The first EU Summit of 2012 ended on Monday with leaders of 27 European nations agreeing to sign a new fiscal treaty, except Czech Republic and Britain. Once effective, the fiscal agreement would legally bind the member nations to implement tougher austerity measures and stricter enforcement rules in their respective country. To ensure its effective functioning, the proposed deal empowers the European Court of Justice with the right to impose fine on nations who fail to follow the new rules.
Also in the recently concluded European Summit, it was decided to bring into effect the European Stability Mechanism in July instead of 2013, which was the original plan. The €500 billion permanent bail-out fund formed on May last year was aimed to insulate the rest of Europe from debt crisis, especially from Greece.
Apart from these two issues, leaders of the European nations also discussed ways to generate employment and encourage small business growth. But, one key issue that has been left largely unanswered in the European Summit is the question of Greece debt crisis. Till Europe finds a comprehensive way to deal with Greece debt crisis, it is very likely that European debt crisis would continue to haunt Europe.
Showing posts with label Debt crisis. Show all posts
Showing posts with label Debt crisis. Show all posts
Monday, January 30, 2012
Sunday, January 29, 2012
Greece rebuffs Germany’s proposal of external budget monitoring
Germany’s proposal to create a “budget commissioner” to oversee tax and spending decisions evoked a strong reaction from Greek finance minister, Evangelos Venizelos. The minister dismissed the plan saying that it is not only improper but an insult to Greek pride.
The proposal was made in exchange for €130 billion help as second emergency package to Greece. The country is in dire need of this fund to repay its debts due on March 20. But if the proposed agreement is reached that would give direct control to European Institutions (IMF, ECB and EU). They would then have the right to oversee or intervene (through the budget commissioner), on major budgetary policy decisions in Greece for a certain period.
The problem erupted in the wake of fear that the €130-billion proposed package may not be enough to address the debt crisis. A latest analysis also revealed that the second bail-out package would require additional funds to bring down Greece’s debt to a manageable total by the year 2020.
With taxpayers in Europe already reeling under debt crisis, the need for additional funds is seen as the biggest hindrance to broker a deal between Greece and its private creditors. But the immediate biggest concern is if an agreement is not reached before March 20th deadline, Greece could be the first defaulter among developed nations in a very long time.
The proposal was made in exchange for €130 billion help as second emergency package to Greece. The country is in dire need of this fund to repay its debts due on March 20. But if the proposed agreement is reached that would give direct control to European Institutions (IMF, ECB and EU). They would then have the right to oversee or intervene (through the budget commissioner), on major budgetary policy decisions in Greece for a certain period.
The problem erupted in the wake of fear that the €130-billion proposed package may not be enough to address the debt crisis. A latest analysis also revealed that the second bail-out package would require additional funds to bring down Greece’s debt to a manageable total by the year 2020.
With taxpayers in Europe already reeling under debt crisis, the need for additional funds is seen as the biggest hindrance to broker a deal between Greece and its private creditors. But the immediate biggest concern is if an agreement is not reached before March 20th deadline, Greece could be the first defaulter among developed nations in a very long time.
Monday, January 16, 2012
EU postpones its decision to save Greek government bonds
Fresh tension brewed in Europe when the three overseas money lenders (termed ‘troika’) deferred their plan to save Greek government bonds by writing off 50% of its debt. The decision was based on the inability of the Lucas Papademos’s interim government in implementing severe austerity measures in Greece, despite reaching an official agreement. The ‘troika’ included European officials representing the EU (European Union), the ECB (European Central Bank) and the IMF (International Monetary fund). They have cast a serious doubt on Greece’s ability and willingness to come out of debt crisis and may withhold the next aid installment due on March.
The situation further aggravated as negotiations between the Greek PM Lucas Papademos’s interim government and the Institute of International Finance (IIF) held on Friday met dead ends. The IIF that constituted members of private sector investors and banks had been engaged on a series of talks with the government on merits of accepting a “voluntarily” default in exchange for additional International aid. The intention was to force private holders of Greek government bonds to accept losses so as to bring down the country’s debt. But with the IIF officials backing out from absorbing losses, the possibility of uncontrolled Greek default is growing larger and so is its impact on Europe and other global economies.
The situation further aggravated as negotiations between the Greek PM Lucas Papademos’s interim government and the Institute of International Finance (IIF) held on Friday met dead ends. The IIF that constituted members of private sector investors and banks had been engaged on a series of talks with the government on merits of accepting a “voluntarily” default in exchange for additional International aid. The intention was to force private holders of Greek government bonds to accept losses so as to bring down the country’s debt. But with the IIF officials backing out from absorbing losses, the possibility of uncontrolled Greek default is growing larger and so is its impact on Europe and other global economies.
