The Commission plans to impose a tax on financial transactions throughout the EU, at a rate of 0.1 percent on stocks and bonds and 0.01 percent on other financial products. [This] “could generate up to 57 billion euros, if applied across the EU.

Which is not a sure thing, the paper notes –

Nine countries, including Germany and France, are defending bringing in the tax, but others, like Britain, are opposed because they fear it will provoke financial activities to relocate.

Britain’s Prime Minister has also erupted in “fury” at the summit, writes the Telegraph, quoting David Cameron –

The Financial Transactions Tax is a bad idea. It will put up... the cost of people's pensions, it will cost many, many jobs. It will make Europe less competitive and I will fight it all the way.

The aim is to create "private, non-profit organization", which could be launched in the first quarter of this year, the Lisbon daily writes. A European rating agency “promises greater transparency” to be able to compete with the three major U.S. agencies, Standard & Poor's, Moody’s and Fitch.

According to Roland Berger, the purpose of creating a European rating agency –  something that several European leaders, like German chancellor Angela Merkel or EU commission president José Manuel Barroso have argued for   –  will -

... overcome the major problems of rating agencies, especially their monopolistic structure, and conflicts of interest that exist in the system’s current structure. (...) It will operate with an efficient cost model developed and approved by the banking sector. The model is based on Basel II – analysis of infrastructure and credit. At the same time, the whole rating process will be changed to ensure greater transparency. An online platform will be created in which all agencies can publish their evaluations. Investors must commit themselves to publish their own rankings or ratings or to opt for the rating agency of their choice.

If it were only about paying the debts of other countries, the Germans would have every reason to refuse. But they’re discovering that the markets, just as they were doling out credit too cheaply to big-spending countries before the crisis, are now rewarding the excessive selfishness of the most thrifty of countries. The deeper the crisis, the more billions of euros Germany is saving by paying excessively low interest rates. Responsibility also means refusing excessive largesse.

Diário de Notícias of Lisbon believes that the first consequence of the cut in France’s rating is that-

... on January 13, the Paris-Berlin axis broke. The Rhine will continue to flow stubbornly on. The struggle for a change in European Central Bank policy will intensify. We can expect nothing good from a desperate Sarkozy and a fearful Merkel on her island, which is sinking under the weight of savings of Europeans in search of a refuge. Europe could have a future: federalism, with prosperity. Political union, with confidence. Instead, it is close to imploding, to poverty, to bayonets. The enemy is not the markets. It is the stupidity of politicians.

In Prague, Hospodářské Noviny writes that S&P has concluded only that “the Emperor has no clothes” – after all, the cut in the ratings of nine eurozone countries had been expected. “The downgrade merely reveals what investors have long known: that Europe as a whole does not work too well. [...] If it is to survive, it must change.” Another consequence of this series of downgrades: the European Financial Stability Fund (EFSF) “is losing its fire power… In essence, the sum of money in the fund that may be used to bail out troubled countries has shrunken from €440 billion to just € 290 billion.”

According to experts, S & P’s announcement will increase the pressure on the European Stability Mechanism (ESM), which in any case was to replace the EFSF [on July 1], to come into effect right away. The advantage of the ESM is that it does not depend on country ratings, because it has its own capital. [...] The cut in France’s rating will strengthen Germany’s role in the operation to rescue the eurozone. Sarkozy is growing weaker. The rescue of the eurozone will be led by Merkel.

In Austria, the press is not kind to the government, which called the downgrade “surprising” and “incomprehensible”. Vienna’s Die Presse wonders where the "surprise" was, noting that Standard & Poor's had given a thumbs-down in December, when it stated that a decision would come in 90 days. The Vienna daily invites the government to-

... change course before it suffers Italy’s fate. [...] In calling the downgrade "incomprehensible", the government is failing to take it into account and is pressing even harder on the accelerator in our race to a new ratings cut.

The same feeling seems to prevail in Slovakia, where Hospodárske Noviny notes that Friday 13 brought bad luck to the eurozone:

Politicians are not doing enough to improve the situation. As a result, Slovakia is paying for joining the euro club. [...] We are under stress from the bailout of Greece and the contribution to the EFSF. The result: political instability and early elections.

Ultimately, remarks the Corriere della Sera, the “mass downgrade” is a statement of mistrust towards the euro that has strong political motivations, “coming from a country [the U.S.] that has always been sceptical about the fate of the single currency.” That said, the “real problem”, according to the Milan newspaper-

... is that these ratings, which should alert investors by pointing out risks they have not yet perceived, in fact come when these alerts have already spread widely among the markets. [...] The well-known message from S&P has emerged reinforced: the European crisis is profound, and there are no easy solutions. The road ahead is long and has plenty of dangerous bends.

Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.

The New York daily of report expresses surprise that “banks in big euro zone countries that have only recently been infected by the crisis do not seem to be nearly as flustered.”

