Eurozone monetary authority discusses possible help for Italy

FRANKFURT, Germany — The European Central Bank held an emergency telephone conference Sunday on how to fend off financial collapse in Italy while officials from rich and developing countries looked for ways to stabilize markets when they reopen after the U.S credit-rating downgrade.

Italian Premier Silvio Berluscon arrives for a joint press conference with Finance minister Giulio Tremonti

Italian Premier Silvio Berluscon arrives for a joint press conference with Finance minister Giulio Tremonti

FRANKFURT, Germany — The European Central Bank held an emergency telephone conference Sunday on how to fend off financial collapse in Italy while officials from rich and developing countries looked for ways to stabilize markets when they reopen after the U.S credit-rating downgrade.

The intense activity on an August weekend underscored how heavy levels of government debt on both sides of the Atlantic have rattled financial markets — and sharpened fears that the global recovery from the 2007-2009 financial crisis could be derailed.

A eurozone official told The Associated Press that central bank officials were to discuss possible purchases of Italian government bonds — a risky move but one that could help drive down bond interest yields that are threatening the heavily indebted country’s finances.

The official declined to be identified without authorization to discuss the meeting. A spokeswoman for the ECB declined to comment.

European officials are trying to keep Italy from being dragged into the same kind of interest-rate death spiral that forced Greece, Ireland and Portugal to seek international bailout loans after they could no longer borrow at affordable rates.

On Sunday, officials from the world’s 20 leading economies also discussed the stability of financial markets after the historic U.S. credit downgrade Friday rattled investors already worried about European debt crises.

European leaders agreed at a summit July 21 to equip their C440 billion (around $620 billion) bailout fund with the powers to buy government bonds in the secondary market and help bailout banks. But the changes will not take effect until national parliaments get back from vacation and ratify them next month.

Responding to market pressure, Italian Prime Minister Silvio Berlusconi on Friday promised to balance the country’s budget by 2013, a year early, and to bring forward other reforms such as including an amendment in the constitution requiring the government to balance its budget.

German Chancellor Angela Merkel and French President Nicolas Sarkozy praised reform efforts by Italy and Spain, but also urged “complete and speedy implementation.”

Deputies from the Group of 20 talked by telephone about proposals to minimize market shocks, South Korea’s central bank said.

Japan’s Kyodo News agency reported Sunday that G-7 deputy finance ministers had agreed on a conference call among the higher-level ministers, who are likely to discuss the U.S. downgrade as well as the eurozone sovereign debt concerns.

The G-7 includes Britain, Canada, France, Germany, Italy, Japan and the U.S., while the G-20 includes those countries as well as large, emerging economies such as China, Brazil, Russia and India.

ECB President Jean-Claude Trichet said last week that the bank was reviving its bond-buying program after leaving it dormant for four months. The head of Belgium’s central bank said it bought Irish and Portuguese bonds, but not those from Spain and Italy, implying those countries had to do more to fix their finances first.

Italy’s bond yields have risen from under 4 per cent late last year to over 6 per cent on Friday, a potentially serious burden for the government’s finances.

The government has debt equivalent to 120 per cent of economic output, the second highest in the eurozone behind Greece, and weak prospects for economic growth that would help pay debt.

Sunday’s phone conference comes just hours before the opening of financial markets in Asia, after Friday’s downgrade of the U.S. credit rating from AAA to AA plus by ratings agency Standard & Poor’s has led to fears of more stock market plunges.

Last week already saw markets around the world deep in the red amid fears the global economy may be weakening and the uncertainty created by Europe’s debt crisis.

In a sign of early fallout, Middle East markets tumbled Sunday on the first day of business after the downgrade.

Middle East markets, open Sunday through Thursday, were the first to react to the downgrade. Egypt’s benchmark EGX30 index fell more than 4 per cent, and other Gulf markets also were sharply lower.

Israel’s Tel Aviv Stock Exchange delayed the start of the week’s first session after pre-market trade showed the benchmark index dropping more than 6 per cent because of concerns over the U.S. debt rating cut. Exchange spokeswoman Idit Yaaron said the start was pushed back by 45 minutes “so market players will have time to react logically and not under pressure.”

Israel’s benchmark TA-25 index plunged 7 per cent to close at 1,074 points.

U.S. markets and others reopen Monday but have had rough patches recently. The Dow Jones industrial average dropped 512 points Thursday, its worst performance since the financial crisis of 2008, and regained only a fraction of that drop Friday.

