Burden Of Reducing Euro

(Reuters) - The euro dipped against the dollar on Wednesday after the French President said a strong euro hurt exporters and should be discussed with the European Central Bank, and it looked set to stay under pressure with investors still wary of Spain's fiscal problems. Traders cited selling by Swiss investors after French leader Nicholas Sarkozy said the euro's exchange rate should be up for discussion with the ECB. The common currency hit a session low of $1.3087, falling around 0.3 percent on the day. The move erased modest gains made the previous day on upbeat earnings from U.S. companies, decent demand at a Spanish bill auction and a better-than-expected German ZEW sentiment survey. Market players said the euro could come under further pressure ahead of a Spanish bond auction on ...

(Reuters) - Fierce debate is growing in Europe over whether austerity or growth offers the best strategy to overcome the continent's sovereign debt crisis. As if it were that simple. As the euro zone hovers on the brink of its second recession in three years, the battle launched in academic journals, blogs and the financial press has spread to the hustings in France, Greece and soon in EU economic powerhouse Germany too. "Europe can't cut and grow," Sony Kapoor, head of the Re-Define think-tank, and Peter Bofinger, a member of the German Council of Economic Advisers, said in an article before European Union leaders adopted a budget discipline pact last month. "The EU needs a growth compact, not a fiscal one. Swift action on tax and jobs is the way out of the crisis." The growth camp ...

(Reuters) - Be careful what you wish for, Japan. Long preoccupied with the strength of the yen and its drag on the anemic economy, policymakers in Tokyo are now being served a warning about the risks posed by the currency's retreat. The yen's decline from record highs in recent months coincides with a major shift in the country's energy balance, a change that threatens to hasten its path to a perennial trade deficit. A record current account deficit in January reported on Thursday was probably a blip, a result of seasonal and one-off factors. But it serves as a reminder that the former export powerhouse may end up in the red and will need to import capital to fund its snowballing debt much sooner than earlier thought. The fear is that foreign investors would demand better returns, ...

This will be our last Daily Reckoning until April 17th. So, what well-chosen words can we leave you with? How about “if,” “but” and “maybe?” Yes, dear reader, if everything continues to clunk along as it is today…maybe the world financial system will hold together until we get back. We certainly hope so. We’ve been waiting years to watch the final crack up of the phony-money system. We don’t want to miss it! But you never know. For all we know, the system is cracking up now…right before our eyes. We just don’t recognize it. Take this item from yesterday’s news. It proves that Lent is bad for you: WASHINGTON (AP) — Europe has endured the pain of layoffs, wage cuts and tax increases designed to bring government debt under control. So where’s the gain? Far from falling, debt burdens ...

The Weekly Bottom Line : 11/02/2012 HIGHLIGHTS OF THE WEEK United States Negotiations between Greece and its international lenders kept financial markets switching the risk button on and off throughout the week. A parliament vote on further austerity measures has been scheduled for Sunday; if it fails, Greece could default in March. In the U.S. initial jobless claims declined, bringing total claims down to levels not seen since September 2008. A $25 billion deal between the White House and five leading commercial lenders was announced on Thursday. It will help underwater homeowners to refinance their loans. It is a positive step, but arguably one with limited macroeconomic impact. Canada Canada's trade surplus more than doubled in December, on the back of a sharp 4.9% ...

Investors known for snapping up distressed debt on the cheap have identified Portugal as their next target but some of these so-called "vultures" say they will wait until a Greek bond swap deal is completed before striking. Many traditional bond investors, such as funds that follow ratings benchmarks, were forced to sell Portuguese debt after it was downgraded to "junk" by Standard & Poor's last month. Others, including some banks, simply fled the volatile market fearing a debt restructuring or under pressure from their shareholders to cut losses on their Portuguese debt holdings, sending the country's bond yields to euro-era highs. That left the door open to a specialized type of investors, often called "vultures" or "vampires," who look to buy bonds when prices hit bottom, hoping to ...

(Reuters) - Hedge funds are taking on the powerful International Monetary Fund over its plan to slash Greece's towering debt burden as time runs out on the talks that could sway the future of Europe's single currency. The funds have built up such a powerful positions in Greek bonds that they could derail Europe's tactic of getting banks and other bondholders to share the burden of reducing the country's debt on a voluntary basis. Bondholders need to give up some 100 billion euros ($130 billion) of their investment in the planned bond swap, drawn up in October, but many hedge funds plan to stay out of it. They either prefer letting the country go under, which would trigger the credit insurance they have bought, or hope to get paid out in full if enough others sign up. That puts them in ...

(Reuters) - Oil prices fell in choppy trade on Monday as concerns about the euro zone's economy outweighed worries about Iran's threats to shut the key Strait of Hormuz oil-shipping route and Tehran's ongoing dispute with the West over the Iranian nuclear program. A drop in German industrial output in November served as a reminder that even the European Union's economic powerhouse faces challenges, though Germany's exports rose in the same month. Euro zone retail sales fell and economic sentiment soured at the end of 2011, adding to the caution about prospects for the region's economy along with a seventh consecutive rise in unemployment. Germany and France warned Greece it will get no more bailout funds until it agrees with creditor banks on a bond swap. German Chancellor Angela Merkel ...

As we approach New Years we'll attempt to address the major issues for 2012. Economic News USD - When will Congress Address the US Deficit and Debt? Could this be the year that Congress finally tackles the difficult issues to reduce spending and lower the national debt? The Congress just recently acted to renew the payroll tax break in a last minute deal, a method that Washington has seemingly perfected. Most likely Congress will kick the can down the road as they are unwilling to take on the big issues of social benefits heading into an election year. If the trend of improving US fundamentals continues then a return to US growth may help to ease the pressure of rising deficits. However, a failure to address the issues could eventually raise the yields on Treasury bonds while reducing ...