France, Germany Seek to Help Greece while Spain Discusses New Bailout Package
German Chancellor Angela Merkel and French President François Hollande met today to discuss how to prevent a deepening of the Greek crisis. While many in Germany and the Eurozone are calling for Greece’s bailout conditions to be strictly enforced, Merkel and Hollande are looking for ways to help the country get over its liquidity issues with measures that could include another debt write-down. The so-called Troika (European Central Bank, European Union, and International Monetary Fund) is due to release a report next month on Greece’s progress. Yesterday, Luxembourg Prime Minister and President of the Eurogroup (the group of finance ministers of the Eurozone) Jean-Claude Juncker said this could be the debt-saddled nation’s last chance before expulsion from the monetary union. Meanwhile, Reuters reported Spain, whose economy is shrinking under heavy austerity measures, is negotiating conditions for another bailout package with the members of the euro bloc. Contrary to the first €100 billion package that helped recapitalize Spain’s banks, this new deal would aim at lowering the country’s borrowing costs. The European emergency rescue fund would buy Spanish bonds directly from the government, while the ECB would buy them back from investors, after the auctions. This would result in lower yields (or perceived risk for creditors) and improve Spain’s ability to borrow. Spanish Prime Minister Mariano Rajoy hasn’t yet made a decision on whether to request aid.
U.S. Jobless Claims Rise, Consumer Confidence Dips, Incomes Fall
Jobless claims in the U.S. rose to a one-month high, with 4,000 new people asking for unemployment benefits last week to a total of 372,000, according to the Labor Department. This is another sign that the country’s economy is sluggish. Separately a Bloomberg index shows consumer confidence dropped for a sixth straight month, the longest decline since 2008, when the country was in the midst of a recession. A third report indicated that American incomes dropped more since the country’s economy began recovering in June 2009 than they did during the recession. Median household income fell 4.6 percent since the end of the recession, compared with a 2.6 decrease during the 18 months during which the economy shrank. Overall, Americans are earning 7.2 percent less than they did at the end of 2007. The news come after minutes from the last U.S. Federal Reserve meeting showed many policymakers said more stimulus measures would be needed soon if the economy didn’t improve. Even still, investors hopes for an intervention were dashed today by St. Louis Fed President James Bullard, who said the economy appeared to be picking up.
World Great Powers at Odds on Syria While War Spills Onto Lebanon
Three days after U.S. President Barack Obama said the Syrian government would face “enormous consequences” should it decide to turn chemical and biological weapons against the rebels, U.K. Prime Minister David Cameron echoed the warning, stating that such a move would be “completely unacceptable,” and would “force them to revisit their approach so far.” Cameron also talked to German Chancellor Angela Merkel and French President François Hollande about ways to help Syrian President Bashar al-Assad’s opponents, and to decide on a plan to facilitate the transition “after the inevitable fall of Assad.” China, through its official press agency Xinhua, accused “western powers” of “digging deep for excuses to intervene militarily in another conflict-torn Middle East country,” following the Russian stance. Meanwhile the Syrian conflict is stirring violence in Lebanon, where sectarian strife between Sunnis and Alawites in Tripoli resumed after less than a day of ceasefire. Lebanese Alawites, a Muslim sect that originitated in Syria and supports Assad, are a minority in Sunni-dominated Lebanon. Sunni fighters in Tripoli have sided with Syrian rebels.
China’s Goods Pile Up as Economy Slows and Demand Drops
China, which has been driving global growth since the global financial collapse started in 2008, is facing a new challenge: as its economy slows, unsold goods pile up more and more quickly. Surveys published today showed finished goods inventories grew faster in August than they have since 2004, when these reports began. As a result, manufacturers have looked to export more, to no avail, since both imports and exports have slowed due in part to the crisis in Europe. The repercussions could be dire: if demand in China, one of Europe’s principal trading partners, drops, it could contribute to deepening the crisis in the European Union, which is already on the verge of a second recession. Chinese manufacturing fell to a nine-month low, reports showed. All of this betrays the toughness of the economic slowdown, a fact the Chinese government has been trying to obscure in order to instill confidence internally and abroad.