This issue has always been a potential dealbreaker: how will Germany’s politically powerful network of small public banks — or Sparkassen — sit under the bailiwick of a single bank supervisor? Until now we’ve mainly seen diplomatic shadow-boxing on the matter. But that fight is beginning in earnest.
As is the custom in Brussels, some ambiguous and unclear summit conclusions are helping spur things along. Chancellor Angela Merkel last week hailed a one particular sentence as a breakthrough for Germany: that the European Central Bank would “be able, in a differentiated way, to carry out direct supervision” over eurozone banks.
To her, that vague language was recognition that the Sparkassen would be treated differently — the ECB would concentrate on big banks and those that are facing troubles, and leave the rest to national authorities. Read more
A woman walks by Greek anti-bailout graffiti in central Athens earlier this week.
For those who really want to get into the nitty gritty of the revised Greek bailout, we’re also posting two other documents we got our hands on and used for today’s story on the nearly-completed deal in order to provide more detail on what the new rescue programme will look like.
The first document is an October 14 draft of the official “Memorandum of Understanding on Specific Economic Policy Conditionality”; the second is the “Memorandum of Economic and Financial Policies”.
Both are chock full of austerity and reform commitments Athens is making to get the bailout extension. But the second memorandum has far more detail on what kind of budget demands Athens is agreeing to. Although there are gaps where specific budget targets are to be included, page two and page nine give strong hints of where they are headed. Read more
Germany's Angela Merkel, left, with Greece's Antonis Samaras during her Athens visit.
With Athens and the so-called “troika” of international lenders close to a deal on an overhauled bailout that would extend the programme by two years, the focus today shifts to Brussels, where talks begin on round two of the revised Greek rescue: how to pay for it.
As we reported in today’s dead-tree edition of the FT, those talks will focus on how to fill a new financing gap of between €16bn-€18bn through 2016.
Although officials have toyed with a bond buyback programme – which would have reduced Greek financing needs by purchasing debt at current distressed prices and retiring the bonds – it now looks like they’re going to focus instead on what they’ve done in the past: lowering rates on bailout loans even further to scrape together extra money. Currently, Greece borrows at 1.5 per cent more than the cost of the cash to lenders. So there’s room to cut. Read more
The EU’s former health commissioner has vowed to sue the European Commission in connection with his resignation over an alleged tobacco bribery scandal, escalating a messy dispute between the Maltese politician and his former boss, José Manuel Barroso, the Commission president.
John Dalli’s legal threat was issued during a one-hour press conference he staged in Brussels, the Commission’s home base, a little more than a week after his surprise resignation stunned the EU capital. Read more