Welcome to a live blog of events in Brussels as European leaders meet for a second day to discuss how far and fast to push integration of fiscal and economic systems in the 27-country bloc. Ben Fenton in London is watching.
14.46: And that seems an appropriately grim note on which to end live-blog coverage of the EU council summit, a meeting of which few had high expectations and yet most observers seem still to have come away disappointed.
Until next time.
14.34: Courtesy of Reuters, we have a jolly Christmas message from Chancellor Merkel:
“One reason I am careful with my forecasts is the adjustment process, the changes that we are going through are very difficult and painful.”
“Next year, and the ECB president said this, we will have very low growth rates, we will see negative growth in some countries, and we can expect very high unemployment levels to continue.”
“On the one hand we have accomplished a lot. But we also have tough times ahead of us that can’t be solved with one big step. There has been lots of talk about the one step, whether it be a debt haircut, euro bonds or some other measure that will solve everything. That won’t be the case.”
14.22: US markets unimpressed by the production numbers, according to the FT’s Jamie Chisholm, who says that fears over the “fiscal cliff” have trumped historic numbers (even if the same analysts they rely on completely failed to see that jump coming).
14.17: The Fed says that US industrial production rose 1.1 per cent in November, compared to an analyst estimate of 0.3 per cent. More good news for the US to compare with struggles in Europe.
13.59: A big beat on US flash PMI numbers, estimated to come in at 51.8, have come in at 54.2. That will cheer markets.
13.58: From our Brussels bureau, James Fontenella-Khan has these thoughts on the Italian prime minister’s performance:
Mario Monti remained tight lipped about his political future but Italy’s technocrat prime minister did not deny (or confirm for that matter) that EU leaders had urged him to run in next year’s electoral race.
“I do not think it is either possible or appropriate at the moment for me to enter into this subject, which concerns Italian voters and their choices,” Mr Monti told reporters quizzing him on his political intentions.
Jean-Claude Juncker, Luxembourg’s prime minister, told reporters on Friday that Mr Monti would “take initiatives, that I don’t want to elaborate now”.
Reporters in one of the steaming hot bunker-style conference rooms of the Council in Brussels asked him to confirm this, but he simply deflected the question.
Silvio Berlusconi, Italy’s former prime minister, told the FT yesterday that centre-right leaders gathering at a pre-summit meeting of the European People’s Party were pushing Mr Monti to try his best to stay in power to keep the centre-left out of power.
What’s clear is that the pressure is piling up on the sholders of “il professore”, sooner rather than later he will be forced to make his intentions clear.
13.38: This looks like a pretty core part of the conclusions from the EU summit:
10: It is imperative to break the vicious circle between banks and sovereigns. Further to the June 2012 euro area Summit statement and the October 2012 European Council conclusions, an operational framework, including the definition of legacy assets, should be agreed as soon as possible in the first semester of 2013, so that when an effective single supervisory mechanism is established, the European Stability Mechanism will, following a regular decision, have the possibility to recapitalise banks directly. This will be done in full compliance with the Single Market.
13.30: We had missed the bit of the European Council summit where they started talking about their abdominal muscles! This from the conclusions:
5. The immediate priority is to complete and implement the framework for stronger economic governance, including the “six-pack”, the Treaty on Stability, Coordination and Governance (TSCG) and the “two-pack”. Following the decisive progress achieved on the key elements of the “two-pack”, the European Council calls for its rapid adoption by the co-legislators.
13.27: The conclusions of the European Council meeting just ended have now been put on its website for your reading pleasure.
13.19: If you enjoyed the video of the FT’s interview with Mario Draghi, our Person of the Year, then we are sure you will also want to see Lionel Barber explaining to CNBC why we chose him.
13.07: The FT’s Quentin Peel has been listening to the German chancellor and already spotted some problems in the way this has been mapped out by political leaders:
Angela Merkel insisted she was “very satisfied” with the result of the summit. “We have a clear timetable,” she said. But in her summary she spent a lot of time saying what had been achieved over the past year, and was less clear about the way ahead to closer economic policy co-ordination in the eurozone.
So there will be “bilateral contracts” between the European Commission and individual eurozone members, which once agreed will be binding. But not everyone will be required to sign up. “If a country agrees to spend more money on research and development, then is some cases they will be obliged to do this,” she said. “In other cases, a country might agree to do these actions in its own way.” That sounds like a big concession to Francois Hollande, who has always been very suspicious of such contracts to enforce competitiveness.
