European Union Economic and Monetary Affairs Commissioner Olli Rehn yesterday said the region will toughen debt-crisis defences to guard against future risks.
“The key thing now is to conclude the comprehensive crisis response,” Rehn told reporters today in Saariselkae, Finland. Rehn said he trusts that euro-area finance ministers “will take a convincing decision on the reinforcement of the firewalls” next week.
Olli is still a little vague about how that’s going to happen. For those not keeping a running total on the amount raised on the ‘open’ market so far, it’s 8 billion euros…some of which the ECB bought itself to get things rolling. The amount required will be roughly a trillion euros when Spain either implodes or defaults or just ups and leaves the eurozone.
Then there is the Berlin problem. They don’t want to expose any more real money, and the Karlsruhe Court will probably get heavy even if they try. Tricky, all of that.
Europe has so far set aside a total of 500 billion euros as firewall money. As shown in previous Slogposts, they haven’t used any of it to ‘bail out’ Greece. The FT insisted at the weekend that the EFSF temporary rescue fund ‘has disbursed 192 billion euros in three bailouts’, but it hasn’t actually. So scared is Draghi that the EU + tiny input from the IMF won’t be anywhere near enough, he used funny-money for the second Greek baled-not-out.
The ESM + EFSF totals rolled together come to about 730 billion euros now – if one includes the 8 billion ‘raised’ last week. So if the EU did that every week, it’d have another 320 billion by Christmas. But it won’t do that, and anyway there are not enough daft people on the planet to raise a fraction of that. So somehow, the rest will have to come from taxpayers.
They certainly won’t be German taxpayers: Bankfurt, Karlsruhe, Schauble and the voters will see to that.
Ergo, this week push is about to come to shove.
Immediately after spouting this drivel, Mr Rehn flew down to Spain and gave another master class in saying two opposing things at once. Getting off the plane, he announced his assessment: he was “fully confident” Spain will meet the fiscal target in 2013….which is already worse than the one Brussels set.
Happy to join in, Mendez de Vigo, Spain’s minister for European affairs (who has no financial expertise at all) added, “We’re going to do it. We’re on the way and we’re serious. We’re going to give our word.” The gist of his remark was clearly that giving one’s word was the clincher to make things happen, but obviously unconvinced by this, Olli Rehn changed tack at the next news conference, arguing that Spain would only retain market confidence by sticking to EU-mandated deficit targets, and there better not be any more backsliding or else so just watch it.
I thought his use of the word ‘retain’ was laughably optimistic, but not as cloud-cuckoo as the deficit target – given that every single indicator in Spain points to recession, rapidly rising unemployment, falling tax returns and further drops in housing values.
Two biggawiggas lived/ Upon a mountain top/ they ran about all day/ Because they could not stop. (Lear)