Moody’s: Eurozone a danger to UK’s AAA rating

Britain’s AAA credit rating could be at risk due to the crisis in the eurozone, Moody’s said in its UK end of year assessment late on Tuesday.

In spite of a “stable” rating, Moody’s warned that Britain may face a downgrade if no policies are implemented to help stabilise markets.

According to the agency, the current rating is based on its strong institutions, government finances and low susceptibility to external event. It cautioned, however, that the future of the ranking is dependent on whether or not a resolution is found for the sovereign debt crisis.

“The significant increase in the government’s deficit and debt stocks since 2008 has eroded its ability to absorb further macroeconomic or fiscal shocks without rating implications,” the ratings agency said.

What Costa Rica’s legal reforms mean

Opting for arbitration over costly litigation as a foreign company in Costa Rica has not always been easy. But a new arbitration law in Costa Rica has triggered a huge sigh of relief among the country’s legal community. Oller Abogados is certainly hopeful: the law firm believes that this extraordinary legal development has done wonders for the Costa Rican jurisdiction. It has turned the country into an attractive place for international commercial arbitrations.

Established in 2000, Oller Abogados has borne witness to the region’s transformation over the past decade. Latin America has emerged as one of the globe’s most economically vivacious areas. In this internationally unpredictable financial climate, South America’s emerging nations have managed to avert collapse. Pedro Oller, a founding partner at Oller Abogados, feels that Costa Rica is one of those countries. It has continued to grow at a record pace and is now at the forefront of Latin America’s economic revolution. Costa Rica’s integration into the global economy resulted in a heightened interest in international arbitration and led to an increase in local arbitration institutions and organisations – all of which are clear indicators of the growing importance of arbitration in the jurisdiction.

In recent years this reorganisation of domestic arbitral law and practice has taken on a surprisingly quickened tempo in Costa Rica, according to Oller Abogados. A reformation of laws was needed to render them more internationally competitive, and make them attractive to foreign investors. The near-complete reform that Costa Rica enacted on its outdated and criticised law of arbitration has been among the most noteworthy developments. The legal change is strongly supported by Costa Rican practitioners who recognise the increasing prominence of arbitration in Central America, says Oller.

Costa Rica’s new arbitration law
Oller Abogados has played a key part in the implementation of the new law, which involved timely deliberations before it could be passed. Oller himself discussed the law with the Minister of Justice and Peace, Hernando Paris, years before it was applied.

“Minister Paris was pushing in Congress during the latter stages of the Arias Administration for the act’s enactment,” Oller says. “At the time I took part in two interesting conferences on International Arbitration in Spain and Mexico, where I served as a panellist. When Minister Paris learned of this he invited me to discuss International Arbitration and to help him in his efforts to get the UNCITRAL [United Nations Commission on International Trade Law] model law enacted. I was extremely proud to be of assistance.”

Costa Rica’s new arbitration law is chiefly based on the UNCITRAL model law on International Commercial Arbitration as amended in 2006. Oller says this is a highly advantageous development for the region, as it now places Costa Rica on a level with Mexico, Honduras, Nicaragua, Venezuela, Guatemala, Peru, Paraguay, Chile and the Dominican Republic – all nations that have implemented the arbitration law based wholly or in part on the model law.

The adoption of this model, viewed in the context of the existing arbitration boom that is engulfing Central America, can be interpreted as representing significant progress. The legal society and foreign investors alike see it as an extremely welcome adjustment. Practitioners at Oller Abogados enthusiastically highlight that the new arbitration law will assist Costa Rica in becoming a regional arbitral centre. According to Oller Abogados, it also helps that the country has established a reputation for comparatively steady governance and a well developed transport infrastructure.

In the absence of a Latin American international arbitration centre, and considering Costa Rica’s strategic geographical location and legal culture, the country can position itself as a very good alternative for the region, Oller believes. “The new arbitration law will bring the possibility of international arbitration to Costa Rica. The enactment of the law will slowly begin to evidence its benefits once the country has instituted a credible global reputation and infrastructure; and once the world’s economy peaks again,” he says.

Advantages over previous laws
The country’s previous arbitration law was perceived burdensome even by regional standards. Under the old law it was obligatory that proceedings be held in Spanish and exclusively conducted by Costa Rican lawyers. These burdensome requirements were highly controversial, considering that the nation wanted to be recognised as an international player. But the effect of the 2011 arbitration law reform is certainly unmistakable. “The prohibitions of the old arbitration law were not based on the UNCITRAL model. Through its implementation all of that has now been rectified. We look forward to a striving arbitration culture in Costa Rica,” says Oller.

