Europe's hopes of "ring fencing" the embattled single currency through a €1 trillion-plus leveraged bailout fund are sinking due to spiraling bond yields, investor flight from euro zone debt, and failure to entice cash-rich governments in the far east to commit to the plan. Klaus Regling, the head of the European Financial Stability Facility (EFSF), is expected to tell euro zone finance ministers meeting in Brussels on Tuesday evening that the scheme to quintuple the firepower of the fund by underwriting initial losses on euro zone bond-buying by China and sovereign wealth funds in the far and Middle East has failed to attract enough interest. The blow to euro zone efforts to save the currency came amid increasingly apocalyptic predictions of a euro collapse........ The Organisation for Economic Co-operation and Development in Paris forecast a "deep depression" across Europe and a tidal wave of bankruptcies if any of the 17 countries was forced to quit the euro. The Polish foreign minister, Radoslaw Sikorski, urged Germany to save the EU from "a crisis of apocalyptic proportions". Stock markets rebound sharply after days of heavy losses as investors ignore IMF denial of aid for Italy and an OECD warning of euro zone recession and risk that US could follow suit...for investors read central banks....The stock market is rigged. Same with the bonds, it is only a matter of time when we get a eurobond. Currencies are rigged by the G 20 who are running an un-official world exchange rate mechanism. Why do journalists keep talking as though there is a free market ?... We will see the FTSE now heading for 6500 and the Dow to 12500, then we will head down back to 5000 and 11000. The dealers in the stock market and bond market brokers are making an absolute fortune, you can read the central banks like an open book.....Meanwhile - Christine Lagarde, the head of the International Monetary Fund, throws her weight behind the unnamed denials - she says neither Italy nor Spain has made a funding request to the IMF. She was speaking from Lima, Peru today as part of a tour of South America. The story that the IMF was drawing up a £517m rescue package for Italy and Spain, sparked by Italian newspaper reports over the weekend, was denied by an unnamed IMF spokesman earlier today. However Ms Lagarde's denial that there has been a request for funding still leaves open the possibility that the fund is thrashing out possible ways to help the eurozone without waiting to be asked... Sir Mervyn King - he's been asked again to defend the rate of inflation being so far above the bank's target of 2 %. The overshoot in inflation is not because we've had a very buoyant economy growing fast - it's not that we overestimated the amount of capacity around. It's not domestically generated inlfation, it's caused by external factors. The nature of the crisis, changes to the banking system - this has made life extremely hard. What we failed to understand was how long it would take for conditions in the banking markets to get back to normal. We thought that by now funding conditions would be better but in fact they are worse. That's one of the things that has made assessing the economy very difficult. Sir Mervyn King has been speaking to the Treasury Select Committee about the latest Inflation Report. He warned the dangers from Europe are so unpredictable that no accurate predictions can really be made.
Access Investments-Building Awareness - European Union-ROMANIA
Monday, November 28, 2011
It could be worse than we can imagine. So there's no room for complacency.
Europe's hopes of "ring fencing" the embattled single currency through a €1 trillion-plus leveraged bailout fund are sinking due to spiraling bond yields, investor flight from euro zone debt, and failure to entice cash-rich governments in the far east to commit to the plan. Klaus Regling, the head of the European Financial Stability Facility (EFSF), is expected to tell euro zone finance ministers meeting in Brussels on Tuesday evening that the scheme to quintuple the firepower of the fund by underwriting initial losses on euro zone bond-buying by China and sovereign wealth funds in the far and Middle East has failed to attract enough interest. The blow to euro zone efforts to save the currency came amid increasingly apocalyptic predictions of a euro collapse........ The Organisation for Economic Co-operation and Development in Paris forecast a "deep depression" across Europe and a tidal wave of bankruptcies if any of the 17 countries was forced to quit the euro. The Polish foreign minister, Radoslaw Sikorski, urged Germany to save the EU from "a crisis of apocalyptic proportions". Stock markets rebound sharply after days of heavy losses as investors ignore IMF denial of aid for Italy and an OECD warning of euro zone recession and risk that US could follow suit...for investors read central banks....The stock market is rigged. Same with the bonds, it is only a matter of time when we get a eurobond. Currencies are rigged by the G 20 who are running an un-official world exchange rate mechanism. Why do journalists keep talking as though there is a free market ?... We will see the FTSE now heading for 6500 and the Dow to 12500, then we will head down back to 5000 and 11000. The dealers in the stock