EU Begs For A Bailout As Stocks Crash And The Euro Tumbles
The Associated Press Reports that EU leaders are urging an immediate bailout to counter act the crashing stock market and the tumbling of the Euro.
The head of the EU has joined the struggles to lift the region out of its financial pit, calling on yet more money to be made available to struggling economies. Jose Manuel Barroso also wants the bailout fund to be able to buy government bonds, as the major Eurozone economies of Spain and Italy face being crushed under their debt. To discuss the situation in the EU Russia Today talks to Dr. Richard Wellings from the UK’s Institute of Economic Affairs.
EU urges bailout changes as stocks, euro tumble
EU urges changes to bailout fund as stocks, euro tumble
BRUSSELS (AP) — Mounting worries that Italy and Spain won’t be able to repay their debts pummeled stocks and the euro Thursday and piled pressure on the 17-nation currency zone to overhaul its crisis strategy.
And despite indications that the European Central Bank has restarted its bond buying program after a four-month hiatus in an attempt to calm markets, the financial pressures on Italy and Spain remained acute.
European Commission President Jose Manuel Barroso admitted as much, urging eurozone leaders to make further changes to their bailout fund — including boosting its size — to ensure it can effectively stem the debt crisis that has rocked the currency union for 21 months.
Barroso’s appeal and the ECB’s apparent turnaround came just two weeks after eurozone leaders reached what they branded a “historic” deal on the currency union’s crisis strategy, including a second massive bailout for Greece and far-reaching new powers for their rescue fund.
However, the accord failed to stem rising panic on financial markets over the ability of the eurozone’s third and fourth largest economies to repay their debts.
Although the yields, or interest rates, on Italian and Spanish bonds were below records reached earlier in the week — possibly linked to purchases by the ECB — the two countries’ stock markets were, like all others in Europe and the U.S., firmly in the red, while the euro slid 1.5 percent against the dollar.
Spain’s benchmark stock market index plunged 3.9 percent Thursday, marking its biggest one-day loss this year yet, and Italy’s stock market also plummeted, with Milan’s FTSE MIB index down by 5.16 percent.
Germany’s DAX index of blue chip companies fell by 3.4 percent.
Investors in the U.S. also dumped stocks amid increasing uncertainty about the economy, with the Dow Jones industrial average about 2.6 percent lower at 11,591 while the broader Standard & Poor’s 500 index fell 2.9 percent to 1,223.
The EU’s Barroso, meanwhile, said in a letter to eurozone leaders dated Aug. 3 but made public Thursday the main reason behind Spain’s and Italy’s market woes was “the undisciplined communication and the complexity and incompleteness of the 21st July package.”
That, he wrote, has led to “a growing skepticism among investors about the systemic capacity of the euro area to respond to the evolving crisis.”
The commission president urged “a rapid reassessment of all elements related to” the eurozone’s bailout fund, known as the European Financial Stability Facility, so it can effectively use its new powers. A spokeswoman for Barroso confirmed that those elements included the fund’s size.
But getting the eurozone to agree to new measures will not be easy.