Spain beset by bank crisis

MADRID: Spain’s borrowing costs shot up at a bond auction on Thursday and its troubled banks suffered a double blow, with shares in part-nationalized Bankia diving and 16 lenders – including the euro zone’s biggest – having their credit ratings cut.

Official data confirmed Spain was back in recession and a newspaper reported a big outflow of deposits from Bankia, but the government said it had taken a fundamental step to strengthen Spain’s credibility by agreeing big budget cuts with the country’s free-spending regions.Moody’s Investors Service cut the long-term debt and deposit ratings of the 16 Spanish banks, including Banco Santander, the euro zone’s largest, saying the government’s ability to support some banks had weakened.

Spain’s banks, saddled with bad loans after a property boom collapsed, lie at the heart of the euro zone crisis as markets fear any major rescue would strain Madrid’s already stretched finances and possibly require an international bailout.Gary Jenkins, credit analyst at Swordfish Research, said Spain had problems which went beyond the risk of contagion from the crisis in Greece, whose future in the euro is in doubt

“Whilst the attention of the world is on Greece, the fact is that Spain faces many challenges irrespective of how the Greek situation is finally resolved,” he wrote in a note.Moody’s cut the rating of BBVA, Spain’s second largest lender, as well as Santander even though both are generally regarded as sound, unlike some of their smaller peers.Nicholas Spiro of Spiro Sovereign Strategy said the government of Prime Minister Mariano Rajoy was not handling the crisis well. “Sentiment towards Spain is deteriorating with each passing day, mainly because of a loss of confidence in the Rajoy government’s approach to tackling the problems in the banking sector,” he said.

At Thursday’s debt auction, the Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds. The latter sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.”This … fits the pattern of recent sales, with the Spanish treasury successfully getting its supply away but at ever-higher yields,” said Richard McGuire, rate strategist at Rabobank in London. “This unfavorable trend looks set to remain firmly in place … Ultimately, this ratcheting up of yields will likely require some form of outside intervention.”

Spain officially slipped into recession in the first quarter this year, final figures confirmed on Thursday, leaving the country threatened with a prolonged slump as the turbulent euro zone struggles to balance austerity with growth.The European Commission warned last week that high debts of the 17 regions, which account for about half of overall public spending, and the welfare system would prevent Spain meeting its goal of cutting the budget deficit to 5.3 percent of gross domestic product this year from 8.5 percent in 2011.However, the government said the regions – most of which missed their deficit targets last year – had agreed to cut their spending by 13 billion euros and increase revenues by 5 billion euros.

After weeks of negotiations, Treasury Minister Cristobal Montoro approved the plans presented by every region except for the small northern one of Asturias, which will have to produce a new budget within 15 days. “We’ve taken a fundamental step for Spain’s credibility,” Montoro told a news conference.Overspending by the regions caused Spain to miss its deficit reduction target badly last year. Moody’s agency downgraded on Thursday its ratings of four regions including two of the biggest, Catalonia and Andalucia.

Regions which meet their targets will get help from the state to cover their financing needs through a new mechanism which will be introduced by July. The government has been working for weeks on a new instrument called “hispanobonos” allowing the regions to issue debt underwritten by the Treasury.Spain’s 10-year debt yields have risen back above 6 percent, which investors view as a pivot point that could accelerate a climb to 7 percent, a cost of borrowing widely seen as unaffordable even though Madrid has raised well over half its needs for this year.

Prime Minister Mariano Rajoy said on Wednesday his government could soon find it difficult to fund itself affordably on the bond market unless the pressure eases.However, the government source said the Treasury could refinance itself at the current high yields for several months, although the country saw it aiss vital that funding costs fall.Top of the country’s worry list is a banking sector beset by bad loans, the result of a property boom that bust in 2008.El Mundo newspaper reported that customers at Bankia had taken out more than 1 billion euros, equivalent to around 1 percent of the lender’s retail and corporate deposits, over the past week. The government denied there had been an exit of funds, but the bank’s shares closed down 14 percent on Thursday on top of steep losses over the past week.

