Schäuble’s letter calls for a “bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence.” Handelsblatt quotes German Social Democrat MP Peer Steinbrück, a potential candidate to become Germany's next Chancellor, saying “it is no longer about whether, but only about how to restructure Greek debt”. US President Barack Obama said yesterday that, “America’s economic growth depends on a sensible resolution of this [eurozone debt crisis]”. The FT suggests that, “in warning against default he appeared to side with the European Central Bank, which fears a restructuring of Greek debt could unleash a financial crisis.” Similarly, the IMF’s top official in Athens, Bob Traa, said, “Once you unleash a restructuring scenario, this is not very helpful.” The WSJ notes that, “The markets' pessimism toward Greece reflects a more fundamental factor: Even the tougher German plan doesn't reduce Greece's staggering debt. It only delays repayment.” Dutch daily FD reports that Dutch Finance Minister Jan Kees de Jager has written to Dutch MPs stating that “so far there is no clarity on the precise size of the additional financing which will be necessary” to cover Greece’s funding gap. “This is partly dependent on the involvement of the private sector. I expect clarity on this to emerge in the run-up to the Eurogroup meeting of 20 June.” Following reports in Handelsblatt that agreement on a second bailout could be delayed until September, de Jager confirmed that further IMF involvement in the Greek rescue was dependent on a deal in June. Les Echos quotes Slovakia’s Finance Minister Ivan Miklos saying that his country will not block a second Greed bailout as long as there are “stronger guarantees for the second loan” and “a commitment to respect the conditions both from the Greek government and opposition.” Open Europe: ECB contradicts itself on how its losses will be covered Le Soir reports that Belgium has been told to put wage increases better in line with productivity rather than inflation. Belgian daily De Standaardnotes that the Commission’s suggestions risk further complicating negotiations for the creation of a new coalition government in Belgium, as French-speaking Socialist leader Elio Di Rupo – who has been tasked with forming the new government – is opposed to reforming the country’s wage indexation system, while the Flemish nationalist N-VA party is in favour of doing it. No specific recommendations were issued for Greece, Ireland and Portugal, other than they need to stick to the conditions attached to their bail-out packages.Open Europe Europe
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Wednesday, 8 June 2011
German Finance Minister: Without a fresh rescue package we’ll “encounter the first disorderly bankruptcy inside the eurozone”;
Private creditors must provide “quantified and substantial contribution”
In a letter to ECB President Jean-Claude Trichet, leaked to the German press, German Finance Minister Wolfgang Schäuble has warned that, without a new Greek rescue package, “We will encounter the first disorderly bankruptcy inside the eurozone.” In an attack on the ECB’s opposition to a Greek debt restructuring, Schäuble stressed that “any further financial aid to Greece must include fair burden-sharing between taxpayers and private investors,” according to Süddeutsche Zeitung. He seemingly rejected the ECB’s proposed compromise of a private sector voluntary debt extension, instead calling for a “quantified and substantial contribution” from private creditors. “If we wait too long, Greece will have no more private creditors left”, Berlin sources told Süddeutsche.
Meanwhile, the Irish Independent reports that the Irish government was last night highly pessimistic of securing a reduction in the interest rate on its bailout due to continuing French demands for a higher rate of corporation tax.
Süddeutsche Zeitung FT Deutschland Ta Nea Vima Isotimia FT Reuters El Pais ExpressoEvening Standard Irish Independent WSJ WSJ 2Kathimerini eKathimerini Ta Nea Isotimia Handelsblatt FD Letter: de Jager EleftherotypiaNaftemporiki Kathimerini eKathimerini Kathimerini Irish Times WSJ: Nixon TribuneLes Echos Handelsblatt 2 FT Guardian WSJ Le Figaro
Open Europe’s briefing looking at the exposure of the ECB to weaker eurozone economies continues to draw coverage around Europe. In an opinion piece in the WSJ, Open Europe Director Mats Persson argues that “no one seems to know” how a scenario in which the ECB faces heavy losses would play out in practice. He notes that ECB executive board member Lorenzo Bini Smaghi’s assertion that a sovereign default would fall mainly on “the central bank of the country that defaulted” has been contradicted by other ECB leaders. For example “Nout Wellink, his Dutch counterpart, who last month estimated that the Netherlands would face losses of €4 billion via the ECB if Greece were to default (a prediction that appears to confirm our own estimates of the overall losses to the ECB in the event of a Greek default).” Mats concludes “One reason that even the ECB's leaders seem unable to give straight answers on these matters is that the prospect of such potential losses appears to have been considered too unthinkable to plan for… We do know that, unless the ECB starts printing excessive amounts of money and triggering dramatic inflation, the bill for any losses would be passed on to taxpayers in one form or another.”
