Germany

Saturday

Daniel Korski

The paradoxes of renegotiation

David Rennie (aka The Economist’s Bagehot) has an excellent column in this week’s issue about the difficulties that Britain will face if she tries to repatriate powers from the EU. His main argument, having spoken to a number of senior German politicians and officials, is that if Britain holds up any treaty revisions in the hope of extracting concessions in return, then the other EU states will organise themselves without the UK. The Economist’s former Brussels correspondent also makes the key point that the 10 countries that are outside of the euro are not natural allies for the UK – some, like Denmark, do not want to join the euro,

Friday

James Forsyth

Cameron leaves Cannes with an IMF headache

The Cannes summit leaves the world no further forward on its quest for some kind of solution to the Eurozone crisis. Strikingly, the Germans still won’t agree — despite huge diplomatic pressure — to the ECB fulfilling the traditional emergency function of a central bank and acting as lender of last resort. This is a blow when you consider that Cameron thought there was a real possibility Merkel would budge on this after last week’s European Council meeting. It also provides Cameron with a domestic political headache. For if the ECB won’t act, the IMF will have to take more of the strain — and increasing Britain’s contributions to the

James Forsyth James Forsyth

Reuters: Papandreou to resign on Friday

Reuters is reporting tonight that the Greek Prime Minister has agreed to resign on Friday. The news agency says that at a meeting Cabinet colleagues told George Papandreou that he had to resign for the good of the Socialist party and he agreed. It quotes one source saying, “He agreed to step down. It was very civilised, with no acrimony.” Now, after Thursday’s experience, I suspect we’re all taking reports about what will, or will not, happen in Greece with a pinch of salt. But it does seem that the referendum is off, stymied in part by Merkel and Sarkozy, who have ridden roughshod over the idea of non-interference in

Wednesday

James Forsyth

Merkel and Sarkozy try to hold the euro together

Right about now, Nicolas Sarkozy and Angela Merkel are having George Papandreou for dinner. There have been all sorts of rumours today about what Sarkozy and Merkel will demand from him. Thankfully, they seem to have abandoned plans to tell him to cancel the referendum. But they still seem keen to dictate the question and the timing to him. How that will go down with the Greek demos remains to be seen. One thing is clear, though: the euro is now destroying the whole European project. The European Union’s claim to be a force for peace, stability and democracy in Europe is rapidly disappearing into the Athens smog. The wholesale

James Forsyth James Forsyth

The Greek land mines that Cameron must avoid

When the topic of Greece comes up at PMQs, David Cameron will need to avoid stepping on three land mines. The first task is not to say anything about what is going on in Athens, or Rome for that matter, that will exacerbate market anxieties. The second is a diplomatic challenge, to avoid anything that would sour Britain’s pitch ahead of the G20. The third, and perhaps most difficult one, is to keep his own backbenchers on side.   An ever growing number of Tories doubt that a 17 member Euro and fiscal union is in Britain’s, or Europe’s, interests. Already, some Tory backbenchers are talking about going to Greece,

Friday

Fraser Nelson

Europe’s new battlefield

The long flight from Australia should give David Cameron plenty time to think about Europe, and how it just won’t go away. He didn’t want this battle — not now, not ever. But in the Daily Telegraph today, the first in what will be a weekly column, I lay out the battlefield that awaits him on his return. First, this bailout is not the end. A trillion Euros needs to come from somewhere, and today the Chinese are being tapped up — God knows what we’ll agree to in return. But that doesn’t address what is, as Mervyn King has said, a solvency issue rather than a liquidity issue. And

Wednesday

Fraser Nelson

The Euro masquerade

So much rot has been said about the Eurozone crisis that you do wonder whether Merkel, Sarkozy et al have come to believe their own spiel. This is an economic problem and it can’t be solved by political will. Greece is bust and several French, German and Dutch banks were stupid enough to lend €130 billion to the Greek government that they’re not going to get back. All the summits in the world cannot change this simple fact. These crisis talks are about bailouts for banks, not bail outs for Greeks. BNP Paribas is in for €37bn. Commerzbank of Germany is owed €15bn. And if Greece defaults, then insurance claims

