The eurozone's first ever bailout of a debt-laden member country is failing and will need to be renegotiated exactly a year after the €110bn (£96bn) rescue package was agreed for Greece. Following secret talks in Luxembourg on Friday between Athens and some of the key EU players, it emerged that Greece will not be able to meet the terms of last year's rescue and is hoping to ask the eurozone for more funds. As Britain made clear it did not want to offer any more support for Greece as part of an EU package or a bilateral loan, investors remain unconvinced of the ability of Athens to sustain its €340bn debt load. Signalling that his government will struggle to finance itself on the bond markets by next year – which was part of the deal struck with the eurozone and the IMF – the Greek finance minister, George Papaconstantinou, said: "We will either go out to markets or use the recent decision by the EU that allows the European fund to buy Greek bonds. The markets continue to disbelieve in our country." His trip to Luxembourg had been kept so quiet in Athens that only the prime minister, George Papandreou, knew about the discussions, which were led by Jean-Claude Juncker, the Luxembourg prime minister and president of the group uniting the 17 countries using the single currency. Juncker confirmed that the Greek bailout would need to be renegotiated amid alarmist reports that the country was contemplating reintroducing the drachma. After the talks – attended by the finance ministers of Germany, France, Italy and Spain as well as Olli Rehn, European monetary affairs commissioner – Juncker said the Greek package needed a "readjustment". Haggling over a new Greek deal is set to dominate the weeks ahead.

The NBR is no longer thinking favourably about leu's strengthening further, after the exchange rate has slid by around 4% since the start of the year. The rising leu is attracting portfolio investors, going into speculative bubbles, and foreign currency lending, says NBR governor Mugur Isărescu. "Allowing the domestic currency to go up to dampen imported inflation can attract rising portfolio investments. More portfolio investments can lead to rising asset prices. Putting up with leu appreciation to help inflation may not be possible in terms of risks generated at the level of private sector balance sheets," Isărescu told the students of "Transilvania" University of Braşov at the end of last week. The NBR is facing a dilemma again, in the context where inflation seems to be climbing steadily, going beyond the 8% threshold this spring, almost double the level of a year ago. After the VAT hike shock of last summer, pressures related to soaring fuel and foodstuff prices internationally have started being felt since autumn. In parallel, the economy is struggling to exit an over two-year recession, and loan demand, though weak, is foreign currency focused. (Z.F.)

Eurozone finance ministers are battling this weekend to contain a mounting sense of crisis about the future of the single currency as details emerge of secret talks on restructuring Greece's debts. Analysts expect a sharp sell-off of the euro when markets open tomorrow morning, as investors digest the fallout from reports – swiftly scotched – that Greece was considering leaving the eurozone. "Perhaps we have crossed a rubicon," said Jonathan Loynes, European economist at Capital Economics. "The knee-jerk response will probably be to push the euro lower. I believe the euro should be at parity with the dollar, not at $1.44 – I don't know what it's doing at anything like these levels." Euro policymakers at first denied that a meeting was taking place, but were later forced to admit that the German, French and Italian finance ministers had been holed up in a chateau in Luxembourg with their Greek counterpart George Papaconstantinou, discussing options for dealing with Greece's unsustainable debt burden. Rumours swept through financial markets late on Friday that Greece was threatening to leave the eurozone and reintroduce the drachma, but that was furiously denied by Athens yesterday.

The euro fell to its lowest in more than two weeks on Friday and headed for its worst week against the dollar since January after a German news report, later denied, suggested Greece had raised the possibility of leaving the euro zone. Spiegel Online reported euro zone finance ministers were meeting in Luxembourg on Friday to discuss Greece, including the issue of its possible exit from the currency bloc. Greece, through its finance ministry, later denied it was considering leaving the euro zone. The Greece headlines though were enough to send investors further unwinding their long positions on the euro, which hit a low of $1.43500, its weakest level since April 20 on electronic trading platform EBS.

