Date: Wednesday 16 May 2012
LONDON (ShareCast) - As leaders in Athens accepted the need for a new general election to end a national stalemate, the International Monetary Fund said Europe’s leaders should prepare for the possibility of a Greek departure from the single currency. Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the utmost effort must be made to ensure any Greek exit was orderly. The effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she said. Raising tensions still further, Germany warned Greek voters that the wrong result in next month’s election will force their country out of the single currency, according to The Telegraph.
David Cameron is considering ordering billions of pounds in extra welfare cuts proposed in a confidential Downing Street policy paper, The Daily Telegraph can disclose. The plans include a new crackdown on housing benefit and a “mark two” system of universal credit to help push people off benefits back into full-time, rather than part-time, work. There are also understood to be a range of measures to encourage more women, particularly single mothers, to return to work. The proposals have been drawn up in a policy paper for the Prime Minister presented by Steve Hilton, the outgoing Number Ten director of implementation, and Iain Duncan Smith, the Work and Pensions Secretary, The Telegraph reports.
Manufacturers have delivered a withering judgment on the Government’s industrial policy, accusing the coalition of empty rhetoric that has delivered stagnating economic growth. According to one of the largest studies of Britain’s engineers and manufacturers, an overwhelming majority believe that the Government is not delivering the right policies to support industry. In the survey of 1,500 employers by the consultancy BDO, only 26% believe the coalition is adopting the right strategies to support and develop UK manufacturing. Half of manufacturers do not anticipate the sector increasing its share of GDP, nor are they confident that it will have become a core part of the economy in ten years’ time, The Times reports.
AstraZeneca is understood to be considering a potential $4bn bid for an American maker of diabetes medicines. The Anglo-Swedish drug group is believed to be among a number of the world’s largest pharmaceuticals companies to have requested financial information on Amylin Pharmaceuticals. Amylin, which is based in San Diego, makes the diabetes drugs Bydureon and Byetta, has a market value of more than $4bn (£2.5bn) and generated $650m of sales last year. It appointed Credit Suisse and Goldman Sachs to assess takeover interest this year and first-round bids are understood to be due in the next two weeks. The American companies Pfizer, Bristol-Myers Squibb and Merck are said to be interested, as are Sanofi of France, the Japanese group Takeda and Roche of Switzerland, says The Times.
A Greek exit from the euro could be a moneyspinner for G4S, which is eyeing the prospect of an elaborate security operation if millions of drachma notes and coins have to be rushed into circulation. Its chief executive Nick Buckles said yesterday that Greece was the company’s fastest-growing cash-handling market in Europe as economic uncertainty encourages businesses to keep money at hand. “Our biggest contingency issue would arise if the country were to leave the euro and go back to the drachma, because basically we would be involved in the whole swap-out of the currency,” Mr Buckles said, The Times says.
JP Morgan's Jamie Dimon was hit with a fresh blow on Tuesday after the Federal Bureau of Investigation launched a criminal investigation into the bank's $2bn (£1.2bn) trading loss that has stunned Wall Street. The FBI and the US Department of Justice are examining whether there was any criminal wrongdoing in losses that have damaged the reputation that JP Morgan and Mr Dimon have built for risk management. America's largest bank by assets has been battling to contain the fallout from the losses, which Mr Dimon described as "self-inflicted". Yesterday, at the bank's annual shareholder meeting in Tampa, Florida, the banker admitted: "It should never have happened. I can't justify it," writes The Telegraph.
Pension fund chiefs have warned the Government against striking a ‘sweetheart’ deal with Middle East investors over the sale of Royal Bank of Scotland and Lloyds. The damning verdict – delivered to MPs yesterday by investment bosses at Standard Life, Schroders and Royal London – undermines one of the Government’s key strategies designed to return the state-backed banks to the private sector. Treasury officials have been working urgently behind the scenes to sell part of taxpayers’ 82% stake in RBS to Abu Dhabi sovereign wealth funds at a loss, The Daily Mail holds.
Panicky investors have lost faith in highly-paid City stock pickers and are bailing out of shares amid the current economic turmoil. A Money Mail investigation has revealed how desperate High Street investors have finally lost faith with professional fund managers who have consistently failed to deliver the goods. And many ordinary savers are quitting funds that hold stocks and shares from some of Britain’s biggest companies for supposedly safer bonds and gilts. The FTSE has yo-yoed wildly in the past ten days following political and economic upheaval in Europe, driven by fears that Greece is ready to quit the euro and other countries such as Spain may also be in worse health than believed. The flight from shares has already begun to show up heavily on fund flows compiled by the Investment Management Association.
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