Scribble Live
Published
Last updated
0 comments
Live coverage of the European Union summit in Brussels
At stake at the European Union summit in Brussels, which began Thursday evening, is the future of the euro, the stability of the global financial system and the balance of power in Europe. Follow our live blog Friday for updates from Globe reporter Susan Sachs at the summit in Brussels and more news and analysis on the impact of the leaders’ decisions from Globe editors and reporters watching from their posts in Canada and around the world.
- Welcome to The Globe and Mail’s live blog on the Brussels crisis summit, the best show on the planet and one that will ultimately determine whether the euro zone survives, blows up or slowly rots away in a swamp of debt and unenforceable legal treaties. The blog will be written by me, from Rome, and Susan Sachs at the summit itself. Later, Globe correspondents in Toronto and Washington will join us.
Overnight, the summit took a dramatic turn when British prime minister David Cameron pulled out of the effort to agree changes to the European Union treaties that would enforce fiscal discipline among all 27 EU members, to the point of automatic sanctions against those who surpass debt and budget deficit limits.
The fall-back position is smaller “intergovernmental” treaty among the 17 countries that share the euro -- the euro zone -- plus perhaps five non-euro zone EU members, who would sign up voluntarily. While any deal is better than no deal, the smaller treaty is a) decidedly less ambitious than the one championed by Germany, b) fraught with legal difficulties, such as questionable enforcement and, c) not really what the markets wanted to see.
The legal issues could dominate talks today and for several weeks to come and will centre on how Brussels will be given new powers over euro zone national budgets outside the EU existing treaties. In effect, it looks like we are getting a two-speed Europe, legally speaking.
Still, it is premature to say the euro will resume its downward trajectory to oblivion to moment the summit ends later today. That’s because the summit is producing new crisis fire fighting weapons. The euro zone countries will loan 150-billion euros to the International Monetary Fund to bolster its own fire fighting efforts. Non euzo zone countries look likely to contribute 50-billion euros, taking the total to euros 200-billion. Meanwhile, the European Stability Mechanism, the permanent bailout fund, will come into force one year earlier, in mid-2012.
Furthermore, the idea of “haircuts” on sovereign debt is being shelved. The attempt last summer to impose a 50 per cent haircut on Greek debt spooked the markets and sent Italian bond yields soaring. Investors rightly judged that if Greek debt could be whacked, so could the debt of any other ailing country.
The overriding challenge today for the summiteers is how to declare a victory? You can be they will. The question is whether the markets will agree. - My story on the European Central Bank's rejection of the rolling out the big guns to fight crisis. lnkd.inby ereguly via twitter 12/9/2011 8:03:32 AM
- First economists reports on summit are, surprisingly, vaguely positive. Carsten Brseski of ING said this morning that "the Eurozone is on a good way towards a fiscal compact and saving the euro." He likes the 200-billion in EU loans to the IMF; the quick arrival of the European Stability Mechanism and the summit background noise about no further "haircuts" on soverign debt.
- Monster stalking summit is S&P, which put 15 eurozone countries on negative watch. Will UK's bolt from the treaty boost downgrade chances?by ereguly via twitter 12/9/2011 8:15:25 AM
- Here is link to Globe and Mail's live blog coverage of summit: live.theglobeandmail.comby ereguly via twitter 12/9/2011 8:17:22 AM
- RT @BBCBreaking: #EU leaders made “nothing like enough of an effort” to meet UK's concerns in treaty negotiations, @WilliamJHague tells ...by ereguly via twitter 12/9/2011 8:24:21 AM
- Moody's downrades ratings of 3 top French banks: BNP, Credit Agricole and Societe Generale, citing liquidity and funding problemsby ereguly via twitter 12/9/2011 8:36:35 AM
- RT @AlbertoNardelli: Woke up to find Britain is the new Switzerland. Just with slightly more people and three times the unemployment.by ereguly via twitter 12/9/2011 8:40:13 AM
- Stocks dropping for a second day as investors lose confidence in summit's ability to fix debt crisis. Various reports of European Central Bank buying sovereign bonds. The worst news: Italian bond yields are rising. They had fallen below 6 per cent, when Mario Monti, Silvio Berlusconi's replacement, rolled out his save-Italy plans. Now they seem back on their way to the critical 7 per cent level. That's the point when Greece, Ireland and Portugal got on their knees and begged for EU/IMF bailouts. It's beomce a cliche to say that Italy, with 1.9-trillion of debt, is too big to save. But cliches are often true.
