New recession in the euro area is unlikely, a depreciation of the euro will help reduce the negative effects that have measures to reduce the debt on economic growth, says Pier Carlo Padoan, chief economist of the Organization for Economic Cooperation and Development (OECD) said from CNBC. Governments need to pursue fiscal consolidation and reforms in the pension insurance system and labor market to promote economic growth, said Padoan. To convince skeptical financial markets in the effectiveness of its strategy, governments should also show that the coordinated work, he added. Even measures to reduce the debt limit growth in the eurozone, it will be partly offset by increased demand for European goods from Asian and other markets due to their better competitiveness resulting from weaker euro, he said. According to data from the European Central Bank the value of the euro against the U.S. dollar declined by 14% this year, while trade-weighted value of the euro has decreased by more than 10%. “Will there be a” W-shaped “recession in Europe? I do not think, “said Padoan, emphasizing that the massive debt following the global recession in 2007 – 2009,” is not just European history “and that Europe will deal with this problem faster than others.
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The turbulence in the euro area is not over, as Greece remained only “the tip of the iceberg,” warned the professor of economics at New York University Nuriel Rubini. “This front is currently facing the euro area is the second stage of a typical financial crisis,” said Rubies to radio BBC. Approved a rescue package amounting to 750 billion, intended to stop the spread of the crisis in Greece to other EU countries do not calm the markets, as questions remain whether governments are strong enough to make the necessary rigor, stated Rubini. Earlier today it became clear that it is paid the first tranche of EUR 20 billion of aid to Greece. Tomorrow ends the maturity of the Greek bonds 8.5 billion. Markets remain worried about the solvency of some European countries in the euro area as there are significant economic and financial problems, stresses Rubini. Protests in Greece against budget cuts fueling suspicions that European governments can solve such problems, he said.
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Leaders of euro area Member States approved a final plan for the financial support of Greece, that the next three years the country will receive 110 billion loans with interest lower than the market, writes Dnes.bg, citing BTA. 80 billion euros will be allocated by the 16 member states of the Eurogroup, about a third of them must be provided this year. The remaining 30 billion will be allocated by the IMF. Athens is expected to receive the first tranche of aid more in the coming weeks. Disbursement has already been approved by governments. The plan was adopted by the Greek Parliament, despite mass protests in the country against him. “The current situation is exceptional and requires exceptional measures. Approved the final declaration, which includes two parts – for Greece and the current crisis situation,” said a news conference after the meeting of permanent European Union president Herman van Rompoy at whose initiative was convened forum. After the meeting, leaders said the euro area as a priority the maintenance of sound public finances. To this end, the greater surveillance of financial markets, whose transparency must be strengthened. Moreover, much wider will be used criminal procedure in case of excessive government deficits. “We are ready to strengthen rules and procedures for surveillance of member countries of the euro area, including through the strengthening of the Pact for Growth and Stability through the most effective sanctions, stated in the Declaration which was adopted at a meeting in Brussels tonight. Furthermore, the EC will propose specific European common mechanism to maintain stable finances.
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France and Germany intend to launch a new project for economic cooperation and assistance within the euro area. This would include the creation of a European Monetary Fund, resembling the structure of the International Monetary Fund, said senior government sources quoted by the FT. Intentions are to create rules and tools for preventing the occurrence of instability in the whole euro area from the problems of a single country. Right now this is the situation with Greece, whose budgetary problems negatively affect the whole community. The first beginnings of that plan were announced by the finance minister of Germany Wolfgang Schäuble, who announced the intention to create a fund similar to the IMF. “I support greater coordination of economic policies within the EU and the euro area,” Schäuble said in an interview with German newspaper Welt am Sonntag. If France and Germany fail to reach agreement, which has lobbied for some time Paris, they probably will create the basis for the most radical reform of the euro in 1999 onwards. At present, neither Germany nor France Greece supported the proposal to have recourse to the IMF. This is another argument for establishing a European support fund, which, however, is unlikely to happen fast enough to help Athens, indicated by the FT.
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Trade in the market for bankruptcy protection under state or contracts for protection against non-performing its obligations (credit default swaps), today passed more calmly than last week, police MarketWatch. Against this background, risk premiums of almost all countries decreased due to a narrowed and the defense costs of unserved. This happens with Spain and Greece, which last week were monitored under a magnifying glass by market participants. Not such a situation, however, with Portugal as the country risk premium went up again. According to the CMA DataVision, which provides data on the cost of credit swaps, the primary risk indicator for Greece is back below the 4 per cent and 3.97 per cent. This means that to protect the position of EUR 10 million in state bonds to Greece need to pay a premium of 397 thousand euros per year. In Spain also observed shrinkage of the risk spread, and he is now 1.61 percentage points. Although the overall stabilization of the situation, however, Portugal remained under strong pressure from the market. The country risk premium is increased to 2.34 percent from 2.27 percent on Friday.
