UE: ATAQUE CONTRA EL EURO

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La Crisis de la Deuda en Europa , seg{un el telegrafo

Greece acts to stop speculators as debt crisis escalates

Greece has moved to stem panic in the country and stop speculators taking advantage of its escalating debt crisis.

By Malcolm Moore in Shanghai
Published: 9:30AM BST 28 Apr 2010

A global market sell-off spread to Asia on Wednesday, sending the region's stocks lower amid fears the worsening European debt crisis will slow a global recovery. Japan's Nikkei index fell 2.5pc and Hong Kong's Hang Seng 1.2pc. Photo: AP

The troubled country triggered a sell-off in global markets after its debt was yesterday slashed to junk status, making it harder to pay down its deficit and raise money to fund its budget.

Fear of contagion from Greece was heightened by a cut in the credit rating of Portuguese government debt.

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This morning, the Greek regulator banned speculators from shorting the Athens market - trying to make money from betting shares will fall further - after widespread selling which saw London's FTSE 100 tumble 2.6pc, Germany's DAX 2.7pc, and France's CAC 3.7pc.

This spread to New York where the Dow Jones dropped 1.9pc before moving to Asia, where Japan's Nikei index and Hong Kong's Hang Seng fell 2.5pc and 1.2pc respectively.

The sell-off continued in Europe in early trading after an uneasy halt as investor took stock as markets opened. Major markets in London, German and France were down around 1pc.

Southern European markets were hard hit, with Portugal tumbling 6pc and Spain 3pc.

Lorraine Tan, director of equities research at Standard & Poor's in Singapore, said "The fear is that Greece and Portugal are just the appetizers.

"The concern is it is going to spread and have an impact on the financial system and ultimately on the economy."

As a further indication of investor jitters, the premium being demanded to hold Greek government bonds jumped to its highest since late 1996.

ASIAN MARKETS, OIL FALLS

The worsening European debt crisis rattled Asia, as stock markets across the region fell and oil slid to near $82 a barrel.

Tokyo's Nikkei-225 index was down 287 points, or 2.5pc, by lunchtime at 10,924.75 points, while Hong Kong's Hang Seng index fell 260 points, or 1.24pc, to 20,998 points.

South Korea's Kospi index fell 1.2pc to 1,728.25 while the losses were more restrained in Shanghai, which dipped 2.32 points to 2906.

Concerns about Europe, which remains the largest market for Asian exports, increased after Standard & Poor's, the rating agency, downgraded Greece's debt to junk status and hit Portugal's rating with a two-notch cut.

The concerns about Europe overshadowed a strong set of earnings from Japanese companies, showing a fragile recovering is underway in Tokyo.

OIL TRADERS EYE EUROPEAN WOES

Meanwhile, US crude oil for June delivery fell 27 cents to USD82.17 a barrel, touching a $2 drop over its last two trading sessions.

Analysts said oil traders were taking note of a possible economic crisis in Europe and that the market had reacted to new inventory figures from the US, which showed that stockpiles were up 5.3m barrels in the week ending April 23.

"Market sentiment remains fragile and there is a possibility that if we have more adverse economic news we could see prices decline further," said David Moore, an analyst at the Commonwealth Bank of Australia, adding that US demand for oil was weak.

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La Tercera Fase de la Crisis Económica

¿Que puede ocurrir en el mundo si colapsa la Unión Monetaria?

Europe debt crisis spreads to Portugal

Greek debt drops to junk status, Portugal's also downgraded; markets slide on fears of crisis

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Greek Prime Minister George Papandreou speaks during a meeting of governing Socialist party deputies at the Greek Parliament on Tuesday, April 27, 2010. Greece must surprise markets by greater improvements to its troubled economy than it has already promised if it is to pull itself out of its severe financial crisis, Bank of Greece governor George Provopoulos said Tuesday. The government is implementing harsh austerity measures designed to trim the debt-ridden country's massive budget deficit, which stands at 13.6 percent of gross domestic product, and has called on a €45 billion joint eurozone and International Monetary Fund rescue package for aid. (AP Photo/Dimitri Messinis)

Nicholas Paphitis and Pan Pylas, Associated Press Writers, On Tuesday April 27, 2010, 5:27 pm EDT

ATHENS (AP) -- Ratings agency Standard & Poor's pushed Greece to the brink of a financial abyss Tuesday and downgraded Portugal's debt, too, fueling fears of a continent-wide debt meltdown in Europe.

