Re: New EC Thread

[Panda]

Brussels Swats Its Buda-'Pest'

• 
  
  
  
  
  
  
  
  
  
  
  
  

Robert Nisbet

February 23, 2012 10:39 AM

• 
  
  
  Recommend post (1)
  

While
much of the press pack's attention has been focused on Greece, there's
another weeping sore troubling the Eurocrats: Hungary.
The
country's maverick Prime Minister Viktor Orban has irritated both the
European Commission and the Parliament, and now he's facing their wrath.
Brussels
is proposing to freeze half a billion Euros in so-called 'cohesion
funding' for Hungary. That's money designed to level the economic
playing field among the 27 member states (think of the EU graph with
Germany at one end, and Greece at the other).
Budapest called the
decision 'unfathomable' but it puts a figure on just how much the
country's leader has annoyed the EU's bigwigs.
The soccer-mad
Orban baffles Brussels with his unpredictable ideological lurches from
socialism - free education for all and ramping up state control of the
economy - to anti-democratic totalitarianism - changing the constitution
to tighten his grip on the legal system and media.
He passed a
constitution which has been condemned across Europe: the normally sleepy
European Parliament is now looking at whether the raft of new laws
complies with 'European values'.
If Hungary were enjoying wild
economic success, then maybe the government's authoritarian streak would
be seen as the growing pains of a country still emerging from communist
rule.
But it's not. The country is in pretty dire shape and is
relying on international handouts (ring any bells?) to keep its head
above the Danube.
So the Commission has found a way of threatening Orban to reconsider his reform programme by turning off the tap.
It
says Hungary hasn't done enough to keep its budget deficit under the
limit of 3% of GDP set in the EU treaties and therefore the funds would
be suspended unless more action was taken.
The tough talk from
Brussels places even more pressure on Orban who will be resuming talks
with the International Monetary Fund next month.

[Panda]

Money "leaking" from Spain to Germany bank deposit flows indicate.

Banks in Germany face Volcker Rule Test.

Yes I know, your'e thinking what the h*ll is the Volcker Rule

Volcker Rule



From Wikipedia, the free encyclopedia
Jump to: navigation, search




Paul VolckerThe Volcker Rule is a specific section of the Dodd–Frank Wall Street Reform and Consumer Protection Act originally proposed by American economist and former United States Federal Reserve Chairman Paul Volcker to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers.^[1] Volcker argued that such speculative activity played a key role in the financial crisis of 2007–2010. The rule is often referred to as a ban on proprietary trading by commercial banks, whereby deposits are used to trade on the bank's personal accounts, although a number of exceptions to this ban were included in the Dodd-Frank law.^[2][3] The rule's provisions are scheduled to be implemented as a part of Dodd-Frank on July 21, 2012.^[4]

[Panda]

Ed Conway

February 24, 2012 3:28 PM

• 
  
  
  Recommend post (3)
  

How much does a pint of beer cost? The answer, of course, depends on where you’re buying it.
I
can tell you that if you’re in a tavern in Athens, the answer is: a
surprising amount. If you’re drinking in Berlin, on the other hand, it's
surprisingly cheap. In fact, a pub crawl across the continent can tell
you more about the single currency’s crisis than any economic textbook.
Honestly.
That pint of lager in Athens goes for about £4.24, according to the website pintprice.com (h/t
Simon Derrick of BoNY Mellon for introducing me to it). Meanwhile in
Berlin, you can pick up a pint for a mere £2.45. In fact, a pint of beer
costs less in Germany than in most of the Mediterranean countries
(Madrid: £3.15; Rome: £3.93, though Portuguese lager is a snip at £1.69
in Lisbon - though beware, I cannot vouch for the reliability of these
figures).
So what? Well, this underlines the central problem with
the euro. Greece is a fundamentally less productive economy than
Germany: in other words one unit of economic output (eg activity,
profits etc) costs comparatively more to generate in Athens than it does
in Germany. This isn't the only reason beer is comparatively more
expensive in Athens (alcohol tax, differences in supply and demand and
licensing restrictions also play a part), but it is one of them.
As
a tourist or a business, it costs more in Athens (or for that matter
Lisbon or Rome) to get the same product or service you can expect in
Berlin.
There's nothing inherently wrong with this. Such disparities are rife throughout the economic world - even within countries.
The
Italian economic powerhouse region of Lombardia, home to Milan, is 4.8%
more efficient than the Italian national average, as measured by unit
labour costs - the price you have to pay to elicit a particular economic
outcome. In the far more impoverished Campania region, on the other
hand, unit labour costs are 7.9% above the national average.
You can see the same disparity in Spain, where rural Galicia is 16% less efficient than Madrid (all these figures are from a 2001 EC study -
the most up-to-date data I've found on this). In Britain, Wales,
Northern Ireland and the North East all appear to be significantly less
efficient than London, based on some back-of-an-envelope sums by Simon
Kirby of NIESR (the ONS helpfully doesn't produce unit labour costs for
UK regions).
Why do such disparities matter? Because in order to
keep a country's books in order and economy functioning, they need to be
balanced out: those less efficient regions must be subsidised by the
richer ones.
That's why London pays far more in taxes than it
receives in benefits - to the tune of 10.3% of local gross domestic
product, according to the CEBR. That cash is, in turn, distributed to
those least efficient areas: Northern Ireland receives a net subsidy of
29.4% of GDP, Wales 26% and the North East 22.2%. A similar pattern is
at play in Italy, between Milan and Campania and in Spain between Madrid
and Galicia. That is how countries - fiscal unions - work: the surplus
generated by more efficient areas is distributed to less efficient
parts.
The euro area is much like Britain in this regard: like the
North East, Greece is far less competitive than its richer neighbours;
like the North East, it does not have its own currency it could devalue
to make its products (beer, tourism etc) cheaper; like the North East it
can try to cut costs and become more efficient, but it won't happen
overnight. The North East, after all, is unlikely to catch up
economically with London any time soon.
The big difference is that
there is no established fiscal union to channel money from the rich
areas to the poor ones to compensate for this gulf in economic
capabilities. If the euro is to function, such transfers will simply have to happen for decades -
fiscally or through monetary means, eg euro-wide inflation (which,
given the German mindset, is the only thing less likely than giving
money away to Greece).
No-one should be surprised by this -
especially the Germans. After all, it's precisely what happens in their
country every year, between the wealthy West and old Soviet East. It is
what happens in Italy, much to the chagrin of the Northern League, who
would like to secede and keep their cash rather than giving it to Naples
or Sicily. It is the way economies work.
Now, consider the following chart.

It's a measure of how efficient various euro economies are. The higher the country on the chart, the less efficient it is (the more it costs to get the same economic product).
The
gulf between the member states has widened, not narrowed, since the
currency was established. Even more damning, it is Germany which is the
biggest outlier.
It is iron-cast economic logic that the countries
at the bottom (of this graph) will have in some way to support the ones
at the top. Or else the euro cannot survive.
The real problem
with the euro is not Greece. It is not even Germany (though it is more
of an outlier than Greece). It is that none of the countries seems to be
aware of what they have already signed up for.
Cheers!

[Panda]

European Council

The “grey mouse” has made his nest





23 February 2012

NRC Handelsblad
Rotterdam

• 
  Comment 4
  
• 
  
• 
  
  

• Text larger
  
• Text smaller
  
• Send
  
• Print
  

Glez






He may avoid the limelight on the European stage, but in
two years, Herman Van Rompuy has discreetly taken control. For the
moment without a challenger, on 1st March he will most likely be chosen
for a second mandate as President of the European Council.



