Wolfgang Schauble

Varoufakis (right) and Schäuble shake hands ahead of Wednesday night's eurogroup meeting

[UPDATE] In response to our post below, the Greek government this morning has denied it ever agreed to the text we got our hands on. “At no point in time did the Greek delegation give consent to the text that has been published,” said Nikos Pappas, the prime minister’s chief of staff. Our account is based on several sources from multiple delegations, so we stand by our story. However, Greek officials insist the text they agreed to Wednesday night was actually an earlier version than the final statement we published. These officials say the agreed draft was changed before it was to be issued at a late-night press conference by Jeroen Dijsselbloem, the eurogroup chairman, prompting their veto. The drama continues…

Wednesday night’s breakdown in talks between Greece and the other 18 eurozone finance ministers happened at such the last minute that many of the participants in the eurogroup meeting – including Wolfgang Schäuble, the powerful German finance minster – didn’t even know it had happened, since they had already left the building.

According to several officials involved in the talks, Yanis Varoufakis, the Greek finance minister, had agreed to a joint statement with his colleagues, a statement that was even signed off by Greece’s deputy prime minister, Yannis Dragasakis, who was also in Brussels for the gathering.

Once agreed, the eurogroup meeting broke up and Schäuble and several of his colleagues headed out the door. But officials said Varoufakis put in one last call back to Athens to inform them what he had just agreed to – and government officials vetoed the statement.

We at Brussels Blog got our hands on the statement and have posted it below. In many senses, it has a little bit for everyone. For eurozone officials, who were pushing Athens hard to request an extension of the current €172bn bailout, which expires at the end of the month, it leaves open the option to “explore the possibilities of extending” the programme.

For Varoufakis, there’s even the word “bridge” mentioned in the final paragraph – though not in the sense the Greek minister probably wanted, which is as part of a bridge financing deal. Read more

Predicting what Germany will do in a negotiation is fast becoming the Brussels equivalent of soothsaying. Tuesday’s tetchy banking union talks set off yet another diplomatic stampede to consult the ouija boards, throwing canes and tarot cards in order to find out what Berlin really wants.

Were the strident objections of Wolfgang Schäuble, the German finance minister, just negotiating tactics? A manifestation of German domestic politics? Or are they red lines that will require the reforms to create a single banking supervisor to be totally recast or significantly delayed? We’ve consulted the FT Brussels Blog Oracle (and a few diplomats) to draw up these two scenarios.

The Germans are digging in: no deal this year

There was genuine shock at Schäuble’s intervention. Ahead of Tuesday’s meeting of finance ministers, four EU ambassadors predicted to us that a deal — or partial agreement — was at hand. That was until Schäuble spoke. He opened with a dispute that officials thought was close to being resolved: whether small banks fall under the ECB’s supervision responsibilities. Don’t think this will pass the German parliament, he warned.

More worrying for some was his next point. Read more

Germany's Schäuble, left, and France's Moscovici sent the Tobin letters out this morning.

First, it was going to be a global financial transactions tax – known among the cognoscenti as the Tobin tax – agreed by the Group of 20 major economies, but the US wouldn’t go along. Then it was going to be an EU-wide levy among all 27 members of the bloc, but the UK and several Nordics disagreed.

That got whittled down to the 17 eurozone members, but the Dutch and Irish didn’t want it. So, starting today, a final push to find nine EU members who will sign up to the Tobin tax was launched by France and Germany, who sent letters around this morning to all EU finance ministries looking for takers.

Under the EU’s arcane rules, if nine sign up, Paris and Berlin can move ahead with “enhanced cooperation” – essentially a tool that allows a small subset of countries to agree on common policies and still stay within the EU’s legal system. But it’s not certain they’ll find even nine, EU diplomats said.

According to copies of two letters obtained by Brussels Blog – one to the European Commission, the other to national capitals – co-signatories Pierre Moscovici, the French finance minister, and Wofgäng Schauble, his German counterpart, are trying to gain support by arguing the tax is the financial sector’s contribution to eurozone crisis response. Read more

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.

 

Eurogroup contenders Juncker, left, and Schäuble

Although the financial markets and many non-Europeans will be watching Friday’s gathering of eurozone finance ministers in Copenhagen to find out how much they will enlarge Europe’s rescue fund, the Brussels echo chamber will be watching for another reason entirely: Just who will be getting three top jobs that must be filled by the time summer rolls around?

Up until the last day or two, the smart money was that Yves Mersch, head of Luxembourg’s central bank, would get the first job on offer – a coveted seat on the European Central Bank’s six-member executive board, taking away a post originally slated to go to a Spaniard, Antonio Sáinz de Vicuña.

But senior eurozone officials said the intense politicking that has occurred in the run up to Friday’s meeting has made Mersch’s appointment less certain. “It’s one of those things that could go one way or another,” said one person directly involved in the talks. “I wouldn’t bank on it yet.”

The politics get very complicated and are directly related to the re-election prospects of French president Nicolas Sarkozy. A detailed explanation of the convoluted twists after the jump… Read more

German finance minister Wolfgang Schäuble

Influential Nobel Prize-winning economist Paul Krugman has picked yet another fight with eurozone politicians, this time with Germany’s Wolfgang Schäuble.

On his New York Times blog, Krugman takes issue with the German finance minister’s claim at a panel discussion in Frankfurt on Thursday that “economists worldwide” agree the 2008 eurozone crisis was triggered by excessive public debt “everywhere in the world”.

Krugman says excessive public debt actually triggered a crisis in only one country, Greece. Ireland and Spain’s problems only become a public debt crisis after private-sector bank debt was moved onto the government books through bail-outs. Similarly, until the recent standoff over the US debt ceiling, American problems have originated in the financial sector. Read more