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Pressure grows on ECB to start buying Spanish government bonds amid continued Bundesbank resistance; Hessen Europe Minister says German government should explore taking ECB to court

30 Jul 2012

German Chancellor Angela Merkel held separate phone calls with French President Francois Hollande and Italian Prime Minister Mario Monti on Friday and Sunday respectively, in which the three leaders pledged to “do everything” to save the eurozone. A follow-up Hollande-Merkel statement said that “European institutions ... must fulfil their obligations”, which has been widely interpreted as a call on the ECB to start buying government bonds again. Eurogroup chariman Jean-Claude Juncker told Le Figaro that the ECB is ready to act “within days. The ECB board will have its monthly meeting on Thursday. Ahead of the meeting, Mario Draghi will meet Bundesbank President Jens Weidmann who remain opposed to bond-buying. FTD reports that the Bundesbank is getting increasingly isolated.

Meanwhile, Die Welt reports  that Hessen’s Europe Minister Jörg-Uwe Hahn (FDP) has called on the German government to assess the possibility of taking the ECB to the European Court of Justice should it re-activate the bond-buying programme.
IHT FT Weekend FT Weekend 2 FT Le Figaro: Juncker EUobserver Expansión Il Sole 24 Ore Il Sole 24 Ore 3 La Tribune Il Sole 24 Ore 2 Saturday’s Guardian Saturday’s Telegraph Saturday’s Times Saturday’s Independent FT 2 FAZ FTD Welt

According to a new Emnid poll for Bild am Sonntag, 71% of Germans want Greece to leave the eurozone if the country does not stick to its adjustment programme. The poll also found that 51% of Germans think their country would be better off outside of the euro.
Bild Süddeutsche

Reuters: Greece’s public lenders could accept taking losses
Unnamed European officials quoted by Reuters have suggested that plans to cut Greece’s debt by €70bn-€100bn via a second restructuring are being considered. The plan may see the ECB, national central banks and eurozone governments taking losses on the Greek bonds they currently hold. Separately, Greece’s three coalition leaders are due to resume talks today to finalise the €11.5bn budget cuts the country is expected to make during 2013-14.

Meanwhile, Latvian Finance Minister Andris Vilks said in a radio interview, “As soon as possible, one should find a way to pull Greece out of the eurozone with as little damage as possible.”
Open Europe Research: Is Greece Better Off Out? Kathimerini Spiegel IHT Kathimerini 2 Kathimerini 3 Telegraph Telegraph: Evans-Pritchard

IMF warns Spain that additional measures will be needed to meet deficit targets
El País reports that the IMF has warned Spain that, despite the latest €65bn austerity package adopted by the government, additional measures will be needed to meet the 2.8% of GDP deficit target agreed with the European Commission for 2014 – suggesting that further VAT increases could be an option. Meanhwile, Íñigo Fernández de Mesa, Secretary General of the Spanish Treasury, told Expansión that the Treasury will temporarily issue the debt of bailed out Spanish regions starting from next year.   

Open Europe’s recent briefing, estimating that taking Spain out of the bond markets for three years in a Greece-style bailout would cost between €450bn and €650bn, continued to receive widespread coverage in European media and was quoted by Spanish business daily Expansión, Belgian daily De Morgen, Belgian magazine Knack, Polish daily Rzeczpospolita, Romanian business daily Ziarul Financiar, the Sunday Telegraph and Saturday’s Express.
Open Europe Research: Spanish Bailout WSJ El País Expansión Sunday Telegraph Saturday’s Express Rzeczpospolita De Morgen Knack Ziarul Financiar Expansión

Le Figaro reports that the French Constitutional Council is due to issue a ruling by 13 August on whether transposing the balanced budget rule laid down in the fiscal treaty requires changing the French constitution.
Le Figaro

Timo Soini, the leader of the opposition Finns Party, has called for the country’s Chancellor for Justice to decide whether the Finnish Parliament was misled during the vote to adopt the eurozone’s permanent bailout fund, the ESM, and must therefore be allowed to vote again.
Yle Yle English Helsingin Sanomat

In Saturday’s FAZ, Dr. Stefan Homburg, a public finance lecturer at the University of Hannover, argues that contrary to the German Government’s often stated claim that Germany’s liability to the ESM is capped at €190bn of the €700bn total, the fine print of the treaty states that there is no upper limit, with decisions taken by the ESM’s Board of Governors and not national parliaments.
FAZ: Homburg

The Mail on Sunday reported that David Cameron is under pressure to impose tighter controls on citizens from EU countries wanting to live and work in the UK, after the Spanish government strengthened its controls, including new requirements for British citizens moving to Spain.
Mail on Sunday Mail on Sunday: Leader Mail on Sunday: Woolas

The European Parliament and the Council of Ministers are set to clash on a proposal for a continent-wide fund to cover payouts to victims of fraud or malpractice by fund managers, brokers and custodians, the FT reports.

In the FT, former ECB Chief Economist Otmar Issing argues that re-establishing respect for the “no bailout clause” rather than “political union” is the solution to the eurozone crisis.
FT: Issing

During a visit to Russia, Turkish Prime Minister Recep Tayyip Erdogan argued that “I am constantly trying to get my message through [to Brussels] and make my point that they might force us to seek alternatives [to EU membership]”. Hürriyet quotes Turkey’s EU Affairs Minister Egemen Bagis as saying “EU leaders should actually take note of Erdogan’s statement. Having waited so long, Turkey might indeed have to consider a plan B, C, and D”.
EurActiv Hürriyet

Romania’s President Traian Basescu survived Sunday’s controversial impeachment vote after less than 46% of Romanians turned up to vote. Prime Minister Victor Ponta has been campaigning to unseat Basescu following his appointment in May, causing the EU to raise questions about democracy and the rule of law in Romania.
EUobserver Guardian Repubblica FAZ

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