Centre For European Studies                             FINANCIAL CRISIS WATCHLast updated on 01/07/2009                  ...
Centre For European Studies                                          FINANCIAL CRISIS WATCHLast updated on 01/07/2009     ...
Centre For European Studies                                          FINANCIAL CRISIS WATCHLast updated on 01/07/2009     ...
Centre For European Studies                                        FINANCIAL CRISIS WATCHLast updated on 01/07/2009       ...
Centre For European Studies                                        FINANCIAL CRISIS WATCHLast updated on 01/07/2009       ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 01/07/2009      ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 01/07/2009      ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 01/07/2009      ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 01/07/2009      ...
Centre For European Studies                                        FINANCIAL CRISIS WATCHLast updated on 01/07/2009       ...
Centre For European Studies                                          FINANCIAL CRISIS WATCHLast updated on 01/07/2009     ...
Centre For European Studies                                         FINANCIAL CRISIS WATCHLast updated on 01/07/2009      ...
Centre For European Studies                                               FINANCIAL CRISIS WATCHLast updated on 01/07/2009...
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Financial Crisis Watch 1 July 2009

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Transcript of "Financial Crisis Watch 1 July 2009 "

  1. 1. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.CONTENTSFOREWORD BY CES HEAD OF RESEARCHFINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATESFINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDEHIGHLIGHTSUPCOMING EVENTS www.thinkingeurope.eu
  2. 2. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks. Foreword by CES Head of Research “Watchtower”: The Downside of Stimulus One of the side effects of the bailouts and stimulus packages in reaction to the crisis, besidesinflation, is hidden protectionism. What is good for the economy, in fact probably essential in order tosave it, may be bad for trade. On July 2, the CES has presented in Brussels its new crisis-relatedresearch paper by Christina Langhorst and Stormy Mildner titled “Good for the economy – bad fortrade? The effects of EU and US economic stimuli on international trade and competition” (to beavailable on CES website in the upcoming days). What is so bad about protectionism, one may ask. In fact, I believe that in this crisis, a lot of thingswill need explaining – things that have seemed self-evident for a long time. Protectionism is inherentlybad because it damages, or even prevents, trade (by tariffs, subsidies or other market distortions).Trade in turn is good because whatever the individual deal, the end result is, on the whole, positive. Ifthis was not the case, the world would not have seen economic development in the last 500 years.This point has to be made over and over again, because it is trade much more than any stimulus(which can only be an emergency, stopgap measure) that will make economic recovery sustainable. The clear political imperative that follows is that in executing stimuli and bailouts, trade must be asunhampered as possible. In reality, however, both the member states of the EU and the US areshowing strong protectionist tendencies in their efforts to stimulate growth, which is exemplified intheir measures for their respective car industries. Most stimulus packages have more or less open“Buy domestic” clauses which amount to international trade distortions. Not that public spending hasbeen very pro-trade in the past – but it is now, in the crisis, that we should actually see stimulation fortrade, not massive distortion. What is more, the World Trade Organisation has more or less effectivemechanisms against tariffs, but few instruments to counter the protectionist effects of subsidies. And it is here that the European Commission has a crucial double task to fulfil: In global trade, tostubbornly advocate open markets (for example, by working towards a successful conclusion of theDoha Round) and internally, by saving the Single Market through enforcing strict competition rules.National governments, if they are serious about getting to recovery and making it sustainable, shouldsupport the Commission in these tasks, and resist the temptation to make life even harder for the“Guardian of the Treaties”. www.thinkingeurope.eu
