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Greek central bank Governor George Provopoulos said he’s confident the government will meet its “very ambitious” deficit-reduction goals and ward off any further credit-rating downgrades.

Rating agencies “want evidence that the plan is implemented on target” and “some time will need to elapse before they can form a better judgment,” Provopoulos, also a European Central Bank council member, said in an interview in Athens on Feb. 19. “I have full confidence” in the government meeting its goals, he said. “They have to succeed. And they will, I’m sure of that.”

Greece’s financial distress could be exacerbated at the end of this year when the ECB is due to revert to old collateral rules that were loosened during the global recession. If Moody’s Investors Service cuts its Greek credit rating to the same level as the other major ratings companies, Greek government bonds would no longer be eligible as collateral at the ECB, making it more difficult for the nation to borrow.

“The government has said already on several occasions that it will take any additional measures required in order to achieve its goal,” Provopoulos said. “This gives me comfort. Even if some risks materialize — like growth — the government is prepared to take immediate corrective action.”

Skeptical Investors

Investors are skeptical that Greece can cut its budget deficit from 12.7 percent of gross domestic product to under 3 percent by 2012. The government’s plan assumes the economy will contract 0.3 percent this year before growing 1.5 percent in 2011. It shrank 2 percent last year, compared with the government’s forecast for a 1.2 percent contraction.

The premium investors charge to hold Greek 10-year bonds instead of the German benchmark soared to 396 basis points on Jan. 28, the most since 1998. The cost of insuring Greek bonds against default jumped to a record high, exceeding the rates in emerging Asian economies such as Vietnam, Indonesia and the Philippines.

Markets are overreacting, Provopoulos said.

“They take advantage of the weak link to make profits,” he said. “It’s clear that there is a certain degree of overshooting. Given the high degree of uncertainty in the markets, one should not expect that the situation will normalize overnight.”

If Greek debt were no longer eligible as ECB collateral, the government would find it harder to find buyers for its bonds and yields would probably rise.

‘Exactly As Promised’

The ECB currently accepts bonds rated BBB- by at least one rating agency as collateral for loans. Under the old rules, due to be reinstated on Jan. 1 next year, A- is the minimum rating required. Standard & Poor’s and Fitch Ratings cut Greece’s credit grade to BBB+ in December.

Moody’s has said it may lower its A2 rating two steps to Baa1 if Greece only partially implements its deficit-cutting plans. That would render Greek bonds ineligible at the ECB.

ECB President Jean-Claude Trichet said on Jan. 14 that the Frankfurt-based central bank won’t make allowances “for the sake of any particular country” and Greece won’t win “any special treatment.”

The ECB will continue its enhanced credit support to the banking system, Provopoulos said, suggesting it may continue lending banks as much cash as they want at its benchmark rate, at least in weekly refinancing operations.

“The ECB never said ‘we have reached the end of the road’,” he said. “Of course there are signs of normalization of the situation, of an improvement. This will be taken into account” when policy makers decide in March on the next steps in the exit from emergency lending measures, Provopoulos said.

Under Pressure

European finance ministers turned up the pressure on Greece last week to rein in the region’s largest budget gap. The country might be asked to raise its value-added tax, introduce a levy on luxury goods and cut capital spending if it fails to show sufficient progress by mid-March, when the European Commission is due to review the government’s progress.

While European leaders on Feb. 11 pledged to take “determined and coordinated” action to support Greece if the need arose, they left open how they would respond to a fresh wave of speculative attacks against Greece or other countries such as Spain and Portugal, which are also struggling to cut their budget deficits.

Provopoulos said he takes the commitment of European governments to stand by Greece “at face value.” The lack of a detailed rescue plan isn’t disappointing, he said.

“Everybody knows how critical the situation is. Of course, an expression of willingness and readiness from the European family, the euro zone, to help in case it’s needed is quite reassuring and understandable.”

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The German government may offer an aid package to Greece and other debt-ridden European nations in an effort to stave off the default concerns that have stunted global markets, according to reports.

