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European Commission to demand increase in 2012 EU budget
The European Commission is due to present a draft EU budget for 2012 next week. European Voice reports that, according to EU sources, EU Budget Commissioner Janusz Lewandowski is expected to demand an increase and set out a ‘tactical’ proposal as a starting point for negotiations with member states, similar to the 5.9% increase initially envisaged by the Commission for the 2011 budget, which was eventually negotiated down to 2.9% by national governments.
European Voice European Voice 2

Schäuble opens the door to Greek debt restructuring;
Growing fear that Finland could block Portugal bailout
Reuters reports that the German Finance Minister, Wolfgang Schäuble, has officially acknowledged that Greece may need to restructure its debt. In an interview with Welt, Schäuble suggested that if the summer progress report raises “doubts about [Greek] debt sustainability” then “further steps [would] have to be taken”. He added that any restructuring before 2013 would need to be on a voluntary basis. Zeit quotes EU sources estimating the size of a potential haircut at 40% to 50%.

During a televised debate last night Finnish opposition leaders, Jutta Urpilainen of the Social Democrats and Timo Soini of the True Finns, indicated that they would block a Portuguese bailout if they were in government. Martti Salmi, an advisor to the Finnish Finance Ministry, told Reuters that polls suggest around 48% of Finns are against the Portuguese bailout and an increase in guarantees for the eurozone bailout fund. The fact that two out of the four leading parties now oppose the Portuguese bailout makes it highly possible that Finland could refuse to contribute to the bailout, which could halt the whole process, reports Swedish daily Svenska Dagbladet.

The IMF has praised Spain’s policies in the wake of the eurozone crisis, suggesting that it was “completely different” from the other peripheral economies. However, it did also warn over the state of its financial sector and the massive debt burden facing households. Separately, in the midst of the eurozone crisis, Sweden, not in the euro, yesterday announced estimated GDP growth of 4.6% this year and another round of tax cuts.
Reuters Nea Vima Zeit Reuters 2 FT Guardian FT 2 WSJ FT 3 WSJ 2 European Voice EurActiv YLE SVD SVD 2 AFPIrish Independent Irish Independent 2 IHT: Fishman Irish Times Irish Times: Casey Zeit Welt Reuters 4 Irish Times 2Reuters 5 Handelsblatt Handelsblatt 2

IMF: European banks still “vulnerable to shocks”
The BBC reports that the IMF, in its Global Financial Stability report, has called on European banks to increase capital holdings as they are still “vulnerable to shocks”. Furthermore, Irish and German banks face the most "acute" need to rollover their debt, with as much as half of all their outstanding debt due in the next two years according to the report. Meanwhile, City AM reports on new information published by PWC today, which suggests that German banks hold €225bn in non performing loans (loans which are unlikely to be repaid), while UK banks hold €175bn. Irish and Spanish banks hold €110bn and €100bn respectively.
City AM BBC Times Independent El Economista El Pais LUSA Telegraph Reuters 3 IMF Global Financial Stability Report

Conservative MPs pressure Cameron to reject ECHR ruling
The Mail reports that Conservative backbench MPs are putting pressure on David Cameron to resist the European Court of Human Rights’ demands to lift the ban on prisoners’ right to vote. They claim that an estimated 8,000 ECHR rulings have not been implemented by other countries in the past. The article quotes a leaked Government document confirming that “the direct sanctions for failure to comply with [ECHR] judgment are political rather than judicial. We are not aware of any country that has been expelled from the Council [of Europe] for non-execution of a judgment.”
Mail Express: McKinstry Open Europe research

European Voice reports that the EU is split over whether it should prepare a military mission to deliver humanitarian aid to Libya. Sweden has so far blocked the plan while Italy has voiced “strong doubts”. EU Foreign Minister Catherine Ashton hopes to complete the plan within “the next few days”.
Correio da Manhã Independent Welt Focus Zeit European Voice

EU on collision course with Berlin over “green tax” on diesel
The FT reports that the EU’s proposals for a new carbon tax will raise diesel prices across Europe by forcing countries to tax diesel at an equal or higher rate to petrol, due to its higher energy content. This is unlikely to impact the UK, at least initially, since it already taxes diesel at the same rate as petrol. Germany in particular has expressed concerns at the proposals. Holger Krahmer, the FDP’s spokesman on environmental affairs in the European Parliament, argued the tax will punish the buyers of more efficient cars and thereby contradict the EU’s climate goals.
FT EUobserver Handelsblatt AGI Le Figaro

The Express reports that the Institute of Directors has warned that EU proposals to harmonise VAT rules across Europe could mean the end of the UK’s VAT exemption on food, children’s clothes, books and newspapers.
Express Express: Leader

EUobserver reports that EU ministers have endorsed the European Commission's ‘Danube strategy’ aimed at improving navigation and cleaning up pollution on the Danube river, despite criticism that some of its targets could clash with green policies at national level.
EUobserver

European Voice reports that EU interior ministers have set a deadline of next month for the European Commission to present its plans to stem the flow of migrants from North Africa, amid continued disagreement over ‘burden sharing’ of immigrants.
European Voice

La Repubblica reports that yesterday the lower house of the Italian Parliament narrowly passed a draft bill putting a three-year time limit on all trials in which the defendant faces a maximum sentence of ten years. The bill follows repeated criticism and fines from the European Court of Human Rights (ECHR) due to the excessive slowness of Italy’s court system. If approved, the bill is will annul some of the trials involving Italian Prime Minister Silvio Berlusconi.
EUobserver Repubblica

Austrian Finance Minister, Josef Pröll, announced yesterday that he will be retiring from politics due to ill health. Pröll has been a leading voice in the calls for fiscal conservatism around the eurozone and led the demands for strong austerity conditions to be applied to any EU bailouts.
FT

The BBC reports that Unilever and Procter & Gamble have been fined €315m by the European Commission for fixing washing powder prices in eight European countries.
BBC Le Figaro IHT El Pais Welt Independent Mail

On Conservative Home Martin Callanan MEP has started a monthly report discussing the activities of the Conservative MEPs and the important issues in the European Parliament.
Conservative Home

New on the Open Europe blog

Why is Portugal in trouble?
Open Europe blog