Barroso: German calls for EU Treaty change are "naïve";
Defends EU spending increases despite member states' austerity
In an interview with FAZ, Commission President José Manuel Barroso has rejected German calls for changes to the EU treaties enabling tougher sanctions to enforce budgetary discipline in the eurozone. "It would be naïve to think one can reform the treaty only in areas Germany considers important. Then of course the British and others will come with their wishes," he said. "We will not propose treaty modifications even though we are open to good ideas."
Barroso said that proposed penalties, including the withdrawal of voting rights in extreme cases, could be accommodated within the existing EU treaties, and that leaders were already considering creating a stronger link between access to EU funds and compliance with fiscal rules. "There are already procedures by which states with excessive deficits do not vote. Under constitutional law it would be nearly impossible to do more, in my view," he added.
EUobserver notes that Barroso has also accused German politicians of not making the case for helping Greece and spelling out the benefits of eurozone membership. "Germany has been, until now, a big winner from the euro. I find that more politicians in Germany should make that clear," he said.
The FT reports that EU leaders will use a two-day summit on 17-18 June to assess proposals for strengthening the eurozone's economic governance. The article suggests that, for the first time, the eurozone is expected to address the question of how to reduce the gaps that have opened up between Germany and southern European countries, in competitiveness and current accounts. "We must do something about the imbalances in competitiveness in Europe... We do not want to make Germany less competitive. Other member states must become more competitive."
Asked whether the Commission might propose a reduction in the EU budget, given the austerity measures being implemented in member states, Barroso replied: "I can only say that we pay attention so that European spending creates added value. I would however be surprised if it would come to a reduction of the EU budget. A consequence of Globalisation is that we do certain things better at the EU level, so at the same time spending at the national level can decrease."
At the State opening of Parliament earlier today, the Queen said in her speech that the Government would propose a bill to ensure that "this Parliament and the British people have their say on any proposed transfer of powers to the European Union", by requiring referendums on future treaties.
Meanwhile, on his Economist blog, Charlemagne looks at the reaction in the British media to potential EU treaty change and cites Open Europe Director Mats Persson's recent article, arguing that an EU treaty change could present the UK Government with the ideal opportunity to push for EU reforms.
Barnier to propose plans for banking levy tomorrow
The FT reports that Internal Market Commissioner Michel Barnier will tomorrow unveil plans for an upfront levy on banks, with the aim of legislating by 2011. The Commission will emphasise that funding must be up-front, rather than a tax on transactions, and that banks should not be allowed to pass the costs on to their customers. It is also likely to stress that funds should be kept ring-fenced from national budgets. The funds are not intended for bailing out banks but to ensure that failures and insolvencies are managed in an orderly way. The article notes that Barnier is likely to leave open the question of whether the tax should be imposed on assets, liabilities or profits.
The Institute of International Finance, the global banking industry group, said it supports taxing the industry to pay the costs of winding up failing banks but it warned that an after-the-fact levy would be preferable. "The problem with [up-front] funding is that it increases the moral hazard ... once banks have paid and the fund exists, it becomes difficult to let a bank fail," said Peter Sands, Chief Executive of Standard Chartered and Chairman of the IIF Committee on Effective Regulation.
Meanwhile, the FTD reports that the European Commission is planning to toughen corporate governance rules for banks and insurance companies. A confidential green paper, which Barnier wants to propose in June, will reportedly target bank supervisory boards, and require that no non-executive director be allowed to sit on more than three boards.
Joschka Fischer: "The EU has been a transfer union ever since its foundation"
In an interview with Der Spiegel, former German Foreign Minister Joschka Fischer criticises Chancellor Merkel's management of the Greek crisis, arguing that her excessive hesitancy delayed the eurozone bailout. "If there hadn't been the Chancellor, Europe could have acted much earlier. In the end, Sarkozy and Berlusconi took the initiative, not our government. The Chancellor could do nothing but give her approval".
As a result, Fischer argues: "Germany is now more isolated than ever within the European Union. Yet, we the Germans must always provide the lion share of the financing, while the French President gets the praise". Asked for his opinion on the risk of the eurozone becoming a "transfer union", Mr. Fischer replies: "the European Union has been a transfer union ever since its foundation. The single market and the Common Agricultural Policy primarily were - and still are - transfer guarantees for Germany and France!"
