The Economist despre "Fondul Monetar European"

Evident, Bruxellesul nu poate admite că mai există şi alţi "doctori" (cum ar fi FMI), şi mai multe doctorii decât euro (este arătat în articol cazul Letoniei, unde anul trecut FMI şi Comisia Europeană au oferit soluţii diferite pentru ieşirea din criză).

Why is Germany talking about a European Monetary Fund?

Mar 9th 2010, 18:25 by Charlemagne

A GREAT leap forward in European integration? Or just words? That is the question posed by the weekend's flurry of excitement, after Angela Merkel endorsed the idea of a European Monetary Fund, to fulfil the same sort of role as the International Monetary Fund (IMF) within the euro zone. Many in Brussels are pretty excited about this apparent concession from the German chancellor. They are also chipper about the proposal from the Belgian prime minister, Yves Leterme, for a central European debt agency that would issue euro-denominated debt centrally. They liked the report in the German press that EU finance ministers want the creation of a European credit ratings agency under the European Central Bank, to challenge the power of the big three commercial credit rating agencies. And they were pleased, for once, with the European Commission when it said today it would look at ways to curb "speculative" trading in Credit Default Swaps on sovereign debt by market actors who did not own any of the underlying debt (ie, naked trading).

These are big subjects, and this is only a blog posting, so I am not about to give you chapter and verse on all of them. Instead, here are a series of thoughts and questions that continue to make me sceptical that we are entering a whole new world of European integration. Apologies if it is a bit of a grab-bag. There is a lot going on.

A first question: why is Germany talking about setting up a European Monetary Fund? Let me answer that with another question. Is Germany really pushing for the creation of an EMF any time soon? True, the German finance minister, Wolfgang Schäuble, launched the idea this weekend. And in a meeting with foreign correspondents in Berlin on Monday, Mrs Merkel said: "We want to be able to solve our problems in the future without the IMF." But in the same meeting, as the FT reported on its front page this morning, she expressed the view that creating such a fund would require changing the EU treaties. Given that a changed treaty would need ratification in all 27 countries, and given the agonies that went into ratifying Lisbon, and given the pledge of Britain's Conservatives to hold a referendum on any transfer of powers to the EU if they are in government when such a move is proposed, Mrs Merkel was effectively signalling that the idea is one for the far horizon. There is also the small detail that the German monetary establishment, in the form of the head of the German central bank and one of the top German officials at the European Central Bank, have jumped on the idea of an EMF, calling a dangerous distraction and a "sideshow" (http://www.ft.com/cms/s/0/ac780622-2b83-11df-9d96-00144feabdc0.html)from the central priority of maintaining fiscal discipline within the euro zone.

Interestingly, it is a subject of considerable debate whether you would need treaty change to create an EMF. I am told (but have not confirmed) that the legal services of the EU council of ministers (the bit of the machine that brings together national governments) have prepared a legal opinion saying you do not need to touch the treaties to create such a fund, and that a unanimous decision of the 27 heads of state and government would do.

It is clear that the French are pretty wary (http://www.lemonde.fr/economie/article/2010/03/09/l-idee-de-creer-un-fonds-monetaire-europeen-pour-secourir-un-pays-de-la-zone-euro-fait-debat_1316398_3234.html#ens_id=1268560) of the Schäuble vision, which is long on rigour and budget discipline and sanctions for countries that allow their deficits to breach the limits fixed by the Maastricht criteria. So what is going on in Germany? One possible answer, offered to me by a well-informed EU official today, is "smoke and mirrors", ie, Germany is keen to be seen to do something for Greece, without spending any money. Talking loudly about an EMF generates a lot of smoke and flashing light.

Here is a second question. What does an EMF offer that the IMF does not? Put another way, why is it so axiomatic that it would be a "humiliation" for Europe if the IMF were to organise the rescue of a euro zone member? That is what everyone says, but why? Some talk of the IMF as standing for "Washington", because that is where it is based, and because the Americans have an effective veto over the IMF through their voting weight there. Others offer the rumour that President Nicolas Sarkozy of France is reluctant to let the IMF save the day because its boss, the French Socialist politician Dominique Strauss-Kahn, is a credible candidate to run against him for the French presidency in 2012. Such explanations strike me as at once too simple and too complicated to be completely convincing.

