 Another high noon summit beckons
Ahead of tonight’s special EU summit, tensions between Germany and France have escalated,Financial Times Deutschland reports. The German government yesterday brushed off all discussions on Eurobonds. Jointly issued bonds are “not the right way”, the issue is not on the agenda for tonight’s meeting, advisors to Angela Merkel yesterday briefed the press. The German rejection of Eurobonds would not change until the next regular EU summit in Berlin, the government sources insisted hinting that Merkel would not hesitate to openly confront Francois Hollande, Mario Monti and Jean-Claude Juncker who push for the creation of Eurobonds. Adding to the tensions is Hollande’s apparent refusal to accept Wolfgang Schäuble as new chairman of the eurogroup. He yesterday said nominating Schäuble would be “a bad signal” as he stood for the failed politics of austerity. According to the paper other countries are worried about the deteriorating Franco-German relationship. “We hope that Germany and France will come back together soon again”, FTD quotes an unnamed president of an EU country.
El Pais leads with a story on Germany’s attempt to seek alliances to isolate Hollande. In particulary, Mariano Rajoy, is quoted as being fully in support of the German position against eurobonds. (Spain opposing eurobonds is the European equivalent of turkeys voting for Christmas. Does he really think the ECB is going to solve his problems?)
This was the news flash from Reuters following the briefing with Merkel’s adviser. We quote in full:
In other words, the German position on all outstanding issues is: No, No, No, No and No.
For Bild the Germans will have to pay everybody else’s debt The mass market daily Bild runs a story under the headline “Once again Germans have to pay for everybody else”. The story is illustrated with an imaginary menu for tonight’s summit dinner in which the tendency of Spain, Italy and France are ridiculed. “How expensive will this menu in the dining room of the EU council be for us?”, the paper asks.
Holger Steltzner warns Eurobonds will crush the few remaining solid euro members Frankfurter Allgemeine Zeitung’s economics editor Holger Steltzner warns that the introduction of Eurobonds will lead to a breakdown of the few remaining euro members with solid public finances. “Nobody asks if Germany, the Netherlands and Finland would break down under the burden”, he writes in a front page editorial. “Legitimate legal questions are being pushed aside as worries of narrow minded bookkeepers. Whoever asks why the eurozone’s debt has to be mutualised just now without any mechanisms that would prevent states to accumulate new debt is being called Anti-European. All that is only understandable from a perspective of the debt sinners. For them the social costs of the adjustment is now as high as the previous exaggerations that were financed with credit”.
OECD says eurobonds are necessary The FT reports that the OECD is also now calling for eurobonds as a tool to stabilise the eurozone. Pier Carlo Padoan, deputy general secretary and chief economist of the OECD, is quoted as saying that that sooner the eurozone issues eurobonds, the be tter. He also said that a fiscal compact with a growth compact would ruin the chances of a longer-term economic union.
Greek leaders on promotion tour through Europe Evangelos Venizelos met with Francois Hollande, a meeting that was carefully orchestrated in the media as it was against the French protocol to give a clear signal of support for PASOK after SYRIZA leader Alexis Tsipras has been denied such a meeting. According to Kathimerini, Venizelos presented his new six-point plan for renegotiation — no more wage and pension cuts, the safeguarding of collective labour contracts, liquidity for banks, aid for infrastructure works, growth-boosting measures and youth unemployment programs. The crucial point in the discussion was the lengthening of the adjustment period for the deficit reduction, according to Les Echos. The fact that Venizelos had been received by the French president, which was denied to Alexis Tsipras earlier, led Tsipras to say: “If he [Hollande] does not keep his promises for Greece, he will become a Hollandreou”, (word twist of Hollande and Papandreou) according to the blog Keep Talking Greece. Tsipras left Paris to meet the Left party in Berlin, where he told a packed press conference he sought solidarity from European neighbours for an investment programme in Greece. “I’m not trying to blackmail anyone but to convince the German people that everything happening [in Greece] is in their own interest,” Tsipras said, calling for an end to a “failed” policy of austerity. Antonio Samaras, meanwhile, hopes to meet Jose Manuel Barroso this week.
Lucas Papademos on Grexit
In his first interview since leaving the office, Lucas Papademos told Dow Jones Wires that the risk of Greece leaving the Eurozone is real and that it would be catastrophic for his country and has profound implications for other member states. “Although such a scenario is unlikely to materialize and it is not desirable either for Greece or for other countries, it cannot be excluded that preparations are being made to contain the potential consequences of a Greek euro exit,” Papademos said.
The SPD-run states threaten to block the fiscal pact According to Handelsblatt the SPD run states threaten to block the fiscal pact’s ratification in Bundesrat, the German upper house. Ahead of tomorrow’s meeting of the government coalition parties and the opposition SPD and Greens, the states run by social democrats say the government is hiding the cost and far reaching consequences of the pact. They refer to a confidential paper by the EU Commission that outlines how the national debt breaks have to be implemented. The SPD thinks that as a consequence, the federal government will be in a position to infringe on the fiscal autonomy of municipalities and states because according to the Commission paper the central governments is responsible for correcting deviations from the agreed debt reduction path. Additionally the Commission paper asks for the creation of independent stability councils that would be able to disregard parliamentary decisions on budgets and sanction deviations.
Wilders in legal move to block ESM Reuters reports that Geert Wilders filed a lawsuit to postpone the Dutch parliament’s ratification of the ESM. The article quotes a professor of Dutch constitutional law as saying that it would be unusual for the court to grant such a request, and to interfere in the deliberations of the parliament. It seems the main motivation is to stir up sentiment in the country. Wilders, by the way, announced the news through Twitter.
France has the fourth highest tax burden in the EU According to Eurostat figures released yesterday, France has the fourth highest tax burden in the EU, Les Echos reports. The fiscal revenue in France represents 42.5% of GDP which is 7 points more than the EU average of the European average. Ahead of France are only Denmark, Sweden and Belgium. Italy is at about the same level (42.3%) while Germany (38.1%) and Spain (31.0%) are considerably lower. Also according to this statistic the tax burden on companies in France is higher than in any other EU country
ECB refuses to publish details of recipients of 3y LTRO’s The ECB refused to give in to a request of the German parliamentarian Gerhard Schick (Greens) and to fully disclose which banks benefitted from the €1tn of credits distributed in the two rounds of 3y LTRO’s, Financial Times Deutschland reports. “The central bank thinks it is indispensable to guarantee the secrecy of individual transactions with counterparties”, the ECB said in its response to the deputy. This guarantee outweighs “the public interest in the data because its publication could endanger commercial interests of the banks”, the ECB continued. The ECB said however that this administrative decision could be contested and would then be discussed and decided again by the executive board.
10-Y Spreads, Forex, ZC Swaps and Euribor-Ois Euro below $1.27 again, but spreads are tightening a little across the board.
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