British Families’ Euro Bailout Share Is $1,050
London, England, United Kingdom (AHN) – Because of Britain’s commitment to help bail out European Union countries facing financial difficulties, British families could have to shell out $1,050 (GBP 700) as their share despite already having to tighten their own belts.
The $1,050 is on top of yearly contributions of Britain to the EU and a potential UK liability of $60 billion (GBP 40 billion) for the eurozone bailout.
However, assurance of an international bailout to Ireland and Greece has not placated the markets, as the contagion has started to spread to Portugal, Spain and Italy. On Wednesday, borrowing costs for Portugal went up to 5.3 percent from 4.8 percent two weeks ago for buyers of the $627 million (GBP 418 million) 12-month Portuguese bonds on the table.
After the auction, ratings agency Standard & Poor’s warned Lisbon it may cut Portugal’s credit rating. By evening, S&P placed Portugal’s debt on negative credit watch and said it may further downgrade Lisbon’s A-minus rating in three months.
The worsening currency crisis has prompted the U.S. Treasury to send a representative to Europe this week to sit down with the governments of German, Spain and France.
The nervousness of the markets over the situation in the eurozone has fueled speculation that the European Central Bank could increase the bailout funds, which would translate into higher costs and liabilities for EU residents.
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Euro zone crisis puts SA business in jeopardy
Earlier this year, the EU and the International Monetary Fund (IMF) organised a e110 billion (R1.04 trillion) bailout for Greece. This week, Ireland has accepted around e90bn to help save it from bankruptcy. What does this mean and what implications does it have for Europe? |||
Earlier this year, the EU and the International Monetary Fund (IMF) organised a e110 billion (R1.04 trillion) bailout for Greece. This week, Ireland has accepted around e90bn to help save it from bankruptcy. What does this mean and what implications does it have for Europe?
As a result of the Greek crisis and the fear of a continuing recession across Europe, the EU has set up two funds, contributed to by the 16 euro zone countries, to support EU member economies in danger of going bankrupt. EU countries, such as Ireland, can also source funds from elsewhere, as they are doing with the IMF and through bilateral arrangements with the UK and Sweden.
Countries go bankrupt when their budget deficit (difference between spending and earning) is too high, leaving them with insufficient funds to manage their economies, as in the case of Ireland.
After initially saying that it would not need a bailout, Ireland accepted separate offers from the UK, the IMF, Sweden and the EU funding programmes.
Ireland remains a major importer of UK products; on average, every Irish citizen spends approximately £3 600 (R40 000) on British goods every year. Were the Irish economy to crash, this would have severely negative effects on the British industry and economy.
But the effect is larger than this.
As the EU has agreed to perfect mobility of labour across borders and a common currency, the collapse of one of its members is indirectly carried by the more successful members. If one country’s economy collapses, businesses fail and unemployment rises. In terms of currencies, failing EU countries are less desirable places to invest, which makes the euro less attractive. This depreciates the euro and affects the economy of all EU states, even the successful ones.
But what are the consequences of these bailouts or loans? The borrowers need to repay the loans, so they need to raise the money to do so, which often results in them raising taxes.
In Ireland’s case, this would be especially damaging as its low company taxes make it attractive for international business. The expense of the loan will put massive pressure on its government spending policy and will make its future cost of borrowing even higher.
The lenders, on the other hand, sit with a catch-22 situation. They can’t allow member states to collapse, but bailing them out requires raising and spending huge funds of their own. Even if they will be repaid, this still imposes huge costs upon their own spending and economic policies.
The bigger worry is how long this strategy can continue. Bailout funds are limited and Spain, Portugal and Italy are all sitting with dangerously high budget deficits. If one of them was to require a bailout, similar to that of Greece or Ireland, there may not be enough money available to help the others. Were their economies to collapse, the knock-on effects on the whole EU economy could make the current bailout policies completely ineffective.
Since the EU is one of South Africa’s major export markets (valued at more than e22bn a year), every South African should be concerned about the success of the EU. A collapse of its economies would cause significant collapse of businesses within South Africa.
Pierre Heistein is the convenor of the UCT Applied Economics for Smart Decision Making course, which starts in March. The course is presented by GetSmarter, www.getsmarter.co.za.
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Ireland to get €85bn banking loan
Potential bailout followed comments by the world’s biggest bond investor virtually inviting depositors to withdraw their money
Ireland is to be offered an €85bn (£72bn) loan from the IMF and the EU to bail out its banks and fund its public finances.
In a deal expected to include a contribution from the UK taxpayer of up to £10bn, the crippled banking sector is to be recapitalised, effectively taking Allied Irish Banks into state control and giving the government a majority stake in Bank of Ireland.
According to Irish broadcaster RTÉ, the banks will be forced to push up their capital cushions from 8% to 12% in a move that should boost confidence in the banking sector that has been suffering big deposit outflows.
RTÉ said €48bn would be used to fund the government deficit over the next three years, with €15bn-20bn to recapitalise the banks, and an extra contingency fund of €20bn.
