French President backs German calls for Treaty change to strengthen euro;
Sarkozy: "If a treaty change is needed we will propose it"
Following yesterday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy, the WSJ reports that the two agreed that Europe needs more integrated "economic government". Nicolas Sarkozy accepted Germany's calls for strengthened economic governance to take place at the level of all 27 member states, not just the eurozone countries.
FTD quotes Angela Merkel saying: "The members of the EU have to look at themselves as a kind of economic government. We must not create the members of the first and second class."
However, the two leaders agreed that the 16 eurozone leaders would have ad hoc meetings in case of emergency, which is already the case. Sarkozy said: "The natural frame for economic governance is at 27...More than ever, Germany and France are determined to speak with one voice". Sarkozy also tried to play down disagreements between the two countries.
Quoted in Sueddeutsche Zeitung yesterday, French Finance Minister Christine Lagarde said that the eurozone "should reflect seriously on the need to have an economic government that could have a real purpose, and not solely be a controller of banks and markets but an effective force for leadership and coordination."
La Tribune quotes Luxembourg PM Jean-Claude Juncker backing the German approach to economic coordination, saying: "Generally, the coordination of economic policy should be done at the level of Ministers of Finance".
The Independent reports that France and Germany also agreed that governments which break EU budget rules should have their voting rights suspended. President Sarkozy said that it was not absolutely clear that a Treaty change would be needed to allow rule-breaking governments to be deprived of their EU vote, but EU officials said there was nothing in the present treaties that would allow such a move. "If a treaty change is needed we will propose it," Mr Sarkozy said.
Euronews quotes Angela Merkel saying: "We agree to change the Treaties. Germany and France will soon make proposals and, for example, will remove the voting rights of the countries that do not meet the deficit criteria and the Stability Pact. It is important for us because we need the Treaties to support a culture of stability and growth".
Meanwhile, the Irish Independent reports that Merkel and Sarkozy also said they were sending a joint letter to Canadian PM Stephen Harper, current head of the G20, to press for a global banking levy and a financial transaction tax at the group summit in Toronto.
WSJ Independent Independent: O'Grady Irish Times IHT EUobserver EurActiv Irish Independent BBC Welt Les Echos Le Figaro La Tribune euronews Le Monde LesEchos Spiegel Online ARD Die Presse Handelsblatt FTD Libération toutleurope Press Statement Merkel and Sarkozy
Draft European Council conclusions back plans for EU supervision of national budgets and for new banking tax
EurActiv reports that draft conclusions of the European Council meeting this week reveal that EU leaders will agree to present national budget plans to the Commission for assessment and penalise countries which do not aim for budget balance. The conclusions read: "As regards the strengthening of budgetary discipline, [the EU summit] agrees on strengthening the preventive arm of the Pact, with possible sanctions or incentives attached to the consolidation path towards the medium-term objective...From 2011 onwards, [governments must present] to the Commission in the spring Stability and Convergence Programmes including budgetary plans for the upcoming years, taking account of national budgetary procedures".
Reuters reports that the draft conclusions also back a new banking tax, reading: "The European Council agrees that a levy on financial institutions should be introduced to ensure that they contribute to the cost of crises. The European Council invites the Council and the Commission to take this work forward and report back in October 2010". Open Europe's Mats Persson appeared on FT Video discussing the upcoming EU summit.
FT Video EurActiv Reuters
Commission accuses Germany of fuelling Spanish bailout speculation;
Barroso: 'Democracy at risk' in struggling eurozone countries
El Mundo reports that the European Commission yesterday reiterated that there is no plan to rescue Spain or any Spanish government request to activate the €750bn eurozone bailout fund. The Commission has singled out Germany as being the source of the "twisted" speculation. "It seems that some people do not understand this, in particular Germany. The Commission is not discussing any plan to provide financial assistance to any member state today," said Economic Affairs Spokesman, Amadeu Altafaj. "There was no Spanish petition for help, so I don't know where the stories come from. They seem to come from the same country, since last Friday," added Altafaj, referring to German newspaper reports.
