£5.3bn of UK tax revenue under threat as Osborne faces defeat on EU alternative investment rules
MEPs on the European Parliament's ECON Committee last night passed their draft of the AIFM Directive. Meanwhile, Chancellor George Osborne, who had hoped to resist the plans in their current form, is expected to be outvoted by other EU finance ministers, who will approve their version of the rules tonight. The EP and EU ministers will then finalise the Directive in the coming weeks. According to Stern, German Finance Minister Wolfgang Schäuble said, "We are a Community, and decisions can be taken against a particular member state - but that can happen to everyone. I believe that the UK is also aware of this."
The Guardian notes that the UK hosts about 80 percent of the European hedge fund industry and cites Open Europe's estimates that the hedge fund and private equity industries contribute £5.3bn in tax revenues to the UK economy every year. Open Europe's Mats Persson is quoted saying, "Forcing through the directive could cause serious damage to the UK's economy and jeopardise billions in funding to developing countries." He added, "The decision is being taken by the bloc's finance ministers only one week after the new UK government has taken office, leaving it virtually no room to prepare for the negotiations." Mats is also quoted by EUobserver and Europolitics.
Under the EP's version of the Directive, funds and managers outside the EU would get EU-wide marketing rights if strict conditions were met. But the industry warns that some of the clauses could severely restrict the ability of professional investors to buy shares or units in third country funds, potentially restricting European investment in the developing world. The Council's draft, prepared by the Spanish EU Presidency, would only allow national authorities to set the terms on which third country funds and mangers can market in the EU, rather than set conditions under which EU-wide marketing rights could be obtained - which the US administration has already criticised as protectionist. Dutch daily Het Financieele Dagblad notes that "in the Netherlands, pension funds are worried, fearing that their investments opportunities outside Europe will be strongly limited".
Meanwhile, the Telegraph notes that Internal Market Commissioner Michel Barnier yesterday announced plans to deal "very severely" with the market in credit default swaps, with new regulations to be tabled in October. The FT notes that Barnier said the Commission would also put forward proposals to launch pan-European supervision of credit rating agencies next month.
Open Europe press release Open Europe research Open Europe blog WSJ WSJ: Editorial Guardian Mail EP press release Telegraph IHT FT BBC EurActiv Europolitics Today Programme EUobserver EUobserver: Open Europe Telegraph: Hannan blog City AM FT 2 European Voice FD Dow Jones Stern
Eurozone finance ministers fail to agree final details of bailout package;
Juncker tells German officials to "keep their mouths shut"
Greece will today receive the first instalment of the €110bn bailout agreement, agreed last month. The eurozone will formally lend Greece €14.5bn, with the IMF contributing €5.5bn, in order for it to meet €8.1bn in bond repayments maturing tomorrow.
Eurozone finance ministers meeting yesterday agreed some details of the €440bn loan guarantee scheme announced last week, including that no country would receive financial assistance unless there was unanimous agreement among other eurozone members, and that the scheme would be set up under Luxembourg law. However, "some technical details and legal matters" of how the scheme will work remain unanswered, and ministers will meet again on Friday to try and settle those issues.
Handelsblatt reports that German Finance Minister Schäuble is demanding that the German Bundestag votes and agrees each time the scheme is used, but has met opposition from French Finance Minister Christine Lagarde.
EUobserver reports that eurozone Chairman Jean-Claude Juncker is unhappy with recent remarks by German officials about the effectiveness of the bailout, which he claims are adding to market uncertainty. He said: "In my opinion, certain people would do better to think before they speak...sometimes they would do better to keep their mouths shut." One of his aides later said the comments were aimed at Deutsche Bank Chairman Josef Ackermann, German Central Bank head Axel Weber and ECB Chief Economist Juergen Stark.
Meanwhile, the ECB revealed yesterday that it had spent €16.5bn buying the government bonds of financially weakened eurozone states, in the first week of the new measure. The ECB would not say which countries' bonds it had bought, but the Irish Independent reports that bond traders say that Irish government bonds are among them.