BUCHAREST - The exposures of Greek and Dutch banks to Romania fell by nearly three billion euros last year compared with 2009, according to data published by the Bank of International Settlements (BIS), also known as the bank of central banks. In the case of Greek banks, exposure to Romania fell by 1.6 billion euros, to 15.8 billion euros, while for banks in the Netherlands exposure was reduced by 1.1 billion euros, to 5.2 billion euros. The Greek now hold 16-17% of the assets in the Romanian banking system, and problems in their own country, which faces a crisis so tough it has shaken the entire euro zone, are making it much more difficult for Romanian operations to finance their activities through loans. Last year, Greek banks kept pressure up on deposit interests and implicitly on loan interests, paying interests above the market average in order to finance their operations preponderantly from the local market. Alpha Bank and Bancpost (the subsidiary of EFG Eurobank) are in the top ten players, but there are six banks with Greek shareholders operating on the Romanian market. Dutch banks are represented on the Romanian market by ING, but there are further lending institutions with local exposure, including to T-bills. "Bank's exposures have remained relatively stable in crisis. More money will continue to flow in if demand for foreign-currency loans returns. Foreign banks' exposure rose very much when lending rose significantly, before the crisis. Financing from parent banks will grow if financing needs grow," commented Ionuţ Dumitru, chief economist of Raiffeisen Bank. (Z.F.)

BRUXELLES - Although the precise terms of the rescue deal announced by caretaker prime minister José Sócrates will not be agreed for another two weeks, news of the deal sent the euro rallying on Wednesday. Portuguese bond prices also recovered some ground in early trading, while shares on the Portuguese stock market moved higher in the face of a widespread sell-off across Europe.The interest rate paid by Portugal for the rescue package is expected to be agreed at a gathering of EU ministers on 16 and 17 May. Sócrates resigned in March after the Portuguese parliament rejected his austerity programme. However, like Greece and Ireland, Portugal will have to accept significant cutbacks and tax rises in return for outside help. Jenkins said: "The prime minister in his television address set out a few things the package did not include, so no cuts to minimum wages or public sector pay, no public sector dismissals and no change to the retirement age. But he was short on what measures the package did include, though it is expected to include further privatisations, recapitalisation of the banks as well as a combination of government spending cuts and tax increases."Portugal successfully auctioned €1.1bn of three-month government bonds on Wednesday morning, slightly more than it was expected to sell. However the yield, or interest rate, on the debt rose to 4.652%, up from 4% in a similar auction.The yield on its 10-year debt fell on Wednesday, in response to the bailout deal, to around 10.06%. This level is still generally seen as unsustainable, and is also several percentage points higher than the interest rates levied on Ireland and Greece's own rescue deals.The euro rose to around $1.4854 against the dollar, and also traded above 90p against the pound.

BUCHAREST - The euro could be introduced in Romania in January 2015, according to the initial schedule, but will be used in parallel with the euro for a further 11 months from adoption, much longer than the standard two-month period. The latest countries to join the eurozone, Slovenia (2007), Slovakia (2009) and Estonia (in 2011), have had a 16-day transition. France and Germany had two months of parallel circulation. In a first stage, the government did not mention January 1st 2015 as a target in the Convergence Programme, a document that is sent every year to Brussels. However, things changed on Friday. The Government and the NBR (National Bank of Romania) decided to keep 2015 as a deadline for the adoption of the euro, with the target also being mentioned in the Convergence Programme adopted by the Government on Friday, which will be sent to the European Commission, according to sources quoted by Mediafax. So, the 11 months of "extension" are set to be approved in Brussels. Prime Minister Emil Boc specified on Friday evening that the precise date of joining the euro had not been set, and would be agreed with European partners. The proposal came virtually out of the blue on Friday, in a meeting of ruling coalition parties which was also attended by governor Mugur Isărescu, after in the past two months the authorities had only talked about the need to reconsider January 2015 as a date amid the deterioration of economic indicators during the crisis. (z.f.)

Bruxelles -The E.U. is investigating HSBC, Royal Bank of Scotland and Barclays among 16 of the world's leading investment banks over suspicions they colluded and abused their positions in providing the financial derivatives many blame for exacerbating the eurozone sovereign debt crisis. The inquiry into credit default swaps (CDS), the controversial financial contracts designed to allow investors to insure against debt default, follows accusations that banks, many of them rescued by their host governments from collapse, played a part in forcing Greece and Ireland to seek EU bailout funds. If found guilty of abusing their position, the banks could be fined up to 10% of revenues by the European commission, which has handed out sanctions as big as €1bn (£880m). Joaquín Almunia, the commissioner in charge of anti-trust cases, said: "Recent developments have shown that the trading of this asset class suffers a number of inefficiencies that cannot be solved through regulation alone. We are therefore opening two new cases to improve market transparency and fairness in the CDS market ... Lack of transparency in markets can lead to abusive behaviour and facilitate violations of competition rules and the commission should react accordingly." Concerns in several EU countries at Europe's slow pace of finance reform as well as the largely unregulated £360tn derivatives market, which ballooned before the financial crisis, are also understood to lie behind investigation. Members of the EU parliament have lobbied for deeper reforms of the CDS market and other areas of the financial system.Rompres,Amos News, Agerpres,Mediafax,Romanian,Vancouver Sun,Global News

