Bond traders warn of EMU break-up in the wake of financial crisis
Ambrose Evans Pritchard notes in the Telegraph the possibility of EMU break-up as a result of the raving financial crisis: "The interest spread between Italian 10-year bonds and German Bunds have ballooned to 92 basis points, the highest since the launch of the euro. Bond traders warn that the spreads are starting to reflect a serious risk of EMU break-up and could spiral out of control in a self-feeding effect. As the eurozone slides into recession, the ECB is coming under intense criticism for keeping monetary policy too tight. The decision to raise rates into the teeth of the crisis in July has been slammed as overkill by the political leaders in France, Spain, and Italy."
The financial crisis has spread further into Europe with the governments of Germany and Iceland stepping in to rescue ailing banks, following the decision in Britain to nationalise Bradford & Bingley and the partial nationalisation of Belgian-Dutch bank Fortis. Today, a bail-out of Belgian bank Dexia through a 6.4 billion euro injection by Belgium, France and Luxembourg was also anounced. The European Commission has reportedly warned that "there would be no leniency in its approach to state intervention despite the spreading crisis".
EU measures have included the European Central Bank announcing it will lend eurozone banks 120 billion euros in "a special term refinancing operation." EU Internal Market Commissioner Charlie McCreevy will propose changes that include creating groups of national regulators to supervise banks doing business across national borders. Also tougher bank capital rules and regulation targeting risky mortgage-backed assets will be unveiled. Le Figaro reports that French President Nicolas Sarkozy has proposed a meeting in Paris of Britain, France, Germany, and Italy at the end of the week to lay the groundwork for a "new international financial system".
Irish Prime Minister Brian Cowen has used the current crisis in the banking and financial markets to highlight the benefit of the EU and its potential to bail out failing Irish institutions. He was quoted in the Irish Independent saying, "the fact that we are members of the euro and have access to the European Central Bank... gives us stability in our financial sector".
However, Le Figaro reports that Europe, lacking the financial means of the US treasury, will react on a case by case basis and largely rely on national governments to act in the face of the financial crisis. "Saving Fortis was not a European plan; it was every man for himself," comments Daniel Gros, director of the European Centre for Political studies. The revised EU bank-funds directive, to be released tomorrow in an effort to reinforce the financial system, is reportedly seen as too little, too late. Also, the FT comments that "the Fortis rescue is less a triumph for European institutions, and more a reminder of the role of national regulators."
Telegraph FT FT Comment Irish Independent Times Guardian Guardian 2 EU Observer EU Observer 2 Euractiv Reuters WSJ Le Figaro Le Monde Le Figaro AFP
Wealthy Scottish landowners receive £1.5 billion in European Union subsidies
Under the Single Farm Payment subsidy scheme, Scottish farms and sporting estates have been receiving vast amounts of funding to encourage animal welfare and environmentally friendly practices. On average, the 100 biggest claimants received £1 million in subsidies over the past 3 years, according to the Sunday Telegraph. The estates include the former home of Queen Elizabeth the Queen Mother, the Castle of Mey estate in Caithness, which received more than £65,000 towards the building of a visitor centre. The sporting estate of Mohammed Fayed near Inverness received more than £238,000. The scheme has been criticised by taxpayers' groups who say that public money should not be used to subsidise the farming interests of wealthy landowners.
France pushes for more military integration
EU Defence ministers, led by France, will meet informally to discuss how to address "shortfalls" in Europe's military capacity. In moves described by the EUobserver as a "litmus test" for Europe's "security ambitions" France is testing the waters with a view to longer term plans to create two rapid reaction units and two larger reconstruction missions, seen as an attempt to challenge Anglo-American domination of Nato.
Congdon: EU regulations "significantly hampered" the rescue of Northern Rock
Breakingnews reports that, in a pamphlet published by Global Vision, Professor Tim Congdon argues that the collapse of Northern Rock can "largely" be blamed on commitments arising from British membership of the EU. Congdon argues that "the effectiveness of the three official UK institutions most involved in the Northern Rock rescue - the Treasury, the Bank of England and the Financial Services Authority - was undermined by commitments made by the British state to the European Union."
Congdon criticises the imprecise wording of EU directives, which "delayed and hampered" decision-taking in the crucial weeks in August and September 2007 when the bank first sought help from the financial authorities. He also argues that redundancies at Northern Rock were justified in terms of compliance with EU state aid rules rather than their costs and benefits to the British nation.
Breakingnews.ie Global Vision pamphlet
European Parliament tries to neutralise Libertas ahead of Euro elections in June
Irish MEPs are concerned about the electoral threat of anti-Lisbon group Libertas after it emerged it may put forward candidates in the Euro elections in June. The European Parliament is stepping up efforts to investigate the group's alleged US funding links.
Irish Agriculture Minister: EU emission targets should not reduce food production
The Irish Agriculture Minister has called for emissions trading to be introduced within the EU so that economies dependent upon agriculture are not forced to reduce food production. Ireland is set to miss the EU's climate change targets and the only way to reach these, Brendan Smith claims, would be to import more food. This would be counter productive, as "transporting more food into Europe would also drive up CO2 emissions".
EU keen to relax sanctions on Belarus despite government "cheating" in parliamentary elections
Western monitors said a parliamentary election in Belarus this weekend, in which opposition candidates failed to win a single seat, fell short of international standards. Poland and Lithuania remain keen to review EU sanctions on Belarus despite this verdict, with the country's neighbours saying it is more important to hold back Russia than to punish the flawed vote.
EU diplomats are worried that if Belarus is left isolated, the new parliament will recognise Georgian rebel enclaves South Ossetia and Abkhazia as independent states. The move would push the country toward Russia and complicate EU policy in South Caucasus.
Independent EUobserver European Voice
Vinocur: French EU Presidency seeks to paper over Europe's divisions
In the International Herald Tribune John Vinocur looks at the challenges facing the French Presidency of the EU. Vinocur argues that French President Nicolas Sarkozy's wish for Europe to speak with one voice is dependent on "not focusing too hard on the details of a Europe whose divisions confront and usually overwhelm its ambitions". As examples of these divisions, Vinocur points to Franco-German disagreements over the use of atomic energy and the growing division between EU countries "increasingly mistrustful of Russia and others wanting to retain a status quo relationship".
300 EU observers deployed in Georgia ahead of Russia's agreed pull-out from South Ossetia on October 10th
Russia to aid EU's mission in Chad
European Voice reports that Russia is to aid the EU with four transport helicopters to aid its peacekeeping mission in central Africa. This mission has previously been hampered by a lack of helicopters covering an area equivalent to the size of France. The EUFOR commander also praised the negotiations as "very professional" in the wake of tensions between Brussels and Moscow over recent developments in Georgia.
EU extends nuclear co-operation with India
EUobserver reports that the EU has made moves to extend its nuclear co-operation with India in a move championed by French President Nicolas Sarkozy, despite the fact that India is not a party to the Nuclear Non-Proliferation Treaty.
Germany says no to the EU bill to fine carmakers that pollute too much
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US House of Representatives rejects $700bn bailout plan
The US House of Representatives rejected a $700bn rescue package in a surprise vote of 228 to 205, responding to constituents who see the bill as a bailout for Wall Street that it does not deserve. Asian and European shares tumbled after the Dow Jones plunged about 780 points, its worst point drop ever, as fears grew that more banks could fail. The House reconvenes on Thursday.
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