Global Economy Lights are flashing, says PM

“Red warning lights” are again flashing over the state of the global economy, the Prime Minister has warner.

Speaking after the G20 meeting of world leaders, David Cameron said a “dangerous backdrop of instability” threatened Britain’s recovery, and we should stick to our long-term plan”.

In a Guardian article, he warned of the impact from conflicts, low growth and a eurozone “on the brink” of another recession.

He said: “The Eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too.

“Emerging markets, which were the driver of growth in the early stages of the recovery, are now slowing down.”

By contrast, the Bank of England has forecast that the UK economy will grow by 3.5% in 2014, remaining resilient in the face of the “subdued world demand”.

But it its latest update last week, it also warned that there were risks from the global economic situation and it revised down its forecasts for UK output next year.

Source: 

Find us on Google

EU TO RAISE CAPITAL RESERVE RATIO FOR BANKS

Europe’s biggest banks could see the amount of capital they are required to hold in reserve more than double. Current plans due to be fully implemented within the next seven years could require banks to hold a minimum of 7% of core capital to act as a buffer against potential losses. However, the EU is now considering requiring the banks to have as much as 17% in reserve in an attempt to avoid another Lehman style bank collapse. The Treasury is preparing a White Paper on new capital rules for UK banks that is expected to be published soon. It will pave the way for putting into law the recommendations of the Independent Commission on Banking for restructuring the UK banking industry. Under the rules, British retail banking businesses would be required to maintain a minimum core capital ratio of 10%, to ensure that retail deposits are not put at risk in a future crisis. http://straightalkdebt.com/

Portugal borrowing costs fall after ECB action

Portugal’s borrowing costs declined at a successful auction of €1.5bn of shorter-term government debt, after the European Central Bank intervened in the country’s sovereign debt market earlier this week to subdue soaring bond yields.

The six-month notes due in July 2012 were issued at an average yield of 4.463 per cent, according to Portugal’s IGCP debt management agency, compared with an average yield of 4.74 per cent at a previous auction on January 18.

The Portuguese debt agency also sold €750m of three-month bills due in May at an average yield of 4.068 per cent, down from an average yield of 4.346 per cent at a previous auction on January 18.

Concerns that the sharp lurch in Portugal’s borrowing costs could lead to contagion spurred the ECB’s intervention. Its action has helped send bond yields, which move inversely to prices, tumbling over the past two days. Portuguese 10-year bond yields fell as much as 161 basis points on Tuesday, the biggest daily fall this year, as the ECB bought debt for the second day in a row.

The 10-year benchmark bond yield fell 80bp to 14.1 per cent on Wednesday, down from a peak of 16.7 per cent earlier this week.

Read more: http://www.ft.com/cms/s/0/47482298-4cf4-11e1-bdd1-00144feabdc0.html#axzz1mrqfWnm8