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Re: New EC Thread

Post  Panda on Tue 24 Jul - 14:44

Badboy wrote:I REMEMBER I THOUGHT ON THE CAN YOU TRUST THGE BANKS PROGRAMME,IT WAS SUGGESTED THAT THE MANIPULATION OF LIBOR RATE MAY HAVE SOMETING TO DO WITH EURO CRISIS.

I don't think so, the LIBOR rate was fixed by Banks from several Countries , it could have affected mortgages and Loans but I think the sub-prime
Mortgages was more responsible , plus the world Wide downturn in trade and Banks not liquid enough to cope. The EU has granted a E50 billion loan
to Greece but E35 has been deducted to pay for the money owed to the ECB!!!

Merkel et al should have let Greece default at the very beginning they are 10 times worse off than they were 2 years ago.

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Re: New EC Thread

Post  Panda on Tue 24 Jul - 17:57

Blaming the Spanish victim as Europe spirals into summer crisis

It is time for Spain and the victim states to seize the initiative.







The reason why Spain is spiralling into deeper depression is because EMU policy settings are contractionary. Photo: EPA/AP









By Ambrose Evans-Pritchard

7:30PM BST 22 Jul 2012

364 Comments





The financial credibility of Spain is close to zero. Fiscal credibility is zero. Political credibility is zero. The new government of Mariano Rajoy has squandered the advantages of its absolute majority in a matter of months, and completely lost the confidence of Europe's institutions.


That is the verdict of unnamed EU officials and sources in Brussels cited by El Pais, following the twin crash of the Madrid bourse and the Spanish bond market on `Black Friday'.


The claims are self-serving spin by Europe’s incompetent policy elite. Once again, they are blaming the victim for the consequences of their own scorched-earth monetary, fiscal, and regulatory policies.


The reason why Spain is spiralling into deeper depression is because EMU policy settings are contractionary.


The European Central Bank caused the Spanish money supply to collapse last year by tightening policy. Real M1 money was falling at double digit rates by mid-2011. The economic damage we are seeing now was baked into the pie.



20 Jul 2012


Fiscal policy has since become maniacal. The latest EU-imposed cuts, passed by the Cortes on Thursday as a condition for Spain's €100bn bank rescue, entail further tightening of 6.7 pc of GDP over three years. It is a ruinous for an economy already contracting, with unemployment of 24.3pc, in the grip of ferocious deleveraging by firms and households.

On top of it all, the EU has foolishly forced banks to raise their core Tier 1 capital ratios to 9pc in the middle of a slump and at breakneck speed, causing an even sharper cut-back in lending than would have occurred otherwise.

Eurozone banks have cut their balance sheets by €4 trillion since late 2008. They have done this by pulling their money out of foreign ventures, especially southern Europe. Spain is the victim of a "sudden stop" in capital flows, just like Germany in 1928 when Wall Street cut off loans.

We can argue about the deeper causes of Spain's crisis. It had little to do with fiscal policy. Spain ran budget surplus of 2pc of GDP in 2006 and 1.9pc in 2007. Public debt fell to 42pc of GDP.

What destabilized Spain was a private credit boom. The country was flooded with cheap capital from North Europe. Interest rates were minus 2pc in real terms for Spain for year after year. The ECB poured petrol on the fire by gunning the Euro zone M3 money supply at twice its target rate.

We all agree that it was folly to build 750,000 homes each year at the top of the boom - La Burbuja - for a market of 250,000. Spain should have copied Hong Kong and others with a long experience of fixed exchange rates in forcing down the loan-to-value ceilings on mortgages to 70pc, 60pc, 50pc , etc, to choke the boom.

While that is obvious in hindsight, it is not what the EU authorities told Spain at the time. The EU was complicit in the Spanish bubble, and so were German banks. This is a collective failure.

Mariano Rajoy has doubtless made a mess of the crisis since taking power, but that is a detail in this greater drama. He is right to claim that Spain has "done its part" in cutting to the bone, even if he is tragically misinformed in thinking that this is what global markets want. What investors really want is a way out of the deflationary impasse.

The reason why Spain’s €100bn bank rescue has failed to stem the crisis is because the EU summit deal in late June has proved to be a sham. It did not break the deadly link between banks and sovereigns, as originally claimed.

Germany now says it never agreed to such a deal. The law passed by the Bundestag last week states clearly that the Spanish sovereign state is solely responsible for the extra debt. Spain's public debt will gallop up to 90pc of GDP this year, just at the moment when international investors are fleeing, and deposit flight from Spanish banks has reached €50bn a month.

Spain's foreign minister José Manuel García-Margallo accused the ECB of "doing nothing to put out the fire". The ECB's Mario Draghi retorted that it is not the job of his institution to sort out the finances of EMU states. Its task is to ensure "price stability".

Actually, the ECB is currently in breach of Article 127 (clause 5) of the Lisbon Treaty obliging it to contribute to "the stability of the financial system". The first duty of every central bank is to avert disaster.

It is time for Spain and the victim states to seize the initiative. They cannot force Germany, Holland, Finland, and Austria to swallow eurobonds, debt-pooling and fiscal union, and nor should they try since such a move implies the evisceration of their own democracies.

What they can to do is use their majority votes on the ECB's Governing Council to force a change in monetary policy. Germany has two votes out of 23, with a hardcore of seven or eight at most. The Greco-Latin bloc can force a showdown. If Germany storms out of monetary union in protest, that would be an excellent solution.

The Latins would keep the euro - until the storm had passed - allowing them to uphold their euro debt contracts. There would be less risk of sovereign defaults since these countries would enjoy a pro-growth shock from monetary stimulus and a weaker Latin euro against the Chinese yuan, the D-Mark, and the Guilder.

The currency misalignment eating away at EMU would be cured instantly. There might even be a stock market rally once the boil was lanced. It would certainly be a better outcome than the current course of deflationary Troika regimes and loan packages for economies trapped with the wrong exchange rate, destined to end with one country after another being thrown out of EMU in a chain reaction.

For Germany it would entail a revaluation shock and stiff losses for German banks and insurers with large holdings of Club Med debt.

If Germany wished to soften the blow, it could do exactly what Switzerland is now doing by holding the Swiss franc to CHF 1.2 against the euro by unlimited intervention. It could fix the D-Mark rate against the Latin euro at whatever was deemed bearable, for as long as needed.

Is Mr Rajoy willing to entertain such heresies? Or Italy's Mario Monti, after a life committed to the euro Project? Or France's Francois Hollande, still in thrall to Quai d'Orsay orthodoxies and the strategic primacy of the Franco-German alliance -- now just a mask for German hegemony?

Yet a full fledged "rescue" of Spain is already on the cards. It will cost €400bn, bringing matters to a head swiftly. Contagion to Italy seems inevitable, with knock-on effects for French banks with €600bn of bank exposure to the Italian debt of different kinds. The EU bail-out machinery becomes irrelevant in such a conflagration.

The Latin Bloc are all too aware of this awful prospect, even if the latest safe-haven flows into France may tempt some in Paris to misjudge the dangers.

They dallied with revolt in June, only to be rebuffed by Berlin. It is time to sharpen swords for a real fight.

















































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Re: New EC Thread

Post  Panda on Wed 25 Jul - 8:19




The International Monetary Fund (IMF) has warned that the worsening debt crisis in the eurozone poses a "key risk" to China's growth.

The IMF added that China also faces domestic risks, not least from a sharper-than-anticipated decline in the property market.

However, the fund said China had ample room and the fiscal tools "to respond forcefully" to any such developments.

Growth in China's economy slowed to a three-year low in the second quarter.

Its economy expanded at an annualised rate of 7.6% in the three months to the end of June.

The Fund said that it expects China's economy to grow by 8% in the current financial year, but warned that a lack of response to the deteriorating crisis in the eurozone, may cut that number by half.

"The main external risk continues to be spillovers to China from a worsening of the euro area crisis," the fund said.

"Assuming no policy response in China, growth could decline by as much as four percentage points in response to a one and three quarter percentage point slowdown in global growth."

The eurozone is a key market for Chinese exports and the fear is that if the debt crisis escalates it may dent consumer sentiment and demand, resulting in slowing exports to the region.

Domestic risks
Continue reading the main story

Start Quote
Following a decline in real estate investment, activity would fall in a broad range of sectors, given the real estate industry's strong backward linkages to other domestic industries such as consumer durables, construction, light industry, electricity”
End Quote
International Monetary Fund

The fund said internal issues are also a threat to China's economic growth, including the country's property sector.

Chinese banks lent out record sums of money in the past few years in a bid to sustain growth amid the global financial crisis. That resulted in a boom in the country's property market.

However, there have been fears of asset bubbles being formed and of the impact of a crash in property prices on China's overall economy.

As a result, Beijing has been trying to implement measures, in a bid to curb speculation and cool down growth in the sector.

The measures, which include a restriction in some cities on the number of homes an individual can own and higher down-payments for property purchases, have resulted in property prices falling in most Chinese cities.

However, the fund warned that a "disorderly decline in real estate investment could have significant implications for growth in China".

"Following a decline in real estate investment, activity would fall in a broad range of sectors, given the real estate industry's strong backward linkages to other domestic industries such as consumer durables, construction, light industry, electricity."

Among the other domestic risks, the fund said that Beijing needs to keep the local government debt in check, which has been a cause of concern for many analysts.

It added that policymakers need to put in place measures to "closely monitor and control the risks related to borrowing by local entities, especially local government financing vehicles".

