There are still 3 weeks until the next so very critical Greek elections (which if we are correct, will have an outcome comparable to the first, and not result in the formation of a new government absent Diebold opening a Santorini office), meaning the power vacuum at the very top in Europe will persist, and while the market demands some clarity about something, anything, nothing is likely to be implemented by a Germany which is (rightfully, as unlike the US, Europe does not have the benefit of $16 trillion in inflation buffering shadow banking) concerned by runaway inflation if and when the global central banks announce the next latest and greatest global bailout, which this time will likely by in the $3-5 trillion ballpark. However, none of this will happen before the market plummets as Citi explained last weekend, and Europe has no choice but to act. Luckily, as the events calendar below from Deutsche Bank shows through the end of July there are more than enough events which can go horribly wrong, which ironically, is precisely what the market bulls need to happen for the central-planning regime to once be given the carte blanche to do what it usually does, and believe it can outsmart simple laws of Thermodynamics, regression to the mean, and all those other things central bankers believe they can simply overrule.
- 28 May: Italy auction. Bonds.
- 29 May: Italy auction. Bills.
- 31 May: Irish referendum on Euro zone ?‘Fiscal Compact?’. A recent poll published in the Sunday Business Post showed a 6 point increase in support for ?‘Yes?’ after the first week of formal campaigning by the government. The yes vote was up 6pp to 53% versus a month ago, the no vote down 4pp to 31% and don?’t know down 2pp to 16%. Excluding the ?‘don't knows?’, Yes leads No 63% to 37%. An alternative poll published in the Irish Independent on 17 May similarly showed a 60% Yes vote when the ?‘don?’t know?’ contingent is excluded. However, in that poll the ?‘don?’t knows?’ represented 35% of the total. The average ?‘don?’t know?’ proportion in the opinions polls on the Fiscal Compact since the start of the year is 24%. The question is whether the ?‘don?’t knows?’ swing in favour of the ?‘No?’ camp. In the last 5 opinion polls in the month ahead of the Lisbon Treaty rejection in 2008, the ?‘don?’t knows?’ averaged 31%. Excluding the ?‘don?’t knows?’, ?‘Yes?’ had a lead over ?‘No?’ of 56% to 42%. In the event, the Lisbon Treaty was rejected 47% to 53%. (see ?“Eurostress?” in this issue of Focus Europe).
- 6 June: ECB Governing Council meeting, followed
by interest rate announcement and news conference.
- 6-June: European Commission proposed Directive on crisis management/bank resolution. The EC is due to present proposals for a bank crisis resolution scheme, potentially including plans for creditor write- downs, before the G20 leaders?’ summit on 18-19 June. The proposals being worked on have been reported not to directly involve the euro zone?’s EFSF and ESM funds.
- 6 June: Portugal auction. Bills.
- 7 June: Spain auction. Bonds.
- 10 June: French legislative election (first round). Elections to entirely renew the deputies in the National Assembly (lower house of parliament). A risk is that the socialist party alone fails to secure an absolute majority and has to depend on the support of the radical left, which could push to try to transform what we hold for pure campaign rhetoric in actual legislation. However, it would be wrong to simply replicate Melanchon?’s score in the first round of the presidential election into the number of deputies the radical left would secure, as the ?“personal factor?” was important in Melanchon?’s strong performance and as the ?“two rounds?” majority system of the parliamentary election should favour the socialists.
- 12 June: Greece auction. Bills.
- 13 June: New timeline for ratifying ESM and Fiscal Compact in Germany. German government and opposition will decide on the final timeline for ratification of ESM and Fiscal Compact. In return for their support to approve the Fiscal Treaty (two-third majority in the Bundestag required), the opposition (SPD and Greens) want to see a broad growth initiative for the euro area. Meanwhile, the opposition has indicated that the elements of a growth strategy discussed at the informal EU dinner on Wednesday will satisfy their demands in this regard (in their statement the SPD joined Chancellor Merkel in rejecting Eurobonds at this point in time). The crucial issue remains the opposition's call for concrete steps to introduce a financial transaction tax which is supported by the ruling coalition in principle but cannot be realised at short notice. Moreover, the second chamber - representing the German states - has to approve the legislative pieces with two-third majority also. 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 is likely to be granted in some form. Government and opposition will convene again on June 13 to decide on the final timing for the legislative process. The ESM should be ratified in time for the July 1st deadline to allow its entering into force but the ratification of the Fiscal Treaty might well slip into July.
- 13 June: SPD and CDU meeting. According to Bloomberg on 13 June the CDU and SPD will discuss the idea of the so-called European Redemption Fund put forward by the ?‘German Council of Economic Experts?’ ?
- 13 June: Italy auction. Bills.
- 14 June: Italy auction. Bonds 17 June: French legislative election (second round) See 10 June entry.
- 17 June: Greek elections. A repeat of the national elections in Greece was called by the President after the three largest parties from the initial election on 6 May (New Democracy, SYRIZA and PASOK) were each in turn unsuccessful in forming a coalition and talks between all party leaders failed to produce a unity government. An emergency government led by the senior judge Panagotis Pikrammenos has been tasked with taking Greece through to the new election. Some polls showed a sharp rise in support for the anti-bailout SYRIZA, while others showed a stronger backing for New Democracy (see ?“A Containment Strategy?” in this issue of Focus Europe for further details).
- 18-19 June: G20 Leaders Summit, in Los Cabos, Mexico. Gathering of the leaders of the world?’s twenty biggest economies. European Commission?’s plan to resolve failed European banks among the issued to be discussed (see the entry above).
- 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 material impact on the German decision-making process should be marginal.
- 19 June: Spain auction. Bills.
- 19 June: Greece auction. Bills.
- 21 June: Spain auction. Bonds.
- 21 June: Eurogroup finance ministers meetings.
- 26 June: Spain auction. Bills.
- 26 June: Italy auction. Bonds
- 27 June: Italy auction. Bills.
- 28 June: Italy auction. Bonds.
- 28-29 June: European Council meeting. This is the quarterly summit meeting of the EU heads of state and government. This may be when a ?“growth compact?” to complement the Fiscal Compact crystallises.
- 5 July: ECB Governing Council meeting, followed by interest rate announcement and news conference.
- 5 July: Spain auction. Bonds.
- 12 July: Italy auction. Bills.
- 13 July: Italy auction. Bonds.
- 17 July: Spain 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.