The potential bailout of the banking system followed comments by the world’s biggest bond investor, virtually inviting depositors to take their money out of Ireland’s stricken banks.
EU authorities will be hoping the speed with which the deal appears to have been agreed will calm the markets, where there have been fears that Portugal could also need a bailout, and even Spain.
Markets were febrile yesterday, with the euro plunging more than two cents against the dollar and share prices falling heavily in Europe and North America.
Tensions between North and South Korea further strained nerves, while Germany admitted that the future of the euro was at stake through the Irish bailout.
Mohamed El-Erian, chief investment officer of the powerful bond manager Pimco, fuelled anxiety about the health of the banks yesterday by describing Ireland’s banks as “bleeding deposits”.
He said: “What you advise your sister in Ireland now is that you’d say take your money out of an Irish bank and put it in another bank headquartered elsewhere.
“That’s what happened in Argentina and in emerging economies. People worry about their savings.”
Ireland’s central bank had immediately denounced Erian’s remarks by saying there was “no basis for concern” and all deposits were guaranteed by the government. But the central bank’s admission that major international firms had been withdrawing their funds from Ireland highlighted the anxious mood of the markets on the eve of the government’s four-year fiscal plan, which is a crucial component on the deal with the IMF and EU.
Erian, who was interviewed by the Bloomberg news agency, said Ireland needed to conclude those negotiations to restore confidence in the banking system.
“It will seriously undermine the prosperity of this country for a generation. The first thing they must do is execute on what they announced this weekend, which is a big external aid package and steps by the Irish government,” he said.
According to RTÉ, Ireland’s banks will be made considerably smaller and the bad loans will be taken out of the troubled UK arm of AIB in an attempt to allow the operation to be sold off.
Irish bank shares had been hit hard before details of the package leaked and central bank boss Patrick Honohan had invited bidders. “They [the banks] are for sale as far as I am concerned. I have been an advocate for a number of years for small countries to have foreign owners for their banks,” he said. US billionaire Wilbur Ross said he was “very far along” in the process of buying a bank.
Ireland’s woes prompted concerns that the authorities had failed to use the Republic as a firebreak for the crisis which now risks enveloping Portugal and even Spain. The cost of borrowing for both countries rose yesterday. Spain did not manage to raise as much money as it had hoped in its regular bond auction and was forced to pay more to raise the funds.
Jim O’Neill, chairman of Goldman Sachs Asset Management, warned that the Irish rescue package did not solve the problems at the heart of the single currency.
Other market experts were also concerned about the eurozone. Graham Turner of GFC Economics said the solution for weak members might be for Germany to walk away from the single currency.
He suggested that Austria, Finland, the Netherlands and Germany could form a new deutschemark bloc which would allow the other 12 members of the eurozone to devalue and reflate their way out of the crisis. “It has to be a better option than the present straitjacket of a single currency,” said Turner.
In Europe, London’s FTSE 100 index closed 95 points (1.8%) lower at 5581.28 while Germany’s DAX tumbled 1.7% and the CAC-40 in France ended 2.5% lower. Spain’s Ibex closed down 2.8% and Portugal’s PSI 2.1%.
The euro fell to its lowest level in two months of 1.3377 against the dollar.
The German parliament was told of the gravity of the situation by finance minister Wolfgang Schäuble. “Our common currency is at risk,” he said, if Germany did not play its part in bailing out Ireland. Without participation, the “economic and social consequences for our country will be incalculable”. Chancellor Angela Merkel echoed his remarks, saying: “We’re in an extraordinarily serious situation.” Ireland bailout European debt crisis Ireland Euro Currencies Banking European banks Euro European Union Economics Banks and building societies Jill Treanor Larry Elliott guardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds
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Thomas Cook Airlines Awards A320 & A330 Full Component Support Contract
A J Walter Aviation And Its Partners Win 5-Year Deal Thomas Cook Airlines has awarded A J Walter Aviation a multi-million dollar contract to provide component power-by-the-hour and leasing support for its A320 and A330 family aircraft based in the UK and Scandinavia.
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Gci Forex Demo Account – A Comprehensive Forex Broker Register
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Some of the brokerage services are not directly accessible for all customers. For example, inter-bank market dealers and treasury operations in commercial banks handle large customer orders themselves.
The top commercial banks in the Forex Broker List, having inter-bank and treasury operations, are JP Morgan Chase Bank, Bank of America, CitiBank, Wachovia Bank, Wells Fargo Bank, Fleet Bank, US Bank, HSBC Bank, Sun Trust Bank, Bank of New York, State Street, Chase Manhattan Bank, Key Bank, Branch Bank, PNC Bank, Lasalle Bank, South Trust Bank, MBNA America Bank, Fifth Third Bank. Gci Forex Demo Account
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Introduction:
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Loans For People With Defaults – Perfect Loan Facilitator For Defaulters
Introduction:
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Unsecured Loans For People With Bad Credit – Financial Aid For the People Downing in Debt
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Description
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