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Posts Tagged ‘European Central Bank’

The world economy: Powering down

Posted by Ram Kumar Shrestha on July 7, 2012

More months of uncertainty about the euro area will weigh on the global economy

EUROPEAN leaders delivered rather more progress in tackling their interminable debt crisis than had been expected when they met in Brussels on June 28th and 29th. They decided, among other things, to allow the new permanent bail-out fund to recapitalise banks in ailing economies directly rather than via their governments. They also enabled rescue funds to buy the government bonds of struggling countries without imposing such strict conditions as before.

The euro promptly rose; stockmarkets regained some vim; the oil price spiked (see article). Government-bond yields fell in Spain and Italy; they also tumbled in Ireland on expectations that it will gain some retrospective relief from the heavy costs of its banking clear-up. In response, the Irish government decided to raise money by issuing short-term bills on July 5th, its first such auction since 2010.

But the June summit also delivered rather less than the market rally suggested. In theory, the agreement promises to break the self-reinforcing link between weak governments and weak banks. In practice, that will not happen until the European Central Bank (ECB) is put in charge of euro-area banking supervision, which may take a lot longer than the planned six months. Before then a deal stitched together in the bleary hours could well snag on legal difficulties about redefining the permanent fund’s remit without changing the treaty that set it up, or on political objections in smaller northern economies—Finland, for example, doesn’t like the idea of using the rescue funds to buy government bonds in secondary markets. Meanwhile, Greece has lost none of its capacity to cause trouble, as a new, weak government tries to extract concessions from creditor nations. Read the rest of this entry »

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German Vision Prevails as Leaders Agree on Fiscal Pact

Posted by Ram Kumar Shrestha on December 10, 2011

By  and 

BRUSSELS — Europe’s worst financial crisis in generations is forging a new European Union, pushing Britain to the sidelines and creating a more integrated, fiscally disciplined core of nations under the auspices of a resurgent Germany.

Exactly 20 years to the day after European leaders signed the treaty that led to the creation of the European Union and the eurocurrency, Chancellor Angela Merkel of Germany persuaded every current member of the union except Britain to endorse a new agreement calling for tighter regional oversight of government spending. The accord, approved at a summit meeting in Brussels early on Friday, would allow the European Court of Justice to strike down a member’s laws if they violate fiscal discipline.

“It’s interesting to note that 20 years later we have realized — we have succeeded — in creating a more stable foundation for that economic and monetary union,” Mrs. Merkel said, adding, “and in so doing we’ve advanced political union and have attended to weaknesses that were included in the system.”

The agreement was a clear victory for Mrs. Merkel, and it prompted a sharp rally in stock markets in Europe and the United States. But it is viewed as unlikely to calm fears that Europe is unwilling to muster the financial firepower to defend the sovereign debts of big member states, including Italy and Spain, that have little or no economic growth and have big debt bills coming due soon. Read the rest of this entry »

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Why Europe Slept

Posted by Ram Kumar Shrestha on July 12, 2011

They will ask why Europe slept as an undercapitalized banking system floundered, unemployment remained unacceptably high, and the continent’s growth and competitiveness plummeted.

Worse still, if a reconstruction plan does not come soon, Europe’s leaders will be charged with “the decline of the West” and then face accusations for being, in the words of Churchill about the 1930s, “resolved to be irresolute, adamant for drift, solid for fluidity and all-powerful for impotence.”

By Gordon Brown, Former prime Minister of the United Kingdom

When the history of the 21st century is written, people will rightly ask why it was that Europe was found wanting during its most intractable economic crisis.

They will ask why Europe slept as an undercapitalized banking system floundered, unemployment remained unacceptably high, and the continent’s growth and competitiveness plummeted.

Worse still, if a reconstruction plan does not come soon, Europe’s leaders will be charged with “the decline of the West” and then face accusations for being, in the words of Churchill about the 1930s, “resolved to be irresolute, adamant for drift, solid for fluidity and all-powerful for impotence.”

