September notes

* Deficit target under question* Spanish yields rise, still well below Italy’s* New govt will struggle with EU-high jobless, need for budget cutsMADRID, Oct 14 (Reuters) - Standard & Poor’s cut Spain’s credit rating on Friday, sending the euro briefly lower and underlining the challenges facing Europe’s major powers as they meet G20 counterparts over the euro-zone debt crisis.S&P, whose move mirrored that by fellow ratings agency Fitch last week, cited high unemployment, tightening credit and high private-sector debt among reasons for cutting the nation’s long-term rating to AA- from AA.Spanish 10-year government bond yields rose slightly in response, although they remained more than 60 basis points lower than those of Italy and, at 5.24 percent, some distance from the 7 percent level widely regarded as unsustainable.”Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain’s growth prospects due to high unemployment, tighter financial conditions, the still high level of private sector debt, and the likely economic slowdown in Spain’s main trading partners,” S&P said.It also noted the “incomplete state” of labour market reform and the likelihood of further asset deterioration for Spain’s banks, and downgraded its forecast for Spanish economic growth in 2012 to about 1 percent, from the 1.5 percent it forecast in February.High yields on Spanish government bonds point to concerns that it could be the next euro zone economy to require a Greece-style bailout, and despite an unpopular austerity programme, doubts remain that Spain will meet its deficit target of 6 percent of GDP this year.”S&P underestimates the scope of the unprecedented structural reforms undertaken, which will obviously take time to bear fruit,” Spain’s Treasury said in a statement to investors on Friday.But a senior Spanish official told the Financial Times that meeting the 6 percent deficit target would be “difficult”. “And if the (2011) deficit is above 6.5 percent, it’s worrying,” the official said.S&P announced the downgrade as finance ministers and central bank chiefs from the world’s 20 biggest economies were due to meet later on Friday in Paris amid pressure to find an urgent and convincing solution to the deepening debt crisis.Spanish unemployment, at 21 percent, is the highest in the European Union, reflecting a stagnant economy, the collapse of a decade-long housing boom and cuts aimed at taming a public sector deficit that reached 11.1 percent of GDP in 2009.The decision to shelve multi-billion-euro privatisation plans, mainly due to tough market conditions, has meanwhile deprived the state of much needed revenues to cut borrowing and left little room for manoeuvre in its public finances.Juergen Michels, economist at Citi in London, said the market was still wary of developments in Spain’s regional public finances, and was aware that fiscal problems would not disappear any time soon.JOB DILEMMAA botched labour market reform in 2010 did little to alleviate joblessness that is concentrated mainly amongst younger Spaniards, and a new government after November 20 general elections will be under pressure to tackle the issue.The centre-right People’s Party is expected to win the election easily and deepen austerity measures but they have shied away from presenting specific policy measures for fear of eroding public support.Like Fitch, which also now rates Spain at AA-, S&P signalled further possible downgrades for Spain, saying there was still a risk the euro zone’s fourth-largest economy could slip into recession next year, with a 0.5 percent contraction.The euro reached a session low of $1.3723 after the downgrade, but later recovered to hit $1.3828 on reports the European Central Bank was buying Spanish and Italian debt.Hopes that G20 officials would agree on the outlines of a plan to resolve the debt crisis ahead of a European Union summit on Oct. 23 also buoyed the shared currency, which remained on course for its biggest weekly rally since January.Spain’s blue chip index was little affected by the rating cut.Finance chiefs from outside the euro zone are expected to speak frankly when they meet their European counterparts at Friday’s G20 meeting, given impatience growing over the crisis and its implications for the rest of the world.Canadian Finance Minister Jim Flaherty set the tone late on Thursday, telling reporters before leaving Ottawa that euro zone actions were short of what was needed.On Thursday, Fitch cut credit ratings or signalled possible downgrades for several major European banks. It downgraded UBS <UBSN.VX, Lloyd’s Banking and Royal Bank of Scotland . It also placed Barclays Bank , BNP Paribas, Credit Suisse, Deutsche Bank and Societe Generale on watch negative.

