Europe
Commission’s proposal for inflation-busting new long-term EU budget continues to spark criticism across Europe;
Labour joins Government in calling on Commission to “go back to the drawing board”
Open Europe yesterday published a new briefing responding to the European Commission’s proposal for a 5% above-inflation increase to the 2014-2020 EU budget. The Commission also earmarked an extra €58bn for projects and funds outside the main balance sheet, which would take the overall increase of EU expenditure to at least 7% compared to the previous budget period.
Open Europe’s Research Director Stephen Booth is quoted in the Guardian saying, “The European Commission has again opted for an above-inflation increase without the radical reform needed to make the EU budget more rational and on target…The European Commission has also chosen to employ some creative accounting by moving some spending items off its main balance sheet, to hide the true rise in overall expenditure. This type of spin will not win the trust of taxpayers and citizens across Europe.” Stephen is also quoted by The Parliament and Northern Irish TV channel UTV, while the Mail cites Open Europe’s briefing.
The Guardian reports that the Labour Party has joined the Government in its attack on the Commission’s blueprint and quotes Shadow Chancellor Ed Balls saying that “the European Commission should go back to the drawing board." Meanwhile, Les Echos reports that, in a joint communiqué, France’s Budget, Agriculture and Foreign Ministers said that the increase in payments proposed by the Commission “is unbearable for the French budget.” In an interview with Austrian daily Kurier, Austria’s Finance Minister Maria Fekter called the proposal “too expensive,” while Italian news agency ASCA quotes Italian Foreign Minister Franco Frattini saying, “We believe it indispensable that in the next financial framework our national net contribution [to the EU budget], which is currently around €5bn per year, be reduced.”
Greek government wins second crucial austerity vote;
German banks agree to rollover €3.2bn in Greek bonds as part of second bailout
The Greek government won a second crucial vote on its austerity package yesterday, by 155 votes to 136. The vote paves the way for the implementation of the austerity measures as well as the disbursement of the next tranche of bailout funds, but significant questions still remain over whether the government will be able to meet its deficit targets or raise enough revenue from privatisations. Vasso Papandreou, a former Greek EU Commissioner, warned ahead of the vote that "Germany is preparing the ground for our official bankruptcy as soon as this can happen without cost to the German banks", but said she would support the package out of patriotic duty. Violent clashes between protestors and police continued outside parliament throughout the day yesterday.
Meanwhile, German Finance Minister Wolfgang Schäuble announced in Berlin yesterday that German banks have agreed to participate in a rollover of Greek debt. Although the details are yet to be finalised, Schäuble suggested German banks would contribute €3.2bn, however, €1.2bn of that would come from the government owned ‘bad banks’. The contribution is smaller than expected, but since most of the bonds held by German banks don’t expire until around 2020 or later, they were not considered for the rollover. It is not yet clear how the rating agencies view the plan, which is based on the ‘French model’, but it has been suggested that they would not judge it to be a default, reports EurActiv. FT Deutschland comments that German banks should not expect plaudits for their voluntary rollover of Greek debt, pointing out that, “Considering their total assets, €2bn is peanuts.”
In the WSJ, Stephen Fidler notes that, although a second Greek bailout will buy time, the effect will be a major transfer of Greek debt from private creditors to taxpayer-backed institutions, such as the ECB. Also in the WSJ, Alen Mattich argues that “France will struggle to keep its core status”, adding that “its prospects are looking distinctly lacklustre compared with those of other core euro-zone countries, not least Germany.” Separately, the Italian government approved a €47bn austerity package yesterday, aimed at balancing the budget by 2014.
Jean-Claude Trichet, ECB President, signalled yesterday that the ECB would raise interest rates at its next meeting on 7 July. Open Europe’s Raoul Ruparel appeared on BBC Radio Manchester discussing the Greek crisis. Open Europe’s findings that each eurozone household currently underwrites €535 in Greek debt are cited by Business Insider and HoweStreet.com. French news site OWNI references Open Europe’s research on the ECB’s exposure to the struggling eurozone countries.
New poll shows True Finns is most popular party;
Finnish Finance Minister: We will pull plug on second Greek bailout unless our conditions are met
According to an opinion poll conducted by YLE, the anti-eurozone bailout party, the True Finns, is now the most popular party in Finland. Its support has gone up to 23%, 2.4% higher than a previous post-election poll in May. Meanwhile, Kauppalehti reports that Finnish Finance Minister Jutta Urpilainen has said that Greece will not receive a euro more, under the proposed second bailout, unless it agrees to the terms stipulated by Finland, which include Greece providing more collateral to underwrite future loans. She said that she is ready to dismiss the whole package unless Finland’s requirements are adhered to.
Poland takes over the rotating EU Presidency today.
On the Spectator’s Coffee House blog, James Forsyth argues that there are “far too many people in Whitehall who take false comfort from the fact that Britain is the best in Europe at this or that. But this doesn’t mean much. Europe is a continent in decline.”
In an interview with Conservative Home, the Conservative MEPs first elected in 2009 agree that they are more eurosceptic now than when they arrived in Brussels.
The Telegraph reports that the amount of electricity generated by onshore wind farms fell last year, while the UK remains well short of the EU’s binding target that requires 15% of all energy to be from renewables by 2020.
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EUobserver reports that EU member states are set launch an appeal at the European Court of Justice in a bid to overturn an earlier ruling that negotiating positions taken by member states in working groups, the stage preceding votes in the Council, should be made public.
The WSJ reports that plans for the establishment of a European credit rating agency are gaining new momentum among leading EU officials.
The WSJ reports that a new free-trade agreement between the EU and South Korea, which is expected to create an estimated $30bn in new trade of goods and services annually, enters into force today.
New on the Open Europe blog
The Commission’s proposals for the 2014-2020 EU budget: The good, the bad and the ugly
Germans join the French in rolling over Greek debt
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