Global stock markets have been hit by fears over global growth following a run of bad economic news.
German figures revealed a sharp drop in industrial production, raising fears than Europe's traditionally strongest economy was weakening.
Showing posts with label European economy. Show all posts
Showing posts with label European economy. Show all posts
Wednesday, October 08, 2014
Saturday, July 19, 2014
IMF's Lagarde says financial markets 'perhaps too upbeat' on Europe
(Reuters) - The head of the International Monetary Fund warned on Friday that financial markets were "perhaps too upbeat" because high unemployment and high debt in Europe could drag down investment and hurt future growth prospects.
Wednesday, March 12, 2014
Poland Says German Reliance on Russian Gas Threatens Europe
WARSAW -- Germany's reliance on Russian natural gas poses a threat to European sovereignty, Polish Prime Minister Doland Tusk warned Monday amid rising East-West tensions over Ukraine.
Tuesday, December 21, 2010
Euro debt may spark more global jitters
THE Reserve Bank has acknowledged Europe's fast-spreading debt problems are emerging as a threat to the Australian economy and could set off a round of jitters in global credit markets.
The dominance of Europe in discussion at the RBA's last monthly board meeting suggests it is now paying closer attention to how the debt crisis is playing out.
The December 7 meeting was held before last week's move by ratings agency Moody's to cut Ireland's credit rating to three notches above junk.
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But minutes of the meeting, released yesterday, suggest the RBA is sticking to its medium-term view of the domestic economy, with growth here underpinned by the continued strength of Asia's key drivers, China and India.
The minutes provide economists with an insight into the central bank's thinking on the factors bearing on monetary policy.
Whether the RBA would have left the cash rate at 4.75 per cent, as it did, on December 7 in the absence of Europe's troubles is not clear from the minutes.
But they show the RBA took into account the banks' super-sized increases in mortgage rates after its 25-basis-point lift in the cash rate last month. The high level of the Australian dollar remains a factor in its thinking.
The board judged current monetary policy conditions as ''mildly restrictive'', though ''appropriate'' given the booming export market and positive outlook for business investment.
While the RBA is widely expected to begin a new round of rate rises next year, economists judged from the tone of the latest minutes that this would not start until April.
''The RBA is 'comfortable' with current policy settings and it could take some time for them to be uncomfortable again,'' said Commonwealth Bank senior economist Michael Workman. He believes the central bank may wait for clear signs of higher inflation and consistently strong jobs growth before lifting rates again.
The RBA also appears to be more relaxed about any signs of an overheating economy, for now at least.
The minutes said improved household savings rates and lower consumer spending had allowed business investment to rise without causing a build-up in inflationary pressures.
While Europe's debt problems provided downside risks to the global economy, the central bank said it was prepared to see how events played out before acting further.
Former Reserve Bank economist Paul Bloxham, now with HSBC, is tipping official cash rates will rise next year.
''If you believe, as we do, that the saving rate won't stay at its current historically high level all on its own- and something will need to restrain it - then you also have in mind that interest rates will need to rise further,'' he said.
By Eric Johnston
Source: www.smh.com.au
The dominance of Europe in discussion at the RBA's last monthly board meeting suggests it is now paying closer attention to how the debt crisis is playing out.
The December 7 meeting was held before last week's move by ratings agency Moody's to cut Ireland's credit rating to three notches above junk.
Advertisement: Story continues below
But minutes of the meeting, released yesterday, suggest the RBA is sticking to its medium-term view of the domestic economy, with growth here underpinned by the continued strength of Asia's key drivers, China and India.
The minutes provide economists with an insight into the central bank's thinking on the factors bearing on monetary policy.
Whether the RBA would have left the cash rate at 4.75 per cent, as it did, on December 7 in the absence of Europe's troubles is not clear from the minutes.
But they show the RBA took into account the banks' super-sized increases in mortgage rates after its 25-basis-point lift in the cash rate last month. The high level of the Australian dollar remains a factor in its thinking.
The board judged current monetary policy conditions as ''mildly restrictive'', though ''appropriate'' given the booming export market and positive outlook for business investment.
