Financial Crisis Watch 1 July 2009

Centre For European Studies
FINANCIAL CRISIS WATCH
Last updated on 01/07/2009 To view full articles click on hyperlinks.

CONTENTS

FOREWORD BY CES HEAD OF RESEARCH

FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

HIGHLIGHTS

UPCOMING EVENTS

www.thinkingeurope.eu


Foreword by CES Head of Research
“Watchtower”: The Downside of Stimulus

One of the side effects of the bailouts and stimulus packages in reaction to the crisis, besides
inflation, is hidden protectionism. What is good for the economy, in fact probably essential in order to
save it, may be bad for trade. On July 2, the CES has presented in Brussels its new crisis-related
research paper by Christina Langhorst and Stormy Mildner titled “Good for the economy – bad for
trade? The effects of EU and US economic stimuli on international trade and competition” (to be
available on CES website in the upcoming days).

What is so bad about protectionism, one may ask. In fact, I believe that in this crisis, a lot of things
will need explaining – things that have seemed self-evident for a long time. Protectionism is inherently
bad because it damages, or even prevents, trade (by tariffs, subsidies or other market distortions).
Trade in turn is good because whatever the individual deal, the end result is, on the whole, positive. If
this was not the case, the world would not have seen economic development in the last 500 years.
This point has to be made over and over again, because it is trade much more than any stimulus
(which can only be an emergency, stopgap measure) that will make economic recovery sustainable.

The clear political imperative that follows is that in executing stimuli and bailouts, trade must be as
unhampered as possible. In reality, however, both the member states of the EU and the US are
showing strong protectionist tendencies in their efforts to stimulate growth, which is exemplified in
their measures for their respective car industries. Most stimulus packages have more or less open
“Buy domestic” clauses which amount to international trade distortions. Not that public spending has
been very pro-trade in the past – but it is now, in the crisis, that we should actually see stimulation for
trade, not massive distortion. What is more, the World Trade Organisation has more or less effective
mechanisms against tariffs, but few instruments to counter the protectionist effects of subsidies.

And it is here that the European Commission has a crucial double task to fulfil: In global trade, to
stubbornly advocate open markets (for example, by working towards a successful conclusion of the
Doha Round) and internally, by saving the Single Market through enforcing strict competition rules.
National governments, if they are serious about getting to recovery and making it sustainable, should
support the Commission in these tasks, and resist the temptation to make life even harder for the
“Guardian of the Treaties”.



FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES
Austria
With Austria in a "severe depression," it is "not the time for restrictive measures," Ewald Nowotny, an
ECB Governing Council member and Governor of the Austrian National Bank, said on 30th June.
Speaking to reporters at a press conference focusing on the International Monetary Fund's most
recent report on Austria, Nowotny cited the importance of medium- and long-term stability as a
reason not to return yet to more restrictive policies. He added that the Fund "is playing a very
important role in stabilizing economies in Central and Eastern Europe. I want to confirm that in all the
talks we had, there is a clear commitment from the Austrian banks to remain in this region. They see it
as a win-win situation. It is a region with high potential." (30/06/2009)
Not the time for restrictive policies in Austria (Market News International)

The Austrian economy, which did well until recently, is now feeling the full impact of the global crisis.
The economy’s openness and outward orientation mean that it cannot insulate itself from foreign
shocks. The transmission runs through two main channels: trade—in particular the negative impact
on exports of the worsened outlook for the European region—and financial flows—including the
impact of the slowdown in Eastern Europe on the returns on foreign investments of the Austrian
banks and corporations. The key policy challenges for the authorities looking ahead are to support the
economy through responsible fiscal policy, while ensuring financial stability. (30/06/2009)nnnnnnnnn
Austria—2009 Article IV Consultation, Preliminary Conclusions of the Mission (IMF)

Belgium
General Motors has stepped up negotiations with rival suitors to offload a stake in Opel, its European
carmaking business, and could sign at least one memorandum of understanding this week as talks with
Magna International, the preferred bidder, have hit obstacles. RHJ International, the Belgium-based
industrial holding company interested in Opel, had improved its earlier bid and GM was “taking it very
seriously”, said a person close to the sale process on 29th June, who added that a memorandum could
be signed within days. (30/06/2009)
GM seeks alternative bids for Opel (Financial Times)

