Public deficit above target
The nation’s public deficit is expected to reach 6.7 to 7.1 percent of output for the first half of this year, far off the government’s target of 4.5 percent, experts commissioned by parliament said. The experts blamed sharply lower tax revenues for the gap, the agency Lusa said. Their report came after official figures on Thursday showed that the government would probably miss its target of cutting the public deficit to 4.5 percent of output this year unless it found ways to tighten the budget further. Like many heavily indebted eurozone countries, the country is in an economic recession exacerbated by sharp budget cuts which took effect starting in May last year as Lisbon was granted a bailout worth 78 billion euros (US$97 billion).
Mortgage lender helped
The government on Saturday said it would grant struggling mortgage lender Credit Immobilier (CIF) a state guarantee, after the group was hit by a liquidity crisis as the markets shunned its calls for financing. Unlike banks, Credit Immobilier does not take deposits from savers, rather, it taps the financial markets for funds to lend to homebuyers. However, tightened rules aimed at averting a repeat of the financial crisis have called into question the group’s financing model and a recent credit downgrade by ratings agency Moody’s added to its problems, forcing it to turn to the state for help. “To help the group CIF to respect its commitments, the state has decided to respond favorably to its request for a guarantee,” the finance ministry said in a statement. “The economic model of the group lies on financing that almost exclusively taps the market. This very specific model, weakened by the crisis, has been put under question by the new prudential rules of Basel III,” the statement said. CIF needs to pay out 1.75 billion euros in October.
Vale selling 10 freighters
Brazil’s mining giant Vale has agreed to sell 10 iron ore freighters for US$600 million to Turkish-based firm Polaris Shipping. The Brazilian firm, the world’s biggest iron ore producer, said on Friday that the transaction would improve cash flow while still maintaining its maritime ore shipping capacity. “In addition to unlocking capital, the transaction preserves Vale’s capacity of maritime transportation of iron ore, since the vessels will be available but without the ownership and operational risks,” Vale said in a statement. Vale is shedding shipping assets to focus on mining output at a time of high global prices.
Swiss investigating UBS
Swiss prosecutors have opened a criminal money laundering probe into UBS after an environmental campaign group filed a complaint accusing it of links to the proceeds of alleged illegal logging in Malaysia. The investigation could be a new embarrassment for the Swiss bank, fined for helping clients dodge US taxes in 2009 and facing similar accusations — which it denies — in Germany. It comes as Switzerland is trying to clean up its image as a haven for ill-gotten gains. A spokeswoman for federal prosecutors said they had opened a criminal investigation into allegations of money laundering. She confirmed that UBS was being investigated in connection with its relationship with Musa Aman, chief minister of Malaysia’s Borneo state of Sabah. He was accused in the complaint brought by Switzerland’s Bruno Manser Fund in May of links to illegal logging in Borneo.