20th EU Crisis Summit - Solutions or more Fudge ?

[DCon]

Finland and the Netherlands have just said that they will block the ESM from buying government debt in the secondary market.

Not what Italy or Spain want

[Ephilant]

[ang]

The Final Countdown only 2hrs and 08 mins unti Europe is fixed

We task the Eurogroup to implement these decisions by 9 July 2012

http://consilium.europa.eu/uedocs/cm.../ec/131359.pdf

[Greengoddess]

Something moves

http://www.rte.ie/news/2012/0710/eu-...debt-deal.html

[MPB]

Our debt situation is improving everytime the economic situation in the EU worsens.

Obviously, any improvement in our debt situation is welcome, but the way it is arising, is not good news.

The reality is, that, our economic outlook is worsened by the decision to continue to save every Bank in the EU with the money taken from EU citizens.

The EU Banking system is bigger than the total GDP of the EU.

How can the EU possibly bailout something that is bigger than its own net worth?

I will repeat it once more. The Banks were, are, and will continue to be, the problem. Without the liquidation of at least 50% of EU Banks and total reform of the other 50%, there will be no solution.

[ang]

Full statement from Finance Ministers meeting here - I see nothing about Debt Solutions but I do see the Fudge err Technical Solution

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. 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 MoUunderlying 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.

http://www.consilium.europa.eu/uedoc...fin/131648.pdf

[C. Flower]

"Discussions will be held" Nothing about the discussions that we are told have been going on for months.

[ang]

"Discussions will be held" Nothing about the discussions that we are told have been going on for months.

Yes its basically a "cover note" for Irish Govt.



Karl Whelan on summit and finance meeting -

So the Germans think the purpose of these discussions is to design an accountancy trick that keeps all the risk on the Spanish sovereign but doesn’t show up in the national debt statistics. It’s not even clear that the people who publish these statistics, Eurostat, would allow such a gimmick but even if they did, the idea that after years of crisis, the most senior finance minister in Europe can think accounting tricks are the solution is perplexing.

The clock is ticking on the euro. Something better than the clown show of the past week will be required to save it.

http://www.forbes.com/sites/karlwhel...lutions-later/

[C. Flower]

Something moves

http://www.rte.ie/news/2012/0710/eu-...debt-deal.html

While the fudging and delays continue, they provide cover for continued payment of billions from the Irish public purse.

The only question ever was how will and when will we default, not whether we will default, on the debt burden assumed by FF and taken on by FG and Labour.

The intention clearly is that the bank debt should all be extracted from us after which, if there is an EU left, there will be some kind of ball and chain agreement to share the burden with our grandchildren.

[Greengoddess]

Karl is right. I am never sure if the government actually think we CAN pay the debt. I noticed that today, when I told a group of teachers that it couldn't be paid back in full, the FG MEPS gave long soliliquyes on " being positive about Europe". etc. The two issues are to some degree separate. We have gained a lot over the years but it simply is not an answer to the present situation.

[Greengoddess]

Below is a piece from John McHale of the fiscal advisory council.
If he has a feeling of foreboding.....



Stumbling into disaster

I am just back from a conference in Berlin that was attended by finance officials from a number of euro zone countries.** I must admit that what I heard left me with an increased sense of foreboding on the future of the euro zone.**** To no great surprise, officials from stronger countries made it clear*their governments are willing to pay a significant price to save the euro zone – but not any price.** What worries me most is the emphasis on restoring “market discipline” given concerns*for moral hazard, including the continued threat of debt restructuring.** (The sentiment behind Deauville has not gone away.)* While I have no trouble in understanding this position from likely net contributors under enhanced risk sharing arrangements, it is a recipe for Italy and Spain being driven from the bond markets.** The concern of stronger countries for their own creditworthiness under guarantee arrangements was also emphasised – and, again, is understandable.**

