April 16, 2025

You are here: Home / Archives for bloc

Optimism on European Economy Continues to Rise

August 30, 2013 by

BRUSSELS — Optimism about the euro zone’s economy improved sharply in August, but stubbornly high unemployment, in particular in the bloc’s weaker countries, highlighted the fissure separating the recovering north from the struggling south, according to official data released Friday.

The confidence of business managers polled by the European Commission rose for its fourth successive month in the euro zone, the commission, the executive agency of the European Union, said. The positive trend was particularly strong in Germany and the Netherlands but was also evident in Italy, France and Spain.

The measure of sentiment across the bloc in August, based on business orders, industrial confidence and other factors such as companies’ hiring plans, increased by 2.7 points to 95.2.

Signs of rising confidence have inspired some analysts to predict that the 17 countries using the euro have overcome a crisis that was triggered by banks’ investment in risky mortgage debt and later drove some nations to the brink of bankruptcy.

“The most acute phase of the crisis and the toughest period of belt-tightening is behind us,” said Dirk Schumacher, an economist with Goldman Sachs.

In a separate release, Eurostat, the European Union’s statistics agency, said annual consumer price inflation in August would be 1.3 percent, down from 1.6 percent in the previous month mainly because of a drop in energy prices.

A lack of price pressures is a potential boon to the economy because households have a little more spending power and the European Central Bank can stick to its low-interest-rate policy.

But while morale improved, unemployment in the euro zone in July remained at a record high of 12.1 percent, with a sharp contrast between countries such as Germany — — just over 5 percent and Spain, more than 26 percent, showing that the improvement is not being felt everywhere.

Although there were 15,000 fewer people in the euro zone without a job compared with the previous month, , according to Eurostat3.5 million people under 25 remain unemployed.

“We haven’t broken the negative dynamic in the south of Europe,” said Guntram B. Wolff of Bruegel, a research concern. “Banking fragility, weak growth and high unemployment still present a threat.”

Article source: http://www.nytimes.com/2013/08/31/business/global/optimism-on-european-economy-continues-to-rise.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Recommendation to European Court Favors Google in Privacy Battle

June 25, 2013 by Leave a Comment

An expert opinion requested by the European Court of Justice, which is based in Luxembourg, recommended that Google not be forced to expunge all links to a 15-year-old legal notice published in a Barcelona newspaper documenting a Spanish man’s failure to pay back taxes.

The recommendation of the court’s advocate general, Niilo Jääskinen, who acted as an official fact-finder for the panel, could inform the debate in the European Union’s Parliament over updating Europe’s 1995 data protection law, which was adopted at the dawn of the Internet broadband era. A proposal before the European Parliament and the Council of Ministers, the European Union’s upper chamber, would give residents of the 27-nation bloc broader control over the display of personal information, including the digital “right to be forgotten.”

Mr. Jääskinen concluded that Spain’s ability to enforce the 1995 European law within its borders gave it jurisdiction over Google, which operates a local advertising business aimed at Spanish citizens. But, he concluded, because Google merely aggregated existing information on the Web and was not a “controller” of information, it was not the legal entity that must comply with the provision of the law in question.

In addition, Mr. Jääskinen said Europe’s 1995 data protection law guaranteed a right to be forgotten only in cases where information was incomplete or inaccurate, which was not at issue in the Spanish case.

Wishing to eliminate embarrassing information is not reason enough to redact public records via Google, the court-appointed expert concluded.

The 1995 law, the court recommendation said, “does not entitle a person to restrict or terminate dissemination of personal data that he considers to be harmful or contrary to his interests.

The case before the European court involved a Spaniard, Mario Costeja, who wanted Google to eliminate all links to a 1998 legal notice in a Barcelona newspaper, La Vanguardia, with details of a government auction of his property for failure to pay back taxes. One of Spain’s top courts in Madrid, the Audienca Nacional, asked the European court last year for guidance on how to apply the 1995 law.

Expert recommendations like the one announced Tuesday are followed by the Court of Justice court tribunal in about three-quarters of cases. The court is expected to make its official ruling, which would give guidance to the Spanish high court, later this year.

Bill Echikson, who oversees Google’s freedom-of-expression activities in Europe, the Middle East and Africa, welcomed the advocate general’s recommendation.

“This is a good opinion for free expression,” Mr. Echikson said. “We’re glad to see it supports our long-held view that requiring search engines to suppress ‘legitimate and legal information’ would amount to censorship.”

Javier Aparicio, a privacy lawyer with the Madrid firm of Cuatrecasas Goncalves Pereira, said the court’s recommendation would compel the Spanish data regulator, the Agencia Española de Protección de Datos, to end its practice of attempting to force Google to redact its own search results to suit the desires of Spanish citizens.

