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US may default on its debt a half-month earlier than expected, new analysis shows

8 Jan

The government hit the $16.4 trillion statutory debt limit on Dec. 31 , but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.

The Treasury has said that the accounting schemes, known as “extraordinary measures,” ordinarily would forestall default for about the first two months of the year, though officials were clear that they could not pinpoint a precise date because of an unusual amount of uncertainty around federal finances.

“Our numbers show that we have less time to solve this problem than many realize,” Steve Bell, senior director of economic policy at the Bipartisan Policy Center, said in a statement. “It will be difficult for Treasury to get beyond the March 1 date in our judgment.”

The fast-approaching deadline to raise the debt limit is likely to be Washington’s next fiscal battleground. Republicans say they plan to use the occasion to demand deep federal spending cuts, with House Speaker John A. Boehner insisting on a dollar reduction in federal spending for every dollar increase in the nation’s borrowing limit.

But the White House says President Obama will not negotiate this point, since the debt ceiling represents a limit to obligations that Congress already has promised to pay.

“What he will not do — as he has made clear — is negotiate with Congress over Congress’s sole responsibility to pay the bills that Congress has already incurred,” White House Press Secretary Jay Carney said on Monday. “Nobody forced Congress to rack up the bills that it incurred. And it is an abdication of responsibility to say that we’re going to let the country default and cause global economic calamity simply because we’re not getting what we want in terms of our ideological agenda.”

The Bipartisan Policy Center’s debt-limit deadline is based on several assumptions, two of which conceivably could change the calendar.

One is that the confusion around end-of-year tax policy could lead to delays in the filing of taxes and refunds, throwing a curveball into projections about the nation’s finances.

The other is the overall pace of economic growth; faster growth tends to lift tax receipts.

If Congress does not raise the debt ceiling by the deadline, the White House has said that the nation likely would default. In a previous episode — in the summer of 2011 — officials determined that the best course would be to withhold all of a given day’s federal payments until enough money became available to pay them.


Miranda Kerr & Andrés Velencoso for Mango

5 Dec

Miranda Kerr & Andrés Velencoso for Mango


The Spanish fashion brand chooses international top models for the face of its Spring/Summer 2013 campaign.

Mango has always looked to famous faces for its advertising campaigns. Models and actresses like Kate Moss, Isabeli Fontana, Scarlett Johansson, Penélope Cruz, Milla Jovovich, Lizzy Jagger, Karolina Kurkova, Naomi Campbell, Eva Herzigova, Inés Sastre, Claudia Schiffer, Christy Turlington and Diane Kruger have all been Mango ambassadors.

Now Australia’s Miranda Kerr, best known as one of the sensual angels of lingerie brand Victoria’s Secret, is taking over for the Spanish brand’s new Spring/Summer 2013 campaign.

Chosen by People magazine as one of the best dressed women of 2012, the actress posed for a special photo shoot in New York, for top photographers, Inez van Lamsweerde and Vinoodh Matadin.

Mango has also updated its men’s line, H.E. by Mango, courtesy of Spain’s Andrés Velencoso. Since he modelled for Louis Vuitton with Jennifer López in 2003, he has become a key figure on the international fashion scene.

Since its creation in 1984, Mango has consolidated its position as one of Spain’s top international fashion companies, with the statistics to prove it: more than 2,500 shops in 109 countries, 11,000 employees, €1.408bn in turnover in 2011 and an export rate of 82%.

Munich is flagship destination for Mango.
E-commerce available at Mango shops.
Mango catwalk show at 080 Barcelona.

