http://euobserver.com/19/116362
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Submitted by testosteronepit on 05/25/2012 20:58 -0400
Van Rompuy to draft plan for deeper economic union
24.05.12 @ 03:38
BRUSSELS - EU leaders have tasked council chief Herman Van Rompuy with drafting a plan on deepening the eurozone's economic union, potentially via an inter-governmental treaty.
After more than five hours of talks on the need to strengthen growth policies while sticking to the already strengthened deficit rules, EU leaders on Wednesday night (23 May) agreed to come back to these issues at a formal summit on 28 June.
"Our discussion also demonstrated that we need to take the economic and monetary union to a new stage. There was a general consensus that we need to strengthen the economic union to make it commensurate with the monetary union," Van Rompuy said during a press conference at the end of the meeting.
The former Belgian premier added he would work on a report for the June summit with the heads of the European Commission, the European Central Bank and the chairman of eurozone finance ministers.
In recent weeks, European Central Bank chief Mario Draghi has called for a 10-year plan on how to achieve closer fiscal and political union in the eurozone. Economics commissioner Olli Rehn has also indicated he will table ideas in this direction.
Van Rompuy explained his report would not be the definitive plan on deeper economic union, but just an outline of the "main building blocs and the working method to achieve this objective."
Back in 2010, when he co-ordinated a similar exercise on stronger sanctions for deficit sinners in the eurozone, Van Rompuy hit a wall when it came to German-led demands for an EU treaty change. With the UK vetoing a treaty change last year and the Czech Republic opting out, an inter-governmental treaty on fiscal discipline was signed in March among 25 member states.
Van Rompuy said any new legal changes would try and stick to the current EU treaties, but "other hypotheses" such as a new inter-governmental agreement were also on the table.
He placed the issue of eurobonds as part of this long-term effort of shaping a deeper economic union, a compromise stance reflecting Germany's willingness to consider this French-led idea only if a stricter economic governance is in place.
"Colleagues expressed various opinions such as eurobonds in a time perspective or integrated banking supervision and resolution and a common deposit insurance scheme," he said, noting that none of the topics was dealt with in detail.
"Tonight's meeting was about putting pressure, focussing minds and clearing the air," Van Rompuy summed up, adding that the discussion about growth and jobs is not new and neither should it lead to scrapping budget rigour and deficit reduction.
Leaders welcomed a deal between ambassadors and the European Parliament on so-called project bonds - a funding scheme to start in a pilot phase this summer, aimed at spurring investments in southern countries.
A deal on energy efficiency and the single market, as well as agreeing the one issue hampering the implementation of a single EU patent among 25 member states should also be achieved at the June summit. The patent scheme is being held hostage by bickering among France, Germany and the UK on where to have the headquarters for the patent court.
EU leaders also used the opportunity to tell Greece that they want the country to stay in the eurozone as long as it respects its commitments.
"Continuing the vital reforms to restore debt sustainability, foster private investment and reinforce its institutions is the best guarantee for a more prosperous future in the euro area. We expect that after the elections, the new Greek government will make that choice," Van Rompuy said in reference to the 17 June elections which could bring in an anti-bail-out government fuelling fears of a Greek exit from the eurozone.
Despite the message of support, eurozone chief Jean-Claude Juncker confirmed Wednesday reports that officials are preparing contingency plans for a Greek exit from the eurozone.
and...
http://www.dailymail.co.uk/news/article-2149757/Eurozone-debt-crisis-France-Germany-hit-Euro-plunges-lowest-level-2-years.html
Merkel to unveil 'East German-style' rescue plan to solve Greece problem and save the single currency
- Aims to revive Greece in same way as East Germany after Communism
- Ailing countries to be transformed via mass privatisations
- Germany's private sector worryingly in decline for first time in six months
- France's slump in same sector is the steepest for just over three years
- Gives urgency to keeping Greece's debt crisis from tearing euro apart
- Euro bonds splits growth-led France and austerity-pioneers Germany
- Spain ponders creating single nationalised bank out of its failed lenders
- Greek election 'has become referendum on austerity measures'
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A secret East German-style rescue package is being cooked up by Germany as the eurozone's 'engine-room' desperately bids to save the single currency.
German chancellor Angela Merkel is preparing a six-point plan that aims to revive Greece in the same way East Germany was developed after the fall of Communism.
Der Spiegel reports that it will see ailing countries transformed through privatisations, soft investment rules and the relaxation of employment laws.
Hit: France, led by Francois Hollande (left), and Germany, led by Angela Merkel (right) are usually known as the engine-room of the eurozone, but are now also suffering from the economic slowdown
The European Union will be presented with the plan, including a proposal for a European privatisation agency or fund, in the next few weeks.
It is likely to provoke outrage in Greece because of it's 'behave more like the Germans' message.
It is modelled on the 'trust agency' Treuhandanstalt, created in 1990 by the People’s Chamber of East Germany to sell off 8,500 state enterprises.
Merkel also wants to create special economic zones that will tempt foreign investors with tax relief and reduced regulation.
The employment market would also be restructured along German lines, with a job protection loosened.
