The eurozone will tackle its debt crisis this week by offering more cash to the IMF and long-term liquidity to banks, while moving toward tighter fiscal rules, after ratings agency Fitch cast doubt on its capacity to respond decisively.
“We all know that Europe has not been able to convince markets that its governance set-up and its measures against the crisis were enough,” Italian Deputy Economy Minister Vittorio Grilli said in a newspaper interview published on Sunday.
“More integration and more effective instruments are needed. We are not yet there,” he told Il Sole 24 Ore.
Eurozone leaders agreed on Dec. 9 to write into national constitutions a rule that budgets have to be balanced or in surplus in structural terms. If they are not, automatic corrective measures would follow.
Such rules would sharply limit government borrowing, bring down debt and, eurozone politicians hope, help restore market trust in the sustainability of public finances.
However, constitutional changes will take a year or more and markets want reassurance now that money invested in eurozone debt is safe, especially after banks were asked to accept a 50 percent loss on their Greek bonds in October as part of a second bailout of the country which sparked the debt crisis.
European leaders have belatedly insisted that the Greek case was unique and did not set a precedent.
To address market concerns that they do not have enough money to prevent the crisis from engulfing Italy and Spain, eurozone leaders brought forward by one year to July next year the launch of their 500 billion euro (US$650 billion) permanent bailout fund.
European Central Bank (ECB) President Mario Draghi told yesterday’s Financial Times that eurozone politicians needed to move fast to make the European Financial Stability Fund (EFSF) operational, as any delay would end up raising the cost.
Eurozone finance ministers were scheduled to discuss at a teleconference yesterday the draft text of the new eurozone fiscal compact so that it can be finalized by the end of next month, EU officials said.
Ministers were also scheduled to discuss yesterday the voting method in the eurozone’s permanent bailout fund, the European Stability Mechanism (ESM).
Leaders decided on Dec. 9 to abolish unanimity in ESM voting to prevent small countries blocking major decisions.
German Finance Minister Wolfgang Schaeuble tried to show his backing for the permanent bailout mechanism in an interview published yesterday, by saying his country might pay its full contribution to the mechanism next year.
“It is clear that the sooner and the more paid-in capital the ESM has, the more it gains trust on the financial markets,” Rheinische Post Duesseldorf quoted him as saying. “My priority is to create trust.”
Draghi declined to give a clear answer when asked in the Financial Times interview whether the ECB would keep buying government bonds once the EFSF entered the picture, and also warned governments not to expect the ECB to become a lender of last resort.
Other uncertainties also weighed.
“A week after the Brussels summit the basis of the agreement reached there has begun to unravel even more quickly than is normally the case,” Emirates NBD bank said in a research note.
The ECB, which is forbidden by EU law from directly financing government deficits, welcomed the Dec. 9 agreement on more fiscal discipline in the eurozone, but doused expectations it would ramp up sovereign debt buying in return.
Eurozone policymakers said the ECB’s role in the crisis was impossible to communicate clearly because of legal and political constraints, but they said the bank would not, in the end, allow the crisis to threaten the survival of the currency bloc.
A declaration from the ECB that it would buy unlimited amounts of eurozone bonds for as long as necessary would immediately calm markets, but would probably break EU law and would also ease pressure on politicians to reform their economies.
“The ECB simply can’t and won’t say that, and it’s very unreasonable to even expect it,” one eurozone official said.
Instead, the bank was likely to keep quietly buying enough Spanish and Italian bonds to keep both countries on the market, but with financing costs sufficiently high to keep pressure on their lawmakers to quickly accept tough reforms.
“This is the most expensive approach, also not likely to work in the longer run, but still it is the only one possible,” the eurozone official said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
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