Euro Zone Debt Crisis

Euro Zone Debt Crisis

IT Mon, Nov 28
 

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  • 11:07
    Another day and another week in the euro zone's long-running debt crisis. If evidence was needed of the new financial world we reside in then perhaps one might look no further than the markets.  A stark Moody's warning for euro zone government bonds and an OECD report predicting the global recovery is petering out was met with a positive surge forward this morning.

    Hello, and welcome to our live coverage of the euro zone debt crisis. Eoin Burke-Kennedy here, bringing you live updates on what promises to be another tumultuous week. By the way, feel free to send us any remarks, comments or observations.
  • 11:19
    First to the OECD, the Paris-based organisation, in its twice-yearly outlook, forecasts world growth would slow to 3.4 per cent in 2012 from 3.8 per cent this year. That marks a sharp fall from its previous outlook in May, when it estimated the world economy would grow 4.2 per cent this year and 4.6 per cent in 2012.

    It revised its outlook for the euro zone for next year to only 0.2 per cent, slashing its forecast from 2.0 per cent in May. The OECD says many key questions about the euro zone's response to the debt crisis remain unresolved.
  • 11:21
    Earlier, Moody’s issued a warning for all euro zone government bonds, saying the euro is approaching a junction, leading to either closer integration or greater fragmentation.

    The likelihood of even more negative scenarios has arisen in recent weeks, Moody's noted, reflecting political uncertainties in Greece and Italy and a worsening of the region's economic outlook, among other factors.

    I should note that its central scenario remains that the euro area will be preserved without further widespread defaults
  • 11:30
    The CSO has just released its provisional retail sales figures for October. They show the volume of sales inched up by 0.1% last month. However, consumer spending in advance of next month’s Budget, which will see a 2% hike in VAT, remains subdued, to say the least. The data show sales were down 3.8% compared with October 2010.
  • 11:51
    Ahead of this week’s Ecofin meeting, the focus of the continent’s debt crisis is again centred on Italy and the new government’s race to get an austerity package in place.

    Both the IMF and the Italian authorities today denied rumours that a €600 billion bailout package was being readied behind the scenes. Italy has seen its borrowing costs on its debt rise steeply in recent weeks. Yields on its benchmark 10-year bonds were today still hovering just over the 7% mark.

    However, stock markets today rose from last week's 7-week low on the back of an expectation that European leaders will unveil fresh measures to tackle the region's growing debt crisis. Around Europe, UK's FTSE 100 index was up 1.97%, Germany's DAX index up 3.1%, and France's CAC 40 up 3.5%.
  • 11:54
    A trader reacts to market conditions at IG Index in the City of London
    A trader reacts to market conditions at IG Index in the City of London
  • 12:04
    Belgium’s borrowing costs have jumped significantly this morning. Despite successfully selling up to €2 billion of debt at auction this morning, the country saw interest rates on its benchmark 10-year bonds rise to 5.67%. The last time the country went to the markets the going rate was 4.37%. Standard & Poor's downgraded Belgium's credit rating on Friday.
  • 12:18
    Here's a scary one. ICAP, the world's top broker for foreign exchange and government bonds, has tested its trading systems to ensure they can handle the collapse of the euro zone and the re-emergence of national currencies.

    It said today it has been testing EBS, the world's largest foreign exchange platform, to ensure it could handle trading the Greek drachma in response to growing fears over a euro zone disintegration.

    A colleague in here says he’s started collecting German euro coins.
  • 12:35
    Chairman of euro zone finance ministers Jean-Claude Juncker has strongly advised against bypassing the EU's treaty to secure deeper fiscal integration. "I don't think we would be best advised to look for instruments outside the treaty," he said today.

    His comments come on back of reports that German and French civil servants are exploring ways of increasing fiscal union outside the EU's Lisbon treaty that could involve a core of around 8-10 euro zone countries.
  • 12:36
    p barrett On the basis of the old adage, that if you owe a bank €1k you have a problem if you owe €1m they have a problem, are "the markets" not creating a problem for themselves by pushing up the interest rates on It and Es bonds. If these countries are forced into default is it not "the markets" that will lose?
  • 13:08
    Greece has so far only raised less 4% of its targeted €50 billion in asset sales, according to the head of its privatisations agency. Athens has agreed to sell gas company Depa and 35 state buildings by the first quarter of 2012 as part of its bailout deal. However, Costas Mitropoulos, head of the Hellenic Republic Asset Development Fund admitted today the country’s divestment plan had fallen behind target.
  • 13:26
    There’s a confusing array of rumour and counter rumour swirling around at the moment. Some commentators are putting today’s market rally down to a technical bounce on the back of a prolonged downward slide.

