Monthly Archives: April 2012

Spain, S&P and the austerty-growth debate

April 27, 2012 11:18 am by Peter Spiegel

Spain's Mariano Rajoy, after a meeting at the Spanish parliament in Madrid earlier this month

The recent turn in market sentiment against Spain has led to a somewhat unanswerable debate in European policy circles about what, exactly, the markets are worried about: Is it that the new Rajoy government tried to break from tough EU-mandated deficit limits last month…or the fact they eventually agreed to stick to next year’s stringent target?

If Standard & Poor’s downgrade of Spanish debt last night is any indication, it appears the markets are more concerned about the latter than the former.

Most senior EU officials have a different view, arguing that by unilaterally declaring he was going to ignore the EU-mandated 4.4 per cent debt-to-gross domestic target for 2012, prime minister Mariano Rajoy spooked the bond market by signalling Spain had lost its sense of discipline.

But S&P makes a different argument. Read more

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Posted in Economic growth, EU, Fiscal policy |

New borders inside Europe? A Franco-German push

April 20, 2012 11:27 am by Peter Spiegel

France's Nicolas Sarkozy has made EU borders an issue in his re-election campaign

The issue of the European Union’s passport-free travel zone has become a political hot potato again, thanks in part to Nicolas Sarkozy, who has warned during his presidential re-election campaign that France would withdraw from the border agreement unless more safeguards are adopted.

With just days before voting in the first round of the French election, Sarkozy’s government is pushing the issue back onto the EU agenda, this time with German assistance.

In a joint letter sent to the Danish presidency, Claude Gueant, the French interior minister, and Hans-Peter Friedrich, his German counterpart, are calling for countries to be granted the right to re-impose border controls unilaterally for 30 days if national authorities believe other countries – particularly on the EU’s southern and eastern frontiers – aren’t securing their borders.

A leaked copy of the letter Brussels Blog got its hands on (in French) can be read here. A look at the proposal (in English) after the jump… Read more

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Posted in EU, EU Commission |

When Willie let fly in Brussels

April 19, 2012 4:23 pm by Alex Barker

Proud competition commissioners and hard-charging chief executives are a combustible mix. Many a business leader has arrived in Brussels imagining that a bit of face time with the man in charge will clinch approval for their compelling merger proposal. How wrong they can be.

The latest lesson in bad lobbying is provided by Willie Walsh, chief executive of IAG, the parent company of British Airways and Iberia. Admittedly the story ended positively for Walsh, who last month won approval for his takeover of British carrier BMI. But the stakes were high (BMI was on the verge of collapse), the decision was finely balanced (and may still be appealed) and Walsh almost wrecked the chances of getting an early green light.

The details of the drama, which played out in February and March, are slowly emerging. One calamitous meeting between Walsh and Joaquín Almunia, Europe’s competition enforcer, nearly overshadowed the entire process. Read more

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Posted in EU, EU Commission |

When will Portugal need a 2nd bailout?

April 19, 2012 3:25 pm by Peter Spiegel

Passos Coelho with Britain's David Cameron during a visit to Downing Street on Wednesday

Largely overlooked amidst the handwringing over Spain this week was a piece written by Portuguese prime minister Pedro Passos Coelho in the FT that all but admits publicly what many officials have been saying privately for some time: Portugal is probably going to need a second bailout.

In fairness, Passos Coelho doesn’t actually come out and say that, but it sure sounds like he’s preparing the groundwork:

We are utterly committed to fulfilling our obligations. But while we are optimistic, we must also be realistic and pragmatic. This is why we accept that we may need to rely on the commitment of our international partners to extend further support if circumstances beyond our control obstruct our return to market financing.

Although Portugal’s current €78bn bailout runs through 2014, a decision on whether a second bailout is needed must be made much more quickly than that – probably sometime in the next two or three months. A look at why after the jump… Read more

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Posted in EU, Euro, Fiscal policy |

More leaked warnings, this time for Italy

April 2, 2012 8:12 pm by Peter Spiegel

Italy's Mario Monti, right, with Chinese premier Wen Jiaobao during a Beijing trip at the weekend.

Most of the focus on Friday’s meeting of eurozone finance ministers in Copenhagen was on how much leaders would increase the size of their €500bn rescue system. But according to a leaked document we got our hands on, the eurozone firewall wasn’t the only topic being debated.

The four-page report says the “Budgetary situation in Italy” was item #3 on the eurogroup’s agenda. As we wrote for Tuesday’s print edition, the report warns that any slippage in growth or a rise in borrowing rates could force the technocratic government of Mario Monti to start cutting again – something he has vowed not to do.

As is our practice, Brussels Blog thought it was worthwhile giving some more details and excerpts from the report beyond what fits in the newspaper. Read more

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Posted in EU, Fiscal policy |

Leaked EU economic analyses: have a read

April 2, 2012 4:24 pm by Peter Spiegel

Denmark's Margrethe Vestager, center, with her counterparts in Copenhagen this weekend.

Following our story Saturday and subsequent blog post on two confidential economic analyses prepared for European finance ministers in Copenhagen which paint a less-than-confident picture of the eurozone crisis, we here at Brussels Blog have received multiple requests for more on their contents. Read more

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Posted in Economic growth, EU, EU Commission, Fiscal policy |