German Parliament approves eurozone bailout
The German Parliament has this morning approved German participation in the €500bn eurozone support package, with 319 voting in favour, 73 voting against, and 195 abstaining. Prior to the vote the Social Democrat opposition said it would abstain. Foreign Minister Guido Westerwelle responded to an attack on German Chancellor Merkel by SPD Chairman Sigmar Gabriel saying: "it doesn't matter whether you think Ms. Merkel is terrible or whether you think I'm terrible. It's about whether Europe will stand or fall!"
Meanwhile an article in FAZ profiles Frank Schäffler and Peter Gauweiler as the leading "Euro rebels" in both the FDP and CDU/CSU parties. It quotes Gauweiler saying: "At first the package for Greece was to be an absolute exception, but as soon as 48 hours later we had another rescue plan that was six times as big. All you can do is shake your head...".
In an interview with Sueddeutsche, President of Bavaria, President Horst Seehofer said: "We have witnessed over many years Parliament losing its voice on European affairs. Europe can only succeed if the public is consulted on these big questions - and a €148 billion credit authorisation is a big question."
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Germany to call for EU treaty changes at today's meeting of finance ministers;
Prodi: This is a "very important step towards the gradual creation of a European fiscal federalism"
The Telegraph notes that Germany's call for EU Treaty change in order to amend the rules of the eurozone will hang over David Cameron's meeting with German Chancellor Angela Merkel today. German Finance Minister Wolfgang Schäuble will today present his proposals in Brussels for moves towards an 'economic government'. He is quoted saying, "We won't make it without amendments to the existing treaties. I know many other countries are sceptical. That is why we will be having arguments back and forth." The Guardian notes that the German demands will present Cameron with a dilemma over whether to hold a UK referendum on the proposed changes.
European Voice notes that the German plan contains nine key proposals, including sanctions, such as withholding EU funds or suspending voting rights, for countries that fail to limit their deficits to 3% of GDP. The plan is also expected to contain ideas for an orderly insolvency procedure for eurozone countries. The meeting, led under EU Council President Herman Van Rompuy's 'task force' will also discuss plans to oversee and potentially intervene in national budgets and economic strategies. Germany has suggested, "The examiner could be the European Central Bank, or a specially appointed group of independent research institutions," according to EUobserver.
Former Italian PM and Commission President Romano Prodi writes in the FT that "Combining the resources of the eurozone countries and the Commission with those of the European Central Bank is a step beyond the stability and growth pact." He adds: "I therefore consider the recent decisions made in Brussels as a very important step towards the gradual creation of a European fiscal federalism."
In the Guardian, Simon Jenkins writes, "European co-operation and combination are necessary, political and currency union impossible. That might change if attitudes and institutions meld, as in America. But a freemasonry of like-minded Eurocrats does not make a united Europe."
Die Welt argues that "[French President Nicolas] Sarkozy is the biggest winner in this crisis. In the circle of European leaders he has won esteem. Merkel has lost it. The old French dream is coming true: the EU is speedily heading for an economic government...One thing is sure: ultimately the EU will become more French".
A leader in the Economist argues that EU leaders are suffering from "three great delusions". It argues that the "most disturbing delusion is that deeper structural reform is not necessary...an obsession with fiscal discipline may also be an excuse for politicians to run away from tackling Europe's chronic imbalances and the loss of competitiveness in southern Europe."
Open Europe's Mats Persson appeared on the BBC World Service yesterday discussing the future of the eurozone.
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France backs German calls for speeding up agreement on new financial taxes;
Barnier will have EU regulation on short selling ready by October
The Times reports that markets continue to fall and the euro remains unstable after the German ban on short-selling. Mr Schäuble has defended the ban saying, "If you want to drain a swamp, you don't ask the frogs for an objective assessment of the situation," according to the FT. DPA reports that EU Internal Market Commissioner Michel Barnier said that an EU proposal on short-selling will be ready by October.
At a conference in Berlin, German Chancellor Angela Merkel has called for a "signal of strength" from world leaders and for progress in agreeing on increased financial regulation, including a banking tax or levy and a financial transaction tax. Ms Merkel also said, "We will campaign for a tax on financial transactions. It is clear that this is something that will not be agreed at our first [G20] dinner [in Canada]. But I don't think it would ruin the financial markets if we found agreement on a global tax".
