Euro Recovery Fading Away

European Union finance ministers met again to discuss financial aid to Cyprus and Greece. The meeting in Brussels starting on Monday (11/2), is also a step for euro zone countries to win back the momentum resolution of the debt crisis are fading.


Europe's economic recovery momentum fades as the growing political risk in Italy and Spain. That indicates to the market that the economic crisis that lasted more than three years was not over.


Wolfgang Franz, chief economic adviser to German Chancellor Angela Merkel, said Italy's tight election and political scandal in Spain have disrupted the stability of the market. "We do not know how we get out of the crisis," he said.


European leaders have reached a deal last week seven annual budget cuts for the first time. In this meeting, they will look back at the Italian elections scheduled to take place on 24-25 February 2013. Opinion polls suggest the possibility of not reaching a majority in the election.

Cost bonds up


European shares recorded a decrease in the last two weeks on the weekend. Decrease due to investor concerns about the possibility policy barriers in Italy and Spain.


Yields on 10-year Italian bonds rose at the highest level of more than 4.5%. Meanwhile, yields on 10-year Spanish bonds rose 5.5% last week, causing the cost of borrowing becomes swollen.


The euro drop, down 2% to U.S. $ 1.336. Euro back up at U.S. $ 1.337 on Monday (11/2), after Mario Draghi, President of the European Central Bank (ECB) raised concerns about the euro decline could hamper economic recovery. "The exchange rate is not a policy target, but it is important to growth and price stability," he said.


In addition to Italy and Spain, the presidential election in Cyprus next week will also tend to affect the schedule of financial aid in the country. Cyprus became the fifth country that received bailout Europe.


To be able to disburse aid worth € 18 billion, or U.S. $ 24 billion that European leaders are waiting to see who will be the President of Cyprus. Therefore, anyone who was elected president next week must approve demands such as privatization of state assets.


Joerg Asmussen, ECB Executive Board member, said the failure to agree on an aid package to Cyprus would be a progress Europe. He hoped that a bailout package for Cyprus can be achieved by the end of March 2013.

He sure Cyprus will not be able to pay obligations (default) if no rescue. "If we let the relevant country falls, it will be risky to progress," he said.