This Brussels-based news channel has a number of reports today on various aspects of European crisis management and regulation.
Since some of this overlaps I give here extended excerpts only from their articles today. The Council meeting (“summit”) tomorrow and Friday underlies all of this flurry of comment.
However, this overview shows clearly the fatuity of those who glibly talk up the end of the recession. Technically this might happen this year but economic problems will continue to worsen for some time thereafter.
Meanwhile as I warned all readers - watch the press this weekend to see precisely how much Brown surrenders in Brussels.
Christina Speight
EU OBSERVER
17.6.09
1. Build-up to financial dogfight continues
Andrew Willis
BRUSSELS – European leaders added to the growing rhetoric on financial regulation on Tuesday (16 June) as the EU prepares for a summit later this week where the topic is likely to generate heated debate.
"By the end of this week, the European Council must give a clear mandate to the European Commission to start the urgent creation of two institutions," said Belgian Prime Minister Herman Van Rompuy. [Only if thdere’s agreement -cs]
"Firstly, a powerful and effective European Systemic and Risk Council centred around the European Central Bank. Secondly, a European system of supervisors having the power of binding mediation," he said.
[- - - - - - - - -]
The UK and a number of other non-eurozone states harbour strong concerns over precisely these two issues – with Mr Van Rompuy's remarks likely to be seen as a direct challenge to the UK's position.
London is concerned that if the chairmanship of the ESRC – a proposed new body designed to monitor overall risk levels in the European financial system – is taken up by the president of the ECB as the commission proposes, then its influence as a non-eurozone member state will be weakened.
Likewise, commission proposals to give powers of "binding mediation" to three new European-level authorities that will oversee national regulators in the areas of banking, insurance and securities have not found favour in Europe's financial capital.
As the ultimate responsibility for bank bail-outs lies with member states, the new authorities should not have the power to over-rule national regulators, argues London.
2. Commission speed
The commission plans for financial supervision propose a faster timetable than the report – drafted by Bank of France governor Jacques de Larosiere - upon which they are based.
"Given the urgency of the situation, the commission has proposed to go further than the Larosiere report by accelerating the implementation of the new architecture," said commission president Jose Manuel Barroso on Tuesday.
[This shows the usual failure of EU institutions to respond to the facts rather than to theories. As I have been illustrating repeatedly the European Banking crisis has yet to reach its peak and it is considerably later than the British problems. One size never fits all -cs]
Assuming EU leaders can reach an agreement on the outstanding issues, the commission says it will come forward with legislative proposals this autumn so that a new financial architecture can get up and running in 2010.
"An ambitious proposal is now on the table …and the proposal deserves the full support of all member states," said Mr Barroso.
3. House of Lords critical of UK government
While pressure is mounting on the UK to back away from its current objections, the government came in for criticism from the House of Lords on Tuesday over its handing of the EU discussions.
A new report released by the Lords EU committee accuses the government of being "behind the ball-game at times", and said it must stand up for the UK's unique interest in financial services.
"The UK government must ensure these national interests are properly reflected in new regulations or in structural reforms," said the committee's chairman, Kenneth Woolmer.
[I will report this separately -cs]
4.Latvia announces massive cuts
Meanwhile Latvia, another country with a troubled economy that in December secured a €7.5 billion bail-out from the IMF, the EU and other lenders, on Tuesday announced austerity measures that Riga said would help it avoid bankruptcy.
By a large majority (63 to 30 votes) the Latvian parliament backed cuts worth 500 million lats (€714 million), or around 10 percent of total expenditure.
"Parliament made a difficult decision, one that allowed the state to avoid bankruptcy," Latvian premier Valdis Dombrovskis told journalists after an eight-hour debate in the parliament
"We think it's a good basis for continuing to receive international support," he added.
[Latvia is being crucified to save the euro SEE “The eurozone in trouble” of 15/6/09 -cs]
The EU welcomed the adoption of the measures, while calling on the Latvian government to seek long-term solution to cut the country's budget deficit.
"The [EU] presidency and the commission welcome the new fiscal package for 2009 and 2010 adopted by the Latvian parliament today, which is a courageous and ambitious step forward to address fiscal imbalances," the Czech EU presidency and the European Commission said in a joint statement.
"While the urgency to act in the current situation may warrant to some extent the recourse to one-off measures in 2009, work on permanent measures to reduce the budget deficit in a sustainable way and improve the competitiveness of the economy in 2010 and the following years should start immediately," they added.
The Latvian finance ministry expects the Baltic country's economy to contract 18 percent this year and finance minister Einars Repse on Monday warned that the public deficit - the gap between a government's spending and revenues - could still hit 11.6 percent, despite the new cuts.
Under its bail-out terms, Latvia has said it would ensure that its deficit would not exceed five percent of GDP.
5. Spain's central bank warns on excessive spending
[Most of this recirculated from Financial Times -cs]
Spain's central bank told the government on Tuesday (16 June) there is no room for further spending measures above those already announced, and warned that the country's rising budget deficit could hamper growth when a global upturn arrives.
"We have to stop public sector debt becoming an obstacle when the Spanish economy is in a better condition to grow," said central bank governor Miguel Angel Fernandez Ordonez in a speech accompanying the Bank of Spain's annual report.
"Any chance of using fiscal policy to increase spending has now been exhausted," he said. [Meanwhile we in Britain continue borrowing more and more to throw away in just such such foolishness -cs]
His words are unlikely to please the government of Socialist Prime Minister Jose Luis Rodríguez Zapatero, who reacted testily to earlier pronouncements by the bank governor this year on the need for pension and labour market reforms.
"I wish it was the last time I had to disagree with the governor of the Bank of Spain," labour minister Celestino Corbacho said a few months ago following comments by Mr Fernandez Ordonez.
Despite also being a Socialist and a former government official, tensions between Mr Fernandez Ordonez and the government have grown this year as the Spanish government embarked on one of Europe's largest fiscal stimulus plans to counter the recession.
Former finance minister Pedro Solbes was replaced by Elena Salgado earlier this year following his complaints over government overspending.
Ms Salgado – whose economic forecasts have generally proven to be overoptimistic - appears to have adopted a more realistic tone following the end of European election campaigning, during which the state of the economy was a central issue.
Shaky economy
Spain's unemployment – by far the highest in Europe - hit 18.1 percent in April and is expected to top 20 next year, bringing with it a corresponding increase in social spending and a growing strain on state coffers.
The country's unemployment rose to 24 percent in the early 1990s and stayed in double figures until 2005.
Added to this, the latest government forecasts now predict the economy will exit the recession later than most EU member states and will not return to annual growth before 2011.
However Mr Fernandez Ordonez says further fiscal spending to boost the economy would raise expectations of future tax hikes, with a rising budget deficit also likely to arouse investor concern.
Spain's credit rating was downgraded earlier this year, along with a number of other European countries
6.. Hungary closing embassies due to economic crisis
Hungary, severely hit by the economic crisis, has said it is to close four embassies worldwide to save money, including one in Europe.
Budapest intends to close its representations in Luxembourg, as well as in Malaysia, Chile and Venezuela.
It will also shut down eight consulates – in Lyon (France), Dusseldorf (Germany), Krakow (Poland), Chicago (US), Toronto (Canada), Sao Paolo (Brazil), Sydney (Australia) and Hong Kong, Hungarian foreign minister Peter Balazs announced on Tuesday (16 June).
"With the reorganisation, the ministry will save two billion forint (around €7 million) annually," Mr Balazs said at a press conference in Budapest, French news agency AFP reported
[saving a ‘mere’ £6m ! -cs]
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