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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 […]

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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 […]

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Financial system more vulnerable after Trump victory, says BoE

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Categorized | Economy

Merkel faces up to stormy parliament

Posted on June 29, 2012

Chancellor Angela Merkel returned to a stormy German parliament on Friday after backing new measures to prop up weaker eurozone economies at a summit in Brussels.

Hours after eurozone leaders agreed to inject capital directly into Spanish and Irish banks, and to help lower Italian borrowing costs, Ms Merkel faced criticism from lawmakers as the Bundestag debated ratification of the European Stability Mechanism, the bloc’s new rescue fund, and a new EU treaty enshrining fiscal discipline.

    The opposition Social Democrats summoned Wolfgang Schäuble, finance minister, to attend an emergency meeting of the Bundestag’s powerful budget committee, with senior lawmaker Carsten Schneider demanding he explain Ms Merkel’s “180-degree about-turn” from previously blocking direct cash injections.

    Dissatisfaction was also voiced by members of Ms Merkel’s coalition, who worried she might have compromised her principle of giving aid only with tough conditions.

    Wolfgang Bosbach, a lawmaker from Ms Merkel’s Christian Democratic Union and long-standing opponent of eurozone aid, said summit decisions about direct bank aid and readier help to lower sovereign-bond rates had seen Germany “finally and irrevocably” abandon the EU’s no bailout clause.

    Ms Merkel was counting on the support from her coalition of Christian and Free Democrats as well as the Social Democrats in the votes as the German constitution requires a two-thirds majority for laws related to budget issues. Previous votes indicated she would easily get the 414 of 620 Bundestag votes required to pass the two laws.

    Ms Merkel left Brussels insisting she had reached “a good compromise” and German taxpayers’ money would not be committed in the eurozone without strict conditions.

    She said there was no increase in the amount of Germany’s financial guarantees in the eurozone rescue funds, and no retreat on Germany’s refusal to contemplate jointly guaranteed eurobonds as a way to help finance the most debt-strapped eurozone member states.

    She said the commitment to use eurozone rescue funds to buy sovereign bonds for countries facing market pressure would still be subject to conditions.

    “I insisted that the current procedures should be maintained, and I think we found a good compromise,” she said.

    “There will be conditionality,” she added. A country such as Italy would have to apply for market intervention and sign a memorandum of understanding based on the European Commission’s recommendations before bond-buying would be approved in the primary market.

    Ms Merkel singled out the agreement on banking supervision by the European Central Bank as a key result, saying: “I have great faith in the ECB, because the ECB has a great interest in having healthy banks.”

    Facing criticism that the German parliament was being asked to approve establishment of the ESM after its rules had been changed, the chancellor said that all the changes would be subject to further Bundestag votes.

    Ms Merkel told the Bundestag that
    the summit decisions were “good and sensible”, even if she had to concede that “differing communications” from various eurozone leaders about what exactly had been agreed had “led to a whole number of misunderstandings”.

    Jürgen Trittin, parliamentary head of the opposition Greens, said allowing the rescue funds to directly recapitalise banks and to buy sovereign bonds were the right moves. “These are positions Ms Merkel always rejected and which she now has had to accept,” he said.

    Herman Gröhe, CDU general secretary, said the summit agreement in Brussels maintained the government’s guiding principle of “only letting mutual responsibility [for others’ debts] come after the institution of political controls”.

    Norbert Barthle, a senior Christian Democrat, also said summit decisions had “no bearing” on Friday’s votes in both the lower and upper chambers of parliament. “Many hurdles” had to be cleared until banks could apply for direct capital injections – and the Bundestag would first have to approve this new instrument when ready.

    Otto Fricke, a senior Free Democrat, said the agreements by EU leaders could “only become law if the Bundestag passes them”. Some ideas being touted at EU level continued to be “wishful thinking”, while “others will prove hard to implement”.