The Wall Street Journal, citing unnamed sources, said a loan guarantee plan would be led by Germany but completed along with European Union partners.

The threat of a default in Greece has given investors pause, as the effect would likely ripple to other members of 16-nation euro zone. Other debt-choked nations in the bloc include Portugal, Spain, Ireland and Italy.

European Union officials are set to meet Thursday to discuss the economy, and Greece is expected to be a major topic on the docket.

In December, Greece’s credit rating was downgraded. S&P’s move came after health care companies complained that the country was behind on payments related to its public health system.

Investors across the globe have been trying to digest what impact such a crisis would have on the nascent signs of recovery, and ripple-effect fears have sent worldwide markets lower payday loans.

The WSJ article said Germany’s finance minister, Wolfgang Schaeuble, has discussed the aid idea in with European Central Bank President Jean-Claude Trichet.

But earlier Tuesday, Reuters reported that German government spokesman Ulrich Wilhelm called reports that a decision was already in effect "unfounded."

A bailout of Greece would mark the first time any EU country rescued a euro zone member.

The U.S. stock market was cheered by the reports of possible Greek aid, as the blue-chip Dow index (INDU) added almost 2% with less than 2 hours left in the session. The euro also rose in late trading. 

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France’s trade deficit narrowed 22 percent last year on lower energy costs and as companies such as Airbus SAS boosted exports after the worst recession since World War II.

The trade gap fell to 43 billion euros ($58.9 billion) from 55.1 billion euros in 2008, the customs department in Paris said today in an e-mailed report. December’s deficit was 4.27 billion euros compared with 5.3 billion euros the previous month.

France’s performance “is due to our specialization in sectors that were less affected by the crisis: pharmaceuticals, airplanes and agriculture,” Trade Minister Anne-Marie Idrac told a Paris press conference today. The decline in the trade gap was also due to a “smaller energy deficit,” she said.

France and neighboring Germany have benefited since the second quarter of last year as global demand for their goods helped fuel the recovery. The French economy expanded 0.3 percent in the last two quarters of 2009 and will grow 1.4 percent this year, the government forecast last month.

The euro-region “recovery will be to a large extent export-led,” said Stephane Deo, an economist at UBS Securities in London. “Trade will indeed support growth this year.”

Exports of Airbus aircraft last year rose 2 percent from 2008 to reach “their highest level” for a total of 16 billion euros, today’s report showed.

Overall, French exports were little changed in December after growing 5 percent in November, according to the report.

“In 2010, French exports should benefit from a rebound in economic activity as well as from structural reforms this government has carried out,” such as cutting some business taxes and providing tax credits for research, Idrac said.

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Fairfax-based SRA International has completed its acquisition of Perrin Quarrels Associates Inc. for an undisclosed sum.

Charlottesville, Va.-based PQA specializes is environmental programs like air quality and climate change. The Environmental Protection Agency is among its biggest customers.

The acquisition adds $6 million to the balance of SRA’s current fiscal year. The company will report fiscal second quarter results this month.

SRA International’s (NYSE: SRX) first quarter revenue was $417.5 million, up from $392.4 million in the same quarter a year earlier.

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Australia’s economy probably expanded in the three months through September for a third straight quarter, boosted by government spending on roads, ports and schools.

Gross domestic product gained 0.4 percent from the second quarter, when it rose 0.6 percent, according to the median estimate in a Bloomberg News survey of 17 economists. The economy probably grew 0.7 percent from a year earlier, the survey showed. The Bureau of Statistics will release the GDP report tomorrow at 11:30 a.m. in Sydney.

Australia’s economy, one of the few to skirt the global recession, grew in the third quarter and will accelerate in 2010 as consumer confidence gains and demand rises for exports such as iron ore, the central bank said today. Faster growth adds to pressure on Governor Glenn Stevens to raise borrowing costs in February after this month becoming the only policy maker in the world to increase interest rates three times this year.

“The economy is gaining good momentum into the end of the year and we continue to expect a further Reserve Bank rate adjustment in February,” said Paul Brennan, an economist at Citigroup Inc. in Sydney.

