YEUr Tidbit: Single Supervisory Mechanism (SSM)

April 26, 2013

The Single Supervisory Mechanism (SSM)  is one step (of three) in achieving a full European banking union, a key part of the EU Single Market in financial services. The others are the Deposit Guarantee Scheme (DGS) and the proposal on Banking Resolution and Recovery (BRR).

Full version PDF of the PIIGSty YEUr Tidbit Factsheet here: YEUr PIIGSty Tidbit: SSM

YEUr Tidbit SSM image


Your PIIGSty ECOFIN Explainer

April 23, 2013

On April 12/13,  EU Finance Ministers met at an informal meeting in Dublin. These ministers meet in a EU Council configuration known as ‘ECOFIN’ for Economic and Finance Ministers (and was preceded by a meeting of the Eurogroup).  PIIGSty has produced a handy explainer with the key terms and acronyms.

ECOFIN infographic new

Eurozone/Euro Area

The 17 Member States of the EU (of 27) who have adopted the euro as their official currency. The 17 are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.


Chair: Rotating position (currently Michael Noonan, Irish Finance Minister)

Michael Noonan 2Economic and Financial Affairs Council (ECOFIN) is a meeting of the Economics and Finance Ministers of all 27 EU Member States. When budgetary issues are discussed, Budget Ministers also attend.

The ECOFIN Council meets once a month in Brussels to discuss economic policy and budgetary policy and once (informally) in the country holding the Presidency of the Council of the EU (previously known as the Council of Ministers).

They receive a report of the Eurogroup meeting taking place before ECOFIN, and consider any legislative or other issues that arise from Eurogroup which may require decision by the 27 Member States.

The Finance Minister of the country holding the Presidency chairs ECOFIN, so from January to June 2013 the Irish Minister for Finance, Michael Noonan, chairs these meetings.

For more information see the Irish Presidency ( website’s  ‘Who Chairs What’ EU council publication


Chair: Permanent position (currently Jeroen Dijsselbloem, Dutch Finance Minister)

dijselbloem208 2The Eurogroup, the main forum for the management of the single currency area, is an informal body that brings together the finance ministers of countries whose currency is the euro.

The Commissioner for Economic and Monetary Affairs, as well as the President of the European Central Bank (ECB), also participate in Eurogroup meetings.

The Eurogroup meets at least once a month, usually on the day before the ECOFIN to discuss matters particular to the euro. They can also call additional meetings when required.

This group has a permanent chairperson. Currently, it is the Dutch Finance Minister Jeroen Dijsselbloem, who took over this position in January 2013.

European Commissioner for Economic and Monetary Affairs

olli rehn 2Olli Rehn is the (Finnish) Commissioner for Economic and Financial Affairs and the euro. He is also one of the Vice-Presidents of the European Commission.

Economic and Financial Committee (EFC)

thomas weiser 2Chair: Thomas Wieser (Austrian senior finance official – elected by members)

The Economic and Financial Committee promotes policy coordination and reports regularly to the Council and Commission on economic and financial matters among Member States. It representation includes officials from Member States and their central banks, the ECB and the European Commission. The Committee also meets in a eurozone (EZ-17) configuration called the Eurogroup Working Group (EWG).

Eurogroup Working Group (EWG)

Chair: Thomas Wieser (Austrian senior finance official – elected by members)

The Eurogroup Working Group (EWG) prepares the work of the Eurogroup. It is composed of senior finance ministry officials from eurozone members (or deputy finance ministers) and representatives from the ECB and the European Commission. Its full time President (currently Thomas Wieser) is also President of the EFC.

European Central Bank (ECB)

Mario_Draghi_World_Economic_Forum_2013_crop 2President: Mario Draghi (former Chairman of the Italian Central Bank)

The ECB is the central bank for Europe’s single currency, the euro. The ECB’s stated main task is to maintain the euro’s purchasing power and thus price stability in the euro area. EU members are represented through national central bank governors who sit on the ECB Governing Council, the main decision making body (eurozone governors only) and the General Council (EU-27 governors).



