Spain will restore border checks and suspend the treaty that makes the EU frontier-free for travelers as it hosts a European Central Bank meeting next month.
An Interior Ministry official said Friday the so-called Schengen Treaty will be suspended right before and during the May 3 meeting in Barcelona. The bank’s governing council meets outside its Frankfurt headquarters periodically.
Spain is suspending the accord because it believes large numbers of protesters will come to Barcelona, in particular people from Italy and Greece, which are reeling under austerity measures guaranteed fast personal loans.
The official spoke on condition of anonymity in line with ministry policy.
Barcelona saw riots during a March 29 general strike. A beefed-up police presence is planned for the ECB meeting.
The number of people seeking U.S. unemployment benefits suggests hiring is slowing.
The Labor Department said Thursday that weekly applications dipped last week by 2,000 to a seasonally adjusted 386,000. But that was only after the department revised up the previous week’s data to show 8,000 more people applied for benefits than first estimated.
The four-week average, a less volatile measure, rose last week by 5,500, to 374,750. That’s the highest level in three months, although it is still 9 percent lower than the level from September.
Applications have started to tick up in recent weeks after months of steady declines. When applications fall below 375,000, it generally suggests hiring will be strong enough to lower the unemployment rate.
Some economists said temporary layoffs stemming from the spring holidays have inflated the figures. Many school employees are laid off during spring break and are eligible to file for benefits.
“What we’re seeing in the numbers is not unusual at this time of year,” said Carl Riccadonna, an economist at Deutsche Bank. Applications will likely fall in the coming weeks, he added.
Others said the gains may not only reflect seasonal adjustments.
“Discouraging news on initial jobless claims suggests job growth is slowing,” said Jennifer Lee, an economist at BMO Capital Markets. “Still growing, mind you, but at a slower pace.”
Hiring weakened in March after a fast start this year. Employers added only 120,000 jobs in March _ half the pace of the previous three months.
Many economists downplayed the weak March figures, noting that a warmer winter may have led to some earlier hiring in January and February. They have noted that the economy has added an average of 212,000 jobs per month in the January-March quarter, well ahead of last year’s pace.
The unemployment rate has fallen to 8.2 percent in March from 9.1 percent in August. Part of the drop was because people gave up looking for work. People who are out of work but not looking for jobs aren’t counted among the unemployed.
Lower benefit applications indicate that companies are cutting fewer jobs. And economists note that unemployment benefit applications are at a much lower level than they were last year, which is a hopeful sign that March’s weak numbers were a temporary lull. Economists say they will have a better sense of the trend in hiring when the government issues the April jobs report next month.
The deal is done, and now the reviews are coming in on Anheuser-Busch InBev’s takeover of the Dominican Republic’s national brewer.
The consensus: Smart, but spendy.
Bernstein Research senior analyst Trevor Stirling calls the $1.2 billion deal for a controlling stake in Presidente parent Cerveceria Nacional Dominicana “strategically attractive,” if also “pricey.”
ABI was already in the market - the Caribbean’s second-largest - with its Brahma label, but by combining two competitors, the brewer will now control 99 percent of all beer sales, which will allow them to “restore a healthy pricing environment” (in other words, beer’s about to get more expensive in Santo Domingo). It’ll also give them a strong platform to keep growing in that part of the world.
Stirling was confident in ABI’s ability to cut costs and make the operation more efficient. But he also noted that, at a price that’s 24 times CND’s earnings before interest, taxes depreciation and amortization, the deal was the most expensive beer merger in recent memory (on an EBITDA basis it cost twice what InBev paid for A-B in 2008, for instance) business card.
Fitch Ratings, too, calls the deal “a strategic positive,” and notes that the terms of the purchase mean that ABI could eventually own a 90 percent stake in CND. The Dominican brewer could “benefit greatly from the expertise” at InBev, which has a “great track record of integrating acquisitions and increasing profitability.”
“But at what a price!” wrote Beer Business Daily, which, like several other outlets reports that interest from Heineken drove up the price tag for CND. Still, BBD wrote “La Maquina (The Machine) continues to feed on what acquisitions they can get done out there.”
European officials travel to Washington this week seeking a bigger global war chest to combat the debt crisis as Spain
The U.K. trade deficit widened to the most in three months in February as exports of cars and heavy machinery fell, especially to the U.S., China and Russia.
