Wednesday, September 08, 2010

Open Europe press summary: 8 September 2010


Professor Hankel confident of legal challenge against eurozone bailout at German Constitutional Court;
"Nobody can deny what has happened... therefore I think the limits for a political judgment are very narrow"
Open Europe yesterday hosted an evening seminar with Prof. Dr. Wilhelm Hankel - one of the five German Professors who have challenged the legality of the eurozone bailout of Greece at the German Federal Constitutional Court. Professor Hankel argued that the €1 trillion eurozone bailout package agreed jointly by the EU, the ECB and the International Monetary Fund are illegal on three grounds: it violates the "no bailout" clause in the EU Treaties, it violates the ECB's own rules (through the ECB's decision to buy government bonds) while the IMF also violates its own rules through its involvement.  

He also warned that the "ammunition" of the €1 trillion rescue package "may not be sufficient" to sustain the eurozone in the long-term. If also private depositors in the weaker eurozone economies begin to put their money elsewhere, "we're looking at a far greater amount", he said.

Professor Hankel said that the chances that the German Constitutional Court would rule the bailout illegal were good. He said that "contrary to the last complaint [made in against the euro in the 1990s], now the court has accepted the complaint from the first minute, it has not been rejected." He said that while the Constitutional Court has a political composition, it is still wary of its reputation, and will fear public opinion. He said that "Nobody can deny what has the case of the European treaties it's a clear cut break of articles and paragraphs, it was forbidden to bail out...and therefore I think the limits for a political judgment are very narrow, at least narrower than ten years ago."

Prof. Hankel concluded that his court case was ultimately about democracy, as the creation of the new EU rescue mechanism represented a clear move "from a federation of states to a federal state".

Osborne outvoted on EU budget increase for 2011;
Vows to defend the UK's rebate
The Times reports that George Osborne failed to block a proposed increase to the EU's budget for 2011 at yesterday's meeting of EU finance ministers. The UK has previously argued in favour of a freeze on the EU budget for next year, to reflect austerity measures at home, but Osborne saw himself heavily outvoted, according to the article. The Commission has proposed a six percent increase, although the exact rise is still to be decided.

Meanwhile, Osborne yesterday vowed to defend the UK's rebate from the EU budget, following comments from Budget Commissioner Janusz Lewandowski that the rebate is no longer "justified". Osborne said, "I have no doubt that there will be some others who will want to put [an end to the rebate] into the mix, but they'll be wasting their time because we are not going to give way on the abatement [rebate], and people had better know that at the beginning of the process, because they'll certainly discover it at the end."

FT Deutschland: The UK could seek further negotiations on "surprisingly powerful EU financial supervision"
There's further coverage of the agreement reached by EU finance ministers yesterday to establish three new pan-European financial supervisors and an EU systemic risk board. FT Deutschland reports that the finance ministers agreed to sign up to a proposal for "surprisingly powerful EU financial supervision". Austrian daily Der Standard also notes that "European financial supervision is more powerful than expected".  However, according to FT Deutschland, British diplomats have said that further negotiations could still be needed to determine crucial aspects of the proposal, including how much power the EU supervisors will have over national regulators.

The German media reported yesterday that "London is certain" that the compromise proposal will be amended prior to the final vote in the European Parliament. However, German Finance Minister Wolfgang Schauble is quoted saying that he's optimistic that the "principle" agreement will stand. Handelsblatt reported yesterday that Britain will seek to nominate a candidate for the position as head of the European Securities and Markets Authority to ensure the UK's influence over the new structure.

Daniel Hannan MEP throws weight behind campaign for referendum on EU membership
Daniel Hannan MEP has today written in support of the cross-party campaign for a referendum on whether Britain should stay in the EU. Hannan writes in the Telegraph that European integration should be "regarded as a proper subject for a popular ballot. It is an issue that divides all the main parties; an issue that cannot easily be settled at general elections; an issue of major constitutional significance; and an issue that sets Parliament against people. Opinion polls consistently show that between 40 and 55 per cent of voters want to withdraw from the EU, yet this position is shared by just one per cent of MPs".

He adds that "as well as being undemocratic in itself, the EU can require its member states to sacrifice a measure of their internal democracy. Seven governments had promised referendums on the European Constitution in 2005; six of them, fearing the result, went back on their words. Britain was one of those six".