I am sure there is a big element of European pride (http://www.nytimes.com/2010/03/09/world/europe/09iht-politicus.html?ref=europe) at work, even if the truth is that the IMF is not "Washington", but an international body, crammed with clever economists and technocrats from around the world. But I do not buy this idea that Mr Strauss-Kahn would be catapulted to domestic French stardom if he were to lead a bail-out of Greece. To believe that, you have to imagine French voters sitting at a bar, saying things like: "I see that Dominique Strauss-Kahn has successfully presided over a narrowing of Greek bond yield spreads, him and that rigorous conditionality of his."

For what it is worth, I recently heard a respectable argument for IMF-scepticism in Brussels that was new to me. I am told that senior officials in the European Commission were shocked by the off-the-shelf feeling of the advice that the Fund offered to Latvia, when that Baltic state needed emergency help last year. In particular, the IMF experts advised Latvia to devalue its currency, which is a standard element of many IMF rescue packages. In this case, however, the then EU commissioner for economic and monetary affairs, Joaquín Almunia, strongly advised the Latvians to stick with their currency peg to the euro, which they did. It is an honest difference of opinion, but the point is that the IMF was seen as offering a rather default solution, that did not seem very sensitive to European circumstances.

A third question. Is the EU going to start issuing debt centrally any time soon? No. Some senior Brussels figures think it is a good question for debate in the future. Some countries (ie, those who pay a premium to borrow money now, like Italy) love the idea, while other countries that can borrow cheaply (hello Germany) are very wary. But right now at this moment of all fiscal dangers, to quote one senior figure, it would send a terrible signal if the EU—which has never run deficits until now—became yet another body running up deficits. I think that is a good enough argument to kick this one into the long grass.

A fourth question. What would a European credit ratings agency gain the EU? There are a couple of reasonable arguments out there for a publicly funded credit ratings agency. One is that the commercial ratings agencies called the credit crunch wrong, because their incentives were all wrong (because they were paid by the institutions whose complex products they were rating). The other argument is that these wicked agencies have ended up with outrageous power over the euro zone, because of the ECB rules about only accepting collateral from governments that has been deemed of reasonable quality by the big ratings agencies. This was what lay behind the complaint of the Austrian ECB Governing Council member Ewald Nowotny, on March 2nd, that the "fate of Europe" rested on ratings agencies. To quote a Reuters report (http://www.reuters.com/article/idUSLDE6220MM20100303?type=marketsNews):

"Greece's recent debt troubles have highlighted problems in the system under which the ECB accepts bonds as security for loans based on the judgment of major ratings agencies: currently at least one agency must rate bonds BBB-, but the threshold is due to go back to A- at year end. Fitch and S&P have downgraded Greece into 'B' territory and should Moody's follow suit, banks would no longer be able to exchange Greek government debt for cash in ECB refinancing operations from January 2011.
Nowotny said on Tuesday Europeans had never been able to agree on setting up a local alternative to the big ratings agencies, but it would be good to escape from dependence on their judgement.
"The fate of Greece, and if you are going to be more dramatic, the fate of Europe, depends on the judgement of one rating agency. That is an unacceptable situation," he said, adding that sanctions from ratings agencies were "bigger than God's."
"The problem is that they are like a black box. A central bank can better judge the economic developments of a country than three people sitting in an office in New York."

But there are good counter-arguments, too. One simple one is that Mr Nowotny's complaint would be solved by the ECB allowing itself more flexibility to decide what bonds to accept as security for loans. Another is that it is hard to see that the creation of an EU ratings agency would "free the euro zone from its dependency on international rating agencies such as Standard & Poors, Moody's and Fitch", which is the boast ascribed to unnamed finance ministers in a report in Handelsblatt, the German business daily, on March 3rd. Those agencies would still exist, and would still presumably still issue credit ratings of EU governments which the markets would be able to see. Imagine what would happen in some near-future, if those commercial agencies downgraded the credit rating of, say, Italian or Spanish sovereign debt. If the EU ratings agency followed suit, because it thought the arguments of its commercial cousins were well-founded, what has Europe gained? And if the EU ratings agency disagrees, will the markets take its word at face value? Or will they start grumbling about rumours of political pressure from the Italian or Spanish governments? Then there is the argument that markets have already become too dependent on credit ratings, and really need to do more digging themselves and to push for more transparency. Establishing a publicly funded ratings agency, with the imprimatur of the ECB behind it, could make that problem worse. A better cure, as colleagues from this newspaper have said before, would be more competition in the world of commercial ratings agencies.

