January 20, 2022

Aid Plans Emerge for Europe’s Banks

With the European Commission scheduled on Wednesday to release proposals to recapitalize Europe’s banks, France announced its own detailed plans aimed at protecting its most vulnerable financial institutions.

Alain Juppé, the French foreign minister, told the National Assembly that several leading French banks like BNP Paribas, Crédit Agricole and Société Générale, which are deeply exposed to the sovereign debt of Greece and other Southern European countries, would move to increase their capital reserves, initially by using their own revenue or through the financial markets. Money from the government would be drawn upon only as “a last resort,” he said, according to Reuters.

But Mr. Juppé said that the move, which was agreed upon with Germany during talks on Sunday, meant the banks’ best buffers against losses — so-called core Tier 1 capital — would increase to 9 percent or higher, from 7 percent, by 2013.

It was unclear whether any of that money might be drawn from the proposed euro zone bailout fund rather than directly from French government funds.

The issue is particularly sensitive in France because of fears that the country could lose its triple-A credit rating if it had to inject billions of euros into its banks. That would be a huge political setback for the French president, Nicolas Sarkozy, who faces election next year.

The French announcement on intervention came as the euro zone entered a critical countdown, with investors in financial markets expecting a European Union summit meeting on Oct. 23 and the leaders of the Group of 20 leading economies Nov. 3 to endorse major decisions to help resolve the European debt crisis.

Meanwhile, lawmakers in Slovakia voted late Tuesday to reject the expansion of the euro rescue fund. The 440 billion euro, or $601 billion, rescue fund, approved by the 16 other members of the euro currency zone, was entwined with the domestic politics of Slovakia, the small former Soviet bloc country. Officials here in Brussels were weighing the possibility of a different way to circumvent the problem if Slovakia failed to pass the measure.

In Brussels, Jean-Claude Trichet, the departing president of the European Central Bank, underlined the urgent task confronting European leaders, who have consistently failed to rise to the challenge.

“Sovereign stress has moved from smaller economies to some of the larger countries,” Mr. Trichet told European lawmakers. “The crisis is systemic and must be tackled decisively.”

The French bank recapitalization plan was expected to complement proposals from the European Commission, whose president, José Manuel Barroso, said that he would offer proposals Wednesday to protect Europe’s banks from potential losses from the sovereign debt that they hold from Greece, Portugal, Italy and Spain.

Like the French-German plan, the European proposals were likely to emphasize that taxpayer money would be used only as a last resort.

Meanwhile in Athens, there was a breakthrough in negotiations over Greece’s efforts to get its public finances under control to qualify for vital international aid. Representatives from the International Monetary Fund, the European Commission and the European Central Bank said that Greece’s next slice of loans, totaling 8 billion euros, would most likely be disbursed in early November after approval from euro zone finance ministers and the I.M.F.

The statement from the representatives of the so-called troika ended weeks of stalemate between the Greek government and its international lenders, and concluded a period of brinkmanship that intensified last week when European finance ministers postponed a decision on whether to approve the loan.

Now, after lengthy negotiations, the declaration Tuesday paved the way for the release of enough money for Athens to pay its bills and postpone any unplanned default or restructuring of its debts.

The troika will have to submit a full report for approval by euro zone finance ministers, who will gather before the Oct. 23 European summit meeting, and by the I.M.F. board, which is expected to meet in early November.

Stephen Castle reported from Brussels and Niki Kitsantonis from Athens.

Article source: http://feeds.nytimes.com/click.phdo?i=a878a6b0a344c5811eaa0ffe5e028561

Aid to Greece Likely in November

With the European Commission scheduled on Wednesday to release proposals to recapitalize Europe’s banks, France announced its own detailed plans aimed at protecting its most vulnerable financial institutions.

Alain Juppé, the French foreign minister, told the National Assembly that several leading French banks like BNP Paribas, Crédit Agricole and Société Générale, which are deeply exposed to the sovereign debt of Greece and other Southern European countries, will move to increase their capital reserves, initially by using their own revenue or through the financial markets. Money from the government would be drawn upon only as “a last resort,” he said, according to Reuters.