Thursday, December 22, 2011
ECB infuses $639 billion fresh credit into European banking system
In an unprecedented move on Wednesday, the European Central Bank (ECB) has made available fresh credit worth approximately $639 billion (equivalent to €489.191 billion) for a period of three years at, unbelievably low, one percent interest. The figure has surpassed economists’ expectation by around $231 billion. By providing cheap loans, ECB is trying to address the issue of “long-term refinancing operation” of European banks (due on first quarter of 2012) and liquidity crisis in the market.
The $639 billion credit aid is considered as the biggest loan given by the European Central Bank in 13 years since the introduction of ‘Euro’ as the shared currency. It is believed that with the availability of cheap loans, banks in Europe might be able to avoid the impending recession. Approximately 500 European banks have applied for long-term loans on Wednesday. Among these are banks of France and Spanish banks.
It is hoped that the availability of cheap loans (at one percent interest) from ECB may spike up interest to buy government securities (bonds), which could bring down governments’ borrowing cost. Or, it may drive commercial banks to invest part of their fund in private sector, which could spur sustainable economic growth in Europe. But whichever options they may take, ECB hopes that, such an action would boost up profit for the banks, initiate growth and ease up the debt crisis in Europe.
The $639 billion credit aid is considered as the biggest loan given by the European Central Bank in 13 years since the introduction of ‘Euro’ as the shared currency. It is believed that with the availability of cheap loans, banks in Europe might be able to avoid the impending recession. Approximately 500 European banks have applied for long-term loans on Wednesday. Among these are banks of France and Spanish banks.
It is hoped that the availability of cheap loans (at one percent interest) from ECB may spike up interest to buy government securities (bonds), which could bring down governments’ borrowing cost. Or, it may drive commercial banks to invest part of their fund in private sector, which could spur sustainable economic growth in Europe. But whichever options they may take, ECB hopes that, such an action would boost up profit for the banks, initiate growth and ease up the debt crisis in Europe.
Saturday, December 17, 2011
Italian PM Mario Monti’s austerity drive gets lower house approval
Prime Minister of Italy, Mario Monti’s austerity plan cruised to victory in the Chamber of Deputies’ confidence vote on Friday. The overwhelming victory of 495 to 88 in the lower house is expected to increase Italy’s chance in receiving bailout package amounting to € 33-billion or $43 billion. Mario Monti still has to get the final approval of the Senate (upper house of the parliament) next week for the smooth passage of austerity package.
Italy’s ‘Super Monti’ is currently under immense pressure from leaders of Europe to put a cap on spending and generate funds to boost Italian economy. Once the austerity bill is passed by both houses of parliament, Mario plans to implement a series of measures to address Italy’s huge debt crisis and balance 2013 budget through increased tax and pension reforms. Some of the immediate steps government of Italy is likely to take are - reintroducing ‘tax on first homes’ (earlier abolished by the previous Berlusconi government), hiking real estate tax and also some growth incentives.
Though Italian Premier’s austerity plan enjoys parliamentary consensus, many in the main opposition parties are skeptical that the proposed measures might be unfair on the poor in society. They are going to be the hardest hit of the austerity cut.
Italy’s ‘Super Monti’ is currently under immense pressure from leaders of Europe to put a cap on spending and generate funds to boost Italian economy. Once the austerity bill is passed by both houses of parliament, Mario plans to implement a series of measures to address Italy’s huge debt crisis and balance 2013 budget through increased tax and pension reforms. Some of the immediate steps government of Italy is likely to take are - reintroducing ‘tax on first homes’ (earlier abolished by the previous Berlusconi government), hiking real estate tax and also some growth incentives.
Though Italian Premier’s austerity plan enjoys parliamentary consensus, many in the main opposition parties are skeptical that the proposed measures might be unfair on the poor in society. They are going to be the hardest hit of the austerity cut.
Wednesday, December 14, 2011
Is Europe NOT in sync with EU treaty change?
Despite repeated assurance from Angela Markel, German chancellor, tension over change in EU deal is brewing up in euro zone. So far, Markel has succeeded in securing agreement from 26 member EU nations. But there are still four nations who have to give their consent to the deal. They have taken time to reconsider the wider implications of the treaty change vis-à-vis their respective countries. Governments of the four states that include Hungary, Denmark, the Czech Republic and Finland are currently going over the details of the treaty with their parliaments before making their decision final. Britain has already withdrawn from the proposed EU pact.
