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19 December 2013

Integrating Europe

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Articles from 12 December 2013 - 19 December 2013


Commission publishes Product Market Review 2013: Financing the real economy
This edition of DG ECFIN's biannual PMR focuses on the interaction between the real economy and the financial sector. It explores the extent to which the crisis in the financial sector casts a shadow on economic activity. (Includes link to Commissioner Barnier's speech.)  View Article
Danièle Nouy appointed head of ECB supervisory board
The Council has appointed Danièle Nouy as the first ever chairperson of the supervisory board of the ECB. The ECB will have direct oversight of eurozone banks under the SSM, and will be responsible for the overall functioning of the SSM. (Includes Barnier/Draghi statements.)  View Article
ECB/Draghi: Interview with Le Journal du Dimanche
Draghi said the crisis had shown that neither sustainable growth nor a fair distribution of prosperity could be generated by amassing debt. For now, the ECB had done all it could in its mandate to stimulate growth.  View Article
FT: Bundesbank chief urges faster eurozone economic integration
Weidmann has pressed eurozone governments to accelerate economic integration ahead of this week's EU summit in Brussels, saying a lack of progress is hindering the task of the currency bloc's central bankers.  View Article
ESM/Regling: Interview with El País
Regling said that as with OMTs, direct recapitalisation of banks should only be considered as a crisis resolution instrument. He also discussed future risks and the ESM's role in post-programme Spain.  View Article
CEPS/Gros: The AQR and capital needs - Why recapitalise with public money? [prepared for ECON MD]
The assumption that any capital needs discovered by the ECB's AQR should be filled by public funding (= fiscal backstop) is wrong, says Gros. Banks with insufficient capital should be asked to obtain it from the market; or be restructured using the procedures and rules recently agreed.   View Article
Bruegel: Ending uncertainty - Recapitalisation of banks supervised by the SSM [prepared for ECON MD]
There is considerable uncertainty about the quality of banks' balance sheets and the central parameters of the upcoming ECB stress-testing exercise, such as the treatment of sovereign debt and systemic risk. The ECB should communicate those parameters early to allow for private sector solutions.  View Article
Bruegel/Wolff: Continued financial fragmentation will put ECB on the hook
An insufficient agreement at the ECOFIN and the European Council would put the ECB in an awkward situation and may force the ECB to engage in non-standard monetary policy measures to fulfil its mandate.  View Article
Peterson/Kirkegaard: Europe's Cypriot solution for failing banks
The BRRD makes clear that the treatment of Cypriot banks earlier in 2013 set a precedent. A final round of negotiations among Member States and the EP will determine the design of the euro area's new single resolution mechanism for failing banks.  View Article
CER/Collignon: Exit strategies and the impact on the euro area [prepared for ECON MD]
Unconventional monetary policies have been successful in preserving the financial system, but it is less clear to what extent they have supported the real economy.   View Article
CEPR/de la Dehesa: Tapering and exiting from present monetary policies [prepared for ECON MD]
The ECB's task is to counter the adverse effect symmetric shocks stemming from the crisis as well as asymmetric shocks, chiefly related to fragmentation of financial markets along national borders. As a consequence, it will take longer for the euro area than for the US to recover from the crisis.   View Article
CEPR/Crafts: The eurozone - If only it were the 1930s
Compared with struggling eurozone economies today, the economic situation in Europe in the later 1930s was in many ways more promising. This is particularly true of the aftermath of public debt and the difficulty of dealing with it.  View Article
iMFdirect: International policy coordination - The Loch Ness Monster
International policy coordination is like the Loch Ness monster: much discussed but rarely seen. Going back over the decades, and even further in history to the period between the Great Wars, coordination efforts have been episodic.  View Article
ECOFIN Council agrees general approach on Single Resolution Mechanism
The Council set out its position on the establishment of a single resolution board and a single fund for the resolution of banks. It called on the presidency to start negotiations with the EP, with the aim of agreeing the SRM regulation at first reading before May 2014.  View Article
Commissioner Barnier's remarks at the ECOFIN Council press conference
"Today is a momentous day for Banking Union. A memorable day for Europe's financial sector. (...) Taxpayers will no longer foot the bill when banks make mistakes. We are ending the era of massive bailouts."  View Article
ECON Committee: Single resolution system for struggling banks - MEPs adopt negotiating position
The Commission, acting as resolution authority, should be empowered to decide to wind down a bank in the Banking Union, says a draft law voted by the ECON Committee. Commissioner Barnier said the proposals formed a good basis, but he expressed a number of concerns.  View Article
EP Groups comment on SRM / SBRF
ALDE, the EPP Group, S&Ds and Greens commented on the Single Resolution Mechanism and the Single Bank Resolution Fund. The EPP Group is opposed to watering down rules for failing banks.  View Article
ECON Committee: Draghi allies with MEPs against a bad Banking Union
The EU Member States' current plans for a common system for winding down troubled banks risk being too complex to work, the ECB president told the ECON Committee.   View Article
Comments on new banking sector rules: AFME, BBA, EBF
Overall, the finance industry has welcomed the EU's plans for dealing with troubled banks. However, the EBF remains somewhat concerned with regard to the demand for banks to build up, at Member State level, a separate ex-ante financed resolution fund of 1 per cent of covered deposits.  View Article
ECON Committee: Deal reached on bank "bail-in directive"
Political agreement has been reached on the draft BRRD, the first step towards setting up an EU system to deal with struggling banks. This Directive will introduce the "bail-in" principle by January 2016, thereby ensuring that taxpayers will not be first in line to pay for bank failures.  View Article
ECON Committee: EP and Council negotiators break depositor-taxpayer link
Savings deposits under €100,000 will finally be guaranteed by funds contributed by banks rather than the taxpayer, thanks to a political agreement struck by Parliament and Council negotiators. (Includes Barnier/Šadžius/Ferreira comments.)  View Article