But Mr. Juppé said that the move, which was agreed upon with Germany during talks on Sunday, meant the banks’ best buffers against losses — so-called core Tier 1 capital — would increase to 9 percent or higher by 2013 from 7 percent.

It remained unclear whether any of that money might be drawn from the proposed euro zone bailout fund rather than directly from French government funds.

The issue is particularly sensitive in France because of fears that the country could lose its triple-A credit rating if it had to inject billions of euros into its banks. That would be a huge political setback for President Nicolas Sarkozy of France, who faces election next year.

The French announcement on intervention came as the euro zone entered a critical countdown, with investors in financial markets expecting a European Union summit meeting on Oct. 23 and the leaders of the Group of 20 leading economies Nov. 3 to endorse major decisions to help resolve the European debt crisis.

Meanwhile, lawmakers in Slovakia voted late Tuesday to reject the expansion of the euro rescue fund. The 440 billion euro, or $601 billion, rescue fund, approved by the 16 other members of the euro currency zone, was entwined with the domestic politics of Slovakia, the small former Soviet bloc country. Officials in Brussels were weighing the possibility of a different way to circumvent the problem if Slovakia failed to pass the measure.

In Brussels, Jean-Claude Trichet, the departing president of the European Central Bank, underlined the urgent task confronting European leaders, who have consistently failed to rise to the challenge.

“Sovereign stress has moved from smaller economies to some of the larger countries,” Mr. Trichet told European lawmakers. “The crisis is systemic and must be tackled decisively.”

The French bank recapitalization plan was expected to complement proposals from the European Commission, whose president, José Manuel Barroso, said that he would offer proposals Wednesday to protect Europe’s banks from potential losses from the sovereign debt that they hold from Greece, Portugal, Italy and Spain.

Like the French-German plan, the European proposals were likely to emphasize that taxpayer money would be used only as a last resort.

Meanwhile, in Athens there was a breakthrough in negotiations over Greece’s efforts to get its public finances under control to qualify for vital international aid. Representatives from the International Monetary Fund, the European Commission and the European Central Bank said that Greece’s next slice of loans, totaling 8 billion euros, would most likely be disbursed in early November following approval from euro zone finance ministers and the I.M.F.

The statement from the representatives of the so-called troika ended weeks of stalemate between the Greek government and its international lenders, and concluded a period of brinkmanship that intensified last week when European finance ministers postponed a decision on whether to approve the loan.

Now, after lengthy negotiations, the declaration Tuesday paved the way for the release of enough money for Athens to pay its bills and postpone any unplanned default or restructuring of its debts.

The troika will have to submit a full report for approval by euro zone finance ministers, who will gather before the Oct. 23 European summit meeting, and by the I.M.F. board, which is expected to meet in early November.

Niki Kitsantonis reported from Athens.

Article source: http://www.nytimes.com/2011/10/12/business/global/aid-to-greece-likely-in-november.html?partner=rss&emc=rss

Fair Game: What Investors Don’t Know About Europe

That’s what Timothy F. Geithner, the Treasury secretary, told Congress last week, trying to allay concerns that American banks might be hurt by the escalating crisis in Europe.

Investors have heard such assurances before, and they have learned to take them with a barrel of salt. Remember how the subprime crisis was going to be “contained”?

As the situation in Europe deteriorates, our own financial institutions are coming under growing scrutiny from investors. American banks have made loans to European ones. Some have also written credit insurance on the debt of European institutions and troubled nations like Greece. So if a default were to occur, some banks here would be on the hook.

Last week, officials at Morgan Stanley worked overtime trying to calm investors about the bank’s exposure to Europe. The company had $39 billion in exposure to French banks at the end of last year, not counting hedges and collateral. (Some analysts argue that the amount today is far lower, and at the end of the week, Morgan Stanley appeared to have relieved investor fears.)

Whatever the case, American banks have been writing more credit insurance lately. As of the end of June, some 34 federally insured commercial banks had sold a total of $7.5 trillion of credit protection, on a notional basis, according to the Comptroller of the Currency. That was up 2.3 percent from the end of March.

