New Open Europe briefing: How the EU elite got it wrong on the euro
Open Europe has today published a collection of promises that the EU elite made to their citizens from the birth of the euro up to the recent crisis entitled, "They said it: how the EU elite got it wrong on the euro". Politicians, central bankers and opinion formers warned citizens that without the euro their countries would suffer economically, unemployment would rise and growth would stagnate. Citizens were told that differences in economic structure and competiveness weren't a problem, as members states' economies would converge once inside the currency union and that strict rules would ensure budgetary discipline. Meanwhile, they said, the EU treaties guaranteed that taxpayers in one eurozone country would never be forced to 'bail out' a foreign government.
While this is a reminder that the experts and our elected representatives do get it wrong, more importantly, it is a call for greater honesty about the future of European cooperation and a reminder of the urgent need to find a new model that is both politically and economically sustainable; one that is more in tune with the interests and preferences of European citizens.
EU to propose unilateral move to increase 2020 emissions target;
Plan likely to cost £33bn a year by 2020
The front page of the Times reports that the European Commission will today propose unilaterally increasing the EU's emissions target from a cut of 20% by 2020, on 1990 levels, to a 30% cut by 2020. The EU's current policy is to wait for other countries to commit themselves to equivalent action on their emissions before raising its target.
According to the leaked Commission communication, the increased target will cost the EU an additional £33bn a year by 2020. The existing 20% target is already due to cost £48 billion. The article notes that carbon taxes on road fuel, heating and other sources of emissions could be introduced, with proceeds reinvested in renewable energy products. The Chairman of the European Parliament's Environment Committee, German MEP Jo Leinen, has also called for the EU to unilaterally adopt the 30% target, reports The Parliament.
The Lib Dems' election manifesto pledged to adopt the 30 per cent target "unilaterally and immediately" but the Conservatives' manifesto suggested they would oppose such a move. The Department of Energy and Climate Change said the Government did not yet have an agreed position on whether the EU should unilaterally adopt the higher target. "They haven't got further than the coalition agreement so it's unclear at the moment," a spokeswoman said.
However, ahead of the announcement, France and Germany made their opposition to a unilateral move known, with French Industry Minister Christian Estrosi telling reporters: "We have shared our concerns at the commission's proposal".
Vince Cable rules out repatriating powers from EU;
Bill for 'referendum lock' to contain protocol on 'ghost MEPs'
The Telegraph reports on Commission President Jose Manuel Barroso's comments yesterday, that it was "naïve" of Germany to push for an EU Treaty change when Britain could use its veto to demand the repatriation of some powers.
The article notes that Business Secretary Vince Cable, on a trip to Brussels yesterday, ruled out taking powers back from the EU, saying the coalition Government would pursue a "deregulation agenda" at EU meetings and summits, adding: "It is a way of making European processes work in a less cumbersome way, rather than reopening treaties. We are not at the moment specifying powers that need to be repatriated. We think we can operate within the framework we've got."
Open Europe Director Mats Persson is quoted saying that Conservative MPs may rebel if David Cameron did not use the "ideal opportunity" for Britain to repatriate powers: "Cameron will come under massive pressure from his own ranks but he should not fear going down this road. If successful, Cameron would set an important precedent for Europe by which powers can be brought back to member states as well as handed over to the EU."
The IHT quotes German Economy Minister Rainer Brüderle saying in a statement that he was "surprised at the criticism" from Mr. Barroso, adding that the "current process of economic policy coordination cannot prevent problems arising in the member states and the euro zone." CSU MP Thomas Silberhorn added that Barroso should set an example in budgetary discipline: "If someone tells others to drink water, he should not drink wine himself", reports FAZ.
Meanwhile, the Queen's speech yesterday revealed that the Government will introduce a bill for a 'referendum lock', to ensure that any future EU Treaty which transfers powers from the UK to EU will be put to a referendum. Conservative Home reports that, included in that bill there will be a protocol to allow the 18 additional 'ghost MEPs' created by the Lisbon Treaty to take their seats in the European Parliament.
Commission to announce EU-wide tax on banks;
UK supports levy, but only for national insurance fund
EU Internal Market Commissioner Michel Barnier will today propose an EU-wide tax on banks, to limit taxpayers' exposure against future financial crises. The Guardian reports that the proposals will suggest that "pooling resources into a single pan-EU resolution fund would deliver clear benefits...It would also better reflect the pan-EU nature of banking markets, in particular for cross-border banking groups".
PA quotes Business Secretary Vince Cable saying that support for such a levy was already part of the coalition Government agreement, adding: "The more countries that join, the better." He added that Britain would be prepared to 'go it alone', if other countries did not sign up.
