Europe
Meeting of eurozone finance ministers fails to solve disagreement over second Greek bailout;
Draghi: ECB losses would be shared out amongst national central banks
Eurozone finance ministers failed to agree on the role of private creditors in a second Greek bailout package, despite meeting for hours in Brussels yesterday. The ECB and Germany remain in a stalemate, though Germany looks more likely to give in. Following the meeting, Belgian Finance Minister Didier Reynders said, "I think financing is within reach for the coming weeks”. However, Slovakian Finance Minister Ivan Miklos said, "Whether we will succeed to conclude the new program for Greece, I don't know…But more likely no." German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on 17 June in an attempt to find a compromise.
The FT reports that, under the German proposal, any new bailout package for Greece would need to include €20bn in financing to recapitalise Greek banks according to a leaked European Commission document. On the total size of the Greek bailout Spanish news agency EFE quotes Belgian Finance Minister Didier Reynders saying: “We’re talking about a new intervention of €80bn coming from the IMF, the EU and the eurozone.” The article suggests that a further €25bn is expected to be provided via the extension of Greek debt held by private investors, making up a total rescue package of €105bn. Writing in Suddeutsche Zeitung, Bundesbank President Jens Weidmann suggests that the ECB would not take part in any debt rollover and will seek to reduce its exposure to Greek debt as quickly as possible.
During an interview with the European Parliament yesterday, Mario Draghi, President of the Italian Central Bank, confirmed that if the ECB does face losses from the Greek crisis “the national banks will need to pay according to their capital key”, as Open Europe suggested in its recent report on the ECB’s exposure to the Greece and other peripheral EU economies. Open Europe’s finding that the ECB has an exposure of €444bn to the eurozone’s peripheral economies is quoted by Italian financial daily Il Sole 24 Ore.
Meanwhile, the Greek government confirmed yesterday that it has missed its deficit target for the first five months of this year. Its deficit totalled €10.28bn, compared with its target of €9.07bn. The Greek government’s majority has dropped to just four seats in Parliament, with more MPs defecting and pledging to vote against the new austerity plan, increasing doubts over whether it will pass through parliament. There will be a general strike in Greece today which is expected to grind the country to a halt.
The WSJ reports that Moody’s has threatened to downgrade France’s three largest listed banks because of their exposure to Greek debt, causing their shares to plummet. Separately, data from Bank of Spain shows that loans from the ECB to Spanish banks rose to €53bn in May, almost €11bn more than in April, marking a 26% increase, reports El Pais.
UK battling against new EU powers to summon Treasury ministers to Brussels
The Telegraph reports that the Government is fighting off new powers for the EU, under new “economic governance” rules, to summon Chancellor George Osborne to justify and defend Britain's economic policy to the European Parliament. While Britain will not be subject to the same EU sanctions or fines to enforce the new rules as eurozone members, British Treasury ministers do face a summons to explain their policies to MEPs. “The Government would not accept any proposal for the European Parliament to be able to summon ministers to appear before it,” said a spokesman.
Reuters reports that a French parliamentary vote on changing the constitution to enshrine a German-style 'Golden Rule' on fiscal discipline, as required by the new competitiveness pact, has been delayed, as government lawmakers admitted the proposal may struggle to pass through the Parliament.
EU member states yesterday agreed to a €210m compensation package for farmers hit by the E.coli outbreak. Spain, France, Slovakia and Poland voted against the package, calling for a larger aid package, reports El Pais.
Speaking yesterday before a UK Parliament committee, EU Foreign Minister Catherine Ashton defended her proposed 5.8% budget increase for the European External Action Service (EEAS) saying, “In creating the [EU’s External Action] service, staff were brought to me…They are very able, great people. But they all need to be paid…The amount of money that was transferred with them doesn't match the amount of money that I have to pay them”, she added.
Writing on Conservative Home, leader of the Conservative MEPs Martin Callanan notes that, under the European Parliament’s proposal for the next long-term EU budget, some Lib Dem and Labour MEPs voted in favour of scrapping the UK rebate and introducing EU taxes.
Europol warns against Schengen expansion
EUobserver reports that the EU’s police agency, Europol, has warned that allowing Bulgaria and Romania to join the border-free Schengen zone is likely to spur illegal migration through Turkey and the Black Sea. In the FT, Tony Barber looks at immigration to the EU and writes, while the eurozone’s troubles are driving governments “towards closer economic integration”, concern about migrants and asylum-seekers “threatens to create the opposite reaction, putting at risk the commitment to the free movement of people enshrined in the Schengen agreement.”
Les Echos reports that, speaking at a conference in Brussels yesterday, French President Nicolas Sarkozy urged the European Commission to tighten up regulation of the trading of commodities at the EU level.
Irish Agriculture Minister Simon Coveney has heavily criticised the EU for penalising Irish dairy farmers for increasing production to meet global demand.
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