Obama blames EU for slow jobs growth, asks Europe to do more, Merkel says no.
With Europe’s debt crisis cited last week for canceled IPO’s, weaker-than-expected Chinese manufacturing figures and a rise in the US jobless rate, Ms. Merkel rejected joint debt issuance in the 17-nation EuroArea as a solution, saying “under no circumstances” would she agree to Germany-backed Euro Bonds.
Now, some “come along and ask for Euro bonds, saying all we need are equal interest rates and everything will turn out all right,” Ms. Merkel said in a speech to members of her Christian Democratic Union in Berlin Saturday. Instead, what is needed is an economic overhaul to tackle the lack of competitiveness in Europe, she said.
Ms. Merkel, the head of Europe’s biggest economy, and the largest contributor to bailouts for Greece, Portugal and Ireland, is the pivotal player in efforts to resolve the crisis now in its 3rd yr.
As Spain struggles to avoid becoming the next country to call for a rescue and the Euro at near a 2-yr low against the USD, Obama is attempting to pressure the European Central Bank, France and Italy to do more to halt the spread of contagion.
Mr. Obama, speaking to Chicago donors on 1 June said that a report showing the slowest month of US employment growth in a year was in large part “attributable to Europe and the cloud that’s coming over from the Atlantic.” The “whole world economy has been weakened by it,” he said.
“Europe is having a significant crisis in part because they have not taken as many of the decisive steps as were needed to deal with the challenge,” he said at a separate event in Minneapolis.
The US President’s point man for the European crisis, Lael Brainard, Treasury undersecretary for international affairs, ended a 3-day tour of Europe’s crisis capitals the same day as work continued on erecting a financial firewall to stem contagion.
Mr. Brainard held closed-door meetings with government officials in Athens, Madrid, Paris, Frankfurt and Berlin in a week when investors flocked to the perceived safety of German and US bonds.
The Euro fell against the USD and dropped to an 11-yr low against the Yen as uncertainty over the outcome of Greek elections on 17 June shifted to take in Spain, where Prime Minister Mariano Rajoy’s government is struggling to shore up banks amid a recession.
Ms. Merkel and Finance Minister Wolfgang Schaeuble are urging Mr. Rajoy to take an international bailout since Spain cannot solve its banking woes alone, German news magazine Der Spiegel reported Saturday.
Steffen Seibert, Merkel’s chief spokesman, declined to comment on the report.
Spain “will emerge from the storm under its own efforts and with the support of our European partners,” Mr. Rajoy said in a speech Saturday in Sitges, near Barcelona, calling on analysts and investors to moderate “irrational” views of Spain’s financial situation. “We are not on the edge of a precipice.”
The European Union is targeting 9 July as the start date for its permanent rescue fund, the 500-B Euro (US$620-B) European Stability Mechanism, an EU official said.
The German chancellor, who was criticized over her crisis fighting policy last week by Italian Prime Minister Mario Monti and ECB President Mario Draghi, took aim at Italy as she cited a “missed opportunity” offered by the Euro’s introduction for Europe to overhaul uncompetitive economies.
The cheaper borrowing that came with the Euro meant “countries like Italy became virtually on a par with Germany in terms of interest rates,” she said.
Now “what we have is a situation that we did not want,” Ms. Merkel said. “The freedom created by this situation was not exploited to improve long-term competitiveness. Instead, it was used to spend too much money in consumption, and too little time in tackling reforms.”
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Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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