The European Commission wrapped up its initial assessment of member state budgetary reports on
24th June, but called on the Belgian government to resubmit a new report this autumn due to a lack of
detail in its most recent offering. "The absence of crucial information in the programme, such as the
expenditure and revenue ratios, has hampered the possibility of assessing the credibility of the deficit
and debt targets in the programme," the Commission said in a statement. (24/06/2009) jjjjjjjjjjjjjjjjjjjjjjj
Commission slams Belgian budget report for lack of detail (EUobserver)



Bulgaria
No government will want to jeopardise the policy anchor provided by Bulgaria's currency board
system as the country prepares for euro adoption, which is not expected to occur before 2014.
However, there are risks to the maintenance of the currency board. Given the recent downward
correction in currency values in several East European countries, there is a risk that Bulgaria's export
competitiveness will be harmed by maintaining the current exchange rate. This could in turn slow
Bulgaria's recovery from the economic crisis. (01/07/2009)
Outlook for 2009-10: Policy trends (The Economist Intelligence Unit)

Cyprus
Cyprus has been relatively shielded from the crisis until now, largely because of a lesser reliance on
exports, prudent fiscal policies in the past, euro adoption, and a resilient financial sector which has
not needed public capital injections. However, the evaporation of growth in 2009–10 will worsen
credit risk in the banking sector which will have to be monitored and it will make current fiscal
policies unsustainable without a policy correction. Structural reforms will be needed to assist the
recovery and boost growth. (29/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
Cyprus—2009 Article IV Consultation, Concluding Statement of the Mission (IMF)

Czech Republic
This was the second consecutive quarter of decline, and the worst performance since 1998, and was
driven by weak manufacturing sector performance, which saw output fall by 10.5 per cent in January-
March. This was in response to a fall in external demand as the recession deepened in the Eurozone,
so that export growth in the first quarter dropped by 20.9 per cent. Gross capital formation declined
by 13.9 per cent. The decline in gross fixed capital formation was less steep, at 3.4 per cent, with the
fall caused by decreased investment in transport equipment and construction. However, in the coming
months the plunge in the industrial sector may be stemmed by a boost in automotive production,
which may also prevent continuing steep declines in investment. (26/06/2009)vbbmmmmmmmmvvvv
Czech Republic economy: In recession (The Economist Intelligence Unit)

Estonia
As the Estonian economy begins to stabilize, the government has affirmed its target to adopt the euro
in 2011. After the economic shock of late 2008 and the continued recession in 2009, government,
bankers and the EU are starting to see signs of stabilization. The elusive entry into the euro zone now
seems more feasible by the month by month basis. (18/06/2009)//////////////////////////////////////
Estonian adoption on track (The Baltic Times)



France
The French government has significantly decreased VAT for the restaurant business from 19.6 per cent
to 5.5 per cent, moving to satisfy a long-term demand from the industry. The tax applies to food but
not to alcohol consumption. This drop signals lower overall prices for consumers, since dining prices in
France include VAT. Establishments are not legally bound to lower their prices as a result of the VAT
drop; if they choose not to, they have the right to keep the same prices as before and pocket the
difference. The measure will cost the French state 2.38 billion euros a year but owners have
committed themselves to employ 40,000 more people. (01/07/2009)
VAT cut paves way for cheaper restaurant bills (France24)

France has taken decisive action to address the domestic impact of the financial crisis and the
unprecedented global contraction. Crisis management needs to remain a cornerstone of near term
policies, but a renewed focus on medium-term fiscal sustainability and a deepening of the country’s
ambitious structural reform agenda will help to minimize the longer-term costs of the current
downturn. (29/06/2009)nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn
France—2009 Article IV Consultation Mission1 (IMF)

François Fillon, the French prime minister, launched a three-month consultation process on plans to
fund the country’s strategic investment priorities with a national savings bond – a proposal that has
inspired heated debate. Mr Fillon, after a special meeting of his new cabinet to discuss the fund-
raising plans, insisted the government was not going to use the savings of French citizens to finance
day-to-day spending or to delay much-needed public spending reforms.
(28/06/2009)mmmmmmmmmmmmmm
PM seeks to calm French bond fears (Financial Times)

France saw its unemployment total grow by 36,400 in May, with young jobseekers suffering the
biggest rises. The increase, which was smaller than rises seen in previous months, took the jobless
count to 2.543 million. It marked a 1.5 per cent rise on a monthly basis and a 26.4 per cent rise year-
on-year, the Ministry of the Economy said. Unemployment among jobseekers under the age of 25 in
mainland France has risen by 41.1 per cent in the last 12 months. (25/06/2009),,,,,, mmmmm,,,,,,,,,,,,
French youth unemployment rises (BBC)

