December 6, 2011
Merkel’s Path: Brinkmanship for Debt Crisis
By NICHOLAS KULISH
nytimes
BERLIN — When the ratings agency Standard & Poor’s warned this week that it might lower the credit ratings of 15 euro zone countries, including Germany, Chancellor Angela Merkel seemed unmoved. “What a rating agency does is the responsibility of the rating agency,” she told reporters in Berlin on Tuesday.
It was the kind of impervious reaction to market gyrations that many critics said was at the core of the euro crisis. Mrs. Merkel, they say, has rarely acted quickly or boldly enough to halt the downward spiral of the euro.
To American officials, Mrs. Merkel, 57, seems at times shockingly aloof about market turmoil. But as European leaders prepare for crucial meetings this week in Brussels, what may have seemed like timid or even bumbling leadership is looking more like a consistent strategy of brinkmanship aimed at remaking the euro zone in Germany’s likeness.
At critical junctures throughout the crisis, Mrs. Merkel has resisted appeals to appease the financial markets by lowering borrowing costs. Instead, she has wielded the pain of soaring interest rates as a cudgel to extract painful changes — and demand leadership changes — in countries like Greece and Italy that have proven resistant to those changes in the past.
It is a clever strategy, one that allows her to juggle divergent interests at home, where the German people do not want her offering more guarantees of taxpayer money to combat the sovereign debt crisis, and abroad, where they are begging her to do so. It is also highly risky.
If the euro is preserved and Europe moves toward a more unified future, Mrs. Merkel will probably win the lion’s share of the credit, perhaps one day being hailed as Europe’s savior. But if her prescriptions turn out to be inadequate, she could reap the blame for presiding over the collapse of the euro, with untold consequences for the world economy.
Either way, Mrs. Merkel, a steely champion of austerity and fiscal discipline, seems to have assumed the nickname of her 19th-century predecessor Otto von Bismarck: the Iron Chancellor.
Mrs. Merkel is in nearly daily contact with Obama administration officials who hope she will master the crisis — or, at the very least, win tacit approval for the European Central Bank to step in more forcefully — even though she deflects their demands for more aggressive action.
Treasury Secretary Timothy F. Geithner flew to Germany on Tuesday, meeting first in Frankfurt with the president of the European Central Bank, Mario Draghi, and the president of the Bundesbank, Jens Weidmann. He then spent an hour with Wolfgang Schäuble, his German counterpart, at the Finance Ministry in Berlin. Mr. Geithner said he was “very encouraged by the developments in Europe in the past few weeks.”
Mrs. Merkel’s leadership has come at a high cost for indebted countries, especially those on the periphery, with cuts in public spending biting just as joblessness has surged. Youth unemployment in Spain is nearly 50 percent, a fact Mrs. Merkel raises with domestic audiences when cautiously selling more intervention.
The treaty changes she and President Nicolas Sarkozy of France proposed in Paris on Monday would have been inconceivable at the beginning of the crisis, since it requires states to cede a significant degree of economic sovereignty. It is a process that many observers, in particular the populist British press, say is well underway. German dominance of the euro zone, they say — with Mrs. Merkel as the unofficial but unchallenged leader of Europe — has in fact already arrived.
Silvio Berlusconi’s resignation as Italy’s prime minister was interpreted as an omen for Europe’s German-directed future. And confidential draft proposals of Ireland’s December budget were found to have circulated among lawmakers in Berlin last month before opposition lawmakers in Dublin saw them.
Despite her global prominence, Mrs. Merkel, an East German physicist turned politician, cuts a modest figure in Berlin. She still lives with her media-shy second husband, a quantum chemist, in the same apartment in the central Mitte District that they lived in before she became chancellor. Her daily commute carries her across the former path of the Berlin Wall, a reminder of her years trapped behind it.
The future of the European Union could well be decided at this week’s summit meeting in Brussels. But a routine day in Mrs. Merkel’s schedule here in the German capital illustrates the unique demands on her, as both a leader who is the unlikely fulcrum of the world’s financial future and as someone who must play the role of legislator and party leader.
Last week, she gave a closely watched government address in the historic Reichstag building, where she compared the steps to strengthen the 17-member currency zone to a marathon.
Mrs. Merkel is not a charismatic speaker but she possesses a commanding air. At one point, a buzz of chuckles and chatter rose from the ranks of the opposition Green Party. Mrs. Merkel looked up from her notes, cast a glare at the murmuring politicians seated before her and said, “It appears to be incredibly funny to the Greens. To me, it’s incredibly logical. That’s just the difference.”
Her critics silenced, she continued. When the official transcript of her speech appeared, the withering aside was conspicuously absent, excised from the record.
After the speech, she sat with her fellow members of Parliament, listening to opposition leaders as they railed about her failure to stem the crisis. With the cameras off her for a moment, Mrs. Merkel yawned and slumped slightly in her chair, a rare down moment but one that did not last long. Soon she was holding a series of impromptu whispered discussions, speaking quietly to the economy minister and vice chancellor, Philipp Rösler, and Mr. Schäuble, her powerful finance minister.
After an hour and a half of working the room, she left to go record her weekly podcast, this week on the subject of energy efficiency, and to prepare to receive the chancellor of Austria, Werner Faymann. The two chancellors talked budgets and bailouts over a lunch of beef roulade in the penthouse dining room, joined by the governor of the Austrian National Bank, Ewald Nowotny, and others.
After a joint news conference with Mr. Faymann, Mrs. Merkel climbed into a black Audi sedan to race to the headquarters of her party, the Christian Democratic Union. She hustled past a table with copies of the magazine Silesia Today and the newspaper Süddeutsche Zeitung to address the party’s East and Central German Association, survivors of the forced migration from lost German territories at the end of World War II and their children.
With the ease of a big-city mayor stroking local constituents, Mrs. Merkel smoothly dropped a reference to the margin of re-election for the association chairman. She thanked members by name for their hard work.
Before the crisis began, Mrs. Merkel had the reputation of a caretaker chancellor, a politician who liked to give voters what they wanted and preferred not to create waves. “Perhaps a few of us thought that after German unification there would not be so much more to do,” she said. “We were wrong there.”
Annie Lowrey contributed reporting.
Geithner backs EU crisis plan, stresses ECB role
6:33pm EST
By Luke Baker and David Lawder
BRUSSELS/BERLIN (Reuters) – Treasury Secretary Timothy Geithner threw his weight on Tuesday behind a Franco-German plan to tackle the euro zone’s sovereign debt crisis and said the European Central Bank had to play a major role in any solution.
Geithner offered his support after Standard & Poor’s agency fired a second warning shot at the bloc in 24 hours by threatening to cut the credit rating of its rescue fund.
German Chancellor Angela Merkel and French President Nicolas Sarkozy want to change the EU treaty to impose mandatory penalties on euro zone states that exceed deficit targets, aiming to restore market trust and prevent the crisis spiraling out of control.
Geithner said he was encouraged by moves towards “fiscal union” – under which euro zone states would obey a common set of tight budget rules – and stressed the central role in tackling the crisis of the ECB, which has been reluctant to take decisive steps until governments get to grips with their budget problems.
Speaking after talks in Berlin with German Finance Minister Wolfgang Schaeuble, Geithner said euro zone countries needed reforms to lay the foundations for the economic growth which is essential if Europe is to solve its debt problems.
He also called for “reforms to create the architecture of fiscal union to make monetary union more viable for the long run”. Likewise, governments and central banks needed to offer financial support to protect the European financial system and allow states to borrow at sustainable interest rates.
“The ECB has been playing a central role in this crisis. It’s obviously going to continue to do that. Of course ultimately, these things only get solved by governments and central banks doing what’s necessary, but their rules are different,” Geithner said.
He also met ECB President Mario Draghi in Frankfurt before an EU summit in Brussels on Thursday and Friday, a sign that Washington shares the view that the event may be a decisive moment for the global economy.
Geithner will also meet the leaders of France, Italy, Spain, and EU institutions to press for decisive action.
Draghi has signaled that a euro zone “fiscal compact” could encourage the ECB to act more decisively. It has been reluctant to buy up debt from distressed euro states more aggressively, arguing that doing so would take pressure off governments to fix their finances.
CONTINUING DISAGREEMENTS
A few hours after Sarkozy and Merkel announced they would put their plan involving changes to the EU treaty to the Brussels summit, Standard and Poor’s put the credit ratings of 15 countries, including Germany and France, on review late on Monday for a downgrade by one to two notches.
The U.S.-based agency cited “continuing disagreements among European policy makers on how to tackle the immediate market confidence crisis”.
S&P went a step further on Tuesday, placing the top-notch rating of the euro zone’s 440 billion euro rescue fund, the European Financial Stability Facility (EFSF), on negative watch since it depends on the creditworthiness of the currency bloc’s six AAA-rated countries.
European Council President Herman Van Rompuy, who will chair the summit of the 27-nation European Union this week, proposed giving a bigger, permanent euro zone rescue mechanism the status of a bank that would allow it to access ECB funding.
Germany has so far opposed any such move, which it says would breach a treaty ban on the ECB financing governments.
Van Rompuy said tighter budget oversight sought by Paris and Berlin for the 17-nation euro area could be achieved quickly with only minor tweaks to the EU treaty, that might not require full ratification procedures in many countries.
“To restore market confidence in the euro area, and to ensure the political sustainability of solidarity mechanisms, it is crucial to enhance the credibility of our budget rules (deficit and debt levels) and to ensure full compliance,” he wrote in a report to EU leaders obtained by Reuters.
He also said the issuance of joint euro zone bonds should be a long-term objective, challenging another German red line in a text likely to be the object of heated negotiations.
S&P warned of slowing economic growth amid so much austerity, predicting a 40 percent chance of a fall in euro zone output. A downgrade could automatically require some investment funds to sell bonds of affected states, making those countries’ borrowing costs rise still further.
Merkel brushed off the S & P threat, saying: “What a ratings agency does is its own responsibility.” Her finance minister, Wolfgang Schaeuble, said the wake-up call was S&P’s way of urging European leaders to act.
But Jean-Claude Juncker, chairman of euro zone finance ministers, said he was astonished by S&P’s announcement, which he called “a wild exaggeration and also unfair” because it failed to take account of Italy’s new austerity plan.
In Paris, Sarkozy’s office said S&P had taken its decision last Tuesday, before both the Italian budget and the Franco-German plan for stricter budget rules.
SPANISH BOOST
Sarkozy and Merkel say they want treaty changes to be agreed in March and ratified after France wraps up presidential and legislative elections in June.
They won a boost on Tuesday when incoming Spanish Prime Minister Mariano Rajoy said he would support a new treaty. Although not yet in office, Rajoy is expected to meet Merkel and Sarkozy and outline his policies at a congress of European conservative leaders in Marseille on Thursday.
However, some other EU governments, notably Britain, Ireland and the Netherlands, are reluctant to amend the EU treaty, either due to euroskeptics at home or because they fear losing possible referendums on ratification.
British Prime Minister David Cameron, under pressure from the euroskeptic wing of his Conservative party, said he would demand safeguards, such as ensuring the EU’s market is not distorted by closer cooperation between euro zone countries.
“Euro zone countries do need to come together, do need to do more things together,” he told BBC TV. “If they choose to use the European treaty to do that, Britain will be insisting on some safeguards too. And as long as we get those, then that treaty can go ahead. If we can’t get those, it won’t.”
However, Merkel and Sarkozy said that if countries such as euro outsider Britain blocked a treaty change for all 27 EU members, the 17 states that use the common currency could proceed with an agreement on their own.
(Additional reporting by Michael Shields and Sylvia Westall in Vienna, Catherine Bremer in Paris, Andreas Rinke in Berlin, Tim Castle in London; Writing by Peter Graff, Paul Taylor; and David Stamp)
WASHINGTON, Dec 5, 2011 (AFP)
With Europe’s finances in tatters and the continent battling recession, eurobashing is resurgent in the United States, leading some to warn US public opinion is diverging dangerously from the national interest.
The Greeks, according to billionaire investor Charlie Munger, “don’t want to pay taxes or do much work.”
Intoned in the flattened vowels of the American Midwest, it was a claim that resonated with an arena full of nodding Berkshire Hathaway shareholders in Omaha, Nebraska last April.
And despite Munger’s lack of credentials as a Hellenist, his take on Greece’s woes — and others like it — have a good deal of weight across the United States.
Throughout the crisis, the stereotype of lazy southern Europeans has resurfaced in the United States, as it is in northern Europe.
For every person pointing to statistics showing that Greeks work on average 41 hours a week compared to Americans roughly 34 hours, there are many more pointing to government waste and cultural deficiencies perceived or otherwise.
When the US media talks about remedies for Europe’s crisis, austerity measures are as likely to be portrayed as less prosecco or panettone for Italians this Christmas than a grinding slog ahead.
“When you hear the stereotypes it is very much along the lines of, ‘oh those Greeks, they lived beyond their means and now they are going to have to pay up,’” said Alexei Monsarrat, head of global business and economics at the Atlantic Council.
Nowhere is that view more easily found than in Washington.