BUCHAREST- IMF says the Romanian economy is starting to rebound, exports continue to increase and consumer and investor confidence, although low, is showing signs of recovery, yet warns that there is a risk that the Government might drop certain reforms because the economy is picking up.
"Many analysts expect Romania's economy to grow faster than the region's on medium term. We cannot relax reforms in Romania. The markets are now seeing Romania doing what it is supposed to do," believe the IMF officials, according to sources close to the talks between the officials in Washington and the Romanian authorities.
IMF experts are considering revising forecasts about macroeconomic indicators, but there will not be any radical changes.Agerpres,Mediafax,Romanian,Vancouver Sun,Global News
The base scenario has IMF estimating a 1.5% economic growth this year. However, the Romanian authorities and the Fund did not rule out the continuation of recession this year, too, forecasting a 0.5% decline in 2011 in a worst-case scenario. It remains to be seen how much the economic growth forecast will be changed and whether the recession scenario will be considered or not. (SOURCE z.f.)Mediafax,Rador,Basa Press,Media Trust,LiveNews.ro

Five Killed In Romanian Coal Mine Explosion.

Five Killed In Romanian Coal Mine Explosion.

"The five miners missing in the Saturday afternoon explosion at the Uricani mine, southern Romania, have been killed in the blast, said local mayor Danut Buhaescu.

He added rescuers were struggling to bring out the bodies, which have been dismembered in the powerful blast. The five were electricians and were apparently servicing an electric transformer when the explosion occurred. About 800 miners are employed at the state-owned mine, which is due to be shut down by 2018. Prosecutors have opened an investigation into the accident" (mediafax).Agerpres,Mediafax,Romanian,Vancouver Sun,Global News,Financial Times,Tribune,Wall Street Journal

BRUSSELS—-European Union leaders will agree to ask the group of countries using the euro to come up with concrete proposals on how to strengthen the European Financial Stability Facility, and ask the group's president to work out the details of a permanent bailout mechanism by March, draft conclusions from a meeting of EU heads of state and government showed Friday. The leaders agreed, as part of a comprehensive package to strengthen the EU's economic governance and financial stability, on taking steps for "concrete proposals by the Eurogroup on strengthening on the EFSF so as to ensure the necessary flexibility and financial capacity to provide adequate support," according to the draft conclusions obtained by Dow Jones Newswires. Eurogroup President Jean-Claude Juncker will be asked to finalize the "operational features" of the permanent mechanism, called European Stability Mechanism, due to come into operation in 2013, the draft conclusions showed. The Eurogroup comprises finance ministers of the euro zone. The leaders will also agree to implement the financial assistance programs for Ireland and Greece as they are now. German Chancellor Angela Merkel and French President Nicolas Sarkozy told reporters at the summit that euro-zone countries will be asked to sign on to a "competitiveness pact" in March, to help coordinate fiscal policies in the wake of the bloc's debt crisis.Agerpres,Mediafax,Romanian,Vancouver Sun,Global News

The euro fell broadly on Thursday and could extend losses after European Central Bank President Jean-Claude Trichet threw cold water on expectations euro zone interest rates would rise any time soon. Trichet, speaking after the ECB's decision to keep interest rates at a record low 1 percent, said inflation expectations remain "firmly anchored" and inflationary pressures over the medium to long term "should remain contained." His comments disappointed investors who had expected a more hawkish statement after recent inflation data came in above forecast. Expectations the ECB would lift interest rates sooner than the Federal Reserve boosted the euro in recent weeks. The euro fell more than 2 cents on the day, moving further away from a 12-week high of $1.3862 set on Wednesday. It was last down more than 1 percent [EUR=X 1.3622 -0.0015 (-0.11%) ] . Traders said support now lies at $1.3570, this week's low, and a break would open the door for a slide below $1.35. "Trichet failed to deliver on expectations for a hawkish statement," said Richard Franulovich, senior currency strategist at Westpac in New York. "He merely repeated what he said in January, which is that inflation risks are balanced but could move to the upside. The markets were clearly looking for something more aggressive than that." Interest rate futures imply an 80 percent chance of a 25 basis point rate increase by August. Before the meeting, the market was fully pricing in a rate hike by then.The spread between German and U.S. two-year bond yields narrowed to 69 basis points from around 75 basis points. "The market has rightly interpreted Trichet's comments as a sign that the prospect of a near-term rate hike is still premature," said Frederik Ducrozet, an analyst at Credit Agricole in a note. "That said, it is very likely, in our opinion, that the ECB staff of economists will revise GDP and inflation projections upwards next month based on recent data and oil price dynamics."

