Euro crisis requires market solution

Ultimately the euro crisis remains a pressure cooker building up steam despite the protestations of the currency system being saved by multiple political interventions. Yet after a half dozen supranational attempts to instil order within the sovereign nations of the EU, the markets are clearly not listening. Instead a market solution is now needed.

Many commentators have been suggesting a eurobond as the answer to Europe’s problems. However, given that Germany has so far rejected this option, the alternative needs to be a simple programme that rewards prudent debt levels, while providing a space for errant sovereign states to reorganise their finances.

Euro rate rise less likely after inflation and job data

Eurozone interest rates are likely to stay on hold following the release of official inflation data from Eurostat.

Inflation in the 17 countries that use the euro was 2.5% year on year in August, unchanged from July's figure.

While it is still above the European Central Bank's target of just under 2%, it means that prices are rising more slowly than earlier in the year.

Portugal plans biggest spending cuts for 50 years

The Portuguese government is planning the country's biggest spending cuts in 50 years, a move its finance minister described as "unprecedented".

Vitor Gaspar said the centre-right Social Democratic administration would reduce public spending from the current 44.2% of Portugal's annual economic output or GDP to 43.5% by 2015.

Euro crisis may be over in 2-3 years

VIENNA (Reuters) - The euro zone can conquer its crisis in the next few years if countries get their financial houses in order, the head of the bloc's rescue fund was quoted saying in Der Spiegel magazine, scolding Germans for being too pessimistic about the region's outlook.

"There is good reason to hope that the crisis is over in two to three years' time," European Financial Stability Facility (EFSF) chief Klaus Regling said, according to a preview of the weekly German magazine.

The Eurozone Crisis Then and Now

The expansion of the European financial crisis and its deepening into a political crisis has followed a clear causal chain produced by a series of missed opportunities.

The problem began in early 2009, as a knock-on effect from the 2008 global financial crisis, which had already claimed Iceland as a victim. Iceland was not an institutional issue for the EU, but in 2009 Eastern members of the EU not using the euro began to have balance-of-payments problems. They suffered effective devaluations of their national currencies and sought help from Brussels to resolve their mounting budget deficits. In response, the EU doubled the funds in an existing facility to address balance-of-payments problems.

ECB’s Trichet: Advanced Economies’ Crisis a ‘Formidable Challenge

By Luca Di Leo

The U.S., Europe and other advanced economies face new formidable challenges in dealing with high debt and low growth, European Central Bank President Jean-Claude Trichet said Saturday.

Speaking at the end of a two-day meeting of top central bankers, Mr. Trichet said Europe was particularly challenged by its governance problems. Responding to questions by policy makers such as World Bank President Robert Zoellick worried by Europe’s ongoing debt crisis, he cautioned that overhauling the continent’s institutions is a “complex process… we’re observing history in the making.”

Private investors say biggest risk is the euro

By Alice Ross

The strength of the euro is now the top concern of private investors, according to a survey, surpassing worries over inflation, recession and unemployment.

A crisis in the euro was cited as the economic outcome most feared by 26 per cent of 1,767 people surveyed by Dianomi, the financial marketing group. Just 9 per cent cited a euro crisis as their main concern when the survey was last carried out in January.

Euro-crisis continues to weigh on City

By Peter Ranscombe

FEARS over Germany's credit rating dragged down shares across Europe yesterday, wiping out early rises in London as worries over the European debt crisis began to re-emerge.

All three of the major credit ratings agencies denied rumours of a possible downgrade of Europe's powerhouse economy but that didn't stop Germany's Dax index losing 4 per cent in just 15 minutes.

European Parliament set to get tough on debt crisis

BRUSSELS: The European Parliament will press top officials face to face next week for firmer action to tackle the region's debt crisis, with common bonds and a stronger euro zone rescue fund likely to anchor the debate.

European Central Bank President Jean-Claude Trichet will be questioned on Aug. 29 alongside Eurogroup Chairman Jean-Claude Juncker and Olli Rehn, the European commissioner for economic and monetary affairs, in an extraordinary session of parliament's economic and monetary affairs committee.

Estonian Growth to Slow Due to Euro-Debt Crisis, Ligi Says

Estonia will reduce its growth forecast for next year due to the euro-area’s sovereign-debt crisis, Finance Minister Juergen Ligi said.

Ligi, speaking at a news conference in Tallinn today, didn’t elaborate. The Finance Ministry is due to publish its updated forecast in the middle of September, Katrin Reimann, a ministry spokeswoman, said in a phone interview today.

What Italy tells us about Europe's debt crisis

So we all know Italy is a mess. Its government debt to GDP ratio of 127% in 2010 is the third worst in the OECD (after Japan and Greece). Economic growth is practically nonexistent, with growth surpassing 2% only once since 2001. So is it any surprise that Italy has been tarred as one of the PIIGS and fallen into a debt crisis?

