Open Europe press summary: 27 May 2010

Europe

Cameron dodges question on repatriating powers in negotiations on new EU treaty
On the BBC Today programme, Evan Davis asked the Prime Minister if an EU treaty change to the rules of the eurozone would require a referendum in the UK, and whether Conservative MP John Redwood was right to call for such a treaty change to be used to negotiate a repatriation of powers.

In response David Cameron said: "I think we're all getting slightly ahead of ourselves here. I mean, even the eurozone doesn't have any unanimity about whether there should be a treaty. They clearly are looking at rule changes and things that need to be changed to make the eurozone work better, and we should encourage that because we want a working eurozone. The issue of the treaty hasn't yet arisen properly, and it may do, it may not do. The rule for us is very clear - that we don't support treaties that transfer powers from Westminster to Brussels."

Writing in the Times, Redwood argues that the Government "should not be frightened of a new EU treaty that seeks to ensure the euro's survival; it could be an opportunity for Britain to seek the repatriation of powers in return for allowing the eurozone countries to enter a tighter union." He adds, "The UK should help Euroland members to create a framework for their budgetary stability. It is in our interests to see a successful euro. We could ask for powers to be given back as our price for consenting to the creation of an economic government of Euroland. The UK could ask to control its own employment and social policies again."
BBC: Today programme Times: Redwood Conservative Home: Persson Mail: Glover Conservative Home: Centre Right blog Conservative Home: Centre Right blog 2 Times

Divisions emerge on EU approach to banking levy;
Commission to push for majority voting on proposals
EU Internal Market Commissioner Michel Barnier yesterday outlined plans for an EU-wide tax on banks to set up 'resolution funds' to manage future bank failures in a structured way. The proposal would see national funds set up, but as a "network of bank resolution funds" across the EU, reports the Independent and the funds would be overseen by "independent executive bodies" in member states, according to the Commission.

However, the proposals contain proposals to merge these national funds to create a pan-European fund from 2014. That could mean that a crisis in one member state would be paid for using funds raised in other countries. The Independent quotes one British official saying: "We would insist that this fund remain in national hands. There is no question of this going towards an EU-wide pot of cash." The Mail and This is Money quote Open Europe saying: "The Government must resist any moves by the Commission towards anything which looks like an EU-wide tax". Barnier reportedly told the Guardian that a European fund was "the aim" and "the second stage."

The Commission said it would come forward with a full legislative proposal by the start of 2011, however the paper reports that Barnier's office stated that he "confirms that in the legislative proposals that will follow, there will not be a proposal for a pan-European fund."

Chancellor George Osborne also said that while he supported the idea of a tax, he was opposed to the idea of ring-fencing the revenue solely for future financial failures, warning that it could create a "moral hazard", by encouraging banks to view them as an insurance policy. He added that, "The purpose of the bank levy is to raise money for general expenditure purposes". The FT reports that France has a similar approach to the idea of a levy.

The Telegraph notes that Mr Barnier believes the proposals could be pushed through under the single market pillar, which would mean a decision would be taken by qualified majority voting, with no country having a veto. British officials are reportedly seeking legal opinions, suggesting that it could come under taxation rules, and therefore should be decided by unanimity. The proposal will be discussed at the EU summit on 17 June, and will feed into global discussions on banking regulation at the G20 meeting in Canada later that month.

A comment piece in FAZ by Brussels correspondent Werner Mussler argues that Michel Barnier's outline fails to address the following questions: "How big should the bank funds be and who should administer them. What would be the role of the EU in the whole scheme?"
Mail This is Money Commission Communication Independent Telegraph FT FT 2 Irish Independent BBC EUobserver EurActiv Mail 2 Times Guardian Express Express 2 IHT Irish Times: Leader Irish Times Guardian: Pratley Independent 2 Telegraph: Reece FAZ Die Welt

Van Rompuy admits citizens were misled about the euro
The Telegraph reports that EU Council President Herman Van Rompuy has admitted that the "man in the street" was misled about the true economic and political implications of adopting the euro. "Nobody ever told the proverbial man in the street that sharing a single currency was not just about making peoples' lives easier when doing business or travelling abroad, but also about being directly affected by economic developments in the neighbouring countries," he said on Tuesday evening. "Being in the 'Euro zone' means, monetarily speaking, being part of one 'Euroland'."

