Lucas Papademos, former Prime Minister of Greece, voting

Shares are down in Europe and North America as Greece’s continuing political uncertainty undermines confidence.

Greece failed to form a coalition government through yesterday and today talks and will continue discussions with political leaders tomorrow.

Bank shares have been worst hit, particularly in France and Spain, with Spanish Ibex 35 index down 2.6 percent and the French Cac closing 2.3 percent down. By their side, American Dow Jones is down 0.7 percent, and both German Dax and English FTSE 100 are down 2 percent.

Euro zone finance ministers are meeting in Brussels to discuss the situation in Greece and Spain. The undermining factor is against the future of the euro zone.

Michael Noonan, Finance Minister of Ireland, expressed his support for Greece’s place within the euro zone. He said they are not planning a Greek exit, because that’s not their business.

In his opinion, Greece should continue to stay in the euro, and added that any support he can give them at the meeting over the next two days to achieve that objective he will do so. However, he warned that any new Greek government must stick to the austerity plan already agreed.

Greece’s lack of a government puts in doubt its ability to stick to austerity measures imposed as part of its financial bailout. Without holding to agreed cuts it will not get the rest of the support funds it needs to function. Adding to the lack of clarity is the fact that anti-bailout parties did well in the elections.

Anti-austerity feeling may be growing in Germany too after Chancellor Angela Merkel’s party suffered a defeat yesterday in an election in North Rhine-Westphalia, the country’s most populous state.

On top of that, Francois Hollande, President of France, won his place after promising to focus more on growth rather than austerity, raising concerns as to whether he will be able to work as closely with Angela Merkel as his predecessor Nicolas Sarkozy did. The two were the driving force behind the euro zone’s fiscal treaty.

French banks are among the biggest fallers as investors worried about their exposure to other troubled euro zone countries. Losses worsened throughout the session leaving BNP Paribas down 3.6 percent, Societe Generale down 4.1 percent and Credit Agricole down 5.5 percent.

Spain’s Banco Santander was also down almost 5 percent, while part-nationalized Bankia lost near 9 percent. Those banks recognized they would need an extra 2,700 and 2,100 million Euros respectively to meet new government requirements aimed at cleaning up the country’s ailing property market.

The price of oil also fell on fears about weakening economic activity. Brent crude was down 6.2 percent to 110.86 Dollars a barrel, while in March it was at 128 Dollars a barrel. United States crude fell 8.4 percent to 94.63 Dollars a barrel.

Meanwhile, both Spain and Italy carried out successful bond auctions this morning. Appetite for Spanish and Italian debt was more than strong enough, but the return demanded by investors in Spain’s debt was higher than in previous auctions, reflecting a dip in confidence.

Spain sold 2,900 million Euros in short-term debt, paying 2.985 percent, up from 2.623 percent last auction. The difference in the rate demanded by Spanish 10-year bond investors over the equivalent German bonds hit 4.83 percent, its highest level since the creation of the Euro.

The yield on Spain’s key 10-year bonds, which are traded on the market, jumped 23 basis points to a record high of 6.22 percent.

By its side, Italy raised 5,250 million Euros paying a yield of 3.91 percent, almost unchanged on the previous rate of 3.98 percent.

United Kingdom's FTSE 100 index

A report argued that bosses of the United Kingdom’s biggest companies earn millions in excess remuneration.

It found that pay packages designed to incentivize FTSE 100 chief executives had little effect on company performance.

The researchers compared profit growth and total shareholder return against the total realized pay earned by bosses between 2008 and 2010.

They found that Reckitt Benckiser, ICAP, and BG Group are among the worst. They argued that Bart Becht, former Reckitt Benckiser boss, earned 138.6 million Pounds more than the performance of his company justified, a 1,199 percent overpayment.

Hermann Stern, head of the researcher group, stated they found that three companies are absolutely no pay-for-performance link in the United Kingdom for those three years.

He argued that remuneration committees never want to pay below average. In his opinion they are more worried about retention than performance, s this has led to spiraling pay inflation.

According to the report, bosses at ICAP and BG Group earned 31.6 and 30.3 million Pounds respectively in excess remuneration.

