Finance topics

+%3Cp%3ESlovenia+had+its+credit+rating+lowered+one+step+to+A1+by+Moody%92s+Investors+Service+on+the+potential+need+for+the+government+to+support+its+banking+system+amid+Europe%92s+debt+crisis.+%3C%2Fp%3E+%3Cp%3EThe+euro-area+nation%92s+banking+industry+has+assets+that+are+about+136+percent+of+gross+domestic+product%2C+which+is+%93relatively+large+when+compared+to+other+systems+in+eastern+Europe%2C%94+Moody%92s+said+yesterday+in+a+statement.+It+assigned+a+negative+outlook+to+Slovenia%92s+credit+grade%2C+the+fifth-highest.+Standard+%26amp%3B+Poor%92s+ranks+the+nation+AA-%2C+one+level+higher.+%3C%2Fp%3E+%3Cp%3ESlovenia+was+downgraded+at+Moody%92s+for+the+second+time+in+three+months+as+the+euro+area+struggles+to+resolve+its+sovereign-debt+crisis%2C+prompting+stepped-up+ratings+scrutiny+for+the+region.+S%26amp%3BP+and+Fitch+ratings+said+this+month+they+may+cut+the+scores+of+15+euro-region+members+after+assessing+the+outcome+a+European+Union+summit+on+a+tighter+fiscal+pact.+%3C%2Fp%3E+%3Cp%3E%93Asset+quality+pressure+and+the+euro-area+debt+and+funding+crisis+have+further+exposed+significant+vulnerabilities+in+the+solvency+and+short-term+external+funding+and+overall+business+model+of+the+largest+institutions+in+Slovenia%92s+financial+sector%2C%94+Moody%92s+said.+%3C%2Fp%3E+%3Cp%3EThe+government+is+the+majority+owner+of+the+country%92s+two+biggest+lenders%2C+Nova+Ljubljanska+Banka+d.d.+and+%3Ca+topic_url%3D%22http%3A%2F%2Ftopics.bloomberg.com%2Fnova-kreditna-banka-maribor-dd%2F%22+href%3D%22http%3A%2F%2Fwww.bloomberg.com%2Fapps%2Fquote%3Fticker%3DKBMR%3ASV%22+density%3D%22sparse%22+title%3D%22Get+Quote%22+ticker%3D%22KBMR%3ASV%22+class%3D%22web_ticker%22%3ENova+Kreditna+Banka+Maribor+d.d.+%28KBMR%29+%3C%2Fp%3E+September+Downgrades++%3Cp%3ESlovenia%92s+rating+was+lowered+one+level+by+S%26amp%3BP%2C+Moody%92s+and+Fitch+Ratings+in+September%2C+citing+fiscal+concerns%2C+a+weak+domestic+banking+industry+and+a+poor+outlook+for+the+export-+driven+economy.+The+nation+is+rated+AA-+by+Fitch.+%3C%2Fp%3E+%3Cp%3EThe+former+Yugoslav+republic+needs+to+repay+1.17+billion+euros+%28%241.5+billion%29+in+bonds+next+year%2C+according+to+data+compiled+by+Bloomberg.+%3C%2Fp%3E+%3Cp%3E%93The+further+weakening+economic+growth+outlook+also+complicates+the+government%92s+ability+to+achieve+its+medium-term+fiscal+consolidation+plans%2C%94+Moody%92s+said.+%93The+highly+volatile+funding+conditions+on+the+euro-area+bond+markets+represent+additional+risks+even+for+a+small+issuer+like+Slovenia+in+the+event+that+the+financing+needs+exceed+the+original+estimates.%94+%3C%2Fp%3E+%3Cp%3ESlovenia%92s+borrowing+costs+surged+after+voters+rejected+pension+changes+in+June+and+after+the+European+debt+turmoil+engulfed+Italy%2C+its+neighbor+to+the+west+and+the+third-biggest+trading+partner+after+Germany+and+Austria.+%3C%2Fp%3E+Rising+Yields++%3Cp%3EYields+on+Slovenia%92s+10-year+bonds+reached+a+peak+of+7.77+percent+on+Nov.+11%2C+a+level+that+had+prompted+other+nations+like+Greece%2C+Ireland+and+Portugal+to+seek+assistance+from+the+EU+and+the+International+Monetary+Fund.+%3C%2Fp%3E+%3Cp%3EThe+yield+on+notes+maturing+in+January+2021+has+dropped+since+and+was+at+6.66+percent+today+at+1%3A54+p.m.+in+Ljubljana+from+6.746+percent+yesterday%2C+according+to+data+compiled+by+Bloomberg.+%3C%2Fp%3E+%3Cp%3E%93It+was+no+surprise%2C+but+of+course+there+is+a+constant+source+of+bad+news+flow%2C%94+said+Lutz+Roehmeyer%2C+a+fund+manager+at+Landesbank+Berlin+Invest+in+Berlin+who+oversees+11.5+billion+euros+and+holds+Slovenian+bonds.