EU leaders have agreed to go public with the results of “stress tests” checking the stability of the bloc’s banks, an attempt to restore confidence to markets spooked since Greece demanded a bailout to prevent an embarrassing default.
Markets welcomed the news, with the euro climbing to about US$1.24 on Thursday, its highest in about three weeks, and stock markets rising.
Despite market fears that Spain may be the next country to need a rescue plan, EU leaders meeting at a summit of the 27-nation bloc in Brussels insisted that they are not worried.
“We don’t believe there is a problem, and that’s the analysis of all 27 of us,” French President Nicolas Sarkozy said.
Under intense pressure from markets and other EU nations, Spain is pushing through budget cuts and labor reforms that Spanish Prime Minister Jose Luis Rodriguez Zapatero claimed would prevent new redundancies and would encourage companies to hire more workers.
Spain is also trying to stem speculation that it could follow Greece in requiring financial aid to rescue its banking system by announcing it would test how well its major banks could cope with more losses if the economy worsens and house prices tumble further.
Its move inspired the EU’s broader decision to publish banking stress tests.
In a sign markets are worried about Spain, investors charged the government sharply higher interest rates at a Thursday bond auction that raised 3.5 billion euros (US$4.3 billion).
Zapatero called for “demanding” tests across Europe to prove that the region’s banks could weather any new crisis.
“There’s nothing better than transparency to demonstrate solvency, to give confidence and to leave all these unfounded rumors behind us,” he told reporters.
European Council President Herman Van Rompuy said the results of the tests on each of Europe’s 25 biggest banks would be released in the second half of next month.
The US published stress tests last year to show how much capital the country’s 19 biggest banks needed to raise to cope with more losses.
Such tests give an estimate of what potential losses financial institutions could be facing. If a result shows that an institution can’t cope with necessary write-downs in case of a worsening market environment, the bank is required to put more money aside to counter the extra risk.
German Chancellor Angela Merkel says she will overcome opposition from some banking executives, who cite legal concerns about making the results public.
“We have the intention to publish it and we will find ways,” she said, according to DAPD news agency.
Marco Annunziata, an economist at UniCredit bank, said Europe needs “to finally clear the air on the health of its financial system” and that greater confidence in Spain’s financial system could bolster market optimism for the entire eurozone.
Meanwhile, EU leaders agreed to bring in more sanctions to discourage member nations from running up debt as they toughen budget rules and introduce wider oversight of their economies to force governments to tackle problems that hold up growth.
British Prime Minister David Cameron said he would not accept any sanctions for his country because it does not plan to join the euro.
Nor does he want to discuss his budget plans with other EU governments and the European Commission before they go to the national parliament.
Also at the summit, EU leaders called on the US and others to “explore and to develop” a global tax on financial transactions at a Group of 20 summit of rich and emerging nations in Toronto next week.
The tax isn’t popular outside Europe, and it is still unclear how it would work worldwide — and if Europe could introduce it alone without damaging its own economy by causing financial groups to flee the region.
Van Rompuy said leaders had already decided in principle on introducing a levy on banks in Europe to “contribute to a fairer burden sharing of the costs of the financial crisis and to greater stability of the financial system.”
However, EU nations do not agree on how the money raised would be used. Sweden already has a levy that feeds into a fund for future bailouts; Germany is also considering a similar system. Both France and Britain say any money raised should go straight to governments.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)