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International Monetary Fund
- Managing Director Lagarde: No end to global slowdown in sight.
European Central Bank
- President Jean-Claude Trichet, “Preventing spillovers on the global economy“
Now, at the end of this exposition, it might be useful for me to tell you what is the assessment that the European Systemic Risk Board has expressed after its last meeting only two days ago:
Since its previous meeting on 22 June 2011, risks to the stability of the EU financial system have increased considerably. Key risks stem from potential further adverse feedback effects between sovereign risks, funding vulnerabilities with the EU banking sector, and a weakening growth outlook both at the global and the EU level. Over the past few months, sovereign stress had moved from smaller economies to some of the larger EU countries. Signs of stress are evident in many European government bond markets, while the high volatility in equity markets indicates that tensions have spread across capital markets around the world. The situation has been aggravated by the progressive drying-up of bank funding markets, and availability of US dollar funding to EU banks had also decreased significantly. In that context, central banks have decided on coordinated US dollar liquidity-providing operations with longer maturities. The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. This is threatening financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond.
Looking ahead, decisive and swift action is required from all authorities. In the immediate future this includes: (1) implementing, fully and rapidly, the measures agreed upon at the 21 July meeting of the Heads of State or Government of the euro area; (2) adopting sustainable fiscal policies and growth-enhancing structural measures so as to achieve or maintain credibility of sovereign signatures in global markets; and (3) enhancing the coordination and consistency of communication.
Authorities must act in unison with a total commitment to safeguard financial stability. Supervisors should coordinate efforts to strengthen bank capital, including having recourse to backstop facilities, taking benefit from the possibility of the European Financial Stability Facility to lend to governments in order to recapitalise banks, including in non-programme countries.
London Telegraph
- Philip Aldrick, ” Multi-trillion grand plan to save the eurozone is being prepared“
European officials are working on a grand plan to restore confidence in the single currency area that would involve a massive bank recapitalisation, giving the bail-out fund several trillion euros of firepower, and a possible Greek default.
New York Times
- Joe Nocera, “Debt levels alone don’t tell the whole story“
steve says:
Remember all the raves about the “Celtic Tiger” from the right, supposedly because they cut corporate tax rates? It looks like it was debt financing.
Steve
September 25, 2011, 6:11 pm