Germany rules out that the rescue fund buy debt to calm the markets

Germany rules out that the rescue fund buy debt to calm the markets

  • Wolfgang Schäuble denounces “speculation” the information that the ECB is moving in this line to reduce interest on the bonds of Spain and Italy.
  • It also rejects the idea that the European Financial Stability Fund can become the safe conduct that evades Germany’s refusal.
  • “The high levels that Spanish interests have reached are painful, but it is not the end of the world to pay a higher percentage in debt auctions,” he says.
Guindos y Schäuble

Luis de Guindos (left), and Wolfgang Schäuble, during a press conference at the Adenauer economic forum in Santiago de Compostela. EFE

German Finance Minister Wolfgang Schäuble dismisses the European Financial Stability Fund (EFSF) as buying Spanish and Italian debt to ease market pressure. “Speculation” of the information indicating that the European Central Bank (ECB) is moving in this line to lower interest on the bonds of Spain and Italy.

Spain’s short-term financing needs are not so high In an interview with the German daily Die Welt am Sonntag published this Sunday, Schäuble dismisses the ECB’s intervention by buying debt and also rejects the hypothesis that The EFSF, the temporary rescue mechanism, can be erected as a safe conduct that evades the refusal of Germany. “No, these speculations are not true, ” replies Schäuble.

“Spain’s short-term financing needs are not that high,” Schäuble says. “The high levels that have reached the interests are painful and create a huge uncertainty, but it is not the end of the world to pay a higher percentage in debt auctions,” argues the German Finance Minister.


However, Schäuble says he is aware of the untenable situation implied by high interest rates on Spanish debt. As a security cushion, the head of German Finance points to the additional 30,000 million euros approved in the Memorandum of Understanding, the document that certifies the financial aid granted to Spain, for “a potential immediate financial assistance”.

Markets and rating agencies

On the other hand, that Germany barely pays interest on its debt only denotes a “deep insecurity” in investors , according to Schäuble. Although it relieves the debt burden, this is a sign that “the markets are not in order,” he points out.

The markets do not take the rating agencies so seriously However, it does not expect that the interest that the investors pay for the German bonds will increase in the hand of the revision of the rating of the German debt to “negative outlook” on the part of of the Moody’s rating agency. ” There will not be any interest increases , so I’ll go on a quiet holiday, since the markets do not take the rating agencies so seriously,” Schäuble praises.

In this sense, it also shows its skepticism about how the markets have received the latest reform packages approved by the Government of Mariano Rajoy. The Spanish Executive, clarifies Schäuble, “has taken all the necessary decisions” and is having “a good effect”. “If the markets do not trust them, the time will come” in which they do, the German minister adds, “Spain needs time.”

If the markets do not trust Rajoy’s reforms, the time will come. Ever since the president of the ECB, Mario Draghi, assured last Thursday that “he will do everything necessary to preserve the euro”, the information about a change in the policy of the eurobank have not stopped appearing. Initially, reluctant to buy debt from countries in difficulties, the ECB could be evaluating this option in order to quell the market battles against Italy and Spain. Not in vain, the Bundesbank, the central bank of Germany, opposes this measure.

In addition, from the words of Draghi, the Spanish risk premium began its decline from 600 basis points to 534 and the stock market began its positive climb, chaining three days of earnings and recovering 6,000 points.

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China sets up bank deposit guarantee

The People’s Bank of China announced on Sunday the creation, in early 2015, of a public fund guaranteeing accounts up to 65,000 euros per individual, if a financial institution collapsed.

Expected for a long time and presented as an important step in the opening of the Chinese economy, a guarantee of bank deposits will be put in place by the Chinese authorities at the beginning of next year.

The People’s Bank of China announced on Sunday, November 30, the next creation of a public fund guaranteeing accounts up to 500,000 yuan (65,000 euros) per individual if a financial institution would collapse in the future.

With South Africa and Saudi Arabia, the world’s second-largest economy remained the only G20 country that had not yet adopted such a mechanism, even though its leaders had been talking about it for two decades.

The official news agency, China News, said Sunday that this guarantee system will be implemented “early 2015”. Probably in January, according to other media and some economists.

Liberalization of rates

The deposit guarantee of bank customers is the corollary of the ongoing liberalization of interest rates. Until recently, the Chinese state itself set the cost of the loans made by the banks as well as the remuneration of the savings. This widespread control meant that competition among banks was weak.

