Monthly Archives: June 2013

Merkel speaks at the post-EU summit press conference where she chided Anglo Irish bankers

The explosive disclosure of audio tapes capturing phone conversations of executives at the failed Anglo Irish Bank, which appear to show a strategy to win government bailout money by exaggerating the bank’s financial health, have up until now largely been a domestic political scandal confined to Ireland.

But revelations that one executive, the then-head of the bank’s capital markets operations, sang the Nazi-era version of the German national anthem when he learned the bank had won funding from Germany brought a stern rebuke from Angela Merkel early Thursday morning after Irish Times Berlin correspondent Derek Scally asked her about it at a post-EU summit press conference.

“I cannot but express my contempt at this,” Merkel said. Here are her complete remarks on the topic:

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Today’s EU summit is getting under way but Brussels’ blogger Joshua Chaffin and Peter Spiegel discuss how most of the big deals have been cut on the sidelines of the big event.

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EU leaders have been arriving at the summit. In a little Brussels Blog attempt at innovation, James Fontanella-Khan and Peter Spiegel did a two-way Twitter chat on the goings on:

 

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After two sets of late-night negotiations that stretched into early morning, EU finance ministers finally reached a deal Thursday on new bail-out rules for European banks. A quick primer:

Is the deal a big step towards a banking union? It is definitely progress. But this is no leap towards centralisation. The bank bailout blueprint was proposed even before a eurozone banking union was endorsed by EU leaders last year. It is more a political pre-condition for deeper financial integration. The reform frames the powers of EU national authorities in handling bank failures and applies to euro and non-euro countries.

The impetus primarily came from the global regulatory response to the Lehman Brothers collapse in 2008. These reforms are supposed to answer the “too big to fail” question, readying the defences for the next crisis and introducing powers to make creditors shoulder the costs of bank collapse, rather than taxpayers. It just turned out the reforms were shaped in the middle of a European banking crisis, rather than in the wake of the US one.

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EU financial services chief Michel Barnier takes questions on the bank bail-in debate Wednesday

Call it the Cinderella rule: complex bank reforms cannot be agreed in Brussels until after midnight. So it will be this evening as ministers reconvene to negotiate laws on how to shut down failing banks, a deal that eluded them in the early hours of Saturday morning. (Though it should be noted negotiators for the Irish government, holders of the EU’s rotating presidency, are telling interlocutors they hope to be at the pub before midnight.)

The talks don’t start in earnest until after 7pm but a compromise text is circulating. It is the opening shot from the Irish to break the impasse. Officials are more optimistic about a deal this time. Fellow Brussels Blogger Peter Spiegel has written extensively on the context of the negotiations already, so this blog offers a short summary of the main changes for those who have followed the talks:

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Greek prime minister Antonis Samaras, centre, holds a cabinet meeting this week.

Just how off track is Greece’s €172bn second bailout? When the FT reported that a new €3bn-€4bn financing gap had opened up in the programme, EU and International Monetary Fund officials went out of their way to insist there wasn’t a gap at all.

“There is no financial gap. The programme is fully financed for at least another year, so there is no problem, on the premise that we reach a final agreement on the review in July,” said Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup.

IMF spokesman Gerry Rice weighed in with a written statement: “If the review is concluded by the end of July 2013, as expected, no financing problems will arise because the program is financed till end-July 2014.”

Notice the caveats, however. Both Dijsselbleom and Rice say there won’t be a shortfall – as long as the IMF is able to distribute its next €1.8bn aid tranche before the end of July. Why? Because of the new financing gap, which means the Greek programme essentially runs out of money in July 2014. The IMF must have certainty that Greece is fully financed for 12 months or it can’t release its cash, so after July, it must suspend its payments. Read more

Noonan addresses reporters outside the finance ministers' meeting in Luxembourg Friday

When EU finance ministers reconvene on Wednesday for a last-ditch attempt to strike a deal on bank bailout rules after they couldn’t get one in the early morning hours Saturday, it won’t be the first time fights over Europe’s “banking union” have gone to the eleventh hour before a major EU summit.

The last major decision – how many banks would be overseen by a new single supervisor based at the European Central Bank – also took one failed finance ministers’ meeting late last year before they reached a deal on the eve of a summit.

But EU leaders are sounding a bit more cautious this time than last December, since the issues at hand – who will pay for bank bailouts – are far more politically sensitive than last time around. They involve both power and money. Last time, it was just power.

To get an idea of where things lie after the Friday night/Saturday morning 18-hour marathon, we’ve posted this three-page proposal tabled by Michael Noonan, the Irish finance minister who chaired the meeting as holder of the EU’s rotating presidency, near the end of the debate. Read more

Viviane Reding announces her plan for female quotas on corporate boards in November

Remember EU commissioner Viviane Reding’s effort last year to get the EU to adopt 40 per cent quotas for women on corporate boards? Well, last night, in the words of one EU diplomat, it may have finally become “brain dead”.

At a meeting of employment ministers from all 27 EU members Thursday night in Luxembourg, a group of ten northern and eastern countries – including Germany, Britain, Sweden and the Netherlands – submitted a statement saying they would block the plan. Combined, diplomats said, the countries had more than enough votes to prevent it from ever seeing the light of day again. Read more

The Brussels Blog team will be trying something new on Wednesday: a Twitter interview. Brussels bureau chief Peter Spiegel will be tweeting with the outgoing US ambassador to the EU, William Kennard, at 4pm Brussels time/3pm London time, asking questions from the account associated with this blog, @FTBrussels, with the ambassador answering from his official account, @USAmbEURead more

Would Ireland's Anglo-Irish Bank, whose rescue forced Dublin into a bailout, been covered?

Remember a year ago when eurozone leaders promised to “break the vicious circle” between banks and sovereign governments by allowing the eurozone’s €500bn rescue fund to bailout struggling banks instead of leaving the task to cash-strapped national treasuries?

At the time, financial markets cheered the deal because it appeared countries that were either forced into sovereign bailouts because of their faltering financial sector (like Ireland) or were near the bailout precipice (like Spain) could get significant relief by handing over responsibility for shoring up teetering banks to Brussels instead.

But gradually, as the so-called “direct recapitalisation” programme has been developed, that “break” has come to look less convincing. Indeed, Olli Rehn, the EU’s economic commissioner, now refers to “diluting” the link between banks and sovereigns instead of “breaking”.

The clearest sign that all sorts of sovereign strings will come attached to a direct recap from the €500bn European Stability Mechanism is a draft paper issued by the eurogroup’s secretariat outlining how the “instrument” will work. It was prepared last week ahead of this Thursday’s eurogroup meeting, and we got our hands on it – and posted it hereRead more