Then there will be a “solidarity fund” to provide some project finance to countries in difficulties. But it won’t be a big fund for counter-cyclical spending, as Mr Hollande would have liked. It will be “time-limited and project-specific”, says the German chancellor, and total “not more than Euro10 or 15bn”.
Ms Merkel suggested the fund might be financed by the planned financial transaction tax, which most but not all the eurozone members are committed to introduce. Countries that don’t have an FTT would pay in “an equivalent amount”.
The only trouble is that everyone seems to want to spend the as yet non-existent FTT on different things. The Commission wanted it for general budget finance. Wolfgang Schaeuble, German finance minister, is still reckoning it will be in his domestic budget finance. And there is a need for money for a eurozone bank resolution fund, still to be established. That is supposed to be “fiscally neutral”, meaning no burden on the taxpayer. The banks are supposed to finance it themselves. According to one senior German official, it could take 20 years to get the money out of the banks.
12.45: Here is the post-summit statement from Herman van Rompuy, president of the European council, on what he calls a “very positive” meeting.
12.40: Reporting from the Merkel press conference, the Open Europe bloggers say:
12.39: Meanwhile, Le Monde reports that Merkel has just recorded record popularity figures for a German chancellor with an 81 per cent favourability rating.
12.32: The overall message from Cameron’s speech and answers he gave to questions is that he sees a new Europe emerging, one with many different faces. That will provoke a situation in which the UK has many opportunities for growth and benefit without changing its “outsider” stance, he said.
12.24: Michael Steen has been pulling together all the European data for us this morning.
12.19: Britain should be confident about the future in relation to Europe, Cameron says. “We wrote the rules of the single market and we now benefit from it; we wrote the rules on enlargement and we benefit from that too.”
Cameron rejects the idea of a two-speed, or two-tier Europe and says that is it for this year.
12.15: The British prime minister says that the putative banking union will “lead to opportunities for the UK to make changes in our relationship with the EU”.
12.14: And here he has a quote that will surprise few observers of the Conservative party:
12.12: Brussels veteran David Gow tweets:
12.11: So, the formal events of the summit are now finished and the individual leaders are beginning to emerge onto various podia (?) to give their spin, sorry, version of events. Angela Merkel and David Cameron first.
12.06: Michael Steen reports from the FT bureau in Frankfurt with important vocabulary news:
The Society for the German Language announced its word of the year on Friday – Rettungsroutine – a compound noun meaning “rescue routine” that perfectly encapsulates the almost humdrum procession of national leaders to Brussels for repeated summits in their attempts to keep the eurozone together. In their citation the judges wrote:
“The contradictory meanings of the two elements of the word are linguistically interesting. While a rescue in its true sense is an acute and completed action, the sense of routine – a word borrowed from the French – is a repetitive, if not permanent development based on past experiences.”
Last year’s winning word? “Stresstest”. (Although a separate annual exercise organised by a linguist at the University of Hamburg that decides on the Anglicism of the year to make the jump into the German language came up with, er, “shitstorm” in 2011. It has yet to pronounce on its 2012 word of the year.)
11.59: Here’s a bit more from those disappointed folk from Barclays in a note issued this morning:
EU Summit: Even more disappointing than we anticipated
EU leaders watered down significantly proposals by President Van Rompuy, the Commission and the European Parliament when they met yesterday to discuss the future of the EMU. For the near future, the focus is on the coordination of national policies, with the immediate implementation of the “six-pack”, the “two-pack” and the fiscal compact, within the legal framework of existing EU institutions. EU leaders have tasked the President of the Council to continue to steer the discussions and to present a detailed roadmap at the June 2013 European Summit on the coordination of national reforms, the social dimension of the EMU, the modalities of contractual arrangements to promote competitiveness and growth, including the solidarity mechanisms underpinning these contracts. The guidelines on the way to insure democratic legitimacy remain very vague at this point and mention the role of both National Parliaments and the European Parliament.
