18/11/2011 World Business Report

an some stagey for the first time. Those are the latest headlines from

Thanks for joining us on World Business Report. The stock market

sell-off continues amid growing signs of stress in the banking

system and fears of a new credit Asia's stocks are down for a fourth

The first big test will crease's new Prime Minister as he tries to

push through tax rises to stave off a default -- Greece's Prime

The sell-off continues on global stock markets as fears grow about

the eurozone debt crisis. Nerves were frayed further on Thursday

after Spain was forced to pay almost 7% interest in an auction of

ten-year bonds, that is the highest since 1997 and around the levels

that forced the likes of Greece and Portugal to accept a bail-out.

Equally worrying, stresses in the money market not seen since the

collapse of Lehman Brothers in 2008. Banks are increasingly reluctant to

lend to each other and short-term borrowing costs, overnight rates,

are soaring. More on that in a moment but first let's find out how

those Asian markets are trading. Rico is in the Singapore office

today. Bring us up today with those So far not a good day for Asian

markets, Sarah. In particular for the whole week. Down for a fourth

day in a row. The steepest falls since September, Sarah. As Europe's

funding difficulties have intensified. Analysts are saying

these are serious tell-tale signs that global funding problems may be

spreading to the region. Case in point, a three-month inflation low

in yen. Resource in a pen and Australia down today by 3.6% for

the week and around 16% for the year. The Nikkei falling 1.6%

heading for a third weekly loss and lower by 18% so far in 2011. Most

emerging Asian currencies from the Singapore dollar to various others

Thank you very much from Singapore. Justin, you heard Rico's update

from the Asian perspective. Why are we seeing these extraordinary

stresses in the market? You can go back to what we saw a few is ago

when we had the Lehman Brothers crisis. -- A few years ago. The

banks did not trust each other. They spread the dead all around the

world and people were concerned about who had the risk -- the debt.

They did not know who else have the debt. Without that trust, that

interbank market started to go. Many people start looking at banks

as piggy banks. They are not, they lend out money so they are not a

resource of endless cash. They need to trade with other banks. If that

freezes, the interbank market fails and this is what you see. A lack of

trust and presumably continuing lack of uncertainty while the whole

debt crisis remains unresolved in Europe. At the moment we are

standing on the flanks of Vesuvius. You can feel it shaking and nobody

is doing anything. That is why you are seeing country-by-country

concern going up. And this is going outside the eurozone. This is

spreading around the world. You need to have some clear decisive

leadership not to actually deal with the symptoms of Greece and

Italy and Spain, but to deal with the fundamental cause which is the

euro is not working properly. If there was some statesmanlike move

to say this is how we now run this currency, with discipline, process

and structure. That would not solve the problem immediately but it

would at least give the market's confidence that they are heading in

the right direction. Thank you for joining us.

Investor focus will once again be on Greece today when the new Prime

Minister, Nicholas Papademos, faces his first major task. He will

present his first austerity budget including tax increases and cuts in

spending. Greece's national unity government must convince the EU and

IMF lenders to release the latest instalment in bail-out money to

avoid defaulting next month as well as a second bail-out next year. But

the task is looking ever more A week after being installed as

interim Prime Minister Lucas Papademos, Greece's technocrat

Despite opposition, Lucas Papademos will unveil a budget the cheering

controversial tax increases. The European Commission's task force or

Greece says the country has about EUR60 billion worth of unpaid tax.

It is about 25% of GDP. The European Commission insists better

ways of collecting tax must be introduced. First and perhaps most

important strengthening debt- collection. But also to have better

tax dispute resolution mechanism to improve the taxpayer audit function

to have better control on large taxpayers. Talks are under way

between Greece and the banks that it owes billions to. Negotiations

aimed at writing off 50% of the debt. The managing director of the

Institute of International Finance reluctant to comment on the talks

so far. Nothing for now, thank you. The prospect of higher taxes and

severe cuts in spending provoked more protest in Athens on Thursday.

As thousands commemorated the anniversary of the collapse of the

military dictatorship in 1973. A poll this week showed one in three

Greeks do not believe any Prime Minister will be able to deal with

After Greece and Italy, Spain is the next country heading for a

political shake-up as it prepares for elections on Sunday. If elected,

as opinion polls suggest, the centre-right Popular Party say it

will step up reforms to ease the borrowing costs which have left

Spain close to the financial edge. But with one in five now unemployed,

getting things going may prove a Spain isn't working. Scenes like

this have become emblematic of major European country where a

tough year of austerity and the outgoing Socialist government has

only added to joblessness, which now stands twice the EU average.

Economic growth could help the country's lost generation, but it

is not happening. Without it Spain is growing its deficit. In spite of

the country's efforts the financial markets continued to shun Spanish

bonds, making servicing the national debt nearly unaffordable.

Whoever gets into power, they will try to set a new tone and break

this vicious downward spiral. The new administration faces an uphill

struggle in trying to avoid the need for a rescue from European

partners who are running out of money. It does have a 100 point

reform programme and included in that is a plan to speed up the

clean-up of the banking system. Another priority will be radical

reform of Spain's labour laws, which experts say discourage

enterprise and makes paying uncompetitive. We need to end with

temporary jobs -- makes Spain uncompetitive. We need to cut down

firing costs by at least 50%. There is a large EUR200 minimum

contribution to social security. That is preventing part-time jobs

in Spain. Remove that and make social security contributions

proportional to your wages and we will seek -- we will seek things

change. Whoever wins after Sunday's vote will inherit one of Europe's

most troubled economies. The only small crumb of comfort might be

that Spain doesn't face a major bond redemption until April of next

year. Let me just show you what those

markets have been doing. We did hear from Rico that it has been a

very difficult day yet again in Asia with the markets down for the

Asia with the markets down for the fourth day in a row. But there's

how the Dow Jones finished on Thursday. Despite some pretty good