Merkel also called on financial institutions to give "honest advice" about how their activities should be regulated, adding: "If we don't get honesty, then we might not do the right thing technically, but we will do the right thing politically".
French Finance Minister Christine Lagarde said she was hopeful that an agreement on a global banking levy could be reached by the G20: "We need progress on this matter." However, Canadian Deputy Finance Minister Tiff Macklem said he opposes Germany's call for new taxes on banks, adding: "there is no 'one size fits all solution'", reports the WSJ.
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Cameron and Sarkozy meet in Paris and reaffirm 'entente cordiale'
On his first trip abroad Prime Minister David Cameron has met with French President Nicolas Sarkozy in Paris, with the latter saying: "We need the English in Europe. It is absolutely strategic. I am sure that a man like David Cameron who has an ambition for his country understands that". The UK PM also said that "We were right not to join the euro and... right to stay out of the euro."
On his BBC blog Nick Robinson argues: "David Cameron now has not one but three coalitions to manage when it comes to Europe. Not just the Lib-Con coalition, but also the coalition which is the EU and that which exists in his own party between anti-Europeans, Euro-sceptics and Euro-pragmatists."
Speaking to BBC Newsnight last night, former French Europe Minister Noëlle Lenoir said: "the image we have of the new, young Tories, either Ministers or deputies/MPs, is that they are much more provocative, much more immature, and certainly much more eurosceptic than the older ones." Jean-François Copé, President of the UMP party in the French Parliament, said, "I said to him [Cameron], you know David, I know the euroscepticism of your party, but let me tell you something...We need you. We need you for Europe...I hope this sentence has been kept in his mind."
Meanwhile, the new Government has released the full details of the coalition agreement. However, the sections on Europe contains no new details than those revealed in the initial outline released last week. On the EU's emissions reduction target, the coalition supports increasing it from a cut of 20 percent to 30 percent by 2020, based on 1990 levels. Controversial home information packs (HIPs) have been scrapped, with only the energy performance certificate, a requirement under EU law, surviving the cut.
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An article in the Economist looks at the EU's AIFM Directive and argues that, in a week of remarkable turmoil in the eurozone, the EP's ECON committee and ECOFIN should have important things to discuss, but instead "both committees thought their time would be well spent agreeing on tough new rules for an industry that has had remarkably little to do with the financial crisis."
Economist Expansion OE research
The Economist reports on the Spanish President Government's "u-turn" decision to make €15bn of spending cuts over two years, noting that the measures will only be a "short term fix", as unemployment figures of 20 percent reveal that Spain urgently needs to implement labour reforms. Meanwhile, AFP reports that German Interior Minister Thomas de Maiziere said that Spain could be the next "possible candidate for the [EU] aid mechanism".
The WSJ reports that red tape is stifling growth in Greece. The European Commission estimates the administrative burden of Greece's bureaucracy--the value of work devoted to dealing with government-imposed administration--is equivalent to 7% of gross domestic product, twice the EU average.
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The Economist's Charlemagne column looks at the UK's often fraught relationship with the EU, writing "Europe will survive only if it acts more like a maritime power, its eyes fixed on growth and the far horizon. And Britain is needed to defend the free movement of people, goods, services and capital in the internal market. Walking away from the EU would not make either the club or its rules go away. In short, Britain and Europe are stuck with each other."
El Mundo reports that the European Parliament has modified the rules of EU Regional Development funds. They can now be used to finance new housing and renovations for marginalised communities, in particular for the Roma Community.
The FT reports that French President Nicolas Sarkozy has announced that France is to modify its constitution to include German-inspired rules on reducing the public deficit.
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The Economist reports on a leaked Russian foreign-ministry paper which sets out plans for a "new pragmatism" arguing that Russia "must form modernisation alliances with leading countries and attract Western technologies", including "the adoption of EU standards".
Dutch paper De Volkskrant reports that a television poll has found that Dutch EU Commissioner Neelie Kroes is the most popular candidate to become the next Prime Minister after elections on 9 June. 37% of people in the poll put Kroes as their top choice, 30% put Labout leader Job Cohen first, and acting PM Jan Peter Balkenende was only the top choice for 13%.
Open Europe is an independent think tank campaigning for radical reform of the EU. For information on our research, events and other activities, please visit our website: openeurope.org.uk or call us on 0207 197 2333.