Eurozone shuttle diplomacy to pick up pace before critical month

August 16, 2012 – EUROPE – After a brief summer lull, euro zone leaders are gearing up for a round of shuttle diplomacy in the run-up to what could be a crucial month in the 2-1/2-year debt crisis. Greek Prime Minister Antonis Samaras will fly next week to meet German Chancellor Angela Merkel and French President Francois Hollande, according to Greek and German government officials. Earlier in the week, he will see Jean-Claude Juncker, who heads the group of euro zone finance ministers. Merkel and Hollande will meet next Thursday, a day before the Greek premier arrives in Berlin, German government sources said, and the round of talks will extend well beyond Greece. Merkel, now in Canada, will visit Spain’s Mariano Rajoy early in September, according to the Spanish premier, and Italy’s technocrat leader Mario Monti has said he would travel to Berlin before August is out. The flurry of activity presages a crucial period for the euro zone after European Central Bank President Mario Draghi bought a measure of calm by announcing he would do whatever it took to shore up the bloc, including tackling high Spanish and Italian borrowing costs. On September 6, the ECB may spell out at its monthly policy meeting exactly how it could intervene in the bond market if asked. Markets will be on red alert for ongoing signs of internal opposition after Bundesbank chief Jens Weidmann made clear his reservations about the plan. Six days later, Germany’s constitutional court will deliver a ruling on the euro zone’s permanent ESM rescue fund before which Berlin cannot ratify it. Dutch elections are held on the same day. The expectation is that the court will not block the fund’s inception but it could demand greater political oversight. Draghi has said the ECB could only intervene to lower borrowing costs if a euro zone sovereign had first asked for similar help from the bloc’s bailout funds, to which conditions would be attached. On September 14/15, European Union finance ministers meet in Cyprus. By then, the troika of EU, IMF and ECB inspectors may have delivered a verdict on Greece’s debt-cutting progress. –Reuters  

Energy cost hit record high in Europe: Between a weaker EUR and Middle-East tensions, Europe faces a very significant (and real) drag on its economic performance. Forget the ‘grow our way out of it’ or ‘believe-me’ memes, the crude reality (that we warned about last week) is that the cost of buying spot Brent Crude in Euros is very close to record highs, above 2008 highs and most worryingly, has seen the biggest rise on record in the last two months. For those wondering what the trade-off is to Mario Monti’s pointless blustering and scorched-earth hostage tactics at the June 29 Summit, just look at the ‘Total’ line item, the next time you gas up. –Zero Hedge

Canada refuses to help bailout Eurozone: The Conservative government on Wednesday rejected calls from Germany and the eurozone that Canada give to a bailout fund, even as German chancellor Angela Merkel arrived in Ottawa for two days of meetings with Prime Minister Stephen Harper. Mr. Harper and Finance Minister Jim Flaherty have repeatedly rejected entreaties from Europe to contribute to a $450-billion bailout pot, managed by the International Monetary Fund, for troubled eurozone economies. On Wednesday, just hours before Ms. Merkel’s flight landed in Ottawa, Mr. Flaherty said the debt and banking crisis in Europe is dragging some eurozone countries back into recession and he resisted calls for Canada to help. “Not only should the European countries take overwhelming concerted action to take control of the situation, but also that European countries themselves have more than adequate resources to do so,” Mr. Flaherty told reporters in Ottawa. “It’s not necessary for Canada to use Canadian resources to help solve the European problem, given that the European countries are among the wealthiest in the world.” Canada and the United States ended up being the only G20 countries not contributing to the eurozone bailout. Mr. Flaherty said the remedy for the eurozone “is very clear,” noting it must recapitalize banks and deal with the sovereign debt crisis. “We’ve known this for several years now, which makes it rather frustrating at the end of the day, quite frankly,” he added. –Calgary Herald