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Posted on Sustainabilitank.info on April 24th, 2010
by Pincas Jawetz (pj@sustainabilitank.info)

Media speculation on whether the collapse of the government would impact negatively on Belgium’s EU presidency stint began immediately following Belgian prime minister Yves Leterme’s decision on this Thursday to resign after a key partner, the Flemish Liberals, withdrew from the Federal governing coalition over a long running linguistic rights dispute between the Dutch-speaking Flemish and Francophone communities.

The collapse of the Czech government during its 2009 EU presidency term caused serious disruption to the EU’s agenda, and concerns have been raised that a long running bout of political turmoil during the Belgian presidency could similarly paralyse the EU’s workload.

The FT quoted an unnamed Brussels diplomat as saying, “The last thing we need is another presidency hobbled by domestic events.

“There are serious institutional, economic and diplomatic questions to be resolved – we cannot afford another vacuum in leadership.”

So, this is the political mess at an EU burdened with three “Presidents” where one Belgian Mr. Herman Van Rompuy heads  the Brussels  so called two year-term “Permanent” Presidency of the European Council, while his successor is losing his Belgian cabinet just in time he was going to take over the 6-months temporary EU Rotating Presidency. All that while the finances of a monetary EURO union that was not backed by a common treasury, is unraveling because on incompetency in Member States that cannot be disciplined, because there is no powerful central home to this chaotic assembly of States calling itself a Union.

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Greece formally requests EU-IMF aid – Euro area states have pledged to give up to €30 billion this year.

ANDREW WILLIS

23.04.2010

EUOBSERVER / BRUSSELS – Greece has formally placed a request to activate a €40-45 billion EU-IMF aid package, a day after new budget deficit figures revealed the country’s 2009 shortfall to be worse than previously forecast.

The country’s finance minister, George Papaconstantinou, transferred the message on Friday (23 April) in a letter addressed to Eurogroup President Jean-Claude Juncker, EU economy commissioner Olli Rehn and European Central Bank President Jean-Claude Trichet.

“In accordance with the Statement of the Heads of State and Government of 25 March 2010 to provide financial support to Greece, when needed, and the follow up Statement of the Eurogroup, Greece is hereby requesting the activation of the support mechanism,” reads the letter.

Earlier, Greek Prime Minister George Papandreou said he would instruct his finance minister to place the request. “It is a national and imperative need to officially ask our partners in the EU for the activation of the support mechanism we jointly created,” he said in statements broadcast live from the remote Aegean island of Kastellorizo.

“Our partners will decisively contribute to provide Greece the safe harbour that will allow us to rebuild our ship,” said the embattled premier against a picturesque backdrop.

Fresh figures released by the EU’s statistics office, Eurostat, on Thursday revealed Greece’s 2009 deficit to be 13.6 percent of GDP, significantly higher than the previous 12.7 percent forecast.

Markets subsequently leapt on the new EU data, sending the yield on 10-year Greek bonds to 8.83 percent, the highest since 1998, and prompting credit rating agency Moody’s to cut the country’s sovereign rating from A2 to A3. On Friday, bond yields retreated marginally following the formal aid request.

Next steps?

A significant amount of uncertainty remains however. Greece, swamped by a €300-billion debt pile, is currently negotiating the lending terms with EU and IMF officials in Athens, with the talks potentially lasting for several more weeks.

An agreement between EU leaders in late March indicated that any request for aid must first be approved by the ECB and the European Commission, before then being formally agreed by euro area states.

While governments may be willing to bail-out their profligate partner, doubts remain as to how quickly member states will be able to release the funds, with at least one legal challenge being mounted in Germany against the unpopular transfer to Greece.

Responding to questions from MEPs in Strasbourg on Tuesday, Commission President Jose Manuel Barroso said several times that he is confident the Greek plan does not breach the EU treaties. The solution found so far is “fully in line with the treaty,” he said. “It is simply wrong to say that it is some kind of bailout.”

Chancellor Angela Merkel, faced with crucial regional elections in May, has been at pains to stress that any support must be considered ‘ultima ratio’, or a last resort.

As well as the legal uncertainty, total contributions to the three-year support package have yet to be finalised. Euro area states have agreed to contribute €30 billion, this year, but figures for 2010 and 2011 remain unclear.

German central bank chief Axel Weber recently conceded that “the numbers are changing all the time”, according to reports in the Wall Street Journal, adding that total euro area contributions over the three years could reach as much a €80 billion.

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Further on Greece:

 www.washingtonpost.com/wp-dyn/con…

 www.nytimes.com/2010/04/24/opinio…

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New York Times Editorial

Greece and Who’s Next?

Published: April 23, 2010

As Greece careened ever close to default this week, frightened investors also rushed to dump bonds from financially troubled Portugal, Spain and Ireland. But while the markets increasingly see this as a euro zone crisis, many European leaders are in denial.

