BBC News - Spanish borrowing costs jump at debt auction

Spanish borrowing costs on 12 and 18-month bonds jumped to 5.1% at its first debt auction since securing a 100bn-euro ($126bn; £81bn) bank bailout.

Prime minister Mariano Rajoy has called for G20 leaders' help to cut Spain's record borrowing costs

Madrid raised the intended 3.04bn euros but the interest rate payable rose from 3% at a similar debt sale on 14 May.

Independent auditors will also delay giving details of Spanish bank debts while they gather more information.

The total bank debt figure will determine the size of bailout needed and is due to be published this week.

On 9 June, the eurozone agreed to provide up to 100bn euros in emergency loans to help bolster under-capitalised Spanish banks, which were hit hard by the collapse of the country's property market.

The eurozone's fourth-biggest economy is struggling to finance its debt on commercial bond markets.

On Monday, the interest rate, or yield, on benchmark 10-year bonds traded on the secondary market hit a record high of 7.1%. Rates higher than 7% are widely seen as unsustainable.

Greece, Portugal and Ireland all had to seek international aid to pay their loans when their bond yields hit similar levels

Reuters News - Europe vows closer union at G20 summit

By Lesley Wroughton and Luke Baker

LOS CABOS, Mexico | Tue Jun 19, 2012 6:29am EDT

(Reuters) - Under pressure from financial markets and anxious world leaders, Europe agreed on Monday to move towards a more integrated banking system to stem a debt crisis that threatens the survival of the euro.

At a Group of 20 summit of the world's leading industrialized and developing economies in this Mexican resort, Germany and its big euro zone partners took the unusual step of spelling out in detail measures to complete the economic and monetary union they launched to great fanfare 13 years ago.

Among the commitments in a draft G20 communique was a pledge to consider concrete steps towards a "more integrated financial architecture" in Europe that would include common banking supervision and firm guarantees to repay bank depositors.

The United States, the International Monetary Fund and European Commission have been urging EU member states to press ahead with a banking union to break the vicious link between deeply indebted governments bailing out illiquid financial institutions, worsening the sovereign debt problems and deepening the euro-zone crisis.

While that term did not appear in the declaration, the wording did suggest that Germany, which has rejected initiatives that might expose it to the cost of rescuing banks outside its borders, was growing more open to the idea of closer banking cooperation.

U.S. President Barack Obama, concerned that Europe's debt crisis could deteriorate further and upend his re-election hopes, met with Chancellor Angela Merkel, who as the leader of Europe's biggest economy is under intense pressure to commit German resources to underpin the euro zoneand prevent a catastrophic breakup.

Obama's spokesman said the U.S. president was encouraged by the talks, which touched on steps to "increase European integration".

EU President Jose Manuel Barroso showed frustration over the pressure which is piling on Europe to act fast. He said G20 members must understand it will take time for the 17 euro zone democracies to agree on how to build a full financial, fiscal and political union and asked fellow G20 members to stop lecturing.

"We certainly are coming here to receive lessons from nobody," he said.

BOOSTING GROWTH

Protected by Mexican navy vessels and troops who patrolled sun-baked beaches and highways, leaders from the G20 countries representing more than 80 percent of world output agreed to prioritize boosting growth and job creation, hit hard by the focus on sharp budget cutbacks, which has contributed to an accelerating slowdown in the global economy.

The World Bank last week lowered its forecast for global growth in 2012 to 2.5 percent and said developing nations faced a long period of financial market volatility and weaker growth.

In its strongest signal in three years that it would act to strengthen the recovery, the G20 said in their draft communique that countries without heavy debts problems were ready to act together to spur growth, if the economy slows a lot more.

The United States has pressed Germany as well as China to stimulate spending in order to help the world economy.

Rising violence in Syria and the near-collapse of a United Nations-brokered peace plan was also in focus as U.S. President Barack Obama met with Russian President Vladimir Putin. The two super powers have clashed over arming Syria and U.N. sanctions.

Obama and Putin agreed that the violence in Syria has to end but offered no new solutions and showed no signs of reaching a deal on tougher sanctions against Damascus.

RELIEF RALLY FLEETING

Europe's battle against a debt crisis that has led Greece, Ireland and Portugal to seek EU/IMF rescues, and forced Spain to seek aid for its banks, dominated the opening discussion of G20 leaders on the global economy.

A narrow victory for the conservative New Democracy party in the Greek election on Sunday eased concerns the heavily indebted country could exit the euro zone soon. But it did little to calm financial markets, which fear a euro zone breakup has only been delayed and will drag Spain andItaly into the maelstrom.

