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European Leaders Hail Accord on Banking Supervision

December 13, 2012 by NewsMaker Leave a Comment

The pact was hashed out in an all-night session of finance ministers that ended Thursday morning after France and Germany made significant compromises. Under the agreement, between 100 and 200 large banks in the euro zone will fall under the direct supervision of the European Central Bank.

A round of talks a week earlier broke up amid French-German discord over how many banks in the currency union should be covered by the new system.

In a concession to Germany, the finance ministers agreed that thousands of smaller banks would be primarily overseen by national regulators. But to satisfy the French, who wanted all euro zone banks to be held accountable, the E.C.B. would be able to take over supervision of any bank in the region at any time.

The agreement by the finance ministers, which still requires the approval of the European Parliament and some national parliaments including the German Bundestag, made it possible for E.U. leaders arriving here later Thursday to gather in a spirit unity.

“It’s a good day for Europe,” said François Hollande, the French president. “The crisis came from the banks, and mechanisms have been put in place that will mean nothing is as it was before.”

Angela Merkel, the German chancellor, said the agreement was “a big step toward more trust and confidence in the euro zone.” The summit meeting could now focus “on strengthening economic coordination” and “set out a road map for the coming months,” she added.

In another measure to shore up the euro, the finance ministers approved the release of nearly €50 billion, or $65 billion, in further aid to Greece, including long-delayed payments, support that is crucial for the government to avoid defaulting on its debts.

“Today is not only a new day for Greece, it is indeed a new day for Europe,” Antonis Samaras, the Greek prime minister, said ahead of the summit meeting.

But threatening to spoil the upbeat atmosphere were questions over the future leadership of Italy, where the economy is contracting, debt levels are rising, and Silvio Berlusconi, the former prime minister, has threatened to try to reclaim the office in an election next year.

It remained unclear Thursday whether Mr. Berlusconi would run and, if that were to happen, whether he would campaign on promises to reverse reforms put in place by Mario Monti, the current prime minister. Even so, the re-emergence of Mr. Berlusconi — who attended a summit meeting of center-right parties in Brussels on Thursday — could destabilize markets and even rekindle the financial crisis.

The bank supervision plan was first discussed in June and wrapped up in a matter of months — record time by the glacial standards of E.U. rulemaking. The agreement should serve as a springboard for leaders to weigh further steps toward economic integration during their meeting.

Such measures could include a unified system, and perhaps shared euro area resources, to ensure failing banks are closed in an orderly fashion. This could be followed, in time, by measures intended to reinforce economic and monetary union, including, possibly, the creation of a shared fund that could be used to shore up the economies of vulnerable members of the euro zone.

Mario Draghi, the president of the European Central Bank, said the agreement on banking supervision “marks an important step towards a stable economic and monetary union, and toward further European integration.” But he noted that governments and the European Commission still had to work on the details of the supervision mechanism.

The new system should be fully operational by March 2014, but ministers left the door open for the E.C.B. to push that date back if the central bank would “not be ready for exercising in full its tasks.”

A series of compromises were needed for finance ministers to reach agreement on banking supervision.

Article source: http://www.nytimes.com/2012/12/14/business/global/eu-leaders-hail-accord-on-banking-supervision.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: french president, german bundestag, night session

European Union Officials Accept Nobel Peace Prize

December 11, 2012 by NewsMaker Leave a Comment

The prize ceremony, held in Oslo’s City Hall and attended by 20 European leaders as well as Norway’s royal family, brought a rare respite from the gloom that has settled on the European Union since the Greek debt crisis exploded three years ago, unleashing doubt about the long-term viability of the euro and about an edifice of European institutions built up over more than half a century to promote an ever closer union.

Unemployment — now at over 25 percent in Greece and Spain — and sputtering economic growth across the 27-nation bloc are “putting the political bonds of our union to the test,” Herman Van Rompuy, president of the European Council, said in his acceptance speech. “If I can borrow the words of Abraham Lincoln at the time of another continental test, what is being assessed today is whether that union, or any union so conceived and so dedicated, can long endure.”

