http://ftalphaville.ft.com/blog/2012/07/10/1076971/eurogroup-statement/

Eurogroup statement

Posted by FT Alphaville on Jul 10 01:56.

9 July 2012

Eurogroup Statement on the follow-up of the 29 June Euro Summit

In line with the Euro Summit statement of 26 October 2011, the Eurogroup will prepare the Euro Summit meetings and ensure their follow-up. In doing so, as is presently the case, it will deliver on its role to ensure ever closer coordination of economic policies and to promote enhanced economic and fiscal surveillance as well as financial stability in the euro area.

We reaffirm our strong commitment to do whatever is necessary to ensure the financial stability of the euro area, in particular through the flexible and efficient use of existing EFSF/ESM instruments for Member States respecting their Country Specific Recommendations and their other commitments including their respective timelines, under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalances Procedure.

As an immediate follow-up, the ECB and EFSF have today signed a technical agency agreement, creating the possibility of an efficient conduct of market operations by the EFSF. As soon as the ESM has been established, a similar agreement will be concluded between the ECB and ESM. In addition, the Eurogroup has politically endorsed the ESM investment policy guideline. Thus, by the time of the entry into force of the ESM treaty and the formal approval by the ESM governing bodies, all ESM instruments will be fully operational so that their effectiveness and efficiency would be ensured.

The Eurogroup has today reached a political understanding on the draft MoU underlying the financial assistance for the recapitalisation of financial institutions for Spain, to be provided via the EFSF until the ESM becomes available and then transferred to the ESM without gaining seniority status. The Eurogroup envisages providing the final approval of the programme by 20 July, after national procedures have been completed. The Eurogroup supports the recently adopted Commission recommendation to extend the deadline for the correction of the excessive deficit in Spain by one year to 2014.

The Commission, in liaison with the ECB, and the IMF are currently conducting its seventh review of the Irish adjustment programme, in the context of which discussions will be held on technical solutions to improve the sustainability of the well-performing adjustment programme. The Eurogroup will consider the issue again at its meeting in September. Similar cases will be treated equally, taking into account changed circumstances.

The Eurogroup has requested the Troika to work together with the Portuguese authorities during the fifth review mission that will start on 28 August so as to ensure that the adjustment process remains on track.

The Eurogroup took note that a fully-fledged programme is expected to be negotiated with the Cypriot authorities.

The Eurogroup welcomes the Commission’s intention to present proposals in early September, notably on the basis of article 127(6) TFEU, for a single supervisory mechanism involving the ECB. We expect the Council to consider these proposals as a matter of urgency by the end of 2012.

In order to break the vicious circle between banks and sovereigns, technical discussions on the future ESM direct bank recapitalisation instrument will also start in September so that the ESM could, following a regular decision, have the possibility to recapitalise banks directly once an effective single supervisory mechanism is established.

and.....

http://aviagemdosargonautas.blogs.sapo.pt/1817485.html

Segunda-feira, 9 de Julho de 2012

Eurointelligence Daily Briefing, 9 de Julho de 2012. Enviado por Domenico Mario Nuti.

Now we know what an ESM capital injection means: states must still guarantee it

Reuters quotes an unnamed official as saying that there was a misconception about the notion of equity injections: states remain the ultimate guarantors;
if this is correct, the European Council would have misrepresented one of its main conclusions two weeks ago;
on Friday, Spanish yields rose above 7%, with spreads now at over 5.6%;
the euro was under $1.23 this morning;
Monti is asking for a faster implementation of EU bailout funds;
German president criticizes Merkel for not explaining the stakes and consequences of the euro rescue;
Schäuble and Moscovici will split the eurogroup chairmanship, Der Spiegel reports;
Italian recession is deepening, as Italian cut home living and clothes expenditures;
Monti attacks Confidustria for driving up the spreads;
Troika says Greece its off course on 2010 targets, and withholds cash until September;
Greece may run out of money during the summer;
Portugal’s constitutional court rules some austerity measures to be unconstitutional;
ECB is preparing counter-proposal to Commission plan on bank supervision;
Asmussen says EU bank supervisor in place in 2013;
Coeure says no more ECB bond purchases;
Merkel ally Von der Leyen calls Eurobonds " an option “;
Mark Schieritz applauds the “wise men’s” special report;
Wolfgang Munchau, meanwhile, says that there will be no crisis resolution.

