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Thread: Euro Economy

  1. #1
    Junior Member fxfir's Avatar
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    Jan 2012

    Default Euro Economy

    Euro Economy
    Merkel: Euro Leaders Must Redouble Efforts

    Chancellor Angela Merkel said euro- area downgrades by Standard & Poor’s reinforce Germany’s stance that European leaders must redouble their efforts to resolve the debt crisis as governments prepare to sell more debt next week.

    “The decision confirms my conviction that we have a long way ahead of us before investor confidence returns,” Merkel told reporters after a meeting of her party in the northern German port city of Kiel today. The downgrades came from “only one of three agencies,” she said.

    Germany was left with the euro-area’s only stable AAA rating as S&P stripped France and Austria of their top credit grades, citing “insufficient” policy steps to combat the debt crisis. The decision to include France among the nine sovereign downgrades was “disappointing” even if expected, French Prime Minister Francois Fillon said, noting that the market response yesterday before the announcement later that day “was muted.”

    The S&P verdict on France shouldn’t be “dramatized” or “politicized,” Fillon said at a news conference in Paris today. “The rating agencies won’t decide our policies.”

    France sells as much as 8.7 billion euros ($11 billion) in bills in two days, offering the first gauge of the report’s impact. History suggests reaction may be limited. Ten-year yields for the nine sovereign borrowers that lost their AAA ratings between 1998 and the U.S.’s downgrade in August rose an average of two basis points in the following week, according to JPMorgan Chase & Co.
    EFSF Impact

    Merkel said that the downgrades won’t “torpedo” efforts to provide financing to indebted member states by weakening the current bailout fund, the European Financial Stability Facility. The EFSF could provide firepower even if its creditworthiness sinks below AAA status, she said.

    “I was never of the opinion that the EFSF necessarily has to be AAA,” Merkel said. “AA+ is also not a bad rating,” Merkel said, citing a remark made yesterday by French Finance Minister Francois Baroin.

    Germany and France are pushing for stricter budget rules as the bedrock of European governments’ response to the debt crisis that emerged in Greece in late 2009 and is now buffeting Spain and Italy. Merkel and French President Nicolas Sarkozy will meet with Italian Prime Minister Mario Monti in Rome on Jan. 20 to prepare for a European summit 10 days later. Threatening to overshadow the Rome meeting are talks on a Greek debt swap that stalled yesterday and may resume on Jan. 18.
    Economic Resilience

    Greece aside, S&P acted at the end of a week in which signs grew that Europe’s woes may be cresting as borrowing costs fell, evidence of economic resilience emerged and the European Central Bank said it had quelled a credit crunch at banks.

    S&P cited the propensity of European leaders to be behind the curve in their response to the crisis as one reason for the decision.

    “The policy response at the European level has not kept up with the rising challenges in the euro zone,” Frankfurt-based Moritz Kraemer, S&P’s managing director of European sovereign ratings, said today in a conference call.

    While policy makers have engaged in an “open and prolonged dispute” over the appropriate course of action, the ECB has been “using its flexibility” through its decisions to lower interest rates, aid banks and step up sovereign bond purchases, he said. “For the time being they have had a constructive role.”
    S&P Ignored

    Investors ignored S&P last year when it cut the U.S. to AA+ in August as the company argued that the failure up to then of Democrats and Republicans to agree on budget cuts made the U.S. less creditworthy. Seven weeks after the downgrade, the yield on the benchmark U.S. government bond fell to a record 1.6714 percent.

    One difference is that the U.S., unlike France, is prepared to print money, making it easier for the world’s largest economy to pay its debts.

    “The U.S. is still rightly seen as a safe haven,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said by phone. “The U.S. is a big liquid economy with a strong tradition of honoring its debts in modern time and a central bank pledged to taking action if needed. It’s different with France in the sense that they cannot rely on strong central bank policies.”
    Asmussen Warning

    Germany has aligned itself with ECB in warning fellow member states not to weaken the tougher debt rules outlined in the so-called fiscal pact being drafted for the Jan. 30 summit.

    ECB Executive Board member Joerg Asmussen said in a letter to negotiators earlier this week that euro-area governments are diluting the pact. From the ECB’s perspective, recent changes in a text aimed at translating the agreement into an international treaty “imply a substantial watering-down of the earlier draft proposal,” he said.