"While in the United States there is clearly a view that Europe can break up, here, we believe Europe must remain as it is,” said one French banker, summing up the thinking at French banks. “So no one is saying, ‘We need a fallback.’”

The Financial Times has followed up on this story with a report that international companies are preparing contingency plans.

Car manufacturers, energy groups, consumer goods firms and other multinationals are taking care to minimise risks by placing cash reserves in safe investments and controlling non-essential expenditure. Siemens, the engineering group, has even established its own bank in order to deposit funds with the European Central Bank.

The London business daily points out that “Some businesses with global reach say a euro break-up would be grim but manageable.” It also notes that:

Some French, Italian and Spanish executives say they have plans in place for severe financial and economic turbulence, but not specifically for a euro break-up. The risk, in their eyes, is that the region’s stability might come under even greater threat if it became known that companies were contemplating the worst.

French financial daily Les Echos focuses on the return to national currency that such a euro break-up would entail. It reports that:

For months [British brokerage firm] Icap has been discreetly testing a return to the Greek drachma on its EBS electronic platform, the largest interbank exchange for currencies.

In Warsaw, Dziennik Gazeta Prawna reports that businesses around the world might be preparing contingency plans, but that “Polish companies keep their cool.” According to one spokesperson from Solaris Bus & Coach:

... should the euro zone collapse, it would not be a blow to us. We already take payments not only in euro, but also in in Czech crowns or Swedish krona.

Meanwhile the vice-president of an aluminum can manufacture, says that “nobody knows what the euro zone collapse would look like in practice. The only thing we can safeguard against is currency fluctuations.”

... it would be a nightmare scenario for the European Financial Stability Fund (EFSF) [...] which is based largely on the financial strength of Germany and France. [...] Paris in effect guarantees over 20 percent of the amount that the Fund may borrow to help the countries in trouble in the eurozone.

For Mediapart, the warning from Moody's is tantamount to blackmail, reminding as it does French politicians, who are preparing for the presidential election of 2012, that “there is no question of letting up the pressure – of, among things, paradoxical injunctions calling for both austerity and growth – placed on them by the financiers.

This blackmailing of France by the financial world is a dangerous game”, the information portal maintains:

In warning France publicly, Moody's is laying the groundwork for an unleashing of speculation. The self-fulfilling prophecies of the financiers could once again come true, dragging France down in turn into an uncontrolled spiral.

If it’s threatening France, Moody's is beating up on Spain: “The trio is made complete,” notes El País following the two-grade deterioration in the Spanish debt rating (from AA2 to A1) by the rating agency, trailing in the footsteps of its fellow agencies Fitch and Standard & Poor's.  “But the worst may be yet to come,” continued the Spanish daily, “since Moody's, like other [agencies], is maintaining a negative outlook and leaving the door open for further downgrades.” Moody's believes that Spain is still too vulnerable to the sovereign debt crisis in the eurozone, for which it sees no “credible solution”. The impact of the downgrading on the ability of Spain to obtain financing in the markets will depend, however, on the outcome of the EU summit on October 23...

... from which may come an agreement that the [EU] bailout funds can partially stand security for Spanish and Italian debt.

In Italy, where it’s the banks that are in the sights of the rating agencies this time, one month after downgrading treasury bond ratings Standard & Poor’s have dealt another blow to the Italian credit system by cutting the ranking of 24 banks, writes La Repubblica. In its statement the U.S. agency urges the government to carry out the structural reforms needed to boost growth if it is to prevent the rating from sliding further. On the same day, Fitch downgraded the rating of FIAT (whose sales are faltering) due to the precarious financial situation of its U.S. partner Chrysler, La Repubblica adds.


Faced with the onslaught of the markets against states, which are looking more and more vulnerable, something is beginning to shift in Brussels. To counter the dreaded speculation against the public debts, the European Parliament decided on the evening of October 18 to prohibit the naked short-selling of sovereign credit default swaps (CDS)  – used to hedge against payment defaults of a state asset that the seller does not actually possess – reports Jean Quatremer on his blog. For the Libération correspondent in Brussels -

... the markets, by attacking the states, have gone too far. The EU has decided to begin to pull out its claws. The European Parliament has, in fact, rallied the states to its proposal to ban one of the favourite instruments of speculators, which was used notably to destabilise Greece in the first quarter of 2010. The agreement was anything but obvious, given that the states are particularly sensitive to the pressures from their financial sector, which loves these instruments. The deepening crisis affecting the eurozone that is now hitting the banks, however, has clearly convinced the European capitals that it was time to crack down.

"Why do markets have Italy in their sights and not Spain", whose real economy is feebler, asks Corriere's leader. "Because we are not serious nor credible. Nobody wants to invest in Italy. Our image is shattered" after the government's inability to adopt budget measures required by the ECB. Economy minister Giulio Tremonti, locked in a long running battle with premier Silvio Berlusconi, commented that Spain is being spared because its shaky government has set a date for snap elections. Corriere shares this view: "this newspaper asked Berlusconi to do the same as Zapatero: announce he won't run again, call elections, avoid dragging down the entire centre-right. No answer".

