New EC Thread
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Re: New EC Thread
Badboy Sat 26 May - 16:42
THERE ARE THREE ARTICLES IN NEW SCIENTIST ABOUT THE GREEK CRISIS.
THESE ARTICLES SUGGEST THAT SOCIAL SPENDING SHOULD BE A PRIORITY.
THESE ARTICLES SUGGEST THAT SOCIAL SPENDING SHOULD BE A PRIORITY.
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Re: New EC Thread
Panda Sat 26 May - 18:28
Angelina wrote:Panda wrote:
The Gerrmans by nature believe in Austerity, Martin Luther was a firm believer in not living beyond ones means. Germans for the most part rent rather than buy their Homes, do not like debt and would you believe the workers havn't had a rise in 10 years while they were rebuilding East Germany. There
is no doubt Germans are a hardworking Nation, even if they do get up at some ungodly hour to put their Towels on Hotel Loungers by the Pool.....true.The crazy part is the weak Euro benefits the Germans because they are Exporters so the weaker currency suits them.
What I always wonder with people that rent their homes, how do they pay for them once they retire? In the UK renting is about the same cost as having a mortgage (I think).
met an English Woman last year living in Germany and she said, German Pensions are very good, Rents are kept low and Germans do not spend beyond their means so have no debt. This is none of the problems bugging the rest of the Euro, Germany makes its money from Exports, but buys very little from EU Countries . You have to respect their lifestyle because they live within their means, unlike Britain and Southern European Countries.
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Re: New EC Thread
Badboy Sat 26 May - 19:44
MANY GERMAN TOURISTS ARE CANCELLING THEIR GREEK HOLIDAYS BECAUSE OF ANTI-GERMAN SENTIMENT,MANY GO TO PLACES LIKE RHODES.
HOLIDAY PRICES HAVE FALLEN TO VERY LOW LEVELS.
HOLIDAY PRICES HAVE FALLEN TO VERY LOW LEVELS.
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Re: New EC Thread
Panda Sat 26 May - 21:43
Badboy wrote:MANY GERMAN TOURISTS ARE CANCELLING THEIR GREEK HOLIDAYS BECAUSE OF ANTI-GERMAN SENTIMENT,MANY GO TO PLACES LIKE RHODES.
HOLIDAY PRICES HAVE FALLEN TO VERY LOW LEVELS.
Badboy, the EU is upsetting everyone, Investors, The U.S., Banks around the World etc because after 2 yrs they, have worsened the situation,even if
Greece stays in the Euro to get the next Bailout, they will have a massive debt that some analysts are suggesting will never be repaid. Their Bonds have
a high yield which means they have to pay more interest than any other european Country. Spain is in dire straits , Italy not far behind and thses were
the Countries considered too big to fail. Portugal is witnessing a mass emigration of young Students going to work in former Portugese Colonies,Belgium
and Ireland also may need a bail-out and Denmark is having problems with Bank liquidity.
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Re: New EC Thread
Panda Sun 27 May - 9:29
YTimes.comReport an ErrorE-MAILEuropean Debt Crisis
Hannelore Foerster/Bloomberg NewsUpdated: May 25, 2012
Recent Developments
May 25 Standard & Poor’s slashed its ratings on the creditworthiness of five Spanish banks, just as one of them — Bankia, the nation’s largest real estate lender — requested an additional 19 billion euros in rescue funds from the country. Bankia already had been granted a 4.5 billion euro emergency loan from Spain. Its forced rescue prompted broader concerns among investors about whether Spain can still finance alone the rescue of such banks.
May 24 Economic reports showed Europe’s prospects dimming as the long battle to defend the euro zone continued to undermine confidence and raised the prospect of a renewed cycle of demands for austerity. German data released showed signs of a slowdown in an economy that until now had been a bright spot for the Continent.
May 23 At a summit meeting in Brussels, regional leaders failed to signal any significant new steps to stimulate the sputtering regional economy or resolve the competing agendas of President François Hollande of France, who favors stronger action to spur growth, and his German counterpart, Chancellor Angela Merkel, who has opposed aggressive moves to ease the pressure on Europe’s weakest economies.
May 22 The Organization for Economic Cooperation and Development cut its growth forecast for the euro zone and said in a report that Europe risked creating a self-sustaining cycle of decline that could have dire effects for the world economy. German officials said there was no way they would bend on collective debt, the so-called eurobonds pushed by the new president of France.
May 17 In response to conciliatory words from Angela Merkel of Germany, Alexis Tsipras, the leader of a leftist Greek party that currently leads public opinion polls, challenged her and other European leaders to find ways of preserving the euro zone while also relieving Greeks of their economic hardship. Meanwhile, worries mounted about Spain’s deeply indebted banks.
May 16 Chancellor Angela Merkel of Germany said that she was ready to discuss stimulus programs to get the Greek economy growing again and that she was committed to keeping Greece in the euro zone, signaling a softer approach toward the struggling country. “I have the will, the determination to keep Greece in the euro zone,” she said in an interview on CNBC.
May 15 Growth in the euro zone was flat in the first quarter. Since that was better than a return to recession, it passed as good news. The search for a unity government in Greece was called off, meaning new elections will be held in June.
May 14 The leaders of Greece’s main political parties remained adamant in their positions on the country’s debt agreement with foreign lenders, making a unity coalition appear impossible and new elections all but inevitable. Markets fell amid concerns that Greece’s departure from the euro was near. Yet there were also indications that the latest turmoil could as easily signify the beginning of a new phase of bargaining.
May 13 Chancellor Angela Merkel’s party suffered a stinging defeat in elections in Germany’s most populous state, one likely to embolden her political opponents both at home and abroad, as the Social Democrats won the parliamentary election in North Rhine-Westphalia.
May 11 Talks on a new Greek government stalled, suggesting that a new vote in June would be needed. The European Commission warned that Spain was likely to miss its deficit reduction targets this year and next by a wide margin.
May 10 Angela Merkel, Germany’s chancellor, suggested that she would be open to small steps to aid growth, like slowing down the pace of budget cuts forced by the fiscal pact she brokered. With Greece still rudderless following inconclusive elections, the leader of the Socialist party, Evangelos Venizelos, indicated that he might be able to establish common ground with the leader of the moderate Democratic Left Party and try to form a government.
May 9 A new round of elections seemed more likely in Greece as the leader of a leftist party was unable to form a government; the Socialists who were the biggest loser in the recent voting had the next turn. Meanwhile, officials in Germany and elsewhere began talking openly of the possibility of a Greek exit from the euro — once unthinkable.
May 7 Chancellor Angela Merkel of Germany pointedly insisted that neither she nor her government favored a renegotiation of a fiscal pact underpinning the continent’s belt-tightening, but left the door open to discussions on measures to increase growth.
May 6 Voters in France and Greece delivered sharp rebuttals to advocates of austerity as the antidote to Europe’s financial crisis. France elected socialist François Hollande to replace Nicolas Sarkozy as president, while Greek voters hammered the two traditionally dominant parties for their support of austerity measures dictated by the E.U.
Overview
Since the fall of 2009, the European Union has been struggling with a slow-moving but unshakable crisis that has underscored the flaws behind the common currency and exposed rifts that have threatened the continent’s 60 years of progress toward gradual unification.
It began when a new government in Greece revealed that its predecessors had concealed enormous deficits. By the spring of 2010, Greece was unable to borrow on the open markets at an affordable interest rate, and a series of bailout package totalling 110 billion euros was devised by the European Union, the International Monetary Fund and the European Central Bank, the so-called troika. In return, Greece was required to slash public spending deeply. In May, leaders approved a contingency fund of 500 billions euro (about $680 billion) for the union at large.
In November 2010, Ireland, wracked by a banking crisis that followed the collapse of a housing bubble, received a 67 billion euro bailout; Portugal, a longtime economic laggard, received 78 billion euros in May 2011. In both countries, the governments soon fell.
In the summer of 2011, worries arose about two vastly larger economies: Italy, still struggling with debts built up before it joined the euro, and Spain, where the collapse of a housing bubble had sent the unemployment rate over 20 percent. Over the rest of the year, European governments struggled to increase the size of the “firewall’' offered by bailout funds. In December, Germany’s chancellor, Angela Merkel, whose push for austerity in return for aid had dominated the response to the crisis, won package of a pact calling for tighter fiscal integration and greater penalties for bid deficits. But what appeared to be an imminent crisis was averted only when the European Central Bank, under a new chairman, Mario Draghi, flooded banks with cheap loans that many used to prop up their governments.
But meanwhile, the continent tipped toward a second recession, with the hardest hit countries, like Greece and Spain — unable to devalue their currency — seeing unemployment soar while deficits remained stubbornly large. Governments fell from the Netherlands to Greece to Slovakia. In March 2012, the troika engineered a default by Greece on most of its private debt and a second bailout package, of 130 billion euros, in exchange for new rounds of budget-cutting and privatization.
But by that time a wave of anger was building against austerity. In May, France elected a Socialist, François Hollande, to replace Nicolas Sarkozy, Mrs. Merkel’s closest ally, as president on a platform that called for an emphasis on growth. In Greece, the two traditional parties, both of which had supported the bailout deal, were roundly repudiated, while a left-wing party that demanded the repudiation of the deal moved to the fore. No party proved able to form a government, and talk about Greece’s exit from the euro, once unthinkable, became common. Fear of a “Grexit’' and the possibility of it happening elsewhere increased strains on weak banks in Spain and elsewhere.
Read
Hannelore Foerster/Bloomberg NewsUpdated: May 25, 2012
Recent Developments
May 25 Standard & Poor’s slashed its ratings on the creditworthiness of five Spanish banks, just as one of them — Bankia, the nation’s largest real estate lender — requested an additional 19 billion euros in rescue funds from the country. Bankia already had been granted a 4.5 billion euro emergency loan from Spain. Its forced rescue prompted broader concerns among investors about whether Spain can still finance alone the rescue of such banks.
May 24 Economic reports showed Europe’s prospects dimming as the long battle to defend the euro zone continued to undermine confidence and raised the prospect of a renewed cycle of demands for austerity. German data released showed signs of a slowdown in an economy that until now had been a bright spot for the Continent.
May 23 At a summit meeting in Brussels, regional leaders failed to signal any significant new steps to stimulate the sputtering regional economy or resolve the competing agendas of President François Hollande of France, who favors stronger action to spur growth, and his German counterpart, Chancellor Angela Merkel, who has opposed aggressive moves to ease the pressure on Europe’s weakest economies.
May 22 The Organization for Economic Cooperation and Development cut its growth forecast for the euro zone and said in a report that Europe risked creating a self-sustaining cycle of decline that could have dire effects for the world economy. German officials said there was no way they would bend on collective debt, the so-called eurobonds pushed by the new president of France.
May 17 In response to conciliatory words from Angela Merkel of Germany, Alexis Tsipras, the leader of a leftist Greek party that currently leads public opinion polls, challenged her and other European leaders to find ways of preserving the euro zone while also relieving Greeks of their economic hardship. Meanwhile, worries mounted about Spain’s deeply indebted banks.
May 16 Chancellor Angela Merkel of Germany said that she was ready to discuss stimulus programs to get the Greek economy growing again and that she was committed to keeping Greece in the euro zone, signaling a softer approach toward the struggling country. “I have the will, the determination to keep Greece in the euro zone,” she said in an interview on CNBC.
May 15 Growth in the euro zone was flat in the first quarter. Since that was better than a return to recession, it passed as good news. The search for a unity government in Greece was called off, meaning new elections will be held in June.