Republicans, keen to discredit “big government” and social handouts, warn darkly that the United States could “end up like Europe” if public spending is not cut dramatically and immediately.
“There is a view that the Germans are right: make these people suck it up and tighten their belts, without any appreciation that this is a tightening of belts beyond which any American would put up with,” said Bruce Stokes, an expert in trans-Atlantic economics at the German Marshall Fund.
But Stokes and others on this side of the Atlantic now worry about the implications of blaming all the crisis on lazy and profligate Europeans.
“It confuses the debate and makes it more difficult to manage,” he said.
“You get people saying ‘we don’t want to be another Greece,’ and the reality is Spain was running a surplus before this crisis started, Italy has a huge debt but their deficit was not that bad.”
First and foremost, this view makes US participation in any bailout politically improbable, despite President Barack Obama and others repeatedly stressing the importance of Europe for the health of the US economy.
“It is inexcusable that the US is not considering (a plan) to protect its own economic self interest, to be able to help on this crisis,” said Stokes.
According to Jacob Funk Kirkegaard, a Danish researcher now with Peterson Institute in Washington, the common diagnosis of Europe’s problems leads to at least one fundamental mistake that continues to cause unease.
“A lot of the criticism that we hear here is about why isn’t the ECB doing what the Fed did and why aren’t the Europeans doing what the Treasury did in terms of its crisis management strategy.”
“In some ways it is a legitimate criticism, if you view the European crisis as similar to that in the United States — a financial crisis and a fiscal solvency crisis.
“I would argue that Europe’s is a very different crisis, it is a political crisis, it is about the institutions that the euro area has.”
While financial deals may be about quickly producing a big enough weapon to instill confidence and scare the markets into submission, political deals are about brinkmanship and lengthy wrangling — something Europe has been repeatedly criticized for.
“I think there is a very basic concern about the speed that we have seen this moving,” said the Atlantic Council’s Monsarrat.
“Their complaint has been… there does not seem to be a responsible adult willing to stand up and say, ‘This is how it is going to be,’” he said.
“Unfortunately that is not how Europe works.”
Did Monti give them a raw deal?
Dec 5th 2011, 17:50 by J.H. | ROME
the economist
WELL, the markets liked it. Today, after Italy’s new prime minister, Mario Monti, outlined a three-year package of fiscal adjustments worth €30 billion ($40 billion), the Milan bourse took wing. Shares closed almost 3% up on the day, by far the best performance among the bigger European stock exchanges.
More significantly, perhaps, the yield on Italian sovereign bonds plunged. The spread over safe-haven German debt securities fell below 400 basis points for the first time in more than a month.
The markets’ reaction to Mr Monti’s announcement made for an encouraging start to a decisive week for the euro, and indeed the European Union itself. The package has unquestionably put Italy in a stronger position to face the capital markets next year, when more than €300 billion of its €1.9 trillion debt will need to be refinanced.
It contained yet another raft of austerity measures to add to the many already loaded on to Italians by Silvio Berlusconi’s government. But Mr Monti also (and for the first time) signalled that he was serious about promoting growth in sluggish Italy. Fully €10 billion of the savings are to be reinvested with this aim. The package includes a tax break aimed at encouraging firms to expand their workforces, a liberalisation of shop opening hours and measures to promote infrastructure development.
Not that results are expected any time soon. Mr Monti’s deputy finance minister, Vittorio Grilli (Mr Monti is serving as his own finance minister), said that the government was pencilling in a fall in GDP of up to 0.5% next year, with the outlook flat for 2013.
That, and the risk (noted by Mr Monti) that Italy could go way the way of Greece, will make it harder for Italians to protest at the steps taken by the government. Even so, the draft budget, which was approved in an emergency cabinet session yesterday, arrived in parliament amid widespread dissatisfaction.
There were two main criticisms. Economists and commentators were almost united in decrying the package’s heavy reliance on tax increases— €17-18 billion of the total, according to Mr Grilli. The same criticism was repeatedly levelled at measures introduced by the last government under Mr Berlusconi.
A property tax on first houses—a levy abolished by Mr Berlusconi—is to be reintroduced; capital repatriated under a 2009 amnesty is to be taxed for a second time (a questionably retrospective measure); there are proposed new levies on private aircraft and luxury cars and higher excise on petrol. Just to be sure, the government has tucked up its sleeve the possibility of a 2% rise in value-added tax next September.
The cuts are more timid: the scrapping of a few public bodies and the reduction (but not abolition) of the provincial administrations, with the rest of the savings foisted on to regional governments in a manner also reminiscent of Mr Berlusconi’s approach.
Though they will not be immediate, significant savings will come from the budget’s shake-up of pensions. But that is also a reason for the second main criticism of the package: that, despite Mr Monti’s promises of fairness, too much is being loaded on to the poor. It worried not only the trade unions and the centre-left, but also the Catholic church. A representative of the Italian Bishops’ Conference said the budget “could have been fairer”.
The government has, in effect, abolished Italy’s unique years-in-work system of calculating pensionable age so that, from the beginning of next year, women will be unable to retire before the age of 62 and men before the age of 66. That may not stir much sympathy for Italians in the rest of Europe, where retirement ages are already mostly higher.
But for existing pensioners the budget held a genuinely nasty surprise: only the minimum pensions will be protected from inflation next year. The effect that could have on some of the most vulnerable members of Italian society was acknowledged in dramatic fashion at a press conference when the welfare minister, Elsa Fornero, was overcome by emotion as she announced the decision.
The budget did not include a one-off wealth tax. Nor did it raise the top rate of income tax. But that was because of pressure from Mr Berlusconi’s party. It still has the power to bring down Mr Monti’s new, “technocratic” government in the Senate. And the budget, though endorsed by the cabinet, has yet to be approved in parliament.
S&P Places 15 Euro Nations on Warning for Downgrade
By Mark Deen and Ben Livesey – Dec 5, 2011
Standard & Poor’s said Germany and France may be stripped of their AAA credit ratings as the debt crisis prompts 15 euro nations to be put on review for possible downgrade.
The euro area’s six AAA rated countries are among the nations to be placed on a negative outlook, and their credit ratings may be cut depending on
the result of a summit of European Union leaders on Dec. 9
, S&P said today in a statement. The euro reversed its gains and U.S. Treasuries rose earlier today after the Financial Times reported that the credit-ranking firm planned to reduce six AAA outlooks.
“Systemic stress in the eurozone has risen in recent weeks and reached such a level that a review of all eurozone sovereign ratings is warranted,” S&P said in a statement.
The downgrade warnings come as German Chancellor Angela Merkel and French President Nicolas Sarkozy push for a rewrite of the EU’s governing rules to tighten economic cooperation in a demonstration of unity on ending the debt crisis. With the fate of the currency shared by the 17 euro countries at risk, Merkel and Sarkozy presented a common platform for a Dec. 8-9 summit of EU leaders in Brussels that aims to halt the crisis now in its third year.
“The S&P move is yet another signal that euro area countries must take decisive action to deal with the crisis or else the problems will spread from Greece and others with the most acute fiscal problems to the rest of the euro zone,” said Phillip Swagel, a professor of economics at the University of Maryland’s School of Public Policy who was an assistant secretary for economic policy in the George W. Bush administration. “It is time for Germany and France to act — either to save Greece and the others or to let them fail.”
Germany, Belgium
The firm said that ratings could be cut by one level for Austria, Belgium, Finland, Germany, Netherlands and Luxembourg, and by up to two notches for the other governments. The euro pared gains against the dollar, trading at $1.3401 per euro at 5:01 p.m. in New York after rising as high as $1.3487.
S&P said it maintained the negative outlook for Cyprus, and Greece wasn’t put on “creditwatch.”
In a joint statement, the governments of France and Germany said they “recognize” the move by S&P and “affirm their conviction that the common proposals made today will strengthen coordination of budget and economic policy, and promote stability, competitiveness and growth.”
S&P roiled global equity, bond, currency and commodity markets on Nov. 10, when it sent and then corrected an erroneous message to subscribers suggesting France’s rating had been downgraded.
Stability Facility
Downgrades of Germany and France would affect the rating of the European Financial Stability Facility, the bailout fund for struggling euro member countries that has funded rescue packages for Greece, Ireland and Portugal partially through bond sales. If the EFSF has to pay higher interest on its bonds, it may not be able to provide as much funding for indebted nations.
Yields on EFSF 3.375 percent bonds due in July 2021 2 basis points, snapping a five-day rally, to 3.6 percent, according to Bloomberg prices.
“Negative news is going to continue to spur rallies in the Treasury markets, at least until the ECB steps in to end this mess once and for all,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the announcement. “With the euro currency in a state of flux, the U.S. markets remain the only true safe haven.”
U.S. Downgrade
S&P downgraded the U.S.’s AAA credit rating by one level to AA+ for the first time Aug. 5, citing the nation’s political process and criticizing lawmakers for failing to cut spending or raise revenue enough to reduce record budget deficits.
Investors nevertheless sought Treasuries after the S&P rating cut sparked financial market turmoil. Treasuries gained 6.4 percent last quarter, their best performance since the last three months of 2008, according to Bank of America Merrill Lynch index data.
The rating company’s decision on the U.S. was flawed by a $2 trillion error, according to the Treasury Department. S&P disputed the Treasury’s assertions and said using the department’s preferred spending measures in its analysis didn’t affect its credit grade.
Moody’s Investors Service and Fitch Ratings affirmed their AAA credit ratings on Aug. 2, the day President Barack Obama signed a bill ending an impasse with lawmakers over raising the nation’s debt ceiling.
Federal Reserve Chairman Ben S. Bernanke said Treasury securities remain a core holding for investors. “The downgrade didn’t scare off any investors,” and the action, along with the prospect of other downgrades, hasn’t done “significant damage” to the economy, Bernanke said at a Nov. 10 at a town-hall-style event in El Paso, Texas.
German bunds are underperforming Treasuries for the first time since the European debt crisis began in 2009.
Best-Performing
Treasuries due in 10 years or more are 2011’s best- performing sovereign securities, returning 26 percent as of Nov. 30, according to Bloomberg/EFFAS indexes. German 30-year bunds yielded more than their U.S. peers last month for the first time since May 2009 as the government was only able to find buyers for 65 percent of a 6 billion euro ($8.1 billion) offering on Nov. 23, its worst auction in 16 years.
Credit-default swaps tied to France climbed 4 basis points on Dec. 2 to 196 basis points, while contracts insuring against a default on Germany’s debt were about unchanged 97 basis points, CMA data show. That compares with 51 basis points for credit swaps on the U.S. and 90 basis points for the U.K.
A basis point on a credit-swap contract protecting $10 million of debt for five years is equivalent to $1,000 a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Bond yields of countries stripped of their AAA ratings since 1998 have historically been little changed following the credit grade change, according to an Oct. 28 report from JPMorgan Chase & Co. analysts led by Terry Belton, global head of fixed-income and foreign-exchange research. The yield on 10- year Japanese government debt rose 10 basis points the week after it was cut to Aa1 by Moody’s in November 1998. The interest rate declined 3 basis points following the cut by S&P to AA+ in February 2001.
Dec. 4, 2011, 6:57 p.m. EST
Italy’s government approves austerity plan
SYDNEY (MarketWatch) — The Italian government approved a three-year austerity plan late Sunday, ahead of a crucial week for European leaders’ campaign to save the euro zone from collapse. “This is essential to reinforce the credibility on the Italian economy but also to regain control on the very high debt and alleviate the burden on future generations of Italians,” vice president of the European Commission in charge of economic and monetary affairs and the euro, Olli Rehn, said in a statement late Sunday. Rehn said the package, which contains spending cuts, tax hikes and pension reforms, “is crucial to keep the momentum in economic reform and in the political renewal.”
Tingkat Pengangguran AS Tercatat Terendah
Sabtu, 3 Desember 2011 11:03 wib
okezone
WASHINGTON – Tingkat pengangguran Amerika Serikat (AS) turun ke level terendahnya dalam dua setengah tahun terakhir pada bulan November seiring terciptanya lapangan kerja baru.
Departemen tenaga kerja AS menuturkan, data tenaga kerja meningkat sebanyak 120.000 pekerjaan. Atau setara dengan 8,6 persen, ini merupakan lebel terendah sejak Maret 2009, sementara pada Oktober pertumbuhan tercatat sembilan persen.
Ini adalah penurunan bulanan terbesar sejak Januari. Penurunan itu terjadi karena angkatan kerja berkurang. Survei yang dilakukan departemen tenaga kerja juga menunjukan adanya penurunan jumlah pengangguran.
“Perekonomian masih melaju ke arah yang benar,” kata analis TD Securities Millan Mulraine di New York seperti dikutip dari Reuters, Sabtu (3/12/2011).
“Namun, tes akhir dari keberlanjutan pemulihan bagi perekonomian untuk menciptakan sejumlah pekerjaan yang cukup untuk mempertahankan tingkat konsumsi harus menonjol. Pada saat ini, laporan menunjukan hal ini mengalami pelemahan pendek,” katanya.
