Open Europe is holding a conference in Frankfurt tomorrow, examining the role played by the ECB during the on-going eurozone crisis. There will be two separate panel discussions: “Has the ECB acted within its mandate in this crisis?”, and “Should the ECB become the eurozone’s lender of last resort?” Speakers include Dr. Ignazio Angeloni and Dr. Antonio Sáinz de Vicuña (both of the ECB), Professor Markus C. Kerber (Technical University, Berlin), Professor Dr. Helmut Siekmann (Goethe University, Frankfurt) and Raoul Ruparel (Head of Economic Research, Open Europe). If you would like to register, please contact Pieter Cleppe at pieter@openeurope.org.uk or on 0032 477 684608.
Europe
Reuters: Germany and France discussed plans for smaller eurozone;
To Vima: Greek political leaders have agreed on Lucas Papademos as the new Prime Minister
Reuters reports that France and Germany have discussed plans for reducing the size of the eurozone. The article quotes an unnamed senior EU official saying, “France and Germany have had intense consultations on this issue over the last months…the truth is that we need to establish exactly the list of those who don't want to be part of the club and those who simply cannot be part.” The French Finance Ministry dismissed the reports, although German officials were more open to the idea, according to the article.
German Chancellor Angela Merkel’s CDU party may adopt a motion at its annual party congress next week in favour of amending the EU Treaties to remove the clause which prohibits member states from voluntarily leaving the eurozone. The text of motion, seen by FT Deutschland, states, “If a Member State of the monetary union is permanently unable or unwilling to comply with the common currency related rules, it may voluntarily withdraw from the euro zone, without leaving the European Union.” If passed by CDU delegates, the proposal would still have to be agreed by the other parties in Merkel’s coalition before becoming government policy.
Meanwhile, speaking at the “Falling Walls” conference in Berlin, Merkel reiterated her call for treaty change, arguing that it was time for “a breakthrough to a new Europe”, in which member states would integrate further, and national sovereignty would be limited. EurActiv quotes Merkel saying, “A community that says, regardless of what happens in the rest of the world, that it can never again change its ground rules, that community simply can't survive.”
Greek daily To Vima reports that Greek political leaders have agreed that former ECB Vice-President Lucas Papademos will be the next Greek Prime Minister. Papademos will lead a government of national unity. FT Deutschland reports that, according to the latest European Commission forecasts, Greece’s public debt will increase to just below 200% of GDP over the next two years.
A separate article in the paper reports that Austria is becoming increasingly concerned over its Triple-A rating since its banks have significant holdings of Italian debt. Separately, the FT reports that the EU is closer to creating a “budget tsar” after the Commission moved to give greater powers to Economics Commissioner Olli Rehn. The additional powers will include greater scope to impose sanctions on countries which do not abide by the latest debt and deficit procedures.
Open Europe’s Director Mats Persson appeared on BBC Newsnight, arguing that the choice for the eurozone may now be between break-up or Southern member states accepting a decade or more of austerity measures, in large part decided by officials and politicians from other countries. Mats also appeared on BBC World Service’s The World Today programme.
Cameron explores options for “emergency brake” to counteract eurozone caucusing;
Inaugural session of new APPG on EU reform discusses Open Europe’s report on repatriating EU social policy
The Times reports that David Cameron has asked EU officials to explore how Britain could secure an “emergency brake” to protect its national interest amid growing concerns that following closer integration in the wake of the crisis, the eurozone bloc could vote unanimously as a “caucus”, meaning that Britain and the other non-eurozone members would be unable to block any proposals they disagreed with at the Council of Ministers, the EU’s main decision-making body.
Meanwhile, the Times also reports that the new All-Party Parliamentary Group (APPG) on EU reform met for the first time today with Conservative MP Andrea Leadsom and Labour MP Thomas Docherty, both from the 2010 intake, elected as co-chairmen. At the session, the group, among other things, discussed Open Europe’s report published yesterday which estimated that complying with EU social policy, such as the Working Time Directive, costs UK businesses and the public sector £8.6bn a year, and that halving the cost of these regulations could provide a boost in economic output equivalent to the creation of between 60,000 and 140,000 jobs.
The report, and its recommendation that Britain implements a “double lock” under which it could be exempted from EU social policy by a legally binding protocol attached to EU Treaties, was also covered by the Times, PA, Public Service Europe and by Michael White on his Guardian blog. Separately, Open Europe’s Director Mats Persson is quoted in Polish daily Rzeczpospolitaarguing, “[Eurozone caucusing] does not only pose a threat to Britain but also other countries such as Poland and Sweden”, adding these states should club work together to combat the rise of such a threatening scenario.
Meanwhile, in a speech in the European Parliament, Deputy Prime Minister Nick Clegg has warned of what he sees as the “dangers of focusing huge political amounts of time and energy” on amending the EU treaties. The Guardian notes that Clegg believes that he has won widespread support to persuade the Germans not to push for treaty change and is urging them to allow the ECB to take more of a role. The FT reports that Clegg also called for “safeguards” for financial services and met with EU Internal Market Commissioner Michel Barnier to discuss the City of London. The paper goes on to quote Clegg saying, “Decisions that affect the 27 [EU member states] must always be taken by the 27.”