Barroso calls for common bonds to finance EU spending;
FT Deutschland: "His Commission can't avoid looking as if Europe wants more power and money"
At his first 'state of the union' address yesterday, Commission President José Manuel Barroso announced his support for a common EU bond to finance large, cross-border infrastructure projects. Barroso also claimed that "a euro spent at European level gets you more than a euro spent at national level" and therefore "pooling money at the European level allows member states to cut their costs, avoid overlaps and get a better return on their investment".

The Telegraph quotes Conservative MEP Syed Kamall saying, "If Barroso gets his way the EU will have the power to raise its own taxes and sell debt. It is hard to say how this is anything but a big step towards a federal Europe. Governments should have the power to raise taxes and sell debt, not the EU." FT Deutschland comments that, "Barroso does not yet have a strategy for how he wants to sell an EU tax to the people" and that, "His Commission can't avoid looking as if Europe wants more power and money."

EU finance ministers agree to closer budget supervision but reach stalemate on bank and transaction taxes
The WSJ notes that finance ministers remained divided on proposals for bank and transaction taxes, delaying any agreement until the coming months. "We're very clear that it is up to national governments and parliaments to decide what should happen to the revenues [from a bank tax]," Chancellor George Osborne said after the meeting. France has backed the UK's position but Germany has pledged the revenues to a specific national bank resolution fund.

There was even less agreement on a tax on financial transactions, with ministers unable to agree how it would be assessed, how revenues would be spent and whether a tax without similar measures at the global level would be feasible. Swedish Finance Minister Anders Borg said his country was opposed. "The banking levy is more suitable as it will give us revenues to deal with a future crisis," Mr. Borg said. Mr. Osborne also opposed the measure. "It is very difficult to see in practice how you could make a transaction tax operate," he said. However, French Finance Minister Christine Lagarde backed the proposal. According to Le Figaro she said, "It is politically feasible, practically difficult, politically desireable," despite being "financially unpredictable."

Internal Market Commissioner Michel Barnier is quoted by AFP saying, "My personal opinion is that a levy on financial transaction can help make the world fairer". Les Echos quotes ECB President Jean-Claude Trichet warning: "We advise you against embarking into this adventure, even if such a levy were to be introduced at the global level. It represents an enormous danger for Europe."

On the supervision of national budgets, Mr. Osborne said Britain's timetable had been recognised and that submissions to Brussels for 'peer review' would follow the UK's spring Budget, EUobserver reports. EU member states will submit by April broad budgetary outlines for the Commission to assess. Following this, based on the Commission's opinion, the Council may then choose to issue country-specific 'guidance' by June and July.

The most contentious issues of whether and what sanctions will be imposed on countries breaking budget rules have been delayed. AFP quotes German Chancellor Angela Merkel on her trip to Latvia restating her calls for treaty change to strengthen the rules. "Latvia and Germany are in favour of strict rules [on deficit]," she said. "This means that the Treaty has to be modified, especially with regard to the rules establishing an orderly default procedure for a country which does not comply with the Maastricht criteria for a long time".

UK to seek opt-out for junior doctors from Working Time Directive
UK Health Secretary Andrew Lansley announced yesterday that junior doctors should not be constrained by the rules imposed by the EU Working Time Directive (WTD) and confirmed that he and UK Business Secretary Vince Cable will seek to negotiate an opt-out with the EU for British junior doctors. Meanwhile, the Times reports that research released today by the British Medical Association (BMA) shows that junior doctors spend more time on administrative paperwork than they do on formal medical training - a trend many blame on the WTD.

The WSJ notes that renewed anxiety over the rigour of the EU's recently completed stress tests has sent the euro tumbling and raised the borrowing costs of eurozone governments.

Home Secretary Theresa May has announced a review into the UK's various extradition treaties, which will include the European Arrest Warrant.

Writing in the FT, Martin Wolf argues, "Germany has an enormous political and economic interest in making the eurozone work, however unpopular that view may be...But Germany has no sane alternative."

EUobserver reports that Justice Commissioner Reading has threatened to take legal action against the French government over the deportation of around 900 Roma last month.

Conservative MEP Emma McClarkin has accused fellow MEPs of hijacking a report on new media to call for more money for EU propaganda. She said, "This report was a wish list for MEPs wanting more column inches and to manipulate how EU matters are reported".

In a letter seen by Euractiv, four EU Commissioners have called on President José Manuel Barroso to bring the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Fisheries Fund under one umbrella.

Italy is prepared to block a free trade agreement between the EU and South Korea unless it gives European carmakers a year to prepare for the lowering of trade barriers.

In the WSJ, international energy consultant Alexandros Petersen argues that recent German energy agreements with Russia amount to a Russo-German energy pincer of Poland.

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