Markets on Wednesday have reacted negatively despite Europe’s brave claim to present ‘fiscal union.’ For the first time since January this year, Wednesday saw Euro hit a record low, below $1.30. This has further spiked up the rate of Italian government bonds, which would mean further increase in borrowing cost for the Italian government already spiraling under debt crisis.
The European Central Bank is facing increased pressure from euro zone nations, reeling under debt crisis, to step in and buy their sovereign bonds. But the head of the central bank of Germany, Jens Weidmann, has rebuffed their attempts to misuse European Central Bank’s fund in this way. Weidmann further stated that instead of looking up to European Central Bank for help, nations should step up reform measures to address their fiscal deficit.
Angela Merkel is optimistic that the new Euro deal would be ready by March. But what the world really wants to know is whether the new deal has what it takes to address the financial crisis of euro zone? Secondly, even if Europe manages to come out of the crisis, will it ever be the same again?
Markets on Wednesday have reacted negatively despite Europe’s brave claim to present ‘fiscal union.’ For the first time since January this year, Wednesday saw Euro hit a record low, below $1.30. This has further spiked up the rate of Italian government bonds, which would mean further increase in borrowing cost for the Italian government already spiraling under debt crisis.
The European Central Bank is facing increased pressure from euro zone nations, reeling under debt crisis, to step in and buy their sovereign bonds. But the head of the central bank of Germany, Jens Weidmann, has rebuffed their attempts to misuse European Central Bank’s fund in this way. Weidmann further stated that instead of looking up to European Central Bank for help, nations should step up reform measures to address their fiscal deficit.
Angela Merkel is optimistic that the new Euro deal would be ready by March. But what the world really wants to know is whether the new deal has what it takes to address the financial crisis of euro zone? Secondly, even if Europe manages to come out of the crisis, will it ever be the same again?
Saturday, December 10, 2011
EU reaches a consensus about broader European treaty change
The seventeen member EU nations whose common currency is Euro has given their consent to a broader change in the European treaty Friday early morning. The new treaty has also got the approval of another six EU nations, while the trio nation – Sweden, the Czech Republic and Hungary – have given their verbal commitments. They assured that they would clear their positions after going over the plan with their respective parliaments. British Prime Minister David Cameron has distanced himself from the proposed treaty on the ground that it doesn’t serve Britain’s interest. The new accord is likely to come into effect from March 2012.
Britain has long misgivings about the proposed Tobin Tax or pan-European financial transaction tax. Britain fears that accepting Tobin Tax would be equivalent to giving up its sovereignty. By withdrawing itself from the proposed treaty, Britain faces the possibility of isolation in Europe.
Once effective, the new treaty would expect governments of member countries to be more ‘fiscally disciplined’ with their spending and burrowing. This would require member countries to place their national budgets before the European Commission for scrutiny. The Commission may ask for revision in the budget should they feel there is a scope for further budget cut. The new European treaty would also empower the European Court of Justice to penalize a member country with increased tax or budget cuts or with both incase the agreement is violated. Europe believes that through centralized monitoring and enforcing stricter discipline, it may come out of debt crisis more quickly and help boost Euro in turn.
Britain has long misgivings about the proposed Tobin Tax or pan-European financial transaction tax. Britain fears that accepting Tobin Tax would be equivalent to giving up its sovereignty. By withdrawing itself from the proposed treaty, Britain faces the possibility of isolation in Europe.
Once effective, the new treaty would expect governments of member countries to be more ‘fiscally disciplined’ with their spending and burrowing. This would require member countries to place their national budgets before the European Commission for scrutiny. The Commission may ask for revision in the budget should they feel there is a scope for further budget cut. The new European treaty would also empower the European Court of Justice to penalize a member country with increased tax or budget cuts or with both incase the agreement is violated. Europe believes that through centralized monitoring and enforcing stricter discipline, it may come out of debt crisis more quickly and help boost Euro in turn.
Thursday, December 8, 2011
Germany and Poland bury their past hatchets to save Eurozone
Mission to save Euro and Eurozone from the ongoing financial crisis has brought together a never-before coalition between Germany and Poland – known enemies whose past are fraught with animosity and war. As the leaders of other EU countries are struggling to reach a common consensus to tackle European debt crisis, leaders of the two countries have taken a united stand.
In a rare gesture, the Prime Minister of Poland, Donald Tusk, has given its full backing to German Chancellor Angela Merkel in her attempt to ask for full change in the treaty. Full and fundamental change in the European treaty is necessary to bring in severe budget cuts and centralized monitoring.
