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EU Treaty amendment to allow for permanent euro crisis fund published;
France backs German opposition to eurozone bonds and enlarged euro rescue fund
The draft amendment to the Lisbon Treaty, which would allow for the establishment of a permanent crisis resolution mechanism for the eurozone has been disclosed to members of the Irish parliament's European Affairs Committee. The draft amendment states: "Member states whose currency is the euro may establish amongst themselves a stability mechanism to safeguard the stability of the euro area as a whole. The granting of financial assistance under the mechanism will be made subject to strict conditions." Committee members and Irish Europe minister Dick Roche have said that the amendment is unlikely to require a referendum in Ireland, reports the Irish Times.
According to the draft conclusions to be endorsed at next week's European Council summit, the mechanism should be up and running as of 1 January 2013, six months ahead of schedule. AFP notes that non-eurozone countries will be "associated" with the plans, opening the possibility of further financial contributions as is the case with Britain, Denmark and Sweden in the Irish bail-out.
Meanwhile, France has backed German Chancellor Angela Merkel in her opposition to Eurobonds and an increase to the current eurozone bail-out package, ahead of next week's European Council meeting. The WSJ quotes a French official from President Nicolas Sarkozy's staff saying: "Today the fund has a size that allows it to confront possible demand so the question of increasing it is not being asked."
The Irish Independent reports that the German government failed to borrow the full €5bn it wanted to raise from a sale of two-year bonds on Wednesday. Handelsblatt reports of a recent poll revealing that 36% of Germans wants the Deutschemark back. De Volkskrant reports on an earlier poll showing that 57% of Germans regret leaving the Deutschemark.
Expansión reports that, in its December bulletin, the ECB has warned that some eurozone banks "depend excessively on ECB liquidity." The Zero Hedge blog notes that "nobody but the ECB is buying Greek, Portuguese and Irish bonds" - as revealed by a bid list provided by the ECB - suggesting that Portugal is next in line for a bail-out. Les Echos notes that, according to the ECB's financial stability review, eurozone banks will need to raise more than €1,300bn only on the bond markets over the next two years, while eurozone governments in turn will have to raise more than €850bn only in 2011. Credit rating agency Fitch yesterday cut Ireland's credit rating to BBB, two levels above Greece.
In an interview with the FT, Italian Central Bank Governor Mario Draghi warns against the possible consequences of the ECB's controversial bond-buying programme and says he is "very careful in stating the terms under which these purchases could be undertaken because I'm only too aware that we could easily cross the line and lose everything we have, lose independence, and basically violate the [EU] treaty."
Irish Times Irish Times 3 Irish Times Irish Times 2 WSJ FT: Draghi AFP AFP 2 Les Echos Euractiv Bloomberg WSJ 2 EUobserver Le Figaro: Westerwelle IHT: Westerwelle Le Figaro EUbusiness Irish Independent 2 Le Figaro Die Presse Handelsblatt FT Deutschland Les Echos Expansion Zero Hedge FT Alphaville European Council draft conclusions
Eurozone comment round-up
Handelsblatt economic editor Daniel Goffart argues that "Juncker's plan is expensive and full of illusions," as "eurobonds won't calm down the markets." He explains that "poor countries are threatened with higher interest rates", since under Juncker's proposal "for all state debts up to 40% of GDP there would be eurobonds. The remaining 60% would need to be financed by single countries themselves just as now it is the case [...] Eurobonds would be traded at a low interest rate, but the remaining bonds to finance the 60% 'shabby remainders' would become considerably more expensive than today for the PIGS. The advantage of low interest rates for eurobonds would therefore again be destroyed as for the remaining national bonds a lot more would need to be paid. On balance, the financing costs would not decrease."
Goffart concludes that an alternative would be "to ultimately have eurobonds for the 100%," but this would "make Germany forever the paymaster of Europe. That Angela Merkel resists this cannot be considered as 'un-European behaviour' even by a sly dog statesman as Juncker."