This is probably the most outrageous eurozone story we have read in a long time. Reuters quotes an unnamed official saying that the ESM will not inject proper capital into banks after all. The member state will still have to guarantee the money, and thus remains the ultimate backstop. That may sound technical. But it means that whatever the ESM injects, it is not capital, since the ultimate risk remains with the member state. After all, the idea of direct ESM capital injections is to sever the link between banks and their sovereigns.

Reuters quotes a senior official as saying the following: "There is some degree of mystification going on here ... in the broader public who think that under current rules the ESM could all of a sudden end up owning Bankia with the full risk of Bankia on the balance sheet of the ESM. This is very much not the case.”

(It is preposterous to argue that the fault lies with the broader public as he suggests. It was a deliberate misrepresentation of a policy by the European Council. If this official is right, it means that the ESM will not ever inject capital into the banks. Now it all makes sense why we don’t need a treaty change. If you don’t change the policy, you don’t need to change the treaty.)

Spreads back up to crisis level

The post-summit rally ended on Friday. The euro is now below $1.23, and Spanish spreads have risen to 5.674bp, which must be close or at their eurozone high. The markets have clearly concluded that there was no substance to the summit’s conclusion in terms of crisis resolution. Irish spreads are still below those of Spain, but Italian spreads have also risen, but remain under 5 point.

Monti is asking for a faster implementation of EU bailout funds

Italy will ask for a faster implementation of access to EFSF/ESM funds in today's Eurogroup, according to Repubblica, in an effort to reduce investor uncertainty. "Italy is considered a debtor by northern Europe, and this despite Italy never having asked for a single euro from the EFSF, ESM," Monti said from Aix-en-Provence. Italy and Spain have pressed Germany to adopt measures to ease their debt problems as their borrowing costs had reached unsustainable levels. And today there will be the next, effective, step, according to Repubblica. "We have asked that a mechanism be put into place which reduces the difference in the spread," Monti said. The yield of Italian 10Y government bond is over 6.00%, 470 basis points over Germany 10Y bond.

German president criticizes Merkel for not explaining the stakes and consequences of the euro rescue

The German president Joachim Gauck criticized Angela Merkel for not explaining well enough the stakes and the consequences of the current euro rescue policy, Süddeutsche Zeitung writes. “She has the obligation to explain in great detail what his means fiscally”, Gauck told ZDF television. The chancellor is often criticized for failing to develop a coherent non-technical narrative on why it is important and in Germany’s interest to save the euro. Gauck said he would be willing to help Merkel but the main task of explaining her policy was with the chancellor. Meanwhile Norbert Lammert, president of Bundestag and member of Merkel’s CDU, put pressure on the constitutional court by saying that it would have “huge consequences” if the court rejected the ESM. The Karlsruhe judges will start with oral hearings on the matter tomorrow.

Schäuble and Moscovici will split the eurogroup chairmanship, Der Spiegel reports

According to Der Spiegel Angela Merkel and Francois Hollande agreed to split the eurogroup chairmanship. In this scenario Wolfgang Schäuble would succeed to Jean-Claude Juncker when leaves later this month and hand over to Pierre Moscovice half way through his the 2.5 year term. This solution would allow both countries to save face. Moscovici however yesterday denied splitting the eurogroup presidency was under consideration and said he not a candidate for the job. He said there would be a good “Franco-German solution” when Juncker leaves his job, according to Reuters.

Italian recession is deepening, as Italian cut home living and clothes expenditures

Italians cut their expenditures for clothes and home living. In the first weekend of the summer sales the revenues of Italian shops dropped by 20% year to year, according to Il Messaggero. "The crisis is not over in Italy, nobody wants to spend a euro," consumer group Codacons said. Shoppers are afraid by tax rises, recession, stagnant wages and unemployment. Plus, the drop on summer sales reflects the income from the IMU property tax, which totalled over 9.5 billion euro at the end of June, relative to the first deadline of 18 June. "We need growth, not austerity," Codacons spokesman said. Italian consumer morale hit its lowest since 1996 in June, Italian statistics office ISTAT has said. Italian GDP is expected to fall by over 2.0% this year, according to the Bank of Italy head Ignazio Visco.

Monti attacks Confidustria for driving up the spreads

The Italian Prime Minister Mario Monti attacks the Italian Business Lobby Confindustria Head Giorgio Squinzi, Il Corriere della Sera reports. "Declarations of this sort make the spread and interest rates go up and affect not only the public debt, but also businesses," Monti said. Squinzi has criticized the Italian government on latest spending review that will cut over €26bn until 2014. "It's not enough, Italy needs of another austerity plan before the end of the year," Squinzi said on last Saturday. In addiction, Squinzi said that "social butchery" must be avoided. Susanna Camusso, head of Italian biggest union CGIL, agreed. "We cannot accept these cuts," Camusso said. According to the technical report of the spending review there are 24,000 redundant public employees.

