Today's Coming Crisis Movie

Friday, July 29, 2011

Greek bail-out was a one-off, says German finance minister Wolfgang Schaeuble

The German finance minister has warned that he will not bail out every troubled eurozone country in a move that rattled confidence in Europe's response to the debt crisis.

n a strongly worded report to German parliamentarians, Wolfgang Schaeuble explained that the €159bn Greek bail-out was a one-off. He said: "In the future such purchases must only take place under very tight conditions, when the European Central Bank establishes that there are extraordinary circumstances in financial markets and dangers to financial stability."

Mr Schaeuble echoed German Chancellor Angela Merkel, who said the union's bail-out fund, the European Financial Stability Facility (EFSF), should not be allowed to engage in "unconditional" buying of bonds from stricken members.

Traders interpreted the letter as a strong signal Germany could not be depended upon for standing by the euro indefinitely. Just a week after European authorities united to rescue Greece, experts fear authorities are already again struggling to contain the region's sovereign debt crisis.

Cyprus threatened to become the fourth eurozone country to need a bail-out after Standard & Poor's downgraded its debt further into junk territory, lowering it to CC from CCC. The rating agency raised concerns that Cyprus' large exposure to Greek bonds - which is among the highest in the eurozone - might hamper its ability to service its own sovereign debt. According to the European Banking Authority, Bank of Cyprus holds €2.4bn in Greek debt and Marfin Popular Bank holds €3.4bn. Yields on Cypriot bonds maturing in 2014 soared to 10.18pc - above the borrowing rates of Ireland and Portugal, which have both been bailed out.

Stock markets across Europe fell. German's Dax was down 1.3pc; the CAC in France was down 1.4pc and Spain's Ibex was down 2pc. In London the FTSE 100 dropped 1.2pc. (more)