The Spanish regulator, in a statement, said it noted the advocate general’s opinion, but declined to comment on the recommendations ahead of the European court’s decision later this year.

The regulator said its policy of requesting deletions on behalf of Spanish citizens was not an attempt to squelch free expression or alter the historic record. Deletions were only requested of Google in cases where information was “obsolete, lacked any relevance or public interest, and where widespread dissemination would lead to the harm of the applicant,” the statement said.

Article source: http://www.nytimes.com/2013/06/26/business/global/european-court-opinion-favors-google-in-privacy-battle.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

European Commission Tables Olive Oil Rule

May 23, 2013 by Leave a Comment

The reaction was severe. Prime Minister Mark Rutte of the Netherlands condemned the measure, calling it “too bizarre for words” and not at all green.

Criticism was particularly harsh in Britain, often the first among critics of the European Union’s reach.

The olive oil rule was “exactly the sort of area that the European Union needs to get right out of, in my view,” Prime Minister David Cameron of Britain said Wednesday after a meeting of the bloc’s leaders in Brussels. “It shouldn’t even be on the table,” he said, immediately begging forgiveness for the wordplay.

On Thursday, the European Commission announced in a hastily called news conference that the measure, meant to take effect on Jan. 1, would be rescinded. Yet the invective continued to flow.

“This was a ridiculous and draconian idea that should never have gone so far,” said Martin Callanan, a member of the European Parliament for Britain’s Conservative Party. “Rather than tackling a double-dip recession, the commission is worried about double-dipped bread.”

In fact, the issue is not as small as it may seem. Olive oil is big business in Europe, not just in sales — the bloc is the world’s largest producer, with up to 70 percent of the global market — but in reputation as well.

The measure, which would have required that restaurants serve olive oil in sealed, clearly labeled and nonreusable containers, was meant to guarantee hygiene, according to the European Commission, the union’s executive body, which originally drafted the rules. It said the labeling would ensure the quality and authenticity of olive oils and also offer suppliers an opportunity to promote brand awareness, backers said. And the measure stood to benefit European olive growers, mostly clustered around the Mediterranean, in some of the countries hardest hit by the crisis in the euro zone.

Fifteen of the union’s 27 governments supported the rule, including the major producers, Italy, Greece, Spain and Portugal. Portugal has had similar measures in place since 2005.

But governments in the non-olive-producing north, including Germany, were opposed. Britain abstained.

Inevitably, perhaps, the affair inspired a gusher of groan-worthy wordplay. On Twitter, posters remade song titles in honor of the debacle, like “Ban on the Run,” “Olive and let die” and “Je ne vinaigrette rien.”

Even though some European officials said the initiative had been killed, the European agriculture commissioner, Dacian Ciolos, insisted Thursday that ways still must be found to ensure that restaurantgoers know what they are drizzling.

In certain restaurants, he said, “you will find a bottle labeled with a certain type of olive oil, but once the bottle is empty it’s topped up with other oil.”

And farmers, who constitute a powerful lobby in Europe, suggested that they would fight on. “It is totally unacceptable that the commission has done a complete U-turn and has succumbed to political pressure like this,” said Pekka Pesonen, the secretary general of Copa-Cogeca, a farmers’ lobbying group.

Harvey Morris contributed reporting from London.

Article source: http://www.nytimes.com/2013/05/24/world/europe/european-commission-tables-olive-oil-rule.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Low Inflation and Falling Imports Confirm Slump in Euro Zone

May 16, 2013 by Leave a Comment

BRUSSELS — Falling prices in Germany and France pulled euro zone consumer inflation to a three-year low in April, while imports fell 10 percent in March, as new data showed the depth of the bloc’s downturn.

The sharp drop in annual consumer inflation to 1.2 percent, confirmed by the European Union’s statistics office, Eurostat, on Thursday, highlights the risk of deflation in the euro zone, which slipped into its longest ever recession at the start of this year.

Prices in Belgium, Germany, Greece and France fell in April from March, and Greece remained in deflationary territory for a second month, along with Latvia, which is due to become the euro zone’s 18th member next year.

Falling world oil prices are behind the drop in inflationary pressures, and the European Central Bank cut interest rates to a record 0.5 percent low this month, aware that inflation could fall further below its target of just under 2 percent.

Energy prices fell 1 percent in April from March in the euro zone, the single biggest drop in Eurostat’s index.

But falling prices also highlight how households are not spending and companies are not investing, dampening the pace of a recovery that could emerge later this year.

