Finance chiefs of the Group of Seven leading industrialized powers will hold emergency talks on the euro zone debt crisis on Tuesday in a sign of heightened global alarm about strains in the 17-nation European currency area.
With Greece, Ireland and Portugal all under international bailout programmes, financial markets are anxious about the risks from a seething Spanish banking crisis and a June 17 Greek general election that may lead to Athens leaving the euro zone.
Canadian Finance Minister Jim Flaherty said ministers and central bankers of the United States, Canada, Japan, Britain, Germany, France and Italy would hold a special conference call, raising pressure on the Europeans to act.
"The real concern right now is Europe of course - the weakness in some of the banks in Europe, the fact they're undercapitalised, the fact the other European countries in the euro zone have not taken sufficient action yet to address those issues of undercapitalisation of banks and building an adequate firewall," Flaherty told reporters.
The disclosure of the normally confidential teleconference came as European Union paymaster Germany said it was up to Spain, the latest euro zone country in the markets' firing line, to decide if it needed financial assistance, after media reports that Berlin was pressing Madrid to request aid.
German Chancellor Angela Merkel and leaders of her centre-right coalition said in a joint statement: "All the instruments are available to guarantee the safety of banks in the euro zone."
They effectively ruled out Spanish calls to allow euro zone rescue funds to lend money directly to recapitalise Spanish banks, which are weighed down with bad property debts, without the government having to take a bailout programme.
Berlin is pressing reluctant euro zone partners, including close ally France, to agree to give up more fiscal sovereignty as part of a closer European fiscal union.
A G7 source, speaking on condition of anonymity because of the sensitivity of the issue, said there were concerns about the risk of a bank run in Spain, which is struggling to recapitalise nationalised lender Bankia and smaller banks stricken by the collapse of a property bubble.
"There's a heightened sense of alarm over developments in Europe, particularly in Spain," the source told Reuters. "There is concern on whether there will be a bank run in Spain that could have repercussions beyond the euro zone."
Spain test
Spain's borrowing costs have soared to around 6.6 per cent for 10-year bonds with the risk premium over safe haven German Bunds reaching a euro era record. Madrid plans to issue 1-2 billion euros in 10-year debt on Thursday in a key market test.
The G7 source said the United States, the current G7 chair, was unwilling to allow International Monetary Fund money to be used to support the euro zone, so there was little prospect of the global community acting as one to contain the crisis.
A senior Brazilian government official said the euro zone crisis would also be a central focus of this month's G20 summit in Los Cabos, Mexico.
"We insist in our position that European countries with enough space to stimulate the economy, even via fiscal stimulus (not many that can do that), should do it now," said the official, referring mostly to Germany.
The euro climbed and safe haven US and German bonds eased off last week's record low yields as speculation mounted that authorities will act to keep the euro zone intact and overcome the debt crisis.
EU leaders hold their next regular summit on June 28-29 and their chairman, Herman Van Rompuy, said on Monday he would put forward a roadmap to design a plan for closer economic union in the euro area by the end of this year.
He said he would present "the main building blocks for this deepened economic and monetary union" at the summit, including banking integration involving proposals on "supervision, on deposit insurance and on resolution".
Germany, keen to limit liabilities for its taxpayers as the biggest contributor to euro zone rescue funds, has so far rejected proposals for a banking union with a joint deposit guarantee and a common resolution fund for failing banks.
Officials say such measures can come only at the end of a drive to closer fiscal union.
Greek exit eyed
China, another major G20 power, has instructed key agencies including the central bank to come up with plans to deal with potential economic risks of a Greek withdrawal from the euro zone, three sources with knowledge of the matter told Reuters.
"It's very urgent," one source said. "The government has asked every department to analyse measures to cope with a Greek exit from the euro zone and make their own suggestions as soon as possible."
The plans may include measures to keep the yuan currency stable, increase checks on cross-border capital flows and stepping up policies to stabilise the domestic economy, the sources said.
Euro zone officials have sought to persuade Beijing, which has vast foreign currency reserves mostly in US Treasury bonds, to back the euro zone, its main trading partner, by buying troubled countries' bonds or investing in a proposed trust fund. But Chinese officials have been reticent, concerned at the risks and mindful of Chinese public criticism.
In one ray of light for the euro zone, Portugal's international lenders said on Monday its year-old bailout programme was on track, offering strong support for Lisbon as it seeks to avoid following Greece into a second rescue package.
Finance Minister Vitor Gaspar said he would stick to the programme after getting a thumbs-up in the latest inspection review by the European Union and IMF, and that the lenders would recommend payment of the next 4.1 billion euro ($4.9 billion) tranche from the rescue fund.
Three leading Portuguese banks said they would draw on funds provided under the country's 78 billion euro ($93 billion) bailout to meet tough new capital requirements as they struggle with the country's debt crisis.
Reuters
Finance Minister Pranab Mukherjee favours 25 per cent cut in states taxes on petrol - Economic Times
Speaking at the day-long meeting of the Congress Working Committee (CWC), he justified the high price of petrol because of the overall international price of crude.
He said the states needed to also do their bit on reduction of petrol price.
Corruption and price rise were the most important issues during the discussion at the CWC.
KPCC President Ramesh Chennithala attacked the petroleum companies for raising the petrol prices, especially at a time when Kerala was witnessing a bye election, that put the party in trouble.
He wanted the government to take back the power to decide oil prices.
