Eurointelligence Daily Briefing, 3 de Maio de 2012. Enviado por Domenico Mario Nuti.

Hollande remains favourite after debate

  • After 170 minutes of an angry debate between Nicolas Sarkozy and Francois Hollande, the prospects for Sunday remains unchanged;
  • Sarkozy accused Hollande of spreading lies;
  • Hollande calls Sarkozy “arrogant”, “unpleasant”, and “self-righteous”;
  • Guillaum Tabard said the debate was too long, too tense, and too technical;
  • Hollande came out in favour of eurobonds;
  • Sarkozy said he was opposed as only France and Germany could guarantee them;
  • French conservative are already positioning themselves for the succession of the UMP after Sunday’s expected defeat;
  • the eurozone is sliding deeper into recession, with the latest purchasing managers index showing a surprising strong fall;
  • eurozone unemployment reaches its highest level in 15 years;
  • the yields on German 10-year bunds fall to the lowest level in history;
  • Werner Hoyer has asked for €10bn capital increase in the EIB;
  • Wolfgang Proissl calls for a broad debate on the mandate of the ECB;
  • Evangelos Venizelos calls on voters not to support parties opposed to the bailout;
  • S&P raises its Greek credit rate from selective default to CCC;
  • Michael Noonan denies scaring Irish voters into supporting the fiscal pact;
  • Austria plans 70-year bond;
  • Bill Clinton says there can only be a long-term solution to the eurozone crisis;
  • Wolfgang Munchau, meanwhile, says the issue is short-term, not long-term: the eurozone needs to get out of the crisis first. 

After 170 minutes of  debate between Francois Hollande and Nicolas Sarkozy the situation appears to be unchanged between the two contenders for Sunday’s run-off in the French presidential election. According to an online conversation on with the paper’s editorialist Francoise Fressot “Hollande came in as the favourite and he remains the favourite”. In an exchange that seemed hostile and aggressive at times, Sarkozy accused Hollande repeatedly of spreading “lies” while Hollande portraid Sarkozy as “arrogant”, “unpleasant” and “self-righteous”. In an editorial for Les Echos Guillaume Tabard said the debate had been “too long, too tense and too technical”.


On the euro crisis, the socialist candidate and the conservative incumbent reiterated their diverging positions. While Hollande advocated the issue of euro bonds guaranteed Sarkozy reiterated his opposition to such securities. “Who will guarantee them if it’s not France and Germany?”, he said. “Should we raise our debt to pay the debts of others? It’s irresponsible.” Sarkozy said the ECB had done “pretty well” in fighting the region’s sovereign debt crisis given the constraints of its mandate. “This is a global crisis”, Sarkozy said. “You think it was easy? I’m not sure you’d have done much better than us. Europe has got out of the crisis.”


Conservative leaders position themselves for the time after Sarkozy’s defeat



According to Le Journal de Dimanche’s website le, leaders of Nicolas Sarozy’s conservative UMP party start to positions themselves for the time after the president’s expected defeat in the run-off elections on Sunday. In an interview with Le Figaro, UMP chairman Jean-Francois Copé he thought it important that in the future different schools of thought should be allowed to express themselves forcefully but he warned the worst case scenario after May 6 would be a return to “a divided right” when there was the right wing RPR and the center UDF. While some leading UMP figures welcomed Copé’s initiative others like his predecessor Xavier Bertrand suspected him of positioning himself for the war of succession after Sarkozy’s defeat. Bertrand called everyone to focus on nothing else than Sunday’s election.


Eurozone is sliding deeper into recession



Yesterday’s big economic news was the surprise fall in the eurozone purchasing managers’ index from   from 47.7 in Marh in 45.9 in April, the lowest level since June 2009. There are also signs that the slowdown is affecting Germany (which is usually late in the cycle), as the downturns becomes more broadly based. Yesterday saw the release of the March eurozone unemployment figures, which reach a 15-year record of 10.9%, up from 10.8% in February. The drivers of this increase were Italy and Spain. Ten year German bunds were trading at just over 1.6% – an alltime low.


German job miracle seems to come to an end


In its leading front page story Financial Times Deutschland claims that the German job miracle seems to have come to an end. According to yesterday’s seasonally adjusted figures unemployment rose by 19.000 in Apri to 2.88m, the highest rise since spring 2009. According to FTD this is a likely new trend because of the deep recession in which much of eurozone is in and that is increasingly being felt in the German economy. From mid 2009 until January 2012 the number of unemployed had dropped by roughly 20.000 each month.


Hoyer asks for €10bn for EIB capital increase



Talking to Frankfurter Allgemeine Zeitung, EIB president Werner Hoyer called for a €10bn capital increase in order to raise enough private capital to finance infrastructure projects in the order of €60bn. The EIB’s financing will be an important part of the European growth strategy that will be first discussed at a leader’s dinner by the end of May and most likely formally adopted at a growth summit in June. But the biggest challenge will be according to Hoyer for the EU governments to find enough projects worthy of support. The bank will not damage its reputation by supporting doubtful projects. Hoyer insisted the capital increase must come from paid in capital. The Austrian finance minister Maria Fektor came out against a capital increase. “The EIB is well equipped”, she said. “The member states cannot do consolidation packages and call for more money at the same time.”


