Euro area finance ministers agreed on November 29 on the terms and conditions to extend EFSF's capacity by introducing sovereign bond partial risk participation and a Co-Investment approach. Ministers also adopted amended EFSF guidelines concerning intervention in the primary and secondary debt markets and precautionary credit lines in order to use leverage. Klaus Regling CEO of EFSF commented: 'Both options are designed to enlarge the capacity of the EFSF so that the new instruments available to the EFSF can be used efficiently. Under the partial risk protection, EFSF would provide a partial protection certificate to a newly issued bond of a member state. The certificate could be detached after initial issue and could be traded separately. It would give the holder an amount of fixed credit protection of 20-30 percent of the principal amount of the sovereign bond. "We agreed to rapidly explore an increase of the resources of the IMF through bilateral loans, following the mandate from the G20 Cannes summit, so that the IMF could adequately match the new firepower of the EFSF and cooperate even more closely," the chairman of the ministers, Jean-Claude Juncker, said. The ministers agreed on Tuesday on two ways to leverage the firepower of their bailout fund, the €440bn (£375bn) European Financial Stability Facility (EFSF), using both an insurance scheme and a co-investment programme. The EFSF has around €250bn of its capacity remaining and could multiply that number several times if it is able to attract outside private investors to buy bonds at primary auctions or traded on the secondary market. The IMF's lending capacity is now around £250bn.
Access Investments-Building Awareness - European Union-ROMANIA
Wednesday, November 30, 2011
Euro area finance ministers agreed on November 29 on the terms and conditions to extend EFSF's capacity by introducing sovereign bond partial risk participation and a Co-Investment approach. Ministers also adopted amended EFSF guidelines concerning intervention in the primary and secondary debt markets and precautionary credit lines in order to use leverage. Klaus Regling CEO of EFSF commented: 'Both options are designed to enlarge the capacity of the EFSF so that the new instruments available to the EFSF can be used efficiently. Under the partial risk protection, EFSF would provide a partial protection certificate to a newly issued bond of a member state. The certificate could be detached after initial issue and could be traded separately. It would give the holder an amount of fixed credit protection of 20-30 percent of the principal amount of the sovereign bond. "We agreed to rapidly explore an increase of the resources of the IMF through bilateral loans, following the mandate from the G20 Cannes summit, so that the IMF could adequately match the new firepower of the EFSF and cooperate even more closely," the chairman of the ministers, Jean-Claude Juncker, said. The ministers agreed on Tuesday on two ways to leverage the firepower of their bailout fund, the €440bn (£375bn) European Financial Stability Facility (EFSF), using both an insurance scheme and a co-investment programme. The EFSF has around €250bn of its capacity remaining and could multiply that number several times if it is able to attract outside private investors to buy bonds at primary auctions or traded on the secondary market. The IMF's lending capacity is now around £250bn.
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This is ridiculous- the IMF is going to seek more funding from the countries it is going to lend money to! How are the Irish, Spanish, Greeks, Portugeese and Eyties and possibly the Frogs going to contribute to a fund when they are already up to their eyebrows in debt? And why should countries outside the EU pay more money to bail out the EU? The people behind these ideas are stupid and desperate, they have no solutions to the problems they face. No wonder confidence is draining away- nobody can have confidence in this bunch of losers.
So,so.The IMF will be blown to gigantic proportions.Since we in Germany shut the entrance to direct ECB funding,they will capitalize a international UN institution through the stealth 'Eurosystem' of the Eurozone national banks and try to keep the potential inflation in their parallel twin structure.This is beyond the usual financial Hogwarts-there is no guarantee that the Eurosystem can contain such amounts of 'created' money in its stasis chamber outside the Eurozone.Since the IMF is undergoing a reform as we speak and the EU is planned to get a single seat with 32% of voting rights,BRICS getting more rights as well things will get interesting.Considering that more than half of the budget of the whole organization will be funded by the ECB via the 'Eurosystem'-the EU will control & usurp the institution for years to come-as Europe has controlled it since its creation.The reform will be no reform at all.The other countries such as America,China & rest will not bring additional capital as they already stated so it will be funded by quasi stealthy money 'creation' out of Europe.Well the Bundesbank & Frankfurt outmatched itself with this piece of financial architecture.It paid off that almost all important financial players in Europe are ex Goldman Sachs employees-it seems they mastered the art of magic.God help us all if this thing collapses,because it will be implemented,since nobody wants to pay in the EFSF in its current form.Europe prints itself money, gives it to the IMF,that than lends it to the insolvent parts of Europe with the hope that inflation will be sterilized in the IMF.Someone needs to get a Nobel prize for the craziest scheme ever in economics.
