"French for a change"

«Faire preuve d'esprit de responsabilité et de sens du compromis.» Nicolas Sarkozy a lancé jeudi un appel solennel aux Européens pour sauver la Grèce. Attendu ce matin à Berlin, le président français sait qu'il devra déployer des trésors d'imagination et de persuasion pour faire bouger Angela Merkel. Alors qu'Athènes, plongé dans une crise politico-financière, est au bord de la faillite, la chancelière est saisie d'un nouvel excès d'attentisme. Confrontée à une fronde au sein de sa majorité, Merkel irrite ses partenaires européens en faisant monter la pression: elle s'obstine à conditionner toute nouvelle aide financière grecque à une participation des créanciers privés afin de leur faire partager le fardeau des contribuables allemands. La position de Berlin s'est toutefois un peu assouplie ces dernières heures. Le gouvernement allemand, qui se heurte à une fin de non-recevoir de la Banque centrale européenne (BCE), réclamerait désormais un report au mois de septembre de la décision concernant une rallonge à la Grèce, initialement attendue au Conseil européen de la semaine prochaine. Jouer la montre lorsqu'il y a urgence, pour tenter d'infléchir le débat: Berlin avait déjà usé de cette tactique dans le premier acte de la crise grecque, en mai 2010, en rechignant à mettre la main à la poche pour Athènes. (source Le Figaro)

A combination of more austerity, haircuts for creditors and further soft loans from rich countries will probably be what eventually solves the euro zone crisis. But the region would get there faster if everybody admitted their own guilt. Simply making everyone share the blame doesn't solve the huge problem of Moral Hazard. The show just goes on.
As far as I can see, the idea of a split-Euro had been dismissed as too confusing. But it would answer the following point - all would share the consequences, pain would be less and nobody will be responsible fo nothing - how convenient for the Brussels pimps and prostitutes populating the European Parliament . Italy, Greece's etc could work their way out with a weakened currency. The Northern banks would hold a weaker denomination, but money would initially flow in the northern direction (gov't officials leading the race, no doubt), so the northern banks would arguably gain and be happier to support a leaner south. The south could, over a number of years, begin to act honestly (i.e. collect taxes) and a balance would be achieved.
A southern Euro would not be drastically different, and in theory could eventually catch up.

Last week saw real progress in reaching a solution to the Greek, Portuguese and Irish debt crises. It is now recognized that these countries can never, ever, repay their debts, certainly not on time, and more than likely not in full. A default by any other name is a default. It might doff its name, as Juliet thought Romeo might do, and choose "repositioning," or "soft restructuring," or "voluntarism," but it remains a default. If the renaming permits banks to continue the fiction that Greek paper is worth what is inscribed in their ledgers, so be it: sooner or later reality will catch up with them just as it has with the profligate governments now at the mercy of their euro-zone benefactors. No need to rehearse the arithmetic that has appeared in this and other columns. It is enough to point out that the bailouts assumed that the recipient governments would be able to return to the financial markets after a period of reliance for cash on the European Central Bank, the International Monetary Fund, and their euro-zone partners. In short, the eurocracy devised a plan for coping with a liquidity crisis when these countries were facing a solvency crisis. Diagnose the disease incorrectly, and the prescribed medicine will make the disease worse by prolonging the period before which a proper diagnosis is developed.

BUCHAREST- ROMANIA - The National Federation of Romanian Agricultural Producers (FNPAR) warned that the unfavorable weather conditions and lack of agricultural strategies will force up food prices in the upcoming period. Data show the rye production will decrease by 22.9% this year compared to 2010, the rape production will drop 22% and the oleaginous plant production by 7.6%, FNPAR leader Vorel Matei said in a press release. He pointed out that the country's irrigation system is not functional. The federation called on the ministry to draw up viable agricultural strategies to help the agriculture sector and prevent food prices from rising. Agriculture Minister Valeriu Tabara said in April there is no reason why food prices should go up significantly this year. Tabara said prices will remain more or less constant, since producers are able to cover their costs and turn a profit. The shelf prices of food, he said, might go down if Romania can build an integrated farming system.

