Eurozone debt crisis timeline

May 20, 2010 by admin

May 19 – France says it is not considering a ban on naked short-selling on European debt and says it has not been consulted.

Short selling is a trade that bets a price will fall. Naked short selling is when a trader sells a financial instrument with out first borrowing the instrument or ensuring that it can be borrowed, as would be done in a conventional short sale.

– Merkel urges the EU to speed up financial market supervision and introduce a new tax on them.

May 18 – Germany, in an attack on the financial speculation, which it blames for much of the euro zone’s debt crisis, announces a ban on naked short selling of shares in the top 10 German financial institutions, euro government bonds and on related transactions in credit default swaps (CDS).

– Euro zone finance ministers meet in Brussels to fine-tune their rescue plan, which comprises standby funds and loan guarantees that euro zone governments could tap.

May 17 – Germany says it is making plans to avert future crises.

May 13 – Prime Minister Jose Socrates and opposition leader Pedro Passos Coelho draw up steps to slash Portugal’s deficit, including 5 percent pay cuts for senior public sector staff and politicians. The deficit, which stood at 9.4 percent in 2009, is to fall to 7.3 percent of GDP in 2010 and 4.6 percent in 2011.

May 12 – Spanish Prime Minister Jose Luis Rodriguez Zapatero sets fresh spending cuts of 15 billion euros in 2010 and 2011.

May 11 – Germany’s cabinet approves the biggest national contribution — 123 billion euros in loan guarantees — to the euro zone’s $1 trillion emergency package.

May 10 – Global policymakers install an emergency financial safety net worth about $1 trillion to bolster financial markets and prevent the Greek crisis destroying the euro.

– The package consists of 440 billion euros in guarantees from euro zone states, plus 60 billion euros in a European debt instrument. The IMF will contribute 250 billion euros, taking the total to 750 billion euros, or around $1 trillion.

May 9 – The IMF unanimously approves its part of the rescue loans, and provides 5.5 billion euros immediately.

– German Chancellor Angela Merkel’s center right coalition loses state election in North-Rhine Westphalia, and its majority in the upper house, after agreeing to aid Greece.

May 6 – Greek parliament approves latest austerity bill.

May 4/5 – Public workers in Greece stage a 48-hour strike. Up to 50,000 protest in Athens. Three people are killed when a bank is set on fire.

May 2 – Papandreou says Greece has done deal with EU and IMF opening door to bailout in exchange for extra budget cuts of 30 billion euros over three years, on top of measures already set.

– The package amounts to 110 billion euros over three years and is the first rescue of a member of the 16-nation euro zone.

– Germany approves a 22.4 billion euro ($30 billion) share.

April 27 – Standard & Poor’s downgrades Greece’s credit rating to junk status. The next day it downgrades Spain’s rating because of poor growth prospects.

April 23 – Papandreou asks for activation of EU/IMF aid.

April 22 – Eurostat says Greece’s 2009 budget deficit was 13.6 percent of GDP, not the 12.7 percent it had reported.

April 11 – Euro zone finance ministers approve a 30 billion euro aid mechanism for Greece, but Athens has not activated it.

March 25 – European Central Bank President Jean-Claude Trichet says bank will soften rules on collateral for ECB loans, easing risk of Greek institutions being cut off from funding.

– Euro zone leaders agree to create joint financial safety net, with IMF, to help Greece and restore confidence in euro.

March 5 – A new package of public sector pay cuts and tax increases is passed in Greece to save an extra 4.8 billion euros. VAT to rise 2 percentage points to 21 percent; public sector salary bonuses cut by 30 percent; tax on fuel, tobacco and alcohol rise; state-funded pensions frozen in 2010.

February 5 – Spain attempts to raise retirement age to 67 from 65, which prompts first and only mass union demonstration against the government.

February 2 – Papandreou says Greece will extend a public sector wage freeze to those making below 2,000 euros a month.

– Greece must refinance 54 billion euros ($66.6 billion) in debt in 2010, with a crunch in second quarter as more than 20 billion euros becomes due and market yields for Greek debt soar.

January 29 – Spain announces plan to save 50 billion euros ($70 billion) including government spending cuts totaling 4 percent of GDP. The plan includes 4 percent cuts in public sector pay.

– Economists are unsure it will meet its target of cutting deficit to 3 percent of GDP by 2013 from 11.4 percent in 2009.

January 14 – Greece unveils a stability program, saying it will aim to cut its deficit to 2.8 percent of GDP by 2012.

December 22, 2009 – Moody’s cuts Greek debt to A2 from A1 over soaring deficits, the third rating agency to downgrade Greece.

December 9 – In Ireland, a budget delivers savings of over 4 billion euros. Public service pension age rises to 66 from 65.

December 16 – Standard & Poor’s cuts Greece’s rating by one notch, to BBB-plus from A-minus, saying austerity program is unlikely to produce a sustainable reduction in public debt.

Dec 8 – Fitch Ratings, which had cut Greece to A- when the higher deficit was revealed, cuts Greek debt to BBB+, the first time in 10 years it has been rated below investment grade.

