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ECB considers taking part in Greek restructuring; Greece misses another deadline as Greek unity government fails to find consensus

08 Feb 2012

The WSJ reports that the ECB is considering a plan which would allow its holdings of Greek bonds to be used in the voluntary restructuring. The plan would see the bonds swapped with bonds from the EFSF, the eurozone bailout fund, which would then accept write downs on the bonds under the restructuring plan in Greece. The bonds would likely be transferred at purchase price, meaning the ECB would not take any losses but the losses for the EFSF would also be smaller than if they were transferred at nominal value. The article suggests this measure could raise up to another €11bn for Greece. According to calculations by the Kiel Institute for Economic Research (IfW) and Welt Online, the participation of taxpayer backed banks and the ECB in the Greek restructuring could cost German taxpayers up to €25bn.

However, the plan could only go ahead if the political leaders in Greece commit to the EU/IMF/ECB troika’s demands – something which is still uncertain after yesterday saw another series of delays to the agreement. Last night’s meeting of Greek political party leaders was moved to 1pm GMT today, after discussions with the troika over the new austerity measures dragged on due to continuing disagreements. Antonis Samaras leader of New Democracy also objected to the plans for some of the Greek bailout funds to be paid into an escrow account focused on paying off debt, saying, "[It] is an indirect oversight of Greece by Germany…I have a problem with that."

The FTD reports that the German government is keen on finding a way to delay the full payment of the second Greek bailout until it gets a stronger commitment from Greece. Kathimerini reports that Greek budget revenues posted a 7% annual decline last month, while the target was for an 8.9% annual increase, according to data released today by the Greek Finance Ministry.

Dutch Prime Minister Mark Rutte told Dutch national broadcaster NOS, "We are currently so strong in the rest of the euro zone, in the countries who have the euro, that we can handle an exit of Greece - a Greece which runs into serious trouble."

Open Europe’s Director Mats Persson is quoted in the Telegraph saying, "Even if Greece were to leave, the structural flaws which pushed the euro to the edge would still plague Portugal, Spain and Italy. Stuck with mismatched interest rates and an overvalued currency, these countries risk continued stagnation and even contraction under the burden of EMU-imposed austerity. Short of debt-sharing or transfers from north to south – which looks politically impossible at the moment – it remains unclear whether they can remain in the euro."
WSJ FT CityAM Telegraph Reuters BBC Guardian Express Times Telegraph Irish Times Irish Independent Washington Post El País Expansión El Mundo IHT Kathimerini Dow Jones EUobserver Times 2 Il Sole 24 Ore FTD RTL Z Handelsblatt FT 3 CityAM 2 FT 4 WSJ 2 Welt WSJ 3 WSJ 4 LUSA FAZ Süddeutsche Süddeutsche 2 Bild Welt FAZ FAZ 2 Le Monde Les Echos Les Echos La Tribune Le Monde Reuters FAZ

Ruparel: It’s time for the ECB and the eurozone to accept losses in Greece
Writing in City AM, Open Europe’s Head of Economic Research Raoul Ruparel argues, “Whatever the outcome of the talks between the Greek government and its creditors, let’s not forget the bigger picture – ultimately, the current approach to Greece’s enormous economic problems is failing. Another bailout along with a ‘voluntary’ Greek restructuring cannot be put together in a way that makes it politically acceptable and/or economically viable – it simply will not return Greece to solvency…This begs the question, should the official sector accept losses this time around, to avoid potentially greater and more painful losses in a Greek default down the road? On one level, this would be the most sensible option – by far.”

Raoul calls for the ECB to transfer its holdings of Greek debt to the EFSF, the eurozone bailout fund, at cost price allowing them to be submitted to the ‘voluntary’ restructuring without the ECB directly taking losses. He concludes, “Admittedly, setting a precedent of official sector losses would raise huge questions over whether Portugal and Ireland will request similar treatment. However there are now no easy options. The current course of a second Greek bailout could just as easily have knock-on effects in the form of a second round of taxpayer-backed rescues. We have always argued strongly against taxpayers taking losses but, unfortunately, this is one of the few plausible options we’re now left with.”
CityAM: Ruparel FT: Editorial FT: Atkins BBC: Flanders Independent: McRae

Merkel says Britain remains a ‘key’ player in the EU;
Reding: EU should move towards closer political union by 2020
The Guardian reports that at event discussing the future of Europe last night, German Chancellor Angela Merkel said that Britain still had a vital role to play in the EU in terms of developing the single market and improving competitiveness. Merkel said "We want to have Great Britain in the European Union. We need Britain, by the way. I want to say this emphatically, because Britain has always given us strong orientation in matters of competitiveness and freedom and in the development of the single European market."

Separately, Handelsblatt reports that at the same event, Merkel said that “step-by-step, European politics is merging with domestic politics”, and called for “comprehensive structural reform” of the EU in the form of closer political integration in order to overcome its “major shortcomings”. Specifically, she said that member states ought to be prepared to cede further powers to the EU, and that the European Commission ought to function more as a European government, with the Council of Ministers operating as a “second chamber” alongside a strengthened European Parliament.

