Axel Weber: If the €750bn rescue fund is not enough "we could increase it";
Ireland unveils new austerity plan with an extra 20% public spending cuts
The eurozone crisis heightened yesterday as investors sold off Spanish, Portuguese and Belgian government bonds in record numbers over fears of contagion and worries that eurozone countries would be unable to push through austerity measures. EUobserver quotes Slovakian Finance Minister Ivan Miklos saying "the risk of the eurozone break-up - or at least of its very problematic functioning - is very real."
Die Welt quotes former Portuguese Finance Minister Bagao Felix saying, "With the EU help for Ireland the markets will calm down for a while, but then they will focus on us." The WSJ notes that, according to data from the Bank of International Settlements, Spanish banks have total of US$108 billion in exposure to Portugal. Any bailout of Spain, with an economy twice the size of the other three PIGS combined, would severely stress the European bailout mechanism, according to the article.
A separate article in the WSJ reports that Axel Weber, Head of the German Bundesbank, yesterday said he believed that, if necessary, countries would be willing to contribute more towards the €750bn rescue program. "If that amount is not enough, we could increase it," he said, adding that "an attack on the euro has no chance of succeeding."
Meanwhile, the Irish government released a new budget yesterday which sets out plans to cut public spending by 20%. The plan aims to reduce public spending by €10bn and to raise an extra €5bn in taxes by 2014, reports the Irish Times. Welfare spending will be hardest hit, pensions will lose tax exemption, university fees will rise and taxation will increase, leading to up to 25,000 public sector job cuts. The Irish Department of Finance confirmed that the IMF and the European Commission will have the authority to recommend changes or alterations to the four-year plan during negotiations. MEPs yesterday tabled a motion demanding Ireland's low corporate tax level of 12.5% be doubled to 25%, as part of a common rate across Europe.
The FT notes that Ireland's banks could receive €12bn immediately, under the EU-IMF bailout. The move would see Ireland's two biggest banks effectively nationalised, as plans suggest full public ownership of Allied Irish Banks and the purchase of 85% of Bank of Ireland's shares. EU Economic and Monetary Affairs Commissioner Olli Rehn yesterday announced that bailout talks will likely be concluded by the start of next month.
Guardian WSJ 4 WSJ 6 FT FT 2 Reuters Deutsche Welle Times Daily Mail Times FT Times Spiegel BBC EUobserver BBC 2 EUobserver European Voice Irish Times EUobserver Irish Times 2 Irish Times 3 Irish Independent IHT BBC: Today Irish Independent 2 Sun Mirror Express Businessweek Reuters AFP WSJ 10 WSJ 9 Die Welt Independent Telegraph 2 Independent 2 Guardian 2 WSJ 5 WSJ 8 Independent 4 Telegraph El Pais WSJ WSJ 2 Independent 5 Handelsblatt Handelsblatt 2 Trends Le Figaro
Sweden puts forward proposals for a permanent state insolvency mechanism
A letter from Swedish Finance Minister Anders Borg to his European counterparts, seen by Handelsblatt, proposes a permanent crisis mechanism for the eurozone which would see countries with a public debt higher than 30% of GDP paying into an "ex-ante fund". The fund would then be used "as a first line of defense" in case of a sovereign debt crisis, but with the bulk of the fund, which could be in the region of €500bn according to Borg, would still financed by loans guaranteed by all member states.
The newspaper notes that discussions are ongoing as to the role of private investors in case of a state insolvency, with Germany still pushing for investors being forced to take a substantial haircut. The Netherlands, Austria, Finland and Sweden are reportedly supporting Germany. The article also notes that "although Sweden hasn't introduced the euro yet, it's remarkable how active the country is in the debate about reforming the monetary union."
Meanwhile, the WSJ notes that Bundesbank Chief Axel Weber is now backing Merkel's calls for a crisis resolution mechanism for the eurozone involving creditors taking potential losses - a position not shared by ECB President Jean-Claude Trichet and other ECB board members. An article in Handelsblatt notes that Merkel is now considering that "there would be other possibilities" to let private investors take outright losses, for example by prolonging the duration of bonds or a reduction in interest, which would damage investors less.
Eurozone comment round-up
In the Irish Independent, Emmet Oliver argues that "with the exception of the Irish Government, no other body has done more to heap mountains of bank debt onto Irish taxpayers and businesses than the EU Commission", by allowing the Irish government to bailout Irish banks without proper restructuring of the banking system.
On his WSJ Real Time Brussels blog, Charles Forelle compares the EU finance ministers' statement on the Irish bailout to "reading a real-estate ad for a lavish villa that has no price tag." In a separate WSJ article, Iain Martin argues that economic success requires "much closer integration of the eurozone countries that goes beyond what is currently on the table. Full-scale political integration is what is being contemplated but it is unclear whether, if Germany formally demands it, it will be viable or capable of gathering support in individual countries with their fractious and soon-to-be-frightened electorates."