Writing on his EUobserver blog, Open Europe Director Mats Persson examines the events in the euro in the last week and details why they are "absolutely extraordinary on so many different levels".
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Merkel: "Our goal must be that all EU member States join the euro one day"
In an interview with Le Monde, German Chancellor Angela Merkel said that, as regards eurozone membership, "solidarity and stability are inseparable. For Germany, this culture of stability or solidarity is not negotiable". Ms Merkel also warned that "Joining the Eurozone isn't about creating a financial transfer union", and underlined that "our goal must be that all EU member States join the euro one day".
Le Monde EU Business
German plans for EU financial transaction tax gather pace
The FT reports that the German Länder are calling for a financial transaction tax and further spending cuts from indebted eurozone governments in return for their approval of the eurozone bailout agreement. Horst Seehofer, head of the CSU, sister party of the CDU, demanded the German government push for tougher regulation "without any ifs and buts". The vote is scheduled in the German parliament for Friday. Focus reports that the German coalition partners have reached agreement on a proposal for an international tax led by the EU, sources within CDU, CSU and FDP have confirmed.
Reuters reports that only Britain and Sweden are expected to oppose a European financial transaction tax, with early estimates putting the cost of such a tax for Europe at €321.3 billion and for the UK at €204.4 billion per year. At yesterday's meeting of finance ministers, eurozone Chairman Jean-Claude Juncker said EU governments would step up efforts to establish a global tax on financial market transactions, saying: "We shall advocate more global taxation on financial transactions".
Reuters Focus FTDHandelsblatt Cost Estimations
MEPs and Council stitch-up deal to ensure additional €9.4m and staff for European Parliament
European Voice reports that the EP and Council of Ministers have reached agreement on approval of the Council's 2008 budget, which MEPs had previously postponed because of a lack of details over spending. In exchange, member states agreed in full to the Parliament's demand for 150 assistants and an €1,500 increase in MEPs' monthly allowance, diplomats and MEPs said. Additionally, the Council also still needs the Parliament's backing to set up the budget for the new European External Action Service. The article notes that the changes would increase the EP's administrative budget by €9.4m to €1.6 billion.
Hague: We didn't find it difficult to reach agreement with Lib Dems on Europe;
Former FCO official: "The only leverage we have in Europe is our taxpayers' money"
In an interview with US broadcaster PBS, Foreign Secretary William Hague was asked about the coalition negotiations with the Lib Dems on Europe. He replied, "Well, funnily enough, we didn't find it difficult to reach a common position...The Liberal Democrats have already come to the view that we do not want to transfer more powers or sovereignty to the EU. So, it was quite easy to agree about that. They have also come to the view that we shouldn't be joining the euro in the foreseeable -- in the near future. So, we have agreed that, in the lifetime of this government, this Parliament, we're not going to be doing that."
Meanwhile, on Conservative Home, former Foreign Office diplomat Charles Crawford advises Hague that "The only leverage we have in Europe is our taxpayers' money. Start now to prepare an ambitious list of reforms and radical savings as the price for further generous UK funding of EU processes in the forthcoming EU Budget round. And crack on with legislation for a 'referendum lock' on further transfer of powers to Brussels - it could be needed soon if the Eurozone crisis accelerates."
Writing for the Telegraph, Open Europe Director Mats Persson looks at the coalition Government's agreement on Europe policy and argues: "It's clear that the EU's flagship project, the eurozone, was built on an unsustainable political and economic model, and that people across the continent are becoming increasingly fed-up with the entire European project. This gives the Conservatives the backdrop they need to push for long overdue changes in Europe."
"The Lib Dems could actually be an asset in achieving such change, by giving the coalition a much friendlier face. A 'good cop, bad cop' approach to EU negotiations could prove particularly effective on issues such as trade, financial services, the EU budget and democratic reform...But what cannot be allowed to happen is that the Con-Lib government adopts the calculating, spinning, referendum-dodging approach of its predecessor."
