Angela merkel

Tuesday

David Blackburn

Further tension in the Eurozone

The Eurozone’s political crisis is deepening. Further to the news that individual member states were seeking their own bilateral deals with Greece to insure their taxpayers’ money from default, the FT reports that disagreements are emerging over how these deals should be conducted. Holland objects that Finland’s accord with Athens relies on Greece using EU bailout funds as collateral. “The Netherlands is no supporter of this proposal,” Jan Kees de Jager, the Dutch finance minister, said. “It is not compatible with the principle of equal treatment of all euro countries.” Moody’s, the credit rating agency, has said that this affair “confirms that Europe is conflicted over the very decision to provide financial support

Monday

David Blackburn

Stumbling towards fiscal union

Angela Merkel must tire of repeating herself. Eurobonds are “exactly the wrong answer” to the European debt crisis, she said yesterday for the umpteenth time. She added that they would “lead us to a debt union not a stability union”, a free-for-all funded by German taxpayers. She concluded that “greater commitment” from the 27 member states of the European Union was required to stabilise the situation. Her comments would have, perhaps, placated her mutinous coalition in Germany, which is virulently opposed to Eurobonds and expensive integration. George Osborne, on the other hand, might have been slightly perturbed that Merkel prefers “greater commitment” from countries like Britain over the “remorseless logic”

Thursday

Sally Thompson

Tobin’s folly

The Eurozone Tobin tax announced on Tuesday by Merkel and Sarkozy is intended to reduce market volatility. It could have the opposite effect, and, if introduced in Britain, could cripple Britain’s financial sector, a new report by the Adam Smith Institute says. Based on the example of the “pure” Tobin tax that was implemented in Sweden in the 1980s and a large number of studies looking at equity and foreign exchange markets, a clear relationship was revealed between increasing transaction costs and higher levels of volatility. Transaction volumes also decrease as business is driven to lower tax regimes. When Sweden introduced a levy of 0.5 per cent, 60 per cent

Wednesday

David Blackburn

This isn’t just any solution; this is an M&S solution

Banks and financial institutions endured a painful day’s trading, following Angela Merkel and Nicolas Sarkozy’s announcement yesterday that the Eurozone should adopt a ‘Tobin tax’, a charge on financial transactions. Once again, M&S chose piecemeal changes over the grand structural scheme desired by markets. The Tobin tax was just one proposal of three. The other two were: to create “genuine economic governance of the Eurozone” under, for the moment, EU President Herbert van Rompuy. The second: to impose a ‘Golden Rule’ on the budgets of Eurozone members. The ‘Golden Rule’ will bind national parliaments to agree to limits on national debt levels and impose statutory requirements on mastering budget deficits. The

Monday

James Forsyth

Battle of the century

The American historian Walter Russell-Mead has a cynical — but very possibly accurate — take on what the French are trying to persuade the Germans to accept with their plan for Eurobonds: ‘France’s clear short term goal is to commit Germany to underwrite debts from weak EU states.  That not only staves off a crisis that threatens to engulf France; by putting Germany on as a co-signer for Greek, Italian and Spanish loans, France will ensure that Germany’s credit rating will not be better than France’s. The French will accept almost any German rules to limit the ability of countries like Greece to run up new debts.  It is in

David Blackburn

Back to the drawing board as Eurobonds look dead in the water

Watch her lips: no Eurobonds. Angela Merkel’s Finance, Minister Wolfgang Schauble has told Der Spiegel: “I rule out Eurobonds for as long as member states conduct their own financial policies and we need different rates of interest in order that there are possible incentives and sanctions to enforce fiscal solidity.” Merkel’s government is making its depositions ahead of tomorrow’s Eurozone summit, rebutting the moves made by other member states over the weekend to introduce Eurobonds, a step towards political integration. Those proposals were backed by Nicolas Sarkozy, with whom Merkel is meeting in private this afternoon. Interestingly, Le Monde reveals that Eurobonds are not even on the agenda of these

Thursday

David Blackburn

Is Merkel getting her way?