As an ally, Poland brings on the table several brownie points for Germany. Poland enjoys close relationships with countries that belonged to former Soviet Union and countries of northern Europe. Poland is also an enthusiastic supporter of unified Europe and hopes to join Euro in the future. Besides, the commanding position that Poland enjoys among nations outside eurozone also goes well with Germany.
The final clincher was the foreign minister of Poland, Radoslaw Sikorski’s recent comment that set the government and foreign policy departments of Berlin abuzz. “I fear German power less than I am beginning to fear German inactivity.” Radoslaw Sikorski also did not forget to hail Germany as indispensable to Europe.
In a rare gesture, the Prime Minister of Poland, Donald Tusk, has given its full backing to German Chancellor Angela Merkel in her attempt to ask for full change in the treaty. Full and fundamental change in the European treaty is necessary to bring in severe budget cuts and centralized monitoring.
As an ally, Poland brings on the table several brownie points for Germany. Poland enjoys close relationships with countries that belonged to former Soviet Union and countries of northern Europe. Poland is also an enthusiastic supporter of unified Europe and hopes to join Euro in the future. Besides, the commanding position that Poland enjoys among nations outside eurozone also goes well with Germany.
The final clincher was the foreign minister of Poland, Radoslaw Sikorski’s recent comment that set the government and foreign policy departments of Berlin abuzz. “I fear German power less than I am beginning to fear German inactivity.” Radoslaw Sikorski also did not forget to hail Germany as indispensable to Europe.
EU countries divided on Euro before EU Summit
Before Friday’s crucial EU summit, EU countries were reported to be divided on several issues over the debt crisis. Difference of opinion emerged about the ways austerity measures would be ensured among member countries and execution of reform activities (within specific time frames) through a centralized monitoring.
Wednesday also saw Germany advocating for full and permanent change in the European treaty, creation of two separate bailout plans – one for short term and another for long term and extension of debt limits for the protection of Spain and Italy. Some other nations like France, however, want an immediate change in the treaty to deal with the euro crisis.
Since changing the entire European treaty may take up to two years, officials of European Union are exploring other ways to deal with it. Herman Van Rompuy, the euro zone and also the European Council president, proposed a quick fix way to ensure‘fiscal discipline’ and avoid delays of a full change in the European treaty. This requires changing a single protocol wherein leaders of respective nations would, under the directives of European Central Bank as well as European Parliament, enter into an obligation to stay within budget for that time frame. Herman Rompoy further elaborated that those nations who violate this rule could be punished with further economic sanctions and more tax burden or with both.
Experts are of the opinion that punishing offender countries that go over-budget would require full and fundamental changes in the treaty rather than changing just one of the protocols. European institutions must have absolute power to squash national budgets.
Wednesday also saw Germany advocating for full and permanent change in the European treaty, creation of two separate bailout plans – one for short term and another for long term and extension of debt limits for the protection of Spain and Italy. Some other nations like France, however, want an immediate change in the treaty to deal with the euro crisis.
Since changing the entire European treaty may take up to two years, officials of European Union are exploring other ways to deal with it. Herman Van Rompuy, the euro zone and also the European Council president, proposed a quick fix way to ensure‘fiscal discipline’ and avoid delays of a full change in the European treaty. This requires changing a single protocol wherein leaders of respective nations would, under the directives of European Central Bank as well as European Parliament, enter into an obligation to stay within budget for that time frame. Herman Rompoy further elaborated that those nations who violate this rule could be punished with further economic sanctions and more tax burden or with both.
Experts are of the opinion that punishing offender countries that go over-budget would require full and fundamental changes in the treaty rather than changing just one of the protocols. European institutions must have absolute power to squash national budgets.
Friday, November 18, 2011
Europe braces against the prospect of credit crunch deepening
Prospect of credit crunch deepens in Europe as markets witnessed massive selling of European government bonds by financial institutions around the globe. Such was the fear that not only new bond issues were shown the doors, but short term loans to reputed European banks were also cancelled.
Low investors’ confidence on European government bonds is believed to be linked with little information about the actual credit status of European banks and the way they are handled. Already Asian investors have started pulling out from European markets. Even Rabobank with AAA-credit rating, considered among the best European banks, had his loan cancelled by American institution, Vanguard.
On Friday, Mario Draghi, the newly appointed president of European Central Bank, has urged the countries affected by debit crisis to come to their own rescue instead of depending on the central bank.