The European Bank for Reconstruction and Development Friday revised upward its forecast for Romanian economic growth to 1.8% in 2011, from 1.1% previously, saying it expects harsh austerity measures implemented under a multilateral financial program will pay off. "In Romania, the government has managed to complete successfully the IMF program by implementing harsh austerity measures that will keep the fiscal accounts under control," EBRD said in its Regional Economic Prospects report. The bank said the southeast Europe continues to lag behind other regions in terms of the pace of recovery from the crisis, with the exception of Turkey, where growth is now proceeding at a rapid pace. "The one bright spot is the external sector, where exports in most countries are growing rapidly reflecting both a base effect from the deep slump in 2009 and renewed global demand for key exports from the region," the report noted. However, except in Turkey and Romania, domestic demand remains sluggish as financial systems continue to unwind imbalances after the pre-crisis boom and consumer and investor confidence stays low, EBRD said. For 2011, EBRD expects the economy will pick up to 2.2% in the region, up from a growth of 1.9% previously predicted.

BRUSSELS - BERLIN: Eurozone governments are considering a plan to prevent a Greek default under which private investors would be asked to maintain their exposure to its debt and Athens would receive a new package of EU/IMF aid, eurozone sources said. Sources spoke of the new strategy on Thursday after ECB raised the stakes in its bid to prevent a restructuring of Greek debt by telling governments it would refuse to accept the bonds as collateral in the event of such a move. The threat, made by ECB executive board member Juergen Stark at a conference in Athens on Wednesday came after European finance ministers raised the possibility of a "soft restructuring" via debt maturity extensions earlier this week. One source with insight into European discussions on Greek debt said any "soft" or "hard" restructuring that might trigger a "credit event" - or the payout of default insurance contracts - was now off the table. Instead of a maturity extension, which might decrease the value of bonds and trigger such an event, banks would be encouraged to maintain their holdings of Greek debt and buy new bonds to replace issues as they matured, the source said. This would be done in combination with a new package of Greek reforms and austerity, as well as more EU/IMF money to secure Greece's funding needs through 2014. "We hope to have an agreement by the end of June," the source said.

IMF - press release

Strauss-Kahn Resigns - In a letter to the board, Mr. Strauss-Kahn said: "I deny with the greatest possible firmness all of the allegations that have been made against me." The letter said Mr. Strauss-Kahn, being held in a New York jail on sexual-assault charges, would resign with immediate effect. "I want to protect this institution which I have served with honor and devotion, and especially—especially—I want to devote all my strength, all my time, and all my energy to proving my innocence," the letter said. The IMF, which released the letter just after midnight Thursday, said it "will communicate in the near future on the Executive Board's process of selecting a new Managing Director." It added that John Lipsky remains as the acting head. The resignation brings a quick end to the paralysis that has gripped the IMF since Mr. Strauss-Kahn was arrested several days ago. The IMF is in the midst of negotiations about the next steps to take in resolving Greece's financial problems and his absence from the talks has been seen as a major problem. His resignation will put in high gear the global search for a replacement. By tradition, a European is selected to head the IMF and French Finance Minister Christine Lagarde is considered the front runner.

Romania went up four places to 50th in the annual IMD World Competitiveness report, with a total score of 57.497 out of 100 points possible.

Romania Up 4 Notches In IMD 2011 World Competitiveness ReportHong Kong and the USA were tied for number, as both received a score of 100, followed by Singapore, with 98.6 points.In Central and Eastern Europe, Estonia is ranked best, on the 33rd spot, followed by Poland (34th), Turkey (39th) and Lithuania (45th).The IMD's report ranks 59 states in terms of global competitiveness.

Buxelles on Greece - While Juncker's and Rehn's statements marked a significant shift in official comment on Greece's predicament, there was apparent disagreement among other senior officials about whether such a move was the right thing to do, although that may have reflected the confusing array of phrases used. "Restructuring, rescheduling -- off the table," French Economy Minister Christine Lagarde said late on Monday, after Juncker had hinted at a "reprofiling" of Greek debt, a way of extending the maturities on its loans without going through a more fundamental restructuring process. "A restructuring or a rescheduling, which would constitute a default situation, what we would call a credit event, are off the table for me," she said. European Central Bank governing council member Ewald Nowotny told Austrian radio that a "soft restructuring" was not on the cards, insisting that Greece needed to shore up its finances. While all EU officials have rejected the idea of a full-on default, they have now introduced at least three terms to refer to the possibility of some alteration in the repayment schedule of Greek debt: restructuring, rescheduling and reprofiling. From the financial markets' point of view, there may be little difference among them. The manager of a debt fund in the United States joked that the only time he had heard the word "reprofiling" used was in reference to a nose job. But sovereign debt analysts draw a distinction between restructuring, which involves enforced losses, and "reprofiling," when bondholders are asked to exchange short-term debt for longer-dated bonds with a similar coupon, thereby altering the profile of the yield curve and effectively giving the debtor more time to repay the loan.