Caroline de Gruyter



Herman Van Rompuy may well be viewed as a grey mouse, but amid
one of the worst crises in the history of the continent, the President
of Europe has succeeded in obtaining a second mandate without any
controversy whatsoever. According to sources in Brussels, next week [at
the 1st and 2nd March European Council meeting] European leaders will
reappoint Herman Van Rompuy for a further two and half years [he was originally appointed in December 2009].

When you meet Herman Van Rompuy, age 64, you are immediately struck
by the atmosphere of calm that inevitably surrounds him. Elsewhere in
the brown-walled building with antiquated lifts where his office is
located, diplomats from Europe’s 27 member states do battle with the
immense task of negotiating measures to counter the crisis. Raised
voices are not uncommon. The North and the South are diametrically
opposed. National interests and emotions prevail over other
considerations. However, Herman Van Rompuy appears completely
unaffected by all of these intrigues.

A slightly boring image as an unredeemed swot


Herman Van Rompuy deliberately cultivates the “grey mouse” image,
however, the reality of the man is very different. He has a warm
personality, and a taste for an occasional glass of beer, and –
notwithstanding his slightly formal manners – he knows how to put
people at ease. He also has a gift for motivating his staff – everyone
in Brussels wants to work for him.

That said, he is also crafty and sufficiently tough to eliminate his
opponents at a distance. For example, when the then prime minister of
Italy, Silvio Berlusconi, sent him a list of reforms, Herman Van Rompuy
refused to sign the acknowledgement of receipt until the list
contained all of the items he wanted included.

He was the one to find a solution to the impossible demands made by Finland,
which insisted that Greece provide guarantees for any loans it
provided. When a large number of European government leaders expressed
support for the introduction of eurobonds, which the German Chancellor
refused to tolerate, Herman Van Rompuy masterminded an agreement to
postpone discussion of the issue – until the questions that Angela
Merkel was willing to discuss had been settled. Herman Van Rompuy kneads
and forms the political agenda, while always remaining at a distance.
As a former Belgian Minister of Budget, he is one of the rare
politicians to be speak with authority on the crisis, in which he has
played a crucial role.

Well aware that as a president of heads of state, he should be
careful not to stand out and avoid direct criticism of other leaders,
he has rarely been able to fully express his point of view. The haikus
he writes are the sole indulgence he has allowed himself to brighten a
slightly boring image as an unredeemed swot. But even these haikus have
attracted a cult following.

Herman Van Rompuy is a spiritual man


Modesty is a watchword for Herman Van Rompuy who has to act as
president for everyone, with a brief to satisfy 27 employers while
steering Europe in the right direction.

Mr Van Rompuy has acted as a rampart and a reliable source of
support for Germany and France, while at the same time ensuring that
Europe’s two major economies do not decide everything as a tandem – a
hegemony that would never be accepted by smaller member states. With
this in mind, he discreetly moves behind the scenes to steer diplomats
in the “right” direction.

No doubt this is source of his personal calm he generates not only
for others, but also for himself, and without which he would go
completely mad. Herman Van Rompuy is a spiritual man. As he has said in
one interview, “You have to acknowledge that some things will remain
out of reach.” And as a first step: “It is important to be modest with
regard to oneself, if one is to avoid being aggressive.”












From Poland
“In the service of EU leaders”





As Herman Van Rompuy’s two and a half year term as President of the European Council draws to a close, Gazeta Wyborcza’s Brussels correspondent writes that any positive ratings –

… are in large part due to revised expectations about his office
created by the Lisbon Treaty. No one styles the Belgian poltician
"President of Europe", because it is now all too clear that this role
does not enjoy consensus amongst Europe’s major players. At most, the
head of the European Council can be – and here is where Van Rompuy does
a good job – a skilful diplomat in the service of EU leaders.

The Warsaw daily recalls that Herman Van Rompuy recently twittered
his photo to former US -Secretary of State Henry Kissinger, who
famously wondered what number to dial if he wanted to call Europe, with
a caption saying, “We are exchanging phone numbers”. This is an
instance of –

… self-deprecation, because while Lisbon Treaty apologists might see
“a telephone” on the Council President’s desk, the White House knows
other numbers better. It was Chancellor Angela Merkel that Barack Obama
called to congratulate after agreement on a new rescue package for
Greece.

• inShare
• 
  
• 
  
• 
  

Read this article in another

[Panda]

G20 inches toward $2 trillion in rescue funds
inShare3Share this
Email
Print
Related NewsEU's Rehn sees deal on euro zone bailout funds in March
6:06pm EST
Bankers urge G20 growth strategy, delay regulations
Fri, Feb 24 2012
Comments from G20 finance chiefs meeting in Mexico
6:06pm EST
Emerging economies want IMF reform to help Europe - Brazil
6:06pm EST
Draft G20 communique calls for April IMF review: source
7:18pm ESTAnalysis & OpinionDoes the G20 matter?
The G20 needs to embrace growth
Related TopicsGermany »
Euro Zone »
Related VideoGeithner says Europe's work not done
5:22pm EST 1 of 4. Security personnel stand outside the hotel hosting the meeting of Group of Twenty (G20) finance ministers and central bankers in Mexico City February 25, 2012.

Credit: Reuters/Bernardo Montoya

By Daniel Flynn and Francesca Landini

MEXICO CITY | Sat Feb 25, 2012 8:16pm EST

MEXICO CITY (Reuters) - Germany is easing its opposition to a bigger European bailout fund, officials said, smoothing the way for the world's leading economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt crisis.

Finance leaders from the Group of 20, meeting in Mexico City this weekend, are trying to build up massive international resources by the end of April to convince financial markets they can prevent the euro-zone's deep problems from inflicting more damage on a still-fragile world recovery.

It would mark their boldest efforts since 2008 when the G20 mustered $1 trillion to rescue the world economy from the credit crisis, which blew up in the United States and caused the worst recession since the 1930s.

They are demanding that Europe build up its war chest first and then other G20 countries would contribute extra money to the International Monetary Fund. As Europe's richest economy, Germany's support for a larger European fund is critical.

A senior G20 official said Berlin was prepared to discuss boosting the firewall in March, but it saw no reason to increase the bailout fund for now because the situation in financial markets has been improving.

The plan is to merge Europe's temporary and permanent bailout funds, the European Financial Stability Fund and the European Stability Mechanism, to create one 750 billion-euro ($1 trillion) fund. Increased IMF resources would back that up.

"Everyone in the euro zone and even in European Union is reasonably happy with combining the ESM and the EFSF, even Germany, but it is too early to say if this will be decided at the EU summit at the beginning of March," said Margrethe Vestager, economy minister of current EU president Denmark.

Merging the funds would mark a softening of Berlin's stance. It has warned that a bigger fund would remove pressure on deeply indebted countries to enact the tough fiscal measures and economic reforms needed to bring their budgets under control.

G20 finance chiefs are piling the pressure on Germany as they try to line up the roughly $2 trillion in resources by the time they next meet in April and draw a line under the two-year-old euro-zone crisis.

"I do want to encourage Germany to take that leadership role very seriously and come up with an overall euro zone plan," said Canada's Finance Minister Jim Flaherty.

Some diplomats have said Germany's reticence to back the bigger bailout plan was linked to a key vote on Monday by German lawmakers on Greece's new financial lifeline, another part of the broader push to ring-fence the euro zone crisis.

Europe's problems have weakened the global recovery and roiled financial markets, which have locked highly indebted countries -- Greece, Ireland and Portugal -- out of debt markets and forced them to seek bailouts. Italy and Spain also are under threat, and bank credit has tightened.

