Spain hopes to increase China’s share of the Spanish government bonds in its investment portfolio. This country’s Prime Minister Jose Luis Rodriguez Zapatero during a visit to Beijing, reported Wall Street Journal. “Clearly we hope that China will continue to increase its portfolio of Spanish government bonds. The country in fact already doing, and thus inject confidence in the market. I think this is a wise decision, “said Zapatero to Chinese media. Zapatero’s words are confirmed by data in July China has purchased Spanish government bonds worth 400 million. At this stage, however, no official signals that the commitment to invest money in Chinese Spanish debt. Speaking of the Spanish prime minister ordered the country to Greece, which earlier this year tried to attract Chinese money to combat the acute financial crisis. Targeting China is understandable because that country has the largest foreign exchange reserves in the world - nearly 2.5 trillion dollars.
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The Russian stock market advanced on Monday following confirmation by the Finance Minister for Privatization plan, which includes the sale of minority state stakes in some of the biggest companies in the country, Reuters reported. Privatization program is expected to help reduce the budget deficit and to attract new investors. According to sources from the Russian Ministry of Finance of Russia plans to help achieve the most significant sale of government shares in nearly two decades to bring the Treasury about 22.5 billion over the next three years. It is possible that the plan to affect state holdings in 10 companies, among which are the largest oil producer Rosneft and VTB Bank. So far authorities have not provided official information about the program, even the agency’s sources confirmed that the plan could be approved soon. “This is a positive development. The less the state is involved, the better for the economy. The state must sell assets in this situation where every ruble is important to close the budget deficit, “said Anton Struchenevski, an economist at investment bank Troika Dialog.
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European Central Bank (ECB), which is known for his calls for fiscal austerity, condemned at the beginning of this week clipped Romania for staff salaries, the central bank of the country forward Financial Times. In May, the Romanian government presented a plan to reduce its budget deficit, which provides for reduction of salaries of all employees in the public sector, including those of the central bank - by one quarter. It includes measures intended to reduce the budget deficit of Romania to 6.8 percent of gross domestic product (GDP) this year, as required by the International Monetary Fund. Romania centrist government relies on 20 billion loan from the IMF and the European Union (EU), which strengthen the country’s economy. It shrank by a record collapse of communism in 1989, 7.1 percent in 2009, the recession is expected to continue until the middle of this year. Romanian law on the reduction of wages in the Central Bank provides 25 percent with the resulting savings to be transferred to the government.
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European Commissioner for monetary policy in the European Union, Olli Rehn declined to rule out the possibility of establishing a mechanism for “controlled bankruptcy” of the eurozone countries. Germany’s business daily Handelsblatt, Rehn asked for his opinion on the proposal of Germany Finance Minister Wolfgang Schauble, such a mechanism be created in the future. “Finance Minister Wolfgang Schäuble believes that it is necessary and therefore insists on a procedure for” controlled bankruptcy, “said Rehn in an interview with the newspaper. “To do this, the EU will have to change the Treaty of Lisbon, but as we all well know, it’s very difficult,” he added, Asked whether this means that it is fundamentally against the idea of “controlled bankruptcy”, Rehn said: “I never said any such thing. But at the outset, I want to concentrate on reforms that are possible without changing the contract. Germany’s daily notes that the government in Berlin is hoping to impose tougher sanctions on sinned with its budget deficit countries, and therefore sought amendment in the EU.
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The Turkish economy has made impressive growth of 11.7 per cent yoy in the first quarter. This is the fastest rate of growth for the past six years, data show. In the previous quarter Turkish economy grew by 6 per cent. Preliminary expectations of analysts did it for an increase of 11.5 per cent. If adjusted for the number of weekend gross domestic product grew even 11.8 per cent. Seasonally adjusted quarterly change of hand is 0.1 percent, official data showing. Because of strong growth the government is preparing to increase its forecast for the economy for 2010 is expected to increase GDP by 3.5 per cent. The forecast of the International Monetary Fund is nearly two times higher - 6.3 per cent. Since the beginning of the crisis in Turkey, there was no rescue of banks, but earlier this year, the government terminated its talks with the IMF for a loan saying the country alone can secure the necessary funding.
