Saturday, 31 March 2012

The Euro crisis

It will NEVER be enough!

Euro Zone Boosts Bailout Firewall to $1.06 Trillion
The euro zone raised the combined lending ceiling for their two bailout funds to 700 billion euros on Friday from 500 billion, euro zone finance ministers said in a statement.

30 March, 2012

The 700 billion will come from 500 billion euros of the permanent bailout fund, the European Stability Mechanism, and the 200 billion euros committed under existing bailout programs for Greece, Ireland and Portugal by the temporary European Financial Stability Facility (EFSF) fund.

"The current overall ceiling for ESM/EFSF lending ... will be raised to 700 billion euros," said the statement, distributed after talks of finance ministers in Copenhagen.

"All together, the euro area is mobilizing an overall firewall of approximately 800 billion euros, more than 1 trillion dollars," the statement said.

Austrian Finance Minister Maria Fekter said earlier the 17-nation currency area would combine two rescue funds for a year to make more money available in case of emergency. She put the total figure at some 800 billion euros, but that appeared to include money already spent to conjure up a more impressive headline number for investors.

"Obviously markets will only have confidence in us if we agree on a strong rescue fund," Belgian Finance Minister Steve Vanackere told reporters. "We can't consider that the crisis is over. We must find a good middle way between those who seek a (maximum) firewall and those who want it kept to a minimum."

Fekter said the residual 240 billion euros from the EFSF would be used as a reserve buffer while the two funds run in parallel and the ESM's capital is being built up.

Bond market players questioned whether the likely compromise would provide sufficient money to help Spain, the euro zone's number four economy, if it needs a bailout to overcome a banking crisis due to the collapse of a real estate bubble.

"At the end of the day the key question is whether this new firepower is enough," said Steve Barrow, head of G10 strategy at Standard Bank in London. "Clearly if things turn down again, and especially if more bailouts are needed, the tricky issue of underfunding the ESM/EFSF relative to the potential bailout need is bound to resurface."

Greyerz - European Leaders Lying, Trillions Need to Be Printed

28 March, 2012

Today Egon von Greyerz told King World News that statements from European leaders claiming the crisis is “ebbing” and “almost over” are completely false.

Von Greyerz also said the first trillion euros printed is nothing compared to the trillions we will see in coming months. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Here is what von Greyerz had to say:

I think these politicians are living in a different world, Eric. They are just pretending that things have been remedied with the last trillion euros of the LTRO that the ECB has just issued. But Spain is the next problem.”

For article GO HERE

Portugal's struggles signal worries for Europe
The country's economy is likely worse off than previously thought.

Jim Jubak

26 March, 2012

It's only Portugal, true, but the trend is ominous for all the eurozone countries trying to meet austerity budget deficit targets in 2012.

Thursday, the Bank of Portugal cut its forecast for the country's economic growth to a 3.4% drop in gross domestic product in 2012 from the central bank's January forecast of a 3.1% decline. The Portuguese economy contracted by 1.6% in 2011.

The central bank also cut its already barely positive forecast for 2013 from growth of 0.3% to a projection of zero growth for next year.

The Bank of Portugal now forecasts that investment will drop by 12% in 2012 and price consumption will fall by 7.3%. Exports will climb a forecast 2.7% in 2012.

Like Greece and Ireland, Portugal needed a bailout -- $104 billion -- from the European Union, the European Central Bank, and the International Monetary Fund as its borrowing costs soared and the country found itself shut out of the international bond markets. That bailout was predicated on an austerity plan of budget cuts and tax increases that would bring the country's deficit under control and allow Portugal to return to the financial markets in 2013.

In 2011, Portugal narrowed its budget deficit to 4% of GDP from 9.8% in 2010, but it got big help from a one-time transfer of pension funds from the banks to the national government. The government is still projecting that Portugal's budget deficit will come in at 4.5% in 2012 before falling to 3% -- the eurozone's ceiling for budget deficits -- in 2013.

Hard to see how those estimates won't go up with the new and lower growth forecasts from the central bank.

Combine this with news Wednesday that Standard & Poor's thinks Greece will "probably" have to restructure its debt again, and you can see why worry about the euro debt crisis is on an upswing. Moritz Karamer, head of sovereign debt ratings at S&P, said a restructuring would be "down the road, I'm not predicting today when."

In a vastly reassuring speech at the same event at the London School of Economics the head of the International Monetary Fund's mission to Greece said it would take at least a decade to fully complete a Greek restructuring.

European finance ministers begin a two-day meeting tomorrow with increasing the cap for the eurozone bailout fund on the top of the agenda. The deal on the table involves a temporary increase in the cap to 2013, but certainly not an increase in government commitments of the magnitude that the International Monetary Fund has been seeking.

It will be interesting to see if the IMF -- and the financial markets -- buy into this latest slight of hand.

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