Monthly Archives: August 2011

Peter Spiegel

Evangelos Venizelos, left, and Jutta Urpilainen, Greek and Finnish finance ministers, last month

The still-roiling dispute over Finland’s insistence on some sort of collateral to guarantee its portion of the new €109bn Greek bail-out only got slightly closer to resolution Friday, and more senior finance ministry officials – this time department deputies – will take up the issue Monday on yet another conference call.

As we reported last week, Friday’s teleconference mulled a proposal to broaden the collateral deal so that non-Finns can participate, and to have the Greek side put up non-cash assets instead of the current bilateral deal, which would have Athens put about €500m cash into a Finnish escrow account.

An official briefed on Friday’s call told Brussels Blog that a consensus appeared to be building around the non-cash plan, which would use Greek government shares in state-owned enterprises or “illiquid” real estate assets as collateral. But time is running short. Read more

Peter Spiegel

German finance minister Wolfgang Schäuble

Influential Nobel Prize-winning economist Paul Krugman has picked yet another fight with eurozone politicians, this time with Germany’s Wolfgang Schäuble.

On his New York Times blog, Krugman takes issue with the German finance minister’s claim at a panel discussion in Frankfurt on Thursday that “economists worldwide” agree the 2008 eurozone crisis was triggered by excessive public debt “everywhere in the world”.

Krugman says excessive public debt actually triggered a crisis in only one country, Greece. Ireland and Spain’s problems only become a public debt crisis after private-sector bank debt was moved onto the government books through bail-outs. Similarly, until the recent standoff over the US debt ceiling, American problems have originated in the financial sector. Read more

Peter Spiegel

British defence secretary Liam Fox, left, at June's meeting of Nato defence ministers in Brussels

Just how much support is Nato providing to rebels in Tripoli hunting for Col Muammer Gaddifi? There seems to be a significant amount of disagreement among alliance officials and leaders of some of its largest members.

This morning, Liam Fox, the British defence secretary, said in an interview with Sky News that Nato reconnaissance assets – presumably spy planes and drones flying over the Libyan capital – were directly aiding the opposition National Transitional Council’s operations.

“I can confirm that Nato is providing intelligence and reconnaissance assets to the NTC to help them track down Col Gaddafi and other remnants of the regime,” Fox said. But that would directly contradict Nato’s claims Tuesday, where a military spokesman vehemently denied any coordination with the opposition. Read more

That Brussels slows down during August is well known. Though European Commission spokespeople repeatedly stress that the EU’s executive arm remains hard at work – especially this year – anyone strolling through the corridors of its Berlaymont headquarters can see there are more than a few people out of the office.

Now in the age of social media, it might be a bit easier to establish who is working and when. To wit: of the eight EU commissioners who regularly use Twitter, four of them have gone completely quiet for the whole month of August, with another commissioner managing only one entry.

All told, the group have tweeted 23 times in as many days. That’s less than a tenth of the usual Twitter activity. In June, for instance, the eight tweeters managed 270 messages, including retweets, between them.

A breakdown of Twitter summer stats after the jump. Read more

Peter Spiegel

Finland's prime minister, Jyrki Katainen, arriving at last month's emergency eurozone summit.

UPDATE: Thanks largely to uncertainty caused by the Greco-Finnish deal, Greek 10-year bonds dropped preciptiously Wednesday, with yields again close to 18 per cent — right where they were before July’s bail-out agreement.

The ongoing dispute between Finland and other eurozone members over the side deal Heslinki struck with Greece as part of Athens’ new €109bn is beginning to make market analysts jittery.

For those unfamiliar with the controversy, Finland has insisted that it get collateral from Greece to guarantee its portion of the new bail-out, and last week struck a deal which would have Athens putting an estimated €500m into a Finnish escrow account. Other countries have begun to cry foul, however, asking why Finland should get special treatment. Talks between eurozone finance ministry officials are expected to resume via teleconference on Friday.

As we reported earlier this week, the Moody’s rating agency has already weighed in with its concerns, saying the Finnish deal could not only delay the Greek bail-out but calls into question eurozone support for all future bail-outs. But other market watchers are beginning to raise similar alarms. Here is a quick cross-section of views that we’ve seen in recent days. Read more

Peter Spiegel

Rebel fighters on the streets of the Libyan capital Monday morning

UPDATE: Jonathan Beale, the BBC’s defence correspondent, tweets that British defence secretary Liam Fox told him in an interview UK bombing operations in Libya have been halted.

