Thursday, December 23, 2010

Open Europe press summary: 23 December 2010

German Finance Ministry outlines new eurozone bailout institution;
Euro must be based on “German stability interests” as concession for support
Sueddeutsche reports that a leaked position paper has revealed that the German Finance Ministry has drawn up proposals for a new body, named the “European Stability and Growth Investment Fund”, to manage the permanent eurozone bailout fund planned for 2013, the European Stability Mechanism. If granted loans from the fund, countries would be required to provide 120% in collateral in the form of gold reserves, stakes in companies, or revenue rights, the newspaper said. The fund would also be able to buy existing European government bonds, freeing the ECB from this task.
Reuters quotes the Ministry’s paper saying that Germany will affirm its “national interest” rests in maintaining the single currency. The euro, however, must “orientate itself on German stability interests” as a “concession to Germany, as the largest economy in the euro zone, serving as an anchor of stability.” According to Sueddeutsche, the new fund would in principle have access to “unlimited refinancing” in order to secure the health of the single currency. The Ministry confirmed the existence of the paper but said it had not approved the proposal, nor had the German government.
Meanwhile, Bloomberg has filed a lawsuit against the ECB, seeking the disclosure of documents showing how Greece used derivatives to hide its fiscal deficit and helped trigger the region’s sovereign debt crisis. The lawsuit asks the EU’s General Court to overturn a decision by the ECB not to disclose two internal documents drafted for the executive board this year. The notes show how Greece used swaps to hide its borrowings.
In an interview with Sueddeutsche, French Finance Minister Christine Lagarde has said she wants “a strong EU economic government” adding that the UK's refusal to take part “shouldn't hold all the others back”. She said that the economic government shouldn’t be limited to the 16 eurozone countries, but that other countries are welcome to join. She named it “the formula 16 plus”. A leader in the paper argues, “Nobody will admit it, but a new institution will be the core of a common European economic and financial policy, introduced through the backdoor”.
New Open Europe briefing: What to expect from the EU in 2011
Open Europe has today published a briefing outlining what to expect from the EU in 2011. It will be an absolutely crucial year for the euro, with eurozone governments facing record levels of refinancing and potentially more bail-outs. The EU will also begin negotiations on the future of the long-term budget, with the UK holding a pivotal role in the talks.
The EU is at a cross-roads and it will have to choose: take a radical step towards an economic and political union in the hope of saving the Single Currency – or go the other way. But any further step towards an economic union, with more bail-outs and supranational budget rules, would radically widen the EU’s democratic deficit.
Open Europe’s Pieter Cleppe was interviewed by Czech TV commenting on the first year with the Lisbon Treaty. He said: “it clearly hasn’t done much to reform the EU for the better. On the contrary, it created more turf wars, less transparent with less democratic accountability. In its first year of existence, the EU Foreign Service has already broken its promise of budget neutrality.”
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Member states warn against Romania and Bulgaria joining Schengen
Interior ministers from Germany and France have warned against Romania and Bulgaria joining the Schengen area in March, as initially planned, due to concerns over corruption, crime and insufficient judicial reforms. Romania’s president, Traian Băsescu, hit back calling it “an act of discrimination” and warned it would create an “unacceptable precedent”, reports the FT. In an interview with Le Figaro, French Europe Minister Laurent Wauquiez urges the EU to “stop letting new countries access the EU at full speed”.
President of European Parliament Industry Committee calls for “immediate end” to EU’s ban on light bulbs
Die Presse reports that prominent MEPs are calling for an end to the EU's ban on traditional light bulbs. CDU MEP Herbert Reul, who heads the European Parliament's Committee on Industry, Research and Energy argues in favour of "lifting the ban immediately and without delay”, adding that "the Commission should look if energy saving light bulbs, which are being proposed as an alternative, should be allowed for sale at all, considering the indicated dangers to health.” The Mail reports on research indicating that energy saving light bulbs can release potentially harmful amounts of mercury if broken.
The Commission has denied having a "credibility problem" on human trafficking after a Council of Europe report accused EU institutions of silently tolerating Kosovo abuses, Home Affairs Commissioner Cecilia Malmstrom said during the launch of an anti-trafficking platform, reports EUobserver.
The Telegraph reports that Hungary is due to reintroduce state censorship for all media on 1 January, the same day it takes up the EU’s rotating Presidency. A leader in Die Welt argues, “Fascist tendencies in Hungary are obvious. Should the country be able to take up the EU Presidency in January?”
A former UK Independence party MEP has won her claim that the party discriminated against her because she was a lesbian. Nikki Sinclaire MEP had the whip removed by Ukip leader Nigel Farage in January after she refused to sit with members of the far-right Italian party Lega Nord, claiming that some of its members were homophobic.
The Express reports that next year EU officials will get a 1.92% pay rise; increasing the salaries of Council President Herman Van Rompuy and Commission president Jose Manuel Barroso to £259,000 per year.
Catherine Ashton, head of the EU’s new foreign service the EEAS, has published an organisational chart. She has now almost finished the recruitment phase.
A leader in Basler Zeitung argues that if Switzerland wants to keep a bilateral framework of relations with the EU, which is currently under review, it will have to give up some privileges, for example with regards to its tax status.
Basler Zeitung

