Bankrupt Banker

Receiver's concern over Sean Quinn bankruptcy

Sean Quinn was declared bankrupt earlier this month The receiver appointed to oversee Sean Quinn's bankruptcy has expressed concerns about the statement of affairs submitted to the High Court in Belfast. Lawyers for the receiver told a court in Dublin that the statement appeared to be unsatisfactory. The former Anglo Irish bank is trying to get loans of more than 2bn euros repaid by Mr Quinn. However, the case has been complicated by Mr Quinn's recent bankruptcy declaration in Belfast's High Court. On Monday, the official receiver sought to have the case in Dublin adjourned. The bank is also bringing an application to have Mr Quinn's bankruptcy annulled, because the institution maintains his centre of interest is in the Republic and not Northern Ireland. That case will go before the Belfast courts later this week. By declaring himself bankrupt in Northern Ireland, Mr Quinn once believed to be Ireland's richest man - would only have to wait a year before going back into business, rather than 12 years in the Republic. The 63-year-old was stripped of control of his manufacturing and insurance business empire in April.

Receiver's concern over Sean Quinn bankruptcy

Sean Quinn was declared bankrupt earlier this month The receiver appointed to oversee Sean Quinn's bankruptcy has expressed concerns abo...

Don't just book it, Thomas Cook it. So runs the slogan. Would you

<a href="http://www.thisislondon.co.uk/markets/article-24012743-can-we-trust-cook-not-to-make-a-dogs-dinner-of-our-holidays.do"> </a>Don't just book it, Thomas Cook it. So runs the slogan. Would you? Here's interim (that's reassuring) chief executive Sam Weihagen doing his safe-as-houses routine: "It's business as usual. We are trading within all our covenants. We have all the protection in place like any other travel company, and customers should not worry at all." Well, not quite like any other travel company. Thomas Cook of course holds an Air Travel Organisers' Licence from the Civil Aviation Authority which means customers should get their money back in the event of calamity. But the simple fear of being stranded a week after passengers of Austria's Comtel Air had to bribe pilots with £20,000 just to return to Birmingham is bound to unsettle would-be customers. There's a circle at work here and it is vicious. Given the choice between a similarly priced holiday with Thomas Cook or, say, Thomson, why would you risk the former? To counteract this, Thomas Cook might have to slash prices. That will eat into margins, cut profits and put banking covenants at risk. It might very quickly find it needs to borrow even more money. The company insists: "This is a robust business that has a strong future". We'll see.

Don't just book it, Thomas Cook it. So runs the slogan. Would you

Don't just book it, Thomas Cook it. So runs the slogan. Would you? Here's interim (that's reassuring) chief executive Sam Wei...

Spanish yields soar in T-bill sale

Spain’s Treasury saw yields rise to painfully high levels on Tuesday when it sold three-month bills at an average yield of 5.11 per cent, ...

China property dip sparks bank fears

The number of property transactions in China’s largest cities has fallen to dangerously low levels, according to regulatory documents obtained by the Financial Times. According to the documents, the China Banking Regulatory Commission earlier this year ordered domestic banks to weigh the impact of a 30 per cent decline in housing transactions in “stress tests” aimed at determining the health of the Chinese financial system. More ON THIS STORY Video Imbalances are rocking China’s economy Stress tests leave unanswered questions Shanghai shines a light on China’s economy Editorial China’s bank reform Graphic China property map ON THIS TOPIC China fears lasting worldwide recession China warns US on territory disputes Lex Solar power David Pilling How America should adjust to the Pacific century While the government has been trying to rein in sky-high property prices, a Chinese real estate slump would have a significant ripple effect on the global economy. Property construction accounted for more than 13 per cent of China’s economy last year. In April the CBRC told banks to test their loan books against a 50 per cent fall in prices, and also a 30 per cent fall in transaction volumes. In October, however, property transactions fell 39 per cent year-on-year in China’s 15 biggest cities , according to government data. Nationwide, transactions dropped 11.6 per cent, accelerating from a 7 per cent fall in September. The fall-off in transactions has affected developers’ cash flows and, in some cases, their ability to repay bank loans. Rising defaults after a lending surge in 2009 and 2010, much of which ended up in the property sector, were cited by the International Monetary Fund this month as one of the Chinese financial sector’s biggest risks. The CBRC has not released the results and declined to comment. But one analyst who reviewed the stress-test documents said they did not take into account the impact that fewer transactions and lower property prices would have on bank collateral. “If developers can’t sell property and local governments can’t sell land, it’s hard to see why banks would be any better at either task under such conditions,” the analyst said. Chinese regulatory officials admit privately that the tests need to be improved. One senior official said banks were often unaware that loans to big state-owned enterprises had been funnelled to real estate subsidiaries, and acknowledged that the impact on collateral had not been fully taken into account. The weaknesses in the Chinese scenarios echo earlier problems with stress testing in the European Union, where regulators underestimated the potential impact of a sovereign debt crisis. The fear is that the impact of a bursting of the Chinese property bubble could yield a crisis just as dramatic as the one now unfolding in Europe. Rising defaults after a lending surge in 2009 and 2010, much of which ended up in the property sector, were flagged by the International Monetary Fund this month as one of the major risks hanging over the Chinese financial sector. While Beijing’s campaign to cool the property market has had its intended effect, some analysts worry that the government has underestimated the impact its measures are having. The measures, including higher downpayments and restrictions on home purchases, have taken nearly two years to gain traction.

China property dip sparks bank fears

The number of property transactions in China’s largest cities has fallen to dangerously low levels, according to regulatory documents obta...

