VIDEO: Youth unemployment rise in Eurozone

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Brazil growth 'to slow sharply'

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29 September 2011 Last updated at 14:25 GMT President Dilma Rousseff has vowed to get Brazil's spending boom under control Brazil's central bank has lowered its forecast for economic growth to less than half of last year's, partly blaming the slowing global economy.

The central bank lowered its prediction for growth in 2011 to 3.5%, from 4% that it expected in June.

Brazil has boomed as other countries have stalled, growing 7.5% last year.

The bank pointed to "the deterioration in the international outlook" for the downgrade, and also to spending cuts enacted by President Dilma Rousseff.

The central bank said there could be further "moderate" cuts to the basic interest rate, which was lowered in August to 12%, from 12.5%.

In February, the Brazilian government will implement 50bn reais ($30bn; ￡19bn) of spending cuts in order to curb inflation and help prevent the economy from overheating.

This was partly to remove all stimulus packages introduced since the onset of the global financial crisis in 2008.

Social spending and infrastructure projects will not be affected, the government has said.

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Drivers 'cut petrol use by 15%'

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4 October 2011 Last updated at 23:18 GMT By Simon Gompertz Personal finance correspondent, BBC News The fall in petrol sales cost the Treasury nearly ￡1bn over the six months to June, the AA reckoned Drivers have cut their petrol consumption by more than 15% since the credit crunch and the recession.

The AA has calculated that petrol sales in the first six months of 2011 were 1.7bn litres less than in the same period three years ago.

The AA says the drop in petrol sales is a direct result of record fuel prices.

Many drivers are struggling to make ends meet in any case, so the high cost of petrol leaves them with no option but to try to use less.

And businesses have been cutting back as well.

The cut in fuel purchases, comparing the first six months of this year with pre-recession levels, is equivalent to 40,000 delivery rounds by fully-laden petrol tankers.

One result has been lower emissions of potentially damaging exhaust fumes.

Another, says the AA, is that the fall in sales has deprived the Treasury of nearly ￡1bn in fuel duty between January and June this year.

And while supermarkets have attracted drivers looking for bargain fuel, hundreds of other petrol stations have gone out of business.

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Dexia shares in new Greece slump

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4 October 2011 Last updated at 09:16 GMT Continue reading the main story Shares in the Franco-Belgian bank Dexia have fallen for the second day running as fears over its exposure to Greece debt continue.

They fell 37% at the open of Tuesday trading after losing 10% on Monday following an alert from the Moody's ratings agency.

Dexia is holding an emergency board meeting amid serious concerns.

The governments of France and Belgium, which are joint shareholders in Dexia, moved to guarantee its debts.

A joint statement from the countries' finance ministers said: "In the framework of Dexia's restructuring, the governments of France and Belgium, in coordination with our central banks, will take all necessary steps to ensure the protection of depositors and creditors."

The two ministers, who are at the wider European finance ministers' meeting in Luxembourg, have been discussing ways to support the bank.

Dexia's shares are worth only just over one euro, so almost any movement will result in a large percentage change.

Market concerns

Greece-linked concerns are also hitting financial markets again after eurozone finance ministers delayed a decision on giving Greece its next instalment of bailout cash.

It came after Greece said it would not meet this year's deficit cutting target.

A meeting set for 13 October, when finance ministers had been expected to sign off the next Greek loan, has now been cancelled, says BBC Europe correspondent Chris Morris.

The UK's FTSE 100 index was down 1.5% at the start of trading. France's Cac was 3.3% lower, while Germany's Dax had lost 3.2%.

Greece announced on Sunday that its 2011 deficit was projected to be 8.5% of gross domestic product, down from 10.5% in 2010, but short of the 7.6% target set by the EU and IMF.

Eurozone banks have been hit by cash outflows since the summer amid fears that Greece, and possibly other governments, may ultimately default on their debts, and even leave the eurozone, leaving their lenders sitting on big losses.

Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; ￡2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.

It has already written off 21% of its Greek debts, but market prices now suggest the eventually loss to lenders could be in excess of 50% of the amount owed by Greece.