May 14 The leaders of Greece’s main political parties remained adamant in their positions on the country’s debt agreement with foreign lenders, making a unity coalition appear impossible and new elections all but inevitable. Markets fell amid concerns that Greece’s departure from the euro was near. Yet there were also indications that the latest turmoil could as easily signify the beginning of a new phase of bargaining.
May 13 Chancellor Angela Merkel’s party suffered a stinging defeat in elections in Germany’s most populous state, one likely to embolden her political opponents both at home and abroad, as the Social Democrats won the parliamentary election in North Rhine-Westphalia.
May 11 Talks on a new Greek government stalled, suggesting that a new vote in June would be needed. The European Commission warned that Spain was likely to miss its deficit reduction targets this year and next by a wide margin.
May 10 Angela Merkel, Germany’s chancellor, suggested that she would be open to small steps to aid growth, like slowing down the pace of budget cuts forced by the fiscal pact she brokered. With Greece still rudderless following inconclusive elections, the leader of the Socialist party, Evangelos Venizelos, indicated that he might be able to establish common ground with the leader of the moderate Democratic Left Party and try to form a government.
May 9 A new round of elections seemed more likely in Greece as the leader of a leftist party was unable to form a government; the Socialists who were the biggest loser in the recent voting had the next turn. Meanwhile, officials in Germany and elsewhere began talking openly of the possibility of a Greek exit from the euro — once unthinkable.
May 7 Chancellor Angela Merkel of Germany pointedly insisted that neither she nor her government favored a renegotiation of a fiscal pact underpinning the continent’s belt-tightening, but left the door open to discussions on measures to increase growth.
May 6 Voters in France and Greece delivered sharp rebuttals to advocates of austerity as the antidote to Europe’s financial crisis. France elected socialist François Hollande to replace Nicolas Sarkozy as president, while Greek voters hammered the two traditionally dominant parties for their support of austerity measures dictated by the E.U.
Overview
Since the fall of 2009, the European Union has been struggling with a slow-moving but unshakable crisis that has underscored the flaws behind the common currency and exposed rifts that have threatened the continent’s 60 years of progress toward gradual unification.
It began when a new government in Greece revealed that its predecessors had concealed enormous deficits. By the spring of 2010, Greece was unable to borrow on the open markets at an affordable interest rate, and a series of bailout package totalling 110 billion euros was devised by the European Union, the International Monetary Fund and the European Central Bank, the so-called troika. In return, Greece was required to slash public spending deeply. In May, leaders approved a contingency fund of 500 billions euro (about $680 billion) for the union at large.
In November 2010, Ireland, wracked by a banking crisis that followed the collapse of a housing bubble, received a 67 billion euro bailout; Portugal, a longtime economic laggard, received 78 billion euros in May 2011. In both countries, the governments soon fell.
In the summer of 2011, worries arose about two vastly larger economies: Italy, still struggling with debts built up before it joined the euro, and Spain, where the collapse of a housing bubble had sent the unemployment rate over 20 percent. Over the rest of the year, European governments struggled to increase the size of the “firewall’' offered by bailout funds. In December, Germany’s chancellor, Angela Merkel, whose push for austerity in return for aid had dominated the response to the crisis, won package of a pact calling for tighter fiscal integration and greater penalties for bid deficits. But what appeared to be an imminent crisis was averted only when the European Central Bank, under a new chairman, Mario Draghi, flooded banks with cheap loans that many used to prop up their governments.
But meanwhile, the continent tipped toward a second recession, with the hardest hit countries, like Greece and Spain — unable to devalue their currency — seeing unemployment soar while deficits remained stubbornly large. Governments fell from the Netherlands to Greece to Slovakia. In March 2012, the troika engineered a default by Greece on most of its private debt and a second bailout package, of 130 billion euros, in exchange for new rounds of budget-cutting and privatization.
But by that time a wave of anger was building against austerity. In May, France elected a Socialist, François Hollande, to replace Nicolas Sarkozy, Mrs. Merkel’s closest ally, as president on a platform that called for an emphasis on growth. In Greece, the two traditional parties, both of which had supported the bailout deal, were roundly repudiated, while a left-wing party that demanded the repudiation of the deal moved to the fore. No party proved able to form a government, and talk about Greece’s exit from the euro, once unthinkable, became common. Fear of a “Grexit’' and the possibility of it happening elsewhere increased strains on weak banks in Spain and elsewhere.
Read
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Re: New EC Thread
Panda Sun 27 May - 18:25
Eurozone crisis
The end of all-powerful Germany
24 May 2012
To Vima Athens Comment88
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On the sign: “Budget cuts”.
Tom Janssen
The advent of a new administration in Paris has shifted the balance of power in the European Union away from Berlin and German austerity — a development that has been welcomed in Athens as a source of renewed hope and a light at the end of the tunnel for the Greek population.
Giorgos Malouhos
With regard to what we have seen in recent years, something changed at yesterday’s extraordinary summit: there were no “guidelines” prepared a few hours in advance by the German chancellor and the French president. François Hollande did not adhere to the “tradition” established by Nicolas Sarkozy. His “baptism of fire” in Brussels was “direct” and not shielded by Berlin.
The summit also had another peculiarity. For the first time in many years, Germany had to contend with an agenda that was not dictated by Berlin, and in particular with issues linked to economic growth. No concrete decisions were taken on Wednesday night, but an important development clearly emerged: Germany’s hegemony has been called into question by Europe. And its leaders in Berlin, who are acutely aware this change, already feel they have been dethroned.
The fact that German pre-eminence is now being contested will have a direct impact on Greece. Before yesterday's summit began, the German central bank made public a report which argues that no further efforts should be made to accommodate Greece, whose bankruptcy would at least amount to a final outcome for what is now an ongoing saga… At the same time, François Hollande reaffirmed his support and confidence in the Greece and its people.
The new balance of power that is emerging in Europe is evident in the conclusions of the summit: “We will ensure that European structural funds and instruments are mobilised to bring Greece on a path towards growth and job creation.”
New balance of power in Europe
Germany’s hegemony in Europe is now on the wane. As many commentators in the German press have pointed out, Angela Merkel is more than ever isolated with regard to her partners. The reality is that her policy has no allies. Now that it has been rejected by international organisations and the United States, which have adopted the line advocated by Paris and Madrid, there is no one to defend it.
So what can we expect the Germans to do? Will they start over and adapt to the new realities as though nothing had happened? Certainly not. They will refuse to back down and fight on. They have the political will and the power to do that. But they are no longer in total control, and they will no longer be the sole arbiters of policy. And this is the change that is the focus of enormous hopes Europe, and especially in Greece.
Conditions faced by our country have changed radically over recent weeks to a point where Greece will now have an opportunity to fight for a better future. Of course, as a majority of our partners have consistently pointed out, we will have to make good on our promises. There is no denying this fact. But at the same time, no one anticipated the new balance of power in Europe which emerged yesterday.
The “commitments” that we are obliged to honour, and which we should honour, are no longer caught in the grip of an impenetrable dogma that no one is allowed to touch. The parameter of “economic growth”, which has now been tabled, is a game changer.
Fanaticism has become the major danger
Greece can base its position on growth, and, perhaps even more tellingly, it can fight more effectivley against an austerity that served to hide a German nationalist approach. Berlin is no longer the sole dealmaker, which means that we can now expect to achieve results, for example, in the area of privatisations, and the energy sector. And there is no denying the critical importance of progress towards these goals.
Having emerged from the tunnel of despair which was the sole outcome of German hegemony, it is time for Greece to show that it intends to become a genuine European state – and not one that needs to be shored up. In any case, we will have to do what is absolutely necessary for our survival either within or outside Europe. But all of this will be made much easier now that we have been released from the suffocating position we were forced to endure.
Since yesterday, our control over the future has grown considerably. This is a positive development, but one that must now be reflected in politics – and, let’s not forget, politics is the art of the possible. It follows that fanaticism has become the major danger. And it is worth wondering how we should oppose the many fanatics that have emerged on all sides of the political spectrum. The first observation and the one that should be emphasised today is that, in spite of all that has been said, the outlook for Greece has improved considerably.
Now is the time to focus on the light at the end of the tunnel. Now we have the opportunity to fight to change our destiny. Europe is no longer what it was a few weeks ago. The context is different, and the change that has emerged has resulted from the expression of the will of two peoples: the people of France and the people of Greece. The French have exercised their power to contest the will of an all-powerful Germany, which had completely subjugated their former president to the point where he could no longer remain in office. The Greeks showed they had the strength to demonstrate their discontent through an unequivocal anti-austerity vote. Now that all-powerful Germany has been forced to retreat, a major obstacle to Greece’s future in Europe has now been removed. We should show that we have understood this change and that we are willing to fight for our future. At least we have the conditions in which such a fight is possible.
The end of all-powerful Germany
24 May 2012
To Vima Athens Comment88
Text larger
Text smaller
Send
On the sign: “Budget cuts”.
Tom Janssen
The advent of a new administration in Paris has shifted the balance of power in the European Union away from Berlin and German austerity — a development that has been welcomed in Athens as a source of renewed hope and a light at the end of the tunnel for the Greek population.
Giorgos Malouhos
With regard to what we have seen in recent years, something changed at yesterday’s extraordinary summit: there were no “guidelines” prepared a few hours in advance by the German chancellor and the French president. François Hollande did not adhere to the “tradition” established by Nicolas Sarkozy. His “baptism of fire” in Brussels was “direct” and not shielded by Berlin.
The summit also had another peculiarity. For the first time in many years, Germany had to contend with an agenda that was not dictated by Berlin, and in particular with issues linked to economic growth. No concrete decisions were taken on Wednesday night, but an important development clearly emerged: Germany’s hegemony has been called into question by Europe. And its leaders in Berlin, who are acutely aware this change, already feel they have been dethroned.
The fact that German pre-eminence is now being contested will have a direct impact on Greece. Before yesterday's summit began, the German central bank made public a report which argues that no further efforts should be made to accommodate Greece, whose bankruptcy would at least amount to a final outcome for what is now an ongoing saga… At the same time, François Hollande reaffirmed his support and confidence in the Greece and its people.
The new balance of power that is emerging in Europe is evident in the conclusions of the summit: “We will ensure that European structural funds and instruments are mobilised to bring Greece on a path towards growth and job creation.”
New balance of power in Europe
Germany’s hegemony in Europe is now on the wane. As many commentators in the German press have pointed out, Angela Merkel is more than ever isolated with regard to her partners. The reality is that her policy has no allies. Now that it has been rejected by international organisations and the United States, which have adopted the line advocated by Paris and Madrid, there is no one to defend it.
So what can we expect the Germans to do? Will they start over and adapt to the new realities as though nothing had happened? Certainly not. They will refuse to back down and fight on. They have the political will and the power to do that. But they are no longer in total control, and they will no longer be the sole arbiters of policy. And this is the change that is the focus of enormous hopes Europe, and especially in Greece.
Conditions faced by our country have changed radically over recent weeks to a point where Greece will now have an opportunity to fight for a better future. Of course, as a majority of our partners have consistently pointed out, we will have to make good on our promises. There is no denying this fact. But at the same time, no one anticipated the new balance of power in Europe which emerged yesterday.
The “commitments” that we are obliged to honour, and which we should honour, are no longer caught in the grip of an impenetrable dogma that no one is allowed to touch. The parameter of “economic growth”, which has now been tabled, is a game changer.
