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Thursday, June 28, 2012

Europe's divided leaders grope for summit breakthrough

Leap forward to political union eludes France and Germany while David Cameron demands safeguards for single market

European leaders came under intense pressure on Thursday night to embark on a "big leap forward" towards political union and rescue for the euro, while groping for milder bailout formulas that would relieve the pressure on Spain and Italy and help to reduce their cost of borrowing.

At a two-day EU summit in Brussels, leaders were more stridently at odds than ever before in the 30-month crisis, but with the stakes also arguably at their highest, frantic moves were being made behind the scenes to avoid serious acrimony.

Mario Monti, the beleaguered Italian prime minister who has been plaintively asking Germany to shift from its refusal to accept liability for others' debt, was expected to deliver a plan later calling for help in reducing the cost of borrowing.

Publicly and privately, senior German officials maintained a tough line, insisting there were instruments available to help, such as two eurozone bailout funds. Italy would have to request aid and accept the same tough terms borne by others who have been rescued.

Monti used the run-up to the summit to warn of disaster if his pleas went unheard, while Mariano Rajoy, the Spanish prime minister, declared that Madrid's borrowing costs were at the brink of what was affordable despite the benchmark 10-year yield falling below 7%.

Various options were being canvassed to help Italy and Spain while observing the German penchant for sticking to the rules governing the bailout funds and the role of the European Central Bank (ECB).

One option, said to be mooted by the Germans, was to use the temporary bailout fund – the European Financial Stability Facility – to absorb excessive Italian and Spanish borrowing costs. Italy would be guaranteed an interest rate of, say, 4%. If the markets charged Italy more, the bailout fund would soak up the difference.

There is only €240bn left in the EFSF, unlikely to be enough to deal with Italy and Spain. More arcane schemes using the fund as an insurance instrument were being mooted while other schemes included using the bailout funds to buy up Italian or Spanish bonds, or have the ECB act similarly in the secondary markets – since the bank is not allowed to finance eurozone governments directly.

Arguments flared over issues of seniority in the bailouts, with Spain seeking changes to the terms so that private creditors would not be subordinate to the bailout fund in debt repayments.

The summit quickly endorsed an EU growth and jobs pact, more of a symbolic exercise in shifting the emphasis from austerity, and then grappled with a "road-map" for a 10-year march towards a eurozone political federation, embracing pooled banking, debt and fiscal policies and powers.

Despite signs the leaders were seeking a short-term fix, while wrangling over the longer-term masterplan for a eurozone political union, no decisions were expected until later today at a separate summit for the 17 eurozone countries.

With the stakes arguably at their highest since the currency and sovereign debt crisis erupted in Greece almost three years ago, the leaders appeared more divided than ever despite the attempts to find a formula that might calm the markets.

After talks between the two key leaders, Angela Merkel of Germany and Francois Hollande of France on Wednesday, it was clear from the remarks of senior German officials there was no meeting of minds, meaning that Paris and Berlin were seriously split at a summit for the first time in the crisis.

"No sign of any warming between Berlin and Paris," said a senior EU official.

"Unless France and Germany can soon agree on a grand bargain, disaster may loom," said Charles Grant, director of the Centre for European Reform.

While France was more favourable towards the blueprint for a eurozone federation, senior German officials were strongly critical. The summit was expected to give Herman Van Rompuy, president of the European council, a mandate to refine the scheme by the end of the year.

The first stage in the integrationist leap would be to establish a banking union, probably putting eurozone banks under the supervisory authority of the ECB.

While officials said this was a huge, complex and detailed undertaking the Germans insisted there could be no common European guarantees for savers' deposits or funds to wind up bad banks until a functioning European supervisory and regulatory system was working well.

Britain is adamant it will have no part in banking union and David Cameron indicated he is prepared to wield a veto again to protect the City of London by fighting off any changes that would change the EU's single market.

The prime minister used last night's dinner to demand "safeguards" though he believes it is in Britain's interests for eurozone leaders to follow what he and George Osborne call the "remorseless logic" of monetary union and take decisive steps towards fiscal union.

The prime minister, who blocked eurozone leaders from embedding their fiscal compact in EU treaties last December, indicated he may wield the veto for a second time.

"We are saying to the eurozone countries they do need to do more things together to strengthen the currency and make sense of their currency," Cameron said as he arrived in Brussels. "But Britain is going to stay out of that. We want Europe to work for us, as a single market, as a place where we trade, as a place where we co-operate. I'm going in there so that we get the safeguards to make sure that can keep happening."

Britain's dilemma is brought into sharp focus by banking union, which it supports but fears could change the single market.

Britain is pleased the paper says that an integrated financial framework needs to be done in a way that preserves the "unity and integrity of the single market". But it has concerns that about plans to create a single European banking supervision system. While this would operate at an EU and a national level, the paper says the "European level would have ultimate responsibility".