European governments are wrestling with the prospect of a fresh bailout for Greece a year after they committed €110bn (£125bn) to Athens, under pressure from Washington and Beijing to calm the markets and stabilise the euro. The meeting of the 17 finance ministers of the eurozone was overshadowed by the absence of Dominique Strauss-Kahn, head of the International Monetary Fund and French presidential hopeful, who is facing sexual assault charges in New York. Strauss-Kahn has been a key player in the Greek drama and had been due to attend the first-night dinner in Brussels. The ministers – along with the 10 EU finance ministers from outside the single currency, including chancellor George Osborne – agreed on a €78bn bailout for Portugal, the third rescue of a eurozone country in a year. They also signed off on the permanent eurozone bailout fund, the European stability mechanism, which is to shore up the currency from 2013. They were expected to agree that Mario Draghi of Italy be appointed the next head of the European Central Bank in Frankfurt. With governments reeling from French socialist Strauss-Kahn's arrest on charges of attempted rape, the meeting in Brussels was also the first chance for ministers to discuss who would be the next head of the IMF in Washington; the post is traditionally held by a European. The German chancellor, Angela Merkel, was the first to say that Europe should retain its prerogative over the post, amid calls that it was time the IMF job went to someone from the emerging economies. "We know that in the mid-term, developing countries have a right to the post of IMF chief and the post of World Bank chief," she said. "I think that in the current situation, when we have a lot of discussions about the euro, that Europe has good candidates to offer."

Greece's Prime Minister has hit out at fellow European nations for demanding "islands or monuments" as security for bailout loans ahead of a gathering of European finance ministers in Brussels on Monday to discuss the country's ailing finances. Despite the conviction in financial markets that Greece's debts are unsustainable and will ultimately have to be restructured, eurozone ministers appear determined to top up last year's €110bn (£96bn) rescue package while forcing the beleaguered country into an ever tighter fiscal squeeze. Prime minister George Papandreou gave a hint on Saturday of his frustration over the terms being discussed by creditor nations, which include Germany and France, by suggesting that they might demand a mortgage over Greece's historic antiquities – or even a lien over some of the country's Aegean islands. "I want to add one thing on which we are very sensitive: to ask us for an island or a monument as a guarantee is nearly an insult," Papandreou told Italy's Corriere della Sera newspaper. "The people expect our word and our actions are a sufficient guarantee." Athens has announced a list of state assets, from airports to motorways, that will be sold off to raise €50bn over four years, but there are concerns that the process has stalled. The country will come under pressure to step up austerity measures in exchange for a fresh bailout at Monday's meeting.

Papandreou States: “There is No Going Back on the Euro for EU” - The Greek debt is manageable without restructuring, Prime Minister George Papandreou stressed in Oslo on Friday. Addressing the Progressive Governance Conference themed “A Post-Crisis Agenda for the Centre -Left: Securing Shared Prosperity”, organised by the think tank Policy Network, Papandreou added that: “We have decided to remain and to safeguard the Euro”.
Papandreou outlined a series of measures being implemented by the Greek government, such as the opening of so-called closed-shop professions, and changes to taxation and the social security system. As a result, he is expecting a 5 percent decrease of the deficit annually and an increase in exports. He further pointed out the positive signs in the tourism sector, while regarding the manageability of the debt he cited a relevant appraisal by the International Monetary Fund (IMF). “The Greek drama has become a European drama,” the Premier said, adding that in the midst of the crisis the European identity, European solidarity and crisis management ability were being put to the test.