"The win in Greece does not really resolve anything," said Boris Schlossberg, managing director at investment advisory firm BK Asset Management in New York. "It's still going to be tough for Greece."

Fitch Ratings agency said the Greek result had lowered the risk of a disorderly default and the scenario of a euro zone exit, but it also warned that any new government in Athens was likely to be fragile.

After an initial relief rally, the euro fell against the dollar. Spanish bond yields hit a new euro-era high above 7 percent.

Merkel, speaking to reporters after landing on the southern tip of Mexico's Baja California peninsula in the middle of the night, welcomed the Greek result but said she could not accept any loosening of the austerity measures and deep structural reforms Athens has agreed to as a condition of its two EU/IMF bailouts totaling 240 billion euros.

"The Greek government will and must deliver on the commitments it has agreed to," she said.

That puts her on a collision course with the winner of the Greek vote, conservative Antonis Samaras, who campaigned pledging to renegotiate elements of the rescue and reiterated that stance on Monday, saying "amendments" were needed to relieve "crippling unemployment and huge hardships" for Greeks.

Greece will ask to spread 11.7 billion euros in austerity cuts over four years instead of two, a New Democracy party source told Reuters in Athens.

German frustration with Greece's failure to deliver on its reform pledges has risen in recent months, as has Greek anger at the tough austerity prescribed by Berlin and its partners.

In a twist of fate, Greece's soccer team will battle Germany later this week in the quarter-finals of the European championships.

David Mackie, an economist at JP Morgan, said he expected European governments would ultimately be forced to agree to an "aggressive restructuring" of the loans they have already provided to Greece to return the country to a sustainable path.

EXTRA IMF FIREPOWER

Merkel has been pushing fellow European leaders to agree a road map toward closer fiscal integration that would involve ceding sovereignty over budgets to Brussels and giving more power to the European Parliament.

By sketching out what the bloc might look like in five to 10 years, she hopes to win back the confidence of markets.

But her counterparts, notably new French President Francois Hollande who arrived here later on Monday after his Socialist Party won control of the French parliament in weekend elections, have doubts about transferring fiscal powers. It appears unlikely that Europe will deliver a "grand bargain" at a separate summit of EU leaders on June 28-29.

In Los Cabos, leaders are set to confirm they will double the IMF's firepower. The Fund's managing director Christine Lagarde said pledges now totaled $456 billion, up from the $430 billion in April, even though some emerging nations are frustrated with the slow pace of winning more power at the global lender.

China on Monday offered to contribute $43 billion to the IMF's crisis-fighting reserves, adding to offers of $10 billion each from Brazil, Russia and India.

Reuters News - Greece's New Democracy seeks bailout coalition

Leader of conservative New Democracy party Antonis Samaras is cheered by supporters after his statement on the election results in Athens June 17, 2012.

Credit: Reuters/John Kolesidis

By Karolina Tagaris and George Georgiopoulos

ATHENS | Mon Jun 18, 2012 5:51am EDT

(Reuters) - Greece's centre-right New Democracy party will try to form a coalition on Monday to back the country's international bailout after a narrow election victory that eased fears of a sudden exit from the euro.

European stocks and the euro briefly opened higher after Sunday's vote, and the Athens streets were quiet after New Democracy leader Antonis Samaras pledged to move swiftly to form a government. He was due to meet Greek President Karolos Papoulias at 12.30 p.m. (0930 GMT).

The once-mighty Socialist PASOK party, now reduced to third place, indicated it would support former coalition partner Samaras but had not yet decided whether to join the government or just offer parliamentary backing.

In deep recession, crushed under its huge public debt and facing rising social tensions, Greecefaces a daunting struggle to restore a near-bankrupt economy, and a new government could face a new wave of protests after taking office.

"The crisis has been postponed, not necessarily averted," said Theodore Couloumbis, political analyst and vice-president of Athens-based think-tank ELIAMEP.

"For this government to last it has to show results. You can't continue with 50 percent youth unemployment and a fifth straight year of recession," he said.

The radical left SYRIZA bloc, which had promised to tear up the bailout deal signed in March with the European Union and International Monetary Fund, scored strongly in the election, and party leader Alexis Tsipras promised to continue its opposition to the painful austerity measures demanded of Greece.

"I don't think anything good will come out of these elections," said Dinos Arabatzis, a 56 year-old taxi driver who voted for New Democracy.

