Posted by: Ben Vickers on January 5, 2012
So much for having a currency outside the euro. Hungary sold just three quarters of the one-year Treasury bills it planned to today and the average yield rose to 9.96 percent. That’s an increase of more than 200 basis points from the country’s last sale on Dec. 22. The particularities of Hungary, where a new law has raised questions about the independence of its central bank, are undoubtedly a major factor in this result—still, the sale does raise the question of whether euro-zone members would have any assurance of a smoother ride if they left the common currency.
The case of a country leaving the euro may never arise. Just in case, the EU’s negotiators are taking no rest. Italy’s Prime Minister Mario Monti is meeting with France’s Nicolas Sarkozy in Paris tomorrow, after a fleeting (and unscheduled) trip to Brussels today. Sarkozy then meets Germany’s Angela Merkel on Monday, and Monti makes the trip to Berlin on Wednesday. The next summit meeting of euro-zone leaders, officially scheduled for Jan. 30, effectively begins now.
And a look at what’s being placed on the table suggests the tone may be different this time. The European Financial Stability Facility is too small, Monti said in an interview with France’s Le Figaro today, indicating this is a theme he may seek to reopen. He also called for a greater opening of markets in the European Union— although Italy itself may have to lead the way in selling off government-owned businesses, given the country’s need to cut its deficit. Sarkozy and Merkel will be discussing economic convergence and a new treaty when they meet on Jan. 9, according to France’s Budget Minister and government spokeswoman Valerie Pecresse. In addition, the proposal for a European financial transaction tax will be brought back to the fore, after Pecresse said Paris will proceed with its plans for such a tax.
So, the major difference between the upcoming summit and the meetings that marked last year is that now the discussion is over longer-term plans, and longer-term differences, rather than how to respond to the latest emergency—euro-zone leaders will be thankful Hungary and its conflagration are safely outside their immediate remit.