Credit Risk Climbs In Europe As U.s. Deadlock Threatens Default

Europe needs Germany to form government soon: ECB’s Asmussen

House Speaker John Boehner said the country may default if President Barack Obama doesnt negotiate over the budget. The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings climbed 2.1 basis points to 99 basis points at 11:31 a.m. in London , the biggest increase since Sept. 27. The Markit iTraxx Crossover Index of 50 companies with mostly speculative-grade ratings jumped 8.5 basis points to 395 basis points. House Republicans will not back raising the governments $16.7 trillion borrowing limit unless the Democrats agree to other provisions, Boehner said in a TV interview yesterday. Both sides have 10 days to end their standoff before the U.S. exhausts measures to avoid breaching the debt ceiling and risk defaulting on its payments, according to Treasury Secretary Jacob J. Lew. The markets have entered the week on the back foot with the U.S.s ongoing fiscal impasse weighing on risk appetite, Richard McGuire and Lyn Graham-Taylor, fixed-income strategists at Rabobank International in London, wrote in a note to clients. Nevertheless, the continued modest nature of the risk off move associated with the fiscal impasse indicates the market remains broadly confident a solution will ultimately be found. Average yields on investment-grade bonds in euros rose 12 basis points last week to 2 percent, the highest since Sept. 18, Bloomberg bond index data show. Yields on junk-rated notes fell 10 basis points to a seven-week low of 4.7 percent. Bond Debut In the new issue market, bioMerieux , a French developer of tests for HIV and hepatitis, is debuting 300 million euros ($407 million) of seven-year notes to yield 3 percent to 3.25 percent, according to a person familiar with the matter.

The singles went down to the final match, and as he did at the Ryder Cup in Medinah, Francesco Molinari anchored the winning side, securing a long-awaited Continental Europe victory with a 3 & 2 defeat of Chris Wood at Saint-Nom-La- Breteche. “Very emotional — it’s been a tough day,” said winning captain Jose Maria Olazabal. “Everything went to the last match. The boys really played well today and I’m very, very happy to have won the Seve Trophy this time.” GB&I struck first on Sunday when Tommy Fleetwood claimed his first point of the week with a 3 & 2 win over Joost Luiten, who was unbeaten entering the match. After Jamie Donaldson and Gonzalo Fernandez-Castano halved their match, Ryder Cup standout Nicolas Colsaerts drew Continental Europe even, draining a 5- footer for par at the last to secure a 1-up win over Paul Casey. Frenchman Gregory Bourdy then continued his stellar play and pushed Continental Europe in front with a 4 & 3 triumph over Scott Jamieson. Bourdy, who never trailed in the match, became the first player in the event’s history to win five points out of five. “I’m so happy to achieve that, and it was an amazing week for me,” said Bourdy. The jostling continued, however, as Marc Warren wrapped up a 4 & 3 ousting of Thorbjorn Olesen to again square the tournament, 12 – 12, with four matches left on the course. From there, Continental Europe took control. Jimenez put the finishing touches on his convincing win, which was aided in part by the ailing Lynn, who twice dropped his ball into the water. Matteo Manassero then increased Continental Europe’s advantage to a pair with a 3 & 2 defeat of Stephen Gallacher. Paul Lawrie showed the GB&I mettle with a 2 & 1 win over Mikko Ilonen, but Molinari was in control at that point, holding a 2-up lead over Wood through 14 holes. After the pair matched birdies at the 15th, Molinari dropped his tee shot at the par-3 17th within 12 feet and drained the birdie putt to seal the Continental Europe victory. “It was going to go down to the last three matches at least,” continued Olazabal.

