August 26, 2011
By Riva Froymovich, The Australian
EURO-ZONE policy makers appeared no nearer to settling a dispute over Finland's collateral demands in exchange for participating in a bailout for Greece, raising concerns that Athens may default.
Markets have grown more worried about the potential for a Greek debt default amid an apparent lack of progress in resolving the collateral issue this week.
Finland, meanwhile, shows no sign of backing down.
German Chancellor Angela Merkel also unexpectedly cancelled a trip to Russia in early September to shepherd through parliament a crucial change to the euro-zone bailout fund.
The cancellation comes at a sensitive time for relations with Russia, and amid growing nervousness about dissent within the ranks of her own party over her handling of the euro-zone debt crisis.
"The date collides with the introduction of the (European Financial Stability Facility) treaty into the Bundestag," a German government official said, adding that the chancellor wants to stay in Berlin due to the significance of the issue.
Yields on Greek two-year bonds rocketed to a record of over 43 per cent, according to Tradeweb, and the cost of insuring Greek government bonds against default also rose sharply.
Greek five-year sovereign credit-default swaps were 1.37 percentage points wider at 22.75 percentage points, according to Markit.
No multi-lateral talks on the collateral issue took place Wednesday or Thursday, a person familiar with the situation said, despite an initial intention to hash out an agreement by the weekend.
However, the person didn't rule out the possibility that bilateral talks are under way.
Euro-zone governments are looking into alternative forms of collateral after a cash deal reached earlier between Greece and Finland was rejected by key member countries, including Germany and the Netherlands.
Under terms of that deal, Greece would pay Finland hundreds of millions of euros from its bailout loans as collateral for those same loans at the expense of other euro-zone countries.
Since Finland is set to contribute just 2 per cent of Greece's total rescue package, guarantees from the richer euro-zone nations would be going directly to Finland.
The collateral dispute, if not resolved soon, could derail a second bailout package for Greece agreed by euro-zone leaders on July 21.
Without support from all 17 euro-zone countries, no funds can be released, while changes to the European Financial Stability Facility, the currency bloc's bailout fund, can't go forward either.
At last month's summit, leaders agreed to expand the fund and make it more flexible, so that it could buy bonds on the secondary market and provide credit lines to countries locked out of markets.
National parliaments across the euro area must approve the changes, however, and the collateral issue must be settled before the final EFSF proposal is written.
The European Commission, the EU's executive branch, has asked that all the details for the EFSF legislation be clarified by the end of August.
German officials have said they expect to approve the new EFSF at a cabinet meeting on Wednesday.
A parliamentary vote is likely to take place September 23.
A commission spokesman said that there is no formal deadline for concluding talks.
Still, "it's good for that to be done toward the end of the month," he said.
Germany insists on a solution acceptable to all euro-zone countries.
The International Monetary Fund, which has been contributing to Greek bailout loans, opposes any deal that would threaten its preferred-creditor status, which ensures the fund is always first to be repaid.
Finland said that it continues discussions with Greece and other euro-zone countries to find a solution. Officials refrained from further comment.
"The issue has become so politicised that no one here at the Finance Ministry wants to talk about it at the moment," said Anita Sihvola, a spokeswoman for the Finnish finance ministry.
On Wednesday, Finnish Finance Minister Jutta Urpilainen reiterated that Finland would not take part in the €110 billion Greek ($150bn) bailout unless it obtained collateral.
Finland's policy is partly the result of April's general election, in which support for the True Finns Party, which opposed the Greek bailout, soared to 19 per cent from 4.1 per cent in 2007.
The True Finns finished third, and the election led to a new government coalition of six parties.
Euro-zone officials have indicated they are exploring other forms of collateral, such as state property or other non-cash assets.
But this option would be anathema in Greece, especially as many of the government's assets are already earmarked for privatisation.
The government has strongly opposed any deals that would involve putting up Greek land or real estate as collateral, viewing the step as a threat to the country's territorial sovereignty.
"It seems that a possible outcome is either collateral for all member states or no country will get it," said a second person familiar with the matter.
Showing posts with label Finland. Show all posts
Showing posts with label Finland. Show all posts
Friday, August 26, 2011
Monday, August 22, 2011
Greek collateral deals negative for rating - Moody's
Monday 22 August 2011
LONDON (Reuters) - A series of agreements forcing Greece to provide collateral in return for aid from foreign governments would be negative for the credit ratings of Greece and other troubled euro zone states, Moody's ratings agency said on Monday.
The agency also said such deals showed a lack of will in some euro zone countries that put more pressure on Germany and France to take stronger steps to support the euro project.
Austria, the Netherlands and Slovakia said on Friday they wanted collateral on their loans to Greece after Finland secured such a commitment, but Greek officials have said they were not talking to countries other than Finland about such a plan.
Moody's warned that the pursuit of such agreements could delay the next tranche of aid for Greece and threaten to cause a default on payments on its debt.