Open Europe’s research is cited by the Irish Independent, by Greek financial daily Isotimia, Elsevier and on several financial news sites. Commenting on Open Europe’s research on Dutch financial news site Z24, Mathijs Bouman, a financial commentator, argues that "the central bank should get rid of its portfolio of bonds as soon as possible, and focus again straight away on monetary policy."
Open Europe researchOpen Europe press release WSJ: Persson Z24: Bouman Elsevier SpitsNieuws Express.be Beursduivel.be IsotimiaBaltic Course Cesca Pozice Invertia Mindful Money Euro2Day Irish Independent Vsekiden Banking Times Micronews Eviablogs
European Commission issues its first recommendations on member states’ economic policies
The European Commission yesterday released its first review of member states’ economic policies under the so-called ‘European semester’. The Telegraph notes that the Commission’s assessment broadly endorsed the UK Government’s plans for deficit reduction, although it warned that "the UK appears to be at high risk with regard to the long-term sustainability of public finances." El País reports that the Commission has recommended that Spain raise the VAT rate and energy taxes in order to reduce the Spanish businesses’ contribution to social security and make them more competitive.
Meanwhile, an article in the FT notes: “National leaders could choose to water down the findings. And national parliaments may ignore the recommendations. But in the view of many senior diplomats in Brussels, for the first time the EU has a serious chance of imposing its economic will on all its members.”
Telegraph BBC La Stampa Il Sole 24 Ore Le Figaro La Tribune Le Soir FT FT 2 El Pais FT 3 El Pais 2 Euractiv Standaard
True Finns back in talks to form a coalition
Yle reports that the True Finns are have returned to negotiations in a bid to form a coalition government, six weeks after the elections. True Finns leader Timo Juhani Soini yesterday said he is ready to restart talks but first wants to make sure that the True Finns' demands on the EU are met. Soini is qupted saying, “I’ve been right all this time...In Europe, the criticality of these [bail-out] packages is increasing each day”. "We will not vote for bailout packages. But will that stop us from entering the government? That remains to be seen", he added.
MEPs vote for 5% increase in next long-term EU budget
The European Parliament has today voted on its proposals for the next long-term EU budget, due to run from 2014 to 2020. MEPs are asking for a 5% increase from the previous budget period (2007-2013). They are also calling for all rebates on member states' contributions to the EU budget to be scrapped and an EU tax to fund the EU budget directly.
Meanwhile, Het Laatste Nieuws reports that Belgian liberal MEP Guy Verhofstadt has described the UK's position on the EU budget as "a provocation." Commenting on a letter from the UK government which voiced disappointment with a European Parliament report demanding a 5% increase in the next long-term EU budget, he said: "This means that we have a good report."
Spainand France reject Commission’s compensation pledge after E coli fallout
The Commission yesterday promised to pay more than €150m in compensation to farmers hit by the E coli crisis, which is estimated to cover about a third of the losses. However, Spain and France announced they would reject the offer demanding full payment for lost sales. Agriculture Commissioner Dacian Ciolos has agreed to review the offer, but warned that Spanish demands for compensation of 90% or even 100% of market price were unrealistic. Ciolos is quoted in the Guardian saying, "We have to bear in mind that this is public money, and we have to account for its use".
Guardian El Pais El Pais 2 Euractiv European Voice EUobserver WSJ La Tribune BBC: Hewitt Mirror Times Irish Independent LiberationInternational Herald Tribune Express Independent Yle Dagens Nyheter
Handelsblatt reports that the Slovenian Central Bank has issued a warning about the country's increasing public debt, with its governor, Marko Kranjec, saying that, “if this goes on, our country will find itself in the position of Greece, Portugal or Ireland”.
The EU General Court, attached to the ECJ, yesterday ruled that the European Parliament must publish information on MEPs expenses, following a case brought by an Irish lawyer who was denied access to the internal auditor’s report for 2006.
Handelsblatt reports that the European Parliament has voted for a non-legally binding proposal in favour of establishing strict regulations for credit rating agencies, including setting up a new EU agency. Commissioner Michel Barnier is expected to release a formal legal proposal later this year.
Der Spiegel reports that German social democrat MEP Martin Schulz has officially announced he wants to be the next President of the European Parliament, seeking nomination by the Socialist Group, to which the EPP Group has already conceded the EP's presidency for the second half of the term.
The FT reports that, as part of its review of EU public procurement rules, the European Commission is considering making it more difficult for non-EU companies to access public tenders in the EU if they come from countries which apply “restrictions that discriminate against EU bidders.”
DPA reports that a Danish parliamentary committee has placed plans to strengthen the country's border controls on hold, despite the government insisting on Tuesday that the move would not violate EU rules.
On Conservative Home, Paul Goodman argues that theGovernment is “unlikely to be defeated” by an alliance of Labour and Tory rebels on eurozone bailouts.
True Finns back at the negotiation table as Finland struggles to form government: He’s Back
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