An action-packed afternoon is coming up, with the Chancellor apparently in two places at once: According to economist Megan Greene on Twitter, the EU finance ministers' conference call is not due to finish until 17.30, from its 14:30 start time. We assume this means George Osborne will have to duck out of the call to make his statement about bank reforms to the Commons at 15.30. Also at 15.30, ECB President Mario Draghi will testify to the European Parliament. With the European finance ministers due to have their conference call in an hour's time, reports are surfacing that the talks may end without agreement on the €200bn of loans to the IMF announced at the leaders summit earlier this month. The Telegraph's Bruno Waterfield and Italian reporter Fabrizio Goria both say talks may end without the eurozone nations agreeing on the €150bn they were due to pay in. Via Twitter: And if it's turns out to be the case, even more controversially, Dow Jones is reporting that the loans from all EU nations will fall short of full €200bn because Britain will not give its consent immediately to the roughly €30bn the EU is banking on us contributing... A report from Open Europe out today finds that European Central Bank exposure to struggling eurozone economies has surged by 50% in six months, meaning, it argues, that the ECB unlikely to act as lender of last resort. The ECB is unlikely to buy the hundreds of billions worth of government bonds required for it to properly backstop the eurozone, following an under-whelming agreement between EU leaders at the summit of 8 and 9 December. However, Open Europe notes that, contrary to popular opinion, the ECB is already heavily intervening in markets. Through its government bond buying and liquidity provision to banks, we estimate that the ECB’s exposure to weaker eurozone economies has now reached €705bn, up from €444bn in early summer – an increase of over 50% in only six months, raising fresh questions about its credibility, independence and possible losses it may face in the case of future sovereign defaults.
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Monday, December 19, 2011
An action-packed afternoon is coming up, with the Chancellor apparently in two places at once: According to economist Megan Greene on Twitter, the EU finance ministers' conference call is not due to finish until 17.30, from its 14:30 start time. We assume this means George Osborne will have to duck out of the call to make his statement about bank reforms to the Commons at 15.30. Also at 15.30, ECB President Mario Draghi will testify to the European Parliament. With the European finance ministers due to have their conference call in an hour's time, reports are surfacing that the talks may end without agreement on the €200bn of loans to the IMF announced at the leaders summit earlier this month. The Telegraph's Bruno Waterfield and Italian reporter Fabrizio Goria both say talks may end without the eurozone nations agreeing on the €150bn they were due to pay in. Via Twitter: And if it's turns out to be the case, even more controversially, Dow Jones is reporting that the loans from all EU nations will fall short of full €200bn because Britain will not give its consent immediately to the roughly €30bn the EU is banking on us contributing... A report from Open Europe out today finds that European Central Bank exposure to struggling eurozone economies has surged by 50% in six months, meaning, it argues, that the ECB unlikely to act as lender of last resort. The ECB is unlikely to buy the hundreds of billions worth of government bonds required for it to properly backstop the eurozone, following an under-whelming agreement between EU leaders at the summit of 8 and 9 December. However, Open Europe notes that, contrary to popular opinion, the ECB is already heavily intervening in markets. Through its government bond buying and liquidity provision to banks, we estimate that the ECB’s exposure to weaker eurozone economies has now reached €705bn, up from €444bn in early summer – an increase of over 50% in only six months, raising fresh questions about its credibility, independence and possible losses it may face in the case of future sovereign defaults.
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In Germany there is an annual vote for the Unwort des Jahres ("most infamous phrase of the year"). From a European perspective, my absolute favourite this year is "national interest". Like it or not, EU politics has become more British in recent years. The UK has always seen the union as an institution in which you try to secure your "national interest" rather than a place where you make political compromises with partner countries. The inability to move beyond the perceived short-term "national interest", at the expense of what is better in the mid to long term, has been a key reason for the EU's powerlessness to respond adequately to the challenges it faces. We are moving towards political deadlock in a severe and worsening crisis and the forecast for next year doesn't look good either.
Is there any positive scenario for 2012? The eurozone crisis is at the heart of global economic uncertainties and their potentially devastating social consequences. Therefore, what the EU does next year to resolve the eurozone crisis will be of global significance. The individual measures needed to resolve the crisis have been widely discussed and are well known. But unless EU leaders completely change course and overcome political and legal obstacles to install the European Central Bank as a lender of last resort, draw up plans for a real fiscal union, introduce eurobonds, devise a strategy for new growth, pursue necessary structural reforms in surplus as well as deficit countries and finally reform the financial sector, there is little hope the current malaise can be overcome.
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