Wednesday, October 24, 2012

Brussels- The EU agreement on banking union is "no triumph". The evidence sits hidden in plain sight in the difference between the summit text before and after yesterday's negotiations...
The summit deal on banking supervision was no triumph. It was another EU exercise in decision dodging and fudge as German procrastination won the day.
Angela Merkel wanted to postpone a new European Central Bank banking supervisor because that in turn delays decision on using the euro’s bail-out fund to recapitalise banks until after German elections.
To see the tricksy, evasive, responsibility-doging fudge – a tortuous linguistic exercise that went into the early hours of today – it is necessary to contrast before and after.
Here is the original draft that the leaders began discussing yesterday: “We need to move towards an integrated financial framework, open to the extent possible to all Member States wishing to participate. In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of completing it by the end of the year:”
Here is the agreed summit text: "We need to move towards an integrated financial framework… In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of agreeing on the legislative framework by 1 January 2013. Work on the operational implementation will take place in the course of 2013.”
This is no triumph. The EU has gone from a deadline to “complete” from one to “agree” with the schedule slipping from December 2012 to anytime next year. This will mean that Chancellor has deferred the issue of using the ESM to directly recapitalise banks until after elections in September 2013, significantly reversing a June summit decision.

6 comments:

Anonymous said...

The statement issued by the Federal Reserve explaining its monetary policy decision is now online.

In it, the Fed pledges to continue Operation Twist (its policy of selling long-dated bonds to push the yield curve down) and to keep recycling profits from its QE holdings into mortgage-backed securites.

It explained:


These actions, which together will increase the Committee’s holdings of longer-term securities by about $85bn each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Fed also predicted that US interest rates will remain at "exceptionally low levels" until at least the middle of 2015.

The vote was not unanimous - Jeffrey M. Lacke opposed additional asset purchases.

Anonymous said...

recap...

• Greece does still not have a deal with its lenders (whatever Yannis Stournaras may have told parliament at one stage). See 14.33 backwards

• Leaked details of Greece's memorandum of understanding have leaked. See 9.12

• As has a controversial proposal from Germany to take more control of Greece's finances. See 10.01

• Mario Draghi has smoothed the Bundestag's ruffled feathers over his bond-buying programme. See 15.11 onwards for highlghts from his press conference, and 13.51 for his opening statement.

• A grim set of economic data has shown that Europe is sliding deeper into recession. See 10.57 onwards

• The US Federal Reserve has left interest rates and quantitative easing unchanged. See 19.19 onwards.

Tomorrow will be a big day in the UK when the first estimate for GDP for the last quarter is released (although David Cameron has rather let the cat out of the bag

Anonymous said...

Gazzetta del sud has the quotes from Berlusconi:


For the love of Italy, one can do crazy and wise things

Eighteen years ago I came into office, a foolhardy venture not devoid of wisdom. Now I choose to take a step back, for the same love that moved me to act back then.

The obligatory bunga-bunga joke is left as an exercise for the reader.

The news doesn't harm Mario Monti's chances of staying on as prime minister - Monti won't run himself, but could be asked to stay on in the national interest.

Earlier today, Monti argued that the European Union should not fret about Italy's upcoming parliamentary elections because the next government will respect previous commitments.

Especially if he's running it?...

Anonymous said...

Over in Greece our correspondent Helena Smith says officials seem to be hedging their bets on the US elections finally resolving the impasse - and unlocking funds even if the thorny issue of labour reforms isn't overcome.

She writes:


"Even if the troika give us a negative report what are they going to do? Are they really going to not give us the installment ( to keep Greece's debt-choked econony afloat) two weeks before the US elections with everything that entails - default, bankruptcy, global market turmoil," asked one senior Greek official.

"These labour reforms will turn our country into Bangladesh. They have no fiscal benefit and will actually derail the adjustment program. The political system will collapse if we impose them. The Troika is demanding that we commit suicide which is why we believe this is a matter that should be solved on a political level by the PM and not here in Athens with the troika."

Anonymous said...

Mario Draghi is giving his press conference in the Bundestag now, following his session before German MPs.

He told reporters that he assured lawmakers that his bond-buying programme was "fully in compliance with the ECB's mandate of price stability for the entire eurozone".

Draghi described his visit as an important piece of "trust building", particularly with the German public.

He was asked whether he could return home, confident that he had reassured Germany's taxpayers. Draghi smoothly replied that it was too early for that sort of confidence(!).

Anonymous said...

One key part of Mario Draghi's pitch to the Bundestag (see 13.51) is that the ECB had to act as markets were not prepared to wait for reforms to take hold.

Only a "fully credible backstop" (ie the promise to buy the sovereign debt of a country seeking help) would work.

And that, he adds, is in the interest of all the eurozone's creditors, including Germany....

We'll find out in around an hour whether this message went down well, when Draghi holds a press conference (eta 3pm BST)