In Brief
Spain will slash borrowing to fend off crisis fears MADRID (AFP) – Spain’s government will slash net borrowing from bond markets by nearly a quarter in 2011, the Treasury said yesterday, as it fends off market fears of an Irish-style debt crisis. Investors have shown deep concern over the annual deficit being racked up by the Spanish government and its heavy reliance on the bond markets, leading them to demand higher and higher returns. An economic and financial rescue for Spain would be far bigger than anything seen to date in Europe: The size of its economy is twice that of Greece, Ireland and Portugal combined. Spain’s Treasury said it had managed to cut borrowing from markets in 2010 and would do so again in 2011 because of austerity measures adopted by the government. For the year ahead, the Treasury estimated net financing needs of 47.2 billion euros (62 billion dollars) – a decline of 24 percent from 2010. But the figure was slightly higher than previously announced because of the country’s 3.588-billion-euro contribution to a European financial rescue for Greece. Portugal plans to sell 20 bln euros in bonds in 2011 Portugal, struggling to cut the euro region’s fourth-largest budget deficit, plans to sell as much as 20 billion euros ($26 billion) in bonds next year to help finance the gap. The country’s total borrowing needs are expected to be about 20 billion euros, the debt agency, known as the IGCP, said yesterday in an e-mailed statement. The government plans to sell a new bond through banks in the first quarter, it said. Portugal is cutting state workers’ wages and has raised taxes to show investors it can narrow the budget gap after the Greek fiscal crisis led to a surge in borrowing costs for high- deficit nations in the region. Ireland last month became the second country to seek a bailout and the first to line up aid from the European Financial Stability Facility. The difference in yield between Portuguese 10-year bonds and German bunds, Europe’s benchmark government security, reached a record 484 basis points on November 11. The gap, or spread, was at 364 basis points as of 3.17 p.m. in London. Portugal’s bond sale through banks will be for at least 3 billion euros, the IGCP said. It intends to sell more of four- to six-month securities through auctions in the first quarter, subject to market conditions, the Lisbon-based agency added. Net financing from treasury bills should be «marginally positive in 2011,» it said. (Bloomberg) Italian auction Italy yesterday raised 12 billion euros (15.7 billion dollars) in a treasury bond auction that drew strong demand but at interest rates sharply higher than at a previous operation. Italy, with a public debt approaching 120 percent of gross domestic product, has lately prompted investor unease amid a wider eurozone finance crisis affecting Spain, Portugal, Ireland and Greece. The Bank of Italy said the Treasury had placed six-month bonds worth 8.5 billion euros and two-year bonds worth 3.5 billion euros. The offer was heavily oversubscribed, with six-month bonds attracting 13.198 billion euros and two-year bonds 4.139 billion euros. But the yield, or interest rate demanded by investors, rose sharply compared with a similar operation November 25. (AFP) Monopoly ends Serbia will end its monopoly on oil imports held by Naftna Industrija Srbije AD (NIS) and cancel price caps on gas, diesel and heating oil as of Saturday. The government made the decision yesterday, keeping a promise to liberalize oil imports and the retail market for oil derivatives, it said in an e-mailed statement. Retailers on the 3-billion-euro ($3.94 billlion) market will be free to import the derivatives independently from NIS, or continue buying them from the refineries run by the biggest oil company in Serbia, majority-owned by OAO Gazprom Neft. The government has issued 240 licenses so far for oil derivatives trading, which includes variations of diesel, gasoline and liquid natural gas for vehicles. Key companies on the market, along with a chain of NIS gas stations, include local units of Mol Nyrt, OMV AG and OAO Lukoil. (Bloomberg)