A spokesperson from Reckitt Benckiser stated the company does not recognize these figures which have not been put to its verification, and added that the company believes that the researchers are completely mistaken in their analysis of company’s remuneration policies.

He argued that Reckitt Benckiser’s shareholders have enjoyed some of the highest returns in the FTSE 100 over the past ten years.

Neil Burrows, head of external communications at BG Group, stated that their policy is to align remuneration policy with the interests of shareholders. He said the majority of their chief executive’s pay package is linked to long-term performance incentives.

He argued that BG Group’s share price has risen 400 percent since 2000 and they have outperformed the FTSE 100 index by a significant margin in the last three years.

In the other side, Admiral, Autonomy, and Hargreaves Lansdown are ranked best for pay-for-performance value.

In what is been dubbed a shareholder spring, shareholders of several companies, including Aviva, Trinity Mirror, Barclays, and Pendragon, have registered their displeasure at overly-generous pay and bonus packages.

Earlier this week, Aviva’s boss resigned after his firm’s pay plan was rejected by 54 percent of voting shareholders. And Barclays suffered embarrassment last month when nearly a third of shareholders refused to back the bank’s remuneration report.

Last Thursday, Vince Cable, Business Secretary at United Kingdom, stated that levels of executive pay are ludicrous.

Experts proposed shareholders to be able to vote down directors’ pay they deemed excessive. Currently, their vote on remuneration is non-binding.

Drachma and Euro notes

Europe‘s central bankers have been openly expressing views on the possibility of Greece leaving the euro zone.

The issue comes up as Greek leaders struggle to form a government after Greek elections.

Germany’s top banker said it was up to the Greeks to decide, and added that it they don’t keep to their bailout commitments, they would receive no new aid.

Patrick Hanohan, chief at central bank of Ireland, argued that a Greek exit would be damaging but not necessarily fatal to the Euro.

Greek leaders are to make a final attempt at forming a government on a meeting on Sunday. Karolos Papoulias, President of Greece, is to meet party leaders after they failed to deliver a coalition through their own negotiations.

Greek voters punished mainstream parties which backed the bailout at last Sunday’s parliamentary elections.

Analysts said that if no government is formed, a new election will have to be held, and opinion polls suggest Syriza, a leftist and anti-bailout party, will benefit most. Syriza firmly reject the terms of the most recent European Union and International Monetary Fund bailout, which requires tough austerity measures in return for loans worth 130,000 million Euros.

Analysts said that after last week’s elections in France and Greece, two things began to change in the euro zone.

First is the opinion that spending could replace austerity as a way out of the crisis, they argued that, probably, that’s more aspirational than practical but it pleased the voters.

Second is the growing confidence amongst euro zone ministers that Greece could, and maybe should, quit the Euro. Some of them speculate it is a public relations exercise to manage expectations, slowly re-introducing the notion that the 17 Euro nations could soon be 16. Others suggest it’s a long overdue move that would have eased the problems much sooner.

Analysts stated that if Greece decides to exit the euro and default, it gives the country more freedom to rebalance its economy. More pain for creditors, but a new start for Greece.

But if the country simply quits the euro and resurrects the drachma, while still trying to pay off its debts, an inevitable slump in the value of the drachma would make those debts even more unaffordable.

They pointed out that much will be determined in the coming week, not least by the response of the financial markets. For now, markets appear to have factored a Greek exit into their numbers, as they ended last week higher. However, markets don’t like surprises, and that’s exactly what they could get over the next few days.

Jens Weidmann, chief at Bundesbank, said that if Greek government doesn’t keep its word, it will be a democratic choice, and the consequence will be that the basis for fresh aid will disappear.

Analysts argued that without financial aid, there is a possibility that Greece will default. Kathimerini, liberal Greek daily, wrote that Greece is a breath away from the drachma and disaster.

Per Jansson, deputy head of Central bank of Sweden, said that central bankers across Europe had begun discussing the possibility of a Greek exit from the euro zone and how to handle the consequences. He said he would be very carefully in speculating that it would be a painless process without complications.

Honohan said that a Greek euro exit is not imagined in the treaties, but things that are not imagined in the treaties can happen. He added that, technically, it can be managed.