To be sure, these figures represent the total amount of insurance written and do not reflect other offsetting trades that bring down these banks’ actual exposure significantly.

For investors, the challenges in trying to assess the true exposures are real. Many of the risks in these institutions are maddeningly hard to plumb, and open to a range of interpretations. The fact is, investors must deal with significant gaps in the data when trying to analyze a bank’s exposure to credit default swaps. Even the people who set accounting rules disagree on how these risks should be documented in company financial statements.

A recent report by the Bank for International Settlements noted: “Valuations for many products will differ across institutions, especially for complex derivatives which may not trade on a regular basis. In such cases, two counterparties may submit differing valuations for valid reasons.”

Investors, therefore, have to trust that the institutions are being appropriately rigorous.

To compute the fair value of derivatives contracts, financial institutions estimate the present value of the future cash flows associated with the contract. On this part, everyone agrees.

But there are two subsequent steps in the valuation exercise that can produce wide variations on an identical exposure. First is the manner in which an institution offsets its winning and losing derivatives trades to come up with a so-called net exposure. Accounting rule makers disagree about the right way to approach this process.

Standard setters in the United States allow an institution to survey all the contracts it has with a trading partner and compute exposure as the difference between winning trades and losing ones.

International standard setters have taken a different view. They have concluded that investors are better served by knowing the gross figures of all of an institution’s trades, both the profitable ones and the money losers. Those favoring this approach say it gives investors more information and greater insight into the risks on the books, like how concentrated the bank’s bets are.

A recent report from the Bank for International Settlements illustrates how different the exposures can be, depending on which approach is used. Posing three hypothetical examples, the report noted that while the gross values of various derivatives totaled $41, the same trades dropped to $17 after netting, as is allowed in the United States.

THE second area where investors must rely on institutions to do the right thing involves the collateral that has been supplied to secure derivatives contracts. Banks reduce their exposure to a possible loss by the amount of collateral they have collected from a trading partner.

But is the collateral solid? Is the bank valuing it properly? Can it be located quickly? This, again, is a gray area.

The B.I.S., in its most recent quarterly review, highlighted these challenges. It said that gleaning information about collateral was difficult, and that arriving at a proper valuation was, too.

Further problems arise when it comes time to pay off a bet in a bankruptcy and close out one of these trades. At such a moment, liquidating collateral can put pressure on other positions carried by an institution, the B.I.S. noted. It is unclear whether institutions’ portfolio and collateral valuations reflect this reality.

Some investors who have been worrying about potential losses associated with European banks may have taken comfort in the results of financial stress tests conducted earlier this year by the Committee of European Banking Supervisors. Of the 91 top European banks tested — accounting for 65 percent of bank assets — only seven failed the toughest measures.

But, as an August report by Dun Bradstreet pointed out, these tests were not as stringent as they might have been. They only assessed the risks posed by deteriorating assets in banks’ trading accounts. The tests did not measure those assets carried in the so-called held-to-maturity accounts.

“In order to give a more adequate picture of European financial sector risk beyond the short term,” Dun Bradstreet said, “we believe the hold-to-maturity bonds should have been included in the stress tests.” There is clearly a great deal that investors do not know about exposures to Europe, notwithstanding the assurances from Mr. Geithner and others. Three years ago, investors were ignorant of the risks in faulty mortgage securities. If we’ve learned anything from that episode, it’s that what you don’t know can, in fact, hurt you.

Article source: http://feeds.nytimes.com/click.phdo?i=9b1b79f44f9066654b87443fc873b02d

German Leader Faces Key Choices on Rescuing Euro

Mrs. Merkel, 57, faces far-reaching decisions about how to deal definitively with the debt crisis in Europe and, more immediately, whether to allow Greece to default or even to leave the currency union. American officials fear that if she does not act more decisively, bank lending could freeze up and the result would be another sharp financial downturn on both sides of the Atlantic.

Fears of a worsening debt crisis slammed European stocks on Monday, especially shares of French banks, forcing the French government to declare its support for its three largest financial institutions. The turmoil added to worries that the Greek crisis would prove difficult to contain without more robust action from Germany and, ultimately, its taxpayers.

