There are several types of loans available. To name just a few: unsecured loans, secured loans, car loans and debt consolidation loans.

A loan is a type of credit – and therefore it must be repaid. Repayments are usually made on a monthly basis, and will continue until the loan (plus any interest) has been repaid.

Unfortunately, at a time like now, many people are finding repayments particularly hard to make, whether it’s because they’ve suffered a drop in income or because their essential expenditure has risen.

Help with your payments

However, there is help available. This help could come in the form of budgeting advice – in other words, advice on how to manage your finances more successfully.

Budgeting is all about managing, controlling and understanding your finances. It involves keeping track of your income (the money you receive/earn) and your expenditure (the money you spend).

• Your total income should include everything your household receives/earns: salary, benefits, grants, etc.

• Your total expenditure should include your priority debts and essential costs of living: your mortgage/rent, your utility bills, secured loan payments, etc. It should not, however, include the cost of servicing your non-priority debts (unsecured loans, credit cards, etc.).

By subtracting your total expenditure from your total income, you will be left with your disposable income. This is the money you can use to service your non-priority debts each month and (if you have anything left) to save and spend on non-essential goods and services.

If your disposable income is not enough to cover the cost of servicing your loan/debts, then you should take immediate action. You may wish to start by contacting a professional debt adviser.

Many aspects of the property and mortgage market have been encouraging in recent months, with Barclays relaunching into 90 per cent mortgages and Nationwide improving its availability of high loan to value (LTV) loans.

The story over the summer was one of improving mortgage rates and more competition in the market that was providing more opportunity for borrowers to make savings, says David Hollingworth from mortgage brokers London & Country.

Landlords have been rubbing their hands with glee over rising rents and lenders have been getting on board. The volume of buy-to-let mortgages has jumped by 16 per cent in the last quarter, according to the latest figures from the Council of Mortgage Lenders (CML), totalling 34,500 in the three months to September and marking its highest level in three years.

Nottingham Building Society currently offers a deal at 4.19 per cent, albeit with a hefty £1,299 fee, fixed until February 2014 for borrowers with a 25 per cent deposit. In one recent move in the buy-to-let market, Woolwich improved the maximum LTV it would offer to wannabe landlords to 75 per cent.

However, Mr Hollingworth says the trend for ever cheaper mortgage rates is one that is on the turn, and points to rate changes this week from Nationwide, Woolwich/Barclays, Skipton and ING.

Although lenders have been seemingly more competitive, he reminds homeowners that the amount of lending in the market has not increased and could fall back a little depending on how the eurozone pans out.

“The continued problems in the eurozone have resulted in an increase in funding costs for lenders and that is feeding through to the mortgage products in the UK,” says Mr Hollingworth. “Some may have come down a little but these tend to be the exception to prove the rule.”

New CML statistics also show that the number of loans dipped in September. There were 48,200 loans taken out for house purchase in September (worth £7.1bn), down 2 per cent on August, although up 3 per cent compared with September 2010.

For remortgaging, there were 34,200 (worth £4.3bn), representing a 1 per cent decline the month before, but a 25 per cent uplift on a year ago.

For anyone wanting to remortgage now, the experts say that this could be the ideal time to switch to a fix. Fixed-rate mortgages offer protection against future rises in interest rates anyone looking for security should act now.

“Several lenders have increased their rates in recent days, often with little or no notice at all, and I expect this to continue,” says Andrew Montlake from mortgage brokers Coreco. “With this in mind it seems that we have now passed the lowest point in the current interest rate cycle and it does seem sensible to look at locking into a rate now.”

He argues that even if the situation begins to settle and more competition returns to the market, it is still highly unlikely that rates will come back down below the current levels.

“The potential upside of rates getting lower is a small one, while the downside of rates getting ever more expensive once more is much larger and there are many, who feel they have ridden their luck long enough,” says Mr Montlake.

Even with no indication that we will see an upward movement in base rate soon, fixed rates still look appealing. Top deals include the 2.89 per cent fix (until November 2014) from Yorkshire BS at 75 per cent LTV with a £495 fee and for first time buyers (FTBs).

