* Fekter says Rome's high borrowing costs may drive it to aid
* Italy's Monti calls comments "totally inappropriate"
* Spanish, Italian bond yields rise on market worries
* EU, ECB press for early euro zone banking union
By Michael Shields and Steve Scherer
VIENNA/ROME June 12 (Reuters) - Raising the stakes in Europe's debt crisis, Austria's finance minister said Italy may need a financial rescue because of its high borrowing costs, drawing a furious rebuke on Tuesday from the Italian prime minister.
Maria Fekter's assessment of the euro zone's third largest economy amplified investors' fears that Europe is far from ending 2-1/2 years of turmoil.
A deal by euro zone finance ministers on Saturday to lend Spain up to 100 billion euros ($125 billion) to recapitalise its banks was seen by many in the markets as yet another sticking plaster.
Euro zone rescue funds, already stretched by supporting Greece, Portugal, Ireland and soon Spain, might be insufficient to cope with Italy as well, Fekter said in a television interview on Monday night.
"Italy has to work its way out of its economic dilemma of very high deficits and debt, but of course it may be that, given the high rates Italy pays to refinance on markets, they too will need support," Fekter said.
She sought to soften her remarks on Tuesday, saying she had no indication Italy planned to apply for aid.
Italian Prime Minister Mario Monti said her remarks were "completely inappropriate" for an EU finance minister, and euro zone officials said they were deeply unhelpful.
Amid the cacophony, Italian and Spanish government 10-year bond yields rose further above 6 percent as the aid deal for Spanish banks failed to ease fears about Madrid's ability to fund itself.
The market reaction suggests that ministers have failed to break the so-called doom loop between rising government debt, economic recession and teetering banks that previously drove Greece, Ireland and Portugal into EU/IMF bailouts.
Analysts cited uncertainty about the mechanics of the Spanish rescue and fears that private bondholders could be pushed down the repayment chain below official lenders, risking losses in any debt write-down, as they suffered in Greece.
"Is this the next stage of a slippery slope in subordinating existing government bondholders?" asked Deutsche Bank strategist Jim Reid in a note to clients.
Investors are also worried about the outcome of a Greek general election next Sunday which may determine whether the country stays in the euro zone.
Credit ratings agency Fitch said the bank rescue may help stabilise Spain's sovereign rating, which it cut last week by three notches to BBB, and the bailout should not have a direct impact on other euro zone countries.
Even though Italy's deficit and unemployment are lower than Spain's and its banks are not exposed to a real estate crisis, doubts about Rome's ability to turn itself around during a deep recession are keeping international investors at bay.
If the economy does not start to grow after a decade of stagnation, it will face mounting difficulty in bringing down its debt, now at 120 percent of gross domestic product - second only to Greece's debt mountain in the euro zone.
Bank of Italy Governor Ignazio Visco said last week Italy's emergency is not over and pressed Monti to speed up reforms.
BANKING UNION
European Commission President Jose Manuel Barroso, European Central Bank policymaker Christian Noyer and French Finance Minister Pierre Moscovici all called on Tuesday for swift moves to create a euro zone banking union.
Barroso told the Financial Times that a cross-border banking supervisor, a deposit guarantee scheme and a bank resolution fund could be put in place in 2013 without changing EU treaties. EU paymaster Germany has so far rejected a deposit guarantee or a resolution fund, saying they would require treaty change.
The Bundesbank weighed in, saying a European banking union could bring advantages only if properly anchored in a fiscal union with powers to stop countries breaking budgetary rules.
Fekter's typically outspoken comments came after Italy's industry minister dismissed the idea that Rome may need external help, saying reforms adopted by his government so far had put the Italian economy on a sound footing.
Her concerns are shared by one of the German government's council of economic advisers, Lars Feld, who told Reuters that Italy could be next in line.
"Overcoming the troubles in Spain will bring calm to the markets for a while, but the chances are not so small that Italy may also come under fire, in particular as the promised labour market reform has turned out to be less ambitious," Feld said.
OUTSPOKEN
The Austrian minister has a track record of speaking out of turn or undiplomatically. She angered EU paymaster Germany last month by suggesting Greece might be forced out of the European Union over its economic problems.
She infuriated Eurogroup chairman Jean-Claude Juncker in March by rushing out to brief the media on a deal to increase the euro zone's financial firewall before he could make the official announcement. She later apologised.