  3. 3. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATESAustriaWith Austria in a "severe depression," it is "not the time for restrictive measures," Ewald Nowotny, anECB Governing Council member and Governor of the Austrian National Bank, said on 30th June.Speaking to reporters at a press conference focusing on the International Monetary Funds mostrecent report on Austria, Nowotny cited the importance of medium- and long-term stability as areason not to return yet to more restrictive policies. He added that the Fund "is playing a veryimportant role in stabilizing economies in Central and Eastern Europe. I want to confirm that in all thetalks we had, there is a clear commitment from the Austrian banks to remain in this region. They see itas a win-win situation. It is a region with high potential." (30/06/2009)Not the time for restrictive policies in Austria (Market News International)The Austrian economy, which did well until recently, is now feeling the full impact of the global crisis.The economy’s openness and outward orientation mean that it cannot insulate itself from foreignshocks. The transmission runs through two main channels: trade—in particular the negative impacton exports of the worsened outlook for the European region—and financial flows—including theimpact of the slowdown in Eastern Europe on the returns on foreign investments of the Austrianbanks and corporations. The key policy challenges for the authorities looking ahead are to support theeconomy through responsible fiscal policy, while ensuring financial stability. (30/06/2009)nnnnnnnnnAustria—2009 Article IV Consultation, Preliminary Conclusions of the Mission (IMF)BelgiumGeneral Motors has stepped up negotiations with rival suitors to offload a stake in Opel, its Europeancarmaking business, and could sign at least one memorandum of understanding this week as talks withMagna International, the preferred bidder, have hit obstacles. RHJ International, the Belgium-basedindustrial holding company interested in Opel, had improved its earlier bid and GM was “taking it veryseriously”, said a person close to the sale process on 29th June, who added that a memorandum couldbe signed within days. (30/06/2009)GM seeks alternative bids for Opel (Financial Times)The European Commission wrapped up its initial assessment of member state budgetary reports on24th June, but called on the Belgian government to resubmit a new report this autumn due to a lack ofdetail in its most recent offering. "The absence of crucial information in the programme, such as theexpenditure and revenue ratios, has hampered the possibility of assessing the credibility of the deficitand debt targets in the programme," the Commission said in a statement. (24/06/2009) jjjjjjjjjjjjjjjjjjjjjjjCommission slams Belgian budget report for lack of detail (EUobserver) www.thinkingeurope.eu
  4. 4. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.BulgariaNo government will want to jeopardise the policy anchor provided by Bulgarias currency boardsystem as the country prepares for euro adoption, which is not expected to occur before 2014.However, there are risks to the maintenance of the currency board. Given the recent downwardcorrection in currency values in several East European countries, there is a risk that Bulgarias exportcompetitiveness will be harmed by maintaining the current exchange rate. This could in turn slowBulgarias recovery from the economic crisis. (01/07/2009)Outlook for 2009-10: Policy trends (The Economist Intelligence Unit)CyprusCyprus has been relatively shielded from the crisis until now, largely because of a lesser reliance onexports, prudent fiscal policies in the past, euro adoption, and a resilient financial sector which hasnot needed public capital injections. However, the evaporation of growth in 2009–10 will worsencredit risk in the banking sector which will have to be monitored and it will make current fiscalpolicies unsustainable without a policy correction. Structural reforms will be needed to assist therecovery and boost growth. (29/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvCyprus—2009 Article IV Consultation, Concluding Statement of the Mission (IMF)Czech RepublicThis was the second consecutive quarter of decline, and the worst performance since 1998, and wasdriven by weak manufacturing sector performance, which saw output fall by 10.5 per cent in January-March. This was in response to a fall in external demand as the recession deepened in the Eurozone,so that export growth in the first quarter dropped by 20.9 per cent. Gross capital formation declinedby 13.9 per cent. The decline in gross fixed capital formation was less steep, at 3.4 per cent, with thefall caused by decreased investment in transport equipment and construction. However, in the comingmonths the plunge