Monday, November 22, 2010

Open Europe press summary: 22 November 2010


UK's to contribute around £7bn to Irish bailout;
Leading German MP: Aid should be conditional on Ireland raising corporate tax rate
Irish Prime Minister Brian Cowen announced yesterday that Ireland had applied for a multi-billion EU-IMF bailout and that the request had been accepted by the EU. Although the exact amount of the bailout package has yet to be disclosed, it is understood that it will range between €80bn and €90bn to be paid out by the EU and the IMF over the next three years. During yesterday's press conference, Irish Finance Minister Brian Lenihan confirmed that the sum involved would be less than €100bn.

A statement by EU finance ministers welcomed Ireland's decision to apply for a bailout and specified that support should be guaranteed through both the €60bn European Financial Stabilisation Mechanism (EFSM) - which former Chancellor Alistair Darling signed up to in May - and the €440bn eurozone's own rescue fund, the European Financial Stability Facility (EFSF). The Irish Times quotes the EFSF Chairman Klaus Regling saying that "drastic conditions" will be attached to the Irish bailout and that the interest rate on the loan should be around 5%, as it was for Greece. AFP reports that, in a study published on its website, credit rating agency Moody's warns that "a downgrade by several notches [...] is now likely after our analysis of [Ireland's] sovereign debt".

The Guardian notes that the UK is likely to participate in the Irish bailout in three separate ways: as a member of the IMF, as part of the EFSM and with an additional bilateral loan. The UK's total contribution is therefore expected to be worth an estimated £7bn. Speaking on the BBC's Today Programme, Chancellor George Osborne has said that the figure "is around that. It's in the billions, not the tens of billions". He also explained: "What we have committed to do is to be partners, as shareholders in the International Monetary Fund, in an international rescue of the Irish economy. But we have also made a commitment to consider a bilateral loan that reflects the fact we are not part of the euro and don't want to be part of the euro."

It is still unclear whether Ireland will be required to increase its corporate tax rate as a condition to receiving support from the EU and the IMF. However, AFP quotes French Economy Minister Christine Lagarde saying that a reform of corporate tax in Ireland would be "desirable". German centre-right MP Michael Fuchs - the economic expert of Chancellor Angela Merkel's CDU - is quoted by Der Spiegel saying: "It cannot be that Ireland gets money from European financial funds, when its citizens and firms are paying much lower taxes than in other countries, for example in Germany."

In an interview with FAZ, German Finance Minister Wolfgang Schäuble refused to say if, from his point of view, Portugal will be the next to need financial assistance. "You can reason like that, you are journalists. I can't: I bear a responsibility as Finance Minister", he argued. ECB board member Lorenzo Bini-Smaghi is quoted by Sueddeutsche Zeitung warning: "If the financial markets see that Europe is having a hard time solving a problematic case they could select the next victim."

Peter Chatwell, rating strategist at Credit Agricole CIB, is quoted in the Guardian saying: "I don't think this does anything to take Portugal and possibly Spain out of the firing line." ING economist Carsten Brzeski is quoted in Les Echos warning: "Will [the Irish bailout] avert contagion? Maybe in the short term, but not in the medium term [...] Portugal, above all, is not yet out of the woods."

In the Telegraph, Ambrose Evans-Pritchard notes, "Portugal will have a current account deficit of 10.3% of GDP this year, 8.8% in 2011, and 8.0% in 2012, according to the OECD. That is to say, Portugal will be unable to pay its way in the world by a huge margin even after draconian austerity. This is the worst profile in Europe."

Meanwhile, on Saturday, when asked on the BBC's Today Programme whether the eurozone is in danger of imminent collapse, Foreign Secretary William Hague said: "Well, I hope not. No one has pointed out more of the problems than I have over the years in having a currency where we lock together the exchange rates and interest rates of countries with different economies. But I very much hope not. Who knows?"

Eurozone comment round-up
In the Independent on Sunday, Hamish McRae argued, "Two down - Greece and Ireland - how many to go? The eurozone will, I am sure, be pulled together for a few more years, but there will be further political ructions against austerity, further tensions in the markets, more crisis meetings in Brussels, more bail-outs. Not good, not good at all."

La Razon Brussels correspondent Jorge Valero comments on the "sweet decadence of Europe" arguing, "The slow exit from the recession, in comparison to the US and emerging economies, has revealed the shadows, imbalances and contradictions of the jewel in the crown of the European utopia: the euro". Writing in FAZ, Werner Mussler argues, "Portugal and Spain are economically much worse than Ireland".

A leader in the Observer argued, "Ireland has been betrayed by its leaders", arguing, "The EU can bail out the budget; only a public vote can clear out the government." In the Times, Bronwen Maddox argues, "But the institutions of Brussels deserve some of the blame for the crisis, and if they fail to find a role in negotiating the tough deals that must now be struck, they will find themselves redundant." In Die Welt, Thomas Exner describes Ireland as an "unwilling applicant" for an EU bailout, writing that the "government in Dublin could not do anything but abandon concerns over national sovereignty and become an applicant [for a bailout package]."

The Weekend FT's leader argued, "The ugliest expression of naked self-interest is the idea of exploiting the control over Dublin's economic affairs that a European loan would imply to force up Ireland's 12.5 per cent corporate tax."

Writing in the NOTW, Fraser Nelson argued that David Cameron should use the euro's difficulties to renegotiate the UK's relationship with the EU. On the Spectator's Coffee House blog, Nelson argued "There is a gaping democratic deficit here, and there's only so long we can ignore it. This is Cameron's chance to correct it: he can tell the Lib Dems that he's acting to save our membership of the EU. Because as things are going, an in-or-out referendum would probably deliver an 'out' verdict." On his WSJ blog, Iain Martin asks, "Does Nick Clegg still think Britain should join the euro?"

EU's growing police and justice role is going unnoticed by voters
The Mail on Sunday warned of the "alarming array of new EU controls over justice and home affairs for which no one has voted". The article reported that Europol, the EU's intelligence agency, employs more than 650 people and offers diplomatic immunity to its officers. Europol staff are about to move into a new £8.5m building and its annual costs are £60m. Open Europe's Stephen Booth was quoted noting that 17 law enforcement systems and databases are currently operating or are being developed. He added the European Arrest Warrant "was a knee-jerk response to 9/11 that has turned out to be completely disproportionate. The premise underlying it is that all member states' judicial systems are equivalent, when clearly they are not."

EU asks Naples to repay funds spent on Elton John concert
La Stampa reports that a spokesman for EU Regional Policy Commissioner Johannes Hahn confirmed on Friday that the Southern Italian Campania region will have to pay back the €720,000 received from the European Regional Development Fund used to host Elton John's concert during the popular "Festa di Piedigrotta" in Naples in September 2009. "Cultural events, culture in general, can fall under the scope of operational programs, but they have to be aimed at structural long-term investments," he said.

Meanwhile, Open Europe's list of 50 examples of wasteful EU spending was cited in Saturday's New York Times, Dutch daily De Pers and by Hungarian Radio NeoFM.

The Telegraph reports that Michal Kaminski, leader of the European Parliament's Conservative and Reformists' (ECR) group, has left his Polish party, Law and Justice, saying that it is "being taken over by the far-Right", causing a split in the Conservative's new grouping in the EP.

At yesterday's two hour EU-US summit an agreement was made to increase co-operation on cyber-security, reports European Voice.

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