European Central Bank President Jean-Claude Trichet has left early and unexpectedly from a symposium organized by the Australian Central Bank of central bankers in Sydney to “attend” a European Council special summit on the economy Thursday in Brussels.
An official at the Reserve Bank of Australia (RBA) said Trichet was breaking his schedule to attend the summit in Brussels. An ECB spokeswoman confirmed the news.
The EU usually holds four summits a year, when all 27 heads of state or government gather in Brussels.
The first summit of the year is usually scheduled for March and normally focuses on economic issues.
EU President Herman Van Rompuy in January said the bloc needed more economic growth in order to finance its social model on a sound basis.
Interesting are the facts that Greece’s debt crisis and the risk of contagion spreading to Portugal, Spain and elsewhere in the euro zone are not on the summit’s official agenda.
Van Rompuy wants to keep its focus firmly on structural economic reform.
We’ll see if the markets will have any influence on Van Rompuy.
He has already caused a stir by stipulating that each EU leader will be allowed to bring no more than one aide to the talks.
Anyway, why did Trichet leave “unexpectedly” Sydney?
José Manuel Barroso, the European Commission president, has somewhat different views on priorities than Van Rompuy.
Barroso is already pointing to the anomaly that countries such as Greece, Ireland and Portugal, which have benefited in the past 20 years from tens of billions of euros in EU regional aid, are in a worse situation than ever in terms of relative competitiveness.
Yes, it could become an “enlightening” summit on Europe’s fundamental weaknesses.
Goldman Sachs has cut from neutral to sell its ratings on National Bank of Greece and Greek Postal Savings Bank.
Interestingly, it also cut Italian banks Banca Monte dei Paschi di Siena, Banco Popolare and Credito Emiliano from neutral to sell.
Goldman said there are now elevated levels of sovereign risk and that will hit bank returns.
It also said that a bank that is big and diversified normally holds up better.
Bottom line: The Europeans are not being careful and it’s not just about Greece any more.
Worries about government debt and associated public sector liabilities have spread through the euro zone to Spain and Portugal.
Ireland and Italy are next up for hostile reconsideration by the markets.
The United Kingdom may not be far behind.
Keep it on your radar screen.
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