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Europe

Spanish debt downgraded ahead of EU summit;
Borrowing costs soar to new record highs in peripheral eurozone economies
Moody’s credit rating agency has today downgraded Spanish government debt by one notch and gave it a negative outlook causing a spike in the borrowing cost for Spain. Moody’s reasoning was that the cost of restructuring the Spanish banking sector could far exceed the governments estimation of €20bn, potentially costing up to €120bn.

Yesterday also saw interest rates on government debt reach new highs for Portugal, Greece and Ireland. Portugal managed to raise €1bn in an auction of 2yr government bonds but at an interest rate of 5.99%. Meanwhile, Portuguese Secretary of State for Treasury and Finance, Carlos Costa Pina, admitted that said that the current cost of borrowing is “unsustainable in the long term”, reports Jornal de Negócios.

Reuters reports that, according to a French government source, the eurozone summit will focus on tackling Portugal’s problems rather than reaching an agreement on the proposed competitiveness pact. Handelsblatt conversely argues that eurozone leaders have already agreed on committing budgetary restraints into national legislation but not on greater wage harmonisation.

Separately, the FT covers the growing support for the ‘I won’t Pay’ movement in Greece, where members refuse to pay for public services in protest against the austerity campaign imposed by the government. Another article in the paper suggests that a significant growth in German imports this year will help rebalance the economy and may help boost growth in the wider eurozone.
FT FT Alphaville WSJ FT Deutschland Le Monde Le Monde 2 FT 2 Irish Independent Irish Times Telegraph HandelsblattBloomberg Jornal de Negócios Expansion Expansion 2 Diario Economico FT 3 Reuters WSJ 2 FT 4 WSJ 3 FT 5 Le Figaro FT 6 Irish Independent Irish Times Irish Times 2 Irish Times 3 European Voice Reuters Handelsblatt 2 Conservative Home: Flight FT: Sutherland FT 7

EU divided on no-fly zone over Libya;
New EU North Africa strategy proposes “free and fair elections” as criteria for aid
EU and NATO officials meet today to discuss the ongoing crisis in Libya. The Irish Times reports that EU officials are concerned a no-fly zone over Libya, or any other military intervention, may inflame anti-western sentiment. No agreement is expected on a no-fly zone at tomorrow’s summit.

EU officials are due to discuss proposals made by the Commission and the EEAS to reform the EU’s policy in North Africa at an emergency summit tomorrow. The BBC reports that the strategy document notes that "A commitment to adequately monitored, free and fair elections should be the entry qualification for the partnership".

Meanwhile, UK Foreign Secretary William Hague and his German counterpart Guido Westerwelle are pushing for an EU declaration stating that "the EU and its member states will not work or co-operate with Gaddafi and that he has to step aside to allow for a true democratic transformation of the country".
Irish Times WSJ: Real Time Brussels blog BBC El Pais EUobserver EUobserver 2 BBC El Pais 2 IndependentIndependent: Hamilton Guardian EurActiv European Voice Expansion Publico BBC 2 Reuters Italia

FAZ reports that in a recent employment drive, only seven UK applicants were selected, out of 308, for jobs in EU institutions. German applicants scored best, with 56 successful applicants, followed by France with 47, then Italy and Spain.
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Danish Finance Minister: We will seek to abolish the UK rebate during our EU Presidency
In an interview with Berlingske Tidende, Danish Finance Minister Claus Hjort Frederiksen argued: “I’ve made clear to the European Commission that the Danish Presidency [due to commence in January 2012] will work loyally to make progress in the [EU] budget battle with the objective of abolishing the rebates. If it doesn’t work, then we will ask for our own rebate.” Hjort Frederiksen described the British rebate as a “bad habit”.
Les Echos Berlingske Tidende: Hjort Frederiksen

Dutch parliament demands PM preserve national control over pensions, wages and taxation
NOS reports that Dutch Prime Minister Mark Rutte has been told by the Dutch Parliament that no more competences should be transferred to the EU level, particularly over pensions, wages and taxes proposed under the Franco-German ‘pact for competitiveness’.

