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New Open Europe briefing: In 2015, 85% of Greek debt will be owned by taxpayer backed institutions

01 Mar 2012

Ahead of today’s EU summit, Open Europe has published a new briefing arguing that the second Greek bailout is bad for Greece and bad for eurozone taxpayers. The briefing notes that of the total amount (€282.2bn) entailed in the various measures currently on the table to save Greece – through the bailouts and the ECB – only €159.5bn, or 57% will actually go to Greece itself. The rest will go to banks and other bondholders. Furthermore, immediately after the restructuring, Greece’s debt to GDP will still be 161%, a reduction of only 2% compared to where it is now. On top of this Greece has to undertake extensive budget cuts amounting to 20% of GDP in total – a level which no other country has even attempted in recent history.

By 2015, once the first and second Greek bailouts have been completed, as much as 85% will be owned by taxpayer-backed institutions (EU/IMF/ECB).This means that in the event of a likely default, a huge chunk of the losses will fall on European taxpayers, potentially leading to significant political fallout in countries such as Finland, the Netherlands and Germany. The briefing concludes that, given the sizeable debt relief needed in Greece, a fuller coercive restructuring would have been a simpler and more effective option from the start and should still be pursued.
Open Europe briefing Open Europe press release

Süddeutsche: Merkel ready to drop her opposition to expanding eurozone bailout funds
Bundesbank head expresses concerns over ECB’s lax collateral requirements for bank lending
Süddeutsche reports that Chancellor Merkel is ready to drop her long-standing opposition to expanding the borrowing ceiling on the eurozone’s bailout funds from €500bn to €750bn, with a final decision expected at the end of March. This would be achieved by running the temporary bailout fund, the EFSF, in parallel with the new permanent fund, the ESM over the next year. Overall, Germany’s share of the guarantee would increase from €211bn to €280bn. The paper cites government sources as saying that “In the long run, we cannot resist such pressure [from the rest of the world]”.  However, FTD reports that Merkel will still face opposition from her CSU and FDP coalition partners.

FAZ reports in a sign of growing unrest at the Bundesbank, its head Jens Weidmann has written to ECB President Mario Draghi, warning of “growing risks” within the euro system following the ECB’s recent relaxation of the requirements for collateral in monetary policy operations, allowing it to lend billions of euros to Europe’s weakest banks via its so-called Long Term Refinancing Operation (LTRO).

Greek PM Lucas Papademos has dismissed a suggestion by Jean-Claude Juncker, the head of the Eurogroup, for an EU-appointed ‘Reconstruction’ Commissioner for Greece, reports ARD. Meanwhile, following a tense debate, the Finnish Parliament yesterday approved the second Greek bailout package by a margin of 111 to 72.

The Irish Times reports that in a report, controversially circulated yesterday in the German parliament, the EU Commission has warned that further deterioration in the global macroeconomic situation this year could necessitate additional “fiscal tightening” in Ireland, and see next year’s planned return to financial markets “evaporate”.

El País reports that protests against education cuts turned violent in Barcelona yesterday, as twelve people were arrested after students clashed with the police. Meanwhile, Cinco Días reports that Spain’s trade unions are considering calling another general strike against the Spanish government’s reform of the labour market on 29 March. Separately, Jornal de Negócios reports that Portugal’s borrowing costs are continuing to rise, despite the ECB resuming its purchase of Portuguese bonds yesterday.
Süddeutsche Welt FTD Handelsblatt FT FAZ Irish Times Telegraph Telegraph 2 European Voice BBC Irish Times 2 Telegraph EUobserver FT 2 CityAM FT 3 Independent IHT Le Figaro WSJ WSJ 2 IHT Le Figaro Kathimerini Kathimerini 2 ARD CityAM 2 Süddeutsche 2 CityAM 3 FT 5 Jornal de Negócios IHT El País El Mundo BBC Cinco Días El País El País 2 Expansión Expansión 2 EUobserver FT 4 Les Echos Monde La Tribune ARD