Stocks around the world tanked when Greek bonds were lowered to junk status and investors saw that Greece's financial contagion was spreading to at least one other eurozone country.

Major European exchanges fell more than 2.5 percent, and on Wall Street, the Dow Jones industrial average finished down more than 200 points. The euro slid more than 1 percent to nearly an eight-month low.

"We have the makings of a market crisis here," said Neil Mackinnon, global macro strategist at VTB Capital.

Greece is struggling with massive debt, and with prospects for economic growth weak it could end up in default. Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a euro45 billion rescue package, but it hasn't worked.

Standard & Poor's warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone.

One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral -- including Europe's fifth-largest, Spain. Can Germany, Europe's effective paymaster, continue to bail out the weaker members of the eurozone?

The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.

It has also disrupted cooperation between eurozone governments, with Germany resisting the idea of bailing out Greece unless strict conditions are met.

Many investors think Greece will have enough money to avoid default in the coming weeks, but the future is cloudier.

Both Standard & Poor's and the Greek finance ministry insisted that the country will have enough money to make the euro8.5 billion bond payments due on May 19.

Even if it does, Greece faces years of austerity with living standards sharply reduced. Standard & Poor's warned that the Greek economy was unlikely to be as big as it was in 2008 for another decade.

Junk status sinks Greece's hopes even deeper. Losing investment-grade status for its bonds means that Greece will have to pay higher costs to borrow if it taps debt markets again, and increases the chances that existing debt will have to be restructured.

"The latest developments mean that the chances of Greece solving this situation without restructuring its debts are now dim," said Diego Iscaro, senior economist at IHS Global Insight.

German Chancellor Angela Merkel reiterated her position that Greece should first conclude the current negotiations with the IMF and the European Union about austerity measures for the coming years before receiving the international loan package.

Speaking at an election rally Tuesday afternoon, Merkel said it is appropriate to tell Greeks, "You have to economize, you have to become fair, you have to be honest; if not, nobody can help you," according to the German news agency DAPD.

A government spokesman said Tuesday evening he could not tell if Merkel was at that point aware of the latest downgrade. He declined to be named in line with government policy.

The FTSE 100 index of leading British shares closed down 2.6 percent, Germany's DAX slid 2.7 percent and the French CAC-40 in France ended 3.8 percent lower.

Greek and Portuguese stocks were pounded -- down 6.7 percent and 5.4 percent, respectively -- while their market borrowing costs went through the roof. The interest rate for Greek two-year bonds jumped to a massive 18 percent.

The interest rate gap, or spread, between Portugese and benchmark German 10-year bonds rose about half a percentage point Tuesday to reach its highest point since the euro came into circulation. The higher the gap, the less confidence in Portugal; its bonds on Tuesday had an interest rate 5.86 percentage points higher than German bonds.

Both the Portugese and Greek governments have imposed budget cutbacks against political resistance from unions at home. Markets have been skeptical that they can push through enough cuts, given political resistance, to put their finances in order.

Both governments responded with alarm at the downgrades.

"This decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence," Portugese Finance Minister Fernando Teixeira dos Santos said.

Greek Finance Minister George Papaconstantinou said the downgrade "does not reflect the real state of our economy, nor the fiscal situation, nor the ongoing negotiations which have the very realistic propects that they will be completed successfully in the next few days."

Papaconstantinou said Greece will pull through.

"One wishes that Europe had acted a little differently. Three and four months ago we were saying that the mechanism must be ready and it must be detailed, that the markets must know what exactly is going. Unfortunately, for a series of political reasons, we are down to the wire," he said.

The crisis has highlighted the eurozone's inability to keep governments from undermining the euro by running up big debts. Rules that limit deficits to 3 percent of gross domestic product have been widely flouted, and EU officials are talking about ways to strengthen them.

AP Business Writer Pan Pylas contributed from London.

