Wednesday, 7 September 2011

Open Europe

Europe

German Constitutional Court rejects challenges against eurozone bailouts;
Court calls for Parliamentary Budget Committee to have greater say over future bailouts
The German Constitutional Court this morning ruled against the claims that the eurozone bailouts are illegal, providing relief for German Chancellor Angela Merkel and causing markets to rebound slightly. However, the Court stressed that the verdict “should not be misinterpreted as a constitutional blank-cheque for further aid-packages”. The Court also ruled that, in order to conform to the constitution, “the Federal Government is in principle obliged to always obtain prior approval by the [Bundestag] Budget Committee before giving guarantees.” This means that the German parliamentary budget committee will have to agree to any future bailout packages or use of the EFSF, the eurozone’s bailout fund. This is a big change from the current situation where the German government only needs to reach a non-binding agreement with the budget committee over any bailouts.

Additionally the ruling looks set to impose further restrictions on Eurobonds or debt mutualisation in the eurozone. The press release states that, “The Bundestag, as the legislature, is also prohibited from establishing permanent mechanisms...which result in an assumption of liability for other states’ voluntary decisions, especially if they have consequences whose impact is difficult to calculate.” This seems to suggest that any move towards Eurobonds would be unconstitutional, even with agreement from the Bundestag, though the ruling also hints that greater German control over the fiscal policies of other states that could circumvent such legal restrictions.

German Chancellor Angela Merkel is quoted by Die Welt saying, in response to the ruling, “The Court has said: solidarity and responsibility. That is exactly the path that we have chosen.” Open Europe’s Pieter Cleppe is quoted in the Telegraph, The Parliament magazine and in Bulgarian business daily Dnevnik discussing the Court ruling. Open Europe’s briefing discussing what the ruling would mean for the eurozone crisis is cited by Finnish business daily Taloussanomat. Open Europe’s Director Mats Persson appeared on BBC World Service’s The World Today programme, and Raoul Ruparel appeared on Al-Jazeera English, discussing the Court’s ruling.

Cameron: Most people want a different kind of EU, not to leave altogether
During a hearing before the House of Commons’ Liaison Committee yesterday, David Cameron said that the eurozone needed to pursue the “logical” step of more fiscal integration to deal with fears over the future of the single currency. When pressed by MPs Cameron did admit that the UK could use any EU treaty change aimed at solving the eurozone crisis, to seek repatriation of EU powers back to the UK. However, Chancellor George Osborne yesterday said, “There’s no immediate prospect of a major treaty negotiation.”

Cameron also ruled out the possibility of an in/out referendum on the EU, saying “I don’t actually think that is the question most people in Britain want answering. It is about what sort of Europe. I believe we should deliver the sort of Europe people want.” George Eustice, one of the MPs forming a new parliamentary group pushing for a revised EU-UK relationship, is quoted in the Times, saying that MPs would be “disappointed but not necessarily surprised” by Mr Cameron’s message, adding that the group would continue to formulate a new approach, “It’s absolutely right that the parliamentary party should map out thinking that could be taken up within months, perhaps years.”

A leader in the Times argues that greater fiscal and political integration is looking likely in the eurozone, meaning that the UK will need to clarify its position in Europe, and this should involve “a new constitutional settlement with Brussels that enshrines the principle of British national sovereignty.”

Merkel: “Treaty changes must not be a taboo”
Die Welt reports that German Chancellor Angela Merkel has suggested that there may need to be a change in EU Treaties to ensure fiscal discipline in the eurozone. She said, “There is no rule so far to force the countries to comply with the Stability and Growth Pact. Therefore, treaty changes must not be a taboo in order to achieve more commitment.” Merkel also reiterated her stance against Eurobonds. Meanwhile, in an interview with Bild, Horst Seehofer, CSU chairman, said that a Greece leaving the eurozone cannot “be ruled out”.

Meanwhile, France is set to become the first eurozone country to ratify the second Greek bailout and the changes to the EFSF. The lower house of the French parliament is expected to adopt the changes this afternoon, despite the Socialist Party’s announced abstention from the vote. The vote in the French Senate is scheduled for tomorrow.

