Stocks Drop, Led by Energy; FB Dips Below $28 - CNBC Stocks Drop, Led by Energy; FB Dips Below $28 - CNBC

Wednesday, May 30, 2012

Stocks Drop, Led by Energy; FB Dips Below $28 - CNBC

Stocks Drop, Led by Energy; FB Dips Below $28 - CNBC

Stocks finished sharply lower Wednesday, wiping out all of the previous session's gains, as growing worries over rising bond yields in Spain and Italy and fears over Greece's possible euro zone exit kept investors on edge.

Facebook [FB  Loading...      ()   ] took another leg lower, with the stock finishing near $28 a share. The stock has plunged nearly 25 percent since its market debut almost two weeks ago. The social-networking giant received notice that U.S. antitrust regulators will give its proposed purchase of Instagram a lengthy investigation.

The Dow Jones Industrial Average tumbled 160.83 points, or 1.28 percent, to close at 12,419.86, led by Alcoa [AA  Loading...      ()   ] and BofA [BAC  Loading...      ()   ]. The blue-chip index is less than 2 percent from erasing all of this year's gains.

The S&P 500 fell 19.10 points, or 1.43 percent, to end at 1,313.32. The Nasdaq dropped 33.63 points, or 1.17 percent, to finish at 2,837.36.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged nearly 15 percent to finish above 24.

All 10 S&P sectors closed lower, led by energy and financials.

“There’s certainly no panic—the S&P bounced at 1,311, which is right where we’re supposed to bounce,” said Stephen Gilfoyle, trader at Meridan Equity Partners. “We’re going into two very heavy macro days in the U.S. where the focus could shift to domestic [reports]—the GDP and non-farm payrolls.”

Non-farm payrolls are expected to show a gain of 150,000 in May, according to a Reuters poll, after a small gain of 115,000 new jobs in April, the fewest in six months.

On the economic front, pending home sales dropped 5.5. percent in April to a four-month low, according to the National Association of Realtors. Economists polled by Reuters had expected a gain of 0.1 percent, after a previously reported 4.1 percent gain.

Meanwhile, the European Commission said the euro zone must move towards a banking union, issue eurobonds and boost growth while cutting debt. (Read More: 'Spexit' Will Come Before a 'Grexit': Analyst)

European shares finished sharply lower and the euro touched a 23-month low against the U.S. greenback as investors worried that Spain's banking problems would push its borrowing costs near highs not seen since last November. And worries over Italy's borrowing costs also raised alarm, pushing the Italian 10-year bond above 6 percent.

“There isn’t a quick fix for this…we’re in a very strong downtrend,” said Andy Busch, global market strategist of BMO Capital Markets. “The very important decision that has to be made on fiscal integration, whether countries are going to give up their sovereignty—that’s highly questionable at this point so you continue to see the euro make new lows and dollar strengthen.”

Apple [AAPL  Loading...      ()   ] CEO Tim Cook said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually, amid speculation the iPad and iPhone maker was on the brink of unveiling a revolutionary iTV.

Meanwhile, Research In Motion [RIMM  Loading...      ()   ] plunged almost 10 percent after the troubled BlackBerry maker said it hired bankers for a strategic review and to look for partnerships as the company warned it would likely report an operating loss in the first quarter. In addition, at least nine brokerages slashed their price target on the firm.

Pep Boys [PEP  Loading...      ()   ] plunged after the automotive parts and service chain .n>said the sale of the company to private equity firm Gores Group had been canceled.

Stanley Black & Decker [SWK  Loading...      ()   ] is among potential bidders for private equity-owned Infastech, a Singapore-based industrial fastener maker with revenues of more than $500 million, sources with direct knowledge of the matter said.

Wynn [WYNN  Loading...      ()   ] shares rose after Goldman Sachs upgraded the gaming resort company from "neutral" to "buy."

Also on the economic front, mortgage applications fell last week even as rates hit another record low, according to the Mortgage Bankers Association.