Fanaticism has become the major danger
Greece can base its position on growth, and, perhaps even more tellingly, it can fight more effectivley against an austerity that served to hide a German nationalist approach. Berlin is no longer the sole dealmaker, which means that we can now expect to achieve results, for example, in the area of privatisations, and the energy sector. And there is no denying the critical importance of progress towards these goals.
Having emerged from the tunnel of despair which was the sole outcome of German hegemony, it is time for Greece to show that it intends to become a genuine European state – and not one that needs to be shored up. In any case, we will have to do what is absolutely necessary for our survival either within or outside Europe. But all of this will be made much easier now that we have been released from the suffocating position we were forced to endure.
Since yesterday, our control over the future has grown considerably. This is a positive development, but one that must now be reflected in politics – and, let’s not forget, politics is the art of the possible. It follows that fanaticism has become the major danger. And it is worth wondering how we should oppose the many fanatics that have emerged on all sides of the political spectrum. The first observation and the one that should be emphasised today is that, in spite of all that has been said, the outlook for Greece has improved considerably.
Now is the time to focus on the light at the end of the tunnel. Now we have the opportunity to fight to change our destiny. Europe is no longer what it was a few weeks ago. The context is different, and the change that has emerged has resulted from the expression of the will of two peoples: the people of France and the people of Greece. The French have exercised their power to contest the will of an all-powerful Germany, which had completely subjugated their former president to the point where he could no longer remain in office. The Greeks showed they had the strength to demonstrate their discontent through an unequivocal anti-austerity vote. Now that all-powerful Germany has been forced to retreat, a major obstacle to Greece’s future in Europe has now been removed. We should show that we have understood this change and that we are willing to fight for our future. At least we have the conditions in which such a fight is possible.
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Re: New EC Thread
Panda Mon 28 May - 5:59
Syriza's leader Alexis Tsipras in Athens, May 24, 2012.
AFP
The leader of Greece’s leftist alliance SYRIZA is the new bright hope of Greek politics. Steering a course between pragmatism and the rhetoric of class warfare, he has unsettled Berlin, and not just those who back Angela Merkel's austerity policies.
Jan Pfaff
Alexis Tsirpas’s visit to Berlin this Tuesday, fresh from Paris, can be seen as a show of his new self-confidence. Invited by the Left Party, he is out to recruit followers for his ideas in the country that has been by far the most unswerving on the austerity policy.
The CDU hastily signalled in advance that there was no need to meet the rising star of the left. The SPD wavered. It was enough to get Tsipras the attention he wants. As he approaches the Reichstag cameras he flashes a broad smile, one that seems a little too big for everyday life but one that comes across very engagingly on the screen.
Tsipras utters polite thanks for the reception. He speaks of solidarity among the German and Greek peoples and urges them not to allow themselves to get played off against each other. “We are fighting this fight for the German workers too.”
If he wins office, the first thing he will do is stop the debt payments and declare the laboriously negotiated austerity package null and void: that’s Tsipras' promise to the Greek voters. He will also, he has declared, write off much of the Greek debt entirely and nationalise the banks. For his critics, he’s a left-wing populist. For the proponents of austerity, that makes Alexis Tsipras the “most dangerous man in Europe”.
The right place at the right time
In Greece, though, where a large part of the population has been pushed to the limits of their endurance by the crisis, he is hailed as a hero. Tsipras is good-looking, and the voters love his youthful charm and the straightforward declarations. He is what the Greeks call a “Pallikari”, a brave boy who bends his knee to no authority.
Born in 1974 in Athens, Tsirpas was already attracting notice at the age of 17 by organising student protests. Not only was he professionally massaging the media, he was also negotiating hard-headedly with the Minister of Education.
In a photograph from his student days Tsipras sits on a hill, shoulder-length hair blowing forward over his face, and laughs into the camera with the unshakeable optimism of a young man who is firmly convinced that the world is just waiting to be saved by him.
With the help of the political pull of his father, Alekos Alavanos, his political career moved ahead fast. In 2006 he was elected to Athen’s City Council, where he made a name as a politician for the people. Following his election as Syriza party leader in 2008, he moved up into parliament in 2009.
Tsipras’ rise is explained in no small part by the fact that he happened to be in the right place at the right time. Last year, when the Greeks had not yet been so demoralised by austerity, Tsipras’ radical demands still alarmed many voters. But that’s not the only thing that has changed. The political climate in Europe as a whole has shifted – and it’s become particularly visible in François Hollande's victory in France.
Pleads for understanding
In an interview he gave before leaving for Berlin, Tsipras stated that Merkel has become “extremely isolated” by her austerity policies in Europe. In the New York Times he advised her to follow the example of the “expansionist approach” of America. It’s part of a broad international media campaign that is helping Tsipras prepare for possible re-negotiations.
After his brief appearance in the German Left Party’s parliamentary group, the agenda skips briskly forward. Party leader Klaus Ernst and parliamentary leader Gysi want to introduce their guest to the capital’s press; the desire of the faltering German left to scoop up a little of his glamour is palpable. Posed against the blue wall at the National Press conference, Ernst and Gysi position Tsipras between them. It looks a little like a group of football club managers announcing the signing of a new superstar. “I am not a hero,” Tsipras begins humbly. “My party is not the hero either. The hero is the Greek people.”
The impact of the austerity package has been a disaster, and a catastrophe in Europe must be averted. “We’re asking for the solidarity of the peoples of France and Germany,” he says. For him, it’s not about asking for more money, but arguing for a different distribution.
What would become of the reforms in Greece, then, if he were to win office? He wants to make the tax system fairer and generate higher revenues.
Tsipras pleads for understanding; referring to the Germans as “big brothers”, he invites them to visit Greece on their summer vacations – but on the core issues he stands his ground: no paying back the Greek debt under the current conditions. After nearly an hour the question period ends, and Tsipras hurries with Gysi to the limousine waiting at the door. Time is short: Sigmar Gabriel (SPD party leader) has just declared his readiness to meet.
Translated from the German by Anton Baer
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Re: New EC Thread
Panda Mon 28 May - 9:34
Stocks across Europe have opened higher on news that the latest Poll in Greece suggests the Pro Euro Political Parties are going to win the Election.
The leader of the Pasok Party has criticised IMF Chief La Garde for her comments that Greeks should pay their Taxes and there are far needier African
Countries wanting help from the IMF. La Garde was forced to use Facebook to apologise, but the latest figures for Tax Revenue in Greece are lower
which suggests some Residents are indeed not paying their taxes.
A new report from Greece, shows all unemployed , including one Cinematographer, digging up land and planting seeds. There is a social supermarket operating where food is being donated by Greeks who can afford it, to help those who can't. There is also a Child and Family Group for the poor where
Doctors, Dentists etc offer their services free of charge. Unless Merkel backs down and offers some growth , there is no point in Greece staying in the
Union because it will take Generations to repay their debt.
Italy business confidence is at it's lowest , selling more Bonds today which might show a higher yield
Ireland is making slight progress.
The major problem now is Spain. The Government forecast E150 billion toil out the banks has proved woefully inadequate . at least E30 billion will be
needed for Bankia alone. There is one proposal the Spanish Government has made which is the Bankia debt be sold to the ECB who will pay the cash to
Bankia Bank, but analysts say the ECB will not agree. Spanish Bonds being sold today are expected to have a higher yield which makes Spain very close
to asking for a Bail out which will prove the Firewall not high enough to cope. Bankia Bank, the 5th largest Bank has been given junk bond status.
The leader of the Pasok Party has criticised IMF Chief La Garde for her comments that Greeks should pay their Taxes and there are far needier African
Countries wanting help from the IMF. La Garde was forced to use Facebook to apologise, but the latest figures for Tax Revenue in Greece are lower
which suggests some Residents are indeed not paying their taxes.
A new report from Greece, shows all unemployed , including one Cinematographer, digging up land and planting seeds. There is a social supermarket operating where food is being donated by Greeks who can afford it, to help those who can't. There is also a Child and Family Group for the poor where
Doctors, Dentists etc offer their services free of charge. Unless Merkel backs down and offers some growth , there is no point in Greece staying in the
Union because it will take Generations to repay their debt.
Italy business confidence is at it's lowest , selling more Bonds today which might show a higher yield
Ireland is making slight progress.
The major problem now is Spain. The Government forecast E150 billion toil out the banks has proved woefully inadequate . at least E30 billion will be
needed for Bankia alone. There is one proposal the Spanish Government has made which is the Bankia debt be sold to the ECB who will pay the cash to
Bankia Bank, but analysts say the ECB will not agree. Spanish Bonds being sold today are expected to have a higher yield which makes Spain very close
to asking for a Bail out which will prove the Firewall not high enough to cope. Bankia Bank, the 5th largest Bank has been given junk bond status.
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Re: New EC Thread
Panda Mon 28 May - 11:42
28 May 2012 Last updated at 11:32 Share this pageEmail Print Share this page
The difference between the price investors will accept for Spanish and German bonds has hit a record high.
Bond markets continue to reflect the tensions in the eurozone with 10-year German bond yields at 1.38% and Spain's 5.05 percentage points higher than them.
Italian government bond yields also ticked higher, rising to 5.87%.
Shares in Spain's Bankia fell 27% after it requested a 19bn euro ($24bn, £15bn) bail-out on Friday.
Its shares had been suspended on Friday pending the funding request.
Continue reading the main story “
Start Quote
The slow and silent run on banks in Italy and Spain - and Greece, of course - is a reality”
End Quote
Robert Peston
Business editor
--------------------------------------------------------------------------------
Spain's blue-chip Ibex index fell 1%.
The amount Bankia needs in state aid was higher than had been feared.
It marks an effective nationalisation for the country's third-largest bank and has raised fears about how Spain plans to pay for it.
The country's economy is in difficulties, with government borrowing at an almost unsustainable price.
Bond yields, which are an indicator of the amount government would have to pay to borrow money, are just short of the 7% deemed unaffordable.
Bankia is estimated to have 32bn euros in toxic assets.
Just under a year ago the Bank of Spain injected 4.5bn euros in rescue funds into Bankia.
Despite the worries about Spain, other European stock markets opened higher.
Shares were boosted after a weekend poll in Greece showed growing support for a pro-austerity conservative party.
The poll suggested the New Democracy party could gain about a quarter of the votes, leaving it as the biggest party, albeit without overall control.
Greek shares bounced back by 2.6% in Monday morning trading. The next elections are scheduled for 17 June.
London, Paris and Frankfurt markets all rose at least 1% at the start of trading, before trimming gains to be about 0.7% higher.
Although both Germany and France have a public holiday on Monday, their equity markets remain open.
The difference between the price investors will accept for Spanish and German bonds has hit a record high.
Bond markets continue to reflect the tensions in the eurozone with 10-year German bond yields at 1.38% and Spain's 5.05 percentage points higher than them.
Italian government bond yields also ticked higher, rising to 5.87%.
Shares in Spain's Bankia fell 27% after it requested a 19bn euro ($24bn, £15bn) bail-out on Friday.
Its shares had been suspended on Friday pending the funding request.
Continue reading the main story “
Start Quote
The slow and silent run on banks in Italy and Spain - and Greece, of course - is a reality”
End Quote
Robert Peston
Business editor
--------------------------------------------------------------------------------
Spain's blue-chip Ibex index fell 1%.
The amount Bankia needs in state aid was higher than had been feared.
It marks an effective nationalisation for the country's third-largest bank and has raised fears about how Spain plans to pay for it.
