Thursday, 17 November 2011

Open Europe

Europe

France and Germany clash once again over role of ECB
Disagreements over the role of the ECB continue to rage on in Europe, as France maintains its position that the ECB should become a lender of last resort for the eurozone. French Finance Minister Francois Baroin said earlier in the week, “We are favourable to the intervention of all the European institutions, including the ECB, to achieve the best responses to the crisis,” adding that German reluctance was due to “historical reasons”. German Chancellor Angela Merkel responded yesterday saying, “The way we see the Treaties, the ECB doesn’t have the possibility of solving” the problems of the eurozone crisis. Mervyn King, Bank of England Governor, also waded into the debate yesterday saying, “I have great sympathy with the position of the ECB…[Being a lender of last resort] is a million miles away from the ECB buying sovereign debt of national countries…it will be a mechanism of transfers from the surplus to the deficit countries.”

Le Figaro reports that France is also wary of the idea of a directly elected European Commission President – which Merkel proposed at her party’s annual conference yesterday – because Germany’s demographic weight would increase the chances of a German President being elected.

Meanwhile, Greece’s new government convincingly won a confidence vote by 255 votes to 38 last night. Separately, the EU/IMF/ECB review team yesterday recommended that the next tranche of Portuguese bailout funds be released by January, despite some slippages in meeting this year’s deficit targets.

The FT reports that Finnish Europe Minister Alex Stubb has warned that power in the eurozone is shifting towards the core economies, saying, “I don’t see some countries dropping out [of the euro], but I see countries inside losing influence…I see the centrifugal force of a core Europe.” According to the Times, Spain’s front-runner to become Prime Minister after elections this Sunday, Mariano Rajoy, has made moves to create closer links with Britain in an effort to out-manoeuvre Franco-German dominance of the EU. In an interview with El País, Rajoy argued, “I’m radically against the existence of two or three speeds [in Europe], because this would mean that certain countries would finance themselves very well and be much more competitive, while certain others would lag far behind. It would be bad for everyone.”

In the FT, Marek Belka, former Polish Prime Minister and Governor of the Polish Central Bank, argues, “The eurozone itself would suffer if it made institutional changes that separated countries such as Poland from Europe’s mainstream. In particular, any move to sub-divide the single market would be counter-productive.”

Ireland’s Taoiseach expresses doubts about German plans for Treaty change;
Van Rompuy suggests Treaty change is unlikely to happen in 2012
At a joint press conference with German Chancellor Angela Merkel in Berlin yesterday, Irish Taoiseach Enda Kenny publicly expressed doubts about the need for EU Treaty change. Kenny stated, “While there are strong rules needed here, any steps towards major treaty change would obviously be very challenging…I believe that the immediate crisis has to be dealt with in the short term with the facilities and tools that are available to us.” The WSJ reports that Kenny’s comments were like “throwing cold water on Ms. Merkel's plea for Treaty changes.”

Meanwhile, Les Echos notes that European Council President Herman Van Rompuy yesterday told the European Parliament that much can still be done “within the [existing] Treaties”, stressing that any Treaty change would require ratification from all 27 EU member states. FT Deutschland notes that Van Rompuy also suggested that Treaty change before the end of 2012 is unlikely, since concrete proposals are unlikely to be presented before next June.

Italy’s new government contains no elected politicians;
Italian Prime Minister Mario Monti to unveil his government’s agenda ahead of vote of confidence in the Italian Senate this afternoon
Italy’s newly appointed Prime Minister Mario Monti yesterday disclosed the list of ministers who will form his government. The new cabinet doesn’t include any politicians, with several key ministries assigned to academics. Monti opted to appoint himself as interim Economy Minister as well, although he said he would nominate four deputies soon. Monti will unveil his agenda this afternoon, ahead of a vote of confidence in the Italian Senate. According to La Stampa, Monti is expected to address several controversial issues, including further reform of the Italian pension system, a privatisation plan and concrete measures to liberalise Italy’s labour market. The vote of confidence in the lower house of the Italian parliament is scheduled for tomorrow.

