Italy's Road To Debt Containment Is Threatened; Greece Extends Deadline For Debt Buyback; And Europe's Finance Ministers Meet December 12 To Decide On Unified Oversight Of Banks

Monday, December 10, 2012 07:56
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Italy's Road To Debt Containment Is Threatened; Greece Extends Deadline For Debt Buyback; And Europe's Finance Ministers Meet December 12 To Decide On Unified Oversight Of Banks

Tags: debt | European debt | European zone

Italian Prime Minister Mario Monti is stepping down as a result of parliamentary pressure from former premier Silvio Berlusconi and his allies. Investors are growing nervous.
 
That’s because Berlusconi is already hitting the campaign trails in a bid to regain power.
 
Berlusconi is decidedly against the austerity mandate of the German government, creating a situation that is bringing European tensions to a head.

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Underlying cracks in the Eurozone are beginning to widen as the Italian election. Monti will make a last ditch effort to raise support for his 2013 budget before resigning.
 
His austerity measures have deepened Italy’s fourth recession since 2001. At the same time, they have put the country on track to meet the Eurozone’s requirement of only 3% debt this year.
 
Italy’s image has improved and restored investor confidence. If Berlusconi regains power, all of that could change.
 
Meanwhile, Greece has extended its deadline to buy back its sovereign debt through Monday, December 10. The original deadline was Friday, December 7. The country is within €30 billion of its buyback target.
 
Domestic and overseas investors have agreed to sell back €27 billion worth of bonds, Greek banks offered to sell €10 billion worth back to the government, and foreign investors including hedge funds agreed to sell back €16 billion worth.
 
The buyback program is part of an approved measure by Eurozone finance ministers to bring Greece’s debt down to 124% of its gross domestic product by 2020 from a projected 190% in 2014.
 
Lastly, Europe’s effort to create a unified bank oversight entity is identifying banks with over €30 billion in assets to come under the European Central Bank’s (ECB) regulatory umbrella.
 
Those with assets larger than 20% of their country’s economic output may also come under the watch of the ECB.
 
Eurozone finance ministers will meet on December 12 in an effort to reach a compromise that will set up a single bank supervisor that would be mandatory for the 17 Eurozone nations and optional for other European Union members.

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