Debt crisis: Germany caves in over bond buying, bank aid after Italy and Spain
threaten to block 'everything'. The agreements at a European Union summit in
Brussels suggested Germany had yielded on its insistence on forcing tough
reforms in exchange for rescue money. That was a victory for Italy and Spain,
who have argued they have done a lot to clean up their economies yet are facing
rising borrowing costs. European Council chairman Herman Van Rompuy said the aim
was to create a supervisory mechanism involving the European Central Bank by the
end of this year, and to break the "vicious circle" between banks and sovereign
governments. Jose Manuel Barrose, the European Commission president, said the
deal was "ambitious".My excuses but I forgot to take my 'suspension of
disbelief' pill this morning. So this 'deal' comes into effect at the end of the
year and after the Bundestag presumably vetoes Germany allowing any more money?
And because the money is not available from a non-existent-fund that hasn't been
set up yet and won't happen anyway the markets have reacted favorably? Until
when will this non-solution solve the problem of Spanish and Italian debt
yields, to say nothng of Greece, Portugal, Ireland, Cyprus and possibly France?
I shall go and celebrate immediately !!!
Access Investments-Building Awareness - European Union-ROMANIA
Friday, June 29, 2012
Debt crisis...
Debt crisis: Germany caves in over bond buying, bank aid after Italy and Spain
threaten to block 'everything'. The agreements at a European Union summit in
Brussels suggested Germany had yielded on its insistence on forcing tough
reforms in exchange for rescue money. That was a victory for Italy and Spain,
who have argued they have done a lot to clean up their economies yet are facing
rising borrowing costs. European Council chairman Herman Van Rompuy said the aim
was to create a supervisory mechanism involving the European Central Bank by the
end of this year, and to break the "vicious circle" between banks and sovereign
governments. Jose Manuel Barrose, the European Commission president, said the
deal was "ambitious".My excuses but I forgot to take my 'suspension of
disbelief' pill this morning. So this 'deal' comes into effect at the end of the
year and after the Bundestag presumably vetoes Germany allowing any more money?
And because the money is not available from a non-existent-fund that hasn't been
set up yet and won't happen anyway the markets have reacted favorably? Until
when will this non-solution solve the problem of Spanish and Italian debt
yields, to say nothng of Greece, Portugal, Ireland, Cyprus and possibly France?
I shall go and celebrate immediately !!!
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European markets soar after Germany caves in to demands made by Italy and Spain for immediate eurozone aid to bring down their soaring borrowing costs, sending the euro and stock markets higher.
The Governor of the Bank of England has launched a scathing attack on “deceitful” investment banking and called for a “real change in the culture of the industry” stretching right to the top, in the wake of the Barclays rate-fixing scandal
The summit text had said: “Existing legislative props on bank resolution and deposit guarantees should be adopted by the end of year. Building on theses the commission will submit by the end of 2012 further legislative propsoals in a single European banking supervision system covering all banks, a European deposit guarantee scheme and a European bank resolution scheme.”
In a major blow for Michel Barnier, the French commissioner responsible for EU financial regulation, the move to a pan-EU system are scrapped after a row predicted by the Daily Telegraph yesterday.
Summit language encouraging eurozone members to “deepen coordination of their economic policies” was also dropped.
We assume that the inflation rate will not continue its downward trend in the coming months. This is based on our forecast for the oil price. We think the recent fall of the oil price was exaggerated and expect the price for a barrel of Brent to exceed $100 again in the second half of the year.
Nevertheless, the ECB may react with relief to the recent decline of the inflation rate as it reduces the risk that the collective bargaining parties will assume higher inflation rates in their pay negotiations. Furthermore, inflation risks are currently low. In view of weak demand, companies are finding it difficult to raise prices.
There is thus no obstacle to an ECB rate cut from the side of inflation. We expect the central bank to lower its repo rate from 1pc to 0.75pc at its meeting next week.
the sad case of Europe, which has accounted for 21% of the cumulative growth in US exports over the past three years. Here, the US Commerce Department statistics are not as helpful in pinpointing the source of the impetus, because only a partial country list is published. What we do know is that the UK, Germany, and France – the so-called core economies – collectively accounted for just 3.5% of total US export growth since early 2009, with the UK grabbing the bulk of that increase. That suggests that most of America's European export gain was concentrated in the region's so-called peripheral economies. And that is clearly a serious problem.
