My finance view

Thomas Jordan

Standard & Poor’s is threatening to downgrade the credit rating of 15 eurozone countries, saying the worsening debt crisis is affecting the bloc’s strongest economies.

The decision Monday to put 15 eurozone countries, including AAA-rating nations such as Germany and Luxembourg, on watch for a possible downgrade piles pressure on eurozone leaders to find a solution to the currency union’s debt troubles at a summit later this week.

S&P said its decision was “prompted by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole.”

The only two euro nations not put on credit watch were Cyprus, which was already under review, and Greece, which already holds the world’s worst rating.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BRUSSELS (AP) _ Efforts to stabilize Europe’s financial crisis were thrown into disarray late Monday as the 17 countries that use the euro braced for a possible downgrade of their credit ratings.

The leaders of France and Germany sought to restore confidence in the troubled European currency during the day with a joint call for changes to the European Union treaty so that countries using the euro would face automatic penalities if budget deficits ran too high.

Stock prices rose and borrowing costs for European governments dropped sharply in response to the changes proposed by French President Nikolas Sarkozy and German Chancellor Angela Merkel. They said their proposals would prevent the kind of out-of-control spending and borrowing that led to the debt crisis that is engulfing Europe and threatening the global financial system.

But on Monday night two people familiar with the matter said Standard & Poor’s is examining the credit rating of all 17 eurozone countries for a possible downgrade as the continent’s debt crisis lingers. They said S&P is likely to make an announcement on putting the euro countries on “credit watch” after the closing of markets in the U.S. on Monday.

The people were speaking on condition of anonymity because of the sensitivity of the matter.

The threat to downgrade all 17 eurozone countries _ including the ones that enjoy the stellar AAA-rating _ comes ahead of a crucial summit of EU leaders later this week. If there is widespread support at the summit, it is assumed that would be an important first step in bringing an end to the crisis, which has dragged on for more than two years.

“Our wish is to go on a forced march toward re-establishing confidence in the eurozone,” Sarkozy said at a news conference in Paris, with Merkel at his side. “We are conscious of the gravity of the situation and of the responsibility that rests on our shoulders.”

EU treaty changes could take months, if not years, to implement and don’t wipe away the mountains of government debt dragging down Europe’s economy. But preliminary buy-in Friday from the 17 countries that use the euro could set the stage for further emergency aid from the European Central Bank, the International Monetary Fund or some combination.

“The onus is still on the ECB to print money to make huge loans or bond purchases and draw a line under the crisis,” said Jennifer McKeown, senior European economist at Capital Economics. “Perhaps if other member states sign up to Merkel’s and Sarkozy’s proposals this week the (ECB) will step in.”

Sarkozy pledged to have a revised EU treaty ready for signing by March. It would then need to be ratified in each country, which could mean lengthy parliamentary debates or national referendums in some cases.

“A lot depends on the specifics and how these are going to be framed by lawyers,” said Piotr Maciej Kaczynski, an expert on EU constitutional issues at the Center for European Policy Studies in Brussels.

At the very least, it could take at least 18 months to ratify a new treaty once it has been signed by all heads of state, said Kaczynski. “That is a much longer timeline than what markets might want,” he said.

Bond-market analysts said they remain skeptical of Europe’s ability to prevent future profligacy. “If you say it strong enough and often enough maybe people will believe it,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. “But I don’t think the markets believe ‘Merkozy’ at this point.”

EU governments reacted with caution.

No other EU leaders came out against the Franco-German proposals, but no strong statements in favor were immediately forthcoming. The reaction from Austrain Finance Minister Harald Waiglein was fairly typical: “There is nothing here that contradicts our position,” although more details are needed, he said.

The modern EU is based on a set of treaties, dating as far back as the 1950s, when the project of consolidating the continent began payday loan lenders. The treaties detail the rules that countries must follow and outline the mandates of institutions like the ECB. The most recent was the Lisbon Treaty, which was ratified in 2009, giving additional powers to the European Commission and European Parliament.

Sarkozy said he and Merkel would prefer that the treaty changes they’re proposing be agreed to by all 27 members of the EU. But he left the door open to an agreement only among the 17 euro countries and anyone else “who wants to join us.”

