European leaders have reached a “three-pronged” agreement described as vital to solve the region’s huge debt crisis.
They said banks holding Greek debt accepted a 50% loss, the eurozone bailout fund will be boosted and banks will have to raise more capital.
Shares on European markets rose sharply on news of the deal.
Pastor Elke Rosenthal has a problem that Christian clergy elsewhere in Europe can only dream of.
While pews across the continent are emptying, her Lutheran congregation in this leafy suburb of Berlin has tripled in size in recent years, outgrowing its two small churches and eager to break ground for a much larger structure.
But the dream sometimes seems like a nightmare for the Resurrection Church parish, which has hit barriers every time it tries to expand.
Just when the eurozone governments thought it could not get worse for Europe’s single currency, it did.
Shell-shocked EU finance ministers meeting in Brussels on Saturday were already reeling from the worst Franco-German rift for over 20 years and a fractious failure to resolve the problems that have brought Greece, and the euro, close to the brink.
But then a new bombshell hit as a joint report by the EU and the International Monetary Fund (IMF) warned that, without a default, the Greek debt crisis alone could swallow the eurozone’s entire €440 billion bailout fund – leaving nothing to spare to help the affected banks of Italy, Spain or France….
The current crisis over the euro has deep roots in the imbalances between north and south, rich and poor, export-led and service-driven economies, tied together by a currency but few rules, and those rarely enforced.
A fix will require fundamental changes in the functioning of the bloc, with more interference in the workings of sovereign states. There would need to be a fiscal union, with a treasury and a finance minister capable of intervening in national budgets, and more unified tax and pension policies. But it is far from clear that the European Union can gather itself to take these fateful steps away from nationalist identities to a truly European model.
“We are today confronted by the greatest challenge our union has known in its entire history,” said José Manuel Barroso, the head of the European Commission. “It is a financial, economic and social crisis. But also a crisis of confidence ”” in our leadership, in Europe itself, in our capacity to find solutions.”
Money flows are even more out of kilter. Cross-border liabilities have jumped from $15 trillion to $100 trillion in fifteen years, or 150pc of global GDP. This creates a very big risk.
“Gross financial flows can stop suddenly, or even reverse. They can overwhelm weak or weakly regulated financial systems,” said Mr [Stephen] Cecchetti.
Well, yes, this is now happening. Did anybody think about this when they unleashed globalisation with its elemental deformity, free trade without free currencies?
Chancellor Angela Merkel won her “own majority” for the bill, narrowly averting the collapse of her government, but only after pledging that there was no grand plan committing Germany to vast and unlimited liabilities.
Horst Seehofer, leader of Bavaria’s Social Christians CSU, said his party would go “this far, and no further”, insisting any expansion of the rescue machinery was out of the question. “The financial markets are beginning to ask whether Germans can afford all this help. We must not risk the creditworthiness of the German state,” he said.
Norbert Lammert, the Bundestag’s president, said lawmakers felt they had been “bounced” into backing far-reaching demands and warned that Germany’s legislature would not give up its fiscal sovereignty to any EU body.
German lawmakers approved an expansion of the euro-area rescue fund’s firepower, freeing the way for European officials to focus on what next steps may be needed to stem the debt crisis.
The lower house of parliament passed the measure with 523 votes in favor and 85 against, granting the fund powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines. It raises Germany’s guarantees to 211 billion euros ($287 billion) from 123 billion euros. The main opposition Social Democrats and Greens said before today’s session in Berlin that they’d vote with Chancellor Angela Merkel’s government, assuring passage.
In “Boomerang” Mr. Lewis captures the utter folly and madness that spread across both sides of the Atlantic during the last decade, as individuals, institutions and entire nations mindlessly embraced instant gratification over long-term planning, the too good to be true over common sense.