Skipton is offering a 95 per cent LTV deal costing 5.99 per cent until January 2014 with a £195 fee, and HSBC has a fee-free 4.89 per cent loan at 90 per cent LTV, fixed until January 2017.

Helen Adams from FirstRung Now.com has concerns about the future for new homeowners. Deposit demands are still a huge hurdle but this week first timers may have had some good news in the shape of Clydesdale and Yorkshire offering attractively priced mortgages with as little as 5 per cent deposit, at a rate of 5.49 per cent fixed for three years, with a fee of just £599 (although this rises steeply to 6.12 per cent for 95 per cent LTV loans). However, Ms Adams predicts that things could soon turn sour.

“I foresee more hesitancy from lenders towards FTBs,” she says. “The trend for parental help will continue. My advice: keep your head down, tighten your belt and save. You never know what’s round the corner.”

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Despite repeated assurances that the public purse would not be left out of pocket, the Treasury today confirmed that Sir Richard Branson’s company would be buying the firm at a knockdown price.

The Government has injected an estimated £1.4billion into the Newcastle-based bank since it was taken into public
ownership in February 2008 following its near collapse.

Chancellor George Osborne said that the sale represented ‘the best deal for taxpayers’, even though ministers had been hoping that Northern Rock would eventually make a profit for the State.

It is second time lucky for Virgin Money, which failed in a bid to buy the bank following its collapse in 2007.

The proposed acquisition, which gives Virgin a presence in the mortgage market for the first time, includes 75 branches and 2,100 staff, one million customers, a £14billion mortgage book and retail deposits worth £16billion. Virgin Money, which was founded in 1995, currently has around three million customers.

At the time the bank was nationalised, the Labour Government predicted that taxpayers would profit from the deal by selling Northern Rock at a higher price than they had paid for it.

In 2009, then Prime Minister Gordon Brown said: ‘At the end of the day banks will be paying money to the British public, not the other way round.’

But under the Virgin deal, which is expected to go through on 1 January 2012 – subject to regulatory approval – the State will lose at least £400million and potentially as much as £700million.

It was in 2007 that rumours that the bank was struggling to fulfil its obligations triggered huge queues outside its branches from customers trying to withdraw desposits, and threatened a bank run.

After its State takeover, Northern Rock was split into two parts, a solvent ‘good bank’ and a ‘bad bank’ which took on the company’s riskier liabilities, totalling around £21billion which taxpayers may never get back.

Only the ‘good bank’ will be bought by Virgin Money, the financial services group which is part of Sir Richard Branson’s business empire.

The ‘bad bank’ is still owned by the Government, and is unlikely to be sold on – even though it has in fact been turning a reasonable profit.

The operational headquarters of the new combined business will be in Newcastle, while Virgin Money has pledged no further compulsory redundancies beyond those already announced for at least three years.

Virgin Money chief executive Jayne-Anne Gadhia said the deal would create a ‘major new competitor’ in the UK retail banking sector.

She added: ‘The two businesses complement each other well and together they will create a strong bank with over four million customers.’

The deal comes at a time of high volatility in the banking sector as businesses struggle to react to the continuing debt crisis in the eurozone.

Mr Osborne said there would be a ‘powerful new presence on the High Street’ which would offer ‘real choice and competition’.

He added: ‘It’s also good for British taxpayers – we are getting some of the money back that we put into the banking system under the last government.

‘And it’s also good for the north-east of England, because we are seeking to protect jobs there and make sure that the headquarters of Virgin Money will be in Newcastle.’

He added that the Treasury had taken independent advice on the deal and looked carefully at all the figures.
‘It was clear to us that this was the best deal for the British taxpayer, we were getting more money back than any other deal on the table,’ he said.

But Mark Field, the Tory MP for the Cities of London and Westminster, said: ‘I’m very concerned about whether we are getting really good value as taxpayers for this. There has to be a sense that Richard Branson has got the deal he was craving four years ago for a song today.’