Sarkozy and Merkel discussed several broad changes for the EU treaty, but failed to provide much detail. The changes they outlined included:

_ Introducing an automatic penalty for any government that allows its deficit to exceed 3 percent of GDP. A majority of nations would need to oppose automatic sanctions for a country to avoid them.

Governments are supposed to abide by the deficit limit under existing rules, but many, including France, have flouted it. Further, punishment only occurs after a majority of euro countries votes to impose them.

_ Requiring countries to enshrine in law a promise to balance their budgets.

A key issue for the proposal’s final approval will be how much flexibility countries can have to run temporary deficits during economic downturns.

_ Pledging that any future bailouts would not require private bond investors to absorb a part of the costs, as was the case for the Greek bailout.

Germany had earlier insisted that Europe’s permanent bailout fund would demand private investors take losses if a country in the future needs rescuing.

_ Promising to not criticize or otherwise comment on the work of the ECB.

This is intended to ensure the bank’s independence and its ability to act without pressure from European leaders.

Sarkozy said more details would be included in a letter sent Wednesday to European Council President Herman Van Rompuy.

After Sarkozy and Merkel spoke, stocks rose and borrowing rates for governments across Europe plunged, indicating a sharp rise in investor confidence in the continent’s ability to resolve the crisis.

France’s CAC-40 index climbed 1.2 percent, Germany’s DAX rose 0.4 percent and markets outside of Europe also pushed higher, with the Dow Jones industrial average up 1.2 percent.

French banks, which have been hit hard this year over fears about their large exposure to the government bonds of financially weak countries like Greece, saw some of the biggest gains.

Societe Generale’s stock price climbed 6.2 percent while BNP Paribas rose 4.9 percent. In Italy, shares of Unicredit rose 5.4 percent while Spain’s Santander rose 3.6 percent.

Worries about the stability of the euro reached a fever pitch in recent weeks as the yields on Italy’s bonds _ in a nutshell, its borrowing costs _ jumped above 7 percent. That is the level that eventually forced Greece, Ireland and Portugal to require bailouts. By comparison, bond yields in Germany, Europe’s largest and most stable economy, are roughly 2 percent.

Italian and Spanish bond yields fell sharply on Monday, an indication of growing investor confidence in their financial future. The yield on Italy’s benchmark 10-year bond fell from 6.65 percent to 5.93 percent.

Italy, whose government debt is equivalent to 120 percent of the country’s annual economic output, needs to refinance $270 billion of its $2.6 trillion of outstanding debt by the end of April.

The size of the problems facing Italy and Spain are considered too large for the existing funds available to the European Financial Stability Facility ($590 billion) and the IMF ($389 billion.) To boost the firepower of the IMF, several economists have proposed that the ECB lend to it.

The big threat to the global financial system is that Europe’s debt crisis could spiral out of control.

If governments default on their bonds, banks that own them could take a significant hit. It could become very difficult for these banks to borrow and nervous depositors could flee with their cash. In the worst case, a global financial panic could be triggered, in which banks all over are too skittish to lend to each other. That would cause a credit crunch that deprives businesses of the short-term financing they depend on for day-to-day operations.

With such fears in the air, the United States is ratcheting up its involvement.

Geithner will meet Tuesday in Germany with ECB President Mario Draghi and German Finance Minister Wolfgang Schauble. On Wednesday, he travels to France for talks with Sarkozy and the prime minister-elect of Spain, Mariano Rajoy Brey.

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Lee Enterprises, the owner of the St. Louis Post-Dispatch and one of the largest newspaper publishers in the country, announced Friday that it will file for bankruptcy after efforts to work out a debt exchange deal with its lenders failed.

In a press release, Lee Enterprises, based in Davenport, Iowa, didn’t say when it would file for “pre-packaged” Chapter 11 bankruptcy.

However, the publisher said the bankruptcy will cause no changes to its business. Vendors, subscriptions, employees and the company’s operations will not be affected.

The publicly-held company said earlier this year it would seek a ‘prepackaged’ bankruptcy if it failed to refinance $904.5 million in debt that matures in April 2012.

In an debt exchange proposal, Lee had tried to convince at least 95 percent of its lenders to swap existing debt for new debt with a later maturity date and a higher interest rate. At one point, it had 90 percent acceptance for the swap.

