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Euro leaders seeking to stave off crisis turn to Cyprus

by Bloomberg News
March 11, 2013 , 6 : 59 pm

EU leaders will meet for a March 14-15 summit in Brussels to discuss terms for Cyprus. Photo � Bloomberg file picture

Brussels: European leaders grappling with political deadlock in Italy and spiralling unemployment in France will turn to a financial rescue for Cyprus in an effort to stave off a return of market turmoil over the debt crisis.

European Union leaders will meet for a March 14-15 summit in Brussels to discuss terms for Cyprus, including the island nation's debt sustainability and possibly imposing losses on depositors.

That comes as Italy struggles to form a government after an inconclusive February 24-25 election and as concern over the French economy mounts with unemployment at a 13-year high.

"We haven't turned the corner yet, but we're on a good path," German Finance Minister Wolfgang Schaeuble told Austria's Der Standard newspaper in a March 8 interview.
"It would be wrong at this point to change course," he added.

The European Central Bank's pledge to intervene in bond markets and the prospect of an economic recovery by the end of the year are holding the three-year-old sovereign debt crisis in check. Still, gridlock in Italy has raised the spectre of renewed turmoil in the euro area's third-largest economy, while growth has ground to a halt in France, the second-largest.

European bonds held steady last week, with Spanish debt advancing for a fourth week and Italian yields sliding.

Spanish 10-year yields declined for the ninth straight day, sliding three basis points to 4.73 per cent at 9:12am in Madrid. Italian yields with the same maturity climbed three basis points to 4.63 per cent.

The euro retreated last week after a US report showed a falling jobless rate.
It traded at $1.3012 at 9:14am in Frankfurt to bring the decline against the greenback this year to 1.4 per cent.

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