He said the poor price ‘doesn’t augur well for the huge stakes we hold in RBS and the Lloyds Banking Group’, saying that if these were hived off by the state on similar terms the taxpayer would lose ‘tens of billions’.

Deputy Prime Minister Nick Clegg insisted the sale was ‘good value’ for taxpayers despite leaving them at least £400million out of pocket.

Speaking at the Science Museum in London, he said: ‘The strong recommendation made to us was that this was the best value for taxpayers.

‘Of course we have an overriding duty to provide good value for taxpayers, that’s what we have sought to do through that decision.’

In selling Northern Rock back into private hands the Treasury has had to weigh up the benefits of a quick sale, securing much needed cash for Government coffers, versus holding out for an upturn in the economy and a profit on its bailout cash.

Estimates of the value of the ‘good’ bank at Northern Rock were around £1.5billion when the lender was divided up 18 months ago. A sale at that level would have recouped the Government its bailout money plus a £100million profit.

However, the economic picture has deteriorated in that time, making a profit from any sale far less certain.

David Buik, markets commentator at stockbroker BGC Partners, said – the sale price is a little less that the £1.5billion that many expected 18 months ago.

However in the current climate a bird in the hand is worth two in the bush. It also gave the Chancellor an opportunity to tell the aggrieved public that he was creating a more competitive environment for banking.’

Shadow chancellor Ed Balls welcomed news of the sale, but suggested that the Government could have secured a better deal if it had waited longer before selling off the bank.

He told BBC Radio 5 Live: ‘It was definitely right to take Northern Rock into public ownership in 2008 to stop a catastrophe, and it is good news it is now going back to the private sector.

‘We will need to look at the details. Given the original money put in from the taxpayer was £1.4 billion, we are going to get less back, we’re going to have a loss here.

‘There is a question for the Chancellor as to why he had decided to sell this bank now rather than at a later stage – would that lead to a smaller loss or a even a profit?’

Mr Balls added that the money from the sale should be used to repay some of the national debt, rather than a tax cut
for high earners.

But Mark Hoban, Financial Secretary to the Treasury, insisted the deal came at the right time.

The judgment we reached was that it was best to sell Northern Rock now, that holding onto it for a few more years wasn’t going to realise an increase in value for the taxpayer.’

He said today’s sale ended uncertainty over the bank, ‘removing a huge shadow’ from staff.
Co-operative Party general secretary Michael Stephenson claimed it was ‘a bad deal for the future of Northern Rock’.

He said: ‘George Osborne has missed a real opportunity to return the Rock as a new mutual, which would have signalled the Government had learnt crucial lessons from the banking crisis.’

Virgin Money is backed by Wilbur Ross, a billionaire Wall Street investor, as well as an Abu Dhabi investment fund.
Virgin reportedly pipped buy-out vehicle NBNK, which is led by Lord Levene and former Rock chief executive Gary Hoffman.

The American private equity firm JC Flowers was also reported to be involved in the auction process. Virgin currently offers credit cards, savings and investment products and general insurance products but no mortgages.

It employs around 500 people in Norwich, Edinburgh and London. Sir Richard said UK banking needed some fresh ideas and an injection of new competition.

He added: ‘Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking.’

The Government will receive £747million on completion and a further £50million within six months. An additional £150million will be realised in the form of a financial instrument, while up to £80 million will be paid if the business is sold or floated in the next five years.

This could take the total proceeds for the Treasury to more than £1billion. Today’s disposal excludes Northern Rock Asset Management, which remains under Government ownership and holds a book of residential mortgages and unsecured loans.

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The Bank of England said the crisis in the eurozone and slowdown in the global economy have deprived UK lenders of access to vital funds.

Britain has a one in three chance of tumbling back into recession but the squeeze on household finances is finally coming to an end, the Bank added yesterday.

Governor Sir Mervyn King said the UK economy ‘could be broadly flat until around the middle of next year’ as the Bank slashed its forecasts for growth and inflation.