As has been pointed out before, the main message from “second-generation” currency crisis models is very relevant.*** Concerns about the willingness of policy makers to bear the costs of protecting a currency peg — or avoiding default — leads to increased expectations of those events, raising the costs of avoiding them still further.** It is all too easy to fall into a self-fulfilling, bad-expectations equilibrium.*

So what is the way out?** Stronger countries need to lay out what institutional arrangements they require to support enhanced risk-sharing arrangements, including some substantial form of euro bonds.** For the medium-term, credible institutional discipline must replace market discipline.** The present mixed approach is not working.** In deciding whether to accede to arrangements that would*significantly diminish fiscal/banking sovereignty, all countries must recognise the likely path under the present course.* *It might be a bridge too far, but at least we should not stumble into disaster.*

[riposte]

Karl is right. I am never sure if the government actually think we CAN pay the debt. I noticed that today, when I told a group of teachers that it couldn't be paid back in full, the FG MEPS gave long soliliquyes on " being positive about Europe". etc. The two issues are to some degree separate. We have gained a lot over the years but it simply is not an answer to the present situation.

Greengoddess ...... I was watching the press Conference at 2AM this morning on Bloomberg. I got the distinct feeling that Olli Rehn was fiddling while the EU was burning behind him .... and as the value of the Euro kept dropping on the strap below his melancholy face.

[C. Flower]

Below is a piece from John McHale of the fiscal advisory council.
If he has a feeling of foreboding.....



Stumbling into disaster

I am just back from a conference in Berlin that was attended by finance officials from a number of euro zone countries.** I must admit that what I heard left me with an increased sense of foreboding on the future of the euro zone.**** To no great surprise, officials from stronger countries made it clear*their governments are willing to pay a significant price to save the euro zone – but not any price.** What worries me most is the emphasis on restoring “market discipline” given concerns*for moral hazard, including the continued threat of debt restructuring.** (The sentiment behind Deauville has not gone away.)* While I have no trouble in understanding this position from likely net contributors under enhanced risk sharing arrangements, it is a recipe for Italy and Spain being driven from the bond markets.** The concern of stronger countries for their own creditworthiness under guarantee arrangements was also emphasised – and, again, is understandable.**

As has been pointed out before, the main message from “second-generation” currency crisis models is very relevant.*** Concerns about the willingness of policy makers to bear the costs of protecting a currency peg — or avoiding default — leads to increased expectations of those events, raising the costs of avoiding them still further.** It is all too easy to fall into a self-fulfilling, bad-expectations equilibrium.*

So what is the way out?** Stronger countries need to lay out what institutional arrangements they require to support enhanced risk-sharing arrangements, including some substantial form of euro bonds.** For the medium-term, credible institutional discipline must replace market discipline.** The present mixed approach is not working.** In deciding whether to accede to arrangements that would*significantly diminish fiscal/banking sovereignty, all countries must recognise the likely path under the present course.* *It might be a bridge too far, but at least we should not stumble into disaster.*

"Stronger countries need to lay out what institutional arrangements they require to support increased risk-sharing arrangements, including some substantial form of euro bonds."

I've seem no signs whatsoever of Germany biting on Eurobonds. They fall within what Namawinelake describes as the Santa Claus theory of finance. The German government is clear that value comes from work, not from financial gambits, and that the only source of repair for devastated banking holdings is to extract more work from us for less money. "Us" not including the rich and powerful, of course, as their expectations of ever-increasing wealth must of course be fulfilled.

It is interesting, certainly, to see that he thinks "the present course" leads to the early break up of the Eurozone.

European populations were encouraged from the outset to see the EU as an opportunity for national advantage, rather than as a mutually supportive union. The banking sector being tied by guarantees (written and unwritten) to national economies as it now is is an enormously divisive underpinning to increasingly unpleasant and even xenophobic relations between countries in Europe.

Completely new alliances are needed to move things forward. The Euro could be retained as a trading currency, like the trading dollar used in Europe, and everyone else revert to a national currency until such time as there is real parity of development and a social wish to dissolve national boundaries.