- RT @EconCharlemagne: Britain and the EU. The Great Divorce. Charlemagne's Notebook ow.ly #euro #eu #euco #Britain #Cameronby ereguly via twitter 12/9/2011 8:45:39 AM
- Italian bond yields up 0.122 basis points to 6.649%. They had been under 6%, though as high as 7.4% a couple of weeks ago.by ereguly via twitter 12/9/2011 8:55:58 AM
- Good quickie analysis from Guardian's, Europe Editor Ian Traynor, on Britain's new isolaton:
Whether or not it has saved the euro remains, of course, to be seen, but the summit in Brussels might go down as a watershed event, the beginning of the end for Britain in Europe.
David Cameron fought and lost, but wielded his veto, battled for Britain and put concessions to the City of London ahead of the fate of the euro. For most of the rest of Europe this is unforgivable. The EU's worst ever crisis and its possible resolution being held to ransom so Cameron can please the City and his europhobic backbenchers.
There is likely to be payback. While the EU is now unable to follow the German-inspired route of renegotiating the Lisbon Treaty to impose a decade of austerity on the eurozone, most of the 27 - the 17 eurozone countries plus at least another six joining them - ignore Cameron's objections and strike out on a separate treaty.
That, however, may result, because of legal problems, in a weaker "fiscal union", underwhelm the markets, and fail to shore up the currency. We will see. There will be months of wrangling before the new treaty is ready by March.
And quietly there are plenty of leaders hiding behind Cameron, happy that the German bid to re-open Lisbon is being dropped since they viewed this as a can of worms.
But despite his veto, Cameron does not get his financial regulation exemptions and concessions. He has isolated himself and Britain, failed to achieve his key goal, shut himself and Britain out of the negotiations on the future shape of Europe all in the name of the Great British national interest. There are senior experienced UK officials who believe this is a disaster for the British national interest. - RT @EurozoneCrisis: Euro zone will survive but EU summit will fail: Reuters poll bit.ly via @kuratcomby ereguly via twitter 12/9/2011 9:10:31 AM
- Funny how Croatia is joining EU the very day that EU splits into a two-speed beast. Croatia, with summit observer status, is 28th EU member.by ereguly via twitter 12/9/2011 9:14:45 AM
- RT @BusinessDesk: European Union summit agreement: the main points gu.comby ereguly via twitter 12/9/2011 9:21:01 AM
- European stock indexes rising, though don't read a lot into it. Soverign bond yields are better indication of investors' views of summit.by ereguly via twitter 12/9/2011 9:30:54 AM
- Looks like Sarkozy is big winner at summit. He never wanted the full 27-country pact. Knew it was impossible and wd be overly Teutonic.by ereguly via twitter 12/9/2011 9:34:43 AM
- An imposing statue in front of the European Commission building is a man on a narrow column in mid-stride, one foot poised in the air. Stepping boldly into the void -- seems like a good metaphor for where the battered EU stands today
- RT @doctorbjorn: @ereguly Indeed looks like he set up Merkel against Cameron, who took the bait.by ereguly via twitter 12/9/2011 9:40:43 AM
- Statement on #eurozone agreement 2 disagree: "automatic correction mechanism" for deficit-busting "will be defined by each Member state"by susansachs via twitter 12/9/2011 9:53:56 AM
- #eurozone accord: The amputated group of 23 "recognize the jurisdiction of the Ct of Just 2 verify" 0.5% annual structural deficit limitby susansachs via twitter 12/9/2011 9:55:38 AM
- RT @ecb_europa_eu: Letter from the ECB President to Ms Rodi Kratsa-Tsagaropoulou, Member of the European Parliament bit.lyby susansachs via twitter 12/9/2011 9:58:24 AM
- My quickie anaysis of the end of debt haircuts:
When the dust settles at the Brussels summit -- definition of victory still to come as I write at 11am European time -- the European Union decision to drop demands for “haircuts” on clapped-out sovereign debt may emerge as the most significant move.
Scroll back to July, when Germany demanded, and appeared to get, approval for a 50 per cent write down on privately held Greek debt. The goal seemed sensible: Reduce the debt load of the one EU country hurtling towards bankruptcy.
