October 26, 2020

Merkel Plays to Germans as She Jousts With Europe

Ms. Merkel, 58 and in power since 2005, will seek a third four-year term in national elections on Sept. 22. Until then, she wants to avoid rocking the boat with voters, who give her popularity ratings in the 60 percent to 70 percent range and seem quite content with the give-and-take, muddling-through approach she has adopted in the protracted euro crisis, often to the consternation of financial markets.

Whether she is shadowboxing with the financial markets or engaged in direct spats with the leaders of Russia and Turkey, as she was this month, Ms. Merkel likes Germany to get the last word.

That was well illustrated early Thursday, after hours of haggling in Brussels over the latest compromise on banking. The bargain struck by European finance ministers required shareholders and creditors to take losses when banks collapse, with states and taxpayers stepping up only later. But because Germany still opposes any plan making its taxpayers liable for the losses of foreign banks, it stopped well short of the kind of debt sharing that markets have urged on Ms. Merkel and her country since the crisis erupted three years ago.

Martin Lück, an economist at UBS in Frankfurt, said that in Berlin’s political circles, people are more responsive to the German Parliament. “We know what the financial markets expect of us — but we are not elected by them,” is the view, he said, adding that officials cite the high popularity ratings for Ms. Merkel and her finance minister, Wolfgang Schäuble.

As if to underscore her dominance, Ms. Merkel displayed fighting form in Parliament on Thursday, before the Brussels summit meeting. As forceful as she gets, at least in public, she insisted to warm applause from her conservative deputies that Germany had shown over the past four years that “we can do both — growth and fiscal consolidation.” She rebuffed attacks from Peer Steinbrück, her Social Democratic challenger in September who is currently floundering in the polls and has accused her of causing mass unemployment.

Ms. Merkel, once famed for an austerity course she now insists was never her sole aim, has softened of late, particularly when it comes to those millions of jobless young people. Conscious that around 7.5 percent of those under 25 are unemployed in Germany — compared with 62.5 percent for Greece, 56.4 percent for Spain, and around 40 percent for Portugal and Italy — she went out of her way on Thursday to express sympathy.

“They are owed,” she told Parliament ahead of hosting a meeting on jobless youth in Europe next week, especially because they bear “no blame for the mistakes of past years.”

That put the issue squarely where Ms. Merkel seems to want it — in the backyards of other European governments. Still, even there she dodged and weaved, noting for instance that she and President François Hollande of France would be presenting joint proposals on Thursday and Friday in Brussels, never mind recent evidence of coolness in the French-German partnership.

It all suggests, said Josef Janning of the German Council on Foreign Relations, that before Sept. 22, “nothing should happen which could endanger the election success of Ms. Merkel.” Her strategy, he added, is simply “to unsettle the Germans as little as possible.”

Holger Schmieding, chief economist at Berenberg Bank, noted that this policy, if successful, would change little after the German vote. In part that is because Germany and Europe know what to expect of each other, and in part because Ms. Merkel’s course finds such broad consensus at home.

Even if Mr. Steinbrück unexpectedly won, Mr. Schmieding said, he served as finance minister in Ms. Merkel’s first coalition government and would be unlikely to change tack.

Article source: http://www.nytimes.com/2013/06/28/world/europe/merkel-plays-to-germans-as-she-jousts-with-europe.html?partner=rss&emc=rss

European Finance Ministers Call Off Pre-Summit Meeting

With less than 24 hours before the summit meeting of government chiefs in Brussels, banking representatives and European officials were locked in negotiation over what losses banks should accept.  

The banks have taken a hard line and warned that the write-off of debts they are being asked to accept — of about 55 percent — could result in a default or similar shock to the financial system, something European officials are desperate to avert. That has prompted a search for so-called complementary measures which might help to sweeten the deal for the bankers.

Italy, meanwhile, has come increasingly under the spotlight as investors doubt the government’s commitment to reduce curb the country’s 1.9 trillion euro, or $2.6 trillion, debt.

European Union leaders want the Italian prime minister, Silvio Berlusconi, to present firm plans on growth and debt reduction in time for the meeting.

Italian news agencies reported late Tuesday that  Mr. Berlusconi had reached an accord with the Northern League,  his principal coalition partner. The league’s leader, Umberto Bossi, said earlier in the day that Mr. Berlusconi’s government could  fall over the issue of raising the standard retirement age to 67 from 65, a move Mr. Bossi opposed.

With the clock ticking, a senior German official, Jörg Asmussen, and a French counterpart, Ramon Fernandez, joined intensive discussions with the banks in Brussels.

