LONDON (AP) â¿¿ Renewed fears over Europe's shaky banking sector sent the euro skidding to a 15-month low against the dollar Thursday, while stock markets failed to get much of a boost from another round of upbeat U.S. economic data
For a second day running, market concern has centered on the state of the banks following UniCredit's announcement Wednesday that it was selling new shares at a 69 percent discount to Tuesday's closing price.
UniCredit, Italy's biggest bank, is trying to raise â¿¬7.5 billion ($9.7 billion) to meet new European requirements for banks to thicken their financial cushions against possible losses. UniCredit's share price was down another 16 percent Thursday, following an equivalent decline the day before.Italy, the recent focus of the debt crisis, must borrow to cover â¿¬53 billion ($69 billion) in expiring debt in the first quarter alone in debt auctions beginning Jan. 13. That will test whether the government of new Prime Minister Mario Monti is making progress in regaining market confidence through budget cuts and efforts to improve weak economic growth. Banks are an integral part of the debt crisis because they hold government bonds. A default or steep fall in the value of government bonds could inflict heavy losses on banks and choke off credit to the European economy. That's why regulatory authorities want Europe's banks to raise their buffers by â¿¬115 billion (149 billion) over the next few months. The worry in the markets is that banks will have to offer sharp discounts. The economic slowdown will also keep pressure on lenders in Europe. Spain's economy minister told the Financial Times he expects the country's banks to have to set aside another â¿¬50 billion in provisions to cover the costs of bad property loans. The comments caused Spanish banks stocks to slide and contributed to losses in other countries. France's Societe Generale SA was down 4 percent, for example.