Unless the European Union and the International Monetary Fund back up Greece, it could default on its debts. And the roughly $40 billion bailout promised — grudgingly — by Brussels with an additional $15 billion to $20 billion from the International Monetary Fund is unlikely to be enough. Greece has more than $50 billion in debt coming due over the next 12 months alone.

Meanwhile, Germany is resisting turning over the money. After George Papandreou, the prime minister of Greece, called on Friday for the bailout plan to be “activated,” Chancellor Angela Merkel of Germany said Greece first had to negotiate “a credible savings program.” Georg Nuesslein, a lawmaker in Merkel’s governing coalition, told Bloomberg the program “has to hurt.”

Greece’s efforts to curtail public spending have not made enough of a dent in its deficit to persuade investors it can bring its debt under control. But amid a severe recession, which is likely to be exacerbated by budget cuts, even the tightest belt-tightening can’t eliminate a deficit that amounted to more than 13 percent of its gross domestic product last year.

To stop a rout, the European Union must commit to activating the bailout. Then Europe and the International Monetary Fund must start negotiations with Greece for a much bigger bailout package. This would help restore investors’ confidence, allowing interest rates on its debt to fall from the punitive heights of nearly 9 percent reached last week. While some economists believe Greece would still have to restructure its debts, it would have space to negotiate the terms.

As investors made clear this week, the turmoil doesn’t end with Greece. Portugal, Spain and Ireland have seen their deficits balloon as the housing bust and the economic downturn took a toll. The European Union and the International Monetary Fund must put together a pre-emptive bailout package to convince investors of the stability of their finances and head off a flight to dump their bonds on a bigger scale. Speed is essential.

Treasury Secretary Timothy Geithner and European finance ministers should start working on that during this weekend’s International Monetary Fund meeting in Washington. This is mainly a European problem. But Washington must ensure that the fund commits adequate resources. The good news, if there is any here, is that American banks do not own much Greek debt. But the American economy won’t be immune if the Greek crisis spreads much further.

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But who should work on The EU CHRONIC STRUCTURAL POLITICO-ECONOMIC DISEASE?

A simple intervention by the Belgian King attempting to beat sense into the heads of his two different National groups warring in his own country, doe nothing to the much larger problem of many more ethnically different groups in the EU that have not yet digested the idea that building a Federal Nations means giving up the previously held pretenses at National Sovereignty. If they do not digest this their model becomes the UN and not the US – so they exist on the grace of their interdepedence but not on the basis of being a major global player to sit at the UN-China discussions table – not even as outsiders like India and Brazil, not even as a tolerated South Africa that is there because they represent the consumers of all-of-Africa.

 www.ft.com/cms/s/0/3d5c4cea-4e6e-…

Fall of Belgium coalition threatens its Brussels chair role.

By Stanley Pignal in Brussels, The Financial Times

Published: April 23 2010

The Belgian government was in turmoil yesterday after the federal coalition collapsed, driven apart by tensions between French and Dutch-speaking factions that will threaten the upcoming presidency of the European Union.

Yves Leterme, prime minister, tendered his resignation to the king after the Flemish liberal party pulled out of the coalition, making it all but impossible for the five-month-old ruling grouping to carry on.

King Albert II sought to avert an outright political crisis by withholding his acceptance of Mr Leterme’s resignation, leaving his government in place but with no viable political mandate.

The upheaval threatens to damage its leadership of the EU, whose six-month rotating presidency Belgium takes on in two months.

“The last thing we need is another presidency hobbled by domestic events,” said an EU diplomat. “There are serious institutional, economic and diplomatic questions to be resolved – we cannot afford another vacuum in leadership”. The collapse of the Czech government in early 2009 while it was in the EU chair caused turmoil in Brussels and forced it to drop large swathes of its presidency agenda.

The king said a political crisis would harm Belgium’s standing in Europe and hamper its economic prospects as it emerged from the downturn.

In an interview with the French-language state broadcaster, Mark Eyskens, a former prime minister, warned: “If we have a deep political crisis, we could find ourselves in a similar position to Greece. We have a debt of over 100 per cent [of GDP] that we must finance.”

Spreads on Belgian debt widened to 50 basis points over equivalent German paper, partly driven by EU deficit statistics published yesterday.

Lieven De Winter, a professor at Université Catholique de Louvain, said new elections in June now appeared inevitable. “We are in a position where the government has been put on hold, it cannot take important decisions. It would be a massive face-losing situation to take on the EU presidency in such circumstances.”

Part of Belgium’s latest bout of political instability can be traced back to the EU; Herman Van Rompuy, Mr Leterme’s predecessor, left national politics to take on the European Council presidency in November.

His departure paved the way for the return of Mr Leterme, a centre-right politician from the Dutch-speaking northern half of the country with a record of antagonising the French-speaking Walloons living in Belgium’s southern half.

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