He added that "We are clearly confronted with a tension within the system, the ill-famous dilemma of being a monetary union and not a full-fledged economic and political union. This tension has been there since the single currency was created. However, the general public was not really made aware of it."

The article cites Open Europe's new briefing, "They said it: How the EU elite got it wrong on the euro", and quotes Open Europe's Vincenzo Scarpetta saying, "The euro zone crisis is not simply about economic failure but also a breakdown in trust between the political class and European citizens. The EU elite simply got it wrong on the euro."

Meanwhile, in an interview with Süddeutsche Zeitung, Commissioner for Budgets Janusz Lewandowski said, ahead of his talks with Chancellor Merkel and German Finance Minister Wolfgang Schäuble, "I want to see to what extent [German] public opinion has changed his mind about European aims [...] Germans have clearly become more eurosceptic: they believe they must pay for other EU citizens' mistakes and good life".
Telegraph Expansión Les Echos Open Europe briefing Open Europe press release

US pressures eurozone governments to implement €750bn bailout;
OECD: Euro needs reform to dispel "doubts about the long-term viability of the monetary union"
The US has raised the pressure on eurozone governments by urging them to provide concrete details about how the promised €750bn bailout plan to help struggling members would work - and, above all, to put the aid package into practice. The FT quotes Tim Geithner, US Treasury Secretary, saying, "Europe should implement the programme they have laid out." Speaking in the UK, on the first leg of a European tour, he also called on Greece to "do what it's committed to."

Die Welt reports that the first eurozone aid package, providing €80 billion to Greece, has two potential 'exit' clauses. The article notes that if a constitutional court in any eurozone country considers the aid package to be illegal, then the country may refuse to take part in the bailout. The second exit clause states that if a donor country must itself take out a loan to help Greece, and the interest rate is greater than that at which it will lend the money to Greece, the donor country is able to obtain the difference from other eurozone countries. If the eurozone countries refuse, donor countries can refuse to participate.

Meanwhile, the FT reports that a German five-year bond auction failed yesterday for the first time since September 2008, in a fresh sign of the crisis in the eurozone debt markets. The BBC reports that the OECD has warned that the eurozone needs to undergo reform if it is to survive. "The sovereign debt crisis has highlighted the need for the euro area to strengthen significantly its institutional and operational architecture to dissipate doubts about the long-term viability of the monetary union," it said.

Writing in the FT Deutschland, Wolfgang Münchau is pessimistic about EU leaders' willingness to reform the eurozone: "Whatever reforms are decided at the next EU summit in June, they won't solve any of the problems of the Eurozone and they will not reassure investors." Writing in FAZ, former ECB Chief Economist Otmar Issing questions whether the Commission would be an effective supervisor of national budgets: "Regarding the European Commission, nobody can claim it has fulfilled its supervisory role even half successfully...The proposals to sharpen supervision...distract from the fact that it was the failures of the same institutions, which will now be trusted, that in the past led to the crisis."
Mail: Farndon Guardian Irish Times FT EUobserver WSJ Telegraph: Conway FT 2 FT 3 FT 4 Prospect: Maddox BBC FTD: Munchau FTD FAZ: Issing Welt Bild

Spanish hoping to sew up Lisbon Treaty change for 'ghost MEPs' before end of June
European Voice quotes a Spanish official saying that they are hoping to hold the intergovernmental conference required for a protocol to the Lisbon Treary to allow the 18 'ghost MEPs' can take their seats before the end of June - when the Spanish rotating EU Presidency comes to an end. However, the ratification process in all 27 member states, required for the change, could take up to three years. The article also reports that Ireland may have to hold a referendum on the protocol, as it is constitutionally bound to hold referendums on EU Treaty changes - but the issue is still subject to legal discussions.
European Voice Open Europe blog

