Tuesday December 23, 2014 Search
Weather | Athens
13o C
8o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Finns, Dutch cast doubt on eurozone deal

Finland and the Netherlands, the euro zone's most hardline creditor states, cast the first doubts on Monday on a European summit deal designed to save Spain and Italy from being engulfed by the currency bloc's debt crisis.

The Finnish government told parliament that Helsinki and its Dutch allies would block the euro zone's permanent bailout fund buying bonds in secondary markets, despite an agreement among leaders' last Friday that the fund could be activated to stabilise markets.

The euro fell and safe-haven German Bunds reversed losses on news of the Finnish statement, which raised fears that the latest deal which drew a positive initial market reaction could be fraying.

Several previous market rallies after euro zone crisis agreements have fizzled within a day or two as investors have fretted about the lack of detail, the risk of delay and national vetoes, or the inadequate size of the rescue funds available.

The 17 euro zone leaders agreed in Brussels on steps to shore up their monetary union and bring down borrowing costs for Spain and Italy, regarded as too big to fail but also too expensive to rescue if they are shut out of markets. They gave few details on the use of the temporary EFSF and permanent ESM rescue funds.

ESM bond buying in secondary markets would require unanimity among euro zone members and that seems unlikely because Finland and the Netherlands are against it, the Finnish government said in a report to a parliamentary committee.

That is essentially true but there is a get-out clause in the ESM's rules which states that if the European Central Bank and European Commission feel the euro zone was under threat, then the rescue fund could act on the basis of an 85 percent majority vote to do so.

That would leave the Finns and Dutch unable to block.

The report gave no explanation for the apparent volte-face but EU diplomats noted that a Finnish proposal that Spain and Italy should issued covered bonds, backed by state assets or future revenues, to avoid Helsinki having to demand collateral for any bailout loans, failed to find agreement last week.

Prime Minister Jyrki Katainen's spokesman said the ESM stance had nothing to do with others blocking Finland's

proposal. Helsinki simply did not consider secondary market purchases an effective way to counter the crisis, he said.

Dutch Prime Minister Mark Rutte said last Friday he was not in favour of using limited rescue fund resources, which run to a maximum of 500 billion euros, to try and turn the bond market.

"The chance of that is very small because I don't see the point at all of buying on the markets because you need a lot of money to do so, Rutte said. The instrument exists but it can only be applied with unanimous support."

The ECB spent some 210 billion euros ($265 billion) in the last two years to buy Greek, Irish, Portuguese, Spanish and Italian bonds without achieving any lasting improvement.

EU officials said the leaders had agreed in principle that the rescue funds would be empowered to buy bonds both at auction when they are first issued, and on the open market, if a government makes a request and signs a memorandum of understanding on macroeconomic conditions.

A European Commission spokesman also insisted that no changes to the treaty governing the ESM were required to enable the fund to recapitalise banks directly.

He was responding to doubts raised in the Netherlands by legal experts who said the treaty would have to be amended and ratified again.

The Commission's spokesman on economic and monetary affairs said articles 14-18 of the treaty set out the instruments the European Stability Mechanism has at its disposal to maintain financial stability in the euro area, and stated that its board of governors may decide changes to that list.

"That is our understanding of where we stand on that, that it would not require a change to the treaty, spokesman Simon O'Connor told a regular news briefing.

Dutch newspaper daily Het Financieele Dagblad quoted legal scholars as saying the Dutch parliament and other national parliaments in Europe would have to ratify the euro zone's ESM rescue fund again after EU leaders decided to directly capitalise banks from the fund.

Sources close to European Council President Herman Van Rompuy, who chaired last week's summit, said the leaders had taken great care to avoid any decision that would require ratification because of bitter past experience.

A deal to expand the scope and effective lending capacity of the temporary European Financial Stability Facility (EFSF) last July exacerbated bond market turmoil after a brief rally when it became clear it would take months to ratify.

Finland threw a spanner in the works by demanding collateral on its share of EFSF loans to Greece, requiring months of tricky negotiation, and Slovakia's coalition government fell apart over the EFSF deal, delaying ratification until mid-October.

Other factors that have spooked investors include the risk of Germany's powerful constitutional court delaying the entry into force of the ESM and possibly placing restrictions on its scope of action, and the fact that the Brussels summit did not increase the overall size of the rescue funds.

Some investors may calculate that the sums available to support Spain and Italy in the bond market are too small to bring their borrowing costs down in a sustained way.

[Reuters]

ekathimerini.com , Monday Jul 2, 2012 (18:19)  
Govt seeks better result in second presidential vote as bribe claim probe shelved
Civil servants to grade evaluation scheme
Police collar fraudsters who conned money out of jobless
Bill aims to close down landfills, curb EU fines
October data show fleeing bondholders
October data compiled by the Bank of Greece confirm that foreign investors are letting go of their Greek bonds, as within just one month the countrys central bank recorded an outflow of 1.7...
Expired debts to the state soar to more than 72 bln euros
Households inability to keep up with their tax payments combined with anticipation of the new repayment plans, which were finally announced a few weeks ago, led to expired debts to the stat...
Inside Business
SOCCER
Special day for Abidal, lucky one for PAOK
PAOK scraped through its Livadia challenge beating Levadiakos to remain on top of the Super League for Christmas, one point ahead of Olympiakos that enjoyed a great game at Kalloni and offer...
BASKETBALL
Explosive Barca unfazed by Panathinaikos, bomb scare
Panathinaikos lost 80-67 at home to Barcelona on Friday in a rather meaningless game at the end of the first group stage of the Euroleague, but the encounter will be remembered for the bomb ...
Inside Sports
INTERVIEW
Klaus Regling stresses debt sustainability through commitment to reforms
BRUSSELS The man who is responsible for the loans to Greece as managing director of the European Stability Mechanism (ESM/EFSF), Klaus Regling, is the only high-ranking European official w...
INTERVIEW
Crisis of confidence will come back again and again, says Thomas Piketty
Hes treated like a rock star wherever he goes to lecture. His book Capital in the 21st Century, a study on income and wealth inequality from the 18th century to the present, recently tran...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. October data show fleeing bondholders
2. Expired debts to the state soar to more than 72 bln euros
3. First four contracts to fund small firms signed by IfG and banks
4. Investors putting plans on hold
5. Govt seeks better result in second presidential vote as bribe claim probe shelved
6. Civil servants to grade evaluation scheme
more news
Today
This Week
1. Greek parliament vote in balance after Samaras election offer
2. Euro shaky on ECB and Greece, dollar keeps edge
3. Prosecutor gathers depositions in Independent Greeks 'bribe' probe
4. Government accuses SYRIZA and Independent Greeks of 'clear alliance'
5. Klaus Regling stresses debt sustainability through commitment to reforms
6. Draghi starts squaring QE circle in month of persuasion for ECB
Today
This Week
1. Samaras summons bond vigilantes with euro exit talk
2. High stakes
3. Europe's drama in Greece needs final act to avoid tragedy
4. On the edge but not gutless
5. Greek PM offers compromise solution with elections by end-2015
6. Ship with 200 migrants off Pylos towed to Italy after passengers refuse to stop in Greece
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.