The States of the EU to the Bank rescue of test failures: draft document

John O'Donnell

BRUSSELS | Friday, July 8, 2011 5 pm EDT

Brussels (Reuters) - European countries will support banks fail stress tests if these lenders can raise capital from investors in the six months, according to a draft EU document seen by Reuters.

Paper, in course of preparation for approval on Tuesday, European Finance Ministers is a reversal of promises of the g-20 politicians in the wake of the financial crisis that taxpayers would never have to bail out banks again.

The European banking authority is due to announce next week the results of its latest high stress of lenders in the region - 91 tests in all - in a further attempt to reassure investors that European banks have rebuilt against future shocks.

This last series of tests is touted as being more stringent than the previous attempts which few banks did not, and the representatives of Finance Ministers to develop plans for how to deal with the fallout.

Lenders who almost fail tests will be put on a list of critical monitoring in the case where they deteriorate further, said the document. These banks will be given until the end of September to repair their finances and will then have a period of three months to implement.

News that European governments seem serious to support banks that fail to maintain own base of 5 per cent of several raised theoretical market shocks future Bund and UK gilts.

"Essentially that puts even more pressure on the periphery (the eurozone countries) to come up with measures, not only to consolidate their budgets, but also to support their banking sectors, which they can ill - allow," said Marc Ostwald, strategist at the Monument of the securities.

"It is basically a load to the back of the present security." "It is a market in the deadly fear of something to do with the zone euro and all involving the banking sector under stress more," said Ostwald.

The performance of Italian/German 10-year spread era hit of euro fresh senior in fears that already fiscally stretched country as the Italy may have to dig into their pockets to bail out banks that fail the test as well.

FIRST PRIVATE SECTOR

According to the document, first capital-raising plans should be based on "" private, including... not distributed... raising additional common shares or measures of the hybrid instruments of high-quality private investors, asset sales, mergers.""

But if the search for private capital leads nowhere, then Governments should be prepared to intervene.

Officials, however, make provision for "extreme case" if efforts to restore a bank fail and threatens the stability of the wider, recommending a "orderly restructuring process and resolution".

The number of banks declared by the ABE were either not encourage investors that Europe is now coming clean with its banking problems, or if the tests are deemed too lax once again, they will have a negative impact credibility already scarred of the EU.

Previous stress tests are widely dismissed as too lax - all Irish banks adopted last year to test a few months before the European Union and the Monetary Fund International had for them and the country overall.

SEPTEMBER DATE LIMIT

In the document, dated July 7, officials wrote that banks that Miss the pass mark of capital of 5% will be given until the end of September, more than later to submit a recapitalisation plan, with a period of three months to implement the "private sector"measures.

"If the banks concerned are unable to implement a credible investment plan within the specified time stands ready to take the necessary measures to maintain financial stability,"officials wrote in the document seen by Reuters.""

The new controls will measure up to how the capital base that depend on the banks to absorb losses such as outstanding loans holds when exposed to an economic dip or fall in the price of the property.

They also assess the impact on banks should the Government obligations that they have issued by States such as the Greece, lose value.

Banks which lends itself poorly to the 5% threshold will be also be kidnapped special attention.

"Banks where (basic level 1) ratio is above, but close to the reference of 5% in the scenario of stress will be subject to prudential supervision strengthened to ensure that it there are no unexpected deterioration in their capital position".

(Additional reporting by Ana Nicolaci da Costa and Huw Jones in London; editing by Sophie Walker)

Greek Europe's choice: default or rescue - CNN

Greeks have protested in Athens, June 29, when the Parliament approved austerity measures more for more bailout money.

NEW YORK (CNNMoney)--if the Greece finally was his rescue money. But when this temporary financial crutch in the following year, the troubled nation will once more the very real possibility of the default value.

The Greece does not have enough money to pay its debts, and rolling on current debt may not be an option, according to the reports of the three major rating agencies.

McGraw-Hill (MHP, Fortune 500) Standard & Poor, of Moody (MCO) investors Service and Fitch Ratings all defined by default in a manner which includes transfers in certain situations.

Standard & Poor reported Monday that the two funding options presented by the French banking system, which involves the restructuring of the debt by the private sector, would "be likely a default under our criteria."

One of the Chief of the rating agencies concerns is that new supporters of Greek debt might eventually be shoddier ones they are replacing.

Fitch noted that an exchange of debt could result by default if the titles are "worse than the original contract of the terms of the existing debt and where the sovereign is subject to the financial distress."

In addition, the French plan would force banks to take on the impairment because of the difficult financial situation of the Greece, according to Moody.

