ECBs involvement in Europes financial crisis

Mr. Trichet, 68, today is said to have lost his cool with a reporter who asked whether Germany should abandon the euro and return to the mark as Europes debt crisis roils markets and spooks voters. Almost 13 years after its demise, the Deutsche mark retains enough potency to haunt Jean-Claude Trichets final days as European Central Bank president. I would like very much to hear the congratulations for an institution which has delivered price stability in Germany for almost 13 years, Trichet said in Frankfurt in an uncharacteristically raised voice. Its not by chance we have delivered price stability, he said. We do our job, its not an easy job. The Frenchman, whose eight-year term ends Oct. 31., oversaw decisions to cut interest rates to a record low and provide banks with unlimited liquidity. He also took the unprecedented step of buying the bonds of countries including Ireland, Spain and Italy to lower yields. As the ECBs involvement in crisis fighting increased, Trichet has criticized governments for not doing enough. Mr Trichet has been at the forefront of efforts to save the regions single currency. As Greeces fiscal crisis ricocheted through European markets, he has spent much of the last two years shuttling back and forth between Frankfurt and national capitals for private meetings and a series of marathon summits. Ive never seen Mr. Trichet get so angry before, said Nick Kounis, head of macro research at ABN Amro in Amsterdam. Trichet underlined to the German public that the ECB is still a trustworthy institution, as the question was punching hard against that view. While the ECB has managed to keep inflation in the 17- nation region just below 2 percent since 1999, 37 percent of Germans said the country would be better off if it reintroduced the mark, according to an Emnid survey for broadcaster N24, published on Aug. 18. The same proportion said the country is better off with the euro, while another 19 percent said that a return to the mark wouldnt change anything, the poll showed. The ECB left its benchmark interest rate unchanged at 1.5 percent today after its monthly meeting and the press conference was Trichets second last before he is succeeded by Italys Mario Draghi.

Berlin, Germany ( source FT.com)

Germany's powerful constitutional court has rejected a series of challenges to the euro zone financial rescue packages agreed last year for Greece and other debt-strapped members of the European currency union. In an eagerly-awaited judgment issued on Wednesday, the judges in Karlsruhe decided that the measures did not infringe the budgetary authority of the Bundestag, the German parliament in Berlin. But they also ruled that in future the budget committee of the Bundestag must give its prior approval before any further German financial guarantees for loans to its 16 partners in the euro zone. The judgment amounts to an important victory for the German government, although it could complicate negotiations over future crisis measures by reinforcing the parliamentary control of the Bundestag. It lifts a cloud over the 110bn rescue package agreed last year for Greece, and the 440bn European Financial Stability Facility (EFSF) used to provide further financial assistance for both Ireland and Portugal. It should also clear the way for German parliamentary approval for further crisis measures to extend the powers of the EFSF. Ms Merkel faces a grueling three weeks to win the backing of her own supporters for new crisis measures, agreed by euro zone leaders last month, which go a lot further than the original plan for Greece. The package would allow the European Financial Stability Facility -- the euro zone rescue fund -- to use its funds to buy sovereign bonds in secondary markets, issue precautionary liquidity loans to euro zone members, as well as recapitalize banks in difficulty. It would increase the size of Germany's financial guarantees for the EFSF from 123bn to 211bn ($297bn).

The European Commission European Commission chief Jos Manuel Barroso yesterday said he did not expect Europe to slide into recession, calling the European Union and the euro strong and