Meanwhile, La Repubblica reports that outgoing Prime Minister Silvio Berlusconi told a meeting of Senators from his party this morning, “We respect Monti, but we will say ‘no’ to any depressing [austerity] package.” Separately, Spain was forced to pay a record 6.975% interest rate at this morning’s auction of ten-year bonds. Expansión quotes Citigroup’s Chief Economist Willem Buiter warning, “I think we have a few months left – perhaps weeks or days – before the significant risk of an unnecessary default of countries like Spain or Italy emerges.”

Mats Persson: The UK needs a comprehensive plan to ensure the EU does fewer things in Britain, but does them better
In the Yorkshire Post, citing Open Europe’s report on the costs and benefits of repatriating EU social and employment law, Open Europe Director Mats Persson writes, “Cutting the cost of EU social and employment regulation by 50% could result in a boost in economic output equivalent to the creation of 140,000 new jobs in Britain. Under a more likely scenario, where the benefits of deregulation would be split between higher employment and increased productivity, a 50% cut could generate the equivalent of 60,000 new jobs in the UK in addition to adding £4.3bn to economic output.”

He adds, “EU involvement in this area is increasingly losing appeal on both right and left. The Right and many businesses complain about the increased compliance cost that comes with EU social law, while the Left and trade unions increasingly view the EU as both failing to provide adequate worker protection, but also actively undermining it as austerity measures, in part decided in Brussels, sweep Europe.” Mats concludes that the UK needs a comprehensive plan “to reshape the EU in the wake of the crisis. It could ultimately could lead to the EU doing less things in Britain, but doing them better.”

Barnier tries to reassure the City but warns it must abide by single EU rulebook
Speaking on the BBC’s Today programme, the EU’s Internal Market Commissioner Michel Barnier reassured the City that it would be “upheld and supported” but added that “there is a single European political and economic area and I very much hold to the unity of 27 countries in the single market.” He said, “I don't want there to be different regulations. There will be a more integrated economic and budgetary co-ordination for the countries of the eurozone because what each does in their own country has consequences for the single currency – the level of indebtedness for example. But the rules of the single market must remain those of the 27 countries.”

In the Spectator, former Chancellor Nigel Lawson argues, “The European Union needs explicitly to abandon the failed notion of ever-closer union, and to agree a constitution which sets out the inalienable competences and responsibilities of the individual member states. For Britain, we have a specific requirement. It is clearly unacceptable that the City of London, which as a financial centre is more important than all other EU financial centres put together, should have to submit to EU regulation – where Britain can be outvoted.” On the Spectator Coffee House blog, Daniel Korski argues, “No 10 needs to get other EU states to sign up to an 'Open Europe Protocol' where everyone agrees that the Eurogroup cannot infringe on ECOFIN's rights – in other words, the 17 cannot decide for the 27. This protocol should also emphasise the need to complete the single market - for example liberalising services.”

The FT reports that if a financial transaction tax were to be introduced at the eurozone level only, the benefit to the City of London of financial businesses relocating there in order to avoid the tax could be cancelled out due to the Commission’s proposed “residence principle” for enforcing the levy, which would apply to any trade authorised by a group located in the eurozone, even if the actual transaction was executed externally.

The WSJ cites a poll conducted by GfK Verein in cooperation with the paper, which shows that 40.5% of Germans believe their government’s handling of the eurozone crisis has been "poor" while 22.8% said it was “very poor.” However, a majority of respondents also said that Germany should stick with the euro and that they envisage the euro being Germany’s currency in 10 years’ time.

Süddeutsche reports that employees of the Greek private bank Proton, including its President Lavrentis Lavrentiadis, have been accused of embezzling €700m, money that came directly from the EU’s bailout fund for Greece and was intended to save the bank from collapse.

World

EUobserver reports that the EU-Ukrainian summit scheduled for the 19th December may be cancelled due to the long-standing dispute over the trial and imprisonment of former PM Yulia Timoshenko, and the fact that Ukraine is demanding an EU accession promise ahead of the summit.

New on the Open Europe blog

A closer look at Labour’s “New” EU policy

Securing Portugal's deficit

A double hat for Super Mario: Key questions about Italy’s new government have yet to be answered


Posted by Britannia Radio at 12:30