Wednesday 4 January 2012

Open Europe

Europe

Unemployment data highlights growing divisions within eurozone;
Eurozone states need to issue €794bn of debt in 2012
Unemployment data released yesterday in Germany and Spain highlights the growing divisions within the eurozone. The German unemployment rate dropped to 6.8%, its lowest point for 20 years, while Spanish levels rose for the fifth month in a row to 23%. Separately, credit rating agency Fitch cut its growth forecasts for Spain to zero for this year and only 1% in 2013.

The FT reports that, according to Barclays Capital, eurozone countries will need to issue €794bn of sovereign debt in 2012, while City AMnotes that total global issuance could reach $7.6 trillion. Signs of banking sector stress continued yesterday, with deposits at the ECB reaching record levels of €453bn, while money demanded from the emergency overnight marginal lending facility stood at €15bn, despite the record levels of ECB funding at last month’s long term lending operation.

Following comments by a Greek government spokesman yesterday, that Greece could be “out of the euro” if the negotiations on the next bailout are not completed soon, Open Europe’s Raoul Ruparel is quoted in City AM saying, “Negotiations have dragged on for some time, and the government wants to stress that if investors do not take a haircut on their bonds, the situation will be much worse for everyone. It would not surprise me if these negotiations again went right to the edge of the timeframe.”

Separately, Il Sole 24 Ore reports that Italy will seek guarantees that the rules on public debt reduction established by the EU’s ‘Six Pack’ on economic governance will not be made tougher by the new fiscal pact agreed at the latest EU summit. An internal document seen by La Stampa also shows that the European Commission is to demand that a deadline be set “to launch an initiative aimed at incorporating the substance of the agreement into the EU framework” within five years from its entry into force.

Meanwhile, in an interview with Il Corriere della Sera, Italy’s former Economy Minister Giulio Tremonti warned, “I think the biggest risk for Italy is not having to pass another austerity package but rather having to ask for IMF assistance... We would become the first big country under [an IMF] programme. We would be the latest in a series of IMF failures.”

Belgian Peter Praet surprisingly appointed new ECB Chief Economist
ECB President Mario Draghi surprisingly appointed Belgian executive board member Peter Praet as the ECB’s new Chief Economist yesterday, as German Jörg Asmussen and Frenchman Benoît Coeuré had been widely considered the front-runners. However Asmussen will continue to play a vital role within the ECB as its lead on foreign affairs, meaning he will represent the ECB at international meetings and summits, and he will also continue to manage its legal department.

The decision means that for the first time in the ECB’s history, the position of Chief Economist is no longer occupied by a German, which the leader in FTD describes as an “embarrassment” for Chancellor Angela Merkel. However the German media are broadly supportive of the move, with Die Welt describing it as a “smart compromise”, while FAZ’s financial editor Stefan Ruhkamp writes that “With this unexpected decision Draghi proves that he does not respond to every whim from Paris or Berlin.”

EurActiv reports that EU talks with Hungary over emergency funding could be frozen and the country faces possible legal action if its new constitution breaches the EU Treaties.

Open Europe's estimate that about 17,500 EU officials, or around 40% of the total staff, earn over €6,500 per month was cited on the front page of Belgian daily De Standaard last week.

Le Monde reports that French Europe Minister Jean Leonetti said in an interview this morning that a financial transactions tax is to be introduced in Europe “before the end of 2012”, adding that the tax will be on the agenda of the next meeting of EU leaders, scheduled for 30 January.

The Telegraph reports that French Foreign Minister Alain Juppé has said the EU should maximise pressure on Iran’s economy by imposing an oil embargo by the end of this month. However, a similar embargo failed to be agreed last month after objections from Greece, Italy and Spain, who together account for most of Iran's crude exports to Europe.

EUobserver reports that the Croatian government yesterday launched a vote “yes” campaign for the upcoming referendum on EU membership being held on 22 January.

The British Egg Industry Council (BEIC) has said it is launching judicial review proceedings against the Government over its refusal to ban imports of battery eggs and egg products from countries that do not comply with new EU legislation on animal welfare standards, warning that the move would make British egg farming uncompetitive and cost jobs.

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