Europe Sighs Relief After Summit, But Doubts Linger – Analysis


EU leaders’ decisions taken early on Thursday (27 October) were greeted with widespread relief across Europe, but the summit outcome was tempered by worries on the complexity of the deal. The EurActiv network reports from Europe’s capitals.

Greece: Difficulties remains

“Relief” is the word that best describes the declarations made so far by the Greek government about the decisions taken in Brussels for the country’s future. However, the uncertainty and the vagueness of the wording in the final agreement have left Greeks wondering what exactly happened in Brussels.

This was apparent in all the morning TV and radio news programmes in Athens as well as the front pages of all the daily newspapers.

Speaking on morning television programmes, members of parliament of the opposition party New Democracy adopted a cautious attitude mostly because they were not certain about the exact wording of the conclusions. However, they noted with irony that even with the haircut decision, Greece’s debt-to-GDP ratio in 2020 will be the same as in 2009, when Prime Minister George Papandreou first came to power.

Issues such as the effects on pension funds, salaries, new taxation, the future of Greek banks, and limitations on the national sovereignty of the country, are expected to create serious problems for the governing majority, EurActiv Greece reports.

However, the most criticised provision appears to be the “permanent presence of foreign experts” who will supervise on a day-to-day basis the running of the country. Many perceive such presence a violation of Greece’s sovereignty.

France: Too dependent on China?

In France, the increasing role of emerging economies in the rescue of the eurozone is being hotly debated. Green MEP Daniel Cohn-Bendit called the final deal a “tiny step” and denounced what he called the “Chinese aberration” of EU leaders petitioning Beijing for help.

Cohn-Bendit called this “ridiculous” and regretted that eurozone leaders preferred to be “tied and bound” to emerging countries rather than adopt euro bonds.”

This viewpoint was echoed by members of the Socialist Party. MEP Françoise Castex made it clear: “Tonight in Brussels, [it was about choosing between] the independence of the ECB or dependence on China. Sarkozy and Merkel picked China.”

“Do you think that China will help Europe without any quid pro quo?” asked Michel Sapin, a socialist MP close to presidential candidate François Hollande. He predicted that this decision will make negotiating with China on currency manipulation, trade and environmental norms much more difficult.

In contrast, French Defence Minister Gérard Longuet downplayed these fears. “We need partners,” he said, adding “It is a good match for both of us.”

Germany: The lady turns

In Germany, the summit’s agreement was widely praised across most of the political spectrum, despite some criticism that Chancellor Angela Merkel had been indecisive and taken too long to reach the deal.

Rainer Brüderle, parliamentary leader of Free Democratic Party which is part of the ruling coalition, said the meeting in Brussels had been a step forward for the eurozone countries, citing the positive reaction of Asian stock markets.

Sigmar Gabriel, leader of the opposition Social Democrats, also spoke well of the summit’s outcome. However, he repeated his accusation that Merkel had been inconsistent, adding that her belated 180-degree turn in policy had increased both uncertainty and the risk for taxpayers.

Andrea Nahles, the Social Democrats’ secretary-general, voiced similar criticism: “The debt cut for example should have come earlier. This would have been less risky. Mrs. Merkel actively prevented this”.

Green leader Cem Özdemir lauded the decisions taken, saying, “It’s a much better solution than anything we have previously had.” However, he suggested that this was hardly the end of the matter and further investment in Greece would be necessary.

“Greece needs jobs and infrastructure. This needs to be connected to a second part, which provides for the Greek economy to get on its feet. After the crisis could be [the same as] before the crisis. The EU made a good step forward but it is not at the end of the road,” he said.

Italy: No respite for Berlusconi

In contrast, Italian Prime Minister Silvio Berlusconi found little positive response among his political colleagues. Reactions focused on the letter sent by Berlusconi to explain the measures his government will take to tackle the debt crisis, mainly in the area of pension reform.

Italian political leaders used the opportunity to hammer at the embattled prime minister. Pierluigi Bersani, leader of the opposition Democratic Party, said: “At first reading the contents of the Italian letter don’t reveal anything serious. Our government is just trying to breathe in some oxygen but it will be very short-lived.”