Continental Europe ends Seve Trophy drought

Germany, the euro zone’s biggest economy, has slowed the project for closer financial integration because of its federal election in September and Chancellor Angela Merkel’s subsequent search for a coalition partner to secure her a third term. “Swift formation of a government would certainly be helpful from a European point of view as there are important decision to be taken for Europe, for example on banking union,” Asmussen told Reuters. Time was short in the run up to the European Parliament elections next year, he said. Asmussen, who was a deputy finance minister before joining the ECB last year, has been tipped by some media to become the next German finance minister, but said recently that he planned to fulfill his ECB contract, which lasts until the end of 2019. The most pressing decision now was to agree by December on a common mechanism to wind down or restore ailing euro zone banks and Asmussen said the timetable was “ambitious, but manageable”. The ECB is particularly interested in having a single resolution mechanism in place by the time it starts supervising euro zone banks from late next year. “Without doubt it is preferable for the common European supervision and the common European resolution to start roughly at the same time,” Asmussen said. EMERGING FROM CRISIS Asmussen said Germany’s international partners recognized the euro zone has made progress on emerging from the crisis. Spain was set to complete its bailout program by the end of the year and probably Ireland as well, he said. If Greece was not able to regain sufficient market access by the second half of next year, additional aid would be needed, as agreed in November last year, Asmussen said. He reiterated that the ECB’s Outright Monetary Transactions (OMT) bond purchase program was still ready to be activated once the necessary preconditions were met – which was currently not the case for Italy. “I would also like to point out that the OMT program aims to counter unjustified fears about a breakup of the euro zone, rather than justified concerns about the functional capability of a political system,” Asmussen said. Italy’s main problem was low growth potential and Asmussen urged Italy to continue with its budget consolidation. One of the issues that is hotly debated as Germany forms its new government is the possible introduction of a minimum wage.

Europe soul-searches after Lampedusa exposes tensions

“The Mediterranean cannot remain a huge open-air cemetery. Action must be taken,” France’s Foreign Minister Laurent Fabius said Sunday after a boat loaded with migrants caught fire and sank near the island of Lampedusa, killing 300 people. Preventing a repeat of Thursday’s tragedy will top the agenda when interior ministers from European states meet on Tuesday, a day ahead of a visit to Lampedusa by European Commission chief Jose Manuel Barroso. Some argue that radical change is now required, among them as Italy’s Integration Minister Cecile Kyenge, who said the number of places in immigrant centres would be trebled from 8,000 to 24,000. Kyenge, an Italian-Congolese politician who has suffered racist taunts from other lawmakers as the country’s first black minister, told the Corriere della Sera daily the law could “no longer be punitive”. Peope light candles in memory of the victims of Lampedusa on October 4, 2013 in Rome, a day after a Lampedusa is struggling to accomodate 1,000 people in a holding facility with just 250 places — a situation replicated elsewhere in Italy as a new influx of migrants from Syria and Egypt has brought 30,000 arrivals since the beginning of 2013. But with far-right parties peddling xenophobia across Europe and a tough economic climate, hopes are slim that the Lampedusa disaster will spawn a long hoped-for single EU migration policy that could avert further tragedy. Experts in Brussels believe the sympathetic words of politicians all too often clash with the complex and politically explosive issue of illegal immigration in Europe. “We need a new policy at the European level,” said Michele Cercone, spokesman for home affairs commissioner Cecilia Malmstroem. “Migration policies are fragmented, inward-looking, left in the hands of member states and subject to domestic political considerations.” A black flag reading “Shame” in Italian flies in the Lampedusa harbour on October 4, 2013, in Italy, In the short term such a move is unlikely, as asylum-seekers in the European Union must appeal for help in the country through which they enter. This system is frequently criticised by Europe’s southern states, particularly Italy, Greece and Spain, which want a redistribution of asylum applications to even out the burden. But Europe’s northern states say they more than do their bit, as two-thirds of the 102,700 successful applications made to the EU in 2012 were granted by Germany, France, Britain, Sweden and Belgium. Strategies to combat the criminal networks exploiting desperate migrants, as well as maintaining maritime borders, are particularly contentious.