“It’s not true that there is an exit of deposits at this moment from Bankia,” said Economy Secretary Fernando Jimenez Latorre. Bankia itself said that deposit activity was normal.The government last week took over Bankia, the fourth-largest lender which holds around 10 percent of Spanish deposits, in an attempt to dispel concerns over its ability to deal with losses related to the 2008 property crash.”The majority of outflows came after the chairman resigned last week, but I think once the bank was taken over by the government, depositors calmed down a bit,” said one Madrid-based trader. “The share price fall has to do with disappointed retail investors dumping the stock.”

Some savers were reassured by the deposit guarantee fund which covers 100,000 euros per customer.”I have two accounts with Bankia and up to now I have not closed them. I’m not even considering it,” said Jose Ignacio Gonzalez, 42. “It must be more secure with the backing of the state, it has a guarantee.”The problem for Madrid is that the property losses which banks face are not yet quantifiable, as prices are likely to fall further.The government told the banking sector last week to set aside another 30 billion euros in provisions, prompting some analysts to say much more would need to be done.

While Greece, facing fresh elections which could hasten its exit from the euro zone, has dominated headlines, uncertainty over the final cost of Spain’s banking reform has raised the prospect that it could also require an international bailout, a bill the euro zone would be stretched to cover.Official data confirmed the Spanish economy shrank 0.3 percent in the first quarter, putting it back into recession. Unemployment is already running close to 25 percent, rising to around 50 percent among the young.

Even if it puts its house in order, Madrid faces the threat of contagion from Greece if it elects an anti-bailout government next month, a move which could hasten a hard default and exit from the euro zone.”It’s not Greece leaving the euro that is the major issue,” said John Bearman, chief investment officer at Thomas Miller Investment, which manages roughly 3 billion pounds ($4.8 billion) of assets. “It’s the domino effect.” – Yahoonews

Honduras prisoners riot at jail

Officials in Honduras say inmates have taken control of a prison in the city of San Pedro Sula.

At least one person was killed and 10 injured when prisoners opened fire on each other on Wednesday.The prison governor said guards had surrounded the jail but he had ordered them not to go in to “avoid a bloodbath”.Honduran prisons are notorious for overcrowding, rioting and violence; 13 inmates died in the same jail in March.Officials said a fight broke out on Wednesday in the block housing inmates not aligned with gangs.

Prison Governor Orlando Leiva said the motive could have been a fight about a woman.”We have not yet been able to confirm that report because the women who were in the prison are still being held by the prisoners,” Mr Leiva said.The governor said that when the shooting started, the guards followed security protocols, opening the cell doors and securing the prison’s perimeter.

Thirty patrols are stationed around the jail to prevent convicts from escaping.The Bishop of San Pedro Sula, Romulo Emiliani, is negotiating with the inmates in an attempt to reach a peaceful outcome to the stand-off.Honduras, which has the world’s highest murder rate and a huge gang problem, struggles to house its inmates.The country’s 24 jails, built for some 8,000 inmates, are currently holding more than 12,000.In February, a fire in a jail in Comayagua, north of the capital Tegucigalpa, killed 361 people. – BBC

Greece caretaker cabinet

A cabinet of professors and diplomats has been sworn in in Greece to steer the debt-ridden eurozone state into repeat elections on 17 June.

Panagiotis Pikrammenos, the senior judge who has taken over as prime minister, said the cabinet’s sole task was to lead the country into the polls.The 300 MPs elected on 6 May are taking their seats for a single day.Voters punished the two mainstream parties which agreed the cuts required under international bailouts.A 130bn euro (£104bn; $165bn) bailout was agreed earlier this year, following a 2010 package of 110bn euros.

Fears that Greece may leave the eurozone are causing uncertainty about the monetary union’s future, despite attempts by politicians and bankers to play down the potential impact.reeks have been withdrawing their savings from banks, with nearly a third of deposits taken out in the first quarter of this year, Reuters news agency reports.At least 700m euros have left Greek banks since 7 May, President Karolos Papoulias told party leaders this week after being briefed by central bank governor George Provopoulos.

A leading German economist has suggested a Greek exit from the euro would be better for both Greece and the eurozone.Hans-Werner Sinn, head of the Munich-based Ifo institute, said that in order to stay in the euro, Athens would have to cut prices and wages by 30-40% to make its goods competitive, but could not do so because it would bring Greece to the “brink of civil war”.

