Politics

ECB will do ‘whatever it takes’ to preserve the currency said the European Central Bank President Mario Draghi easing market concerns about the escalating EU debt crisis after Draghi appeared to signal that the central bank is prepared to act to calm the bond markets…



Powered by Guardian.co.ukThis article titled “Euro is irreversible, declares European Central Bank president Mario Draghi” was written by Josephine Moulds, for guardian.co.uk on Thursday 26th July 2012 13.48 UTC

Mario Draghi, president of the European Central Bank, said on Thursday the euro was “irreversible” and promised to do everything within his power to save it.

Speaking at the UK government’s Global Investment Conference in London, Draghi said: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”

The news sent the euro up 1% against the dollar, to $1.2315, and it also gained against other major currencies. Spanish and Italian borrowing costs eased, after Draghi appeared to signal that the ECB was prepared to act to calm the bond markets.

“If government borrowing premia hurt monetary policy transmission, they are in our mandate,” he said.

The yield on Spanish 10-year debt dipped to a whisker above 7%, at 7.009%, while Italian 10-year yields fell to 6.1%.

Draghi said the eurozone was much stronger than people acknowledged and progress over the last six months had been remarkable. “The last summit was a real success as it was the first time that all the leaders of 27 countries, including the UK, said the only way out of this crisis is to have more Europe. This means that much more of what is national sovereignty is going to be exercised at supranational level.”

Draghi was sharing the stage with Sir Mervyn King, governor of the Bank of England, who took the opportunity to deflect blame for the financial crisis from the banking sector. “Of course there was bad behaviour,” he said. “But this was a crisis which emanated from major mistakes in macroeconomic policy around the world, and fundamentally the inability to successfully co-ordinate macroeconomic policy so that globally you wouldn’t get the imbalances, the capital flows, that created the difficulties in the banking system.”

The day kicks off two weeks of investment summits aimed at attracting more foreign investment into the UK and promoting British business. Based in Lancaster House, the summit is taking place within earshot of the beach volleyball at Horse Guards Parade and aims to take advantage of the influx of foreign dignitaries for the Games.

The event offers some respite for trade minister Lord Green, who is under pressure because of his role as chief executive and then chairman at HSBC when the bank laundered money for Mexican drug barons and possibly even terrorists.

Green welcomed delegates to the conference and exchanged a warm handshake with King, among others. Green was promoting the UK as a great place to do business, alongside Lord Sassoon, commercial secretary to the Treasury, in a change to the schedule. He had been due to share the podium with Stuart Gulliver, current chief executive of HSBC, but Gulliver withdrew from the conference after the money laundering revelations.

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USA 

U.K. GDP figures for second quarter from Office for National Statistics surprise City analysts who had expected a 0.2% drop. The decline prolongs the first double-dip recession in 30 years and follows the 0.3% fall in the first three months of 2012 and a 0.4% decline in the final quarter of 2011…



Powered by Guardian.co.ukThis article titled “Shock 0.7% fall in UK GDP deepens double-dip recession” was written by Larry Elliott, economics editor, for guardian.co.uk on Wednesday 25th July 2012 09.09 UTC

Britain’s economic output collapsed by 0.7% in the second quarter of 2012 as the country’s double-dip recession extended into a third quarter.

Across-the-board weakness in manufacturing and construction coupled with the loss of output caused by the extra bank holiday to mark the Queen’s diamond jubilee were responsible for the setback, according to data from the Office for National Statistics.

Analysts in the City had expected a 0.2% drop in gross domestic product in the three months to June and were stunned by the scale of the fall in activity. The decline followed the 0.3% fall in the first three months of 2012 and a 0.4% decline in the final quarter of 2011.

Construction output dropped by 5.2% between the first and second quarters of 2012, with industrial production falling by 1.3% and service sector output by 0.1%

The first double-dip recession since the mid-1970s – when the UK was beset by high inflation and rising unemployment – meant GDP in the second quarter of 2012 was 0.8% lower than in the same three months of 2011.

Officials at the ONS said it was hard to assess the full impact of June’s additional public holiday on GDP in the second quarter, but officials expect a bounce back from the loss of production in the third quarter, when the London Olympics should also provide a boost to activity.

The news will come as a fresh blow to the chancellor, George Osborne, whose deficit reduction plans have been thrown off course by the poor performance of the economy. Output has declined in five of the last seven quarters.

Osborne said: “We all know the country has deep-rooted economic problems and these disappointing figures confirm that.

“We’re dealing with our debts at home and the debt crisis abroad. We’ve made progress over the last two years in cutting the deficit by 25% and businesses have created over 800,000 new jobs.

“But given what’s happening in the world we need a relentless focus on the economy and recent announcements on infrastructure and lending show that’s exactly what we’re doing.”

The data shocked City analysts. Howard Archer of IHS Global Insight said the figures were “a very nasty surprise indeed”. And Labour were swift to criticise the chancellor. Rachel Reeves, the shadow chief secretary to the Treasury, tweeted that the 0.7% contraction was a “disastrous verdict on George Osborne’s failed plan”.

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