Jean-Claude Trichet: "We are a monetary federation. Now we need a budgetary federation"
In an interview with Le Monde, ECB President Jean-Claude Trichet has said that EU surveillance over member states' budgets needs to be "radically improved", adding: "We are a monetary federation. Now we need the equivalent of a budgetary federation in terms of the control and surveillance of the application of public finance policy". He added that: "during the first stage, we must rest upon the Treaties as they are at the moment" in order to implement the required reforms.
Mr. Trichet also rejected suggestions that Greece might not be able to fulfill its commitments in reducing its budget deficit, while saying that he fully supports recent Commission proposals for a first look at eurozone countries' draft budgets, before the budgets are sent to national parliaments.
Il Sole 24 Ore reports that Italian Central Bank Chief Mario Draghi, who is in the race for the next ECB President, said yesterday that "there is no way back from the euro", adding that "it has been deceitful to believe that the single currency alone could build up Europe. Today the only viable solution is the reinforcement of the EU as a political construction". Mr. Draghi also called for "a more active EU [economic] government both in the field of budgetary discipline and of structural reforms, to be based on a new Stability and Growth Pact - broader and more binding at the same time".
Meanwhile, Open Europe's Mats Persson and Karl Sigfrid, MP for Swedish governing party Moderaterna, have an op-ed in Swedish daily Svenska Dagbladet, arguing that Sweden must resist moves towards fiscal federalism in the EU and instead "work towards making the European Union more competitive".
They argue: "The problem with Greece, Portugal, Spain and a few other countries in the eurozone is low growth and poor competiveness. Temporary loans and more rules will not solve this." They go on to argue that "what we probably will see in the eurozone in the long-term is common fiscal policies, which aim to even out economic differences", that could include direct EU taxes. "EU taxes and fiscal federalism would disadvantage Sweden and lack democratic legitimacy...through large financial transactions Swedish taxpayers would be forced to pay for the mistakes of governments which they cannot vote out of office," they note.
MEPs have spent £5m on foreign trips since 2004
The Sunday Telegraph and News of the World reported on new research by Open Europe, which found that MEPs have spent £4.7 million and clocked up over 14 million air miles in foreign travel and 'fact-finding' missions since 2004. The distance travelled is equivalent to flying to the moon and back 29 times, and has left a carbon footprint of around 4,200 tonnes of CO2.
The most widely travelled UK MEP was Glenys Kinnock, who racked up 143,033 airmiles between 2004 and 2009 on trips which cost almost £60,000. Jim Nicholson, the Ulster Unionist, was second with trips costing nearly £52,000 and totalling 137,506 miles. Open Europe researcher Siân Herbert was quoted in the articles saying, "It seems ridiculous that while the EU faces economic crisis, MEPs jet to far-flung destinations and stay in luxury hotels."
Spanish credit downgrade puts new pressure on eurozone;
ECB warns that eurozone banks face another €195 billion write-off of bad loans
Fitch credit rating agency downgraded Spain's credit rating from AAA to AA+ on Friday. Monday's FT reported that a new poll shows that most Spaniards want early elections, which the opposition conservatives would be on course to win. The poll in El Mundo showed that 50.6 per cent of voters wanted early elections, and that the rightwing Popular party would win 45.6 percent of the vote, ensuring an absolute majority in parliament, while the ruling Socialists would receive 35.1 percent.
The European Central Bank warned last night that banks in the eurozone nations might have to write off another €195 billion in a "second wave" of bad loans over the next 18 months, and are facing a "hazardous contagion" from the sovereign debt crisis. The ECB also revealed that it had purchased €35 billion in eurozone government bonds since 3 May.
Meanwhile the Sunday Times reported that the London-based Centre for Economics and Business Research (CEBR) has said that Greece should leave the euro and default on its €300 billion debt to save its economy.
Debt crisis exacerbating tensions between Bundesbank and ECB
The WSJ reports that the ECB's bond purchasing move is exacerbating tensions in Germany's Bundesbank, where officials are worried that the bond buying program is being used for a stealth bailout of eurozone banks holding Greek debt. ECB critics within the Bundesbank say the main beneficiaries of the bond purchases are the banks that hold much of Greece's roughly €300 billion in outstanding debt.
Handelsblatt reports that Bundesbank President Axel Weber has again criticised the ECB's purchase of eurozone government bonds, and demanded that it ends the operation as soon as possible. He said: "In an attempt to cope with the crisis, the monetary policy has undergone fundamental changes, which I see critically, because they carry risks for political stability".
Meanwhile, in remarks on Friday, ECB Executive Board member Lorenzo Bini Smaghi criticised the German government's handling of the eurozone crisis. He said: "In one large euro area country it was thought that public support for swift action could be achieved only by dramatising the situation, for instance, by telling the public that 'the euro is in danger' or by considering the possibility of expelling a country from the euro area. But it was not realised that...such words are fanning the flames and that the cost of the support package could only increase following such dramatic declarations."
