Fiscal policy

New FT/Harris poll: Italians receptive to Berlusconi?

December 11, 2012 11:55 am by Peter Spiegel

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

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Posted in EU, Euro, Fiscal policy |

Leaked bailout deal for Cyprus: €10bn for banks

December 3, 2012 12:52 pm by Peter Spiegel

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

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Posted in EU, Euro, Fiscal policy |

Leaked Greek troika report: devil in the details

November 12, 2012 8:47 pm by Peter Spiegel

Greek finance minister Yannis Stournaras, left, and IMF chief Lagarde at Monday's meeting.

It may be incomplete and its conclusions subject to debate, but on Monday night eurozone finance ministers got a draft copy of the much anticipated troika report on Greece. As we report online, there’s not much in it we didn’t already know – including the fact Greece will need as much as €32.6bn in new financing if the programme is extended through 2016.

But the language in the report is, as usual, pretty revealing. We’ve posted a copy of the draft here. It makes clear that eurozone creditors will be leaning on Greece pretty heavily for the foreseeable future. This, in spite of the fact the Greek parliament barely passed €13.5bn in austerity measures last week amidst serial defections form its governing coalition.

The most glaring is that Athens will have to find an additional €4bn in austerity measures for 2015 and 2016, meaning the pain isn’t done yet. But it also implies there are some more shorter-term measures that haven’t been completed yet that the troika is expecting.

Greece has revamped its reform effort and fulfilled important conditions…. These steps, which have tested the strength and cohesiveness of the coalition supporting the government, leaving also some scars therein, significantly improve the overall compliance, provided some remaining outstanding issues are solved by the authorities.

 Read more

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Posted in EU, Fiscal policy |

Reader’s guide to Greece: Eurogroup edition

November 12, 2012 12:00 pm by Peter Spiegel

Greek finance minister Stournaras, left, and prime minister Samaras during last night's debate.

Tonight’s meeting of eurozone finance ministers was, as recently as a week ago, thought to be the final bit of heavy lifting needed to complete the overhaul of Greece’s second bailout. After all, Athens has done what it promised: it passed €13.5bn of new austerity measures on Wednesday and the 2013 budget last night.

But EU officials now acknowledge that the Brussels meeting of the so-called “eurogroup” will not make any final decisions on Greece amid continued debate over how much debt relief Athens needs – and how fast it should come. That means a long-delayed €31.3bn aid payment will be delayed yet again.

One EU official said that despite hopes, the key part of a highly-anticipated report from international monitors – known as the “troika report” because it is compiled by the European Central Bank, International Monetary Fund and European Commission – will not be ready in time for tonight’s meeting: the debt sustainability analysis, which remains a point of contention. Read more

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Posted in EU, Euro, Fiscal policy |

Greekileaks 2: The new draft MoUs for Athens

October 25, 2012 11:38 am by Peter Spiegel

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

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Posted in EU, Fiscal policy |

Lagarde urges 2 years for Greece. What will it cost?

October 11, 2012 12:47 pm by Peter Spiegel

IMF managing director Christine Lagarde, during this morning's news conference in Tokyo.

IMF chief Christine Lagarde’s declaration this morning that Greece should be given two more years to hit tough budget targets embedded in its €174bn bailout programme – coming fast on the heels of German chancellor Angela Merkel’s highly symbolic trip to Athens – are the clearest public signs yet of what EU officials have been acknowledging privately for weeks: Greece is going to get the extra time it wants.

But what is equally clear after this week’s pre-Tokyo meeting of EU finance ministers in Luxembourg is there is no agreement on how to pay for those two additional years, and eurozone leaders are beginning to worry that the politics of the Greek bailout are once again about to get very ugly.

The mantra from eurozone ministers has been that Greece will get more time but not more money. Privately, officials acknowledge this is impossible. Extending the bailout programme two years, when added to the policy stasis in Athens during two rounds of elections and a stomach-churning drop in economic growth, means eurozone lenders are going to have to find more money for Athens from somewhere. Read more

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Posted in Economic growth, EU, Fiscal policy |

Can Brussels really have a quiet August?

July 27, 2012 11:32 am by Peter Spiegel

With the European Commission holding its final summer meeting on Wednesday, Brussels goes on holiday in earnest starting next week, with nothing on the formal EU calendar until a meeting of European affairs ministers in Cyprus on August 29.

But if whispers in the hallways are any indication, veterans of the eurozone crisis remain traumatised by last August, when some inopportune comments by then-Italian prime minister Silvio Berlusconi shook Europe from its summer slumber. Indeed, Maria Fekter, Austria’s gabby finance minister, has already speculated on the need for an emergency August summit.

Herewith, the Brussels Blog posts its completely unscientific odds on which of the eurozone’s smouldering crisis embers could reignite into an out-of-control summer wildfire, forcing cancelled hotel bookings and return trips to Zaventem. Read more

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Posted in Euro, Fiscal policy |

The moment George Osborne was encircled

May 17, 2012 9:41 am by Alex Barker

George Osborne, the UK chancellor, surrounded at the marathon Brussels negotiations on bank capital rules. The May 2 talks ended at 2am with Osborne outnumbered 26-1 by other EU finance ministers. A deal was finally done on Tuesday.

  Read more

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Posted in EU, Fiscal policy |

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 |

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 |
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