In his opinion, it would be a knock to the confidence for the euro area as a whole, so it would add to the complexity of the operation until things settle down again. He concluded that it is not necessarily fatal, but it is not attractive.

Olli Rehn, European Commissioner for Economic and Monetary Affairs, stated Europe is certainly more resilient to a possible Greek exit than it had been two years ago when it would have been massively under-prepared.

He added that he still believes that Greece can stay in the Euro and find the way to make sure that it respects its commitments. And he concluded that Greece would suffer more than Europe if it leaves the Euro.

By his side, John Bournos, spokesman for Syriza, said his party wants Greece to remain within the euro zone but Syriza rejects the super-austerity measures imposed on Greeks by Angela Merkel, chancellor of Germany.

He argued Greek people have been suffering in order to pay off speculative interest rates and make the private banking systems of Greece and Europe richer. He added that what Syriza will offer is the future existence of the euro zone. He opined that euro zone is not willing, and will not dare, to kick Greece out of the euro zone.

After Greece’s three biggest parties, the centre-right New Democracy, the leftist Syriza, and the cetre-left Pasok; each failed to form a government, Papoulias called them to a meeting on Sunday. Papoulias will also hold talks with fringe parties, including Golden Dawn, an extreme right-wing, anti-immigration group.

Analysts pointed out that Papoulias’ bid is unlikely to succeed because the parties are so divided over the bailout.

Alexis Tsipras, leader of Syriza, said he could not join any coalition that intended to implement the bailout deal. He stated the bailout austerity has already been denounced by the Greek people with its vote, and no government has the right to enforce it.

Analysts stressed that Syriza could be hoping for another election after one opinion poll put them in first position in any new ballot, albeit without an overall majority.

Money invested in mortgage loans

Government of Spain forced Spanish banks to take on an extra 30,000 million Euros of capital to cushion themselves against loans going bad.

Spanish banks will have to raise the money in capital markets or borrow from the government at an annual interest rate of about 10 percent.

Spanish government said it was determined to take the necessary measures to restore credibility and trust to the financial system. If banks have to go to the government to borrow money, the loans will be structured so that they could ultimately be converted into partial state ownership.

On Wednesday, it took a 45 percent stake in Bankia, the fourth largest bank in Spain. Bankia had a 4,470 million Euros loan by the Spanish bailout fund converted into shares. Government of Spain has already forced banks to make provisions of 54,000 million Euros to cover bad loans few months ago.

The government is now appointing independent auditors to value the banks’ property assets. A housing boom and bust has left many small lenders holding mortgage debt that may not be repaid. The banks will also be forced to put some of their mortgage books into separate companies.

Spanish government said it would also be liberalizing rules for property rental to make it easier for the banks to sell their portfolios of property debt.

After the announcement of the reforms Madrid stock market fell more than 3 percent.

This morning, the European Commission has warned that the necessary adjustment of bank balance sheets would make it harder for individuals and business to borrow money, which would constrain the economy.

It also predicted that the Spanish economy would contract by 1.8 percent in 2012 and by 0.3 percent in 2013. The European Commission also said that Spain’s budget deficit would be 6.4 percent this year and 6.3 percent next year.

From the other side, Luis de Guindos, Economy Minister of Spain, said that the country would meet its target of a 5.3 percent deficit this year and 3 percent in 2013. He added that the money to be loaned to banks would have no effect on the deficit.

However, the Spanish banking sector was cited by the ratings agency Standard & Poor’s when it downgraded Spain’s debt by two notches at the end of last month.

Figures from the Bank of Spain show that, at the end of 2011, banks held 184,000 million Euros worth of problematic real estate assets. Ii includes loans and seized property, accounting for 60 percent of their property portfolios.

Keys from a house

Deutsche Bank, Germany’s largest bank, has agreed to pay more than 200 million Dollars as a penalty.

German bank accepted to pay to settle charges it defrauded the Government of the United States over the release of risky mortgages.

The Department of Justice of the United States said Deutsche Bank’s MortgageIT subsidiary in the country lied to get Federal Housing Administration insurance for its loans. Deutsche Bank bought MortgageIT for 430 million Dollars in 2007.

