Category Archives: Euro

(DW) European Central Bank unveils new €100 and €200 banknotes

(DW) The European Central Bank has said the new notes will include the latest anti-counterfeiting features and come in a slimmer size. The new €100 and €200 bills are slated to go into circulation across the eurozone by May.

Presentation of the new banknotes (picture-alliance/dpa/H. Punz)

The European Central Bank (ECB) unveiled the new €100 and €200 notes to the public at its headquarters in Frankfurt on Monday.

Like other bills in the second-generation “Europa” series, introduced in 2013, the new banknotes will include different holograms in a silver strip and an “emerald number” showing the denomination.

The new bills have also been updated to include the latest anti-counterfeiting features, including an improved “satellite” hologram of small euro symbols, while also being reduced in size to match the height of the €50 bill. That means notes will only be distinguishable by their length, with the longer ones bearing a higher value.

The new €100 and €200 banknotes are unveiled at the ECB headquarters in Frankfurt (Reuters/K. Pfaffenbach)The new euro notes are tipped to come with the latest security and anti-counterfeiting features

ECB board member Yves Mersch told reporters in Frankfurt that green €100 banknotes make up some 23 percent of the value of paper money in circulation in the eurozone, making them “not just a niche product and also not just a rich (person’s) product.”

Despite the increasing use of electronic payments, Mersch said Europeans remained attached to paper money. Banknotes, he said, were “the most inclusive payment method” since they do not require special equipment and are equally available to all, including the elderly, handicapped and minors.

Nevertheless, more than a million cash machines across the 19-member eurozone will have to be adjusted before the new notes go into circulation in May next year. The older notes will remain legal tender but will gradually be phased out from circulation.

(EUobserver) No plans for digital euro, Draghi says

(EUobserver) European Central Bank (ECB) chief Mario Draghi has said the eurozone was not looking to create a digital currency. “The ECB and the eurosystem currently have no plans to issue a central bank digital currency,” he said in a letter to an MEP on Friday, Reuters reports. Such technologies “require substantial further development” and there was no “concrete need” for a digital euro, he added.

(KTG) Dijsselbloem: Greece should have been grateful to European aid, kept mouth shut

(KTG) Greece should have been grateful to European aid and kept its mouth shut, the former chief of Eurogroup Jeroen Dijsselbloem said more or less in an interview on Saturday. He has clearly not recovered yet from the traumatic experience with former Greek finance Minister Yanis Varoufakis. At the same time and after three painful bailout agreements that increased the debt and pushed millions to impoverishment, Dijsselbloem dared saying that  “Greece is obviously not a success story, demands on Greeks were to heavy” and that the Greek “crisis has been so deep, that you can’t call it a success”

Euro zone countries have asked for too much from the Greek people in return for international bailout loans, former Eurogroup chief Jeroen Dijsselbloem said in an interview on Dutch television on Saturday.

“On reforms, we have asked a lot from the Greek people, too much,” Dijsselbloem told current affairs program Nieuwsuur. “Reforms are hard enough to accomplish in a society with a well-functioning government, but this was obviously not the case in Greece.”

“Greece is obviously not a success story,” Dijsselbloem said. “Their crisis has been so deep, that you can’t call it a success.”

At the same time, in the usual North European arrogance, he said that Greece should be grateful for the help it received and keep its mouth shut.

Speaking about former ex finance minister Yanis Varoufakis, Dijsselbloem has obviously not recovered from the traumatic experience in front of the cameras in February 2015 in Athens.

Politics is just a tricky job, you have to compromise, Greece was dependent on help from others, and then to put a big mouth against the people who help you … We set conditions for that. Disagree, but you can not raise a big finger at them,” Dijsselboem said.

Is Dijsselbloem such a political naive to believe that Varoufakis was acting on his own and that Prime Minister Alexis Tsipras did not agree with the negotiation policies in the first half of 2015? Apparently….

Does Dijsselbloem who blindly followed the strict austerity orders by German finance Minister Wolfgang Schaeuble during 2013-2018, now show some kind of remorse? Hardly.

He is one – yet another one – self-righteous, thin-weight man who found himself in a powerful position and who now has nothing else to do than write a book about his glorious past, when he was at the spotlight of media.

He and his Labor party were defeated big in the Dutch parliamentary elections last year and is set to publish a book on his time as head of the Eurogroup.

The book has the title “The Euro crisis the story from the inside” or else “The Animal Farm of Eurogroup and EU solidarity.”

The man who had nothing to say during his term as Eurogroup chief, suddenly has found his tongue and keeps giving interviews whenever sees a microphone in front of him.

In an interview last week with Greek daily tanea, Dijsselbloem also admitted that mistakes were made by the Europeans in handling the Greek crisis, saying that they initially experimented and it took four years for them to stand on their feet and set up mechanisms to confront the crisis.

He conceded that a different policy should have been implemented in Greece, as the bailout programmes were very strict, and their implementation was very difficult. He noted, however, that Greek politicians made many mistakes before the crisis.

The former Dutch Finance Minister who has zero knowledge about finances and who turned Eurogroup chief thanks to Schaeuble went so far to blame on Germany for its delay in accepting the need for collective European action, with the implementation of bailout programmes in countries that were in danger.

Greek Sunday newspaper Documento has also in interview with Dijsselbloem today.

The former eurogroup chief accuses PASOK and New Democracy saying “intermingling interests were enjoying protection by the previous governments.

(CNBC) Greece ends nearly 10 years of bailouts — this is what it means


  • The yield on the 10-year Greek bond is at about 4.3 percent — the highest across the region.
  • Analysts have pointed out that Greece ends this third rescue with a “massive cash buffer”— meaning that it won’t need market help for nearly two years.

Monday is an historic day for Greece as nearly a decade of external financial help comes to an end.

The Syriza-led government has managed to end a third bailout rescue, implementing all the measures demanded by creditors, despite earlier doubts whether the inexperienced party would manage to complete the arduous task.

“Today we celebrate the end of a very long and difficult journey,” European Commission Vice President Valdis Dombrovskis told CNBC via email.

“What matters now is to build on this achievement by sticking to sound fiscal and economic policies,” he added.

However, some analysts argue that this is more a “symbolic” moment and there is plenty yet to do to improve the Greek economy. “Both the EU and the Greeks will try to put a positive spin on the end of the bailout, but there is little to celebrate,” Constantine Fraser, European analyst at research firm TS Lombard, told CNBC via email.

CNBC looks at what the completion of Greece’s third financial rescue means and how markets are set to react.

What does ending a bailout program mean?

As of Monday August 20, Greece will be a self-financing nation, so will no longer receive regular financial tranches from its European creditors.

As a result, whenever Athens finds it suitable, Greece will be able to tap financial markets to fund its activities — just like any other country in a relatively healthy economic situation.

Why is it important?

The first time that Greece asked for financial help was in 2010, when the country’s public debt pile became so high that investors were no longer willing to keep financing Athens.

Since then, Greece has relied on European creditors and the International Monetary Fund (IMF) to keep its finances afloat. The financial crisis was perpetuated by a number of political events, including the historical spat between former finance minister Yanis Varoufakis and other euro zone finance ministers.