It is feared that if selling pressure continues, higher borrowing costs, more cost cutting and slower growth would plague wider Europe. Euro zone banks are already in deep crisis trying to meet the rising borrowing costs. This is despite half a trillion cash inflow (in Euro currency) in debt from the European Central Bank. But this has little effect on the negative growth story in Europe so far. Already German bonds and Swedish bonds have started showing weakness. They are not strong as they used to be. Though they still are a safer bet than other European bonds – French, Spanish or Italian bonds.
Low investors’ confidence on European government bonds is believed to be linked with little information about the actual credit status of European banks and the way they are handled. Already Asian investors have started pulling out from European markets. Even Rabobank with AAA-credit rating, considered among the best European banks, had his loan cancelled by American institution, Vanguard.
On Friday, Mario Draghi, the newly appointed president of European Central Bank, has urged the countries affected by debit crisis to come to their own rescue instead of depending on the central bank.
It is feared that if selling pressure continues, higher borrowing costs, more cost cutting and slower growth would plague wider Europe. Euro zone banks are already in deep crisis trying to meet the rising borrowing costs. This is despite half a trillion cash inflow (in Euro currency) in debt from the European Central Bank. But this has little effect on the negative growth story in Europe so far. Already German bonds and Swedish bonds have started showing weakness. They are not strong as they used to be. Though they still are a safer bet than other European bonds – French, Spanish or Italian bonds.
Thursday, November 17, 2011
Italy’s Mario Monti proposes big plan for reform and growth
After coming to power on Wednesday, Mario Monti’s new government on Thursday made public its plan to bring in stringent reforms to turn around country’s economy. The highlights of the measures proposed by the new Italian PM are ¬– budget cut, revenue hike, change in labor law and pension system and bringing down tax evasion.
From what appears to be a major shift since ex Italian Premier Silvio Berlusconi’s departure, the present Italian government has made its priorities clear and its intention sincere. Italy is not afraid to take on the challenge posed by debt crisis. Mario Monti urged that how fast and successfully Italy can come out of debt crisis would also have a positive and significant bearing on ‘Euro’ and the Euro zone. For that Italy needs to act fast and push for sweeping changes. Monti, the ex- EU commissioner, said that he is counting on the European Union to lend support to Italy.
On Thursday's confidence vote, the Italian Prime Minister has got thumping victory from his Senate. He is set for another confidence vote on Friday.
From what appears to be a major shift since ex Italian Premier Silvio Berlusconi’s departure, the present Italian government has made its priorities clear and its intention sincere. Italy is not afraid to take on the challenge posed by debt crisis. Mario Monti urged that how fast and successfully Italy can come out of debt crisis would also have a positive and significant bearing on ‘Euro’ and the Euro zone. For that Italy needs to act fast and push for sweeping changes. Monti, the ex- EU commissioner, said that he is counting on the European Union to lend support to Italy.
On Thursday's confidence vote, the Italian Prime Minister has got thumping victory from his Senate. He is set for another confidence vote on Friday.
Sunday, November 13, 2011
Mario Monti on the hot seat as new Italian Premier
Only a day after the exit of Berlusconi, Giorgio Napolitano as the President of Italy gave his formal approval to Mario Monti to become the new Prime Minister on Sunday. In doing so, the cool and competent 68-year-old Monti has replaced the charismatic and flamboyant Silvio Berculoni to head Italy. Lovingly called ‘Super Monti’, the new Italian Premier has recently received the “senator for life” title from the Italian President for his distinguished role as an economist and as ex-European Commissioner.
It is said that Mario Monti had initially showed interest to form a coalition government, but after most of the major parties showed their reluctance, that idea was shelved. It is now expected that the new cabinet would consist largely of technocrats.
As the new Italian Premier, Mario’s priority will be to implement austerity measures, arrest Italy’s piling debt crisis and win back the confidence of financial markets. Not an easy task, considering that Monti will be closely watched not only by his own country, but also by the EU leaders and skeptical investors. It is indeed ‘the’ testing time for Italy’s Super Mario and also a nerve-racking moment for Europe who are desperate to cut back on Euro risk (currency).
It is said that Mario Monti had initially showed interest to form a coalition government, but after most of the major parties showed their reluctance, that idea was shelved. It is now expected that the new cabinet would consist largely of technocrats.
As the new Italian Premier, Mario’s priority will be to implement austerity measures, arrest Italy’s piling debt crisis and win back the confidence of financial markets. Not an easy task, considering that Monti will be closely watched not only by his own country, but also by the EU leaders and skeptical investors. It is indeed ‘the’ testing time for Italy’s Super Mario and also a nerve-racking moment for Europe who are desperate to cut back on Euro risk (currency).
