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Central banks move to ease European bank problems
Five central banks, including the European Central Bank, the Bank of England and the Swiss National Bank took action yesterday to ease the dollar funding crisis looming in Europe. The central banks agreed to provide unlimited three-month loans in US dollars to banks until the end of the year. The announcement caused a strong rebound in financial markets, with European bank shares posting significant gains. The FT notes that this optimism is not expected to last, with the measure only providing a boost in liquidity without solving any of the underlying problems.

Eurozone finance ministers will meet in Poland today, along with US Treasury Secretary Timothy Geithner, to discuss the Greco-Finnish collateral deal and the potential for Eurobonds. No deal is expected to be reached on the collateral issue, although the main plans being discussed include Greece offering shares in state-owned companies or illiquid commercial real estate as collateral.Reuters reports that the plan may be structured to make it expensive meaning only Finland would be willing to take it up.

A position paper drafted by Germany’s junior governing party FDP, seen by Bild, calls for a mechanism by which countries that do not meet the debt and deficit requirements can be forced to leave the euro. The article suggests that the move could endanger the stability of the governing coalition. FAZ reports that the vote in the German Parliament on the eurozone’s post-2013 permanent bailout fund, the European Stability Mechanism (ESM), will be delayed until early 2012.

Christine Lagarde, Head of the IMF, suggested yesterday that the IMF is yet to be satisfied by the Greek government’s attempts to implement the necessary budget cuts, saying in an interview withCNBC, “If there has been no implementation, we don’t pay.” EU officials are expected to take a more positive view on Greece’s austerity measures.

Speaking on BBC Newsnight, Justice Secretary Kenneth Clarke stated that he believes the eurozone would survive, but that it needs more fiscal discipline, saying, “It doesn't need the same level of tax, it doesn't need the same level of spending. Governments can decide that for themselves whether they are high tax, high spend, or low tax, low spend…But discipline, fiscal discipline, controlling of deficits…we agreed it when I was chancellor and the Germans led the way in breaking it.” Clarke’s comments suggest he is against greater fiscal integration, something which Chancellor George Osborne has already called for.

Reuters reports that, according to Greek paperKerdos, Greek banks could tap the Emergency Liquidity Assistance (ELA) for up to €30bn, further highlighting their lack of access to usual ECB funding. EUobserver reports that Latvia is hoping to join the eurozone by 2014.
FT CityAM WSJ European Voice Times Guardian Independent EUobserver El País Les EchosTelegraph IHT FAZ: Steltzner FAZ Telegraph 2 FT 2 FT 3 WSJ 2 BBC Le Figaro Irish TimesCityAM 2 Kauppalehti TS Reuters FT 4 Bild Guardian 2 FT 5 FT 6 WSJ 4 European Voice 2 Irish Times 2 Reuters EUobserver 2 Economist Times 2 Guardian 3 Guardian 4 Guardian 5

The European Commission revised its growth estimates for the EU sharply downwards yesterday, saying that growth in the region will come to a “virtual standstill” by the end of the year, although it does not expect a recession.
BBC EUobserver Telegraph

EU member states and MEPs strike deal on economic governance
EU member states and MEPs yesterday reached a final agreement on the ‘six-pack’ of legislative proposals to strengthen economic governance in the eurozone and the EU. Under the compromise, MEPs have obtained that the ‘final warning’ issued by the European Commission to eurozone member states in breach of the EU’s deficit and debt rules before proposing sanctions will be considered automatically adopted unless a qualified majority of eurozone countries reject it. MEPs will also be allowed to invite national finance ministers to explain their budgetary plans to the European Parliament, although member states will be free to turn down the request. EU finance ministers are expected to rubber-stamp the deal at their two-day meeting in Poland, while MEPs will vote on the package at the next plenary session in Strasbourg, scheduled for 26-29 September.
EUobserver EurActiv Les Echos European Voice

Simon Jenkins: “The European debt crisis is a reformation moment – the EU has overreached its power and now faces a crisis of legitimacy”
In the Guardian, Simon Jenkins argues, “This is a true reformation moment in Europe's history…It is turning back to national identity, and there is nothing the EU can do to stop it.” The Economist’s Bagehot argues, “Europe’s tectonic plates are moving, and Britain’s vital interests are in play. The government should plan defensively in case a moment for horse-trading arises. But it should seek a narrow, valuable and—if timed right—achievable concession. Try a protocol giving a veto over EU financial regulation to Britain (where the lion’s share of European financial business is transacted, after all).”

