Europe, IMF need to act soon to avoid contagion: IIF

By John O'Donnell

BRUSSELS | Tue Jul 12, 2011 1:07pm EDT

(Reuters) - Euro zone countries and the IMF need to show they can deliver a rescue plan for Greece, including a debt buyback, in coming days to avoid financial markets "spinning out of control," a bank lobby group said.

The Institute of International Finance (IIF), which is leading negotiations on behalf of banks and insurers with billions of euros of exposure to Greekbonds, made the warning in a draft paper delivered to European finance ministers, dated July 10 and seen by Reuters.

Highlights: IMF says Greece must work harder on implementation

ATHENS | Wed Jul 13, 2011 12:30pm EDT

(Reuters) - Poul Thomsen, the International Monetary Fund's mission chief for Greece, gave a news conference on Wednesday to present the multilateral lender's latest review of Greece's efforts to deal with its debt burden.

Following are highlights of comments by Thomsen:

ON REFORMS

"Reforms were slowing down and need reinvigoration. To have further progress in bringing down the deficit, Greece needs to go ahead with structural reforms." "The medium-term program is very impressive. There is hardly a part of society that is not affected. It is a difficult program, one that will be asking for some sacrifices, but the burden of adjustment is fairly distributed."

Germany digs in heels over Friday summit on Greece

By John O'Donnell and Sarah Marsh

BRUSSELS/BERLIN | Wed Jul 13, 2011 12:28pm EDT

(Reuters) - Euro zone plans for a leaders' summit on a second Greek rescue were thrown into doubt by Germany on Wednesday, raising fears markets may exploit a policy vacuum with a new onslaught on the bloc's high debtors.

Berlin stuck to its line that Greece was funded until September so there was no rush to finalize the details of a second package. "There are no concrete plans for a special summit," a German government spokeswoman said.

Commerzbank CEO: Greek Restructure Is Feasible

The Wall Street Journal

By WILLIAM LAUNDER

FRANKFURT—A restructuring of Greek debt would be "rocky but feasible" for Greece and could include private creditors replacing more than €50 billion in Greek debt backed by the euro zone, Martin Blessing, chief executive of Germany's Commerzbank AG, said Tuesday in an interview with newspaper Frankfurter Allgemeine Zeitung.

Mr. Blessing's comments mark what is probably the first public occasion that a senior-level private banker has pushed for a restructuring of Greek debt, and amid persisting concerns about how to provide a new bailout package for Greece involving private bondholders' support.

Moody's cuts Ireland to junk, warns of second bailout

12-7-2011

 (Reuters) - Moody's cut Ireland's credit rating to junk on Tuesday, warning that the debt-laden country would likely need a second bailout -- just the latest move amid heightening concerns about Europe's ability to address its debt crisis and prevent it from spreading.

Moody's move comes a week after it slashed Portugal to junk status with a similar warning about the need for a second round of rescue funds. It reflects the credit rating agency's view that any further financial assistance from Brussels will require private investors to share part of the pain, possibly through a debt rollover or swap.

European finance ministers have acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts, and if that materializes, Ireland's rating, never before in junk territory, could be set for a further round of cuts.

Countdown

The row over the debt ceiling is going down to the wire

jul 7th 2011 | WASHINGTON, DC | from the print edition

THE stand-off over America’s debt ceiling has entered strange territory: pretty much everyone agrees the limit will be raised, but it is becoming ever harder to see just how. The Treasury reckons it will run out of cash on around August 2nd. But with time running short, the parties seem as far apart as ever.

A substantial problem

Jul 12th 2011, 16:28 by Charlemagne | BRUSSELS

AS ministers, officials and journalists stagger out of the Justus Lipsius building tonight, the unofficial word is that European leaders will be summoned here on Friday to finalise the deal that finance ministers could not conclude.

The  statement issued last night was a study in vagueness (see my earlier post), but the outlines of a compromise are becoming clearer: in exchange for a willingness by private bond-holders to support some form of debt rollover for Greece, euro-area members will have to support Greece in buying back its bonds from the secondary market.

The way to end the Greek farce

JUL 12, 2011 10:10 EDT

Reuters 

By Hugo Dixon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Greek crisis is fast descending into farce. The position of Germany, the euro zone’s main lender, is increasingly absurd. It is adamant that there will be no restructuring of Greek debt — at least, until 2013. And yet it is equally insistent that Athens’ private-sector creditors should contribute up to 30 billion euros to a new, 120 billion euro bailout. That would effectively amount to a half-cocked restructuring.

America's debt

Shame on them

The Republicans are playing a cynical political game with hugely high economic stakes

Jul 7th 2011 | from the print edition

IN THREE weeks, if there is no political deal, the American government will go into default. Not, one must pray, on its sovereign debt. But the country will have to stop paying someone: perhaps pensioners, or government suppliers, or soldiers. That would be damaging enough at a time of economic fragility. And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.

Greek fire

The Economist

Jul 12th 2011, 15:08 by Charlemagne | BRUSSELS

ONE CAN understand the anger of George Papandreou, the Greek prime minister. He has faced down riots, mass protests and party rebellion to push through a second austerity and reform package. But a second bail-out from the euro zone that was supposed to tide Greece over until 2014 has yet to materialise (although it did get a €12 billion ($17 billion) tranche of loans to keep going until September).