Oller Abogados points out that Costa Rica’s amended arbitral law departs from the UNCITRAL model law only minimally. The one key variation will serve to protect the various parties involved by requiring that arbitration proceedings be confidential. This is achieved by obliging that in judicial proceedings information regarding the arbitration may be revealed only to the parties and their representatives concerned. Although the new law has been received with open arms within the international arbitration community, its application by domestic courts will have to be closely monitored in the coming years, says Oller.

FDI legislation changes Costa Rica aid standing
Keeping in line with foreign influences has also played a crucial role in the implementation of other legislation in the country. Oller believes that foreign direct investment (FDI) has over the last 10 years significantly altered Costa Rica’s socio-economic and legal environment. “FDI has transformed a traditionally agricultural economy into one focusing on services and knowledge,” says Oller. “The country is currently in third place globally in terms of outsourcing. We primarily provide the outsourcing to G-12 countries.”

But it was not always possible, and at first required legislation that was sympathetic to FDI, says Oller. It was not until the end of 2009 when change occurred in aid of FDI. That was when the Free Trade Zone Regime (FTZR) was reformed to comply with the commitments Costa Rica entered into with the World Trade Organisation.

This legal overhaul brought major innovations in support of FDI to the country, says Oller Abogados, which offers expertise second-to-none in this knowledge area. According to the firm, income tax is now set at a rate of five percent for those enterprises that are part of the strategic sector, or that are in less developed areas. “Companies within the strategic sectors which maintain an investment of $10m, through a programme of investing for eight years and contracting over 100 workers, are able to keep their existing conditions,” says Oller. “Additionally, there is a tax credit of 10 percent for the reinvestment of profits, costs and training. This is done in order to promote the reinvestment of profits in Costa Rica, the training and education of local workers, as well as small companies that supply FTZR entities.”

Impact of international trade agreements in Costa Rica
Other investment barriers in Costa Rica have widely been banished with the signing of vital international trade agreements. “Costa Rica has positioned itself as a key global player with a range of free trade agreements. The CAFTA-DR [the Central America – Dominican Republic Free Trade Agreement] is one of the important ones, but there are others: such as an association agreement with the European Union that includes the various Central American countries,” says Oller. The firm also considers the bilateral FTA with China, Chile, Canada, Mexico and the upcoming agreements with Singapore and Peru are of significant importance. “All these agreements prove the country’s growing commercial strategy and push law firms and lawyers to keep up and be proactive in an international context,” Oller says.

The CAFTA-DR has established a secure and predictable environment for international investors operating in Costa Rica. The country has made important changes in its legal and regulatory framework in order to prepare for future changes and an increased international client base.

To Oller Abogados the impact of CAFTA-DR has been most visible in telecommunications and insurance, two areas the country had previously reserved to be represented exclusively by the government. Under the agreement, Costa Rica made a commitment to open sections of its insurance and telecommunications market, including internet, private network, and wireless services. CAFTA-DR also authorised six insurance companies, including a US-owned company, to compete with the former monopoly state insurance.

Oller Abogados has since observed a swelling interest in both insurance and telecoms, and has made it its business to become closely acquainted with the particularities of those sectors. “We are seeing the difficulty of adjusting to the new realities of a competitive market scene, where supervising entities are still getting their feet wet. The turnaround and specific implementation have proven cumbersome and the rules not exactly clear.”

International developments
In spite of the country’s legal evolution creating onerous new questions, Oller Abogados has stayed on top of new international laws and its clients’ needs. It predominantly serves corporate clients in a variety of sectors, including energy, agribusiness, aviation, banking and finance, IT and the environment. It excels at advising customers in the most important junctures including M&A, corporate reorganisations, litigation and project finance.

The expert team at the firm is not limited by the inflexibility of the law or a customary point of view. It goes the extra mile to apply its experience to the new arbitration law, or any other legal issue thrown at it, in a timely and reliable manner. Its expertise in government agencies and the business world has allowed it to bring a unique perspective to the corporate environment. Both domestic and international clients can rely on Oller Abogados, which has access to any jurisdiction via well-established relationships and resources.

Business, corporate and commercial representations are also at the forefront of services offered at the firm. “At Oller Abogados, we come from a long-standing family tradition within the business world. A commitment to excellence, ethical, and knowledgeable service, are the bedrock values upon which we base all of our work,” says Oller.

