Europe
Schäuble: Agreement on financial supervision can be reached by September;
Commission official: It cannot be excluded that EU financial supervision will be extended in future
Reuters reports that the EU institutions are trying hard to strike a deal on the new architecture for financial supervision before the summer break. Another trilogue - talks held between the Commission, the European Parliament and member States - is taking place this morning, ahead of the meeting of EU Economy and Finance Ministers in Brussels. According to Bloomberg, today's negotiations are very likely to focus on what powers the European Banking Authority (EBA) should have over national authorities with regard to the supervision of cross-border banks. The article notes that some member States - including the UK - disagree with the EP's proposals to give EBA powers to supervise banks directly and oversee a fund to help failing banks.
However, EU Commissioner for the Internal Market Michel Barnier reiterated yesterday that "we are not far away from an agreement", while German Finance Minister Wolfgang Schäuble is quoted by Reuters saying: "I am actually confident that if we don't reach an agreement with the [European] Parliament today, then we will reach one over the course of the summer by September [...] I think the [Belgian] Presidency can pick up the negotiations again today in the trilogue with a new mandate. There are fewer points of contention now".
Meanwhile, at a debate yesterday, organised by Open Europe and Policy Exchange, Salvatore Gnoni from the Internal Market DG within the European Commission said that the European Securities and Markets Authority (ESMA) - one of the supervisors set up by the proposal - would at first have direct supervision over credit rating agencies but that, "It cannot be excluded that in the future direct supervision will be extended to other entities." He noted that the proposals include "review clauses" that will allow policy makers to assess "the need to change something, to strengthen something, or to simply modify". Mr Gnoni also said that in "an emergency situation" EU supervisors would have the power of "direct supervision" over individual firms. When asked about the European Supervisory Authorities' (ESAs) power to ban certain market practices, such as short-selling, Mr Gnoni replied that "we don't know exactly how it will end" because the possibility to ban specific financial transactions or products is likely to be included in future individual EU directives. He said, "The real discussion will be when the sectoral legislation is proposed."
Kay Swinburne, a Conservative MEP for Wales and member of the EP's Committee on Economic and Monetary Affairs, said that a positive aspect of the creation of the ESAs was that they "should deliver a stronger Single Market" by universally applying a "single European rulebook." However, she also said that the EP's version of the proposal "completely breached all subsidiarity rules and took an awful lot of sovereign states' initiative away" in an attempt to regulate the "Anglo-Saxons."
When questioned about what safeguards there would be on the decision making role of the ESAs, Ms Swinburne answered that she felt it was important that member states had the power to call an "emergency situation" and not the Commission, the ESAs or the EP. However, she conceded that, under the current proposal, a vote on declaring an emergency situation is "likely to be simple majority", meaning that the UK would have the same voting weight as all other member states, even those with very small financial sectors.
William Underhill, Chairman of the City of London Law Society's Company Law Committee, warned that the scope and powers of the new ESAs could be extended over time. "What are the boundaries of the single EU rulebook that lies behind a lot of this new architecture?" he asked.
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Slovakian government does not buckle to Van Rompuy's pressure on Eurozone bailout fund;
Merkel wants to give Eurozone countries the right to default
European Voice reports that Eurogroup President Jean-Claude Juncker said last night that he expects the €440 billion European financial stability facility to be fully operational soon, despite opposition from the new Slovakian government which is holding up its launch. After a meeting with EU President Herman Van Rompuy last night, Slovakian Prime Minister Iveta Radičová said: "The position of our minister of finance and also my personal and our political party [position] is as it was before, that we really do not agree, we really do not agree". Slovakian Finance Minister Ivan Miklos - who is currently in Brussels to attend the ECOFIN meeting - is quoted by Die Welt saying that he is "not here to sign, but to discuss and negotiate".
