Re: New EC Thread

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I did try malena, had a look at the info, it's very interesting and shows how skewed the EU is. The sooner Britain is allowed a referendum the better.

[malena stool]

I did try malena, had a look at the info, it's very interesting and shows how skewed the EU is. The sooner Britain is allowed a referendum the better.

I see no sense in staying in the EU panda, we've gone downhill fast as a nation since we joined. the only winners are the French with their rubbish farming being subsidised by all and sundry, while much of our own arable farmland is left in fallow.

[Panda]

I did try malena, had a look at the info, it's very interesting and shows how skewed the EU is. The sooner Britain is allowed a referendum the better.

I see no sense in staying in the EU panda, we've gone downhill fast as a nation since we joined. the only winners are the French with their rubbish farming being subsidised by all and sundry, while much of our own arable farmland is left in fallow.

malena, had they kept it to a common market that would have been O.K., but no, that wasn't enough for the EU, they had to dictate on almost every aspect of a Country's governance. Had they let Greece default 3 years ago the Country would never have accumulated the debt it has which has no hope of being repaid. It was Germany and France who were first to exceed the 3% of GDP. Britain already had a thriving market with the Commonwealth ....will Cameron turn chicken and be another PM denying his Country a Referendum.???

[malena stool]

I did try malena, had a look at the info, it's very interesting and shows how skewed the EU is. The sooner Britain is allowed a referendum the better.

I see no sense in staying in the EU panda, we've gone downhill fast as a nation since we joined. the only winners are the French with their rubbish farming being subsidised by all and sundry, while much of our own arable farmland is left in fallow.

malena, had they kept it to a common market that would have been O.K., but no, that wasn't enough for the EU, they had to dictate on almost every aspect of a Country's governance. Had they let Greece default 3 years ago the Country would never have accumulated the debt it has which has no hope of being repaid. It was Germany and France who were first to exceed the 3% of GDP. Britain already had a thriving market with the Commonwealth ....will Cameron turn chicken and be another PM denying his Country a Referendum.???

I would think it depends on how much of his own money is tied up in Europe.

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what do you mean malena, his own money?? I read that Germany is busy printing deutchmarks. A Reporter commented this morning that it is the Grandees like Barroso, Schauble etc who are too intransigent and Merkel faces an election next year so wants to hopefully delay any decisions until after that. None of them really care about the people they serve, just themselves.

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EU Budget Summit Fails in Echo of Debt-Crisis Stalemate


By James G. Neuger and Svenja O’Donnell - Nov 23, 2012 6:11 PM GMT

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European Union leaders failed to agree on the 27 nation bloc’s next seven-year budget, replaying the clash between rich and poor countries that has stymied the response to the euro debt crisis.

National chiefs plan another summit early next year, when northern countries including Britain and Germany may have the upper hand in seeking to cut subsidies to lesser-developed southern and eastern economies clamoring for EU investment.





Enlarge image

EU Chiefs’ Budget Summit Fails in Echo of Debt-Crisis Stalemate




Mario Proenca/Bloomberg

European Union leaders failed to agree on the bloc’s next seven-year budget, forcing them to hold another summit next year to seal the deal.

European Union leaders failed to agree on the bloc’s next seven-year budget, forcing them to hold another summit next year to seal the deal. Photographer: Mario Proenca/Bloomberg



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U.K. Prime Minister David Cameron




Jock Fistick/Bloomberg

U.K. Prime Minister David Cameron, center, speaks to the media as he arrives for the European Union leaders summit at the European Council headquarters in Brussels.

U.K. Prime Minister David Cameron, center, speaks to the media as he arrives for the European Union leaders summit at the European Council headquarters in Brussels. Photographer: Jock Fistick/Bloomberg



France's President Francois Hollande arrives for the European Union leaders summit at the European Council headquarters in Brussels. Photographer: Jock Fistick/Bloomberg

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“Anything short of admitting that our talks have been extraordinarily complex and difficult would not reflect reality,” Jose Barroso, head of the European Commission, which manages the subsidy programs, told reporters after a two-day meeting in Brussels.

Britain’s defense of its cash-back guarantee and France’s clinging to farm aid gave the summit the flavor of EU negotiations in the 1970s or 1980s, diluting efforts to equipEurope with a budget to make it more competitive. Eastern and southern countries said reduced financing for public-works projects would condemn them to lag behind the wealthier north.

The euro rose to $1.2977 at 7 p.m. in Brussels from $1.2880 late yesterday. The Euro Stoxx 50 index rose 0.9 percent to 2,557.03.

In the EU’s last budget round, it took two summits, in June and December 2005, to strike a bargain. No date was set for the next negotiations. In the absence of an accord by late 2013, the EU would roll over its annual budget.

One Percent


At stake is a spending plan for the years 2014-2020 that would total about 1 percent of EU-wide gross domestic product. While that sum is paltry compared to the average 50 percent of GDP that each country spends inside its borders, the political resonance is far larger.

Wealthier countries such as Germany, the U.K., Denmark,Sweden and the Netherlands banded together to cut what they pay to the collective pool, pounding away at the original proposal of 1.033 trillion euros ($1.3 trillion) that came out in mid-2011.

Germany has led a bloc demanding austerity in Greece and three other bailed-out euro countries in exchange for rescue aid.

By the time the leaders convened yesterday, the figure on the table was 973 billion euros. It was soon trimmed to 971 billion euros, still too much for financially stronger countries that pressed for another 30 billion euros in cuts.

“For the upcoming weeks and months, my feeling is that we can go further, but it takes some preparatory work and it has to be balanced,” EU President Herman Van Rompuy, said.

Cameron’s Rebate


The alliance of spending cutters unraveled, when it came to the financing side of the budget. While U.K. Prime MinisterDavid Cameron defended a rebate won by Margaret Thatcher in 1984, Germany, the Netherlands and Sweden sought better terms for their own refunds and Denmark made a bid to join the money-back club.

French President Francois Hollande, for example, paired his farm-aid advocacy with calls for savings elsewhere, since France is among the 11 countries that pay more into the EU budget than they get out. As a result, agriculture was the relative winner as the leaders strengthened some budget lines and pared others.

The latest proposal added 8 billion euros back to the farm budget, taking it to 372 billion euros. Cuts elsewhere left infrastructure at 460 billion euros and immigration and border control at 17 billion euros. The biggest cuts came in foreign policy, down by 5 billion euros to 60.7 billion euros. The proposal left staff costs untouched at 62.6 billion euros.

Hollande’s Check


Taking aim at Cameron’s rebate, Hollande said: “Francepays more than Britain; I could ask him for a check.”

For Britain, the summit was about more than euros and cents, testing Britain’s EU influence at a time of mounting pressure for a national referendum on whether to stay in the bloc.

Demanding spending cuts at home, Cameron made a special target of the 50,000 civil servants at EU institutions ranging from the commission and European Parliament, to the Court of Justice and agencies that regulate sectors from fishing to medicines.

“More than 200 Brussels staff earn more than I do,”Cameron said. “Brussels continues to exist as if it’s in a parallel universe.”

Aid Multipliers


Led by Poland, defenders of EU financing pointed out that spending at the European level goes further than money that stays within national borders, since EU subsidies back international projects like pipelines, bridges and airports.

European Parliament President Martin Schulz countered the wealthier countries’ insistence on paying less with the contention that it is cheaper for them to promote European projects, since contracts in Latvia or Slovenia go to companies in places like Germany and Sweden.

“Every euro invested by the EU attracts an average of between 2 and 4 euros in additional investment,” Schulz said.“The EU budget is not a zero-sum game in which one country wins what another loses. Synergies are generated which benefit the net contributors as well.”

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Europe campaign against companies that dodge tax


Britain has joined forces with Germany and France to press for a speedy crackdown on systematic tax dodging by big business.








Starbucks has been threatened with a customer boycott over its UK tax affairs Photo: Reuters






By Philip Aldrick, Economics Editor

6:54PM GMT 23 Nov 2012


259 Comments




George Osborne, Wolfgang Schaeuble, the German finance minister, and Pierre Moscovici, the French finance minister, have written to the Organisation for Economic Co-operation & Development (OECD) with a pledge to provide €150,000 (£120,000) each to help stamp out “profit shifting” and ensure major companies pay their fair share of tax.


In the letter, the finance ministers said “tax shifting” was a “growing problem”. It was “important both for its potential impact on Government revenues and for the confidence of our citizens in the fairness of taxation of international companies”.


“International tax standards have had difficulty keeping up with changes in global business practices,” the letter added.


They expect the Paris-based think-tank, which has been working on the issue this year, to publish “concrete results” in time for the next meeting of leading countries’ finance ministers in Russia in February.


MPs have accused foreign-based multinationals such as Amazon, Starbucks and Google, of “immoral” behaviour for diverting profits to low-tax jurisdictions to minimise their UK tax bill.



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Anger is also mounting in France, where the authorities have hit Amazon with a €252m demand for back payments.

Public outrage has already led to customer boycotts. Attempts by Starbucks executives to explain its low tax rate have been angrily rejected by bloggers on the coffee chain’s website. One said colleagues had “decided to move to Costa”.

Vince Cable, the Business Secretary, has said the Government will “get to grips” with the problem. John Lewis and Dixons Retail have also expressed concerns that foreign groups can “out-trade” and “out-invest” domestic rivals by using tax arrangements to gain a financial advantage.

Mr Osborne is expected to close some loopholes in the Autumn Statement next month. However, the Treasury recognises that it needs international co-operation for a crackdown to be effective and to prevent companies leaving the UK.

