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Iceland at 'turning point' Before there were the so-called PIGS, there was Iceland.
The tiny island nation was the poster child for melting economies, until Portugal, Ireland, Greece and Spain created Europe's debt crisis. Now, though, the country says it's back on its feet and preparing to test the markets again.
"We're at an important turning point in many ways," Finance Minister Steingrimur J. Sigfusson told Bloomberg Television. "We're mainly trying to present our own case, which we think is good enough to make a convincing story that Iceland is a safe place to lend money to."
Credit default swaps, or CDS, Bloomberg noted, are back at pre-crisis levels, and below those of Spain and Portugal, while its economy is expanding again
"The economy is turning to growth and we think it's about time to start seriously preparing to make a move on the international financial markets," Mr. Sigfusson said."The long-term developments have been very favourable and the CDS on Iceland is now lower, or around the same, as it was well before the banking crisis."
Portugal's 6.716% solution The markets heaved a hefty sigh of release today as Portugal pulled off a widely-watched auction of 10-year bonds, €599-million worth at a lower-than-expected yield of 6.716 per cent, below the key level of 7 per cent. It also sold four-year bonds, bringing the todal to €1.25-billion.
That's today. As so often has been the case with Europe's debt crisis, who knows what tomorrow may bring. And the big question is, when will reality set in?
"This removes some pressure on the country to seek a bailout, but investors remain worried that borrowing costs remain unsustainably high and that Portugal will need to seek aid," said BMO Nesbitt Burns economist Sal Guatieri.
"As well, the bigger test of investor confidence could be Spain and Italy's debt auctions tomorrow."
Yes, 6.716 per cent is lower than 7 per cent - fears surrounded the fact that yields peaked last week at 7.2 per cent. But, as Paul Krugman pointed out in his blog on The New York Times website, it says something about the "sheer desperation" of the euro situation when that level is deemed a success.
"If you think about the debt dynamics here - the burden of growing interest payments on an economy that is likely to face years of grinding debt deflation - an interest rate that high is little short of ruinous," he wrote.
"But it is, indeed, not as bad as people were expecting last week; hence, success. A few more successes and the European periphery will be destroyed."
As Scotia Capital economist Derek Holt also pointed out, the €599-million is a tiny drop in an ocean of funding needs.
"I don't think they're out of the woods by any stretch," Mr. Holt said, noting elections are on the way in Portugal and its government still has much debt to roll over, so this may be a temporary respite.
Together, Portugal, Ireland and Spain have needs this year of about €300-billion, a combination of maturing debt and additional funding needed to cover deficits, Mr. Holt calculated.
"One auction does not settle the headaches for the year as a whole."
Howard Wheeldon, a senior strategist at BGC Partners, agreed, telling The Financial Times: "The point is that despite the yield on the latest auction today being 6.71 per cent compared to the 6.80 per cent paid at previous auction last November markets have already decided that Portugal requires help and that is an end of it. Even though the government managed to get the latest bond auction away does not mean that this problem is in any way solved."
CMC Markets analyst Michael Hewson added that, while the yield came down below the 7-per-cent level that precipitated the bailouts for Greece and Ireland, this was "largely down to the European Central Bank's purchase of peripheral bonds earlier this week on the secondary market which had helped in bringing yields down."
Many observers believe Portugal will be forced to seek a bailout regardless, despite its protestations that it doesn't need one, but Spain is the greater concern.
Europe's new age of austerity Europe's austerity measures, aimed at dealing with a crippling debt crisis, are playing out in strange ways.
In Belgium, for example, the country's king had to get involved because a political stalemate has left the country without a full-time government.
King Albert II sent in a mediator to kick-start talks to form a coalition government, and his caretaker prime minister, Yves Leterme, promised to bring down the deficit, despite the fact there's no budget because there's no government.
In the Netherlands, the taxman has turned his sights on the world's oldest profession. Prostitution in Amsterdam's famed red light district, for example, does a thriving trade.
A spokeswoman for the Dutch Tax Service told The Associated Press that authorities aim to get their fair share of the revenue, and have been visiting brothels, for business purposes only, of course.
"We began at the larger places, the brothels, so now we're moving on to the window landlords and 'the ladies,"' Janneke Verheggen told the news agency. This will include audits.
Comments from one of the sex trade workers sound just like those of any other business workers. She's been paying taxes for many years, and says those who don't are competing unfairly.
European governments have announced huge cutbacks and tax initiatives, sparking at times violent protests, as they deal with huge debts.
Loonie at 8-month high The Canadian dollar rose today to an eight-month high of more than $1.01 (U.S.), pushed along by a big mining deal and speculation of more takeovers to come.
The proposed takeover by Cliffs Natural Resources for Consolidated Thompson Iron Mines is worth $4.7-billion in cash, which helped propel the loonie, said Scotia Capital currency strategist Camilla Sutton, adding a weaker U.S. dollar was also a factor.
So far this year, the Canadian dollar has gained 1 per cent, outperforming other major currencies. The outlook for the U.S. economy has brightened, which is seen as good news for Canada and also helps propel the loonie.
Why the West will win Fiscal restraint, stronger commodity prices and the powerful Canadian dollar will lead western provincial economies to outperform those of central and eastern Canada this year, a new forecast shows.
"All of these factors appear to favour growth in western Canada over central and Atlantic Canada, and while we're a long way from the commodity-boom days of 2007, the regional growth divide should assert itself in the coming year," economists Michael Gregory and Robert Kavcic of BMO Nesbitt Burns said in their report today.
Magna sees growth Magna International Inc. today presented a bullish forecast for sales and auto production this year in another sign that the global auto industry is recovering from the battering it took in 2009 and 2010, Globe and Mail auto reporter Greg Keenan writes.
"Vehicle production is poised for future growth in a number of important markets for us, including North America," Magna president and chief executive officer Don Walker said in forecasting sales of between $25.6-billion (U.S.) and $27.1-billion this year.
Boyd Erman's Morning Meeting Carfinco Income Fund, an Edmonton-based provider of car loans, is looking for a buyer, Streetwise columnist Boyd Erman reports today.
The fund has engaged investment bank FBR Capital Markets to try to find a way to maximize shareholder value. The fund said the options on the table include a sale.
In Your Business today
A Bank of Canada survey this week suggests lenders are loosening their purse strings as they try to bolster their loan portfolios ahead of a recovery. But the "heightened competition among lenders," the central bank flagged remains weighted toward more-established companies, or those with bigger operations.
Columnist John Warrillow recently chatted with often-outspoken management guru Tom Peters about what makes a valuable, sellable company. "Don't start out thinking about selling. Think about creating the world's best deli or car dealership."
In Personal Finance today
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The UN's Food and Agricultural Organization says food prices hit record highs in 2010. Find out what you can do to fight back.
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In Globetechnology today
From today's Report on Business