Financial Communique » eurozone

Spain and France sold government securities for 8.1 billion EUR

Viliyana Filipova — Thu, 01 Dec 2011 11:25:15 +0000

Spain and France held a successful auction of government securities, gaining 8.1 billion EUR, a day after six central banks, led by the Federal Reserve (Fed) lowered the cost of dollar funding for European banks. The auctions bond yields fell across the Eurozone. Spain sold bonds for 3.75 billion EUR in yield ranging from 5.19 to 5.54% and the ratio of demand / supply of 2 to 1. France, which enjoys top-notch AAA credit rating, sold bonds for 4.3 billion EUR in yield of 3.18 percent – lower than in the previous auction in Paris on November 3rd. The sale of bonds was to test investor confidence after the Fed, European Central Bank (ECB) and Bank of Canada, Japan, Switzerland and Britain dropped the price of a coordinated emergency loans in dollars to European banks.
“Both auctions were pretty good”, said Hugh Worthington, strategist at Barclays Capital in London. “Yields are higher than they want, but the auctions were strong. Actions of central banks yesterday definitely helped.” France sold securities with maturities in October 2017, October 2021, April 2026 and April 2041, while Spain sold bonds maturing in April 2015 and January 2016 and January 2017.
On November 17th, spread between 10-year French bonds and equivalent German bonds reached a record 204 basis points, while in April the premium on French bonds was only 28 points.

Serbia decreased the main interest rate with 0.75 points

Viliyana Filipova — Thu, 10 Nov 2011 23:37:40 +0000

In an attempt to support the growth of the country, the Serbian central bank lowered its key interest rate for the fifth time since June, against a background of declining inflation and concerns about the effects of debt crisis in the Eurozone. The National Bank of Serbia lowered its main interest rate by 75 basis points to 10% – the lowest level last year. Of 23 economists surveyed by Bloomberg, 9 were predicted lowering of interest by a quarter percentage point, 6 half a percentage point, while 8 did not expect change.
“Less pressure on food prices, weak demand, the slower increase in regulated prices, and a low inflation expectations as a whole”, helped the decision, said in a statement the bank. Future changes in interest rates will depend on the inflation outlook, growth prospects and local fiscal policy. Earlier this week, analysts in Belgrade-based Economics Institute said that the central bank should refrain from infusing liquidity as lower interest rates and reserve requirements could cause capital flight from the country at a time when inflow of new capital is slowed down. Dinar in Belgrade fell to 102.24 dinars per EUR from 102.03 dinars per EUR before the publication of news by the central bank. Citing declining inflation and relatively stable dinar, Fitch Ratings on Wednesday confirmed the country’s credit rating, rated at BB-with stable outlook. According to central bank precautionary agreement with the International Monetary Fund (IMF) and the Fitch assessment will support the financial stability of Serbia.
In the third quarter the economy grew by 0.7% versus 2.4% in the previous 3 months. In 2011, the IMF expects the Serbian economy to grow by 2%. Domestic inflation slowed from 14.7 percent in April to 9.3% in September.

Ireland is planning budget savings for 12.4 billion EUR

Viliyana Filipova — Fri, 04 Nov 2011 17:16:54 +0000

In an attempt to reduce its deficit and to protect the debt crisis caught Greece, Ireland planned budget savings for 12.4 billion EUR over the next four years.
“There is no easy way forward”, said the Irish Finance Minister Michael Noonan. For 2012, planned layoffs totaled 3.8 billion EUR, against the savings in 2011, 6 billion EUR. The Irish Finance Ministry lowered its forecast for growth in 2012 to 1.6% of the expected 2.5%. Ireland is trying to distance itself from the crisis that led the Greek government to the brink of bankruptcy and threatening the survival of the Eurozone.
For restoration of Dublin Irish economy relies primarily on the revival of exports. Earlier this week Goldman Sachs Group Inc. announced the reconstruction of the country is threatened by the slowdown of the global economy.
“We believe the old story is repeated in Ireland – they work well and will continue to do so”, said Brian Devine, economist at NCB Stockbrokers in Dublin. “The country is still a lot more vulnerable, given the high deficit”. The upcoming cuts amount to 8% of Irish gross domestic product (GDP). Since the crisis began in 2008, Ireland has made budget savings of around 20 billion. The annual growth of the Irish economy is expected to reach 2.8 percent average for 2013 – 2015, says the latest government forecast. The initial expectations were for an average growth of 3%. By 2015, Noonan aims to reduce the budget deficit to below 3% enshrined in the Treaty on European Union (EU).
For 2012, the Irish budget deficit is expected to reach 8.6%.

Brazil will not buy European debt

Viliyana Filipova — Wed, 26 Oct 2011 09:17:10 +0000

Brazil rejects the idea of buying European bonds to help tame the debt crisis in the Eurozone. European countries launched their own idea of developing economies, including China and Brazil, to provide financing of troubled countries, such as buying debt. This would help to lower interest on debt securities and the cost of borrowing in Italy and Spain, for example, notes the magazine. The Brazilian Finance Minister Guido Mantega, however, urged Europe to solve its own problems and said that his country has no intention to make such investments.
“I believe that European countries do not need that Brazil bought their bonds. Brazil is not even considering such a step. They must find a solution jointly”, he said. However, Mantega confirmed that Brazil is ready to provide financial assistance through the International Monetary Fund (IMF). The Brazilian authorities have announced plans to buy European bonds with the rest of Brix. The plan, however, adopted a skeptical group. Analysts even commented that only Brazil could not allocate sufficient resources so that the plan for buying European debt to have sufficient effect. Yesterday the information came out that the IMF is considering to include in a special investment vehicle that issue debt and use the proceeds to buy bonds of troubled European countries. Official confirmation is still there.

