Write Comment     |     E-Mail To a Friend     |     Facebook     |     Twitter     |     Print

BRUSSELS: With Italy teetering on the brink of financial disaster, the eurozone is under pressure to put up robust defences to keep the bloc’s third largest economy from sinking and dragging down the euro with it.

After Greece, Ireland and Portugal, Italy -- which accounts for one fifth of the 17-nation eurozone economy -- could be next to need a bailout, having already refused last week to take up the offer of 50 billion euros in IMF support.

Finnish Prime Minister Jyrki Katainen and Austrian Finance Minister Maria Fekter each warned this week that Italy was too big to bail out, the Finn wondering how Europe could ever "shoulder the entire Italian national debt."

That vast debt mountain has reached 1.9 trillion euros ($2.6 trillion). With Italy needing to raise up to 400 billion euros next year, the price could be heavy after Rome’s borrowing rates soared to a record 7.0 percent on Wednesday.

By comparison, Germany currently pays around 1.75 percent but the underlying problem is that Italy’s economy is not growing anywhere fast enough to keep up with such rates, leaving the debt to mount ever higher.

"If Italy’s nominal GDP (Gross Domestic Product) were growing at a modest 4.0 percent and the interest rates it paid on new debt were 5.0 percent or less, it might manage its way out, however, neither is likely," says Peter Morici, a professor at the University of Maryland’s Smith School of Business.

One option would be for Italy to call in the eurozone rescue fund, the European Financial Stability Facility (EFSF), which can issue loans but also act to provide governments with liquidity via bond purchases.

EU officials have been planning for this eventuality for weeks, although Rome has yet to ask for help.

But until the EFSF leverages, as planned, its capacity up from the 440 billion euros of government guarantees it currently contains, to the trillion EU leaders want, there is little scope for the fund to make much difference.

The ramping up of its firepower, also involving a special investment fund to attract Chinese or Russian interest and managed by the IMF, will not be ready before February, EU finance chiefs admitted this week.

A plan to use the EFSF to insure debt issued by fragile states cannot help either since it would not be operational until December.

Besides, Morici said, "large purchases of Italian debt by France would surely result in the loss of an AAA rating it already doesn’t deserve, push up further French borrowing costs and put Paris’ finances into a negative feedback cycle.

"With Europe imploding, even Germany’s finances would not look quite so pristine" thereafter.

Either way, time is of the essence, with Italy’s next big five-year bond issue set for Monday.

For now, the European Central Bank (ECB) will remain at the forefront of efforts aimed at stopping the country’s borrowing costs soaring off the scale altogether. Since the start of November, the central bank’s head is an Italian, Mario Draghi.

The ECB last week more than doubled its bond-buying outlays to 9.52 billion euros, taking the total to 183 billion euros in eurozone government bonds since it first began such operations early last year.

It resumed major purchases in August when renewed strains pushed Italian and Spanish borrowing rates above 6.0 percent, levels judged even then to be unsustainable for the longer-term.

-----------------------------------------------------------------------------------------------

NEW DELHI: Social networking giant Facebook expects its largest user base to come from India, surpassing Indonesia and the US in the near future, a senior executive said.

"India is our third largest market in terms of number of users and what we’re excited about and why we’re here is because some time in the future, we think that India will pass first Indonesia, which should happen soon, and then US," Facebook’s vice president for mobile partnerships and corporate development Vaughan Smith said.

Indonesia has more than 45 million Facebook users while India follows at around 30 million users, Smith added.

More than three-fourth of Facebook’s 800 million users are outside the US with users in India growing at phenomenal pace. According to Comscore data released in June, one in three Internet user in India was a Facebook user.

Facebook’s user count in India jumped 85% to 34 million as of June this year over the 18 million last year, as per Comscore. Smith expects more number of users to come from India than the US.

Facebook’s prospects are also looking up since India is adding more around 5-7 million internet users a month. According to an IMRB and Internet and Mobile Association of India, the country’s internet population was 112 million in September, which is likely to go up to 121 million by the year end. At this rate, India will overtake the US, which has 245 million internet users, within two years, the survey adds.

"We expect that majority of people in India who have phones would use Facebook as the most important thing on their phone, because that’s what we see in other markets. Which means we will have more Facebook users in India than we do in America," Smith added.

"More than twice as many people login to Facebook from mobiles than desktops, globally. Usage is switching and the same is happening in India," Smith said. Facebook’s statistics reveal that 350 million users access the website through mobile phones.

On Tuesday, Facebook and mobile phone chipset maker MediaTek announced a partnership to bring the social networking major to low-cost feature phones or entry-level mobile phones, which may encourage more people to access the website on the go.

"We think that partnership with MediaTek will create a good, fast and engaging experience on devices that cost less than $50 and that’s a bonus for us, not just in India but in all of Asia and Africa where affordability is one of the ways for people to get on Facebook," Smith added.

The Taiwanese chipset maker will embed Facebook on its mobile platform solution, MRE, which will be offered to handset makers. More than 40% of handsets sold in India used MediaTek’s chipsets as of last year.

MediaTek’s corporate vice president Cheng-Te Chuang said it was working with the Indian brands such as Micromax and Spice Mobility to offer the solution on affordable low-cost handsets being sold in India.

Micromax mobile business director Vikas Jain said the company will launch three handsets with the embedded solution by the end of this month, which will be priced below Rs 5,000.

Spice Mobility managing director Dilip Modi said the company will launch one to two devices next month, priced between Rs 2,000 and Rs 8,000. Modi added that they are also talking to mobile operators for bundling of the new device with data plans.