Europe
Handelsblatt: Eurozone rescue fund for Ireland was close to being activated
Handelsblatt notes that the ECB was close to calling for the activation of a eurozone rescue package for Ireland, amid mounting fears that the country's finances are on the brink of collapse. The article notes that the ECB asked several member states to set aside capital, but then called off the move at the last minute. Analysts at Société Générale have warned that the costs of the Irish governments' rescue of its banks could reach €30bn, which would increase the country's public debt to over 100% of GDP by 2015, reports the article. Foreign bank exposure to Ireland's economy is $844bn, or five times the value of Ireland's GDP or economic output. Of that, German and UK banks are Ireland's biggest creditors, with €206bn and €224bn of exposure respectively.
However, Goldman Sachs yesterday argued that "A repeat of the Greek debt turmoil in Ireland is very unlikely" noting that Irish banks can avert liquidity shortages by turning to the European Central Bank's (ECB) emergency lending operations, reports the Irish Independent. Also, the ECB can now buy European sovereign debt, unlike in April when the Greek crisis hit, and Ireland has access to the €440 bn rescue package established by eurozone leaders.
Meanwhile, a WSJ investigation based on interviews with officials from around the EU, notes that French Minister Christine Lagarde said that the eurozone was "on the verge of breaking apart" in May this year as eurozone leaders were divided over the decision to create the Greek bailout fund.
EU finance ministers to discuss new budget rules including possible supervision of member states' public sector salaries
The task force on economic governance chaired by European Council President Herman Van Rompuy will meet today in Brussels to discuss the strengthening of rules on budget discipline and the introduction of sanctions for countries running excessive deficits, while the European Commission is set to come forward with its own proposals on Wednesday.
Under the Commission's proposal, member states running a public debt higher than 60% of GDP would be required to reduce their excess over this figure by a yearly 5% for the following three years, or face a fine. A qualified majority of member states within the Council would be needed to block a proposed fine from the Commission, instead of a qualified majority to approve it, as is currently the case. Handelsblatt also reports that Commissioner Rehn is considering the introduction of a new principle preventing member states from increasing their yearly public spending by an amount exceeding their GDP growth rate for the same year.
Meanwhile, Die Welt reports that the Commission is also considering proposals for a "warning system" to monitor member states' wage policies as part of the strengthening of economic governance at the EU-level. Marco Buti from the European Commission for Economic and Financial Affairs is quoted saying, "when wages in the public sector damage competitiveness and price stability then the country will be requested to change this policy. And the wage development in the public sector does of course have a great influence on the private economy".
The FT reports that German Finance Minister Wolfgang Schäuble has written a letter to his European counterparts ahead of the task force meeting, insisting that, on top of the fines envisaged by Commissioner for Economic and Monetary Affairs Olli Rehn, he would like to see the EU's development and agriculture funding suspended for repeated violators of the new EU budget rules. Schäuble has also reiterated his idea of temporarily withdrawing voting rights within the Council of Ministers for countries failing to meet the new fiscal benchmarks. However, EUobserver reports that France and Italy are less keen on plans for greater "automaticity" of sanctions. Poland and some other Eastern member states could eventually support tougher sanctions, but only if the costs of reform of their pension systems were discounted from their deficits, according to Euractiv.
Lord Mandelson still receives £8,600 a month from the EU
Saturday's press reported that Lord Mandelson is still receiving a "transitional allowance" of £103,465 a year from the European Union, despite making £400,000 in serialisation rights alone from his book over a number of years. The payment of £8,622 (€10,139) a month is set at 50% of his former salary as European Trade Commissioner, a stipend paid at low rates of "community tax", the Telegraph reported. Open Europe's Stephen's Booth was quoted in the Telegraph and the Mail saying, "It beggars belief that Lord Mandelson should be entitled to receive hugely generous EU payoffs, first while in government and now when he's enjoying a comfortable life on the media circuit". He added, "This is a slap in the face for taxpayers, particularly in these tough economic times. If Lord Mandelson was principled, he would have turned down these allowances."
Handelsblatt: Criticism of the AIFM Directive ought to come from Frankfurt not only from London
Negotiations over the AIFM Directive remain deadlocked, amid French opposition to giving fund managers a 'passport' which would allow them to market their funds across the EU. The last negotiation session between MEPs, national ministers and the Commission is now scheduled for 4 October, reports the FT. Handelsblatt reports that the so-called German special funds (funds with fewer than three investors) are not exempted from the AIFM Directive according to the latest compromise draft of the proposal, which could have negative consequences for the German fund management sector. The article notes that "So far, criticism of the regulation has mostly come from London...As of today the criticism ought also to come from Frankfurt."
The Independent on Sunday reported that Viviane Reding, the EU Justice Commissioner, has said that unless companies move fast to employ more women in boardrooms, she will use new powers under the Lisbon Treaty to impose "gender quotas", which could reach 20 per cent.
EU member states to move forwards with plans for defence cooperation
EurActiv reports that member states agreed on Friday to more cooperation on defense, after France urged its European partners to fight austerity by boosting defense cooperation saying that Europe risked becoming a "pawn" of the United States and China if it failed to do so. The ministers plan to work more closely together in the areas of weapons acquisition and maintenance, reports FAZ.
Former French Prime Minister: "Europe at 27 is doomed to failure"
In an interview with Le Monde, former French Prime Minister Lionel Balladur argues: "Europe at 27 is doomed to confusion and failure. It suffers from problems that the Lisbon Treaty has failed to correct. Lack of authority: the 1950s structure, with the [European] Parliament, the Commission and the European Council, is too heavy. We will witness conflicts between the Parliament-Commission duo and the European Council in the future. Lack of realism: the 4 or 5 countries representing the 2/3 or the 3/4 of Europe's population and wealth have indeed special responsibilities. Lack of coherence: the 27 member states have very different social and juridical regimes. We pay the price of an enlargement which was decided too hurriedly". He concludes: "Wisdom suggests delaying any further enlargement of the EU and the eurozone".
Speaking in the European Parliament last week, MEP Daniel Hannan criticised the fact that Britain's contribution to the EU is rising by 60%, despite the fact that every UK departmental budget is falling by 25% to 40%
Reuters Deutschland reports that Chancellor Merkel will keep pushing for a European financial activity tax despite strong opposition from many member states. Chancellor Merkel is quoted saying, "economic management without responsibility has to be forbidden. On this point we will not rest until we have achieved it".
Commissioners László Andor, Michel Barnier and Olli Rehn have a plug in FTfm for their recent 'green paper' on how to achieve a more "comprehensive" approach to pension systems across the EU.
In an interview with Euractiv.cz, Czech Prime Minister Petr Nečas has said that the next EU budget should not exceed 1% of the EU's total GDP. "I don't see any reason to increase the EU budget", he argued, adding that he would like to see less EU money spent on farm subsidies and being used to support innovation, transport and new infrastructure projects instead.
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.
