http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_14860_30/06/2012_449877
and why should Samaras ask for a redo as Ireland expects one.....
http://www.irishtimes.com/newspaper/breaking/2012/0630/breaking3.html
http://globaleconomicanalysis.blogspot.com/2012/06/headline-in-spain-government-sacrificed.html
Officials of both Economy and the Bank of Spain claimed yesterday that has not yet been defined how will such a monitoring mechanism or what the status of the former Central Bank. Some sources believe that it is logical that national central banks are the arms of the central agency in each country and to continue in office today, but accountable to a higher power who will make the final decisions.
Other experts, such as Eurointelligence, say that "it is far from clear that Germany is willing to give up their own banks to supervision by the ECB." It is also unclear what will happen to insurance, which can not be monitored by the ECB according to the EU Treaty. Or if the conditions to be imposed in order to use the European Stability Mechanism (MEDE), conditions that likely will go beyond the financial sector despite yesterday again denying Mariano Rajoy.
A major uncertainty centers on the period within which this new monitoring system will come into force, which is the condition for the MEDE to inject money directly to banks. In principle, the idea is to reach an agreement in October to put in place before year end. But "it is unrealistic to expect an agreement by October? MEDE himself was delayed. The EU has consistently been too optimistic on the timing," adds the analyst firm.
Athens to ask for EFSF deal to apply to Greece, too
The issue was discussed, according to reports, during a meeting at the Prime Minister’s residence in Athens on Saturday evening, ahead of the visit of the representatives of Greece’s creditors from Monday. The meeting involved the recovering PM Antonis Samaras, new Finance Minister Yannis Stournaras, Alternate Finance Minister Christos Staikouras, State Minister Dimitris Stamatis and the PM’s adviser Costas Bouras. Talks focused on the negotiations with the creditors’ inspectors and the acceleration of privatizations that would send a message to Europe that the new government is determined to proceed decisively with reforms. The meeting also examined the government’s program that will be presented to Parliament probably from Thursday, July 5, as well as a list of names to head key state companies and corporations. Main opposition leader Alexis Tsipras urged the government on Saturday to press for local banks to benefit from the new system of direct recapitalization from the EFSF, or threaten to veto the European Union’s Treaty for Stability Co-ordination and Governance and refuse to accept the visit of the creditors’ inspectors in Athens. |
and why should Samaras ask for a redo as Ireland expects one.....
http://www.irishtimes.com/newspaper/breaking/2012/0630/breaking3.html
Euro zone finance ministers are poised to initiate a fundamental review of Ireland’s bank bailout after EU leaders moved to give their new rescue fund the power to recapitalise banks directly.
Taoiseach Enda Kenny said the breakthrough, which follows a big policy shift by German chancellor Angela Merkel, opens up the prospect of a significant easing in the burden of Ireland’s banking debt.
“The end result will be a re-engineering to lessen the debt burden on our people,” the Taoiseach told reporters in Brussels.
The development came as EU leaders took steps to calm intensive investor pressure on Spain and Italy, whose leaders threatened not to back a new plan to stimulate economic growth if moves were not made to tackle the immediate crisis.
In addition to the direct rescue of Spain’s banks, Europe’s bailout funds will intervene in bond markets to keep a lid on Italian borrowing costs.
Financial markets responded favourably to the manoeuvre, with Irish borrowing costs for 10 years dropping to their lowest level since the month before the November 2010 EU-IMF bailout.
“It is a first step to break the vicious circle between banks and sovereigns,” said European Council president Herman Van Rompuy.
Although Dublin will develop detailed proposals to recast the banking arrangements, the negotiation of new terms is likely to continue for months.
The Coalition’s campaign for a better deal has centred to date on the €47 billion Anglo Irish Bank promissory note scheme, but Mr Kenny said it was open to Europe to consider a variety of options.
The ministers will consider their next move at a meeting in Brussels on Monday week. At Dr Merkel’s request, however, the current regime will not be changed until a new pan-European banking regulator takes office. Member states aim to complete this step, which will see the European Central Bank take a direct role in banking supervision, by the end of the year.
“The end result will be a re-engineering to lessen the debt burden on our people,” the Taoiseach told reporters in Brussels.
The development came as EU leaders took steps to calm intensive investor pressure on Spain and Italy, whose leaders threatened not to back a new plan to stimulate economic growth if moves were not made to tackle the immediate crisis.
In addition to the direct rescue of Spain’s banks, Europe’s bailout funds will intervene in bond markets to keep a lid on Italian borrowing costs.
Financial markets responded favourably to the manoeuvre, with Irish borrowing costs for 10 years dropping to their lowest level since the month before the November 2010 EU-IMF bailout.
“It is a first step to break the vicious circle between banks and sovereigns,” said European Council president Herman Van Rompuy.
Although Dublin will develop detailed proposals to recast the banking arrangements, the negotiation of new terms is likely to continue for months.