The country's economy is in difficulties, with government borrowing at an almost unsustainable price.
Bond yields, which are an indicator of the amount government would have to pay to borrow money, are just short of the 7% deemed unaffordable.
Bankia is estimated to have 32bn euros in toxic assets.
Just under a year ago the Bank of Spain injected 4.5bn euros in rescue funds into Bankia.
Despite the worries about Spain, other European stock markets opened higher.
Shares were boosted after a weekend poll in Greece showed growing support for a pro-austerity conservative party.
The poll suggested the New Democracy party could gain about a quarter of the votes, leaving it as the biggest party, albeit without overall control.
Greek shares bounced back by 2.6% in Monday morning trading. The next elections are scheduled for 17 June.
London, Paris and Frankfurt markets all rose at least 1% at the start of trading, before trimming gains to be about 0.7% higher.
Although both Germany and France have a public holiday on Monday, their equity markets remain open.
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Re: New EC Thread
Panda Mon 28 May - 15:44
Photograph: Olivier Hoslet/EPA
Britain is to tell the new French government that it will demand major cuts in generous EU subsidies to farmers in France if President François Hollande challenges the annual £2.7bn British rebate.
In a sign of how traditional tensions could complicate the prime minister's attempts to woo the new president, Britain is planning to warn Paris that Hollande would be well advised to abide by an informal deal struck with Nicolas Sarkozy.
The prime minister agreed with Sarkozy not to push too hard for reform of the Common Agricultural Policy, which favours French farmers. In exchange Sarkozy undertook not to demand a watering down of Britain's EU budget rebate.
Britain is hoping to deliver the message in a friendly way to Hollande who has not forgotten that David Cameron declined to meet him during the presidential campaign, all but endorsing Sarkozy.
But the prime minister is under pressure to take a tougher stance on Europe with a more radical reform of the next seven year EU budget which will run from 2014-2021. A tough round of negotiations, not expected to conclude until next year, is gathering pace.
Andrea Leadsom, a central figure in the eurosceptic Fresh Start group of MPs, said the prime minister needed to be "more aggressive" in his negotations with other EU leaders.
Leadsom, former head of corporate governance at Invesco Perpetual, said the EU's overall budget could be cut by 15% if a series of reforms are made to structural funds which are meant to support poorer member states. The budget is worth £112bn a year which would mean it would be cut by 15% – £16.8bn.
In a chapter of a new green paper, to be published by the Fresh Start group, Leadsom says that structural funds should only be distributed by the EU to countries whose gross national income is less than 90% of the EU average. Britain would have been handed back £13bn of the £33bn it contributed during the current budget period from 2007-2013 had the plans been in place then. The £9bn spent in Britain on structural funds would have been administered in Britain while a further £4bn, spent on relatively rich EU regions, would have been repatriated to Britain. The remaining £20bn would have remained with the EU to distribute to poorer regions.
Leadsom said: "We should be far more aggressive in our negotiating position. Advisers tell me you can't have a shopping list but reforming structural funds would be a razor sharp reform."
The demands by the Fresh Start group may help ministers as they explain to the French that the prime minister will face intense domestic pressure during the budget negotiations that are expected to last well into 2013. One senior government source said Britain will tell the new administration in Paris of the need for each country to respect their interests.
The source said: "The prime minister and Nicolas Sarkozy had an informal understanding that we would not push the French too hard on the CAP if they keep their hands off the rebate."
If Hollande demands major cuts to the rebate Britain will explain that the CAP and the rebate are linked. If the first element of the CAP, known as Pillar 1 which provides direct support to EU farmers, were to fall then the rebate would fall at a commensurate rate. Margaret Thatcher negotiated the rebate in 1984 because Britain paid a disproportionate amount in the CAP Pillar 1 under the terms of its EEC accession terms when it joined in 1973. "The rebate is never as simple as the French think," the government source said.
Cameron wants to avoid a repeat of the last EU budget negotiations, concluded in December 2005 under the British presidency of the EU, when Tony Blair agreed to cut the rebate by about £7bn in a seven year period. Blair has always maintained that he achieved a good deal because the rebate had to be reformed after the arrival of ten new member states in 2004. The former prime minister says he rejected French demands for larger rebate cuts by placing the CAP on the table.
Leadsom said, "With the eurozone in absolute crisis the impact on all European economies is going to be disastrous. At a time like this it is complete nonsense for the EU to bury its head in the sand. We have got to really start to fight back."
Pressure from backbenches to take a tougher stance on Europe could interfere with Cameron's attempts to minimise tensions with his Liberal Democrat coalition partners.
On Sunday those tensions were increasing when Nick Clegg dismissed suggestions by the home secretary Theresa May that Britain was planning to "pull up the drawbridge" on any exodus of workers from crisis-hit eurozone nations.
May said on Friday contingency planning was under way to deal with a potential influx of would-be immigrants.
Clegg said she had only been talking about "keeping an eye on migration patterns".
He told the BBC's Andrew Marr: "I really do think some of the breathless talk in the media about do we pull up the drawbridge to stop hordes of people migrating across Europe is both far-fetched, somewhat apocalyptic in tone and deeply unhelpful. We are not there yet."
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Re: New EC Thread
Panda Mon 28 May - 15:52
Investors are judging Spain's debt as the riskiest it has been as fears grow over the health of the country's banking sector.
The premium for Spain's 10-year bond over its German equivalent rose to 5.05 percentage points, the highest since the euro was formed.
The Spanish prime minister admitted on Monday that the situation in Spain was "extremely difficult".
But he said the banking system would not a bailout.
"We took the bull by the horns because the alternative was collapse," said Mariano Rajoy, adding that Bankia customers' savings were now safer than ever.
"There are major doubts over the eurozone and that makes the risk premium for some countries very high," he added at a press conference.
"That's why it would be a very good idea to deliver a clear message there's no going back for the euro."
Mr Rajoy added: "There will not be any (European) rescue for the Spanish banking system" but backed calls for the European rescue fund to be able to lend to banks directly.
The higher bond yields rise, the more expensive it is for governments to borrow and roll over their debts.
There is speculation that Spain might ask the ECB to help the government so it will not need the permanent rescue fund, which will be up and running from July.
Shares in Spain's Bankia initially fell 27% before trimming losses to 11% later on Monday after it requested a 19bn-euro ($24bn, £15bn) bailout on Friday.
The amount Bankia needs in state aid was higher than had been feared.
It marks an effective nationalisation for the country's third-largest bank and has raised fears about how Spain plans to pay for it.
Bankia is estimated to have 32bn euros in toxic assets. Just under a year ago the Bank of Spain injected 4.5bn euros in rescue funds into Bankia.
"Can Spain bypass the ECB and print its way out of the crisis by using sovereign debt to pay for assets of dubious quality with no guarantee things won't get worse and the central government will get its money back?" asked Kathleen Brooks, research director at Forex.com.
She said "it seems only a matter of time" until bond investors demanded an even greater rate of return than the record high of 6.7% reached in November 2011.
Elisabeth Afseth, an analyst at Investec, said that rising bond yields in certain parts of the eurozone would make it harder for those countries to straighten out their finances.
"If it goes on for much longer, it just adds to the burden of fiscal consolidation, she said.
"If a large part of that [the yield] is spent on paying a premium to borrow, it just makes it so much harder."
Italian government bond yields also ticked higher, rising to 5.87%.
Shares were boosted after a weekend poll in Greece showed growing support for a pro-austerity conservative party.
The poll suggested the New Democracy party could gain about a quarter of the votes, leaving it as the biggest party, albeit without overall control.
Greek shares rose 7% by Monday afternoon trading. The next elections are scheduled for 17 June.
London, Paris and Frankfurt markets all rose at least 1% at the start of trading, before trimming gains to around half that. Although both Germany and France have a public holiday on Monday, their equity markets remain open.
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Re: New EC Thread
Panda Tue 29 May - 15:04
AFP
The leader of Greece’s leftist alliance SYRIZA is the new bright hope of Greek politics. Steering a course between pragmatism and the rhetoric of class warfare, he has unsettled Berlin, and not just those who back Angela Merkel's austerity policies.
Jan Pfaff
Alexis Tsirpas’s visit to Berlin this Tuesday, fresh from Paris, can be seen as a show of his new self-confidence. Invited by the Left Party, he is out to recruit followers for his ideas in the country that has been by far the most unswerving on the austerity policy.
The CDU hastily signalled in advance that there was no need to meet the rising star of the left. The SPD wavered. It was enough to get Tsipras the attention he wants. As he approaches the Reichstag cameras he flashes a broad smile, one that seems a little too big for everyday life but one that comes across very engagingly on the screen.
Tsipras utters polite thanks for the reception. He speaks of solidarity among the German and Greek peoples and urges them not to allow themselves to get played off against each other. “We are fighting this fight for the German workers too.”
If he wins office, the first thing he will do is stop the debt payments and declare the laboriously negotiated austerity package null and void: that’s Tsipras' promise to the Greek voters. He will also, he has declared, write off much of the Greek debt entirely and nationalise the banks. For his critics, he’s a left-wing populist. For the proponents of austerity, that makes Alexis Tsipras the “most dangerous man in Europe”.
The right place at the right time
In Greece, though, where a large part of the population has been pushed to the limits of their endurance by the crisis, he is hailed as a hero. Tsipras is good-looking, and the voters love his youthful charm and the straightforward declarations. He is what the Greeks call a “Pallikari”, a brave boy who bends his knee to no authority.
Born in 1974 in Athens, Tsirpas was already attracting notice at the age of 17 by organising student protests. Not only was he professionally massaging the media, he was also negotiating hard-headedly with the Minister of Education.
In a photograph from his student days Tsipras sits on a hill, shoulder-length hair blowing forward over his face, and laughs into the camera with the unshakeable optimism of a young man who is firmly convinced that the world is just waiting to be saved by him.
With the help of the political pull of his father, Alekos Alavanos, his political career moved ahead fast. In 2006 he was elected to Athen’s City Council, where he made a name as a politician for the people. Following his election as Syriza party leader in 2008, he moved up into parliament in 2009.
Tsipras’ rise is explained in no small part by the fact that he happened to be in the right place at the right time. Last year, when the Greeks had not yet been so demoralised by austerity, Tsipras’ radical demands still alarmed many voters. But that’s not the only thing that has changed. The political climate in Europe as a whole has shifted – and it’s become particularly visible in François Hollande's victory in France.
Pleads for understanding
In an interview he gave before leaving for Berlin, Tsipras stated that Merkel has become “extremely isolated” by her austerity policies in Europe. In the New York Times he advised her to follow the example of the “expansionist approach” of America. It’s part of a broad international media campaign that is helping Tsipras prepare for possible re-negotiations.
After his brief appearance in the German Left Party’s parliamentary group, the agenda skips briskly forward. Party leader Klaus Ernst and parliamentary leader Gysi want to introduce their guest to the capital’s press; the desire of the faltering German left to scoop up a little of his glamour is palpable. Posed against the blue wall at the National Press conference, Ernst and Gysi position Tsipras between them. It looks a little like a group of football club managers announcing the signing of a new superstar. “I am not a hero,” Tsipras begins humbly. “My party is not the hero either. The hero is the Greek people.”
The impact of the austerity package has been a disaster, and a catastrophe in Europe must be averted. “We’re asking for the solidarity of the peoples of France and Germany,” he says. For him, it’s not about asking for more money, but arguing for a different distribution.
What would become of the reforms in Greece, then, if he were to win office? He wants to make the tax system fairer and generate higher revenues.
