In the FT, Rachel Sanderson and Martin Arnold report that the board of Monte dei Paschi is about to approve a recapitalization led by JPMorgan in order to avoid the alternative, a bailin according to European rules.
Other news sources reported that the European Commission had made it clear that it rejected the proposal by Italy’s prime minister (supported by the ECB president) to change the rules and let the Italian government finance the recapitalization. EU finance ministers and Angela Merkel had opposed the proposal as well.
In the FT, Martin Arnold reports about estimates by Fitch according to which
European banks would have to raise up to €170bn of extra capital or sell almost €500bn of sovereign debt if regulators push ahead with plans to break the “doom loop” tying lenders to their governments …
The European Commission and the European Central Bank support steps in that direction while some European governments oppose them.
In the FT, Jim Brunsden reports that the European Commission’s 2013 proposal to install a financial transactions tax has not made much progress. At least nine countries have to sign up.
The report highlights that key differences remain on how to craft exemptions from the tax, including the problem of how to shield transactions in other non-participating EU countries such as Britain. Other splits concern how to protect market-making activities by banks, and also what carveouts should apply for derivatives that are used by traders to hedge risk when they buy sovereign debt.
The Commission should establish an institution-wide framework allowing the rapid mobilization of the Commission’s staff and expertise if a financial assistance programme emerges. The Commission should also develop procedures in the context of the ‘two-pack’ regulations.
The forecasting process should be subject to more systematic quality control.
To ensure the factors underlying programme decisions are internally transparent, the Commission should enhance record-keeping and pay attention to it during quality reviews.
The Commission should ensure that proper procedures are in place for the quality review of programme management and of the content of programme documents.
For budget monitoring purposes, the Commission should include, in memoranda of understanding, variables that it can collect with short time lags.
The Commission should distinguish conditions by importance and target the truly important reforms.
For any future programmes, the Commission should attempt to formalize interinstitutional cooperation with other programme partners.
The debt management process should be more transparent.
The Commission should further analyse the key aspects of the countries’ adjustment.
In the FT, Henry Foy reports about critical comments by Jeroen Dijsselbloem. The chair of the Eurogroup has argued that the Euro area needs an independent fiscal oversight body to disperse fears of “politicised” European Commission decisions when it comes to evaluating national budgets.
Naturally, lack of trust in the Commission is widespread. But now it seems to have reached the higher echelons of EU institutions themselves.
In the meantime, Tony Barber writes (also in the FT) that “The eurozone’s fiscally lax nations are at it again”.
Joachim Jahn and Manfred Schäfers report in the FAZ about pressure by the European Commission and the IMF to liberalize personal services in Germany. The IMF expects less regulation/protection of architects, tax advisors and the like to increase services growth. The tax advisors warn that liberalization would create conflicts of interest for the service providers.