Meskipun ada penambahan dalam jumlah pekerjaan yang tercipta terkonsentrasi di sektor ritel, kenaikan lapangan kerja melampaui yang terjadi pada bulan Oktober, yang direvisi naik 100.000 meningkat. Secara keseluruhan, sebanyak 72.000 pekerjaan yang muncul pada bulan Oktober dan September. Itu lebih banyak dari yang dilaporkan sebelumnya. (//wdi)
Unemployment falls to 8.6% as US adds 120,000 jobs in November
Jobless figures lowest since March 2009 – but Republicans say rate is still too high and Obama’s policies are not working
guardian uk
Unemployment in the US fell to 8.6% in November, its lowest level since March 2009, as private employers continued to add jobs at a healthy pace.
The government’s closely watched non-farm payroll figures rose by 120,000 last month. Growth was driven by private companies, which added 140,000 jobs. Cuts in the public sector led to the loss of 20,000 jobs, the US Department of Labor reported on Friday.
The unemployment rate fell to 8.6% in November from 9.0% the previous month. The rate is the lowest since March 2009, when it was also 8.6%.
The drop in unemployment figures is a welcome boost for Barack Obama going into an election year. Recent political history shows that no president has managed to win re-election with unemployment as high as 9%, where it had been stuck.
In a statement from the White House, Alan Krueger, chairman of the council of economic advisers, said: “Today’s employment report provides further evidence that the economy is continuing to heal from the worst downturn since the Great Depression. But the pace of improvement is still not fast enough given the large job losses from the recession that began in December 2007.”
The Department of Labor revised its October figure to show a gain of 100,000 from a previously reported 80,000. September’s numbers, too, were revised up to 210,000 from 158,000.
Some industries and some groups fared better than others: retail added 50,000 jobs, leisure and hospitality jobs rose by 22,000, and professional and business services saw a gain of 33,000. Healthcare jobs rose 17,000.
Although the White House can take no comfort until a clear downward trend in unemployment is established, it is a bonus for Obama in the short term in his battle with the Republicans over extending the payroll tax cut beyond December 31.
The president can conceivably claim that his policies are working and that failure to extend the tax breaks risks sending the downward trend into reverse.
Krueger said:”It would be a setback for the economy and American families if Congress were to allow extended unemployment benefits to expire at the end of the year.”
Republicans in Congress are in a bind. As the party of tax cuts, they do not want to be seen as blocking the tax breaks, but at the same time do not want to support increased spending. Reflecting the confusion, the Senate on Thursday night blocked both a Democratic and Republican tax plan, with many Republicans voting to kill off their own party leadership’s proposals.
Negotiations are underway between Democratic and Republican leaders in Congress to find a compromise that will allow the tax breaks to continue.
The House speaker, John Boehner, who on Thursday for the first time came out in support of extending the tax breaks, welcomed the unemployment drop, but maintained the figure was still too high.
“As you may remember, the Obama administration promised unemployment would stay below 8% if its ‘stimulus’ was enacted. That promise has gone unfulfilled,” Boehner said.
One of the leading presidential candidates, Mitt Romney, told Fox: “It’s very good news, obviously, going into the holiday season. People are shopping again. It’s very good news that the unemployment rate is down. People are going back to work.
“But look: overall, the president’s record on the economy – it’s been miserable.”
Ken Goldstein, economist at the Conference Board in New York, said the figures were encouraging but that the recovery remained fragile.
“We are not near levels that economists would call robust growth. There’s a chance we could be there by this time next year,” he said.
Goldstein said the figures added further evidence that younger men were finally finding jobs, but said the numbers for long-term unemployed remained stubbornly high at 6 million.
“This is good news on unemployment. Consumer confidence has been rising as well since the summer, but I think the lack of wage growth could put a damper on recovery,” he said.
The unemployment rate for adult men fell by 0.5% to 8.3% in November. The jobless rate for whites (7.6%) also declined, while the rates for adult women (7.8%), teenagers (23.7%), black people (15.5%), and Hispanics (11.4%) showed little or no change. The jobless rate for Asians was 6.5%.
The number of people employed part-time for economic reasons – sometimes referred to as involuntary part-time workers – dropped by 378,000 over the month to 8.5 million.
Friday’s report also showed Americans’ hourly earnings declined by 2¢ to $23.18 in November. Wages are up by 1.8% over the past 12 months, below overall inflation.
PARIS, Dec 2, 2011 (AFP)
France and Germany will push for a new European Union treaty to impose tough budgetary discipline on the debt-ravaged eurozone, President Nicolas Sarkozy declared ahead of a critical week for the euro.
The French leader was to meet Britain’s Prime Minister David Cameron on Friday to discuss the crisis and then Germany’s Chancellor Angela Merkel on Monday to agree a joint Franco-German proposal to save the single currency.
Then, on December 8 and 9, all 27 European leaders will meet at the EU Summit in Brussels, a meeting which some observers have billed as their last chance to restore the credibility of eurozone economic governance.
In a landmark speech Thursday in front of 5,000 cheering supporters, Sarkozy warned that the developed world was entering a “new economic cycle” dominated by debt reduction, heralding tough times ahead for jobs and business.
“Europe will have to make crucial choices in the weeks to come,” he warned in the southern port city of Toulon, adding: “Europe is not a choice, it is a necessity, but it needs to be rethought, refounded.”
“We must confront with total solidarity those who doubt the stability of the euro and speculate on its break-up,” he declared.
“France is fighting with Germany for a new treaty. More discipline, more solidarity, more responsibility … true economic government” he said, urging members to adopt a “Golden Rule” obliging them to balance their budgets.
The stability of the European economy has been rocked by a sovereign debt crisis spreading from the eurozone’s highly indebted peripheral states like Greece and Ireland towards major economies such as Spain and Italy.
France has also seen borrowing costs rise, and ratings agencies have warned that its prized Triple-A status is at risk — a potential humiliation for Sarkozy six months before he is due to seek re-election.
European leaders have struggled to convince markets that they will be able to stave off the risk of a massive default that could bring down banks, cause a global credit crunch and bring down their single currency.
Next week’s Brussels summit is now seen as key to halting the crisis, but there have been reports that the eurozone’s two biggest players — France and Germany — are at odds over which course to take.
French officials have been pushing for the European Central Bank to become the eurozone’s lender of last resort — effectively permitting it to print money in order to buy up member states’ debt and relieve fiscal pressure.
But this is anathema to Germany, which nurses grim memories of inter-war hyperinflation and insists the ECB should stick to its price stability mandate.
Sarkozy appeared to partially concede this point, saying the bank should remain “independent” but added that he was sure that it would act.
“It is for it to decide how and with what means. That’s its responsibility. No one doubts that it will meet it, and I welcome what it has begun to do,” Sarkozy said, in comments that observers said risked riling Berlin.
ECB chief Mario Draghi had already warned Thursday the central bank cannot act beyond its mandate — although he left the door open to a more activist role if states agreed tougher fiscal rules of the kind Merkel wants.
Some EU members have opposed the idea of a new treaty, which would take time to agree and might trigger referendums in some countries — votes that governments would struggle to win against a backdrop of economic austerity.
Sarkozy said the existing Maastricht Treaty had proved “imperfect” as it allowed states with lax budget discipline to escape punishment. Germany is pressing for automatic sanctions to be imposed on backsliders.
Eurogroup signs off on 8bn euro aid payment
29 Nov 2011
Eurozone finance ministers agreed on Tuesday to release an 8bn euro aid payment to Greece, part of an 110bn euro package of support agreed with the government last year, an EU diplomat said.
The joint EU/IMF payment is the sixth installment of loans to help Greece finance itself since being cut off from financial markets. Without the payment, the country risks going bankrupt.
The payment was dependent on a written commitment from Greece that it would meet its obligations to cut its budget deficit and keep finances in check.
“The Eurogroup endorsed the payout of the sixth tranche to Greece”, the diplomat said.
The payment has been held up for a month because of delays in Greece’s commitment to cut spending and increase taxes. (Reuters)
Central banks act as euro zone crisis rages
11:09am EST
By Robin Emmott and Kirsten Donovan
BRUSSELS/LONDON (Reuters) – The world’s major central banks acted jointly on Wednesday to provide cheaper dollar liquidity to starved European banks facing a credit crunch as the euro zone’s sovereign debt crisis threatened to bring financial disaster.
The surprise emergency move by the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the central banks of Britain, Canada and Switzerland recalled coordinated action to steady global markets in the 2008 financial crisis.
The euro and European shares surged on the news, which came after euro zone finance ministers agreed to ramp up the firepower of their bailout fund but acknowledged they may have to turn to the International Monetary Fund for more help.
In a related move, Italy’s central bank started emergency cash tenders for banks which have been squeezed particularly hard in recent weeks as Rome’s borrowing costs have soared towards 8 percent, a level seen as unaffordable in the long term.
“We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union,” Economic and Monetary Affairs Commissioner Olli Rehn said as EU finance ministers met.
Two years into Europe’s debt crisis, investors are fleeing the euro zone bond market, European banks are dumping government debt, south European banks are bleeding deposits and a recession looms, fuelling doubts about the survival of the single currency.
Euro zone leaders have agreed belatedly on one half-measure after another but have failed to restore confidence and now face a crunch moment at a December 9 Brussels summit seen by some analysts as a make-or-break moment for the euro.
Finance ministers agreed on Tuesday night on detailed plans to leverage the European Financial Stability Mechanism (EFSF), but could not say by how much because of rapidly worsening market conditions, prompting them to look to the IMF.
“We are now looking at a true financial crisis — that is a broad-based disruption in financial markets,” Christian Noyer, France’s central bank governor and a governing council member of the European Central Bank, told a conference in Singapore.
Italian and Spanish bond yields resumed their inexorable climb towards unsustainable levels on Wednesday, as markets assessed the rescue fund boost as inadequate.
“It must also be remembered that the EFSF is already funding at very wide (borrowing) levels over Germany, struggled in its last auction to raise the required funds and would have its rating put under severe pressure by any rating downgrade of France,” Rabobank strategists said in a note.
“This must call into question any plans related to the EFSF. It is yesterday’s solution and the market has simply moved on.”
IMF TO MATCH?
The 17-nation Eurogroup adopted detailed plans to insure the first 20-30 percent of new bond issues for countries having funding difficulties and to create co-investment funds to attract foreign investors to buy euro zone government bonds.
Both schemes would be operational by January with about 250 billion euros from the euro zone’s EFSF bailout fund available to leverage after funding a second rescue program for Greece, Eurogroup chairman Jean-Claude Juncker said.
The aim was for the IMF to match and support the new firepower of the EFSF, Juncker told a news conference.
But with China and other major sovereign funds cautious about investing more in euro zone debt, EFSF chief Klaus Regling said he did not expect investors to commit major amounts to the leveraging options in the next days or weeks, and he could not put a figure on the final size of the leveraged fund.
“It is really not possible to give one number for leveraging because it is a process. We will not give out a hundred billion next month, we will need money as we go along,” Regling said.
Most analysts agree that only more radical measures such as massive intervention by the ECB to buy government bonds directly or indirectly can staunch the crisis.
The prospects of drawing the IMF more deeply into supporting the euro zone are uncertain. Several big economies are skeptical of European calls for more resources for the global lender.
The United States, Japan and other Asian states are hesitant to chip in unless Europe commits to first use its own resources to fix the problem and peripheral euro zone states map out more concrete steps on fiscal and economic reforms.
“Nobody wants to spend money on something they doubt would work,” a G20 official said.
“That goes not only for Europe but for any other country outside Europe. The threshold for seeking IMF help is quite high. Those seeking help need to be willing to give up some of their jurisdiction on fiscal policy and willing to undergo painful reform. Mere pledges and speeches won’t do.”
MONTI DENIES IMF BID
New Italian Prime Minister Mario Monti said he had received a very positive reaction from the euro zone ministers to his fiscal plans, although he was told to take extra deficit cutting measures beyond an austerity plan already adopted to meet its balanced budget promise in 2013.
He said he had met the head of the International Monetary Fund’s European department on Wednesday but Italy had not considered taking help from the IMF.
Reuters reported on Tuesday that Italian and IMF officials have held preliminary discussions on some form of financial support for Rome, although no decision has been taken, according to sources familiar with the talks.
Italian bond yields are now above the levels at which Greece, Ireland and Portugal were forced to apply for EU/IMF bailouts, and Rome has a wall of issuance due from late January to roll over maturing debt.
The Eurogroup ministers agreed to release their portion of an 8 billion euro aid payment to Greece, the sixth installment of 110 billion euros of EU/IMF loans agreed last year and necessary to help Athens stave off the immediate threat of default.
Juncker said the money would be released by mid-December, once the IMF signs off on its portion early next month.
G20 leaders promised this month to boost the global lender’s warchest. However, another G20 source said policymakers had made no progress since then in efforts to boost IMF resources, which at current levels may not be sufficient to overcome the crisis.
EU sources said one option being explored is for euro system central banks to lend to the IMF so it can in turn lend to Italy and Spain while applying IMF borrowing conditions.
