Anti-austerity protesters in Athens hold up a Greek flag that says "not for sale" on Friday.
Thanks to some help from the European Commission, we have a bit more clarity on where European leaders will be spending the new €130bn in Greek bail-out aid. But the new data we received makes all the more clear that a huge amount is dependant on the still-to-be negotiated details of the 50 per cent Greek bondholder haircut deal, which may not be completed until the end of the year.
Just to remind readers where the confusion lies, of the €130bn in new funding, only €30bn was officially earmarked in last week’s summit communiqué – and that money will go for “sweeteners” to current bondholders so they’ll participate in a bond-swap programme. If they are going to take a 50 per cent cut in the face value of their bonds, they insisted on getting something else in return, and this was the price.
Of the remaining €100bn, fully €30bn will go to bank recapitalisations, not then €20bn we assumed last week. Although EU banking authorities have called for €30bn in new capital for Greek banks, officials tell us this is in addition to the €10bn provided in the first €110bn Greek bail-out.
Which leaves us with only €70bn to actually run the Greek government for the next three years. How did European authorities come to this number? That requires even more detective work, after the jump.
Greek prime minister George Papandreou, right, with his counterparts at Wednesday's summit
Thursday’s early-morning deal on a new €130bn Greek bail-out is different in magnitude and in kind from the July €109bn programme it replaces, but in one respect they’re very similar – European officials have had a hard time explaining what, exactly, the money is for.
The one thing they have announced is that €30bn of it will go to so-called “sweeteners” to convince Greek bondholders to accept 50 per cent haircuts on the face value of their bonds.
How this would work has yet to be negotiated, but in the July plan, such sweeteners were used to create a collateral pool for new, gold-plated Greek bonds that could be used in a bond swap programme. In order to convince bondholders to trade in their current bonds that are about to come due for new bonds that don’t come due for 30 years, these new bonds needed to be extra safe. The collateral “sweeteners” were the means to do that.
How is the remaining €100bn in the new €130bn Greek bail-out going to be spent? A little detective work after the jump.
Juncker, left, heads Eurogroup of 17 euro finance ministers. Rostowski, right, the Ecofin of all 27.
UPDATE 2: The Polish presidency has just made the official announcement. They say the cancellation allows heads of government to decide the things finance ministers were originally going to tackle. Despite negative market reaction to the news, several EU diplomats insist this is a diplomatic miscue by the Poles rather than a sign of things to come.
UPDATE: European diplomat confirms meeting of 27 EU finance ministers has been cancelled.
It’s getting uncomfortably close to crunch time for eurozone leaders, with just over 24 hours left before the summit-to-end-all-summits. But will they actually be able to agree on the big euro rescue plan? A letter sent last night by Jacek Rostowski, the Polish finance minister, makes it seem doubtful.
Since Poland currently holds the European Union’s rotating presidency, Rostowski is charged with convening a meeting of all 27 EU finance ministers tomorrow ahead of the big summit to lay the groundwork for a final agreement.
But officials tell Brussels Blog the so-called “Ecofin” council meeting is now likely off, and in a letter to Jean-Claude Juncker, the Luxembourg prime minister who chairs the group of 17 eurozone finance ministers, Rostowski makes it appear the cancellation is due to a failure to agree on outstanding issues.
After a two hour overrun, the meeting of the EU 27 has broken up here in Brussels, to be followed by a pow-wow of the 17 eurozone members. This could be another late one.
One thing we know has been agreed so far: more meetings.
Instead of a single summit of eurozone leaders next Wednesday, as had been planned on Thursday afternoon, it now looks like there will be at least two – but probably three – more separate get-togethers.
The most important of those will be European Council (of 27) just before Wednesday’s eurozone summit.
This is painted as a big win for Britain and Poland, the biggest “outs” (of the eurozone) who are afraid of seeing their influence on the wider EU wane by literally not having a seat at the negotiating table for the big decisions taken by eurozone leaders.
European summits are fertile ground for PR stunts, if only because of the hundreds of journalists milling around waiting for decisions to be made.
Oxfam today has distributed copies of “(Not the) Financial Times”, a 4-page edition of our paper dated November 2016 and devoted to the effects of a hypothetical tax on cross-border financial transactions, or Financial Transaction Tax, apparently agreed in 2011.
In this alternative universe, bankers will be pleased to discover that the adoption of a so-called Tobin tax has helped boost their popularity rating from near 0 per cent today to 80 per cent by 2014.
France and Germany may be divided over the key issues on the agenda of today’s European Union summit. But President Nicolas Sarkozy and Chancellor Angela Merkel have found common ground in the need to hammer Italy over its heavy debt load.
The leaders of the EU’s biggest and most powerful member states called in Silvio Berlusconi, the Italian prime minister, this morning for a pre-summit tongue-lashing. The message they delivered, according to one diplomat familiar with the discussion, was that Italy must deliver “specific and convincing reform measures soon.” They communicated a similar message to Berlusconi at a gathering on Saturday evening held by the centre-right European People’s Party.
Sarkozy also expressed his displeasure with Italy’s refusal to make way for a Frenchman on the European central bank’s executive board, according to the diplomat. France is due to lose its seat when Jean-Claude Trichet steps down as ECB president at the end of the month to be replaced by Mario Draghi, the outgoing president of the Bank of Italy. Berlusconi infuriated the French this week when he declined to free up a seat on the powerful decision-making committee by refusing to name current board member Lorenzo Bini Smaghi as Draghi’s replacement.
French president Nicolas Sarkozy arrives at the summit this morning.
The big European Union summit will be divided in two parts today, with all 27 EU leaders meeting in the morning before the session is narrowed to the 17 members of the eurozone in the afternoon.
The Brussels Blog has obtained a copy of the 12-page draft of the morning gathering’s communiqué, circulated to summiteers this morning, and unless things change at the meeting, it looks like there will be no final decision on the one thing the 27 had hoped to finish today – a plan to recapitalise Europe’s banks.
The draft “welcomes progress made” by EU finance ministers during their 10-hour meeting on Saturday, but says the work will not be officially signed off until another meeting on Wednesday – the first official acknowledgement that leaders from all 27 EU countries (and not just the eurozone) will have to meet again next week. Whether that meeting will be the heads of all 27 governments or just their finance ministers remains to be seen.