Category: Euro-Zone

Ireland Lacks Sufficient Collateral for Bailout Loan

The European Central Bank expressed concerns that Irish bail out would affect Ireland’s ability to provide further funding to Eurozone members. The ECB is of the view that Ireland lacks quality collateral for bail out loans in case Ireland fails to pay back those loans.

On Friday, credit rating agency Moody’s cut sharply the Republic’s debt rating reducing it by five notches. Last week, the International Monetary Fund (IMF) approved a three-year loan of 22.5bn euros for the Republic. The funds form the first part of the IMF’s contribution to the EU and IMF rescue package. The Irish government has passed a series of spending cuts and tax rises totalling 15bn euros as a condition of the bailout.

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ECB Continues Bond Buying to Help Troubled Eurozone

ECB president Jean-Claude Trichet confirmed on Thursday that the European Central Bank would continue to buy government bonds of Eurozone countries. The ECB already bought governmentTrichet bonds of Eurozone countries worth 67 billion Euros. He did not offer any details as per BBC news.

Trichet said the ECB would continue to support troubled banks in Eurozone area. After Trichet’s announcement, the Euro rose to $1.3145 from $1.3059 on Thursday. ECB decided to maintain bank rate at 1%, as expected.

On Thursday (December 2), Spain government carried a bond auction to raise 2.47 billion Euros. Spain had to offer increased yield on its 3-year bonds, 3.7% instead of previous rate of 2.5% in October. Yesterday, Portugal also increased its yield on 1-year bonds from 4.8% to 5.3%. Markets are still nervous on public finances of Portugal and Spain.

Elsewhere, official figures confirmed Q3 growth rate of 0.4% for Eurozone, a slow growth compared with Q2 growth rate of 1%.

European Debt Crisis Deepens, Crisis Spreads to More Countries

Article first published as European Debt Crisis Deepens, Spreads to More Countries on Blogcritics.

Ireland bailout worth 85 billion Euros could not convince the markets that the crisis would not spread to other indebted Eurozone countries. On Tuesday, debt costs of Portugal, Spain and Belgium have touched life time high levels in euro’s 12-year history. Late on Tuesday ratings agency placed Portugal on credit watch over its huge debts, signalling the next country to ask for joint aid from the EU and IMF would be Portugal as per BBC News.

Bond Yields

Portugal’s central bank warned about the risks being faced by its banks. Failure of the PortugalEurozone debt and bond prices - tn government in consolidating public finances may lead to Portugal banks to face intolerable risks, the central bank warns. France already came forward saying it will support to help Portugal and Spain if such a need arises. Financial officials in France and Germany accused investors for acting irrationally on the threat of financial contagion.

The yield on Spain’s 10-year bonds reached to 5.7% on Tuesday, a record difference of 3.05% compared with Germany’s 10-year bond. Bond spread for Italy’s 10-year bond was at 2.1 percent over Germany’s bonds and Irish bond yield stood at 9.53% while Portuguese bond yield stood at 7.05% for 10-year bonds. However, the yields for governments bonds of these countries are reportedly lowered on Wednesday on speculation that the European Central Bank would take extra measures to save Euro from falling, Reuters reported.

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ECB to hold fire, Fed loads second stimulus round

Yahoo | AFP | 31/10/2010

The European Central Bank governing council meets this week after European leaders moved to shore up eurozone stability and as the US Federal Reserve mulls a second round of monetary stimulus. The ECB is sure to maintain its main lending rate at a record low of 1.0 percent, analysts say, while focusing potentially tense talks on whether to continue unwinding its own unconventional measures.

euro-unionA rift between ECB governors has opened over pursuing purchases of eurozone government debt, with German central bank chief Axel Weber saying he will stick to his guns even if it means passing on a chance to be the next ECB president. Weber insists the scheme should be phased out and said last week: "If that’s going to have implications for my future career, then I’d be happy to live with those consequences."

Commerbank economist Michael Schubert said: "Behind closed doors … the council is likely to discuss how to continue its gradual exit from unconventional measures" some eurozone banks have come to depend upon. "Discussions could become even more heated at Thursday’s meeting," he added.