Prime Minister Kevin Rudd’s government is spending A$22 billion ($20 billion) on ports, roads, hospitals and schools, adding 0.8 percentage point to GDP in the third quarter, Citigroup estimates.

Global Rebound

Tomorrow’s report may add to global evidence of an economic rebound. Europe’s economy emerged from its worst slump in more than six decades in the third quarter, expanding 0.4 percent from the previous three months, a report showed on Dec. 3. The U.S. economy grew at a 2.8 percent annual pace.

Australia’s economy is expanding faster and generating more jobs than the government and central bank forecast at the start of the year as China’s demand for raw materials including iron ore, coal and gas prompts mining and energy companies such as BHP Billiton Ltd., Woodside Petroleum Ltd. and Santos Ltd. to increase investment and hire workers.

Treasurer Wayne Swan last month forecast GDP will rise 1.5 percent in the 12 months through June 30, 2010, compared with a May prediction of a 0.5 percent contraction. The central bank says the economy will grow 2.25 percent this fiscal year and 3.25 percent in 2010-11.

Employers added 99,500 workers between the start of September and Nov No teletrak payday loan. 30, the biggest three-month hiring surge in three years, a report showed last week. The jobless rate fell to 5.7 percent from 5.8 percent.

Gas Deal

Chevron Corp. said this month it has signed a deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone venture in Western Australia. The project, estimated to be worth $82 billion, is forecast to generate 6,500 jobs during construction.

It is in addition to the $39 billion Chevron-led Gorgon gas venture, also in Western Australia, which is forecast to create 10,000 jobs when construction starts early next year.

Stronger economic and jobs growth will increase Governor Stevens’s scope to increase borrowing costs next year. He raised the overnight cash rate target by a quarter percentage point on Dec. 1 to 3.75 percent, adding to similar moves in October and November.

The central bank said today its decision to raise borrowing costs two weeks ago gives it more flexibility in future.

“Members agreed that, if developments unfolded as currently expected, monetary policy would need to be adjusted further over time to lessen the degree of stimulus,” officials said in minutes released today of their Dec. 1 gathering.

‘Appropriate Stance’

“That adjustment would not be intended to slow demand compared with the current forecast path, but aimed simply at keeping the stance of policy appropriate for improving economic conditions.”

Figures available at the time of the central bank’s board meeting two weeks ago “suggested a rise in GDP for the quarter,” today’s minutes added.

Investors are betting there is a 62 percent chance of a quarter-point increase in the benchmark lending rate to 4 percent at the central bank’s next meeting on Feb. 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:02 p.m.

The statistics bureau, which normally publishes third- quarter GDP figures in the first week of December, delayed publication of the report this year by two weeks as officials adopt new accounting standards.

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The worldwide decline in equities spurred by Dubai’s efforts to reschedule its debt is a sign that government spending alone won’t be enough to protect financial markets, according to Arnab Das of Roubini Global Economics.

Stock volatility will probably jump as countries and companies default on loans, said Das, the head of market research and strategy at RGE, the advisory firm founded by economist Nouriel Roubini.

Shares slumped from Shanghai to Brazil and European shares fell the most in seven months yesterday after Dubai World, the government investment company burdened by $59 billion of liabilities, sought to delay repayment on much of its debt. Governments have spent, lent or guaranteed $11.6 trillion and central banks held interest rates near zero percent to end the first global recession since World War II.

“We’re bound to see a rise in risk aversion,” Das, who is based in London, said in an interview. “The Dubai situation signifies that although the major central banks around the world have stabilized the financial system, they can’t make all the excesses simply disappear. We still have to work out those balance sheet stresses. The recovery is proceeding, but significant challenges still lie ahead.”

Japanese stocks fell today after commodity prices declined and the dollar depreciated to a 14-year low against the yen, dimming the overseas earnings prospects for exporters. The Nikkei 225 Stock Average lost 1.9 percent to 9,204.65 as of 10:10 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index slipped 2.1 percent after the MSCI World Index of 23 developed- country markets lost 1.4 percent yesterday.

