Open Europe press summary: 25 February 2009

Europe

Commission report to call for financial 'early warning system';
German Foreign Minister: "Turbo-capitalism of the past few years is dead"
The BBC reports that a European Commission report written by former Bank of France Governor Jacques de Larosiere, to be released today, will include proposals for an EU-wide supervisory scheme for banks and other financial bodies, including a new pan-European watchdog. The report is the product of an eight-man committee appointed by Commission President Jose Barroso last November to focus on "European supervisory arrangements covering all financial sectors". The proposal is one of 30 recommendations made in the report, which include those on capital requirements for banks, accounting principles, relations with the US, and the need to reform the Basel II global-banking standards.

PA reports that the proposed body will be asked to act as an "early warning system" against future economic shocks. The WSJ reports that Mr. de Larosiere will say Europe needs a wider range of supervision to address the fragmented nature of the current national setup, according to people familiar with his plans. It is not yet clear what the proposed relationship, if any, the European Central Bank will have with the body.

The WSJ notes that the UK has previously stated that regulation is better done where each bank is based, and that it should be aligned with national finance ministries responsible for bailing out banks if things go wrong. However, BBC Europe Editor Mark Mardell notes that "Gordon Brown has recently dropped his opposition to tighter regulation, but we will have to wait and see what he's prepared to swallow."

The FT reports that UK industry and the City of London's interest in the European deliberations is "growing rapidly". John Liver, of Ernst & Young said, "The City is now realising these issues could have important consequences so they had best engage with the process...There's a thin red line of people involved in strategic thinking within financial services and they're already very busy."

Meanwhile, Deutsche Welle reports that German Foreign Minister and SPD candidate for German Chancellor Frank Walter-Steinmeier is aiming to turn financial regulation into a key campaign issue. In an interview with the FT, he said, "The turbo-capitalism of the past few years is dead, irrevocably so, we must now create a new order for the future."

Euractiv reports that the Commission has given the go-ahead for the nationalisation of banks as a measure of last resort, setting out a range of requirements for banks eligible for state aid.
FT BBC BBC: Mardell blog WSJ Les Echos Guardian: Tisdall Deutsche Welle EurActiv

Business morale in Germany at 18 year low;
BNP Paribas: "Markets think Germany will have to pay the bill for bailing out Eastern Europe"
The FT reports that German business confidence has fallen to its lowest level for at least 18 years after a decline in industrial orders late last year. FT Deutschland notes that German politicians are "desperate".

Meanwhile, the Telegraph reports that the cost of bankruptcy protection on German debt has reached an all-time high as a result of spill-over from the financial crisis in eastern Europe and mounting concerns about the stability of Germany's banking system. Hans Redeker, Currency Chief at BNP Paribas, is quoted saying: "the markets have started to price in a de facto bail-out of Eastern Europe and they think that Germany will have to pay the bill."

Le Figaro reports that an unnamed European diplomat revealed his concern that "Europe has a new baby on its hands" with eastern Europe.FT IHT FTD 1 FTD 2 EU Observer Telegraph Open Europe blog Le Figaro La Tribune

ECB indicates willingness to back bailout of distressed countries
The Irish Independent reports that the European Central Bank has signalled that it may back a bailout of distressed countries like Ireland, should a situation become "inevitable". ECB Governing Council member and head of the Bundesbank, Axel Weber, stressed that any aid should be tied "to very strict" conditions and modelled after International Monetary Fund support. The paper notes that one of the ideas being considered is the offering of "bilateral bonds" that would allow a struggling country to borrow money at rates enjoyed by the likes of Germany, when it issues government bonds without having to pay the current risk premium as well.

FAZ notes that early on in the financial crisis only Greece seemed to be at risk but since then, Spain and Portugal have also had their creditworthiness downgraded by rating agency Standard & Poor's and it is expected that analysts will also add Ireland to the list.
FAZ Irish Independent

EU to put halt on enlargement over fears of foreign workers backlash?
The Telegraph reports that the Dutch and German governments have put plans for further enlargement on hold amid fears of a popular backlash over foreign workers and rising unemployment levels. Ministers will next week decide whether an application from Montenegro for EU membership will be allowed to continue. Several countries are said to be concerned that if Montenegro is considered for entry, bids will quickly follow from Albania, Bosnia and Serbia. The article quotes an "official" involved in the talks saying "The Dutch said that the Lindsey refinery dispute has proved that enlargement and free movement of workers can be difficult to sell to EU electorates...the British defend free movement and enlargement but if even they cannot sell it to their own people, who else can?"
Irish Independent

