ARAB TIMES, MONDAY, DECEMBER 5, 2011
‘no deal at EU summit ‘extraordinarily grave’ EU at threat without solution: Portugal PM
Britain’s Deputy Prime Minister nomic governance. selves. Failure to find a solution to the euro clearly that could represent the end Portugal became the third euro
Nick Clegg said Sunday it would be “It is extraordinarily grave if no “Those rules were not adhered zone crisis could lead to the end of of the European Union.” zone country to seek a bailout, of
“extraordinarily grave” if no agree- agreement is reached,” Clegg told to. That’s the great tragedy. And, the European Union, Portuguese He said the crisis had become 78 billion euros ($105 bln), after
ment was reached on saving the BBC television. “We need to have a bluntly, it was the French and Prime Minister Pedro Passos systemic and as a result a “much Greece and Ireland. Passos Coelho
eurozone at this week’s EU sum- clear roadmap towards a stabilisa- German governments back in 2005 Coelho said in an interview pub- stronger response is necessary. In repeated his determination to meet
mit. tion and strengthening of the euro- who signalled that there was going lished on Sunday. spite of various attempts, we have tough budget goals under the
European Union leaders gather zone.” to be a free-for-all. “We have to find a response,” to not been able to find one.” bailout, stressing that was his gov-
in Brussels on Thursday and Friday He said the eurozone rules “If those rules had been stuck to the crisis, he said in the interview Passos Coelho said any solution ernment’s key priority. He said if the
to thrash out a way to save the 17- should be toughened up, and in the first place, we wouldn’t now with daily Publico, adding he hopes to the crisis would have to address economic situation worsens and
country single currency bloc, likely blamed Paris and Berlin for caus- be in the trouble that we now face. a solution can be found at a the need for economic and political more austerity measures become
with proposed treaty changes to ing much of the present woes by “It’s right that they should be European Union summit this week. union within the bloc, to “comple- necessary “there will be no other
create closer fiscal union and eco- breaking the existing rules them- strengthened.” (AFP) “If we don’t (find a response), ment” monetary union. possibility than to adjust.” (RTRS)
Governing council to hold year’s last meeting on Thursday
ECB set to cut rates again as crisis deepens
FRANKFURT, Dec 4, (AFP): The ly stressed its fire-fighting role is only major shock... our view is that, under analysts said. One possible answer to this could be ters.”
European Central Bank is expected to temporary and it is ultimately up to current circumstances, there is not Tensions in the sovereign bank mar- for the ECB to extend the maturity of Holger Schmieding, chief economist
cut its key interest rates for the second member countries themselves to get much merit in delaying rate action.” kets appear to have eased slightly in the liquidity-providing operations from at Berenberg Bank, was not convinced,
time in two months next week as EU their finances in order. With the ECB’s latest staff economic last few days. currently one year to two or three years. however, seeing only a 1-in-3 chance
leaders battle to find a solution to the Draghi surprised the markets when projections, also scheduled for publica- Nevertheless, signs of strain in the And the beneficial impact of such a “that the December summit and a more
long-running debt crisis. he took over at the ECB’s helm only tion on Thursday, expected to be banking sector “have grown, with move could be maximised by relaxing active ECB thereafter can turn senti-
The ECB’s decision-making govern- last month with an immediate quarter- revised downwards significantly, the interbank interest lending rates rising the rules on collateral, argued Valli at ment around for good.
ing council is holding its last monthly point reduction in borrowing costs as bank will have ample arguments to jus- and banks placing more money on UniCredit. “That leaves a probability of 2 in 3
interest-rate meeting this year on the 17 countries that share the euro tify a further rate cut, said deposit with the ECB instead of lend- Overall, analysts are convinced the that the summit will again relieve ten-
Thursday, the same day as European teeter on the brink of a new recession. Commerzbank economists Michael ing to each other,” said Jennifer ECB is preparing to take more aggres- sions only temporarily,” Schmieding
Union leaders gather in Brussels to find And markets and ECB watchers are Schubert and Ralph Solveen. McKeown, senior European economist sive action. But it likely to make that warned.