Spain likely to see new protests after election

Spain is likely to see renewed street protests after an election that brought a conservative government bent on austerity to power but als...

euro zone's debt crisis swept closer to the heart of Europe

euro zone's debt crisis swept closer to the heart of Europe despite a clear-cut election victory in Spain for conservatives committed to austerity, adding to pressure on the European Central Bank to act more decisively. Spain's Socialists became the fifth government in the 17-nation currency area to be toppled by the sovereign debt crisis this year. Portugal, Ireland, Italy and Greece went before, while Slovakia's cabinet lost a confidence vote last month and faces a general election in March. An absolute parliamentary majority for Mariano Rajoy's centre-right Popular Party brought no respite on financial markets increasingly alarmed by the absence of an effective firewall to halt a meltdown on sovereign bond markets. Rajoy kept investors, and Spaniards, guessing about his plans to tackle the crisis, saying the constitution will make him wait until just before Dec. 25 to name an economy minister and explain how he will get five million people back to work. The risk premiums on Spanish, Italian, French and Belgian government bonds rose as investors fled to safe-haven German Bunds, while European shares fell more than 3 percent after Moody's warned that France's credit rating faced new dangers. "This crisis is hitting the core of the euro zone. We should have no illusions about this," European Economic and Monetary Affairs Commissioner Olli Rehn said. He defended the European Union executive's advocacy of austerity policies blamed for choking off growth and jobs. "One simply cannot build a growth strategy on accumulating more debt, when the capacity to service the current debt is questioned by the markets," Rehn told a Brussels seminar. "One cannot force foreign creditors to lend more money, if they don't have the confidence to do it." Greece's new technocrat prime minister, Lucas Papademos, on his maiden trip to Brussels, won an assurance that euro zone finance ministers should be in a position to agree at their next meeting, next Monday, to disburse vital bailout funds to avert bankruptcy. Papademos was expected to meet European Central Bank chief Mario Draghi on Tuesday evening in Frankfurt. Borrowing costs for both Spain and Italy hit levels regarded as unsustainable last week before the European Central Bank stepped in temporarily to steady the market. Two newspapers said the ECB's governing council had imposed a weekly limit of 20 billion euros on purchases of euro zone government bonds, a figure analysts say prevents it wielding massive deterrent power in the markets. Germany's central bank has led resistance to the bond-buying it sees as inflationary. The latest weekly figures released on Monday showed the central bank bought nearly 8 billion euros in the week to last Wednesday, far below that reported limit in a week when Italian and French spreads hit euro era highs. Critics say this reluctant, piecemeal approach is aggravating the situation rather than restoring confidence. ECB governing council member Ewald Nowotny, regarded as a dove, told a conference in Vienna that the central bank could not simply start printing money but would have to discuss its next response to the crisis. "What we certainly have to discuss is what is a role for the ECB in these difficult times, but this is also something we will discuss in Frankfurt at the appropriate time," he said.

euro zone's debt crisis swept closer to the heart of Europe

euro zone's debt crisis swept closer to the heart of Europe despite a clear-cut election victory in Spain for conservatives committed ...

Gang targets wealthy diners

Diners at some of the city's most popular restaurants had their credit card details stolen by waiters working for gangs, who targeted customers with American Express black cards, then spent millions of dollars on expensive clothes and vintage wine, it is alleged. The cards of wealthy customers at Smith & Wollensky, the Capital Grille and Wolfgang's Steakhouse restaurants were allegedly "skimmed" and used to buy Rolex watches, Jimmy Choo shoes and Chanel handbags. Almost 30 people have been charged with crimes, including racketeering, conspiracy and grand larceny, after the alleged fraud ring was broken by police in Manhattan. Seven waiters at the restaurants are alleged by prosecutors to have been recruited by Luis Damian "D.J." Jacas, the 41-year-old alleged ringleader, and equipped with card-copying devices. They were instructed to focus on customers with premium credit cards, including the American Express black card, so that expensive purchases would not trigger alerts to customers. "The thieves were very selective, waiting until they were handed cards with extremely high or unlimited credit," said Manhattan district attorney Cyrus Vance.

Gang targets wealthy diners

Diners at some of the city's most popular restaurants had their credit card details stolen by waiters working for gangs, who targeted ...

The government has dismissed as false rumors that it is bankrupt.

The government has dismissed as false rumors that it is bankrupt. The romors have been citing late payment of salaries to civil servants and disbursement of funds to institutions, including district councils. Mustafa Mkulo , Minister for Finance and Economic Affairs speaking to The Guardian on Sunday in Dodoma over the weekend denounced reports published by a section of media about the government running bankrupt. “So far all the salaries of civil servants have been paid. It is possible that there was a delay but the problem was not caused by claims that the government was broke,” Mkullo said. He explained that all salaries are paid from the domestic revenue, adding that the Tanzania Revenue Authority (TRA) collections between July and October reached the 99 per cent of the target. “It is possible there are some technical problems. The monthly economic review of the Bank of Tanzania (BoT) issued in September showed the revenue collections had risen to Sh487bn for August down from Sh449bn during the preceding month. The increase in revenue collections is attributed to amplified use of Electronic Fiscal Devices (EFD). There was abnormal late payment of salaries in October and in some cases until November 7. An official of Parliament who preferred anonymity told The Guardian on Sunday in Dodoma over the weekend was also of the opinion that the government was facing financial problems. According to him, allowances for Bunge workers for the 4th Parliamentary meeting that ended in August this year were settled about four days before the Parliamentary Standing Committee began convening in Dar es Salaam, ahead of the Parliamentary meeting that ended in Dodoma yesterday.

The government has dismissed as false rumors that it is bankrupt.

The government has dismissed as false rumors that it is bankrupt. The romors have been citing late payment of salaries to civil servants and...