The European Union, said Mr. Van Rompuy, will “answer with our deeds, confident we will succeed.”

“We are working very hard to overcome the difficulties, to restore growth and jobs,” he continued.

Aside from economic misery, the most serious threat to the bloc so far is growing pressure in Britain for a referendum on whether to pull out of the union. The British prime minister, David Cameron, did not attend the ceremony, but most other European leaders showed up, including Chancellor Angela Merkel of Germany and the French president, François Hollande, who sat next to each other and whose countries, once bitter enemies, have been the main motors driving European integration.

Mr. Van Rompuy’s comparison of the European Union to the United States is likely to irritate critics of the European Union, who reject efforts to push European nations to surrender more sovereignty in pursuit of what champions of a federal European state hope will one day be a United States of Europe.

Just how far Europe is from such a goal, however, was made clear by the presence of three Union presidents in Oslo. In addition to Mr. Van Rompuy, whose European Council represents the leaders of the union’s member states, there was José Manuel Barroso, president of the European Commission, the bloc’s main administrative and policy-making arm, and Martin Schulz, president of the European Parliament.

Instead of the customary Nobel lecture delivered by the winner, Mr. Van Rompuy and Mr. Barroso each read parts of what Thorbjorn Jagland, chairman of the Norwegian Nobel Committee, described as “one speech but two chapters.”

Hailing the European Union for helping bring peace to Europe after repeated wars, Mr. Jagland said, “What this continent has achieved is truly fantastic, from being a continent of war to becoming a continent of peace.”

Mr. Barroso spoke of the horrors of past wars and tyranny and Europe’s efforts to overcome them through the building of supranational institutions, which began in 1951 with the establishment of the European Coal and Steel Community by France, Germany and four other countries. But he also cited the current conflict in Syria, describing it as a “stain on the world’s conscience” that other nations have “a moral duty” to address. The European Union’s member states are themselves divided about how far to go in supporting opponents of Bashar al-Assad, the Syrian president.

The decision to honor the European Union with the Nobel Peace Prize stirred widespread criticism in Norway, whose citizens have twice voted not to join the union. On the eve of Monday’s award ceremony, peace activists and supporters of left-wing political groups paraded through the streets of Oslo, carrying flaming torches and chanting, “The E.U. is not a worthy winner.”

Many peace activists say they have no problem with European integration but question whether the union has lived up to conditions laid down by Alfred Nobel, the 19th-century Swedish industrialist who bequeathed the peace prize and four other Nobel Prizes.

Article source: http://www.nytimes.com/2012/12/11/world/europe/european-union-officials-accept-nobel-peace-prize.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: european leaders, french president, political bonds

Merkel and Sarkozy Push Debt Restraint in Euro Zone

December 6, 2011 by NewsMaker Leave a Comment

Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, meeting here at the start of a crucial week that will end with a European Union summit meeting on Thursday and Friday, called for amendments to European treaties that would include centralized oversight over budgets and automatic sanctions against countries that violate firmer rules on deficits.

The changes are among the most sweeping proposed since European countries began coordinating their economic policies in the aftermath of World War II. They would effectively subordinate economic sovereignty to collective discipline enforced by European technocrats in Brussels.

“We want to make sure that the imbalances that led to the situation in the euro zone today cannot happen again,” Mr. Sarkozy told a joint news conference. “Therefore we want a new treaty, to make clear to the peoples of Europe that things cannot continue as they are.”

It is unclear if promises of future action will be enough to pacify markets, which have been testing the resolve of European leaders for months. They initially responded with relief on Monday, with stocks and the euro rising, but lost some of those gains after Standard Poor’s put 15 European nations on credit watch because of disagreements about how to tackle short-term and long-term threats to financial stability.