As a result, Greece is the last country in the euro zone to end a financial assistance program on the back of the sovereign debt crisis. Portugal, Ireland and Spain (Madrid only requested some help towards its banking system) have all came back from the brink.

After eight years of economic turmoil, Greece can finally claim financial independence. And European institutions are also happy to officially turn the page on the financial crisis that seriously dented the continent’s economy.

How will the markets react?

“On Monday, there might be some positive movements in Greek bond markets, responding to a feelgood factor on the day, but I’d expect most of the news to already be priced-in by now,” Fraser from TS Lombard said.

The yield on the 10-year Greek bond is at about 4.3 percent — the highest across the region.

Premium greece woman 180518 EU
Sakis Mitrolidis | AFP | Getty Images

Analysts have pointed out that Greece ends this third rescue with a “massive cash buffer”— meaning that it won’t need market help for nearly two years.

This buffer stands at 24.1 billion euros ($27.4 billion), thanks to money that Greece put aside during the financial program and tranches from European creditors. The amount is expected to cover all sovereign needs for the next 22 months. This means that Greece won’t have to tap the markets in the coming year-and-a-half, unless it thinks there are favorable conditions to do so.

“Greece has build up a massive cash buffer, so they wont have to tap bond markets, in theory, for roughly two years. So the end of the bailout programme on Monday should not have an impact on the bond yields,” Carsten Hesse, European economist at Berenberg, told CNBC.

Nonetheless, he warned that there could be some contagion risks from other market events that could affect the performance of Greek bonds on Monday.

On the back of the ongoing economic turmoil in Turkey, Greek bonds saw “a little bit of contagion last week,” Hesse said. “But luckily, Greek banks have very, very little exposure to Turkey and trade between Turkey and Greece is also little. So, in theory, there should not be an impact (in the bond market).

“The threat is more politically. If a larger part of the (exiled) 3.5 million Syrians would come to Greece due to a potential massive crisis in Turkey, it would be a big political problem for Greece and could impact the standing of Prime Minister Alexis Tsipras.”

Greece is one of the main arrival points of Syrian refugees, which has caused several controversies at the European level. The EU made a pact with Turkey to stem the number of refugees crossing to Europe — something that could be at risk if the economic crisis there exacerbates.

Other analysts nonetheless, argue that Greece has yet to rebuild its reputation.

“Now Greece needs to bring confidence to the markets both by political actions and by the country’s gradual exit to the markets,” Constantinos Zouzoulas, head of research at Axia, told CNBC via email on Saturday.

Nevertheless, in the short term, and despite the program exit, Greek government bonds most likely to continue to be impacted by the turmoil in the neighboring countries, since, although not directly exposed, Greece is seen as a weak link, ” Zouzoulas added.

How’s the future for Greece looking?

“It is a historic day for Greece and will likely be used heavily by the current government coalition, with a view on the 2019 parliamentary elections,” Ricardo Garcia, chief euro zone economist at UBS, told CNBC via email.

Ahead of a general election next year, Tsipras will want to sell this moment as a key milestone that he and his party managed to achieve. Syriza is currently second to opposition party New Democracy in opinion polls — a position that the left-leaning party wants to reverse.

”(The end of the bailout) should also strengthen business and consumer confidence in Greece, as well as entice more foreign direct investment,” Garcia said.

After a decade of economic turmoil and about 260 billion euros in bailout money, Athens seems to be slowly returning to growth. It registered a positive growth rate of 1.4 percent in 2017, after contracting 0.2 percent in the previous year.

According to forecasts from the European Commission, the country is set to grow 1.9 percent in 2018 and 2.3 percent the year after. But Garcia, like other analysts, warned that “there is much more to be done, looking, for example, at competitiveness rankings.”

“However, Greece has already made a huge adjustment on the fiscal and current account side,” he added. “Nonetheless, it is important that fiscal discipline remains in place, and that reforms continue.”

(EUobserver) Euro hit by Turkish lira crisis

(EUobserver) The Turkish lira dropped almost nine percent in early trading on Monday and the euro hit a one-year low as investors feared Turkey’s financial crisis could spread into European markets. The lira has lost more than 40 percent of its value this year on worries over president Recep Tayyip Erdogan’s economic management. Erdogan accused foreign countries of waging war on Turkey and said he would respond with trade measures.

(CNBC) US tariffs are an ‘unnecessary test’ to Europe’s economic recovery, top finance chief says


Mario Centeno, Portugal's finance minister and head of the group of euro-area finance ministers, listens during a press conference following a Eurogroup meeting in Brussels, Belgium, on Monday, Jan. 22, 2018. 

Mario Centeno, Portugal’s finance minister and head of the group of euro-area finance ministers, listens during a press conference following a Eurogroup meeting in Brussels, Belgium, on Monday, Jan. 22, 2018.

Higher trade tariffs coming from the U.S. are not what the euro zone needs right now following several years of a promising recovery, a high-ranked European official told CNBC.

The 19-member region that shares the single currency has been growing at a gradual pace over the last two years following a sharp downturn due to the sovereign debt crisis of 2011. But the current threat of higher tariffs with key trade partners, especially the U.S., could prove a challenge for the euro area’s fragile recovery.

“This is a major risk that we see for the global economy and certainly for the relationship between the U.S. and Europe,” Mario Centeno, who heads the group of 19 finance ministers for the euro area, told CNBC Wednesday, speaking on increased duties coming from the U.S.

The region grew at a rate of 2.4 percent in 2017 — an expansion not seen in about a decade. However, the economic momentum has cooled down in the start of 2018 — something that higher trade barriers could dampen further.

“We don’t know exactly how it will evolve, but I agree with those that see this process as an unnecessary test to the economic recovery, and actually to the (economic) expansion that our economies were experiencing,” Centeno said.

He added that right now it is important to work toward a limit to the tariffs both in scope and duration.

Greek bonds now less risky, Eurogroup president says

Greek bonds now less risky, Eurogroup president says  

The European Union is currently studying ways to prevent an escalation in trade tensions with the White House. Media reports earlier this week suggested the EU could propose a deal to the world’s biggest car exporters and thus prevent wider ramifications in case President Donald Trump moves ahead with a 25 percent tax on European carmarkers.

The International Monetary Fund (IMF) also warned in June that higher trade tariffs are the biggest single risk to the euro zone economy. IMF Managing Director Christine Lagarde told CNBC that the problem now is not the direct economic impact of higher duties, but “the breach in confidence that undermines the relationship” between both the U.S. and Europe.

Lagarde also warned that if the trade tensions escalate further, then the direct impact on the economy will become more substantial.

Until now, Trump has only raised tariffs against the EU on steel and aluminum exports. However, more recently, Trump threatened to put a 25 percent added tax on European cars.

The EU is the largest exporter of motor vehicles in the world, whereas the United States is the largest importer of motor vehicles in the world.

Correction: This article, including the headline, has been updated to correct a quote from Mario Centeno where he stated that tariffs would be an unnecessary test to the euro zone.

(CNBC) SocGen chairman calls on regulators to help strengthen Europe’s banks 


  • The French lender announced the acquisition of the equity markets and commodities arm of the German firm Commerzbank last week.
  • Consolidation may not always the best strategy for these banks, Elisabeth Rudman, managing director at DBRS said.

