Euro Summit 27.10.2011

EU leaders agree on measures to provide more support for countries with debt problems and restore financial stability to Europe.

The decisions made on 26 October are in response to the debt crises affecting some eurozone countries. These crises threaten to undermine economic stability in the whole currency area, and by extension other EU countries. ‘The package we have agreed is a comprehensive package that confirms that Europe will do what it takes to safeguard financial stability,’ said Commission president José Manuel Barroso.
1) More loans for Greece
A sustainable solution to help Greece recover includes a new loan of up to €100bn from the EU and the IMF. Banks and other private creditors have agreed to write off 50% of Greek debt. The package aims to help Greece reduce its public debt to 120% of gross domestic product by 2020.
2) Better crisis support
Leaders agreed to enlarge the EU’s main debt support fund, the European Financial Stability Facility (EFSF), without extending member countries' commitments. The fund’s lending capacity will be boosted to about one trillion euros – a fivefold increase – using private market tools.
3) Bank reforms
Governments will provide guarantees for banks affected by the sovereign debt crisis. These guarantees will be coordinated at EU level. They will allow banks to continue to provide the loans needed for growth and job creation. A temporary measure will require banks to increase their capital base to 9% by June 2012. Banks should reduce dividends paid to investors and bonuses to staff until they reach the 9% target. This recapitalisation will strengthen the banking system. Banks will first use private sources of capital, with national governments providing support if necessary. Loans can also be made through the EFSF, as a last resort.
4) Stronger economic governance
Eurozone countries also approved measures to improve economic governance. There will be more coordination of economic and national budget policies, along with increased monitoring to ensure the measures are implemented. The eurozone will seek closer economic integration. A report on implementing the agreed measures will be completed by March 2012.
Commission website

EU states to speed up austerity, embrace 'limited' treaty change

Leaders of the EU's 27 member states met on Sunday (23 October) with little fresh to show in the face of the biggest crisis in the bloc's history, but did back a "limited" change to the EU treaty to deliver stronger economic convergence amongst eurozone countries.
At the crisis meeting in the EU capital, the bloc's premiers and presidents agreed to speed up already-agreed-to austerity and structural adjustment measures and to seek new "growth-enhancing" measures, such as unifying the bloc's still-fragmented market in digital products and services and cutting regulations on small businesses.

But on the core issues of what leaders have described as a "comprehensive" package aiming to draw a line under the eurozone debt crisis - including how to leverage the bloc's rescue fund to a size that can protect Italy and Spain from contagion, and the scale of the write-down to be imposed on holders of Greek bonds - there was no agreement.
The president of the EU Council, Herman Van Rompuy, told reporters in a pause between the closing of a meeting of the full EU 27 chiefs and a smaller meeting of the eurozone's 17 leaders, that "good progress" was made, with the bulk of the discussion so far focussed on the issue of a recapitalisation of Europe’s banks.
It is understood that leaders have converged on a sum of €107 or €108 billion in a scheme for a second round of bank bail-outs. Under the plans, troubled financial institutions must first attempt to raise fresh cash from markets. If unable to do so, national governments will then have to provide back-stops. Only if governments are too weak to be able to perform this task will the eurozone's rescue fund, the European Financial Stability Facility (EFSF), step into the breach. However, no final agreement has been reached on bank recapitalisation, and details will only be released after a meeting of European finance ministers and a second pair of EU and eurozone summits - all of which will take place on Wednesday.

The leaders did back a "limited treaty change" that will involve tightening fiscal discipline and deepening economic union. "'Limited' means not a general overhaul of the architecture found in the Lisbon Treaty,” said Van Rompuy. "What is most important is not to change the treaty but to strengthen economic convergence," he said, adding however that such a change is "not a taboo." The leaders said in a joint communique "that any treaty change must be decided by the 27 member states" and not just the 17 in the eurozone. The leaders will take a decision on treaty change in December based on recommendations from President Van Rompuy and the chair of the eurogroup of states, Luxembourgish Prime Minister Jean-Claude Juncker.