The goods-trade gap widened to 8.77 billion pounds ($14 billion) from a revised 7.88 billion pounds in January, the Office for National Statistics said today in London. The median of 18 forecasts in a Bloomberg News survey was for a deficit of 7.65 billion pounds. Exports fell 3.4 percent while imports were unchanged.
Prime Minister David Cameron is in Asia this week, leading a trade and diplomatic mission seeking to boost commercial ties with the region. The government hopes exports can bolster the British economy as manufacturers cope with rising unemployment and inflation that
President Obama on Tuesday continued to beat the drum for the Buffett Rule, his campaign-ready tax proposal aimed at millionaires and billionaires.
A central message of Obama’s re-election campaign is his argument that the very rich should pay more in taxes.
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"When it comes to paying down the deficit and investing in our future, should we ask middle-class Americans to pay even more at a time when their budgets are already stretched to the breaking point? Or should we ask some of the wealthiest Americans to pay their fair share?" Obama said recently.
Obama’s not alone in pushing the Buffett Rule. Next week, Senate Democrats hope to vote on legislation modeled on Obama’s proposal.
The legislation is not expected to advance very far, if at all. But you’ll be hearing a lot about the Buffett Rule in coming months.
And like most campaign planks, the Buffett Rule doesn’t necessarily make for the best policy, at least from the perspective of many tax experts.
What is the Buffett Rule exactly? The general principle behind the proposal is that millionaires and billionaires like investor Warren Buffett shouldn’t pay a lower percentage of their income in federal taxes than middle-class households.
Obama has even set a threshold for how much they should pay: At least 30% of their income.
The president proposed the rule last year as a guiding principle for tax reform, and he later touted it as a replacement for the Alternative Minimum Tax.
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On Capitol Hill, the Senate will hold a procedural vote on one version that would apply to today’s tax code and serve as an "interim step" to tax reform.
The "Paying a Fair Share Act," introduced by Rhode Island Democrat Sheldon Whitehouse, would apply to anyone whose adjustable gross income exceeds $1 million. Those who itemize their deductions would get a credit equal to the value of their charitable contribution deductions, so as not to discourage charitable giving.
To measure whether a millionaire is paying at least 30% of his income in taxes, the bill would take into account what the individual paid in federal income and payroll taxes plus the new 3.8% Medicare surtax set to take effect in 2013.
The minimum effective tax rate would be phased in for those with incomes between $1 million and $2 million electronic check payday advance.
The independent Tax Policy Center estimates that 35% of the richest would pay higher taxes under the bill than they do today.
How much revenue would it raise? The Joint Committee on Taxation, which analyzes tax legislation, has estimated that the "Paying a Fair Share Act" would raise $47 billion over 10 years, or an average of less than $5 billion a year, assuming the Bush tax cuts expire.
That wouldn’t do much to help reduce federal deficits. In recent years, annual deficits have ranged from several hundred billion dollars to more than $1 trillion.
And if the rule were to serve as a replacement for the AMT, as Obama has proposed, it wouldn’t come close to making up for the $1 trillion-plus in revenue that the AMT is expected to generate over 10 years.
What do independent tax experts think of the Buffett Rule? Tuning out the partisan rhetoric on both sides, tax experts say the Buffett Rule would further complicate an already complex tax code by adding a new minimum tax on top of the old AMT.
What’s more, the evidence that the Buffett Rule is correcting a big disparity in the tax code is not so clear cut.
For example, even without a Buffett Rule, most millionaires already pay more in taxes as a percentage of their income than those in the middle class, said Roberton Williams, a senior fellow at the Tax Policy Center. Not always as much as 30%, but a higher percentage of their income than the vast majority of the middle class.
And the Congressional Research Service notes that today’s tax code doesn’t violate the Buffett rule as egregiously as Warren Buffett and others have asserted. Using 2006 data, the CRS found the average tax rate among millionaires is almost 30% — with about a tenth of them paying a rate higher than 35% and another tenth paying a rate below 24%.
Lastly, tax reform done right shouldn’t create a need for a Buffett Rule, an AMT or any other accessory to the tax code, Williams said.
The only reason policymakers call for such measures is when they don’t like the outcomes of the system they’ve got. Tax reform is their chance to design a better system. And if one goal is to tax the rich more, they can do that in a simpler, more effective way than the Buffett Rule.
