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Europe

ECB’s credibility under threat from rising inflation;

Investors rule out buying risky eurozone bonds

The WSJ reports that eurozone inflation reached 2.2% in December, above the ECB’s mandated target to keep inflation just below 2%. The figures could undermine the credibility of the ECB and its current policies of low interest rates and purchases of struggling eurozone governments’ bonds. The article notes that Barclays Capital expects inflation to rise to 2.3% this month and 2.5% in February.

The Irish Independent notes that Switzerland's central bank has rejected using Irish government bonds due to be repaid between 2011 and 2025 as collateral for future loans. The article adds that the investment fund Pimco has also stopped buying Irish government bonds, as well as bonds issued by other ‘peripheral’ eurozone economies. Pimco’s Executive Vice-President Andrew Bosomworth is quoted saying: “We’re also not investing new money in countries with contagion risks, even if they’re solvent, like Spain and Italy.” The WSJ notes that, in a survey of 154 real-estate professionals by property analysts at J.P. Morgan Cazenove, 77% of those polled predicted Spain would be the worst-performing property market in Europe in 2011. The best performers are expected to be the UK, Germany and France.

Meanwhile, the EU will today sell about €5bn in five-year debt, the first part of around €50bn in bonds that will go towards the Irish bail-out over the next two years. The euro bond will be issued by the European Financial Stabilisation Mechanism on behalf of all EU member states, including the UK.

FT Les Echos Irish Independent WSJ WSJ: Analysis FT 2 European Voice Les Echos Irish Times Bloomberg Guardian Bloomberg 2 New Europe: Strauss-Kahn New Europe: Wolfgang Schäuble Libération AFP WSJ: Smith WSJ

FAZ: Merkel may withdraw support for Weber to succeed Trichet at head of ECB

FAZ looks ahead to the appointment of the new ECB President, which EU leaders are expected to make in June, and suggests that Chancellor Angela Merkel may drop her support for her compatriot Axel Weber as a concession to France. The article notes that Merkel might also prefer the ECB to maintain its interventionist role in the eurozone crisis, something that Weber has fiercely opposed, because the ECB’s activism goes largely unnoticed by domestic voters.

FAZ

Top EU officials entitled to three months off per year on full pay

The Telegraph reveals that 1,962 senior EU officials, earning between £104,000 and £185,000 a year, were entitled to three months time off work on full pay last year. Top officials are allowed 24 days leave, 11 ‘non-working’ days over Christmas and six public holiday days. On top of this, EU officials are entitled to an extra 24 days off per year if they choose to work an extra 45 minutes per day, as part of a flexi-time scheme originally designed for lower paid secretarial staff. Open Europe’s Stephen Booth is quoted saying: "If the top ranks of the EU's civil service can take this much time off it raises interesting questions about how much work they are actually doing."

Telegraph

City traders brace themselves for new EU financial watchdogs

The FT reports that traders and executives in the City of London are concerned that the work of the three new European Supervisory Authorities will be hijacked by political agendas and that the bodies may not be able to keep Europe competitive with other global financial centres. Barney Reynolds from the law firm Shearman & Sterling is quoted saying: “A single market [for financial services] is a good thing [...] But people need to be close to the markets they are regulating.” He adds that the new EU supervisors may follow “a moralistic political agenda”, rather than conduct a “dispassionate technical exercise.”

Meanwhile, an article in the Express notes that the new pan-EU watchdogs will cost EU taxpayers £35m this year, rising to around £58m in three years’ time. Open Europe’s Siân Herbert is quoted saying: “The EU’s new financial watchdogs will see the UK lose substantial control, despite the City being home to the bulk of the EU’s financial services industry. The cost of these new supervisors will only increase as the EU finds more work for them to do.”

FT FT 2 Express Express: Leader Expansión: editorial Il Sole 24 Ore OE research

UK Environment Secretary: CAP is “morally wrong”

The Guardian reports that Environment Secretary Caroline Spelman will today call for reform of the EU’s Common Agricultural Policy, including a reduction of direct subsidies and an end to export bans. Speaking at the Oxford Farming Conference, she will say that the distortion of trade caused by the CAP is “morally wrong” and will argue: "We need to make the new CAP fundamentally different. It must be about the new challenges of achieving global food security and tackling and adapting to a changing climate. Now is the time to make very significant progress towards reducing our reliance on direct payments. Rising global demand for food and rising food prices make it possible to reduce subsidies and plan for their abolition.”

Guardian

The Irish Times notes that 25 March is emerging as a likely date for the forthcoming Irish general election.

Irish Times

Euractiv reports that French Budget Minister François Baroin said yesterday that the new media law passed by the Hungarian government is “incompatible with the application of ideas on press freedom that have been validated in the European Treaties”, and called on other EU member states to take action against it.

Euractiv Le Monde: Editorial AFP AFP 2

The Irish Times reports that the European Commission will launch a consultation tomorrow on how to compel bondholders to bear costs in future bank collapses. Bloomberg reports that the Commission is also expected to present new proposals which would give national regulators of cross-border banks the power to block new products and limit trading risks at banks deemed too big to fail.

Irish Times Bloomberg

EUobserver notes that EU Foreign Minister Catherine Ashton has failed to persuade the UK and other Beijing-critical member states to lift the EU arms embargo on China, in spite of China continuing to gain influence within the EU through bond purchases from vulnerable eurozone countries.

EUobserver

The Romanian parliament has postponed its ratification of a Lisbon protocol allowing 12 EU states to appoint 18 extra members to the European Parliament. EUobserver notes that the decision was taken shortly after Romania’s entry into the Schengen area was postponed.

EUobserver

The Commission has announced that a universal charger for mobile phones will be available in the coming weeks, under new EU harmonised standards.

Euractiv

UK

Support for the Liberal Democrats has slumped to its lowest level since the party was formed in 1988, according to the Independent's “poll of polls”.

Independent Independent: Grice Independent: Leader