Europe
Details of the Eurozone rescue mechanism to be agreed today;
National Parliaments will have no veto power on future activation of fund
Eurozone finance ministers meeting today will finalise the last technical details of the rescue mechanism agreed in May, and will create the 'special purpose vehicle' of €440bn in loans and loan guarantees for any countries in financial difficulties. Its duration will be prolonged to five or six years, from the initially agreed three, following concerns that recipient countries would need longer to pay back the loans, reports Handelsblatt. French newspaper Les Echos reports that an overall agreement was reached on Friday, following a series of phone calls between Paris and Berlin.
Under the final plans, national Parliaments will be given no veto power over future activation of the mechanism, in spite of the strong demands for that from Germany, Austria, the Netherlands and Finland. It has also been agreed that the fund will lend money at market conditions, i.e. without applying lower interest rates to borrowing countries.
According to Reuters, the loans will be guaranteed by the whole eurozone bloc, despite Germany favouring making each country responsible for its own share of money lent.
In an interview with Sueddeutsche, European Investment Bank Chief Philippe Maystadt, denies that the special purpose vehicle is tantamount to a "Eurobond", saying "one could call them Eurobonds. I wouldn't do so however, because not every country is without limit liable for the liabilities of its partners." He added that, "with the package all EU countries can be bailed out, apart from Germany and France."
Handelsblatt Times BBC BBC: Hewitt blog Le Figaro Le Monde Nouvel Observateur Wall Street Journal Les Echos Sunday Times OE blog LeFigaro LesEchos LesEchosBlogs
Eurozone reforms envisage tough and "automatic" sanctions over debt levels
EU finance ministers will meet tonight as part of the eurozone task force, led by EU President Herman Van Rompuy. French President Nicolas Sarkozy and German Chancellor Angela Merkel are meeting today ahead of that, in order to discuss the future of economic governance in the EU. Nouvel Observateur quotes an Elysée source saying: "If it is to be hoped that the 27 member States develop coordinated macroeconomic - and especially budgetary - policies, it is absolutely indispensable to make sure that such coordinated policies are adopted by the 16 countries which share the same currency".
Die Welt reports that it has seen a copy of the working paper which finance ministers are to discuss, and notes that it would see the EU imposing sanctions for breaching debt limits much earlier than previously, with a "gradual and automatic sanctions mechanism" proposed. Additionally, as well as national budget deficits, the entire debt position of a country would be taken into account. The article adds that the document does not specify what the sanctions would be. Finance ministers will also discuss whether member states should submit "binding budget planning" for the next several years.
Handelsblatt reports that EU member states are opposing automatic sanctions for countries that breach the budget rules, because the Ecofin council would no longer have a right to discuss possible sanctions, quoting an EU source saying: "That is not an option for any Minister".
Die Welt adds that there is unanimity within the eurozone for the proposal for a "European Semester" during which eurozone member states' budgets would be discussed within the eurogroup, before being sent to national parliaments. The EU summit on 17 June will aim to reach "political agreement" on his proposals, with reform to the growth and stability pact to be achieved by the autumn.
Meanwhile, EP Vice-President Silvana Koch-Mehrin has criticised the calls by EU President Herman Van Rompuy for a "strong economic government in the EU", saying that, "this would mean that other EU member states would essentially get more influence on the economic and social policies of Germany."
Posts