Erriah Chambers offers international business law expertise in Mauritius

As a former French and British colony, the legal system in Mauritius has been influenced to a large extent by the legal systems of both countries. The hybrid legal system is governed by the French Civil Code and English common law. Company law, trust law, criminal procedure, and the law of evidence are mostly imported from the English legal system, while the Code Civil, Code de Procedure Civile and Code de Commerce follow French laws – with some changes brought in over the years to suit the Mauritian context and accommodate local conditions.

In terms of the judiciary, the Privy Council serves as the final appellate court for both civil and criminal cases, while the Supreme Court heads the judicial system as a court of higher jurisdiction and as an appellate court.
The Mauritius legal system and judiciary are currently undergoing major reforms with a view to modernising the system. One notable addition to the judiciary is the Mediation Division of the Supreme Court, inaugurated in June 2011. Mediation aims to provide a prompt dispute resolution mechanism to parties, and in so doing reduce the costs involved in a case, and avoid undue delays.

Recently, the Law Practitioners Act 1984 was amended to provide for the establishment of a Council for Vocational Legal Education, and allow a Mauritian citizen who has obtained a professional qualification equivalent to that of barrister in another Commonwealth country or in America to practise as a barrister in Mauritius. In the near future, Mauritius will see the establishment of an Institute for Judicial and Legal Studies, which will manage the training of prospective magistrates and the ongoing training of judicial and legal officers.
The liberalisation of the legal services market with the adoption of the Law Practitioners (Amendment) Act 2008, enables foreign law firms to establish local offices or joint ventures in Mauritius alongside Mauritian lawyers. This makes Mauritius an attractive jurisdiction. The country is also positioning itself as a regional centre for international dispute resolution, and is actively promoting for international legal practitioners to represent parties and to act as arbitrators in international commercial arbitrations in Mauritius. This will create more opportunities for the Mauritian legal sector and provide a better framework for Mauritius to establish itself in the international legal arena.

Recent business legislation
The global business sector in Mauritius commenced operations in 1992, offering services to both the local and offshore sectors. The Financial Services Commission is the authority responsible for the licensing and regulation of non-banking financial services, including the insurance sector. The Financial Services Act 2007, the Insurance Act 2005, the Securities Act 2005 and the Trust Act 2001 are the governing legislations for global businesses in Mauritius.

The Financial Services Commission of Mauritius issued its codes on the Prevention of Money Laundering and Terrorist Financing, which were subsequently revised and reissued in July 2005, to meet new national and international initiatives. The codes build upon the provisions of the Financial Intelligence and Anti-Money Laundering Act 2002, and set out the preventive measures that financial institutions, trusts and corporate service providers must put in place to counteract money laundering and terrorist financing. These codes also take into account the 40 recommendations and nine special recommendations of the Financial Action Task Force, and various other international standards.

Mauritius is progressively paving its way to establishing a solid investment fund industry in the offshore sector. The banking sector alone is worth over $1bn. About 90 percent of the active funds invest in Indian securities and shares, and more than half of the registered offshore funds are listed on international stock markets. South Africa, the US, India and non-resident Indians represent the major sources of offshore investment.

The Mauritian government took the initiative to amend key legislations, to bring them in line with international business expectations and compete across the markets:
• Offshore companies have been replaced by Category 1 Global Business Companies;
• The concept of ‘offshore trusts’ has also been abolished as a result of the repeal of the Offshore Trusts Act 1992 (now replaced by the Trust Act 2001), which has fused the law relating to domestic trusts and offshore trusts;
• The Banking Act 2004 allows offshore banks in Mauritius to conduct all types of banking business activities with non-residents of Mauritius;
• The Financial Services Act 2007 now provides for the legal framework governing the financial service sector.

World Finance recommends
Erriah Chambers is a law firm specialising in international tax law, international trusts law, international business law and all aspects of offshore business activities. The chambers was set up in response to the demand for Mauritius-based lawyers with international exposure and specialised expertise in the fields of international trusts, international finance, corporate and cross-border insolvency, tracing, and debts recovery.

Erriah Chambers consists of a team of seven barristers, led by managing partner Dev Erriah, and has associateship with many foreign law firms. Dev Erriah is listed as Band I and II individually in Chambers and Partners Global for the years 2008, 2009 and 2010.

Erriah graduated in the UK and holds an LLM in international tax law, company law, and law of international finance and international trusts from the University of London. He undertook his pupillage with Philip Baker QC at Gray’s Inn Tax Chambers.

