Eurointelligence Daily Briefing, 24 de Fevereiro de 2012. Enviado por Domenico Mario Nuti



The Greek torture list in full


  • The FT has obtained the detailed list of how the EU plans to micromanage Greece;
  • measures include 38 specific changes in Greek tax, spending and wages policies by end of the month;
  • reforms spelt out in three separate memoranda of a combined 90 pages;
  • there is also a ten-page list of prior actions, to be completed by Wednesday;
  • many of those measures had already been agreed, but stalled subsequently in the implementation phase;
  • opposition within Angela Merkel’s party to the Greek deal is growing, as a result of which she may have to rely on the opposition at the vote scheduled for Monday;
  • MPs also make their assent dependent on final agreement on IMF participation;
  • Greek parliament approves bond swap, to be launched today;
  • Jan Kees de Jager warns that Greece will need more public support in the future;
  • Paul Krugman says Greek politicians are trapped between two catastrophic options;
  • Mario Draghi hints at a tighter monetary policy stance, as recovery takes hold;
  • says net liquidity effect of LTRO was €200bn;
  • also says there will be no further relaxation in collateral requirements;
  • he said that a selective default rating for Greece would trigger the provision of EFSF collateral in the order €35bn;
  • European Commission forecasts a 0.3% contraction of GDP this year;
  • Italy to contract by 1.3%, Spain by 1% and Greece by 4.3% with substantial downward risks;
  • Germany’s Ifo index defies expectations, rising for the fourth month in succession;
  • James Saft, meanwhile, argues that sovereign bondholders have effectively been subordinated as a result of the eurozone rescue policies.

Eurointeligence Comment and Analysis

To make or break the euro: Germany’s euro trilemma

by Jörg Bibow

Replacing lending by transfers, fiscal union proper could save and make the euro overnight. By contrast, ECB liquidity cannot make competitiveness imbalances and the corresponding debt flows go away, even as the foul debts now accumulate on the Eurosystem’s balance sheet.

The FT has obtained documents showing that the EU is demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month, plus further reforms. The reforms are spelt out in three separate memoranda of a combined 90 pages.


They include an overhaul of judicial procedures, centralising health insurance, completing an accurate land registry, installation of computer systems for tax collectors, changes to drug prescriptions, and setting minimum crude oil stocks. There is also a 10-page list of “prior actions” that must be completed by Wednesday in order for eurozone finance ministers to give a final sign-off to the new bail-out at an emergency meeting scheduled for Thursday. It comprises 38 measures in the form of acts of parliament, ministerial decisions and presidential decrees, affecting topics such as health spending, municipal administration and tax collection.


So far, only a handful of the measures are listed as passed or in the process of being implemented, including the pension and spending cuts. Among the measures that must be completed in the next seven days are cuts in state spending on pharmaceuticals by €1.1bn;

75 full-scale audits and 225 value added tax audits of large taxpayers;

liberalising professions such as beauty salons, tour guides and diet centres. A draft 49-page “memorandum of understanding on specific economic policy conditionality”, dated February 9, includes dozens of measures that must be completed in the first half of the year.


The article says that the opening up of closed professions was agreed last year, but stalled in subsequent stages as parliament failed to agree on measures to implement the law.


Growing opposition in German coalition to Greek agreement

Reuters reports from Berlin that resistance to the Greek bailout is growing among German coalition MPs, quoting a report in the Rheinische Post newspaper. Merkel may have to rely on opposition support to win the vote next week. CDU budget spokesman Norbert Barthle said that the number of MPs in the CDU/CSU who will vote against the bailout would be around a dozen, after only four declared such a stance on Wednesday.  The SPD and the Greens already said they would support the package, so that the passage of the package is not in doubt.

In Berlin, a senior official of Chancellor Angela Merkel’s ruling Christian Democrats said lawmakers due to vote on the bailout on Monday would make it dependent on the IMF taking part as planned.  European and IMF sources have told Reuters the Fund could contribute €13bn in new money on top of €9.9bn still unpaid from the first bailout. The extent of the IMF contribution still has to be discussed by the board.


Greek parliament approved bond swap, official offer to be launched today

Greek parliament approved the bond swap with private bond holders on Thursday, Kathimerinireports. The official public offer to bondholders is to be made today with the aim of completing the procedure by March 12. The bill which details the austerity measures including pension cuts was approved by Parliament’s social affairs committee and is due to be voted next Wednesday.


Dutch Finance minister keeps pressure up on Greece

Dutch Finance Minister Jan Kees de Jager, who took a particularly hard line during negotiations over the latest Greek bailout, gave another warning in a letter to the Dutch parliament that the second bailout package might not be enough: “The package is no guarantee that the problems in Greece will be solved,” Reuters quotes from De Jager’s letter“ .. it is uncertain when Greece will again get market access, making it therefore impossible to rule out that Greece needs extra public sector support, as I have discussed earlier in Dutch parliament.”  De Jager has warned in the past week of the risks to the Greek rescue package from Greece’s past behaviour and the possibility it may need further financial support when the current program ends.