+%93It+weighs+on+the+sentiment+of+investors+and+funds+with+rating+constraints+get+into+selling+pressure+depending+on+their+specific+rating+limits.%94+%3C%2Fp%3E+%3Cp%3ENova+Ljubljanska+received+a+250+million-euro%2C+three-year+loan+from+the+European+Central+Bank+as+lenders+in+Europe+sought+a+record+489+billion+euros+in+financing%2C+the+Ljubljana-based+bank+said+yesterday.+The+company+wants+to+raise+400+million+euros+by+mid-2012+to+improve+its+capital+ratio+to+above+9+percent.+%3C%2Fp%3E+Bank+Ratings++%3Cp%3EMoody%92s+also+cut+the+debt+and+deposit+ratings+of+three+Slovenian+banks%2C+Nova+Ljubljanska%2C+Nova+Kreditna+and+%3Ca+topic_url%3D%22http%3A%2F%2Ftopics.bloomberg.com%2Fabanka-vipa-dd%2F%22+href%3D%22http%3A%2F%2Fwww.bloomberg.com%2Fapps%2Fquote%3Fticker%3DABKN%3ASV%22+density%3D%22sparse%22+title%3D%22Get+Quote%22+ticker%3D%22ABKN%3ASV%22+class%3D%22web_ticker%22%3EAbanka+Vipa+d.d.+%28ABKN%29%2C+it+said+in+the+statement+today.+The+rating+company+also+downgraded+the+issuer+and+senior+unsecured+ratings+of+SID+Banka%2C+a+government-owned+development+bank.+%3C%2Fp%3E+%3Cp%3ENLB+and+its+smaller+competitor%2C+Nova+Kreditna%2C+said+they+will+probably+report+losses+for+this+year+on+mounting+bad+loans+from+the+sinking+construction+industry+and+as+more+and+more+companies+file+for+bankruptcy+or+receivership.+%3C%2Fp%3E+%3Cp%3ESlovenia+%93believes+that+the+question+of+a+capital+boost+only+relates+to+the+country%92s+biggest+bank+NLB%2C%94+as+Nova+Kreditna+passed+the+recent+test+by+the+European+Banking+Authority%2C+the+Finance+Ministry+in+Ljubljana+said+today.+%3C%2Fp%3E+%3Cp%3E%93With+the+capital+increase+at+NLB%2C+private+investors+are+considered+the+first+option%2C+or+the+participation+of+the+government+that+wouldn%92t+increase+the+country%92s+debt%2C%94+the+ministry+said.+%3C%2Fp%3E+%3Cp%3EBad-loan+provisions+in+Slovenia+surged+40+percent+in+the+first+10+months+from+a+year+ago+to+706+million+euros%2C+the+central+bank+said+in+a+Dec.+7+report.+%3C%2Fp%3E+Savings+Measures++%3Cp%3ESlovenians+on+Dec.+4+elected+the+Positive+Slovenia+party+of+Ljubljana+Mayor+Zoran+Jankovic+in+snap+elections+after+the+previous+government+collapsed+in+September.+%3C%2Fp%3E+%3Cp%3ELawmakers+adopted+savings+measures+of+150+million+euros+by+freezing+by+freezing+public+employees%92+pay%2C+pensions+and+benefit+payments+to+allay+investor+concern+over+its+debt.+%3C%2Fp%3E+%3Cp%3EAll+86+lawmakers+present+voted+for+the+legislation+that+will+come+into+force+from+Jan.+1+and+will+last+until+June+next+year%2C+according+to+a+live+broadcast+by+public+broadcaster+TV+Slovenija.+%3C%2Fp%3E+%3Cp%3E%93I+count+on+Europe+to+take+into+account+these+efforts+and+bond+yields+could+go+lower+if+we+adopt+these+measures%2C%94+Jankovic%2C+who+is+likely+to+form+the+next+government%2C+said+before+the+vote.+%3C%2Fp%3E+%3Cp%3ESlovenia%2C+the+first+former+communist+country+to+adopt+the+euro%2C+is+struggling+with+the+euro+region%92s+sovereign+debt+crisis%2C+which+erodes+demand+for+its+exports.+It+risks+sliding+back+into+recession%2C+while+public+debt+may+widen+to+more+than+50+percent+next+year.+%3C%2Fp%3E+%3Cp%3EThe+economy+shrank+0.5+percent+in+the+third+quarter+from+a+year+before%2C+following+growth+of+0.8+percent+in+the+previous+three-month+period+and+public+debt+has+more+than+doubled+in+four+years.+%3C%2Fp%3E++%3Cp%3E%3Ca+href%3D%27http%3A%2F%2Fwww.bloomberg.com%2Fnews%2F2011-12-22%2Fslovenia-ratings-cut-by-moody-s-on-concern-nation-s-banks-may-need-funding.html%27+rel%3D%27nofollow%27%3ESource%3C%2Fa%3E%3C%2Fp%3E+