Nearly five months after some $1.6 billion in customer money went missing at bankrupt brokerage MF Global, the question remains: Will anyone be held responsible?
A congressional subcommittee will take up the issue on Wednesday in the latest hearing on Capitol Hill to focus on the firm’s collapse. Watching anxiously will be the 38,000 former MF Global customers who are still missing money and are waiting for someone to be held accountable.
"We’ve been arguing for a long time that at a minimum, this was larceny," said John Roe, a partner at BTR Trading Group who has advocated on behalf of MF Global customers. "This was a company appropriating money that wasn’t its own."
While the case had been quiet in recent months, that changed last week when the subcommittee released a memo detailing a critical $200 million transfer out of an account holding customer funds.
The memo has reignited questions about who at MF Global knew that customer money had been appropriated and how that information could influence a possible criminal case.
It cites an email from MF Global assistant treasurer Edith O’Brien saying the transfer, to resolve an overdraft of an account at JPMorgan (, Fortune 500), came "Per JC’s [Jon Corzine’s] direct instructions."
The memo does not say, however, that Corzine ordered that the transfer use customer funds, in violation of industry rules.
Futures brokers like MF Global can hold their own cash in customer accounts along with that of their clients, and money belonging to the firm may be transferred out freely.
Testifying under oath before Congress last year, Corzine denied ordering the use of client money, saying he received assurances "both orally and in writing" that the transfer had been lawful.
Corzine’s spokesman also said last week that the former New Jersey governor had not specified from which account the transfer was to be made
No one from MF Global has been formally accused of wrongdoing, though the FBI and federal regulators are investigating.
In a criminal case, prosecutors must prove there was a deliberate intent to appropriate customer funds, or failing that, that there was "willful blindness" by Corzine or others to the fact that such funds were at risk, said Michael E. Clark, an attorney with the law firm Duane Morris and a former federal prosecutor.
"The practical problem is that, if there were instructions given to move the money from customer accounts, can they establish a direct link or is this going to be more circumstantial?" Clark said. The testimony of lower-level employees, he added, could be crucial to building a case.
Finding charges that stick: Shortly after the transfer to JPMorgan, the banking giant requested that O’Brien sign a letter certifying that the transaction complied with industry rules on the protection of customer funds. O’Brien was "reluctant" to sign this letter, according to the memo from the subcommittee, and it was never returned.
In addition, Terry Duffy, the head of exchange operator CME Group (), has accused MF Global of falsifying accounting statements in the week prior to its bankruptcy to conceal its use of customer funds.
O’Brien has been summoned to appear at Wednesday’s hearing along with several other former MF Global staffers, though she is expected to refuse to testify, invoking her Fifth Amendment right against self-incrimination.
Leaving aside the issue of the missing money, there are other ways prosecutors might pin charges on MF Global executives.
MF Global was felled after its disclosure of billions of dollars worth of bets on risky European debt sparked a panic among investors. Trading partners called for increased margin payments and clients began taking their business elsewhere, leaving the firm scrambling for cash to make good on its obligations.
Less than two weeks before MF Global went bankrupt, however, executives assured staff from ratings agency Standard & Poor’s that the firm was in good health. A week before the bankruptcy filing, CFO Henri Steenkamp told S&P that the firm was in "its strongest position ever as [a] public entity."
"Let’s ignore the missing $1.6 billion for a second and let’s talk about securities fraud, because you have the CFO running around telling ratings agencies that the company had never been in a stronger position, and that clearly wasn’t the case," said Roe, the customer advocate.
Again, a fraud charge would require proof that misstatements by MF Global executives about the health of the firm were intentional. Lawyers for Steenkamp and Corzine did not respond to requests for comment.
There’s also the Sarbanes-Oxley Act of 2002, which requires corporate officers like those at MF Global to certify that the internal risk controls at their firms are adequate. Ironically, Corzine helped write this law while serving in the Senate.
Sarbanes-Oxley violations can carry prison terms of up to 20 years. While the law has seldom been used in this context over the years, Clark said it could be part of a broader case against MF Global executives.
"I would hate to be in their shoes," he said.
European markets recovered some ground Friday, after sharp losses this week, as finance ministers from the 17 euro countries discussed whether to increase the amount of resources at their disposal for future bailouts.
