Merkel tells irate Greeks painful reforms will pay off
Tens of thousands of angry Greek
protesters filled the streets of Athens to greet German Chancellor Angela
Merkel, who offered sympathy but no promise of further aid.Police fired teargas
and stun grenades to hold back crowds chanting anti-austerity slogans and
waving Nazi flags while Merkel's host, Prime Minister Antonis Samaras, welcomed
her on Tuesday as a "friend" of Greece.On her first visit to Greece
since the euro zone crisis erupted three years ago, Merkel struck a
conciliatory tone.She reaffirmed Berlin's commitment to keep the debt-crippled
Greek state inside Europe's single currency but offered Samaras no concrete
relief ahead of a new report on Greece's reform progress due by next month."I
have come here today in full knowledge that the period Greece is living through
right now is an extremely difficult one for the Greeks and many people are
suffering," Merkel said at a news conference with Samaras just a few
hundred yards from the mayhem on Syntagma Square, outside
parliament."Precisely for that reason I want to say that much of the path
is already behind us," she added.Samaras, who invited Merkel to Greece during a visit to Berlin in August, promised
to press on with economic reforms necessary to restore confidence."The
Greek people are bleeding but are determined to stay in the euro," he
said. "They are not asking for more money or favours. They only want to
get back on their feet as soon as possible and exit this recession."On the
other side of the parliament building, tens of thousands of demonstrators
defied a ban and gathered to voice their displeasure with the German leader,
whom many blame for forcing painful cuts on Greece in exchange for two EU-IMF
bailout packages worth over 200 billion euros ($315 billion).Greek riot police
clashed with protesters who tried to break through a metal barrier to reach the
cordoned-off area where Merkel and Samaras were meeting. Some demonstrators
pelted police with rocks, bottles and sticks.At least 30 people were hurt or
suffered breathing problems from tear gas and about 300 were detained, police
said.Four people dressed in World War Two-era German military uniforms and
riding on a small jeep, waved black-white-and-red swastika flags and raised
their hands in the Hitler salute.Banners read "Merkel out, Greece is not
your colony" and "This is not a European Union, it's
slavery"."We know that she is not here to offer favours but she must
help us, this is our last chance," said 45-year-old Mari Hanioti, a saleswoman
supporting her two children and her unemployed husband."She must be able
to see what we are going through, how much we are suffering. She should see the
poor neighbourhoods not just the expensive hotels."Some 6000 police
officers were deployed for the six-hour visit, including anti-terrorist units
and rooftop snipers. German sites in the Greek capital, including the embassy
and Goethe Institute, were under special protection.Before departing, Merkel
met Greek business people to ask how reforms were progressing and hear how they
were affected by an economy that has shrunk by a fifth in five years, leaving
25% of workers out of a job."She said: talk to me as if I wasn't a leader
but a good reporter," one attendant said on condition of anonymity.Merkel
decided to come to show support for Samaras, a fellow conservative, as he
struggles to convince reluctant, leftist coalition partners to impose more
austerity on a society fraying at the edges after several rounds of cuts.With a
year to go until Germany holds a parliamentary election, Merkel also hoped to
neutralise opposition criticism at home that she has neglected Greece and
contributed to its woes by insisting on crushing budget cuts.After her
government flirted earlier this year with the idea of allowing Greece to exit
the euro zone, she now appears determined to keep it in - at least until the
German election is out of the way.Greece is in talks with its
"troika" of lenders - the European Union, European Central Bank and
International Monetary Fund - on the next tranche of a 130-billion-euro ($204
billion) loan package, its second bailout since 2010.Without the
31.5-billion-euro tranche, Greece says it will run out of money by the end of
November.Merkel said the aid payment was "urgently needed" but stopped
short of promising that the funds would flow."The troika report will come
when it is ready. Being thorough is more important than being quick,"
Merkel said.Ties between Germany and Greece run deep. Thousands of Greeks came to Germany after World War Two as "guest workers" to help rebuild the
shattered country and more than 300,000 Greeks currently reside there.But the
relationship is clouded by atrocities Greeks suffered at the hands of the
Nazis. Samaras's own great grandmother killed herself after Nazi tanks rolled
down the streets of Athens and the swastika flew over the Acropolis.Greek
President Karolos Papoulias, whom Merkel also met on Tuesday, fought against
the Germans as a teenager, before fleeing to escape persecution by the Greek
military dictatorship and finding refuge in Germany.