The German bank admitted responsibility, which cost the government of the United States more than 350 million Dollars when the mortgages defaulted.

Federal Housing Administration rules state lenders must make sure the borrower will be able to repay the loan, but the justice department had urged Deutsche did not do so.

According to American government, between 1999 and 2009, MortgageIT endorsed more than 39,000 mortgages for Federal Housing Administration insurance and the lender had powerful incentives to generate as many FHA-insured loans as it could so that it could then sell them on to investors.

Preet Bharara, federal prosecutor of the United States, said that Deutsche Bank treated the federal insurance as free government money to backstop lending practices that did not follow the rules.

He added that their failure to meet these requirements caused substantial losses to the government, losses that could have and should have been avoided.

As a part of the settlement, Deutsche Bank accepted responsibility that its executives were in a position to know that the operations of MortgageIT did not conform fully to United States regulations.

The global financial crisis was sparked by mortgages being given to people who could not afford them, with the debt then being repackaged and sold on to investors.

Rodrigo Rato, former CEO at Bankia

Bank of Spain has confirmed that the troubled Spanish fourth lender Bankia is partly nationalized.

Rodrigo Rato, CEO at Bankia, has resigned because the bank holds around 32,000 million Euros in distressed property assets.

Bankia will have near 4,500 million Euros loan by FROB converted into shares. After the move, Spain will emerge with a stake in the bank of 45 percent.

Earlier, Spanish Ibex-35 fell by 3 percent and government bond yields rose above 6 percent, a level seen as unsustainable by analysts.

Bank of Spain has stated the new management of Bankia will have to submit, as soon as possible, a fortified clean-up plan that will place it in a position to address its future with every guarantee of success.

Bankia has the sector’s largest exposure to the real estate market, which burst spectacularly and has saddled its banks with bad debt. Spain’s fourth-biggest bank was only created in 2010 from a merger of seven struggling savings banks.

Analysts said that the partial nationalization will be a controversial operation, because it will lead to huge losses for many thousands of Spanish investors, who bought shares in Bankia and provided it with loan capital when it was listed on the stock market few months ago.

Many are worried about the level of bad debt that Spanish banks have, and fear that Spain will need a bailout.

Bank of Spain stated that Bankia is a solvent institution that continues to operate on an absolutely normal footing. Its customers and depositors have no cause for concern.

Government of Spain, elected last December, has so far insisted that no public money would be used to rescue banks. But Mariano Rajoy, Prime Minister of Spain, said on Monday that if it were necessary to prompt lending, he would do so as a last resort.

Indian Rupees in a bank office

Government of India stated that it would delay proposed laws targeting tax avoidance by one year.

The Indian Rupee has strengthened in currency markets after the government announcement.

The legislation would allow authorities to scrutinize deals where they think taxes may have been avoided by routing investments via other countries.

However, critics said the proposed laws were not clear and there were fears they could impact foreign investment funds. They argued that, for foreign institutional investors, their near-term concern over the General Anti-Avoidance Rules is resolved now. And concluded that foreign institutional investors will definitely improve and there will be a restoration of confidence.

Today, the Rupee gained near 1.5 percent today, rising to 52.91 against United States Dollar.

Analysts said the rise in the Rupee may only be a temporary one, not least due to concern about India’s overall economic growth.

They argued India’s economy grew at its slowest pace in almost three years during the first three months of the year. Meanwhile the rate of inflation continues to remain high despite efforts by the Indian central bank to rein in price increases.

To make matters worse, high volatility in global oil prices have made it tough for policymakers to control consumer price rises.

Analysts said that given these issues, the Rupee is likely to remain under pressure. They stressed that elevated oil prices and cooling growth momentum, against a backdrop of high inflation, continue to create a poisonous environment for the Indian currency.

In their opinion, even though oil prices had fallen recently, low prices needed to be sustained for a longer period for them to have a positive impact on the Rupee.

Euro Disney theme park in east Paris

The Euro Disney theme park in Paris reported a 22 percent increase in its net loss for the first half of its financial year.

Euro Disney explained it missed its visitors target and placed hope in summer visitors.

Euro Disney, the biggest amusement park in Europe and celebrating its 20^th anniversary, reported a net loss of more than 100 million Euros, an increase of 21 million Euros from the loss for the first half of last year.