    “These revisions in my view clearly run against the spirit of the initial general agreement on an ambitious fiscal compact,” Asmussen said in the letter.

    Spanish Prime Minister Mariano Rajoy, responding to Spain’s downgrade in a speech in Malaga today, pledged spending cuts and a banking-system cleanup, as well as a “clear, firm and forceful” commitment to the euro’s future.
    German Financing

    Merkel, who convened with leaders of her Christian Democratic Union for a strategy meeting, said the S&P decision won’t unduly force Germany to increase financing for the bailout package. European leaders must now quickly set up the permanent fund, the European Stability Mechanism, which is due to replace the EFSF this year, a year ahead of schedule.

    German Foreign Minister Guido Westerwelle called the S&P announcement an “artificially produced” setback that emerged just as leaders’ efforts were beginning to bear fruit. In an e- mailed statement, he said he’ll step up efforts with euro-member states to create a European rating company.

    Michael Fuchs, the CDU’s ranking floor member for economic issues, said the downgrades were “arbitrary Anglo-Saxon politics that don’t square with the efforts of countries including France” to take aim at state spending.

    “At the same time, the rating moves show we daren’t weaken the terms of the fiscal pact,” Fuchs said in an interview in Kiel. “The days of writing in escape clauses for fiscal austerity must be over; the stakes are too high.”

  2. #2
    Junior Member fxfir's Avatar
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    EURO News
    Greek Bondholders May Get GDP Sweetener(by

    Bondholders negotiating a debt swap with Greece may get a sweetener tied to a revival in economic growth that would ease the impact of accepting a lower interest rate on the new bonds, people with knowledge of the talks said.

    In discussions late last week in Athens, creditors lowered their demands for an average coupon on the new 30-year securities they would receive to as little as 3.6 percent from 4.25 percent after European officials demanded they take steeper losses, people familiar with the matter said at the time.

    While the lower coupon would lead to an estimated loss of 70 percent or more for investors, adding a so-called gross domestic product warrant -- which would pay bondholders more if the Greek economy rebounds -- would trim the loss in net present value terms by an estimated 0.5 to 3 percentage points, said two people, who declined to be identified because the talks are confidential.

    Greece and private creditors are near a tentative accord that would in principle include the warrants, the people said. As an additional inducement for creditors, the debt would probably be governed under U.K. rather than Greek law, providing more bondholder protection, people familiar with the situation said.

    These matters are still subject to change, and questions over whether Greece can fulfill conditions for a second aid package from the European Union and International Monetary Fund have put the accord on hold for the moment, they said.
    ‘One Step’ Away

    The Greek government is “one step from closing” a debt- swap deal with its private bondholders, Finance Minister Evangelos Venizelos told reporters in Athens yesterday. The sides are close to completing a voluntary exchange within a framework outlined by Luxembourg Prime Minister Jean-Claude Juncker, the Washington-based Institute of International Finance, which is negotiating on behalf of creditors, said last week.

    Talks with EU and IMF officials on a new financing package for Greece must be completed by Feb. 5, Venizelos also said at a Parliament hearing. A private-sector debt swap, for which a public offer must be made by Feb. 13, can only proceed after a deal on the loan package is sealed, he said.

    EU leaders on Jan. 30 held their 16th summit in the two years since the Greek debt emergency provoked a Europe-wide crisis, leading to aid packages for Greece, Ireland and Portugal. Greece pledged a last-ditch effort to prevent the collapse of its second rescue package from creditors, aiming to complete talks this week on a financial lifeline that’s been in the works for six months.
    Debt Exchange

    Prime Minister Lucas Papademos said in Brussels he would try to meet German-led demands for a bigger debt writedown by investors and deeper budget cuts by his government.

    Greece and its creditors are seeking to seal a debt-swap deal three months after private bondholders agreed to a 50 percent cut in the face value of more than 200 billion euros ($262 billion) of debt by voluntarily exchanging bonds for new securities.

    The aim is to reduce Greece’s debt burden to 120 percent of GDP in 2020 -- an objective complicated by a deepening economic contraction. An accord is tied to the second bailout for the country, which faces a 14.5 billion-euro bond payment on March 20.
    Last edited by fxfir; 02-06-2012 at 03:32.