in the industrial sector may be stemmed by a boost in automotive production,which may also prevent continuing steep declines in investment. (26/06/2009)vbbmmmmmmmmvvvvCzech Republic economy: In recession (The Economist Intelligence Unit)EstoniaAs the Estonian economy begins to stabilize, the government has affirmed its target to adopt the euroin 2011. After the economic shock of late 2008 and the continued recession in 2009, government,bankers and the EU are starting to see signs of stabilization. The elusive entry into the euro zone nowseems more feasible by the month by month basis. (18/06/2009)//////////////////////////////////////Estonian adoption on track (The Baltic Times) www.thinkingeurope.eu
  5. 5. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.FranceThe French government has significantly decreased VAT for the restaurant business from 19.6 per centto 5.5 per cent, moving to satisfy a long-term demand from the industry. The tax applies to food butnot to alcohol consumption. This drop signals lower overall prices for consumers, since dining prices inFrance include VAT. Establishments are not legally bound to lower their prices as a result of the VATdrop; if they choose not to, they have the right to keep the same prices as before and pocket thedifference. The measure will cost the French state 2.38 billion euros a year but owners havecommitted themselves to employ 40,000 more people. (01/07/2009)VAT cut paves way for cheaper restaurant bills (France24)France has taken decisive action to address the domestic impact of the financial crisis and theunprecedented global contraction. Crisis management needs to remain a cornerstone of near termpolicies, but a renewed focus on medium-term fiscal sustainability and a deepening of the country’sambitious structural reform agenda will help to minimize the longer-term costs of the currentdownturn. (29/06/2009)nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnFrance—2009 Article IV Consultation Mission1 (IMF)François Fillon, the French prime minister, launched a three-month consultation process on plans tofund the country’s strategic investment priorities with a national savings bond – a proposal that hasinspired heated debate. Mr Fillon, after a special meeting of his new cabinet to discuss the fund-raising plans, insisted the government was not going to use the savings of French citizens to financeday-to-day spending or to delay much-needed public spending reforms.(28/06/2009)mmmmmmmmmmmmmmPM seeks to calm French bond fears (Financial Times)France saw its unemployment total grow by 36,400 in May, with young jobseekers suffering thebiggest rises. The increase, which was smaller than rises seen in previous months, took the joblesscount to 2.543 million. It marked a 1.5 per cent rise on a monthly basis and a 26.4 per cent rise year-on-year, the Ministry of the Economy said. Unemployment among jobseekers under the age of 25 inmainland France has risen by 41.1 per cent in the last 12 months. (25/06/2009),,,,,, mmmmm,,,,,,,,,,,,French youth unemployment rises (BBC)GermanyThe German government provided Arcandor a 50 million euro loan, averting the need for the insolventretailer to close large parts of its Primondo mail-order subsidiary and give up hopes of restructuring.Under the agreement, the German government will join the states of Bavaria and Saxony in providingPrimondo’s Quelle catalogue division a 50 million euro loan which it needs to restart the flow of cashadvances from its bank/ (30/06/2009) Berlin throws Arcandor €50m lifeline (Financial Times) www.thinkingeurope.eu
  6. 6. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.GreeceGreece’s economic policy needs to focus on fiscal adjustments, improving the financial system andreversing the decline in the country’s competitiveness in order to better prepare for the post-crisisenvironment, the Foundation for Economic and Industrial Research (IOBE) said on 29th June. IOBE, anonprofit research group, said these proposals could contain the negative impact of the downturn andalso help to create more favorable conditions for an economic recovery. IOBE proposed a gradualreduction in government spending by better organizing and controlling costs in the public sector whilealso suggesting boosting budget revenues through more effective tax collection methods, such assetting up shared electronic databases. Economics and Finance Minister Yiannis Papathanassiou saidthe government is working on “long-term and structural measures” to be unveiled in October andaimed at cornering tax cheats and limiting public sector spending. (30/06/2009)Post-crisis economy needs reforms (Kathimerini)HungaryThe European Commission gave Hungary another two years to curb its budget gap, postponing itsdeadline until 2011 as it deals with a severe recession. European Union finance ministers have toldHungary repeatedly to reduce its deficit because it has exceeded the maximum 3 per cent of grossdomestic product set by EU budget rules every year since it joined the bloc in 2004. The financial crisishas hit Hungary hard and forced it last year to seek a 20 billion euro bailout from the InternationalMonetary Fund and the EU to plug the gap between government spending and plunging tax revenues.