As a result, most of these banks preferred to lend to state-owned enterprises and local governments, sometimes financing themselves behind these companies, as all of them had an implicit guarantee from the state. The gap was wide enough between the rate required to obtain credit and the low remuneration of savings for the big Chinese banks to record lucrative profits in recent years.

On the same subject To support its economy, Beijing lowers the cost of credit

As a result of this system, Chinese SMEs and the private sector as a whole are still struggling to obtain loans. They default to the proposed high-rate credits by the “shadow bank”, a flurry of institutions existing at the margins of the Chinese financial system, on which the party-state turned a blind eye.

The absence of the notion of risk

These two sides, the official system and the “shadow bank” have until now in common the absence of the notion of risk: each considers that the government will bail out its coffers in one way or another in case big glitch.

“The implicit quasi-universal guarantee of the state is the most important factor that has protected China from a systemic crisis until today, but it is also the most detrimental factor to the efficiency of the Chinese economy.” , summarizes Yao Wei, an economist at Société Générale on China, in a note published Monday, December 1.

The secretary-general of the Communist Party since the fall of 2012, Xi Jinping, has pledged credibility on its ability to deeply reform the Chinese economy. Liberalization of interest rates is a crucial element of this program.

In July 2012, Beijing had already decided to regulate the price that banks must charge for credit.

The reluctance of the big public banks

The step of liberalizing the remuneration of savings is more complex. Banks will take more risks to offer better pay to their savers. So it is necessary to introduce beforehand a mechanism guaranteeing a part of the savings. This will be done after a period of consultation by Beijing sector players, which runs until the end of December.

Behind the curtain, the big Chinese-owned banks – and their powerful relays in the Communist Party and the families of its leaders – have long held back the liberalization of interest rates, citing unconscious risks in other economies. the banks.

The rigidity of the system assured them a good rent. But the sharp slowdown in the Chinese economy, which fell to 7.3% growth in the third quarter, convinced Beijing of the need to quickly modernize the financing system of the economy, to bring him a breath of fresh air.

 If the refrigerator goes on strike and the car has to go to the garage in the same month, the financial scope can be tight. If you want to bridge such bottlenecks, it is usually advisable to install an installment loan – because the interest rate on the credit line is almost always much higher. How consumers can further reduce the interest burden, explains the independent comparison portal Verivox.

Picture: Credit money 

The right information is important

Whether and on what terms a loan is granted, banks decide on the one hand based on the Schufa information, on the other hand based on the information provided in the loan application. “Those who take it very seriously when specifying their personal data can significantly improve their chances of obtaining a favorable loan,” explains Ingo Weber, Managing Director and Chief Financial Officer at Verivox.

It is unfavorable, for example, to specify the purpose “other”, because many banks offer special conditions for certain projects. The marital status of the borrower is also of interest. So divorced ones can improve their score after a year as “single”. The same applies to widowhood. Anyone who classifies his job as an “employee” will be better off “workers”. And also the indication of the industry is important: The service sector has the lowest score. If children are asked, only the offspring who lives in the household or is paid for maintenance should be indicated.

Of course, nobody should misrepresent. This is punishable and the credit is denied.

Verivox has the largest market overview

The conditions of the banks vary greatly. If you are looking for a cheap installment loan, you can use the free services of the comparison portals. “Verivox has the largest online market overview in Germany, eliminating the tedious transition from bank to bank. In addition to negotiated special interest, consumers also find regional loans with us, “explains Weber. “In addition, our experts provide individual and non-binding advice and are also happy to assist in completing the loan application.”

Better interest rates with a second borrower

Many banks offer special rates for applications with two borrowers. Those who work together with their partner usually benefit from better interest rates. In addition, the likelihood that the loan application will be granted increases significantly. But: the borrowers are jointly and severally liable, ie the bank may demand the repayment of the debt from both parties.

Extras make the loan more expensive

A residual debt insurance secures the loan repayment in the event of death, unemployment or disability. However, it is associated with additional costs and is often unnecessary. Because often existing insurance, such as accident, occupational disability or term life insurance, already covered the risks. Consumers should therefore check carefully if they really need a residual debt insurance. There is no obligation to graduate.

Further information

With Verivox you are always up to date. Whether energy, telecommunications, finance or insurance – You can find the latest news and valuable tips in our daily news.

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