The fund also urged China to reduce its reliance on investment to boost growth and instead focus on domestic consumption in the country.


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Re: New EC Thread

Post  Panda on Wed 25 Jul - 9:22

EconomyEuro


Eurozone crisis

Latin euro or German rescue ?


23 July 2012

Presseurop
The Daily Telegraph, Handelsblatt Comment41


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“The financial credibility of Spain is close to zero,” writes Ambrose Evans Pritchard in the Daily Telegraph–


Fiscal credibility is zero. Political credibility is zero. The new government of Mariano Rajoy has squandered the advantages of its absolute majority in a matter of months, and completely lost the confidence of Europe's institutions.

The Telegraph’s International business editor pulls not punches, blaming “Europe’s incompetent policy elite” and its “scorched-earth monetary, fiscal, and regulatory policies.” Reserving particular ire for the European Central Bank, he argues that –


It is time for Spain and the victim states to seize the initiative. They cannot force Germany, Holland, Finland, and Austria to swallow eurobonds, debt-pooling and fiscal union, and nor should they try since such a move implies the evisceration of their own democracies.

What they can to do is use their majority votes on the ECB's Governing Council to force a change in monetary policy. Germany has two votes out of 23, with a hardcore of seven or eight at most. The Greco-Latin bloc can force a showdown. If Germany storms out of monetary union in protest, that would be an excellent solution.

The Latins would keep the euro – until the storm had passed – allowing them to uphold their euro debt contracts. There would be less risk of sovereign defaults since these countries would enjoy a pro-growth shock from monetary stimulus and a weaker Latin euro against the Chinese yuan, the D-Mark, and the Guilder.

This option is of no interest for Germany, writes the chief economist of the German business daily Handelsblatt. In an article entitled “Like a second reunification”, he recommends that critics of the government’s bailout policy read the latest reports by the German Council of Economic experts and the rating agency Moody’s –


Both show unequivocally that the end of the euro would be much more expensive for Germany than many think.

The Council experts estimate the amount of credit Germany has extended to its euro partners is €2.8 trillion. In the case of a break up of the single currency they expect an “uncertainty shock” which would slow the economy down by 5%, plus a long term slowdown in exports following the revaluation by about 30% or more for the new Deutschmark.

Moody’s estimate is lower – €1.9 trillion (the price of the German reunification) – and leads Handelsblatt to the conclusion that Berlin has no alternative but to push for completion of monetary union. The government must honestly explain –


... how much each way out of the euro crisis would cost compared to a euro exit. It should explain to citizens that solidarity with our partners is necessary, and in exchange we would get the chance of establishing a competitive Europe that corresponds to a great extent with our ideas.



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Re: New EC Thread

Post  Panda on Thu 26 Jul - 7:14

26 July 2012 Last updated at 05:07 Share this pageEmail Print Share this page

European Commission President Jose Manuel Barroso is heading to Athens for talks on Thursday amid concern over whether Greece has done enough to have the next tranche of bailout loans.

It is his first visit for three years and he is expected to say the EU wants Greece to stay in the eurozone.

But there will be tough talking behind the scenes, analysts say.

Greece's international lenders are also in Athens in an attempt to get deficit cutting measures "back on track".

After months of political deadlock and two general elections earlier this year, Greece is struggling to meet the economic targets it has accepted as a condition of its bailouts.

Inspectors from the EU and the IMF are trying to work out whether or not Greece has done enough to receive its next tranche of loan money.

The European Commission says the country's financing needs will be met in August, but a decision on further payments will have to be made in early September.

Without sufficient progress, it may not receive the final part of its bailout worth 31.5bn euros ($38bn; £24.5bn).


Troika
The term used to refer to the European Union, the European Central Bank and the International Monetary Fund - the three organisations charged with monitoring Greece's progress in carrying out austerity measures as a condition of bailout loans provided to it by the IMF and by other European governments. The bailout loans are being released in a number of tranches of cash, each of which must be approved by the troika's inspectors.
Glossary in full Earlier in the week, Prime Minister Antonis Samaras said Greece would suffer a much deeper recession than thought this year.

He expects the economy to shrink by 7%, greater than the 5% forecast by the crisis-hit country's central bank.

Mr Samaras said Greece would not return to growth until 2014.

He is expected to ask for more time to repay its loans.

'Regular meeting'

BBC Europe correspondent Chris Morris says Jose Manuel Barroso's visit is overdue as Greeks often complain about European political leaders who spend plenty of time talking about them, and not much talking to them.

The Commission president is unlikely to be out and about shaking hands, but at least he will be in Athens to speak directly to the Greek people, our correspondent says.

Mr Barroso's spokesman said the purpose of his visit was "to meet Mr Samaras and discuss the overall economic situation in Europe and in particular in Greece".

He said it was "a regular meeting" and that the preparation for the talks had been "under discussion for some time".
More on This Story

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Re: New EC Thread

Post  Panda on Thu 26 Jul - 12:23

Draghi says he will do whatever is necessary to preserve the EURO which is much stronger than people realise . He says EURO has much lower debt than people . He also says social cohesion is also important for change and progress has been extraordinary, much stronger than people acknowledge .

Stocks across Europe immediately rose after his comments.

CityGroup says Greece will leave the Euro by the end of the Year.

Santander profit hit by bad Spanish property loans Santander is the eurozone's biggest bank
Profits at Spanish banking giant Santander have halved after it made more write-downs against unrecoverable loans secured against property.

The bank, which is the eurozone's biggest, said first-half profits halved to 1.7bn euros ($2.6bn; £1.3bn) in the six months to the end of June.

Write-offs for Spanish property loans were 2.8bn euros. It has written off 6bn euros of the 8.8bn euros that it has been told to write off this year.

Profits in the UK rose by 41% to £466m.

The company said the rise profits at the UK's arm came after 2011's first half results were dented by provisions for payment protection insurance mis-selling claims.

Santander has a 13% share of the UK's mortgage market, and rates 80% of the loans as "prime", saying it has no self-certified mortgages.

Property crash

Santander's home market is one of the worst-hit in Europe, with a rising number of homeowners and businesses defaulting on debts.

The impact of the property crash, which started in 2008, has forced Spain to ask for 100bn euros in help for its banks.

In an attempt to clean up the banks' balance sheets the Spanish government has introduced reforms that require them to realise losses from the falling property market.

Santander says the 6bn euros it has written off so far means it has already achieved 70% of the necessary adjustment.

Its chairman, Emilio Botin, said in a statement: "The provisions we are making will allow us to put real estate write-offs in Spain behind us by the end of this year."

The bank is reducing its dependence on the weak home market and made 27% of its profits from fast-growing emerging market Brazil

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Re: New EC Thread

Post  Panda on Fri 27 Jul - 6:52

Eurozone crisis

What must be said


26 July 2012
Süddeutsche Zeitung Munich Comment26


Wolfgang Ammer


In the midst of the eurozone crisis, we're fortunate to have politicians who can tell us how things stand, ironises the Süddeutsche Zeitung, with this list of choice quotes.

Wolfgang Luef


“Russia is not Greece.” (Vladimir Putin, Russian Prime Minister, March 2010).

“France is not Greece.” (Christian Lagarde, director of the International Monetary Fund, May 2010).

“Portugal is not Greece, and Spain is not Greece.” (Jean-Claude Trichet, President of the European Central Bank, May 2010).

“Spain is not Greece. But Greece is where it is thanks to a policy like Zapatero’s policy in Spain.” Mariano Rajoy, leader of the Spanish opposition, May 2010).

“Hungary is not in the same situation as Greece.” (Olli Rehn, EU Commissioner for Economic and Monetary Affairs, June 2010).

“Hungary is quite obviously not Greece.” (Gyorgy Matolcsy, Hungarian Finance Minister, June 2010).

“Spain is neither Ireland nor Portugal.” (Elena Salgado, Spanish Minister of Finance, November 2010).

“Ireland is neither Spain nor Portugal.” (Angel Gurria, OECD Secretary-General, November 2010).

“Ireland is not Greece.” (Angela Merkel, German Chancellor, November 2010).

“Greece is not Ireland.” (Giorgos Papakonstantinou, Greek Minister of Finance, November 2010).

“Ireland is not in Greek territory.” (Brian Lenihan, Irish Minister of Finance, November 2010).

“Ireland is not Greece.” (Michael Noonan, Irish Minister of Finance, June 2011).

“France is not Greece and it’s not Italy either.” (Barry Eichengreen, American economist, August 2011).

“Italy is not Greece.” (Rainer Bruederle, Germany's FDP parliamentary party leader, August 2011).

“Italy is not Greece.” (Silvio Berlusconi, Italian Prime Minister, October 2011).

“Austria is not Greece.” (Karlheinz Kopf, parliamentary faction leader of Austria’s People's Party, November 2011).

“Italy is not Greece.” (Christian Lindner, FDP general secretary, November 2011).

“Portugal is not Greece, and it will not turn into Greece.” (Antonio Saraiva, head of the Confederation of Portuguese Industry, February 2012).

“Spain is not Greece.” (Richard Youngs, head of the Madrid-based think tank FRIDE, May 2012).

“Portugal is not Greece.” (Pedro Passos Coelho, Portuguese Prime Minister, June 2012).


“Italy is not Spain.” (Ed Parker, senior director of Fitch Ratings Agency, June 2012).