Those efforts ultimately failed, however, in reaching that level, prompting Lee to proceed with the bankruptcy filing.

However, the level of support for debt restructuring by the vast bulk of creditors will allow the company to file a prepackaged bankruptcy, the company said.

“We have achieved agreements with an overwhelming majority of our creditors to extend our existing loan agreements on reasonable terms that preserve stockholders’ ownership interests in the company with only 13% dilution,” Lee Chief Executive Mary Junck said in a press release.

With a prepackaged deal, Lee expects to exit bankruptcy in sixty days or less.

 

 

 

 

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It was a passengers’ nightmare at Bradley International Airport in Hartford, Conn., this weekend.

Passengers on three JetBlue planes and one American Airline plane say they were stranded on the tarmac for seven hours or more after being diverted from New York-area airports.

The ordeal continued after they were let off and had to spend the night on cots and chairs in the terminal.

A passenger on one of the diverted JetBlue planes says the crew ran out of snacks and bottled water for the last few hours of the delay.

“The toilets were backed up. When you flushed, nothing would happen,” said Andrew Carter, a reporter for the Sun Sentinel of Florida, who was traveling to cover the Miami Dolphins game against the New York Giants. His plane took off from Fort Lauderdale for Newark Liberty International Airport at around 9 a.m. After being diverted to Hartford, the plane sat on the tarmac between around 1:30 p.m. and 9 p.m., he said.

A representative for Bradley International was not available to comment on the scope of the tarmac delays at the airport.

A JetBlue spokeswoman, Victoria Lucia, confirmed in an emailed statement that six of its planes, carrying a total of about 700 passengers, were diverted to Hartford as a result of a “confluence of events” including equipment failures at Newark and New York’s John F. Kennedy International Airport that prevented planes from landing in low visibility.

She declined to specify how long the planes sat on the tarmac at Bradley, but noted that 17 other flights with different carriers were also diverted to airport.

Once the planes landed at Bradley, Lucia said that intermittent power outages at the airport made refueling and deplaning difficult.

Kate Hanni, executive editor for FlyersRights.org, said she got calls and emails from passengers and worried family members regarding at least four flights that were stranded on the tarmac for up to 10 hours.

Brent Stanley and his wife were on one of those planes, an American Airlines flight that had originally been headed to JFK after taking off from Charles de Gaulle airport in Paris.

After being diverted and landing in Hartford at 2:30 p.m., Stanley said passengers were given various reasons for being held on the tarmac, including the need to refuel and de-ice and the airport’s limited capacity for handling international flights. He and his wife were eager to get back home to their two young sons in Lake Zurich, Ill. But they realized they didn’t have it as bad as the parents who had infants on the plane.

“There was a lady in front of us with an 18-month-old daughter,” Stanley said. “Another woman came by to borrow diapers because we couldn’t get to our luggage.”

After spending the night at the airport, Stanley was lucky to find two seats Sunday on an afternoon flight home to Chicago. But the headache isn’t over yet; his luggage was headed to JFK because the Hartford airport crew wasn’t able to handle international luggage, he said.

An American Airlines spokesman, Ed Martelle, said the passengers weren’t allowed off the plane by customs at the airport. Martelle did not know the exact number of American planes that were diverted to Bradley or how long they sat on the tarmac personal business card.

Matt Shellenberger, who was on a JetBlue flight from Boston to JFK, said his plane was diverted to Bradley International and sat on the tarmac for seven hours.

The crew picked up trash regularly and handed out water and snacks and “everyone held their cool,” he said. But his frustrations grew with each status update; the reasons for the delay kept changing as the hours passed.

Early on, passengers were told that the plane was just being refueled and would fly out soon, Shellenberger said. Then they were told it was being de-iced. Then there was an emergency on another plane.

“We were told we were the third plane in line to get to the gate when we landed,” he said. “Then we stayed on the plane for seven hours.”

Carter of the Sun Sentinel, who was on another JetBlue flight, reported a similar sequence of updates.

The saga continued long after passengers were let off the plane.

The power outages from storms throughout Connecticut made booking hotel rooms difficult. As a result, many passengers just slept at the airport, Carter and Shellenberger said in separate interviews.