Desmond Lachlan, resident fellow at the American Enterprise Institute for research of Police public and former policy advisor to the Monetary Fund International, said the rating agencies were "operation very technically" in their analysis of the Greek debt.

Lachlan said he hoped that the European Central Bank to accept debt instruments Greek as collateral, despite their low ratings.

"[The ECB bankers] seem to be indicating that they will accept Greek paper, even if it is evaluated in the default value," he said. "If the ECB did not say that it would play in the Greece."

The Greece debt is set to mature from July 2011 to June 2014. Spectrum default is imminent, but immediately, even if a part of the debt is due this month.

The Greece has enough money to continue the operation, at least in the short term. The Member countries of the euro and the Monetary Fund International has recently approved the last tranche of $ 17 billion in the $156 rescue plan launched last year.

But even with the rescue plan, Greece will eventually run out of money. Fitch said in a recent note, that "deficits of budget financing" would take place in 2012, suggesting that the rescue plan is sufficient to obtain the Greece through the rest of 2011.

The last tranche of the bailout of funding has been approved on the condition that the Greece make of new belt-tightening, in addition to those imposed austerity measures last year.

The original raft of austerity measures that have been applied in 2010 has raised the retirement age to 65 for as low as 61 and tempered eligibility for disability benefits. Also, the taxes have been added to a multitude of products, including fuel, alcohol and cigarettes.

The new measures of austerity, which include reductions in remuneration for public workers, led thousands of demonstrators in the crowd in the streets of Athens, where they clashed violently with riot police.

Many demonstrators were blaming their economic woes rich tax dodgers.

Tax dodging has been generalized in Greece, the national budget, undermine and curb fraud is a major focus of new austerity measures.

Workers, the wildlife rescue team join the cleaning of accidental oil spills in the Montana - CNN International

Leakage of crude oil in RiverHigh of Yellowstone waters and a fast current helped to rupture of a spillExxon of oil, said about 750 to 1,000 barrels of oil spilled in the spill YellowstoneThe occurred when a pipeline ruptured near BillingsCleanup efforts were hampered by flooding

(CNN) - dozens more workers Monday joined the effort to clean up a spill of oil spilled hundreds of barrels of crude oil in the Yellowstone River in Montana over the weekend, ExxonMobil said.

ExxonMobil said between (32 to 42 000 gallons) of 750 to 1,000 barrels of oil escaped late Friday when a pipeline broke under the River near Billings. Some of the oil has washed ashore or trained tailing "Milky Brown" in the vortices, Yellowstone County Sheriff Mike said Linder River.

High water and a fast current helped to break up the spill, said local officials.

But clean-up effort has been hampered by flooding that made more difficult to detect and clean up the oil, said Linder and Duane Winslow, County emergency services Director. The Yellowstone was running above flood on the weekend scene, radical brush and logs dans River and had a 5 - to 7 - mph current Sunday.

"It is too dangerous to do anything on the River, to extinguish any boats or anything, said Winslow." So people will work from the shores rather that out in the middle of the River. »

About 80 people are expected Monday to join the 120 working to contain the oil spill, ExxonMobil said in a statement released late Sunday on its Web site. Clean-up crews use absorbent to absorb oil boom to isolate oil which brought together adjacent to the river and vacuum trucks and tankers to pick up and dispose of the oil, he said.

The spill was discovered late Friday night near Laurel, West of Billings and approximately 100 miles from Yellowstone National Park. The pipeline feeds an ExxonMobil Billings refinery, and the company said it had cut the line a few minutes.

"We will remain with the clean-up until it is complete, and we sincerely apologize to the people of Montana for any inconvenience that the incident is the creation," Gary Pruessing, President of ExxonMobil's pipeline subsidiary, said in a release issued Sunday.

There is no case of wildlife in danger by the spill, Tim Thennis, who heads the response for the Agency's emergency disaster in Montana, said Sunday.

Worker rescue with the International Bird Rescue also had to join the efforts of cleaning Monday, said ExxonMobil.

Montana Audubon Conservation Education and Yellowstone Valley Audubon Center have offered to provide facilities and wildlife recovery services, he said.

The spill has forced the evacuation more of 200 nearby residents after it was discovered Friday night, but they were allowed to return Saturday morning. Laurel Lloyd Webber farmer said the spill left a smell "quite heavy" oil suspended over the area Friday night as he and his wife left their home.

"We went to the Perkins Billings drinking coffee for two or three hours, then returned," said Webber, who lives on a kilometre from the River.

ExxonMobil said that received more than 70 calls to its line of Community claims. ExxonMobil does not say if these calls were of the individual claims or that the claims were made.

