted to encourage competition by reducing the concentration of capital in the hands of a few.An inter-ministerial commission responsible for this matter has been specially convened for Sunday, he said. For its part, the Director General of the Ministry of Finance, Haim Shani, announced his resignation, as opposed to an increase in public spending.

"Netanyahu is good reason to worry"

"In the short term, the government is not at risk, but this is more true in the medium term. Netanyahu has good reason to worry" also considers the political scientist Yaron Ezrachi. "His problem is that to satisfy everyone will have to pay an economic price too high," says the professor of the Hebrew University of Jerusalem, who expects that the extreme right and religious "are the first to leave a sinking ship. "According to the researcher, the "weak link in his coalition is the ultra-Orthodox Shas party, required to provide insurance to its base" consists of poor segments of the Jewish population from Arab countries and headed by the Minister of Inside Eli Yishai, Sunday publicly supported the claims of social movement.

"Never before were such crowds took to the streets on social issues", says the mass-circulation daily Yediot Aharonot. The newspaper noted "the hostility and even panic that caused the protest movement in the direction of the settlers' West Bank Jews, who accuse the left of the handle.

A four-day deadline set by the Treasury to raise the debt ceiling Barack Obama warned Friday that the political wrangling could cause the loss of the triple A of the United States.

The U.S. president again called on political leaders on both sides to compromise, while holding that the plan proposed by the leader of Republicans in the House of Representatives John Boehner would not solve the problem states USA.

The urgency of finding a solution has been highlighted with the release Friday of U.S. GDP figures, which not only showed an increase less than expected in the second quarter (+1.3% annualized in place the figure of 1.8% expected) but also a very strong downward revision of the first quarter (0.4% versus 1.9% previously announced).

"Now, what is clear is that any solution to avoid the fault must be bipartisan," said Barack Obama.

Failing agreement, the world's largest economy will soon Aug. 2 unable to meet its obligations and would end up in default.

Loss of the triple A, the three major rating agencies to give the note of the U.S. sovereign debt, would raise interest rates similar to the consequences of tax increases that would affect all Americans.

The situation is more complicated than the Republican camp is unable to speak with one voice. Some members of the GOP and have refused Thursday night to support the plan proposed by John Boehner.

The overall business climate has worsened in France in July, reflecting a marked decline in the industry as in services, according to the monthly business survey released Friday by INSEE.

The synthetic indicator of business climate in manufacturing industry fell by 5 points to 105 compared with June, the month in which it was revised up from one point to 110.It fits, however, still above its long-term average (100).

Twenty-four economists surveyed by Reuters on average expected a pointer to 107, with estimates ranging from 105 to 110.

The indicator turning down and is now in the area indicating unfavorable conditions.

The indicator of business climate as a whole, including services, construction, wholesale and retail trade, fell 4 points to 105 from 109 in June.

The turning point indicator fell for the third consecutive month but remained favorable in the area.

The indicator of the services down 4 points to 103, the indicator turning from the negative zone.

The Paris Bourse opens up Wednesday, continuing its rebound from the previous day, supported by signs of progress in discussions about the U.S. budget, as well as the good results from Apple.

At 9:30, the CAC 40 index, which is pressed from the opening above the 3700 points, a gain of 0.71% to 3721.70 points, supported by bank stocks.

"Equity markets are supported by good results from the United States, with the numbers from Apple, which saw its profits more than double – better performance than expected – after those of IBM on Monday night," said Ben Potter, a strategist IG Index."There's also been progress in discussions on the U.S. debt ceiling."

Dexia yet again 3.7% and BNP Paribas and Societe Generale still returning nearly 3% each.

Accor is 1.8%, confident for 2011 after a good quarterly revenue.

Edenred lost 5.1%, largest drop in the SRD, then an investment of 8% of its capital is underway on behalf of South Eastern Asset Management.

Alstom losing 2.7% after a turnover and orders deemed below expectations.

Other major European markets also rose: London is 0.46% and 0.56% Frankfurt.Of the European indices, the EuroStoxx 50 won 0.72% and 0.51% Eurofirst 300.

The euro continued its rebound vis-à-vis the U.S. dollar and is trading around 1.4165 dollars against 1.4150 Tuesday, while U.S. light crude gained 90 cents to 98.40 more dollars per barrel.

Eight European banks have failed the stress test that would evaluate their response in the event of a prolonged recession, said Friday the EBA.

These reviews, which did not take into account the hypothesis of a defect in Greece, were conducted on 90 banks and forced the banks to deliver their anticipated results, to include depreciation in their bond assets and a subsequent rise their funding costs.

They found that banks that failed were in need of 2.5 billion euros in fresh capital, much less than anticipated by most analysts.

Five Spanish banks, two Greek and one Austrian were unable to overcome the hardest scenario.The markets were expecting 5 to 15 banks fail and they need to agree on 10 billion euros.

In the wake of the publication of these results, following the closure of European markets, the euro hit a session high against the dollar while Treasuries erased losses and went up.

"With only eight banks that fail, and the need for these banks to raise 2.5 billion euros of capital, it is not the solution if we are to restore confidence," said Michael Symonds, credit analyst Daiwa Capital Markets in London.

"What we needed was to see more banks fail and have to eventually raise more capital."

"That said, I do not think people really expected such a result.But the remedy for the broader malaise sovereign debt / bank in Europe must do more than simply injecting new capital into banks of Europe. "

To pass these tests, banks had to overcome an adverse scenario and come out with a hard capital ratio above 5.0%.The scenario in question provided a collapse of equity markets, bonds and real estate during a recession of two years.

In addition to eight banks that have failed these tests, 16 have succeeded only just.

"The European Banking Authority also recommended that national regulatory authorities that all banks whose capital ratios are above but close to 5% and have significant exposure to government bonds, making the decisions necessary to that 'they reinforce their positions, "said the EBA.

FAILURE NOT GREEK simulated live

The banks that failed now have until September to detail how they intend to close their deficit in equity, while their governments must be prepared to intervene with public funds if needed.

"The results of stress tests show that European banks are stronger and better able to withstand shocks," responded the European Commissioners for Internal Market and Economic and Monetary Affairs Michel Barnier and Olli Rehn in a joint statement.

The operation is not without detractors.These emphasize the absence of the hypothesis of a failure, even partial, of Greece, resulting in heavy losses for the French and German banks.

The BEA did not impose on banks a discount on long-term sovereign debt they hold, but asked them to consider the impact on their holdings of a lowering of the sovereign rating four notches, which reflect the failure of a country already rated poorly, such as Greece.

Under the plan, banks would suffer a 15% discount on the Greek paper they hold.Most experts believe, however, that market is expected that these shares lose 50% of their value.

FLIGHT OF SPREADS

The fear that the Greek crisis spread to Spain and Italy did fly the rate of return on the debt of these two countries and their banks.

Fearing that European banks are not strong enough to cope with such a contagion, the markets have driven down to the lowest in two years.

This series of tests is the third-and most rigorously conducted in European Union since the global financial crisis opened four years ago.

Tests conducted last year had presented the Irish banks as strong, just before they collapse and do not force Dublin to nationalize while demanding a European aid.

Several banks failed tests had already started the sale of assets to strengthen their capital base.

The Austrian Volksbanken Thursday had sold its subsidiary in Eastern Europe, VBI, in the Russian Sberbank.

The same day, the Greek EFG Eurobank announced to be in talks to sell a majority stake in its Turkish subsidiary Eurobank Tefken.

Initially 91 European banks should be subject to testing, but the German bank Helaba was ultimately not taken part in the exercise.