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Banco Central Europeo podría comprar bonos publicos de los paises europeos del s

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ECB may have to turn to 'nuclear option' to prevent Southern European debt collapse

The European Central Bank may soon have to invoke emergency powers to prevent the disintegration of southern European bond markets, with ominous signs of investor flight from Spain and Italy.

 

By Ambrose Evans-Pritchard, International Business Editor
Published: 7:09PM BST 27 Apr 2010

Comments 93 | Comment on this article

Pigeons swirl in front of the National Bank of Greece headquarters' building in central Athens

Greece's fortunes were dealt yet another blow as Standard & Poor's slashed its credit rating to junk status - BB+ - the first time that has happened to a euro member since the single currency was created, pushing yields on 10-year Greek bonds up to a record 9.73pc.

The credit-rating agency also cut Portugal's sovereign debt ratings by two notches to A-, as the swirling storm hit the country with full-force.

 

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"We have gone past the point of no return," said Jacques Cailloux, chief Europe economist at the Royal Bank of Scotland."There is a complete loss of confidence. The bond markets are in disintegration and it is getting worse every day.

"The ECB has been side-lined in the Greek crisis so far but do you allow a bond crash in your region if you are the lender-of-last resort? They may have to act as contagion spreads to larger countries such as Italy. We started to see the first glimpse of that today."

Mr Cailloux said the ECB should resort to its "nuclear option" of intervening directly in the markets to purchase government bonds.

This is prohibited in normal times under the EU Treaties but the bank can buy a wide range of assets under its "structural operations" mandate in times of systemic crisis, theoretically in unlimited quantities.

Mr Cailloux added: "This feels like the banking crisis in late 2008 post-Lehman, though it has not yet spread to other asset classes. The ECB will have to act it if does."

Yields on 10-year Portuguese bonds spiked 48 basis points to 5.67pc, replicating the pattern seen as the Greek crisis started.

Portugal's public debt will be just 84pc of GDP by the end of this year, far lower than that of Greece, at 124pc. However, its private debt is much higher and data from the IMF shows that its external debt position is worse.

Interest payments on foreign debt will be 8pc of GDP this year. Portugal's net international investment position is minus 100pc of GDP, the worst in the eurozone.

The interest rate on a €9.5bn (£8.2bn) issue of Italian notes jumped to 0.814pc, up from 0.568pc in March. The bid-to-cover ratio was wafer-thin, falling to 1.02. Italy has the world's third biggest debt in absolute terms.

The issue of the ECB buying bonds is a political minefield. Any such action would inevitably be viewed in Germany as a form of printing money to bail out Club Med debtors, and the start of a slippery slope towards in an "inflation union".

But the ECB may no longer have any choice. There is a growing view that nothing short of a monetary blitz — or "shock and awe" on the bonds markets — can halt the spiral under way.

The markets are already looking beyond the €40bn to €45bn joint rescue for Greece by the IMF and the EU, questioning whether some form of debt restructuring or managed default can be avoided over the next year or two, or even whether the rescue plan can work at all in a country trapped in debt deflation with no way out through devaluation.

Professor Willem Buiter, a former member of Britain's Monetary Policy Committee and now global economist for Citigroup, said there may need to be a "voluntary restructuring" of debt.

"It is quite likely that a haircut of, say, 20pc to 25pc will be imposed on creditors as parts of the deal," he said.

The bond markets are already "pricing in" a default of some kind in Greece, where rates on 2-year debt spiked close to 15pc in panic trading yesterday. The European Commission and the International Monetary Fund both insist that restructuring is out of the question but investors have become cynical after months of EU rhetoric and foot-dragging by Berlin.

The ECB cannot lightly risk a second sovereign crisis erupting, with dangers of a spillover into Spain.

The exposure of Spanish-based banks to Portuguese debt exceeds $80bn, according to the Bank for International Settlements. There were early signs of strain in the Spanish banking system yesterday.

Banks were forced to pay a premium in the domestic "repo" market on fears of counterparty risk, although the Bank of Spain has so far won plaudits for ensuring that banks have large safety buffers.

It is unclear why the markets are becoming skittish over Italian bonds. Public debt is 115pc of GDP but this is offset by very low household debt.

Italian citizens are among the most frugal savers in the OECD club of rich states. Moreover, the government has weathered the financial crisis with a budget deficit in remarkable good health.

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