Euro Zone Debt Crisis

Euro Zone Debt Crisis

IT Thu, Dec 1

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  • 10:54
    Markets are in see-saw mode again today. Most European bourses are in positive territory after demand at a Spanish bond auction held up better than expected, easing some of the worst fears about the euro zone debt crisis. Spain managed to sell €3.75 billion worth of five-year bonds at an average yield of 5.5 per cent, compared with 4.8 per cent at a similar auction last month.

    Yesterday’s stock market rally - on the back of co-ordinated liquidity action by central banks - was brought to an abrupt halt earlier following a downbeat assessment of Europe’s economic outlook by ECB chief Mario Draghi. In an address to the European Parliament, Draghi said: “Downside risks to the economic outlook have increased”.

    Hello, and welcome to our live coverage of the euro zone debt crisis. Eoin Burke-Kennedy here, bringing you live updates. By the way, feel free to send us any remarks, comments or observations.
  • 11:20
    The European Commission has today announced an extension of its interim rules on government support for troubled banks because of tensions on sovereign debt markets and the funding conditions for banks.

    The EU's competition chief Joaquin Almunia said: "My intention had been to put an end to the crisis regime... this month. But since last summer, I was obliged to change my mind, given the stronger tensions in sovereign debt markets and the transmission of those tensions to interbank markets and to the funding conditions for banks".

    The interim rules were originally introduced during the credit crisis in 2008 for lenders that received a capital injection or transferred impaired assets to holding agencies or so-called "bad banks".
  • 11:26
    Bank of England governor Mervyn King has urged banks to brace themselves for a potential euro zone collapse. At the UK's Financial Policy Committee, the governor said: "This spiral is characteristic of a systemic crisis."
  • 11:48
    Weakening domestic demand and the threat of a European recession risk undermining Ireland's hopes of meeting its medium-term fiscal goal under an EU-IMF bailout, a Reuters poll indicates. The survey of nine economists polled by the news agency is for the deficit to fall to 3.2% of GDP compared to 2.9%, which is the Government's target.

    "In view of the degree of uncertainty about the outlook for the euro area, it's very difficult to be any way sure how the Irish economy will fare in 2012," said Austin Hughes, chief economist at KBC Bank Ireland.
  • 12:07
    ECB Mario Draghi said today the downside risks to the economic outlook have increased.
    ECB Mario Draghi said today the downside risks to the economic outlook have increased.
  • 12:12
    Germany's opposition to a common euro zone debt issuance is "non-negotiable", according to economy minister Philipp Roesler. He said the leaders of chancellor Angela Merkel's centre-right coalition were united in a flat rejection of euro bonds to help solve the debt crisis.

    "We are not prepared to buy into changes to the (EU) treaty in exchange for rules that other European countries want, for example euro bonds."
  • 12:42
    The markets are steady at the moment as we await next piece of information to tumble out of the clouds. It’s hard to believe that just a month ago European leaders seemed confident that an expansion of the euro zone’s bailout fund and agreement on Greek austerity measures would bring calm to the pre-Christmas markets.

    The crisis seems to be escalating all the time and suggestions that Germany may compromise on ECB orthodoxy in return for more fiscal cohesion is vague and unsubstantiated.

    Ahead of next week’s EU summit, chief financial officer of the European Bank for Reconstruction and Development, Manfred Schepers, told a Dutch newspaper today: "There are seven work days left to save Europe." Euro zone deadlines, however, appear to be "writ on water" these days.
  • 13:11
    Minister for Tourism Leo Varadkar's comments yesterday in which he said households would still have money "to take a holiday" next year and that things "won't be all bad" are fuelling a steady stream of public anger on Twitter and Facebook.  

    In the Dáil earlier, Sinn Féin’s Mary Lou McDonald said Varadkar’s remarks were brash and tantamount to telling the public “to cheer up and to take a vacation”.

    Remarking on Varadkar’s absence in the chamber, she quipped: “I don’t see him here. Perhaps he’s on a weekend break.” The Consumers’ Association also claimed Varadkar was living in a world of make-believe.
  • 13:32
    Athens again brough to standstill today as workers protest against fresh set of austerity measures
    Athens again brough to standstill today as workers protest against fresh set of austerity measures
  • 13:43
    The euro rose again against the dollar today following the better-than-expected demand at a Spanish debt auction. The euro was up 0.35% at $1.3485, close to yesterday’s one-week high of $1.3533. Spain managed to sell €3.75 billion worth of five-year bonds at an average yield of 5.5 per cent, compared with 4.8 per cent at a similar auction last month. France also found demand for its sale of €4.35 billion of debt in several maturities.
  • 14:16
    New US claims for unemployment benefits rose unexpectedly last week, drifting above 400,000 for the first time in just over a month and reinforcing the view that the battered labour market was healing only slowly.
  • 14:46
    An interesting measure of the level of stock market volatility we're seeing these days can be had from the Euro STOXX Volatility Index. The index has hovered around 40 since early October even though the cash market has added more than 6%. It has also held above 30 since the August sell-off, with three spikes above 50. 

    That level of volatility compares to an average of 25 between late 2010 and mid-2011, and is a direct result of the long-running sovereign debt crisis.

