Friday, October 22, 2010

Open Europe press summary: 22 October 2010


German Foreign Minister contradicts Merkel on budget sanctions for eurozone countries
Deutsche Welle reports that German Foreign Minister Guido Westerwelle has contradicted Chancellor Angela Merkel by calling for tougher eurozone sanctions on countries with high debt and deficits. Merkel this week agreed with French President Nicolas Sarkozy to water down proposed sanctions, allowing governments greater power to block them, in return for his backing for EU treaty change to create an 'orderly default procedure' for eurozone countries.

"It is crucial that sanctions are not subjected to political opportunism," Westerwelle said. Adding that, "It makes a big practical difference if sanctions are passed by a two-thirds majority, or blocked by a two-thirds majority." The fear in the German media and expressed among Westerwelle's FDP party, Merkel's coalition partner, is that despite giving in on sanctions there is no guarantee that Germany's demands for treaty change will be met, as any country can veto changes. Handelsblatt quotes Westerwelle saying, "Germany cannot agree to go forward [on this] without a clear mandate for Treaty change."

FT Deutschland highlights the significance of a German Foreign Minister questioning a joint Franco-German deal of two heads of government. Handelsblatt's front page carries the headline "three against Merkel", as it notes Westerwelle joined earlier criticism by ECB President Jean-Claude Trichet and Commission President Jose Manuel Barroso of Merkel's deal with Sarkozy.

However, writing in the paper, Professor Clemens Fuest, argues that Merkel is right to pursue a default mechanism for the eurozone as this would do more to reduce taxpayers' exposure to struggling eurozone countries in the long-term than tougher budget sanctions.

Meanwhile, the FT notes that Portugal's borrowing costs rose yesterday after new figures showed the government may not meet its deficit-reduction target this year and its 2011 budget continues to face political uncertainty.

EU Budget Commissioner 'worried' by bailout funds guaranteed by EU budget
The WSJ's Real Time Brussels blog reports that, at a meeting with journalists, EU Budget Commissioner Janusz Lewandowski expressed concern at the amount of money which can potentially be lent to struggling governments using the EU budget as a guarantee.

Besides the €440bn eurozone bailout package, which does not include the UK and is guaranteed by eurozone governments, the EU also agreed a €60bn fund to be lent against the EU budget, guaranteed by all member states, including the UK. Added to the pre-existing fund for non-eurozone members, which totals €50bn, the EU budget can potentially be used as a guarantee for €110bn in loans.

"That is worrying me," Mr. Lewandowski said. The EU must "be realistic about the budget as a guarantee." In case of danger, "we should be very watchful" about the maturities of the various pieces of debt issued, he added.

Open Europe is cited by Italian financial website Fondionline in an article looking at the EU's AIFM Directive.

European Parliament's EU budget increase includes more perks for MEPs
The Mail notes that the 5.9% increase proposed to the EU 2011 budget by MEP includes a 4.4% increase in administration costs, including a 90% increase in the European Parliament's entertainment fund to almost £2million. Open Europe's Stephen Booth is quoted in an article in Romanian daily Adevarul looking at MEPs' vote to increase the EU budget. Stephen is also quoted by The Parliament magazine.

EUobserver reports that, within its vote on the 2011 EU budget, the European Parliament decided to withhold some of the money paid out to ex-Commissioners until the European Commission tightens up its code of conduct.

Open Europe's Mats Persson is quoted in Swedish magazine Fokus in article looking at EU politics in the wake of the eurozone crisis, saying that the "Germans are growing tired of being the EU's bank."

National governments threaten MEPs and Commission with legal case over 'power grab'
EUobserver reports that national governments yesterday threatened to take the European Parliament and Commission to court over what it calls the "illegal" provisions of an inter-institutional agreement which gives MEPs extra powers on international negotiations and greater access to classified EU documents.

The FT reports that EU Trade Commissioner Karel De Gucht is calling for an instrument to use in retaliation against countries that do not grant European companies fair access to government contracts - a move that could raise tensions with China.

Euractiv reports that the European Parliament has voted to approve new labelling laws that would require firms to specify the country where the majority of their product was originally made on the label, which manufacturers' associations fear could place extra burdens on small businesses.

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