ways out of a crisis that is threatening pencilling in a similar move again this This “should prompt the ECB to cut at Capital Economics. conditional on EU leaders adopting a “Our central case remains that the
the very existence of the single curren- month, bringing borrowing costs in the its refi rate from currently 1.25 percent Another sign that banks are increas- much tighter fiscal framework, possi- crisis will escalate again thereafter
cy. euro area down to just 1.0 percent. to 1.0 percent,” they predicted. ingly hoarding liquidity came when the bly at their December 8-9 summit in until, probably some time in January,
Many governments and analysts see While Marco Valli at UniCredit Thus, with such a move already ECB failed to “sterilise” or mop up the Brussels, analysts argued. the ECB and the Bundesbank (the
the ECB as the sole institution capable believed that such a move was “not a widely priced in, the focus of attention extra liquidity it has pumped into the That certainly appeared to be German central bank) finally realise
of putting out the fires of the crisis in foregone conclusion, because in the will be on the so-called “unconvention- markets via its controversial pro- Draghi’s message when he said in that they have no further option but to
the immediate term. But the bank’s past the ECB rarely moved at two con- al measures” that Draghi will announce gramme of buying the bonds of dis- Brussels last week: “Other elements intervene (much more) aggressively,”
new chief, Mario Draghi, has repeated- secutive meetings without facing a to try and get the crisis under control, tressed countries. might follow, but the sequencing mat- he concluded.
Decision time for EU leaders, ‘The situation is grave’
Italy rushes to approve
with euro’s ‘future’ at stake crisis-busting measures
ROME, Dec 4, (Agencies): Italy’s
under-pressure cabinet met Sunday a
a debt blow-up in Italy, the euro-
zone’s third largest economy, could
Wrangling over treaty change to dominate day ahead of schedule to launch a
package of far-reaching budget cuts
kill off the entire 17-nation euro area
and observers say Italy is “too big to
and pension reforms aimed at resolv- bail” in case of a default.
ing the financial crisis threatening the Angelino Alfano, the leader of
PARIS, Dec 4, (RTRS): The eurozone. Berlusconi’s People of Freedom
euro faces a decisive week as The cabinet’s adoption of the party, the biggest party in parliament,
European Union leaders, measures had been scheduled for also put the situation in stark terms:
Monday but Prime Minister Mario “The choice is between a harsh plan
urged on anxiously by the Monti brought the meeting forward in today and the risk of bankruptcy
United States, seek agree- a bid to finalise the budget before the tomorrow.”
ment on a convincing rescue markets open early Monday. Emma Marcegaglia, one of Italy’s
Monti was scheduled to outline the top business leaders, said the reforms
plan that has eluded them for 24 billion euro ($32 billion) package, were “fundamental for Italy and to
two years. expected to include housing and lux- save the euro.”
Despite short-term market opti- ury goods taxes, at a press confer- The populist Northern League
mism about a possible deal to tackle ence. party is the only major opposition to
Europe’s sovereign debt crisis and Final approval by parliament is Monti in parliament. Its leader
underpin the survival of the single expected by the start of the Christmas Umberto Bossi on Sunday said: “Italy
recess on Dec 23. has lost.”
currency, the outcome is far from cer- Italy is under intense pressure from The Northern League is scoring
tain as the EU gears up for a summit the international community and political points with a strong
in Brussels on Thursday and Friday. investors to introduce measures to Europhobic message and has said it
“This week, the stable future of the rein in public finances ahead of a cru- will call a referendum against pension
euro and thus the economic recovery in cial European Union summit on reforms.
Europe and employment are at stake,” Thursday and Friday. An EU summit this week is expect-
EU Economic and Monetary Affairs “We’re faced with an alternative ed to sketch out a new vision for the
Commissioner Olli Rehn told Reuters. between the current situation, with 17-nation eurozone with deeper inte-
“This calls for a convincing package of the required sacrifices, or an insolvent gration accompanied by more puni-
measures from the European Council state, and a euro destroyed perhaps by tive measures and interventions for
(summit).” Italy’s infamy,” Monti said ahead of weaker eurozone states.
Portuguese Prime Minister Pedro the cabinet meeting.
Passos Coelho went further. Defences
“The situation is grave and the
“We have to find a response” to the cri- Italian situation is being followed in With Italy, the euro zone’s third-
sis, he told the daily Publico. “If we Washington, Beijing and Tokyo,” the largest economy, close to a debt emer-
don’t, clearly that could represent the end mayor of the city of Bari, Michele gency that would destroy Europe’s
of the European Union.” Emiliano, quoted Monti as saying financial defences, EU leaders will
Treaty during talks on Sunday. meet in Brussels this week hoping to
Monti’s package is set to include agree steps to bind the bloc more
If all goes according to plans being closely with tougher fiscal rules.