Wednesday, December 22, 2010

Open Europe press summary: 22 December 2010

New Barclays chief suggests “one or two” countries could leave eurozone;
EU and eurozone bailout funds to issue bonds in January
The Times reports that incoming Chief Executive of Barclays Bob Diamond has suggested that the eurozone will “hold together” but that “one or two” countries could leave. “I think it is possible that the number of countries are smaller inside it,” he said. The paper also notes that Citi Bank strategists have said there is increasingly intense discussion in the markets of a potential Latin American-style “restructuring” of some eurozone peripheral debt that would involve swapping maturing bonds for new issuances with a long duration, perhaps 20 years, and an interest rate of 2%.
The Guardian reports that Portugal faces a debt downgrade, with Moody’s announcing this morning that it would review the country’s rating over fears that its borrowing costs continue to increase and austerity cutbacks will hurt economic growth next year. Spain's central government budget deficit shrank by nearly half in the first eleven months of the year, the WSJ reports. “We will meet our deficit targets for 2010,” Carlos Ocaña, Deputy Finance Minister for the Budget, said. However, City AM notes that Spain’s borrowing costs soared again yesterday.
Dow Jones reports that Luxembourg's Prime Minister and chair of the Eurogroup Jean-Claude Juncker yesterday said the euro is not in crisis and “isn’t endangered either”.
Meanwhile, the WSJ reports that the EU yesterday finalised funding plans for Ireland's bailout. The EU will issue a bond at the beginning of January through its emergency lending fund, the European Financial Stability Mechanism, which has a lending capacity of €60 billion and includes the UK. The eurozone's bailout fund, the European Financial Stability Facility, will follow in late January. The article notes that the EFSM aims to raise up to €17.6 billion in 2011 and up to €4.9 billion in 2012, while the EFSF aims to raise up to €16.5 billion in 2011 and up to €10 billion in 2012.
Writing in the Irish Times, former Taoiseach John Bruton argues that, “In all the fuss about whether creating a permanent EU bailout fund required a treaty amendment, little note has been taken of the fact that the German courts’ objection to giving the EU more powers was not one of principle, but was based on a concern that the EU as it stands is not democratic enough.” In the FT, Martin Wolf argues that “the failings of the eurozone have not been fiscal irresponsibility, but macroeconomic divergence, financial irresponsibility, asset price bubbles, and huge shifts in competitiveness. If the eurozone is to work better, it must manage these disorders.”
The Guardian notes that that higher spending on defence, the NHS and contributions to the EU left Britain with a higher than expected November budget deficit of £23.3bn.
Labour MP Gisela Stuart and Conservative MP Bernard Jenkin criticised the Government this week for failing to hold a House of Commons debate before last week’s crucial EU summit.
European Commission launches review of EU working time rules
The Times reports that the European Commission launched a consultation document yesterday on reviewing the EU’s Working Time Directive. The review will look at changing the way on-call time is counted and how rest periods are enforced, amid continuing problems the Directive causes health services across Europe. The Commission has not included the opt-out from the EU’s 48 hour week within the review, which came under threat the last time the Directive came up for renegotiation.
FTD: Germany is planning new Europe of fiscal and social policy
FT Deutschland looks at German Chancellor Angela Merkel and French President Nicolas Sarkozy’s joint declaration last week announcing that they intend to cooperate more closely in economic and fiscal policy, noting that “Berlin is working on a new Europe”. The article notes that German experts see the possibility of France and Germany leading a new push for social and economic integration using the EU’s so-called “enhanced cooperation”, which allows a group of member states to move further than other EU states.
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An agreement made yesterday by EU ambassadors (representatives of Coreper) has pushed forward proposals for a cross-border EU Health Directive, which could lead to its adoption as early as 2013. The European Parliament will vote on the proposal in January.
Germany and France yesterday blocked the extension of the EU’s Schengen border-free area to include Romania and Bulgaria.
EU Transport Commissioner Siim Kallas has criticised airport operators in Europe for being ill-prepared to cope with bad weather such as snow, warning that if necessary the Commission would bring in regulations on "minimum service requirements" – including the provision of proper facilities and equipment to tackle severe winter conditions, PA reports.
The Commission has approved Irish government plans to pump another €17.5bn into Anglo Irish Bank, AIB and Irish Nationwide but demanded that investors also make a "significant contribution" to the banks recovery.
The Telegraph reports the Foreign Office has confirmed that it and other EU member states are studying a proposal that would see Palestinian “general delegations” upgraded to “diplomatic missions” in a number of European capitals.