When they awoke, hundreds of passengers had to wait in line for hours just to figure out which flight they’d be on.

“That was most disappointing part,” Carter said. “It seemed like there was no plan when we got off the plane.”

In the morning, Carter said he and several other passengers rented a van to drive to New Jersey rather than wait for the afternoon flight JetBlue had scheduled to Newark.

It’s not the first time JetBlue has had problems with tarmac delays. The New York-based airline also made headlines in 2007 when snow and ice storms stranded its planes for nearly 11 hours at New York’s John F. Kennedy International Airport.

Such high-profile delays helped prompt a regulation last year that fines airlines for holding domestic flights on the tarmac for more than three hours. This year, the rule was extended to apply to international flights that are held on the tarmac for more than four hours.

The Department of Transportation often doesn’t enforce the fines to their full extent unless delays are extreme, however. Passengers also do not get a cut of the fines.

Low-cost carriers are more prone to tarmac delays because letting passengers off planes can cost an airline a lot of money, said Hanni of FlyersRights.org.

If a plane is diverted because of a reason within the airline’s control, such as a mechanical failure, ticket contracts usually state that passengers will be reimbursed for hotels, food and transportation. That means airlines do everything in their power to keep passengers on board in hope that the plane will be able to take off again.

JetBlue said that passengers who were diverted to Bradley International would be reimbursed for their fares and hotel expenses.

A representative for the Port Authority of New York & New Jersey, which oversees Newark and JFK airports, could not immediately say how many total flights were diverted to other airports because of equipment failures.

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WellPoint says its third-quarter earnings fell more than 7 percent even as medical enrollment and revenue grew.

The largest publicly traded health insurer based on enrollment reported net income of $683.2 million, $1.90 per share, in the three months that ended Sept. 30. That’s down from $739.1 million, or $1.74 per share, a year earlier.

Total operating revenue rose almost 6 percent to $15.2 billion.

Analysts polled by FactSet forecast earnings of $1 guaranteed payday loans.68 per share on $15.22 billion in revenue.

WellPoint says enrollment climbed more than 2 percent to 34.4 million members.

The Indianapolis company operates Blue Cross Blue Shield plans in 14 states, including California, New York and Ohio.

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Switzerland’s leading chocolate makers are trying to convince their countrymen to embrace quality over quantity.

The chocolatiers from around the Alpine nation have gathered in Geneva to show off their finest wares to consumers already spoiled for chocolate choice.

On Sunday, thousands lined up outside the venue in a converted hydropower station to get a taste.

Tibor Luka, one of the organizers of Switzerland’s first chocolate salon, says 24 master chocolatiers have been invited to explain the fine points of cocoa quality and flavoring free 3-in-1 credit report.

The aim is to teach visitors to think about chocolate the way they would about wine.

Switzerland has the highest per capita consumption of chocolate in the world, with about 26.5 pounds (12 kilograms) per person each year.

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U.S. stock futures are rising on hopes that European leaders will come up with a new strategy to resolve the region’s debt crisis.

Finance officials met in Washington this past weekend and pledged to take bolder steps to fight the problems. German leaders, for example, want banks and private institutions that hold Greek bonds to take a bigger loss on those holdings to slash Athens’ debt.

Investors have been on edge about Europe’s debt problems for months. Last week, the Dow Jones industrial average fell by 6.4 percent, its biggest drop since October 2008.

Ahead of the opening Monday, Dow futures are up 134 points, or 1.3 percent, at 10,833. S&P 500 futures are up 17, or 1.5 percent, at 1,147. Nasdaq 100 futures are up 23, or 1.1 percent, at 2,225.

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Many smart people have applied their brainpower to the question of how to pull the nation out of the ongoing jobs crisis. The answers have not come easily cash advance loan. We put the question to three experts in St. Louis: What should government and policymakers do

Revolutionary fighters struggled to make gains in an assault into Gadhafi’s hometown Saturday with bloody street-by-street battles against loyalist forces fiercely defending the most symbolic of the shattered regime’s remaining strongholds.

The fresh attack into the Mediterranean coastal city of Sirte contrasted with a stalemate in the mountain enclave of Bani Walid where demoralized anti-Gadhafi forces tried to regroup after being beaten back by loyalist snipers and gunners holding strategic high ground.