A Yemeni military official says al-Qaida-linked militants have attacked a military barracks in an embattled southern town, leaving two soldiers and 11 militants dead.

The official said Saturday that another 36 soldiers were injured in the base in Zinjibar, the capital of Abyan province.

He says that the fighting began Friday night and continued into the morning. He spoke on condition of anonymity because he was not authorized to speak to the media payday loans.

Militants and the army have fought for control of Zinjibar since May. A 10-month-old uprising against authoritarian President Ali Abdullah Saleh has caused a breakdown of authority throughout the country.

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A steady decline in the number of people applying for weekly unemployment benefits is the latest signal that the economy has strengthened and businesses may be poised to step up hiring.

Applications fell last week fell to a seasonally adjusted 381,000, the Labor Department said Thursday. That’s the lowest level since late February.

And a four-week average for applications, which smooths week-to-week fluctuations, fell for the ninth time in 11 weeks to an eight-month low.

The downward trend in unemployment benefit applications bolsters the view that the economy has improved from its spring slump, when many feared another recession was likely. Consumer confidence is up, retailers reported a strong start to the holiday shopping season and the unemployment rate fell last month to its lowest point in two and a half years.

“There have been numerous indications that the labor market is healing and today’s jobless claims report only reinforces that view,” Dan Greenhaus, chief global strategist at BTIG, a trading firm.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the drop in unemployment benefit claims reflects relief among businesses that consumer demand didn’t plunge this fall as some had feared.

“We expect claims to head slowly downwards for the foreseeable future, and in due course payroll growth will accelerate,” Shepherdson said in a note to clients.

Applications that drop below 375,000 _ consistently _ tend to correlate with a steady decline in the unemployment rate.

The unemployment rate fell to 8.6 percent in November, the government said last week, down from 9 percent the previous month. Still, the rate dropped last month in part because more people gave up looking for work. Once the unemployed stop looking for jobs and drop out of the work force, they are no longer counted as unemployed.

Employers added a net total of 120,000 jobs last month. The economy has generated 100,000 or more jobs five months in a row _ the first time that has happened since April 2006 no faxing payday loans.

Many economists expect growth to accelerate in the final three months of the year, to about a 3 percent annual rate. That would be an improvement from 2 percent growth in the July-September period.

But the U.S. economy is vulnerable to shocks from overseas. European leaders are struggling to contain a two-year old debt crisis and the 17 nations that use the euro may already be in recession, economists say.

That could slow U.S. exports and cut into overseas profits earned by U.S. multinationals. Even worse, the crisis could force European banks to cut back on lending and U.S. banks to follow suit, leading to a credit crunch. Most economists are penciling in slower U.S. growth next year, partly because of Europe’s slowdown.

Fewer people are receiving unemployment benefits, and the number of people on extended benefits also fell. Some of that decline is because those out of work found jobs. But economists think most have likely used up all their benefits.