    There are also rumours that Italy is about to get €600 billion bailout from the IMF (denied by officialdom). A number of pundits on Twitter suggest euro zone leaders are preparing some sort of a five-point plan to rescue Italy and the euro.
  • 13:36
    Today's market rally has also seen the euro rise 1% to $1.3367, having earlier hit a short-term high of $1.3399. "It has become relatively commonplace in recent months for the euro to do well in the days leading up to an important meeting on the hope that something tangible will emerge," says Michael Derks, currency strategist at FXPro.
  • 13:54
    There is a lot of talk about how the euro would break up if it comes to that and just what sequence of events it might entail and indeed what the practical implications would be for not just for member states but for the average man or woman on the street.  Economist Gavyn Davies has good piece on the topic in the FT. http://tinyurl.com/cb8gfku
  • 15:13
    Leo Regan In Gavyn Davies diagram of outcomes, the only one in which the euro survives without the periphery depends upon a series of contingencies, each of which seems less likely to occur by the minute, including ECB and EFSF alterations and fiscal union measures, outside of treaty changes. Not to mention successful fiscal measures in eurozone countries now under market stress for bonds. This is all highly problematic. The question is when not if there is a collapse. What is the Irish government doing to prepare for the eventuality?
  • 15:13
    Bob I’ve heard rumors that the Irish Central Bank are printing punts, do you think there is any truth to this?
  • 15:13
    Zap Would you recommend one to buy German bonds for secure capital at present
  • 15:22
    It’s time for little stroll around the markets, here’s a snapshot. Dow Jones  11,534.40 +302.62 up 2.69%, FTSE 100 5,311.16 +146.51 up 2.84%, Dax 5,739.30 +246.43 up 4.49%, Cac 40 2999.12 +142.15 up 4.98%. The Dublin Iseq index of shares was 2,598.14 up 76.17 points

    Commentators are divided on whether the rally reflects genuine optimism that euro zone leaders are about to unveil a fresh solutions to help resolve the region's debt crisis or whether technical market factors are behind it.
  • 15:32
    Ecofin ministers meet in Brussels tomorrow where they’re expected to announce further details of arrangements for scaling up the European Financial Stability Facility rescue fund to help prevent contagion in bond markets, and release a vital aid lifeline for Greece.

    US president Barack Obama is also expected to press European Union officials to reach a solution to the crisis at a meeting in Washington tonight.
  • 15:35
    Despite the dark cloud hanging over the euro zone, consumer sentiment in the continent’s largest economy rose for the second month in a row. Germany’s the GfK index bucked forecasts for a fall, rising to 5.6 from a reading of 5.4 in November.
  • 15:52
    Irish Life & Permanent has said last week's failed German bond auction and the increase in French bond yields prompted the lead bidder for its life assurance unit to pull out of the process. "The pressure in the euro zone last week caused the bidder to reconsider investing in the euro zone," the company says.

    Canada Life, part of Great West Lifeco, the second largest insurance company in Canada, was the leading contender to take over Irish Life, according to sources familiar with the deal. "Agreement had been reached on the price and the contractual items by the middle of last week and plan was to make an announcement in the week commencing December 5th," IL&P says.
  • 15:52
    Sunshine Hi Eoin, I enjoy your regular updates - thank you. I've also heard that they've been printing the punt for the last three months or so, Bob and am inclined to believe it. Living in Austria, I know that many Germans and Austrians are and have been sending their euro north to be converted into Norwegian Kroner. Interesting times for sure.
  • 16:24
    And now some relatively good news.....Reuters report new U.S. single-family home sales rose in October and the supply of homes on the market fell to its lowest level since April of last year, showing some healing in the battered housing sector. The Commerce Department on Monday said that sales edged up 1.3 percent to a seasonally adjusted 307,000-unit annual rate, which was the fastest pace in five months yet still below analysts' expectations.
  • 17:08
    Signs of life in the US housing market seem to have helped the Euro off its seven week low even if the rumours of an IMF funding line for Italy have turned out to be just that: rumours.

    The single currency (for the time being) looks like closing in Europe at around $1.334, up 0.8 per cent on the day.
  • 18:23
    The Dublin market also closed day in positive territory with the overall Index closing up more than 3 per cent higher as Irish stocks rode the rising tide.

    But tomorrow is another day in Euroland and all eyes will be on the emergency meeting of the Eurogroup in Brussels - thier 8th this year - which is the first of a series of set pieces leading to the full EU leader's summit on December 9th.

    Anyone hoping for a break through at this stage will most likely be dissapointed. But if you are looking for a level headed view of how things may pan out read Donal O'Mahony of Davy's latest note. http://www.davy.ie/content/pubarticles/supplydemandcurve201101128.pdf


    Thats it from us for this evening. Suspect we will be back live blogging tomorrow.