Thu, Jun 07, 2012 - Page 10 News List

Europe vows speedy response on Spain

IBERIAN WOES:European leaders are under mounting pressure to take bold steps to save the euro as states buckle under the pressure of recession and debt

AFP, PARIS and HONG KONG

Top European finance ministers vowed on Tuesday to respond “speedily” to the continent’s debt crisis as Spain pleaded for help for its struggling banking system so as to avoid a full and humbling bailout.

Eurozone member Cyprus also warned that there was a serious possibility it may need EU aid to save its banking system, which is heavily exposed to twice bailed-out Greece.

Asian markets mostly rose yesterday following a positive lead from Wall Street and a European G7 members’ promise to solve the continent’s debt crisis.

The euro edged higher as traders looked to a European Central Bank policy meeting later in the day amid hopes of easing measures, although investors were still nervous after Standard & Poor’s warned of a possible Greek euro exit.

Tokyo closed up 1.81 percent, or 151.53 points, at 8,533.53, while Sydney edged up 0.29, or 11.6 points, to close at 4,055.3 after data showed the economy grew better than expected in the January-to-March period.

Hong Kong rose 1.43 percent, while China closed down 0.10 percent.

European stock markets rose at the opening. London’s benchmark FTSE 100 index climbed 0.82 percent to 5,303.39 points, Frankfurt’s DAX 30 gained 0.99 percent to 6,028.36 points and in Paris the CAC 40 added 0.62 percent to 3,006.38 points.

“We were able to share our recognition on the European issue,” Japan’s Jun Azumi was quoted as saying by Jiji Press after finance ministers and central bank chiefs from the world’s seven top developed nations held a conference call. “The European side stated that they will respond to it speedily.”

The US Department of the Treasury confirmed in a statement that Europe was a key topic of the call, saying the ministers and governors reviewed developments in the global economy and financial markets “and the policy response under consideration, including the progress towards financial and fiscal union in Europe.”

The White House said it hoped for “accelerated” action on the eurozone crisis and shoring up debt-ridden banks in the coming weeks ahead of a G20 summit in Mexico.

“European leaders seem to be moving with a heightened sense of urgency and we welcome that. We are hoping to see accelerated European action over the next several weeks,” White House spokesman Jay Carney said. “A movement to strengthen the European banking system will be of particular importance in this time period.”

European leaders are under mounting pressure to take bold steps at a summit later this month to save the euro as states buckle under the pressure of recession and debt.

The European Commission was set later yesterday to unveil new plans for winding up failing banks, one of the pillars of the EU’s drive toward an integrated eurozone “banking union,” according to a presentation.

The latest EU response to the crisis is to integrate the eurozone’s national banking systems in a bid to avoid investor flight or runs on banks in one country, such as Spain, dragging down the entire system.

Spain’s sovereign debt risk premium — the extra return investors demand to hold Spanish bonds over their safer German counterparts — stood at 5.23 percentage points on Tuesday, near a euro-era record of 5.48 percentage points struck last week as investors fear Madrid will be forced to seek a bailout over its banks.

Spain wants the EU to allow the European Stability Mechanism (ESM) bailout fund — due to come into force in the coming weeks — to directly recapitalize banks struggling to raise 80 billion euros to shore up their books.

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