Meanwhile, Handelsblatt reports that Ulrich Wilhelm - a spokesman for the German government - confirmed that Chancellor Angela Merkel will present a proposal to create default proceedings for debt-laden Eurozone countries. Citing sources in government, the article suggests that Merkel wants to suppress any discussion about extending the life span of the EU aid package.
The Irish Independent reports that Nobel prize-winning economist Robert Mundell has said that Ireland, Spain and Portugal face a 20 percent risk of having to restructure their public debt, but the euro area will not break up, even if some countries do renegotiate their debt.
An article in the WSJ looks at Greece's defence spending, which includes plans to spend more than one billion euros on two submarines from Germany this year.
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Barnier: Strengthened EU economic governance should include all member States
In an interview with E!Sharp magazine, EU Internal Market Commissioner Michel Barnier has said that reforms to the EU's economic governance should be implemented among the 27 member states, rather than just eurozone countries. "I can understand very well, from a pragmatic point of view, that the 16 countries using the euro need more economic and budgetary coordination than the others. Because they share a currency, anything that happens to one of them has immediate repercussions for the others - as we saw with Greece," Barnier says. But he adds: "Let us describe this as a sort of two-level governance, with the fundamental level being that of the 27 members of the Union. That is what we are working towards".
Meanwhile, AFP reports on yesterday's meeting of the EU task force on economic governance. European Council's President Herman Van Rompuy - who chairs the task force - outlined in a statement that the scope of sanctions for countries which do not comply with the Stability and Growth Pact criteria should include suspension of EU funds and that the European semesters (during which member States are expected to submit their draft national budgets for peer review) will begin in 2011.
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EU member States set to offer direct aid to banks which fail stress tests;
German banks give the cold shoulder to "private" bailout fund proposal
FTD reports that several EU Finance Ministers are already preparing themselves for a number of European banks to fail the stress tests. EU Commissioner for Economic and Monetary Affairs Olli Rehn also warned yesterday that "we must be prepared to find out some sacks of vulnerability". To this end, new injections of public money are being considered in case particularly serious weaknesses are highlighted. Belgian Finance Minister Didier Reynders is quoted by AFP explaining that "all necessary measures will be implemented" after the publication of stress tests' results on 23 July. The Irish Times quotes Dutch Finance Minister Jan Kees de Jager saying: "It is firstly up to the banks themselves. They will get a certain period to refinance themselves in the market, but the countries will immediately announce that there is a certain backstop".
Meanwhile, the European Commission has welcomed the call from UniCredit Chief Executive Alexander Profumo - published in yesterday's FT - for the creation of a private voluntary €20 billion rescue fund for banks, as an alternative to a broader bank levy for a bailout fund.
However, the WSJ reports that German banks, including Deutsche Bank, Commerzbank and Deutsche Postbank, offered a lukewarm response to the proposal. One official is quoted saying the fund would be an "unnecessary burden in an already tense situation".
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Denis MacShane: I give the coalition seven out of ten on Europe
An article in E!Sharp magazine looks at the coalition Government's performance so far and quotes former Labour Europe Minister Denis MacShane giving the coalition "seven out of ten" on Europe. "I would like to beat them up for being manic Eurosceptics but the plain fact is that, so far, they are not," he says.
Open Europe Director Mats Persson is also quoted saying: "It would be counterproductive for the government not to keep its promise of a referendum after a transfer of powers [to the EU]...The biggest risk is that like Labour, the coalition government tells the domestic audience that nothing is happening in Brussels and dismisses any changes as a tidying-up exercise to avoid a referendum. That would store up massive problems for the future, antagonising Tory backbenchers and public opinion."
Open Europe was quoted in the Express, commenting on research that found the UK contributes £135 million a year to EU officials' pensions. Open Europe called for immediate reform of the EU's pension scheme and said: "The outrageous cost of EU civil servants' pensions is completely unaffordable. Governments across Europe are making tough spending choices and workers are facing unemployment and salary cuts".