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The Banks in Greece, Portugal, Ireland and Spain have received two thirds of the financing of the European Central Bank (ECB) for financial institutions since the summer of 2008, writes Financial Times. Heavy dependence of these banks by the ECB signal a growing stress in the euro, as investors and other banks refused to lend to them due to fears of deepening the debt crisis. Banks in four countries have taken 225 billion of total additional 332 billion allocated by the ECB since June 2008 These countries received 68 percent of the additional funding, but on the other hand, contributed only 18 percent of GDP euro area. Published data collected by Royal Bank of Scotland. The ECB has so far not revealed the geographical distribution of liquidity it provides, and news that its funding is concentrated on only a few countries may be a political problem. Analysts say the ECB may be accused of unfair support of financial institutions in Southern Europe. This is a sign of stress in the system. Banks do not want to borrow one another, which means that many of them should seek the assistance of the ECB, says Nick Matthews, an economic analyst at RBS.
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The European budget independent agency should be created and integrated into the structure of the European Commission (EC) to implement pact for stability and growth, said on Monday head of the European Central Bank (ECB), Jean-Claude Trichet. Trichet, who was heard by the European Parliament at the start of new week, also again advocate for the strict application of EU budgetary rules to be changed before the current arrangements. “We believe that in some areas, even within the commission itself has (administrative) units which can be independent,” said ECB chief, stressing that the budget agency may be tasked with ongoing monitoring and diagnosis ” the budgetary situation in Member States. “We were very clear, when we say we do not want to be prejudiced exclusive privilege of the Committee with regard to warnings, recommendations and suggestions (for budgetary situations). But many insist on the existence of this independent unit as part of a committee.” In mid-May the European Commission proposed a “European budget semester, in which member countries to submit projects for national budgets. Then Germany, in turn, gave the idea of supervision budgets to be entrusted to an independent institute or the ECB. This proposal has caused concerns about possible weakening of the role of the European Commission as an institution.
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Romania has negotiated with Russia for the decrease in imported gas prices, today said Romanian Minister of Economy and Trade Adrian Videanu after talks in Moscow with the management of Gazprom, Reuters reported. In the words of Videanu Romania managed to achieve a reduction in price of Russian gas to 13 dollars per 1000 cubic meters, ie a 3.6% rebate after Russian natural gas to the country, bought by the firm Wintershall, will cost 352 dollars per 1000 cubic meters. Romanian minister added that he would continue to negotiate with Gazprom on further reducing the price of Russian natural gas for the country and it is expected that at the end of this year Romania will receive additional discount on the price of Russian gas. Videanu added that Gazprom is interested in partnership with the Romanian state company Romgaz in relation to gas and electricity projects. It is envisaged that negotiations on these issues to fall out when the President of OAO Gazprom Alexei Miller will visit Romania.
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The European stocks failed to rise slightly Tuesday despite pressure, which had the market position of BP. Pan-European index Stoxx Europe 600 index rose 0.15 percent to 245.34 points, helped by gains in shares of food and utilities sector, considered to be less cyclical. Shares of BP fell by over 13% during trading in London after it became clear that its costs caused by the oil spill in the Gulf of Mexico is already approaching $ 1 billion. At the time of the session, shares of U.S. company lost nearly 12 per cent. Colossal amount worsen mood of investors on the Old Continent and the indexes were mostly red area in the U.S. were not disclosed slightly more positive economic data. So in late European session shares started to recover and Germany’s DAX even reported a profit for the day by 0.28 percent to 5981 points. But such was not the fate of the French CAC 40 and UK’s FTSE 100, which lost respectively 0.13 and 0.48 per cent to 3503 and 5163 points.
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Germany’s Finance Minister Wolfgang Schauble has hinted that it may be necessary to increase taxes in order to strengthen public finances, transmits Reuters. This happens day after the ruling coalition sources said the government can eliminate the preferential rate of VAT on certain products. “The real task is to save as much cost,” said Schauble to the German Bild am Sonntag. “If, however, remove tax breaks, some will probably call it a tax increase. Ultimately it is a reasonable and balanced policy. And let’s keep in mind that reductions in social spending affects the poorest citizens. I do not mean any concrete steps at the moment, but do not exclude such” added the German finance minister. Center-right coalition of Chancellor Angela Merkel is currently considering raising VAT on certain sectors, which enjoy a preferential rate of 7% to its full size by 19%, are shared by coalition sources. Although Germany’s budget deficit is not expected to be as large as in other euro area countries, it is likely to surpass 5 percent of GDP this year - well above the EU threshold of 3%.
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