A reminder that all is not well in the euro zone
A reminder that while the euro zone crisis may be in abeyance, it still has the ability to bite.
Portugal will blow 4.4 billion euros of the 6.4 billion euros left from Lisbon’s recently exited international bailout programme shoring up troubled lender Banco Espirito Santo which will be split into “bad” and “good” banks. Junior bondholders and shareholders will be heavily hit.
BES’s tale of woe is so specific that there is no obvious reason to think it will be replicated. But it is a reminder that bank stress tests later this year could throw up other nasties and more immediately the saga leaves Lisbon short of rescue funds should anything else blow up. The bond market is likely to react adversely. The 4.4 billion euros will come in the form of a state loan to a bank resolution fund which the government insists will be paid back.
Jean-Claude Juncker, the new European Commission President, will visit Athens for talks. The point at which Greece will ask its euro zone peers for some form of further debt relief is nearing amid signs of its economy finally pulling out of recession after six years.
EU officials have warned that Greece is slowing down on the reform front after the opposition, anti-bailout Syriza party won the country’s EU election in May.
Prime Minister Antonis Samaras has also promised austerity-weary Greeks gradual some relief on the tax front as Athens expects to post another budget surplus before debt servicing costs this year, but that has not yet won the backing of EU/IMF lenders.
Ukraine government forces have intensified their offensive in east Ukraine since the Malaysian airliner came down. The crunch point will be the battle for the rebel-held city of Donetsk and the huge imponderable: whether Vladimir Putin, now facing a really quite stiff sanctions regime, will choose to intervene more forcefully or back off.
Pro-Russian separatists battled to keep advancing Ukrainian government forces at bay in heavy fighting on the outskirts of Donetsk over the weekend. The army has all but encircled the other main rebel redoubt of Luhansk and is trying to tighten the noose around Donetsk. Russia is conducting new military exercises with more than 100 aircraft in the country’s central and western districts, officials said, a show of strength near the border with Ukraine.
Britain’s David Cameron visits NATO HQ in Brussels a month before he hosts the organisation’s summit in Wales. In a letter to other NATO leaders over the weekend, Cameron said NATO must rethink itsrelationship with Russia because Moscow now views the alliance as an adversary. He called for a robust presence in eastern Europe because of Russia’s “illegal” actions in Ukraine.
An Israeli air strike killed 10 people on Sunday in a U.N.-run school in the southern Gaza Strip. After unusually strong international criticism of Jerusalem – the United States said the incident was disgraceful and U.N. Secretary-General Ban Ki-moon described the attack as a “moral outrage and a criminal act” – Israel said it would unilaterally hold fire in most of the Gaza Strip to facilitate the entry of humanitarian aid and allow some of the hundreds of thousands of Palestinians displaced to go back home. The previous ceasefire last week had barely started before it was broken.
Islamic State fighters seized control of Iraq’s biggest dam, an oilfield and three more towns on Sunday after inflicting their first major defeat on Kurdish forces since sweeping across much of northern Iraq in June. Capture of the electricity-generating Mosul Dam, could give the Sunni militants the ability to flood major Iraqi cities or withhold water from farms, raising the stakes in their bid to topple Nuri al-Maliki’s Shi’ite-led government.
Libya’s government said more than 20 people had been killed in the latest battles between factions seeking to control Tripoli airport, while fighting led to a huge fire at the city’s fuel depot. Rival groups from the towns of Misrata and Zintan have been fighting for nearly three weeks over control of the capital’s airport in the worst violence since the 2011 civil war that ousted Muammar Gaddafi. A steady stream of foreigners have been evacuated and on Sunday a Royal Navy ship took away around 100 British citizens, families and others from Tripoli.
Romania rates are up for review and are expected to be held at a record low 3.5 percent. A growing number of analysts now expect rate cuts by the end of the year. Inflation hit a low of 0.7 percent in June and is highly likely to undercut the central bank’s year-end forecast of 3.3 percent.
Bulgaria’s parliament is set to discuss on final reading the changes aimed to raise the fiscal deficit and allow the interim government to raise new debt and deal with its worst banking crisis since the 1990s.
The U.S.-Africa summit takes place in Washington with around 50 African leaders attending. Apart from the perennials of trade and development, there is much to discuss – Ebola in the west of the continent and violent unrest all over the place.
Also over the weekend, Ghanaian President John Mahama ordered his government to open talks with the IMF on a programme to help stabilise the economy and halt a slide in the cedi currency.