China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading


Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading


China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading


Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

Continue Reading

Categorized | Banks, Economy

Europe warned crisis not over yet

Posted on March 30, 2012

Euro coin pworld

European finance ministers were warned on Friday that the underlying causes of the continent’s debt and banking crisis had yet to be resolved, as Spain, struggling to rein in its fiscal deficit, published its most austere budget since democracy returned after the Franco era.

Two confidential analyses prepared by European Union officials and distributed to ministers meeting in Copenhagen said €1tn in cheap loans to banks provided since December by the European Central Bank had provided a reprieve, but sovereigns and financial institutions needed to use the relative calm to shore up finances and balance sheets.

You need JavaScript active on your browser in order to see this video.

No video

Click to enlarge

“Contagion may … re-emerge at very short notice, as demonstrated only a few days ago, and re-launch the potentially perverse triangle between sovereign, bank funding risk and growth,” one of the analyses, prepared by the EU’s economic and finance committee and seen by the Financial Times, said. The existence of the documents was first reported by the Italian daily La Stampa.

The reference was a clear allusion to the recent sharp rise in Spanish borrowing costs, which have hovered near 5.5 per cent for more than a week. Eurozone and Spanish officials have launched a two-front offensive in an attempt to prevent the country becoming the next crisis victim.

In Copenhagen, ministers agreed to increase the ceiling of their two bailout funds to €700bn, an attempt to erect a firewall big enough to convince markets the EU can protect Spain. In Madrid, the government announced €27bn in benefit cuts and tax increases as part of the toughest budget since the death of General Francisco Franco in 1975.

As part of what Cristóbal Montoro, the budget minister, referred to the “the biggest fiscal consolidation of the democracy”, €12.3bn will be raised in new taxes, with €5.3bn coming from corporate taxes, and €2.5bn projected to come from a temporary amnesty on tax evasion.

Other savings will come from cutting ministry budgets by almost 17 per cent to €65.8bn this year. The foreign affairs ministry is hardest hit, losing 54 per cent of its funding. Industry and agriculture both lost just over 31 per cent each.

“We are convinced that Spain will no longer be a problem, especially for the Spanish, but also for the European Union,” Luis de Guindos, finance minister, said.

The warning on the fragility of the European recovery undercuts optimistic rhetoric by government leaders. Nicolas Sarkozy, French president, this month said the eurozone had “turned the page”, and Mario Monti, his Italian counterpart, this week said the “financial aspect” of the crisis had ended.

However, senior officials at EU institutions – particularly the ECB and the European Commission, the EU’s executive branch – have been more sanguine, warning the ECB’s long-term refinancing operation has bought time but cannot replace reforms in national economies and the financial sector.

The second document, which was prepared by the Commission, warned bluntly: “The euro crisis is not over. Many of the underlying imbalances and weaknesses of the economies, banking sectors or sovereign borrowers remain to be addressed.”

The paper argued the elements of the recent restoration of confidence – finalising a second Greek bailout, increasing the eurozone’s rescue fund, EU-wide bank recapitalisation, new eurozone fiscal discipline rules, and efforts to pass policies to encourage growth – must be fully implemented or leaders risk losing their last chance to act.

“If this window of opportunity is not most effectively used … we might have missed the last chance for a considerable amount of time,” the analysis said.