“The Greeks must give up the euro as quickly as possible and reinstate the drachma,” he told the Rheinische Post.Greece returns to the polls in one month’s time and opinion polls suggest Syriza, a leftist bloc opposed to the cuts, will win the biggest share of the seats in the next parliament.

The 16-strong new cabinet includes

Giorgios Zannias, former head of the state’s council of economic advisers and a key debt negotiator, as finance minister

Petros Molyviatis as foreign minister, a post he held before from 2004-06

Frangos Frangoulis, former head of the army general staff, as defence minister

Antonios Manitakis, a professor of constitutional law, as interior minister

Eleftherios Ekonomou, a former police chief, as minister for public order

Greece’s two biggest mainstream parties, the New Democracy (ND) conservatives and Pasok socialists, both suffered at the 6 May polls, but ND still emerged as the biggest party.In tortuous negotiations last week, ND and Pasok failed to form a coalition government, and they have warned voters that anti-bailout policies will lead Greece out of the euro.”Two courses lie ahead… either to change everything in Greece – with changes which can be carried out in a Europe that is also changing – or to experience the terror of an exit from the euro, the terror of isolation outside Europe and the collapse of all we have built so far,” said ND head Antonis Samaras.

Syriza, which came a strong second at the elections and was also unable to form a coalition, argues Greece should remain in the eurozone but should not be expected to make “barbaric” cuts.Its leader, Alexis Tsipras, told BBC News on Wednesday: “Our choice is to stay in Europe without austerity policies.

“We are in favour of the euro without the austerity that is destroying it. We are convinced that if the austerity policies continue then the eurozone will be destroyed.”An opinion poll released by VPRC suggests Syriza will increase its share of the vote from 16.8% to 20.3% while ND’s share will drop from 18.9% to 14.2%, and Pasok’s from 13.1% to 10.9%.A recent poll by by Metron Analysis suggested a similar surge in support for Syriza and drop for Pasok, but suggested ND would retain its support at about 17.3%. – BBC

Facebook sets share price

Facebook has priced its shares ahead of one of the most eagerly-anticipated share flotations in recent stock market history.

The social network said on Thursday that it valued shares at $38 (£24) each, and that its shares would begin trading in New York on Friday.At this price the eight-year-old firm would be worth $104bn (£66bn).Demand is set to be high; earlier this week Facebook said it would be selling 25% more shares than planned.But questions remain about the firm’s ability to generate profits and take advantage of mobile phone platforms.

There are also concerns that once the company has to answer to shareholders, there may be a greater emphasis on advertising to generate profits.Earlier this week, the company indicated the price would be between $34-$38 a share, with about 421 million shares up for sale.This would represent one of the highest value share sales, or initial public offerings (IPOs) in US history.By selling shares at that value, Facebook raised $16bn for itself.However, the new shareholders will not have much of a say in how the company is run.

The shares on offer are A shares, which carry one vote per share, whereas the current owners’ shares are B shares, which carry 10 votes each.They will control more than 96% of the votes after the public listing, with founder Mark Zuckerberg holding just under 56% of the voting power of the company.Mr Zuckerberg, who owns about 25% of the company, stands to gain the most from taking Facebook public. Fellow founders Dustin Moskovitz and Eduardo Saverin will also become paper-billionares overnight, as will Napster founder and former employee Sean Parker.

US venture capital firm Accel Partners and Russian internet investment group Digital Sky Technologies also hold significant stakes in Facebook, while Microsoft and U2 frontman Bono also stand to make a huge profit on their investment in the company.Revenue growth.The social networking site has transformed the way in which hundreds of millions of people around the world communicate. It is also transforming the way companies advertise to existing and potential customers.But Facebook’s 900 million users helped the company generate just $1bn in profit last year, and there are concerns about its ability to grow profits in the future.

For while it holds a depth of personal information advertisers dream about, Facebook only generates about $5 a year per user.This has led a number of commentators to question the company’s valuation.”Facebook will need to generate annual revenue of $30bn-$40bn in order to justify the likely valuation of the business,” said Victor Basta at Magister Advisors.”This is a tenfold increase over the revenues that it currently generates. The question is ‘where from?’”.The potential revenue from online advertising is huge.