With Germany opposed to the idea of the ECB providing liquidity to the EFSF or acting as a lender of last resort, the euro zone needs a way of calming markets and fast.
The ECB shows no sign yet of responding to widespread calls to massively increase its bond-buying although EU officials said it may have to shift, even if the EFSF gained IMF help.
A Reuters poll of economists showed a 40 percent chance of the ECB stepping up purchases with freshly printed money within six months, something it has opposed so far.
The poll forecast a 60 percent chance of an ECB rate cut to 1.0 percent next week and a big majority of economists said they expect the central bank to announce new long-term liquidity tenders to help keep banks afloat at its next meeting on Dec 8.
EU powerhouse Germany has pinned its efforts on a drive for closer fiscal integration among euro zone members with coercive powers to veto euro zone members’ budgets that breach EU rules.
Chancellor Angela Merkel told lawmakers she would not make a deal at a December 9 European Union summit to drop resistance to joint euro zone bonds in exchange for progress on strengthening fiscal rules, MPs quoted her as saying.
(Additional reporting by Marius Zaharia in London, Erik Kirschbaum in Berlin, Robin Emmott and John O’Donnell in Brussels, Saeed Azhar and Kevin Lim in Singapore; Writing by Paul Taylor/Mike Peacock; Editing by Janet McBride)
Nov. 29, 2011, 5:47 p.m. EST
EU agrees to EFSF leverage expansion rules
SAN FRANCISCO (MarketWatch) — European finance ministers agreed late Tuesday on terms for two options to expand the capacity of the region’s bailout fund, according to a statement released by officials following a meeting in Brussels. Under the first option, bond holders would get partial risk protection of 20% to 30% backed by the European Financial Stability Facility. Under the second option, one or more so-called co-investment funds would be created allowing for the combination of public and private funding to buy bonds on the primary and secondary markets. Both options are expected to be ready to use by early 2012. Also, president of the Eurogroup finance ministers Jean-Claude Juncker said ministers agreed to a sixth disbursement of Greek bailout funds and that they will be available by mid-December.
Washington (ANTARA News/AFP) – Amerika Serikat (AS) menegaskan bahwa Eropa perlu bertindak segera untuk menyerang krisis utang zona euro sehubungan Presiden AS, Barack Obam,a menjadi tuan rumah pertemuan puncak dengan para pejabat Eropa.
Konperensi Tingkat Tinggi (KTT) AS-Eropa dilakukan di tengah peringatan baru yang mencolok tentang kedalaman gejolak zona euro dan kekhawatiran baru bahwa paparan ke Eropa dari bank-bank AS bisa memukul pemulihan ekonomi AS yang lambat.
“Ini adalah sesuatu yang mereka butuhkan untuk menghentikan krisis dan mereka memiliki kapasitas untuk mengentikannya,” kata jurubicara Gedung Putih, Jay Carney.
Ia menimpali, “Posisi kami adalah bahwa hal itu penting bagi Eropa untuk bergerak dengan kekuatan dan ketegasan sekarang, terutama dengan pemerintah-pemerintah baru datang ke tempatnya di Italia, Yunani dan Spanyol.”
Obama menerima tamu Presiden Dewan Eropa, Herman Van Rompuy, Presiden Komisi Eropa, Jose Manuel Barroso, Perwakilan Tinggi, Catherine Ashton, dan para pejabat untuk pembicaraan dan makan siang di Gedung Putih.
Pembicaraan, juga termasuk Menlu AS Hillary Clinton dan Menteri Keuangan Timothy Geithner, dibuka dengan singkat dan kemudian menyimpulkan dengan pernyataan dari kedua belah pihak.
http://www.antaranews.com/berita/286880/eropa-harus-bertindak-tegas-atasi-krisis-utang
Sumber : ANTARANEWS.COM
WASHINGTON, Nov 28, 2011 (AFP)
Ratings agency Fitch reaffirmed the United States’ top credit rating on Monday, but downgraded the outlook to negative as it projected slow growth, political stalemate and rising levels of debt this decade.
Citing “still strong economic and credit fundamentals,” Fitch nonetheless said that the recent failure of Congress to reach a short-term deficit cutting deal could delay more fundamental reforms.
Fitch added that there was “considerable uncertainty surrounding the economy’s potential output.”
Taken together, political failures and slower growth could result in a full-fledged downgrade.
“The negative outlook indicates a slightly greater than 50 percent chance of a downgrade over a two-year horizon.”
Fitch said a key trigger would be the government’s failure to reach agreement in 2013 on a “credible deficit reduction plan” as the economy slows. That, Fitch said “would likely result in a downgrade of the US sovereign rating.”
“The longer productive capacity remains idle and unemployment high, the greater the likelihood that the loss of output (and tax receipts) is greater than currently estimated.”
Fitch said that had “negative implications for the medium to long-term fiscal outlook.”
Fitch projected federal debt would rise to 90 percent of GDP by the end of the decade.
“In Fitch’s opinion, such a level of government indebtedness would no longer be consistent with the US retaining its ‘AAA’ status despite its underlying strengths.”
November 28, 2011
Pressure Mounts for Urgent Action to Avert a Euro Zone Split
By LIZ ALDERMAN AND STEPHEN CASTLE
PARIS — European leaders faced mounting pressure Monday to overcome divisions and move ahead quickly with new plans to prevent the euro zone from fracturing, as warnings multiplied that the crisis could endanger the global economy and cause credit to dry up in the banking system.
The Organization for Economic Cooperation and Development said Monday that the euro crisis remained “a key risk to the world economy.” The research group, which is based in Paris, sharply cut its forecasts for wealthy Western countries and cautioned that growth in Europe could come to a standstill.
The warning came just hours after Moody’s Investors Service issued its own bleak report on Europe’s sovereign debt crisis. Moody’s, a leading credit rating agency, warned that the problems could lead multiple countries to default on their debts or exit the euro, which would threaten the credit standing of all 17 countries in the currency union.
Despite the gloomy predictions, stock indexes rose sharply in Europe and Asia, and were surging in Wall Street trading, and the euro strengthened, on hopes that European leaders were working on a new approach to resolve the crisis.
Finance ministers from the euro zone were to meet Tuesday in Brussels to try to agree on how to increase the firepower of their bailout fund, and also hope to sign off on an €8 billion, or $10.7 billion, loan installment to prevent Greece from defaulting. A proposal for a Europe-wide solution to the crisis is expected before a summit meeting of European Union leaders on Dec. 9.
Concerns about the European crisis hung over a meeting Monday at the White House between President Barack Obama and three European leaders: José Manuel Barroso, the president of the European Commission; Catherine Ashton, the European foreign policy chief; and Herman Van Rompuy, the president of the European Council.
Those concerns also surfaced during a White House news briefing, when a questioner asked the press secretary, Jay Carney, whether the White House shared the view that “the euro is in a particularly perilous state, perhaps poised to collapse within days.”
Without going that far, Mr. Carney replied that “our position is and has been that it’s critical for Europe to move with force and decisiveness now, particularly with new governments coming into place in Italy, Greece and Spain.”
He added: “We continue to believe that this is a European issue, that Europe has the resources and capacity to deal with it and that they need to act decisively and conclusively to resolve this problem.”
In Brussels, European officials rejected suggestions that the euro was days away from breaking up, pointing out that countries have completed most of their bond issuance for this year, though they know the respite will only be a matter of weeks.
Belgium had to pay higher interest rates to borrow money in the markets on Monday, illustrating how the country’s failure to form a government has increased concerns about its ability to tackle its debts. The yield on 10-year bonds was 5.66 percent as opposed to 4.37 percent last month.
Concern also mounted regarding Italy, where borrowing rates skyrocketed at a bond auction Monday for the second consecutive business day. The interest rate Italy had to pay to get investors to part with their cash for 12-year issues soared to 7.20 percent, a full 2.7 percentage points higher than the previous similar auction.
There was alarm in several capitals Monday over French-German plans to create strict new budget rules for countries that use the common currency — something seen in Berlin as a precondition of further steps to save the euro zone.
On Sunday, France, Germany and Italy signaled they were ready to agree on new rules to enforce budget discipline in the euro zone, and to encourage more coordination of economic and fiscal policy.
On Monday the German Finance Ministry published comments from the finance minister, Wolfgang Schäuble, suggesting that this could be done by amending a protocol of the E.U. treaty, though officials said this would still need approval by all 27 E.U. members.
An alternative, favored by some French policy makers, is to reach agreement among euro zone nations outside the framework of the E.U. treaty. Some news reports have suggested an even smaller group might be involved.
Finland’s prime minister, Jyrki Katainen, made it clear Monday that he did not favor a solution outside the current system, a view echoed by the prime minister of Luxembourg, Jean-Claude Juncker, who is also chairman of the Eurogroup, a forum for the finance ministers of the euro zone.
“I don’t think we would be best advised to look for instruments outside the treaty,” Mr. Juncker said, according to Reuters. “Trying to divide even the 17 member states of the euro area and having them organized in two different groupings seems to me to be a very bad idea.”
With growing signs of a looming credit crunch, the O.E.C.D. report warned that Europe’s politicians had so far moved too slowly to prevent the crisis from spreading. Its report said that the problems that started in Greece almost two years ago would start to infect even rich European countries thought to have relatively solid public finances if leaders dallied, a development that would “massively escalate economic disruption.”
“We are concerned that policy makers fail to see the urgency of taking decisive action to tackle the real and growing risks to the global economy,” the O.E.C.D.’s chief economist, Pier Carlo Padoan, said.
In its warning, Moody’s underlined that “the probability of multiple defaults by euro area countries is no longer negligible,” and that “a series of defaults would also increase the likelihood of one or more members not simply defaulting, but also leaving the euro area.”
Efforts at greater European integration have so far been overshadowed by the failure of euro zone countries to follow through on promises made back in July to bolster mechanisms to fight the crisis. In particular, the authorities have been slow to implement an expansion of the bailout fund, known as the European Financial Stability Facility, that was meant to raise money by issuing bonds backed by the stronger European countries and loan it to shakier countries facing high interest rates on their debt.
The head of the fund, Klaus Regling, has said that, under current conditions, the leveraging of the resources left at his disposal — thought to be around €250 billion — will be in a multiple of three or four times. That means that the €1 trillion target is likely to be a maximum. If the guidelines are approved by euro zone finance ministers, the expanded fund could start to operate early next year.
The O.E.C.D. called on politicians to get the expanded bailout fund running as fast as possible, and said the European Central Bank must be allowed to step in more than it has to stem the crisis.
“We know there is a lot of disagreement, but the E.C.B. should decide to send a very strong message to markets by saying, ‘We will put a cap on interest rates and we will do that credibly because we have the resources to do that,”’ Mr. Padoan told Reuters.
Germany last week made clear its opposition to issuance of a common bond that would be backed by euro zone countries, something investors said could help calm the crisis during the long time that it will take to expand the rescue fund.
The government in Berlin has also resisted calls to allow the E.C.B. to act as a lender of last resort to put out financial fires during the transition to a more federalist structure in the euro zone.
Many observers expect the next fire to come from Italy, where investors are so nervous about the country’s debts that the International Monetary Fund took the unusual step Monday of denying reports in the Italian press that it was in talks with Rome on a program for I.M.F. financing.
But observers say eventual I.M.F. involvement is likely.
The fund has about $390 billion available to lend worldwide — a sum too small to help Italy, whose economy is seven times the size of Greece’s. Thus, in recent weeks, European leaders have floated numerous ways to augment I.M.F. resources. The fund could oversee a loan package that uses E.C.B. or European rescue fund money. It could allow Italy to borrow by asking all its member nations to contribute. Cash-rich, emerging-market countries like Brazil and China have also signaled their willingness to provide more money to the fund.
“The odds that the I.M.F. will step in have increased substantially,” said Domenico Lombardi, a senior fellow at the Brookings Institution, a research group in Washington. “By having a program with the I.M.F., the newly established Italian authorities will be able to isolate the implementation of an ambitious reform agenda from the intrinsically unstable political outlook. The I.M.F. provides an external anchor, boosting the chances that a reformist agenda will be implemented,” Mr. Lombardi said.
In the coming days, the I.M.F. is due to send a team of observers to Italy to verify the implementation of an overhaul program agreed to by the government of Silvio Berlusconi, who recently stepped down as prime minister.
Stephen Castle reported from Brussels. Reporting was contributed by Steven Erlanger in Paris, and Annie Lowrey and Brian Knowlton in Washington.
WASHINGTON, Nov 28, 2011 (AFP)
The euro regained ground on the dollar Monday propelled by rumors that Italy was negotiating a rescue package with the IMF and that EU leaders were moving toward a crisis resolution deal.
But a denial by the International Monetary Fund, and a dire warning from the OECD that Europe’s economies are one step away from plunging into recession, tempered the rise.
At 2200 GMT the euro was at $1.3318, up from $1.3240 late Friday.
Earlier it traded near the $1.34 level.
The euro also picked up to 103.83 yen from 102.90 yen, while the dollar edged up to 77.97 yen from 77.72.
