Friday 6 January 2012

Open Europe

Europe

David Cameron pledges to do “everything possible” to stop single market being discussed behind the UK’s back;
Revised draft of fiscal pact includes provision to incorporate the agreement into EU Treaties within five years
Speaking on the BBC’s Today programme this morning, David Cameron said, “One of the strengths of there not being a treaty within the European Union is that the new thing, whatever it is, can't do things that are the property of the European Union. They [the signatories of the pact] shouldn't be doing things that are about the single market or about competitiveness, and we will be very clear that when it comes to that you cannot use the European institutions for those things because that would be wrong.” He went on to argue, “There are legal difficulties over this. One of the problems is that the European Court of Justice, we all think it is great independent arbiter, but the European Court of Justice tends to come down on the side of whatever more Europe involves.” On his use of veto at the latest EU summit, Cameron said, “I am not making some great claim to have achieved a safeguard but what I did do was stop a treaty without safeguards. Is that clear enough?”

Meanwhile, negotiations on the new European fiscal pact will resume today. Reuters France notes that the revised draft prepared by European Council President Herman Van Rompuy’s office includes – as demanded by the European Commission and MEPs – a provision establishing that the agreement has to be incorporated into the EU Treaties “within five years” of its entry into force, something which would require the UK’s approval. Handelsblatt notes that the new draft gives the Commission greater supervising powers over national governments’ reform plans than the previous version. The Commission would also be allowed to take a signatory country to the ECJ over alleged infringements of the pact, but “only on behalf” of the other signatory countries. La Stampa’s Brussels correspondent Marco Zatterin notes on his blog that the new draft does not include stricter rules on public debt reduction, which was Italy’s main concern. Separately, Il Corriere della Sera reports that, as part of its negotiating position, Germany will demand that eurozone countries be allowed to receive financial assistance under the eurozone’s permanent bailout fund, the ESM, only after they have ratified the fiscal pact.

Mats Persson: 2012 will be another incredibly messy year for the euro
Open Europe’s Director Mats Persson has launched a regular blog for the Telegraph, examining in his first post whether “the euro will crack in 2012”. Outlining the ‘good’ and ‘bad’ news for the eurozone in 2012, including a ‘perfect storm’ scenario that could lead to the end of the euro this year, he concludes, “ultimately, it is how…political tensions are played out in various countries that is likely to determine the eurozone’s fate. My best bet is still on the euro surviving this year – we haven’t yet reached rock bottom. But make no mistake, this will be another incredibly messy year for the euro and the choice between what’s right for democracy in Europe and what’s right for the euro cannot be avoided forever.”

European financial markets hit by eurozone fears;
Belgian government decides to ignore EU Commission’s budget recommendations
Eurozone concerns hit markets hard yesterday, with worries over UniCredit fuelling fears that many banks may face similar problems in raising new capital. Weak economic data from the end of 2011 increased market pessimism. The euro dropped on the market jitters, reaching its lowest level for 15 months against the pound and the dollar.

Greek officials expect to have a deal on the private sector involvement in the second Greek bailout completed by the end of the month, according to the WSJ. Officials suggested that bondholders had made concessions on the level of write downs in exchange for new Greek bonds to be governed under English law. Writing in the FT, Athanasios Orphanides, Governor of the Central Bank of Cyprus, calls for the private sector write downs to be dropped, suggesting that the fear of future write downs on other eurozone sovereign debt is fuelling the rising borrowing costs around Europe.

Belgian daily De Morgen reports that the European Commission has refused to approve the 2012 Belgian budget, saying that the growth figures are too optimistic. Originally the Belgian government rejected the Commission’s calculations. However, it has now simply decided to ignore the Commission’s recommendations. A final Commission decision is expected on Wednesday. A Belgian government source is as saying "it is beginning to look as if Europe wants to show who is the boss and a small country as Belgium is an easy target… That's unfair and ridiculous".

Franceyesterday sold €8bn in long term debt although with yields rising slightly and demand falling compared to last month’s auctions. The French government yesterday announced plans to revamp the way it finances its welfare programmes, shifting the burden from employment charges to VAT/sales tax.