    "If you look at the history of these volatility indices, what seems to be unprecedented about this episode is its length," Ramin Nakisa, global cross-asset strategist at UBS, says. "Previously, there's been a shock and volatility has recovered over the course of, say, three months; but this time it doesn't seem to be subsiding at all."
  • 15:00
    "While the rising interest rates that euro zone governments are forced to pay is widely acknowledged as unsustainable, the fact that market demand was strong has for now, alleviated some concerns about government funding issues," says Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
  • 15:28
    Former British chancellor Norman Lamont has warned that if Germany kept pursuing a "minimalist" policy towards the euro through bailouts, there would be a recurring crisis every few months with countries requiring help.

    The cost of euro zone bailouts is becoming “astronomical and potentially disastrous”, Lamont told a House of Commons debate.
  • 15:39
    Poland has thrown its weight behind a German-led push for a change in the European Union's treaty to allow for greater fiscal integration which is likely to result in a two-speed euro zone. The country, which is outside the euro zone, has been increasingly vociferous on the need for Germany and ECB to take decisive action to stem the debt issue.

    Prime minister Donald Tusk today called for a bigger role for the European Central Bank in ending the sovereign debt crisis. "We prefer a change in the EU treaty over bilateral agreements clinched between euro zone members," Tusk told a news conference after speaking with Angela Merkel.
  • 15:55
    The International Monetary Fund board will consider approval of its next loan tranche to Greece on Monday next, an IMF spokesman has said. The spokesman said an IMF mission would travel to Greece on December 12th to 16th for further discussions with the Greek government.
  • 17:42
    French president Nicolas Sarkozy is on his feet and making his much anticipated speech. Defending the actions he had to take and how France is in a better place than Greece, Ireland, Portugal, Spain and Italy. He's dusting down his concept of "regulated capitalism" which he introduced to the debate two years ago.
  • 17:44
    The truth is the crisis is not over and the sovereign debt crisis is simply the private debt crisis infecting states says Sarkozy. The main cause of the crisis is the spread of globalisation since the end of the 1970s with no rules other than the freedom of trade.
  • 17:47
    So far Sarkozy very much talking about the historic routes of the euro crisis - the "flight to debt" as he's calling it
  • 17:53
    Sarkozy is basically saying France is not going to accept years of austerity to pay for other European nations debts. France will have to work its way out of the crisis if people are to maintain their lifestyle. But he warns people will have to work harder and for longer.
  • 17:56
    Faisal Islam, Channel 4 economics editor tweets "This feels like one of those droning Arab Spring leader speeches". So far we're inclined to agree.
  • 17:57
    France will only replace one out of every two public servants that retire, says Sarkozy
  • 18:10
    Retirement at 60 and the 35 hour working week were serious mistakes for France says Sarkozy
  • 18:12
    Ruadhán Mac Cormaic (@RuadhanIT), our man in France has tweeted: "All well-trodden domestic ground so far. Hitting every one of #Sarkozy's favourite themes, with his favourite phrases"
  • 18:13
    Europe is no longer a choice it is a need. The crisis has revealed weakenesses and we must overhaul Europe quickly. We need more solidarity and more discipline. That's the first discipline, says Sarkozy.
  • 18:15
    We need more politics - the second principle for overhauling Europe. We must draw lessons from the crisis; leaders must take joint responsibility. Within eurozone have to decide to go for qualified majority voting rather than being held back by a minority, says Sarkozy to widespread applause.
  • 18:17
    Sasrkozy now talking about "tax dumping" between member states, leading to unfair competition. Thinly veiled reference to Ireland there.
  • 18:18
    Europe can be swept aside by the crisis if it does not change, says the French president. The crisis could sweep away Europe - defending Europe means defending Europe because without it what is left.
  • 18:19
    The disappearance of the euro would make France's debts unmanageable. Withdrawl from Europe would double debts of France and impoverish the people. As president of France he can not let that happen
  • 18:20
    The crisis is one of credibility and confidence. We have to call for solidarity within the euro and fight against those who are speculating against it. It must be clear what we did for Greece (burn bondholders) was done in specific circumstances and will not happen again.
  • 18:22
    ECB is independent and it will remain so. Faced with the risk of deflation it will take the right action. The ECB will assume its responsibility as it has already shown. We need more fiscal discipline.
  • 18:23
    Calling for sanctions against euro zone countries who don't meet their commitments. Laws must be drawn up to achieve a fiscal balance. There cannot be a single currency without convergence of the economies. Otherwise the euro will be too strong for some countries and too weak for others
  • 18:24
    Convergence is the key word says Sarkozy. Europe has been disappointing in many ways - we haven't gone far enough quick enough in many ways. The Masstricht Treaty was weak in many ways.
  • 18:26
    France is advocating with Germany a new European treaty which will reinvent Europe with more discipline, solidarity and genuine fiscal governance. Europe must make its voice heard and express its very ancient concept of civilisation.
  • 18:27
    We must fight together not against each other says Sarkozy. Our way of life and culture must not disappear - that is what we are fighting for, the beautiful things that France has created over the years. We are not arrogant, just determined, he adds.
  • 18:27
    Vive La Republic, Vive La France and its stage left Sarkozy
  • 18:31
    And just as Sarkozy finishes outlining his vision for a more integrated but tightly controlled Europe, Reuters reports German Chancellor Angela Merkel will travel to Paris on Monday for talks on the euro zone crisis with the French president