The project of European integration, which began in the difficult years after World War II, is also on the line. If Greece were forced to abandon the euro, as more and more voices on the German right are demanding, it would be a jarring setback for solidarity on the Continent.

Critics say Mrs. Merkel has focused too much on protecting her political standing inside Germany, placing her position as chancellor above the need for bold, risk-taking leadership to rescue the European currency zone. But that would mean sinking more German money into an ever-deepening economic union that voters have shown an antipathy for.

Her governing coalition is already splintering over the Greece bailout, and her party, the Christian Democratic Union, has suffered setbacks in state elections, including this month in the state of Mecklenburg-West Pomerania, where her parliamentary home district is located. Her father died in the stretch run heading into that election, adding personal anguish to a politically fraught moment.

Mrs. Merkel’s efforts to please both sides on the question of the debt crisis — through stern talk about Greece’s failure and profligacy on the one hand and a series of conditional debt guarantees to prop up Europe’s problem child on the other — have succeeded in ultimately pleasing neither.

Supporters argue that Mrs. Merkel has worked in a typically low-profile, methodical fashion to make the best of a difficult situation, winning passage for unpopular bailouts while wringing greater fiscal responsibility from the most heavily indebted nations.

The resignation Friday of Jürgen Stark, a German member of the executive board of the European Central Bank, and the second significant German figure at the bank to leave its governing council this year, offered a window into the intensity of German opposition to the steps Germany and the central bank have already taken in bailing out the weaker southern nations.

“The chasm between what is needed in terms of economic policy and what is possible in terms of domestic politics and party politics has widened,” said Cornelius Adebahr, a Europe expert at the German Council on Foreign Relations in Berlin. “She needs to show stronger leadership, but so far she hasn’t even revealed in what direction she really wants to move.”

Events appear to be forcing Mrs. Merkel to tip her hand. With the latest market assault this week on French financial institutions, the spillover from the debt crisis has now reached the German border. With first Italy and now France affected, problems once dismissed as confined to the distant periphery of Greece and Portugal have arrived at the core of Europe, and with them unavoidable questions about the continent’s future.

President Nicolas Sarkozy of France, her buoyant, antic foil, hopes to draw Mrs. Merkel into deeper commitments to an economic government for the currency zone, once again making France and Germany the motor of European integration that the two countries have been since their reconciliation after World War II. And if France’s struggles are not enough to prod Germany and its phlegmatic leader to take bold action, analysts say, it is likely that nothing will.

“We’ve been pretending for a year and a half that the Greek crisis could be solved this way, but it’s not the case and this has created uncertainty,” said Guntram B. Wolff, deputy director of Bruegel, a research organization based in Brussels.

Steven Erlanger contributed reporting from Paris.

Article source: http://feeds.nytimes.com/click.phdo?i=8f99a853933286a87cd210e5824001db

High & Low Finance: European Banks Apply Slippery Standards on Greek Bond Valuations

That is the important issue being sorted out now in Europe, where banks have taken widely divergent positions on valuations of Greek bonds.

Broadly speaking, there seems to be a consensus within countries. British banks were most willing to swallow bad medicine and admit the bonds were worth far less than par value. Some German banks were equally forthcoming, but others were less so. Italian banks seem to have done as little as they could, but did take write-downs. French banks went the farthest to find ways to act as if Greek bonds were just fine.

The first-half financial statements issued by the banks were unaudited, but they were reviewed by audit firms. The same firms — well, firms with the same name — seem to have signed off on wildly different ways of looking at the same underlying market for Greek bonds. In some cases there is enough disclosure for investors to try to adjust valuations, but in other cases there is not.

The situation is so chaotic that the chairman of the International Accounting Standards Board, Hans Hoogervoorst, wrote to European securities regulators in early August to protest that “it appears that some companies are not following” the relevant accounting rule, known as IAS 39. He did not name names, but there was no doubt he had the French banks in mind.

The protest — which was kept secret until someone leaked it to The Financial Times — has so far provoked no public response from the regulators.