Finnish Finance Minister Jutta Urpilainen is quoted by YLE saying that, “no concrete decisions on collateral” emerged from Tuesdays discussions between Dutch, German and Finnish Finance Ministers. It remains unlikely that a decision will be reached before the meeting of eurozone finance ministers on 16 September. Greek paper Imerisia reports, without citing its sources that the private sector participation in the Greek debt swap under the second Greek bailout has so far reached the 75% mark, still well below the 90% threshold set by the Greek government.

Italian Senate will vote on second austerity package today;
Protests against austerity turn violent in various Italian cities
The Italian Senate will today vote on the new set of austerity measures proposed by the Italian government to meet the zero deficit target by 2013. In a U-turn from its previous declarations, the Italian government yesterday announced that the package will be put to a vote of confidence, meaning that Senators will not be allowed to amend it. The latest version of the austerity package unveiled yesterday by the Italian government envisages a VAT rise from 20% to 21%, a 3% levy on incomes higher than €300,000 and a gradual increase in retirement age for women working in the private sector, starting from 2014.

Meanwhile, yesterday’s protests against the new austerity measures turned violent in some Italian cities, with eight police officers injured in Naples and minor clashes between protesters and the police in Rome, Milan and Turin.

Spanish Senate set to approve constitutional deficit limit after day of protests
The Spanish Senate is today expected to give the green light to the introduction of deficit and debt limits in the Spanish constitution. However, El País reports that pro-referendum groups are working to rally the 35 Deputies or 26 Senators needed to require a referendum on the constitutional amendments. Meanwhile, thousands of protesters took to the street yesterday in various Spanish cities, calling for a referendum on the constitutional reform.

In an interview with Belgian daily Le Soir, Belgian Finance Minister Didier Reynders has suggested that Belgium, Luxembourg and the Netherlands should join the Franco-German initiative to harmonise their corporate taxes.

Open Europe’s Research Director Stephen Booth is quoted by The Diplomat magazine, arguing, “Germany’s decision to abstain in the UN vote over Libya shows that the EU remains fragmented when it comes to taking concrete action…The events of the recent past, such as over Libya and also Iraq, illustrate that the EU remains a bloc of 27 individual nations, often with different external interests, which often allows the likes of Russia and China to play them off against each other.”

In the Huffington Post, Policy Director of the Foreign Policy Centre Adam Hug suggests that those in the UK who are in favour of greater European integration need to set up an “organisation in the same mould as” Open Europe.

Joachim Voth: “The death of the euro will not be the end of Europe”
In an op-ed in Le Monde, under the headline, “The death of the euro will not be the end of Europe”, Barcelona University Professor Joachim Voth argues that, with the abandonment of the single currency, “The megalomaniac deliria about ‘the United States of Europe’ will be consigned to oblivion. The so-called ‘bicycle theory’, that Europe must move forward in order not to fall, will be forgotten. Policy-making will become more pragmatic, with Brussels dealing with real problems.”

Commission to claim power to approve temporary re-introduction of border checks
More details are emerging about European Commission plans to overhaul the rules of the border-free Schengen area, due to be unveiled next week. EUobserverreports that, under the Commission’s draft proposal, in the case of ‘foreseeable events’ EU member states which – unlike the UK – are also party to the Schengen agreement would have to ask the Commission to authorise the temporary re-introduction of border checks. If the Commission gives the green light, the decision would then have to be rubber-stamped by a qualified majority of member states in the Council of Ministers. In the case of ‘unforeseeable events’, national governments would be allowed to put in place border controls immediately, but would then have to seek authorisation from the Commission and other member states to maintain them.

EU Energy Commissioner Günther Oettinger will today unveil a proposal requiring that in future EU member states negotiating energy deals with third countries submit any agreements to the European Commission for preliminary vetting, reports the Guardian.

Europaportalen reports that the EU’s Committee of Permanent Representatives is today expected to extend copyright protection for recorded music from 50 to 70 years, despite Sweden, Belgium, the Netherlands and other member states opposing the changes.

World

Switzerland sets exchange rate ceiling
The Swiss Central Bank (SNB) shocked markets yesterday by announcing a ceiling for the exchange rate of the Swiss Franc against the euro, following a massive flight to safety over recent months, sending the Swiss currency to record highs. The WSJ reports that the move could prompt retaliatory measures from other central banks and could even spark a currency war.

New on the Open Europe blog

What kind of fiscal integration for the eurozone, Mr Osborne?

Posted by Britannia Radio at 17:29