Tsipras pleads for understanding; referring to the Germans as “big brothers”, he invites them to visit Greece on their summer vacations – but on the core issues he stands his ground: no paying back the Greek debt under the current conditions. After nearly an hour the question period ends, and Tsipras hurries with Gysi to the limousine waiting at the door. Time is short: Sigmar Gabriel (SPD party leader) has just declared his readiness to meet.
Translated from the German by Anton Baer
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Re: New EC Thread
Panda Tue 29 May - 16:30
Banking crisis
Can Spain make a solo comeback?
29 May 2012
El País Madrid Comment1
Alex Ballaman
Assurances from the head of government cannot amount to much: victim of a severe banking crisis, Madrid will soon be forced to seek help in the EU. Like Ireland, it will then be placed on a drip-feed – and under guardianship.
Claudi Pérez | Luis Doncel
The doomsayers are rubbing their hands, sure that they are about to win the match. The possibility that is bringing shudders to the streets of Madrid and offices in Berlin alike – that a major EU country will ask for a bailout – looms ever closer. Spain’s President Mariano Rajoy denied Monday for the umpteenth time that Spanish banks need any rescue from abroad, but the hole in Bankia is pushing the country a little closer to the abyss.
Even before it was known that the state would have to pump a further € 19,000 million into Bankia, several experts were warning that, however painful it would be, the government would have to ask for money from outside Spain’s borders to recapitalise the country’s banks. “It should have done it long ago,” says Daniel Gros, CEPS researcher, “but better late than never.”
“Spain looks likely to enter some form of a troika program this year as a condition for further European Central Bank support for the Spanish sovereign debt or Spanish banks,” noted Citi’s chief economist William Buiter a couple of months back.
Many mysteries in the equation still have to be cleared up. Not just if Spain will finally take the next step. There’s also the worry about what system would be put in place if savers let themselves be carried away by panic, or if it’s possible to avoid contagion, which would spread right away to Italy, and later to France and Belgium.
Last summer the EU leaders took two decisions that paved the way for the temporary fund – officially the European Financial Stability Fund (EFSF) – to help avert the collapse of a large part of the Spanish banking sector. First, it increased the endowment fund from 440 to 780 billion euros, though the effective capacity of the loan remained at 440 billion. A month later, the focus broadened: the support mechanism could also be used to recapitalise banks via loans to states.
“It is indeed a bona fide intervention”
The problem is that the stream of money would go primarily to the government, which would assume the debt, and that the government would then direct it toward the banks. This implies conditionality: an intervention with all the consequences, with compensatory measures like those imposed on Greece, Ireland and Portugal.
It would then matter little that it would be a ‘Rescue Lite’ – to save the banks, not the state – because Europe, by stressing the requirement for firm restructuring plans, could slap conditions on such aspects as fiscal policy, public services, privatisation or management of the bailed-out institutions.
Perhaps most worrisome, though, is the possibility that Spain will be unable to fund itself in the markets for no one knows how long. “You can give it many different names, but it is indeed a bona fide intervention,” sums up a high-ranking source in the Community.
This opens the door to a scene somewhat reminiscent of Ireland: the paternal government supports its banks, but the hole is too big to fill and the country finds itself led down the road to outside intervention. “If money could go directly to the banks [an option quashed by Germany], they would be the ones who would have to return it,” explains Professor Santiago Carbó.
“Bank runs throughout the periphery”
“Europe should monitor and supervise the rescued banks, which could be the start of the banking union. But we can’t kid ourselves; this won’t happen until the European Stability Mechanism is ratified,” adds Guntram Wolff of the Belgian think tank Bruegel.
The European Stability Mechanism is to take over from the EFSF on July 1 as Europe’s permanent bailout fund. Not only will it be more powerful (with half a billion euros of fresh money), it will also be more flexible. But it still has to be ratified by many of the Member States before it enters into force. A delay in the schedule, with Spain on fire, would be a catastrophic signal.
What would happen if the Spanish government were finally forced to dip into the rescue fund? Harvard professor Kenneth Rogoff answers: “If the eurozone and the ECB fail to take unequivocal and speedy steps, there’ll be bank runs throughout the periphery and devastating capital flight. To avoid this, banks must be provided with liquidity.
"The eurozone should move several rungs up the ladder of fiscal union with Eurobonds. We will see exceptional measures, which until very recently were unthinkable – but that has happened every time Europe has been on the verge of an accident.”
Translated from the Spanish by Anton Baer
On the web
Original article at El País es
El Mundo article es
Debt crisis
“Rajoy effect” fails to reassure the markets
“The Rajoy effect has come late and hasn’t staunched the bleeding," announces El Mundo following the press conference given by the Spanish Prime Minister. The Madrid daily criticises Rajoy’s intervention, which isn’t concrete enough for its liking –
It would be foolish to try to divert attention from our problems of debt-financing to the European context in general. We are in the crosshairs of the markets because of Bankia and the uncertainty over the Spanish financial sector – but also because of the urgent financial aid needed by Catalonia, and the spreading of this problem to the other regions.
The daily adds that on Friday the government will announce the creation of “hispabonos” bonds to finance the most indebted regions, which include Catalonia, Andalusia, Valencia, Murcia, the Balearic Islands and Castilla-La Mancha. It’s estimated that 17 billion euros will be needed by the end of 2012.
For El Mundo–
Starting in June the government wants to finance a major operation to rescue a few regions on the brink of defaulting and have no other choice, since the markets have given a thumbs down on their sovereign debt bonds.
Can Spain make a solo comeback?
29 May 2012
El País Madrid Comment1
Alex Ballaman
Assurances from the head of government cannot amount to much: victim of a severe banking crisis, Madrid will soon be forced to seek help in the EU. Like Ireland, it will then be placed on a drip-feed – and under guardianship.
Claudi Pérez | Luis Doncel
The doomsayers are rubbing their hands, sure that they are about to win the match. The possibility that is bringing shudders to the streets of Madrid and offices in Berlin alike – that a major EU country will ask for a bailout – looms ever closer. Spain’s President Mariano Rajoy denied Monday for the umpteenth time that Spanish banks need any rescue from abroad, but the hole in Bankia is pushing the country a little closer to the abyss.
Even before it was known that the state would have to pump a further € 19,000 million into Bankia, several experts were warning that, however painful it would be, the government would have to ask for money from outside Spain’s borders to recapitalise the country’s banks. “It should have done it long ago,” says Daniel Gros, CEPS researcher, “but better late than never.”
“Spain looks likely to enter some form of a troika program this year as a condition for further European Central Bank support for the Spanish sovereign debt or Spanish banks,” noted Citi’s chief economist William Buiter a couple of months back.
Many mysteries in the equation still have to be cleared up. Not just if Spain will finally take the next step. There’s also the worry about what system would be put in place if savers let themselves be carried away by panic, or if it’s possible to avoid contagion, which would spread right away to Italy, and later to France and Belgium.
Last summer the EU leaders took two decisions that paved the way for the temporary fund – officially the European Financial Stability Fund (EFSF) – to help avert the collapse of a large part of the Spanish banking sector. First, it increased the endowment fund from 440 to 780 billion euros, though the effective capacity of the loan remained at 440 billion. A month later, the focus broadened: the support mechanism could also be used to recapitalise banks via loans to states.
“It is indeed a bona fide intervention”
The problem is that the stream of money would go primarily to the government, which would assume the debt, and that the government would then direct it toward the banks. This implies conditionality: an intervention with all the consequences, with compensatory measures like those imposed on Greece, Ireland and Portugal.
It would then matter little that it would be a ‘Rescue Lite’ – to save the banks, not the state – because Europe, by stressing the requirement for firm restructuring plans, could slap conditions on such aspects as fiscal policy, public services, privatisation or management of the bailed-out institutions.
Perhaps most worrisome, though, is the possibility that Spain will be unable to fund itself in the markets for no one knows how long. “You can give it many different names, but it is indeed a bona fide intervention,” sums up a high-ranking source in the Community.
This opens the door to a scene somewhat reminiscent of Ireland: the paternal government supports its banks, but the hole is too big to fill and the country finds itself led down the road to outside intervention. “If money could go directly to the banks [an option quashed by Germany], they would be the ones who would have to return it,” explains Professor Santiago Carbó.
“Bank runs throughout the periphery”
“Europe should monitor and supervise the rescued banks, which could be the start of the banking union. But we can’t kid ourselves; this won’t happen until the European Stability Mechanism is ratified,” adds Guntram Wolff of the Belgian think tank Bruegel.
The European Stability Mechanism is to take over from the EFSF on July 1 as Europe’s permanent bailout fund. Not only will it be more powerful (with half a billion euros of fresh money), it will also be more flexible. But it still has to be ratified by many of the Member States before it enters into force. A delay in the schedule, with Spain on fire, would be a catastrophic signal.
What would happen if the Spanish government were finally forced to dip into the rescue fund? Harvard professor Kenneth Rogoff answers: “If the eurozone and the ECB fail to take unequivocal and speedy steps, there’ll be bank runs throughout the periphery and devastating capital flight. To avoid this, banks must be provided with liquidity.
"The eurozone should move several rungs up the ladder of fiscal union with Eurobonds. We will see exceptional measures, which until very recently were unthinkable – but that has happened every time Europe has been on the verge of an accident.”
Translated from the Spanish by Anton Baer
On the web
Original article at El País es
El Mundo article es
Debt crisis
“Rajoy effect” fails to reassure the markets
“The Rajoy effect has come late and hasn’t staunched the bleeding," announces El Mundo following the press conference given by the Spanish Prime Minister. The Madrid daily criticises Rajoy’s intervention, which isn’t concrete enough for its liking –
It would be foolish to try to divert attention from our problems of debt-financing to the European context in general. We are in the crosshairs of the markets because of Bankia and the uncertainty over the Spanish financial sector – but also because of the urgent financial aid needed by Catalonia, and the spreading of this problem to the other regions.
The daily adds that on Friday the government will announce the creation of “hispabonos” bonds to finance the most indebted regions, which include Catalonia, Andalusia, Valencia, Murcia, the Balearic Islands and Castilla-La Mancha. It’s estimated that 17 billion euros will be needed by the end of 2012.
For El Mundo–
Starting in June the government wants to finance a major operation to rescue a few regions on the brink of defaulting and have no other choice, since the markets have given a thumbs down on their sovereign debt bonds.
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Re: New EC Thread
Panda Wed 30 May - 7:17
hristine La Garde is getting a lot of criticism for her remark that the Greek people ought to pay their Taxes. It has been pointed out that her job is free of Tax and she earns £350,000 p.a. !!!!!
Citigroup has $15 billion in French Banks and $30 Billion in Spanish Banks.
The number of German tourists in Greece is 33% down from last year. This is because of the demonstrations in Greece and the anti Merkel feeling. The
number of Tourists from other Countries is also down but not as much.
The Minister for tourism says conditions are tough but not a catastrophe and everyone must just try harder.Banks are not so keen to lend money.
The owner of Brain Hotel in Greece says the people must retain the right to vote how they like and democracy remain .
Spain worries that their Country will be locked out of the Bond market . Bankia needs. E24 Billion but the last sale of 10 yr bonds had a yield of 6.43%, very near the 7% crisis level. Spanish Banks need $96 billion to bail out Spain and there is talk of merging some of the smaller ones, which
of course raises the unemployment level which is almost 25%.
Citigroup has $15 billion in French Banks and $30 Billion in Spanish Banks.
