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Finnish Finance Minister: “Finland will not cling to the euro at any cost”

06 Jul 2012

In an interview with Finnish daily Kauppalehti, Finnish Finance Minister Jutta Urpilainen said, “Finland is committed to being a member of the eurozone and we believe the euro is beneficial to Finland. However, Finland will not cling to the euro at any cost and we are prepared for all scenarios.” In a separate interview with Helsingin Sanomat, Urpilainen said, “Collective responsibility for the debt and the risks of other countries is not what we must prepare for.”
Le Figaro HS: Urpilainen

Greek government rows back on pledge to renegotiate bailout
The Greek Finance Minister Yannis Stournaras announced yesterday that “The [Greek reform] programme is off-track and we can’t ask for anything from our creditors before we get it back on course.” Kathimerini reports troika officials presented a tough line in yesterday’s meetings, with the Greek government hesitant to push too hard for renegotiation, especially since reports suggest the budget is up to €2bn off target. The Greek government will now have to accelerate the reforms before it can request any renegotiation of the programme.

However, Evangelos Venizelos leader of coalition partner PASOK, yesterday called for Greece to be given an extra three years to meet its fiscal consolidation targets. Venizelos also put forward his plan for shaving €91bn off the Greek debt level, which includes: using the ESM to provide €50bn of the bank recapitalisation funds so that this amount is not included in Greek debt, a restructuring of the Greek bonds held by the ECB – saving €27bn – and having social security funds swap their bonds for restructured English law bonds, saving €14bn.

The coalition is holding final talks this morning over its policy programme, with the Democratic Left resisting plans for increased privatisations. The government will present the programme in the Greek Parliament tonight, where it will be discussed for three days with a confidence vote held at the end. Kathimerini also reports that the Greek government only managed to collect €630m out of €13.2bn in court ordered tax fines. Bild reports that the new Greek government has rejected the offer of 165 German officials being seconded to Greece to help restructure its finance ministry and tax-collecting facilities.
FT WSJ Times Irish Independent Kathimerini Kathimerini 2 Kathimerini 3 Le Monde Kathimerini 4 EUobserver 2

ECB decision to cut rates to historic lows fails to ease market jitters
The ECB lowered its main interest rate by 0.25% yesterday to a historic low of 0.75%, while central banks in the UK and China also took action to boost growth. The decision was surprisingly unanimous amongst the board members of the ECB and included cutting the deposit rate to 0%. The moves did little to boost markets, with the euro weakening and the borrowing costs of Italy and Spain rising back to the levels seen before last week’s summit. In his press conference, ECB President Mario Draghi also stressed that further increasing the use of ‘non-standard measures’ to ease eurozone concerns was not discussed, emphasising that there is little more the ECB can do to boost lending in the wider economy – putting the pressure back on eurozone governments to find a solution. Draghi also stated that, in its new role as financial supervisor for the eurozone, the ECB would work closely with national supervisors rather than replacing them and will look to become more “democratically accountable”.
FT FT 2 FT 3 FT 4 WSJ WSJ 2 Irish Independent Irish Times BBC European Voice EurActiv Times Guardian Telegraph WSJ 3 EUobserver Welt

Cyprus considering taking loans from both EU-IMF and Russia
Cypriot President Demetris Christofias yesterday denied that he is planning to reject the EU-IMF bailout loan to take on a Russian loan only, adding that Cyprus “can combine both” since it needs money for “development” and for bank recapitalisation. Meanwhile, EUobserver reports that Cypriot Finance Minister Vassos Shiarly has suggested that the decision to impose losses on private holders of Greek debt earlier this year is to blame for Cyprus now being in need of a bailout. The total loss incurred by Cypriot banks amounted to €4.2bn – around 24% of the island’s GDP.
FT Times European Voice EUobserver

Mats Persson: Last week’s EU summit illustrated danger for Germany of an EU without the UK;
Pawel Swidlicki: Germany might be more amenable to revised membership terms for the UK than it admits
In a letter to the FT, Open Europe’s Director Mats Persson writes that “At last week’s summit, German Chancellor Angela Merkel may have got a taste of what an EU without Britain would be like. Backed into a corner and with her list of allies growing thin, she was forced to give way to the Mediterranean bloc – Italy, Spain and France – over direct recapitalisation of eurozone banks…Germany needs the UK inside the EU tent to balance the more protectionist southern bloc, and to uphold a rules-based system where goods and services can be traded freely across borders.”