While the RBA is widely expected to begin a new round of rate rises next year, economists judged from the tone of the latest minutes that this would not start until April.
''The RBA is 'comfortable' with current policy settings and it could take some time for them to be uncomfortable again,'' said Commonwealth Bank senior economist Michael Workman. He believes the central bank may wait for clear signs of higher inflation and consistently strong jobs growth before lifting rates again.
The RBA also appears to be more relaxed about any signs of an overheating economy, for now at least.
The minutes said improved household savings rates and lower consumer spending had allowed business investment to rise without causing a build-up in inflationary pressures.
While Europe's debt problems provided downside risks to the global economy, the central bank said it was prepared to see how events played out before acting further.
Former Reserve Bank economist Paul Bloxham, now with HSBC, is tipping official cash rates will rise next year.
''If you believe, as we do, that the saving rate won't stay at its current historically high level all on its own- and something will need to restrain it - then you also have in mind that interest rates will need to rise further,'' he said.
By Eric Johnston
Source: www.smh.com.au
Thursday, December 16, 2010
EU leaders meeting amid eurozone jitters
Concerns about the stability of the eurozone are set to dominate a meeting of European leaders in Brussels.
The two-day summit is expected to see an agreement to set up a permanent system for rescuing countries that get heavily into debt.
But there is still much debate about how such a system should operate.
Meanwhile concern over Spain's financial stability continued as it was forced to pay a higher rate of interest in a government bond sale.
Spain has been under financial market scrutiny since the Irish Republic was forced to take an aid package of 85bn euros (£72bn; $113bn) last month.
That bail-out followed the 110bn-euro rescue of Greece in May.
Arriving at the summit, Sweden's Prime Minister Fredrik Reinfeldt stressed that beyond crisis management there was a long-term need for EU countries to reform labour markets and boost competitiveness.
Greece's Prime Minister George Papandreou said "the challenge is a collective one now - more integration... and all have to live up to their responsibilities".
'Succeed together'
Issues on the agenda in Brussels include:
* How to change the EU's Lisbon Treaty to allow changes to create a permanent stability mechanism for eurozone members
* Whether to increase the eurozone's 750bn-euro temporary bail-out fund, the European Financial Stability Facility (EFSF)
* The possibility of creating pan-European bonds to boost confidence in the euro.
But even assuming that leaders do agree to the way countries are helped, the slow pace of politics in Brussels means a permanent stability arrangement will not come into force until 2013, says BBC Europe correspondent Matthew Price.
In the meantime they will have to rely on the current temporary mechanism that has already been used to rescue Greece and the Irish Republic, he added.
And analysts have expressed concern that talks will not address a key issue - whether or not investors who have bought bonds in struggling euro nations will have to lose money, or in the language of the financial world, take a "haircut", on their investment between now and 2013.
This was causing "uncertainty" in financial markets, said Carsten Brzeski, a senior analyst at ING.
"This is an inconsistency. The politicians need to address this insolvency issue in the period between now and 2013," he told the BBC.
German caution
French Foreign Minister Michele Alliot-Marie said that the EU had to stop speculators from attacking eurozone countries and would adopt ways to do that at the summit.
And separately the Prime Minister of Luxembourg, Jean-Claude Juncker, said European leaders were determined to do everything to ensure the eurozone's financial stability.
On Wednesday, German Chancellor Angela Merkel stressed Berlin's commitment to help its European partners, pledging that: "Nobody in Europe will be abandoned. Europe will succeed together."
But she has been an opponent of some suggested actions, including increasing the eurozone's euro bail-out fund or introducing euro bonds.
Concerns reflected
In its latest bond auction, Madrid managed to raise 2.4bn euros.
But the yield on the Spanish bonds - essentially the interest rate which the government must pay in order to borrow money - was higher than that on previous auctions of similar bonds.
The Spanish treasury sold 1.8bn euros worth of 10-year bonds at an average interest rate of 5.4% - up from 4.6% in the last such auction in November,
And it was forced to pay a rate of 6% to sell 618m euros in 15-year bonds, up from 4.5% in October.
