Tuesday, December 07, 2010

Open Europe press summary: 7 December 2010

Open Europe will host a seminar in Brussels with Prof. Dr. Markus Kerber on Thursday 9 December at 1.30pm-3pm, entitled "Will the German Constitutional Court put an end to euro bail-outs?" If you wish to attend, please contact Pieter Cleppe by e-mail at pieter@openeurope.org.uk or call 0032 477 68 46 08


Eurozone finance ministers make no move on rescue fund and Eurobonds;
German Professor: Single currency at any price is a nightmare for German taxpayers
At yesterday's meeting in Brussels, eurozone finance ministers made no fresh move with regard to the increase of the €440bn eurozone rescue fund, the European Financial Stability Facility. Speaking after the meeting, Eurogroup Chairman Jean-Claude Juncker said that the fund was large enough "for the time being". Ahead of the meeting, German Chancellor Angela Merkel had told reporters in Berlin: "Right now, I see no need to expand the fund." Dutch magazine Elsevier notes that, at yesterday's meeting, the Netherlands and France also announced that they were against injecting additional resources into the EFSF.

The Guardian reports that German Chancellor Angela Merkel has also rejected proposals to issue common eurozone bonds. "It is our firm conviction that the treaties do not allow joint Eurobonds", she said. Merkel is also quoted in the WSJ arguing that common bonds would eliminate the differences among eurozone countries, giving governments less reason to manage their own public finances. "The level of interest rates is also an incentive to fulfill the Stability and Growth Pact," she noted.

Sueddeutsche Zeitung reports that ECB Executive Board member Jürgen Stark is also against common eurozone bonds, as he argued that "every state must be liable for its own debt." Die Presse quotes Austrian Finance Minister Josef Pröll saying that he "is very critical" of the idea. The Economist's Charlemagne notes that Juncker said the issue "was not part of the agenda" at yesterday's meeting of eurozone finance ministers.   

Meanwhile, yesterday eurozone borrowing costs increased again as yields on Irish, Italian, Portuguese and Spanish bonds all rose. The ECB said that it bought almost €2bn of government bonds from weaker eurozone countries last week, up from €1.3bn the week before. However, Reuters reports that ECB Executive Board member Jürgen Stark dismissed calls for the ECB to further increase its bond buying programme, saying: "We are not at a bazaar here. Politicians make demands and the ECB jumps - Europe doesn't work like that."

The Guardian reports that IMF Chief Dominique Strauss-Kahn will arrive in Greece today to discuss the extension of the repayment period for Greece's bailout loan with Greek Prime Minister George Papandreou. EU statistics office Eurostat has predicted that Greece's public debt will be at 160% of GDP by 2013.

In an interview with Handelsblatt, former German Chancellor Helmut Schmidt argued that it would have been better to launch the euro with a smaller membership, saying "that's indeed my view. And there should have been stricter rules for the members." Under questioning from MPs on the Treasury Select Committee, Stephen Nickell, a member of the Office for Budget Responsibility (OBR) and a former Bank of England rate-setter, said: "There is a possibility it [the euro] will collapse but at the moment it is not something to which I subscribe a very high probability", reports the Telegraph.

Meanwhile, on the BBC's Today programme, Professor Markus Kerber - a German academic and constitutional law expert - explained his reasons for challenging the Greek and Irish bail-outs at the German Constitutional Court. "The single currency for Germany should not comprise the risk of ruining public finances. Germany has been a very competitive export nation before the single currency [...] Single currency at any price is a nightmare for German taxpayers," he argued.

UK could withhold its contribution to EU development projects if no action is taken against corruption and waste
The Telegraph reports that International Development Secretary Andrew Mitchell has said that the UK could cut off its £400mn contribution to EU development projects and redirect the money to home-grown initiatives if the EU fails to clean up its aid spending from pervasive corruption and waste. Mr. Mitchell's calls for the EU to submit its aid spending to independent scrutiny have been backed by Sweden's Development Minister Gunilla Carlsson.    

Poll: 48% of Britons would vote in favour of pulling out of EU
A new Angus Reid poll shows that, in the event of a referendum on the UK's EU membership, 48% of the 2,002 asked Britons would vote in favour of leaving the EU. The results also indicate that 42% of Lib Dem voters and 36% of Labour voters would now vote for the UK to pull out, while 80% of all respondents would vote in favour of the country maintaining the pound.

Eurozone comment round-up
On her BBC blog, Stephanie Flanders looks at recent proposals to create a common eurozone bond and argues: "In the absence of true centralised control of budgets (which Germany clearly favours), someone will have to explain to me how a proposal that 'insulates countries from speculation' will also 'foster fiscal discipline'. A common European bond could do either of these things. I cannot see how it could achieve both."

