Belgium: Will it Be The Next Euro Domino to Fall Down? – Belgium’s positions are not only massive but probably toxic, he said, albeit in more colorful language. Belgium’s publicly admitted gross debt to GDP ratio already stands at 100%. In 2008, before Greece had to ‘fess up to the true size of its public debt, it had a ratio of 99%. This year, Greece’s ratio will be above 130%, on its way — probably — to 150% over the coming couple of years. OK, so on many of the other metrics, Belgium doesn’t do (quite) as badly as the peripheral Europeans currently in crisis. But the numbers are nothing to cheer about. Belgium’s government deficit is expected to come in at 4.8% this year, according to the IMF, and is seen rising for the coming few years.True, the structural deficit, at 3.5%, is about half of Greece’s level. But given Belgium has been without a government since April and is riven by deep tensions between its French- and Dutch-speaking communities, the prospects of strong, clear-sighted economic policy any time soon seems far fetched.
Portugal Remains Under Pressure As Contagion Intensifies – With reports of Ireland trying to finalize an IMF/EU deal over the weekend, all eyes are on Portugal. Press report that Portugal is being pushed to request an aid program have been denied by officials, but the way things are going, it seems like it’s only a matter of time before Portugal succumbs to the contagion. As seen in EM crises of the past, we simply cannot ignore the fact that contagion remains a very strong force and so we see little chance that Portugal can avoid it. Parliament gave final approval to the 2011 budget, which contains harsh austerity measures. However, harsh budget measures have not taken any pressure off of Greece or Ireland.
Cost of borrowing hits a eurozone record of 9.21pc – Ireland’s cost of borrowing hit 9.21pc yesterday, the highest since the creation of the euro. It came after news that investors holding Irish bonds face punitive costs to do business through key market player LCH Clearnet. Yields on the cost of Spanish and Portuguese bonds also widened. Clearing house LCH Clearnet demanded a 48pc cash deposit for deals involving Irish bonds. These houses act as middle-men when investors trade bonds between them. LCH Clearnet holds a cash deposit while bond deals are in place to protect it from losses if deals go wrong. The standard deposit for deals involving government bonds is 3pc. LCH Clearnet is the second biggest clearing house in the world. The increase in the deposit requirement means holders of Irish bonds are essentially being frozen out of the clearing system.
EU denies pushing Portugal towards bailout (Reuters) – Ireland hammered out the final details of an EU/IMF rescue on Friday as financial market pressure mounted on Portugal and Spain despite vehement denials from euro zone governments that they too might require bailouts. The euro currency dipped as low as $1.32 for the first time in over two months and shares on both sides of the Atlantic fell amid fears the currency bloc’s debt crisis could deepen further and the 85 billion euro ($113 billion) package for Ireland might not be the last. The bloc’s woes and the seeming inability of its leaders to unite behind a plan to stem the contagion has prompted some experts to speculate the 16-nation currency area could splinter apart, but the costs of a breakup would be catastrophic and the chances are still seen as extremely slim. European officials were forced to deny a German newspaper report on Friday that Portugal was under pressure from some of its euro zone partners to follow Ireland and seek a rescue in order to prevent contagion to its much larger neighbor Spain.
More Charts on Debt in Europe, Germany and the Periphery – A lot of other cool graphics from Spiegel, including debt and deficits throughout Europe. See sources at the bottom for more (like when periphery bonds come due, Italy included).
Debt Crisis Woes: Merkel’s Reputation on the Decline in Europe – SPIEGEL – It wasn’t all that long ago that Germany’s chancellor was the star of Europe — a consensus builder who had positioned herself at the vanguard of the effort to save the world from global warming. Indeed, it looked for a time as if Merkel was on the way to becoming a European politician as widely respected as Helmut Kohl was in his time. Now, though, Merkel’s eventual legacy seems to be more unclear than ever. Ever since the sovereign debt crisis began shaking the euro zone, Germany has been the target of criticism more frequently than it has in a long time. And the image of the chancellor has been badly blemished. European papers these days are full Merkel, looking tight-lipped and severe. Her plan to create a bankruptcy mechanism for euro-zone countries, they say, has worsened the debt crisis in Ireland and elsewhere. Merkel’s name, once widely respected, is now mud.
The politics of the Fed: Bernanke in the crosshairs | The Economist – REPUBLICANS have trumpeted their victory in the mid-term elections as a revolt against big government, from bail-outs to fiscal stimulus. Having made short work of the Democratic Congress, it was inevitable that they would next turn their sights on the Federal Reserve, a perennial target of the wilder-eyed. On November 3rd the Fed said it would buy $600 billion-worth of Treasury bonds over the next eight months with newly printed money. This second round of quantitative easing (QE), the Fed hopes, will nudge down long-term interest rates, thus stimulating spending and fending off the threat of deflation. Republicans and “tea-party” activists erupted in criticism. “Cease and desist,” cried Sarah Palin, a former vice-presidential candidate. “Currency debasement and inflation,” declared a gaggle of conservative economists and commentators in an open letter published as a full-page ad in leading newspapers. Republican leaders in Congress wrote to Ben Bernanke, the Fed chairman, to express “deep concerns”; and two of their colleagues proposed stripping the Fed of its statutory responsibility to promote growth and employment, leaving it to occupy itself only with controlling inflation.
Tuna group defies quota cut calls – Fishing nations have agreed a small cut in Atlantic bluefin tuna quotas, after meeting in Paris. The International Commission for the Conservation of Atlantic Tuna (ICCAT) set the 2011 quota at 12,900 tonnes, down from 13,500 tonnes. Conservationists say the bluefin tuna is threatened by overfishing, and much deeper cuts are needed. They have criticised ICCAT in the past for failing to ensure that the species and others are fished sustainably. Correspondents say the 48 countries represented at the talks were divided over what action to take, with some calling for a lower quota or even a temporary suspension of bluefin fishing to allow stocks to recover
Commodity investment hits record high – Commodity assets under management rose US$19 billion to a record US$340 billion last month, led by demand for index-linked investments, Barclays Capital said. Investment flows into products linked to commodity indexes reached US$7 billion in October, the bank’s analysts said in a report late Thursday. Total inflows into indexes, medium-term notes and exchange-traded products were US$50.6 billion in the year to October. The Federal Reserve has kept its benchmark interest rate near zero since December 2008 and plans to pump another US$600 billion into the economy through June by buying government bonds, known as quantitative easing. It purchased US$1.7 trillion of securities in a first phase that ended in March. “QE2 has provided a tonic to commodity markets over the past few months that even the re-emergence of sovereign-debt concerns has not entirely canceled out,” the Barclays analysts said in the report.