The rising cost of borrowing reflects investors' concern about the outlook for the Spanish economy and its banking sector in particular.
Madrid insists it will not need to apply for a bail-out from the EFSF - the temporary rescue scheme funded by the EU and International Monetary Fund.
Downgrade threat
While the demand for Spanish bonds remained oversubscribed, concerns remained about Spain's ability to get affordable funding to refinance its debts and support its banks, said Kathleen Brooks, research director at Forex.com.
And this had wider implications for the single currency, she added.
"Spain is the canary in the coal mine for the survival of the eurozone," Ms Brooks said.
On Wednesday, ratings agency Moody's said it was reviewing Spain's credit rating with a view to downgrading it - warning of problems the country faced in refinancing its debts next year.
Moody's had already cut Spain's sovereign debt rating from the top, triple-A rating to Aa1 in September.
The two-day summit is expected to see an agreement to set up a permanent system for rescuing countries that get heavily into debt.
But there is still much debate about how such a system should operate.
Meanwhile concern over Spain's financial stability continued as it was forced to pay a higher rate of interest in a government bond sale.
Spain has been under financial market scrutiny since the Irish Republic was forced to take an aid package of 85bn euros (£72bn; $113bn) last month.
That bail-out followed the 110bn-euro rescue of Greece in May.
Arriving at the summit, Sweden's Prime Minister Fredrik Reinfeldt stressed that beyond crisis management there was a long-term need for EU countries to reform labour markets and boost competitiveness.
Greece's Prime Minister George Papandreou said "the challenge is a collective one now - more integration... and all have to live up to their responsibilities".
'Succeed together'
Issues on the agenda in Brussels include:
* How to change the EU's Lisbon Treaty to allow changes to create a permanent stability mechanism for eurozone members
* Whether to increase the eurozone's 750bn-euro temporary bail-out fund, the European Financial Stability Facility (EFSF)
* The possibility of creating pan-European bonds to boost confidence in the euro.
But even assuming that leaders do agree to the way countries are helped, the slow pace of politics in Brussels means a permanent stability arrangement will not come into force until 2013, says BBC Europe correspondent Matthew Price.
In the meantime they will have to rely on the current temporary mechanism that has already been used to rescue Greece and the Irish Republic, he added.
And analysts have expressed concern that talks will not address a key issue - whether or not investors who have bought bonds in struggling euro nations will have to lose money, or in the language of the financial world, take a "haircut", on their investment between now and 2013.
This was causing "uncertainty" in financial markets, said Carsten Brzeski, a senior analyst at ING.
"This is an inconsistency. The politicians need to address this insolvency issue in the period between now and 2013," he told the BBC.
German caution
French Foreign Minister Michele Alliot-Marie said that the EU had to stop speculators from attacking eurozone countries and would adopt ways to do that at the summit.
And separately the Prime Minister of Luxembourg, Jean-Claude Juncker, said European leaders were determined to do everything to ensure the eurozone's financial stability.
On Wednesday, German Chancellor Angela Merkel stressed Berlin's commitment to help its European partners, pledging that: "Nobody in Europe will be abandoned. Europe will succeed together."
But she has been an opponent of some suggested actions, including increasing the eurozone's euro bail-out fund or introducing euro bonds.
Concerns reflected
In its latest bond auction, Madrid managed to raise 2.4bn euros.
But the yield on the Spanish bonds - essentially the interest rate which the government must pay in order to borrow money - was higher than that on previous auctions of similar bonds.
The Spanish treasury sold 1.8bn euros worth of 10-year bonds at an average interest rate of 5.4% - up from 4.6% in the last such auction in November,
And it was forced to pay a rate of 6% to sell 618m euros in 15-year bonds, up from 4.5% in October.
The rising cost of borrowing reflects investors' concern about the outlook for the Spanish economy and its banking sector in particular.
Madrid insists it will not need to apply for a bail-out from the EFSF - the temporary rescue scheme funded by the EU and International Monetary Fund.
