Monday, March 15, 2010

Open Europe press summary: 15 March 2010


AIFM Directive threatens EU tax revenues of €9.2 bn
As EU finance ministers meet tomorrow to reach an agreement on the EU's proposed Alternative Investment Fund Managers Directive, Open Europe warns that failure to agree proportionate regulation could hurt investors, the industry and the wider EU economy.

According to Open Europe estimates, the hedge fund and private equity industry contributes €9.2 billion in tax revenues to the EU economy every year - an amount under threat if the Directive is passed in a flawed form. The taxes raised from these industries in the UK alone are enough to pay for the salaries of over 200,000 nurses. In addition, Open Europe estimates that the Directive will cost the industry around €8.2 billion by 2020.

The Sunday Telegraph reported that UK Chancellor Alistair Darling has said that, although the UK wanted to reach an agreement at tomorrow's Ecofin meeting, a deal would not be signed at any price, and insisted that controversial plans to insert restrictions on non-EU based fund managers and funds would be damaging to a global regulatory framework.

Meanwhile, the front page of the FT reports that the private equity industry is arguing that the AIFM Directive threatens the UK's national strategic interest, quoting Simon Walker, Chief Executive of the British Private Equity and Venture Capital Association, saying: "It is the same as an attack on manufacturing in Germany or farming in France. Financial services are just as core to Britain's future...There is a well understood right for EU countries to invoke national interest. It must be credible of course, but I think this is blindingly obvious."

Le Monde quotes one French diplomat saying that, for the UK the issue is about "defending the free movement of capital", adding: "The English want everything to be open, this is not acceptable."

An editorial in the WSJ argues, "Europe's finance ministers might also consider how much the vastly diminished choices imposed by the proposal would cost European retirees, who are the major customers for 'alternative investment funds' on the Continent... [one group] estimates the European pension industry would lose up to €25 billion annually under the new rules. Assuming that figure is roughly accurate, that seems a risk Europe's aging populations can hardly afford."

Eurozone finance ministers to draw up Greek bailout plan;
French Finance Minister warns Germany over trade imbalances in eurozone
The Telegraph reports that EU finance ministers will today attempt to reach agreement on a €20bn-€25bn aid package to help ease the financial crisis in Greece if required.

However, France has attempted to play down suggestions of an agreement with Finance Minister Christine Lagarde saying: "I'm certainly not expecting any decision being made or any button being pressed or any button being selected to be pressed because it's totally premature," she said. Bild quotes German Finance Minister Wolfgang Schauble saying, "There are always rumours, as regards these kinds of meetings [Today's meeting of finance ministers] especially. But there are no new developments. Therefore [there is] no reason to make decisions about financial help".  
The WSJ notes however that on Friday Largarde said that "technical experts" at the Commission have been working on a contingency plan, so that if the need arose, "all we would have to do is press the button."

The FT notes that the German government considers it essential that any bailout would mean neither individual governments nor the eurozone would be assuming Greece's debts, because of the "no bail-out" clause in the EU treaties that could be invoked by domestic opponents to financial aid for Greece in a constitutional lawsuit. Writing in the WSJ, Irwin Stelzer argues that German Chancellor Angela Merkel "shouts 'no bailout' to appease voters, while her officials try to fashion one that can plausibly go by another name."

The Mail notes that a Treasury spokesman insisted any rescue package for Greece would not involve a contribution from Britain, adding: "This is a eurozone thing, so it's nothing to do with us or UK taxpayers."

Meanwhile, in an interview with the FT, Ms. Lagarde has said that Germany's trade surpluses, built on holding down labour costs, may be unsustainable for the other countries in the eurozone. Christine Lagarde said Berlin should consider boosting domestic demand to help deficit countries, such as Greece, regain competitiveness and sort out their public finances. She added, "[Could] those with surpluses do a little something? It takes two to tango. It cannot just be about enforcing deficit principles."

EU foreign ministers and Commissioners ready to 'deputise' for Cathy Ashton
European Voice reports that some EU foreign ministers are proposing that they might serve as special EU envoys when EU Foreign Minister Cathy Ashton is unable to travel, following an informal meeting of a small number of EU foreign ministers in Finland over the weekend, including those from Sweden, France and Estonia.

EurActiv reports that a Commission official has said that the EU Commissioners for Enlargement, Development and Humanitarian Aid will all act as 'deputies' for Cathy Ashton, and quotes the official saying: "I wish we had dealt with the issue of deputies at the intergovernmental conference [laying the ground for the Lisbon Treaty], but here we are".

Meanwhile, the Telegraph reports that infighting between the EU institutions over the set-up of the new External Action Service means plans to present a draft structure of the body on Wednesday are now likely to be delayed, and the EAS itself may not be ready to be launched until the summer. The Mail on Sunday reported that Gordon Brown unleashed a "four-letter tirade" at Cathy Ashton over her performance as EU Foreign Minister so far, which included the charge that she was "letting Britain down".

Cathy Ashton is due to travel to the Middle East this week, and Open Europe's Sarah Gaskell was interviewed by Al Jazeera's English news channel yesterday, discussing whether or not Lady Ashton's trip might boost her credibility among her domestic constituency.

