Key bank warns against 'uneasy calm' in global markets

ZURICH - The Bank for International Settlements (BIS) issued a warning Sunday over an "uneasy calm" within financial markets, noting that the global economy remains vulnerable to serious disruptions.

The BIS - known as the central bank of central banks - made the call in its quarterly report which is closely watched by investors.

In August and September, markets were shaken after serious concerns emerged about the health of leading emerging economies, especially China.

Interventions from monetary authorities succeeded in stabilizing markets to a degree, but the head of the monetary and economic division at the BIS, Claudio Borio, cautioned against being lulled into a false sense of security.

"The present calm is fragile," Borio said.

He pointed specifically to slowing capital flows and persistent signs of trouble in Brazil and Russia, even if China appears to have stabilized in part.

"In this context, it's hard to see the current calm as anything other than uneasy," Borio said.

Emphasizing the uncertainty that continues to affect financial markets, Borio noted that investors still remain extremely sensitive to even the slightest surprise in actions from central bankers.

A case in point is the reaction this week to European Central Bank chief Mario Draghi's latest stimulus package, which sparked a broad sell-off from disappointed investors who said the measures did not go far enough.

Senior ECB officials blamed the disappointment on investors who they say misjudged the ECB's expected actions.

source: interaksyon.com

Merkel: Euro debt crisis 'far from over'

The eurozone debt crisis is "far from over," even as reforms begin to show results, German Chancellor Angela Merkel said in remarks to be broadcast Monday.

"The reforms that we've agreed on are starting to be effective," Merkel said in her recorded New Year's address.

"Nevertheless, we still need a lot of patience. The crisis is far from over," she said in a transcript of her addressed released early Monday.

Her comments differed from those of Finance Minister Wolfgang Schaeuble, who was quoted Thursday as telling the Bild newspaper, "I think we have the worst behind us."


They also differed from those of European Central Bank President Mario Draghi, who told France's Europe 1 radio Nov. 30, "The recovery for the entire eurozone will no doubt begin in the second half of 2013."

Merkel, 58, who faces an election to a third term in September, pointed to Germany's lowest level of unemployment since 1990's reunification of East Germany and West Germany, while the number of people employed had risen to record highs.

She said this meant "many hundreds of thousands of families have a secure future."

Merkel urged Germans to resist laying blame on economically weaker countries for the 3-year-old financial crisis that has made it difficult or impossible for some eurozone governments to repay or re-finance their debt without assistance.

"For our prosperity and our solidarity, we need the right balance. We need the willingness to perform and social security for all," she said in the recorded remarks. "The European sovereign debt crisis shows how important this balance is."

source: upi.com