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Disagreements over eurozone governance mount ahead of EU summit;
ECB keeps low interest rates in spite of increasing inflationary pressures
Ahead of the summit of EU leaders today, disagreements mount over the details of a Franco-German proposal that would see stronger coordination of six areas of fiscal and economic policies in the eurozone, in return for increasing the size and scope of the EU’s bail-out fund, the European Financial Stability Facility. The plan, known as a “pact for competitiveness”, includes a common corporate tax rate across the eurozone as well as curbs on wage increases and a minimum retirement age, reports FAZ. Several papers note that EU leaders are unlikely to agree on anything substantial today, making an agreement on the new eurozone structure in March less likely – a critical date for convincing markets that the eurozone has a credible plan for stability in place.
The German-dominated plan has been met with much scepticism, also from the French, who question the feasibility of wage coordination and want the permanent bail-out fund to be able to buy bonds directly. A French official is quoted by the FT, saying: “Let’s be clear, we’re not in full agreement with our German friends.” Belgian Prime Minister Yves Leterme is quoted by AFP saying he is “absolutely not in agreement” with plans to break the link between wage increases and the level of inflation across the eurozone. “We will not allow our social model to be undone”, he added.
The French Presidency announced yesterday that
Meanwhile, it is widely reported that, in spite of increasing inflationary pressures, the European Central Bank decided not to raise eurozone interest rates. The FT notes that the decision triggered a “sell-off in euro”. Bloomberg reports that this week the ECB failed to fully neutralise the liquidity created by its bond purchases for the third time since the program began.
An article in the Economist notes that, despite the significant austerity measures adopted,
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Eurozone comment round-up
A leader in the FT argues that “all the balanced budgets in the world will not solve the eurozone’s problems”, since the problems centre on ever-widening gaps between strong and weak nations, low long-term economic growth and an enfeebled banking sector.
In an op-ed in Le Monde, German Finance Minister Wolfgang Schäuble suggests that stronger coordination of eurozone countries’ economic and financial policies could be achieved under the Lisbon Treaty’s “enhanced cooperation” framework, meaning that a limited number of member states can establish closer cooperation in a policy area without other member states being involved. “With the concept of ’17 plus’, the question arises whether, on a voluntary basis, member states which are not yet part of the eurozone can join, especially in order to avoid reinforced cooperation in the eurozone turning into a durable division of the EU,” he adds.
In Le Figaro, Chief International Economy reporter Alexandrine Bouilhet describes the Franco-German “pact for competitiveness” as the “tree hiding the forest” and argues: “The markets listen to it with only half an ear, not to say that they are indifferent. They are only waiting for one thing: fresh money on the table to avoid a Spanish collapse. The rest is nothing but political window-dressing made of promises that only bind those who made them…”
An editorial in Le Monde’s front page notes: “This Franco-German dynamism can now be beneficial. In the medium term, the Commission’s relinquishment of part of its prerogatives is dangerous.”
An editorial in El País criticises Merkel’s proposal to break the link between wage increases and the level of inflation across the eurozone. A leader in FAZ notes: "The first point of the pact [for competitiveness], which is the abolishment of wage indexation systems, is already being disputed by French President [Nicolas] Sarkozy. When it starts like this, how will it end? [...] Should the Germans maybe introduce the 35 hours working week, so the French are willing to introduce pensions at 67? [...] With a centralised and dirigist economic government,
Hans-Werner Sinn, President of the IFO Institute for Economic Research, has criticised some of the proposals on the table to strengthen economic coordination in the eurozone, such as the idea of harmonising labour costs. Het Financieele Dagblad quotes Sinn saying: "This is ridiculous. This is a solution in the style of a centrally planned economy which is foreign to a market economy.”
In the Irish Times, Elaine Bryne argues: “The date of the Irish election, a month in advance of the March European summit, offers a window of opportunity for
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EU officials already working on computer models for EU taxes
The Guardian reports that the European Commission’s schemes for raising EU taxes are already being simulated through computer models, coming up with figures from €2bn to €100bn a year. The
MEPs propose higher fines for eurozone countries violating EU rules on deficit and debt
Euractiv reports that the European Parliament has put forward its own proposals to strengthen budgetary discipline in the EU and the eurozone. Under MEPs’ proposals, fines for eurozone countries repeatedly ignoring recommendations from EU institutions could reach 0.5% of GDP, instead of 0.1% proposed by the European Commission. A one-off penalty worth 0.5% of GDP has also been proposed for countries caught providing false data on their deficit and debt – such as in the case of
The Government yesterday opted in to an EU directive on cybercrime, despite MPs on the House of Commons European Scrutiny Committee’s refusing to clear the proposal late last year because they felt there were still questions for Ministers to answer about the plans. The directive sets “a maximum term of imprisonment of at least five years” for certain cybercrime offences. Under the Lisbon Treaty, the European Court of Justice will have full and ultimate jurisdiction over the application of these rules in the
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Liam Fox: Defence pact with
PA reports that Defence Secretary Liam Fox will today reject calls for
In an interview with Süddeutsche Zeitung, Prime Minister David Cameron has said that the Franco-British defence agreement “is not necessarily a prototype for a common European defence. But it could very well be useful as a model for other European nations that want to work closer together.”
Meanwhile, writing in the Times, Philip Collins argues that, under the Government’s foreign policy, “
Times: Collins Süddeutsche: Cameron
The FT reports that the European Commission has suggested creating a new kind of trading venue known as an “organised trading facility” to reign in some currently off-exchange share trading and over-the-counter derivatives as part of its review of the MiFID directive. Mark Hoban, Financial Secretary to the UK Treasury, is quoted saying, “Applying a one-size-fits-all regulatory approach to a vague and ill-defined category of facilities clearly makes no sense.”
Meanwhile, a separate article in the paper notes that MEPs have voted to approve the three heads of EU’s new financial supervisors after obtaining written assurances from the Commission and the Hungarian Presidency over the new authorities’ independence and their resources.
German insurance industry calls for improvements to “chaotic” Solvency II
Handelsblatt reports that the German insurance industry has called for substantial improvements to the EU’s Solvency II Directive, the preparation of which has been described as “chaotic” by industry representatives. Jörg von Fürstenwerth, CEO of the General Association of German Insurers, is quoted saying: "The trial run to Solvency II has demonstrated that the regulatory framework is not yet ripe for implementation.”
EU leaders will discuss European energy and environmental policy at today’s summit and the BBC’s Today Programme asks who will pay for the infrastructure needed to meet the EU’s various emissions and renewable energy targets.
BSkyB could have its rights to show Premier League football matches in pubs loosened following advice from a European Court of Justice Advocate General. Juliane Kokott told the ECJ that venues showing live Premier League matches from foreign broadcasters are not breaking EU law.
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On his BBC blog, Gavin Hewitt argues: “The EU is wedded to soft power. It could well have a central role in helping supervise elections in
In an interview with EUobserver, European Parliament President Jerzy Buzek has argued that the
Conservative Home reports that Polish MEP Michal Kaminski, former leader of the Conservative’s EP grouping, the ECR, has said he will remain in the group.
An article in the Economist argues that the recent thefts of carbon permits in the European Commission’s Emissions Trading Scheme have embarrassed the entire market.
Writing in the WSJ,
The Mail quotes Paul Polman, Chief Executive of Unilever, saying: “
The Guardian reports that EU Fisheries Commissioner Maria Damanaki has said that she intends to reform the EU’s Common Fisheries Policy in order to put an end to the practice of discarding caught fish exceeding EU fishing quotas.
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