The leaking of the plans comes as it was revealed France and Germany, dubbed the eurozone's engine-room, is now being hit by Europe's economic slowdown.
Worry: The news that Germany and France is also suffering from the economic slowdown gives added urgency to the region's struggle to keep Greece's debt crisis from tearing the single currency apart
So far, the 17-nation bloc's downturn has been confined mainly to its periphery - with Greece, Portugal and Ireland all seeking bailouts.
But an index measuring broad economic activity across the monetary union in May showed its weakest outcome since mid-2009, during the global financial crisis.
It has given added urgency to the region's struggle to keep Greece's debt crisis from tearing the single currency apart.
'GREEK ELECTION IS ESSENTIALLY A REFERENDUM ON AUSTERITY DRIVE'
Greece's general election on June 17 has turned into a referendum on whether Athens should continue with an austerity drive that is the price of continued fiscal support from its euro partners.
Greece's anti-bailout leftist SYRIZA party is maintaining a lead ahead of the elections, according to an opinion poll yesterday.
Greece held elections on May 6 but that vote left parliament divided evenly between groups of parties that support and oppose austerity conditions attached to a €130billion rescue agreed with lenders in March.
The Public Issue/Skai TV poll showed SYRIZA leading with 30 per cent of the vote, four points ahead of the conservative New Democracy party, which is backing the bailout.
If repeated on June 17, this would fall short of enabling SYRIZA to govern alone but give it a decisive role in forming a new government.
Greece's deficit means that without the EU/IMF money, which would stop flowing if Athens were to tear up the agreement on reforms, it would not be able to pay salaries and would have to leave the eurozone and start printing its own currency.
'Regardless of the turmoil and the debate that's going on in these crucial countries, it would seem that for the time being, people want to stick with the euro,' said John Wright, senior vice president of global public affairs at Ipsos.
Yesterday's composite PMI indicated core nations such as Germany and France were also being caught up in the downturn.
This was as they made contingency plans to deal with financial and economic turmoil in the event Greece quits the euro.
Italy, which could be on the front line of speculative attacks on euro markets if Greece went back to the drachma, put a brave face on the situation, saying the most probable outcome was still that Greece would remain in the euro zone.
'Anything can happen, but I think the most probable outcome is the one which is most positive for Greece and for all of us,' Italian Prime Minister Mario Monti told Italian TV.
He said Greece's eurozone partners had been wrong to insist on overly rapid reforms and fiscal adjustment, and he did not expect it would be long before European countries were ready to introduce common euro zone bonds.
'Italy is very much in favour of the creation of euro bonds when the time is right, and we do not expect it to be too far off,' Monti told an earlier news conference.
At least half of eurozone governments, as well as banks and large companies, are making contingency plans in case Greece decides to quit the euro.
Despite Monti's comments, his deputy economy minister said Rome was ready for such a possibility.
And European markets are currently stable.
The FTSE-100 is 0.05 per cent up at 5,352.93; France's CAC 40 is 0.41 per cent up at 3,050.58; and Germany's DAX is 0.43 per cent at 6,343.35.
It came as yesterday the euro crashed to a 22-month low as the European economy took another dramatic turn for the worse.
Figures showed the biggest slump in private sector business across Europe this month for nearly three years. The dire news sent the euro tumbling against the dollar to $1.25 – its lowest level since July 2010. Against the pound it was worth little more than 80p.
Figures from financial research group Markit showed the eurozone economy sank deeper into the mire this month. In Germany, the private sector was in decline for the first time in six months while in France the slump was the steepest for just over three years.
Common euro bonds, which would allow weaker nations like Greece to borrow with the collective backing of the bloc, have been placed back on the agenda as Greece's possible exit looms larger.
And the topic has seemingly split France and Germany. France's election on May 6 of a Socialist president, Francois Hollande, has changed the tone of the debate on euro bonds.
He urged a reluctant German Chancellor Angela Merkel and other European leaders at talks on Wednesday to consider recourse to euro bonds among other measures.
Merkel, seen as an architect of the austerity prescription for Greece, now looks increasingly vulnerable on the eurozone crisis. Other European leaders have rallied around Hollande's call for a new emphasis on growth alongside debt-cutting.
On euro bonds, Germany's opposition Social Democrats (SDP) and Greens have taken a similar line to Hollande. But there were signs yesterday they might instead accept a compromise plan to mutualise only a proportion of members' sovereign debts.
This would involve mutualising the debts of euro zone countries beyond 60 percent of GDP.
The euro crisis has also thrown a spotlight on the vulnerability of commercial banks to a full-blown crisis of confidence in the single currency, especially in the indebted countries of southern Europe, such as Spain.
Spain is considering creating a single nationalised bank out of its failed lenders, including problem lender Bankia, if the state cannot find buyers for state-rescued banks, a senior Economy Ministry source said.
Bankia, which was part-nationalised just two weeks ago, is also to ask Madrid for £12billion in bailout cash.