“Greece is not Argentina.” (Yiannis Stournaras, Greek Minister of Competition, July 2012).

“Germany is not Zimbabwe.” (Paul Casson, fund manager from Henderson Global Investors, June 2012).

“Spain is not Uganda.” (Mariano Rajoy, Spanish Prime Minister, June 2012).

“Uganda does not want to be Spain.” (Asuman Kiyingi, Foreign Minister of Uganda, June 2012).

The title of the article alludes to a poem by Nobel laureate Günter Grass published in April by the same paper. Highly critical of Israel, the poem sparked an international controversy.

Translated from the German by Anton Baer



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Re: New EC Thread

Post  Panda on Fri 27 Jul - 6:59

Greek PM Antonis Samaras is set to meet international creditors to try to persuade them that Athens deserves its final instalment of bailout money.

The EU, IMF and European Central Bank are due to examine Greece's finances before deciding whether to hand over 31.5bn euros ($38bn; £24.5bn).

Without the funds, Greece would face bankruptcy and probably leave the euro.

Mr Samaras said on Thursday that the government would do all it could to get Greece back on track.

The government is preparing a two-year, 11.7bn euro cost-cutting plan, reportedly through further reductions in pension, benefits and healthcare spending.

Patience 'wearing thin'

After talks with European Commission President Jose Manuel Barroso, the prime minister said the three-party coalition had decided to press ahead with measures such as privatisation and changes to the public sector.

Continue reading the main story Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
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Troika
The term used to refer to the European Union, the European Central Bank and the International Monetary Fund - the three organisations charged with monitoring Greece's progress in carrying out austerity measures as a condition of bailout loans provided to it by the IMF and by other European governments. The bailout loans are being released in a number of tranches of cash, each of which must be approved by the troika's inspectors.
Glossary in full Mr Barroso said he had been assured that the government would speed up key structural reforms such as tackling tax evasion. But he said the main issue was in the delivery of results.

"Words are not enough. Actions are much more important," he said.

The BBC's Mark Lowen in Athens says Mr Samaras will attempt to put minds at rest when he meets the three international lenders, known as the troika.

But the troika's patience is wearing thin, our correspondent says, as Greece is lagging behind schedule in reducing its deficit.

Greece held two general elections in May and June as the country's politicians struggled to form a government.

But after two international bailouts worth 100bn euros and then 130bn euros, there is widespread scepticism that Athens will be able to meet the commitments made to secure the agreements.

On Tuesday, Mr Samaras declared that the country's economy was expected to contract by 7% in 2012, more than the 5% previously forecast by the Greek central Bank
































































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Re: New EC Thread

Post  Panda on Fri 27 Jul - 16:27



Greek PM Antonis Samaras is meeting international creditors to try to persuade them that Athens deserves its final instalment of bailout money.

The EU, IMF and European Central Bank (ECB) are studying Greece's finances before deciding whether to hand over 31.5bn euros ($38bn; £24.5bn).

Without the funds, Greece would face bankruptcy and probably leave the euro.

France and Germany say they are jointly "determined to do everything to protect the eurozone".

In a joint statement, German Chancellor Angela Merkel and French President Francois Hollande said they were "committed to the integrity of the eurozone".

They urged eurozone members and EU institutions to stick to their commitments and implement the EU's June summit decisions as quickly as possible.

Their words echoed those of ECB President Mario Draghi, who said he would do whatever was necessary to save the euro.

There are widespread doubts about Greece's future in the eurozone and this week speculation grew about a possible large-scale bailout of Spain, pushing Spanish borrowing costs to new highs.

Mr Samaras said on Thursday that his government would do all it could to get Greece back on track.

The government is preparing a two-year, 11.7bn euro cost-cutting plan, reportedly through further reductions in pension, benefits and healthcare spending.

Patience 'wearing thin'

On Friday the European Commission gave "temporary" approval to state aid that injected 18bn euros into four struggling Greek banks - Alpha Bank, EFG Eurobank, Piraeus Bank and National Bank of Greece.

But the Commission said it was still investigating the aid, to ensure compliance with EU rules. The aid plugged a hole in the banks' finances caused when private bondholders agreed to write off 107bn euros of Greek debt.



Mr Barroso said he had been assured that the government would speed up key structural reforms such as tackling tax evasion. But he said the main issue was in the delivery of results.

"Words are not enough. Actions are much more important," he said.

The BBC's Mark Lowen in Athens says Mr Samaras will attempt to reassure the international lenders, known as the troika.

But the troika's patience is wearing thin, our correspondent says, as Greece is behind schedule in reducing its deficit.

Greece held two general elections in May and June as the country's politicians struggled to form a government.

But after two international bailouts worth 100bn euros and then 130bn euros, there is widespread scepticism that Athens will be able to meet the commitments made to secure the agreements.

On Tuesday, Mr Samaras declared that the country's economy was expected to contract by 7% in 2012, more than the 5% previously forecast by the Greek central bank.

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Re: New EC Thread

Post  Panda on Fri 27 Jul - 16:49

Mario Draghi — bluff or balm for the crisis?


27 July 2012

Presseurop
Corriere della Sera, El País, El Mundo & 3 others Comment




ECB chief Mario Draghi

Giannelli


In stating that “the ECB is ready to do whatever it takes to save the euro,” its president has sent a positive signal to markets, believes the European press. In the absence of clarification, though, it is difficult to know the effects over the long run.


“Draghi gives his assurances that the ECB will save the euro,” announces the Corriere della Sera, stating that the Milan Stock Exchange gained 5.62 percent after the statements from the president of the European Central Bank. And on July 27 Rome was able to borrow 8.5 billion euros for six months at a rate below six percent. For the daily, this reveals a “banal truth” –




It is not true that governments without money and central banks with rates close to zero cannot stimulate the economy. They can and they have done so, in a simple but sophisticated way: by making commitments for the future.


This is what the Federal Reserve chairman Ben Bernanke did when he pledged to keep borrowing rates at zero percent at least until late 2014, reports the Corriere della Sera. Draghi, like Bernanke, is thus helping the economy by resorting to psychology –




With his words, Draghi has neither printed money nor created liquidity, but has reassured the markets and is offering something that is much rarer these days: confidence.


In Madrid, El País is pleased that “the financial storm over Spain has been calmed with a single gesture from the ECB”. The “magic words” of Mario Draghi had an immediate effect, as the Madrid Stock Exchange soared by six percent and the interest rate on government ten-year bonds dropped below seven percent. But, the newspaper asks,




Why did the ECB not react earlier? An assumption widely shared is that the ECB has been punishing the government [Spanish] for its mismanagement of the financial crisis. And as the punishment has now touched Italy, the monetary authority has shifted its policy towards the target the governments are demanding: to calm speculation on sovereign debt. Another possible explanation is that Draghi has spoken out now that a Spanish bank bailout is already irreversible and the stability mechanism has been prepared [...] Draghi’s bold sally is only a first step, which must be interpreted as firm evidence that the European Commission has already decided on the form and scope of the action of the new Stability Mechanism [...] – the hypothesis that the ECB is ready to intervene has shut down speculation against the euro and temporarily staved off the risk of the euro collapsing. But it does not guarantee that Spain has averted the risk of an intervention [a global bailout].


El Mundo also notes that “the magic words of Draghi provoked euphoria in the markets”. For the daily –




Never, until yesterday, had the ECB president done honour to his nickname: Super Mario. The fact that a mere declaration of intent can generate this reaction [in the markets] shows the power of the ECB. [.. .] We’ll have to see how far the ECB can go to support our economy, but his statement suggests that Draghi has the support of Merkel to keep Spain and Italy from succumbing to the pressure from the markets.


German reactions have been less enthusiastic. Die Welt writes deploringly that “the ECB appears to be a Trojan horse.” The conservative daily thinks that Mario Draghi is transforming “the symbol of a new Europe, a Europe of reforms, of principles, of a stable currency” into an institution for organising a “vast redistribution at the expense of Northern Europe”, which runs contrary to the democratic process –




[The positive market reaction] is just a flash in the pan. International investors have turned their backs on the eurozone, and in London there is surprise at how many wealthy Greeks are buying expensive houses. This is the end of confidence; capital is leaving Europe. And the ECB stands willing to plug the holes in the balance sheets of banks and states. This it justifies by saying that it’s the only institution still functioning in Europe that’s capable of stopping this crisis of confidence. But the so-called guardian of the currency is just making things worse this way.


For its part the Süddeutsche Zeitung notes that, at bottom –




This is about whether the ECB has the right to buy Spanish bonds to lower the country’s interest rates. Draghi and his colleagues have already invested 210 billion euros in the bonds of risky states, to little result. Politically, the appeal to the ECB is understandable. In theory the guardians of the currency have unlimited financial resources. In this tense situation, that makes them both stronger and weaker at the same time. Stronger, because the central bank could swiftly stamp out the fires in the financial markets. Weaker, because that would solve none of the problems. Quite to the contrary: in those states in crisis, once the fire has been put out, the will to get on with reforms will also be quenched.


The Guardian, meanwhile, notes that the commitment of Mario Draghi to do everything to save the euro, as courageous as it is, is short on detail –




Unfortunately, as in poker, merely declaring that you hold strong cards doesn’t always intimidate the table. [...] Was he claiming the right to start buying bonds if the market doesn’t behave itself by lending to Spain and Italy at a cheaper rate? [...] But there’s a reason why the ECB’s bond-buying activities... have been frozen for months – it’s because anything that smells like back-door financing of sovereign states tends to get squashed by Germany, among others. [...] In the absence of clarity, there are possible bearish interpretations of his words. For example: are eurozone policymakers simply trying to quieten markets over the summer to give themselves time to prepare a full bailout of Spain?

