Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

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 […]

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Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Categorized | Economy

Berlin insists on eurozone austerity


Posted on April 30, 2012

Wolfgang Schauble holds a press conference after the G20 meeting of Finance Ministers and Central Bank Governor at the finance ministry in Paris

Wolfgang Schauble at a press conference after the G20 meeting of fnance ministers and central bank governors

The eurozone must stick to its austerity-led recovery plan, Germany’s finance minister insisted on Monday, signalling Berlin’s limited appetite for the
more growth-oriented policies advocated by some other European leaders.

Wolfgang Schäuble said the only way to achieve the economic growth that was needed in the region was to continue to rein in budget deficits and pay down debt, praising the tough new Spanish budget – which contains €27bn in new taxes and spending cuts – as an example.

    “The first precondition in order to have sustainable growth everywhere in Europe is fiscal consolidation,” Mr Schäuble said at a press conference with his Spanish counterpart, Luis de Guindos. “If now we talk about growth, it shouldn’t be understood as a change of direction. That would be a mistake.”

    Mr Schäuble’s remarks, following similar comments from Angela Merkel, Germany’s chancellor, come despite the recent political upheaval in France, Greece and the Netherlands, where strong polling from eurosceptic populists has forced political leaders to confront growing voter anger towards austerity measures.

    The push for new growth policies – prompted in part by expectations of a victory in Sunday’s French presidential election by socialist François Hollande, who has made such policies a cornerstone of his campaign – has prompted EU officials to dust off similar proposals that have been stymied in the past.

    “A number of actors are trying to adjust to the change in tone in the debate,” said one senior EU diplomat involved in the discussions.

    EU officials said the plan gaining the most traction is new funding for the European Investment Bank, the EU agency which invests alongside private financing in infrastructure and other European development projects.

    Olli Rehn, the EU’s top economic official, this month proposed €10bn in new capital for the EIB, which would raise the bank’s lending capacity by €60bn – a move that has since been backed by both Ms Merkel and Mr Hollande. Mr Schäuble said the EIB had “good experience” of attracting capital through co-financing projects.

    Such a move is unlikely to have near-term benefits, however, and other EU officials have been pushing for measures with more immediate impact.

    Because of worse-than-expected economic contraction in some countries, some officials have urged a loosening of the tough new budget rules that have forced Belgium, Spain and the Netherlands to slash billions of euros in spending, despite deepening recessions in all three.

    International Monetary Fund officials back such loosening and officials said there was some support for such a move within the European Commission. But there has been strong resistance from the European Central Bank, and it would likely be opposed by Berlin, as well.

    Advocates of delaying tough deficit-reduction targets could be aided by new economic projections due from the European Commission later this month. The figures are expected to show sharp downward revisions in economic growth in several eurozone countries.