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S&P downgrades euro bailout fund from AAA;
Finnish Foreign Minister slams new fiscal pact as “unnecessary and harmful”
As expected S&P last night downgraded the EFSF, the eurozone’s bailout fund, from AAA to AA+. The move is likely to lead to higher borrowing costs for the fund which will feed through to higher rates on any loans it pays out, reducing its effectiveness. Both France and Germany have reiterated that the lending capacity of the EFSF remains intact. S&P said it could boost the EFSF’s rating if countries put up more loan guarantees.

Negotiations on the Greek voluntary restructuring continued to be deadlocked yesterday, with the private bondholders saying they may not return to the table tomorrow as scheduled unless further “clarification” was given on the level of interest rates to be charged on the new bonds. ECB President Mario Draghi said that the Greek debt sustainability analysis "needs to be clarified [to see] whether it's realistic." In the FT, Iannis Mourmouras, Greece’s Deputy Finance Minister, argues, “Austerity has not been the answer for Greeks. We cannot sustain it. This is the lesson of the last year. All in the eurozone should heed it.”

The FTD reports that discussions are taking place in the ECB Governing Council over how to deal with losses on the ECB’s holdings of Greek debt if the country defaults or undertakes a forced restructuring. Boersen-Zeitung reports that Bundesbank board member Carl-Ludwig Thiele has said that the ECB’s purchases of government bonds are illegal, marking the first time a member of the Bundesbank has questioned the legality of the purchases. The ECB’s former chief economist Juergen Stark has written a letter to his former employers critising their handling of the crisis.

Meanwhile, Finnish Foreign Minister Erkki Tuomioja has slammed the new European fiscal pact, saying “the whole compact is at best unnecessary and at worst harmful, and Finland has reason to oppose the whole treaty and at least remain outside it,” adding “the majority of [the Finnish] parliament has the same view as I do”.

Wolfgang Reitzle, CEO of the a large industrial and engineering firm, Linde Group, became the first head of a DAX listed company to publicly call for Germany to consider leaving the euro if efforts to impose fiscal discipline and reforms on indebted countries fail.
FT CityAM WSJ European Voice BBC Independent Guardian Irish Independent Telegraph Times Irish Times FT 2 CityAM 2 WSJ 2 IHT FT 3 CityAM 3 WSJ 3Süddeutsche Les Echos WSJ 4 FT 4 FT 5 WSJ 5 FT 6 Irish Times 2 Telegraph 2 Le Monde Le Figaro Le Monde 2 Nouvel Observateur Boersen-Zeitung SpiegelHandelsblatt Bloomberg Spiegel Reuters Spiegel 2 BBC: Hewitt BBC: Peston BBC: Peston BBC: Flanders Telegraph: Editorial Telegraph: Osborne Telegraph: Warner Times: Manolopoulos FT: King FT: Editorial FT: Rachman FT: Beattie FT: Mourmouras City AM: Heath WSJ: Heard on the Street WSJ: Review & OutlookSüddeutsche: Kläsgen Welt: Schiltz EUobserver EUobserver 2

German socialist Martin Schulz MEP was elected EU Parliament President today with 387 votes, defeating two UK candidates who had vowed to break the ‘stitch-up’ between the two main European groups, the EPP and the Socialists. Diana Wallis, a Liberal Democrat and Nirj Deva, a Conservative, received 141 and 142 votes respectively.
CBS Independent Bild

Osborne gives conditional support to IMF in push for extra firepower
The Mail reports that George Osborne has said he is willing to ask Parliament to go beyond the UK’s current £40 billion limit on contributions to the IMF if he felt “it was a decent request”, but stressed the UK was not going to be a “substitute for the Eurozone providing money for dealing with its own currency”. This follows Christine Lagarde, the IMF’s managing director’s comments that its resources are inadequate after falling below $400 billion (£261 billion) due to bailouts in Greece, Ireland and Portugal. On Conservative Home, Paul Goodman notes that the last time the Government sought to extend the UK’s contributions to the IMF it was nearly derailed by a rebellion of 32 Conservative MPs.
Times Mail Express Conservativehome: Goodman

Following the news that the EU Commission is considering amending the EU’s rules of origin criteria, which could affect Germany’s manufacturing sector, the founding director of Deutschlandradio Prof. Ernst Elitz writes in Bild “Hands off ‘Made in Germany’… this label is the envy of the world…Made in Brussels is the exact opposite – expensive regulations that shackle the economy”.
Reuters Welt Le Figaro Bild: Elitz

The Irish Times reports that the European Commission is expected today to formally warn Hungary that it will take it to the European Court of Justice over controversial reforms to its constitution that include measures that critics argue compromise the independence of the Hungarian Central Bank.
Irish Times Times EUobserver

The FT reports that Spanish Prime Minister Mariano Rajoy announced yesterday that he backed French President Nicolas Sarkozy’s proposal to introduce a tax on financial transactions.
FT

EurActivreports that yesterday Romanian Justice Minister Catalan Predoiu met with European Commission officials in Brussels to discuss the removal of EU legal monitoring mechanisms in Romania that were introduced five years ago.
EurActiv

The Express reports that the European Commission is facing criticism for being too extravagant after offering to pay €135,000 to the creator of a new logo for the organisation.
Express

The FT warns in an editorial that the eurozone crisis has given an opportunity to the French National Front and its leader Ms Le Pen, who has scored between 17% and 21% in presidential election opinion polls. The paper argues that this presents an urgent challenge to mainstream candidates who need to set out a serious rebuttal to the National Front’s policies which now includes leaving the euro.
FT Editorial