The number of German tourists in Greece is 33% down from last year. This is because of the demonstrations in Greece and the anti Merkel feeling. The
number of Tourists from other Countries is also down but not as much.
The Minister for tourism says conditions are tough but not a catastrophe and everyone must just try harder.Banks are not so keen to lend money.
The owner of Brain Hotel in Greece says the people must retain the right to vote how they like and democracy remain .
Spain worries that their Country will be locked out of the Bond market . Bankia needs. E24 Billion but the last sale of 10 yr bonds had a yield of 6.43%, very near the 7% crisis level. Spanish Banks need $96 billion to bail out Spain and there is talk of merging some of the smaller ones, which
of course raises the unemployment level which is almost 25%.
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Re: New EC Thread
Panda Wed 30 May - 16:49
Spain has a problem. It's running out of money.
More precisely, it's running out of euros. It can't print them. It can't borrow them, except at ruinous rates. It's bailout or bust.
But first, a bit of background. Spain was, as Paul Krugman colorfully put it, the Florida of Europe. It had a prodigious housing bubble that has subsequently gone into reverse. But that's where the similarities end. Spain is on its own. Florida isn't. Remember, Florida doesn't pay for its social insurance spending or bank bailouts. The federal government does. Social Security checks keep coming and the FDIC keeps taking over failing banks regardless of the state of Florida's finances. Spain doesn't have that safety net. That's how you get 25 percent overall unemployment and over 50 percent youth unemployment.
The only question is whether Spain will go bankrupt now or later. It's looking much more like the former than the latter due to the spiraling cost of its bank bailouts.
Spain's big banks actually didn't get into too much trouble. It was its small banks -- the so-called cajas savings banks -- that threw fistfuls of euros at dubious real estate deals. And now they've reached the limit of how long they can pretend the problems don't exist.
Bankia is the poster child for these bad banks. It's the unholy progeny of seven troubled cajas thrown together. Not so shockingly, it turns out that it's just as easy to fall together as it is to fall separately. After getting a €4.5 billion capital injection from the government, Bankia recently revised its 2011 earnings down by a modest factor of 100 -- although we should cheer up, because it might be twice as bad. Now, Bankia needs at least another €19 billion to stay afloat.
That's roughly €19 billion more than the Spanish government can come up with right now. Over the weekend, the government admitted that its borrowing costs are too high for it to raise that much money in the bond market. But the government did suggest an eye-popping alternative. They proposed recapitalizing Bankia with €19 billion worth of Spanish bonds, that Bankia could then use as collateral at the ECB for new money. It that sounds suspiciously like asking the ECB to print money to bail out its banks, that's because it is.
This is a fairly frank admission that Spain is insolvent. The ECB has financed nations through the backdoor before -- Greece and Ireland come to mind -- but that's certainly not a club Spain wants to belong to. It's a reminder of how dire things really are in Spain.
There are two broad stories about the ways they are doomed -- though these are hardly the only ways. First, Spain is supposed to trim its budget deficit some 3.6 percent of GDP this year alone. That's an impossible task that will only push Spain further into depression, as their economy falls more than they save. And second, the ongoing collapse of its banking system is starving the private economy of credit. Small and medium-sized businesses can't get loans. It's the same dynamic Ben Bernanke famously observed in the U.S. during the Great Depression: As cajas fold into each other and shrink their balance sheets, they lose the local knowledge they need to make loans to smaller, riskier customers. A credit crunch follows, even if the economy recovers -- which it's not. That's how you get retail sales falling 9.8 percent from the previous year. Neither businesses nor customers have enough money to keep going on. It's a vicious circle down.
Only the government can stop a complete collapse. Except the euro stops the Spanish government from doing so. That leaves Europe to bail Spain out. The ECB isn't likely to go for not-so-stealth money-printing, so that means Germany and France will actually have to put money in their mostly imaginary bailout fund.* It will be enormously expensive.
But the only thing more expensive than bailing out Spain is not bailing out Spain. Of course, the people don't necessarily think about these counterfactual costs, which is why there's a real danger of a TARP-like political backlash once the full costs of the euro become clear.
One way or the other, the slow-motion trainwreck that is the euro crisis looks to be picking up speed. Time to buckle up.
___________________________
* Update: As expected, the ECB has turned down Spain's request to use government bonds to recapitalize Bankia.
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Re: New EC Thread
Panda Wed 30 May - 17:51
Economic data suggests European confidence has dropped to its lowest since 2009.
Ireland will vote to adopt the fiscal policy because it may need a bail-out later on.
Stocks across Europe traded lower as fears grow that Spain.s debt will become unmanageable.
Iceland is facing a property bubble .
Italian and Spanish Bond sales slump .
It is becoming increasing clear that the Euro is proving a straitjacket because individual Countries cannot adjust interest rates or go for quantitiive
easing.
Banks in the U.S. are parking their money in the ECB not individual Countries' Banks.
Nomura Securities Executive says The EU MUST take action , but because they have to hold meetings to discuss and vote on decisions it is hampering
any control which the EU has to have to address to avoid a worsening situation.
European Banks have little Capital so Germany's Bonds have been sold with 0% yield because investors want to put their money in a safe place.
similarly , the British Treasury Bonds are showing a 0% yield.
Ireland will vote to adopt the fiscal policy because it may need a bail-out later on.
Stocks across Europe traded lower as fears grow that Spain.s debt will become unmanageable.
Iceland is facing a property bubble .
Italian and Spanish Bond sales slump .
It is becoming increasing clear that the Euro is proving a straitjacket because individual Countries cannot adjust interest rates or go for quantitiive
easing.
Banks in the U.S. are parking their money in the ECB not individual Countries' Banks.
Nomura Securities Executive says The EU MUST take action , but because they have to hold meetings to discuss and vote on decisions it is hampering
any control which the EU has to have to address to avoid a worsening situation.
European Banks have little Capital so Germany's Bonds have been sold with 0% yield because investors want to put their money in a safe place.
similarly , the British Treasury Bonds are showing a 0% yield.
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Re: New EC Thread
Panda Thu 31 May - 7:21
31 May 2012 Last updated at 07:07 Share this pageEmail Print Share this page
mull fiscal treaty arguments
Irish voters have begun casting their ballots on whether to ratify the European Fiscal Treaty, which sets strict rules on the budget deficits countries are allowed to run up.
Rejecting it would debar Ireland from emergency EU funding when its current bailout package expires in 2013.
Ireland is the only one of 25 nations which is putting the fiscal pact to a national vote.
Because of the treaty's complexity, a high turn-out is not expected.
The BBC's Mark Simpson, in Dublin, says the "Yes" camp fears people, angry with continuing austerity measures, will vote against the treaty to punish the government.
Complicated
The pact, signed by all EU members except the Czech Republic and the UK, allows EU member states to co-ordinate their budget policies and impose penalties on rule-breakers.
Signed in February, it commits all ratifying members to achieve budget deficits of less than 0.5% of economic output.
Last year, Ireland's deficit reached 13.1%.
Continue reading the main story
“
Start Quote
I ask you to make a further contribution by coming out to vote 'yes' on Thursday”
End Quote
Enda Kenny
The country's 3.1m voters have twice rejected European Union treaties - in referendums in 2001 and 2008 - though both votes were then overturned in subsequent polls.
Those against the treaty argue that austerity is not working and suggest that the country should instead default on debts at five nationalised banks.
In a nationwide television address before campaigning ended, the Irish Prime Minister, Enda Kenny, urged people to vote in favour of the treaty.
"I ask you to make a further contribution by coming out to vote 'Yes' on Thursday. Yes to stability. Yes to investment. Yes to recovery. Yes to a working Ireland," he said.
Sinn Fein president Gerry Adams, who is campaigning against the treaty, told voters not to be fooled.
"Be wise. Join with the millions across Europe who are demanding an end to austerity. On Thursday, vote 'No'."
The party's stance on the treaty has seen its support surge in recent weeks, making it the second-most popular party in the Republic of Ireland for the first time.
Results are not expected until late on Friday.
mull fiscal treaty arguments
Irish voters have begun casting their ballots on whether to ratify the European Fiscal Treaty, which sets strict rules on the budget deficits countries are allowed to run up.
Rejecting it would debar Ireland from emergency EU funding when its current bailout package expires in 2013.
Ireland is the only one of 25 nations which is putting the fiscal pact to a national vote.
Because of the treaty's complexity, a high turn-out is not expected.
The BBC's Mark Simpson, in Dublin, says the "Yes" camp fears people, angry with continuing austerity measures, will vote against the treaty to punish the government.
Complicated
The pact, signed by all EU members except the Czech Republic and the UK, allows EU member states to co-ordinate their budget policies and impose penalties on rule-breakers.
Signed in February, it commits all ratifying members to achieve budget deficits of less than 0.5% of economic output.
Last year, Ireland's deficit reached 13.1%.
Continue reading the main story
“
Start Quote
I ask you to make a further contribution by coming out to vote 'yes' on Thursday”
End Quote
Enda Kenny
The country's 3.1m voters have twice rejected European Union treaties - in referendums in 2001 and 2008 - though both votes were then overturned in subsequent polls.
Those against the treaty argue that austerity is not working and suggest that the country should instead default on debts at five nationalised banks.
In a nationwide television address before campaigning ended, the Irish Prime Minister, Enda Kenny, urged people to vote in favour of the treaty.
"I ask you to make a further contribution by coming out to vote 'Yes' on Thursday. Yes to stability. Yes to investment. Yes to recovery. Yes to a working Ireland," he said.
Sinn Fein president Gerry Adams, who is campaigning against the treaty, told voters not to be fooled.
"Be wise. Join with the millions across Europe who are demanding an end to austerity. On Thursday, vote 'No'."
The party's stance on the treaty has seen its support surge in recent weeks, making it the second-most popular party in the Republic of Ireland for the first time.
Results are not expected until late on Friday.
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Re: New EC Thread
Panda Thu 31 May - 16:34
Europeans express limited trust in EU
30 May 2012
Presseurop
El País Comment6
"The crisis has undermined the trust of Europeans in the EU," headlines Spanish daily El País, following publication of a report by the Pew Research Centre of an opinion poll conducted in eight European countries (United Kingdom, France, Italy, Germany, Spain, Greece, Poland and the Czech Republic). The conclusions of the report show that only one European out of three believes that economic integration was positive for his/her country while 37% say that the euro has no positive influence. The opinion poll also shows that –
Germany and Greece are the two current pillars of the EU. Germany and Germans – including the Chancellor [Angela Merkel] benefit from a large favourable opinion – such as the most admired, the most respected leaders, the most hardworking, the greatest supporters of economic integration and of the EU and the least corrupt. On the other side there is Greece – of which no one has a favourable opinion, other than the Greeks.
The newspaper also notes that –
Spain, historically bound to the pro-European ideal, is, along with the eurosceptic Czech Republic, the country the most disappointed by the European Union. Today; a little more than half of Spaniards believe that the EU was positive for their country. At the European level, the euro continues to be appreciated by Europeans who see it as a lesser evil. They prefer to keep it than to lose it.
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Re: New EC Thread
Panda Thu 31 May - 16:54
Draghi is reluctant to intervene in the Spanish Crisis and says the EU needs to act, instead of these endless meeting acheiving nothong.
The Euro has dropped for the 8th consecutive trading day and could fall below E1.25 to the $.
For the first time ever the German Bond yield shows a minus. Investors all over the world are seeking refuge for their money.
Stocks around the World are down, including the $ because the jobless figure there has increased.