Germany
The German government provided Arcandor a 50 million euro loan, averting the need for the insolvent
retailer to close large parts of its Primondo mail-order subsidiary and give up hopes of restructuring.
Under the agreement, the German government will join the states of Bavaria and Saxony in providing
Primondo’s Quelle catalogue division a 50 million euro loan which it needs to restart the flow of cash
advances from its bank/ (30/06/2009)
Berlin throws Arcandor €50m lifeline (Financial Times)



Greece
Greece’s economic policy needs to focus on fiscal adjustments, improving the financial system and
reversing the decline in the country’s competitiveness in order to better prepare for the post-crisis
environment, the Foundation for Economic and Industrial Research (IOBE) said on 29th June. IOBE, a
nonprofit research group, said these proposals could contain the negative impact of the downturn and
also help to create more favorable conditions for an economic recovery. IOBE proposed a gradual
reduction in government spending by better organizing and controlling costs in the public sector while
also suggesting boosting budget revenues through more effective tax collection methods, such as
setting up shared electronic databases. Economics and Finance Minister Yiannis Papathanassiou said
the government is working on “long-term and structural measures” to be unveiled in October and
aimed at cornering tax cheats and limiting public sector spending. (30/06/2009)
Post-crisis economy needs reforms (Kathimerini)

Hungary
The European Commission gave Hungary another two years to curb its budget gap, postponing its
deadline until 2011 as it deals with a severe recession. European Union finance ministers have told
Hungary repeatedly to reduce its deficit because it has exceeded the maximum 3 per cent of gross
domestic product set by EU budget rules every year since it joined the bloc in 2004. The financial crisis
has hit Hungary hard and forced it last year to seek a 20 billion euro bailout from the International
Monetary Fund and the EU to plug the gap between government spending and plunging tax revenues.
(25/06/2009)
EU tells Hungary to curb budget gap by 2011 (Associated Press Worldstream)

Ireland
Ireland is suffering more than any other advanced economy from the global recession and Irish banks
could be facing losses of about 35 billion euros, the IMF said. In its annual report on the state of the
Irish economy, the IMF described Ireland's short-term outlook as "bleak'' and predicted the economy
would shrink by 8.5 per cent in 2009 followed by a further 3 per cent in 2010. The IMF forecast the
Irish unemployment rate would hit 15.5 per cent in 2010. (26/06/2009)ffffffffnnnnnnnnnnnffffffffffffff
Irish economy and banks worst hit in the global downturn, says IMF (The Daily Telegraph)

Italy
Italian ministers approved a new stimulus package on 26th June - reported to be in the region of 4.5
billion euros – as the government attempts to stave off a further slide in economic activity this year.
Measures under the new plan, whose total size has yet to be finalized, include tax incentives for
businesses that re-invest profits in new machinery and refrain from cutting workers. The government
also intends to reduce costs for gas utilities so that savings can be passed on to consumers. The new
stimulus comes as forecasters predict the Italian economy will contract by a greater margin than
initially anticipated this year. (29/06/2009)
Italy approves fresh multi-billion-euro stimulus plan (EUobserver)



Italian Finance Minister Giulio Tremonti's chances of becoming the next president of the Eurogroup
are growing, after the Italian centre right PdL party seems to have lost the battle inside the European
People’s Party for the European Parliament presidency. On 19th June at the European Council, Italian
Prime Minister Silvio Berlusconi publicly endorsed Tremonti's candidacy for the chair of the
Eurogroup, which brings together finance ministers of the 16 euro zone countries and meets on a
monthly basis before the EU Economic Council. (24/06/2009)vvvvdddddddddddddddddddddddddddd
Italy's finance minister eyes Eurogroup chair (EurActiv)

Latvia
Latvia's Parex Bank hopes to meet all the necessary requirements by November to be able to lift the
restrictions set on the bank by the financial watchdog, said the bank's CEO Nils Melngailis. He said that
the bank has prepared a plan for lifting restrictions. Melngailis emphasised that the main restrictions
imposed on the bank were related to the fact that there was a money outflow from the bank which
had to be stopped until the bank is stabilized. He said that lifting these restrictions should not have
any impact on the bank's liquidity. (29/06/2009)
Latvia's Parex Bank hopes to meet all requirements to be able to lift restrictions (Baltic News Service)

