20th EU Crisis Summit - Solutions or more Fudge ?

[DCon]

Constantin

So the Irish Government is de facto 'defaulting' and welcomes this. And it is going into the second bailout despite repeated claims that it will be funding itself via markets post 2013. And it welcomes this too. Reverse gear has not been used as much for some time on Merrion St.

One area of concern will be the treatment of the banks debt under ESM - with respect to seniority and any attached Government guarantees. In particular, in my view, if ESM were to assume directly unsecured banks debt, even with an attached explicit sovereign guarantee, such debt will have to adversely impact ESM cost of funding.

The biggest issue with the above statement is that it will NOT reduce overall economic debt carried by the EU states, including Ireland. The potential reduction in the cost of financing this debt is good news. The fact that this economy (not banks or some rich uncle in America) - aka us - are still on the hook for debts of insolvent banks remains.

http://trueeconomics.blogspot.com/

[DCon]

Rubbing sleep from their eyes, a fudge emerges....

Bank debt need not be allocated to sovereign..... to be detailed..... later.....

Over here - http://www.politicalworld.org/showth...=10007&page=31

I painted a scenario for the next 2/3 years.

IMO, last nights fudge is part of it, allows Angela go to the Bundestag tonight (after telling the heavies, privately, that the details will screw the borrowers.) and get the vote she needs on the ESM/Fiscal Fudge.

Inda delighted that Ireland gets a mention, I'd say the negotiators were all droned out by Noonan at about 4.30am.

The devil will, as usual, be in the details. The only indication of them will be a requirement to agree an MoU on how the debts will be paid. I'd be very surprised if our Anglo promisory notes will be shredded, just shuffled.

Move on, nothing much to see here. Eurobonds,the Merkel/Germany version, will be agreed, probably next year, another referendum here in 2014.

Even in the EU, all politics are local

Monti and Rajoy were able to secure the immediate assistance they had been demanding by threatening to torpedo the €120 billion ($150 billion) European Union growth pact leaders had hoped to rubber stamp early on Thursday evening. Even if experts doubt whether the growth pact will have much of an effect, German Chancellor Angela Merkel had promised the successful passage of the pact to the opposition back home in exchange for their support in ratifying the ESM and the EU fiscal pact in parliamentary votes on Friday. Merkel is seeking a two-thirds majority for both measures to take the wind out of the sails of potential legal challenges at Germany's Constitutional Court.

http://www.spiegel.de/international/...medium=twitter

[Greengoddess]

FYI
A briefing from Labour.


Meeting of the European Council, 28/29 June 2012-06-29
This is a major step forward for the country. It is now agreed that Europe will invest directly in troubled banks, breaking the link between bank debt and public finances. Critically, Ireland has secured agreement that there will be a look back at our position, and we will receive equal treatment. This is a major shift in our favour. We now face into several more months of detailed work to get the details right for Ireland. *

The outcomes are consistent with the objectives set for the summit by the Taoiseach in his letter to fellow EU leaders - (1) a growth stimulus of relevance to Ireland; and (2) a new shared EU response to the banking crisis, with a particular reference to Ireland's situation.

The process will now be taken forward by finance Ministers at Eurogroup level - our Minister will seek the maximum benefit to Irish taxpayers consistent with the agreed principle of breaking the link between the banks and the state. The Minister will be preparing Ireland's negotiating position in time for the next meeting of the Eurogroup on July 9.

Key Points:

Ahead of this meeting, we said we were looking for four things:

A break in the toxic link between sovereign and banking debt,

An address to the immediate crisis, especially in Spain and Italy,

A European growth strategy, including a stimulus investment package; and

A laying of the groundwork for a strong and stable Europe and euro into the future.

In what has been the most productive meeting of the European Council, all four of these goals have been met. This is a hugely significant step forward for Europe and for Ireland.

The challenge will now be to implement what we have agreed and to get Europe moving forward and back to work.
Growth, Investment and Jobs

The “Compact for Growth and Jobs” we have adopted is an ambitious programme, with the potential to deliver an immediate stimulus to the European economy – especially in those countries that need it – and to deliver the growth that Europe needs. This has real potential for Ireland.

It contains a commitment to a €120 billion investment package – 1% of the EU’s income – to be mobilised for fast-acting growth measures.

This includes significant additional money for the EIB to be spent across the Union, including Ireland and other vulnerable countries.

The Bank’s President, Werner Hoyer, will visit Ireland next Friday and I look forward to discussing with him how Ireland can now benefit from this.

We also insisted that the new Project Bonds should be available to all countries, not just those with continental-scale projects, and that is reflected in the Compact.

The Compact also points to potential of the single market and trade to really contribute to growth. Driving this forward will be a key priority for the Irish Presidency next year.

Breaking the Banking-sovereign link and Addressing the Immediate Crisis

It is clear, however, that generating growth in Europe will be an uphill struggle until we put the euro crisis behind us.

Following a long last night, we took enormously significant steps forward on this, especially for Ireland’s tax-payers.