And when U.S. Treasury Secretary Timothy Geithner was invited to a euro zone finance ministers' meeting in Poland last year to plead for a more robust rescue fund, Fekter said bluntly that Washington should look after its own worse fiscal mess first.
In Brussels, EU officials privately voiced exasperation at her latest comments on Italy.
"The problem is that this is market sensitive," said a euro zone official, whose position does not authorise him to speak on the record. "It's one thing if journalists write this but quite another if a euro zone minister says it. Verbal discipline is very important but she doesn't seem to get that."
Italy's leading economic newspaper, Il Sole 24 Ore, appealed to Germany to save the single currency before it is too late.
"Schnell Frau Merkel! (Hurry Up Mrs Merkel!)," the usually sober business daily said in a banner headline in German.
An editorial urged Chancellor Angela Merkel to back guarantees for European bank deposits, allow direct access for banks to euro zone rescue funds and accept a mutualisation of European public debts, with each country paying a different interest rates.
Merkel has opposed issuing joint euro zone bonds and says member states must agree to transfer more budget sovereignty to European institutions, including the EU's Court of Justice, as part of a political union before she would consider such idea.
An opinion poll published on Tuesday showed Italian confidence in the euro had plunged by 16 percentage points in two weeks as Spain's banking crisis and the looming Greek election test the single currency.
Motor industry cries out for finance and engineers - BBC News
The staging of a car show in the heart of London's Canary Wharf is a potent symbol.
Not only does holding the Motorexpo in Docklands illustrate the dependence of the UK's motor industry on the world of finance; it also points to how the City has become one of its toughest rivals.
What car makers and component suppliers need to thrive are cash and talent.
Both these scarce resources can be found here.
But that is not to say it is easy for industry players to get hold of them.
Stimulating growthCash, or rather investment funding, is often hard to come by for companies in the motor industry, especially for parts suppliers or dealers that are often relatively small.
This is a challenge Paul Everitt, chief executive of motor-industry body SMMT, has been keen to tackle for some time.
"Improving access to finance and credit has the potential to stimulate growth in UK automotive's small and medium-sized companies, enabling them to develop facilities, tooling and machinery to take advantage of broader automotive growth," he says.
"By achieving competitive funding for UK businesses, the UK can take a larger share of the components market."
Talent, meanwhile, is also in short supply, not least because many of the best engineers in the UK are snapped up by City firms, according to Nick Pascoe, who runs Controlled Power Technologies, a relatively small technology company specialising in petrol-electric hybrid solutions for the motor industry.
"All of the motor industry is crying out for good-quality engineers," he says. "But many of them are only too happy to come to Canary Wharf and get into finance instead."
Mutual benefitsRichard Hill is among those who have chosen to work in banking rather than the motor industry.
Four years ago, at the height of the credit crunch when the car industry was in dire straits, he left the sector to join Royal Bank of Scotland.
But his departure was no desertion.
Rather, the task he was given was simple: help the bank understand the motor industry, to make it possible to provide finance for struggling dealers and component makers.
"The way the motor industry is structured and driven, it is a challenging environment to lend to," Mr Hill says, pointing to how the sector is capital intensive, generally offers low returns, and how debt levels are generally restricted by companies' balance sheets, which are often far from healthy.
But at the same time, there are plenty of opportunities for those in the know.
For instance, many suppliers or dealers say banks often take too long to make decisions, a particular difficulty for a sector as nimble as this, according to a report by The Smith Institute, published late last year.
"When you don't have an understanding of the business, those opportunities could be missed," says Mr Hill.
Similarly, the motor industry would benefit from a broader view of the finance options that are available.
"It's not just about traditional debt, such as overdrafts or loans," he says.
For example, structured finance products can be used to fund acquisitions or mergers, trade finance can help a component supplier expand internationally, while stock finance can help a dealer ensure there are enough cars in the showroom.
"Things have changed, or are changing, or could change if we work harder to understand each other," Mr Hill says.
"We need to bring the two worlds closer together."
How to avoid the 'gap trap' for car cover - This is Money
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Car buyers are being urged to avoid taking expensive loan insurance sold by commission-driven forecourt salesmen.
