Debt crisis: as it happened, June 28, 2012

Does Europe need more hedge funds? That was one of the more intriguing questions to come out of a one-day seminar on Europe's sovereign debt crisis I attended this week in Brussels. The event was co-sponsored by the IMF and Bruegel, the respected European think tank, and it was held under the Chatham House Rule, which means I can't tell you who said what. But I can give you a few headlines.

‘It must realize its current business model is dead’ NICOSIA/MOSCOW — Russia rebuffed Cypriot entreaties for aid on Friday, leaving the island’s increasingly isolated leaders scrambling to strike a bailout deal with the European Union by next week or face the collapse of its financial system. In Nicosia, lawmakers considered proposals to nationalize pension funds, pool state assets and split the country’s second-largest bank in a desperate effort to satisfy exasperated European allies.

BERLIN – Back in May, as the eurozone veered deeper into crisis, Nobel Prize-winning economist Paul Krugman penned one of his gloomiest columns about the single currency, a piece in the New York Times entitled “Apocalypse Fairly Soon”.

World stock markets rocketed on Friday, propelled by bank shares, and the euro surged against the dollar after an EU summit delivered surprise emergency measures to fight the eurozone debt crisis.Thye Madrid and Rome markets were the biggest gainers after emergency aid to crisis-hit Italy and Spain was announced following marathon talks at a summit to save the ailing single currency.And interest rates on Spanish and Italian 10-year bonds dropped on the easing debt concerns.

The EU has fallen short of a target for loans to the IMF destined for a eurozone bailout, with Britain leaving its EU partners in the lurch for the second time this month.Eurozone chief Jean-Claude Juncker said the 17 countries that share the single currency pledged 150 billion euros ($195 billion) in bilateral loans for the International Monetary Fund late on Monday.The European Union hopes the money can help stabilise the debt-laden euro area.

Eurozone finance ministers will hold telephone talks on the debt crisis on Monday to flesh out decisions taken at a key summit earlier this month to save the European currency.With several eurozone nations under threat of a credit rating downgrade, a key focus of the conference call will be plans to boost International Monetary Fund (IMF) coffers to allow it to come to the aid of floundering members.

By John M. Mason: “European leaders’ blueprint for a closer fiscal union to save their single currency left the onus on central bankers to address investor concerns that Italy and Spain would succumb to the two-year-old financial crisis.”