United Kingdom Would Need Longer to Recover its ` Tripe-A-Debt-Rating ' if Scotland Gains Independence '

#AceFinanceNews – BRITAIN – April 10 – The UK would need longer to recover its triple-A debt rating if Scotland gains independence after a referendum in September, Fitch said on Thursday.

Scottish independence would raise the ratio of the UK’s gross public debt to gross domestic product, Reuters said.

“The UK’s gross debt ratio will need to be lower than its current level and steadily declining before any upgrade back to AAA, a prospect that would be delayed by such a debt shock,” according to the ratings agency.

Telegraph Reported on March 20 – Britain’s public sector net debt will need to fall before the country can regain its top-notch triple-A sovereign debt rating, ratings agency Fitch said on Thursday, a day after finance minister George Osborne’s annual budget http://www.telegraph.co.uk/finance/economics/10712316/UK-not-close-to-regaining-triple-A-rating.html

“The public debt ratio will need to be lower and steadily declining before any upgrade to ‘AAA’. This is unlikely in the near term,” Fitch said in a statement.

Fitch currently rates Britain AA+, one notch below triple-A, with a stable rating.

Government forecasts released showed that Britain’s public sector net debt is expected to rise over the coming years and is not forecast to fall below its current level of around 74.5pc of GDP until the 2018/19 financial year.

It means that only Standard & Poor’s has the UK on the top rating, albeit on “negative outlook”.


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` Bond Holder’s will have to `Pay’ for `Ukraine’s’ Unrest’

#AceGuestNews says this from `REUTERS BREAKING VIEWS’ Bondholders will have to pay for Ukraine’s reset

Wed, Mar 05 09:51 AM EST

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Ukraine bondholders haven’t seen the end of their suffering. The country’s bonds have sunk in spite of talks of an imminent bailout by the International Monetary Fund. The country’s creditors may face either a soft debt rescheduling or more radical haircuts. The risks of austerity, devaluation and continued political uncertainty all point to the latter.

The recent political turmoil has already cost bondholders. Ukraine’s 2016 dollar-denominated bonds traded as low as 85 percent of par on March 3, with a yield of 15 percent. With such borrowing costs, Ukraine needs support from the IMF and the European Union to fund its deficit, repay debt and bolster its melting foreign currency reserves. The country has asked for at least $15 billion.

As nearly 60 percent of Ukraine’s bonds mature by the end of 2017, according to Thomson Reuters’ data, official lenders should insist that local and international creditors accept a maturity extension, or roll over their debt. The question is whether a more severe restructuring is needed.

Ukraine’s total public debt stood at 40 percent of GDP in 2013. That looks low, but more than half is denominated in dollars. The depreciating hryvnia is increasing the burden. Nomura estimates the recent currency fall increased debt to 47 percent of GDP. That may get even worse. Ukraine previously set a 60 percent legal ceiling to its debt – the exact level of a covenant in the country’s recent $3 billion Russian bond.

Political uncertainty does not help. If Ukraine embraces reform to make its economy more efficient, trade with Europe should pick up, the weaker currency will help exports. But that will take time, while Russian tensions may hurt trade. Support for the bailout may wane as the 7 percent budget deficit is hacked back, fuel subsidies cut, and inflation sets in.

The market isn’t yet pricing in the worst. Assume the June 2016 bond is extended to seven years, with other terms untouched. Discounted at 9 percent, it would be worth 86 cents on the dollar, just below current prices. That would be a lucky escape:  Ukraine’s previous restructuring saw losses on par value of 28 to 34 percent in 2000, and even 57 percent in 1998.

The lesson of the euro zone crisis has been that austerity should be moderate, and bondholders not spared. Ukraine’s case is unique. The lessons remain the same.


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` Super Rich Taxation could Boost the Economic Growth according to IMF ‘

#AceFinanceNews says that the `IMF says `Taxing Super Rich’can boost Economic Growth in the long run’

Published time: : March 01, 2014 20:28
Reuters / Kim Kyung-Hoon Reuters / Kim Kyung-Hoon
A new International Monetary Fund study has found that taxing the super wealthy does not stunt the economic growth of a country, and that redistribution can actually spur gross domestic product.

The paper argues inequality is harmful to a country’s growth, and that redistributing wealth using taxes can reduce inequality and boost growth and the length of growth cycles.

“There is surprisingly little evidence that increases in tax rates impede medium-to-long-run economic growth,” the IMF paper says.

Redistribution is a win-win situation and overall has a “pro-growth effect”, and is not a job killer, as many other economists argue.

Growth inequality is more common in countries that redistribute less, and more equal societies have “faster and more durable growth”. The paper addresses extremes in the formula that sometimes suggest huge redistribution has a negative effect on growth.

America’s tax authority, the International Revenue Service, released a report in November 2013 that shows that the US’s richest 1 percent now owns 31 percent of its wealth, while the rest of the population experienced an income rise of only 1 percent.

A recent Oxfam study shows that up to 146 million Europeans are at risk of falling into poverty by 2025, and 50 million Americans are currently suffering from severe financial hardship.

“We find that higher inequality seems to lead to lower growth. Redistribution, in contrast, has a tiny and statistically insignificant (slightly negative) effect,” the IMF paper states.

However, the report admits that labor supply could be adversely affected by a top heavy tax scheme.

“Redistribution that takes from the rich and gives to the poor is likely to reduce the labor supply of both the rich (who are taxed more) and the poor (insofar as they receive means-tested benefits that reduce incentives to work),” the report said.

The IMF study, compiled by researchers Jonathan Ostry, Andrew Berg and Charalambos Tsangarides and published by Oliver Blancard, the institution’s chief economist and released on Wednesday, is meant to serve as a ‘discussion note’ and not an official stance of the Washington-based institution.

“Redistribution, Inequality, and Growth” stops short of declaring the paper economic gospel, as the authors admit the data, and discipline of economic theory, is complex and many different variables are at play.

‘Tax the rich’ has become the main mantra of Warren Buffet, America’s second richest man, who has urged Congress to raise taxes on millionaires to 30-35 percent.

Download the PDF #AFN2014


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