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Re: New EC Thread

Post  Panda on Sat 28 Jul - 14:05

Spain is in an "unprecedented" double-dip recession and the outlook for the country remains "very difficult" with "significant downside risks", the International Monetary Fund has said.

Its annual report on the Spanish economy praised Madrid's "decisive action on many fronts", but warned further reforms were needed.

Action to cut debt and push financial reform were "critical", it said.

Earlier, figures showed Spanish unemployment hitting a fresh high.

Almost 5.7 million Spaniards are now out of work, with the jobless rate reaching 24.6% during the April to June quarter - the highest since the 1970s.

Despite the worsening jobless figures, Spanish stocks rose sharply on Friday after French President Francois Hollande and German Chancellor Angela Merkel issued a joint statement suggesting they were ready to act to save the euro.

The main Spanish Ibex share index closed up 3.9%, while France's Cac 40 rose 2.3% and Germany's Dax ended the day 1.6% higher.

Battered banks

The IMF forecast the Spanish economy to contract by 1.7% this year and 1.2% next year, before growing by 0.9% in 2014.

It said further action was needed to bring down unemployment and tackle public debts that were "increasing rapidly".

"Directors underlined the urgency of additional progress in boosting competitiveness and jobs, given the high level of unemployment, in particular among the youth," it said.

It also stressed the need for continued support for Spain's battered banking sector, and suggested the European Stability Mechanism, the eurozone's firewall fund, should be used directly to support Spanish banks.

The IMF did, however, "commend" the actions already taken by Madrid to try and turn the country's economy around, including far-reaching labour-market reforms, tax increases and sweeping budget cuts.

"Imbalances are improving, especially the current account deficit, inflation and unit labour costs," it said.

Direct action

Spain's borrowing costs on the secondary market - seen as a good indicator of investor confidence in the country - jumped above 7% earlier this week, a level widely seen as unsustainable.

This raised fears Spain may soon be forced to seek a full bailout from its European partners. The EU has already agreed to 100bn euro loan package to help recapitalise the country's highly indebted banks.

However, the borrowing costs, or yields, fell back on Thursday after the head of the European Central Bank (ECB), Mario Draghi, said the bank would do "whatever it takes" to preserve the single currency.

On Friday, Spain said it was not seeking a bailout from the EU.

"There is not going to be a bailout and a bailout is not an option," government spokeswoman Soraya Saenz de Santamaria said.

This came after reports suggested Spanish Economy Minister Luis de Guindos had raised the subject of a 300bn euro bailout at a meeting with Germany's Finance Minister Wolfgang Schaeuble earlier this week.

On Friday afternoon, Spanish bond yields stood at 6.7%.

Also on Friday:

Mr Hollande and Mrs Merkel issued a joint statement reasserting their commitment to preserving the euro. "Germany and France are deeply committed to the integrity of the eurozone," it said. "They are determined to do everything to protect the eurozone"
A report in the French newspaper Le Monde said that eurozone governments and the ECB were preparing to take action to cut borrowing costs for Spain and Italy. One way the bank could do this is to buy directly Spanish and Italian debt
But Germany's central bank, the Bundesbank, sought to quell such speculation when it stated that direct bond purchases by the ECB would be "problematic"

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Re: New EC Thread

Post  Panda on Sun 29 Jul - 6:53

EU remains a selective club


27 July 2012
De Groene Amsterdammer Amsterdam Comment8



The EU already has twenty-seven members, and more are knocking on the door. But isn't the process of enlargement undermining its founding principles and energies? De Groene Amsterdammer continues its series on euromyths.

Yasha Lange | Reinier Bijman


The metaphor of the runaway train without brakes. The fear of a European Union that includes not only Turkey, but also the Ukraine, Georgia and Farawayistan as member states. Impossible to administer, diluted due to differences in culture and economic development.

This fear is fed by the fact that there is no hard eastern border, and that expansion appears to be the core business of the Union. Peace, safety and stability through integration. After 1989 the expansion with twelve member states just had to happen, even if everyone knew that certain candidate member states were not yet ready.

According to some people this meant the train had left the station. Not only because it de facto confirmed that expansion is purely a political matter, but also because the character of the Union changed in such way that adding even more countries really didn't matter that much any more.

And indeed: there are four more candidate member states engaged in official accession talks (Croatia, Macedonia, Montenegro and Serbia) and two other Balkan countries that are eligible (Albania and Bosnia-Herzegovina, if it doesn't fall apart). These countries are practically in the heart of Europe. “Moreover,” says Belgian political scientist Hendrik Vos, “if countries do end up doing the homework we asked them to do year ago, then it is difficult to say: just wait a while longer.”

There is a lot of discussion about whether the border is determined by geography, democracy, politicians or the voters. The answer: by all of them. That is why the idea that the Union is continually expanding is not correct.

Every national parliament has a veto right

Starting with geography. While there may not be an eastern border, there is a clear southern border. When it comes to democracy reference is always made to the Copenhagen criteria, the accession requirements such as the rule of law, fair elections, respect for human rights and something as vague as ‘shared values’.

According to europhiles, Europa welcomes the countries which are willing to embrace those values. But even according to Josef Janning, director of Studies with the European Policy Center and proponent of expansion, this also means that Russia and Turkey, for example, will never join. “Because they see themselves as special and do not want to function under anyone else's rules.”

And then the politicians. “You have to see where the ability to run a functional administration stops, with how many countries you can make laws together,” says Vos, who wrote two books about decision making in the EU. This limit seems to have been reached.

In addition, every national parliament has a veto right. This means that in the end public opinion is the ultimate brake on expansion. And in many countries the public no longer supports a bigger Europe. The time that accession could be bought off through economic growth is over.


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Re: New EC Thread

Post  Panda on Mon 30 Jul - 11:16

30 July 2012 Last updated at 10:12 Share this pageEmail Print Share this page


Spain's recession deepened in the second quarter of the year as the economy shrank 0.4%, figures show.

That compares with a 0.3% contraction in gross domestic product (GDP) in the first three months of the year.

Despite the figures, Spain's 10-year borrowing costs fell to 6.55% from last week's record high of 7.5% on hopes of action from the European Central Bank.

Stock markets also rose, with Spain's Ibex 35 index up 1.6%, France's Cac-40 up 0.7% and Germany's Dax up 0.4%.

Spain's worsening GDP figures reflected "weaker domestic demand", according to national statistics institute INE which published the figures.

INE also said that Spain's annual rate of inflation in July rose to 2.2% from 1.8% in June.

There is increasing speculation that action will be taken by eurozone authorities to cut borrowing costs for countries such as Spain and Italy.

Eurogroup leader Jean-Claude Juncker, who has called for the European Central Bank (ECB) to act to cut Spain's debt costs, told German and French press: "We will work in close agreement with the ECB, and we will, as ECB President Mario Draghi said, see results.

Continue reading the main story “
Start Quote
The ECB is not entirely convinced that more bond buying, by itself, will be effective. Many market analysts have their doubts as well ”
End Quote
Stephanie Flanders

Economics editor

--------------------------------------------------------------------------------
Read more from Stephanie

"I don't want to drive expectations, but I must say, we have reached a decisive phase."

On Thursday, the ECB will announce its latest decision on interest rates and there is speculation that it may also announce that it is restarting its bond-buying programme, known as the Securities Markets Programme (SMP).

Under the SMP, the ECB buys government debt from banks on the commercial market, which helps to bring down the cost of borrowing for governments without the ECB having to lend directly to them.

The SMP was suspended at the end of January.

Mr Juncker also referred to agreements at the last European Union summit regarding the European bailout fund, the EFSF.

Under the EFSF's constitution, the fund is permitted to buy government bonds on the primary market, effectively lending directly to indebted governments such as Spain.

This is important because the European Central Bank's constitution prevents it from lending money directly to governments.

It is now hoped that co-ordinated action between the ECB and the EFSF would be more effective in bringing down the borrowing costs of countries such as Spain and Italy.

ECB president Mario Draghi is also due to meet the US Treasury Secretary Timothy Geithner for talks later on Monday

------------------------------------------------------------

The head of Treasury is adamant that Spain will not seek a Bailout and it is expected that Banks holding Spanish Property Mortgages will reduce the price of the them , so if you have money to spare you could pick up a real bargain.

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Re: New EC Thread

Post  Panda on Mon 30 Jul - 16:37

The euro is coming to an end


30 July 2012
Die Welt Berlin Comment1





Draghi, Merkel, Hollande and Juncker may be fond of standing behind the euro in a demonstrative display of unity. It no longer makes sense, writes the Die Welt am Sonntag. Europe's differences are too big for a single currency.

Michael Fabricius


Late in the past week it became clear that the politicians of Europe have overstepped the limits of their real power. The joint statement of President Hollande of France and Chancellor Merkel “to do everything it takes to protect the eurozone” was nothing more than an act of desperation.

Even in the third sentence of the explanation, after all, it became obvious just how much the individual countries of the eurozone, including Germany and France, differ in how they perceive the crisis. Everyone, it read, should “fulfil their commitments in their area of competence.” That could be interpreted as a capitulation: everyone now ought to look to how to get out of the mess on their own.

