March 21, 2020 / By mobanmarket
Leaders to hold crisis phone conference as stock markets plunge.Merkel, Sarkozy, Zapatero to discuss market turmoil
The leaders of Germany, France and Spain are to discuss the worsening situation in the eurozone today, according to a German government spokesman.
Angela Merkel, Germany’s chancellor, is expected to speak by telephone to Nicolas Sarkozy, France’s president, and José Luis Rodríguez Zapatero, Spain’s prime minister, today.
The call comes after world stock markets plunged because of fears that the eurozone debt crisis was spreading out of control and because of poor growth prospects in the US.
Stock markets in the UK, Germany and France have fallen by 2%-3% over the last 24 hours.
Barroso comments
The downturn in market sentiment is being partly blamed on comments by José Manuel Barroso, the president of the European Commission. In a letter to eurozone leaders published yesterday, Barroso said that the eurozone crisis was spreading beyond the “euro-area periphery”, a reference to Greece, Ireland and Portugal, which are receiving financial assistance from the EU and the International Monetary Fund.
His comments fuelled market fears that Spain and Italy would not be able to manage their deficits. Yields on Italian and Spanish government bonds have soared to above 6% as investors demand a higher premium for holding eurozone bonds that they consider to be at greater risk of default. Irish and Portuguese government bonds were trading at yields of close to 7% just before they requested a bail-out from the EU and the IMF.
Philipp Rösler, Germany’s economics minister, criticised Barroso’s comments, saying: “This is not the right time for such a debate. It is only two weeks since comprehensive and good decisions [on supporting the eurozone] were taken.” There was no need for a new discussion, he added.
Barroso also suggested that the eurozone’s €440 billion rescue fund, the European Financial Stability Facility (EFSF), needed more funds to help other eurozone countries. He wrote in his letter: “I also take the opportunity to urge a rapid re-assessment of all elements related to the EFSF…to ensure they are equipped with the means for dealing with contagious risk.”
But attempts to increase the size of the EFSF are strongly resisted by Germany and other eurozone countries. Public disagreements over the need to increase the size of the EFSF are increasing uncertainty about its effectiveness if the crisis spreads.
The main aim of Barroso’s letter was to urge eurozone governments to implement measures agreed at a summit on 21 July to defend eurozone stability. These included a second bail-out for Greece and expanding the flexibility of the EFSF. Changes to the EFSF need to be agreed by national parliaments in some eurozone countries. But many parliaments are closed for the summer break, meaning the changes could take several months to be agreed.
ECB bond-buying
Yesterday the European Central Bank (ECB) responded to the problems on bond markets by buying up some eurozone government bonds. It bought Irish and Portuguese governments bonds, but not Italian or Spanish debt. Bond markets were underwhelmed by the move, taking the view that the decision did not address the larger problem of a lack of investor appetite for Spanish and Italian bonds. The ECB also kept its main lending ready unchanged at 1.5%, reflecting lower growth prospects.
Olli Rehn, the European commissioner for economic and monetary affairs, will give a press conference at 12.20pm on the situation in the eurozone.
Click Here: kanken kids cheap
Categories: News