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Decision on second Greek bailout delayed until mid-July after IMF agrees to pay out next tranche of funding;
Germany wants the whole EU to be involved in a second Greek bailout
FT Deutschland reports that EU leaders will seek to delay any decision on a second Greek bailout until July. This is because the IMF has now agreed to release the next tranche of bailout funds next week, according to the FT. In exchange, the IMF will ask the Greek government to ensure a political consensus is reached on the medium term fiscal strategy and will seek assurances from the EU that a second bailout will be forthcoming.

Greek Prime Minister George Papandreou will announce a cabinet reshuffle today and will seek a vote of confidence on Sunday following violent demonstrations against the new round of austerity measures in Athens yesterday. The Greek government failed to reach a consensus with the opposition on the new austerity package, despite a full day of negotiations yesterday, leading to Papandreou offering to stand down and attempt to form a coalition government, although this option was eventually rejected. The FT reports that the market for credit default swaps suggests a 75% chance of a Greek default over the next five years, up from 45% at the start of the year.

Meanwhile, in an interview with Het Financieele Dagblad Dutch Central Bank Governor, Nout Wellink, warned that if private sector involvement in the second Greek bailout was judged to constitute a default, the EU's bailout fund "would need to be raised to €1.5 trillion and there would need to be more flexibility in spending the money" in order to ensure an adequate safety net.

The Times reports that the UK could be forced to contribute up to €1bn in a second bailout of Greece in loan guarantees, with Germany leading the call for the whole EU to be involved, not just the eurozone. The article suggests that the European Financial Stabilisation Mechanism, which involves the UK, could be asked to contribute between €6bn and €8bn. A UK Treasury spokeswoman dismissed the claims last night, saying, "We do not want to be part of any second European assistance package for Greece. And no such proposal has been made". Open Europe is quoted in the Sun saying: “Bailing out Greece a second time won't work."

The BBC reports on a leaked account of Tuesday’s meeting of eurozone finance ministers, which suggests that finance ministers “fear for the future of the eurozone”. The report also suggested that a Greek default could "threaten the viability of the ECB [European Central Bank] itself" which owns €49bn of Greek bonds. Open Europe’s research into the risk presented by the ECB’s exposure to Greece is quoted by the WSJ’s Real Time Economics blog. Open Europe's Raoul Ruparel appeared on Channel 5 news yesterday discussing the eurozone crisis.
FT WSJ EurActiv Telegraph Telegraph 2 Vima Ta Nea Isotimia Irish Times Irish Independent BBC EUobserver FTDLe Monde Independent Le Figaro El Pais El Pais 2 WSJ 2 FT 2 FT 3 FT 4 FD Guardian Guardian 2 Telegraph 3 Guardian 3Telegraph 4 BBC 2 BBC: Today Irish Independent 2 Irish Times 2 FT 5 FT 6 FT 7 Irish Independent 3 Irish Independent 4Handelsblatt Sun Express WSJ: Real Time Economics

UK pushes for tougher approach to EU aid to Arab countries
The Independent reports that the UK is putting pressure on the EU to threaten to halt aid to Arab countries which fail to meet conditions on human rights and democratic reform in future, and also to give these countries more market access. In an interview with the paper, UK Europe Minister David Lidington said: “We need to break away from the idea that once the cheque has been written, nothing more is required of the recipient country. That does no favours to anyone…Where a country refuses to reform, or having embarked on reform and backtracked, there should be a penalty."
Open Europe research Independent

Government suffers a further two defeats on its EU Bill in the Lords
The Government suffered another two defeats in the House of Lords last night on its EU Bill and “referendum lock”, designed to prevent the transfer of powers to Brussels without the consent of Parliament and voters. Peers voted to amend the Bill’s so-called “sovereignty clause” and voted to introduce a “sunset clause”, which would mean the referendum lock would lapse after the next General Election. It could then be revived, but only through new resolutions in both Houses of Parliament. The amended Bill will now be sent to the Commons, where the Government is expected to overturn the Lords’ amendments.
Open Europe blog Guardian Conservative Home Hansard

EU Budget Commissioner:  EU budget freeze is a threat to European integration
In an interview with Handelsblatt, EU Budget Commissioner Janusz Lewandowski has criticised the UK, Germany and France over their demands to freeze the next long-term EU budget, due to run from 2014 to 2020. “To develop Europe further is impossible on the basis of a frozen budget", he argued, suggesting that this would endanger European integration.
Handelsblatt: Lewandowski

