Euro debt crisis expands: Ireland debt downgraded to junk, fears for Italy as bond yields rise, and Eurozone officials plan emergency summit for Greece (+ analysis); China's growth slows; Pakistan spy chief heads to Washington after US cuts off aid; Thousands flee Nigerian city after religious violence; and more
Top of the Agenda: Ireland Downgraded to Junk, Debt Contagion Fears Rise
Credit rating agency Moody's downgraded Irish debt to junk status Tuesday, suggesting the country may need a second bailout, just a week after the agency provided Portugal with a similar assessment. European Union officials have expressed public frustration (DerSpiegel) toward the "Big Three" rating agencies--Moody's, Fitch, and Standard and Poor's--for exacerbating the European sovereign debt crisis with speculative ratings.
At the same time, markets feared that Italy could be the next victim in the ongoing eurozone crisis, as the yields on the country's ten-year bonds reached a high of 6 percent (Bloomberg) Tuesday for the first time since 1997. Bonds gained today, after Italian Prime Minister Silvio Berlusconi vowed to push a €40 billion deficit-reduction (FT) plan through Parliament by the end of this week.
Meanwhile, eurozone officials planned to hold a special summit (WSJ) Friday to hash out a second financial rescue package for Greece. On the agenda is a proposal by the Washington-based Institute of International Finance that advocates buying back Greece's debt at a discount and exchanging bonds to reduce the country's debt burden.
Italy is used to crises--the government is rudderless, the economy is stagnant, and Prime Minister Silvio Berlusconi is mired in scandals. Now the country may become embroiled in the euro crisis, and its fate lies in the hands of its finance minister, writes Der Spiegel's Michael Braun.
The United States may be on the verge of making one of the biggest and least-necessary financial mistakes in world history, while the eurozone could be on the verge of a financial crisis that destroys not just countries' solvency but even the currency union and, at worst, much of the European project, writes the Financial Times' Martin Wolf.
EU leaders will be asked to approve an expensive compromise to save Greece and the eurozone, says the Economist.
PACIFIC RIM: China's Growth Slows in Second Quarter
Following the Chinese government's implementation of strict monetary policies to fight rising inflation, China's growth slowed (FT) to 9.5 percent in the second quarter of this year, down slightly from 9.7 percent in the first quarter.
China: In a move to give emerging markets a greater voice at the IMF, the Fund's new managing director, Christine Lagarde, appointed China's Zhu Min (BBC) to a deputy managing director post.
The International Monetary Fund, both criticized and lauded for its efforts to promote financial stability, is again at the forefront of global economic crisis management. This CFR Backgrounder examines the Fund's history and role.