Monthly Archives: July 2011

Understanding Greece’s bail-out 2: Missing €7bn?

July 28, 2011 12:13 pm by Peter Spiegel

Greek finance minister Evangelos Venizelos visits the IMF in Washington earlier this week

In what appears to be an acknowledgement of the ongoing confusion in the financial markets over last week’s agreement on a €109bn Greek bail-out, the European Commission has just posted some very useful documents on its web page, which we highly recommend for those still trying to get their head around the deal.

Although they go a long way towards explaining things, the documents also reveal an interesting €7bn gap in the programme that’s worth highlighting. Our excavation of the missing €7bn is after the jump.

Continue reading: “Understanding Greece’s bail-out 2: Missing €7bn?”

Tags: Greece, sovereign debt crisis
Posted in EU, Fiscal policy | Permalink

Understanding Greece’s bail-out: Where’s €172bn?

July 25, 2011 6:03 pm by Peter Spiegel

Like most people who have been following the Greek debt crisis closely, we’ve been spending much of the last few days drilling down to figure out just what eurozone leaders agreed to Thursday night, since even market participants remain confused about certain elements of the deal.

For Brussels Blog, the key question was always the most straight forward one: how big is the hole, and how are you going to fill it? We found out how big the Greek hole was earlier this month, when the European Commission released a report that showed the gap in Greek financing between now and mid-2014 – a whopping €172bn.

But just how they are going to fill that hole has not been publicly acknowledged amidst the conflicting accounts of the plan’s details that emerged in the days since the summit ended. Thanks to a previously undisclosed document obtained by the Brussels Blog – and a little help from a big EU economic brain – we seem to have figured it out.

Continue reading: “Understanding Greece’s bail-out: Where’s €172bn?”

Tags: Greece, sovereign debt crisis
Posted in EU, Fiscal policy | Permalink

The good news in Moody’s Greek downgrade

July 25, 2011 11:07 am by Peter Spiegel

Greek prime minister George Papandreou, at the end of Thursday's summit in Brussels

All eyes in Brussels will be watching the bond markets in the eurozone’s periphery this week, particularly in Spain and Italy, where the danger of post-Greek deal contagion is most acute. After a brief relief rally after the bail-out package was agreed Thursday night, things have begun to look a bit shaky again.

Already, Moody’s this morning has joined Fitch in downgrading Greek bonds, citing the “substantial economic losses” Greek debt holders will incur under the plan. But it’s worth looking at a “special comment” Moody’s issued alongside the Greek downgrade, because there’s a bit of good news for European leaders in it.

Continue reading: “The good news in Moody’s Greek downgrade”

Tags: credit ratings agencies, Greece
Posted in Euro, Fiscal policy | Permalink

EU summit: A deal for Ireland and Portugal, too?

July 21, 2011 12:05 pm by Peter Spiegel

Enda Kenny, the Irish prime minister

Although the crisis summit is focused on Greece, there are signs that Portugal and Ireland may benefit from today’s deal, too. According to a senior European official, leaders are close to an agreement that would see lending rates on Lisbon’s and Dublin’s bail-out loans be cut – though no word on how much.

Currently, Portugal and Greece pay 200 basis points above the borrowing costs of the eurozone’s €440bn bail-out fund, while Ireland – because of an arcane dispute with France over corporate tax rates – still pays 300 basis points. There’s been some talk that this could be lowered to as little as 50 basis points for all three, but our source was mum on that point.

Continue reading: “EU summit: A deal for Ireland and Portugal, too?”

Tags: EU summits, Ireland, Portugal
Posted in EU, Fiscal policy | Permalink

EU summit: Merkel sounds upbeat

July 21, 2011 11:46 am by Joshua Chaffin

Angela Merkel in Brussels on July 21.

Eurozone leaders have made their way into the council building in Brussels, and their comments – though still cautious – have turned upbeat. Here is a sample of the chatter, thanks to our door-stepping friends at Reuters.

Angela Merkel, the German chancellor, believes a decisive deal is at hand. “I expect that we will be able to seal a new Greece programme. That is an important signal. And with this programme we want to grasp the problems by their root,” Merkel said.

Asked whether a Franco-German agreement – which would likely push Greece into a selective default – had the support of its main critic, Jean-Claude Trichet, the European Central Bank president, she was more circumspect. “We spoke at length with ECB President Jean-Claude Trichet and listened to his arguments, too. For this reason, I hope that today will be a constructive day.”

Continue reading: “EU summit: Merkel sounds upbeat”

Posted in EU, EU Commission, Euro | Permalink

[Updated] EU summit: The meetings before the meeting

July 21, 2011 10:21 am by Peter Spiegel

Josef Ackermann, CEO of Deutsche Bank

UPDATE: According to our crack team in Paris, Baudouin Prot, chief executive of BNP Paribas, is also in Brussels participating in the talks.

European leaders have begun gathering in Brussels for their emergency summit to solve the Greek debt crisis, and though the formal session does not begin until after noon local time, several meetings-before-the-meeting are already underway.