“We know our industry is $1tn worldwide,” Martin Sorrell, chief executive of advertising giant WPP, told the BBC.”We know internet advertising is currently 20% roughly [of the total]. We know people are spending almost a third of their time online in one way or another, so there’s a vast opportunity for Facebook.”Generating greater revenues from this potential market is the first key challenge facing the company, both in terms of its own business model and in the face of strong competition from the likes of Amazon, Apple and Google.

“We’re telling our investors to hold off,” Oliver Pursche, president of Gary Goldberg Financial Services, told the BBC.”Number one, we don’t know what the guts and the balance sheet of the company looks like yet so that’s a big red flag for us. We want to understand the business before we tell people to invest.”Facebook has identified mobile devices, phones and tablet computers as key areas for revenue growth, but observers say this will not be easy.”[Facebook is] the holy grail for advertisers. It holds the minutiae of everybody’s lives, the perfect concoction of information – age, sex and what you like,” technology analyst Ernest Doku told the BBC.

“[But] so many people are engaged for so long, it’s very difficult to lure them away to what you’re trying to sell them.The second big challenge is not alienating users while trying to maximise revenue.”[The company] is balancing on a knife edge between servicing its users and pleasing its investors,” Mr Doku said.”It has been able put the user experience first and foremost, but now investors are going to want [a return].”

Necessary

The two allies in the war on terror, Pakistan and the US, have somewhat remained estranged after a series of incidents last year that put Pakistan in a not so good light, both inside the country and before the world community.

The Salala check post incident was the final blow after which Pakistan reacted with cutting off the Nato supplies going through its territory. This became a burning issue putting the US and its coalition forces in difficulties.After locking horns for months, Pakistan and the US have now shown the first clear signs of reaching an agreement and are moving towards a resumption in their relations that is so crucial to the war on terror. President Zardari is going to attend the Chicago summit on Afghanistan while the government of Pakistan has almost agreed to reopen the Nato supply lines that had been closed down for almost six months now.

Pakistan is also going to charge one million dollars per day on the supplies transported through Pakistan, thus somewhat compensating its losses in customs, transportation and road usage charges. But, it is not going to be easy for Islamabad as well. To make sure that they get what they are paying for, the US has asked for better security for the supplies, an issue that has already caused controversies. Under the present setup, private transportation companies have been hired for this task but they have often been targeted by militants and miscreants, making the whole exercise not viable and putting lives of the transporters and coalitions forces in harm’s way. Making foolproof security arrangements is going to be a tough job for the country’s weak civilian leadership. Nevertheless, it has to be done, or allegations of incompetence or being complacent will again do the rounds.

Besides the Nato supplies issue, an apology from the US over the Salala incident and reimbursements of almost two billion dollars under the CSF suspended for over two years are the main issues that made this relationship go sour. Sensing that the apology might never come, Pakistan is no more insistent on that front but it is still vocal about CSF, which Washington has used as a hedge to make Pakistan come around to its terms. These issues need sorting out and that too soon. Otherwise, it won’t be the terrorists that will be suffering. – PT

Greece hands over the Olympic flameto a London

ATHENS: Greece formally hands over the Olympic flame to a London delegation led by Princess Anne and including David Beckham on Thursday at the Panathenaic stadium where the first modern Games were held in 1896.

Seb Coe, chairman of the London organising committee LOCOG, spoke of a ‘massive, massive moment’ as the clock ticks down to the Games opening on July 27 while London Mayor Boris Johnson was typically ebullient.”It’s an amazing day for us. This is the moment when we prepare to take the torch and the eyes of the world are swivelling to London,” Johnson told reporters.”I think they will see a city that has made phenomenal progress in getting ready…by any measure, London is extraordinarily well prepared.”Princess Anne, daughter of Queen Elizabeth and a member of the International Olympic Committee (IOC) as well as a former Games competitor, will receive the flame from the president of the Hellenic Olympic Committee, Spyros Capralos, in the ceremony.

