Friday, 17 June 2011

Open Europe

Europe

IMF deal fails to halt market fears over contagion from Greek crisis;
Greek PM: EU will approve a new bailout package of “mammoth proportions”

Despite the IMF agreeing to release the next tranche of funds from the Greek bailout, the cost of borrowing for peripheral eurozone countries continues to rise, with Spanish costs reaching a decade-high record of 5.66%. The IMF and the EU are also still insisting that the Greek parliament agree on a new austerity package before the end of the month. If this fails to happen, then snap elections are likely to be called and the chance of a Greek default would increase significantly.

Greek Prime Minister George Papandreou announced a cabinet reshuffle last night with the focus on the appointment of Evangelos Venizelos as Finance Minister. A vote of confidence on the new cabinet will be held on Sunday in the hope that renewed support will quell the rising political chaos in Athens. The WSJ reports that, in a speech to the Greek parliament last night, Papandreou also promised that the EU would come up with a new bailout package of “mammoth proportions”, adding, “We are at a critical moment. Either Europe will write history, or history will write off the European Union". ARDreports that the second bailout now looks likely to be finalised at the 11 July meeting of eurozone finance ministers and will total €120bn.

Le Figaro reports that, speaking after a bilateral meeting with German Chancellor Angela Merkel in Berlin this morning, French President Nicolas Sarkozy said that “France and Germany defend the same position…we, as are our German friends, are of the opinion that a second Greek program is necessary.”  on the It's unclear exactly what conclusions were reached, however Merkel added that a new package would include, "voluntary – I strongly stress voluntary – participation of private investors."

Eurozone leaders and the ECB have maintained their opposition to the Irish government’s plan to force losses onto a select group of senior bank bondholders despite appeals from the Irish Prime Minister Enda Kenny.

Swedish financial daily Dagens Industri features an interview with Open Europe’s Mats Persson discussing Open Europe’s report on the exposure of the ECB. Mats is quoted saying, “It’s not sustainable. We can’t have economies and banks that are so dependent on support from the ECB. The ECB did mitigate the immediate effects of the crisis, but in the long-term it is now making the crisis worse.” The report is also covered by Goldmoney CEO James Turk onHoweStreet.com and in Les Echos.

ECB Executive Board member defies Italian government’s call for early resignation

Italian daily Corriere della Sera reports that yesterday, following the appointment of Mario Draghi as the next ECB President, Italian Prime Minister Silvio Berlusconi formally asked Italy’s ECB Executive Board Member Lorenzo Bini-Smaghi to step down and make room for a Frenchman in order to secure France’s support for Draghi’s appointment. However, Bini-Smaghi is resisting Berlusconi’s call, arguing that the ECB’s independence is a guarantee against the “arbitrary revocation” of ECB board members’ mandate, reports La Repubblica.

Kathimerini: “Our country will find itself out of the euro”
CityAM Editor Allister Heath warns that Greece could be the new Lehman Brothers and writes: “What the eurozone finance ministers should really be talking about now is how to structure an orderly, partial Greek default, combined with its exit from the euro…Merely delaying the inevitable…will go down as a historic blunder and prove that nobody ever learns anything from economic crises.” A briefing on the Greek crisis in the Economist argues: “Though the [European] ministers will doubtless go on talking, it is increasingly hard to see a safe way out of this crisis.”

Managing Editor of Greek daily Kathimerini Nikos Konstandaras writes: “The passport-free zone and the common currency were the EU’s two greatest achievements – and both are in danger today…With this in mind, when Portugal, Ireland and other members of the eurozone begin to recover and Greece is still far behind, then our country will find itself out of the euro.” In the WSJ, Alen Mattich notes: “If Greeks come to think they're already near or have reached the worst-case outcome of a euro exit but are getting none of the upside, they may well start to agitate to leave the single currency.”

A leader in the Independent warns that European leaders “have set their face against a managed Greek default, but that means they are heading for a chaotic one. And that could easily lead to contagion across wider European debt markets. Ireland”. The Economist’s Charlemagne blog argues that “The EU has often only acted to avert impending disaster. But even by its standards it is leaving matters very late. It is playing with fire, Greek fire.”

Handelsblatt’s Brussels correspondent Ruth Berschens notes that “a disorderly insolvency [of Greece] would be the worst possible option but the eurozone would survive it,” adding: “Greece is not a region of the EU, it is a federal state and as such must take responsibility for its own shortfalls.” Meanwhile, an editorial on the front page of El País warns that “Spain could find itself in a thorny situation in July, with early elections imposed by the financial crisis and a painfully restrictive budget to be adopted with urgency, if the Greek cataclysm is not resolved soon”.

No agreement in sight over economic governance sanctions
The WSJ reports that the EU's economic governance package is expected to miss its June deadline for adoption. The FTnotes that the package is at risk of collapsing over a dispute about sanctions for when member states breach spending rules. Meanwhile, in his speech titled “A Plea For Euroland”, European Council president Herman Van Rompuy yesterday stressed the importance of “peer pressure” as an incentive.

In a letter printed in the Spectator, Ronald Stewart-Brown of the Trade Policy Research Centre, argues, “We should seek reform and repatriation of powers within the EU. But to be credible we must have a fall back plan to withdraw from the EU altogether.”
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The Telegraph notes that by securing further speaking rights for the EU at the UN, EU Foreign Secretary Catherine Ashton “has inflicted a major defeat on [UK Foreign Secretary] William Hague”.

Funds from the EU employment and social solidarity programme PROGRESS have ended up funding a Hungarian anti-abortion campaign with €416 000. When questioned about the funds, EU Fundamental Rights Commissioner Viviane Reding said, “This campaign goes against European values. We want European funds to be returned as quickly as possible.”

FAZ reports on an internal battle among German Christian Democrats over a eurosceptic paper tabled by the Secretary-General of the CSU, Alexander Dobrindt, in which he warned against the "automaticity in which powers are being transferred to Brussels".

The Irish Times reports that Ireland’s Minister for Social Protection Joan Burton is calling for a revision of EU rules on child benefit payments, which allow residents to claim for non-resident children. In 2010, Ireland paid child benefit to 7,814 children living in other EU states, costing €15.4mn, this is down from its peak of €20.9 million in 2008.

The FT’s Westminster blog notes that William Hague and the Foreign Office are preparing for battle with the House of Lords over the Government’s EU “referendum lock”.

In Le Figaro, former EU Commissioner Yves-Thibault de Silguy argues that “Jean-Claude Trichet’s idea of creating an EU Finance minister deserves to be taken into consideration. […] Merging all the national budgets into one EU budget is out of the question. But it is no longer possible to put in place national budget policies without the agreement and control of the EU.”

Germany yesterday reiterated its criticism towards Denmark’s plan to increase border controls, which led Pia Kjaersgaard, leader of the far-right People’s Party to say in a statement that the EU is afraid of Denmark and uses Germany as a “torpedo” reports SvD. Denmark’s plans have been criticised by the Commission for not respecting the Schengen agreement.

Finish governmental negotiations are set to be concluded today as the six-party coalition have agreed on the main strokes of the government program, according to Yle. Euro sceptic True Finns remains in opposition after choosing not to take part in negotiations due to disagreeing views on the EU.

New on the Open Europe blog

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Posted by Britannia Radio at 12:45