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Greece activates emergency lending for its banking sector;
France, Italy, Spain and Belgium extend short selling ban
The Greek central bank yesterday activated the Emergency Liquidity Assistance (ELA) programme, which allows it to provide liquidity to Greek banks outside of the usual ECB operations. Open Europe’s Raoul Ruparel is quoted in theTelegraph and on Zerohedge saying, “The activation of the so-called ELA looks to be the last stand for Greek banks and suggests they are running alarmingly short of quality collateral usually used to obtain funding. This kicks off another huge round of nearly worthless assets being shifted from the books of private banks onto books backed by taxpayers. Combined with the purchases of Spanish and Italian bonds, the already questionable balance sheet of the euro system is looking increasingly risky."

The FT reports that a ‘euro working group’, consisting of officials from finance ministries across the eurozone, will meet today in an attempt find a solution to the dispute over the Greco-Finnish collateral deal which is threatening to derail the second Greek bailout. The focus has shifted to creating a collateral deal using Greek public assets, although given the large privatisation scheme already underway it is unclear what assets these would be – Greece has ruled out putting up any assets which are part of the country’s cultural heritage.

Meanwhile, the short-selling bans on selected bank stocks which were introduced two weeks ago, were extended yesterday by French, Spanish, Italian and Belgian regulators. The ban will run until the end of September in Italy and Spain, while it may run for longer in France and Belgium. The FT reports that the ban looks to have significantly reduced liquidity in the market, meaning shareholders in these banks will face higher costs if they wish to trade.

Spain’s two main parties have reached an agreement on changing the constitution to include limits on public deficit and debt. However, the proposed amendment allows the limits to be overridden in case of natural disasters, economic recession, or other extraordinary circumstances, provided that an absolute majority is achieved. The constitutional amendment will not fix limits itself, but will be accompanied by a law limiting the structural deficit at 0.4% of GDP from 2020, reports Expansion. The law must be approved before 30 June 2012. Spanish unions and the United Left coalition have threatened to push for a referendum on the issue, reports El Pais. Open Europe’s Pieter Cleppe appeared on RTdiscussing the French austerity package.
El Pais Expansion Expansion 2 Political agreement between PSOE and PP El Pais 2 El Pais 3 Telegraph ZerohedgeCityAM WSJ Reuters EUobserver HS Reuters 2 Bloomberg Boston Globe BBC FT CityAM 2 WSJ 2 WSJ 3 FT 2 WSJ 4FT: Betts FT: Tett WSJ Review&Outlook WSJ: Forelle WSJ: Mattich El País: Villaverde El País: Bolaños Reuters 3 Irish Times IHT El Pais El Pais 2 El Pais 3 El Pais 4 Reuters France

Government concedes it is forced to accept “disappointing” new EU employment laws
The Telegraph reports that business leaders have urged the Government to delay the implementation of the EU’s Temporary Agency Workers Directive until the economy has recovered. An analysis by the Department for Business shows that firms will face costs of more than £1.8bn a year as a result of the new laws, under which agency workers will effectively have to be treated as full-time workers after 12 weeks.

Business groups have pushed for new amendments to the rules to reduce the burden of the legislation, due to enter force in October. However, the Government says that, because the EU rules required a deal brokered between the CBI business group and the TUC trade union, unpicking it could lead to legal challenges to other parts of the Directive and mean that employers could be forced to give agency workers equal rights from day one rather than after 12 weeks. A spokesman for the Department for Business conceded that the rules were “disappointing” and that, “Unfortunately it was not possible to find a way forward that would be acceptable to both parties.”
Telegraph Open Europe research

Deutsche Welle’s Head of the Europe desk: EU “asleep at the wheel” on Libya
Deutsche Welle's Head of Europe desk, Bernd Riegert, argues that the “EU struggles to find a common voice on post-Gadafi Libya”, characterising the EU as “asleep at the wheel” while “many member states are doing what they think is correct without serious multilateral consultations”.

The Economist’s Bagehot argues, “Cameron allies question whether such formal, exclusive clubs as the European Union enjoy special legitimacy, merely by claiming to speak for 27 like-minded nations. Recalling the tense days in March as France and Britain led a push for a UN Security Council resolution authorising force to stop a massacre in Benghazi, a source recalls “indispensable” help from America, then notes: “We didn’t even consult the EU.”
Economist: Bagehot DW: Riegert Le Parisien Le Figaro BBC: Hewitt EUobserver Il Sole 24 Ore Le Figaro Les Echos Le Figaro L’Expansion Money Week

Danish Prime Minister Lars Loekke Rasmussen has called an election on 15 September saying, “Voters need to choose between sustainable welfare or higher taxes,” after a stimulus bill proposed this week looks to lack the votes to pass. A Voxmeter poll published this week by Ritzau showed Rasmussen’s coalition on 44.5%, with the Social Democrat led opposition at 53.5%.
Bloomberg JP

Les Echos reports that France is uneasy about the bilateral agreements, to tax money held in Swiss bank accounts, signed by Germany and the UK with Switzerland. The article notes that these agreements could complicate the ongoing negotiations for an overhaul of the EU’s Savings Directive, with Paris and the European Commission seeking to strengthen the principle of automatic exchange of tax information among European countries.
Les Echos

The Guardian reports that the Government’s cap on migration to Britain from outside Europe is being more than offset by a renewed rise in migration from Poland and other EU countries.
Guardian

The Guardian reports that the Commission has been accused by human rights groups of failing to stop EU states, primarily France and Italy, expelling Roma mainly back to Romania. However, Le Monde reports that yesterday EU Justice Commissioner Viviane Reding congratulated France for adopting new measures implementing the EU’s Freedom of Movement Directive.
Guardian

New on the Open Europe blog

Pushing the limit: Spain races ahead with a constitutional change
Open Europe blog