Stocks have given back 100 points of Wednesday's misguided gains
The Euro sinks to a new low
Headlines from FT:
Germany Rejects Larger Bailout Fund
The German government has rejected any suggestion of an increase in the size of the €440bn European financial stability facility – the eurozone rescue fund established by European Union finance ministers in May to help debt-laden members of the common currency zone.
“It really is a non-issue for the German government right now,” said Steffen Seibert, the government spokesman. “We have never been approached in any way about this. All conversations are taking place within the framework of the existing facility.”
Berlin’s approach - and that of the European Central Bank - to handling the eurozone crisis has come under strong attack from Peter Bofinger, economics professor at Würzburg university and an independent adviser to the German government. Without a profound change of strategy there was a “major risk of an unraveling of the euro area,” he has said.
A “dangerous” adjustment process is being forced on eurozone countries he told a Financial Times/Credit Suisse conference in Frankfurt. The weakest spot is Greece, which faces rising unemployment and debt levels. As a result, political opposition to euro membership would grow, according to Prof Bofinger. “Sooner or later we will have a discussion in Greece: ‘why not leave the euro?’” A new currency could then be devalued and much of the government’s debt cancelled out. Once Greece had left, others would follow.
IT'S GETTING WORSE, NOT BETTER:
Europe’s proposed “permanent crisis resolution mechanism” is aptly, if rather ironically, named. Trying to resolve a permanent crisis seems to be what the continent’s leaders have been doing all year and will no doubt be doing for some time yet. (One presumes they really mean a permanent mechanism for crisis resolution – the final language may well be different).
Whatever the final shape of the mechanism, designed to allow eurozone countries to default in an orderly manner, Europe seems little closer to resolving its debt crisis. To the financial markets, bail-outs for Greece and now Ireland are clearly insufficient, no more than plasters placed over gushing wounds.
U.S. Munis Sink Still Lower
Investors withdrew another $2.3bn from funds that buy US municipal bonds in the latest week, capping a sell-off that has taken about $5.4bn from the sector, according to Lipper, the fund tracker owned by Thomson Reuters.
The latest outflows from mutual and exchange traded funds for the week ended November 23 follow redemptions of $3.1bn in the previous week, the largest outflow since Lipper began compiling weekly data in 1992. The combined weekly outflows accounted for 1.5 per cent of the assets managed by the muni funds that Lipper follows.
Investors have cashed out of muni bonds this month after a rise in yields on benchmark US Treasuries and against a backdrop of warnings that the financial problems of local governments and municipalities will lead to a rise in defaults. The selling also came amid record amounts of new issuance into the end of the year.
The latest round of outflows from funds occurred even though the $2,800bn municipal bond market, where states, cities and other public entities raise money, had rebounded in the last few days.
