The draft eurozone summit statement (to be issued after Sunday's talks) is circulating and it confirms that a lot of agreement still has to be reached on the three core issues: private sector involvement in Greek debt (increased haircuts), bank recapitalisation and, above all, "increasing the efficiency of the EFSF". The first and last of these will be the hot topic at tomorrow's eurogroup meeting starting at 1400CET while the middle one (banks) is on the agenda for the ecofin meeting on Saturday morning (attended by George Osborne and the other nine "outs"). These sections are left pretty well blank or in brackets, including the agreement to give the Greeks their sixth bailout tranche worth €8bn and the prospect of a new EU-IMF programme with Athens to be concluded by the end of November. It's also worth noting the reaffirmation of "our unequivocal commitment" that PSI "is and will continue to an exceptional solition applying only to Greece as its unique condition requires a unique solution." And there's talk of the other eurozone countries reaffirming their "inflexible determination" to abide by sustainable fiscal conditions etc. There are these gaps but it is clear that Herman Van Rompuy, European Council president and proposed eurogroup president too, wants a full-scale political deal on Sunday - in tome for Monday's market openings. "The crisis, however, is far from over, as shown by the volatility of sovereign and corporate debt markets. Further action is needed to restore confidence. That is why today we agree on additional measures reflecting our strong determination to do whatever is required to overcome the present difficulties," the draft communique says. And the statement indicates that eurozone countries are discussing plans for national budgets to be based on growth forecasts produced independently from government (the OBR model) and, in case of consistent upward bias, governments will be forced to use European commission forecasts. And, yes, the commission and eurozone partners will be empowered to impose changes on budgets if countries are too far out of line regarding their deficit. As we try to get more on that Troika report into Greece (several news agencies are picking up the same story, but there seems to be little more detail immediately available), one thing worth noting is that the German finance minister has said there is no agreement on EFSF leverage. This, of course, is the idea that €440bn could become €2tn if the fund could borrow from the ECB, or just guarantee the first 20% of losses or some other way of doing it. Reuters is saying Wolfgang Schäuble saying there is no agreement as yet.
Access Investments-Building Awareness - European Union-ROMANIA
Thursday, October 20, 2011
The draft eurozone summit statement (to be issued after Sunday's talks) is circulating and it confirms that a lot of agreement still has to be reached on the three core issues: private sector involvement in Greek debt (increased haircuts), bank recapitalisation and, above all, "increasing the efficiency of the EFSF". The first and last of these will be the hot topic at tomorrow's eurogroup meeting starting at 1400CET while the middle one (banks) is on the agenda for the ecofin meeting on Saturday morning (attended by George Osborne and the other nine "outs"). These sections are left pretty well blank or in brackets, including the agreement to give the Greeks their sixth bailout tranche worth €8bn and the prospect of a new EU-IMF programme with Athens to be concluded by the end of November. It's also worth noting the reaffirmation of "our unequivocal commitment" that PSI "is and will continue to an exceptional solition applying only to Greece as its unique condition requires a unique solution." And there's talk of the other eurozone countries reaffirming their "inflexible determination" to abide by sustainable fiscal conditions etc. There are these gaps but it is clear that Herman Van Rompuy, European Council president and proposed eurogroup president too, wants a full-scale political deal on Sunday - in tome for Monday's market openings. "The crisis, however, is far from over, as shown by the volatility of sovereign and corporate debt markets. Further action is needed to restore confidence. That is why today we agree on additional measures reflecting our strong determination to do whatever is required to overcome the present difficulties," the draft communique says. And the statement indicates that eurozone countries are discussing plans for national budgets to be based on growth forecasts produced independently from government (the OBR model) and, in case of consistent upward bias, governments will be forced to use European commission forecasts. And, yes, the commission and eurozone partners will be empowered to impose changes on budgets if countries are too far out of line regarding their deficit. As we try to get more on that Troika report into Greece (several news agencies are picking up the same story, but there seems to be little more detail immediately available), one thing worth noting is that the German finance minister has said there is no agreement on EFSF leverage. This, of course, is the idea that €440bn could become €2tn if the fund could borrow from the ECB, or just guarantee the first 20% of losses or some other way of doing it. Reuters is saying Wolfgang Schäuble saying there is no agreement as yet.
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They went ok especially given that Germany has been slightly struggling covering its own auctions... It might be a combination of domestic demand and maybe some people might be slightly hunting for yield and thinking there might be a solution to the crisis and ultimately the biggest solution would benefit Spain, Italy and France and the biggest loser will be Germany. Debt burden shifting to Germany is probably one of the reasons they've been struggling with their auctions.
Last night's farewell gala in Frankfurt for ECB president Jean-Claude Trichet, who steps down at the end of the month, was a lavish affair by all accounts. The two-hour event at Frankfurt's historic Alte Oper concert hall, interspersed with musical interludes, was attended by a number of political dignitaries such as former French president Valery Giscard d'Estaing and former German chancellor Helmut Schmidt who fell over themselves to praise Trichet as a great European.
Schmidt, wheeled onto the stage in a wheelchair, used the opportunity to lash out at the "dramatic inability of the EU's political bodies to curb the dangerous turbulence and uncertainty". Only the ECB directorate, under Trichet's leadership, he said, had proved effective and able to act.
"The constant talk of a 'euro crisis' is mere chatter on the part of politicians and journalists," Schmidt said. "In truth, we have a crisis in the ability to act of the EU's political bodies. This inability to act is a much bigger danger for the future of Europe than the over-indebtedness of individual eurozone countries."
Trichet, who turns 69 in December, will hand over to Italy's Mario Draghi on 31 October. The farewell gala began with a short film spanning the Frenchman's eight-year reign and ended with a concert by the Mozart Orchestra under its founder and chief conductor, the legendary Italian maestro Claudio Abbado.
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