The new accounting law, modified through a government emergency ordinance, for the first time makes a clear distinction between organising and keeping the books, versus doing more advanced reporting (an accountant's job) and signing for it. The Romanian accounting system takes one more step towards deregulation, which brings it closer to the Anglo-Saxon school, says Marin Toma, chairman of the Body of Expert and Licensed Accountants of Romania (CECCAR), who has been running one of the most important and stable bodies in Romania for the last 18 years. Companies with turnover or overall assets worth under 35,000 euros, which will hire based on a contract or on a service agreement graduates of economic faculties to keep the books, risk a lot, because these graduates will be responsible not only for keeping the books, but also for putting together the accounting records and signing for them. "As an entrepreneur, you have to be really adventurous to accept something like that. I would separate the two processes (organising and keeping the books, and doing accounting and signing for it) because the risk is quite significant. At big companies, only those who have the right to sign can be held accountable. For instance, for a fictitious invoice introduced in the cost category, both the entrepreneur and the graduate of an economics faculty are held to account, it is considered a crime," Toma says. A novelty that the accounting law brings is that these graduates of economics faculties will be able to organize, keep the books, as well as do accounting and sign financial statements

The eurozone's first ever bailout of a debt-laden member country is failing and will need to be renegotiated exactly a year after the €110bn (£96bn) rescue package was agreed for Greece. Following secret talks in Luxembourg on Friday between Athens and some of the key EU players, it emerged that Greece will not be able to meet the terms of last year's rescue and is hoping to ask the eurozone for more funds. As Britain made clear it did not want to offer any more support for Greece as part of an EU package or a bilateral loan, investors remain unconvinced of the ability of Athens to sustain its €340bn debt load. Signalling that his government will struggle to finance itself on the bond markets by next year – which was part of the deal struck with the eurozone and the IMF – the Greek finance minister, George Papaconstantinou, said: "We will either go out to markets or use the recent decision by the EU that allows the European fund to buy Greek bonds. The markets continue to disbelieve in our country." His trip to Luxembourg had been kept so quiet in Athens that only the prime minister, George Papandreou, knew about the discussions, which were led by Jean-Claude Juncker, the Luxembourg prime minister and president of the group uniting the 17 countries using the single currency. Juncker confirmed that the Greek bailout would need to be renegotiated amid alarmist reports that the country was contemplating reintroducing the drachma. After the talks – attended by the finance ministers of Germany, France, Italy and Spain as well as Olli Rehn, European monetary affairs commissioner – Juncker said the Greek package needed a "readjustment". Haggling over a new Greek deal is set to dominate the weeks ahead.

The NBR is no longer thinking favourably about leu's strengthening further, after the exchange rate has slid by around 4% since the start of the year. The rising leu is attracting portfolio investors, going into speculative bubbles, and foreign currency lending, says NBR governor Mugur Isărescu. "Allowing the domestic currency to go up to dampen imported inflation can attract rising portfolio investments. More portfolio investments can lead to rising asset prices. Putting up with leu appreciation to help inflation may not be possible in terms of risks generated at the level of private sector balance sheets," Isărescu told the students of "Transilvania" University of Braşov at the end of last week. The NBR is facing a dilemma again, in the context where inflation seems to be climbing steadily, going beyond the 8% threshold this spring, almost double the level of a year ago. After the VAT hike shock of last summer, pressures related to soaring fuel and foodstuff prices internationally have started being felt since autumn. In parallel, the economy is struggling to exit an over two-year recession, and loan demand, though weak, is foreign currency focused. (Z.F.)

Eurozone finance ministers are battling this weekend to contain a mounting sense of crisis about the future of the single currency as details emerge of secret talks on restructuring Greece's debts. Analysts expect a sharp sell-off of the euro when markets open tomorrow morning, as investors digest the fallout from reports – swiftly scotched – that Greece was considering leaving the eurozone. "Perhaps we have crossed a rubicon," said Jonathan Loynes, European economist at Capital Economics. "The knee-jerk response will probably be to push the euro lower. I believe the euro should be at parity with the dollar, not at $1.44 – I don't know what it's doing at anything like these levels." Euro policymakers at first denied that a meeting was taking place, but were later forced to admit that the German, French and Italian finance ministers had been holed up in a chateau in Luxembourg with their Greek counterpart George Papaconstantinou, discussing options for dealing with Greece's unsustainable debt burden. Rumours swept through financial markets late on Friday that Greece was threatening to leave the eurozone and reintroduce the drachma, but that was furiously denied by Athens yesterday.