"Whoever is in power now will get burned. Samaras will get burned, and Tsipras will come out much stronger if we go to elections again - that's what worries me," he said.

MILITANT OPPOSITION

With nearly 100 percent of ballots counted, New Democracy had won 29.7 percent of the vote, ahead of SYRIZA on 27 percent, and PASOK on 12.3 percent.

A 50-seat bonus automatically given to the party that comes first would give a theoretical New Democracy-PASOK alliance 162 seats in the 300-seat parliament, enough for a majority broadly committed to the 130-billion-euro ($164 billion) bailout.

"The result showed people want the euro, but society remains divided. SYRIZA will be a militant opposition, possibly complicating the new government's efforts," a senior New Democracy official said on condition of anonymity.

"The new government must deliver a positive development soon - an easing of the bailout terms or a positive sign in the economy - or people will lose trust in a week."

In the markets, trust had an even shorter shelf life. Though the FTSEurofirst 300 index rose 1.1 percent at the open, the index had shed all those gains before two hours were up, as the underlying problems in the euro zone brought investors back to earth. The euro's rise also evaporated.

SUPPORT

PASOK officials told Reuters that a meeting on Monday would decide how they would support Samaras - whether by participating fully in government, or by voting with the coalition in parliament. The smaller, anti-bailout Democratic Left party was also due to decide on Monday whether it would back the conservatives.

The White House said it hoped the election outcome would lead to the swift formation of a new government that would make "timely progress" on economic challenges.

"We believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform," said President Barack Obama's press secretary Jay Carney.

The new government may get some help from euro zone peers relieved that SYRIZA had not won, setting Greece on course for a euro exit with incalculable consequences for the rest of the 17-member bloc.

However, they have offered no prospect of any major overhaul of the bailout agreement, which requires Greece to find 11.7 billion euros in spending cuts in June to qualify for the next loan installment.

German Foreign Minister Guido Westerwelle said the substance of the bailout agreement was "not negotiable", but he said creditors might be willing to offer some flexibility on timing for some of the targets, given the time lost in campaigning after the inconclusive election on May 6.

"We're ready to talk about the timeframe as we can't ignore the lost weeks, and we don't want people to suffer because of that," he told German radio on Monday.

However, even if it were granted some leeway, a coalition that won only 40 percent of the vote would struggle to push through reforms in the face of deep public resentment of repeated rounds of tax hikes and pay and pension cuts.

Despite his loss Tsipras, 37, appeared buoyed by the election and rejected calls to join an all-party unity government, saying his party was now the main opposition force and promising to fight the bailout package.

His attitude has raised fears of a return to the anti-austerity protests that have left parts of central Athens pock-marked with angry graffiti.

Underlining the signs of potential instability, the ultra-nationalist Golden Dawn party took 18 seats, repeating its success of May 6 and confirming its status as a force in Greek politics, carried by an angry mood of public protest.

Reuters News - UK fights euro zone threat with $155 billion credit boost

. Mervyn King, the Governor of the Bank of England (R) speaks as Britain's Chancellor of the Exchequer George Osborne (L) and Lord Mayor Alderman David Wootton look on during the Mansion House Banquet in the City of London June 14, 2012.

Credit: Reuters/Paul Hackett

By Matt Falloon and Sven Egenter

LONDON | Fri Jun 15, 2012 6:24am EDT

(Reuters) - The government and central bank will flood Britain's banking system with more than 100 billion pounds ($155.43 billion), seeking to pump credit through an economy struggling to escape recession under the "black cloud" of the euro zonecrisis.

In his annual Mansion House policy speech to London financiers on Thursday, Bank of England Governor Mervyn King said Britain would launch a scheme to provide cheap long-term funding to banks to encourage them to lend to businesses and consumers.

He also said the bank would activate an emergency liquidity tool.

Treasury officials said the government plan could support an estimated 80 billion pounds in new loans, while the central bank's separate scheme will provide monthly 5 billion pound tranches of six-month liquidity to banks.

King said the case for pumping more money into the economy via further purchases of government bonds had increased as the outlook for the economy had worsened, although he again rejected calls for the central bank to buy private assets.

King said the euro zone's woes were leading to a crisis of confidence in Britain which was leading to a self-reinforcing weaker picture of growth.

"The black cloud has dampened animal spirits so that businesses and households are battening down the hatches to prepare for the storms ahead," he said.

Britain's action comes just before cliffhanger Greek elections this weekend that could determine the fate of the euro zone, as well as a meeting of the leaders of the world's major economies next week to find ways to tackle the currency bloc's crisis and spur the global economy.

