June 10th, 2010 15:10:03 GMT

Italy govt plan to cut spending “ambitious”, will need close monitoring in coming 3 years – Bk of Italy official


  • Worsening of economic situation could trigger need for further budget correction measures
  • Budget could cut growth  by 0.5% in 2011-12.  Deficit GDP seen at 3% in 2012

EUR/USD meanwhile consolidating earlier gains, presently at 1.2118.

Spread between Italian and German 10-year bonds narrows to 140 bps, lowest since May 27.


June 10th, 2010 14:15:15 GMT

US Data: Quarterly Service Sector Revenue Survey


Release for: First Quarter 2010
Source: U.S. Department of Commerce
Data seasonally adjusted

Total Revenue ($mln)
Type of Business 1Q-10 4Q-09 3Q-09 2Q-09 1Q-09 4Q-08

Information 289.17 286.08 283.85 283.06 282.58 285.02
Software publishers 37.32 37.85 35.84 35.69 34.82 36.44
Motion picture 26.47 26.02 25.35 25.14 24.93 24.32
Professional, scientific, tech
ex. landscape, veterinary 330.39 320.47 319.95 315.51 319.50 328.62
Legal services 67.49 65.42 66.26 64.64 64.14 64.12
Accounting, tax prep, bookkeeping,
and payroll services 30.64 29.36 30.41 29.96 29.96 31.05
Administrative, support and waste
(except landscape) 135.28 133.75 131.03 129.74 130.71 136.11
Employment services 44.23 42.19 39.94 38.79 39.83 42.75
Travel arrangement 7.77 7.61 7.44 7.40 7.46 7.82
Waste manage, remediation 17.41 16.87 16.72 16.48 16.85 18.05

Hospitals 189.78 190.68 189.91 187.99 185.17 181.93

** Market News International Washington Bureau (202) 371-2121 **


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June 10th, 2010 14:15:13 GMT

ECB Trichet Rejects Narrowing Margin On USD Swaps Operations


LONDON (MNI) – European Central Bank President Jean-Claude Trichet
Thursday rejected that idea that the ECB should narrow the margin on its
US dollar swap liquidity operations.

Speaking at a press conference following the ECB’s monthly
Governing Council meeting in Frankfurt, Trichet was asked whether the
ECB would consider some narrowing on the spread in order to make the
facility more attractive:

“No at this statge it is not something that we envisaged,” he

Trichet said that there was “no particular intention as regards the
margin” at present.

–London Newsroom: 00442078627492; email: ukeditorial@marketnews.com/

[TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$FX$,M$B$$$]

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June 10th, 2010 14:05:09 GMT

ECB’s Trichet: Banks Have To Restore Balance Sheets


–Supports Bank Of Spain’s Efforts To Bolster Caja Sector

LONDON (MNI) – European Central Bank President Jean-Claude Trichet
said Thursday that banks had to restore their balance sheets and the ECB
supported the Bank of Spain’s efforts to bolster the troubled Caja

Speaking at a press conference following the ECB’s monthly
Governing Council meeting in Frankfurt, Trichet said:

“We rely [for] the Spanish banks very much on the Bank of Spain,
which has the responsibility of banking surveillance. The Bank of Spain
has always been impressively good in this respect. We support the Bank
of Spain in all its efforts.”

“The Governing Council is saying that [the banks] have to improve
their own balance sheets, to take responsibility to put aside their
capital. They have to embark on issuance of new shares and stocks and
[take advantage of] recapitalization efforts that have to be available
in the past,” he said. “We call on all countries themselves to put their
house in order.”

–London Newsroom: 00442078627492; email: ukeditorial@marketnews.com/

[TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$FX$,M$B$$$]

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June 10th, 2010 14:05:06 GMT

ECB Contancio: EMU Austerity Measures Could Limit S-T Growth


BRUSSELS (MNI) – Austerity measures could dampen short term growth
in the 16 Eurozone member states, European Central Bank Vice-President
Vitor Constancio said on Thursday.

