Italy's Woes Weigh on Europe

Prime Minister Resists Calls for New Measures, Anxiety Spreads Across Continent

By STACY MEICHTRY, CHARLES FORELLE and DAVID ENRICH

ROME—Italian Prime Minister Silvio Berlusconi resisted calls for a swift economic overhaul, heightening worries that the world's eighth-largest economy is sliding into the sort of debt distress that has laid low its smaller European neighbors.

World debt guide

Owe dear

Jul 28th 2011, 13:05 by The Economist online

Our interactive graphic shows how deeply in hock we all are THE headlines are all about sovereign debt at the moment. But that is only part of the problem. Debt rose across the rich world during the boom, from consumers maxing out credit cards to financial firms taking on more leverage, and the process of reducing it is still at a very early stage.

U.S. Debt-Ceiling Agreement Is an Alarming Bipartisan Mess: View

Bloomberg

The deal reached by the U.S. Congress to raise the $14.3 trillion debt ceiling has spared the nation an immediate catastrophe while potentially setting a path for longer-term disasters.

Financial markets’ initial euphoria over the deal faded quickly. The S&P 500 index of U.S. stocks declined for the sixth day in a row, losing 0.4 percent Monday to close at 1,286.94. The dollar gained against the euro and the yen but declined to a record low against the Swiss franc.

Gold Rallies to Record for Second Day as Signs of Slowdown Fire Up Demand

Bloomberg

By Pham-Duy Nguyen and Nicholas Larkin - Aug 3, 2011 5:35 PM GMT+0300

Gold rose to a record $1,675.90 an ounce in New York on signs that the U.S. economy is faltering amid debt woes, boosting demand for the precious metal as an investment haven.

Moody’s Investors Service said the U.S. credit rating may be downgraded and yesterday placed the country on negative outlook after President Barack Obama signed into law a plan to lift the nation’s borrowing limit and cut spending. Gold priced in euros also reached a record on concern that slowing growth will hamper efforts by Spain and Italy to trim debt.

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.