Chesnot | Getty Images News | Getty Images

The chairman of Societe Generale said Europe‘s banking space should follow in the footsteps of the U.S.’s, calling on regulators to facilitate more consolidation in the region.

Speaking to CNBC over the weekend, Lorenzo Bini Smaghi said that European banks need to become more concentrated, so they can compete with American lenders.

“In general if we look at Europe, obviously there are too many banks and it’s too fragmented so I think Europe needs to move in a direction of more concentration to help better the real economy. If we compare (it) to the U.S., we’ve seen this process of concentration 30 years ago,” Smaghi told CNBC’s Charlotte Reed.

The French lender announced the acquisition of the equity markets and commodities arm of the German firm Commerzbank last week. The deal, which still needs to be cleared by regulators, is an attempt to have a larger presence in the German market at a time when Deutsche Bank is re-defining its strategy, after recent turmoil and management changes.

According to Smaghi, the transformation of European banks “has to come.”

“And of course as chairman of SocGen I can say that we will be a protagonist in this process. But this requires for things to happen on the regulatory side.”

“I’m not suggesting anything at this stage, just that we need more concentrated and larger banks able to compete with the American banks,” he said on potential new mergers.

SocGen chairman: You don't get to a fairer system by raising barriers

SocGen chairman: You don’t get to a fairer system by raising barriers  

On Friday, reports suggested that J.P. Morgan and the Industrial and Commercial Bank of China were looking to buy Deutsche Bank, which was promptly denied. In June, another French bank, BNP Paribasbought the asset manager DWS, which was owned by Deutsche Bank. The move was also seen as an attempt to increase its presence in the German market.

However, according to Elisabeth Rudman, managing director at DBRS, consolidation is not always the best strategy for these banks.

“We’ve seen big cross-border mergers and acquisitions in the banking sector in the past and a lot of them did not turn out very well at all … (It’s) difficult to see that as a solution to everything,” she told CNBC’s “Squawk Box Europe” Monday.

“Europe is, in many ways, overbanked and there are still a lot of banks, some big banks and some small banks that are still struggling. But there’s not going to be an overnight solution,” Rudman added.

(ECO) Na Europa ganhamos todos – Mário Centeno

(ECO) Confrontamo-nos sempre com a mesma velha questão: seremos capazes de assumir o comando nos bons momentos ou vamos esperar por outra crise para mostrar a nossa força?

Esqueçamos os céticos. A Europa está a ganhar. A crise pôs o euro à prova, mas o euro saiu mais forte. Quando discutimos medidas para fortalecer ainda mais a moeda única, confrontamo-nos sempre com a mesma velha questão. Seremos capazes de assumir o comando nos bons momentos ou vamos esperar por outra crise para mostrar a nossa força?

No auge da crise, não era evidente que o euro saísse ileso. A grande depressão trouxe dificuldades a muitos dos nossos cidadãos, reduziu a popularidade do euro a níveis recorde e precipitou uma partilha de recursos entre Estados-membros. Fomos apanhados desprevenidos, mas perante o perigo real, os líderes europeus escolheram sair das suas zonas de conforto para defender a nossa moeda. A criação de uma ‘rede de segurança’ para a dívida soberana de 500 mil milhões de euros – o Mecanismo Europeu de Estabilidade (MEE) – é provavelmente o exemplo mais claro deste esforço.
Não duvidem: a expansão económica que vivemos hoje é a recompensa.

Todas as economias do euro gozam de um crescimento sólido. Os legados da crise, como a dívida pública, os défices e o desemprego, caem a pique e de uma forma coordenada na zona euro, sem precedentes. De entre todos os países, a Grécia é talvez a melhor prova da nossa determinação. Após oito anos de ajustamento apoiado por 256 mil milhões de euros em empréstimos, a Grécia sairá finalmente do seu programa de assistência financeira este verão.

Paciência e determinação política são fundamentais. A paciência é o melhor antídoto contra populismos crescentes e extremos políticos. Defender o euro com instituições reforçadas é a solução mais barata para promover as nossas sociedades e economias num mundo em transformação. Tentámos outras soluções no passado, mas revelaram-se muito mais caras.

Esta nossa união económica e monetária ainda é um projeto inacabado. Nesse sentido, o Presidente do Conselho Europeu, Donald Tusk, pediu ao Eurogrupo que desenvolvesse soluções para completar a união bancária e reforçar o MEE. O progresso registado nas nossas discussões no Eurogrupo pode ser agora traduzido num conjunto de decisões quando os líderes se encontrarem em Bruxelas no final desta semana.

“É possível avançar na partilha de risco, uma vez que temos reduzido os riscos no setor bancário.”

Mário Centeno

Não se trata de um Big Bang: esse não seria o caminho mais eficaz para reformar o euro. Uma das propostas chave sobre a mesa é fazer do MEE uma rede de segurança de último recurso (‘backstop’) para a resolução bancária. Assim evitaremos de forma credível que bancos em dificuldade prejudiquem no futuro as nossas economias e os nossos contribuintes. Além disso, o MEE pode obter novas ferramentas para lidar com as crises soberanas. E, ao mesmo tempo, estamos prontos para abrir o caminho a discussões políticas no sentido de criar um sistema europeu de garantia de depósitos, de forma a evitar que uma corrida aos bancos se repita na Europa.

É possível dar passos no sentido de uma partilha de riscos, uma vez que temos vindo a reduzir riscos no setor bancário. Um relatório recente da Comissão Europeia, do Mecanismo Único de Supervisão e do Conselho Único de Resolução nota que, nos últimos anos, os bancos aumentaram significativamente as suas reservas de capital, ao mesmo tempo que reduziram o seu nível de endividamento e os stocks de créditos em mal parado. Estes últimos caíram a pique, um terço do total de créditos, desde o início da crise, em particular naqueles países em pior posição. No terceiro trimestre do ano passado, a média dos níveis de crédito mal parado ficou nos 4,4% do total dos empréstimos, mantendo-se a trajetória descendente dos trimestres anteriores. Os indicadores recentes mostram que essa tendência se mantém, e assim terá de continuar.

No mês passado, os Ministros das Finanças da União Europeia deram mais um grande passo no sentido de reduzir riscos ao obterem um acordo para uma posição comum no chamado Pacote Bancário. Isto inclui uma regra que estabelece a quantidade de capital subordinado que os bancos necessitam para absorver as perdas antes do recurso aos fundos de resolução.

Em retrospetiva, o nosso ênfase em desenvolver a união bancária e o MEE revelou-se uma abordagem correta. Permitiu-nos encetar um processo de reforma e reforçar confiança no sistema. Temos de prosseguir este caminho e também mostrar abertura a discutir outras áreas.

Nestes seis meses como Presidente do Eurogrupo, aprendi que cada país – incluindo Portugal – tem as suas próprias preferências neste debate. Para alguns, um instrumento orçamental ou um orçamento da zona euro é uma prioridade chave. Esta ideia tem levantado preocupações relativamente ao risco moral e a transferências permanentes, que não podem ser ignoradas e devem ser tidas em conta.

