As Professor Philip Booth of the Institute of Economic Affairs has already made the following comment much better than I could have put it, I am using his words to explain why:

“Europe is trapped in a cycle where debt is being passed round and round in circles – the banks are bust so the Irish government bails them out; the Irish government’s debt is owned by other banks and if the government defaults, they go bust; the EU as a whole then tries to rescue both in opaque arrangements which are only sustainable because Ireland is so small; now Britain is getting involved.

“Responding to debt crises in this way is entirely unsustainable, we potentially have crises in Italy and Spain around the corner and nobody can shoulder their indebtedness.

“The EU has been sitting around doing very little for the last two years (except for dreaming up new regulations for the banks, hedge funds and private equity). What it and the nation states involved should have been doing is ensuring that banks can be wound up in an orderly fashion so that all providers of capital and credit potentially lose money except for depositors who were insured at the beginning of the crisis. The EU governments are simply underwriting mistakes made by private businesses and then blaming it all on “casino capitalists”.

“The Irish government’s debt position would not, in fact, be that bad if it were not for the bank guarantees. Ireland is not another Greece (or Italy) – its underlying position is sound. The key issue has not changed since the beginning of the crisis – it is the need to recognise failed financial institutions for what they are and not load the cost of their bad loans onto taxpayers in general. At the beginning of the crisis, the bail-outs were understandable; we have now had two years to sort out proper legal mechanisms for winding up banks.”

The European Central Bank will offer funds on Wednesday to banks looking to repay loans later this week. The euro has been under pressure since earlier this year when questions were asked about high government borrowing and markets are tense going into the end of the long term refinancing programme.

The pound was also boosted by comments from the Bank of England’s Monetary Policy Committee member Andrew Sentance who made noises on Monday about raising UK interest rates to counter inflation.

The pound stood at 1.2327 against the euro this morning, getting close to the pre-crisis average.

angela merkel

Not quite a u-turn, but Germany’s no nonsense Chancellor Angela Merkel has agreed to support the European financial aid package for Greece, but only if  ‘certain conditions are met.’

Merkel made it clear that Germany would play its part in order to ensure the stability of the euro, but warned that Greece must be ready to accept ‘tough measures’ over several years as a consequence.

The German Chancellor did not elaborate on what the conditions are likely to be, but her comments are likely to ease the pressure on Greece and the euro, temporarily at least.

It is possible that for Germany a stable euro is more important than the financial crisis in Greece, but both go hand in hand in the current climate and the situation in Greece is causing concern amongst investors and speculators in the money market threatening to undermine the value of the euro

Angela Merkel told reporters;

“Germany will help if the appropriate conditions are met. Germany feels an enormous obligation towards the stability of the euro. If Greece is ready accept tough measures, not just in one year but over several years, then we have a good chance to secure the stability of the euro for us all.”

The IEA are particularly at odds with the Conservative party over the issue, David Cameron’s party have not only shown support for the idea emanating from France and Germany, but also believes that the UK should take the lead in implementing the levy.

Indeed the idea has the backing of all the UK parties and given the situation that the financial crisis has caused to the general public the bank levy will also appeal to most of the electorate.

The average man on the street would love to see banks in the UK operating under stricter governance and guidelines, but the IEA point out that this is not necessarily the best move and the benefits from adopting such a policy are far outweighed by the drawbacks.

Mark Littlewood said;

“Britain needs to decide whether we want an economic recovery or not. If we do then we need to realise that it will only happen if we value the finance that supports private sector growth. The call from France and Germany to introduce an international levy on banks is hardly a positive step in trying to rebuild Europe’s fragile economies. There has been support for this idea from all parties, with the Conservatives even going so far as to suggest that Britain should lead on it, but the cost of the tax to Britain will be far higher than the benefit.

We’ve seen our politicians intervening to try and ‘stimulate’ a recovery, but more important is the kind of culture we create. If we want Britain to become a place that thrives with commercial activity then we need to be seen as a place that values commercial activity, a levy on bankers’ bonuses, discussion of a Tobin tax and now a proposed levy on bank assets all contribute to the message that we don’t want to be the financial hub of Europe and that we do not value cheap, efficient finance for consumers and firms. It’s time we changed our tune.”

finance minister christine legarde

France are to follow the lead outlined by the UK government in Alistair Darling’s recent pre-budget speech and introduce a special one off tax on banker’s bonuses for 2010.

French Finance minister Christine Legarde has said that a bill will be put before the French parliament in January that will commit tax bonus payments of over 27,000 euros, to fifty percent taxation.

The French government had indicated last week that a similar tax to that announced by the UK would be announced, but no further details were available at that time.

Germany’s Chancellor Angel Merkel has said that she is sympathetic to the idea but fears that it may be against German law.

casa se vende

As the winter draws in and the recession bites further into our incomes, memories of summer holidays long since passed may start us thinking of next years vacation or even thoughts of a life changing experience of  a ‘better life’ overseas.

