Greece: New bailout fails to ward off default
The Greek economy is probably headed for default despite a second bailout, said Howard Schneider in The Washington Post. Ratings agency Moody’s downgraded Greece’s credit rating just days after eurozone countries, led by France and Germany, agreed to provide Greece with another $157 billion in loans. Moody’s is pessimistic because private investors will be asked to swap their Greek bonds for new ones that mature later. Those bondholders are sure to take a loss, putting chances of a Greek default at “virtually 100 percent,” Moody’s said.
The bailout package will reduce Greece’s debt, which now stands at 150 percent of GDP, to 126 percent of GDP. That may not sound like much of a reduction, but austerity alone was never going to end Greece’s woes, said Floyd Norris in The New York Times. Since shortly before the first bailout, in May 2010, the Greek economy has shrunk by 5.5 percent and unemployment has risen to 15 percent. With this second bailout, Europe is embracing “far more fiscal and economic integration.” That could be a dangerous strategy, said Felix Salmon in Reuters.com. European leaders say this deal is for Greece and Greece only, but once these bailout tools are forged, they “will be used again.” Greece may be the first eurozone country to default, but it probably won’t be the last.
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Telecom: BlackBerry maker chops 2,000 jobs
The BlackBerry, once dominant in the smartphone market, is feeling the squeeze, said Hugo Miller in Bloomberg.com. Its maker, Research in Motion Ltd., has announced 2,000 job cuts because of weak sales. The Ontario-based company’s products have been eclipsed in the U.S. by iPhones and smartphones running Google’s Android operating system. It is also losing customers to cheaper phones in Asia, Europe, and Latin America. “They need to find a way to make consumers get excited about RIM products,” said telecom analyst Alkesh Shah.
Airlines: American adds wings
American Airlines said it will purchase 460 new planes from Boeing and Airbus in a deal valued at more than $38 billion, said Nicola Clark in The New York Times, and that decision could spur rival airlines like Delta and United to update their fleets, too. Half of the planes in “the largest commercial aircraft deal in history” will feature more fuel-efficient engines, key for an industry hit hard by high oil prices. The deal is also “a coup” for France-based Airbus, which hadn’t sold a new plane to American Airlines in more than two decades.
Real estate: Countrywide coughs up
More than 450,000 borrowers who were overcharged fees by mortgage lender Countrywide Financial are receiving settlement checks, said Jonathan Stempel in Reuters.com. Bank of America, which purchased Countrywide in 2008, agreed last year to pay $108 million to settle allegations that Countrywide had charged delinquent borrowers excessive fees for property inspections and even lawn mowing, sometimes by a markup of 400 percent. It “was absolutely a business model based on deceit,” said Jon Leibowitz, the chairman of the Federal Trade Commission. The average refund for borrowers comes to about $240.
Autos: The U.S. sells its stake in Chrysler
One chapter of the auto-industry bailout has come to an end, said Annalyn Censky in CNNMoney.com. Two years after making a
$12.5 billion investment in Chrysler, the U.S. government has sold its remaining 6 percent stake in the company to Italian automaker Fiat. U.S. taxpayers stand to lose $1.3 billion in the deal. Despite the loss, a Treasury official called Chrysler’s recovery a “major accomplishment.” The government still owns 32 percent of General Motors.
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