France's president, Nicolas Sarkozy, has insisted that Europe will stand behind the euro, declaring that it would be unthinkable and "cataclysmic" for the single currency to fall apart.

Speaking at the World Economic Forum in Davos, Sarkozy, who is chairman of both the G20 and G8 international groups, delivered a wide-ranging critique of global banking and vowed to crack down on speculators he blamed for pushing up the price of food and energy. Referring to the sovereign debt crises in Ireland, Portugal and Spain that have called the euro's future into question, Sarkozy said there was simply no question of scrapping the currency: "The consequences of a failure of the euro would be so cataclysmic that we could not possibly entertain the idea. We couldn't even play with the idea of entertaining the idea." Those predicting the euro's demise, he said, were failing to consider Europe's recent history of "barbaric" wars: "That wasn't in the middle ages – that was yesterday."

Deutsche Bank AG and Rabobank Nederland led European lenders selling U.S. bonds.

Germany’s biggest bank issued $1 billion of five-year notes in its first dollar-denominated sale since March, while Rabobank sold $2.75 billion of securities, according to data compiled by Bloomberg. European lenders offered $7.25 billion of bonds yesterday, driving corporate sales to $21.2 billion, the most since September 2009, while today saw the year’s first senior bank bonds in euros. European banks are competing for investors after the region’s crisis drove borrowing costs for its most indebted governments to the highest on record. For financial companies, relative yields on dollar-denominated debt are at the tightest since May, while spreads on bonds in euros are about the widest since July, Bank of America Merrill Lynch index data show.

“It will be a challenge to raise funds at least in the early part of this year,” said John Stopford, who helps oversee about $65 billion as head of fixed-income at Investec Asset Management Ltd. in London. As redemptions come due in the first half of the year for Portugal and Spain, “more clarification on how and in what form support might be necessary would be a constructive thing,” he said. The banks are taking advantage of investor demand for higher-rated financial debt, said Michael Gower, the head of long-term funding at Rabobank. The Utrecht, Netherlands-based company, which has top credit ratings from Moody’s Investors Service and Standard & Poor’s, split its sale yesterday between $1.5 billion of 4.5 percent, 10-year bonds and $1.25 billion of 1.85 percent, three-year notes, Bloomberg data show.AgerpresM,ediafax, Romanian Vancouver SunG,lobal News,
Financial Time,Tribun,Wall Street Journal,The Washington,Times Athens, NewsT,he New York TimesUSA Today,

Unfortunately, the new year's resolutions made in Europe and America were the wrong ones. The response to the private sector failures and profligacy that had caused the crisis was to demand public sector austerity. The consequence will almost surely be a slower recovery and an even longer delay before unemployment falls to acceptable levels. There will also be a decline in competitiveness. While China has kept its economy going by making investments in education, technology and infrastructure, Europe and America have been cutting back. Debt restructuring – writing down the debts of homeowners and, in some cases, governments – will be key. It will eventually happen. But delay is very costly – and largely unnecessary. Banks never wanted to admit to their bad loans and now they don't want to recognise the losses, at least not until they can adequately recapitalise themselves through their trading profits and the large spread between their high lending rates and rock-bottom borrowing costs. The financial sector will press governments to ensure full repayment, even when it leads to massive social waste, huge unemployment and high social distress – and even when it is a consequence of their own mistakes in lending.

Madrid is reining in a large budget deficit

Investor nervousness is mounting just as Madrid is reining in a budget deficit that reached 11.1 percent of gross domestic product last year. Prime Minister José Luis Rodríguez Zapatero, initially slow to recognize the crisis, narrowly pushed through Parliament last May an austerity package that included 15 billion euros of spending cuts. As a result, Spain’s central government deficit fell 47 percent in the first 10 months of this year, according to government figures released on Tuesday.
Elena Salgado, Spain’s finance minister, insisted on Wednesday that Spain would not need rescuing. She told Spanish radio that “we are in the best position to resist against these speculative attacks.” Indeed, some say that one of Spain’s relative strengths is that a large amount of its government debt — 203.3 billion euros ($271.1 billion) — is owed to its own banks, rather than foreign lenders. If the government’s financial condition worsens, the thinking goes, Spanish banks would have a greater incentive to help out by easing terms on the loans than would foreign banks, which might take a harder line.Banca Mondiala,FMI, Guvern,agenda de business, bugetul de stat, economie, revista presei,romania,antena3.ro,realitatea.net,mediafax,bucuresti,camera de comert