Four member states reject Commission’s verdict on their economies
EUobserver reports that the Hungarian rotating EU Presidency has accused the Commission of steamrolling through the process of supervising national budgets and fiscal plans, under the so-called “European Semester”, leaving no time for national governments to consider the recommendations. “This approach undermines the credibility of the whole procedure,” said Hungarian Finance Minister Gyorgy Matolcsy. Spain, France and Denmark also criticised the Commission’s recommendations for their economies, although not formally.
EUobserver European Voice

Andrew Lilico: “UK banks should only experience difficulties if the crisis reaches France”
Writing on Conservative Home, Andrew Lilico from Europe Economics sets out “Twenty things Westminster needs to know about Greece and its debts” and cites Open Europe’s calculations that the ECB has €40bn in outstanding loans to Portuguese banks. He also notes, “UK bank exposure to Ireland is material, but to Greece is modest (much less than France or Germany) and to Portugal and Spain only small. The UK banks should only experience difficulties if the crisis reaches France.”

Writing from Greece on his BBC blog, Paul Mason argues, “You are seeing the lines of defence against financial and social chaos within this part of Europe getting very frayed… But a new situation is emerging: Greek people I have spoken to are beginning to express things in terms of nation and sovereignty - and this makes the Greek situation different, for now, to Ireland and Portugal”.

In the Irish Independent, columnist Lise Hand notes that, after the EU/IMF Irish bail-out was agreed, “It was game over for our economic sovereignty. And now look. The new household names are Trichet and Rehn and Van Rompuy and Barroso and Lagarde and Merkel, and all we want to do is crawl out of the doghouse and get tossed a couple of concessionary bones for being good little doggies.”
Open Europe research Conservative Home: Lilico FT: Bremmer WSJ: Armey and Kibbe WSJ: Jonsson WSJ Heard on the Street Irish Independent: Hand BBC: Mason BBC: Mason 2 BBC: Hewitt Le Figaro: de Capèle Guardian: Pratley Guardian: Garton Ash

Writing in CityAM, Anthony Browne looks at the impact of EU financial regulation and notes: “The trouble is that Brussels matters. A lot. Particularly if you work in financial services…Largely unnoticed by the political and media class, Brussels has unleashed a tsunami of legislation and regulation at Britain’s most profitable, biggest tax-paying industry.”
Open Europe research City AM: Browne

Finnish government talks are expected to come to an end tomorrow, with Jyrki Katainen, leader of the National Coalition Party, heading a six-party coalition, reports Yle. The True Finns walked out of negotiations last week because of irreconcilable differences towards EU policies.
Hs.fi Yle.fi

Violence kicked off outside the Catalan Parliament yesterday as protestors marched against austerity cuts to Catalonia’s budget. The Bank of Spain’s annual report released yesterday notes that “almost half of the austerity measures required for us to meet our deficit targets by 2013 will have to be made by the autonomous communities and local government”, reports El Pais.
El País El País 2 Bank of Spain Report

Italian authorities and the EU’s anti-fraud office OLAF have launched an investigation into a network suspected of pocketing more than €50m of EU funds for research and development by presenting fake research projects. 
Repubblica Nature Der Standard

The WSJ’s Real Time Brussels blog notes that Bank of England Governor Mervyn King used his speech at the Lord Mayor’s dinner last night to underline his concerns about a draft European Commission proposal concerning bank capital requirements.
WSJ: Real Time Brussels Independent BBC: Peston

EurActiv reports that Peter Vis, Chief of Staff of EU Climate Action Commissioner Connie Hedegaard, has warned that the Commission’s proposed Energy Efficiency Directive could “undermine” the EU’s Emissions Trading Scheme (ETS).
EurActiv

Pedro Passos Coelho was appointed yesterday as Portugal’s new Prime Minister, reports Le Monde.
Le Monde

MEPs are expected to approve a report urging EU governments to maintain regional aid spending at current levels in the post-2013 EU budget, reports European Voice.
European Voice

EUobserver reports that the European Parliament’s Committee on Economic and Monetary Affairs yesterday backed Italy’s Central Bank Governor Mario Draghi to take over the ECB Presidency in November. A vote by the European Parliament’s plenary session is scheduled for 23 June. 
EUobserver

Les Echos reports that a new poll conducted by Sweden’s Statistics Bureau has shown that 64% of Swedes are opposed to their country joining the euro, up from 60% last year. 
Les Echos

EurActiv reports that Iceland is due to start EU accession talks at the end of June, according to EU diplomats. 
EurActiv

New on the Open Europe blog

Two new defeats for the Government on EU Bill: House of Lords isn’t getting with the programme
Open Europe blog