Weaker growth threatens to blow a hole in the Chancellor’s plans to slash the record deficit racked up by years of borrowing and spending under Labour.

It piles pressure on George Osborne to produce a comprehensive plan to boost economic growth in the Autumn Statement at the end of this month.

In its latest inflation report yesterday, the Bank said British lenders have found it increasingly hard to raise funds since the eurozone debt crisis escalated over the summer.

One key funding measure – the cost of insuring UK banks against default – rose ‘significantly’ in August and September to above the level seen ahead of the collapse of U.S. investment bank Lehman Brothers.

The report warned that if the ‘strains’ on the UK banking system persist, it will hit households and businesses ‘as banks pass on higher funding costs to borrowers and scale back lending’.

That would wreak havoc in the housing market and leave millions of small businesses already starved of the loans they need to prosper facing collapse.

The Bank slashed its economic growth forecasts to around 1 per cent for both 2011 and 2012 from the 1.5 per cent and 2.2 per cent predicted in August.

It pencilled in growth of around 2.5 per cent in 2013 but conceded that the ‘prospects for the UK economy have worsened’ over the summer.

Sir Mervyn said the crisis in the eurozone is the ‘single biggest risk’ to Britain and admitted the Bank has ‘no idea how this will be resolved’ in an attack on dithering politicians in the single currency bloc.

Official meetings come and go but the underlying global problems remain,’ said Sir Mervyn. ‘The journey to a more balanced world economy will be long and arduous.’

But he added that inflation will ‘fall back sharply next year’ towards the 2 per cent target from the current level of 5 per cent.
‘The extraordinary squeeze on real take-home pay that we have seen in the last three years should now begin to come to an end,’ he said.

It was the one silver lining in a bleak report.

Last night experts warned that the Bank’s report may be ‘optimistic’. Vicky Redwood, chief UK economist at Capital Economics, said: ‘Even the Bank’s downgraded growth forecasts still look optimistic to us. We expect zero growth next year.’

Ross Walker, chief UK economist at Royal Bank of Scotland, said: ‘The UK economy isn’t back in recession but it is on the edge. We are stalling.’

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Families are putting aside only about £19 a month in savings after having their budgets squeezed by soaring bills and stagnating wages.

Although typical monthly incomes have risen by £46 since January, energy bills, transport costs and food bills have soared, sending spending on non-essentials plummeting.

About 25 per cent of families are spending nothing on holidays and 52 per cent have no budget for children’s activities. About 30 per cent of families are helping relatives and friends with loans amounting to £442 a year.

‘To make ends meet, we have found that UK families are cutting out luxuries, economising on spending and reducing the amount they save,’ said Aviva spokesman Paul Goodwin.

The study analysed more than 8,000 people and its definition of ‘family’ included couples living together, with no children, and single parents.

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The European Financial Stability Facility (EFSF) was forced to pay slightly more to lenders to make the funds available because of the eurozone’s worsening debt crisis. But the cost to Ireland of borrowing this money will not be significantly more expensive, according to experts.

Donal O’Mahony, of Davy Stockbrokers, said the next tranche of bailout funds would not end up being more costly for the country.

“This is the first 10-year funding the EFSF has raised for Ireland at 3.5pc. This is in line with the price of raising bailout funds for Portugal in June,” he said. It raised money at 3.4pc then, just below the cost of the new funds.

The exchequer finances were plunged into crisis last week after the EFSF delayed raising the new money pledged as part of the bailout after lenders demanded a higher interest rate on foot of the latest Greek crisis.

Costs

Fund officials said Ireland would suffer if it had gone ahead then, as it would have had to pass on the additional costs. This would mean Ireland would be forced to pay a higher rate of interest on this money.

Yesterday, the Luxembourg-based fund said the deal attracted more than €3bn worth of orders and met with “solid demand”.

EFSF chief executive Klaus Regling said he was pleased the fund had again attracted investors from all over the world, with a satisfactory overall amount despite a “difficult market environment”.

