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ECB raises ceiling on emergency liquidity for Greek banks as Greek officials agree to meet EU, IMF and ECB counterparts

The ECB yesterday agreed to raise the limit on the amount of Emergency Liquidity Assistance (ELA) which Greek banks can access, from €60bn to €65bn. The move was motivated by the funding needs of the banks which have grown due to deposit outflows, which Kathimerini reports have totalled €4bn in December, €12bn in January and €3bn so far this month.

Meanwhile, Greek Prime Minister Alexis Tsipras presented his views to other EU leaders at yesterday’s summit, though negotiations were left for Monday’s Eurozone finance ministers meeting. Following the meeting, Tsipras seemed to soften his tone somewhat speaking of “important steps”. However, he did insist, “The Memorandum of Understanding as we knew it is over. The same goes for the Troika”.

Following the meeting, German Chancellor Angela Merkel said, “Europe always aims to find a compromise, and that is the success of Europe. Germany is ready for that…However, it must also be said that Europe’s credibility naturally depends on us respecting rules.” French President François Hollande also warned “there’s not much time” since any new or revised programme will need approval of some national parliaments. He added that everyone in Europe must “play by the rules” and that EU states cannot “ask the ECB to do what should be done by governments.”

Eurogroup Chief Jeroen Dijsselbloem announced yesterday that Greek officials will meet with officials from the relevant “institutions” – the Commission, IMF and ECB – to discuss technical work on assessing what the “common ground is between the current programme and the political programme of the new Greek government”. However, he also warned, “I’m very cautious on the political side, it’s going to be very difficult and it’s going to take time and don’t get your hopes up yet.”

Separately, the Greek government revealed that its tax revenues were 20% below target in January, meaning the primary surplus target was missed by almost €1bn.

Sources: Frankfurter Allgemeine Zeitung, Capital.gr, Kathimerini, The Wall Street Journal, Kathimerini 2, The Financial Times, Reuters

  • Merkel: Further sanctions against Russia will be imposed if Minsk agreement not respected

    European leaders yesterday gave a cautious welcome to the cease-fire agreement negotiated between the leaders of Ukraine, Russia, France and Germany during all night talks in Minsk. German Chancellor Angela Merkel told reporters after the conclusion of the European Council summit that “We hold open the possibility, if these new agreements are not implemented, that we must take further measures”, a line also taken by UK Prime Minister David Cameron who argued that “I think we should be very clear that [Russian President] Putin needs to know that unless his behaviour changes, the sanctions we have in place won’t be altered.” Meanwhile, Reuters reports that eight Ukrainian soldiers were killed and 34 wounded in clashes with Russian-backed separatists following the signing of the agreement.

    Sources: The Wall Street Journal, Reuters, Reuters 2, The Daily Mail

  • Strong German performance pulls up Eurozone GDP growth in final quarter of 2014

    Data released this morning showed that the Eurozone economy grew by 0.3% in the final quarter of 2014. The German economy led the way growing by 0.7%, firmly beating expectations of 0.3% growth thanks to strong domestic demand growth. France only managed 0.1% growth. Portugal also beat expectations of 0.3% growth, posting a 0.5% expansion. However, the Italian economy stagnated showing no growth, though beating expectations of a slight contraction.

    Sources: Eurostat, Reuters, Il Sole 24 Ore, La Tribune

  • Le Figaro: FCO working on two reform scenarios, one for 2017 and one for a fast-track negotiation

    Le Figaro reports on speculation that David Cameron may decide to bring forward his promised 2017 EU referendum arguing that the FCO is planning on two scenarios, one for 2017 and one for an earlier date. Open Europe’s Christopher Howarth is quoted as saying: “Two years already leaves very little time to obtain significant [EU] reform given the EU’s calendar, especially if treaty change is required. Discussions about bringing forward the referendum are really about domestic politics.”

    Sources: Le Figaro, Open Europe blog

  • Treasury Select Committee calls on BoE to investigate impact of low-skilled migration on wages

    The Times reports that the House of Commons’ Treasury Select Committee has asked the Bank of England to investigate growing evidence that migrant workers are depressing wages. Stephen Nickell, a member of the Office for Budget Responsibility, told the committee: “I think you will find it in the evidence that the pay of unskilled workers, particularly in the service sector, has been held back to some extent — not to a massive extent, but to some extent — by unskilled immigration.”

    Sources: The Times, Treasury Select Committee, Open Europe Intelligence

  • Juncker presents ideas for further Eurozone integration, does not mention treaty change

    At yesterday’s European Council summit, European Commission President Jean-Claude Juncker presented an ‘analytical note’ with ideas on how to strengthen integration in the Eurozone. These ideas are now to be discussed by Eurozone countries. The document does not mention EU treaty change, but suggests considering whether the Eurozone needs “strong common institutions” and “further risk-sharing in the fiscal realm” (most likely a Eurozone budget). The note also mentions “stronger common governance over structural reforms” – an idea backed by ECB President Mario Draghi.

    Sources: Juncker note, The Financial Times

  • Bundesbank to buy €10bn in German government bonds per month as part of ECB QE

    The Wall Street Journal reports that the Bundesbank will buy €10bn in German government bonds per month as part of the ECB’s Quantitative Easing programme. André Bartholomae, Head of Markets at the Bundesbank, warned that questions still remain over how to treat bonds with negative interest rates and concerns abound over the potential high price which the central bank may have to pay for its purchases.

    Source: The Wall Street Journal

  • Timmermans: It will take time for the Commission to learn to focus on quality not quantity of regulation

    The Economists’ Charlemagne profiles European Commission Vice-President Frans Timmermans and quotes him as saying that his biggest challenge has been tackling the “Brussels logic”, according to which policymakers do not obstruct projects they consider useless for fear of seeing their own ideas squashed. He adds that it will take time to change the culture of “an administration that has for generations believed that its purpose is to create legislation.”

    Source: The Economist: Charlemagne

  • Rise of Podemos pushes Spanish government to take tough line on Greece

    Spanish Prime Minister Mariano Rajoy told reporters upon his arrival at yesterday’s European Council, “A country like Spain lent Greece €26bn. We don’t have money in excess. One can’t build up Europe if we all decide not to meet our commitments…I can’t contemplate a scenario where Greece doesn’t meet its commitments.” Speaking to the press after the summit, Greek Prime Minister Alexis Tsipras said Rajoy looked “nervous” when Greece’s situation was discussed, and added, “He’s wrong, there’s no point in externalising domestic problems” – a reference to the fact that anti-austerity party Podemos is leading in some opinion polls ahead of this year’s Spanish general elections.

    Sources: El País, EUObserver

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