Tagged: Debt crisis

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.

France President Woos India Against the United States

Article first published as French President Woos India Against the United States on Blogcritics.

France President Nikolas Sarkozy is now on India tour along with his wife Carla Bruni for fourSarkozy days from November 4 to November 7. The US president Barack Obama began his India visit with India’s business hub Mumbai. Sarkozy chose India’s technology hub to start his India tour. He brought 50 member business community and top cabinet officials including Economy minister Christine Lagarde along with him. Sarkozy seems to have come on a top mission along with signing some business contracts.

Strategic and Business Goals

During his speeches on November 4 and his interview to Times of India newspaper, Sarkozy outlined his top political and trade related priorities on global arena of his India tour. Very important offers extended to and requirements sought from India are as follows:

  • Supporting France’s G20 agenda to reform global monetary system during its G20 presidency in 2011
  • Improvements in global governance
  • Help maintain greater stability in commodity prices

In return, to the help in achieving the above-mentioned France’s goals, Sarkozy offered following package.

  • Helping Rupee to become one of the major currencies in the world
  • Support India’s long standing demand of securing permanent seat in UN Security Council

Some business contracts will be concluded during Sarkozy’s visit. Major one is a memorandum of understanding signed between a French nuclear group Areva and India’s Nuclear Power Corporation of India Limited (NPCIL) to supply at least two water-pressurised reactors worth 7 billion euros ($9.4 billion or Rs 43,240 Cr). France is competing with the US company Boeing to supply 126 fighter jets. France’s defence electronics group Thales is hoping to gain a contract to modernise 51 mirage 2000 planes.

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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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Portuguese Expensive Bond Sale Hints Bailout Need

Article first published as Portuguese Expensive Bond Sale Hints Bailout Need on Technorati.

Portugal’s latest bond auction was successful on Wednesday, but the yield offered for 1-year bonds has risen sharply, indicating that market is losing confidence in Portugal economy. The sale of 500 million euros worth 1-year bonds was oversubscribed by two and half times. The yield rose to 5.3%, which is too expensive for 1-year bonds. The previous sale of 1-year Portugal bonds yielded 4.8%. Moreover, some of these bonds might have been bought by Portuguese banks, funded by European Central Bank.

As usual, Portugal’s Prime Minister Jose Socrates reiterated that his country did not need outsidePortugal PM Jose Socratese help. What his country needed was confidence in its economy, he added. S&P rating agency placed Portugal on credit watch citing its huge debt. S&P said Portugal had not done enough to increase its labour flexibility and productivity, which means, Portugal has to decrease wages of the workers.

The yield for 10-year Portuguese bonds fell slightly on Wednesday, but remained at historically high level of 6.85%. However, the yield on German bunds that are considered the safest among the Eurozone countries remained at 2.67%. The difference between yield of German bonds and the yield on any particular country’s bonds is called bond spread of that particular bond of that country. This bond spread is widening day by day for the most indebted countries of the Eurozone despite huge bailouts offered to those countries.

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Irish People Protest against Austerity Cuts

Article first published as Irish People Protest against Austerity Cuts on Technorati.

Irish Congress of Trade Unions (ICTU) has called for protests against what he called as harshest budget ever since the state was established. Irish Police are expecting at least 50,000 people may participate in the protests. BBC News has reported that thousands of protesters are already gathering on Dublin streets.

The protests come a day after a humiliating defeat for the ruling coalition in a by-poll. TheIrish protests majority for the ruling coalition has been reduced to just two from six seats after the by-election on Friday, November 26. As a result, the Irish Prime Minister is facing pressures to resign as he lost mandate to take any important decisions on Ireland’s future.

The proposed bailout package of 85 billion euros ($114 billion) is coming with costly austerity measures. The government has already delivered a set of austerity cuts for coming four years that include 5% reduction in minimum wages, pension freeze and public sector job cuts of more than 25,000.

Most depressingly, the media reports suggest that Ireland might be charged with 6.7 percent interest on bailout loans to prop up crisis hit Irish banks. This is well above the interest rate 5.2 percent charged to Greece bailout. This suggests that even more interest rate may be charged for other countries like Portugal and Spain that may claim for bailout in future. There is only 6

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Italian Students Protest against Education Cuts

Italian students are on war path protesting against education reforms planned as part of wider austerity measures. Tens of thousands of students marched in cities all over Italy on November 24. Students were organised in more than 50 cities. They occupied premises of 44 universities out of 66 government funded universities. Their protests included picketing, suspending classes and climbing on top of faculty buildings, administrative buildings and buildings of tourist attractions.

In Rome, the student protestors formed a human chain around the ancient Leaning Tower of PisaStudent protests in Florence, Italy and the Colosseum. About 2,000 students marched through the city surrounding the Pisa tower to prevent tourists from visiting the tower, BBC reported. They climbed to the top tire of the tower to hang a banner. They even tried to enter Parliament building. Teachers and Researchers also joined protests extending their support.

Hundreds of student chanted slogans and with banners and red smoking flares nearby the Parliament where the discussions were taking place on education reforms. Students pledged they would not allow passing the educations cuts in the Parliament. They threw stones and eggs on official buildings and riot police who blocked them. Some students were arrested and complaints were filed. Protests took place in several cities including Padova, Siena, Florence, Turin, Naples, Pavia, Perugia, Palemo and Saierno.

The proposed educations reforms are called Geimini Reforms named after Maria Stella Geimini, Minister of Education. The reforms aimed to decrease funds allocated to public education drastically. The reductions in funds allocation would lead to massive layoffs and reduced education programmes. Around nine billion euro cuts are proposed in the reforms bill. Nearly, 130,000 jobs will be lost from the educations system.

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