Troika says Greece its off course on 210 targets, and withholds cash until September

Troika officials informed the new finance minister Yannis Stournaras on Sunday that Greece was off course on 210 targets in its loan agreement and would need to rectify this before receiving any more money, Kathimerini reports. EC, ECB and IMF officials also rejected any talk of extending the fiscal adjustment period from the end of 2014 until progress has been made with the existing targets.

The Greek government was told that the earliest it can expect to receive its next loan tranche is in mid-September. This means Greece, which was due to run out of money later this month, will have to find a way to stretch its finances and that there will have to be a special arrangement for a government bond held by the ECB, which matures on August 20. Kathimerini understands that either a clause allowing it to be paid a month later will be triggered or it will be covered by the EFSF.

To meet the bailout targets, the Greek government puts an extensive privatization programme at the forefront. Stournaras identified 28 privatizations, including the state natural gas, water and betting companies, as well as regional airports and ports. The new three-party coalition government in Greece was backed by all its 179 deputies in a vote of confidence in parliament.

The first opinion poll since the June 17 election showed that while a majority of Greeks supported the coalition government, they were split on whether it should stick to implementing the terms of the bailout, Bloomberg reports.

Portugal’s constitutional court rules some austerity measures to be unconstitutional

Portugal's constitutional court ruled late last week that the government's move last year to cut public-sector workers' traditional extra two months of salary each year from 2012-14 was unconstitutional. Dow Jones reports that the ruling won't apply to wage cuts in 2012, which will save the government more than €1bn, but 2013/2014. In 2013, the government will need to raise €2bn to meet a deficit target of 3% of GDP of the bailout agreement. One of the options discussed are to increase income taxes. But this would completely change the composition of the bailout programme, according to Jornal de Negocios.

Official budget deficit figures released late last week showed that first-quarter budget execution deteriorated due to the government spending more than expected on unemployment benefits and receiving less from tax revenue. Budget problems have led political parties to urge the government to renegotiate terms of the bailout program, saying too much austerity is strangling the country's economy.

ECB is preparing counter-proposal to Commission plan on bank supervision

The ECB is drawing up a counter-proposal to the Commission plan on bank supervision, Der Spiegel reports. The Governing Council last Thursday decided to present in September a the latest the central banks own proposal because the central bankers are horrified by the preparations undertaken in Brussels. At the Commission Michel Barnier, Joaquín Almunia and Olli Rehn have started to work and he issue and according to first versions of their proposal the main supervisory task would be with the EBA, the largely discredited European Banking Authority and the ECB would only receive certain specific tasks. But as of now there is also disagreement within the Governing Council with Christian Noyer of France arguing the ECB should supervise all banks within the eurozone and Austria’s Ewald Nowotny saying it should only be a very limited number of cross border systemic banks.

Asmussen says EU bank supervisor in place in 2013

We don’t really how they define “bank supervisor” but whatever it will be, it will be ready by 2013 according to Jorg Asmussen. He told La Stampa (hat tip Reuters): "There are several practical issues to solve to get to a European banking supervision... I believe that European supervision will be fully operational only during 2013." And once the mechanism is in place, the increase in Spanish debt as a result of the ESM loan would be transferred to the banks.

(So in conjunction with our top story this reads: the eurozone tries to solve the crisis through an accounting trick, by pretending there will be equity injections when, in reality, this is not the case.)

Coeure says no more ECB bond purchases

Benoit Coere said the European Council decision to allow the ESM to act in the secondary market has let the ECB off the hook. The market should not expect any ECB bond purchases from now onwards. "It would be a paradox if the central bank intervened in the place of the governments," he said, placing the ball firmly into the hands of governments. He said the only exceptions are bond purchases with the specific goal to improve monetary transmission mechanisms.

Merkel ally Von der Leyen calls Eurobonds „an option“

Ursula Von der Leyen, Germany’s social affairs minister and a close ally to Angela Merkel, called Eurobonds “an option”. Talking to Der Spiegel the member of the chancellor’s CDU said: “If there is a complete common fiscal policy with an effective debt control common bonds become an option.” However she insisted that currently the conditions were not fulfilled. Von der Leyen also criticized Francois Hollande for lowering the retirement age back to 60 years for certain categories of French. “If I look at the French I would say. Lowering the retirement age is not the right step in the long run.”

