Dijsselbloem, left, with his predecessor Juncker after his election as eurogroup president
Spain’s decision to abstain from Monday night’s vote on Dutch finance minister Jeroen Dijsselbloem’s ascendance to the chair of the eurogroup served to highlight the almost complete dominance of the EU’s triple-A countries in securing top economic jobs in the eurozone.
If we include France and Austria (both of which were downgraded last year by Standard & Poor’s, but retain triple-A ratings from Fitch), the six creditor countries have swept nearly every big opening save the European Central Bank presidency – which was secured by Italian Mario Draghi only after Axel Weber, then head of the German Bundesbank, unexpectedly withdrew his candidacy.
“The Dutch minister seem to us an appropriate person, but fundamentally, it’s a matter of institutional calculations,” Luis de Guindos, the Spanish finance minister, said today in explaining Madrid’s abstention. “Spain has taken a position in regards to a situation that it considers is unjust, which is the representation to the European institutions.”
Madrid has a particular reason to complain, since it has been completely shut out of the top jobs after losing a Spaniard on the ECB’s executive board last year, despite being the euroszone’s fourth largest economy. Dijsselbloem said he has invited De Guindos to The Hague to discuss the issue. The Spaniard has accepted, officials said.
After the jump, a run-down of the triple-A’s recent winning streak: Read more
Ireland's Kenny, right, with European Commission chief Barroso at start of the Irish EU presidency.
Ireland appears to be taking advantage of the comparatively positive sentiment in the eurozone that has marked the start of the year by moving back into the bond markets in a major way.
Last week, Dublin raised €2.5bn by issuing additional five-year government bonds, and then days later was able to convince private investors to buy €1bn in debt it holds in one of the largest banks nationalised at the peak of its banking crisis. This morning, the government was at it again, announcing a €500m auction in short-term t-bills will take place tomorrow.
Despite the winning streak, there’s still a lot of nervousness in official circles about whether Ireland can fully emerge from its bailout when its €67.5bn in rescue loans run out in November. All this has led to a debate in Dublin about whether Ireland should seek additional aid, such as a line of credit from the International Monetary Fund or the EU – which would be backed by the European Central Bank’s new limitless bond-buying programme – to provide a backstop to new Irish bonds.
The Irish website TheStory.ie got its hands on the new European Commission report on the Irish bailout, which makes clear on page 44 that Dublin is in discussions with the troika about whether the ECB’s bond-buying programme – known as Outright Monetary Transactions – can be accessed: Read more
Enda Kenny, Ireland's prime minister, during a November EU summit in Brussels
One of the hardest things about keeping on top of the eurozone crisis is the tendency for issues once regarded as done and dusted to re-emerge months later as undecided. In the new year, there are two places where this revisionism will be thrust back into the limelight: Cyprus and Ireland.
In Cyprus, two hard-and-fast principles, long believed sacrosanct, will be tested. The first is eurozone leaders’ long-held insistence that Greece is “unique”, in that it would be the only eurozone country where private holders of sovereign debt would be defaulted on.
With Cyprus’s bailout likely to double the country’s debt levels, officials say debt relief must come from somewhere or Nicosia faces a burden rivalling Greece’s – somewhere in the neighbourhood of 190 per cent of economic output. Haircuts for private bondholders could be one option to lower that, though for the time being Jean-Claude Juncker, outgoing head of the eurogroup of finance ministers, insists it’s off the table.
Which takes us to controversial option two: wiping out senior creditors in Cypriot banks. If creditors don’t need to be repaid, than the size of the bailout can be much smaller. This may appear more palatable to eurozone leaders – after all, about €12bn of the €17.5bn in bailout funding is need to recapitalise Cyprus’s collapsing banking sector – but it would also break unspoken rules. Read more
Berlusconi, right, hands over ceremonial bell to Monti, marking the transfer of power last year.
With Silvio Berlusconi’s vow to run again for prime minster in February’s snap elections on an avowedly anti-German and anti-austerity platform, Italian attitudes towards Berlin and the EU’s handling of the eurozone crisis are suddenly back on the front burner.
Fortuitously, we just completed one of our regular FT/Harris polls, which surveyed 1,000 adults in the EU’s five biggest countries – including Italy– in November. And it’s no wonder Berlusconi believes his new attacks will be receptive at home: Italian attitudes against Germany and austerity are hardening.
We’ve posted the 16-page report with the complete results here for anyone who wants to wade through them, but it’s worth highlighting the Italian findings. Fully 83 per cent of those polled believe Germany’s influence in the EU is “too strong” – the same total as Spaniards, but a stunning jump since October 2011 when only 53 per cent of Italians felt that way. Read more
Juncker, right, with potential successor Pierre Moscovici, France's finance minister
Jean-Claude Juncker, the Luxembourg prime minister who heads the eurogroup of finance ministers, set off another round of speculation about his potential successor Monday night when he reiterated that he wanted to step down from the job either by the end of the year or early next year.
