EU summit: Samaras pulls the first punch

May 23, 2012 3:17 pm by Peter Spiegel

Antonis Samaras. Getty Images

Leaders have begun arriving at their party caucuses and one of the first to show up at the centre-right EPP gathering was Antonis Samaras, the New Democracy leader locked in a neck-and-neck fight to become Greece‘s next
prime minister.

Predictably, on his way in, Samaras pushed EU leaders to do more to turn around the eurozone‘s faltering economy. “Europe needs a new growth orientation,” he said. “In my country recession and unemployment have
really had a devastating effect on the social fabric and social cohesion.”

Before ducking in, he said that a focus on growth in the run-up to the
June summit — where more firm decisions are expected than tonight — was
“crucial for Europe and critical for Greece.”

Tags: Antonis Samaras, eurozone, Greece
Posted in Euro | Permalink

EU summit: Let the games begin

May 23, 2012 10:51 am by Peter Spiegel

France's Hollande and Germany's Merkel at the Nato summit in Chicago earlier this week

Ahead of today’s informal EU summit in Brussels, senior officials have been repeatedly warning that no decisions will be taken. Indeed, no communiqué has even been circulated among national delegations, so the dinner is likely to wrap with only a press statement from Herman Van Rompuy, the evening’s host.

Even though Van Rompuy in his letter to leaders has emphasised the informal nature of the session, Europe’s two largest party groupings – the centre-right European People’s Party and the centre-left Party of European Socialists – will both hold pre-summit caucuses starting in the late afternoon.

In the past, the EPP gathering was the more significant affair, with almost every major EU leader (Van Rompuy, European Commission president José Manuel Barroso, Eurogroup chair Jean-Claude Juncker) and leaders from the largest eurozone countries (France’s Nicolas Sarkozy, Germany’s Angela Merkel, Italy’s Silvio Berlusconi) all regular attendees.

At one point, the PES became something of a caucus of the damned, with only Greece’s George Papandreou, Portugal’s José Socrates and Spain’s José Luis Rodriguez Zapatero as centre-left leaders in attendance. Like so much in Europe these days, the French presidential elections have changed all that.

Continue reading: “EU summit: Let the games begin”

Tags: EPP, EU summits, European socialists
Posted in EU | Permalink

The slow-motion run on Greece’s banks

May 17, 2012 10:32 am by Peter Spiegel

People pass Bank of Greece in Athens last week

Jitters over whether Greece will be forced out of the euro have turned the focus of policymakers in recent days on whether Greece is on the precipice of a bank run.

It’s no mere academic exercise; a full-scale bank run would force the European Central Bank and eurozone lenders to either pump in more money – without a new government in place, and no assurances Athens would live up to the rescue terms – or pull the plug on Greece’s financial sector.

Since a banking sector without a central bank would essentially force Greece back to the barter system, there would be few options left then for Athens to begin printing its own currency again. Essentially, the drachma would return through the back door.

As we reported in today’s dead-tree edition, senior eurozone officials responsible for monitoring the currency area’s banking system said the rate of withdrawals thus far falls short of a panic. But the International Monetary Fund’s recent report on Greece makes it clear that a slow-motion bank run has been under way for more than two years, with close to 30 per cent of deposits being pulled out since the end of 2009.

Continue reading: “The slow-motion run on Greece’s banks”

Tags: European banks, European Central Bank, Greece
Posted in EU, Euro | Permalink

Michel Barnier and the future of the French right

May 16, 2012 6:37 pm by Peter Spiegel

In our interview published today with Michel Barnier, the silver-haired Frenchman who oversees the EU’s financial system, he talks in great depth about the future of banking regulation and his relationship with François Hollande.

EU commissioner Michel Barnier

For Barnier, the election back home not only brought him a new French president to deal with, but also a mixed legacy for his political home, the centre-right UMP. The party’s standard-bearer Nicolas Sarkozy used the waning days of the campaign to openly court voters who had supported the far-right National Front through anti-EU rhetoric.

In addition to threatening to pull France out of the EU’s passport-free Schengen travel zone, Sarkozy regularly belittled the European Commission and urged “buy French” policies that violated the EU’s common market.

In our hour-long interview, Barnier insisted that such Europe-bashing was only the result of overheated politics ahead of a contentious vote. “I think you have to put to one side the electoral campaign,” he said, citing UMP party luminaries like François Fillon and Alain Juppé who have strong pro-European pedigrees.

Still, Barnier said he intends to actively insert himself in the post-Sarkozy debate about the UMP’s future – though he assiduously declined to say what role him himself might play in that new party.

Continue reading: “Michel Barnier and the future of the French right”

Tags: France, Francois Hollande, Michel Barnier, Nicolas Sarkozy
Posted in EU, EU Commission | Permalink

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.

Continue reading: “Spain, S&P and the austerty-growth debate”

Tags: credit ratings agencies, Spain
Posted in Economic growth, EU, Fiscal policy | Permalink

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…

Continue reading: “New borders inside Europe? A Franco-German push”

Tags: Greece, Nicolas Sarkozy, Schengen
Posted in EU, EU Commission | Permalink

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…

Continue reading: “When will Portugal need a 2nd bailout?”

Tags: Portugal, sovereign debt crisis
Posted in EU, Euro, Fiscal policy | Permalink

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.

Continue reading: “More leaked warnings, this time for Italy”

Tags: Italy, Mario Monti, sovereign debt crisis
Posted in EU, Fiscal policy | Permalink

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.

Now that the documents are safely back in the FT’s Brussels bureau (which is fully equipped with a document scanner), we thought we’d simply post the entire reports for our regular readers to examine for themselves.

The more tough-worded analysis was prepared by the European Union’s economic and financial committee, headed by Austrian Thomas Wieser, and simply entitled “Assessment of key risks and policy issues”. A link to that 3-pager, which warns market panic could flare up again “at very short notice”, is here.

The other, longer document, prepared by the European Commission’s directorate for economic and financial affairs and entitled “Economic Outlook, Financial Stability in the EU: Policy Challenges and Way Forward”, can be read here.

Tags: EU economic policy, sovereign debt crisis
Posted in Economic growth, EU, EU Commission, Fiscal policy | Permalink

Leaked EU economic analyses on Europe’s banks

March 30, 2012 7:41 pm by Peter Spiegel

Belgium's finance minister Steven Vanackere talks to colleagues at the Copenhagen meeting.

Our front page story in tomorrow’s dead tree version of the FT includes lines from confidential analyses distributed to European Union finance ministers at their gathering in Copenhagen. As usual, we thought we’d offer a bit more from the documents here at the Brussels Blog.

Among the most interesting elements in the documents are discussions about Europe’s banks, which have seen a surge in confidence thanks to the European Central Bank’s €1tn in cheap loans, known as LTRO for long-term refinancing operations.

One of the analyses in particular – the three-page “Assessment of key risks and policy issues” prepared by the EU’s economic and policy committee – warns that there are new signs of instability in the European banking sector. Details after the jump…

Continue reading: “Leaked EU economic analyses on Europe’s banks”

Tags: European banks, European Central Bank
Posted in EU, EU Commission, Financial services | Permalink