José Manuel Barroso began his press conference to outline
today's report on the European economy (see 12.03pm onwards) by expressing
sympathy to the victims of yesterday's earthquake in Italy. Moving to economic
issues, Barroso argued that Europe is moving in the right direction on public
finances, and also moving towards "greater integration in the euro area".
Barroso stuck to broad-brush issues (I think Olli Rehn will do the detail
shortly), insisting that the euro had delivered benefits, and wasn't the cause
of this crisis – on the grounds that countries who aren't in the euro have also
been caught up in the financial turmoil. The key message within the 1,000 pages
of reports issued by the European Commission is that the eurozone risks
imploding unless it uses the tools at its disposal to calm the crisis.
From Brussels, reports: The eurozone is confronted with the prospect of
"financial disintegration" and should use its new bailout fund to overcapitalize
distressed banks directly while embarking on a transnational banking union, the
European commission said today. Delivering more than 1,000 pages of diagnosis
and policy prescriptions on the dire condition of the European economy and how
to try to end almost three years of euro crisis, the commission also talked up
the merits of eurobonds or pooling of eurozone debt, a proposal gaining in
traction but strongly resisted for now by the biggest economy, Germany.
3 comments:
The stock markets staged something of a recovery after the EU report was released. From a 104 point loss at 11.59am, the FTSE is now down just 60 points.
The proposal for closer banking ties across the eurozone, and particularly the idea that the European Stability Mechanism could be used to repair bank balance sheets, has been welcomed by the City -- on hopes that Spain's battered financial sector could be helped in this way.
But this reaction may be premature – the EC recommending something is not the same as Europe's wealthier agreeing to it, and paying for it.
12.07pm: The EC's assessment of the Europe's economy is pretty bleak, in its new report on the region (see 12.03pm for the topline):
The EC's assessment of the Europe's economy is pretty bleak, in its new report on the region (see 12.03pm for the topline):
The economic situation in the euro area deteriorated significantly over the last year. After contracting at the end of 2011 euro area GDP stabilised at the beginning of 2012. The loss of confidence due to the intensifying sovereign debt crisis, the oil price increases and the decelerating of world output growth have been weighing on growth.
While the risk of acute problems in the banking system has been eased by prompt policy action at the end of 2011, economic prospects remain sluggish.
The report also warns that the crisis could escalate, reigniting the "vicious feedback loop between the financial sector and the real economy".
12.03pm: The European Commission's report cards have just been released They're packed with warning and recommendations, and there are some stern warnings for France over its budget deficit.
The European Commission's report cards have just been released They're packed with warning and recommendations, and there are some stern warnings for France over its budget deficit.
Here are some top-line recommendations:
The EC is recommending that the eurozone should move to a banking union. It also offers support for "joint debt issuance" (such as eurobonds?) saying it would help the eurozone through the crisis.
The EC is also recommending that stricken banks could be recapitalised through the eurozone's bailout fund. That would be a BIG help to Spain.
On France, the EC is warning that it could miss its deficit targets for 2013 unless it takes "additional steps".
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