Global Economic News
Arab Funds Won't Save Failing Citigroup
March 5 (EIRNS)Shares of struggling Citigroup fell yesterday to their lowest level since November 1998, after the head of a Dubai-owned investment firm said the largest U.S. bank needs to raise many billions more in new capital in order to survive its massive losses, and that Middle East wealth funds could not save it.
Sameer al-Ansari, chief executive officer of Dubai International Capital, said Citigroup would need "a lot more money" on top of some $30 billion already raised from investors including Abu Dhabi, Kuwait, and Saudi Prince Alwaleed bin Talal. "It's going to take more than that [$30 billion] to rescue Citi," al-Ansari told a private equity financial conference.
Ironically, al-Ansari's warning came just three days after Federal Reserve chairman Ben Bernanke told the U.S. Senate that U.S. banks would be failing in the worsening financial crash, but "only small banks" and regional institutions. Of course, by the time Citigroup takes huge new write-offs of worthless security assets from its books this quarter, it may be a "smaller" bank. And its collapse could take a hundred small banks down with it.
Merrill Lynch & Co. put the latest dagger in: Its analysts published on March 4 that they expect Citigroup to have to write down, in the first quarter, $15 billion more of its $37 billion of exposure to subprime mortgages, and collateralized debt obligations, and $3 billion of loans to commercial real estate and leveraged buyoutsa total of at least $18 billion more. This would make for net quarterly losses as big or bigger than the $9.8 billion Citi lost in the fourth quarter of 2008, and thus require a large new infusion of capital, or bust.
Depressed Europeans Buying Cheaper Autos
March 4 (EIRNS)Initially built only for export to poor countries, sales of the French Renault car model "Logan" increased by 83% in February within France itself. The inexpensive Logan was constructed by cheap labor in Romania. Renault aims to sell 800,000 cars worldwide between 2006 and 2009, and the success of the Logan put the French automaker on top of sales figures for February (+16%), compared to Citroen (+11%) and Peugeot (+13%), establishing an average increase of car sales at +11% for the same period.
Rocard: Capitalism Is Immoral; Regulation Needed
PARIS, March 5 (EIRNS)Former French Prime Minister Michel Rocard, who has been actively campaigning in recent times for a new Bretton Woods, once again used his pen to denounce, in the French daily Le Monde, the present decadence of "capitalism." Rocard used a huge scandal which is rocking the French business association, to analyze the current systemic crisis and to call for a broad moralization of the system.
Methodically, Rocard goes through different aspects of that crisis: How it started with the subprime crisis, in which "bankers' rapacity rid them of any scruples about the fact that their victims (those now losing their homes) were human beings"; how the "second massive immorality" led bankers to mix viable and rotten financial instruments together and spread them throughout the system; the increasing number of financial crises and of unemployed over the last 30 years, in stark contrast to the stability and growth in the period of post-war reconstruction; and, finally, the emergence of a new, money-hungry generation, who like the corporate CEOs are demanding millions in stock options and other gains.
Rocard concludes angrily, "For me things are clear: Capitalism is sinking into immorality. And we are discovering that it is possible that it can entirely succumb to it." The problem with this type of capitalism, is that "its voracity threatens the very system in which we live.... Without strong ethics, capitalism cannot survive. It will probably be necessary that public regulation provides the means to act."
Threat of Food Crisis Worries Indian Subcontinent
March 7 (EIRNS)The worry of a rapid rise in food price, and shortage of food grains, has begun to appear in both India and Pakistan. New Delhi has imposed fresh restrictions on export of lower-price rice varieties. The government announcement said only those varieties of rice which fetch more than $650 per ton in the international market will be allowed for export. Besides the price restrictions, export shipments of rice would be permitted only from Kandla, Kakinada, Kolkata, and JNPT Port in Mumbai.
In Pakistan, Naeem Butt, chairman of the private All Pakistan Flour Mills Association said, "the government may have to import between 1 and 2 million tonnes of wheat to meet requirements." Pakistan will miss its wheat output target of 24 million tons for the 2007/08 crop year. Late sowing, a fall in the area planted with wheat, a shortage of irrigation water, and rising fertilizer prices are reasons for the lower output. Butt pointed out that nearly 1 million tons of wheat, bought with opium-generated cash of the Afghan druglords, finds its way to neighboring food-short Afghanistan.
In addition, what worries both New Delhi and Islamabad, among others, the most is the UN Food and Agriculture Organization (FAO) report that says wheat stem rust, whose spores are carried by wind across continents, and was previously found in East Africa and Yemen, has moved to Iran where its presence has been confirmed by laboratory tests in some localities in Broujerd and Hamedan in the country's West.
Major wheat-producing nations to Iran's east, including Afghanistan, India, Pakistan, Turkmenistan, Uzbekistan, and Kazakstan, should be on high alert, FAO said.