The euro zone, which generates almost a fifth of global output, wallowed in recession for a sixth straight quarter at the start of this year, Eurostat said on Wednesday, and economists do not expect growth until next year.

The impact of the bloc’s debt and banking crisis was evident in the euro zone’s international trade balance for March. A €22.9 billion, or $29.5 billion, surplus was due to a 10 percent decline in imports and no increase in exports compared to the same month a year ago, on a non-seasonally adjusted basis.

Demand in Asia and the Americas for the euro zone’s cars, wine and luxury goods is one of the few things that could help lift the bloc out of recession. The lack of export growth in March is likely to be of some concern to policymakers.

While Spain is regaining some of its business dynamism and exports are growing again, Germany and France, Europe’s two largest economies, have stagnated, with the French economy tipping into recession in the first quarter of this year.

Confidence in the euro zone’s economy dropped for a second month in a row in April, and morale darkened significantly in the core countries, particularly in France and Germany.

Article source: http://www.nytimes.com/2013/05/17/business/global/low-inflation-and-falling-imports-confirm-slump-in-euro-zone.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Leaders in Europe Agree to Deal on Long-Term Budget

February 8, 2013 by Leave a Comment

The expected deal met the demands of northern European countries such as Britain and the Netherlands that wanted belt-tightening, while maintaining spending on farm subsidies and infrastructure to satisfy the likes of France and Poland.

It is the first net reduction to the EU’s long-term budget in the bloc’s history, representing a decrease of around 3 percent on the last budget and shaving spending in areas such as infrastructure, bureaucracy and scientific research.

Last-minute haggling over precisely how to divide up the 960 billion euros (822.4 billion pounds) to be spent between 2014 and 2020 dragged out the process, before Herman Van Rompuy, the president of the European Council and chairman of the summit, announced that a definitive deal had been struck among the leaders.

“Deal done!” he said in a message posted on Twitter.

At a news conference shortly afterwards, battling to stay alert after nearly 36 hours awake, Van Rompuy said the agreement was a budget of moderation that reflected straightened times.

“We simply could not ignore the extremely difficult economic realities across Europe, so it had to be a leaner budget,” he said. “For the first time ever, there is a real cut compared to the last multiannual financial framework.”

The deal must now be approved by the European Parliament, where leading legislators have already expressed opposition. Securing parliamentary approval is likely to take several months and is far from guaranteed.

After negotiating through the night, leaders broke for a brief rest, allowing German Chancellor Angela Merkel to swap her green jacket for a lilac one, and returned to address a list of questions, including how to satisfy smaller countries such as Romania and Bulgaria among the 28 states covered by the budget.

Mindful of their restive voters, Northern European countries were adamant that as they shrink spending at home and grapple with the aftermath of the global financial crisis, the European Union had to do the same by cutting headline spending.

Around 12 billion euros was cut from the last budget proposal, made at a summit in November, bringing the total reduction from the European Commission’s original blueprint to 85 billion euros. European Commission President Jose Manuel Barroso said he was disappointed, but understood the logic.

While vast as a headline figure, in annual terms the budget amounts to just 1 percent of total EU economic output.

The cuts agreed fell mainly on spending for cross-border transport, energy and telecoms projects, which were reduced by more than 11 billion euros. Pay and perks for EU officials – a top target for Britain – were lowered by around 1 billion euros.

Spending on agriculture was spared further cuts, and there was an increase of about 1.5 billion euros on rural development over the seven years, satisfying France, Italy and Spain.

NARROW GAP

Even with a deal, around 40 percent of the spending will still be dedicated to farming, something that frustrates many northern European states, which want a more dynamic budget.

At the same time, officials said money had been set aside for measures to stimulate economic growth, for research and for structural funds to flow to countries worst hit by the economic crisis, including Greece, Ireland, Portugal and Spain.

There were also stipulations for green investment and 6 billion euros for a fund to combat youth unemployment via apprenticeships in hard-hit countries.

The deal still faces further hurdles, not least at the bloc’s parliament. “The European Parliament will not accept this deficit budget if it is adopted in this way. That is certain,” the parliament’s president Martin Schulz said.

Van Rompuy urged the parliament to be responsible and to reflect carefully before deciding to reject the spending plan.

In recent weeks, Van Rompuy has been in touch with every EU leader to assess where the contours of an agreement may lie.

But reaching a deal was never going to be a simple since it also involves delicate negotiations over rebates – amounts countries get reimbursed after they have made contributions.

Denmark won a refund of around 130 million euros a year, but other rebates were trimmed or modified. The Czech Republic was among a small group of countries that fought for final extra distributions, mostly for funds to build infrastructure.

