Greece’s new bail-out helps, but should have gone further

WHEN Henry Paulson, America’s then treasury secretary, readied a plan to prop up Fannie Mae and Freddie Mac, two teetering housing agencies, in the summer of 2008, he spoke of having a “bazooka” in his pocket. In their response to the sovereign-debt crisis, Europe’s policymakers have tended to favour the peashooter. Their latest salvo in defence of Greece on July 21st produced some favourable initial reports, but the bang has faded. In a strange inversion of the crisis to date, the new bail-out plan seems to have helped the weaker peripherals and hurt the stronger ones.

Debt crisis puts $ on a tailspin

LONDON, July 29 (news agencies and on-line reports): The dollar fell to a four-month low against the yen and hovered near record lows versus the Swiss franc on Friday.

The euro also came under fresh pressure as investors sought safe-haven currencies on mounting sovereign debt problems.

Eurozone inflation unexpectedly slows in July to 2.5%

Eurozone inflation unexpectedly slowed in July to 2.5%, raising questions about when the European Central Bank (ECB) might raise interest rates again.

The preliminary estimate is down from 2.7% in June, according to the European Union statistics office Eurostat.

The July reading comes as a surprise after data earlier this week suggested inflation in Germany, Europe's largest economy, edged up to 2.4%.

Eurozone crisis fears continue as Italy forced to pay higher rates to borrow

The Italian government was forced to pay the highest borrowing costs for 11 years in a bond auction that underscored market fears that a new phase of the European debt crisis is set to be unleashed.

Italy successfully sold €2.7bn (£2.4bn) of 10-year bonds but only after yields had soared to 5.77pc – compared to 4.94pc at the last auction a month ago. Traders argued that last week's €159bn Greek bail-out was not enough to prevent contagion to the bigger European economies.

The Euro Crisis: Big Rescue, Big Doubts

This time is different. Really. That was the message from European leaders after the 11th debt-crisis summit in 17 months produced an additional €109 billion ($157 billion) in loans for deficit-bloated Greece, easier aid terms for Ireland and Portugal, and a retooled bailout fund to prevent markets from trashing Spain and Italy as well. The euro, as well as the distressed countries’ bonds, rallied.

Greece credit rating cut by S&P on 'likely default'

Ratings agency Standard & Poor's has cut Greece's credit rating, saying that eurozone plans to restructure the country's debts would constitute a "selective default".

Under the plans, Greece would be given longer to repay its debts and private investors would take a hit.

S&P said it had cut Greece's rating to CC from CCC.

UPDATE: Schaeuble Says Single Summit Can't Solve Debt Crisis

LONDON (Dow Jones)--The euro zone's debt crisis isn't over and discipline needs to be maintained to stop it spreading further, according to German Finance Minister Wolfgang Schaeuble.

In a letter to party comrades in the Bundestag, seen by Dow Jones Newswires, Schaeuble warned "it would be a mistake to think that the crisis of trust in the euro area can be solved by a single summit," although he argued that last week's decisions by heads of government were "an important step towards overcoming the Greek crisis and the preservation of financial stability."

German consumer confidence slips on euro debt crisis worries

BERLIN — A new survey finds that German consumer confidence is slipping amid unease about the potential impact of the eurozone debt crisis.

The GfK research group said Tuesday its forward-looking confidence indicator for August stands at 5.4 points. It is down from 5.5 in July, a figure that GfK revised down from its initial forecast of 5.7.

Greece aid package boosts stock markets

Shares have risen following the eurozone's agreement designed to resolve the Greek debt crisis.

UK and French markets gained more than 1% in morning trading, before slipping slightly, with the FTSE 100 index ending up 0.6% and the Cac 0.7% higher.

Eurozone leaders agreed a new package worth 109bn euros ($155bn, £96.3bn).

Players in a Greek Drama

Not only does he have the power to effectively put a “sell” on Uncle Sam, but on Friday he roiled global markets after he said the Greek rescue package would constitute a limited default on the country’s debt.

The analyst, who is based in London, oversees the 30-person government bonds team inside Fitch Ratings, which could soon downgrade the debt of the United States government from its historical, gold-plated, triple-A rating if politicians in Washington cannot agree to raise the debt limit.

Gold hits record high as euro crisis worsens

(Reuters) - Gold prices hit a record $1,578.50 an ounce on Wednesday as concerns over the euro zone debt crisis deepened, and after minutes to the Federal Reserve's June meeting suggested some members were pondering the possible need for additional easing.

Spot gold was bid at $1,572.99 an ounce at 1203 GMT against $1,565.25 late in New York on Tuesday. U.S. gold futures for August delivery were up $11.30 an ounce at $1,573.60, also off a record $1,579.70.

Gold is set for an eighth consecutive day of gains, something it has not achieved since mid-October 2006, when it rose for nine days in a row.

Yuan Weakens Most in July on Growth Concern, Euro Debt Crisis

China’s yuan dropped the most this month as concern growth in Asia’s largest economy is slowing and Europe’s debt crisis is worsening damped investor sentiment.

