Posts Tagged ‘Europe’

Reuters online 30 Nov 2010

“Sovereign default fears could soon extend to Japan and the United States…” (Bette: The US stock market fell today partly on fears about the Eurozone crisis.)

LISBON/DUBLIN (Reuters) – The euro zone’s debt crisis deepened on Tuesday, with investors pushing the risk premium on Spanish and Italian government bonds to euro lifetime highs amid concern weaker member states may ultimately be forced to default.

European policymakers appeared at a loss to calm markets hell-bent on testing their determination to rescue countries like Portugal and Spain after approving an 85 billion euro ($110.7 billion) bailout for Ireland at the weekend.

The borrowing costs of countries like Belgium and France also rose — and the euro hit a 2-1/2 month low versus the dollar — as investors looked beyond the so-called euro periphery and targeted core founding members of the bloc.

A Reuters survey of 55 leading fund management houses showed U.S. and UK investors had significantly cut back their exposure to euro zone bonds this month, piling into equities instead despite a weakening in global shares.

“The crisis of confidence in Europe can’t be resolved quickly,” said Rick Meckler, president of investment firm LibertyView Capital Management in New York. “No single event can put things back in order.”

Markets are already discounting an eventual rescue of Portugal although the government in Lisbon denies, as Irish leaders initially did, that the country needs outside aid.

While a Portuguese rescue would be manageable, assistance for its larger neighbor Spain would sorely test EU resources, raise deeper questions about the integrity of the 12-year old currency area, and possibly spread contagion beyond Europe.

Citigroup Chief Economist Willem Buiter described the turbulence hitting the euro zone as an “opening act” and predicted that sovereign default fears could soon extend to Japan and the United States. “There is no such thing as an absolutely safe sovereign,” he wrote in a research note.

EURO SLIDES, SPREADS WIDEN

The euro fell as low as $1.2969 and has shed nearly 8 percent of its value against the dollar this month.

The yield spreads of 10-year Spanish, Italian and Belgian bonds over German benchmarks spiked to their highest levels since the birth of the euro in January 1999 and the cost of protecting against a euro zone sovereign default surged.

Jitters also hit European banking shares, which fell 1.2 percent, led lower by French banks BNP Paribas, Societe Generale and Credit Agricole on market rumors Standard & Poor’s might cut France’s outlook.

“There is no reason for concern, no risk,” said Francois Baroin, France’s budget minister and government spokesman.

Italian officials also scrambled to play down the risks for their economy, the euro zone’s third largest, which some economists have labeled “too big to bail.”

http://reut.rs/elr387

For more on the Eurozone crisis: http://www.reuters.com/subjects/euro-zone

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What is the Eurozone? From Wikipedia:

The eurozone, officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted the euro currency as their sole legal tender. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. Eight (not including Sweden, which has a de facto opt out) other states are obliged to join the zone once they fulfill the strict entry criteria.

Since Obama’s announcement, Russia has cancelled the deployment of “new” Iskander missile complexes to Kaliningrad. Makes me wonder what type of “old” missile complexes may already be there. These missiles are nuclear-capable and Russia has lots of them scattered about.

Here’s what Pravda had said earlier about the possibility of a US European missile shield:

“Russia (previously) promised to take adequate measures in return and deploy Iskander missile complexes in the Kaliningrad enclave.” Read entire article here. http://bit.ly/dkR1l

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From Wikipedia re Kaliningrad Enclave:

BalticSeaMapKaliningrad Oblast is the most militarized area of the Russian Federation, and the density of military installations is the highest in Europe. Kaliningrad is a headquarters of Russian Baltic Fleet circled by Chernyakhovsk (air base), Donskoye (air base), and Kaliningrad Chkalovsk (naval air base).

Kaliningrad Oblast is a federal subject of Russia (an oblast) situated on the Baltic coast. The oblast forms the westernmost part of the Russian Federation, but it has no land connection to the rest of Russia. Since the fall of the Soviet Union it has been an exclave of Russia surrounded by Lithuania, Poland, and the Baltic Sea. Borderless travel to the main part of Russia is only possible by sea or air.

This political isolation became more pronounced when Lithuania and Poland both became members of the European Union and NATO, and entered the Schengen Zone, which means that the oblast is surrounded by the territories of these organizations as well.