Darling's 'Politically Motivated' Bonus Tax Attacked 
Dec. 9 (Bloomberg) -- Chancellor of the Exchequer AlistairDarling said the U.K. will force banks awarding discretionarybonuses of more than 25,000 pounds ($40,800) to pay a one-timelevy of 50 percent.
The tax, effective today, will be paid by all banks thatoperate in the U.K., including U.S. firms such as Goldman SachsGroup Inc. and JPMorgan Chase & Co. Employees will still have topay income tax on their bonuses, the Treasury said. The top taxrate on earnings of more than 150,000 pounds will rise to 50percent in April, a measure announced earlier this year.
Today’s levy will raise about 550 million pounds, less than1 percent of the U.K.’s total tax revenue, according to KPMG LLP.Darling, whose Labour Party faces an election by June, is tryingto mollify voter anger after providing more than 1 trillionpounds to prop up lenders including Royal Bank of Scotland GroupPlc in the credit crisis. Barclays Plc President Robert Diamondsaid yesterday the measure risks driving business away from theCity of London.
Darling Raises Taxes on Income, Bonuses as UK Deficit Rises
Dec. 9 (Bloomberg) -- Chancellor of the Exchequer AlistairDarling imposed a 50 percent levy on banker bonuses and said hewill increase income taxes after elections next year as the worst recession on record drives up government borrowing.
The Treasury expects to raise 550 million pounds ($896million) targeting payouts at banks in the next few months andanother 3 billion pounds from incomes earned after April 2011.Borrowing will rise by 4.6 billion pounds to 611 billion poundsin through March 2013.
Trailing in opinion polls before an election that he musthold by June, Prime Minister Gordon Brown is balancing the needto clamp down on a record budget deficit while extending supportfor voters struggling to keep their jobs during the slump.
Greece Downgrades May Hinder Banks Seeking ECB Loans
Dec. 9 (Bloomberg) -- Greek government bonds may not beeligible as collateral at the European Central Bank if the ECBreverts to pre-crisis rules in 2011, making it more difficultfor Greece to borrow money.
The credit rating on Greece’s government bonds wasyesterday cut by Fitch Ratings to BBB+ and the two other majorratings companies are threatening to follow suit. The ECBcurrently accepts bonds rated BBB- as collateral for loans afterrelaxing its rules in response to the financial crisis lastyear. At the end of 2010, it is due to revert to the old rules,under which A- is the minimum required rating.
“The banks are currently able to pledge bonds issued bytheir government as collateral at the ECB,” said Ben May, aneconomist at Capital Economics Ltd. in London. “This will nolonger be an option come the end of next year if the otherrating agencies follow Fitch’s lead.”
Hottest Plan at Climate Talks Never Got Onto Table
Dec. 9 (Bloomberg) -- The proposal drawing the mostattention and criticism at the United Nations climate-changetalks in Copenhagen never got put on the table.
The formula for slowing global warming, circulated byDenmark before the two-week negotiations started Dec. 7, hasgenerated a stir because Denmark is the host country for morethan 190 nations, striving to be neutral.
The plan, leaked more than a week ago, is flawed because itwas drawn up outside the UN process without input from poorernations, said Kim Carstensen, head of the global climateinitiative at environmental group WWF. UN climate chief Yvo deBoer issued a statement saying the paper is “informal” only.
Volkswagen Will Pay $2.5 Billion for 19.9% Stake in Japan's Suzuki Motor
Dec. 9 (Bloomberg) -- Volkswagen AG, Europe’s largestcarmaker, agreed to buy 19.9 percent of Suzuki Motor Corp. for222.5 billion yen ($2.5 billion) to boost its presence in India.
Suzuki, Japan’s fourth-biggest automaker, will spend asmuch as half of the amount it will receive from Volkswagen intoVW shares, Wolfsburg, Germany-based Volkswagen said in astatement today. The deal is subject to regulatory approval andwill probably be completed by January, the companies said.
The carmakers will focus on “achieving synergies” indeveloping and manufacturing energy-efficient small cars inemerging markets. Suzuki controls Maruti Suzuki India Ltd., themaker of half of the cars sold in India. VW is the second-biggest overseas automaker in China, which is set to surpass theU.S. as the world’s largest auto market this year.