German Finance Minister Wolfgang Schaeuble told bankers in Mexico City that he was worried that the root causes of Europe's problems have not been tackled sufficiently and showed no sign that he was ready to announce a shift in course on issues such as common euro zone bonds as well as bigger bailout funds.

"It does not make any economic sense to follow the calls for proposals which would be mutualizing the interest risk in the euro zone, nor in pumping money into rescue funds, nor in starting up the ECB printing press," Schaeuble said.

BIG BAZOOKA

A European agreement during March to merge the EFSF and the ESM to create a $1 trillion war chest would clear the way for other G20 countries in April to meet the IMF's request for $500-$600 billion in new resources, on top of its current $358 billion in funds.

Put together, this would total around $1.95 trillion in firepower. But the G20 has no intention of easing the pressure on Europe by giving it a strong signal now that new IMF money is in the bag.

A G20 communique at the end of the ministerial meetings on Sunday will merely state that the world's leading economies will review the resources of the IMF in April without setting a date for a deal, G20 officials said.

Olli Rehn, European Commissioner for Economic and Monetary Affairs, said more funds are essential. "In order to overcome the crisis, you have to get ahead of the curve and have a big enough bazooka," he told reporters.

"The negotiations are now going on," Rehn said, adding he was confident that a decision to merge the European funds would be taken in March.

A euro zone official said a deal is unlikely to come in time for a summit of European Union leaders next week which could nonetheless reveal some flexibility by Berlin: "What we can expect, at most, is a reference in the conclusions suggesting Germany is not closing the door."

GERMANY NEEDS TIME

Diplomats said Germany appears to be playing for time. It faces a critical vote on Monday to win support in the German parliament for Greece's second rescue package. Many Bundestag members are skeptical that Greece can meet tough fiscal conditions required to bring its public debt down to 120 percent of GDP by 2020.

Similar votes are scheduled in the Netherlands and Finland next week. Germany also wants to see whether enough investors sign up for Greece's debt swap, which Athens wants to complete by March 12, a euro zone official said.

"Most euro zone countries are ready to move now, but I am afraid that Germany will need more time to agree to the increase, mainly to be able to better manage the Bundestag," one euro zone official said.

The United States has said it will not provide more funds for the IMF. But it is not standing in the way of other countries lending to the Fund and is keeping up the pressure on Europe to put forward first more of its own money.

"I hope that we're going to see, and I expect we will see continued efforts by the Europeans ... to put in place a stronger, more credible firewall," Treasury Secretary Timothy Geithner said on Saturday.

Policymakers said they were hopeful that putting in place a strong firewall against further crises in Europe would help strengthen the world economy.

"The economy is somewhat picking up in the world as a whole including Japan and (we) want to put an end to the Europe crisis in the early spring and to accelerate the global economic growth," Japan's Finance Minister Jun Azumi said.

(Additional reporting by Louise Egan, Glenn Somerville, Tetsushi Kajimoto,; Alonso Soto, Dave Graham and the G20 reporting team.; Writing by Stella Dawson; editing by William Schomberg)

GermanyEuro Zone
Tweet this
Link this
Share this
Digg this
Email
Reprints

After reading this article, people also read:Georgia on his mind, Gingrich fights in own backyard
Feb 25, 2012
American officers killed in Afghan Interior Ministry
Feb 25, 2012
Berkshire identifies Buffett successor, not by name
Feb 25, 2012
Rally on Wall St to be put to test
Feb 25, 2012
Taliban militants say they shot down U.S. drone
Feb 25, 2012
Sponsored links by TaboolaVideos you may like:
Sacha Baron Cohen gets a warning from OscarFri, Feb 24 2012Greek debt deal seen as "very close"Fri, Jan 27 201210 days to save the euro zoneWed, Nov 30 2011


From around the web:
Why UK Shares Dividends Are Soaring - And How You Can Cash In (Hargreaves Lansdown)
Is Apple The New Dixons? (Motley Fool UK)
‘I Wish I Were Wrong’ – Economist Laments 2012 Prediction. (Moneynews)
[?]


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (0)
Be the first to comment on reuters.com.
Add yours using the box above.

Ads by Marchex
Experienced Stock Market Knowledge
Get our free stock alerts and watch your portfolio sky rocket in value.
www.RocketAlerts.com
News- Wind Energy Tech Slashes Cost
Mass Megawatts Wind Power( stock ticker MMMW ) introduces low cost power units.
www.massmegawatts.com
More From Reuters

G20 inches toward $2 trillion in rescue funds
MEXICO CITY - Germany is easing its opposition to a bigger European bailout fund, officials said, smoothing the way for the world's leading economies to secure nearly $2 trillion in firepower to prevent further fallout from the euro-zone's sovereign debt crisis. | Video

Continue Reading Top News Georgia on his mind, Gingrich fights in own backyard
ATLANTA - Only a month ago, Newt Gingrich was atop the Republican presidential race. Now he is in a fight for a win even in his home state of Georgia as his campaign stakes its future on the Super Tuesday primaries.
As violence rages, Syria holds referendum |
SEC probes exchanges and electronic trading firms ties
» More Top NewsTop Videos Geithner says Europe's work not done Michigan primary puts focus on Detroit's economic recovery
» More Top VideosMost PopularAmerican officers killed in Afghan Interior Ministry |
Hamas ditches Assad, backs Syrian revolt
As violence rages, Syria holds referendum |
Robert F.Kennedy's son faces charges in maternity ward tussle
'Act of Valor' Destroys Competition, Is No. 1 at Friday Box Office
Romney, Santorum battle for support in tight Michigan
Analysis & OpinionRon Paul and the pink slip that could decide the election
By Jack Welch and Suzy Welch
The maxims of business and politics don’t always overlap, but when it comes to parting ways, they sure do. In business, firing someone incorrectly is a disaster that can haunt you for years. Same in politics. Commentary | Video
Rob Cox: Mr. 99 Percent crashes Davos
» More Analysis & OpinionToday in Pictures Editor's Choice Our best photos from the last 24 hours.

[Panda]

Portugal

Recession raises second bailout fears


24 February 2012





Público, 24 February 2012

"Portuguese GDP forecast reinforces new bailout scenario", warns Público, the day after the European Commission predicted that Portugal will experience the second worst economic performance in the EU in 2012 – only surpassed by Greece. While the Portuguese government forecasts a 3% decline in GDP, Brussels goes further with 3.3%, in a macroeconomic climate full of "uncertainties".

Economists speaking to the Lisbon daily believe that unemployment, currently at 14%, will continue to rise, and "with a growing recession, a new bailout will be inevitable. It’s just a matter of time,” said one. Another gloomily adds that forecasts are -


... confirmation that austerity measures are not working, that they are destructive and that recession will be inevitable and long. [...] A bailout programme wrapped in recession creates itself the impossibility of a solution. I fear that the need for outside help will become a cumulative and recurrent problem.

The Brussels forecast comes as experts from the ECB/EU/IMF are in Portugal studying its compliance with the €78 billion bailout package of May 2011. In an angry editorial, Público warns that –


In the absence of a different European approach to the Portuguese problem (and the Spanish, Italian, or Greek one), this sharp fall in gross domestic product is a sentence without appeal. And as we can see no significant change in the priorities of the Merkozy axis towards the debt crisis, the country must be prepared to gnash its teeth even more, to watch ever faster destruction of jobs and further deep degradation of the economy. (...) As Brussels revealed yesterday, the troika`s solution threatens to lead the country to the abyss even before the reforms take place.

