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Europe brings a $670 Billion Artillery to battle the “speculators”; We shall defend the Euro whatever it takes – New Battle Cry

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As promised the European leaders chalked out a massive 500 Billion Euros Fund to battle against the “speculators” . This fund will provide emergency lending and loan guarantees to its member . This fund has been apparently set up to save the PIGS. This might provide a short term relief but the long standing structural problems of the “Club Med” members still stand.Providing more liquidity and lending to  the solvency and productivity problems of the PIGS cannot help.The Euro and and the Asian markets are up on the news of the Fund . The markets would have shown a dead cat bounce anyway after the fall of the last week. However the EU leaders would have been better served by drawing out a roadmap whereby their structural problems could have been solved.Another feature of the program like the direct buying of government bonds in the secondary market by the ECB will do no good to Euro’s future as buying of the junk bonds like that of Greece at much lower than market  rates by the ECB would be to weaken the common currency.

European leaders set program to defend euro– MarketWatch

European finance ministers agreed late Sunday on a rescue package worth as much as 500 billion euros ($670 billion) designed to keep the Greek debt crisis from spreading to other vulnerable countries.

The deal came after a full day and night of closed-door meetings in Brussels. The finance ministers held a joint press conference shortly after the opening of Asian markets — well after midnight local time — to discuss the program.

European ministers also hit back at speculation that the euro zone would be forced to shrink if the crisis continued.

“We shall defend the euro whatever it takes,” said Olli Rehn, the European Union’s commissioner for economic affairs.

The package was designed to ease market fears that Greece, Portugal or Spain will have to restructure their debt, a move that would have hit European banks particularly hard.

Rehn said the European Central Bank had agreed to buy government bonds in the secondary market to support the program.

The International Monetary Fund will also contribute to the plan, perhaps by as much as 250 million euros, the EU officials said.

Euro zone pledges bailout fund

European nations scrambled to build a bailout fund big enough to satisfy markets and contain a post-Greece crisis engulfing the entire eurozone. Video courtesy of AFP.

The new EU program includes 60 billion euros in emergency lending that would be available quickly. The leaders also agreed to set up a special purpose vehicle for 440 billion euros for loan guarantees, though it will likely take time to set this program up.

In Washington, administration officials appear to share this concern. They have said they are watching the European financial situation closely.

The White House said President Barack Obama spoke Sunday with German Chancellor Angela Merkel and French President Nicolas Sarkozy to discuss the latest development in the European negotiations.

IMF approves $30 billion loan to Greece – MarketWatch

The executive board of the International Monetary Fund on Sunday approved a three-year, $30 billion loan for Greece to help the debt-wracked country meet its obligations as European Union leaders scrambled to keep the crisis from spreading to other member nations.

European finance ministers were meeting behind closed doors late Sunday to design new anti-contagion programs.

European nations scrambled to build a bailout fund big enough to satisfy markets and contain a post-Greece crisis engulfing the entire

U.S. futures, euro jump on euro zone package news – MarketWatch

U.S. index futures soared early Monday in Asia after European finance ministers agreed on a 500 billion euro ($670 billion) loan guarantee package for euro-zone members. Dow Jones Industrial Average futures jumped 191 points to 10,526 and S&P 500 futures climbed 24.10 points to 1,131.10, pointing to a sharp rebound after Wall Street stocks fell for four straight sessions. The euro also rose sharply against major currencies on the news, and was buying $1.2856, up from $1.2757 late Friday in New York. The euro also soared to 118.97 yen from 116.78 yen, while the U.S. dollar was fetching 92.55 yen, up from 91.58 yen


Sneha Shah

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