Echoes of the crisis
Tuesday 10 April 2012
Rome to sharply lower GDP prediction for 2012:The Italian government will sharply decrease its GDP prediction for this year. However, it is not set to modify its public deficit predictions, the economic daily
Il Sole 24 Ore wrote, on 10 April. Although the latest official government prediction from December 2011 talks of a GDP contraction of 0.4% in 2012, the government is set to predict a contraction of between 1.3% and 1.5%, according to
Il Sole. This new prediction, “which is still susceptible to vary,” will be “transmitted to Brussels shortly,” adds the newspaper. The EU had already planned a 1.3% decrease in the Italian GDP this year, while the IMF is still predicting a 2.2% contraction. With regard to public deficit, however, Rome is still intending to arrive at a balanced budget in 2013, and to reach a 1.3% deficit this year, according to
Portuguese banks borrow record amount from ECB:Banks in Portugal borrowed a record amount from the European Central Bank (ECB) in March, according to official data published on 10 April by the Bank of Portugal. This figure is a new high since the historic record of €49.1 billion came in August 2010. In late February, the banks’ ECB borrowings reached €47.5 billion. Other figures, meanwhile, showed that corporate bad debt hit €8.28 billion in February, while sour loans to households totalled €4.87 billion. These are record highs since the Bank of Portugal started collecting these data in 1997. Portuguese banks have not had access to the interbank market since the eurozone debt crisis, and have therefore become very dependent on ECB financing. On 4 April, the ECB maintained its key interest rate at 1% and turned down the idea of withdrawing its anti-crisis measures. As well as a historically low interest rate, these measures include a quasi-unconditional support to eurozone banks – the latest example of which is the loan of €1,000 billion over three years to some 800 establishments during the two operations in December and February.
IIF wants less austerity and more common resources: The Institute of International Finance (IIF) called, on 9 April, for less budget austerity and more common resources in order to overcome the economic crisis in the eurozone. “The emphasis so far on fiscal austerity, while to a degree necessary for the countries facing market funding difficulties, is excessive when carried out across the board,” Charles H. Dallara, the IIF’s managing director, wrote in the institute’s quarterly letter of recommendations to the member states of the IMF.
This austerity “has already contributed to a steep contraction in domestic demand in the euro area as a whole. It is important to move beyond just fiscal discipline,” says the IIF, “and embark on a more gradual and differentiated fiscal consolidation by the weak member countries, surplus countries such as Germany and the other countries with fiscal space, so as to avoid the risk of an austerity overload”.
Spanish government wants to redefine regions’ spending:Budget Minister Cristobal Montoro said, on 9 April, that the Spanish government wants to redefine regions’ spending, namely in terms of education and health care, so as to reduce the public deficit. Faced with a new crisis of confidence from the markets and with the concerns of its neighbours, Madrid is issuing many statements of reassurance that Spain will fulfil its objective of reducing the public deficit. This objective was raised from 5.3% of GDP for 2012 from 4.4% previously planned. “We need a more reliable country to face our creditors and our European partners,” said the minister in an interview with the daily
El Mundo. “We will define, along with the autonomous communities, which public services they should provide, in terms of health, education and social services,” he said. The regions must “relinquish a large part of what they are currently spending,” Montoro concluded.