Too bad Germany didn’t spend more time figuring out the consequences. Yields on other highly indebted countries, notably and most worryingly Italy, soared. Investors weren’t stupid. They rightly determined that if haircuts could be effectively forced on one country, why not the others?
Suddenly, the crisis accelerated. Italian bond yields kept climbing -- 6 per cent, then 7 per cent, eventually reaching an ulta-critical 7.4 per. Greece, Ireland and Portugal each sued for bailouts shortly after their yields reached 7 per cent, a funding level that is considered unsustainable.
In Brussels yesterday, the EU leaders dropped their demand that investors share in the costs of bailouts (though it appears Greek bondholders will still get taken to the barber shop). EU president Herman Van Rompuy told reporters at the summit that “our first approach to PSI [private sector involvement, ie, haircuts] which had a very negative effect on debt markets is now officially over.”
This is a blow to German chancellor Angela Merkel who, in principle, argued that private sector bond holders should share in the pain of a debt restructuring. She is right, of course. After all, the bonds came with heavy dose of risk, so take your losses and shut up -- capitalism works both ways. But the euro zone was too fragile to risk a run on sovereign debt in Italy and Spain, countries considered too big to bail out.
The EU decision to hold its nose and end haircuts was the right thing to do. - Journalists straggling back to EU press centre after night/day that lasted past 5 a.m. How is it EU leaders look so much more fresh?by susansachs via twitter 12/9/2011 10:01:01 AM
- European Parliament official: no budging the Brits into the #eurozone fiscal compact. And why did the Czechs say no? "They're very British."by susansachs via twitter 12/9/2011 10:04:50 AM
- UK shadow foreign secty Doug Alexander: "I don't glory in Britain's isolation this morning." Sez Cameron's negotiations "let Britain down."by ereguly via twitter 12/9/2011 10:07:01 AM
- RT @FGoria: Italian austerity measures may drop GDP 2012 by 0,5%, according to Bank of Italy.by ereguly via twitter 12/9/2011 10:13:31 AM
- My story on #eurozone summit. Brits have opted out of many EU efforts at collective action & policies: www.theglobeandmail.comby susansachs via twitter 12/9/2011 10:17:52 AM
- Has the date been set yet for the next EU summit? With EU going into recession, endless summit stimulus needed more than ever.by ereguly via twitter 12/9/2011 10:22:43 AM
- Hmm..missed this. Moody's, in downgrading 3 French banks this morning, said that "probabilty of systemic support" for each remains high.by ereguly via twitter 12/9/2011 10:28:16 AM
Quote from Douglas Alexander, UK shadow foreign secretary:
"David Cameron's isolation is a sign of weakness not of strength.
Britain this morning is more isolated than at any point in the 35 years of British membership of Europe.
It is not in Britain's national interest for decisions to be taken without us even at the table and it's a direct result of David Cameron spending more time negotiating with his own backbenchers than with our European partners."- "And they are outside of decision making" -- Lithuanian President Dalia Grybauskaite re UK as he arrives today at Brussels summit.by ereguly via twitter 12/9/2011 10:46:12 AM
- RBC's Jens Larsen sez: "We see significant disappointment potential with respect to the summit." Forecasts 2 more ECB rate cuts.by ereguly via twitter 12/9/2011 10:53:55 AM
- It's worth remember
- Societe Generale forecasts "mild rather than deep recession" in Frances, notes flat industrial production in October.by ereguly via twitter 12/9/2011 10:56:36 AM
- Hi. I'm an online editor with The Globe and Mail.
Starting at 9 a.m. CT (3 a.m. ET), Globe and Mail reporter Susan Sachs will start bringing you updates from the EU summit in Brussels. She will be tweeting as @susansachs.
Rome-based business reporter Eric Reguly will add news and analysis from his post in Italy. He will be tweeting as @ereguly.