Mark Schieritz applauds the “wise men’s” special report

In his Herdentrieb blog Mark Schieritz applauds the special report the German council of economic advisor’s published last week. Schieritz concedes that federalists will criticize the report for not being daring enough in terms of mutualisation of debt and risk while eurosceptics will criticize that it goes way too far. But Schieritz thinks the report is “clear, consistent and oriented towards solutions”. He argues that the irritating aspect of Hans-Werner Sinn’s appeal against the summit results and the banking union is that that it criticizes without proposing any alternative. “The council (of economic advisors) has in the past years often retreated to pointing to liberal (and in a minority vote Keynesian) basic believes. Now it starts making proposals for the dirty reality. That is what it was created for”, Schieritz argues.

Wolfgang Munchau says that there will be no crisis resolution

In his FT column Wolfgang Munchau debunks the Yes-But commentary on the European Council’s latest decision. He says it was a catastrophic outcome because it made crisis resolution contingent on an illusionary integration process, which is going to take years to complete at best. A banking union, if done properly, would comprise elements Germany in particular is not prepared to accept, including deposit insurance, central resolution powers, and the inclusion of Landesbanken and smaller banks. Munchau recalls his prediction in November when he wrote that the European Council had 10 days left to solve the crisis. He said it was right. If they had laid the foundation for a fiscal and banking union in December, they might now be in a position to decide on the necessary banking resolution steps. But they did not agree then, and they cannot, and do not want to, solve the crisis now.

http://www.zerohedge.com/news/egan-jones-downgrades-netherlands-aa-negative-watch

Egan-Jones Downgrades Netherlands And Austria To A, Negative Watch

Submitted by Tyler Durden on 07/09/2012 15:50 -0400

Egan-Jones

European Central Bank

Eurozone

Germany

Gross Domestic Product

Netherlands, that one of four remaining AAA-rated Eurozone countries (by the big 3 rating agencies at least), was just downgraded by Egan Jones. And for good measure, EJ also cut Austria, both to A, outlook negative.

Netherlands:

The Netherlands is among the European Union's top economies. However, the Netherlands has been shouldering the burdens of other EU countries and their banks via its exposure to the EFSF and indirectly via the ECB. The country's debt to GDP of 75% as of 2011 (expect near 82% for 2012) and a deficit to GDP of 4.7% is weak and is understated due to exposures to the EU periphery and the Netherland's financial institutions. On the positive side, unemployment was only 5.8% but will probably increase as many EU countries implement austerity measures. Other positives were the EUR48B balance of trade surplus and the EUR67B current account surplus as of the end of 2011. Inflation is near 2.5% currently (per the the Dutch Statistics Office) but is up from 0% in 2009 and will probably rise with monetization.

And Austria

Same story - like Germany and The Netherlands, Austria is among the European Union's top economy. However, Austria has been shouldering the burdens of other EU countries and their banks via its exposure to the EFSF and indirectly via the ECB. The country's debt to GDP of 79.4% as of 2011 (expect near 85% for 2012) and a deficit to GDP near 3.0%, are weak and are understated due to exposures to the EU periphery and the Netherland's financial institutions. Unemployment was near 8% and will probably increase as many EU countries implement austerity measures. Other positives were the EUR9.4B balance of trade surplus and the EUR10.6B current account surplus as of the end of 2011. Inflation is near 2.1% currently (per Statistik Austria) but is up from 0% in 2009 and will probably rise with monetization

and......

http://www.guardian.co.uk/business/2012/jul/09/eurozone-crisis-greek-government-confidence-vote

4.43pm: Germany finance minister Wolfgang Schäuble has warned this afternoon that European banks should not get direct access to funding from the Eurozone bailout fund until European banking supervision has been established.

In a clear signal that Germany will not allow direct bank recapitalisation soon, Schäuble also told reporters in Brussels that setting up closer banking union across the eurozone was "not a small deal" and would take time.

Eurozone finance ministers are set to debate the conditions under which the European Stability Mechanism (ESM) will be able to buy government bonds or recapitalise banks directly at tonights talks. The other issues on the table are the details of Spain's banking sector bail-out, whether to change Ireland's earlier bank bail-out in response, and Greece's compliance with its financial programme.

3.55pm: The eurozone crisis is now "much more profound and more fundamental" than the collapse of Lehman Brothers.

That's according to Peter Praet, the European Central Bank's chief economist. Praet ratched up the pressure as today's eurogroup meeting got underway in Brussels, by telling a conference in Lisbon that we are now in a more dangerous place than after the fall of the Wall Street titan in 2008.