S&P said it downgraded a host of banks after changing its criteria earlier this month to take into account new considerations, including the likelihood that a government would again provide state aid as it did during the financial crisis of late 2008. Across the Atlantic, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley all had their credit ratings cut by a notch as S&P implemented the new criteria. Although S&P had warned earlier this month that it would be reviewing the ratings of 37 banks, the changes will do little for investors who are already nervous about possible contagion from Europe's financial system. Shares of most major banks were buffeted over the summer on concern that sovereign defaults in Europe would leave them nursing losses from their holdings of government debt. Barclays' rating was reduced to A+ from AA–; Royal Bank of Scotland had its rating lowered to A– from A and HSBC saw its rating lowered to AA– from AA. The downgrade from S&P came as a new study showed that Switzerland's banking industry risks losing out on almost Sfr50bn (£35bn) in assets as new tax accords with Britain and Germany prompt wealthy clients to withdraw money, according to a new study. The country's banks, which have historically been a home for wealthy people looking for lower tax rates, also face missing out on about Sfr1.1bn in annual revenue from managing the offshore assets because of tax agreements that come into effect in 2013. Under those agreements, struck earlier this year, Britain and Germany will secure revenues from taxes on investments and capital gains held in offshore accounts with Swiss banks. (telegraph.ul)
IF the 'big bazooka' that is the IMF came into play.... which means the USA taxpayer, then Obama will not be re-elected.
The American people are keenly aware that an IMF EU bailout puts the American taxpayer on the hook.
As much as europeans like to think that Americans cant read or write, we are very capable of understanding the economics of a bad investment.
Obama knows this. This IMF bailout cannot happen.
Bottom line. America is borderline broke and wont risk its future on a scheme. The EU needs to get its own house in order.
Eurozone finance ministers have turned desperately to the IMF to help boost the firepower of their main bailout fund and prevent contagion from the sovereign debt crisis spreading to the core, forcing the collapse of the euro and plunging the global economy into recession.
The IMF has no money it is a taxpayer funded scam. Care to elaborate on that?
The european project has been a top down exercise from the get go. Not that surprising then that now they think they can impose solutions to problems that have Fu*k all to do with politics and everything to do with culture, philosophy, etc...from the top down now!!!!
As if Germany can just command trifling Greeks and Italians to all of a sudden become "competitive"
That was alway the amusing bit about the Lisbon treaty....Europeans don't want to compete. They want to retire early and live la dolce vita...
Even if you could work out the politics and the economics of this crisis (and you can't incidentally) you'd still have the real problem to deal with...the smug laziness, the ennui...it's over FFS, recognize it and let's move on
Talk about fiddling while Rome burns! Germany must move this week to stabilise its currency (the Euro) by issuing a massive backstop. If Germany refuses, tighten your belts for a ride so rocky that you will wish time and again that Germany had had the maturity to have acted in time, and got over its narrow idealogical absurdity!
Talk about fiddling while Rome burns! Germany must move this week to stabilise its currency (the Euro) by issuing a massive backstop. If Germany refuses, tighten your belts for a ride so rocky that you will wish time and again that Germany had had the maturity to have acted in time, and got over its narrow idealogical absurdity!
I read Der Spiegel and Die Welt daily, and they're every bit as pessimistic about the euro zone as any Brit or Yank paper. The Guardian is... guarded, much of the time. El Pais has been screaming at the Europeans for months to get their house in order. The French press has been too embarrassed and vainglorious to admit that the EZ is in a pickle. Day in and day out, Le Monde and Le Figaro are pretty chirpy and upbeat. But the EZ's in a pickle all right.
America is too broke to help, so don't even ask. Ditto Britain (again: don't ask). Canada and Australia are too small to help, but both would help if they could. China, Russia and Brazil have full coffers, but they don't want to squander their cash reserves on ungrateful and snobby Europeans. (And here you thought only Americans felt this way! You are wrong.) That said, everybody wishes the EZ well. Good luck, and let's hope it all pans out.
: Interesting development in Italy this morning. The Italian Treasury has announced plans to "lend or borrow significant amounts of cash on the money markts", using its own account at the Bank of Italy.
The Italian Treasury describe it as "a new system of liquidity management" -- it seems that the Treasury will hold one-day auctions to either put more money into the Italian banking sector or take it out.
Izabella Kaminska of FT Alphaville compared it to the Supplementary Financing Program set up in America after the credit crunch. That was designed to soak liquidity out of the US banking sector (counterbalancing the huge injections from the Federal Reserve). The Italian scheme, though, would also seem designed to put liquidity into the system.
More as we get it....
9.18am: Just in case anyone was in doubt about the situation today, EU monetary effairs commissioner Olli Rehn has warned that Europe has just 10 days to "complete and conclude" its crisis response.
Speaking ahead of today's EU finance ministers' meeting in Brussels, Rehn said Europe was now entering a "critical period":
We have to continue to work especially on two fronts -- both in order to ensure that we have sufficiently credible financial firewalls to contain market turbulence and at the same time we need to further reinforce our economic governance.
Meanwhile, ECB governing council member Christian Noyer also warned that the situation has deteriorated sharply in recent days. Noyer told a conference in Singapore that:
The situation in Europe and the world has significantly worsened over the past few weeks. Market stress has intensified .... (and) we are now looking at a true financial crisis -- that is a broad-based disruption in financial markets.
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