One of the most closely watched is a session between European negotiators and the International Institute of Finance, the consortium that represents the eurozone’s major banks. According to a senior European official, German and French government negotiators are meeting with IIF officials, including Josef Ackermann, the chief executive of Deutsche Bank who also serves as IIF chairman.

The IIF appears to be on board with the most likely plan for bondholder participation, a bond-swap programme where all owners of Greek debt that comes due between now and 2019 would be encouraged to trade in their holdings for new bonds that don’t mature for 30 years. According to a European Commission outline of the plan described to Brussels Blog, the swap could reduce the net present value of Greek debt by an estimated €90bn.

Tags: EU summits, Greece
Posted in EU, Euro, Fiscal policy | Permalink

Sherpas move Greek meeting, leak options paper

July 20, 2011 12:41 pm by Peter Spiegel

Senior eurozone officials – including finance ministry negotiators in the “euro working group” and sherpas to all 17 presidents and prime ministers – have moved their pre-summit meeting in Brussels (originally scheduled for this evening) to 9am tomorrow, a sign they still need more time to hammer out a deal on a Greek bail-out ahead of Thursday’s much-anticipated emergency summit.

But as we reported in today’s paper, after the working group held a teleconference on Friday, the European Commission prepared a “policy options” paper outlining the possibilities they’re looking at (our worthy rivals at Reuters also got their hands on a copy).

As has become our practice, we thought we’d give Brussels Blog readers a bit more insight into what the leaked options paper had to say, after the jump.

Continue reading: “Sherpas move Greek meeting, leak options paper”

Tags: EU summits, Greece
Posted in EU, Euro, Fiscal policy | Permalink

Greek press review: No bail-out deal at hand?

July 19, 2011 9:59 am by Peter Spiegel

Greek taxis block Athens streets during a 48-hour strike. A similar Greek roadblock in Brussels?

If this morning’s media accounts are any indication, European leaders are still scrambling to come up with a deal on a second Greek bail-out ahead of Thursday’s emergency eurozone summit here in Brussels.

In our dead-tree edition, we focused on moves to ensure Greek banks don’t melt down and the sudden emergence of a proposal to tax eurozone banks to help pay for bail-outs. Our friends and rivals over at Reuters also mention the new bank levy proposal, but led with leaders continuing to “struggle to reconcile competing proposals” – a similar line to what we’ve been hearing.

Our German counterparts at FT Deutschland also report that things remain up in the air, focusing on the continuing split between the European Central Bank and the German-backed group of countries who are pushing for some bondholder participation in the bail-out – a move the ECB fears will lead to a Greek default and further eurzone contagion.

In other words, either a deal is at hand and the town’s leading journalists don’t know about it – or we’re still a long way off with just 48 hours to go. Brussels Blog is betting on the latter.

Tags: EU summits, Greece
Posted in EU, Fiscal policy, Further reading | Permalink

We read the IMF’s Greece report so you don’t have to

July 14, 2011 2:53 pm by Peter Spiegel

Poul Thomsen, head of the IMF's misssion to Greece, during a visit to Athens in May

UPDATE: Here’s an interesting take on the same reports by our friends and rivals over at the Wall Street Journal.

As part of the Brussels Blog’s new mission to read brick-sized reports on eurozone bail-outs so you don’t have to, today we bring you the highlights of the 173-page International Monetary Fund review of the Greek crisis – which we reported on in today’s newspaper, but which has lots of other good details worth chewing over.

The first thing we like to turn to when getting these kinds of reports is the analysis of just how big the financing hole is for Greece – and how international lenders intend on filling it.

According to page 62 of the report (see the pdf here), the IMF has a slightly lower estimate of how big the Greek hole is than the European Commission: it believes Athens will need €103.4bn in new bail-out funds through 2014, while the Commission thinks it will be closer to €115bn.

Potentially more interesting, however, is how they propose to fill the hole.

Continue reading: “We read the IMF’s Greece report so you don’t have to”

Tags: Greece, IMF, sovereign debt crisis
Posted in EU, Fiscal policy | Permalink

More trouble for the eurozone periphery

July 14, 2011 10:48 am by Stanley Pignal

The Italian finance ministry. Image by Bloomberg.

Italy has been in the news for all the wrong reasons, and a look at World Bank indicators on how easy is to run a business there might explain a few things: It takes 1,210 days to enforce a contract in Italy and it costs around a third of the contract’s disputed amount in legal costs – for those hardy enough to attempt to navigate the byzantine court system.

Businesses not willing to wait forty months to get their money back might want to try setting up shop in Luxembourg instead, where courts will process claims in a far more reasonable 321 days – and at a lower cost, too.

Those World Bank figures highlight the difficulties facing the European Union’s single market. Though goods and services can flow nearly seamlessly through the EU’s 27 countries, the laws and regulations that apply to them remain very different.

Continue reading: “More trouble for the eurozone periphery”

Posted in EU | Permalink