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Tens of thousands of Greeks take to the streets in largest anti-austerity protest in a year
Greek police clashed with hooded rioters hurling petrol bombs as tens of thousands took to the streets of Athens on Wednesday in Greece’s biggest anti-austerity protest in more than a year.

Violence erupted after nearly 70,000 people marched to parliament chanting “We won’t submit to the troika (of lenders)” and “EU, IMF Out!” on the day of a general strike against a new round of cuts demanded by foreign lenders. (Photos: AP Photo; AFP/GettyImages)

Filed under greece europe protests austerity measures financial crisis euro crisis

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Greece agrees new spending cuts to keep bailout Leaders of Greece’s fragile coalition government have agreed 11.5bn euros (£9bn) in new spending cuts needed to keep its EU/IMF bailout. The cuts were required for Greece to qualify for the next 31.5bn euro instalment of the 130bn euro loan. Without the funds, Greece would face bankruptcy and probably leave the euro. The deal came after the two junior coalition parties shelved demands for an immediate renegotiation of the bailout terms to delay the cuts. Conservative Prime Minister Antonis Samaras has argued that Greece must regain credibility before it can ask its international creditors for an extension to its 2013-4 austerity deadline. “The prime minister said that it must be accepted - as a necessary condition for our country to remain in the eurozone and to be able to negotiate further - to cut public spending by another 11.5bn [euros],” Finance Minister Yannis Stournaras said after the meeting. “That position was accepted.” He said the government would finalise the cuts by the end of August and would seek to “minimise the social effects”. The austerity measures are expected to include new reductions in state benefits and pensions. Fairness The leader of the socialist Pasok, the second-largest party backing the government, said he had temporarily set aside demands for an immediate renegotiation in order to avoid early elections. “If the prime minister feels that immediately adopting the measures worth 11.5bn euros will safeguard future loan releases and the country’s place in the euro, I am forced to accept his view,” Evangalos Venizelos said. Both he and Fotis Kouvelis, leader of the the third coalition party, the Democratic Left, said they would continue to fight for a renegotiation, and insisted that the burden of the cuts should be fair. Greece’s “troika” of international creditors - the EU, International Monetary Fund (IMF) and European Central Bank (ECB) - have said they will not release the next bailout payment if they are not satisfied by next month that Greece has made sufficient progress in implementing spending cuts and economic reform. Pictured: Prime Minister Antonis Samaras is under international pressure to deliver cuts and economic reform

Greece agrees new spending cuts to keep bailout

Leaders of Greece’s fragile coalition government have agreed 11.5bn euros (£9bn) in new spending cuts needed to keep its EU/IMF bailout.

The cuts were required for Greece to qualify for the next 31.5bn euro instalment of the 130bn euro loan.

Without the funds, Greece would face bankruptcy and probably leave the euro.

The deal came after the two junior coalition parties shelved demands for an immediate renegotiation of the bailout terms to delay the cuts.

Conservative Prime Minister Antonis Samaras has argued that Greece must regain credibility before it can ask its international creditors for an extension to its 2013-4 austerity deadline.

“The prime minister said that it must be accepted - as a necessary condition for our country to remain in the eurozone and to be able to negotiate further - to cut public spending by another 11.5bn [euros],” Finance Minister Yannis Stournaras said after the meeting.

“That position was accepted.”

He said the government would finalise the cuts by the end of August and would seek to “minimise the social effects”.

The austerity measures are expected to include new reductions in state benefits and pensions.

Fairness

The leader of the socialist Pasok, the second-largest party backing the government, said he had temporarily set aside demands for an immediate renegotiation in order to avoid early elections.

“If the prime minister feels that immediately adopting the measures worth 11.5bn euros will safeguard future loan releases and the country’s place in the euro, I am forced to accept his view,” Evangalos Venizelos said.

Both he and Fotis Kouvelis, leader of the the third coalition party, the Democratic Left, said they would continue to fight for a renegotiation, and insisted that the burden of the cuts should be fair.

Greece’s “troika” of international creditors - the EU, International Monetary Fund (IMF) and European Central Bank (ECB) - have said they will not release the next bailout payment if they are not satisfied by next month that Greece has made sufficient progress in implementing spending cuts and economic reform.

Pictured: Prime Minister Antonis Samaras is under international pressure to deliver cuts and economic reform

Filed under greece europe Eurozone austerity measures financial crisis

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Catalonia unable to fund its social services Catalonia has indicated it will join Valencia and Murcia in asking the government for loans from a regional bailout fund The Catalan government on Tuesday said it is unable to pay this month’s bills for privately managed hospitals, old people’s homes and disabled centres, blaming Spain’s central government for its financial problems. “Liquidity for these payments depends on them,” said Francesc Homs, spokesman for the Barcelona-based government. “They should meet their obligations, and they are not doing so.” Regional governments provide health, education and social services and jointly account for almost 40% of Spain’s public spending. Catalonia, one of Spain’s wealthier regions, has outsourced management of almost half of its hospital services and much of its care for the disabled and elderly. Several old people’s homes were reported to have lodged a court writ demanding immediate payment. Late payment of July’s bills will also apply to some 700 privately managed, but state-funded, schools – though teachers salaries are not affected. The Catalan administration boycotted a meeting between the Spanish government and regional finance chiefs. At the meeting budget minister Cristóbal Montoro was expected to try to force regional finance chiefs to stick to a joint deficit target of 1.5% this year. “It doesn’t make sense to attend a meeting where everything is already decided,” said Homs. Catalonia has indicated it will join Valencia and Murcia in asking the government for money from a new regional bailout fund for financing deficits and refinancing existing debt. Regional leaders were waiting to hear exactly what conditions the government would attach to loans from the fund – which will probably include more austerity and a tighter rein from Madrid. Pictured: Calella de Palafrugell, Costa Brava, Catalonia, the Spanish region has run out of money to pay for social services. Photograph Alamy

Catalonia unable to fund its social services

Catalonia has indicated it will join Valencia and Murcia in asking the government for loans from a regional bailout fund

The Catalan government on Tuesday said it is unable to pay this month’s bills for privately managed hospitals, old people’s homes and disabled centres, blaming Spain’s central government for its financial problems.