Markets grow jittery after IMF issues stark warning to Spain
The euro slid another 1.5 percent yesterday, and the FTSE 100 fell below the 5,000 mark this morning amid continued fears over the eurozone and after the IMF yesterday issued a warning to Spain, calling for "far-reaching and comprehensive reforms", adding: "[Spain's] challenges are severe -- a dysfunctional labour market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anaemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness".
City AM reports that the ECB had purchased at least €26.5bn worth of government bonds by the end of last week.
The Mail reports that economists at RBS have calculated that foreign banks, pensions funds and insurers hold €2.16trillion - or 22% of the region's GDP - in Spanish, Greek and Portuguese public and private debt. The paper also reports that the Carnegie Endowment's International Economic Programme has warned that the EU's "current welfare state is unaffordable."
FTD reports that European Council President Herman Van Rompuy again raised the idea of a eurozone bond at Friday's economic taskforce meeting, despite German opposition to the idea. The article notes that, since Germany counts as one of the most secure member states of the eurozone, the interest on German Bunds would rise if a common bond were issued with countries with lower credit ratings.
Meanwhile, in an interview with La Tribune, IMF Chief Economist Olivier Blanchard says that there still are "doubts over the EU's capacity to deliver the money it pledged to disburse in order to finance the Greek government. These doubts are probably not justified, but until the money is on the table, the uncertainty will remain".
Eurozone comment round-up
A leader in the FT argues that "If its leaders want the euro to survive, they must forge a new political bargain in place of the one that made its birth possible...Reaffirming sovereigns' responsibility for their sovereign mistakes would not weaken the eurozone's political cohesion. It would strengthen it, by showing that monetary union is not a covert 'transfer union' lacking popular legitimacy."
Writing in the paper Joshua Chaffin argues that "Even before the current European crisis is past, one thing already seems certain: countries that require future bail-outs will do so on Germany's terms."
An editorial in the WSJ argues: "Feeding the financial panic is the policy panic, especially in Europe. Instead of keeping cool, political leaders are restricting short sales, banning hedge funds, and proposing to raise taxes on any euro that moves somewhere that politicians don't like. All of this only speeds the flight out of euro assets. German Finance Minister Wolfgang Schäuble should try not speaking for a day, and see if the euro rises."
Writing in Le Figaro, columnist Yves de Kerdrel questions the EU's entire approach to the debt crisis, arguing that the turmoil "has not prevented our beloved Eurocrats from carrying out a velvet coup d'état during the last days. They have decided on the sly that we need 'better governance' of the euro...Have we realised that we are going to leave the keys of our budgetary policy to some Brussels-based Eurocrats who are not accountable to anyone, and who could just keep on making mistakes, as they have been doing with the regularity of a metronome during the last decade?"
He concludes: "This European coup d'état has been masterly finalised using as its only argument: 'if we don't strengthen the rules now, the euro will fall into pieces'. Fear can silence people".
EU Climate Commissioner under pressure over knowledge of ETS fraud;
Germany and France to oppose increasing 2020 emissions target
The Guardian reports that EU Climate Commissioner Connie Hedegaard is under pressure to explain her failure to close the loophole which has allowed alleged fraudsters to make millions of euros through the EU's emissions trading scheme. According to documents seen by the paper, she had been informed about the fraudsters targeting the Danish carbon industry last August, but had previously said she did not know about the suspect fraud until December 2009.
Meanwhile, FAZ reports that France and Germany are opposed to unilaterally increasing the EU's target for reducing greenhouse gas emissions by 2020 from 20% to 30%. The European Commission is expected to publish a paper tomorrow, calling for the target to be increased to 30%.
The BBC reports that Scottish MEP Struan Stevenson has warned that EU proposals for a ban on the most widely used rat poisons would be "catastrophic" for the agricultural industry, leaving them no other way of controlling the rodent population.
There is continued coverage of the British Chambers of Commerce's new report, which has found that EU legislation accounts for 68.8% of the total regulatory burden on business in the UK.
The Parliament reports that the EP has decided to set up a special committee to prepare the EU's next seven-year budget framework, which will "define the assembly's budget priorities and propose how the EU budget should be financed in the future".
Le Monde reports that the European Commission is considering implementing a "sustainable" integrated urban policy, with Regional Policy Commissioner Johannes Hahn saying that more regional funding will probably be needed, with a specific budget for urban policy.
A new ICM poll for the Guardian has found that 59% of voters approve of the new coalition Government, and 32% oppose it.
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