If you want to see where Spain is headed, take a long look at Jerez

30 Nov

Decades of financial mismanagement have brought the city to the brink of bankruptcy
The new mayor is determined to impose order, but at what cost?
Guillermo Abril
Jerez, in the southern region of Andalusia, can be viewed as an illustration of all that has gone wrong with Spain over the last two decades: rapid growth based on seemingly limitless borrowing, which has produced a glut of houses and office space that nobody wants. Three years ago the bubble burst, and the local authority has been left with no money. That means it is unable even to pay its utility bills or the cleaning staff in its schools.
To put it simply, Jerez has been living beyond its means. Anybody working in the public sector – or for a company that depends on the public sector – is either on strike, has been on strike, or is likely to be very soon. From one month to the next they have no idea whether they will be paid, or even if they will be left with a job. People were being laid off even before the government introduced new laws to make it easier to fire employees, and the unions have been unable to do anything about it.
Some commentators say that if you want to see where Spain is headed, take a long look at Jerez: ever-declining public services that mean people just have to get on with making the best of what there is.
Around 8pm on a rainy Wednesday at the end of October we meet Moisés Gálvez, the father of one of 7,000 children in the city who haven’t been to school that week, and the head of the parents’ association of the Manuel de Falla junior school. He tells us that around half of the city’s 47 infant and junior schools have been closed this week because of a strike by cleaning staff who haven’t been paid. Negotiations are underway, and it is possible, he says, that the strike may be lifted this evening. But then again, it may not. That’s the way things are in Jerez right now: nobody knows anything.
By fighting for your rights, you’re more than likely to be trampling on somebody else’s
The cleaners are owed around 1,500 euros each in back pay, and have been staging partial walkouts over the last two weeks in protest. This is the fourth time that they have taken industrial action in just under a year. In the new Spain, by fighting for your rights, you’re very likely to be trampling on somebody else’s. That’s austerity for you. When there is no more money in the state’s coffers, people have no choice but to deal with the ensuing cuts as best they can. This means looking out for one’s own interests, even at the expense of those around you. “These women are exercising their right, fine. But at the same time they are affecting our children’s education. And what happens if City Hall gives in to them?” asks Gálvez, a worried and angry parent, like so many others throughout Spain.
Gálvez has been a municipal police officer in Jerez for the last 12 years. Back in 2009, when the crisis really began to bite, he and his colleagues marched to City Hall dressed as Roman legionaries to draw attention to the worsening situation. When the authorities stopped paying them, they set up a camp in the main square. Since then, they have lost a range of subsidies and benefits, as well as having to take a pay cut, like the rest of their colleagues in the public sector. He looks tired: he’s just worked a night shift, and hasn’t slept this morning, having spent the free time looking after his son, who is off school.
“Police officers are not allowed to strike, so that means that City Hall can hold back our pay. At one point they owed us three months’ wages. By the middle of the year we were no longer being paid. Now they owe us two-thirds of our wages for September. Over the summer we were unable to go out on patrol because there was no fuel for our cars and bikes. We could only go out if we got an emergency call. We didn’t even have paper for the photocopier. We’re using the old voting slips from the last elections.” Like everybody else in Jerez he has no answers, and no solutions to the situation: “We just want to be paid, that’s all,” he says.
But Jerez City Hall has no money. In fact this city of 212,000 people owes one billion euros. The loan it requested from the government under a scheme to allow local authorities to pay their suppliers was the second largest, after Madrid’s. Unemployment in Jerez is around 34 percent, with 34,000 people out of work. Meanwhile, City Hall’s budget is getting smaller and smaller.
At one point they owed us three months’ wages,” says a policeman
Since María José García-Pelayo of the Popular Party (PP) took over in May 2011 with an absolute majority, the council has reduced its budget by 20 percent, and its costs – the amount it spends on products and services – have fallen by 40 percent. One of the first things the mayor did was to lay off 260 City Hall employees. She says that in the year 2000 there were 1,650 employees on the City Hall payroll, a figure that had ballooned to 2,150 by 2007, many of them on “generous salaries with significant benefits and perks.” A 55-year-old man who wouldn’t give his name described the layoffs as “arbitrary, despotic, and neo-fascist.”
City Hall brought in consultants Deloitte to go through its books. Its report, which led to the layoffs, reads: “The current situation at City Hall is a reflection of a situation inherited from previous periods. In this sense, during the period between 1995 and 2007, characterized by important economic growth, Jerez City Hall had access to abundant revenue and easy credit, which provided relief to the local treasury, but which covered up the real financial situation at the institution. In the end, the current economic crisis, with its strong impact on revenues and subsequent increase in demand for social services, has highlighted the desperate situation of Jerez City Hall’s finances.”
There is now something of a war economy in Jerez these days. City Hall is fighting on any number of fronts, most of them related to public services.
On the way to the Manuel de Falla junior school, where the next day cleaning staff went in to work after City Hall agreed to pay them part of their salary – albeit without supplying the means to purchase cleaning products, for which there is no money – one passes the local fire station. In front of it is a collection of tents. They’ve been there since September, when firefighters decided to stage a go-slow. They are only covering emergencies. They are not training, studying or even checking their machinery of vehicles. They were paid their August salary in late October. There is no sign of September’s. The provincial firefighters’ union has threatened to expel them if City Hall doesn’t cough up their union dues and back pay. A few days later, City Hall promised to pay them by the end of November.
Jerez City Hall has no money – the city of 212,000 people owes a total of one billion euros
Walking through newly paved streets, lined with rows of small houses built over the last two decades, a bus driver with 16 years behind the wheel tells us that he and his colleagues are resigned to their fate. They too are owed money, and are unlikely to be paid any time soon. “We’re on strike. But the truth is that we’ve no longer got any way to put pressure on City Hall,” he says. “We’ve been on strike for 25 weeks now. But we’re a laughing stock. We’re owed nine months back pay, around 12,000 euros each. Jerez privatized its bus services, but in 2010, the company, called Cojetusa, part of the FCC construction group, went bust. The former manager in Jerez has since been dragged into Operation Malaya, the far-reaching investigation into corruption in Marbella.