“Liquidity for these payments depends on them,” said Francesc Homs, spokesman for the Barcelona-based government. “They should meet their obligations, and they are not doing so.”

Regional governments provide health, education and social services and jointly account for almost 40% of Spain’s public spending. Catalonia, one of Spain’s wealthier regions, has outsourced management of almost half of its hospital services and much of its care for the disabled and elderly. Several old people’s homes were reported to have lodged a court writ demanding immediate payment.

Late payment of July’s bills will also apply to some 700 privately managed, but state-funded, schools – though teachers salaries are not affected.

The Catalan administration boycotted a meeting between the Spanish government and regional finance chiefs.

At the meeting budget minister Cristóbal Montoro was expected to try to force regional finance chiefs to stick to a joint deficit target of 1.5% this year. “It doesn’t make sense to attend a meeting where everything is already decided,” said Homs.

Catalonia has indicated it will join Valencia and Murcia in asking the government for money from a new regional bailout fund for financing deficits and refinancing existing debt.

Regional leaders were waiting to hear exactly what conditions the government would attach to loans from the fund – which will probably include more austerity and a tighter rein from Madrid.

Pictured: Calella de Palafrugell, Costa Brava, Catalonia, the Spanish region has run out of money to pay for social services. Photograph Alamy

Filed under spain europe Eurozone financial crisis

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Crisis-Hit Cyprus Takes Europe’s Helm The island republic of Cyprus has taken over the EU’s rotating presidency at a particularly inauspicious moment. Not only does it have an ongoing dispute with Turkey, but the euro-zone member has just requested a bailout. But the small country is determined to show that it can perform its EU duties with aplomb. A steel-and-glass palace stands at the gateway to the Cypriot capital Nicosia. The headquarters of Laiki Trapeza, or People’s Bank, is directly next to the expressway. It’s a futuristic building, but bankruptcy lurks behind the façade. Laiki Bank, which made unwise investments in Greece, urgently needs €1.8 billion ($2.25 billion). Because the bank was unable to raise the money itself, despite weeks of efforts, Cyprus has had to ask for help from its international partners. Last week, the country applied for aid from the EU bailout fund and the International Monetary Fund (IMF). The call for help could hardly come at a worse moment. As of July 1, the Republic of Cyprus has assumed the rotating European Council presidency for six months. Laiki Bank isn’t alone. Other Cypriot lenders are also potentially in trouble. They lent about €25 billion to Greek borrowers, and now it is unclear how much of that money they will ever recover. The government also needs new loans, meaning that Cyprus’s request for aid could total up to €10 billion — and that in a country with about 840,000 people, the third-smallest economy in the euro zone, with a gross domestic product of less than €18 billion. All three major rating agencies have downgraded Cyprus’s debt to junk status. This is a new experience for the Greek Cypriots, who had enjoyed consistently growing affluence for decades. Unemployment was almost nonexistent, and unlike Greece, the bureaucracy which controlled the island state’s affairs was efficient, even if it was bloated. This is now over. Cyprus is in a deep recession. Unemployment is around 10 percent, and among young people it’s climbed to almost 30 percent. “For rent” signs are taped to more and more storefronts in downtown Nicosia. Under an Unfavorable Star Unlike the Laiki headquarters, the presidential palace in the Cypriot capital is a modest villa from British colonial days. It’s the residence of President Demetris Christofias, the only communist head of government in the EU. His Progressive Party of Working People (AKEL) traditionally captures the votes of a third of all Greek Cypriots in parliamentary elections. AKEL never officially abandoned Moscow-style socialism, but in practice the party more closely resembles traditional European social democratic parties. Its central goals are to increase prosperity among workers and resolve the conflict with Turkish Cypriots. In both cases, the prospects are not good. Cyprus has been divided since 1974. The demarcation line runs from east to west, straight through Nicosia’s old town and the entire island. Empty oil drums and sand bags, topped with rusty barbed wire, form the “green line,” interrupted by a small number of checkpoints which allow people to cross into the other part of the island. Thirty-eight years ago, the Turkish army captured the northern part of the island after the military government in Athens had been overthrown in a coup. Since then, the Turkish Cypriots have been living in the Turkish Republic of Northern Cyprus, a country that is only recognized by Turkey. Ankara has about 40,000 troops stationed in the territory. Although border incidents are rare, real peace has eluded the island to this day. After years of fruitless talks, the negotiations are now on ice. The fact that Turkey does not recognize the Republic of Cyprus as the only legitimate state on the island has consequences. Although Cyprus as a whole formally joined the EU in 2004, the implementation of European rules and laws ends at the demarcation line. The Greek Cypriots share some of the blame. In 2004, a majority rejected a United Nations reunification plan in a referendum, while the Turkish Cypriots approved the plan. Pictured: The Republic of Cyprus has assumed the rotating European Council presidency for six months as of July 1. Here, the Cypriot and EU flags fly next to each other in the city centre of the Cypriot capital, Nicosia.AFP

Crisis-Hit Cyprus Takes Europe’s Helm

The island republic of Cyprus has taken over the EU’s rotating presidency at a particularly inauspicious moment. Not only does it have an ongoing dispute with Turkey, but the euro-zone member has just requested a bailout. But the small country is determined to show that it can perform its EU duties with aplomb.