According to the OECD’s preliminary investigations, the gap between the level of tax multinationals pay and the statutory rate “has clearly broadened and this is largely due to aggressive positions taken”. It has also acknowledged that, with many countries facing austerity, “it is more important now than ever that taxpayers pay the right amount of tax at the right time and in the right place”.

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   Tories cheer Cameron in Europe and demand referendum
   

Conservative backbenchers praised David Cameron’s tough stance on Brussels spending at the EU's budget summit but step up pressure on the Prime Minister to hold a referendum on Britain’s place in Europe








Mr Cameron was far from impressed and called it a night Photo: REUTERS






By Robert Watts, Deputy Political Editor

9:30PM GMT 24 Nov 2012

247 Comments




Writing for The Telegraph today, Mark Pritchard, a former secretary of the party’s 1922 committee, urges the Prime Minister to let the public vote on Britain’s membership of the EU at the next general election in 2015 - or even before.


Mr Pritchard wants the Coalition to publish a Referendum Bill to set the terms on a public vote. “This should be an in/out referendum – anything short of that simply won’t deliver,” he writes.


The MP said that only such an unambiguous question would “assuage the British people”.


Mr Pritchard’s article is published two days after Mr Cameron blocked plans for a 5 per cent rise in the EU’s 2014-20 budget at two-day summit in Brussels.


His intervention, which will be seen as representative of the views of a swathe of the Tory backbenches, comes as a full picture of how Mr Cameron managed to win new allies within Europe over the EU’s spending emerged.



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At a post-summit press conference, Mr Cameron unfurled a series of punchy criticisms of the EU. He said they were living in a “parallel universe” and that their ongoing largesse was “insulting to taxpayers”.

Such comments attracted strong support from the Tory Right, who have also been impressed by the Prime Minister success at strengthening ties with other countries sceptical of increases to the EU budget.

The talks over the €1 trillion (£809billion) budget ended in deadlock on Friday afternoon, with delegations from Britain, Germany, Denmark, Sweden and the Netherlands pushing for a cut in the EU’s spending plans.

France, Spain, Poland and most of the poorer states who rely on the Common Agricultural Policy to support their farmers and grants to boost their flagging economies want the EU’s spending to rise. Talks are set to resume in the new year, with another summit in early February.

“I am delighted that the Prime Minister has won new allies as he pushes for cuts to Brussels spending,” said Mark Reckless, one the leading Tory eurosceptics who also wants a referendum on Britain’s position in the EU.

“I am particularly pleased that he chose to highlight the disgraceful level of pay and perks of European staff.”

On arriving in Brussels on Thursday morning, Mr David Cameron asked to be the first EU leader to meet Herman Van Rompuy, the president of the EU council who chaired the summit, and Jose Manuel Barroso, the president of the European Commission.

Mr Van Rompuy and Mr Barroso held 10-minute discussions with each of the 27 leaders, but Mr Cameron knew that if he got there first he could set out his stall early in a bid to shape their leaders’ discussions over the budget.

At the December meeting of the European Council last year Mr Cameron cut a lonely figure. The one leader to veto a new EU treaty on closer integration, Mr Cameron was even blanked by the then French president, Nicolas Sarkozy.

Mr Cameron’s initial meeting lasted three times longer than planned, as he set about demanding further cuts to the EU’s vast administration budget. The EU’s pay bill should also be cut by 10 per cent, the Prime Minister said. He called for retirement ages of EU staff to be increased from 58 to 68 and other measures to water down pension rights.

As Mr Cameron called for the single market to share in the austerity being experienced by his own country, the other side of the argument could be seen and heard outside the Council’s offices.

A noisy gang of Estonian farmers had gathered outside the Justus Lipsius building, claiming that cuts to the EU’s Common Agriculture Policy will leave them on the breadline. They plastered the pavements around the building with stickers saying that any cuts were “unfair” and would leave them impoverished.

When Mr Cameron left the meeting, the waiting game began. The Prime Minister would hold a few “bilaterals” - one on one meetings - with Angela Merkel, the German prime minister, as well as the Finish, Swedish and Danish delegations, but most of the time was spent twiddling his thumbs as he waited for Mr Van Rumpoy and Mr Barroso to meet the 26 other leaders

To keep himself occupied, the Prime Minister took with him a heavy load of policy papers, correspondence and other paperwork.

Rather than sharing a sandwich with fellow European leaders, Mr Cameron and his team of eight Downing Street aides took lunch at 1898, a Brussels brasserie known for it 25 euro steaks and grilled fish.

On their return it was clear that the grilling of European leaders was running behind time. A dinner had been planned for 7.30pm. That slipped to 8pm, then 10pm. It would be after 11pm before the 27 leaders would finally sit down to eat and hold their first group discussion.

“The menu for this was cold meat,” said one Downing Street source. “Maybe that was because they knew it was likely that the meal would be delayed or perhaps it is now understood that having a lavish meal while discussing the budget doesn’t look sensible.”

At the meeting Mr Van Rompuy unveiled his revised budget proposal. This only offered a reduction of €1bn in the €973bn (£783bn) initial limit in Brussels spending between 2014-2020.

It also failed to identify a single euro of cuts that could be made to the administration spend of the EU, which accounts for 6% of its total budget.

Mr Cameron was far from impressed and called it a night, taking a taking a taxi to his five-star hotel in the city’s Saint-Josse-ten-Noode district.

After an early breakfast of bacon and eggs, Mr Cameron went straight into a meeting with the Brussels-based UK diplomats who had spent much of the night scrutinising Mr Van Rompuy’s new budget proposals.

“The plan looked under-cooked,” said one source close to the Prime Minister. “It was progress, but it simply did not go far enough.”

It was the failure of the EU to even consider cutting spending on pay and perks for their own staff that particularly irked Mr Cameron.

Arriving back at the Justus Lipsius building at 10am, Mr Cameron held a series of bilaterals with Mrs Merkel and the Scandinavian delegations, all of whom shared Mr Cameron’s scepticism of the new proposal.

Around noon the leaders entered a plenary session and lunch. The irony that the leaders were discussing the EU’s reluctance to cut its spending while being served 1992 Chateau Angelus Premier Grand Cru - a red Bordeaux that costs £120 a bottle – was not lost on the Prime Minister.

The talks continued but it became increasingly clear that the “net contributors” of Britain, Germany, Sweden, Denmark and the Netherlands were adamant that further cuts were necessary - something untenable to Poland, France, Spain and Greece.

The Belgians and Poles thought the talks should continue. Most other countries agreed that Mr Van Rompuy should be sent away to find new cuts and unveil a new budget proposal at the next meeting, which is planned for February.

By 2pm on Friday afternoon the sense of deadlock was clear. In one of those moments of farce that seem to pepper Brussels summits, members of the Italian delegation whispered that the talks had broken up. Nonsense, insisted Polish representatives. The summit would continue for hours yet.

Minutes later it was confirmed that talks had indeed broken up, but that the leaders had reconvened for a further wrangle over when they would next meet, which was eventually decided for early February in Brussels.

However, there is little belief that the budget will be resolved at that meeting either. Those close to the Prime Minister stress that this is a seven-year budget that does not begin for more than a year.

Fredrik Reinfeldt, the Swedish prime minister also warned: “I am not in a hurry. It will take a long time.”

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Rather than sharing a sandwich with fellow European leaders, Mr Cameron and his team of eight Downing Street aides took lunch at 1898, a Brussels brasserie known for it 25 euro steaks and grilled fish"

No doubt he will claim expenses ....what did the other EU Members make of this??

Estonia, a poor Country, as are some of the other EU Members, benefit from the Main Countries input into the EU Fund yet are the first to moan. British farming has been decimated by EU demands and we are paid to keep fields fallow while importing inferior produce at a higher price.!!!

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Merkel rival warns of impact of Greek default


Peer Steinbrueck cautioned that German taxpayers could foot the bill from loan guarantees.








Peer Steinbrueck is a rival to German Chancellor Angela Merkel. Photo: AP





Telegraph staff and agencies

1:15PM GMT 24 Nov 2012

181 Comments




German taxpayers should be warned of the consequences of a Greek default, a rival to Chancellor Angela Merkel has said.


Peer Steinbrueck, the Social Democrats' candidate for the role of German chancellor at next year's election, said the German public need to be told that the loan guarantees Germany has provided for Greece could leave taxpayers footing a hefty bill.


“One must tell the people that Greece could default on these loans," Mr Steinbrueck is reported to have said. "We in Germany have to make sacrifices to help hold Europe together. We're already part of a ‘liability union’.”


“We were ready to pay money for the costs of German reunification - something all of our neighbours welcomed despite the bad experiences they had had with us," he said, a reference to the Nazi regime.


“Now is time that we have to ask ourselves the question: what is Europe worth to us?”



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Mr Steinbrueck also cautioned that it would take troubled Greece, which is awaiting its next tranche of international aid, a further eight years before it could fund itself in the capital markets.

"We're going to have to build a bridge for this period and that's going to cost money," he added.

Eurozone finance ministers are preparing to meet on Monday in an effort to agree a deal that would release at least € 31bn (£25.1bn) of aid to Greece, after failing to reach an agreement on Wednesday.

“There’s no time to waste,” Mrs Merkel said yesterday. A solution for Greece “is being intensively worked on”.

Finance ministers will hold a conference call today ahead of next week’s meeting.

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Monday 26 November 2012

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Spain's Catalan separatists win election but punish Mas


Separatists in Spain's Catalonia won regional elections on Sunday but failed to get the resounding mandate they need to push convincingly for a referendum on independence.








Voters punished the separatist party of Catalan President Artur Mas, who has implemented unpopular spending cuts in an economic crisis, cutting the CiU's seats to 50 from 62. Photo: Reuters





Reuters

6:46AM GMT 26 Nov 2012

3 Comments




Catalan President Artur Mas, who has implemented unpopular spending cuts in an economic crisis, had called an early election to test support for his new drive for independence for Catalonia, a wealthy region in northeastern Spain.


Voters handed almost two thirds of the 135-seat local parliament to four different Catalan separatist parties that all want to hold a referendum on secession from Spain.


But they punished the main separatist group, Mr Mas's Convergence and Union alliance, or CiU, cutting back its seats to 50 from 62. That will make it difficult for Mr Mas to lead a united drive to hold a referendum in defiance of the constitution and the central government in Madrid.


"Mas clearly made a mistake. He promoted a separatist agenda and the people have told him they want other people to carry out his agenda," said Jose Ignacio Torreblanca, head of the European Council on Foreign Relations' Madrid office.


The result will come as a relief for Spanish Prime Minister Mariano Rajoy, who is battling a deep recession and 25 percent unemployment while he struggles to cut high borrowing costs by convincing investors of Spain's fiscal and political stability.



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Mr Mas, surrounded by supporters chanting "independence, independence", said he would still try to carry out the referendum but added that, "it is more complex, but there is no need to give up on the process."

Resurgent Catalan separatism had become a major headache for Mr Rajoy, threatening to provoke a constitutional crisis over the legality of a referendum just as he is trying to concentrate on a possible international bailout for troubled Spain.

Frustration over the Spanish tax system, under which Catalonia shares some of its tax revenue with the rest of the country, has revived a long-dormant secessionist spirit in Catalonia. Catalans believe if they could invest more of their taxes at home their economy would prosper.

Mr Mas had tried to ride the separatist wave after hundreds of thousands demonstrated in the streets in September, demanding independence for their region, which has its own language and sees itself as distinct from the rest of Spain.

In a speech to supporters on Sunday night, Mr Mas recognised that he had lost ground and though CiU is still the largest group in Catalan's parliament, he said would need the support of another party to govern and to continue pushing through tough economic measures.

"We've fallen well short of the majority we had. We've been ruling for two years under very tough circumstances," he said.

Traditional separatists the Republican Left, or ERC, won the second biggest presence in the Catalan parliament, with 21 seats. The Socialists took 20 seats. And Mr Rajoy's centre-right People's Party won 19.

Three other parties, including two that want a referendum on independence, split the remaining 25 seats. ECFR's Torreblanca said the Catalan elections were similar to those around Europe in that economic woes have benefited marginal political groups, while larger, traditional parties have lost ground.

Mr Mas's bet on separatism may have helped out the big winner of Sunday's election, the Republican Left, which more than doubled its seats in the Catalan parliament to 21 from 10,

"He talked about it so much that he ended up helping the only party that has always been for independence, which is the Republican Left," said political analyst Ismael Crespo at the Ortega y Gasset research institute.

A legal referendum would require a change to the constitution, and Spain's main parties in the national parliament, the Socialists and Rajoy's People's Party, have shown no appetite for that.

Mr Mas's CiU had traditionally been a pro-business moderate nationalist party that fought for more autonomy and self-governance for Catalonia without breaking away from Spain. He broke with that tradition in September when he made a big bet on a referendum.

Catalonia, with 7.5 million people, is more populous than Denmark. Its economy is almost as big as Portugal's and it generates one fifth of Spanish gross domestic product.

After a decade of overspending during Spain's real estate boom, Catalonia and most of the country's other regions are struggling to pay state workers and meet debt payments. Unemployment has soared and spending on hospitals and schools has been cut.

Mr Mas was one of the first Spanish leaders to embark on harsh austerity measures after Catalonia's public deficit soared and the regional government was shunned by debt markets.

Josep Freixas, 37 and unemployed, voted for CiU but recognised the party had lost seats "because people have been really affected by the spending cuts and by the crisis."

At CiU headquarters on Sunday night Freixas carried a rolled up pro-independence flag - a single star against yellow and red stripes - that has become a symbol of the separatist movement.

Turnout was very high in the election, 68 percent, 10 percentage points higher than in the previous vote two years ago.

Many Catalans are angry that Mr Rajoy has refused to negotiate a new tax deal with their largely self-governing region. Annually, an estimated 16 billion euros ($21 billion) in taxes paid in Catalonia, about 8 percent of its economic output, is not returned to the region.

Home to car factories and banks and birthplace of surrealist painter Salvador Dali and architect Antoni Gaudi, the region also has one of the world's most successful football clubs, FC Barcelona.

Wary that separatism could spread to the Basque Country and beyond, Mr Rajoy said this week that the Catalan election was more important than general elections.

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Euro Chiefs Claim Greek Progress, Seek to Persuade ECB, IMF


By James G. Neuger and Jonathan Stearns - Nov 26, 2012 12:26 PM GMT

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Euro-area finance ministers will push central bankers and the International Monetary Fund to endorse new plans to save Greece from the fiscal abyss, seeking to overcome the latest impasse in the three-year debt crisis.

Finance chiefs will brief the European Central Bank and IMF on “further concessions” that would plug Greece’s deficit gap without forcing a writeoff of official loans, Austria’s Maria Fekter said before the ministers’ fourth round of talks on the Greek crisis in two weeks.





Enlarge image

French Finance Minister Pierre Moscovici




Balint Porneczi/Bloomberg

French Finance Minister Pierre Moscovici said, “Consensus is within reach if we are capable of seizing it. If everyone is reasonable, we can do it quite quickly.”

French Finance Minister Pierre Moscovici said, “Consensus is within reach if we are capable of seizing it. If everyone is reasonable, we can do it quite quickly.” Photographer: Balint Porneczi/Bloomberg

A deal is “practically finalized, there are just a few centimeters to go,” French Finance Minister Pierre Moscovicisaid before the Brussels meeting. “Consensus is within reach if we are capable of seizing it. If everyone is reasonable, we can do it quite quickly.”

IMF criticism of Europe’s failure to put Greece’s debt on a“sustainable” path has held up an accord on an updated financing package, narrowing the options for patching up the debt-stricken country drawing on 240 billion euros ($311 billion) in official loans awarded since 2010.

“We’re going to try to work for a solution that is credible for Greece,” IMF Managing Director Christine Lagardesaid as she entered the meeting.

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ECB: Eurozone leaders disregard democracy

26 November 2012La Tribune Paris

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Bas van der Schot

On the sidelines of the Brussels budget summit on November 22 and 23, Eurozone leaders approved the appointment of Luxembourgian Yves Mersch to the board of the European Central Bank. However, he was elected despite the European parliament voting against him, a move which highlights the EU's dysfunctional nature.

Romaric Godin

Everyone agrees that Europe suffers from a democratic deficit and a lack of legitimacy which alienate its citizens. That is everyone except for the heads of Eurozone governments, who, notwithstanding a European parliament vote to the contrary, quietly appointed Luxembourg’s central bank governor, Yves Mersch, to the board of the ECB when they met for Friday’s European summit.

With the appointment, the European Council has provided proof of the true value of a European parliament, which, with the adoption of the Lisbon Treaty, was supposed to exercise “real” power.

The reason for parliament’s rejection ofMr Mersch's application – his gender – hardly matters. You might even argue that it was not valid. But, in a democracy, you cannot ignore a parliamentary vote. It is a golden rule which is far more important than a guideline for the management of budgets. However, it is not one that has been set down in European treaties.


Governed by summits



Yves Mersch’s arrival on the board of the ECB highlights the extent to which Europe has been steered in the wrong direction by heads of state and government who are determined that only their voices should be heard.

The trouble with this attitude is that it results in difficulties which are a lot more problematic than the appointment of a Luxembourgian banker. The disastrous management of the debt crisis, which for the last two years, has sought to treat a serious financial hemorrhage with plasters that have offered at a series of “last chance summits”, is a case in point. And the Eurogroup’s recent failure to find a solution for Greece, which is supposed to be fixed on Monday, is yet further proof.


Crocodile tears in 2014...



The establishment of a proper European parliamentary system could be the means for the creation a Europe-wide sense of community which is sorely lacking.

It would encourage greater responsibility on the part of voters, political representatives and heads of state that would certainly be for the good. It is galling to think that the same heads of state who have wiped their feet on the vote by the Strasbourg parliament will tearily deplore the mass abstention that will inevitably mark the next European election and sigh over “the illness that is eating away at our democracy.”

In reality, the decision to appoint Yves Mersch is a lot more worrying than it might appear, because it marks the victory of a certain idea of Europe. On the level of monetary policy, it has brought a hawk onto the board of the ECB – a hawk who will be the voice of the Bundesbank, and who will likely cite the need for “stability” as his reason for acting as an internal brake on the ECB’s necessary contribution to management of the crisis.


Spain shown the door



On the issue of representation in Europe, the arrival of Mr Mersch will confirm a definitive decision to remove the permanent Spanish representative from the board of the ECB, which is why Madrid has spoken out against the appointment.

We should not kid ourselves: Spain’s financial difficulties are the reason for its expulsion. In other words, this means that countries caught up in the economic crisis will be treated as second-class states. Or worse still, Europe’s heads of state and government believe it is useful to ensure a certain “north-south” balance on the ECB board, thereby reinforcing a certain “ethnic” vision of Europe. All of this bodes very badly for the future management of the continent.


The disproportionate weight of Luxembourg



Finally the appointment of a native of Luxembourg, whose prime minister is already at the head of Eurogroup, will add to the disproportionate weight of the Grand Duchy in European institutions.

It is not a matter of refusing to acknowledge that the subjects of His Royal Highness Henri of Luxembourg might be a little more gifted than the rest of us, but at a time when the European Commission has taken issue with the small state’s reluctance to join in the fight against tax havens, and at a time when larger countries are struggling to clean up their finances, the influence of Luxembourg cannot be described as neutral.