Lithuania
The Lithuanian economy is forecast to shrink by 16 per cent in 2009 and a further 3¾ per cent in 2010
but there is a considerable range of uncertainty around these forecasts. In this challenging
environment, ensuring a sustainable path to euro adoption will require a continued remarkable effort.
Frontloading some of the fiscal structural reform to 2009 is important not only to address financing
needs but also to anchor a strong commitment to reform. The package of measures recently proposed
to Parliament strikes a good balance between structural measures that realign high public sector costs
with the rest of the economy and revenue measures that alleviate pressing financing needs.
(22/06/2009)pcccccccc
Lithuania—2009 Article IV Consultation: Concluding Statement (IMF).

Lithuania has raised 500 million euros in a Eurobond issue that matures in 2014 in an effort to help
plug the budget deficit, which the Cabinet expects to be around 5 per cent of Gross Domestic Product
(GDP) at the end of the year. “The successful launch of our securities shows investors’ confidence in
Lithuania ... following recent gloomy forecasts for the Baltic region and prevailing negative news in the
market,” Lithuanian Finance Minister Algirdas Semeta said. (18/06/2009)bbbbbbbbbbbbbbbbbbbbbbb
Lithuania issues 500 million euro bond (The Baltic News)



Luxembourg
The European Commission said on 25th June it was taking Luxembourg to court over concerns the
Grand Duchy is breaching EU rules on savings revenues and using a so-called non-domiciled status for
tax avoidance. The Commission is accusing Luxembourg of using the status in order to get around the
EU Savings Tax Directive on savings interest payments. Under the EU directive, member states must
exchange information on non-resident savings revenues. Those countries who have not signed up to it
– namely Belgium, Luxembourg and Austria – can tax the income at source. But the Commission
considers Luxembourg to be breaching that rule as well by not applying the directive to people who
benefit from the "non-domiciled resident" status in their country of residence. (26/06/2009)nnnnnnnn
EU takes Luxembourg to court over tax haven concerns (EUobserver)

Poland
Poland will present an updated timetable for adopting the European single currency by early August, a
deputy finance minister said on 24th June amid growing expectations that the 2012 target date for
euro entry will be pushed back. Earlier on 24th June, the European Commission gave Poland until 2012
to cut its ballooning budget deficit below the 3 per cent ceiling for euro aspirants. The move came one
day after Warsaw downgraded its 2009 budget deficit target to around 6 billion euros.
(26/06/2009)fffff n
Poland's euro adoption faces delay (EurActiv)

While Poland is likely to see a small contraction in output in 2009, it is doing better than most of its
peers in Central and Eastern Europe. This reflects in part the fact that Poland entered the crisis with
smaller external and internal imbalances. As to fiscal policy, the room for maneuver is less, because
policies were pro-cyclical before the crisis. Thus, the extent to which the deficit can be allowed to
increase as the economy weakens depends on taking credible measures to strengthen confidence in
the authorities’ commitment to medium-term consolidation targets. However, even with such policy
adjustments, a sustained recovery will, to a large extent, be externally driven. (23/06/2009)ffffffffffffff
Poland—Concluding Statement of the 2009 Article IV Consultation (IMF)

Romania
The European Commission and Romania reached an agreement on a 5 billion euro loan package to
help the country weather the financial crisis. The agreement requires Romania to undertake a number
of reforms, including improving its system of financial regulation. The Memorandum of Understanding
was signed by Commissioner Joaquín Almunia, Romanian Prime Minister Emil Boc as well as the
country's finance minister and Central Bank Governor. The loan will be disbursed in up to five
instalments and is part of a 20 billion euro multilateral financial support package. (23/06/2009)vvvvv v
Commission and Romania sign MoU on 5 billion euro balance-of-payments loan (European
Commission)



Slovakia
The Slovak low-cost airline SkyEurope is now flying under court protection from creditors while the
company undergoes a financial reorganisation over the next three months. SkyEurope said that it has
not filed for insolvency or bankruptcy and that it will pay its suppliers for goods and services provided
during the reorganisation. The company, which is a subsidiary of SkyEurope Holding AG, also said that
it will secure uninterrupted flight operations while respecting all its obligations towards holders of
existing and future flight tickets. (29/06/2009)
SkyEurope's crisis (Slovak Spectator)

