European Union

The European Central Bank’s emergency overnight lending window hits highest level in 8 months

November 9, 2011

“Use of the European Central Bank’s emergency overnight lending window hit an eight-month high Tuesday, amid growing concern about the health of the euro-zone banking system.

Banks borrowed EUR7.735 billion from the marginal lending facility, which charges a punitive rate of 2.0%, up from EUR1.246 billion Monday, ECB data showed Wednesday.

That was the highest level since March 1, when banks borrowed EUR15.104 billion.

Marginal lending by the ECB surged to double-digit billions in late February as a result of Ireland’s efforts to wind down nationalized lenders Anglo Irish Bank Corp. and Irish Nationwide Building Society, a person familiar with the matter told Dow Jones Newswires at the time.”

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Europe joins U.S. in pushing for more sanctions against Iran

November 9, 2011

“U.S. and European officials said they will seek to tighten financial sanctions against Iran as soon as possible, armed with a United Nations atomic weapons inspectors’ report that asserts Iran has conducted clandestine activities “specific to nuclear weapons.”

The International Atomic Energy Agency concluded the Persian Gulf nation has pursued a nuclear warhead small enough to fit on its ballistic missiles. Yesterday’s statement is the strongest to date from the Vienna-based UN watchdog that Iran isn’t simply seeking peaceful nuclear power, as its leaders insist.

The findings bolster the arguments of U.S. and European officials who say negotiations with Iran have failed to halt a covert nuclear weapons program. Prime Minister Benjamin Netanyahu of Israel is seeking support in his cabinet for military action to destroy Iran’s program, news reports said, raising concerns in Washington and at the UN.”

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Euro gains value on news that Italian Prime Minister Berlusconi will resign after an austerity plan passes

November 8, 2011

“The euro advanced against the dollar after Italian President Giorgio Napolitano said Prime Minister Silvio Berlusconi agreed to resign after the parliament approves the country’s austerity plans.

The 17-nation currency earlier traded little changed after Berlusconi won a vote in parliament without an absolute majority, fueling calls for him to quit and concern about who will lead the nation out of its debt crisis. The yen appreciated to its strongest level against the dollar since Japan intervened Oct. 31 to stem its rise.”

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As European crisis worsens, US banks reduce their lending to European banks

November 8, 2011

“U.S. banks tightened their standards for loans to European banks and fewer relaxed lending standards to businesses in the third quarter, the Federal Reserve said Monday.

The Fed’s quarterly senior-loan-officer survey, based on 51 domestic banks and 22 U.S. branches of foreign banks, showed that about two-thirds of banks that make loans to their European counterparts had tightened standards for those loans in the July-to-September quarter, reflecting growing uncertainty in financial markets over Europe’s sovereign-debt crisis.

“Many domestic banks indicated that the tightening was considerable,” the Fed said about lending to European banks. The central bank added a set of special questions about lending to Europe to the survey, conducted in early October. About half of the domestic banks in the survey said they make loans or extend credit lines to European banks.”

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Battling politicians in Greece add more delay to the vital selection of Greece’s new Prime Minister

November 8, 2011

“The struggle to appoint a new prime minister at the helm of an interim coalition government in Athens dragged on as squabbling politicians darted across the capital in frantic negotiation while EU leaders looked on nervously.

After laying down their arms long enough to agree to the formation of a broad-based administration to fend off the country’s financial collapse, party heads failed to make progress over who would head the cabinet as power-sharing talks continued for a second day.

The unexpected length of the negotiations combined with their fractious nature, despite the looming threat of bankruptcy, raised fears over the ability of Greece’s sparring politicians to forge consensus at all. In a nation so bitterly divided by left and right, where memories of brutal civil war and military dictatorship still run deep, coalition governments are almost non-existent.”

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As uncertainty grows in the Italy and the Eurozone, the yields for Italian bonds soar

November 8, 2011

“Italy, the world’s eighth largest economy, overtook Greece as the prime threat to the stability of the 17-country single currency zone, as finance ministers met to try to find ways of building a firewall around the two-year-old crisis.

Italian 10-year bond yields rose to their highest since 1997 — approaching levels regarded as unsustainable — with political turmoil in Rome threatening to drag a fourth European economy after Greece, Ireland and Portugal into the debt mire.

