	Generational Dynamics
	Forecasting America's Destiny ... and the World's

\| HOME \| WEB LOG \| COUNTRY WIKI \| COMMENT \| FORUM \| DOWNLOADS \| ABOUT \|

Generational Dynamics Web Log for 10-May-2010
10-May-10 News -- Europeans approve trillion dollar aid package

Web Log - May, 2010

10-May-10 News -- Europeans approve trillion dollar aid package

Angela Merkel's governing coalition suffers big election losses

Europeans approve 720 billion euro aid package - in principle

European finance ministers approved a 720 billion euro (almost $1 trillion) aid package for any countries in the euro zone that appear close to default, according to Bloomberg.

The breakdown is as follows:

440 billion euros from individual countries.
60 billion euros from the European Commission.
220 billion euros from the International Monetary Fund (IMF).

In addition, America's Federal Reserve will join central banks in Canada, Switzerland and Japan to to provide liquidity to eurozone banks that require it.

Furthermore, the European Central Bank will announce some kind of "intervention" in financial markets. It's thought that might be the "nuclear option" that everyone has been discussing (aggressive purchase of country bonds), but no further details were given.

The BBC quotes Economic Affairs Commissioner Olli Rehn as saying, "The fiscal efforts of the EU member states, the financial assistance by the commission and by the member states, [and] actions taken today by the ECB proves we shall defend the euro whatever it takes."

However, Reuters quotes Rehn at further length as follows:

"60 billion euros would be first in line to be used... possible use of special purpose vehicle of up to 440 billion euros. The case of Greece is a benchmark for how quickly it would be activated... (It could take) some weeks to be fully operational."

The key difference is that the 60 billion euros that we have at our disposal on the basis of the community budget... that is managed according to the normal community rules".

In parallel, if needed there is available up to a volume of 440 billion euros, which the member states in the Ecofin decided to channel through a special purpose vehicle that is guaranteed by participating member states in a coordinated manner, and the Commission is tasked to do the management of this and also ensure conditionality, of course with the ECB and in cooperation with the IMF.

If needed, we will use these elements according to this legal basis -- the legal base for this 440 billion is an intergovernmental mechanism between the member states."

In other words, this seems to be a lot like some of the earlier non-bailout bailouts of Greece, where the intent was to promise to provide money in the hope of never having to provide money.

As of this writing on Sunday evening ET, investors seem to have bought in. Tokyo's stock exchange is registering big gains, while Wall Street futures are also up significantly.

However, volatility is also very high, and markets can change direction very quickly in this environment. We'll see how the bond and stock markets fare during the week to come.

Angela Merkel suffers major defeat in regional election

German Chancellor Angela Merkle's center-right governing coalition parties have suffered huge losses in regional elections, causing her government to lose its majority control of the upper house of parliament, according to Deutsche-Welle.

Opposition leaders took these election results as a sign of big changes to come in the country's political landscape.

This is one of the reasons why I don't see how the $1 trillion EU aid package could be anything like a sure thing. The German people are strongly opposed to spending 25 billion euros as their share of the aid package for Greece, although they finally agreed to it reluctantly because it was absolutely necessary.

But will the "absolutely necessary" argument work again, when the amount being discussed is 100 billion euros or more? This remains to be seen.

Additional links

For the first time, American soldiers joined Russian soldiers in Red Square in Moscow to celebrate Victory Day, the defeat of the Nazis in Europe. Other Nato forces joined in as well. NY Times

The most popular Tweeter in Venezuela is President Hugo Chavez. BBC

When the Dow Industrials fell by almost 1000 points on Thursday, it rebounded quickly largely because many investors moved quickly to buy stocks at much lower prices. However, the Nasdaq exchange is going to cancel hundreds of those trades, specifically those where the stock price had fallen 60% or more. CNN Money

France will use its intelligence agencies to track down and punish speculators who seek to profit from the debt crisis by spreading rumors. Reuters

Unlike any other period since World War II, what really makes the current period stand out is the number of people that have been unemployed for 27 weeks or more. Calculated Risk

(Comments: For reader comments, questions and discussion, see the 10-May-10 News -- Europeans approve trillion dollar aid package thread of the Generational Dynamics forum. Comments may be posted anonymously.) (10-May-2010) Permanent Link
Receive daily World View columns by e-mail
Donate to Generational Dynamics via PayPal

Web Log Pages

Current Web Log

Generational Dynamics Web Log for 10-May-2010 10-May-10 News -- Europeans approve trillion dollar aid package

Europeans approve 720 billion euro aid package - in principle

Angela Merkel suffers major defeat in regional election

Additional links

Web Log Pages

Generational Dynamics Web Log for 10-May-2010
10-May-10 News -- Europeans approve trillion dollar aid package