Speaking to Portuguese Radio station TSF Radio Noticias, Open Europe's Pieter Cleppe argued that "If the European Parliament wants to raise voter turnout, it should try to reduce the impression that its main goal is to increase the powers of the EU and those of the European Parliament in particular." He encouraged the EU to "open up the single market in services, which constitute about 70% of the European economy".
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Trichet advocates end to "oligopoly" of Anglo-Saxon credit rating agencies
In an interview with French daily Libération, ECB President Jean-Claude Trichet called for an end to the "oligopoly" of only three credit rating agencies, saying that "they tend to amplify upward and downward swings in the financial markets. This runs counter to financial stability". Trichet also played down claims that Europe responded too late to the sovereign debt crisis, especially in the case of Greece, explaining that "if the real figures had been known, it is likely that things would have turned out differently".
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Industry highlights problems with draft EU payout rules on bank deposits
The Commission yesterday published proposals to harmonise rules on bank deposit guarantees, calling for savings of up to €100,000 to be guaranteed, and refunded within one week. The FT reports that the proposals were immediately criticised by the financial services industry, with the European Banking Federation welcoming the push for harmonisation, but saying that the seven-day pay-out deadline would be "quite problematic".
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In a letter to the Guardian, Jack Thurston, co-founder of farmsubsidy.org, argues that the public's right to know who receives money from the €55bn CAP "is at risk" from an ECJ verdict, which may affirm the EU Advocate General's opinion, upholding an objection by two German farmers, on the rights of farmers not to have their details published.
EU to allow member states to choose for themselves on GM crops
The Guardian reports that the Commission is to propose today that national governments be able to make up their own minds on whether to permit the cultivation of GM crops. EUobserver suggests that it is possibly the first ever example of Brussels returning back to member states a power it had earlier taken upon itself.
Le Figaro quotes French Agriculture Minister Bruno Le Maire saying, "Everything that goes in the direction of the renationalisation of agricultural issues goes in the wrong direction."
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Ed Balls: Tony Blair and "many in the Cabinet" wanted to join euro
Speaking on the BBC Today programme, Labour leadership candidate Ed Balls spoke about Labour's period in Government, saying: "There were times we had to make big decisions, and I'll give you one example - the issue of joining the single currency. Tony Blair wanted to join the single currency, so did many in the Cabinet. I personally thought that would have been a profound mistake for Britain, for our country - I made that argument very hard, as did Gordon Brown. I think we look back now, and say that we were right not to join the single currency".
EUobserver reports that the accession of the EU as a signatory to the European Convention on Human Rights (ECHR), required under the Lisbon Treaty, will make EU law subject to rulings by the European Court of Human Rights in Strasbourg - meaning the EU member States could be subject to penalties and forced to make changes to pieces of legislation found to violate human rights.
An editorial in Spanish paper El Economista argues that successive fiscal adjustment plans across Europe "have already reduced the EU's growth potential for the next ten years" and "could possibly destroy the economic and political integration of the last thirty years".
A Bloomberg survey of 43 financial experts has revealed their prediction that the single currency will continue to fall by a further 5 percent by the end of the year.
El Mundo reports that a majority of EU Agriculture Ministers yesterday voted in favour of dairy sector contract regulations which would improve the prices that the rancher receives. Hundreds of producers protested in the streets of Brussels against the proposal.
Commission President José Manuel Barroso congratulated the success of European teams in the World Cup saying: "The European teams were ambassadors of Europe's spirit, energy and openness."
UK
The Mail reports that Standard & Poor's has threatened to downgrade the UK's AAA credit rating if Chancellor George Osborne fails to reduce national debt. Although the government's "strong framework for fiscal consolidation" was praised, the agency warned that the bulk of the tough political decisions have yet to be made.
The FT's Westminster blog notes that Ed Davey, Lib Dem Business Minister, is pressing hard against the proposed EU Directive on pregnant workers, and it is partly due to his lobbying, according to an EU contact, that a vote on the Directive has been deferred to the autumn.
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.