It is the French securities regulator, the Autorité des Marchés Financiers, whose reaction will matter most. If it forces French banks to change their accounting, it risks incurring the wrath of both the French government and French bank regulators. If it looks the other way and other European securities regulators do nothing, the essential weakness of international standards — a lack of consistent enforcement — will be clear to all.

That the fight is taking place now may be critical to the future of the international rules. The Securities and Exchange Commission is weighing whether to allow American companies to use the international rules rather than the ones set down by the American rule writer, the Financial Accounting Standards Board. The S.E.C. would be able to enforce consistent application of the rules by companies whose securities trade in the United States, but arguments for the change would be undermined if it appeared there was little reason to think those reports would be comparable to reports issued by companies in other countries.

It has long been clear there is no common legal enforcement mechanism for international rules, but some hoped the audit firms would fill that role. In this very visible area, that did not happen.

“Auditors have not enforced a consistent approach among their clients,” wrote Peter Elwin, the head of European accounting research for J. P. Morgan. “Some institutions have taken full advantage of the principles-based IAS 39 impairment rules to achieve the desired result.”

In an interview, Mr. Elwin said that could change. “Interim results are not audited, whereas the year-end figures will be,” he said. “That may tighten things up.”

Or it may not. Although they use similar names in various countries, the auditing firms are organized as national partnerships. There are efforts within the firms to assure consistency across borders, but in the end it is the French partnership — which is no doubt quite aware of what the French government wants — that decides what it will allow French companies to do.

Mr. Hoogervoorst is upset by the way banks are accounting for Greek bonds that they have carried on their books as “available for sale.” Under IAS 39, such bonds are supposed to be marked to market values. But such write-downs do not have to be shown in net income unless and until the bond values are deemed to be impaired.

During the financial crisis in 2008 and 2009, banks could and did argue that there was no active market for some of the strange derivatives that they owned. If that were the case, then they were supposed to look to market values of similar instruments. Only if those were not available were they allowed to go to “mark to model.” If they can use models, they can apply assumptions about expected cash flows and determine current value from those calculations.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=be00dec3685f7b1b88f3089cb66a52eb

French Economy Ground to Halt in 2nd Quarter

PARIS — The French economy ground to a halt in the second quarter, the government reported Friday, posing a challenge to President Nicolas Sarkozy as France grapples with the growing costs of managing Europe’s debt crisis.

The French slowdown comes as growth stalls in a number of other countries across Europe. The continent’s biggest economy, Germany, is also likely to feel the impact as France, its largest trading partner, pulls back on imports.

“What worries us is that the core euro area countries were the ones carrying the growth” for Europe, Jens Sondergaard, a senior European economist at Nomura, which cut its forecast for German growth after the French economy’s poor showing. “And now you suddenly have flat growth in one of them, and that in itself is worrying.”

News that France’s gross domestic product fell unexpectedly to zero from April to June capped a tumultuous week in which Mr. Sarkozy interrupted his vacation to fight concerns that the country might lose its AAA credit rating if it cannot bring down a high debt and deficit.

The government also closed ranks to protect French banks after they slumped on rumors over their health. It imposed a 15-day ban on short-selling starting Friday, and opened an investigation into the market turbulence.

Although the French finance minister, Francois Baroin, pledged Friday that France would cut the budget deficit despite the gloomy growth report, a cooler economy could make it harder. It means the French government might need to resort to even to deeper budget cuts if it is to meet its target of paring its deficit to 5.7 percent this year.

French growth had been on a more positive trajectory — first-quarter growth, although only 0.9 percent, was the economy’s best quarterly showing in five years.

But consumers pulled back on spending in the second quarter, especially after the expiration of a cash-for-clunkers program the government had used to stoke new car sales.

While the government stuck to its optimistic forecast of 2 percent growth for the whole year, French shoppers seem inclined to remain prudent.

“People are anticipating future difficulties, not necessarily because of austerity yet, but because everything from gas to food is expensive,” Thomas Richard, a consultant at Kurt Salmon, said as he passed by a Monoprix grocery store in a leafy suburb of Paris. “They are paying more attention to their spending.”

While few people think France can come under market attack the way Italy and Spain have recently, they acknowledge the country can’t stay immune from the troubles of their euro-zone neighbors.