He was the first Chairman of STEP Mauritius (the Society of Trust and Estate Practitioners), and is a member of the International Bar Association, part of Committee N (for tax) and Committee E (for banking).

More than 80 percent of the chambers’ practice involves advising international clients – including multinational enterprises, international law firms, the top 10 international accountancy firms, management companies, and domestic and international banks. The chambers is also involved in setting up various types of investment funds with very complex structures in jurisdictions in Africa and Asia, and undertakes international litigation such as international bankruptcy, enforcement of international creditors’ claims, money laundering and due diligence in Mauritius and at an international level.

AT&T kills $39bn takeover bid for T-Mobile

After months of opposition from regulators and rivals, AT&T late on Monday dropped its controversial $39bn takeover bid for T-Mobile USA, the company said.

The FCC, which was against the takeover since it was announced in March, said that the bid would reduce competition and choice, and increase prices for consumers.

AT&T announced it will now have to take a $4bn charge for dropping the offer, of which a $3bn breakup fee will go to T-Mobile’s parent company Deutsche Telecom.

In addition, AT&T said it plans to enter into a roaming agreement with T-Mobile.

SEC sues ex-Freddie Mac and ex-Fannie Mae executives

The Securities and Exchange Commission late on Sunday filed securities fraud charges against six former Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) executives.

The SEC court filing showed that executives had claimed that their company’s exposure from 2007 to 2008 was between $2bn and $6bn, when it was actually as high as $244bn.

Those alleged of fraud include former Fannie Mae CEO Daniel Mudd, vice president of Single Family Mortgage, Thomas Lund, and chief risk officer Enrico Dallavecchia. The names for Freddie Mac executives include CEO Richard Syron, Vice President Patricia Cook, and Single Family Guarantee Vice President, Donald Bisenius.  

Zynga IPO prices hit top of the range

Online games producer Zynga late on Thursday managed to raise $1bn in its initial public offering after it priced shares at the top end of a preliminary $8.50 to $10 market range.

The creator of games including “FarmVille” and “CityVille” sold 100 million shares of Class A common stock at $10 a share in the IPO. The initial share price gives the group a valuation of an estimated $7bn.

Zynga’s offering is the largest by a US internet company since Google’s IPO raised $1.9bn in 2004, Bloomberg data showed.

Brazil sues Chevron for $10.6bn oil spill damage

Brazilian federal prosecutors late on Wednesday sued US-based Chevron and rig operator Transocean for $10.6bn in damages following environmental harm alleged to have been caused by an oil leakage in early November.

Prosecutors also asked the court to force the companies to shut down operations at the Frade field in Brazil until the case is resolved. The Frade field site, where the spill occurred, is Chevron’s biggest capital investment.

“During an investigation, the attorney general’s office found that Chevron and Transocean were not capable of controlling the damage from a spill of 3,000 barrels of oil, proving a lack of environmental planning and management,” a prosecutors’ statement said.

Olympus meets earnings deadline to stay in TSE

Japanese optical equipment manufacturer Olympus has submitted long delayed earnings reports on Wednesday, only hours before a crucial deadline to avoid being removed from the Tokyo Stock Exchange.

The TSE, the world’s second largest bourse, has now removed the company from its watch list for automatic ejection. However, Olympus continues to be at risk of being delisted pending results of an investigation into the group’s accounting practices.

The camera maker reported net assets of ¥46bn as of the end of September, according to its surrendered financial report for the second quarter.

Areva shelves projects and plans 1,500 job cuts amid $1.6bn loss

Areva, the globe’s largest supplier of nuclear fuel and services, on Tuesday said it is to suspend building work at sites including Africa, the US and France.

The news comes a day after it announced it is expecting to post an operating loss of between $1.4 and $1.6bn this year.

The French company also unveiled plans of limiting its dividend payout to 25 percent of net profits for the next 24 months, according to CEO, Luc Oursel.

Areva will slash up to 1,500 jobs in Germany and has suspended a nuclear plant project in the US to help offset losses, Oursel unveiled in a statement.

Equity deals drought to cost banker jobs

A handful of bumper deals in the first half of 2011, such as the $10bn flotation of commodities firm Glencore and a $13bn fundraising by Commerzbank, has helped cushion the impact of a slow second half for many but with just $17.6bn raised in Europe since the end of July, banks are having to make a call on when things might pick up.

Annualised, the volumes seen between August and November would make for the lowest European equity fundraising levels for more than 10 years, according to Thomson Reuters data.