A steel-and-glass palace stands at the gateway to the Cypriot capital Nicosia. The headquarters of Laiki Trapeza, or People’s Bank, is directly next to the expressway. It’s a futuristic building, but bankruptcy lurks behind the façade.

Laiki Bank, which made unwise investments in Greece, urgently needs €1.8 billion ($2.25 billion). Because the bank was unable to raise the money itself, despite weeks of efforts, Cyprus has had to ask for help from its international partners. Last week, the country applied for aid from the EU bailout fund and the International Monetary Fund (IMF).

The call for help could hardly come at a worse moment. As of July 1, the Republic of Cyprus has assumed the rotating European Council presidency for six months.

Laiki Bank isn’t alone. Other Cypriot lenders are also potentially in trouble. They lent about €25 billion to Greek borrowers, and now it is unclear how much of that money they will ever recover. The government also needs new loans, meaning that Cyprus’s request for aid could total up to €10 billion — and that in a country with about 840,000 people, the third-smallest economy in the euro zone, with a gross domestic product of less than €18 billion. All three major rating agencies have downgraded Cyprus’s debt to junk status.

This is a new experience for the Greek Cypriots, who had enjoyed consistently growing affluence for decades. Unemployment was almost nonexistent, and unlike Greece, the bureaucracy which controlled the island state’s affairs was efficient, even if it was bloated. This is now over. Cyprus is in a deep recession. Unemployment is around 10 percent, and among young people it’s climbed to almost 30 percent. “For rent” signs are taped to more and more storefronts in downtown Nicosia.

Under an Unfavorable Star

Unlike the Laiki headquarters, the presidential palace in the Cypriot capital is a modest villa from British colonial days. It’s the residence of President Demetris Christofias, the only communist head of government in the EU. His Progressive Party of Working People (AKEL) traditionally captures the votes of a third of all Greek Cypriots in parliamentary elections. AKEL never officially abandoned Moscow-style socialism, but in practice the party more closely resembles traditional European social democratic parties. Its central goals are to increase prosperity among workers and resolve the conflict with Turkish Cypriots. In both cases, the prospects are not good.

Cyprus has been divided since 1974. The demarcation line runs from east to west, straight through Nicosia’s old town and the entire island. Empty oil drums and sand bags, topped with rusty barbed wire, form the “green line,” interrupted by a small number of checkpoints which allow people to cross into the other part of the island. Thirty-eight years ago, the Turkish army captured the northern part of the island after the military government in Athens had been overthrown in a coup. Since then, the Turkish Cypriots have been living in the Turkish Republic of Northern Cyprus, a country that is only recognized by Turkey. Ankara has about 40,000 troops stationed in the territory.

Although border incidents are rare, real peace has eluded the island to this day. After years of fruitless talks, the negotiations are now on ice. The fact that Turkey does not recognize the Republic of Cyprus as the only legitimate state on the island has consequences. Although Cyprus as a whole formally joined the EU in 2004, the implementation of European rules and laws ends at the demarcation line. The Greek Cypriots share some of the blame. In 2004, a majority rejected a United Nations reunification plan in a referendum, while the Turkish Cypriots approved the plan.

Pictured: The Republic of Cyprus has assumed the rotating European Council presidency for six months as of July 1. Here, the Cypriot and EU flags fly next to each other in the city centre of the Cypriot capital, Nicosia.AFP

Filed under cyprus europe European Union financial crisis

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Eurozone bank bailout deal throws lifeline to Spain and Italy Italy and Spain stunned Germany by blocking progress until they obtained softer bailout rules in 14 hours of bad-tempered talks European leaders have pulled back from the brink of disastrous failure in their attempts to rescue the euro, throwing a lifeline to the weakest links in the eurozone by agreeing to shore up struggling banks directly, remove disadvantages for private creditors and move quickly towards a new supervisory regime for banks. David Cameron said on Friday: “The countries of the eurozone did take some important steps forward last night. There’s still important work to do.” Amid bad-tempered talks that continued through the night, Italy and Spain stunned the Germans by blocking progress on an overall deal at a two-day EU summit in Brussels until they obtained guarantees that the eurozone would act to cut the soaring costs of their borrowing. The tough negotiations were deadlocked for hours, prompting the departure from the summit after midnight of the 10 non-euro countries, including Britain, leaving the eurozone leaders to fight it out. After 14 hours of wrangling, they emerged with a three-point statement rewriting the rules for the eurozone’s new bailout regime in a way likely to soften the draconian terms that have accompanied the rescue programmes for Greece, Portugal, and Ireland over the past two years. The leaders said a new eurozone banking supervisory system should be established by the end of the year. Once it is operational, the eurozone’s new permanent bailout fund, the European Stability Mechanism, would be able to recapitalise failing banks directly, without the loans going via governments as at present and adding to national debt burdens. The shift had been demanded particularly by Mariano Rajoy, the prime minister of Spain. The new supervisory system is likely to come under the authority of the European Central Bank. Under plans being mooted, the new banking regime is to entail pooling eurozone liability for guaranteeing savers’ deposits and a common resolution fund for winding up bad banks. But the statement mentioned neither of these two points, which are controversial in Germany, which is reluctant to accept responsibility for the conduct of other countries. The statement added that in drawing up the terms for up to €100bn (£80bn) for Spanish banks, private creditors would enjoy the same status as the bailout fund in the event of a debt rescheduling. Previously the fund enjoyed “seniority” over private investors. Herman Van Rompuy, the European Council president who chaired the fractious summit, described the agreement as a breakthrough. “We are opening possibilities for countries that are well-behaving to make use of financial stability instruments in order to reassure markets and get again some stability around some of the sovereign bonds of our member states,” he said. Pictured: German chancellor Angela Merkel arrives for day two of the summit in Brussels on Friday. Photograph: John Thys/AFP/Getty Images

Eurozone bank bailout deal throws lifeline to Spain and Italy

Italy and Spain stunned Germany by blocking progress until they obtained softer bailout rules in 14 hours of bad-tempered talks

European leaders have pulled back from the brink of disastrous failure in their attempts to rescue the euro, throwing a lifeline to the weakest links in the eurozone by agreeing to shore up struggling banks directly, remove disadvantages for private creditors and move quickly towards a new supervisory regime for banks.

