Headlines

Rising and volatile Italian government bond spreads caught domestic banks off guard and caused a credit crunch in the euro-zone's third-largest economy in late 2011, the International Monetary Fund concludes in a new study, The Wall Street Journal reported. Banks with lower capital levels and higher rates of nonperforming loans suffered the most, while Italy's sovereign borrowing costs reacted significantly to the scale of foreign ownership, said the technical working paper from Edda Zoli, a senior economist in the IMF's European department.

The European Union's banking regulator will decide over the coming months which bankers should have bonuses capped, raising hopes among lenders that the rules can be eased before they take effect in 2014, Reuters reported. The EU approved a law to cap bonuses at no more than fixed salary, rising to twice the salary if shareholders give their approval. The new law is in response to public anger at the size of bonuses, especially at banks that had to be rescued by taxpayer money at a time of general austerity in Europe.

Complaints about the dearth of lending by banks can be heard in small and midsized businesses up and down the country, and are raising concern not just within the Spanish government but also the European Central Bank in Frankfurt, the Financial Times reported. Spain’s economic crisis and the near-collapse of its banking sector last year have conspired to choke off the flow of bank loans – threatening to dry out the vast and versatile pool that dominates Spain’s private sector.

Belgium-based television services company Alfacam Group said on Wednesday that its bank lenders had decided to cancel its credit lines, leaving it scrambling to find a new investor, Reuters reported. Alfacam, which was granted creditor protection in October, said in a statement that its banks had decided not to extend suspension of debt repayments beyond March 31. The provider of broadcast services, TV studios and Europe's largest fleet of outside-broadcast vans signed a memorandum of understanding in December with its banks and Indian family-owned conglomerate Hinduja Group.

The finance chief of Spain's Catalonia region said that unless the European Union relaxes its austerity drive, the recession in Southern Europe may spread north, The Wall Street Journal reported. "It would be a pity if a more prudent macroeconomic policy would happen only after recession has arrived in the center of Europe. It would be better to anticipate," Andreu Mas-Colell, head of economics of Catalonia's regional government, said in an interview here last week. "EU policy makers should not underestimate the depressive effects of austerity in the south," he added.

A group of Italian investors is ready to stump up over 100 million euros to take control of small cooperative lender Banca Popolare di Spoleto, which was put under special administration this year, Reuters reported. The Clitumnus group of investors said on Tuesday it would underwrite a capital increase of up to 102 million euros. Shares in Popolare Spoleto, in which Banca Monte dei Paschi di Siena has a 29.5 percent stake, closed up 3.2 percent at 1.85 euros after the offer by Clitumnus. Clitumnus offered in January to buy a 51 percent stake for 2.10 euros per share.

A planned EU tax on transactions would raise the cost of issuing UK debt by nearly four billion pounds if it were in force this year even though Britain will not impose the levy, a study said on Wednesday, Reuters reported. Eleven euro zone countries intend to introduce the tax on stock, bond and derivatives transactions next January to help to make banks pay for aid they received in the financial crisis. There are provisions to ensure the levy is applied no matter where in the world securities from the 11 states are traded.

While the euro zone has been transfixed lately by the Cyprus meltdown, another and potentially bigger European crisis has continued to simmer: record-high unemployment, the International Herald Tribune reported. Spending cuts and tax increases aimed at trimming debt and addressing the financial crises in bailed-out euro zone countries, and the rising rate of joblessness in much of the currency bloc, “are feeding off of each other,” said Mark Cliffe, chief economist at ING Group. “It’s a bit of a vicious circle,” he said.

Cement producer AfriSam on Tuesday successfully completed a years-long restructuring programme that reduced its overall debt by more than R15-billion, Engineering News reported. The group, which faced a significant debt burden and almost defaulted on billions of rand of debt over a year ago, now had a sustainable long-term debt solution to the overgearing that resulted from the acquisition transaction that created AfriSam. The total debt remaining on the balance sheet could not be confirmed, but previous reports had indicated that it could be about R6.5-billion.

Suntech Power Holdings Co., forced to put its Chinese solar unit into bankruptcy last month, began that slide into insolvency in 2009 when customers linked to the founder couldn’t pay their bills and the company booked the sales as revenue anyway, regulatory filings show, Bloomberg reported. Seven buyers backed by an investment firm funded by Suntech and its founder, Shi Zhengrong, accounted for 29 percent of Suntech’s uncollected bills as 2009 ended, according to correspondence between the solar company and the U.S. Securities and Exchange Commission.