The bank is already partly-owned by the two governments, after it received a 6bn euros joint bailout at the height of the financial crisis in 2008.

There were reports last week that the bank could be split up, and speculation of a possible nationalisation of the bank.

Another option under consideration is the sale of Credit Local, a unit of the bank responsible for lending to French local governments.

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Ericsson up on handset exit news

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6 October 2011 Last updated at 18:13 GMT Sony may merge its phone joint venture with its other mobile gaming business Shares in the Swedish telecoms firm Ericsson have risen on a report that Sony may soon buy it out of their mobile phone handsets joint venture.

The Wall Street Journal says Sony wants to integrate the division with its tablet computer and hand-held games machine businesses.

The report said the Japanese firm may pay its partner up to 1.25bn euros ($1.7bn, ￡1.1bn) for its 50% stake.

Ericsson's shares climbed close to 8% in US trading after the news broke.

'Struggling'

Despite Sony's reputation as a technology innovator, the joint venture has struggled to maintain market share.

Sony Ericsson accounted for 1.7% of all global mobile phone sales between April and June, according to a recent report by technology research firm Gartner.

That compared to a 3% share the previous year.

"The business has been struggling," said Mark McKechnie, a technology analyst at ThinkEquity.

"Sony's decision to use its brand with Ericsson's technology was a good idea, but it didn't work out. Now it wants more control to better compete against Apple and other [Google] Android devices."

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'Bad bank' plan for Dexia assets

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4 October 2011 Last updated at 22:46 GMT Dexia shares have fallen sharply in the past two days The Belgian government has approved the creation of a "bad bank" for risky assets held by the troubled Franco-Belgian bank Dexia.

Shares have fallen sharply in the past two days amid fears about its large exposure to Greek government debt.

Belgian Prime Minister Yves Leterme said his cabinet had agreed to isolate at-risk assets and to guarantee debts.

There are fears that Greece may end up defaulting on more than 50% of its debt, mostly held by European banks.

Shares fell by as much as 37% at the start of European trading on Tuesday - adding to a 10% Monday drop prompted by an alert by ratings agency Moody's - but rallied back to a mere 22% down at the end of the day.

Reorganisation

The commitment to guarantee debts raised questions over the heavily indebted Belgian government's own solvency.

Belgium's 10-year cost of borrowing jumped from 3.7% to 3.8% in bond markets on Tuesday.

Separately, the French and Belgian central banks also stated that they "fully support" Dexia, indicating that they will provide whatever borrowing is needed by the bank to ensure it does not run out of cash.

Continue reading the main story

The European Banking Authority... portrayed Dexia as one of the strongest banks in Europe”

End Quote Robert Peston Business editor, BBC News The bank is to be restructured. As well as the creation of a "bad bank" supervised by the French and Belgian governments, a unit of the bank responsible for lending to French local authorities, Credit Local, will be sold off.

A joint statement from the countries' finance ministers said: "In the framework of Dexia's restructuring, the governments of France and Belgium, in co-ordination with our central banks, will take all necessary steps to ensure the protection of depositors and creditors."

The two ministers, who were meeting at a wider EU finance ministers' meeting in Luxembourg, have been discussing ways to support the bank.

Many investors anticipate that the bank will ultimately have to be recapitalised by the two governments - in other words, nationalised.

The crisis at Dexia comes just weeks after the bank passed stress tests by regulators of all the major European banks, further undermining the credibility of the entire exercise.

Exposure

Market concerns over Greece's ability to repay its debts were further heightened on Monday, as eurozone finance ministers again delayed a decision on giving Greece its next instalment of bailout cash.

It came after Greece said it would not meet this year's deficit cutting target.

Eurozone banks have been hit by cash outflows since the summer amid fears that Greece, and possibly other governments, may ultimately default on their debts, and even exit the eurozone, leaving their lenders sitting on big losses.

Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; ￡2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.

It has already written off 21% of its Greek debts, but market prices now suggest the eventual loss to lenders could be in excess of 50% of the amount owed by Greece.

The bank is partly-owned by the French and Belgian governments, after it received a 6bn-euro joint bailout at the height of the financial crisis in 2008.