PIIGSty Presents: Your PIIGSty Guide to Econ101

February 17, 2013

Eco Guide Cover

In celebration of 10,000 page views, PIIGSty proudly presents our very own comprehensive reference guide to basic economics – or – as our transatlantic cousins might put it, ‘Econ101′

This guide represents the culmination of our very hard work over many months in response to many reader requests and we are delighted to offer our readers this guide for FREE for the very first time. The component chapters have already been uploaded in the Econ101 section (feel free to pilfer them at your leisure) but this is the final, finished, polished version, ready to sit pride of place on your coffee table. If you’d like a fully published version, contact us for a price (yeah,  thats not free…)

Your PIIGSty Guide to Econ101 eBook

Many thanks to all our PIIGSty readers. Comments/criticism welcome at

YEUr Tidbit: The Multiannual Financial Framework (MFF) Q&A

February 10, 2013

Q1. What is the MFF?

The Multiannual Financial Framework (MFF) is a 7 year ‘big picture’ EU spending tool which will last from 2014 to 2020. It details the maximum level (ceilings) of what the EU expects to spend on its priorities to fund new and existing programmes such as Horizon 2020, ERASMUS for All, Connecting Europe Facility and the Common Agricultural Policy. It also ensures the annual EU budget is devised and spent correctly to achieve the best results for all EU taxpayers.

Q2. So, Its a big budget?

Not really. The MFF only sets out the upper limits (ceilings) of what the EU can spend; it doesn’t mean any money can yet be spent. As such, discussions over the MFF are more about politics than economics. Annual EU budgets add the missing specifics, usually at levels below the ceilings.

Q3. Why do we need the MFF?

Beginning in 1988 with Delors 1, multiyear EU funding packages sharpen the EU focus on headline programmes and priorities. For a Union of 27 Member States (soon 28 with Croatia joining on July 1 2013), there needs to be limits and coherence between annual budgets to make sure they are cost-effective and focus on what the EU hopes to achieve. The MFF will run alongside the EU2020 Strategy with shared priorities in the areas of employment, research and innovation, education, social inclusion and climate/energy.

Q4. What’s the process for reaching agreement on the MFF?

The three main EU institutions have a role in the process; the European Commission, European Parliament and European Council (Heads of State and Government). The Commission proposes while the Parliament and Council work together known as ‘co-decision.’ Roughly speaking, the process is as follows:

MFF Box-Graph_New1

The Commission (as the EU executive branch) proposes a package which sets out the terms for negotiation (called a ‘negotiating box’).  Discussions take place in the General Affairs Council (GAC) of EU Foreign Affairs ministers where Member States make their views known.

The proposal must first be passed by the European Parliament before being unanimously agreed by the Council (EU Heads of State and Government). Due to the requirement for unanimity, Member States through the Council have huge power.  Negotiations are led by the permanent President of the Council, Herman Van Rompuy as the real work lay in bridging the gap between Member States to reach collective agreement (reached last week). It will now go to the Parliament for consent.

Q5. I heard agreement wasn’t easy. How come?

In June 2011, the European Commission led by President José Manuel Barroso proposed a €1.025tn MFF but before that could come into force, the Commission, European Parliament and all 27 EU Member States through their Presidents/Prime Ministers (called the European Council) have to work together to achieve agreement on the political side. On the 7th of February/early morning of the 8th – the European Council finally agreed to a slimmed down €960bn MFF. This was not what most Member States, the European Commission or the President of the European Parliament (Martin Schulz MEP) most wanted. It now passes to the European Parliament for consent.

The MFF negotiations were mainly a tug o’ war between those Member States who contribute more than they get back (from benefits from the Single Market or rebates) and those Member States who need EU monies for infrastructural development or to boost their domestic economies . The two groups were as follows:

A. Friends of Cohesion – FOC

Goal: A big MFF with the same/more spending than before

  • States which see higher spending as benefiting them most and any reduction in this hurting them in equal measure.
  • 15 members mostly those new members who had joined in the 2000s plus Greece, Spain and Portugal.

B. Friends of Better Spending – FOBS  

Goal: A targeted, smaller, more efficient MFF

  • States who demand restraint and more efficient spending – mainly mature and stable economies.
  • 8 members in total.