—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

THURSDAY: Challenger job-cut report, ADP employment report, GDP, jobless claims, Fed's Pianalto speaks, corporate profits, Chicago PMI, oil inventories, chain-store sales, Zipcar shareholders mtg; Earnings from Joy Global
FRIDAY: Non-farm payrolls, personal income & outlays, ISM mfg index, construction spending, auto sales, Wal-Mart shareholders mtg

More From CNBC.com:



Business Highlights - WJTV.com

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Fearing a financial rupture in Europe, investors around the world fled from risk Wednesday. They punished stocks and the euro, and the yield on a benchmark U.S. bond hit its lowest point since World War II. In the United States, where concerns ...

Financial reporting limitations impacting businesses' bottom lines - CIO UK

Research out from Oracle and Accenture has found inefficient financial reporting could lead to unnecessary costs which would be taken out of more transformational projects.

According to the report, Challenges of Corporate Financial Reporting, less than half of the 1,123 financial staff surveyed had invested in financial reporting systems in the last three years.

On the whole, spreadsheets and emails are still being used as the core tools to record and distribute financial information used in regulated financial reporting processes.

According to Accenture Finance & Enterprise Performance Consulting Group executive director Scott Brennan, enterprise organisations typically spend as much as 1.5 per cent of yearly earnings on financial reporting processes.

He advocates more embedded financial data management through an ERP system, to break down the siloes in reporting.

He said: “The current practices are having a significant impact on investor confidence when companies cannot articulate their financial results clearly. Any improvement on financial reporting systems will go straight through to the bottom-line.”

According to the report, over two thirds of respondents admitted that they have inadequate visibility of reporting processes. Over four fifths of finance managers reported that they find it difficult to control the quality of financial data across the course of their reporting.



Business Matters: Grooveshark's New Data Product Beluga Offers Listener Insights - Billboard Business News

Grooveshark's New Data Product Beluga Offers Listener Insights
-- Grooveshark has launched a new analytics tool that provides information on artists' fans while generating revenue for the company. Called Beluga, the service allows anybody to look up information on any given artist and view listener data like strong and weak demographics and top markets ranked by affinity.
 
What separates Beluga from most analytics products are the market research questions that cover culture and lifestyle, socioeconomics, affinity for various consumer products and music listening habits. According to a spokesperson for Grooveshark parent company Escape Media Group, the standard list of market research questions was given to listeners and is presented online according to users' streaming data. To tap into the survey data, just type in an artist name and start browsing.
 
Take the Lady Gaga page at Beluga, for example. We learn that, among Grooveshark's 20 million-plus listeners, Lady Gaga's strongest demographic is 18- to 24-year-old females and Japanese fans have the highest level of affinity. We also find out that Lady Gaga has a relatively high number of listeners who are vegetarians relative to all listeners who participated in the survey. In case you were wondering, Grooveshark's data also shows listeners of country artists Toby Keith and Luke Bryan have relatively few vegetarian listeners and a relatively high number of meat-eating listeners (hardly a surprise but nice to know). 
 
Much information is free at Beluga. The service offers a wealth of demographic and psychographic information on artists' listeners that goes well beyond the type of shallow metrics -- streams, views, likes -- that have become commonplace. A spokesperson says the new service was launched "to benefit artists and equip the music industry with transparent, actionable data for confidently building artists' careers and connecting with fans."
 
But the company does plan to make money from Beluga through custom reports -- look for the red rectangle marked "custom reports" in the upper-right corner on most pages. The spokesperson confirmed to Billboard.biz that custom market research reports "will have a cost based on the depth of the report and how customizable the report is."

The idea of making money from listener data will sound familiar if you have followed the Grooveshark saga since late last year. Emails contained in Universal Music Group's November 2011 lawsuit against Grooveshark owner Escape Media Group described how the company planned to sell listener data back to record labels. Escape director Sina Simantob indicated the company planned to use the labels songs without a license until the service was big enough it could "tell the labels who is listening to their music where, and then turn around and charge them" for the data.
 
The Beluga website lists a number of possible uses for the data: understand a fan base, improve booking shows and routing tours, make decisions on actions such as selling merchandise and recorded music, use the demographic data to help pitch music to brands and music supervisors.
 
A more cynical view of Beluga would call upon the email in Universal's complaint against Escape. Critics might say Grooveshark is engaging in copyright infringement to sell advertising and listener data. The very least one could say is Grooveshark is using its controversial business model to sell listener data back to some of the artists, manager and labels that don't approve of its business.
 