Fall of ‘Mighty Quinn’ mirrors Irish collapse

He was once Ireland’s richest man, with a personal fortune estimated at $6bn and all the trappings of the very wealthy – a helicopter, a private jet and a string of international properties. But in a Belfast court this month Sean Quinn was declared bankrupt with debts of €416m ($563m) and just over €11,000 in his bank accounts. Nicknamed the “Mighty Quinn” for his tenacity in business, he founded the Quinn Group with a £100 loan in 1973 and built it into a conglomerate that ranged from cement to insurance. But a disastrous multibillion-euro gamble on the share price of Anglo Irish Bank prompted Mr Quinn’s spectacular fall from grace. More On this story Liberty and Anglo acquire Quinn Insurance Once-richest Irishman declared bankrupt In depth Ireland fiscal crisis Liberty Mutual moves in on Quinn empire Lex Ireland and its banks On this topic Irish angry over budget leak to Germany Students protest in Dublin over fees N Ireland cross-border road plan scrapped Tourism twinkles in the Irish murk “My employment has been effectively terminated [without compensation],” said Mr Quinn in the debtor’s petition he filed to the High Court in Belfast, where he lists his assets as a 2004 Mercedes and a £35,000 ($55,000) plot of land he owns with his wife. The rise and fall of the 63-year-old businessman mirrors Ireland’s Celtic Tiger boom and bust. It has also sparked one of the most expensive and bitter legal battles in Irish history. Mr Quinn lost control of Quinn Insurance – one of the three main parts of the Quinn Group – in March 2010 when the Irish financial regulator placed the company into administration for failing to rectify a solvency shortfall. A year later Anglo enforced its security over €2bn in loans issued to the Quinn Group. A receiver was appointed, which led to Mr Quinn and other family members being stripped of their positions in the Quinn holding company. Anglo, which was nationalised in 2009 at an estimated cost of €25bn-€30bn to Irish taxpayers, recently sold the Quinn insurance business to US firm Liberty Mutual and is restructuring the debt of the Quinn manufacturing business. Neither deal did much to reduce the overall Quinn debt to Anglo. Anglo alleges ‘conspiracy’ over property portfolio Anglo Irish Bank alleges that the Quinn family are involved in a “conspiracy” to move hundreds of millions of euros in property assets beyond the reach of the state-owned lender, writes Jamie Smyth. The bank has filed lawsuits in Ireland, Sweden, Ukraine and Cyprus to try to prevent the transfer of flagship properties, which it claims are mortgaged to the bank. It is also seeking to lift legal injunctions obtained by the Quinn family to prevent the bank seizing control of the properties. In an affidavit to a Cypriot court – where one of the main Quinn property firms is registered – Anglo alleges that the interests in Russian companies with assets worth about $188m were wrongly transferred for the benefit of Quinn family members for a nominal sum of €1,000 ($1,351). The property assets held by the Russian companies include the 20 storey Kutuzoff tower in central Moscow, which is estimated to be worth $188m. In Ukraine Anglo is seeking to overturn a court injunction preventing it from gaining control of the Ukrainia department store in central Kiev, which is worth about $80m. Anglo is also seeking to secure the rent roll from the Quinns’ Ukrainian properties, estimated to be worth about €30m a year. The Quinn family oppose Anglo’s claims. They say the loans advanced by the bank were “illegal and unenforceable” and they are protecting the assets on the basis of strong legal advice. The Quinn property portfolio includes several flagship properties including: the Q City office development in Hyderbad, India; the Casipy business centre in Moscow; and the Leonardo business centre in Kiev, Ukraine. In 2007 Mr Quinn took a huge gamble on Anglo’s share price using contracts for difference, an anonymous form of investment that allows the holder to bet on price movements without buying the shares outright. Mr Quinn amassed a CFD-based holding in Anglo of close to 30 per cent, initially funding the bets with a €750m loan from the Quinn Group. But when the bank’s share price began falling sharply, the Quinn Group was advanced loans by Anglo to cover the CFD position. It is not just Mr Quinn and taxpayers who stand to lose from the bet on Anglo. His decision in 2002 to transfer ownership of the Quinn Group to his five children has placed the family at the centre of one of several legal cases. Anglo is pursuing the Quinn family for alleged debts of €2.88bn, which are related to loans advanced to the Quinn Group to fund the CFD transactions, property acquisitions and other deals. It is also challenging Mr Quinn’s decision to locate his bankruptcy in Northern Ireland, which has much more lenient insolvency regime than in the Republic of Ireland, where bankrupts must wait up to 12 years to be discharged. Anglo alleges that Mr Quinn owes more than €2bn, not the €416m he claims. It claims his main centre of interest is in the Republic of Ireland. On Monday in the Dublin High Court Anglo will seek a €2bn summary judgment order against Mr Quinn. In a statement to the Financial Times the Quinn family said they were “saddened that Anglo at the expense of the Irish taxpayer continues to persecute” their father in relation to his bankruptcy. The bank is engaged in a legal battle with the Quinn family for control of the third element of the Quinn Group – a €500m property empire spanning the UK, Ireland, Czech Republic, Ukraine, Russia, Turkey and India. This portfolio is the jewel in the crown of the Quinn group and the only hope of repaying some of the alleged €2.8bn debt to Anglo. The Quinn family itself is suing Anglo. They claim the bank advanced €2.34bn in loans to fund the CFD margin calls to support its share price. They allege that Anglo’s former chief executive David Drumm and chairman Sean Fitzpatrick advanced the loans to the Quinn Group in the full knowledge the money was being used to meet the CFD margin calls. They say the loans are “tainted with illegality” because they had an objective of market manipulation and therefore are not enforceable. Anglo, which has recently been rebranded Irish Bank Resolution Corporation, denies these claims.

Fall of ‘Mighty Quinn’ mirrors Irish collapse

He was once Ireland’s richest man, with a personal fortune estimated at $6bn and all the trappings of the very wealthy – a helicopter, a pri...

IRISH Bank Resolution Corporation is to ask the courts in Northern Ireland to overturn the bankruptcy of businessman Seán Quinn.

