Italy's new government approved a new decree Friday aimed at staving off a default by the city of Rome while insisting that the capital must still seek ways to curb its perennial deficit, The Wall Street Journal reported. The new decree, which must be approved by parliament, offers €575 million ($788.32 million) in cash, which will cover more than half the capital's 2013 shortfall. That is more than the amount pledged by the previous government's so-called "Save Rome" decree, which languished in parliament until being withdrawn earlier this week due to a parliamentary filibuster. The city has a budget hole of more than €800 million in its 2013 accounts. Part of that reflects cuts to transfers from the central government under the previous administration's austerity drive. Under the new measure, the fund will be an advance rather than an outright transfer, giving the city more time to devise a strategy to trim its chronic overspending, said Cabinet Undersecretary Graziano Delrio. The new decree effectively squelches the risk of a default, but requires Rome Mayor Ignazio Marino to tighten the municipal belt by cutting spending, raising taxes or selling off assets. Under Italian rules, the Interior Ministry appoints commissioners to failed cities, tasking them with raising local taxes, slashing costs and renegotiating debts with creditors and suppliers. Read more. (Subscription required.)
Daily Insolvency News Headlines
Mon., March 3, 2014
OAO Gazprom’s threat to end natural gas discounts for Ukraine adds to the financial burden on the near-bankrupt government in Kiev and makes Europe’s energy supply part of the escalating crisis, Bloomberg News reported. Russia’s gas-export monopoly said on March 1 it may end last year’s agreement to supply Ukraine at a cheaper rate unless it’s paid $1.55 billion owed for fuel. It’s the first time since the otherthrow of pro-Moscow president Viktor Yanukovych last month that Russia has directly used its position as Ukraine’s dominant energy supplier to pressure the new regime. Vladimir Putin, who has permission from lawmakers to deploy troops to Ukraine, has repeatedly used gas to strong-arm his western neighbor, cutting off supplies twice since 2006 over payment disputes. Because Ukraine hosts a network of Soviet-era pipelines that carry more than half of Russia’s gas exports to the European Union, any disruption of supply puts the region’s energy security at risk. Read more.
Sony is now looking to sell its former headquarters and surrounding buildings in central Tokyo in its continuing struggle to stem losses from its consumer electronics business, according to a person familiar with the plan, The Wall Street Journal Japan Real Time blog reported. The sale would follow a frenzied unloading of properties in 2013, the most iconic being the $1.1 billion sale of Sony’s U.S. headquarters at 550 Madison Avenue. Weakened by an erosion of demand for its television and personal computers, the Japanese tech giant also parted with another of its prime buildings in Tokyo for another $1.1 billion in February of last year. The building it’s now looking to sell currently houses its medical business and various other non-consumer related operations, and served as Sony’s former headquarters from 1990 to 2007. First reported in the Nikkei on Friday, local media reacted to the sale – reportedly around Y15 billion ($146.5 million) – with some emotion, describing the move as selling of Sony’s “birthplace” and saying there’s no “sacred cow” for the company’s restructuring efforts. Read more. (Subscription required.)
Part-nationalised Royal Bank of Scotland is working on a plan to salvage its troubled Irish business, Ulster Bank, by merging it with a number of rivals, the Sunday Times newspaper reported. Attempts to find a buyer for the business have failed and a team inside RBS is looking at tie-ups between Ulster and other lenders, such as Permanent TSB or the Irish units of Danske Bank or KBC, the newspaper reported. Bolting the institutions together could allow the new Ulster Bank to strip out costs and mount a credible challenge to Ireland's top players. Ireland's finance minister Michael Noonan said on Saturday he would like a "significant" new bank with a big balance sheet to enter its lending market this year to drive competition in the diminished sector. Noonan said on Sunday that he was looking at the possibility of overseas banks partnering with Irish lenders to create a competitor to the country's biggest lenders - Allied Irish Bank and Bank of Ireland. "I'm sending a signal out to the European banking system that a growing economy in Ireland has space for more banking activity and we would welcome their participation in Ireland by way of subsidiaries or by way of going into partnership with some of our domestic banks," he told national broadcaster RTE. Read more.
The Mt. Gox bitcoin exchange in Tokyo filed for bankruptcy protection Friday and its chief executive said 850,000 bitcoins, worth several hundred million dollars, are unaccounted for, The Washington Post reported. The exchange’s CEO Mark Karpeles appeared before Japanese TV news cameras, bowing deeply. He said a weakness in the exchange’s systems was behind a massive loss of the virtual currency involving 750,000 bitcoins from users and 100,000 of the company’s own bitcoins. That would amount to about $425 million at recent prices. The online exchange’s unplugging earlier this week and accusations it had suffered a catastrophic theft have drawn renewed regulatory attention to a currency created in 2009 as a way to make transactions across borders without third parties such as banks. It remains unclear if the missing bitcoins were stolen, voided by technological flaws or both. “I am sorry for the troubles I have caused all the people,” Karpeles, a Frenchman, said in Japanese at a Tokyo court. Karpeles had not made a public appearance since rumors of the exchange’s insolvency surfaced last month. He said in a web post Wednesday that he was working to resolve Mt. Gox’s problems. The loss is a giant setback to the currency’s image because its boosters have promoted bitcoin’s cryptography as protecting it from counterfeiting and theft. Read more.
Zhang Hongbao, who’s run a funeral home in Shanghai for more than a decade, says he can’t recall the last time business was so dead, Bloomberg reported. “Government officials don’t dare to spend too much on funerals,” Zhang, owner of Shanghai Funeral Service (China) Co., said in an interview. “It’s the peak of the anti-corruption drive. They choose simple ceremonies, such as inviting fewer people and have quieter events rather than the noisy rituals of the past.” Zhang, who says profits have fallen 20 percent in the past year, illustrates how President Xi Jinping’s drive to root out corruption is morphing into a broader austerity campaign that’s spreading to small businesses in the world’s second-largest economy. What began as a fight against extravagance, which put a halt to surging sales of Ferraris and Gucci bags, is now sapping demand for items such as firecrackers and greeting cards. “There’s always collateral damage,” said Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole SA. “These are negative side effects that nobody wanted but it’s a big economy and making one rule for a market that size means that you cannot take care of every nuance and it’s unavoidable.” Credit Suisse Group AG in January cited the anti-corruption drive for cutting its projections for gross domestic product and real consumption growth. As analysts estimate China’s GDP to grow at its slowest pace in more than two decades, investors will be on the lookout for economic policy updates when the National People’s Congress kicks off its annual two-week meeting this week. Read more.