Under one of about five plans being debated, Greek bonds might be swapped for those of much lower face value issued by the euro zone’s bailout fund, according to two officials briefed on talks, who added that the idea might make a write-down more attractive for the banks.

The Institute of International Finance, which represents the banks involved, intends to send its own proposal to European leaders on Wednesday, according to a person with direct knowledge of the negotiations. That would involve banks taking more than the 21 percent loss they had agreed to in July, in exchange for sweeteners that would help mitigate some of the additional loss, such as allowing banks to buy bonds from the bailout fund.

“It’s clear that circumstances have changed too much for the July 21 agreement to work at this point,” said the person, who spoke on condition of anonymity because the discussions are ongoing. “We are prepared to adjust to new circumstances within limits. The question is are the governments prepared to meet us halfway.”

Adding to the mood of anxiety, a meeting of E.U. finance ministers on Wednesday, which was to precede the second gathering in a week of European leaders, was abruptly canceled on Tuesday by the Polish government, which holds the bloc’s rotating presidency.

Though that was a recognition that the deal with the banks will not be ready by Wednesday morning, it did not mean that agreement was impossible later in the day, when the leaders meet, diplomats and officials said.

The summit meeting will still take place and “work on the comprehensive package of measures to curb the sovereign debt crisis” will continue there, the Polish statement said.

Those measures include a recapitalization of European banks and an expansion of the firepower of the euro zone’s 440 billion euro bailout fund, probably to more than 1 trillion euros. This will likely be achieved through two methods that are likely to run alongside each other.

The rescue fund, known as the European Financial Stability Facility, is expected to offer insurance against a portion of the losses on bond purchases. A separate mechanism is expected to be set up to purchase bonds, drawing in funds from the International Monetary Fund and other investors from the emerging world.

Though France is reluctant to bring other powers, like China, into the heart of the euro zone, it will probably have to overcome its reservations because of the gravity of the situation.

Jack Ewing reported from Frankfurt. Liz Alderman contributed reporting from Paris and Elisabetta Povoledo contributed reporting from Rome.

Article source: http://www.nytimes.com/2011/10/26/business/global/european-finance-ministers-call-off-pre-summit-meeting.html?partner=rss&emc=rss

From Europe, Mounting Pressure Over Greece’s Debt

The announcement could portend yet another restructuring of Greek debt to stave off a default. A stopgap bailout plan announced on July 21 has yet to be approved by all 17 nations that share the euro currency, and in recent weeks a renewed sense of crisis has engulfed the euro region.

In the latest sign of turmoil, Italy — the euro region’s most indebted member, after Greece — was forced to pay record-high interest rates in order to complete an auction of its five-year bonds on Tuesday, despite continuing purchases by the European Central Bank. Spain, which plans a bond sale on Wednesday, could be subjected to similar investor wariness.

Plans were clearly being laid Tuesday for a serious conversation with Mr. Papandreou. His government has proved incapable so far of making the kinds of legal changes and budget cuts in the middle of a deep recession that Athens has promised its European partners and the International Monetary Fund.

France, where shares of the biggest banks have plummeted recently on fears of exposure to Greece’s debt, is pressing for a stronger signal from Germany that Europe will act to resolve the Greek matter before it spreads further contagion.

Despite the stepped-up pace of economic diplomacy, Europe’s response to the debt crisis still appeared to be behind the curve. That was underscored by the announcement that Timothy F. Geithner, the United States Treasury secretary, will make a rare appearance at an informal meeting of European finance ministers to be held Friday in Wroclaw, Poland. The trip will be Mr. Geithner’s second across the Atlantic in a week, following the Group of 7 session in Marseille, France, last weekend.

“Clearly the U.S. Treasury is disappointed with the direction of the European debt crisis and is looking for action, before further sections of the banking system are drawn in and a global financial crisis is revisited,” Chris Turner and Tom Levinson, strategists at ING, said in a research note.

Growing concern in Washington about the euro crisis and the damage it is doing to the markets and the global economy was also expressed by President Obama, meeting with Spanish-speaking journalists in Washington.

Mr. Obama urged European leaders to step up their efforts. “In the end the big countries in Europe, the leaders in Europe, must meet and take a decision on how to coordinate monetary integration with more effective coordinated fiscal policy,” Mr. Obama said, according to the Spanish news agency EFE.

Mr. Sarkozy met Tuesday evening at the Élysée Palace with Herman Van Rompuy, the president of the 27-nation European Council, to discuss the euro crisis, but neither man spoke afterward to the press. Mr. Van Rompuy has been asked by Germany and France to head a similar council of the 17 euro zone nations.