The Coalition’s campaign for a better deal has centred to date on the €47 billion Anglo Irish Bank promissory note scheme, but Mr Kenny said it was open to Europe to consider a variety of options.
The ministers will consider their next move at a meeting in Brussels on Monday week. At Dr Merkel’s request, however, the current regime will not be changed until a new pan-European banking regulator takes office. Member states aim to complete this step, which will see the European Central Bank take a direct role in banking supervision, by the end of the year.
Government sources expressed the hope that a deal to rework the bank rescue could be finalised before the budget in December.
However, the Taoiseach and Minister for Finance Michael Noonan warned that a harsh budget was still likely. “It does not change the fact that we still have a very difficult and challenging budget coming up,” Mr Kenny said. “We have to deal with our deficit and that is what we are going to do.”
For months Germany resisted Dublin’s demands to change the banking rescue, arguing that such a move would send a negative signal about a bailout which was perceived to be proceeding well.
“An examination by finance ministers will show what can be done,” a German source in Brussels said.
The climbdown by the chancellor on direct bank rescues came less than three weeks after she rejected Spain’s pleas to pursue that path.
At the Irish Government’s insistence, a communique issued by euro zone leaders after 4am yesterday made a direct reference to Ireland and said cases similar to Spain’s would be treated equally. “The euro group will examine the situation of the Irish financial sector with a view to further improving the sustainability of the well-performing adjustment programme,” it said.
A high-level European official said it was “difficult to deny” the position advanced by Mr Kenny and Irish negotiators. “They had an argument: ‘You are doing for Spain something you didn’t do for us’, and so there was some kind of understanding.”
Dr Merkel faced parliamentary votes last night to endorse Europe’s fiscal treaty and the treaty to set up the ESM. She won the first of those when the lower house voted by a large majority for both treaties.
However, the Taoiseach and Minister for Finance Michael Noonan warned that a harsh budget was still likely. “It does not change the fact that we still have a very difficult and challenging budget coming up,” Mr Kenny said. “We have to deal with our deficit and that is what we are going to do.”
For months Germany resisted Dublin’s demands to change the banking rescue, arguing that such a move would send a negative signal about a bailout which was perceived to be proceeding well.
“An examination by finance ministers will show what can be done,” a German source in Brussels said.
The climbdown by the chancellor on direct bank rescues came less than three weeks after she rejected Spain’s pleas to pursue that path.
At the Irish Government’s insistence, a communique issued by euro zone leaders after 4am yesterday made a direct reference to Ireland and said cases similar to Spain’s would be treated equally. “The euro group will examine the situation of the Irish financial sector with a view to further improving the sustainability of the well-performing adjustment programme,” it said.
A high-level European official said it was “difficult to deny” the position advanced by Mr Kenny and Irish negotiators. “They had an argument: ‘You are doing for Spain something you didn’t do for us’, and so there was some kind of understanding.”
Dr Merkel faced parliamentary votes last night to endorse Europe’s fiscal treaty and the treaty to set up the ESM. She won the first of those when the lower house voted by a large majority for both treaties.
The Minister for Public Expenditure and Reform Brendan Howlin said a banking regulator for the Eurozone now needed to be developed. Speaking at the Labour Party Tom Johnson summer school in Kilkenny today, Mr Howlin said this regulator would be in charge of ensuring that banks properly manage risk.
"And there is also a clear need for a European system for bank resolution, so that when a bank fails there are clear rules about who carries the cost, and to the extent that the answer is taxpayers, the cost will be managed on a cross-European basis," he said.
- and......
http://globaleconomicanalysis.blogspot.com/2012/06/headline-in-spain-government-sacrificed.html
Saturday, June 30, 2012 12:58 PM
Headline in Spain: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout; ESM Agreement Raises More Questions Than Answers
In the wake of a huge market reaction on Friday, it's interesting to see how the headlines read other places, especially Spain.
Here is one such viewpoint by El Confidencial: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout
Here is one such viewpoint by El Confidencial: Government 'sacrificed' Bank of Spain in Exchange for Financial Sector Bailout
The clearest conclusion to the European Agreement made by Spain and Italy is that our government has preferred to sacrifice the sovereignty of the banking supervision enjoyed by the Bank of Spain in exchange for the bailout of the sector does not compute as debt or deficit and that The European rescue fund to buy Spanish debt when things get as ugly as this week. However, many unknowns are open, including the timing of the operation. Therefore, the FROB who will initially inject capital to entities that need it in September, with funds from European loan subsequently permutarán MEDE the money."The government has chosen to advance the loss of competition in banking supervision, it was inevitable sooner or later if you go to a European Banking Union in exchange for breaking the feedback loop between the banking and public debt, which is very positive and not only for Spain, "says an analyst.
Officials of both Economy and the Bank of Spain claimed yesterday that has not yet been defined how will such a monitoring mechanism or what the status of the former Central Bank. Some sources believe that it is logical that national central banks are the arms of the central agency in each country and to continue in office today, but accountable to a higher power who will make the final decisions.
