:00:13. > :00:17.from BBC World News. Now for the latest financial news with Sally.
:00:17. > :00:22.Hello and a worm welcome, you are with World Business Report. Here
:00:22. > :00:26.are the headlines. The pressure intensifies on Spain as the
:00:26. > :00:31.interest on its debts go up and up. Prime Minister Mariano Rajoy admits
:00:31. > :00:38.the state is struggling to borrow. Back us or we face collapse. That
:00:38. > :00:44.is the warning from Thomas Cook management as it seeks shareholder
:00:44. > :00:49.approval for its latest asset sale. And in Singapore, the Japanese
:00:49. > :00:58.general start trading on June 1 in a move to promote trade between
:00:58. > :01:03.Asia's two biggest economies. Good to have you with us. Well,
:01:03. > :01:07.despite attempts by its government to reassure parents that it's banks
:01:07. > :01:14.do not need bailing out, Spain is plunging deeper into crisis. On
:01:14. > :01:19.Monday borrowing costs hit danger levels with ten-year Spanish bond
:01:19. > :01:25.yields climbing to 6.47%. Spain's main stock market dropped to its
:01:25. > :01:31.lowest level in nine years and Bankia's shares plunged 13% after
:01:31. > :01:36.the bank asked the government for a 19 billion Euros bailout. Investors
:01:36. > :01:41.are growing increasingly concerned Spain could be forced to seek an
:01:41. > :01:44.international bailout. I am joined by a senior foreign exchange
:01:44. > :01:51.strategist. Thanks Jane for coming in. A very hectic day for Spain
:01:51. > :01:54.yesterday and the markets in general. Just explain how this bank,
:01:54. > :01:59.Bankia is being bailed out because Mariano Rajoy was at pains to say
:01:59. > :02:03.it would not add to spannic debt levels. What they may do is
:02:03. > :02:05.something similar to what happened in Ireland in that the government
:02:05. > :02:09.is trues a promissory note. The important thing about the note is
:02:09. > :02:14.it can be deposited at the European Central Bank and used at collateral.
:02:14. > :02:19.So that then the bank can then drew funds from the European Central
:02:19. > :02:23.Bank. This is one way they may get around doing it, but it doesn't
:02:23. > :02:27.avoid the bigger question - that this is only one bank with a very
:02:27. > :02:33.bad symptom but within a very larger crisis and other ban bes may
:02:33. > :02:37.need more fun. So the bailout money or the toxic
:02:37. > :02:40.debt doesn't go on the Spanish books? Not yet. It is a
:02:40. > :02:43.postponement. Eventually the note will be due and it will have to be
:02:43. > :02:46.paid and I think they are hoping that in the interim conditions will
:02:46. > :02:51.improve. Actually, certainly in the next two years, conditions could
:02:51. > :02:56.get an awful lot worse for the Spanish banks. What if they need
:02:56. > :03:03.assistance because many are arguing that that is a possible?, I think
:03:03. > :03:06.it is. If you look at Spain you have recession conditions and non-
:03:06. > :03:09.performing loans which are going to increase. The reason being is that
:03:09. > :03:12.property prices in Spain have already dropped 25% from its peak
:03:12. > :03:16.and with a recession there is no signed of that ending yet. So the
:03:16. > :03:19.whole environment for non- performing loans seems to be
:03:19. > :03:23.getting worse. There is a lot of speculation out there that over the
:03:23. > :03:28.next two years Spanish banks could in total need an awful lot more
:03:28. > :03:34.money for recapitalisation purposes. So what can we see happening in the
:03:34. > :03:37.next few weeks? We have the Greek election on 17 June. Between now
:03:37. > :03:41.and then how critical will things become because every day the
:03:41. > :03:47.interest on Spanish debt is climb. If you look at the spread between
:03:47. > :03:53.the interest on Germany debt and Spanish debt yes, sir it was at
:03:54. > :03:57.Euro era record liveles. That gives you a sense how far aapart they are
:03:57. > :04:01.coming? One thing Spain did do was issue a lot of it earlier in the
:04:01. > :04:06.year at cheaper levels. That has bought it some time but towards the
:04:06. > :04:10.end of the year things could be getting more pressures. We do think
:04:10. > :04:15.as the time drags on it will become increasingly more likely that the
:04:15. > :04:17.Spanish Prime Minister will have to admit he does need support.
:04:17. > :04:25.International bailout? Quite possibly. What we would like to do.