Centrifugal forces growing

The diplomacy around the ‘shared euro’ is in its last throes. Agreements exist still only on the surface. Massive centrifugal forces are at work below, and those forces are growing.

On one day ECB chief Draghi holds out the prospect of more help for bankrupt states, and the next day Finance Minister Schäuble quashes the commitment. Greece asks for more time, while new announcements come in every day about the shortcomings of the government in Athens and German politicians call openly for the country to be expelled from the eurozone.

A Spanish Minister for the EU talks not about the problems of his country, but prefers to clamour for more money from Germany. And, in any case, there is no consensus on the instruments, either – direct or indirect purchases of bonds, aid to banks or austerity programs.

The euro is dying in the South

The German government is in a minority position only on the ECB’s governing council. If one adds the EU members in the East, the situation looks quite different. Between North and South, a yawning gulf has opened up. It's just a matter of time until we’ll have to look deep into each other’s eyes and confess: it’s just not working out any more.

In the eleven years of the euro the economies in the North and South have not moved towards each other, but grown further apart. Under these conditions, a shared currency makes no sense.

Translated from the German by Anton Baer

On the web
Original article at Die Welt de
Rzeczpospolita article pl
Rzeczpospolita editorial pl


From Warsaw

“The darkest scenario is becoming a fact”

“Is it already the end of the eurozone?” asks Rzeczpospolita grimly after Germany’s finance minister Wolfgang Schäuble rejected the idea of an additional €300 billion bailout for Spain. The conservative Warsaw daily notes that “the eurozone has no money set aside for saving Spain”, and the cost of the operation would likely exceed €300 billion, anything from €450 billion to €650 billion, as estimated by experts from London think tank Open Europe.

In its leader Rzeczpospolita observes that “the EU can’t afford to save Spain. Contrary to Greece, Portugal, or Ireland, Spain is simply too big”. One should therefore hope that –


... Madrid’s plan for a bailout worth €300 billion is just a negotiation position, and the Spaniards will be content with €100 billion [already agreed upon to bail-out the faltering banks]. If, however, it turns out that their situation is actually very bad, the eurozone’s existence would really be at a risk.

Rzeczpospolita believes that the current crisis shows how “Utopian the idea of creating a confederation of states with a common currency but with differing political, social, and economic systems was” and augurs that “we are observing the beginning of the end of the present model of the monetary union”. The Spanish bailout problem will be probably resolved by –


... printing empty money by the European Central Bank. But this will not end the farce. [...]

Sooner or later some [country] will collapse and the pyramid of mutual loans will fall. So unless the eurozone changes, there’s no point in spending money to put off the execution.

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Re: New EC Thread

Post  Panda on Mon 30 Jul - 17:21

Market DataYour MoneyEconomyCompanies30 July 2012 Last updated at 17:18 Share this pageEmail Print Share this page

746ShareFacebookTwitter.Euro crisis: Geithner and Schaeuble call for co-operation The German finance minister met Mr Geithner for informal talks Continue reading the main story
Eurozone crisisWill the ECB's bond plan work?
How Spain's regions got into trouble
Who's afraid of the euro crisis?
Q&A: Spain's woes

A meeting between US Treasury Secretary Tim Geithner and the German finance minister has boosted hopes of imminent action on the eurozone crisis.

The pair stressed the need for "ongoing international co-operation and co-ordination," in a joint statement.

They also expressed confidence in the eurozone's efforts to reform and move towards greater integration.

Mr Geithner met Wolfgang Schaeuble ahead of a meeting with European Central Bank head Mario Draghi.

The informal meeting was held on the German North Sea island of Sylt - a luxurious resort - where Mr Schaeuble was on holiday.

The timing of these meetings, just three day's ahead of Thursday when the ECB will announce its latest decision on interest rates, has added to speculation that it may also announce that it is restarting its bond-buying programme, known as the Securities Markets Programme (SMP).

The SMP, which was suspended at the end of January, enables the ECB to buy government debt from banks helping to reduce the cost of borrowing for governments.

Continue reading the main story “
Start Quote
The ECB will try to tame market expectations. It will want to make them believe that the risk of Madrid being allowed to default on its debts is rather closer to Germany's rather than Greece's ”
End Quote Pauline Mason

Business reporter, BBC News

--------------------------------------------------------------------------------
Will the ECB's bond plan work?

Spain's 10-year borrowing costs dropped again on Monday to 6.6% from last week's record high of 7.5%, reflecting a slight improvement in investor confidence.

In recent days, European leaders have pledged to act in support of the eurozone.

Eurogroup leader Jean-Claude Juncker joined in late on Sunday when he called for action to cut Spain's debt costs.

"We will work in close agreement with the ECB, and we will, as ECB President Mario Draghi said, see results.

"I don't want to drive expectations, but I must say, we have reached a decisive phase," Mr Juncker said in interviews with German and French press.

Cheaper borrowing
Continue reading the main storyMarket DataLast Updated at 17:18

Market index Current value Trend Variation % variation
FTSE 100 5693.63 Up 66.42 1.18%
Dax 6774.06 Up 84.66 1.27%
Cac 40 3320.71 Up 40.52 1.24%
Dow Jones 13054.43 Down -21.23 -0.16%
Nasdaq 2945.00 Down -13.09 -0.44%
BBC Global 30 6293.10 Up 60.49 0.97%
Marketwatch ticker
Data delayed by 15 mins

Spain's Ibex 35 index closed up 2.8%, France's Cac-40 up 1.2% and Germany's Dax up 1.3%.

However, Commerzbank rate strategist Rainer Guntermann cautioned that the market rally may not continue.

"Expectations are high... but for the rally to continue we may need more colour, more details and maybe some action," said Mr Guntermann.

Mr Juncker also referred to agreements at the last European Union summit regarding the European bailout fund, the EFSF.

Under the EFSF's constitution, the fund is permitted to buy government bonds on the primary market, effectively lending directly to indebted governments such as Spain.

This is important because the European Central Bank's constitution prevents it from lending money directly to governments.

It is now hoped that co-ordinated action between the ECB and the EFSF would be more effective in bringing down the borrowing costs of countries such as Spain and Italy.

Spain slowdown

Meanwhile, Italy paid a lower rate of interest at a bond auction to raise 5.48bn euros (£4.2bn).

Italy's bond auction saw it offload its 10-year bonds at an interest rate of 5.96%, the first time it has sold them below 6% since April.

However, Richard McGuire, a rate strategist at Rabobank, said the interest rate Italy was paying to sell its debt was still too high.

"While these sales do provide some indication of an easing of tensions at the periphery, they also show considerable further progress on this front is needed," Mr McGuire added.

Official data also showed that Spain's economy shrank 0.4% in the second quarter of the year.

That compares with a 0.3% contraction in gross domestic product (GDP) in the first three months of the year.

The national statistics institute INE, which published the figures, said the worsening GDP figures reflected "weaker domestic demand".

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Re: New EC Thread

Post  Panda on Tue 31 Jul - 8:25


30 July 2012
De Groene Amsterdammer Amsterdam Comment2




Andrzej Krauze


Is the EU really is a cumbersome and expensive bureaucracy comprising vast numbers of civil servants, churning out endless amounts of rules? Dutch weekly newsmagazine De Groene Amsterdammer sets out to find an answer to the question in its euromyths series.

Yasha Lange | Reinier Bijman


According to the European Commission’s own figures, its entire administrative system comprises some 50,000 civil servants, who develop policy for around half a billion Europeans. And Brussels is not slow to brandish this ratio of one civil servant to ten thousand citizens.

Eurosceptics, such as the London-based think tank Open Europe and the Dutch Socialist Party (SP), nevertheless claim that the numbers are much higher. They also include the national civil servants who are involved in EU policy, which raises the figure to three times as many.

However, according to Nico Groenendijk, Professor of European Economic Governance, this is not an accurate comparison: “After all, we don’t include those municipal civil servants who are engaged in the field of national policy in the Netherlands either.”

Administration – six percent of EU budget

The question nevertheless remains whether there are actually too many. Sadly, the majority of comparisons fail to hit the mark. In an effort to emphasise the claim that the administrative system in Brussels is small and efficient, it is often pointed out that it employs just as many civil servants as a city like… ­Berlin for instance.

Berlin also has a sanitation department, however, whereas the EU comprises primarily highly educated, well-paid policy-making officials. Nor is there any point in a comparison with the United States (which is forty times as large); defence is a federal matter in its case, which it is not in Europe.

Perhaps there are not too many civil servants after all, given the vast policy area for which they are responsible. What about the costs, though? All those documents that have to be translated into 23 languages (over a billion euros annually). Administration has accounted for almost six percent of the entire European budget for years now.

And while this is considerably lower than that of the Dutch central government (almost thirty percent), the latter does include the tax authorities, or the national auditor’s office. They simply cannot be compared.

“Bureaucracy is control”

Whichever way you look at it, claims Rinus van Schendelen, Professor of Political Science, the level of bureaucracy in Brussels is tiny. “The government in The Hague – not including institutions such as the army, the police and education – has one civil servant for every 133 inhabitants. The Commission has one for every 20,800 EU inhabitants. You can’t argue with statistics!”

And while almost all experts share this opinion, might Brussels nevertheless remain highly bureaucratic? Political scientist Ben Crum insists that it is indeed, although he emphasises that bureaucracy, as Max Weber saw it, is not a bad thing: “Bureaucracy is control.”

