RTC Director

Italy debt worries keep European markets on edge

European markets remained jittery on Thursday after Italy's record high cost of borrowing renewed fears over the eurozone debt crisis.

After opening lower, markets in Germany and France rebounded to show slight gains in early morning trade, but the UK's FTSE index was slightly down.

Yields on Italian 10-year bonds were 6.98%, a level seen as unsustainable.

Meanwhile, an auction of Italian one-year bonds saw them pay a yield of 6.087%, up from 3.57% in October.

The full planned amount of 5bn ($6.7bn; £4.2bn) euros was placed, with the yield level, or interest rate, the highest in 14 years.

'Growth stalled'

Earlier in the day, Japan's Nikkei index had fallen by 2.9%, South Korea's Kospi shed 3.8% and Hong Kong's Hang Seng index dropped 5.3%.

Among the European markets, Germany's Dax index was up 0.22% at 5,842.16, the French Cac 40 index was 0.4% higher at 3,087.38, while the UK's FTSE 100 was down 0.5% at 5,434.06.

And there was more bad news for the beleaguered eurozone, as the European Commission cut its forecast economic growth in the area for 2012 to 0.5%, down from a prediction of 1.8% made in the spring,

"Growth has stalled in Europe, and there is a risk of a new recession," said the Vice-President for Economic and Monetary Affairs, Olli Rehn, in a statement.

The commission predicted that if there was no change in political policy then Italian public debt would remain unchanged at 120.5% of GDP next year, before falling to 118.7% in 2013.

The commission also forecast that next year Greece would see its debt level rise to 198.3% of GDP.

Commenting on the current eurozone crisis, UK Prime Minister David Cameron said that "leaders of the eurozone must act now... the longer they delay the greater the danger".

Oil issues

The continuing problems in Europe also saw the International Energy Agency cut its forecast for oil demand.

"The ever-present threat of a far-reaching financial collapse from the worsening quagmire in Greece and Italy generated a raft of daily headlines that injected a high level of trading volatility," it said.

"Market attention has shifted to Italy where a weak financial reform package has triggered a dangerous rise in 10-year government bonds (yields).

"Oil markets are inextricably linked to the deterioration in the European debt situation given the impact on financial markets, the heightened risk of global recession, and the corresponding potential loss of oil demand."

'Radical solutions'

The high interest rate on Italian bonds means that if Italy were to borrow money today, with the aim of paying it back in 10 years, it would have to pay an interest rate of just under 7%.

However, Italy has a low growth rate, which means it would be virtually impossible for it to repay what it owes.

Analysts said action needed to be taken in order to calm the markets.

"Europe has moved from a manageable crisis in Greece to a much bigger challenge in Italy," said Frederic Neumann from HSBC in Hong Kong.

"We need radical solutions at this point to backstop the markets."

Economists are concerned that the global banking system could still be affected, regardless of whether there is a resolution to the eurozone crisis.

"Whatever they come up with, it doesn't avoid a European recession," said Su-Lin Ong at RBC Capital Markets.

"Increasingly, there is a risk that it spills into the banking system and becomes an issue of credit, and the lifeline of economies freezes up again," she said.

Last month, in an attempt to ease concerns about the Greek debt crisis, eurozone leaders asked banks to raise more capital to protect themselves against any losses resulting from future defaults by Greece.

At the same time, banks also accepted a 50% loss on the money they had lent to Greece.

The fear is that if Italy's debt crisis worsens, similar measures may have to be taken by banks that are exposed to its debt.

Meanwhile, the euro continued to weaken on Thursday, touching a one-month low of $1.35 against the US dollar, and a two-week low of 105.1 yen against the Japanese currency.

As uncertainty about the outcome of the eurozone debt crisis continues, many investors have been ditching the euro and euro-based assets.

by RTC Director

Amnesty Intl. Urges Shell to Clean Up Nigeria Oil Spill

Amnesty International released a report Thursday saying Shell Oil should commit $1 billion to start cleaning up two spills in southeastern Nigeria that have impacted the livelihoods of thousands of farmers and fishermen.

Amnesty says British lawyers representing those affected by the oil spills in the Bodo, Ogoniland area of the Niger Delta in 2008 suggested that 4,000 barrels of oil were leaked each day for 10 weeks, surpassing Alaska's Exxon Valdez spill.

Shell has admitted to the spills, but says the total spill amounted to 4,000 barrels of oil.

Amnesty says the prolonged failure of Shell Petroleum of Nigeria to clean up the Niger Delta continues to have catastrophic consequences.

The United Nations originally suggested that Shell allocate an initial $1 billion for the clean-up, claiming it will take more than 25 years for Ogoniland to recover from the spill.

Shell says criminals who sabotage oil facilities also bare responsibility for oil spills in the region.

by RTC Director

Japan to Announce Decision on Joining Pacific Trade Pact

Japanese Prime Minister Yoshihiko Noda abruptly postponed a news conference Thursday at which he had been expected to announce that his government will join negotiations on a trans-Pacific free trade pact.

Japanese news reports say the prime minister planned to announce the decision to the Japanese people Thursday and personally notify U.S. President Barack Obama when the two meet in Hawaii on Saturday. But officials announced late Thursday that the Tokyo press conference has been pushed back to Friday.