Praet argued that EU leaders did make real progress at last month's summit, by recognising that the 'construction' of the eurozone needs to be improved. He also hinted that the ECB could cut borrowing costs again, saying there was "no taboo" on interest rates.

Update: Mario Draghi also indicated that eurozone interest rates could be cut again. Under questioning at the European Parliament (see 2.02pm and2.34pm), he said:

We have to look at what the situation is, look at the data and the developments, and then we'll make our mind up in the governing council about what next actions we'll do.

3.27pm: The word from Brussels today is that Spain is about to be granted another year's grace to hit its deficit targets.

An announcement could come as early as Tuesday, when finance ministers from all EU countries meet in Brussels (tonight's gathering is just for euro members). This idea has been floating around for months, since it became clear that Spain would struggle to get its deficit down to 3% (the European target) in time.

Speaking to Reuters earlier today, a "diplomat" indicated that a deal would be hammered out (giving Spain until 2014), as long as the Spanish government could prove it was still committed to fiscal consolidation, saying:

Spain's budget consolidation targets will be adjusted to give it an extra year.

This is not a unilateral move. Spain needs to make the necessary cuts to reach that goal and this will be discussed on Tuesday..... I expect the extra year to be granted.

Update: The Financial Times's Peter Spiegel reports that Luxembourg's officials refused to allow the Spanish extention to be agreed today:

2.55pm: France saw its borrowing costs hit record lows at an auction of short-term debt this afternoon. And, like Germany this morning, investors were prepared to accept negative yields on some bonds – accepting a loss in return for holding such safe debt.

The French treasury sold 50-week bills at a historic low (according to Reuters) of 0.013%. It also sold 13-week bills at a yield of -0.005%, and 6-month bills at -0.006%.

Another sign of investors valuing security over profitability. And that the financial markets are not functioning as they should.

1.35pm: Nikos Nikolopoulos's resignation means that the current Greek government has lost three ministers since Antonis Samaras was sworn in as prime minister on 20 June.

Vassilis Rapanos resigned as finance minister on 25 June after being hospitalised, swiftly followed by deputy merchant marine minister Giorgos Vernikos, who faced conflict of interest charges over his ownership of an offshore company.

Ministerial resignations have been a regular feature of Greek political life since the financial crisis began. The final days of George Papandreou's administration was pockmarked by defections, which all-but eliminated his majority by November 2011 (when he was succeeded by technocrat Lucas Papademos).

Here's some reaction to Nikolopoulos's resignation:

1.09pm: Nikos Nikolopoulos has released an official statement explaining why he resigned as deputy labour minister today.

As suspected (see 12.17pm), Nikolopoulos is disapppointed by the way the new Greek government has approached negotiations with its international lenders.

He said:

The sole reason of my resignation is my personal conviction that the issue of renegotiating with the troika, as well as the correction of significant distortions in labour, pension, social security and welfare issues, should have been emphatically put on the table from the start.

Samaras's approach to the negotiations with the Troika has been to reiterate his commitments to Greece's financial targets, while pushing for changes to some of the most punishing elements of the plan. Nikolopoulos, though, argues that he's not taken a firm enough line.

12.17pm: There are reports from Athens in the last few minutes that deputy labour minister Nikos Nikolopoulos has resigned.

It appears that Nikolopoulos has quit in protest at Antonis Samaras's refusal to renegotiate changes to Greek labour laws with the Troika. That's an early blow the government, just hours after winning its vote of confidence.

11.43am: Portugal's banks borrowed a record amount from the European Central Bank last month, as the country remained locked out of the money markets.

The Bank of Portugal reported this morning that its commercial banks have now borrowed a total of €60.5bn from the ECB, up 3% from May.

Portugal's reliance on the ECB actually fell in April, following the central bank's second huge injection of liquidity. But it rose in May, as fears grew that the country may need a second bailout when the €78bn package agreed in April 2011 expires.

11.24am: From Brussels, my colleague Ian Traynor explains what has gone wrong in Europe since the 'breakthrough summit' of 28th and 29th June:

The summit resolved to break the invidious link between failing banks and weak sovereigns by agreeing to use eurozone bailout funds to recapitalise banks directly and not via governments, to avoid pushing up debt levels.

But since the summit, creditor eurozone governments have backtracked on the pledges amid furious debate and rancour over what was actually agreed and how the accord will be implemented.

