KeNo's Housing and Economic Portal: Monday July 25 Housing and Economic stories

Sunday, July 24, 2011

Monday July 25 Housing and Economic stories

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TOP STORIES:

Economy Faces a Jolt as Benefit Checks Run Out - (www.nytimes.com) An extraordinary amount of personal income is coming directly from the government. Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government. By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year. In terms of economic impact, that is slightly less than the spending cuts Congress enacted to keep the government financed through September, averting a shutdown.

Spain’s Castilla Has ‘Extremely Serious’ Deficit, Leader Says - (www.bloomberg.com) Spain’s Castilla-La Mancha region requested an urgent meeting with the Finance Ministry about its “extremely serious” fiscal situation as the nation’s borrowing costs reached a record on concern about debt-crisis contagion. “The deficit is much higher than what we were told, the situation is extremely serious,” the region’s president, Maria Dolores de Cospedal, told Onda Cero radio in an interview today. “In the first quarter alone, the deficit reached 1.7 percent of gross domestic product compared with an annual target of 1.3 percent,” said Cospedal, elected on May 22 when the opposition People’s Party ended three decades of local Socialist rule. Cospedal said she sent a letter to Finance Minister Elena Salgado seeking talks to find out “if the government knew about the reality of Castilla La Mancha’s fiscal situation.” Deepening deficits in the regions are sparking investor concern that the Socialist-led central government will struggle to rein in the euro area’s third budget deficit and prevent the nation from following Greece, Ireland and Portugal in seeking a bailout.

New Fears on Italy Jolt Europe - (online.wsj.com) Italy, long a bystander to the euro-zone's debt woes, was thrust into the maelstrom Monday as investors fled the country's bonds and Europe's leaders struggled to keep the crisis from infecting the Continent's third-largest economy. Fears over Italy's solvency and political stability were compounded by market frustration that Europe's leaders haven't yet come up with a solution to Greece's deepening debt problems: The gap between the yields on Italy's 10-year sovereign bonds and safer German Bunds jumped by more than 100 basis points, or a whole percentage point, to a record high of 285.6, compared to a week ago. Stocks across Europe tumbled. In the U.S., investors paid more attention to the worsening situation in Europe after having largely shrugged it off in recent weeks. The Dow Jones Industrial Average lost 151.44 points, or 1.20%, to 12505.76. Trying to stem the panic, embattled Italian Prime Minister Silvio Berlusconi has promised to avoid the political dithering that so often thwarts Italian policy-making, and speedily get through parliament a package of austerity measures unveiled two weeks ago, aimed at balancing Italy's budget by 2014.

Italian, Spanish Bonds Tumble as Contagion Worsens; German Bunds Advance - (www.bloomberg.com) Italian and Spanish bonds tumbled and German bund yields sank to a more than seven-month low as contagion from Greece’s debt crisis threatened to spread to bigger economies, stoking demand for the safest assets. Ten-year Italian yields soared to the highest in 10 years. The spreads investors demand to hold Italian, Portuguese and Spanish debt over bunds widened to euro-era records. German Finance Minister Wolfgang Schaeuble said “there’s no discussion whatsoever” of doubling the European Union’s rescue facility after Die Welt reported yesterday that the European Central Bank is seeking to increase the pool to 1.5 trillion euros ($2.11 trillion) to cover an Italian crisis.

It Looks Like Greece Is Angry At All The Attention Italy Is Getting - (www.businessinsider.com) Everyone has moved on to Italy -- it even got the NYT treatment today -- but Greece seems miffed at no longer being the center of attention. We only say that because Greek yields are surging to totally brand new records: over 31% for 2-year debt, after having briefly dipped to near 25% right after the Hellenic Parliament passed the bailout. Of course, now that "selective default" is on the table as a Greek option, it makes sense that bondholders are eager to dump whatever they're still hanging onto. And yes, this blowout is the story across Europe today. Italian short-term yields are at fresh highs vs. German Bunds. Portuguese yields up. You get the drill...