Medtronic: Sweet Home Ireland

Medtronic, Covidien in Advanced Talks to Combine - Deal, Valued at More Than $40 Billion, Would Be Structured as So-Called Tax Inversion
Excerpt:

Medical-device maker Medtronic Inc. is in advanced talks to combine with rival Covidien PLC in a deal valued at more than $40 billion, according to people familiar with the matter. The deal, which could be announced Monday, would be structured as a so-called tax inversion, according to one of the people. In such deals, acquirers buy companies domiciled in countries with lower corporate tax rates than their own as a means of lowering their overall rate. Covidien is based in Ireland, which is known for having a relatively low tax rate.

Comment: Corporate Inversion defined:

Re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. Corporate inversion as a strategy is used by companies that receive a significant portion of their income from foreign sources, since that income is taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country that has lower tax rates and less stringent corporate governance requirements.

Comments: Others domiciled in Ireland: Accenture, Seagate. The problem: High US Corporate tax rates.

"Advanced Nations" borrowing - "heading in the wrong direction"

Number of the Week: $10.2 Trillion in Global Borrowing

Excerpt:

As the debts of advanced countries rise to levels not seen since the aftermath of World War II, it’s hard to know how much is too much. But it’s easy to see that the risk of serious financial trouble is growing.

Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That’s up 7% from this year, and equals 27% of their combined annual economic output.

Aside from Japan, which has a huge debt hangover from decades of anemic growth, the U.S. is the most extreme case. Next year, the U.S. government will have to find $4.2 trillion. That’s 27.8% of its annual economic output, up from 26.5% this year. By comparison, crisis-addled Greece needs $69 billion, or 23.8% of its annual GDP.

Comment: Be sure to view graphic associated with the WSJ article above. One of the so-called "advanced nations" highlighted below

Irish Debt Woes Revive Concern About Europe

Excerpt:

The yield on Ireland’s 10-year bond climbed to 7.6 percent on Friday, expanding the gap with the 2.5 percent interest rate on comparable bonds issued by Germany, which is emerging most strongly from the European debt crisis.

Borrowing costs in Spain, Portugal and Greece also spiked upward again, as investor concern re-emerged that those countries would be hard-pressed to bring their deficits under control and avoid defaulting on their bonds.

Even as global stock markets rallied last week, those bond market jitters were a forceful reminder of how wary investors remained after Europe’s debt crisis last spring, despite the commitment of a combined 750 billion euros ($1.05 trillion) in bailout funds by the European Union and the International Monetary Fund.

“The scale of the deficits are just so big,” said Philip R. Lane, a professor of international economics at Trinity College in Dublin. “The issues are political as much as they are economic.”

Comment: With the Fed pumping so much money into the economy one wonders when inflation will commence.

Irish reject Lisbon treaty

Irish voters reject EU treaty

Excerpt:

Europe was thrown into political chaos Friday by Ireland's rejection of the Lisbon Treaty, a painstakingly negotiated blueprint for consolidating the European Union's power and streamlining its increasingly unwieldy bureaucracy.

The defeat of the treaty, by a vote of 53.4 percent to 46.6 percent, was the result of a highly organized campaign that played to Irish voters' deepest fears about the EU. For all its benefits, many people feel, the Union is remote, undemocratic and ever more inclined to strip its smaller members of the right to make their own laws and decide their own futures.

Although the Irish are less than 1 percent of the EU population of almost 500 million, the repercussions of the vote Thursday - whose results were announced Friday - are enormous. To take effect, the treaty must be ratified by all 27 members of the EU. So the defeat by a single country, even one as tiny as Ireland, has the potential effect of stopping the whole thing cold.

Comment: Lisbon Treaty. Good for them!