market and bond market brokers are making an absolute fortune, you can read the central banks like an open book.....Meanwhile - Christine Lagarde, the head of the International Monetary Fund, throws her weight behind the unnamed denials - she says neither Italy nor Spain has made a funding request to the IMF. She was speaking from Lima, Peru today as part of a tour of South America. The story that the IMF was drawing up a £517m rescue package for Italy and Spain, sparked by Italian newspaper reports over the weekend, was denied by an unnamed IMF spokesman earlier today. However Ms Lagarde's denial that there has been a request for funding still leaves open the possibility that the fund is thrashing out possible ways to help the eurozone without waiting to be asked... Sir Mervyn King - he's been asked again to defend the rate of inflation being so far above the bank's target of 2 %. The overshoot in inflation is not because we've had a very buoyant economy growing fast - it's not that we overestimated the amount of capacity around. It's not domestically generated inlfation, it's caused by external factors. The nature of the crisis, changes to the banking system - this has made life extremely hard. What we failed to understand was how long it would take for conditions in the banking markets to get back to normal. We thought that by now funding conditions would be better but in fact they are worse. That's one of the things that has made assessing the economy very difficult. Sir Mervyn King has been speaking to the Treasury Select Committee about the latest Inflation Report. He warned the dangers from Europe are so unpredictable that no accurate predictions can really be made.
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British banks are much better capitalized than they were in 2007/08 and also better capitalized than many banks on the continent. But none of us really know the scale of the shocks that could come out of the euro area. It could be worse than we can imagine. So there's no room for complacency. Over the last quarter, all banks have become less safe because our banking system is exposed to the euro zone. The countries where they are most exposed are Italy and Spain, although it's not exposure to sovereign but to other banks in the euro area. So, is it all bad? Things could get better. There's no point in pretending we can quantify how things will go on. It's certainly true that any delay is not helpful. But it's very easy for countries not in the euro area to criticize but what they are trying to do is put together an agreement between sovereign nations about the way forward. I don't think any of us would be particularly enthusiastic about being asked to jump from one position to another in a matter of days.
Germany is playing a risky long game, eschewing spectacular short-term fixes to the debt and deficit dilemmas which have shifted from small peripheral economies to hit Italy and Spain – and threaten Belgium and France.
Amid ongoing arguments over whether the eurozone should pool its debt and issue "eurobonds", and whether the European Central Bank should turn into a clone of the Federal Reserve as the eurozone's last resort lender, Berlin and Brussels pooh-poohed German newspaper reports that France and Germany were plotting new "elite bonds" issued jointly by the eurozone's six AAA-rated countries – Germany, France, The Netherlands, Austria, Finland, and Luxembourg. Although the cheap borrowing could be used to salvage the eurozone laggards, European commission officials said such a move would be deeply divisive and counter-productive, splitting the eurozone and possibly hastening the end of the single currency.
"The massive wealth destruction, bankruptcies and a collapse in confidence in European integration and cooperation ... would most likely result in a deep depression" for the world economy as well as any past or present euro members, it warned. The watchdog's baseline scenario, which assumes policymakers avoid this outcome, sees eurozone growth slowing to just 0.2pc next year. However, the OECD said a bleaker outcome "may be even more likely".
The FTSE 100 climbed 2.9pc to close at 5,312.76 on reports that Germany and France want to fast-track a "stability union", which would involve much tighter oversight of euro members' finances. France's CAC 40 gained 5.5pc and Germany's DAX 4.6pc.
Paris and Berlin are prepared to pursue a separate agreement outside the EU treaty in order to hurry attempts to enforce fiscal discipline, according to EU officials. The goal is to calm markets before hundreds of billions of euro government debt must be refinanced early next year.
However, Finland and Luxembourg spoke out against the idea of the treaty being sidelined.
Berlin also denied reports it is working on issuing joint "elite" bonds with its five fellow eurozone members who share a top-notch "AAA" credit rating, in a plan to prop up debt-laden euro states.
The International Monetary Fund likewise rebuffed speculation it will offer Italy a €600bn (£516bn) lifeline, but the prospect still cheered investors. "It [the denial] hasn't dented market sentiment – no smoke without fire, hey?" said Katherine Brooks, research director at Forex.com.
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