Greece, Mr. Lewis writes, ran up astonishing debts ”” from high-paying government jobs and generous pensions, as well as waste, bribery and theft ”” that came to “about $1.2 trillion, or more than a quarter-million dollars for every working Greek.” In just the last 12 years, he says, “the wage bill of the Greek public sector has doubled, in real terms” with the average government job now paying almost three times the average private sector job. Those who work in jobs classified as “arduous” can retire and start collecting pensions, he adds, “as early as 55 for men and 50 for women”; more than 600 Greek professions have somehow managed “to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on.”
When Angela Merkel, the German chancellor, met Pope Benedict in Berlin last week, it appears that their conversation focused more on Mammon than on God.
“We spoke about the financial markets and the fact that politicians should have the power to make policy for the people, and not be driven by the markets,” Ms Merkel said after the talks. “This is a very, very big task in today’s time of globalisation.”
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Germany’s top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU’s rescue machinery to €2 trillion (£1.7 trillion).
Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.
“The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution),” he said.
We should embrace other languages and cultures, particularly those of our European neighbours, says the Bishop of Bradford the Rt Revd Nick Baines in a Church of England podcast, published today, to celebrate 20 years of Anglo-German ecumenical links. Both in business and in the classroom we need to broaden our horizons, he adds, or we are in danger of missing out.
The Meissen Agreement was published in 1988, before Germany was re-united, between the Church of England and the Federation of Evangelical Churches in the German Democratic Republic (DDR) and the Evangelical Church in Germany (EKD). A signing service followed in 1991 in Westminster Abbey.
Dear Brothers and Sisters, here in Thuringia and in the former German Democratic Republic, you have had to endure first a brown and then a red dictatorship, which acted on the Christian faith like acid rain. Many late consequences of that period are still having to be worked through, above all in the intellectual and religious fields. Most people in this country since that time have spent their lives far removed from faith in Christ and from the communion of the Church. Yet the last two decades have also brought good experiences: a broader horizon, an exchange that reaches beyond borders, a faithful confidence that God does not abandon us and that he leads us along new paths. “Where God is, there is a future.”
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We see that in our affluent western world much is lacking. Many people lack experience of God’s goodness. They no longer find any point of contact with the mainstream churches and their traditional structures. But why is this? I think this is a question on which we must reflect very seriously. Addressing it is the principal task of the Pontifical Council for the New Evangelization. But naturally it is something that concerns us all. Allow me to refer here to an aspect of Germany’s particular situation. The Church in Germany is superbly organized. But behind the structures, is there also a corresponding spiritual strength, the strength of faith in the living God? We must honestly admit that we have more than enough by way of structure but not enough by way of Spirit. I would add: the real crisis facing the Church in the western world is a crisis of faith. If we do not find a way of genuinely renewing our faith, all structural reform will remain ineffective.
After a weekend of tense meetings among world finance officials here, euro-zone leaders were weighing options to maximize the size of their bailout fund by borrowing against it. The move could provide trillions of dollars of firepower to rescue governments and banks””-but only if all 17 euro-zone legislatures approve a two-month-old agreement to broaden the bailout fund.
Highly public opposition from Germany, the largest and most powerful euro-zone economy, could block the plan.
Policy makers are “focused on their own internal restraints, so that we don’t have the outcome that we need,” Antonio Borges, head of the International Monetary Fund’s Europe department, said Sunday. While key players were understandably acting in self-interest, he said, it was generating “disastrous” collective results.
The reserve powers would be well advised to pull out all the stops to save Europe and its banking system. Together they hold $10 trillion in foreign bonds. If they agreed to rotate just 4pc of these holdings ($400bn) into Spanish, Italian, and Belgian debt over the next two years, they could offer a soothing balm. None has yet risen to the challenge. It is `sauve qui peut’, with no evidence of G20 leadership in sight.
Once again, the US has had to take charge. The multi-trillion package now taking shape for Euroland was largely concocted in Washington, in cahoots with the European Commission, and is being imposed on Germany by the full force of American diplomacy.
It is an ugly and twisted set of proposals, devised to accomodate Berlin’s refusal to accept fiscal union, Eurobonds, and an EU treasury. But at least it is big.