Translated from the French by Mark McGovern

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   EU-IMF agrees deal to cut Greek debt by €40bn
   

The Eurozone has agreed a deal with the International Monetary Fund to unblock the Greek bailout with a package of measures worth €40bn (£32bn) aimed at bringing an immediate 20pc reduction to the country's debt.








IMF negotiators said immediate measures needed to be taken to cut Greek debt by 20pc of GDP, a sum equivalent to €40bn Photo: Alamy






By Bruno Waterfield, in Brussels

1:55AM GMT 27 Nov 2012


24 Comments




The complex deal brings an end to a dispute between eurozone finance ministers and the IMF over the viability of Greek debt and gives the go-ahead by 13 December to an urgently needed €34.4 billion instalments of international aid programme to Greece.


Another €9.3 billion will be paid in three "tranches" in the first three months of next year.


The eurohit a one-month high, rising 0.3 percent to $1.3010, and Asian shares rose in morning trading after news of the deal was announced.


Jean-Claude Juncker, the chairman of the Eurogroup of the single currency's finance ministers, said the agreement would bring new hope to Greece.


"This is not just about money. This is the promise of a better future for the Greek people and for the euro area as a whole, a break from the era of missed targets and loose implementation towards a new paradigm of steadfast reform momentum, declining debt ratios and a return to growth," he said.



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Christine Lagarde, the head of the IMF, hailed a deal that would give the green light to blocked aid payments to Greece and that would make "a substantial contribution to the sustainability of its debt".

"Taken together, these measures will help to bring back Greece's debt ratio to a sustainable path and facilitate a gradual return to market financing," she said.

Under the new plan, Greece is forecast to reach a debt to GDP ratio of 175pc in 2016, shrinking to 124 pc in 2020. In a decision that may return to haunt the EU and IMF, the eurozone has agreed to be responsible for a Greek debt to GDP ratio to be "substantially lower than 110pc" in 2022.

"I welcome the commitment by European partners to bring back Greece's debt to substantially below 110pc of GDP by 2022, conditional on full implementation of the program by Greece," she said.

"This represents a major debt reduction for Greece relative to its current debt trajectory."

Meeting for the third time in two weeks, eurozone finance ministers agreed to lower interest rates to Greece by 100 bps on the original €110 billion lent to the country, to extend all loan maturities by 15 years and to defer interest payments on euro bailout fund loans by 10 years.

On top of that, to bring about the immediate 20pc debt reduction, the EU and IMF agreed support for an unspecified bond buy back scheme for the Greek government.

"The Eurogroup was informed that Greece is considering certain debt reduction measures in the near future, which may involve public debt tender purchases of the various categories of sovereign obligations," said a statement.

"If this is the route chosen, any tender or exchange prices are expected to be no higher than those at the close on Friday, 23 November 2012."

The ECB will also hand profits, worth up to €15bn, made on Greek bonds back to the eurozone's national central banks with the commitment that the money will be paid into a "segregated account" for Greece.

Since the summer, the EU and IMF have pushed the Greek government to the brink of bankruptcy by haggling over a credible strategy to decrease Greece's debt - previously projected to be 190pc of GDP in 2015 - over the next decade.

The IMF had previously set the goal of reducing Greek debt to 120pc of GDP by 2020, a target that has been knocked off track by the deeper and longer than forecast recession in Greece.

Negotiations continued for 13 hours on Monday night as the IMF clashed with ministers over the Fund's call for eurozone governments to accept losses on their loans to Greece, known as "Official Sector Involvement" (OSI).

The proposal was blocked by Germany, Holland and the ECB but could return as source of conflict between the EU and IMF if, as before, Greece fails to meet targets on debt reduction.

Wolfgang Schaeuble, the German finance minister, hinted that government might consider write downs after 2016, when Greece is expected to reach a primary surplus of 4.5 per cent of GDP.

"When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt," he said.

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Jean-Claude Juncker, the chairman of the Eurogroup of the single currency's finance ministers, said the agreement would bring new hope to Greece.


"This is not just about money. This is the promise of a better future for the Greek people and for the euro area as a whole, a break from the era of missed targets and loose implementation towards a new paradigm of steadfast reform momentum, declining debt

==============================

.UUM, can you understand Junckers' comment? Greece was in such a bad position it could not pay pensions !!! Now the Country has received yet another bail-out and will take at least 2 generations of prosperity to repay the debt. Yet another example of the EU fudging the issue of the EURO which gives no Country the ability to act independently .

Protest march in Portugal yesterday, peaceful , but yet another Country unable to cope with the austerity and unemployment rising.

France too is feeling the pinch . Mittal, the biggest Steelmaker in the World is closing down a Steel Plant in France with 600 workers facing unemployment. A French minister has retaliated by telling Mittal to get out of France altogether and the Government will Nationalise Steel. (Don't mess around those French do they!!!)

Spain is facing a break-up with Catalonia voting for independence, also receiving a 35 billion bail out.

Ireland is in dire straits, Italy as well.

There is a world wide recession , could even dip into depression , but the EU makes it worse by taking too long to react and the various Countries all have vested interests so there will never be unity.

RANT OVER

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Eurozone: Greece’s creditors offer the minimum

27 November 2012To Vima Athens

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Bojesen

After a series of tough negotiations, the agreement on reducing the Greek debt reached by the Eurogroup and the IMF allows about €44 billion in aid to be released and gives Athens a little breathing room, but does little to help the country in the longer term.

To Vima

The Brussels agreement is, in fact, the result of a consensus reached between Germany and the IMF. It was neither straightforward nor a foregone conclusion. On the contrary, this meeting that dragged on for more than 12 hours could have ended in train wreck, as a number of sources have claimed.

For all those who held that it was a foregone conclusion that the tranche would be paid out and our debt restructured, it should be noted here that, had the austerity measures not been voted through [in early November], nothing would have been given to the country and Greece would find itself once more in a very sticky situation. On the other hand, we must say that our partners could have found a more dynamic way to solve our debt problem.

The solution chosen here – the package of instruments, this entire orchestration devised to avoid the clear cut choice to slash our debt directly – is not the best. And this shows, through the suspicion levelled at Greek politics and the influence of the Protestant ethic in European policy.


Heartless accountants



Europe did not act with flexibility. It did not exceed the miserly, pessimistic, somewhat sordid approach of heartless accountants who cannot see beyond their own noses. It does not respect, as it should, the sacrifices of the Greek people.

One thing is certain, the Europeans could have been more gallant with Greece. However, “it's better than nothing", as the saying goes. Without this agreement, today would have been a different day. Now we can breathe. Even if there are constraints and sensitivities, we must acknowledge that we have seen some progress.

Foreign aid is not enough and it will not last for long. This means that Greece, from now on, beyond fulfilling its commitments, should find its own path towards development.

By putting to good use the stability that outside aid has given us, all our internal forces – political, commercial, social – must move heaven and earth to get the country on the road to a final recovery.

On the web

• Original article at To Vima el
  
• The editorial in Le Monde fr
  
• Eurogroup statement on Greece
  

View from Paris
A sensible compromise


After several weeks of negotiations, the Eurogroup countries and IMF meeting in Brussels on November 26 had to “satisfy a vital precondition: reduce the amount of Greek debt,” writes Le Monde. “If not, there would be no future, only the darkness of a monumental bankruptcy that could rock the entire eurozone.” The two sides now disagree over the means:

The IMF favours a radical solution: write off part of the Greek debt held by its creditors (the central banks), a move modelled on what private banks agreed to at the start of 2012. Neither the ECB nor Germany, which will soon be caught up in an election campaign, want that. In the course of the night, the 17 agreed to a complex financial package that would see Greece buy back its own bonds and a lower interest rate on bilateral loans to Athens, etc. – which would lead to the lowering of that total Greek debt by €40 billion. Further measures will have to be taken if the situation demands it, to ensure Greek debt is kept to 124 per cent of its GDP by 2020 [the target set by the Agreement]. It's a smart patch-up job, as this is the goal that matters and that determines market confidence. It's a healthy compromise too, and the Greeks deserve it: they have suffered enough along the road to recovery.

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Schaeuble Signals Greece May Need More as Bild Slams Deal


By Brian Parkin & Patrick Donahue - Nov 28, 2012 4:19 PM GMT

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German Finance Minister Wolfgang Schaeuble signaled that Greece may need additional help as the country’s most-read newspaper slammed a rescue accord as a“never-ending story” financed by German taxpayers.

Euro-area governments may provide additional funding through the European Union structural fund and further interest-payment reduction as long as Greece meets all its obligations under the agreement, Schaeuble wrote in a letter to German lawmakers obtained by Bloomberg News. Legislators in the lower house, or Bundestag, will vote on the measure on Nov. 30.





Enlarge image

German Finance Minister Wolfgang Schaeuble




Tomohiro Ohsumi/Bloomberg

German Finance Minister Wolfgang Schaeuble wrote in a letter to German lawmakers obtained by Bloomberg News that euro-area governments may provide additional funding through the European Union structural fund and further interest-payment reduction as long as Greece meets all its obligations under the agreement.

German Finance Minister Wolfgang Schaeuble wrote in a letter to German lawmakers obtained by Bloomberg News that euro-area governments may provide additional funding through the European Union structural fund and further interest-payment reduction as long as Greece meets all its obligations under the agreement. Photographer: Tomohiro Ohsumi/Bloomberg



Enlarge image

Schaeuble Signals Greece May Need More Help as Bild Slams Deal




Kostas Tsironis/Bloomberg

A Greek national flag flies above scaffolding during construction work on administrative buildings at Athens University in Athens.