And that is exactly the reasoning behind all those forms that have to be completed. “If you want to allocate subsidies among 27 countries, then bureaucracy is the only means of checking that it is done correctly. Many of those people who complain the most about bureaucracy are also the first to object to subsidies being granted to unfarmed olive orchards. You can’t have it both ways. Given the circumstances, I don’t think Europe is actually excessively bureaucratic.”



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Re: New EC Thread

Post  Panda on Tue 31 Jul - 14:26

Deutsche Bank AG (DBK), Germany’s biggest bank, said it will eliminate 1,900 jobs, including 1,500 at the investment bank, as part of an effort to save 3 billion euros ($3.68 billion).

Deutsche Bank, based in Frankfurt, forecast “substantial costs” to achieve the savings without giving a figure in a statement to the stock exchange today.









15:39

July 30 (Bloomberg) -- Richard Bove, an analyst at Rochdale Securities, talks about the outlook for the banking industry. Bove speaks with Tom Keene, Scarlet Fu and Michael Moore on Bloomberg Television's "Surveillance." (Source: Bloomberg)









The job reductions are part of a strategy review Deutsche Bank ’s new co-chief executive officers Anshu Jain and Juergen Fitschen are conducting as the lender grapples with declining revenue from the investment bank, which reported a 63 percent decline in second-quarter earnings today. Photographer: Hannelore Foerster/Bloomberg
.
The job reductions are part of a strategy review Anshu Jain and Juergen Fitschen, Deutsche Bank’s new co-chief executive officers, are conducting as the lender grapples with declining revenue from the investment bank, which reported a 63 percent decline in second-quarter earnings today. Pretax profit at the corporate banking and securities unit slid to 357 million euros ($439 million) from 969 million euros in the same period a year earlier, missing the 835 million-euro average estimate of eight analysts surveyed by Bloomberg.

Investment banks are cutting staff to reduce costs as the debt crisis curbs trading and leads to a slump in stock and bond offerings. Deutsche Bank is reviewing its compensation practices and codes of conduct.

“The time for vague promises of cultural change in our industry is long gone,” Jain said on a conference call with analysts and reporters. Deutsche Bank’s leaders are “totally determined to act quickly and decisively.”

****** Deutsche Bank is listed as one of those involved in the LIBOR scandal , although the Bank is making a profit.

UBS is also cutting jobs due to heavy losses.


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Re: New EC Thread

Post  Panda on Tue 31 Jul - 16:16

Chancellor Angela Merkel’s coalition rejected granting the permanent euro rescue fund access to European Central Bank liquidity via a banking license, as the Finance Ministry said it saw no need for any such move.





Enlarge image









Chancellor Angela Merkel ’s coalition rejected granting the permanent euro rescue fund access to European Central Bank liquidity via a banking license, as the Finance Ministry said it saw no need for any such move. Photographer: Alessia Pierdomenico/Bloomberg
.
The rules of the European Stability Mechanism don’t foresee a license to allow refinancing at the ECB, the Berlin-based ministry said today in an e-mailed response to questions. The ministry isn’t holding talks on the topic and neither are secret meetings taking place on such proposals, it said.

France and Italy are building support for a previously floated plan to allow the permanent backstop to wield unlimited firepower courtesy of the ECB, Germany’s Sueddeutsche Zeitung newspaper reported today, citing a European Union official it didn’t name. Leading ECB governing council members are among those who now back the idea, the newspaper said.

Lawmakers from all three parties in Merkel’s coalition immediately repudiated the suggestion. It is a “dangerous attempt” to bypass the ban on the central bank financing states directly, said Hans Michelbach of the Bavarian Christian Social Union. The Free Democratic Party’s Rainer Bruederle told Die Welt newspaper such a mechanism is a “wealth-destroying weapon,” while Norbert Barthle of Merkel’s Christian Democratic Union said it won’t happen.

“Those who try to circumvent their own rules through the back door lose their legitimacy in the eyes of the public,” Michelbach said in an e-mailed statement. “Financing debt by means of the printing press leads to growing inflation dangers.”

Draghi’s Pledge

Almost three years into Europe’s financial crisis, leaders are still struggling to hit upon a solution. Spanish and Italian borrowing costs retreated from euro-era records last week as ECB President Mario Draghi said he will do everything that is needed to safeguard the euro area.

Euro-zone members can’t afford take their eyes off the ball for a minute even if there has been a “gradual clearing of the outlook” for the common currency, Italian Prime Minister Mario Monti told reporters in Paris today after a working lunch with French President Francois Hollande.

“Madrid, Rome and Paris shouldn’t overplay their hand,” Die Welt cited Bruederle, parliamentary floor leader of Merkel’s junior coalition partner, as saying. “The burdens that can be placed on contributors from the north aren’t limitless.”

A banking license for the ESM would pile up budgetary risks and set incentives to simply continue policies of endless debt accumulation, said Michelbach. The ECB’s purchase of Italian bonds in the secondary market curtailed the government’s resolve to change economic policy, and a renewed round of bond buying would harden Italy’s refusal to carry out reforms, he said.

“It’s clear that the ESM shouldn’t become the ECB’s bad bank,” Barthle, parliamentary budget spokesman for Merkel’s party, told Tagesspiegel newspaper in an interview. It makes “no sense to speculate daily about ideas to solve the euro crisis,” he said. “We need calm and discretion.”

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Re: New EC Thread

Post  Panda on Tue 31 Jul - 16:51

Portugal

Black economy explodes in crisis




31 July 2012


Portugal’s black economy rose from 9.3% of GDP in 1970 to 24.8% by 2010, writes Lisbon daily i. According to a study by the University of Porto, GDP stood at €130 billion, while parallel economy was €32 billion. The figures are worrisome, the daily continues – the OECD average is 17% and only Greece and Italy have higher percentages.

The black economy thrives on undeclared second jobs, menial work or rent paid without receipt, explains the Lisbon daily. The tertiary sector (including building, rentals, services, restaurants) is the most affected, with VAT climbing from 17% to 23% in the last decade, and the current crisis might make matters worse. “Taking into account rising taxes and unemployment, it should grow again,” warns economist Óscar Afonso, author of the study.

Payments in cash are a huge source of revenue for the underground economy and “government [austerity] measures provide the incentive,” argues another economist, Sérgio Vasques, while a consulting firm quoted by the daily urges encouraging more online and credit card payments to reduce it.

The Porto study argues that the black economy explains “the survival of populations in countries where GDP per capita is under the subsistence threshold.” According to a study by the University of Bogazici in Turkey, the black economy can have a positive effect on impoverished places, but makes statistics unreliable. “Saying it revitalises the economy is like saying crime creates jobs”, concludes Vasques. “Living underground is no project for a country.”


Last edited by Panda on Wed 1 Aug - 16:54; edited 1 time in total

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Re: New EC Thread

Post  Panda on Tue 31 Jul - 19:50




Friends that Merkel could do without


31 July 2012


Handelsblatt, 31 July 2012


“Who governs Germany?“ wonders a slightly querulous Handelsblatt. The Düsseldorf business daily points out that the German Chancellor has to contend with a constant stream of “desiderata, requests and threats" from all kinds of parties who want Berlin to make a greater commitment to saving the euro –


Recently many commentators have discovered a vocation to advise Europe’s largest economy on the course of action it should take in response to the crisis. These budding governors can be found in Washington, London, Rome, Luxembourg and Paris.

Among those who have called on Germany to be more enthusiastic in the fight against the crisis, even though “no one asked them” for their opinion, Handelsblatt singles out US Treasury Secretary Timothy Geithner –

… who descended on the holiday destination of his German counterpart Wolfgang Schäuble, having announced that leaving Europe on the edge of the abyss would only increase the cost of the crisis.

The newspaper discerns another unwanted advisor in the person of ECB Governor Mario Draghi, who has pushed Angela Merkel –


… to allow the ECB to go ahead with the controversial purchasing of more sovereign bonds, thereby activating the ‘bazooka’, which is the term used by the Southern Europeans for the unlimited emission of money from the ECB.

A further surprising inclusion in the circle of “uninvited counselors“ is former British Prime Minister Tony Blair –


… who allegedly said that German taxpayers should guarantee the 8.8 trillion euro mountain of European debt.

And last but not least, Eurogroup President Jean-Claude Juncker, a native of Luxembourg –


… who feels unnecessarily confined by his small homeland. He has criticised Germany for focusing on internal policy in the euro crisis and for ‘wanting to manage other members of the monetary union like subsidiaries.’

In this context, Handelsblatt observes –


Given that the singularity and the dignity of her function have made it impossible for Angela Merkel to respond to these criticisms directly, the leader liberals parliamentary group, Rainer Brüderle, has taken charge of the task. In an allusion to Geithner’s flying visit to Schäuble, he remarked to Handelsblatt: 'Given the sorry state of the US budget, it is difficult to avoid the impression that the focus on the European debt crisis amounts to a welcome diversion'

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Re: New EC Thread

Post  Panda on Wed 1 Aug - 16:46

The day we’ll find out what Germany wants


1 August 2012
La Vanguardia Barcelona Comment





Angela Merkel

Petar Pismestrovic


The meeting of the European Central Bank of August 2 has been declared crucial for Spain and Italy, who are waiting for help. This will be the moment we find out who in Germany — be it the Chancellor or the President of the Bundesbank — is to decide on its position on the crisis.