[Panda]

Europe News

Geithner, Schaeuble Spar Over Debt Crisis
Updated 1 hour, 7 minutes ago
The U.S. and Germany sparred about how to tackle Europe’s sovereign debt crisis as a meeting of officials from the world’s biggest economies struggled to break an impasse over outside help for the region.


Japan Urges Bigger Euro-Crisis Firewall Before G-20 in April
Updated 2 hours, 33 minutes ago
Jun Azumi, Japan’s finance minister, wants Europe to widen measures preventing the spread of its debt crisis before global finance chiefs reconvene to discuss the International Monetary Fund’s expansion in April.

[Panda]

The latest news from the G20 Meeting is that no more money will be available to help bailout Greece.....Europe must put it's own money in.

Tensions are building in both Greece and Germany . The Greeks are saying Germany has tried twice to make Greece German. Germany occupied Greece
during the 1939-45 War and has never paid the reparation damages. There has been a big increase in young people emigrating to Germany saying
they are fed up with their own Government who have caused this crisis and the emigration rate has risen 80% in the last year.

A Minister in Merkel's Party is saying publicly that Greece should default, although it is assumed the E130 Billion will be voted through, Germany will not
keep bailing out Greece.

Since Portugal is considered the next weak link, it may be the start of the collapse of the Euro. It is unlikely that Hedge Funds and Investment
Companies will want to invest in Greece or any other Euro Country after the loss it has suffered over the Greek bail-out.

How will the EU build a higher firewall to protect Italy and Spain.

One Analyst is saying it is like trying to plug holes in a Colander.

[Panda]

The Greek Minister of Culture says the Eurozone must work it would be catastrophic if it were to fail.
He says the Greek goverment must collect taxes and Govern more wisely for the sake of the suffering population.#
Tourism is the way to save Greece, the Goverment has lowered Airport Taxes and Sales tax which makes for cheaper holidays .

An American Investment Analyst says when Argentina defaulted it had a deficit of S9.8 Billion as opposed to Greece E320 billion . He said Argentina
refused to deal with her Creditors and was sued by over 100 Countries and Banks but never repaid a peeny. With the result there are many Countries
that cannot borrow from.

British banks are funding loans to Argentina via World Banks.

He also believes the ECB lent to European Banks before the crisis because many used the money to lend at higher rates than the 1% charged by the ECB and they probably do not now have the liquidity the money was meant to secure. He sees the serial bailout of Greece and the Banks as ill
conceived and hasty, and it looks as though Portugal, Spain and Italy will require bailouts.

[Panda]

Eurozone crisis

Draghi buries European social model


27 February 2012
La Tribune Paris Comment


Text larger
Text smaller
Send
Print


Faber


At a time when the ECB is preparing to write a further €500 billion cheque for the banks, the ECB President has declared that over-indebted countries will have no option but to implement draconian austerity policies if they are to overcome the crisis. Shocking words, which, French business daily La Tribune argues, are nonetheless justified.

Philippe Mabille

"The European social model has already gone". Never has a central banker spoken with such brutality about the ongoing crisis. The remarks made by Italian Mario Draghi who has succeeded Jean-Claude Trichet at the head of the ECB, in a long interview with the Wall Street Journal on Friday 24 February, are so overwhelming in their implications that they probably could not have been published elsewhere than in the newspaper revered as the "bible" of global finance. Even Jean-Claude Trichet chose his words more carefully when attempting to explain what the future holds for the peoples of Europe.

For Mario Draghi, a former Goldman Sachs banker who now commands the fate of Europe’s single currency, the bid to save the euro will come at a high cost. Specifically, there will be "no escape" from tough austerity measures in all of the over-indebted countries; and this will necessarily involve giving up a social model based on job security and generous safety nets.

The model that provided the basis for European prosperity since the Second World War "has gone," argues Mario Draghi who reminds the WSJ journalist that the situation described in the famous quote from German economist Rudi Dornbusch – "the Europeans are so rich they can afford to pay everybody for not working” – no longer applies.

The ECB President’s remarks could be construed as provocative at a time when the European Central Bank is about to write a further €500 billion cheque for the banks, which, on Wednesday 29 February, will be offered unlimited credit as part of a further scheme to save the euro. In the light of such statements, how can he expect to face down increasingly vocal criticism of measures that sacrifice populations in order to save financial institutions?

However, the argument put forward Mario Draghi is incontrovertible: any “backtracking on fiscal targets [for debt reduction] would elicit an immediate reaction by the market” that would push up interest rates for sovereign states, making it even more difficult, or even impossible for them to clean up their books. This is what happened in Greece, and what almost happened in Portugal, Spain, and Italy.

An immediate and unflinching clean-up

We should also bear in mind that Mario Draghi’s remarks are obviously linked to the electoral schedule in Europe: in April in Greece, in May in France, and in the spring of 2013 in Italy, voters will be called on to choose their destiny. In explaining, like a modern-day Margaret Thatcher, that regardless of the outcome of these votes, new governments will have no alternative but to adopt stringent austerity policies, push through structural labour market reforms and further dismantle welfare systems, the ECB President aims to put an end to any ambiguity.

He further refuses to be swayed by any assertion that the current calm on the markets indicates that the crisis is over. Proof that this is not the case will be evident on Wednesday 29 February, when the banks will seek to obtain the ECB support without which the financial system would no longer be sustainable. Without cash injections from central banks – in the form of quantitative easing (QE) and a federal funds rate that is close to zero in the US, and the ECB’s Long Term Refinancing Operation (LTRO) in Europe – the entire financial system would collapse. Even China has been forced to bailout beleaguered banks. Welcome to the cruel realities of the new "QE world."

In adopting this harsh position, Mario Draghi intends to raise awareness of the fact that it is in our interest to accept an immediate and unflinching clean-up of balance sheets and the structural reforms required to restore market confidence rather than to embark on another decade fraught with the terrible pressure that results from the absence of that confidence. This is the strategy that has been adopted by Mario Monti, which has proved to be highly successful. In less than 100 days, the former Goldman Sachs advisor has permanently changed the face of Italy, which he has steered out of the eye of the storm. Other countries would do well to follow his example.

Translated from the French by Mark McGovern

[Panda]

German MPs Approve Second Greek Bailout
0 Comments
German Chancellor Angela Merkel talks to MPs during a vote over a second EU-aid package for Greece
9:13pm UK, Monday February 27, 2012

German MPs have endorsed a second bailout for Greece - despite strong opposition from the public and media.
The German Parliament has overwhelmingly approved the new 130bn euro (£110bn) IMF/EU rescue package by 496 votes to 90, with only five abstentions.

Before the vote, Chancellor Angela Merkel warned the Bundestag that it would be "irresponsible" to abandon the country to bankruptcy.

However, she conceded there was "no 100% guarantee" the bailout approved by eurozone states last week would work.


Greece's chances to regenerate itself and become competitive are surely greater outside the monetary union than if it remains in the euro area

Interior Minister Hans-Peter Friedrich
Bild - Germany's biggest newspaper - appealed to MPs with the front-page headline "Stop!". "Don't keep on going the wrong way," the paper said.

Read more about the crisis on Sky's dedicated eurozone page.

Exposing a rift in the chancellor's centre-right coalition, interior minister Hans-Peter Friedrich gave an interview to Spiegel magazine on Sunday, arguing that Greece should be encouraged to leave the eurozone.

"Greece's chances to regenerate itself and become competitive are surely greater outside the monetary union than if it remains in the euro area," he said.

"I'm not talking about throwing Greece out, but rather about creating incentives for an exit that they can't pass up," he added.

Opposition politician Peer Steinbrueck warned: "This strategy of buying time has failed because times have got worse."