(25/06/2009)EU tells Hungary to curb budget gap by 2011 (Associated Press Worldstream)IrelandIreland is suffering more than any other advanced economy from the global recession and Irish bankscould be facing losses of about 35 billion euros, the IMF said. In its annual report on the state of theIrish economy, the IMF described Irelands short-term outlook as "bleak and predicted the economywould shrink by 8.5 per cent in 2009 followed by a further 3 per cent in 2010. The IMF forecast theIrish unemployment rate would hit 15.5 per cent in 2010. (26/06/2009)ffffffffnnnnnnnnnnnffffffffffffffIrish economy and banks worst hit in the global downturn, says IMF (The Daily Telegraph)ItalyItalian ministers approved a new stimulus package on 26th June - reported to be in the region of 4.5billion euros – as the government attempts to stave off a further slide in economic activity this year.Measures under the new plan, whose total size has yet to be finalized, include tax incentives forbusinesses that re-invest profits in new machinery and refrain from cutting workers. The governmentalso intends to reduce costs for gas utilities so that savings can be passed on to consumers. The newstimulus comes as forecasters predict the Italian economy will contract by a greater margin thaninitially anticipated this year. (29/06/2009)Italy approves fresh multi-billion-euro stimulus plan (EUobserver) www.thinkingeurope.eu
  7. 7. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.Italian Finance Minister Giulio Tremontis chances of becoming the next president of the Eurogroupare growing, after the Italian centre right PdL party seems to have lost the battle inside the EuropeanPeople’s Party for the European Parliament presidency. On 19th June at the European Council, ItalianPrime Minister Silvio Berlusconi publicly endorsed Tremontis candidacy for the chair of theEurogroup, which brings together finance ministers of the 16 euro zone countries and meets on amonthly basis before the EU Economic Council. (24/06/2009)vvvvddddddddddddddddddddddddddddItalys finance minister eyes Eurogroup chair (EurActiv)LatviaLatvias Parex Bank hopes to meet all the necessary requirements by November to be able to lift therestrictions set on the bank by the financial watchdog, said the banks CEO Nils Melngailis. He said thatthe bank has prepared a plan for lifting restrictions. Melngailis emphasised that the main restrictionsimposed on the bank were related to the fact that there was a money outflow from the bank whichhad to be stopped until the bank is stabilized. He said that lifting these restrictions should not haveany impact on the banks liquidity. (29/06/2009)Latvias Parex Bank hopes to meet all requirements to be able to lift restrictions (Baltic News Service)LithuaniaThe Lithuanian economy is forecast to shrink by 16 per cent in 2009 and a further 3¾ per cent in 2010but there is a considerable range of uncertainty around these forecasts. In this challengingenvironment, ensuring a sustainable path to euro adoption will require a continued remarkable effort.Frontloading some of the fiscal structural reform to 2009 is important not only to address financingneeds but also to anchor a strong commitment to reform. The package of measures recently proposedto Parliament strikes a good balance between structural measures that realign high public sector costswith the rest of the economy and revenue measures that alleviate pressing financing needs.(22/06/2009)pccccccccLithuania—2009 Article IV Consultation: Concluding Statement (IMF).Lithuania has raised 500 million euros in a Eurobond issue that matures in 2014 in an effort to helpplug the budget deficit, which the Cabinet expects to be around 5 per cent of Gross Domestic Product(GDP) at the end of the year. “The successful launch of our securities shows investors’ confidence inLithuania ... following recent gloomy forecasts for the Baltic region and prevailing negative news in themarket,” Lithuanian Finance Minister Algirdas Semeta said. (18/06/2009)bbbbbbbbbbbbbbbbbbbbbbbLithuania issues 500 million euro bond (The Baltic News) www.thinkingeurope.eu