A final thought, this time about speculators. A simple morality tale has been spun in recent weeks about the role played by hedge funds and big banks like Goldman Sachs, and the hitherto little-known market in sovereign Credit Default Swaps, financial products offering something analogous to insurance on the risk that a country will default on its debts. The press on the continent has told readers how big hedge funds snapped up CDS on Greek sovereign debt, even though they did not hold the underlying debt, and how that is as suspicious an act as buying insurance on your neighbour's house burning down. The whole thing was a gigantic conspiracy, it is explained, in which the markets were supposed to see a sudden surge of interest in CDS "insurance", and conclude that Greek default was imminent, forcing Greece to pay ever-higher rates to borrow money, thus eventually bringing about Greek default. I have repeatedly read that the whole idea of the game was to drive up bond yields on Greek debt by spreading the idea that default was imminent, as markets watched the cost of CDS insurance rise.

Here is an online story in today's Le Monde (http://www.lemonde.fr/economie/article/2010/03/09/bruxelles-veut-interdire-des-operations-speculatives-sur-la-dette-des-etats_1316823_3234.html#ens_id=1268560), telling the tale:

"CDS, or Credit Default Swaps, are financial derivatives, originally designed to offer cover against the risk that an issuer of debt might default, working a bit like insurance. But speculators buy CDSs covering risks to which they themselves are not directly exposed, betting on a default by the issuer of the debt in question. In that event, they can buy up the bonds at rock bottom prices, while pocketing the "insurance" offered by the CDS."

Note the key assumption that the speculators' big payout occurs when a debtor actually defaults. This sort of reporting explains why so many people think that the hedge funds are part of a big Anglo-Saxon plot to destroy whole countries, if not all Europe. But here is the thing: there is a plot on the part of Anglo-Saxon speculators, but it is not very secret. The plot is this: to make lots of money. And if you believe the hedge funds themselves (a big if, I realise, for some readers), they found a way to make lots of money by buying up CDS relating to Greek sovereign debt without Greece defaulting. Their trick, as reported in this fascinating FT report (http://www.ft.com/cms/s/0/56cde15a-27bf-11df-863d-00144feabdc0,dwp_uuid=2b8f1fea-e570-11de-81b4-00144feab49a.html), was to buy up this insurance, if you like, when it was very cheap, in the belief that big banks that had loaded up on Greek debt would eventually start panicking that this debt was not as safe as they had once thought. At which point, the hedge funds were in a position to "sell insurance", if you will, to panicking banks at a hefty premium. Here is the FT's description of the scheme:

"Hedge funds anticipated that if the Greek government’s financial situation deteriorated – as they expected – then the owners of the approximately $300bn of outstanding Greek bonds, would be desperate for credit protection, or else would look to sell their holdings.
Having already locked in credit protection cheaply, if such a situation were to occur – as it did – the hedge funds would then be in a position to write credit insurance at a significant premium to panicking banks, or else buy up Greek bonds being dumped in the market for a decent yield. In the event, the trade paid handsomely."

Are hedge funds and big banks ruthless? Yes. Have some big banks behaved pretty shabbily in Greece for years? There is a lot of evidence that points in that direction. But the current hysteria about CDS speculation is based on a misunderstanding. Greece did not have to default for the trades to pay out. And the real target of the speculators in this case may have been other market actors, not the Greek public. Does that mean that nothing untoward went on? I do not know, this is a blog posting, not an investigative report. American regulators are looking into the CDS market

A final thought, to end a very (very) long posting. If you poke about behind the headlines, the top levels of the EU machine seem to understand that speculation is only part of the story. Here is a speech (http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/10/80&format=HTML&aged=0&language=EN&guiLanguage=en)by the European Commission president, José Manuel Barroso today, in which he said:

"If it is true that the current problems in Greece were not caused by speculation on the financial markets, it is also true that this speculation was an aggravating factor...we need to proceed with an in-depth analysis on Credit Default Swaps markets so as to better determine how these markets function and if they are the subject of questionable practices."

I think that is code for: I know these things are not the reason Greece is in trouble, but Nicolas Sarkozy and Angela Merkel have told me I have to be seen to do something about them, so here goes.

http://www.economist.com/blogs/charlemagne/2010/03/european_indecision

UPDATE : Mihai Tănăsescu are o părere similară ("Subiectul Fondului Monetar European este lansat emotional, din cauza Greciei"), la HotNews.ro