Eggs and veal at the EU Summit

 

So it’s yet another two days where the leaders of the EU get together for a dinner (this time it’s tarte, fine eggs/mushrooms, braised veal on bed of fresh spinach  followed by a chocolate trio) and attempt to thrash out greater economic integration. Up for discussion is Greece and Spain, what to do with the funds from the financial transaction tax and most importantly the plan for a banking union.

Given previous results the expectations are running fairly low and Reuters reported that Hollande and Merkel are already at odds over some key points:

Germany and France, Europe’s two central powers, clashed over greater European Union control of national budgets and moves towards a single banking supervisor before a summit of the bloc’s leaders began on Thursday.

German Chancellor Angela Merkel demanded stronger authority for the executive European Commission to veto national budgets that breach EU rules, but French President Francois Hollande said the issue was not on the summit agenda and the priority was to get moving on a European banking union.

The two leaders met privately for 30 minutes just before the start of the 22nd EU summit since the euro zone’s debt crisis erupted nearly three years ago. Afterwards, a French source said they had agreed on the need for a tight timetable for introducing banking union.

In the lead up to the summit Angela Merkel had stated that Germany wouldn’t be rushed on the banking union and reports in the last hour look as if she has got her way:

German diplomats say leaders meeting in Brussels have reached agreement on creating a powerful single supervisor for eurozone banks and the plan will be implemented at some point next year.

France and Germany have been tussling over how to best shore up Europe’s struggling banks. France wanted a single supervisor in place by the end of this year — because that would allow Europe’s bailout fund to directly loan money to banks, a key tool in fighting the crisis.

But Germany has been dragging its heels because it’s nervous about such loans.

The diplomats said leaders reached agreement Thursday night to draw up the legal basis for the supervisor by the end of this year. They will then put it into place sometime in 2013.

It is yet to be seen what the UK, Finland and Sweden have to say about this given they have been opposed to a banking union for their own reasons, and let’s not forget the risk of post-summit backflips.

The single supervisor makes way for direct banking re-capitlaisation and a further move towards a banking union. As I’ve talked about previously, without the banking union there is no supra-European deposit insurance which means that deposit outflows from the periphery are likely to continue and this will add to the pressure on the weaker sovereigns. In regards to that we saw Spanish bad loans reach a new record overnight:

Spanish households and companies defaulted on their debts in record numbers in August, hurting the country’s lenders and highlighting the need for an aid package and bad bank to help the economy out of recession. A property crash left banks with billions of euros in bad debt from real estate developers on their balance sheets but the problems have spread to small businesses and other sectors. Loans that fell into arrears in August increased by 5.3 billion euros ($7 billion) from July, reaching 178 billion euros, Bank of Spain data showed on Thursday.
Spain is setting up a bad bank to siphon property assets off lenders’ balance sheets and banks are preparing to receive the first funds from a 100-billion-euro credit line agreed with the European Union. But the record loan data raises the question of whether consumer loans should also be transferred to the bad bank and if Spain will take too little of the European cash. The government estimates it only needs 40 billion euros.

We are also expected to hear from the Greek PM on the progress, or lack there of , on Greece’s progress to meet its emergency program obligations. I don’t expect the speech to lead to anything as everyone is well aware that Greece already needs a further debt write-off , although the EU does appear to be pushing for a debt buy-back in order to hold off the inevitable. In the meantime back in Athens anti-austerity rallies have turned violent once again.

There is another full day of the summit to come , so we will get further announcements over the next 24 hours.

19 Responses to “ “Eggs and veal at the EU Summit”

  1. dumpling says:

    “Hollande and Merkel are already at odds over some key points”

    “It is yet to be seen what the UK, Finland and Sweden have to say about this given they have been opposed to a banking union for their own reasons”

    It is all too predictable. It is worth remembering that these “leaders” represent (or are constitutionally meant to represent) national interests of their electorates, not the interests of the still-half-baked EU framework whatever it might turn out to be. It will not work under the current system. Why do not they “get it”?

    • The Patrician says:

      What was Merkozy has become the MerkeHoll

      • dumpling says:

        “We are also expected to hear from the Greek PM on the progress, or lack there of , on Greece’s progress to meet its emergency program obligations. I don’t expect the speech to lead to anything as everyone is well aware that Greece already needs a further debt write-off…”

        Greek will soon stop being newsworthy no matter what they do unless, perhaps, it becomes the next safe haven of Al Qaeda….

      • Janet says:

        Unlikely. I hear China is going to buy Greece…..

      • amaroo says:

        Be interesting to follow the due diligence…

      • dumpling says:

        I thought China was going to buy Zimbabwe. What had happened to that transaction?

      • Alex Heyworth says:

        What was Merkozy has become the MerkeHoll

        More like the Merde.

      • Magpie says:

        “What was Merkozy has become the MerkeHoll

        “More like the Merde”

        Best comment, ever! :-)

      • dumpling says:

        Holy shit! Good.

    • Revert2Mean says:

      It will not work under the current system. Why do not they “get it”?

      Exactly. It’s like watching an ultra slow-motion train wreck. :eek:

      • dumpling says:

        “It’s like watching an ultra slow-motion train wreck”

        Perhaps, they may be thinking that they can disassemble every piece of train as it goes off the track in ultra slow motion?

      • Bubbley says:

        Every time I read one of these articles I wonder why they just don’t amputate the financially gangrenous countries rather than just slowly watching the whole EU rot away.

        And then I realise all they would be left with is Angela Merkels head.

      • dumpling says:

        Or probably the purpose of this whole saga is to show to everybody with half a brain that it does not work and therefore never to invoke an EU idea again in future …..

    • littleguy says:

      They get it just fine. They are just trying save their banking friends but they can’t do it without making the populace suffer so that is what they are doing. And each one is trying to help their own banking friends get more help than the other countries banking friends.

  2. Bobby Fischer says:

    Perhaps if these political jokers spend less time having bi-weekly meetings and spent more time examining research from history, they would realise (see the Global McKinsky report on deleveraging):

    - there is no precedent for countries with debt to GDP ratios this high which have grown out of their debt problems, other than in the presence of accelerated growth during periods of war;

    - long term arduous deleveraging and tepid credit growth is their future for many years unless they wish to restructure debt and write off certain debts that will never be repaid or we enter a hyper-inflationary period;

    - this will also lead to ongoing economic contraction and worsening of relative debt burdens in the presence of ‘bail outs’ – simply throwing good money after bad; and

    - the real solutions is debt write-offs, a possible debt jubilee etc in the presence of significant restructuring of the financial sector and rules

    The political hand wringing and continuous bailouts with no end is farcical.

    ‘Burn baby burn…. Europe is a fiscal disco inferno…’

    http://www.youtube.com/watch?v=A_sY2rjxq6M

  3. SMc says:

    its good to know that whilst club med drowns in debt these clowns spend budget money on these “get togethers” how many have there been now.. 50..more?? producing the sum total of zilch… if hot air were a commodity then we would all be debt free

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