Friday, 23 September 2011

Open Europe

Europe

Greek media reports that Greek government accepts possibility of debt restructuring
Reuters reports that, according to the Greek press, Greek Finance Minister Evangelos Venizelos told the Greek parliament yesterday that he sees three scenarios for Greece, including a debt restructuring with 50% write downs for Greek bondholders. The government quickly moved to deny the reports. Kathimerini reports that the vote on the emergency property tax, one of the many new austerity measures, was delayed yesterday until Tuesday following dissent within the governing party, which meant the vote may not have passed. Meanwhile, Moody’s yesterday downgraded eight Greek banks by two notches and put them on a negative outlook.

In an interview with FD, Dutch central bank governor Klaas Knot has admitted that a Greek default can no longer be ruled out, saying, “It is one of the scenarios…[The news from Greece] is at times not encouraging.” Knot’s comments contradict the official ECB line, which is that a Greek default is not being considered. Knot also said that contagion could be contained by expanding the eurozone’s bailout fund.

Eurozone looks to speed up recapitalisation of weakest banks;
Cameron: Eurozone cannot keep “kicking the can down the road”
The FT reports that European officials are looking to speed up the recapitalisation of 16 banks – located mostly in peripheral Europe – which came close to failing the recent stress tests, following another day in which European banks saw their share prices plummet. The group of banks, which does not include any French banks, is expected to seek private funding first, although officials readily admitted that state aid or EU aid may be required. According to the FT, negotiations have already started over whether the EFSF, the eurozone’s bailout fund, would be used.

EU Internal Market Commissioner Michel Barnier said, “We want the recapitalisation for these banks to be by private means. The era of bailing out banks must end. But I cannot of course exclude the possibility that some of the above banks will require state aid,” this is despite him yesterday rejecting the IMF’s analysis of bank recapitalisation needs in Europe.

Financial markets rebounded slightly this morning following a pledge by G20 leaders to “take all necessary actions” to support growth. This follows an open letter sent by six G20 leaders, including UK Prime Minister David Cameron, to French President Nicolas Sarkozy urging Eurozone leaders to “act swiftly to resolve” the eurozone crisis. At the meeting Eurozone leaders did commit to ratifying the expanded role of the EFSF by mid-October. Cameron separately warned that the world is on the “brink of a new economic crisis”, saying, in an interview with Channel 4 News, “We cannot go on kicking the can down the road. We need decisive action, swift action to deal with this issue [the eurozone crisis].”

Meanwhile, in an interview with Hannoversche Allgemeine Zeitung, EU Justice Commissioner Viviane Reding has suggested that the six Triple-A rated eurozone countries should issue joint bonds, arguing, “This larger core-European bond market would be solid as a rock, with strong liquidity and credit rating.”

Separately, Handelsblatt reports that, according to research from Bernd Raffelhüschen, an economist at Freiburg University, Germany has unfunded liabilities of up to €5tr from its pension and social security commitments on top of its official debt of around €2tr. In a comment piece in Bild, Rolf Kleine calls German Finance Minister Wolfgang Schäuble “Minister Clueless”, arguing that he provides Germans “with new truths every day, most of which we suspect will be passed stations already the following day.” Director of IFO Institute Hans-Werner Sinn told Handelsblatt, “It's cheaper to bail out banks than to finance an excessive standard of living of entire peoples.”

La Repubblica reports that the Italian Economy Ministry has halved its growth forecasts for the next three years, but has insisted that another austerity package will not be needed to meet the balanced budget target by the end of 2013.

The Irish Times reports that twenty-six Irish parliamentarians and an MEP have called for a referendum on the EU treaty amendment establishing the European Stability Mechanism, the eurozone’s post-2013 permanent bailout fund, which they say could lead to “a regime of unmitigated austerity for decades to come.”

UK could face costs from EU financial transaction tax even if it opts out
The FT reports that the Commission’s draft plans for a financial transaction tax, seen by the paper, could have cost implications for the UK even if the Government managed to block its introduction at the level of the EU-27. The Commission’s proposal is based on broad definition of tax residency, meaning any transaction involving one investor based in continental Europe would be hit by the levy, even if it was executed in London, New York or Asia.

EU officials refuse proposal to work 40 hour week
Trade unions representing the EU's 55,000 officials have refused to discuss proposals for a 40 hour working week – an extra 2.5 hours – the key measure in a drive to save taxpayers £870m a year by 2020. Staff unions are also opposed to any changes to a flexitime scheme that meant that 2,000 Brussels officials, earning from £104,000 to £185,000 a year, were entitled to three months off work on full pay last year.

Open Europe’s Research Director Stephen Booth is quoted by the Telegraph and the Mail saying, “For Brussels civil servants to protest against working a few more hours a week borders on comedy, would it not be for the EU facing its worst crisis in its history. It shows a complete lack of self-awareness and is an insult to taxpayers all over Europe, who face falling living standards and the threat of redundancy.”

Oborne: Pro-euro lobby’s attempts to get Britain into the Single Currency would have brought “economic dereliction”
On the BBC’s Today Programme, Peter Oborne, co-author of a new pamphlet published today entitled “Guilty Men” on the UK’s pro-euro lobby, argues that had attempts succeeded to get the UK into the euro they would “have brought Britain to the economic dereliction faced now by Greece and Spain.” In the Times, former Ambassador to the US Peter Jay, who wrote the foreword to the pamphlet, argues, “The number of people who in their youth just thought of Europe as a nice place for culture, sunshine, wine and skiing and made this the foundation of their view of the political and economic architecture being imposed on the UK is pathetic and shocking.”

An article in Le Figaro notes that yesterday French Prime Minister François Fillon “sowed trouble” when he suggested that France will need to gradually align working hours and retirement age with Germany in the name of Franco-German economic convergence.

In a joint letter, five EU member states – including the UK and France – have rejected a European Commission proposal to extend the right to a lawyer for the entire period a suspect is held in custody by the police, arguing that the plan would create “substantial difficulties” for investigations, reports EUobserver.

In a letter to the Spectator, Ronald Stewart-Brown of the Trade Policy Research Centre argues, “As the one leading member state which had the sense not to join the euro, the UK could credibly argue for a less integrated Europe based on trade and co-operation. Failing that, we would be in a strong position to negotiate withdrawal based on a new intergovernmental customs-union-based trade agreement.”
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The Netherlands and Finland yesterday vetoed Romania and Bulgaria's bid to join the border-free Schengen area.

World

EU nations remain split over the question of Palestine’s status at the UN, with the Independent reporting that David Cameron looks set to abstain in the vote on French President Nicolas Sarkozy's proposal to give the Palestinians enhanced observer status.

New on the Open Europe blog

Guilty men’s lessons from the past: Peter Oborne attacks the UK’s pro-euro lobby

Eurocrat unions on the warpath…again!

Contrasting the ECB and the European Systemic Risk Board


Posted by Britannia Radio at 11:53