European interventions to calm markets 2011

European interventions to calm markets

ECB Trichet headed headache trying to end the debt crisis of Europe (Reuters)

He said the European Central Bank President Jean-Claude Trichet said today the bank will resume the process of buying government bonds from the market, and will provide a new opportunity to finance the commercial banks in an effort to contain the worsening debt crisis of the euro area.

However, analysts considered that the interventions of the European Central will not smooth out the pressure on the market except for a brief period.

Indeed, traders said that the European Central intervention in the market to buy bonds, Irish, Portuguese, sources said that the bank does not have plans to buy bonds of other countries.

However, some decision-makers in Europe do not like this approach by the European Central because it is a deviation from the foundation of his mission is to control inflation, and that Trichet said that the decision to resume the purchase of bonds did not obtain consensus on the Governing Council.

Facilities for banks
Trichet said at a news conference that the ECB has decided not to change interest rates, and added that there is a high level of uncertainty not only about economic growth for the eurozone.

On the other hand, Trichet said he would allow commercial banks to borrow from the European Central as much as you like until the end of the year at least.

He also announced a new offer to finance the banks for a period of 6 months in view of the renewed pressure on some financial markets, while some countries want from the central bank to adopt a long-term financing facility for the benefit of the banks.

Some analysts fear of signals issued from Trichet that official interest rates may increase later, which carries with it more pressure on the weak economies in the euro area.

Financial markets
As a result of worsening crisis in the European debt against the backdrop of sale Spain, Italy, its bonds at a prohibitive cost, plunged the financial markets in Europe and the United States directly by more than 3% as the value of shares of Italy to 5.16% and decided to Madrid not to proceed to issue bonds on August 18 / August of this.

In Italy, a meeting was held today described Balhacm between the government of Silvio Berlusconi, employers and unions to discuss the worsening debt crisis of the country, where the government is seeking to find common ground on restoring balance to the general budget by reducing spending and the expansion of the privatization process.

The Institute for economic research in the UK to the possible bankruptcy of Italy in the long run, so unable to pay its debts huge, said the Institute "C. Gueye NPR" in the study by the volume of borrowing from Italy will increase from 128% to 150% of GDP by 2017, in if it continues the interest rate on the bonds of Italy in the range of 6% economic growth and remained non-existent as it is now.