Tag Archives: Eurogroup

EU to Consider Bailout of Slovenia

As pointed out in the previous post, it is almost impossible to predict which country that will be the victim of the economic crisis. But right now the alarm is sounding in Slovenia.  According to the German business daily Handelsblatt the Eurogroup is due to discuss the country at its next meeting on Friday to determine whether Slovenia may need outside aid save its banking system.

“The country is at risk of a prolonged downturn and constrained access to financial markets.”


Slovenian bank

Slovenian Finance Minister Uros Cufer is expected to report to his euro-zone counterparts on the country’s financial situation, which has been deteriorating over the past several months, SPIEGELOnline, reports.

EI-CA029_SLOVEN_NS_20130402123904The country is in recession, and is still struggling to bring its budget deficit in line with the EU mandated maximum of 3 percent of gross domestic product.

Slovenia was the first former Yugoslav republic to join NATO and the EU, and was once hailed as a model for other former socialist European democracies seeking to establish competitive economies. But its rising standard of living appears to have been built-in part on bad credit.

Concerns that Ljubljana might soon request emergency aid were intensified on Tuesday by a report issued by the Organization for Economic Cooperation and Development (OECD). Noting the country’s economic struggles, rising sovereign debt and deeply troubled banking industry, the report noted that the country is at risk of a “prolonged downturn and constrained access to financial markets.”


In other words, Slovenia might soon be unable to borrow the money from the markets it needs to remain solvent.

The Slovenian government last week announced it would liquidate two small private banks, Factor Banka and Probanka, and would put up €1.3 billion to guarantee the banks’ liabilities.

The central bank governor said the measures were to help avoid a run on the country’s other banks.


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Filed under International Econnomic Politics, National Economic Politics

Credit; Cras Credemus

The investor sentiment in the European credit market suddenly changed on Monday afternoon. Whether it’s just another dead cat bouncing, or investors really see the situation improving, we will find out tomorrow as Greek Prime Minister George Papandreou face a vote of no confidence.

“The catalyst for the change in sentiment seemed to be the announcement that the potential lending capacity of the European Financial Stability Facility (EFSF) will be raised to EUR440 billion. “

Gavan Nolan

The markets expectations for the Eurogroup meeting culminating Monday was never particularly high, but it still proved a disappointment to many. Spreads opened this week wider when it became clear that the euro zone’s finance ministers would not be signing off on the next EUR 12 billion tranche of Greek aid. However, something changed during the trading session.

The Eurogroup confirmed that they would not disburse the funds until the Greek parliament had passed the latest austerity programme proposed by the government.

This wasn’t a surprise to many market participants – noises from the IMF and EU last week suggested this was likely to be the case.

“Nonetheless, the lack of movement and the immense pressure on the Greek government to deliver – prime minister George Papandreou face a no confidence vote tomorrow – was always going to weigh on risk assets,” credit analyst Gavan Nolan at Markit Credit Research writes in today’s Intraday Alert.

But it didn’t turn into a rout, and by late afternoon the market had recovered from the earlier widening.

Sovereigns were still underperforming but at the close the Markit iTraxx SovX Western Europe index was just 1 basis point wider at 223,5 bp’s.

The catalyst for the change in sentiment seemed to be the announcement that the potential lending capacity of the European Financial Stability Facility (EFSF) will be raised to EUR 440 billion, according to Markit Financial Information.

This will be achieved by increasing the amount of guarantees from euro zone member states to EUR 780 billion.

“The restricted lending capacity of the EFSF – due to the AAA rating requirement and the consequent overcollaterisation – has been an issue for the markets, and the fact that the authorities are at least putting measures in place for further bailouts will ease some near-term concerns,” Gavan Nolan writes.

Adding: “Also of importance was the related announcement that the European Stability Mechanism, which is to succeed the EFSF in 2013, will not enjoy preferred creditor status.”

Many though that the preferred status would make it more difficult for countries that tapped the facility to return to the private capital markets.

There was also uncertainty in the market over whether the legal subordination of existing bonds could trigger a credit event.

“Clarification on this issue is therefore to be welcomed,” Nolan comments.

Italy’s spreads were under pressure today after Moody’s placed the country’s Aa2 rating on review for downgrade late on Friday.

The agency highlighted Italy’s well known structural problems – low growth, low productivity and inflexible labour markets – as well as the dangers from the escalating euro zone debt crisis.