But the market conditions have become more difficult for the EFSF, with one analyst saying this deal is “a complete level-changer, a completely new world” for the fund. “This will be the new reference point”, for any future 10-year deal, David Schnautz, of Commerzbank, said.

Bond issues

The EFSF, which was established in June 2010, previously raised €13bn from three bond issues this year but it is struggling as the debt crisis escalates.

Its existing loan notes have underperformed European benchmark debt.

“The EFSF is paying the price for being a relatively new issuer, and for the increasing concerns about a sustainable solution for the peripheral economies,” Ivan Comerma, of Banc Internacional d’Andorra, said.

There is still no clarity about what a new EFSF mechanism will look like, which is a concern for lenders who are being asked to provide more money.

“You’re being asked to invest in something that could change shape relatively radically,” Richard McGuire at Rabobank International in London said.

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This latest so-called “negative feedback loop” from the euro zone sovereign debt crisis is yet another potentially damaging blow to a global economy already experiencing shocks to both business sentiment and planning as well as bank funding strains.

An echo of the global reverberations caused by the Lehman Brothers bust through the winter of 2008/09, this transmission mechanism may have weakened slightly over the past two years due to more regulatory safeguards but still underlines the viral impact of banking shocks in an interconnected global system.

It also illustrates why many emerging economies have as much interest in the resolution of the euro crisis as leaders of the Group of Seven rich nations or even the Europeans themselves.

Regional exposure of European banks to their emerging neighborhood in central and eastern European is clear.

“The region could be in for a much bigger shock this time around because its economies are so tightly linked to the euro zone,” Piroska Nagy, adviser to the chief economist of the European Bank for Reconstruction and Development, told Reuters.

A lending crunch could hurt much further afield too.

“The possibility that European banks might reduce their exposure to Asia as part of their recapitalization effort is something that has to be taken seriously,” Deutsche Bank’s Michael Spencer told clients, warning of risks to the likes of Vietnam, South Korea, Indonesia and India.

TWO TRILLION CLAWBACK

In a report last week, Morgan Stanley reckoned that European banks may be forced to shrink their balance sheets by up to 2 trillion euros by the end of 2012, resulting in a drop in overall lending to emerging markets of over 500 billion euros.

“Investors have not properly calibrated the intensity of the negative feedback loop between developed markets and emerging markets via the ever important funding channel,” said the bank.

This is one of the reasons why the much-debated “decoupling” of faster-growing, more fiscally sound emerging economies away from the slow-grinding, debt-burdened rich world struggles to play out in the short term at least.

Emerging equities – MSCIEF,for a variety of reasons to do with sagging Western demand and early-year monetary tightening — have underperformed developed stock markets – MIWD00000PUS this year by seven percentage points.

The breakneck globalization of the past two decades that benefited so many developing economies was at least in part due to the opening of credit pipes from the giant global banks.

If those global banks, the lion’s share of whom were European, are now under the cosh from domestic politicians and regulators to both strengthen their capital ratios and focus on their home economies and businesses, that could spell retreat.

“We are not doing business which is not to the benefit of Germany or Poland,” the Commerzbank’s Chief Financial Officer Eric Strutz told analysts on Friday. “We have to focus on supporting the German economy.”

CRUNCHING THE NUMBERS

Given the sort of minimum capital ratios now being required of European banks — the European Banking Authority demands a 9 percent minimum by the middle of 2012 — Morgan Stanley expects cutbacks in assets or loans to be inevitable.

“The core bank function of lending to corporates and consumers is uneconomic at the current cost of wholesale funding, which makes deleveraging absolutely necessary,” the report said, adding as much as 1 trillion of the 1.7 trillion euros in bank debt maturing through 2014 would be allowed to roll off or not be refinanced.

Of $35 trillion of Western European bank assets outstanding, some $3.8 trillion, or 2.7 trillion euros, are in emerging markets — a rise of well over 300 percent in a decade and surpassing the mid-2008 peaks hit before the credit crisis.

