Plus ça change...

by afew Mon Jul 9th, 2012 at 03:04:35 AM EST

If this is true...

Ministers seek to untangle measures to help euro | Reuters

The ESM is due to start operating during the European summer, but at least for now, countries will need to provide guarantees in return for bank aid it gives, according to one euro zone official who is involved in preparing the Euro group.
That might help overcome German concerns about the ESM taking on this risk.
"There is some degree of mystification going on here ... in the broader public who think that under current rules the ESM could all of a sudden end up owning Bankia with the full risk of Bankia on the balance sheet of the ESM," he said, referring to the Spanish lender. "This is very much not the case."

The ESM is to be used to separate banks from sovereigns, except that it isn't?

Comment from Eurointelligence:

It is preposterous to argue that the fault lies with the broader public as he suggests. It was a deliberate misrepresentation of a policy by the European Council. If this official is right, it means that the ESM will not ever inject capital into the banks. Now it all makes sense why we don’t need a treaty change. If you don’t change the policy, you don’t need to change the treaty.

Slick? Duplicitous? FUBAR? Or is the official talking out of his official orifice?

Poll

Votes: 6
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Plus ça change... | 33 comments (33 topical, 0 editorial, 0 hidden)

Re: Plus ça change... (none / 0)

Well, I guess it depends on the sort of "guarantees" that the sovereigns are providing, doesn't it ?

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Jul 9th, 2012 at 03:18:05 AM EST

Re: Plus ça change... (4.00 / 3)

Let's not forget what the Council Conclusions actally said: EURO AREA SUMMIT STATEMENT [PDF] - 29 June 2012 -

* We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. ...

That's how the document started. Have we been had? Sunt Pacta Servanda?

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 03:46:49 AM EST

Re: Plus ça change... (4.00 / 2)

We've been had.

But more to the point, they should realise that this will restart the crisis psychology all over again. Since they are ditching severing the link between banks and sovereigns, the sovereigns will come under renewed attack - probably starting with Spain.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 9th, 2012 at 04:30:56 AM EST
[ Parent ]

Re: Plus ça change... (none / 0)

afew quotes the evidence for this from Eurointelligence below...

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 9th, 2012 at 04:31:57 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

They should realise they're undermining the credibility of the Council itself. Its conclusions are not worth the paper the PDFs are not printed on.

But they won't realise anything. I wonder what they think they're doing.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 04:35:18 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

Right - bad wording on my part.

I hope that when the attack on Spain intensifies, they realise that this set of misinformation gained them 3 days of relative calm at the cost of their credibility.

But, as you say, if they haven't realised anything is wrong with their approach so far, why would this time be different?

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 9th, 2012 at 04:49:34 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

Hope springs eternal...

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 04:51:12 AM EST
[ Parent ]

Re: Plus ça change... (4.00 / 6)

Hm, lets see.

(A) the Council is unified and this was either (I) a boop-up or (II) a sinister move.

(B) the council is not unified (in effect a power-struggle is going on) and (I) the power has shifted since the decision or (II) whoever has the microphone claims their version to be true.

I would say B(II) is the case, mostly based on the anonymity of the eurozone official.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Mon Jul 9th, 2012 at 06:27:06 AM EST
[ Parent ]

Re: Plus ça change... (4.00 / 5)

(C) The council doesn't have the power to do anything but they need to put out a statement, so they do. Then the Commission or the ECB remind everyone that what the Council proposed cannot be achieved without treaty change, and the Council members are not willing to push before their electorates the policies they agreed to for their statement.

There was a revealing anecdote about the June 29 council meeting. Van Rompuy had scheduled two press conferences, a 7pm and at 10-11 pm. The first one was supposed to be about announcing the "growth compact". As Monti was blockading the growth compact with the banking issue 7pm came around and van Rompuy got up to give his press conference. Monti stopped him cold with "where do you think you're going?". Then at 10pm they decided he had to go out and give a progress report. He asked "what do I tell them?" and Hollande said "the truth", so van Rompuy had to come out and say that two countries were holding back the agreement on the growth compact.

