EU leaders agree permanent eurozone bailout fund;
Cameron settles for ‘political commitment’ UK will not be called on for future bail-outs
EU leaders have agreed a treaty change to establish a permanent eurozone bail-out fund post-2013, which would include investors taking losses in future bailouts. On the insistence of Germany, the fund will only be activated “if indispensable to safeguard the stability of the euro as a whole”. It is yet unclear what size and scope the new bail-out mechanism will take, with the details expected to be decided throughout 2011. Die Welt quotes a diplomat saying, “If you have a permanent mechanism then it cannot be limited. A permanent crisis mechanism has to be unlimited in its size.”
David Cameron has secured a political commitment in the summit conclusions, to be presented today, that Article 122 of the Lisbon Treaty, which allows the EU to bailout countries facing difficulties caused by “natural disasters or exceptional occurrences”, will not be used to force non-euro members to contribute to future eurozone bail-outs once the new mechanism is established. UK diplomats have admitted that there is no prospect of amending Article 122 itself and that therefore the declaration will not be legally binding, the Telegraph reports.
Calls for increasing the size of the existing bail-out fund and introducing common eurozone bonds were rejected at the summit. However, the Economist’s Charlemagne blog notes that EU leaders may yet add a pledge to provide “adequate financial support” for the €440bn European Financial Stability Facility to the summit conclusions, which could indicate a future increase. Commission President José Manuel Barroso this morning said, “This is a very important commitment. I hope it will be adopted today.” The BBC’s Gavin Hewitt quoted Open Europe stating that the actual size of the €750bn eurozone bail-out fund currently in place is closer to €410bn because many countries will be unable to contribute.
IMF Managing Director Dominique Strauss-Kahn said he is worried Europeans officials are “too much behind the curve,” adding, “The risk is always to act only at the last minute.” On the BBC Today Programme, former Chancellor Alistair Darling called for “urgent” new stress tests on Europe’s banks.
The ECB, which yesterday doubled its capital, is now likely to come under increased pressure to buy eurozone debt and support struggling banks. Les Echos notes that Spain was yesterday forced to offer 10-year bonds at an average yield of 5.45%, up from 4.61% a month ago. The FT reports that Moody’s has downgraded Ireland’s debt by five notches, while the Guardian quotes economist Nouriel Roubini saying that Greece has no option but to restructure its debt. Open Europe’s Pieter Cleppe was interviewed on Portugese Radio Antena 1, commenting that “if Portugal is ever to be competitive again, it will need the necessary evil of devaluation. That is not possible with a monetary union.” Pieter also appeared on BBC World and on BBC World Service Radio.
Meanwhile, an opinion poll in German Stern magazine this week suggested that 45% of German voters believed the euro had brought more disadvantages than benefits to them, against 33% for the contrary.
BBC Economist: Charlemagne Economist: Charlemagne 2 Euractiv EUobserver European Voice BBC Today: Hewitt El País WSJ Guardian FT FT: Brussels blog Independent Sun Telegraph Mail Express Times BBC 2 Independent Coulisses de Bruxelles Les Echos WSJ 2 El País 3 Guardian 2 FT 2 El País 4 European Voice 2 ECB press release El País 2 WSJ 3 Telegraph 2 FT 3 Irish Independent BBC: Hewitt Euractiv 2 ASCA IHT Times IHT 3 IHT 2 Irish Times Irish Times 2 Irish Times 3 Irish Times 4 Irish Times 5 Irish Times 6 Guardian 3 EUobserver 2 FT 4 Die Welt Economist: Charlemagne 3
David Cameron wins support for real-terms freeze in post-2013 EU budget;
Germany worried about soaring contribution to EU budget from 2014
During a press conference in Brussels, Prime Minister David Cameron has announced that he will tomorrow publish a joint letter with French President Nicolas Sarkozy, German Chancellor Angela Merkel and other EU leaders to demand a real-terms freeze in the next EU long-term budget, due to start in 2014. The letter, as seen by European Voice, reads: "European public spending cannot be exempt from the considerable efforts made by the member states to bring their public spending under control. Payment appropriations should increase, at most, by no more than inflation over the next [2014-2020] financial perspective." PA reports that the Prime Minister told journalists that the joint text would also cover negotiations on the EU budgets for 2012 and 2013.
