Thursday, November 18, 2010

Open Europe press summary: 18 November 2010


Irish Central Bank Governor expects "very substantial" EU loan;
Osborne: UK to help Ireland "because we are good neighbours" not out of fear for British banks
The Telegraph notes that figures from the Bank for International Settlements show that UK banks have a £140 billion exposure to Ireland. The FT quotes Chancellor George Osborne saying, "Our engagement in this is because we are good neighbours of Ireland, not because we have particular concerns about any particular UK bank."

IMF and EU officials are due to visit Dublin today for "technical talks" on the crisis. The BBC quotes Irish Central Bank Governor Patrick Honohan saying that he expects Ireland to accept a "very substantial loan" as part of an EU-backed bail-out. Mr Honohan told RTE radio he expected the loan to amount to "tens of billions" of euros. EU Economics Commissioner Olli Rehn has said Ireland is not strong enough to guarantee its struggling banking system. "The Irish banking sector has to be made viable and sustainable," he said. FT Deutschland quotes Finnish Finance Minister Jykri Katainen saying, "It is difficult to believe that Ireland doesn't need any help."

The Telegraph notes that European Commission officials have signalled that Ireland will have to raise its corporate tax in order to boost state revenue to close Ireland's widening budget deficit. "Of course, our corporate tax rate is safe," insisted Irish Finance Minister Brian Lenihan. Reuters quotes Austrian Finance Minister Josef Proell saying, "When the [aid] takes effect, then there also needs to be talks with the [Irish] government about this issue." Speaking on the BBC's Today Programme, French Economy Minister Christine Lagarde refused to comment on whether Ireland will be required to raise its corporate tax if it decides to tap the eurozone's €440 billion bailout fund. 

The FT notes that a defeat in next Thursday's by-election could see the Irish government's majority cut to two seats in parliament.

Meanwhile, the WSJ reports that the average yield paid by Portugal on its auction of €750 million in 12-month treasuries increased by nearly 50% compared to that paid at the previous auction two weeks ago.

Swedish Radio reports that yesterday Swedish Finance Minister Anders Borg presented a proposal which would see eurozone countries with higher debts paying more towards a permanent euro rescue mechanism.

Open Europe's Pieter Cleppe appeared on Belgian TV program Terzake arguing that "the ECB sets interest rates for the whole eurozone. At certain times these interest rates were too low for Germany, so certainly too low for Ireland and Spain, with huge real estate bubbles and a very unhealthy banking system as the result." He added, "Ireland has lost a lot of competitiveness because of its euro membership [...] It's not clear how it will escape the spiral".

Eurozone comment round-up;
Die Zeit: "The European Union would exist even without the euro"
A leader in Die Zeit argues that European Council President Herman Van Rompuy "is exaggerating" when he says that the end of the euro would mean the end of Europe: "The European idea is more than a mere nine year old currency union [...] The European Union would exist even without the euro". In the Spectator, Irwin Stelzer argues, "The euro is almost certainly dead. Brussels would be wise to accept that."

Handelsblatt complains that "again we are saving Europe's banks". Writing in the paper, Dirk Heiman argues that there is a "need for a European bank rescue package and a bank supervision system with teeth and claws." The Economist's Charlemagne notes, "There is a limit to the EU's ability to sugar the medicine. It is hard enough to convince European taxpayers to bail out other governments; explaining why they should save other countries' banks may prove even more unpopular."

In City AM, Allister Heath argues, "There are many lessons to be learnt from all of this. The EU's treaties are not worth the paper they are written on, especially the nonsense about fiscal sustainability; the euro is a giant with feet of clay; monetary union will either lead to fiscal centralisation and destroy democracy in small countries or break up completely."

On the BBC's Newsnight Programme, Labour MP Gisela Stuart said that the eurozone bailout fund established in May "did not address the underlying problem of this political construct [the single currency area], which is that it doesn't provide for economic competitiveness."