Sweden
Sweden, the newly installed holder of the European Union’s presidency, came to the defence of hedge
funds and private equity, saying it did not blame them for the financial crisis and would press for
improvements in EU proposals to regulate the two industries. “There is an exaggerated fear that
private equity contains big systemic risk. Our opinion is that it does not,” Mats Odell, Sweden’s
financial markets minister, told reporters. (01/07/2009)
Sweden rides to defence of hedge funds (Financial Times)

UnitedcKingdom
The British economy contracted in the first quarter more strongly than in over 50 years as output in
the manufacturing and construction sectors plummeted. Gross domestic product fell by 2.4 per cent in
the first quarter from fourth quarter of 2008, the most since 1958 and greater than the estimate of a
1.9 per cent decline, Michael Saunders, an economist at Citigroup in London, said the second quarter
would also probably show a contraction, though not as bad as the first quarter. The recession should
be nearing its end soon, he added. (30/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
British economy suffers worst drop in 50 years (International Herald Tribune)

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE
UnitedfStates
Bernard Madoff was sentenced to 150 years in prison, the maximum possible under law, for running a
$65bn Ponzi scheme that has devastated thousands of investors around the world. The sentence came
after an emotional hearing in which Mr Madoff, 71, conceded he could offer no excuses for a decades-
long fraud that may be the biggest in business history. (29/06/2009)
Madoff sentenced to 150 years in prison (Financial Times)



The developing world, traditionally disadvantaged in case of a global crisis, could end up taking the
lead of the world’s economic recovery. Emerging powers like India, China and Brazil seem to have
absorbed the crisis more quickly than the US and Europe and are now ready to rebounce. The US,
Europe and Japan don’t seem to react as quickly, which supports the theory of “decoupling.”
(25/06/2009)ggggggggggggggg
'Decoupling' rises again in O.E.C.D. projections: Developing economies could be driving force for
global turnaround’ (The International Herald Tribune)

The US Dollar’s leading role in the global economy is under increasing pressure. The financial crisis
heavily intensified the debate over the need for a future global currency alternative to the US dollar.
Last week, the leaders of Brazil, Russia, India and China, whose governments are some of the world's
largest dollar holders, jointly declared the need for a "more diversified international monetary
system," sparking a drop in the greenback on world markets. The end of the hegemonic role of the
dollar in the long-run and a more balanced range of international currencies seem now more likely
than ever. (24/06/2009)ggvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvggg
Fading of the Dollar's Dominance: Other Nations See Opening to Boost Their Currenciesvvvvvvvvvvvv
(The Washington Post)

China
Will China rule the world? China has raced to prop up threatened industries and preserve jobs, but will
these moves drive a global recovery? China seems to be bearing the weight of the crisis better than
other export-led countries, according to Goldan Sachs. However, there are discouraging signs that
China has taken a dangerous path to recovery mainly based on the 1 trillion USD stimulus package. Is
China moving out of the crisis or is it just avoiding economic structural reforms?
(24/06/2009)gggggggggggggg
Swallowing China's economic medicine (Guardian Unlimited)

Russia
Prime Minister Vladimir Putin has announced that Russia will lend Moldova $500 million; the first
tranche of $150 million will be transferred to Chisinau soon. After meeting with Putin in Moscow,
President Vladimir Voronin of Moldova said that the Russian loan will be used for Moldova's
investment projects. Voronin assured Putin that Moldova will be able to repay the money.
(24/06/2009)
Russia to lend Moldova $500 million (Russia Business Monitor - Reuters)



Vladimir Putin told the heads of Russia’s leading banks on Monday to scrap their summer holidays and
help overcome the steep recession by lending more – even as the country braces itself for a surge in
bad loans. Russia’s second lender, VTB, expressed concerns on the financial sustainability of increased
lending and gave warning that it would face losses in 2009. However, Russia’s PM seems reluctant to
accept this argument and publicly condemned banks’ lending prudency the crisis of the real economy.
(20/06/2009)
Putin urges banks to boost lending (Financial Times)

Brazil
The President of Brazil, Luiz Inacio Lula da Silva, has big plans for Brazil’s future. With reserves
accounting for more than 200 bn USD, Brazil has the opportunity to use fiscal stimulus not only to
tackle the short-term effects of the financial crisis but also to reshape its infrastructure. President Lula
describes a long-term view that entrenches economic growth and sustainability. (25/06/2009)
Lula has big plans for Brazil - before and after his exit (Agence France Presse)