It said a proliferation of collateral agreements would also limit the availability of funds for future bailout programs, and that for these reasons it expected other euro area members ultimately to reject the Finland-Greece deal.
"The tentative Finnish-Greek collateral accord raises concerns about the willingness and ability of some euro area policymakers to implement measures that may prove necessary to preserve the stability of the European Monetary Union," it said.
"This reticence places greater pressure on Germany and France to stake out a strongly supportive stance towards the euro area, with more concrete and immediate effect than the proposals the two countries made last week, in order to shore up the single-currency project."
LONDON (Reuters) - A series of agreements forcing Greece to provide collateral in return for aid from foreign governments would be negative for the credit ratings of Greece and other troubled euro zone states, Moody's ratings agency said on Monday.
The agency also said such deals showed a lack of will in some euro zone countries that put more pressure on Germany and France to take stronger steps to support the euro project.
Austria, the Netherlands and Slovakia said on Friday they wanted collateral on their loans to Greece after Finland secured such a commitment, but Greek officials have said they were not talking to countries other than Finland about such a plan.
Moody's warned that the pursuit of such agreements could delay the next tranche of aid for Greece and threaten to cause a default on payments on its debt.
It said a proliferation of collateral agreements would also limit the availability of funds for future bailout programs, and that for these reasons it expected other euro area members ultimately to reject the Finland-Greece deal.
"The tentative Finnish-Greek collateral accord raises concerns about the willingness and ability of some euro area policymakers to implement measures that may prove necessary to preserve the stability of the European Monetary Union," it said.
"This reticence places greater pressure on Germany and France to stake out a strongly supportive stance towards the euro area, with more concrete and immediate effect than the proposals the two countries made last week, in order to shore up the single-currency project."
Thursday, March 24, 2011
GLOBAL MARKETS-Euro, crude ease on Portugal debt worries
Thu Mar 24, 2011 6:50am GMT
* Portugal bailout appears likely after PM resigns
* Nikkei down 0.2 percent, MSCI Asia ex-Japan up 0.9 percent
* U.S. stocks rise modestly on back of base metals gains
* Euro falls below $1.41, yen sits around 81 per dollar
* Oil eases 0.2-0.3 percent, gold steady near record (Fixes format of bullet point)
By Alex Richardson
SINGAPORE, March 24 (Reuters) - The euro fell and oil eased on Thursday after Portugal's prime minister resigned following parliament's rejection of his minority government's austerity programme, renewing worries about the scale of the euro zone's sovereign debt crisis.
Asian stocks outside Japan rose as higher commodities prices lifted materials shares, but Tokyo shares weakened as concerns over radiation leaks from an earthquake-damaged nuclear power plant continued to sap investor confidence.
European shares were expected to open little changed as uncertainty over Portugal, Japan and the Middle East gave investors little incentive to stake out fresh positions, while U.S. S&P 500 futures barely budged, pointing to a cautious start on Wall Street as well.
The resignation of Prime Minister Jose Socrates was seen as increasing the likelihood that Portugal will join Greece and Ireland in requiring a bailout from the European Union.
An official euro zone source estimated in January that if Portugal asked for international aid, it might need between 60 billion to 80 billion euros (up to $113 billion).
"Whether there will be a bailout for Portugal or not has some consequences on how things will pan out in Europe. Risks in the euro-zone seem to be increasing," said Serene Lim, a Singapore-based oil analyst at ANZ Bank.
Tokyo's Nikkei fell 0.2 percent. It remains 8 percent below its close on March 11, when a 9.0 magnitude earthquake and tsunami hit northeastern Japan, leaving around 25,600 people dead or missing and cutting power to millions of homes as well as factories, many of which are still struggling to come back online.
The estimated $300 billion in damage makes it the costliest natural disaster in history, and Japan is still grappling with the worst nuclear crisis since Chernobyl after the quake and tsunami crippled a power plant 240 km (150 miles) north of Tokyo.
"We are unlikely to see further gains in the near future, unless there's an end to the nuclear crisis in sight," said Takashi Hiroki, chief strategist at Monex Securities.
Disruptions in the global supply chain after the Japan quake continue to be felt around the world, most notably for auto makers and electronics firms. Toyota Motor said overnight it will slow some North American production because of parts shortages.
MSCI's measure of Asia Pacific shares outside Japan rose 0.9 percent, with Australia's resources-heavy index gaining 1 percent after a rally in prices of base metals such as copper the previous day.
Gains for materials shares lifted Wall Street on Wednesday, with the Dow Jones industrial average rising 0.6 percent and the broader S&P 500 gaining 0.3 percent.
DEBT CRISIS
The political upheaval in Portugal, along with looming elections elsewhere, was expected to deter European leaders from taking tough decisions to address the region's sovereign debt crisis when they meet at a summit this week.
They are unlikely to come up with a plan to strengthen the euro zone's bailout fund until June, which may also undermine the single currency.
