The euro is ‘irreversible’ and the beleaguered currency union is not in danger of collapsing, according to European Central Bank President Mario Draghi, who also argued that Eurozone nations will eventually be bound even closer together. The central bank chief suggested that analysts who have been tracking the mounting sovereign debt crisis in Europe have been too pessimistic in forecasting worst-case scenarios for the currency and had not recognised the political will behind the Eurozone. He was bullish on the future of the currency despite the escalating crisis in Spain, where stocks on Friday experienced their biggest one-day drop in two years, dragging other European markets down with them. The yields, or interest rates, on benchmark 10-year Spanish government bonds have also climbed even further beyond the 7 per cent threshold, which many market-watchers view as unsustainable. Mr Draghi claimed that the currency was ‘absolutely not’ in danger when asked by France’s Le Monde newspaper in an interview, The Sunday Telegraph explains.
Rich Ricci, head of Barclays’s investment bank, has ruled himself out of the running to replace Bob Diamond as chief executive as the troubled bank prepares to announce profits in the region of £1.7bn for the second quarter. Mr Ricci, one of Mr Diamond’s key lieutenants, is believed to have told friends that he neither wants the job, nor thinks it would be sensible for him to be appointed. His absence from the running to replace Mr Diamond – who resigned in the wake of the Libor-fixing scandal – will create a further headache for Barclays’ board, which must also find a replacement for Marcus Agius, the outgoing chairman, The Sunday Telegraph writes.
The British economy has shrunk for the third successive quarter, prolonging Britain’s recession and threatening to derail chances of recovery this year, official figures are likely to show.The Office for National Statistics is expected to say gross domestic product shrank by at least 0.2% between April and June as the Jubilee holiday, weak domestic demand and the Eurozone crisis dragged the economy down. It would mark the third successive quarter of contraction, leaving Britain in its first double dip recession since 1975. The economy shrank by 0.3% in the first quarter of the year, following a 0.4% contraction in the final quarter of 2011. The work lost as a result of the extra day given for the Queen’s Diamond Jubilee celebrations in June was a significant drag during the quarter according to economists, disguising a slightly stronger ‘underlying’ economy, according to The Sunday Telegraph.
World markets are set for a rocky week after it emerged yesterday that a second Spanish region is on the brink of asking Madrid for help. Catalonia, the region that includes Barcelona, is said to be days away from requesting an emergency loan. It is unable to pay the interest on EUR48bn (£37bn) of debts, according to reports. Markets tumbled on Friday after a rescue deal for Valencia — site of some of the worst excesses of Spain’s property boom — was unveiled. An emergency loan of an undisclosed size will be made by the Spanish government via an EUR18bn rescue fund set up two weeks ago to deal with struggling regions. Spanish reports claim that six other regions may need help, The Sunday Times says.
ENRC, the FTSE 100 miner, is close to a deal to buy out a controversial Israeli tycoon from its operations in Democratic Republic of Congo. The deal, which could be announced within a month, would end a tumultuous episode. ENRC sparked outrage when it bought a copper mine from Dan Gertler, a former diamond trader with close ties to Joseph Kabila, Congo’s president, two years ago. The deal led to a $2bn lawsuit from rival First Quantum, which owned the mines until they were expropriated by the Congolese government. It also sparked an internal battle between the trio of billionaires who control ENRC and the City grandees who sat on the board. Two, Ken Olisa and Sir Richard Sykes, were turfed out last year, The Sunday Times reports.
British Gas is this week expected to report a 25% rise in profits for the first half of the year in its residential business as poor weather forces customers to switch on their heating. The news is likely to incense households across the UK, coming as it does after a warning by British Gas in May that domestic consumers will see their annual bills rise by an average of £100 in 2013. The energy giant blamed the forthcoming increase on a rise in wholesale energy costs. Such an increase would see the average household’s annual dual fuel bill rise to more than £1,100, The Financial Mail on Sunday reports.
The 14 million savers with Nationwide Building Society, the UK’s largest, are still paying a heavy price for generous mortgage promises the society made to borrowers a decade ago, its bosses have admitted. And the situation is set to persist. The admission, by Nationwide chairman Geoffrey Howe, came in answer to several furious questions to the board about the society’s savings rates at last week’s annual meeting in Manchester. Savers repeatedly compared their ‘meagre’ returns with the ‘astronomical’ pay of Nationwide executives, including chief executive Graham Beale, who pocketed more than £2m last year. When one member demanded to know why the society claims to be different from banks but ‘doesn’t seem to offer any better rates’, Howe replied that a promise made to hundreds of thousands of mortgage borrowers from 2001, that their mortgage could not rise a certain amount above the Bank of England’s base rate, was costing the society £750m per year – money which would otherwise be available to pay as interest to savers, The Financial Mail on Sunday says.
At last, more of the world’s most senior policymakers and top financial analysts are starting to acknowledge the obvious; that a complete break-up of banks such as Barclays between their retail and investment banking operations is by far the best way to make our banking system safer and fairer to the taxpayer. It could also be the quickest and most effective way to get lending to the real economy going again. One convert to splitting Barclays in two is Neil Shah, the head of global research at Edison Investment Research, one of the few global independent research houses, so he has no axes to grind. Mr Shah says that so long as Barclays has retail and investment banking, the government will never let it go bust which means the bank will always leverage up, taking more and more risky bets. And that, he says, is inherently wrong for the taxpayer, reports The Independent on Sunday.