At 6 a.m. ET, Globe economy editor Rob Gilroy will join in as moderator from Toronto and be your guide to the summit as the day unfolds. At this point you can send in questions and comments. - Big question now is whether ECB's Draghi sees enough good in summit agreement to reward eurozone with more bond purchases to drop yields.by ereguly via twitter 12/9/2011 11:04:09 AM
- RBC sez summit outcome makes it "more likely than not that S&P will carry out its threat to downgrade most of EZ member states."by ereguly via twitter 12/9/2011 11:12:31 AM
- With EU summit statement out early this morning, the final press conference this afternoon is going to be an epic non-event.by ereguly via twitter 12/9/2011 11:13:39 AM
- It's worth remembering, in the wake of the EU failure to agree as a group of 27 on fiscal union, that Britain has long stood aloof from continental Europe's fitful efforts at integration. The UK did not join the founding organization, the European Coal and Steel Community, that was the first post-war effort to bind together long-standing enemies in a trade and economic union. Britain joined the community in 1973, with Denmark and Ireland, and Ireland was one of the big beneficiaries of the Community's principle of shifting wealth and resources from the richer Europeans to the poorer ones through the ever-more complicated EU machinery. But with greater integration -- coordinated border and visa schemes, the Common Agricultural Policy, harmonization of tax and social service legislation -- Britain again and again butted heads with continental Europe. It surely leads the EU in the number of opt-outs from EU programs and treaties. It's also worth remembering that, for all their enormous political differences on domestic economic and social policies, French and British leaders have often found common political ground. Margaret Thatcher and Francois Mitterrand shuddered together at the prospect of German reunification. Both feared German domination of Europe. In light of the angry split last night between Germany and France, on one hand, and Britain on the other, there is an interesting historical footnote to think about. Here is what The European Council on Foreign Relations (ecfr.eu) had to say in a recent blog: "But Mitterrand thought the introduction of a single European currency could help control Germany; Thatcher, on the other hand, believed it would only increase German power in Europe." As in any relationship, it seems, money and budgeting are cause for intractable arguments. Only a few weeks ago, it seems, Nicolas Sarkozy and David Cameron were congratulating each other on their cooperation in the air strikes and blockade of Libya that hastened the downfall of Col. Gadhafi. Last night, when the subject was EU financial regulation and harmonization of monetary policy, they were at each other's throats.
- RT @DougSaunders: The absurdity is that UK is the only EU country that *already has* a financial transaction tax. And it's worked out ex ...by ereguly via twitter 12/9/2011 11:18:06 AM
- Portugal just announced that its economy contracted by by 0.6 per cent in Q3, more than earlier estimates, and by 1.7 per cent over 12 months. Any plan to save the euro will be moot if the continental economy doesn't get rolling again.
- Britain is looking more isolated by the minute. Early this morning, British prime minister David Cameron refused to take part in the proposed European Union treaty changes that would have enforced region fiscal discipline, complete with automatic sanctions for transgressors. That meant the 17 euro zone countries, plus five EU countries that do not share the common currency, would forge their own agreement.
Britain’s ally was Hungary, which was strongly opposed to the new treaty. Or so Britain thought. In the last couple of yours, according to the Financial Times, the Hungarians have tweaked their communique. The upshot is that Hungary will consult its national parliament before deciding whether to join Britain in isolation. So will the Czech Republic and Sweden.
As the FT said, “The English Channel just got a lot wider.” - It must be obvious by now that the Euro will fail, if not completely in all but name. Why can't the euro leaders admit defeat and save a load more bail out cash. Every time we are told something is too big to fail, it still fails but costs more over longer !! Cut your losses and run. All this is doing is dragging the one healthy euro economy (Germany) into debt aswell The financial guys allegedlly in the know said Germany could afford it a few months ago, and they had done very well over the past decade or so out of the Euro. Lossing their AAA status may give that ill concived hope away. We simply need to concentrate on being meaner leaner and more reactionary than a new lumbering debt riden superstate. Slash your government slash your taxes and then - business can grow. Give a living wage before your taxed and more people will save enough to start small businesses, more jobs will be created and the income gap will decrease as businesses look for good employees. None of this is rocket science. But no one out there is stating the obvious that when the state is too big turkeys don't vote for christmass, so we have a failure of democracy. Socialism in Europe has been the popular bribe for tha last 50 years and now we find it has cost too much. Britian now has an oppertunity to break away and be more dynamic, but only if we talk candidly about the size and role of the state.
European Commission President Jose Manuel Barroso, left, talks with Britain's Prime Minister David Cameron at the EU summit Friday in Brussels. REUTERS