Downgrade threat
While the demand for Spanish bonds remained oversubscribed, concerns remained about Spain's ability to get affordable funding to refinance its debts and support its banks, said Kathleen Brooks, research director at Forex.com.
And this had wider implications for the single currency, she added.
"Spain is the canary in the coal mine for the survival of the eurozone," Ms Brooks said.
On Wednesday, ratings agency Moody's said it was reviewing Spain's credit rating with a view to downgrading it - warning of problems the country faced in refinancing its debts next year.
Moody's had already cut Spain's sovereign debt rating from the top, triple-A rating to Aa1 in September.
Saturday, November 20, 2010
Irish corporate tax in focus as bailout deal nears
By Julien Toyer and Jodie Ginsberg
LISBON/DUBLIN (Reuters) - French President Nicolas Sarkozy said on Saturday he expected Ireland to raise its corporate tax rate but added that an increase would not be a condition for any bailout.
International Monetary Fund and European Commission officials are in Dublin to discuss financial aid to help Ireland cope with its struggling banks, whose huge liabilities have sent Irish borrowing costs soaring.
The main concern for EU policymakers is that Ireland's problems will spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
Euro zone states want Ireland to raise its 12.5 percent corporate tax rate as part of any deal but Dublin argues the low rate is crucial to attracting foreign investment.
Sarkozy, speaking at a news conference in Lisbon on the sidelines of a NATO summit, said he expected Ireland to raise its corporate tax rate.
"It's obvious that when confronted with a situation like this there are two levers to use: spending and revenues," he said. "I cannot imagine that our Irish friends, in full sovereignty, (would not use) this because they have a greater margin for maneuver than others, their taxes being lower than others."
"In the conditions for activating the (bailout) mechanism, there are no fiscal demands," he added.
The Irish Times newspaper reported that Ireland's four-year plan to reduce its deficit would be published on Tuesday, before any international financial aid package was ready.
Last month, Ireland doubled to 15 billion euros ($21 billion) the sum it calculated was needed to bring its deficit under control by 2014. Finance Minister Brian Lenihan said this was designed to ensure Ireland would not need a bailout but it failed to calm jittery markets.
Ireland's central bank chief acknowledged this week the country needed a loan running into tens of billions of euros to shore up a banking sector that has grown dependent on ECB funds and seen an exodus of deposits over the past six months.
CABINET TO MEET
The Irish Times said the government -- deeply unpopular and hanging on to a tiny parliamentary majority -- had pushed forward the publication date for its four-year plan so it could be identified as a programme drawn up by the government rather than one driven by the European Union or the IMF.
The newspaper said the plan would be published on Tuesday, citing unnamed senior Irish officials. A government spokesman said only the plan would be published early next week.
An international aid package is expected to be announced shortly afterwards.
"The cabinet will meet tomorrow to sign off on the 160-page document which charts how the state will reduce its outgoings," the Irish Times said, adding a separate plan for restructuring the bank sector was also expected to be finalized this weekend.
Sources have told Reuters that Ireland may need assistance of between 45 billion and 90 billion euros, depending on whether it needs help only for its banks or for public debt as well.
SYSTEMIC RISK
Markets calmed in recent days after it became clear Ireland was on track to receive aid, but remained jittery on Friday.
The euro briefly pushed above $1.3720, but fell back to $1.3660 in late European trading. The spreads of Irish 10-year bonds above German benchmarks drifted down toward 5.4 percentage points before pushing back up to 5.6 points, dragging Greek, Portuguese and Spanish debt alongside.
ECB policymaker Lorenzo Bini Smaghi told the weekly Die Welt am Sonntag that the costs of any bailout could increase if Dublin needs financial aid but delays in asking for it.
"This risk in fact grows with time -- we have seen this already with Greece. There is also danger that contagion spreads to other highly indebted euro zone countries," he said.
"If the financial markets see that Europe is having a hard time to resolve a problem quickly, they could seek out a new victim," he added.
