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IMF proposal on Greece goes further than expected
Today’s European media outlets comment on various economic issues: primarily the Greek crisis, the fines which are threatening Spain and Portugal for having broken the EU Stability and Growth Pact, the European Commission’s approval of Italy’s request for flexibility, and the ECB policy. According to the Wall Street Journal, as quoted by La Tribune and Efimerida Ton Sintakton, the International Monetary Fund (IMF) has proposed a scheme for restructuring the Greek debt that is far from what European creditors were expecting. The IMF wants Greece’s bailout loans to be spread from 2040 to 2080, a measure that would maintain Athens’ net financing requirements under 15% of GDP.
The IMF proposes a grace period until 2040 and an extension of the repayment of Greek loans to Europe until 2080. Äripäev says that after 2040, the debt payments should be distributed evenly in the following decades until 2080. The Estonian economic daily adds that the euro area loan interest rates would be fixed at 1.5% for the next 30-40 years until loans start falling due. This new IMF proposal goes far beyond what the country’s Eurozone creditors have said they are willing to do to help it regain its financial health, the Wall Street Journal Europe comments. Naftemporiki therefore says that it is not clear whether the proposal will be accepted by the Europeans and particularly by Germany.
De Standaard states that this plan will be contested during the next Eurogroup meeting even though a debt relief was agreed on in principle. Nevertheless, an unnamed high-ranking EU official said, according to Reuters, that a political agreement on the Greek debt at the 24 May Eurogroup is difficult but not impossible, notes. Efimerida ton Syntakton comments that Bundesbank President Jens Weidmann expressed the know position of Berlin that the Greek debt relief is not an issue that needs to be discussed now.
 Les Echos reports that the European Commission will decide today whether it will apply sanctions against Spain and Portugal due to excessive deficit: indeed, at the end of 2015, Spanish and Portuguese deficits reached 5.1% and 4.4% of GDP respectively, instead of the 4.2% and 2.5% expected. The French newspaper specifies that the value of potential fines, which have never been imposed by Brussels so far, could amount to 0.2% of GDP. According to media reports, European Commission Vice-President Valdis Dombrovskis and Commissioner Pierre Moscovici support the tightening up of the procedures against the countries’ deficits, whereas EC President Jean-Claude Juncker opposes this position, Frankfurter Allgemeine Zeitung writes. He has opted for postponing sanction proceedings against Spain and Portugal until a new government is formed in Madrid, El País notes. In Jornal de Negocios, Socialist MEP Pedro Silva Pereira defended that sanctions against Portugal would be nonsense, emphasising that the economic strategy followed until December 2015 was sanctioned by the European Commission.
He added that there are many other member states that do not meet the European fiscal targets and imposing sanctions only on Portugal and Spain would be an intolerable double standard. In the same newspaper, MEP José Manuel Fernandes also claimed that if Portugal is fined, the same should go for the European Commission for having approved all measures implemented until 2015. La Tribune’s Romaric Godin looks back at the Bundesbank President Jens Weidmann’s interview published yesterday and quotes him proposing to take the monitoring compliance with the Stability and Growth Pact away from the European Commission. The author stresses that this question “is the European executive’s biggest fear” and that “it is probably why Brussels has divided to raise its voice against Spain and Portugal”. Il Sole 24 Orenotes that the European Commission is expected to publish today its verdict on member states’ public finances.
Therefore, many media comment on the economic and budgetary situation of their own country. In a commentary for La Stampa, Marco Zatterin stresses Prime Minister Renzi’s success in obtaining a record level of flexibility from the European Commission. Officials in Brussels explained that no country had ever been given so much before, TG la 7 says, adding that in exchange, Italy has to correct its finances for 2017. Italian media report that EC will make official its decision to grant Italy 0.85% in flexibility today. In an interview with La Repubblica, Lorenzo Bini-Smaghi, former member of the ECB board, says that the European Commission’s approval of Italy’s request for flexibility must be interpreted as a “political” decision, while being a “lesson” for people who accuse Commissioners of being “bureaucrats”.
Le Soir reports that the European Commission told Belgium it ought to reduce its deficit by 0.6%, better educate its citizens and better integrate the unemployed. Finally, Le Figaro reports that some German entrepreneurs and academics have just complained against the European Central Bank (ECB) and its ultra-loose monetary policy to the Constitutional Court in Karlsruhe. Indeed, they accuse it of overstepping its mandate to revive inflation and boost growth, notably underlining that the massive redemption of public debt helps to fund the States, which is prohibited by European treaties. For his part, in an interview with Handelsblatt, Governor of the Banca d’Italia Ignazio Visco defends the QE programme as necessary and claims that it has worked.
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