A Greek national flag flies above scaffolding during construction work on administrative buildings at Athens University in Athens. Photographer: Kostas Tsironis/Bloomberg

They may confront increased public resistance as Bild-Zeitung, a tabloid that’s called in the past for Greece’s exit from the currency union, pilloried yesterday’s agreement in Brussels to ease terms on emergency aid for Greece.

“The Greek patient is beyond help,” Bild said in a commentary, adding that the ever-rising costs were falling on German taxpayers. “One hardly needs to imagine the worst scenario: the patient dies, the paramedic goes bust.”

German lawmakers are set to approve the new terms of aid for Greece, where the European debt crisis originated over three years ago. Euro-area finance ministers also agreed to scale back debt by engineering a Greek bond buyback.

Cut Debt


The yet-to-be-approved additional measures are to slice off 2.7 percentage points of Greece’s debt as measured against gross domestic product by 2020, according to a table provided in Schaeuble’s letter. That will go toward scaling back the country’s debt load to 124 percent of GDP in eight years from the 144 percent projected if policy makers don’t act.

That’s a smaller portion than the buyback, which accounts for 11 percentage points -- more than half -- of the drop, the letter shows. Having failed to agree on debt relief, a move that would have fallen on contributing nations’ taxpayers, euro ministers will rely on the more complicated and risky buyback.

“We’re relatively confident that it can work,” Schaeuble told reporters yesterday in Berlin. If the buyback fails, “the troika will have to take other measures and tackle the issue in another way,” he said.

Meanwhile, Chancellor Angela Merkel said she was “very optimistic” that European leaders will resolve the crisis, if it stumbles amid setbacks and progress is slow.

‘Upward Trajectory’


“I think we have good chances to get beyond the phase where you wake up every morning and ask how is this going to go on,” Merkel told a regional-development conference in Regensburg. “Now I think we’re more on the upward trajectory.”

She spoke as euro nations began to tally the cost of the rescue, partly from the European Central Bank’s steering of profit from its Greek bond holdings back to Greece.

Germany’s forgone profit from future ECB Greek holdings will total about 2.74 billion euros ($3.5 billion), according to Schaeuble. Spain will have an impact of 1.7 billion euros through 2020, the newspaper ABC reported, citing Economy Ministry officials. The newspaper L’Echo reported that forgone profit and reduced interest rates will cost Belgium 90 million euros next year.

The plan may cost the Netherlands approximately 70 million euros each year during the next 14 years, Finance Minister Jeroen Dijsselbloem said yesterday.

Reduced Fear


National central banks could deliver a 3.7 billion-euro reduction in Greece’s financing needs through 2014 by rolling over the Greek bonds in their investment portfolios, Schaeuble’s letter said. Such a decision would rest with central bankers.

Greek Finance Minister Yannis Stournaras told reporters inAthens today that the debt buyback is a significant part of the accord and the reduced fear of his country exiting the euro is leading to a return of deposits to Greece. Stournaras said a Greek debt buyback announcement will be made next week and that it will be voluntary and open to everyone.

Lawmakers from Merkel’s coalition and two of three opposition parties voiced approval of the deal as the Bundestag prepared to vote by the end of the week, helping Greece past one of Europe’s biggest political hurdles.

“We’ve always gotten a majority in the past and I don’t think that will change,” Christian Democratic Union parliamentarian Michael Grosse-Broemer, who’s responsible for gathering his party’s votes, told reporters in Berlin yesterday.“It’s good that there was an agreement.”










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Showing 3 of 17 comments on Schaeuble Signals Greece May Need More as Bild Slams Deal

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  sergeystoyanov1964 3 hours ago 1 comment collapsed CollapseExpand
  
  
  Honestly, what happened in Greece is based on their misleading, lies, political influence, laziness, complete economical crash or better catastrophe, corruption and more.I write that, because my native country is Bulgaria(North border of Greece) and because we had painful experience with their economical arrogance in this region of the world.In my opinion, with no offence, they completely deserve the recent economical situation, but still all the time they give Bulgaria as example(to their people), how not to make economical policy.Just 15 years ago when IMF come in Bulgaria, blaming us about overspending,ballooning budget deficit, Greece "greece" smile pointed on us, as horrible example and as say till now.And what - now Bulgaria being part of EU has financial parameters and budget balance compatible with the most advanced countries not just in EU and also globally. But Greece farmers are still blocking the borders, maybe every day, disrupting the normal business connections, with their weird protests and demands for more and more and more money....perhaps they believe that they can suck with the same matter EU money and to live as "GREAT GREECE"...
  
  
  
  
  
  
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  Mial Pagan 3 hours ago 1 comment collapsed CollapseExpand
  
  
  The Greek public resents receiving aid and the German public resents giving it so how is this sustainable? The 'analyst' from BNP (the French bank which may also be bust by this time next year) might be correct in the short term by predicting the Euro at $1.35 by year end but it will be the last burn of a dying star.
  
  
  
  
  
  
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  gravity_15206 3 hours ago 1 comment collapsed CollapseExpand
  
  
  The numbers accorded to the losses anticipated are complete lies. "$70 million a year for 14 years" etc - this is give the impression that the risks to the bondholders are negligible in the grand scheme of things. The actual sums of the debt are huge (hundreds of billions of EURO'S), and are growing every day, even as this article points out.
  
  So don't be misled by these carefully released propaganda pieces.
  
  
  
  
  
  
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The Neets, a generation in need

28 November 2012Trouw Amsterdam

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Bologna University students at Piazza Santo Stefano.

Micrus

Fourteen million European young people are neither working nor in school. Their number is growing because of the economic crisis, with disparities according to the countries. Sociologists worry of the social and health consequences of this phenomenon.

Fleur de Weerd

A long-term unemployed youth in Naples, a teenage mother in Sachsen-Anhalt, a high school drop-out in Lelystad and a depressed couch potato in Vilnius: All vulnerable young people far removed from the labour market. Due to the continuing economic crisis they are ending up even further removed from working Europe.

"The figures on increasing youth unemployment are shocking. But in the calculations, we generally only count the young people who are ready to work and who want to work. There is also an enormous group which is so demotivated that they are turning away from the labour market," says Massimiliano Mascherini of the European Foundation for the Improvement of Living and Working Conditions, an agency of the EU, on the phone. He studied young people who are neither working, nor following education or training (also called "Neets"). He looked at the background and the behaviour of these “couch potatoes” and what they are costing Europe.

The results are worrying. Fourteen million young people sitting at home doing nothing in Europe. This constitutes 15.4 per cent of young people aged 15 to 29. Some are unemployed through their own choice or are travelling, but the majority are not. "They have little faith in institutions and their fellow man. They are socially and politically isolated. They also have a bigger chance of ending up mixing in criminal circles," says Mascherini.


Disabilities and troubled homes



Brussels is closely monitoring developments relating to Neets with concern, as the issue is costly. Mascherini calculates that youth unemployment cost member states €153 billion in 2011, while the figure was only €119 billion in 2008. And this is just a conservative estimate, including only the cost of social services, not things such as crime and healthcare.

Ton Eimers, director of the Knowledge Centre for Professional Education and the Labour Market (KBA) knows the problem group well. "They are often young people with a disability, learning problems and/or a troubled home situation." The Nijmegen-based sociologist praises the study. "It describes high school drop-outs and the unemployed as expressions of the same type of problem: young people who are at risk of losing their connection with society. In times of crisis, this group’s problems increase."

What is striking is that the young people in various parts of Europe respond to their situation differently. In the Anglo-Saxon countries and Central and Eastern Europe, the Neets are passive. They are disappointed in society and institutions and have the feeling that no one wants to help them. The response to this is that they turn away from society. The group finds politics less important, and a large number do not vote. Sitting in front of the TV, social isolation and loneliness are the key words.


Politically active youth



In the Mediterranean countries, on the other hand, the problem category is politically active. "There is a good reason why young people take to the streets in Spain and Greece,” says Mascherini. “They do not feel that their interests are represented by the politicians and are protesting against this. They tend to lean toward radicalism. If an extremist block arises in these countries, there is a great risk that it will find a lot of support among these young people."

Although Spain is always mentioned as the country with the greatest unemployment, the situation in Italy and Bulgaria is more worrying, says Mascherini. "Spaniards have a relatively good education and a lot of work experience. Youth unemployment there is a direct consequence of the crisis. The problems in Bulgaria and Italy are more structural in nature. The education and training does not meet the demands of the market. In Italy, young people have been sitting around at home for years, which makes the situation more urgent."

Eimers prefers to explain the difference between passive and active dissatisfaction in a different way. "I think that frustration is more likely to turn to anger in southern Europe because the numbers are greater. If all of a sudden Nijmegen saw a youth unemployment rate of 40 per cent, the youth here would be on the barricades too. But if you are one of a small group, you are more likely to stay at home feeling ashamed."

According to the study, the only region in Europe where the Neets will not run amok is Scandinavia. "In those countries all young people are equally involved in society and politics, unemployed or not, school drop-out or not,” says Mascherini. “Countries like Sweden and Denmark are doing well anyway. There is hardly a gap between training and the labour market. The contrast with Bulgaria and Italy could not be greater."


Drugs trade and teen mothers



And the Netherlands? Mascherini believes it is an exemplary country. "Few structural problems, many projects and good supervision, even if the number of problem cases is increasing due to the crisis".

Hennie van Meerkerk thinks this picture is too rosy. She is the chairwoman of the board of directors of Scalda, a vocational training school in Zeeland for former high school drop-outs who are unemployed, and describes a new category of young people with multiple problems. "Many have psychological problems, suffer from depression and often come into contact with the police."