EUobserver notes that German Chancellor Angela Merkel responded to the criticism saying, "We must not encourage rumours and I have no intention of participating in speculation." However, Merkel added that "if there should be problems...the relief mechanism can be activated at any time...If Spain needs the money, there is the umbrella of the EU."
The WSJ reports that Spanish Treasury Secretary Carlos Ocaña has said the lack of credit in the Spanish financial system "is a problem." El Pais notes that the Spanish government wants to publish the results of its stress tests on major banks in order to restore market confidence but Josef Ackermann, CEO of Deutsche Bank, said that it would be "very, very dangerous to disseminate the result." A leader in the FT argues, "There is a continuing need for European countries to stress-test their banks and, if necessary, recapitalise them. Crystallising the losses is the only way to restore confidence." A leader in Handelsblatt argues, "The EU has probably decided on the wrong aid package. It would have better created a Europe wide bank recapitalisation fund instead."
The Guardian reports that the Moody's credit rating agency has cut Greek sovereign debt to junk status, reigniting fears that the country may yet default. The Telegraph quotes Theodora Zemek, Head of Global Fixed Income at AXA Investment Managers, saying there is "no chance" that the EU's €750bn 'shock and awe' bailout package will succeed since it treats Mediterranean countries' debt problems as a short-term liquidity crisis.
Meanwhile, the Mail reports that Commission President Jose Manuel Barroso has warned that 'democracy could be at risk' in countries such as Spain, Portugal and Greece. It quotes John Monks, former head of the TUC, saying, "I had a discussion with Barroso last Friday about what can be done for Greece, Spain, Portugal and the rest and his message was blunt: 'Look, if they do not carry out these austerity packages, these countries could virtually disappear in the way that we know them as democracies. They've got no choice, this is it.'"
In the Mail, John Humphrys writes, "So perhaps it was true that we on [the BBC's] Today [programme] had too easily accepted the orthodoxy of the times that Europe would always head in one direction - summed up in the words of the Treaty of Rome as 'an ever closer union'. If so, we were hardly alone...But is it time to reconsider that orthodoxy? If the Europeans I have been talking to over the past days and weeks are any guide, then the answer may well be yes."
El Mundo El Pais El Mundo 2 EUobserver EUobserver 2 Mail WSJ Irish Times El Pais 2 Les Echos Irish Times IHT Irish Times 2 Guardian Irish Independent BBC City AM FT FT 2 FT: Leader Handelsblatt: Leader Telegraph Mail: Humphrys
UK's net contribution to EU budget will rise to £10.3billion by 2014
Tony Blair's decision to surrender part of Britain's rebate in EU budget negotiations in 2005 will lead to a massive increase in the annual cost of Britain's EU membership, the Mail reports. The Office of Budget Responsibility yesterday revised Britain's net contribution to the EU upwards by more than half a billion pounds for the present year and predicted the cost of membership will reach £10.3 billion by 2014/15. Open Europe's Sarah Gaskell is quoted saying: "It is now shockingly clear just how poor the deal Tony Blair negotiated in 2005 was for the UK."
Writing in the Express, Ross Clark cites Open Europe's research calculating that regulation introduced in the UK between 1998 and 2008 has cost the economy £148.2bn.
Express: Clark Open Europe research Open Europe research 2
62% of French think euro has aggravated crisis
Le Monde reports that the monthly opinion poll by TNS for the paper, in partnership with Europe 1 and iTélé, has found that 62 percent of French people think that the euro has aggravated the effects of the economic crisis, compared with 28 percent who think that it has protected France during the crisis, with 10 percent saying they were undecided.
