My comment: As all of them are in delicate situation I think that this will not be an easy process. First of all because there are two Europes, one is the Eurozone that shares same currency, where capital, workers, goods, etc. can move freely and in fact is one economy, and two the EU that is one political entity, but not one economy as it does not share the same currency, and movement of workers, capital and goods and services is not always free. Will the Eurozone suffer to help non-Eurozone EU-member states that rejected to be Eurozone members? Let us see what happens.
Also, inside the Eurozone, will that help have a price such as tax harmonization? will ECB or some member states force others to follow some certain macroeconomic policies? Let us see what happens. Peace and best wishes. Xi http://www.bloomberg.com/apps/news?pid=20601087&sid=aGwRmgq6Tz7w&refer=home Feb. 17 (Bloomberg) -- German Finance Minister Peer Steinbrueck said euro-region countries may be forced to bail out other members of the 16-nation bloc that face problems refinancing their debt. “Some countries are slowly getting into difficulties with their payments,” Steinbrueck said late yesterday in a speech in Dusseldorf. “The euro-region treaties don’t foresee any help for insolvent countries, but in reality the other states would have to rescue those running into difficulty.” While declining to identify countries facing problems, the German finance chief said Ireland, which has a widening budget deficit, is in a “very difficult situation.” Ireland’s debt- rating outlook was cut by Moody’s Investors Service Jan. 30. Steinbrueck is going further than his European Union counterparts in saying euro states can’t be allowed to fail. The EU governing treaty says member states aren’t liable for others members’ obligations. Spending to combat the worst downturn since World War II has forced governments to run up deficits that violate EU rules. The European Commission predicts budget shortfalls this year of 11 percent of gross domestic product in Ireland, 3.7 percent in Greece, 6.2 percent in Spain and 3.8 percent in Italy, compared with 2.9 percent in Germany. The EU ceiling is 3 percent. The difference in yield, or spread, between 10-year Irish and German bonds widened nine basis points to 257 basis points today. It widened by almost six times since the middle of last year as investors demanded higher premiums to hold Irish debt. ‘Very Unlikely’ Governments including Germany’s may call in help from international organizations first before committing funds and pushing their own budgets deeper into the red to help others. The German government, presiding over Europe’s biggest economy, is “very unlikely” to provide help to troubled euro- region members by selling bonds jointly, Juergen Michels, an economist at Citigroup Inc. in London, said in an interview, adding that it would be a “very expensive solution.” “The most likely option is that the European Investment Bank or some other multinational organization will start supporting these countries by buying government bonds or by providing direct support,” Michels said. “That would help narrow spreads and reduce refinancing costs.” Investors should keep buying bonds of European governments that have “more flexibility in funding requirements in the short term,” Barclays Plc analysts said today. It’s better to be “adding positions here rather than in the periphery, where any renewed funding concerns may weigh more heavily,” Huw Worthington, a fixed-income strategist at Barclays Capitalin London, wrote in a research note. ‘Worrying Developments’ Widening yield spreads are “worrying developments,” Luxembourg Finance Minister Jean-Claude Juncker, who represents the countries sharing the euro at international meetings, said at a Group of Seven gathering in Rome on Feb. 14, according to an unpublished prepared “speaking note.” Michels said the EU can help governments that are finding it hard to sell their bonds without violating the bloc’s “no bail-out” clause. Any insolvency of a euro region country would be “fraught with significant costs” for the EU as a whole. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