As propostas recentes da Alemanha e França, mas também as da Comissão, são um contributo positivo para a nossa discussão. Outros países devem também apresentar as suas próprias propostas de forma construtiva. Não podemos construir trincheiras em torno de linhas vermelhas na negociação. O sucesso do euro resulta da nossa vontade política e capacidade de liderança, combinando ousadia e pragmatismo.

Neste debate devemos igualmente estar conscientes dos custos de inação. Se formos incapazes de garantir uma zona euro mais forte onde todos os nossos países possam prosperar, o euro não será sustentável. E esse já não é um problema de alguns, é um problema de todos.

(BBG) ECB’s Job-Rich Recovery Shows Up in Portugal as Italy Struggles

(BBG) The European Central Bank’s choice of Portugal for its annual forum puts its officials in a nation that shows what can be achieved by cheap funding and a program of economic reform — and the limits.

Portuguese unemployment has dived since the euro area came out of a double-dip recession and debt crisis in 2013, and is now below the currency bloc’s average. The turnaround is partly due to economic reforms required as part of its 2011 bailout by the European Union and the International Monetary Fund, and partly because of the ECB’s ultra-low interest rates and bond-buying.

That’s likely to please ECB President Mario Draghi, who used his opening speech in the hilltop resort of Sintra to praise the euro zone’s “job-rich” recovery. It’s also in stark contrast to Italy, which avoided financial rescue but put off the structural adjustments that could have helped people back to work.

“I wish Italy had the same prospects as Portugal these days,” Italian-born Luigi Zingales, professor of finance at the University of Chicago Booth School of Business, said in a Bloomberg TV interview in Sintra. Portugal “went through a very tough time, they went through a program with very strict guidelines. But they are coming out of it.”

The country made hiring and collective bargaining more flexible, changes described by the IMF as crucial in facilitating the employment-driven character of the recovery. The reforms helped cut production costs in the country, increasing its competitiveness. That’s vital because membership of the euro means currency devaluation, which would largely achieve the same thing, wasn’t an option.

Italy, on the other hand, hasn’t managed to align wage growth with productivity, even after a controversial labor-reform package was introduced in 2015. Voters have now elected an anti-establishment government that plans to boost public spending despite having the highest debt burden in the region.

Portugal has managed to avert such a rise in populist sentiment, but the current Socialist administration is signaling that the pain of structural reforms has gone far enough. After taking office in 2015, Prime Minister Antonio Costa reversed state salary cuts, raised the minimum wage and reduced the working week for state employees.

That trend has raised some concerns at the ECB and the European Commission, which said in a joint economic assessment of the country last week that “it remains essential for policies to continue supporting the adaptability of the labor market.”

Only So Far

For central bankers, the country demonstrates that there is only so much they can do to help boost growth, particularly as gradually accelerating price pressures reduce the need for accommodative policy.

When Draghi put his institution last week on a gradual path toward halting its stimulus by ending net bond purchases, he also reiterated his call for governments to “substantially” step up structural reforms to boost growth potential.

The same goes for rebuilding fiscal buffers. Portugal is one of several countries at risk from tighter monetary policy because of a debt burden of about 126 percent of gross domestic product — behind only Greece and Italy.

(Xinhua) Markets look to ECB forum in Portugal for rates clues

(Xinhua) — A three-day European Central Bank (ECB) conference gets underway in Portugal on Monday as markets seek further clues regarding future interest rates rises.

Last week the financial markets reacted sharply to the ECB’s announcement that it would keep interest rates low until the summer of 2019, while phasing out its quantitative easing program by the end of 2018.

Bond traders sold euro paper in favor of U.S. dollar notes, European equity markets climbed and the euro fell against all the major currencies.

Some analysts viewed movements to be a slight over-reaction and so any indication from the ECB regarding future rate hikes may trigger a correction.

The ECB Forum on Central Banking, entitled “Price and wage-setting in advance economies” will be held in Sintra, a town 29 km northwest of Lisbon.

Proceedings begin with a welcome dinner for delegates Monday evening. After dinner, ECB chief Mario Draghi will offer the forum’s “Opening Remarks”.

Draghi is not expected to say anything market-moving, but his “Introductory Speech” on Tuesday morning will be watched carefully.

However, Wednesday afternoon will perhaps provide the most significant moment with a roundtable “Policy Panel” discussion featuring Draghi, Jerome Powell, the Chairman of the U.S. Federal Reserve, and Haruhiko Kuroda, Governor of the Bank of Japan.

(EFE) BCE debate em Portugal sobre preços e salários nas economias avançadas


Dirigentes de instituições financeiras, economistas e académicos participam a partir desta segunda-feira no fórum anual que o Banco Central Europeu (BCE) realiza em Sintra (Portugal), que este ano aborda os preços e a fixação de salários nas economias avançadas.

O presidente do BCE, Mario Draghi, vai abrir o fórum no fim da tarde em Sintra, antes da recepção e o jantar de gala.

Na cerimónia inaugural também está previsto um discurso do ex-secretário do Tesouro americano Lawrence Summers sobre a política monetária num contexto de baixa inflação e baixos juros.

Draghi vai voltar a discursar na terça-feira com um discurso introdutório antes da primeira sessão, dedicada aos aspectos macroeconómicos dos preços e a fixação de salários e presidida pelo membro do comité executivo do BCE Peter Praet.

Esta sessão irá contar com uma conferência sobre desaceleração e inflação sensível aos ciclos de James H. Stock, da Universidade de Harvard, e outra sobre as expectativas em torno da inflação de Yuriy Gorodnichenko, da Universidade da Califórnia.

A primeira sessão vai acabar com um painel no qual participam o presidente da Reserva Federal de St. Louis, Jim Bullard; o governador do Banco Central da Irlanda, Philip Lane; a professora do Massachussets Institute of Tecnology (MIT) Kristin Forbes, e o economista francês Charles Wyplosz.

O fórum irá continuar na quarta-feira com uma sessão centrada no preço e a fixação de salários do ponto de vista microeconómico, presidida por outro membro do comité executivo do BCE, Sabine Lautenschläger.

A sessão começa com as conferências do professor Aviv Nevo, da Universidade da Pensilvânia, sobre medir a inflação nas economias modernas; e de Uta Schönberg, da University College London, sobre crescimento da produtividade e os salários.

O economista da Comissão Europeia Tommaso Valletti; o chefe de mercados trabalhistas inclusivos da Organização Internacional do Trabalho, Philippe Marcadent; o presidente da Organização Global do Trabalho, Klaus Zimmermann, e a professora Erica Groshen, da Universidade de Cornell, vão fechar a sessão com um debate.

A reunião finaliza na quarta-feira pela tarde com um painel que vai juntar Draghi com o presidente da Reserva Federal (Fed), Jerome Powell; o governador do Banco do Japão, Haruhiko Kuroda; e o do Banco da Reserva Australiana, Philip Lowe.

A cidade de Sintra recebe há cinco anos este fórum do BCE, que replica um modelo que a Fed realiza desde 1978 na cidade de Jackson Hole, no Kansas.