The Economist's Charlemagne argues: "Using the ECB to back sovereign debt might be seen in some quarters as another stealthy step towards fiscal union. One more foundation stone quietly being laid is the first issuance next year of common bonds, for Ireland, by the European Financial Stability Facility. One way or another, say enthusiasts, a Eurobond is just a matter of time. That might provide an insurance policy for the future. But what of the current inferno?" An article in the Economist notes that the euro crisis has shown that power in the EU has shifted from France to Germany.
Dutch magazine Elsevier's EU correspondent Carla Joosten argues that "EU member states should really question whether the eurozone countries have sufficient economic potential to maintain a strong euro. If the answer is negative, the question on how to realise the divorce is on the table. But that discussion is being postponed as long as possible, just as in real life."
Economist: Charlemagne Economist Economist 2 Economist 3 Economist 4 Economist 5 Economist 6 Irish Times: Munchau Expansion: Valverde Expresso: Monteiro Expresso: Costa Irish Times: Carswell Handelsblatt: Goffart WSJ: Buiter
EU defence ministers back closer military cooperation
Deutsche Welle reports that yesterday EU defence ministers endorsed a plan presented by Sweden and Germany to analyse areas where closer military cooperation between EU member states would be possible. Meanwhile, EUbusiness notes that the annual budget for the European Defence Agency has been frozen at €30.5m after the UK opposed the €1.2m increase proposed for next year.
DW EUbusiness Council conclusions
Der Spiegel: US mocks "dwarf power EU"
An article in Der Spiegel reports on WikiLeaks cables on the EU-US relations and notes that "the US is mocking the dwarf power EU." According to the cables, the US does not rate European leaders as very influential. The cables also indicate that the "special relationship" between Europe and the US is now a thing of the past and that the Obama administration seeks more important allies.
Meanwhile, in a comment piece in FAZ, EU correspondent Nikolas Busse argues that "it is becoming clear that in the foreseeable future [the European External Action Service] will not give the EU the expected influence."
Der Spiegel FT Brussels blog FAZ
Open Europe's briefing listing the top 50 examples of EU wasteful spending was featured on BBC World Service in a programme discussing the flaws of EU structural funds.
BBC World Service OE top 50 examples of EU waste
On his blog, BBC Europe editor Gavin Hewitt cites Open Europe's daily press summary in a post looking at the exchange between Eurogroup Chairman Jean-Claude Juncker and the German media.
Leaders of the main political groups in the European parliament have agreed to accept an increase of 2.9% to the EU's 2011 EU budget, paving way for a deal with member states. Commission President Jose Manuel Barroso has promised to come forth with a proposal for an EU tax next summer.
European Voice EUobserver Belga
The Committee of European Bank Supervisors will today unveil new rules for bank bonuses, possibly including requirements that only 20% of bonuses can be paid in cash, at least 50% must be paid in shares, while up to 60% of any payout must be deferred over a number of years.
In an op-ed for the FT, Adjunct Professor at the Copenhagen Business School Bjørn Lomborg argues that "Europe needs real vision on climate" and notes: "Standard climate models show that, by the end of this century, the EU's [20/20/20] approach will reduce temperature rises by approximately 0.05°C - almost too small to measure [...] The EU is spending $250bn to achieve minuscule reductions in temperature rises."
Euractiv reports that yesterday French Europe Minister Laurent Wauquiez told the French parliament that Bulgaria and Romania are not ready to join Europe's visa-free Schengen zone, due to poor border and immigration controls.
The Irish Independent reports that executives at Allied Irish Bank were awarded bonuses averaging €180,000 last year despite the bank's record losses and the taxpayer-backed bailout.
A leader in the FT argues in favour of a single EU patent.
The Commission has said that it may not consider a petition presented under the European Citizens' Initiative scheme by environmental groups Greenpeace and Avaaz. The petition enclosed the signatures of over one million EU citizens and called for a ban on GM crops until a new scientific body is set up to assess their impact. "Strictly speaking, they would have to do it all over again" as the ECI is not fully established yet, Commission administration spokesman Michael Mann is quoted saying on EUobserver.
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