EU auditors find material errors in EU spending for the 17th consecutive year
The European Court of Auditors has today published its annual report on the EU’s accounts. Despite the accounts being confirmed as reliable, the Court has noted – for the 17th consecutive year – that EU spending is affected by ‘material error’, with a 3.7% estimated error rate on €122bn worth of spending. Regional funds, energy and transport were the spending areas with the highest error rate.
Berlusconi open to national unity government led by Mario Monti;
New package of economic reforms to be adopted by the end of the week
Italian Prime Minister Silvio Berlusconi has said he is open to the possibility of a government of national unity led by former EU Commissioner Mario Monti, who was yesterday appointed ‘Senator for life’ by Italian President Giorgio Napolitano. Berlusconi is due to resign after the adoption in both the houses of the Italian parliament of the new package of budget savings and economic reforms Italy committed to at the latest EU summit, which is expected to be completed by Saturday afternoon.
Italian media reports suggest that Monti could therefore be tasked with forming a new government as early as Sunday. However, it is still unclear whether the new government will then call early elections for next year or will try to remain in office until 2013, when the next general elections are scheduled. The new national unity government should be able to secure a broad cross-party consensus in the Italian parliament, although some MPs from Berlusconi’s party, as well as junior coalition partner Lega Nord and centre-left party Italia dei Valori have said that they would not vote approve Monti’s cabinet, insisting on the need for immediate elections.
Meanwhile, Open Europe’s estimate that, at a borrowing cost of around 6.7% on its ten-year bonds, Italy would face an extra €28bn in interest payments over the next three years is quoted twice by Bloomberg, and twice by the Telegraph.
Senior member of Merkel’s party at odds with Schäuble over ECB’s role
Die Welt reports that there is a dispute within German Chancellor Angela Merkel’s CDU party over the ECB, with Peter Hintze, a close confidant of the Chancellor in the Economy Ministry, clashing with Finance Minister Wolfgang Schäuble. Hintze wants to prevent the ECB purchasing eurozone countries’ bonds in the future without Germany’s approval, and also to change the voting weights in the ECB’s governing council from one vote each to a reflection of the economic strength of national economies, both of which are opposed by Schäuble.
A leaked report from the German embassy in the US from February 2010 reveals that German politicians consciously neglected to inform the German public about the seriousness of Greece’s financial situation at the time, reports Die Welt.
Eurozone comment round-up
In a letter to the FT, Shadow Chancellor Ed Balls argues, “The IMF has a vital role to play around the world and should have the necessary resources it needs to do that, but there should be no IMF funding to plug the gap in the eurozone’s bail-out fund and do the job the ECB should be doing.” In the IHT, Professor John Quiggin calls the ECB “the euro crisis’s enabler”, arguing, “Far from struggling to manage a ‘one size fits all’ monetary policy, the bank has pursued a ‘one size fits nobody’ policy of monetary contraction, at a time when no European economy is growing strongly. With great reluctance, the bank has agreed to support the markets for European sovereign debt through purchases of government bonds. But, unlike the policy of quantitative easing pursued by the Federal Reserve…the ECB has insisted on ‘sterilising’, or neutralising, its purchases of government bonds by selling the securities to private-sector banks. Such a policy cannot be sustained on a scale sufficient to stabilize financial markets.”
Meanwhile, in the Spectator, Fraser Nelson discusses the impact of EU pressure on the domestic politics of Greece and Italy, arguing, “The idea of a prime minister chosen by foreign powerbrokers will be no more popular in Rome than it would be in Berlin. The idea of an ersatz politburo in Frankfurt will unnerve those EU members who lived under a real one in Moscow.”
The Telegraph reports that leading surgeon Professor Roger Williams has complained that new EU rules on transplants are “unnecessary” and will end up costing the NHS almost £25m over the next decade.
European Voice reports that plans by the EU Commission to reduce EU staff by 5%, lengthen the working week, and raise the retirement age in order to save €1bn by 2020 have led to staff unions threatening strikes.
EUobserver reports that the German Constitutional Court has ruled that Germany should give up its 5% threshold for parties to be represented in the European Parliament, arguing that the threshold is unconstitutional.
The IHT reports that EU Justice Commissioner Viviane Reding’s plans to introduce tougher web privacy rules and sanctions in the EU’s revised Data Protection Directive could trigger a dispute with the US. The first draft of the revised Directive is expected to be presented in January.
New on the Open Europe blog
Open Europe’s timely event in Frankfurt: The role of the ECB in the eurozone crisis
Inverting Italy: Why the fact that the interest rate on Italy’s short and medium-term debt is higher than on its long-term debt is no good sign
Why not now, Cavaliere?
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