Intense resistance has stalled forces of Libya’s new leadership trying to crush the dug-in fighters loyal to Gadhafi, weeks after the former rebels swept into Tripoli on Aug. 21 and pushed the country’s leader out of power and into hiding. Sirte and Bani Walid are the main bastions of backers of the old regime in Libya’s coastal plain, but smaller holdouts remain in the deserts of the center of the country _ and another major stronghold, Sabha, lies in the deep south.

The resistance has raised fears of a protracted insurgency of the sort that has played out in Iraq and Afghanistan, even as the transitional government tries to establish its authority and move toward eventual elections.

A military spokesman for the transitional government said revolutionaries do not know Gadhafi’s location.

Col. Ahmed Omar Bani pointed to the still uncollected bounty of nearly $2 million that the new leadership has put on the fugitive leader’s head, saying, “Up to now we don’t have any certain information or intelligence about his whereabouts.”

Columns of black smoke rose over Sirte, as revolutionary fighters backed by heavy machine guns and rockets tried to push through crowded residential areas in the city. They claimed to have gained less than a mile into the city, along the main coastal highway leading in from the west.

The forces were met by a rain of gunfire , rockets and mortars. A field hospital set up outside Sirte at a gas station filled with wounded fighters, including some from a convoy hit by a rocket-propelled grenade. Twenty-four anti-Gadhafi fighters were killed and 54 wouneed in the day’s battles, the military council from the nearby city of Misrata reported.

The pro-regime radio station in Sirte repeatedly aired a recorded message it said was from Gadhafi, urging the city’s defenders to fight on. “You must resist fiercely. You must kick them out of Sirte,” the voice said. “If they get inside Sirte, they are going to rape the women.” The voice resembled Gadhafi’s but its authenticity could not be confirmed.

Gadhafi’s spokesman, Moussa Ibrahim, vowed, “We have the ability to continue this resistance for months,” in a phone call Friday to Syrian-based Al-Rai TV, which has become the mouthpiece for the former regime.

The conditions inside Sirte were reportedly growing increasingly dire for those caught in the crossfire. Nouri Abu Bakr, a 42-year-old teacher fleeing the city, said there is no electricity or medicine and food supplies are nearly exhausted.

“Gadhafi gave all the people weapons, but those fighting are the Gadhafi brigade of loyalists,” he said.

Hassan Dourai, Sirte representative in the new government’s interim government, said fighters reported seeing one of Gadhafi’s son, Muatassim, shortly before the offensives began Friday, but he has not been spotted since the battles intensified. The whereabouts of Gadhafi and several of his sons remain unknown. Other family members have fled to neighboring Algeria and Niger.

Most of the hundreds of fighters assaulting Sirte are from Misrata, a city to the northwest along the coast that held out for weeks against a brutal Gadhafi siege during the civil war. Revolutionary commanders were trying to open a second front into Sirte, from the east. They said they were trying to reach a surrender deal with elders in most of the Harawa region, about 50 miles (80 kilometers) east of Sirte, to open a possible new pathway _ but fighting was reported in the area Saturday, suggesting efforts were stalled.

The other stronghold of Bani Walid, 150 miles (250 kilometers) east of Sirte, has proven even more difficult for the forces of the new regime. The fighters withdrew Friday after facing withering sniper fire and shelling from loyalist units.

The loyalists hold the strategic high ground along the ridges overlooking a desert valley called Wadi Zeitoun that divides the city between northern and southern sections. From there, they could bloody the fighters trying to move down through the northern half of the city and into the valley, which is irrigated with olive groves. The terrain has made the city a historical hold-out: In the early 20th century, Italian forces occupying Libya struggled to take Bani Walid.

“This may be the worst front Libya will see,” said fighter Osama Al-Fassi, who joined other former rebels gathered at a feed factory outside the city’s northern edge, where they drank coffee and took target practice at plastic bottles.

On Saturday evening, Gadhafi forces blasted fighters at the northern entrance with snipers and mortar fire, prompting the revolutionary forces to battle their way in once again in an unplanned advance, said Bilqassim el-Imami, one of the fighters. They made their way back to the edge of Wadi Zeitoun amid heavy fire with anti-aircraft machine guns.

