January - June 2010

Merkel and Sarkozy Want EU to Ban High-Risk Trading
9 June 2010 - BBC - Oana Lungescu
Both leaders have urged the EU Commission to impose a ban on the practice known as 'short selling.' Short-sellers usually borrow shares, sell them, then buy them back when the stock falls. They are calling for the Commission to fast track work on financial reform and to approve the implimentation of an EU-wide ban of 'naked short selling' by July. 'Naked short selling' is when a trader sells shares before actually owning them.
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Bernanke Says Europe Woes Impact on US 'Modest'
9 June 2010 - BBC
Bernanke, chairman of the Federal Reserve, has said today that Europe's debt crisis will have only a modest impact on the US' economic recovery. He continued by saying he was confident that the US would avoid a double dip recession. While acknowledging the debt crisis might have an effect on exports, the US would benefit from lower oil prices and nervous investors looking for a stable market. (Read More)


EU Finance Ministers Support Tougher Scrutiny Rules
8 June 2010 - BBC
EU finance ministers have moved closer to agreeing to allow other governments to study their annual budgets before they are seen by national parliaments. The move is strongly opposed by the UK, though an agreement has been negotiated. To protect against market fears of default, the eurozone has created the "Special Purpose Vehicle," a fund with 440bn euros accessible for cheap loans if needed.  In addition to the SPV, the European Commission is making 60bn euros available "to cover urgent financial needs, were it to arise", while the International Monetary Fund will provide another 250bn euros. The two-day meeting also approved Estonia's adoption of the euro starting in January 2011.
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Germany Sets EU Example with 80bn Euro Austerity Package
8 June 2010 - EU Observer - Valentina Pop
Angela Merkel announced on Monday (June 7) spending cuts of up to 80 bn euros over the next four years. The cuts proposed by Ms Merkel are based on a constitutional clause capping the country's deficit at 0.35 percent of GDP by 2016, a mechanism she would like to see replicated in all euro-countries. Several EU countries have announced similar austerity programmes, with Spain agreeing deep cuts last week and Greece having agreed to far-reaching reforms earlier this year when it signed up to an EU-IMF rescue package.
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U.S. Chides Europe's Crisis Response
27 May 2010 – The Wall Street Journal – Bob Davis & Ian Talley
U.S. Treasury Secretary Timothy Geithner stated that, "What Europe should do is implement the program they laid out," furthermore he added that, "The basic lesson of financial crises is that you have to come in and act quickly and with force." Christina Romer, Chairman of the White House Council of Economic Advisors and head of a separate U.S. delegation to a meeting at the Organization for Economic Cooperation and Development in Paris, stated that she, too, would warn European and other countries against pulling out of their stimulus plans too quickly. "There's a certain amount of rush for the exits on fiscal policy."
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Spanish Parliament Approves Budget Cuts 
27 May 2010 – The Wall Street Journal – Jonathan House
The Spanish government won approval Thursday for €15 billion ($18.29 billion) in additional budget cuts this year and next. The government said the new budget measures will allow it to cut its deficit to 9.3% of GDP this year and to 6.5% in 2011. Concerns over Spanish creditworthiness were heightened when the country's central bank moved Saturday to take over Roman Catholic Church-controlled savings bank CajaSur, in a big step forward in its efforts to clean up the country's ailing mutually owned banks. The cleanup of the savings banks is one of Spain's main challenges, on top of 20% unemployment and a widening budget deficit.
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EU Seeks Bank Tax for a Failure Fund
27 May 2010 – The Wall Street Journal – Matthew Dalton
The European Commission on Wednesday proposed that each European Union government levy a tax on its banks and use the proceeds to create a fund dedicated to ensuring the "orderly failure" of troubled banks. EU Commissioner for Financial Regulation Michel Barnier stated that, "Without these funds, what we will see is an uncontrolled falling apart of large financial institutions, which can have disastrous secondary effects." The idea is to maintain the crucial functions of a weak bank without governments being forced to choose between allowing a bank to go bankrupt, at great economic cost or bailing out a bank through repeated recapitalizations.
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IMF Urges Spain to Cure Its Ailing Economy
25 May 2010 – The Wall Street Journal – Bob Davis & Jonathan House
The International Monetary Fund issued an unusually blunt warning to Spain that it needs a "radical overhaul" of its labor laws, a "bold" reform of its government pension system and accelerated consolidation of its banks. "Time is of the essence," the IMF said in a statement issued after its economic team finished an annual review of Spain's economy, even if Spain manages the deep structural reforms the IMF is prescribing, the Fund forecast that the country can expect to grow only 1.5% to 2% a year in the "medium term." The IMF statement is "remarkably hard-hitting, clear and strong," said Arvind Subramanian, a former senior official at the Fund who is now at the Peterson Institute of International Economics, furthermore he added, "It's spelling out what needs to be done for Spain to avoid coming to the IMF" for a loan.
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Europe's Banks Hit by Rising Loan Costs
25 May 2010 – The Wall Street Journal - Carrick Mollenkamp, Randall Smith &David Enrich
European banks are being forced to pay more for short-term dollar borrowings than banks in the U.S. and Asia. The London interbank offered rate, or Libor—the rate at which banks lend money to each other, and thus a vital sign of their mutual trust—rose to its highest level for the three-month dollar rate since last July. While the current Libor, at just above 0.5%. The markets "have already downgraded the European banking system," said George Goncalves, head of U.S. interest-rate strategy in the Americas at Nomura Securities in New York.
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Germany Proposes Wider Ban on Naked Short Selling
25 May 2010 – The Wall Street Journal
Germany's Finance Ministry has proposed extending a ban on some "naked" short selling to cover all stocks and euro-currency derivatives not intended for hedging. The ban goes beyond the prohibition of naked short-sales of certain financial stocks imposed last week. The proposals also include a new "transparency system" for short selling. The proposal states that, "Naked short selling of stocks and the debt of euro-zone states that are listed on a domestic exchange in a regulated marketplace will be forbidden."
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EU to Propose Tax on Banks for Crisis Fund
25 May 2010 – The Wall Street Journal – Matthew Dalton
