The European Central Bank (ECB) has stopped offering liquidity to some Greek banks it does not consider solvent, and international concern about the eurozone rose as Athens called new elections that look set to be won by parties opposing austerity measures.
The risk of the contagion spreading to bigger European economies that are vulnerable due to high debt or weak banks has sent stocks and commodities tumbling, and driven Europe’s single currency towards its lowest levels this year.
The euro traded around US$1.2740, off a four-month low of US$1.2681 reached in the previous session, while the US dollar , measured against other key currencies, edged up to near a four-month high reached on Wednesday.
Photo: Reuters
European shares ticked higher at the open yesterday in line with a recovery in Asian markets, but quickly turned lower with the FTSE Eurofirst index of top European shares down 0.4 percent at 988.47 points.
“The core question will be not Greece, but Spain and Italy,” World Bank President Robert Zoellick said on Wednesday.
If Greece left the euro zone, the ripple effects could be very damaging and reminiscent of when Lehman Brothers investment bank collapsed in 2008, spreading panic on global financial markets.
Highlighting the fragile state of Greece’s banking system, the ECB said on Wednesday that it had stopped providing liquidity to some lenders because their capital was too depleted.
“As recapitalization wasn’t in place, the ECB stopped monetary policy operations,” a eurozone central bank source said, declining to be identified.
That meant the affected banks can no longer offer assets to the ECB as collateral for loans, and would have to seek costlier emergency financing from the Bank of Greece.
It was not immediately clear which banks, or how many of them, were affected. One person familiar with the matter said the capital of four Greek banks was so low they were operating with negative equity.
IMF Managing Director Christine Lagarde warned of “extremely expensive” consequences were Greece to leave the eurozone, a once taboo possibility that European leaders have now begun to discuss openly.
Echoing Zoellick’s comments, Lagarde told Dutch television any Greek departure from the euro “would be extremely expensive and hard, and not just for Greece.”
An EU official conceded that other G8 countries, whose leaders are due to meet at US President Barack Obama’s Camp David retreat at the weekend, had signaled heightened concern at the deepening political crisis in Athens.
“We have been confronted ... by a number of concerns on what might happen,” the official said. “This concern has become more pronounced after the result of the Greek elections.”
The leftists argue they can tear up the bailout deal and keep the euro, but European leaders say that if Greece fails to meet promises to them, lenders will pull the plug on financing.
Greeks have withdrawn hundreds of millions of euros from banks in recent days as the fears grow that the country might be forced out of the euro zone, although there has been no sign of a run on Athens bank branches.
ECB President Mario Draghi said that under the EU treaty, it was not his job to decide what happened to Greece.
“I want to state that our strong preference is that Greece will continue to stay in the euro zone,” he said in Frankfurt. However, he added: “Since the treaty does not foresee anything on [an] exit, this is not a matter for the ECB to decide.”
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure
RSS