UK set to compromise on AIFM Directive next week;
US warns EU against discriminating against third country funds
Handelsblatt notes that European finance ministers are expected to agree a draft of the EU's proposed AIFM Directive, aimed at regulating hedge fund and private equity managers, next Tuesday. The article notes that "even the British government...has given up its blockade."
The UK is currently struggling to find enough allies among other member states to water down the Directive's restrictions on foreign funds and fund managers - restrictions that would cut off most foreign funds and managers from the EU market, and therefore radically limit the choice for EU-based institutional investors such as pension funds and charities. The FT reports that Tim Geithner, the US Treasury Secretary, has delivered a blunt warning to the European Commission that the protectionist elements of the Directive could cause a transatlantic rift by discriminating against US groups and restricting the access of EU investors to funds based outside Europe.
Paul Myners, UK Financial Services Minister, told a meeting of private equity executives yesterday that he would fight "line by line and minute by minute" to defend the free movement of capital. But he also warned that "nobody in this room is going to get the directive they want".
French MEP Jean-Paul Gauzès, who is the European Parliament's rapporteur for the directive, said that "Finance Ministers need to make progress now" on the AIFM Directive. He added that, "We need to prohibit hedge funds from naked short-selling", citing hedge funds' bets on Greek default, Handelsblatt reports. Gauzès also signalled a willingness to water down restrictions entailed in the draft Directive on German so-called 'special funds', which account for about 90% of all alternative investment funds in Germany.
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Trichet hints at support for European Monetary Fund
The WSJ and the FT report that European Central Bank (ECB) President Jean-Claude Trichet yesterday hinted he might yet support proposals for a European Monetary Fund to help crisis-hit countries, despite scepticism expressed by German ECB governing council members and Bundesbank President Axel Weber. Trichet said the ECB had not "rejected" the plan put forward by Wolfgang Schäuble, the German Finance Minister, but more details were required before a verdict could be reached.
Focus reports that German Chancellor Angela Merkel and French Prime Minister Francois Fillon met yesterday to discuss the creation of an EMF. DPA notes that Fillon signalled that France may be willing to accept the creation of an EMF in the "medium term" if it was combined with stronger 'economic government' of eurozone countries.
Merkel faces opposition within her own party, the CDU, and her coalition partner, the FDP, to the creation of an EMF. Handelsblatt quotes the head of the Bundestag's Financial Committee Volker Wissing (FDP) saying, "It is the responsibility of Finance Minister Schauble to explain to what extent the creation of a European Monetary Union would actually improve the current situation. Schauble made it clear that no German taxes would be used to support Greece. They must also not be used through the creation of a European Monetary Fund either".
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An article in Le Figaro questions whether the foundations of the Lisbon Treaty are to blame for the current "cacophony" and confusion in EU governance. The article quotes an unnamed Commissioner saying that "the treaty has not simplified life; it has complicated it and wasted a lot of energy".
Ashton has an "open mind" about a central EU military HQ
The Telegraph reports that EU Foreign Minister Catherine Ashton has dropped her opposition to a permanent European Union military headquarters, seen by the UK as a duplication of existing NATO capability and "an unnecessary use of resources." In her speech to the European Parliament yesterday, Ashton said, "People raise the question whether the EU should have its own permanent operations HQ. This is a serious issue that deserves a serious debate." Hervé Morin, the French Defence Minister, has recently stepped up calls for the creation of a central military HQ, seen as a step towards a European army.
The article notes that EU officials have said that as Europe's Foreign Minister, Lady Ashton's job "is not to put the British view" ahead of negotiations on the HQ next month. "She has an open mind on the issue," said an aide.
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MEPs vote in favour of 'Tobin tax' that could finance EU budget
An overwhelming majority of MEPs yesterday voted in favour of a tax on financial transactions, which will require the EU Commission to investigate proposals for a levy. "This resolution is not advocating one model or another, but aims to launch work on many questions that need answering," said Maltese MEP Edward Scicluna in a debate with the European Commission on Monday.
A European Parliament press release notes that the resolution passed by MEPs urged the Commission to look at "how the tax could contribute to the EU budget".
"European citizens expect the costs for the financial crisis to be borne by those on the financial markets who caused it. We cannot therefore be content with a minimalist solution in line with the US proposal, which would generate a few billion Euro - a relatively small revenue considering the huge costs," German MEP Sven Giegold said after yesterday's vote.
The Spectator Coffee House blog argues that a tax on all financial transactions would "castrate" the City.
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France and Germany call on EU to ban credit default swaps
The FT reports that Germany and France yesterday called on the EU to consider banning speculative trading in credit default swaps (CDS), which have been blamed for the Greek debt crisis. A leader in the paper argues, "Proposals by European leaders to crack down on sovereign credit default swaps serve an important purpose: to deflect attention from the fact that their inability to deal with the Greek debt crisis is a trap of their own making. It does nothing, however, to solve the crisis or make future ones less likely."
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Investors continue to demand high interest rates on Greek debt
The WSJ notes that investors are continuing to demand high interest rates on Greek government debt, raising again the spectre that it may need external aid. A Greek official said the government needs "some kind of guarantee for our bonds from our European partners" to bring down rates. "If they don't give it to us and the spreads continue to be so wide, we will likely publicly ask for economic assistance."
Meanwhile, Die Welt reports that Greece has come to a standstill following strikes protesting against the government's latest austerity package. The FT reports that Greek Prime Minster George Papandreou also faces unrest in his governing Socialist party over the new austerity measures, with two senior Socialists criticising the switch in policy since the party came to power in October pledging "more social protection".
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MEPs demand transparency in ACTA talks
MEPs have called on the European Commission to increase transparency in the ongoing negotiations with the US for an Anti-Counterfeiting Trade Agreement (ACTA), which will cover regulation of the internet, or risk legal action in the European Court of Justice. The parliamentary resolution passed yesterday underlines that the EP would like to be granted access to all ACTA negotiations texts, while calling on the Commission to refuse to support internet cut-off as a penalty for internet users found to be violating copyright laws.
The Commissioner for Trade, Karel De Gucht, replied on behalf of the Commission, arguing that "I understand that the EP needs to be informed [...] but we agreed with our counterparts on several confidentiality clauses that prevent us from disseminating the texts".
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EU accounting rules could distort the internal market without cutting red tape, business group warns
A leading European small business group, UEAPME, described the EP's vote yesterday to allow "micro-companies" to be exempt from EU accounting rules as a "step back for the internal market". The plans were designed to simplify rules for businesses, but Andrea Bernassi, UEAPME's General-Secretary, said the move will "decrease transparency and create an uneven playing field between businesses operating in different member states...This is not better regulation."
Belgian MEP, Bart Staes, has warned that his report criticising European Parliament's spending of €1.4 billion in 2008 is at risk of being "watered down", reports European Voice.
EUobserver reports that over 60 percent of Brussels-based lobbying firms are still unregistered with the Commission and that transparency suffers as a result.
European Voice reports that campaigning group fishsubsidy.org has found that there is a "strong link" between EU subsidies and illegal fishing.
UKIP MEP Lord Dartmouth was removed from a European Parliament debate yesterday following his announcement that for countries such as Greece and Cyprus to have an "Arctic Policy" was "as bizarre as the appointment of Baroness Ashton as the EU's high representative".
Le Monde reports that the EU has decided to support the ban on the international trade of bluefin tuna.
The Independent notes that German Chancellor Angela Merkel's coalition government is coming under strain amid disagreements over tax cuts.
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