Headlines

Britain's fragile recovery was dealt a severe blow on Wednesday after figures revealed a slump in household spending that could severely restrict growth and knock the government's debt reduction plans off course, The Guardian reported. A shock collapse in business investment in the first three months of the year added to the gloomy picture of a sluggish economy sliding back into recession. Several economists said a downturn in key areas of the economy meant there was unlikely to be an interest rate rise until at least November and possibly next year.

Civil servants last year earned better pay than their private sector counterparts in what marks the biggest labour market shift in more than three decades, Business Daily Africa reported. Public servants took home an annual average pay of Sh394,131 compared to private sector employees’ Sh393,760, according to official data contained in the Economic Survey 2011, which was released last week. The change in fortunes of government employees is partly attributed to the reforms that the Kibaki administration has pursued since coming to power in 2003.

Under pressure to reduce its holding of troubled loans, Allied Irish Banks PLC has struck a deal to sell a portfolio of roughly $1 billion in U.S. commercial mortgages to Blackstone Group LP and Wells Fargo & Co., according to people familiar with the matter, Dow Jones Daily Bankruptcy Review reported. Allied Irish Banks is selling off about $1 billion in troubled loans tied to, among others properties, the MetLife Building in New York, left rear.

Australian home loan delinquencies jumped to the highest on record in the first quarter, driven by Christmas spending, a November interest rate increase, and recent natural disasters, Fitch Ratings said, Bloomberg reported. Mortgages more than 30 days overdue rose to 1.79 percent of the nation’s residential mortgage backed securities in the quarter ended March 31, from 1.37 percent in the previous three months, according to the London-based ratings firm. The number of “low-doc” loans more than 30 days late climbed to a record 6.74 percent from 5.7 percent, according to the report.

British home improvement retailer Focus DIY is to close with the possible loss of up to 3,000 jobs, after administrators were unable to find buyers for the bulk of its stores, they said on Wednesday, Reuters reported. Administrators at Ernst & Young said they had appointed retail consultants Gordon Brothers to advise on the sale of all Focus DIY's stock with a view to shutting the chain. The closing down sale will begin this weekend.

The dispute between Europe's central bankers and politicians over how to deal with Greece's worsening financial problems intensified, as one of the European Central Bank's top officials rejected calls by Germany and other euro-zone states for a restructuring of Greek debt—calling it a "horror scenario," The Wall Street Journal reported.

Credit rating agency Moody’s has warned that Ireland could be pushed further into financial turmoil if Greece restructures its debt, saying bailout recipients could have debt downgraded to “junk” status if Athens defaults, the Irish Times reported. Amid renewed market attention on Spain and anxiety about new credit downgrades of Italy and Belgium, Moody’s made it clear yesterday that a Greek default would be “highly destabilising” and would have implications for the creditworthiness of bond issuers across Europe.

While Europe is preoccupied with a possible restructuring of Greece's debt, huge risks lurk elsewhere -- in the balance sheet of the European Central Bank. The guardian of the single currency has taken on billions of euros worth of risky securities as collateral for loans to shore up the banks of struggling nations, Spiegel Online reported. Since the beginning of the financial crisis, banks in countries like Ireland, Portugal, Spain and Greece have unloaded risks amounting to several hundred billion euros with central banks.

Financial regulators need to develop stricter rules for dealing with failed banks to assure that shareholders and creditors rather than taxpayers bear the loss, Sweden's Financial Supervisory Authority said Tuesday in its yearly Supervision Report for 2011, Dow Jones Daily Bankruptcy Review reported.

The Prague Municipal Court declared Czech developer ECM insolvent on Tuesday and the stock exchange halted trading in the firm's shares, Reuters reported. The developer, which builds mainly in the Czech capital, filed for insolvency on May 17 and proposed reorganisation. The court said it would decide on the reorganisation plan within three months, the filing said. The company accumulated debt as an economic downturn pounded the construction and development sector which only began to recover this year in the Czech Republic.