EU Leaders Delay Spanish Banking Aid Legislation

Arthi Gupta
19 Oct, 2012
New York City

The European markets fell after leaders delayed the Spanish banking aid legislation implementation. German producer prices rose and the UK public sector net borrowing declined. ING agreed to sell its Asian units for

[R]2:15 PM Frankfurt – The European markets fell after leaders delayed the Spanish banking aid legislation implementation. German producer prices rose and the UK public sector net borrowing declined. ING agreed to sell its Asian units for €1.6 billion. Carrefour agreed to sell its Colombian business for €2 billion.[/R]

European indexes edged lower after leaders agreed on a plan to enact legislation that provides aid directly to Spanish banks but failed to agree on the timetable to implement it.

The legislation should be agreed by the end of the year and focuses on improving supervision of banks in the euro zone and places them under direct review of the European Central Bank. However, Chancellor Angela Merkel is opposed to such a move.

The euro area leaders in a statement in Brussels on early Friday also said that for now they are satisfied with the progress in the negotiations between Greece and troika.

However, the leaders urged Greece to continue budgetary and structural policy reforms to achieve renewed growth.

Nationwide protests against additional spending cuts and austerity measures paralyzed normal life in Greece yesterday. Most of the establishments including schools, hospitals, shops and public and private sector offices remained shut.

Greece is required to implement austerity measures to receive the next tranche of the bailout from the troika.

In another statement, the European Council invited the legislators to proceed with work on the legislative proposals on the single supervisory mechanism, with the objective of agreeing on the legislative framework by January 1, 2013. The EC said it is important to establish a single rulebook underpinning the centralised supervision.

In Paris trading, the CAC-40 Index fell 22.75 or 0.6% to 3,512.43 and in Frankfurt the DAX Index edged lower 44.62 or 0.6% to 7,392.70.

For the week, the CAC-40 Index soared 3.7% and the DAX Index gained 2.2%.

The yields on Spain’s benchmark 10-year declined five basis points to 5.32%. Italian 10-year yields fell five basis points to 4.725%.

Euro Area Surplus Improves

The seasonally adjusted current account of the euro area recorded a surplus of €8.8 billion in August from €8.1 billion in July, the European Central Bank said today.

This reflected surpluses for goods of €10.2 billion, services of €7 billion and income of €3.2 billion, partially offset by a deficit for current transfers of €11.7 billion.

German PPI Climbs

Germany''s producer price index rose 1.7% annually in September following a 1.6% increase in August, Destatis reported today.

On a monthly basis, producer prices climbed 0.3% in September compared to the 0.5% growth in August.

UK Public Sector Net Borrowing Drops

The UK public sector net borrowing declined £0.7 billion from a year ago to £12.8 billion in September, the Office for National Statistics showed today. In September 2011, net borrowing was £13.5 billion.

Public sector net debt was £1,065.4 billion at the end of September, equivalent to 67.9% of gross domestic product.

Separately, the UK households perceive that the value of their home declined in October, data from a survey by Markit Economics and Knight Frank showed.

Only 6% of households said the price of their home had risen, while 16% said that their property value had declined. This resulted in a HPSI reading of 45, down from 46.8 in September and the second lowest reading since February.

ING to Sell Insurance Units

ING Groep NV agreed to sell its life insurance, general insurance, pension and financial planning units in Hong Kong and Macau, and its life insurance operation in Thailand to Pacific Century Group for a combined consideration of $2.14 billion or €1.64 billion in cash.

Carrefour to Sell Colombian Business

Carrefour SA, the French retailer agreed to sell its operations in Colombia to Chilean retail group Cencosud for an enterprise value of €2 billion.