Tuesday, 20 September 2011

Open Europe

Europe

Italian government blames media reports after S&P’s credit rating cut

Standard & Poor’s has downgraded Italy’s credit rating by one notch and kept it on a negative outlook, due to the country’s weak growth prospects. In a communiqué issued this morning, the Italian government has responded arguing, “S&P’s evaluation seems more influenced by the dailies’ backstage reports than by reality, and appears to be motivated by political considerations.” Meanwhile, credit rating agency Moody’s has also warned that the austerity package recently adopted by the Italian parliament will have a negative impact on the finances of local administrations, putting the country’s rating at risk.  

Stand-off continues over next tranche of Greek bailout;
Kathimerini: Greek government considering referendum on euro membership

The Greek Finance Ministry said yesterday’s conference call with EU/IMF/ECB officials was “productive” despite not reaching a final agreement on another Greek austerity package – the call will resume today. The WSJ reports that the IMF is pushing for more savings to be found through spending cuts rather than tax increases.

Greek daily Kathimerini reports that, according to unnamed sources, the Greek government is considering holding a referendum on whether the country should remain in the eurozone or not. The hope would be that a positive outcome would give the government a fresh mandate to negotiate economic reforms with the EU/IMF. The Greek government quickly denied that it was considering holding a referendum or calling early elections. Reuters reports that, according to the IMF, the Greek economy may contract by 5.5% this year, a much deeper recession than expected.

FT Deutschland reports that a 50% Greek restructuring would cost the German government around €14bn, while German financial institutions would face losses of €6bn. Meanwhile, the ECB continued its bond buying last week, purchasing €9.8bn, a decrease from the levels of the past few weeks. Separately, a recent poll conducted in twelve EU countries by the German Marshall Fund found that only in Slovakia did a clear majority of respondents view the impact of the euro as “positive” for their economy, reports EurActiv.

PA reports that, in his speech at the Lib Dem Conference, Deputy Prime Minister Nick Clegg blamed France and Germany for the current eurozone crisis, saying, “I think history will judge the then French and German governments very, very unkindly who, some years ago, basically signalled that the rules could be relaxed because that then sent a signal out to everybody else.” Clegg also admitted that joining the euro would have been a “huge, huge error.” In his speech, Business Secretary Vince Cable warned that the eurozone crisis could push Britain back into recession.

The Telegraph reports that the Department for Business has said that new legislation to implement the EU’s Agency Workers Directive will definitely come into force unchanged from when it was laid before Parliament last year. This is despite the Prime Minister’s office commissioning legal advice to see whether the law could be moderated to reduce its impact on UK employers.

EU auditors say billions spent on environmental projects of dubious value
EUobserver reports that more than a third of EU agro-environmental aid is given to farms that have no ecological problems on site or within a 10-Km range, a study carried out by the European Court of Auditors (ECA) shows. “The current policy is too vague to deliver tangible results and there are considerable problems in calculations and in differentiating between various regional and local conditions,” Olavi Ala-Nissila, Finland's envoy to the EU court, said. For the period 2007-2013, national governments allocated €22.2bn in EU funds to the programmes.

Merkel insists there is no threat to the stability of the governing coalition;
Poll: 40% of Germans could imagine voting for “Euro-critical” party
The fallout from this weekend’s regional elections in Berlin continues, with German Chancellor Angela Merkel insisting that she did “not expect governing to become any more difficult”, despite growing problems in the junior coalition party, the FDP. The FT reports that the Social-Democrat leader Sigmar Gabriel has reiterated his call for early elections, adding that the FDP’s recent results “showed that you can’t win elections in Germany with some superficial anti-euro campaign.” However, FDP leader Philipp Rösler insisted, “Our thinking is clearly laid out: pro-European with a necessarily sensible economic policy.”

Meanwhile, members of the governing coalition yesterday circulated a proposal for giving the Bundestag a greater role in the use of the EFSF, the eurozone bailout fund. The proposal suggests that the parliament would need to vote to approve any new bailout packages, but an emergency standby committee could approve the more flexible tools, such as bond purchases or precautionary loans.

Separately, Die Welt notes that a recent survey by the polling institute Emnid on behalf of Bild am Sonntag revealed that 40% of German voters could imagine voting for a “Euro-critical” party.

Eurozone comment round-up
In the Guardian’s Comment is Free, Economics Professor Costas Lapavitsas argues, “Greece is on the brink of defaulting and abandoning the euro. This is the harsh reality, though none of the major parties is prepared to acknowledge it. The tragedy is that Greece now has a far weaker economy than in 2010. It is likely, therefore, that there will be major economic and social upheaval with unpredictable outcomes.”

In Le Figaro, columnist Yves de Kerdrel argues, “The real catastrophe threatening Europe is not a Greek default. It would be to see banks unable to lend money to businesses…This is why, instead of wasting time looking for a solution which doesn’t exist to make Greece solvent, public authorities – in France as in Germany – would be better advised to set out a rescue plan for our big banks.”

In an op-ed in the WSJ, French UMP Senator Philippe Marini argues, “I won't deny that I voted ‘No’ in 1992, against the Maastricht Treaty that created the European Union as we know it and formed the basis for the euro. Moreover, so there is no ambiguity: The current crisis confirms my belief that we would all be better off if the euro had never been established. However, I am today in favour of maintaining the euro, for the simple reason that its collapse would be an economic disaster. Unfortunately, many supporters of the 1992 ‘Yes’ campaign have not learned the lessons of Europe's crisis and are attempting a dangerous leap forward for the EU and euro area.”

In the FT, Gideon Rachman notes, “The images on euro notes are of imaginary buildings. While national currencies typically feature real people and places – George Washington on the dollar bill, the Bolshoi theatre on the Russian rouble – European identity is too fragile for that…This lack of a common identity is the fatal flaw that may sink the common currency.”

The Spectator’s Coffee House blog notes that, “Every single Lib Dem Cabinet minister has, over the past few days, ruled out any attempt to repatriate powers from Brussels.”

The EU’s financial markets watchdog ESMA yesterday presented for consultation the first set of draft regulatory standards for credit rating agencies. Under the proposals, every month the agencies will have to disclose the exact time and date a rating was altered, and the full name of the lead analyst responsible for the change, GFS News reports.

Following the ECB’s moves to force clearinghouses that deal with high volumes of euro-denominated financial products to relocate to the eurozone, the FT argues, “It is hard to see why the London operations of, say, LCH.Clearnet in euro-related business could not be handled via a co-operative oversight framework, a well-established procedure, in which primary responsibility is assigned to the Bank of England.”

EU countries have “shamefully failed” to help thousands of refugees stranded near Libya's borders, Amnesty International says, according to the BBC.

The WSJ reports that Canada is claiming that the EU’s Fuel Quality Directive unfairly discriminates against oil sands crude – one of the country’s key exports – and says it could refer the matter to the WTO if the rules aren’t changed.

New on the Open Europe blog

Changing mood: How the public’s attitude towards Greece and eurozone bailouts is changing in France


Posted by Britannia Radio at 13:33