Forecasts are always hazardous, but some "what-if" scenarios shed considerable light on what all of this means for the world's largest economy. Since the second quarter of 2009, US annualised real GDP growth has averaged 2.4%. With roughly 40% of that increase attributable to exports, that means the remainder of the economy has grown at an anemic 1.4% pace.
Under a flat-line export scenario, with no rise in US exports, and if everything else remains the same (always a heroic assumption), overall real GDP growth would converge on that 1.4% bogey. That is a weak growth trajectory by any standard – likely to result in rising unemployment and further deterioration in consumer confidence.
David Cameron is asked his final question, on whether or not the summit was a failure for Angela Merkel:
I don't think we should see it in that way. At the end of the day, Italy, Spain, France, Germany, they may be playing each other at football, but when it comes to the eurozone they should all be on the same side.
I don't see this as some sort of face-off between Italy and Germany or whoever, taking the right steps is right for all of them. Angela Merkel is being asked to do some things that are difficult for her to dliver.
Then he signed off, saying: "See you at another one of these before long, I guess."
On banking union, Cameron says he expects to see "enhanced cooperation" under existing treaties, so that will offer "lots of protection" for the single market. But a single European regulator is not something which the UK should be accountable to - that should only apply to the eurozone, not the EU, he says:
In my view that must be the Bank of England for our banks... rather than a single European regulator. It's never entirely clear how far these changes will go, exactly which treaty clauses will be used... that's one of the reasons that when you come to these summits you've got to be absolutely focussed on the text and what you're signing up to. We want a functional eurozone, not a dysfunctional eurozone, but we need those safeguards. Permanent vigilance is required.
On banking union, Cameron says he expects to see "enhanced cooperation" under existing treaties, so that will offer "lots of protection" for the single market. But a single European regulator is not something which the UK should be accountable to - that should only apply to the eurozone, not the EU, he says:
In my view that must be the Bank of England for our banks... rather than a single European regulator. It's never entirely clear how far these changes will go, exactly which treaty clauses will be used... that's one of the reasons that when you come to these summits you've got to be absolutely focussed on the text and what you're signing up to. We want a functional eurozone, not a dysfunctional eurozone, but we need those safeguards. Permanent vigilance is required.
Mr. Schäuble's comments indicate that Germany is more flexible than many observers in Europe have thought after Ms. Merkel told German lawmakers early this week that there wouldn't be full mutualization of European debt in her lifetime. German lawmakers who were present have said that Ms. Merkel's comment was made in jest and that media have exaggerated its significance. Mr. Schäuble's comments seem to support this view.
Such a fundamental change—in effect, a grand European bargain between Germany and other euro members—would require countries to give up a large degree of sovereignty over their budgets. Many European policy makers are asking how far Berlin is willing to go in putting its financial strength at the disposal of the euro zone.
"We are willing to go as far as we need to in order to get a sustainable agreement in Europe," Mr. Schäuble said.
While Berlin continues to insist that European leaders take concrete steps toward a fiscal union, Mr. Schäuble signaled that Germany is open to a level of mutual financial support between euro members that has so far been taboo in the currency bloc's biggest country—under the right conditions.
Mr. Schäuble's comments indicate that Germany is more flexible than many observers in Europe have thought after Ms. Merkel told German lawmakers early this week that there wouldn't be full mutualization of European debt in her lifetime. German lawmakers who were present have said that Ms. Merkel's comment was made in jest and that media have exaggerated its significance. Mr. Schäuble's comments seem to support this view.
Such a fundamental change—in effect, a grand European bargain between Germany and other euro members—would require countries to give up a large degree of sovereignty over their budgets. Many European policy makers are asking how far Berlin is willing to go in putting its financial strength at the disposal of the euro zone.
"We are willing to go as far as we need to in order to get a sustainable agreement in Europe," Mr. Schäuble said.
While Berlin continues to insist that European leaders take concrete steps toward a fiscal union, Mr. Schäuble signaled that Germany is open to a level of mutual financial support between euro members that has so far been taboo in the currency bloc's biggest country—under the right conditions.
Congratulations to Italy. Both Monti and Balotelli were very impressive last night.
I am not really sure how the banking union will look like. So far I've heard that the ECB will be the main oversight body. Which I would find appropriate. It would make use of existing institutions and ensure accountability and legitimacy.
But there must be a a clear roadmap for political union. It will be difficult to deal with the countries that will refuse a federal structure. At least we know how they did it in the US. And it also took four years...1861-1865. Not sure this would be accepted today.
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