Underpinning the euro’s tentative rebound was hope that meetings by Europe’s top finance officials on this week will offer a convincing path out of crisis for the eurozone.
“With Eurozone finance ministers meeting in Brussels tomorrow and EU finance Ministers meeting on Wednesday, there is a realistic chance of progress and that is the main reason why the euro has rallied,” said Kathy Lien of currency specialists GFT.
However, she added, “until there is substance to any of the rumors and speculation in Europe, euro traders should be cautious. With Italian bonds being auctioned off on Tuesday and Spanish and French bonds being auctioned on Thursday, expect more volatility in the euro.”
The dollar eased to 0.9224 Swiss francs from 0.9299. The British pound rose to $1.5508, from $1.5436 Friday.
EU May Shield Banks From Costs During Crisis
Q
By Aoife White and Esteban Duarte – Nov 26, 2011 3:56 AM GMT+0700
bloomberg
Banks in states roiled by Europe’s sovereign-debt crisis may be partly shielded from extra costs when they seek government guarantees, according to two people familiar with the situation.
The European Commission will publish rules on state aid for lenders that may dilute the effect of turmoil in the euro area on the fees that banks have to pay for guarantees on their loans and bonds, said the people who couldn’t be identified because the discussions aren’t public. Under the plans, the formula for setting the fees would reduce the impact of soaring debt- insurance costs for the country giving the backstops, one of the people said.
“Renewed tensions” in financial markets are forcing European Union regulators to extend into 2012 special state aid rules for banks that have allowed governments to inject billions of euros into the industry, said EU Competition Commissioner Joaquin Almunia this month. He said he was planning to “clarify and update the rules on pricing and other conditions.”
The cost of insuring against default on European sovereign and financial company debt rose to records as the euro-region’s crisis deepened with Italy paying the highest yields to sell short-dated bills in 14 years. The Markit iTraxx Financial Index on senior debt of 25 banks and insurers increased to 354 and the subordinated gauge gained six basis points to 601, according to JPMorgan Chase & Co. An increase signals worsening perceptions of credit quality.
Shrunk Balance Sheets
EU governments spent 757 billion euros ($1 trillion) in state guarantees for banks from October 2008 until December 2010. EU regulators have ordered banks that received bailouts to shrink their balance sheets and change their business models.
Under current rules, a bank that gets a state guarantee pays a fee to the government according to a pricing formula partly based on the lender’s credit-default swaps between January 2007 and August 2008.
The revised measures, to be published on Nov. 30, will adjust the price of the guarantee and use a three-year period for the lender’s credit-default swaps to mitigate the effects of higher prices of the contracts, the people said.
A basis point on a credit-default swap protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
Is this really the end?
Unless Germany and the ECB move quickly, the single currency’s collapse is looming
Nov 26th 2011 | from the print edition
EVEN as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.
A euro break-up would cause a global bust worse even than the one in 2008-09. The world’s most financially integrated region would be ripped apart by defaults, bank failures and the imposition of capital controls (see article). The euro zone could shatter into different pieces, or a large block in the north and a fragmented south. Amid the recriminations and broken treaties after the failure of the European Union’s biggest economic project, wild currency swings between those in the core and those in the periphery would almost certainly bring the single market to a shuddering halt. The survival of the EU itself would be in doubt.
Yet the threat of a disaster does not always stop it from happening. The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship. The odds of a safe landing are dwindling fast.
Markets, manias and panics
Investors’ growing fears of a euro break-up have fed a run from the assets of weaker economies, a stampede that even strong actions by their governments cannot seem to stop. The latest example is Spain. Despite a sweeping election victory on November 20th for the People’s Party, committed to reform and austerity, the country’s borrowing costs have surged again. The government has just had to pay a 5.1% yield on three-month paper, more than twice as much as a month ago. Yields on ten-year bonds are above 6.5%. Italy’s new technocratic government under Mario Monti has not seen any relief either: ten-year yields remain well above 6%. Belgian and French borrowing costs are rising. And this week, an auction of German government Bunds flopped.
The panic engulfing Europe’s banks is no less alarming. Their access to wholesale funding markets has dried up, and the interbank market is increasingly stressed, as banks refuse to lend to each other. Firms are pulling deposits from peripheral countries’ banks. This backdoor run is forcing banks to sell assets and squeeze lending; the credit crunch could be deeper than the one Europe suffered after Lehman Brothers collapsed.
Add the ever greater fiscal austerity being imposed across Europe and a collapse in business and consumer confidence, and there is little doubt that the euro zone will see a deep recession in 2012—with a fall in output of perhaps as much as 2%. That will lead to a vicious feedback loop in which recession widens budget deficits, swells government debts and feeds popular opposition to austerity and reform. Fear of the consequences will then drive investors even faster towards the exits.
Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.
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Germany’s cautious chancellor, Angela Merkel, can be ruthlessly efficient in politics: witness the way she helped to pull the rug from under Silvio Berlusconi. A credit crunch is harder to manipulate. Along with leaders of other creditor countries, she refuses to acknowledge the extent of the markets’ panic (see article). The European Central Bank (ECB) rejects the idea of acting as a lender of last resort to embattled, but solvent, governments. The fear of creating moral hazard, under which the offer of help eases the pressure on debtor countries to embrace reform, is seemingly enough to stop all rescue plans in their tracks. Yet that only reinforces investors’ nervousness about all euro-zone bonds, even Germany’s, and makes an eventual collapse of the currency more likely.
This cannot go on for much longer. Without a dramatic change of heart by the ECB and by European leaders, the single currency could break up within weeks. Any number of events, from the failure of a big bank to the collapse of a government to more dud bond auctions, could cause its demise. In the last week of January, Italy must refinance more than €30 billion ($40 billion) of bonds. If the markets balk, and the ECB refuses to blink, the world’s third-biggest sovereign borrower could be pushed into default.
The perils of brinkmanship
Can anything be done to avert disaster? The answer is still yes, but the scale of action needed is growing even as the time to act is running out. The only institution that can provide immediate relief is the ECB. As the lender of last resort, it must do more to save the banks by offering unlimited liquidity for longer duration against a broader range of collateral. Even if the ECB rejects this logic for governments—wrongly, in our view—large-scale bond-buying is surely now justified by the ECB’s own narrow interpretation of prudent central banking. That is because much looser monetary policy is necessary to stave off recession and deflation in the euro zone. If the ECB is to fulfil its mandate of price stability, it must prevent prices falling. That means cutting short-term rates and embarking on “quantitative easing” (buying government bonds) on a large scale. And since conditions are tightest in the peripheral economies, the ECB will have to buy their bonds disproportionately.
Vast monetary loosening should cushion the recession and buy time. Yet reviving confidence and luring investors back into sovereign bonds now needs more than ECB support, restructuring Greece’s debt and reforming Italy and Spain—ambitious though all this is. It also means creating a debt instrument that investors can believe in. And that requires a political bargain: financial support that peripheral countries need in exchange for rule changes that Germany and others demand.
This instrument must involve some joint liability for government debts. Unlimited Eurobonds have been ruled out by Mrs Merkel; they would probably fall foul of Germany’s constitutional court. But compromises exist, as suggested this week by the European Commission (see Charlemagne). One promising idea, from Germany’s Council of Economic Experts, is to mutualise all euro-zone debt above 60% of each country’s GDP, and to set aside a tranche of tax revenue to pay it off over the next 25 years. Yet Germany, still fretful about turning a currency union into a transfer union in which it forever supports the weaker members, has dismissed the idea.
This attitude has to change, or the euro will break up. Fears of moral hazard mean less now that all peripheral-country governments are committed to austerity and reform. Debt mutualisation can be devised to stop short of a permanent transfer union. Mrs Merkel and the ECB cannot continue to threaten feckless economies with exclusion from the euro in one breath and reassure markets by promising the euro’s salvation with the next. Unless she chooses soon, Germany’s chancellor will find that the choice has been made for her.
Berlin says “Yes” to Samaras’ letter
Δημοσίευση : Πέμπτη, 24 Νοέμβριος 2011 12:42 Εκτύπωση | E-mail
Ανανέωση : Πέμπτη, 24 Νοέμβριος 2011 12:51:29
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The Sixth tranche’s release is ever closer, since, probably, Berlin will be accepting Samaras’ letter to the Troika as a “written commitment” to meeting the 26 and 27 of October summit decisions.
As reported to protothema.gr by a relevant source of the Finance Ministry of the German government, which, however wants to remain anonymous, “the letter from the ND chairman is perceived as a written commitment to the observance of what has been agreed at the Summit, whose application is an absolute priority for Athens, according to the assurances given to European officials by PM Lucas Papademos, during his recent visits to Brussels, Luxembourg and Frankfurt”.
The same sources has express the chancellery’s satisfaction, estimating that the release of the sixth tranche is now unlocked. The source also added “we made an error with Greece. Even though top economists were part of the attempt, we should have given a bigger aid package to Greece. The second is that from the outset the haircut should have been greater, with a bigger private sector participation”.
This followed the publication of Antonis Samaras’ letter to theTroika, which also confirmed relevant reports of protothema.gr that had taken place at noon.
Syngrou Avenue had already estimated that the letter would be accepted, while protothema.gr had reported yesterday that there was a solution in the works, on the matter of signatures.
Sarkozy, Merkel agree to stop sniping on ECB crisis
ReutersReuters – 2 hours 56 minutes ago
By Daniel Flynn and Emmanuel Jarry
STRASBOURG, France (Reuters) – France and Germany agreed on Thursday to stop arguing in public over whether the European Central Bank should do more to rescue the euro zone from a deepening sovereign debt crisis.
President Nicolas Sarkozy and Chancellor Angela Merkel said after talks with Italian Prime Minister Mario Monti that they trusted the independent central bank and would not touch its inflation-fighting mandate when they propose changes of the European Union’s treaty to achieve closer fiscal union.
They also demonstrated their backing for Monti, an unelected technocrat, to surmount Italy’s daunting economic challenges, in contrast to the barely concealed disdain they showed for his predecessor, media billionaire Silvio Berlusconi.
“We all stated our confidence in the ECB and its leaders and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it,” Sarkozy told a joint news conference in the eastern French city of Strasbourg.
French ministers have called for the central bank to intervene massively to counter a market stampede out of euro zone government bonds, while Merkel and her ministers have said the EU treaty bars it from acting as a lender of last resort.
The Netherlands however moved closer to endorsing the ECB as lender of last resort, apparently breaking ranks with Germany.
Finance Minister Jan Kees de Jager said he would prefer that the European Financial Stability Facility, the euro zone bailout fund, should be strengthened. But if the EFSF did not succeed, other measures would have to be considered.
“In a crisis one should never exclude anything beforehand. In the end, something has to happen,” he said.
Sarkozy said Paris and Berlin would circulate joint proposals before a December 9 EU summit for treaty amendments to entrench tougher budget discipline in the 17-nation euro area.
Merkel said the proposals for more intrusive powers to enforce EU budget rules, including the right to take delinquent governments to the European Court of Justice, were a first step toward deeper fiscal union.
But she said they would not modify the statute and mission of the central bank, nor soften her opposition to issuing joint euro zone bonds, except perhaps at the end of a long process of fiscal integration.
Some French and EU officials hoped Berlin would soften its resistance to a bigger crisis-fighting role for the ECB after Germany itself suffered a failed bond auction on Wednesday, showing how investors are wary even of Europe’s safest haven.
“There is urgency (for ECB intervention),” Foreign Minister Alain Juppe told France Inter radio before the meeting.
Sarkozy took a step toward Merkel this week by agreeing to amend the treaty to insert powers to override national budgets in euro area states that go off the rails. But there was no sign of a German concession on euro zone bonds or the ECB’s role.
“This is not about give and take,” Merkel said. Only when European countries reformed their economies and cut their deficits would borrowing costs converge. “To try to achieve this by compulsion would weaken us all.”
With contagion spreading fast, a majority of 20 leading economists polled by Reuters predicted that the euro zone was unlikely to survive the crisis in its current form, with some envisaging a “core” group that would exclude Greece.
Analysts believe that sense of crisis will in the end force dramatic action. “I think we are moving closer to a policy response probably, which could be either more aggressive ECB action or the idea of euro bonds could gain some traction,” said Rainer Guntermann, strategist at Commerzbank.
RESISTANCE
In signs of public resistance to austerity in two southern states under EU/IMF bailout programs, riot police clashed with workers at Greece’s biggest power producer protesting against a new property tax, and Portuguese workers staged a 24-hour general strike.
Credit ratings agency Fitch downgraded Portugal’s rating to junk status, saying a deepening recession made it “much more challenging” for the government to cut the budget deficit, highlighting a vicious circle facing Europe’s debtors.
German bonds fell to their lowest level in nearly a month after Wednesday’s auction, in which the German debt agency found no buyers for half of a 6 billion euro 10-year bond offering at a record low 2.0 percent interest rate.
The shortage of bids drove Germany’s cost of borrowing over 10 years to 2.2 percent, above the 1.88 percent markets charge the United States and the 2.18 percent that heavily indebted Britain has to pay.
