Markets rebound as Greek PM scraps plan for referendum on eurozone and ECB cuts interest rates
Greek Prime Minister George Papandreou yesterday announced that he would scrap his plan to hold a referendum on Greece’s eurozone membership during a speech to MPs from his Pasok party. Papandreou suggested that, since the main opposition party New Democracy had offered to support the latest bailout package earlier in the day, a referendum wasn’t necessary saying: “Failure to back the package would mean the beginning of our departure from the euro…But if we have consensus, then we don’t need a referendum.” However, following Papandreou’s speech, New Democracy leader Antonis Samaras said: “If he thinks I want to govern together with him, he understood wrong…I told him clearly to resign and that we go to elections.”The fate of Papandreou and his Government will likely be decided by tonight’s vote of confidence, which he looks unlikely to win. However, it is not clear what will happen if the government does fall, although it seems probable an interim cross-party government would be formed in order to implement the latest bailout package, with elections being held in the near future. Meanwhile, the public debate about Greece possibly leaving the euro is picking up with French Europe Minister Jean Leonetti saying yesterday, “the euro and Europe would survive” a Greek exit, it would be “a moral blow, but on an economic level it is possible.” UK Treasury Secretary Mark Hoban admitted that the Government had contingency plans for a Greek exit from the euro.
The ECB yesterday surprisingly cut interest rates by 0.25%, to 1.25%, in a unanimous decision. Börsen-Zeitung Economics Editor Stephan Balling argues that the ECB’s decision stemmed from “dangerous ideas about the mission and means of a central bank”, noting that the ECB has started acting as a “European Federal Reserve.” However, in his first press conference, new ECB President Mario Draghi suggested that the bank would not become the lender of last resort for the eurozone, and that the eurozone’s problems can’t be solved by outside interventions. Draghi added that he expects the eurozone to experience a “mild recession” by the end of the year. The ECB also announced details of its new €40bn covered bond buying programme.
Separately, FTD reports that, according to Spanish government sources, there have been discussions at the G20 about offering Spain and Italy precautionary loans from the EFSF, the eurozone’s bailout fund.
On his blog, the BBC‘s Business Editor Robert Peston quotes Open Europe’s figures breaking down how Greek debt is divided among international lenders, while Open Europe’s Pieter Cleppe was quoted by Xinhua, China Daily andShanghai Daily discussing the conclusions of the G20 summit. In Die Welt, Clemens Wergin argues that the positive effect of this week’s chaos in Greece will be that “it will have become clear to all politicians in the problem countries that there are limits to what the giving countries are willing to accept”.
FT CityAM WSJ EurActiv European Voice Times Guardian Irish Times Express Bild Welt FAZ FAZ 2 Le Figaro IHT EUobserver FT 2 Times 2 BBC Mail Irish Times FT 4 CityAM 3 Guardian FT 3 CityAM 2 WSJ 2 FT 5 EurActiv 2 Times 3 BBC Welt Telegraph Telegraph 2 Telegraph 3 Telegraph 4 Telegraph 5 EUobserver FT 7 CityAM 4 WSJ 3 WSJ 4 EurActiv 3 European Voice Welt Guardian IHT BBC EUobserver FT 8 Telegraph 6 Börsen-Zeitung: Balling FTD FTD 2 Reuters Le Monde Kathimerini Spiegel SR Kauppalehti Times Leader Times: Fleming WSJ: Smith FT Editorial FT: Piris FT: Tett FT: Brittan Telegraph: Editorial Coulisses de Bruxelles BBC: Hewitt BBC: Peston Economist: Charlemagne Economist Economist: Leader Le Figaro: Prévélakis IHT: Norris Welt: Wergin FAZ: Mussler Sueddeutsche: Strittmatter Le Figaro: Roufiol
Cameron voices support for greater UK contribution to IMF to tackle eurozone crisis
At the G20 summit, David Cameron indicated that he would support a proposal to potentially double the IMF’s £600bn lending facility, which would mean the UK underwriting up to an additional £29bn, arguing that: “When the world is in crisis, it’s right that you consider boosting the IMF, an organisation founded by Britain, in which we’re a leading player”. Chancellor George Osborne clarified however that: “What we wouldn’t support is the IMF investing directly in some euro bailout fund. That wouldn’t be right and we won’t back it”. The proposal is opposed by the Labour Party and a number of Conservative MPs, 30 of whom voted against a previous IMF expansion in July.
FT Telegraph Telegraph 2 CityAM CityAM: Heath Guardian Guardian: Kettle Independent Mail Express
Corriere della Sera: IMF offers Italy €44bn credit line;
Berlusconi loses mathematical majority in Italian parliament
Italian daily Il Corriere della Sera reports that IMF Chief Christine Lagarde has offered to open a €44bn credit line for Italy, but Italian Prime Minister Silvio Berlusconi has rejected the offer, at least temporarily. Italian government sources have also played down allegations that the IMF would be monitoring and reporting on the implementation of structural economic reforms in Italy, saying that the IMF will only provide “advice.” Meanwhile, two Italian MPs from Berlusconi’s party yesterday defected to the Christian Democrats’ group in the lower house of the Italian parliament. Several Italian papers note that the move virtually leaves Berlusconi without a majority, as he can now count on 314 MPs from a total of 630.
Corriere della Sera Repubblica La Stampa Il Sole 24 Ore Le Monde blogs: Leparmentier IHT Le Figaro Le Figaro 2 Corriere della Sera 2 Repubblica 2 Il Sole 24 Ore Corriere della Sera: Polito Corriere della Sera: Franco FT CityAM WSJ WSJ 2 European Voice Welt Guardian
The Economist‘s Bagehot notes, “Germany‘s priority is rules establishing unprecedented oversight of eurozone economies. If Britain asks too high a price for its consent, Germany will reluctantly agree to a new treaty outside the EU system. This, it is expected, would involve more than 17 countries but fewer than 27. Britain would lose its veto… Mr Cameron has promised MPs that the euro crisis offers a golden opportunity to advance Britain’s national interest. Other EU countries disagree. Something, at some point, will have to give.”
Economist: Bagehot Economist
City AM reports that Bank of England Governor Mervyn King admitted yesterday that the implementation of major parts of the Vickers Commission report proposals would be illegal under the EU’s new draft Capital Requirements Directive (CRD IV).
The Telegraph reports that the British Government has made it clear it will block any plans to remove the EU arms embargo with China in exchange for Chinese financial aid for the eurozone crisis, although the paper notes that at present, both sides have denied that this is even under consideration.
City AM reports that calculations by the Adam Smith Institute, based on the Commission’s own impact assessment, show that the introduction of an EU Financial Transaction Tax would cost the UK economy £25.5bn.
Aviation Week reports that the Airports Council International (ACI) this week called for aircraft emissions to be addressed globally, and that ACI Director Angela Gittens said the body was very concerned about the trade conflict developing over the EU’s plan to extend the EU’s Emissions Trading System (ETS) to all airlines flying in and out of European airports.
This post originally appeared on Open Europe.