EU says capacity to solve debt crisis in doubt

(Reuters) - The European Union acknowledged on Wednesday that investors now doubt whether the euro zone can overcome its debt crisis and Italy's Silvio Berlusconi called for more action to ward off market attacks.

European Commission President Jose Manuel Barroso said a surge in Italian and Spanish bond yields to 14-year highs was cause for deep concern although they did not reflect the true state of the third and fourth largest economies in the currency area.

Worsening euro crisis may force bigger rescue fund

(Reuters) - A worsening euro zone debt crisis may ultimately force the bloc to expand its 440 billion euro ($625 billion) bailout fund, despite political opposition in key contributing countries, some officials and analysts say.

Italy, Spain Bond Yields Rise Further

The Wall Street Journal

BY NEELABH CHATURVEDI AND MARK BROWN

LONDON—Italian and Spanish government bond yields rose again toward dangerously high levels early Wednesday on persistent fears that the euro-zone debt crisis is spreading to countries too big to be rescued by the existing euro-zone bailout fund.

Italian 10-year yields rose to 6.227%, a fresh euro-era high, taking the ...

The debt ceiling crisis

Tuesday morning quarterbacking

Aug 2nd 2011, 8:24 by Buttonwood

The Economist

WHAT lessons can be learned from the last minute deal on the US debt ceiling? The first may be that the markets (and some commenters on this blog) were right all along; the politicians would take things to the wire but would eventually do a deal. "It's theatre, folks" as one reader remarked. The trouble with this assumption is that it only encourages politicians to play the game of chicken on the grounds that the other side will blink; this time, the Democrats did but they may adjust their tactics next time.

That 30s feeling

Aug 2nd 2011, 15:16 by R.A. | WASHINGTON,

The Economist

PAUL KRUGMAN finds a troubling story out of Greece:

They descended by the hundreds — black-shirted, bat-wielding youths chasing down dark-skinned immigrants through the streets of Athens and beating them senseless in an unprecedented show of force by Greece’s far-right extremists.

Worries Mount Over Italy and Spain

The Wall Street Journal

By STACY MEICHTRY in Rome, JONATHAN HOUSE in Madrid and CHARLES FORELLE in Brussels

Government bonds and financial markets in Italy and Spain continued their relentless downward march Tuesday, heightening concern about the potential spread of the euro zone's debt crisis into two of the region's most vulnerable countries.

WRAPUP 2-Cyprus faces imminent bailout threat, biggest bank says

Reuters

Adds statements by finance ministry, European Commission)

* Cyprus would be fourth euro zone state to seek bailout

* Bond yields soar in secondary market, CDS hit record

* European Commission says bailout not being discussed

* Government says no significant funding needs til December

* Looking at local, international funding options after that

By Michele Kambas

ECB eyed for signs of growing rate hike caution

(Reuters) - Financial markets will be watching the European Central Bank on Thursday for any hints that recent signs of an economic slowdown and the unrelenting debt crisis have lowered the chances of another rate hike this year.

Germans Abetted Greek ‘Kleptocrats’ as Odious Sovereign Debt Grew: Books

Bloomberg

If you’re still wondering how an Aegean wonderland of sun, sea and sand slid into a money pit and began dragging the euro with it, pick up Jason Manolopoulos’s “Greece’s ‘Odious’ Debt.”

How much closer a union?

The Economist

01-08-2011

The euro zone is moving closer towards an uncertain fiscal union

AT THE emergency meeting of euro-zone leaders on July 21st Jean-Claude Trichet, president of the European Central Bank, circulated a set of charts showing how bond spreads had blown out after every summit over the past year. He also handed out a ranking of countries deemed by markets most likely to default: Greece, Portugal and Ireland were at the top, riskier than Venezuela and Pakistan;

Answers to the 7 big “what-ifs” of debt default

The debt negotiations are getting down to the wire. Republican and Democratic lawmakers are scrambling to broker a deal to raise the country’s $14.3 trillion debt ceiling before Tuesday, when the Treasury will no longer be able to borrow funds to meet all of its obligations. That’s why major credit rating agencies are considering a downgrade of U.S. debt.

What does that mean for consumers? Here are some answers we compiled from Reuters Moneyexperts:

Should I be worried that I won’t receive my Social Security benefit in August?

Lawmakers to vote on last-minute debt deal

01-08-2011

(Reuters) - After months of vitriolic discord, Republican and Democratic lawmakers were expected to vote on Monday on a White House-backed deal to raise the U.S. borrowing limit and avert an unprecedented default.