Paul Krugman on the Greek trap

This is a very perceptive commentary by Paul Krugman on austerity from a Greek perspective. He says Greek politicians are trapped between two unworkable alternatives – a counter-productive austerity programme, and a euro exit.

“If you imagine yourself as the Prime Minister of such a country, what can you do? For the most part, I’m afraid, you plead with the troika to make the austerity demands less severe, you do what you can to accelerate improving competitiveness (which isn’t much), and you wait for things either to get gradually better via ‘internal devaluation’ or to get worse and provide the economic and political environment in which euro exit becomes a real possibility. It’s a hell of a way to make economic policy, but I don’t see any magic bullets.”


Draghi hints at a tighter monetary policy stance

In an interview with Frankfurter Allgemeine Zeitung Mario Draghi hinted that the ECB would rather tighten its monetary policy stance than loosen it further. Draghi ruled out that that the ECB would relax the quality requirements for collateral further and said: „With the outlook of today in mind, the topic for the future will be rather to raise the requirements.“ Also he minimized the impact of last December’s 3y LTRO by emphasizing that the net added liquidity was not close to €500bn but only €200bn. The ECB president went on to say that in the past two weeks there had been continued positive signs in the eurozone although uncertainty remained. That remark could be interpreted as a signal to markets that at the moment they should not expect further cuts in the ECB’s policy rate of 1.0%. Draghi also said that for the time being he would not announce a definite closure of the SMP despite the fact that bond purchases of the ECB have gone down to zero last week. „Markets are still vulnerable. Therefore we have to very careful with announcements that such an instrument would be abandoned.“

Draghi also talked about the situation in Greece after the second rescue package, PSI and the possible introduction of collective action clauses. Should the rating agencies downgrade Greece to „selective default“, the EFSF would temporarily provide for additional collateral in the magnitude of €35bn, he said, a reference to the value of Greek bonds that the ECB could not accept as collateral for a certain time once the downgrade happens.

Draghi also said that since the Deauville, government bonds no longer were a risk free asset class with the consequence that spreads had reverted to their pre-EMU levels in some countries. Draghi applauded that development because market prices exercised a corrective function on governments and, according to his view, „that is good“.


Commission expects eurozone in recession this year

The euro-zone economy is now expected to contract in 2012 by 0.3%, the European Commission warned in its autumn forecast on Thursday. Most eurozone countries have their GDP growth outlook for 2012 revised downwards compared to last autumn forecast. The downward revision is broad-based across member states though the magnitude is different. Italy’s 2012 outlook was among the most significant changes, predicting a contraction of 1.3%, revised downwards from a 0.1% expansion. Spain’s economy is expected to shrink 1% this year, compared to 0.7% growth in the last forecast.  Greece’s economy is forecasted to contract by 4.3% in 2012 subject to ‘substantial downside risks’. Portugal’s economy also remains in recession, with GDP expected to contract by 3.3% over the year. Ireland is expected to grow by 0.5% in 2012. France’s forecast was cut down to 0.4%, slightly lower than the government’s forecast.  Germany’s growth rates remain mildly positive throughout 2012, with a 0.6% annual growth forecast. The full interim forecast report of the European Commission is available here.


Ifo indicator show improved economic sentiment in Germany

Ifo’s economic sentiment indicator improved in January for the fourth time compared to the preceding month, Frankfurter Allgemeine Zeitung writes. With 108.3 points it was one point higher in December and higher than any result since August 2011. FAZ interprets this as a further sign that the German economy is decoupling from the eurozone’s depressed South. Economists quoted by the paper said that the economy’s most recent weakness had been only temporary and there would be no sustained recession in Germany.


James Saft on why we have all become junior investors now

In his Reuters column, James Saft says the Greek agreement means that all private sovereign bond investors are now effectively junior.


“Surely, after this, who on earth would be a sovereign bond investor in a similar circumstance? If this is not a practical problem for the euro zone, it is because it is old news now that no one in their right mind would invest in a peripheral euro zone bond without official backing. Euro zone officials have, in essence, acknowledged that the financing of their weaker members can only be effected with official support, and with the support of banks, who are offered privileged access to ECB funding in a tacit quid pro quo for holding government debt.

Market distortion by official intervention has become, in other words, a feature, not a bug.”


10-Y Spreads, Forex, ZC Swaps and Euribor-Ois

The euro rises on the Ifo report.












10-year spreads








Previous day


This Morning





























Bund Yield












Euro Bilateral Exchange Rate









This morning














Swiss Franc












ZC Inflation Swaps









last close


1 yr




2 yr




5 yr




10 yr












Euribor-OIS Spread









last close


1 Week




1 Month




3 Months




1 Year
















Source: Reuters






1 Comment

  1. Caro Mario,ti ringrazio e ti segnalo, se non li hai già visti, due pezzi che trovi in Insight (www.insightwebit ) conl’intervista di Draghi al WSJ e la riforma del lavoro di Rajoy.A presto.Tonino · Q&A: ECB President Mario Draghi-Wall Street Joirnal· El empresario podrá rebajar los salarios a discreció

Leave a Reply