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Greek coalition to push for two year delay in deficit targets

21 Jun 2012

New Democracy leader Antonis Samaras was yesterday sworn in as Greek Prime Minister, after PASOK and the Democratic Left agreed to form a coalition. The cabinet will be finalised today.  PASOK and the Democratic Left will not put up any MPs for cabinet posts. The Chairman of the National Bank of Greece, Vasilios Rapanos, has been named Finance Minister. The parties will form a permanent panel which will discuss the government’s day-to-day policy to ensure continued cooperation within the coalition.

Kathimerini reports that the new government will ask eurozone leaders for an extra two years to get its deficit under 3% of GDP, this would require between €16bn and €20bn in extra funding. The Greek economy may contract by up to 7% this year, well above forecasts of 4.5%, which bolster calls for an easing of the adjustment programme, according to Kathimerini.

According to Eurostat data released yesterday, Greek GDP per capita dropped to 82% of the EU average, compared to 94% only three years ago. Stern reports that Eurostat warned the Commission ahead of Greece’s entry into the euro that Athens’ economic statistics were not accurate. Open Europe’s Pieter Cleppe appeared on BBC World Service radio yesterday, arguing “the new Greek government and its eurozone partners will probably manage to conclude a new deal”, citing Open Europe’s estimates that “a Greek euro exit exposes Europe for almost €600bn” and that “the other alternative of Germany leaving the currency union is still a taboo in the country”.
FT FT 2 CityAM CityAM 2 WSJ Le Monde Les Echos BBC Guardian Irish Times Independent IHT Le Figaro Coulisses de Bruxelles EUobserver Welt Kathimerini Kathimerini 2 Kathimerini 3 Stern European Voice Irish Independent Le Monde 2 La Tribune Les Echos 2 Les Echos 3 Les Echos 4 CityAM 3 Le Monde 3

ECB executive board member: Euro bailout fund should start buying bonds;
Merkel: Bond-buying plan is not being discussed at the moment
Italy’s proposal to use the eurozone’s bailout funds to buy bonds on the secondary market continues to receive mixed reactions. In an interview with the FT, France’s ECB Executive Board Member, Benoît Cœuré said, “It’s a mystery why the EFSF was allowed almost a year ago to undertake secondary market interventions and governments have not yet chosen to use that possibility…Current circumstances would probably warrant EFSF intervention in the secondary market.” He added, “[The EFSF] is big enough for the purpose for which it was created…The EFSF can be used to alleviate temporary tensions. It is not an instrument of a transfer union.” European Commission spokesman Amadeu Altafaj said EFSF bond-buying would only be “financial paracetamol”.

Expansión reports that Spanish Foreign Minister José Manuel García-Margallo called Italy’s proposal “intelligent”. However, German Chancellor Angela Merkel told the press yesterday, “It is true that both the EFSF and the ESM include the possibility of buying bonds in the secondary market, but this is not in discussion at the moment.” Merkel is expected to come under pressure to change her mind when she meets Italian Prime Minister Mario Monti, French President François Hollande and Spanish Prime Minister Mariano Rajoy in Rome tomorrow.
FT WSJ CityAM Irish Times Telegraph EUobserver Welt Il Sole 24 Ore Il Sole 24 Ore 2 La Stampa Expansión IHT FT 2 FT 3 FT Interview: Coeure Les Echos La Tribune

French PM admits eurobonds would “take several years”
In an interview with Die Zeit, French Prime Minister Jean-Marc Ayrault claims that the introduction of eurobonds to mutualise eurozone debt would “undoubtedly take several years” , adding that “any debt mutualisation would require more political integration than is currently necessary”.
Les Echos La Tribune La Tribune 2 Irish Independent Le Figaro

Spain expected to make formal request for aid to recapitalise its banks today
According to a high-ranking EU official quoted by El País, Spain should make a formal request for its bank bailout at today’s meeting of eurozone finance ministers in Luxembourg, while an agreement on the conditions attached to the rescue package should be finalised “within one or two weeks.” The source added that “a sensible solution” could involve giving Spain the loan via the EFSF (the eurozone’s temporary rescue fund) and transfer it on to the ESM (the permanent fund) at a later stage – meaning that the loan would not become senior to Spanish debt held by private investors.