Sales of guaranteed asset protection policies are soaring. These policies are also known as ‘gap’ or car depreciation insurance, and are sold when buyers take out car finance deals.
It provides cover for the car’s full purchase price, or total cost of a finance deal, if your car is written off before you have repaid the loan, and usually costs around 300 for three years’ cover.
'I WAS DELUGED BY INSURANCE ADD-ONS'
John Amandini, pictured with his wife Mary, who was deluged with insurance add-ons
John Amandini, 74, was deluged by insurance add-ons and extras when he bought his new Hyundai ix20 Active car from his local forecourt.‘It wasn’t just a new car they were trying to sell me,’ he says.
‘It was the gap insurance to packages for valeting and even diamond polishing.
‘Do I really need to insure against my insurance company? I didn’t think so.’
He turned them all down after becoming frustrated at being give the hard-sell.
The retired nursing teacher, pictured with his wife Mary at their home in Devon, says the car cost 12,000 but he got it for 7,000 after trading in his old vehicle.
Car salesmen pressurise customers to take out gap insurance because they typically pocket half the premiums as commission. But those who want cover can find it cheaper elsewhere.
When you buy a new car, its value will usually drop like a stone the moment you drive it away. Depending on the model, a car can lose as much as 10 per cent to 15 per cent of its value the minute you turn the ignition for the first time.
If it were written off, an insurer would only give you a like-for-like replacement, not a brand-new car — leaving you with a finance deal worth more than the value of the car.
The selling point of the gap insurance is that it would cover the difference. It can also be taken out for second-hand cars.
Two in every three of the 517,493 new cars sold last year were bought on a finance plan offered by a dealer. And a fifth of the 728,971 used cars purchased in the same period were also through forecourt finance. Almost half also bought gap cover.
But complaints about the insurance have shot up by 17 per cent in the past 12 months, says independent complaints investigator the Financial Ombudsman Service. And there are fears this number could rise further given the boom in forecourt finance deals in the past year.
A spokesman for the Ombudsman says: ‘Gap insurance can be useful for some consumers. But we increasingly see cases where sellers have failed to explain the limitations of the cover.’ If your new car is written off, most fully comprehensive car insurance policies offer to cover the cost of a new replacement vehicle during the first 12 months of ownership.
If your car is written off or stolen after this period, you will probably receive a payout worth the car’s current value.
This could be a lot less than you paid since some new cars lose as much as two-thirds of their value within three years, says consumer group Which?
For example, a 12,000 new hatchback bought on finance would typically have repayments totalling 15,000 including interest.
So if the car was written off 14 months later, the insurer would be likely to pay out only its current value of 9,000. The driver would still have the full loan to repay, leaving them 6,000 short. The gap cover would pay off this difference.
Money Mail has previously reported how the City regulator is understood to have concerns about the way some kinds of low-cost insurance were sold — typically those types of cover taken out alongside another product.
In a trend which echoes PPI — another type of cover sold alongside a loan or credit deal — the Ombudsman says it has seen cases during new car purchases where people did not even realise they had bought the cover.
This is often because it has been bundled up with various add-ons such as an extended warranty or breakdown cover.
The Ombudsman says many car buyers do not understand that:
- Gap policies do not cover additional purchases such as service plans;
- A policyholder may be left out of pocket if they paid more than the recommended retail price;
- Policies often last several years, but provide no refund if they are cancelled early.
If you do still want to take out gap insurance, consider using a comparison website to find the best deal.
German finance minister - bank union only after more EU integration - The Guardian
Drug Money From Mexico Makes Its Way to the Racetrack - New York Times
Yet in September 2010, a beaming band of men waving Mexican flags and miniature piñatas swept into Ruidoso, N.M., to claim the million-dollar prize with a long-shot colt named Mr. Piloto.
Leading the revelry at the track was Mr. Piloto’s owner, José Treviño Morales, 45, a self-described brick mason who had grown up poor in Mexico. Across the border, Ramiro Villarreal, an affable associate who had helped acquire the winning colt, celebrated at a bar with friends.
As for the man who made the whole day possible, Miguel Ángel Treviño Morales, he was living on the run, one of the most wanted drug traffickers in the world.
Mr. Treviño, a younger brother of José Treviño, is second in command of Mexico’s Zetas drug trafficking organization. Thin with a furrowed brow, he has become the organization’s lead enforcer — infamous for dismembering his victims while they are still alive.