Senior officials who should know about leading candidates insist nobody has emerged as a clear front-runner to take over the post, despite Juncker’s Shermanesque declaration. But that hasn’t stopped the guessing game. The criteria are unhelpfully vague. The latest EU treaty basically says that anyone with a pulse can hold the job:
The Ministers of the Member States whose currency is the euro shall elect a president for two and a half years, by a majority of those Member States.
But after two days of gossiping in the halls, here is the sum total of what Brussels Blog has gleaned on the topic, boiled down to three groups of candidates. Read more
Van Rompuy is, once again, asking summiteers to endorse the idea in draft conclusions.
When José Manuel Barroso, the European Commission president, unveiled his blueprint for the future of the eurozone last week, aides acknowledged it contained some blue-sky ideas that were meant to provoke debate as much as set firm policies.
But EU presidents and prime ministers may be asked to endorse some of its more controversial ideas if a leaked copy of the communiqué for next week’s EU summit is any indication – including a plan to have all eurozone countries sign “contractual” agreements with Brussels akin to the detailed reform plans currently required only of bailout countries. We’ve posted a copy of the draft, dated Monday, here.
The idea of the Brussels contracts was originally advocated by the summit’s chair, European Council president Herman Van Rompuy, ahead of October’s gathering. But in the end, summiteers only agreed that such a plan should be “explored”. Read more
Cyprus finance minister Vasos Shiarly, left, with EU economics chief Olli Rehn.
With the Greek government announcing the details of its highly-anticipated debt buyback programme this morning, there really is only one major agenda item offering any suspense at tonight’s meeting of eurozone finance ministers in Brussels: Cyprus.
Brussels Blog has got its hands on the draft deal between Nicosia and the “troika” of international lenders (with the words “contains sensitive information, not for further distribution” on top of each of its 29 pages) that, for the first time, lays out in minute detail just what the Cypriots are being asked to do in return for bailout cash. We’ve posted a copy here.
Senior Cypriot and eurozone officials have cautioned that the whole deal cannot be completed until Pimco, the California-based investment firm, finishes a complete review of the teetering Cypriot banking sector. But the Memorandum of Understanding pencils in €10bn to recapitalise banks.
Considering Cyprus’ entire economy is only €18bn, that’s a whopping sum, equivalent to 56% of gross domestic product – much higher than either the Irish or Spanish bank bailouts.
Which raises a problem: Cypriot sovereign debt is already at almost 90 per cent of GDP. The bank rescue, plus additional cash that will be lent to run the Cypriot government, will take that debt to levels the International Monetary Fund has, in the past, argued is unsustainable. Read more
IMF chief Christine Lagarde arrives at Monday's eurogroup meeting where Greek deal was struck.
When eurozone finance minsters announced their long-delayed deal to overhaul Greece’s second bailout early Tuesday morning, there was much they didn’t disclose.
The most glaring was how big a highly-touted bond buyback programme would be, a question dodged repeatedly at a post-deal news conference. But there were other things that were left out of a two-page statement summing up the deal, including how much the European Central Bank was making on its Greek bond holdings, profits that will be returned to Athens as part of the agreement.
It turns out, those were not the only – or even the biggest – unanswered questions left after the early-morning deal. As we report in today’s dead-tree edition of the FT, ministers failed to find enough debt relief measures to get to the purported Greek debt target of 124 per cent of economic output by 2020, far above the 120 per cent target set in February.
In reporting our story, we relied heavily on a leaked chart that we got our hands on (which we’ve linked to here) that lays out in great detail the assumptions built into the new programme. A quick review of the chart comes after the jump… Read more
Germany's Schäuble and France's Moscovici after the 1st attempt this month to reach a Greek deal.
Eurozone finance ministers have begun arriving at the EU’s summit building in Brussels for their third meeting in two weeks to try come up with a deal to get Greece’s overweening debt levels back down to levels that can credibly be considered sustainable.
For those who need a reminder of where the talks stand, we offer a handy official chart we got our hands on (see it here) which shows just how big the debt gap is – a gap that must be closed to finalise the overhauled programme and release the long-delayed €31.3bn in bailout assistance.
The key thing to remember is the last time the eurozone revamped the Greek programme in February, they agreed that it would return Athens to a debt level of 120 per cent of economic output by 2020. This has become a de facto benchmark.
As the chart shows, without any debt relief, Greece’s debt is now expected to be at 144 per cent by 2020 and the entire debate today (and possibly tonight) will be on who will give up some share of Greek debt repayments to bring that down. Read more