Open Europe press summary: 6 October 2008

Europe

EU Commission tells Ireland to "correct" bank deposit guarantees - but Germany and Denmark unilaterally issue their own guarantees
Germany has followed Ireland and Greece in issuing a blanket guarantee to personal bank deposits, despite pledging at a weekend summit that Berlin would not take any unilateral action on the credit crunch. Late last night Denmark followed suit. As a result of the failure of EU leaders to reach a consensus on how to react over the weekend, and uncertainty over what action member states would take in light of the German move, European financial stocks suffered sharp falls this morning. London's FTSE 100 fell 5.2 per cent.

Downing Street and the Treasury appeared confused this morning about what exactly had been promised by Berlin - according to the Guardian, London is "furious". "We are still expecting clarification from Germany this morning about what their arrangements are, so we don't have the full details yet," Treasury Chief Secretary Yvette Cooper told the BBC Today Programme.

Despite the unilateral German action, EU Competition Commissioner Neelie Kroes has told the Irish government to change key parts of its bank guarantee plan to ensure that it does not break EU state aid rules, according to the Irish Times. She told Dutch TV yesterday that Dublin had at the weekend agreed to amend crucial parts of its plan to ensure it was not in breach of European law. "My people were in Dublin on Friday and Saturday, and returned with positive news that there will be corrections to the plan. They will correct the discriminatory elements which we don't like," Ms Kroes said. "You can't introduce something like that, it is not allowed. And a guarantee without any limits isn't allowed either," she said. "They will reformulate their plan, after which we can establish together that it is compliance with the treaty."
Le Figaro Le Figaro Le Monde Euractiv EUobserver AFP AFP-Germany Deutsche Welle BBC Volkskrant Elsevier Independent Mail FT FT 2 FT 3 FT Munchau Guardian Guardian IHT European Voice Guardian FT Independent Times Irish Times Irish Times BBC Irish Independent Irish Times Irish Times WSJ

Reaction to German move: Markets fear fracture of the Eurozone
Jim O'Neill, Head of Global Economics Research at Goldman Sachs, told the BBC Today Programme that now we are seeing a "fresh European angle to the crisis". He argued that the 'every person for themselves approach' together with the failure to agree a common stance is "making people worried about aspects of European Monetary Union".

Mail City Editor Alex Brummer argues "Last night's action looks as if it could represent the biggest challenge to European monetary union since the single-currency Euroland area came into existence at the end of 1999. The principle behind Euroland is one currency, one interest rate and one set of rules governing the way the currency bloc operates. By taking a unilateral decision to guarantee bank deposits - without consultation - Germany is in effect cocking a snook at its partners in the community, undermining the authority of institutions such as the Frankfurt based European Central Bank. It is not just European banking which faces its greatest crisis but the single currency, the euro, itself."

Wolfgang Munchau takes a similar line in the FT, arguing that "A systemic banking crisis is one of those few conceivable shocks with the potential to destroy Europe's monetary union."

Guardian Economics Editor Larry Elliot argues that the "Contagion could fracture the eurozone". He writes that, "The week's events have challenged the smug notion that the credit crunch is a purely Anglo-Saxon affair. A glance around Europe shows this is far from the truth: from Iceland to Greece, there are signs of acute stress accentuated by the same marked slowdown as in the UK... In the long term, monetary unions do not survive without political union, and so the...conclusion is that there are pressures both for closer integration and for disintegration. The crisis could strengthen those who argue that the halfway house is inherently unstable and will remain so until there is fiscal as well as monetary union. On the other hand, the growing threat of recession may make some countries question the value of remaining in a monetary union."

Marco Annunziata, Chief Economist at UniCredit argues in the WSJ, that "The euro zone's credibility is now at stake, and its viability might soon be called into question. The ECB has often argued that when setting monetary policy, the differences in the growth and inflation rates of individual member countries could be safely ignored as those differences are no more relevant than the differences across individual US states. The same ECB, however, also says that Europe is not a federation and can therefore not mount its own version of an 'Economic Stabilization Act.' But the euro zone cannot have it both ways: It can't be just like the US when it comes to monetary policy but then fundamentally different when it comes to rescuing the financial system. The European Union would become increasingly irrelevant if national governments rushed to design and implement individual survival strategies. Yet this is exactly what seems to be happening."

