Open Europe press summary: 17 October 2008

Europe

EU climate package: eastern European states want cost burden shifted to Britain, France and Germany
EU leaders yesterday agreed that they will maintain their targets and timetable for implementing a controversial package which aims to cut greenhouse gas emissions by 20% by 2020 and to derive 20% of energy from renewable sources by this date.

Following strong objections from Italy and eight eastern European states however, the controversial details of the package remain to be negotiated. The Independent notes that Poland and six other eastern European nations who depend heavily on coal are demanding more of the cost burden be taken on by richer member states such as Britain, France and Germany. Some want the 20% cut to be based on emissions in 1999, rather than 2005 as planned, to ease pressure on industry. According to Le Monde, Poland wants a mechanism to limit volatility in carbon prices.

The IHT reports that Italian Foreign Minister, Franco Frattini, has welcomed an important concession that decisions on the package will be taken by leaders unanimously, allowing each member state to exercise a veto.

Open Europe's new study on the EU climate and energy package is cited in Time Magazine, including the finding that the plan will cost Europe $100 billion a year by 2020. Open Europe Research Director Hugo Robinson is quoted as arguing that the package "comes at exactly the wrong time for hard-pressed families all around Europe," and "will channel money towards very expensive and inefficient means of reducing CO2 emissions, imposing unnecessarily high costs on people struggling through already tough economic conditions." The study is also featured in Czech business daily Financni Noviny and Portuguese daily OJE.

The IHT reports that Prime Minister Donald Tusk of Poland underlined the problems confronted by Poland's reliance on coal-fired power stations, compared to countries like France that have a bigger nuclear-based component in their energy mix. Tusk argued "We don't say to the French that they have to close down their nuclear power industry and build windmills, and nobody can tell us the equivalent." According to Polish officials cited in the WSJ, Polish coal fired plants would need to pay 4.8bn euros per year under the plans.

Belgian Finance Minister Didier Reynders is quoted in the WSJ arguing "Let's face it, industry is scared, and governments need to give them the flexibility they need to make a profit." Belgian chemical federation Essenscia has a piece in Belgian's business daily De Tijd arguing that: "The EU risks chasing away energy intensive companies to regions without similar obligations".

Meanwhile, in the US, the WSJ notes that within the US Democratic Party, which is expected to gain congressional seats in the 4 November election, splits are emerging between lawmakers from coastal states and those from Rust Belt and 'coal-friendly' regions.
WSJ FT FT 2 FT leader Financni Noviny OJE Time VILT IHT Telegraph BBC Independent Irish Independent EUobserver Le Monde OE Press release

EU Commission could threaten Lloyds TSB-HBOS merger
According to the Telegraph, the European Commission has banned banks taking part in Gordon Brown's emergency bail-out from paying dividends to shareholders for five years. The article notes that "The intervention by Brussels officials threatens to deny investors significant income and could threaten the Government's scheme." The article also notes that "There are fears that this stipulation could lead to the collapse of the Lloyds TSB-HBOS merger." The issue is crucial as banks need to pay dividends to attract private investment. The Government had already set the rate of interest for its own "preference" shares in Lloyds TSB, RBS and HBOS at (an unusually high) 12%, hoping that this would allow the UK to comply with EU competition laws.

However, the Commission has said that this would not be an adequate incentive to ensure banks repay the state as quickly as possible, and stated that the UK bail-out could only proceed if dividend payments are banned until after the preference shares are repaid - which the article notes cannot be done for at least five years. Commission Spokesman Jonathan Todd explained "Initially the UK Government thought the penal interest rate would be sufficient disincentive for the banks. We insisted that the payment of the dividends should be suspended while the state still had the preference shares."

In an interview with the FT, Adair Turner, the Chairman of the FSA, calls for significant changes to capital requirements for banks. He said that Basel II framework would need fundamental improvements, and could even adopt a "countercyclical" approach to capital requirements. Turner admitted that such a framework would need to be agreed through an "international set of rules". The Basel II agreement is already implemented at EU level through the 2006 Capital Requirements Directive.