Bini-Smaghi: ECB should be given greater supervisory power over eurozone banking system
Writing in the FT, former ECB Executive Board member Lorenzo Bini-Smaghi says “The ECB has helped to reduce systemic risk and avoided a credit crunch. To minimise the inefficiencies and perverse incentives that may result from the increase in its balance sheet, and to reduce counter-party risk, the ECB should be given a greater role in co-ordinating and overseeing supervision of the eurozone banking system. The euro area needs a supervisory and regulatory compact, as much as – if not more than – a fiscal compact.”

Writing in Bild, the former President of Germany’s Constitutional Court between 2002 and 2010, Hans-Jürgen Papier, argues that "the EU should become more humble", adding that “it is not necessary to reinvent the EU. Rather it simply needs to over-come its self-centeredness and focus more on two core elements; the principles of subsidiarity and vibrant democracy. Europe should act only if and when member states cannot adequately fulfill the task themselves”.
FT: Bini Smaghi FT Lex FT: Verhofstadt FT Editorial Le Monde BBC: Flanders Times: King Independent: McRae IHT: Fitoussi El País: Otero Iglesias WSJ: Review & Outlook WSJ: Heard on the street Kathimerini: Xydakis Bild: Papier

Handelsblatt reports that Van Rompuy will also be elected as Eurogroup chief, succeeding Luxembourg PM Jean-Claude Juncker. FAZ comments that "Angela Merkel is now glad that Herman Van Rompuy has turned into a counterweight to José Manuel Barroso".
FAZ Handelsblatt

Süddeutsche reports that the German foreign ministry has issued new guidelines for its EU communications, noting that "we must remove fears for German go-it-alone actions and attempts for hegemony.”
Sueddeutsche German Foreign Ministry Press Release

Welt: Fiscal Treaty to lose its teeth
Die Welt reports that according to a draft agreement concerning the implementation of the fiscal treaty, the Commission will not have the right of taking signatories that are in breach of its provisions on budgetary discipline to the European Court of Justice, but instead this obligation will fall to the three member states holding the EU’s rotating presidency, providing they themselves are signatories to the pact and not in breech of it.

Separately, the deputy leader of Ireland’s main opposition party Fianna Fáil, Éamon Ó Cuív, resigned yesterday after coming out against party leader Micheál Martin’s decision to campaign for a ‘Yes’ vote in the Irish referendum on the ‘fiscal treaty’.
Welt FT FT: Gardner EUobserver BBC: Hewitt Irish Times: Barrett Irish Times Irish Independent Irish Times Irish Times Irish Independent: Devlin Irish Times: Scally

The FT reports that in a speech today, EU internal Market Commissioner, Michel Barnier, is expected to say that strict new rules for insurers will not be applied to all pension schemes, following warnings by industry groups and businesses that harmful regulation could damage growth and stop pay-outs for pensioners in the future.

The Telegraph reports that the European Commission has released a new draft consultation paper aimed at preventing companies from taking advantage of cross-border tax loopholes in countries across Europe.

The BBC reports that Google has implemented its new privacy policy, despite EU warnings that it could violate EU law. The search engine can now share user’s data with its online platforms youtube, gmail and blogger.

Conservative MEP Nerj Deva has called for a multimillion-pound EU aid programme to Argentina to be halted until the country stops “threatening” Britain over the Falklands, PA reports.
EUobserver Les Echos

A new EU Health and Safety directive is prohibiting visitors from drinking Harrogate’s renowned ‘healing’ water, as it has been graded ‘unwholesome’ due to its high sulphur content.
Mail Express

EU leaders are expected to grant Serbia candidate status this evening. The agreement has been reached as Serbia formally strikes a ‘name-deal’ with Kosovo, which determines how Kosovo will be recognised in international discussions.
European Voice

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