resilient. On his first official visit to Australia, the Portuguese also stressed the need to strengthen the international monetary system and continue financial regulatory reform to help prevent any further economic crisis. We dont anticipate a recession in Europe. The latest forecast by the European Commission shows there will be growth, modest growth it is true, he said during a joint press conference with Prime Minister Julia Gillard. His comments follow rating agency Standard and Poors last week saying a second quarter slowdown had increased the risk of a double dip recession in Europe, but that the region should escape with sluggish growth this year. The agency lowered its forecast for euro zone growth to 1.7 per cent this year from 1.9 per cent, with evidence of a slowing in some of the blocs strongest economies. Moving to reassure nervous markets, amid US debt woes and stagnant growth, Mr. Barroso added that the European Union and the euro were in good shape. I want to be very clear here: The European Union and euro are strong and resilient, he said. We are doing all it takes, from tackling the underlying budget problems to strengthening the governance of the euro zone, from tighter financial regulation to improving our overall preparedness. On Greece, the EC chief, who heads to the Pacific Islands Forum in Auckland later this week, said it was too early to judge efforts by the Greek government to adhere to austerity targets demanded under its bailout terms. But he stressed Athens has said it would meet its commitments. We are making a mission to Greece, and we are now in the process of analyzing what Greece has been doing, he said.

It is premature now to make an assessment on exactly the efforts of the Greek government. The Greek Finance Minister Evangelos Venizelos conceded his country would have to revise its public deficit target for this year. This was a key condition for continued funding from the 110 billion European Union-International Monetary FundEuropean Central Bank bailout loan agreed last year. Ms Gillard said there had been testing times in Europe and Australia, and welcomed the steps European authorities had taken to address sovereign debt problems and to press on with reform. We know and understand these are difficult decisions but we know that tough decisions are needed to stabilize financial markets, she said. In a joint statement, Mr. Barroso and Ms Gillard both reaffirmed their commitment to boosting economic cooperation in international forums ahead of the G20 summit in Cannes to help achieve strong, sustainable and balanced growth. They also agreed on the need to strengthen the global monetary system and continue financial regulatory reform, which will contribute to addressing the causes of the current vulnerabilities and preventing future crises.

During talks in the national capital, the two leaders also discussed free trade and investment and their opposition to protectionist trade actions. Mr. Barroso called

Australia one of Europes most like-minded partners, and said the European Commission had sought a mandate from its 27 member states to negotiate a cooperation framework treaty with Canberra. It will serve as an umbrella for the many areas of our thriving cooperation, he said, adding that it could be signed next month.

The OECD prediction The OECD predicted in its 'interim assessment report' that the UK economy would come to a virtual halt in the second half of 2011, with growth of just 0.1pc in the third and fourth quarters. That was a significant downgrade from the 0.4pc quarter-on-quarter growth it was forecasting in May. Henrik Braconier, senior economist and head of the UK desk at the OECD, said "the risk is significant", referring to economic contraction in the second half. "What we have seen is that data has been coming in measurably weaker than we expected, notably on the trade side. The support we expected from exports has vanished in the UK and that is mostly what has driven these downward revisions." "There have been almost five quarters of virtually no growth in the UK from the end of 2010," Mr Braconier said. He added that depressed market confidence triggered by euro zone fears, and a decline in consumer and business confidence had also taken their toll on the UK.

The Dow Jones Bernanke says Bernanke says he's surprised by how cautious consumers have been - thinks a number of factors keep them from spending more: high unemployment, a temporary spike in energy prices, falling home prices and high debt burdens. Bernanke also said the Fed will consider a whole range of policy options at its next meeting later this month - but no details as yet. To sum up: Bernanke said that a "range of tools" are available to boost the economy, which will be discussed at two-day meeting later this month, and that they "are prepared to deploy these tools" if needed. But no details were given on what exactly these were, and neither were there any promises to use them - just an assurance that there would be a discussion. So, the speech is over, and it offered nothing in the way of new information or promises. But US markets have still managed to haul themselves back up a bit - perhaps looking to Obama for hope. The Dow Jones is now down 0.51pc, the S&P 500 by 0.57pc and the Nasdaq is 0.32pc off. "The Fed hasn't come out with more

options or tools that the market wants or was expecting," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "The market was disappointed because this wasn't a game changer."

Figure 1

Date: updated 09/09/2011

Mircea Halaciuga, Esq. 0040724581078 Financial news - Eastern Europe