The EU calculates two budget numbers: a headline ‘commitments’ figure that sets a ceiling on how much can be paid out, and a lower ‘payments’ figure that indicates what will actually be spent.

The baseline payments figure in the framework agreed on Friday was 908 billion euros, a figure low enough to convince Britain, which focuses on payments rather than commitments, that it was getting a satisfactory deal.

(Additional reporting by John O’Donnell, Illona Wissenbach, Andreas Rinke, Robin Emmott, Luke Baker, Mark John, Peter Griffiths and Emmanuel Jarry; writing by Luke Baker and Robin Emmott; Editing by Toby Chopra, Will Waterman and Giles Elgood)

Article source: http://www.nytimes.com/reuters/2013/02/08/business/08reuters-eu-budget.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

European Leaders Back Common Banking Rules

December 15, 2012 by Leave a Comment

BRUSSELS — European Union leaders pledged on Friday to take further steps to set up common banking rules for the bloc, but they delayed plans for a shared budget for the euro zone nations as pressure appeared to be easing on the single currency.

At the end of a two-day summit meeting, the leaders fully endorsed a deal, reached Thursday by European finance ministers, to place the region’s biggest banks under the supervision of the European Central Bank.

The leaders also agreed on the need to put in place by 2014 a central means for shutting down failing euro zone banks. That policy is aimed at stopping banks from accumulating so much debt that they put the finances of countries like Ireland and Spain at risk, in turn threatening the future of the euro.

But the leaders also appeared to take advantage of the relative calm in financial markets to avoid rushing toward any further central integration of banking in the region.

At a news conference Friday at the end of the meeting, Chancellor Angela Merkel of Germany brushed off suggestions that leaders were complacent. She acknowledged, however, the difficulties of pressing 27 different nations to adopt similar fiscal and economic systems in the middle of a period of low growth and high unemployment.

“On the one hand, we have accomplished a lot,” she said. “But we also have tough times ahead of us that can’t be solved with one big step.”

Analysts were mostly unimpressed by the results.

“The E.U. summit failed to deliver any big decisions,” Gizem Kara, an analyst with BNP Paribas, wrote in a research note Friday. “Certainly, some countries — Germany, in particular, with its election in September — may want to postpone major decisions as much as possible.”

Pursuing a more integrated banking framework could entail even more difficult negotiations than in the case of the banking supervisor because it implies that nations share some liability for failing lenders in other countries and that they give up some sovereign rights over how those decisions would be made.

As part of efforts to make it acceptable, the European leaders said the resolution system should receive significant financing by banks, in advance. A financial “backstop” to ensure failing banks do not endanger national finances should be “fiscally neutral over the medium term” and ensure that “public assistance is recouped by means of ex post levies on the financial industry,” the leaders said in their formal conclusions.

But other plans, like a bigger budget for the euro area, would have to wait amid continuing disagreement on what it should be used for.

France has continued to emphasize the need for a budget to counter economic shocks and better manage unemployment. But Germany wants the money mainly available for countries that carry out painful structural reforms.

Leaders agreed to establish a so-called solidarity fund for euro area countries, which would be limited to 10 billion to 20 billion euros ($13 billion to $26 billion). The fund would be linked to countries signing contracts in exchange for carrying out reforms.

“To me it seems rather intelligent to start with a specific fund dedicated to these contracts for employment, growth and competitiveness, more than waiting for an eventual budget for the euro zone that perhaps will never come,” the French president, François Hollande, said in a news conference Friday.

The current atmosphere of calm could still be broken by events in Italy, where the economy is contracting, debt levels are rising and Silvio Berlusconi, the scandal-tainted former prime minister, has threatened to try to reclaim his old office next year.

It remained unclear Friday whether Mr. Berlusconi would run and, if that were to happen, whether he would campaign on promises to reverse reforms put in place by Mario Monti, the current prime minister.

But leaders are aware that the re-emergence of Mr. Berlusconi — who attended a meeting of center-right parties in Brussels on Thursday — could destabilize markets.

Ms. Merkel praised Mr. Monti during a news conference on Friday, but she said it was not her role to endorse him as a potential candidate. “What Mario Monti and his government have done in recent months has greatly contributed to a growing confidence in Italy,” she said.

Ms. Merkel said she would “not interfere as the head of the German government in the question of who is a candidate in Italy and how the elections are structured there.”

Mr. Hollande also said he did not wish to interfere in Italian matters, though he did take a swipe at the former prime minister. “I don’t think Berlusconi is all that serious,” Mr. Hollande told journalists in Brussels. “With him, what’s true one day is not necessarily true the next.”

David Jolly contributed reporting from Paris.

