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 Express.be.
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.
FT Deutschland Saturday’s Guardian Saturday's Telegraph Weekend FT WSJ Bloomberg City AM Irish Independent Irish Times Euractiv Sunday Times Sunday Telegraph El Pais FT 3 EurActiv.es EurActiv.es 2 El Mundo FT FT 2 FTfm FTfm 2 BBC Express.be FAZ Die Welt WSJ: Lagarde
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”.
Saturday's Independent: Leader FT: Jacomb Weekend FT: Barber Weekend FT: Leader Irish Times: Bini Smaghi Telegraph: Evans-Pritchard WSJ: Stelzer WSJ: Editorial WSJ: Carney & Jolis Independent on Sunday: McRae Mail on Sunday El Pais: Nair
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.”
Saturday's Independent BBC Saturday's Telegraph Weekend FT Saturday's Guardian Swedish Radio Europaportalen
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
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: openeurope.org.uk or call us on 0207 197 2333.