Lib Dem MEP accuses banks of manipulating stress test results Between five to ten banks, out of 90, are expected to fail the EU-led stress tests, due to be released at 17:00 BST. Investors have warned that the results could lead to runs on the more vulnerable banks, especially as results will disclose information on banks’ sovereign debt holdings. Although the tests have been toughened since last year, they still do not include the possibility of a Greek default. IMF: European response to crisis “insufficient”;German Finance Minister: Crisis “threatening the euro” Meanwhile, the upper house in the Italian Parliament approved the €45bn austerity package by 161 votes to 135. The lower house, in which the government has a smaller majority, will hold a vote this evening. The package needs approval in both houses to be enforceable. Italy did manage to sell €3bn in long term bonds yesterday, but with much higher interest rates than in previous auctions. In an interview with FT Deutschland, German Finance Minister Wolfgang Schäuble warned that the crisis was now threating the survival of the eurozone, saying: “This trust crisis, which was evoked by Greece is now threatening the euro as a whole. That’s why we have to find a convincing solution to the problem.” He did not give a precise answer of what this solution could be but ruled out Eurobonds saying, “[Eurobonds] would only be a further incentive for states not to budget properly anymore.” In an interview with De Dagelijkse Standaard, German MP Otto Fricke, FDP Budget Spokesman, stressed that the German government could not agree to a plan for a buyback of Greek debt without the approval of the Bundestag. Separately, an article in Handelsblatt suggests that the ECB could face losses of €24bn if Greece defaults and quotes Mohamed El-Erian, CEO of Pimco, saying, “I suspect that the ECB will need new capital over the next three years”. The latest progress report on Ireland by the EU/IMF/ECB praised the country for “steadfastly” following the bailout conditions and implementing its austerity programme. The IMF said there was “no target that was not met”, according to the WSJ. Treasury says EU Commission’s budget proposal could add 1% to VAT in the UK Eurozone comment round-up An editorial in El Pais argues, “The political disorder of Berlusconi is not the best guarantee to give credibility to Brussels before the markets. But the most dangerous absence is in Europe….The short-sightedness of Berlin is costing a lot of money and employment in Madrid and Rome”. The Economist argues, “Debt reduction must begin with Greece, the country that is most obviously bust. However the restructuring is pitched, Greece will be in default, so a plan to recapitalise banks hit badly by this, starting with Greece’s own, will be needed too…There may have to be a similar restructuring for Portugal and Ireland.” The Economist notes that left-wing Spanish protesters, known as los indignados (the indignants), have targeted a clause in the Lisbon Treaty that prevents central bankers providing cheap credit to governments and also the recent “pact for the euro”. In light of the new budget, EurActiv reports that France’s regions oppose President Nicolas Sarkozy’s proposal to reduce regional spending in favour of the Common Agricultural Policy. An opinion poll by CSA shows that French President Nicolas Sarkozy is gaining ground in the Presidential election race. The poll indicates that in a first round Sarkozy would win with 27%, followed closely by the socialist Francois Hollande (26%) and Martine Aubry (25%). The leader of the far-right Front National, Marine Le Pen, would only win 17% and would face elimination. Another bad review for Greece…Open Europe Europe
Ahead of today’s stress test results, Lib Dem MEP Sharon Bowles, Chairman of the European Parliament's Economic and Monetary Policy Committee, accused the banks of manipulating their results saying, "In their latest round of crisis-denial, German banks are lining up to try and hide what any decent analyst already knows, that there are significant cases of undercapitalisation… Publication of the stress tests will not bring Germany and its banks down, but denial of telling things as they really are lies at the heart of Germany's failure to rescue the euro project", she said. A report published by the IMF yesterday said it is "critically important to put in place and immediately publicise credible plans" to deal with failing banks, reports the WSJ.
WSJ El Pais El Pais 2 Le Figaro El Pais 3 i informação Expansion IHT Irish Times 2 Irish Times Guardian Guardian 2 FT Guardian: Pratley
Pressure is growing on German Chancellor Angela Merkel to agree to hold an emergency eurozone meeting to discuss the increasing market jitters which have pushed Italian and Spanish borrowing costs to record levels this week. Ajai Chopra, Deputy Director of the IMF’s Europe department, said EU leaders had so far provided an “insufficient response” to the crisis, adding, “What’s lacking so far is a European solution to a European problem”. Italian Finance Minister Giulio Tremonti warned that “politics cannot make any more mistakes” in this crisis. Kathimerini reports that the Greek government met yesterday to discuss the impact of a ‘selective default’ for Greece.
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PA reports that the UK Treasury has calculated that the European Commission’s proposals for financing the next 2014-2020 EU budget could mean an increase of 1% on VAT in Britain. At the moment 0.3% of VAT on every pound spent goes directly towards the EU budget. But under European Commission proposals to increase its revenue-raising powers through a new system of EU VAT contributions, that could grow to 1.3% - money which could either be absorbed by the Treasury or passed on to taxpayers by raising standard-rate VAT from the current 20% to 21%.
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Writing in the FT, Mohamed El-Erian, Chief Executive and Co-Chief Investment Officer of Pimco, argues that, given the political impossibility of a ‘fiscal union’, “Europe should opt for a restructuring of the debt of the weak peripherals, recapitalising the ECB, protecting the payments and settlement system, countering other collateral damage, and restoring conditions for growth. At some stage, this could even involve a country taking a sabbatical from the eurozone – but not the EU – in order to regain the policy flexibility needed to restore competitiveness.”
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Friday, 15 July 2011
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