Below, courtesy of the Telegraph, is a leaked copy of the draft proposals on managing the Greek debt crisis.There are no measures to reduce Greece’s debts to sustainable levels; subsidy is the preferred route. This will presumably hit German taxpayers the hardest, but Merkel has managed to obtain private sector involvement, a clear German objective in these discussions.  However, this course is likely to lead to Greece’s selective default as creditors buy back bonds. The European Central Bank has declared that it is happy to allow this and will continue to accept government bonds in the event of sovereign default. This is a major retreat from its earlier position and commentators are clear that the Eurozone is now flirting

David Blackburn

Common Franco-German position on Greek debt

As I wrote earlier this morning, rumours of a ‘common Franco-German position’ on Greek debt were circulating in the early hours. Details are now emerging. Nicolas Sarkozy has dropped plans to impose a 0.0025 per cent levy on Eurozone bank assets, which was opposed by Angela Merkel for being much too cumbersome. In return, it seems that Merkel is prepared to consider the French-led plan of bond rollover. Merkel is also keen that private sector holders of Greek bonds pay their share of this second bailout. According to the FT, she favours a bond-swap deal, whereby bonds that will mature in the next eight years are swapped for new 30 year bonds paying a

David Blackburn

Getting a grip of the crisis

“I’m very worried, this building [the Treasury] is very worried and this government is very worried,” said George Osborne of the unfolding crisis in the Eurozone. In an interview with the FT, the chancellor goes on to say that he is in constant contact with his continental counterparts and urges them once again to “get a grip”. Eurozone leaders are meeting today to discuss further loans to Greece. Three options are being considered: first, an extension of the European Financial Stability Facility; second, private sector creditors re-lend money for a longer period and at a lower rate; third, impose a tax on banks to secure revenue for Greece. Despite a

Wednesday

David Blackburn

Gearing up for another European drama

Away from the amateur dramatics in parliament this afternoon, the government is fighting yet another battle with the European Commission over banking reform. European leaders will vote later today on proposals to introduce the rubric of Basel III across European financial institutions. Led by EU Finance Commissioner Michel Barnier and ECB Vice-President Jean-Claude Trichet, these proposals would insist that minimal and maximum capital requirements are imposed on banks. The terms dictate that banks hold 7 per cent of their top-class assets in reserve. Britain opposes the scheme, not because the requirements are too steep: the UK’s Banking Commission has suggested that banks hold 10 per cent of their assets in reserve.

Friday

David Blackburn

Merkel is running out of patience with the eurozone

Like an unseasonal Atlantic gale, the Portuguese sovereign debt crisis has blown in to ruin the latest EU summit. This meeting was intended to mark the beginning of the end of the eurozone crisis. Instead, the ponderous European Union has been overtaken by events, with grave consequences. Already speculation about contagion is rife: Spain, Malta* and Italy are now being spoken of in hushed and exasperated tones. The Economist’s Charlemagne correspondent reports that several countries are now wary of the monetary pact that Germany is demanding for delving deeper into its pockets, because they do not want to be accused of surrendering sovereignty. Likewise, the injection into the European Financial

Friday

Alex Massie

In Defence of Germany

Among the many odd things about the Libyan “debate” is the argument that Germany’s decision to abstain during the Security Council vote is somehow disgraceful and proof that Germany still isn’t ready to play its part on the international stage. (Obviously some of these objections come from the kind of rightists who fear or dislike German influence in other, more peaceful, areas of international politics and business. But never mind.) But Germany’s vote seems qualitatively different from the BRIC-blog of abstentions. Brazil, India, China and Russia each have reasons to be wary of this kind of resolution and, indeed, this kind of precedent. Deep down, I suspect some of them

Thursday

Alex Massie

A Grim St Patrick’s Day

St Patrick’s Day is often pretty grim, not least on account of the American habit of suggesting the poor old boy is actually the patron saint of uncooked hamburgers. It is St Patrick’s Day or Paddy’s Day and “Patty’s Day” is an abomination. True, the pubs tend to be stuffed with insufferable amateurs today but in general Ireland is a decent place to pass St Patrick’s Day and a better one than most. At least there are proper Irish people there. But this is not an especially bonny St Patrick’s Day and not even a new government that can scarcely fail to be some modest improvement upon its predecessor can

