Europe
German government sources: "talks on Spanish bailout will start in coming weeks"
FAZ reports that the EU is preparing for a bailout of Spain, and quotes government sources in Berlin saying: "We will hold talks on that in the coming weeks in Brussels". The situation has worsened so much that member states do not want to wait for the EU summit this Thursday, according to the article. The Spanish government has denied that it will seek aid from the EU.
Meanwhile, according to a new report by the Bank for International Settlements, French and German banks have lent nearly $1 trillion to the most troubled European countries and are more exposed to the debt crisis than the banks of any other countries, reports the IHT.
IHT WSJ Sunday Times FAZ 1 FAZ 2 FAZ Comment El Pais El Mundo Expansion ORF Reuters
UK Government may not hold veto over EU plan to vet national budget;
Commission wants power to 'referee' in imposing sanctions
Saturday's Telegraph reported that the Government risks not being able to veto EU Council President Herman Van Rompuy's proposal to inspect national budgets before they are seen by Parliament. According to the article, the European Commission is currently planning to pass the legislation to create the budget "peer review" system on the basis of qualified majority voting (QMV).
In an interview with the BBC's Andrew Marr Show, Foreign Secretary William Hague said the plan was "not a proposal that we can support." He added, "The Prime Minister, the Chancellor and I have all made that very clear - the British Budget must be presented to the British Parliament - and that is the position that we will argue for and that's the position we will maintain." When challenged about the prospect of being outvoted, Hague responded that the Government's position would be "trenchant" on the issue.
Open Europe Director Mats Persson was quoted in Saturday's Telegraph saying, "Bulldozing over Britain on a matter of economic and parliamentary sovereignty at this sensitive time would do nothing to improve EU-UK relations. It also runs counter to the constructive sprit now needed to save the eurozone and get Europe's economy back on track."
In an interview with the BBC Today programme, when asked about UK opposition to the proposal, French Finance Minister Christine Lagarde said: "You know the devil is in the details. If we play the game of a club, we have to play by the rules of a club. To share and agree upon the macroeconomic data and forecasts, and to share the common basic principles as well as the expected balance, I don't see that as a major obstacle - but we're going to have to discuss that in detail."
Meanwhile, in an interview with the FT, Van Rompuy has repeated his view that the EU may need to amend the treaties in order to step up economic governance. Although he said he was not personally in favour of such a move, he admitted that, "If there is a consensus on treaty change, I will not oppose it. We are in a crisis. We are in one of the most difficult situations you can imagine. So to exclude certain solutions would not be wise."
The budget proposal will be discussed by David Cameron and other EU leaders at this week's EU summit, and is expected to be finalised at another summit in October to come into force by the start of next year. The Guardian notes that the Commission is demanding to referee decisions on how to punish countries that don't meet the EU's budgetary rules, similar to its role in competition policy where it is empowered to levy big fines, and wants a "rules-based" system that would make the penalties almost automatic. EU Monetary Affairs Commissioner Olli Rehn is quoted saying, "An effective way of reinforcing independence is to apply the model of competition policy to budgetary surveillance."
Writing in the Sunday Telegraph, Conservative MEP Daniel Hannan argued that "as Brussels steps up its demands for economic integration, the euro's problems are becoming our problems." He also urged the Government to "announce that financial services are a red-line issue" and that the UK "will not implement any directives damaging to the City."
Saturday's Telegraph Saturday's Guardian Times FT FT 2 Conservative Home Sunday Telegraph: Hannan BBC: Today programme
Merkel "isolated" in battle with Sarkozy over eurozone "economic government"
German Chancellor Angela Merkel and French President Nicolas Sarkozy are meeting in Berlin tonight ahead of this week's EU summit, as rifts between the two grow wider. Die Welt reports that Merkel is "isolated" in her battle with Sarkozy over the shape of eurozone economic governance, with the article suggesting that 13 of 16 eurozone countries support Sarkozy. It adds that her last real allies are the Finns but they will probably not side with her in the end.
Merkel and Sarkozy remain divided over an 'economic government' for the eurozone only, which Merkel opposes, and continued austerity, which Sarkozy opposes.
