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Europe and Evergrande’s debt crisis, Lagarde speaks

Christine Lagarde, European Central Bank President, says that Europe’s direct expression to Evergrande, the Chinese property company, would have restrictions.

This comment came when global stock exchanges were on great alert over the company’s massive debt issues.

 

Evergrande has experienced its share price fall in current months in the middle of a broad crackdown by Beijing on highly leveraged developers. This fact produced fears in investors. It might also affect several security payments this week.

Evergrande is deeply tangled with the broader economy of China. The multiple financial institutions are presented to cash-strapped developers through indirect holdings and direct loans.

Market experts tell an increasing liquidity crisis at the company might send further complications over the global economy. 

Interview with Lagarde

On Tuesday, speaking with CNBC, Lagarde said that the ECB kept the debt-laden property developer prices.

She said that they are looking at it and monitoring it.

She also said that she remembers the latest stock market developments in China, but in Europe, direct exposure would be small.

When the interviewer asked her if the ECB was prepared for the possibility of a chaotic worldwide effect in the event of the company’s collapse, she replied that for the moment, what they see is a China-centric influence and exposure.

Lagarde commented on these events after Jerome Powell, U.S. Federal Reserve Chair, stated his position on Evergrande’s debt problems, saying that it appeared to China. On Wednesday, Powell also told reporters that he did not view a similarity with the U.S. corporate sector. Powell on wednesday said that there’s not much direct exposure for the United States in terms of their suggestions. On Friday, Evergrande`s Shares in Hong Kong dropped approximately 8%.

On Thursday, the Wall Street Journal stated that Chinese authorities had told local executives to prepare for the possible failure of Evergrande.

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