David Cameron said on Friday: “The countries of the eurozone did take some important steps forward last night. There’s still important work to do.”

Amid bad-tempered talks that continued through the night, Italy and Spain stunned the Germans by blocking progress on an overall deal at a two-day EU summit in Brussels until they obtained guarantees that the eurozone would act to cut the soaring costs of their borrowing.

The tough negotiations were deadlocked for hours, prompting the departure from the summit after midnight of the 10 non-euro countries, including Britain, leaving the eurozone leaders to fight it out.

After 14 hours of wrangling, they emerged with a three-point statement rewriting the rules for the eurozone’s new bailout regime in a way likely to soften the draconian terms that have accompanied the rescue programmes for Greece, Portugal, and Ireland over the past two years.

The leaders said a new eurozone banking supervisory system should be established by the end of the year. Once it is operational, the eurozone’s new permanent bailout fund, the European Stability Mechanism, would be able to recapitalise failing banks directly, without the loans going via governments as at present and adding to national debt burdens. The shift had been demanded particularly by Mariano Rajoy, the prime minister of Spain.

The new supervisory system is likely to come under the authority of the European Central Bank. Under plans being mooted, the new banking regime is to entail pooling eurozone liability for guaranteeing savers’ deposits and a common resolution fund for winding up bad banks. But the statement mentioned neither of these two points, which are controversial in Germany, which is reluctant to accept responsibility for the conduct of other countries.

The statement added that in drawing up the terms for up to €100bn (£80bn) for Spanish banks, private creditors would enjoy the same status as the bailout fund in the event of a debt rescheduling. Previously the fund enjoyed “seniority” over private investors.

Herman Van Rompuy, the European Council president who chaired the fractious summit, described the agreement as a breakthrough.

“We are opening possibilities for countries that are well-behaving to make use of financial stability instruments in order to reassure markets and get again some stability around some of the sovereign bonds of our member states,” he said.

Pictured: German chancellor Angela Merkel arrives for day two of the summit in Brussels on Friday. Photograph: John Thys/AFP/Getty Images

Filed under spain italy europe Eurozone financial crisis bail out

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Spain´s leader warns nation may not be able to borrow much longer MADRID — Paying ever-higher rates to borrow money, Spain may not be able to finance itself much longer through debt, the country’s prime minister warned Wednesday. It was the clearest indication yet that his country may need an even bigger rescue than a European bailout already slated for its banks. Although fellow government ministers have hinted at such, Prime Minister Mariano Rajoy’s comments before parliament marked his first and most direct admission that Spain is close to being locked out of capital markets. The interest rate Madrid pays to borrow using short-term bonds nearly tripled at an auction a day earlier. “We can’t keep funding ourselves for too long at the prices we’re currently paying,” Rajoy told lawmakers on the eve of a crucial European Union summit that begins Thursday in Brussels. Spanish lawmakers also debated whether to raise property, sales and energy taxes to close the budget gap. Rajoy’s comments suggest that Spain’s financial woes go well beyond its troubled banks, which are burdened by unpaid property loans left over from its housing bubble. The country’s borrowing costs have soared in the last several weeks after Spain requested a loan from fellow European nations to aid its banks, as investors have come to realize the negative effect that helping hand would have on Madrid’s books. Spain’s budget deficit was 8.9% of the country’s gross domestic product last year, nearly three times what EU rules allow. Rajoy has pledged to cut the deficit down to the required limit of 3% of GDP by the end of next year, but the International Monetary Fund has said that looks unlikely. Rajoy told parliament he would push fellow leaders in Brussels to allow aid to go directly to troubled Spanish banks to ensure the European loan would not exacerbate the government’s debt load. But finance ministers of the Eurozone, made up of the 17 nations that share the euro currency, rebuffed that suggestion Wednesday, issuing a statement saying “the Spanish government will remain fully liable” for the loan. Germany in particular has insisted that Rajoy’s administration be held accountable for loan repayment. Pictured: Spanish Prime Minister Mariano Rajoy speaks during a session of parliament in Madrid on Wednesday. Credit: Andres Kudacki / Associated Press

Spain´s leader warns nation may not be able to borrow much longer

MADRID — Paying ever-higher rates to borrow money, Spain may not be able to finance itself much longer through debt, the country’s prime minister warned Wednesday. It was the clearest indication yet that his country may need an even bigger rescue than a European bailout already slated for its banks.

Although fellow government ministers have hinted at such, Prime Minister Mariano Rajoy’s comments before parliament marked his first and most direct admission that Spain is close to being locked out of capital markets. The interest rate Madrid pays to borrow using short-term bonds nearly tripled at an auction a day earlier.

“We can’t keep funding ourselves for too long at the prices we’re currently paying,” Rajoy told lawmakers on the eve of a crucial European Union summit that begins Thursday in Brussels. Spanish lawmakers also debated whether to raise property, sales and energy taxes to close the budget gap.

Rajoy’s comments suggest that Spain’s financial woes go well beyond its troubled banks, which are burdened by unpaid property loans left over from its housing bubble. The country’s borrowing costs have soared in the last several weeks after Spain requested a loan from fellow European nations to aid its banks, as investors have come to realize the negative effect that helping hand would have on Madrid’s books.

Spain’s budget deficit was 8.9% of the country’s gross domestic product last year, nearly three times what EU rules allow. Rajoy has pledged to cut the deficit down to the required limit of 3% of GDP by the end of next year, but the International Monetary Fund has said that looks unlikely.