Actually, it is. Yes, Italy has its economic problems, but its government has not been fiscally irresponsible, with a much more conservative record than most other countries in the developed world. In other words, Italy has been gripped by Europe's debt crisis even though it really doesn't deserve to be. That scary fact tells us a lot about where Europe's debt crisis may be headed.

France's Sarkozy to discuss crisis with China's Hu

President Nicolas Sarkozy will seek support from Chinese President Hu Jintao on Thursday for Europe's handling of the euro zone debt crisis, amid signs of growing concern in Beijing.

Chinese Vice Foreign Minister Fu Ying warned on Tuesday that the euro zone could collapse if it did not pull together, just a day after China's leading official newspaper likened the bloc's debt crisis to the Black Death pandemic.

Does Merkel Need a 'Lehman Crisis' to Save Euro?

In 2010 former US Treasury Secretary Hank Paulson admitted that if had not allowed Lehman Brothers to fail, he would have not been able to win approval for the Troubled Asset Relief Plan (TARP) -- the bailout of the country's banks -- from Congress.

“We didn't have TARP without Lehman Brothers," Paulson said.

Could Europe be on the cusp of a Lehman moment?

The euro zone debt crisis has now spread from the sovereigns – after the ECB came in and purchased Italian and Spanish debt – to the banking sector. Although the EU authorities put in place a short-selling ban, which has another week to run, the banking sector is back at the pre-ban levels or in some cases even lower.

Europe’s banks are by and large less capitalised than their U.S. peers. They are also exposed to Europe’s sovereign debt and European loan books. Even if a member state manages to avoid a default, growth is now slowing and we could be in line for another recession that would most likely increase bad debts and further erode banks’ profits.

Greek Crisis Now Worse, Not Better: Analyst

On July 21, EU leaders agreed to a second bailout for Greece, one that was supposed to draw a line under the euro zone debt crisis and give the new government in Athens a chance come to grips with the huge debts it inherited when it was elected.

One month later, and the situation appears to be getting worse rather than better, according to Simon Derrick, the head of currency research at Bank of New York Mellon.

Franco-German call for 'true euro economic governance'

The French and German leaders have called for "true economic governance" for the eurozone in response to the euro debt crisis.

Speaking at a joint news conference, German Chancellor Angela Merkel and French President Nicolas Sarkozy urged much closer economic and fiscal policy in the eurozone.

Merkel and Sarkozy rule out talks on eurobonds

German Chancellor Angela Merkel and French President Nicolas Sarkozy will not discuss the controversial question of eurobonds when they meet on Tuesday to discuss the eurozone crisis, spokesmen for both governments said on Monday.

"Eurobonds will play no role in the talks," government spokesman Steffen Seibert said.

Crisis in euro zone could affect finances

GERRY MORIARTY, Northern Editor

NORTHERN IRELAND: THE EURO zone crisis and the financial pressure on the US economy could have an impact on the North’s public finances, Minister for Finance Sammy Wilson has warned.

The DUP minister issued his warning after an emergency meeting with industry, business and trade union representatives at Stormont yesterday to discuss the convulsions in the global economy.

George Osborne to make statement to MPs on economy

Chancellor George Osborne is to make a statement to MPs on Thursday about the economic situation.

Mr Osborne is taking advantage of the rare summer recall of Parliament, to outline the UK's view on the economy and to answer questions from MPs.

There have been heavy falls in stock markets over recent weeks and fears over some euro members' economies.

Yen, Franc Rise as U.S. Downgrade, Euro Crisis Spur Safety Bid

(Bloomberg) -- The Japanese yen and the Swiss franc strengthened as Standard & Poor's downgrade of the U.S., coupled with a deepening euro-region sovereign debt crisis, lifted demand for the safest assets.

The dollar dropped to a record low against the Swiss franc and fell for a second day versus the yen after S&P lowered the U.S. credit rating one level on Aug. 5. The yen gained versus all but one of 16 major peers as Asian shares slid for a fifth day and European equities dropped for a seventh. Gold jumped to an all-time high, rising to more than $1,700 an ounce. The euro advanced after the European Central Bank started buying Italian and Spanish bonds to curb the region's debt crisis.

Bank of Spain urges euro crisis action, warns on debt

(Reuters) - Spain's central bank urged euro zone leaders to act decisively over new crisis-fighting measures, warning that debt market turmoil risked choking off the country's economic recovery, which slowed in the second quarter.

With yields on Spanish 10-year bonds continuing to trade close to euro era highs at well above 6 percent on Friday amid a broad market selloff prompted by global growth fears, the bank said sovereign debt market tensions were the main risk to the country's outlook.

Europe's money markets freeze as crisis escalates in Italy and Spain

The European money markets have begun to seize up as pressure mounts on the Italian and Spanish banking systems, tracking the pattern seen during the build-up towards the financial crisis in 2008.

The three-month euribor/OIS spread, the fear gauge of credit markets, reached the highest level in two years today, jumping 7 basis points to 40 in wild trading.