These statistics from the Bank for International Settlements also show European bank lending to emerging markets at ten times their U.S. peers and now equal to the amount they lend to the United States as a whole. A decade ago European bank lending to the United States was twice that to emerging markets.

If there were to be a repeat of the 20 percent drop in European bank lending to emerging markets that took place in the 15 months after the credit crisis snowballed in early 2008, Morgan Stanley said that could see a lending shock of more than 500 billion euros.

That compares to total external financing needs of emerging market on a 12-month rolling basis of some 1.5 trillion euros.

Yet, “emerging markets” is a large and diverse group of countries and some are more vulnerable than others.

Even though 12-month external financing needs in emerging Asia are at almost 500 billion euros are close to the combined 549 billion euro needed in central and eastern Europe, Middle East and Africa (CEEMEA), the former markets are cushioned by national surpluses and hefty hard cash reserves.

The CEEMEA region, however, is right the firing line especially big deficit countries such as Turkey and Poland.

With average loan-to-deposit ratios at banks across the region in excess 100 percent and foreign bank ownership high, there is a vulnerability to wholesale funding stress as well as parent bank sales of so-called “non-core” assets.

This is a particular risk for eastern Europe and Africa — where European banks account for 91 percent and 85 percent of foreign lending respectively. And, as the credit crisis has proven, domestic banking instability quickly becomes sovereign.

There are some who say the anxiety may be overstated.

Acknowledging the threat of shrinking credit lines, ING’s global emerging markets strategist David Spegal points out that domestic banking assets in emerging markets were stronger than first seems.

Even excluding a relatively closed Chinese sector, European bank holdings of emerging bank assets when domestic bank assets are taken into account is just 19 percent.

Spegal also said a series of new regulations and monitoring regimes since 2008 would likely limit the risk of widespread or sudden exits by parent banks from local emerging markets.

Yet, many policymakers are already braced for fallout.

“The fear is that it would be easier for Western banks just to cut their exposure in eastern Europe,” said the EBRD’s Nagy. “The point is to make sure there is genuine recapitalization with EBA supervision required and not massive deleveraging.”

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The district schemes will heat about 280 homes and are expected to save more than 68,000 tonnes of carbon dioxide over 25 years.

It is part of a pilot project open to councils, housing associations, small businesses and energy service companies.
All nine of the successful projects are for small community biomass heating systems.

Energy minister Fergus Ewing said: “This Government is committed to supporting the development of low carbon district heating networks in Scotland, helping homes and businesses stay warm with minimum impact to the environment, creating jobs while bringing heating bills down.

“We have a target of 11% of heat demand coming from renewables by 2020 and district heating schemes will help Scotland achieve that target.

“But the high start-up costs involved can mean schemes fail to get off the ground because commercial finance isn’t available. By offering these loans, we are helping communities to help themselves, developing affordable, green and locally-produced heat.”

The loans were capped at £400,000 for capital costs and will be paid back over 10 years at 3.5% interest. The projects cover councils from Shetland to South Lanarkshire and include a £100,000 loan for wood-fuel heating at Hill of Banchory business park in Aberdeenshire.

Others include £200,000 for infrastructure costs at Mull and Iona Progressive Care Centre in Argyll and Bute and £280,000 for the West Highland Housing Association biomass project, which will provide heating for a school and 60 properties.

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Finance Minister Hazem El Beblawi said on Oct. 26 Egypt needs an “urgent liquidity injection” to help finance the budget deficit. Relying on domestic lenders for funding reduces available resources for private companies, he said.

Borrowing from abroad won’t hurt the economy, Deputy Central Bank Governor Hisham Ramez told Al Shorouk daily ahead of last week’s visit by a delegation from the International Monetary Fund to discuss assistance to Egypt.

The efforts of the interim government are set to collide with the start today of a drive for more public scrutiny over foreign borrowing. Under the slogan “Open Your Eyes, The Debt Comes Out of Your Pocket!” the campaign includes political activists and economists who helped organize this year’s revolt that ousted President Hosni Mubarak. They opposed a $3 billion IMF loan that Egypt negotiated before turning it down in June under popular pressure.

