U.S. import prices dropped 1% in May, the biggest one-month drop since June 2010, the Labor Department said Tuesday. Prices for U.S. imports also decreased over the past 12 months, falling 0.3%, the first year-over-year decline since October 2009. Fuel prices tumbled 4.2%, while nonfuel imports edged down 0.1%.
Indeed, it now appears that the bailout could make things in Spain worse, not better. And market indicators for the next domino in line for a bailout, Italy, point in the wrong direction.
This was bound to happen. That’s because bailing out the banks in each European country individually is a fool’s errand.
Experts often note — wrongly — that TARP, the Troubled Asset Relief Program that pumped $700 billion into the banking system in the United States, arrested the financial crisis in 2008. TARP, to some degree, has become the model for Europe.
But we forget history: TARP was only one component of the bailout. Perhaps more important — consider it the unsung hero of ending the crisis — was the government’s unilateral move to raise the amount of money the Federal Deposit Insurance Corporation could insure, increasing the account limit to $250,000 from $100,000 and fully backstopping the entire money-market industry.
Investors and bank customers who were considering taking their deposits and running in 2008 no longer had reason to do so once deposits and money-market funds had been guaranteed. Keeping your money at Citigroup or Bank of America was relatively indistinguishable from a safety standpoint.
That is not the case in Europe. Customers of Spanish banks still have reason to worry about the solvency of their banks — and their country — making it reasonable for them to take their money from Spanish banks and send it to banks in safer countries like Germany. Indeed, the bailout makes it less likely Spain can pay back its debts because the new loan of up to $125 billion was just added to its huge debt pile. Worse, Spanish banks had been the biggest buyers of Spanish debt (a farce of a way to prop up the economy) and that most likely won’t continue.
All 27 EU countries should submit their big banks to a single cross-border supervisor as part of a banking union to be enacted as soon as next year, the president of the European Commission has urged.
In an interview with the Financial Times, José Manuel Barroso said the EU needed to go beyond the incremental legislative measures proposed by his institution last week and take “a very big step” towards deeper integration if the bloc is to learn the lessons of the sovereign debt crisis.
The plan, which would also include an EU-wide deposit guarantee scheme and a rescue fund paid for by levies on financial institutions, could be achieved by next year and without changes in the bloc’s existing treaties, Mr Barroso said.
Germany’s Bundesbank has warned of possible risks from banking union in the EU, saying it would be tantamount to a back-door pooling of sovereign debt, unless accompanied by fiscal union that allowed control over national budgets.
… Sabine Lautenschläger, vice-president of the Bundesbank, said banking union could only work in tandem with fiscal union – meaning some common cross-border binding rules on how countries could set budgets.
The views of Germany’s hawkish central bank reflect broader German opposition to any agreement that could leave the eurozone’s largest economy liable to bailing out banks in weaker countries, unless in return for measures that more closely integrate budget and spending policies.
Speaking at a Bundesbank conference in Frankfurt, she said banking union without fiscal union would, in particular, benefit banks in weaker economies with higher refinancing costs. If those banks then bought more of their own countries’ sovereign bonds, they would, in effect, pass on cheaper refinancing costs to their domestic governments, Ms Lautenschläger said.
Apple Inc took the wraps off its own mobile mapping service and improved the search capabilities of its Siri voice assistant, taking the fight into Google Inc’s domain.
CEO Tim Cook, who took over from late co-founder Steve Jobs last August, spearheaded the unveiling of new services — such as in-house mapping, beefed-up Siri software, address-bar search on its Safari browser — to help keep at bay Google and its fast-growing Android mobile platform.
Apple tweaked several features in its mobile operating system to try to enhance its ability to entice users to stay within its ecosystem. The upgrades marked a bolstering of Apple’s arsenal as it tries to keep its top-down applications and hardware environment ahead of competition from Android device makers such as Samsung Electronics and Motorola Mobility.
But the highlight was the debut of Apple’s in-house mapping service after years of development, a direct challenge to the same Google service that is one of the most popular functions on both Android smartphones and the iPhone.
Apple’s new mobile software — the iOS6 — will be available in the fall. It comes with a mapping system “built from the ground up,” said software chief Scott Forstall.