  3. #3
    Junior Member fxfir's Avatar
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    Jan 2012


    Euro News
    ECB May Hold Out on Greek Swap Until Investor Deal Reached on Debt Burden

    The European Central Bank is likely to refuse to show its hand on how it will help cut Greece’s debt burden until investors and the government have agreed to a deal, said economists from ING Group to Deutsche Bank.While Greece’s creditors are increasing pressure on the ECB to join the bond swap being negotiated with the country, central bankers have remained silent on their intentions. Economists say the ECB wants to see the private-sector agreement concluded before indicating its strategy, which may include forgoing profits from its Greek bonds or a transfer to one of the region’s rescue funds.The Greek government needs to reach a deal and secure a second European Union-led bailout by March 20, when it faces a 14.5 billion-euro ($19.1 billion) bond payment. Charles Dallara, who as managing director of the Institute of International Finance leads a group negotiating on behalf of creditors, says involvement of public institutions is needed as bondholders hold only about 60 percent of Greek debt.“Politicians will bang their heads against the wall trying to get the ECB to be involved at this stage,” said Carsten Brzeski, senior economist at ING in Brussels. “The ECB will stay out of this as long as it can. While they won’t take a haircut, not booking profits would be a realistic option.”

    Summit Discussions

    At a summit in Brussels this week, ECB President Mario Draghi rejected the idea of transferring back profits from bond holdings to the Greek government, according to a person with knowledge of the discussions who declined to be identified because the talks were private. Greek government spokesman Pantelis Kapsis said yesterday that officials expect to complete talks in the next days.The ECB has purchased 219 billion euros of debt-strapped nations’ bonds since 2010. Between 36 billion euros to 55 billion euros are invested in Greek sovereign debt, according to estimates by Barclays Capital and UBS AG.When the ECB started buying bonds as part of its Securities Markets Program, Greek 10-year bonds traded at 84 cents on the euro. Since then, prices have dropped to 23 cents as investors’ concern about debt sustainability has pushed the country close to default. The ECB insists that the purchases are aimed at restoring the functioning of its monetary policy.“The ECB remains against an involvement simply because monetary and fiscal policy would cross paths,” said Silvio Peruzzo, euro-area economist at Royal Bank of Scotland Group Plc in London. “Participating would severely undermine the role of the ECB in crisis management.”

    ‘Logical’ Step

    The ECB is “not party” to ongoing discussions between the Greek government and the private sector, Draghi said on Jan. 19, without elaborating further.ING Groep NV Chief Executive Officer Jan Hommen said this week it would be “logical” for the ECB to participate in alleviating Greek debt.“I’m not saying they should take a loss,” Hommen told reporters in the Hague. “But they have a potential gain on their position which they bought at a discount.”Even if the ECB remains outside the outright restructuring of Greece’s debt, policy makers have not ruled out other involvement. The region’s central banks will await the outcome of the deal currently being negotiated, Bundesbank board member Joachim Nagel told Deutsches Anleger Fernsehen yesterday.conomists have suggested options that include the ECB selling back its holdings to Greece, or to Europe’s temporary bailout fund, the European Financial Stability Facility, or to its successor, the European Stability Mechanism.

    Selling Bonds

    “The ECB could promise to sell their holdings of Greek sovereign bonds upon maturity to the Bank of Greece at their original purchase prices,” said Holger Schmieding, chief economist at Berenberg Bank in London.A “middle way” might involve the EFSF or Greece, via an EFSF loan, buying the bonds off the ECB at their original purchase price, said Mohit Kumar, head of euro-area rates strategy at Deutsche Bank in London.Selling the bonds to the ESM would be the best option, said ING’s Brzeski. The permanent rescue fund will have the capital available to fund such a move, while the EFSF would have to raise money in the market beforehand, he said.“It’s possible that the ECB is already working on a compromise behind closed doors,” said Michael Schubert, an economist at Commerzbank AG in Frankfurt. “It’s a dangerous game.”

