ECB chief Mario Draghi on Thursday said it is crucial that eurozone governments do not “unravel” the progress made in reducing their borrowing cost, arguing that EU leaders must focus on structural reforms to ensure long-term growth, as the central bank cut its key interest rates for the first time in 10 months in a move aimed at boosting the ailing eurozone economy.
Unemployment in Spain and France has jumped to new highs, data showed on Thursday, fuelling a European debate over whether to ditch austerity policies and switch to reviving economic growth. More than 6 million Spaniards and 3.2 million French are unemployed, beating previous highs last seen in 1976 and 1997 respectively.
The eurozone will slow its pace of fiscal belt tightening to help reinvigorate growth, said EU Commissioner Olli Rehn, highlighting a policy shift that the United States and the International Monetary Fund have long been pressing for.
The pace of fiscal tightening around the globe is set to dominate talks by leaders of the Group of 20 advanced and emerging economies who have gathered in Washington for a two-day meeting.
Eurozone finance ministers on Friday agreed to give Ireland and Portugal seven more years to repay their bailout loans, in a bid to help the two euro nations wean themselves off bailout money in the coming year.
The loan repayment extensions are intended to ease the financial burden on both countries, giving them more time to recover from the debt crisis after their bailout loans run out. Ireland’s loans run out later this year and Portugal’s in 2014.
Prolonging the payment schedules would also allow them to obtain better terms from private lenders.
Except for lower debt refinancing costs, the fundamentals of peripheral eurozone economies have not improved in the last six months. At best they are unchanged, but they are probably worse. The region’s crisis continues to be just a liquidity crisis as far as policymakers are concerned – and not caused by problems in the “real” economy. But is peripheral Europe really suffering primarily from a liquidity crisis? When do we call it a solvency crisis?
Bankers in Europe will have one final bonus payout before they are barred from awarding themselves bonuses bigger than their salaries, EU officials said on Wednesday.
The rules, part of a wider reform of capital regulation for banks, would hold banks to a 1:1 bonus to salary ratio, with the possibility of being raised to 2:1 if shareholders consent.
“A deal is done,” confirmed one official who attended the negotiations.
The European Union has reached a deal on the legal framework for a centralised banking supervisor that will have the power to directly bailout troubled banks.
Under the deal, the so-called Single Supervisory Mechanism would receive sweeping powers to supervise some 6,000 banks throughout the eurozone, as well as in other European countries that chose to join the supervision scheme.
The European Union summit opened on Thursday where leaders will try to find a difficult balance between fiscal tightening and growth, as thousands of anti-austerity protesters took to the streets yesterday demanding an end to austerity cuts in response to the region’s worsening socioeconomic crisis.
European leaders gathered in Brussels yesterday, for once under little financial market pressure, with differences over austerity and how best to tackle the social costs of the debt crisis set to dominate.
European Central Bank President Mario Draghi on Wednesday acknowledged growing indignation over painful austerity and reform measures, but argued that they are crucial to a fairer society and can reduce injustices in the long-run.
Draghi’s remarks come two days after an inconclusive election in his native Italy, in which voters roundly rejected the austerity policies pursued by outgoing Prime Minister Mario Monti.
The inconclusive result of Italy’s general election has sparked concerns that one of Europe’s largest economies will have difficulty tackling its budget problems, raising the risk of a renewed flare-up in the eurozone crisis as the region’s financial turmoil is replaced by political instability.
