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POLITICAL ECONOMY
Japan calls on Germany to build debt 'firewall'
by Staff Writers
Tokyo (AFP) Nov 18, 2011


Japan called on Germany on Friday to step up and help plug the widening hole in the eurozone's finances, saying Berlin should play a leading role in creating a debt "firewall".

Japan, along with China, was one of the first ports of call when the bloc began looking abroad for cash to keep its debt-crippled nations afloat.

Finance Minister Jun Azumi said Germany, the continent's largest economy, needed to do more if Europe was to get out of the downward spiral of debt that is threatening to tip the global economy into recession.

"It is important for Germany to (play) a central role in creating a firm funding scheme that we can refer to as a firewall," Azumi told a news conference, Dow Jones newswires reported.

"I think it is time for Germany to work particularly hard," Azumi said, adding the need to prevent a worsening of the situation in Italy and Spain was becoming "urgent".

Azumi's comments come after European deal brokers began travelling the globe looking for cash to boost the coffers of a bailout fund earmarked for countries struggling under piles of sovereign debt.

The continent's leaders have agreed to a massive boost to the European Financial Stability Facility (EFSF), but shied away from putting in their own money, instead agreeing to "leverage" its capacity from 440 billion to one trillion euros, via a debt insurance scheme.

The head of the fund, Klaus Regling, received a distinctly non-committal response during a cap-in-hand visit to China, where he was asking Beijing to spend some of its $3.2 trillion of foreign reserves on the venture.

At the G20 in Cannes, Chinese President Hu Jintao told his French counterpart Nicolas Sarkozy that Europe had primary responsibility for resolving its debt crisis.

Beijing has said it could provide up to $100 billion in support for the eurozone, but says there are strings attached; it wants certainty that the EFSF package will work and wants to know what sort of guarantees would be offered if the bailout fails.

Azumi's comments echo statements from his boss, Prime Minister Yoshihiko Noda, during the APEC meeting in Hawaii at the weekend.

Noda said Japan, the world's third-largest economy, was committed to helping the eurozone but stressed the currency bloc bore primary responsibility for sorting out its own debt problems.

"We want Europe to first roll up their sleeves and work on this. I believe this is the very first step to bring confidence to the marketplace," Noda told a news conference in Honolulu.

"This crisis is a matter that will have bearing for the world as a whole," Noda said. "If the proper stance is demonstrated, then we will make our appropriate contributions."

Japan was initially buying 20 percent of the debt issued by the EFSF, but the figure has recently decreased to about 10 percent.

Japan also has a mounting public debt and faces major challenges as it rebuilds from the catastrophic March 11 tsunami.

Azumi told reporters on Friday that there had been talk of G7 finance chiefs meeting again before the year is out, but said no details have yet been finalised, Dow Jones reported.

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Berlin, London rift as Spain crisis looms
Berlin (UPI) Nov 18, 2011 - Britain and Germany are talking to heal a rift over the eurozone troubles as renewed worries loom over a developing debt crisis in Spain and continuing problems in Greece and Italy.

German Chancellor Angela Merkel and British Prime Minister David Cameron revealed sharp differences of opinion over ways of tackling the eurozone crisis after they met in Berlin. Although Britain is outside the eurozone its vast financial networks from the City, London's so-called Square Mile, to the rest of Europe are increasingly exposed as the focus shifts toward Spain, seen as the next debt casualty.

Britain is also fighting European plans to tax financial transactions throughout the continent, whether the member countries are part of the 17 eurozone constituents or outside it, as is Britain.

If implemented the taxation regime will spell ruin for London's financial center, but Germany and France are vigorously pushing for the move. They also want the 2009 Lisbon Treaty revised to allow for a closer monitoring of individual countries' handling of their finances, something that has prompted calls in Britain to ditch Europe.

Worries over the eurozone crisis, compounded by most recent market analyses of Spain's troubles, pushed global markets to new lows.

"As Spain prepares for its general election on Sunday, it has become the weaker link in the eurozone chain," the BBC said, after Spain found the borrowing rate available to its institutions was inching dangerously close to 7 percent -- generally thought to be unsustainable.

Opinion polls ahead of Sunday's general election in Spain predict a clear victory for the right-wing Popular Party.

Market analysts said in addition to the Spanish outcome they would await details of plans to boost the eurozone bailout fund to one trillion euros -- about $1.3 trillion. Fears that European leaders would fail to agree on a deal led to more nervous selling in Asia, Europe and North America.

There were also fears that European banks might fail to raise enough cash to pump up the European Financial Stability Facility used to bail out troubled member states. Spain had trouble raising funds to the level it wanted this week.

Britain has angered France and Germany by questioning approaches to the crisis. Cameron and Merkel showed their differences when Cameron made comments in London seen to be challenging the German chancellor's pronouncements in Leipzig, Germany.

Merkel told her party's followers, "The task of our generation is to complete economic and monetary union, and build political union in Europe, step by step... that does not mean less Europe, it means more Europe."

A short while later Cameron declared at the London Lord Mayor's banquet those skeptical about eurozone solutions had the right to question "grand plans and Utopian visions."



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POLITICAL ECONOMY
China's Wen warns over global economic turmoil
Nusa Dua, Indonesia (AFP) Nov 18, 2011
Global economic turmoil could persist for "a long time to come", Chinese Premier Wen Jiabao warned Friday, saying that recovery in some developed nations lacked momentum. China has become a key driver of the global economy in recent years and has been courted by top European officials looking to bolster a fund set up to support troubled economies. Beijing has the world's largest foreign ... read more


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