Though the target of (EURO)1 trillion ($1.3 trillion) requested by a number of international institutions, as well as the U.S. and China, is unlikely to be met, it appeared the ministers would agree to increase the firewall to around (EURO)800 billion.
Some (EURO)300 billion ($398 billion) of that has already been spent in the bailouts of Greece, Ireland and Portugal, meaning (EURO)500 million would be left to fund new rescue packages.
Germany, the eurozone’s largest economy and the biggest contributor to the bailout funds, has signaled it would agree to such a proposal.
“The hope is that Germany will soften its stance and allow the various bailout funds to be enlarged, providing more firepower to combat the crisis,” said Chris Beauchamp, market analyst at IG Index.
Many in the markets see increasing the firewall as a sure step in dampening down the debt crisis, which has crippled the eurozone for the past couple of years. The fear is that the euro bloc just won’t have enough resources to help out Spain and Italy, should they need outside help.
Worries that Spain will be dragged into the debt crisis mire has weighed on markets this week. The new Spanish government is expected to unveil a tough budget later as it attempts to get the deficit down to levels sanctioned by its partners.
Even if a deal to increase the bailout resources is approved at the euro meeting in Copenhagen, Denmark, there are many doubts over whether Italy or Spain, the eurozone’s third and fourth largest economies could be saved if the markets lose confidence.
“The reality is that the firewall is likely to be both underwhelming and insufficient to deal with potential problems in Spain and Italy,” said Neil MacKinnon, global macro strategist at VTB Capital pay day loans.
For now, European stocks have recovered some of their losses this week. Germany’s DAX was up 0.8 percent at 6,931 while the CAC-40 in France rose 0.9 percent to 3,413. The FTSE 100 index of leading British shares was up 0.5 percent to 5,769.
Wall Street was poised for a solid opening too, with both Dow futures and the broader S&P 500 futures up 0.3 percent.
The euro was also 0.3 percent higher at $1.337, supported by figures showing inflation in the eurozone in March only fell to 2.6 percent from the previous month’s 2.7 percent. The market consensus had been for a fall to 2.5 percent.
Earlier in Asia, sentiment in stock markets was hurt by news that Japan’s factory production fell a worse-than-expected 1.2 percent in February _ its first decline in three months _ as demand for exports weakened. The Nikkei 225 index in Tokyo fell 0.3 percent to close at 10,083.56.
Hong Kong’s Hang Seng fell 0.3 percent to 20,555.58, while mainland Chinese shares were mixed. The benchmark Shanghai Composite Index gained 0.5 percent to 2,262.79 while the Shenzhen Composite Index lost 0.4 percent to 891.84.
Oil prices bounced back alongside equities _ benchmark oil for May delivery was up 32 cents to $103.12 per barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract plunged $2.63 to $102.78 after French Prime Minister Francois Fillon said there’s a “good chance” that the U.S. and Europe will agree to release some of their oil reserves.
____
Pamela Sampson in Bangkok contributed to this report.
BATS Global Markets says it will replace Joe Ratterman as chairman of the board, even as the company’s directors expressed support for him as chief executive.
The announcement Tuesday came after technical difficulties derailed the exchange operator’s initial public offering last week.
BATS operates electronic markets for stocks and stock options in the United States and Europe. The Kansas-based company is a leading platform for high-frequency, computer-driven trading.
In a brief statement, BATS directors said Ratterman "continues to do a tremendous job as CEO of BATS."
"We fully support his leadership, vision and strategic direction as BATS continues to enhance competition and foster innovation in markets worldwide," the statement said.
But the directors still voted to replace Ratterman as chairman under "an enhanced corporate governance structure."
Ratterman, who has been the company’s chairman since 2007, will hold the position until a replacement is named, the directors said cash advance.
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BATS officially withdrew its IPO late Friday after it was forced to halt trading in its own stock and others because the company’s technology malfunctioned.
Ratterman publicly apologized for the problem, saying in a letter to customers that the company’s failure to perform "has no excuses."
BATS is third largest exchange operator in the United States after NYSE Euronext (, Fortune 500), which operates the New York Stock Exchange, and the NASDAQ OMX Group. ()
The company said this week that its troubles have not impacted its market share.
As of Monday, BATS boasted a 10.3% share of the U.S. equities market and a 25.4% share of the European market.
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