The number of people receiving benefits fell by 174,000 to 3.58 million. But that doesn’t include several million people receiving aid under extended programs put in place during the recession. All told, 6.6 million people received unemployment aid in the week ending Nov. 19, the latest data available. That’s about 400,000 fewer than the previous week.

Congress is debating whether to continue the extended benefit program, which expires at the end of this year. The program provides up to 99 weeks of benefits in states with high unemployment rates. If the program isn’t continued, the Labor Department estimates that about 1.8 million people could lose benefits by early February.

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ST. LOUIS COUNTY

Australia’s central bank cut its benchmark interest rate by a quarter percentage point on Tuesday, the second such move in as many months as concern mounts over the fragile global economy.

The Reserve Bank of Australia said its decision to lower the rate to 4.25 percent comes amid uncertainty over the European debt crisis, and concern that global economic conditions could worsen.

“Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe,” Reserve Bank Governor Glenn Stevens said in a statement. “This, together with precautionary behavior by firms and households, means that the likelihood of a further material slowing in global growth has increased.”

Economists were split on what the bank would do, after it cut the cash rate by a quarter percentage point in November. Tuesday’s decision marked the first time the bank has cut rates in consecutive months since Dec. 2008, the height of the global financial crisis.

The move will provide a savings of an extra 50 Australian dollars ($51) a month on a AU$300,000 mortgage, Treasurer Wayne Swan said.

“Christmas is a time when family budgets are stretched, so I’m certain it will be welcome,” Swan told reporters.

The treasurer said the country’s economy remained strong, but said there are “serious risks” arising from Europe’s debt woes. European Union leaders will hold a summit later this week to discuss a plan to resolve the crisis.

“There is a lot riding on what is happening in Europe as we go through the rest of this week,” Swan said. “All of us hope and pray that the Europeans get their act together.”

Australia’s economy remained strong throughout the global financial crisis thanks to a mining boom largely fueled by China’s demand for iron ore, coal and natural gas.

Craig James, chief economist with the Commonwealth Bank of Australia, said the Reserve Bank will probably cut the rate by another quarter percentage point when it meets again in February. Should the European crisis worsen dramatically, he said, the bank may issue an even steeper cut of half a percentage point.

“In the global financial crisis, they were quite aggressive with cutting interest rates,” James said. “This time around, they’re not taking any chances.”

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Shares of Abercrombie & Fitch Co. tumbled on Wednesday after the retailer of preppy teen apparel reported third-quarter results that missed expectations due to higher costs and a slowdown in Europe.

After losing market share to cheaper competitors during the recession, Abercrombie & Fitch has focused on expanding internationally with flashy flagship stores in places like Milan and Paris and on closing underperforming stores in the U.S.

But it is facing challenges on two fronts, higher costs and the increasingly shaky economy in Europe. In a call with analysts, CEO Mike Jefferies said the company stood by its European expansion plans.

“Our European business, while slowing somewhat during the quarter, is very robust and healthy by any objective measure,” he said. “If anyone is inclined to believe that a softening of our business in Europe this quarter in the face of severe macroeconomic headwinds is a major issue for our model, frankly, I think they are missing the forest for the trees.”

Its shares dropped more than 14 percent in late morning trading.

Abercrombie reiterated that it plans to open 40 international mall-based Hollister stores during the year. About 25 have opened as of Oct. 29. It plans to open five international flagship Abercrombie & Fitch stores in 2011. It said it would open Abercrombie & Fitch flagship stores in Amsterdam and Munich in 2012, in addition to previously announced flagships opening in Hamburg and Hong Kong.

Meanwhile, high costs pressured results. The cost of goods sold was up 34 percent during the quarter. But the company did not raise prices, in order to drive sales in its U.S. stores.

“We chose to keep our average unit retail prices down in these stores, which, combined with double-digit average unit cost increases, puts significant pressure on our gross margins,” Jeffries said.

He said the company likely would likely raise prices in the future, and not doing so “left dollars on the table,” in the third quarter.

The New Albany, Ohio-based retailer’s net income rose to $50.9 million, or 57 cents per share, for the three months ended Oct. 30. That compares with $50 million, or 56 cents per share, a year ago. Analysts polled by FactSet expected earnings of 72 cents per share.

Revenue rose nearly 22 percent to $1.08 billion from $886 million. Analysts expected revenue of $1.07 billion.