THE IRISH Bank Resolution Corporation is to ask the courts in Northern Ireland to overturn the bankruptcy of businessman Seán Quinn. The bankruptcy was secured last Friday with no notice to the bank, which initiated proceedings nine days earlier for summary judgment orders for more than €2 billion against Mr Quinn. IBRC, formerly Anglo Irish Bank, is pressing ahead with its action here and Mr Justice Peter Kelly said yesterday it was “clearly at issue” whether the bankruptcy was properly obtained or, as the bank alleged, contrived to frustrate its case. The corporation had “telling” information concerning Mr Quinn’s centre of main interests which was not before the Northern courts and left open the suggestion the bankruptcy was contrived and “forum shopping” as the Northern bankruptcy regime was more lenient than here, he said. The corporation only yesterday received the bankruptcy petition which, its counsel Paul Gallagher SC said, asserted Mr Quinn’s centre of main interests is in Northern Ireland because companies of his are registered at Derrylin, Co Fermanagh, and he is domiciled for taxation there. The petition also set out a “not complete” schedule of his debts, referring to debts of €416 million and £375 million, while the cause of bankruptcy was described as due to his ongoing dispute with the corporation. It was “extraordinary” for Mr Quinn to claim he first had difficulty paying his debts in April 2011 when he had provided guarantees of some €2.8 billion relating to companies which he knew could not pay. The bankruptcy was “obviously planned”. The judge agreed to admit the application for €2 billion summary judgment orders against Mr Quinn to the Commercial Court but adjourned the hearing of the application to Monday next to allow the trustee in bankruptcy in the North to consider if he wishes to be represented. Mr Quinn’s claim that his centre of main interest is Northern Ireland was set out in one sentence and was “seriously at odds” with the raft of information suggesting Mr Quinn’s commercial activities and residence is here and the money was borrowed from an Irish bank governed by Irish law, the judge said. “To go North certainly raises a few questions, to put it at its lowest.” The issue of annulment of bankruptcy was for the Northern courts to decide but, as of now, there was no impediment to the bank bringing legal action here against Mr Quinn, he added. That action was for “astonishing” sums arising mainly from guarantees of borrowings of companies associated with Mr Quinn including for “ventures, or adventures” in places as far away as Russia and India. Aidan Redmond SC, for Mr Quinn, earlier asked the judge to adjourn or stay the bank’s application for admission but the judge ruled, as Mr Quinn was a bankrupt and his counsel was not instructed by the trustee, Mr Quinn had no legal standing to make that application. Mr Quinn could not “have his cake and eat it” and he was not sympathetic to giving him any indulgence, the judge remarked. Mr Gallagher, objecting to any stay, said he wondered how Mr Quinn, said to have assets of only €50,000 having been one of the richest men in Ireland, could be represented by lawyers making “beguiling and Delphic utterances”. Mr Justice Kelly also admitted to the court the bank’s additional application for €3 million summary judgment orders against Mr Quinn and his wife Patricia arising from personal borrowings. He rejected arguments by Bill Shipsey SC, for Ms Quinn, that delay by the bank in moving against Ms Quinn disentitled it to the fast-track procedures of the Commercial Court. This was a “well-resourced bank” and his client was a housewife who had not personally benefited from the loans, counsel said. The judge said “context is everything” and there was no culpable delay by the bank as it had been involved in extensive negotiations to try and save the Quinn Group’s business. Ms Quinn was a director of several Quinn companies and this bank was “well-resourced by the taxpayer”, he added. The bank had brought three actions, the largest being a claim for summary judgment against Mr Quinn for sums of €1.05 billion, $808 million and 13.8 billion yen brought under his guarantee of November 2007 in relation to the liabilities of Quinn Finance. In affidavits, the bank said that, due to the scale of the borrowings and the large number of jobs dependent on the Quinn Group businesses, it had negotiated with Mr Quinn for some time rather than immediately call in the loans.

IRISH Bank Resolution Corporation is to ask the courts in Northern Ireland to overturn the bankruptcy of businessman Seán Quinn.

THE IRISH Bank Resolution Corporation is to ask the courts in Northern Ireland to overturn the bankruptcy of businessman Seán Quinn. The ban...

Alice Walton, heiress to the Walmart supermarket fortune and the the 10th richest woman in the United States, opened a spectacular fine art museum in her home town