Another company tried running the buses, but in May Jerez City Hall cancelled the contract. The bus service is now being run by a local civil servant. City Hall says that after it has settled up back pay, drivers will be offered a 20-percent salary cut in exchange for being able to keep their jobs. “When you see so many people around you with nothing, if they pay me my 12,000 euros and cut my pay by a fifth I will consider myself fortunate,” says the driver.
Jerez, once an important part of the industrial revolution in Spain, and with its long tradition of sherry- and wine-making, once hoped to establish itself as a leading commercial center in Andalusia. Those hopes are now long gone.
This is where the first railway in Andalusia was built to ship brandy and sherry out to the markets in Europe. The industry grew throughout the last century, with sherry production reaching around 200 million bottles a year in the 1990s. Output is now barely 55 million bottles. Of the workforce of 10,000 people directly employed in the wine-making industry a decade ago, just 1,000 or so remain. Juan Luis Bretón Abrisqueta, the former director of vintners Williams & Humbert and John Harvey, says that Jerez’s wine sector is a shadow of its former self. “This is no longer a place where the different wineries are respected for their respective identities.”
Firefighters are only covering emergencies and are not training or checking vehicles
By the end of the 1990s, Jerez was caught up in the construction boom that had swept through the rest of Spain, fueled by cheap credit. Land that for centuries had been used for grape growing was rezoned and sold off for building houses. City Hall was suddenly awash with cash, and used its new-found liquidity to borrow more money. Bretón describes what happened as “a curious approach to municipal management: the city began to grow rapidly, all paid for by City Hall, which was getting deeper into debt as it drove the local economy and became its biggest employer. A motor-racing circuit was built, and costly events were staged to raise the city’s profile, but that brought in little investment.
“This city scares the living daylights out of me,” says Pedro Pacheco, who took over as mayor in the late 1970s, staying in office for 24 years. He is now a local councilor for the left-leaning Citizens’ Forum party, which emerged out of the Andalusian Socialist Party. He tells his version of events. “I was 29 when I was elected. I was very young, and expectations were high. We transformed this city, putting in new roads, sidewalks, lighting, the sewers, sports and leisure facilities… We built the motor-racing circuit, a new sports stadium, and we promoted the show jumping competition. Jerez was a pioneer in a new approach to running a city.”
More than that, as he now admits, “Jerez was living way beyond its means,” borrowing money and getting deeper and deeper into debt: “We wanted to do it all, and we got so caught up in the job that we stopped listening to what people wanted.” He stepped down in 2004, but under a deal with the Socialist and Popular parties, he stayed on as head of urban planning until 2007, by which time the scale of the financial disaster was huge.
Everybody involved in what happened over the last two decades in Jerez has their version of events. Pilar Sánchez, the Socialist Party Mayor between 2005 and 2011, agreed to talk for a few moments during a break at a meeting in City Hall, where she is still a local councilor. Outside, a group of protesters stood forlornly in the rain, being roundly ignored by everyone in the building.
Of the 10,000 people who worked in the wine industry, just 1,000 or so remain
Sánchez blamed her predecessor, Pacheco, for the city’s problems, saying that she inherited an already disastrous situation. “Pacheco’s dreams resulted in a 50-million-euro debt for the motor-racing circuit; 70 million for the show jumping events… During the boom times, the money coming in from the construction sector covered all eventualities. But when the market collapsed, we went from revenues of 22 million euros to two million euros in a single year. We had to pay what we owed, along with the debts we had inherited. And now I’m the one getting all the blame.” She admits that she should have taken tougher measures to reduce the city’s spending, for example cutting the municipal workforce, and putting employees on part-time contracts.
Later that day we joined her for a glass of sherry at the González-Byass winery, where officials were deciding on who would play the three wise men in the Christmas parade.
We were there in the hope of an interview with the mayor, María José Garcia-Pelayo, who eventually found time to talk to us at the end of a very long day. “It’s been a very difficult time, since the first day that I took over,” she says. “The worst moment so far was when we announced the mass layoffs.” When she was elected, her team of accountants recommended declaring the city bankrupt. “I am determined to get this sorted out. But there is no way that we can do that in just 15 months.” Her goal is to reduce the city’s deficit to zero by August 2013, and that means cutting spending everywhere. “We are already into our third financial restructuring plan,” she says.
This has involved renegotiating with suppliers to get them to bring their prices down by 20 percent. García-Pelayo met personally with Florentino Pérez, the president of Real Madrid. He is also the owner of Urbaser, an affiliate of his ACS construction company, and is owed 88 million euros by Jerez city council. She says that more jobs will be shed from the municipal payroll. The city’s water supply is to be privatized. “That will give us a vital supply of oxygen,” she explains. Her approach to resolving the city’s finances is that of a gym instructor hired to get a flabby has-been into shape. She believes that Jerez has a bright future, once it is back on track. “This is a luxury brand; this is not some failed city. The failure has been on the part of the people who ran it: we’re finally waking up,” she says.
Land that had been used for grape growing was rezoned for building houses
But for many of Jerez’s inhabitants, the wake-up call has come too late, and they are unsure what kind of future awaits them; people like Cristóbal, a 78-year-old who survives by selling cane baskets and lives in an abandoned 19th-century sugar processing plant in El Portal, a run-down area to the south of the city. Both Pacheco and Sánchez intended to develop El Portal. All that remains is a half-built sports center and unfinished office buildings, as well as land set aside for low-rent apartments that were never started. On one abandoned site a horse is tied up, chewing on the little grass that remains. A boy squeezes through the fence. He sets a trap for birds using ants as bait. He has already caught one. When he has a dozen he says he’ll take them home for his mother, who will fry them up for lunch.