Wednesday

Alex Massie

The Greek Crisis in a Single Chart

There are some – especially on the American left – who give the impression of thinking that if only the European Central Bank behaved differently or if only Angela Merkel could be persuaded to do the right thing then somehow there might be a way out of the eurozone crisis. But even allowing for the fact that politics and economics are generally concerned with making the best of less than optimal situations sometimes there really is no way out. Here’s a handy chart that basically explains it all: No-one is “solving” this crisis because there isn’t a solution to it. Since every choice leads to bad places it is sensible,

Monday

James Forsyth

The dawdling eurozone

For all the attention that is being focused in Westminster on the publication of the Cabinet Secretary’s report into the links between Adam Werritty and Liam Fox tomorrow, the real story is the countdown to Cannes. It is now three weeks since George Osborne declared that the eurozone countries had three weeks to save the Euro. So far, they haven’t done anywhere near enough. There’s also little sign that this weekend’s summit will see them make much progress. The Germans are already busy playing down expectations. From a British perspective, the intriguing question is: what does the coalition do if the eurozone continues to show no sign of getting its

Tuesday

David Blackburn

Italy in the firing line

Markets sank into negative territory this morning, following Standand&Poor’s downgrade of Italy’s credit rating. (Although they have since recovered.) The agency cut Italy’s rating from A+/A-1+ to A/A-1; it also kept its outlook as negative. The agency’s reasoning is hardly surprising: growth is negligible, debt is unsustainable and Silvio Berlusconi’s inert government appears incapable of arresting the crisis. Frail economics and supine politics, those twinned threats to prosperity, have struck again. The implications to the Eurozone, and the world economy, are obvious. An economist in Nomura’s Sydney office told Reuters, “It only adds to the contagion risk over Greece and has encouraged the flight to safety in markets here.” Over

Friday

David Blackburn

“It started in Germany…”

Bugger the Bundesbank — that seems to be ECB President Jean-Claude Trichet’s current raison d’être. The ECB, together with other global central banks, yesterday agreed to provide dollar funding to ease the mounting liquidity crisis in European banks, largely caused by American banks curtailing interbank lending in anticipation of another crisis. This unorthodox action runs contrary to the wishes of the German Bundesbank, adding to the pre-existing strain between the ECB and the German establishment over bond purchasing, tension that was epitomised by the resignation of Jurgen Stark last weekend. Obviously, central banks do not take this action every day and it is yet another indication that crisis is now impending.

Thursday

Clarissa Tan

Britain sues the ECB

As the EU debt drama continues unspooling like a perversely watchable soap opera (the FT’s Neil Hume describes it as ‘eurozone crisis porn’), an intriguing sub-plot has emerged: Britain is suing the European Central Bank. The Treasury is unhappy with an ECB move to limit the kind of euro-denominated products that can pass through UK clearing houses, suspecting it’s a bid to shift financial activity from London to Paris/Berlin. So it’s taking legal action, the first of its kind by an EU member state. This is not the first UK-EU disagreement that has surfaced in recent months, underlining the tensions between Britain and the Continent as financial centres across Europe

David Blackburn

Merkel & Sarkozy have only words

It was something of a mystery. Emergency conference calls about the future of the Eurozone were being made yesterday, but there was no news of those discussions. As it turned out, this was for the best of all possible reasons: there was no news to report. Angela Merkel and Nicolas Sarkozy announced no new measures to alleviate the sovereign debt crisis; rather, they merely declared “solidarity” with Greece and assured the markets that Greece would not be forced from the single currency. Their words seem to have assuaged the markets for the moment, but only the most brazen optimist would bet on the rally being long lived. Tests of confidence

Wednesday

David Blackburn

The Euro-crisis heats up

Angela Merkel, Nicolas Sarkozy and George Papandreou are in crisis talks about Greek debt. There are rumours that they are preparing an “orderly default” for Greece. But, officially, Merkel is still pressing ahead with implementing the existing Greek debt deals. This meeting also has a domestic context for Merkel. According to the FT, she is determined to stamp on the growing disquiet within her governing coalition over the Eurozone crisis and is pleading for calm resolve. It remains to be seen if she succeeds.  The danger of contagion within the Eurozone remains and concerns about the exposure of French banks persist, which is doubly worrying for Nicolas Sarkozy given the proximity