PBS Economist: Charlemagne's blog Conservative Home: Crawford Mail Telegraph: Persson Open Europe press release
German proposal for EU budget law receives mixed reaction
The FT reports that the German proposal to encourage other eurozone countries to adopt their own versions of Berlin's balanced budget law received a mixed reception from other eurozone finance ministers yesterday. Finnish Finance Minister Jyrki Katainen described the budgetary discipline as "a good start for the debate" and "really ambitious", but cautioned: "I'm not that sure if everybody is ready to do the same." The article cites several diplomats suggesting that some countries view the law as too inflexible.
Nonetheless, details of such a plan are expected to be presented on Friday to a task force on eurozone reform, headed by EU President Herman Van Rompuy.
Meanwhile, NRC Handelsblad reports that the European Commission has watered down its plan for supervision of member states' budgets. The article quotes Dutch Finance Minister Jan Kees de Jager saying the Commission has "removed fear" from amongst member states, who were resisting the original proposal.NRC Handelsblad Elsevier FT Irish Times European Voice WSJ: Jamieson
President of Europe Committee in French Senate: "It is pointless to try and hide the differences between France and Germany"
Writing in Handelsblatt, Jean Bizet, the President of the Europe Committee in the French Senate, argues that "It is pointless to try and hide the differences between France and Germany". He adds: "The time of symbols in the EU is over. Practical cooperation in the name of Delors' principles of 'competition, cooperation and solidarity' is crucial for the relationship of the two countries."
France looks to introduce carbon tax at EU borders but admits it will increase prices of imports
EurActiv reports that French President Nicolas Sarkozy's is now pushing for the introduction of a so-called "carbon inclusion mechanism", which would require importers of goods manufactured in non-EU countries to buy pollution permits from the EU's emission trading scheme. "The mechanism, which responds first and foremost to an environmental objective within the framework of the international negotiation on climate change, would seek only to preserve current competitive conditions", says a briefing note issued by France's permanent representation to the EU. The document concedes, however, that the new scheme would increase the price of manufactured goods imported from non-EU countries.
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New UK Agriculture Minister looks for allies on CAP reform
European Voice reports that new UK Agriculture Minister Caroline Spelman believes that Europe's current financial difficulties will make a stronger case for radical reform of the EU's Common Agricultural Policy (CAP) and "will bring allies on [the UK's] side". She told journalists that the evolution of CAP over the last decade "had not been helpful to British interests" but that "The hard times financially will focus all member States' minds on how we are going to focus [CAP] resources."
European Voice EurActiv
Oxfam warns EU's pledges of climate aid to developing world are "undermining trust"
EUobserver notes that according to a report issued by the European Council, the EU is falling short of meeting its pledge of €2.4 billion in climate financing for developing countries in 2010. Tim Gore, EU Climate Policy Advisor at Oxfam, is quoted arguing that "by not being fully transparent about its financing pledges, the EU is undermining trust with developing countries at a very delicate stage of the game [...] The report does not provide clarity on how much each EU member State will pay, on how much it will cover mitigation or adaptation projects, and critically, if this money will come on top of existing commitments [...] for overseas aid".
Meanwhile, an article in Handelsblatt noting that the EU is considering unilaterally upping its CO2 reduction targets from 20 to 30 percent by 2020, reads "EU Climate goals shock German businesses".
Writing in the FT Gideon Rachman argues that "the ideas that represent Europe", multilateralism and the establishment of an international legal order, will be under threat if the European experiment begins to unravel.
In a draft document setting out the future of the alliance, Nato has warned member governments against making cuts in national defence budgets, in order to continue efforts in Afghanistan and deal with future threats of terrorism and cybercrime.
Ahead of this week's EU-Latin America Summit, Spanish think tank FAES hosted an event on Cuba yesterday in Madrid. Former Prime Minister José María Aznar warned against the proposed reforms to the EU's common position on Cuba, saying that any relaxation would make the EU "complicit" in human rights violations. Wilfried Martens, President of the European People's Party (EPP), also expressed regret that the Spanish Presidency had not done more to address the issue of Cuba, noting that it had "disillusioned many Europeans".
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