Tuesday

Daniel Korski

Meltdown danger

The situation in Japan is deteriorating further. In the early hours of this morning, the last workers are said to have left the Fukushima Daiichi Nuclear Power Plant as the danger of a nuclear meltdown grew. There have been explosions in three of the plant’s reactors and a fourth one is on fire. Everyone within a 30 kilometre radius has been told to stay indoors, and the U.S. Navy’s 7th Fleet, stationed more than 100 miles away to help earthquake victims, sailed farther away from the stricken plant after detecting unusual levels of radioactivity in the air. The Japanese Prime Minister, Naoto Kan, has confirmed that, “substantial amounts of radiation

Saturday

Peter Hoskin

Cameron signs up to muscular liberalism

“State multiculturalism has failed.” Angela Merkel put voice to that sentiment last October. Now it David Cameron’s turn to do the same. In a speech in Munich today, the Prime Minister has taken a rhetorical torch to Islamic extremism. “Frankly,” he says, “we need a lot less of the passive tolerance of recent years and much more active, muscular liberalism.” It is, at the very least, a significant political moment. What Cameron is doing here – as explained by Charles Moore and Paul Goodman – is publicly signing up to a philosophy of the world. It is a philosophy that rejects the idea that extremism should simply be contained. Instead,

Friday

Mats Persson

What Cameron should push for in Brussels

As David Cameron stays in Brussels for his third European summit as PM, it’s becoming increasingly clear that the EU’s approach to the eurozone crisis – put up short-term cash and pray – isn’t convincing anyone.   On Wednesday, Moody’s threatened to downgrade Spanish government bonds another notch, citing the fact that, between them, the country’s government and banks have to raise €290bn next year to keep the party going. And, across the eurozone, banks and governments face daunting refinancing targets in 2011, which begs the questions: at what cost? And what happens if they fail to meet them?   Taking into account the countries that themselves have received support

Wednesday

Daniel Korski

A “two stone” solution to the Euro crisis will unbalance the coalition

Whatever the British government wants, moves are now afoot on the Continent to address some of the structural problem with the Euro. They may in the end lead to some form of fiscal federalism. So far they are not supported by Angela Merkel, the key decision-maker, who worries constantly about the court in Karlsruhe, which has set clear limits on further European integration. But they are said to be supported, at least in part, by Finance Minister Wolfgang Shauble. Writing in the Financial Times, Frank-Walter Steinmeier and Peer Steinbrück argue that the EU needs “a more radical, targeted effort to end the current uncertainty, and provide stronger support for the

Monday

David Blackburn

Ireland’s crisis is the fault of Fianna Fáil, not just the euro

In all likelihood, George Osborne will rise this afternoon to groans if not jeers. Britain looks set to lend Ireland £7bn as part of multilateral and bilateral bailouts. Many, particularly the Eurosceptic right, question our involvement, given our straitened financial circumstances and the apparent fact that Britain is sustaining the eurozone’s monetary and debt union, and will have to borrow to do so.     George Osborne has been adamant throughout: Ireland is too important to Britain’s recovery to risk collapse – British and Irish banks are closely linked, debts and borrowing are often co-dependent, trade is very profitable. That the bailout should strengthen the euro is a natural consequence of Ireland

Wednesday

Daniel Korski

G-20 in Seoul: Beyond “Camerkelism”

David Cameron is now in Seoul for the first G-20 summit hosted by a non–G-7 member state. It will be the Prime Minister’s second G-20. But things have changed dramatically since he came to power and had to jet to Toronto for his multilateral baptism. Then the Prime Minister’s arguments for austerity measures were theoretical – and a minority position. Now, they are real and have become the majority view. “Camerkelism”, the idea that short-term fiscal consolidation will induce sufficient private-sector activity to more than fully offset the fiscal drag seems to be in the ascendant. Yet the forced smiles at the traditional G-20 class photo will belie a number

Tuesday

Mats Persson

A wasted opportunity for EU reform?

David Cameron made his statement on last week’s EU summit yesterday, answering a range of questions on the 2011 EU budget increase and future changes to the EU treaties. The Tory backbenchers appeared to be on their best behaviour, but Cameron did make an interesting admission. Asked by Ed Miliband if he would he be repatriating powers, he pointed to a reassurance that the UK’s opt out from economic sanctions remained intact, which was not really in question in the first place, and spoke of “progress on the EU budget”. It slipped through virtually unnoticed, but this second remark is actually quite worrying. Cameron’s answer suggested that he has agreed