Volkswagen to Buy 20% of Suzuki to Boost India Sales
Dec. 9 (Bloomberg) -- Volkswagen AG, Europe’s largestcarmaker, agreed to buy 20 percent of Suzuki Motor Corp. for222.5 billion yen ($2.5 billion) to boost its presence in India.
The Wolfsburg, Germany-based automaker will pay for thestake in January, Suzuki said in a statement to the Tokyo StockExchange today. The Japanese automaker is the parent of MarutiSuzuki India Ltd., the maker of half of the cars sold in thecountry.
Volkswagen plans to expand in India, the world’s secondmost populous country, as job concerns stunt auto demand in theU.S. and Europe. The company is also the second-biggest overseasautomaker in China, which is set to surpass the U.S. as theworld’s largest auto market this year.
US Homeowners Lost $5.9 Trillion Since 2006 Peak, Zillow Says
Dec. 9 (Bloomberg) -- U.S. homeowners have lost about $5.9trillion in value since the housing market peak in March 2006 asmounting foreclosures and the recession weighed on prices,according to Zillow.com.
Almost half a billion dollars was wiped out this yearthrough Nov. 30, as the market headed for a third straightannual decline. New foreclosures and higher mortgage rates in2010 may hinder a rebound, the property data service said todayin a statement.
“A phenomenal amount of wealth has been erased since thehousing bust,” Stan Humphries, chief economist for Seattle-based Zillow, said yesterday in an interview. “For manyhouseholds, most of their wealth is tied up in real estate.”
Pound Falls to Lowest in Almost Two Months on Dubai Concerns
Dec. 9 (Bloomberg) -- The pound fell to its lowest levelin almost two months against the dollar on concern Dubai’sstate-controlled companies will have to sell U.K. assets to payfor loan obligations.
The British currency weakened versus 15 of its 16 majorcounterparts after Moody’s Investors Service said yesterdaythat deteriorating public finances in the U.K. and the U.S. maytest their Aaa ratings. The yen reversed earlier gains onspeculation the Bank of Japan will take more credit-easingmeasures after a report showed the world’s second-largesteconomy grew less than earlier estimated in the third quarter.
“There are concerns that companies in Dubai, which arefalling behind on debt payments, may need to sell U.K.property,” said Yuji Saito, head of the foreign-exchange groupin Tokyo at Societe Generale SA. “Risk aversion is prevailing,so the dollar will probably be bought. The pound will likely besold.”
Euro Near 5-Week Low on Concern More European Ratings to Be Cut
Dec. 9 (Bloomberg) -- The euro traded near a five-week lowagainst the dollar on speculation credit ratings of moreEuropean nations will be cut after Greece’s debt ranking waslowered by Fitch Ratings.
The pound was near its weakest level in almost two monthsversus the dollar on concern that Dubai’s state-controlledcompanies will have to sell U.K. assets to pay for loanobligations. The yen reversed earlier gains on speculation theBank of Japan will take more credit-easing measures after areport showed the economy expanded less than initially estimatedin the third quarter.
“There are worries more European countries’ sovereignratings will be downgraded,” said Yuji Saito, head of theforeign-exchange group in Tokyo at Societe Generale SA. “Thereare also concerns that companies in Dubai, which are fallingbehind on debt payments, may need to sell U.K. property. Riskaversion is prevailing, so the dollar will probably be boughtand the euro will likely be sold.”
Greece Downgrades May Pose Problem for Banks Getting ECB Loans
Dec. 9 (Bloomberg) -- Greek government bonds may not beeligible as collateral at the European Central Bank if the ECBreverts to pre-crisis rules in 2011, making it more difficultfor Greece to borrow money.
The credit rating on Greece’s government bonds wasyesterday cut by Fitch Ratings to BBB+ and the two other majorratings companies are threatening to follow suit. The ECBcurrently accepts bonds rated BBB- as collateral for loans afterrelaxing its rules in response to the financial crisis lastyear. At the end of 2010, it is due to revert to the old rules,under which A- is the minimum required rating.
“The banks are currently able to pledge bonds issued bytheir government as collateral at the ECB,” said Ben May, aneconomist at Capital Economics Ltd. in London. “This will nolonger be an option come the end of next year if the otherrating agencies follow Fitch’s lead.”
