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EU working on second Greek bail-out in order to get the first one back on track;
Irish Cabinet Minister: Ireland may also need another bail-out

Reuters reports that the EU is drafting a proposal for a second EU/IMF bail-out for Greece to ensure the country receives the next tranche of funding from the original bail-out, after the IMF confirmed it would only release more funds if it received guarantees that Greece would be able to fund itself over the next 12 months. Fitch has said that Greece will need another €90-100bn to meet its funding needs until the end of 2014. This would avoid the country from defaulting and “potentially buying it sufficient time to put necessary reforms in place to enhance public debt sustainability," Fitch said.

The latest progress report on the state of the Greek crisis, compiled by the EU/IMF/ECB, is expected this or early next week and should highlight how large a funding gap Greece will have over the next year. However, the FT reported yesterday that the EU/IMF may only provide half of the required amount with the rest being made up by the sale of Greek public assets. Any second bail-out is likely to include even stricter conditions than the first and may even include giving the EU/IMF a strong say over privatisation and tax collection, according to the FT.

Kathimerini reports that Greek opposition leader Antonis Samaras continues to insist on tax cuts in return for support for a new austerity package. Protests in Greece against austerity have continued into their sixth day but remain peaceful.

FT Deutschland reports that German Finance Minister Wolfgang Schäuble said yesterday that a second Greek bail-out would only be possible if conditions for the first bail-out are fulfilled, saying: "Only when the conditions [of the EU/IMF/ECB progress report] are fulfilled, can we broaden the program...If not, than we will experience what will happen with a currency union if it is no longer capable to solve its problems."

Reuters reports that Ireland may also have to ask for a second bail-out, following comments by Irish Transport Minister Leo Varadkar over the weekend. Varadkar told the Sunday Times that Ireland may not be able to return to the markets as soon as is expected under the current bail-out conditions, saying: "I think it's very unlikely we'll be able to go back next year. I think it might take a bit longer ... 2013 might be possible but who knows?" Prime Minister Enda Kenny moved quickly to dispel the rumours, saying: "There will be no need for a second bail-out for Ireland in 2012.”

Spanish daily ABC cites Open Europe research warning of a “perfect storm scenario” in Spain, which would see a worsening of the crisis in countries such as Greece and Portugal coincide with domestic factors such as a large drop in real estate prices and an increase in the number of bad loans in Spanish banks.
Reuters FT Independent Irish Independent IHT CityAM WSJ WSJ 2 Express Guardian Monday's FT Monday's FT 2 Irish Times Monday's FT 3 EUobserver Reuters 2 Kathimerini Naftemporiki Kathimerini Coulisses de Bruxelles ABC FTD FD FT Weekend Reuters 3 Irish Independent 2 Irish Times 2 Welt El País: CarstensReuters

Eurozone comment round-up: Growing calls for Greece to leave the euro

In the WSJ, Josef Joffe, Editor of German daily Die Welt, argues that, “Greece faces default no matter what it does, but only abandoning the euro would give it a chance at growth.” In Dutch daily De Telegraaf, former Dutch Social Democrat Finance Minister Willem Vermeend argues that, “Greece should leave the euro”. Harvard Economics Professor Martin Feldstein argues, “A temporary leave of absence from the eurozone would allow Greece to achieve a price-level decline relative to other eurozone countries, and would make it easier to adjust the relative price level if Greek wages cannot be limited.”

Writing in the FT, Wolfgang Münchau states that Greece and possibly other countries of the eurozone’s periphery are likely to default sometime between 2013 and 2016 but “the main creditors left by then will be EU governments and the IMF”. He asks will EU leaders “forgive Greek debt, which would be a massive fiscal transfer? Or will they allow the eurozone to crack up, which would also be a fiscal transfer?”

The FT’s Brussels bureau chief Peter Spiegel argues that, following the eurozone crisis and the row over the border-free Schengen zone, “European integration is unravelling” and “we may be witnessing a generational change in European political dynamics.”
FT: Spiegel Monday's Independent: King Monday's FT: Munchau Monday's Telegraph: Bootle Irish Times: Beesley Spectator: Coffee House blog Sunday Times: Stelzer WSJ: Stelzer IHT WSJ: Hannon WSJ: Joffe Le Figaro: de Kerdrel Telegraaf Project-syndicate: Feldstein Telegraaf: Vermeend

Labour willing to work with backbench Conservatives to reduce UK contributions to eurozone bail-outs

The Labour Party announced on Sunday that it is willing to work with Eurosceptic sections of the Conservative Party in an attempt to bring down UK contributions to the eurozone bail-outs and reduce the timescale of the UK’s liabilities. Labour have suggested that the €60bn European Financial Stabilisation Mechanism, for which the UK is liable, has been overused and that the permanent eurozone bail-out fund should be brought in earlier than 2013, as is currently scheduled.
Guardian Conservative Home Mail Open Europe blog

The Sunday Times reported that Barclays CEO, Bob Diamond, met with Spanish Prime Minister José Luis Rodríguez Zapatero last week to discuss the potential purchase of one of the ailing Spanish regional savings banks. It is thought any deal would be dependent on the Spanish government offering guaranteed funding.
Monday's Telegraph