Data tomorrow will show the Chinese economy grew 9.3 percent last quarter, the least in almost two years, according to a Bloomberg survey. Twelve-month yuan forwards dropped by the most in four weeks after European finance ministers declined to rule out a temporary default on Greek bonds yesterday, struggling to contain the region’s debt crisis as bond yields in Italy and Spain surged. Annual Inflation reached a three-year high of 6.4 percent in June, a July 9 report showed.

Eurozone ministers meet to discuss debt concerns

Eurozone finance ministers are due to meet to discuss the continuing debt woes of some member states, with fears growing over Italy's situation.

The talks come amid growing concerns that Italy may be the next eurozone country to require a European Union led bail-out.

ECB raises eurozone interest rates to 1.5%

The European Central Bank (ECB) has raised interest rates to 1.5% from 1.25% in an attempt to cool inflation in the 17-nation eurozone.

ECB president Jean-Claude Trichet said that inflation, now 2.7%, was likely to remain "clearly" above the ECB's 2% target over the coming months.

German Exports Increase More Than Forecast as Nation Weathers Euro Crisis

German exports increased more than economists forecast in May, adding to signs the sovereign debt crisis isn’t harming Europe’s largest economy.

Exports, adjusted for work days and seasonal changes, increased 4.3 percent from April, when they fell 5.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 1.5 percent, according to the median of 12 estimates in a Bloomberg News survey. Imports rose 3.7 percent from the previous month.

Iceland's Euro Bid Hinges On Greek Crisis Outcome, Central Banker Says

AIX-EN-PROVENCE, France -(Dow Jones)- Policymakers in Reykjavik are closely watching the unfolding of the Greek debt crisis, for its outcome will be a key element of Iceland's decision to join the euro, the head of the country's central bank, Sedlabanki said, as he urged the currency bloc to improve its economic governance.

"The outcome of the Greek crisis will affect the attractiveness of being a member of the euro area," Mar Gudmundsson told Dow Jones Newswires in an interview here late Friday. "A monetary union needs much more economic integration, some elements of common economic and fiscal policy and a common financial stability framework. One needs to match an economic union with the monetary union for it to work," he added.

EURO GOVT-Bunds dip before ECB, Italy yields reflect crisis

LONDON , July 7 (Reuters) - German government bond yields were steady on Thursday, supported by fears the euro zone debt crisis was intensifying, with a solid Spanish bond sale doing little to relieve tension.

Two-year German yields were off lows hit in the previous session, with strategists saying a move to close to 1.54 percent looked overdone given the European Central Bank is poised to raise interest rates to 1.5 percent later in the day.

Euro Zone Status Quo 'Untenable': Economist

The current situation in the euro zone is "untenable" and policymakers will have to either pursue greater European economic integration or see countries exit the euro, George Magnus, Senior Economic Advisor, UBS told CNBC Tuesday.

"Every crisis takes us closer to the point where an existential decision has to be taken," Magnus said. "This sequential crisis that the euro zone has been through since the beginning of last year must be resolved."

Political incentives and the euro crisis

Several prominent economists have pointed out that some of the troubled countries in the Eurozone periphery may need to restructure their sovereign debts as soon as possible. Although debt restructuring will probably not spare these countries from a period of economic austerity and stagnation, it will at least provide some hope for the medium-term future. After some of the burden of the debt has been lifted, these countries will be able to channel more resources to economic recovery and will become more attractive destinations for investors. And, in any case, the sovereign debt of some of these countries, especially Greece, has reached such proportions that it is hard to see how it can be repaid without a significant restructuring.

Greek, Spanish, Italian Bonds Gain Amid Debt-Crisis Optimism

July 1 (Bloomberg) -- Greek two-year notes led gains by securities from the euro region's most indebted countries as speculation that the Mediterranean nation will default subsided, boosting demand for higher-yielding assets.

German 10-year government bonds snapped four days of declines as data showed growth in euro-region manufacturing slowed for a third month in June. Spanish bonds gained for a fourth day after Greece's lawmakers approved a budget-cutting package and banks lined up behind debt-rollover plans. Ten-year German yields have jumped 18 basis points this week, the biggest five-day increase in seven months.

Greece's economy to slump before rebounding on economic reforms: Finance minister

ATHENS - Greece's economy will slump further before starting to expand again next year thanks to fast injections of EU funds and reforms to spur growth, new Finance Minister Evangelos Venizelos told Reuters on Friday.

In his first interview to international media since being appointed last month, Venizelos pledged to accelerate efforts to sell off state companies and crack down on tax evasion, saying violent anti-austerity protests masked a high level of political consensus on the need to reform and keep Greece in the euro zone.

Contagion biggest threat to insurers in Greek crisis

(Reuters) - Greece's debt crisis has stirred fears of a wider euro zone sovereign credit meltdown that would be damaging for insurers, although the sector should be able to easily withstand any losses on its Greek debt, analysts said.

Most European insurers' holdings of Greek government bonds are small relative to their overall portfolios, enabling them to absorb any losses in the event of a default or restructuring, according to ratings agencies and equity analysts.