The main events are listed below. Two and a half years into the crisis, and after a string of “historical” deals which only yielded buffer measures, there is considerable hesitancy in defining the next two weeks as “decisive” for the future of ….
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The first crucial event of the week, therefore, will be the political elections in Greece on Sunday, 17 June. While exit polls and projections will be available already on Sunday evening, uncertainty could drag on for days. However, Greek politicians simply cannot afford to engage in long negotiations, given the risk of an implosion of the financial system, and the government’s liquidity restraints. It should be stressed that a favourable outcome, guaranteeing the highest level of continuity, such as the formation of a government formally committed to pushing ahead with the economic consolidation programme, would not solve all the problems on the table: not least because unfreezing any of the residual tranches of the bailout package remains subject to the veto of individual Member States. A spiralling of the crisis will probably be countered through the adoption of special measures by central banks, that would surely include extraordinary refinancing operations; however, there is no certainty that purchases of securities through the SMP would also be added, despite the fact that Spain has already scheduled auctions of Letras and Obligaciones on 19 and 21 June respectively: these will be covered through the usual collaboration of local banks.
On 18-19 June, the G20 meeting will follow. Confirmation is expected that the IMF will step up the resources made available by 430 billion dollars, to around 800 billion. A year ago, this move, plus EUR 500 billion of lending capacity in the European funds, and the adoption of flexible intervention modes such as primary market intervention, could have positively impacted confidence on the market; today, on the other hand, the announcement is unlikely to make much difference. Coordinated central bank actions in support of liquidity could also be announced, probably already defined as part of the contingency plans drawn up in recent weeks. Lastly, non-European countries will continue to exert pressures on Germany.
The third crucial event will be represented by the meetings of the Eurogroup (21 June) and of Ecofin (22 June). The meetings should provide a good opportunity to understand whether the proposal made by euro area leaders on the roadmap towards integration stands any chance of being accepted, and what its contents will be. The European Parliament’s recent vote on the new rules proposed by the Commission on control over national balance sheets revealed vast support for a greater integration of the euro area, to include the common issue of Treasury bonds. However, on many topics unanimous consent is necessary, and Germany’s approval in particular: as Mr. Monti reminded a few days ago, in the European Union it is much easier to block an initiative than to have one approved.
The remaining issues will have to be solved the following week at the European Council of 28- 29 June. For the time being, the program only includes the sharing of a “EU growth agenda” and the approval of recommendations to Member States within the framework of the European semester, but clearly stronger commitments are also expected, towards the building of a more integrated economic and monetary union. If the finance minister meeting lays bare disagreements and resistances, the run-up to the summit is likely to prove very turbulent, even in the event of the Greek elections resulting in miraculous harmony. The importance of the results will also have to be assessed in light of the leeway they will allow the ECB, which in the present phase of the crisis is the only institution with the power to keep the euro area on its feet during acute phases of the emergency.
Appendix
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