British finance minister George Osborne warned of the huge dangers from a collapse of the euro area. He again urged euro zone leaders to fix the crisis and said Britain was taking action to protect its own economy.

"We are not powerless in the face of the euro zone debt storm," Osborne said in his speech at Mansion House. "Together we can deploy new firepower to defend our economy from the crisis on our doorstep."

Britain is still reeling from the 2007-2009 financial crisis that has left many Britons poorer and forced the country to bail out big banks with tens of billions of pounds of taxpayers' money.

The government on Thursday announced a sweeping reform of bank regulations aimed at making financial institutions safer, and avoiding a re-run of the crisis which has pushed Britain into recession twice in the last four years.

CASH BOOST

Britain slid back into recession around the turn of this year, piling pressure on Osborne's embattled Conservative-led coalition government to come up with new ways to boost growth.

The government has pinned its fortunes on a tough austerity plan of tax hikes and spending cuts to erase a budget deficit which still comes in at around 8 percent of GDP.

Osborne defended his debt-cutting measures, arguing that they gave the Bank of England the leeway to keep monetary policy loose, and said there was still more the central bank could do.

BoE Governor Mervyn King said the central bank would complement its quantitative easing asset purchase scheme with new steps to encourage bank lending and reduce their funding costs, which have rocketed as a result of the euro zone crisis.

The BoE and finance ministry have designed a new scheme, to be launched in a few weeks, that would offer banks loans with a maturity of possibly 3-4 years at below current market rates.

The loans would be made available on condition that banks increase their lending to businesses and households.

In addition, the central bank will activate its Extended Collateral Term Repo facility, created in December, to provide six-month liquidity to banks against a wide range of collateral.

King said now was the right time to activate the scheme, which is aimed at helping banks through phases of exceptional stress.

King hinted that the central bank may also restart its QE program, which it halted in May having bought 325 billion pounds of British government bonds, and countered accusations that the scheme had lost its effectiveness.

"With signs of a deterioration in the outlook, especially in world markets, the case for a further monetary easing is growing," King said. ($1 = 0.6434 British pounds)

Reuters News - Credit hedge funds profit despite rocky markets

By Katya Wachtel

NEW YORK | Thu Jun 14, 2012 7:16pm EDT

(Reuters) - In a year of uneven returns for many U.S. hedge funds, managers who invest mainly in bonds have outshone stockpickers.

Over the first five months of the year, credit-focused hedge fund portfolios were up 4.11 percent compared with a 2.4 percent gain for stock-focused ones, according to hedge fund tracking service eVestment|HFN.

Well-known managers such as David Tepper and Daniel Loeb have seen hefty returns in their credit-focused portfolios on bets they made in the second half of 2011.

Some managers are profiting from those shrewd trades, which they made on mortgage-related securities, U.S. corporate debt and beaten-down European sovereign and corporate bonds. Others, meanwhile, benefited from an early move into junk bonds, which have been one of the credit market's better-performing sectors this year.

It is another indication that, in a year of great turbulence in the stock market, bonds have been the place to be despite the yield on the 10-year U.S. Treasury hovering around 1.61 percent.

"At the end of last year, European financials were massively battered down so we went long those corporate credits - they were great investments," said Peter Faulkner, a credit portfolio manager at $2 billion P. Schoenfeld Asset Management.

Similarly, Third Point's Dan Loeb, in a May 4 investor letter, said successful bets on corporate credit during a debt market selloff last October, led to strong gains on those positions in the first quarter.

PSAM's credit fund, which was up 6.6 percent through May according to HFN, also benefited from gains in corporate credits that have exposure to U.S. housing such as iStar Financial Inc (SFI.N) and Residential Capital LLC RESC.UL.

James Malley, who co-manages the PSAM credit fund with Faulkner, likened the fund's gains this year to "harvesting" investments it made last year.

The PSAM fund profited, in part, from the European Central Bank's move to pump more money into the euro zone banking system earlier this year in an attempt to stabilize the economic situation. The effort temporarily boosted liquidity and confidence, which led to a rise in corporate bond prices around the globe.

Also funds that were early to buy high-yield debt benefited from a growing sentiment that corporate defaults were unlikely given signs of a strengthening economy and a search by investors for securities that yield more Treasuries.

But the high-yield market has given back some of this year's gains in the wake of recent weaker jobs data and renewed worries about Europe.

ROUGHER ROAD AHEAD?

