Draghi warns on eurozone credit

27 January 2012 Last updated at 15:16 GMT Mario Draghi says his actions avoided a major crisis The head of the European Central Bank (ECB), Mario Draghi, has said that credit in the eurozone remains "seriously impaired" in some areas.

But speaking at the World Economic Forum (WEF) in Davos, Mr Draghi said the situation had improved since the bank's intervention last year.

The ECB lent a total of 489bn euros ($643bn; £375bn) to banks last December to relieve pressure on the system.

Despite this, he said, banks were still not lending to each other sufficiently.

"We have to see a re-activation of the interbank market, that banks trust each other to the point that they lend to each other and don't have to go through the central bank," he said.

The ECB has launched a number of operations aimed at relieving pressure on the banking sector resulting from concern about governments defaulting on their debts.

Many European banks have leant heavily to eurozone governments and could face big losses.

The ECB's interventions included unlimited three year loans - the three year LTRO - and reducing the quality of assets that could be offered as collateral.

"We know for sure that we have avoided a major, major credit crunch, a major funding crisis," said Mr Draghi.

Structural reforms

Mr Draghi said the ECB's actions alone were not enough to end the crisis in the eurozone and called on governments to agree the planned "fiscal compact" limiting eurozone budget deficits.

However he also warned that efforts to cut national deficits would cut economic growth.

"Fiscal consolidation is unavoidable, but it is also contractionary, there is no point denying this," he said.

To tackle this he urged leaders to implement structural reforms, which don't involve tax or spending, to increase economic growth and employment.

Such reforms can include lower wages or changes to pensions and infrastructure.

UK Chancellor George Osborne also called on eurozone countries to carry out reforms.

"I think the really important thing about the Monday summit is it should focus not just on the immediate issue about the fiscal compact but also on competitiveness," he said.

"That is the lasting solution not just to the eurozone crisis but also to the challenge of increasing jobs and prosperity in Britain."

US Treasury Secretary Timothy Geithner said Europe had made "some progress" in recent months, partly due to the work of the ECB and three new governments of eurozone member countries - Italy, Spain and Greece - doing some "very tough" things.

But he stressed that the key to overcoming the crisis and resisting recession was the "firewall" being erected, which consists of bailout funds pledged by eurozone members.

"Our view is the only way Europe is going to be successful in holding this together, making monetary union work over the long-run, is to for them build a more stronger, more comprehensive firewall," he said.

"That is going to require a bigger commitment of resources."

He indicated that the US and others could be willing to contribute to additional IMF funds if European nations were willing to do that. "It not as a substitute for a more effective European response," he told a Davos session.

Greece debt talks 'close to deal'

27 January 2012 Last updated at 20:00 GMT Olli Rehn tells the World Economic Forum in Davos that the next three days are crucial for the eurozone

Greece could reach a deal with its creditors over the weekend, according to a senior European official.

"We're very close," the European Union's Economic Commissioner, Olli Rehn, said at the World Economic Forum in Davos.

Greek Prime Minister Lucas Papademos also said he was optmistic a deal could be reached in "the coming days".

Greece and its private creditors have failed to agree to reduce the existing debt to help Greece avoid bankruptcy.

"They're about to close a deal, if not today, maybe over the weekend, preferably in January rather than February," Mr Rehn said.

He said he hoped a deal would be done by the EU summit that takes place on Monday.

Mr Papademos told the Reuters news agency that the two parties had made "significant progress over the last few weeks and in the last few days in particular. We are trying to conclude the discussions as quickly as possible".

"Greece will not default," he said.

Athens is negotiating with the Institute of International Finance (IIF), which represents Greece's private creditors. The main sticking point in the discussions is the interest rate that Greece will pay on newly-issued bonds that will replace its existing debts.

The IIF has said it wants no less than 4%, while Athens, backed by eurozone finance ministers, wants the rate to be well below 3.5%.

Agreeing a deal is a precondition of receiving further bailout funds from the European Commission, the European Central Bank and the International Monetary Fund (IMF).

Mr Papademos said the aim was to complete discussions with this so-called troika "by the middle of next week at the latest".

Stronger discipline

Mr Rehn said a deal would be part of a "crucial" three days for the eurozone. The European Council of all 27 leaders in the EU is due to meet on 30 January.

"We need reinforced fiscal discipline on the one hand and firewalls on the other," in addition to a Greek debt deal, Mr Rehn said.

