Headlines

The International Monetary Fund has urged the European Central Bank to consider cutting interest rates to below zero as it warned that deflation in the eurozone was a key new risk facing the world economy, The Guardian reported. In its assessment of global prospects published ahead of the meeting of G20 finance ministers in Sydney, the IMF said recovery from the deep global recession had been disappointingly weak and urged stronger co-operation between developed and developing countries to promote growth and financial stability.

The Bank of Japan surprised the market on Tuesday by doubling incentives designed to spur bank lending, weakening the yen and lifting Tokyo stocks at a time when the nation's economy is showing signs of trouble, The Wall Street Journal reported. In the hope that it will open the spigot for lending to the broader economy, the central bank said it will expand two programs where it offers fixed-rate loans at rock-bottom interest rates to commercial banks.

China’s central bank has drained Rmb48bn ($7.9bn) from money markets, an unexpected move that signals its concern with the boom in lending at the start of the year, the Financial Times reported. The People’s Bank of China withdrew the cash by issuing 14-day bond repurchase agreements. It was its first time using repos to drain liquidity from the money market in eight months. The central bank typically gauges demand from banks the day before conducting open-market operations, but on this occasion it issued the repos without advance warning, traders said.

China's Wanxiang Group won court approval Tuesday to take over failed luxury hybrid-car maker Fisker Automotive Inc. after successfully outbidding Hong Kong billionaire Richard Li in an auction, The Wall Street Journal reported. Mr. Li's takeover vehicle, Hybrid Tech Holdings, signaled it would move to collect most of the $149.2 million Wanxiang is paying, exercising its rights as Fisker's senior secured lender to trump the claims of Fisker's unpaid suppliers. Judge Kevin Gross approved the sale of Fisker's assets to Wanxiang at a hearing in the U.S.

A court in the German town of Bonn has begun hearings in the insolvency case of utilities discounter Teldafax. Three of the firm’s former executives stand accused of running a Ponzi-like scheme to finance the business, Deutsch Welle reported. Teldafax's former senior executives Klaus Bath, Gernot Koch and Michael Josten were facing charges of delayed filing of insolvency, unlawful book-keeping and organized fraud to cover up a bankruptcy, the state court in Bonn announced ahead of opening the trial on Tuesday.

Codere SA (CDR) formally rejected a final restructuring proposal from bondholders less than three months before the Spanish gaming company’s deadline to agree to a restructuring or request full creditor protection, Bloomberg News reported. The plan bondholders submitted Feb. 2 doesn’t treat shareholders equally by allowing minority shareholders to have 3.2 percent of Codere and the founding Martinez Sampedro family 14.3 percent, the company said in a statement. The proposed debt structure is not the best solution for the company, which needs to lower its interest payments, Codere said.

The euro zone's struggling countries are making progress in an effort to reform their economies and boost competitiveness, while other parts of the bloc risk lagging behind, a European Central Bank executive board member said, The Wall Street Journal reported. Peter Praet also said that the job of reforming wasn't only limited to the countries that have suffered the worst during the euro zone's four-year old debt crisis, but rather all countries in the bloc need to change. Mr.

House prices in Germany’s biggest cities are overvalued as much as 25 per cent, the Bundesbank warned on Monday, stoking fresh fears that a wave of international investment has helped to fuel a property bubble in the eurozone’s largest economy, the Financial Times reported. The German central bank said that residential real estate prices in 125 cities rose by 6.25 per cent on average last year. In October, it reported that property prices in the biggest German cities were 20 per cent overvalued, suggesting the problem is getting worse.

Austria has not ruled out letting nationalised lender Hypo Alpe Adria go bust even though this option poses many risks, Finance Minister Michael Spindelegger told parliament on Monday, Reuters reported. He was speaking after ratings agency Moody's fired a shot across the government's bows late on Friday by downgrading the bank and its home province of Carinthia. "I do not exclude any option but I warn against shooting from the hip," Spindelegger told a debate about the government's handling of the bank it had to nationalise in 2009.

The eurozone's banks are about to get greater insight into the European Central Bank's landmark review of their books, as national experts and their advisers meet in Frankfurt on Monday to hammer down details of the next phase of the tests. The ECB is carrying out a wide-ranging review of 128 of the region's largest banks in an effort to address lingering doubts about their health before it becomes their supervisor in November.