Monday, November 15, 2010

Open Europe press summary: 15 November 2010


Open Europe will host an event tomorrow in London at 12.30 - 14.00, entitled "The Government's EU referendum lock: giving the key to Parliament and voters?" Speakers include: David Lidington MP (Minister of State for Europe), Kate Hoey MP (Labour MP for Vauxhall), David Rennie (The Economist), James Forsyth (The Spectator) and Mats Persson (Open Europe). Places are limited, if you wish to attend please contact Sarah Hodges on 0207 197 2333 or by email at  

Ireland may seek EU bailout for banks;
Portuguese Foreign Minister: the alternative is to leave the euro
Over the weekend the Irish government has denied speculation that it may seek a bailout from the EU as its borrowing costs continue to rise. However, the Irish Independent today reports that Ireland's Finance Minister Brian Lenihan may ask his counterparts in Brussels tomorrow if it would be possible for the banking sector alone, rather than the state as a whole, to access emergency funds. The paper quotes a "senior source" saying, "We have to find out - could you go to the fund and get money for the banking sector? The Irish State doesn't need the funds."

European officials reportedly want Ireland to draw on emergency loans of €60bn to €80bn to ease the pressure on the eurozone. But under the Irish government's alternative plan, emergency funds would only be funnelled into Irish banks, allowing the government to maintain control of the economy. The Irish Times quotes German Finance Ministry spokesman Martin Kreienbaum denying a Bloomberg report that Germany is putting pressure on Ireland to seek a bailout. The Sunday Times reported that France and Germany have said that Ireland would have to raise its 12.5% corporation tax rate in exchange for aid, according to sources close to 'preliminary' talks.

If Ireland were to seek a bailout, it is unclear which EU funds would be used and therefore whether the UK would be involved in any bailout. However, the Times quotes a UK Treasury official saying that Britain would, if needed, play its part. "This is not like Greece - they are close trading partners," the official said. Under this scenario, the €60bn European Stability Mechanism could be used, which is guaranteed by all member states via the EU budget, in addition to the €440bn loan package agreed between eurozone member states. Articles in the Mail and the Telegraph suggest that UK taxpayers could be asked to guarantee around £7bn of Irish debt.

Meanwhile, in an interview with Portuguese weekly Expresso on Saturday, Portuguese Foreign Minister Luís Amado said, "The country needs a big coalition which allows it to go through the present situation. I think the political parties understand that the alternative solution to the present situation would be leaving the eurozone in the end."

AFP reports that Greek Prime Minister George Papandreou has not ruled out the possibility of asking for an extension of the deadline to repay Greece's €110bn bailout. Eurostat last week confirmed that Greece's 2009 budget deficit reached 15.4% of GDP, significantly above its previous estimate of 13.6%.

100 MPs ready to push for a stronger EU Bill
The Sunday Telegraph reported that as many as 100 MPs could put pressure on UK PM David Cameron to ensure that the new EU Bill works as an effective tool to avoid future transfers of powers from the UK to Brussels.

Meanwhile, a separate article in the paper suggested that the EU's drive for stronger economic governance of the eurozone, including revisions to the Treaties to allow for countries to default, represents an opportunity for the UK Government to achieve meaningful EU reform. Open Europe's Director Mats Persson was quoted arguing: "In this fluid situation, Cameron should play politics. He should say to the French and Germans: we will give you what you want if you give us back some things. There are real opportunities for reform here. We don't think it's inevitable that powers will always go in one direction." Mats noted that such reforms could include taking back some control over EU financial supervision and regulation, repatriate regional spending to the UK or strengthening the role of national parliaments to give MPs more scope to shape EU law. Mats also warned that the Coalition has "decided not to talk about [the EU], and they find it difficult to recognise the opportunity they've got in front of them."

EU to spend £850 million for new office complex in Luxembourg
The Sunday Times reported that the EU will spend almost £850m to refurbish and replace its various headquarters in Luxembourg. Construction has already started on the European Parliament's Konrad Adenauer 2 building - whose final cost will be £498 million. The European Commission is also planning to replace the existing Jean Monnet complex, built in 1975 and currently serving as its headquarters in Luxembourg, with a completely new building, at an estimated cost of more than £340 million. According to the paper, the buildings will have their own fitness and recreation areas including spas for EU officials.    

Open Europe's Vincenzo Scarpetta was quoted saying, "It's not at all clear why the EU needs to knock down a seemingly perfectly adequate building for sparkling new offices. This is incredibly out of step with what is happening across the rest of Europe." Vincenzo is also quoted in the Mail.  

Meanwhile, German daily Bild features Open Europe's report on EU waste in an article entitled "How the EU squanders our money". The article notes that "these are only [...] examples, but they show some of the absurd EU grants that sometimes come to fruition." The report continues to receive coverage across Europe and is cited in the Mail, Slovenian daily Delo, Slovakian newspaper SME, twice in Austrian daily Kronen Zeitung, twice in Hungarian daily Nepszabadsag and in Polish daily Rzeczpospolita.

Open Europe's Stephen Booth was quoted in the News of the World criticising the European Commission's recent proposal for a 0.4% increase in EU officials' salaries arguing, "When the UK is suffering job losses and pay cuts across the board, a Commission U-turn to increase wages is wholly unjustified". Stephen is also quoted in today's Express.