France and Germany are pressing to put into place the decisions made at the last euro zone summit meeting on July 21, which called for raising the total bailout fund to 440 billion euros ($598 billion). Germany, whose participation would be the most crucial financially and politically, is among the many countries that have yet to ratify that agreement.

Mrs. Merkel, who is working to win a ratification vote in the Parliament this month, said on Tuesday that Germany would ensure there would be no “uncontrolled default” of Greece that could pull down the euro zone. An uncontrolled default would be the equivalent of Greece’s simply walking away from its debts, whatever the consequences, rather than undergoing the equivalent of supervised bankruptcy proceedings.

“It is our top priority to avoid an uncontrolled default,” Mrs. Merkel said, “because it would hit not only Greece. The danger would be very high that it would hit many other countries.”

Mrs. Merkel’s mention of default was significant, because there is increasing skepticism that even the second bailout of Greece would be enough to bring it to a sustainable level of debt.

The Dutch finance minister, Jan Kees de Jager, said on Tuesday that he was studying the possible consequences of a Greek default.

“We’re currently preparing for many scenarios and possible shock effects,” Mr. De Jager said in an interview with the broadcaster RTLZ. He declined to comment when asked whether euro zone officials were preparing for a default of Greece.

Reporting was contributed by Nicholas Kulish and Judy Dempsey in Berlin, Matthew Saltmarsh in London, Elisabetta Povoledo in Rome and Graham Bowley in New York.

Article source: http://feeds.nytimes.com/click.phdo?i=320f941de9b29b256dfc8e89dc53497a

World Markets Dogged by Recovery Fears

LONDON (AP) — Worries over the state of the global economic recovery weighed on stock markets Monday but the euro managed to claw back some lost ground despite the weekend arrest of Dominique Strauss-Kahn, the head of the International Monetary Fund.

Strauss-Kahn’s arrest in New York on charges he sexually assaulted a hotel maid had weighed on Europe’s single currency as trading got under way in Asia, but investors soon concluded that it was unlikely to affect a meeting of European finance ministers in Brussels later.

Strauss-Kahn had been scheduled to join the meeting to put the finishing touches to a euro78 billion ($111 billion) bailout of Portugal. The ministers will also consider Greece’s economic plight and whether to extend it any more help.

By early afternoon London time, the euro was trading 0.3 percent higher at $1.4119. Earlier, it had fallen as far as $1.4046, its lowest level since March 29.

Stock markets were faring much worse.

In Europe, the FTSE 100 index of leading shares was down 0.9 percent at 5,873 while Germany’s DAX fell 1.3 percent to 7,307. The CAC-40 in France was 1.5 percent lower at 3,961.

Wall Street was poised for a lower opening, too — Dow futures fell 0.4 percent at 12,507 while the broader Standard Poor’s 500 futures fell an equivalent rate to 1,328.

Doubts about the strength of economic recovery, particular in the U.S., have weighed on markets in the past couple of weeks after they enjoyed their best first quarter since 1998.

The Standard and Poor’s 500 stock index, a broad market benchmark, is up just 1 percent this quarter after jumping 5.4 percent in the first three months of the year. That weaker performance is in large part because of conflicting data about the health of the U.S. economy.

Investors will be closely monitoring a speech from U.S. Federal Reserve chairman Ben Bernanke.

“Bernanke’s comments on the outlook for the U.S. economy will be meticulously scrutinized early this afternoon, as will sales updates from a number of U.S. retailers,” said Ben Critchley, a sales trader at IG Index. “At present Friday’s sell-off across the Atlantic is set to continue.”

Earlier in Asia, Japan’s Nikkei 225 index dropped 0.9 percent to close at 9,558.30 with banking shares incurring losses following comments last week by Chief Cabinet Secretary Yukio Edano suggesting that Tokyo Electric Power Co. will need help repaying its debts in the wake of March’s devastating earthquake and tsunami.

South Korea’s Kospi lost 0.8 percent to 2,104.18, and Hong Kong’s Hang Seng shed 1.4 percent to 22,960.63.

Mainland Chinese shares lost ground Monday following the latest increase in the central bank’s reserve requirement for banks, which was announced Friday. The benchmark Shanghai Composite Index lost 0.8 percent to 2,849.07 and the Shenzhen Composite Index of China’s smaller, second exchange lost 0.2 percent to 1,198.72.

Commodities have been badly hit recently by fears over the global recovery and oil prices took another dive Monday.

Benchmark crude for June delivery was down $1.72 to $97.93 a barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

Article source: http://www.nytimes.com/aponline/2011/05/15/business/AP-World-Markets.html?partner=rss&emc=rss