Bank Writedowns

Banks wrote down or lost $1.7 trillion from the collapse of the subprime mortgage market and raised $1.5 trillion since the credit crunch began in 2007, data compiled by Bloomberg show.

“In some countries and sectors, debtors will be able to get by because government intervention has made it easier for them to refinance,” said Das. “In other places, excessively leveraged debtors, who always get access to too much credit during a boom, cannot roll over their debt and will default.”

Das, the former head of emerging-markets strategy at Dresdner Kleinwort, joined RGE last month to lead a new team that advises investors on allocations in stocks, bonds, interest-rate products, commodities and currencies in developed and emerging markets advance payday loans. Roubini, an economics professor at New York University and chairman of RGE, predicted the financial crisis that spurred credit losses and asset writedowns at global financial companies.

Protected Investors

Roubini’s 2006 warning about the crisis shielded clients from the worst slump in global equities since at least 1988. He said in March that the stock rally that began that month was a “dead-cat bounce” and that it may “fizzle” in May. The MSCI World Index of has since rallied 68 percent, and the Standard & Poor’s 500 Index has climbed 64 percent in the steepest rally since the Great Depression.

Roubini warned in July that the economy is “not out of the woods.” Reports since then have shown that the U.S. exited a four-quarter contraction in gross domestic product, expanding 2.8 percent from July through September.

The benchmark index for U.S. stock options, which measures the cost of using options as insurance against declines in the S&P 500 over the next month, has dropped 49 percent this year. It surged last November to a record 80.86, a level almost four times higher than its 20.28 average over its 19-year history.

Market Correlation

The so-called correlation coefficient that measures how closely markets rise and fall together reached the highest level ever in June, with the S&P 500 and benchmark measures for raw materials, developing-country equities and hedge funds rallying in tandem, according to data compiled by Bloomberg. Oil has jumped 71 percent this year, the Reuters/Jefferies CRB Index of 19 raw materials climbed 21 percent and the MSCI Emerging Markets Index soared 69 percent.

“All this should magnify differentiation between riskier and less risky asset classes and names, after a couple of quarters in which correlations have risen sharply as market participants put on risk pretty much across the board,” Das said. “That will make it harder to make money simply by riding the liquidity wave from central banks. People are going to have to start focusing even more on the fundamentals.”

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Joanna Lohman, a real estate specialist and professional soccer player, can add another job to her plate: general manager of the Washington Freedom.

The team is expected to announce the appointment in coming days. Her first agenda item as GM of the professional soccer team is changing the team’s name.

“We created the name over here in Tokyo,” said Lohman, who is currently practicing the sport overseas. “One idea was the Freedom Reserves, but as athletes we don’t aspire to be a reserved player.”

The new name of the team will be Freedom Futures. An official announcement is expected soon from the team.

Lohman said the name draws attention to future soccer players in the U.S. and to “the future of America for business.” She said her primary goal is to help players in the league secure long-term careers in the corporate world.

Future Minded

Lohman, also a vice president with Tenant Consulting LLC, holds a business and mathematics degree from Penn State.

“Being the GM of a sports team is the marriage of my skill sets,” she said, who also has a long-term goal to be GM of the Washington Redskins. “I truly believe the [Women’s United Soccer Association] has untapped resources in these amazing, talented players, who don’t realize their potential and power that can be [used] in corporate America.”

She admits it’s a struggle for some female players to realize that potential.

“When you are so passionate about soccer it’s hard to view yourself in a non-sports world position,” she said.

Her first plan of action as general manager is to put a good product out on the field by recruiting the best players to play.

“We have one of strongest teams in the country and will continue that,” she said.

In terms of business, she said this year will be a growing period for the team. The 2010 season starts in early spring.

“I want players to feel they can come here and learn on and off the field. I want to get our players incorporated in local businesses and charities and learn to walk and talk and be a valuable resource to the company.”

She said those skills will come with resume building and interviews, or “anything to build a platform for a career.”