The Yellowstone is one of the tributaries of the Missouri River, where it joins the neighbour of North Dakota. Thennis said State agencies, the Federal Environmental Protection Agency and ExxonMobil are working together to clean up the spill. CNN Matt Smith, Joe Sutton and Chelsea j. Carter contributed to this report.

Ministers of the eurozone Greek return assistance payment, Shift Focus to the Second rescue plan - Bloomberg

Jean-Claude Juncker, head of the Eurogroup and the Luxembourg, Prime Minister. Photographer: Jock Fistick/Bloomberg.

The euro area has approved its part of an assistance payment of 12 billion dollars-euro ($17.4 billion) for the Greece and is committed to complete the work in the coming weeks a second rescue plan for the nation to short of cash to prevent a default.

Ministers of finance agreed to pay 8.7 billion euros of loans within the framework of bailing out of 110 billion - euros last year before 15 July, rewarding the Greek Prime Minister George Papandreou to push a plan of additional austerity by Parliament. The Fund International Monetary is due to provide the rest of the tranche assistance from July, the fifth under the package of 2010.

Now, the spotlight turned to a second rescue plan to banks and insurers plan to contribute German requests for relief. Investors and Governments in the euro area will provide 70% of the new aid which can total as much as 85 billion euros, with the IMF in providing the rest, Thomas Wieser, an official of the Austrian Finance Ministry, said on June 30.

"The Greek authorities provided a strong commitment to adhere to the agreed budgetary adjustment path," Finance leaders eurozone 17 said in a statement by email yesterday after a conference call that was joined by the acting head of the IMF, John Lipsky and Central Bank President, Jean-Claude Trichet. "The precise terms and the extent of the participation of the private sector and the additional funds from official sources will be determined in the coming weeks."

The obligations of the nations most indebted of Europe has rebounded this happened a week after the victory of Papandreou in Parliament facilitated concerns about imminent Greek default. Stocks and the euro has increased. The obligations of the Greece advanced for a second week and Italian titles in 10 years for the first week in three, while the Spanish performance of 10 years has decreased by more than five months. The Greek performance of two years has fallen more than 150 basis points.

The euro has increased by 2.4% against the dollar, its first weekly gain in four weeks and European Stoxx 600 Index snap a string of eight consecutive weeks of losses. The MSCI World Index posted its biggest weekly advance in nearly two years.

Europe is seeking to draw a line under a debt crisis that the Greece stung more than a year and threatens monetary union for 12 years. The Ireland and the Portugal requested emergency assistance for a total of 146 billion euros after the initial rescue of the Greece in May 2010, and the investors concerned about the vulnerability of some larger euro, including the Spain nations.

The political climate in Europe has complicated the task, with a group led by German of rich countries reluctant to offer more support and opposition to the austerity of Mount Greece. Papandreou stirred his Cabinet last month to repel a rebellion by his Socialist Party and fact face demonstrations and strikes this Greek legislators last week approved a package of 78 billion euro of increases in taxes and asset sales.

The Finance Minister Greek Evangelos Venizelos said the decision by its counterparts in the euro area to release the fifth loan payment strengthens the international credibility of the country.

"What is now critical is the implementation rapid and effective decisions of Parliament," Venizelos said in a statement by email of the Ministry of finance, based in Athens.

The IMF noted a readiness to approve its share of 3.3 billion euro in the next instalment of aid for the Greece. "We look forward to continuing to work with the Greek authorities and the European partners in support of the economic program that will help to restore the financial viability," the Washington - based fund said in a news release by e-mail.

The European Union and the IMF pushed Papandreou in action with a June report that said changes of Greek economic policy is linked came at a "standstill." The lack of progress contributed to derailing the country plan to return to the bond markets next year and led work on a second package of aid.

In may, the EU has warned that the Greece had shifted its course to reduce its budget deficit to 7.4 per cent of the gross domestic product this year from 10.5 per cent of GDP in 2010, saying: failure of this year would be 9.5%. The debt of the countries will be increased to 158% of GDP this year from 143% in 2010, according to EU forecasts of.

Papandreou to the Parliament legislative victory facilitated concerns a Greek default, European Governments reported progress in negotiations with investors in their contribution to a new package of aid through a reversal of the Greek debt.

The heads of finance in the euro area, "Consultations with the creditors of the Greece are in progress to define the modalities of voluntary participation from the private sector to achieve a substantial reduction in year funding needs the Greece, while avoiding the selective default," said the statement. The Eurogroup so-called, directed by Jean-Claude Juncker of the Luxembourg, is due at the next meeting on 11 July in Brussels.

