Tuesday, 8 November 2011

Eurozone reports and reactions – Italy hot stuff

Yesterday evening the chairman of the Euro Group, Jean-Claude Juncker, held a press conference (recorded, including questions and answers 35:33), together with the Commission vice-president Olli Rehn and the EFSF chief executive officer Klaus Regling.

Media reports and reactions

We take a look at some reports and reactions in the media regarding the eurozone meeting.

Bloomberg reports that payment of the next tranche of loan aid to Greece is possible by mid-December if the new government and the two main parties give a written commitment to the bailout terms, according to Juncker, who also replied that he knew who was going to be the following Greek prime minister.

Despite Juncker's answer about the next Greek prime minister, there is still no agreement according to Reuters. The report paints the former ECB vice-president Lucas Papademos as the front runner to head the transitional government of national unity until the election 19 February 2012. However, the news agency hedges its bets by mentioning the European ombudsman Nikoforos Diamandouros and the envoy to the IMF Panagiotis Roumeliotis.

Reuters provides quotes from the document on EFSF leverage Regling mentioned.

Italy hot stuff

Juncker pointed out that Italy is not undergoing an EU rescue programme. However, Italy experienced unprecedented speculation yesterday, from at least three angles.

Media speculated wildly on (1) the possible resignation of prime minister Silvio Berlusconi and (2) Italian bond yields surged towards the 7% level. Both bonds and (3) the stock market fluctuated on the conflicting rumours, positively on resignation and negatively on denial.

In the background we have a vote of confidence in the Italian parliament today, as well as the economic reforms sketched by Berlusconi.

Prime minister Silvio Berlusconi promised a string of reforms to the European Council 26 October 2011 and the European Central Bank, as described by EurActiv, Reuters and The Guardian. The Corriere della Sera had a report, but also the full text of Berlusconi's letter (in Italian).

The finance ministers meeting in the Ecofin Council today will keenly follow the political developments in Italy and the market reactions, and want to hear about concrete plans to put the promised reforms into practice.

Ralf Grahn