U.S. revenue rose 14 percent to $920.2 million. International sales rose 56 percent to $255.7 million.

Revenue in stores open at least one year, a key gauge of a retailer’s performance, rose 7 percent, including a 4 percent gain at Abercrombie & Fitch, a 6 percent gain at Abercrombie kids stores and an 8 percent gain at surf-themed Hollister Co.

Shares fell $8.01, or 14.4 percent, to $47.69 in late morning trading after falling as low as $46.69 earlier in the session. The stock had been down 3 percent since the beginning of the year.

Stock fell in the broader market as oil topped $100 a barrel for the first time since July and concern about Europe’s debt crisis lingered. The Dow fell 121 points in morning trading.

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Male CEOs with faces that are wider relative to facial height achieve better financial performance for their firms, according to research from the University of Wisconsin-Milwaukee.

Elaine M. Wong, assistant professor in the school’s department of communication, analyzed the features of 55 U.S. CEOs and found that in general, the wider the face, the higher the company’s return on assets.

She did not find the same correlation with women. She hypothesizes that wider faces – which her research also links to greater aggression – may have been an evolutionary necessity for men, but not women.

The successful group of current and former CEOs included Herb Kelleher of Southwest Airlines, who turned a pioneering business model into a high-flying success; Kenneth Wolfe, who expanded Hershey chocolate into new markets, dramatically increasing revenues and William Stavropoulous, who made Dow Chemical Company an industry leader.

All have faces that are wider rather than narrower, according to Wong’s research.

The Star asked her to put some Canadian CEOs to the test.

Jim Balsillie, co-chair of Research-in-Motion, the BlackBerry maker whose fortunes have tumbled this year, has a relatively narrow face, according to Wong’s calculations, forecasting less stellar results.

She put Tim Horton’s CEO Paul House and Loblaw’s chief Galen Weston Jr. squarely in the middle of the pack of 55 U.S. CEOs.

U.S. CEOs with lower facial ratios included Paul Allaire of Xerox, George Fisher of Kodak, and Richard Fuld of Lehman Brothers.

Wong cautions against eyeballing it because looks are deceiving. Barack Obama appears to have a thin face, but it only looks that way because he’s tall and thin. Precise measurements reveal he has a relatively wide face.

Even Wong and her fellow researchers don’t eyeball it. They use computer software to standardize the photos and measure the distance between cheekbones and the distance between the brow and upper lip.

But if Obama has a wide face, how to explain the current state of the U.S. economy? How to explain that a year ago, RIM, run by Balsillie and his partner Michael Lazaridis, was flying high?

The research reveals a trend, not an absolute that will hold true in every case, says Wong. And facial width is only one factor among numerous other variables.

The research was based on previous work by the University of Toronto’s Nicholas Rule, Ph.D., an assistant professor of psychology and Canada Research Chair in Social Perception and Cognition.

Rule’s research showed that people are able to judge successful CEOs from less successful ones based on photographs. They can even judge success later in life based on photographs taken in university.

Studies at Brock University have found that hockey players with wider faces tended to be more aggressive, with more penalty minutes, says Rule.

“It suggests there is something about the face,” says Rule. “What these studies are doing is saying indeed it’s the facial metrics.”

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The Greek government teetered and stock markets around the world plummeted Tuesday after a hard-won European plan to save the Greek economy was suddenly thrown into doubt by the prospect of a public vote.

One day after Prime Minister George Papandreou stunned Europe by calling for a referendum, the ripples reached from Athens, where some of his own lawmakers rebelled against him, to Wall Street, where the Dow Jones industrial average plunged almost 300 points.

Papandreou convened his ministers Tuesday night, and a spokesman said the prime minister was sticking to his decision to hold the referendum, which would be the first since Greeks voted to abolish the monarchy in 1974. Papandreou has also called a vote of confidence in his government, to be held midnight Friday.

“The government is not falling,” said Angelos Tolkas, a deputy government spokesman.

Under a recently amended law, a referendum can be called by presidential decree on issues of grave national concern, if it is proposed by the cabinet and approved by absolute majority in the 300-member parliament.

With several of his lawmakers rebelling, it was unclear whether Papandreou would have enough support to push the idea through. Although he had not set a specific question or date for the referendum, ministers indicated it would likely be held in January.