Banking union: A good deal but implementation slow
The Ecofin reached agreement on Wednesday on the design of the single supervisory mechanism (SSM). EU leaders last night welcomed this agreement and urged the co-legislators to swiftly implement this agreement and adopt the corresponding regulations. As expected, the ECB will be in charge of the supervision of all European banks but for banks below a certain threshold (assets of less than €30bn) the day-to-day supervision will be the responsibility of national supervisors. The system is, as expected, open to non-euro area member states, and an agreement has been reached on the balance of power between ins and outs. The EBA will retain its competence for developing the common banking regulation and ensuring convergence and consistency in supervisory practice. But the proposal also includes changes to the EBA regulation, in particular with regards to voting modalities, to ensure equitable and effective decision-making within the single market.
11.50: Analysts are rushing to express their disappointment with the summit, in fact to outdo each other in the degree to which the EU has fallen short of their low expectations, says Robin Wigglesworth, the FT’s capital markets correspondent:
11.47: Alexander Stubb, the Finnish European affairs minister, is tweeting again (see 09.32). The man with surely the widest smile in Europe, has this to say:
11.38: Very nice piece on SpiegelOnline by @CarstenVolkery the magazine’s correspondent in London and a Brussels veteran, explaining how the EU’s leaders lost their ambition at this summit. He blames it on Christmas (and they only ate turbot for dinner, imagine how stultified things would have been with a full carp inside them).
As recently as November, Chancellor Angela Merkel said that this month’s EU summit would set an ambitious timeline for far-reaching reforms in the euro zone. European leaders in Brussels responded to relative calm on the markets by backing away from such aspirations and taking a breather.
The list of accomplishments this latest European Union summit was supposed to deliver was long: The euro zone was to receive a substantial push forward with a decisive redesign of the currency union’s architecture. There was even to be a new convention to rapidly adjust EU treaties to the realities of the changes occurring in the euro zone.
As recently as November, Chancellor Angela Merkel announced in a speech before the European Parliament that the December summit would establish an “ambitious timeline” for the next two to three years.
Yet by the time the 27 heads of state and government arrived in Brussels on Thursday evening, such ambition had been forgotten. It could be pre-Christmas exhaustion that got the better of the EU leaders, but enthusiasm for reform was nowhere to be found. One after another, they insisted that they would merely hold non-binding talks about the deepening of the currency union.
11.09: And it would seem that fisheries policy is under discussion inside the summit as David Cameron, the UK tries to recruit Angela Merkel’s support for his vision of the absolute smallest size of herring that should be allowed to be caught by European trawlers.
11.01: First pictures coming in from Brussels of leaders arriving and if there was any doubt that Mario Monti is the best-informed, best-read and wisest prime minister of Italy for many a year, we think this picture confirms it (but we may be biased).
10.57: In news that cycling fans at least might see as a sign of greater unification in Europe, the organisers of the Tour de France have announced that next year’s race will begin in Yorkshire. No word yet on whether it will be called “t’Tour” for the duration of its presence in England’s most idiosyncratic county.
10.53: And here is the FT’s considered view on the progress made on regulation at the summit.
10.49: While we wait for news to trickle out of the summit (if there is to be any), here are a couple of other ICYMIs from FT.com. (that is “in case you missed it”, for anyone who doesn’t speak Twitter)
First, Alex Barker and Quentin Peel in Brussels and Gerrit Wiesmann in Berlin set the scene for where Thursday’s agreement on banking regulation will lead next:
One exhausted EU official dubbed it “the miracle”. But before a legal text on creating a single bank supervisor had even been released, the battle lines were already drawn over the next phase of banking union: joint rescues for failed banks.
This first step – common supervision – was close to unthinkable at the beginning of this year. When European finance ministers agreed at 4am on Thursday to surrender oversight of national lenders to the European Central Bank it did, after all, represent the most ambitious integration scheme since the creation of the single currency.
10.23: Sarah O’Connor from the FT’s economics team says there are some UK figures to consider too:
10.20: Arriving at the summit, Mariano Rajoy, the Spanish prime minister, has told a Spanish radio station that the country still doesn’t need a bailout, according to Bloomberg, but he made it sound a rather simpler decision than it is, or may be:
“Today we don’t need it,” Rajoy said in an interview with Cadena Ser from Brussels, where he’s attending an European Union summit. “If it’s necessary we will use it, and if it’s not, which it isn’t at the moment and that’s why we haven’t used it, well we won’t.”
10.14: Markets are taking more notice of the German PMI figures, however, which were below consensus forecasts, especially on manufacturing, where the figure of 46.3 was down from 46.8 in November and well under the Reuters poll of analysts who expected 47.2.