Player update

The 27-year-old is currently in Japan with her Washington Freedom teammate Rebecca Moros, practicing with the NTV Beleza.

She has been training overseas since early September and was expected to leave Oct. 22, but is opting to stay another month because of the “incredible” experience she has been having with the team. She’s hoping to get better at the sport in order to return to the U.S. National Team, where she helped the U.S. women’s team win the Peace Cup in China, and the Penn State player was named Pennsylvania’s NCAA Woman of the Year in 2004.

“The training environment is so unique and different. In [the U.S.] we are strong athletes and run fast and jump high. Here they train in small, tight spaces and are so good with their feet and the ball.”

While she was invited to practice with NTV Beleza in Japan, she cannot play in the games because she does not have a work Visa.

It’s hard to get one in Japan, she said, because their work Visas require a minimum payment of $25,000 a year. “But often that’s too much for a company to pay when they can pay someone a bit less in Japan.”

Plus, she admits, “five hours of working on top of [practicing] would be a bit much. It’s been physically demanding and when I’m not playing I like down time.”

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European Union nations should begin cutting budget deficits swollen by emergency government spending by 2011 “at the latest,” according to a draft of a statement to be issued after next week’s summit in Brussels.

“The bold policy response to the economic and financial crisis is now starting to bear fruit,” according to the draft, prepared by the Swedish government, which will chair the Oct. 29-30 meeting. “To anchor expectations and reinforce confidence, it is necessary to prepare a coordinated strategy for exiting” stimulus policies so that budget deficits are cut “beyond the benchmark 0.5 percent” of output, it said.

At least 20 EU governments, including those of Germany and the U.K., will breach the 27-nation bloc’s deficit ceiling of 3 percent of gross domestic product this year and next, the European Commission estimates. The EU’s average budget shortfall is forecast to be twice the limit both years.

The statement would be the first time EU leaders set a deadline to begin budget restraint since the region entered the recession last year. By doing so, the region’s governments are signaling their seriousness about trimming borrowing over time without choking off the nascent recovery next year, said Stephane Deo, chief European economist at UBS in London.

“A lot of people were worried that there would be tightening next year; now we know that that’s not going to happen,” he said. “Yet the current situation is totally unsustainable. You have to do fiscal tightening at some point” and 2011 is an “appropriate” time to do so, he said.

Deficit Spending

Deficit spending can only be successful in stabilizing the economy as long as financial markets and the public view it as temporary, the European Commission, the EU’s Brussels-based executive, said on Oct. 14. The commission forecasts that debt among the 16 nations using the euro will rise to 77.7 percent this year and 83.8 percent in 2010 from 69.3 percent last year.

“The new and main challenge is to get public finances in order as soon as possible after the crisis, and to prepare the social-security system for an aging population,” Alexander Kockerbeck, a senior European analyst at Moody’s Investors Service, said today in an interview.

At the same time, the EU is being careful not to stifle growth. The euro-area economy will shrink 4 percent this year, the commission estimated on Sept. 14. The latest forecast for 2010, issued in May, projects a 0.1 percent contraction.

Central Banks

“Support by governments and central banks should not be withdrawn until the recovery is fully secured,” according to the draft summit statement.

Even 2011 will be more of a turning point on deficits rather than a sudden about face on taxes or spending, Deo said.

“The next debate will be about whether this will cause a double dip in 2011,” he said. “I don’t think so because I don’t think politicians will all of a sudden jump on the breaks and kill the recovery. It’s more about smoothing this out over a number of years, about entering a phase of consolidation.”

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Treasury Secretary Timothy Geithner said the U.S. must reduce its record budget deficit as soon as the economy returns to a sustainable growth rate without relying on government assistance.

“Americans understand that we have to go back to living within our means as a country,” he said in an interview broadcast today on CNBC. “When we have an economy that’s growing again and we get unemployment down, we’re going to have to bring those deficits down.”

The U.S.’s 2009 budget gap widened to $1.42 trillion as the deepest recession since the 1930s crippled tax revenue and the administration increased spending to rescue the economy. The shortfall for the 12 months ended Sept. 30 was more than triple the $455 billion record set a year earlier, the Treasury Department said today in Washington.