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Stiglitz: Austerity not the way

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3 October 2011 Last updated at 23:01 GMT Viewpoint by Joseph Stiglitz Professor at Columbia University Joseph Stiglitz won the Nobel Prize in Economics in 2001 and is a former World Bank chief economist Most economists thought that when the euro was put together, it was an incomplete task. They'd taken out too many adjustment mechanisms and had not put anything in its place.

One of the things that makes the American common currency work across the country is we have a common fiscal authority and high migration - we're willing to allow North Dakota to become empty.

In Europe, there's no fiscal authority, migration is more difficult and most of the countries are not willing to let themselves become empty. So the framework for allowing for an effective common currency is not there.

Now you might be able to make up for the deficiencies in one part by strengthening another part, for instance by having a stronger fiscal authority. But they don't have that.

What they did fiscally was tie themselves to the stability and growth pact, which was a pact for recession rather than for growth because limiting deficits when you have a shock is a recipe for recession, which is what is happening in Greece.

So the question was always: when a crisis occurred would they be able to finish the task? And I think the jury is still out.

Misguided

The agreement that they made in July was a reasonably good agreement. It recognised that Greece needed help to grow but they haven't put in any money and the process of ratification has been very slow.

So I think it's really a question that has not yet been resolved.

There are a number of institutional ways of going about helping to resolve it. The European Financial Stability Facility (EFSF) needs to be larger or to have more ability to leverage itself. That's a minimum.

Over the longer term they're going to need European bonds and a number of other actions, and they have to recognise the framework of austerity is not the way to go.

Issuing bonds should be one part of the fiscal framework.

The problem with the eurozone was the one part of the framework that they thought they needed was limiting fiscal deficits and that was just a misguided analysis.

Ireland and Spain had surpluses before the crisis. But they thought that having limited fiscal deficits was necessary and sufficient for protecting the economic framework and that was just wrong.

Politics

The July agreement was a good start if they implement it quickly. But that's not been happening.

Austerity measures in Greece have brought widespread protests

Let me say, for democracy it's not been that slow. Two months to get landmark legislation through is not a long time. But markets move quickly. So I don't criticise the fact that there's been a deliberate pace - that's the nature of democracy.

My criticism is they didn't do anything in the 10 years before there was a crisis.

I suspect that we're going to see a lot of volatility. Whether at the end the eurozone will emerge intact or not, it's hard at this point to say.

It all depends on the politics. Even though I think the commitment of the leaders to do something is there, the political process in some ways is not in tune with the economics. The problems are deep.

I think there is a reasonably good chance that a year from now you would find the eurozone smaller than what it is today.

There's a broad consensus among economists that the best way of doing it would be for the northern European countries to leave. That would be the easiest adjustment.

But the general view is that is not what's going to happen. The view is that some of the weaker countries will leave and that will lead to very large trauma in the global financial markets such as freezing the credit markets, a repeat of 15 September 2008 (when Lehman Brothers collapsed).

Growth potential

If Europe insists on going forward with the kind of austerity packages in Germany and without the kind of assistance they need to help those countries with severe economic problems, such as Greece, then almost surely the eurozone will break up.

But if they come forward with that money, then it can survive, at least for a while.

Continue reading the main story Use the dropdown for easy-to-understand explanations of key financial terms:AAA-rating GO The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule.The European Central Bank (ECB) is the one institution that has the kind of flexibility that is necessary to deal with the crisis. It will be absolutely essential, because they will be able to step into the breach and be willing to do that.

Now the problem is that some people in Germany and elsewhere have said the ECB should not be buying Italian and Spanish bonds and that it should not be stepping into the breach. But if the ECB doesn't do that, then the eurozone's prospects are very, very bleak.

It's not inevitable that Greece will default if they come forward with enough assistance for it to grow. It has enormous growth potential, so if Europe comes up with enough money, it will grow and that will enable it to manage its debts.

But so far I've seen nothing in the form of growth assistance as opposed to austerity assistance just to meet its budget shortfall, and I'm not very optimistic that it will avoid a default.

Joseph Stiglitz is a recipient of a Nobel Prize in Economics and a former chief economist at the World Bank.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.

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