The European Commission on Wednesday will propose legislation requiring European Union governments to create bank crisis funds supported by up-front taxes on financial institutions. The idea is to maintain the crucial functions of a weak bank, without governments being forced to choose between repeated bank recapitalizations at taxpayer expense or a bank bankruptcy that could threaten the entire economy. Sweden has already introduced a bank tax to create a fund that will be valued at 2.5% of Swedish gross domestic product after 15 years. The International Monetary Fund has proposed a bank tax that could be valued at 2% to 4% of a country's gross domestic product.
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Sarkozy: Change Constitution to Limit Deficit
20 May 2010 – The Wall Street Journal – William Horobin
French President Nicolas Sarkozy said he wants constitutional changes to commit this and subsequent French governments to reducing deficits. He stated that, "From 2011 onwards, we will rigidly strengthen spending controls, we will not allow ourselves any generalized rises in taxes, we will go at the pace of the economic recovery and will pursue reforms that will put growth back on its feet," he said. "It's not austerity, nor is it laxity, but responsibility." The French government has committed to reducing its deficit as a percentage of gross domestic product to 6% in 2011 and 4.6% in 2012.
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The Euro Turns Radioactive
20 May 2010 – The Wall Street Journal – Mark Gongloff, Alex Frangos & Neil Shah
So far during the Euro’s months-long descent, attention has been focused on hedge-fund selling of European assets but central banks and large managers have a much-larger influence on foreign-exchange markets. South Korea's central bank, which holds $270 billion in foreign-currency reserves, said this month that the euro was less attractive as a reserve currency. Russia, with $400 billion in foreign-currency reserves, said it shifted its mix of reserves away from the euro last year. The program of diversifying out of dollars has come to a screeching halt," said Collin Crownover, managing director and global head of currency management for State Street Global Advisors. "If the downward progression of the euro continues, then you see outright selling of euro-zone assets, and it snowballs and gets worse."
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Merkel Pushes G-20 for Financial Reform
20 May 2010 – The Wall Street Journal – Patrick Mcgroarty & Andrea Thomas
German Chancellor Angela Merkel said she will push her Group of 20 counterparts to accelerate steps to tighten political control over financial markets and add new taxes on banks. "I am very concerned that we will be able to agree on a similarly coordinated international agreement on exit strategies," said Merkel. Furthermore Merkel criticized the U.K. and U.S. approach of waiting for the labor market to stabilize before cutting deficits. In addition Germany's unilateral ban on so-called naked short sales of securities caught other European Union governments unawares, drawing an angry response from France.
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EU Governments Back Hedge-Fund Rules
18 May 2010 – The Wall Street Journal – Matthew Dalton & Adam Cohen
The EU is working to set up new rules for hedge funds and private-equity firms, with most member states backing regulation. The proposal backed by finance ministers at the European Council calls for fund managers to be authorized by national governments. The legislation will require funds that routinely use borrowed money to boost returns to disclose information about their borrowings to EU and national authorities. Andrew Baker, head of the Alternative Investment Management Association, Europe's main hedge-fund lobbying group stated that, "the council text of the directive is actually a great improvement on the parliament's version, but there are numerous issues of detail to be resolved."
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EU Vows to Avoid Continent-Wide Austerity, Keep Recovery Alive
18 May 2010 – Bloomberg - James G. Neuger and Rainer Buergin
European finance ministers vowed to avoid a continent-wide austerity drive only high-deficit countries including Greece, Spain and Portugal will be ordered to make additional deficit cuts. European Union Economic and Monetary Affairs Commissioner Olli Rehn stated that, “Countries with no or little fiscal space will need to frontload or accelerate measures, while others that have more fiscal space should maintain their less-restrictive fiscal stances for the sake of growth in Europe as a whole.” Concern that a Europe-wide spree of spending cuts would stifle the economic recovery contributed to the Euro’s 3.4% drop against the greenback.
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Greece Cuts Deficit, Expects Return to Markets Sooner
18 May 2010 – Bloomberg - Jurjen van de Pol
Greece cut its budget deficit in the first four months of 2010 by 42% and expects to borrow in the financial markets. Finance Minister George Papaconstantinou stated that, “The program has been designed to be able to stay away from financial markets through the end of 2011 and the first quarter of 2012. We don’t expect this to be the case, we want to come back to markets much sooner,” furthermore he added, “When exactly will depend on the condition in the international markets.”
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Mummy’ Merkel battered as Germans lose faith in EU
16 May 2010 – The London Times – Peter Millar
The tension between Germany and France threatened to spill over at a Brussels summit last weekend when Merkel and Sarkozy had a heated argument over the bailout. According to observers, it ended with Sarkozy threatening to leave the euro. There is now a pervasive sense in Germany that the post-war consensus of subsuming its national identity and self-interest in the “common European house” no longer gets a popular support. The euro talks, combined with the Greek bailout, led to a Merkel’s party (CDU) defeat in North Rhine-Westphalia’s state election last weekend and with it the loss of her majority in the upper house. The stakes could scarcely be higher. Merkel stated that, “If the euro fails, it is not only the currency that fails, then Europe fails. The idea of European unity fails.” Ulrike Guérot, head of the European Council on Foreign Relations think tank, said: “Germany has provided the oil that greased Europe. If we don’t want to do that anymore, we need to say so. But that means we no longer want to see a Europeanised Germany, but a German-style Europe.”
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Lack of Trust’ Pummels Bank Lending in Europe: Credit Markets
17 May 2010 – Bloomberg - Pierre Paulden and Shannon D. Harrington    
Money markets are revealing increasing levels of mistrust between Europe’s banks on concern that the massive bailout package won’t prevent a sovereign debt default. Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece may not be able to repay its debt in full, and former Federal Reserve Chairman Paul Volcker said he’s concerned the euro area may break up. Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” as the sovereign-debt crisis deepens.  The Royal Bank of Scotland Group Plc and Barclays Plc led financial firms punished by rising borrowing costs, British Bankers’ Association data show. The cost to hedge against losses on European bank bonds is 62 percent higher than a month ago. Investment-grade corporate debt sales in the region plummeted 88 percent last week to $1.2 billion from the previous period.
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Greece Considering Legal Action Against U.S. Banks for Crisis
17 May 2010 – Bloomberg - Timothy R. Homan
Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou stated that, “I wouldn’t rule out that this may be a recourse,” furthermore he added that, ““There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here.”
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Euro Falls to Lowest Since Lehman as Breakup Concern Increases
17 May 2010 – Bloomberg - Ben Levisohn
The euro fell to its lowest level since the collapse of Lehman Brothers. The shared currency fell for a fourth week versus the dollar, the longest losing streak since February, as German Chancellor Angela Merkel said that Europe is in a “very, very serious situation” despite a rescue package for the region’s most indebted nations. The ECB said it will intervene in government and private bond markets “to ensure depth and liquidity in those market segments which are dysfunctional,” in addition the Federal Reserve restarted a dollar-swap line with the ECB and central banks in Germany, Italy and France began buying government bonds yesterday. Sebastien Galy, a currency strategist at BN Paribas SA in New York stated that, “The markets are trying to figure out what the consequences are for growth. There are massive uncertainties and that will keep the downward pressure on the euro.”
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German Households Are More Indebted Than Greeks: Chart of Day
17 May 2010 – Bloomberg - Flavia Krause-Jackson and Giovanni Salzano
Germans, who largely opposed their country’s participation in a bailout for Greece, are more indebted than the citizens of the Mediterranean nation they share a currency with. Ciaran O’Hagan, a fixed-income strategist at Societe Generale SA in Paris, stated that, “Greece is a relatively rich country but with an impoverished state, Greece does have the means to repay its external debts, especially when you add in the private sector.”
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EU to Take More Fiscal Control
13 May 2010 – The Wall Street Journal – Charles Forelle & Matthew Dalton
The European Union's executive arm called for centralized review of member countries' budgets, a first step toward a tighter integration of fiscal affairs in Europe. The European Commission proposed Wednesday that EU governments submit their budgets to Brussels for review by other governments before they are passed by parliaments. It also advocated punitive measures for countries that flout the EU's budget rules. The EU's economic-affairs commissioner, Olli Rehn stated that, "Coordination of fiscal policy has to be conducted in advance, in order to ensure that national budgets are consistent with the European dimension, that they don't put at risk the stability of the other member states."
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Europe Austerity Push Deepens After Rescue Message
13 May 2010 – Bloomberg – Emma Ross Thomas
Spanish Prime Minister Jose Luis Rodriguez Zapatero announced the biggest round of budget cuts in 30 years. Meanwhile in Portugal, Finance Minister Fernando Teixeira dos Santos says he’s prepared for “social tension” after announcing additional budget cuts. Erik Nielsen, chief European economist at Goldman Sachs Group Inc. in London stated that, “The fiscal announcements serve to suggest that the momentum now is indeed towards fiscal cuts,” furthermore he added, “What we have in the euro zone policy space right now is ‘moral suasion,’ not ‘‘moral hazard.’’ Spain and Portugal are bracing for opposition from unions one week after Greek demonstrators torched buildings in Athens.
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Snow Says Euro Faces ‘Tough’ Survival Without Budget
13 May 13, 2010 – Bloomberg – Jennifer Ryan
Former U.S. Treasury Secretary John Snow who served as Treasury secretary from February 2003 to June 2006, suggested the euro may not survive unless member nations agree to merge policies from budgets to labor markets. Snow stated that, “For the euro to be able to survive long term, fiscal consolidation of some kind -- tax policy consolidation, fiscal policy consolidation -- is probably necessary,” furthermore he added, “But that’s not enough, you really need one labor market, one capital market. Europe is going to face hard choices in the future to make this thing work.”
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EU Bailout Sparks New Challenge: Enforcing Fiscal Rigor in Euro Zone
11 May 2010 – The Wall Street Journal – Andrea Thomas
A massive €750 billion bailout from EU countries and the IMF has been approved for European countries on the verge of a default. The approval comes after EU finance ministers over the weekend decided to give €440 billion in state guarantees for emergency loans to be provided by a special vehicle to heavily indebted member countries. However Marco Annunziata, chief economist of UniCredit Group in London stated that, “the euro-zone's problems run much deeper than an uncoordinated fiscal policy. The structure of economies in southern Europe needs to be overhauled to make them more competitive so they can live in a currency zone with Germany. This isn't an issue that's going to be resolved by one or two governments getting tough on public spending."
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Amid the Storm, Questions About Bank's Role
11 May 2010 - The Wall Street Journal -  Brian Blackstone
ECB's reluctant move to buy debt, a switch from focus on inflation, could alter its future position in Europe. The ECB quickly put the plan into action, buying government bonds of Greece, Ireland, Portugal, Spain and Italy, according to the Association for Financial Markets in Europe. If purchases continue while the euro-zone recovery strengthens, it could lead to inflation. Purchasing assets also puts central-bank balance sheets at risk if securities lose value. The decision faced resistance even within the ECB's governing council. Axel Weber, president of Germany's Bundesbank and a leading candidate to become the next head of the ECB, publicly distanced himself from the decision.
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Fed to Defend Loan Plan
11 May 2010 – The Wall Street Journal – Jon Hilsenrath
The Federal Reserve sought to pre-empt criticism of its decision to reopen a controversial lending program, in which it funnels U.S. dollars to the European Central Bank and central banks in Japan, Switzerland, England and Canada. Under the Fed program, initiated during the financial crisis in 2007 and suspended in February 2010, the Fed lends dollars to the ECB and others, who in turn lend to banks in dollars. The loans are from overnight to three months. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, stated that, "Our view from here is that we don't want the financial spillover effects of what's going on in Europe to put at risk our incipient recovery here in the United States," furthermore he added, "This is a way of helping protect the U.S. from being exposed to some of that."
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Shares and Oil Prices Surge after EU Loan Deal
10 May 2010 - BBC
The euro rose against the dollar and oil prices rose more than $3 a barrel after the EU and IMF agreed to a 750bn euro loan-guarantee deal. Across the board banking stocks rose as the markets opened today. The actually amount of the loan-guarantee has shocked many, it's much larger than anticipated. Under the terms of the European loan-guarantee deal, the 16 members of the eurozone will have access to 440bn euros of loan guarantees and 60bn euros of emergency European Commission funding.

