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After The Flood: European Cities On The Edge Of A Debt Crisis

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http://www.guardian.co.uk/business/2010/may/23/financial-crisis-european-cities-in-debt

While relaxing on the back of a gondola, the millions of tourists who drift by the Palazzo Diedo, Gradenigo or San Casciano in Venice don't generally know that what they're looking at are the roots of another European debt crisis. For in a desperate move by the Italian city to shore up its books, these three historic Venetian sites have been put up for sale.

A quarter of Venice's income comes from the City-owned casino near the famous Rialto bridge, where thousands of tourists gamble, unaware that they're funding the city's battle against rising lagoon levels, or paying for its world-renowned carnival. But a credit crunch-led drop in tourism has starved the municipal coffers, and forced the city into new fundraising ventures. Venice recently created an 18-property fund, valued at €82m (£71.3m), expected to be sold within three to five years.

"The lower income from the casino has decreased our expense capacity, so the fund structure gave us half of the value, €40m in cash, ahead of the sales," said Paolo Di Prima, director of financial investment at Comune di Venezia – the city hall. Downgraded by Moody's earlier this month but still within investment grade status, Venice is "not desperate, as before we had an excellent position, and now we're in a good one", Di Prima says.

The crisis in the eurozone is making headlines at the moment, but at a lower level another debt storm is slowly brewing. European cities and regions are expected to flood the market this year, all anxious to fund ballooning deficits. Local and regional government borrowing is expected to reach a historical peak of nearly €1.3 trillion, according to credit ratings agency Standard & Poor's (S&P). The bulk will come from the highly decentralised German Länder (states) and from the deficit-ridden Spanish regions, which face severe central government transfer cuts. Regions also face higher borrowing costs and, most likely, further credit downgrades.

"We expect a significant increase in [debt] issuance in Germany; German borrowers have huge refinancing needs and they're running deficits," said Myriam Fernandez, head of European local and regional government ratings at S&P. "And in Spain, where there is a need to roll over debt, and there are high deficits in 2010, we could see further downgrades for local and regional governments."

S&P recently cut the rating of Madrid, whose debt is expected to remain between 155%-170% of expected revenues until 2012. Madrid went through a spending spree during the boom years, investing millions in infrastructure projects, such as covering up the ring road around the capital. Valencia also spent huge sums in international attention-grabbing events such as the America's Cup or a Formula One grand prix.

"These events don't have any capacity to generate economic growth and now they will have to rush to issue debt," said Andres Rodriguez-Pose, a professor of economic geography at the London School of Economics. "They will have fewer transfers from the central government and will need to cut their budgets brutally."

Catalonia also suffered the S&P axe, as the credit ratings agency said the region's "high debt burden is likely to persist in the long term". But the downgrade won't affect the government's ability to tap international markets, claims Ferran Sicart, general director for financial policy at the Catalan government. As with other senior civil servants, he faces a possible 15% salary cut as the region tries to shrink its deficit. Catalonia needs to raise €9.4bn this year, almost twice as much as last year, and plans to use its industrial and tourism base, as well as the strong Barcelona brand to attract investors. Catalan officials have now added Japan to the usual roadshow spots of London, Paris and Frankfurt.

"The weight of international investors in our public debt has slightly diminished – there's also more competition, so we have to reach out to investors, through meetings and roadshows," Sicart says. "We need to raise more money because of a fall in tax-intake, mostly linked to the construction sector."

But as much admiration as Catalan officials receive for Barcelona – and its successful football team – Catalonia still needs to pay higher interest rates than it did before financial turbulence hit the markets earlier this month.

In contrast, the German state of North Rhine-Westphalia can get away with forking out just 0.35% above the sovereign German bund rate. The biggest local borrower in Europe, it plans to raise €27bn this year – one third of it through bonds. "We take advantage as German bonds are seen as a safe haven – and we offer a bit more than German sovereign bonds," says Eckhard Helms, the state's treasurer, in his office in Dusseldorf. "We tell investors we're reliable. I don't compare myself to Spanish regions, but the market seems to make differences."

Germany's richest and most populous state isn't immune to the global recession, though: North Rhine-Westphalia needs to raise €3bn more than last year, "because we have lower tax income, and because we had to issue short-term bonds following the collapse of Lehman Brothers two years ago", Helms says.

All of these people looking to borrow and we need people to borrow to prop up house prices, this isn't going to end well.

Everyone needs to issue debt to survive, this is the best plan for economic sustainability.

Debt is wealth.

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http://www.guardian....-cities-in-debt

All of these people looking to borrow and we need people to borrow to prop up house prices, this isn't going to end well.

Everyone needs to issue debt to survive, this is the best plan for economic sustainability.

Debt is wealth.

no, the plan was that people could borrow to infinity.

infinity is not real though.

debt is.

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no, the plan was that people could borrow to infinity.

infinity is not real though.

debt is.

http://en.wikipedia.org/wiki/Infinity

Infinity (symbolically represented by ∞) is a concept in mathematics and philosophy that refers to a quantity without bound or end. People have developed various ideas throughout history about the nature of infinity. The word comes from the Latin infinitas or "unboundedness."

In mathematics, "infinity" is often used in contexts where it is treated as if it were a number (i.e., it counts or measures things: "an infinite number of terms") but it is not the same sort of number as the real numbers. The German mathematician Georg Cantor formalized many ideas related to infinity and infinite sets during the late 19th and early 20th centuries. He also discovered that there are different "kinds" of infinite sets, a concept called cardinality. For example, the set of integers is countably infinite, while the set of real numbers is uncountably infinite.

A set of elements can be called Dedekind-infinite if the set has a seemingly paradoxical quality: a subset of elements in an infinite set can be matched up, one-to-one, to all of the elements in a set. The paradoxical nature of infinity is illustrated by the idea of a grand hotel, with infinitely many rooms—all of which are occupied by guests—but can nevertheless manage to accommodate a new guest by moving each existing guest over, one by one, to the next room. This hotel can also hold infinitely more guests by moving guest number one to room number two, guest number two to room four, and moving each guest to the room with double the value. This frees up infinitely more rooms.

Perhaps we just need a new hotel?

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When we talk about government debt we almost always only look at national debt.. mainly because in the UK the government is so centralized. But in other nations a lot of government is decentralized to the regional level.

Huge borrowing by regional governments can help grow debt.

If local and regional borrowing does hit 1.3 trillion Euros that is around 10% of European gdp. And of course that is on top of whatever percentage the national governments are borrowing.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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