(ZH) Euro Dumps Then Jumps On Conflicting Reports Of Merkel Government Collapse

(ZH) Yesterday we reported that the tenuous Merkel coalition government is in a crisis following a revolt of the junior coalition partner, the CSU, over Merkel’s immigration policies.

Specifically, as we said Merkel was facing a rebellion from her hardline Interior Minister Horst Seehofer, who demands that German border police be given the right to turn back migrants without identity papers or who are already registered elsewhere in the European Union.

This morning, the rebellion appeared to come to fruition when a report on a local radio said that Merkel’s Interior Minister Seehofer announced the end of the CSU’s allliance with Merkel’s CDU, effectively collapsing Merkel’s government. From Reuters.


The result was an immediate plunge in the Euro:

However, this was promptly reverse following subsequent reports by an unnamed CSU lawmaker who denied the report:


The Euro then promptly spiked:

With Reuters and Bloomberg making the following clarification:


It wasn’t just the Euro: Bunds rallied 32c higher with 13k contracts trading in a one-minute window on the initial report; the rally was trimmed however after German government spokesman denied the initial report.

So for now, Merkel’s government appears to be still in place, although it remains to be seen just how the CSU and CDU reach a compromise over the increasingly disruptive topic of immigration. If anything, the sharp EUR reaction showed just how great Merkel’s influence on Europe’s overall stability is. Of course, if Draghi really needs to crush the Euro, he now knows which European politician he needs to get rid of next.

(ECO) BCE termina estímulos no final do ano. Reduz compras para metade a partir de setembro

(ECOBCE anunciou hoje que vai reduzir as compras de dívida pública na Zona Euro para 15 mil milhões de euros por mês a partir de setembro, se inflação estiver robusta. Estímulos terminam no final do ano.

Banco Central Europeu (BCE) vai reduzir as compras de dívida pública na Zona Euro de 30 mil milhões de euros para 15 mil milhões de euros por mês a partir de setembro, isto se a taxa de inflação estiver em linha com o seu objetivo. Depois disso, o programa de estímulos monetários terminará no final do ano. Já os juros vão continuar em mínimos históricos até ao verão do próximo ano.

As decisões foram conhecidas esta quinta-feira, após nova reunião de política monetária do banco central liderado por Mario Draghi, que teve lugar em Riga, Letónia.

Está em marcha a normalização da política monetária na Zona Euro, depois do programa agressivo de compras de dívida ter adquirido mais de dois biliões de euros em obrigações desde março de 2015. No fundo, o BCE vai deixar de comprar dívida já no início do próximo ano e, a partir daí, apenas os reinvestimentos (com dinheiro dos títulos que foram vencendo) vão ajudar a conter os juros na região, um cenário que já era esperado pelos analistas. .

Adicionalmente, apesar de ter mantido os juros nesta reunião, o BCE deixou uma nova orientação quanto ao rumo das taxas na região nos próximos tempos. E os juros em mínimos vão continuar durante mais um ano, antecipa o banco central.

“O Conselho de Governadores espera que as taxas diretoras do BCE continuem nos seus atuais níveis até, pelo menos, ao verão de 2019 e, em qualquer caso, durante o tempo que for necessário para assegurar que a evolução da inflação permaneça alinhada com as expectativas atuais de um ajustamento sustentado da trajetória”, afirma a autoridade em comunicado.

Atualmente, a taxa de juro de referência, que determina o custo do crédito na economia da Zona Euro, está nos 0,0%. Já as taxas de juro dos depósitos no banco central permaneceram nos -0,4%.

Daqui a pouco, quando foram 13h30 em Lisboa, Mario Draghi vai comparecer perante os jornalistas para explicar as decisões tomadas esta quinta-feira. E são vários os pontos de interesse para acompanhar. O italiano vai apresentar novas projeções para a evolução da economia do bloco do euro. Além disso, a instabilidade política em Itália também deverá merecer a atenção da imprensa. Mas o tema central deverá ser mesmo o programa de compras de dívida pública.

(PUB) Euro: Hotel Califórnia? – Ricardo Cabral

(PUB) O “pai” do euro, principal arquitecto, foi o alemão Otmar Issing. O seu principal desafio era criar uma moeda única “irreversível” e, mais do que isso, considerada como irreversível, sem transferências orçamentais entre países membros, sem que o BCE estivesse obrigado a financiar os países membros quando estes fossem incapazes de refinanciar a sua dívida pública.

Welcome to the Hotel California

Such a lovely place


You can check out any time you like,

But you can never leave!‘”

Extracto da lírica da música Hotel Califórnia, dos Eagle, © Warner/Chappell Music

Uma leitura atenta do “plano B” de Savona et al. de 2015, que defende a saída da Itália da zona euro, revela que é quase uma cópia do plano de Roger Bootle de 2012, facto que os autores do “plano B” reconhecem logo no início da apresentação. Mas a linguagem utilizada é muito dura, chocante mesmo. Daí o abalo que provocou, nos mercados e não só, a indicação de Paolo Savona para ministro da Economia (e Finanças) do novo governo italiano.

Roubini e Rosa (1 de Junho) pensam que o caminho da Itália no euro estará a chegar ao fim. Carmen Reinhart (31 de Maio) exagera ao assumir que a dívida das Administrações Públicas e do Banco Central de Itália ascende a 160% do PIB defendendo, por isso, que a dívida pública de Itália terá de ser reestruturada.

Temos assim dramatismo, q.b., por parte de nomes sonantes da macroeconomia!

Mas afigura-se um erro assumir que o fim do euro estará para breve.

Para se compreender porque é tão difícil para um governo advogar e implementar uma saída do euro é necessário ter em conta alguns detalhes da arquitectura da zona euro.

Os países com moeda própria (e com baixos níveis de dívida externa) podem, no limite, ordenar ao respectivo banco central que adquira dívida pública (i.e., monetize a sua dívida). Mas, os países membros da zona euro não podem impor ao BCE que adquira a respectiva dívida pública. Estão obrigados a vender essa dívida pública nos “mercados” processo que, em países como Itália e Portugal, somente passa a desempenhar um papel relevante a partir dos anos 80 e 90. Antes, a dívida pública era directamente adquirida pelo respectivo Banco Central no mercado primário, i.e., quando o soberano vendia pela primeira vez a sua dívida pública. A Itália abdicou em 1981 desse mecanismo em resultado de intervenções de responsáveis alemães ao mais alto nível. Portugal, nos anos 90.

O “pai” do euro, principal arquitecto do seu desenho, foi o alemão Otmar Issing. O seu principal desafio era criar uma moeda única “irreversível” e, mais do que isso, considerada como irreversível, sem transferências orçamentais entre países membros, sem financiamento directo das Administrações Públicas dos países membros e sem que o BCE estivesse obrigado a financiar os países membros quando estes fossem incapazes de refinanciar a sua dívida pública nos mercados.