Abbey Road Live U.S. Rebrands
-- Abbey Road Live U.S., the live-recording and production company that for the past several years was affiliated with EMI Music Group, has rebranded and relaunched as DiscLive Network. DiscLive will be headed by Zach Bair, who also headed Abbey Road Live U.S. through his company RockHouse Live Media Productions.
 
The company launches its new name with deals with 3 Doors Down, which launches its tour June 6 in Simpsonville, S.C. DiscLive will offer limited-edition collectible USB Wristbands. Beginning June 9, DiscLive will also go on tour with Tesla, offering limited edition, individually numbered CD sets. Both products can be pre-ordered on DiscLive's website.
 
In addition to rebranding and separating from EMI, DiscLive also announced the appointment of Ted Cohen, president of TAGStrategic, to its board of directors.
 
Soundtracking Videgogames Future for Bands?
-- The Guardian asks a good question: Could soundtracking games be the future for bands? The short answer is no. The longer answer is yes, but only for a very small number of artists.
 
As the article explains, everybody from Paul McCartney to the National has composed either music or entire scores for videogames. Videogames outsell the best-selling albums and have become more like movies in their scopes and budgets.
 
But the numbers reveal why creating soundtracks for games is not an option for most bands: only 267 videogames were released in 2011 for the major gaming platforms, according to a Wikipedia page that lists each one (smaller and independent games are released each year as well). Compare that to the 76,000 or so albums (from EPs to box sets) that came out in 2011, according to Nielsen SoundScan.
 
There were only 196 films by major studios released in the U.S. in 2011, according to a Wikipedia page that lists each one by release date. There were certainly more independent films released last year, but the point is the same: games aren't going to be available for all but a select few artists.
( The Guardian)



Spain scrambles to contain financial crisis - thejakartaglobe.com

Spain battled to contain fears of financial collapse Wednesday, scrambling to fund a major banking rescue as its debt risk premium rocketed to a euro-era record.

The interest rate on Spain's 10-year bonds shot to 6.703 percent -- unsustainable over the longer term -- as the nation fought to avoid being the next victim of the eurozone crisis.

When compared to safe German debt, investors in Spanish bonds were demanding an additional 5.39 percentage points, a premium that easily crashed through euro-era records set each day of this week.

Stock prices skidded across the world on fears Spain would need a rescue and the European single currency plunged to $1.2389 -- a low point last seen in July 2010.

Bank of Spain governor Miguel Fernandez Ordonez shook investors by announcing he would depart June 10 -- a month before his term was due to end.

The central bank chief, who said he was leaving early to give his successor time to take the reins, had sought in vain a hearing in the lower house of parliament to explain stricken lender Bankia's woes.

"Nothing is more important now than regaining confidence because without that we cannot resolve any of our problems," Ordonez told the Senate on Wednesday.

But he also said there were risks to Spain's plan to slash the public deficit from 8.9 percent of economic output last year to 5.3 percent this year and 3.0 percent in 2013.

In a recession with 24.4 percent unemployment, the state faces "downward risks" to its revenue forecasts and the threat of higher-than-expected expenses, for example for unemployment benefits, he warned.

"It is not an exaggeration to say that Spain is staking a great part of its future on achieving these fiscal targets," he said.

In Brussels, Economic Affairs Commissioner Olli Rehn said that if Spain reined in regional government deficits and presented a "solid" two-year budget, then the deficit deadline could be extended to 2014.

Spanish banks, hugely exposed to a property market that crashed in 2008, are at the heart of market concerns.

Prime Minister Mariano Rajoy's conservative government this month instructed banks to set aside 30 billion euros in 2012 in case property-related loans go bad, on top of 53.8 billion euros demanded under February reforms.

Hardest hit lender Bankia has asked the government for 19 billion euros in capital in addition to 4.465 billion euros invested by the state earlier this month to salvage its books.

But no-one seems clear about where the money will come from, especially when debt markets are charging exorbitant sums to lend to Spain.

"Some sort of attempt to rescue Spain is likely and it is likely to come in July," said Barcelona-based economist Edward Hugh.

Spain would attempt to cling on until Greek elections were over and the European Stability Mechanism, a permanent rescue fund, was operational, he predicted.

The cost of recapitalising the banks would be 150-200 billion euros, he estimated, assuming that lenders were obliged to make additional provisions for home mortgages.