Wall Street falls on IMF report
Equities slumped on both sides of
the Atlantic after the International Monetary Fund reduced its forecast for
global growth.The global economy will expand 3.3% this year and 3.6% in 2013,
the IMF said in its World Economic Outlook. That is down from July forecasts of
3.5% in 2012 and 3.9% in 2013.Meanwhile, the latest round of US earnings-kicked
off by Alcoa-is expected to clearly reflect the impact on corporate profits.
Earnings reports for S&P 500 companies may show the first quarterly drop in
three years, with analysts forecasting a 2.3% decline from the year-ago
quarter, according to Thomson Reuters data.To be sure, some say expectations
are so low that it leaves plenty of room for good news."There's so much
pessimism over earnings that there's room for upside with any positive
surprise," Paul Zemsky, the New York-based head of asset allocation for
ING Investment Management, told Bloomberg News."Overall I think traders
are too pessimistic. Even with the IMF economic numbers we got, those are still
pretty good numbers. The IMF is forecasting global growth next year will be
above 3%. That's probably higher than what most people are fearing at the
moment," Zemsky said.In afternoon trading in New York, the Dow Jones
Industrial Average dropped 0.55%, the Standard & Poor's 500 fell 0.74%,
while the Nasdaq Composite Index shed 1.29%.It was five years ago that the
S&P 500 reached a record high of 1565.15. Today, it was last at 1445.12The IMF's
downgrade of expectations for global growth helped demand for US Treasuries-an
auction of US$32 billion in three-year notes was met with record demand.Shares
of Intel fell, last down 2.55%, after downgrades from Sanford Bernstein &
Co and Robert Baird & Co.In Europe, the Stoxx 600 Index ended the session
with a 0.5% decline from the previous close.Benchmark indexes also fell in
Germany, France and the UK, declining 0.8%, 0.7% and 0.5% respectively.The euro
weakened too, dropping 0.9% against the Japanese yen, while falling 0.7%
against the greenback.European Union finance ministers met in Luxembourg today,
while German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras
met in Athens."I want Greece to remain in the
euro," Merkel told reporters, according to Bloomberg. "A lot has been
done, much remains to be done."Her visit came as the IMF forecast today
that Greece will miss the five-year debt reduction goal that underpins the nation's
bailout.
Europe edges towards banking union
European Union ministers examined a
proposal today to limit planned new powers for the European Central Bank to
supervise lenders, in a bid to allay the concerns of countries outside the euro
zone over a new banking union.The diplomatic drive came as the President of the
ECB and Germany's markets regulator cautioned that setting up a new system of
supervision would take up to the end of next year, later than many expected and
a potential setback to efforts to help distressed euro zone countries and their
banks.Brussels proposed earlier this month that the ECB take charge of
supervising all banks in the euro currency zone in stages from January, as a
first step towards creating a banking union under which chiefly euro zone
countries would eventually jointly back their lenders.Winning broad support for
a prompt introduction of the new supervision framework is important because it
should allow the euro zone's rescue fund, the European Stability Mechanism
(ESM), to directly inject much-needed capital into banks, such as those in
Spain.However, the plan has sparked concerns among the 10 EU countries which do
not use the euro that they will be indirectly affected by the ECB's new
supervisory powers and put at a competitive disadvantage, whether they join the
scheme or not.On Tuesday, diplomats from Cyprus, the current holder of the
European presidency, delivered a proposal to change the blueprint for banking
supervision, a move, in the words of one EU official, to make it more
"digestible" for countries outside the euro.In the document, seen by
Reuters, they recommend a counterweight to the central bank's authority to
withdraw a bank's licence, the ultimate threat a supervisor holds, by giving
national regulators a large say in such a decision.They also suggest a way for countries
outside the currency area that choose to join the banking union, subjecting
lenders to ECB control, to leave it again, by allowing them to "request
the ECB to terminate the close cooperation at any time".Speaking to
journalists after the meeting, Michel Barnier, the European commissioner in
charge of regulating banks, called for "flexibility and imagination"
in reaching a "fair" system for those countries outside the euro zone
to participate.Barnier is aiming to reach agreement on the new supervisory
system by the end of this year. But Mario Draghi, the president of the ECB,
cautioned on Tuesday that setting up a new framework of supervision would take
longer."The ECB is not supposed to take over supervision in three months'
time and do it," Draghi told lawmakers in the European Parliament.