  8. 8. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.LuxembourgThe European Commission said on 25th June it was taking Luxembourg to court over concerns theGrand Duchy is breaching EU rules on savings revenues and using a so-called non-domiciled status fortax avoidance. The Commission is accusing Luxembourg of using the status in order to get around theEU Savings Tax Directive on savings interest payments. Under the EU directive, member states mustexchange information on non-resident savings revenues. Those countries who have not signed up to it– namely Belgium, Luxembourg and Austria – can tax the income at source. But the Commissionconsiders Luxembourg to be breaching that rule as well by not applying the directive to people whobenefit from the "non-domiciled resident" status in their country of residence. (26/06/2009)nnnnnnnnEU takes Luxembourg to court over tax haven concerns (EUobserver)PolandPoland will present an updated timetable for adopting the European single currency by early August, adeputy finance minister said on 24th June amid growing expectations that the 2012 target date foreuro entry will be pushed back. Earlier on 24th June, the European Commission gave Poland until 2012to cut its ballooning budget deficit below the 3 per cent ceiling for euro aspirants. The move came oneday after Warsaw downgraded its 2009 budget deficit target to around 6 billion euros.(26/06/2009)fffff nPolands euro adoption faces delay (EurActiv)While Poland is likely to see a small contraction in output in 2009, it is doing better than most of itspeers in Central and Eastern Europe. This reflects in part the fact that Poland entered the crisis withsmaller external and internal imbalances. As to fiscal policy, the room for maneuver is less, becausepolicies were pro-cyclical before the crisis. Thus, the extent to which the deficit can be allowed toincrease as the economy weakens depends on taking credible measures to strengthen confidence inthe authorities’ commitment to medium-term consolidation targets. However, even with such policyadjustments, a sustained recovery will, to a large extent, be externally driven. (23/06/2009)ffffffffffffffPoland—Concluding Statement of the 2009 Article IV Consultation (IMF)RomaniaThe European Commission and Romania reached an agreement on a 5 billion euro loan package tohelp the country weather the financial crisis. The agreement requires Romania to undertake a numberof reforms, including improving its system of financial regulation. The Memorandum of Understandingwas signed by Commissioner Joaquín Almunia, Romanian Prime Minister Emil Boc as well as thecountrys finance minister and Central Bank Governor. The loan will be disbursed in up to fiveinstalments and is part of a 20 billion euro multilateral financial support package. (23/06/2009)vvvvv vCommission and Romania sign MoU on 5 billion euro balance-of-payments loan (EuropeanCommission) www.thinkingeurope.eu
  9. 9. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.SlovakiaThe Slovak low-cost airline SkyEurope is now flying under court protection from creditors while thecompany undergoes a financial reorganisation over the next three months. SkyEurope said that it hasnot filed for insolvency or bankruptcy and that it will pay its suppliers for goods and services providedduring the reorganisation. The company, which is a subsidiary of SkyEurope Holding AG, also said thatit will secure uninterrupted flight operations while respecting all its obligations towards holders ofexisting and future flight tickets. (29/06/2009)SkyEuropes crisis (Slovak Spectator)SwedenSweden, the newly installed holder of the European Union’s presidency, came to the defence of hedgefunds and private equity, saying it did not blame them for the financial crisis and would press forimprovements in EU proposals to regulate the two industries. “There is an exaggerated fear thatprivate equity contains big systemic risk. Our opinion is that it does not,” Mats Odell, Sweden’sfinancial markets minister, told reporters. (01/07/2009)Sweden rides to defence of hedge funds (Financial Times)UnitedcKingdomThe British economy contracted in the first quarter more strongly than in over 50 years as output inthe manufacturing and construction sectors plummeted. Gross domestic product fell by 2.4 per cent inthe first quarter from fourth quarter of 2008, the most since 1958 and greater than the estimate of a1.9 per cent decline, Michael Saunders, an economist at Citigroup in London, said the second quarterwould also probably show a contraction, though not as bad as the first quarter. The recession shouldbe nearing its end soon, he added. (30/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvBritish economy suffers worst drop in 50 years (International Herald Tribune)FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDEUnitedfStatesBernard Madoff was sentenced to 150 years in prison, the maximum possible under law, for running a$65bn Ponzi scheme that has devastated thousands of investors around the world. The sentence cameafter an emotional hearing in which Mr Madoff, 71, conceded he could offer no excuses for a decades-long fraud that may be the biggest in business history. (29/06/2009)Madoff sentenced to 150 years in prison (Financial Times) www.thinkingeurope.eu
