Moody’s downgrade of six EU countries goes unnoticed

By Gustavo Vieira - Tuesday, February 14, 2012 at 11:26 AM - 0 Comments

In normal circumstances, if a major credit rating firm like Moody’s downgraded six European Union countries in a row, that would likely set markets tumblings all over the world. That would be especially true if notice of the downgrades included warnings about top-rated Britain, France and Austria. But that is not what’s happening just one day after Moody’s adjusted the sovereign debt ratings of Italy, Portugal, Spain, Malta, Slovenia and Slovakia downward, and warned that it could remove the triple-A rating from the UK, France and Austria soon. The Moody’s downgrade on Monday night did not shake markets that were otherwise buoyed by news that Greek lawmakers had approved a package of austerity measures, paving the way for a $172 billion (U.S.) bailout.

EU leaders aim for ‘fiscal compact’

By Alex Ballingall - Monday, January 30, 2012 at 10:45 AM - 0 Comments

The politics of budgetary control are slowing negotiations between Greece and its international creditors aimed at getting the next chunk of bailout cash into the beleaguered Mediterranean country’s hands. Greek Finance Minister Evangelos Venizelos “angrily rejected” a German proposal to implement European oversight of Greece’s budgetary decision-making, according to the Financial Times. The proposal would allow the EU overseer to veto Greek tax and spending decisions, effectively giving the country’s creditors budgetary control. Venizelos was offended by the implication that his country would have to choose between “national dignity” and financial aid.

The tiff over fiscal sovereignty is the latest in the seemingly never-ending effort to avoid a Greek debt default. Greek bond holders are being pressured to give up profits on their investments, while the EU and IMF are asking for deeper austerity measures in return for their bailout cash.

“If the process is not completed successfully, we will be faced with the spectre of bankruptcy that would have great consequences for society, and especially for the poor,” Lucas Papademos, the Greek prime minister said.

But as the wrangling over the Greek bailout continues, a summit of euro zone countries is kicking off in Brussels, where member nations are discussing the creation of a “fiscal compact” that will coordinate spending policies among the countries using the common currency. Worries over the downside of austerity—that too much spending cuts can derail the possibility of economic growth—are fueling a vision of “smart” budget discipline for the euro zone.

These worries are especially relevant for countries like Spain, which has an unemployment rate of 22.8 per cent, the highest in the European Union. Alarmingly, more than half of Spanish youth — aged 16 to 24 — are jobless. Cuts to social programs that support such people could foster widespread anger and instability, which would deter investment and perpetuate economic stagnation.

Financial Times

BBC News

BBC News

Merkel under siege

By Michael Petrou - Tuesday, October 4, 2011 at 9:50 AM - 0 Comments

Eric Herchaft/Redux

Spare a sympathetic thought for German Chancellor Angela Merkel, leader of the most powerful country in the euro zone, and the one whose decisions will have a consequential effect not just on citizens of Germany, but the rest of the continent. “When Angela Merkel goes into a room at a summit meeting, it’s as if the headmistress has arrived,” says William Paterson, honorary professor of German and European politics at Aston University in Britain.

This is all well and good when the school—or a monetary union of 17 member states and 300 million people—is running well. But when half the students are wasting or hiding their lunch money, the teachers are overspending and asking the headmistress to cover for them, and—to stretch the metaphor—the headmistress’s own family doesn’t see why she should do so, it becomes a much more trying job.

This is roughly the position in which Merkel finds herself as the popularity of her Christian Democratic Union (CDU) party crumbles, and the governing coalition it leads shows signs of imploding. The eurozone is facing a financial crisis, driven by soaring sovereign debts of member states such as Greece, Portugal, Italy, Ireland and Spain. Greece’s situation is the most serious, with some observers predicting that a default on its debts is inevitable. Such an event would hurt all the economies in the union (not sparing those outside it) and dramatically weaken the euro. And so, multi-billion-dollar bailout packages have been pledged, with more on the way.

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Merkel hopes to ease investor worries over Euro debt crisis

By macleans.ca - Tuesday, September 13, 2011 at 11:19 AM - 0 Comments

German Chancellor Angela Merkel worked to assuage worries over a Greek debt default on Tuesday as the euro zone debt crisis continues to fuel market volatility. Investor confidence took a hit when Italy was forced to pay its highest yield to sell 5-year government bonds since adopting the euro in 1999. The possibility of a Greek default is raising concerns over the health of larger euro zone economies, such as Spain and Italy. Speaking with the media, Merkel called the challenge “historic,” saying that if Greece were to default on its debt, “we would see domino effects very quickly.” She also urged European policymakers to choose words carefully to avoid further propagating investor fears. Meanwhile, U.S. President Barack Obama told a group of Spanish journalists that European leaders must show the political will to confront the debt crisis in order to stabilize the markets. American Treasury Secretary Timothy Geithner, in an unprecedented move, will attend a meeting of EU finance ministers in Poland later this week. Greece has indicated that it will run out of money in October, and needs the next 8 billion euro tranche of bailout money to pay for pensions and wages.

Reuters

Room among the ruins

By Patricia Treble - Thursday, June 10, 2010 at 10:40 AM - 0 Comments

DIMITAR DILKOFF / AFP / Getty Images

Rioters rampaging through the streets of Athens, combined with tales of corruption and economic collapse, have emptied Greece’s beaches and tavernas just as the crucial summer tourist season begins. More than 27,000 hotel bookings were cancelled in Athens in the two weeks after demonstrations turned deadly in early May. And sales of holiday packages to Germans and Britons, who account for a third of the Mediterranean nation’s tourist market, have plunged by at least 25 per cent.

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