Tuesday 10 January 2012

Open Europe

Europe

German Finance Minister looking at ways to circumvent constitutional debt brake
Bild reports that German Finance Minister Wolfgang Schaüble is looking at ways to circumvent Germany’s constitutionally embedded debt brake, most likely involving a vote in the German Bundestag. This would offer the government a degree of flexibility in the case of an emergency, such as a new wave of bank bailouts. The proposal has been criticised by CDU MP and budgetary expert Norbert Brackmann, who said: “This could result in the creation of more debt than is permitted under the debt-brake. This will lead to a new bubble, which has already proved fatal. It is unacceptable.”

Merkel’s support for potential eurozone-only FTT divides German government
Senior politicians from Angela Merkel’s junior coalition partner, the FDP, have criticised the possibility of a eurozone-only Financial Transactions Tax. FDP leader and vice-Chancellor Philip Rösler said: "I remain convinced that such a tax must apply to all EU countries, not only for the euro countries", while the party’s general secretary, Patrik Döring, warned that it would “distort competition”.

Meanwhile, Nicolas Sarkozy’s plan to unilaterally introduce the FTT if necessary continues to attract criticism in France. Le Figaro reports that Paris Europlace, an umbrella association which includes among others French SMEs, insurance firms and banks, has warned that the levy “would weaken the French economy.” La Tribune notes that the Federation of French Banks (FBF) has dismissed the unilateral introduction of the FTT as “ineffective” and “counterproductive”.

Clegg: Eurozone fiscal pact should be “folded” into EU Treaties
Deputy PM Nick Clegg told fellow European liberal ministers yesterday that the eurozone fiscal pact "should, over time, be folded into the existing EU Treaties so you don't get a permanent two parallel treaties working separately from each other.” He went on to say of the EU fiscal pact “We all see this as a temporary arrangement rather than one which creates a permanent breach at the heart of the EU." The Mail reports that Clegg also said that “the veto suggests something was stopped. It’s not stopped, it’s carrying on.”

The Guardian reports that in an apparent scaling down of UK demands, which had centered on safeguards for financial regulation, Clegg outlined that in future negotiations "the UK would want to make sure that the basic building blocks of the single market – a level playing field upon which competition takes place – are properly safeguarded”, adding "We don't think it should be drawn to include economic governance”. The Sun accuses Clegg of “treachery” while the Expressbelieves he is in danger of “over-reaching himself”.

The Irish Times reports that ahead of Irish Taoiseach Enda Kenny’s visit to London on Thursday, he said that he believes it “absolutely fundamental” for Ireland that Britain stays an active and core member of the European Union, despite remaining outside the fiscal stability pact for eurozone members.

Separately, City AM reports that Conservative MPs have warned that attempts to increase the UK’s contributions to the IMF in order to shore up the eurozone’s bailout fund would fail to get through Parliament.

Merkel and Sarkozy expect new treaty to be agreed by end of the month
Following their meeting in Berlin yesterday, both German Chancellor Angela Merkel and French President Nicolas Sarkozy stressed that discussions on the new treaty were making headway, with an agreement expected by the end of the month and for the treaty to be signed by March. In a change in tone, the focus of the meeting was on boosting economic growth and reducing unemployment, rather than just austerity, with the leaders asking the Commission to come up with specific measures to these ends. Merkel also issued a warning to Greece, calling for talks on the voluntary debt restructuring to be finalised if Greece wants to receive the next tranche of bailout funds.

Dutch Prime Minister Mark Rutte yesterday dismissed the idea of holding a referendum on the new treaty in the Netherlands since it is “so small and so limited.” Open Europe’s Raoul Ruparel was quoted in the Telegraph as saying: “Until the significant amount of uncertainty is removed from the fiscal compact – in terms of implementation, use of institutions, timeline, severity of sanctions and exceptions – it is likely that markets will continue to be underwhelmed by it.”

Germany yesterday sold €3.9bn in six month debt at -0.0122%, the first time it has ever issued debt at negative yields, highlighting investors’ worries over the eurozone and the premium they are willing to pay for the safety of German bonds.

Il Sole 24 Ore reports that the Italian government is to adopt the first set of measures aimed at liberalising Italy’s labour market before 20 January. Separately, Italian Prime Minister Mario Monti will meet David Cameron in London next Wednesday. Meanwhile, Italian bank borrowing from the ECB reached a record €210bn last month and accounted for almost a quarter of all liquidity supplied by the ECB. La Repubblica reports that Fitch this morning warned that there are “significant chances” of Italy’s credit rating being downgraded, while a French downgrade in 2012 is unlikely.

The Times reports that UK Government sources suggest that the “no” campaign against the break-up of the United Kingdom is preparing to warn voters that an independent Scotland could be forced to join the single currency as the price of full membership of the EU.

Greek Rural Development Minister Kostas Skandalidis has said that he intends to file an appeal before the ECJ against a European Commission decision ordering Greece to return €425m in illegal farm subsidies to Brussels, reports EurActiv.

The Mail reports that around 10,000 Britons living abroad are currently claiming a total of £1m a week in benefits. This is due to EU rules forcing the UK Government to pay certain benefits to its citizens even if the recipients move abroad, and also to similar bilateral arrangements the UK has with other countries, including the US and Jamaica.

EUobserver reports that Danish Europe Minister Nicolai Wammen told reporters yesterday, “We want an efficient presidency at a low cost…This is the last time we have bottles on the table during the Danish [EU] Presidency. We will serve only tap water from now on.”

Philipp Hildebrand resigned as Chairman of the Swiss National Bank yesterday following a controversy over a series of profitable currency trades by his wife, in which Hildebrand may have played some role. The decision is unlikely to affect the cap on the exchange rate of the Swiss Franc to the euro.

New on the Open Europe blog

Draft Euro Fiscal Pact: Not great news for the eurozone either...

Posted by Britannia Radio at 12:45