While the Germans and other north Europeans insist that direct bank injections can only be contemplated once a new regime of eurozone banking supervision is in place (likely to take a year), senior Eurogroup officials signalled that even in the event of bailout funds going straight to banks, the host country would still be burdened.

Were the main bailout fund, the European Stability Mechanism, to take equity in troubled banks, the host government would need to underwrite the risk and be liable if the bank went bust, the officials involved in preparing tonight's meeting said.

"The ESM is able to take an equity share in a bank but only against full sovereign guarantees. It remains the risk of the sovereign. There's some degree of mystification going on here," said a senior official.

As if to back up that point, we're getting newsflashes from the European Commission's daily briefing in Brussels, that sovereign guarantees may not be needed, but the details 'remain to be negotiated'.

Developing....

Ian also says there is speculation in the corridors of power that fresh emergency talks may be needed, especially if tonight's eurogroup meeting goes badly:

The ministers are expected to try to reach a "political understanding" on a memorandum of understanding between the eurozone and Madrid to be finalised later this month. In Brussels there is talk of new emergency Eurogroup talks around July 20 or even an extraordinary summit. Or ministers could confer by video-conference instead before the August holiday.

and news from Greece ......

http://www.athensnews.gr/portal/11/56819

Troika demand public sector pay cuts

9 Jul 2012

Troika representatives demand 12% pay cuts in the private sector to meet 2012 budget goals

As negotiations with the troika continuing on July 9, the government must address the commitment to further cut the pay of to 200,000 public-sector doctors, judges, priests, university professors and diplomats under the terms of the bailout commitments – or find additional savings of 600 million euros by the end of next year.

The memorandum details 12% cuts starting in July which aim to save 200 million euros this year and 400 million in 2013. The measure could be retrospective cuts from June, according to media reports.

The cuts would eliminate dozens of benefits and alter the method of salary grading. Initial government comments indicate that low-paid public sector staff members would be protected.

Government officials have reportedly attempted to convince the troika representatives that alternative measures could provide similar budget cuts. However, the debt inspectors have repeatedly said that no further loan installments will be authorised until fiscal adjustments are made and that there will be no change to the overall memorandum targets.

Finance Minister Yiorgos Stournaras stressed: "Greece must take the measures it has already voted for the implementation of the 2012 budget in order to reach the objectives for which it has committed, in order not to avoid further compromising the credibility of the country and endangering the next loan installment."

and.....

News bites @ 10

by Damian Mac Con Uladh

9 Jul 2012

Prime Minister Antonis Samaras and Foreign Minister Dimitris Avramopoulos (L) check their watches during the debate (Reuters)

1. CONFIDENCE VOTE As expected, the Samaras government on Sunday won a vote of confidence, securing the votes of 179 of 300 MPs. The vote, which was announced just after midnight, saw all New Democracy, Pasok and Democratic Left MPs back the government, after three days of debate on the government's programme. The leaders of all seven parties represented in parliament spoke during the debate, as did a number of other MPs. On Friday, when the leader of the rightwing extremist Golden Dawn party rose to speak, MPs from the Syriza, the Communist Party and the Democratic Left withdrew.

2. GOVERNMENT PROGRAMME An accelerated programme to privatise state assets, the merger of state bodies, allowing taxpayers pay their tax bill in instalments and limiting the bank repayments to 30 percent of a borrower’s income are among the main features of the government’s programme, announced in parliament by the prime minister on Friday. The privatisation targets would be the operational branch of Hellenic Rail (OSE), the freeing up of the energy market, parts of the productive segment of the Public Power Corporation (DEH), the Athens and Thessaloniki water companies (with the state’s regulatory role being kept in place), as well as regional ports and airports. “We see privatisation as a growth tool. Whoever takes control of state assets, must make investments,” Samaras said.

3. DEBATE Bringing the debate to a close, Prime Minister Antonis Samaras lashed out at main opposition Syriza, which earlier said it would oppose the new government's privatisation drive. "We announced major privatisation initiatives and we were told that we put a "for sale" sign on our country. This is just cheap populism. Is making use and taking advantage of Greece's great wealth 'selling out'?" Samaras said. Samaras continued by calling the Syriza MPs "drachma lobbyists", accusing them of pretending to be against the memorandum, while pushing the state towards bankruptcy.

4. SYRIZA LASHES OUT AT SAMARAS The new government was "cooking" from the same flawed recipe, the leader of main opposition Syriza said on Friday, after the announcement of the new government's programme. Alexis Tsipras also accused the three parties involved in the administration of backtracking on their pre-election commitments to rewrite the memorandum: "The renegotiation [of the memorandum] ended on the night of June 17 [general elections]. Whoever believed it was deluded," he told MPs.