“The government does a lot, and we must leave time for programs to be put in place,” said a bank teller who would only give her first name, Isabelle. “But France is intertwined with Portugal, Ireland, Greece and even the United States, which have been hit. So we are waiting for a slowdown.”

The French economy is far more dependent on domestic demand than Germany, with its strong export sector. Unemployment in France remains high at 9.2 percent, while joblessness among youth, a particularly sensitive problem, is 22.8 percent.

Mr. Baroin played down the figures Friday, saying slower growth was expected after a faster run in the first quarter. But he acknowledged on French radio that the government would need to reduce the deficit with savings that “won’t hurt the most vulnerable in the economy.”

The International Monetary Fund said in a recent report that it expected France to experience a “robust” recovery over the next two years, despite plans to further consolidate its finances. In a sign things were calming for the moment, the yield on the French 10-year bond fell below 3 percent on Friday, and the spread with German bunds — considered the safest in Europe — shrank to 63.1 percentage points, after spiking at 89 points last week.

But there is a big risk that growth and exports would weaken if the economies of France’s major trading partners did not revive, the I.M.F. said. Any major downturn in the Spanish and Italian economies in particular would post a “significant” problem for French growth, the fund added.

What is more, because France has high public debt, and its banks are significantly exposed to weak southern European countries, the risks to growth would become bigger if the euro crisis is not stemmed, the fund said.

The deficit is expected to fall to 5.7 percent of gross domestic product this year, the I.M.F. said, while the ratio of debt to gross domestic product will be 85.3 percent — a source of concern among investors who have started targeting Spain, Italy and any country with high debt and low growth, no matter what their stature.

Mr. Sarkozy this week instructed his ministers to find ways to cut the deficit and debt, which are the highest of any AAA country. Still, Mr. Sondergaard cautioned against looking too darkly at France’s fiscal position. The ratings agencies reaffirmed France’s AAA rating this week, and the budget situation in France “is considerably better than other countries, not just in the euro area but around the globe,” he said.

Article source: http://www.nytimes.com/2011/08/13/business/global/french-economy-ground-to-halt-in-second-quarter.html?partner=rss&emc=rss

Europe Persists in Seeking a Solution for Greece

“We’re continuing to work for a possible solution,” Michel Pebereau, chairman of BNP Paribas, the biggest French bank, said at the Paris Europlace conference, a gathering attended by hundreds of international bankers. Both the French and German banks have put proposals forward, he said, and “If those doesn’t work out, we’ll come up with something else.”

Several other bankers said the important thing was that banks had begun to work together to solve the crisis, and the fact that the stakes were so big meant they would find a way forward.

“Everyone here is anxious,” said one executive with the French unit of a major American financial institution, who said he was not authorized to speak on the record. “Everyone is interconnected. It’s not just a problem for Greece. All the banks are nervous and strongly desire a solution.”

Standard Poor’s said Monday that a proposal by French banks for helping Greece to meet its medium-term financing needs would constitute a de facto default, as banks would be required to roll over loans for a longer term at a lower interest rate. That deflated hopes that Greece’s problems might be brought under control soon.

French bankers had not contacted the ratings agencies before publicizing their proposal to roll over Greek debt to determine whether the agencies would consider such an action to constitute a form of default. “The French banks jumped too soon,” said one banker who was involved in designing the proposal.

French and German bankers were scheduled to meet Wednesday in Paris with central bank officials, under the auspices of the Institute for International Finance, which groups the world’s biggest financial companies, to discuss the way forward, according to people briefed on the plan who were not authorized to speak publicly.

They are to discuss not only the definition of “selective default” put forward by Standard Poor’s but also what would constitute a full-blown default, the people said. The difference is crucial, because in the latter case the European Central Bank would not be able to accept Greek debt as collateral.

Euro-zone finance ministers last week reached a deal to keep the Greek government operating through the summer but put off the question of how to provide a second bailout to meet its financing needs through 2014.

There is wide agreement that some kind of debt relief is necessary, and officials, particularly in Germany and the Netherlands, want banks to bear part of the pain of a debt restructuring. Negotiations are complicated by the fact that a declaration of default by the ratings agencies could cause a dangerous escalation of the crisis.