Rajoy told parliament he would push fellow leaders in Brussels to allow aid to go directly to troubled Spanish banks to ensure the European loan would not exacerbate the government’s debt load.

But finance ministers of the Eurozone, made up of the 17 nations that share the euro currency, rebuffed that suggestion Wednesday, issuing a statement saying “the Spanish government will remain fully liable” for the loan. Germany in particular has insisted that Rajoy’s administration be held accountable for loan repayment.

Pictured: Spanish Prime Minister Mariano Rajoy speaks during a session of parliament in Madrid on Wednesday. Credit: Andres Kudacki / Associated Press

Filed under spain europe financial crisis Eurozone

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Merkel rejects sharing eurozone debt through bonds German Chancellor Angela Merkel has again rejected the idea of pooling eurozone debt through bonds and urged greater competitiveness in the EU. She told parliament in Berlin that the proposal for “eurobonds” went against Germany’s constitution. Mrs Merkel later travelled to Paris for talks with President Francois Hollande. In a gesture to Mr Hollande, who holds opposing views on debt, she said she hoped European leaders would adopt a 130bn-euro ($162bn) stimulus package. Mr Hollande, who became French president on a ticket of anti-austerity, has been a strong supporter of the growth package. Mrs Merkel said: “We have made progress toward a pact for growth, which we hope can be decided tomorrow.” The pair head to Brussels on Thursday for a two-day summit of European Union leaders regarded as crucial in tackling a growing economic crisis. European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets. The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems. Spanish Prime Minister Mariano Rajoy said on Wednesday that his country could not afford to finance itself for long at current bond rates. Spanish 10-year government bonds have been trading at yields above 6.8%, coming close to the 7% considered unaffordable. Pictured: Francois Hollande and Angela Merkel have differing views on debt management

Merkel rejects sharing eurozone debt through bonds

German Chancellor Angela Merkel has again rejected the idea of pooling eurozone debt through bonds and urged greater competitiveness in the EU.

She told parliament in Berlin that the proposal for “eurobonds” went against Germany’s constitution.

Mrs Merkel later travelled to Paris for talks with President Francois Hollande.

In a gesture to Mr Hollande, who holds opposing views on debt, she said she hoped European leaders would adopt a 130bn-euro ($162bn) stimulus package.

Mr Hollande, who became French president on a ticket of anti-austerity, has been a strong supporter of the growth package.

Mrs Merkel said: “We have made progress toward a pact for growth, which we hope can be decided tomorrow.”

The pair head to Brussels on Thursday for a two-day summit of European Union leaders regarded as crucial in tackling a growing economic crisis.

European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets.

The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems.

Spanish Prime Minister Mariano Rajoy said on Wednesday that his country could not afford to finance itself for long at current bond rates.

Spanish 10-year government bonds have been trading at yields above 6.8%, coming close to the 7% considered unaffordable.

Pictured: Francois Hollande and Angela Merkel have differing views on debt management

Filed under germany europe Eurozone financial crisis eurobonds bail out

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Cyprus to ask for bailout from eurozone partners

Cyprus has told the European authorities that it intends to apply for financial assistance, the fifth eurozone member to do so.

It said it needs help to shore up its banks, which are heavily exposed to the Greek economy.

The announcement came on another day of nervousness about the single currency.

Shares in Italy, Spain and Greece fell sharply amid concerns that an EU summit this week will again fail to produce a deal to shore up the euro.

The Spanish prime minister called for Thursday’s European Union summit to “dispel doubts” about the euro.

The Italian and Spanish indexes both closed about 4% down. The fall on Spain’s Ibex index was exacerbated by a Reuters report that the Moody’s credit rating agency is planning to downgrade Spain’s banks.

Earlier, Spain formally requested a bailout loan for its banking sector, expected to be for up to 100bn euros (£80.2bn, $125bn).

Cyprus’s main probems

  • Banks: Cypriot banks’ exposure to Greece totals 29bn euros, or 160% of GDP, including both Greek government bonds and loans to Greek residents.
  • Recession: Economy expected to shrink 1.2% this year (IMF).
  • Deficit: 2011 deficit 6.3% of GDP - one of the highest in the eurozone.
  • Highest public sector wage bill in eurozone (as a percentage of GDP).

Filed under cyprus europe Eurozone financial crisis

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Eurozone four leaders agree economic growth package Leaders of the eurozone’s four biggest nations have agreed in principle to measures to boost growth equal to 1% of the currency area’s economic output. Germany, France, Italy and Spain outlined plans to push for a 130bn-euros (£104bn; $163bn) package. But analysts suggest that with little or no new money involved, the significance of the agreement between the four was more symbolic than actual. There is also still no consensus on issues such as common eurobonds. “We want there to be a significant European growth package,” said Italian PM Mario Monti. He appeared at the press conference alongside Spanish PM Mariano Rajoy, German Chancellor Angela Merkel and French President Francois Hollande. The four met in Rome ahead of an EU summit on the euro crisis next week. The growth package is expected to comprise several measures already in the works to boost spending on infrastructure and other investments, backed by European taxpayer money: Increasing the capital of the European Investment Bank by 10bn euros, which would enable the EU government-backed institution to increase its lending capacity by several times that amount; Fully deploying unused money in the European Commission’s regional funds; The creation of pan-European “project bonds” - common debts used to finance specific investment projects such as the construction of pan-european transport networks. The agreement may represent a political victory for the recently elected French president, who has demanded a growth pact despite strong reservations expressed by his Germany counterpart. Pictured:The four leaders also agreed to push for a pan-European tax on financial transactions

Eurozone four leaders agree economic growth package

Leaders of the eurozone’s four biggest nations have agreed in principle to measures to boost growth equal to 1% of the currency area’s economic output.

