Tuesday

22nd Sep 2020

Barroso: EU moving too slow on debt crisis

  • Barroso (r) is 'deeply concerned' while Van Rompuy (c) was 'astonished' (Photo: consilium.europa.eu)

European Commission head Jose Manuel Barroso has urged EU countries to speed up ratification of the bloc's new-model bailout mechanism to reassure markets on Italy and Spain.

In a flash statement emailed to press on Wednesday (3 August), Barroso voiced "deep concern" about the increase to record highs in the cost of borrowing for the two countries in recent days.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"It is essential ... that we move forward rapidly with the implementation of all of that has been agreed by the heads of state and government and send an unambiguous signal of the euro area's resolve to address the sovereign debt crisis," he added. "Tensions in bond markets reflect a growing concern among investors about the systemic capacity of the euro area to respond to the evolving crisis."

Eurozone leaders at a summit in July agreed to change the terms of the currency club's €440 billion bailout fund so that it could in future act pre-emptively to avert Greek-type financial meltdowns.

But national parliaments opted to break for their summer recess instead of ratifying the measures, leaving investors wondering how or if they will work in practice.

Rainer Guntermann, a strategist at Germany's Commerzbank, told EUobserver on Wednesday that this uncertainty is part of the reason for jitters on Italian and Spanish bonds: "The markets were disappointed by large countries who did not want to vote now but took their summer vacations instead of coping with the crisis. This has created an implementation risk."

Another contact at a large Swiss bank, who did not want to be named, added: "Market participants are not trusting enough about whether the new measures will really work if they are needed ... The decisions have been made, but they haven't seen the new system working properly on an operational level."

Neither Italy nor Spain are facing imminent problems with debt repayment. But a number of other concerns about the health of the eurozone as a whole are also playing a part in bond spreads.

Markets fear that if Ireland and Portugal need second bailouts, private creditors will be made to pay part of the cost, as in Greece, creating general aversion toward non-AAA-rated eurozone debt. Weaker-than-expected economic performance by the US is also casting doubt on the global economic recovery, auguring lower growth and less money in the public pot in peripheral euro-using countries.

Meanwhile, the choice of words by EU officials is itself proving unhelpful.

EU Council chief Herman Van Rompuy on Tuesday said he was "astonished" at the Italian and Spanish bond moves. "'Astonished?' - this element of surprise suggests you are not prepared. The statements suggest Europe is moving too slow for the markets right now," Commerzbank's Guntermann said.

For his part, Italian leader Silvio Berlusconi will at 5.30pm local time tell parliament how he plans to put his country on a sound financial footing.

The move follows a meeting between his finance minister Giulio Tremonti and eurozone president Jean Claude Juncker in Luxembourg earlier the same day after which Tremonti said only: "We had a long and fruitful discussion."

Commentators noted that Berlusconi will need to announce concrete measures - such as bringing forward previously-tabled austerity cuts from 2013 to 2012 or 2011 - if his speech is to have a positive impact. "A kind of general pep talk will not be helpful ... anything other than specific actions will be seen as a non-event," the Swiss source said.

Barroso raises alarm about severity of euro crisis

EU commission chief Barroso has indicated that market developments on Italy and Spain threaten the survival of the euro, amid fresh talk of increasing the EU's €440 billion bailout pot.

MEPs warn of 'significant gaps' in budget talks

The budget committee chair said the European Parliament expects tangible improvements to the package in its talks with member states - while the German minister argued that the EU leaders' deal was difficult enough.

Top EU officials urge MEPs give quick budget-deal approval

MEPs criticised the EU deal on the budget and recovery package clinched by leaders after five days of gruelling talks, saying it is not enough "future-oriented", and cuts too deeply into EU policies, including health, innovation, defence and humanitarian aid

EU Parliament gears up for fight on budget deal

European parliament president David Sassoli said certain corrections will have to be made in the budget, citing research and the Erasmus program for students, calling the cuts "unjustified".

EU leaders agree corona recovery after epic summit

After gruelling five-day talks, EU leaders agreed on €390bn in grants and €360bn in low-interest loans to hardest-hit member states - after much opposition from the Dutch-led 'frugal' bloc of countries.

News in Brief

  1. Italy to cut number of MPs by one third
  2. World's richest 1% 'fuelling climate crisis'
  3. Polish government at risk over animal-rights law
  4. UK 'could see 50,000 new corona cases a day'
  5. EU cuts carbon market compensation for industry
  6. Russia and US could scrap another nuclear arms treaty
  7. Turkish president sues Greek newspaper over headline
  8. Hungarian ministry wanted list of journalists' foreign trips

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  2. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  3. UNESDAReducing packaging waste – a huge opportunity for circularity
  4. Nordic Council of MinistersCOVID-19 halts the 72nd Session of the Nordic Council in Iceland
  5. Nordic Council of MinistersCivil society a key player in integration
  6. UNESDANext generation Europe should be green and circular

Latest News

  1. Borrell gives EU four weeks to save foreign policy
  2. Belarus opposition leader urges EU to be 'braver'
  3. Kyrgyzstan cannot paper over death of Azimjon Askarov
  4. 'Big Three' EP groups nominate homophobe for Sakharov prize
  5. Cyprus leaves EU ministers red-faced on Belarus
  6. EU seals new Covid-19 deal amid global distribution fears
  7. German court hears harrowing testimony of Syria torture
  8. Turkey, Belarus and migration in the EU spotlight This WEEK

Stakeholders' Highlights

  1. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  2. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  3. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  4. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  5. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  6. UNESDACircularity works, let’s all give it a chance

Join EUobserver

Support quality EU news

Join us