The Council is the most dysfunctional institution in the EU. It's possibly worse than useless.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 07:02:53 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

It would seem that the purpose of the Council is to prevent the EU - that it is the antithesis of the dream of a functioning EU executive.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 9th, 2012 at 07:36:28 AM EST
[ Parent ]

Re: Plus ça change... (4.00 / 3)

Quite.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 09:08:43 AM EST
[ Parent ]

whoever has the microphone ... (4.00 / 3)

@SonyKapoor

"@SpiegelPeter: EU Commission briefing direct bank recaps will NOT need sovereign guarantees. Direct contradiction from earlier guidance."

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 07:10:52 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

Lot of "when"s, "could"s, and "possibility"s in there.

by tjbuff (timhess@adelphia.net) on Mon Jul 9th, 2012 at 10:28:16 AM EST
[ Parent ]

Re: Plus ça change... (none / 0)

Shorter Council:

We affirm that it is imperative to break the vicious circle between banks and sovereigns. Waffle waffle, if, but, maybe, possibly, could, yatta yatta bing bing

Good job, guys.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 10:32:29 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

They're running out of road. No matter how Serious they are...
The market has a better nose for BS than The Serious Ones have talent to produce it and declare it smells like roses.
So the kabuki continues... Anything rather than admit the banks' little gambling problem and resultant insolvency. For that would be to admit that their God Is Dead, and they are Zombies.
Prediction: the € will implode this autumn, collapsing under the strain of its baked-in contradictions.
Draghi will deliver the euthanasia.

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Mon Jul 9th, 2012 at 02:09:28 PM EST
[ Parent ]

Re: Plus ça change... (3.67 / 3)

Prediction: the € will implode this autumn, collapsing under the strain of its baked-in contradictions.
Draghi will deliver the euthanasia.

No, the ECB will not commit suicide as an institution.

More likely Germany or some other surplus country will quit the Euro. I'd put my money on the Netherlands, actually, rather than Germany.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 02:30:07 PM EST
[ Parent ]

Re: Plus ça change... (4.00 / 2)

This might be a good time to resurrect Le Monde last summer's political fiction series, after all...

Berlin gets ready to leave the euro | Presseurop (English)

On the night of his re-election, Nicolas Sarkozy learns that Angela Merkel is about to be overthrown by a faction in her party that wants to leave the euro. A short time later, Germany's constitutional court invalidates the euro stability mechanism. In this political fiction, Le Monde examines a possible scenario -- which may be more likely than it seems -- for the end of the single currency.

OK, with a couple of different twists here and there...

Europeans think a hundred miles is a long way. Americans think a hundred years is a long time.

by Bernard on Mon Jul 9th, 2012 at 02:38:53 PM EST
[ Parent ]

Dutch disease, take two (n/t) (4.00 / 3)

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 9th, 2012 at 03:08:35 PM EST
[ Parent ]

Re: Plus ça change... (4.00 / 2)

I'm not certain that even the kool-aid contingent leading surplus countries are ignorant of the risks of currency appreciation, export market deterioration, and a host of ancillary effects of leaving the Euro.

Although, after a decade here, i'm not certain of anything.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Jul 9th, 2012 at 03:43:48 PM EST
[ Parent ]

Re: Plus ça change... (4.00 / 2)

Just last week the Finnish finance minister said they would rather leave the Euro than "pay for others' debts"...

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 03:48:16 PM EST
[ Parent ]

Re: Plus ça change... (none / 1)

He had better be careful what he would rather do. After he had done it he might rather he had not.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 9th, 2012 at 04:06:07 PM EST
[ Parent ]

Re: Plus ça change... (none / 0)

Migeru:

No, the ECB will not commit suicide as an institution.

isn't that exactly what it is doing?

and taking down the rest of us too, as max keiser puts it 'financial terrorists'-

It's a fine line between homage, parody, and consumer opportunism. Jess Walter

by melo (melometa4(at)gmail.com) on Mon Jul 16th, 2012 at 02:56:09 PM EST
[ Parent ]

Re: Plus ça change... (none / 0)

[ET Moderation Technology™] Now with poll!

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 03:49:38 AM EST

Re: Plus ça change... (none / 0)

The Council is divided and statements to date have reflected this: FUBAR.
The members opposing direct ECB/ESM recapitalization have no intent on allowing direct recapitalization without sovereign guarantees, which defeat the purpose of direct recaptialization, but want to further temporize the situation: Duplicitous.
The anonymous official is trying to spin things in the direction he prefers: Speaking out of other official orifice.
All of the above are true: Other.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 9th, 2012 at 07:50:51 AM EST
[ Parent ]

Other (please elaborate) (4.00 / 2)

The get-out clause in the official's words is "under current rules".