Britain repeated its readiness to help because of its strong economic links with Ireland and Sweden said it could help too.
"There could be some bilateral help. We are waiting to hear more from the Irish government," Swedish Prime Minister Fredrik Reinfeldt told RTE.
"We feel that we are very close to Ireland and are always ready to listen and help if we can do so," he said.
Funds for Ireland are likely to come from a safety net fund set up after the EU bailed out Greece earlier this year.
Prime Minister Brian Cowen's razor-thin parliamentary majority could be cut even further if, as expected, his Fianna Fail party loses a seat in a special election next week.
Support for Fianna Fail has fallen to 17 percent, according to a Sunday Business Post/Red C poll, a result that would cost the party more than half its MPs if repeated in a general election.
Union leaders said the public was already angry over the government's austerity cuts and any further measures to be announced on Tuesday could prove a tipping point.
"The talk now is of the budget, and effectively destroying the social welfare system. I think there is going to be huge civil unrest as a result of that," TEEU union leader Eamon Devoy told Reuters.
Unions plan a November 27 protest march against austerity measures imposed to rescue the state's finances and one has called for a campaign of civil disobedience if the government fails to call an election.
(Additional reporting by Lorraine Turner in Dublin and Emmanuel Jarry in Lisbon; editing by Jon Boyle)
Source: www.reuters.com
LISBON/DUBLIN (Reuters) - French President Nicolas Sarkozy said on Saturday he expected Ireland to raise its corporate tax rate but added that an increase would not be a condition for any bailout.
International Monetary Fund and European Commission officials are in Dublin to discuss financial aid to help Ireland cope with its struggling banks, whose huge liabilities have sent Irish borrowing costs soaring.
The main concern for EU policymakers is that Ireland's problems will spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
Euro zone states want Ireland to raise its 12.5 percent corporate tax rate as part of any deal but Dublin argues the low rate is crucial to attracting foreign investment.
Sarkozy, speaking at a news conference in Lisbon on the sidelines of a NATO summit, said he expected Ireland to raise its corporate tax rate.
"It's obvious that when confronted with a situation like this there are two levers to use: spending and revenues," he said. "I cannot imagine that our Irish friends, in full sovereignty, (would not use) this because they have a greater margin for maneuver than others, their taxes being lower than others."
"In the conditions for activating the (bailout) mechanism, there are no fiscal demands," he added.
The Irish Times newspaper reported that Ireland's four-year plan to reduce its deficit would be published on Tuesday, before any international financial aid package was ready.
Last month, Ireland doubled to 15 billion euros ($21 billion) the sum it calculated was needed to bring its deficit under control by 2014. Finance Minister Brian Lenihan said this was designed to ensure Ireland would not need a bailout but it failed to calm jittery markets.
Ireland's central bank chief acknowledged this week the country needed a loan running into tens of billions of euros to shore up a banking sector that has grown dependent on ECB funds and seen an exodus of deposits over the past six months.
CABINET TO MEET
The Irish Times said the government -- deeply unpopular and hanging on to a tiny parliamentary majority -- had pushed forward the publication date for its four-year plan so it could be identified as a programme drawn up by the government rather than one driven by the European Union or the IMF.
The newspaper said the plan would be published on Tuesday, citing unnamed senior Irish officials. A government spokesman said only the plan would be published early next week.
An international aid package is expected to be announced shortly afterwards.
"The cabinet will meet tomorrow to sign off on the 160-page document which charts how the state will reduce its outgoings," the Irish Times said, adding a separate plan for restructuring the bank sector was also expected to be finalized this weekend.
Sources have told Reuters that Ireland may need assistance of between 45 billion and 90 billion euros, depending on whether it needs help only for its banks or for public debt as well.
SYSTEMIC RISK
Markets calmed in recent days after it became clear Ireland was on track to receive aid, but remained jittery on Friday.
The euro briefly pushed above $1.3720, but fell back to $1.3660 in late European trading. The spreads of Irish 10-year bonds above German benchmarks drifted down toward 5.4 percentage points before pushing back up to 5.6 points, dragging Greek, Portuguese and Spanish debt alongside.