The FOC had powerful friends in the President of the Commission José Manuel Barroso and European Parliament President Martin Schulz. They preferred the €1.025tn version and met a number of times to confirm/restate their position. The most recent ‘Joint Declaration’ by this group was in October 2012.

This excellent graphic from the European Commission/Financial Times sums up the positions well.


In negotiations, the two opposing camps fought it out. While it might be argued the Friends of Better Spending ‘won’ the argument, the devil is in the detail which is yet to come. Although yes, the Friends of Cohesion have 15 members (of 27), their economies represent only 19.3% of total EU GDP while the ‘Friends of Better Spending’ represent a whopping 74%.  The economic argument speaks for itself.


Source: Eurostat

YEUr Tidbit: The Connecting Europe Facility

November 18, 2012

Today, PIIGSty launches a new explanatory series ‘YEUr Tidbits’ which will seek (in true PIIGSty style) to simplify EU initiatives you may not have heard of. Where possible, we’ll link to official explanations, links to videos or articles. We begin with the ‘Connecting Europe Facility.’

The Connecting Europe Facility (Click for video)

Below in the audio transcript.

Europe and its citizens are linked by a web of transport, energy and telecommunications networks. Its dense, but its not complete. Gas and oil pipelines, electricity grids, railways to ports to airports and roadways are still not sufficiently connected. Nor is access to widespread access to broadband a reality. And Europe needs it all, if its to grow. Proposed by the European Commission in 2011, the CEF is a €50bn initiative to get Europe working better.

Without this kind of investment, it will not be possible to have these links. This investment will generate growth and jobs and at the same time, make work and travel easier for millions of European citizens and also for businesses.

  • Lets look at energy (€9.1bn). Around the North Sea, Europe already has the worlds largest offshore wind farms and Southern Europe has world class solar powered stations but how do we get electricity to the Worlds largest plane maker? Along one of 11 energy corridors that will cover the entire EU. And gas corridors with compressors will allow gas flows in both directions when gas supplies are disrupted. Keeping all Europe supplied, all the time.
  • In transport (€31.7bn) where we want to focus most of the investment, we need to make better links across borders and we need to make the most of different modes of transport. This means infrastructure investment in road, in rail and in remoter regions. Freight and passenger corridors will link Europe from the far north to Valletta and from Portugal’s Atlantic coast to France. And bottlenecks will be removed from road and rail hubs.
  • And in telecommunications (€9.2bn)  high speed broadband needs to be the norm for businesses and citizens alike – not just a luxury in super fast cities. Targeted investment stimulated through the EU budget is the way to join up Europe’s missing link. Project bonds are a way or making the most of public money by involving the European Investment Bank (EIB) and encouraging private sector investment. Europe needs to complete it connection well – and it can do it.

The CEF – connecting to grow.

PIIGSty Presents: The EU Decision Making Process Made Easy

August 19, 2012 has always promised to demystify all that academic speak and needless jargon to make current political, economic and legal topics in the EU accessible and easily understandable for all. One area which continues to confuse is the rather complicated decision making (aka legislative) process which drives the European Union forward. We are proud to present this new PIIGSty publication on that very topic.

With easy to identify (and adorable) original logos displayed with a simple and easy to read diagrammatic style, we have trimmed all the fat and just left the best bits. or click the cover

Heres the PDF PIIGSty Publication #4 or click the cover

The Economist Presents: EU Enlargement (Made Easy!)

August 19, 2012

The folks over at The Economist have produced a short nifty clip on EU enlargement which is worth checking out. Simplicity is the name of the game and summarising 60 years of EU economic, political and legal effort is no mean feat.

Just to note (we’re not jealous or anything) but PIIGSty has its own original Evolution Series #1 on EU enlargement.  We’re just sayin’


The Quintet Screwing up Europe #3

August 18, 2012

Part 3 of the PIIGSty analysis based on Matthew Feeney’s article of continues with an insight into the European Central Bank (ECB) President, Mario Draghi.

