Monday newspaper round-up: Interest rates, RBS, Lloyds

4th Oct 2010 06:16

Sir John Gieve, the former deputy governor of the Bank of England, has stepped into the increasingly divided debate over monetary policy and urged the Bank not to print more money. Claims that Britain's economy was heading into a Japanese-style slump were far too pessimistic, Sir John said in an interview with The Times. Instead, he said, the evidence pointed to a continuing recovery which would require the Bank to raise interest rates. Hopes that that the taxpayer might soon see a return from the billions pumped into Lloyds Banking Group and Royal Bank of Scotland (RBS) have been all but written off thanks to the launch of the Banking Commission. UK Financial Investments is understood to have all but ruled out any attempted sale of the Government's stakes beyond a small "test the water exercise", reports the Independent. George Osborne will today brace Britain for the speed and scale of the looming cuts by insisting that going slower would threaten the recovery and cost more in the long run. The Chancellor will warn that trimming the £83 billion package he will unveil on October 20 would threaten the recovery and mean a return to "crippling economic instability", according to the Times.The CBI will today launch a campaign for the biggest overhaul of trade union legislation since Margaret Thatcher confronted militant workers in the Eighties. The employers' group will call for a series of reforms to the law, amid concern amongst businesses that the forthcoming public spending review could trigger a wave of strikes, says the Independent.Forget gold. Silver, the yellow metal's poor cousin, has been the investment of the year, says the Telegraph. Silver prices have risen 31pc in 2010 to a 30-year high, outperforming gold, equities and most base metals. On Tuesday, the gold-silver ratio dropped below 60 for the first time in 11 months. AIG has been forced to lower its valuation for the Hong Kong initial public offering of AIA, its Asian business, to secure a $1bn commitment from the Kuwait Investment Authority and other cornerstone investors. The US insurer has had to abandon its original plan of selling shares in AIA at a level that would value the company at $35bn-$37bn to get Kuwait's sovereign wealth fund on board, writes the FT.A four-strong group of insurers, including RSA and Resolution, discussed mounting a multibillion-pound break-up bid for Aviva, The Times has learnt. The talks, which also included Zurich Financial Services of Switzerland and Germany's Allianz, would have seen RSA secure control of Aviva's general insurance arm. Under the plan, Resolution would have picked up the domestic life and pensions business as well as Aviva Investors.Premier Foods, owner of Hovis and Mr Kipling cakes, is auctioning its meat-free division that includes Quorn, the meat substitute. Potential buyers are believed to include Nestlé of Switzerland, Unilever and the French food group Danone.There could also be interest in the business from private equity, reports the Times. The Lord Mayor of London is to call for a "new contract" between the City of London and the public. Nick Anstee plans to "challenge the City" with a debate on trust and ethics at a City of London conference today. Mr Anstee has been a vocal critic of recent political efforts to crack down on the City, such as the previous Chancellor's one-off tax on bankers' bonuses. He has warned that such moves "damage" London's standing as a financial centre, the Independent reports. Britain's top banking industry trade body has attempted to calm fears over the future of the City with a month-long tour of Europe's largest financial centres as worries continue to gather over the shape of new regulation. The British Bankers' Association (BBA) tour, which took in cities including Paris, Rome and Frankfurt, ended on Friday and came ahead of a meeting in London this week of the heads of the world's main banking industry lobby groups, according to the Telegrpah.The first step in the US government's efforts to extricate itself from General Motors is likely to raise substantially less money than initially expected. Challenging markets and the difficulties of planning a long-term exit strategy from the Detroit carmaker have reduced the expected size of the float - from $12bn, when GM first filed its prospectus, to about $8bn, the FT reports.