Mrs. Merkel, warmly embracing the French president despite their often testy relationship, insisted that the euro zone must be effectively re-established under a different set of rules. “We want structural changes that go beyond agreements,” she said. “We need binding debt brakes.”

By pressing for a new treaty the French and German leaders took big risks on two fronts. Their proposal threatens to divide the 17 European Union countries that use the euro from the 27 nations that are part of the larger European Union, some of which, like Britain, are likely to reject intrusive budget oversight from Brussels. And it remains uncertain how warmly national parliaments and voters even within the euro zone will embrace the changes.

The two leaders are aiming to develop a clear consensus among the other members of the euro zone that they will push ahead with a new treaty. They appear to be calculating that such a signal of solidarity will be enough to persuade the European Central Bank, the only institution in Europe with enough financial firepower to defend the ability of member states to raise money on bond markets, that it has enough political cover to move more aggressively to protect vulnerable countries like Italy and Spain.

Mrs. Merkel and Mr. Sarkozy did not directly address the role of the central bank, which operates independently. But many European analysts have concluded that the Germans, who have been among the most wary of an expanded role for the bank, will implicitly endorse a bolder intervention in the markets if European nations accept more intrusive rules.

Mr. Sarkozy said the Franco-German aim was to have treaty changes drafted and agreed upon by the end of March. But ratification will take longer. In France, for instance, Mr. Sarkozy will not try to ratify any treaty change until after legislative elections that finish on June 17. Even if he is re-elected president in May, not a sure thing, he may lose his majority in Parliament.

There is another crucial issue, too, which is the process of ratification. If Ireland decides that these changes are fundamental enough to be approved by referendum, it may slow matters further. Ireland rejected the last European treaty in a referendum, before European colleagues forced Dublin to vote again.

And it may be that voters are wary of “more Europe,” and that their growing disaffection has not been overtaken by their concerns over the fate of the euro.

The two leaders, to reach a joint position, did some bargaining on Monday. Mrs. Merkel wanted oversight of national budgets to be exercised by Brussels, with the European Court of Justice the ultimate arbiter, with the power to veto budgets and send them back to national parliaments to review. Mr. Sarkozy, the political inheritor of Gaullism, did not want to give any supranational body that much authority over an elected national parliament, a view shared by other countries, too.

Stephen Castle contributed reporting from Brussels.

Article source: http://www.nytimes.com/2011/12/06/world/europe/leaders-piece-together-an-effort-to-keep-the-euro-intact.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: euro zone, european treaties, french president

French-German Proposal for Europe Emerges Before a Meeting on Greece

July 24, 2011 by NewsMaker Leave a Comment

Details of the agreement were not disclosed.

Released by the office of the French president, Nicolas Sarkozy, the statement said he and Chancellor Angela Merkel of Germany had reached an agreement they presented to Herman Van Rompuy, president of the European Council, for consideration.

The leaders of the 17 member countries of the euro zone are to meet in Brussels to try to keep the debt crisis from spiraling out of control after a week of market turbulence in which borrowing costs spiked in Italy and Spain.

Many see the meeting as a moment of truth, particularly for Mrs. Merkel, whose caution has been blamed by some for the region’s failure to stem the crisis, and who, earlier this week, played down expectations of a breakthrough on Thursday.

“Nobody should be under any illusion: the situation is very serious,” José Manuel Barroso, president of the European Commission, the executive arm of the European Union, said earlier in the day. “It requires a response. Otherwise the negative consequences will be felt in all corners of Europe and beyond.”

The commission was arguing for a plan that would have private creditors swap Greek bonds that mature before 2019 for new 30-year bonds, thereby prompting a selective default, according to an official briefed on the negotiations who was not authorized to speak publicly.

The terms of the plan would imply a 20 percent reduction in the value of Greek bonds, the official said, a change that would raise tens of billions of euros to be directed to support the Greek bailout.

In addition, the other countries in the euro area and the International Monetary Fund would contribute 71 billion euros, or $100 billion, to the rescue plan, up to 2014.