But Mrs Merkel insisted: "The opportunities outweigh the risks of turning away from Greece now."

[Badboy]

GREECE NEEDS MORE TOURISTS.

[Panda]

Standard & Poors has given Greece the lowest credit rating ever on a Country "D" (f0r default?) and says it will consider an upgrade when the E130 Billion is given to Greece. Remember there was talk of a special account being opened for this money and sums doled out to Greece as and when
required.

The ECB is not going to buy any Government Bonds for now, a spokesman for ECB says it has done the job it was required to do.

I think they have stopped this for 2 reasons:-1. The existing Greek Bond Holders are the ECB, Hedge Funds and Private investors. The private bond
holders had to take a 73% writedown while the ECB had special lender status which has caused a backlash among Private Bond holders. The ECB has
Greek Bonds totalling E219 Billion .

2. The G20 Countries have made it clear they will not lend any more money to the Euro Countries until a higher Firewall is built to protect Italy, Spain, Portugal and Ireland. For this reason the ECB will need plenty of money in the Bank.

53% of Europe Companies missed estimates on their profits.

[Panda]

Alcohol abuse report shocks country

According to a recent Department of Health report, “the average Irish adult is drinking the equivalent of a bottle of vodka a week -- or downing 482 pints of lager a year,” notes the Irish Independent.

With alcohol abuse costing 88 lives a month and increasing the chances of developing 60 medical conditions, the report has launched a major debate in Ireland, not least because it costs the cash-strapped state €1.2bn a year. One of the first columnists to weigh in has been John Waters of the Irish Times –


When foreigners ask me to explain why the Irish people have not revolted against the incomprehensible and unjust burdens being placed on them, I tell them to look at the drinking statistics. Alcohol is functioning as a highly effective instrument of artificial social cohesion. It is the main reason why people are not marching in the streets or pulling the gates of Government Buildings off their hinges.

[Panda]

10:20am UK, Tuesday February 28, 2012

Greece's solvency is being called into question, raising the stakes in its battle to avoid default.
The International Swaps and Derivatives Association (ISDA), which oversees complex forms of credit-related trading, has been asked to determine if a Greek 'sovereign credit event' has occurred.

The identities of the people or organisations behind the query is unknown but they are believed to be 'market participants'.

If ISDA agrees that Greece has failed to meet its payment obligations, it could lead to a payout on outstanding Greek Credit Default Swap (CDS) contracts - which are essentially insurance mechanisms to protect against default.

ISDA's deadline for a decision on whether to investigate is 1700 GMT on Wednesday.



A default ruling could trigger CDS payments

In reaction, Sky's economics editor Ed Conway said "The negotiated default is now starting to kick in and become official."

"This is the default that has been planned for and is aimed at preventing a 'messy' default."

The development followed Standard & Poor's decision last night to downgrade the country's debt to below junk status - deciding Greece was in 'selective default'.

It was, S&P said, a reaction to the bond swap plan agreed with private creditors by Athens to reduce its debt burden which will see investors incur losses of up to 75% on existing Greek bonds.

The European Central Bank has said today it will temporarily suspend the eligibility of Greek sovereign bonds as collateral for bank loans.

:: Use the Sky News interactive Eurozone crisis map

The ECB moved to reassure banks affected by the move that they could still borrow cash from their national central bank under emergency assistance provisions.

It will start accepting Greek bonds again by mid-March when measures to insure the ECB against losses come into effect.

But the moves do little to inspire confidence over Greece and a Government minister has told Sky News the second financial bailout for his country, worth an additional 130bn euros (£110bn) is not sufficient.

In an interview with Jeff Randall Live, tourism minister Pavlos Yeroulanos said:"Actually, there are no reassuring words at this time.

"It is not enough...it's enough to stabilise the situation but not enough to secure it.

"Stabilisation is a key element right now in order to produce growth.

He continued "We need to focus right now on growth and creating jobs."

Megan Greene, senior western European economist at Roubini Economics, expects Greece to have left the euro by the end of 2013.

Following today's developments she said: "I don't think there will be a panic just because it is a default...it's really effectively a default anyhow.

"The net CDS market for Greece is really tiny but it does set a very dangerous precedent when other larger countries end up in the same position."

[Panda]

Ed Conway
February 28, 2012 12:04 PM

Recommend post (1) The talking is over; it is finally happening. For the first time since World War Two, a developed nation is going into default.

That’s the significance of the events of the past 24 hours, with Greece’s debt being classified as in “selective default” and the European Central Bank banning it from its cash window. Months of planning by both banks and policymakers have gone into ensuring that Greece’s negotiated default will be a smooth painless process. We are about to find out whether that planning pays off.

Now, we shouldn’t be surprised by Standard & Poor’s decision to cut the rating on Greece’s sovereign debt from CC to SD (which stands for “selective default”). The ratings agencies had always said that, given private investors are about to lose just over half the value of their debt (through a complex bond swap), this downgrade would be a natural consequence.

Nor should we be shocked that the ECB says it will no longer accept Greek debt as collateral: in fact, the only surprise is that it’s taken this long – on the basis of the ECB’s previous policy, the bonds should have become ineligible when were first downgraded from investment status two years ago.

In the coming weeks we’re likely to learn whether the credit default swaps on Greek debt (opaque insurance contracts) will be triggered. That decision is taken by a committee of bankers and investors convened by ISDA, the International Swaps and Derivatives Association, and they’re due to decide by tomorrow evening whether to start this formal deliberation process.

But as far as analysts and bond investors are concerned, even if they eventually decide it is, as they call it, a “credit event”, this shouldn’t necessarily be a cause for panic. The total amount investors stand to lose if these CDSs trigger is a “relatively small” $3.2 billion, according to ISDA’s wonderfully caustic blog.

Now, you could be forgiven for feeling a little sceptical of the rictus grins worn by the eurocrats and investors responsible for the above information. After all, we’re now officially in the process of the first Western sovereign default in six decades; is everyone really so sanguine?

Actually, no. Because there are so many things in the managed default process that could go deeply, horribly wrong.
To take just three:

1. The process of CDSs being triggered could nonetheless hold some surprises in store. This ISDA system of determining credit events is still only a few years old. This will be its first big test. And what if the committee actually decides this isn’t a credit event. According to Felix Salmon that could be even more disruptive.

2. Many analysts assumed in the run-up to the Lehmans collapse in 2008 that investors were prepared for just such an eventuality. They weren’t. While thousands of hours have been spent investigating the chain reaction that a CDS event could cause in the sovereign bond market, there will almost certainly be some kind of financial impact (eg someone unexpectedly losing money) .

3. The managed default hasn’t actually happened yet. Private bondholders have yet to swap their investments with the 53.5%-reduced bonds they are supposed to get in exchange. It is quite conceivable that not enough of them offer up their bonds, which could in turn trigger a messy default (Greece simply not paying interest on its bonds) and the country not receiving its next bail-out cash. This would then potentially trigger Greece's ejection from the single currency.

So perhaps the talking isn’t quite over yet. And big question marks still remain over whether this grand experiment in managed financial disappointment will work. So far, based on the sanguine attitude of investors and the behaviour of markets this morning, things are going according to plan. But, this being Europe, don’t expect the calm to last.

[Panda]

A newspaper for the Europe of tomorrow


26 January 2012

Presseurop
La Stampa, Le Monde, Gazeta Wyborcza & 3 others Comment7




La Stampa, 26 January 2012

Six major European dailies, well-known to the readers of Presseurop -- Le Monde, El País, Gazeta Wyborcza, Süddeutsche Zeitung, The Guardian and La Stampa– are launching a joint project called Europa and scheduled for publication on Thursday. In this "State of the Union," as Italy's La Stampa headline dubbed it, the idea is "to reflect on the actual state of the EU, which, like never before, is at the centre of a thousand questions on its present and, most of all, its future".

