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Greece’s second largest party unlikely to succeed in bid for anti-bailout coalition; Germany’s ECB Board Member: “no alternative” to austerity if Greece wants to remain a euro member

09 May 2012

Attempts to form a stable coalition government, led by the radical left Syriza party who came second in Sunday’s election, look to have failed, meaning that new elections in June are increasingly likely. Greek weekly Proto Thema reports that PASOK leader Evangelos Venizelos may not accept the mandate to form a government. Instead he could ask the Greek President Karolos Papoulias to convene all the political leaders and try to form a new government of national unity, in favour of Greece’s euro membership. Süddeutsche reports that Greece’s deadline to establish a viable government is early June, when the Troika is scheduled to return to Athens to discuss further economic reforms, a pre-condition for more bailout funds.

Syriza leader Alexis Tsipras took centre stage yesterday and used the opportunity to rail against “barbarous” EU/IMF-led austerity saying that the elections had shown it to be “null and void.” New Democracy leader Antonis Samaras says he would not sign up to the “destruction of Greece”. The Syriza leader also laid out his plan, which includes a moratorium on payments of Greek debt, ripping up the bailout programme, nationalising the banking sector and reversing many of the labour market reforms.

In an interview with Handelsblatt, ECB Executive Board Member Jörg Asmussen said, “Greece needs to be aware that there is no alternative to the agreed reform programme if it wants to remain a member of the eurozone.” The paper also quotes unnamed sources within the German government saying that, although a Greek exit from the euro is not desirable, this scenario is “no longer excluded”. CDU MP Klaus-Peter Willsch is also quoted saying that “the dogma that no country should leave the eurozone, has already caused too much political damage to Europe”.

Stock markets across Europe fell on the back of the comments from both sides, with many investors expecting a Greek exit from the euro in the not too distant future. The fears also caused borrowing costs for other struggling countries to rise again. Les Echos reports that the next €5.3bn tranche of Greek bailout funds due on 14 May is in doubt, meaning that Greece may not be able to pay off the €450m in debt maturing the next day. The WSJ reports that Greece will come up with a plan for paying off this debt and other hold-outs from the recent bond swap by the end of the week.
FT CityAM WSJ FT 2 FT 3 CityAM 2 WSJ 2 BBC EurActiv Irish Times Times Times 2 IHT 2 PT Jornal de Negócios Irish Times Telegraph Telegraph Telegraph Le Monde Coulisses de Bruxelles: Liberation Le Monde Les Echos Les Echos 2 Les Echos 3 IHT Kathimerini Il Sole 24 Ore Liberation Les Echos 4 FT Editorial Irish Times Handelsblatt Handelsblatt 2 Handelsblatt 3 Süddeutsche EU Observer Mail

Open Europe will today give oral evidence to the Department for Communities and Local Government parliamentary select committee’s inquiry on the effectiveness of the EU’s European Regional Development Fund in reducing regional disparities and boosting jobs and growth in England.
Open Europe: Off Target DCLG Select Committee Inquiry

DMN: Merkel and Hollande could be close to deal on ‘fiscal treaty’
Deutsche Mittelstands Nachrichten reports that Merkel and Hollande have made progress towards a compromise over the fiscal treaty during intensive behind-the-scenes negotiations. The paper reports that Merkel will most likely agree to commonly funded ‘project bonds’ in return for Hollande publicly endorsing the treaty. Merkel is keen for a deal to be wrapped up before the Bundestag votes on ratifying the treaty later on 25 May and the Irish referendum on 31 May. The WSJ notes that the possibility of Franco-German renegotiation of the fiscal pact might leave Irish voters voting on the pact without knowing the final details.

In the FT, Martin Wolf argues that Francois Hollande’s task is to convince Germany of the need for “symmetrical adjustment of the imbalances that built up before the crisis,” however, “the chances that Mr Hollande can deliver such a changed perspective are small.”
DMN EUobserver Le Monde Les Echos BBC Irish Times Les Echos Le Monde 2 WSJ FT: Wolf BBC: Flanders FT: Plender Times: Finkelstein Telegraph: Walden Telegraph: Evans-Pritchard

Cameron urges greater debt co-ordination in the Eurozone;
Queen’s speech to contain Bill that would see UK ratify controversial EU treaty change
In his interview with the Mail, David Cameron said, “Making sense of the euro for me would mean that those eurozone countries would have to have much more co-ordinated economic policy, much more co-ordinated debt policy. There’s nowhere in the world that has a single currency without having more of a single government” but adding that “All these countries have to make their own choices.”