Papandreou’s decision upended a deal that was the product of months of work by European leaders who were trying, sometimes opposed by their own people, to agree the details of a second bailout for Greece and shore up their own economies in the name of saving the euro, the common currency.

The deal would require banks that hold Greek government bonds to accept 50 percent losses and provide Greece with about $140 billion in rescue loans from European nations and the International Monetary Fund.

But Greeks have been outraged by repeated rounds of tax increases and salary and pension cuts imposed as the government struggles to meet the conditions of a first, $153 billion bailout the country has been relying on since May 2010. With Greece facing a fourth year of recession next year, unions have held frequent strikes, and protests have often degenerated into riots.

A Greek rejection of the second rescue package could cause bank failures in Europe and perhaps a new recession in Europe, the market for 20 percent of American exports. It could also cause Greece to leave the alliance of 17 nations that use the euro.

European leaders made no secret of their displeasure.

“This announcement surprised all of Europe,” said a clearly annoyed French President Nicolas Sarkozy, who has been scrambling to save face for Europe before he hosts leaders of the Group of 20 major world economies later this week.

“Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts,” he said.

French lawmaker Christian Estrosi was even more direct. He told France-Info radio that the move was “totally irresponsible” and reflected “a wind of panic” blowing on Papandreou and his party.

“I want to tell the Greek government that when you are in a situation of crisis, and others want to help you, it is insulting to try to save your skin instead of assuming your responsibilities,” Estrosi said.

Sarkozy and German Chancellor Angela Merkel, who have been at the forefront of Europe’s efforts to contain national debt, talked by phone and agreed to convene emergency talks Wednesday in Cannes, France. Papandreou will also attend.

Merkel also spoke by telephone Tuesday with Papandreou, his office said.

The response was brutal in the international financial markets, especially in Europe. Greece’s general price index plunged to close down 6.92 percent, while in Germany the Dax index, the major stock market average, lost 5 percent _ the equivalent of about 600 points on the Dow.

The French stock market closed down 5.4 percent, the Italian 6.7 percent and London 2.2 percent.

“Talk about your all-time bonehead moves,” said Benjamin Reitzes, an analyst at BMO Capital Markets free business cards.

In New York, the stocks of major banks like Citigroup and JPMorgan Chase were hit hard. The value of the dollar rose, and bond prices jumped so dramatically that analysts said they were stunned.

Analysts said the bond action reflected fears that the turmoil in Greece would tear at the fabric of Europe’s financial system and create a crisis that could engulf the entire European Union, which together forms the world’s largest economy.

“This brings all of the concerns about Europe back to the front burner,” said Scott Brown, chief economist at Raymond James. “If this ends up turning into a financial catastrophe in Europe, then no one will escape it.”

Papandreou’s decision was such a surprise that even the finance minister, Evangelos Venizelos, apparently did not know about it ahead of time. He was unable to make the ministers’ meeting Tuesday after being hospitalized with stomach pains. He was to remain in the clinic overnight.

The main opposition conservatives called for Papandreou’s resignation. But criticism was also intense from Papandreou’s own Socialists, who have been clinging to a shrinking parliamentary majority.

A public vote would allow the party, vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over austerity measures, to shift responsibility for the country’s fate to the Greek people themselves.

But it was unclear whether Papandreou’s government would last long enough for the referendum to take place _ or even until Friday’s confidence vote.

Several Socialist lawmakers openly rebelled, with one going as far as defecting. Milena Apostolaki’s departure whittled Papandreou’s parliamentary majority to just two deputies, leaving the party with 152 seats in the 300-member legislature.

Apostolaki’s departure “shows clearly that the government itself is losing gradually its cohesion,” said George Tzogopoulos, a political analyst from the Hellenic Foundation for European and Foreign Policy.

He estimated that “that the government will not be able to remain in power for many days” and said it was likely that Papandreou “will call an early election very soon.”

Papandreou did not ask for a vote last year, when Greece got its first round of international bailouts, about the same size as what is being debated now. Some lawmakers wondered why he called for one this time.

“Yesterday’s surprise and irrational announcement of the referendum has led me to doubt something that I considered certain until yesterday: That I am a member of a group that is striving to save our country from bankruptcy,” Socialist deputy Hara Kefalidou said in a letter to Papandreou. “I cannot back a referendum which is a subterfuge by a government that appears unwilling to govern.”