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Euro to Get Only Limited Reprieve from EU Deal
10 May 2010 - Reuters - Naomi Tajitsu
The euro has won a reprieve with a European Union emergency aid deal, but the prospect of future financial restrictions in some eurozone countries and a more expansive monetary policy will likely slow further gains. Though the loan safeguards the euro from falling farther and protects at-risk countries such as Spain and Portugal from following Greece into crisis, it also requires these countries to quickly mend their finances. Analysts argue that though the plan protects the euro in the short term, many believe it will eventually fall back to 1.25 levels. "The key problem for the currency remains the solvency issues, which continue to exist and are not directly tackled by these packages," Barclays Capital said to clients.

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Greece Gets Aid, Promises Austerity

3 May 2010 - The Wall Street Journal – Charles Forelle, Nick Skrekas & Bob Davis
Finance ministers approved the unprecedented bailout yesterday for Greece after a week that saw the country’s fiscal crisis spread to Portugal and Spain. Under the 3-year agreement, Greece would receive €80 billion in loans from other euro-zone members and €30 billion from the IMF totaling a massive €110 bailout. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member euro zone. Greece now projects that its debt, which last year stood at 115% of its GDP, will surpass 140% by 2014 before it begins declining. It remains unclear whether the bailout will cover all of Greece's funding needs over the next three years and it'll do little to alleviate the political crisis provoked by Greece.
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Euro Short Bets at Record as Traders Look Past Greece

3 May 2010 – Bloomberg Hedge funds and other large speculators raised net wagers on a euro drop by 25% to 89,013 according to the Commodity Futures Trading Commission. The euro has depreciated 7.6 % against the dollar this year, including last week’s 0.7% loss. Robin Marshall, who helps oversee $20 billion as director of fixed income at Smith & Williamson Asset Management in London stated that, “Greece is a Lehman Brothers for the sovereign world.” Bruce Kasman, the chief economist at New York-based JPMorgan Chase & Co. stated that, “The main risk flowing from the sovereign stress is that European banks will curtail credit to each other and to private borrowers in a way similar to the post-Lehman bankruptcy fallout.”