The results of the two independent audits of the real estate assets held by Spanish banks are also due for publication today. Meanwhile, Spain sold €2.2bn of medium-term debt in an auction this morning. Despite solid demand, the interest rate on five-year bonds was above 6% – the highest level since the introduction of the euro, notes El Economista.
La Stampa El Mundo El Economista Les Echos Les Echos 2 Les Echos 3 European Voice Spiegel El País El Mundo 2 Cinco Días Cinco Días 2 City AM

David Cameron calls on Germany to display more European “solidarity”
David Cameron, in an interview with the BBC, argues that Germany “need to have guarantees from other parts of the eurozone that they’re putting their house in order, but there has to be solidarity as well.” The Prime Minister adds “But I'm relaxed about what is happening in Europe for this reason - that I've always believed you're going to have different parts of Europe doing different things in different ways.”
BBC Open Europe blog

German parties reach agreement in talks on ratifying fiscal treaty and ESM
The German government and opposition have agreed this morning to ratify the fiscal treaty, and the ESM treaty establishing the eurozone’s permanent bailout fund. FAZ reports that representatives from the CDU, FDP, SPD and Greens signed off on a joint "Pact for Sustainable Growth and Employment” which includes a commitment to introducing a tax on financial transactions in the absence of an agreement at the EU level. However, there has been no confirmation of agreement on the issue of a potential debt-redemption fund – which would pool eurozone members’ debt above 60% of GDP - which had been urged by the opposition but resisted by the government.

The government is still to conduct final talks on Sunday with representatives of Germany’s 16 federal administrations who also have to give their consent, and who have raised concerns over the impact the fiscal treaty would have on their ability to raise new debts. Meanwhile far-left Die Linke party has announced that following the vote on 29 June, it will lodge a formal compliant over both treaties with the country’s Constitutional Court.

Writing in Finnish business daily Taloussanomat , Open Europe’s Pieter Cleppe, comments on the European Stability Mechanism (ESM) ahead to Finland’s ratification of the Treaty which is expected today, warning that it won’t solve the fundamental problems of the eurozone and that Finland hasn’t got a veto against emergency lending by the ESM.
EUobserver Focus FAZ Welt Süddeutsche

Berlusconi: Considering euro exit is “no blasphemy”
Speaking at a book launch yesterday, Italy’s former Prime Minister Silvio Berlusconi said, “I don’t think the hypothesis of leaving the euro and using competitive devaluation is blasphemy. The best solution is to convince Germany that the ECB must act as [the eurozone’s] lender of last resort.” He concluded, “If Germany sticks to its negative positions, it can either happen that individual [eurozone] countries return to national currencies, or that Germany leaves the euro.” Berlusconi had played down similar remarks he made earlier this month, calling them “a joke”.
Corriere della Sera Il Sole 24 Ore La Stampa FT WSJ

Fresh taxes planned as French budget short of €10bn
French Minister for Parliamentary Relations Alain Vidalies confirmed yesterday that the government was short of €10bn to finance its 2012 budget. A series of “emergency measures” which include a 3% tax on dividends, and an increased tax on inheritance and donations, are currently under consideration.
Le Monde

Prospect Magazine reports on a YouGov poll which it believes demonstrates it is possible that UKIP could win the 2014 European Elections. Separately in an interview with the magazine UKIP leader Nigel Farage MEP predicts: “We aim to win. We aim to win and cause an earthquake in British politics.”
Prospect Prospect 2 Open Europe blog

UK minister: There will be “no compromise” on EU pensions rules
PA reports that UK Pensions Minister Steve Webb vowed today to fight potentially “catastrophic” EU plans to impose funding rules on British occupational pensions. Mr Webb said there would be “no compromise” over the Solvency II rules to “harmonise” schemes, which, according to the Government, would affect all private sector companies offering defined benefit schemes in Britain, amounting to around half of the private pension assets in the country.
No link

In an opinion piece in Le Figaro, Thomas Eymond-Laritaz,  former European affairs advisor to the Bulgarian and Georgian governments, writes that “The UK’s exit from the EU could be politically and economically disastrous…If the UK left, other EU states may wish to follow its example”.
Le Figaro: Eymond-Laritaz

In the Times, Shadow Home Secretary Yvette Cooper writes that “Labour has learnt its lesson on immigration,” noting that, “we should have adopted transitional controls for Eastern Europe.”
Times: Cooper Open Europe research

In an interview for Die Welt,  EU Commissioner for Regional Policy Johannes Hahn claims that President Hollande’s idea to bolster the growth pact with €55bn from unused EU funds is based on the premise that the money is readily available.  “There is no money lying around and just waiting to be utilized somewhere else. There is only money that still hasn't been assigned to a project”.

Dutch newspaper Het Financieele Dagblad reports that EU finance ministers will abandon proposals for a financial transaction tax at tomorrow’s meeting.  A stamp duty which would apply to buyers of stock is proposed.

The Telegraph reports that David Cameron believes that people can be “infuriated” by “European interfering” as he explains his support for an announcement that the UK will follow Belgium in printing a UK national symbol on its driving licenses in addition to EU symbols.
Telegraph Mail

EU countries are set to stop buying Iranian oil on 1 July. At talks in Moscow at the start of the week, Iran dismissed calls by the UK, US, France, Germany and China, to halt the development of its nuclear power.

The EU announced yesterday that Brussels would withdraw its nine year police mission in Bosnia-Herzegovina at the end of this month.
Les Echos

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