“Borrowing from abroad is an easy solution for the government, which is just transferring the problem to future generations,” Wael Khalil, an activist and a campaign organizer, said in a telephone interview from Cairo yesterday.

“Officials feel the public pressure and this is a change in its own right. The country is not just theirs any more to take whatever decision they want. They need to persuade us.”

More Expensive Debt

Delays in aid from lenders such as the IMF may force the government, whose credit rating was last week lowered for a third time this year by Moody’s Investors Service, to pay more to borrow locally, said Mona Mansour, co-head of research at Cairo-based investment bank CI Capital.

The yield on 1-year treasury bills soared 342 basis points, or 3.42 percentage point, this year to 13.85 percent at the most recent auction, near the highest level since November 2008, according to central bank data on Bloomberg.

By contrast, the yield on Egypt’s 5.75 percent dollar bond due in April 2020 is 5.73 percent, according to data compiled by Bloomberg. The extra yield investors demand to hold Egyptian debt instead of U.S.

Treasuries jumped 157 basis points this year to 378, according to JPMorgan Chase & Co.’s data. Middle East spreads for the period rose 53 basis points on average to 403, the data show.

Domestic, Not Foreign

Activists including Khalil say the government should exhaust domestic solutions before resorting to foreign borrowing. They blame the government for reversing a decision to impose a capital-gains tax on stocks dividends after pressure from businessmen such as billionaire Naguib Sawiris.

At the heart of their campaign are calls for raising revenue through measures like a real-estate tax on the rich and removing energy subsidies for industries. The government says imposing taxes won’t solve short-term financing problems.

While it’s yet not clear how much support the campaign would garner, it taps into a vein of resentment among Egyptians toward debt that can be traced to a 19th century borrowing binge by autocratic rulers such as Khedive Ismail.

The experience, still taught at local schools, cost the country its stake in the Suez Canal before the 1882 British invasion.

The anti-debt campaign also aims to convince foreign creditors to forgive loans taken during the Mubarak rule, said Samer Atallah, assistant professor of economics at the American University in Cairo.

‘Enough Borrowing’

“We have to send a clear message: all this borrowing from abroad is being repaid from the pockets of every Egyptian citizen,” he said in a telephone interview yesterday. “Enough borrowing; it doesn’t solve the economic problems. It’s like treating a cancer patient with aspirin.”

The campaign will kick off with a public event in Cairo and London, according to an e-mailed statement. It has set up a Facebook page, attracting more than 400 members before its official start.

El Beblawi has declined to say whether the government would seek another IMF loan. He wasn’t immediately available to comment when contacted by Bloomberg News yesterday in Cairo.

The standoff shows the need for a swift political transition from the military, which took interim power from Mubarak in February, to an elected government that can form a clear economic policy, said Mansour of CI Capital. Under the current timeline, the generals may stay in power until 2013.

‘Nothing Is Clear’

“This isn’t a long-term government, so it’s unable to take long-term decisions,” she said. “Whether to go to the IMF or not, whether to impose a real-estate tax this year or next. Nothing is clear or transparent. The rate of change in decisions is really quick.”

To be sure, analysts such as Raza Agha, a London-based economist at the Royal Bank of Scotland say the government is likely to push for an IMF loan in the absence of aid from Arab countries. Even an elected government would find it difficult not to seek foreign assistance, said Liz Martins, Dubai-based senior economist at HSBC Holdings Plc.

“There’s not much option, and any pragmatic government is likely to accept foreign aid,” she said in an e-mailed response to questions yesterday. “The kind of revenue growth that would be needed is unrealistic in the current economic climate, foreigners are likely to remain very wary toward the treasury- bill market, and local banks are already stretched.”

The economy grew 1.8 percent in the fiscal year that ended in June, compared with 5.1 percent in the previous 12 months, according to government figures. Foreign investors sold 36 billion pounds ($6 billion) of their treasury-bill holdings in the first seven months this year, according to the most recent central bank data.