ECFIN Economic Paper: EU governance and funds - testing the effectiveness of EU funds in a sound macro-economic framework
This paper analyses whether sound fiscal and macro-economic policies are beneficial to the achievement of the socio-economic development objectives enshrined in the TFEU, and in particular whether sound policies have an impact on the effectiveness of European Structural and Investment Funds.  View Article
Fitch: Recovery taking hold but risks to global sovereign outlook remain
In its 2014 Outlook report for global sovereigns, Fitch says that a gradual, broad-based economic recovery is taking hold, supporting a more positive macro-economic outlook. However, despite an easing of downward pressure on developed market sovereigns, a number of key risks remain.  View Article
Spiegel: Complaint to EU - German banks try to torpedo transaction taxes
German banking associations have sent letters to the Commission urging it to forbid the new financial transaction taxes imposed by France and Italy. Insiders believe the letters are an attempt by the banking lobby to block the planned EU-wide FTT.  View Article
LSE/Pissarides: Tough choices for a troubled euro
The euro should either be dismantled in an orderly way or the leading members should do what is necessary to make it growth- and employment-friendly as fast as possible, said Nobel Laureate Pissarides in his inaugural lecture as the first Regius Professor of Economics at the LSE.  View Article
WSJ: US and EU dive into divisive trade topic - Your rules versus ours
As a part of trade talks launched this year, the US and the EU are getting down to the nitty-gritty issue that divides officials and citizens on opposite sides of the Atlantic: who has the better rules for businesses and consumers.  View Article