ECB policymaker Lorenzo Bini Smaghi told the weekly Die Welt am Sonntag that the costs of any bailout could increase if Dublin needs financial aid but delays in asking for it.
"This risk in fact grows with time -- we have seen this already with Greece. There is also danger that contagion spreads to other highly indebted euro zone countries," he said.
"If the financial markets see that Europe is having a hard time to resolve a problem quickly, they could seek out a new victim," he added.
Britain repeated its readiness to help because of its strong economic links with Ireland and Sweden said it could help too.
"There could be some bilateral help. We are waiting to hear more from the Irish government," Swedish Prime Minister Fredrik Reinfeldt told RTE.
"We feel that we are very close to Ireland and are always ready to listen and help if we can do so," he said.
Funds for Ireland are likely to come from a safety net fund set up after the EU bailed out Greece earlier this year.
Prime Minister Brian Cowen's razor-thin parliamentary majority could be cut even further if, as expected, his Fianna Fail party loses a seat in a special election next week.
Support for Fianna Fail has fallen to 17 percent, according to a Sunday Business Post/Red C poll, a result that would cost the party more than half its MPs if repeated in a general election.
Union leaders said the public was already angry over the government's austerity cuts and any further measures to be announced on Tuesday could prove a tipping point.
"The talk now is of the budget, and effectively destroying the social welfare system. I think there is going to be huge civil unrest as a result of that," TEEU union leader Eamon Devoy told Reuters.
Unions plan a November 27 protest march against austerity measures imposed to rescue the state's finances and one has called for a campaign of civil disobedience if the government fails to call an election.
(Additional reporting by Lorraine Turner in Dublin and Emmanuel Jarry in Lisbon; editing by Jon Boyle)
Source: www.reuters.com
Thursday, November 18, 2010
Greece unveils austerity budget
The Greek government has unveiled an austerity budget that aims to cut its 2011 public deficit to 7.4% of the nation's annual economic output or GDP.
If achieved, this would mean a 5bn-euro ($6.8bn; £4.3bn) reduction on Greece's projected 9.4% deficit for 2010.
Under the budget plans, the government will cut health and defence spending, and increase the sales tax on most retail items from 11% to 14%.
Greece had to accept a 110bn-euro ($150bn; £93bn) rescue deal in May.
This sum - which is being given to the country in three stages - has come from the European Union and International Monetary Fund.
To get the money, Greece had to agree to enforce substantial spending cuts to reduce both its public deficit and overall government debt, which are among the largest in Europe.
The country's finance department also said that the Greek economy would contract by 4.2% this year and by a further 3% in 2011, higher than its previous estimate of a 2.6% slowdown next year.
The budget also reveals that the Greek government is to sell stakes in state-owned companies, and even four Airbus A340 planes that it owns.
The sale of organisations to be partly or fully privatised included rail operator Trainose, mining firm Larko, gas operator DEPA, and defence group Hellenic.
Cource: BBC
www.bbc.co.uk
If achieved, this would mean a 5bn-euro ($6.8bn; £4.3bn) reduction on Greece's projected 9.4% deficit for 2010.
Under the budget plans, the government will cut health and defence spending, and increase the sales tax on most retail items from 11% to 14%.
Greece had to accept a 110bn-euro ($150bn; £93bn) rescue deal in May.
This sum - which is being given to the country in three stages - has come from the European Union and International Monetary Fund.
To get the money, Greece had to agree to enforce substantial spending cuts to reduce both its public deficit and overall government debt, which are among the largest in Europe.
The country's finance department also said that the Greek economy would contract by 4.2% this year and by a further 3% in 2011, higher than its previous estimate of a 2.6% slowdown next year.
The budget also reveals that the Greek government is to sell stakes in state-owned companies, and even four Airbus A340 planes that it owns.
The sale of organisations to be partly or fully privatised included rail operator Trainose, mining firm Larko, gas operator DEPA, and defence group Hellenic.
Cource: BBC
www.bbc.co.uk
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