A solução encontrada foi a criação do sistema de compensações de pagamentos TARGET2 entre Bancos Centrais Nacionais da zona euro. O euro é (aparentemente) irreversível porque os bancos comerciais da zona euro são capazes de converter, de forma teoricamente ilimitada e quase automática, os depósitos dos seus clientes – moeda bancária denominada em euros, mas que não são euros do BCE – em euros emitidos pelo BCE. O Eurosistema (BCE e Bancos Centrais Nacionais) é um emprestador de primeira instância à banca da zona euro, mas não aos Estados da zona euro. Aos bancos não é exigido qualquer programa de ajustamento com condicionalidade estrita para obter empréstimos em euros do Eurosistema, estando obrigados “apenas” a cumprir os requisitos prudenciais de capital e liquidez e de entregar em troca “colateral” (garantias) aceites pelo Eurosistema. Essas garantias podem ser criadas, do nada, pela banca, por exemplo, no passado, através da compra mútua de dívida entre bancos.

Porém, o BCE reservou-se de muita latitude e discricionariedade neste sistema: pode excluir bancos individuais do acesso às operações de refinanciamento do Eurosistema sem ter de fundamentar essa decisão, como já fez no passado; pode exigir à banca de um dado país membro (e já o fez, várias vezes, no passado) que deixe de financiar as suas Administrações Públicas; e pode limitar a capacidade de financiamento da banca de um país, impondo moratórias de facto, como ocorreu em vários países, mas particularmente no caso da Grécia, em 2015, onde os bancos fecharam para “férias” durante três semanas. Os controlos de capital (ilegais, à luz do Tratado Europeu) introduzidos nessa altura ainda permanecem parcialmente em vigor, três anos decorridos.

Nos países devedores da zona euro, as elites e a população com elevadas poupanças defendem o euro porque temem pelas suas poupanças. Por outro lado, nos países credores da zona euro sabe-se que sem o euro os países devedores serão incapazes de algum dia pagar a dívida aos países credores. Por último, e de modo algum irrelevante, o bem-estar de responsáveis e funcionários do BCE e de outras instituições europeias depende da continuação do euro.

Maquiavel certamente consideraria brilhante o desenho da zona euro e a forma como é assegurada a “irreversibilidade do euro”.

Dada esta arquitectura do euro, se o novo governo italiano “ousar” questionar a presença da Itália no euro, verá tanto o mercado de dívida soberana como o sistema bancário, atravessar enorme instabilidade. Como reagiria o povo italiano a uma moratória ao levantamento de depósitos bancários? E como, do ponto de vista dos próprios interesses pessoais, os representantes do eleitorado do Movimento Cinco Estrelas e da Liga – deputados e senadores da república italiana, muito bem remunerados em euros – poriam dessa forma em risco e em causa o seu nível de vida e o seu bem-estar? Por que abanar o barco dessa forma?

O mais provável não será que se acomodem uma vez chegados ao poder?

Ou seja, a força do euro, não estará no suposto poder da economia da Alemanha. O cordão umbilical do euro está nas poupanças na forma de depósitos bancários dos aforradores (e credores) da zona euro, poupanças essas distribuídas de forma muito desigual entre países e, dentro de países, entre cidadãos.

Paradoxalmente, o risco de desintegração do euro nunca foi tão elevado como hoje é. Fundamentalmente porque a política de austeridade adoptada pelas autoridades europeias, alterou o equilíbrio político de forças entre aforradores e cidadãos em geral nos países periféricos.

Acresce ainda que o risco de fugas de capitais é menor do que se pensa. Com efeito, dificilmente países como a Alemanha aceitarão converter depósitos em euros de não residentes para “euros alemães”. As eventuais fugas de capital ocorrerão para outras moedas como o dólar, o franco suíço e para activos reais, como propriedade imobiliária na Alemanha. Nem mesmo títulos de dívida pública da Alemanha detidos por não residentes estarão a salvo, se o euro se desintegrar.

Do processo de fugas de capitais resultariam perdas adicionais para países credores, como a Alemanha, por via de desequilíbrios crescentes do sistema TARGET2, que nunca seriam posteriormente pagos pelos países devedores. Ou seja, são a Alemanha e outros países credores, e não Portugal ou a Itália, que têm um incentivo para reduzir a fuga de capitais dos países “periféricos”.

Se tal processo de desintegração viesse a ocorrer, países hoje devedores da zona euro – porque deixariam de pagar parte da sua dívida externa – poderiam tornar-se, de um dia para o outro, em países credores do resto do mundo (i.e. países pobres tornar-se-iam em países ricos), com melhorias muito significativas da sua posição de investimento internacional, enquanto o reverso poderia ocorrer aos países credores como a Alemanha.

É sempre difícil antecipar como agirão os actores políticos europeus, nomeadamente porque poderão avaliar mal a situação ou porque poderão não dispor da informação e conselho adequados. No entanto, afigura-se que a Alemanha sentir-se-á compelida a encontrar um compromisso na zona euro, particularmente no contexto da crise comercial crescente com os EUA. São frentes “de guerra” a mais. O processo europeu de reestruturação de dívidas excessivas poderá estar, surpreendentemente, ao virar da esquina!

(Reuters) ECB to debate ending bond buys next week: Praet

(Reuters)The European Central Bank will debate next week whether to end bond purchases later this year, the bank’s chief economist said on Wednesday, a hawkish message seen preparing investors for another cut in stimulus.

Having revived growth with an unprecedented 2.55 trillion euro ($3 trillion) bond-buying scheme, ECB policymakers must decide when to end the purchases as the threat of deflation is long gone and the bloc is on its best growth run in a decade.

While policymakers are in broad agreement that the purchases should end this year, ECB President Mario Draghi has avoided any formal discussion about winding down the program, looking for more evidence that inflation is on a sustained rebound.

But comments from Peter Praet, a close Draghi ally, suggest that the ECB is pleased with the rise in inflation, raising the risk that a decision may come sooner rather than later.

“Next week, the Governing Council will have to assess whether progress so far has been sufficient to warrant a gradual unwinding of our net purchases,” he said in his last remarks before the ECB’s next policy meeting, noting that it will be a “judgment” call.

Euro zone bond yield rose and the euro hit a 10-day high against the dollar on comments from Praet, seen as one of the most dovish members of the Governing Council.

Some analysts took the comment to suggest a decision is coming at the June 14 meeting but others saw it as the starting gun in a debate that will likely culminate in a decision in July.

“We still don’t think that the ECB will easily give away flexibility and room for maneuver on QE in a situation in which downside risks to the economic outlook have increased and political risks could easily re-emerge,” ING economist Carsten Brzeski said.


Major policy changes have been taken in two steps in recent years with Draghi announcing preparations for a change in one meeting, then following through six weeks later.

The bank is also meeting in Riga, Latvia, making a major decision unlikely. External meetings away from the ECB’s Frankfurt headquarters, held just once a year, involve protocol functions with local officials, leaving less time for substantial work.

But Praet’s comments were a clear signal that when a decision is made, it is likely to be about gradually winding down the program as progress has been made in the ECB’s three inflation criteria.

“Signals showing the convergence of inflation toward our aim have been improving, and both the underlying strength in the euro area economy and the fact that such strength is increasingly affecting wage formation supports our confidence that inflation will reach a level of below, but close to, 2 percent over the medium term,” Praet said in Berlin.

“Waning market expectations of sizeable further expansions of our program have been accompanied by inflation expectations that are increasingly consistent with our aim,” Praet.

