Seven European banks fail stress test

Seven European banks would not be strong enough to withstand another recession. They would face a capital shortfall of 3.5 billion euros ($4.5 billion).Tests were run in an attempt to revive investor confidence showed on Friday, but have obviously not succeeded.

Five of Spain’s smaller regional lenders, known as cajas, failed the test and their recapitalization is likely to speed a restructuring of the troubled sector.

Banks in Germany and Greece were also seen as weak spots and in need of restructuring, but state-owned Hypo Real Estate was the only German lender to flunk and state-controlled ATEbank was the only Greek bank to fail.

No big banks failed the test.

Europe tested how 91 banks would cope with another recession and losses on government debt after the Greek crisis hit markets and raised fears the euro zone could unravel.

It aimed to repeat a health check on U.S. banks last year that helped restore investor confidence and underpinned a recovery by bank shares.

Well, see you next year?

Ireland’s debt rating downgraded

Ireland’s debt was downgraded this morning. The downgrade was “primarily driven by the Irish government’s gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability,” said Dietmar Hornung, a lead analyst for Ireland at Moody’s Investors Service.

Ireland went from an Aa1 to an Aa2. At the end of last year, Ireland’s debt-to-GDP ratio reached 64% and is still rising.

Of course, fears of a European collapse are ignited again. Ireland is part of collection of countries known as PIIGS. Portugal, India, Ireland, Greece and Spain, the countries with wavering economies.

Meanwhile, the IMF was in Hungary to discuss the $25 billion in aid that was sent in 2008 from IMF and the European Union. The talks did not go well, it seems.

The central governments of the EU, Germany in particular, are trying to send a strong message to the countries of Europe. German voters seem to be against bailing out more European nations.

Hungary is central Europe’s most indebted country with debt around 80% of GDP.

Euro rises

After the whole Greece debacle, the value of the euro has plummeted. Now, the euro has climbed to a three week high against the dollar. The reason?

Spain has successfully auctioned off some of its debt.

The euro hit $1.2412. The euro was helped by European equities, which advanced for a seventh straight session.

The euro has regained more than 5 cents from a four-year low of $1.1876 set on EBS last week, though it remains more than 13 percent lower year-to-date.

European Union leaders are attempting to strengthen budget discipline and economic policy coordination. While critics believe Spain’s auction was only a temporary fix, perhaps the upward trend can continue.

Greek debt still causing problems

The euro fell to the lowest level against the dollar in  a year.

Meanwhile, in Greece, public sector workers storm the Acropolis and tangle with riot police over the bailout. A general strike is planned for Wednesday, nationwide, but the public sector added today, as well. The plan to bailout Greece includes wage freezes, pension cuts, and tax increases. Fears that the plan targets low income Greeks have driven many to protest.

Two days ago, the European Union and the International Monetary Fund announced a three year $146 billion bailout for Greece. But, the bailout seems to be serving as a catalyst, igniting every problem and issue with the euro since its introduction. Some believe that the European Union is the problem, not the solution.

The question now is which country will be next?

Greek Bailout Strengthens Euro

EU leaders agreed on a 30 billion Euro aid package for Greece, with the IMF adding 10 billion Euros of its own to Greek relief. The loans will be applied if needed.  The interest rate on these loans is set at 5%, which seems a bit high for debt-ridden Greece, but will have to do. Greece already pays 7% or higher on its current debt.

As a result, it seems the value of the euro has increased. On Friday, the value of the euro was $1.3488. Now, it’s up to $1.3616.

If more bailouts are on the way for the EU, though, the euro may be difficult to maintain at that rate. By the time this is posted, the euro will undoubtedly fluctuate again. However, this shows that investors may have faith in the bailout plan.

Europe’s Big Fat Greek Bailout

Over the past few days, the Greek markets have been circling the drain. It appears as though the debt-ridden country will not be able to pay their debts. A bailout may be in order. Euro zone leaders fought hard for a bailout plan the provides Greece with loans and IMF funds. One intent is to protect the euro.

Greece hoped that the existence of the plan would be enough to calm the market, and, as of today, they have no interest in putting the plan in action. However, the plan is too vague to calm the market. Should a bailout be required, every member of the EU must agree to the plan. Germany does not seem to support the plan while Italy and France have both voiced support for Greece.