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EU News
• 23 NOV 2011
Concerns over eurozone breakup or bank failure are at their highest level in the City since the collapse of Lehman Brothers in 2008, the Bank of England has found
By Jill Treanor and David Gow | The Guardian
America announced stress tests for six big banks amid fears that the eurozone crisis had made the UK's financial system more vulnerable to a major shock than at any time since Lehman Brothers collapsed in 2008.
Shortly after a Bank of England survey showed that the sovereign debt crisis in the eurozone was at the top of the worry list of major City firms, the US Federal Reserve said Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo would be tested for a global market shock. This test will be based on price and interest rate movements similar to those in 2008, and also on "additional stresses related to the ongoing situation in Europe".
As bank shares fell sharply in London and across the eurozone amid anxiety that Germany's second biggest bank, Commerzbank, could need an emergency capital injection, the Bank of England also revealed that confidence in the health of the UK financial system had fallen sharply to its lowest level for two years.
The perception that there could be a "high impact" event in the next year – such as the collapse of the euro – has increased in the last six months and anxiety has reached its highest level since the survey began in July 2008.
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EU News
• 23 NOV 2011
• Billions could be poured into Rome with few strings attached
• Britain would have to pay 4.5% of the costs
• Heaps further pressure on David Cameron to protect national interests
• Germans and French looking to modify treaties to prevent fiscal divergence in single currency
By Tim Shipman | Mail Online
Plans to funnel British taxpayers’ cash to Italy’s stricken economy were unveiled yesterday as the Euro continued to teeter on the edge of disaster.
The International Monetary Fund (IMF) set up a new ‘credit line’ to channel money to troubled economies - and officials said it could be used to bail out the government in Rome.
The move could see billions of pounds being poured into Italian coffers with very few strings attached – with Britain required to pay 4.5per cent of the costs.
The IMF decision will pile pressure on David Cameron to do more to protect British national interests from the Eurozone crisis.
In a separate move yesterday, both German Chancellor Angela Merkel and French President Nicolas Sarkozy said they are working on plans to introduce changes to EU treaties to impose central controls over fiscal policy in countries in the single currency.
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EU News
• 23 NOV 2011
By Patrick O'Flynn
DOWN the ages it has been the role of this newspaper to take a stand against flawed conventional wisdom on key issues of public importance.
Most famously, under our proprietor of the time Lord Beaverbrook, the Daily Express stood alongside Winston Churchill against the appeasement of Hitler.
A decade ago we took a stand against uncontrolled immigration – and found ourselves condemned for our front page coverage by fashionable media outlets such as the BBC’s Newsnight programme.
But we were proved right again and now all the main political parties admit that immigration ran out of control with damaging consequences for Britain.
More recently still we took Gordon Brown to task over his punitive inheritance tax regime and changed the course of politics again as the Conservatives took up the cause and used it to ward off an early election they were on course to lose.
It is a year ago this week that the Daily Express began its greatest crusade since Beaverbrook’s era. Seeing the extent of the subjugation visited upon Britain by the European Union, its escalating cost and chaos, we declared that the nation would be better off out and pledged to fight for a referendum to achieve that end.
Once more this decision placed us outside the scope of the fashionable opinion of the metropolitan elite – an elite which sought to depict our stance as extreme, foolish or a mixture of the two. In fact it was neither.
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EU News
• 23 NOV 2011
Jose Manuel Barroso, head of the executive EU Commission, will on Wednesday unveil proposals for eurobonds to stem the escalating debt crisis, amid strong Germany opposition.
The Telegraph
The Commission is launching a public consultation on whether eurozone governments should be able to collectively issue bonds to raise money.
It believes issuing a joint eurobond that would replace national issuance by eurozone members could ease market fears about sovereign debt in the region and bring down yields for those nations under the most pressure.
As well as bailed-out trio Greece, Ireland and Portugal, eurozone giants France, Italy and Spain have each seen borrowing costs rise on bond markets this year as fear of defaults grow.
The Commission says the introduction of so-called 'stability bonds' would only work if done hand-in-hand with much tighter and more intrusive control of national budgets in the 17 countries using the euro and their economic competitiveness.
