AMERICAN FUTURE

From El Pais (Google translation)

Rajoy denies that the bank rescue to impose conditions on the economy

The president avoids triumphalism and ensures that the agreements of the EU summit has strengthened the euro

Mariano Rajoy has learned the lesson. Following the European Council which has garnered the most international success so far, the Spanish prime minister has been more cautious than ever. If the June 10, after the Eurogroup approve the rescue of Spanish banks, boasted of having put pressure on their partners , today denied the existence of pressure, although with Italian Prime Minister, Mario Monti, blocked Thursday afternoon the approval of the plan for growth in the amount of 120,000 million to be given to stabilizing the financial markets. Rajoy has good reason to be cautious. His previous acts of arrogance angered his partners and, in addition, there are still too many loose ends to tie before declaring victory. Although the Spanish prime minister insisted on repeating that there will be strict conditions on the agreement reached on Thursday, as ECB President, Mario Draghi, the presidents of the European Commission Jose Manuel Durao Barroso and European Council, Hermann Van Rompuy reiterated in speeches that will be.

Therefore, in the press conference has been offered at the end of the European summit, Rajoy has insisted that it is a European triumph, rather than Spanish. ”The Council has launched a clear political signal,” he said, refusing to go into detail, arguing that “the most important is that the agreement strengthens the position of the euro , which today is stronger and more credible than yesterday, other minor issue. ”

But it is not irrelevant issues. The president has said that the agreement to recapitalize Spanish banks, currently under negotiation, “there is macroeconomic conditions” affecting the whole economy. However, the agreed text early this morning by the leaders of the 17 euro countries are said to aid the financial sector, amounting to 100,000 million, will include “the appropriate conditionality”, at the individual entity of each sector “or throughout the entire economy.” Both the European Central Bank President (ECB) and German Chancellor Angela Merkel have stressed the importance of these conditions are met.

Once the ECB supervisor assumes the status of single European banking system, the rescue of Spanish banks from the current European Financial Stability Fund (EFSF) to the new European Stability Mechanism (MEDE), and in that time, no will require that the Spanish state, through the Bank Restructuring Fund (FROB), is involved as an intermediary and guarantor, thus breaking the vicious circle that links the public debt with the banks. Rajoy has been assumed that this change will occur before the year ends, but the Eurogroup agreement only says that the European Council will consider it within that period, without venturing a date for its implementation. What has become clear is that the MEDE not have the priority creditor status, a requirement that had scared off potential investors, since relegated time to collect their debts.

Although the agreement allows for use “in a flexible and efficient” two European bailout funds-the provisional and the final-to stabilize financial markets by buying Spanish and Italian debt to halt the escalation in the risk premium , Rajoy ruled out recourse to this instrument. ”We did not consider anything in this regard,” he assured. The truth is that it is in this chapter that has had its greatest setback. The Spanish prime minister supported the proposal of the Italian Prime Minister for the fund to intervene in the secondary market debt whenever the risk premium exceeds a certain level, without carry macroeconomic conditions attached. The agreement, however, makes the intervention of the fund to implement the recommendations of the European Commission and the commitments made ​​by each country and notes that these requirements should be reflected in a Memorandum of Understanding, which is a rescue plan in all rule.

Maybe that’s why Rajoy has not even want to venture that the European Council agreement will relieve the pressure on Spanish debt, which this morning has begun to reposition themselves relaxing then on the threshold of 500 points. ”To me the concern now is to try to do things right,” he responded.

While denying that there are macroeconomic requirements, Rajoy has made ​​clear that the Government will continue its fiscal consolidation program, consolidation of public finances and structural reforms. And not just for “the commitments made ​​with partners” in Europe, but also because it responds to “deep convictions”. Rajoy has even refused to rule that before approving vacation one to rise in VAT , in line with the amount claimed by the European Commission. ”If we take a stand, do not worry that you will know,” he replied wryly.

From Corriere Della Sera (Google translation)

“FOR ITALY, THE BREAKEVEN BUDGET REMAINS FIXED AT 2013 ‘. DRAGONS ‘TANGIBLE RESULTS’.

EU summit, there is the agreement: 120 bln for growth Mountains satisfied Merkel: “Success”

The Eurogroup opens to an anti-spread. The Prime Minister: “Got what we wanted, but now I ask the shield”

BRUSSELS – The agreement was reached on the night: EU leaders reached agreement on direct recapitalization of banks and the role of money-saving state.Eurogroup leaders “have opened the possibility that countries use the funds saved were virtuous and ESFS ESM stability to reassure the markets.” This was announced at 4 am was the President of the EU Council Herman Van Rompuy , that during the final press conference, “spoke of a difficult and fruitful meeting, during which it was approved a pact for growth and employment can mobilize more than 120 billion euros.”