The rules would have to be changed for anything to really change. Some countries (see Finland, Netherlands) are opposed to the change, Germany can hardly be said to be in favour.

The rules may change once everything is over the cliff and in freefall.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jul 9th, 2012 at 03:59:23 AM EST

Re: Other (please elaborate) (4.00 / 2)

In that case, the 29 June Council conclusions were either mendacious or diversionary.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 04:10:19 AM EST
[ Parent ]

Re: Other (please elaborate) (none / 1)

Well, we knew at the time there was no way this would be implemented quickly - a fact which was quite probably at the back of opposing countries' minds.

How about duplicitous AND diversionary?

Or Council of the EU = FUBAR?

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jul 9th, 2012 at 08:53:49 AM EST
[ Parent ]

Re: Plus ça change... (none / 1)

Also from today's Eurointelligence briefing (e-mail):

The post-summit rally ended on Friday. The euro is now below $1.23, and Spanish spreads have risen to 5.674bp, which must be close or at their eurozone high. The markets have clearly concluded that there was no substance to the summit's conclusion in terms of crisis resolution.

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jul 9th, 2012 at 04:06:58 AM EST

For kicks (none / 1)

The Dutch news broadcaster apparently doesn't like Merkel anymore...

by Nomad on Mon Jul 9th, 2012 at 04:21:12 AM EST

Re: Plus ça change... (none / 1)

Anonymous diplomats spinning things to their own point of view?

by Colman (colman at eurotrib.com) on Mon Jul 9th, 2012 at 05:08:35 AM EST

Re: Plus ça change... (3.50 / 2)

Reuters making up an anonymous diplomat to spin things to their own point of view?

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 9th, 2012 at 08:17:17 AM EST
[ Parent ]

Re: Plus ça change... (4.00 / 4)

How the mighty have fallen:

Two German officials told Reuters that the Spanish government would make an announcement concerning the European Financial Stability Facility that day, when European finance ministers were meeting in Luxembourg to finalise details of the 440 billion euro backstop arrangement for euro zone states.
...
After extensive checks, Reuters decided there were no facts to report. But the rumours were already affecting the markets.
It appears journalistic integrity is in short supply at Financial Times Deutschland and Frankfurter Allgemeine Zeitung.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Mon Jul 9th, 2012 at 08:40:30 AM EST
[ Parent ]

Re: Plus ça change... (none / 0)

Eurointelligence Dily Briefing: On Spanish banks, the EU cannot agree on what they agreed (10.07.2012)

There were loads of denials of that story - from Jean Claude Jucker and Olli Rehn, who said yesterday there will be no state guarantee. But there will be no equity injections either. Peter Spiegel and Joshua Chaffin had an excellent analysis in this morning's FT in which they quoted a senior EU official as saying: "If the ESM lends to Spanish banks, it has to be structured so the first loss, which would be common equity, would be borne by the Spanish government." That statement, if true, ultimately confirms yesterday's story - that the pernicious link between banks and sovereign will not be broken. Olli Rehn's spokesman, however, maintained: "There will be no need for a sovereign guarantee for banks being directly recapitalised by the ESM." (I guess the meaning depends on what they mean by "sovereign guarantee". If it is a first-tranche loss, then it is technically not a guarantee, but it is economically a guarantee, for this is what a first-tranche loss is all about.)
Wolfgang Schauble and others also played down expectations that there could be a quick deal on supervision. "That will take time, it's complex, that's not easy to create, but we will work on that." He did not address the issues of how the loans would be turned into a direct equity injection.
To recap, it is completely uncertain whether, when and how the EU meets the conditionality that is needed to trigger direct ESM bank aid to Spain. And it is completely uncertain, and contested, what form that bank aid will take. If the Spanish government takes first loss, then we are talking about some hybrid type investment.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Tue Jul 10th, 2012 at 04:28:56 AM EST

Plus ça change... | 33 comments (33 topical, 0 editorial, 0 hidden)

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