The German chancellor, Angela Merkel, said Tuesday that the opinions of the International Monetary Fund, the European Central Bank and the European Commission should be given more weight than those of the rating agencies, The Associated Press reported from Berlin.

“I trust above all the judgment of those three institutions,” Mrs. Merkel said.

Bank executives said the assessment of the International Swaps and Derivatives Association — whose members hold much of the Greek debt and the credit default swaps based on it — would probably be more important, in the final analysis, than that of the ratings agencies.

A Standard Poor’s rival, Moody’s Investors Service, said Tuesday that banks might have to book losses on their existing Greek bonds if they chose to roll over the maturing debt.

While European officials were trying to come up with a workable Greek bailout, the German government was defending itself against a lawsuit seeking to block its participation.

Speaking to the Federal Constitutional Court in Karlsruhe, Finance Minister Wolfgang Schäuble argued that the government had no choice but to back aid for Greece.

“A common currency can’t do without the solidarity of all members,” The Associated Press quoted Mr. Schäuble as saying.

Article source: http://www.nytimes.com/2011/07/06/business/global/06euro.html?partner=rss&emc=rss

U.S. Markets Edge Ahead on Greek Optimism

Stocks on Wall Street rose in early trading after encouraging signs about Europe’s debt crisis overshadowed a dismal report about spending by American consumers.

Greece’s parliament was debating an austerity package that must pass for that nation to receive a second bailout and avoid defaulting on its debt. European markets rose Monday after French banks agreed to let Greece repay some of its debt more slowly.

Earlier Monday, the Commerce Department said that American consumer spending was unchanged in May, the weakest pace in 20 months, another sign that the economic recovery slowed this spring.

The Dow Jones industrial average was up 78 points, or 0.7, percent, at 12,012. The Standard Poor’s 500-stock index was up 7 points, or 0.6 percent, at 1,276. The Nasdaq composite index rose 19, or 0.8 percent, at 2,672.

Investors are hopeful that Greece will get another financial lifeline to see it through the next couple of years even if some lawmakers from the governing Socialist Party fail to back the measures in a vote this week. The expectation was that votes from other parties will see the government home.

That has eased concerns over what impact a Greek default would have on Europe’s financial system. Many analysts say a default could trigger mass panic in the markets, akin to what happened in the aftermath of the 2008 collapse of investment bank Lehman Brothers.

Ahead of the vote, the French government on Monday said banks had agreed to roll over a significant amount of their holdings in Greek debt.

France’s president, Nicolas Sarkozy, said the plan being worked out between French government officials and bankers would involve reinvesting debt held by French banks in new securities over 30 years. The hope was that would ease the pressure on Greece to constantly find money to pay off investors.

French bondholders hold about 15 billion euros in Greek government debt.

European leaders are trying to get the private sector to take part in Continental efforts to help Greece avoid default. Finance ministers from the 17 euro zone countries are scheduled to meet Sunday and confirm Greece’s next batch of bailout funds — provided the Greek Parliament has backed the austerity measures.

Stocks in Europe were mixed to start the week, while the euro edged 0.4 percent higher to $1.4244.

The FTSE 100 index of leading British shares was up 0.2 percent at 5,709, while Germany’s DAX was 0.2 percent lower, to 7,108. The CAC 40 in France was 0.1 percent higher at 3,789.

Earlier in Asia, Japan’s Nikkei 225 fell 1 percent to close at 9,578.31, while South Korea’s Kospi lost 1 percent to 2,070.29.

Hong Kong’s Hang Seng fell 0.6 percent to 22,041.77, but shares in mainland rose. China’s Shanghai Composite Index gained 0.4 percent to 2,758.23 while the smaller Shenzhen Composite Index added 1.1 percent to 1,148.63.

In the oil markets, prices continued to fall following last week’s surprise decision by oil-consuming countries to release 60 million barrels of crude over 30 days. Benchmark oil for August delivery was down $1.12 to $90.04 a barrel.

Article source: http://feeds.nytimes.com/click.phdo?i=5c117476dd1d757236360bf733464ce5