Big fall in number of east Europeans seeking work in UK
According to Home Office figures published yesterday, the number of east and central Europeans registering to work in the UK has fallen to its lowest level since their countries joined the European Union five years ago, the FT reports. The Guardian notes that the final three months of 2008 saw 29,000 applications to work in Britain from migrants from the countries that joined the EU in 2004 - down from 53,000 over the same period in 2007 and 63,000 the year before.
FT Independent Mirror Mail Guardian BBC

Dutch retailers protest against EU import duties for driving up consumer prices
According to ANP, Dutch retailers have protested to their government against EU import duties, saying that "in the name of antidumping, the crisis and saving jobs, one duty after another is being installed. Especially China is being targeted, but also products from Australia and the US are being made unnecessarily expensive", adding that "the consumer pays a higher price".
ANP

Sarkozy: "if the United States defends its farmers...maybe we can do the same in Europe"
EUobserver reports that French President Sarkozy has called on the EU to protect its industry in the face of US protectionism, saying "if the United States defends its farmers as it does, maybe we can do the same in Europe. If the United States defends its industry, as it does - and they are right - maybe in Europe we can do the same". He also said that France and Italy would insist on this at a meeting of EU leaders in Brussels on Sunday.
EUobserver

British diplomat: EU bodies are "self-absorbed"
In a letter to the Times, former Commonwealth Deputy Secretary-General Sir Peter Marshall argues that "Like the rejected constitutional treaty that it so closely resembles, the straitjacket Lisbon treaty has become part of the problem rather than part of the solution, a sobering truth that would by now have been accepted by bodies less self-absorbed, and less seemingly deaf to constructive questioning of prevailing orthodoxies, than the institutions of the European Union."
Times: Letters

German CSU party calls for "slim Europe"
Suddeutsche Zeitung reports that the Bavarian CSU party, part of the ruling CDU coalition, has set a different course in EU policy than the CDU, with Thomas Silberhorn, the CSU speaker on EU affairs, quoted saying: "Externally we need a strong Europe, when it concerns competing with external power. Internally we need a slim Europe, which confines itself".
Suddeutsche Zeitung

EU administrative error over days at sea
The European Ombudsman has upheld a complaint by Scottish fishermen against the European Commission for an administrative error that reduced the number of days they could spend at sea. The mistake was included in a 2007 Council ruling which reduced the west of Scotland allocation from 280 to 250 days according to the BBC. European Voice reports that the Commission "immediately denied" any error had taken place, and it has until April to respond.
BBC European Voice

Conservative proposal for food labeling "certain to fail" EU legal test says Labour
PA reports that the Shadow Defra Secretary, Nick Herbert, has called for a mandatory country of origin indication on meat products, but the Environment Secretary Jane Kennedy has said such a proposal was "certain to fail" the European Commission's legal test.
No link

France and Italy yesterday signed an agreement to co-operate on nuclear energy and, with French help, Italy wants to build new nuclear reactors, for the first time in two decades.
FTD

Hungary's currency fell abruptly against the Euro yesterday after the Hungarian Prime Minister, Ferenc Gyurcsany, was apparently misquoted by Bloomberg as saying "we are in serious trouble indeed" with reference to Hungary, rather than Europe as intended.
EurActiv


President Sarkozy has drawn criticism over his plan to nominate Francois Perol, Deputy Chief of Staff of the Elysee, as the Chairman of a new bank formed by the merger of Banque Populaire and Caisse d'Epargne, two troubled French mutual banks. The merger was supervised by Mr Perol.
Irish Times

The FT reports that Iceland has dropped its plans to take the UK Government to the European Court of Human Rights over its use of anti-terror legislation to freeze Icelandic assets last year.
FT Telegraph

Credit rating agency Standard and Poor's has cut the debt rating of Latvia to that of junk status, which is rare for a sovereign state, and has said it may further cut the rating this year, as well as that of Lithuania and Estonia.
Independent

The IHT reports that Hungarian Prime Minister Ferenc Gyurcsany has urged the EU to speed up Euro membership, saying: "the best protection against foreign exchange problems is to join the euro-zone".
IHT FTD Guardian

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