Small early gains on European markets and in the value of the euro against the dollar were pulled back by the disappointing news.
10.09: There have been plenty of PMI figures around this morning, with the Markit PMI Composite improving from 46.5 in November to 47.3. Within that, Manufacturing PMI was up a smidgeon from 46.2 to 46.3 and the Services measure had a bigger rise to 47.8 from 46.7.
10.07: There’s also a transcript of the full interview and a video to boot:
10.03: In case you missed it, the FT has made Mario Draghi its Person of the Year and, not uncoincidentally, features a big interview with him conducted by Lionel Barber, the editor, and Frankfurt bureau chief Michael Steen as well as an analysis of his success in 2012.
The main story to be drawn from that:
The EU needs fresh powers to wind up failing banks in a speedy push to the next phase of banking union, according to Mario Draghi, president of the European Central Bank, after a landmark agreement on centralised supervision.
The hard-won agreement among eurozone finance ministers on Thursday to appoint the ECB as the “single supervisory mechanism” (SSM) is just the first, and easiest, step in a banking union plan designed to prevent a repeat of the financial contagion that dragged down banks and sovereigns in the debt crisis.
09.41: Markets around the world have other things on their minds than the summit, according to Jamie Chisholm’s global markets overview‘ on FT.com, notably China surges and US cliffs:
The penultimate full trading week of the year is ending with a flurry of potential catalysts and contrasting fortunes as China’s stock market surges but US fiscal cliff concerns leave many equity benchmarks struggling to revisit recent multi-month highs.
The FTSE All-World index is up 0.1 per cent to 222 – less than 2 points below its best closing level since July 2011 – after the Asia-Pacific region just managed to take its winning streak to 12 days with a 0.1 per cent advance.
The FTSE Eurofirst 300 has opened flat, though according to futures trading Wall Street’s S&P 500 will add 3 points to 1,422 at the starting bell.
Gold is up $3 to $1,700 a troy ounce, the dollar index is down 0.2 per cent and 10-year Treasury yields are up 1 basis point to 1.74 per cent as investors continue to absorb the US Federal Reserve’s decision to extend its quantitative easing programme.
09.36: While other European leaders may be feeling a bit red-eyed, Irish eyes, as they do traditionally according to the song, should have been smiling, the FT’s Jamie Smyth in Dublin says:
While Enda Kenny, Ireland’s prime minister, continues to push for a deal on Ireland’s €64bn bank debt at the EU summit this morning he received some support from the man who has helped position the country as the Eurozone’s most likely bail out success story.
Michael Hasenstab, the US bond trader whose fund has bought a tenth of Ireland’s bonds over the past 18 months, told The Irish Times on Friday the country “deserved” a deal on its legacy bank debt.
“Ireland is benefiting from the fact that it took the tough medicine upfront but the terms that they got from official support probably could be revisited,” he told the newspaper.
Hasenstab, who oversees $165 billion in investments for asset management company Franklin Templeton, began buying Irish bonds in July 2011 when the country was in crisis and its benchmark 10 year bonds traded at almost 15 per cent. His euro 8.5bn investment has helped drive Irish yields below 5 per cent enabling the country to return to international bonds markets this year to raise fresh debt.
The 39 year old trader said the turnaround in the Irish economy will be “one of the best investments of the decade”.
“I think there’s a fair amount of regret by some people who sold those at distressed prices when they are now trading at par [face value] or above par. I think there is also some regret from people who missed what I would argue is one of the best investments of the decade: the Irish turnaround,” he told the paper.
09.32: But, as the leaders slouch in feeling a bit TGIF, we should perhaps bear in mind the wise words of Alexander Stubb, the Finnish minister for European affairs:
09.30: Well, it’s been a slow start in Brussels on Friday, after two late nights and quite a bit of action on the banking regulation front, as Peter Spiegel, Josh Chaffin and Quentin Peel report from the Belgian capital:
An EU summit once touted as a gathering to set the future course of the eurozone has instead put off all major decisions on closer fiscal and economic integration until June, dealing a blow to efforts by the presidents of the bloc’s largest institutions to jump-start the effort early next year.
Coming less than 24 hours after finance ministers took a significant step towards creating a banking union within the eurozone, EU heads of government appeared to decide that such progress was sufficient for now and that other elements of integration for the single currency bloc could be delayed.