Manel Pérez


Those analysts most severe in their criticism of Germany’s actions in Europe say that at the start of the crisis Germany was always inflexible, that mid-game it was prepared to give in and change its mind, and that now, nearing the end game, it is once more standing firm, back in its initial position and ruling out any changes to it in these decisive final moments.

What will happen now, in this stage of existential doubt over the euro? For a few days it seemed that Angela Merkel, Chancellor, and her finance minister, Wolfgang Schauble, accepted the proposition of the southern countries like Spain and Italy, supported by France, traditional partner of Berlin but afraid of being backed into a corner by Germany: that the European Central Bank (ECB), together with the European bail-out funds, would come to the rescue of their doomed sovereign debt.

Opinion these days has tended to emphasise that Germany has shifted its position, even though its two most visible leaders in this matter have not made a single statement backing that purchase of debt or any other additional measure. However, from Germany there has clearly emerged the outright rejection by the economic establishment, led by the Bundesbank, Germany’s central bank. Influential German economists, politicians and industrialists have rallied round this flagship institution. The arguments of the debate are known, and they are not worth repeating here.

More interesting is whether the obstinacy of the President of the Bundesbank, Jens Weidmann, reveals a real split with Merkel's government or whether it’s about a sharing of roles, since the chancellor, for her part, has in recent weeks said “No” in all possible ways.

A historic day

It is obvious that Merkel cannot go back to the Bundestag to request more resources for another bailout, which was just around the corner for Spain and Italy, as the markets were anticipating too – right up until Mario Draghi, the head of the ECB, delivered his spell-binding utterance last week.

Without the political space to orchestrate a Greek-style bailout and under unyielding pressure from the markets, the most comfortable solution for Merkel was to dump the dossier into the hands of the ECB, which in national terms means the Bundesbank. The latter, observing the manoeuvre – that is, it would be the bank that would run the risk of absorbing the losses if the operation turns out badly – has stonewalled.

This would be the logic of a clash between Merkel and the bank, and not the logic of a division of roles. If this scenario is true, the ECB council meeting on Thursday will see the emergence of an alliance between central bankers from southern Europe and the majority of the eurozone governments, including Germany, against the Bundesbank and some allied central banks. A historic day.

Under the second scenario – in which Merkel left it to the Bundesbank to stonewall and Draghi was merely mouthing empty words – we will see on Thursday an authentic fiasco, with the ECB left hardly any room for manoeuvre and stripped of its authority by the powerful states of the eurozone, even if it does win the formal vote. A nightmare scenario.

Translated from the Spanish by Anton Baer

On the web
Original article at La Vanguardia es
Frankfurter Rundschau editorial de


Opinion

Save the euro without scaring Germany

“The entire world is worried that the solution to the crisis will come a cropper on German ordoliberalism– and in particular on its insistence that a central bank cannot buy sovereign bonds,” remarks Frankfurter Rundschau in an editorial which defends European Central Bank (ECB) intervention to save the euro. The centre-left daily sets out to refute the arguments against a decision to intervene, and in particular the injunction against the indirect provision of funds to member states via the ECB –


The ECB has a mandate to guarantee price stability. As it stands, we have a problem that is worse than inflation […] – a deflationary trend that is lowering prices. In this context, the purchase of bonds to stabilise the economy is entirely covered by its mandate.

The daily also argues that we should question the capacity of markets to determine the rates of interest for sovereign borrowing, especially in the context of the major errors made in recent years by investors who failed to notice the onset of the crisis –


Would it not be smarter to allow central banks to determine these rates of interest, instead of giving speculators’ whims free reign over prosperity and employment?

Finally, Rundschau points out that if the ECB acts appropriately, it will not have to contend with with an elevated risk of accumulating sovereign debt –


The ECB simply has to define a credible policy whereby it will buy all long-term debt that rises above a certain rate of interest, let’s say 5 %. [...] It’s a good bet that it will not have to spend a penny.

The only cloud on the horizon is the non-democratic nature of debt purchases by the ECB. With this in mind, the daily argues that the European Stability Mechanism (ESM) should act on behalf of the ECB, while using ECB funds, because the EMS is supervised by member state ministries of finance.

=======================================

Weidman of the Bundesbank is saying the ECB has overstepped it's mandate .
Monti is pressing National Leaders to back the Draghi plan.
HSBC analyst Philip Poole says Global growth will be weak for some time.
Germany's economy is faltering which makes it more unlikely that the German people will agree to add to the EFS fund.



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Re: New EC Thread

Post  Panda on Thu 2 Aug - 10:47

2 August 2012 Last updated at 10:42 Share this pageEmail Print Share this page

The European Central Bank (ECB) will hold its latest meeting amid much speculation that it will take action to bring down Spain's cost of borrowing.

ECB president Mario Draghi has said he is ready to do "whatever it takes" to support the euro, prompting a rally in shares and the single currency.

Fears that Spain will need a bailout have prompted speculation that the ECB will take unprecedented steps to help.

One commentator told the BBC that it was "crunch time for the euro".

David Llewellyn, vice chairman of the Banking Stakeholder Group at the European Banking Authority, said: "Expectations are very high, the markets recognise that past measures simply haven't worked.

"Above all if nothing is done to lower and stabilise the borrowing costs of countries like Spain and Italy then their future within the euro must be in question."

Mr Draghi will hold a news conference later on Thursday.

A decision on whether to help Spain will come as the central bank decides on interest rates. In July, the ECB - which sets the cost of borrowing for the 17 countries which use the euro - cut its key rate from 1% to 0.75%, a record low for the eurozone.

On Wednesday, the US Federal Reserve took no further steps to boost the economy - as some observers had predicted - but said that it "will provide additional accommodation as needed to promote a stronger economic recovery".

Stephen Evans

BBC News, Berlin

--------------------------------------------------------------------------------
If the ECB intervenes, does this mean that the politics of the ECB have changed?

The ECB's main decision-making body is the Governing Council, made up of the six members of the ECB's executive board, presided over by Mario Draghi, and the governors of the central banks of the seventeen euro zone countries.

It is, accordingly, a body with politics. There can be alliances and the economic situation in each of the countries plays in the minds of the members, including those from Greece, Italy, Spain, Ireland, France as well as Germany.

And the politics of all those countries have changed because of the obvious pain being experienced in Greece, Spain and Ireland and because of the election of Francois Hollande to the presidency of France.

On the one hand is Germany which takes the view that softening the stance on buying debt of troubled governments will only soften the pressure for reform.

But on the other side, and not just among the debtor countries of the Mediterranean, but also France and Belgium, there is a growing view that you can't ignore the politics of pain. On this reading, whatever the clauses in the rules say about the duty of the ECB to prevent inflation (but not be duty-bound to prevent rising unemployment) the political realities have to kick in.

Will the ECB's bond plan work?
US Fed signals stimulus action

At a conference in London last week marking the start of the Olympics, Mr Draghi said: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."

Many investors took that to be a hint that the ECB might restart its Securities Markets Programme (SMP).

The scheme - introduced in 2010 - allows the ECB to buy large quantities of government bonds from banks and other financial institutions on the open market.

That, in turn, allows indebted eurozone governments to borrow money at rates much lower than those offered in the commercial bond markets.

The last SMP purchase took place at the end of January. Since then, Mr Draghi has repeatedly reiterated his resistance to large-scale bond purchases, saying it was up to governments who needed support to help themselves.

But there is controversy around any such plan as the ECB is forbidden from lending money to European governments under its constitution. Notably, it faces opposition from Germany, its biggest funder.

Earlier this week, the Bundesbank - the German central bank which holds a seat on the ECB's Governing Council - took the unusual step of posting an English translation of an interview with its president Jens Weidmann from a month ago.

It said that the ECB should be aware that its independence "also requires it to respect, and not overstep, its own mandate".

The SMP is just one of the tools at the ECB's disposal to try to bring down borrowing costs:

Acting as a bailout fund agent: Using money from the bailout funds, the European Financial Stability Fund (EFSF) or the planned European Stability Mechanism (ESM), to buy bonds directly from eurozone governments
Cutting base rate: Lowering the key interest rates used to calculate the cost of borrowing
Negative deposit rate: Charging banks who deposit money with the ECB, encouraging them to lend it to firms and households instead
Bond spread target: Setting a target for the difference between German bond yields and those of other eurozone countries
Setting an effective target for the borrowing costs for eurozone countries such as Spain and Italy backed up by a promise to buy bonds in large quantities in order to maintain this level is probably the least controversial move.

If bond investors fully believed the ECB's commitment to back up this promise with action then they could adjust their expectations for bond yields without the ECB spending a single penny.

However, in reality, investors would be likely to test the ECB's resolve so it is likely to have to restart its SMP bond-buying programme in combination with any such target.

Interest rate cuts could lower the cost of borrowing for firms and households if passed on by banks however, they are likely to have little impact on the high borrowing rates of governments such as Spain and Italy which is currently driving the debt crisis.

Spanish borrowing costs

On Thursday, the Spanish government sold 3.1bn euros of two, three and 10-year debt at an auction.

The average yield on 10-year bonds rose to 6.65% from 6.43% at the last auction on 5 July.

On the commercial markets where Spanish bonds auctioned in previous years change hands, normally between banks and other financial institutions, the yield on 10-year bonds fell to 6.56%.

Last week, that 10-year yield hit a record high of 7.6% on the secondary market.

That would make the process of regularly borrowing money to pay government salaries and bills unaffordable for Spain.

