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German government lays out proposals to save the Euro in strategy paper;
Calls for Treaty changes and insolvency procedures for bankrupt states
Handelsblatt has seen an internal German government strategy paper revealing an emergency German plan to 'save the Euro', as the article describes it. The paper proposes harsh punishments for countries that run up large debts, including the loss of EU cohesion funds. "The payment of European funds would be made conditional on a solid financial policy", the paper states. It also suggests that those who break the rules would see their voting rights in the European Council suspended for at least a year. It notes that the Eurozone "is not equipped for the extreme scenario of a sovereign liquidity and solvency crisis".
For the supervision of national budgets, the German government is proposing that the European Central Bank or a 'board of independent research institutes' carry out any surveillance of member states' budgets. Those who break the stability pact would have to face "earlier and more effective sanctions".
As an "ultima ratio", the strategy paper foresees an insolvency procedure for bankrupt states. In such circumstances, the country would de facto become a protectorate of the European Commission. The paper notes that only small changes to the eurozone rules will not suffice, adding: "when we strive for a lasting and an acceptable framework for Monetary Union, the possibility of Treaty changes should be included in our proposals".
Meanwhile, in a government declaration delivered today German chancellor Angela Merkel described the current EU crisis as "existential", adding: "failure of the euro means failure of Europe, but if Europe passes the current existential test, it will be stronger than ever before." Le Figaro reports that Germany is still pushing for the German Parliament to be given the right to vote on any future aid request from eurozone countries under the new eurozone mechanism. An official German source is quoted saying that "the match is not over yet. For Germany, this should be a German procedure".
European Voice reports that, at yesterday's ECOFIN meeting, several finance ministers opposed the Commission's proposals that member states submit their budgets to the EU for 'peer review', before being sent to national parliaments. The fact-check website Full Fact looks at claims made over the proposals and quotes Open Europe's Sarah Gaskell saying, "While it remains to be seen whether or not these proposals will elicit the required level of support - it is important that the UK Government does not sit back and allow proposals to take shape without their input, or they may find EU economic cooperation moving further than they expect or want."
El Pais Le Monde Full Fact European Voice FT Irish Independent Le Monde 2 Handelsblatt Handelsblatt 2 Handelsblatt 3 Handelsblatt 4
EU finance ministers sideline UK in agreement on hedge fund and private equity rules;
Osborne's next battle will be over EU financial super-regulator
EU finance ministers last night agreed their draft of the AIFM Directive despite the UK's concerns that the regulations will damage the industry and harm the economy. Ministers must now work with the European Parliament, whose ECON Committee passed a differing version of the rules on Monday, to thrash out a final deal. The texts differ substantially on their provisions for non-EU funds, with the EP offering an EU-wide "passport" system, but under very strict conditions. On their part, finance ministers have opposed such a "passport", instead demanding that fund managers register with national authorities in every EU country, which has worried countries including the US.
The UK did win a concession on the passport provision in the wording of the ministers' declaration, which said ministers had noted "the concerns expressed by some member states on certain aspects of the...proposed general approach, in particular as regards to the third country provisions". Future negotiations should take these concerns into account, it added.
The Times quotes UK Chancellor George Osborne saying, "My concerns have been that the directive is not entirely consistent with the single market and particularly the passport provisions for third countries." Open Europe is quoted by TAZ, saying "This Directive could cause serious harm to the British economy", and Sueddeutsche Zeitung, the Mail and several other papers cite Open Europe's estimates that the industry contributes £5.3bn to the UK economy ever year - an amount which would be under threat if the Directive is passed in a flawed form.
The Mail quotes Open Europe's Mats Persson arguing, "The current UK Government was landed in a real mess by its predecessor and should be given credit for trying to make the best of a bad situation. The attempts to remove the most protectionist (hedge fund) rules are clearly welcome." He added, "The last thing the EU needs is the City of London and the British Government feeling like victims of a political point-scoring exercise in Europe. Constructive relationships have to work both ways."
The FT notes that Osborne's team is not playing up the prospects of a major rewriting of the text ahead of the negotiations with the European Parliament, but said that the meeting had kept "the door open" for tweaks. The paper also suggests that "rather than fighting a last-ditch battle over hedge funds, Mr Osborne wants to keep his powder dry for a much bigger debate next month over plans to create an EU-wide regulatory system for financial services." The article quotes Barney Reynolds, a lawyer for Shearman & Sterling, saying, "What really worries us is the plan to create a powerful pan-European financial regulator. That is the real battle we should be fighting." In addition, a review of the next seven-year EU budget will begin later in the year, putting Britain and France on course for their regular battles over farm subsidies and the UK's budget rebate.
Meanwhile, in an interview with Le Monde, Angela Merkel emphasises the need for the EU to speed up the introduction of stricter financial regulation. She said, "We need to agree on a European framework for financial regulation, even though there still are significant divergences between the European Parliament and the Council. Once this framework is adopted, we will be able to supervise credit rating agencies more effectively. We urgently need it. Germany, along with France and others, will exert remarkable pressure".