The European Weekly Crisis:

30 Nov

The weekly crisis:

The Euro Group and the International Monetary Fund has had to ‘bite the sour apple’ and ‘pardon’ 40,000 million euros of Greek debt, to avoid the country going formally bust and losing the 43.700 million, next installment of the ‘rescue package’….

The Spanish government has indicated that it will again use the reserve fund of the Social Security, which at present has 66,000 million euros, to pay pensions in December

FROB, the Government agency for banking restructure, has agreed to sell Banco de Valencia for 1 euro to Catalunya Bank, after first injecting 4,500 millions to keep it afloat

Bankia will reduce the staff by 6.000 people, 25% of the total, and close down 1.000 branch offices

FUNCAS (Foundation of the Saving Banks) predicts that the contraction in the economy this year will be 1.4% of the Gross Domestic Product, and 1.6 next year

The federation of the metal industry considers the Government budget for 2013 as ‘overly optimistic, which may deepen the crisis’

Non-financial companies assets fell 57.2% in the 9 first months of the year

The public deficit was in October 43,374 million euros, 4.13% of Gross Domestic Product. That is 9% more than at the same time last year

The results of the Catalan elections have made the country risk rise slightly over 420 points, the interest rate on 10 years bond to go over 5.7% and the IBEX to fall below 7,863 points


Swiss bank accounts, Catalan regional elections

22 Nov

Catalonia is holding elections to the regional parliament on 25th of this month which the leaders of the regionalist party CiU are trying to make into a plebiscite on independence from Spain.


