October 22, 2011 – 8:05 pm
After two days of meetings of ministers in Brussels, the Europeans always struggled Saturday night, the eve of a double peak of the euro area and Twenty-Seven, to define a major response to the crisis of debt hit the continent in two years.
More than ten hours of meetings were necessary to reach an agreement Saturday on a recapitalization of the banking sector to the tune of 100 billion euros, which was nevertheless widely agreed at the technical level this week.
The work, however, little or no progress on the form that is chosen to leverage the fund to support the euro and to reduce the mountain of Greek debt, even if a discount up to 60% of the shares held by investors Private is under discussion.
On his arrival in Brussels, where he was to dine with Angela Merkel, the ECB President Jean-Claude Trichet, the Executive Director of the International Monetary Fund Christine Lagarde and the President of the Commission and the European Council, José Manuel Barroso and Herman van Rompuy, Nicolas Sarkozy expressed his confidence in the outcome of discussions.
"There is progress (…) By Wednesday, we must find a solution, a structural solution, an ambitious solution, a final solution, there is no choice," he said in reference to the date of the second summit will bring together the leaders of the euro area.
The French president spoke by telephone with German Chancellor Saturday afternoon and, says one EU source, they should meet again Sunday morning at their hotel before joining their European counterparts.
Meetings could also take place with the Italian Prime Minister Silvio Berlusconi and Spanish Prime Minister Jose Luis Zapatero, while Italy and Spain are under peer pressure to reassure their determination to keep public finances under control.
BANKS
At the end of the agreement reached Saturday, about sixty of the largest European banks need to recapitalize by 30 June 2012 at 100 billion euros to hold at least 9% of equity "hard" core tier one .
Some 38% of this amount, which may not be officially published, should return to the three countries already under the aid program: Greece, Portugal and Ireland.
Banks will also mark their sovereign debt to market value and the institutions that will not comply with this set of rules will be banned from paying dividends to their shareholders and bonuses to their executives.
The bloc have also talked Saturday reactivation of the guarantees offered to banks in the fall of 2008 at the height of the crisis, enabling them to find financing in the medium and long term, said on the same source.
GREECE
Ministers also returned to the long record of Greek and how to make Greek debt sustainable in the long term.
According to a report that will serve as the basis for decisions of the leaders of the euro area, private creditors of Greece may have to accept a loss of up to 60% on their sovereign debt.
The EU finance ministers, however, remain divided on the voluntariness or otherwise of the private sector to the new rescue plan for Greece.
Fearing to trigger a credit event with unforeseeable consequences, France and several other countries are reluctant to go beyond the envelope of 50 billion euros negotiated last July 21 with the banks, as called for Berlin if necessary by forcing them to go the extra mile.
Friday night, Athens received a shot in the arm with the provisional go-ahead European payment by mid-November of the next tranche of international assistance by 8 billion euros, without which Greece would default on its sovereign debt in the coming weeks.
The IMF still has to validate itself as this payment, he conditioned ambitious decisions of Heads of State and Government of the euro area to reduce the mountain of Greek debt.
EFSF
The last part of the discussions – the multiplication of the European Financial Stability Fund (EFSF) – has so far been barely touched by the ministers, that would leave it to decide this question and leaders.
Friday night, Minister of Economy, Baroin, confirmed that France continued to believe that change the cash in bank was the best solution but it did not make "one final point of confrontation."
Granted a banking license in EFSF would allow access to funding from the European Central Bank to increase its capacity for action by a factor of up to five.
But Berlin rejects this possibility, which would be to accept that the institution of Frankfurt finance the countries of the euro area, one of the dogmas explicitly excluded by the European treaties since the creation of the euro.
The other members of the euro area are also divided, Belgium and Spain having voted for a reconciliation BCE-EFSF while Slovakia and Austria have indicated that this solution was not studied.
European leaders are under intense pressure by their international partners to take decisive action against the crisis, less than two weeks of the G20 summit in Cannes, where they planned to hold them accountable.
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