Greek president Karolos Papoulias, whose debt-stricken country risks bankruptcy and an exit from the European single currency, is also due to attend after naming a caretaker Prime Minister in an emergency government on Wednesday to lead Greece to new elections next month.
Former England soccer captain Beckham, born in east London where the new Olympic Park has taken shape, will play a role in the proceedings with five young Britons chosen for their commitment to sport and promoting Olympic values. The youngsters will join Princess Anne, who is president of the British Olympic Association, in receiving the flame.Greek rowing world champion Christina Giazitzidou will carry the flame into the stadium, built in 330BC and reconstructed for 1896, after it travels from its overnight perch on the golden rock of the Acropolis down through the centre of Athens.

The final two torchbearers will be Greek weightlifter Pyrros Dimas and Chinese gymnast Li Ning, who lit the cauldron at the 2008 Beijing Games.The lighting at ancient Olympia last week by an actress playing the role of high priestess brought bittersweet emotions for some of the spectators, emphasising how far Greece had fallen from its glorious past.Coe said the response to the torch relay around Greece since last Thursday had been extraordinary, despite the economic difficulties.”It’s reminded them that, for all the current challenges, you can’t expunge 28 centuries of history. This is uniquely theirs and a moment of celebration,” he said.

The flame will be kept overnight in lanterns at the British embassy in Athens and then flown on the golden-liveried ‘Firefly’, British Airways Flight 2012, to a navy base in Culdrose near Land’s End in south-west England.The 70-day, 8,000-mile (12,874-km) relay around Britain starts on Saturday and organisers hope it will spark an explosion of enthusiasm for the third Summer Games London has hosted.”This is really the beginning of the journey,” said Coe.”Once that flame starts its route…8,000 torchbearers within 10 miles of 57 million people over 1,000 villages, towns and cities, I think people will recognise that actually there is no turning back now. It’s theirs.” – PT

West Indies 243-9 against England

LONDON: West Indies, after losing the toss, were 243 for nine against England at stumps on the first day of the first Test at Lord’s here on Thursday.

 Shivnarine Chanderpaul was 87 not out after Stuart Broad ended play for the day by having Fidel Edwards caught behind for two to finish Thursday with figures of six for 72.This is the first of a three-Test series.Earlier, at lunch, Adrian Barath’s unbeaten 41 helped the West Indies to 83 for two at lunch on the first day of the first Test against England at Lord’s here on Thursday.West Indies were suffering an all too familiar top-order struggle at 32 for two after England strike bowler James Anderson had removed Kieran Powell and Kirk Edwards.

But opener Barath refused to be cowed and with Darren Bravo (27 not out) offering solid support in an unbroken stand of 51, the West Indies — who came into this match having won just two of their previous 30 Tests — got through the session without losing any more wickets against the world’s number one-ranked side.England captain Andrew Strauss won the toss and elected to field, doubtless hoping his seamers would exploit the overcast conditions.But with Barath unfurling several cover-driven boundaries, England did not have things all their own way.

Powell, who made a cenntury against the second-string England Lions last week, fell for five when Anderson, after moving several deliveries away from the left-hander, expertly swung one back in.Powell was late with his intended defensive shot and was bowled off stump to leave West Indies 13 for one in the ninth over.Anderson was in the wickets again when Edwards, aiming across the line of a full-length delivery, was lbw for one.At that stage, Anderson had taken two wickets for nine runs in 19 balls.But Barath struck his sixth four in just 25 runs when Stuart Broad felt the force of his cover-drive, while off-spinner Graeme Swann was denied a customary early wicket. – PT

Big Meal hits our Waistline

ISLAMABAD: There may be some truth to the saying `a moment on the lips, a lifetime on the hips`.

Scientists have found that once eaten, fat is stored on the waistline within hours – far faster than previously thought.Within just three or four hours of having a meal, up to two or three teaspoons of fat from the food gets stored.And if eaten again shortly afterwards, the fat stored around the middle will grow and grow.Those who like to tuck in at dinner should take particular note, as fat from meals eaten later in the day is especially likely to be stored around the middle.

The finding that it is possible to `become fat` within three hours contradicts the popular belief that weight gain is gradual.It was believed that fat from food was transported from the gut into the blood, where it could be used by the muscles as needed.Any excess was thought to be gradually removed and stored in the fatty, or adipose, tissue around the waist, hips and legs.However, the Oxford University research indicates a more complex – and rapid – process.In the experiments, volunteers ate fat, which could be traced around the body. This was found to take around an hour to be broken down in the gut and then enter the bloodstream as tiny droplets, the Daily Mail reported.