37% of voters say German coalition will not survive until next election
The Guardian reports that, in light of the €80bn austerity package, rifts have widened in the German CDU-CSU-FDP coalition making it harder for Chancellor Angela Merkel to impose her decisions. Le Monde claims that "the pervasive criticism is that Merkel is incapable of acting with authority". Hemann Gröhe, Secretary-General of Merkel's CDU party, said that "There is total agreement that we cannot carry on as we have in recent weeks". According to a poll reported in the paper, fewer than 37% of Germans now believe that the coalition will survive until the next election in 2013, with 79% judging the planned cuts as being unfair and 93% believing that proposed measures will not help the government realise its goals.
Guardian FT FT 2
Der Spiegel: EU's foreign service is a "money-burning authority"
In an article entitled "a Brussels' mega money-burning authority", Der Spiegel reveals new data on the EU's External Action Service, currently being established by Foreign Minister Catherine Ashton. The article argues, "Even by Brussels' standards this apparatus is enormous: 8,000 people," noting that the EEAS' annual budget is €8bn. The article quotes German MEP Inge Grässle saying, "All this is nothing compared to what is coming." The article notes that problems have already occurred with the EU's office in Ethiopia's capital Addis Ababa which have led to €65 million being paid incorrectly.
Commission proposes giving new regulator power to impose temporary bans on short-selling and CDSs
The WSJ reports that the European Commission has suggested imposing temporary restrictions on CDS transactions and short selling of shares and bonds during a 'financial emergency'. It proposes that the European Securities Market Authority - a new body being set up under other legislation - would be able to override national authorities if they took such actions in the absence of an emergency. The article notes that German Chancellor Angela Merkel and French President Nicolas Sarkozy have urged the European Commission to consider an outright ban on CDSs.
In a speech at LSE last night, Vice President of the European Commission, Joaquin Almunia, said the German ban on naked short-selling of eurozone government bonds was "not a wise decision because it was done unilaterally and a ban on short-selling is not a solution."
Meanwhile, the FT reports that business leaders in France and Germany have warned that plans to force banks to hold more capital to cover risk-taking would be "catastrophic" for the financing of European companies.
WSJ FT City AM Telegraph EurActiv FT 2
MEPs want EU health directive to be more far-reaching
EurActiv reports that the political agreement on the EU's cross-border healthcare directive agreed on by EU health ministers last week is still to be backed by a majority of MEPs before it will become law. However, some MEPs feel that the agreement reached by ministers attached too many safeguards giving health authorities the power to prevent patients from travelling. MEPs will debate the issue again before the end of the year.
Commission to unveil bank data deal with US
The Commission has finalised a draft agreement which would allow the transfer of European banking data to the US as part of anti-terrorist investigations. According to EUobserver, the draft will be presented today and then forwarded to the Council of ministers and the European Parliament for its consent.
FT EUobserver Der Standard
The WSJ reports that Bank of England Monetary Policy Committee member Adam Posen has defended the ECB's decision to buy government bonds.
The IHT reports that the EU seems likely to back United Nations sanctions against Iran on the basis of its continued nuclear program. According to William Hague, Britain, France and Germany are advocates "of strong measures".
The Irish Times reports that EU Foreign Minister Catherine Ashton refused to comment on the merits of the Israeli inquiry into the Gaza flotilla affair, announced yesterday.
The European Parliament will tomorrow vote on whether junk food should be marked by red, amber and green "traffic light" warning labels, the Independent reports. Food industry representatives have been lobbying heavily against the proposal, and it is uncertain whether the "consumer-friendly" labelling system will prevail.
Independent Independent: Leader
The EU has approved the Stabilisation and Association Agreement with Serbia, which is an important step towards Serbian EU membership. The Dutch had previously vetoed the agreement, but lifted their objections yesterday.
IHT Times Guardian Telegraph BBC EUobserver EurActiv European Voice
The Telegraph reports that Iceland is close to opening membership talks with the EU.
The Aberdeen Press and Journal reports that Conservative MEP Struan Stevenson has called for seats in the European Parliament to be based on an equal number of electors per seat.
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.