Meanwhile, the FT notes that Poland has voiced strong opposition to Cameron’s initiative. "What is the most important from our point of view is for the budget not to be reduced significantly, because we believe the funds flowing to Poland and other countries help us fight the crisis," said Polish Prime Minister Donald Tusk. According to Euractiv, a Polish official hinted that Poland would decide not to ratify the EU treaty change needed to establish a permanent eurozone crisis mechanism if the size of the post-2013 EU budget were reduced.
Euractiv Deutschland reports that the German government is increasingly worried about its soaring contribution to the EU budget. An internal document notes: “Berlin should expect significantly higher burdens in financing the EU budget from 2014. The Federal Government fears that the German net contribution to the EU budget is going to rise in the next financial period by up to 50% to €12bn a year. Without an active intervention, Germany's position as net contributor is going to deteriorate significantly in 2014.”
Eurozone comment round-up;
Mats Persson: “It’s time for Cameron to play European politics […] There’s a power vacuum in Europe just waiting to be filled”
On the Spectator’s Coffee House blog, Open Europe’s Mats Persson sets out a four point strategy for David Cameron at this week’s Council meeting. “Most importantly, it’s time for Cameron to play European politics […] The eurozone crisis, and the fluid situation it has created, presents a huge opportunity for a British Government to finally make some headway in the EU. It’s not entirely clear if Cameron actually got anything substantial in return for backing Merkel’s calls for changes to the EU treaties, but he should have. There’s a power vacuum in Europe just waiting to be filled with new ideas,” he writes.
Mats goes on to argue: “A radical reform agenda for growth, jobs and democracy (including bringing powers back home) wouldn’t obstruct Europe’s efforts to save the eurozone, as some have argued. If the end result is a more adaptable, legitimate and competitive Europe, it will do far more for the euro – in whatever form it’ll exist in future – than any of the proposals that have been floated so far. Cameron must show enough confidence in the UK’s diplomatic and political capabilities to push this line.”
FT Deutschland outlines four possible scenarios for the eurozone in 2015: business as usual, stronger economic union, ‘mild’ break-up of the eurozone in two separate blocks, and collapse of monetary union.
In the Independent, Hamish McRae argues, “What we don't know is whether the weaker European countries will be able to repay their debts as they fall due and whether the currency in which they have borrowed, the euro, will itself survive. Sovereign default has arguably become a greater threat than banking default […] One results from a failure of commercial judgment, the other of political self-discipline.”
In the IHT, Jacques Attali, founding President of the European Bank for Reconstruction and Development, and Haris Pamboukis, Greece’s Minister of State to the Prime Minister, argue, “The European Union is the only sovereign entity without the capacity to borrow in private markets by issuing treasury bonds.”
In the WSJ, Marian Tupy, senior fellow at the Legatum Institute argues, “Harmonising taxes and labour regulations would be a catastrophe for the ex-communist eastern countries in the EU, and would further undermine the public finances of rich western countries such as Germany.”
Independent: McRae Economist WSJ: Tupy El Mundo: Andreasen Handelsblatt El País: Editorial Expansion: Beguelin Le Figaro: Bouilhet WSJ: Walker Spectator: Persson FT: Smaghi John Redwood’s diary WSJ: Fidler Guardian: Kettle FT: Tett IHT: Attali and Pamboukis Irish Times: Beesley WSJ: Barley FTD
In a letter to the Times, Europe Minister David Lidington hits back at criticism that Parliament’s time is being “wasted” on discussing the European Union Bill. “While no Parliament can bind its successor, I question why any future Government would want to take away the people’s right to have their say,” he argues.
The FT reports that yesterday the European Commission released a draft regulation on the creation of a pan-European payment system for banks, public authorities and utilities across the EU. EU officials hope that the text will be approved by EU member states and the European Parliament by mid-2011. Credit transfers will have to be done under the new system within 12 months of the regulation coming into force, and direct debits within 24 months.
The BBC reports that the European Parliament has rejected a plan put forward by EU member states to reallocate €1.4bn from the current EU budget to cover a shortfall in building costs of the ITER nuclear fusion reactor in 2012-2013.
The Telegraph reports that the European Commission has been criticised for producing more than three million copies of an EU diary for secondary schools which contains no reference to Christmas but mentions Muslim, Hindu, Sikh, Jewish and Chinese festivities as well as Europe Day and other key EU anniversaries.
EU judges have ruled that the Dutch authorities are not in breach of European single market laws by barring foreigners from buying the marijuana that is on sale to natives in the country's famous cannabis “coffee shops”, the Telegraph reports.
The European Court of Human Rights has ruled that Ireland must change its abortion laws, which could result in a referendum on the subject.
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