Answering these questions in their articles and their analysis is the goal of the six papers' journalists and of contributing intellectuals and politicians. The six titles together represent over 10 million readers, points out Spain's El País.

Among the first to be published is British sociologist Anthony Giddens, Greek writer Petros Makaris, who paints a "bitter-sweet portrait of Brussels", and Italian author and semiologist Umberto Eco. The latter argues that "culture, beyond war, constitutes our identity". A culture he calls "shallow" and which "needs to be better rooted, before it is destroyed totally by the crisis".

As for the politicians, there are contributions from former prime ministers, Gordon Brown of Britain and Spain's Felipe González. But the key interview is accorded by "the leader that most represents the real power in Europe," Angela Merkel. The German Chancellor provides her vision of the future of Europe. "Over a long process," she says –


... we will transfer more powers to the [European] Commission, which will then handle what falls within the European remit like a government of Europe. That will require a strong parliament. A kind of second chamber, if you like, will be the council comprising the heads of [national] government. And finally, the supreme court will be the European court of justice. That could be what Europe's political union looks like in the future – some time in the future, as I say, and after a goodly number of interim stages.

[Panda]

28 February 2012 Last updated at 13:40 Share this pageEmail Print Share this page


Portugal has passed the latest review of its continuing spending cuts and economic reforms, the country's Finance Minister Vitor Gaspar has said.

It paves the way for the government to receive the next 14bn euros ($19bn; £12bn) round of bailout funds from the European Union, European Central Bank and International Monetary Fund.

The move follows after inspectors from the so-called troika had been in Lisbon to assess the country's performance.

Portugal is to get 78bn euros in total.

Mr Gaspar said: "The result [of the evaluation] was positive despite unfavourable conditions.

"The mission confirmed the fulfilment of the criteria demanded by the terms."

Strike plan

The Portuguese government has been working hard to continue to cut costs, despite a steep recession and an unemployment rate of 14%.

Portugal's austerity programme has sparked major protests
In particular, the government is making important changes to labour conditions.

Last month, it reached an agreement with unions and employers to cut holidays and the compensation paid when workers are laid-off.

Under the deal, it was also made easier to hire and fire staff.

Measures like that have won praise from the troika and Portugal has, so far, received its bailout funds with much less drama than Greece.

But the gain has not come without pain for Portugal.

There have been deep cost cuts that are hitting public sector workers particularly hard, with many people facing a steep reduction in income.

That has prompted mass protests, and a general strike is planned for late March.

Unemployment warning

Mr Gaspar also warned on Tuesday that the economic situation in the country would only worsen this year.

The government now predicts that the Portuguese economy will contract by 3.3% in 2012, compared with its previous estimate of 3%.

It also expects the unemployment rate to reach 14.5%.

Economist Diego Iscaro, of IHS Global Insight, said Portugal was likely to need a second bailout before the end of the year

[Panda]

There is a possibility that the Loans to European Banks is not being used to lend to customers as intended .

If Banks use ECB to buy Bonds it could be seen as loans to Government.

The Euro has increased which affects German exports, also there are signs of inflation in the Euro economy which is not going down well in Germany .

The ECB will lend E470 billion this time which is the second loan. The first time 520 European Banks took advantage of the loan and Draghi says there is no stigma to lending.

The first time, many of the Banks loaned to other banks at a higher rate of interest, rather than lend to Businesses which was the intention .

It will take some time to estimate how much the actions taken by the Troika has benefitted the Euro Countries .

Papdemos says agreement has been reached to cut another E4.3 billion to satisfy the Troika that the E350 Billion will be given the go-ahead.

LTRO won't fix the EU in the long run.

Cheap loans delays Countries taking action to reduce their deficit and when the 3%GDP becomes Law it is difficult to see how any Country can meet
this requirement.

[Panda]

Europe's Banker Talks Tough
Draghi Says Continent's Social Model Is 'Gone,' Won't Backtrack on Austerity .
Article Video Comments (115) more in World | Find New $LINKTEXTFIND$ ».
Email Print Save ↓ More .
.smaller Larger By BRIAN BLACKSTONE, MATTHEW KARNITSCHNIG and ROBERT THOMSON
FRANKFURT—European Central Bank President Mario Draghi warned beleaguered euro-zone countries that there is no escape from tough austerity measures and that the Continent's traditional social contract is obsolete, as he waded into an increasingly divisive debate over how to tackle the region's fiscal and economic troubles.

Interview Transcript
Mario Draghi, president of the European Central Bank, on the importance of austerity in Europe, the Greek bailout deal and the ECB's recent decision to exempt its Greek bond portfolio from losses.

Read the full Q&A
.
In a wide-ranging interview with The Wall Street Journal at his downtown office here, Mr. Draghi reflected on how the region's travails were pushing Europe toward a closer union. He said Europe's vaunted social model—which places a premium on job security and generous safety nets—is "already gone," citing high youth unemployment; in Spain, it tops 50%. He urged overhauls to boost job creation for young people.

There are no quick fixes to Europe's problems, he said, adding that expectations that cash-rich China will ride to the rescue were unrealistic. He argued instead that continuing economic shocks would force countries into structural changes in labor markets and other aspects of the economy, to return to long-term prosperity.

Journal Community

..
"You know there was a time when [economist] Rudi Dornbusch used to say that the Europeans are so rich they can afford to pay everybody for not working. That's gone," Mr. Draghi said.

"There is no feasible trade-off" between economic overhauls and fiscal belt-tightening, Mr. Draghi said in the interview, his first since Greece sealed its second bailout.

"Backtracking on fiscal targets would elicit an immediate reaction by the market," pushing interest-rate spreads higher, he said.

Mr. Draghi's comments come amid an intensifying debate in Europe over whether deeper austerity is the best prescription for countries facing substantial economic contraction and place him squarely in the hard-line camp, alongside Angela Merkel and other German officials.


WSJ's Brian Blackstone joins Mean Street to discuss a Wall Street Journal exclusive interview with ECB chief Mario Draghi, in which the central bank leader issued a stern warning to Eurozone countries. Photo: Reuters.
.
They also come against a backdrop of a gloomier European Union economic forecast that shows the euro zone at risk of recession. Some governments, meanwhile, have resisted emphasizing spending cuts in favor of tax increases, though those can stifle enterprise. Boosting consumption taxes can also increase inflation, which makes it harder for the ECB to keep interest rates low and spur growth.

Though Mr. Draghi welcomed the relative calm that has descended on European debt markets in recent months, he said credit remained scarce, especially in Europe's struggling southern fringe.

Despite Europe's vast wealth, it has gone to the International Monetary Fund three times for aid—for Greece, Portugal and Ireland—and is going back again for additional assistance for Greece. Euro-zone officials have pressed emerging markets such as China for help by having these countries purchase euro-zone debt or bonds issued by the bailout fund.

Related Reading
Greece Approves Debt Swap
Swap Branded 'Inquisition'
EU Sees Recession
Heard on the Street: Banking on ECB Liquidity Fix
.
"There have been lots of talks and conversations. I hear about them but I haven't seen any official investment [from China] in European financial markets," Mr. Draghi said.

Greece, despite its latest, €130 billion ($172.24 billion) bailout, remains a major risk, he said. While Athens has agreed to rein in its debt and overhaul its economy, the country's leaders now need to show that they will follow through and implement the measures.

