Headlines

Watching Europe flirt with financial catastrophe has not erased memories in Asia of the region’s own meltdown 15 years ago. Indeed, it has served as a reminder of the dangers lurking out there, The Economist reported. So the effort to build regional financial defences carries on, albeit at the snail’s pace typical of Asian multilateral diplomacy. Bold talk of an “Asian Monetary Fund” has yielded something more modest, called, with that also-typical flair for catchy nomenclature, the Chiang Mai Initiative Multilateralisation (CMIM).

Spanish industrial production fell at an accelerated pace in February, the latest sign that the euro zone's fourth-largest economy remains mired in contraction, as Prime Minister Mariano Rajoy expressed renewed support for deep spending cuts, The Wall Street Journal reported. Industrial production declined 5.1% in February from a year earlier in calendar-adjusted terms after sliding 4.3% in January, because of lower activity in the construction and car-manufacturing sectors, statistics agency Instituto Nacional de Estadística, or INE, said on Wednesday.

A growing shortage of safe assets poses a new threat to global financial stability, the International Monetary Fund warned on Wednesday. Sovereign debt crises are reducing the number of governments that investors trust to issue “risk-free” bonds just as new financial regulations are increasing demand for safe securities from banks, the Financial Times reported. The report shows how reforms in the wake of the 2007-09 crisis may create new pinch points in the global financial system that could cause trouble in the future.

Lawyers handling a $9 billion class-action lawsuit against Sino-Forest Corp. will ask an Ontario judge on Friday to terminate bankruptcy proceedings involving the troubled timber company, the Toronto Star reported. When Sino-Forest, which is based in Mississauga but operates in China, sought protection from creditors under the Companies’ Creditors Arrangement Act last month, any pending legal actions were essentially put on hold.

As Ireland trudges through the pain of economic recovery, restaurant owners across the country have been cutting prices to sustain a flow of customers and avoid going out of business, The Wall Street Journal reported. The result is sector-specific deflation that has brought big drops in revenue not only for Irish restaurant owners but also for hotel proprietors, retailers and most other consumer-linked businesses. The situation is a peril of the euro.

Dexia, the bailed-out Franco-Belgian lender, said on Wednesday it was looking into a severance package granted to former chairman Pierre Richard, forced to resign after the group's initial rescue, Reuters reported. The French government, which injected 3 billion euros ($3.94 billion) into Dexia's 2008 rescue alongside 3.4 billion from Belgium and Luxembourg, earlier this year asked the bank to examine how it could recover funds paid to the former chairman as part of his exit package. Newspaper Le Monde reported that Dexia's board had mandated a labour law specialist to look into the case.

European Union officials are putting the final touches to a detailed economic growth plan they hope to unveil next week. The move comes as investors, spooked by the prospect of a deepening recession in the eurozone’s south, have pushed Spanish borrowing costs to their highest levels for four months. A draft of the 28-page plan by the European Commission, the EU’s executive branch, calls on national governments to implement a series of job-creating policies, including cutting labour-related taxes, and shifting the burden to property, energy and emissions levies.

European companies are swarming to the corporate-bond market for financing and vastly reducing their reliance on banks, a move that could mark a significant change in the region's financial landscape, The Wall Street Journal reported. During the first quarter, European companies borrowed more from the bond market than they did from banks, according to Dealogic, a data provider. That is a rare phenomenon in Europe, where banks have long dominated lending.

The International Monetary Fund (IMF), a part paymaster in the €67.5bn in bailout loans to Ireland, has recommended the "bold" restructuring of household debt including mortgage writedowns in a bid to prevent prolonged recessions, The Independent reported. Such moves could help avert cycles of household defaults, further house price declines and additional contractions in output, according to the IMF’s bi-annual assessment of the global economy. It cited the examples of Iceland and the US where this policy has worked in the past.

Progress made by France's largest banks with restructuring plans they launched late last year in response to the European debt crisis should help ease pressure on their ratings, Fitch Ratings said Tuesday, Dow Jones reported. French banks were hit hard last summer when investors retreated from the euro zone because of deepening concerns over their exposure to sovereign debt in Europe's weaker economies, forcing the main listed players to start reducing assets and to cut funding needs. Fitch said that because of those actions they have since won back some market confidence.