There is, of course, no shortage of European meetings. Hardly a day goes by without a summit of European leaders discussing the latest crisis facing a member state. But each time they talk as though they are dealing with a calamity confined to the nation in the headlines — the Greek problem, or the Irish problem, sometimes the Portuguese or the Spanish problem — without an agreement on the true nature of the emergency, which is pan-European. By wrongly analyzing Europe’s woes, they end up implementing the wrong remedies too. For Europe’s deficit crisis is a real concern but just one of its concerns.

Europe has in fact three deep-rooted problems, each of which is entwined with the other, and each of which reaches systemically into every corner of the continent. Alongside the deficit problem is also a banking problem — not confined to a handful of banks or countries — and a chronic growth problem.

First, banks: I was present in Paris in October 2008 at the first meeting ever held of the euro zone heads of government. The diagnosis of the banks I presented was of problems of liquidity but also of structure. But most in Europe at the time believed they were dealing only with the indirect consequences, the fallout, from an Anglo-Saxon financial crisis, and of course thought that a wayward Britain had allowed itself to be locked into the American financial boom. They did not then know that HALF the sub-prime assets had been bought by banks across Europe. No one had yet fully appreciated the depth of the entanglements between European banks and other global financial institutions, or how big the banks’ exposure to falling property markets was. I remember the shocked looks which passed along the table when I argued that European banks were even more vulnerable than American banks because they were far more highly leveraged — and indeed still are. Read the rest of this entry »

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Why Europe Slept

Posted by Ram Kumar Shrestha on July 12, 2011

Yes Mr. Brown, we are not making history. To be more precise we are not maintainin­g previous history. There are lots of reasons behind this. And we are not being honest to accept our own mistakes and weaknesses­. Our way of thinking is not so broad to sort out problems in real. Without crossing this boarder solving problems and maintainin­g history could not be possible.
Read the Article at HuffingtonPost

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Europe’s Elusive Gold Reserves: Are Greece, Portugal Sitting on Billions of Dollars?

Posted by Ram Kumar Shrestha on July 4, 2011

By Daniel Eckert and Holger Zschäpitz / Die Welt / Worldcrunch

This post is in partnership with Worldcrunch, a new global-news site that translates stories of note in foreign languages

Jonathan Nourok / Getty Images

into English. The article below was originally published in Die Welt.

The first thing any insolvent private person is forced to do is relinquish the family silver. But other rules seem to apply to governments. Whether they’ve been living above their means for a few years or for decades, certain countries hold on tight to their assets, declare themselves unable to pay back their debts and turn to other countries for help.

The European Union has seen many an example of this. Right now, Greece is negotiating with the troika of the E.U., the European Central Bank (ECB) and the International Monetary Fund (IMF) for a new rescue package while Athens sits on an impressive 114-ton stash of gold, about what four large, fully loaded trucks could carry.

The gleaming bars in the vaults of the Greek central bank are worth $5.8 billion. If Athens were to sell that gold, the Greek state would theoretically be able to meet at least part of the debt payments due soon without any outside help.(Read how the Greek economic crisis is threatening the euro.)

Another country in crisis, Portugal, also holds a significant amount of precious metal dating back to the days of António de Oliveira Salazar’s regime. Instead of aid, Lisbon could have converted its $19 billion worth of gold into cash.

Nick Moore, chief commodities strategist at the Royal Bank of Scotland in London, reports that a question often asked by bank clients is why these governments don’t sell some of their gold. After all, it is recognized worldwide as an asset that can be sold even in tough economic times. The gold in the central banks of euro-zone members is altogether worth some $545 billion.

With that, 4.5% of Euroland’s $12 trillion public debt could be paid off in one fell swoop. In relation to its debt, Portugal is particularly gold rich. Lisbon could put 383 tons of it on the market and make $19.3 billion at the present rate. Read the rest of this entry »

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Bankers Agree To New Global Rules Designed To Prevent Future Financial Crisis

Posted by Ram Kumar Shrestha on September 13, 2010


Not sure, but anyway better to be optimistic.
Read the Article at HuffingtonPost

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