"My short term feeling is that they will somehow get through the summer at least and keep on going but at any moment the whole thing could buckle," Hugh said.

Economy Minister Luis De Guindos said the state-backed Fund for Orderly Bank Restructuring (FROB) would issue bonds to raise capital, which it could then inject into Bankia.

He denied a Financial Times report which said the European Central Bank had rejected a Spanish proposal to put newly issued government bonds into Bankia, which could then use them as collateral to borrow from the ECB.

The ECB also issued a statement denying it had taken a position or been consulted on the plan.

But the government failed to quash the concerns over Spain's financial sector.

Centre-right daily El Mundo this week said three other banks, CatalunyaCaixa, NovacaixaGalicia and Banco de Valencia, could need another 30 billion euros in public funds to meet new regulations.

Yet another lender, Banco Popular, whose bonds have been downgraded to junk bond-status, said this week it was in talks to sell its Internet banking business in a scramble for cash.

AFP



The financial side of the education question - Ct Post

I tip my hat to Roger Conway and Dick De Witt. When they talked about school reform in their May 1 letters to the Connecticut Post, they focused on the classroom.

Mr. Conway speaks of "bottom up" reform led by teachers and Mr. De Witt speaks of the American legacy of one-room schoolhouses and Regents exams.

The governor and the Legislature seem mostly focused on the monetary aspects of education, and I can understand why this is so: with more than 568,000 students in K-12 consuming an average statewide expenditure of more than $14,000 per student, there is nearly $8 billion on the table in Connecticut yearly.

Meanwhile, Bridgeport only ponies up a paltry $10,000 per student per year. I will attempt to show that Bridgeport's $10,000 is plenty.

Assume that an average class size of 25 is chosen: one more than the federal recommendation to make the arithmetic easy. This would provide $250,000 in funding per year per classroom. Pay the teachers well at $100,000 per year (average): much more than the current average of $69,000 since they will become entrepreneurs running their own "businesses." This leaves us $150,000 per year for teaching tools (books and other items), rent, utilities and pensions.

Let's look at teaching tools (books) first. The range is from $40 for high school English to $120 for high school chemistry. Let's go for a conservative $100 per text with five texts needed per student per academic year. This costs us $12,500 for 25 students with new books for all every year. I chose high school texts as a benchmark because they cost more than elementary texts.

Now let's look at rent. For a good sized classroom of 30-by-30 feet at $12 per square foot (utilities included), this would cost only $10,800 per year, and since it is leased, the landlord is responsible for maintenance and upkeep. Leased space avoids the costs of city-owned schools. Since renters are often responsible for basic maintenance, it makes sense to call it $12,500 per year.

Bridgeport can conservatively have teacher, classroom, utilities and books for $125,000 per year out of $250,000 available.

This brings us to pensions. With a Bridgeport enrollment of about 20,000, this should require about 800 teachers. There's a similar number drawing retirement benefits that average $35,000 per year for each.

With $125,000 left in the budget, it can afford, say, $75,000 per year per teacher into the fund until it's paid off (about 16 years for $1 billion in liabilities). Meanwhile, current teachers must be moved immediately onto the rolls of Social Security like most ordinary Americans. Meet all existing commitments but no more state/city-funded pensions. Teachers already pay 7.5 percent of their pay for their pensions: make it the usual 6.5 percent and the city can match it with an ordinary payroll tax of the same amount paid at the same time into a trustee account that the city cannot touch for any other purpose. Same goes for Medicare taxes. Let them form their own risk pool and pay their own insurance.

Still $50,000 left. After the $6,500 payroll tax, there's still $43,500 left to buy computers ($10,000 for 25 from Dell) and everything else including a ride to and from classes (using city bus passes, if necessary). We can also allow for some supervision like Mr. De Witt's superintendent that visits a couple times per year. We could similarly provide for shared nurses, counselors, computer technicians and a few truant officers to take care of the students who misbehave.

Superintendents would be super-teachers, not bureaucrats. They would be paid at the high end of the scale because they will have earned the respect of their peers by having done what they do at an exceptional level of skill.

As for the teachers: their word in the classroom is law. No smart-alecks. No disrespect. No nonsense. All backed up by the parents.

The results can be easily measured by a Regents exam.

