Monthly Archives: November 2011

Eurozone governments: Are “the markets” refusing to lend to you? Turn to “the people” instead.

That is in essence what Belgium is proposing to do, with an appeal to retail investors (i.e. you) to buy the sovereign bonds it is struggling to sell to institutional investors (i.e. Goldman Sachs).

Yves Leterme, prime minister, plugged the bonds-for-the-people in the local press on Thursday, arguing they were a particularly good deal now that Belgium’s institutional muddle has helped send yields to attractive levels.

For those who have not been following Belgian politics in the past 577 days, the country has been run by a caretaker administration since April 2010 while its political class tries to cobble together a new government. 

Belgium's flag

Image by Getty.

One week, two set-backs for Belgium. First markets started attacking its debt, then the putative prime minister throws in the towel in his protracted efforts to form a new government, citing lack of common ground between the main political parties over the 2012 budget. After 529 days of negotiations, is it time for a technocratic government?

It’s probably a bit soon. Elio Di Rupo, the Socialist leader, may have offered his resignation to King Albert II, but it has yet to be accepted. It would not be the first time that Di Rupo has “resigned”, only to be begged to stay on as new, unexpected consensus is found. The King, at his countryside estate recovering from a recent nose operation, is consulting party leaders this week and will advise on Di Rupo’s fate later this week. A few have already reaffirmed their faith in Di Rupo.

Two factors suggest a government is closer at hand than may at first seem the case. 

For the unfortunate diplomats locked in the Justus Lipsius council building all of Friday and into Saturday morning, the European Union’s 2012 budget negotiations were an arduous affair. Upon emerging, one groggy diplomat lamented “an evening I can never get back.”

But to the union at large, the remarkable thing about the talks was how easily they went down.

For those who missed the news early Saturday morning, representatives from the EU’s 27 member states, the European parliament and the European commission agreed on a 2.02 per cent increase in next year’s budget, bringing it to €129bn.

That was well below the 5.23 per cent sought by MEPs, and the 4.9 per cent recommended by the commission. 

One week, two policy retreats. Things are not going too well at the moment for Michel Barnier, Europe’s top financial regulator.

First he came unstuck on his credit rating agency reforms, as his fellow European commissioners mounted an revolt over proposed powers to ban sovereign ratings on bailout countries. The result was a last-minute climbdown.

Then, just two days later, some of the same Commission rebels were expressing strong reservations about a separate proposal to break the grip of the Big Four accounting firms. This time around Barnier is offering up his concessions early - at least one of the most controversial measures in the audit proposals will likely be dropped. 

German chancellor Angela Merkel during a press conference Thursday

Our friends and rivals over at The Daily Telegraph have gotten their hands on an interesting document from the German government detailing its proposals for EU treaty change, and have helpfully posted it online (with an English translation by the Open Europe think thank).

Although the Telegraph focuses on its implications for Britain, there is a significant amount of detail on how Berlin would like to change eurozone economic governance, including yet another stab at enshrining bondholder “haircuts” in the EU treaties.

For those who haven’t followed the debate closely, there is now a closed-door fight going on about whether Greece really will be the only country that sees its bondholders pushed into losses – as the eurozone’s leaders have repeatedly insisted in their summit conclusions – or whether the bloc’s new €500bn rescue fund, which could come into place as early as next year, should allow for organised defaults.

Although almost all EU institutions – including the European Commission and European Central Bank – want to make explicit Greece was a one-off, the German paper makes clear they want to keep the door open. 

A tram passes the euro sign sculpture in front of the European Central Bank ( ECB) in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg

Welcome to our continuing coverage of the eurozone crisis. All times are London time. By Tom Burgis and John Aglionby on the news desk in London, with contributions from FT correspondents around the world. This post should update automatically ever few minutes, but it may take longer on mobile devices.

