Archive for February, 2010

Eurozone tells Greece to ready new cuts, taxes (AP)

Monday, February 15th, 2010 | Finance News

BRUSSELS – European finance ministers bluntly told Greece to prepare tougher spending cuts and new taxes in an attempt to snuff out a government debt crisis that has shaken the entire eurozone.

The 16 countries that use the euro warned Greece on Monday that it will need to take the extra measures if current cutbacks don't bring its massive deficit down — from a staggering 12.7 percent of economic output to a still-high 8.7 percent this year.

Greece has until March 16 to report back on its progress.

It was already under pressure for falsifying statistics for years to make its deficits look lower and is now under added scrutiny for using complex financial deals to mask debt going back to 2001.

Eurozone nations have pledged to help Greece if it can't repay its debts — but want Greece to make big spending cuts first. They are taking action because fears of a Greek default could spark a wider European debt crisis, threatening governments ability to borrow money.

"It's clear that we are all in this together. We won't abandon Greece," said French Finance Minister Christine Lagarde — who would likely lead a potential bailout along with Germany.

"Greece has to actually deliver and is beginning to deliver. Greece has to demonstrate on a day to day basis .. that it is committed to do what it takes," she told reporters.

Luxembourg Prime Minister Jean-Claude Juncker, who led the Monday talks, said Greece has agreed to take further action if it looks like it can't hit the target.

"On March 16 we will check to see whether Greece is achieving the targets it has set for itself," he said.

If it isn't on course, eurozone finance ministers — except Greece — would then vote on whether tougher action was needed and "would impose on Greece" extra measures, he said.

The details of new spending cuts would be agreed with the European Commission and would focus on raising value-added tax and energy taxes, setting new excise duties on luxury goods — including private cars — and new cuts to capital expenditure.

Juncker said Greece's debt crisis was "first and foremost a Greek problem and an internal Greek problem" and that he believed its program to reduce debt was "feasible."

But if Greece's budget plans and extra action does not slash the budget deficit, he said the eurozone would step in and "will take determined and coordinated measures to safeguard the stability of the eurozone as a whole," he said, repeating a statement from EU leaders last week.

He refused to give details about how the eurozone would come to Greece's financial rescue if it comes to that. European leaders also omitted details when they made the statement last week, though it appears to have partly calmed market fears — for the moment.

"We do not feel it would be wise to have a public discussion of such instruments, but if those instruments are called for, then you can take it that we will have those instruments," he told reporters.

Greek Finance Minister George Papaconstantinou called Monday on eurozone nations to say how a bailout would work, saying this would "stop markets from attacking Greece."

Market worries of a default have hiked the cost of Greek government borrowing in recent months and caused the euro to slide to a near nine-month low against the dollar.

Lagarde said the eurozone is now in "crisis management" mode and that the International Monetary Fund and the European Central Bank would join the European Commission in checking on Greece to make sure "that things are going in the right direction."

Greece says it isn't asking for financial help and won't need any — but it is facing a credibility crisis as the European Commission asks it to explain by the end of February how it used complex financial deals, called currency swaps, since 2001 that allegedly made its debt limits look lower.

A Feb. 1 report commissioned by the Greek finance ministry also warned of "significant debt revisions" for 2009 statistics due to swaps, debt to suppliers and state-guaranteed loans that may default.

It said some swaps are now "being done in order to transfer interest from the current year to the future, with long-term loss to the Greek state."

EU spokesman Amadeu Altafaj Tardio said such swaps weren't illegal unless the Greece was not using market rates to calculate the exchange rates used for the swaps. Greece never told the EU that it was using the swaps to mask debt, he said.

Papaconstantinou said some of the derivative contracts used in the past "were at the time legal" and that Greece is not using them now.

"We do want to restore credibility," he said. "We have enough trouble as it is convincing people that our numbers are real."

Greek finance ministry officials, speaking on condition of anonymity, told the Associated Press on Sunday that the government has met with most major international banks over the last months "to explore options and discuss their involvement in financing Greek national debt."

They said any financing would be transparent and in line with EU statistics rules.