Benedict XVI is the embodiment of resistance to the idiocies of today, when the obsession with ratings and sex are more important than any article of faith. But he performs that role with a soft voice and the steadfastness of a deeply religious man. And he binds the loyalty of those people who stand with him in opposition — some 1.2 billion Catholics in the global Church — and who are often ridiculed as idiots for doing so. They are true to the words of the apostle Paul: “God hath chosen the foolish things of the world.”
In his last Mass before he was elected as pope, Cardinal Ratzinger preached against the “dictatorship of relativism” and the ideology of “anything goes.” Today, many observers regard that sermon as a pre-emptive statement of the approach he would take as pope.
The conference ”” held at Al Akhawayn University in Ifrane, a town in the Atlas Mountains about two hours south of Rabat ”” brought together Holocaust scholars and survivors, leaders of Morocco’s Jewish community and American Jewish and Moroccan Muslim students. Its twin mandates were to teach about the extermination of European Jewry and to pay homage to the courage of Morocco’s wartime king, Mohammed V, in resisting the orders of the Vichy French occupation government to round up and turn over Jews for internment and probable death.
Uncommonly among Arab and Muslim nations, Morocco has accepted the reality of the Holocaust, rather than either dismissing it outright or portraying it as a European crime for which those countries paid the price in the form of Israel’s creation. Partly, no doubt, because of Mohammed V’s stand against the Vichy regime, the current king, Mohammed VI, called in a 2009 proclamation for “an exhaustive and faithful reading of the history of this period” as part of “the duty of remembrance dictated by the Shoah.”
Still, the recent conference would never have occurred without Mr. Boudra. Now 24 and majoring in political science, Mr. Boudra grew up after much of Morocco’s Jewish population had moved to France or Israel. But he heard from his grandmother about her childhood in the Jewish quarter of Casablanca, and a grandfather still had Jewish neighbors in his apartment house.
Before the euro zone, individual countries issued bonds in their local currency and could print more of it, whether it be francs, lire or drachmas, if a crisis was making it difficult to pay off the loans.
Today, with the European Central Bank in charge of euros, governments in Athens, Rome and elsewhere no longer control the “printing press.” Yet even as individual governments lost the power to pay off debts by printing money, the politics and regulations of the euro zone encouraged banks, insurance companies and other financial firms to load up on government bonds ”” and countries to issue them.
The “persistence in sustaining risk-free status .”‰.”‰. has, in our view, directly contributed to the development and severity of recent market turmoil,” Achim Kassow, a member of the board of managing directors of Germany’s Commerzbank, wrote in a recent study of the bank rule for the European Parliament. “Both the course and the severity of the crisis can clearly be tied to incentives set by current regulation.”
Key indicators of credit stress have reached the danger levels seen before the Lehman Brothers failure three years ago, with Markit’s iTraxx Crossover index ”“ or “fear gauge” ”“ of corporate bonds surging 56 basis points to 857 on Thursday….
The yield spread between Italian 10-year bonds and Bunds reached a fresh record of 408 basis points before the European Central Bank (ECB) intervened in late trading. It is near the level at which LCH.Clearnet raises margin requirements, the trigger that forced Greece, Portugal and Ireland to request bail-outs.
None of this is religious tourism and much less a “show.” The motto of these days tells us what it is: “Where God is, there is a future.” It must focus on the fact that God returns to our world, this God who often seems totally absent, of whom we have dire need.
Perhaps you will ask me: “But does God exist? And if he exists, does he care about us? Can we reach him?” It is true of course that we cannot put God on the table, we cannot touch him like a utensil or take him in hand like any object. We must again develop the capacity to perceive God, a capacity that exists in us.
Siemens withdrew more than half-a-billion euros in cash deposits from a large French bank two weeks ago and transferred it to the European Central Bank, in a sign of how companies are seeking havens amid Europe’s sovereign debt crisis.