Article source: http://www.nytimes.com/2012/12/15/business/global/european-leaders-back-banking-regulation-but-delay-further-measures.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Italy’s Borrowing Costs Soar

November 29, 2011 by Leave a Comment

The Italian treasury sold €7.5 billion of bonds, including three-year bonds at a yield of 7.89 percent, meeting demand for 1.5 times the amount on auction. The euro and European stocks were little changed after sharp gains on Monday.

At an evening session, euro-zone ministers were hoping to nail down guidelines on how to expand the European Financial Stability Facility, the main bailout fund for heavily indebted euro-zone countries. Such a step could in theory make it possible for the fund to begin buying government bonds on a large scale by early next year.

The ministers were also expected to approve the release of an €8 billion, or $10.7 billion, loan to Greece — the latest installment in its international rescue package.

Both actions have been debated for months — a reminder of the painfully slow pace of European decision making, compared to the speed with which the financial markets have battered confidence in the euro. As the crisis drags on, fears have grown that the euro currency union could collapse, with potentially catastrophic consequences for Europe and the global economy.

Yields on euro-zone government bonds, which move in the opposite direction of prices, have been rising for months amid growing turmoil and doubts about the bloc’s ability to close ranks and respond credibly to market attacks on individual countries such as Italy and Spain.

With the exception of a few countries like Greece, the finances of euro members are relatively strong in comparison with those of more stable sovereign borrowers like the United States and Britain. But the political response to the crisis has been hampered by disagreements between Germany and the European Central Bank, on the one hand, which do not want to shoulder the large cost of a bailout, and other countries that see no credible alternative.

On Monday, President Barack Obama met in Washington with top European leaders, including Jose Manuel Barroso, president of the European Commission; Herman Van Rompuy, president of the European Council; and Catherine Ashton, the European foreign policy chief. Mr. Obama urged an immediate resolution to the debt crisis, saying the issue is “hugely important” for the United States.

The yield on the three-year bonds was the most Italy has paid to move such securities since the creation of the euro, according to Reuters, and sharply above the 4.93 percent the government paid at the previous auction at the end of October. It sold 10-year bonds at a rate of 7.56 percent, 1.5 percentage point higher than last month.

Italy’s budget deficit is not huge in comparison with other developed nations, but its debt is among the world’s largest. Considering the burden of repaying that debt, interest rates of that magnitude will not be long sustainable.

The auction was held as the lower house of the Italian Parliament was preparing balanced-budget legislation, a key measure for convincing investors and euro-zone partners of its commitment to reeling in its public debt.

Also on Tuesday, Belgium sold €502 million of three-month Treasury bills at an average yield of 2.19 percent, up from the 1.58 percent it paid just two weeks ago. Demand rose to 5.61 times the amount sold from 1.45 times at the previous auction.

It also sold €513 million of six-month bills at an average yield of 2.44 percent, more than double the 1.09 percent on Nov. 8. The bid-to-cover ratio was 2.76, up from 1.85 times in the prior auction.

Belgian borrowing costs rose after Standard Poor’s on Friday cut its rating on the country’s sovereign debt to AA from AA-plus.

In addition to the turmoil that is shaking all the euro-zone countries, the agency cited Belgian’s peculiar problems, which include the fact that it has been without an elected government for the past 19 months, as well as the cost of bailing out Dexia, the French-Belgian bank that last month became the first European bank to be partially nationalized amid the euro crisis.

European ministers Tuesday were planning to address an expansion of their bailout fund, which was meant to raise money by issuing bonds backed by the stronger European countries and loan it to shakier countries facing high interest rates on their debt.

It now also plans to offer insurance of up to 30 percent to investors in some European bonds to encourage them to buy.

The head of the E.F.S.F., Klaus Regling, has said that by leveraging the roughly €250 billion at his disposal by a multiple of three or four times, the bailout fund would have a maximum value of around €1 trillion.

Meanwhile Greece’s loan has been held up by political turbulence in Athens, where former Prime Minister George Papandreou suggested a referendum on the bailout before he stepped down. In the wake of the referendum idea — which was scrapped — European leaders requested a written commitment from Greek political leaders that they accept the terms of the rescue.

Meanwhile a broader proposal for a Europe-wide solution for the crisis, focusing on much tighter rules for euro-zone nation, is expected before a meeting of European Union leaders on Dec. 9. A failure to sort out the bloc’s problems by then could have dire consequences, economists have warned.