We made the clearest possible statement that :

“We affirm that it is imperative to break the vicious circle between banks and sovereigns”.

This is something the Government has been saying for a long time. It is now the shared position at the highest levels in Europe.

Ireland has secured a firm commitment to resolving our banking issues with a view to enhancing the sustainability of our Programme.

The measure of our Programme’s success will be our ability to get back into the markets at the end of it. *

Colleagues have listened to the case that the Government has been making - in meetings like this, in capitals, at political and official level – and have responded.

We have said that banking legacy issues were holding us back. Our partners are now committed to working with us to remove this obstacle.

The work will begin very quickly – the eurogroup is meeting on 9 July – and I look forward to an early resolution. This is a major breakthrough for us on our bank debt problem.

We made it possible for Spain’s banks to be funded directly. We it possible for interventions in the markets to be made in support of countries, such as Italy, that are delivery their reform commitments but remain under pressure.

Stronger Economic and Monetary Union

Finally, we received President Van Rompuy’s report on how to strengthen Economic and Monetary Union for the future. He will now take work on this forward, presenting an interim report in October and a final one before the end of the year.

I look forward to engaging with him in this important process.

Europe is stronger today as a result of the decisions that have been taken.

That is very good news for Ireland.

[Greengoddess]

From Socialist Group
http://www.socialistsanddemocrats.eu...uest_locale=EN

[DCon]

FYI
A briefing from Labour.


Meeting of the European Council, 28/29 June 2012-06-29
This is a major step forward for the country. It is now agreed that Europe will invest directly in troubled banks, breaking the link between bank debt and public finances.

I stopped reading after this, because it is false.

Europe will not invest in our banks. Europe will lend to our banks.

There is a massive difference.

[C. Flower]

I stopped reading after this, because it is false.

Europe will not invest in our banks. Europe will lend to our banks.

There is a massive difference.

Nor is the link broken for us, unless the ESM lends to our banks and we are then prepared to let the banks go bust.

[C. Flower]

Where in the Conference statement does it say that there will be a look back / retrospective treatment of the bank debt Ireland took on ?

[Greengoddess]

I stopped reading after this, because it is false.

Europe will not invest in our banks. Europe will lend to our banks.

There is a massive difference.

DCon. I didn't put it there as hard fact, just for discussion. I am still trying to get sense myself. We were woken up by texts at six thirty from the press office! Gave me a bit of a fright too. ( child on post- leaving junket etc) Eamon was good on MI, I thought. The presence of socialists in Germany and France have given our bit of the government more power. I know this for sure from many sources .
But we still need details on effects on budgets,

[ang]

Ireland will be responsible for any loans paid out to our banks from the ESM and attached MOU to be fulfilled.

The BIG "deal" for Governments will be that this debt will be removed from their balance sheets on to the ESM but that is it, absolutely no break in the banking debt burden here for the Irish people themselves. I believe that there may well be a deal on extending Anglo PN's.

Meanwhile back in Germany -

Yannis Koutsomitis ‏
#Germany's SPD has asked for a special meeting of Bundestag's Budget Committee following #euco. ~@handelsblatt

[Greengoddess]

There doesn't seem to be any mention of Greece in all of this. Or maybe I misssed it.

[C. Flower]

Kieran Allen on the Pat Kenny Show is making the point that ESM nua will now be able to bailout Europe's banks directly and that we will have to contribute to this.

Also, that along with this would go Fiscal Union and centralised determination of banking policy, including things like how mortgages are handled.

Other items coming out of the conference include more pressure on Ireland's Corporate Tax Rates.

[ang]

Where in the Conference statement does it say that there will be a look back / retrospective treatment of the bank debt Ireland took on ?

Posted earlier in thread -

http://www.politicalworld.org/showpo...2&postcount=58

The Eurogroup will examine the situation of the Irish financial sector with
the view of further improving the sustainability of the well-performing adjustment
programme. Similar cases will be treated equally.

[C. Flower]

Posted earlier in thread -

http://www.politicalworld.org/showpo...2&postcount=58

I'm not seeing anything there that is refers to retrospective action. I assumed that might be longer payment time - and more interest - on the PNs.

It could mean anything or nothing.

[DCon]

trouble brewing in the Bundestag?

SPD has called special meeting of budget committee to explain “180 degree turn” on ESM

http://www.forexlive.com/blog/2012/0...-in-bundestag/

[DCon]

DCon. I didn't put it there as hard fact, just for discussion. I am still trying to get sense myself. We were woken up by texts at six thirty from the press office! Gave me a bit of a fright too. ( child on post- leaving junket etc) Eamon was good on MI, I thought. The presence of socialists in Germany and France have given our bit of the government more power. I know this for sure from many sources .
But we still need details on effects on budgets,

It will have little or no effect on Budgets, unless the ESM lends on a 50 - 100 year time scale (which it won't)

This is purely an accounting gimmick that will reduce our stated debt/GDP ratio.

Nothing else