The German government’s plan to lower the retirement age has come under fire for the message it sends to cash-strapped peripheral eurozone states, the Financial Times reported. Speaking to national paper Die Welt, Günther Oettinger, German EU commissioner, said that Germany’s plans to allow longer-serving employees to retire at the age of 63 sent the “wrong signal” at a time when countries like Greece, Spain and Portugal are struggling to introduce tough labour market reforms. “We expect Greeks to work longer for less pay,” said Mr Oettinger. “They are now wondering that Germany is going in the other direction.” Warning that the eurozone’s largest economy faces a skills shortage, the EU energy commissioner said that politicians should start to talk instead about a retirement age of 70 and help equip people with professional training for a longer working life. Read more. (Subscription required.)
Daily Insolvency News Headlines
Tue., April 22, 2014
After a year in office, Nicolás Maduro has made little headway in correcting the economic distortions bequeathed by his Comandante. Since Hugo Chávez died in March last year, Venezuelans have suffered rapidly deteriorating economic conditions, from a yawning budget deficit to galloping inflation and widespread shortages of goods, from milk to toilet paper, the Financial Times reported. But the people have pushed back. As Mr Maduro’s approval ratings have fallen, there are signs that the socialist government is taking orthodox steps to ease the country’s severe macroeconomic imbalances. Recent rallies in Venezuelan debt have pushed yields down. “There are certain indications that economic policy making may now have a market logic,” says Alberto Vollmer, a local businessman who manages one of a dwindling number of privately held companies in Venezuela. Late last month, in the first attempt at pragmatic policy making since Mr Maduro won the election by a whisker in April last year, officials loosened strict currency controls, a move some hope may revive an economy that is forecast by the IMF to contract 0.5 per cent this year. Inflation is running at 57 per cent. The new market-determined foreign exchange system, called Sicad 2, allows companies and individuals to legally trade dollars in an attempt to stem widespread shortages – one of the reasons for nationwide protests that left at least 41 dead in the past two months. Read more. (Subscription required.)
Russian companies, facing $115 billion of debt due over the next 12 months, will have the funds even as bond markets shut because of the Ukraine crisis, according to Moody’s Investors Service and Fitch Ratings. Firms will have about $100 billion in cash and earnings at their disposal during the next 18 months, Moody’s said in an analysis of 47 businesses April 11. Almost all 55 companies examined by Fitch are “well placed” to withstand a closed refinancing market for the rest of 2014, it said in a note on April 16. Banks have more than $20 billion in foreign currency to lend as the tensions prompted customers to convert their ruble savings, ZAO Raiffeisenbank said. “The amount of cash on balances of Russian companies, committed credit lines from banks and the operating cash flows they will get is sufficient for the companies to comfortably service their liabilities,” Denis Perevezentsev, an analyst at Moody’s in Moscow, said by phone on April 17. Read more.
Mexican homebuilder Geo said on Monday that it entered bankruptcy protection after a judge accepted its filing for restructuring, Reuters reported. The company, which said last month that it gained the support of the majority of its creditors in a so-called pre-packaged bankruptcy plan, will seek to replace most of its about $1 billion in debt with stock. Read more.
Three years ago Sweden was regarded as a role model in how to deal with a global crisis. The nation’s exports were hit hard by slumping world trade but snapped back; its well-regulated banks rode out the financial storm; its strong social insurance programmes supported consumer demand; and, unlike much of Europe, it still had its own currency, giving it much-needed flexibility. By mid-2010 output was surging, and unemployment was falling fast. Sweden, declared The Washington Post , was “the rock star of the recovery”. Then the sadomonetarists moved in. The story so far: in 2010 Sweden’s economy was doing much better than those of most other advanced countries. But unemployment was still high, and inflation was low. Nonetheless, the Riksbank – Sweden’s equivalent of the Federal Reserve – decided to start raising interest rates. There was some dissent within the Riksbank over this decision. Lars Svensson, a deputy governor at the time, vociferously opposed the rate hikes. Svensson, one of the world’s leading experts on Japanese-style deflationary traps, warned that raising interest rates in a still-depressed economy put Sweden at risk of a similar outcome. Sure enough, Swedish unemployment stopped falling soon after the rate hikes began. Deflation took a little longer, but it eventually arrived. The rock star of the recovery has turned itself into Japan. Read more.
Italy's two largest banks, UniCredit and Intesa Sanpaolo, are teaming up with U.S. private equity firm Kohlberg Kravis Roberts to pool some of their bad loans into a vehicle that will provide fresh capital for the struggling companies, the Financial Times reported. The preliminary agreement, which also involves restructuring adviser Alvarez & Marsal, will be announced on Tuesday, the paper said on its website on Monday. The announcement is likely to say the four companies have signed a memorandum of understanding but are still working out many details, FT said. The vehicle could house several billion euros of loans, the paper said. The two Italian banks are considering how much of their bad loan portfolio to transfer into the vehicle and whether to contribute fresh funds themselves, the FT reported. Read more.