This year retail investors have made a similar big move into bond mutual funds, as they flee stocks and seek to avoid risk. Through May, bond mutual funds gained $139.84 billion in net inflows, while equity mutual funds saw $27.21 billion in net outflows, according to estimated data from the Investment Company Institute.

But some analysts wonder whether the big gains for credit funds in the hedge fund universe have already been achieved for the year. These analysts suggest it will be much tougher for debt funds going forward with yields on high-quality corporate debt declining and an uptick in U.S. home foreclosures that could spell trouble for mortgage-backed securities.

"Most of the positive year-to-date performance in credit strategies can be attributed to January through March," said Minkyu Michael Cho, a research analyst at eVestment|HFN.

In May, credit-focused portfolios fell 0.02 percent, according to eVestment|HFN. But that was not as bad as the sharp 3.31 percent decline registered by stock-focused funds in May.

Still, the credit market also has proved to be a bumper crop for Tepper's Palomino fund, which is one of the largest portfolios managed by his Appaloosa Management. The $5 billion credit fund rose 12.94 percent through April 30, according to data collected by HSBC Private Bank.

Another top performer is Andrew Feldstein's Bluemountain Credit Alternatives Fund, which was up 7.85 percent through May 25, according to HSBC data. Another Bluemountain credit fund, a long short credit portfolio run by Derek Smith, was up 3.72 percent through May 25.

The Brevan Howard Credit Catalysts Fund has risen roughly 6.5 percent through May 25, and a CQS ABS Feeder Fund had gains of almost 5 percent through April 30. Meanwhile, the Mariner-Tricadia Credit Strategies fund was up 5.14 percent through May 15.

The stand out performance by credit-focused funds has helped some managers offset sharp losses in their stock funds. One example is John Paulson, whose flagship Paulson Advantage fund is down 6.3 percent this year, while Paulson & Co's Credit Opportunities Fund is up 5.26 percent.

Global credit-focused fund Pamli Capital Management, which earned big gains earlier in the year on trades in mortgage-backed securities, has risen 1.6 percent for the year, according to an investor note.

But eVestment's Cho said with yields coming down on high-grade U.S. corporate debt and Treasuries, the easy money may have been had.

"It seems the move to safer assets may actually have hurt credit strategies over the course of the year," he said. "Yields have come down across the board for U.S. treasuries since highs in March, and yields have also come down for U.S. AAA corporates."

Reuters News - Analysis: Endless QE? $6 trillion and counting

Pedestrians walk past the Federal Reserve Building in Washington April 3, 2012.

Credit: Reuters/Joshua Roberts

By Mike Dolan

LONDON | Wed Jun 13, 2012 4:03am EDT

(Reuters) - Many more years of money printing from the world's big four central banks now looks destined to add to the $6 trillion already created since 2008 and may transform the relationship between the once fiercely-independent banks and governments.

As rich economies sink deeper into a slough of debt after yet another wave of euro financial and banking stress and U.S. hiring hesitancy, everyone is looking back to the U.S. Federal Reserve, European Central Bank, Bank of England and Bank of Japan to stabilize the situation once more.

What's for sure is that quantitative easing, whereby the "Big Four" central banks have for four years effectively created new money by expanding their balance sheets and buying mostly government bonds from their banks, is back on the agenda for all their upcoming policy meetings.

Government credit cards are all but maxed out and commercial banks' persistent instability, existential fears and reluctance to lend means the explosion of newly minted cash has yet to spark the broad money supply growth needed to generate more goods and services.

In other words, electronic money creation to date - whether directly through bond buying in the United States or Britain or in a more oblique form of cheap long-term lending by the ECB - is not even replacing what commercial banks are removing by shoring up their own balance sheets and winding down loan books.

Global investors appear convinced more QE is in the pipe.

"It is almost as if investors are saying QE will happen no matter what," said Bank of America Merrill Lynch's Gary Baker.

BoA Merrill's latest monthly survey of 260 fund managers showed nearly three in four expect the ECB to proceed with another liquidity operation by October. Almost half expected the Fed to return to the pumps over the same period.

The BoJ has already upped asset purchases yet again this year and Bank of England policy dove Adam Posen said on Monday the BoE should not only buy more government bonds but target small business loans too.

SO FAR, SO SO

But aside from investor hopes of a market-based call and response, is there any evidence that QE actually helps the underlying problem and what are the risks from all this?

The "counterfactual", to use an economics wonk's term, is the most powerful argument in QE's favor - what would have happened if they didn't print at all and broad money supply collapsed?

