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Uh oh, Slovenia says it doesn't need a bailout

These are stories Report on Business is following  Tuesday, April 9, 2013.

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Slovenia says it will solve its problems
You know you could be headed for some kind of trouble when a European country doth protest too much.

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Slovenia declared today that it will try to solve its troubles on its own, following a failed debt auction that helped fuel speculation it could become the sixth member of the bailout club.

Slovenia sold about €55-million in Treasury bills, falling well shy of its target amid climbing borrowing costs.

"The new government will do everything in its power to solve our problems on our own," Prime Minister Alenka Bratusek told reporters, according to Bloomberg.

"To those who've been speculating about Slovenia lately, I would say, please assess Slovenia through facts and figures."

Those facts and figures, according to BMO Nesbitt Burns today, include "poor productivity, a shrinking economy and rising unemployment" facing the three-week-old government.

And delinquent bank loans to the tune of 14 per cent by last fall, added senior economist Sal Guatieri, raising the question whether Slovenia will become the sixth recipient of an international bailout.

"The good news is that any financial aid for Slovenia should be on par with that provided to Cyprus (€10-billion), which is essentially pocket change relative to the hundreds of billions of euros shovelled into the other five nations," Mr. Guatieri said in a research note.

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"The bad news is that all five countries are still locked in recession, in part because of the austerity demanded to receive the bailouts, suggesting they could require even more financial support later this year."

Agrium defeats challenge
Agrium Inc. today beat back a challenge from dissident shareholder Jana Partners as investors backed the agribusiness giant's board of directors slate, The Globe and Mail's Boyd Erman and Kelly Cryderman report.

The vote illustrated "the overwhelming support for Agrium and its integrated strategy," said chief executive officer Mike Wilson.

Jana had believed it had enough votes to get two directors on the board.

RBC's Nixon on outsourcing issue
Royal Bank of Canada's chief executive officer says the incident involving the outsourcing of technology jobs has been overblown and does not reflect RBC's policy.

"We work very hard as an institution to ensure that we put a very high priority on Canadian jobs," he told the CBC today.

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"I think our track record when it comes to things like outsourcing is very good. Our record is very impressive.

Bitcoin surges
Bitcoin, the digital currency that has become a global phenomenon, reached an all-time high today, topping $200 (U.S.).

It went as high as $240.11 at one point.

As The Globe and Mail's Omar El Akkad writes, Bitcoin has become an Internet sensation, suddenly surging in value four years after its birth.

Just to illustrate how far it has come, one Bitcoin was worth about just $9 two years ago, and is now being talked about by those in the currency trade, among others.

Of late, this currency has been gaining as the euro crisis rears its ugly head again. Now, of course, there are questions over whether it's in bubble territory.

What to make of this?

"You can think of Bitcoins like the suburbia of Toronto, with the crucial difference that the land isn't real and the government steps in to limit the supply the more investors apply," said Sébastien Galy of Société Générale.

"The difference is that instead of taking years for that boom-and-bust process to happen it is happening at an incredibly rapid pace," Mr. Galy added.

"Another way to look at it, is Germany post World War I where the absence of manufacturing supply and imported goods meant that lots of moneys helpfully supplied by the central bank was chasing a very limited supply."

As to its frothy nature, Mr. Galy said something's a bubble only when it pops but "it has characteristics of one, it would be safe to assume."

As an asset, said Justin Fox, editorial director of the Harvard Business Review Group, Bitcoin "is clearly in a bubble," and has been so always. Though looking at asset pricing may be the wrong approach in this case, he wrote today on the group's blog.

"A dollar bill lays claim to no stream of future earnings, yet nobody says there's a 'dollar bubble' because somebody's willing to give you a candy bar for one," he said.

"This even though a dollar is almost certain to buy you less in a few years than it does now. According to the Bureau of Labor Statistics, a 2013 dollar has one-tenth the purchasing power of the 1950 version."

Bitcoins, in turn, have surged.

"This sounds like a good thing, but for a currency it's really not," Mr. Fox said.

"An economy where bitcoins were the means of exchange would have experienced 98-per-cent deflation over the past year. No one would be able to repay any loans, or really do business at all. What we want out of a currency is not price appreciation but stability."

You can invest in Bitcoins, or sell what you've got, among other things. One man says he sold a 2007 Porsche for 300 Bitcoins.

"You can't lend them yet or leverage at this point," said Mr. Galy. "It will come, though."

Porter expected to unveil deal
Porter Airlines Inc. is expected to announce an order for as many as 30 of Bombardier Inc.'s C Series aircraft, according to the Wall Street Journal.

The announcement could come as early as tomorrow, and would make Toronto-based Porter the first Canadian carrier to buy the mid-range aircraft, The Globe and Mail's Bertrand Marotte writes.

Construction cools
Canada's homebuilding industry is cooling off, but still holding up.

Housing starts climbed 0.4 per cent in March to an annual rate of 184,000, better than expected, though that was driven by construction in rural, rather than urban, areas, Canada Mortgage and Housing Corp. said today.

Separately, Statistics Canada reported that building permits, which can be volatile, rose 1.7 per cent in February, although it was driven up by the non-residential sector.

"Canadian homebuilding activity has been on a decidedly downward trend since peaking in the first half of 2012 and the six-month moving average of Canadian housing starts (which the CMHC refers to as the 'trend' rate) declined to 189,700 annualized units in March, its lowest level since June 2011," said economist David Onyett-Jeffries of Royal Bank of Canada.

"The moderation in homebuilding is consistent with our view that the housing market is experiencing a gradual cooling from the elevated levels of activity seen in 2012."

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