Frantic bid to put together emergency summit plan
Doubts rise as Greece downgraded again
Published 14/07/2011 | 05:00
Eurozone leaders are frantically trying to put together a package of proposals for an emergency summit on the euro crisis in the coming days.
Doubts rose over whether the radical changes signalled by finance ministers on Tuesday could be implemented as Greece was hit with another downgrade and borrowing costs for Italy and Spain remained high.
The meeting was to take place tomorrow, but last night sources said that political disagreements had pushed it out until early next week.
Taoiseach Enda Kenny called on his eurozone counterparts to implement the finance ministers' plans, which were welcomed by Michael Noonan as helpful to Ireland.
"There is no point in going to a meeting on Friday unless there will be a decision or set of decisions on the European situation," he said.
It was time for Europe to "grasp the nettle" and set out a comprehensive response to the financial crisis, he added.
Worries grew when German Chancellor Angela Merkel said Greece was funded until September so there was no rush to finalise the details of a second package. "There are no concrete plans for a special summit," a German government spokeswoman said.
Following the downgrading of Ireland to 'junk' status by the ratings agency Moody's, Mr Kenny said the latest revelations about Italy's debt of €1.8 trillion was a cause for concern.
"Moody's problem is not with Ireland. Ireland's problem is with Europe. Moody's has pointed out that Ireland is in a very different set of circumstances from other countries," he said.
Irish government bonds were badly battered after the rate cut. The change in rating means many investment funds were forced to sell Irish bonds because when they raised their own cash, they committed to only hold highly rated investments.
To borrow in the normal markets yesterday, Ireland would have had to pay investors a yield of 19.29pc -- up a full per cent since Tuesday's close. The yield to borrow for 10 years is 13.7pc -- almost double the 7pc level that forced the State to seek a bailout last November.
The European Commission condemned Moody's for the downgrade, calling it "incomprehensible". The commission said its data showed Ireland would return to growth this year and that Ireland had shown determined implementation of the bailout programme.
Meanwhile, Italy's treasury officials and key bankers were in crisis mode. Italy hopes to borrow between €3bn and €5bn today on the international money markets by auctioning four sets of bonds. A failed auction would induce panic across the eurozone and beyond.
Reports suggested that Italy's treasury officials were drumming up every available scrap of support for the bond sale, including lobbying Italy's own massive bank sector and large global debt buyers such as China and Japan.
If it fails, there will be real and immediate doubts over the country's ability to meet €900bn of bond repayments over the next four years. That will drive up bond yields further for almost all national and corporate borrowers.
The Italian efforts were boosted when ratings agency Fitch affirmed Italy's AA credit rating.
The 10-year Italian bond yield fell to 5.562pc yesterday. (Additional reporting Reuters)
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