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FAZ: IMF will not pay out its share of the next installment of the Greek bail-out making Greece insolvent;
EU may have to cover IMF’s share if it wants to avoid a Greek default
FAZ reports that the IMF will almost certainly not pay out its share of the next instalment of aid from the Greek bail-out, as the EU/ECB/IMF are expected to conclude that Greece cannot fund itself over the next year, meaning that it would be against the IMF’s rules to pay out the next tranche of aid. This means that Greece will need a second bail-out or face a default, with the article estimating that the fresh rescue package would need to be between €60bn and €70bn. A third option, reports the article, would involve the EU covering the IMF’s share of the funds, through the European Financial Stabilisation Mechanism (EFSM), until a new adjustment programme can be agreed. A statement by German Finance Minister Wolfgang Schäuble notes that the conditions attached to the first bail-out “have not been fulfilled”, suggesting that the IMF will not pay out the money.
However, in conflicting reports, Kathimerini notes that Athens is heading for an overall agreement with the EU/IMF/ECB officials on the next instalment of aid and a medium-term plan. Reuters reports that the EU/IMF/ECB have agreed to let the Greek government propose a VAT reduction from 23% to 20% in an attempt to gain political consensus on the new austerity package, but the main opposition party New Democracy is still requesting further tax decreases.
Meanwhile, FT Deutschland reports that eurozone central banks are no longer excluding a voluntary debt restructuring, but it is unclear whether there is unanimity on this within the ECB’s governing council. El País reports that the deficit of Spanish regions has reached a total 0.46% of Spanish GDP in the first quarter of 2011, doubling last year’s figure for the same period. Separately, eurozone inflation fell slightly in April. However, the ECB is still widely expected to increase interest rates again this summer, probably in July, in a move which could further hurt recovery in weaker eurozone economies.
FAZ Handelsblatt Eleftherotypia Capital FTD Welt Nu.nl Kathimerini Reuters Reuters2 Kathimerini2 Nea Naftemporiki Vima FT Irish Times Mail Telegraph IHT CityAM Guardian EurActiv France European Voice Irish Independent WSJ El País Telegraph WSJ 2 FT 2 WSJ 3 IHT WSJ 4 FT 3 Irish Times 2 Irish Independent 2 Irish Independent 3 FT 4 WSJ 5
El País reports that, according to the latest polls, the centre-right Social Democratic Party has increased its lead over the incumbent Socialist Party in the final days before Portugal’s general elections, scheduled for 5 June. The Social Democratic Party is now ahead with 37% of support, while the Socialist Party comes second with 32.3%.
El País Dow Jones Wires
Commission wants a third of next EU budget to be funded by new direct taxes
The Telegraph reports that EU Budget Commissioner Janusz Lewandowski wants the EU to have direct taxation powers to generate one-third of the EU budget by 2020, under proposals that will impose £3bn a year in extra taxes levied on the UK. “I have as an objective a future budget being fed two thirds, 66% by member state contributions, and own resources, one third, or 33%,” he said. The WSJ notes that, taking the proposed 2012 budget as a reference, this would mean the Commission having direct control over at least €40bn of the budget instead of €16bn at present.
Lewandowski will suggest that national payments are cut and be replaced by taking a fixed percentage of aviation or carbon taxes, new levies on financial transactions and VAT. Writing in the Telegraph, Dan Hannan MEP notes that proposals for a financial transaction tax would “hit London especially hard.”
Telegraph Telegraph 2 Telegraph: Hannan WSJ EurActiv Priorities of Polish Presidency Priorities of Polish Presidency 2 Le Vif EurActiv 2
Barnier calls on Geithner to speed up US banking reform;
Commission proposes huge fines on bankers
The FT notes that EU Internal Market Commissioner Michel Barnier has written to US Treasury Secretary Tim Geithner to speed up and toughen new banking rules in order to prevent American banks from having unfair advantages over their European counterparts. Meanwhile, Euractiv reports that a new Commission proposal would allow EU countries to fine individual bankers up to €5m or 10% of their pay and bonus – whichever is higher – for breaking rules or withholding information.