However, according to the Guardian, he said: "The one major reservation that we have about the [Commission] proposal as I have seen it is that it seems to suggest that the levy will be paid into a pot at the European level for collecting an insurance fund for future bailouts. That is not the way we saw the levy operating in London."
EU leaders will be asked to agree the main principles at their next summit on 17 June, before discussions at the G20, with firm proposals to be established in October. Handelsblatt notes that it remains unclear on what basis the levy will be imposed, as the Commission has set three possible parameters: assets, liabilities or profits.
Michel Barnier also said: "it would be very difficult to begin with the creation of an EU Resolution Fund in the absence of an integrated EU supervisory and crisis management framework. For that reason, an appropriate first step could be a system based around the establishment of a harmonised network of national funds linked to a set of co-ordinated national crisis management arrangements."
According to the FT, the Treasury is opposed to using the proceeds to provide any kind of "insurance" facility, because of the risk of creating a moral hazard.
The resolution fund should progressively receive the equivalent of 2 to 4 % of GDP in order to offer a satisfying guarantee, according to the Commission, citing IMF figures. Der Spiegel notes that for the 27 EU member states this would mean a sum between €250 and €500 billion.
Van Rompuy wants to establish a eurozone 'crisis cabinet'
EUobserver reports that European Council President Herman Van Rompuy has said he is looking to establish a clearer "hierarchy" among the EU institutions and member states to make it easier to deal with any future crises in the eurozone. "We are working in order to have some crisis cabinet because we are a lot of players in the field - certainly when you are in crisis - and there is not much hierarchy or organic links between the main players and the main institutions," he said. An informal structure could include the European Commission President Jose Manuel Barroso, the head of the European Central Bank, Jean-Claude Trichet, and Mr Van Rompuy, a source later said.
The Parliament reports that Van Rompuy admitted that the Lisbon Treaty contains "uncertainties and gaps" but expressed opposition to any Treaty changes to tackle the current eurozone crisis.
Meanwhile, Europolitics reports that EU Economic Affairs Commissioner Olli Rehn has said that new legislation to reinforce economic integration in the eurozone will be published "quite soon".
Europolitics EUobserver The Parliament
Continued market turmoil over eurozone sovereign debt crisis
Following yesterday's turmoil on the markets, the premium demanded by investors to hold Spanish ten-year bonds instead of ten-year German bonds rose to its highest level since the agreement on the €750bn bailout package was announced, another sign that Spain has replaced Greece as the focus of concern, according to the Times.
The Italian government yesterday approved €24bn in austerity cuts for 2011/2012, including an immediate freeze on public sector wages. City AM reports that four Spanish savings banks will merge into a joint holdings group, creating Spain's fifth biggest financial institution, with assets of more than €135bn.
Germany's Finance Ministry yesterday proposed extending a ban on "naked" short selling to cover all stocks and euro-currency derivatives listed in Germany that aren't intended for hedging.
Meanwhile, writing in the Times Anatole Kaletsky argues that if any debt default by Greece or other European country "were to occur, it could trigger a global financial catastrophe even larger than Lehman...The fact is that if Greece were allowed to renege on its debts, the foreign banks that held €338 billion of Greek debt at the end of 2009 would immediately move to dump their additional €333 billion of Portuguese debt and probably their €1,500 billion of Spanish debt. And who knows how well over two trillion euros of Italian debt would be treated?"
Writing in the Independent David Prosser argues: "increasingly few people believe that Greece can now avoid a default on its debt...And for as long as Brussels does not face up to this reality, the perception is that EU officials do not get it. The credibility of their pronouncements on other aspects of the crisis is thus damaged."
El Mundo reports that EP spokesman Jaume Duch yesterday denied the story in the Sunday Times that €5 million is to be spent on purchasing iPads for MEPs. He said that no decision had yet been taken, and any proposal would not be voted on before the autumn, when the 2011 budget is to be discussed.
El Pais notes that likely cuts in EU structural funds within the next financial framework (2014-2020) risk seriously affecting Spanish economy. According to economic forecasts made by the Universidad Complutense, the country may even experience up to a 0.5% reduction in GDP, especially if Spain shifts from being a net recipient to being a net contributor to the EU budget from 2014.
Reuters Italia reports that the Committee of European Securities Regulators (CESR) wants the European Commission to speed up regulation of financial derivatives. An official CESR note reads: "The CESR has urged the European Commission to adopt urgently the planned legislative reforms, in conformity with the original schedule". EU Internal Market Commissioner Michel Barnier is expected to unveil a draft document on derivatives regulation by the end of July.
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