European Leaders Struggle to Contain Debt Contagion

Arthi Gupta
26 Nov, 2010
New York City

The European indexes fell on rising debt concerns in the euro-zone as leaders struggle to contain the spreading debt contagion. German CPI rose in November and French consumer spending declined in October. Euro area bank lending climbed in October. Spain mortgage approvals fell in September.

[R]4:00 PM Frankfurt – The European indexes fell on rising debt concerns in the euro-zone as leaders struggle to contain the spreading debt contagion. German CPI rose in November and French consumer spending declined in October. Euro area bank lending climbed in October. Spain mortgage approvals fell in September.[/R]

German economy minister Wolfgang Schaeuble told German radio Bayerischer Rundfunk on Friday that demands to expand the European Stability Fund were ill-advised. The comments come after German daily Die Welt reported on Thursday that the European Commission had debated doubling the size of the rescue fund.

Swedish central bank deputy governor Barbro Wickman-Parak said in a speech in Stockholm on Friday that more efforts are needed towards making banks less vulnerable and more resilient to crises.

""We need to continue the work on strengthening the financial system,"" the policy maker said.

In Paris CAC 40 Index decreased 47.10 or 1.25% to close at 3,713.32 and in Frankfurt DAX Index edged lower 45.45 or 0.66% to close at 6,834.21. For the week, the CAC 40 Index plunged 3.8%.

Portugal Urged To Seek Aid

Financial Times Deutschland reported today that the European Central Bank and a majority of euro area nations have urged Portugal to formally apply for a bailout from the European rescue fund.

Without disclosing sources, the paper said by putting pressure on Portugal to seek aid, the ECB aims to prevent a collapse of Spain.

The paper explained that if Lisbon accepts bailout, it would automatically ease the pressure on Spain, whose banks have high involvement in Portugal.

However, Portugal, the European Commission, and the ECB have denied the report.

Spanish Premier Rejects Bailout Chances

Spanish Prime Minister Jose Luis Rodriguez Zapatero told in an interview with RAC1 radio today that there was ""absolutely"" no chance that Spain will need a bailout like that required by Greece and Ireland. He rejected speculation that his country will eventually have to accept an E.U. bailout to plug the gap in its public finances.

The comments come in a week in which Spanish bond yields rose sharply on fears that Ireland''s debt woes could spread.

Ireland Bailout Plan

The bailout package for Ireland could be concluded as early as next week. A spokesman for European Union economic and monetary affairs commissioner Olli Rehn said talks between the Irish government and the International Monetary Fund/ EU could be finished next week and a deal reached.

‘We hope that be the end of November, beginning of December that this work can be concluded successfully,’ the spokesman told Irish broadcaster RTE.

Ireland unveiled tough austerity measures to cut its €15 billion debt by 2014. The cuts are part of the terms of the €80 to €90 billion bailout deal from the IMF/EU. The €15 billion of cuts is equivalent to 9.5% of Ireland’s economic output.

Euro-zone Bank Lending Climbs

The European Central Bank reported that lending by banks to companies operating in the euro-zone rose at an annual rate of 1% in October, compared with a 0.9% increase in September. Annual lending to households rose 2.9% in October, from a 2.8% rise in September.

M3 money supply, which is the broadest measure of money supply in the 16-nation area, rose 1% from a year ago in October, falling from a 1.1% rise in the prior month.

In another report, the EuroCoin indicator rose for a second consecutive month in November, a report from the Center for Economic Policy Research and the Bank of Italy showed on Friday.

The indicator that suggests the current economic situation in the euro area rose to 0.45 in November from October''s 0.41. The rise was due to improvements in business and consumer confidence.

German Import Price Inflation Drops; CPI Rises

According to a report released by the Federal Statistics Office today, Germany''s import price index rose 9.2% annually in October, as against a 9.9% growth in the September. This was mainly due to higher prices for energy, raw materials and metals.

On a monthly basis, import prices dropped 0.2% in October, compared to a 0.3% increase in September.

However, export prices advanced 4.3% annually in October, following a 4.6% rise in September. A year earlier, export prices declined 2.6%. On a monthly basis, export prices fell 0.3% in October, in contrast to a 0.3% rise in September.

In another report, Germany''s inflation rose to 1.5% in November from 1.3% in October, according to a preliminary estimate by the Federal Statistics Office. The latest growth was mainly driven by rising prices of heating oil, motor fuels and fruits and vegetables, the statistics office said.

On a monthly basis, consumer prices increased 0.1% in November,

French Consumer Spending Dips

French consumer spending in manufactured goods fell 0.7% on a monthly basis in October after rising a revised 1.6% in September, statistics office Insee said today.

On an annual basis, household spending declined 0.3% in October, as against the revised 1.2% increase in September. Consumer spending dropped for the first time in four months.

Hungary Jobless Rate Unchanged

Hungary''s jobless rate was 10.9% in the August to October period, same as in the July to September period, according to a report published by the Central Statistics Office today.

The number of unemployed persons totaled 465,600 persons during the three-month period ended in October, down from 465,700 in the previous three months and the number of employed totaled 3.82 million.

Swiss KOF Economic Barometer Declines

Switzerland''s KOF Institute''s economic barometer fell for a third straight month to 2.12 points in November from October''s revised 2.16, according to data released by the institute today.

Spain Mortgage Approvals Fall

Data published from the statistics agency INE showed that the number of mortgaged properties for dwelling purposes in Spain fell 15.9% annually in September.

At €135,132, the average value of the overall mortgages in September increased 4.2% from the previous year and 8.7% from August.

Gainers & Losers

Cable & Wireless Worldwide PLC gained 0.88% to 62.75 pence after the telecommunications service provider said it published a notice to the holders of its £230 million 5.75% convertible bonds due 2014.

Cap Gemini SA fell 0.92% to €33.47 after the Paris-based global consulting and outsourcing services provider, said on Thursday in Mumbai, that it had acquired Indian IT firm, Thesys Technologies, for an undisclosed sum.

Neste Oil Corporation fell 1.43% to €11.00 after the Finland-based company active within the oil and gas industry received an International Sustainability & Carbon Certification for the NExBTL renewable diesel produced at the company''s Porvoo refinery in Finland.

The certificate confirms that NExBTL diesel produced from certified raw materials is suitable for use in meeting mandated bio-content on the German market.

Rio Tinto plc dropped 2.14% to 4,178.00 pence after the British-Australian miner said it is expanding its iron ore position in the Pilbara revealing a 2.0 billion ton addition to the Mineral Resource base.

X5 Retail Group N.V. fell 1.76% to $38.51 after the grocery retailer reported third quarter revenues climbed 24% to $2.61 billion from $2.10 billion in the previous year. Profit in the quarter rose 9% to $79.55 million compared to $72.92 million a year ago.