Criminality is a justified concern, according to Mascherini. His study shows that these young people are susceptible to falling victim to drug and alcohol problems. "This can be both a cause of dropping out of school or unemployment, or a result of dropping out of school or unemployment. Young people who sit around at home for a long time often become depressed, leading to alcohol and drug addictions. Through their drug addiction many of them end up in the drugs trade. Girls often become teenage mothers."

Van Meerkerk: "Hardly any permanent jobs are available. It is precisely those young people who cannot express themselves well or who had a troubled youth who suffer the most." Eimers confirms this. "The number may not be as high as in Spain or Italy, but the hard core of our problem youths is growing as a result of the crisis and you can foresee the problems they will have at work, when they are still in school. There should be better cooperation between local authorities, benefits agencies and organisations responsible for compulsory school attendance. You cannot wait until it goes wrong."

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Eurozone unemployment hits record high of 11.7pc


Recession in the eurozone forced a further 173,000 people out of work during October and pushed the unemployment rate to a record high of 11.7pc.










By Matthew Sparkes

2:09PM GMT 30 Nov 2012


3 Comments




Almost 26m people across Europe are now out of work, according to the EU's statistics agency Eurostat, with an 18.7m majority of those living in the eurozone.


The rate has been climbing steadily during the debt crisis. During September the eurozone unemployment rate was 0.1 percentage points lower at 11.6pc, while in the same period in 2011 it was 10.4pc.


The north-south divide in Europe also remains clear, as Austria has an unemployment rate of just 4.3pc, Germany 5.4pc and the Netherlands 5.5pc. Meanwhile, troubled Greece has a rapidly rising rate of 25.4pc and in Spain 26.2pc of people are out of work.


The worst victims of rising unemployment in the eurozone are those under 25. Youth unemployment across the single currency area has now reached 23.9pc, up from 21.1pc in the same month last year. Spain's youth unemployment rate has soared to 56pc. Greece publishes data a month behind much of the rest of the eurozone, but figures from August show that 57pc of young people were out of work.


Graeme Leach, chief economist at the Institute of Directors, said: "This is extremely bad news – it is clear that the instability in the eurozone is not going away, which will impact negatively on the UK.



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"Some will interpret this as a sign to panic and start a tide of spending funded by yet more debt, but that would be precisely the wrong thing to do. With trouble continuing on the continent, it is essential that the Chancellor sticks to his commitment to reduce Britain’s deficit. It’s George Osborne’s role to cut the deficit – it’s the incoming Governor of the Bank of England’s role to stimulate the economy.”

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Greek deal frays as IMF threatens walk-out on debt buy-back impasse


The eurozone's debt relief plan for Greece has hit serious trouble within days as banks and pension funds balk at fresh losses, raising fears that the package could unravel before a deadline in mid-December.








It is far from clear whether Greek society will accept yet more cuts as the economy contracts a further 4.5pc next year Photo: Getty Images






By Ambrose Evans-Pritchard

6:14PM GMT 29 Nov 2012

456 Comments




The International Monetary Fund said on Thursday that it would not disburse funds under its part of the EU-IMF package unless the eurozone delivers on a bond "buy-back" scheme, which is supposed to cut Greece’s burden by 10pc of GDP and is deemed crucial for restoring long-term viability.


If the IMF withdraws, Finland and Holland will also pull out of the programme. "This has become a really big problem," said Raoul Ruparel from Open Europe.


The dispute comes as Moody’s said the EU-IMF deal to unlock €44bn in bail-out payments to Athens merely papers over cracks and does little to alleviate Greece’s "extreme economic and social fragility".


"We believe that the country’s debt burden remains unsustainable," it said. Moody’s warned that there can be so lasting solution until EU states and official creditors agree to write down their holdings, now the lion’s share.


Private investors are furious at demands that they take a second "haircut" of 70pc on residual holdings, after already taking a 53.5pc loss earlier this year, while official creditors still refuse all loses.



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Greek banks told finance minister Yannis Stournaras on Thursday that they cannot take part in the "buy-back" plan unless the Troika-imposed terms of Greece’s bank recapitalisation scheme are relaxed. They still hold €22bn of Greek bonds, mostly used as collateral for raising money under the European Central Bank’s emergency liquidity assistance (ELAs).

"It is our patriotic duty to make the scheme succeed. It must succeed," said Mr Stournaras, although he also alluded vaguely to a "Plan B".

Mr Ruparel said the burden will have to fall on foreign pension funds, insurers and banks with some €30bn of bonds, but it is unclear how they can be made to comply. The scheme is supposed to be voluntary. "Most want to hold the debt to maturity and have no interest in crystalising losses," he said.

Under the buy-back plan, investors sell their bonds back to Greece at a 70pc discount - last week’s market price. Greece in turn borrows the money from the eurozone bail-out funds.

The Institute of International Finance (IIF) said it would be an outraged if its members are forced to take further losses.

"Debt restructuring was clearly explained to investors as a one-off, as unique, not to be repeated. If they do restructure again, their own credibility is at risk," said the IIF's Hung Tran.

In theory, the plan could cut Greece’s €301bn debt by €20bn, but the IMF has been sceptical from the start. Without it, Greece cannot come close to meeting the agreed debt target of 124pc of GDP by 2020.

Leaked documents have already cast serious doubts on that target, much to the irritation of the IMF, which fears that its own credibility is being damaged by the continued fudge over figures that appear to be extracted out of thin air and have repeatedly proved wide of the mark over the past two years.

There is mounting irritation among the Asian and Latin American members of the IMF Board - as well as the US - at the failure of the Europeans to deploy their full wealth to clean up an internal EMU problem.

Gary Jenkins from Swordfish said there is a risk that the deal will "fall apart" over coming months. "It is a long way away from the permanent fix that the IMF had been insisting upon. It is just one more big kick of the can down the road."

Dario Perkins from Lombard Street Research said the convoluted deal aims to veil the fact - until after Germany’s elections next year - that German taxpayers are facing real losses for the first time since the crisis began. "In the meantime, Greece’s Greater Depression will just get greater," he said.

Mr Perkins said the package inflicts serious humiliations on Greece. The Troika will confiscate all privatisation revenues and the primary surplus at source for debt payments, yet offers no real change in strategy. "The plan to ‘save’ Greece shares the same fatal flaw as all the others. Rather than recognize that its policy prescriptions are fundamentally wrong - that austerity is no solution to a depression and Greek debt must eventually be written down completely - the Troika has stuck to its view that lack of success reflects poor Greek effort."

It is far from clear whether Greek society will accept yet more cuts as the economy contracts a further 4.5pc next year. Youth unemployment is already 58pc. The anti-Memorandum Syriza movement is running at 32pc in the polls.

While there is no doubt that the German Bundestag will back the deal for Greece in a vote on Friday, it is becoming hard for Chancellor Angela Merkel to disguise the mounting cost.

FT Deutschland said the process had become a charade. "Almost everybody knows Greece will need debt restructuring in the long run. It will remain cut off from capital markets and dependent on the international community for aid, and European citizens should be made aware of this. Political integrity from the eurozone-IMF talks are long overdue. Instead they are maintaining the illusion - especially in Germany - that the whole thing won’t cost taxpayers much."

Die Welt said the Chancellor’s office is still trying to "play down" the awful truth that the eurozone is turning into a "transfer union". The newspaper said it will soon be clear to everyone that the ultimate red line has been breached.

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Germany Seen Recession-Bound in Poll Showing Euro Crisis


By Simon Kennedy - Nov 30, 2012 9:24 AM GMT

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Investors See German Recession from Debt Crisis
Germany, Europe’s largest economy, will be tipped into recession as the sovereign debt crisis roiling its neighbors extends into the new year, according to the Bloomberg Global Poll.





Enlarge image

Germany Seen Recession-Bound in Poll Showing Crisis Deepens




Jochen Eckel/Bloomberg

An employee assembles a Golf automobile as it passes along the production line at the Volkswagen AG (VW) factory in Wolfsburg, Germany.

An employee assembles a Golf automobile as it passes along the production line at the Volkswagen AG (VW) factory in Wolfsburg, Germany. Photographer: Jochen Eckel/Bloomberg




4:33
Nov. 30 (Bloomberg) -- Joerg Kraemer, chief economist at Commerzbank AG, discusses European Central Bank interest-rate policy, Spanish and Italian bonds, and Greece's debt sustainability. He talks with Mark Barton in Frankfurt on Bloomberg Television's "Countdown." (Source: Bloomberg)




6:43
Nov. 30 (Bloomberg) -- Andrew Bosomworth, managing director at Pacific Investment Management Co., talks about the outlook for European Central Bank monetary p[olicy and his European bond strategy. He speaks in Frankfurt with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)




5:35
Nov. 30 (Bloomberg) -- James Ashley, a senior economist at RBC Capital Markets, discusses Spain's funding needs and the German economy. He talks with Francine Lacqua on Bloomberg Television's "Countdown." (Source: Bloomberg)




6:18
Nov. 30 (Bloomberg) -- James Nixon, chief European economist at Societe Generale SA, discusses the outlook for the region's economy, European Central Bank monetary policy and Italian bonds. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Chart: Poll Results
Attachment: Copy of poll


Enlarge image

Germany Seen Recession-Bound in Poll Showing Crisis Deepens




Jochen Eckel/Bloomberg

Volkswagen automobiles sit stored in the company's cylindrical tower facility in Wolfsburg, Germany.

Volkswagen automobiles sit stored in the company's cylindrical tower facility in Wolfsburg, Germany. Photographer: Jochen Eckel/Bloomberg

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Even as European leaders laud their latest fix for Greece’s debt woes, 53 percent of 862 investors, analysts and traders who are Bloomberg subscribers said this week they think Germany’s economy will drop into a recession for the first time in more than three years. Sixty-four percent expect Europe’s debt turmoil to deepen again despite recent signs of calming in its financial markets.

