Headlines

Switzerland, for decades a paragon of safety in finance, is engaged in a high-risk strategy to protect its export-driven economy, literally betting the bank in a fight to contain the prices of Swiss products sold abroad, The Wall Street Journal reported. The nation's central bank is printing and selling as many Swiss francs as needed to keep its currency from climbing against the euro, wagering an amount approaching Switzerland's total national output, and, in the process, turning from button-down conservative to the globe's biggest risk-taker.

David Cameron will damage Britain's fragile economy if he demands major changes that could threaten the country's relationship with the European Union, business leaders said on Wednesday, Reuters reported. In an open letter, the heads of some of Britain's biggest companies said Britain can't afford to quit a market of 500 million people that buys half of its exports. Other countries in the 27-nation bloc would probably reject Cameron's attempts to claw back powers from Brussels, isolating the country from its biggest trading partner, they said.

Eurozone unemployment hit a fresh record of 11.8 per cent in November, official statistics showed on Tuesday, highlighting the dire state of the bloc’s economy in spite of hopes for a gradual recovery this year, the Financial Times reported. Across all 27 members of the EU, more than 26m people were out of work in November, or 10.7 per cent of the workforce, according to Eurostat, the EU’s statistical office.

The key to preventing a messy devaluation of Egypt's pound may lie with the country's households, whose dollar holdings are being eyed by foreign investors as a critical gauge of trust in the authorities, Reuters reported in an analysis. Countless emerging market crises have shown over the decades that it is not the withdrawal of foreign investors from a market but the flight of local households and businesses from a currency that is instrumental in its collapse. Egypt, despite months of upheaval, is not there yet.

China’s bank loans as a share of funding in the economy may have fallen to a record low, highlighting the growth of alternative financing channels that have prompted warnings of rising credit risks. New yuan loans probably dropped 14 percent last month from a year earlier, according to the median projection in a Bloomberg News survey of 37 analysts ahead of data due by Jan. 15. That would give bank lending a 55 percent share of aggregate financing for 2012, based on UBS AG estimates, the least in figures dating to 2002.

The first ever meeting of The Netherlands' Financial Stability Committee, set up by the government in November last year, has focused on ways of stabilising funding sources for mortgage lending, CentralBanking.com reported. A report from the meeting, published Tuesday, said high mortgage indebtedness was causing banks to rely heavily on market funding, which made banks vulnerable and reduced investment in Dutch banks' mortgage portfolios. This was being passed on to consumers in reduced mortgage lending.

Books-to-music retailer Virgin Megastore France will formally declare itself insolvent on Wednesday, the latest casualty of an industry-wide slump in CD and DVD sales as consumers download more film and music online, Reuters reported. The filing, the first step towards a possible court-ordered company restructuring in France, coincides with the start of winter clearance sales in a morose economic climate. Shoppers are reining in spending in the euro zone's second-biggest economy where the total number of people out of work is at a 15-year high.

Trustees to the UK Coal pension schemes have been given the right to monitor the business risks of the company’s newly formed property arm and to intervene in company strategy where needed, under the terms of an unusual corporate restructuring, the Financial Times reported. Keith Jones, chairman of the UK Coal trustees, said that formal arrangements have been put in place allowing for oversight of both the core coal business and its property arm, which is 75 per cent owned by the schemes.

While German industry has enjoyed record export and profit growth, ordinary Germans have not had much economic joy over the past 13 years, The Guardian reported in a commentary. As Charles Dumas of Lombard Street Research has demonstrated, real personal disposable income per capita rose by just over 7% from 1998 to 2011, compared to growth of 13% for Spain and around or over 18% for Britain, France and the US. German income growth lagged behind almost all OECD countries; only Italy and Japan performed worse.

Argentina’s messy legal battle with hedge funds over its 2001 sovereign default has heightened calls to resurrect plans for a bankruptcy regime for countries, under the auspices of the International Monetary Fund, the Financial Times reported. Many senior lawyers, fund managers and former policy makers say recent court rulings against Argentina highlight the weaknesses of the current approach to government debt workouts, and argue that it is time to revisit the “sovereign debt restructuring mechanism” proposed by the IMF in 2002.