:04:25. > :04:31.What he is in support of is using the bailout fund to directly put
:04:31. > :04:35.money into Spanish banks are or banks in general. Now that the
:04:35. > :04:39.different to where the money must be given to the government, but if
:04:39. > :04:41.it was given to the bank it would avoid it being put on the
:04:41. > :04:44.government's debt. Thank you very much for. That Jane will be back to
:04:45. > :04:48.talk through the papers later. We will discuss it further then. The
:04:48. > :04:51.holiday company Thomas Cook is facing a make or break meeting with
:04:51. > :04:54.shareholders later. The tour operator which appointed a new
:04:54. > :04:57.chief exec thetive on Thursday wants to sell and lease back part
:04:57. > :05:01.of its fleet of planes and sell some of its Spanish hotels. The
:05:01. > :05:05.company has warned that if it fails to get backing for the deal it
:05:05. > :05:08.could collapse. Thomas Cook came close to shutting
:05:08. > :05:14.up shop earlier this year as the weight of its debts became almost
:05:14. > :05:17.too much to bear. But after securing a $2.2 billion loan
:05:18. > :05:21.package from its lender, the firm says it is able to carry on for at
:05:21. > :05:25.least the next three years while it raises funds and revitalised its
:05:25. > :05:29.business. It has been a difficult time for Thomas Cook. Consumer
:05:29. > :05:33.spending is down and the holiday market has been hurt by tougher
:05:33. > :05:37.competition. The company has now agreed to sell-off its Indian
:05:37. > :05:42.business as part of its restructuring and to help boost
:05:42. > :05:48.cashflow and reduce its debt levels. Later in the week, the group will
:05:48. > :05:51.public its interim results, but is also revealed losses of $411
:05:51. > :05:54.million for the winter period, after a particularly poor
:05:55. > :06:00.performance in ference and north America. Thomas Cook has lost its
:06:00. > :06:04.way. It is as simple as that. It did what many, many big companies
:06:04. > :06:08.do when they lose their sense of direction and it has expanded in to
:06:08. > :06:13.all kinds of parts of the world and all kinds of different businesses
:06:13. > :06:16.which it really has no business being in. It should concentrate on
:06:16. > :06:24.delivering great vacations at good prices with a brand that people
:06:24. > :06:27.trust. The refinancing, the company's third within a year, will
:06:27. > :06:31.give them more breathing space. The company has also been trying to
:06:31. > :06:34.reduce capacity before the summer season, which is expected to be
:06:34. > :06:44.difficult as more people leave booking their annual break until
:06:44. > :06:48.the last minute. The future of BBP's Russian joint venture is
:06:48. > :06:57.looking more and more uncertain after the resignation of the chief
:06:57. > :07:01.executive. TNK-B spfplt a joint venture between BP and a group of
:07:01. > :07:04.Russian billionaires. The news marks a further deterioration in
:07:04. > :07:09.the relationship between the two parties last year. BP had to
:07:09. > :07:15.abandon plans to form another joint venture with rival Russian oil firm
:07:15. > :07:20.and that was after AAR launched a legal challenge. Tom explains why
:07:20. > :07:25.there is so much animosity between the two sides.
:07:25. > :07:32.The Russians at the outset, they didn't like the fact that BP tended
:07:32. > :07:37.to see TNKBP as a subsidiary of BP. The Russians felt that was a
:07:37. > :07:42.cologneist attitude. Around about 2008 the Russians flexed her
:07:42. > :07:46.muscles and took greater control. Behind that there is also another
:07:46. > :07:50.issue and that is the Russian parts who are involved in this, the four
:07:50. > :07:56.billionaires, they would like an end game where by they can take
:07:56. > :08:00.their money off the table. The moment that is not possible. T NKBP
:08:00. > :08:07.is not a listed entity but there is no other facility for them to do
:08:07. > :08:12.that. China will allow direct trading of
:08:12. > :08:16.the yawn and the Yen next month. Nice to see you Rico. Fill us in on
:08:16. > :08:21.what is going on. Sally. This is indeed a milestone between China
:08:21. > :08:27.and Japan and this means that the two countries will directly trade
:08:27. > :08:32.their currencies with no US dollars involves in the transaction.
:08:32. > :08:36.China's Central Bank said that the foreign exchange trade system would
:08:36. > :08:40.launch in June in Tokyo and Shanghai. According to some
:08:40. > :08:46.analysts basically breaking down this whole nichety, they say this
:08:46. > :08:50.is part of China's biggest strategy to reduce its bepen dense on the US
:08:50. > :09:00.dollar and the Yen was chosen because of the large amount of
:09:00. > :09:01.
:09:01. > :09:04.trade between the two sides. China which some times have a tense
:09:04. > :09:13.relationship with Japan is their biggest trader and the mainland
:09:13. > :09:17.bank said that the moft would help to help facilitate bilateral trade
:09:17. > :09:20.and investment.. It will reduce transaction costs and lower risks
:09:20. > :09:24.involved in settlements at financial institutions and they
:09:25. > :09:28.also said that it will also improve the convenience of both country's