A slump in the German economy would remove a rare engine of demand for the rest of the continent, probably extending the euro-area-wide recession that was confirmed last quarter. A contraction would also pose a challenge for Chancellor Angela Merkel who is seeking a third term in elections next year amid domestic disquiet with three years of supporting Europe’s debt- lashed governments.

“Germany is starting to feel some pressure as sentiment in the euro-zone weighs on its economy,” said Chanoine Webb, a poll participant and global investment analyst at Close Brothers Asset Management Ltd. in London. “It won’t be able to decouple for much longer.”

Retail Sales


The survey was released hours before data showed German retail sales slumped the most in almost four years in October, falling 2.8 percent from September when adjusted for inflation and seasonal swings. The DAX Index (DAX), Germany’s benchmark stock index, was up 0.3 percent at 7,425.99 at 10:22 a.m. in Frankfurt.

Germany may soon have to agree to more aid as 83 percent of survey participants said Spain will need a bailout within the next year, about the same as in September. Italy won’t need a rescue, according to 64 percent.

European governments this week cut Greece’s interest rates and gave it more time to pay back loans, declaring that after three years of stop-start crisis-fighting they had found a way to nurse its economy back to health.

That was welcomed by investors who have already reduced the bond yields of Europe’s peripheral states after the European Central Bank announced it would join the EU in buying bonds of those that sign up to economic reforms. Spain is still mulling whether to do so.

Signs of Stabilization


Spain’s 10-year bond yield is down almost 250 basis points since its euro-era high of 5.75 percent in July, and 32 percent of poll respondents said such signs of stabilization signaled the worst is over for Europe. Eighty-three percent also doubted a Greek default will cause the collapse of the euro zone next year and 65 percent said no country will quit the bloc.

Investors expressed greater confidence in the ability of European nations to keep paying their bills. While 73 percent bet Greece will default, that was the lowest since November 2010. Sixty-two percent said Spain won’t go bankrupt and 81 percent predicted Italy will remain solvent.

Eighty-two percent endorsed Ireland’s credit-worthiness and 60 percent said the same of Portugal. More than 90 percent of those asked said Germany, the U.K., France and the U.S. won’t default.

“Slowly but surely Europe is resolving its issues,” said Nikolay Zhukovsky, a poll respondent and credit analyst at Standard Bank in London.

Green Shoots


While the German economy expanded 0.2 percent in the third quarter as the euro-region’s shrank 0.1 percent overall, data this month showed factory orders, industrial production and exports all fell more than forecast in September in the region’s lynchpin economy. German manufacturing shrank this month and investor confidence unexpectedly declined.

Siemens AG, the biggest engineering company in Europe, on Nov. 8 unveiled a 6 billion-euro ($7.8 billion) savings plan to restore profitability, acknowledging it was slow to react to shrinking demand

Still, a German recession isn’t guaranteed with 44 of poll respondents saying it will be avoided. The Paris-based Organization for Economic Cooperation and Development this week predicted a 0.6 percent expansion next year, the country’s jobless rate is close to a two-decade low and business confidence unexpectedly rose this month.

Survey participants remained downbeat about the euro-zone economy overall even though at 71 percent, the number saying it was deteriorating was the smallest this year.

Merkel Policies


The policies of Merkel, in power since 2005, were viewed optimistically by 60 percent of those surveyed, the most since January 2011.

By contrast, the approach of French President Francois Hollande, who took office in May, was regarded pessimistically by 80 percent. U.K. Prime Minister David Cameron divided survey participants with 44 percent applauding his actions and 40 percent opposing them.

ECB President Mario Draghi was seen favorably by two thirds of participants and International Monetary Fund Managing Director Christine Lagarde won the support of 58 percent.

The Bloomberg Global Poll was conducted Nov. 27 by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 3.3 percentage points.

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Greek Aid Deal Reached by EU, Debt Relief Ruled Out


By James G. Neuger & Stephanie Bodoni - Nov 27, 2012 1:09 AM GMT















Vogt: Greece Pales in Comparison to Spanish Rot
European finance ministers cut Greece’s interest rates and gave it more time to pay back rescue loans while dismissing for now calls for debt relief that may be needed to keep the country afloat over the longer term.






5:28
Euro-region finance ministers reached an agreement to help Greece manage its debt burden after talks in Brussels lasting more than 12 hours to overcome the latest impasse in the debt crisis.



Enlarge image

French Finance Minister Pierre Moscovici




Balint Porneczi/Bloomberg

French Finance Minister Pierre Moscovici said, “Consensus is within reach if we are capable of seizing it. If everyone is reasonable, we can do it quite quickly.”

French Finance Minister Pierre Moscovici said, “Consensus is within reach if we are capable of seizing it. If everyone is reasonable, we can do it quite quickly.” Photographer: Balint Porneczi/Bloomberg

In the fourth Greek crisis meeting in two weeks, the ministers persuaded a skeptical International Monetary Fund that Europe has a formula for putting the country that triggered the debt crisis onto a path back out of it. Greece was also cleared to receive a 34.4 billion-euro loan installment in December.

“All initiatives decided upon today will bring Greece’s public debt clearly back on a sustainable path,” Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing a 13-hour meeting that ended early today. “This has been a very difficult deal.”

After three years of false starts, the creditor governments led by Germany proclaimed the latest fix for Greece just as they grapple with swelling financing needs in Cyprus and a potential aid request by Spain, the fourth-largest euro economy.

“We didn’t discuss a debt cut,” said German Finance Minister Wolfgang Schaeuble. The agreement reached “on the one hand, tries with a debt buyback to significantly cut the overall debt burden by 2020. On the other hand we closed the financing gap and the measures for the financing of the debt buyback through temporary measures.”

Finland Fulfilled


Finland, another creditor nation whose tolerance of the cost of supporting Greece has tested its electorate, also backed today’s accord, according to Finance Minister Jutta Urpilainen.

“Finland’s conditions were fulfilled,” she said. “New loans won’t be granted to Greece.”

The batch of measures will help pare Greece’s debt from 190 percent of gross domestic product in 2014 to 124 percent of GDP in 2020, a target set by the IMF as its condition for continuing to fund the Greek program. One IMF concession was to raise that target from 120 percent.

The accord then envisages the debt ratio falling further, to “substantially lower than” 110 percent two years later.

“This is not just about money,” Juncker said. “It is the promise of a new future for the Greek people as a whole.”

The gathering began at lunchtime yesterday and ended in the early hours of the next morning.

It was “a long meeting, which was conducted in good spirit,” Urpilainen said.










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02:07

02:07Apple to Start Selling iPhone5 & iPad Mini in China




16:01

16:01Rutte Sees Prospect of `Extra Steps' on Greek Aid


China Is Slowing Down U.S. Debt Position, Galy Says



//




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Showing 3 of 20 comments on Greek Aid Deal Reached by EU, Debt Relief Ruled Out

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  billsimpson 4 days ago 1 comment collapsed CollapseExpand
  
  
  They should call it the Merkel reelection loan.
  
  
  
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  John Michael D'Arecca 4 days ago 1 comment collapsed CollapseExpand
  
  
  (Click here for chart:
  
  http://dareconomics.wordpress....
  
  The
  chart above from ZeroHedge helps to show what is really driving the
  Greek bailout deal. If you thought it was the welfare of the Greek
  people , then you have not been paying enough attention to the
  Eurocrisis.
  In the chart above, GDP continues its descent
  until after German elections in the fall of 2013. Then, the number
  begins rising dramatically. This is no coincidence. The purpose of the
  this deal is to avoid problems for a few more months to enable Merkel's
  reelection. The GDP numbers are realistically poor until the fall,
  because Germany needs them to be. Actual money is needed to plug funding
  holes until the election.
  After the election, it makes no
  difference what happens, so unrealistic projections may be used instead
  of real money to plug financing holes. The next time Greece needs to be
  bailed out, Merkel will try to get a longer term deal to keep Greece in
  the euro. If the political calculus does not favor another bailout for
  Greece, she will allow it to default. It's that simple.
  While
  the deal expertly defers the Greek problem for another few months, it
  will do nothing to arrest the descent of the economy. The Greek people
  receive nothing for their suffering except malaria and more suicides.
  The Greek politicians receive money to hand out to their cronies at the
  banks.
  The IMF did well. It conceded to allow the Eurozone to
  raise the sustainability goal to 124% Debt to GDP in exchange for an
  agreement to reduce Greece's debt to under 110% by 2022. The only way to
  reduce the debt ratio that low by 2022 is for the Eurozone to forgive
  Greek loans. I am skeptical that this will happen, but we will have to
  wait until 2016 to see if I am correct. In politics, that is a lifetime,
  and Schaeuble's language is vague enough so that he can claim that
  nothing was promised.
  The German led Eurozone did very well
  in this deal. In exchange for maintaining the status quo for a few more
  months, they gave up peanuts:
  Lower interest rate on bilateral loansRelinquishing profits an ECB held debtExtending the maturity of the loansDeferring interest payments for 10 yearsLoaning the money to Greece to buy back its outstanding debt
  The
  first two points actually help Greece, but the last three are mere
  window dressing. Extending the maturity of the loans and deferring
  interest payments for 10 years ensures that the Greeks will be debt
  slaves long after Samaras, Merkel and Juncker have retired to their
  summer homes.
  The Greek buy back is actually bad for Greece,
  because it will not be able to obtain replacement financing on such
  generous terms:
  http://dareconomics.wordpress....
  
