Irish bailout, still not known how much is planned, failed to alley market worries as debt costs for Ireland, Spain and Portugal continued at high levels. However, most of the European share indices along with that of the US were up, with positive news from the US data.
Jobless claims in the US came down slightly comparing with the previous week. Yesterday, the US revised up its third quarter growth rate from 2% to 2.5%.
The yield on Irish government’s 10 year bond was 8.92%, a record level reached before the bailout talks began. Though Irish government is not going for debt sale as it is fully funded up to the first half of next year with EDB funding, it is still a matter to worry. Because, it denotes that the markets are losing confidence on Ireland’s capacity of repayment of its debt.
The yield on 10 year Portuguese bond was 7.8%, which means the bond spread relative to the German bund was 4.8%. The Spanish-German 10 year bond spread recorded at 2.6% a life time high for Spain.
Article first published as Portugal, Spain Worry Contagion from Ireland on Technorati.
A country, which once recorded more than 30 percent GDP growth, is now threatening European Union for its liquidity problem and soaring debt costs. Though the Ireland authorities are repeatedly telling that they do not need any bailout from the European emergency fund, markets are not in a position to believe. It seems they recall the same type of confident announcements by Greece Prime Minister George Papandreou that his country only needed assurances from the EU but not monetary aid. Then, ultimately Greece had to claim the financial aid from the EU and the IMF worth 110 billion euros.
Worries of Portugal and Spain
Finance ministers of Portugal and Spain are worried that Ireland crisis will spread to their countries if the Ireland does not move fast to assure the markets. Portugal’s debt costs are already going up. Spain is also almost ready to follow suit.
Portugal finance minister Fernando Teixeira dos Santos is quoted by BBC as urging Ireland to do the right thing for the Euro and accept bail out. Spain’s Treasury Secretary has also reportedly asked Ireland to act quickly to cool down the market’s worries about uncertainties prevailing on Ireland’s capacity of debt repayment.
BBC News | 17 August 2010 | 16:51 GMT
Spain has become the latest country to launch an investigation into the collection of sensitive wi-fi data by Google. Google has admitted that its Street View cars had “accidentally” collected data from unsecured wi-fi networks in more than 30 countries. A Google representative has now been summoned to appear before a judge in Madrid on 4 October. It is in response to a complaint by a privacy watchdog called Apedanica.
The Google representative has been summoned to explain what data was collected, how it was obtained and the number of people affected. “We are working with the authorities in Spain to answer any questions they have,” said a spokesperson for Google. “Our ultimate objective is to delete the data consistent with our legal obligations and in consultation with the appropriate authorities.” Investigations are ongoing in France, Germany and Australia. In the US, Google faces a class action lawsuit over the data harvesting, as well as a large scale investigation backed by 38 states.In the UK, the Information Commissioner (ICO) recently cleared the company after it found that it had not collected “significant” personal details. However, the firm is still under investigation by the Metropolitan police. Continue reading
Bloomberg | Aug 13, 2010 | 4:26 PM GMT+0530
Germany’s economy grew from the first quarter at 2.2 percent in the second quarter the fastest pace since the country’s reunification two decades ago, driving faster-than-forecast expansion of 1 percent in the 16-nation euro area. Economists had forecast GDP would rise 1.3 percent in Germany and 0.7 percent in the currency bloc. Germany, Europe’s largest economy, is benefiting from a recovery in global demand after last year’s recession just as the euro’s 10 percent decline against the dollar this year makes its exports more competitive outside the region. At the same time, European governments are cutting spending to rein in ballooning budget deficits, threatening to slow growth in coming months. “It’s a Germany-driven story,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. The euro rose a quarter of a cent after Germany’s GDP report before erasing its gains. It traded at $1.2814 at 12:45 p.m. in Frankfurt.
Germany’s performance highlights the growth differential across the euro region in 2nd quarter. France’s economy expanded 0.6 percent in the period, Italy’s 0.4 percent and Spain’s 0.2 percent, while Greece, which was forced to seek a European Union bailout in May, experienced a 1.5 percent contraction. “Looking ahead, the peripheral economies will continue to suffer from fiscal tightening and look set to remain in, or return to, recession,” said Jennifer McKeown, an economist at Capital Economics Ltd. in London. “The German recovery will weaken as global demand slows and its own fiscal consolidation begins next year.” Stocks reversed an early rally on concern about weaker growth in Spain and Greece and the Stoxx Europe 600 Index lost 0.5 percent to 253.57 as of 12:45 p.m. in London. “Recovery is on path but it is still fragile,” European Commission spokesman Amadeu Altafaj told reporters in Brussels today. Germany, which accounts for about a quarter of the euro region’s economy, was responsible for almost two thirds of the bloc’s second-quarter growth, according to Eurostat, the E.U.’s statistics office in Luxembourg.
