European stocks fell for a second week as Standard & Poor’s said Greece might have to restructure its debt again and a European Central Bank (ECB) policymaker said a bigger firewall would not solve the fiscal crisis.
The STOXX Europe 600 Index declined 0.9 percent to 263.32 this week, even after jumping 1 percent on Friday.
The benchmark measure climbed 7.7 percent in the first quarter of the year, its best performance for that period since 2006, as the ECB disbursed 1 trillion euros (US$1.3 trillion) in three-year loans to the region’s financial institutions and US economic reports beat estimates.
National benchmark indexes dropped in 15 out of 18 Western European markets this week. France’s CAC 40 Index and the UK’s FTSE 100 Index lost 1.5 percent, while Germany’s DAX fell 1 percent.
Greece would probably have to restructure its debt again, S&P sovereign ratings head Moritz Kraemer said on Wednesday.
There may be “down the road, I’m not predicting today when, another restructuring of the outstanding debt,” he said. “At that time, maybe the official creditors need to come into the boat.”
Eurozone finance ministers, meeting in Copenhagen on Friday, set the maximum lending capacity of the proposed European Stability Mechanism (ESM) at 500 billion euros (US$667 billion) and the combined lending limit of the ESM and the temporary fund — the European Financial Stability Facility — at 700 billion euros.
In addition to the 102 billion euros already paid to support current rescue programs, the new limit takes the total size of the firewall to 800 billion euros, the
Eurogroup said in a statement. “Robust firewalls have been established,” the ministers said in the statement. “This comprehensive strategy has paid off and led to a significant improvement in market conditions.”
ECB governing council member Jens Weidmann said on Wednesday that increasing the rescue funds’ capacity would not solve the debt crisis.
“Just like the ‘Tower of Babel,’ the wall of money will never reach heaven,” he said in a speech at Chatham House in London. “If we continue to make it higher and higher, we will, in fact, run into more worldly constraints.”
A gauge of lenders was the worst performer of the 19 industry groups in the STOXX 600 this week, slumping 3.4 percent. Banca Popolare di Milano, the oldest Italian cooperative bank, plunged 14 percent after posting a net loss of 614 million euros last year after a goodwill writedown of 336 million euros in the fourth quarter.
The mean daily volume of shares changing hands on the STOXX 600 this week was 3.6 percent lower than the average over the past 12 months, according to data compiled by Bloomberg.
The VSTOXX Index, which measures the cost of option prices on the Euro STOXX 50 index, rose 4.1 percent this week.