Germany, France, Italy and Spain outlined plans to push for a 130bn-euros (£104bn; $163bn) package.

But analysts suggest that with little or no new money involved, the significance of the agreement between the four was more symbolic than actual.

There is also still no consensus on issues such as common eurobonds.

“We want there to be a significant European growth package,” said Italian PM Mario Monti.

He appeared at the press conference alongside Spanish PM Mariano Rajoy, German Chancellor Angela Merkel and French President Francois Hollande.

The four met in Rome ahead of an EU summit on the euro crisis next week.

The growth package is expected to comprise several measures already in the works to boost spending on infrastructure and other investments, backed by European taxpayer money:

  • Increasing the capital of the European Investment Bank by 10bn euros, which would enable the EU government-backed institution to increase its lending capacity by several times that amount;
  • Fully deploying unused money in the European Commission’s regional funds;
  • The creation of pan-European “project bonds” - common debts used to finance specific investment projects such as the construction of pan-european transport networks.

The agreement may represent a political victory for the recently elected French president, who has demanded a growth pact despite strong reservations expressed by his Germany counterpart.

Pictured:The four leaders also agreed to push for a pan-European tax on financial transactions

Filed under europe Eurozone germany spain italy france financial crisis

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Brics nations to increase contribution to IMF resources The Brics economies have said they will increase their contribution to the International Monetary Fund (IMF). Brics refers to Brazil, Russia, India, China and South Africa, five of the fastest growing emerging economies in the world. The move comes as the IMF has been looking to boost its finances to help prevent any future financial crisis. The Brics nations have also asked for a greater say at the fund. “These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares,” the Brics economies said in a statement on the sidelines of the G20 summit in Mexico. The nations added that they expect their contributions would be used only after the existing resources had been “substantially utilised”. Pictured: The IMF has been seeking the help of emerging economies to boost its resources

Brics nations to increase contribution to IMF resources

The Brics economies have said they will increase their contribution to the International Monetary Fund (IMF).

Brics refers to Brazil, Russia, India, China and South Africa, five of the fastest growing emerging economies in the world.

The move comes as the IMF has been looking to boost its finances to help prevent any future financial crisis.

The Brics nations have also asked for a greater say at the fund.

“These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares,” the Brics economies said in a statement on the sidelines of the G20 summit in Mexico.

The nations added that they expect their contributions would be used only after the existing resources had been “substantially utilised”.

Pictured: The IMF has been seeking the help of emerging economies to boost its resources

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Spain issues dramatic messages of impending eurozone doom Spain’s foreign minister, José Manuel García-Margallo, said the EU’s future would be played out in days or perhaps even hours A panicky Spanish government issued dramatic messages of impending doom for the eurozone on Thursday as its borrowing costs reached unsustainable levels and foreign minister José Manuel García-Margallo claimed that the EU may need to act within hours. “The future of the European Union will be played out in the next few days, perhaps in the coming hours,” he said, according to Spanish press reports. The foreign minister, who was speaking as Spain’s long-term borrowing costs hit an unsustainable 7%, warned that other European countries would suffer dreadfully if they let Spain fall. ”If the Titanic sinks, it takes everyone with it, even those travelling in first class,” he said, in a warning clearly aimed at Germany and other eurozone countries. The interest rate on the country’s benchmark 10-year bonds briefly hit 7% on Thursday, its highest level since the country joined the euro in 1999, after the ratings agency Moody’s downgraded Spain’s sovereign debt to just one grade above ”junk” status. Moody’s said the downgrade was due to the offer from eurozone leaders of up to €100bn (£81bn) to Spain to prop up its failing banking sector adding considerably to the government’s debt burden. García-Margallo’s comments contrasted with those of finance minister Luis de Guindos, who called for calm during an inevitably volatile period while Europe prepares to make key decisions on its future and waits to see how Greece votes on Sunday. “It is not a situation that can be maintained over time … and I am convinced that we will continue to take more measures in the coming days and weeks to help bring it down,” De Guindos told reporters, referring to Spain’s borrowing costs, after senior cabinet members had met prime minister Mariano Rajoy. Government sources said that the EU president Herman von Rompuy was set to meet Rajoy, Germany’s Angela Merkel, Italy’s Mario Monti and Frrance’s François Hollande in a five-way meeting during the G20 meeting in Mexico on Monday. Barack Obama, who has been pressuring eurozone countries to act quickly in order to sort out the debt crisis, was also expected to meet the five leaders in Mexico. David Cameron may also join the meeting. Pictured: Spanish foreign minister José Manuel García-Margallo warned other European countries would suffer dreadfully if they let Spain fall. Photograph: Eraldo Peres/AP

Spain issues dramatic messages of impending eurozone doom

Spain’s foreign minister, José Manuel García-Margallo, said the EU’s future would be played out in days or perhaps even hours

A panicky Spanish government issued dramatic messages of impending doom for the eurozone on Thursday as its borrowing costs reached unsustainable levels and foreign minister José Manuel García-Margallo claimed that the EU may need to act within hours.

“The future of the European Union will be played out in the next few days, perhaps in the coming hours,” he said, according to Spanish press reports.

The foreign minister, who was speaking as Spain’s long-term borrowing costs hit an unsustainable 7%, warned that other European countries would suffer dreadfully if they let Spain fall. ”If the Titanic sinks, it takes everyone with it, even those travelling in first class,” he said, in a warning clearly aimed at Germany and other eurozone countries.

The interest rate on the country’s benchmark 10-year bonds briefly hit 7% on Thursday, its highest level since the country joined the euro in 1999, after the ratings agency Moody’s downgraded Spain’s sovereign debt to just one grade above ”junk” status.