Inflation surged to 1.9 percent last month to hit the ECB’s target but most of the rise was due to higher energy prices. While the ECB tends to look past oil price shocks, it targets headline inflation suggesting that rising prices, even if fueled by those higher energy costs, support the case for curbing stimulus.

Several Governing Council members including two board members have recently argued for an end to the bond buys this year and Bundesbank President Jens Weidmann, among the most conservative rate setters, renewed his call on Wednesday to end the purchases.

The buys, now reduced to 30 billion euros a month, are due to run until the end of September but policymakers have long argued that they should be wound down gradually, over the course of several months.

(BBG) Italy’s Extraordinary $146 Billion Experiment

(BBG) Italy’s new government is one of the most extraordinary democratic experiments tried in western Europe since the Second World War.

The Five Star Movement and the League have put together a largely inexperienced ministerial team, which is promising a set of policies that seem impossible to deliver. They face formidable constraints, from Italy’s fragile public finances to the EU rules that Rome must abide by. It’s only fair that the two parties have their shot at governing, but it’s hard to see how they can succeed.

Italy will be led by a prime minister, Giuseppe Conte, whom most Italians have never heard of. His two deputies – League leader Matteo Salvini and Five Star’s Luigi Di Maio – will be his political bosses. The two anti-establishment parties have worked hard to reconcile their differences and put together a draft coalition agreement. But it’s hard to see how they won’t pull Conte in different directions on a number of issues, including whether Italy’s priority should be cutting taxes or lifting spending for the most vulnerable.

The cost of the coalition agreement is up to 125 billion euros ($146 billion), according to independent estimates. And yet, Italy’s sovereign debt is among the world’s largest. Investors and the rest of the euro zone will be watching intently when the new government presents its first budget in the autumn. Expect tensions. Italy’s financial constraints will inevitably bite and the two parties will squabble over what pet projects to prioritize.

The last-minute reshuffle of the top team has at least reassured investors and European partners. Enzo Moavero Milanesi, a seasoned law professor and EU expert, will be foreign minister. Bizarrely, for an avowedly anti-elitist administration, he has worked before in a technocratic government led by Mario Monti.

The finance minister, Giovanni Tria, is a little-known academic whose unorthodox views will raise German hackles. For example, he argued last year that the European Central Bank should pay for state funding of investment, so long as governments kept other spending under control.

However, his views on Italy’s euro membership seem more moderate than those of Paolo Savona, whom the president vetoed as finance minister and who’s been moved to EU affairs. Tria still needs to show his true colors but, unlike Savona, he has never drafted a “Plan B” to leave the euro in secret.

Other ministers are more of a worry. As minister for labor and economic development, Di Maio will take charge of Italy’s industrial policy and reforming its labor code, even though he lacks any real business or administrative experience. He has vowed to punish companies that close their Italian plants and move production abroad, but it’s unclear how. The risk is a clash with Brussels over strict rules on state aid.

The mood among investors has nevertheless improved after a rocky week; bond yields have moved sharply lower and Italian stocks higher. The chief reason is President Sergio Mattarella’s veto of Savona’s appointment as finance minister, which shows he won’t let Italy sleepwalk out of the euro without a popular mandate for an “Ital-exit.” This lessens the “re-denomination risk” on Italian assets.

Meanwhile, we avoid (for now) a fresh election that would have been seen as a referendum on Italy’s membership of the single currency. At the very least, the Five Star-League coalition contract includes no reference to quitting the euro and the party leaders have moderated their views of late.

Still, a fundamental question persists. That 125 billion euro-spending plan is entirely incompatible with existing euro zone rules and will set Italy on a collision course with Brussels and its European partners. So how will the new government react when these constraints are enforced? Will the coalition stick together or splinter? Italy has a government, but it is unclear how long it will last. The political drama in Rome will go on.

(BBG) Investor Confidence in Euro Economy Knocked by Italy Turmoil

(BBG) Investors are worried that political upheaval in Italy will derail euro-area economic growth.

Concerns over the new populist government’s euro-skeptic tendencies and budget-busting spending plans prompted a slide in sentiment among financial-market participants, according to a survey by Sentix. Expectations for the euro-area economy dropped to the lowest since August 2012, when the region was embroiled in a debt crisis that threatened to break up the bloc.

“The new government in Italy is giving investors fears for the euro zone,” Sentix said. While U.S. tariffs on steel and aluminum are “also having a negative impact” it added that those concerns “seem to be even lower than those before the government in Rome reopened the euro crisis. Either way, investors expect a serious slowdown in growth.”

Italian government bonds slid and yields surged last week amid alarm over a constitutional crisis after President Sergio Mattarella rejected a finance minister critical of the euro. While markets calmed somewhat after the parties tweaked their proposal to form a government, investors are worried that plans to challenge European Union fiscal rules could lead to a showdown further down the road.

What Our Economists Say

“Discontent drove Greece toward populism, now Italy is shifting to political extremes. Where else have economic conditions failed to satisfy? Cyprus, France, Lithuania, Portugal and Spain stand out.”
— David Powell and Jamie Murray, Bloomberg Economics. Click to see their EURO-AREA INSIGHT.

Read our QuickTake on why Italy’s political struggles stoke euro worries

The conflict comes at a crucial time for the euro area, with economic growth apparently slowing. Weaker economic activity combined with declining confidence will complicate the task of the European Central Bank, which is scheduled to meet next week to discuss when it might be able to halt its bond-buying program.

Momentum worldwide has been cooling in recent months. A global Purchasing Managers’ Index on Friday indicated the second quarter of 2018 will see weaker growth than the first.

The Sentix survey showed that expectations for Germany, the euro zone’s largest economy, also slid to the lowest since August 2012. While record-low unemployment is supporting the nation’s domestic consumption, exports are under pressure.

“Germany seems particularly vulnerable to an expansion of trade disputes with the U.S.,” Sentix said. “The German economy, which seemed invulnerable at the beginning of the year, is now facing a relatively rough headwind.”

Read more: Trump’s ‘America First’ Disrupts Yet Another European Project

German Finance Minister Olaf Scholz told reporters ahead of a Group of Seven meeting of finance chiefs over the weekend that unilateral tariffs imposed by the U.S. are “wrong, and — from my point of view — also illegal.”

(Reuters) In Italy’s ‘Plan B,’ euro-skeptic and their currency ideas take center stage

(Reuters)If Italy leaves the euro, it will be late on a Friday night.

Government officials will have planned the move in the utmost secrecy, telling their European partners only that same evening while simultaneously ordering the shutdown of banks and financial markets to prevent a stampede of capital out of the country.

This is “Italy’s Plan B,” an eye-popping contingency scenario drawn up by the team at a website specializing in economic issues, for how the eurozone’s third-largest economy should go about returning to the lira if necessary.

The 80-page booklet was overlooked when it first appeared in October 2015, and would ordinarily have stayed that way.

But then one of the best-known contributors to the website, 81-year-old economist Paolo Savona, was put forward as a candidate for economy minister under the new anti-establishment coalition between the right-wing League and the 5-Star Movement.

The government forged on Thursday has since relegated Savona to the more junior European affairs portfolio after the head of state refused to allow an arch-euroskeptic to occupy the key economics ministry.

