Mr Ayrault made clear the frustrations in the new socialist
government over the handling of Greece by eurozone leaders, including the German
chancellor, criticizing them for a “political weakness” and “a lack of vision”.
I think Merkel is guilty of both of these things. She makes big, definitive
statements, then undermines them a few days later. The people of Greece (and of
Spain, Ireland and Portugal) deserve to know where they stand. The last Greek
election was a farce because it was fought between a party that said it would
simply cancel the debt with no consequences and a party that said it would
renegotiate the bailout. Surely, if Merkel's "heart bleeds" for the Greeks,
she's morally obliged to be straight with the Greek people. These are real
people who can't make big life decisions - like whether to stay in Greece,
whether to start a business, whether to start a family - because their country
is in limbo. And it's in limbo because they don't know how much support they
have from Germany. They don't have a clear way to stay in the EZ... they're just
being strung along. Maybe it's good for her re-election chances - or her opinion
poll numbers - but it's a lousy way to treat people.As things stand, we're still
waiting for the Troika's official report into Greece's progress. Ayrault's
comments add weight to the theory that Athens will be granted more support in
the event that it has missed a significant chunk of its targets. We'll bring you
reaction to Ayrault's comments as soon as possible.
Portugal is on the brink of abandoning its controversial
plans to hike taxes on workers, in a victory for the huge numbers of people who
protested a week ago. Pedro Passos Coelho, the
Portuguese prime minister, is due to hold talks with employers and trade unions
today to discuss alternative proposals. The public opposition to his plan to
effectively slash workers' pay to fund lower taxes for companies appears to have
forced Lisbon to change course.
8 comments:
As unrest gripped Greece, Spain, and Portugal, Madrid's borrowing costs surged through the 6% threshold after the leading eurozone creditors made it plain that a planned €100bn (£80bn) bailout for Spanish banks would saddle the country with higher debt levels.
The lack of political will to fix the crisis was reinforced by the European commission flatly contradicting the governments of Germany, the Netherlands and Finland after they walked away from pledges delivered at an EU summit in June.
Is there any doubt remaining that EMU will go down in history as one of the most harmful acts of political hubris the world has ever seen? How ironic that EMU, rather than lead to greater pan-European identity, might instead lead to a balkanization that will persist for decades. The least painful solution I can see is for Germany to reinstate the DM and let the sick men of Europe devalue. Better a managed unwinding of a terrible idea (EMU) than an unmanaged one, brought about by radical political forces in Spain, etc. The Eurocrats and other pro-integrationists will fight this to their end of course, which cannot come quickly enough.
It is quite a scary thought that things could unravel so quickly on the back of what is happening in Athens...
a) Protestors storm parliament building
b) Section of army joins them and police disperse fearing for their safety
c) number of MP's attacked and a coup ensues
d) Union leaders claim control of country and announce immediate withdrawal from Euro
e) Markets panic and stock markets plunge
f) Spain upraises on back of Greece events
g) The World panics
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Commentary
By Martin Essex It’s not as though there’s one particular story that’s sending the financial markets spiraling downwards again this session, it’s the drip, drip, drip of bad news that’s wearing away confidence once more. As predicted here eight days ago, the market vigilantes have been regrouping for a new attack, and here are some of the latest reasons why they’ve returned:
The Federal Reserve’s new mortgage bond-buying program is unlikely to boost economic growth and risks hurting the central bank’s credibility, according to Federal Reserve Bank of Philadelphia President Charles Plosser. He’s a known hawk, but such comments from inside the Fed matter nonetheless.
The European Central Bank couldn’t partake in a restructuring of Greek debt, as this would be an illegal monetary government financing, according to ECB executive board member Joerg Asmussen, quoted by the newspaper Die Welt.
Government borrowing costs over 7% haven’t caused the end of the world in the past and the euro zone wouldn’t fall apart if some countries had to temporarily pay such rates now, Deutsche Bundesbank president Jens Weidmann said in an interview published late Tuesday in the Swiss daily Neue Zuericher Zeitung.