President VAN ROMPUY - Euro Crisis

Some economists are not so sure whether the EU will "overcome" the financial crisis, as Mr Van Rompuy believes. "We're in a survival crisis," the president told the audience at an event (at a Brussels think-tank) on Tuesday morning (16 November) ahead of a meeting of finance ministers from countries that use the euro as their currency. It is expected that they will interrogate Ireland and Portugal over the state of government finances. EU Council President Herman Van Rompuy has warned that the euro zone and the European Union itself are fighting for their life as a result of the ongoing sovereign debt shocks, most recently in Greece, Ireland and Portugal. Mr. Van Rompuy warned that if the euro zone does not survive, neither will the EU. "We all have to work together in order to survive with the euro zone, because if we don't survive with the euro zone we will not survive with the European Union," he said. "But I'm very confident we will overcome this," he added.TiAgerpres, Mediafax, Romanian Global News, Vancouver mes,USA Today

Dealing with macroeconomic pressures

In an economic downturn, dealing with macroeconomic pressures is bad enough. But financial institutions add to their woes, experts say, by refusing to provide capital to worthy businesses because they fear other lenders will also cut back. In the end banks create a credit shortage that extends the crisis and delays recovery.
This sort of self-fulfilling credit crunch is the focus of Wharton research that explores alternative ways to prevent inefficient credit tightening from causing further damage to an already wounded economy. In a paper titled, "Self-Fulfilling Credit Market Freezes," Wharton finance professor Itay Goldstein and Lucian A. Bebchuk of Harvard Law School examine different approaches to halt an overreaching credit crunch.
After examining numerous policy responses to the problem, the authors suggest that governments should put up capital to be distributed to nonfinancial companies. However, they say the public sector should rely on private entities that are putting some of their own capital at risk to evaluate proposals and disperse the funds. That way, the money will not get caught in a bank-created credit squeeze and instead will be directed toward viable businesses. This solution to self-driven financial crises is similar to the U.S. government's Term Asset-Backed Securities Loan Facility, which helped free up credit during the height of the 2008–09 financial crisis, the authors conclude.
Finding the Right Solution When times are good, banks do not need government help. Likewise, when companies or industries are deeply affected by poor macroeconomic fundamentals, there may be little impact from government involvement in credit markets. However, the authors suggest there is an "intermediate range" of economic distress that requires a more sophisticated approach to keep credit flowing as businesses pass through a rough patch. Using a theoretical model that tests a series of potential policy actions, the paper reveals the strengths and weaknesses of each response, as well as the conditions in which one policy might work better than another.Uniunea europeana,creditare,coalitia,dosare,interne,guvern,prezidentiale,dreapta, finante,IMF,liberalism,marea neagra,lege,europarlamentare,The New York Times,USA Todayparlament

BRUSSELS — European ministers worked over the weekend on a financial rescue plan for Ireland, as pressure mounted on Dublin to seek a bailout to prevent the markets from spreading turbulence to other European countries, officials said on Sunday. Dublin is hoping to reassure markets that it can avoid a bailout by winning formal European Union approval for its bailout of Anglo Irish Banks. The Irish government continued to insist that it did not need a bailout, arguing that it could present a credible austerity budget next month that would satisfy investors, and that it had enough money to finance its operations through early next year. But analysts and investors, as well as some European officials, say the government’s plan needs to be buttressed by a promise of outside funding to counter the jumpiness in the markets, which have pushed interest rates on Irish bonds to record highs. Wall Street Journal,The Washington Times,The New York Times,USA Today
“There is a risk of a self-fulfilling prophecy,” a European diplomat said, speaking on the condition of anonymity because he was not authorized to discuss the matter publicly. “Even a denial is seen as some sort of affirmation that there is something to deny.”

Cotton, grain, gold and meat prices skyrocketing

Raw material prices have been following a significantly upward trend worldwide this year, and the impact on Romania is getting stronger and stronger, even if not taking into account the VAT hike.
The Statistics Institute yesterday announced a 0.55% monthly inflation in October, which explains last week's nervousness of the NBR officials when it came to talking about prices.
The high growth of the resource-intensive emerging economies, as well as the hundreds of billions of dollars worth of injections by Federal Reserve are some of the causes of a new boom of prices of raw materials - be they foods or non-foods, after the 2008 boom, which was offset by the major financial crisis. Agerpres, , Mediafax, Romanian Global News,Vancouver Sun,Financial Times,Le Monde,Tribune,Financial Times,Wall Street Journal