This is mainly a victory for Italy and Spain, who had made ​​common to Europe asking for greater willingness to reach out to countries ‘virtuous’, while addressing problems that recessive or budgetary consolidation measures, and have adopted policies cope with the crisis. And, conversely, is a surrender of Germany, although German Chancellor Angela Merkel , who also had German sources described as “irritated” with Rajoy, but especially with Mountains, at the end made ​​the best of a cattvo game: “We got what we wanted and achieved good results on ESM and EFSF tools, a good base to work. ”

MONTI: “NEXT STEPS” - The Italian Prime Minister Mario Monti said similar words: “We met, we got what we wanted.”But in the case of Italy it is a position actually corresponds to the mood of the delegation of government. ”In these two days we have made ​​significant progress – said the president of the Council -. Steps that correspond to those much that Italy has long maintained: it was adopted a pact for growth and employment, which contains important measures both at national and European level. “ ”We’re doing a little ‘action to promote in other countries – he added a number of Palazzo Chigi – the idea, but not always natural to us as such, including synergy between fiscal discipline and measures for growth ‘.”We are confident – said Monti – that this vision pervade all economic policies, even the French had made, especially in election period, with accents in the limelight a little ‘different’.

“BUT WE DO NOT ask” - The Prime Minister further reiterated that Italy has no intention of asking the European coverage of the shield as soon relieved. At least not for now: “In the future, should serve as a form of encouragement for the economy, does not exclude the possibility that Italy might ask.But not now. “ Monti has also confirmed that for Italy the goal of a balanced budget is set at 2013, and currently the Executive does not expect to make additional financial maneuvering on site. ”The situation of the Italian economy is heavy – he admitted the Premier – and I never thought to turn it into the light in a few months, even as the government first had to give tools and carry out measures, from pension reform to that of work, that the political system was not up to that time managed to accomplish.”

THE SATISFACTION OF DRAGONS AND BARROSO-Satisfied with the result is called the European Central Bank president Mario Draghi : “results were achieved in the short term. The exemption of the preferred creditor status for Spain is one of those results. “ ”The future possibility of using the ESM to recapitalize the banks directly, something that the ECB calls for some ‘time, is also a good result – he stressed -. And we must keep in mind that all these things, to be credible, should be accompanied by strict conditionality. This is essential. “ For the Commission President Jose Manuel Barroso, the summit was a step towards a true monetary union of the Eurozone. Also according to Barroso, “EU leaders have been able to take measures of short and medium term, unthinkable until a few months ago.”

MERKEL IS HAPPY FACE - The German chancellor says so pleased with the outcome. In the press conference after the summit, Merkel hailed the appointment of Brussels’ a success on all fronts, served to stabilize the markets. “ But then he explained: “My position has not changed on Eurobond.” And the application of the States-saving interventions and anti-spread told to trust in particular in the European Central Bank: “We have great confidence in the ECB because it is an independent body and has interest in having a bank safe.” On the line of Merkel and French President is also the Dragons Francois Hollande , who spoke of “a good meeting,” in which he found “a global agreement” with “measures that will be quickly put to work.”

MEASURES TAKEN - With the approval of the shield anti-spreads, Italy hopes to avoid a “black Monday” at the reopening of markets: while not dovendolo immediate use, the mere existence of ‘”umbrella” Europe puts the country in a position markets and to better address their speculation. As with the opening on direct recapitalization of banks, Spain hopes to be able to receive aid up to EUR 100 billion to help its banks without the public debt to rise. The agreement “will be implemented by the Eurogroup in the very short term, by 9 July,” when they established the criteria for application.Countries that respect the stability pact and recommendations, it was decided, “not have to adhere to the monitoring of the troika,” but will continue to fulfill our commitments.

THE NEGOTIATION - Italy has struggled during the negotiations by pointing your feet and saying he was determined not firmareinsieme to Spain, the pact on growth when they were not introduced measures to contain the spread. Thursday evening van Rompuy speaking for the first time reporters had to admit the difficulties, while denying “a veto Italian.” Then it was the French president François Hollande to clarify a few hours later, that EU leaders had reached agreement on the pact for growth and jobs, but that Rome and Madrid had decided to postpone their signature.

AGREEMENT - But in the end the reserves of Italy and Spain have been taken: to proclaim it was Prime Minister of Luxembourg Jean-Claude Juncker, the past 4 am, at the end of the Eurogroup meeting. ”We affirm that it is imperative to break the vicious circle between banking and sovereign debt.”

So much for my previous post. And, yes, I’m surprised at the outcome.

The Euro Area Summit Official Statement (Full Text)

We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. [Key point] This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding. The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally.

We urge the rapid conclusion of the Memorandum of Understanding attached to the financial support to Spain for recapitalisation of its banking sector. We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status. [Key point] We affirm our strong commitment to do what is necessary to ensure the financial stability of the euro area, in particular by using the existing EFSF/ESM instruments in a flexible and efficient manner in order to stabilise markets for Member States respecting their Country Specific Recommendations and their other commitments including their respective timelines, under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalances Procedure. These conditions should be reflected in a Memorandum of Understanding. We welcome that the ECB has agreed to serve as an agent to EFSF/ESM in conducting market operations in an effective and efficient manner.

We task the Eurogroup to implement these decisions by 9 July 2012.

Links:

http://www.bloomberg.com/news/2012-06-29/eu-leaders-ease-debt-crisis-rules-for-spain-as-merkel-retreats.html

http://online.wsj.com/article/SB10001424052702304830704577494693764255190.html?mod=wsj_streaming_stream

http://www.bbc.co.uk/news/world-europe-18620965

http://www.reuters.com/article/2012/06/29/us-eurozone-idUSBRE85O0CS20120629

http://www.nytimes.com/2012/06/29/world/europe/european-union-meeting-opens-without-french-german-accord.html?hp

Nothing as yet from the FT.