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http://www.zerohedge.com/contributed/2012-21-25/germany-walks-away-greece
Germany Walks Away From Greece
Wolf Richter www.testosteronepit.com
Preparing for Greece’s exit from the Eurozone has been picking up momentum and has reached critical mass—on the way to a fait accompli. Still unspeakable in public discussion last year, it has become a routine topic at all levels of government. While everyone at the very top still hues to the line that Greece should stay in the Eurozone, out of the other side of the mouth comes the but—especially since the focus is on Spain, the real problem, the one problem that the Eurozone will have trouble digesting.
Even if it could digest bailing out Spain or losing Spain, the next step up, Italy, due to its size, is beyond bailout and would cause the Eurozone to fracture into its component pieces—unless the ECB decides against all treaty limitations and stiff German opposition to monetize directly and without qualms any sovereign debt that needs to be monetized. And even that would tear up the Eurozone because Germany and a handful of other countries would refuse to be tied to that kind of loosey-goosey management of their currency.
There are political realities in Germany, where Chancellor Angela Merkel, slipping in the polls, is trying to decipher the scribbles on the wall. Her people, who vacation in Greece more than any other people, have handed her some clues: 60% said they wanted Greece out of the Eurozone, a jump from November when an already shocking 49% had wanted them out, according to aZDF Politbarometer poll released Friday. Only 31% wanted Greece to remain in the Eurozone, down from 41% in November, with 9% not giving a hoot.
And Germans made short shrift of French President François Hollande’s favorite debt crisis panacea that he’d demanded from day one of his campaign, re-demanded at the G-8 in Chicago, and slammed on the table at the EU summit in Brussels earlier this week: Eurobonds. An astounding 79% were against them, and only 14% were for them.
Apparently, Germans have understood how insidious—insidious for Germans, but a great deal for debt-sinner countries—these bonds would be. They'd spread the risk of each country to all countries, but the last man standing, possibly Germany, would end up having to bear them all. They'd cut the borrowing costs for Greece (oops, scratch that), Spain, Italy, and a slew of other Eurozone countries but raise the costs for Germany—now zero on shorter term debt, and negative when adjusted for inflation. It didn't help that Bundesbank President Jens Weidmann vilified them in his quiet manner every chance he got, most recently when hesaid, "The belief that Eurobonds could solve the current crisis is an illusion."
But the next big battle may actually revolve around keeping Germany in the Eurozone: 50% of the respondents saw more disadvantages than advantages, up from 43% in February; only 45% saw more advantages, down from 51% in February. The more costs and risks rise for Germany, the more this number is going to skew away from the euro. A scary trend for Eurozone bailout freaks. And suddenly Germans woke up to the headline, "Greeks Pay less Taxes"—taxes being a sore subject for Germans who pay out of their noses to get their welfare-state budget into balance. For a debacle without equal, read.... The Confiscation Conundrum in Europe.
"The notoriously tax-sinning Greeks paid their government even less than before," the article began unnervingly. Turns out,Reuters had gotten two anonymous “senior” finance ministry officials to talk: Greeks were refusing to pay their taxes in euros in anticipation that they could soon pay them in drachmas, albeit with minor penalties. And lacking a government, they wanted to wait for the outcome of the next election on June 17, which hopefully would produce a government, any government. And so tax revenues in May were on track to drop 10%. Outside of Athens and Thessaloniki, tax revenues would fall between 15% and 30%. First capital flight then quiet bank runs, and now a refusal to pay taxes to a government they don’t have, in a currency they might not have much longer.... The Greeks are preparing for a reversion to the drachma, and they're trying, very understandably, and very smartly, to protect whatever they can—which, of course, simply speeds up the process of reverting to the drachma.
And when Germans were through with this article, the same Friday morning, they’re hit by the headline, “How the Greek Elite Stuff their Pockets,” an article about corruption in Greece. And so, at a conference in Berlin, Jürgen Fitschen, designated Co-Chairman of the gargantuan Deutsche Bank, said that there is no single solution for the euro debt crisis in part because the situation in Greece is so unique. Then he let it slip that Greece was a "failed state."
Thus, Europe has re-descended into rumor hell—where good rumors are head fakes that cause markets to rally, and where bad rumors, though passionately denied by all sides, turn out to be true. Read.... Rumors, Denials, and Visions of Chaos in the Eurozone.
And here is an awesome video by investment manager and author of Currency Wars, James Rickards—particularly in light of the euro crisis: Currency Wars – The Making of the next Global Crisis (video).
and.....http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_25/05/2012_443965
Deposits could flow to Turkey after euro exit
Turkish authorities “hope that there could be some deposit flow from Greece to Turkey,” Istanbul-based economist Yarkin Cebeci said in a report. “Turkish banks are perceived to be strong and out of the radar of the European Central Bank and European Union officials who could track Greek money in other eurozone countries.” Turkish authorities are “downplaying the risk of a serious impact through the funding channel,” citing Turkey’s relatively low total debt levels and “the diversification of funding sources to include more sources from the Middle East and Northern Africa region and the Far East,” Cebeci said. The JPMorgan report is based on meetings with Turkish government and central bank officials in Istanbul and Ankara on Monday and Tuesday, Cebeci said. [Bloomberg] |
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