The Economist points to the challenges the EU will face as "a group of countries held together by overlapping pacts of solidarity...Take away the money, and it can start to look awfully fragile." It notes "A nasty recession will thus have political consequences for Europe. If inflation and unemployment rise sharply, EU solidarity could break down in some damaging ways."

Jean-Claude Juncker, Luxembourg premier and Eurogroup chair is quoted in the Telegraph as saying "Let everyone remember after this crisis, who solved it. Politicians did, not bankers."
WSJ FT Volkskrant Telegraph Guardian Economist-Charlemagne Economist AFP Independent Euractiv IHT Euractiv 2 Telegraph 2

Member states ratify EU Immigration and Asylum Pact;
Frattini: "different rules in member states will no longer exist"
Agence Europe reports that EU leaders yesterday definitively adopted the French proposed European Pact on Immigration and Asylum. At the end of the European Council, French President Nicolas Sarkozy said: "Europe now has a genuine immigration policy - it was both expected and inevitable". Italian Foreign Affairs Minister Franco Frattini said: "with this pact, different rules in the member states will no longer exist". He added that "everything the pact contains will no longer be done bilaterally but rather, at a level of European-level defined rules".
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EU leaders tell Ireland: our lawyers will help yes side in second Lisbon referendum
According to the Irish Examiner, EU leaders have told Irish Prime Minister Brian Cowen that "EU lawyers will begin working with the government on assurances to the Irish electorate in the event of a second vote on the Lisbon Treaty." According to the paper, Cowen intimated at a summit of EU leaders, which concluded yesterday, that the Irish would need assurances on tax, abortion, the country's neutrality and keeping its Commissioner. Cowen is to put forward a plan of action for the Lisbon Treaty at the December summit.

The Irish Independent reports that French President Nicolas Sarkozy said he intends to visit Ireland again at the start of December. Agence Europe quotes Sarkozy saying, "in the weeks to come, I will have the opportunity to make proposals on both legal and political levels and would undoubtedly have to go back to Ireland". The Irish Times notes that the French President also suggested that if the Irish government could not come up with its own proposals on Lisbon in December he may propose his own. The fear among Irish diplomats is reportedly that frustration at the 'slow progress' in Dublin will lead to more outside intervention.

At yesterday's summit, Sarkozy also urged the need for a permanent EU Presidency - provisions which are set out in the Lisbon Treaty to replace the rotating system. "We can't work as we are doing, changing every six months...You shouldn't be afraid of the stable presidency of the European Council. Europe is not about the lowest common denominator," citing fears expressed by many states over how the EU would have responded to the Georgian crisis if a big state like France were not holding the rotating Presidency.

Meawnhile, Polish President Lech Kaczynski reaffirmed that he would not sign Poland's ratification of the new Treaty. In an interview with the TVN24 TV channel, he asserted: "I will willingly sign but only when the Irish have said yes". The Polish Prime Minister, Donald Tusk, told the press that Nicolas Sarkozy will be in Poland on 6 December to personally convince Kaczynski to sign Poland's treaty ratification.
Irish Examiner EUobserver EUobserver 2 Irish Independent Irish Times Irish Times 2 Irish Times Comment-Marlowe The Parliament

Sarkozy's calls for EU bailout for 'real economy' meet resistance
European Voice reports that Nicolas Sarkozy has called for EU leaders to sign up to supporting European industry as well as the finance sector, but met with resistance from a number of member states, including the UK, the Netherlands and the Czech Republic. According to the Irish Times Sarkozy said: "If we had a co-ordinated response to the financial crisis in Europe, shouldn't we have a co-ordinated response to the economic crisis in Europe?"

The Irish Times reports that in their Summit Communiqué, EU leaders called on the European Commission to present proposals by the end of December "to preserve the international competitiveness of European industry". The paper notes that an earlier draft of the statement could have been interpreted as a call for a Europe-wide fiscal boost for manufacturing. But the UK insisted on removing a French-inspired phrase that referred to "necessary steps to react to the slowdown in demand".

Sarkozy's proposals won enthusiastic support from Silvio Berlusconi, Italy's Prime Minister, who pointed to $25 billion in low-interest loans that Congress has approved for US car-makers. "Since the US is taking massive steps to support its auto companies, it shouldn't be a scandal if some EU states find it necessary to give support to their own," Mr Berlusconi said.

