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EU prepares revamped bailout package for Greece following rumours of a euro exit;
Osborne: “We certainly don’t want to be part of any bailout of Greece”

Der Spiegel reported on Friday afternoon that, according to German government sources, Greece was threatening to leave the eurozone prior to a ‘secret’ meeting of eurozone Finance Ministers last Friday. The report caused a sharp drop in the price of the euro but EU officials, as well as Greek and German governments, moved quickly to deny the rumours.

Reports suggest that European officials are preparing to revamp the Greek bailout package and possibly provide a second bailout, after the Greek government confirmed that it would require additional help. Under the original package it was hoped Greece would return to the markets early next year, as it needs to raise around €30bn, but with borrowing costs still reaching record highs that looks increasingly unlikely. “We think that Greece does need a further adjustment programme,” said Jean-Claude Juncker, Luxembourg’s Prime Minister. The Chancellor George Osborne also admitted that Greece may need “additional assistance from the eurozone”, but he added that Britain would not be part of such measures, other than under its IMF contributions, saying: "We certainly don't want to be part of any bailout of Greece, a second bailout of Greece". Open Europe’s Raoul Ruparel appeared on LBC yesterday discussing the Greek crisis and what the UK’s approach should be.

Juncker said that Friday’s meeting had ruled out “the restructuring option” but it is thought that there were talks over an extension of debt maturities and possibly using the eurozone rescue fund to purchase Greek bonds. Welt reports that Germany is arguing in favour of some form of restructuring and rescheduling but is “isolated”. Meanwhile, the spotlight has switched back to Spain with growing concerns that the renewed fears over Greece will finally drag the Spanish economy fully into the peripheral debt crisis.

The BBC reported over the weekend that Ireland has agreed a reduction to the interest rate charged on its bailout loans with the eurozone. The reduction is expected to be around 1%, giving an estimated saving of €400m. It is not yet clear what concessions the Irish government will make in exchange for the new rate, however, Ireland maintains that it will not increase its corporate tax rate.
Spiegel FT WSJ EurActiv European Voice CityAM Welt Guardian IHT IHT 2 Daily Telegraph SVD FT 2 FT 3 Saturday’s Times Saturday’s Times 2 Saturday’s Guardian Saturday’s Telegraph AFP Observer Mail on Sunday Sunday TimesReuters Sunday Telegraph Sunday Telegraph 2 Le Figaro El País Le Monde Reuters France Irish Independent Irish Independent 2 Sveriges Radio Yle Irish Times Irish Times 2 Irish Times 3 BBC WSJ 2 Elsevier: Wynia Nu.nl TijdKathimerini Echos: Barre Reuters Jornal de Negocios

New Open Europe briefing: EU’s €13bn commitment to North Africa and the Middle East has failed to promote democracy and development

Open Europe yesterday published a new briefing looking at EU assistance to its Mediterranean neighbours. The briefing argues that the EU has failed to promote democracy and development in North Africa and the Middle East despite committing €13bn in aid to the region between 1995 and 2013. It also highlights how the EU’s preference for security over democracy led it to develop close ties with – and in some cases provide direct funding for – regimes that have since lost popular legitimacy, such as Egypt and Tunisia. For example, in 2009, these two countries were allocated a combined total of €169m under the EU’s Neighbourhood Policy in the form of sector budget support, meaning money going directly to governments. Open Europe’s Director Mats Persson was quoted in the Sunday Times arguing: “The [European] Commission needs to explain how these regimes were able to pass its democracy and anti-corruption tests for direct aid funding, while people in these countries took to the streets protesting against their corrupt and autocratic rule.”

Open Europe’s report also stresses the EU’s mixed record on enhancing trade and prosperity in the region, noting that the annual trade deficit of Mediterranean countries with the EU soared from €530m in 2006 to €20.4bn in 2010. Open Europe’s Vincenzo Scarpetta is quoted by AFP saying: “Moving forward, Europe must establish a far stronger link between reforms on the ground and funding, with particular focus on boosting trade in the region." Vincenzo is also quoted by the Express, Svenska Dagbladet, Egyptian newspaper al-Ahram and Bulgarian business dailyDnevnik. Open Europe’s briefing also featured in the News of the World and in Dutch daily De Volkskrant.

In an op-ed published by Le Monde and other European dailies, European Council President Herman Van Rompuy argues that, “In the past, we haven’t always respected our own values by giving priority to the interest in regional stability and even accepting regimes which weren’t democratic in order to counter the risk of fanatic dictatorships.”

Writing in Dutch daily Het Financieele Dagblad, Open Europe Research Director Stephen Booth argued that national contributions to EU development aid spending should be voluntary. He asked, “Why is the Commission so reluctant to move to a voluntary-funded model? The answer, one suspects, is that it would result in far less money heading to Brussels. People might also question whether other areas of the EU budget might be better funded nationally rather than via Brussels: the Common Agricultural Policy, or regional spending within the Union, perhaps?”

