Eurozone finance ministers have put off until next month any decision to give the green light for a further €8bn bailout for Greece despite recognising that the Athens government had made some considerable progress in slashing the country's debts. Jean-Claude Juncker, Eurogroup chairman, repeatedly made plain early on Tuesday that none of the eurozone countries was urging a Greek default and categorically denied that there was any question of Greece leaving the euro area. In a move certain to disappoint markets, the 17 finance ministers sent signals they had no intention of agreeing to reboot the zone's rescue fund of €440bn closer to the €2tn or more demanded by leading investors and analysts. EU officials reiterated that there was "no Plan B". But Juncker and Olli Rehn, the EU economic and monetary affairs commissioner, indicated that ministers had for the first time discussed measures to improve the bailout fund's efficiency and effectiveness in order to raise its firepower – code for raising the guarantees it needs for buying up more government bonds in the secondary market. Juncker said: "We consider that we should by no means increase the fund's financial volume." He dropped a broad hint that private bondholders would be forced to pay more than the 21% "haircut" agreed at the 21 July meeting that increased the fund's volume and approved the second €109bn bailout for Greece – ascribing that to "technical" reasons. Juncker and Rehn recognised Greece had made strides towards overcoming its debts and budget deficit but said that the Athens government had to be stricter about structural reforms and more ambitious in implementing privatisations.
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Tuesday, October 4, 2011
Eurozone finance ministers have put off until next month any decision to give the green light for a further €8bn bailout for Greece despite recognising that the Athens government had made some considerable progress in slashing the country's debts. Jean-Claude Juncker, Eurogroup chairman, repeatedly made plain early on Tuesday that none of the eurozone countries was urging a Greek default and categorically denied that there was any question of Greece leaving the euro area. In a move certain to disappoint markets, the 17 finance ministers sent signals they had no intention of agreeing to reboot the zone's rescue fund of €440bn closer to the €2tn or more demanded by leading investors and analysts. EU officials reiterated that there was "no Plan B". But Juncker and Olli Rehn, the EU economic and monetary affairs commissioner, indicated that ministers had for the first time discussed measures to improve the bailout fund's efficiency and effectiveness in order to raise its firepower – code for raising the guarantees it needs for buying up more government bonds in the secondary market. Juncker said: "We consider that we should by no means increase the fund's financial volume." He dropped a broad hint that private bondholders would be forced to pay more than the 21% "haircut" agreed at the 21 July meeting that increased the fund's volume and approved the second €109bn bailout for Greece – ascribing that to "technical" reasons. Juncker and Rehn recognised Greece had made strides towards overcoming its debts and budget deficit but said that the Athens government had to be stricter about structural reforms and more ambitious in implementing privatisations.
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The French president, Nicolas Sarkozy, meanwhile said he would meet the German chancellor, Angela Merkel, in Berlin on Sunday for talks on "ways and means to accelerate the economic integration of the eurozone economy".
Ostensibly, the eurozone's two most powerful political figures are preparing the way for the crucial summit of the 17 member countries that will take place on 18 October or a day after a summit of all 27 EU countries, including the UK.
But the talks are bound to raise market hopes that the pair will come up with an outline plan for substantially increasing the scope of the European financial stability facility (EFSF) that can be put to the eurozone summit without necessarily boosting its funds. Slovakia assured ministers that its parliament would endorse the enhanced EFSF by 14 October.
Christian Noyer, Bank of France governor, indicated he was open to a scheme that would allow the EFSF to be leveraged – most likely by increasing the guarantees it can rely on to buy up more bonds and make bigger precautionary loans to countries suspected of being in trouble.
Oct. 3 (Bloomberg) -- Seth Waugh, chief executive officer of Deutsche Bank AG's Americas division, talks about financial regulation, his company's capital levels and the European debt crisis. He speaks with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)
One under-discussed area of implications of a Greek default is how it could affect Israel. Greek default could impose ruinous losses on Cypriot banks – which have balance sheets at positively Icelandic levels of 600 to 900 per cent of Cypriot GDP (depending on definitions). But, more fundamentally, there is unlikely to be much political desire in Cyprus, given its intimate economic and political linkages to Greece, to continue in the euro (and European Union) if and when Greece leaves.
This much is widely known. What is less widely known is how entangled Israel has recently become with Greece and Cyprus. Following the deaths in the Gaza flotilla debacle of 2010, leading to tensions with Turkey, and the loss of key ally Egypt in the Arab Spring, Israel has shifted its Eastern Mediterranean focus – building new linkages with Greece and especially Cyprus.
Secular Israelis getting married have for many years used Cyprus as a sort of Vegas of the Eastern Mediterranean – civil (non-religious) weddings in Cyprus are recognised in Israel, where there is no domestic equivalent. There are also significant real estate ties. But more recently economic ties have accelerated.
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