Moody’s said the downgrade was due to the offer from eurozone leaders of up to €100bn (£81bn) to Spain to prop up its failing banking sector adding considerably to the government’s debt burden.

García-Margallo’s comments contrasted with those of finance minister Luis de Guindos, who called for calm during an inevitably volatile period while Europe prepares to make key decisions on its future and waits to see how Greece votes on Sunday.

“It is not a situation that can be maintained over time … and I am convinced that we will continue to take more measures in the coming days and weeks to help bring it down,” De Guindos told reporters, referring to Spain’s borrowing costs, after senior cabinet members had met prime minister Mariano Rajoy.

Government sources said that the EU president Herman von Rompuy was set to meet Rajoy, Germany’s Angela Merkel, Italy’s Mario Monti and Frrance’s François Hollande in a five-way meeting during the G20 meeting in Mexico on Monday.

Barack Obama, who has been pressuring eurozone countries to act quickly in order to sort out the debt crisis, was also expected to meet the five leaders in Mexico. David Cameron may also join the meeting.

Pictured: Spanish foreign minister José Manuel García-Margallo warned other European countries would suffer dreadfully if they let Spain fall. Photograph: Eraldo Peres/AP

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EU, Germany exploring Spanish rescue, no request yet (Reuters) - Germany and European Union officials are urgently exploring ways to rescue Spain’s debt-stricken banks although Madrid has not yet requested assistance and is resisting being placed under international supervision, European sources said on Wednesday. Spain, the euro zone’s fourth biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks. The European Central Bank dashed investors’ hopes of an easing of monetary policy or another flood of cheap liquidity for banks despite saying that the euro zone money market has again become “dysfunctional”. The ECB left interest rates on hold at 1 percent at its monthly meeting. The move raised pressure on EU political leaders to outline a solution to the bloc’s festering debt crisis at a summit later this month. Spanish Economy Minister Luis de Guindos said after talks at the European Commission on Wednesday there were no immediate plans to apply for a bailout. Spain would await the results of an IMF report and an independent audit of the banking sector, both due this month, before taking decisions on how to recapitalize the banks, he said. ECB President Mario Draghi said financial markets were not wrong to be worried about the future of the euro zone but they underestimated the political commitment backing the single currency. He welcomed EU leaders’ agreement to step up work on a long-term vision for a full economic and monetary union. “Some of the problems in the euro area have nothing to do with monetary policy,” he told a news conference. “I don’t think it is right for monetary policy to fill other institutions’ lack of action.” Acknowledging that the rate-setting governing council’s decision was not unanimous, he said “a few members, I would say not many” had wanted a rate cut on Wednesday. Asked whether the central bank would take supportive action if the EU summit agreed to move towards a fiscal and banking union, he said there was no such “horse-trading” but the ECB would monitor developments and stood ready to act. Pictured: A Spanish flag flies above the Bank of Spain in Madrid, June 6, 2102. Credit: Reuters/Paul Hanna

EU, Germany exploring Spanish rescue, no request yet

(Reuters) - Germany and European Union officials are urgently exploring ways to rescue Spain’s debt-stricken banks although Madrid has not yet requested assistance and is resisting being placed under international supervision, European sources said on Wednesday.

Spain, the euro zone’s fourth biggest economy, said on Tuesday it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.

The European Central Bank dashed investors’ hopes of an easing of monetary policy or another flood of cheap liquidity for banks despite saying that the euro zone money market has again become “dysfunctional”. The ECB left interest rates on hold at 1 percent at its monthly meeting.

The move raised pressure on EU political leaders to outline a solution to the bloc’s festering debt crisis at a summit later this month.

Spanish Economy Minister Luis de Guindos said after talks at the European Commission on Wednesday there were no immediate plans to apply for a bailout. Spain would await the results of an IMF report and an independent audit of the banking sector, both due this month, before taking decisions on how to recapitalize the banks, he said.

ECB President Mario Draghi said financial markets were not wrong to be worried about the future of the euro zone but they underestimated the political commitment backing the single currency. He welcomed EU leaders’ agreement to step up work on a long-term vision for a full economic and monetary union.

“Some of the problems in the euro area have nothing to do with monetary policy,” he told a news conference. “I don’t think it is right for monetary policy to fill other institutions’ lack of action.”

Acknowledging that the rate-setting governing council’s decision was not unanimous, he said “a few members, I would say not many” had wanted a rate cut on Wednesday.

Asked whether the central bank would take supportive action if the EU summit agreed to move towards a fiscal and banking union, he said there was no such “horse-trading” but the ECB would monitor developments and stood ready to act.

Pictured: A Spanish flag flies above the Bank of Spain in Madrid, June 6, 2102. Credit: Reuters/Paul Hanna