EU financial supervisors call for power to ban trading practices such as short-selling
Reuters reports that Eddy Wymeersch, Chairman of the EU's Committee of European Securities Regulators, has said there is no consensus among EU securities regulators for introducing a German-style ban on trading credit default swaps linked to eurozone government bonds. "I am not sure if there is a clear majority for following the German approach," he said. However, the article notes that the CESR is urging the European Commission to give the EU's three proposed financial supervisors, which will be decided on in the coming months, the power to take emergency action like a trading ban during times of market stress, Wymeersch said. The CESR would be upgraded to become one of three new financial supervisors.

Writing in FAZ, former ECB Chief Economist Otmar Issing laments the German action against 'speculators', saying: "should one call it speculation when pension funds and insurers try to get rid of Greek bonds, in order to limit the damage for the insured?"
Reuters FAZ: Issing

Commission backs down from plans for unilateral increase in 2020 emissions target
The Guardian reports that Energy and Climate Change Secretary Chris Huhne has come out in support of a Commission outline in favour of unilaterally increasing the EU's emissions target, from a reduction of 20% by 2020, on 1990 levels, to a reduction of 30%. He said: "we will push for the EU to demonstrate leadership by supporting an increase in the EU emissions reduction target to 30 per cent by 2020." The Commission's outline will be discussed by EU environment ministers next month.

However, EurActiv notes that EU Climate Commissioner Connie Hedegaard failed to stand by the plans yesterday, following resistance from France and Germany. It quotes her saying: "Are the conditions right now? Would it make sense at this moment? My answer would be 'No'".
Guardian Times FT: Brussels blog BBC: Earth Watch blog EurActiv

Ashton concessions could see foreign ministers sent before European Parliament
European Voice reports that EU Foreign Minister Catherine Ashton is prepared to offer concessions on MEPs' demands for greater political accountability of the EU's External Action Service in order to win their backing for her plans. These include sending EU Commissioners or national foreign ministers to EP hearings, rather than the three senior civil servants who will lead the service. A second round of negotiations with the EP is to take place on 4 May, and if an agreement is reached then Ashton will submit the proposal for the EEAS to the European Council summit on 17 June.
European Voice

Commission rejects tougher controls on EU budget
European Voice reports that the Commission has said that the EU does not need to introduce tougher controls in a bid to reduce "errors" in EU-funded research, energy, transport and rural development projects to less than 2 percent. It argues that it is acceptable to keep the "risk of possible error" to 2-5 percent. However, the EU's Court of Auditors has previously indicated that only an error rate of below 2 percent should be treated as "free of material error".
European Voice

Commission proposes data protection agreement with US in bid to get data sharing deals back on track
EUobserver reports that the European Commission yesterday proposed a new draft agreement with the US on data protection. The proposal aims to overcome concerns expressed by the European Parliament, which voted down a previous agreement on sharing banking data with the US last February. According to Justice Commissioner Viviane Reding, the new text sets a framework of "legally binding personal data protection standards" to be respected in any exchange of information between the EU and the US.
EUobserver Irish Times El Mundo

El Mundo quotes Spanish Secretary of State for Europe Diego López Garrido, after his first meeting with the new UK Minister for Europe David Lidington yesterday, saying, "I haven't perceived any euroscepticism".
El Mundo

European Voice notes that the European Commission's Directorate General for Justice, Freedom and Security will soon be split into two separate departments, with one portfolio for Justice and Fundamental Rights and a different one for Home Affairs. 16 new posts will be created for the new DG Justice and 4 for the new DG Home Affairs.
European Voice 

The Irish Times notes that unions are battling with the French government to oppose an increase to the retirement age in France of 60.
FT: Analysis Irish Times

---

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.