5. EUROZONE TO MEET Eurozone finance chiefs will try to flesh out plans to reinforce the single currency on Monday but their talks in Brussels may do little more than highlight the limitations of last month's deal to help indebted states and banks. Decisions on banking supervision, how to use eurozone bailout money, aid to Spain and Cyprus and whether to grant concessions to Greece are likely to take months to finalise, while pressure for action is growing. Spanish and Italian borrowing costs moved back up near unsustainable levels on Friday as hopes raised by the summit began to fade. Leaders of both countries issued pleas at the weekend for rapid moves to implement the agreement.

6. STOURNARAS IN BRUSSELS Eurozone ministers will also discuss the troika's most recent findings on Greece. Finance Minister Yannis Stournaras said on Thursday he had been warned to expect a tough time at the Eurogroup, having acknowledged the country was off course on memorandum commitments. One senior eurozone official said the Eurogroup needed to see that the government is getting back on track before it can hand over more aid.

7. MIGRATION The new public order minister, Nikos Dendias, has expressed his dissatisfaction with Turkey's stance on illegal immigration, pointing out that it is not accepting migrants under the terms of an agreement. He said that of 112,000 requests for repatriation of third-country nationals who entered Greece from Turkey, only 11,000 were accepted. Of these, only 3,000 migrants have actually been returned. Dendias also said data from the past two years shows that the involvement of foreign nationals in homicide attempts and armed robberies exceeds 51 percent.

8. AIRBUS The country will sell four Airbus A340-300 passenger jets that belonged to former state carrier Olympic Airways which is now privatised, as part of divestments to pay down public debt, the finance ministry said on Sunday. The aircraft will be sold to Apollo Aviation Group, the highest bidder in a tender, for about 33m euros based on a decision by Finance Minister Yannis Stournaras.

9. WILDFIRE A wildfire that broke out around noon on Sunday in a remote area near the village of Varnavas, in northwestern Attica, was brought under control by the evening, the fire service announced. The blaze burned crops, fruit trees and pine trees. The fire was attended by dozens of firefighters and more than 60 vehicles. Smoke from the blaze was visible throughout most of the northern Attica and in southern Evia.

First euro test for new coalition

Finance Minister Yannis Stournaras was experiencing his first encounter with his eurozone counterparts at Monday's Eurogroup meeting in Brussels, where the Greek bailout was one of several items on an agenda that included the support package for Cyprus and details of a bank rescue.

Stournaras, who had been warned by troika officials in Athens last week to expect a rough ride at his first Eurogroup, was expected to set out for his counterparts how Greece had slipped behind its targets, both in terms of reforms and fiscal adjustment.

Finance ministers were due to receive a report on the first mission by the troika of the European Union, the European Central Bank and the International Monetary Fund to Greece since the June 17 elections. It was expected to show that Athens was off course for 210 of its targets and would need to step up its structural reforms.

Stournaras was expected to repeat the position of the new coalition government that it would first seek to get its program back on track and then negotiate with its lenders possible changes to the fiscal adjustment process, which is likely to include a request for two extra years beyond 2014 to meet its targets.

The meeting in Brussels had not ended by late Monday.

Speaking to Skai TV ahead of the Eurogroup talks, government spokesman Simos Kedikoglou said Athens would not be seeking an immediate renegotiation of its bailout terms.

“At the moment, we are way off our targets,” he said. “We cannot negotiate because to do so you need to give and take. The clear impression we got at the recent EU leaders’ summit was that there are some who are looking for an excuse to push us out of the euro. But most people are telling us that if we prove we are moving in the right direction, there will be room to negotiate.”

Ahead of the meeting, Luxembourg’s Finance Minister Luc Frieden suggested that his colleagues would take a lenient view of the Greek government and the challenge it faces.

“First of all, I’m happy that we have a coalition in Greece now, which wants to negotiate with Europe and is willing to enact reforms,” he told journalists.

“We have to see how realistic the things are that we want from Greece. I think we can accommodate Greece, but Greece must also know that it’s not a one-way street. Greece has to enact a series of reforms that we have demanded; we will need to hear the Greek minister about this.”

ekathimerini.com , Monday Jul 9, 2012 (23:04)

and......