The company reported an increase in operating loss of 38 percent to near 85 million Euros, and 8 percent fall in sales to more than 550 million Euros.  Euro Disney has debt of nearly 1,800 million Euros and has to meet pre-set objectives each year.

Euro Disney warned it might have to take cost-cutting action. It also said that if it was on a course to miss these debt targets it would have to reduce operating costs and some investment, and sell assets or seek help from parent company The World Disney Company or other parties.

However, the management held that currently it had enough resources for the foreseeable future, including lines of credit from the parent company. According to the company, another factor is a possibility to delay conditionally the payment of part of management and license fees due and interest.

The firm intends to repay loans of 72.1 million Euros in the second half, in line with targets laid down.

The number of people visiting its attractions and its hotels fell, in a difficult context for the economy, but despite the hard time the average amount spent by each visitor rose.

The accounts were also burdened by big charges for renovation and for the launch of new attractions to mark the 20^th anniversary of the creation of Euro Disney on a green field site east of Paris.

In its 20 year history, Euro Disney, which involves important real estate interests, has encountered various severe financial difficulties. However, Mark Stead, deputy CEO at Euro Disney, stated the firm has withstood the economic crisis very well.

He expected investment marking the 20^th anniversary to boost activity in the second half of the company’s financial year from April to September. This period is usually the stronger part of the firm’s year because it coincides with the summer holiday period in the northern hemisphere.

Stead said Euro Disney is already seeing encouraging signs for the second half with an increase of hotel reservations. He also highlighted that the average amount spent by visitors rose by 2 percent to more than 44 Euros per day in the parks and by 4 percent to more than 200 Euros per room in the hotels, owing mainly to an increase in prices.

On the other hand, the number of visitors to Euro Disney fell by 1.5 percent to near 7 million and the rate of occupation in the hotels by 3.6 percent to near 80 percent.

Francois Hollande with his supporters

Francois Hollande, socialist candidate, has won a clear victory in the French presidential election.

Nicolas Sarkozy, centre-right candidate, admitted defeat and wished good luck to Hollande.

Shortly after polls closed, French media published projections based on partial results giving Hollande a lead of almost four points against Nicolas Sarkozy.

The excitement among members of the socialist party was mixed with relief and perhaps some disbelief. They have waited for 17 years for a Socialist president. Exhuberant Hollande supporters gathered on Place de la Bastille in Paris to celebrate, a traditional rallying point of the Left.

Hollande, the first socialist to win the French presidency since Francois Mitterrand in the 1980s, gave his victory speech in his stronghold of Tulle in central France. Hollande stated the French had chosen change and vowed to rework a deal on government debt in member countries.

He also said he is proud to have been capable of giving people hope again. He explained he would push ahead with his pledge to refocus European Union fiscal efforts from austerity to growth. In his opinion, austerity can no longer be the only option.

Hollande has called for renegotiation of the hard-won European treaty on budget discipline championed by Angela Merkel, German Chancellor, and Nicolas Sarkozy. Analysts said the vote has wide implications for the whole euro zone.

Pierre Moscovici, campaign director of socialist Francois Hollande, said that Merkel had congratuled the president-elect by phone, and that the two had agreed to work together on a strong Franco-German relationship in the interest of Europe.

Merkel also said she had invited Hollande to come to Berlin soon. By his side, David Cameron, Prime Minister of the United Kingdom, has called Hollande to congratulate him.

Analysts said Hollande capitalized on France’s economic woes and President Sarkozy’s unpopularity. They also added that vote has wide implications for the whole euro zone.

Hollande has promised to raise taxes on big corporations and people earning more than 1 million Euros a year. He wants to raise the minimum wage, hire 60,000 more teachers and lower the retirement age from 62 to 60 for some workers.

In his concession speech, Sarkozy told supporters that Francois Hollande is the president of France and he must be respected. The outgoing president said he was taking responsibility for defeat.

Hinting about his future, he said his place will no longer be the same. During the campaign he said he would leave politics if he lost the election, but at his speech he stated his involvement in politics will now be different.

