The European Commission is investigating possible manipulation of the Euro Interbank Offered Rate (EURIBOR) benchmark rate at which banks lend in euros to each other. The EURIBOR is used as a reference for trillions of euros in euro-denominated loans and debt instruments.

A total of 43 banks sit on the EURIBOR panel, which is hosted by the European Banking Federation. The EURIBOR panel banks are the banks with the highest volume of business in the euro zone market. They claim to have a first class credit standing (?), high ethical standards (?) and an excellent reputation (?).

By: Jose M. de Areilza & Jose Ignacio Torreblanca- 26 June 2012 Published on European Council on Foreign Relations Website

Extract

Banks in Europe are technically insolvent. They have huge debts that they cannot pay and governments are doing the bidding of the banks by transferring these debts to the public and then imposing austerity measures. Banks have found innovative ways to sell their debt back and forth to each other without having to increase their reserve requirements in any way. For example, Deutsche Bank has three trillion euros in debt that is supported by less than one and half percent of tier one capital. (Tier 1 capital is the core measure of bank's financial strenghth from a regulator's point of view.

At the end of July Greece had completed only about 100 out of more than 300 reform benchmark set by international lenders. Greece has legislated plenty of reforms but failed to implement many of them. The stakes are higher than ever. Greece will not receive any more rescue funding until the medium-term package is in place. Without that money, the Greek government will run out of cash to pay pensions and public-sector salaries in September, if not sooner.

Despite being the European Union's fifth-largest economy Spain is teetering on the brink of a Greece-style meltdown and the silence of Spanish lobbyists is bewildering.

Europe's harsh austerity programs have pushed depressed economies even deeper into depression. Growth has stagnated. Debt is out of control. In vulnerable economies like Spain, interest rates are veering toward usury. Governments are bailing out banks. And Greece has imploded both politically and economically with citizens now emptying their bank account. Because investors look at the state of a nation's economy when assessing its ability to repay debt, austerity programs haven't even worked as a way to reduce borrowing costs.

The author of this article is Dr. Conor McGrath (www.Conormcgrathpa.com), Ireland. Dr. Conor McGrath has written/edited seven books on lobbying and public affairs. 

France's new President is calling for a European rethink to foster growth strategies. But he will face two monumental challenges. The first is to solve France's overwhelming debt and fiscal crisis- in the eyes of many economists, the most serious in Europe. Currently, France's public deficit is 5.2% of GDP and public debt is 85.8% of GDP. France is still able to borrow 10 year money at below 3%, compared to 1.6% for Germany, around 2% for the UK and 4.7% for deeply troubled Spain.

Europe needs to get its growth groove back. But how? A growth agenda for Europe requires several parts: 1) an emphasis on productivity growth, with policies to support saving and investment, innovation and research, trade, education and training; 2) a budget framework that does not threaten European fiscal health; (3) tax policy that enhances economic growth; 4) regulation that balances growth with concerns about safety and soundness, and 5) a healthy financial system that meets the needs of savers and borrowers.

Southern Europe's moribund growth is rooted in the long term decline of competitiveness in countries like Italy, Spain and Portugal. Reforms to free up labour markets, cut business costs and slash red tape could pay off in the long term. But right now, austerity measures to bring budgets down are compunding the no-growth problem.