Tuesday, 22 November 2011

Open Europe

Europe

Commission wants right to intervene directly in member states’ budgets;
German government: Eurobonds no “panacea” for eurozone crisis
In an interview with FTD, EU Commissioner for Economic and Monetary Affairs Olli Rehn argues for “the functioning of the eurozone to be improved through better coordination and tighter fiscal surveillance”, which would include having to clear national budgets in Brussels in order to ensure that rules on budgetary stability are adhered to. According to a draft copy of the Commission’s legislative package seen by Süddeutsche Zeitung, member states would have to submit their draft budgets to Brussels by April 15 in order for the Commission to provide comments and suggestions. The budget would then be discussed nationally and resubmitted by October 15 in order to get the Commission’s final approval. Rehn argues that the Treaty changes urged by Germany would not be necessary to achieve this, although he added that the Commission did not exclude this possibility.Handelsblatt reports that a source close to German Chancellor Angela Merkel has said that her goal is a Treaty amendment which allows for similar budgetary intervention and an enforcement role for the European Court of Justice, and according to experts, such a change can be achieved through a protocol added to the EU Treaties.

Ahead of the release of the Commission’s Eurobonds proposal tomorrow, Steffen Seibert, spokesman for Angela Merkel, dismissed the idea as a possible solution to the crisis, saying, “[Germany does] not share the view of many people that Eurobonds would now be some sort of panacea for the crises [in the eurozone]…On the contrary, [there is] a danger that such Eurobonds could distract [us] from tackling the root of the problem.”

The Bundesbank yesterday significantly cut the growth forecast for Germany in 2012 down to between 0.5% - 1% from 1.8%, citing dampening external demand and the eurozone crisis as the key factors. Separately, the ECB nearly doubled its purchases of bonds last week, buying €7.99bn.

FAZ reports that Greek Finance Minister Evangelos Venizelos yesterday announced that in addition to the necessary recapitalisation of Greek banks following the planned write-down of government bonds, he intends to extend state guarantees for the country’s banks from €30bn to €60bn.

A new YouGov poll conducted across France, Germany, Britain and Denmark shows sharp contrasts in opinion on whether it is right for so much money to be spent on bailouts trying to save the eurozone. 54% of French respondents and 56% of Danish respondents think it is the right thing to do, while respondents from Germany are the most opposed – only 27% support spending money to save the eurozone, with 56% opposed.

Ruparel: Greater intervention by the ECB raises more problems than it solves
On the FT A-list, Open Europe’s Raoul Ruparel responds to a piece by George Soros and Peter Bofinger, which calls for the ECB to become temporary liquidity provider of last resort to sovereign states, while a solution to the eurozone crisis is found. Raoul argues that, “the ECB is already playing this role to a large extent. It has, along with the eurozone bail-outs, bought European politicians 18 months in which to devise the fiscal rules and growth strategy the authors call for. Unfortunately, leaders have repeatedly failed to reach any semblance of consensus on a lasting solution to the crisis…Against this backdrop, it becomes a huge risk for the ECB to stake its independence and credibility on the hope that such a solution will be achieved in the near term.” Raoul adds, “Having the ECB act as a full lender of last resort will detract from the economic and structural reforms needed in the eurozone, and may throw up more problems in the longer term; making it ultimately self-defeating.”

In the WSJ, Simon Nixon writes, “Even now, many cling to the belief the ECB could make these problems disappear…After all, banks have been dumping Spanish and Italian bonds to escape the higher capital charges required under the new European stress tests. It isn't clear why ECB intervention would encourage them to start buying again…At best, the ECB can only buy time – but time for what?”

New Spanish government calls for “joint eurozone strategy” to tackle Spain’s debt problems;
Interest rate on Spain’s short-term debt doubles in only one month
The results of Sunday’s elections have failed to bring down Spain’s borrowing costs. At this morning’s auction, Spain was forced to pay a record 5.11% interest rate on its three-month bonds, more than double than the 2.29% paid in the previous auction last month. Meanwhile, Spanish Partido Popular’s Secretary-General María Dolores de Cospedal said yesterday: “We won’t make miracles, and we never promised any. The solution to [Spain’s] debt problem must come from a joint eurozone strategy…What is clear is that Spain can’t keep financing itself at [an interest rate of] 7%...An agreement to save and guarantee the solvency of [Spain’s] sovereign debt must come from European institutions.” Cospedal also said that the new government announce details of its fiscal policy until it takes office just before Christmas.

The Italian government is working on a new package of budget savings and tax hikes, which could reportedly include the re-introduction of a local council property tax estimated to raise €3.5bn a year.

In spite of initial opposition, Hungary has requested further financial backing from the EU and the IMF in order to tackle its rising borrowing rates and sinking currency.

Osborne encourages efforts of Tory EU reform group
Writing on Conservative Home, Paul Goodman reports that following Open Europe’s social and employment policy presentation to the new All-Party Parliamentary Group on European Reform, the subject of the next presentation will be how best to protect the City of London from excessive and intrusive regulation from Brussels. He also reports that Chancellor George Osborne has offered his encouragement to the related but Conservative-specific Fresh Start group. Separately, the Mail reports a “cautious welcome” from Conservative MPs to the news that David Cameron is seeking to get aspects of the EU’s controversial Working Time Directive relaxed, while the Sun also welcomes the news but adds: “we're not holding our breath”.

In the Telegraph, Foreign Secretary William Hague writes: “I call on Turkey to keep its patience and determination to join the EU, and also on our EU partners to keep working towards a goal that is in our common interests.”

UK Regulator says EU plans for accountancy regulation are “damaging”
Stephen Haddrill, Chief Executive of the UK Financial Reporting Council, told a meeting of British accountants that European Commissioner Michel Barnier’s proposals for accountancy regulation, due out next week, “are extremely damaging and threatening to the quality of audit and would do no more than add cost”.

PA reports that, after talks in Brussels with EU Internal Market Commissioner Michel Barnier, Cabinet Office Minister Francis Maude said that he hoped that new Commission proposals, due in December, will simplify rules and cut the costs of public procurement to help small and medium-sized firms compete with bigger suppliers.
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Die Welt reports that the European Commission will propose a new funding regime for stem cell research which includes research on human embryos that are subsequently discarded, something which had previously been excluded because it is considered highly controversial by several Member States.

The Guardian reports that Transport Secretary Justine Greening has insisted the UK’s "no security scan, no fly" policy at British airports is to remain in place despite EU demands that passengers be allowed a pat-down search instead.

The EU’s High Representative for Foreign Affairs and Security Policy, Catherine Ashton, has called on Egypt’s military government to respect the Egyptian people’s aspiration for democracy, and offered the EU’s assistance in monitoring the forthcoming elections, although this was rejected.

New on the Open Europe blog

After the election: What does the future hold for Spain?

Greater intervention by the ECB raises more problems than it solves

Posted by Britannia Radio at 15:26