Germany is opposed to eurobonds. It fears that as Europe's biggest economy and the state with the lowest borrowing costs, it would be liable for the lion's share of pooled borrowings.
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EU News
• 23 NOV 2011
By Geoff Meade | The Independent
Treaty-changing plans for eurobonds as a way out of the economic crisis kicked off a new political storm today.
German Chancellor Angela Merkel insisted that ambitious European Commission ideas in a green paper offered the wrong remedy at the wrong time and made clear she would not support them.
Dutch finance minister Jan Kees De Jager said eurobonds were no magic solution to the crisis "and could even worsen it".
He and Ms Merkel both said the focus should be on better supervision and enforcement of eurozone budget discipline - something the commission also proposed today.
A package of monitoring measures extends tighter controls announced earlier this year to impose tougher reporting requirements between eurozone treasuries and Brussels - and all euro area governments would have to put in place "independent fiscal councils", as well as basing their budgets on "independent forecasts".
The UK Government kept out of the eurobonds exchanges today but a spokesman said: "We've been clear that the eurozone has to face up to its responsibilities and that both the individual members of the eurozone and the institutions of the eurozone need to find a sustainable solution to the current crisis, but it is not for us to dictate how they do this."
UK Independence Party leader and MEP Nigel Farage was more outspoken.
"The Eurobond proposal would render all future general elections within the eurozone totally meaningless," he said.
"However, it is not going to happen because the Germans have said no, and they are in charge. Commission talk about eurobonds is just eurobluster."
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EU News
• 23 NOV 2011
By RUADHÁN Mac CORMAIC in Paris and DEREK SCALLY in Berlin | Irish Times
GERMAN CHANCELLOR Angela Merkel has said the EU should be given powers to strike out national budgets that do not meet tougher euro zone debt rules.
The German leader dismissed pooling euro zone debt as a solution to the euro zone crisis, ahead of today’s European Commission proposals, saying there was “no way around” treaty change to allow EU oversight of national budgets.
The French and German leaders said yesterday they would soon present joint proposals for treaty change, prompting European commissioner for economic and financial affairs Olli Rehn to question if this was “really necessary” as existing oversight rules had yet to be exhausted.
“Whoever doesn’t live to the agreed rules will have to reckon with an automatic right of intervention which would mean the national budget is invalid,” Dr Merkel told German employers in Berlin.
“For me, treaty changes are not something one should look on as a particularly German obsession – because we love treaties or because we’re so precise – rather they are a political answer to a politically-induced crisis of trust.” Chancellor Merkel brushed off demands for the ECB to go beyond its current mandate and become a lender of last resort for ailing euro zone members.
“I don’t think that will work, at least not for any length of time,” she said, saying markets would soon realise that “someone has to recapitalise the bonds on the ECB’s books”.
Earlier in the day, Mr Rehn told sceptical German employers that his eurobond proposals were “worthy of closer study”.
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See also:
EU to scrutinise State after bailout (Irish Times)
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EU News
• 23 NOV 2011
Markets have dashed any lingering hopes of an investor honeymoon for Spain's incoming leader Mariano Rajoy, sending the IBEX index in Madrid crashing through the 8,000 level and pushing borrowing costs to toxic levels.
By Ambrose Evans-Pritchard | The Telegraph
Yields on three-month Spanish notes jumped to 5.11pc at a sale on Tuesday, higher than rates paid by Greece last week.
Mr Rajoy's team is scrambling to find ways to shorten the paralysing hiatus until mid-December when the new government is finally able to take charge under Spanish law.
"We have to go beyond strictly legal requirements because the markets are not going to wait," said Miguel Arias Canete head of the Partido Popular's top body.
Close advisers to Mr Rajoy said the party will have to flesh out exactly how it plans to pull the country out of its downward spiral, and perhaps reach an accord with the outgoing socialist to start implementing emergency measures. The country may need €30bn (£26bn) in fresh cuts to reach its 4.4pc deficit target next year.