November 20 – A final budget draft shows Greece aims to cut the deficit to 8.7 percent of GDP in 2010 to show EU partners and markets it is serious about restoring fiscal health.

November 5 – George Papandreou’s new socialist PASOK party government says the 2009 budget deficit will be 12.7 percent of GDP — more than double the previously published figure — and pledges to save Greece from bankruptcy.

(Writing by David Cutler, London Editorial Reference Unit;)

Euro falls over debt fears

May 15, 2010 by admin

The euro currency has slipped to an 18-month low against the US dollar amid fears that European spending cuts and tax rises could derail economic recovery.

The euro slid as low $1.2358 on electronic trading platform EBS on Friday, its lowest position since October 2008, while the concerns also pushed down markets and the price of oil.

European countries are battling to stop Greece’s debt crisis, which has required the EU and International Monetary Fund to provide a $136billion bailout and Athens to announce sweeping cuts, spreading to other nations.

“It’s clear that the chief responsibility of Europeans is to take appropriate measures to counteract the current tensions in Europe,” Jean-Claude Trichet, the European Central Bank president, said in an interview with Germany’s Der Spiegel on Saturday.

Trichet called for better monitoring of euro zone government budgets, which under the zone’s stability and growth pact should run deficits of no more than three per cent of GDP.

“What we need is a quantum leap in mutual surveillance of economic policies in Europe. We need improved mechanisms to prevent and punish misconduct.”

“We need an effective implementation of the mutual control, we need effective sanctions for breaches of the stability and growth Pact. The ECB calls here for profound changes.”

Euro warning

Angela Merkel, the German Chancellor, warned on Saturday that the were the European monetary union to collapse it would “shake the whole European project” to its foundations.

“If the euro fails, a lot more will also fail,” she told the Sueddeutsche Zeitung newspaper.

Stocks has rallied after last week’s announcement that EU finance ministers had agreed to a $1 trillion package of loans and loan guarantees to prevent contagion.

But the optimism was short-lived, with the euro continuing to fall and stocks down three days this week.

“The euro hasn’t derived any benefits from any budget cuts from Spain and Portugal,” Chris Turner, the head of FX strategy at ING, told the Reuters news agency.

“People are either concluding that these cuts will be unsuccessful and debt sustainability remains a key issue, or they will be successful in aggressive fiscal tightening and that these economies would slow aggressively and the European Central Bank has to keep interest rates low.”

ING forecasts that the euro will fall as far as $1.15 within six months.

The International Monetary Fund that budget deficits must be reined in to prevent economies contracting.

“As economies gradually recover, it is now urgent to start putting in place measures to ensure that the increase in deficits and debts resulting from the crisis … does not lead to fiscal sustainability problems,” it warned in a report on Friday.

“If public debt is not lowered to precrisis levels, potential growth in advanced economies could decline by over half a per cent annually, a very sizable effect when cumulated over several years.”

The IMF said current policies could result in average debt ratios of 110 per cent of gross domestic product by 2015 for advanced economies.

Source: Al Jazeera and agencies

USD1 trillion global emergency fund to stabilise world financial markets

May 11, 2010 by admin

Global policy makers issue a financial emergency package worth a total of USD 1 trillion to stabilize world financial markets and resolve Greek debt crisis that threatens the stability of the euro.

This financial emergency package is the largest in the two years since the leaders of the G20 injecting money to the global economy after the fall of Lehman Brothers. Financial analysts are quite surprised with the size of the package, and as a result; the euro rose to 2%, while shares in Asia becomes increasingly strong.

U.S. Federal Reserve reopened the currency swap line with the central bank tries to ensure the market liquidity of dollars and the European Central Bank (ECB) said it will buy government debt to recover the confidence of investors.

A Professor at the University of Maryland, Peter Morici said, “With the establishment of a fund of €750 billion to save the Greek’s economy and help other countries which have the same problem; Germany and other European countries also envision the same dreams: the single European currency and the wider European unity – which at first may not be achieved (with the debt crisis).”

Financial markets have punished heavily indebted euro zone members, for example: Portugal, Spain and Ireland; threatening to throw them into Greece’s troubles, in turn roiling global markets.

The USD1 trillion packages are consists of €440 billion in guarantees from euro area states, and €60 billion in a European instrument.

Greece Debt Crisis

May 10, 2010 by admin

Greek crisis has reached a new level this week with the riots occurred. It involves three people injured in Marfin Bank in Athens, after masks protestors threw Molotov bombs in front of the bank windows.

On the Thursday night, the Greek parliament to come to talk about the bailout Greek. Although the Greek main opposition parties oppose it, but the parliament gave the final say about whether Greek will have access to 110 billion by the International Monetary Fund European Union.

Street protests are not about the bailout money, but spending cuts and tax increases are excessive. Also need to understand that the IMF bailout will not be enough to close the Greek debt.

Obviously, there will be financial assistance to help finance Europe. It is evidenced by the European Union has agreed to provide nearly USD1 trillion bailout on the date of May 10, 2010, Monday. Bailout announcement will bring investors back into the market. That was unexpected to everyone how long this will restore confidence in the market and the economy of the European Union.