To the great dissatisfaction of the CiU leaders, the questions of corruption, tax evasion and transfer of huge sums of money to accounts in Swiss banks have been brought to attention in information leaked from the Swiss UBS bank, and in a Spanish police report published by the leading newspaper ‘El Mundo’.


Last week we wrote about the father of the present President of the Catalan government, Artur Mas, who had an substantial account in Switzerland. He is being investigated for possible corruption connected with the construction of the Palau in Barcelona. This week we can tell our readers about the publication in ‘El Mundo’ of a report from the Spanish police that the Pujol family has 131 million euros stashed away in a Swiss account. Jordi Pujol was one of the founders or the regional party and President of the Generalitat for several years. He was also the founder of the Banca Catalana that was investigated by the Bank of Spain due to heavy losses. The national prosecutors examined transfers to other countries of more than 500 million pesetas, but in 1986 the Barcelona courts of shelved the accusations.


The Catalan nationalists are now pretending that the accusations about the Swiss bank accounts are just election rhetoric.


In the meantime, President Barroso of the European Commission has confirmed that is a territory segregates from a member state it automatically leaves the European Union, and their citizens will no longer be European Citizens.





Typewriters reach the end of the line in the UK

21 Nov

It was at 12pm on Friday that the last British-made typewriter was packed into its box at the Brother factory in Wrexham. Its maker, Edward Bryan, 40, has worked in the factory since 1989. When he started, around 30 people were on the typewriter line. By the end there was just him – the team leader – and another worker. The last CM-1000, an electronic typewriter that retails for around £400, was presented to Rachel Boon, a curator of technologies and engineering at the Science Museum, which will keep the machine. Colleagues gathered around, and the MD of Brother Industries, Craig McCubbin, reminisced about how he had started out on the production line in his school holidays.

“I was a bit sad,” says Bryan, who has been building typewriters for Brother for 23 years. “You could have ownership of the machine. From taking a little screw at the start, you end up with a typewriter in a box.” He can build one with his eyes closed – he tried it once. “It took about 40 minutes,” he says with a laugh. (Usually, it would take him just 18.)

The decision was taken six months ago to stop production, says Phil Jones, Brother’s UK head. “Clearly, typewriters have been undergoing a decline in many years. There’s always a point where it’s not economically viable any more, and we always knew that time was coming.”

The factory had been making 300-500 machines a month, accounting for just 0.25% of the company’s turnover. “When a category is such a small percentage, it really isn’t worth doing analytics on it,” says Jones when I ask who was still buying typewriters, but he says he thinks many of their customers were older people who don’t feel comfortable using a computer. “And they’re popular in prisons – it seems they’re still one of the approved technological products that prisoners can use in some prisons.” He also thinks there may be secret government bunkers, where highly classified missives are written on typewriters, “but that’s just speculation”. The international company will still produce typewriters in its Malaysia factory, primarily for the US market and developing countries, “but it is the end as far as UK manufacturing is concerned”.

As typewriters go, it would be difficult to feel too romantic about the CM-1000 – the large greige machine hardly conjures up the same image as Hemingway hammering away at his trusty black Royal, the clatter of the typing pool or William Boot packing his portable typewriter for assignment in Ishmaelia – but it still feels like a heavy-hearted full stop.


Eurozone crisis live: Anger in Greece as debt talks fail

21 Nov

Good morning, and welcome to our rolling coverage of the eurozone crisis.

Greece’s international lenders have failed to agree a deal over its bailout package, leaving the country’s future in doubt again.

After overnight negotiations in Brussels, eurozone finance ministers, the European Central Bank and the International Monetary Fund again admitted that they could not reach agreement on how to bring Greece’s debts down to a sustainable level.

Talks broke up around 3.30am GMT, with weary participants telling reporters that some progress had been made.

Not enough, though. Instead, the eurogroup intends to meet again on November 26th for another go.

News that the eurozone had flunked its Greek test, again, sent the euro sliding (down half a cent to $1.275). It has also sparked disappointment in Greece, after it met its side of the bargain by agreeing tough austerity plans.

I’ll be tracking all the news and reaction to this latest setback in the crisis through the day, along with other key events in the world economy.