“We take into consideration the effects of fiscal measures to
reduce deficits in all countries,” Constancio said. “We have to
distinguish between the short-term and long-term effects. It is in a way
unavoidable that those measures can have a destructive effect on the

But he said if nothing was done to reduce debt and deficit levels,
the situation “would have been much harsher.”

“Second, if we take the medium and long term view, we have also to
consider that if economic agents can feel confident that, in the medium
term, the public financial situation is better, improved, [that] will
have a positive effect on expectations and can help to create conditions
for faster growth,” Constancio said.

Eurozone countries are under pressure to cut their debt and deficit
levels because of market turmoil over fiscal policy that is pushing the
euro sharply lower. Greece, the worst offender, was offered a E110
billion life line after it revealed its budget deficit was more than
four times the EU’s stipulated 3% limit.

Constancio was speaking at a press conference after the European
Central Bank’s Governing Council decided at its monthly monetary policy
meeting to leave its key interest rate unchanged at 1.0%. The rate has
been at this level since May 7, 2009.

At the same time, the central bank announced it would conduct three
new 3-month liquidity providing operations on a full allotment, fixed
rate basis. They will be held on July 29, August 25 and September 29.
This is in addition to one already scheduled for June 30.

The next rate-setting Governing Council meeting will be held July

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]

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June 10th, 2010 14:05:05 GMT

Trichet: Need Formidable Increase In Economic Governance


–ECB Chief Backs EU Commission Plan For More EU Surveillance

BRUSSELS (MNI) – The European Central Bank strongly supports a
formidable increase in economic governance, rigorous application of the
European Union budget rules and a plan for governments to submit their
budgets for peer review at the same time each year, ECB President
Jean-Claude Trichet said on Thursday.

“I am and we all are supporting stronger governance at the level of
the 27 (EU countries) and the 16 (Eurozone countries)… within the EU
and within the euro area,” Trichet told reporters at a press conference.

“It is extremely important that we make a quantum leap in this
domain for Europe as a whole, but particularly for the euro area,” he

Trichet said more sanctions and “much more effective monitoring”
were needed.

“We have to go up to all that the legal framework permits. It is
absolutely of the essence,” he said.

The ECB also backs a controversial proposal where EU governments
would submit their budget plans and key projections for peer review at
the same time each year, a plan known as the European semester, he said.

“In the fiscal area… we are very strongly in favour of the
European semester,” Trichet said, adding that he trusted that some
countries that had opposed the European semester plans initially were
now in favour of the idea.

“We need more sanctions… it is absolutely of the essence, all
what we are experiencing is a wake up call,” Trichet said.

European governments are coming under increasing pressure to put
together plans to improve economic governance after investor worries
about high debt and deficit levels have weakened the single currency.

European Council President Herman Van Rompuy is leading a task
force which aims to up economic coordination among the 27
European Union countries but is treading a fine policy line because some
countries fear their sovereignty will be infringed.

Trichet was speaking at a press conference after the ECB Governing
Council decided at its monthly monetary policy meeting to leave its key
interest rate unchanged at 1.0%. The rate has been at this level since
May 7, 2009. The next rate-setting Council meeting will be held July 8.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]

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June 10th, 2010 13:55:21 GMT

Update: ECB Staff Raises Growth, Inflation Forecasts For 2010


–Adds Trichet comments on growth; forecast assumptions on oil, euro fx

PARIS (MNI) – Eurosystem staff have raised their midpoint forecasts
for 2010 Eurozone GDP growth and for HICP while lowering them for 2011,
ECB President Jean-Claude Trichet announced Thursday.

The ECB had been widely expected to raise its growth and inflation
forecasts this year, based on signs of a stronger than expected second
quarter performance with respect to growth and, on the inflation front,
due to higher commodity prices and a weaker euro.

The new forecasts put 2010 GDP in a range of +0.7% to +1.3% with a
midpoint of 1.0%, up from 0.8% in the March forecast. For 2011, the
staff now projects growth in an extremely wide range of +0.2% to +2.2%,
yielding a midpoint of +1.2%. In March, the ECB staff had forecast a
2011 growth midpoint of +1.5%.

