Friday, December 03, 2010

Open Europe press summary: 3 December 2010


FT: More than one-third of allocated EU structural funds goes to wealthiest member states;
Hungarian company asked to pay back EU money for dog wellness centre after Open Europe revelations
The FT continues to report on the findings of its joint investigation with the Bureau of Investigative Journalism into the flaws in EU structural funds. An article in today's paper notes that currently more than one-third of the total money allocated for structural funds goes to member states whose GDP per capita is above the EU average, such as Germany (€25bn assigned for the period 2007-2013) and Italy (€28bn).

The article mentions Open Europe's proposal to scrap structural funds for the wealthiest member states. This would roughly halve the size of the scheme and turn the structural funds into a real redistributive tool to the advantage of the poorest EU countries. Open Europe's Director Mats Persson is quoted arguing: "It makes sense in principle to have some sort of policy in place to help poor regions catch up, but in a lot of EU 15 [old member states] it doesn't have any impact."
Meanwhile, Hungarian economic magazine HVG reports that the Hungarian Development Agency - the national body responsible for the distribution of the EU's regional development funds - has asked Hungarian IT company Gyrotech Ltd to pay back the money from the European Regional Development Fund it received in 2007 for a project to "improve the lifestyle and living standard of dogs". The company used the money to build new offices while the dog centre has yet to materialise. The article credits Open Europe after it highlighted the project at the top of its list of 50 examples of EU waste and brought the case to the attention of the international press.

New EU supervisor will be given power to oversee credit rating agencies
EU member states and the European Parliament have agreed to give the European Securities and Markets Authority - one of the EU's new financial watchdogs due to start work on 1 January - the power to supervise credit rating agencies operating within the EU. French economic daily La Tribune notes that, under the new rules, ESMA can impose fines on credit rating agencies found to be in breach of EU law worth up to 20% of their turnover. The draft regulation is now expected to receive final endorsement by EU member states and the European Parliament by the end of the year.

Meanwhile, the FT notes that the European Commission is set to unveil next week its first proposals for a revision of the Markets in Financial Instruments Directive. The article notes that the proposed measures are expected to include tighter rules on high-frequency trading. 

ECB extends emergency liquidity to banks
ECB President Jean-Claude Trichet yesterday announced that emergency liquidity support for eurozone banks would be extended until at least next March. He did not, as expected, announce a mass purchase of eurozone government bonds, saying that the process was "ongoing" but that the ECB would not be drawn into "quantitative easing".

However, Portugal, Ireland and Spain's borrowing costs declined yesterday, indicating that the ECB stepped up its purchases of government bonds, although this was not confirmed. Trichet also suggested that member states should consider increasing the EU rescue fund if necessary. The WSJ reports on IMF documents which reveal that the IMF may consider doubling its lending capacity to the eurozone.

The Telegraph reports that German Economy Minister Rainer Brüderle insisted that, for Germany, "the permanent printing of money is not a solution." Meanwhile, FAZ reports that yesterday the German Bundestag approved the Irish bailout package, although a formal vote was not necessary. FT Deutschland suggests that bringing the issue before the Bundestag was a way for German Chancellor Angela Merkel and her party to show that the German Parliament is not split over the issue.  

The FT reports that Spain's bank restructuring fund plans to issue bonds worth €2bn over the next few months. On the BBC's Today programme, Spanish Economy Minister Elena Salgado affirmed that Spain is not in line for a bailout. In an interview with Les Echos, German Finance Minister Wolfgang Schäuble has said: "I am convinced that we have all the instruments to safeguard the euro as a worldwide stable currency."

Meanwhile, rating agency Standard & Poor's warned that it may further downgrade Greece's sovereign debt rating as it assesses how the proposed EU treaty could change the relationship with private-sector creditors, reports the WSJ. An article in the Express quotes Open Europe on the UK's involvement in the bailout.

A leaked cable from Wikileaks reveals that Bank of England Governor Mervyn King said in February this year: "Germany and France will ultimately have no choice but to offer explicit guarantees of Greek debt [...] Germany and France will likely, as a condition of any guarantee, require the ability to scrutinize if not exercise some control over the Greek budget. Longer-term, the drive for greater political cohesion will accelerate", reports EUobserver.

Eurozone comment round-upIn the Irish Times, columnist John Waters argues, "For as long as prosperity lasted, we were told that it was down to the benefits of membership of the euro zone - but it seems our failures are the consequences of our own stupidity [...] But let us at least be clear among ourselves: whatever craziness may have overcome the Irish public in the past decade or so was an all but unavoidable by-product of the changes taking place as a result of the spectacular economic shifts instigated by the introduction of the common currency. We voted for this, but did not understand what it would mean".

In the Telegraph, Jeremy Warner argues that "Germany will save the euro, but at a price," writing that "economically and fiscally, the German approach to saving the euro may make sense, but whether the deflationary therapy it imposes on the fringe is democratically achievable, given the history of political and economic instability in these countries, is a much more difficult question to answer."

In FT Deutschland, Christine Mai argues: "When nothing is working, then the ECB has to run. This is obviously the philosophy of a number of politicians in the EU. They are helplessly seeing how the skepticism in the markets is growing and growing and growing, thanks to the debt problems of the Euro countries. The rescue packages for Greece and Ireland, a billion-Euro safety net and a permanent crisis mechanism - nothing seems to be able to calm down investors."

The Economist's Charlemagne column argues: "The political commitment to the euro may be strong enough to bail out excessive debtors and even to survive a partial default. But it may not be so strong that it can support closer fiscal integration. In between the two is just prayer and improvisation. The EU will try to make its fixes hold long enough for the storms to subside."

A leader in the Economist suggests that EU leaders should try to avoid a break-up of the eurozone and argues: "Breaking up the euro is not unthinkable, just very costly. Because they refuse to face up to the possibility that it might happen, Europe's leaders are failing to take the measures necessary to avert it."

EU transport ministers endorse rules on cross-border road traffic penalties
Euractiv reports that EU transport ministers agreed yesterday on new rules which will make EU drivers who commit major traffic offences abroad punishable in their home country upon return. The UK has now three months to decide whether to opt in, as the measures are considered as part of the EU's justice and home affairs legislation.   

German radio station Deutschlandfunk reports that a recent Gallup poll has shown that a majority of Croatians oppose their country's accession to the EU, due to fears for their fisheries and tourism industry. Croatia is expected to join the EU in 2012.

European Voice reports that EU member states' permanent representatives have given the green light to the new draft EU budget for 2011 proposed by the European Commission. Negotiations with the European Parliament are now due to kick off on Monday. 

Le Figaro reports that plans for Franco-German fiscal convergence may be threatened by the two governments' diverging priorities. The article notes that Germany would like to focus on corporate tax, whereas France is pushing for action on income tax.
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In an interview with Handelsblatt, EU Energy Commissioner Guenther Oettinger has insisted that "we now have to adopt European rules" for the energy markets.

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