Pier Ferdinando Casini, leader of the centrist UDC, had a similar reaction: “The Italian answer to Brussels was disappointing; we were not able to take a strong position. If we want to stop smiles and laughs we have to solve our problems and, before calling for help, we must face unpopular choices.”

The “smiles and laughs” refer to Angela Merkel and Nicolas Sarkozy’s reaction at the EU leaders’ summit last Sunday, which pressed Berlusconi to come up with a more structured plan for effective reform to slash the Italian debt.

Other political leaders, including the centrist Antonio Di Pietro, criticised Berlusconi’s proposals as antisocial.

Slovakia: Confusion over role in EFSF

In Slovakia, the decisions to boost the European Financial Stability Fund (EFSF) proved particularly difficult for the government. Uncertainty remains as to what elements of the final deal Slovakia will be contributing to.

Prime Minister Iveta Radičová said in reference to the expansion of the aid package to Greece from about €100 billion to €130 billion that “the Slovak Republic has a waiver and will take part in this programme, only in the framework that we have previously committed ourselves to, nothing more.” She claimed she did not have a mandate to agree to a bigger Greek aid package from the parliament.

This was interpreted by a news agency as saying that Slovakia would be the only member state to achieve an opt-out from participating in the EFSF’s enhancement, a line repeated by most national media.

However, there is no mention of any such special arrangement for Slovakia in the Council conclusions and it seems almost certain Radičová was only referring to the expanded Greek aid package.

Radičová upholds the country’s specific agreement will save Slovakia €200 million. Meanwhile, the finance minister Ivan Mikloš explained that Slovakia will not exactly save anything, since the portion of Slovakia´s contribution in the EFSF will not change and money saved on the Greek package will be used in other running programmes.

Asked if Slovakia is not perceived now as an untrustworthy partner, Radičová said that Slovakia is seen as a country that had let the government fall to be able to secure EFSF enhancement is ratified.

Bulgaria: We won’t pay

The Bulgarian government issued a strong official declaration, stating that the country won’t give its support to the Commission proposal to lower the proportion by which EU-sponsored projects require co-financing to help ‘countries under programme’.

Under the proposal, made last August, Greece, Ireland, Portugal, Romania, Latvia and Hungary, which have all benefited from different forms of bailouts in recent years, would be required to contribute less to projects that they currently co-finance with the EU, Regional Policy. Although Bulgaria is the poorest EU country, it is excluded from the beneficiaries, because its macroeconomic indicators are stable.

Dnevnik, the EurActiv partner in Bulgaria, quotes Prime Minister Boyko Borissov as saying that he is strongly against any support given to the bailout countries by reducing the ratio of national financing for EU-sponsored projects.

To the contrary, those who needed to be stimulated are those who respect the financial discipline, Borissov said. “If this ratio is to be lowered, then it should be lowered for all countries.”

Spain: Confidence restored

José Luis Rodríguez Zapatero, Spanish prime minister, said the European Summit deal represented a comprehensive response to the concerns of the financial sector. The approval of the banking recapitalization plan, he said, was necessary to restore confidence and combat “systemic crisis” in the eurozone.

Approval of 9% of the capital ratio compared to the 5% today, “will serve to convey confidence to the financial system of the EU”. The Spanish leader says affected domestic banks (BBVA, Santander, Banco Popular, Bankia and La Caixa) have the capacity to achieve the agreed requirement without resorting to public-sector help. Zapatero insists that Spanish banks have already shown they can achieve solvency with the stress tests that they made in recent months.

Poland: A Chinese surprise

Economic analysts questioned the numbers of the agreement. Alfred Adamiec, president of Dom Maklerski Alfa, told the Gazeta Wyborcza daily that €100 billion might not be enough to save Greece, and said asking China for financial help was both a surprise and a mistake.

Cooperation within the eurozone should not and must not contradict the unity of the EU as a whole, Polish Prime Minister Donald Tusk said after the meeting of 27 EU leaders.

Poland, which holds the rotating EU presidency, is pleased with the agreement reached at the summit of euro zone. A government spokesman said the agreement on the recapitalization of banks can be considered as a success of the Polish Presidency.

Original article


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