The 2010 growth forecast were upwardly revised “owing to the
positive impact of stronger activity worldwide in the short run, while
the range has been revised somewhat downwards for 2011, reflecting
mainly domestic demand prospects,” Trichet said.

In particular, Trichet specified that “after having had a first
quarter which was not buoyant, we will have much more buoyant second
quarter and that of course explains that for the full body of this year
you might have this upward revision, which is not totally negligible
since it is 0.2″ [percentage point].

But the economic situation is characterized by “tension” and
“unusually high uncertainty,” Trichet warned.

“We do not see similar [positive] changes for next year,” he said.
“We see a level of uncertainty at the level of our economy and the
industrialised world…Growth depends on us and crucially depends on
confidence and we try to continue to be an anchor of confidence

More generally, “the Governing Council expects real GDP to grow at
a moderate and still uneven pace over time and across economies and
sectors of the euro area,” Trichet added.

On the positive side, the ECB president said, “the ongoing recovery
at the global level and its impact on the demand for euro area exports,
together with the accommodative monetary policy stance and the measures
adopted to restore the functioning of the financial system, should
provide support to the euro area economy.”

Weighing against growth, however, “the recovery of activity is
expected to be dampened by the process of balance sheet adjustment in
various sectors and weak labour market prospects.”

On the price front, the new forecasts continue to show inflation
well below the ECB’s price stability threshold of close to but below 2%.
HICP is now expected at +1.5% this year, up from the 1.2% projected
midpoint in March. The ECB staff put HICP in 2011 at a midpoint of
1.1%, down from 1.5% in the March forecast.

Trichet said the upward revision in the 2010 HICP forecast was
“mainly reflecting higher euro prices for commodities.” He noted that
the new forecast — as for that of growth — “provide a broadly similar
picture” to that of other international organizations.

Trichet characterized inflation risks as “broadly balanced.”

Upside risks over the medium term were related particularly to
commodities prices. There might also be increases in administered prices
and indirect taxes, because of the need for Eurozone governments to cut
their budget deficits over the next few years.

He also said price pressures could continue to emanate from the
global economy. Nonetheless, Trichet said, “risks to domestic price and
cost developments are contained.”

In its most recent forecasts, published in early May, the European
Commission raised its 2010 GDP forecast for the Eurozone 0.2 point to
+0.9% y/y and its HICP forecast by 0.4 point to +1.5%. For 2011, the
Commission is forecasting growth of 1.5% in the euro area, unchanged
from its previous forecast, and inflation of 1.7%, an upward revision of
0.2 point.

The OECD is projecting growth of +1.2% and +1.8% in 2010 and 2011,
respectively. On the inflation front, the OECD Sees Eurozone HICP at
1.4% this year, then slowing to 1.0% in 2011.

In its forecasts, the ECB staff assumed an average euro-dollar
exchange rate of $1.30 in 2010 and $1.26 in 2011. It assumed oil prices
at $79.50 per barrel this year and $83.70 next year. It said the euro’s
average effective exchange rate was assumed to depreciate by 6.4% this
year and 1.8% next year.

The ECB, using market expectations, pegged the average short-term
interest rate at 0.8% this year and 1.1% in 2011. It said average
10-year rates were seen at 3.9% in 2010 and 4.2% in 2011.

The following table contains the ECB’s new forecasts, compared with
the ones they issued in March.

New (%) Projections (%) Dec (%) Projections (%)

Range Midpoint Range Midpoint
2010 GDP +0.7% to +1.3% +1.0% +0.4% to +1.2% +0.8%
2011 GDP +0.2% to 2.2% +1.2% +0.5% to 2.5% +1.5%
2010 HICP +1.4% to +1.6% +1.5% +0.8% to +1.6% +1.2%
2011 HICP +1.0% to +1.2% +1.1% +0.9% to +2.1% +1.5%

–Frankfurt newsroom: +49-69-720142; frankfurt@marketnews.com

[TOPICS: MT$$$$,M$X$$$,M$$EC$]

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