Britain will insist that two key elements of such a union – a single regulator and the mutualisation of risks in which banks stand behind one another – must be limited to the eurozone. One UK official said: "We support the steps to move towards banking union. We see that as intrinsically linked with the concept of a single currency. As a consequence of that we would not be part of some of the steps envisaged in that report such as mutualising risk, standing behind one and another's banks and we would not be behind moves to centralise the supervision of banks and financial institutions."

The official added: "There are some quite far-reaching proposals in that report. It sets out a new framework for the governance of economic and monetary union. But it is a relatively short paper given the number of issues it covers."


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Romano Prodi says "we are all Greeks"

In an exclusive interview on AMNA Web TV on Thursday, former European Commission president and prime minister of Italy Romano Prodi stressed that “Greece should not be the only one to renegotiate; all of us should. We are all Greeks.”

Speaking from Brussels, Prodi warned that “Greece is beyond the poverty line and if this policy mix continues unchanged, the entire Europe will become Greece.”

He said that in the past, Greece (...)

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Greece's PM Reaffirms Commitment to Bailout Program


AFP

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Letter by PM Samaras to EU leaders

The letter that president Karolos Papoulias will be handing over to EU leaders at the EU summit, written by newly elected Prime Minister Antonis Samaras, was released by Reuters on Thursday.

That letter in full:

As I have already informed you, I will unfortunately not be able to attend the current European Summit, due to an eye operation I had to undergo. Greece will be represented by the President of the Hellenic Republic, Mr. Karolos Papoulias.

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IMF open to negotiating terms of Greece's bailout

WASHINGTON (AP) — The International Monetary Fund is open to adjusting the terms of a Greek bailout and will send a team to Greece next week to meet with the new government.

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Greek politics: Not an easy start

ANTONIS Samaras’s first week as Greece’s new centre-right prime minister proved unexpectedly medical. First, Mr Samaras was rushed to hospital for surgery to treat a detached retina. Told by doctors to spend a quiet week at home recovering, he is missing his first EU summit.Next, Vassilios Rapanos, the new finance minister, collapsed, complaining of dizziness and nausea. After spending three days in a private clinic for tests, the 64-year-old economist decided his health was too poor for the job. Stressful negotiations are looming with other euro-zone finance ministers and with the troika, the European Union, European Central Bank and International Monetary Fund officials overseeing Greek reforms to avert a “Grexit” from the single currency.A third blow came from Syriza, the hard-left coalition that ran Mr Samaras’s New Democracy party close in the election. Mr Samaras had to sack George Vernicos, the deputy shipping minister, after Syriza dug out a 2010 law banning government officials and lawmakers from owning shares in companies registered offshore. (The Vernicos family firm is registered in the Marshall Islands.)Despite the rocky start, the three-party coalition government kept calm. Yannis Stournaras, an Oxford-trained economist, was appointed finance minister. A technocrat by inclination, Mr Stournaras was nonetheless considered too political at first for a...


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IMF to visit Greece, Cyprus next week


The Hindu

IMF to visit Greece, Cyprus next week
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'Patched-up' Greece pleads for more bailout time


CBC.ca

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As Europe's big leaders meet in Brussels for a summit on the euro crisis, the Greek delegation is a patchwork of stand-ins and walking wounded. As Margaret Evans reports, it's an apt metaphor for a country in the deep throes of austerity.
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Press Watch, June 28

Today’s crucial EU summit dominated headlines in the Athens press, which focused on the great divide between the states of the fiscally “virtuous” north and the south.



From the Greek angle, Premier Antonis Samaras’ letter to EU officials also captured broad attention. He cannot travel to Brussels as he is recuperating from an eye operation, so President Karolos Papoulias will head the delegation and hand over the letter.

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Newly elected Greek deputies sworn in to Parliament


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Leaders weigh urgent steps as Europe summit nears


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Greece frozen out of EU summit debates

The nightmare of EU leaders gathered for Thursday’s crucial summit in Brussels is not the deadlock in a tug-of-war between North and South over a roadmap towards “genuine” fiscal and banking union backed by some form of Eurobonds, which Berlin vehemently rejects.

The real horror, according to Wednesday’s article by Reuters is a possible failure of the next Spanish bond auction that would prompt “solvency worries to Italy and (...)

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Greek media: Iranian FM was detained in Cyprus


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New Greek deputies sworn in to Parliament


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New Greek deputies sworn in to Parliament




ATHENS, Greece (AP) — Greece's 300 newly elected lawmakers are being sworn in to Parliament, eleven days after the country's second election in six weeks left no party with enough votes to govern outright.


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Greece to ask EU payback for 'sacrifices'


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Greek and European Crisis: The Key Milestones


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