Headlines

Germany’s top economic experts have slashed their growth forecast for 2019 from 1.5 per cent to 0.8 per cent, offering fresh confirmation that Europe’s largest economy is losing momentum, the Financial Times reported. “The period of high growth in the German economy is over for now. But given the strong domestic economy there is no reason to expect a recession,” said Christoph Schmidt, a professor of economy and one of the five members of Germany’s government-appointed council of economic experts.

In a related story, the International New York Times reported on a Reuters story that Italy is studying changes to the country's securitisation rules in order to help banks shed so-called 'unlikely-to-pay' (UTP) loans, a document seen by Reuters showed on Tuesday. Italian banks have drastically reduced defaulted loans on their balance sheets but for the most part they are yet to tackle UTP loans, which are not yet in default but are unlikely to be repaid in full.

Italy will renew for up to 36 months a state guarantee scheme to help banks shed bad loans, tightening rules to increase protection for some investors, a draft law decree seen by Reuters showed. The ‘GACS’ scheme allowing banks to buy a guarantee from the state on the least risky tranche in bad loan securitization sales, has proved a success in helping lenders tackle the legacy of a deep recession, Reuters reported.

Listed Chinese banks will need to raise about $260bn in fresh capital over the next three years as regulations force shadow-bank loans back on to balance sheets and global rules on systemically important groups impose extra requirements on the largest lenders, the Financial Times reported. A recent lending surge by Chinese banks in response to monetary stimulus designed to support China’s slowing economy is also adding to the banks’ capital needs, by accelerating the expansion of their balance sheets. China’s bank regulator has forcefully implemented the global Basel I

After defaulting in November, embattled Brazilian construction giant Odebrecht Engenharia e Construcao SA appeared determined to move quickly to negotiate with creditors, Bloomberg News reported. One month later, the company began talks with some of its largest bondholders, granting them access to confidential information and agreeing to reimburse them for some fees. The two sides held follow-up conversations as a prelude to a sitdown in New York on Feb. 27, when the Brazilian company was due to present its proposal to restructure around $3 billion of debt. Odebrecht wasn’t ready, though.

In a related story, the International New York Times reported on a Reuters story that India's government has asked state-run banks to rescue privately held Jet Airways without pushing it into bankruptcy, as Prime Minister Narendra Modi seeks to avert thousands of job losses weeks before a general election, two people within the administration told Reuters. The finance ministry has in the past year sought regular updates from the banks, led by State Bank of India (SBI), on Jet's financial health, the people said.

Jet Airways India Ltd., once India’s second-biggest airline, is flying just about a third of its fleet because its inability to pay lessors is grounding aircraft, Bloomberg News reported. The number may drop further, the nation’s airline regulator said. The company has 41 planes available, according to a statement released by the Directorate General of Civil Aviation after it reviewed Jet Air’s performance in New Delhi Tuesday. The beleaguered airline, which has a fleet of 119 as per its website, has been forced to ground planes as it awaits restructuring of its debt.

The market’s memory is so short when it comes to Lebanon that a few weeks of government inaction all but wiped out a bond rally fueled by Gulf aid pledges and the end of a nine-month political stalemate, Bloomberg News reported. The brief morale boost is giving way to frustration among investors and creditors as a new cabinet formed in January fails to discuss, let alone act on, promised measures meant to shrink a yawning budget gap and jumpstart growth.

All Avianca Brasil flights were operating normally, a spokeswoman for the carrier said on Tuesday, a day after a Brazilian appeals judge lifted an order that allowed the carrier to operate 10 of its planes despite missed leasing payments, Reuters reported. She added that the decision, which could disrupt the airline’s ability to complete scheduled flights, would be appealed. The ruling, a copy of which was reviewed by Reuters, is the latest development in a bitter legal fight between lessors and the carrier, which is going through bankruptcy protection.

Deutsche Bank and Commerzbank, Germany’s two biggest banks, are in talks to merge. The news broke over the weekend, hot on the heels of a Deutsche Bank research report called “How to fix European banking... and why it matters.” So we have a rare case of a merger suitor publishing a big intellectual defense of its actions before anyone knew about the talks. The problem is that the intellectual defense can still be breached, a Bloomberg View reported.