Jean-Claude Juncker, the chairman of Eurogroup finance ministers, said the European Central Bank would take part in monitoring Italy’s promised economic reforms along with the European Commission and the International Monetary Fund, effectively putting the country under full surveillance.”

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Is Italy too big to fail, but too big to save?

November 8, 2011

“Italy’s size makes the potential consequences if it were to fail more wide-ranging than the much smaller Greece.

“Italy has much more systemic implications,” Thanos Vamvakidis, Head of European G10 FX Strategy, BofA Merrill Lynch Global Research, told CNBC Monday.

“It’s too big to fail, too big to save.”

The problems facing Italy include the euro zone’s second-highest debt-to-GDP ratio, and the lack of a credible alternative to Berlusconi’s government.”

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Analyst: Greece’s debt problems a ‘teething crisis’ for the European Union

November 8, 2011

“Despite mounting speculation that Greece’s problems will cause the euro zone to unravel, one strategist says such a scenario will not materialize, and describes the debt crisis as a “teething” problem for the bloc.

“I think these are just teething crisis, or really just the evolution of the European union into something greater, which is going to be a federalism fiscal unity,” Andrew Economos, Head of Sovereign & Institutional Strategy Asia at JP Morgan Asset Management told CNBC on Monday.
Economos is confident that “Europe will hold together” and “muddle through just like the world has done in the past”.

“There will be a Euro zone, there will probably not be defaults- technically they’re insolvent but it doesn’t matter, the system will adjust to make sure that there are no defaults,” he said.”

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Chairman of China’s Sovereign Wealth Fund: European labor laws induce ‘sloth, indolence, rather than hardworking’

November 7, 2011

“If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.
“Why should, for instance, within [the] eurozone some member’s people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard.”
Jin Liqun, the supervising chairman of China’s sovereign wealth fund”

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Today’s News from Europe: Italy, Greece in disarray; U.K. and France adjusting; Eurozone finance ministers meet again

November 7, 2011

Morning Update:
“The negotiations between George Papandreou and Antonis Samarasover Greece’s new unity government resume this morning, with the name of the next prime minister expected to be announced before the end of the day.
We are expecting details of French austerity measures – reports over the weekend suggest €8bn of cuts/tax hikes. The announcement is expected at 11am. The cuts come on top of €12bn of savings announced only three months ago.
The eurozone’s finance ministers are meeting in Brussels later today to agree the technical details of the operation of the ramped-up €440bn EFSF.
The Italian centre-left opposition is preparing a vote of no confidence in prime minister Silvio Berlusconi. The media mogul faces a difficult vote tomorrow on the public finances – we will be following developments today ahead of that vote.
The Eurozone Sentix index, an indication of investor sentiment in the Eurozone, is out at 9:30am GMT.
There are few big US corporate announcements this week. Cisco reports on Wednesday and Disney on Thursday, but we will as ever have an eye on the US markets to see how events in the eurozone are impacting globally.
Evening Summary:
• Silvio Berlusconi is clinging to power. Italy’s prime minister has vowed to win a vote on the public accounts tomorrow, followed by a confidence vote – but details remain vague
• Fears over Italy drove its borrowing costs to euro-era record highs. The yield on Italian 10-year bonds hit 6.69%
• Talks continue in Greece tonight over the formation of a unity government. Lucas Papademos remains the favourite to become prime minister, but is said to be taking a tough line in negotiations.
• Eurozone finance ministers are meeting tonight to discuss the crisis. Germany is under huge pressure to allow the European Central Bank to play a wider role.
• David Cameron urged Europe to deliver on its promises. “Sort yourself out and then we will help” said the prime minister, as George Soros warned that Europe faces a lost decade.
• France announced more austerity. An extra €7bn of tax rises and spending cuts are meant to keep its deficit reduction plan on track
Thanks for reading, and for the hundreds of comments – they’re really helping us to cover this crisis.

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Eurozone Leaders met Monday to focus on ailing European economies other than Greece

November 7, 2011

“Eurozone finance ministers assembled Monday in Brussels, Belgium, after a week of turmoil in Athens, but their focus extended beyond Greece to include other, bigger ailing economies.