"If the EU leaders fail to come up with measures to enhance the safety net that markets have wanted in their summit meeting, the euro could face further pressure down the road," said Sumino Kamei, senior currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The euro bought around $1.4085 , having dropped as far as $1.4075 on electronic trading platform EBS in late New York trade on Wednesday.
The yen sat near 81 per dollar, a level it has hugged tightly in recent days with markets still wary of further central bank intervention to curb the Japanese currency if it strengthens past 80.50.
Leading central banks launched the first coordinated market intervention in more than a decade last week to reverse a run that had seen the yen hit a record 76.25 on expectations Japan -- a net creditor to the rest of the world -- would see a wave of funds being repatriated to pay for earthquake reconstruction.
Japanese government bonds rose, with benchmark 10-year futures up 0.19 point, while the 10-year yield eased 1.5 basis points to 1.2 percent.
Oil eased as the euro zone concerns rekindled worries about economic growth -- and hence energy demand -- in the bloc, although traders said continued political unrest in parts of the Middle East would prevent it from falling far.
U.S. crude fell 0.3 percent to $105.48 a barrel and Brent crude was off 0.2 percent at $115.35.
Spot gold traded around $1,437.90 an ounce, in sight of its record $1,444.40 set earlier in the month. ($1 = 0.707 Euros) (Editing by Kim Coghill,sourced:Reuters)
Asian stocks outside Japan rose as higher commodities prices lifted materials shares, but Tokyo shares weakened as concerns over radiation leaks from an earthquake-damaged nuclear power plant continued to sap investor confidence.
European shares were expected to open little changed as uncertainty over Portugal, Japan and the Middle East gave investors little incentive to stake out fresh positions, while U.S. S&P 500 futures barely budged, pointing to a cautious start on Wall Street as well.
The resignation of Prime Minister Jose Socrates was seen as increasing the likelihood that Portugal will join Greece and Ireland in requiring a bailout from the European Union.
An official euro zone source estimated in January that if Portugal asked for international aid, it might need between 60 billion to 80 billion euros (up to $113 billion).
"Whether there will be a bailout for Portugal or not has some consequences on how things will pan out in Europe. Risks in the euro-zone seem to be increasing," said Serene Lim, a Singapore-based oil analyst at ANZ Bank.
Tokyo's Nikkei fell 0.2 percent. It remains 8 percent below its close on March 11, when a 9.0 magnitude earthquake and tsunami hit northeastern Japan, leaving around 25,600 people dead or missing and cutting power to millions of homes as well as factories, many of which are still struggling to come back online.
The estimated $300 billion in damage makes it the costliest natural disaster in history, and Japan is still grappling with the worst nuclear crisis since Chernobyl after the quake and tsunami crippled a power plant 240 km (150 miles) north of Tokyo.
"We are unlikely to see further gains in the near future, unless there's an end to the nuclear crisis in sight," said Takashi Hiroki, chief strategist at Monex Securities.
Disruptions in the global supply chain after the Japan quake continue to be felt around the world, most notably for auto makers and electronics firms. Toyota Motor said overnight it will slow some North American production because of parts shortages.
MSCI's measure of Asia Pacific shares outside Japan rose 0.9 percent, with Australia's resources-heavy index gaining 1 percent after a rally in prices of base metals such as copper the previous day.
Gains for materials shares lifted Wall Street on Wednesday, with the Dow Jones industrial average rising 0.6 percent and the broader S&P 500 gaining 0.3 percent.
DEBT CRISIS
The political upheaval in Portugal, along with looming elections elsewhere, was expected to deter European leaders from taking tough decisions to address the region's sovereign debt crisis when they meet at a summit this week.
They are unlikely to come up with a plan to strengthen the euro zone's bailout fund until June, which may also undermine the single currency.
"If the EU leaders fail to come up with measures to enhance the safety net that markets have wanted in their summit meeting, the euro could face further pressure down the road," said Sumino Kamei, senior currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The euro bought around $1.4085 , having dropped as far as $1.4075 on electronic trading platform EBS in late New York trade on Wednesday.
The yen sat near 81 per dollar, a level it has hugged tightly in recent days with markets still wary of further central bank intervention to curb the Japanese currency if it strengthens past 80.50.
Leading central banks launched the first coordinated market intervention in more than a decade last week to reverse a run that had seen the yen hit a record 76.25 on expectations Japan -- a net creditor to the rest of the world -- would see a wave of funds being repatriated to pay for earthquake reconstruction.
Japanese government bonds rose, with benchmark 10-year futures up 0.19 point, while the 10-year yield eased 1.5 basis points to 1.2 percent.
Oil eased as the euro zone concerns rekindled worries about economic growth -- and hence energy demand -- in the bloc, although traders said continued political unrest in parts of the Middle East would prevent it from falling far.
U.S. crude fell 0.3 percent to $105.48 a barrel and Brent crude was off 0.2 percent at $115.35.
Spot gold traded around $1,437.90 an ounce, in sight of its record $1,444.40 set earlier in the month. ($1 = 0.707 Euros) (Editing by Kim Coghill,sourced:Reuters)
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