Participation in the talks is highly controversial in Japan, where thousands of farmers and fishermen marched late last week to oppose membership in the Trans-Pacific Partnership . Politically powerful rice farmers, who have been excluded from previous Japanese free trade deals, are adamantly opposed.

A special working group of Mr. Noda's ruling Democratic Party noted the opposition in a report late Wednesday, and urged the government to be cautious in deciding whether to join the talks. But Mr. Noda has maintained that freer trade is vital to Japan's economic survival.

U.S. officials hope to use this weekend's annual meeting of the Asia Pacific Economic Cooperation forum in Honolulu to lay out a blueprint for the trade pact, which could transform economic relations between the United States and Asia.

Nine countries are already involved and analysts say it could eventually be broadened to include all APEC members, accounting for more than half the world's economic activity.

Current participants in the negotiations are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.

Negotiators have set ambitious goals for the pact, including the swift removal of all tariffs among member countries and steps to reduce non-tariff trade barriers.

For the United States, the TPP presents an opportunity to cut through an elaborate network of bilateral and trilateral regional trade agreements and become a key player in the world's fastest growing economic region.

Tom Donohue, president of the U.S. Chamber of Commerce, said in Hawaii this week that the TPP presents the United States with its best chance of tapping into the world's most exciting and lucrative markets.

The TPP began in 2005 as an obscure agreement among Brunei, Chile, New Zealand and Singapore. In 2008, the United States announced its interest in joining the group and bringing in other major economies.

by RTC Director

Anglo American sells stake in Chile mining operations

Mining giant Anglo American says it has sold a 24.5% stake in its operations in southern Chile to Japan's Mitsubishi for $5.39bn (£3.38bn).

But the deal could hit trouble after Chile's state copper miner Codelco said it would exercise an option to buy 49% of the business, Anglo American Sur.

Anglo's sale of the stake to Mitsubishi means Codelco might not be able to buy more than 24.5% of the operation.

Anglo American said it had made a "thorough assessment" of the sale.

Anglo's properties in southern Chile include the flagship Los Bronces project, El Soldado mine, the Chagres smelter and Los Sulfatos and San Enrique Monolito exploration projects.

Anglo has invested about $2.8bn to develop Los Bronces.

The company said in a statement: "Anglo American has regularly reviewed its available alternatives and, following a thorough assessment, and in the interests of its shareholders, it entered into a process to explore the potential value of the Anglo American Sur (AAS) assets."

Anglo chief executive Cynthia Carroll added: "We are free to sell any percentage of our shares in AAS at any time. We evaluated and continue to evaluate various alternatives."

But Codelco said it was ready to fight to exercise what it believed was an option to buy almost 50% of AAS.

"If this sale (to Mitsubishi) is confirmed, it does not affect Codelco's right over 49% of the shares of Anglo American Sur," Codelco said in a statement.

"Codelco will exercise all the actions that are necessary to safeguard its rights."

by RTC Director

Jefferson County in Alabama faces bankruptcy

Leaders of the largest county in the US state of Alabama have voted to file for a $4.1bn (£2.6bn) bankruptcy, the costliest US municipal failure ever.

Jefferson County has been struggling to avoid bankruptcy since 2008, but recent talks on a deal to restructure its crippling debt broke down.

The county sunk into debt after a costly upgrade of its sewer system.

Jefferson County has about 658,000 residents and is home to Alabama's largest city, Birmingham.

The bankruptcy was approved by the Jefferson County Commission by a 4-1 vote.

Announcing the vote result, Commissioner Jimmie Stephens said filing for bankruptcy would not radically change the situation in the county.

"Jefferson County has, in effect, been in bankruptcy for three years," he told the Associated Press.

Bond problems

In September, a deal with the county's creditors, including JPMorgan Chase, saw lenders agree to forgive about $1bn in debt, with the county refinancing another $2bn, and a series of sewer rate increases.

However, the negotiations ended some $140m short as terms of the deal shifted, increasing the repayment amount from $2.05bn to $2.19bn.

Jefferson's mounting debt issues were brought on by a combination of increasing interest rates on bonds, turbulency in the derivatives market and corruption among local government officials.

At least 21 people, including four former county commissioners, have been convicted or pleaded guilty to corruption-related charges in connection with the sewer's construction and bond financing, according to Bloomberg News.

Jefferson's local government has suffered as a result - police officials cannot afford to respond to traffic accidents - all while sewer and water bills increased, reports say.

"I get tired of them dumping on the little people," Deb Passmore, a former Laundromat owner told the New York Times in July.

She closed her business after her sewer and water bills reached $500 a month.

Orange County precedent

Earlier in 2011, the Alabama Supreme Court declared a separate county tax unconstitutional, limiting Jefferson's ability to raise further income to pay off its debts.

The county's bankruptcy deal would be significantly larger than the current biggest filing, that of Orange County, California, which filed in 1994 with debts of $1.7bn.

Municipal bankruptcies are rare, but are becoming more common as the US faces continuing economic problems.

Pennsylvania's capital city, Harrisburg, filed for bankruptcy in October 2011 in the face $300m in debt arising from a costly trash incinerator program. Soon afterwards the state passed a law taking control of the city's finances.

by RTC Director