  10. 10. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.The developing world, traditionally disadvantaged in case of a global crisis, could end up taking thelead of the world’s economic recovery. Emerging powers like India, China and Brazil seem to haveabsorbed the crisis more quickly than the US and Europe and are now ready to rebounce. The US,Europe and Japan don’t seem to react as quickly, which supports the theory of “decoupling.”(25/06/2009)gggggggggggggggDecoupling rises again in O.E.C.D. projections: Developing economies could be driving force forglobal turnaround’ (The International Herald Tribune)The US Dollar’s leading role in the global economy is under increasing pressure. The financial crisisheavily intensified the debate over the need for a future global currency alternative to the US dollar.Last week, the leaders of Brazil, Russia, India and China, whose governments are some of the worldslargest dollar holders, jointly declared the need for a "more diversified international monetarysystem," sparking a drop in the greenback on world markets. The end of the hegemonic role of thedollar in the long-run and a more balanced range of international currencies seem now more likelythan ever. (24/06/2009)ggvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvgggFading of the Dollars Dominance: Other Nations See Opening to Boost Their Currenciesvvvvvvvvvvvv(The Washington Post)ChinaWill China rule the world? China has raced to prop up threatened industries and preserve jobs, but willthese moves drive a global recovery? China seems to be bearing the weight of the crisis better thanother export-led countries, according to Goldan Sachs. However, there are discouraging signs thatChina has taken a dangerous path to recovery mainly based on the 1 trillion USD stimulus package. IsChina moving out of the crisis or is it just avoiding economic structural reforms?(24/06/2009)ggggggggggggggSwallowing Chinas economic medicine (Guardian Unlimited)RussiaPrime Minister Vladimir Putin has announced that Russia will lend Moldova $500 million; the firsttranche of $150 million will be transferred to Chisinau soon. After meeting with Putin in Moscow,President Vladimir Voronin of Moldova said that the Russian loan will be used for Moldovasinvestment projects. Voronin assured Putin that Moldova will be able to repay the money.(24/06/2009)Russia to lend Moldova $500 million (Russia Business Monitor - Reuters) www.thinkingeurope.eu
  11. 11. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.Vladimir Putin told the heads of Russia’s leading banks on Monday to scrap their summer holidays andhelp overcome the steep recession by lending more – even as the country braces itself for a surge inbad loans. Russia’s second lender, VTB, expressed concerns on the financial sustainability of increasedlending and gave warning that it would face losses in 2009. However, Russia’s PM seems reluctant toaccept this argument and publicly condemned banks’ lending prudency the crisis of the real economy.(20/06/2009)Putin urges banks to boost lending (Financial Times)BrazilThe President of Brazil, Luiz Inacio Lula da Silva, has big plans for Brazil’s future. With reservesaccounting for more than 200 bn USD, Brazil has the opportunity to use fiscal stimulus not only totackle the short-term effects of the financial crisis but also to reshape its infrastructure. President Luladescribes a long-term view that entrenches economic growth and sustainability. (25/06/2009)Lula has big plans for Brazil - before and after his exit (Agence France Presse)IndiaThe financial crisis has tarred the reputation and ideology of free marketeers and central bankers theworld over, including Alan Greenspan. But it has had the opposite effect on Yaga Venugopal Reddy,the former governor of the Reserve Bank of India. Accused of excessive cautiousness in the past years,he now enjoys a completely different fame in the light of the positive results of the Indian economy.The Indian economy is still growing, albeit slowly, and Indian Banks proved to be in perfect shape.(25/06/2009)In India, Central Banker Played It Safe (New York Times)AustraliaAustralian PM Kevin Rudd has been accused of not doing enough to tackle the financial crisis bothdomestically and at the international level. Australia has been hit twice by the global crisis, as a majorfinished product exporter and in reason of the dramatic drop of the price of commodities.(25/06/2009)OECD tells us to loosen belts (Canberra Times) www.thinkingeurope.eu