3. Mario Draghi ECB President 

Draghi is a relatively fresh addition to the European saga. The colourful choice of former Bank of Italy ( Italian central bank) governor to succeed the shrewd Frenchman Jean-Claude Trichet has managed to stir things up, not least considering the ECB – a bank built on the inflation averse German bundesbank model – is now led by an Italian. Considering the current crisis in Italy with Mr. Monti’s technocratic government desperately trying to piece the country back together after decades of political instability, corruption and fiscal irresponsibility, Draghi is unfairly battling prejudice from day 1. After his recent London pledge in late July to do ‘whatever it takes’ to protect the euro, Draghi has since failed to accurately outline what ‘whatever it takes’ means (because this means very different things to each key player).

In early August, with Draghi alluding to expanding the scale of bond buying using undeniably direct language, the ECB appears set for a showdown with reluctant member states (and a good thing too!) There are signs that the cold German approach is facing a thaw and warming to the idea of the ECB strengthening its bond buying effort to cover the big 2 – Italy and Spain but this isn’t without its domestic detractors. To placate these, government rebels have demanded ECB operating procedures be changed to provide for a German veto (effectively neutering Draghi by politicising the independence of the ECB – so very unlikely to happen). In the meantime, accusations of ECB mutating into a state financier and a ‘bad bank’” are being thrown about.”

While most of the this is typical political chest pounding without substance or particular importance, the reality is that an ECB which unilaterally chooses to dish out bail-outs using mostly German funds could be (pretty fairly) accused of doing this at the expense of Germany’s own best interests. Hence, questions arise as to why Germans would pay in the first place. ECB ‘independence’ remains factually correct as far as any offspring is ‘independent’ of its watchful parent.

A fuzzy ECB is no help when signs of EU solidarity aren’t too convincing. PIIGSty has long said that a collective comprehensive plan to ‘save the eurozone’ is the real Holy Grail eluding European leaders. While Draghi and others continue to drag their feet while promising the sun, moon and stars (yet not a single cent), his words inevitably just adds to uncertainty and inertia as member states publicly argue and the markets bounce around unconvinced. Plans such as ‘fiscal’ or ‘banking’ union – despite German support  – remain completely undefined as the powers that be pray for growth. Without a plan, investors become convinced that messy defaults are just around the corner. Would you invest your savings in Italy or Spanish debt right now?

The Euro-jitters continue…

It hasn’t helped matters that the Finnish Foreign Minister has been speaking frankly to the British Daily Telegraph about the oncoming currency crisis and the necessity to prepare for just the possibility of a break-up. Mr. Tuomioja spoke awkwardly frankly against the changing of current bailout (ESM) rules and the writing of blank cheques for further bailouts and (damningly) voiced a  personal distrust for Mr. Draghi (among others). Although rebuffed later by other Finnish ministers, the consequences of prolonged inaction in Europe are becoming graver as whispers of a managed mechanism for ejecting weak links from the euro resonates across the EU-27.

The inscrutable Angela Merkel is the one certainly on which the European project precariously sits and, as a result, is feeling heat and wrath in equal measure. With her own Bundesbank sounding the alarm over Draghi’s new August announcement of a Italian-Spanish bond buying campaign, her task to thread a very delicate needle at home and abroad is a near impossible one. Eventually though, sanity must prevail and difficult decisions made regardless of the political cost which PIIGSty believes will be forthcoming from her government, when the dust truly settles – possibly this Autumn.

EU Debt Seniority

In the meantime, until a comprehensive plan is published, issues like the seniority of EU bailout debts remain contentious. Under current ESM (European Stability Mechanism – the main bailout fund) rules, seniority means the order of repayment of debt by borrowers in the case of default.  When you throw into the mix a Spanish bank (not sovereign/country) bailout of over €100bn, then the waters become murky.

Ultimately (which will surprise no one) it will take a greater crisis to really give Draghi sufficient cover to deliver a politically acceptable plan – something he has made clear himself. A more interventionist ECB is the last thing Germany will accept and so member states must request a bailout (of whatever form). Small wonder investors are cashing in their Italian and Spanish bonds and preparing for the worst. Draghi must remember – actions do speak louder than words, not least to the markets he needs to tame or a least calm. Like the EU politicians, Draghi should stop waffling about wanting to ‘save the euro’ and actually do it.

The Quintet Screwing up Europe #2

August 5, 2012

Part 2 of the PIIGSty analysis based on Matthew Feeney’s article of continues with an insight into the Bank of England Governor Mervyn King.