Bond investors are effectively on strike in the euro zone, interbank lending to euro area banks is freezing up, ever more banks are dependent on the ECB for funding, and depositors are withdrawing increasing amounts from southern European banks.
“It’s quite telling that there has been upward pressure on yields in Germany – it might begin to change perceptions in Germany,” Standard and Poor’s head of sovereign ratings, David Beers, told an economic conference in Dublin.
In one possible response, people familiar with the matter said the ECB is looking at extending the term of loans it offers banks to two or even three years to try to prevent a credit crunch that chokes the bloc’s economy.
Monti repeated Italy’s goal of achieving a balanced budget by 2013 but said there was room for a broader discussion about how fiscal targets could be adjusted in a worse-than-expected recession.
Italian bond yields’ jumped this month to levels above 7 percent widely seen as unbearable in the long term, despite stop-go intervention by the ECB to buy limited quantities, triggering Berlusconi’s fall.
Keeping Italy solvent and able to borrow on capital markets is vital to the sustainability of the euro zone. Key Italian bond auctions early next week will test market confidence.
GERMAN EXPOSURE
German officials said the failed auction did not mean the government had refinancing problems and several analysts said Berlin just needed to offer a more attractive yield.
But it was a sign that, as the bloc’s paymaster, Germany may face creeping pressure as the crisis deepens that may cause it to re-examine its refusal to embrace a broader solution.
Economy Minister Philipp Roesler of the Free Democratic junior coalition partner called for parliament to reject euro zone bonds “because we don’t want German interest rates to rise dramatically.”
But some market analysts are convinced joint debt issuance will eventually have to be part of a political solution to hold the euro zone together.
“Although it is not easy to see how the region will get to a fiscal union with Eurobonds, we believe that this is the path that will be chosen,” JP Morgan economist David Mackie said in a research note.
With time running out for politicians to forge a crisis plan that is seen as credible by the markets, the European Commission presented a study on Wednesday of joint euro zone bonds as a medium-term way to stabilize debt markets alongside tougher fiscal rules for member states.
The borrowing costs of almost all euro zone states, even those previously seen as safe such as France, Austria and the Netherlands, have spiked in the last two weeks as panicky investors dumped paper no longer seen as risk-free.
(Reporting by Stephen Brown, Noah Barkin, Natalia Drozdiak, Veronica Ek, Eva Kuehnen, Ana Nicolaci da Costa, Giselda Vagnoni, Padraic Halpin; Writing by Paul Taylor, editing by Mike Peacock/Janet McBride/Giles Elgood)
Make or break time for eurozone: EU economic chief Rehn
24 November 2011, 15:48 CET
— filed under: Rehn, Finland, debt, economy
(HELSINKI) – The eurozone crisis has placed the monetary union at a critical crossroads that could make or break the single currency, EU Economic and Monetary Affairs Commissioner Olli Rehn warned Thursday.
“Ahead lies either the slow disintegration of the euro area or a significant strengthening of the monetary union,” Rehn told journalists in Helsinki.
Rehn declined comment on the disappointing outcome of a German bond auction Wednesday, when just 3.9 billion of 6.0 billion euros in government bonds were taken up by investors.
“It is not our practice to comment on day-to-day developments in the markets,” Rehn said, but added that “the situation is very serious” as the contagion from the Greek debt crisis had now touched the heart of the EU.
“The contagion effect that started in Greece and spread to different EU countries has recently affected countries close to the heart of the EU area and has now touched even the hardest core of the EU,” he said.
Rehn said what was needed were “courageous and determined decisions without delay in next week’s EU meetings” of the eurozone group in Brussels on November 29.
The Finn said that beating the current crisis required proactive stabilisation and strengthening of the union, as well as the correction of imbalances.
“Without this, the (proposed) eurobond would become junk bonds that no one would want, neither European nor other states,” he declared.
PM Monti vows to balance Italian budget by 2013
24 November 2011, 18:03 CET
— filed under: Italy, finance, Headline, budget, debt, Economy, public, euro
PM Monti vows to balance Italian budget by 2013
(STRASBOURG) – Italy’s new Prime Minister Mario Monti insisted at eurozone debt crisis talks Thursday that his country would balance its budget in 2013, after raising doubts over its ability to do so.
Monti said after the talks with French President Nicolas Sarkozy and German Chancellor Angela Merkel that he had laid out his economic programme to the leaders, “confirming the objective of a balanced budget in 2013.”
On Tuesday, Monti had raised doubts about his chances of balancing the budget by 2013, saying his government would “respect” the commitments made by his predecessor Silvio Berlusconi, who was toppled by the crisis.
But he said of the 2013 budget: “We want to see how to take into account the (economic) cycle to calculate this objective.”
On Thursday, Monti said: “The objective of balancing the budget in 2013 is not called into question.
“Italy must make a particular effort because it has a very high debt,” said Monti, who took office earlier this month at the head of a technocrat government of national unity.
Quoting Merkel, Monti said each country “must do its own duty at home.”
“We will do our duty at home,” he added.
However, Monti said there is “a more general problem, for the world economy and for the European economy, concerning what happens if we go into a phase of recession.”
“If, how and by how much must budgetary policies be adjusted to take into account the cycle’s variation, this is a known theme that could be raised at the level of the entire European Union,” he said.
Athens, November 23, 2011
As stated in the meeting of the three Party Leaders under the auspices of the President of the Hellenic Republic C. Papoulias: “it has been agreed upon that the task of the new Government will be to materialize the decisions taken at the European Council of October 26th 2011 and to implement the economic policies linked to those decisions”.
The new Prime Minister has already pledged to fulfil this task.
Nea Demokratia [New Democracy] is committed to support the new Prime Minister.
Nea Demokratia is strongly committed to the success of fiscal consolidation and structural reforms, rebuilding market confidence and fostering economic growth.
Nea Demokratia fully supports the targets of fiscal adjustment, regarding all issues on eliminating the deficit and reversing the debt dynamics; it also supports “tools” already implemented (albeit poorly); namely, public expenditure cutting, fighting tax evasion, structural reforms, privatization programs and capitalizing on idle real estate public property.
On the evidence of the budget execution so far, we believe that certain policies have to be modified, so as to guarantee the Program’s success. This is more so, since according to the latest European Economic forecasts, Greece in 2012 will be the only European country with 5 consecutive years in recession!
We intend to bring these issues to discussion, along with viable policy alternatives, strictly within the framework outlined by the Program. We give great emphasis to allowing for prompt recovery, so that public revenues generated will help us achieve the targets set.
We also attribute special emphasis to the implementation procedures which have to be streamlined and upgraded.
The commitment of the Greek people and of Nea Demokratia to the European Union and the Euro is strong and irrevocable.
Nea Demokratia believes that Greece can get out of the crisis and safeguard its social cohesion.
We are committed to make that happen.
Sincerely,
Antonis C. Samaras
President of Nea Demokratia
NEW YORK, Nov 23, 2011 (AFP)
The euro fell heavily Wednesday, sent reeling by news of a lackluster German bond auction that struck at the heart of the eurozone’s fiscal credibility.
The single European currency lost over one percent of its value against the dollar, hitting $1.3347, down from from $1.3507 in New York late Tuesday.
The tone was set early in the day.
Germany was able to sell only 3.6 billion euros’ worth of its benchmark 10-year “Bund” out of the 6.0 billion euros on offer, an outcome reflecting “extraordinarily nervous market conditions,” according a German spokesman.
“There’s been a lot of talk lately that perhaps Germany isn’t the safe-haven that many people thought it was,” UBS currency strategist Chris Walker commented.
The dollar rose to 77.29 yen from 76.92 yen.
The pound weakened to $1.5530 from $1.5647.
NEW YORK, Nov 22, 2011 (AFP)
The euro strengthened against the dollar on Tuesday as the IMF rolled out a new tool to help “bystander” countries protect themselves from contagion during financial crises.
The euro rose slightly to $1.3518 from $1.3494 on Monday.
With at least one eye on Europe’s rolling debt crisis, the IMF announced a mechanism that could see Italy borrow some 45.5 billion euros ($61.5 billion) and Spain borrow 23.3 billion euros ($31.5 billion) over six months.
Kathy Lien of GFT asked: “The International Monetary Fund has come to the eurozone’s rescue but is their attempt to provide additional liquidity to cash strapped nations enough?”
While the answer appeared to be negative, it was enough to prop up the under-siege single currency.
“This new instrument is too small and too limited to help countries like Italy and Spain but some help is better than no help at all which is why the euro has held onto its gains and why European bond yields will probably decline on Wednesday,” she said.
The dollar fetched 76.97 yen versus 76.94 yen the day before, and 0.9132 Swiss francs versus 0.9169 francs.
The pound strengthened to $1.5647 from $1.5642.
Choose your poison
Nov 21st 2011, 14:24 by Buttonwood
ANOTHER bad day for the markets. Investors seem to have taken little heart from the sweeping victory of the Popular Party in Spain, focusing instead on the failure of the US super-committee to agree on a deal and rather gloomy statement on the global economy from Chinese vice premier Wang Qishan.
In the euro zone, investors may be suffering from what Lombard Street Research neatly describes as “crisis solution fatigue”. An FT story suggested a plan for eurobonds may be issued this week; last week, the market was pinning its hopes on the ECB and the IMF and it was long ago that the European Financial Stability Facility was the rescue vehicle of choice.
The idea behind eurobonds is to allow the weaker countries to benefit from the financial strength of the likes of Germany and the Netherlands. After all, at the aggregate level, eurozone government indebtedness is no worse than that of the US. But the quid pro quo for such a deal is some kind of central control over the fiscal policies of euro zone governments.As Lombard remarks
we remain a long way from any kind of comprehensive solution to Europe’s crisis. To start, the most draconian form of Eurobond – probably the one that would appeal most to the Germans who have to fund it, will face stiff opposition everywhere else. Many countries will oppose the loss of sovereignty this scheme seeks to impose on them. Sure, there are times when democratic deficits are manageable, but deep recession/depression is not typically one of them.
To be fair to European leaders, they have an extremely difficult circle to square. Euro zone countries have variants of six problems; slow growth; high private sector debt; high government debt-to-GDP ratios; wide fiscal deficits; high funding costs; and uncompetitive economies. There is no way of solving all these problems at once. If you think that the problem of slow growth is caused by uncompetitive economies (as the ECB seems to do), then the answer is to push governments into reform. As Jacob Kirkegaard of the Peterson Institute argues in a recent paper, this strategy has been rather successful, with new governments in place in all five PIIGS countries, all of which are committed to reform.
It is now clear that the ECB under the new presidency of Mario Draghi, the former governor of the Bank of Italy, has been vindicated in its strategy of refusing to defend Italian bond spreads around the 400–450 basis points, thereby forcing Italy to implement the reforms the central bank sought in August. In the end, it was the Italian political class that blinked first in this latest game of chicken and pushed Berlusconi out.
But others disagree violently. David Zervos of Jefferies describes the Kirkegaard paper as
one of the most misguided pieces of research on the euro crisis
describing the strategy as “sado-fiscalism”. To many people, the danger is clear. The crisis is steadily spreading from country to country with bond yields rising outside Germany. We risk a bond buyers’ strike. Higher bond yields also add to the contractionary pressures placed on the economy by fiscal austerity packages. And the iced botulism on this cake is the threat to the banking system. Banks are having difficulty getting finance; many are turning to the US for (very expensive) finance in the form of collateral swaps that allow the Europeans to get access to the ECB.
So for the expansionist camp, the answer is for the ECB simply to turn on the taps, buying all the government bonds it can, as well as supporting the banks. Of course, that won’t deal with the competitiveness problem. But if the euro zone is not careful, it may blunder into a very deep recession.
The ECB is getting a lot of flak at the moment. But on one crucial point, it was right. It warned that forcing Greek bond investors to take a writedown would unleash contagion effects; ever since the idea was floated that the Greeks would impose a 50% hit, contagion has duly occurred.
Foreign Banks Double Deposits at Fed
By Catarina Saraiva – Nov 21, 2011
Foreign bank deposits at the Federal Reserve have more than doubled to $715 billion from $350 billion since the end of 2010 amid Europe’s debt turmoil, buttressing the dollar’s status as the world’s reserve currency.
Forty-seven non-U.S. banks held balances of more than $1 billion at the New York Fed as of Sept. 30, up from 22 at the end of 2010, according to a survey of 80 financial institutions by ICAP Plc, the world’s largest inter-dealer broker. The dollar has appreciated 7.2 percent since Standard & Poor’s cut the nation’s AAA credit rating Aug. 5, the second-best performance after the yen among developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indexes.
A budget deficit of more than $1 trillion, a deadlock among Congressional supercommittee members on spending cuts and 9 percent unemployment haven’t deterred investors from seeking safety in the world’s biggest economy. The euro has been undermined by the region’s sovereign debt crisis, while the Swiss franc and yen have fallen as their governments buy billions of dollars to weaken them.
