Jean-Claude Trichet, president of the European Central Bank, tightened the screws on Greece, Portugal and Ireland on Thursday by pressing ahead with an increase in interest rates, and insisting the single currency's weakest members must avoid a default at all costs. Trichet also attempted to keep Portugal away from the abyss by pledging to keep accepting its bonds, despite some rating agencies regarding such securities as no better than junk. This stance pushed shares higher across Europe and helped the euro to strengthen, as fears abated that Portuguese banks would soon struggle to finance themselves. Speaking after the ECB's governing council met in Frankfurt, Trichet warned eurozone governments against pursuing any plan that the credit ratings agencies would deem a default. "Our message is no credit event, no selective default, no default. As simple as that." The ECB is nervous that a default would trigger billions of pounds-worth of complex financial instruments such as credit default swaps, and destabilise the European banking sector. Trichet's staunch defence of the ECB's stance came as he announced a quarter-point increase in interest rates, to 1.5%, to clamp down on inflation, despite some of the single currency's members – including Greece – remaining deep in recession. Trichet said he would "monitor very closely" price developments – usually regarded as code for another rate rise in the pipeline, though not at the next meeting. The ECB is tightening policy in response to above-target inflation, driven by the strong recovery in the eurozone's largest member, Germany, as well as other northern economies including France. Inflation across the eurozone hit 2.7% in June. Analysts said higher borrowing costs would make life even harder for the struggling "peripheral" economies of Greece, Portugal, Ireland, Italy and Spain, which are all imposing tough austerity measures to deal with budget deficits, at the same time as coping with sickly economic growth, or outright recession.
Access Investments-Building Awareness - European Union-ROMANIA
Friday, July 8, 2011
Jean-Claude Trichet, president of the European Central Bank, tightened the screws on Greece, Portugal and Ireland on Thursday by pressing ahead with an increase in interest rates, and insisting the single currency's weakest members must avoid a default at all costs. Trichet also attempted to keep Portugal away from the abyss by pledging to keep accepting its bonds, despite some rating agencies regarding such securities as no better than junk. This stance pushed shares higher across Europe and helped the euro to strengthen, as fears abated that Portuguese banks would soon struggle to finance themselves. Speaking after the ECB's governing council met in Frankfurt, Trichet warned eurozone governments against pursuing any plan that the credit ratings agencies would deem a default. "Our message is no credit event, no selective default, no default. As simple as that." The ECB is nervous that a default would trigger billions of pounds-worth of complex financial instruments such as credit default swaps, and destabilise the European banking sector. Trichet's staunch defence of the ECB's stance came as he announced a quarter-point increase in interest rates, to 1.5%, to clamp down on inflation, despite some of the single currency's members – including Greece – remaining deep in recession. Trichet said he would "monitor very closely" price developments – usually regarded as code for another rate rise in the pipeline, though not at the next meeting. The ECB is tightening policy in response to above-target inflation, driven by the strong recovery in the eurozone's largest member, Germany, as well as other northern economies including France. Inflation across the eurozone hit 2.7% in June. Analysts said higher borrowing costs would make life even harder for the struggling "peripheral" economies of Greece, Portugal, Ireland, Italy and Spain, which are all imposing tough austerity measures to deal with budget deficits, at the same time as coping with sickly economic growth, or outright recession.
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