The Democratic-led Senate is expected to pass the deal which raises the debt ceiling and cuts about $2.4 trillion from the deficit over the next decade.

German finance minister: Greek deal no transfer union

(Reuters) - German Finance Minister Wolfgang Schaeuble denied on Saturday that this month's Greek bailout deal paves the way for a future 'transfer union' in which euro zone countries are liable for each others' debts.

Schaueble's remarks in a newspaper interview to be published on Sunday follow his attempt earlier this week to reassure conservative political colleagues that a new euro zone rescue fund would not have 'carte blanche' to buy bonds of states in difficulty.

The euro crisis

The Economist

Bazooka or peashooter?

Greece’s new bail-out helps, but should have gone further

WHEN Henry Paulson, America’s then treasury secretary, readied a plan to prop up Fannie Mae and Freddie Mac, two teetering housing agencies, in the summer of 2008, he spoke of having a “bazooka” in his pocket. In their response to the sovereign-debt crisis, Europe’s policymakers have tended to favour the peashooter. Their latest salvo in defence of Greece on July 21st produced some favourable initial reports, but the bang has faded. In a strange inversion of the crisis to date, the new bail-out plan seems to have helped the weaker peripherals and hurt the stronger ones.

Moody's warns it may downgrade its Spanish bond rating

BBC 29-7-11

Moody's has warned it may downgrade the credit rating of Spanish government bonds, saying last week's second rescue package for Greece had done little to ease debt concerns in the eurozone.

The rating agency said it was reviewing Spain's current Aa2 grade, adding that if it was downgraded, it would probably be by just one level, to Aa3.

UPDATE 2-China may help fund Greek bond buybacks-finmin source

There are signs that China interested in buybacks - source

* Greek finmin met China's IMF representative in Washington

* Analyst says may be wishful thinking

By George Georgiopoulos and Lefteris Papadimas

ATHENS, July 29 (Reuters) - China could provide loans to Greece to fund government bond buybacks in the secondary market to help cut the country's debt burden, a Greek finance ministry official said on Friday, but analysts were sceptical.

Greece to get September bailout from bilateral loans

(Reuters) - Greece will get its next 8 billion euro tranche of emergency loans from the euro zone and the International Monetary Fund in September as planned, provided it meets agreed criteria, the spokesman for the Eurogroup President said on Friday.

"There is no problem at all. The troika will only be in Athens from mid-August onwards and deliver their report at the beginning of September and that is when the decision (on the next disbursement) will be taken," Guy Schuller said.

Greek Deal Facilitates Worsening Relations

The Wall Street Journal

Frau "nein" becomes Frau "ja," and the euro zone is saved. So we are told by the 17 Heads of State after a meeting that even the tough-minded analysts at Jefferies International concede "exceeded expectations."

Of course, past meetings helped set the expectations bar quite low. Still, let's not quibble: Because German Chancellor Angela Merkel and French President Nicolas Sarkozy decided that some progress had to be made lest Greece bring down Italy, Spain, and perhaps the euro, the Heads put their heads together and staved off—deferred would be a better word—a crisis that was about to burst on the euro zone, primarily because Ms. Merkel won her battle to have private-sector investors share the pain.

Greece Gets New Bailout as U.S. Nears Brink

The Wall Street Journal

Plan to Contain Crisis Likely Means First Euro-Zone Default

By CHARLES FORELLE, PATRICIA KOWSMANN and COSTAS PARIS

BRUSSELS—Euro-zone leaders agreed Thursday on a new €109 billion ($157 billion) bailout for Greece and new steps to prevent its debt crisis from metastasizing across the Continent—in a plan expected to trigger the first debt default by a nation using the common currency.

The meeting also produced a stark and open-ended declaration: The wider euro zone is committed to financing countries that take bailouts—thus far, Greece, Ireland and Portugal—for as along as it takes them to regain access to private lenders.

What Constitutes a Greek Default? And Who Decides?

The wall street journal

By ART PATNAUDE

The euro-zone crisis is bringing ratings agencies once again into sharp focus, with euro-zone governments eager to avoid anything that could be considered a default as they try to restructure Greece's debt. After several failed attempts, euro-zone officials are now saying the plan could be to allow a default.

But how do the credit ratings agencies decide whether a Greek restructuring plan constitutes a default? Who are the decision makers? And what criteria do they use to make such a decision?