hatched in Berlin and Paris, the EU will an increase on housing tax that would
bring in up to 12 billion euros as well Sources present at discussions on
have taken a step towards fiscal union by the new fiscal measures said they
Friday night, agreeing on a treaty change as a tax on luxury goods such as high-
performance cars and yachts. would total around 20 billion euros
to anchor coercive budget discipline for ($27 billion). An extra 4 billion euros
the 17-nation currency area. The head of Italy’s industrial lobby Confindustria, Emma Marcegaglia, gestures as she briefs the media after meeting Cards would come from automatic cuts to
The European Central Bank will Italian Premier Mario Monti in Rome, Dec 4. Marcegaglia said Sunday the future of the common euro currency depends Another increase in value-added tax breaks and welfare measures out-
have cut interest rates on Thursday to on Italy’s coming up with very strong austerity and growth measures. (AP) tax, which was raised by one percent- lined but not clearly identified in the
counter a looming recession and taken age point to 21 percent in September, austerity package presented by the
new measures to provide longer-term impossible for many countries to refi- public backing in referendums. brought forward to Sunday a cabinet is also on the cards. previous government.
funding for Europe’s teetering banks. nance. That indicates how urgent it is to European Council President Herman meeting to approve rigorous austerity Italy has already adopted two aus- Monti will have to balance the
And new prime ministers in Italy, take measures now,” Frans van Houten, Van Rompuy, who chairs the crucial measures and economic reforms terity packages this year and is aiming competing needs of showing budget
Greece and Spain will have demon- CEO of electronics giant Philips told end-of-week summit in Brussels, will designed to save Rome from requiring to restore a balanced budget by 2013 rigour while not choking off growth,
strated their commitment to tough aus- TV programme Buitenhof. present options for stricter budget con- the next international bailout. And in line with EU demands. without which it will be impossible to
terity measures and structural econom- Underlining Washington’s vital inter- trol without touching the treaty, as well bailed-out Ireland will be presenting The pension reform will reportedly reduce a 1.8-trillion-euro debt moun-
ic reforms to tackle their debt problems est in averting a euro zone meltdown, US as steps that would require amend- an eye-watering 2012 austerity budget. increase the number of years that tain.
and restore investor confidence. Treasury Secretary Timothy Geithner ments, aides said. Italy has become the centre of the Italians have to pay their dues to About half of the overall package
World financial markets rallied last will visit Frankfurt, Berlin, Paris, European Parliament President Jerzy debt crisis since yields on its 10-year receive a full pension from the current is expected to be used to cut the
Marseille and Milan from Tuesday — Buzek warned last Friday that treaty bonds shot up above 7 percent, levels at 40 years and bring forward an budget deficit and help balance the
week on the prospect of such a master- increase in the women’s pension age. budget by 2013 despite the economic
plan after ECB chief Mario Draghi sig- his fourth trip to Europe since early change could be divisive and “danger- which Greece, Ireland and Portugal Monti’s technocratic, unelected downturn and rising borrowing costs.
nalled that in response to a new “fiscal September – to urge key European offi- ous”. But diplomats say it is a political were forced to seek EU/IMF help. government was installed after his The other half will free up
compact” in the euro zone, the central cials to take decisive action. must for Merkel. Government sources say Monti’s flamboyant predecessor Silvio resources to try to regenerate Italy’s
bank could act more decisively to fight Sources close to German Chancellor Veteran former German Chancellor mix of cuts and tax rises will total some Berlusconi was forced out by a parlia- chronically stagnant economy, which
the crisis. Angela Merkel say she is prepared, Helmut Schmidt, 92, urged Germans 20 billion euros ($27 billion) over two mentary revolt from his own party’s is widely expected to go into reces-
A convincing show of political deter- despite hostility from the German on Sunday to soothe growing fears of years. About half will go to reduce the ranks and a wave of panic on finan- sion next year.
mination to stand behind the euro and Bundesbank, to see the ECB step up German dominance in Europe and help deficit and balance the budget by 2013 cial markets. Changes to pensions will be key in
surmount the crisis through closer euro buying of troubled states’ bonds as a rescue debt-stricken euro zone part- despite an economic downturn and ris- The former top European Union the new reform plan, with eligibility
zone integration could prompt the ECB short-term bridging measure until ners, warning that Berlin faced isola- ing borrowing costs. commissioner, who is a widely- requirements toughened up for so-
to do more to support Italian and stricter budget controls take hold. tion otherwise. Regenerate respected free-market economist, has called seniority pensions which are
Spanish bonds, cementing that reversal But things may not go entirely For British Prime Minister David raced to shore up support for his based on a combination of workers’
of market sentiment. according to plan. Cameron, the choice is between The rest will free up resources to try reforms from across the political age and the years for which they have
“It all comes down to what the ECB Merkel visits French President enraging eurosceptics at home by let- to regenerate Italy’s recession-bound spectrum and from Italy’s powerful paid contributions.