Writing for the Guardian online, Open Europe’s Pawel Swidlicki argues that “If push comes to shove, the Germans may prove more susceptible to UK arguments for revised membership terms than it is willing to admit publicly. A common response from EU-reform sceptics to any suggestion that the UK should seek a more flexible relationship with Europe is that other member states would never allow it, but this has never been credibly tested...Germany needs Britain and vice versa. No one likes being without friends.”
FT Letters: Persson Guardian: Swidlicki

Bundesbank President criticises constant mutualising of risks and weakening of agreed rules;
Row over letter by German economists warning against banking union grows
Yesterday’s open letter warning against setting up a eurozone banking union, now signed by 172 German economists, received partial backing from Bundesbank President Jens Weidmann reports FAZ. Weidmann argued that “This is not some short-term instrument that will solve the existing problems but an ambitious project whose complexity matches that of the monetary union and the common monetary policy”. He also criticised the government over the decisions taken at last week’s EU summit, warning that the eurozone was “constantly mutualising risks and weakening the agreed rules”, adding that “Fiscal aid should be the last resort of crisis management [but] this position has by now been recognisably weakened.”

The German political establishment has reacted angrily to the letter, with German Finance Minister Wolfgang Schäuble claiming it was “outrageous” that the economists were “confusing the public”. The letter was also criticised by the FDP, while the opposition SPD’s budgetary expert Carsten Schneider described it as “hysterical”. Chancellor Angela Merkel denied that Germany would be taking on any additional liabilities, claiming that “Liabilities for banks are banned under the current rules just like liabilities for state debts”.

According to a new Infratest Dimap poll for German public broadcaster ARD and Die Welt, 60% of Germans are satisfied with Merkel’s handling of the eurozone crisis. Open Europe’s blog post looking at the economists’ letter was cited by National Review Online.
FT Handelsblatt FAZ Süddeutsche Handelsblatt 2 Süddeutsche 2 Welt La Tribune National Review Online

Italian government unveils €26bn public spending cuts over three years
The Italian government has adopted plans to cut public spending by €26bn over three years. The proposals include public sector staff cuts and the reduction of central government funding to Italian regions. Meanwhile, Italian Prime Minister Mario Monti yesterday urged the Italian parliament to ratify the fiscal treaty and the eurozone’s permanent bailout fund, the ESM, “by the end of the month.”

Meanwhile, Jornal de Negócios reports that the Portuguese Constitutional Court has ruled that the government’s plans to scrap the extra month’s salary public sector workers receive before summer holidays and Christmas are unconstitutional, since they infringe the principle of equality between public and private sector employees.
City AM City AM 2 WSJ BBC Telegraph Jornal de Negócios EUobserver 3 Times EUobserver 4 Il Sole 24 Ore Repubblica La Stampa Italian government press release Reuters Italia El País Expansión WSJ: Berman WSJ: Fidler FT: Lind

Slovenian Finance Minister Janez Šušteršic told reporters yesterday, “If the problems of [Slovenian] banks turn out to be bigger, if it turns out we were not aware of some of them or if new risks appear, then maybe down the road, asking for help can't be ruled out.”
Telegraph

In the Telegraph, the winner of the Wolfson Economics Prize, Roger Bootle, writes that, “If the euro is to be reconfigured, it looks as though it will be through the departure of the weaker southern members, one by one. In that case, we would end up with a set of independent floating currencies for the peripheral countries while the euro continued as the currency of the German-dominated northern core.”
Times: Wolfson Times: Kamm Telegraph: Bootle Times Guardian

The FT reports that the European Parliament’s Economic and Monetary Affairs committee has postponed its votes on the Mifid, Mifir and the Market Abuse Regulations in order to allow more time for MEPs to reach a compromise with member states.
FT

In the Telegraph, UKIP leader Nigel Farage calls on the Prime Minister to “explain why Britain can’t vote” on continued membership of the EU.
Telegraph: Farage

François Hollande’s plan to introduce new taxes on foreign second home owners has been attacked by former French finance Minister Jean Arthuis. He said that imposing a “social contribution” on home owners without granting the benefits to which the charge should entitle them could be illegal under EU law.
Telegraph Telegraph: Skovgaard  

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