Spanish riot police fired rubber bullets and baton-charged protesters Tuesday as thousands rallied near parliament in Madrid in anger at the economic crisis, in clashes that left 14 people wounded
Those protests have been followed Wednesday by a general strike in Greece, where hundreds of thousands of workers have walked out as part of a nationwide protest against a fresh round of budget cuts the Greek government is expected to announce in coming days.
As if Spain didn’t have enough problems, the leader of Catalonia, Artur Mas, has announced in Barcelona that he will call early elections there on Nov. 25, which observers see as a move to strengthen his bid for more autonomy for the wealthy northeastern region.
And Spain’s prime minister, Mariano Rajoy, is still not committing himself to request a bailout. Asked in a Wall Street Journal interview whether his government would apply for a financial bailout from one of the European Union’s two financial-rescue vehicles, Mr. Rajoy said: “At the moment, I cannot tell you,” adding that the government would need to see if the conditions attached to the bailout are “reasonable.”
The finance ministers of Germany, the Netherlands and Finland dealt a blow Tuesday to hopes that the euro zone’s bailout fund could soon lighten the debt burden of states such as Spain that are in the throes of severe banking crises. They said national governments should continue to be responsible for resolving problems created by bad lending decisions made by banks before they start being policed by a proposed new euro-zone bank supervisor.
And finally, symbolically, the yield on Spanish 10-year bonds hit the 6% level this session before easing back; underlying the pressures back on the highly-indebted euro-zone nations such as Spain
SZ (not found online) reports what little there is to report on the Merkel/Lagarde meeting yesterday. There was no press conference as the situation is too delicate. Mostly just summing-up what we already know:
-Lagarde wants to help (she's french, after all), but her organisation is utterly fed up with the failure of the greek program, and wants to pull out. And most non-european countries on the board are fed up too. As, rather delicately, is the Bundesbank, which occupies the german seat at the IMF.
-Merkel knows that extra money can't be ratified by the various parliaments. Also wants to help. But where does the money come from? The ECB has already categorically rejected a haircut on their holdings, as illegal state financing.
Looking on the positive side: they appear to have found some basic level of trust in the greek government again. Probably more in Finance Minister Stounaras then in Samaras, however. His "encounter" with Thomsen of the IMF, where he pointed to a bullet-hole and asked if the IMF wanted to bring down the greek government, is reported with considerable sympathy.
The Spanish and Greek people all want their governments to both end austerity and keep the Euro. It seems to me it would be easier explaining to a frog that he is going to boil. I may be wrong but I don't think a transfer union will be on the cards any time soon. I remember when Britain left the ERM, the propaganda machine was telling us it would be the end of life as we knew it. Turns out the lesson we learned was worth every penny.
The whole purpose of the Euro is to create a permanent crisis, with no workable solutions and no means of exit. Its function is to undermine national governments one by one, by placing them in intolerable and unworkable situations.
The intention of the EU is to impose a system of governance which no-one will willingly accept, and this is its chosen modus operandi
Olli Rehn, EU commissioner for economic affairs, comments on the Spanish budget:
The comprehensive reform plan announced today by the Spanish authorities is a major step to broaden and deepen structural reforms, building on important achievements made already. The reform plan includes concrete, ambitious and well-focused measures and establishes clear deadlines in many areas.
This new structural reform plan responds to the country specific recommendations issued to Spain under the European semester and goes even beyond them in some areas. The reforms are clearly targeted at some of the most pressing policy challenges. Further enhancing the flexibility of product and labour markets will indeed be critical to boost growth and employment and to support fiscal consolidation.
I particularly welcome the ambitious plans to establish an independent Fiscal Council, to further liberalise professional services, and to effectively reduce the fragmentation of the internal market in Spain. Labour market measures complement past reforms of collective bargaining and employment protection. The planned reform of the vocational education system is particularly pertinent.
Spain is facing important challenges to correct very sizable macroeconomic imbalances which require a comprehensive policy response. The measures announced today are a further important step towards addressing these challenges.
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