A new fiscal discipline 'super-commissioner' in the euro area is also to be created. The leaders "welcomed" the idea of strengthening the powers of a commissioner with added competence of "closer monitoring and additional enforcement." This chimes with a proposal from the Netherlands in September that a commission could upon the support of a majority of eurozone countries make a heavily indebted state a "ward" of the EU executive, whereby all economic decisions would be taken out of the hands of the country concerned and vested instead in the super-commissioner. Finland, Germany and the commission have backed versions of the plan.

A completely new post is also to be created, that of "president of the Euro summit", which will be elected by euro-area premiers and president at the same time that the president of the European Council is appointed. The next such appointment is to take place mid-2012. Until then, the current president, Herman Van Rompuy, will play this role.

The summit chiefs are also exploring the possibility of a massive new fund alongside the zone's existing rescue mechanism, hoping to tap trillions from sovereign wealth funds owned by the likes of Norway, Singapore and China that could be used to purchase government debt from in troubled states.

The existing rescue outfit, the EFSF, would offer insurance up to around 20 percent against losses government bonds purchased by the new fund, or 'Special Purpose Vehicle', extending the firepower of the EFSF to as much as €1 trillion. Such a plan, involving investment via the International Monetary Fund with 'Brics' involvement - referring to the emerging powers of Brazil, Russia, India, China and South Africa - is "on the table", an EU official told this website.

Pressure piled on Italy

Immediately after the meeting of all 27 member states, the 17 countries in the euro area met to continue discussions. Following the eurozone meeting at a late night press conference, no fresh breakthroughs were announced. The two EU presidents told reporters simply that talks were advancing.

However, while Italy was not mentioned by name, in a pointed reference to the country, Van Rompuy said: “All member states need to give clear signals of their commitment" regarding public finances by Wednesday, “and this is understood by everybody.”

German Chancellor Angela Merkel and French President Nicolas Sarkozy held a brief but sharp private meeting with the Italian Prime Minister early on Sunday, demanding that he take tougher austerity measures than he so far has implemented.

In return for Italy receiving assistance from the European Central Bank late in the summer via vast purchases of government debt in order to temper the country’s borrowing costs, Rome committed to a series of stringent austerity measures. But divisions in his government have slowed down the pace of their implementation. Last week, Berlusconi was forced to hold a vote of confidence to prove that he still commanded sufficient support in parliament to push through cuts and structural adjustment.

Euobserver

Slovak parties reach deal on EU bail-out fund

The Slovak parliament is set to approve legislation backing a strengthening of the eurozone’s €440 billion rescue fund after the centre-left opposition said it would back a fresh version of the bill in return for early elections. (...)
“The agreement makes it possible that either tomorrow night or at the latest Friday morning the fund and the laws tied to it will be approved,” he (Robert Fico) said. “Slovakia will ratify the bail-out mechanism without any problems.”
In return for Smer’s support, the three centre-right coaliion parties that backed the EFSF changes - the Slovak Democratic and Christian Union (SDKÚ), the Christian Democratic Movement (KDH) and Most-Híd - had to agree to elections that will take place on 10 March.
The cabinet is set to propose a constitutional law to bring forward the election schedule, a bill that is to be passed via a fast-track procedure, according to local reports. Once the election bill has been approved, Smer, which had abstained in the first vote on the EFSF changes on Tuesday evening, will now give its blessing to the alteration of the bail-out fund.

(...)