Coalition plays down another ministerial departure

About 12 hours after the coalition government received a vote of confidence in Parliament, paving the way for it to begin its work, the administration led by Prime Minister Antonis Samaras suffered a fresh blow as yet another minister announced he was quitting.
Deputy Labor Minister Nikos Nikolopoulos said on Monday he was leaving the government because he disagreed with the decision not to renegotiate the terms of Greece’s bailout.
“The sole reason for my resignation is my personal conviction that the issue of renegotiating with the troika, as well as the correction of significant distortions in labor, pension, social security and welfare issues, should have been emphatically put on the table from the start,” he wrote in his resignation letter.
Although Nikolopoulos, an MP in the Achaia area of the Peloponnese, is not a high-profile figure, his resignation comes days after Giorgos Vernikos resigned as deputy merchant marine minister and Vassilis Rapanos walked away from the top job at the Finance Ministry.
The government played down the latest departure, suggesting that Nikolopoulos had not been prepared for the tough task he would have to take on.
“There is no reasonable explanation for this,” government spokesman Simos Kedikoglou said. “The negotiation with the troika has not started yet and only yesterday he voted in favor of the government. Not everyone is cut out for tough times.” The tone of Kedikoglou’s remarks is thought to reflect Samaras’s anger with the resignation.
Sources said Nikolopoulos, a New Democracy MP since 1989, is likely to have left for one of three reasons. It seems he expected to be appointed labor minister and was disappointed to be serving under Yiannis Vroutsis. There are also suggestions he was worried by the hard line taken by the troika on labor issues and reports linking him to an attempt to interfere with a financial probe. Kavala MP Nikos Panayiotopoulos will replace Nikolopoulos.

and.....

Troika calls for sell-off restart

By Sotiris Nikas
This week or next the government will appoint a new head to the state privatization fund (TAIPED), as the inspectors of the country’s creditors -- known as the troika -- are putting pressure on Athens to find a replacement for Ioannis Koukiadis, who resigned last month, so that the sell-offs can restart.
No decision for any major privatization can be made until a president is appointed so that he can convene the fund’s board. Eager to see projects sealed, the troika visited the fund’s offices yesterday, warmly receiving news of Finance Minister Yannis Stournaras signing off the sale of four Airbus aircraft that used to belong to Olympic Airways.
In a couple of weeks’ time in-depth negotiations will begin between the troika and TAIPED for the revision of the sell-off program, which includes 28 projects. Until then a number of pending issues, such as the application of joint-ministerial decisions and the changes to regulatory authorities, will have to be completed, while the troika’s technical experts are now visiting the fund on a daily basis.

and....

Stark warning of deeper recession

IOBE says GDP will drop by almost 7 pct this year, but privatizations could turn things around

By Sotiris Nikas
Greece’s economy will contract at a whopping 6.9 percent this year, taking the budget deficit to 9 percent of gross domestic product, while unemployment will soar to 23.6 percent, according to the latest quarterly report by the Foundation for Economic and Industrial Research (IOBE), whose general director until a few days ago was Yannis Stournaras, the country’s new finance minister.
The major uncertainties that emerged during the prolonged election period and their continuation owing to the as-yet-unknown outcome of negotiations with the representatives of the country’s creditors are seen as the two main reasons for the further worsening of the country’s economic outlook, according to the report presented yesterday.
The contraction had been forecast at 5 percent for the whole of the year in the previous quarterly report, in early April, but in the second quarter it came to 7.5 percent and it is expected to leap to 8 percent in Q3 due to the decline in tourism traffic and revenues. The forecast for the jobless rate is much higher than that of the European Commission, which was for 19.7 percent.
IOBE further suggests that the state debt will remain at high levels, at 161.3 percent of GDP this year, while inflation will come to 1.5 percent, as despite the reduction in market prices, the harmonizing of the price of heating oil with diesel rates from October and various market distortions do not allow for the index to drop any further.
Nevertheless, the foundation’s vice president, Raphael Moissis, said the situation is not irreversible and Greece is not doomed. IOBE’s president, Ulysses Kyriakopoulos, added that the sooner Greeks realize that the country’s competitiveness must be strengthened, the faster it will emerge from the crisis. The country is currently looking for solutions to the wrong problems, he stated.
In a separate report, IOBE warned that should the government fail to proceed with the much-needed privatizations, GDP will shrink by a further 1.7 to 2 percent and another 85,000-90,000 jobs will be lost. In contrast, the efficient utilization of state assets could bolster GDP by an average of 2 percent and aid in the creation of as many as 140,000 jobs.

Catharsis Ours

Monday, July 9, 2012

Eurogroup statement

Now we know what an ESM capital injection means: states must still guarantee it

Egan-Jones Downgrades Netherlands And Austria To A, Negative Watch

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