The German and French banks, the largest Greek debt holders, intensified its discussions on a reversal that officials say should be as much as 30 billion euros. Deutsche Bank AG CEO Josef Ackermann predicted on 29 June that financial companies would contribute to help avoid a "crisis."

Under the French proposal, bond would agree with more than 70% of their debt coming due in mid-2014 in new Greek bonds for 30 years, with the main on new debt guaranteed through the Greece invest in bonds coupon of similar maturity. As a second option, investors would drive more than 90% of their debt in five years of the new obligations without warranty.

Member of the Board of Directors of ECB Christian Noyer, said the French proposal is "very well" and can make more credible Greece rescue program. It is in the interest of all financial institutions who could participate in a plan to support Greek, Christian Noyer told newspaper based in Athens Proto Thema in an interview to be published today.

To contact the reporters on this story: Jonathan Stearns in Brussels at the jstearns2@bloomberg.net; James g. Neuger in Brussels at the jneuger@bloomberg.net.

To contact the editor responsible for this story: James Hertling at the jhertling@bloomberg.net

Zone euro set to discuss the capacity of Fund to rescue my (Reuters)

Brussels (Reuters) - Ministers of Finance of zone Euro are likely to consider next week, the possibility of increasing the effective ability of loan from the Fund of assistance of eurozone's efforts to calm markets, said of the sources of the eurozone sovereign debt.

Opportunity to strengthen the real capacity of the European financial Stablity (CEES) installation to a full 440 billion euros, about $ 250 billion could be part of

movement to strengthen the confidence of markets in the euro area.

"I think that this increase in the capacity of the CEES is something that will certainly be on the table next week," said euro zone source of knowledge of the preparation of the meeting of Finance Ministers eurozone Monday.

"It's essentially the whole 440 billion operations", said the source. "I think it will be given at least seriously next week."

A second source of eurozone has confirmed that this possibility had was discussed at a preparatory meeting for the meeting of the Ministers, although none of the decisions taken and none have been planned until next week.

It does y no decision on anything specific yet. "It's matter of Ministers", said the second source.

Economists have indicated that a more substantial increase in funds of rescue, 1-2 trillion of the current EUR 750 billion, would be necessary to appease investors.

Markets fear that the eurozone may not having enough cash loans in support of countries such as the Spain or the Belgium if the Portugal follows Ireland to apply for financial assistance and others are obliged to make too.

But a more substantial increase in funds available for the CEES seems unlikely now.

"Double or triple EEHC will not be seriously taken into consideration at this stage - for a number of Member States, the limit is the 440 billion which was agreed in May and it would be a fundamental step in addition to discuss something," said the source.

Euro area Governments agreed in May to guarantee the issuance of the CEES, which raises money to help Governments frozen in the market, up to 440 billion euros.

To secure a triple a rating of bonds issued by euro area Governments that are not frozen special purpose vehicle to guarantee bonds issued by the CEES in a proportion of 120 percent of their share in the capital of the European Central Bank.

"We talk about more or less double guarantees to obtain the full 440 billion, it would be enough perhaps less increase, but we do not err error on the small side," the source said.

Sources of the zone euro said more adjustments to EEHC might include lowering the margin of penalty charged the CEES loans to countries frozen out of the current 300 basis points and lowering cash buffer.

Ireland was the first country to apply for money from the CEES and his experiences with the program could form the basis of a review of the mechanism.

"We now have the first experience of the GED with the Ireland... also, it is possible that a number of things may be adjusted at the same time,"says the source."

"It might be not only the effective ability but also margin reserves of cash, etc. - it could be an adjustment of the CEES after the first experiment," said the source.

A third source said that discussions of the euro area Finance Ministers Monday would be largely determined by the result of the auction the eurozone bond this week, especially of the Wednesday Portugal.

Market players are to be expected that rising market financing costs will be force Portugal to apply for the euro area and the Monetary Fund International helps soon.

"In the case of the Portugal it much depends on how it goes to the auction of the binding of tomorrow; "The Portugal is a concern for us, but we'll see how it goes," said the third source of eurozone.

"This will be a question for discussion Monday - what to do - but it will depend on how the situation develops on a per day basis the source said."

The source said that no there was so far no talks on a Portuguese rescue plan at least no way "structured."

(Reporting by Jan Strupczewski.) (Editing by Ruth Pitchford)

Portugal, refusing rescue plan faces binding key test (AP)

Lisbon, Portugal - Portugal is inflexible, there no need international rescue plan to fix its problems of debt, but he now faces an auction of bond on Wednesday that could reveal the price to go to the same impetus to financial crisis in Europe.

