EU Commissioner says that eurozone bailout fund could be used to re-finance banks
Die Welt reports that EU Monetary Affairs Commissioner Olli Rehn has said that the eurozone's €500bn aid package could be used to recapitalise failing banks, if the EU's stress tests reveal inadequate capitalisation. Should a country exceed its national funds to support ailing financial institutions it can expect financial backing from the fund, Rehn said. He added that a programme is needed for the dispersion of these funds, focusing on the recapitalisation and restructuring of the banking sector.
Meanwhile, in the Telegraph, Ambrose Evans-Pritchard looks at the EU's stress tests for European banks and quotes Jacques Cailloux, Europe Economist at RBS, saying, "I don't think it is going to work." Reports in Der Spiegel have said the tests will not include the cost of defaults by Greece or other states for fear that this would hurt the credibility of the EU's new €440bn European Financial Stability Facility (EFSF) designed to shore up eurozone debtors. Also in the Telegraph, Jeremy Warner writes, "Europe seems gripped by denial, both of its problematic banks and the credit risk attached to parts of its sovereign debt."
ECB backs EU Treaty change to improve economic governance;
Croatian Accession Treaty a potential vehicle for changes
EurActiv reports that the European Central Bank is asking EU finance ministers to consider changing the Lisbon Treaty in order to impose automatic sanctions against those countries breaking EU budget rules. The proposal, submitted to the economic governance task force led by President Herman Van Rompuy, would require a vote by qualified majority by other member states to agree to suspend economic punishment in the case of breaches of EU rules - otherwise the sanctions would stand. The burden of proof would be on the member state to prove that sanctions were a harsh penalty.
The article quotes an EU source saying: "We welcome the proposal but we all know it would require treaty change, an issue member states will have to discuss among themselves". The source also suggested that any Treaty change to introduce such economic sanctions could be added on to Croatia's upcoming accession agreement, rather than go through the separate process of opening up the Treaties.
Hague looks to strengthen FCO's power over EU policy at the expense of Clegg's Cabinet Office
Writing in the FT, Phillip Stephens argues that William Hague "is writing the international script. Behind the scenes he is fighting to expand his department's influence. Co-ordination of the UK's European Union policy has long belonged to the Cabinet Office. Mr Hague wants to run it from his own department."
Comment: This is a potentially significant development. Moving coordinating responsibilities over EU policy to the FCO would effectively circumvent Nick Clegg who is sitting in the Cabinet Office. There's a good rationale for this in the short term, as Clegg is widely regarded as a Europhile and the Europe Minister sits at the FCO, and is in theory well placed to take on the overall coordinating responsibility. However, the risk is that the FCO, whose civil servants tend to be more pro-EU than those in other departments, get more influence in the long-term should Hague fail to penetrate the FCO with his own vision of EU-UK relations.
Commission to propose "peer review" of member states' pension systems
Le Monde reports that the European Commission will plead for an increase to retirement ages in EU member states in a paper to be presented tomorrow. The Guardian quotes an EU official saying: "The situation is untenable. Unless people, as they live longer, also stay longer in employment, either pension adequacy is likely to suffer or an unsustainable rise in pension expenditure may occur".
The article notes that the Commission paper suggests that, similar to the proposal to supervise national budgets, the EU could construct a system of surveillance and "peer review", with member states checking up on each other to make sure their pension systems are "sustainable". Although France, Britain and several other European countries have already announced moves to raise pensionable age, the Commission now wants to make such moves automatic. Under its proposals, all governments would impose automatic changes to ensure that the longer people live, the later they retire, allowing each country to still have different retirement ages, but ensuring that all progressively increase. The EU has limited competence over pensions but the article suggests that the "open method of co-ordination" could be employed, whereby member states co-ordinate policy collectively, but there are minimal sanctions for offenders.
German Professors take out ad in FAZ against eurozone aid package
Four German Professors who have filed a constitutional complaint against the eurozone aid package have taken out an ad in FAZ, in which they argue that: "the aid package from Brussels does not save the currency union". They argue that "it is forbidden that the Community or a Member State is liable for the financial obligations of another Member State", referring to the EU treaties' no-bailout clause. They conclude that, "we are sure that our highest Court will declare this coup unconstitutional against parliamentary democracy and economic efficiency."
Suddeutsche and Die Presse report on the reactions to a new study from the CEP, which states that the €60 billion eurozone bailout package breaches EU law. The Deputy Government speaker, Christoph Steegmans, said "The federal government has always taken great care to minimise possible constitutional risks along with the emergence of the EU aid package." He added that Germany is entering a "constitutional new land".
Meanwhile, FT Deutschland reports that Dirk Meyer from Hamburg University has proposed a plan for Germany to adopt a "new German Mark", saying "if Greece doesn't leave the currency union, Germany must use the emergency brake."
UK and German opposition stalls talks on EU's financial supervisors
Sueddeutsche reports that talks on the three new EU financial supervisory authorities broke down late last night. According to participants, Britain and Germany were unhappy that the current proposals would allow the EU to overrule national regulators in the banking, securities and insurance sectors. The EP will decide today if it will vote tomorrow on its version of the package, or wait until the autumn. If no agreement is reached by October, the supervisory institutions are unlikely to start work on 1 January 2011 as planned.