  12. 12. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.ArgentinaThe President of Argentina, Cristina Fernandez de Kirchner, risks losing control over the Senate in oneof the most delicate moments of Argentina’s economy of the last decade. After the clash with thefarmers’ lobby over export taxes Cristina Fernandez has not yet managed to improve her rate ofapproval. The drop in commodity prices and the economic crisis affecting the exports furtherdiminished her popularity both in the electorate and in the Congress. Former president NestorKirchner, husband of Cristina Fernandez, claimed that a presidential crisis in the peak of the economiccrisis risks jeopardising the recovery of the national economy, bringing Argentina back to thecataclysm of 2001. (23/06/2009)cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccGloom has hung over the reign of Queen Cristina. Its not all her fault (Guardian Weekly)NorwayNorways finance ministry is setting up a committee to investigate the causes of the global financialturmoil and its impact on the countrys financial markets, the ministry revealed in a statement on 19 thJune. (20/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvNorway appoints financial crisis committee (Nordic Business Report)HIGHLIGHTSIn an attempt to pull the EU economy out of recession, the European Central Bank (ECB) injected 442billion euros worth of one-year funds into money markets on 24th June, the banks biggest-everliquidity injection. The massive loan to Eurozone banks at a flat rate of 1 per cent marks the latest stepin the ECBs efforts to get liquidity flowing and fend off the impact of the financial market crisis. Theloan represents about 70 per cent of the ECBs outstanding liquidity operations and 5 per cent of eurozone economic output, and analysts said the generous supply of funds should bring down moneymarket rates. (25/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvECB lends record sum to banks (EurActiv)Commission 2009 Report on Public Finances: The report finds that the fiscal stimulus was needed tosupport the economy, but the overall success depends on a credible exit strategy. As the Europeaneconomy suffers its worst post-war recession, the European Recovery Plan provides needed fiscalsupport to ailing economies. But rising public debts and the contingent liabilities incurred bygovernments to support the financial sector, together with the prospected increases in age-relatedexpenditure and slowdown in potential growth, raise concerns about public finance sustainability.(23/06/2009)Commission publishes the 2009 report on Public Finances in EMU (European Commission) www.thinkingeurope.eu
  13. 13. Centre For European Studies FINANCIAL CRISIS WATCHLast updated on 01/07/2009 To view full articles click on hyperlinks.The Presidency and the European Commission welcome the new fiscal package for 2009 and 2010adopted by the Latvian Parliament, which is a courageous and ambitious step forward to address fiscalimbalances. Commenting on the vote, European Economic Affairs Commissioner Joaquín Almuniasaid: “I very much welcome the vote by the Latvian Parliament and the support given by the socialpartners to the package of budgetary savings. This is necessary to reduce the deficit to levels that areconsistent with the need to overcome the present difficulties with the financial help of the EU andother contributors. The reduction in the deficit will have to continue in 2010 and in the next years, soas to anchor the economy in a credible and sustainable path." (18/06/2009)bbbbbbbbbbbbbbbbbbbbJoint Statement Presidency of the ECOFIN council (European Commission)UPCOMING EVENTSEvent: Eurogroup and ECOFIN Meetingsvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv cDate: 6th - 7th July 2009Event: G8 Summitc ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccDate: 8th – 10th July 2009, L’Aquila, ItalyccccccccccccccccccccccccccccccEditor: Roland FreudensteinffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffResearch Assistance: Katarína KrálikováccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccDesign: José Luis FontalbacccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccQuestions and comments: briefs@thinkingeurope.eu www.thinkingeurope.eu

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