Euro Crisis Briefs – December 2011

Since the global financial system is so closely inter linked between the individual economies of the world’s nations, the current crisis in the Euro currency of the 17 member Euro zone has broad implications which impact the major economies of the world, including the United States, as the 27 member European Union is the largest trading partner of the US.  Because not all European Union countries are part of the Euro zone, which uses the Euro currency, some foresee a splitting of the European Union between the Euro haves and the Euro have nots.

Geithner praises Italy’s reform package

The United States has stated that Europe is getting its debt crisis under control. “The world can be encouraged by the progress of the last few weeks,” US Treasury Secretary Timothy Geithner said after a meeting with Mario Monti, the Italian head of Government. Geithner praised the savings efforts of the ailing euro country shortly before the start of the EU Summit in Brussels in the evening. Monti’s Government has put together a strong reform package, the Minister said. The Government enjoys great confidence.

Fitch praises Italy

The US credit rating agency Fitch praised the Italian cost saving efforts, keeping the outlook for the country on a positive course. The reform package of the government reduced pressure on the rating because the measures underpinned the objective to achieve a balanced budget by 2013.

Key interest rates at record low

The European Central Bank (ECB) lowered its key interest rate to 1.0 percent from 1.25 percent. Thus the interest rates for banks has now reached its record low, which stood from March.

150 Billion for the IMF?

The Euro countries want to make available 150 billion euros to the IMF (International Monetary Fund) for the fight against the debt crisis. This should be done through bilateral loans by the central banks of the 17 Euro zone States, a senior representative of the Euro zone told the Reuters news agency. According to the IMF, the funds should pass to crisis countries which are cut off from the capital market or can only refinance at enormous costs.

Finland can not accept Amendment

Finland insists on an act of Parliament to make a simple majority enough for certain decisions regarding the debt crisis in the European Union in future. Such a reform could only be accepted in Helsinki previously if members agreed to a two thirds majority, says Miapetra Kumpula-Natri, Chairman of the Grand Committee in the Finnish Parliament, who to advises on many key decisions. Thus Prime Minister Jyrki Katainen would definitely not agree to the amendment proposed by Germany and France at a recent EU Summit.

Westerwelle reaches out to EU Treaty amendment

German Foreign Minister Guido Westerwelle is again calling for change of the EU Treaty as demanded by Germany and France to eliminate the flaws of the Monetary Union. “Some say it is sufficient to build a firewall. We are told the firewall must be built, but at the same time we need to eliminate the flaws of the Monetary Union,” he said in Brussels. The outcome of the Summit had still not been secured. Germany must always make it clear that it has benefited the most from all the countries from European integration. “We are interested not in a German Europe, but a European Germany”, he stressed.

Finance Minister Osborne warning

The British Finance Minister George Osborne warns of the massive impact a collapse of the euro-zone would have on the UK economy. He said at the Economic Committee of the House of Lords that it was wrong to think the problems would end in only a year’s time.