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EU Broke Every Rule in the Bailout Textbook

3 May 2010 – The Wall Street JournalAlessandro Leipold, former acting director of the International Monetary Fund's European Department stated that, "The Greek crisis has been so severely mishandled by European policy makers that the markets legitimately fear that matters are now beyond repair." If a bailout is being contrived to change those expectations, it should be assembled rapidly. Procrastination can be fatally toxic for countries hit by financial turbulence." Furthermore Moody's said in a report that, “The fractious nature of the European assistance has likely created permanent damage. Debt will likely stabilize at a higher amount and at a higher economic and social cost than previously expected."

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Germany Prepares for Greece Vote

3 May 2010 – The Wall Street Journal – Andrea ThomasThe German government began gathering political support for its contribution of about €22 billion ($29 billion) to Greece's bailout package; other euro-zone governments also will need parliamentary approval in order to release the funds. In Germany the bailout remains politically controversial and that could prove a liability for Chancellor Angela Merkel in the May 9 regional elections. Meanwhile the French Parliament debates the bill today, before the senate debates it later this week. In Italy, the government has drafted a decree and it can approve the disbursement immediately. The Spanish government stated it will amend by decree a section of its 2010 budget to disburse the funds.

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ECB Suspends Rating Limits on Greek Debt3 May 2010 – The Wall Street Journal – Geoffrey T. SmithThe European Central Bank suspended the application of the minimum credit rating threshold in collateral eligibility requirements for Greek sovereign debt; the suspension will be maintained until further notice. It applies to all bonds guaranteed by Greek government however far they are downgraded by the international ratings agencies. The move allows the Greek government to continue borrowing from the ECB's credit windows using such bonds as security. Peter Boone, an economist with the London School of Economics' Center for Economic Performance stated that, "The moral hazard is huge, the message to investors is: if you challenge the bond market, we will come in strong and make you wish you did not sell the Greek bonds. They are in essence promising to do the same for Portugal if needed."

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U Warns Credit Rating Agencies
4 May 2010 - BBC
A new regime for credit rating agencies will begin in December amid calls for further regulation by the European Commission. Michel Barnier, European Commissioner, says he was "surprised" at how fast Greece's rating fell, and the profound impact it had on both the bailout and the economy. In this new era, the power of credit rating agencies is considerable and many blame them for their poor assessment of securities backed by sub-prime mortgages.
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Global Markets Tumble as IMF warns on Greek Contagion

5 May 2010 - EU Observer - Andrew Willis
The global markets tumbled yesterday (Tuesday, May 4th) as fears over the dept crisis prompted mass sell-offs. The euro fell to a one year low against the dollar after the IMF director general Bominique Strauss-Kahn warned against the risk of contagion spreading to other vulnerable states within the EU. Portuguese and Spanish bonds also suffered losses on Tuesday forcing Spanish Prime Minister to deny claims that he is seeking a bailout package from the IMF.

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Contagion Fear Hits Spain
29 April 2010 – The Wall Street Journal - Marcus Walker & Neil Shah
A cut to Spain's credit rating on Wednesday, just one day after downgrades to Portugal and Greece, fueled fears that the euro zone's debt crisis is widening and sent new tremors through financial markets. IMF President Dominique Strauss-Kahn stated,  "Every day that is lost, the situation is growing worse and worse, not only in Greece but in the European Union." Furthermore ECB President Jean-Claude Trichet stated, “It is extremely important that the decision is taken extremely rapidly; That calls for a fast procedure in the German parliament."

