“It’s a serious problem.”
(Article in English)
International Monetary Fund Managing Director Dominique Strauss-Kahn said the euro region will withstand the turmoil caused by Greece’s credit downgrade, a day after finance chiefs voiced concern debt woes are spreading.
“It’s a serious problem,” Strauss-Kahn said in an interview with Bloomberg Television in Hong Kong today, referring to the Greek fiscal situation. “But I don’t think that would lead to the fragmentation of the euro zone.”
Greece’s deteriorating finances prompted Fitch Ratings, Moody’s Investors Service and Standard & Poor’s to cut its sovereign ratings last month, spurring a sell-off in its bonds. The country faces pressure from other European Union governments to tackle the crisis caused by a budget deficit more than four times the EU limit of 3 percent of gross domestic product.
Policy makers gathering in Brussels yesterday called on Greece to take more action to contain the situation. Dutch Finance Chief Wouter Bos said the country’s plan to rein in spending “needs to be more substantial.” Luxembourg’s Jean- Claude Juncker said “we’ll have to see whether they’re enough.”
“The fate of one is the fate of all,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia said at a press conference yesterday after the meeting of EU finance ministers. “This situation in Greece is having effects on other countries.”
Strauss-Kahn earlier reiterated the IMF’s view that China’s yuan is undervalued and should trade more freely. Premier Wen Jiabao has rebuffed calls from U.S. and European officials to allow the currency to be more flexible.
The Chinese government have asked banks to improve their capital adequacy, and simultaneously sets a ceiling on the total credit growth in the country of 7.5 trillion yuan in 2010, around 1.1 billion U.S. dollars, approximately 22 percent lower than in 2009.
“The message that China should tighten credit is the most important news and will weigh on the markets.” says a broker to the Norwegian financial news site TDN Finans.
DnB NOR Markets believes the massive tightening measures in China will put a heavy damper on economic growth in the country in 2011 and projected a GDP growth of 6.5 percent, against 8.5 percent expected this year.
OECD estimates are 9.3 percent for 2011.
Most european stock markets continue to slide Wednesday.
Here’s some European markets afternoon snap shots:
German Stock Marked
DAX Index (Relative Strength Index and On-balance Volume Indicator)
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