<div></div><div><div id="main-content-picture" style="margin-top: 0px; margin-right: 0px; margin-bottom: 14px; margin-left: 0px; border-collapse: collapse; color: #333333; font-family: arial, sans-serif; line-height: 18px; background-color: #ffffff; background-repeat: no-repeat no-repeat; padding: 0px;"><img alt="Moshe Safdie" height="276" src="http://static.guim.co.uk/sys-images/Admin/BkFill/Default_image_group/2011/11/19/1321714678805/Moshe-Safdie-007.jpg" style="border-collapse: collapse; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;" width="460" /><div class="caption" style="border-collapse: collapse; color: #666666; font-size: 12px; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;">Architect Moshe Safdie looks out of a window next to a large red untitled magnifying disk sculpture by artist Fred Eversley at Crystal Bridges Museum of American Art in Bentonville, Arkansas. Photograph: Danny Johnston/AP</div></div><div id="article-body-blocks" style="border-collapse: collapse; color: #333333; font-family: arial, sans-serif; line-height: 18px; background-color: #ffffff; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;">When Alice Walton, heiress to the <a href="http://www.guardian.co.uk/business/wal-mart" style="border-collapse: collapse; color: #005689; text-decoration: none; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;" title="More from guardian.co.uk on Walmart">Walmart</a> supermarket fortune and the the 10th richest woman in the <a href="http://www.guardian.co.uk/world/usa" style="border-collapse: collapse; color: #005689; text-decoration: none; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;" title="More from guardian.co.uk on United States">United States</a>, opened a spectacular fine art museum in her home town, she might have expected plaudits and gratitude. It hasn't quite worked out that way.The long-awaited opening of the Crystal Bridges Museum for American Art in Walton's home town of Bentonville, Arkansas, has provoked mixed reactions. Some have celebrated the unveiling of a significant new private art institution, but many have criticised the decision to spend $1.4bn of company and family foundation money as the retail colossus cuts back its workers' benefits.Protesters at the museum have informally joined forces with the Occupy Wall Street camps across the US and point to growing ties between the Occupy movement and established trade unions.The museum, which opened last weekend and features a survey of American art from Benjamin West to Georgia O'Keefe, from Norman Rockwell to Andy Warhol, and from Joan Mitchell to Walton Ford, has also come under criticism from within the art establishment for both inflating values and buying masterpieces from impoverished art institutions without giving local institutions a chance to match Walton's offer.While historians point out that this is little different from 19th-century robber barons such as Henry Clay Frick and Andrew Carnegie amassing vast collections of European art and bringing it to America, the prospect of hundreds of masterpieces in rural Bentonville, two hours' drive from Tulsa, is still controversial.Walton, at 62 the youngest of Walmart founder Sam Walton's four children, started buying specifically for the project in 2005. The Moshe Safdie-designed institution, which sits in 120 acres of dogwood trees and trails minutes from downtown Bentonville, already has 440 works on display and 800 in storage."We set market records for very few pieces that we purchased," says curator, David Houston. "But there is latent criticism from an east coast elite that bringing a famous painting like Thomas Eakins's [$68m] Gross Clinic to Arkansas is itself an act of cultural vandalism. We're bringing art to the public, but it's a different kind of public, and there are social and political connotations to that."In the week since Crystal Bridges opened, it has already seen 5,000 registered visitors. "Sheer curiosity and hunger for an institution like this bears out Alice Walton's vision," Houston says.Ben Waxman, spokesman for the union-affiliated Making Change@Walmart, said: "Opening a huge, opulent museum in the middle of nowhere while the company is cutting health insurance for its employees is troubling. It sends the message Wal-Mart doesn't care about them."The issues of wealth distribution that have brought art into conflict with the labour movement at Crystal Bridges have also been on display at Sotheby's during the billion-dollar modern, impressionist and contemporary sales earlier this month in New York.Since August, when Sotheby's dismissed 43 unionised art handlers, its salesrooms have been besieged by Teamsters union members, bearing an inflatable rat and a fat cat banker with a cigar in one hand and throttled worker in the other. "The company is having its most profitable year in 267 years and they locked us out in the middle of our contract," said Teamsters member Phil Cortero. "Sotheby's represents the richest people in the world. When you lose your shirt down on Wall Street you come and hock your stuff here."Increasingly, the Teamsters are joined by Occupy Museum activists, chanting "We are the 99%!" They <a href="http://www.guardian.co.uk/world/protest" style="border-collapse: collapse; color: #005689; text-decoration: none; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;" title="More from guardian.co.uk on Protest">protest</a> that the multimillion dollar art handled by auction houses is used to maintain and transfer the wealth of the 1%.Outside Christie's, which is not involved in the dispute, Los Angeles property developer Eli Broad, one of America's wealthiest men, confirmed as much to the New York Times. "People would rather have art than gold or paper," he said.OWS Labor Outreach member Mike Friedman said that Occupy had no problem with the art itself. "But at a time when we're seeing cutbacks in health and education spending, we're seeing the transfer of wealth by way of tax cuts and subsidies to an elite who use excesses of that transfer to buy these magnificent works of art."With the end of the Zuccotti Park sit-in, Occupy says it plans to initiate focused protests against cultural institutions associated with big Wall Street donors. It has singled out Lincoln Center, home to the New York Philharmonic, the Metropolitan Opera and New York fashion week, which is financially supported by Tea Party funder David Koch.Back at Crystal Bridges, Houston argues that it will take years to see the full effect of how the Walton family has used its wealth. The family foundation is active in a whole variety of charitable activities, many of them educational, he says. "Their intent is not to create a shrine to an individual or even a family. Their goal is to create a tremendous cultural resource in this part of the world."</div></div>

Alice Walton, heiress to the Walmart supermarket fortune and the the 10th richest woman in the United States, opened a spectacular fine art museum in her home town

Architect Moshe Safdie looks out of a window next to a large red untitled magnifying disk sculpture by artist Fred Eversley at Crystal Bridg...

British bonds win 'safe haven' tag in eurozone debt storm

British government bonds are attracting strong support, in sharp contrast to their troubled eurozone peers as investors seek a safehaven f...

German chancellor may have an unexpected ally in David Cameron, the U.K. prime minister.

<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Even as opposition grows to Angela Merkel's campaign for an overhaul of the European treaty, the German chancellor may have an unexpected ally in David Cameron, the U.K. prime minister.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">When Mr. Cameron meets Ms. Merkel for talks in Berlin on Friday, he is expected to offer to back limited changes to the European treaty in exchange for guarantees that the U.K. will continue to have an explicit opt out from tighter fiscal rules. Mr. Cameron also wants guarantees that none of the changes Ms. Merkel envisages will hurt London as a global financial center, according to U.K. officials familiar with the matter.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Mr. Cameron and his finance minister, George Osborne, have openly backed the need for greater euro-zone integration, even if it requires treaty change. Berlin's more ambitious changes—if they help stabilize the euro zone—could therefore be quietly welcomed in Whitehall, where the knock-on effects of the euro zone's troubles on the U.K. economy are the major concern.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">But there are two catches, U.K. officials say. First, Britain would want explicit recognition that it would not be bound by tighter fiscal rules—extending the opt-out it currently enjoys in Brussels for running large deficits. If it gets this, it could help the government argue there is no need for a referendum on the treaty changes, officials say. The U.K. coalition government has written into law a pledge to hold a vote if further U.K. powers are transferred to Brussels. Second, it also wants safeguards to make sure that as euro-zone integration tightens it wouldn't be locked out of key decisions on the single market or on regulatory decisions that would affect the City of London.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Ensuring London's special status outside the euro-zone could be the way for Berlin and Brussels to gain Mr. Cameron as a powerful ally in their bid to revamp the European Union. A show of support from Mr. Cameron would be a welcome sign for Ms. Merkel, who has faced a week of constant criticism of her drive for treaty change from visiting leaders ahead of the Dec. 9 European Council meeting.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Ms. Merkel faced fresh opposition to the plan on Thursday amid warnings that euro-zone integration without involving the broader EU could be driving a wedge between the 17 euro-zone members and the remaining 10 EU members who aren't in the currency club.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Members outside the euro zone are growing increasingly concerned that the 17-member currency bloc is distancing itself from the other 10 member states in the broader EU. Many of the decisions taken to combat the euro-zone debt crisis, which also have a direct impact on the whole EU, are taken by a small group of euro-zone officials.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Concerned about the growing split, Danish Prime Minister Helle Thorning-Schmidt said after meeting Ms. Merkel in Berlin that the EU as a whole must deal with the crisis and, in another blow for Ms. Merkel, rejected the chancellor's pleas for wide-ranging changes to the European treaty. "In the crisis we are now facing, it is perhaps more important that the 27 member states stick together," Ms. Thorning-Schmidt said at a joint news conference with Mrs. Merkel. "It is exactly when we have a crisis that we should stick together as the European Union, use our institutions and use the community method."<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Irish Prime Minister Enda Kenny was in Berlin for talks on Wednesday and also rejected Ms. Merkel's bid for treaty changes, saying the existing European treaty provides all the tools Europe needs to deal with its debt crisis.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Mr. Cameron has expressed concern that a growing split between euro-zone members and the other 10 EU countries will leave the U.K. frozen out of decision making on key issues like financial regulation. He is concerned that if the euro-zone countries obtain greater fiscal-policy union, the bloc could form a caucus within the EU to make changes at the expense of the member states outside the common currency. To assuage these concerns, Mr. Cameron may support Ms. Merkel's bid for treaty change if the U.K can receive protection of its interests.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Speaking at a conference before her meeting with Ms. Thorning-Schmidt in Berlin on Thursday, Mrs. Merkel acknowledged that there were "certain tensions" between the euro states and those outside the currency club. After the meeting, Mrs. Merkel sought to calm any fears of a split in the EU.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">"Even though the euro member states surely have to resolve a few problems among their 17 member states, we will never forget that the 27 belong together, that the internal market is the foundation upon which the euro can work," she said during the news conference in the chancellery.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">Mrs. Merkel wants changes to the European treaty that would allow far-reaching integration of fiscal policy within the euro zone to match the currency union. Germany also wants tough, automatic sanctions against euro-zone members that violate the rules on debts and deficits contained in the Maastricht Treaty on Economic and Monetary Union.<p style="margin-top: 0px; margin-right: 8px; margin-bottom: 1em; margin-left: 8px; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; line-height: 1.5em; text-align: left; background-color: #ffffff; padding: 0px;">"We need to assure that we don't endanger the healthy part of Europe through the part that currently has its hands full to survive," Ruediger Grube, chief executive of Deutsche Bahn, the German railway, said. "The idea of sharpening the rules certainly isn't wrong."