Mail TAZ Times Irish Independent Independent FT FT 2 FT 3 Economist: Charlemagne notebook BBC EUobserver European Voice Independent: Moore WSJ City AM Mail2 Telegraph Open Europe press release Open Europe research Open Europe blog EUobserver blog: Persson
Merkel comes out for European financial transaction tax;
MEPs want to use revenue to fund EU budget
Reuters reports that, in a speech to the German Parliament today, Chancellor Angela Merkel urged the EU to introduce a new tax on financial markets. She said the EU would move ahead if the G20 failed to do so at its meeting in June.
Sueddeutsche notes that in her speech, Merkel clearly supported the idea of a financial transaction tax, as opposed to a financial activity tax, which would be levied on purchases or sales of shares or other financial products. The article suggests she did so because the mood in other European countries is disposed to such a proposal. Handelsblatt quotes government sources saying that Finance Minister Wolfgang Schäuble is ready to move forward with proposals now, rather than wait until the autumn, as EU Commissioner Michel Barnier is planning. Die Welt notes that the FDP has now given up his opposition to the proposal and the CSU is the driver behind it.
La Tribune reports that the two main political groups within the European Parliament have drafted a joint report also recommending the introduction of a financial transaction tax, and suggesting that any monies raised from it be used to fund the EU budget, giving it an autonomous income supply. French MEP Alain Lamassoure, co-rapporteur for the EPP group, is quoted saying: "On May 9 we drew together our borrowing capabilities. Let's take a further step. Let's join our budgetary means...Why not introduce a European tax to fund the European budget?" The draft report will now be submitted to the EP's ad hoc Committee on the Financial Crisis.
Reuters Sueddeutsche Welt Spiegel Spiegel ARD Handelsblatt La Tribune FT
Osborne calls for freeze on increases in EU budget
At yesterday's ECOFIN meeting, Chancellor George Osborne said he was not in favour of a proposed 6% rise in the EU's budget for 2010/2011, which would see a £600m increase in the size of Britain's gross contribution to the EU.
The Mail reports that, separately, George Osborne had to concede on plans to increase MEPs' expenses by €1,500 a month, which will increase the EP's administrative budget by €9.4m to €1.6 billion.
Guardian Times Reuters PA Mail
Shares tumble following German move to ban short-selling
Shares in Europe and Asia have fallen today after Germany's financial-markets regulator, BaFin, banned naked short-selling of certain euro-zone debt and credit-default swaps, as well as some financial stocks, saying "excessive price movements" could endanger the stability of the financial system. European Voice reports that MPs in the ruling coalition had demanded the move in exchange for approving the creation of the €500bn eurozone bailout package agreed last week.
Mail IHT: Marsh Telegraph Mail WSJ: Cochrane Irish Times Irish Times 2 WSJ City AM Telegraph 2 Guardian Times FT FT 2 BBC EurActiv European Voice Le Figaro Handelsblatt Le Figaro FAZ Spiegel Welt Le Figaro
MEPs back changes to rules of origin labels
EurActiv reports that the European Parliament yesterday adopted a draft regulation preventing foreign manufacturers from using a 'Made in' EU country label unless at least two out of four stages of manufacturing are carried out in Europe. The draft regulation still needs backing in the Council if it is to become law.
US Senate blocks use of money for IMF rescues
The US Senate yesterday voted 94-0 in favour of an amendment to block the use of taxpayers' money for IMF rescues which underwrite "dysfunctional governments abroad", said the Bill's sponsor, Texas Senator John Cornyn. If it is signed into law, the US representative to the IMF must certify that any bailout loans are likely to be repaid, and must report directly to Congress on the subject. The rule would apply every time the IMF is considering loans to a country whose government debt exceeds 100 per cent of its GDP, as is already the case for Greece and Italy, reports the Independent.
City AM Telegraph: Evans-Pritchard's blog Independent
New UK PM David Cameron will travel to meet Nicolas Sarkozy and Angela Merkel on his first foreign trips this week, discussing issues including the European economy, Afghanistan, and closer cooperation between the UK and its EU partners.
FT EUobserver EurActiv Reuters
Writing in the FT Charles Grant, Director of the Centre for European Reform, looks at EU relations in the wake of the Greek crisis and argues, "many Germans, hurt by criticism that they regard as unfair, no longer want to subordinate their interests to those of 'Europe'. Never before in the EU's history has Germany been so disconnected from most of its partners."
The President of the European Central Bank, Jean-Claude Trichet, is due to officially kick off construction of a new €850 million ECB headquarters along Frankfurt's Main River today.
The EU has reached a new trade deal to reduce import tariffs on goods traded with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.
EurActiv reports that EU finance ministers yesterday endorsed a report laying down the EU's priorities on climate aid for developing countries, but left open details of how they will share the costs.
An EP Press Release notes that the European Parliament has approved a report by Rui Tavares MEP which suggests that EU member states who volunteer to welcome third-country refugees could receive up to €6,000 per resettled person.
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