Stephen Castle contributed reporting from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=e2fb4e96eb311b604fa61e1a8de99323

Filed Under: Business News Tagged With: ,

News Analysis: Greece Awaits Votes on Rescue Package in Euro Crisis

September 26, 2011 by Leave a Comment

It’s not clear whether the global markets will give them that much time. Investors will be watching a series of crucial votes by European parliaments due this week on an earlier package aimed at preventing a default by Greece, Ireland and Portugal.

Sensing urgency from the markets and keenly aware of the potential consequences of a rejection of that plan by the German Parliament when it votes on Thursday, Chancellor Angela Merkel drew parallels on Sunday between the risk of a Greek default now and the broader chaos in the financial system that followed the collapse of Lehman Brothers in 2008. “We are doing it for ourselves,” she said in a radio interview on Sunday night aimed at persuading a skeptical German audience that setting aside hundreds of billions of euros to prop up shaky neighbors made sense. “Otherwise, the stability of the euro would be in danger.”

“We can only take steps that we can really control,” she said. If a Greek default started a fresh financial crisis, “then we politicians will be held responsible.”

All 17 member countries of the euro bloc must approve the strengthening of the rescue package, known as the European Financial Stability Facility, with votes set on Tuesday in Slovenia, Finland on Wednesday and Germany on Thursday. So far, only six countries have signed off, but European leaders say the process should be completed by mid-October.

Only after that do they seem likely to come up with a broader rescue package aimed at relieving the anxiety that has driven markets lower in recent weeks. The markets may not wait that long.

Indeed, for political leaders like Mrs. Merkel, the problem now is that investors have already concluded that the 440 billion euro bailout fund, the expansion of which is being voted on this week, might not be enough to stop the contagion from spreading. On Friday, the yield on two-year Greek notes rose to 69.7 percent, suggesting that investors considered a default all but inevitable.

When the initial expansion of the bailout fund was agreed to in July, worries centered on three smaller countries on the periphery of Europe — Greece, Ireland and Portugal. Since then, however, fears have multiplied about the ability of Spain and Italy, the third-largest economy in the euro zone, to keep borrowing heavily, creating doubts about pools of debt from countries that right now are considered “too big to bail.”

The worry is that a default by Athens would threaten these and other sovereign borrowers, as well as banks in France and Germany that hold tens of billions of euros in Greek debt. That, in turn, has helped push shares of American banks, which are intertwined with their European counterparts, sharply lower, dragging down the broader market.

“The next three weeks are absolutely critical, and they can still stabilize the markets, but I wouldn’t tell my clients to put money to work until we see it,” said Rebecca Patterson, chief market strategist at J.P. Morgan Asset Management. “As we stand right now, European policy makers have gotten well behind the curve. It’s not about the periphery anymore; it’s about the core, too.”

A fresh indicator of market confidence in European borrowers will come as Italy sells billions of euros in bonds this week, culminating on Thursday. Weak demand at an auction on Sept. 13 brough global worries about the safety of Italian debt, which stands at a whopping $2.3 trillion, making Italy one of the world’s largest borrowers.

What is more, Italy’s debt load equals 120 percent of the country’s gross domestic product. In Europe, only Greece is in worse shape, with debt totaling roughly 150 percent of G.D.P.

In addition, the Greek Parliament must vote this week on a recently proposed property tax increase that is seen as a test of whether the country will stick to past promises to tighten its belt.

Greece is also trying to show its austerity program is enough to qualify for an aid payment due in October.

Last week, anxiety about Europe led to the worst week for the Dow Jones industrial average since the onset of the financial crisis in 2008, and as was the case then, it seems events are moving faster than political leaders, further narrowing their options.

Besides the 6 percent drop on Wall Street last week, investors are concerned about the continuing rout in European stocks, especially bank shares, which stand at two-year lows. In another troubling echo of the events of 2008, traders abandoned former havens like gold, oil and other commodities, preferring the safety of United States Treasury securities or, better yet, cash.

In Asia on Monday, investors remained nervous. The Nikkei 225 index in Japan was down about 2 percent in the early afternoon, and the Hang Seng index in Hong Kong was down about 1.5 percent.

Meanwhile, deep divisions persist, not just among political leaders in different countries but among policy makers and the heads of Europe’s biggest banks.

Under a deal worked out in July, European banks agreed to take a 21 percent loss on their holdings of Greek debt as part of a restructuring that would give Greece more time to pay back what it owes, but now it appears political leaders in Germany and elsewhere want the banks to take a bigger hit.

Wolfgang Schäuble, Germany’s finance minister, suggested as much in a tough speech delivered to international bankers at the Institute for International Finance over the weekend. He argued that because of their bad lending decisions, bankers shared the blame for Greece’s predicament and should also share in the cost.

“Without a substantial contribution from financial institutions,” he said, “the legitimacy of our westernized capitalized systems will suffer.”