German chancellor may have an unexpected ally in David Cameron, the U.K. prime minister.

Even as opposition grows to Angela Merkel's campaign for an overhaul of the European treaty, the German chancellor may have an unexpecte...

Why E.U. collapse is more likely than the fall of the euro

European politics has become a giant Jenga game. Since June 2010 governments have fallen in the Netherlands, Slovakia, Belgium, Ireland, Finland, Portugal, Slovenia, Greece and Italy. The question is not: Who will be next? That’s easy. (Spain’s Socialist government will be pulverized in this weekend’s elections.) The real question is: When will the Jenga tower topple?  Many people assume that the tipping point will come when one country — most likely Greece — leaves or is ejected from Europe’s monetary union. But the scenario that worries Eurocrats is different. They fear that a country could leave the European Union itself. This is by no means an irrational anxiety. Under E.U. law, it would be much easier for Britain to leave the European Union than for Greece to leave the euro zone. Thus the process of European integration has reached a richly ironic point: The breakdown of the European Union is now more likely than the collapse of the single currency that was supposed to bind it together. This is not surprising. In March 2000, Larry Kotlikoff and I wrote in Foreign Affairs, “History offers few examples of successful adjustments on the scale necessary in certain European countries today. What it does offer are several examples of monetary unions disintegrating when fiscal strains became incompatible with the unpleasant arithmetic of a single currency.” The euro, we predicted, “could degenerate — not overnight, but within the next decade.” Our timing was not bad. The degeneration of the single currency began in 2010, though the crisis has certainly intensified in recent months. We specified “degeneration” to highlight the generational imbalances arising from Europe’s combination of aging populations and over-generous welfare systems. Even if there had been no financial crisis emanating from the U.S. subprime mortgage crisis that began in 2007, the European monetary system would still have degenerated as public debts soared. But we also struggled to see how, once assembled, the euro zone could be dismantled. The costs of exit would be prohibitive for a small peripheral country such as Greece, which would overnight lose access to any source of external credit. And a Greek departure would raise the probability of others leaving, causing contagion throughout Southern Europe. Finally, if all the weaker brethren were to leave the monetary union except Germany, Austria, the Netherlands and Finland, the strengthening of the euro would cause significant pain to the exporters of those countries. In short, almost nobody would gain from a breakup of the euro zone. This is why I am not among the growing throng of pundits predicting the degeneration of the euro — a number of whom argued with equal self-confidence a dozen years ago that the euro would be a great success. Anyone who closely followed events of the 1990s had a clear idea of what a monetary union with the Federal Republic of Germany would entail: short-term spending power but long-term unemployment mitigated by handouts.

Why E.U. collapse is more likely than the fall of the euro

European politics has become a giant Jenga game. Since June 2010 governments have fallen in the Netherlands, Slovakia, Belgium, Ireland, F...

Saif al-Islam Gaddafi after his capture, his fingers wrapped in bandages and his legs covered with a blanket