Jean-Claude Juncker, who chairs eurozone ministerial meetings, said the referendum was a dangerous decision that could endanger Greece’s next installment of bailout loans _ without which the country will run out of money in mid-November.

Juncker told RTL radio in Luxembourg that the vote proposal changes the conditions of that deal, according to his spokesman, Guy Schuller.

It was not only international leaders who were taken by surprise.

Venizelos, the finance minister, “found out about it along with all other Greeks” during Papandreou’s speech, which was televised live, an official close to Venizelos told The Associated Press. The official spoke on condition of anonymity to discuss sensitive details.

From his hospital bed, Venizelos launched a telephone campaign to shore up international support for the debt deal, speaking with the German finance minister, the head of Deutsche Bank and the monetary affairs chief for the European Union, among others.

____

Associated Press writers Derek Gatopoulos and Nicholas Paphitis, and APTN producer Ted Tongas in Athens, Angela Charlton in Paris, Raf Casert in Brussels and David McHugh in Berlin contributed.

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U.S. stock futures are lower on worries about the broker MF Global and about Italy’s ability to repay its debts.

Bank stocks dropped sharply in premarket trading after the New York Federal Reserve said it suspended MF Global Holdings from conducting new business as a Treasury bond dealer.

Trading in MF Global shares was halted in premarket trading.

The Wall Street Journal reported Monday that MF Global would seek Chapter 11 bankruptcy protection after large investments in sovereign bonds issued by European countries went against it guaranteed high risk personal loans.

Before the opening bell, Dow Jones industrial average futures are down 106 points, or 1 percent, at 12,062. S&P 500 index futures are down 14, or 1.1 percent, at 1,266. Nasdaq 100 futures are down 23, or 1 percent, at 2,374.

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The 17-nation eurozone is considering two forms of leveraging to boost its euro440 billion ($600 billion) bailout fund’s capacity in a bid to contain the debt turmoil that threatens to engulf more European nations.

A document obtained by The Associated Press, which Germany’s government was sharing with key lawmakers Monday, shows the currency zone wants to give the bailout fund the ability to provide investors with a partial insurance against losses from its member states’ government bonds.

The eurozone document also foresees setting up a special investment vehicle that seeks to attract outside investors such as sovereign wealth funds, combining “public and private capital to enlarge the resources available to” the European Financial Stability Fund, or EFSF.

Leading German opposition lawmakers, who were briefed earlier Monday by Chancellor Angela Merkel on the plan, said the fund’s capacity will be boosted “beyond euro1 trillion” ($1.39 trillion) under the new rules.

But the draft document by the eurozone working group did not provide a headline figure for the bailout fund, stressing “a more precise number on the extent of leverage can only be determined after contacts with potential investors” and rating agencies.

Eurozone governments hope that the enhanced EFSF will be able to protect countries such as Italy and Spain from being engulfed in the debt crisis. To do that, however, it needs to be bigger or see its lending powers magnified.

German lawmakers will vote on the bailout funds’ new rules Wednesday, hours before an EU summit in Brussels is set to adopt them.

The draft document stressed that the EFSF would “benefit from the flexibility to deploy both options, which are not mutually exclusive.” The insurance model is designed to increase the demand for newly issued eurozone government bonds, lower the yields “thereby supporting the sustainability of public finances,” the document said.

Lowering the yields for troubled eurozone governments is a key step to counter the widening debt crisis, because spiraling yields on debt issued by Greece, Portugal and Ireland eventually cut them off from market financing, forcing the eurozone to provide those nations which an emergency loan package.

In the event of a default, “the investor could surrender the partial protection certificate” and “receive payment in kind with an EFSF bond,” the document said, referring to the insurance option.

The new investment facility, a so-called special investment purpose investment vehicle, is meant to allow the EFSF “to attract a broad class of international public and private investors.” The investment structure aims at creating “additional liquidity and market capacity to extend loans, for bank recapitalization via a member state and for buying bonds in the primary and secondary market,” the eurozone draft document said.

Beefing up the bailout fund is one part of a three-pronged eurozone plan to solve the crisis.

The other two parts are reducing Greece’s debt burden so the country eventually can stand on its own and forcing banks to raise more money so they can take losses on the Greek debt and ride out the financial storm that will entail.

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