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U Nears Deal on Greece Aid Package 
29 April 2010 – The Wall Street Journal – Andrea Thomas
Europe is close to sealing the much needed Greek bailout after Germany's three opposition parties finally come to an agreement to fast-track consideration for €8.4 billion ($11.09 billion) in German aid. We can't afford any further waiting," said Juergen Trittin, the parliamentary floor leader of the opposition Green Party. "We are ready to enable a decision of the Bundestag [lower house of parliament] by May 7 and won't make any objections to a fast-track procedure." The Social Democratic Party's parliamentary floor leader, Frank-Walter Steinmeier, also said his party is willing to give the green light to an accelerated approval process.
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Euro Sales Extend as Morgan Stanley Mulls EU Breakup
29 April 2010 – Bloomberg - Bo Nielsen and Liz Capo McCormick
Investors are abandoning the euro at a rate not seen since the collapse of Lehman Brothers Holdings Inc. Mather, whose California- based firm runs the $220 billion Total Return Fund, the world’s biggest bond fund stated that, “So when push comes to shove and you have these large imbalances that develop between countries, it is very likely that they go back to the old world of being more nationalistic”. Emma Lawson, a currency strategist in London at Morgan Stanley said, “Central bankers and institutional investors have spent 10 years pricing out the likelihood of a euro-zone break-up, and now they have to price it in again,” furthermore she added, “The euro will no longer have this additional support going forward.”
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FOREX-Euro gains on hopes of Greek aid package
29 April 2010 – Reuters - Vivianne Rodrigues
The euro rose on Thursday, rebounding from a one-year low the previous day, on hopes a bailout plan for Greece was imminent. Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto stated that, “The market seems slightly more comfortable today, with the expectations of an imminent aid package, to go euro-bargain hunting at these levels." Furthermore he added, “People tend to forget that just a couple of months ago the euro was trading at $1.50. For some type of investors, buying some euros back at $1.32 is more than justified".
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S&P cuts Greece ratings to junk status
27 April 2010 – Market Watch –
The ratings agency lowered the long-term sovereign credit rating on Greece to BB+ from BBB+. The outlook is negative. Marko Mrsnik, an S&P credit analyst stated that, "The downgrade results from our updated assessment of the political, economic, and budgetary challenges that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory".
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Portugal Cut Two Steps to A- by S&P as Greek Contagion Spreads
27 April 2010 – Bloomberg & Businessweek - Emma Ross-Thomas
Portugal had its credit rating cut two steps by Standard & Poor’s it lowered its long-term local and foreign currency ratings to A- from A+. The extra yield investors demand to hold Portuguese bonds over German bunds surged to 265 basis points today, the most since at least 1997. S&P said in the statement that the move “reflects our view of the amplified fiscal risks Portugal faces,” furthermore they added “We expect the Portuguese government could struggle to stabilize its relatively high debt ratio over the outlook horizon until 2013.”
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Investors Add to Pressure on Greece
26 April 2010 – The Wall Street Journal 
Financial markets have stepped up pressure on Greece, as investors remained skeptical about its long-term solvency despite assurances that a rescue loan is on its way. The Markets are being fuelled in part by Germany's hesitant attitude toward bailing Greece out. Greek government spokesman George Petalotis stated the severity of the issue saying, "When the question at issue is whether we can borrow, one realizes how difficult a position the country is in". Ian Stannard, a currencies analyst at French bank BNP Paribas in London said that, "Greece asking for the aid package is the start of the uncertainty, not the solution it opens up a whole new can of worms in terms of the implementation of the aid".
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Merkel Brakes As Germany Struggles For Greek Consensus
26 April 2010 – The Wall Street Journal - Andrea Thomas and Patrick McGroarty
German Chancellor Angela Merkel said she won’t release Greek rescue funds until the country shows it’s got a “sustainable, credible” plan to cut its budget deficit. Merkel added that “Germany will help when the corresponding conditions are fulfilled,” furthermore she stated that the bailout “must be negotiated in all calmness, level-headedness and decisiveness.” Opposition lawmakers accused Merkel of playing politics, holding up an unpopular decision to shore up support in Germany’s most populous state, North Rhine-Westphalia.
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FOREX-Euro hit by Greek Uncertainty
26 April 2010 – Reuters
The euro dipped briefly below $1.33, falling against the greenback for the seventh trading session in the last eight. It also hit a three-month low against sterling as investors were concerned about the potential conditions attached to a loan to Greece, the euro fell 0.5 % to $1.3323 after earlier hitting a session low of $1.3291. Underscoring those worries, Greek 10-year bond yields soared to 9.60%, from 8.70% late Friday, as the yield premium over comparable German debt, the euro-zone benchmark, widened to 6.55 % point, from 5.63 % point late Friday.
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IMF Speeds Up Greece Efforts
25 April 2010 – The Wall Street Journal – Adam Cohen
International Monetary Fund Managing Director Dominique Strauss-Kahn said talks over an aid package for cash-strapped Greece are accelerating and will be completed ‘in time” to meet the nation’s needs. “The IMF, the European partners and everyone involved in the financing effort recognizes the need for speed,” Strauss- Kahn said after talks in Washington with Greek Finance Minister George Papaconstantinou. Furthermore he added that, “I am confident that we will conclude discussions in time to meet Greece’s needs.”
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Euro slumps as Greece gets another downgrade
22 April 22, 2010 – Market Watch – William Watts
Moody's Investors Service cut Greece's sovereign ratings to A3 from A2 and placed them on review for further possible downgrade. The move is based on Moody's view that there is a significant risk that debt may only stabilize at a higher and more costly level than previously estimated. "Irrespective of the spin stemming from the E.U., debt restructuring and default are still possible in Greece going forward; as a consequence 10-year Greek bonds are now yielding well over 8%," said Jane Foley, research director at Forex.com
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Greek Civil Servants Strike Over Austerity Measures
22 April 2010 – The Wall Street Journal – Alkman Granitsas
The 24-hour strike by Greece's public-sector umbrella union ADEDY, its fourth strike this year, was called to oppose the deep spending cuts in civil-service salaries and entitlements that the Greek Government is trying to implement as a part of its budget deficit curtail plan. ADEDY stated that "The policies that are being followed are leading workers and the society toward poverty, penury and insecurity, while at the same time preserving and increasing the privileges of the financially well-off, banks and businesses,"
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Euro falls on Greece concerns; sterling shines
22 April 2010 – Reuters
Greece who is negotiating a bailout package with the European Commission, European Central Bank and International Monetary Fund, has a deficit of 13.6 % of GDP rather than the 12.7 % reported earlier. The Greek Finance Ministry said in a statement that the upward revision of the deficit was due to the downward revision of the estimate for GDP in 2009 as well as a reassessment of financial accounts of pension funds. Greece’s widening deficit and questions about the accuracy of its economic data have undermined the credibility and enforcement of the EU’s budget rules and contributed to the 6.9  % slide in the euro this year. Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ added that “The focus has moved from liquidity concerns to one where the market is discounting a debt restructuring or possible default”.
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Greece Faces Tight Timeline Before May Debt Crunch
21 April 2010 – Reuters – Michael Winfrey
Greece is set to accept the joint EU/IMF aid package that will help Greece overcome its “refinancing hump” in May. However, there are many obstacles between now and the fifth month that will make the process of procuring the financial help an arduous one. Before the €8.5 billion euro bond comes due on May 19, there will have been a German election, intense aid package negotiation deals, and multiple political processes among eurozone states to get approval from their parliaments. Currently, Greek financial leaders – along with their prime minister – are negotiating with IMF officials in order to reach a €40-45 billion deal by May 15.