Italy’s Silvio Berlusconi bows out of Prime Ministership
Silvio Berlusconi, the longest-serving Italian Premier since World War II, stepped down on Saturday. His exit marks an end to a political career spanning almost two decades. The resignation of the three-time elected Premier in Italy came immediately after the parliament gave sanction to austerity measures to address debt crisis.
With Berlusconi’s big exit, President Giorgio Napolitano is now expected to appoint a new government, probably headed by a technocrat. The name that is coming up as the most likely candidate for the prime ministerial’s post is that of Mario Monti. His role as a respected economist and also as former European Commissioner gives him an edge over others in leading Italy through the current debt crisis and stepping up economic reforms. Monti is also said to enjoy the support of financial and European institutions.
The priority of the new government would be to step up measures to reduce Italy’s huge public debt (amounting to 1.9 billion Euros), steer its economy on the path of growth and to get back investors’ confidence in Italian economy.
Though Silvio Berlusconi’s party, Pasok, has given its support to Mario Monti, they might want to have a say in the composition of new cabinet.
With Berlusconi’s big exit, President Giorgio Napolitano is now expected to appoint a new government, probably headed by a technocrat. The name that is coming up as the most likely candidate for the prime ministerial’s post is that of Mario Monti. His role as a respected economist and also as former European Commissioner gives him an edge over others in leading Italy through the current debt crisis and stepping up economic reforms. Monti is also said to enjoy the support of financial and European institutions.
The priority of the new government would be to step up measures to reduce Italy’s huge public debt (amounting to 1.9 billion Euros), steer its economy on the path of growth and to get back investors’ confidence in Italian economy.
Though Silvio Berlusconi’s party, Pasok, has given its support to Mario Monti, they might want to have a say in the composition of new cabinet.
Friday, November 11, 2011
Greece chooses Lucas Papademos as the new Prime Minister
Finally after days of eager anticipation, Greece has found its new interim Premier in the form of Lucas Papademos on Friday. Papademos, a much respected economist and also an ex- European Central Bank vice president is the new head of the interim three-party coalition government, the national unity government. He has replaced George Papandreou, leader of the Socialist party, Pasok. The new government is expected to push through the long-awaited tough austerity measures and steer the country away from the massive debt crisis.
The swearing-in ceremony was graced by the President of Greece Karolos Papoulias and spiritual head of the Greek Orthodox Church, Archbishop leyronymos. In the new 48-member cabinet are Evangelos Venizelos, who retains his finance minister portfolio, and Stavros Dimas, as the new foreign minister. Dimitris Avramopoulos holds the post of both defence minister and New Democracy law maker.
To retain its Euro zone membership, Greece under the leadership of Lucas Papademos has some toughest measures to take to deal with the ongoing debt crisis. Foremost are; implementation of tougher austerity measures, securing the release of the next installment (8 billion Euros aid) as per 2010 agreement, getting the sanction of 130 billion Euros rescue package and the sanction of 2012 budget (considered to be the toughest one) by the parliament.
The swearing-in ceremony was graced by the President of Greece Karolos Papoulias and spiritual head of the Greek Orthodox Church, Archbishop leyronymos. In the new 48-member cabinet are Evangelos Venizelos, who retains his finance minister portfolio, and Stavros Dimas, as the new foreign minister. Dimitris Avramopoulos holds the post of both defence minister and New Democracy law maker.
To retain its Euro zone membership, Greece under the leadership of Lucas Papademos has some toughest measures to take to deal with the ongoing debt crisis. Foremost are; implementation of tougher austerity measures, securing the release of the next installment (8 billion Euros aid) as per 2010 agreement, getting the sanction of 130 billion Euros rescue package and the sanction of 2012 budget (considered to be the toughest one) by the parliament.
Wednesday, November 9, 2011
European debt crisis threat as Italian Bonds touches new high
The fear of European debt crisis became more pronouned on Wednesday as Italian government bond spiked to a new high of 7 percent plus. Italian market tumbled in the afternoon as bonds breached the important threshold of 7 percent, triggered by the fear that EU has no rescue plan for Italy. This had a spiraling effect on other world markets, including Asian markets on early Thursday.
Italy, a core Euro zone member and the 8th largest world economy, is the world’s third largest bond market. Its debt amounts to a huge 2.6 trillion Euros – considered too much to be absorbed by EU.
German chancellor, Angela Merkel, warned that unless concrete and quick structural reforms take place to cut cost, it could result in collapse of the Euro currency. Angela Merkel has also demanded changes in the EU treaties.
The European Central Bank has bought, until recently, large chunks of Italian bonds to cut back its borrowing cost. But it is unlikely that the bank will be willing to buy any more after the new high.
