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France and Germany push for greater “tax coordination” in the EU and swifter negotiations on FTT
France and Germany yesterday unveiled a set of joint proposals which they say would boost growth in the EU. The proposals will be submitted to European leaders at their meeting on 30 January. The document reads, “European institutions and member states should accelerate the process of tax coordination…In particular, the negotiation of the European Commission proposals on Energy Tax Directive, Common Consolidated Corporate Tax Base and Common System of Financial Transaction Tax should be accelerated.”

Süddeutsche Zeitung notes that, in committing the German government to support the possible introduction of the FTT in the eurozone only, German Chancellor Angela Merkel has overridden the objections of her junior coalition partner, the FDP – a move which Der Spiegel describes as an “affront” and “provocation”.

In an interview with Bild, Hungarian Prime Minister Viktor Orbán argues, “We support the initiative of Chancellor Angela Merkel on the fiscal union. But we strictly reject a Europe-wide harmonised tax system. Hungary's low tax rate is for us a competitive advantage that we cannot do without.” Handelsblatt notes that the Czech Republic has voiced opposition to the introduction of an EU-wide FTT.

The Franco-German proposals also include the creation of a “fund for growth and competitiveness” which would be used to finance projects “in programme countries and other countries facing serious structural challenges” this year. The money would come from unused allocations from other EU funds. Separately, France and Germany “will, by the end of February, present proposals on the convergence of their corporate tax.” Les Echos reports that French Finance Minister François Baroin and his German counterpart Wolfgang Schäuble will meet next Monday to discuss the details of the proposals.
Les Echos Les Echos 2 Expansión City AM Welt Spiegel Bild: Orbán Handelsblatt Süddeutsche

IMF will seek an extra $500bn in funds to deal with eurozone crisis
It emerged yesterday that the IMF will be seeking up to $500bn in additional resources after announcing that there may be a $1 trillion funding gap globally over the next two years if economic conditions worsen. It is not yet clear how the money will be raised, but it is likely to be in the form of voluntary ad hoc contributions from IMF members rather than a mandatory increase in funding. Some European countries have already pledged €200bn, under their new treaty, leaving the rest to be raised by the rest of the IMF members. If the IMF wishes to lend the full amount the overall increase in funds may need to be raised to $600bn as the IMF is required to maintain a substantial cash buffer.

The US already distanced itself from increasing its contributions, with the US Treasury saying, “The IMF cannot substitute for a robust euro area firewall…We have told our international partners that we have no intention to seek additional resources for the IMF.” The UK Government has said it is willing to contribute, with its share likely to come close to $30bn in total, but any increase will require a vote in Parliament. Given the substantial rebellion which the Government faced on the previous vote increase IMF contributions, it is not guaranteed to pass.

The market reaction to the news was mixed. Open Europe’s Raoul Ruparel was quoted in the Telegraph saying, “The muted market response to the IMF announcement highlights that, as things stand, such a large increase just doesn't look feasible.”
FT CityAM Telegraph WSJ EurActiv Times Sun Irish Independent Independent Le Figaro BBC Guardian Mail TelegraphLe Monde Express Welt Telegraph 2

Negotiations continue as deal on voluntary Greek restructuring once again said to be ‘close’
Talks on a voluntary Greek restructuring will continue today with reports suggesting that a deal is close. The FT reports that, according to sources close to the negotiations, the interest rate on the new bonds will start at 3% and increase to 4.5% as the bonds mature, allowing for an average rate closer to the demands of the private bondholders. The IHTreports that hedge funds will consider suing Greece in the European Court of Human Rights if the Greek government introduces retrospective legislation which forces them to take losses on their holdings of Greek debt.

The Italian government will tomorrow endorse new measures aimed at enhancing competition in the labour market. The proposals will include the abolition of minimum fees for all services and will give shopkeepers complete freedom on opening hours, reports La Stampa. Meanwhile, Spanish Treasury Minister Cristóbal Montoro said yesterday that the Spanish government is considering introducing criminal sanctions for public administrators who fail to comply with deficit limits. Separately, following a meeting with trade unions, French President Nicolas Sarkozy yesterday unveiled a new package of measures worth €430m for this year, aimed at boosting employment in France. Le Figaro notes that the money will be transferred from other budget items.

Responding to Italy’s calls for the EU to do more to lower its borrowing costs, German Chancellor Angela Merkel said at a press conference yesterday, “I'm still trying to ascertain exactly what more we should be doing.” At the same press conference, Bulgarian Prime Minister Boiko Borisov added, “I would like to dispense the advice to my colleagues that they should preoccupy themselves less with Germany and instead worry more about their own budget deficits and their external debt.”

Tomorrow is the deadline for European banks to submit their capital raising plans to the European Banking Authority which will then judge whether they are adequate.
FT FT 2 CityAM CityAM 2 WSJ 2 FT 3 Telegraph Le Monde IHT FT 4 Irish Independent Times Telegraph 2 Il Sole 24 Ore Corriere della Sera La Stampa El País Expansión El País 2 Les Echos: González Páramo Handelsblatt SpiegelFTD Welt Les Echos FAZ Zeit: Wermuth FTD 2 Le Figaro Les Echos Independent: Whittam Smith FT: Severgnini New Statesman: Leader

Landmark ruling on Romanian’s rights to UK housing benefit
In a landmark case, a judge has ruled that a Romanian woman should be classified as self-employed, and therefore be eligible for extra benefits, because she sold the Big Issue magazine at her own profit or loss. Firuta Vasile, who already receives £25,547.60 a year in benefits, was initially refused housing benefit because a local authority judged that her job selling the magazine "didn't count.” In the Times, Ross Clark writes, “If Ms Vasile can exploit this loophole, so can every EU citizen.”
Times: Clark Telegraph Sun Guardian Mail

European Voice reports that, following UK criticism, the EU Council of Ministers has been discussing whether to put forward a mixed approach of minimum and maximum standards on capital requirements for banks and other financial institutions in the proposed review of the Capital Requirements Directive.
European Voice

Italian PM: Possibility of UK joining European fiscal treaty is “water under the bridge”;
Czech Republic to hold referendum on fiscal treaty
Following his meeting with David Cameron in London yesterday, Italian Prime Minister Mario Monti told reporters, “The possibility of the UK subscribing [to the new European fiscal treaty]...is water under the bridge.” Monti insisted that, although Italy and other EU member states were ready to consider some sort of “compensation” in return for Cameron’s support to the treaty, his requests at last month’s EU summit were “not acceptable”.

Meanwhile, DPA reports that the Czech coalition government has decided to put the fiscal treaty to a referendum.EUobserver reports that Poland has indicated that it might not sign up to the fiscal treaty unless it is allowed to be present at future meetings of eurozone leaders.
Independent Repubblica FT EurActiv Guardian CityAM EUobserver DPA

European Voice reports that EU Home Affairs Commissioner Cecilia Malmström has voiced concerns over Denmark’s interpretation of common visa rules established by the Schengen Agreement.
European Voice

In a speech to the European Parliament yesterday, Hungarian Prime Minister Viktor Orbán sought to reassure MEPs that the sweeping reforms undertaken by his government since its election victory in 2010 were in line with EU principles. Meanwhile, the WSJ notes that Hungary aims to secure an agreement with the EU and IMF on a loan package by the end of the first quarter.
FT IHT Times BBC Guardian Welt Welt: Schmid WSJ Bild: Orbán

UK

EUobserver notes that a paper published by the House of Commons library last year suggested that an independent Scotland would have to pay almost €10bn into the eurozone’s permanent rescue fund, the ESM.
EUobserver

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