AFP quotes a French Minister saying: "Sarkozy and Merkel have no choice. They have to find a 'deal', a little more fiscal restraint in exchange of a little more economic governance...because if there is no agreement at the European Council on the 17th, we will be exploded by the markets".
In an interview with Sueddeutsche Zeitung, French Finance Minister Christine Lagarde presented her views on EU economic government, saying, "We definitely need a common pact, which I still call the Stability and Growth Pact, but which should contain additional elements, especially a thorough examination of the states' competitiveness, as well as the differences in the levels of competitiveness." She added, "This results in an economic policy that makes it possible to erase the differences and harmonise the economic policies".
Sueddeutsche comments that "Lagarde left it open as to whether by this statement she means financial transfers between the poorer and the richer states." Die Welt quotes German FDP MEP Silvana Koch-Mehrin saying Merkel must "oppose with all her strength the French demands for a European economic government".
Meanwhile, Derwesten argues, "Sarkozy, more vehemently than ever before, claims for himself a leading role of the EU, leadership à la francaise."
Welt Derwesten Le Figaro EurActiv Boursier.com AFP OE blog
Van Rompuy: Strength of the euro hid fiscal problems
The front page of the FT reports that EU President Herman Van Rompuy has said in an interview with the paper that the strength of the euro helped disguise some of the union's fiscal problems. He said: "What went wrong wasn't what happened this year. What went wrong was what happened in the first 11 years of the euro's history. In some ways we were victims of our success. The euro became a strong currency with very small interest rate spreads [on government bonds]. It was like some kind of sleeping pill, some kind of drug. We weren't aware of the underlying problems."
Bloomberg reports that the Centre for Economics and Business Research has predicted that the euro will drop to parity with the dollar in 2011 before the "inevitable" breakup of the currency.
Le Monde reports that experts from the EU and IMF have arrived in Athens today, to oversee Greek efforts to meet their deficit reduction targets. Senior Greek officials have said that the Greek budget deficit is 38.8% lower for the first quarter of 2010, than the same period in 2009.
FT El Economista Expansion City AM Reuters Bloomberg Le Monde
AIFM Directive: The Commission wants to go back to original proposal on controversial third country rules
The WSJ noted over the weekend that the Commission has proposed a compromise on the question of how overseas hedge funds will be allowed to operate in the European Union, under the EU's proposed AIFM Directive. The compromise, which is very similar to the Commission's original proposal, would allow a transition period of around three years during which national governments could maintain their rules for hedge fund operations - under so-called private placement rules. After that, national rules would be abolished and the Commission will be allowed to determine which funds fulfil the criteria to access the EU's market.
Meanwhile, EurActiv reports that, in a joint statement from Robert Plaze, the SEC's Associate Director for Regulation, and Dan Waters, Director of Retail Policy at the FSA, they argue: "There are differences in regulation that would mean the US would not be able to comply with current proposals in the Alternative Investment Fund Managers Directive". Waters said the FSA preferred the European Council's position, which proposes maintaining a form of private placemen,t whereby non-EU funds get access to each market individually.
WSJ Open Europe research EurActiv
Poul Nyrup Rasmussen: Merkel's austerity measures are "killing growth"
Writing in the FT Wolfgang Münchau argues, "From my own conversations with French politicians and economists, I have no doubt that the majority of them think the German obsession with austerity is crazy...The rush to austerity creates a formidable dilemma for France. The strategic alternative is either to accept it or risk a break with Germany, thus reversing more than 25 years of Franco-German monetary and fiscal convergence. It is a deeply serious choice."
In an interview with El Pais, former Danish Prime Minister Poul Nyrup Rasmussen criticised German Chancellor Angela Merkel's approach to the economic crisis saying, "What Angela Merkel is promoting is killing growth. Any little flowers that appear in the path of growth are being blighted by this policy of cuts. We need a strategy that creates a balance between fiscal consolidation on the one hand and employment and growth on the other."
