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Eurozone update
The situation in the Eurozone appears to be worsening day by day. The scenario is
stretching the Eurozone’s leaders and institutions to the farthest limits. Despite
various proposals, dialogues and rounds of meetings, EU leaders are struggling to
find a direction to improve the dire state of the countries, namely Greece, Spain
and Italy. The episode has touched new depths as it ousted two prime ministers in
three days. In case of Greece, the deeply unpopular austerity measures are set to
kick-off, as Greece is likely to go ahead with Euro130bn bailout package in order
to avert default. All in all, the crisis has undoubtedly invaded the once considered
muscular pillars of the global economy.
Concerns loom large; Greek Central Bank warns about the possible Eurozone
exit
In a harsh warning, Greece's Central Bank cited a possibility of Greece’s
unmanageable exit from the Eurozone. Stemmed from the fact that the country is
in the fifth-year of recession, the economy is projected to shrink by ~5% this year.
The long continuing debt crisis in Greece has flagged concerns about its
sustainability in the Eurozone. According to experts, exit from the Eurozone would
be disastrous, as it will lead to a disorderly financial situation and severely impact
foreign banks having exposure to the nation. In addition, this could derail the
already slowing global economic recovery.
Bonds lose luster
Spain sold three-month bills at an average yield of 5.11%, which was more than
4.63% paid by Greece (for 13-week bills sold on November 15 and 4.895% paid
by Portugal for three-month bills on November 16). German bonds also saw one
of the poorest debt sale since the launch of single currency, as Bundesbank was
forced to retain almost half of the targeted sale of EUR6bn new 10-year note due
to a shortage of bids by investors. The new bonds, which promised to pay out a 2%
interest rate (lowest ever), were sold at an average yield of 1.98%.
France pushed hard on ECB intervention – Rift begins with Germany
European Central Bank (ECB) is viewed as a lender of the last resort and is pressed
by France to expedite efforts by exercising its exceptional powers to buy unlimited
assets, including sovereign bonds. France fears that if no quick action is taken, the
Eurozone will be forced into a vicious cycle where austerity policy clearly arrests the
growth of the economy. Hence, France wants ECB to act promptly on its current
special measures program under which it can buy bonds of weaker Eurozone
nations and restore economic stability.
However, this move is strictly opposed by Germany as it feels that ECB lacks the
authority to carry on a major bond purchase operation. ECB’s most conservative
members also offered support to Germany’s view, but ECB’s president, Jean-
Claude Trichet, insisted that such measures were necessary to ensure stability in
the financial system. Experts believe that ECB may end up with no choice but to
become the lender of last resort.
Fitch comes hard on Portugal; downgrades to junk
Fitch has cut Portugal’s credit rating by one notch to BB+, implying ‘junk’ or ‘noninvestment’
grade. Fitch reasoned the country’s large fiscal imbalances, high
indebtedness and bleak macroeconomic outlook for the downgrade action. While
the Eurozone must have seen this coming, it will further add to negative cheers for
the region.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Eurozone update
The situation in the Eurozone appears to be worsening day by day. The scenario is
stretching the Eurozone’s leaders and institutions to the farthest limits. Despite
various proposals, dialogues and rounds of meetings, EU leaders are struggling to
find a direction to improve the dire state of the countries, namely Greece, Spain
and Italy. The episode has touched new depths as it ousted two prime ministers in
three days. In case of Greece, the deeply unpopular austerity measures are set to
kick-off, as Greece is likely to go ahead with Euro130bn bailout package in order
to avert default. All in all, the crisis has undoubtedly invaded the once considered
muscular pillars of the global economy.
Concerns loom large; Greek Central Bank warns about the possible Eurozone
exit
In a harsh warning, Greece's Central Bank cited a possibility of Greece’s
unmanageable exit from the Eurozone. Stemmed from the fact that the country is
in the fifth-year of recession, the economy is projected to shrink by ~5% this year.
The long continuing debt crisis in Greece has flagged concerns about its
sustainability in the Eurozone. According to experts, exit from the Eurozone would
be disastrous, as it will lead to a disorderly financial situation and severely impact
foreign banks having exposure to the nation. In addition, this could derail the
already slowing global economic recovery.
Bonds lose luster
Spain sold three-month bills at an average yield of 5.11%, which was more than
4.63% paid by Greece (for 13-week bills sold on November 15 and 4.895% paid
by Portugal for three-month bills on November 16). German bonds also saw one
of the poorest debt sale since the launch of single currency, as Bundesbank was
forced to retain almost half of the targeted sale of EUR6bn new 10-year note due
to a shortage of bids by investors. The new bonds, which promised to pay out a 2%
interest rate (lowest ever), were sold at an average yield of 1.98%.
France pushed hard on ECB intervention – Rift begins with Germany
European Central Bank (ECB) is viewed as a lender of the last resort and is pressed
by France to expedite efforts by exercising its exceptional powers to buy unlimited
assets, including sovereign bonds. France fears that if no quick action is taken, the
Eurozone will be forced into a vicious cycle where austerity policy clearly arrests the
growth of the economy. Hence, France wants ECB to act promptly on its current
special measures program under which it can buy bonds of weaker Eurozone
nations and restore economic stability.
However, this move is strictly opposed by Germany as it feels that ECB lacks the
authority to carry on a major bond purchase operation. ECB’s most conservative
members also offered support to Germany’s view, but ECB’s president, Jean-
Claude Trichet, insisted that such measures were necessary to ensure stability in
the financial system. Experts believe that ECB may end up with no choice but to
become the lender of last resort.
Fitch comes hard on Portugal; downgrades to junk
Fitch has cut Portugal’s credit rating by one notch to BB+, implying ‘junk’ or ‘noninvestment’
grade. Fitch reasoned the country’s large fiscal imbalances, high
indebtedness and bleak macroeconomic outlook for the downgrade action. While
the Eurozone must have seen this coming, it will further add to negative cheers for
the region.
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