Despite the stunning events in Libya, a Nato spokeswoman here in Brussels says the alliance is not currently planning any special briefing today on the campaign’s progress. The normal weekly news conference is scheduled for Tuesday. That may change, but for now Nato headquarters is keeping a low profile.

The alliance just released its regular daily update on the basic facts and figures of their Libyan mission, but it reveals little out of the ordinary. It notes that 46 strike sorties were flown yesterday (not out of the normal range), with most targeting facilities in and around Tripoli, including three “command and control facilities” and one “military facility”. It provides no more detail than that.

The alliance has for weeks been calling for a post-Gaddafi peacekeeping plan, but has insisted the United Nations has the lead and will only get involved if asked.

Last night, the alliance’s secretary general, Anders Fogh Rasmussen, issued a statement warning forces loyal to teetering leader Muammer Gaddafi to lay down their arms, saying Nato warplanes were still willing to act to protect Libyan civilians. Rasmussen’s full statement is after the jump. Read more

Those who have read today’s paper edition of the FT will have seen our interview with Didier Reynders, Belgium’s finance minister and doyen of the EU’s economic and financial council meetings.

Reynders has been in the job since 1999, three years before the euro was introduced in its physical form, so knows a thing or two about the politics of monetary union. Because we never have enough space in the paper to delve into everything we talk about in such hour-long interviews, we thought we’d offer a bit more for our Brussels Blog readers. Read more

Peter Spiegel

Merkel and Sarkozy at their post-summit news conference Tuesday evening in Paris

The letter Nicolas Sarkozy and Angela Merkel sent yesterday to the president of the European Council, Herman Van Rompuy, contains a lot of ideas that have been discussed previously in Brussels and not gone very far, raising questions as to how much of the new Franco-German agenda can actually be implemented.

But reading between the lines of the letter, one theme that has gone almost unnoticed is the seeming sidelining of the institution that is supposed to be at the centre of European integration: the European Commission, the EU’s executive branch headed by José Manuel Barroso.

Suggesting that Van Rompuy head regular summits of eurozone heads of state as “the cornerstone of the enhanced economic governance of the euro area” is only part of the seemingly anti-Commission tenor of the plan. Read more

Peter Spiegel

Portuguese prime minister Pedro Passos Coelho arriving at last month's EU summit

Financial markets today have been whipsawed yet again by data showing the one bright spot on the eurozone’s economic horizon – the German growth engine – may be faltering. But Eurostat’s quarterly report on the currency region’s economic health did have at least one unexpected positive surprise, too: Portugal.

Yes, Lisbon may be beginning a wrenching austerity programme, agreed as part of its €78bn bail-out. And yes, the country’s bonds suffered recent downgrades because debt analysts do not think Lisbon will be able hit the bail-out’s debt and deficit targets.

But during the second quarter of the year, the Portuguese economy was flat – a significant improvement after two quarters of 0.6 per cent shrinkage, and much better than the 1.1 per cent decrease that analysts predicted. Read more

Conventional wisdom in Brussels holds that nothing helps the cause of European integration like a crisis: the battles of the exchange-rate mechanism in the 1990s led to the Euro, the 9/11 terrorist attacks to greater judicial cooperation, and now the financial meltdown is spurring an ever-stronger European response.

As Jacques Delors, former Commission president, put it in a recent speech, firefighters battling crises soon make way for architects.

Proponents of this vision would do well to read Otmar Issing’s comment piece in Tuesday’s FT. Read more

New York Stock Exchange on August 4, 2011. Image by AFP

In a sign of the severity of this week’s market turbulence, Olli Rehn, Europe’s economics commissioner, has cut short his holiday and will be back in Brussels today. Rehn is to address the press corps at midday – presumably to undo some of the damage caused by an explosive letter penned by his boss, José Manuel Barroso, the European Commission president.

In his letter – which was sent to the eurozone heads of government on Wednesday, but released to the press on Thursday – Barroso acknowledged that the big decisions taken at a eurozone summit on July 21 were not having the intended effect on financial markets. He also called for a “rapid reassessment” of the eurozone’s €440bn bailout fund just two weeks after leaders had armed it with new weapons following a torturous, months-long debate. Read more

Demetris Christofias, president of Cyprus

Demetris Christofias, president of Cyprus, at the eurozone summit in Brussels in June

The news of further turmoil in Cyprus is a reminder that Italy and Spain are not the only eurozone members that may soon be forced to seek European Union support.

After weeks of negotiations, the coalition government’s junior partner, the centrist Democratic Party, has broken off talks with the ruling AKEL, led by communist president Demetris Christofias. As of this morning, that has pushed the yields on 10-year Cypriot bonds above 11 per cent. Read more