Monday, October 11, 2010

Open Europe press summary: 11 October 2010


Eurogroup Chairman: "It was obvious that one day Greece would have to face this kind of problem"
AFP reports that Eurogroup Chairman Jean-Claude Juncker told a forum on the sidelines of the IMF meeting in Washington that eurozone leaders knew that Greece was facing tremendous fiscal problems, but decided to keep quiet. "It was obvious that one day Greece would have to face this kind of problem, and we knew that this problem would occur", he said, adding that German and French officials had been discussing with ECB Chief Jean-Claude Trichet "the perspectives of what was not at that time known as so-called Greek crisis". He concluded: "The Greek crisis could have been avoided, but not starting last year, starting two or three decades ago".

However, former Greek Prime Minister Costas Simitis has denied that Juncker had warned him against a potential financial crisis in his country. Trichet has also admitted that he was "very surprised" that Juncker had mentioned him among those who had been predicting the Greek crisis; he refused to comment further.

AIFM Directive: New EU supervisor could be given exclusive right to supervise offshore funds
Reuters reports that France is pushing hard to give the soon-to-be created European Securities and Markets Authority the exclusive power to issue so-called 'passports' - EU-wide marketing rights - to funds based outside the EU, and also directly supervise these funds under the AIFM Directive. The UK could possibly cave in on such new powers for ESMA, in return for keeping the 'passport' provision in the Directive. An editorial in the FT argues, "Restricting this power to ESMA alone sparks concerns about protectionism. Keeping the state-level door open would also ensure that if ESMA proves inefficient, hedge funds can go directly to national bodies."

Alistair Darling: US pushed Europe to save the euro;
Swedish Finance Minister: UK "could pay a price" for not funding bailout
In the first of a three-part feature on the eurozone crisis, the FT notes that the bailout plans for Greece and the eurozone were driven partly by rising US anxiety about the risks to global financial stability stemming from Europe's slowness to take action, according to those involved in the emergency. Alistair Darling, then the UK Chancellor, told the paper "in simple terms, they started saying, 'What the hell's going on over there? You guys are being incredibly complacent.'" George Papaconstantinou, Greece's Finance Minister, is quoted saying, "It's a fair assessment that the US agitation did help to bring things along."

The article quotes Swedish Finance Minister Anders Borg saying that the UK's refusal to pledge any money to the €440bn eurozone bailout fund "will not be easily forgotten." He added, "The British could pay a price for this for some time to come." The UK is however liable for part of the separate €60bn eurozone bailout fund guaranteed by the EU budget.

Meanwhile, Thomas Mayer, Chief Economist of Deutsche Bank, argues in FAZ that "It is very unlikely that the German population would support a real and continual increasing of current fiscal transfers to the periphery" of the eurozone. In the WSJ, George Kopits, a former member of the Monetary Council of the National Bank of Hungary, argues against the centralisation of budget supervision to the European Commission. He suggests that, "Instead of attempting hands-on surveillance of budgetary performance, the EU ought to urge member states to establish their own national fiscal watchdogs." Eurostat starts an audit into Greece's finances today.

EU rules on bankers' bonuses "misguided"
New EU rules on bankers' bonuses agreed last Friday by the Committee of European Banking Supervisors (CEBS) have attracted widespread criticism amid fears they could force businesses to relocate outside the EU. Under the proposed measures, bankers would be allowed to receive only 20% of their bonuses in cash, while the remainder would be paid in shares or some other financial instrument and deferred for between three and five years. Crucially, European banks would be expected to comply with the new rules irrespective of where they employ their staff.

Writing in the FT, Global Chief Risk Officer of Nomura David Benson notes that the proposal to link half of the bonuses to bank share prices is "fundamentally misguided" and is "likely to create more risky behaviour rather than less".

Mandelson channels book royalties into private firm in order to receive EU payoff
The Sunday Times reported that Lord Mandelson has channelled fees and royalties from his recent autobiography into a private company, enabling him to qualify for up to half his former salary as a European Commissioner two years after leaving the job. His book royalties and speaking engagement fees (estimated at £350,000) are paid to Willbury, his firm. This enables him to claim up to £104,000 a year, intended to cushion former Commissioners while they look for new work. By paying his earnings into a company of which he is a director, he can tell the Commission he has no other private income.

Saturday's Telegraph reported that the Coalition Government is divided over a proposed EU 'free trade agreement' with India, which will allow looser immigration rules for Indian workers to work in the EU in return for lower tariffs and better access to India's domestic market.

The Sunday Telegraph reported that there are over 41,000 children who are currently awarded UK child benefit, according to EU rules, despite living in other EU member states. Under EU rules, child benefit is paid to parents who work and pay tax in the UK, even if their children live in other countries.

The Independent on Sunday warned that proposed EU rules to remove sex discrimination in insurance pricing could lead to cuts in pensions for men. Men currently receive higher pension payments due to an average life expectancy 3-4 years less than a woman.

A group of UK business associations, led by manufacturing group EEF, have called for a temporary suspension of the EU's REACH Directive, which introduces safety standards for chemicals, warning that it "exposes UK industry to significant risks" that could lead to shortages of key materials, reports the FT.

City AM reports that the European Central Bank has changed its rules to give itself increased power to bar or restrict banks from borrowing from it and impose ad hoc limits on what assets can be swapped for loans.

The Irish edition of the Sunday Times reported that Edmund Honohan, Master of the Irish High Court, has accused the Irish Parliament of failing to assert Irish legislation over new laws from Brussels and delegating much of the workload involved in scrutinising EU law to civil servants.

Handelsblatt reports that EU Competition Commissioner Joaquín Almunia has accused the German bank WestLB of unfairly receiving €3.6bn in state aid.

The European Commission and EU Justice Minister Viviane Redding have warned the European Parliament that the extension of maternity leave would financially overburden member states, with estimated costs of €40bn in France and €57bn in the UK over the next 20 years.

La Tribune reports that German Finance Minister Wolfgang Schäuble remains sceptical about French President Nicolas Sarkozy's proposals to reform the international monetary system, noting "We doubt whether a new, artificially imposed system would be credible".

Euractiv France reports that EU Tax Commissioner Algirdas Semeta said the financial crisis has made EU member states acknowledge the importance of fiscal harmonisation, blaming tax competition within the bloc for reducing member states' revenues at a time when the EU needs additional resources to meet its 2020 targets.

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