Tuesday, 19 April 2011

Open Europe

Europe

True Finns to enter negotiations about forming a coalition government;
Open Europe: EU leaders’ two-fold eurozone gamble starting to unravel
Finland's True Finns party said yesterday that they were prepared to take part in talks on forming a new government in Helsinki - following their electoral breakthrough making them the third largest party. However, Timo Soini, the leader of the True Finns, is quoted by Scandinavian newssite E24, identifying Finland’s EU and eurozone policy as the most important issue for him in the negotiations. “This was a referendum on [Finland’s] EU policy”, he said. Yesterday, Soini also said that a softer line on a Portuguese bail-out – which the party has resisted so far – was “unthinkable”, according to Finnish daily Vasabladet.

Open Europe’s Director Mats Persson has an op-ed in today’s Wall Street Journal. He argues that “When European Union leaders forged their monetary union without a full political and economic merger, they gambled on two vital factors: That economic forces could be kept in check, and that national democracies could be managed. Over the past 16 months, we have been reminded time and again exactly how big and how irresponsible those gambles were.” He goes on, “irrespective of what we think of the True Finns, the election does highlight how powerfully a euro-zone crisis can contribute to shaping national politics”, arguing that “Writ large, [the] elections are a rebuke of one of the euro zone's central, and fatal, conceits: that political ambition can trump economic and democratic realities.”

He concludes, “Will EU politicians' second gamble turn out as ill-judged as their first? Time will tell. But one thing is clear. The political price that European leaders are paying to keep their flawed project afloat continues to rise.” Mats also appeared on Newsnight, arguing that we are entering “unchartered territory both in terms of the willingness of taxpayers in stronger eurozone economies to underwrite governments in weaker ones, and the extent to which citizens in weaker member states will put up with EU-backed austerity measures.”

Open Europe report on EU aid sparks Dutch debate on EU budget
De Telegraaf, Elsevier and politics blog GeenStijl.nl report that Open Europe's report revealing that EU aid funds have gone to a dancing project in Burkina Faso has caused a political row in the Netherlands, with Dutch MPs demanding that the EU budget be cut. Dutch MP for the leading VVD party, Han ten Broeke, is quoted saying that, “the EU is shooting itself in the foot. That's true for almost all structural and cohesion funds. The EU cannot be credible if it doesn't change its spending patterns.” Belgian daily Het Nieuwsblad quotes the organisers of the €485,000 dance project, Africalia, defending the project saying it is meant to “improve socio-cultural skills”.

The report is also featured on Conservative Home. In response to Open Europe’s report, the UK’s Development Secretary Andrew Mitchell said, “This report underlines the very reason why we are pressing for reforms of the way the EU spends aid…The EU's aid needs to be far more transparent, results-focussed and targeted at the poorest people, and we are now working with Brussels to help achieve this.”

Officials suggest Greece has already asked for a restructuring;
Bundesbank slams permanent Eurozone bailout fund
FT Alphaville reports that the Greek government has already discussed the possibility of a debt restructuring, particularly the extension of loans, with senior IMF and EU officials. Reuters reports that Germany expects Greece to require some form of debt restructuring before the end of the summer, according to unnamed officials. The Greek cost of borrowing continued to skyrocket, while problems also began to spread to other peripheral eurozone economies, as markets continued to price in the risk of a Greek debt restructuring.

The cost of borrowing on 10yr bonds for Spain also increased significantly to 5.54%, leading to suggestions that it is not as withdrawn from the peripheral crisis as previously thought. Meanwhile, the Irish Independent reports that the ratio of bad loans held by Spanish banks continues to increase, due to the unresolved crisis in the real estate sector.

Handelsblatt reports that the Bundesbank has slammed the agreement on the EU’s permanent bailout fund. The German central bank is not happy with the fact that bondholders will not take write downs on debt with a maturity of less than one year, as well as the fact that the fund does not have a clear limit. It also suggested that the interest rates charged would be lower than the IMF, creating significant moral hazard. Separately, Hans-Werner Sinn, head of the IFO economic institute has estimated Germany’s exposure to the eurozone bailouts is €400bn, reports FAZ, which is more than the size of the German government budget.

EU supports France in stepping up border controls with Italy
Home Affairs Commissioner Cecilia Malmstrom yesterday announced support for France’s action in stepping up border controls on migrants arriving from Italy. “Based on the information we had so far, they were not in violation of the Schengen border code and they had the right to do it", she said. French Interior Minister Claude Guéant confirmed that migrants will be sent back to their point of arrival unless they can prove they have adequate funds to support themselves. El Pais quotes Marine Le Pen, the Leader of France’s National Front Party, saying, “only by France leaving Schengen will the country be able to control its borders”.

‘EUfor Libya’ mission could see up to 1,000 troops deployed
While speaking about the EU’s military mission to support humanitarian assistance in Libya, the so called ‘EUfor Libya’ mission, Michael Mann, a spokesperson for EU Foreign Minister Catherine Ashton, said it is unclear how many troops would be deployed, though it would be "definitely less than 1,000", reports CNN. In the IHT, columnist Judy Dempsey argues that “The Libya crisis is even worse news for Europe and its military ambitions. It shows more clearly than ever how most E.U. countries are unwilling to match their defence ambitions with any broad strategic goals”.

The WSJ reports that, according to an unnamed source, the EU budget for 2012, to be presented tomorrow, is expected to increase substantially and above inflation. With inflation running at 2.7% in the euro zone, the budget increase is likely to be significantly higher than the 2.9% rise in 2011.

De Standaard reports that the Belgian Constitutional Court has approved a lawsuit challenging the incorporation of the European Financial Stability Facility into Belgian law and will now look into it.

According to Dow Jones, Belgian Finance Minister Didier Reynders has said that imposing capital controls on EU member states is worth debating, as it could prevent foreign investors rushing into peripheral eurozone economies causing inflation and potential overheating. However, Reynders suggestions contravene EU internal market rules which ban the use of such controls.

Handelsblatt reports that the European Commission is planning to force member states to implement the Data Retention directive in its current form, despite the fact that it will soon be revised. In particular, Germany has refused to implement the directive following a ruling from the Constitutional Court ruling that it violates the guaranteed right to privacy.

The Telegraph notes that the EU is under pressure to enforce equality rules on airlines as increasing numbers of disabled people are being refused travel because they are in a wheelchair.

EurActiv reports that public support in Croatia for EU accession has reached an all-time low, with only 23% of Croatians explicitly supporting joining the EU.

World

Standard & Poor’s cut its outlook on the US government’s debt to “negative” yesterday and warned of an increased likelihood of a downgrade from its coveted AAA credit rating if legislators cannot agree on how to handle America’s national debt.

New on Open Europe blog

The Great Euro Gamble

EU External Aid: Who is it for?

The EU’s Walls of Jericho moment?


Posted by Britannia Radio at 17:29