Bloomberg | Aug 12, 2010 | 1:22 PM GMT+0530
Prime Minister Jose Luis Rodriguez Zapatero may face a second front in his battle to contain Spain’s fiscal crisis as borrowing costs for the country’s regional governments climb. Catalonia, which accounts for a fifth of Spanish gross domestic product, has been shut out of public bond markets since March and the extra yield it pays over national government debt has almost tripled this year. Galicia, in the northwest, has asked to freeze payments of debt it owes the central government and the Madrid region postponed a bond sale last month. Spain’s regions, which borrowed at similar rates to the central government before the global credit crisis started in 2007, are key players in Zapatero’s drive to get his budget in order and push down the country’s borrowing costs. They control around twice as much spending as the state, employ more than half of all public workers and piled on debt during the recession. “If investors focused more on the problems in the regions, they would be less optimistic on Spain’s central government debt, and see that the rally in July was a bit overdone,” said Olaf Penninga, who helps manage 140 billion euros ($182 billion) at Rotterdam-based Robeco Group, and sold Spanish bonds last year.
The yield on 10-year Spanish government bonds has dropped 79 basis points to 4.09 percent since June 16, according to Bloomberg generic prices. The extra return investors demand to hold the debt rather than German equivalents was at 165 basis points today, down from a euro-era high of 221 points two months ago. The region, which attracts more tourists than any other in Spain, paid 300 basis points more than three-month Euribor for 1 billion euros of four-year bank loans last month, a spokesman said. Fomento de Construcciones & Contratas SA, Spain’s fourth- largest builder, said on Aug. 2 it agreed to pay a 260-basis point spread to extend 1.1 billion euros of loans until 2014. While government records on Aug. 9 show that Catalonia sold 1 billion euros of five-year debt via savings bank La Caixa in June, it hasn’t issued a benchmark-sized bond in public markets since March. “Debt markets closed” as Greece’s fiscal crisis spread through the euro region in the second quarter, said spokesman Adam Sedo last month. At 5.5 percent, the yield on Catalan 10-year bonds is on a par with Peru. Continue reading
FX Concepts LLC, the hedge fund that bought the euro in June just as it began a 9.7 percent surge against the dollar, now says it’s almost time to get out of the currency. The firm, which manages $8 billion in assets, expects the euro’s advance from a four-year low on June 7 to come undone by September, partly because European austerity programs will start to weigh on growth. Reports last week that showed Spanish consumer confidence falling to the lowest level this year and banks tightening credit standards in the region suggest the budget measures may already be undermining the recovery. The same fiscal measures that helped restore confidence in the euro may soon weaken the region’s economies and torpedo the rally. A July 30 survey of 21 money managers overseeing $1.29 trillion by Jersey City, New Jersey-based research firm Ried Thunberg ICAP Inc. found 75 percent don’t expect Europe’s common currency to strengthen over the next three months. “Austerity is really bad for growth,” said Jonathan Clark, vice chairman at New York-based FX Concepts, the world’s biggest currency hedge fund. “In the U.S., austerity is mainly on the state level, but in Europe they are whole-hog into cutting spending to reduce deficits. Under a pessimistic scenario, the European currencies are in a lot of trouble.”
Spain, Portugal and Greece will reduce spending by an average 4.3 percent of gross domestic product from 2009 to 2011, said Gilles Moec, an economist in London at Deutsche Bank AG, Germany’s largest lender. The euro area will expand 1.5 percent this year, less than a previous estimate of 2 percent, UBS AG, the biggest Swiss bank by assets, said in a July 16 report. The cuts contrast with the U.S., where President Barack Obama signed into law a $34 billion extension of unemployment benefits last month. The Congressional Budget Office projects a record $1.47 trillion deficit this fiscal year ending Sept. 30, and $1.42 trillion in 2011. While U.S. growth is slowing, it beats the European Union, where a 750 billion-euro ($981 billion) backstop for the region’s most indebted nations stabilized the currency after it slid from $1.5144 on Nov. 25 to the June 7 low. U.S. GDP grew at a 2.4 percent pace in the second quarter, compared with 3.7 percent in the prior period, the Commerce Department in Washington said July 30. Corporate spending on equipment and software jumped at a 22 percent annual rate, the biggest increase since 1997. The median second-quarter estimate for the euro region is 1.30 percent, and 1.10 percent for the year, based on a survey of 20 economists by Bloomberg. Continue reading
Bloomberg | Jul 29, 2010 | 7:09 PM GMT+0530
A Spanish judge ordered the detention of three U.S. soldiers accused of killing Spanish cameraman Jose Couso in Iraq in 2003. Judge Santiago Pedraz at Spain’s National Court ordered the arrest of Sergeant Thomas Gibson, Captain Philip Wolford and Lieutenant Colonel Philip de Camp, according to court documents. The court offered to hear the soldiers’ defense in the U.S., although American authorities haven’t cooperated, and the relevant international arrest warrants will be activated, the judge said. Pedraz said he would seek information on the men’s whereabouts from Spanish police and intelligence agencies.
Couso was killed while filming with other reporters in the Palestine Hotel in Baghdad on April 8, 2003, the court said. Spanish law allows courts to pursue crimes including terrorism and crimes against humanity in other countries if they have a Spanish connection. A spokeswoman for the U.S. embassy in Madrid declined to immediately comment.