The race was one of many victories for the Treviño brothers, who managed to establish a prominent horse breeding operation in the United States, Tremor Enterprises, that allowed them to launder millions of dollars in drug money, according to current and former federal law enforcement officials. The operation amounted to a foothold in the United States for one of Mexico’s most dangerous criminal networks, the officials said.
Using Miguel Ángel Treviño’s cash, José Treviño’s legal residency and Mr. Villarreal’s eye for a good horse, Tremor bought a sprawling ranch in Oklahoma and an estimated 300 stallions and mares. The Treviño brothers might have kept their operation quiet, given the criminal connection, but their passion for horses and winning apparently proved too tempting. In the short span of three years, Tremor won three of the industry’s biggest races, with prizes totaling some $2.5 million.
The Justice Department moved against Tremor on Tuesday morning, sending several helicopters and hundreds of law enforcement agents to the company’s stables in Ruidoso and its ranch in Oklahoma. José Treviño, his wife and five associates were taken into custody later in the day, and a total of 15 people were charged, the authorities said.
Miguel Ángel Treviño, 38, and another brother, Omar, 36, were among those charged. They remain at large in Mexico. Omar Treviño is also a high-ranking member of the Zetas, and an F.B.I. affidavit filed in United States District Court describes him as participating in the money laundering.
The affidavit said the Zetas funneled about $1 million a month into buying quarter horses in the United States. The authorities were tipped off to Tremor’s activities in January 2010, when the Zetas paid more than $1 million in a single day for two broodmares, the affidavit said.
The New York Times became aware of Tremor’s activities in December 2011 while reporting on the Zetas. The Times learned of the government’s investigation last month and agreed to hold back this article until Tuesday morning’s arrests.
The business was “so far out there it’s hard to believe,” said Morris Panner, a former prosecutor who handled drug cases. “Maybe they were using some kind of perverse logic that told them they could hide in plain sight, precisely because people wouldn’t believe it or question it.”
The Treviño brothers devised an elaborate scheme in which Mexican businessmen paid for the horses — some of them worth hundreds of thousands of dollars — from their own bank accounts so the purchases would appear legitimate, according to the affidavit. The Zetas would later reimburse the businessmen, and the horses’ ownership would be transferred to Tremor. The brothers’ activities on either side of the border made for a stark contrast. One week in May began with the authorities pointing fingers at Miguel Ángel Treviño for dumping the bodies of 49 people — without heads, hands or feet — in garbage bags along a busy highway in northern Mexico. The week concluded with José Treviño fielding four Tremor horses in a prestigious race at Los Alamitos Race Course, near Los Angeles.
Colombia finmin wants more "aggressive" forex intervention - Reuters UK
BOGOTA, June 12 |
BOGOTA, June 12 (Reuters) - Colombian Finance Minster Juan Carlos Echeverry said on Tuesday he favored more aggressive intervention into the foreign exchange market to stem strong gains by the peso currency.
Colombia has attracted record foreign investment since beating back leftist rebels over the last decade, which has fueled the economy but also put appreciation pressure on the peso, making exports less competitive.
In a move to counter the strengthening currency, the central bank board of directors, of which Echeverry is member, is buying at least $20 million daily until early November.
"I maintain it's necessary that in the central bank we have a more aggressive intervention with immediate sterilization," Echeverry told lawmakers during a debate on the peso.
"The exchange rate remains a worrying variable. I've asked the central bank board to look at what other similar economies are doing like Peru. We can learn from them if one can have controlled inflation and a more aggressive intervention."
Colombia's peso is one of the world's strongest gaining currencies, firming about 8.5 percent so far this year although in the last month the rising trend has slowed due to worries over the crisis in Europe.
Latin America has absorbed huge amounts of money as investors look for higher yields in what some policymakers have called a global "currency war".
Europe's debt crisis and China's economic slowdown pose new threats to Latin American economies and markets, and as the region begins to cool down, governments are doing what they can to protect themselves from a wave of cheap goods.
While the United States and many European nations struggle to shore up their fiscal accounts, Colombia's financial management, buoyant economy and security advances were rewarded last year with an investment grade from major rating agencies.
The Andean nation's economy is seen growing around 5 percent this year with full-year inflation between 3 percent and 3.5 percent.
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