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.

Tuesday, December 21, 2010

Open Europe press summary: 21 December 2010

Moody’s warns France it could lose AAA rating
Ratings agency Moody’s yesterday downgraded ratings for two Spanish regions, five Irish banks and announced it is considering downgrading 30 Spanish banks and Portugal’s long-term debt rating. Bloomberg reports that France is also at risk of losing its AAA rating. Costs to insure French government debt trebled this year, rising to an all-time high yesterday, according to data provider CMA.
Pimco, the world's largest bond fund, has called on Greece, Ireland and Portugal to step outside the eurozone temporarily and restructure their debts unless the currency bloc agrees to a radical change of course, reports the Telegraph. Handelsblatt reports that despite the bailout, Ireland’s problems are deepening, noting that 10% of real estate loans are considered critical.
FTD looks at China’s increased involvement in the eurozone, after it announced a "strategic partnership" with Greece. Reuters quotes Chinese vice-PM Wang Qishan at a meeting with EU Commissioners in Bejing saying, "China has taken concrete actions to help some European countries deal with their sovereign debt crisis".
Cameron: UK liable for eurozone bailouts until 2013
Speaking to MPs in Parliament yesterday, David Cameron confirmed that the UK would be liable for further eurozone bailouts until a permanent bailout fund comes into force in 2013. He said, “We should not have any liability for bailing out the eurozone when the new permanent arrangements come into effect in 2013. With the current emergency arrangements, established under Article 122, we do.” Mr Cameron added that Britain “stands ready to do whatever is required to return the eurozone to stability” and that it “was profoundly not in Britain's interests to see the break-up of the eurozone”.
Cameron also outlined his proposal for a cap on the EU budget up to 2020. The Guardian argues, “Mr Cameron would be uncharacteristically naive if he thought his budgetary real-terms freeze campaign is either in the bag or that it may not bite back at him in the future…there are no signatures on the deal yet, just promises.”
In a recorded conversation with Telegraph journalists, Liberal Democrat Business Secretary Vince Cable said of the Coalition Government, “There are some arguments we’ve won, big arguments, on civil liberties issues and questions over Europe”.
Germany opposes tougher eurozone bank stress tests
Reuters reports that the ECB is backing the Commission to include a liquidity criterion in the new round of eurozone bank stress tests due next year, but according to EU sources, they face opposition from Germany.
The Guardian reports that the European Commission has overturned a UK Revenue and Customs verdict on artworks by Dan Flavin, meaning they will liable to full VAT, which rises to 20% on 1 January. As sculpture the pieces would be subject to only 5% VAT.
EP President blames national leaders for declining support for EU
FTD reports that European Parliament President Jerzy Buzek has blamed European governments for increasing euroscepticism, saying, “People look in the first place to their national leaders. The support for European integration isn't as strong as 20 years ago.” He also slammed the proposal by five EU countries to freeze the multi-annual EU budget, saying this could lead to a “political crisis”.
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UK targets role at head of EU markets supervisor
Handelsblatt reports that EU diplomats have said that the UK wants the chairmanship the European Securities and Markets Authority, in order to prevent the French government from exerting political influence on the body. The London-based European Banking Authority is expected to be chaired by a Frenchman. The Commission has confirmed that the positions of chairman of the three new EU financial supervisors will be probably be announced in April 2011, not January as p-planned.
EU Justice Commissioner, Viviane Reding, has confronted the US over data protection rights in the fight against terror, accusing the US of being interested only in accessing European citizens' bank records and flight schedules but not in protecting their rights while doing so, reports the Guardian.
Handelsblatt looks ahead at the upcoming Hungarian Presidency, noting that priorities are the economic consolidation of Europe and energy policy. Also the enlargement of the Schengen zone to Romania and Bulgaria is a priority.
EUobserver reports that talks to link greenhouse gas emissions trading systems (ETS) in the EU and Switzerland are set to start early next year. Meanwhile, a leader in FAZ argues, “In a world in which many states are not prepared for comparable climate goals, the EU can’t run ahead with harder obligations on itself.”

