Mr Benoît Coeuré, Member of the Executive Board of the European Central Bank, gave a speech in Frankfurt am Main at the BIS-ECB Workshop on global liquidity and its international repercussions.  
European Council/Parliament Statements (crisis)

 
S&D: A financial transaction tax would have a positive impact on growth and jobs

The introduction of a financial transaction tax in Europe could benefit the European economy and raise the level of growth, according to a study written by two prominent economists, Professors Stephany Griffith-Jones and Avinash Persaud.  
 

The newly-agreed governance treaty was largely unnecessary for emerging from the crisis. It must be made consistent with the economic governance "six pack", and backed by immediate measures to address the eurozone's short-term constraints, said Parliament.  
 

Commenting on the resolution on the Treaty for a Fiscal Stability Pact, S&D Group Leader, Hannes Swoboda, said: "Even if this treaty is ratified in national parliaments, it is and will remain the wrong approach".  

 

 
Economic Governance Developments

Mr Van Rompuy said that the future of the Union and of the euro is being questioned. He spoke on two key issues: interdependence and co-responsibility.  
 

Deutsche Bank has risked a clash with the European Central Bank by indicating it sees a stigma attached to the long-term help offered to banks to try to ease the eurozone's funding crisis  

 

EFSF/ESM/Eurobonds  

 

According to the International Capital Market Association (ICMA), the creation of eurobonds could help stabilise European markets, but only if they are viewed as a long-term – and even a permanent – solution.  
 

Mr Van Rompuy said that this permanent crisis mechanism will contribute to raising confidence and ensuring solidarity and financial stability in the euro area. It creates a permanent firewall with a broad range of tools and a strong financial basis to safeguard financial stability.  

 

 
At-Risk States  

 

 
Reuters: Greeks fail to strike deal to take to Brussels

Greek leaders failed to agree on reforms and austerity measures, the price of a bailout to avoid a default, forcing finance minister Evangelos Venizelos to go to the country's financial backers with an incomplete deal.  
 

The article says that the European Central Bank has made key concessions over its holdings of Greek government bonds that will contribute to a reduction of the country's debt burden.  
 

FT: Pension cuts stall Greek austerity talks
A dispute over pension cuts stalled talks last night between leaders of Greece's fractious national unity government on tough new austerity measures, one of the last hurdles to be cleared before eurozone officials can sign off on a €130 billion bailout and save Athens from the default.  
 

Greece missed a deadline to approve conditions for a second €130 billion bailout, after a meeting with political leaders was postponed because of last-minute haggling with international lenders over emergency spending cuts.  
 

Guy Verhofstadt, ALDE group leader, called for a major roll back of the Greek State, an end to party political clientelism, and sweeping structural reforms to liberalise the economic sector.  
 

The situation in Portugal remains uncertain as the government, economists and investors take opposing views. The government is optimistic, economists expect a haircut, and investors are cautious.   
 

Greek Prime Minister, Lucas Papademos, and the political leaders backing his interim government will try again on Tuesday to agree on the cutbacks needed to win a new bailout deal and avoid Greece defaulting on its debts next month.  
 

European officials are insisting any new Greek bailout programme specifically earmark funds to pay off remaining holders of Greek debt, giving lenders the freedom to withhold aid to Athens, without risking a default that could reignite panic in financial markets.  
 

German Chancellor, Angela Merkel, and French President, Nicolas Sarkozy, proposed setting up a separate account for Greek debt payments to reassure creditors.  
 

Staff teams from the World Bank, European Commission and the International Monetary Fund visited Bucharest for the review of Romania's economic programme. The objectives of the programme are to solidify economic growth, while maintaining macro-economic and financial stability.  
 

Today, S&D Group leader, Hannes Swoboda, urged the EU and the international experts to find a lasting solution for Greece.  
 

Lucas Papademos, the Greek premier, failed to make party leaders accept harsh terms in return for a second €130 billion bailout, pushing Athens closer to a disorderly default as early as next month.  
 

Greece is moving closer towards a deal with international creditors on a second €130 billion bailout package, the country's finance minister said, but added that key differences holding up negotiations remain, and that political leaders still needed to sign off on tough decisions on spending cuts.  
 

Will Italy be able to cut its debt and abide by the new EU fiscal rules? This column presents a simulation of the evolution of the Italian debt-to-GDP ratio. It finds that Italy's borrowing and saving plans are sustainable – even at today's high interest rates.  
 

Katinka Barysch comments that the underlying problem persists: Greece's donors – not only Germany but also other EU governments and the IMF - no longer trust Greek politicians to turn their country around.   
 

According to John Greenwood, chief economist at Invesco, the whole of southern Europe will eventually leave the eurozone due to a general lack of competitiveness, with Greece and Portugal first in line for the exit.  

 

 
International Comments on the EU Crisis  

 

 
Ricardo Hausmann: Ireland can show Greece a way out of the crisis

Greece must export its way out of the crisis or face ruin, writes Ricardo Hausmann for the FT.  
 

Mr Gurria said that Italy has embarked on an ambitious, much-needed reform programme to strengthen its public finances, to restore growth and to improve the competitiveness of the Italian economy.  

The ECB's behaviour should not be surprising: as we have seen elsewhere, institutions that are not democratically accountable tend to be captured by special interests. That was true before 2008; unfortunately for Europe – and for the global economy – the problem has not been adequately addressed since then.  

 

 
Commentaries on the Economic Crisis  

 

 
Jacob Funk Kirkegaard: Europe’s new fiscal compact treaty does not outlaw Keynesianism and is a stepping stone to more progress

This column says that there is still room for government spending in extreme situations, but that there are now more safeguards to maintain stability, reduce contagion, and placate German taxpayers.  
 

This FT Editorial asks what will happen to banks that fall short of required capital-raising?
 

With unification, Germany has become too big to be an ordinary European state, yet not big enough to be a superpower, comments Münchau in his FT column.
 

As the European economy risks falling into recession, many observers are asking whether “austerity” could be self-defeating.
  

This column compares the 2007–09 crisis to earlier episodes of banking, currency and sovereign debt distress, and identifies domestic-credit booms and real currency appreciation as the most significant predictors of future crises, in both advanced and emerging economies.  

 

 
Think Tank Contributions  

 

 
EPIN: Why the Czechs did not sign up to the fiscal treaty

Author David Král argues that the Czech position is not based on substantive arguments, but rather is more likely motivated by ideological and political considerations.  
 

Guntram B Wolff and Eric Ruscher comment that the global economic crisis has put banks' balance sheets in the spotlight, showing the strong potential impact of imbalances in the financial sector on the functioning of the real economy.  
 

The crisis has underlined the strong interdependence between the euro area banking and sovereign crises. To understand the role domestic banks have played in holding sovereign debt, a breakdown of government debt by holding sectors is required.  
 

Jean Pisani-Ferry writes that protracted recession in southern Europe would soon put the single currency in danger. Having opted for a strategy of adjustment and reform, the eurozone must now do all it can to give it a chance to succeed.  
 

This paper by Jean Pisani-Ferry, together with European and Asian colleagues from the Asia-Europe Economic Forum (AEEF), discusses the implications of the euro crisis for Asia, reasons for Asia-Europe cooperation in solving it, and obstacles on the way to this cooperation.