Budget Balance in 2011

 

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The 17-nation euro zone is a collection of countries with vastly different economic profiles. Far from stimulating “convergence” toward a single economy, the eurozone has perpetuated divergence.  Despite the predominance in the mainstream that Greece, Ireland and Portugal should be punished for deviating from the Maastricht rules these graphics show that the majority of countries are well beyond the 3% deficit and 60% debt threshold ratios.

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New research from the Cornerhouse highlighting the links between ecological and financial crisis:

New markets in environmental services are springing up all over the world – biodiversity markets, wetlands markets and species markets, in addition to the climate markets that got their start more than 15 years ago. Britain is no exception. Its Department of Environment, Food and Rural Affairs is enthusing over the economic potential of a “market in conservation projects” populated by a “network of biodiversity offset providers”.

What lies behind this trend? Some historical perspective is necessary to answer this question. Environmental services markets are not aimed merely at “solving environmental problems at the lowest cost”. More importantly, they redefine those problems in a way that creates new assets, economic sectors and property rights. As part of the neoliberal response to the economic crisis that set in during the 1970s, they function to loosen regulatory constraints on business, relax Environmental Impact Assessment (EIA) requirements, and open up new profit opportunities for an increasingly dominant financial sector.

With the economic crisis showing no signs of retreat, and the impact of the government’s aggressive austerity measures already being felt, the status of the financial sector is very much in question at the moment. However, despite five years of economic turmoil, the workings of the financial system are still bewilderingly opaque to many people (including most politicians, it seems!).

We are therefore pleased to announce the publication of our clear and concise, 24-page ‘Nuts & Bolts’ Guide to the ins and outs of the financial sector. From hedge funds to the money markets and derivatives, all of the major players and products are broken down from a critical perspective. With jargon deconstructed, case studies explained and many of the myths about the city and its operations debunked, this booklet is designed to give readers with little or no knowledge of the world of finance and banking an accessible overview of its workings.

This booklet is the first publication in our ‘Banking on Crisis’ series. The next booklet, due out it the next few months, will cover the ongoing economic crisis, its origins and history, the politics of crisis and a breakdown of some of the most common narratives used to explain the current financial meltdown. Watch this space for more…

order a hard copy (£2) go to our shop
Or to download the digital version (free) click here

“Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments.”

Article From the NY Times. The international pressure on Greece is mounting as bondholders do all they can to extract maximum value from the ticking time bomb of its debt. Yet as this chart shows, the ‘all-important’ bond market only constitutes a third of greek debt holdings:

If Greece were to announce a default its own banks, pension funds and household savers would also suffer huge losses, possibly plunging the country into a more acute crisis. The situation then, is far more complex than ‘greece vs. the international money markets’. The question of how or even if greece can resolve the contradictions of its current predicament remains open.

With all the fear and speculation surrounding the current wave of credit rating downgrades, this chart gives a useful indication of the global situation (liable to change at any moment mind!).

A credit rating gives an indication of how risky an investment a state is percieved to be. Although ostensibly only a ‘guide’ provided by the rating agency, a lower rating almost always leads to higher borrowing costs for a govenrment. This means big trouble when states ‘refinance’ (basically renewing old debt), as they are suddenly hit with a much higher interest bill on their debts.

Here’s a run down of what Standard & Poor’s (one of the three main rating agencies, along which Moody’s and Fitch) ratings indicate:

AAA: The best-quality borrowers, reliable and stable

AA: Quality borrowers, a bit higher risk than AAA

A: Economic situation can affect finance

BBB: Medium-class borrowers, which are satisfactory at the moment

BB: More prone to changes in the economy

B: Financial situation varies noticeably

CCC: Vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.

CC: Highly vulnerable.

C: Even more highly vulnerable.

D: Defaulting on commitments.

Ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.