In an 'open letter' to Greece and Italy in the Times, Die Welt’s Foreign Editor Clemens Wergin writes, “At a time when our parliament is debating a huge rescue package for you – which if used will be a burden on our children – we have the impression that your governments are not keeping their end of the deal.” A leader in the Economist argues, “For the ECB to stand behind less prudent countries may be unwelcome to Germans; but letting the euro fall to bits is much, much worse. Spell that out clearly to your voters, Mrs Merkel.”

In an op-ed in Belgian daily De Morgen, Dutch Conservative MEP Derk-Jan Eppink notes, “During the debate on the euro in the European Parliament this week, I felt like I was at a funeral where only the deceased was still missing.”
Economist: Bagehot Times: Wergin Guardian: Jenkins Independent: McRae FT: Mallaby FT: Sender City AM: Heath WSJ: Fidler WSJ Heard on the Street WSJ: Mattich WSJ: EditorialEconomist: Charlemagne Economist: Leader Telegraph: Osborne Telegraph: Burleigh BBC: Mason Le Monde: Delors Le Figaro: Leroux

Open Europe’s Pieter Cleppe appeared on Polish TV channel Polsat discussing the European Commission’s plans for Schengen reform, which have been unveiled today. He said, “The Commission is merely trying to use the discussion about Schengen to take powers from member states. It doesn’t seem to realise that such decisions are at the core of the sovereignty of national democracies…The solution is not more powers to Brussels.”
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Lower house of Spanish parliament clears second Greek bailout;
Frattini: Italy “ready to give up sovereignty” to create EU economic government
The lower house of the Spanish parliament yesterday gave its approval to the second Greek bailout and the increase to the EFSF’s size and scope agreed by eurozone leaders in July. A vote in the Spanish Senate is expected next week. Meanwhile, yesterday Spain managed to sell almost €4bn worth of long-term bonds at a lower interest rate than the previous auction. Spanish business daily Cinco Días reports that the Spanish government will today re-introduce a temporary tax on people with net assets of more than €700,000, which is expected to raise around €1bn a year.

Separately, in an interview with Süddeutsche Zeitung, Italian Foreign Minister Franco Frattini said, “Different countries have different views on European federalism, but Italy is ready to give up all the sovereignty necessary to create a genuine European central government. We must work seriously towards the formation of a genuine European economic government.”   
Expansión El País 2 Cinco Días WSJ  EurActiv AdnKronos

Reuters reports that a draft of European Commission plans for banks would make senior bondholders rather than taxpayers the lenders of last resort in a restructuring when losses are imposed to keep the lender going. Banks would also have to write “living wills” that map out what they will do when in trouble.
Reuters

Denmark elects first female Prime Minister
Yesterday’s general elections in Denmark saw the victory of the left coalition led by former Socialist MEP Helle Thorning-Schmidt, who becomes the country’s first female Prime Minister.EUobserver notes that the incoming government is likely to row back on the controversial re-introduction of border checks and have a more generous approach to EU spending.
EUobserver El País Les Echos JP Times Independent

The FT reports that, in a letter sent to the EU Presidency earlier this month, Ireland’s permanent representative to the EU requested that a protocol be attached to Croatia’s EU accession treaty, ensuring that Ireland’s jurisdiction over taxation will not be compromised.
FT

EU Competition Commissioner Joaquín Almunia has said that the introduction of stricter EU rules on state aid for banks will be delayed beyond the end of this year, reports the FT.
FT

The Telegraph reports that a new EU directive has led to far stricter rules from the Driver and Vehicle Licensing Agency which may see up to a million motorists with diabetes lose their licences.
Telegraph

The Irish Times reports that, according to diplomats, the EU is seeking to persuade Palestinian leaders to drop their bid for full UN membership in return for an upgrade of their observer status.
FT Irish Times Times

World

David Cameron and French President Nicolas Sarkozy were welcomed to the newly liberated Libyan capital yesterday, receiving a “heroes’ welcome”, according to the Times.
France Soir Le Figaro El País Times

New on the Open Europe blog

The latest Franco-German statement on Greece said nothing – and yet meant everything
Open Europe blog

Coalition all over the place on the eurozone
Open Europe blog