JAMES G.NEUGER AND GREGORY VISCUSI
May 9, 2010Jolted into action by the sliding currency and soaring bond yields in Portugal and Spain, leaders of the 16 euro countries said the workings of the financial backstop would be hammered out before the markets opened tomorrow.
"We will defend the euro, whatever it takes," European Commission president Jose Barroso told reporters early yesterday after the leaders met in Brussels.
Europe's failure to contain the Greek fiscal crisis triggered a 4.3 per cent drop in the euro this week and led the US and Asia to rally around in an attempt to prevent a global sovereign debt crisis pitching the world back into recession.
European officials declined to disclose the size of the stabilisation fund, to be made up of money borrowed by the European Union's central authorities with guarantees by national governments. Finance ministers were scheduled to meet to flesh out the details.
"It will be a very clear signal against those who want to speculate against the euro," German Chancellor Angela Merkel said.
Mr Barros said steps were being considered to stop speculation, including restrictions on short sales and credit default swaps.
He said he would not push the independent European Central Bank to buy government bonds, for example. Bank president Jean-Claude Trichet had accelerated the market sell-off by rejecting that measure.
With the euro facing its stiffest test since its introduction in 1999, the summit – called to discuss longer-term efforts to co-ordinate economic policies – turned into a crisis-management session that dragged past midnight.
The euro slid to $US1.2715 from $US1.3293 during the week, and is down 15 per cent since late November. European stocks sank the most in 18 months. The STOXX Europe 600 Index tumbled 8.8 per cent to 237.18.
The extra yield investors demand to hold Greek, Portuguese and Spanish debt instead of safer German bonds rose to euro-era highs on Friday, with 10-year bonds jumping 973 basis points for Greece.
Europe came under pressure in a hastily arranged conference call of finance ministers from the Group of Seven industrialised nations on Thursday. All agreed on "the need for a clear, timely and strong response", said Canadian Finance Minister Jim Flaherty, who chaired the call.
The contagion also drew the attention of US President Barack Obama, who said regulators would examine the "unusual market activity" that on Thursday briefly drove the Dow Jones Industrial Average down by almost 1000 points
No comments:
Post a Comment