Sarkozy, who had been in office since 2007, had promised to reduce France’s large budget deficit through spending cuts.  He is the latest European leader to be voted out of office amid widespread voter anger at austerity measures triggered by the euro zone debt crisis.

It is the second time that an incumbent French president has failed to win re-election since the start of the fifth republic in 1958. The last was Valery Giscard d’Estaing, who lost to Mitterrand in 1981.

In Greece, voters also turned against the two main parties which supported tough budget cuts in parliamentary elections today.

Election results for Parliament of Greece

Two main Greek parties, Pasok and New Democracy, have seen dramatic losses in Greece’s parliamentary elections results.

Both parties Pasok and New Democracy, in coalition since November 2011, were expected to lose some support due to austerity measures.

New Democracy, the centre-right party, is in the lead with 20 percent of the votes, down from 33.5 percent in 2009. Pasok, the centre-left party, is in third place with 13.8 percent, down from 43.9 percent in the last elections. Syriza, left-wing coalition, is in the second pace with 16 percent of the votes.

Analysts said that there is widespread anger across Greece to harsh measures imposed by the government in return for international bailouts.

Syriza, the party which obtained the biggest growth, opposes the government’s austerity measures. And Golden Down, the neo-Nazi party, could enter parliament for the first time in its history with 21 seats.

Analysts said that many Greeks expected a huge move away from the two big pro-austerity parties that have long dominated Greek politics. And they added that this could spell intense instability for Greece.

In their opinion, New Democracy may be unable to form a government, there may be calls for fresh election and possibly even anti-bailout parties from the left and right may attempt to form a coalition.

Such coalition could threaten Greece’s austerity path and raise fresh questions over its membership of the euro zone. Another reply uncertain chapter in the Greek drama might now begin, sending shockwaves throughout the euro zone.

Antonis Samaras, leader of New Democracy, said he would form a national salvation government to keep the country in the euro. But he added he would seek to amend Greece’s controversial bailout agreement with European Union and International Monetary Found in order to boost growth.

Alexis Tsipras, leader of Syriza, said he wants to form a left-wing coalition rejecting the terms of Greece’s bailouts. He argued that the parties that signed the memorandum with the European Union and the International Monetary Fund are now in minority.

In his opinion the public verdict has de-legitimized them, he stated his proposal is a left-wing government that, with the backing of the people will negate the memorandum and put a stop to our nation’s predetermined course towards misery.

Evangelos Venizelos, leader of Pasok and former Finance Minister, called for a broad coalition government of pro-European parties. He said that a coalition government of the old two-party system would not have sufficient legitimacy or sufficient domestic and international credibility if it would gather a slim majority.

In his opinion would have meaning a government of national unity with the participation of all parties that favor a European course, regardless of their positions towards the loan agreements.

He stated that today is particularly painful. He said Pasok knew the price would be heavy and they had undertaken for a long time to beat it. Pasok was in power when Greece negotiated the terms of its 2010 bailout of 110,000 million Euros and was in a coalition with New Democracy when it secured the second bailout of 130,000 million Euros.

In fourth place is the new right-wing Independent Greeks with 10 percent of the votes. Panos Kammenos, leader of Independent Greeks, has already ruled out co-operation with either Pasok or New Democracy.

Analysts stressed that if no party win enough votes to form a government, the winner will have to seek coalition with rivals.

Coalition negotiations can take place over three days. If they fail, the party in second place can try to form a coalition, and if still unsuccessful, the third party will receive the mandate. If still no coalition emerges, Greece will hold another election, a prospect which would alarm heft country’s international creditors.

Analysts it is unprecedented that no party won more than 20 percent of the vote. They argued that the whole landscape becomes even more unpredictable after the election. They stated they don’t know if there will be a coalition or how long it will survive, and some of them said they don’t see it surviving very long.

In their opinion, Greeks are sending a very strong message abroad, which is enough with austerity.

The ability of any new government to carry on with the austerity programme will be crucial for Greece’s continued access to bailout funds from the so-called Troika, it is the European Union, the European Central Bank and the International Monetary Fund.

Any political instability may prompt fresh questions over the country’s place in the euro zone. Under the current plan, a further 11,000 million Euros of savings in spending are due to be found before July.