“There’s not anything close to a substitute and part of it is the deepness of the market, the liquidity,” Jack McIntyre, a fund manager who oversees $23 billion in debt at Brandywine Global Investment Management, a unit of Legg Mason Inc., said Nov. 15 in a telephone interview from Philadelphia. “There’s a perception, right or wrong, that we’re going to make good on all of our assets.”
Demand Rises
The Fed’s record-low target interest rate for overnight loans among banks at between zero and 0.25 percent hasn’t discouraged dollar buying as slowing global growth and turmoil in Europe spur central banks from Australia to Brazil to cut rates, reducing their appeal to investors seeking higher returns.
Foreign demand for U.S. assets rose the most in 10 months in September. Net buying of long-term equities, notes and bonds totaled $68.6 billion, the highest since November 2010, compared with net buying of $58 billion in August, the Treasury Department said Nov. 16.
The dollar is up 6.5 percent in the past three months, recovering to about level this year with its nine peers, which include the Swedish krona and the Swiss franc. It’s trading about 4 percent below where it was in 1975, two years after President Richard Nixon ended the currency’s official ties to gold.
The U.S. currency rose 1.7 percent to $1.3525 per euro in the five days ended Nov. 18, gaining for a third week in a row. It fell 0.4 percent to 76.91 yen. The greenback traded at $1.3515 per euro and 76.94 yen at 1:13 p.m. in New York.
Banks Seek Safety
Demand for Treasury securities that mature in under a year has increased as financial institutions boost holdings of the highest-quality assets to meet new regulations set by the Bank for International Settlements in Basel, Switzerland. Bank holdings of Treasuries and government-related debt totaled a record $1.69 trillion at the end of October, up from less than $1.1 trillion in 2008.
“With the heightened emphasis on stronger liquidity positions for financial institutions around the world, we’ve seen an increase in the regulatory demand for liquid assets, but we’re not necessarily seeing an increase in the supply of liquid assets,” Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, a unit of ICAP, said in a Nov. 14 interview. “They’re meeting that need by holding Fed balances.”
‘Hoarding Cash’
Rates on three-month bills ended last week at zero, down from this year’s high of 0.157 percent in February and 5 percent in mid-2007, just before credit markets froze as losses on subprime mortgages accelerated.
“People are hoarding cash because they see that there’s some difficulty in the U.S. dollar funding market” as banks shed euro-denominated assets, Charles St-Arnaud, a foreign- exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview Nov. 14.
Three-month cross-currency basis swaps, the rates banks pay to convert euro payments into dollars, were as low as 132 basis points, or 1.32 percentage point, below the euro interbank offered rate Nov. 18, the most expensive since December 2008.
The cost of dollar funding is increasing as Europe’s debt crisis escalates. Last week, yields on German two-year bunds dropped below 0.3 percent for the first time, while the extra yield investors demand to hold 10-year bonds from France, Belgium, Spain and Austria instead of bunds climbed to euro-era records. The spread between German and French bonds of that maturity widened to 190 basis points on Nov. 15, the highest in the euro union’s history.
Europe Cuts Rates
European Central Bank policy makers cut the benchmark interest rate by 0.25 percent at their Nov. 3 meeting, after increasing it by 50 basis points earlier this year. Expectations for further cuts rose after Europe’s third quarter gross domestic product expanded 0.2 percent from the previous three months, a Nov. 15 report showed, signaling the region may be headed for a recession.
Slowing growth drove the Reserve Bank of Australia to cut its interest rate this month for the first time since April 2009, reducing it to 4.5 percent. Brazil’s central bank has lowered its rate twice since July to 11.5 percent, after raising it to 12.5 percent during the past 1 1/2 years.
Fed Stays Low
Cuts in central bank rates around the world have made the carry trade of selling dollars to buy the currencies of higher- yielding countries unprofitable. The trade, when borrowing dollars to buy the Australian, Swedish, Brazilian and South African currencies, has lost 30 percent since July, according to Bloomberg data.
The Fed said it will keep its rate at an all-time low through mid-2013 as the unemployment rate has remained stuck at or above 9 percent since March.
Consumer confidence rose to 64.2 this month, the highest since June, according to the Thomson Reuters/University of Michigan preliminary index of sentiment. Retail sales rose 0.5 percent in October, increasing for the fifth-straight month, according to a government report.
The economy expanded at a 2.5 percent pace in the third quarter, from 1.3 percent in second quarter, the Commerce Department said Oct. 27. Economists have increased their fourth- quarter economic forecasts to an expansion of 2.3 percent, from 2 percent estimated in October, according to two Bloomberg News surveys.
Bretton Woods
Faster growth may boost investor appetite for riskier assets, decreasing demand for the dollar’s safety, said Lane Newman, director of foreign exchange at ING Groep NV in New York. “This is perhaps a temporary respite from the dollar losing its reserve status,” he said. “I see this as a decades- long trend. Ultimately, it’s the devaluation and the end of the hegemony of the big dollar.”
The dollar has been the world’s reserve currency since World War II, when the U.S. and allies agreed at the 1944 Bretton Woods conference to peg it to a rate of $35 per ounce of gold. After global currencies began freely floating in 1973, it has remained the most-traded legal tender, accounting for 85 percent of the $4 trillion per day foreign exchange market, according to the BIS.
US$ share of foreign-exchange holdings has held steady at 61.6 percent since 2009
US$ accounting for 85 percent of the $4 trillion per day foreign exchange market
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Its share of foreign-exchange holdings has held steady at 61.6 percent since 2009 after peaking at 72.7 percent in 2001. The euro has stabilized at an average of 26.6 percent of reserves since 2007, up from 18 percent at its inception in 1999.
Deficit Panel
Options traders are increasingly betting that the dollar will strengthen. They paid 4.4 percentage points more for the right to sell the euro against the dollar than to buy it on Nov. 17, the most since the common currency’s inception in 1999. The so-called three-month 25-delta risk reversal rate has widened for all developed-nation currencies versus the dollar and for emerging-markets such as the real and Mexican peso.
The dollar’s rise comes as a Congressional panel of six Democrats and six Republicans, known as the supercommittee, has until Nov. 23 to find $1.2 trillion in deficit reduction, or cause that much in spending cuts to go into effect beginning in 2013.
Senator Jon Kyl of Arizona, a Republican on the 12-member panel, said on CNBC today the Republican and Democratic committee co-chairmen, Representative Jeb Hensarling of Texas and Senator Patty Murray of Washington, would make a formal announcement “toward the end of the day.” They are expected to say the panel can’t agree on deficit reduction of at least $1.2 trillion, triggering across-the-board cuts of the same amount starting in 2013.
Budget Deficit
If Congress removes the automatic deficit cuts, Standard and Poor’s may drop the nation’s credit rating to AA, after reducing it to AA+ following the debt-cutting agreement, the ratings company said in a statement Aug. 5 when it announced the downgrade.
The U.S. budget deficit was $1.3 trillion in the fiscal year ended Sept. 30, up from $1.29 trillion in 2010 and the second-highest on record, according to Treasury Department data. It reached $1.42 trillion in 2009, the most ever.
Other traditional havens in times of market stress, the Swiss franc and yen, reached record highs against the euro and dollar, respectively, this year before their central banks acted in September and October to drive them from their peaks.
“The U.S. picks up an awful lot of the slack,” Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG, the world’s biggest currency trader according to Euromoney Institutional Investor Plc, said in a Nov. 17 telephone interview. “Particularly for large reserve portfolios, that need very liquid markets, they’re only really going to be accommodated in the U.S. market.”
S&P Keeps U.S. Rating at AA+ After Panel Failure
By Zeke Faux and John Detrixhe – Nov 21, 2011
Standard & Poor’s said it would keep the U.S. government’s credit rating at AA+ after a congressional committee that was supposed to break partisan gridlock and cut the budget deficit didn’t reach an agreement.
S&P, which stripped the U.S. of its top AAA grade on Aug. 5, said it decided that the supercommittee’s failure didn’t merit another downgrade for the country because the failure will trigger $1.2 trillion in automatic spending cuts. While the firm expects the Budget Control Act to “remain in force,” easing those spending limits may cause “downward pressure on the ratings,” S&P analysts Nikola Swann and John Chambers said today in a statement.
S&P, Moody’s Investors Service and Fitch Ratings, the world’s three biggest providers of debt grades, have criticized the U.S. as Democrats and Republicans in Washington have made little progress in negotiations to reduce the budget deficit. That’s had little impact on the bond market with Treasuries returning 6.4 percent last quarter, the most since the three months ended December 2008.
“Investors look right through the agencies,” Greg Peters, global head of fixed-income research at Morgan Stanley, said today in an interview on Bloomberg Television’s “InBusiness with Margaret Brennan.” “They’re going to invest how they see fit.”
Both parties have blamed each other for the stalemate, with Democrats saying Republicans wouldn’t relent on taxes and Republicans accusing Democrats of rejecting an offer to raise revenue along with spending cuts.
Automatic Cuts
“After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline,” said panel co-chairmen Representative Jeb Hensarling of Texas and Senator Patty Murray of Washington.
The supercommittee’s collapse triggers across-the-board spending cuts to domestic and defense programs set to take effect starting in January 2013. Some lawmakers were already looking at ways to lessen the cuts.
Moody’s, which rates the U.S. Aaa and put the country on ‘‘negative outlook” in August, said the committee’s deadlock wouldn’t on its own cause the U.S. to lose its top rating because of the automatic cuts. Fitch, which also gives the U.S. its highest ranking, said on Aug. 16 that a failure by the committee would “likely result in negative rating action.
August Downgrade
After the government almost reached its borrowing limit before striking the deal that created the supercommittee, S&P lowered the U.S.’s credit rating to AA+ from AAA on Aug. 5. The ratings firm said the government is becoming “less stable, less effective and less predictable.”
The S&P 500 Index of U.S. stocks plunged 6.7 percent on the first trading day after the downgrade, while government bonds rallied as investors sought safety.
House Majority Leader John Boehner, an Ohio Republican, and House Minority Leader Nancy Pelosi, a California Democrat, have said they support the automatic cuts. “The markets should know that the deficit reduction will occur,” Pelosi said on Nov. 3. Boehner has said he “personally” feels a moral obligation to uphold the agreement.
“There is time for Congress to change the rules again,” Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ, said in an e-mail before the announcement. “The supercommittee deadline was never make or break anyway.”
A sense of surrealism
Nov 18th 2011, 15:23 by J.R. | FRANKFURT
the economist
TIMING in central banking, just as in politics, is everything. Originally, Jens Weidmann, the head of the Bundesbank, was supposed to speak before Mario Draghi, the new president of the European Central Bank (ECB) at the European Banking Congress, held today in Frankfurt. But a late change of the agenda had Mr Draghi be the first to take the stage in Frankfurt’s old opera house (which, ironically, only a few weeks ago was the site of a furious argument over the ECB’s role in the crisis between Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president).
Yet even more than the speaking order, it was the stridency of views in his first public speech outside the ECB, which drove home the point that Mr Draghi has no intention of playing second fiddle to Mr Wiedmann.
Mr Draghi dwelled on the need for discipline and reform in the euro zone’s periphery. While stressing the consistency of the ECB’s efforts to control inflation, and the need for it to maintain the credibility of its inflation target, Mr Draghi passed responsibility for solving the sovereign debt crisis right back to Europe’s politicians:
We are more than one and a half years after the summit that launched the EFSF as part of a financial support package amounting to 750 billion euros or one trillion dollars; we are four months after the summit that decided to make the full EFSF guarantee volume available; and we are four weeks after the summit that agreed on leveraging of the resources by a factor of up to four or five and that declared the EFSF would be fully operational and that all its tools will be used in an effective way to ensure financial stability in the euro area. Where is the implementation of these long-standing decisions?
For veteran readers of central-banking tea leaves, Mr Draghi appeared to offer just one concession. The ECB, he suggested, might do more to help banks obtain longer term financing, which has essentially dried up since early July.
If Mr Draghi had indeed set out to be holier than the Bundesbank, he failed. For Mr Weidmann went even further. Departing from his prepared comments, Mr Weidmann sounded alarm that the current approach to crisis management may in fact be making matters worse “by diminishing incentives for reform.”
Adding to the sense of surrealism was Wolfgang Schäuble, Germany’s finance minister, whose talk at the event was mainly a sermon against the “Chicago School” of “unregulated markets” and a defence of the Financial Transaction Tax. It would act against “herd behaviour” in financial markets, he argued. Mr Schäuble also said that if the ECB became a lender of last resort and started intervening massively, “the financial markets would simply presume the euro would not remain a stable currency”.
Bond markets took all these comments in their stride, although some of them have now become so dysfunctional that it is difficult to discern too much information from prices. Spanish and Italian bonds rose during the day, helped by bond buying by the ECB.
Even in Frankfurt, at the centre of Germany’s financial system, it is difficult to discern whether Germany and the ECB are playing an elaborate game of brinkmanship—or are acting out of firm conviction. There is a case to be made for keeping up the heat on countries such as Italy and Greece to extract badly-needed economic reforms. But investors are ever more likely to take Germany and the ECB at their word that they will not provide support on the scale needed to keep Italy afloat.