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Associated Press writers Emma Vandore in Brussels and Demetris Nellas and Elena Becatoros in Athens contributed to this story.

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European markets edge up despite Greek debt fears (AP)

Monday, February 15th, 2010 | Finance News

LONDON – European stock markets won some respite Monday ahead of a meeting of eurozone finance ministers in Brussels, where the Greek debt crisis will inevitably top the agenda. Public holidays in Asia as well as the U.S. have kept volumes low.

The FTSE 100 index of leading British shares closed up 25.02 points, or 0.5 percent, at 5,167.47 while Germany's DAX rose 10.71 points, or 0.2 percent, at 5,511.10. The CAC-40 in France was 11.27 points, or 0.3 percent, higher at 3,610.34.

And with Wall Street closed Monday for the Presidents Day holiday, investors held back from launching a new attack on the euro, which remained steady over the day around the $1.36 mark. Last week, at the height of the Greek fiscal concerns, the euro had slid to a nine-month low of $1.3533, way down on December's high above $1.50.

The main point of interest in the markets continues to be the debt problems afflicting Greece, as finance ministers from the 16 euro countries gather in the wake of last Thursday's meeting of EU leaders. On Tuesday, the finance ministers of the full 27-nation European Union meet.

Though EU leaders gave Greece some vocal support, no money or guarantee was offered, primarily because Germany was not willing to stump up cash as that could undermine German bonds and put further pressure on the euro.

Instead, all agreed that Greece's progress in bringing down its budget deficit will be closely monitored and it would not be allowed to threaten the eurozone. Markets interpreted the latter comment as an implicit guarantee that eurozone policymakers will help the country if its own efforts fail.

An ensuing narrowing in spreads between German and Greek bonds — a sign that the markets think a Greek default is becoming less likely — and a more steady tone to the euro have diminished expectations that anything substantially new will emerge later.

Frederik Ducrozet, eurozone economist at Credit Agricole, said last Thursday's EU statement was interpreted as a "major commitment" to support Greece to avoid possible contagion risks to other countries like Portugal and Spain.

Greece's finance minister George Papaconstantinou said Monday that a detailed rescue plan from other eurozone nations would be the best way to soothe market fears that Greece could default on debt payments.

"My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what has been decided last Thursday," he said.

Dubai is also a growing market concern amid fears that the highly indebted emirate may repay creditors less than the amounts due — it was November's debt postponement from Dubai World, a government investment company with around $59 billion in debts, that stoked the markets' concerns about overborrowed countries.

Dubai's stock market fell sharply while the cost of insuring against the emirate's debts edged back up.

"The theme of sovereign debt risk is likely to remain on investors' agenda as fresh rumblings in Dubai make clear," said Neil Mackinnon, global macro strategist at VTB Capital.

Earlier, much of Asia was closed for the Lunar New Year holiday, including Hong Kong, Shanghai, Singapore and Seoul.

However, Japanese and Australian markets fell as investors reacted to China's move late Friday to curtail bank lending to cool off strong growth there.

Better-than-expected Japanese fourth quarter economic growth figures failed to lift Tokyo's benchmark Nikkei 225 index, which slid 78.89 points, or 0.8 percent, to close at 10,013.30. Analysts said that the monetary tightening in China — the second such move in a month — and uncertainty about the economic outlook in coming quarters weighed on sentiment.

Japan's gross domestic product grew at an annual pace of 4.6 percent in the October-December period, keeping Japan just ahead of China as the world's No. 2 economy. Japan's nominal GDP for the 2009 calendar year came to about $5.1 trillion, ahead of China's $4.9 trillion.

Australia's benchmark S&P/ASX200 fell 16.6 points, or 0.4 percent, to 4,545.5.

Wall Street is closed for the Presidents Day holiday.

Elsewhere, oil prices were flat, with benchmark crude for March delivery down 18 cents to $73.95 a barrel.

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Associated Press Writer Malcolm Foster in Tokyo contributed to this report.