FT EurActiv FT: Brussels Blog
Former Argentine Central Bank Chief: Postponing inevitable default increases “cost of eventual adjustment”
Writing for Bloomberg, former governor of Argentina’s central bank Mario I. Blejer argues that “there is an important lesson” from the Argentine experience of default: “Postponing inevitable actions increase the cost of eventual adjustment”. “The current European strategy, if there is one, seems to be to delay the day of reckoning…Just muddling through, in the mist of a cacophony of contradictory statements that further erode the credibility of the crisis-management framework, only creates uncertainty and is a recipe for major disaster,” he adds.
The FT’s John Plender argues that a second Greek bail-out would buy time to bring Greece to a primary budget surplus and for French and German banks to recapitalise but, “At that point, it would be sensible for Greece to bow out of the monetary union and take advantage of currency devaluation.”
In the FT, Martin Wolf looks at the transfers between national central banks within the eurozone, which could result in “a fiscal transfer by the back door.” He concludes that, “The eurozone confronts a choice between two intolerable options: either default and partial dissolution or open-ended official support…How will the politics of these choices now play out? I truly have no idea. I wonder whether anybody does.”
FT: Wolf FT: Plender FT: Editorial City AM: Samuel Independent: McRae Irish Independent: McWilliams Bloomberg: Blejer WSJ
La Repubblica reports that, in his last official speech as Governor of Italy’s Central Bank, Mario Draghi has criticised the Italian government for failing to promote growth, noting that over the last decade Italy’s GDP has gained less than 3%, compared with France’s 12%. Draghi also said that Italy needs to cut public spending by 5% by 2014, and cannot afford to raise taxes or reduce investments.
Repubblica FT WSJ
EUobserver reports that the European Commission is planning to publish proposals for a review of EU aid policy this autumn. A draft Commission strategy paper argues that in the future, EU development aid should focus on fewer recipients and be better linked to progress on democratic reform.
Open Europe research EUobserver
UK Transport Minister Norman Baker has suggested that the UK will not support EU proposals to include tar sands in its new fuel directive, reports the Independent. The Netherlands also opposes the proposal.
Independent
Reuters reports that an EU source warns that if the EU’s Emissions Trading Scheme (ETS) is included in the new EU Energy Services Directive, due in June, it could reduce demand for permits by about 400 million tonnes in 2013-2020. This flooding of the market could cut prices in half and reduce governments’ budgeted revenues by billions, claims the source.
Reuters
Elsevier reports that MEPs have received a 6.75% pay increase since 2009, the largest of any of the 257 professions which the article examined.
Elsevier
MEPs are expected to vote next week in favour of changing the code of conduct of European Parliament elections, including a proposal to create a single EU-wide constituency, reports European Voice.
European Voice
NRC Handelsblad reports that EU anti-fraud agency OLAF has started an investigation into corruption at Eurojust, the EU's Justice Agency, based in The Hague.
NRC
Spanish Agriculture Minister Rosa Aguilar said yesterday that Spanish and other European producers affected by the loss of sales following the outbreak of a deadly bacterium in cucumbers should receive compensation from the EU, estimating that her country was losing “more than €200m a week.” The BBC reports that the Netherlands will also ask for compensation.
BBC EUobserver El País
EUobserver reports that the EU is considering sanctions against Yemen similar to those imposed on the Syrian regime over the past weeks.
EUobserver
Speaking on the BBC’s Today programme, EU Home Affairs Commissioner Cecilia Malmström looks at the growing number of Libyan refugees reaching Italy’s and Malta’s shores and argues: “We are indeed discussing how member states increasingly can share this responsibility with Malta and Italy, but…the mood in the Union right now is not particularly enthusiastic about this idea.”
BBC Today: Malmström
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