January 26, 2020

Germany’s Merkel Again Rules Out Rapid Action on Euro

“Nothing has changed in my position,” she said at a news conference with Prime Minister Mario Monti of Italy and the French president, Nicolas Sarkozy, in Strasbourg, in eastern France.

But with signs of spreading contagion — a weak bond sale on Wednesday in Germany that lifted rates there, rates on sovereign debt rising to unsustainable levels in Italy and Spain, and interbank lending in Europe beginning to dry up — questions remained about just how long Germany can resist the persistent calls for action.

The German newspaper Bild reported Thursday that the Merkel government was inching toward accepting so-called euro bonds, at least in some form, even if the public stance remained against them, and that some of her party said there could be a trade-off for treaty changes. “We aren’t saying never,” Norbert Barthle, a legislator from her coalition, told journalists. “We’re just saying no euro bonds under the current conditions.”

That could be some time. France and Germany say euro bonds will make sense only down the road, when there is more convergence and growth, and when Paris and Berlin will not be on the hook for all the other weaker economies. France, however, wants to use the European Central Bank more aggressively to backstop vulnerable euro zone economies while they reform themselves.

Mrs. Merkel and other German officials fear that giving in to the calls for collective bonds or using the European Central Bank as a lender of last resort will ease pressure on the debtor nations, allowing them to avert the drastic structural changes that Berlin says that they need to make to become competitive, while making Germany and other creditors liable for their debts.

There was no hint of any softening from Mrs. Merkel after the leaders of the three largest economies in the euro zone met Thursday to try to reassure the markets about the future of the currency, vowing to work together on German-inspired treaty changes to promote more economic discipline and convergence.

Those treaty changes, which could take years to draft, ratify and put in effect, will have little impact on the current market anxiety over the euro, which has seen the interest rates on Italian, Spanish and French bonds rise sharply over German ones, and a growing distaste among investors even for the previously rock-solid German bonds.

The three leaders finished their luncheon meeting in Strasbourg by expressing confidence that the independent central bank would do the right thing for the currency, presumably continuing to buy enough bonds to keep the interest rates on European sovereign debt from becoming unsustainable.

“We all stated our confidence in the European Central Bank and its leaders, and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it,” Mr. Sarkozy told the news conference.

But Mr. Sarkozy’s frustration with German intransigence was evident. “I am trying,” Mr. Sarkozy said, “to understand Germany’s red lines.”

Mr. Sarkozy, who has been pressuring Berlin to let the bank act more decisively to support Italy and Spain and halt a rush out of euro zone bonds and banks, said that joint proposals to modify European Union treaties would be presented ahead of a summit meeting on Dec. 9. The modifications, sought by Germany but supported by France, would allow the European Union greater oversight of national budgets and statistics, create debt limits for governments and try to create more convergence on policies like pension ages and tax levels.

But Mrs. Merkel made it clear that any new treaty changes would not touch the charter of the central bank.

The markets were predictably disappointed with the German position. The yield on Italian 10-year bonds, the broad cost of government borrowing, crept back above 7 percent on Thursday as European stocks fell for a sixth day. The markets were also affected by remarks from the chief economist of the Organization for Economic Cooperation and Development, Pier Carlo Padoan, who warned in an interview with the newspaper La Stampa that while a euro-zone recession could still be avoided, forthcoming forecasts showed “declining and very weak growth.”

Steven Erlanger reported from Paris, and Nicholas Kulish from Berlin.

Article source: http://www.nytimes.com/2011/11/25/world/europe/merkel-rejects-rapid-action-on-the-euro.html?partner=rss&emc=rss

Merkel Rejects Rapid Action on the Euro

“Nothing has changed in my position,” she said at a news conference with Italian Prime Minister Mario Monti and French President Nicolas Sarkozy in Strasbourg, in eastern France.

But with signs of spreading contagion — a weak bond sale Wednesday in Germany that lifted rates there, rates on sovereign debt rising to unsustainable levels in Italy and Spain and interbank lending in Europe beginning to dry up — questions remained about just how long Germany can resist the persistent calls for action.

The German newspaper Bild reported Thursday that the Merkel government was inching towards accepting so-called eurobonds, at least in some form, even if the public stance remained against them, and that some of her party said they could be a tradeoff for treaty changes. “We aren’t saying never,” Norbert Barthle, a legislator from her coalition told journalists. “We’re just saying no eurobonds under the current conditions.”

That could be some time. France and Germany say eurobonds would make sense only down the road, when there is more convergence and growth, and Paris and Berlin will not be on the hook for all the other weaker economies. France, however, wants to use the European Central Bank more aggressively to backstop vulnerable euro zone economies while they reform themselves.

Mrs. Merkel and other German officials fear that giving in to the calls for collective bonds or to use the European Central Bank as a lender of last resort will ease pressure on the debtor nations, allowing them to avert the drastic structural changes that Berlin says they need to make to become competitive, while making Germany and other creditors liable for their debts.

There was no hint of any softening from Mrs. Merkel after the leaders of the three largest economies in the euro zone met Thursday to try to reassure the markets about the future of the currency, vowing to work together on German-inspired treaty changes to promote more economic discipline and convergence.