Portugal is one of the smaller members and frailest 17-nation euro zone after the Greece and Ireland, which last year had massive subsidies to their partners of the European Union and the Monetary Fund International.

Investors have identified the countries debt as the next potential crisis victim and pushed its borrowing costs at sustainable levels barely requiring premiums higher for the loan of money.

Market tensions have eased slightly after Japan said he would help to finance a portion of Europe, rescue efforts that echo its commitment by China, but the situation remains dire.

Portuguese Prime Minister José Socrates sought to calm the nerves frayed Tuesday with his Government, which has introduced a package of austerity of pay cuts and tax hikes, made progress in reducing its budgetary deficit. Preliminary data indicate that deficit than last year would be less than the objective of the Government of 7.3%.

"The Government is doing its job and do", Socrates said at a press conference. "I wish to emphasize once again that...". Portugal seeks no financial assistance for the simple reason that there no need for it. »

But reports say the Germany and France, two major financial Europe grow in Lisbon to accept assistance to verify the debt crisis spreading to improperly further major countries that would be much more expensive to save. Portugal, such as the Greece and the Ireland represents only about 2% of GDP in the euro area.

Analysts estimate Portugal would require a rescue plan for euro50 billion to euro100 billion ($ 65 $ 130 billion). A rescue for the Spain operation is several times larger.

Finance Minister Fernando Teixeira dos Santos vented frustration with a lack of help from other European nations to keep the Portugal to take financial assistance. Repositioned come with strings attached - more painful austerity - which erode sovereign capacity countries to control its budget policy.

"We are doing our job." Obviously, Europe does not work to defend the stability of the euro, "he told radio TSF." It was not specified.

In the euro area, the European Central Bank has endorsed the main task of the stabilization of markets by quietly buying bonds more indebted countries of Europe, such as Portugal, Ireland and Greece, on the capital markets. Bond purchase supports their prices and reduces the performance of obligations.

But more help is from outside the region.

Japan is committed to fund approximately one fifth of the next European Rescue Fund bond issue which is estimated to about 5 billion ($6.5 billion).

China had promised earlier help Portugal, like the Greece and the Spain, he supported by buying their debt. While details have not been released, reports suggest China is ready to invest at least euro4 billion.

Analysts say that Asian countries are probably interested in yields higher in Europe as well as stabilization of global markets between partners commercial key. China, which has long vilified by the United States and Europe to keep its low currency to boost exports, can be the search for political goodwill.

The extent of the problems of the Portugal market will become more clear on Wednesday, when the Government auctioning off the coast of bonds of 3 and 9 years. Request of poor or high painful at the auction interest rates would further strain on the financial difficulties of the continent.

Analysts believe Portugal raise money, but at a heavy price.

"They can exploit the market... but in terms of a more average perspective and in light of what it means for the country's debt Outlook and that a greater amount of money is required to service this debt... This isn't a real reason for comfort," said Michael Leister, an analyst with fixed income to WestLB commercial bank in Düsseldorf, Germany. ""

The Portuguese bond yields of 10 years, a telling test of the investor sentiment has recently reached a record of over 7% euro-ère compared to about 3% for the eurozone powerhouse Germany. This level of interest on loans is not far rates that finally forced the Greece and Ireland to concede defeat after months of rejecting a rescue.

New data deficit and the promise of the Japan in support of European debt Portugal 10 year bond yield has contributed assisted refuse 6.87%.

Among other heavily indebted countries, Italy also saw his ascent of yields, but has no problem of selling euro7 billion in obligations of 12 months offered Tuesday.

More worrying are the Belgium, the level of debt of 98.6% of GDP in 2010 would be the third most high EU behind the Spain and the Italy and the Greece, which is nearly two years of recession. Madrid is organizing an auction of bond Thursday.

The Greece raised euro1.95 billion in the auction of Treasury bonds Tuesday, easing concerns a day after his success in bond yields a record.

Socrates, Portuguese Prime Minister, said his deficit cuts are among the sharpest in the eurozone 17-nation and that the Government could bring down the deficit to 4.6% this year. 9.3% Portugal 2009 deficit was the fourth most high in the euro area.

However, much of the reduction of the deficit last year was attributable to tax increases and one-off factors while expenditure continued to grow, albeit at a slower pace.

Prospects are not brilliant. In a report, the Portugal Bank said Tuesday that he expected the economy sank into recession, the next year by austerity measures. Its forecast of a 1.3% contraction are roughly analysts expectations.

___

Pan Pylas London, Menelaos Hadjicostis in Cyprus and Derek Gatopoulos Athens has contributed to this story.