Draghi says it is time for Politicians to do something, he knocks Merkels ausrterity measures.
ECB Executive Board Member Gonzalez Parano says Spain can manage it's finances but the latest sale of Bonds yielded 6.57%.
Bankia could cause immense problems for Spain because their liabilities exceed the money available from the Spanish Government.
The Euro has dropped for the 8th consecutive trading day and could fall below E1.25 to the $.
For the first time ever the German Bond yield shows a minus. Investors all over the world are seeking refuge for their money.
Stocks around the World are down, including the $ because the jobless figure there has increased.
Draghi says it is time for Politicians to do something, he knocks Merkels ausrterity measures.
ECB Executive Board Member Gonzalez Parano says Spain can manage it's finances but the latest sale of Bonds yielded 6.57%.
Bankia could cause immense problems for Spain because their liabilities exceed the money available from the Spanish Government.
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Re: New EC Thread
Panda Thu 31 May - 20:36
May 31, 2:14 PM EDT
Euro setup is unsustainable, ECB chief warns
AP Photo/Yves Logghe
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Euro setup is unsustainable, ECB chief warns
FRANKFURT, Germany (AP) -- The setup of the 17-country euro currency union is unsustainable, the head of the European Central Bank has told EU leaders, warning they must quickly come up with a broad vision for the future to get the bloc through the current financial crisis.
Mario Draghi said Thursday that the crisis had exposed the inadequacy of the financial and economic framework set up for the euro monetary union launched in 1999.
"That configuration that we had with us by and large for ten years which was considered sustainable, I should add, in a perhaps myopic way, has been shown to be unsustainable unless further steps are taken," he said in response to questions in the European Parliament.
Draghi said the central bank had done what it could to fight the 2 1/2-year-old debt crisis by reducing interest rates and giving (EURO)1 trillion ($1.2 trillion) in emergency loans to banks. But it was now up to governments to chart a course ahead by reducing deficits, carrying out sweeping reforms to spur growth and by strengthening the euro's basic institutions. The ECB cannot "fill the vacuum of the lack of action by national governments" in those areas.
He said the next step "is for our leaders to clarify what is the vision ... what is the euro going to look like a certain number of years from now. The sooner this has been specified, the better it is."
In 1989, for example, European Commission President Jacques Delors presented a landmark report that charted the initial path to the creation and launch of the euro a decade later and laid out the goals to be achieved. "The same thing should be done now," Draghi said.
He likened Europe's current struggles to those of a person crossing a river in thick fog while struggling against a strong current.
"He or she continues fighting but does not see the other side because it is foggy. What we are asking is, to dispel this fog," he said.
The euro was set up as a single currency with one central bank, the ECB, to issue the currency and set interest rates. But the different national governments continued to independently determine their budgets and manage their widely different economies. The currency union was unable to prevent some countries from running up unsustainable debt burdens as their economies lagged behind with excessive business costs and economic imbalances such as trade deficits.
European officials have worked to strengthen rules against piling up debt and to tighten surveillance over countries' budgets and economies. More wide-ranging measures - such as a common finance ministry or shared borrowing through so-called Eurobonds - have not found agreement.
Draghi said one first step would be to impose tighter central control over banks through a banking regulator that could force banks to restructure and take over the burden of bailing them out. The European Commission announced plans for such a "banking union" on Thursday.
Banks have been a key part of the government debt crisis. Bank bailouts are a further burden on financially shaky governments, and weak government finances in turn hurt the banks that hold those governments' bonds.
Currently, most powers to regulate banks have been left with national authorities, who have been seen as protective of their domestic financial services industries. The EU's existing regional regulator, the European Banking Authority, has limited powers.
Draghi said bailouts for Bankia in Spain, and before that Dexia in Belgium, show that national regulators are reluctant to admit the extent of troubles at home. That only has the effect of raising the end costs of rescuing the banks and undermining trust and transparency, he said.
"What Dexia shows - and Bankia shows as well - is that whenever we are confronted with the dramatic need to recapitalize, if you look back, the reaction of the national supervisors... is to underestimate the problem, then come out with a first assessment, a second, a third, fourth. "
"That is the worst possible way of doing things, because everybody ends up doing the right thing but at the highest possible cost and price," Draghi said in testimony in the European Parliament in Brussels.
Spain said last Friday it would need to put (EURO)19 billion ($23.63 billion) into Bankia to rescue it from losses on real estate loans. The company made a successful stock market flotation only last year but has since had to restate earnings and has been taken over by the government. Dexia was bailed out in October by France, Belgium Luxembourg. It was the second time the bank has needed help, as it was bailed out for (EURO)6.4 billion in 2008.
© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.
Euro setup is unsustainable, ECB chief warns
AP Photo/Yves Logghe
Business Video
Advertisement
Latest News
UK minister faces questions over ties to Murdoch
Euro setup is unsustainable, ECB chief warns
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Euro setup is unsustainable, ECB chief warns
FRANKFURT, Germany (AP) -- The setup of the 17-country euro currency union is unsustainable, the head of the European Central Bank has told EU leaders, warning they must quickly come up with a broad vision for the future to get the bloc through the current financial crisis.
Mario Draghi said Thursday that the crisis had exposed the inadequacy of the financial and economic framework set up for the euro monetary union launched in 1999.
"That configuration that we had with us by and large for ten years which was considered sustainable, I should add, in a perhaps myopic way, has been shown to be unsustainable unless further steps are taken," he said in response to questions in the European Parliament.
Draghi said the central bank had done what it could to fight the 2 1/2-year-old debt crisis by reducing interest rates and giving (EURO)1 trillion ($1.2 trillion) in emergency loans to banks. But it was now up to governments to chart a course ahead by reducing deficits, carrying out sweeping reforms to spur growth and by strengthening the euro's basic institutions. The ECB cannot "fill the vacuum of the lack of action by national governments" in those areas.
He said the next step "is for our leaders to clarify what is the vision ... what is the euro going to look like a certain number of years from now. The sooner this has been specified, the better it is."
In 1989, for example, European Commission President Jacques Delors presented a landmark report that charted the initial path to the creation and launch of the euro a decade later and laid out the goals to be achieved. "The same thing should be done now," Draghi said.
He likened Europe's current struggles to those of a person crossing a river in thick fog while struggling against a strong current.
"He or she continues fighting but does not see the other side because it is foggy. What we are asking is, to dispel this fog," he said.
The euro was set up as a single currency with one central bank, the ECB, to issue the currency and set interest rates. But the different national governments continued to independently determine their budgets and manage their widely different economies. The currency union was unable to prevent some countries from running up unsustainable debt burdens as their economies lagged behind with excessive business costs and economic imbalances such as trade deficits.
European officials have worked to strengthen rules against piling up debt and to tighten surveillance over countries' budgets and economies. More wide-ranging measures - such as a common finance ministry or shared borrowing through so-called Eurobonds - have not found agreement.
Draghi said one first step would be to impose tighter central control over banks through a banking regulator that could force banks to restructure and take over the burden of bailing them out. The European Commission announced plans for such a "banking union" on Thursday.
Banks have been a key part of the government debt crisis. Bank bailouts are a further burden on financially shaky governments, and weak government finances in turn hurt the banks that hold those governments' bonds.
Currently, most powers to regulate banks have been left with national authorities, who have been seen as protective of their domestic financial services industries. The EU's existing regional regulator, the European Banking Authority, has limited powers.
Draghi said bailouts for Bankia in Spain, and before that Dexia in Belgium, show that national regulators are reluctant to admit the extent of troubles at home. That only has the effect of raising the end costs of rescuing the banks and undermining trust and transparency, he said.
"What Dexia shows - and Bankia shows as well - is that whenever we are confronted with the dramatic need to recapitalize, if you look back, the reaction of the national supervisors... is to underestimate the problem, then come out with a first assessment, a second, a third, fourth. "
"That is the worst possible way of doing things, because everybody ends up doing the right thing but at the highest possible cost and price," Draghi said in testimony in the European Parliament in Brussels.
Spain said last Friday it would need to put (EURO)19 billion ($23.63 billion) into Bankia to rescue it from losses on real estate loans. The company made a successful stock market flotation only last year but has since had to restate earnings and has been taken over by the government. Dexia was bailed out in October by France, Belgium Luxembourg. It was the second time the bank has needed help, as it was bailed out for (EURO)6.4 billion in 2008.
© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.
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Re: New EC Thread
Panda Fri 1 Jun - 8:09
Recommend post (1) To the naked eye, the euro is still alive. From a financial perspective, on the other hand, it is already pretty much kaput.
In just the same way as the currency union was preceded by an invisible rise in financial integration across the euro area, its demise is already being prefigured by financial disintegration throughout the eurozone.
Up until relatively recently, the banks and investors responsible for the financial plumbing throughout Europe would tend to treat euros as euros. So, if you lent money to a Greek business it was entirely sensible to balance that out with a deposit from Germany or France. There really was a single market for finance – and this was one of the most important component parts of the monetary area.
What’s happening at present – silently but swiftly – is that banks have realised that some euros are more equal than others. A German euro is not a Greek euro, and so on. Not only have they started to carry out “war games” to work out how their balance sheet would be affected if, suddenly, all those Greek assets were redenominated in drachmas, and were thus worth only half their previous value, they are also taking action.
Banks from around the world are attempting to ensure that any assets they have in Greece are matched against liabilities in Greece. The same goes for all of the embattled periphery countries, and even for other euro members.
You can get a sense of this from the following chart (source: Jefferies), which shows you the proportion of sovereign debt owned by foreign investors in certain eurozone countries.
Note that in Germany, France and Austria the proportion has remained the same (or has increased) between 2009 and 2011, but in other countries it has fallen – in other words foreign investors have pulled out to be replaced by domestic investors (the Netherlands is the outlier here, since it is generally regarded as a stronger euro member).
Another pretty striking illustration of this financial disintegration can be seen in the chart below, which charts the yields on benchmark Spanish government bonds (the yellow line) and compares them with the yields on German bonds.
Note that in 2005 and 2006, investors were charging the two governments precisely the same interest rate to lend them money. But a gap started to open up from mid 2007 onwards, as they started to realise that a euro of Spanish debt carried a significantly greater risk than the German stuff.
If you ‘re a bank or insurance company and think that the euro could split up, it’s only sensible to try to make sure your assets and liabilities are in the same country – so that if Greece left the euro, then at least your (30% reduced value) assets are matched against Greek (30% reduced value) liabilities. Otherwise a euro exit could leave you insolvent overnight.
The problem is that this makes the plight of those troubled euro members even tougher, as they get starved of cash from overseas lenders. They face a credit crunch of even greater proportions which makes their recessions deeper and longer, and lessen their chances of recovering, thus increasing the likelihood that they leave the currency.
It’s this dynamic, alongside the analogous phenomenon of the invisible Greek/Spanish bank runs, that mean the euro’s demise could be something which happens in spite of, rather than because of, politicians’ actions.
euro crisis finance currency economy
Your Comments
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Posted by: nomolos on May 31, 2012 7:48 PMOne thing is for certain you wont find many Euro MPs with
Euro cash in Swiss banks it will have been unloaded ages ago they are in the know. Their accounts will be in dollars,Pounds . gold .silver & gems. The Euro s will have a very slow death until people will carry worthless scrap.Recommend (7)Report this commentPermalinkPosted by: nomolos on May 31, 2012 7:46 PMOne thing is for certain you wont find many Euro MPs with
Euro cash in Swiss banks it will have been unloaded ages ago they are in the know. Their accounts will be in dollars,Pounds . gold .silver & gems. The Euro s will have a very slow death until people will carry worthless scrap.Recommend (1)Report this commentPermalinkPosted by: Chris Lynn on May 31, 2012 7:25 PMmr biscuit - I had hoped that David Cameron would have given us a say. Doesn't look like he will now.
