Thursday paper round-up: Eurozone crisis, BAE Systems, Goldman Sachs

29th Apr 2010 06:31

The crisis affecting the eurozone worsened yesterday when Spain's credit rating was downgraded less than 24 hours after Greece was sent into financial meltdown.Fear of contagion gripped Europe's financial markets when the debt rating agency Standard & Poor's cut the rating on Spain's sovereign bonds. The decision ? coming after the agency downgraded Portugal's rating and cast Greek bonds into the scrapyard, designating them junk ? sent the euro plunging against the dollar, the Times reports.German leaders have agreed in principle to a rescue package of up to €135bn for Greece in emergency talks with EU and IMF officials, but failed to offer any clarity on the conditions for such aid. Hopes for a respite for Southern Europe's battered bond markets were quickly dashed as Standard & Poor's downgraded Spain. Rainer Brüderle, Germany's economy minister, said the Greek bail-out would be much larger than first thought, acknowledging that Greece cannot hope to tap the private debt markets for three years, the Telegraph reports.The Iraqi Government is in talks to buy 24 Hawk trainer jets for up to £1bn in a deal that would be the country's first large arms purchase from the UK for more than 20 years. Military insiders have told The Times that officials from the Iraqi Air Force will be in Britain in May and June to test the Hawk, which is used by the Royal Air Force to train fast-jet pilots. The BAE Systems Hawk is being considered alongside jets from Korea and Italy.One of Britain's most powerful trade bodies has warned that the winner of the next election must be prepared to reduce the size of the Government immediately or risk economic problems for a decade. The Institute of Directors used its annual conference in London to criticise all of the political parties for failing to produce policies that will adequately tackle Britain's economic problems, the Telegraph reports.Royal Bank of Scotland was forced into an embarrassing climb-down over its executive remuneration policy yesterday, bowing to shareholder pressure to make bonus targets tougher. Speaking at the bank's annual general meeting in Edinburgh, its chairman, Sir Philip Hampton, said the board would amend a scheme that allows Stephen Hester, the chief executive, to earn nearly £5m a year, which is partly linked to the performance of RBS shares, the Independent reports.Shareholders in Royal Bank of Scotland expressed anger at the destruction of the value of their stock over the past two years at the bank's annual meeting yesterday. They also attacked the "obscene" bonuses paid to bankers across the sector and criticised the "riches" handed to Sir Fred Goodwin, who continued to cast a shadow over the meeting despite having resigned as RBS's chief executive a year and a half ago, adds the Times.The computer giant Hewlett-Packard has agreed to buy the struggling smartphone company Palm for $1.2bn, ending the independence of the pioneer of the personal digital device. The move will give the world's largest PC maker immediate entry to the rapidly growing market for smartphones, which is currently dominated by Research in Motion's BlackBerry, Apple's iPhone and Nokia, the Times reports.Credit rating agencies are still being paid millions of dollars a year to report on the performance of collateralised debt obligations that have lost most of their value despite having been issued in many cases with triple A stamps of approval.The fees, known as "ratings surveillance" payments, are paid to the agencies ahead of any payments to investors under the terms of the CDO contracts - and without regard to how accurate the original ratings were, the FT reports.Goldman Sachs is in talks over a potential settlement with an investor that claims that it lost money and went out of business after buying into a $1bn (€760,000) mortgage-backed security that was later privately criticised by a senior executive at the bank. Basis Yield Alpha Fund, a hedge fund, is seeking compensation over its $100m investment in Timberwolf, a complex security, say several people familiar with the matter, the FT reports.The world's largest electricals retailer, Best Buy, will open its first UK store in Essex to a fanfare tomorrow, but consumers will have to wait until the autumn to buy anything online. Best Buy had originally intended to introduce e-commerce at the time of opening its first tranche of UK stores this spring in order to maximise the impact of its launch, the Independent reports.