ECONOMY

In Brief

Budget cuts to have smaller impact on Italy Italy’s 24.9 billion euros ($30.2 billion) in budget cuts will have a smaller impact on economic growth than similar measures adopted by other European countries to reduce their deficits, economists at Deutsche Bank AG said. «Mitigated by the depreciation in the euro exchange rate, the impact of the austerity measures on Italian growth should be limited, to the tune of 0.2 percent» between 2011 and 2012, economist Gilles Moec at Deutsche Bank in London said yesterday in a report. By contrast, budget cuts will negatively affect growth over the same period by 1.5 percent in Portugal, 2.3 percent in Spain and 3.7 percent in Greece, according to the report. Prime Minister Silvio Berlusconi announced the spending cuts on May 25 as part of a European effort to reduce deficits, stop contagion from Greece’s debt crisis and defend the euro. The adjustment will help bring Italy’s shortfall to 2.7 percent of gross domestic product in 2012 from 5.3 percent last year, the government said. (Bloomberg) Borrowing costs rise sharply on debt concerns PARIS (AFP) – Borrowing costs for financially troubled eurozone economies rose sharply yesterday, reflecting renewed concerns about their solvency following a debt downgrade in Spain. The yield on the Spanish 10-year sovereign, which Spain would have to pay to attract new investors, widened to 4.298 percent from 4.247 percent on Monday. Credit rating agency Fitch lowered Spain’s sovereign rating one notch from the maximum AAA to AA+ on Friday owing to the country’s poor growth prospects. Yields also rose on 10-year bonds offered by Greece, from 7.673 percent to 7.776, and by Ireland, from 4.779 percent to 4.850 percent. By contrast, borrowing costs for Germany and France, seen as relatively solid financially, narrowed yesterday as investors sought quality instruments. Ireland’s prospects Ireland’s prospects are more favorable than those of other indebted European countries such as Greece and Portugal, Ernst & Young said in a report. Ireland’s «extremely strong» exports, falling prices and wages, and «highly competitive» corporation tax rate will help the country’s economy return to growth, the accounting firm said in its Summer 2010 forecast yesterday. «Ireland has been branded alongside Portugal, Spain, Italy and Greece,» the report said. While there are similarities, there is «a range of factors in which the economies differ markedly,» Ernst & Young said. (Bloomberg) Dubai Holding’s loss Dubai Holding’s main unit posted a $6.2 billion loss for 2009 and said it may resort to asset sales, sending shares in Dubai sharply lower, in the latest setback to the emirate’s troubled finances. Dubai Holding Commercial Operations Group (DHCOG), said it was in talks with banks to roll over debt and had access to emergency funding if needed as it renegotiated obligations to trade creditors after the property crash put its cash flow under severe pressure. The loss increases challenges faced by Dubai Holding to meet its obligations, estimated at $14.8 billion out of a total $109 billion owed by the government of Dubai and its related entities. The news sent Dubai’s main index down 3 percent with property stocks weakening on anticipation that DHCOG will need to sell more property units, possibly flooding the market, to pay down debt. (Reuters) OPAP strike Greek betting group OPAP’s sales agents are threatening to strike over tax changes and exclusivity rules on June 11 and 12, the first two days of soccer’s World Cup, their head said yesterday. The move highlights unrest triggered by Greece’s drastic belt-tightening to counter a debt crisis that has shaken the euro zone and undermined Europe’s single currency. OPAP, which has a monopoly on sports betting and lotteries in the country until 2020, is 34 percent-owned by the state. Its 5,000 Greek agents are the only ones allowed to sell its products. Under a new tax regime decided as part of reforms aimed at plugging Greece’s fiscal gap, OPAP’s agents will now be taxed on their profits instead of paying a flat rate on their revenues. Agents say this will hurt business. They also demand fast-track parliamentary approval of a deal signed with OPAP which will continue to bind the firm to its agents. (Reuters)