NEWS,14.12.2012

EU holds back on eurozone overhaul

European leaders doused hopes of a radical eurozone overhaul on Friday, after brokering deals to control banks and refloat Greece seen as adequate to stem the immediate crisis.The last EU summit of a year that saw Greece close to bankruptcy and bigger Latin countries pressured to overhaul their economies in line with German demands saw a series of ambitious proposals effectively kicked into the long grass.Despite worries over political uncertainty in Italy, flagship plans to fix fundamental flaws criticised since the introduction of the single currency were put to one side until late 2014 at the earliest.Europe's effective paymaster, German Chancellor Angela Merkel, hinted that "financial aid" could in the future be given to countries committing to reforms as part of moves towards greater economic co-ordination in the bloc.In the eurozone alone, joblessness is heading towards the 20 million mark after a year of devastation and with recession set to last throughout much of 2013.However, the sense of imminent panic on financial markets that dominated much of 2012 decision-making has receded significantly since the European Central Bank (ECB) issued a long-resisted but near-unlimited guarantee in the summer to stand behind countries in financial difficulty."No doors were closed," said Jose Manuel Barroso, the head of the executive European Commission.Yet ideas heavily promoted by EU President Herman Van Rompuy over the last six months, including a central eurozone budget, seemed to fizzle out.Van Rompuy said he would present another report to leaders in June 2013, as well as proposing that national governments sign up to contracts with the EU on reforms."All the hard work is beginning to pay off. A lot has been achieved over the course of a year," he insisted."This work is not over: the dynamic will carry on in the coming year," pledged Van Rompuy.French President Francois Hollande said that late-2014, when a new Commission is installed, "would be the time we could envisage a new phase with a modification of the treaties."The resumption of loans to Greece followed a successful plan to wipe tens of billions of euros from the country's debt pile.A first payment of €34.3bn would be flowing to Athens "as early as next week," said outgoing Eurogroup chair and Luxembourg Prime Minister Jean-Claude Juncker.The accord prompted Greek Prime Minister Antonis Samaras to declare that "Grexit", the idea that Greece would be forced out of the 17-nation bloc, was "dead.""Greece is back on its feet," declared an ecstatic Samaras, who has pushed through painful economic reforms demanded by international creditors, sometimes in the face of violent street protests.Meanwhile, the deal for the eurozone's largest banks to come under the aegis of the ECB from March 2014 was hailed by its head Mario Draghi as "an important step towards a stable economic and monetary union, and towards further European integration".Despite a noticeably more bullish tone at the summit, fears over Italy lurked in the background, after Prime Minister Mario Monti, credited with important reforms there, said he was stepping down soon.Former leader Silvio Berlusconi had hinted that he might stand for a fourth time but appeared to row back, telling Belgian television that he had "so much to do" outside politics.Hollande downplayed the chance Berlusconi would run in a future election, saying: "I don't think there is a very serious likelihood" of this."Merkel underlined a closing of ranks at the summit. "I made clear that the government of Mario Monti has done a great deal of helpful work for the confidence that Italy is now enjoying again," she said.Leaders were to reconvene later Friday at 10:00am (09:00 GMT) to discuss moves towards a common security and defence policy as well as to take a position on the Syria crisis.

Fiscal cliff looming larger

Wall Street declined as US House Speaker John Boehner renewed concern about the lack of progress in talks aimed at preventing US$600 billion in tax increases and spending cuts taking effect on January 1."Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk our economy right up to the 'fiscal cliff,'" Boehner told a news conference.Failing to reach a deal to avoid the so-called fiscal cliff could push the world's largest economy into recession next year, the non-partisan Congressional budget office has forecast.Further evidence of the glacial pace of negotiations has increased uncertainty about the outlook for the economy and corporate profits."There's a lot of confusion. Nobody knows what's going to happen with the cliff," Tom Schrader, managing director of US equity trading at Stifel Nicolaus Capital Markets in Baltimore.In afternoon trading in New York, the Dow Jones Industrial Average fell 0.44 percent, the Standard & Poor's 500 Index shed 0.56 percent, while the Nasdaq Composite Index dropped 0.75 percent.Positive economic data, while welcome, did little to help the mood. New claims declined 29,000 to a seasonally adjusted 343,000, according to the Labor Department."The labour market might be improving a bit quicker than expected," David Sloan, an economist at 4Cast in New York, told Reuters. And two separate reports from the Commerce Department showed that retail sales increased 0.3 percent last month, following a 0.3 percent slide in October, while business inventories gained 0.4 percent in October.Shares of Best Buy soared, last up 14.9 percent, after a report in the Minneapolis Star-Tribune newspaper that company founder Richard Schulze will offer to buy the consumer electronics retailer by the end of the week.In Europe, the Stoxx 600 Index ended the day with a 0.4 percent drop from the previous close. That was its first drop this month, according to Bloomberg. National benchmark stock indexes declined in Frankfurt, Paris and London, falling 0.4 percent, 0.1 percent and 0.3 percent respectively.Standard & Poor's today cut its crediting rating outlook for the UK to negative from stable.Meanwhile, UBS faces a fine of about US$1 billion next week to settle charges of rigging the Libor interest rate benchmark, Reuters reported, citing a person familiar with the situation."The global settlement is about US$1 billion," the source told Reuters on Thursday. "It's expected early next week on Monday or Tuesday."

No need for Spain bailout right now - PM

Spain's Prime Minister Mariano Rajoy insisted on Friday that his country currently had no need of a bailout from the Eurozone to fix its public finances. Spain will seek help to ease its borrowing costs if necessary, but "currently we do no need to and therefore we have not asked for it", he told Cadena Ser radio.Rajoy has for months been fending off speculation that Spain will seek help from Eurozone emergency funds, which would trigger supportive action by the European Central Bank."We will use this mechanism only if necessary for the interests of the Spanish people," said Rajoy, interviewed on the sidelines of a European Union summit in Brussels.He spoke a day after European leaders approved a new system of banking supervision for the Eurozone, a key move for Spain, the bloc's fourth-biggest economy.Spain has had to seek a Eurozone bailout for its banks, ruined by financial turmoil in recent years, and speculation mounted that it would have to seek aid when its borrowing costs surged to danger levels in July.But Rajoy has held off from making such a demand and Spain has managed to complete its financing operations for 2012 without outside help.Figures released by Spain's central bank on Friday showed that the level of debt owed by Spanish banks to the European Central Bank decreased for a third month running in November, to €340.8bn.This indicated that Spanish banks were finding it easier to raise money on regular financial markets, a sign of recovering confidence in the sector whose collapse has fuelled a bitter recession in Spain.Other data from the Spanish central bank Friday showed that Spain's public debt rose to a fresh record at 77.4% of gross domestic product in September and was forecast to reach at least 85.3% by the end of 2012.