The ‘easy’ life always sounds attractive, but is the grass really greener? It is worth remembering that the credit crisis was a global phenomenon and nowhere in Europe has escaped unscathed.

The financial crisis has taken its toll on property markets across Europe and while the UK sees a minor recovery in the market, property prices in Spain for instance are still falling dramatically. That is good news if you are in the market to buy, but ex pats selling property have had to deal with a double whammy.

Not only have prices fallen but the GB Pound/Euro exchange rate has also been badly hit, leaving ex pats who rely on a UK income facing all sorts of financial problems when they come to exchange money.

It is good to know therefore that there are financial companies around who can make  international payments at better exchange rates than those offered by high street banks.

World First is the leading currency exchange broker in the UK, exceeding £1 billion turnover in 2008 representing over 20,000 private clients and 3,000 business transactions. They also guarantee the best foreign exchange rates, the fastest available international payments and boast an exceptional level of service.

At World First they also offer ‘forward contracts’ which allow you to set the sterling cost of your property up to a year before payment is due, avoiding fluctuations in currency rates.

Savings can also be made by ex pats who rely on income from the UK, World First do not charge extra for transfers made to Europe and offer the option of fixing the exchange rate of all payments from six months to 2 years in advance, a great way to manage finances with no fear of fluctuation.

alliance & leicester international

A survey by Alliance & Leicester International has revealed that a staggering 87% of ex pats are content to choose to retire in the country that they have chosen to reside in, with France (18%), Spain (13%) and the UK (12%), being the most popular retirement destinations.

With the cost of retirement in the UK estimated to hit £400,000, ex pats intend to fund their retirement in the sun through savings (27%), UK State Pension (23%) and Private Pension (20%). Property is a major source of retirement funding with 6% relying on rental income, 6% intending to sell a residential investment and 2% opting for an equity release plan.

When considering the key factors that contribute to choosing the perfect retirement destination, better quality of life was the most popular answer with 21%, but close behind is a better climate (20%) with value for money (14%) in third.

Major concerns regarding moving abroad appear to be proximity to the UK, with well over half of those surveyed choosing to live in Europe to be closer to UK relatives and friends. Health care and medical issues- in a foreign language, concerned 22% while finances and exchange rates would concern 12%.

Ten percent of those surveyed said that they would not consider moving abroad because of family ties in the UK. Also their lifestyle allows them to take summer vacations as well as the opportunity of skiing holidays in the winter months.

Lynette Byrne, Head of Marketing at Alliance & Leicester International, commented:

“It is interesting to see that many UK expats have settled in their new home, with 87% of UK Expats intending to retire abroad.  However, while some Expats might prefer life outside the UK, they are still very attached to friends and family thus settling in European destinations that are only a low cost flight away.

This research really highlights the international nature of society today and raises some interesting questions as to how people are going to manage their finances and protect their savings against interest rate fluctuations.

Expats who bank with Alliance & Leicester International can choose to hold their savings in a sterling, US Dollar or Euro account giving them not only access to ‘Best Buy’ rates but also the opportunity to shield their retirement cash from currency fluctuations.  They can also be safe in the knowledge that they can access their money using internet banking 24 hours a day no matter where they are living.”

The CEBR believes that the record low interest rate will remain at its current level of just 0.5% until at least 2011 and do not foresee the rate increasing to any more than 2% by 2014.

The pound will suffer further says the report, predicting a low of $1.40 and crucially falling to new lows against the Euro where the pound could ‘possibly’ fall to under one euro.

Further quantitative easing of £75billion-over the already announced £175billion, is also predicted.

The CEBR base their predictions on the government managing to slash the UK budget deficit by £100billion over the next parliament, with £80billion coming from spending cuts and £20billion from rises in taxes.

Douglas McWilliams chief executive of CEBR says;

“We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward. Our analysis says that this ought to work. If it does so, we are likely to see a major rerating of equities and property which in turn should stimulate economic growth after a lag.”

A final decision has yet to be made by the EU Commission but it appears that the competition commissioner Neelie Kroes has made it clear that she plans to impose tough penalties on Lloyds.

The commission has already dismissed Lloyds offer to sell off the smaller Cheltenham & Gloucester business along with limited disposals in Scotland. The bank will now hope to seek a compromise that will allow them to keep the Halifax name but sell off a significant amount of its one thousand UK branches.

Halifax is a key player in the Lloyds home loans sector as well as being one of the UK’s most well known and respected banking brands.

The recession and decent weather in the UK for the first six months of the year have been attributed to the increase in turnover at the discount clothing store. But there has also been an underlying shift towards buying cheaper clothes says AB Foods Finance Director John Bason;

“There’s a real change in people’s shopping habits, and certainly among 20 to 30 year old females, it’s a change for good.”

Primark accounts for almost a third of AB Foods profit, as well as branches across the UK there are currently Primark stores in Ireland, Spain, Portugal, Germany and Holland.

There are plans to increase the groups foothold in Europe with at least ten stores planned to open in the next year, giving the retailer over 200 outlets in the UK and Europe.