The German industrial group withdrew the money partly because of concerns about the future financial health of the bank and partly to benefit from higher interest rates paid by the ECB, a person with direct knowledge of the matter told the Financial Times.
The agency said the country’s net general government debt is the highest among A-rated sovereigns, and now expects it to peak later and at a higher level than it previously anticipated.
“In our view, Italy’s economic growth prospects are weakening and we expect that Italy’s fragile governing coalition and policy differences within parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges,” S&P said in a statement.
It is apparent not only that US banks have lost confidence in their European counterparts and have started shutting them out of inter-bank funding markets, but also that US officials are busy making matters worse by seeking to shift blame for America’s dire domestic performance on to influences from this side of the Atlantic. “Seventy-five per cent of the dark things happening in the world economy are because of the eurozone,” one of Geithner’s team said at Marseille….
Markets are convinced of several things: that Greece is politically incapable of meeting the austerity demands imposed by the EU and the IMF, and is now locked into a spiral in which its debt position can only become worse as its economy deteriorates; that a default on Greek sovereign debt is therefore inevitable sooner rather than later, and will impose losses on European banks, including the likes of Société Générale and Crédit Agricole of France, which may in turn need to be bailed out by their governments; and that the eviction of a bankrupt and incorrigibly irresponsible eurozone member is not only a technical possibility but an economic necessity if the single currency is to survive at all.
Anders Borg, the Swedish finance minister, said that “the politicians seem to be behind the curve all the time.” Citing a “clear need for bank recapitalization,” he added: “We really need to see some more political leadership.”
Despite the potentially grave consequences, the mood in Germany seemed to be turning increasingly in favor of letting Greece fail rather than bear the growing cost.
Mrs. [Angela] Merkel, 57, faces far-reaching decisions about how to deal definitively with the debt crisis in Europe and, more immediately, whether to allow Greece to default or even to leave the currency union. American officials fear that if she does not act more decisively, bank lending could freeze up and the result would be another sharp financial downturn on both sides of the Atlantic.
Fears of a worsening debt crisis slammed European stocks on Monday, especially shares of French banks, forcing the French government to declare its support for its three largest financial institutions. The turmoil added to worries that the Greek crisis would prove difficult to contain without more robust action from Germany and, ultimately, its taxpayers.
The project of European integration, which began in the difficult years after World War II, is also on the line. If Greece were forced to abandon the euro, as more and more voices on the German right are demanding, it would be a jarring setback for solidarity on the Continent.
Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.
And all indications are that European leaders are unwilling even to acknowledge the nature of that threat, let alone deal with it effectively.
Germany’s Finance Ministry is studying the potential impact of a Greek debt default, working through scenarios which include Greece abandoning the euro to reintroduce the drachma, Germany’s Der Spiegel magazine reported on Saturday.
Mr. [Jürgen] Stark’s resignation, nearly three years before his term was up, is widely viewed as another fissure in the edifice of European unity, which has suffered as wealthier countries like Germany have been asked to underwrite poor performers like Greece.
“It’s a very bad sign,” said Daniel Gros, director of the Center for European Policy Studies in Brussels. “It means that the split within the E.C.B. that we thought was far down the road is here now.
“It puts a shadow over the E.C.B. and risks financial markets asking, ”˜How long can they go on buying these Italian bonds?’ This indicates that the answer is, ”˜Not as long as I had thought.’ “
Harvinder Sian from RBS said the sovereign humiliation of Greece by EU creditor states smacks of colonialism and can expect to meet fierce resistance. It may be tempting for Greece to precipitate a “hard default” before the second rescue package comes into force and switches a large stock of debt contracts from Greek law to English law, he said.
It is not clear who is in the stronger position in the latest round of brinkmanship between Greece and the German bloc. If pushed too far, Greece can set off a powderkeg. The International Monetary Fund says European banks are highly vulnerable and need to raise their capital by €200bn. Many of the weakest are in Germany.
The Greek crisis has spilled over into Cyprus, raising the risk that a fourth country will soon need an EU bail-out….