UK diplomats accuse EU’s new foreign office of ‘mission creep’ and ‘bending the rules’

The Sunday Telegraph reported that UK diplomats are growing increasingly concerned by the threat of ‘mission creep’ from the EU’s new diplomatic service, the European External Action Service. The article noted that diplomats say that on a number of occasions – including the Human Rights Commission in Geneva, the climate change conference in Tianjin (China) and the UN Environment Programme meeting in Nairobi – the EU has tried to take a leading role in discussions which were reserved for national governments.“They talk about things being 'in the spirit of Lisbon' as an excuse to completely bend the rules,” a senior British source said.
Sunday Telegraph EUobserver

The Heritage Foundation, a US think-tank, has criticised the EU for spending millions of euros inside the US on a variety of different projects and programmes, which “raise important questions over Brussels’ interference in US political and social debates.” This includes funding “at least five US-based organizations a total of €2.1m ($3.1m) from 2007 to 2009 for anti-death penalty advocacy.”
Heritage Foundation

Dutch politicians: “Wasteful EU is losing the citizens’ trust”

Writing in De Volkskrant, Dutch Social-Democrat MEP Thijs Berman and MP Ronald Plasterk argue that the Netherlands should not give any extra money to the EU budget, noting that “a wasteful EU is losing the citizens’ trust…Exactly those who recognise the value of the EU, should understand that it is reasonable to ask this kind of modest austerity from it.”

Meanwhile, European Voice reports that yesterday the European Parliament’s Special Committee on the financial crisis adopted a report calling for member states to increase their contribution to the EU budget to 5%-10% of national GDP, as opposed to the current maximum of 1.06%. Monday’s Express quoted UK Europe Minister David Lidington saying that MEPs’ proposal for the next multi-annual EU budget, which includes new EU taxes and scrapping national rebates, “is a kick in the teeth for taxpayers throughout Europe.”
European Voice Volkskrant

Bank of England officials warn against Commission plans to strip national regulators’ powers

The Telegraph reports that three senior Bank of England officials have voiced fears that the UK’s control of financial regulation is under threat from European Commission moves to harmonise standards in areas such as capital and liquidity requirements. Hector Sants, Chief Executive of the Financial Services Authority (FSA) who will become the Bank’s Deputy Governor for prudential regulation, said, “In other words, national regulators could not allow banks to go above or below the European standard...all we would be doing is policing European fixed standards.”

Meanwhile, an editorial in the FT urges the European Commission to resist the temptation to water down the new Basel III international banking regulations in forthcoming EU legislation. Handelsblatt quotes Gerhard Hofmann, a spokesman for Germany's banking federation saying that "a silent transfer of national sovereignty towards Brussels institutions is taking place", adding that the Basel III rules are likely to be introduced through an EU Regulation rather than a Directive, which will reduce member states’ flexibility to tailor the rules to their own circumstances.
Open Europe research Telegraph FT Weekend FT: Editorial

PA reports that UK Business Minister Ed Davey has welcomed an EU deal to exempt Europe’s smallest firms from a series of accounting requirements applicable to larger businesses, saying it could save Britain’s small businesses as much as £300m a year.
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FAZ reports that a fundamental reform of the EU's agricultural spending is unlikely in the next long term budget period between 2014 and 2020, as a majority of EU agriculture ministers and the European Commission yesterday supported only modest reforms to the Common Agricultural Policy.
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El País reports that Italy and Spain have filed two separate complaints to the European Court of Justice against the EU Council of Ministers’ decision to go ahead with plans for a single EU patent through the so-called ‘enhanced cooperation’.
El País

EurActiv reports that EU Industry Commissioner Antonio Tajani will unveil plans on Wednesday to set out EU-wide standards for the provision of “all services” ranging from tourism to logistics.
EurActiv

Monday’s FT reported that Germany will close its 17 nuclear power plants – which generate one-quarter of the country’s electricity – by 2022, following the partial nuclear meltdown at the Fukushima Daiichi plant in Japan in March.
Monday's FT BBC EUobserver Le Figaro

Italian Prime Minister Silvio Berlusconi’s ruling coalition suffered a crushing defeat in yesterday’s local elections, with centre-left mayors being elected in Milan (Berlusconi’s home town), Naples, Turin and other major Italian cities. Opposition leader Pier Luigi Bersani has called for early elections.
BBC: Hewitt Repubblica Le Figaro El País IHT Sveriges Radio FT

EurActiv reports that the EU and Japan have agreed to launch “pre-negotiations” over a potential free trade agreement, although they maintained conflicting views on the automotive sector and other strategic areas.
Saturday’s WSJ European Voice EurActiv

World

French Economy Minister Christine Lagarde yesterday began a tour of big emerging countries in a bid to build support for her candidacy to be the next IMF Chief.
FT Observer Sunday Telegraph: Halligan Le Monde FT Weekend

New on the Open Europe blog

Labour’s bail-out confusion
Open Europe blog