With regard to the possibility of an implosion of the eurozone because of increasing pressure from the markets, she argued: "Nobody dares to think about it, but what will cause political problems will not be political decisions, but I think it will be the markets. And remember: Keynes always said that 'markets can remain irrational for much longer than you can remain liquid'."  

On his BBC blog, Nick Robinson writes, "Could a British, Eurosceptic, Conservative prime minister have to pledge billions to save the euro from collapse? Will David Cameron agree to increased EU powers to avert a future crisis of the sort brewing around Ireland? The answer to both questions appears to be yes which may land the Tory part of this coalition in a very hot Irish stew."

On his blog, Conservative MP John Redwood argues, "The UK should make it clear that we are not part of any Euroland rescue or facility. We should say we do not think they can use EU disaster relief provisions to offer Ireland more cash. If Ireland does not wish to take any EU money, the UK should be Ireland's ally." The Mail argues, "This is one eurozone country we must help."

Commission and MEPs hope UK and the Netherlands will come under pressure to agree on EU budget in December
Trouw reports that the European Commission and MEPs are hoping that Dutch Prime Minister Mark Rutte and UK Prime Minister David Cameron will come under severe pressure in December to agree to their demands on the EU budget, but notes that Germany, Austria, Denmark and Finland are standing by the UK, along with the Netherlands and Sweden. Elsevier quotes Dutch Finance Minister Jan Kees de Jager claiming that German Finance Minister Wolfgang Schäuble has pledged support to the Netherlands on this issue.

Meanwhile, European Voice reports that Belgian Finance Minister Didier Reynders said yesterday that he would convene an emergency meeting of EU budget and finance ministers on 16 December in a last bid to reach an agreement on next year's EU budget before 1 January 2011. 

In the Times, Tim Montgomerie argues that William Hague's former supporters feel let down over Europe, noting that "Mr Hague has broken his promise to renegotiate Britain's relationship with the EU at the earliest opportunity."

In a Parliamentary Written Answer, the Home Office has revealed that 119 European Arrest Warrants were issued for the extradition of UK citizens from Britain in 2009 and that 43 have been issued in 2010 up to the end of March. The figures do not include EAWs issued for UK citizens in Scotland.

The Times reports that the Government is expected to introduce a carbon floor price designed to penalise investment in fossil fuel power stations and boost the attractiveness of low carbon energy.

The FT reports that the Foreign Office is to shed one in 10 of its staff, sell old embassy buildings and step up recruitment of cheaper "local hires" as it focuses resources on becoming a leaner trade-oriented department.

The US has no plans to bring out detailed rules on bankers' pay along the lines of the new EU directive that limits the use of upfront cash compensation, said the US Treasury official in charge of financial reform, the FT reports. 

In European Voice, Valentin Zahrnt looks at the European Commission's proposals for a reform of the EU's Common Agricultural Policy after 2013 - due to be published today. He argues: "'The eternal CAP: incoherence, inertia and waste' would have been an honest title for the communication to be published today by the European Commission on the Common Agricultural Policy post-2013."

FAZ reports that French President Nicolas Sarkozy wants to achieve "harmonisation" of taxes between France and Germany by spring 2011, but that no German politicians are interested in the idea.
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Euractiv reports that €200 billion will be needed to upgrade Europe's gas and electricity grids over the coming decade, half of which will have to come from government funding at a time of budgetary pressure.
Euractiv DPA

In the Guardian, columnist Simon Tisdall looks at next weekend's EU-US summit in Lisbon and argues that both parties must realise that "for all their myriad differences, [they] need each other more, not less."

In an interview with the Irish Times, Turkish EU Affairs Minister Egemen Bagis said that "Europe does need Turkey more than Turkey needs Europe." 

In an interview with Le Figaro, Hungarian Prime Minister Viktor Orban has insisted that "a real European strategy" is needed to address the Roma question in a more effective way. 

EUobserver reports that, in line with his government's position, German EU Energy Commissioner Günther Oettinger is counting on the European Parliament's support for an extension until 2018 of an EU deadline for closing subsidised coal mines.

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