Growth in powerhouse Germany is strong now but Greece is still in recession and faces an unsettled political situation that could worsen its debt crisis. In London meanwhile, the Bank of England is expected to maintain its main interest rate at a record low of 0.50 percent on Thursday.

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Wave of Parcel Bombs Target Embassies in Greece Capital

Article first published as No Yemeni Connection to Parcel Bomb Sent to German Chancellor on Technorati.

Security officials at the German Chancellery detected a parcel bomb received at the office of the Chancellor Angela Merkel, who was in Belgium. The parcel addressed to Angela Merkel. French president’s office missed the parcel as it was intercepted in Athens itself.

Security Detection

Security men became suspicious of the parcel as the sender was given as the Economic Ministry of Greece. Bomb disposal squads were alerted and the bomb was deactivated. The bomb was discovered at noon on October 2, mailed from Greece capital Athens three days ago. The device was contained in a parcel with books in it.

Germany’s Interior Minister Thomas de Maiziere was quoted by Bloomberg as saying “ThisAthens suspects was a functional explosive device.” He said the detected bomb was similar to the parcel bomb exploded at the Swiss embassy in Athens.

Targeting Embassies

Besides the Swiss embassy, Russian embassy was also hit by a parcel bomb on the same day. Greek authorities intercepted similar parcel bombs sent to Chile, Dutch, Belgian, German and Bulgarian embassies. They also seized on October 1 a parcel bomb addressed to French President Nicolas Sarkozy. Another parcel bomb sent to Mexican embassy exploded at a courier firm injuring one person.

By Tuesday evening, 11 mail bombs had been detected in the Greek capital. Two more were destroyed in controlled explosions at Athens’ international airport — one addressed to the European Union’s highest court in Luxembourg and the other to law enforcement agency Europol in the Netherlands.

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Ireland slams IMF rumours; tension looms over budget

Reuters | Sep 17, 2010 | 10:22pm IST

Ireland’s finance ministry and the International Monetary Fund sought to calm markets on Friday after a newspaper report on the possibility of an IMF bailout sent investors running for cover. The cost of insuring Irish sovereign debt against default hit a record high and the Irish/German spread reached a euro lifetime peak after the Irish Independent newspaper said Ireland was "perilously close" to calling in the IMF and the EU. The IMF told Reuters it did not foresee its financial assistance would be needed for Ireland and praised Ireland Central Bank Dublin’s efforts at propping up its banking system. Ireland’s Department of Finance slammed the Irish Independent article. "There is absolutely no truth to a rumour concerning external assistance. It is based on a local misinterpretation of a research report," a spokesman said in a statement.

The newspaper used a report from Barclays Capital as the basis for the article. Barclays said Ireland’s liquidity position was comfortable but if unexpected banking losses emerged or economic conditions deterioriated outside help may be needed. "The report is a lot more measured than what has been reflected in the newspaper," said Geraldine Concagh, a senior economist in Allied Irish Banks. "The market is very nervous at the moment." A combination of costly bank bailouts, anaemic growth and the worst budget deficit in the EU have stoked fears of a full-blown debt crisis and Finance Minister Brian Lenihan is under pressure to ramp up efforts to get the finances in order.

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Growth of the EU and the US to continue to slow –IMF Official

IMF-Logo Despite strong growth figures recorded in the Europe, Germany in particular, and the United States economic growth in both regions will remain at slow pace as per the IMF chief economist Olivier Blanchard. His remarks were published on Monday in a French newspaper Le Figaro, Reuters reported. He reiterated that the euro zone governments should deliver credible plans so as to reduce their budget deficits for medium terms. Instead of stipulating target dates only the contents of the plans would reassure financial markets about the financial health he remarked. “Whether it is 2013 or 2014 is not important,” he said.

Impact on Asia

A slowdown in the US would have automatic impact on growth in the short term Mr. Blanchard was quoted as saying. He might be referring to the dependent on exports to the US of the major players of Asia China, Japan and India. Exports from the three countries are majorly destined to the US and hence the impact. China recently concentrated on developing domestic market to relieve itself from depending on exports to the US. Japan market is already saturated and the haunting deflation for Japan is preventing it to shift priorities in trade it seems. Decreasing prices prevent consumers to come to shops as they expect the prices may further slip. That is making hard for Japan to increase consumer spending.

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