Category: EMU

The Future of the Euro

On the afternoon that marks the beginning of the end of the Berlusconi era in Italy,  Gideon Rachman’s piece in today’s FT seems no more than an acknowledgement of the realities now facing us.

More on EFSF’s Ireland Bond

I got some flak the other day for this post on the EFSF’s fundraising efforts for Ireland because some people figured there was no problem. At this point, though, there does seem to be an issue. See here and here.

Thoughts on a Greek Referendum

I have posted some thoughts on the potential Greek referendum over at the IIEA’s blog.

Greek Referendum

Papandreou says

“We have faith in our citizens, we believe in their judgment and therefore in their decision,” Mr Papandreou said after rejecting a call for early elections by some socialist politicians. “All the country’s political forces should support the [bail-out] agreement. The citizens will do the same once they are fully informed.”

Does he believe this? What are the implications for the euro?

EFSF Scales Back Irish Bond Issue

This is hardly confidence-inspiring news. EFSF is supposed to save the Eurozone and offer Ireland cheap and long-term funding. What if the markets decide not to play ball and decline to offer the facility sufficient funding at low rates or long maturities?

The eurozone rescue fund has scaled back a planned bond issue designed to finance the bail-out of Ireland amid uncertainty over the level of demand.

The offering will provide a key test of investor sentiment after the announcement last week of new plans to tackle the eurozone debt crisis.

The bond from the European Financial Stability Facility will only target €3bn, instead of €5bn, and will be in 10-year bonds rather than a 15-year maturity because of worries over demand. A 10-year bond is more likely to attract interest from Asian central banks than a longer maturity …

Already delayed from last week, EFSF officials decided to price this week because market conditions could deteriorate if they held off any longer.

The bond is expected to price at yields of about 3.30 per cent, and about 130 basis points over Germany, the European market benchmark. This is a big mark-up since the middle of September when existing 10-year EFSF bonds were trading around 2.60 per cent and only 70bp over Germany.

Not good.

Update: Eoin points us to an Oct 13 statement indicating they intended a €3 billion issue. Thanks Eoin. It appears the FT over-egged this one. They’re probably right about the delay, the reduced maturity and the higher yield