On Britain’s role in the EU, Cameron said, “We want to be in the single market, we want European co-operation…We’ve started to demonstrate that it is possible to have a Europe where you’re leading some things – the single market, Nato – but other things you’re not involved in.”

The BBC notes that the Queen’s Speech is expected to contain a Bill which would see the UK ratify an EU treaty change, agreed in March 2011, to give the permanent eurozone bailout fund, the ESM, a legal base in the EU treaties.
BBC Mail Sun

On its front page, Bild notes that Hollande has promised to restore the retirement age to 60, for certain workers, whereas in Germany it is 67. Columnist Jan Schäfer argues that “Europe has lived beyond its means for years - and wasted billions of euros. Therefore now is not the time for new benefits, but painful reforms and austerity programs. Otherwise others will again ultimately have to foot the bill for France. For the avoidance of doubt that means us Germans”.
Bild Bild: Schäfer

Spanish government set to call on banks to increase provisions against loans to the building sector;
Ruparel: Spanish bank bail-outs must come with strong conditions, including allowing banks to fail
The news of the injection of public funds into Spanish bank Bankia using public funds has raised concerns that further state-backed bail-outs will be needed in the Spanish banking sector. Spanish news agency EFE reports that the Spanish government will on Friday require banks to set aside a total of between €20bn and €40bn of additional provisions to cover for the €140bn of loans to the construction sector which are currently considered ‘not problematic’.

Writing in City AM, Open Europe’s Raoul Ruparel argues that, “Taxpayer-backed bank bailouts are never ideal, but if Spain goes down this road, getting the correct mix of support and strong conditions is vital… The key will be allowing some banks to fail or be wound down. In the end, many of these banks have unworkable balance sheets in the aftermath of the housing bust. This will be the clearest signal to show that public funds are not being used to solely prop up banks, that only viable businesses will survive and that the Spanish government is committed to reform.”

Raoul concludes, “The good news is that the Spanish government finally accepts the need to tackle the wider problems with its banks, presenting an opportunity to flush out the sector once and for all. On the other hand, it significantly increases the likelihood of taxpayer-backed Spanish and Eurozone funds being used to bail out banks once again. What’s clear is that, until the problems are fully addressed, the Spanish banking sector malaise will still threaten to engulf the whole economy and potentially drive the country into a full bailout programme.”
FT City AM WSJ El País El País 2 Expansión City AM: Ruparel

EU leaders to meet on 23 May to discuss fiscal stimulus measures
EU Council President Herman Van Rompuy has scheduled an informal dinner for EU leaders on 23 May to discuss fiscal stimuli measures including a €10bn increase in the European Investment Bank’s lending capacity to fund SMEs, and the introduction of “project bonds” to finance European-wide infrastructure.

Meanwhile, Les Echos reports that the Commission has issued a briefing on its proposed financial transaction tax (FTT). The Commission claims that a 0.1% tax on bond and shares transactions, and a 0.01% tax on derivatives would reduce European growth by just 0.28% by 2050, compared to the 0.53% reduction initially forecast. The briefing contends that the tax would not induce the re-localisation of financial services.
Le Figaro El País EUobserver El Mundo Irish Times Irish Times EurActiv Irish Independent FT 2 Reuters Le Monde Les Echos Les Echos

elgian daily HLN and Dutch daily De Telegraaf both cite Open Europe’s findings that the European Court of Justice has demanded an additional €29m from next year’s EU budget while maintaining a collection of fine wines valued at €70,000.
Het Laatste Nieuws Telegraaf

Handelsblatt reports that Spanish official Belèn Romana Garcia, not EFSF head Klaus Regling, is supported by Merkel to become head of the ESM bailout fund. In return, Spain has given up its demand for an ECB Executive Board member. The article also confirms that German Finance Minister Wolfgang Schäuble will become the next Eurogroup chief.
Handelsblatt Bloomberg

Norbert Röttgen, German Environment Minister and the CDU’s candidate for State President in Sunday’s Nordrhein-Westfalen regional elections, has called for the election to be a referendum on Chancellor Merkel’s eurozone policy, reports FAZ.

Ahead of the French legislative elections in June, interior minister Claude Géant has confirmed that outgoing French President Nicolas Sarkozy would “no longer play an active role” in politics when he leaves the Elysee palace on May 15. It is currently unclear who would replace him as head of the UMP party.
Le Monde Les Echos Les Echos

Judges at the ECtHR will meet today to consider whether Jordanian terror suspect Abu Qatada's appeal over deportation should be allowed to go ahead.
Telegraph Sun BBC

Portugal is set to scrap four of its 14 public holidays over the next five years from 2013 in a bid to tackle austerity and boost economic activity.
BBC Le Figaro

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