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The European Union has made clear that Greece will not abandon and leave the growing crisis with the country’s obligations to endanger the eurozone, writes Financial Times. “It is clear that economic policies are not only a national issue, but also Europe, told reporters in Brussels, European Commission President Jose Manuel Barroso. According to senior EU officials in Greece last resort may receive emergency assistance from the governments of the euro area and by the EC, but without the participation of the International Monetary Fund. Euro zone countries and European authorities did not specify how Greece would help, since they fear that it will reduce pressure on Greece to cope alone with their problems and that would confuse an already turbulent financial markets. Immediate priority for the country to show that it is serious in its intention to reduce public spending, improve tax collection, to publish reliable financial and statistical data to deal with corruption, EU representatives stressed.
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Eurozone industrial production in November rose by 1.0% on a monthly basis and decreased by 7.1% yoy, with expectations for a rise of 0.7%, respectively, and decreased by 8.5%. Production for October was down by 0.3 percent revised on a monthly basis and by 10.9% per year compared to previous data for -0.1% respectively. and -11.1%. Faster rise to expectations due to growth in manufacturing in all sub-sectors without energy. Annual decrease was even the least since October, but still negative for the 19th consecutive month. Thus improving the progression index coincides with the studies on the activity of the industrial sector, which is significant in recent months.
However, maintaining levels of negative annual highlights the slow steps of recovery and because of its economists are firm that the ECB will keep its key interest rate unchanged today. We recall that it is 1%. Data showed that manufacturing in the industrial sector decreased by 2.2%, while the remaining 4 sub-sector growth is between 0.6% and 1.8% on a monthly basis in November with the strongest is the production of intermediate and capital goods.
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The European Union today rejected new emissions targets proposed by the United States and China, on the ground that are too low to prevent catastrophic climate change, forward Journal Times. The dispute between the three main forces of the summit on climate change in Copenhagen darkened first day of negotiations and shattered hopes that will soon be reached on emissions. The EU has called U.S. President Barack Obama to announce higher goals next week when he will come to Copenhagen for the last day of the conference – 18th December. Representatives of the United States, however, insist that the proposed emission occurs before 10 days after Barack Obama was “remarkable” and in line with the recommendations of scientists. Obama suggested the United States emissions to be reduced by 4 percent compared to 1990 levels until 2020 did the EU have committed to cut emissions by 20 percent over the same period. Moreover, the EU is committed to the reduction to 30 percent if other countries are ready to take “such action”.
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The Trading session on the Old Continent ended with divergent movements of major indexes on the background of mixed economic data today. During today’s session of the European Central Bank expected left its main interest rate in the eurozone at a level of 1 percent for the eighth consecutive month in December. Its president, Jean-Claude Trichet surprised markets, however, as announced in December that the planned auction for the granting of loans to commercial banks in the euro area for a period of 1 year will be in the basic rate of 1%. Instead, the interest rate will be indexed to market interest rates in the euro area. Economic data today showed that services sector in Britain and the United States has dropped unexpectedly in November. Moreover, the gross domestic product of the euro area rose by 0.4 percent in the third quarter, but only because of the increase in government spending and exports. Shares of the largest engineering company Siemens in Europe fell by 5.2 percent to 64.08 euros on the stock exchange in Frankfurt, after the conglomerate reported its first quarterly loss for last year. Conglomerate announced that its profit has contracted by 57 percent annually for the preceding fiscal 2009
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Lithuania will not adhere to the “painful” scheme for adopting the euro, which will shrink consumption and greatly harm the economy, said Prime Minister of the country Cubilus Andrews. The country probably will fail to meet EU requirements for the deficit within 3 percent of GDP by 2011, so the adoption of the euro can not happen before 2013, said in an interview yesterday, Finance Minister of Lithuania Ingrid Simon. “These are very ambitious and very painful measures, and, of course, there are any limits on what measures can enter,” said Cubilus. The aim is not to kill the entire economy and stability in society by reducing costs, salaries and pensions. Lithuania’s economy contracted by 14,3 per cent in the third quarter after the government took budget cuts, equivalent to 8 percent of GDP this year. Even after these stringent measures, the evaluation of the European Commission Lithuania will have a deficit of 9,7 per cent in 2011 to 9.8 per cent for this. Lithuania, whose currency – liras is tied to the euro should be introduced European single currency “as soon as possible, but the opportunities in turn have practical limits and practical measures should be introduced,” said Cubilus. The government has proposed the 2010 budget cuts of 5 percent of GDP, aimed at social welfare. Lithuania lags behind neighboring Estonia, which plans to join the eurozone from January 1, 2011, after years of using the government budget surplus for the establishment of reserves. This allowed the public finances remain intact even after the crisis hit the country.
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