Münchau: EMF is about helping countries leave the eurozone
Writing in the FT, Wolfgang Münchau argues that German Finance Minister Wolfgang Schauble's proposal for a European Monetary Fund (EMF) "is just a smokescreen", and that: "The real bullet in his proposal is that countries could leave the eurozone without leaving the European Union. This is not about helping countries in trouble. This is about helping them to get out."

FAZ reports that the German Bundesbank will show "determined resistance" to requests to transfer its gold to a proposed EMF. The Bundesbank has the ability to decide autonomously on the use of its gold reserves.

Meanwhile, writing in the Independent Sean O'Grady argues that the EMF should have nothing to do with the EU, and be set up outside its institutions, arguing: "The greatest obstacle to the establishment of a European Monetary Fund is said to be the need to amend existing EU treaties, which would require the gruesome business of 27 national ratifications, including referenda."

UK to support proposal to increase EU emissions targets
The Times reports that the UK Government will today support a European Commission proposal advocating increasing the EU's emissions target to cut greenhouse gases by 20 percent by 2020, on 1990 levels, to 30 percent. The Commission is carrying out a study of the policies, such as higher taxes on fuel and flights, that would be needed to achieve the 30 percent cut, which will be ready in time for the EU to make a decision on the higher target in June, six months ahead of the next climate summit in Cancun.

UK backs plans to decrease protection for citizens facing criminal proceedings abroad
Saturday's Telegraph reported that the UK is among 13 countries which are trying to dilute legislation giving suspects the right to translators when facing criminal investigations abroad under the European Arrest Warrant. Britain has also supported a loophole that would allow a suspect to give up his rights without a lawyer present and without any written evidence.

€920,000 a year EU "heritage label" for historical and "obscure" sites across Europe
Saturday's Independent looked at the European Commission's proposal for an "EU heritage label" scheme, which would cost €920,000 a year to run. The project is aimed at encouraging awareness - especially amongst young people - of "European integration, ideals and history". Current sites include such disparate places as the Acropolis in Athens and the house of Robert Schuman, one of the founding fathers of the Common Market. The article noted that some sites on the list are "obscure in the extreme", citing a student residence in Madrid - the Residencia de Estudiantes - included because it was a meeting place for Spanish artists and intellectuals in the early 20th century and the Vitkovice coal mine in the Czech Republic because it was the site of the "first puddle furnace in the Austrian empire."

The scheme already exists on a bilateral basis but the proposal would see the scheme run by the Commission, which has already said that the existing 64 European heritage sites will have to be re-assessed against its "new criteria". The article noted that the UK has not put forward any sites for the label.

Sarkozy: The UK should be "bang in the middle of Europe"
Saturday's Times reported on the joint press conference between Prime Minister Gordon Brown and French President Nicolas Sarkozy in London on Friday. It quoted Mr. Sarkozy saying he regretted the Conservatives' decision to leave the EPP group in the European Parliament, adding: "I remain convinced that the position of our British friends is bang in the middle of Europe. We need you."  

Le Figaro reports that preliminary results from France's regional elections, held yesterday, put the Socialists on 29.5 per cent, with a 3 point lead over Sarkozy's UMP party, at 26.2 per cent.

Writing in Saturday's Guardian Simon Hoggart's political sketch looked at the punishments for UKIP MEPs Nigel Farage and the Earl of Dartmouth for making abusive speeches in the European Parliament, describing the institution as "a tea party with pretensions".

The Guardian reports that EU Commissioner for Home Affairs Cecilia Malmström has said that deportation flights should carry human rights monitors to check on the safety of failed asylum seekers who have been forcibly removed. The suggestion comes as the EU's external border agency, Frontex, prepares to assume extra powers, including chartering aircraft for deportations.

In an interview with the WSJ Sir Robert Fry, a retired UK Lieutenant General and former Deputy Commander of the multinational forces in Iraq, advocates the creation of a more powerful and better integrated European military force. He said that if the US strategic focus moves to the Pacific: "Under those circumstances, greater integration into some form of better-defined and more-unified European defense capability might be an appropriate response."

Saturday's papers reported that senior former Conservative MEP Edward McMillan-Scott has defected to the Lib Dems.

Belgian daily De Morgen reports that the EU's ban on the sale of 100 watt incandescent light bulbs, which started on 1 September 2009, has caused massive hoarding by consumers.

The WSJ looks at the European Commission's proposals to ban "naked" selling of credit default swaps, arguing that a ban could lead to "falling stock markets, via increased stress in the financial system."

Les Echos reports that French Finance Minister Christine Lagarde has argued in favour of an acceleration of the measures to be taken on the trading of credit default swaps. She said, "Sixteen months after the crisis, we get the feeling that the financial reform is a very fragmented process, in which some go forward while others drag their feet or don't want anything to change. But it is impossible to leave things as they are."  

In Il Corriere della Sera, former ECB Board Member Tommaso Padoa-Schioppa writes, "When I was [Italy's Economy and Finance] Minister, I had to receive into the Italian legal system several European norms providing for protectionist practices that were forbidden by Italian law: the EU ordered me to close our borders, instead of opening them!"  

The FT Deutschland reports that industry experts have warned that the EU's Solvency II Directive could lead insurance premium price increases of up to 50 percent.

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: or call us on 0207 197 2333.

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