Ambrose Evans-Pritchard argues in the Telegraph, "Far from offering reassurance, the weekend mini-summit of EU leaders served only to highlight that nobody is in charge of this runaway train. There is still no lender of last resort in euroland. The £12bn stimulus package is risible."
Telegraph Rudd BBC Today Mail Brummer WSJ Annunziata Guardian Elliot Telegraph Evans Pritchard

Booker: EU Directive "crucial factor" in Europe's credit crunch
Christopher Booker argued in the Sunday Telegraph that the EU's Capital Requirements Directive and the move to "mark to market" accounting has played a key role in the credit crunch in Europe. He concludes that even if EU leaders decide to follow the US lead and reform this problem "it would entail the tortuous procedure of the Commission drafting a new directive, which could take more than a year. Meanwhile Europe's banking system remains frozen".
Sunday Telegraph Booker

Lib Dems call for rewriting of "sloppy" European Arrest Warrant
Britain should ignore a European arrest warrant requesting the extradition to Germany of a man accused of Holocaust denial, says Liberal Democrat home affairs spokesman Chris Huhne, according to the Sunday Telegraph. Huhne argues that individuals should not be handed over to courts abroad for Holocaust denial, which is not a crime in the UK and raised issues of freedom of speech.

Huhne called for a redrafting of the law: "I think the time has come to ensure that the European Arrest Warrant's scope is effective. Some of the sloppy drafting does need to be tightened up. It was rushed through without proper thought as a knee-jerk reaction to terrorist offences."
Sunday Telegraph Open Europe blog

EU maternity leave proposal criticised
EUobserver notes that a proposal from the Commission to extend full pay for the first 18 weeks of maternity leave has caused controversy. Czech Labour Minister, Petr Necas, said the proposal would overstretch the country's budget, while others have suggested the proposal could be counterproductive, as women would potentially represent higher costs for their employers. British Conservative MEP Philip Bushill-Matthews said, "Flexible working and work-life balance must be encouraged but it is not for Brussels to tell British mothers and fathers how much leave they should take." The proposal needs the approval of both the member states and the European Parliament, which the Commission hopes will be completed by mid-2009.
European Voice Irish Independent Euobserver

Financial crisis threatens EU climate policy
In the run up to the European Parliament vote on large parts of new EU climate legislation tomorrow, pressure is mounting on MEPs to grant exemptions for heavy industry. Simultaneously, doubt is rising whether the French presidency will manage to reach agreement before the end of the year. Poland is leading a group of Eastern European nations who oppose new restrictions on CO2 emissions agreed by the EU 18 months ago, and the Polish government is confident that delaying tactics can prompt a debate about reforms the Emissions Trading Scheme. Under EU rules, legislation can be delayed by a group of countries with 91 or more of the 345 total votes in the European Council, a benchmark that Poland claims to have reached.

The Telegraph also reports that Poland in particular, which relies on fossil fuels to produce most of its energy, is keen to avoid turning to Russia for gas if it's domestic supply is squeezed by the new targets. German CDU MEP Hartmut Nassauer said: the proposed rules are "far too complex and have profound implications on the economy and consumers."
FT Boerse online Irish Times Telegraph Euroactiv

Barroso backs Ashton for EU Trade Commissioner
Baroness Catherine Ashton has been named to replace Peter Mandelson as EU Commissioner, and has received the backing of José Manuel Barroso to take up his trade portfolio, according to the FT. Although the Baroness is not a well-known public figure, European Voice reports that she has a reputation in political circles of "quiet efficiency and strong advocacy of social rights." However, Saturday's Times reported that Gordon Brown was asked if he could appoint a woman to replace Peter Mandelson in Brussels to help improve the gender profile of the European Commission.
European Voice FT

