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Merkel under pressure at G8 for eurozone economic stimulus package; Cameron seeks to build ties with Hollande

18 May 2012

German Chancellor Angela Merkel will be under pressure from other G8 leaders at this weekend’s summit at Camp David to take measures to stimulate the eurozone economy. The Times reports that David Cameron used a video conference call ahead of the G8 to tell Chancellor Merkel that Germany must do more to stop the single currency unravelling. President Barack Obama is expected to welcome new French President, François Hollande, as a potential ally in seeking greater stimulus in Europe and as a counterweight to Merkel.

The FT notes that Cameron is desperate not to get caught on the wrong side of public opinion on ‘growth’, so is prepared to back many of Hollande’s demands, including the mutualisation of eurozone debt in the form of eurobonds, but not his proposed tax on financial transactions. Cameron and Hollande are also expected to discuss the EU budget and Anglo-French defence cooperation.

French Prime Minister Jean-Marc Ayrault told France Inter this morning that the Franco-German relationship has “become imbalanced, it’s obvious”. He added “it’s important that we ensure mutual respect, one country should not be submitted to another”.

Separately, the latest FT/Economist Global Business Barometer survey has revealed that more than three-quarters of executives surveyed said their businesses had no contingency plans for the break-up of the euro.

On his Telegraph blog, Mats Persson argues that Cameron and Hollande “actually have quite a bit in common”, including both having threatened to veto an EU treaty, called for the ECB to act as the euro’s lender of last resort and having cabinets with ministers who opposed the Lisbon Treaty/European Constitution. Mats appeared on Sky News yesterday discussion the future of the euro.
Telegraph blogs: Persson Guardian Express Times Mail Irish Times Telegraph Telegraph 2 Irish Times 2 FT FT 2 FT 3 BBC WSJ: Dalton FT: Wolf FT: Stephens City AM: Brooks Guardian: Leader Times: Rifkind Guardian: Mazzucato Telegraph: Warner Bild Welt Les Echos

Syriza warns that a Greek exit from the euro would mean a eurozone break-up
The caretaker Greek government was sworn in yesterday with a 16 member cabinet made up of technocrats. Syriza leader Alexis Tsipras stepped up his rhetoric speaking to NET TV, saying, “[German Chancellor Angela] Merkel now realises that if she takes the risk of sending Greece packing, the next day she herself will have to leave the euro.’’ Tsipras warned that a euro exit would be painful but added that Greece could survive on its own and would focus on paying its internal commitments rather than external debtors. In an interview with Belgian daily De Standaard, EU Trade Commissioner Karel De Gucht says, “Today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn’t make it.” The front page of Handelsblatt reports that the German government is preparing for a Greek exit from the euro, suggesting it would cost Germany €80bn.

Most polls since the election have put Syriza in the lead. However, a MARC/Alpha poll published in To Vima has the following results: New Democracy 23.1%, SYRIZA 21%, PASOK 13.2%, Independent Greeks 7.2%, Democratic Left 5.6% and the Communist Party 5.1%. This would make New Democracy the largest party and allow a majority coalition with PASOK.

Meanwhile, IMF officials have said they won’t visit Greece until after the 17 June elections. Fitch downgraded Greece again from B- to CCC given the political turmoil. The FT reports that the Cypriot government has said it will underwrite a €1.8bn capital increase for Cyprus Popular Bank to help protect it from the crisis in Greece.

Open Europe’s Raoul Ruparel was yesterday quoted by the USA Today and ABC News discussing the Greek crisis and its potential exit from the eurozone.
USA Today ABC FT BBC WSJ CityAM Kathimerini Kathimerini 2 Les Echos Kathimerini 3 Independent EurActiv Guardian Guardian 2 Irish Times Irish Times 2 FT 2 To Vima De Standaard: De Gucht Bild Welt Welt 2 Handelsblatt Handelsblatt 2 Handelsblatt 3 Handelsblatt 4

Moody’s downgrades 16 Spanish banks and four Spanish regions;
Spanish regions pledge adjustment of over €18bn this year

Moody’s downgraded the credit rating of 16 Spanish banks yesterday, including Santander and BBVA – the country’s two biggest banks. Meanwhile, the Spanish government yesterday denied reports by El Mundo that €1bn worth of deposits had been withdrawn from Bankia in only one week, following the bank’s nationalisation. However, Bankia’s shares fell another 14% yesterday. Spanish business daily Cinco Días reports that Spanish banks are in favour of re-introducing a temporary ban on short-selling to help contain the losses.

Moody’s also cut the rating of four Spanish regions, including Andalusia and Catalonia – the country’s two most populous regions. Expansión reports that, following negotiations with the central government yesterday, Spanish regions have committed to save a total of €18.4bn this year, €13bn via spending cuts and the rest via tax hikes. However, the government rejected the adjustment plan submitted by Asturias, which makes a direct intervention in the region likelier.
El País Expansión Expansión 2 Expansión 3 Il Sole 24 Ore El País 2 El Mundo El Mundo 2  Cinco Días Cinco Días 2 El País 3 Le Monde La Tribune Times Guardian EUobserver Independent IHT BBC: Today BBC BBC 2 Mail FT CityAM WSJ FT 2 FT 3 WSJ 2 Telegraph Telegraph 2 Irish Times

SPD MP calls for early elections after party’s triumph in latest regional elections
Johannes Kahrs, spokesman for the influential centre-right Seeheim Circle grouping within the social-democratic SPD party, has called for fresh elections in Germany following Merkel’s dismissal of Environment Minister Norbert Röttgen and the SPD’s victory in the Nordrhein-Westfalen regional elections. Kahrs is quoted by Handelsblatt as saying: “The CDU, CSU and the FDP are concerned only with themselves…new elections would be good for our country”. However, Die Welt notes that the party’s leadership is more reserved as they do not yet feel fully confident of winning a majority. Meanwhile polling among SPD members shows that Hannelore Kraft, the winner of the NRW elections, has emerged as the party’s preferred candidate for Chancellor.
Handelsblatt Welt Welt 2 Reuters

The Irish Government has moved swiftly to deny that there would be a second referendum on the fiscal treaty if the country voted ‘No’, after Employment Minister Richard Bruton said : "I suppose I will have to say that we will need access to this fund [the ESM] and Ireland will be looking to say can we vote again, because we will need access to this fund. We will have a crisis on our hands."
Irish Independent

The European Parliament is expected to vote in favour of an EU Financial Transaction Tax on 23 May, although the result is not binding as the Parliament only has consultation rights on the issue, reports European Voice.
European Voice

The front page of Süddeutsche reports that General Motors, which owns both Germany’s Opel and the UK’s Vauxhall car manufacturers, has decided to move production of the Astra range from its Rüsselsheim plant in Germany to plants in Gliwice, Poland and Ellesmere Port in the UK. The paper notes that employees in the Ellesmere Port plant had voted to accept a cut in wages.

A British company, De La Rue, that produces banknotes for more than 150 countries is preparing for a potential reintroduction of the drachma, the Times reports.

Observers monitoring EU fish quotas are being regularly intimidated, offered bribes and undermined by the fishing crews they are observing, a Guardian investigation claims.

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