Daily Insolvency News Headlines

Fri., August 29, 2014

Fri., August 29, 2014

A group representing more than 400 of the world’s largest banks, investors and debt issuers has agreed a plan for dealing with financially stricken countries and their creditors, in a bid to prevent a repeat of the wrangling that has pushed Argentina into default, the Financial Times reported. After months of talks convened by the US Treasury in the wake of Greece’s restructuring, global debt experts will on Friday unveil a new framework that could transform the relationship between critically indebted nations and lenders. Lawsuits filed by creditors against defaulting governments have doubled over the last decade and the changes come at a time when levels of sovereign debt have risen to record highs around the world in the wake of the financial crisis. The fallout from recent defaults reignited calls for an international bankruptcy court, but market participants and Washington authorities favour a voluntary response rather than new statutory mechanisms. The International Capital Market Association, whose members include banks, investors and debt issuers, has created fresh clauses for inclusion in sovereign debt contracts that will give countries the option to bind all investors to decisions agreed by the majority. Read more. (Subscription required.)

Fri., August 29, 2014

Finland's budget deficit will be so large in 2015 that it will violate the European Union's budget-balance rules designed to fix the euro zone's rickety public finances, the highest-ranking civil servant at Finland's Ministry of Finance said Thursday, The Wall Street Journal reported. A breach of these binding rules would mark a humiliation for Finland which only a few years ago was classified as a fiscally responsible euro area member and thus a natural ally of Germany, Europe's economic and political powerhouse. "According to the latest estimates, the structural deficit of Finland's public finances will deviate significantly from the limit set in the EU's Fiscal Stability Treaty and the Finnish law in which this limit is enshrined," Martti Hetemaki, Permanent Secretary of Finland's Ministry of Finance, said at a news conference where Finland presented its 2015 budget. Before the financial crisis in 2008. Finland enjoyed robust output growth and public finances. But since then, Finland's export-oriented economy has stagnated, and its annual GDP is still 5% below its precrisis high of 2008. The European Union introduced in 2013 new and stricter fiscal rules for countries using the euro. The rules were a response to the sovereign debt crisis which put future of the common currency in doubt. The EU's new fiscal rules, whose goal is to keep public debt in check, limit euro area members' structural public deficits to less than 0.5% relative of their national outputs. Read more. (Subscription required.)

Fri., August 29, 2014

This week’s theatrical resignation threat by Manuel Valls, the French prime minister, combined with the deep anxiety about deflation revealed at Jackson Hole, Wyo., by Mario Draghi, the president of the European Central Bank, suggest that the euro crisis may be coming back. But a crisis is often an opportunity, and this is the hope now beginning to excite markets in the eurozone, the International New York Times reported. Investors and business leaders are asking themselves three questions: Will European governments and the central bank recognize the unexpected weakness of the eurozone economy as an opportunity to change course? If they do see this as an opportunity, will they know how to grasp it? And will they be allowed to do what is necessary by the true economic sovereign of Europe, Chancellor Angela Merkel of Germany? First, the opportunity. Europe still has a chance to save itself from a Japanese-style lost decade of stagnation and deflation. And this may well be a last chance, because a lost decade in Europe could produce some very un-Japanese social rebellions and political unrest. Europe, after all, lacks Japan’s social consensus, national unity and financial cohesion. It is therefore far from clear that Europe could survive 10 years of recession without the breakup of the eurozone and perhaps even the European Union. Secondly, what must Europe do to save itself from stagnation and disintegration? Read more. (Subscription required.)

Fri., August 29, 2014

Mexico is attracting record levels of foreign investment, boasts a stable economy, and is becoming an export powerhouse in areas like cars and aerospace. But when it comes to one economic measure—its minimum wage—the country lags behind only Haiti in the hemisphere, The Wall Street Journal reported. Pressure is rising on the federal government to change that. On Thursday, Mexico City's leftist Mayor Miguel Ángel Mancera proposed to lift the federal minimum wage to 82.86 pesos a day ($6.33) for 2015, a 23% increase from the current 67 pesos ($5.12) in Mexico City and enough to buy a basic basket of foods. The idea of raising the minimum salary, which hasn't been done in real terms since 1976, has gained support among both big opposition parties, Mr. Mancera's leftist Party of the Democratic Revolution and the conservative National Action Party, or PAN. Mr. Mancera's proposal, flagged in recent weeks, has already set off a debate among political leaders and Mexicans not seen in years. Critics, among them the central bank and business groups, say that lifting wages by decree will lead only to higher inflation and workers' layoffs and a loss of competitiveness against manufacturing rivals like China. Mr. Mancera also plans to work with lawmakers from his party to send a bill to Congress in the coming days to dissociate the minimum wage from fines, scholarships, public-housing mortgage loans and other regulated prices. The step is seen as critical to avoid unwanted impacts on the economy, as the minimum wage has been used here for decades as an index to calculate annual increases. Read more. (Subscription required.)

Fri., August 29, 2014

A Swedish court on Thursday rejected an application from China's National Electric Vehicle Sweden (NEVS), which bought bankrupt car maker Saab in 2012, for protection against creditors while it concludes funding talks, Reuters reported. The court called the solutions NEVS had outlined to secure funding "vague and completely undocumented," casting further doubt over the long-term future of the company, which has not built any cars in recent months due to a shortage of money. "For instance, there is no reasonably exact information about financing needs over time or regarding the timing and size of funds that may be received," the court said in a statement. A NEVS spokesman said the company would appeal the decision. NEVS, which last year resumed low-volume production of the marque, halted production in May saying it lacked enough cash to pay its outstanding debt. The company has been in talks with two unnamed car firms to secure additional money and said earlier on Thursday it had filed the application. Read more.

Fri., August 29, 2014

London’s property market stagnated for a second month in August as buyers became reluctant to accept high asking prices amid the prospect of increasing borrowing costs, Hometrack Ltd. said, Bloomberg News reported. The survey of real-estate agents showed values were unchanged in the capital in a “stark” change from the sharp increases over the past year that helped propel national prices to a record. Across England and Wales, values grew 0.1 percent in August, the same as in July, bolstered by gains in commuter towns in the southeast. There’s “evidence of growing resistance to rapid price rises in the London market,” said Richard Donnell, director of research at Hometrack. “Talk of a housing bubble and warning from the Bank of England have impacted sentiment.” Read more.

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