Many economists see the world’s big central banks as the last line of defence at this moment in the crisis, after policymakers in Europe and the U.S. have failed to agree on the kind of shock-and-awe moves that many investors demand.

Investors have also been calling on the U.S. Federal Reserve to start pumping money into the American economy again to help underpin the slowing economic recovery.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

DynaLife is hiring more staff to bring waiting times for blood tests down in Red Deer. (AP Photo/Jacqueline Larma, File)
DynaLIFE is hiring more staff in Red Deer to reduce wait times

Wait times for appointment will be further reduced

sign
Alberta Biobord Corp. recently hosted a virtual open house from Stettler

The company plans to develop a fuel pellet and medium density fibre board (MDF) plant near the community

WHL Logo
WHL announces no playoffs for 2020-21 season

The Western Hockey League will not have playoffs following the shortened 24-game… Continue reading

ALERT’s Internet Child Exploitation (ICE) Unit
Two central Albertans charged with child porn

ALERT’s Internet Child Exploitation unit arrests 24 suspects

A child writes in their school notebook during a home schooling session in Cremona, Alta., Monday, March 23, 2020, amid the worldwide COVID-19 pandemic. Thousands of students in Calgary will shift to online learning as of today in a bid to curb rising COVID-19 infection rates in the city. THE CANADIAN PRESS/Jeff McIntosh
Alberta begins rolling out AstraZeneca COVID vaccine for those 40 or older

Alberta begins rolling out AstraZeneca COVID vaccine for those 40 or older

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

A Quebec Superior Court justice is set to issue a ruling Tuesday on the constitutionality of the province’s secularism law, known as Bill 21. People hold up signs during a demonstration against Bill 21 in Montreal, Sunday, Oct. 6, 2019. THE CANADIAN PRESS/Graham Hughes
Quebec court upholds most of province’s secularism law, exempts English school boards

MONTREAL — Quebec’s secularism law is largely legal, a Superior Court judge… Continue reading

Minister of Public Safety and Solicitor General Mike Farnworth speaks during a press conference at the legislature in Victoria, Monday, Oct. 28, 2019. The British Columbia government is providing a few more details about travel restrictions aimed at limiting movement around the province to slow the spread of COVID-19. THE CANADIAN PRESS/Chad Hipolito
Periodic roadblocks but no individual stops planned for B.C.’s COVID-19 travel rules

VICTORIA — The British Columbia government is looking at using periodic roadblocks… Continue reading

Prime Minister Justin Trudeau is joined virtually by Minister of Finance Chrystia Freeland as they talk online to a group of front-line pharmacists from across the country to discuss the ongoing vaccination efforts in the fight against COVID‑19, from the Prime Ministers office on Parliament Hill in Ottawa on Tuesday, April 20, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Provinces balk at Liberals’ child-care budget pledge as funding negotiations loom

OTTAWA — Multiple provincial governments are questioning the Liberals’ promise of a… Continue reading

Pharmacist Barbara Violo arranges empty vials of the Oxford-AstraZeneca COVID-19 vaccine that she has provided to customers at the Junction Chemist, an independent pharmacy in Toronto, Monday, April 19, 2021. Younger Canadians in several provinces are now able to get the AstraZeneca vaccine. THE CANADIAN PRESS/Nathan Denette
Trudeau, Freeland seeking AstraZeneca shots as they become age-eligible with others

OTTAWA — Prime Minister Justin Trudeau and Deputy Prime Minister Chrystia Freeland… Continue reading

The Rogers Logo is photographed on a Toronto office on Monday, September 30, 2019. THE CANADIAN PRESS/ Tijana Martin
Rogers says wireless service fully restored but questions remain after massive outage

A massive countrywide wireless outage that left millions of Rogers Communications Inc.… Continue reading

sign
Alberta Biobord Corp. recently hosted a virtual open house from Stettler

The company plans to develop a fuel pellet and medium density fibre board (MDF) plant near the community

The controversial Super League is materializing after Madrid and 11 other clubs announced its creation on Sunday. (File photo by BLACK PRESS)
Super League a ‘longtime dream’ for Madrid president Pérez

League created because coronavirus pandemic left clubs in a dire financial situation

San Jose Sharks centre Patrick Marleau (12) skates during the third period of an NHL hockey game against the Minnesota Wild, in San Jose, Calif., Monday, March 29, 2021. Marleau is skating in his 1,757th game. Only one other player in NHL history has hit that mark. THE CANADIAN PRESS/AP-Tony Avelar
Patrick Marleau set to break Gordie Howe’s record for most NHL games played

Marleau was set to suit up for the 1,768th time Monday

Most Read