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Hypo Real Estate expects heavy charges

German property lender Hypo Real Estate expects to suffer heavy charges in 2009 after flirting with bankruptcy this year, the bank said in a statement on Monday.

Hypo Real Estate expects heavy charges
A Hypo Real Estate building reflected in a puddle. Photo: DPA

Hypo Real Estate (HRE), which suffered a net loss of €3.052 billion ($3.8 billion) in the third quarter, expects “an extremely negative consolidated result for the whole of 2008,” a statement quoted financial director Markus Fell as saying. The statement confirmed third-quarter results initially announced on November 12. It preceded a separate statement saying that eight members of the bank’s supervisory board had resigned.

Fell said that “the necessary restructuring of the Hypo Real Estate Group and the costs of the agreed or planned liquidity lines and capital assistance will continue to pose a major strain on consolidated result in 2009.”

HRE was saved from bankruptcy by a public-private rescue package worth €50 billion and suffered most of its losses through its Depfa subsidiary, which had extensive dealings with bankrupt US investment bank Lehman Brothers. It has also obtained a €15 billion state loan guarantee under a government rescue plan for the banking sector.

In the third quarter, HRE was forced to devalue Depfa assets by €2.48 billion “The tremendous force which hit the Hypo Real Estate Group as a result of the unparalleled financial crisis can clearly be seen in the figures for the period ending 30 September,” Fell said.

HRE directors are working under the supervision of the German government and central bank to reposition the group, aiming to establish a group which is “more strongly integrated and less complex,” the statement said. “For the time being, the Hypo Real Estate Group will not be able to adequately refinance the company via the money and capital markets alone, even if this is of course our objective in the medium term,” chief executive Axel Wieandt was quoted as saying.

In a separate statement, the bank announced that eight members of its supervisory board, including its president, had resigned. Former German central bank governor Hans Tietmeyer also submitted a resignation. The former head of HRE, Georg Funke, had already been forced out owing to the bank’s desperate situation.

However, three board members who represent US investment fund JC Flowers, which owns around 24 percent of HRE, are to stay on.

MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

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