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European Airlines Seek Help with Cost of Ash Crisis
20 April 2010 – The Wall Street Journal – Steve McGrath & David Pearson
The European Commission stated it would consider updating state aid rules in the wake of the flight cancellations to clarify how airlines affected can benefit from a national government aid. The commission has rules that could be applied to compensate airlines in exceptional circumstances and allow member states to compensate companies for damage caused by natural disasters, said spokeswoman Amelia Torres.
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Greek Debt Crisis Seen Getting Worse
20 April 2010 – The Wall Street Journal – David Crawford
Bundesbank President Axel Weber said Greece may require financial assistance of as much as €80 billion ($107.92 billion) considerably more than the €45 billion that EU countries and the IMF are at the present time prepared to extend so that the country avoids default. Weber stated on Monday, that he saw "no alternative" to a rescue of Greece at this point.
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Greek yields at highs as unemployment rises
20 April 2010 – Financial Times – Neil Dennis
Greece’s finance minister on Tuesday shrugged off soaring yields on government bonds, saying the country would be able to borrow next month “either from the markets or from our Eurozone partners”. Yields on Greek debt soared to fresh highs on Tuesday after unemployment jumped to a six-year peak. Diego Iscaro at IHS Global Insight stated that “The labour market will continue to deteriorate in the coming months, as a result of plunging demand, large spare capacity levels and an increasingly worrying economic outlook”. Interest rates on 10-year Greek bonds jumped 36.2 basis points to a record 7.84%
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EU Politicians to Step In as Volcanic Ash Losses Mount
19 April 2010 – The Wall Street Journal – Steve McGrath & David Pearson
EU lawmakers were preparing to meet Monday to discuss measures to reduce the mounting losses on businesses and the economy as a flight ban over much of Northern and Central Europe continued. Eric Chaney, chief economist at AXA Group said that "Europe is the biggest exporter in the world and the second biggest importer. It is China's biggest customer". "Trade has been the biggest component in the global recovery and an extended grounding will have a significant impact on global trade and on the recovery that's still fragile." IATA Director General Giovanni Bisignani stated that "I challenge governments to agree on ways to flexibly reopen airspace. Risk assessments should be able to help us reopen certain corridors, if not entire airspaces".
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ECB Calls for Harmonized Default Rules
19 April 2010 – The Wall Street Journal – Nina Koeppen
European default rules must be enhanced to eliminate possible inconsistencies between default procedures across the region, the European Central Bank stated Monday in a special report on Europe's financial market infrastructure. Possible inconsistencies between European default-management rules should be identified, and there may be a need to harmonize the default procedure of interconnected financial market infrastructures, or FMIs, the ECB said.
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Leading Economic Indicators Index in U.S. Rose 1.4%
19 April 2010 – Bloomberg – Bob Willis
The index of U.S. leading indicators rose in March by the most in 10 months; the 1.4 % increase in the New York-based Conference Board’s measure of the outlook for three to six months was more than anticipated and followed a revised 0.4 % gain in February. “It’s one of the indicators signaling a very rapid pace of expansion,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. The figure “certainly offers hope that the recovery may be swifter,” he added.
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Greece May Cancel Bond Issue
15 April 2010 – The Wall Street Journal – Costas Paris
Greek officials stated the Government expected to raise "between $1 billion and $4 billion," from its dollar denominated bond sale, compared to $5 billion to $10 billion previously expected. A second official stated, "Fact is there is no strong interest in the U.S. for Greek debt," furthermore he added Athens could cancel the issuance if "the minimum necessary amount can't be collected." A bond trader at a leading Greek bank stated, "In some ways, the fact that the Greek government is lowering its expectations for the dollar-bond isn't really new news".
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Euro Slumps on Greece Jitters
15 April 2010 – The Wall Street Journal – Bradley Davis
The euro declined by more than 0.8% against the dollar in early trading, the gap widened between the yield in German bunds (Eurozone standard bearer) and Greek bonds.  "Fears regarding Greece have been reignited," said analysts at BNP Paribas. "Though it seems that greater clarity is in place following the weekend announcement of the bailout package details, it is difficult to find a justification to buy a currency that would see a member state require emergency financing to avoid default," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto
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Fed May Keep Low-Rate Vow as Bernanke Sees Recovery Restraints
15 April 2010 – Bloomberg – Craig Torres
Federal Reserve Chairman Ben Bernanke yesterday told Congress that high unemployment and weak construction are among the “significant restraints” on the pace of growth the US economy is having. Furthermore he affirmed the Fed’s view that borrowing costs are likely to stay low for an “extended period”. Stephen Stanley, chief economist at Pierpont Securities LLC stated that “The worst mistake they could possibly make would be to nip a recovery in the bud and push us back into a recession,” furthermore he added that, “They are going to have to see several months in a row of good solid employment growth before tightening policy”.
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Greek FinMin: Hard to Block Aid if EU, ECB Recommend
13 April 2010 – Reuters – Harry Papachristou
According to the Greek finance minister, no EU country will block Greece’ access to EU/IMF aid if the European Commission or European Central Bank say it is a good plan. Indeed, Papaconstantinou believes that with a deal receiving “a positive recommendation” from leaders, no country would vote against the bailout measure. With an election coming up for Chancellor Merkel of Germany on May 9, she continues to resist the call for financial aid for the rocky nation. Greece is still unsure if it will grab help from both the IMF and EU, which would be the “largest multilateral bailout ever attempted if activated.”
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Strong demand for short-term Greek debt
13 April 2010 - Financial Times – Jennifer Hughes
The Greek Public Debt Management Agency Tuesday sold €1.56 billion ($2.12 billion) of six- and 12-month Treasury bills met with strong demand and reassured investors that it can meet its short-term financial needs. The Greek government, led by Prime Minister George Papandreou, has to raise €11.6bn by the end of May to cover debt that matures, and also needs to find another €20bn by the end of the year. Until yesterday's bail-out, investors had been demanding ever greater returns to own Greek debt, making it more costly for the financially-strapped government to borrow. However Paul Bednarczyk at 4Cast economic consultancy stated “It appears that we are not the only ones not to get over excited by the Greek T-Bill auctions flying out of the door, the acid test will involve bigger amounts [of longer maturities].”
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U.S. Trade Deficit Widens
13 April 2010 – The Wall Street Journal – Meena Thiruvengadam & Tom Barkley
The U.S. trade deficit widened by 7.4% in February to $39.7 billion, the Commerce Department said Tuesday. The trade deficit was above the consensus forecast of Wall Street economists of a deficit of $38.5 billion. Imports rose faster than exports in February. The U.S. trade deficit with China widened to $16.5 billion in compared with $14.2 billion in the same month last year. This is the smallest deficit since last March.
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Deflation the Only Option for Greece – IMF Chief
12 April 2010 – CNBC
According to Dominique Strauss-Kahn, the managing director of the IMF, “deflation is the only way Greece can tackle its debt problems.” He also says that the European Commission agrees with this analysis – in fact, the EC was the one that proposed it. In addition, Strauss – Kahn believes that social security programs can still persevere despite Greece’s need to handle its state debt. In order to do this, however, “pension benefits must be trimmed and higher inflation targets may be an option.” Another option, in this vain, may be to increase the retirement age. In any case, Strauss – Kahn is certain that the only way for Greece to survive this economic lull is to pursue deflation and apply all other policies around this idea.