Euobserver

Megbukott a szlovák kormány

Nem kapott elég szavazatot az eurós mentőcsomaggal egybekötött bizalmi szavazás a szlovák parlamentben, ezért Iveta Radičová miniszterelnöknek be kell adnia lemondását az államfőnek. A következő lépés innen Ivan Gašparovič kezében van, kisebbségi kormány, nagykoalíció is jöhet, de a helyzet mindenképpen az ellenzéki, Robert Fico vezette Smernek kedvez.
Be kell adnia lemondását Iveta Radičová szlovák miniszterelnöknek, miután a parlament nem szavazta meg az eurós mentőcsomagot, amelyet kedden délelőtt a kormányról szóló bizalmi szavazással kötött össze a kormányfő. Ezzel ő a második szlovák miniszterelnök Vladimir Meciar 1994-es bukása óta, aki lemondásra kényszerült.
Az éjszakába nyúló vita után megtartott kedd esti szavazáson a 150-ből 124 képviselő igazolta jelenlétét, de csak ötvenöten szavaztak a kezdeményezés mellett, az elfogadáshoz 76 szavazatra lett volna szükség, írja a Bumm.sk. A miniszterelnököt delegáló Szlovák Kereszténydemokrata Unió (SDKÚ), a Kereszténydemokrata Mozgalom (KDH) és a Híd összes képviselője igennel szavazott, ez azonban nem volt elegendő.

A négypárti kormánykoalícióból a Szabadság és Szolidaritás (SaS) már előre jelezte, hogy nem hajlandó megszavazni a mentőcsomagot, mert az szerintük ellentétes lenne a kormányprogram több elemével. Richard Sulík házelnök, a párt elnöke hangsúlyozta, hogy kiálltak Radičová mögött, és a reformok folytatását szeretnék, de úgy vélte, hogy reáljövedelmeikhez képest nekik kellene a legtöbbet fizetniük az egész eurózónában. Úgyszintén nem adta le szavazatát a Hídon belüli minifrakció, a Polgári Demokrata Párt (OKS) négy képviselője közül három, valamint ugyanilyen arányban az SaS listáján parlamentbe kerülő Egyszerű Emberek minifrakció zöme sem. Ján Slota pártjának képviselői nemmel szavaztak. Az ellenzéki Smer, élén Robert Ficóval a Bumm.sk szerint azzal indokolta tartózkodását, hogy noha az eurósáncot támogatják, a kormányt azonban nem, így az eredeti voksolás összevonása a bizalmi szavazással nem hagyott nekik választást.
index.hu

Eurozone ministers delay Greek bailout

Eurozone finance ministers postponed until November a decision on releasing the next tranche of last year's €110 billion EU and IMF Greek bailout. Despite assertions by Greece that it will run out of funds by mid-October if it does not receive the €8 billion installment, the finance ministers said they would first push for more austerity measures from the indebted state.

The ministers also said they would wait for a verdict from representatives of the European Commission, the European Central Bank, and the IMF–the so-called troika–to determine Greece's eligibility for more funding. The chair of the eurozone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, insisted Greece had the financial means (DeutscheWelle) to get through to November.

Juncker added that the ministers were reassessing the terms (Reuters) of a € 109 billion second Greek bailout, tentatively agreed upon in July. Ministers are considering more private-sector involvement, which could amount to an orderly restructuring of Greek debt.

European bank stocks, heavily exposed to eurozone sovereign debt, continued to fall. Shares in French-Belgian bank Dexia (WSJ) dropped 17 percent, as the French and Belgian governments said they would take all necessary measures to shore up the bank.

A drought in wholesale financing is merely the symptom of a much deeper problem–the crisis of confidence over sovereign debt. The markets simply do not have faith that a divided and hesitant Europe will be able to meet the challenge of contagion should Greece default, argues this Financial Times editorial. In addition to Greece missing its deficit targets, the country's continued economic contraction has multiplied doubts as to the wisdom of saving Greece at all, says Der Spiegel.

CNN

Greece will not meet deficit targets

The Greek finance ministry on Sunday (2 October) conceded that the government will not be able to meet the deficit reduction targets imposed by the European Union and the International Monetary Fund for this year or next.

The shortfall between spending and revenues will amount to 8.5 percent of GDP in 2011, considerably wider than the 7.6 target set by international lenders. In 2012, the government will be able to reduce the deficit to 6.8 percent of GDP, but this figure still comes short of the 6.5 percent demanded by Brussels and Washington.

The news comes as Athens unveiled further details on its plan to trim the public-sector wage bill by placing 30,000 workers into a so-called labour reserve pool. These workers will see their salaries slashed by 40 percent ahead of a presumed dismissal within a year. (...)

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