In an op-ed in the WSJ, EU Commissioner for Justice, Fundamental Rights and Citizenship, Viviane Reding, writes that 20 years after Maastricht, Europe is in need of “democratic rejuvenation”, and she proposes a five-point plan for 2020. The plan includes convening “a convention to draft a treaty on European political union. Such an agreement should ensure that the European Parliament becomes a true European legislature, with the right to initiate legislation and the exclusive right to elect the Commission… From 2016-19, the treaty on political union would be subject to ratification in all member states by way of referendums. It would enter into force once two-thirds of member states have ratified it. Citizens should be given two alternatives: either to accept the new treaty, or to reject it and remain in a close form of association, notably by continuing to participate in the single market.”
Guardian FT Handelsblatt WSJ: Reding

Nine euro countries call for fast-tracked negotiations over EU financial transactions tax
EUobserver reports that nine eurozone countries – including Germany, France, Italy and Spain – have signed a joint letter urging the Danish EU Presidency “to accelerate the analysis and negotiation process” of the European Commission’s proposal for an EU financial transactions tax (FTT), with a view to “completing the first reading of the draft directive in the first semester of 2012.” The letter reportedly suggests that the FTT could be introduced among fewer EU member states, under the so-called ‘enhanced cooperation’.

A leader in Swedish daily Sydsvenska Dagbladet criticises Algirdas Šemeta, the European Commissioner for Taxation, for claiming that those oppose who oppose an EU FTT, implicitly including Swedish Finance Minister Anders Borg and the Swedish National Debt office, don’t base their arguments on “common sense and facts”.  The leader notes, "Šemeta’s intervention shows that the EU-commission has a serious communications problem which seems to stem from an even more serious attitude problem. A slightly more humble approach wouldn’t hurt from an institution that lacks a popular mandate. In particular considering the tricky situation that the EU is currently in, or rather, has put itself in.”
Les Echos French Finance Ministry: Communiqué EUobserver Le Monde La Tribune ORF Handelsblatt Sydsvenska Dagbladet: leader

French Socialist presidential candidate will seek to “clarify” ECJ’s role under new fiscal treaty if elected
In an interview with Le Monde, French Socialist Presidential candidate Francois Hollande gave further details on his plans to renegotiate the new European fiscal treaty on budgetary discipline if elected. Hollande said that he intended to “clarify” the ECJ’s role and add specific provisions on growth. Meanwhile, German Social Democrats look set to back Francois Hollande’s presidential campaign, as they seek to counter Merkel’s “tactless” and “unintelligent” support for Sarkozy’s re-election. Nicolas Sarkozy and Angela Merkel stated on Monday that European treaties were not renegotiated because of leadership changes.
Le Monde Frankfurter Rundschau Les Echos  Telegraph: Moutet Liberation La Tribune

Open Europe’s blog post responding to reports that Greek MPs are among the highest paid in Europe, with a net monthly salary of up to €8,500 on top of additional allowances, is cited by the Telegraph’s live blog.
Telegraph: Live blog Open Europe blog Coulisses de Bruxelles

The Telegraph reports that a Lithuanian rapist was allowed into Britain despite previous convictions in Germany. Neither he nor the German authorities had to declare his serious conviction, which was only discovered after a British police officer researched his background when he was arrested for a less serious offence.
Telegraph

MPs have called on the Home Secretary, Theresa May, to defy the European Court of Human Rights and deport the terror suspect Abu Qatada.
Mail Mail 2 Sun Telegraph Conservative Home Express Guardian: Jenkins Times: Leader

European Voice reports that in this year’s ‘Innovation Union Scoreboard’ unveiled yesterday by the EU Commission, Sweden was ranked as the most innovative EU member state, ahead of Denmark, Germany and Finland. However, Switzerland was Europe’s most innovative country overall, while the EU as a whole lags behind the US, Japan and South Korea.
European Voice

In an op-ed for EUobserver, Belgian MEP Derk-Jan Eppink notes that two EU bodies, the Economic and Social committee and Committee of Regions, have increased their spending by roughly 50% over the last eight years. Furthermore, the secretaries of the two committees have failed to produce any concrete savings plans when challenged by the European Parliament.
EUobserver: Eppink

The IHT reports that the European Commission could relax its new rules forcing all airlines flying in and out of European airports to buy pollution permits under the EU’s Emissions Trading Scheme (ETS), if clear progress were to be made this year towards establishing a global emissions control system.  
IHT EUobserver FT: Editorial CityAM: Robinson

El Mundo reports that the EU is ready to freeze its aid to Egypt if the country’s criminal court refuses to dismiss the trials of 43 NGO workers accused of illegally financing civil movements across Egypt.
El Mundo Open Europe Research   

In Greece, far left party “Democratic Left” has surged in popularity, obtaining 18% of the public vote, up 4.5% since last month.
Kathimerini

France’s trade deficit has reached a record €69.6bn (3.6%) in 2011, up from €51.4bn in 2010, reports Le Figaro. This stands in contrast with Germany’s trade surplus of €157bn in 2011. French Foreign Trade Secretary Pierre Lellouche admits the situation is “delicate”, adding that the fact that French labour costs are 10% higher than Germany’s “isn’t sustainable”.  
Le Figaro


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