"It's hard to say if the crisis is over," he said.

The ECB chief's views on austerity programs will be tested at the voting booth in coming months. Greece and France are due to hold elections this spring, which may result in new leaders less willing to fully embrace the bank's stance.

A number of European leaders, led by Italian Prime Minister Mario Monti, want to shift Europe's focus away from spending cuts toward stimulating growth.

Mr. Monti and Spanish Prime Minister Mariano Rajoy, who met in Rome on Thursday, urged EU countries to work harder at making their local economies more competitive as a way to encourage growth and counter harsh austerity measures.


The European Central Bank's final tranche of cheap bank financing through its long term refinancing operation will be made available next week. Dow Jones's Geoffrey Smith assesses its success to date and who might be in the market for more loans. Photo: AP
.
Mr. Draghi argued that austerity, coupled with structural change, is the only option for economic renewal. While government spending cuts hurt activity in the short run, he said, the negative effects can be offset by structural overhauls.

His view was supported on Thursday by the European Commission. Despite forecasting a recession for the euro zone this year, the commission said governments under financial stress "should be ready to meet budgetary targets."

But critics have blasted Europe's austerity-heavy focus, saying it is causing the euro zone, which makes up about one-fifth of world output, to stagnate or contract, threatening the global recovery.

Mr. Draghi's contention that overhauls will offset the negative effects of austerity has also been met with some skepticism. Rooting out inefficiencies in labor markets or cutting government bureaucracies subtract from growth in the short run whatever the longer-term benefits, some economists say.

Enlarge Image


Close
Don McNeill Healy for The Wall Street Journal

European Central Bank President Mario Draghi, speaking in Frankfurt, said Europe must not divert from its austerity measures.
.
"He's just sugar coating the message," said Simon Johnson, former chief economist at the International Monetary Fund.

"A lot of this structural reform talk is illusory at best in the short run…but it's a better story than saying you're going to have a terrible 10 years," he said.

In the interview, Mr. Draghi defended the ECB's decision to shield its €50 billion Greek bond portfolio from the steep losses private-sector bondholders face as part of a separate deal between Greece and its creditors to write down €107 billion in debt. He said the ECB "is committed to protect the taxpayers' money."

On Thursday, Commerzbank AG Chief Executive Martin Blessing criticized the ostensibly voluntary haircut for private investors holding Greek bonds in unusually blunt language, calling it "as voluntary as a confession during the Spanish Inquisition."

On other matters related to Europe's two-year-old debt crisis, Mr. Draghi—who took the helm of the ECB less than four months ago after heading the Bank of Italy for six years—was more upbeat. After a weak fourth quarter, the overall euro-zone economy is stabilizing, he said.

Governments have made progress on deficit reduction, making economies more competitive. Banks have stabilized and bond markets are reopening. Portugal, which many analysts think is next in line after Greece for another bailout, won't need to be rescued again, Mr. Draghi said.

Mr. Draghi has earned praise from investors for his handling of the crisis in recent months. He lowered interest rates back to record lows with back-to-back cuts. The ECB in December flooded banks with €489 billion in cheap, three-year loans, and expanded the types of collateral banks can post.

Taken together, the moves have led to a rally in equity markets and helped bring government-bond yields down in Italy and Spain, countries seen as critical to keeping Greece's debt crisis from spreading throughout the euro bloc.

Despite the ECB's efforts, however, credit has tightened throughout the euro area, particularly in southern parts of the region. Banks appear to have used a significant share of the three-year loans to buy back their own bonds coming due, Mr. Draghi said.

The Greek crisis has laid bare many of the structural weaknesses in the setup of the euro, which is governed by a single interest-rate policy yet has no common finance ministry to steer money from rich countries to poor.

Mr. Draghi, whose comments came ahead of this weekend's meeting of finance officials from the Group of 20 major developed and emerging economies, dismissed criticism that Europe can't get a handle on its debt crisis. Recent steps by governments to create binding deficit controls are "a major political achievement" and the "first step" toward fiscal union, he said.

He also brushed back concerns that the ECB's aggressive crisis measures are distancing the central bank from its most powerful member, Germany. Two of Germany's top officials at the ECB resigned last year in opposition to the ECB's purchases of government bonds, concerned that the central bank was effectively rewarding profligacy. The Bundesbank's current president, Jens Weidmann, has warned of risks associated with the ECB's generous lending programs.

"One of my objectives is that we have as much consensus as possible. We have to do the right things, and we have to do them together," Mr. Draghi said. The ECB's decision to lend banks money for three years was unanimous, suggesting there isn't as much division within the ECB as some observers think.

Write to Brian Blackstone at brian.blackstone@dowjones.com and Matthew Karnitschnig at matthew.karnitschnig@wsj.com and Robert Thomson at Robert.Thomson@wsj.com

[Panda]

Ireland is to hold a referendum on whether to accept the European fiscal treaty which tightens controls on member states' budgetary decisions.
Prime Minister Enda Kenny said he was confident the public will vote in favour of ratifying the contentious compact.

"I believe it is in Ireland's national interest that this treaty be approved," said Mr Kenny.

The plans for the referendum were announced in the Dail.

Mr Kenny said that adopting the fiscal compact would be vital for Ireland's economic recovery and job creation.


I believe it is in Ireland's national interest that this treaty be approved.

Taoiseach Enda Kenny
A decision to hold a referendum was taken on advice from Attorney General Maire Whelan.

The treaty, agreed by 25 of the 27 European Union states after Britain and the Czech Republic refused support, must be ratified by January 2013.

It is designed to prevent a repeat of the Greek debt crisis and protect against the potential collapse of the euro currency.

The fiscal compact carries a number of firewalls aimed at protecting individual states from contagion from countries on the verge of defaulting on their debts.

The Irish government will set up a special referendum committee in the coming weeks, normally headed by a senior judge.

It will advise the public on what the vote is about but not whether to support or reject.

[Panda]

800 Banks took advantage of the ECB 1% Loan, more than expected , including Lloyds Bank which borrowed E18.2 Billion.

Philippe Borderaux of Pimco is very pessimistic that the Euro crisis will improve in the near future. He bel;ieves the firewall to protect Italy and Spain
is not strong enough .

German jobless rate holds.

Britain, Spain and Portugal stock exchange falls .

ECB said to buy Portugese notes although yesterday they said they were not buying any more for a while..

Hollandw the Labour Candidate in the forthcoming Election in France. He is to meet Labour Leaders, but not Cameron because he says Cameron supports Sarkozy.

Citibank Cheif Economist says Europe is now in recession and it could take up to 2 years before there is significant improvement. The Draghi move to
lend Euros at 1% interest hasn't solved the problem of Sovereign debt , but has bought time. He said the ECB is a lender of last resort so why doesn't Draghi admit this. There will be more crises and he believes it will be impossible for the Euro Countries to adhere to the 3% GDP until the recession is
over.

Ireland seeks to attract Investors to buy Bonds by offering Visas as incentive.

[Panda]

Fiscal Compact
Ireland calls surprise referendum
The Irish Times, Irish Examiner, Irish Independent
In a move that has sent shockwaves across Europe, the Irish government announced on February 28 that it plans to hold a referendum on the new European fiscal compact. In spite of a context of deep recession, high unemployment and growing resentment against the EU, the Irish press believes that there is no alternative but to vote Yes.

[Panda]

Will China Help to Alleviate the Euro zone Debt Crisis?

Analysis

By Esther Tran Le: Subscribe to Esther's RSS feed

February 29, 2012 10:45 AM EST



When German Chancellor Angela Merkel visited China in early February, Chinese Prime Minister Wen Jiabao soothed some European Union (EU) leaders by floating the idea that China would help ease the euro zone debt crisis. However, China's extended hand remains short of reach.