That could be the beginning of the end. If investors truly believe that no support will be forthcoming, it is difficult to see that any amount of structural reform or austerity could turn around perceptions in time to prevent a liquidity crisis from turning into a solvency one.
NEW YORK, Nov 18, 2011 (AFP)
The euro edged up against the dollar Friday despite new open EU discord over how to muster funds to strengthen the eurozone against contagion.
The euro picked up to $1.3519 from $1.3457 late Thursday, after having jumped as high as $1.3614.
The euro also pushed up to 104.00 Japanese yen from 103.60 yen, while the dollar lost to 76.93 yen from 76.98 Thursday.
While there were some encouraging signs from Greece and Italy on political acceptance of austerity programs, European Central Bank chief Mario Draghi’s blunt rebuff to suggestions that the ECB can supply rescue funds for the eurozone added a new layer of risk in the markets.
Draghi called on Europe’s leaders to follow through with their own plans to raise more money for the EU emergency fund instead — a plan of weeks ago that appeared to have hit a wall.
With a comprehensive deal to protect the eurozone still not in sight, traders warned of more danger ahead for the euro.
“The rebound in the single-currency could be short-lived as the fundamental outlook for the region remains bleak,” said David Song of DailyFX.
“The crisis out of Europe has entered a new scary chapter as the events of the past couple weeks have exposed the inherent flaws of the zone,” said George Goncalves of Nomura Fixed Income Research.
“It’s clear downside risks remain. In fact, we could be approaching the point of no return for the fate of the euro.”
The US dollar ended the day lower against the Swiss franc, at 0.9162 francs from 0.9219 francs.
The British pound pushed higher to $1.5798 from $1.5751.
Sofjan Wanandi: Lupakan Eropa!
| Erlangga Djumena | Jumat, 18 November 2011 | 16:04 WIB
NUSA DUA, KOMPAS.com – Kekuatan ekonomi Eropa makin lemah setelah krisis terus menjalar dan melebar ke negara-negara anggota Uni Eropa. Tidak hanya mata uang Euro saja yang tak stabil, gejolak dalam negeri personel Masyarakat Eropa tersebut juga nyaris tak terkendali.
Walhasil, Eropa menjadi tempat yang paling riskan untuk urusan perdagangan dan investasi. Tak pelak, inilah momentum yang penting untuk segera melupakan Eropa. “Eropa sudah masa lalu, lupakan Eropa!. Kini masa depan ada di China, India dan ASEAN, termasuk di dalamnya Indonesia sebagai kekuatan potensial di kawasan Asia Tenggara,” sebut Sofyan Wanandi, Ketua Umum Asosiasi Pengusaha Indonesia (Apindo), kepada Tribunnews.com, Jumat (18/11/2011), di restoran Portraits, Hotel Westin, Nusa Dua, Bali.
Pria berusia 71 tahun tersebut menegaskan, saat ini pusat perhatian dunia tengah tertuju pada Asia. Diprediksi, dalam waktu tidak lama lagi, Asia bakal menjadi sentra kekuatan perekonomian, yang mengatur jalannya ekonomi di jagad raya ini. “Asia akan menjadi rasa masa depan. Kondisi ini harus dimanfaatkan secara maksimum oleh Indonesia. Otomatis, setelah China dan India, para pelaku bisnis dunia akan melirik ASEAN, dan kita harus lebih atraktif,” tegas Sofyan.
Pengusaha kawakan ini yakin, iklim investasi di Asia yang makin mudah, menjadi gimmick tersendiri bagi investor. Nantinya, Asia akan menjadi kawasan yang diperebutkan banyak pihak di saat kondisi ekonomi di Eropa dan Amerika mulai menurun. “Ciri yang paling kentara adalah kepastian. China, India dan ASEAN tak hanya sekedar memerbanyak MoU, melainkan sudah pada level realisasi dan optimalisas, jadi bukan hanya hitam di atas putih saja,” tukas Sofyan.
Pengusaha Darjoto Setyawan setuju dengan pendapat seniornya itu. Pria yang juga Managing Director Grup Rajawali tersebut optimis level pertumbuhan ekonomi dan realisasi investasi akan semakin membaik, terutama saat ASEAN berlari kencang hingga tahun 2030 mendatang, dengan “Beyond ASEAN”-nya. (Nurfahmi Budi)
Saham Eropa Jumat (18/11) terindikasi untuk dibuka melemah untuk hari keempat dipicu kekhawatiran yang tumbuh atas biaya pinjaman Eropa.
CNBC melaporkan indeks FTSE diperkirakan akan turun 50 poin, indeks DAX turun sebesar 60 poin, dan indeks CAC 40 turun 30 poin.
Pemerintah Spanyol dipaksa untuk membayar biaya pinjaman tertinggi sejak tahun 1997 pada hari Kamis dalam lelang obligasi 10 tahun, di mana yieldnya 1,5 poin di atas rata-rata pembayaran untuk penjualan serupa tahun ini. Kekhawatiran bahwa pengetatan dana tersebut dapat menyebar ke Asia yang meningkat ketika rate euro / yen berjangka jatuh ke level terendah dalam 8 bulan pada Jumat di tengah kekhawatiran bahwa strain di pasar keuangan dolar bisa melihat bank-bank di luar Jepang meningkatkan rate mata uang Jepang.
Perdana Menteri baru Italia Mario Monti meluncurkan reformasi ekonomi pada hari Kamis, memperingatkan bahwa negara sedang berurusan dengan masalah utang yang darurat serius. Monti memenangkan mosi percaya di Senat Italia pada hari Kamis oleh 281 suara untuk 25 dan ia diperkirakan untuk memenangkan suara kepercayaan lain di Ruang Deputi pada hari Jumat.
Pemerintahan kesatuan nasional baru pemerintah di Yunani, yang dipimpin oleh Perdana Menteri Lucas Papademos, sejauh ini belum mendapat dukungan dari mitra Italia dan 50.000 orang Yunani turun ke jalan-jalan di Athena pada hari Kamis untuk memprotes langkah-langkah penghematan yang dikondisikan Uni Eropa / IMF untuk syarat baliout.
Pejabat IMF, Uni Eropa dan European Central Bank tiba di Athena pada hari Jumat untuk diskusi tentang apa yang harus dilakukan bagi Yunani untuk mengamankan tahap bantuan berikutnya, namun Ketua Partai Konservatif New Denodracy, Antonis Samaras menilak untuk menandatangani komitmen untuk melakukan apa pun yang diperlukan untuk mengamankan bailout yang kemungkinan akan tetap bermasalah.
Di Brussels, Pejabat Uni Eropa akan bertemu Jumat untuk membahas anggaran Uni Eropa berikutnya untuk tahun 2012. Jika kesepakatan tercapai, Parlemen Eropa dan Dewan Eropa harus secara resmi menyetujui dalam waktu 14 hari. Perdana Menteri Inggris David Cameron akan bertemu dengan Kanselir Jerman Angela Merkel di Berlin pada Jumat, dengan konferensi pers yang dijadwalkan pada pukul 12.45 am waktu London.
Cameron telah mendapatkan kritik dari Partai Angela Merkel CDU yang telah menuduhnya bertindak semata-mata untuk kepentingan Inggris dengan mengorbankan Uni Eropa yang lebih luas.
Data ekonomi Jumat termasuk angka PPI Jerman untuk Oktober, keluar pukul 07.00 waktu London. Omset industri Italia untuk September akan diumumkan pada pukul 09:00.
http://pasarmodal.inilah.com/read/detail/1798009/kondisi-pinjaman-eropa-bakal-hantam-saham-eropa
Sumber : INILAH.COM
Obama reads riot act to European leaders in late night phone calls and orders them to take more dramatic action on debt crisis
U.S. Treasury Secretary: ‘The crisis in Europe remains the central challenge to global growth’
Obama embarks on eight day Asia-Pacific tour to ‘hitch’ U.S. economy to growth opportunities
By Daily Mail Reporter
Last updated at 12:55 PM on 11th November 2011
Late night calls: Barack Obama made contact with several European leaders to demand faster action
Late night calls: Barack Obama made contact with several European leaders to demand faster action
Barack Obama has read the riot act to the leaders of several European countries – saying more dramatic action is needed to avert a eurozone meltdown.
The U.S. President made telephone calls to German Chancellor Angela Merkel, French President Nicolas Sarkozy and Italian President Giorgio Napolitano late last night.
Treasury Secretary Timothy Geithner said the president had demanded faster action from Europe.
It came as Hong Kong revealed it had plunged into recession.
Speaking from the Asia-Pacific Economic Co-operation conference, Geithner said: ‘The crisis in Europe remains the central challenge to global growth.
‘It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.’
He said all of the 21 APEC countries were directly affected by the Eurozone crisis, and encouraged them to take steps to ‘strengthen growth in the face of these pressures from Europe’.
And he revealed that Obama was looking to hitch the U.S. economy to growth opportunities in Asia, where he is embarking on an eight day tour, that he hoped would help power the recovery he needs for re-election.
More…
Look who rolled out the White House: The toilet paper with Obama’s face on every sheet
U.S. aircraft carrier that buried bin Laden transformed into basketball arena for Veterans Day
‘He’s a madman’: Sarkozy tells Obama what he really thinks of former Greek PM… as country’s new leader is finally named
‘Oops!’: Rick Perry’s presidential hopes go up in flames as he forgets his own policies in biggest GOP debate flop yet
Developments in Europe saw U.S. stocks rise yesterday. The Dow Jones Industrial Average finished up 1 per cent at 11893.79, and the Nasdaq Composite tacked on 0.1 per cent to 2625.13.
The warning to Europe comes as Italy’s Senate today votes, after months of dithering and delay, on austerity measures demanded by the EU.
The Italian upper house is due to vote on a package of cuts. The law should pass easily, as it should in the lower house on Saturday.
German chancellor Angela Merkel
Sarkozy
Midnight chat: German chancellor Angela Merkel (left) and French President Nicolas Sarkozy (right) received calls from the U.S. President last night
Graphic showing the latest EC GDP growth and debt forecasts
Voting for the first time in the upper house will be Mario Monti, the former European Commissioner who has emerged as favourite to replace Silvio Berlusconi as prime minister.
EUROPEAN CRISIS: AT A GLANCE
Greece: Appointed Lucas Papademos as new Prime Minister, who hopes to secure 130bn euro debt deal from the eurozone to keep the country in the single currency.
Italy: PM Silvio Berlusconi has promised to quit once economic reforms have been passed, possibly as early on Sunday. Likely to be replaced by former European Commissioner Mario Monti.
Fears Italy would have to be bailed out after interest on its 10-year bonds rose past critical 7 per cent figure which saw Ireland, Portugal and Greece default.
Resignation of Berlusconi has calmed the waters, and yields are now down to 6.8 per cent.
Britain: Government making contingency plans for if the euro collapses. Worried that it will drag the UK into a double-dip recession.
Berlusconi, who lost his majority in a vote on Tuesday, has promised to resign after the financial stability law is passed by both houses of parliament.
If the votes pass smoothly, Napolitano may accept Berlusconi’s resignation as early as Saturday night and formally mandate Monti to try to form a new government soon afterwards.
At first, Berlusconi had insisted that early elections were the only option. But he has since softened his stand and is said by sources to be open to a new government.
Markets were calmed at the prospect of an interim government, rather than a three-month vacuum before elections are held.
Monti, a highly respected international figure, has been pushed for weeks as the most suitable figure to lead a national unity government to push through painful austerity measures.
It also comes as Greece’s prime minister designate was set to name a new crisis cabinet today to calm the political turmoil that has threatened to bankrupt the country and force it out of the euro zone.
Greece’s two main parties agreed yesterday to make Lucas Papademos head of a new unity government.
It ended a chaotic search for a leader to save the country from default. He must now fulfill the terms of a 130 billion euro bailout plan agreed with European partners in October.
Papademos said: ‘The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence.’
Sources in the two parties – the ruling Socialists and the opposition New Democracy – said Evangelos Venizelos was likely to remain as finance minister when President Karolos Papoulias swears in the new cabinet, scheduled for 12noon GMT.
The weak global economy has today pushed Hong Kong into a recession with GDP figures showing a third-quarter contraction, the second straight quarterly decline.
The Hong Kong government said exports dropped off sharply towards the end of the quarter ‘amid an increasingly austere global economic environment’.
The economy grew 4.3 per cent in the third quarter, smaller than the revised 5.1 per cent growth in the second quarter, which was itself less than the 7.5 per cent expansion notched up in the first quarter.
Some economists define a recession as two straight quarters of economic contraction while others say it is a significant decline in across-the-board economic activity lasting more than a year.
Obama
Read more: http://www.dailymail.co.uk/news/article-2060227/Eurozone-crisis-Obama-orders-European-leaders-dramatic-action.html#ixzz1e25tD2N3
Barry, please have A MERRY and JOYFUL YEAR OF DRAGON for YOUR SPOUSE, YOUR FAMILY, and YOURSELF
GO ALL THE WAY of the YEAR of WATER and DRAGON YEAR