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.

Monday, December 20, 2010

Open Europe press summary: 20 December 2010

French Finance Minister: “We violated all the rules” to rescue the euro;
New poll: One in three investors expect a eurozone default
In an interview with the WSJ, French Economy Minister Christine Lagarde has said, “We violated all the rules because we wanted to close ranks and really rescue the euro zone.” She said, “The Treaty of Lisbon was very straightforward. No bailing out,” adding that the Greek and Irish rescues, as well as the creation of the bailout fund, were “major transgressions” of the Treaty.
Speaking at a press conference after last week’s EU summit, French President Nicolas Sarkozy and German Chancellor Angela Merkel announced they would propose plans early next year for greater harmonisation of tax and labour policies within the eurozone. It is “important that we have a common economic policy,” Merkel said. Open Europe’s Director Mats Persson was quoted by Euractiv saying, “The [permanent bailout] package agreed by EU leaders provides no fundamental solution to the eurozone’s structural weaknesses. Given Europe’s interconnected trading books, the eurozone’s problems will therefore remain Britain’s problems. What we need is a complete restructuring of the single currency, including changes to its membership.”
In an interview on BBC World Service, Open Europe’s Pieter Cleppe criticised Sarkozy’s comments that "the disintegration of the euro would mean the disintegration of Europe”, arguing that “this is incorrect. Many EU member states are not a member of the Eurozone and still they trade with each other through the internal market, which is a great achievement and should be kept.” Pieter was also quoted on Belgian news site
The FT notes that the EU will announce plans to issue up to €13bn in bonds in the coming days, through the Commission and the European Financial Stability Facility.
Meanwhile, the Irish Times reports that, in a position paper published on Friday, the ECB expressed “serious concerns” about the Irish government’s plans to aid its banking sector. Saturday’s Guardian reported that Lloyds Banking Group admitted on Friday it is to incur £4.3bn of losses on Irish loans. Saturday’s Telegraph reported that the ECB on Friday said it has arranged to borrow up to £10bn from the Bank of England in a temporary swap to ease liquidity at Irish banks. FAZ notes that German banks have the highest exposure to Ireland, amounting to €113bn.  
The FT notes that doubts remain over the stability of Spain’s savings banks – the cajas – that account for approximately half of the country’s banking assets. Meanwhile, Euractiv España reports that the debt of Spain’s local administrations – the Comunidades Autónomas – increased by almost 30% during the third quarter of 2010, compared with the same period in 2009.