Meanwhile, UK Financial Secretary Mark Hoban writes in Le Monde, "The British Government is holding to view that the new European Supervisory Authorities and the European Systemic Risk Board (ESRB) will be in place by 2011". This new framework must radically improve the quality and the coherence of regulatory supervision. It is imperative for the new European structure to be independent and to meet the highest standards of governance."
National governments and MEPs to battle it out over EU budget increase
The Irish Times reports that the proposed €142.6 billion 2011 EU budget, a 5.3 percent increase on last year, is set to become a battleground between member states and the European Parliament, which is using new powers under the Lisbon Treaty that give it a much greater say over the EU's finances. The article notes that governments want to cut the increase to some 2.8 per cent, yet MEPs want a higher figure.
Lord Lawson calls on Government to justify £50bn a year cost to meet EU renewable targets
In yesterday's House of Lords debate on renewable energy, former Chancellor Lord Lawson revealed that, according to Mr Bob Wigley, the Chairman of the previous government's Green Investment Bank Commission, the EU's Renewable Energy Directive "will cost the United Kingdom £50 billion a year, every year, for the next 40 years". He went on to ask "How, above all in this age of austerity, can this possibly be justified?" The Directive sets the UK the target of sourcing 15 percent of its energy from renewable energy sources by 2020, up on 1.3 percent in 2005.
Bronislaw Komorowski has been declared Poland's new President. The Telegraph notes that the result could be seen as a minor setback for David Cameron, as Mr Jaroslaw Kaczynski would have made for a more natural ally in the EU.
UNESCO site risks losing status because of EU funding for overdevelopment;
EU fishing subsidies used to support illegal fishing
The FT has a feature on EU spending, which notes that Lanzarote is facing the possibility of losing its Unesco classification of "Biosphere" status, because developers breached planning rules in protected coastal areas using EU funds. A separate article notes that data from EU sources suggests that a third of pirate driftnetters penalised in Italy in the past five years had previously received more than €12m in public funding to stop using the nets.
EU's economic partnership agreements will "tie West Indian hands"
In a letter to the Guardian, Dr Matthew Bishop, of the University of the West Indies, argues that the EU's Common Agricultural Policy does not just create "subsidy millionaires", but "the hypocritical way that the EU chooses to subsidise such rent-seeking from its Caribbean outposts (as well as the Spanish Canaries, and the Portuguese Azores), and permits a range of protectionist policy measures, stands in direct contrast to the way it has aggressively browbeaten the rest of the independent Caribbean into signing the controversial free trade economic partnership agreement, which, over time, will tie West Indian hands in formulating distinctive trade, development and economic policy, with debilitating economic and social consequences."
Turkey closer to eurozone convergence criteria than some members
The IHT notes that Turkey recorded 11.4% growth in GDP in the first quarter of the year, and is well under the 60 percent ceiling on government debt (49 percent of GDP) and could get its annual budget deficit below the 3 percent benchmark next year.
Writing in the Independent, Mary Ann Sieghart looks at the 'No' campaign in the 1990s against Britain joining the euro, and argues: "there were loads of voters on the centre and left who were suspicious of the project but reluctant to say so for fear of the company they would keep. So what we did was to bring together a strong group of lefties, greens, trade unionists, centrists and wet Tories, as well as former senior diplomats, business people, economists and academics, to legitimise these voters in the views they privately held."
The Mail reports that three Conservative MPs Christopher Chope, Peter Bone and Philip Hollobone have put forward an alternative coalition agreement with 30 new Bills, including suggestions to repeal the European Communities Act 1972 and thereby withdraw Britain from the EU.
The Sun reports that a European Parliament vote on maternity leave, due to take place today, has been postponed for a third time. The vote would increase maternity pay to 100% of salary for 20 weeks, up from 90% for six weeks, followed by £123 a week for 33 weeks, and cost the UK £2 billion a year.
In a letter to the FT, Arlene McCarthy, Vice Chair of the EP's Economic and Monetary Affairs Committee, argues that EU agreement on new rules for bank bonuses will mean a "significant" change for big bank earners.
In the WSJ, Patience Wheatcroft warns that "Now it is retailers who should be fearful of potentially damaging restrictions and demands that could be heaped on them from Brussels", after the European Commission yesterday adopted a report that listed the perceived failings of the retail industry.
The European Parliament's Civil Liberties Committee has recommended that MEPs approve the redrafted SWIFT agreement to share bank data with the US. The new draft increases the role of Europol, the EU's police agency, and will see an EU representative posted to Washington to supervise data transfers.
In the interview with Freie Welt, Ewald König, a Chief Editor of Euractiv, says that "it seems that the Eurosceptical attitude is growing, both in the new and in the old member states."
Le Figaro reports that Kyrgyzstan has asked the EU to send police corps to stop violence between Kyrgyz and Uzbeks.
MLex magazine reports that, under the Lisbon Treaty, EU member states' bilateral investment treaties must be phased out, of which over a thousand have been signed since 1959. An official told MLex that "It will take decades- perhaps 40 years, senior officials say - before all BITs have been centralised in Brussels".
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