Eurozone comment round-up
On his Telegraph blog, Peter Oborne argues, "For Greece and Ireland, there is an absurdly easy way back to economic growth: return to the drachma and the punt."

The Irish Independent argues, "Nobody can deny that a bailout may be necessary - in six months' time, or tomorrow afternoon." Business Editor of the Observer Andrew Clark noted that "the money would come with conditions: Europe would demand austerity. Civil servants have already suffered pay cuts of 5%-15% and ministers suggested last week that pensioners could feel the pinch too. Pride is at stake - no Irish voter wants bankers in Frankfurt, Paris or London dictating policy in Dublin." In the Mail on Sunday, Simon Watkins argued, "Frankly, it would be extraordinary if Germany and others did not insist that, as a price for getting its hands on European taxpayers' money, Ireland was forced to raise its corporate tax."

A leader in the Sunday Times argued, "Thankfully the debate over whether Britain should join the single currency has largely disappeared. Gordon Brown's greatest legacy was keeping Britain out. But the Liberal Democrats remain committed to the euro and while the party has accepted that it will not happen in this parliament, it will not abandon that commitment in the long term. Anyone tempted by the allure of the euro should remember the hardships of our long-suffering neighbour."

In the Telegraph, Ambrose Evans-Pritchard argues that "The ECB is the last line of defence. It can halt the immediate Irish crisis whenever it wishes by buying Irish bonds. Yet instead of pulling out all the stops to save monetary union, the bank is winding down its emergency operations and draining liquidity." In the FT, Wolfgang Munchau writes, "We knew 10 years ago that the eurozone's governance framework was insufficient. But what we thought would happen only in the long run has already occurred. I would expect the present set of inconsistencies to explode in a shorter time frame than the previous one - some time this decade."

MEPs' demand for EU tax may require British referendum
The European Parliament, Commission and member states' ministers are expected to reach a final agreement on the 2011 EU budget later today. The Telegraph reports that if the European Parliament's demands for an EU tax are met, a referendum may need to be called in the UK as the move would be "inconsistent with the Treaties", amounting to eight breaches of the Lisbon Treaty. Open Europe's Siân Herbert was quoted in Saturday's Mail saying "Virtually no one in the real world thinks this is a good idea. The Government needs to stick to its guns and make it completely clear to MEPs that a discussion about an EU tax is off the table".

Charles Crawford analyses the EU budget in a two part series on Conservative Home. He warns against the prospect of EU taxes noting: "it would represent a momentous step of principle towards some sort of new federalistic Europe. Any EU member state can look across the Atlantic and see for itself what has happened to the USA's national finances under federal profligacy. So enthusiasm in capitals for this so-called reform is at best limited. The British could be expected to veto it, and should do so".

In an interview with French daily La Tribune, President of the European Parliament Jerzy Buzek has said that MEPs still intend to block the 2011 EU budget unless member states commit to open a serious debate on the introduction of an EU tax. "We do really want to reach an agreement [...] but if the Council does not want a political discussion, I will have no other choice but to block [the budget]", he warned. "I hope that the handful of governments - starting from the UK - which refuse to talk with us are aware of the costs of disagreement in terms of growth and investments", he added.      

In a commentary in Handelsblatt, Jacques Delors, former President of the European Commission, supports the move saying, "The EU needs independent income to take care of the budget without detours on the national level".

The FT reports that according to the National Association of Pension Funds (NAPF), British occupational pension funds may have to close their schemes if newly-proposed European legislation is enforced. The new EU rules would force them to "set aside reserves as though they were insurance companies. NAPF chief Joanne Segers says such rules - which ignore British particularities - would be "the final nail in the coffin" for defined benefits schemes.

Writing in the FT, Timothy Hailes from the International Swaps and Derivatives Association questions the usefulness of EU plans to achieve greater standardisation of retail investment markets, given the variety of products involved and the complex nature of the sales process.

In a comment piece for Belgian financial weekly Trends, investor Geert Noels warns that "insurers are under pressure" because of the European Central Bank's low interest rate policies, "which threatens to undermine their revenue model".

Dutch Advisory Board on Administrative Burdens criticises European Commission approach to tackle red tape
Het Financieele Dagblad reports that ACTAL - the Dutch Advisory Board on Administrative Burdens - has criticised the fact that, in 75% of the considered cases, the extra administrative burden for Dutch businesses deriving from new EU regulations is not being clearly highlighted by the European Commission. Only in 6% of cases has the Commission considered alternatives which actually reduce red tape, ACTAL claims. ACTAL President Steven van Eijck is quoted saying that "about 50% of all administrative burden which Dutch companies face is coming from Brussels. Because of that it is in the interest that regulatory pressure derived from European regulation is being countered."

In Saturday's Mail, Deborah Davies noted that MEPs in the European Parliament still frequently sign in to receive subsistence allowances on Fridays only to leave work for the weekend.
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Saturday's Independent reported that the economic recovery of the eurozone slowed in the third quarter of the year, with German growth at 0.7%, well down on the 2.3% recorded during the second quarter of the year.

After a cabinet reshuffle, Laurent Wauquiez is the new French Europe Minister. Pierre Lellouche, who previously held the post, has been appointed as Trade Secretary.

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: or call us on 0207 197 2333.