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Greek PM refuses to rule out forced restructuring if voluntary deal cannot be reached; IMF looks to increase its funds to deal with eurozone crisis

18 Jan 2012

Negotiations between the Greek government and private bondholders are due to resume today, as the country prepares for a second day of mass strikes and protests. The Telegraph reports that, according to sources close to the negotiations, Greek officials showed enough flexibility in their position to convince bondholders to return to the table. In an interview with the IHT, Greek Prime Minister Lucas Papademos said that the introduction of retrospective collective action clauses on Greek debt cannot be ruled out, adding that “it is contingent on the percentage” of bondholders who agree to a voluntary restructuring, although he added that a voluntary deal was close. Edward Parker, Head of sovereign ratings at Fitch said, “Greece is insolvent so it will default…It clearly is a default, however they try to spin it.” FTD reports that German Chancellor Angela Merkel told a meeting of her party officials yesterday that there would be “no solution [to the Greek crisis] without side effects.”

In an interview with the FT, Italian Prime Minister Mario Monti said, “I’m convinced, and the IMF is also convinced, that the more pledges are made [to the eurozone’s rescue fund], the higher the volume of pledges made, the smaller the probability that a single euro of cash will have to be disbursed.” IMF Director Christine Lagarde said yesterday that the fund will investigate ways to increase its firepower to deal with the global impact of the eurozone crisis. Monti will hold talks with David Cameron in London today and will then visit the City in a bid to reassure investors over Italy’s economic stability. Meanwhile, Fitch yesterday warned that Italy’s credit rating could be downgraded by the end of the month, Reuters Italia reports. 

Italian business daily Il Sole 24 Ore cites Open Europe’s estimates from last year that, by 2014 and following a second Greek bailout, each household in the eurozone will be underwriting €1,450 in Greek debt. 

ECB Governing Council Member Ewald Nowotny said that the ECB is “discussing other possible alternatives” to its bond buying programme, according to the WSJ. YLE reports that Finnish Prime Minister Jyrki Katainen has said that there is no need to strengthen the EFSF, adding that the idea that only the four countries with the highest credit rating would increase their share is a non-starter.

The EFSF, the eurozone’s bailout fund, yesterday held a successful auction of €1.5bn in short term debt despite just losing its triple-A rating. Moritz Kramer, head of sovereign debt rating at S&P, revealed that Germany would maintain its AAA rating even in the case of a recession. The FT reports that markets are pricing in a 65% chance of a Portuguese default in the next five years now that all three rating agencies rate the country’s debt as junk.
IHT BBC Guardian CityAM WSJ EurActiv Telegraph Independent Il Sole 24 Ore Il Sole 24 Ore La Stampa Telegraph Reuters Italia FT EUobserver Irish Independent CNBC CityAM 2 CityAM 3 WSJ 2 FT 2 FT 3 WSJ 3 Irish Independent CityAM 4 Times Times Le Monde YLE FTD WSJ.de Handelsblatt FTD 2 Hamburger Abendblatt Spiegel: Kaiser Handelsblatt 2 Irish Independent Times: Kaletsky WSJ Review&Outlook WSJ: Stephens FT: Wolf

Open Europe’s Mats Persson appeared on CNBC this morning, discussing the UK’s role in Europe.
No link 

City AM reports on new analysis by the Global Financial Markets Association showing that an EU-wide financial transaction tax would make foreign exchange trades between seven and 18 times more costly.
Open Europe research City AM City AM: Heath 

The European Commission yesterday initiated legal proceedings against Hungary over its new constitution, specifically due to concerns over the independence of the central bank, the judiciary and the national data protection authority. Hungary has been given one month to enact the necessary changes or else it faces the prospect of being fined by the ECJ.
IHT Independent EUobserver BBC Telegraph FAZ Bild Welt Süddeutsche Süddeutsche: Winter FT CityAM WSJ

An independent committee set up by the Norwegian government two years ago to assess the country's membership of the European Economic Area has concluded that it is “an illusion” to consider Norway as outside the EU, the BBC reports. “We are almost as deeply integrated as the UK,” said report committee Chairman Prof Fredrik Sejersted. A recent opinion poll suggested that 76% of Norwegians wanted their country to remain outside the EU.
BBC EurActiv 

Handelsblatt reports that, despite the Greek government’s denials last October that it was planning to take possession of 400 old M1A1 Abrams tanks from the US, a Greek team was sent to Nevada to inspect the tanks with a view to taking them after all. The paper notes that, although Greece would not have to pay for the extra tanks themselves, it would have to pay for transport and maintenance costs which would run into millions of euros.
Handelsblatt Open Europe blog 

The European Commission has told US Secretary of State Hillary Clinton that the EU will not abandon its curbs on carbon dioxide emissions by international airlines, despite opposition from the US, China and Russia.


An Islamist cleric, Abu Qatada, accused of having links with al-Qaeda cannot be extradited from the UK to stand trial in Jordan because of the risk that local courts may use evidence gained through torture, the European Court of Human Rights has ruled.
Independent Telegraph Mail Sun Sun: Leader FT


A leaked report by the EU’s heads of mission in Jerusalem and Ramallah suggests that the European Commission should propose new rules “to prevent/discourage financial transactions in support of [Israeli] settlement activity” in East Jerusalem, notes the Independent
Independent EUobserver 

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