Geithner cautioned that a lack of confidence that the U.S. will return to fiscal sustainability may lead to a weaker economic recovery, higher interest rates and constrained investment.

“That’s why deficits matter. That’s why deficits in the end can be very damaging to growth,” he said. “That’s why you cannot live with future deficits as large as ours are likely to be.”

The Treasury chief said he hasn’t decided yet whether to extend the $700 billion Troubled Asset Relief Program, adding that it’ll be important to businesses and the housing market that the government has the ability to “continue to put in place programs to help make sure they get credit.”

Asked whether tax cuts enacted during the Bush administration should be allowed to expire next year, he said, “it does not make sense to raise taxes in a recession” and that “getting growth on track led by the private sector is still our most important priority.”

Geithner also said he sees a “good case” for Congress to pass legislation extending unemployment benefits.

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German investor confidence unexpectedly declined for the first time in three months in October amid concerns that the pace of the nascent recovery in Europe’s largest economy may ease.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months ahead, dropped to 56 from 57.7 in September. Economists had forecast an increase to 58.8, the median of 36 forecasts in a Bloomberg News survey showed.

Germany’s benchmark DAX index has surged around 57 percent since early March as the economy pulled out of the worst recession since World War II. While growth probably accelerated in the third quarter, according to the Bundesbank, the pace of the recovery may be tempered by rising unemployment, the fading of stimulus measures and the euro’s increase against the dollar.

“Enthusiasm is now gradually giving way to realism and the German economy is about to enter calmer waters,” said Carsten Brzeski, an economist at ING Groep in Brussels. Today’s reading is “no reason to fall back into depression.”

ZEW’s gauge of the current economic situation fell to minus 72.2 from minus 74 in September.

The euro pared its gains after the report and was up 0.1 percent to $1.4792 as of 10:43 a.m. in London, having earlier risen to $1.4804. Bonds were little changed, with the yield on the 10-year German bund at 3.17 percent.

‘Too Much’

The performance of the DAX has been matched across Europe, where the Dow Jones Euro Stoxx 50 has risen around 60 percent since early March. In the U.S., the S&P 500 has surged 59 percent.

The stock-market gains may reverse if the recovery isn’t sustained. Nouriel Roubini, the New York University professor who predicted the financial crisis, on Oct. 3 said that markets have “gone up too much, too soon, too fast.”

“Analysts have given the recovery an early round of applause, which the economy has to live up to now,” said Andreas Scheuerle, an economist at DekaBank in Frankfurt who correctly forecast the ZEW reading bad credit pay day loans. “The recovery is still a fragile little plant but overall, it’s doing well.”

Economic Support

Germany’s economy probably expanded around 0.75 percent in the third quarter from the second, when it grew 0.3 percent, Bundesbank President Axel Weber said Oct. 3. Still, the recovery “continues to rely on support from fiscal and monetary policies, and that shouldn’t be withdrawn too quickly,” Weber said.

The government is spending 85 billion euros ($125 billion) to revive growth, including a 2,500-euro payment for people who scrap an old car to buy a new one. The 5-billion-euro car- purchase fund ran dry last month. The Bundesbank projects unemployment will rise to 10.5 percent in 2010 from 8.2 percent in September.

The euro-area economy is also facing rising unemployment and a “bumpy” recovery, European Central Bank President Jean- Claude Trichet said on Oct. 9.

In addition to joblessness, the euro’s appreciation against the dollar may hinder the recovery by eroding export competitiveness. Aurelio Maccario, chief euro-area economist at UniCredit Group in Milan, estimates that the euro’s 2 percent appreciation in trade-weighted terms since the start of the third quarter is enough to shave 0.2 percentage points off euro- area growth through 2010.

“We’ve had quite a remarkable summer with catch-up processes that boosted economic activity,” said Laurent Bilke, an economist at Nomura in London. “Now we expect a normalization and a come-back toward the underlying trend, which is obviously lower. But it won’t be a relapse.”

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