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.

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