The public debt in Eurozone countries will reach 83.3% from their GDP in 2012

Viliyana Filipova — Mon, 12 Sep 2011 19:26:08 +0000

The total debt of 17 countries of the Eurozone in 2012 will reach 83.3 percent of their gross domestic product, announced today by the European Commission. During the crisis period, the value of total debt in the Eurozone grew by about one third. In 2007 the index was over 20 percentage points lower. The data show not only that most euro area countries have exceeded the debt limit in the Stability and Growth 60% of the GDP, but the Eurozone as a whole has long exceeded the limits laid down in its economic base documents. This in turn highlights systemic, not accidental nature of this sovereign debt crisis that year and a half now threatens the existence of a common European currency, according to Russian news agencies.
“In times of high and still rising debt levels in the European Union countries, providing support for public finances is a prerequisite for sustainable economic growth and job creation. EU Strategy for gradual and differentiated fiscal consolidation remains valid against the permanent market storms and uncertainty about the pace of recovery”, said the European Commissioner for Economic and Monetary Affairs Commissioner Olli Rehn said in a message to the EC.
In his words, Member States should focus on meeting objectives and to take further measures if necessary. “This development underlines the need for the fastest adoption of a legislative package to support our economic management,” said the Commissioner.

ECB will not increase the interest rate until December 2011

Viliyana Filipova — Wed, 17 Aug 2011 21:36:31 +0000

Barclays Capital said on Friday he expected the European Central Bank (ECB) to keep its key interest rate unchanged at 1.5% until December 2012 when the central bank will probably raise rates by a quarter point. In its previous forecast Barclays expected the ECB to raise interest rates a quarter point in December this year. The revision was announced after the British bank lowered its expectations for the eurozone as a whole. According to Barclays, the gross domestic product (GDP) of the eurozone in 2011 will grow by 1.8 percent instead of the originally projected 1.9%. Growth in 2012 even expected to reach only 1.1% instead of 1.6%. The bank analysts, including chief economist Julian Callow of Europe, indicate that even forecast to increase interest rates in December 2012 is “optimistic” and that this step may be postponed.
“There is a risk in the next 12 months, the ECB lowered its main interest rate by half a point, as part of coordinated action by the G-20″, they say. “In taking this step, however, the ECB will need to significantly lower their criteria for assessing the risks of inflation”.

Investors confidence in the Eurozone increased

Viliyana Filipova — Mon, 04 Jul 2011 09:07:23 +0000

The confidence of European investors has risen for the first time in four months, after oil prices retreated and the economy gained momentum. The index measuring sentiment in the 17-nation euro area rose to 5.3 from 3.5 points in June, the study of Sentix, which is one of the leaders in Germany and Europe. The indicator of current business conditions rose from 18.50 19.25, and that the expected – advanced from -10.50 to -7.75 points. In the monthly study involved 922 investors. It was conducted between June 30-July 2, and results are revised.
In the first quarter euro area recorded the strongest growth for almost a year, helped by unexpectedly strong economic growth in Germany, compensating austerity in other countries in the region. The crude oil prices fell by around 4% last month, EU finance ministers approved a loan to Greece amounted to 8.7 billion, increase confidence.
“It seems that the correction in commodity prices, especially oil, is considered as a cushion,” it said in a statement Sentix. “Improved estimates of the investors are definitely influenced the vote and support for Greece.”
“Inflation fears are far from the hysteria in February and March”.noted by Sentix. “This should reduce pressure on the ECB to raise rates.”

Crude oil price decreased, which gold jumped highly

Viliyana Filipova — Mon, 22 Nov 2010 19:22:48 +0000

The first day of the new week brought an increase in gold prices and cheaper petrol. This is due to the strong decline in risk appetite among investors for uncertainty about the future of Ireland. Yesterday it became clear that the country has requested international assistance to solve their problems, which in turn cause a weakening of the euro. The single currency retreated positions as the only within little more than half a year is required rescue the second member of the eurozone. Today, the euro fell significantly to 1,3608 EUR / USD. This happened despite the known progression common currency in early trade this week. The first trading session bring cheaper oil from 0,3 percent to 81.74 dollars a barrel on the New York Stock Exchange. The lowest price reached during the day was 81.61 dollars per barrel. Zltoto hand rose 0.4 percent to 357.80 dollars an ounce.
After the session, however, the metal continues to become more expensive, raising its price by 10 dollars an ounce.

OECD: Low euro is welcome, recession will miss the Eurozone

Viliyana Filipova — Fri, 28 May 2010 04:00:49 +0000

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.
Manufacturers in the euro area were not late to take advantage of euros due to weak international demand for increased European goods, said Padoan. “If you combine these two factors – strong growth in Asia and the weak euro, this could give a pretty good boost to European exports,” said Padoan. “Low euros in the short to medium term is very good news.” “In any case, it would be good for the world economy if the currency rates suffering a slight adjustment. The euro has certainly been overestimated for some time, while Chinese yuan was certainly underestimated. The publication of his latest economic report in this month the OECD increased its forecast for world economic growth to 4.6 percent in 2010 and 4.5 percent in 2011 than projected in November, respectively 3.4% and 3.7% growth. OECD forecast for the global labor market is also quite optimistic. The organization expected that unemployment in its member countries has reached its peak of about 8.5 percent – much lower cost than originally anticipated 10%. OECD and raise its forecast for U.S. growth to 3.2 percent this year and next than expected in November, respectively 2.5% and 2.8%.

The crisis in the Eurozone did not finished according to Rubini

Viliyana Filipova — Tue, 18 May 2010 21:10:30 +0000

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.
If stringent measures are introduced, however, the markets will stabilize, “says Rubini.