As the resignation of Italian Prime Minister, Silvio Berlusconi, is still a month away, investors confidence has gone southward. Experts feel that Wednesday’s market reaction is not because of its poor fundamentals but because of fear of instability triggered by lack of decisive action on the part of Italian Premier.
Italy, a core Euro zone member and the 8th largest world economy, is the world’s third largest bond market. Its debt amounts to a huge 2.6 trillion Euros – considered too much to be absorbed by EU.
German chancellor, Angela Merkel, warned that unless concrete and quick structural reforms take place to cut cost, it could result in collapse of the Euro currency. Angela Merkel has also demanded changes in the EU treaties.
The European Central Bank has bought, until recently, large chunks of Italian bonds to cut back its borrowing cost. But it is unlikely that the bank will be willing to buy any more after the new high.
As the resignation of Italian Prime Minister, Silvio Berlusconi, is still a month away, investors confidence has gone southward. Experts feel that Wednesday’s market reaction is not because of its poor fundamentals but because of fear of instability triggered by lack of decisive action on the part of Italian Premier.
Italian Premier selected Angelino Alfano as the next party head
On Wednesday, the outgoing Prime Miniter of Italy, Silvio Berlusconi, pushed for early elections in 2012 . The Italian Premier claimed that he is not going to contest in the next election. But the longest-serving Italian Prime Minister named Angelino Alfano, as the head of People of Freedom party and likely candidate for the Prime ministerial’s post.
In the mean time, the fear of Italy’s debt crisis worsened on Tuesday as its financial market reacted adversely to the news. Its 10-year government bonds hit a shocking 6.95 percent, a jump of another 0.37 percent from Tuesday’s high. Experts have estimated that over the next few years, Italy would need 825 billion to 907 billion Euros in capital flow to tide through the debt crisis.
Silvio Berlusconi offered to vacate his chair on Tuesday after losing overall majority in Parliament. The announcement came after Berlusconi’s centre-right coalition managed 308 votes out of 316 votes, 8 votes short from absolute majority. The 70-year-old dominant Italian figure would, however, stay until budget reforms are passed by the Italian Parliament. As of yet, no date has been confirmed regarding vote on budget, but it is likely to be later this month.
In the mean time, the fear of Italy’s debt crisis worsened on Tuesday as its financial market reacted adversely to the news. Its 10-year government bonds hit a shocking 6.95 percent, a jump of another 0.37 percent from Tuesday’s high. Experts have estimated that over the next few years, Italy would need 825 billion to 907 billion Euros in capital flow to tide through the debt crisis.
Silvio Berlusconi offered to vacate his chair on Tuesday after losing overall majority in Parliament. The announcement came after Berlusconi’s centre-right coalition managed 308 votes out of 316 votes, 8 votes short from absolute majority. The 70-year-old dominant Italian figure would, however, stay until budget reforms are passed by the Italian Parliament. As of yet, no date has been confirmed regarding vote on budget, but it is likely to be later this month.
Tuesday, November 8, 2011
Italy on jitters over the debt crisis
After Greece, it is Italy’s turn to be hit by the spiraling debt crisis. On Monday, Europe’s financial crisis worsened as Italian government bond almost touched 15-year high, aided by slow economic growth. Like Greek Prime Minister George Papandreou, pressure mounted on Italian Prime Minister, Silvio Berlusconi, to resign and allow a new government to exercise reforms to reduce debt. But unlike Papandreou, the Italian Prime Minister refused to step down from his chair.
Unlike Greece, Portugal and Ireland, Italy needs a huge rescue package. The Italian debt amounts to 1.9 trillion Euros. It is feared that arranging for such a massive bail-out package could bring down the European Union, if not the global economy.
Monday saw the 10-year government bond of Italy touch 6.6 percent, the highest since Euro was introduced in 1997. As interest rate rises, government has to pay out more from its budget to investors who own these government bonds, thereby getting into debt.
The austerity measures promised by Italy to the European Central Bank was supposed to be passed before November 15th, current year. But that is caught in the deadlock because of conflicting interest within the government.
In an effort to save Italy from going under further debt crisis, European Central Bank has been buying government bonds to check its borrowing costs. But to tackle debt crisis, the Italian government must be prepared to take tough stand.
Unlike Greece, Portugal and Ireland, Italy needs a huge rescue package. The Italian debt amounts to 1.9 trillion Euros. It is feared that arranging for such a massive bail-out package could bring down the European Union, if not the global economy.
Monday saw the 10-year government bond of Italy touch 6.6 percent, the highest since Euro was introduced in 1997. As interest rate rises, government has to pay out more from its budget to investors who own these government bonds, thereby getting into debt.