Those treaty changes, which could take years to draft, ratify and implement, will have little impact on the current market anxiety over the euro, which has seen the interest rates on Italian, Spanish and French bonds rise sharply over German ones, and a growing distaste among investors even for the previously rock solid German bonds.

The three leaders finished their luncheon meeting in Strasbourg by expressing confidence that the independent central bank would do the right thing for the currency, presumably continuing to buy enough bonds to keep the interest rates on European sovereign debt from becoming unsustainable.

“We all stated our confidence in the European Central Bank and its leaders, and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it,” Mr. Sarkozy told the news conference.

But Mr. Sarkozy’s frustration with German intransigence was evident. “I am trying,” Mr. Sarkozy said, “to understand Germany’s red lines.”

Mr. Sarkozy, who has been pressuring Berlin to let the bank act more decisively to support Italy and Spain and halt a rush out of euro zone bonds and banks, said that joint proposals to modify European Union treaties would be presented ahead of a summit on Dec. 9. The modifications, sought by Germany but supported by France, would allow more Brussels greater oversight of national budgets and statistics, create debt limits for governments and attempt to create more convergence over matters like pension ages and tax levels.

But Mrs. Merkel made it clear that any new treaty changes would not touch the charter of the central bank.

The markets were predictably disappointed with the German position. The yield on Italian 10-year bonds, the broad cost of government borrowing, crept back above 7 percent on Thursday as European stocks fell for a sixth day. The markets were also affected by remarks from the chief economist of the Organization for Economic Cooperation and Development, Pier Carlo Padoan, who warned in an interview with La Stampa newspaper that while a euro zone recession could still be avoided, forthcoming forecasts showed “declining and very weak growth.”

Steven Erlanger reported from Paris and Nicholas Kulish from Berlin.

Article source: http://www.nytimes.com/2011/11/25/world/europe/merkel-rejects-rapid-action-on-the-euro.html?partner=rss&emc=rss

In Her First Week at the I.M.F., a New Leader Stresses Diversity and Respect

On Tuesday, she met at the fund’s headquarters in Washington with employees still shaken by the abrupt resignation of her predecessor, Dominique Strauss-Kahn, after he was charged with the sexual assault of a hotel maid. On Friday, she holds her first board meeting to consider another round of emergency financing for Greece.

“I thought it was necessary to come back to D.C. very promptly simply because there are so many issues to address,” Ms. Lagarde said by way of introduction at her first official news conference. “It cannot wait for another summer holiday. Here I am, and for good.”

When Ms. Lagarde last met with reporters here, during the fund’s annual spring meetings, she made a point of speaking mostly in French. On Wednesday, settling into her new international role, she spoke in English even when addressed in French.

She mostly dodged questions about Greece, saying that she would not prefigure Friday’s meeting, but she did provide a measure of her thinking on the fund’s mission and priorities.

Mr. Strauss-Kahn, a member of the Socialist Party in France, expanded the fund’s focus on financial stability to include broader goals like reduced unemployment. He argued that the benefits of prosperity did not necessarily flow to the broader populace.

Ms. Lagarde, by contrast, is a political conservative. She said that she needed time to study the fund’s policies before offering her own opinions. But she sounded a note of caution, saying that she supported a move toward “comprehensive” measures of efficacy, but that the fund “should not become a specialized boutique to reduce unemployment.”

The fund was created by the United States and its allies after World War II as a lender of last resort for troubled governments. Since that time it has always been run by a European, though the United States maintains effective control.

Ms. Lagarde campaigned to replace Mr. Strauss-Kahn largely on the strength of Europe’s determination to maintain that leadership. But her victory required the support of emerging economies, who want to play a larger role. Ms. Lagarde indicated Wednesday that she was likely to expand the number of her deputies to four from three to make room for the elevation of a Chinese official at the fund, Min Zhu.

Ms. Lagarde also said during her campaign that a female executive would be an advantage for the fund, reducing what she described as the testosterone level.

Mr. Strauss-Kahn was allowed to remain atop the fund after the disclosure of an affair in 2008 with a subordinate, a decision that some considered a mistake.

A number of women have come forward in recent months to describe the fund as a problematic workplace, where some superiors felt free to press subordinates for dates and little effort was made to prevent or to punish sexual harassment. Officials at the fund have disputed their characterizations, and a group of several hundred female employees signed a public letter defending the fund as a workplace.

On Wednesday, Ms. Lagarde said that increasing the diversity of the fund’s staff would be a priority. “Together with diversity comes respect for everybody,” Ms. Lagarde said, “and it’s been the case in the past that people have been respected and I will make sure that they continue to be respected no matter what their differences are.”

The fund has made a number of recent changes to improve its workplace culture, including instituting a more restrictive policy on relationships with subordinates. Ms. Lagarde’s contract includes a new injunction, “You shall strive to avoid even the appearance of impropriety.” And Ms. Lagarde noted Wednesday that she would soon attend a new ethics program now required for all employees.

She will make $467,940 in her new job, plus a stipend of $83,760, all of it untaxed.

Article source: http://www.nytimes.com/2011/07/07/business/in-first-week-on-the-job-lagarde-stresses-diversity.html?partner=rss&emc=rss