Enlarge


(Photo: Reuters)
German Chancellor Angela Merkel and Chinese Premier Wen Jiabao.



Share This Story


1
inShare.








Related Articles



Sino-European economic ties are grounded in export-import relations. The EU is now China's largest trading partner, with imported goods peaking at a value of €281.9 billion ($379 billion) in 2010, according to the European Commission. Similarly, China is now the EU's second largest trading partner, behind the United States.

European leaders hope that the close and intertwined economic relations between China and the EU will give leaders in Beijing the incentive to help the continent. Indeed, China's own economic growth has slowed down partially due to a decrease in export flow to the debt-stricken European countries.

"China is closely connected with the European Union, less so from a banking standpoint and more so from their reliance on exports as a major part of their economy. Slower growth in Europe will mean slower growth in China and you are already starting to see that in the latest economic numbers," said Michael Yoshikami, founder and chairman of Destination Wealth Management in Walnut Creek, Calif.



















Like us on Facebook

The International Monetary Fund (IMF) predicted earlier in February that China's economy would definitely take a hit should the euro zone debt crisis lead to a sharp, economic recession. However, the IMF also reported that China has ample room to concoct a stimulus package that could weather the storm.

Scholars and politicians argue that the crisis in Europe is global in nature. The downfall of the euro zone economies could potentially plunge the world into another global financial crisis. Emerging countries, including China, are being called upon to buy up the debt of these countries in order to prevent this worst-case scenario. With a foreign currency reserve of close to $3.2 trillion, China has become the primary target of these pleas.

European leaders hope that China's willingness to help out might lead to a large contribution -- perhaps a bailout package through the IMF or the purchase of a huge sum of bonds. However, China's promises have yet to develop into concrete financial action.

"Ideally, European nations would like to see China create an IMF-like fund for some sort of pool of assets that might be tapped when the need arises," said Yoshikami.

Merkel herself while visiting Beijing requested that China directly purchase some of the European debt. However, she was briskly shut down by Chinese officials saying that "such investments were 'difficult' for long-term investors," the New York Times reported. China would only truly consider directly investing funds in industrial and other real assets.

China has indeed confirmed its refusal to assume the position of savior.

"China's standpoint is very clear. Europe should make great efforts to solve its own problem," Zhu Guangyao, China's Vice Finance Minister told Xinhua News in Mexico City while attending the G-20 Finance Ministers summit.

China Bail-Out: Why Not?

Although bailing out the European countries would increase China's international status as a major economic power, China hesitates to take the risk.

"China prefers to do things multi-laterally, rather than bilaterally," said James C. Hsiung, professor of politics at New York University.

In effect, the only way China has truly offered to help alleviate the Eurozone crisis is through IMF channels.

"If China offers aid to the EU through the IMF, it means that the IMF will take on the subsequent onerous responsibility of overseeing and monitoring how the funds will be used by the aid recipients. In other words, let the IMF be what in the military is called the 'master kick sergeant.' It would make China look, and remain, the kind and benign donor," Professor Hsiung explained.

The most realistic fashion in which China could ease the debt crisis is through the IMF's rescue fund: the European Financial Stability Facility (EFSF).

The EFSF was created in 2010 to "safeguard financial stability in the Euro zone." Its purpose is to raise capital and act as a source of funding for loans to countries with heavy debts.

China could potentially pour in huge sums of money into the EFSF, Professor Hsiung believes.

But before China contributes to the EFSF, Chinese leaders have made it clear that the European countries need to take more proactive actions in redressing their faultu economic behavior -- i.e., "strengthen fiscal consolidation, cut deficits and reduce debt risks in light of their national conditions," as Vice Premier Wen said, according to Bloomberg.

"We hope the EU will soon reach internal consensus, make the political decision and send to the international community a clearer and a stronger message of policy responses," Wen continued.

Quid Pro Quo

Part of China's reluctance to help rid the European countries of their debt crisis is the uncertainty of any return on China's investments.

If China becomes the prime contributor to the EFSF, then can it expect a larger role in the IMF?

One way that China hopes to increase its membership weight is through the IMF "currency" -- the Special Drawing Rights (SDRs). China hopes to back SDRs with the renminbi (RMB), establishing the Chinese currency as an international standard.

"Voting in the IMF is weighted, and the value of SDRs is based on a basket of currencies. So, if China's weight increases and the RMB is given more prominence, then China will have a bigger SDR quota plus a bigger say in voting," explained Professor Hsiung.

If the European countries request that China become their financier, Chinese leaders don't see why they wouldn't consider China's economy equal to that of Europe.

Vice Premier Wen first linked China's financial help to Europe in September of last year with demands that the EU grant China a market economy status (MES).

The World Trade Organization's standard for a market economy relies on the government's non-interference with the economy. In other words, the forces of supply-and-demand drive the economy, versus government's manipulation.

MES would grant China several advantages. Import duties would not be imposed as severely on Chinese manufactured goods in Europe. Secondly, MES would affect anti-dumping procedures. Currently, anti-dumping investigators compare prices of Chinese goods sold in European markets to the prices of goods sold by other low-cost countries. However, in granting China MES, anti-dumping investigators would need to compare the prices of Chinese exports to the same goods price in China.

"A 'market economy' designation will change China's status in international institutions and under the laws of certain countries like the U.S., where non-market economies are in effect being discriminated against," said Professor Hsiung.

China will automatically acquire MES by 2016, but Chinese leaders urge the EU to recognize the status beforehand. However, European countries have repeatedly rejected China's request. In effect, China sees the rejection as an act of protectionism, further distancing Beijing from taking an active role in the EU's bail-out dream.

The United States also does not recognize China as a market economy.

China's empty promises are a result of traditionally, risk-averse leaders and the struggle to position China on the world stage as a leading power. Furthermore, China has historically deferred to non-interference in international affairs, often more preoccupied in resolving internal problems.

As of now, experts have reasoned that China could weather another global recession with the implementation of a strict stimulus package. But if China were to inject large funds into the European debt crisis, this potential could be cancelled out.



This article is copyrighted by International Business Times, the business news leader




















































.


.
..

[Panda]

Portugal will need another bailout. There appears a reluctance to buy Portugese Bonds because of the write off of Greek bonds.

Italy and Spain are considered too big to fail.

The ISDA is meeting today to discuss thw Greek debt swap and consider whether it is a default. There is much riding on this because on the one hand the Insurance Companies would have to pay up, alternatively the bond holders could hold on to their bonds for a 230% yield . This is critical , not just for Greece but all Countries selling Bonds.

Spanish GDP 8.5%, higher than expected.

Deutchebank in exclusive talks with Guggenheim regarding sale of Asset Manager Units.

Italian and Spanish Bond sales continue to show lower yield.

The ECB Governing Council says new proposals may be needed but the Draghi action served its purpose. There is the problem of quantitive easing of
the Euro through lending all this money which leads to higher inflation.

EU Finance Ministers meet today , Monti says he expects a deal this month on increasing the firewall .

Unemployment in Italy rose to 9.2%, the highest in 10 years.

With regard to the IMF stipulation that the EU enlarge the firewall around Italy, Spain and Ireland, there is a big problem.Germany, being the richest
Country in the EU would have been expected to increase the EFSF Fund, but German Financial Law forbids lending above it's current GDP% and the rise
in the Euro will hinder German exports which are slowing down.

This is why the EC is hoping China will help out, but if it does it will want its pound of flesh, more access to Common Market trade.

[Sponsored content]