“I expect to see a substantial culling of the herd. Banks will leave and even for the banks that remain there will be some level of head count shrinkage,” said one senior banker working in equity capital markets (ECM), which includes activity such as stock market listings, rights issues and secondary share sales.

“All banks are having to reevaluate their business models and figure out what they can and can’t be committed to … We are at a point in the bank profitability cycle where you have to ask yourself if there is not a demonstrable value proposition, how can all this headcount and cost continue to be justified?”

Investment banks such as Barclays, Credit Suisse and the European arms of their US peers have invested heavily in equity business as a whole, banking on a pick-up in the market that was then scuppered by economic woes.

Some banks are already scaling back in equities – Italy’s UniCredit ditched its equities sales and trading team in Western Europe in favour of a tie-up with French brokerage Kepler Capital Markets, effectively outsourcing the business –while others are reassessing the importance of Europe.

“A lot of banks are asking themselves whether Europe is really going to be a region in which they want to engage,” said one London-based banker.

Last month the chief financial officer of Japan’s Nomura said 60 percent of a planned $1.2bn cost savings would come from Europe, where it is losing money and has 4,500 workers, or about 13 percent of its total staff.

Little by little
Europe is seen as the most fiercely competitive region for ECM business, with the largest number of players chasing the smallest number of deals.

At least ten banks want to be among the top five, bankers say, and aggressive pitching for deals is pushing fees down to what some consider to be unsustainable levels.

Goldman Sachs is at the top of the European ECM league tables for 2011, followed by Deutsche Bank in second and Morgan Stanley in third place.

Those committed to maintaining their position in both Europe and ECM will have to strike the right balance between short-term cuts and the ability to jump on any uptick in activity.

“You need to keep a certain infrastructure in place because the market can bounce back and if you cut back too far then you’ll miss out on all the opportunities because hiring takes a long time in this industry,” said a second senior ECM banker.

Unlike their equities trading colleagues, ECM teams have not yet been heavily affected by job cuts, but they have little doubt the overall number of people working in the sector will shrink, with a wave of cuts likely mid-year if continued market uncertainty keeps the first half quiet.

“If you could get a real read on numbers of ECM people in Europe, my guess is that by January 2013 you are going to be 25-30 percent down on January this year,” said one ECM banker. Several others agreed 25 percent was a realistic number.

“It is going to be very different on a bank by bank basis. Some banks will be 5-10 percent down, and some will be 50-60 percent down,” he added.

While most think banks will do their best to scale back rather than mothball whole departments, for some the exit of smaller players is inevitable.

“We are going to see a winnowing out of competition, starting with the non-bulge bracket banks,” said the second senior ECM banker, referring to banks lower down the league tables.

“The second and third tier players are probably going to be withdrawing little by little. Even parts of the bulge bracket will be struggling to stay in there.”

German president criticises G20’s crisis approach

German President Christian Wulff criticised efforts by the Group of 20 nations to contain the global financial crisis, saying they were too small in scale and had achieved little.

Last month’s summit of G20 leaders in France failed to bring progress which the world urgently needed, Wulff said, citing regulation of the financial sector and setting stricter guidelines for the operations of major banks as examples of the group’s failures.

“The approaches that have been tried so far are too modest to match the scale of the problems that the crisis has exposed,” Wulff said in a speech to businessmen on Monday during a visit to Abu Dhabi, capital of the UAE.

Accompanied by a political and business delegation, Wulff is visiting the UAE as part of a tour to several Gulf states. He has a largely ceremonial role and little direct influence on government policy, but has spoken out this year as the eurozone debt crisis has worsened; in August he questioned the legality of the ECB’s bond-buying programme.

Excessive debt, economic imbalances and competitive weaknesses in a number of countries have eroded trust in global financial markets, Wulff said on Monday, adding that the problem was not limited to Europe.

“In the context of the G20 and of global responsibility too, I appeal to everyone to start paying far more attention to sound, sustainable economic development and finances.”

Wulff said that as Europe worked to repair its economy, Berlin would count on the oil-rich UAE as a major investor in Germany. But he did not make any public appeal for the UAE or other Gulf countries to contribute emergency aid to Europe.

EU leaders agreed at a summit in Brussels on Friday that eurozone states and other nations should provide up to €200bn ($270bn) in bilateral loans to the IMF to help it tackle the zone’s debt crisis. They envisaged €50bn of the total coming from non-euro countries, but it is not clear which nations would be willing to provide the money.