Meanwhile, a tax on the banks equivalent to 0.025 percent of the assets of financial institutions could raise around 50 billion euros over five years and would finance a buyback of Greek bonds via the euro zone bailout fund known as the European Financial Stability Facility, the official said. That would reduce the stock of Greek debt by around 20 percentage points of gross domestic product.

Although a tax on banks has been discussed for several days, it had previously been presented as a tool for raising private sector financing without provoking a default, rather than a means of raising additional money. There are also technical problems with a bank tax that would have to be levied by each national government and would exclude countries that did not use the euro even if they had Greek liabilities.

With its willingness to contemplate selective default and ambitious targets for raising cash from the private sector, the European Commission proposal seems to be intended to appeal to Germany, which has consistently called for banks to take a substantial part of the loss.

Germany, Finland and the Netherlands are at odds with the European Central Bank and some governments over their insistence that private bondholders share the pain. Besides concerns over contagion, the central bank has said that a selective default would make it impossible to accept Greek bonds as collateral. That may require measures to ensure that liquidity still flows to Greek banks, the official said.

Officials said it was unclear whether the plan floated by the commission would be accepted by Berlin and Paris and other governments.

One element attracting consensus is the need to reduce the burden on indebted nations, not only by buying back Greek bonds but also through a reduction in the interest rates offered to Greece, Ireland and Portugal, which have also accepted international help. The maturities of these loans would also be extended.

The European Financial Stability Facility looks destined to gain a more important role, financing the buyback of bonds, and possibly the extension of credit lines or help in bank recapitalization.

“For the federal government, the participation of private investors is of immense value and is our aim,” Steffen Seibert, the German government spokesman said on Wednesday. “We are very confident that there will be a good and sensible solution,” he said in Berlin.

Economists said that a debt buyback would have other consequences.

If the program were voluntary, some investors might not participate, hoping that market prices for Greek debt would rise. So the buyback would have to be compulsory — a default, in other words — for Greece to get the debt reduction it needed, said Harald Benink, a professor of banking at Tilburg University in the Netherlands.

In addition, Greek banks would need to be bailed out because they have such large holdings of domestic debt. Portugal and Ireland might need a similar buyback deal to protect them from market attacks. The European Central Bank might need to be compensated for losses on its holdings of Greek debt.

And the European Union would have to substantially increase the size of the stability fund to show markets it is ready to protect Spain and Italy, Mr. Benink said.

“That requires a lot of political willingness and ability,” he said. “The worry is that these political leaders will have to drive at a much faster speed than their voters will allow them.”

Judy Dempsey reported from Berlin. Jack Ewing in Frankfurt and Matthew Saltmarsh in London contributed reporting.

This article has been revised to reflect the following correction:

Correction: July 22, 2011

An article on Thursday about efforts to negotiate a rescue plan for Greece paraphrased incorrectly, in some editions, from a statement by the French president, Nicolas Sarkozy, about the progress of talks. Mr. Sarkozy said that Germany and France had agreed on a plan to be presented to a summit meeting; he did not say that the plan would include the participation of Europe’s banking sector. The article also misspelled part of the surname of the president of the European Council, who received the agreement. He is Herman Van Rompuy, not Van Rumpuy.

Article source: http://feeds.nytimes.com/click.phdo?i=bc36992b2916064007266692bfbc8db4

Filed Under: Economy News Tagged With: chancellor angela merkel, french president, nicolas sarkozy

Hints of a Bank Plan for Europe Before a Meeting on Greece

July 21, 2011 by NewsMaker Leave a Comment

Details of the agreement were not disclosed, but the statement said it would include participation of Europe’s banking sector.

Released by the office of the French president, Nicolas Sarkozy, the statement said he and Chancellor Angela Merkel of Germany had reached an agreement they presented to Herman Van Rumpuy, president of the European Council, for consideration.