The Guardian reports that after preventing Alitalia from being taken over by the French and Dutch, Berlusconi is acting to ensure no other Italian company falls into foreign hands at the bargain prices available on the Milan stock exchange. Berlusconi declared on Wednesday night that the government and Italy's stock market regulator were working to change the rules and protect Italian companies from "hostile bids". Italy's Finance Minister Giulio Tremonti said the measures would be "within the European framework".
European Voice Irish Times Guardian Coulissesdebruxelles

Jean Quatremer: eurozone moves one step closer to "European economic government"
On his blog, Libération journalist Jean Quatremer writes: "It's a small revolution, a step closer towards the establishment of a European economic government. For this first time, it is foreseen in the conclusions of the European Council, that the G8 summit on the 'real and complete reform of the international finance system' will be prepared by the 27 EU member states and not only by the 4 European G8 countries and the Commission. Until now, Paris and London, jealous of their prerogatives, opposed such a common preparation. Nicolas Sarkozy, at the request of Spain, said that it was time to put an end to this relic of the past and share the European seats within the G8." He asks: "Will there soon be a single representation for the eurozone at the G8?"
Coulisses de Bruxelles

Fresh questions over Mandelson and his links to Russian oligarch
Peter Mandelson has faced fresh questions in Parliament over the extent of his relationship with Oleg Deripaska, after it emerged that the two had dinner in Moscow on at least two occasions. This follows the impression left by Mandelson's spokesman that "the two had only ever met...aboard Mr Deripaska's yacht", according to the Telegraph. The revelations have prompted concern about "why Lord Mandelson had not been more candid" about the acquaintance which presented a potential conflict of interest during his time as EU Trade Commissioner.
Telegraph

EU unveils members of the 'Reflection group on the future of Europe'
Agence Europe reports that the European Council has approved the list of the 12 people making up the 'reflection group on the future of Europe', chaired by the former Spanish PM Felipe Gonzales. The other 11 members are: Vaira Vike-Freiberga (Latvia, vice chair of the group), Jorma Ollila (Finland, vice chair of the group), Lykke Friis (Denmark), Rem Koolhaas (Netherlands), Richard Lambert (United Kingdom), Mario Monti (Italy), Rainer Münz (Austria), Kalypso Nocolaïdis (Greece), Nicole Notat (France), Wolfgang Schuster (Germany) and Lech Walensa (Poland).

The group will begin its work as soon as possible in view of presenting its final report during the June 2010 European Council. The group's mandate stipulates that its objective is to help the EU to pre-empt and more effectively tackle long term difficulties up to 2020-30. The group says that it will seek to "identify the key issues and developments which the Union is likely to face and to analyse how these might be addressed". The mandate says that the group must not talk about institutional questions because this will "undermine its reflections with the framework set out in the Lisbon Treaty".
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EU split over relations with Russia
The Telegraph reports that Silvio Berlusconi went as far as to suggest, "I consider Russia to be a Western country and my plan is for the Russian Federation to be able to become a member of the EU in the coming years." In contrast, countries such as Britain, Poland and Lithuania believe it is not yet time to thaw relations with Moscow.
Telegraph Irish Times

EU regulation 'is denying patients the benefits of clinical trials'
The Times reports that a paper, by leading medical academics, highlights the new bureaucratic burden facing scientific researchers. The European Union's Clinical Trials Directive is hampering researchers' attempts to conduct clinical trials without bringing safety benefits for participants. Professor Morris Brown, of the University of Cambridge, said: "Mindless regulation is halving the amount of research we can do and clearly works against the interest of the very patients it supposedly protects."
Times

Bulgarian PM's party received funds from "criminal network"
Bulgarian Prime Minister, Sergey Stanishev, has pledged to donate any campaign contributions tainted by irregularities to charity after allegations emerged that his party received donations from people involved in a "criminal network", according to IHT. Within the next few weeks the European Commission will have to decide whether to unfreeze 250mn euros of EU money for Bulgaria, amid concerns that past monies have gone to projects with "unclear ownership."
IHT

Le Monde reports that the European Central Bank announces up to 5bn euro loan to the Hungarian central bank.
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