does, and whether political leaders pro- Nicolas Sarkozy in Paris on Monday to ting treaty change go ahead without economy. trade unions. The minimum number of years
duce a sufficiently convincing plan to outline joint proposals on economic winning a return of key powers to On Tuesday, the Greek parliament is He has emphasised the need for workers have to pay contributions is
give the ECB a basis to intervene,” a governance, but Berlin and Paris still London, or seeing the 17 euro zone due to give final approval to a dracon- “sacrifices” but also says he will aim set to go up to 42 years for men and 41
states reach a separate agreement out- ian 2012 austerity budget that is a con- for “social equity” and want to ensure years for women from its current level
senior EU government source said, have significant differences about how the reforms help boost economic of 40 years. Inflation indexing will be
speaking on condition of anonymity to the euro zone would control national side the treaty that could cement a dition for a second bailout package still
two-speed Europe. under negotiation with private credi- growth including possible infrastruc- cut back, leaving only the lower
respect the independence of the central budgets. ture projects and lower taxes on brackets of pensions fully indexed.
bank. Merkel wants to empower the execu- Germany and France want to short- tors, euro zone governments and the
IMF. labour. Economists are worried that Susanna Camusso, leader of Italy’s
tive European Commission to veto circuit the complex treaty amendment
Confidence procedure by wrapping the new budget On Wednesday and Thursday, cen- the toxic mix of high borrowing costs, biggest union CGIL, said the reforms
national budget plans that breach EU massive debt and low growth could would be an “extremely heavy blow”
However, if the 27-nation EU is limits before they go to parliament, procedures into a single amended pro- tre-right leaders who control most EU
unable to agree, or settles for another push Italy towards insolvency within for pensioners and said she would
with automatic sanctions for deficit tocol 14 on the euro zone. They hope to governments meet in Marseille, months. propose that parliament make some
half-measure after months of dithering, sinners and the possibility to take seri- avoid a parliamentary convention and France. That will provide the platform The government has denied per- amendments.
the flight from euro zone bond markets al offenders to the European Court of spare most, if not all, countries the need for incoming Spanish Prime Minister sistent rumours that it is preparing to Planned cuts to the national health
may accelerate, confidence may ebb Justice for punishment. for a referendum on ratification. Mariano Rajoy to outline his commit- accept a credit line from the service budget are expected to be
further and the crisis could become That has outraged some lawmakers ment to radical budget cuts and eco- International Monetary Fund (IMF), accelerated by one year, to reduce
acute in January, when Italy has to start Powers who say the EU’s major powers are nomic reforms to restore Madrid’s par- following in the wake of bailouts for spending by 2.5 billion euros in 2012
a massive refinancing campaign. Sarkozy, struggling to win re-elec- sidelining national parliamentary budg- lous public finances. fellow eurozone members Greece, and 5 billion euros from 2013, a local
The chief executives of leading tion next May, wants euro zone leaders et sovereignty without any democratic It will also give “Merkozy” — as the Ireland and Portugal. government source said.
Dutch multinationals published a joint to have the final say, with no new accountability. Franco-German leadership team has But the IMF and the EU have been Graziano Delri, head of Italy’s
newspaper ad warning it was now “one supranational powers for EU institu- In their defence, Paris and Berlin become known — a last chance to keeping Italy under special surveillance local government association, said
minute to midnight” for the euro zone. tions. argue the debt crisis is an emergency lobby reticent partners, with Geithner through teams of auditors to ensure it 10-11 billion euros would be raised
“There is almost 1,000 billion euros Several other governments, notably that requires swift executive action to in the wings, to accept treaty change as implements long-delayed reforms and a from property taxes, with the reintro-
in refinancing that needs to be done Britain, Ireland and the Netherlands, do avert disaster, and that member states a crucial part of the long-term plan to reduction in a debt mountain equivalent duction of a tax on principal resi-
next year, while the risk premium on not want treaty change at all because of already signed up to the budget rules in secure the euro before the summit to 120 percent of output. dences that was scrapped by
interest rates is increasing strongly. the domestic political risks. Some fear the 1992 Maastricht Treaty. starts with a dinner on Thursday France and Germany have said that Berlusconi.
That means that it will be almost it would be hard if they have to win New Prime Minister Mario Monti evening.