Mandelson "leaves a difficult legacy": FT's verdict on his time in Brussels
As Gordon Brown brings Peter Mandelson back into Cabinet, the FT and Le Monde take stock of his achievements as a spokesman for free trade at the European Commission. Le Monde accuses him of "having trouble turning actions into words," while the FT quotes Joe Guinan, trade analyst at the German Marshall Fund think-tank in Brussels as saying: "There was a lot of ambition there, but it is hard to point at many achievements."
FT Le Monde: Profile Sun

Mandelson has cost EU taxpayers £1.5 million over the last 4 years
Saturday's Express looked at Peter Mandelson's EU costs, including a £155,000 a year salary; an accommodation allowance of 2% of basic salary plus £100 a month; dining expenses of £20,000 a year; an expatriation allowance of 16% of basic salary; £100,000 a year travel expenses; a car and driver at £50,000 a year; and bodyguards at £25,000 a year. This makes a total of £1.51million over the four years, plus a £27,000 a year pension for life, and an EU severance allowance of £60,000 a year for three years.
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EU governments plan to preserve status of smaller member states in the Commission with eye to second Irish referendum
The FT reports that EU governments may seek to keep the European Commission in office beyond the end of its five-year term, due to expire in October 2009. The aim of the plan is to reassure the smaller member states, particularly Ireland, that they will not lose their national representatives in the Commission. The FT suggests that keeping the Commission at its current size is seen by many EU politicians and officials as a price that has to be paid in order to secure Irish approval of the Lisbon Treaty in a second referendum.

If the Lisbon Treaty is not ratified by 2009 the new Commission will be formed under the rules of the Nice Treaty, which requires that the number of Commissioners be reduced. By extending the current Commission's term, the next Commission would be chosen under the rules of Lisbon, which currently allows every country to keep its Commissioner until 2014. The FT suggests that "the EU may even drop its plans to slim down the Commission after 2014". However it also notes that "Diplomats acknowledged the proposal to extend the term of Mr. Barroso's Commission would come to nothing if Ireland voted No again."
FT

European automakers to seek EU aid
The European auto industry is seeking 40 billion euros from the European Union this week to help it maintain a competitive standing with American competitors, the EUobserver reports.
IHT EUobserver WSJ

Ireland seeks almost 37 million euros in EU fishing aid
The Irish Times reports that the Irish government is seeking 37 million euros from the European Commission's 600 million euro emergency aid package for the fishing industry.
Irish Times

ACP nations seek to renegotiate EPAs
Some of the poorest African, Caribbean and Pacific (ACP) nations will send emissaries to Europe, following the conclusion of a summit in Ghana on Friday to discuss trade agreements and rising food prices, according to EUbusiness. The meeting failed to reach agreement on the 'divisive' Economic Partnership Agreements (EPAs) which some nations are still to sign. The agreements would require ACP nations to liberalise their markets to European goods and would replace existing preferential access agreements, which have been ruled illegal by the World Trade Organisation.
AFP

Jack O'Connor, Head of Ireland's largest union SIPTU, claims people rejected the Lisbon Treaty because of an erosion of workplace rights and that new workers from EU accession states have "dragged down" wages.
Irish Independent

The Guardian reports that the European Commission is likely to ban the Government's proposed £14million plan to help Channel 4 meet the costs of the digital switchover and fulfil its public service broadcasting commitments.
Guardian

African 'Job Centre': First EU immigration centre outside Europe
In an attempt to stem the flow of illegal immigration from Africa, which often ends in death for those travelling on overcrowded boats, the EU has set up an immigration centre in the capital of Mali to help prospective immigrants find work legally in Europe. The centre, which will have job adverts and training opportunities, will also warn about the dangers of illegal immigration, the BBC reports. Mali has been chosen as it is at the centre of well established migration routes.
BBC

Russia has removed one checkpoint near the breakaway province of South Ossetia, in line with a plan to pull out from Georgia proper by 10 October. However, tensions remain high after Moscow blamed Georgian secret services for a car bomb on Friday that killed nine Russians in the South Ossetian capital.
EUobserver