Amid protests in Athens, the Greek parliament is set to vote on a fresh austerity package to avoid default Financial markets have responded positively this morning on the hope that the vote will pass. In an interview with Die Zeit Jürgen Stark, ECB Executive Board Member, ruled out a Brady bond type plan, saying: “Brady-bonds are not an option. They would contradict the ‘no bail-out’ clause in article 125 in the treaty of the EU.” Meanwhile, the new Portuguese government released its austerity and privatisation plans for the next four years yesterday, saying that it will be “more ambitious” than the targets laid out under the EU/IMF bailout. The Independent notes that David Cameron is expected to lead opposition to the Commission’s expected demand for new taxes to fund the EU budget, with options ranging from a financial transactions tax to energy taxes. “We will not be alone in opposing this,” said one Government source. In an op-ed in French financial daily La Tribune, French Economics Professor Florin Aftalion quotes Open Europe’s finding that the ECB currently holds €190bn of Greek debt, while its capital and reserves amount to only €82bn. He argues: “When it agreed to participate in Greece’s temporary bail-out during the spring of 2010, the ECB bowed to political pressure. It made a fatal mistake and seriously betrayed the trust placed in it, while taking excessive risks for which European taxpayers will have to foot the bill.” Open Europe Europe
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Thursday, 30 June 2011
Greece faces a crucial parliamentary vote on the new austerity package today, with widespread protests continuing in Athens. Despite the government’s slim majority and talk of dissent among party ranks, the vote is expected to pass with some opposition members suggesting they may support the package. Both the governing party, PASOK, and leading opposition party, New Democracy, have made it clear that any dissenters (against each party’s line) will be expelled from the party permanently. EurActiv reports that EU Economics Commissioner Olli Rehn said, "To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default". Meanwhile, the Governor of the Bank of England Mervyn King suggested that the UK is preparing for a potential Greek default, saying: “There’s sufficient concern in the market about a default for us to think carefully about contingency plans and the consequences of such an event”.
Open Europe’s Raoul Ruparel appeared on the BBC World Service discussing the Greek crisis and its impact on the global economy. Open Europe’s briefing on the second Greek bail-out is cited by Romanian paper Jurnalul National and Malta Independent. Open Europe’s research on the ECB’s exposure to the eurozone crisis is cited by French Professor Florin Aftalion in an op-ed in French financial daily La Tribune.
FT WSJ WSJ 2 EurActiv FT 2 FT 3 WSJ 3 Kathimerini Isotimia Kathimerini 2 Ta Nea Vima Dow Jones Dow Jones 2 Irish Times Irish Times 2Irish Times 3 Telegraph Telegraph 2 Liberation La Tribune BBC Independent Le Monde EUobserver Le Monde 2 Sun Express GuardianGuardian 2 Les Echos IHT Reuters El Pais El Pais 2 FTD FTD 2 FTD 3 FT 4 FT 5 FT 6 FT 7 Market News WSJ 4 La Tribune 2 El Pais 3Expresso WSJ 5 Reuters 2 Reuters 3 Business Insider CNBC Moneycontrol FAZ Nu.nl Trouw Zeit Jurnalul National Malta Independent La Tribune
Treasury suggests that overall contribution to the EU may increase by 12%
The European Commission is due to publish its proposal for the next long-term EU budget, running from 2014-2020, this afternoon. TheTelegraph reports that, according to the UK Treasury, if all EU funds are included, the Commission will ask for a 12% increase. Apart from the EU budget itself – which may not be subject to a big increase – member states also contribute towards the European Development Fund and the Globalisation Fund, which are technically separate from the EU budget. The increase would defy the British, French, German, Finnish and Dutch calls for an increase limited to inflation outlined in a recent letter to Commission President Jose Manuel Barroso. Open Europe Director Mats Persson is quoted by the Telegraph and the Mail saying, “Any increase above the rate of inflation would clearly be unacceptable, given the continuous austerity around Europe and the exceptionally poor value for taxpayers’ money the EU budget provides.”
FAZ reports that eight member states, including the UK and Germany, have sent a letter to the European Commission, calling for cuts to wages, pensions and perks of 45.000 EU officials, given austerity measures in member states. The Commission will today or tomorrow propose concrete changes to the statute of EU officials and a proposal for possible job cuts. An article in Polish daily Rzeczpospolita quotes Open Europe arguing that, should the Commission opt for cutting jobs, it may “be starting to get the message, however slowly, that in the long term the EU will have to make better use of its resources.”
In a report published today, the European Court of Auditors has highlighted a number of flaws of the Single Payment Scheme (SPS) – through which the EU provides direct aid to European farmers. The Court has noted that the SPS “primarily benefits few but large beneficiaries” and that the definition of ‘beneficiaries’ allows “persons or entities not engaged in agricultural activity, or only marginally so,” to receive EU farm subsidies.
Eurozone comment round up
Writing in the WSJ, Research Director of the Oxford University Centre for Business Taxation Clemens Fuest argues that, “By threatening to stop providing Greek banks with liquidity in the event of a rollover, the ECB has interfered with this decision and overstepped its mandate. It has exposed itself to the suspicion that its true motive is to avoid losing money on its stock of Greek bonds”.
Writing on his Telegraph blog Andrew Lilico looks at the importance of having a mechanism to wind down insolvent banks and to encourage ‘bail-ins’ rather than bail-outs. Adding that the quicker this is done, the quicker the banking and eurozone crisis can be solved.
Telegraph: Lilico Times: Koletsky Independent: Prosser Suomenkuvalehti: Salokoski WSJ: Fuest Reuters: Breaking Views El Pais: OntiverosBBC: Mason BBC: Today FT: Spiegel FT: Pisani-Ferry FT Editorial WSJ Heard on the Street La Tribune: Aftalion
EurActiv reports that, according to eurozone sources, between 10 and 15 of 91 scrutinised European banks are set to fail the new round of EU-wide stress tests. The article notes that casualties are expected in Germany, Greece, Portugal and Spain.
The European Commission is considering cutting fishing quotas by up to 25% in reaction to missing data from several member states. It also decided to impose sanctions against EU candidate Iceland and prepare sanctions against the Faroe Islands.
Il Sole 24 Ore reports that the European Commission has threatened to impose new fines on Italy unless the serious problems with waste disposal in Naples are solved quickly. EU Environment Commissioner Janez PotoÄnik is quoted saying, “I hope that the Italian authorities address the problem so that [Italian] taxpayers’ money can be spent on improving the situation rather than on paying fines.”
The European Court of Human Rights ruled yesterday that, unless the safety of foreign criminals is guaranteed in their home countries, then immigrants convicted of violent crime cannot be deported.
Lagarde to be next IMF Managing Director
French Economy Minister Christine Lagarde has been appointed as the new Managing Director of the IMF. Meanwhile, on his Contes publicsblog, Le Monde journalist Philippe Le Coeur argues that French Economy Minister Christine Lagarde will leave France’s public finances “in a deteriorated state” and notes that three names are currently mentioned to succeed her as French Economy Minister: Budget Minister François Baroin, Education Minister Valérie Pécresse and Agriculture Minister Bruno Le Maire.
Live blog on the Greek vote: EU super Wednesday
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