HSBC said the country is in a race against time to avoid becoming the fourth EMU country to need a bail-out. "The question now is whether the new government is able to reassure markets that it can deliver quickly enough to beat back the market bears and avoid turning to the (EU-IMF) troika," said the bank's strategist Madhur Jha.
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EU News
• 23 NOV 2011
By Philip Ebels | EUobserver
BRUSSELS - The latest collapse in talks to form a government in Belgium has sent investors running, amid fears the core eurozone country could face similar problems to Greece.
The country’s cost of borrowing money soared over five percent on Tuesday (22 November) to an almost-10-year high, after would-be prime minister Elio Di Rupo handed in his resignation on Monday, marking a preliminary end to a-year-and-a-half-long attempts to reach a deal.
Belgian EU trade commissioner Karel De Gucht warned earlier this month that his country might be “next” on the markets' radars if it did not manage to agree and draw up a budget for 2012. Belgium's debt is almost at 100 percent of GDP - the third-highest in the eurozone.
The European Commission expects to receive the new budget by mid-December. Next year's spending programme will have to see cuts of more than €11bn to stay below the EU-imposed deficit ceiling of three percent.
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See also:
Belgian government talks in chaos after 528 days of failed talks (Irish Times)
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EU News
• 23 NOV 2011
EurActiv (Brussels confident Italy's Monti will balance budget)
After talks with the new Italian Prime Minister Mario Monti, Commission President José Manuel Barroso said he was confident that Italy would deliver the needed structural reforms to balance the budget.
Speaking following his first meetings in Brussels since taking office, Monti said he was convinced his new government can push ahead with more ambitious reforms than its predecessor but declined to confirm that it will balance its budget in 2013.
Monti added he was determined to win back investor confidence after Italy's short-term borrowing costs surged to levels seen as unsustainable, striking the 17-nation eurozone to its core.
"We can get to the bottom... to the heart of structural reforms in Italy," Monti said, flanked by European Commission President Jose Manuel Barroso.
Barroso said there are "no miracles" in financial markets and Italy will have to run a "marathon" of reforms to win back credibility about its government debt. "The situation remains difficult for Italy," Barroso said.
But the Commission president expressed full confidence that Monti's programme "correctly" addresses the challenges facing the nation.
Monti's new government, supported by nearly all of Italy's main political parties, will focus first on enacting austerity measures passed by the previous, scandal-plagued government of Silvio Berlusconi.
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EU News
• 23 NOV 2011
Reuters (Greece on brink of running out of money)
REFUSAL TO SIGN PLEDGE: ATHENS – Greece’s new technocrat prime minister says he is confident fractious politicians will soon provide a commitment to painful austerity measures as demanded by the EU that will unlock funds needed to stave off bankruptcy.
The country is on the brink of running out of money.
“There is enough money for another 20 days,” a senior Greek government official said. “Without the loan tranche we will default on the €2.8 billion bond payments in December and we won’t be able to pay out salaries and pensions. The situation is very serious and this issue has to be settled this week.”
However, as prime minister Lucas Papademos tried to reassure EU officials in Luxembourg, the leader of the conservative New Democracy party repeated his refusal to sign any pledge and Greece’s main trade unions called a 24-hour strike for December 1st.
It will be the first major strike since Mr Papademos, a former vice-president of the European Central Bank, formed his three-party coalition to secure payment of an €8 billion aid tranche to avert default in December.
“Our partners demand written commitments. They want political leaders to send a letter of commitment over the policies which will be implemented in the coming years,” Mr Papademos said after talks with euro group head Jean-Claude Juncker in Luxembourg. “I believe party leaders will fulfil their duty . . . This must be done by the end of the month.”
While the Socialist Pasok of fallen prime minister George Papandreou and the far-right LAOS have signalled their readiness to sign, New Democracy leader Antonis Samaras has infuriated EU leaders by insisting his verbal consent is sufficient. Mr Juncker was reported to have said that Mr Samaras must sign the undertaking by Friday.
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See also:
EU Warns Greece on Bailout (WSJ)
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UK Independence Party in the European Parliament, Europe of Freedom and Democracy group, Rue Wiertz, 60 - 1047 Brussels
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