Forex: USD index back below 83 amid improving risk sentiment prospects - FXStreet.com
Finance Services Leaders Appeal for Limited Government Aid to Fight Cyber Attacks - PC Advisor
A group of industry experts representing the financial services industry, an increasingly popular target for cyber criminals, on Friday appealed to members of a House subcommittee for limited government action to help banks and other institutions protect themselves and their customers from the growing breadth and sophistication of online attacks.
Their wish list includes policy changes to facilitate greater sharing of threat information among public- and private-sector entities, stricter law enforcement in the United States and abroad, and a more holistic approach to the policing the Internet ecosystem.
Banks and other financial services firms already have sophisticated cybersecurity mechanisms in place, of course, but even state-of-the-art perimeter defenses can't guard against every threat vector, according to Michele Cantley, senior vice president and chief information security officer with Regions Bank, who testified at Friday's hearing on behalf of the Financial Services Information Sharing and Analysis Center. That group counts more than 4,400 members, accounting for the majority of the U.S. financial services sector.
"[C]orporate account takeover attempts cannot be stopped solely by the financial institutions," Cantley said. "All participants in the Internet ecosystem have roles to play. Banks, for instance, have no direct control over the end customers' computers, nor can banks control what emails bank customers open or what websites they visit prior to accessing their online systems."
Cantley concurred with other witnesses in their appeal for removing legal and compliance barriers to sharing threat information, an issue addressed by a bill that recently won approval in the House and awaits consideration in the Senate, where it faces an uphill climb amid competing cybersecurity legislation in an election season. Though they expressed some reservations about privacy and confidentiality concerns in the bill, the witnesses said they broadly supported the Cyber Intelligence Sharing and Protection Act.
But Cantley also told lawmakers that financial firms and others across the public and private sectors need to do more to educate users about safe computing, training them to detect the warning signs of phishing attacks, malware and other threats. Additionally, Cantley suggested that lawmakers could pursue legislation that would give Internet service providers more flexibility to filter out traffic carrying malicious content so that fewer threats would ever make to unsuspecting users' desktops.
Those appeals came with the predictable caveat that industry groups would resist initiatives to impose more prescriptive regulations that would oversee their cybersecurity efforts on a technical level.
Friday's hearing comes amid rising concerns about vulnerabilities not only to individuals transacting with financial institutions, but to the corporate networks themselves. After all, as the notorious outlaw Willie Sutton is said to have quipped when asked why he robbed banks, "That's where the money is," recalled Rep. Scott Garrett (R-N.J.), chairman of the House Financial Services Committee's Subcommittee on Capital Markets and Government-Sponsored Enterprises.
"Unfortunately, just as there have been many and numerous instances of identity theft out there, where individuals have credit cards stolen or accounts looted, there has also been a significant rise in corporate account takeovers as well," Garrett said.
But there is an important distinction between the garden-variety denial-of-service attacks perpetrated by hacker collectives such as Anonymous that can knock a site off line—grabbing headlines in the process—and the attacks that can infiltrate the inner walls of critical digital infrastructure such as financial trading platforms or top-secret nuclear systems, said Mark Graff, chief information security officer at NASDAQ OMX.
Graff, who only joined NASDAQ in April, has spent more than two decades in information security, including a recent stint overseeing the defenses at Lawrence Livermore National Laboratory, where nuclear secrets were among the more sensitive assets under his guard.
"I changed industries, but most of the challenges and many of the adversaries remain the same," said Graff, who stressed the need for tiered security that isolates mission-critical assets behind additional firewalls or in distinct network zones, keeping them away from the Internet.
"One key message in both institutions is the isolation of critical systems from the Internet at large. While many of the services we deliver to customers worldwide are housed on Internet-facing Web services, our trading and market systems are safely tucked away behind several layers of carefully arranged barriers," he said. "This is an important distinction to remember, and we should all keep this in mind when you hear about denial-of-service attacks against one institution or another. Any troublemaker can run up to the front door of a house and ring the doorbell over and over again, and that's what most denial-of-service attacks amount to."
Graff said that those attacks, while they might temporarily block consumers from accessing certain websites, are typically nothing more than an act of "vandalism," hardly a sign that anyone has gained entry to the house, by his metaphor.
But even in seeking to remove the sensationalism from the often breathless media coverage of cyber attacks, Graff acknowledged that the threats are very real.
"Effectively, all of the systems represented at this table," he said, "they're all under attack all the time at some level, in contrast to the situation just a few years ago. Today Internet attacks are a little bit like weather. We have a little bit more rain or a little less rain. Sometimes there's a hurricane that comes at us, but generally speaking they're all under attack."
In addition to a more fluid information-sharing framework—a point on which nearly all observers agree— Graff argued that corporate systems could achieve a higher degree of stability if hardware manufacturers and software producers did a better job of building security in at the time of production.
Additionally, he suggested that lawmakers and government officials could dramatically improve the nation's security posture if they took steps to shore up the supply chain for parts that tech companies import from overseas, citing concerns that compromised hardware could provide hostile foreign actors, including those working at the behest of their government, with an entry point into critical U.S. systems.
"The supply chain problem, the threats of supply chain attack, are really, I think, perhaps the knottiest problem, the most serious issue that faces us, and the one that would be most susceptible to help from government," Graff said. "I think it's one where the U.S. government really could make the biggest assistance."
Kenneth Corbin is a Washington, D.C.-based writer who covers government and regulatory issues for CIO.com.
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