The IMF Managing Director Christine Lagarde recently mentioned that a more unified euro area could be a “compass to prosperity for the region and a beacon of hope to the world.” In this spirit, the Elcano Royal Institute has recently published a paper by Spanish economists on the reform of the EMU.
Within the EU it is being discussed how to set up a fiscal backstop, a barrier of public money to be used in times of crisis, not just to help out a bank. One option being considered in Brussels is turning The European Stability Mechanism (ESM) into a kind of management tool for a crisis.
LONDON | Barclays | Despite this clear victory and positive status quo, a number of key questions remain for the post-election era: Will the quarterly targets be met as the macroeconomic outlook worsens? Will the ECB reintroduce the waiver on GGBs and include them in the PSPP programme?
By Jens Bastian via MacroPolis | During his visit to Berlin this week, Prime Minister Antonis Samaras repeatedly emphasised that Greece does not require a third financial support programme. In his conversation with Chancellor Angela Merkel he highlighted that the Greek sovereign was able to successfully return to international bond markets in April after a three-year forced hiatus.
ATHENS | By Yiannis Mouzakis via Macropolis | This is the total amount of money that has left German coffers since the Greek crisis started in 2010. It corresponds to Germany’s portion of the European Stability Mechanism’s (ESM) paid in capital, which was announced on May 1 as the fund reached its full capital amount following the transfer of five installments since the end of 2012. Germany’s participation in the euro crisis mechanisms, aside from the ESM paid in capital, has been in the form of guarantees. It all started with the bilateral loans to Greece which every country apart from Germany provided directly. Berlin only gave state guarantees to its AAA-rated development bank KfW. The German taxpayer did not have to bear any cost for this transaction.
MADRID | By Julia Pastor| German judges are removing uncertainties little by little. The country’s Constitutional Court confirmed on Tuesday that the European Mechanism of Stability is legal and does not damage the Bundestag’s budget. Furthermore, they also approved euro zone’s fiscal pact. The court had brought an appeal against constitutionality of both treaties in June of 2012. The third appeal regarding ECB’s bond purchase program is still pending of a sentence, however, and apparently it would be more difficult to solve: Karlsruhe’s court has required European Court of Justice to decide against the program following the arguments -more economic than legal- that Bundesbank has handed to them.
MADRID | By Luis Martí | Each time the monetary union takes a step forward, German individuals and/or civil or political groups file a case with the Constitutional Court in Karlsruhe. So far, the Court has sanctioned that German governments were correct in accepting obligations emanating from Maastricht or the Lisbon Treaty, for example, but at the same time, it has also turned the screw on the Berlin executive by setting more and more strict limits to their freedom of action, by requiring –for instance- higher levels of co-decision with the legislative organs.
NEW YORK| By Ana Fuentes | Don’t fall asleep with your banking union, the IMF urged the EU on Wednesday, or you won’t be credible. The Washington-based institution also called for an agency that would close or help troubled banks from a national to European level. Everyone in Brussels seems willing to compromise… except for Germany. The elections are over, but Berlin is still sticking to its tough stance.
BERLIN | Via Presseurop | A deal on transparency regulations for the new supervisory watchdog, which will oversee operations at 150 of the Eurozone’s largest banks, reports EUobserver is submitted to vote at the Parliament today.
The European Stability Mechanism, the euro bailout fund, was designed to avoid a rapidly approaching doomsday scenario. But Germany’s tendency to backtrack in the last moment will only scare investors even more. Market pressure on Madrid is mounting again.