“We also will be discussing Italy today,” European Union Finance Minister Olli Rehn told reporters. “I have requested further information from the Italian government on the matters of fiscal consolidation and statutory reforms,” he said, adding that commission staff had been dispatched to Rome.

“It’s essential now that Italy will stick to its fiscal targets, ensure their implementation and intensify the statutory reforms so it can boost growth and job creation.”

Also to be discussed was the reinforcement of financial firewalls, which Rehn called “essential in order to contain the contagion that is going on in Europe for the moment.”

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Italy Prime Minister Berlusconi’s parliamentary majority fading heading into key economic and austerity votes

November 7, 2011

“Prime Minister Silvio Berlusconi struggled to hold on to power and prove he can implement austerity measures pledged to European Union allies as reports of his imminent resignation sent Italian stocks surging.

Berlusconi denied a report by Giuliano Ferrara, his former spokesman and now editor of newspaper Il Foglio, who wrote today that the premier would step down “within hours.” Berlusconi will likely resign next week in return for support in a vote on the austerity and economic-growth measures, Ferrara said in a phone interview after his initial report.

Reports of his resignation were “totally unfounded,” Berlusconi said in an interview with newspaper Libero today. He said he would call on a confidence vote next week on the austerity measures and “look into the eyes of those who try to betray me.”

Berlusconi is struggling to keep his allies in line after key lawmakers announced defections before key parliamentary votes in coming days. The premier plans to stake the survival of his government in a confidence vote next week on implementation of measures pledged to the EU that aim to boost growth and trim the region’s second-largest debt. The first test comes tomorrow on a normally routine vote to rubber-stamp last year’s budget report that may indicate whether Berlusconi still has a majority in the 630-seat Chamber of Deputies.

A third member of Berlusconi’s party defected to the opposition last night, after two quit the party last week. Six others called for Berlusconi to resign and seek a broader coalition in a letter to newspaper Corriere della Sera last week. More than a dozen more are ready to ditch the coalition, Repubblica daily reported yesterday, without citing anyone.”

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Italy’s Prime Minister Berlusconi refuses an IMF bailout and refuses to resign

November 7, 2011

“Defiant Italian prime minister Silvio Berlusconi today refused an offer of financial support from the IMF – and insisted he would not resign. The 75-year-old leader insisted he did not think his coalition government would collapse as they struggle to deal with their debt crisis.

With its colossal £1.6trillion debt, Italy is now at the eye of the storm and is paying 6.43 per cent to borrow money for ten years. That figure is perilously close to the 7 per cent level where Greece, Ireland and Portugal were forced to seek a bailout.

But rejecting IMF help the Italian leader said at the end of the two-day G20 summit in Cannes: ‘We don’t believe this type of intervention is necessary.’ Italy has built up debts 120 per cent bigger than national income. Its fate is crucial to the eurozone, because its economy – the third-largest in the currency union – would be too expensive to bail out like Greece, Portugal and Ireland have been.

Berlusconi earlier agreed to allow the IMF to monitor its progress in carrying through reforms whose delay has sapped market confidence in Italy and ravaged its government bonds.

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Despite winning vote of no confidence, Greece Prime Minister Papandreou to resign today

November 6, 2011

“Greece’s prime minister George Papandreou will resign today, Pasok party sources have told Sky News.

A possible replacement for Mr Papandreou is currently being discussed, the sources have also indicated.

The development comes after the country’s opposition leader insisted the PM must go to save the economy.
Antonis Samaras said he was willing to help in the formation of a coalition government – but not until Mr Papandreou had stepped down.

Despite winning a confidence vote in parliament, Mr Papandreou has struggled to form a temporary coalition government to back the controversial EU bailout package.”

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G-20 fails to reach an agreement on IMF assistance for the European debt crisis

November 6, 2011

“World leaders balked at writing new checks to help bail out the euro-area, demanding its own governments first do more to fix the two-year-old debt crisis.

Global policy makers demanded more details of a week-old rescue package before they commit fresh cash to the International Monetary Fund, which could then lend to Europe’s bailout facility, German Chancellor Angela Merkel said at the end of a Group of 20 summit in Cannes, France. French President Nicolas Sarkozy said a deal may not come before February.”

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