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Eurozone crisis: Spanish fears send euro near to two-year low against dollar Currency hit as concerns grow about solvency of Spanish banks and central bank governor reveals decision to step down early The euro sank to a near two-year low against the dollar on Tuesday amid worries about the solvency of Spanish banks, and as the governor of the country’s central bank quit. The single currency fell below $1.25 after rating agency Egan-Jones cut the country’s credit rating. Against the pound it was worth 79.95p. Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, will step down on 10 June, a month earlier than expected, the central bank said. The decision came amid fierce criticism from the ruling People’s party over the central bank’s role in failing to deal quickly enough with the toxic real estate problems of Spanish banks. The government has invited external auditors to value bank assets, in effect bypassing the central bank. The government is expected to ask central bank board member Luis María Linde to take over. Spain’s borrowing costs are near euro-era records amid worries about when the country will recover from its second recession in three years and start cutting its 24% unemployment rate. Retail sales fell 9.8% in April compared with March, figures showed on Tuesday. It was the biggest monthly drop since the statistical series began in 2003, underlining the impact of government austerity measures. Sales in April were 11.3% lower year on year. Spain’s leading Ibex 35 share index fell 2.3% to 6,251.70. Troubled lender Bankia sank 16.3% after several brokers cut their ratings on the stricken bank, which had tumbled 13% on Monday after its €23.5bn (£18.8bn) rescue announced on Friday. As markets fretted about Spain, policymakers in Brussels struggled to reach a consensus on how to tackle the crisis. The European commission is to deliver economic and fiscal policy prescriptions for the eurozone countries on Wednesday amid intense speculation that Spain will need to be given a longer and looser timeframe for budget deficit reduction. With Ireland voting in a referendum on the eurozone’s German-pushed fiscal pact on Thursday, Spain’s growing banking predicament, and Greece’s standoff with Brussels deepening with elections less than three weeks away, Wednesday’s verdict from the commission is anxiously awaited by governments and the markets. The air of last-minute uncertainty was heightened when commission officials admitted they had no idea when the results of the scrutiny of national budget figures and the resulting policy recommendations would be revealed. Pictured: Bank of Spain governor Miguel Angel Fernández Ordóñez. Photograph: Susana Vera/Reuters

Eurozone crisis: Spanish fears send euro near to two-year low against dollar

Currency hit as concerns grow about solvency of Spanish banks and central bank governor reveals decision to step down early

The euro sank to a near two-year low against the dollar on Tuesday amid worries about the solvency of Spanish banks, and as the governor of the country’s central bank quit. The single currency fell below $1.25 after rating agency Egan-Jones cut the country’s credit rating. Against the pound it was worth 79.95p.

Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, will step down on 10 June, a month earlier than expected, the central bank said.

The decision came amid fierce criticism from the ruling People’s party over the central bank’s role in failing to deal quickly enough with the toxic real estate problems of Spanish banks. The government has invited external auditors to value bank assets, in effect bypassing the central bank. The government is expected to ask central bank board member Luis María Linde to take over.

Spain’s borrowing costs are near euro-era records amid worries about when the country will recover from its second recession in three years and start cutting its 24% unemployment rate. Retail sales fell 9.8% in April compared with March, figures showed on Tuesday. It was the biggest monthly drop since the statistical series began in 2003, underlining the impact of government austerity measures. Sales in April were 11.3% lower year on year.

Spain’s leading Ibex 35 share index fell 2.3% to 6,251.70. Troubled lender Bankia sank 16.3% after several brokers cut their ratings on the stricken bank, which had tumbled 13% on Monday after its €23.5bn (£18.8bn) rescue announced on Friday.

As markets fretted about Spain, policymakers in Brussels struggled to reach a consensus on how to tackle the crisis. The European commission is to deliver economic and fiscal policy prescriptions for the eurozone countries on Wednesday amid intense speculation that Spain will need to be given a longer and looser timeframe for budget deficit reduction.

With Ireland voting in a referendum on the eurozone’s German-pushed fiscal pact on Thursday, Spain’s growing banking predicament, and Greece’s standoff with Brussels deepening with elections less than three weeks away, Wednesday’s verdict from the commission is anxiously awaited by governments and the markets.

The air of last-minute uncertainty was heightened when commission officials admitted they had no idea when the results of the scrutiny of national budget figures and the resulting policy recommendations would be revealed.

Pictured: Bank of Spain governor Miguel Angel Fernández Ordóñez. Photograph: Susana Vera/Reuters

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Spain’s Bankia seeks 19bn-euro bailout from government Spain’s fourth-largest bank, Bankia, has asked the government for a bailout worth 19bns euros ($24bn; £15bn). The bank said that the “recapitalisation measures strengthen the group’s solvency, liquidity and stability”. Earlier on Friday, trading in Bankia shares was suspended on the Madrid stock exchange while its management put together a restructuring plan. The bank was part-nationalised because of problems with bad property debt. Rating agency Standard and Poor’s has also lowered the credit rating of Bankia and four other Spanish banks. The Spanish government has pledged to inject at least 9bn euros into the lender but added that more would be available if needed. Shares in Bankia’s parent company Banco Financiero y de Ahorros (BFA) were also suspended. Bankia had to reassure its savers last week that their money was safe after a Spanish newspaper reported a run on the bank. Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets. Its shares fell 7.4% on Thursday to close at 1.57 euros, which is 58% down from their listing price in July 2011. There have been four attempts by Spanish governments to shore up the banking system since the global banking crisis of 2008. As part of the latest plan, lenders are having to make 30bn euros of extra provisions to cover potential losses on property loans, which comes on top of 54bn euros they were ordered to set aside in February.

Spain’s Bankia seeks 19bn-euro bailout from government

Spain’s fourth-largest bank, Bankia, has asked the government for a bailout worth 19bns euros ($24bn; £15bn).

The bank said that the “recapitalisation measures strengthen the group’s solvency, liquidity and stability”.

Earlier on Friday, trading in Bankia shares was suspended on the Madrid stock exchange while its management put together a restructuring plan.

The bank was part-nationalised because of problems with bad property debt.

Rating agency Standard and Poor’s has also lowered the credit rating of Bankia and four other Spanish banks.

The Spanish government has pledged to inject at least 9bn euros into the lender but added that more would be available if needed.

Shares in Bankia’s parent company Banco Financiero y de Ahorros (BFA) were also suspended.

Bankia had to reassure its savers last week that their money was safe after a Spanish newspaper reported a run on the bank.

Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets.

Its shares fell 7.4% on Thursday to close at 1.57 euros, which is 58% down from their listing price in July 2011.

There have been four attempts by Spanish governments to shore up the banking system since the global banking crisis of 2008.

As part of the latest plan, lenders are having to make 30bn euros of extra provisions to cover potential losses on property loans, which comes on top of 54bn euros they were ordered to set aside in February.

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