Meanwhile,EUobserver reports that EU member states have agreed to impose a travel ban and asset freeze on 13 high-level members of the Syrian regime, but Syrian President Bashar al-Assad has for the moment been kept off of the EU’s sanctions list.
OE research OE press release Sunday Times Express EUobserver FT Weekend Saturday’s Guardian AFP SVDDnevnik FD: Booth Le Monde: Van Rompuyal-Ahram De Tijd: Van Rompuy

Commission’s £225m bill to ‘communicate’ the EU

The Telegraph reports that the European Commission will next year spend over £225m on communication campaigns to sell the EU to the public. Almost half the cost, £115m, will be spent on administration and the 1,078 staff who work in the Commission's Directorate General for Communications. Open Europe Director Mats Persson is quoted saying, “British taxpayers shouldn't be paying for PR exercises that vainly try to make them love the EU. The EU needs reform not more spin.”
Telegraph

Ashton demands an extra €27m for EU’s diplomatic service
The Sunday Telegraph reported that EU Foreign Minister Baroness Catherine Ashton is formally requesting a 5.8% increase – an extra €27m – in next year’s budget for the EU’s new diplomatic corps, the European External Action Service (EEAS). A Commission official was quoted saying: “There have been too many promotions, too many senior members – there are too many chiefs at the EEAS. Every promotion means salary and pension costs go up…Now they are asking for a bigger budget increase than any other EU institution.” The Sunday Times reported that Ashton is facing criticism from her own staff over her “arrogant” and “remote” management style and that a group of civil servants threatened to take legal action over her decision to place them in open-plan offices.
Mail on Sunday Sunday Times Sunday Telegraph

Leader of the True Finns: “People feel betrayed” by the EU bailouts

In the WSJ, leader of the True Finns Timo Soini argues that, “Current plans are destroying the real economies of Europe through elevated taxes and transfers of wealth from ordinary families to the coffers of insolvent states and banks.” He adds, “This is not just about economics. People feel betrayed.” In an interview with the FT Erkki Liikanen, President of the Finnish Central Bank, insisted that Finland would continue to be a “constructive member” of the eurozone and warned “that if you don’t contain this sovereign crisis it may rebound and hit us again in Finland”.

Writing in the Sunday Times, David Smith argued, “In the long term, Europe will need a new currency arrangement. Whether that involves a northern euro and a southern euro, or a single ‘hard’ euro around which other national currencies float, can be debated.”

FAZ quotes leading German economist Hans-Werner Sinn, arguing: "Greece leaving the eurozone would be the lesser evil" as trying to enact an internal devaluation could lead the country to the “brink of civil war”. FAZ also ran a front page leader titled “The Failure”, referring to the Greek bailout.
FAZ Handelsblatt Express: Leader El País: Crespo Le Figaro: de Capèle Les Echos: Barré Guardian: Elliot FT Letters: Tilford Observer: Clark FT Letters: Lachman Sunday Times: Smith City AM: Shawcross Helsingin Sanomat FT: Munchau WSJ: Stelzer WSJ: Soini Spiegel FAZ Leader Bild: Müller-Vogg NY Times: Krugman

In an op-ed in Le Monde, the EU Commissioners for Justice, Viviane Reding, and Home Affairs, Cecilia Malmström, discuss the recent proposals to reintroduce internal border controls within the Schengen area in exceptional circumstances and argue: “We must avoid that [national] governments define the conditions for reintroduction of border controls by themselves. Given that it will affect us all, such a decision should necessarily be approved by European institutions.”
Le Monde: Malmström & Reding

The Times reports that the UK Government’s Committee on Climate Change has said Britain must build 14 new nuclear plants because that is the cheapest way of meeting compulsory EU carbon reduction targets. The cost of meeting the EU obligation to increase the share of energy from renewable sources from 3% to 15% by 2020 is expected to add at least £50 to the average household’s annual energy bills in the next ten years.
Times Mail BBC: Today

Der Spiegel reports that German Chancellor Angela Merkel looks unlikely to support Mario Draghi’s candidacy for ECB President, as she does not believe the he has the support of the German public. Merkel is expected to offer him the job as Head of the IMF, once Dominique Strauss-Kahn steps down to run for the French Presidency, as consolation.
Spiegel Zeit

The FT Weekend reported that European officials will debate a revised version of the proposed ban on naked short selling this week. The revised version includes an agreement to relax the ban if liquidity in government bond markets was seriously affected. However, numerous countries, including the UK, are still sceptical of the proposals.
FT Weekend FD

The EU is planning to rescind trade benefits for dozens of developing countries, including Russia and Brazil, because officials believe they have grown too wealthy and no longer deserve preferential access to the world’s largest market.
FT

New on the Open Europe Blog

Greece considering eurozone exit?
Open Europe Blog