Greece, Portugal and the Republic of Ireland all had to seek international bailouts when their implied borrowing costs reached similar levels.

Spain has already received a 100bn euro (£79bn) bailout for its banks which are struggling with huge bad debts from loans in the country's property sector.

However, if Spain cannot borrow on the commercial markets at affordable rates it would need a full bailout which would be much more costly.

The European Union and international lenders would have to provide sufficient money to finance the eurozone's fourth biggest economy for several months, or even years, to prevent it from defaulting on its international debts.

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Re: New EC Thread

Post  Panda on Thu 2 Aug - 11:42

http://edition.cnn.com/video/?hpt=wo_c2#/video/business/2012/07/31/soares-spain-sperm-eggs-for-sale.cnn

This is an example of about hard it is in some European Countries to make ends meet. I think if the Euro Countries
impose any more conditions for Spain to have a bail-out the Spanish people will take to the streets again, this is why
Rajoy does not want a bail-out.

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Re: New EC Thread

Post  Panda on Thu 2 Aug - 16:34

The euro of our discontent


2 August 2012
Público Lisbon Comment


Vlahovic


Designed to end a half a millennium of conflicts, today European political unity faces an uncertain future. This is because Europeans no longer share the same vision and because the United States will not accept the existence of the euro, says Portuguese writer Eduardo Lourenço.

Eduardo Lourenço


In the aftermath of two suicidal wars in the 20th century, three of the belligerents, out of desperation, dreamed of a new Europe. The world wars – Europe's double suicide – marked the culmination of a pitiless struggle: half a millennium of a quest for supremacy between Spain, France, England and the Netherlands joined by Austria, Prussia and Russia. Occasionally Sweden, then marginal, and Portugal would participate as an ally to one or the other of the major players.

It would thus not be a calumny to European history to see it as a long, on-again, off-again “civil war”. All of these nations have a certain common culture. Inherited from Antiquity and of Christian origin (Catholic, Protestant, Orthodox) it has, since the fall of Constantinople, been in opposition to other cultures and religious affiliations.

Faced with such a complex past, it is not surprising that Western Europe stumbled over so many difficulties on the path to realising its European Utopia, its first serious and democratic attempt at building something of international scope. Unfortunately, and in spite of the urgency of the European project, it could not be attempted outside of the Cold War context: the United States and the Soviet Union each claimed to establish its supremacy on the world and, for them, Europe was (already) a coveted area. Torn between the United States and Russia, Europe was then split; since the fall of the Berlin Wall it has changed radically.

One could argue, especially today, that the creation of the euro shook up the fetish that is the US dollar. Until then, it was the only imperial single currency of the globalised zone – or rather of the political, economic, financial, technological and, especially, cultural Americanisation of the world. Perhaps the euro, its assertiveness and its (excessive?) success troubled the world monetary system from the start. A system for which the dollar and its absolute dominance are the supreme weapon, the one that makes it possible to buy that other weapon – petrol – and to control the world market.

No ideological-financial plot needs to be conjured up to explain the nearly-universal crisis pervading the core of capitalism in the digital era. Nor is one needed to imagine an attack to destabilise the euro and, through it, any project of political autonomy in the new Europe, with the aim of ensuring its historic subjugation. NATO is, in strategic terms, what the weakening of the euro (or even its eventual disappearance) is at the economic and financial level: the single currency symbolises and incarnates the post-1989 Europe. But who, in Europe, still wants Europe?

We do not need anyone to save us

Paradoxically, the most pro-European of the major nations, in spite of its ethical and political constraints, is none other than Germany. The country of the former Deutschmark is the euro's new International Monetary Fund. Only Germany (despite being disarmed or perhaps because of it) still has enough economic clout to preserve the European “utopia” from the dark influences that, yesteryear, dragged it towards the abyss. It alone still has sufficient historical aura to take on the major role that destiny has assigned it, or which it assigned to itself. Who, if not Germany, can, despite the terrifying ghosts this idea awakens, attract “Europeans” such as Ukraine and Greater Russia to the European area? Or Turkey, to which Germany is closer than any other country?

Yet it is from the homeland of Voltaire, and not that of Luther, that we may expect a historical commitment in favour of an exemplary Europe. One as exemplary as France once was in many areas. For a long time, France by itself incarnated Europe. For many, it was the “nation” of reference, as opposed to the “world island” that is England. It is undoubtedly for this reason that France has balked, from the beginning, at transcending its borders in order to draw on a dynamic incarnation of Europe. Historic heirs of an insurmountable rivalry, neither England nor France feel the need for Europe. They are extras.

In Southern and Eastern Europe, on the other hand, the European dream is alive and well. But these areas are limited and marginal, if not marginalised. The North, for its part, seems to belong to a continent whose dreams were frozen long ago.

Perhaps Europe never needed to go anywhere. Did not need to provide itself with a historic, political, ideological and cultural status other than that of the multiplicity of ethnic groups it has always been. This is where the modern world was forged, as was the modernity of the world. Let us not forget that. We do not need anyone to save us. We need to save ourselves and that's no small feat. Whatever happens, we are not for sale.


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Re: New EC Thread

Post  Panda on Thu 2 Aug - 16:59

2 August 2012 Last updated at 15:25 Share this pageEmail Print Share this page


European markets have fallen after the European Central Bank president Mario Draghi said the bank would come up with ways to help struggling eurozone countries "over the coming weeks".

Analysts had been hoping for more details and immediate action.

Help from the ECB would also only be given if the governments themselves made certain committments, he said.

The Spanish and Italian stock markets fell sharply while both countries' borrowing costs rose sharply.

Earlier, the ECB kept the main eurozone interest rate at a record low of 0.75%.

Mr Draghi said that the high yields on some eurozone government bonds were unacceptable, adding that, "the euro is irreversible".

He said the ECB may intervene in the bond markets to support struggling nations.

"Once again, we have no commitment to action from the ECB, and no execution of promises previously made," said Carl Weinberg, chief economist at High Frequency Economics.

"Traders and investors who expected immediate action are, and should be, disappointed. More scolding of governments, but no ECB action, is the bottom line."
Analysis
Stephanie Flanders

Economics editor

--------------------------------------------------------------------------------
Financial markets got some clarity from the ECB president today on what the central bank was prepared to do to help troubled Eurozone economies.

There was also some genuine news in what Mr Draghi said on the issue of seniority.

But, as Mr Draghi said himself - there are plenty of details still to be filled in. He's going to make sure that governments get their act together first.

Will this be enough? The early response of financial market analysts seems to be that it will no.

Read more from Stephanie
UK holds off from more stimulus

The yield on Spanish 10-year bonds rose from 6.6% before Mr Draghi spoke to 6.9% afterwards, while Italian bond 10-year bond yields rose from 5.7% to 6.2%.

Bond yields are taken as indicators of what interest rate governments would have to pay to borrow money.

Government action
At his press conference, Mr Draghi said that the ECB's bond-buying process would resume, but that it would be different to the Securities Markets Programme (SMP), which involved buying large quantities of government bonds from banks and other financial institutions on the open market.

Mr Draghi said that the new scheme would involve buying shorter-term bonds, which should allay some of the fears of the German government, worried about having to guarantee debts of weaker countries over the longer-term.

But he also made it clear that the market intervention was only a short-term measure, to keep the markets happy until governments had solved their own problems.

"Policymakers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination," he said.

Mr Draghi continued: "The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions."


Currently, the European bailout fund - the EFSF - and its delayed sister fund - the ESM - would require any country seeking help to sign a memorandum of understanding, or promise to carry out certain measures such as cutting spending or raising taxes.

Spain, which needs outside help to bring down its borrowing costs, is keen to avoid loans with strict economic conditions.

Mr Draghi stressed this "conditionality" several times.

When asked whether Spain, and Italy would, therefore, have to submit to similar strictures imposed on Portugal, Ireland and Greece before the ECB could act to buy their bonds, Mr Draghi replied: "Yes, that is exactly how you should see it."

He also said that the ECB would address "the concerns of private investors about seniority".

Some investors are worried that if the ECB were to buy a lot of government bonds, it would get precedence over them when funds were distributed if a country were to default on its debts.

Spain's borrowing costs have been at high levels, prompting speculation that it will need a full bailout.

Mr Draghi said: "What we have expressed is guidance, and strong guidance, about strong measures which will be completed in the coming weeks."

Asked whether the ECB's decisions had been unanimous, he replied: "The endorsement to do whatever it takes to preserve the euro as a stable currency has been unanimous."

"But it is clear, and it is known, that Mr Weidmann [ECB member and head of the German bank] and the Bundesbank have their reservations... about buying bonds."

Spanish yields
Continue reading the main storyMarket DataLast Updated at 16:44

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The Spanish government sold 3.1bn euros of debt at an auction earlier on Thursday, but again had to pay more to borrow the money.

The average interest rate on 10-year bonds rose to 6.65% from 6.43% at the last auction on 5 July.

Last week, the yield on Spanish 10-year bonds hit a record high of 7.6% on the secondary market, where bonds sold at previous auctions are bought and sold.

This raised concerns that the country would need a full bailout, beyond the help for its struggling banks that has already been agreed.

Greece, Portugal and the Republic of Ireland all had to seek international bailouts when their borrowing costs reached similar levels.

The ECB, which sets the cost of borrowing for the 17 countries which use the euro, cut its key rate from 1% to 0.75% last month, to try to bring down borrowing costs and stimulate economic activity.

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