El Pais FT: Münchau EUobserver
Cathy Ashton: EU staff could be used for security checks on Gaza border
EU foreign ministers meeting today in Luxembourg are expected to increase pressure on Israel to ease its blockade of the Gaza Strip. Writing in the Times, EU Foreign Minister Catherine Ashton argues, "Instead of a list of a very restricted number of products, there should be a short, agreed list of prohibited goods about which Israel has legitimate security concerns. The European Union has trained staff on the ground who could help to implement this at Gaza's border, letting permitted goods through and keeping banned goods out."
Guardian EUobserver El Mundo Times: Ashton
Huhne's calls for climate target increase could see Britain forced to cut emissions by 42%
The Mail on Sunday reported that Environment Secretary Chris Huhne urged the EU to increase its emissions targets from a 20 percent cut to a 30 percent cut over the weekend, which the article reported could mean an extra 2,500 wind turbines going up around Britain. If the targets are increased, Britain could be forced to cut its CO2 emissions by at least 42 percent, because larger countries would have to take on a larger burden within the EU.
AFP reports that EU leaders are to push ahead with a banking tax at this week's European Council meeting. Writing in City AM Stuart Fraser argues: "What form a UK bank tax will take and what the proceeds will be used for remains unclear but one thing is certain; this is a matter for our own national government to decide."
Flemish separatist party N-VA won a huge victory in yesterday's Belgian elections, securing 27 of the 150 seats in Parliament, a gain of 19 seats. Handelsblatt cites Brussels diplomats dismissing fears over the upcoming Belgian EU Presidency, saying "nervous? No. Despite all domestic quarrels Belgians are very loyal to Europe."
NY Times Handelsblatt Guardian Times Independent FT Irish Times EUobserver EurActiv BBC European Voice Irish Independent Daily Telegraph Berlingske Tidende WSJ WSJ: Editorial IHT Le Monde Le Monde 2 Le Figaro
Slovakian PM Robert Fico has been asked by the President to try and form a coalition government, following Saturday's election, although an opposition coalition of four centre-right parties won a majority of 79 out of 150 seats.
FT Irish Times BBC EurActiv European Voice WSJ
EUobserver reports that EU governments' plans to gather data on people who voice or share "radical messages" in a bid to pre-empt terrorist attacks have been attacked by MEPs and civil liberties groups. Lib Dem MEP Sarah Ludford said: "The danger is that this is spreading the net too wide, instead of gathering targeted information on people who are seriously becoming a terrorist threat."
EUobserver Open Europe research
The FT reports that EU Taxation Commissioner Algirdas Šemeta is to launch a formal debate on a new carbon tax this month, proposing that taxes of transport and heating fuels be based on a calculation of carbon emissions and energy content rather than volume. European carmakers have said they would oppose a new carbon tax if it were to result in higher prices for diesel oil.
City AM reports that David Cameron is calling for a new approach to avoid "overwhelming businesses with red tape", but notes: "it is not clear how much power Cameron actually has to roll back health and safety legislation, as many of the laws are dictated by EU directives."
On his Telegraph blog Conservative MEP Dan Hannan hat-tips Open Europe's press summary which last week revealed that EU President Herman Van Rompuy said that the eurozone bailout package could be higher than the €750bn agreed already.
Telegraph: Hannan blog OE press summary
German Chancellor Angela Merkel has appealed for unity in her coalition as splits occur over spending cuts, and amid reports that Defence Minister Karl-Theodor zu Guttenberg threatened to resign in a defence budget dispute.
Writing on Conservative Home, Stewart Jackson MP argued that the Government should "review the operation of the EU Workers Registration Scheme and put more effort in to removing EU citizens who cannot or will not work and are an imposition on UK taxpayers."
Environment Secretary Chris Huhne has urged the Conservatives to leave the ECR grouping in the European Parliament, and return to the EPP grouping, which they left last year. He said: "I'm very willing to give them unsolicited advice - I would urge them to rejoin the EPP. But I'm not going to stick my nose in."
Independent on Sunday Independent on Sunday 2
EUobserver reports that EU Foreign Minister Catherine Ashton sent a letter to MEPs, the Spanish Foreign Minister and the EU Institutional Affairs Commissioner on Friday to arrange final four-way talks to iron out differences on the European External Action Service (EEAS), in time to reach agreement before the European Council this week.
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.