Stanley Fink: "The last government was asleep at the watch" on AIFM Directive
In an interview with the Sunday Telegraph Stanley Fink, sometimes called the 'godfather' of hedge funds in the UK, said that the EU's proposed Alternative Investment Fund Managers Directive, "could either damage or push up the cost of investment products in Europe, but I'm resigned to it happening now and I think it's just a question of how much it can be moderated." He added: "The directive should have been strangled at birth. The last government was asleep at the watch when the legislation first bubbled up and reacted too late."
The article cited Open Europe's research, which estimated that €5.3bn in annual tax revenues will be lost to Britain if hedge fund managers conduct their business elsewhere, and that in total the Directive could end up costing the UK economy between €6.8bn and €9.6bn by 2020.
Eurozone comment round-up
Writing in Monday's Guardian Larry Elliott argued: "Belief in Europe was just as messianic - and just as bonkers - as belief in the market. The idea was that you could take a dozen or more countries of wildly differing economic performance, with entirely disparate cultures, and bolt them harmoniously together. What's more, you could do this without a common language to facilitate labour mobility or a common budget to transfer resources from rich countries to poor countries."
A leader in yesterday's FT argued that European and Commission criticism of Germany's handling of the eurozone crisis has been "unfair", adding: "Respect for the law is fundamental to any democracy - and so is respect for public opinion...One of the reasons the European Union is now in trouble is that previous German governments thought too much about 'Europe' and too little about domestic public opinion. The euro was created - and the Deutschmark abolished - without securing the explicit consent of the people. So it is unsurprising that there is now a public backlash in Germany, at the spectacle of a crisis in the euro-zone."
On his EUobserver blog, Open Europe Director Mats Persson argues, "If Merkel sounds like Thatcher, what exactly is that a sign of? German taxpayers are potentially liable for some €120 billion in eurozone loans and have just seen the independence of the ECB kissed goodbye - after having been promised that neither could ever happen. Whining over the fact that the Germans are not acting like this is 'business as usual' just isn't serious."
Writing in the Observer Will Hutton argued that "European governments have a matter of months - maybe weeks - to find a way of making the euro a credible currency, installing some long-term discipline into the way European banks do business and European governments organise their budgets and, above all, offering a way for the continent to raise its terrible low growth rate. Otherwise, the markets are going to refuse to buy euro debt and the rancour between Germany, its supporters and the rest will bring the whole edifice down."
Writing in Monday's Independent Bruce Anderson argued: "Though the EU is part of their political identity, the Germans are not prepared to sacrifice their prosperity to others' profligacy. So it is hard to see how the euro can survive."
In an interview with the BBC's The Record: Europe, former Conservative Party Chairman Lord Patten has predicted that Conservative MEPs will eventually rejoin the EPP grouping in the European Parliament, saying: "one day, yes, I'm sure it would be a sensible thing to do, but I wouldn't give that huge priority just at the moment."
The Guardian reports that, in a letter sent to the WTO, John Clarke, head of the EU delegation, has accused China of continued protectionism, saying that "The Chinese trading regime remains unduly complex and characterised by a large number of non-tariff barriers and a burdensome regulatory process."
In an interview with the Telegraph new Business Minister Mark Prisk has said that regulatory reform is a "top priority".
Following a robbery at one of the European Parliament's buildings in Brussels on Friday, a security guard working there has said that security at the Parliament is "lax".
Czech centre-right parties are beginning talks on forming a coalition government, after success in national elections on Sunday. The left-wing Social Democrats received the most votes, with 22%, but not enough to form a government. If they can form a coalition, the Civic Democratic Party and two new parties - TOP 09 and the Public Affairs party - would have a majority of 118 seats in Parliament's 200-seat lower chamber.
Speaking on World No Tobacco Day yesterday, EU Health Commissioner John Dalli said that "the commission will soon launch a public consultation on the possible revision of the Tobacco Products Directive", which will aim to make the habit appear "less attractive."
German President Horst Köhler resigned yesterday, over comments in which he suggested military deployments were central to the country's economic interest. Jens Böhrnsen, the present head of the Bundesrat, will become the temporary Head of State. Germany now has 30 days to find a new President.
El Mundo reports that Commission's Vice-President Maroš Šefčovič said yesterday that the EU wants the European External Action Service (EEAS) to be operational by autumn, adding that "at least 30% of current national diplomats should become part of the new corps".
El Mundo reports that the Speaker of Spanish Parliament José Bono delivered a speech yesterday at the Conference of Community and European Affairs Committees of Parliaments of the European Union (COSAC) meeting, warning that the complexity of the decision-making process at the EU level risks "turning our common project into a colossal bureaucratic machine".
The Mail on Sunday noted that the European Commission is planning to deploy 'mystery shoppers' to pose as customers at banks as part of an investigation into how banks treat their customers.
The Sunday Express looked at the leaked Green Paper from the Commission which suggested that no EU citizen should spend more than a third of adult life in retirement, which would mean raising the retirement age in Europe to 70 by 2060.
EU ambassadors have condemned Israel for its "use of violence" against the aid ships headed for Gaza yesterday.
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