Last night's euro-zone statement was filled with promises of action, but the details remain slippery (see my post). Indecision is causing contagion; contagion is affecting bigger countries, like Italy. And the contagion of Italy threatens to ravage all of the euro zone, including Greece.

Mr Papandreou's letter to Jean-Claude Juncker, who presides over the Eurogroup of finance ministers, sums up the mismanagement of the euro-zone crisis more eloquently than most. It is worth reading. A long excerpt below:

Which way things are going?

My estimations of the situation (they reflect my personal views).

Selecting default

The Economist June 11^th 23:48

FOR THE first time since the start of the Greek debt crisis more than a year ago, the finance ministers of the euro area are ready to consider a default by Greece. They did not say so explicitly, of course, but the omissions from their statement tonight were eloquent.

Stocks, Euro Pare Losses, Italy Bonds Gain

Global stocks trimmed declines, a day after the biggest selloff since March, and the euro pared losses after Italy and Greece sold debt and European governments worked to halt the region’s credit crisis.

The MSCI All-Country World Index fell 0.7 percent at 10:56 a.m. in New York, recovering from an earlier plunge of as much as 1.4 percent. The Standard & Poor’s 500 Index slipped 0.1 percent after futures on the gauge tumbled as much as 1.8 percent before U.S. exchanges opened. The euro was down 0.2 percent at $1.3964 after slumping as much as 1.4 percent. Italian bonds reversed losses, sending 10-year yields down 15 basis points to 5.53 percent. Sugar and zinc led gains in the S&P GSCI Index of commodities as it reversed early losses.

Europe considers Greek default, leaders to meet

(Reuters) - European Union leaders are poised to hold an emergency summit after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and stop contagion to Italy and Spain.

"There will be an extra summit this Friday," a senior euro zone diplomat told Reuters, suggesting policymakers have been seized with a new sense of urgency after markets started targeting Italian assets.

Italian, Spanish, Portuguese Bonds Slump

By Garth Theunissen and Emma Charlton - Jul 11, 2011 1:28 PM GMT+0300

Italian and Spanish bonds tumbled and German bund yields sank to a seven-month low as contagion from Greece’s debt crisis threatened to spread to bigger economies, stoking demand for the safest assets.

The spreads investors demand to hold Italian, Portuguese and Spanish debt over bunds widened to euro-era records. The European Central Bank is seeking to double a fund to 1.5 trillion euros ($2.14 trillion) to cover an Italian crisis, Die Welt reported yesterday, citing senior central bankers. EU leaders are prepared to accept a Greek default on some obligations, the Financial Times said yesterday.

Democratization Can't Save Europe

The Need for a Centralization of Power

An Essay by Herfried Münkler

Spiegel Online International

Despite the myriad problems currently facing the European Union, democratization is not the answer. Rather, the EU's elites need to improve -- and power has to be taken away from the periphery.

Europe's political elites are a pathetic sight at the moment, from their contradictory reactions to the rebellions in the Arab world to their timid handling of the euro crisis. Either they persist in doing nothing or they flee from one falsehood to the next, all in the expectation that this will enable them to gain control over the markets. Now that the European elites have had to produce proof of their long-held claim that Europe is a capable player on the global political and economic stage, they have done nothing but flounder. And because they refuse to believe that this is the case, they celebrate every stumbling move as the salvation of Europe and the euro. The poor image Europe is currently projecting is largely the result of the impotence of its elites .

Italian Debt Adds to Fears in Euro Zone

The New York Times

By STEPHEN CASTLE

Published: July 10, 2011

LONDON — Top European officials planned to meet on Monday to wrestle with threats to the currency union as fears mounted that Italy could become a victim of the debt crisis even as discussions stalled over a second bailout for Greece. Finance ministers in the euro zone had previously scheduled two days of talks to begin on Monday afternoon in Brussels, with an emphasis on how to resolve Greece’s troubles. Over the weekend, a meeting of more senior officials was set for Monday morning.

A spokesman for Herman Van Rompuy, president of the European Council, denied that senior officials would discuss the state of Italy’s finances, which many investors consider increasingly precarious. But another official, who requested anonymity because he was not authorized to speak publicly, said Italy would probably be on the agenda.

ECB Is Heading for Some Hefty Icebergs

The By IRWIN STELZER

The Wall Street Journal

The Argentine government and the euro-zone policy makers have much in common: both have pistols at the ready, and aimed at unwanted messengers.

Argentina's government says the country's inflation rate is 9.7%. Most independent economists put the figure at 20%. So the government has filed criminal charges against one consulting firm, MyS for "publishing false information about inflation data," part of a coordinated campaign against independent economists.

EU Calls Top Officials to Meet on Greece Aid

The Wall Street Journal

By RIVA FROYMOVICH

European Union President Herman Van Rompuy has called a meeting of top EU policy makers Monday to discuss plans for a second bailout package for Greece, EU officials said on Sunday.

The gathering comes as Europe continues to struggle with a contentious issue: whether and how Greece's private-sector creditors should share the burden when the anticipated second aid package is doled out to the debt-burdened country.

Greece Needs ‘Endgame’ From EU to Enact Deficit Cuts, Canada’s Martin Says

Bloomberg
Former Canadian Prime Minister Paul Martin, who slashed his nation’s debt in the decade through 2005, said Europe needs to show Greece how austerity will pay off in the medium term to successfully push through budget cuts.