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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“Italy is not in the same situation as Greece. Has shown a persistence in this difficult period. Separately, showed that it was able to hold the annual budget deficit and to implement EU rules, said in an interview with the Italian business daily Il Sole 24 Ore, President of the European Central Bank (ECB) Jean-Claude Trichet. Thus, he denied rumors that the country of the Apennines can be the next member of the eurozone, which would be in severe economic situation. ECB President added that today’s situation is a signal to the countries of the monetary union, it must work hard to make their economies more flexible and increase their potential. According to Trichet improving the productivity of labor is beneficial to increase exports and create jobs. In his interview with Jean-Claude Trichet pointed out that at this stage sees no need for the financial mechanism in support of Greece to be used. “Greece is firmly continue with its rehabilitation program. Asked whether Greece can declare inability to pay its obligations, Trichet said that “this is not an option, taking into account the discussion of government measures to reduce the deficit or public statements by leaders of the eurozone.
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The European Central Bank (ECB) continued to gradually decreased anti-crisis measures to support the economy. Since April the ECB returns to its usual practice to conduct auctions for the banks to provide the 3-month loans instead of 6-month, announced the bank’s governor Jean-Claude Trichet. This happened immediately after the board of the financial institution decides to maintain a historically low level of interest of 1 percent for 11 consecutive month, said agency Reuters. Trichet stressed that ECB will offer banks and unlimited credit in one quarter by providing so-called weekly credits. The manager of the ECB’s main interest at the time the central banks of Member States have an acceptable level, but the process of economic revival will be uneven, and inflation in the medium term - moderate. The ECB’s decision to return to the performance of standard auctions, which are offered 3-month loans will most likely cause banks to step up and start increasingly to seek “the weekly credits” that allow financial resource for short-term low interest rate.
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The price of crude oil, finished with a slight decrease today’s volatile session, after an unexpected contraction in the services sector in the U.S. reinforce concerns about the recovery of U.S. economy, Reuters reported. Today’s data showed that the index of business activity in the services sector of the United States fell to 48.7 points in November and thus returned to pessimistic zone below 50 points. Moreover, market participants remained cautious and in anticipation of Friday’s unemployment data for the United States in November. Earlier this week it became clear that weak demand has increased the country’s oil reserves more than expected. The U.S. dollar slipped slightly against a basket of major currencies, which raise the price of oil briefly before to take down quotes. The euro advanced against the dollar after European Central Bank announced its first steps to repeal some of the emergency measures to help the economy. U.S. light crude for January delivery fell 14 cents, or 0.2 percent, to 76.46 dollars per barrel of oil exchange in New York.
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European Central Bank left its main interest rate to 1%, which is found in May, cited by Bloomberg. The move was expected by all analysts polled by Bloomberg. The decision came minutes after the regular meetings of the Bank of England, which also left its main interest rate unchanged. We recall that in October 2008 began the gradual reduction of the interest of leading banks to unfreeze credit markets after the collapse of Lehman Brothers, which analysts say is symbolically marked the beginning of one of the most difficult period for the global economy. That the ECB aims to cut 3.25 percentage points.
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The International agency Standard & Poor’s increased outlook for Hungary’s credit rating from negative to positive after the country make improvements in fiscal policy and government debt. The negative outlook was given in March 2008 due to the deterioration of public finances. After the news forint - the national currency appreciated by 1.1% against the euro and was trading at levels of 268 forints per euro. Hungary was the first EU country to be turned to the IMF for assistance in March national currency hit record lows against the euro. Standard & Poors’s credit rating reaffirmed Hungary’s long-term and short-term debt in foreign currency and local currency, which is BBB-/A-3.
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European Central Bank (ECB) has realized significant additional profit allocated to troubled banks in the euro area emergency loans. However, this is considered divergent from its leaders, since it might lead to new difficulties for the profits of commercial banks. Additional liquidity into the financial system inflated the euro area after the collapse of Lehman Brothers just before one year, probably brought to the ECB profit of 900 million euros so far, show calculations Goldman Sach, quoted by Financial Times. About 300 million of them were generated from June months before, when the ECB provided 442 billion euros as a one-year loans of commercial banks in an unprecedented operation to date and to increase liquidity. Additional profit is the difference between the profit of the ECB and loan crisis of the normal and positive result of its market operations. Although the interest rate charged by the ECB is currently 1 percent, which is the lowest level in 11-year history of the institution, the revenue “remain juicy because the amount of funds that banks borrow,” said Natasha Vala, an economist Goldman Sachs.
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