Italian Prime Minister Mario Monti made an unannounced trip to Brussels yesterday, reportedly to meet Italy’s Permanent Representative to the EU and other top negotiators ahead of talks on the fiscal pact. Separately, the Spanish government yesterday unveiled plans to recover around €8.2bn a year through stricter rules to combat the grey economy and tax fraud. The government also pledged to scrap some 450 public companies.

Economist: The City is in danger from a ‘death by a thousand cuts’
In a dedicated briefing, the Economist argues that the future of the City, one of Britain’s great export industries, is uncertain due to both economic and regulatory threats, including the “swarm of rules” coming out of Brussels. However it concludes that David Cameron’s attempt to defend the City by vetoing a EU27 Treaty “has given London’s rivals the excuse to hamstring the City”.

Separately, European Voice reports that France and Germany will renew calls for a financial transaction tax at a bilateral summit on Monday. The FT reports that France will attempt to frame the eurozone only tax in a way that will still be likely to have a significant impact on the City of London. The Dutch paper Elsevier reports that Dutch pension funds have warned that the tax will have "major consequences" for pensioners.

Ronald Stuart-Brown: Britain must now think through European trade options
In an article in the Telegraph, Ronald Stuart-Brown, the Director of the Trade Policy Research Centre, argues that it would be preferable for the UK to remain within a Customs Union with the EU as an alternative to full membership. The alternative, an EU-UK free trade area, would burden UK industry with the need to comply with highly complex “rules of origin” on exports to the EU. He argues that a new arrangement based on being in a Customs Union could give Britain the ability to regain control of financial supervision and its EU budget contributions.

Handelsblatt reports that the European Parliament’s rapporteur on the implementation on the Basel III capital requirement rules for banks, Otmar Karas MEP, has suggested that their introduction in the EU could be postponed due to the US’ “faltering” progress on implementation, which Karas claimed could put the EU’s banking system at a comparative disadvantage.

French magazine Le Nouvel Observateur notes that France, Germany, Italy and Spain are opposing plans to grant full access to any European Parliament, Commission and Council documents, including preparatory texts and the negotiating positions of individual member states. MEPs endorsed a draft Regulation last month, despite resistance from the centre-right European People’s Party group.

IHT reports that Tamas Fellegi, the Hungarian minister in charge of talks with international lenders, said yesterday that the government was keen to strike a new funding deal for the country, which is seen as carrying a high default risk, “as soon as possible… We are ready to negotiate without preconditions, and we are ready to discuss everything at the negotiating table”.

The FT reports that Italy has warned that it would only back a possible EU ban on Iranian oil imports if the embargo was imposed gradually and excluded billions of euros of oil-related debt owed to Rome-based oil group Eni, while Die Welt reports that Greek diplomats have "vehemently" resisted the sanctions.

EUobserver reports that last month’s letter issued by twelve member states expressing concerns over the effectiveness of the EU’s External Action Service, also criticised its head Baroness Catherine Ashton over her handling of meetings between the EU’s Foreign Ministers, and her purported neglect of security affairs.

Following yesterday’s announcement by the Chinese Airline Trade Association (CATA) that it will not pay the EU emissions tax on its airlines, the EU has said it is happy to discuss the issue and would accept alternative forms of carbon reduction.

EurActiv reports that the European Commission is demanding that the Greek government repay €425 million in farm subsidies deemed to be incompatible with EU law.

European Voice reports that the European Commission is set to launch a consultation on banking fees next week in a bid to reduce costs by conducting transactions as ‘e-payments’ over the internet or by mobile phone, after Michel Barnier, Commissioner for internal market and services, voiced concerns that bank transaction fees are preventing growth.

The Telegraph reports that a raid by Italian tax officials on the exclusive ski resort of Cortina d'Ampezzo found that a third of owners of 133 Lamborghinis, Ferraris and SUVs had declared incomes of less than €22,000.

New on the Open Europe Blog

For how long can Merkel have it both ways on the eurozone?

Posted by Britannia Radio at 16:43