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Slovakian Government falls as Parliament rejects EFSF expansion;
Sulik: “I'd rather be a pariah in Brussels than have to feel ashamed before my children”

Following an all-day debate yesterday, the Slovakian parliament voted last night to reject the expansion of the EFSF, which would have seen Slovakia’s loan guarantees under the bailout fund increase from €4.4bn to €7.7bn. As a result Slovakian Prime Minister Iveta Radicova’s four-party coalition government has effectively collapsed, as the EFSF vote was tied to a vote of confidence. Radicova’s coalition partners Freedom and Solidarity (SaS) and the main opposition party Smer abstained en-masse, meaning the proposal only received the support of 55 out of 150 MPs.

SaS’s leader Richard Sulik has attracted a lot of criticism from coalition colleagues, with the Prime Minister’s advisor blaming him for the fall of the government, saying: “He destabilised the political situation, damaged Slovakia’s name and allowed Slovakia to be thought of as untrustworthy partner in the EU by being stubborn”. However Sulik, who opposed shifting the debt burden onto Slovakian taxpayers told fellow MPs: “I'd rather be a pariah in Brussels than have to feel ashamed before my children, who would be deeper in debt should I back raising the volume of funding in the EFSF bail-out mechanism”.

The Slovakian parliament is nonetheless expected to pass the EFSF expansion later this week as Smer leader Robert Fico has said that he “supports the bill on an ideological level” but that his party’s support is conditional on fresh elections following the vote. Slovakia’s President Ivan Gasparovic will now conduct negotiations with all the parties in order to decide whether to try to form a new government or call an early election. Political analyst Juraj Marusiak is quoted in Pravda saying that: “They will ratify the EFSF at the second attempt, the question is what price will the coalition be willing to pay. It seems that the price will be paid to Smer instead of SaS”. Open Europe’s Raoul Ruparel appeared on BBC World news discussing the Slovakian situation and the eurozone crisis.

Reaction to the Slovakian vote in Germany has been mixed; Bild’s deputy editor Nicolas Blome argues that: “Slovakia is poor and has put in a lot of effort to drag itself out of the mire. Greece is richer, but has put off similar efforts… Solidarity is not a one-way street”. Meanwhile inSuddeutsche, Cerstin Gammelin writes that one country should not be able to endanger the whole eurozone club, and argues that “new rules are required or else [the eurozone] will remain a hostage to the domestic politics of 17 countries”.
FT WSJ CityAM Times European Voice Guardian Telegraph Mail Irish Independent Der Standard ARD BBC 3 BBC 4 EUobserver FAZSuddeutsche Le Figaro Le Monde Pravda Pravda 2 Pravda 3 Pravda 4 Pravda 5 Pravda 6 Slovak Spectator Slovak Spectator 2Hospodarske Noviny Hospodarske Noviny 2 Hospodarske Noviny 3 Hospodarske Noviny 4 Sme Sme 2 Bild: Blome

Berlusconi to require a vote of confidence in the lower house of Italian parliament;
Early elections might take place even if Berlusconi wins the vote
Italian Prime Minister Silvio Berlusconi will deliver a keynote speech in the lower house of the Italian parliament this afternoon, setting out his government’s priorities for the following months. He will then demand that a vote of confidence be held, most likely tomorrow. If Berlusconi fails to secure a majority, he will almost certainly have to resign. An article in Il Corriere della Sera suggests that early elections could take place next year even if Berlusconi wins tomorrow’s vote, due to growing pressure from junior coalition partner Lega Nord. Berlusconi’s decision to require a vote of confidence comes after the lower house of the Italian parliament failed to approve the government’s 2010 budget review yesterday.

Meanwhile, the Italian Court of Auditors yesterday rejected the Italian government’s draft reform of the tax system – a key piece of the set of austerity measures aimed at achieving a balanced budget by 2013 – due to uncertainties over its financial coverage.
Repubblica Repubblica 2 Repubblica 3 Corriere della Sera Corriere della Sera 2 Corriere della Sera 3 La Stampa Il Sole 24 OreStraneuropa Rai News 24 IHT WSJ FT

Greece set to receive next tranche of bailout funds, despite missing deficit targets;
CDU considering EU Treaty change within the next year
The EU/IMF/ECB review of the Greek bailout was completed yesterday, with the review team stating that it expects Greece to receive the next tranche of bailout aid, despite Greece not being able to reach its deficit target for this year. The so-called ‘troika’ also suggested that it expects Greece to meet its fiscal targets for next year, but needs further austerity to do so in 2013 and 2014. Open Europe’s Raoul Ruparel is quoted in the Telegraph, saying, "The EU and IMF have now dropped all pretence that Greece can achieve its original deficit targets, but look set to pay out the next tranche of Greek bailout aid regardless. This may be necessary to avoid a disorderly default, but it is imperative that the EU takes these failures into account when deciding the future of the second Greek bailout."