Speaking on the BBC's Today programme, Co-Head of equities at MF Global Simon Morgan said: "I think there is a hardcore element in the middle of the EU that actually welcomes this type of crisis because it gives them precisely the opportunity to take over some of the sovereignty of the peripheral nations."
For Daniel Hannan MEP, writing in this week's Spectator, "Ireland is in this mess because of the single currency: the euro forced it to follow a pro-cyclical monetary policy during the credit boom [...] The bailout might allow the republic to limp along until the next crisis; but, until it leaves the euro and starts exporting its way back to growth, Ireland will be trapped in a cycle of rising debt and unemployment, falling prices and incomes."
In a comment piece in FT Deutschland, Peter Ehrlich argues that the problem with the euro in Germany is not a material but a psychological one. "The majority of Germans did not want the euro and is therefore ready to express its doubts in every crisis," he argues.
David Blanchflower in the New Statesman is looking past Ireland to Portugal and Spain, warning, "the big fear for the EU is contagion of the crisis to other countries, hence the pressure to accept a deal and to go away quietly and suffer alone."
BBC Today WSJ: Forelle New Statesman: Blanchflower Taxpayers Alliance petition Telegraph: Hannan Coulisses de Bruxelles
The Express launches campaign calling for Britain to leave the EU
The Express has today launched "Get us out of Europe" - a new campaign calling for the UK to exit the EU. "After far too many years as the victims of Brussels larceny, bullying, over-regulation and all-round interference, the time has come for the British people to win back their country and restore legitimacy and accountability to their political process," reads the article introducing the campaign and the annexed petition. The campaign is supported, among others, by Conservative MPs Philip Davies and Douglas Carswell.
A separate article in the paper cites Open Europe's research showing that EU legislation has cost the British economy approximately £124bn since 1998. Open Europe's Director Mats Persson is quoted saying: "Europe is an absolutely explosive issue in this country. Half of the population already want to leave the EU altogether according to some polls. The Coalition must embrace a radical agenda that involves less EU waste, more democracy and bringing powers back from Brussels. Without such a commitment, the number of people wanting to leave is going to increase."
EU officials likely to get interests on unpaid salaries after ECJ ruling
New details have emerged on yesterday's ruling from the European Court of Justice establishing that 46,000 EU officials are entitled to get the full 3.7% pay increase proposed by the European Commission last year. The Mail notes that, as a result of the ruling, ECJ judges themselves will benefit from a pay increase of almost £8,000, taking their annual salary to almost £220,000. EUobserver reports that the ECJ ruling has retroactive effects, meaning that member states may now be forced to adopt a new regulation to top up EU officials' salaries over the disputed period (July 2009 - June 2010). Commission spokesman Michael Mann is quoted saying that the Commission is "satisfied" with the ruling and specifying that "there is also a legal requirement [for member states] to pay interests on the salaries we didn't receive."
Open Europe's Stephen Booth is quoted by the Mail, arguing: "This only goes to show how out of touch Brussels is from reality. When pay cuts and job losses are the norm across national public sectors - and with Ireland and others on the verge of bankruptcy - EU officials seem to think it is a good time to sue national governments for even more money." Stephen is also quoted by the Express. BBC European Voice Le Figaro Express Euractiv EUbusiness Mail BBC Business Week FAZ
Open Europe's Stephen Booth is quoted in the Telegraph responding to the European Commission's decision to launch a dedicated website to dispel "urban myths" on the EU in the UK. "The EU's public relations efforts tend to verge on propaganda rather than genuine information but citizens aren't fooled that easily. Instead of spending huge sums on 'communication', the EU should reform its wasteful budget, stop over-interfering and start listening to the genuine concerns of citizens," Stephen argued.
Open Europe's list of top 50 examples of EU wasteful spending is cited by the WSJ.
UKIP MEP asked to leave the chamber over Nazi jibe
EUobserver reports that yesterday UKIP MEP Godfrey Bloom was asked by a majority of his colleagues to leave the European Parliament's plenary chamber after shouting the Nazi slogan "Ein Volk, Ein Reich, Ein Führer" and calling the leader of Socialist MEPs Martin Schulz "an undemocratic fascist". A Dutch MEP insisted that Bloom's expulsion was unfair because Schulz had not been sanctioned when he called another Dutch MEP from the far-right Freedom Party "a fascist".
European Voice reports that the European Parliament's Constitutional Affairs Committee is expected to back a set of new user-friendly rules next week in a bid to make the European Citizens' Initiative more accessible.
European Voice reports that EU transport ministers are set to agree on the disputed cross-border traffic enforcement directive. Under the new rules outlined in the directive, drivers could be tracked down by any police force within the EU for some of the most common road traffic offences.
AFP reports that Hungary - which will hold the rotating EU presidency during the first half of 2011 - has signed up to the Franco-German common position on the EU's Common Agricultural Policy post-2013.
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.