In contrast, Moody’s today upgraded Brazil’s rating one notch to Baa2, citing the government’s conservative fiscal policies.

The credit markets have reflected Brazil’s prudence for some time.

“Indeed, the Latin American sovereign has traded tighter than higher rated Italy for over a year,” Gavan Nolan at Markit concludes.

On the personal account, an old latin expression comes to mind;

Cras Credemus, Hodie Nihil – Tomorrow We Believe, But Not Today.

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Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics, Uncategorized

The Masters of Lies

The Austrian daily newspaper, Der Standard, describe the eurogroup chief, Jean-Claude Juncker a “master of lies”, in the aftermath of this weekends not-so-secret meeting between the top EU leaders. The newspaper also see Juncker’s handling of the whole farce as “a fatal error that multiplies the scepticism of the citizens.”

“Juncker and his Round Table should be reminded that it was the small states in May 2010 that made the rescue package for Greece possible in the end.”

Der Standard

EU leaders, with Jean-Claude Juncker in the middle at the back.

Criticism is now mounting against eurogroup chief Jean-Claude Juncker for lying about a secret meeting last Friday of selected EU finance ministers in his native country Luxembourg to discuss the worsening Greek debt situation.

A series of furious attacks on the chair of the group of EU states that use the single currency have appeared in the European press over the last 48 hours, arguing that Mr. Juncker can no longer be trusted.

Ministers and their spokespeople across the euro zone had first denied, or refused to comment, on a report which appeared in Spiegel Online revealing that a secret meeting of senior EU officials was being held in a Luxembourg castle to consider a Greek exit from the euro.

The same officials later confirmed that the meeting took place, but that Greece returning to the drachma was never on the table.

Juncker had apparently invited finance ministers from France, Germany, Spain, and Italy, ostensibly under the aegis of the EU members of the G20 (although the UK, a G20 member, was absent), along with Greece, the European Central Bank and Olli Rehn, the EU economy commissioner.

Juncker’s spokesman, Guy Schuller, was quoted by Reuters as saying:

“I totally deny that there is a meeting, these reports are totally wrong.”

This absurd event comes just a week after the Luxembourgh prime minister admitted the that over the course of his career, despite his Catholic upbringing, he often “had to lie” in order not to feed rumours and that economic policy was too important to be discussed in public. “I am for secret, dark debates,” he quipped, according to an EUobserver report.

German press agency DAPD quoted him as saying:

“When the going gets tough, you have to lie.”

On Monday, Austrian daily newspaper, Der Standard, attacked the Luxembourg prime minister calling him a “master of lies,” also complaining that Juncker had invited the larger EU states but not the likes of Austria or Finland and describined the move as “a fatal error that multiplies the scepticism of the citizens.”

“Juncker and his Round Table should be reminded that it was the small states in May 2010 that made the rescue package for Greece possible in the end,” the paper writes in an editorial.

Germany’s Suddeutsche Zeitung states that no one can believe what the EU leaders, particularly Juncker, says any more regarding the stability of the euro zone .

“Seldom have we seen politicians acting as irresponsibly as they did on Friday evening. In Berlin, Brussels, Paris, Rome and Luxembourg, officials were silent, deceptive or just plain lied,” the paper thundered.

“Within a matter of hours, the governments of the euro countries managed to fritter away the last remaining trust the people of Europe still have in the bailout action.”

“Who in the future is supposed to believe that Greece isn’t interested in leaving the euro zone if Luxembourg Prime Minister Jean-Claude Juncker, who heads the Euro Group, is taking the lead on the deception?” the German paper writes.

A frustrated European diplomat told EUobserver the handling of the meeting was “amateur.”

Adding: “What happened is silly. How is anyone going to trust what we say now?”

Meanwhile, Greek authorities are going after Spiegel Online for reporting “false news” about Greece considering withdrawal from the euro.

The Greek prosecutor has contacted German counterparts, requesting assistance in tracking down those responsible at Spiegel Online for the initial report.

On Wednesday, European Commission President Jose Manuel Barroso is to visit German Chancellor Angela Merkel to discuss the Greek conundrum and EU Council President Herman van Rompuy will also be dropping in on the German leader to consider the next steps in the crisis.

This meetings will not take place in secret in a Luxembourg castle, but in Berlin – and will be official – at least that’s what they say…

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Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics