Euro-Zone News and Analysis
Press summary: Stand-off between IMF, Germany and Greek parties over second Greek bailout; Bundesbank President: Fiscal treaty “not a huge success”
From the Open Europe daily press summary.
European officials suggested last night that a deal on the voluntary Greek restructuring was only ‘hours’ away, however no final agreement was reached due to remaining differences between Germany and the IMF as well as amongst the Greek parliamentary parties. The IMF continues to push for official sector Greek creditors (Eurozone/ECB) to take write-downs. However, this has been roundly rejected by Germany which argues for greater austerity in Greece, which the IMF argues is not achievable. The LAOS Party, junior member of the Greek governing coalition has warned more austerity could lead to a “social explosion”. One option being discussed by eurozone officials is for national central banks to submit their holdings of Greek bonds, around €12bn held in national investment portfolios, for the voluntary restructuring. Eurozone finance ministers will hold an emergency meeting next Monday to discuss the Greek situation, according to DPA.
Kathimerini reports that, according to National Confederation of Greek Commerce (ESEE), 160,000 jobs will be lost in the Greek commerce sector this year alone, leading the ESEE to warn that Greece will soon be in a “condition of absolute poverty”.
The FT reports that Spain will pose the first challenge to the new eurozone budget rules as the slowdown in growth means it is almost certain to miss its deficit target for this year. Separately, Spanish Economy Minister Luis de Guindos is due to present his plans for reforming the banking sector this afternoon, which are likely to include legislation forcing Spanish banks to hold up to €50bn in extra provisions to cover potential losses from defaulting real estate loans.
The WSJ reports that, under heavy pressure from the banking sector, EU regulators are considering loosening planned requirements on which assets can be held as liquidity buffers to protect banks in a crisis. The latest ECB lending survey, released yesterday, confirmed that European banks continue to reduce lending to households and businesses, while imposing harsher requirements on those that they do lend to. Separately, the Institute for Fiscal Studies has warned that the UK would face a two year recession if the eurozone broke up.
Belgium was officially in recession at the end of last year, according to the GDP measures from the last quarter. As German Chancellor Angela Merkel visits China, Die Welt reports that Chinese experts have said that it is unlikely that European governments will be able to count on China purchasing their bonds on a large scale without further reforms.
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Bundesbank President: Fiscal treaty “not a huge success”
FTD reports that Bundesbank President Jens Weismann has criticised the new fiscal treaty agreed at Monday’s summit of EU leaders for not going far enough, arguing that “The requirements for national fiscal rules still leave considerable room for maneuver, and there is no control at the European level to what extent they are actually observed… this raises lingering doubts at the very least".
Meanwhile, the head of François Hollande’s presidential campaign, Pierre Moscovici, confirmed that the socialist candidate does not accept the validity of the treaty, claiming that “a treaty which isn’t yet ratified has not got any legal value”, reports DPA. Swiss news agency Romandie reports that in an effort to assuage Hollande, the German minister for European Affairs, Michael Link, announced that new growth-boosting measures could be added to the treaty at the next EU summit, scheduled in March.
Separately, Süddeutsche reports that Czech President Vaclav Klaus has revealed that he refused to sign the treaty on the grounds that “This treaty is based on the presumption that that people are not sufficiently clever and that everyone in Brussels is cleverer than them, and this is not the case”.
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