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Friday, August 24, 2012

While everyone is talking about Greece...

It may sound incredibly obvious, but the eurozone crisis is not only about Greece. Yes, Athens may be facing its "last chance" (Juncker dixit) to save its euro membership. And yes, the diplomatic offensive launched by Greek Prime Minister Antonis Samaras (see picture) to obtain a two-year extension to the EU-IMF adjustment programme clearly deserves attention.

However, while everyone is talking about Greece, quite important (and not necessarily good) news is coming out of other eurozone countries - of which, as usual, we also offer a comprehensive overview in our daily press summary.

In particular:
  • According to sources quoted by Reuters, the Spanish government is in talks with its eurozone partners about the eurozone’s temporary bailout fund, the EFSF, buying Spanish bonds – but has made no final decision over whether to request the assistance. Unsurprisingly, the European Commission said that there are no negotiations under way, and a bailout request from Spain is not expected "any time soon". Right...
  • According to a high-ranking official at the Portuguese Finance Ministry quoted by Jornal de Negócios, Portugal (the 'forgotten man' of the euro crisis) will not be able to meet the EU-mandated deficit target of 4.5% of GDP for this year unless new austerity measures are adopted. The main reason seems to be the sharp fall in tax revenue: -3.6% during the first seven months of the year, as opposed to the 2.6% increase the Portuguese government was betting on for 2012. The alternative, the Portuguese press suggests, would be asking the EU-IMF-ECB Troika to relax the target. Boa sorte with that one, especially since in September we will hit the point where Portugal is within one year of being expected to return to the markets. Remember how the IMF's requirement for a country to be funded for twelve months played out in Greece... 
  • A Cypriot government spokesman told reporters yesterday that the island's public deficit at the end of the year will be around 4.5% of GDP – significantly higher than the 3.5% of GDP initially forecast. Clearly not good news, as this will almost certainly increase the EU-IMF bailout Cyprus is currently negotiating. Another headache for the Troika, which is due to visit the island again shortly (although no clear date has been specified yet).
  • New figures published by the Irish Central Bank show that €30.5 billion or 27.2% of the €112 billion outstanding in owner-occupier mortgages at banks in Ireland was in arrears or had been restructured at the end of June, up from €29.5 billion (26%) in March. Furthermore, German Finance Minister Wolfgang Schäuble told the Irish Times that he will oppose any debt-relief plan for Ireland that “generates new uncertainty on the financial markets and lose trust, which Ireland is just at the point of winning back.”
Add the German Constitutional Court ruling on the ESM treaty along with the Dutch general elections (with the EU-critic Socialist Party led by Emile Roemer ahead in the polls) into the mix and it really looks like there will be little room for boredom in September.

7 comments:

Bugsy said...

It is becoming increasingly clear that for the Euro to survive there must be reckoning. The gap between rich and poor is too great and growing.

Either the PIIGS and Cyprus have to leave or Germany has to leave.

Since the main point of the Euro is to keep German exports acceptably cheap the it will have to be the PiIIGS and the sooner that is recognised and an orderly withdrawal is managed the better.

christina Speight said...

And the blog hasn't got round to the latest Franco-German stitch up announced today with the joint working party of the 2 Finance Ministries to stitch up unstoppable proposals for the December Council meeting for yet another treaty to altere the EU into a federal state.

Personally I am of the school that things can only get worse if the leaders continue to face facts.

Nouriel Roubini says it alkl in my view and puts it briefly too!
Just consider, he says, what must be overcome: _= economic divergence and deepening recessions; irreversible balkanisation of the banking system and financial markets; unsustainable debt burdens for public and private agents; daunting growth and balance-sheet costs in countries that pursue internal devaluation and deflation to restore competitiveness; asymmetrical adjustment, with moral-hazard risks in the core and insufficient financing in the periphery fuelling incompatible political dynamics; fickle and impatient markets and investors; austerity fatigue in the periphery and bailout fatigue in the core; the absence of conditions for an optimal currency area; and serious difficulties in achieving full fiscal, banking, economic, and political union. [WHICH WOULD TAKE YEARS!]

All the rest is froth!


christina Speight said...

And the blog hasn't got round to the latest Franco-German stitch up announced today with the joint working party of the 2 Finance Ministries to stitch up unstoppable proposals for the December Council meeting for yet another treaty to altere the EU into a federal state.

Personally I am of the school that things can only get worse if the leaders continue to face facts.

Nouriel Roubini says it alkl in my view and puts it briefly too!
Just consider, he says, what must be overcome: _= economic divergence and deepening recessions; irreversible balkanisation of the banking system and financial markets; unsustainable debt burdens for public and private agents; daunting growth and balance-sheet costs in countries that pursue internal devaluation and deflation to restore competitiveness; asymmetrical adjustment, with moral-hazard risks in the core and insufficient financing in the periphery fuelling incompatible political dynamics; fickle and impatient markets and investors; austerity fatigue in the periphery and bailout fatigue in the core; the absence of conditions for an optimal currency area; and serious difficulties in achieving full fiscal, banking, economic, and political union. [WHICH WOULD TAKE YEARS!]

All the rest is froth!


christina Speight said...

I only SENT it once - really! Apologies for the typos! The worst sentence SHOULD have read - -
"Personally I am of the school that thinks can only get worse if the leaders continue to refuse to face facts."

Anonymous said...

It all boils down to the big question: Do countries (and that includes the public) WANT to be ruled by an enelected, unaccountable EU Commission as part of a Peoples Democratic Republic of Europe (where the people are taxed without representation to pay for the weaker countries) OR don't they?

Countries should stop faffing about and make a ruddy decision. How difficult can it be to say yes or no?

Rik said...

@Christina Speight
Never mind, I thought that you moved to something technologically advanced and we were spectators of the world's first 3D comment.
But I understand I can take the funny glasses off and put my head again in vertical position. Good nobody could see me.

Rollo said...

I am not sure that anonymous is right. The whole idea of letting these weaker economies into the Euro was that they would get into trouble, and need help, and therefore be forced to accept federal rules; that is where we are now, they are being forced by circumstance to accept control of their economies from Brussels. It is not a question of what they want; it is a question as to how strongly they will resist enforcement.