€55bn for a Greek bailout

 

The Austrian newspaper Der Kurier has quite detailed information leaked from the ongoing negotiations for a Greek bailout scenario. According to their sources, Germany and Paris agreed that Greece might need €55bn until the end of the year to prevent insolvency.  The German government would be ready to contribute €20bn, the French €10bn. Other member countries, except those that are themselves in trouble (Spain, Portugal and the UK), will have to contribute according to their shares in the ECB. How the money will be provided is still open. Germany prefers to provide half of its share through guarantees and the other half by purchases of Greek bonds through the KfW. Angela Merkel outlined the time frame, with the first intervention around Easter. The plan is strictly confidential (well except for the leaks), no written testimony, and coordinated with the German government and the ECB. (But we should not get too excited about this: Even if there is an agreement on a technical level, at a political level this is not yet a done deal).

 

 

Schäuble wants to legalise the euro exit

This is probably the single most important part of the Schäuble proposal. In a column in the FT and other papers the German finance minister, while defending his idea of a European Monetary Fund, said this:

“Should a eurozone member ultimately find itself unable to consolidate its budgets or restore its competitiveness, this country should, as a last resort, exit the monetary union while being able to remain a member of the EU.”

In the article he is setting out in great detail his vision of a new euro area governance system that links an EMF with a strengthened stability pact. The latter is to be based on strict sanctions – withdrawal of voting rights, withdrawal of EU cohesion funds. This is Germany’s price for accepting an EMF.

 

 

Greek strikes are a hugely disruptive

It is one thing to read about Greek strikes in non-Greek papers, and quite another to read what is happening on the ground in Kathimerini, which has a blow-by-blow account of all the stoppages that have ground the country to a stillstand: Teachers, public transport, landfill workers, petrol stations. The list is very long. The union say that they are not prepare to shoulder the lion share of the cost to pay for the Greek solvency crisis.

 

 

ECB criticises Spain and others over budget plans

The spotlight is now turning to Spain. El Pais reports that the ECB has been critical of the Spanish government’s lack of concrete proposals to reduce the defict from 11.4% in 2009 down to 3% in 2013. The ECB has demand that the Spanish government defines exactly how it wants to do this, rather than content itself with stating the objective in broad terms. Ireland has also been criticised. The paper says the existing stability programme sets out some measures for the period 2011 to 2013, including the withdrawal of housing deductions, and more generally stated goals to reduce spending on public sector employees. The article also makes the point that all the stability programmes implicitly assumed a strong recovery, which is now not happening.

 

Spanish private bankers are getting nervous about the lack of restructuring

El Pais has an interesting article this morning about a meeting of the Spanish Banking Association, in which its president Miguel Martin said that not enough progress is made in respect of balance sheet cleanup in the savings bank sectors, which is threatening to drag down the entire Spanish financial system , as foreign investors did not distinguish banks and savings banks, so the failure to restructure the savings bank sector would drag down the private sector as well.

 

Conflicting reports in FT and FT Deutschland about what the EU will do about hedge funds

FT  Deutschland reports on its front page that the other EU countries are ready to use the qualified majority voting system to overrule British objections to hedge fund regulation, and make a decision at the next Ecofin meeting on Tuesday. The FT reports that last minute negotiations were taking place and that Britain and France were together trying to find a solution. EU finance commission Michel Barnier reject US criticism of the proposed regulation as saying that it was consistent with the G20 goals. The biggest disagreement between the British and the others is the third country issue – access and terms for alternative investment fund managers – the polite term for hedge funds – from outside the EU. Critics say the current proposal is potentially protectionist. Also note: The EP has co-decision, and there are 1700 amendments already on the table.

 

 

 

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