KeNo's Housing and Economic Portal: Friday February 11 Housing and Economic stories

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In California, a Proposed Cut Angers Local Officials - (www.nytimes.com) Nobody around here doubts that the pie is getting smaller. With the state facing a $25 billion budget gap, cuts have to come from somewhere. So in the two weeks since the newly installed Gov. Jerry Brown released his budget proposal, the howls of complaints have come from nearly every corner. But perhaps the loudest protests have come from city and county officials, who say that after years of slashing local budgets, Mr. Brown’s cuts could cripple them. Most significant, the governor is proposing to eliminate local redevelopment agencies, which funnel hundreds of millions of dollars to real estate projects meant to improve struggling areas. Such projects, he argues, cannot be immune to cuts while other basic services, like education and health care, are trimmed yet again. “You’re all riled up,” Mr. Brown said recently at a meeting with city leaders from across the state. As a former mayor himself, Mr. Brown says he is empathetic to their concerns, but he has not backed off his own demands. “I look all across it, and none of it looks good,” he said. “But tell me where else to draw the lines. It’s a zero-sum game right now.” Redevelopment agencies were created in the 1940s as a way to revitalize blighted areas. Now, city and county officials say that such projects have sharply improved once-sagging neighborhoods, but critics say they are simply a gift to private developers. Mr. Brown said eliminating the agencies would save the state $1.7 billion this year.

What’s Broken in Greece? Ask an Entrepreneur - (www.nytimes.com) DEMETRI POLITOPOULOS says he has suffered countless indignities in his 12-year battle to build a microbrewery and wrest a sliver of the Greek beer market from the Dutch colossus, Heineken. His tires have been slashed and his products vandalized by unknown parties, he says, and his brewery has received threatening phone calls. And he says he has had to endure regular taunts — you left Manhattan to start up a beer factory in northern Greece? — not to mention the pain of losing 5.3 million euros. Bad as all that has been, nothing prepared him for this reality: He would be breaking the law if he tried to fulfill his latest — and, he thinks, greatest — entrepreneurial dream. It is to have his brewery produce and export bottles of a Snapple-like beverage made from herbal tea, which he is cultivating in the mountains that surround this lush pocket of the country.

Egypt’s Banks Risk Deposit Run as Week of Violence Hits Economy - (www.bloomberg.com) Egypt’s banks may risk a surge in customer withdrawals when they open for business, placing them among companies worst hit by the nationwide uprising against President Hosni Mubarak. “A run on the banks would be the biggest concern, which is possible in the current situation,” Robert McKinnon, chief investment officer at ASAS Capital in Dubai, said in a telephone interview. Authorities are likely to keep the financial system closed to avert the risk, he said. Egypt’s banks and markets stayed shut yesterday after six days of clashes in the most populous Arab country that left as many as 150 people dead. Tanks are guarding banks and government buildings in Cairo that are vulnerable to looting, state television said. The EGX 30 stock index had a two-day drop of 16 percent through Jan. 27, with Commercial International Bank Egypt SAE, which accounts for more than one-fifth of the benchmark, falling 12 percent. Markets throughout the Middle East declined yesterday on concern the unrest may spread.

Long US house price decline predicted - (www.ft.com) To many, the US housing market, in particular its notorious subprime component, was the epicentre of the global financial crisis. As such, a recovery in that gargantuan market, or at the very least a bottoming out in house prices, might be seen as an essential precursor to any meaningful economic recovery. Believers in this world view might want to ensure they are firmly seated before reading the thoughts of Sean Gallop, a 20-year veteran in managing residential real-estate investments. “It’s probably 40 years, if ever, before [US house prices] get back to their peak,” he says, and that’s in nominal, rather than real terms. “We are going to need a lot of population growth. It’s easily 30-40 years.” And with credit still restrictive and foreclosure notices dished out to 2.9m of the 56m mortgaged homes in the US last year, he adds for good measure: “I think it’s likely that US house prices fall 5-10 per cent more from here,” potentially extending their 30.3 per cent decline since the July 2006 peak, as measured by the Case-Shiller 20-city index. “A further 10 per cent fall is not priced in to the market. I think that is going to have repercussions. Housing is in worse shape than it appears and that’s likely to lead to a bumpier, slower economic recovery that is subject to reversals.”

Egyptian Stock Market To Stay Closed, But Now The Saudi Market Is Tanking - (www.businessinsider.com) Chaos in the streets means the Egyptian market will stay closed at least another day, following two consecutive days of crashing. In the meantime, fears of spillover are having ramifications in Saudi Arabia. According to Bloomberg, the Saudi Market fell over 4.4% in Saturday trading. Meanwhile, the protesters are out in full force in Cairo today. And in the US, new comments from Hillary Clinton continue to suggest that the US is distancing itself from Mubarak.