  4. #4
    Junior Member fxfir's Avatar
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    Jan 2012


    Latest Forex News (Bloomberg)
    Euro Declines as Greek Debt Stalemate Increases European Crisis Concern

    The euro weakened against 14 of its 16 major counterparts before Greek leaders respond today to demands by international creditors on economic measures.
    The 17-nation currency slid versus the dollar with France set to sell as much as 8.5 billion euros ($11 billion) of bills today. The dollar maintained a two-day gain versus the yen before St. Louis Federal Reserve President James Bullard speaks amid speculation the U.S. central bank will avoid easing monetary policy further. Australia’s currency retreated for the first time in five days after government data showed the nation’s retail sales unexpectedly declined.
    “The movement in euro is directly related to the concerns in the market that Greece may not get an agreement,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “There is some hesitation in the currency market” ahead of today’s response.
    The euro fell 0.5 percent to $1.3087 as of 12:16 p.m. in Tokyo from the close in New York on Feb. 3. It lost 0.4 percent to 100.36 yen. The dollar was at 76.69 yen after gaining 0.5 percent over the previous two trading days.
    Greek political-party leaders must provide a first response to demands by the European Union, European Central Bank and International Monetary Fund on economic measures, including wage cuts, by 11 a.m. local time today, a spokesman for the biggest party, Pasok, told reporters in Athens.
    Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro aid package wasn’t forthcoming.
    ‘Declaration of Bankruptcy’
    “If we determine that it’s all going wrong in Greece, then there won’t be a new program -- and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday.
    Futures traders reduced their bets that the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain was 157,546 on Jan. 31, down from a record 171,347 a week earlier.
    The euro has fallen 4.7 percent over the past three months, the worst performance among the 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The yen has advanced 3.3 percent and the dollar has gained 1.1 percent.
    Bank of Japan Governor Masaaki Shirakawa said the nation’s economic condition is “severe” because of deflation and the strong yen. The central bank is implementing strong monetary easing measures and will take appropriate steps as needed, he said in parliament in Tokyo today.
    Monetary Policy
    U.S. government data showed on Feb. 3 that nonfarm payrolls rose by 243,000 in January, surpassing the 140,000 increase estimated by economists. The benchmark yield on 10-year Treasuries jumped 10 basis points to 1.92 percent that day, the biggest gain since Dec. 20.
    “I need to see significant deterioration in the economy and some threat of deflation or inflation moving significantly below our inflation target before” backing more bond buying by the Fed, Bullard said on Feb. 3 in an interview. He is due to speak about inflation targeting today in Chicago.
    The Fed pledged last month to keep the benchmark interest rate near zero until late 2014. The central bank purchased $2.3 trillion of Treasury and mortgage-related bonds in two rounds of so-called quantitative easing, or QE, that ended in June.
    ‘Get Traction’
    “The stronger U.S. data will increasingly be supportive of the U.S. dollar,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “We would think the U.S. dollar will increasingly get traction, particularly if it’s enough to impress the Fed and to stop them considering QE3.”
    The Australian dollar, known as the Aussie, weakened against 12 of its 16 major peers after the Bureau of Statistics said the country’s retail sales fell 0.1 percent in December from a month earlier. Economists had estimated a 0.2 percent gain.
    The Reserve Bank of Australia will lower the benchmark interest rate to 4 percent from 4.25 percent in a meeting tomorrow, another survey of economists shows.
    “The market has got a high chance of a rate cut priced in for tomorrow and this number isn’t going to change that,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, referring to retail sales data. “If they do deliver a cut, the Aussie might fall, but the major push to the Aussie from the RBA is going to come from their statement.”
    Australia’s dollar lost 0.5 percent to $1.0713 and dropped 0.4 percent to 82.16 yen.

  5. #5
    Junior Member edowibawa's Avatar
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    Jul 2013


    How about the Euro Economic for today guys...
    Is euro move up or down??
    How far the unemployment affect the euro economic???

  6. #6
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    Sep 2013


    Merkel won the election. THat is mean that the stable economic course is to be held. In general EUR keep getting stronger.

  7. #7
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    Sep 2013


    Actually, as I'm from Ukraine, I do expect the signing of associated membership agreement with EU. As for me, Euro will gain some positions after that due to the market opening

  8. #8
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    Sep 2013

    Default Euro zone inflation pressures ebbed further in August: ECRI

    Euro zone inflation will ease further in coming months after price pressures fell to their lowest in almost four years, an indicator designed to predict cyclical trends showed on Friday.

    The Eurozone Future inflation Gauge ( EZFIG), published by the Economic Cycle Research Institute, fell to a 44-month low of 89.7 in August from July's 91.3.

  9. #9


    Positive political proceedings is giving Euro a lift.....

  10. #10
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    Default Austerity pushing Europe into social and economic decline, says Red Cross

    Europe is sinking into a protracted period of deepening poverty, mass unemployment, social exclusion, greater inequality, and collective despair as a result of austerity policies adopted in response to the debt and currency crisis of the past four years, according to an extensive study being published on Thursday.

