Europe
S&P downgrades Greece again on the back of default fears;
Kathimerini: IMF says Greece may need another €80-€100bn
Standard & Poor’s cut Greece’s credit rating by two notches yesterday, warning that any debt restructuring would be equivalent to a default. Greece now has the same credit rating as the likes of Belarus and Burkina Faso. The Greek government responded, saying that the downgrade was “not justified” and again questioned the integrity of credit rating agencies, saying their actions were based on market rumours which “seriously cast in doubt [their validity]".
Various figures for a potential second Greek bailout are quoted in the Greek press. Kathimerini reports that the IMF has suggested a new €80-€100bn bailout package to cover Greece’s funding needs between 2011 and 2013. Meanwhile, Ta Nea reports that Greece will need at least €60bn for the same period with €27bn needed in 2012 and €32bn in 2013, with Naftemporiki reporting that Greek officials have confirmed those figures. Kathimerini also reports that Greece will have to put up state assets as collateral, not only for any new loans agreed, but also for the pending June instalment of the existing package.
The German government continues to play down talk of a debt restructuring and refused to spell out what action would be taken until after it has seen the next progress report from the EU/IMF on the implementation of the Greek bailout. The next report is not due until June, meaning a decision may not be reached for some time. In any case, Greece looks unlikely to achieve its targets without significant delays to the structural reforms and its €50bn privatisation plan. The cost of borrowing for Greece, Ireland and Portugal continue to rise and the cost of insuring against a Greek default, using credit default swaps, reached record highs yesterday.
FAZ reports that German CDU budget spokesman Norbert Barthle has said that pushing through another bailout for Greece would be “very, very difficult”, given the current discussions on the Portuguese bailout and the eurozone’s post-2013 permanent bailout fund, the European Stabilisation Mechanism (ESM). Meanwhile, FDP MP Frank Schäffler has proposed a motion calling to rule out further bailout packages for indebted eurozone countries.
The Guardian reports that negotiations over a potential interest rate cut on the Irish bailout loans are ongoing. However, Germany has moved to separate the issue from the Greek crisis, stating that the situation has not changed from the previous negotiations. The previous sticking points over what concessions Ireland will make in exchange for a rate reduction, particularly over its corporate tax rate, remain. Meanwhile, Irish Prime Minister Enda Kenny last night firmly rejected calls from UCD economics Professor Morgan Kelly to pull Ireland out of the EU-IMF bailout deal. Kenny said the plan would constitute a “lethal injection” to the Irish economy, the Irish Times reports.
Separately, Portugal’s banking sector borrowing from the ECB increased by 23% in April showing the massive impact which the state’s problems are having on the country’s banks. Finnish parliamentary parties will meet today to begin discussions over Finland’s participation in the Portuguese bailout. Ahead of the meeting, Erkki Tuomioja, a senior member of the Social Democratic Party, said that if Greece wants more favourable terms for its bailout package then it should restructure its debt, specifically to shift some of the burden onto investors, indicating that his party is still against further eurozone bailouts.
Eurozone comment round-up
In the WSJ, Richard Barley argues, “German politicians need to recognise there is no solution to the euro-zone crisis that doesn't involve Germany stumping up cash…rather than offering voters false hope, German leaders should start spelling out some home truths.” The Economist’s Charlemagne argues, “Plainly, the crisis requires fresh thinking. But so far the EU remains doggedly on its year-old path…Above all, push the problem beyond the political horizon of the euro area's main leaders: the 2012 presidential election in France, and the 2013 parliamentary election in Germany.”
An editorial in the WSJ argues, “Whether you call it default, restructuring or reprofiling, somebody isn't going to get paid back everything they expected when they expected it unless Greece gets a lot more bailout money.” A special feature in Le Monde notes that, with the sole exception of Baltic states, the prospect of euro membership is increasingly losing appeal in the eyes of non-eurozone countries.
A comment piece in Die Welt entitled “the market must determine Greece’s fate” argues that although politicians do not want to hear about Greece leaving the euro, such a scenario could be mutually beneficial as “Greece's economy could become more competitive and the eurozone stable.”
EU Commissioner calls for single, more powerful EU President
EurActiv France reports that yesterday, speaking in Berlin on the occasion of Europe Day, EU Internal Market Commissioner Michel Barnier said that “one day, [Europe] will need an EU President” cumulating the functions of European Council and Commission President, arguing that “Europe needs a strong face and a strong voice.” Barnier also called for the creation of a single representative allowed to speak on behalf of eurozone countries and for a common EU defence policy, reports the IHT.
Following the news that the European Commission is due to spend £225m on ‘communicating’ the EU, Open Europe Director Mats Persson is quoted in the Express saying: “The EU needs reform, not more spin.”
The Mail notes that Germany’s exports hit a record high £86bn in March – the biggest figure since records began in 1950.
In an interview with French local radio Euradionantes on the occasion of Europe Day, Open Europe’s Pieter Cleppe argued that “one of the EU’s best achievements has been to promote open borders, and the prospect of EU accession has stabilised ex-Communist countries,” but that “from the very beginning, a protectionist customs union and a tendency for centralisation were installed.”
Open Europe’s Pieter Cleppe appeared on Russia Today discussing France’s triple A credit rating.
Speaking at the Festival of Europe in Florence, New York University Professor Joseph Weiler, an expert on EU Law, warned that EU integration has reached its limits, and argued that the result was a “continuous decline in the EU's legitimacy and the mobilising force of the EU institutions,” reports EurActiv.
In his City AM column, Editor Alistair Heath argues that if David Cameron is going to offer concessions to the Liberal Democrats on government policy then “he should do a deal: the Lib Dems should allow him to be tougher on the EU in return. The coalition has done nothing yet to reverse the EU juggernaut – it is high time for some action on this important front.”
In an interview with Le Figaro, German Interior Minister Hans-Peter Friedrich says he is supportive of France’s proposal for temporary reintroduction of border checks within the Schengen area in the event of a member country failing to ensure proper control of one of the area’s external borders.
Writing on Conservative Home, Douglas Carswell MP argues that MPs should oversee the appointment of Britain's next Ambassador to the EU.
EurActiv reports that EU Trade Commissioner Karel De Gucht’s proposals for lowering the EU’s import duties on goods from Pakistan face significant opposition because of their expected impact on the European biofuels and textiles industries, particularly in crisis-hit Portugal.
EUobserver reports that during its upcoming EU Presidency, Poland intends to push for the increased exploitation of Europe’s shale gas reserves as an alternative to traditional fuels, and also to break the EU’s reliance on imports of Russian gas.
New on the Open Europe blog
The EU and the Mediterranean: good neighbours?
Posts
