June 2012

June 27, 2012
Angela Merkel has firmly rejected the use of eurobonds ahead of a crucial summit in Brussels this week, ruling out jointly guaranteed eurozone debt for “as long as I live”. Her tough stance guarantees conflict with Italian Prime Minister Mario Monti at this week’s pivotal EU summit in Brussels.
http://www.telegraph.co.uk/finance/financialcrisis/9357592/Angela-Merkel-rules-out-eurobonds-for-as-long-as-I-live.html
http://www.spiegel.de/international/europe/chancellor-merkel-vows-no-euro-bonds-as-long-as-she-lives-a-841163.html
June 23, 2012
Germany’s finance minister, Wolfgang Schäuble, told Der Spiegel that the collapse of the euro would call into question ‘many of the things we have achieved and cherish’. 
In the first year after a breakup, the German economy would contract by 10% and the number of unemployed would soar above 5 million, the ministry predicts. Germany’s current jobless figure is just under 3 million, the lowest in two decades.
Hundreds of thousands of jobs would move abroad, and thousands of companies would go bust. The country’s deficit would shoot up as tax income fell and the government was forced to increase expenditure, from bailing out banks to spending more on social welfare.
Der Spiegel also cites another scenario put forward by the Swiss bank UBS, which predicts that the breakup of the euro would cost Germany far in excess of €500bn (£403bn), and up to a quarter of its entire GDP.
http://www.guardian.co.uk/business/2012/jun/24/germany-eurozone-collapse-economy
http://www.spiegel.de/politik/ausland/euro-krise-schaeuble-prophezeit-baldiges-europa-referendum-a-840549.html
June 21, 2012
Brazil and China agree currency swap. Brazil and China announced the R$60bn (US$29bn) local currency swap after a bilateral meeting between Wen Jiabao, the Chinese premier, and Dilma Rousseff, Brazil’s president, on the sidelines of the Rio+20 environmental summit in Rio de Janeiro.
China has launched an aggressive campaign of “currency swap diplomacy”, signing about 20 such agreements over the past four years with countries ranging from Argentina to Australia and the United Arab Emirates.
http://www.ft.com/cms/s/0/015f526a-bc07-11e1-9aff-00144feabdc0.html#axzz1z0isPzxL
http://www.bbc.co.uk/news/business-18545978
http://www.foxbusiness.com/news/2012/06/21/brazil-china-to-sign-30-billion-local-currency-swap-agreement/
June 20, 2012
Economic projections released by the Federal Reserve on Wednesday saw officials expecting weaker growth, higher unemployment and softer inflation over the next few years.
The Fed’s “central tendency” for the U.S. gross domestic product now ranges from 1.9% to 2.4% this year, compared with the 2.4% to 2.9% gain predicted in April. Growth is seen between 2.2% and 2.8% in 2013, from the April view of 2.7% to 3.1%. U.S. GDP growth is seen between 3.0% to 3.5% in 2014.
The Fed’s outlook on hiring was also gloomier. It now sees the unemployment rate this year as coming in between …
http://online.wsj.com/article/BT-CO-20120620-710990.html
June 15, 2012
Nouriel Roubini predicts a full sovereign bailout in addition to international bailout of banks (as recently in Spain),  a persistence of political gridlock over fiscal adjustment in USA and a  further depression of the consumer and business confidence as a result of new fights on the debt ceiling, risks of a government shutdown, and rating downgrades.
Eonomies and markets no longer face liquidity problems, but rather credit and insolvency crises. Meanwhile, unsustainable budget deficits and public debt in most advanced economies have severely limited the scope for further fiscal stimulus.
Sovereign risk is now becoming banking risk. Indeed, sovereigns are dumping a larger fraction of their public debt onto banks’ balance sheet, especially in the eurozone.
He suggests that in order to prevent a disorderly outcome in the eurozone, today’s fiscal austerity should be much more gradual, a growth compact should complement the EU’s new fiscal compact, and a fiscal union with debt mutualization (Eurobonds) should be implemented.
In addition, a full banking union, starting with eurozone-wide deposit insurance, should be initiated, and moves toward greater political integration must be considered, even as Greece leaves the eurozone.
http://www.project-syndicate.org/commentary/a-global-perfect-storm
June 13, 2012
European Commission President Jose Manuel Barroso has called for further political and economic union in the EU, claiming that some national governments have not grasped the urgency of the crisis. Mr Barroso said Europe has a “systemic problem” and must set out a clear vision and path for deeper integration.
European Commission President Jose Manuel Barroso has said member states must agree to a big common budget, a future banking union and – ultimately – political union in order to save the EU.
http://news.bbc.co.uk/democracylive/hi/europe/newsid_9727000/9727929.stm
http://www.telegraph.co.uk/finance/financialcrisis/9328606/EU-in-social-emergency-says-EC-chief-Jose-Manuel-Barroso.html#
http://euobserver.com/18/116605
Hollande met en garde les Grecs contre une sortie de la zone euro
http://www.lemonde.fr/europe/article/2012/06/13/hollande-met-en-garde-les-grecs-contre-une-sortie-de-la-zone-euro_1717968_3214.html
Rating agency Moody’s Investors Service cut its rating on Spanish government debt by three notches on Wednesday to Baa3 from A3, saying the newly approved euro zone plan to help the country’s banks will increase the country’s debt burden.
http://www.reuters.com/article/2012/06/13/us-spain-moodys-idUSBRE85C1K120120613
Spain could ask for more international aid if a bank bailout proves insufficient, a sovereign analyst from Moody’s Investors Service said on Wednesday, the same day the agency slashed the country’s rating to Baa3, its lowest investment grade.
http://www.reuters.com/article/2012/06/13/us-spain-moodys-idUSBRE85C1K120120613
June 12, 2012
Interest rates on Spanish bonds rose to 6.8% , a rate not seen since the pre-euro days of the 1990s, the spread between German bonds widened to a record 537 basis points and the cost of insuring Spain against a debt default reached an all-time high. Investors fear Spain’s cocktail of economic, financial and banking problems will see it frozen out of world markets.
http://www.reuters.com/article/2012/06/12/markets-bonds-euro-idUSL5E8HCJIW20120612
http://online.wsj.com/article/SB10001424052702303901504577462013267298668.html?mod=europe_home
http://news.xinhuanet.com/english/video/2012-06/13/c_131650133.htm
June 9, 2012
Euro zone finance ministers agreed on Saturday to lend Spain up to 100 billion euros
http://uk.reuters.com/article/2012/06/09/us-eurozone-idUKBRE8530RL20120609
June 8, 2012
Moneynews interview with Martin Feldstein, a Harvard economist and head of the Council of Economic Advisers under President Ronald Reagan, talked about his views on the economy.
http://www.moneynews.com/StreetTalk/Martin-Feldstein-us-Economy/2011/06/08/id/399253
June 7, 2012
Fitch slashes Spain rating by three notches to “BBB”
http://www.reuters.com/article/2012/06/07/us-spain-fitch-idUSBRE85610M20120607?feedType=RSS&feedName=topNews
Merkel says EU ready to act as Spain downgraded
http://uk.reuters.com/article/2012/06/07/uk-eurozone-idUKBRE8540LU20120607
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