A 50-year-old civil servant fleeing Bani Walild with his family, Ismail Mohammed, described the pro-Gadhafi forces as “too strong” inside Bani Walid and suggested a generational divide between young people strongly behind the uprising and older Libyans often more cautious about whether the revolutionary forces can bring stability.

“The youth wanted this revolution and sometimes you can’t control your own son,” he said.

In Libya’s southern desert, hundreds of revolutionary fighters were negotiating with villagers in the still pro-Gadhafi region to surrender peacefully. The fighters left the captured Bani Jalloud air base and rolled through villages where they reached truces. Along the route, crowds cheered their arrival and flashed V-for-victory signs. But in one village, Ayoun, they came under fire, prompting a heavy gunbattle in which one fighter was killed.

Col. Bashir Awidat said they seek to secure the surrounding hinterlands before moving against Sabha, the main southern urban center about 400 miles (650 kilometers) south of Tripoli. He said the villagers had been isolated and believed Gadhafi’s propaganda.

“They think that we’ll raid their houses and rob them. The media coverage here has been bad for 42 years and it has trained people to think a certain way, and that will take time to change,” he told The Associated Press at the captured air base.

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Moody’s downgraded Cyprus’ credit rating by two notches over concerns about the economic toll of a deadly blast that took out the island nation’s main power station.

As well as cutting its rating on Cyprus from A2 to Baa1, the credit rating agency also slapped a negative outlook on the country Wednesday, meaning that another downgrade may be in the offing.

Moody’s said the destruction of the Vasilikos power plant as a result of a July 11 blast at a nearby naval base has amplified concerns about the fiscal situation in Cyprus, which began using the euro currency in 2008.

As well as killing 13 people, the blast has led to rolling, two-hour power cuts to cope with demand.

“This incident has caused material disruption to the Cypriot medium-term economic and fiscal position,” Moody’s said, adding that it has reduced its growth forecasts for Cyprus to zero percent and one percent in 2011 and 2012 respectively.

Before the blast, the European Commission projected Cyprus’ economy to grow by 1.5 percent this year and 2.4 percent in 2012.

Moody’s also said that an “increasingly fractious political climate” in the wake of the blast raises the risk that planned economic reforms may be watered down or delayed.

Public anger at the government over the blast of dozens of seized containers filled with Iranian munitions has yet to subside. Thousands continue to protest outside the presidential palace, accusing the government of negligence and calling on President Dimitris Christofias to quit.

Some 98 containers, most of them filled with gunpowder, were left stacked in an open field since being seized from a Cypriot-flagged ship in 2009 that the U.N. said breached a ban on Iranian arms exports.

The Cyprus government and opposition leaders agreed last week to cuts cost to buoy the economy in the wake of the blast.

But there is still disagreement on how deep cost cuts should go, especially to the public payroll that takes up about a third of the island’s euro8 billion ($11.58 billion) budget.

Cyprus’ top banker last week warned that the blast may force Cyprus to seek a bailout if deep spending cuts aren’t swiftly made.

Cyprus has pledged to the EU to cut its fiscal deficit which now stands at 5.3 percent to 3 percent of GDP by next year.

Moody’s also said there is a material risk that the Cypriot government may need to prop up some of the island’s banks over the next few years because of their heavy exposure to bailed-out Greece.

“Therefore, a period of prolonged macroeconomic stress would increase the likelihood that these contingent liabilities will crystalize on the Cypriot government’s balance sheet,” said Moody’s.

Moody’s also pointed to the Cypriot banking sector’s large size relative to the economy, as domestic bank assets total 600 percent of the island’s euro17.4 billion ($25.18 billion) gross domestic product. Around 40 percent of the total loans of the island’s three largest domestic banks are to customers based in Greece.

However, Cypriot banks should remain well capitalized over the short term after strengthening their capital reserves over last year.

The agency said it would consider upgrading Cyprus’ credit rating if the government moves ahead with large scale structural reforms. But it warned of additional downgrades if those reforms are watered down or significantly delayed.

Credit rating agencies Fitch and Standard and Poor’s have also downgraded Cyprus in recent months, mainly because of the island’s Greek exposure.

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