Following the hugely successful auction of Irish bail-out bonds Tuesday, Klaus Regling, head of the eurozone agency that raised the cash, said the offering “confirms confidence in the strategy adopted to restore financial stability in the euro area”. But is that really what investors were telling us?
To be sure, the first-ever use of the eurozone’s €440bn rescue fund, the European Financial Stability Facility, was an unmitigated victory for Regling and his nascent organisation – though, let’s remember, that the agency which actually did the heavy lifting was Germany’s debt agency, which is rather experienced in such auctions.
And investors would not have flocked to the issue – some €44.5bn in orders came in for a €5bn offering – if the markets thought the euro was about to implode.
But as my London-based colleague and sovereign debt savant David Oakley quoted one fund manager saying: “We are buyers of this bond because it is very safe and offers extra yield over German Bunds.” Which seems to be the prime motivator here.
Here at the Brussels blog, we’re keeping a close eye on the run-up to next Friday’s rare one-day summit of European Union heads of government. And nothing is occupying more of our attention than whether leaders will actually tackle the ongoing eurozone crisis at the conclave.
One of the events that had been closely monitored by the tea-leaf readers was Tuesday night’s private dinner outside Berlin between the two main antagonists in the debate, José Manuel Barroso, president of the European Commission, and Angela Merkel, the German chancellor.
According to people we have talked to, however, there was little meeting of the minds. Even though the dinner lasted for well over three hours – and almost all of it was occupied by discussions of economic policy – there is still no agreement on whether to put reforms touted by Barroso, including a revamp of the EU’s €440bn bail-out fund, on next week’s agenda.
Fellow Brussels Blogger Stanley Pignal and I have a story in today’s paper about a letter sent to the Hungarian government on Friday by Neelie Kroes, the European Commissioner in charge of broadcast and digital media, in which she gives Budapest two weeks to avoid legal proceedings over its controversial media law.
If you’re wondering why Monday afternoon felt unusually quiet in Brussels, you can thank Belgacom, the Belgian telecoms group which provides the phone lines to the European institutions.
For five hours starting at lunchtime, all lines at the European parliament and the Commission, the EU’s executive arm, were severely disrupted, apparently blocking incoming calls from landlines and some mobiles.
The European Central Bank has emerged from the financial crisis as one of the few institutions with its reputation intact – and its powers greatly enhanced – so a job on its governing council is a pretty good gig by any measure.
One is coming up in June, when Austrian economist Gertrude Tumpel-Gugerell is leaving after eight years at the top table. She’s one of the six executive board members at the ECB, and as such also sits on the rate-setting governing council alongside the 17 governors of the national banks whose countries use the euro.
Two candidates have been put forward to replace her: Peter Praet, 61, a well-regarded director of the Belgian central bank for the past decade; and Elena Kohutikova, 57, a former Slovak national bank deputy governor and now an economist at Vseobecna Uverova Banka, a unit of Italy’s Intesa SanPaolo.
If you’re a European policymaker and you’ve become exhausted by the idea of austerity, then you might consider a new report by Charles Roxburgh of the McKinsey Global Institute.
The report, “Beyond Austerity: A path to economic growth and renewal in Europe”, is an attempt to skip past the discussion about how drastically governments should slash spending to look at ways they can stoke growth. It coincides with a growing complaint among some Brussels diplomats that months of economic crisis fire-fighting have caused the EU to neglect policies that create jobs.
On the job-creation front, Europe’s record is actually better than many people might suspect. Between 1995 and 2008, the European Union generated slightly more jobs than the US – 23.9m to 20.5m. (For statistical reasons, the study only includes the 15 countries that were EU members before its 2004 enlargement).
“There’s quite a good story on job growth,” Mr Roxburgh said. “The flipside is in productivity.”
The euro will survive…for at least another year.
So proclaimed Jean-Claude Juncker, the Luxembourg prime minister and head of the euro group of countries, who announced Monday night that doubters of the currency’s future would be proven wrong in a year’s time.
How much does it cost to launch your own fleet of satellites to provide accurate navigation data to rental car drivers, airlines and missile commanders alike? If you’re the European Union, quite a lot.
In 2003, the European leaders gave their formal backing to the Galileo programme, a state-of-the-art satellite navigation system created so the EU would not be reliant on the GPS service run by the US Department of Defence or Russia’s Glonass. The cost of Galileo was supposed to be roughly €3.4bn – some of which would be picked up by private investors – and the system was supposed to be operational by 2010.
But, like so many public works projects, Galileo has run behind schedule and over budget. The latest estimates are spelled out in a report to be presented to the European Parliament on Tuesday by Antonio Tajani, the EU’s industry commissioner. Mr Tajani will call for an additional €1.9bn for Galileo infrastructure in the next financial framework, which covers the budgeting period from 2014 through 2020. The report also pegs Galileo’s annual operating costs at a staggering €800m.
Ahead of this week’s gathering of European finance ministers in Brussels to hash out new bail-out systems for the eurozone, two magazines have weighed in with their views of what needs to come next to rescue the single currency – and both suggest going further than ministers have been willing to thus far.
On Sunday, the New York Times Magazine published a highly readable summary of the crisis by Nobel Prize-winning economist Paul Krugman entitled “Can Europe be Saved?” in which he appears to back the idea of a Europe-wide bond.
And the new issue of the Economist advocates a different and far more pessimistic route: a restructuring of Greek debt, followed potentially by similar moves in Ireland and Portugal.
The European Commission, the EU’s executive branch, on Wednesday formally kicked off what is now known as the “European Semester” – a new six-month process of reviewing national budgets and reform programmes to make sure the countries are getting their fiscal acts in order.
The Commission considers the process so important to pulling the continent out of the current crisis that it organised a day-long conference in Brussels to discuss its role in the post-crisis world.
But at the first panel of the day, two of the most influential economists in town – Marco Buti, the powerful head of the Commission’s economic and financial affairs directorate, and Daniel Gros, director of the respected Centre for European Policy Studies – got into a heated tussle over whether the whole process was just one big waste of time.
Gros played the skunk at the garden party, saying that all the attention being paid to the European Semester – essentially another round of austerity recommendations – was taking time and energy away from the real task at hand: fending off the bond market’s attack on one eurozone country after another.