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Update to Previous Article: Not Just State Budget Days of Reckoning--There's More!

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"Whitney is warning about a financial meltdown in state and local governments. “It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy,” she told Kroft. Asked why people aren’t paying attention, Whitney said, “‘Cause they don’t pay attention until they have to.”…”The lack of transparency with the state disclosure is the worst I have ever seen,” Whitney said."

That's just the states. Now for Europe (from the Guardian):

"Istanbul

Turkey's ancient metropolis is one of the few European cities with a "junk" credit rating. Its impeccable location, linking Asia and Europe, does not compensate for its serious weaknesses – including "low revenue flexibility and a lack of predictability regarding future reforms", according to a recent report from the Standard & Poor's credit-rating agency. The city also has high investment demands, leading to large deficits, and mounting debt, the agency said. It is trying to develop other sources of income, especially by developing its emerging financial industry, hoping that new glass towers will appear on its famous skyline of mosque domes and minarets. The prime minister, Recep Tayyip Erdogan, said this month that he planned to move the stock exchange across the Bosphorus to the Asian side of the city as part of plans to turn the Atasehir district into a financial centre.

Naples

The credit rating on this historic city in southern Italy is just one notch from junk level. If two thousand years ago the nearby town of Pompeii was a model of public administration, today's Naples has one of the lowest tax-collection rates in Europe – and the worry is that not enough is being done to change it.

In a recent report by Standard and Poor's, analysts expressed concern that 30% of the debts owed to the city in 2008 were of "doubtful collection" as some of the bills are too old to collect. With higher unemployment and a greater dependency on state and EU help than other Italian capitals, Naples faces increasing delays in paying for some of its running costs. The city could also face liabilities from some of its controlled public companies, S&P said. Overall, the town's liquidity position is "less than adequate", the ratings agency said. At least the city – with a population of almost a million – has a higher percentage of children than the national average and a lower percentage of over 65s, limiting the costs of its care for the elderly.

Florence

The Tuscan capital was warned about a possible credit downgrade last week, following its decision to stop payments on some derivatives contracts to banks including UBS and Bank of America. "The review will focus on the assessment of the potential, legal and financial risks facing the municipal administration and their implications for bondholders," Moody's said.

In 2006, the city signed contracts with a group of banks, setting a fixed interest rate on about €200m (£170m) of debt. The move was aimed at protecting the city coffers from any potential interest rate rises. Florence, however, has been caught out by two years of record low interest rates, which make their current agreement substantially more expensive than prevailing market rates. Florence, due to pay the banks €9m this month, now says that it would be illegal, under Italian law, to honour those obligations. Some of the creditor banks have already filed a claim at London's high court. S&P has an A+ rating on the city, one of its highest, based on the strength of its tourism industry.

Madrid

Spain's capital city, with a staggering €7bn of debt, was recently stopped from rolling over some of its obligations by the central government. Fighting the scepticism of international investors over Spain's sovereign debt, the finance minister, Elena Salgado, recently urged Alberto Ruiz-Gallardón, Madrid's mayor, to stop spending and start paying back.

Years of a booming property market pumped up the city coffers, leading officials to start multibillion-euro projects such as covering the city's orbital motorway. In 2007, at the peak of the market, the city hall also moved buildings in a change that cost locals millions. But the tax take has fallen sharply while the doors to international financial markets remain mostly shut. Investors are worried about the city's high debts, projected to reach as much as 155% of its revenues by 2012. Madrid's payments to some of its trade creditors, including cleaning service contractors, are severely delayed.

Barcelona

Catalonia's capital was placed on review for a possible downgrade by Moody's last week, amid plunging revenues and a tougher control on central state transfers. "In Spain, the municipalities' budgets essentially rely on sizeable transfers stemming from the national government, increasing the linkages between both governmental levels," Moody's said. Despite the recent tourism boom, Barcelona and Catalonians are struggling to recover from the effects of the property sector's collapse. The regional government recently had to issue bonds to its own citizens as it faces ostracism by international bond investors, given its high debts. However, with almost 1.6 million inhabitants, Barcelona is still one of Spain's richest cities, with a dynamic services sector that accounts for almost 86% of salaried employment, S&P said in its latest report."

Posted by Cute at 10:44 PM

Labels: financial (non-tax), politics