But after four years in which, according to HSBC, the balance sheets of the Big Four have collectively more than tripled to $9 trillion and still not generated self-sustaining recoveries, the question is how long this can keep going on without creating bigger problems for the future.

For a start, there is no quick solution to the problem of mountainous indebtedness.

Recapitalizing banks; stabilizing housing and mortgage markets responsible for deteriorating loan quality; further deep integration of euro fiscal links to support the shared currency; and capping government debt piles in the United States, Japan and Britain will - even for optimists - take many years.

On top of that the rich economies face gale force headwinds over the next decade from ageing and retiring populations.

In the interim, the job of central banks looks increasingly like a blended mix of monetary policy and sovereign debt management. And that's on top of recently acquired roles as guardians of financial and banking system stability.

The concern is that monetary authorities are increasingly acting as government agents responsible as much for stabilizing bond markets and keeping banks clean as for fighting inflation.

The question is not whether central banks can withdraw this money again once broad money growth gains traction - most think that's mechanically easy - it's whether they will be able to resist pressure to carry on underwriting government deficits.

A series of papers prepared for a Bank for International Settlements workshop in May certainly saw the problem.

"Whatever view is taken of this, the boundary between monetary policy and government debt management has become increasingly blurred. Policy interactions have changed in ways that are difficult to understand," the BIS overview concluded.

The papers also made clear that this form of monetary policy has plenty of precedents throughout the earlier part of the 20th century during the gold standard. It's only since the 1980s and 1990s that consensus shifted squarely behind the idea of highly independent central banks pursuing narrow price stability and even strict inflation targets.

And given the level of credit chaos that ultimately emanated from the so-called Great Moderation, it's possible that history will see that system as the aberration rather than norm.

HSBC economists Karen Ward and Simon Wells reckon central bank independence is the biggest impact from ever-more QE and fear that, as in Japan, the price will be paid by persistently high if sustainable government deficits that stifle growth.

"The heyday of independent central banking could be drawing to a close," they wrote in a wide-ranging report on QE.

Hedge fund manager Stephen Jen said he thinks the temporary benefits of QE are outweighed by long-term costs such as removing pressure for fiscal reform and market volatility.

"At some point, the benefit-cost balance flips."

Then again, not everyone bemoans the greater responsiveness of central banks to the will of elected governments.

"The source of central bank independence is public support from elected officials that the central bank is pursuing desirable social goals," BoE's Posen said Monday.

BBC News - Australia to create world's largest marine reserve

Plans released by the Australian government to create the largest marine reserve in the world

Australia says it will create the world's largest network of marine parks ahead of the Rio+20 summit.

The reserves will cover 3.1 million sq km of ocean, including the Coral Sea.

Restrictions will be placed on fishing and oil and gas exploration in the protected zone covering more than a third of Australia's waters.

Environment Minister Tony Burke, who made the announcement, will attend the earth summit in Brazil next week with Prime Minister Julia Gillard.

"It's time for the world to turn a corner on protection of our oceans," Mr Burke said. "And Australia today is leading that next step."

Australia has timed its announcement to coincide with the run-up to the Rio+20 Earth Summit - a global gathering of leaders from more than 130 nations to discuss protecting key parts of the environment, including the ocean, says the BBC's Duncan Kennedy.

The plans, which have been years in the making, will proceed after a final consultation process.

The Coral Sea is home to diverse wildlife, including sharks and tuna

Ocean parks

Last year, the Australian government announced plans to protect the marine life in the Coral Sea - an area of nearly 1 million sq km.

The sea - off the Queensland coast in northeastern Australia - is home to sharks and tuna, isolated tropical reefs and deep sea canyons. It is also the resting place of three US navy ships sunk in the Battle of the Coral Sea in 1942.

The network of marine reserve will also include the Great Barrier Reef, a Unesco World Heritage site.

The plan will see the numbers of marine reserves off the Australian coast increased from 27 to 60.

"What we've done is effectively create a national parks estate in the ocean,'' Mr Burke told Australian media.

However, activists and environmental protection groups are likely to be less than satisfied with the plans, having called for a complete ban on commercial fishing in the Coral Sea.

The fishing industry is set to receive hundreds of millions of dollars in compensation, reports say.

Some have also noted that oil and gas exploration continue to be allowed near some protected areas, particularly off western Australia.

The Australian Conservation Foundation said that although the plan didn't go as far as they would like, it was a major achievement in terms of ocean conservation.

Currently the world's largest marine reserve is a 545,000-sq-km area established by the UK around the Chagos Islands in the Indian Ocean.