Euro-Zone News and Analysis
Press summary: Ireland to hold a referendum on European ‘fiscal treaty’; Irish Deputy PM: Only a ‘Yes’ vote would allow Ireland to tap eurozone bailout fund in future
Irish Prime Minister Enda Kenny announced yesterday that Ireland’s ratification of the new European ‘fiscal treaty’ on budgetary discipline will be put to a referendum. The decision follows legal advice from Ireland’s Attorney-General, who concluded that a referendum was needed because the agreement “is a unique instrument outside the EU treaty architecture.” Kenny will sign the fiscal treaty at this week’s meeting of EU leaders in Brussels. The referendum is then expected to take place in May, although the exact date is yet to be confirmed, reports the Irish Independent.
Ireland’s ‘No’ vote would not stop the fiscal treaty from entering into force, as only 12 eurozone countries’ ratifications are needed. However, Deputy Prime Minister Eamon Gilmore told MPs, “Ratifying the [fiscal] treaty will also provide Ireland with access to emergency funds in the future, if we need them, through the new European Stability Mechanism. Our intention is to emerge from the EU/IMF [bailout] programme without having to resort to the ESM, but the facility itself is an important backstop that will further enhance international confidence in Ireland.” The Irish Times quotes Michael Meister, a budget and finance spokesman for German Chancellor Angela Merkel’s CDU party, saying, “Whoever doesn't accept the treaty has no protection from the ESM bailout fund. If the Irish people think they don't need any ESM protection they can, of course, reject the fiscal treaty.” Open Europe’s analysis of Ireland’s decision to put the ‘fiscal treaty’ to a referendum was quoted by the Telegraph’s live blog.
Separately, Westminster MPs will discuss the legality of the ‘fiscal treaty’ in a three-hour debate today, specifically to what extent the 25 signatories will be able to access common EU institutions. No formal vote is due after the debate because the UK decided not to join the agreement.
Open Europe blog Telegraph: Live blog FT CityAM WSJ Reuters Times Telegraph Mail BBC Guardian Irish Times EurActiv European Voice EUobserver EUobserver 2 La Stampa blogs: Zatterin Independent Le Figaro Il Sole 24 Ore Le Monde Irish Times Irish Times FT 2 Irish Independent Irish Independent 2 Irish Independent 3 Telegraph: Reece Conservative Home: Montgomerie Independent: McRae Irish Independent: Keenan Irish Independent: McWilliams
800 banks borrow €529bn under the ECB’s second three year lending operation;
Greek parliament approves huge budget and pension cuts
This morning, the ECB announced that 800 banks requested €529bn in three year loans under the ECB’s second long term refinancing operation (LTRO). The amount corresponds closely to expectations, although the number of banks borrowing from the operation is up significantly from the 523 which took part in the previous allotment. FT Deutschland reports that Fitch has warned that the ECB’s LTROs will not directly prevent another banking sector crisis, although they may buy some time.
The EU/IMF/ECB troika yesterday approved the release of the next tranche of the Portuguese bailout. The troika said that the eurozone “stands ready to support Portugal until market access is regained” provided Lisbon perseveres with “strict programme implementation”. The next €14.9bn instalment of bailout money is likely to be paid in April.
The Greek parliament yesterday approved legislation implementing large budget and pension cuts worth €3.2bn this year, in an attempt to fulfil the list of ‘prior actions’ which Greece must meet in order to gain its second bailout. Further legislation is due to be passed today, since Greece is expected to detail the completion of the necessary measures at tomorrow’s EU summit.
In an interview with Die Welt, Head of the Eurogroup Jean-Claude Juncker confirmed that a third Greek rescue package was a possibility, and called for an EU appointed ‘Reconstruction’ Commissioner for Greece, whose job it would be to plan ahead and oversee the reconstruction of the Greek economy. Bloomberg reports that Dutch Finance Minister Jan Kees de Jager said he expects Germany to eventually agree to an increase in eurozone bailout funds but only once southern European economies had taken “sufficient steps”. The Dutch parliament yesterday backed the second Greek bailout package, although a formal vote was not held.
Meanwhile, the International Swaps and Derivatives Association (ISDA) has announced it will decide on Thursday whether a ‘credit event’ occurred in Greece, which would trigger the pay out of credit default swaps (CDS). There is currently €3.2bn net outstanding in Greek CDS, the eurozone has suggested that any pay-out would be manageable and would not damage the European financial system.
Separately, EU Economic and Monetary Affairs Commissioner Olli Rehn has said that the Commission cannot make a decision on the revision of Spain’s deficit reduction target for 2012 until the country submits its draft budget for this year. El País quotes Spanish government sources saying that the draft budget currently being prepared is already based on a deficit for 2012 higher than the planned 4.4% of
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Die Welt reports that following Monday’s Bundestag vote on the second Greek bailout, where Chancellor Merkel failed to obtain an absolute parliamentary majority based on the votes of coalition MPs, the SPD and Green opposition parties could try to tie any future votes on increasing German guarantees for the eurozone bailouts to a vote of confidence in the Chancellor.