“The government and [Portuguese President Anibal] Cavaco [Silva] are united. Against the rating agencies: a struggle without respite,” headlines the Portuguese daily i. The Lisbon daily notes the rapidity with which the government and the president, along with the politicians, bankers and businesspeople unanimously condemned the country’s downgrade by the Moody’s rating agency.

Público – Spain

“Europe (finally) in revolt against rating agencies,” headlines Spanish daily Público.”It’s time to end the oligarchy exercised by the three North American rating agencies around which there exists a network of interests that raise legitimate doubts about the objectivity of their dictates,” the paper says. A “generalised reaction of indignation,” says the paper’s leader, which explains that “the president of the European Commission, the German finance minister, the European Parliament and Spanish and Portuguese business leaders are leading a charge of unparalleled force against rating agencies and are calling for the creation of a European rating institution. But “creating alternative agencies is not enough, albeit European and honest ones, if no progress is made on European political union and if no far-reaching thought is given to the most adequate economic model,” the paper concludes.

Gazeta Wyborcza - Poland

“Moody’s sows seeds of terror,” runs the headline in Gazeta Wyborcza, which fears that “Portugal will not be able to reduce its budget deficit” and that the country will need, just like Greece, “a new financial infusion" from the International Monetary Fund and the European Union. The Polish daily quotes an expert who says that the rating agencies impede bailout operations in the eurozone by lowering the ratings of indebted countries “at the worse time for the markets”. It is thus urgent to put in place an international ratings agency under the influence of the EU. Otherwise, the paper concludes, “we will be forced to continue to believe institutions that warned us often about the crisis and that, once it arrived, only made things worse”.

Worse still, continues the daily, “we are now seeing the emergence of a new breed of political leader who suffers from the hitherto unknown syndrome of “rescue mania.” This type of politician will stop at nothing to rescue banks, the euro and the Greeks. As it stands, every fresh European summit will likely make us poorer,” because, as Handelsblatt points out, our leaders are forcing central banks to bear the brunt of the crisis, while private banks are swimming in money.

Since 2009, the markets have gone crazy: sugar is up 180 %, copper has risen by 225%. And anyone who has the temerity to suggest that all of this fresh money has resulted in an unreal world is labeled a fuddy-duddy. “But that said, we cannot argue that nothing has changed since the crisis: before it began, the banks had a corner on stupidity. […] Now this monopoly has been taken over by the state,” concludes the newspaper.

In its editorial, the London daily wonders how Diamond, who himself is likely to receive a bonus cheque of £8.5 millions (€9.6 millions euros) can “expect to defend bankers' bonuses with a name that is so resonant of wealth and opulence? A change is clearly in order. We suggest: Bob Diamante. They are cheap and create a little sparkle: just what many people need in an age of austerity."

Meanwhile on the continental, German banks are preparing an offensive against a hike in the bank levy introduced earlier this year. As the Financial Times Deutschland headline explains “Berlin is planning to hustle the banks for more.” The levy will be used to finance a fund for financial institutions in difficulty, which should no longer be a burden on the taxpayer. Until now the levy was limited to 15% of annual profits, but the government, which “has suddenly decided that the banks can dig a little deeper,” wants to raise this ceiling. “The move has been unanimously condemned by the industry,” remarks FTD, adding that “the ongoing introduction of proposals for a bigger bank tax, a ceiling on bonuses and a tax on financial transactions, will be an incentive for banks to announce losses.”

Meanwhile, the front pages of Irish press are refraining from such blood curdling pronoucements. However, Irish Independent columnist Lise Hand reports that the mood in the national parliament is bleak. “'It's like the last days of the Roman Empire around here at the moment, Taoiseach,” quipped one opposition member to Irish PM Brian Cowen. “And yesterday,” writes Hand, “the Irish bonds soared to hitherto unimaginable heights and some of the uglier Masters of the Universe had the insolence to pronounce on Irish sovereign matters by proclaiming that only a general election would settle international jitters.” “Unfortunately for Caligula Cowen,” she concludes, “the impression continues to build that he is the head of a Nero Government which continues to fiddle about while the homeland burns."

Having been criticized for the their role in the economic meltdown, some of the tax havens are now experiencing problems of their own. The daily reports that revenues from financial services and fees from banks have declined to the point where the Cayman Islands had “to beg the Foreign Office for permission to raise a £280m bank loan.” Worse still, some British officials are concerned that poorer territories in the Caribbean, which have been affected by a reduction in US tourism, “could become failed states and be dragged into the illegal drugs trade.” The report is expected to emphasize that there will be no bailout financed by the UK, offshore financial centres will simply have to raise taxes to survive the economic crisis.