The Economist's Charlemagne argues: "In the absence of radical measures - be it a demonstrative act of integration like issuing joint Eurobonds, or getting a bigger bazooka for the EFSF, or even forcing over-indebted countries to restructure their debt immediately - the euro zone seems destined to muddle along for now. The euro zone can only hope that the European Central Bank, which is buying up the bonds of troubled countries and is providing liquidity to banks, can defend the euro zone long enough for better days to come."

John Taylor, head of FX Concepts, the largest currency hedge fund notes: "The markets should have been disappointed on Thursday that the ECB only extended its extraordinary loan program and bought Irish and Portuguese debt. The hope was the ECB would either announce a bold expansion of monetary efforts, but all they got was a slight of hand press conference and loud market noises for the ECB traders [...] The Eurozone is treating the symptoms of Ireland, Spain, Portugal, Italy and Greece's lack of competitiveness, but not the causes. The narrowing of credit spreads between these countries and Germany is unlikely to persist for very long without further action by the European leaders."

In Le Monde, Director of Bruegel think-tank Jean Pisani-Ferry argues: "When the Germans reject the 'transfer union', they show not only a certain national selfishness, but also economic logic. There is something better to do than keeping Southern Europe under an oxygen tent." In a separate comment piece in the paper, Martin Wolf notes that "a monetary union can survive sovereign defaults. But the point is to know whether its members continue to think that it is beneficial for them."

In the FT, columnist Gideon Rachman argues: "One unpleasant consequence of successive rescue packages in Europe is that they impose a financial strain on countries that fund the emergency loans but are themselves heavily indebted - such as Italy and Belgium. That makes it a little more likely that they themselves will run into financial trouble. Germany is looked to as the moneybags of the EU. But German financial firepower and patience is not inexhaustible."

FT Deutschland business editor Lucas Zeise argues that "for the rescue of the currency union interim aid is not enough. A debt haircut for over-indebted countries is inevitable." Reuters correspondent Alan Wheatley notes: "One more victim can be added to the casualty list from the fallout of the euro zone debt crisis: the cause of currency integration in Asia."

In a letter to the Economist, Open Europe's Vice-Chairman Derek Scott noted that "the 'Austrian school' of economic ideas has not been taught for a long time in any university department; hence the response of the economic establishment that the current crisis could not have been foreseen."

UK has lost more than three quarters of cases taken to the European Court of Human Rights
The Mail reports on a study conducted by the TaxPayers' Alliance revealing that the UK has lost more than three quarters of cases (331 out of 418) taken to the Strasbourg-based European Court of Human Rights, forcing Parliament to overturn a number of UK laws. In complying with judgments, the ECHR has cost the UK more than £42bn. Open Europe's Siân Herbert is quoted saying: "The ECHR and the European Court of Justice [which rules on EU law] now act as a de facto supreme court in the UK in many ways. While we need to remain a country committed to strong protection of basic liberties and rights, these two bodies lack the democratic and judicial legitimacy to fulfil this duty."

DPA reports that, according to EU diplomats, member states and the European Parliament could reach agreement on the 2011 EU budget next week.

An article in Italian daily Il Fatto Quotidiano features the Sunday Times' research into the high salaries and generous perks received by the heads of EU overseas delegations serving in exotic locations. Open Europe's Director Mats Persson is quoted saying that "at present [common EU embassies] only add confusion while drawing vital funds away from national foreign ministries."

EU employment ministers yesterday rejected the European Parliament's proposals to extend maternity leave in the EU to 20 weeks at full pay. Belgian Employment Minister Joelle Milquet is quoted by EUobserver saying: "The very, very great majority of member states consider that [the European] Parliament went too far [...] That is not a basis for negotiation."

The Telegraph reports that, speaking at the opening ceremony of Europe House, the new £30mn EU headquarters in London, Foreign Secretary William Hague said: "Just as this Government is bringing excessive spending under control here in Britain - control that has required some very difficult decisions - so we look to all EU institutions to join us in effective and rigorous control of spending."

A cable published by WikiLeaks has revealed that, in a 2004 conversation with US diplomats, former EU External Relations Commissioner Chris Patten voiced his scepticism that the EU will ever become "a real power", arguing that "there is always someone in the room who is overly cautious, and will insist on looking at matters 'sensibly'."

The FT reports that the EU is planning to crack down on possible insider trading and price manipulation in the natural gas and electricity markets. EU Energy Commissioner Gunther Oettinger is expected to unveil tomorrow proposals calling for a dedicated staff at the Agency for the Cooperation of Energy Regulators - the EU's new energy regulatory body - to oversee market activity.    

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.