Budget deficit shrinks
The US federal budget deficit for the just-ended fiscal year shrank by US$207 billion from the prior year, but still marked its fourth straight year above US$1 trillion, the US Congress’ budget referee estimated on Friday. The deficit equaled about 7 percent of US economic output, down from 8.7 percent last year, 9 percent in 2010 and 10.1 percent in 2009, but it was still greater than in any other year since 1947, the non-partisan Congressional Budget Office (CBO) said. Economists generally consider any deficit that exceeds 3 percent of US gross domestic product to be unsustainable in the long term. CBO said a US$75 billion surplus last month helped to hold the full-year fiscal deficit to US$1.09 trillion, compared with a US$1.297 trillion deficit last year. Last month’s surplus was just the second month in the black for the US government since September 2008, when the country was in the throes of a financial crisis.
Moody’s cuts bank ratings
Moody’s Investors Service on Friday lowered its ratings on four Spanish banks owned by a government fund due to expected losses in the financially strapped country. Spain’s banks and government are struggling as the country suffers through its second recession in three years and its overall unemployment rate is at nearly 25 percent. Moody’s lowered its senior subordinated debt ratings on Catalunya Banc, NCG Banco, Banco de Valencia S.A and Bankia, along with its parent company Banco Financiero y de Ahorros, to a junk grade “C” status. This rating is typically given to debts that are in default and show little prospect for recovery of the principal or interest.
World Bank offers loan
The World Bank on Friday offered India a US$500 million loan aimed at improving access to secondary education and enhancing its quality, a statement said. The government plans to use the funds to construct 11,000 new secondary schools and repair 60,000 existing ones, while upgrading 44,000 primary schools into secondary schools. The major focus would be on “quality of education... the country needs its young people to get good quality secondary education,” said Onno Ruhl, the World Bank’s country director for India.
States back financial tax
Six EU states have so far sent letters to the European Commission backing a controversial financial transactions tax (FTT) which needs the support of nine to proceed, EU sources said on Friday. France and Germany are leading the drive on the FTT, writing last week to European Taxation Commissioner Algirdas Semeta and EU colleagues seeking an “enhanced cooperation” accord to allow the tax to go ahead. Alongside France and Germany, the EU sources said Austria, Belgium, Portugal and Slovenia had now also sent similar letters to the Commission. With six on board, the starting threshold of nine could be reached soon, they added, saying Estonia and Greece were believed to also favor the introduction of the tax. In June, the Commission tried to introduce the tax — aimed at curbing the market excesses that led to the 2008 global financial crisis — but failed to get enough support from all 27 EU states.