<div id="main-content-picture" style="margin-top: 0px; margin-right: 0px; margin-bottom: 14px; margin-left: 0px; border-collapse: collapse; color: #333333; font-family: arial, sans-serif; line-height: 18px; background-color: #ffffff; background-repeat: no-repeat no-repeat; padding: 0px;"><img alt="Saif al-Islam gaddafi captured" height="276" src="http://static.guim.co.uk/sys-images/Guardian/About/General/2011/11/19/1321711529299/Saif-al-Islam-gaddafi-cap-007.jpg" style="border-collapse: collapse; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;" width="460" /><div class="caption" style="border-collapse: collapse; color: #666666; font-size: 12px; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;">. Photograph: Reuters Tv/Reuters</div></div><div id="article-body-blocks" style="border-collapse: collapse; font-family: arial, sans-serif; line-height: 18px; background-color: #ffffff; background-repeat: no-repeat no-repeat; padding: 0px; margin: 0px;">Saif al-Islam Gaddafi, the fugitive son of Libya's deceased former dictator, has been arrested in southern Libya, according to officials from the country's new government.Libyan state TV reported that Saif has arrived in captivity and unhurt at an army base in the town of Zintan, 90 miles south-west of Tripoli.Muammar Gaddafi's second and highest-profile son was captured along with several bodyguards by fighters near the town of Obari in Libya's southern desert, said the interim justice minister and other officials.Saif was said to be in good health, according to the justice minister Mohammed al-Alagi."We have arrested Saif al-Islam Gaddafi in [the] Obari area," the minister told Reuters.Saif was captured near the southern city of Sabha with two aides trying to smuggle him out to neighbouring Niger, militia commander Bashir al-Tayeleb said.Zintan, a base for forces in the Nafusa Mountains which played a key part in the storming of Tripoli in the summer, is reported to have crowds dancing in the streets and waving the Libyan flag.There are reports that an angry mob tried to storm the plane on which Saif was taken to the western mountain town of Zintan, the home of one of the largest revolutionary brigades in Libya.Gunfire is echoing across the capital, Tripoli, where large crowds have gathered in Martyrs' Square firing volleys of automatic fire in the air. "A great day, a great day," said Abdullah, a taxi driver, stuck in one of the traffic jams that built up around the square.A Reuters reporter said a man who appeared to be Saif, but who refused to confirm his identity, was on a plane flown by militiamen to the town.The man wore traditional robes with a scarf pulled over his face, but his features, visible despite a heavy black beard, as well as his rimless spectacles, conformed to pictures of the 39-year-old younger Gaddafi.The man's thumb, index finger and another finger were heavily bandaged.Libyan TV also showed him He is sitting by a bed and holding up three bandaged fingers as a guard looks on.</div>

Saif al-Islam Gaddafi after his capture, his fingers wrapped in bandages and his legs covered with a blanket

. Photograph: Reuters Tv/Reuters Saif al-Islam Gaddafi , the fugitive son of Libya 's deceased former dictator, has been arrested in so...

Saif al-Islam Gaddafi after his capture, his fingers wrapped in bandages and his legs covered with a blanket

Saif al-Islam Gaddafi after his capture, his fingers wrapped in bandages and his legs covered with a blanket

. Photograph: Reuters Tv/Reuters Saif al-Islam Gaddafi , the fugitive son of Libya 's deceased former dictator, has been arrested in so...

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis.

<blockquote>An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis. The Prime Minister returned from talks in Berlin with the German leader having made little progress in agreeing emergency action to stop the financial contagion spreading. Tensions were inflamed after a close ally of Ms Merkel predicted Britain would eventually adopt the euro. The German media joined the clamour, with the mass-circulation newspaper Bild questioning whether it might be better for Britain to leave the European Union altogether. Behind the leaders' smiles at a joint press conference yesterday, they acknowledged fundamental differences remained on three key issues: * New eurozone rules. Ms Merkel called for "limited" changes to European treaties to impose fiscal discipline on the single currency but stressed negotiations should only be for eurozone members. Mr Cameron wants Britain involved in the talks because of the potential impact of the decisions on the UK; * Whether the European Central Bank should intervene to support the eurozone. Ms Merkel – backed by the German public – is fiercely resisting the move, which she fears would fuel inflation. But Mr Cameron insisted that all the eurozone's institutions had to "do what is necessary to defend it"; * Taxing financial transactions within the EU. Ms Merkel supports the step but Mr Cameron fears it would disproportionately hit the City and said it would work only if applied globally. The Prime Minister said: "It is obvious we don't agree on every aspect of European policy, but I am clear we can address and accommodate and deal with those differences." He also stressed the two leaders were "very good friends" and "absolutely" in agreement on the importance of completing the single market, budget discipline and stopping EU spending from rising by more than inflation. But shortly before Ms Merkel also paid tribute to the "strong bonds of friendship" between the countries, her veteran Finance Minister used less diplomatic language in which he seemed to predict the end of sterling. Wolfgang Schäuble told the news agency DPA it was Britain's right to remain outside the eurozone "for the time being". But he said it was a matter of time before non-eurozone states became convinced of the euro's advantages. "One day the whole of Europe will have a single currency and perhaps it will happen more quickly than many people on the British island think," he said. Meanwhile, in an article headlined 'The Sick Empire', Der Spiegel magazine described Britain's plans to eradicate its budget deficit by 2015 as "utopian". It added: "The situation on the island is more dramatic than in parts of the continent. It's bad news nearly every day. "But the British government gets away with it by proclaiming carry-on-as-usual policies and by blaming its economic stagnation on the eurozone." The war of words between Berlin and London erupted on Tuesday after Volker Kauder, Ms Merkel's parliamentary party leader, lambasted Britain for being too self-centred on Europe. "Just looking for their own advantage and not being prepared to contribute – that cannot be the message we accept from the British," he told a congress of his ruling conservatives. The former Prime Minister, Sir John Major, weighed in behind Mr Cameron last night as he condemned the financial transaction tax as "a heat-seeking missile...aimed at the City of London". He also warned of an "undemocratic" move towards eurozone fiscal union. In an interview with Al Jazeera, he also predicted "one or two countries" would be forced to quit the euro.</blockquote>

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis.

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them...

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis.

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them on how to tackle the eurozone crisis.

An anti-British backlash gathered pace in Germany yesterday as David Cameron and Angela Merkel struggled to disguise the gulf between them...

A NEW breed of super-rich is crawling out of the mahogany woodwork in Australia.