2. Sir Mervyn King Governor of the Bank of England (BoE)

The British have historically enjoyed their splendid isolation from European entanglements. The Euro-crisis is no exception. With UK growth forecasts set to be slashed, the UK is now staring directly into a double (or even triple) dip recession. The key player here is Bank of England Governor Sir. Mervyn King. A skilled technocrat,  King has – on paper –  a purely independent economic job. In reality, King’s job is infused with politics. Despite what 10 Downing Street tends to say, as recipient of 50% of UK trade, Europe remains a major worry for King.

The job of BoE governor has been bolstered substantially since the New Labour government effectively privatised the bank in 1997 jettisoning it from from the reach of greasy fingered MPs. Not only does the BoE control monetary policy – it has recently supplemented its role as chief banking supervisor under the Tory-Liberal Democrat government’s plans to ‘get tough’ on the unpopular banking sector. King often has his finger on the populist pulse. His desire to see a full split between bank investment and high street activities as well as greater competition between banks is right from the street smart political handbook. King has is in good company with this view. The 2010-11 Independent Commission on Banking (ICB or ‘Vickers’ Commission) under BoE Chief Economist Sir John Vickers, recommended this separation, to remove the ‘casino’ speculative one-upmanship of modern British banks. This was undermined significantly by the softer 2012 UK Treasury white paper which featured watered down Vickers proposals. Again, politics prevail over smart economics – meaning the government (again) wins over the BoE.

Monetary independence meant keeping the pound, allowing the BoE to print money (quantitative easing) as a tool to stimulate the economy. This hasn’t exactly been a roaring success  – production is stagnant, inflation is gradually increasing and the economy continues to shrink and expand in a haphazard wave. Critics lament King’s use of ‘fiscal activism’ which only shocks the spluttering economic engine rather than seeks to get the real tools out and fix anything.

Further measures to stimulate growth seem inevitable.  With another £50bn likely toward the end of 2012, this brings the total pumped in by the BoE to £425bn – to possibly over £500bn in 2013.

Quantitative Easing

Quantitative easing (QE – aka printing money or ‘asset purchase programme’ in British speak) is an unproven and expensive medicine – buts its pretty much the only course any globalised industrial economy can realistically take (For a PIIGSty explanation on QE – see here and here). No one really can know if the patient improved because the fever broke naturally or if the medicine has cut the suffering short. Sure, QE helps finance the deficit by flooding the economy with pounds to spur growth and demand (and preserving current demand) without inflicting the full pain of austerity on the (voting) public. Although austerity or ‘necessary deficit reduction’ is unavoidable, King’s actions mean the Tory led government can  avoid the tougher actions forced down the throats of the PIIGS by the ECB-EU-IMF troika. Hence, QE translates into funding the deficit by any other means.

This means the BoE under King effectively causes inflation, to force growth of a sustainable level (2-3%) to ensure the actual pain is dissipated by growth. Seems like a handy solution? Nope – QE has downsides and as growth forecasts are slashed, the UK cant avoid the facts. Aside from being more a delaying mechanism for inducing painful but necessary long term reform of the economy by avoiding inducing tax rises and spending cuts in the hope that recovery will be swift and make these reforms unnecessary, QE risks devaluing the pound (which helps British exporters) and escalating inflation – two reasons not many would relish Mervyn King’s job.

King as Puppet-master

The British public (reasonably fairly) see King as a puppet master pulling the strings to keep profligate British banks afloat after years of making a balls of things (never mind the inconvenient truth that Northern Rock is set to make an £11bn+ profit over 10-15 years from the original government investment of £37bn in 2007. Of course that has nothing to do with the independent BoE but it is worth noting.) Another factor is that stimulus through a major public works/infrastructure project would be a more bog standard (and potentially far more successful) Keynesian option. A second option would be a direct fixed ‘free money’ to each citizen but this would be a behemoth to administer.

King isn’t afraid of strong statements. In relation to American support for EU political union, he brusquely retorted “Some of our American colleagues take the view it’s easy to solve the Europe crisis. Too many people assume Europe is one country, but we’re not one country, we’re several countries.”

