No let up on the austerity demands, which are now to be legislated via balanced budget rules.
EU Leaders to Agree on Rescue Fund, Balanced Budget
Jan 29 (Reuters) — European Union leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday and are expected to agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions.
The summit – the 17th in two years as the EU battles to resolve its sovereign debt problems – is supposed to focus on creating jobs and growth, with leaders looking to shift the narrative away from politically unpopular budget austerity. The summit is expected to announce that up to 20 billion euros of unused funds from the EU’s 2007-2013 budget will be redirected towards job creation, especially among the young, and will commit to freeing up bank lending to small- and medium-sized companies.
But discussions over the permanent rescue fund, a new ‘fiscal treaty’ and Greece will dominate the talks.
Negotiations between the Greek government and private bondholders over the restructuring of 200 billion euros of Greek debt made progress over the weekend, but are not expected to conclude before the summit begins.
Until there is a deal between Greece and its private bondholders, EU leaders cannot move forward with a second, 130 billion euro rescue program for Athens, which they originally agreed to at a summit last October.
Instead, they will sign a treaty creating the European Stability Mechanism (ESM), a 500 billion-euro permanent bailout fund that is due to become operational in July, a year earlier than first planned. And they are likely to agree the terms of a ‘fiscal treaty’ tightening budget rules for those that sign up.
The ESM will replace the European Financial Stability Facility (EFSF), a temporary fund that has been used to bail out Ireland and Portugal and will help in the second Greek package.
Leaders hope the ESM will boost defenses against the debt crisis, but many – including Italian premier Mario Monti, IMF chief Christine Lagarde and U.S. Treasury Secretary Timothy Geithner – say it will only do so if its resources are combined with what remains in the EFSF, creating a super-fund of 750 billion euros ($1 trillion).
The International Monetary Fund says an agreement to increase the size of the euro zone ‘firewall’ will convince others to contribute more resources to the IMF, boosting its crisis-fighting abilities and improving market sentiment.
But Germany is opposed to such a step.
Chancellor Angela Merkel has said she will not discuss the issue of the ESM/EFSF’s ceiling until leaders meet for their next summit in March. In the meantime, financial markets will continue to fret that there may not be sufficient rescue funds available to help the likes of Italy and Spain if they run into renewed debt funding problems.
“There are certainly signals that Germany is willing to consider it and it is rather geared towards March from the German side,” a senior euro zone official said.
The sticking point is German public opinion which is tired of bailing out the euro zone’s financially less prudent. Instead, Merkel wants to see the EU – except Britain, which has rejected any such move – sign up to the fiscal treaty, including a balanced budget rule written into constitutions. Once that is done, the discussion about a bigger rescue fund can take place.
It’s baffling. First austerity. Then, finally, admissions that austerity alone won’t work. Yet full speed austere!
Any ideas what’s going through their heads? Now they want austerity, PLUS capitulation? Plus interest?
What happens if they get what they want? Another wave of emigration to the USA? The great Irish Bankster Famine?
Irish bankster famine! LOL!
“20 billion euros of unused funds from the EU’s 2007-2013 budget will be redirected towards job creation”
Too little, too late. The angry mob of bored unemployed youth have already defaced most of the european cities from what I saw in my travels. Drug/alcohol abuse were so rampant all over europe I constantly felt like I was in an episode of Miami Vice.
A lot of people I talked too over there are beginning to really hate the immigrants, hate each other. In france it was the muslims, in Germany the same, especially the turkish immigrants. In Croatia they still hating on the serbs. In the UK the romanian gypsies, etc etc
I didn’t see a lot of tolerance, even the swiss and danes seemed very bigoted in some regards. I thought ww2 taught us to never let it happen again, but hate has a way of making a home in so many people’s hearts.
I may have been too quick to say that the tide is turning as their “job creation program” is too little, too late and they are still pushing on the “fiscal compact”. The change is not coming yet. First someone has to burn their fingers or more.
As in the old joke about the communist party in Poland:
If they say that they take, they take.
If they say that they give, they say.
The same happens in Austerian Union. Welcome to the new normalcy! BTW it is not true that the people from Eastern Europe don’t know what it is going on. We are very familiar. You will see Eastern Europe enlarged West, it may swallow America as well. There is no escape.
@Adam (ak),
I like good jokes, let me share a few 😉
http://www.amazon.com/Yugo-Rise-Fall-Worst-History/dp/0809098911
This book was great, the fastest way to double the price of a yugo, fill up the gas tank.
How to make Yugo go from 0-60 in 5 seconds, push it off a cliff. Tito was a master at playing the superpowers against each other, but what a lost opportunity in the Yugo.
@Adam (ak), http://www.businessinsider.com/today-we-saw-this-chart-literally-make-peoples-jaws-drop-2012-1
50% unemployment for the YOUTH in various european nations according to this chart. I saw it firsthand, they are defacing all thier history and culture, the political leaders are really failing the citizens over there. Shameful!
Another way out of this crisis, and rather clever way, would be to tackle what is at the root of the problems: pension savings.
In a way or an another, societies have to be indebted to their retirees. In the MMT logic, since all money is debt, when they collect pension savings “government” (more accurately taxpayers) becames indebted to pension savers. But this method of becoming indebted requires issuance of net financial assets, NFA’s.
Other way to become indebted is just to promise. Government’s could just promise “we will pay you pensions when time comes due”. This method would not require accumulation of private sector NFA’s in the meantime, and hence, lower national debts.
If europe had any idea what it were doing, it could tackle it’s problems from this angle, also.
certainly get rid of the tax advantages! see ‘the 7 deadly innocent frauds’