“British or German taxpayers cannot finance the failures of others,” German Economy Minister Rainer Bruederle said at the World Economic Forum in Davos, Switzerland, according to the Associated Press. “Solidarity also means everybody adheres to common rules.”
France is not working with Germany or other countries on a support package for Greece which is managing to handle its problems on its own, a French government source said on Thursday. “I am not aware of a support plan. There is not a plan. We’re not discussing one (with Germany or others),” the source told Reuters. “They are managing themselves. They are finding financing support on the market. There is no plan for a support plan. We are not working on one. Le Monde newspaper said earlier that euro zone countries were studying ways of helping Greece resolve its budget problems.”
The above statements have been widely interpreted in the international press as a “no” from Germany and France to any EU bailout of Greece. But is this interpretation justified? Before going further, I think it should be pointed out that the whole argument depends on what you consider a bailout to be. If you take the view that a bailout involves a restructuring of Greek Sovereign Debt, with the EU itself offering to pay a part, then this is clearly not on the cards, at least at this point, and let’s take things a day at a time. But if you consider the “bailout” which is under consideration at the present time to be simply a loan, which in some way shape or form (yet to be determined) would be guaranteed by the EU institutionally, and would thus be available at a cheaper rate of interest than the one the markets are currently charging, then it is hard to see how British or German taxpayers would be having to finance anything, except in the unikely event that Greece were unable to repay (as Moody’s point out, Greece’s problems are longer term, not short term), and remember, even Latvia and Hungary are likely to repay the loans already made to them, and their underlying economic situation (and competitiveness problem) is a lot worse than that of Greece. So basically the German economy minister is making a speech which generates good headlines, and political enthusiasm, but like JÃ¼ergen Starks before him, has little real significance in terms of the options which are really on the table. Continue reading
Well, the Spanish government are due to announce their 2009 fiscal deficit number this morning, together with their adjustment plan for reducing the annual fiscal deficit to below 3% of GDP by 2013. This rather distasteful news will be presented to the Spanish people later in the same day on which they opened their morning newspapers to discover that they were all going to have to work two years longer – no crisis comes free – since the Labour Minister Celestino Corbacho has announced that the retirement age will be raised from 65 to 67 (in two-month-per-year installments) between now and 2025. Continue reading
Well, it’s not fully official yet, and all the fine print certainly isn’t written and signed, but the will is now clearly there, and where there’s a will, there’s a way, especially when you have the global financial markets breathing down your necks. The first one out of the box was the Economist’s Charlemagne, earlier this afternoon.
In Brussels policy circles, the question asked about a bailout of Greece used to be: are European Union governments willing to do this? Now, I can report, the question among top EU officials has changed to: how do we do this?
Twice in the past 48 hours I have heard very senior figures – both speaking on deep background – ponder the political mechanics of how large sums in external aid could be delivered to Greece before it defaults on its debts: a crisis that would have nasty knock-on effects for the 16 countries that share the single currency. One figure said yesterday that heads of government could not wait “forever” to take decision. That means a decision in the next few months, at most.
Well there certainly is a lot happening out there at the moment. And Monday’s successful bond sale which left the Greek government triumphally proclaiming they could comfortably meet their 2010 borrowing program now seems to belong to a lifetime ago. The sale raised 8 billion euros over a 5-year syndicated bond which attracted total bids of EUR25 billion, well above the EUR 3 billion to EUR5 billion initially targeted by the government, who immediately declared a major victory.
That was before yesterday, and the Financial Times announcement that Athens was wooing Beijing to buy up to â‚¬25bn of government bonds in a deal being negotiated using Goldman Sachs as intermediary. China had not agreed to such a purchase, according to the FT at the time. In the wake of this announcement – as the FT put it – “Greeceâ€™s debt crisis returned to financial markets with a vengeance as agitated investors demanded the highest premiums to buy its government bonds since the launch of European monetary union over a decade ago”. Continue reading
Mostly in lieu of a proper review, excerpts from The Discovery of France by Graham Robb, the best non-fiction book I read in 2009. (Tough competition, too: In Europe: Travels Through the Twentieth Century by Geert Mak, Gold and Iron by Fritz Stern and To the Castle and Back by Vaclav Havel were all top notch.)
Today’s ratings downgrade by S&P for Japanese public debt has brought further attention to Japan’s huge and growing debt burden.Â Yet with each round of concern, there’s always a viable response that says “So what, yields are still low.”Â And it’s true; if you were looking for sustainability concerns to be expressed in the level of yields, it’s hard to find — and those low yields coupled with the yen policy provided the key ingredients of the boom-era carry trade.Â An interesting working paper from the IMF looks in-depth at the reasons for the chronically low yields on Japanese public debt and comes to 2 conclusions.Â
Reuters Jan Strupczewski gives more details of the EU Commission report first leaked by Der Spiegel. According to Strupczewski the “new European Commission report has expressed concern about gaps in competitiveness that could undermine confidence in the euro zone and point to tensions related to wage levels and capital flows in the 16-member club”. The report was prepared for the finance ministers meeting on January 16. Continue reading
Sometimes I am surprised by what some people consider to be news. Tony Barber points out today in the FT Brussels blog that the EU has the power to mount bailouts of any member country under “exceptional circumstances”. As Tony rightly points out, under Article 122 of the EUâ€™s Lisbon treaty, which came into effect last December, when a member-state is:
“in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council [of national governments], on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member-state concerned.â€
So there it is, as he says, “in black and white”, whatever the propaganda smokescreen some widely quoted but anonymous “EU Officials” have been mounting for the press in recent days. Continue reading
Instead of a straight-up best-of list, a slightly more eclectic look back at what I read in 2009. Best large Russian book, Tolstoyâ€™s big one; best small Russian book (and most scurrilous of any nationality) Moscow to the End of the Line by Venedikt Erofeev. Best fantasy, parts two through four of the Princess of Roumania series. Most overrated, The Time Travelerâ€™s Wife by Audrey Niffenegger. Best SF, Brasyl by Ian McDonald. Best non-fiction, The Discovery of France by Graham Robb. Most off-putting but finished anyway, Live and Let Die by Ian Fleming. Best surprises, The Final Reflection by John M. Ford (along with his How Much for Just the Planet, the first two Star Trek novels I’ve read in a quarter century) and Bleachers by John Grisham. Best look behind the scenes of history (also best dissection of a fellow national leader), To the Castle and Back by Vaclav Havel.
Complete list (in order read) is below the fold. Links are to previous writing about the book or author on AFOE. See also 2006 and 2007.