Same crisis, different summit. What is estimated to be the 18th emergency summit
of the eurozone crisis gets under way today. Rather than agree any constructive
plans to alleviate the currency region's problems, the meeting will give vent to
the new political divisions that have arisen since elections in Greece and
France. In the spotlight will be the latest supposed panacea for the eurozone's
woes - so called eurobonds. The idea is that eurozone countries club together
and issue debt collectively which will ultimately carry a credit rating
underwritten by Germany. That would help insolvent countries such as Greece
borrow on the international capital markets and allow extremely hard up nations,
such as Spain, raise capital to bail out their banks. What it won't do is
address the fundamental imbalances and policy differences within the eurozone.
Angela Merkel is implacably opposed to euorbonds while other major nations such
as France and Italy are in favor, as are the likes of the IMF. What is new this
morning is the personnel at the summit where Merkel will find herself
increasingly isolated now Nicholas Sarkozy is out of office. His successor,
Francois Hollande, will meet his Spanish opposite number ahead of the summit to
agree tactics and agenda items. We are now witnessing the start of political
fracturing within the euro system with the anti and pro-austerity camps creating
two broad groupings which will shape the immediate debate around the currency
and could provide an obvious fault line along which the eurozone may ultimately
split.Christine Lagard , managing director of the IMF, has told BBC Radio this morning that Greece will have to do more if it wants to stay in the euro. We have to be prepared for all situations, she said, referring to a possible Greek exit.
Adding to the sense of economic unease, the World Bank has cut its Chinese growth forecasts over night to 8.2pc from 8.4pc. That still sounds robust but the World Bank said a slowing China will drag growth in emerging East Asia to two-year lows this year, warning Europe's seething debt crisis could inflict even bigger damage if it worsens.
6 comments:
8.08am: European markets have fallen sharply at the start of trading, as Tuesday's optimism vanishes.
FTSE 100: down 64 points at 5338, - 1.2%
German DAX: - 1.3%
French CAC: - 1.2%
Spanish IBEX: down 97 points at 6560, -1.5%
Italian FTSE MIB: down 227 points at 13228, - 1.7%
That follows a grim day in Asia, with Japan's Nikkei falling almost 2%.
Traders fear that today's EU summit will fail to make a significant leap forwards, which seems particularly likely as it's only an 'informal' summit.
European firewall will be discussed, while the prospect of a Greek euro exit looms.
Analysts fear that the talks will not yield much progress, with François Hollande and Angela Merkel likely to disagree on the best way to tackle the crisis. Indeed, the euro is back below $1.27, and Asian markets have fallen overnight.
Also on the agenda: the minutes of the Bank of England's last monetary policy meeting will be released at 9.30am, showing how many committee members voted for more quantitative easing.
And Germany will sell €5bn of bonds with a zero coupon this morning – which means investors would not get any interest payments on the debt. As I blogged yesterday, analysts fear this shows the financial system may be drifting off the rails …
Well, 'a dead cat bounce' is the only way to describe the UK/EU/US equity markets yesterday... as expected.
And, it looks like a 'risk off' day in the currency markets, so that may follow through to the equities again.
The next few hours will tell, however it's worth noting that the markets are rather directionless at the moment, so emphasis should be on EU/EZ leaders to provide some input into the EZDC so markets can react against something solid.
Tis a waiting game...
In China, where 2012 economic growth was lowered to 8.2pc from 8.4pc previously, it said Beijing should only marginally tweak monetary policy for now by lowering banks' reserve requirements as real interest rates are negative.
That leaves the world's second-largest economy to lean on fiscal policy instead to fuel growth.
"Fiscal stimulus would ideally be less credit-fuelled, less local government-funded, and less infrastructure-oriented," the World Bank said.
"Fiscal measures to support consumption, such as targeted tax cuts, social welfare spending and other social expenditures, should be viewed as the first priority."
The World Bank's recommendations come just a day after a top Chinese financial paper cited unnamed sources as saying China will fast-track approvals for infrastructure to combat an economic downturn.
The World Bank's lowered growth forecast for this year also comes after the International Monetary Fund kept its forecast for China unchanged at 8.2pc in its April report.
At 12.45am, the FTSE 100 was down 1.8pc, the French CAC had fallen 2.1pc, the German DAX had lost 1.7pc, the Spanish IBEX had dropped 2.2pc and the Italian MIB had shed 3pc.
The falls followed heavy sell-offs in Asian markets, where the Japanese Nasdaq closed down 2pc.
In the US, the Dow is expected to open down 0.7pc.
Spanish bond yields rose to cross the 6pc danger level, with Italian yields also up sharply.
European leaders will meet in Brussels this afternoon with the shadow of a Greek exit from the euro and a Spanish banking crisis looming over them.
eu debt is 23 trillion euros.
germany has to pay it off or break up the ez and let everyone escape.
and all the eu leeches need to be arrested and assets seized. kinnocks,mandy,ashton,barroso,van stoatface.
Post a Comment