Of course a Regents exam is a standardized test and there are those who rail against testing, but what other objective means is there to measure academic proficiency?

This approach also resolves the theoretical tenure issue since if a teacher does not produce results, the parents who care (and let's assume that this is a majority) will enroll their children with a different teacher.

This approach should also be agreeable to free-market thinkers since this is how a free market should work.

Martin Hoffmann

Shelton

In "Public schools are worth the price," Hugh Bailey laments the public's unwillingness to spend additional monies to improve Connecticut's underperforming schools. I believe most taxpayers would spend more money for schools if they thought the money was spent wisely. Unfortunately our politicians have not been good stewards of our money. They have run up a $10 billion unfunded teacher pension liability, created the highest per-capita debt of any state in the country and have raised the income, property, sales and gas taxes to some of the highest in the nation. A fiscal mess and we still have many urban schools that boast four year graduation rates of under 60 percent.

So the taxpayer and parents requested metrics around spending and performance and were met with a chorus of objections of why it is unworkable and will only harm teachers and parents. We asked for charter schools, for which there are huge waiting lists in New York and Washington, and we were told these too are bad for students and teachers, and merely play into the hands of the evil profiteers.

So the defenders of the status quo pass the largest tax increase in Connecticut history and continue to ask for more money. And in "Connecticut's Reforms Mirrors Failings of New York's," Wendy Lecker introduces the new litigation weapon. Her group will sue the Legislature (and the taxpayers) to get the additional money that will surely solve the education issues. But before getting more funding, it is reasonable for taxpayers and parents to demand fiscal accountability, student progress metrics and choices for students to get out of failing schools.

Bill Stapleton

Fairfield



Business program for Vt. vets inspires federal legislation - NECN
(NECN: Jack Thurston, Rutland, Vt.) - Congressman Peter Welch, D-Vt., has hailed a Vermont business counseling and training program aimed at helping veterans start and manage their own businesses. Welch said at a press conference in Rutland Tuesday that he hopes the program will become a national model.

Welch pointed to success stories like Tim McCollum's as examples.

Before McCollum owned Eagle Eye Property Management in Killington, Vt., he wore the uniform of a Major in the Vermont National Guard and served three tours in Afghanistan.

When he got home, McCollum realized he could use his military skills and discipline to start a new career.

"Was I a maintenance guy in the Army? No," McCollum told New England Cable News. "But I was around it, so I understood that if you don't maintain things, they're going to break."

To launch into lawn maintenance, snow plowing, light construction and more, McCollum got help from a Vermont Guard program called Yellow Ribbon Reintegration. It teams with the Vermont Small Business Development Center to give returning troops technical assistance on business management topics including finding start-up money, marketing and, in McCollum's case, free accounting training.

NECN asked where McCollum would be without that advice.

"I'd probably be looking for a job right now," he answered.

Welch's amendment to the 2013 National Defense Authorization Act would require similar partnerships in every state, he said. He praised Rep. Chris Gibson, R-N.Y., for his bipartisan work on the legislation. It passed the U.S. House and is now awaiting a vote in the Senate, where Welch said he thinks it'll have support.

"In Vermont, we had on-the-ground leadership from the Guard, on-the-ground leadership from the Small Business Development Council, and we had the veterans who were willing to come forward and ask for the help," Rep. Welch explained. "So we had minimal bureaucracy here; it's all about getting the job done. Whether some of the bigger states would be able to overcome some of those bureaucratic challenges, I don't know. But let's give them a shot."

Welch said there has not yet been a dollar figure put on the implementation of the proposed national program. In Vermont, the Small Business Development Center's partnership with the Guard was largely funded with a grant from the U.S. Small Business Administration, a Vermont SBDC flyer read.

Welch said he hopes the concept could eventually bring down the unemployment rate for post-9/11 veterans. U.S. Labor Department figures show the national number was around 12-percent last year: several points higher than the unemployment rate for non-veterans.

"A lot of them simply want to get a job and integrate back into the community," said Brian Perry with the Vt. National Guard Veterans Outreach Team. "And those are the people we try to help."

"Many people return and they want to do something different," added Linda Rossi of the Vermont Small Business Development Center. "There are resources in this state and in the other states to take advantage of."

Tim McCollum said Eagle Eye is signing up new clients weekly.