The turmoil in the eurozone has taken a troubling turn in recent days, with anxiety spreading from Europe’s periphery to its “core” countries. Even as Italy’s Mario Monti readies his economic agenda to be presented today, investors are looking at France, the Netherlands and Austria with increasing unease and wondering whether the ECB might yet ride to the rescue. Over in Greece, today is the anniversiary of 1973′s mass student protests – with demonstrators once more planning to take to the streets. And the bond markets are showing ever more strain, with today’s Spanish bond auction likely to test sentiment still further. We’ll bring you all the latest as it happens.

 

The FT reports this morning that Michel Barnier, Europe’s top financial regulator, has shelved plans to rein in the credit rating agencies. Barnier, who is internal market commissioner, had to bow to objections elsewhere in the EU. We report that Barnier still unveiled proposals to transform the business model of the big agencies but has ordered some last-minute “technical work” that amounts to a ceasefire.

Both Barnier and the rating agencies were discussed in the House of Lords last night, where former City minister Lord Myners was on scathing form. First the Labour peer (a former chairman of Marks & Spencer) criticised the “flawed thinking” from the European Commission on the issue. He then continued:

I worry very much about Mr Barnier. I met Mr Barnier when he was a Minister. He came to see us at the Treasury. He came down the corridor and I was watching him. I am a great fan of art and I was rather impressed that he stopped to look at every painting. I thought this is a man with whom I share a common interest-until I realised he was actually looking at his reflection in the glass on every painting, and adjusting his hair or his toupee. This to me is a man whom we should treat with a very long spoon. I hope the Minister will take due care in working with Mr Barnier because we have been forewarned that this man intends to seek even more powers than those he announced today. He said he wants to return to the issue of censoring rating agencies. I sincerely hope that the Government and the Opposition would have no part in endorsing such an activity.

 

Mario Monti arrives to unveil his new government at the Quirinale Palace in Rome. Photo: Alberto Pizzoli/AFP/Getty Images 

Mario Monti arrives to unveil his new government at the Quirinale Palace in Rome. Photo: Alberto Pizzoli/AFP/Getty Images

 

Welcome back to the FT’s rolling coverage of the eurozone crisis. By Esther Bintliff and John Aglionby on the world news desk, with contributions from correspondents around the world. All times are GMT.

This post will update automatically every few minutes but could take longer on mobile devices.

Europe’s two new technocratic prime ministers should consolidate their respective grips on power today. Lucas Papademos, in Greece, is expected to win a confidence vote in parliament, while Mario Monti, his Italian counterpart, announces his new cabinet. Eyes will not be far from the markets either, following yesterday’s bruising ride.

 

12.52: Here’s the full list of the new Italian cabinet, courtesy of our reporter Giulia Segreti who is at the Quirinale palace in Rome:

 

Monti, at a press conference in Rome Monday

In today’s newspaper, we have a piece on presumptive Italian prime minister Mario Monti as viewed from Brussels, with special attention to comments and writings he’s made as one of the most prominent members of the Brussels think tank circuit.

As we pointed out in the story, his views on what ails Europe have been there for all to see for some time, but Brussels Blog wanted to draw specific attention to a symposium he spoke at just a few weeks ago sponsored by the Polish presidency and the Bureau of European Policy Advisors, the European Commission’s in-house think tank.

At the conference, Monti gives a pretty thorough analysis of what ails Italy and the need for cross-party political pain. But he also goes out of his way to lavish praise on the US Congress’s so-called “super committee” that is currently just a week away from a self-imposed deadline to come up with a bipartisan budget-overhaul plan.

Because we did not have enough space in the newspaper to delve into Monti’s comments more fully, some extended excerpts after the jump. 

 

Mario Monti, Italian prime minister designate – Image Getty

Welcome back to the FT’s live coverage of the eurozone crisis and the global fallout. By John Aglionby and Esther Bintliff in London with contributions from correspondents around the world. All times are GMT.

This post should update every few minutes but might take longer on mobile devices.

Are calm waters finally visible on the horizon of the eurozone? Perhaps – for now. Mario Monti’s first full day as Italian prime minister designate will be marked by a bond auction and his efforts to form a government. A confidence debate starts in Greece on Lucas Papademos’s government. And German chancellor Angela Merkel holds her Christian Democratic Union party annual conference in Leipzig.