"There is a phase-in time. We foresee that one year will be needed to
adapt all the structures."Elke Koenig, head of Germany's markets regulator
BaFin, also warned that the original deadline to start such supervision by the
beginning of next year was unrealistic."I could imagine that we get there
in January 2014. That's a guess," she told German television station ARD
on Tuesday, advocating a cautious approach."I support the idea of a strong
European regulator. But I have not seen a roadmap of how we get there,"
she said."The last thing we can afford is to have an interregnum between
those who are no longer responsible (for supervision) and those who are not yet
in a position to act."Word play
Others urged quick action.The Dutch central bank said today that policymakers
should quickly allow the European Central Bank to supervise major lenders and
to enable the ESM to directly recapitalise troubled banks.Gerard Rameix, head
of the French markets watchdog AMF, said that he had heard nothing to suggest
there would be a change to the timeframe."I think they are playing on
words a bit. If they are talking about the utmost end of the process, then they
are maybe not wrong," Rameix said.As a first step, the ECB is set to take
responsibility for supervising banks which have received state aid beginning
2013. From mid-2013 the ECB will add systemically relevant institutions, before
finally overseeing all euro zone banks by 2014.Germany, the euro zone's
economic heavyweight, has criticised efforts to allow the ECB to supervise all
euro zone lenders, claiming it will be overstretched.In reality, the ECB will
not be in day-to-day charge of supervision, which will still lie with national
regulators, but will have the power to overrule those authorities.The close
ties between some troubled governments and the banks they supervise - and on
which they also rely to buy their debt - have dragged both ever deeper into
crisis.A banking union would break this link by making the policing of banks
supranational and establishing central schemes paid into collectively to cover
the costs of closing failed lenders and protecting savers' deposits.
French parliament backs EU budget discipline treaty
France's lower house of parliament
voted to ratify a European budget discipline treaty today.A law ratifying the
fiscal pact was passed by 477 votes in favour to 70 against, despite a small
but noisy revolt from left-wingers and Greens that threatened to embarrass
Hollande just before an October 18-19 European Union summit.In all, 45 among
the 314 lawmakers that make up Hollande's left-wing parliamentary coalition
either voted against the law or abstained, ignoring pleas from Prime Minister
Jean-Marc Ayrault in recent days to fall into line.Yet Hollande still rallied
282 left-wing votes in favour, above the 274 required for a majority and
sparing him from having to rely on votes from opposition conservatives, who
voted largely in favour of ratification."This sweeping majority will give
France a bigger voice, that is to say it will enable us to forge ahead with the
rebuilding of Europe that I have committed to since my election," Hollande
said after the result.When former president Nicolas Sarkozy signed up to it in
March, the Socialists had opposed the fiscal pact, which holds governments to
meet deficit-cutting goals or face sanctions.Plagued by painful memories of
failing to rally his party behind a 2005 referendum on an EU constitution,
Hollande persuaded his EU partners at his first summit in June to sweeten the
pact with accompanying measures to stimulate growth in Europe.As recalcitrant
left-wingers continued to revolt against the pact this month, Ayrault told them
voting against it meant putting the euro's future in danger.Still, 20 out of
the 264 Socialist Party deputies in the lower house voted against the law on
Tuesday, along with 12 Greens. Among opposition parties, 13 radical leftists
voted against and 17 conservatives.Shackles
Hollande is anxious to show that his party will stand united behind him on
steps agreed in June to deepen fiscal and economic integration in Europe, steps opponents on the left view
as handing too much control of national affairs to EU authorities."We
salute the no vote of a number of Socialist and Green deputies who, like us,
reject the shackles this austerity treaty imposes on the people of
Europe," said Andre Chassaigne, leader of far-left lawmakers in the
National Assembly."It will lead our country, like other EU states, towards
the abyss of recession," he said.Hollande is treading a fine line as he
tries to convince his EU partners, and investors from London to Beijing, that
he is serious about bringing down the public deficit while also battling to
restore jobs and growth to a stalled economy.Since his May election Hollande's
approval ratings have fallen from 55% to as low as 41%, the fastest drop of any
recent president, as unemployment has surged to a 13-year high above
10%.Tuesday's vote came as riot police used teargas to disperse protesters
during nationwide demonstrations over mounting job losses and a wave of
industrial layoffs.Hollande's economic credibility is being put to the test by
the jobs crisis and by a 2013 budget that hinges on an economic growth target
of 0.8% that many view as over-optimistic.The International Monetary Fund
joined sceptical economists on Monday and halved its growth forecast for France
to 0.4% next year. Finance Minister Pierre Moscovici responded by calling the
government's outlook "realistic".The president has promised the European
Union he will cut the deficit to 3% of gross domestic product in 2013, but the
gloomier growth outlook and his decision to make two-thirds of the adjustment
through tax rises has raised doubts.The fiscal pact enters into force on
January 1 next year or when 12 of the 17 euro zone member countries ratify it,
as half a dozen, including Germany, already have.The ratification law passes to
the Senate today and should be finally adopted before the end of the week.