Finance Ministry Plans

The Finance Ministry plans to raise 24.5 billion pounds at auctions of treasury bills and bonds this week, according to central bank data on Bloomberg.

3The ministry will likely miss its target for a budget deficit of 8.6 percent of economic output this fiscal year, according to estimates from analysts at Moody’s and the Royal Bank of Scotland.

Still, opposition to foreign loans, in particular from international institutions such as the IMF, may also come from the Muslim Brotherhood, the country’s biggest Islamist group.

“I don’t know why they’re talking about loans again now,” spokesman Mahmoud Ghozlan said in a telephone interview yesterday, referring to the government.

It’s a bad thing to be in debt. With debt, one loses part of one’s freedom and will. If they didn’t intervene in political issues, they still might intervene in economic issues as creditors.

Former Egyptian Finance Minister Samir Radwan, who was forced to turn down the $3 billion IMF loan, said the assistance came with no strings attached. He was replaced in a cabinet reshuffle in July.

For activists such as Khalil, this year’s revolt ensures that the public scrutiny would go beyond one particular loan.

“From now on, we will all look at the budget,” he said. “We will all see how much is going toward debt servicing and how much is going to education and health care. We will see where is our money going.”

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The Germans are celebrating the discovery of a £48?billion ‘bonus’ lurking undetected in one of its bailed-out banks.
The money, which would be enough to build nearly 10,000 British primary schools, had been lost in the accounts of FMS Wertmanagement after officials were left so confused by a set of complex financial instruments governing its financial obligations that they overstated the bank’s debts.

News of the windfall came as enthusiasm about the outcome of last week’s European bailout summit was starting to fade, with analysts expressing growing doubt that the measures to write off part of Greece’s debts and bolster the reserves of European banks would provide a long-term solution to the continent-wide financial crisis.

Concerns are increasing about the strength of the Italian economy. On Friday the cost to the country of borrowing on the markets reached its highest level since the euro was created in 1999, rising to 6.06 per cent for a ten-year loan.

An interest rate higher than six per cent is considered a sign that a state is heading for default on its debts.
The scale of the eurozone crisis and the resulting shift in economic power to the Far East was starkly illustrated yesterday when the man sent by Brussels to beg for money from the Chinese admitted that Europe could soon be issuing bonds – contracts to pay out interest on borrowed money – in China’s currency, the yuan.

Klaus Regling, head of the European Financial Stability Facility (EFSF), who has flown to Beijing looking for financial support for the euro rescue plan, said: ‘We have so far only issued euro bonds but we are authorised to use any currency we want if it seems efficient.’

While conceding that it would need approval from the Chinese government and could not be implemented immediately, he added: ‘Over the years it might happen’.

Ruth Lea, economic adviser at City firm Arbuthnot Banking Group, described Mr Regling’s comments as an ‘extraordinary’ admission of a power shift.

She said: ‘Going cap in hand to China like this – what does it tell you about the comparative economic strength of Europe and China? It’s an admission by Europe that they can’t deal with this themselves.’

The £48?billion (€55?billion) discovery in the German vaults is a substantial sum even for such an economic powerhouse, amounting to five per cent of all government spending. It will cut the country’s national debt from 83 per cent of GDP to 81 per cent.

FMS Wertmanagement is often referred to as one of Germany’s ‘bad banks’, housing toxic assets which the government was forced to take on to its books during the banking crisis.

The Brussels summit agreed three-pronged response to the euro crisis: boosting the main bail-out fund, the EFSF, from £220?billion to more than £880?billion – partly by begging money from the Chinese; swelling banks’ capital reserves by £90?billion; and forcing lenders to accept a 50 per cent write-off on Greece.

Plans to reform Italy’s public finances and cut its deficit were also presented to the summit.
Stock markets rose strongly on Thursday in the immediate aftermath of the deal but eased back after analysts picked apart the details of the deal.

The reaction of the markets when they open again tomorrow will be watched closely for further signs of deteriorating confidence.

Source