Saturday

James Forsyth

Resignation provides a Stark reminder of the divisions within the eurozone

The problems facing the eurozone have been underlined by the departure from the European Central Bank yesterday of its senior German representative, Jürgen Stark. Stark, who is in essence the bank’s chief economist, has quit its six-member executive board. The ECB is saying that he’s leaving for personal reasons but it is widely suspected that he’s really off because he can’t accept the bank’s policy of buying up the debt of embattled eurozone economies.  Stark will almost certainly be replaced by another German. Given the current political dynamics there, it is almost certain that whoever succeeds Stark will take an equally dim view of the ECB purchasing bucket loads of ‘olive

Monday

James Forsyth

Merkel’s domestic difficulties threaten the Eurozone

As August draws to a close, Europe is bracing itself for a series of September sovereign debt crises. Events in Germany at the moment have the potential to make these crises into events that could break the back of the Eurozone. As Ambrose Evans-Pritchard reports, Chancellor Merkel might not have the votes to push the European Financial Stability Facility through the German parliament. Merkel is currently under attack from all angles in Germany. Helmut Kohl has criticised her foreign policy, while the German president has implied that she should not have let the European Central Bank buy up so many poor quality bonds. It is now possible to see her coalition

Tuesday

David Blackburn

Further tension in the Eurozone

The Eurozone’s political crisis is deepening. Further to the news that individual member states were seeking their own bilateral deals with Greece to insure their taxpayers’ money from default, the FT reports that disagreements are emerging over how these deals should be conducted. Holland objects that Finland’s accord with Athens relies on Greece using EU bailout funds as collateral. “The Netherlands is no supporter of this proposal,” Jan Kees de Jager, the Dutch finance minister, said. “It is not compatible with the principle of equal treatment of all euro countries.” Moody’s, the credit rating agency, has said that this affair “confirms that Europe is conflicted over the very decision to provide financial support

Wednesday

David Blackburn

This isn’t just any solution; this is an M&S solution

Banks and financial institutions endured a painful day’s trading, following Angela Merkel and Nicolas Sarkozy’s announcement yesterday that the Eurozone should adopt a ‘Tobin tax’, a charge on financial transactions. Once again, M&S chose piecemeal changes over the grand structural scheme desired by markets. The Tobin tax was just one proposal of three. The other two were: to create “genuine economic governance of the Eurozone” under, for the moment, EU President Herbert van Rompuy. The second: to impose a ‘Golden Rule’ on the budgets of Eurozone members. The ‘Golden Rule’ will bind national parliaments to agree to limits on national debt levels and impose statutory requirements on mastering budget deficits. The

Monday

James Forsyth

Battle of the century

The American historian Walter Russell-Mead has a cynical — but very possibly accurate — take on what the French are trying to persuade the Germans to accept with their plan for Eurobonds: ‘France’s clear short term goal is to commit Germany to underwrite debts from weak EU states.  That not only staves off a crisis that threatens to engulf France; by putting Germany on as a co-signer for Greek, Italian and Spanish loans, France will ensure that Germany’s credit rating will not be better than France’s. The French will accept almost any German rules to limit the ability of countries like Greece to run up new debts.  It is in

David Blackburn

Back to the drawing board as Eurobonds look dead in the water

Watch her lips: no Eurobonds. Angela Merkel’s Finance, Minister Wolfgang Schauble has told Der Spiegel: “I rule out Eurobonds for as long as member states conduct their own financial policies and we need different rates of interest in order that there are possible incentives and sanctions to enforce fiscal solidity.” Merkel’s government is making its depositions ahead of tomorrow’s Eurozone summit, rebutting the moves made by other member states over the weekend to introduce Eurobonds, a step towards political integration. Those proposals were backed by Nicolas Sarkozy, with whom Merkel is meeting in private this afternoon. Interestingly, Le Monde reveals that Eurobonds are not even on the agenda of these