Member State events

ECON Committee: Bailout Troika review - Preliminary views tabled
The draft report from the EP's review of crisis bailout work by the Troika was tabled by Rapporteurs Karas and Ngoc. It will form the basis of political work set to kick off in January, at hearings with key bailout players and delegations to Cyprus, Greece, Ireland and Portugal.  View Article
ESM Board of Directors approves €100 million disbursement to Cyprus
This follows the approval of the updated MoU by the ESM Board of Governors and the positive assessment of the second quarterly review of Cyprus's macro-economic adjustment programme. Separately, the Commission approved a third prolongation of the Cypriot bank guarantee scheme.  View Article
EY: Outlook for Cyprus
Severe austerity and the credit crunch leave the outlook bleak for Cyprus, argues the December issue of Ernst & Young's eurozone forecast.   View Article
Statement by the President of the Eurogroup on Greece
As Greece has achieved the four milestones agreed with the Troika institutions in the context of the third review of the Greek economic adjustment programme, the EFSF will disburse the second sub-tranche of the fifth instalment, amounting to €0.5 billion.  View Article
Kathimerini: Samaras aims for decision on debt relief in April
Greek PM Samaras said Athens would 'insist' that a decision on further debt relief for Greece be taken in April and not delayed until after May's EP elections. Greece is close to reaching an agreement with the EU/IMF/ECB for the release of the next tranche of funds.  View Article
Commission publishes final review of programme for Ireland – gives green light for final disbursement
The Commission adopted a decision authorising the final disbursement under the financial assistance programme for Ireland. The disbursement amounts to €0.8 billion (from the EFSM) out of a total of €67.5 made available over the past three years from the EFSM, the EFSF, the IMF and bilateral loans.  View Article
ECFIN Occasional Paper: Economic Adjustment Programme for Ireland - Autumn 2013 Review
This report provides a summary of the main findings of the 12th and final review mission, including an assessment of compliance with the programme conditionality, and an overview of challenges faced by Ireland ahead.  View Article
IMF completes twelfth and final review under the Extended Fund Facility arrangement for Ireland
The completion of the review enables the disbursement of an amount equivalent to about €0.65 billion, bringing total disbursements under the EFF to the equivalent of about €21.81 billion, or the equivalent of 1,548 per cent of Ireland's IMF quota.  View Article
Fitch: EU deficit rule anchors post-bailout Irish fiscal policy
The EU's Excessive Deficit Procedure will serve as a medium-term anchor for Irish government fiscal policy, following the successful termination of the three-year EU-IMF programme. Further fiscal consolidation in 2014 and 2015 is anticipated, in line with the 2014 budget.  View Article
Statement by the EC, ECB and IMF on the tenth review mission to Portugal
Staff teams from the Commission, ECB and IMF visited Lisbon during December 4-16 for the tenth quarterly review of Portugal's economic adjustment programme. The joint mission for the next programme review is expected to take place in February 2014.  View Article
Statements by EC/ECB and IMF following conclusion of fifth review of financial assistance programme for Spain
The positive assessment of steadfast programme implementation that formed the basis of the Eurogroup statement of 14 November has been maintained through the final review. The programme ends on 23 January, 2014. (Includes link to ECFIN country focus report.)  View Article
FT editorial: Spain's next crisis
Parties representing nearly two-thirds of Catalonia's parliament called a referendum on independence, tilting Spain towards full-blooded constitutional conflict just as the Spanish economy was showing signs of starting to emerge from its crisis.  View Article
Chancellor Merkel: For a strong Europe
Germany will continue to play a "responsible and integrative role" in Europe under the new government, underlined Merkel in her first government statement since she was re-elected. She called for EU treaty change, which she said was the only way for Europe to evolve.   View Article
SPD 'yes' vote paves way to Merkel III government
Having voted in favour of the grand coalition agreement, the SPD party membership cleared the last hurdle so that Angela Merkel and her new cabinet could be sworn in earlier this week.  View Article
CER/Barysch: What Germany's new coalition government means for the EU
Katinka Barysch argues that the new government is unlikely to change EU policy a great deal. The vagueness that will disappoint some will allow the new government to react flexibly if there is renewed instability in the eurozone. Simon Tilford believes the SPD's input will be bad news for Cameron.  View Article
Jean-Dominique Giuliani: France-Germany, a duty to help recovery
The Franco-German motor is ticking over but it is not moving forward, comments Giuliani.  View Article
CER/Grant: Cameron's European gamble is a losing proposition
David Cameron has embarked on a bold, possibly reckless, strategy to sort out Britain's troubled relationship with the EU. His problem is that large parts of his Conservative party expect the renegotiation to deliver much more than his EU partners are likely to offer.  View Article
EPC/Cridland: Our global future - Britain in a globally competitive Europe
The Director-General of the Confederation of British Industry writes that, from a business perspective, membership of a reformed EU is the best way to realise Britain's global future.  View Article
Austria agrees old-model coalition government
Austria's government will be unchanged after the incumbent Social Democrats and centre-right People's Party agreed to form a new coalition. The announcement on 12 December, after 75 days of talks, follows inconclusive elections in September.  View Article
ČTK: New Czech coalition vows to raise pensions and minimum wage
The new Czech coalition of Social Democrats (CSSD), the ANO movement and Christian Democrats (KDU-CSL) promised to increase pensions and the minimum wage as well as to cancel most health fees in their coalition pact.  View Article

© Graham Bishop

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