The droplets are then whisked around the body – but not for long – before they are `caught` and stored.“The process is very fast,” said Fredrik Karpe, professor of metabolic medicine.“The cells in the adipose tissue around the waist catch the fat droplets as the blood carries them and incorporates them into the cells for storage.”Only a small amount of the fat found in breakfast takes this route. But, by dinner, the amount increases to half. This is because of hormonal changes that occur later in the day which make it easier for the stores in the waistline to trap passing fat droplets.

In a dinner with 30g of fat, two to three teaspoons of lard will rapidly gather around the waist.However, the storage system is temporary, with the fat deposited quickly drawn on, or mobilised, to feed our muscles. But when we overeat, it is a different story, Professor Karpe cautioned.“If you eat too much, you don`t get into this phase of starting to mobilise it,” he said.“There will just be constant accumulation and you will start to put on weight,” he added. – Onlinenews

Pakistan Rangers Sindh

KARACHI: Pakistan Rangers Sindh on Thursday claimed to have arrested six suspects and recovered explosive material and weapons from their possession.

According to a release, they conducted a targeted operation in Pipri, Bin Qasim, within the limits of Steel Town police station and detained six suspects. They also recovered four Improvised Explosive Devices (IEDs), two kalashnikovs, four rifles, two repeaters, explosive detonators and ball bearings from their possession. Sources said all suspects belonged to a banned outfit.

When contacted, a Rangers spokesman denied giving any statement about the accused. Meanwhile, during the last 48 hours, Rangers conducted targeted raids and snap checking in different areas of the city, arresting 18 suspects and recovering 12 weapons of various calibers. – Dailytimes

Bagram airbase in Afghanistan

LONDON: The headquarters of the United States Department of Defence, Pentagon, has unveiled a precise scale model of Osama bin Laden’s Pakistan compound used to plan the Navy SEALs raid that ended in the al Qaeda chief being killed.

Wheeled out onto one of the Department of Defence headquarters hallways, the one inch to seven feet scale model is an exact replica of the Abbottabad building that the terrorist mastermind lived in for five years before his death in May 2011.Built in six weeks by the National Geospatial-Intelligence Agency and considered top secret until last week, the detailed recreation even contains a parked red van that intelligence officials often observed at the site.

Every tree, bush, door and fence is as it was prior to that May evening, created using satellite imagery, pictures from drones and actual CIA ground surveillance.“Nothing you see would have been included if we didn’t see it there,” said Greg Glewwe, who works with the National Geospatial-Intelligence Agency.To keep the entire model built from Styrofoam and acrylic as precise as possible, measurements were produced using a process called photogenic measurement, which uses shadows to work out specific heights.

“The mock-up was an instrumental device in planning the raid that killed Osama bin Laden,” said one unnamed US official involved with the planning and delivery of the US Navy SEALs raid to Fox News. Created months before the final go-ahead was given by US President Barack Obama, the model was first assessed by the CIA and other US intelligence agencies.The scale model was then presented to military officials such as Admiral Mike Mullen, then chairman of the Joint Chiefs of Staff, General James Cartwright, Mullen’s deputy, and Admiral William McCraven, head of Special Operations Command.

The model was used subsequently in the final preparations and planning for Operation Neptune Spear, the codename given to the helicopter-borne mission to kill Osama bin Laden.In addition to the smaller US-based model, the US Navy SEALs practiced at a one acre full-scale replica of the compound built at Bagram airbase in Afghanistan, known as Camp Alpha.The raid itself was completed shortly after 1am local time when bin Laden was shot once in the chest and once in the head by a US Navy SEALs who announced “for God and country Geronimo, Geronimo, Geronimo” because Geronimo was the codename given to the al Qaeda leader. The unveiling of the model came on the same day when US former defence secretary

Robert Gates said that he had doubts that bin Laden was in the compound.“We didn’t have one single piece of hard data that he was actually in that compound, not one,” said Gates to CBS this Morning co-host Charlie Rose. “The whole thing was a circumstantial case built by analysts at CIA. My view was, let’s kill him, but let’s use a missile of some kind.” – Dailytimes