His comments come on the day when the future of the eurozone took centre stage at the annual meeting of the World Economic Forum.

Public debt

Greek officials are talking with private creditors about reducing its debt before a key payment comes due in March.

Athens also needs another tranche of its bailout aid from eurozone and international lenders, without which it cannot afford to repay 14.5bn euros ($19bn; £12.1bn) worth of bonds that come due on 20 March.

George Soros has warned that Europe is likely to face a "lost decade" of economic stagnation

On Thursday, Mr Papademos met Charles Dallara, head of the IIF, and Jean Lemierre, senior adviser to the chairman of French bank BNP Paribas.

Private bondholders are being asked to write-off half their Greek debt, and in return accept cash payments and new bonds with longer maturities.

This week, the issue of whether Greece's public lenders will also need to take a hit has come up.

"The key is that all sides now accept that, for the numbers to add up, the public sector has to take a hit," said the BBC's economics editor Stephanie Flanders.

"There's a limit to the losses that the private sector debt holders will accept, and they have reached it."

That leads to the issue of how much European governments are willing accept losses on the debts they hold - the European Central Bank has about 40bn euros of Greek bonds.

In Davos, however, eurozone leaders appeared reluctant to talk about any ECB involvement in the debt write off.

"Of course the private sector has to take responsibility, that has been agreed in July and now we are discussing the concrete figures [for that]," said German Finance Minister Wolfgang Schaeuble.

If a deal is not agreed, Greece could decide itself what, if anything, to repay its creditors - in effect, default on its debts.

This so-called disorderly default would undermine confidence in the eurozone economy and its banking system.

"We don't expect a default in Greece," added Mr Schaeuble, "We can avoid it and we will avoid it."

Some analysts have said a default could result in Greece being forced to give up the euro.

Treaty changes

Greece was bailed out in 2010 and again last year by the eurozone and the IMF.

The Greek talks take place as eurozone leaders rush to agree the details of a treaty imposing strict rules on government spending.

They are also trying to agree the details of a permanent eurozone bailout fund, the European Financial Stability Mechanism, to deal with sovereign debt crises in future.

But differences remain between France and Germany over the details of the fund and its implementation.

"We are not here in a negotiation," said French Finance Minister Francois Barron, speaking at Davos.

"The firewall is one of the best policy responses, but that is only one of the issues, we haven't dealt with this finally today but it will be on the agenda on Monday."

Italian cruise firm offers payout

27 January 2012 Last updated at 12:45 GMT Sixteen people are known to have died in the disaster The Italian company that owns the capsized cruise ship Costa Concordia has offered passengers 11,000 euros (£9,000; $14,000) each in compensation.

The deal comes after negotiations between the company, Costa Cruises, and several Italian consumer groups.

The company also promised to refund medical and transport expenses, as well as the cost of the cruise.

One consumer group, Codacons, has urged passengers not to accept the offer, Reuters news agency reports.

Codacons and two US law firms are filing a class-action lawsuit in the US suit against Costa Cruises, demanding at least $160,000 (£105,000) for each passenger on the ship. Costa Cruises is owned by the US-based Carnival Group.

Mitchell Proner, a lawyer with one of the firms filing the lawsuit, told the BBC last week that it was being brought on behalf of 110 claimants.

A crew member from the Costa Concordia has also brought a lawsuit against Costa Cruises in the US state of Illinois, Reuters reports.

In court documents, Gary Lobaton says he was not aware of the "dangerous conditions" the ship was in until it was too late to abandon ship.

Reconstruction of the Concordia's final minutes by Dutch software firm QPS

Hopes for deal

The deal will not cover those passengers who lost loved ones or who were injured.

"This deal concerns some 3,000 passengers from 60 countries, including some 900 Italians," Adoc, one of the consumer groups that negotiated the agreement, said in a statement, AFP reports.

"We think around 85% of them will agree to this deal," it added.

On Tuesday another body was found inside the wreck of the Costa Concordia, bringing the death toll to 16. At least 16 others are missing.

The ship ran aground off the Tuscan island of Giglio on 13 January with more than 4,200 people on board.

Costa Cruises has blamed Capt Francesco Schettino for committing "grave errors of judgement" by steering the ship too close to Giglio on an "unauthorised manoeuvre".

Capt Schettino is currently under house arrest on suspicion of manslaughter, which he denies.

