The Wall Street Journal flags up that weaker euro-zone governments would be able
to borrow from the currency union's rescue fund, the European Stability
Mechanism, to top up their own backstops. But it won't be easy: Taxpayer-funded
bailouts will only be allowed under "extraordinary circumstances," when it is
technically impossible to impose losses on certain creditors in a rush or when a
government is worried about effects on financial stability, officials said. Such
exceptions will have to be authorized by the European Commission, the EU's
executive arm. Rich countries like Germany and Finland worked hard to make it as
difficult as possible for poorer countries to tap the euro-zone rescue fund.
Ministers agreed that the common fund could eventually be used to recapitalize
failing banks directly, but only to protect depositors—not shareholders or
bondholders—and if the bank's home government has run out of money. Speaking to
reporters after the deal was agreed, Dutch finance minister Jeroen
Dijsselbloem argued it was a significant step forward: If a bank gets
in trouble we will now, throughout Europe, have one set of rules on who pays the
bill," he said. "The financial sector itself will now to a very, very large
extent become responsible for dealing with its own problems. Dijsselbloem had
been heavily criticised a few months ago for indicating that the Cyprus bailout
(which forced massive losses on some large depositors) was a
template for future rescue deals. He backtracked on the comments, but this
deal confirms that the Cypriot experience could be repeated across the
continent. And German finance minister Wolfgang Schaeuble
confirmed this point, telling reporters: They can affect German savers just as
well as they can affect any other investor in the world. France's Pierre
Moscovici told the press pack that Europe's bailout fund could still be
used for bank rescues (after creditors have been hit). Reuters got the quotes:
French Finance Minister Pierre Moscovici signalled that ministers also agreed to
French demands that the euro zone's rescue fund, the European Stability
Mechanism, can be used to help banks in the 17-nation currency area that run
into trouble. It makes the whole thing coherent," said Moscovici. "It creates a
solidity for the system and a system of solidarity.
Access Investments-Building Awareness - European Union-ROMANIA
Saturday, June 29, 2013
The Wall Street Journal flags up that weaker euro-zone governments would be able
to borrow from the currency union's rescue fund, the European Stability
Mechanism, to top up their own backstops. But it won't be easy: Taxpayer-funded
bailouts will only be allowed under "extraordinary circumstances," when it is
technically impossible to impose losses on certain creditors in a rush or when a
government is worried about effects on financial stability, officials said. Such
exceptions will have to be authorized by the European Commission, the EU's
executive arm. Rich countries like Germany and Finland worked hard to make it as
difficult as possible for poorer countries to tap the euro-zone rescue fund.
Ministers agreed that the common fund could eventually be used to recapitalize
failing banks directly, but only to protect depositors—not shareholders or
bondholders—and if the bank's home government has run out of money. Speaking to
reporters after the deal was agreed, Dutch finance minister Jeroen
Dijsselbloem argued it was a significant step forward: If a bank gets
in trouble we will now, throughout Europe, have one set of rules on who pays the
bill," he said. "The financial sector itself will now to a very, very large
extent become responsible for dealing with its own problems. Dijsselbloem had
been heavily criticised a few months ago for indicating that the Cyprus bailout
(which forced massive losses on some large depositors) was a
template for future rescue deals. He backtracked on the comments, but this
deal confirms that the Cypriot experience could be repeated across the
continent. And German finance minister Wolfgang Schaeuble
confirmed this point, telling reporters: They can affect German savers just as
well as they can affect any other investor in the world. France's Pierre
Moscovici told the press pack that Europe's bailout fund could still be
used for bank rescues (after creditors have been hit). Reuters got the quotes:
French Finance Minister Pierre Moscovici signalled that ministers also agreed to
French demands that the euro zone's rescue fund, the European Stability
Mechanism, can be used to help banks in the 17-nation currency area that run
into trouble. It makes the whole thing coherent," said Moscovici. "It creates a
solidity for the system and a system of solidarity.
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2 comments:
France is exhibit A that proves that once state expenditures passes a certain point, then wealth creation in the economy goes into decline - a downward spiraling vortex of wealth destruction is created, slowly at first but then with increasing velocity.
In these situations politicians and their public come to learn the hard way that it is very easy to destroy the wealth creating processes in an economy but a very long and difficult process to build them back up again.
Has France now finally fallen into the insolvency vortex or is this just business as usual for France?
That is the question that will be on the mind of every bond dealer holding French debt. With the French electorate finding little to enthuse about the EU, will Germany continue to implicitly prop up French sovereign debt if France fails to fiscally reform?
I doubt it - German banks have been careful to ensure that cross holdings with French banks are in equilibrium.
I suspect that France and Italy are going to increasingly come to dominate the financial pages of the Telegraph as Latin insolvency speeds up. And we all know what French social unrest looks like when it really gets going.
The U.S. stock market had its best start to a year since 1999, but by Friday—the halfway mark of 2013—investors had ditched their party hats and braced for the Federal Reserve to cut back on policies that helped send stocks soaring this year.
The Dow Jones Industrial Average ended the first six months of the year up 14%, but all the gains came in the first five months. The Dow fell 1.4% in June, including a 114.89 point, or 0.76%, drop on Friday to 14909.60.
WSJ’s Jon Hilsenrath says the markets’ initial panicked reaction could have been titled, “The Markets Are From Mars, the Fed Is From Venus.” The markets misread the Fed and the Fed misread the markets, he says.
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The impact on financial markets from an anticipated shift in Fed policy in the second half of the year is now a matter of intense debate. In the past week, senior Fed officials have sought to reassure markets the central bank would withdraw its assistance gradually and only if the U.S. economy appeared strong enough.
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