A NEW breed of super-rich is crawling out of the mahogany woodwork in Australia. With the recent mining boom and strengthening dollar, a new report has revealed that more than 2500 individuals are worth at least $US30 million. The report, the first conducted by Sydney-based Wealth-X - which describes itself as a wealth intelligence firm - showed that 2750 Australians earned at least $US30 million (30 of them are billionaires). Wealth-X Australia vice-president Adrian Jenkinson said the number of ultra-high net worth (UHNW) individuals reflected the strength of the resources boom. "A lot of the wealth is a result of the current economic environment ... (especially) around mining and mining-related services," he said. "It's directly linked to the commodities boom." Clive Palmer did not make the cut with the survey valuing him at a paltry $1.27 billion, far below the Sunday Mail Rich List estimate of $6 billion. But Queensland-born Chris Wallin, of QCoal, made 7th position with a net worth of $US3 billion. The top three were Gina Rinehart, with a net worth of $US10.1 billion, Ivan Glasenberg at $US9 billion and Andrew "Twiggy" Forrest $US4.9 billion. Mr Jenkinson said the majority of UHNW individuals had become wealthy for the first time. "Unlike Europe, where you have large pockets of old wealth . . . these are people who are becoming very wealthy for the first time," he said. He said the new generation would retain its newfound wealth through smart banking and investing, but they were still willing to indulge in luxury "playthings". "They're interested in luxury goods - art, watches, boats, planes and helicopters," he said, adding that traditional investments such as property and motor vehicles would always be popular. Mr Jenkinson said Wealth-X had only recently been introduced to Australia but the organisation planned a number of connected studies on the rising number of ultra-rich individuals. He said people would always be interested in the studies, with the public and media constantly fascinated by the ultra-wealthy lifestyle. "They're always interested in what the ultra-wealthy are doing and what they're buying," he said. But he said the survey also helped the wealthy individuals to better connect with each other. "It helps people in the overall investment community understand where the money is," he said.

A NEW breed of super-rich is crawling out of the mahogany woodwork in Australia.

A NEW breed of super-rich is crawling out of the mahogany woodwork in Australia. With the recent mining boom and strengthening dollar, a ...

GYRATIONS IN the world’s financial markets have been dominated of late by negative developments in the euro zone.

The rolling crisis has assumed a more urgent dimension as heavy selling of Italian government debt pushed yields beyond the 7 per cent threshold that ultimately proved to be the point of no return for the Greek, Irish and Portuguese sovereigns. The turmoil has been blamed variously on the travails of Silvio Berlusconi, the large outstanding stock of government debt versus annual economic output and the economy’s low prospective growth rate. These factors have been known for a considerable time, however, and, if truth be told, the malaise was precipitated by the steps taken by Europe’s leadership in Brussels last month, which were designed to ease the growing stress. The measures backfired spectacularly as the facts of economic life in a poorly constructed monetary union became clear for all to see. The truth is that debt issued by a government in a currency that it does not control should never be considered free of default risk and, in this regard, euro zone members are not that far removed from emerging countries that are forced to issue bonds in a foreign currency. This harsh reality has finally dawned on the bond community and, as the pre-crisis assumption is discarded completely and credit risk continues to be discounted in government debt prices across the euro zone, it becomes ever clearer that the only solution to the immediate crisis rests with the European Central Bank. In order to prevent the liquidity crisis from degenerating into a solvency problem, the central bank must make a credible commitment to employ its balance sheet and purchase the debt of troubled sovereigns in whatever size proves necessary. Until recently, the threat of a solvency issue emerging in Italy was considered small, as the economy does not suffer from the major imbalances that were so evident in the periphery and possesses important strengths that should have kept the wolves from its door. These included a small primary fiscal surplus, a relatively long average life on outstanding government debt, relatively conservative non-financial private sector balance sheets and a relatively low level of external debt. These strengths counted for nothing, however, once Europe’s leadership announced that the rules of the game had changed, which not surprisingly precipitated a wave of selling across the region’s sovereign debt markets. First, the large size of the haircut – 50 per cent – pertaining to the private sector holdings of Greek government debt, which is considered by most analysts to be nowhere near sufficient to yield a sustainable public debt position, revealed to investors that credit risk is very real indeed, with losses expected by some to be in the region of 90 per cent. Second, the decision to exempt official financing from the write-downs sparked the realisation that all credit losses in the event of future write-downs on troubled sovereign debt would in all likelihood fall in their entirety on the remaining private sector investors – in other words, larger losses for fewer investors. Finally, the large write-down of Greek debt was designed so as not to trigger credit default swap contracts and, as a result, investors cannot expect such insurance to pay out should further sovereign defaults occur. The yields on Italian sovereign debt have dropped below 7 per cent for now as a result of ECB purchases but the lukewarm nature of the buying means that investors cannot be sure how long it will be before the threshold is tested again. Indeed, media reports suggest that heavy bank selling is in the pipeline and, should yields surge higher in response to the liquidation, the less attractive Italian debt will become as the probability of default grows. It is not difficult to envisage a scenario in which insolvency becomes self-fulfilling. Higher interest rates and the related market stress could plunge the economy into a sharp recession with an attendant increase in the budget deficit and the government’s financing requirement, which could precipitate a further increase in yields and so on. To prevent such a death spiral from developing, it is absolutely essential that the ECB commits its balance sheet. However, the monetary authority continues to object to such action on a number of fronts. First, it is argued that an expansion of the central bank’s balance sheet would lead to inflation. However, an increase in the monetary base – currency and bank deposits held at the central bank – does not automatically translate to a concomitant increase in the money supply. Indeed, the traditional money multiplier breaks down at times of crisis due to an increase in liquidity preference. Furthermore, the level of deposits held by banks at the central bank has little bearing on the credit decision, which is determined by capital adequacy and the availability of profitable lending opportunities. European banks already have a capital shortfall of €106 billion according to official estimates and a credible commitment to purchase government debt may not only ease the stress on troubled sovereigns but may also forestall a credit crunch. Second, the aggressive purchase of Italian government debt would see the ECB assume the risk of default on its own balance sheet and, should a restructuring occur, its capital base could well be wiped out. However, inaction could have even more dire consequences, as an Italian default would almost certainly unleash the mother of all banking crises and a deep recession that could tear the monetary union apart. The euro zone crisis has reached a dangerous phase, as Italy stands on the brink. The ECB must act forcefully and act now. The clock is ticking.

GYRATIONS IN the world’s financial markets have been dominated of late by negative developments in the euro zone.

The rolling crisis has assumed a more urgent dimension as heavy selling of Italian government debt pushed yields beyond the 7 per cent thr...

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