European leaders agreed on Friday to police thousands of eurozone banks beginning next year as they sought to create much-needed jobs in their austerity-battered economies.
By the close of a two-day summit, France and Germany had patched up differences over how to beat the debt crisis, with the new watchdog for 6,000 banks a key condition for allowing a dedicated rescue fund to re-float troubled lenders.
Leaders cited “significant progress” on a 120 billion euro (US$155 billion) package of measures to try to kickstart a climb out of recession as social and political unrest hits Spain as well as Greece.
However, the bank deal appeared to come too late for Spanish lenders, who need recapitalization to the tune of some 40 billion euros that Madrid had hoped would not be added to its public debt burden for fear of sparking new pressures on money markets.
German Chancellor Angela Merkel told reporters that direct recapitalization by the eurozone rescue fund could not be retroactive, that it “will only be possible for the future.”
Fellow hardliners the Netherlands and Finland adopted the same view when finance ministers from the three states met last month in Helsinki, seemingly reversing plans carefully laid down by the eurozone in June.
France is still pleading for the “Helsinki” trio to come round.
A top EU official speaking anonymously after the summit ended said Paris has concerns about spillover effects from Spain, and maintained Merkel’s remark came as “a surprise” as the 27 EU bloc leaders “did not settle this.”
This official said the Spanish bank bailout could benefit from some direct recapitalization later in the process, once the watchdog is up and running — supposed to be later next year.
Spanish Prime Minister Mariano Rajoy faces growing political problems with a general strike called for Nov. 14 and key elections in the autonomous Basque Country yesterday and independence-minded Catalonia next month.
Rajoy said the direct aspect of recapitalization was not an “urgent” issue for Spain, while talk of sovereign aid — expected to take the form of a credit line initially — also remains on the back-burner.
With market pressures considerably eased since the summer, the fresh commitment bird’s eye bank supervision led by the European Central Bank (ECB) is supposed to anchor a re-designed economic and monetary union.
Leaders are beginning to believe — after three years in full crisis mode — that the euro can be made more attractive to influential EU states still outside the currency bloc like Poland, one of the bloc’s strongest economies.
After an 11-hour session into the wee hours to reach the bank supervision deal, Merkel said it was about ensuring a “solid legal framework” as the ECB puts in place “hundreds” of staff.
The target date here is Jan. 1 next year, Merkel citing a need for “democratic legitimacy,” including a change to voting rights to assuage concerns in non-euro territories where eurozone banks operate, namely the global financial center of London.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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