Pakistan flood pain lingers

The 2010 floods in Pakistan started late in July, following heavier than normal monsoon rains in Balochistan, the Punjab, Sindh, Pakhtunkhwa and the Khyber; in fact the whole Indus River Basin was affected.

At one stage nearly 20 percent of Pakistan’s land area was covered with water, a total of some 307,374 square miles (796,095 square kilometres). According to the Pakistani government the floods affected nearly 20 million people, mostly as a result of destroying infrastructure, property and crops. The death toll was nearly 2,000.

Initially, Ban-Ki-Moon, Secretary General of the UN, asked for emergency relief amounting to some $460m, noting that he had never seen a flood of this magnitude before. By August 15 only 20 percent of these funds had been received, which was a huge concern for the UN. The World Health Organisation reported, at the time, that 10 million people had no other choice but to drink polluted water.

The damage to the already frail Pakistan economy was immense. Infrastructure damage was calculated to be in the region of $4bn; wheat crops to the value of $500m were destroyed by the floodwaters and the total crop loss was estimated to be in the region of $1bn, much higher according to Pakistan’s own calculations. The impact on the country’s economy could well have been as high as $43bn.

More than 100,000 animals died during the floods and 17 million acres of agricultural land was submerged by the raging waters.

The last thing Pakistan needed was a disaster of this magnitude; the country’s economy was already extremely fragile and depended on a support package of some $11.3bn from the IMF. Even before the floods, the government was finding it difficult to adhere to the fiscal discipline required by the package. The country has an oversized public sector, a relatively small tax base and perpetual problems with its balance of payments.

Pakistan’s Finance Minister, Abdul Hafeez Sheikh, said in an interview with TIME magazine, “Now, it alters all the calculations, all the projections, all the scenarios. It is still too early to assess the full impact of the disaster, but the damage is colossal, it’s still unfolding. It will run into billions and billions of dollars.”

Aid donors did not come forward with the help that was needed, which forced the Pakistani government to take up a World Bank loan of $900m. This only added to the country’s already huge debt burden of $55.5bn and will make it even more difficult for the government to balance its budget in future.

Moody’s subsequently downgraded its rating of Pakistan government bonds, causing interest rates on them to increase even further. Standard & Poors affirmed its B-rating for long-term Pakistan government debt on November 15 last year.

Financial institutions, such as Nomura, UBS and Morgan Stanley, have warned that Pakistan will not be able to service such a large debt indefinitely, especially taking into account the high interest rates involved.

State entities in Dubai show $101.5bn debt

Moody’s Investors Service on Tuesday said Dubai and its state-owned non-financials have outstanding debt of $101.5bn and could require further financial support to meet their obligations.

The credit rating agency’s report showed that it remains concerned about the emirate’s maturing debt in spite of the “significant process” made by the authorities and state-owned companies to deal with it.

Figures published by the agency showed that Dubai’s government has about $27.9bn of direct debt, while State-owned corporations have $68.6bn in debt.

The FT reported quoting an unnamed senior government official that Dubai may restructure by next year some issued bonds to assist these companies to meet their $3.8bn debt payments.

Italian cabinet approves radical austerity measures

Italy’s new Prime Minister Mario Monti announced late on Sunday and ahead of a crucial EU summit on Thursday and Friday, that his cabinet has approved a €30bn package of austerity measures to help “reawaken” the Italian financial system.

Europe’s third biggest economy is scheduled to present the plan to parliament today in a bid to help pull Italy back from the verge of insolvency and assist in saving the common currency from collapse.

The austerity plan includes budget cuts, a higher pension age and instruments to help fight tax evasion.

Fitch cuts US credit outlook to negative

Fitch Ratings late on Monday warned the US it may cut its AAA rating if policymakers failed to agree on a “credible plan” to reduce its swelling budget deficit by 2013. There is a “slightly greater than 50 percent chance of a downgrade over a two year horizon,” said Fitch.

The ratings agency downgraded the US outlook from stable to negative after a bipartisan super-committee failed to agree on much needed $1.2trn deficit cutting measures.

 “The negative outlook reflects Fitch’s declining confidence that timely fiscal measures necessary to place US public finances on a sustainable path and secure the US AAA sovereign rating will be forthcoming,” said a Fitch statement.

Meanwhile, UK chancellor George Osborne will on Tuesday deliver his autumn statement to the House of Commons. Osborne is due to unveil measures which will focus on tackling the increased deficit of almost £30bn.