In Brief
Euro in ‘exceptionally serious’ situation German Chancellor Angela Merkel said the euro is in an «exceptionally serious» situation, as Ireland seeks to become the second European country to need a rescue loan after Greece. «I don’t want to paint a dramatic picture, but I just want to say that a year ago we couldn’t imagine the debate we had in the spring and the measures we had to take» over Greece, Merkel said in a speech to Germany’s BDA employers’ group in Berlin yesterday. «We are facing an exceptionally serious situation as far as the euro’s situation is concerned.» While Ireland gives «cause for great concern,» the problem is different from Greece because Irish banks are the main issue, Merkel said. «But it’s also right and good» that the European Union set up the 750-billion-euro ($1 trillion) rescue package with the International Monetary Fund that Ireland is now preparing to tap. Merkel is stressing the threat to the euro posed by indebted member countries as she pushes German plans to make investors help pay for any future crisis in the currency area. (Bloomberg) Irish bonds decline; Greek yield increases four points Irish bonds led a slump in debt issued by the euro area’s high-deficit nations amid speculation that rescue talks won’t damp the region’s escalating crisis. Spanish and Portuguese securities slid on concern more countries will struggle to manage their obligations as borrowing costs surge. Irish Prime Minister Brian Cowen signaled on Monday he would call elections for early 2011, triggering concern any agreement on a bailout may not be upheld. German two-year yields dropped below 1 percent after North and South Korea exchanged fire, pushing investors to seek the safest assets. «This political uncertainty won’t let Ireland enjoy the upcoming benefits of an aid package,» said Ioannis Sokos, an interest rate strategist at BNP Paribas in London. «There’s clearly a contagion effect from Ireland» for other euro-area nations, he said. Irish 10-year bonds fell, sending the yield 24 basis points higher to 8.55 percent as of 12.47 p.m. in London. The extra yield investors demand to hold the securities instead of German bunds widened 25 basis points to 569 basis points. Spanish 10-year bonds dropped for a sixth day, with the yield 12 basis points higher at 4.87 percent. Portugal’s 10-year yield rose seven basis points to 6.88 percent. The yield on the 10-year bund declined four basis points, or 0.04 percentage point, to 2.61 percent. Greek bonds dropped after the EU and IMF said Greece must make an «extra effort» to cut its deficit to keep receiving aid. (Bloomberg) Shipowners spend Greek shipowners, with the world’s second-largest merchant fleet after that of China, increased spending on new ship orders tenfold in the first 10 months of the year, shipbroker Golden Destiny said. Greeks ordered 231 new vessels, with a total carrying capacity of just over 25.8 million tons, for $6.38 billion; that compared with 36 orders for $623.8 million in the same period of 2009, the Piraeus-based broker said in an e-mailed report. In October alone, Greek owners spent $450 million on 13 orders. Dry-bulk ships, which carry commodities such as coal and steel, accounted for 142 orders, while Greeks placed 65 orders for oil, petroleum and chemical tankers and 19 for container ships, according to the report. (Bloomberg) Downward trend Bulgaria’s gross foreign debt inched down 0.9 percent year-on-year in September to 36.7 billion euros ($49.86 billion) mainly due to a drop in commercial banks’ liabilities, the central bank said yesterday. The Balkan country started to emerge from a prolonged recession in the second quarter, and gross foreign debt, mainly loans from commercial banks, recorded a 0.4 percent rise on a monthly basis. Total external debt equaled 101.4 percent of annual gross domestic product in September, from 101 percent the previous month, preliminary data from the central bank showed. The government expects Bulgaria’s economy to grow by 0.7 percent this year mainly due to rising exports and by 3.6 percent in 2011, when it hopes demand will also pick up. Gross private debt dropped 1.2 percent in September year-on-year to 32.5 billion euros, equaling 89.9 percent of GDP, while public and publicly guaranteed external debt rose 1.8 percent on an annual basis to 4.17 billion euros. (Reuters)
