The panic engulfing Europe’s banks is alarming. Their access to wholesale funding markets has dried up, and the interbank market is increasingly stressed, as banks refuse to lend to each other. Firms are pulling deposits from peripheral countries’ banks. This backdoor run is forcing banks to sell assets and squeeze lending; the credit crunch could be deeper than the one Europe suffered after Lehman Brothers collapsed. Add the ever greater fiscal austerity being imposed across Europe and a collapse in business and consumer confidence, and there is little doubt that the euro zone will see a deep recession in 2012—with a fall in output of perhaps as much as 2%. That will lead to a vicious feedback loop in which recession widens budget deficits, swells government debts and feeds popular opposition to austerity and reform. Fear of the consequences will then drive investors even faster towards the exits. Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.
Access Investments-Building Awareness - European Union-ROMANIA
Monday, November 28, 2011
The panic engulfing Europe’s banks is alarming. Their access to wholesale funding markets has dried up, and the interbank market is increasingly stressed, as banks refuse to lend to each other. Firms are pulling deposits from peripheral countries’ banks. This backdoor run is forcing banks to sell assets and squeeze lending; the credit crunch could be deeper than the one Europe suffered after Lehman Brothers collapsed. Add the ever greater fiscal austerity being imposed across Europe and a collapse in business and consumer confidence, and there is little doubt that the euro zone will see a deep recession in 2012—with a fall in output of perhaps as much as 2%. That will lead to a vicious feedback loop in which recession widens budget deficits, swells government debts and feeds popular opposition to austerity and reform. Fear of the consequences will then drive investors even faster towards the exits. Past financial crises show that this downward spiral can be arrested only by bold policies to regain market confidence. But Europe’s policymakers seem unable or unwilling to be bold enough. The much-ballyhooed leveraging of the euro-zone rescue fund agreed on in October is going nowhere. Euro-zone leaders have become adept at talking up grand long-term plans to safeguard their currency—more intrusive fiscal supervision, new treaties to advance political integration. But they offer almost no ideas for containing today’s conflagration.
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The European Financial Stability Facility may insure bonds of troubled countries with guarantees of between 20 percent and 30 percent of each issue to be determined in light of market circumstances, according to EFSF guidelines to be considered by finance ministers this week.
The insurance would be in the form of tradable partial protection certificates, to be issued by an independent Luxemburg-based special purpose vehicle, the guidelines show. The step is one of several new tools including setting up private funds with investors and selling short-term debt aimed at increasing the EFSF’s power to combat the debt crisis.
Euro-area finance ministers are due to meet in Brussels on Nov. 29 as governments bid to regain the confidence of financial markets. With bond spreads soaring to records, Germany failed to attract enough buyers for a sale of its benchmark bunds on Nov. 23 and two days later Belgium’s credit rating was cut one step to AA.
The proposal to attach guarantees of up to 30 percent of future EFSF bond issuances’ worth may create a threefold expansion of the 440 billion-euro ($583 billion) fund, according to the guidelines distributed to lawmakers in Berlin. The EFSF’s pool of potential aid would also be increased by setting up so- called credit investment funds with private investors to buy the bonds of euro-region states that struggle to sell their debt.
President Barack Obama has met with European Union officials today, and is making a statement now along with Herman Van Rompuy, President of the European Council - the group of leaders from the 27 EU nations.
The US President said the nation stands ready to help Europe resolve its debt crisis, and that it has a stake in the success of the region.
Mr Van Rompuy stuck up for himself a bit, saying slower global growth is not only Europe's fault, and that other economies "must act" too.
If you live in the EU, the US or MENA, then your personal security, health and standard of living are all in imminent danger of virtual collapse, together with stock markets worldwide. For as soon as a nuclear warhead is deployed in the Middle East or anywhere else, life as you know it, will change irrevocably. There has never before been a global nuclear war, but we are now very near to that cataclysmic event, through the greed and arrogance of a powerful group of vested interests that can influence governments around the world. Yet the world carries on as if everything is just OK. People drink skinny lattes and watch football and have babies. How unbelievable is that? But then these warnings are often dismissed as scaremongering. Maybe someone will find a copy in amongst the rubble when the gamma radiation has died down, and those severely shocked but otherwise relatively uninjured walk upon the desolated landscape to look for their homes and families, but with little success. Because nuclear warheads are the ultimate weapon of mass destruction and they are even now being primed and readied in their secret, underground silos for an imminent attack – not with any authority from the U N Security Council but upon the demand of those who work in their own interests - interests that will lead inevitably to global war and the downfall of democracy as we know it. Sounds unreal? So does crude oil at $300-$400 / Barrel.
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