In an interview with FAZ, CDU Secretary-General Hermann Gröhe has said that his party is considering the possibility of an EU Treaty change within the next year. Gröhe suggested that "we need the possibility that eurozone countries which breach the Pact would be sued before the European Court of Justice in the future", adding that "our goal should be to be ready within one year". Focusreports that an Emnid poll shows that 37% of German voters could imagine voting for a euro-critical party. This number tops two thirds among voters of the FDP and the left.

A group of almost 100 commentators, led by George Soros, have written a letter urging euro area countries to move towards political union. In City AM Alistair Heath argues, “No system can survive if it is sufficiently hated or despised by most of the population. Those who believe that the Eurozone needs to push through radical fiscal integration and federalise vast amounts of sovereign debt are playing with fire.”
European Voice Irish Times Irish Independent BBC EUobserver Independent Les Echos Telegraph Reuters Handelsblatt Kathimerini FTCityAM 2 Times Express Irish Times FT 2 FT 3 FT 4 BBC 2 Expansión El País Le Figaro Les Echos Trichet’s speech Le Figaro 2Sueddeutsche De Morgen Les Echos 2 Tribube de Genève Kathimerini Bloomberg Le Monde AFP Les Echos 3 FT: Letter Irish Times El País: Soros et al. El País Times: Bremner Independent: McRae WSJ: Nixon WSJ: Review & Outlook City AM: Heath FT: Wolf FT: AltmanFT: Gros City AM: Drake FAZ interview Groehe DAPD Focus

UK dismisses Commission CAP proposals as ‘lost opportunity’
The European Commission will today unveil its plans for the Common Agricultural Policy. The plans, covering 2014 to 2020, see spending on the CAP cut in real terms by 9% to €435bn over the period. But by the end of the decade the CAP will still account for 37.7% of the overall EU budget. The Guardian quotes Caroline Spelman, UK Environment Secretary, saying, “We're worried that the Commission's proposals will be far too backward-looking and this precious opportunity will be lost.”

Open Europe Director Mats Persson is quoted by Bloomberg saying that “The reformist bloc is outgunned and outnumbered. About 21 countries, which is obviously a strong negotiating block, are basically in favour of the status quo.” He added, “Whoever can get Germany on board wins the battle. Once you have the Franco-German bloc reaching a position, that tends to produce more or less the outcome for the EU as a whole.”
FT BBC ORF Bloomberg Guardian

MPs’ 'Fresh Start Project' publishes its goal of new UK-EU relationship
Following a meeting of over 100 Conservative MPs in September to discuss a new approach to the EU a group of MPs, now including Labour MPs, called ‘Fresh Start’ have published their aim to set out what a new relationship with the EU could look like, what powers should be returned to Britain and a practical process to achieve it.
Conservative Home

EBA to set higher capital threshold for Europe’s banks
The European Banking Authority (EBA) has in principle agreed to apply a higher requirement for core tier one capital, around 9%, to European banks. The proposal would also give banks six to nine months to achieve the necessary capital levels or face forced government recapitalisation. The FT reports that this could result in recapitalisation needs of around €275bn. A final decision is expected on 23 October at the EU summit, although the final level is still unclear with Germany in particular thought to be pushing for a lower threshold.
FT Handelsblatt Reuters CityAM Times EUobserver IHT Guardian

On Conservative Home Anthony Browne, former Director of Policy Exchange and economic advisor to Boris Johnson, argues that moves towards further integration in the Eurozone create a need to protect Britain’s interests in vital areas such as financial services.
Conservative Home: Browne

Elsevier reports that MEPs Derk-Jan Eppink and Geoffrey Van Orden have, in a paper published by think tank New Direction, put forward a proposal to cut the costs of the European Parliament by 24%.
Elsevier New Direction

Yesterday’s sentencing of former Prime Minister Yulia Tymoshenko to seven years in prison, a $188m fine and ineligibility to run in elections has been criticised by EU member states who said in a statement that it will have implications for Ukraine’s EU relations. In particular the EU-Ukraine Association Agreement is now thought to be in doubt.
Guardian Independent FT EUobserver Handelsblatt

On his Coulisses de Bruxelles blog, French journalist Jean Quatremer reports that the Greek Defence Ministry has dismissed allegations over Greece’s purchase of 400 US tanks as “completely false.”
Coulisses de Bruxelles

After 485 days of talks, Belgian politicians have reached a deal to transfer a significant amount of power from the federal government in Brussels to regional authorities. Around €17bn of spending, equivalent to 4% of national income, will be transferred from the federal to the regional level, reports the FT. The deal paves the way for fresh negotiations over the formation of a national government.
Standaard Standaard 2 RTBF VRT English FT WSJ

The European Commission will today recommend that the EU starts accession negotiations with ex-Yugoslav state Montenegro, reports Der Standard.
Standard Reuters

UK

Roger Helmer has written a letter to the Chairman of East Midlands Conservatives Stephen Mold announcing his resignation from the European Parliament, arguing, “It would be disingenuous to deny that my decision is dictated in part by my increasing disillusion with the attitudes of the Conservative Party. I am finding it ever more difficult to defend the policies of the Coalition, not only on my key issues of Europe, and of climate and energy, but on a range of other matters besides.”
Conservative Home

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