IMF Sees Europe Bank Plan as Moody’s Warns
By Rebecca Christie and Chiara Vasarri - Oct 5, 2011 7:19 AM ET
Bloomberg.com
European Union officials are working on plans to boost bank capital to contain the euro-region’s debt crisis, the International Monetary Fund said, as Moody’s Investors Service warned of deteriorating public finances.
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Signals that European politicians may step up efforts to aid banks and push investors to take deeper losses as part of a Greek bailout reflect international pressure to end the debt crisis and domestic opposition to expanding rescues.
Moody’s Investors Service late yesterday followed its three-level downgrade of Italy by warning that euro-area nations rated below the top Aaa level may see their rankings cut.
European banks may need more than 140 billion euros ($186 billion) of capital through a program similar to the U.S. Troubled Asset Relief Program, Morgan Stanley analysts say.
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Dexia Plans
At the same time, officials in France and Belgium are preparing a bailout for Dexia SA. Dexia will pool its troubled assets into a “bad bank” with Belgian and French government guarantees to protect depositors and its municipal-lending business after struggling to fund itself.
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EU spokesmen moved to damp speculation triggered by a Financial Times report late yesterday on progress toward a bank- recapitalization plan.
EU Economic and Monetary Commissioner Olli Rehn “doesn’t speak of a concrete plan in hand,” his spokesman, Amadeu Altafaj, said today in Brussels. “He speaks of an initiative, of discussions in progress and he pleads for a European approach.”
No New Plan
The commissioner “clearly indicated he doesn’t have a new recapitalization plan,” the commission’s chief spokeswoman, Pia Ahrenkilde Hansen, said.
The speculation about efforts to support banks followed a finance ministers’ meeting in Luxembourg in which officials signalled their intent to prod investors to cover more of the cost of bailing out Greece.
“Many euro countries have now realized that the July deal is too advantageous for investors and there’s too little investor burden sharing,” Finland’s Finance Minister Jutta Urpilainen said today in Helsinki. “This was discussed at Monday’s euro group; how can we find a way to increase burden sharing? No solution’s been put forward so far.”
Greek Swap
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When the bailout was announced, banks and other bondholders were expected to contribute about 50 billion euros alongside 109 billion euros in public funds and a proposed 20 billion-euro debt buyback. German Finance Minister Wolfgang Schaeuble told reporters in Luxembourg yesterday that the deal may require “adjustments” depending on whether Greece has met its commitments and other developments.
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Full article: http://www.bloomberg.com/news/2011-10-05/imf-sees-europe-working-on-bank-plan-as-moody-s-predicts-wider-downgrades.html
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