India
The financial crisis has tarred the reputation and ideology of free marketeers and central bankers the
world over, including Alan Greenspan. But it has had the opposite effect on Yaga Venugopal Reddy,
the former governor of the Reserve Bank of India. Accused of excessive cautiousness in the past years,
he now enjoys a completely different fame in the light of the positive results of the Indian economy.
The Indian economy is still growing, albeit slowly, and Indian Banks proved to be in perfect shape.
(25/06/2009)
In India, Central Banker Played It Safe (New York Times)

Australia
Australian PM Kevin Rudd has been accused of not doing enough to tackle the financial crisis both
domestically and at the international level. Australia has been hit twice by the global crisis, as a major
finished product exporter and in reason of the dramatic drop of the price of commodities.
(25/06/2009)
OECD tells us to loosen belts (Canberra Times)



Argentina
The President of Argentina, Cristina Fernandez de Kirchner, risks losing control over the Senate in one
of the most delicate moments of Argentina’s economy of the last decade. After the clash with the
farmers’ lobby over export taxes Cristina Fernandez has not yet managed to improve her rate of
approval. The drop in commodity prices and the economic crisis affecting the exports further
diminished her popularity both in the electorate and in the Congress. Former president Nestor
Kirchner, husband of Cristina Fernandez, claimed that a presidential crisis in the peak of the economic
crisis risks jeopardising the recovery of the national economy, bringing Argentina back to the
cataclysm of 2001. (23/06/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Gloom has hung over the reign of 'Queen Cristina'. It's not all her fault (Guardian Weekly)

Norway
Norway's finance ministry is setting up a committee to investigate the causes of the global financial
turmoil and its impact on the country's financial markets, the ministry revealed in a statement on 19 th
June. (20/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
Norway appoints financial crisis committee (Nordic Business Report)

HIGHLIGHTS
In an attempt to pull the EU economy out of recession, the European Central Bank (ECB) injected 442
billion euros' worth of one-year funds into money markets on 24th June, the bank's biggest-ever
liquidity injection. The massive loan to Eurozone banks at a flat rate of 1 per cent marks the latest step
in the ECB's efforts to get liquidity flowing and fend off the impact of the financial market crisis. The
loan represents about 70 per cent of the ECB's outstanding liquidity operations and 5 per cent of euro
zone economic output, and analysts said the generous supply of funds should bring down money
market rates. (25/06/2009)vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
ECB lends record sum to banks (EurActiv)

Commission 2009 Report on Public Finances: The report finds that the fiscal stimulus was needed to
support the economy, but the overall success depends on a credible exit strategy. As the European
economy suffers its worst post-war recession, the European Recovery Plan provides needed fiscal
support to ailing economies. But rising public debts and the contingent liabilities incurred by
governments to support the financial sector, together with the prospected increases in age-related
expenditure and slowdown in potential growth, raise concerns about public finance sustainability.
(23/06/2009)
Commission publishes the 2009 report on Public Finances in EMU (European Commission)



The Presidency and the European Commission welcome the new fiscal package for 2009 and 2010
adopted by the Latvian Parliament, which is a courageous and ambitious step forward to address fiscal
imbalances. Commenting on the vote, European Economic Affairs Commissioner Joaquín Almunia
said: “I very much welcome the vote by the Latvian Parliament and the support given by the social
partners to the package of budgetary savings. This is necessary to reduce the deficit to levels that are
consistent with the need to overcome the present difficulties with the financial help of the EU and
other contributors. The reduction in the deficit will have to continue in 2010 and in the next years, so
as to anchor the economy in a credible and sustainable path." (18/06/2009)bbbbbbbbbbbbbbbbbbbb
Joint Statement Presidency of the ECOFIN council (European Commission)

UPCOMING EVENTS

Event: Eurogroup and ECOFIN Meetingsvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv c
Date: 6th - 7th July 2009

Event: G8 Summitc cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Date: 8th – 10th July 2009, L’Aquila, Italycccccccccccccccccccccccccccccc

Editor: Roland Freudensteinffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff
Research Assistance: Katarína Králikovácccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Design: José Luis Fontalbaccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc
Questions and comments: briefs@thinkingeurope.eu


Financial Crisis Watch 1 July 2009

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