The euro fell to its lowest in more than two weeks on Friday and headed for its worst week against the dollar since January after a German news report, later denied, suggested Greece had raised the possibility of leaving the euro zone. Spiegel Online reported euro zone finance ministers were meeting in Luxembourg on Friday to discuss Greece, including the issue of its possible exit from the currency bloc. Greece, through its finance ministry, later denied it was considering leaving the euro zone. The Greece headlines though were enough to send investors further unwinding their long positions on the euro, which hit a low of $1.43500, its weakest level since April 20 on electronic trading platform EBS.

BUCHAREST - The exposures of Greek and Dutch banks to Romania fell by nearly three billion euros last year compared with 2009, according to data published by the Bank of International Settlements (BIS), also known as the bank of central banks. In the case of Greek banks, exposure to Romania fell by 1.6 billion euros, to 15.8 billion euros, while for banks in the Netherlands exposure was reduced by 1.1 billion euros, to 5.2 billion euros. The Greek now hold 16-17% of the assets in the Romanian banking system, and problems in their own country, which faces a crisis so tough it has shaken the entire euro zone, are making it much more difficult for Romanian operations to finance their activities through loans. Last year, Greek banks kept pressure up on deposit interests and implicitly on loan interests, paying interests above the market average in order to finance their operations preponderantly from the local market. Alpha Bank and Bancpost (the subsidiary of EFG Eurobank) are in the top ten players, but there are six banks with Greek shareholders operating on the Romanian market. Dutch banks are represented on the Romanian market by ING, but there are further lending institutions with local exposure, including to T-bills. "Bank's exposures have remained relatively stable in crisis. More money will continue to flow in if demand for foreign-currency loans returns. Foreign banks' exposure rose very much when lending rose significantly, before the crisis. Financing from parent banks will grow if financing needs grow," commented Ionuţ Dumitru, chief economist of Raiffeisen Bank. (Z.F.)

BRUXELLES - Although the precise terms of the rescue deal announced by caretaker prime minister José Sócrates will not be agreed for another two weeks, news of the deal sent the euro rallying on Wednesday. Portuguese bond prices also recovered some ground in early trading, while shares on the Portuguese stock market moved higher in the face of a widespread sell-off across Europe.The interest rate paid by Portugal for the rescue package is expected to be agreed at a gathering of EU ministers on 16 and 17 May. Sócrates resigned in March after the Portuguese parliament rejected his austerity programme. However, like Greece and Ireland, Portugal will have to accept significant cutbacks and tax rises in return for outside help. Jenkins said: "The prime minister in his television address set out a few things the package did not include, so no cuts to minimum wages or public sector pay, no public sector dismissals and no change to the retirement age. But he was short on what measures the package did include, though it is expected to include further privatisations, recapitalisation of the banks as well as a combination of government spending cuts and tax increases."Portugal successfully auctioned €1.1bn of three-month government bonds on Wednesday morning, slightly more than it was expected to sell. However the yield, or interest rate, on the debt rose to 4.652%, up from 4% in a similar auction.The yield on its 10-year debt fell on Wednesday, in response to the bailout deal, to around 10.06%. This level is still generally seen as unsustainable, and is also several percentage points higher than the interest rates levied on Ireland and Greece's own rescue deals.The euro rose to around $1.4854 against the dollar, and also traded above 90p against the pound.

Manufacturing output in the eurozone powered ahead last month but fuelled concerns that a two-speed recovery will leave faltering southern European countries far behind. Output in Germany, France and the Netherlands soared in April, according to analysts Markit, to register the second fastest monthly jump since 2000. Northern European countries dragged up the average after capitalising on a surge in orders from the far east. Recent company results, lead by Mercedes last week, show China spurring a huge rise in demand from European factories for cars and other manufactured goods. Job creation also increased in northern Europe, with Ireland for the first time joining the job recovery in the manufacturing sector. However, a slowdown in orders and rising input prices threaten growth over the rest of the year, said Markit in its monthly report. "The euro area purchasing managers' index (PMI) was boosted by output and new orders both rising slightly faster than indicated by the flash estimates," Markit said. "An acceleration in the rate of increase of output – to one of the fastest seen during the past 10 years – contrasted, however, with a slight easing in growth of new orders.