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Europe Bankrolls Greece
12 April 2010 – The Wall Street Journal – Charles Forelle & Marcus Walker
The 16-nation euro zone governments Finance ministers approved a mechanism for their countries to extend up to 30 billion euros ($40 billion) of emergency loans to Greece. The aid package entails taking three-year loans this year at an interest rate of close to 5%, a rate below the more than 7% Greece now has to pay on the open market. Together with at least 10 billion euros expected from the International Monetary Fund in the first year, Greece may receive the biggest multilateral financial rescue ever. Athens has not decided whether to apply for the aid as Greek Prime Minister George Papandreou stated "The question is whether that mechanism will convince the markets, simply as a gun on the table. If it doesn't convince them, it is a mechanism that exists and can be used". Before Greece has ready access to the funds all 16 euro-zone countries must agree to activate the package.
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Corporate Bond Risk Falls on Greece Rescue Plan: Credit Markets
12 April 2010 – Bloomberg – Jody Shenn and Sarah McDonald
Greek bonds rallied Monday on weekend news that the euro zone agreed to details of a EU bailout package worth as much as 45 billion euros ($61 billion) at below-market interest rates in a bid to stem its fiscal crisis and restore confidence in the euro. The cost of insuring Greek sovereign debt against default dropped sharply in early trading Monday, with five-year sovereign credit default swaps trading at around 3.47 percentage points, from a closing level of 4.26 percentage points Friday. That represents a drop of €79,000 fall in the annual cost of insuring €10 million of Greek government debt for five years. “The immediate impact is to remove the prospect of a Greek default,” said Gary Jenkins, head of credit strategy. (Read More)


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