Nigel Farage may get my vote in 3 years . . .Recommend (9)Report this commentPermalinkPosted by: OrganisedChaos on May 31, 2012 7:23 PM$ 166,319,455,838
World spending on illegal drugs this year (worldometer)
why not Tax that! DOH!Recommend (4)Report this commentPermalinkPosted by: mr biscuit from warks on May 31, 2012 7:01 PMIf the Euro collapses ( which it will) .I wonder if we will at last get a vote on the E.U. or will our political leaders wait until Europe collapses. Surely its against our human rights not to have a say.Recommend (12)Report this commentPermalinkPosted by: Chris Lynn on May 31, 2012 5:35 PMThank god we didn't join the Euro currency. Now all we need to do is get out of the EU.Recommend (14)Report this commentPermalinkPosted by: thoughtcriminal on May 31, 2012 2:00 PMThe sooner the Euro collapses, the better !Recommend (29)Report this commentPermalinkPosted by: PJGB on May 31, 2012 1:35 PMHi Vinnie HKI
I agree with you totally...People saying you cannot of many countries having the one currency. I use the USA as an example of different laws, different taxes and different deficits BUT one currency. The major difference is that the FED backs up the Dollar...it follows if the ECB backs up the Euro part of the problem will be solved...it's just taking too long for the politicians all with vested and sovereign differences to see the light.Recommend (6)Report this commentPermalinkPosted by: Vinnie HKI on May 31, 2012 12:51 PMFlorida bond rates are significantly lower that those for California - should I sell my US Dollars due to it's impending disintegration? Well run (fiscally) US states enjoy better credit ratings (and enjoy the benefits thereof) than those less well run. What's new here?
I remember sitting on plane leaving Athens six years ago discussing with a US banker that any fool who treated Greek debt in the same way as that of other EU economies deserved all he (or she) got.
Ed Conway sky news
In just the same way as the currency union was preceded by an invisible rise in financial integration across the euro area, its demise is already being prefigured by financial disintegration throughout the eurozone.
Up until relatively recently, the banks and investors responsible for the financial plumbing throughout Europe would tend to treat euros as euros. So, if you lent money to a Greek business it was entirely sensible to balance that out with a deposit from Germany or France. There really was a single market for finance – and this was one of the most important component parts of the monetary area.
What’s happening at present – silently but swiftly – is that banks have realised that some euros are more equal than others. A German euro is not a Greek euro, and so on. Not only have they started to carry out “war games” to work out how their balance sheet would be affected if, suddenly, all those Greek assets were redenominated in drachmas, and were thus worth only half their previous value, they are also taking action.
Banks from around the world are attempting to ensure that any assets they have in Greece are matched against liabilities in Greece. The same goes for all of the embattled periphery countries, and even for other euro members.
You can get a sense of this from the following chart (source: Jefferies), which shows you the proportion of sovereign debt owned by foreign investors in certain eurozone countries.
Note that in Germany, France and Austria the proportion has remained the same (or has increased) between 2009 and 2011, but in other countries it has fallen – in other words foreign investors have pulled out to be replaced by domestic investors (the Netherlands is the outlier here, since it is generally regarded as a stronger euro member).
Another pretty striking illustration of this financial disintegration can be seen in the chart below, which charts the yields on benchmark Spanish government bonds (the yellow line) and compares them with the yields on German bonds.
Note that in 2005 and 2006, investors were charging the two governments precisely the same interest rate to lend them money. But a gap started to open up from mid 2007 onwards, as they started to realise that a euro of Spanish debt carried a significantly greater risk than the German stuff.
If you ‘re a bank or insurance company and think that the euro could split up, it’s only sensible to try to make sure your assets and liabilities are in the same country – so that if Greece left the euro, then at least your (30% reduced value) assets are matched against Greek (30% reduced value) liabilities. Otherwise a euro exit could leave you insolvent overnight.
The problem is that this makes the plight of those troubled euro members even tougher, as they get starved of cash from overseas lenders. They face a credit crunch of even greater proportions which makes their recessions deeper and longer, and lessen their chances of recovering, thus increasing the likelihood that they leave the currency.
It’s this dynamic, alongside the analogous phenomenon of the invisible Greek/Spanish bank runs, that mean the euro’s demise could be something which happens in spite of, rather than because of, politicians’ actions.
euro crisis finance currency economy
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Posted by: nomolos on May 31, 2012 7:48 PMOne thing is for certain you wont find many Euro MPs with
Euro cash in Swiss banks it will have been unloaded ages ago they are in the know. Their accounts will be in dollars,Pounds . gold .silver & gems. The Euro s will have a very slow death until people will carry worthless scrap.Recommend (7)Report this commentPermalinkPosted by: nomolos on May 31, 2012 7:46 PMOne thing is for certain you wont find many Euro MPs with
Euro cash in Swiss banks it will have been unloaded ages ago they are in the know. Their accounts will be in dollars,Pounds . gold .silver & gems. The Euro s will have a very slow death until people will carry worthless scrap.Recommend (1)Report this commentPermalinkPosted by: Chris Lynn on May 31, 2012 7:25 PMmr biscuit - I had hoped that David Cameron would have given us a say. Doesn't look like he will now.
Nigel Farage may get my vote in 3 years . . .Recommend (9)Report this commentPermalinkPosted by: OrganisedChaos on May 31, 2012 7:23 PM$ 166,319,455,838
World spending on illegal drugs this year (worldometer)
why not Tax that! DOH!Recommend (4)Report this commentPermalinkPosted by: mr biscuit from warks on May 31, 2012 7:01 PMIf the Euro collapses ( which it will) .I wonder if we will at last get a vote on the E.U. or will our political leaders wait until Europe collapses. Surely its against our human rights not to have a say.Recommend (12)Report this commentPermalinkPosted by: Chris Lynn on May 31, 2012 5:35 PMThank god we didn't join the Euro currency. Now all we need to do is get out of the EU.Recommend (14)Report this commentPermalinkPosted by: thoughtcriminal on May 31, 2012 2:00 PMThe sooner the Euro collapses, the better !Recommend (29)Report this commentPermalinkPosted by: PJGB on May 31, 2012 1:35 PMHi Vinnie HKI
I agree with you totally...People saying you cannot of many countries having the one currency. I use the USA as an example of different laws, different taxes and different deficits BUT one currency. The major difference is that the FED backs up the Dollar...it follows if the ECB backs up the Euro part of the problem will be solved...it's just taking too long for the politicians all with vested and sovereign differences to see the light.Recommend (6)Report this commentPermalinkPosted by: Vinnie HKI on May 31, 2012 12:51 PMFlorida bond rates are significantly lower that those for California - should I sell my US Dollars due to it's impending disintegration? Well run (fiscally) US states enjoy better credit ratings (and enjoy the benefits thereof) than those less well run. What's new here?
I remember sitting on plane leaving Athens six years ago discussing with a US banker that any fool who treated Greek debt in the same way as that of other EU economies deserved all he (or she) got.
Ed Conway sky news
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Re: New EC Thread
Panda Fri 1 Jun - 9:17
Would you Adam and Eve it......German 2 year Bonds are being sold for -2%!!!!!!! This means that Investors are PAYING Germany to hold their Euros
for 2 years instead of being paid.
The Euro is currently 1.23 to the Dollar and there are real fears that it could collapse. Merkel is under a lot of worldwide pressure now to do something and the EU is also getting criticism for the inaction after two years and countless meetings to resolve the problem initially about Greece. Now Spain is
in great difficulty and Italy not far behind with 36% youth unemployment.
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Re: New EC Thread
Panda Fri 1 Jun - 16:51
1 June 2012 Last updated at 10:50 Share this pageEmail Print Share this page
The rate of contraction in Spain's manufacturing sector was worse than that of Greece in May, according to a business survey.
Markit's eurozone manufacturing purchasing managers' index for the whole eurozone dropped to 45.1 from 45.9 in April.
Any figure below 50 suggests a contraction in the sector.
Spain's figure of 42.0 was the worst in the bloc, dropping below Greece's level of 43.1.
It was Spain's fastest rate of decline in its manufacturing sector since May 2009.
"Things went from bad to worse in the Spanish manufacturing sector during May," said Andrew Harker, the report's author.
"The ongoing lack of demand in the sector is mainly reflective of domestic problems, but the weakness in the rest of the eurozone was also reported to have weighed on demand in May."
Contagion fear
The eurozone-wide figure of 45.1 was also the lowest for three years.
Markit said this suggested the downturn in so-called peripheral countries was spreading into stronger nations such as France and Germany.
Chris Williamson, chief economist at Markit, said the figures were a cause for concern: "All four of the largest eurozone nations are now reporting worryingly sharp downturns in their manufacturing sectors.
"Eurozone manufacturers reported a deepening downturn in May, indicating that the damage to the real economy caused by the region's financial and political crises continues to spread across the region."
Firms have also been cutting jobs. The survey showed staffing levels fell for the fourth month in a row.
The European Central Bank will meet next week to talk about the level of interest rates.
It is also expected to cut its growth forecasts for this year and next.
The rate of contraction in Spain's manufacturing sector was worse than that of Greece in May, according to a business survey.
Markit's eurozone manufacturing purchasing managers' index for the whole eurozone dropped to 45.1 from 45.9 in April.
Any figure below 50 suggests a contraction in the sector.
Spain's figure of 42.0 was the worst in the bloc, dropping below Greece's level of 43.1.
It was Spain's fastest rate of decline in its manufacturing sector since May 2009.
"Things went from bad to worse in the Spanish manufacturing sector during May," said Andrew Harker, the report's author.
"The ongoing lack of demand in the sector is mainly reflective of domestic problems, but the weakness in the rest of the eurozone was also reported to have weighed on demand in May."
Contagion fear
The eurozone-wide figure of 45.1 was also the lowest for three years.
Markit said this suggested the downturn in so-called peripheral countries was spreading into stronger nations such as France and Germany.
Chris Williamson, chief economist at Markit, said the figures were a cause for concern: "All four of the largest eurozone nations are now reporting worryingly sharp downturns in their manufacturing sectors.
"Eurozone manufacturers reported a deepening downturn in May, indicating that the damage to the real economy caused by the region's financial and political crises continues to spread across the region."
Firms have also been cutting jobs. The survey showed staffing levels fell for the fourth month in a row.
The European Central Bank will meet next week to talk about the level of interest rates.
It is also expected to cut its growth forecasts for this year and next.
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Re: New EC Thread
Panda Fri 1 Jun - 17:08
All the pundits are saying the EU MUST get a grip and take action to stem the crisis. Merkel is still held in high esteem across Europe but she must
bow to the escalating crisis and waive the austerity plan until the World is out of recession.
The EU must consider the role of the ECB which is really only to keep the Euro healthy , it is currently 1.24 to the $ depreciated all week.
Ireland has voted 60% to accept the fiscal pact and can now borrow money.
Olli Rehn says the Euro is in danger of breaking up.
The Bundesbank borrowed 11 billion euros to lend to Spain and Italy.
The Stock Market across europe , including Britain has closed lower for the week.
Let's hope the EU Meeting next week will prove decisive and act immediately.
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