And inside the League, which is dominant in the wealthy Lombardy and Veneto regions in the north, sources say there are no signs of anxiety that leader Matteo Salvini would ever risk the chaos of pulling the country out of the single currency.

Nevertheless, “Plan B” remains on the list of compulsory reading for those seeking to understand the intellectual foundations of the new coalition.

Salvini, the new interior minister and a deputy prime minister, has been particularly instrumental in bringing Savona and several other euroskeptic economists and their ideas out of intellectual obscurity and into the Cabinet for the first time, people familiar with the situation said.

New Economy Minister Giovanni Tria, economics professor at Rome’s Tor Vergata University, was not involved in outlining “Plan B,” but he, too, is no fan of the euro.

Last year he wrote that “not even European Central Bank President Mario Draghi is right when he says the euro ‘is irreversible,’ unless he clarifies the conditions and timings of the reforms needed to save the euro.”

On Friday night, however, said that he “never said that Italy must leave the euro.”

“A debate on how to reform Europe is going on all over the bloc, and in Italy too. There is no political force in Italy that wants to leave the euro,” he added.

Salvini has cited euroskeptic thinkers who characterize the currency union as a form of monetary “slavery” — a view not promoted by the League and its heavily business-based supporters until he became its head in 2013.

“Euroskeptic economists have been very able to build up a consensus on social media. Thanks to Salvini, they have now emerged from the academic shadows,” said Riccardo Puglisi, a political economy professor at the University of Pavia and one of the most vocal critics of the idea of leaving the euro.

Another economist who has moved into Salvini’s intellectual circle is Alberto Bagnai, who entered parliament as a senator for the first time in the March 4 elections.

An associate professor in economic policy at Gabriele d’Annunzio University, Bagnai published “Il tramonto dell’euro” (“The Sunset of the Euro”) in 2012, a book considered by Salvini as a must for any library.

In it, Bagnai described the euro as “an economic monster” and German Chancellor Angela Merkel “as intransigent as a League member” for advocating austerity for recession-hit European countries during the global financial crisis rather than letting them spend more to support internal demand.

At the center of Salvini’s euroskeptic circle is League economics policy chief Claudio Borghi, an economist and former managing director of Germany’s Deutsche Bank who just before 2014 European election wrote “Basta euro” (“Enough Euro”), the party’s policy on the single currency.

In it, Borghi claimed the European single currency would inevitably come to an end and expressed his hope that this would happen sooner rather than later.

Savona did not respond to requests for comment. Bagnai did not comment. Borghi said he was an economist coming from the business world rather than academia.

Economists in favor of leaving believe that a devalued currency would revive Italy’s exports and that by throwing off the shackles of EU fiscal rules the country could ramp up public spending to boost growth and create jobs.

Salvini’s outspoken attacks on the fiscal rules governing the eurozone, which Italy agreed to in the 1992 Maastricht Treaty, appear to be polling well with Italian voters who traditionally have been among the strongest supporters of the single currency.

But few inside the League believe he would ever take the plunge and pull the country out of the currency.

“The League’s leaders are radical but not mad. In the era of social media, strong language helps to attract followers on the web, but we are in good hands,” said a longtime member of the party who was not authorized to speak publicly on the matter.

Those who want to stay in the euro say that leaving it would trigger a surge in interest rates and inflation, capital flight, a banking crisis and possibly a default on Italy’s public debt.

(BBG) Portugal Wants Next ECB Head to Stick With Draghi’s Approach

(BBG) Portuguese Prime Minister Antonio Costa wants the European Central Bank to continue with Mario Draghi’s robust approach to policy after the ECB president steps down next year.

“We’d like someone who could continue the very good role played by Mr. Draghi, who was greatly responsible for saving the euro,” Costa said in an interview in London. “The nationality of the future president of the ECB is not the question. The question is what is the policy of the ECB? What is important is the continuity and the stability of Mr. Draghi’s approach in the future.”

Draghi’s eight-year term, which ends in October 2019, has so far been dominated by unprecedented monetary measures aimed at averting the breakup of the bloc and staving off deflation. Many of those steps have been criticized by Bundesbank President Jens Weidmann, who is currently viewed as the front-runner in the succession battle.

Portugal has been a beneficiary of the ECB’s stance, seeing borrowing costs tumble and unemployment drop to below the euro-area average. The nation’s economy expanded 2.7 percent last year, the fastest growth in almost two decades.

The next ECB head will be chosen by European governments in multiple rounds of horse-trading that will include the replacement of most of the Executive Board, the head of the Single Supervisory Mechanism and political positions such as the European Commission presidency.

(EUobserver) Anti-austerity Portuguese PM warns of financial crisis risks


Portugal’s prime minister Antonio Costa told the European Parliament on Wednesday (14 March) that the future stability of the single currency remains at risk.

Speaking to a half empty chamber, the socialist prime minister warned against complacency in addressing what he described as structural weaknesses in the eurozone.

“As long as the economic and monetary union is still incomplete, there will still be a risk of further crises,” he said.

His speech is part of a series of debates on the future Europe and aimed to present Portugal in a new light, as a country that managed to exit from the depths of a 2008 financial crisis with both renewed growth and a strong social policy.

“In Portugal, we devised an alternative to the austerity policy, focusing on higher growth, more and better jobs, and greater equality,” he said.

The measures imposed at the time by the then-conservative government had slapped additional taxes on incomes and cut benefits and pensions, given the conditions of a €78bn bailout from the European Union and the International Monetary Fund.

Those initial results saw education, health and social security plummet as poverty increased and unemployment reached new heights. Many such measures were later reversed by the Costa government in 2015, which then saw a rise in economic growth.

“The rise in earnings made economic operators more confident resulting in the fastest economic growth since the beginning of the century,” said Costa.

Last week, the European Commission removed Portugal from the list of countries with serious macro-economic imbalances.

Last year, the country exited the so-called excessive deficit procedure. It means Portugal has reined in public debt and managed a budget deficit that no longer misses the EU three-percent target of gross domestic product.

“Who would have believed this a couple of years ago?” said EU commission president Jean-Claude Juncker, speaking after Costa.

Juncker said the employment rate in Portugal continues to increase as a result, in part, of huge efforts by the Portuguese.

But Costa also issued warnings and pressed for greater convergence, a term that broadly describes the process behind better European economic integration. It includes, among other things, the completing of the internal market and economic and monetary union.

“We cannot continue to perceive the eurozone just as a group of economies that compete with each other and the rest of the world. We have to view it as an integrated space,” he said.

Costa also pressed his case for a bigger European Union budget and said Portugal was prepared to put in more contributions. But budget hawks such as Austria, Denmark, Netherlands and Sweden are likely to reject his views.

The issue is part of a larger debate triggered by the UK referendum vote to leave the European Union, followed by a 2016 Bratislava declaration where national leaders pledged their loyalty to the Union.

It also feeds into last year’s paper from Juncker that sets out five scenarios for the future of Europe ahead of the European Parliament elections in 2019.

Costa’s address to the parliament was the third by a EU leader in a series on the subject. In April, it will be French president Emmanuel Macron’s turn to lay out his vision.