Europe Lower As Us Debt Deadline Nears; Peugeot Down 9%

The European Central Bank (ECB) President Mario Draghi reacts during the monthly news conference in Frankfurt, February 9, 2012. REUTERS/Alex Domanski

The ECB’s new checks are seen as the last chance to come clean for the euro zone as the bloc tries to set up a single banking framework, known as banking union. The debate opens amid ebbing political enthusiasm for banking union – originally planned as a three-stage process involving ECB bank supervision, alongside an agency to shut failing banks and a system of deposit guarantees. It would be the boldest step in European integration since the crisis. “We have to find a solution now,” said Michel Barnier, the EU Commissioner in charge of financial regulation, urging faster progress in the slow talks. “The next financial crisis is not going to wait for us.” ANGLO-GERMAN AXIS? In one sign of the divisions, Britain has repeatedly refused to sign off on the first pillar of the banking union framework, allowing the ECB monitor banks. Having earlier agreed, London now wants additional assurances from ministers this week that Britain, which is outside the euro and polices its own banks, will not face interference from the ECB-led euro bloc. Britain is likely to find a sympathetic ear in Berlin, which wants to keep London on side in its push to prevent stricter EU emissions rules to protect its luxury car makers. Before the ECB takes over as supervisor late next year, it will conduct health checks of the roughly 130 banks under its watch. This is the nub of the problem facing finance ministers at the two-day talks. With the euro zone barely out of recession, a failure to put aside money to deal with the problems revealed could rattle fragile investor confidence and compound borrowing difficulties for companies, potentially killing off the meek recovery. In turn, that raises the question about who pays for the holes that are found in balance sheets in countries such as Spain and Italy. While Rome and Madrid would like easy access to the euro zone’s permanent bailout fund, the European Stability Mechanism, Germany, Finland and other strong countries say each country should pay for its own clean-ups. This time around, the task of cleaning up banks should not be quite as daunting as five years ago because shareholders, bondholders and wealthy depositors can expect to take some of the losses, as happened in the bailout of Cyprus in March.

Europe, China agree currency deal

chinese yuan euro

debt loses some appeal in Hong Kong In June, China struck a similar agreement with the Bank of England worth up to 200 billion yuan. The deal with the ECB comes as political gridlock in the U.S. weakens the U.S. dollar against many other global currencies. A spokesperson for the ECB said the deal had been in the works for the last few months. China’s wine obsession spurs Bordeaux sales The yuan, also called the renminbi, currently trades directly with the U.S. dollar, the Australian dollar and the Japanese yen . In September, the Bank for International Settlements announced the Chinese yuan was the ninth most traded currency in the world. The yuan was involved in 2.2% of foreign exchange trading worldwide in April, the period examined by the report, more than double its share in April 2010. The dollar was involved in 87% of all trades, the euro was part of 33% of trades, and the Japanese yen was involved in 23%.

The U.S. government needs to raise the debt ceiling before Thursday, October 17 if it is to avoid a potential default on its debt. As global concerns over such a scenario grow, the chief of the International Monetary Fund, Christine Lagarde, said the situation was “very, very concerning” though she warned that ‘creative accounting’ was not the solution. Chris Scicluna, an economist at Daiwa Capital that market expectations are for a deal to be eventually forthcoming to avoid a disorderly default event. “But any agreement is unlikely to be swift in the finalization,” he said in a morning “With a significant probability that it will come after Thursday’s debt-ceiling deadline has passed – and also still seems more likely to offer a temporary rather than lasting solution to the impasse.” (Read More: As shutdown drags on, is more global easing coming? ) In European news, the Eurogroup of finance ministers from the euro zone are meeting on Monday to discuss, among other topics, Greece and banking supervision. The group meets on the eve of the meeting of the Council of the European Union (Economic and Financial Affairs – ECOFIN). Irish budget In Ireland, the government is preparing to soften its line on austerity for Tuesday’s budget, despite warnings that it would be better to stick to its targets. Taoiseach (Prime Minister) Enda Kenny triumphantly declared an end to the “era of the bailout” on Saturday. He said Ireland will become the first euro zone country to finish its bailout in mid-December and it may even do so without a financing backstop from the rest of Europe. (Read More: Ireland riskslong-term pain for short-term gain ) Economic forecaster the Ernst and Young ITEM Club said in a new report on Monday that the U.K.