GERMANY BLOWING HOT AIR - "Greece is getting on track," German Finance Minister Wolfgang Schäuble said in Brussels as the meeting ended. "It is not easy for them." The agreement reached on Monday night foresees an initial payment of €2.5 billion this month to be followed up by more payments in subsequent months. Greece's creditors are primarily concerned by the slow progress Athens has made on downsizing its public sector, with thousands of additional layoffs pending. The country's privatization program has also generated much less cash than expected, most recently as a result of the government's inability to find a buyer for the natural gas company DEPA. Tax reform and the pursuit of tax dodgers is another area where Greece's creditors have demanded improvement. "It's time to step up the momentum of reform in Greece," said European Commissioner for Economic and Monetary Affairs Olli Rehn. Still, the public sector cuts are controversial in Greece, with thousands of teachers and municipal workers taking to the streets of Athens on Monday and Tuesday. Some 12,500 state employees are to be placed on administrative leave by the end of September with an additional 12,500 to join them by the end of the year. They will receive 75 percent of their salary for eight months. If they haven't found a new job by then, they will be unemployed.
There is concern that the additional cuts could further damage the country's fragile economy which, while slowly improving, is still stuck in its sixth straight year of recession. Economists forecast that the country could return to growth next year -- a tiny increase of just 0.6 percent -- but some worry that dividing up aid payments could derail the slow recovery. The agreement to continue funding Greece, however, was by no means unexpected. Despite widespread concern with Athens' slow pace of reform, there is little appetite for risking a return of the euro crisis by withholding funding. The situation in Portugal has made European finance ministers even more cautious. Political instability in Lisbon last week recently triggered a spike in the interest rate on Portuguese sovereign bonds. The country was able to avoid a collapse of the government, but Lisbon must nevertheless push through an additional €5 billion austerity package in the coming months, and there are concerns that political worries might return.
Greece too has seen its share of political instability in recent weeks, with the government of Prime Minister Antonis Samaras almost collapsing due to its sudden and controversial shutdown of public broadcaster ERT. One of the parties in his three-party coalition left, leaving him with a tiny three-seat majority in parliament.
It is unclear whether France's proposal to provide direct aid to Greek banks will gain much traction. Some €60 billion of the €500 billion ESM fund has been made available to provide direct assistance to euro-zone banks that need it. But it remains controversial. Furthermore, European leaders only recently agreed to involve shareholders, creditors and individual countries should large banks find themselves in need of help. It remains unclear whether that agreement applies to existing cases like Greece.
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The police have been attacked with petrol bombs in north Belfast as trouble flared for the second consecutive night.
Stones, bottles and fireworks have also been thrown at officers in the Woodvale area. Water cannon have been deployed.
It follows serious rioting on Friday night when 32 police officers and an MP were injured.
AdvertisementChris Buckler reports from the scene of Saturday's clashes
Another 400 police officers have been brought into Northern Ireland to assist the Police Service of Northern Ireland.
BBC Northern Ireland reporter Mark Simpson said on Saturday: "Hundreds of police officers are trying to stop the violence spreading.
"So far, they are succeeding but the trouble does not seem likely to stop any time soon."
"Now, the ECB is going to look deep into the books and will involve external, independent experts. It is clear to the ECB that its credibility will be harmed if it doesn't make precise checks," Dijsselbloem said in an interview with four European newspapers on Wednesday, including the German daily Süddeutsche Zeitung. "Because as soon as the ECB takes over the central monitoring role over Europe's banks, it becomes responsible."
The European Union tasked the ECB with keeping an eye on banks in the bloc late last year and preparations have been underway since then. Starting in the autumn of 2014, the central bank of the common currency zone will begin monitoring the euro area's largest financial institutions. Should they be unable to prove their financial health before then, however, unwinding them and shutting them down could be an option.
That, though, has become the most controversial element of the banking union plan. On Wednesday, disagreement flared between the European Commission and Germany over who will have the final say when it comes to restructuring wobbly banks. A proposal by Commissioner Michel Barnier, who is in charge of the financial regulation portfolio on Europe's executive body, called for the Commission to have final decision making powers on which banks get restructured.
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