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Microsoft replays Zune design for phone comeback (AP)

Monday, February 15th, 2010 | Finance News

BARCELONA, Spain – Apple Inc. rocked the wireless business by combining the functions of a phone and an iPod. Now, more than two years later, Microsoft Corp. has its comeback: phone software that works a lot like its own Zune media player.

The software, which was unveiled Monday at the Mobile World Congress, is a dramatic change from previous generations of the software that used to be called Windows Mobile. But Microsoft is, for now, sticking to its model of making the software and selling it to phone manufacturers, rather than making its own phones.

Microsoft's mobile system powered 13.1 percent of smart phones sold in the U.S. last year, according to research firm In-Stat. That made it No. 3 after Research In Motion Ltd.'s BlackBerry and the iPhone. But Microsoft has been losing market share while Apple and Google Inc.'s Android gained.

All the while, the market is becoming increasingly important. People are spending more and more time on their phones, and the devices steer people to potentially lucrative Web services and ads.

Phones with the new software will be on the market by the holidays, Microsoft said. All four major U.S. carriers will offer phones, just as they sell current Windows phones.

The new ones won't be called "Zune phones," as had been speculated. The software will be called "Windows Phone 7 series."

Forrester Research analyst Charles Golvin said the new software looked promising, but that it was also Microsoft's "final chance to get it right." He notes that those who have current Windows phones don't seem excited about the brand — many of them believe their phones are made by Apple or Nokia Corp., according to his firm's research.

Andy Lees, senior vice president of Microsoft's mobile communications business, said Windows Mobile suffered from the company's chaotic approach to the market. The software maker gave phone hardware makers and wireless carriers so much freedom to alter the system and install it on so many different devices that none worked the same way.

As a result, while other phone vendors such as Apple linked their hardware and software tightly to ensure a better experience, Windows Mobile might not have looked like it quite fit on a certain handset.

With the new software, "We really wanted to lead and take much more complete accountability than we had in earlier versions of the Windows phone for the end user experience," CEO Steve Ballmer said at the Barcelona launch event.

Microsoft is imposing a set of required features for Windows phones. Manufacturers must include permanent buttons on the phone for "home," "search" and "back"; a high-resolution screen with the same touch-sensing technology as the iPhone; and a camera with at least 5 megapixels of resolution and a flash. Hardware QWERTY keyboards will be optional.

A test device from Asus, which Microsoft used to demonstrate the new phone software for The Associated Press in Redmond, Wash., also had a front camera and a speaker.

The iPhone's success has spurred lots of look-alike phones with screenfuls of tiny square icons representing each program. Just as it did with the Zune, Microsoft has tried to avoid an icon-intensive copy of that setup. Instead, it relies more on clickable words and images pulled from the content itself. For example, if you put a weather program on the device's home page, it shows a constantly updated snapshot of conditions where you are, rather than a static icon that you have to click in order to see the weather.

The idea of pulling information from different Web sites, like Facebook, and presenting them on the phone's "home" screen isn't unique to Microsoft: Motorola Inc. and HTC Corp. have created such software for their own phones.

Windows Phone 7 Series borrows the clean look of the Zune software, departing from the more "computer screen" look of earlier Microsoft efforts. These were also reliant on the user pulling out a stylus for more precise maneuvering, while the software is designed to be used with the fingers. It's not clear how older third-party application designed for the stylus will work on the new phones.

Most of the built-in applications complement or connect with existing Microsoft programs or services, such as the Bing search engine. The games "hub" connects to an Xbox Live account and lets players pick up where they left off with multiplayer games. They will even be able to play games against PC users. Microsoft also turns to the Zune programming for the phones' entertainment hub, much in the way the iPhone's music library is called iPod. And when users plug the phone into a PC, the Zune software pops up to manage music, movies and podcasts.

About 18 months ago, Microsoft stopped most improvements to its existing smart-phone operating software and started from scratch on Windows Phone 7 Series.

Microsoft "is resolved at a company level to be successful in mobile," Lees said. He indicated Microsoft is willing to spend hundreds of millions of dollars on marketing to ensure it's successful.

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Jessica Mintz contributed from Redmond, Wash.

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