From Deutsche Bank, below is a list of key events to watch over the next several weeks – events that could have bearing on how the euro sovereign debt crisis evolves. Of particular note: in the next 6 weeks there are 18 or so days on which Spain, Italy or, yes, Greece will be issuing debt. Have that espresso machine ready.
June
18 June: Asmussen to speak. ECB Executive Board member Joerg Asmussen to speak on the ECB’s role in the crisis.
18-19 June: G20 Leaders Summit, in Los Cabos, Mexico. The G20 were an effective policy coordination forum in the context of the global shock that was the credit crisis. It is possible, in a more market-negative Greek election outcome, that global central banks coordinate announcements in order to quell market pressures. Each would respond within its own abilities and remit. The G20 is not the forum to resolve the euro crisis. Only a sub-set of EU leaders attend. Rather, we believe resolution of the crisis will come from meetings such as the EU Finance Ministers on 21-22 June and EU leaders on 28-29 June.
19 June: German Constitutional Court ruling The German Constitutional Court will deliver its ruling on the information obligations of the German government to the parliament in the context of ESM and Euro-Plus Pact. The opposition Green Party claims that the government has failed to inform parliament "comprehensively and at the earliest possible time" and to consult parliament on the negotiations and EU-level decisions concerning ESM and the Euro-Plus Pact. The dispute is partly procedural in nature as there is a legal basis for information obligation by the government in matters concerning European Union affairs. ESM and Euro-Plus Pact, however, have been treated as intergovernmental decisions not covered by this legal act. The claimants want to see the formal information obligations also extended to decisions with an intergovernmental character. Since the Constitutional Court has followed the line of strengthening parliament's role in euro crisis management, it might well rule in favour of the Greens. The impact on the German decision-making process should be marginal.
19 June: Spain auction. Bills.
19 June: Greece auction. Bills.
20 June: German-Dutch summit. Angela Merkel is due to hold talks on the crisis with Mark Rutte, her Dutch counterpart. His caretaker status and the approaching Dutch election on 12 September could make strong progress towards integration at the 28- 29 June summit more challenging.
By 21 June: Interim consultants’ assessment on Spanish banking. The Oliver Wyman/Roland Berger interim/top-down assessment of bank asset valuation, part of the Royal Decree 2 (RD2), is due for publication. The Spanish government has claimed this will form part of the basis for its decision to trigger an EFSF bank recapitalisation loan.
21 June: ECB mid-month meeting. Not normally an occasion at which the ECB Council discusses monetary policy.
21 June: Spain auction. Bonds.
21-22 June: Eurogroup/ECOFIN finance ministers meetings. Assuming a new government has been formed, this meeting could give the first indications of the new Greek government’s demands in a renegotiation of the second loan programme.
22 June: Big 4 crisis meeting. The heads of state/government of Germany, France, Italy and Spain are due to meet in Rome to discuss the crisis. This will be an occasion to agree common positions to take into the EU leaders’ summit on 28-29 June.
26 June: Spain auction. Bills.
26 June: Italy auction. Bonds
27 June: Italy auction. Bills.
28 June: Italy auction. Bonds.
28 June: Greek parliament to reconvene.
28-29 June: European Council meeting. This is the quarterly summit meeting of the EU heads of state and government. There are likely to be five elements to the summit: Greece (probably too soon for any renegotiation to have been agreed or finalised). Spain (a likely endorsement of an EFSF bank recapitalisation deal, although the volume of recapitalisation would await the conclusion of a stress test), the ‘growth compact’ (small-scale stimulus from EIB balance sheet growth, absorption of structural funds and EU Project Bonds), and road-maps to ‘banking union’ and ‘fiscal union’.
29 June: Germany: Government and opposition parties to meet on ESM/ Fiscal Compact. With the agreement between ruling coalition (CDU/FDP) and opposition (SPD/ Greens) on a roadmap to financial market taxation, one of the biggest stumbling blocks for ratification of the ESM/ Fiscal Compact has been removed. The deal comprises a commitment of Berlin to launch the procedure towards enhanced cooperation in the upcoming EcoFin on 21-22 June. This essentially shifts the responsibility of delivering a new legislative proposal back from capitals to the Commission. The German deal entails a commitment to as broad a base as possible, to a low rate and to a design which does not provide large relocation incentives. The other opposition's condition in return for its approval (two-thirds majority in parliament required), the German proposals on growth in the euro area - also to be presented to the EcoFin - have yet to be finalised. This should, however, not be a problem as there is broad consensus on most elements (e.g. EIB capital injection and increase of lending capacity, better use of structural funds, initiative to combat youth unemployment). The Greens are also pushing for some agreement on the idea of a European Redemption Fund (ERF) as proposed last year by the independent German Council of Economic Experts, Setting up the ERF, however, would be a medium-term project still entailing legal and constitutional difficult questions.
Apart from the negotiations on the federal level, the second chamber - representing the German states - has to approve the legislative pieces on ESM and Fiscal Treaty with two-thirds majority, too. There, the states face budgetary problems in implementing the budget rules of the Fiscal Compact until 2014 (stricter than the German debt brake so far) and demand financial support from the federal level to comply with them - which looks likely to be granted in some form. Given the progress made, the Bundestag has put the approval of the ESM/ Fiscal Treaty on the agenda for its 29 June plenary session with the Bundesrat approving the same day.
30 June: Deadline for EBA capital target. Banks have until the end of June to satisfy the EBA core tier one capital ratio of 9%.
July
5 July: ECB Governing Council meeting, followed by interest rate announcement and news conference. We expect a policy interest rate cut. The refi rate can drop 25bp. The ECB may, however, be reluctant to cut the deposit rate all the way to zero.
5 July: Spain auction. Bonds.
9-10 July: Eurogroup/ECOFIN finance ministers meeting.
10 July: Greece auction. Bills.
12 July: Italy auction. Bills.
13 July: Italy auction. Bonds.
17 July: Spain auction. Bills.
17 July: Greece auction. Bills.
19 July: Spain auction. Bonds.
24 July: Spain auction. Bills.
25 July: ECB lending survey. The ECB are due to publish their third lending survey of the year on Wednesday 25 July. The survey could provide the ECB with a key piece of evidence to justify additional 3Y LTROs — if lending standards tighten again, another liquidity push may be necessary to avert a harsher credit crunch. The ECB will publish one more lending survey this year on 31 October.
26 July: Italy auction. Bonds.
27 July: Italy auction. Bills.
30 July: Italy auction. Bonds.
Mid July: Italian parliament lower house vote on labour reforms. The senate approved all four chapters of the labour market reform; the first two chapters were approved 30 May – including the modifications to dismissal rules (Article 18) – and the last two approved on 31 May. Given Italy’s ‘perfect bicameralism’, the lower house will also have to approve the reform. Whilst the labour market reforms fall well short of ideal, they nonetheless represent progress when compared to the failures of previous efforts to modify Article 18 (dismissal rules), legislated over 40 years ago.