Other experts, such as Eurointelligence, say that "it is far from clear that Germany is willing to give up their own banks to supervision by the ECB." It is also unclear what will happen to insurance, which can not be monitored by the ECB according to the EU Treaty. Or if the conditions to be imposed in order to use the European Stability Mechanism (MEDE), conditions that likely will go beyond the financial sector despite yesterday again denying Mariano Rajoy.
A major uncertainty centers on the period within which this new monitoring system will come into force, which is the condition for the MEDE to inject money directly to banks. In principle, the idea is to reach an agreement in October to put in place before year end. But "it is unrealistic to expect an agreement by October? MEDE himself was delayed. The EU has consistently been too optimistic on the timing," adds the analyst firm.
The terms do not match
And although respected, there is an inconsistency between this term and timing of the rescue plan by Spain. This includes the signing of the memorandum with the conditions for the sector on 9 July, the end of the audit work in each state on July 31 and defining the specific needs of each in September, when performing the new stress test bottom-up (bottom up). Thereafter, viable entities that need capital will have nine months to get their media, and immediately nonviable may receive the loan proceeds Europe.
Therefore, various sources claim that the FROB will perform the first injection of capital until the conditions for you to do the MEDE. So initially counted as debt itself. So then have to do a swap between the FROB and MEDE. Another option is to wait until the system is willing, but the markets probably will not have much patience, and as mentioned, is likely to be delayed.
A priori, it seems very complicated to start with the FROB and replaced by MEDE, but the text of the Declaration of the Summit opened the door this way, referring to Ireland: "The Eurogroup will review the status of the Irish financial sector with a view to further improving the sustainability of the adjustment program is working well. Similar cases are treated in the same way. " That similar case would be Spain.
ESM Agreement Raises More Questions Than Answers
The above article certainly raises a lot of questions. Gavyn Davies at theFinancial Times also says More questions than answers after the summit
This is clearly the critical new development which potentially allows the costs of recapitalising troubled banks to fall on the eurozone as a whole, rather than on an individual sovereign country. It could therefore represent a very large step towards debt mutualisation, and it directly addresses the point which the markets so disliked in the Spanish bank deal two weeks ago. The statement says that this can only be done after the eurozone’s new bank supervisor is “established”, and that this should only be “considered” by the Council before the end of the year. ... I suspect that Germany will be quite demanding is setting these terms. Otherwise, there could be great problems with the constitutional court in Karlsruhe. ...
3. ESM support for the Spanish and Italian bond markets
The final paragraph of the statement gives the strong impression that the ESM will in future be able to stabilise these bond markets in a “flexible and efficient” manner. This appears to be a major victory for Mario Monti, but actually it does not contain anything really different from the status quo.
The above article certainly raises a lot of questions. Gavyn Davies at theFinancial Times also says More questions than answers after the summit
In the wake of yet another summit, we need to ask our usual question: is this the eurozone’s game changer?
My fear is that, as so often in the past, the devil will prove to be in the detail. The more carefully one examines the text of the statement, the more questions are raised about how the proposed measures will actually work.
In particular, it is debatable whether there are any terms for direct eurozone recapitalisation of Spanish banks which will be acceptable both to the Spanish government and to the German Bundestag. (The latter will be empowered to “monitor” the new arrangement, according to Mrs Merkel’s spokesman.) And the shortage of remaining funds in the EFSF/ESM, which I discussed here last week, has certainly not been solved.1. Direct bank recapitalisation by the ESM
This is clearly the critical new development which potentially allows the costs of recapitalising troubled banks to fall on the eurozone as a whole, rather than on an individual sovereign country. It could therefore represent a very large step towards debt mutualisation, and it directly addresses the point which the markets so disliked in the Spanish bank deal two weeks ago. The statement says that this can only be done after the eurozone’s new bank supervisor is “established”, and that this should only be “considered” by the Council before the end of the year. ... I suspect that Germany will be quite demanding is setting these terms. Otherwise, there could be great problems with the constitutional court in Karlsruhe. ...
3. ESM support for the Spanish and Italian bond markets
The final paragraph of the statement gives the strong impression that the ESM will in future be able to stabilise these bond markets in a “flexible and efficient” manner. This appears to be a major victory for Mario Monti, but actually it does not contain anything really different from the status quo.
4. The availability of funds for the ES
German Finance Minister Schauble emphatically said yesterday to the Wall Street Journal that there would be no increase in the size of the ESM, and that position has been maintained by Germany at the summit. Furthermore, Mrs Merkel has repeatedly stated that there will be no “joint financing” of eurozone debt (ie eurobonds, or eurobills) before full fiscal union has taken effect. Again, there is no change in that position. Indeed, that is the basis for the German government’s insistence that they have not taken on any extra “joint liabilities” as a result of this summit.
In summary, the summit has given the ESM some new tasks, but no new money with which to discharge these tasks. And many details are obscure.
and......
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