The Fukushima Daiichi nuclear power plant, struck by a devastating quake and tsunami in March, has released radiation into the atmosphere that has been carried by winds, rain and snow across eastern Japan.Officials in Setagaya, a major residential area in Tokyo about 235 km (150 miles) southwest of the plant, said this week it found a radioactive hotspot on a sidewalk near schools, prompting concerns in the country’s most populated area far from the damaged nuclear plant.The radiation measured as much as 3.35 microsieverts per hour on Thursday, higher than some areas in the evacuation zone near the Fukushima plant, the center of the world’s worst nuclear disaster since Chernobyl 25 years ago.But the local government found several bottles under the floor of a nearby house emitting high levels of radiation.”A measuring device, when pointed at them, showed very high readings. Radiation levels were even exceeding the upper limit for the device,” Setagaya Mayor Nobuto Hosaka told a news conference.Officials from the Education Ministry are now looking into the matter, including the contents of the bottles.Public broadcaster NHK said no one had been living in the house in question.The city of Funabashi, near Tokyo, said that a citizens’ group had measured a radiation level of 5.8 microsieverts per hour at a park, but that the city’s own survey showed the highest reading at the park was a quarter of that level.Radiation levels in the 20 km radius evacuation zone around the Fukushima Daiichi plant ranged from 0.5 to 64.8 microsieverts per hour, government data showed this week.About 80,000 residents have evacuated this zone. A microsievert quantifies the amount of radiation absorbed by human tissue.In Yokohama, also near Tokyo, radioactive strontium-90, which can cause bone cancer and leukemia, was detected in soil taken from an apartment rooftop, media reported.Strontium has been detected within an 80 km zone around the Fukushima Daiichi plant, but this is the first time it has been found in an area so far away, local media added.Radiation exposure from natural sources in a year is about 2,400 microsieverts on average, the U.N. atomic watchdog says.Japan’s education ministry has set a standard allowing up to 1 microsievert per hour of radiation in schools while aiming to bring it down to about 0.11 microsievert per hour.

LONDON Oct 13 (Reuters) - British tax authority HMRC is contacting 6,000 holders of accounts with HSBC’s Swiss bank to see if they have declared all income and gains to the taxman, offering a final opportunity to straighten out their affairs.HMRC has already started criminal and serious fraud probes into more than 500 individuals and organisations, it said on Thursday, and will shortly start contacting the rest.”They will be offered a window of opportunity to contact HMRC and disclose all their tax liabilities,” the body said, adding that those that did not come forward will be investigated and could incur penalties of up to 200 percent.HMRC said it was “acting on information received last year under a tax treaty.”A source at the tax authority said the information was obtained through an information exchange agreement with French authorities.However, the original source of the data is a haul of up to 24,000 Swiss client accounts stolen from HSBC by a former IT employee, the source said.The details subsequently found their way into the hands of tax authorities around Europe, including the UK.Switzerland’s coveted banking secrecy has come under increasing pressure as tax authorities in the United States, neighbouring European countries and now Britain step up crackdowns on hiding funds abroad.The source at the HMRC said the probe was limited to the individuals, companies and trusts holding accounts and did not extend to an investigation of the bank itself.A spokesperson at HSBC said: “HSBC does not condone tax evasion, and clients are responsible for their own tax affairs.”Earlier this year, the British government made 917 million pounds in new funds available to help fund the pursuit of tax evaders.HMRC’s Permanent Secretary for Tax Dave Hartnett said in a statement the latest move did not constitute a tax amnesty.”There are no special rates of penalty or interest for those who come forward voluntarily. This is an opportunity for those who have made errors in the past to correct them,” he said.In August Switzerland and the UK struck a deal to tax money kept by British residents in Swiss accounts that could net around 5 billion pounds.