Meanwhile, the Editor of Dutch magazine Elsevier, Syp Wynia, describes the Franco-German proposals for eurozone economic government as “the biggest coup in the history of European integration.” He adds that, “There is hardly any eurozone country with a political majority for large-scale transfer of political powers to Brussels…The exclusion of competition by creating fiscal and economic Brussels uniformity would be a solution that is worse than the current disease.”
NOS Elsevier Elsevier: Wynia

New ECR leader defends liberal stance on gay rights
In an interview with Polish daily Rzeczpospolita, new ECR leader Jan Zahadril defended his support for partnership rights for homosexuals, saying “If anyone accuses me of excessive liberalism, I can live with that. I understand why. Czech nature is completely different to Polish. And I'm a typical Czech. Czechs and Poles have much in common, but also vary on many issues…Czech society is more secular.”

On his Telegraph blog, Dan Hannan comments on yesterday’s election of Zahradil, noting “So what will the Europhiles say about Jan? It won’t be easy to make him out as a Neanderthal: he speaks six languages and is liberal about immigration and gay equality”, adding that “Jan won the support of a majority of British Conservative MEPs,” meaning that the election cannot be seen as a defeat for the Conservatives.
Telegraph blogs: Hannan Rzeczpospolita

The UK Government is preparing to reverse its pledge to reform air passenger duty (APD), after finding the measures proposed are incompatible with EU laws.
Guardian

In an interview with Touteleurope.eu, French Europe Minister Laurent Wauquiez argued: “There must be no ambiguity. The French government will never agree to call into question again the European Parliament’s seat in Strasbourg…To be clearer, if we need to refer the matter to the ECJ, we will do it.”
Touteleurope.eu: Wauquiez

European Voice reports that, MEPs will vote next week on proposals to tighten regulations and potentially create a publicly funded European ratings agency.
European Voice

The Sun quotes a ‘Government source’ saying that David Cameron and Lib Dem leader Nick Clegg have decided to kick plans for a British Bill of Rights “into the long grass” because “both parties know they won't agree” on the role of the European Court of Human Rights.
Sun Telegraph

The Telegraph reports that in 2005, the European Parliament spent £600,000 on six body scanners which have never been used because MEPs complained it would be an infringement of privacy. The European Parliament failed to sell the scanners, which are now considered technically out of date.
Telegraph

Finnish daily Kaleva reports that drivers in Finland and Germany are refusing to buy a new generation fuel with 10% ethanol content called E10 – the introduction of which is required under EU rules on biofuels – due to concerns that it could damage vehicles’ engines.
Kaleva OE blog

In the Telegraph, Jeremy Warner argues that the new round of stress tests for European banks “is proving to be yet another charade…To conduct the process in conditions of strict secrecy is to undermine a large part of the purpose from the outset”.
WSJ WSJ: Smith Telegraph: Warner Expansión

EU states fail to agree on curbing debt swaps
The FT reports that EU member states failed to agree yesterday on whether to ban the controversial practice of ‘uncovered’, or ‘naked’, credit default swaps, also known as naked short-selling, meaning progress on new rules is likely to be delayed, despite support from the European Parliament. France and Portugal, with some German support, argued in favour of an outright ban, while the UK and a number of other countries were opposed.
FT

David Cameron yesterday rejected a call during PMQs to hold a referendum on the UK’s EU membership, saying that the UK was better off staying within the EU while pushing for reform.
BBC: Cameron PMQs Express Express: Editorial

El País reports that EU Climate Commissioner Connie Hedegaard has asked the Spanish government to reconsider its decision to impose retroactive cuts on incentives for renewable energy projects.
El País

New on the Open Europe blog

Portugal: The cost of dignity
Open Europe blog

EU patent falls victim to the arbitrary world of EU judges
Open Europe blog