"We're past our break-even point," he noted.

McCollum may be in business for himself, but said he never felt he was by himself, thanks to the Vermont Small Business Development Center and the Vermont Guard's Yellow Ribbon Reintegration Program.

"It's a good ride," McCollum said of owning his own business.

Click here to connect with the Vt. Small Business Development Center.



Eurozone faces 'financial disintegration' unless it acts again, warns commission - The Guardian

The eurozone is confronted with the prospect of "financial disintegration" and should use its new bailout fund to recapitalise distressed banks directly while embarking on a transnational banking union, the European commission said today.

Delivering more than 1,000 pages of diagnosis and policy prescriptions on the dire condition of the European economy and how to try to end almost three years of euro crisis, the commission also talked up the merits of eurobonds or pooling of eurozone debt, a proposal gaining in traction but strongly resisted for now by the biggest economy, Germany.

With international attention focused on Spain wrestling with an escalating banking crisis, the commission was surprisingly critical of Mariano Rajoy's attempts to chart a way out of an extreme predicament – recession, soaring national debt, a ballooning budget deficit, the highest unemployment in Europe, and the banks sitting on tens of billions of toxic assets from the bust property bubble.

"The policy plans submitted by Spain are relevant, but in some areas they lack sufficient ambition to address the challenges," the commission's Spanish report card said.

On banking regulation, administrative reform, labour market changes, growth and competitiveness policies, "the national reform programme does not contain any specific plans for addressing the challenges".

Tax system reforms, meanwhile, were going "in the opposite direction" to that recommended by Brussels.

"Spanish banks still have large exposures to the real estate and construction sectors (amounting to about 10% of total consolidated assets in December 2011). Over a half of this exposure is already problematic and may eventually rise further as developers prove unable to sell their assets and make repayments," the commission said.

Overall in the eurozone, the sovereign debt crisis of the past 30 months had fostered "a very dangerous" degree of "interdependence of weak banks and weak sovereigns".

The European Central Bank's intervention last December, throwing a trillion euros of cheap three-year loans at European banks over a period of three months, had brought a respite. But the commission said that this was merely temporary and that investors' confidence was again evaporating. Despite the liquidity help, the banks were failing to lend, raising the chances of a credit crunch in Europe wrecking growth prospects and causing unemployment to rise from current 15-year highs.

"At this stage, there is no clear-cut evidence that the deleveraging process has become excessive or disorderly with disruptive consequences on the real economy. Nevertheless, the heterogeneity across member states is large and the aggregate picture may hide different situations at country level," the commission said.

Given the gravity of the situation, the commission, whose recommendations are to be put to a summit of EU leaders in Brussels at the end of next month, outlined a quantum leap in fiscal and economic union going beyond the scope of the EU's Lisbon treaty and which would require a new EU charter.

While also hedging its bets, the commission stressed the merits of eurobonds, a eurozone banking union, deploying the European Stability Mechanism (ESM) – the permanent bailout fund being made operational in July – for direct loans to banks rather than to governments, as required by the ESM treaty.

"Additional reforms to economic governance may be considered to complete the institutional structure of monetary union," the commission said. "The changes made so far have in some cases touched on issues traditionally tied to national sovereignty. In some instances, they appear to have exhausted the scope of action possible under the [Lisbon] treaty … The question remains as to whether stronger co-ordination of economic policies will be sufficient or whether there needs to be progress towards closer integration of economic policy-making. The crisis experience has underlined the importance of this issue."

The commission said that there were signs of banks deleveraging, retreating behind national borders and divesting their foreign subsidiaries.

"To counter this trend of financial disintegration, more co-ordination at European level is required in supervision and crisis management frameworks. More specifically, closer integration among the euro area countries in supervisory structures and practices, in cross-border crisis management and burden sharing, towards a 'banking union' would be an important complement to the current structure of monetary union."

"To sever the link between banks and the sovereigns, direct recapitalisation by the ESM might be envisaged," it added. The proposal is again fiercely resisted by Berlin, but supported by the new French president, Fran├žois Hollande, by Washington, and is also gaining support at the European Central Bank.

Talking up the advantages of eurobonds, the commission sought to appeal to German reservations by stating that "the net effects of common issuance will be positive only if the potential disincentives for fiscal discipline can be controlled".


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