    "Whilst other continents successfully reduce poverty, Europe adds to it," says the 68-page report from the International Federation of Red Cross and Red Crescent Societies. "The long-term consequences of this crisis have yet to surface. The problems caused will be felt for decades even if the economy turns for the better in the near future … We wonder if we as a continent really understand what has hit us."

    The damning critique, obtained exclusively by the Guardian, of the policy response to the debt crisis that surfaced in Greece in late 2009 and raised fundamental questions about the viability of the euro single currency, foresees extremely gloomy prospects for tens of millions of Europeans.

    Mass unemployment – especially among the young, 120 million Europeans living in or at risk of poverty – increased waves of illegal immigration clashing with rising xenophobia in the host countries, growing risks of social unrest and political instability estimated to be two to three times higher than most other parts of the world, greater levels of insecurity among the traditional middle classes – all combine to make a European future more uncertain than at any time in the postwar era.

    "As the economic crisis has planted its roots, millions of Europeans live with insecurity, uncertain about what the future holds. This is one of the worst psychological states of mind for human beings. We see quiet desperation spreading among Europeans, resulting in depression, resignation and loss of hope. Compared to 2009, millions more find themselves queuing for food, unable to buy medicine nor access healthcare. Millions are without a job and many of those who still have work face difficulties to sustain their families due to insufficient wages and skyrocketing prices.

    "Many from the middle class have spiralled down to poverty. The amount of people depending on Red Cross food distributions in 22 of the surveyed countries has increased by 75% between 2009 and 2012. More people are getting poor, the poor are getting poorer."

    The survey conducted in the first half of this year "mapped" the 28 countries of the EU plus a further 14 in the Balkans, eastern Europe and central Asia.

    In the EU, it found that the grave impact of the crisis was not confined to the crisis-ravaged, bailed-out countries of southern Europe and Ireland, but extended to relative European success stories such as Germany and parts of Scandinavia.

    Last year the Spanish Red Cross launched a national appeal to help people in Spain, the first ever. Suicides among women in Greece have at least doubled. Many employed in Slovenia have not been paid for months. In France 350,000 people fell below the poverty line from 2008 to 2011. One in five Finns born in 1987 have been treated for psychiatric or mental disorders, associated with the economic slump in Finland in the 1990s.

    Despite Germany's vaunted success in avoiding the high levels of unemployment prevalent across much of the EU, a quarter of the country's employed are classified as low-wage earners, almost half of new job contracts since 2008 have been low-paid, flexible, part-time so-called mini-jobs with little security and usually no social benefits. In July last year 600,000 employed in Germany with social insurance did not have enough to live on.

    The problems are also affecting Europe's wealthiest societies, such as Denmark and Luxembourg, the study found.

    In the Baltic states and Hungary up to 13% of the populations have left in recent years due to economic hardship. The study reports a mounting trend of intra-European migration, mainly from east to west, in search of work.

    The jobs crisis is one of the most debilitating issues facing the EU and the eurozone. Of more than 26 million unemployed in the EU, those out of work for longer than a year stands at 11 million, almost double the level of five years ago when the international financial crisis broke out in the US.

    The social impact is immense, the study found. In Greece and Spain adult children with families are moving back in with their parents, several generations are living in single households with one breadwinner between them. It is now a common sight to find formerly prosperous middle-class men and women sleeping rough in Milan, Italy's financial capital.

    Youth unemployment figures in a quarter of the countries surveyed ranged from 33% to more than 60%. But as destructive to families, the report said, is the soaring jobless levels among 50-64 year-olds which has risen from 2.8 million to 4.6 million in the EU between 2008 and 2012.

    "The rate at which unemployment figures have risen in the past 24 months alone is an indication that the crisis is deepening, with severe personal costs as a consequence, and possible unrest and extremism as a risk. Combined with increasing living costs, this is a dangerous combination," the study said.

    Despite the perceived success of Germany, Europe's economic engine, the study takes the EU's biggest country to illustrate the widening wealth gap, raising questions about the longevity of the EU's traditional model, the social market economy. According to Germany's Bertelsmann Foundation some 5.5 million Germans have lost their middle-class social status over the past decade and fallen into the ranks of low-income earners while at the same time half a million others made the grade as high-income earners.

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