Reuters blog archive
The finance ministers of Germany, France, Italy and possibly Spain are expected to meet in Berlin to discuss banking union. Two sources told us Dutch Finance Minister Jeroen Dijsselbloem – who chairs the Eurogroup of euro zone finance ministers -- should attend as will EU commissioner Michel Barnier and key European Central Bank policymaker Joerg Asmussen.
There is a possibility, however, that a violent storm that has hit Germany could prevent the participants reaching Berlin. If they make it, they will bid to come closer to a solution on a planned European resolution mechanism to deal with troubled banks ahead of a full meeting of euro zone finance ministers next week to help fashion a deal by the end of the year.
The last time the ministers met it didn’t go so well.
Germany is cool to the original idea that the euro zone clubs together to tackle frail banks. Instead, Berlin wants losses imposed on bank creditors, including bondholders, once stress tests due next year expose any weak links.
The reluctance of Germany, which is worried that it will shoulder much of the burden if weaker countries turn to the bloc's emergency fund, put it at odds with France, which wants a euro zone-wide safety net.
The European Central Bank holds its last rates meeting of the year with some of the alarm about looming deflation pricked by a pick-up in euro zone inflation last week – though at 0.9 percent it remains way below the ECB’s target of close to two percent.
The spotlight, as always, will be on Mario Draghi but also on the latest staff forecasts. If they inflation staying well under target in 2015 (which is quite likely), expectations of more policy easing will gather steam again.
Ukraine’s shock decision to turn its back on an EU trade deal continues to reverberate with mass rallies on the streets of Kiev in protest at President Viktor Yanukovich’s decision.
To try to defuse tensions, Yanukovich issued a statement saying he would do everything in his power to speed up Ukrainian moves toward the EU. Is this another U-turn or mere semantics? The answer is important.
A round of European Central Bank policymakers speeches this week can be boiled down to this. All options, including money-printing, are on the table but it will be incredibly hard to get it past ECB hardliners and neither camp sees a real threat of deflation yet.
Reports that the ECB could push deposit rates marginally into negative territory in an attempt to force banks to lend have been played down by our sources, not least because it would distort the working of the money market.
French President Francois Hollande is in Rome for talk with Italy’s Enrico Letta. Both have a lot on their minds.
The French economy contracted in the third quarter and Hollande faces a blanket of criticism over his timid economic reforms (although he has pushed through some labour and pension changes).
from Stories I’d like to see:
Watching the spate of committee hearings on Capitol Hill related to the Obamacare launch debacle reminds me of a story -- or, rather, an ongoing type of coverage -- that I wish the Washington Post, Politico or even C-Span would do: Keep count of the percentage of time each senator or congressman talks versus the amount of time the witnesses, whose appearances are ostensibly the purpose of the hearings, get to talk.
A sub-tally might also be done of how much of the committee member’s time is spent even asking a question, as opposed to giving a speech.
Today’s meeting of EU finance ministers will grapple with banking union and next year’s stress tests though with no German government in place, a leap forward is unlikely.
One German official seemed pretty clear yesterday, saying: “We don't want a mutualisation of bank risks.” That, some would argue, takes the union out of banking union and is certainly a very different approach to the one promised last year when EU leaders were scrambling to keep the euro zone together.
from The Great Debate:
Last weekend, after years of failed negotiations, the “P5+1” nations -- the five permanent members of the United Nations Security Council (the United States, Britain, France, Russia and China) plus Germany -- finally appeared to be on the verge of a deal with Iran regarding curbs on its nuclear program.
All except France were ready to sign a stopgap agreement that would offer Iran limited sanctions relief in return for a freeze in its nuclear program. But Paris torpedoed the arrangement at the last moment -- denigrating it as “a sucker’s deal.”
It’s euro zone third quarter GDP day and Germany and France are already out of the traps with the latter’s economy contracting by 0.1 percent, snuffing out a 0.5 percent rebound in the second quarter. Growth of 0.1 percent was forecast, not just by bank economists but by the Bank of France too.
Germany failed to match its strong 0.7 percent growth in the second quarter, but expanding by 0.3 percent – in line with forecasts - it is clearly in much better shape.
Barring a last minute change of heart, the European Commission will launch an investigation into whether Germany’s giant trade surplus is fuelling economic imbalances, a charge laid squarely by the U.S. Treasury but vehemently rejected by Berlin.
This complaint has long been levelled at Germany (and China) at a G20 level and now within the euro zone too. Italian Prime Minister Enrico Letta urged Berlin this week to do more to boost growth.