But Josef Ackermann, chief executive of Deutsche Bank and the chairman of the Institute for International Finance, quickly rejected any effort to renegotiate what had been agreed to in July. “It is not feasible to reopen the agreement,” he said.

Now, not only must the original July plan be approved, but policy makers must agree on how to augment it in the face of widening worries.

“The Europeans are trying to balance the process of approval in 17 parliaments and trying to get the most firepower” from the stability fund, said Robert B. Zoellick, president of the World Bank.

Just how to do that, including what can be purchased and how it might be leveraged, was “richly discussed,” Mr. Zoellick said at the annual meetings of the International Monetary Fund and the World Bank this weekend.

On both sides of the Atlantic, there is a feeling that policy makers have few arrows left in their quiver. A Federal Reserve announcement on Wednesday that it would buy $400 billion in long-term Treasury securities left the stock market unimpressed.

“It gets worse before it gets better,” said Adam Parker, Morgan Stanley’s chief United States equity strategist. “If you’re banking on a policy to bail you out, you will be disappointed.”

Landon Thomas Jr. and Jack Ewing contributed reporting.

Article source: http://www.nytimes.com/2011/09/26/business/global/greece-awaits-votes-on-rescue-package-in-euro-crisis.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Surveys Show Manufacturing Slowing Worldwide

September 3, 2011 by Leave a Comment

In the euro area, the purchasing managers’ indexes showed that manufacturing contracted for the first time in almost two years in August, echoing earlier data from South Korea and Taiwan, where new export orders fell sharply.

Britain’s manufacturing sector shrank at its fastest pace in more than two years, hurt by a sharp decline in demand for exports.

The pace of growth in the U.S. manufacturing sector slowed to a crawl but fared better than economists had forecast.

The Institute for Supply Management said its index of national factory activity edged down to 50.6 from 50.9 the month before. The reading topped expectations of 48.5, which would have signaled a contraction, according to a Reuters poll of economists.

And although China’s official P.M.I. rose slightly, its first increase since March, it also showed the effects of slowing demand in Europe and the United States.

A P.M.I. figure for China compiled by HSBC, which relies more heavily on private companies than the large state-owned enterprises that dominate the government’s P.M.I. report, showed that growth in factory activity, while still rapid, was slowing.

“The key thing they show is that we are not out of the woods,” said Jeavon Lolay at Lloyds Banking Group. “The economies are very vulnerable to any shock, which at this moment in time there are a few of. What is happening in the euro zone is very important, and in the U.S., growth has weakened markedly in the last two quarters. There is a risk of a return to recession.”

Markit’s Eurozone Manufacturing P.M.I. fell to 49 in August from 50.4 in July, revised down from a preliminary 49.7. It is the first time since September 2009 that the index for the sector, which drove a large part of the bloc’s recovery, has fallen below the 50 mark that divides growth from contraction.

In a worrying sign for policy makers, the slowdown appears to be spreading. German factories, which have been supporting growth in the bloc, eased off the accelerator, and French manufacturing contracted for the first time since July 2009.

The German economy grew just 0.1 percent in the second quarter, far slower than the 1.3 percent growth seen in the first three months of the year, figures released Thursday showed, adding to evidence that the outlook for its economy, Europe’s largest, was darkening.

New export orders in the euro zone fell for the third straight month. The subindex declined to 46, down from the preliminary 46.9 reading and much lower than the 47.6 in July.

Switzerland, which is outside the 17-nation euro zone, said Thursday that its economy grew at its slowest pace since 2009, as a record-strong Swiss franc hurt exports.

“The West’s deteriorating growth outlook is becoming an increasingly heavy burden to bear,” said Donna Kwok, an economist with HSBC, which sponsors P.M.I. reports in many Asian countries.

Weak growth in the United States and Europe has revived worries that they will slip back into recession, which would deal a heavy blow to Asia’s export-driven economies.

Most advanced economies have already cut interest rates to near zero, and with government finances constrained, policy makers have limited options for spurring stronger growth.

The European Central Bank, the U.S. Federal Reserve and the Bank of England are all expected to retain their ultra-loose monetary policy for at least another year.

That leaves the big emerging economies as the best hope for propping up global growth, but they are also struggling.

While HSBC’s China P.M.I. rose to 49.9 last month, it still pointed to slower growth, and Taiwan’s dropped to 45.2, the lowest reading since January 2009, in the middle of the global financial crisis that crushed world trade.

“Asian growth is set to slow more sharply than most expect over the coming months,” a Credit Suisse economist, Robert Prior-Wandesforde, wrote in a note to clients.