King’s reputation has taken a knock recently with the LIBOR (London Inter-bank Offered Interest Rate) – a rate set in London by 16 key banks acting in consortium – in a scandal where Barclays bank under CEO Bob Diamond was found illegally manipulating the rate over a 4 year period between 2005 and 2009.  This scandal has tainted the obvious successor to Mervyn King, Deputy Governor  Paul Tucker – as King’s chummy relationship with Diamond turned destructive.

Feeney sums King’s role up, saying “Although the British government has embarked on a so-called austerity program, the fact is that there has only been a decrease against projected spending while nominal spending continues to increase. It is only thanks to the inflation created by the Bank of England that Britain is enjoying modest real terms cuts of what will probably be between 3 to 4 percent over the next five years.”  A fair enough synopsis. With growth collapsing – there will be trouble ahead and political pressure on the BoE will be enormous (independence be damned!) King’s action over the next few months may have a huge impact on the EU economy thanks to the size of its British component.

The Quintet Screwing Up Europe #1

August 5, 2012

Matthew Feeney of – the rightwing libertarian e-magazine – has penned a particularly thought provoking article that merits some analysis. Feeney identified 5 individuals lurking in the shadows (somewhat…) who might just hold the future of Europe in their hands. PIIGSty will supplement Feeney with its own analysis to give an enhanced overview.

1. Pierre Moscovici French Minister for Finance

The French electorate proved quite the predicable bunch. Francois Hollande as prospective (and ultimately, nominated) Socialist Party (PS) Presidential candidate, led incumbent Nicolas Sarkozy of the Gaullist Union for a Popular Movement (UMP) in the run off opinion polling since August 2010. Hollande won in May 2012 and his PS won the companion legislative election in June. Leftist parties, including the Greens and Radical Party won over 300 seats in the 577 seat French parliament.

During the election, the PS sought a mandate with a policy platform which bucked the ‘deficit reduction’ and ‘reform’ agenda which Europe has assiduously followed since 2009. With the Merkozy ‘austerity consensus’  shattered by the ballot box (those pesky voters!) Hollande sought to promote his plan for ‘growth’ over austerity i.e. an end to cuts for sake of cutting and a halt to pulling money out of European economies for the sake of ‘building confidence’ by returning to sustainable economies. But France after all, was not one of the unruly PIIGS and as the second largest EU economy refused to rustle in the same trough to be thrown scraps by the master. The new French government, under PM Jean-Marc Ayrault, would have a tightrope to walk to protect the welfare state while maintaining growth and stability.

Without cuts , the alternatives to balance the books are always the same – shifting the debt burden onto those who can ‘well afford to pay’ i.e. the upper crust.  Financial gymnastics is never easy. Luckily for Ayrault, the burden for action falls on the Finance Minister Pierre Moscovici. As promised, the election tax plans were realised in July when the new government outlined plans to tax incomes greater than €1m at 75% and incomes up to €1m (over €150,000) as high as 45%.

But with Hollande and Ayrault sticking to their election promises, there are already accusations of watering down and compromise with deficit reduction measures. Raising the minimum wage by 2% has been met with scathing criticism from the left for being too low.

Despite low borrowing costs (bond yields) with French unemployment hovering at 10%, flat growth and weak consumer spending –the tripartite of Hollande, Ayrault and Moscovici are significantly constrained in their efforts at home and are likely to seek to front load cuts in public sector costs to give them more breathing room.  They’re sugarcoatng this by striking an interventionalist tone with the private sector – throwing their oar in with the workers in rejecting Peugeot’s plan to cut 8,000 workers and using state owned financial providers to pump money into cash strapped local government.

Ultimately though, you can’t square a circle – something has to give.

With speculation abound that Moscovici and German Finance Minister Schaeuble could split the chairmanship of the Eurogroup upon the departure of Jean-Claude Juncker (although this is seen as unlikely), the French Finance Ministry’s say in European finance has rarely been so strong in recent years.  The French, unlike the Germans, are warm to the idea of Eurobonds – while both are on the same page when it comes to growing the power of the ECB and enhanced fiscal union.

As Feeney sums it  up “Because France wields a huge amount of influence in Europe, and with the eurozone collapsing, Moscovici’s influence will become more apparent and dominant in the coming months.” Dramatic American journalists…you gotta love ‘em.