Hope runs eternal

The mainstream runs on hope – until the next round of the crisis – in a week's time?

Eurozone hopes of crisis easing rise as budget deficits tumble

Dublin banks rescue a special case, Merkel and Hollande agree, as EU says aggregate deficit falls to 4.1% from 6.2%.

the Guardian,

22 October, 2012

The eurozone appeared last night to be in a stronger position to survive the debt crisis after EU figures revealed member governments cut their annual budget deficits last year.

The EU statistics office, Eurostat, said the aggregate budget deficit in the 17 countries using the currency fell to 4.1% of GDP in 2011 from 6.2% in 2010 – the first year of the sovereign debt crisis.

Ireland cut its annual deficit from 31% of GDP to 13.4%, while Germany brought the deficit on its annual budget down to 0.8%, Eurostat said.

The figures were published before a flurry of meetings that culminated in the taoiseach, Enda Kenny, gaining a commitment from François Hollande of France and Angela Merkel of Germany that cheaper funds would be made available to prevent Dublin's bank rescue from bankrupting the country.

Hollande said after talks with Kenny that he supported calls to treat the Irish banking sector as "a special case" after the Dublin government was almost brought to its knees by the crippling cost of bailing out the Irish Republic's main banks.

Merkel previously blocked direct recapitalisation of banks with eurozone rescue funds until a banking supervisor is fully operational late next year but issued a joint statement with Kenny on Sunday affirming that Ireland's bank rescue was a "special case".

"I said Ireland was a special case and should be treated as such," Hollande told reporters after his meeting with Kenny. Asked if recapitalisation could be backdated, he said: "Yes, recapitalisation already took place through their own funds so the Eurogroup will take that into account."

The Eurogroup represents the 17 nations in the single currency zone and has sought to impose strict austerity measures on members with escalating debt.

Eurostat said although annual budget deficits had fallen, eurozone public debt rose to 87.3% of GDP in 2011 from 85.4%.

Ireland's public debt jumped to 106.4% from 92.2% in 2010 as the benefits of spending cuts were undermined by a fall in tax receipts and a prolonged recession.

Greece, where the crisis started, had the highest debt ratio in Europe last year, reaching 170.6% of GDP, or €355bn (£289bn). It reduced its annual deficit to 9.4% from 10.7% in 2010 and 15.6% in 2009.

The Greek prime minister, Antonis Samaras, said his government would receive €31.5bn in loans next month if the Athens parliament pushed through €13.5bn in spending cuts and tax increases, though it remained unclear that MPs would do so.

The finance minister, Yiannis Stournaras, warned MPs that "people would go hungry" should Greece failed to take receipt of its next rescue loans.

"The cost for the country will be boundless if we don't get the €31.5bn instalment," he said.

Stournaras asked if MPs thought the Europeans were bluffing over their demands for new cuts. "Time is running out," he said. "If we want to get the instalment before state funds at our disposal are exhausted we must move very quickly."