Wolfgang Proissl predicts the eurozone’s economic and social situation will provoke a debate on the ECB’s mandate



Commenting in Financial Times Deutschland, Wolfgang Proissl argues that the dire economic and social situation in many euro member states will lead to a debate if the ECB’s mandate with a strong focus on inflation is still appropriate or if it should be extended growth enhancement. According to Proissl this debate will be fuelled to the likely election of Francois Hollande in France and possible changes in the power balance in Germany after two important Länder elections in Germany on Sunday. On top of that unemployment in Spain, Portugal and Greece will reach heights that look increasingly similar to the levels Germany had during the Weimar Republic and which may pose a threat to the young democracies in these three countries that where ruled by dictators only a few decades ago. Proissl calls on euro central bankers to accept a debate about the ECB’s mandate and to make their case instead of brushing off any mentioning of a changed mandate as totally unreasonable as they had done in the past. 


Venizelos warns not to vote for anti-bailout parties



Evangelos Venizelos warned Greek voters on Wednesday that they should not take the country’s eurozone membership for granted and should avoid voting for parties that might put Greece’s future at risk, Kathimerini reports. Venizelos warned that some parties were creating a front that could lead Greece back to the drachma. “This works in favour of corruption and all those who took their money out of the country and are waiting to buy up everything if we return to the drachma,” he said. Venizelos went on to say that it was a “lie” to suggest that Greece could simply reject the terms of its bailout after the May 6 elections without suffering any consequences. He said it was also a “lie” to suggest there was no danger of Greece being forced out of the eurozone. He said that the EU and the IMF could choose to provide Greece with money only to cover the servicing of its loans and forcing it to pay its public expenditure costs.


S&P raises credit rating for Greece



Standard & Poor’s raised Greece’s credit rating to CCC from SD (selective default) after the country completed its distressed debt exchange, the Wall Street Journal reports, with stable outlook on the country’s long-term rating. The CCC rating reflects the reduction and the improved maturity of Greece’s sovereign debt, taking into account the significant stress Greece’s economy faces. S&P said the austerity programme has implementation risks due to the deep recession, which will result in persistent social pressures. Parliamentary elections May 6 are likely to render Greece’s path to fiscal adjustment more uncertain, the rating firm also warned.


Noonan denies scaring voters



Michael Noonan has rejected claims that he is trying to scare voters in Ireland into voting Yes to the fiscal treaty, saying the Irish people are entitled to know the truth, according to the Irish Times. He said his comment that next year’s budget would be more difficult if the treaty is rejected was a “considered statement”. A No vote would oblige him to reduce his forecast for economic growth for next year, he added. Enda Kenny backed his Minister yesterday warning that if Ireland was excluded from the European Stability Mechanism, the budget deficit might have to be dealt with “in an accelerated fashion”.


Austria plans 70 year bond



Austria plans to issue bonds with a 70 years maturity from next year on, Der Standard reports.  The draft law is already with the parliament. Triple A countries are currently exploring ways on how to benefit from the low interests and this is one way to insure. The head of the debt management agency Martha Oberndorfer said a 70y bond issue is in line with rising life expectancy and a refocusing on long term rather than short term debt. Austria would be the first Eurozone country to issue such long maturity bonds. The UK and the USA are also discussing even 100-year bonds.


Spanish borrowing costs to go up at auction



Reuters reports that Spain’s borrowing costs are likely to rise by more than a percentage point at an auction of three and five year bonds today, as markets are now wondering at what point will Spanish banks lose their appetite for their country’s sovereign debt. It is the first auction since the latest downgrade by S&P, to BBB+. The Spanish treasury hopes to raise between €1.5bn and €2.5bn.


Bill Clinton criticises austerity



In a speech to the Milken Institute Global Conference, Bill Clinton criticised the European crisis response strategy. The EU should stop squabbling over austerity measures, and focus on solving the deep-seated long-term economic problems. “The prescription of austerity continues to be pushed in the face of evidence that it won’t work…,” he is quoted by Reuters. He called leaders to work on a strategy “of what would work in a five-year period, a 10-year period, instead of three or six months.” 


Wolfgang Munchau on why long-term solutions are not what you need in a financial crisis



In his column in Spiegel OnlineWolfgang Munchau argues that long-term solution will not get us out of a financial crisis. They will only work once the crisis is over. Munchau says he is not even sure whether structural reforms will produce as much as growth as its advocates are claiming, but even if they do, the focus now should be to avoid a debt trap, which is an imminent prospect for several eurozone countries, including Spain. And the one thing that is not sustainable in the long-run is a debt trap. Munchau concludes that the structure growth initiative by Angela Merkel and other EU leaders is likely to be another diversion from the crisis.


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Source: Reuters






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