Fw: Re: please protect

And yes, again, I did write this myself.....

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Sender: Peter Mandelson
Date: Monday, March 1, 2010, 7:50
Subject: Re: please protect

Regulatory uncertainty is a factor now in my view but the bigger point is what happens when demand for credit picks up. At the moment, low demand is shielding supply side constraints and as demand strengthens (hopefully) during course of this year, supply issues will be exposed. My fear based on discussion in London and on continent (Paris and Frankfurt) is that need to repair balance sheets plus pressure on balance sheets from regulatory requirements will have adverse supply effect.

Gordon/Labour's position strengthening over last two months because of growing doubts about Cameron/Conservatives and because the more Brown is attacked the better he seems to come out of it. There is a long way to go yet, tho....

On intl co-operation, I have to say that since G20 in London, it has been downhill. The President appears in Europe and Beijing and elsewhere to be failing to give international leadership (sorry to be frank) and given the huge expectations of him, this is creating real disappointment. There is a sense that he does not yet feel inclined to use US power in the world or with others, Afghanistan being an exception (eventually).

Peter

• Sender: Blacked out
• Recipient: Blacked out
• Subject: Re: please protect
• Date: Monday, 1 March, 2010, 0:08
• Previous entry date: Monday, 1/3/10

thanks this is helpful and I will protect.

I can see greek solution along guarantee lines you suggest but I'dguess speculators will move on and trick will be
harder to replicate—also I worry about next round on greece.

do people really believe regulatory uncertainty is major factor holding back banklending rather than lack of demand and banks own doubts about their position?

take point on cooperation though genuine surprise here that volcker rule played so big as an issue with europe given that glass steagall related issues never did.

what are gordon's prospects?

EFTA00746038

-----Original Message-----
From: PETER MANDELSON < [Redacted] >

To:

Sent: Sun, Feb 28, 2010 4:40 pm Subject: please protect

Larry,

sorry for slow response but I have been travelling.

On Greece, the eurozone is damned if it does (bail out Greece) and damned if it doesn't. If it acts, this will be seen by many as condoning indiscipline and rule breaking. It will also be hated by taxpayers, notably in Germany, who already feel they have paid enough for East Germany. Greece would be a stretch too far! Either way, Greece is test case for the eurozone. It will set precedents for others. It also has implications for how eurozone organises itself.

'Pro Europeans' hope that the result of the crisis will be more effective coordination within the eurozone. But while the French and current Spanish Presidency are pushing for this, Germany is reluctant. No doubt they fear further transfer of sovereignty to the centre, less control for them and more of Germany having to foot the bill. As I say, public opinion in Germany is very opposed to Greek bail out. They were promised this wouldn't happen when Germany accepted abolition of the D mark. Also Germany was uncompetitive when Euro set up - but they put that right through their own domestic efforts - and it was tough: industrial restructuring, loss of jobs to new EU Member States, higher pension age, Schroder labour market reforms etc. So why shouldn't the Greeks accept the same tough medicine as the Germans had to bear ?

So I do not see increased fiscal transfers by Germany. But if bond market strike against Greece, then Germans have hinted that they might underwrite Greek bonds as long as Greeks accept tougher fiscal plan than they propose at present. Merkel's economic sherpa (lens Widdeman) told me he thought some solution like this was likely to happen.

Incidentally, at recent Progressive Governance Summit in London, Papandreou demonstrated great calm and surer feel for scale of crisis than Zapetero. Latter kept going on about need to regulate and teach everyone a lesson. Also very able Greek Finance Minister in professional economist George Papaconstantinou. At moment PASOK popular - there was element of tokenism about general strike last week. However there could be a Greek anti-EU reaction to being pushed around - which is why it might be preferable for IMF to have played bigger role.

My guess is that eurozone will muddle through. The Anglo Saxon view that the Euro is unsustainable is not shared on Continent. And no one thinks that by breaking free of Euro (if it could be done) they would put themselves in a better place. The big issue for future is whether stronger discipline exerted by Commission/ Eurozone over deficit countries results (as French would want) in countervailing pressure on Germans to expand their economy.

There is also a big problem in lack of strong leadership in Brussels; Merkel's caution and lack of vision (FDP coalition is working out badly - worse than with SPD). There are no strong figures other than Trichet and Lagarde/ Sarko.

By the way, in London, Frankfurt and Paris there is concern that the uncertainty surrounding future bank regulation is creating additional caution that is frustrating lending and thus harming recovery. And that future waves of regulation from different directions will hamper ability of banks to fund global economy. I share these concerns, even discounting for bank moaning.

There is also mourning for the high tide of international policy co-ordination we saw in the G20 last year. Korea and Canada (Harper) not doing good job. But I guess that Gordon has already passed this (muted) message to your President......

best,

Peter

--- On Sat, 27/2/10, < > wrote:

EFTA00746039

From: < >
Subject: Re: U guys should talk
To:
Date: Saturday, 27 February, 2010, 15:22

Peter--I'd be interested in getting your off line thoughts about greece/pigs/eurofinance. im reachable at 202503 5783

-----Original Message-----
From: Tim Collins <
To: ;
Sent: Fri, Feb 26, 2010 10:45 pm
Subject: U guys should talk

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