Redknapp: 'I don't fiddle taxes'

27 January 2012 Last updated at 15:36 GMT The BBC's James Pearce reports from Southwark Crown Court

Harry Redknapp told police he has paid "fortunes in income tax" and did not "fiddle anybody", a court has heard.

The Spurs boss is accused of receiving untaxed payments from Milan Mandaric during their time at Portsmouth.

He said his family were "givers, not takers" and he would rather "give you £100,000 than nick a few quid off you".

Mr Redknapp said he should have told his accountant about a Monaco account where the payments were made, jurors heard.

In an interview with police in 2009, played to Southwark Crown Court, Mr Redknapp said: "I don't fiddle anybody. I pay my taxes.

"I've been in football all my life. I've paid fortunes in income tax."

He added: "To try and nick a few quid off the income tax... Why? I am not into that. I don't need that.

"I'd rather give you £100,000 than nick a few quid off you.

'Make some money'

"That's how I live. I have got a golf [charity] day tomorrow... I give £15,000 tomorrow to Leukaemia Busters."

The court heard during his time at Portsmouth he was earning £35-£40,000 a week.

The football boss also told police his home was at risk after losing millions of pounds in disastrous investments, jurors heard.

He said he lost £6m in a property venture in Southsea, Portsmouth, and squandered £250,000 in a failed takeover bid at Oxford United.

The court heard he put the money forward to help his friend Jim Smith maintain his role as manager at the club.

Earlier, Mr Redknapp was heard during interviews saying he never wanted the "Rosie 47" Monaco account - named after his dog and year of birth - the court heard.

The prosecution alleges Mr Mandaric made untaxed payments totalling $295,000 (about £189,000)

The prosecution alleges Mr Mandaric made untaxed payments totalling $295,000 (about £189,000) into the Monaco account when he was chairman and Mr Redknapp was manager of the south coast side.

The Tottenham boss said he never asked how much was going into it and just hoped Mr Mandaric would "make me some money", jurors heard.

It has been previously heard that he thought the tax had already been paid by Mr Mandaric.

Mr Redknapp, 64, who lives in Poole, Dorset, and Mr Mandaric, 73, of Oadby, Leicestershire, each deny two charges of cheating the public revenue.

The first of the two charges alleges that, between 1 April 2002 and 28 November 2007, Mr Mandaric paid $145,000 (£93,100) into a bank account held by Mr Redknapp in Monaco, to avoid paying income tax and National Insurance.

The second charge for the same offence relates to a sum of $150,000 (£96,300) allegedly paid by Mr Mandaric to the same account between 1 May 2004 and 28 November 2007.

Tottenham have confirmed Mr Redknapp will be in the dugout when his side take on Watford at Vicarage Road in the FA Cup later.

The trial continues.

BP ordered to share spill damages

27 January 2012 Last updated at 00:40 GMT The explosion at the Deepwater Horizon rig killed 11 people BP must cover some but not all of oil rig owner Transocean's liabilities for the 2010 oil spill in the Gulf of Mexico, a US judge has ruled.

US District Judge Carl Barbier said that Transocean was shielded by its contract with BP from having to pay many pollution claims.

But Transocean must cover its own legal fees and is not exempt from paying punitive damages and civil penalties.

A trial on damages from the oil spill will begin next month.

The trial, which will also involve oil services firm Halliburton who made the cement cap on the well which blew, is expected to apportion blame and quantify damages arising from the incident.

'Cannot avoid responsibility'

BP said that the ruling made it clear that contractors would be held accountable for their actions.

"Under the decision Transocean is, at a minimum, financially responsible for any punitive damages, fines and penalties flowing from its own conduct," the company said in a statement.

"As we have said from the beginning, Transocean cannot avoid its responsibility for this accident."

In his decision Judge Barbier said: "The court defers ruling on BP's arguments that Transocean breached the drilling contract or committed an act that materially increased BP's risk or prejudiced its rights."

He added that the court "does not express an opinion as to whether Transocean will be held strictly liable, negligent, or grossly negligent".

BP has spent $14bn (£9bn) so far in its spill response and cleanup operation and has set aside a further $20bn for damages claims.

It has been locked in legal battles with both Transocean and Halliburton over who should pay for costs and damages arising from the spill.

The explosion at the Deepwater Horizon rig on 20 April 2010 killed 11 people and caused the worst offshore oil spill in US history.