China’s index for new export orders dropped to 48.3 from July’s 50.4, and Beijing attributed the decline at least partly to the debt crises in advanced economies. The National Bureau of Statistics said the export sector was “facing challenges.”

Taiwan had a sharp decrease in new export orders, particularly from Europe, while in South Korea the subindex fell to a seasonally adjusted 48.86 from 52.13, dropping below the neutral point for the first time since October last year.

Article source: http://feeds.nytimes.com/click.phdo?i=b43ce51edb660c193c0fc6e13d7ae29d

Filed Under: Economy News Tagged With: , ,

Expanded Euro Bailout Fund Clears Hurdle in Germany

August 31, 2011 by Leave a Comment

BERLIN — The German Cabinet approved new powers for the euro zone’s bailout fund on Wednesday, kicking off a month-long campaign to convince sceptics in Chancellor Angela Merkel’s conservative camp to back efforts to contain the bloc’s crisis.

Concerned that Germany is ceding too much power to Brussels, some members of her center-right coalition have threatened to vote against bolstering the fund — the European Financial Stability Facility — when the lower house of parliament meets on Sep. 29.

If enough conservatives rebel, and Mrs. Merkel is forced to rely on opposition parties to pass the legislation, she could face pressure to dissolve parliament and call early elections, although the chances of that seem slim.

“It is very important to get new powers for the E.F.S.F. passed swiftly, not just because it is expected to assume the bond-buying role of the” European Central Bank, “but simply because the commitment of resources sends a very strong signal of reform momentum in the euro area,” said Silvio Peruzzo, European economist at RBS in London.

“Our working assumption at the moment is that Germany is fully on board to give the E.F.S.F. new powers. But we are at a point where the political capital is being tested,” he said.

Euro zone leaders last month agreed to boost the effective size of the fund to €440 billion, or $635 billion, and give it extra powers, including a potential role in helping to recapitalize banks.

In a sign of how important the current debate in Germany is for investors, news of the Cabinet approval pushed the euro up against the dollar.

There are fears that if Berlin insists on its parliament having a greater say in the E.F.S.F., other countries will too, limiting the fund’s ability to act swiftly to save stricken states.

Faltering economic growth in the 17-nation euro zone risks prolonging the debt crisis, which began nearly two years ago and has since spread from peripheral states like Greece, Portugal and Ireland — all of which have received bailouts — to menace bigger economies like Spain and Italy.

The German Finance Minister Wolfgang Schäuble said an expanded E.F.S.F. that would have powers to intervene in bond markets and provide precautionary credit lines to troubled member states would help the bloc “prevent contagion in good time.”

Mrs. Merkel’s conservative coalition has 330 seats in the 620-seat Bundestag, the lower house of parliament. With nearly two dozen of her lawmakers reportedly considering voting against the stronger fund, conservative leaders have come up with a proposal to assuage fears that they will be bypassed on future aid decisions.

Under the plan, the Bundestag’s budget committee would be informed of minor decisions but there would be a fuller parliamentary consultation in other cases. Norbert Barthle, chief budget expert for the conservative bloc, said that should mollify dissenting legislators without introducing lengthy new legislative hurdles.

The lawmakers’ insistence on having more influence over the deployment of the rescue fund is expected to be upheld by Germany’s top court next Wednesday.

In what is expected to be a landmark ruling, many legal experts expect the Constitutional Court to say that the government broke no laws by contributing to euro-zone bailout funds, but that Parliament should be consulted more.

As Europe’s biggest economy, Germany foots more than a quarter of the bill for euro zone bailouts.

“Governments in the euro zone can no longer assume they can take decisions that affect their citizens very closely without consulting their parliaments,” said political scientist Oskar Niedermayer at Berlin’s Free University. “It has become clear that this no longer works in Germany, and I think parliaments elsewhere in the euro zone will be even more difficult.”

The Bundestag vote on Sep. 29 will be followed by a vote in the upper house, the Bundesrat, the next day, which would allow ratification of the fund by the end of the month as Mrs. Merkel and the French President Nicolas Sarkozy have promised.

This month Germany also starts discussing the permanent bailout fund that is to become operational in mid-2013, the European Stability Mechanism, which has to be ratified by year-end.

Frank Schäffler, a lawmaker with the Free Democrats, junior partners in Mrs. Merkel’s coalition and a bailout sceptic, said it was possible she would manage to push through the E.F.S.F., “but I don’t believe the Bundestag will give her a majority on the E.S.M.”

Article source: http://www.nytimes.com/2011/09/01/business/global/expanded-euro-bailout-fund-clears-hurdle-in-germany.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
Next Page »