  At least it makes the numbers look good today.
  While
  the whole deal is a scam whereby Petros is being robbed to pay Pavlos,
  the biggest lie comes to us courtesy of the biggest liar in the
  Eurozone. Ladies and gentlemen, Mr. Jean-Paul Juncker:
  "This
  is not just about the money. This is the promise of a better future for
  the Greek people and for the euro area as a whole, a break from the era
  of missed targets and loose implementation towards a new paradigm of
  steadfast reform momentum, declining debt ratios and a return to
  growth," he told a 2 a.m. new conference.
  He's
  right about one thing. It isn't just about the money. It's about German
  elections. See you at the next Greek bailout summit, J.P.
  
  
  
  
  
  
  

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EU-Middle East: European disunion

29 November 2012Neues Deutschland Berlin

CartoonistWhile the EU's High Representative for Foreign Affairs Catherine Ashton said on November 29, that "the EU stands ready to recognise a Palestinian state at the right time," only hours later, the member countries themselves have not reached an agreement over how to vote with a single voice on granting the Palestinian Territories the status of "non-member observer state to the UN."





Some, like France, Belgium and Spain, voted yes, while others, such as Germany, the United Kingdom and the Baltic countries abstained.

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Paris. A road sign modified by artist Clet Abraham

AFP

The resignation of Health Commissioner John Dalli last month lifted the lid on the influence of the tobacco industry in the European Commission. That influence has even penetrated OLAF, Europe's anti-fraud office, writes Der Spiegel. Excerpts.

Christoph Pauly

The influence of the tobacco industry in the European Union has raised an increasing number of questions since the resignation of John Dalli, former European Commissioner for Health and Consumer Protection.

Did José Manuel Barroso really force him out? And what role did the European Anti-Fraud Office (OLAF) play in the case? Never before has the tobacco industry had so much influence in Brussels.

In Brussels, every meeting with a representative of the tobacco industry is a test of will – even for occasional smokers. Scarcely had we arrived when a spokesman for Philip Morris (Marlboro, L & M) slipped a packet of cigarettes into our hands. Instead of a brand name, the packaging has a picture of a man with a cancerous tumour in his throat.

“This is defamation,” says the Philip Morris representative before showing us another packet featuring another cancer patient. The European Commission would like to print such images on all cigarette packaging to shock smokers, he protests, before lighting up a cigarette with evident relish.

Journalists are not the only ones to hear complaints from the industry. Tobacco manufacturers have clearly managed to win influence over part of the European Commission. A series of internal documents obtained byDer Spiegel indeed reveals that several people from office of the President of the Commission oppose any strengthening of the tobacco regulations. Even the head of the European Anti-Fraud Office (OLAF) has doubts about the legislation. In that light, Jose Manuel Barroso and the agents of OLAF have therefore played a not insignificant role in the resignation of the European Commissioner for Health a month ago.


Circumstantial evidence



“There is no conclusive evidence” against Dalli, the head of OLAF, Giovanni Kessler, admitted before the Committee on Budgetary Control of the European Parliament. But “the circumstances” don't put him in a good light, he insisted. While the President of the European Commission is still refusing to publish the OLAF inquiry, recent documents are reinforcing suspicions that have been circulating the capital for weeks, that Dalli may have fallen victim to a conspiracy.

The former European Commissioner, who used to be a heavy smoker, undeniably wanted to strengthen EU tobacco legislation, and was proposing harsh curbs on the sale and advertising of many products containing nicotine.

The President of the Commission, on the other hand, appeared to be in no hurry to put this idea into effect. Ireland's Catherine Day, Secretary General of the European Commission and as such the most powerful woman in Brussels, repeatedly saw to it personally that brakes were put on the procedure.

On July 25, Day, who had been Barroso's closest ally for the last seven years, sent Paola Testori Coggi, the head of SANCO (Directorate General for Health and Consumers) a two-page letter that could easily have been sent by a tobacco industry representative.

In it she expressed “serious doubts” about the directive. She criticised the “general prohibition of smokeless tobacco products,” questioned “the treatment of products containing nicotine” and expressed reservations about “the provisions for the sale of cigarettes.”


Resignation setback



On September 23, Day sent a second letter to Paola Testori Coggi. She demanded that the directive not be presented before the Summit of Heads of State and European Governments scheduled for mid-October. Certain details, she wrote, could still be modified, and no controversy should be stirred up before the summit.

The Director General of SANCO could not understand why, as the details of the Dalli proposal had been public for some time – and had sown panic in the tobacco industry. The goal was to move onto the next stage as quickly as possible to get the proposal adopted by the Commission before the end of the year.

Today, one thing is sure: John Dalli's resignation has set back the draft directive, and the reality is that it is highly unlikely to be adopted before the end of the mandate of the current Commission in 2014.

The Committee on Budgetary Control of Parliament will indeed have to shed some light on the role of the President of the Commission and OLAF before that date. The head of the budget control committee, Michael Theurer, therefore finds it “unacceptable” that Jose Manuel Barroso is keeping the OLAF report confidential, preventing any effective democratic control. A special commission of inquiry may have to look into the matter.


Close relationship



Many of the questions circle OLAF. Europe's anti-fraud office and the tobacco industry are closely linked, Kessler,acknowledged before a board of inquiry set up by the Italian parliament this summer. Agreements exist between the European Commission and companies such as Philip Morris and British American Tobacco, and OLAF uses information provided to it by the industry in the fight against smuggling and counterfeiting.

The multinationals also finance the work of investigators and pay in close to €2 billion to the European Union. This collaboration is undoubtedly a success: in one operation, OLAF seized 70 million contraband cigarettes and arrested 35 suspects.

But does this collaboration not bring the investigators a little too close to the industry? Are there not discussions going on at the same time and calling for a little more leeway in the tobacco regulations?

Many MEPs no longer believe in coincidence when they hear Kessler echo the tobacco multinationals. This shadowy affair stretches far beyond the strange resignation of a European Health Commissioner. Today, the credibility of the entire European Commission is at stake. Its president must now respond swiftly and clearly to questions from MEPs. If not, the Dalli Affair could quickly turn into the Barroso Affair.

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EFSF, European Stability Mechanism Ratings Cut to Aa1 by Moody’s


By Craig Stirling - Nov 30, 2012 10:45 PM GMT

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The European Stability Mechanism and European Financial Stability Facility were downgraded by Moody’s Investors Service, which cited a high correlation in credit risk present among the entities’ largest financial supporters.

The ESM was cut to Aa1 from Aaa, while the EFSF provisional rating was lowered to (P)Aa1 from (P)Aaa. Moody’s said in a statement that it would maintain a negative outlook on each. The EFSF has about 161.8 billion euros ($210.1 billion) of bonds outstanding according to data compiled by Bloomberg.

The move follows downgrades of the EFSF’s second-biggest contributor after France lost its top grade at Moody’s and Standard and Poor’s this year. Investors often ignore such ratings actions, evidenced by the drop in France’s 10-year bondyields since last week’s Moody’s downgrade and a rally in Treasuries after the U.S. lost its AAA at S&P in 2011.

The EFSF’s “rating is at the mercy of the creditworthiness of its biggest backers,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said before the actions.“Another downgrade of the EFSF would show how the creditworthiness of the euro zone’s rescue fund itself is being affected by the worsening economic conditions in the core.”

About half the time, government bond yields move in the opposite direction suggested by new ratings, according to data compiled by Bloomberg in June on 314 upgrades, downgrades and outlook changes going back to 1974.

‘High Correlation’


EFSF debt declined on the fund’s last credit downgrade, when S&P cut the rating by one level to AA+ on Jan 16. The yield premium over benchmark government debt of the EFSF’s 5 billion euros of 2.75 percent senior, unsecured bonds due July 2016 increased 13 basis points on the day of the downgrade to 155 basis points, according to Bloomberg prices. The spread has since narrowed to 55 basis points.

Moody’s statement said that “there is a high correlation in credit risk among the entities’ supporters is consistent with the evolution to date of the euro area debt crisis and the close institutional, economic and financial linkages among the major euro area sovereigns.”

All the debt securities that have been drawn down to date from the EFSF were also downgraded to Aa1 from Aaa, according to the statement released late yesterday.

‘Exceptionally Strong’


The Luxembourg-based EFSF was formed in 2010 to provide loans to cash-strapped European Union countries. The ESM will replace the temporary EFSF, which has spent 192 billion euros of its 440 billion euros on loans to Ireland, Portugal and Greece. The two funds will run in parallel until the EFSF is phased out in mid- 2013.

‘Moody’s rating decision is difficult to understand,”Klaus Regling, managing director of the ESM and chief executive officer of the EFSF, said in a statement. “We disagree with the rating agency’s approach, which does not sufficiently acknowledge ESM’s exceptionally strong institutional framework, political commitment and capital structure.”

The 500 billion-euro ESM was set up to aid debt-swamped countries and declared operational on Oct. 8. The fund’s birth was eased by the European Central Bank’s offer in August to buy bonds of fiscally struggling countries, which has driven downinterest rates in Spain and Italy and bought European governments time to address the root causes of the crisis.

Moody’s said after its Nov. 19 downgrade of France that it will assess the implications of the move for the ratings of the EFSF and ESM. It would focus on whether the support available from the remaining top-rated guarantors and shareholders is“consistent with the EFSF and ESM retaining the highest ratings,” the ratings firm said in a statement at the time.

The short-term issuer rating of the ESM remains unchanged at Prime-1, while the provisional short-term rating of the EFSF were kept at (P)Prime-1.

A provisional rating for a debt facility is an indication of the rating that Moody’s would likely assign to future draw-downs from the facility, pending the receipt of documentation detailing the terms of the debt issuance, the New York-based company said.

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