The austerity measures promised by Italy to the European Central Bank was supposed to be passed before November 15th, current year. But that is caught in the deadlock because of conflicting interest within the government.
In an effort to save Italy from going under further debt crisis, European Central Bank has been buying government bonds to check its borrowing costs. But to tackle debt crisis, the Italian government must be prepared to take tough stand.
Saturday, November 5, 2011
Papandreou secures the confidence vote
With the win of confidence vote on Saturday, the Prime Minister of Greece has tackled a crucial political crisis in the recent time. The victory stamps the official approval of the Greece parliament on the debt agreement reached with EU leaders last week. The win though came by a narrow margin, 153 to 145, is going to pave the way for the EU to sanction bail out package for Greece, needed to manage the current debt crisis. Saturday’s victory means, Greece is going to receive 8 billion Euros as relief installment from EU and IMF next month. This is expected to allow Greece to pay its next month’s bill and avoid immediate default.
As per the Greece bail out package, The EU along with IMF would finance a total of approximately 109 billion Euros in Greece debt. Major private sector banks in Europe has voluntarily agreed to contribute another 37 billion Euros. In exchange, Greece is expected to cut down on government jobs, reduce pensions and encourage privatization.
The vote ends a jittery week that started with Papandreou’s announcement of holding an election on Greece’s debt agreement. He was then forced into a humiliating climb-down not only by the EU leaders but also by the members of his own Socialist party, Pasok.
Also on Saturday, the Greece Prime Minister has called on the Greece President, Karolos Papoulias, to ask for his permission to help form a coalition government. He has expressed urgency to break through the controversial Greece rescue package. George Papandreou has also voiced his intention to step down to make way for the coalition government.
As per the Greece bail out package, The EU along with IMF would finance a total of approximately 109 billion Euros in Greece debt. Major private sector banks in Europe has voluntarily agreed to contribute another 37 billion Euros. In exchange, Greece is expected to cut down on government jobs, reduce pensions and encourage privatization.
The vote ends a jittery week that started with Papandreou’s announcement of holding an election on Greece’s debt agreement. He was then forced into a humiliating climb-down not only by the EU leaders but also by the members of his own Socialist party, Pasok.
Also on Saturday, the Greece Prime Minister has called on the Greece President, Karolos Papoulias, to ask for his permission to help form a coalition government. He has expressed urgency to break through the controversial Greece rescue package. George Papandreou has also voiced his intention to step down to make way for the coalition government.
Saturday, October 29, 2011
Europe calls for China to rescue Euro
Concerns over weak Euro have prompted EU leaders to seek out for Chinese investment. In what is seen as a major shift of power towards the East, top EU officials have initiated talk with China to rescue Europe with fresh funds. If this happens, this would give China the perfect opportunity to get a very strong hold in the Western financial world.
China indicated that it doesn’t want to be a mere spectator in the current debt crisis – Europe being their biggest trading partner. But Chinese government certainly needs to ensure that European heads meet certain key conditions – it doesn’t want to “throw away the countries wealth.” China has alluded that in exchange of emergency rescue fund, it expects European leaders, and the rest of the world, to stop criticizing its economic policy. In addition, it is also expected that China might demand various other concessions, which might include financial guarantees and concessions in trade policies, etc.
Klaus Regling, the head of the European rescue fund, on his visit to Beijing on Friday acknowledged that he doesn’t expect an immediate deal with China. Reports are going around that China has also made a tough proposal.
It is anticipated that if China choose to rescue Europe, it will bring the beginning of a new world order – overthrow the world’s most powerful financial power long held by the United States. Does that mean China is the new super power in the making? We have to wait and watch...
China indicated that it doesn’t want to be a mere spectator in the current debt crisis – Europe being their biggest trading partner. But Chinese government certainly needs to ensure that European heads meet certain key conditions – it doesn’t want to “throw away the countries wealth.” China has alluded that in exchange of emergency rescue fund, it expects European leaders, and the rest of the world, to stop criticizing its economic policy. In addition, it is also expected that China might demand various other concessions, which might include financial guarantees and concessions in trade policies, etc.
Klaus Regling, the head of the European rescue fund, on his visit to Beijing on Friday acknowledged that he doesn’t expect an immediate deal with China. Reports are going around that China has also made a tough proposal.
It is anticipated that if China choose to rescue Europe, it will bring the beginning of a new world order – overthrow the world’s most powerful financial power long held by the United States. Does that mean China is the new super power in the making? We have to wait and watch...
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