FTfm reports that one in three institutional investors is expecting at least one eurozone country to default on or restructure its debt in 2011, according to a survey of more than 2,000 hedge funds, money managers, proprietary traders and corporate trading desks, conducted by Barclays Capital.
Merkel ally says he could “imagine” common eurozone bonds
Reuters Deutschland reports that, despite strong opposition from Chancellor Angela Merkel, there are supporters in her party, the CDU, for common eurozone bonds. CDU Minister for Saarland Peter Mueller is quoted saying that he could “imagine such bonds”, and that “it depends on how they would be designed.” Le Figaro reports that Greek Prime Minister George Papandreou has proposed launching an EU-wide campaign to collect one million signatures and present a petition in favour of the introduction of common eurozone bonds under the new European Citizens’ Initiative scheme.
Eurozone comment round-up;
Sir Martin Jacomb: “It is time to put aside slogans and take into account how ordinary people behave”
In the Telegraph, Ambrose Evans-Pritchard argues that “If Germany and its hard-money allies genuinely wish to save the euro – which is open to doubt – they should stop posturing, face up to the grim imperative of a Transferunion, and desist immediately from imposing their ruinous and reactionary policies of debt deflation on southern Europe and Ireland.”
An editorial in the WSJ argues, “Thursday's decision moves the euro zone closer to a fiscal union, which is a far more politically complicated beast. The existence of a bailout fund creates moral hazard that makes future bailouts more likely, so the EU will inevitably become more involved in coordinating and even dictating fiscal policies in European countries. French Finance Minister Christine Lagarde acknowledges the new reality”.
In an opinion piece in the FT, Sir Martin Jacomb, former Chairman of Prudential Plc and Open Europe board member, argues that “Europhiles risk ignoring the jobless tide” noting that “the obligation to service and pay off very large sovereign indebtedness will continue to punish the countries concerned, and the result will be depressed economic conditions and rising unemployment”. He concludes, “The clear message from Messrs Jean-Claude Juncker and Giulio Tremonti and many others, is one of political commitment to economic and monetary union and the irreversibility of the euro. This is a fine message no doubt, but their solution involves the taxpayers of the rich eurozone countries subsidising the poorer, and so far there is no sign of willingness to do this. It is time to put aside slogans and take into account how ordinary people behave”.
Swedish PM: Cameron’s EU budget letter too “ambiguous” and doesn’t focus on how money is spent
David Cameron faced a backlash from some EU leaders following his calls to freeze the EU budget between 2014 and 2020 in a letter circulated at last week’s EU summit. Swedish PM Fredrik Reinfeldt criticised the letter, which won the backing of France, Germany, the Netherlands and Finland, arguing that it could, in fact, open up the possibility of a budget increase. “We see it as a bit ambiguous and from a Swedish point of view, not restrictive enough when it comes to the budget...our position is that even the possibility of increasing the budget that the signatory countries are open to is too far-reaching,” he said according to Swedish Radio. “First we want to discuss the content in the budget, what we should spend the money on. When that is done, we can see what it costs,” he added.
Saturday’s Telegraph reported that Cameron had reached a deal with French President Nicolas Sarkozy on the content of the budget, quoting a diplomat saying, “Sarkozy said that if Cameron leaves farm subsidies alone, then he, in turn, would leave the British rebate alone.” Open Europe Director Mats Persson was quoted in Saturday’s Independent and by the BBC saying, “A cash freeze on the EU's long-term budget without reforming its actual substance could well prove a strategic mistake. Such a deal would serve to antagonise the new member states that stand to lose the most and represent a missed opportunity to re-negotiate the EU's flawed subsidy schemes, at a time when the UK has some leverage.”
UK MEPs cost Britain £26m per year
An investigation by the Sunday Telegraph has revealed that UK MEPs cost Britain £26m per year in salaries, pensions, perks and office expenses – an average of £370,000 per MEP. Conservative MEP Charles Tannock is cited to be the best-value MEP.
Open Europe’s Siân Herbert was quoted saying, “MEPs' activities and whereabouts are woefully under-scrutinised in this country, so this is a great initiative. The system of MEPs' expenses is an absolute minefield, raising serious questions about transparency and accountability". Siân is also quoted in the Express. Meanwhile, Open Europe’s Stephen Booth appeared on LBC radio on Sunday arguing that MEPs represent bad value for money and that the current allowances system needs to be reformed.
Van Rompuy appoints foreign policy staff to compete with Ashton’s foreign service;
Ashton defies UK Government with calls to lift China arms embargo
The Sunday Telegraph reported that EU Council President Herman Van Rompuy has appointed 20 senior foreign policy officials at a cost of at least £15 million over the next nine years, despite the fact that Catherine Ashton’s 7,000 strong EU foreign service is due to start work on 3 January.
Meanwhile, the Sunday Express reported that Baroness Ashton wants to lift an EU arms embargo against China in defiance of the UK Government. Foreign Secretary William Hague said last week the Government had “no plans to lift the arms embargo on China”.
Sunday Telegraph Sunday Express
Saturday’s Guardian reported that the European Commission is investigating why a concert hall, situated near Naples, built at a projected cost to the European taxpayer of more than €8m, is not in use almost a year after its gala inauguration.
Ilkka Salmi, the 42-year-old head of the Finnish security service the Suojelupoliisin, has been appointed as the new director of the EU's intelligence-sharing bureau, the Joint Situation Centre (SitCen), by EU Foreign Minister Catherine Ashton.
The Sunday Telegraph reported that Fair Trials International has warned that the high volume of extradition requests made under the European Arrest Warrant is placing an “unjustified burden” on UK police and prisons.
City AM reports that Roger Carr, president-elect of the CBI, has said that Britain would lose out if it were to quit the EU.
De Telegraaf reports that proposed EU regulations could see a ban on any imported goods containing traces of pesticides, threatening many Dutch retailers with closure.
The Times reports that the EU mission sent to maintain the rule of law in Kosovo says that it may not have the jurisdiction to investigate allegations that the Kosovan Prime Minister ran a human organs trafficking ring, despite international calls for an inquiry.
In a letter to the Sunday Times, Commissioner for Enlargement Stefan Fule defended the EU’s pre-accession funds.
Italy faces demands from the European Commission to explain its ban on German-operated trains from stopping on their journeys through Italy, amid a renewed to stamp out anti-competitive behaviour in Europe’s rail market.

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.