Europe
Labour launches “new EU policy for a new era”;
Douglas Alexander: Treaty change an “opportunity to safeguard the rights of non-euro members”
In a speech today, Labour’s shadow Foreign Minister Douglas Alexander is to announce what theGuardian describes as a shift in Labour’s policy towards the EU, which involves opposing any further transfer of power to Brussels that could damage UK growth, and accepting that Treaty changes resulting from moves to consolidate eurozone governance could present a legitimate opportunity to examine the distribution of powers between the EU and nation states.
Writing in the Guardian, Alexander argues, “There is a tendency among some pro-Europeans to blame the press, or even the voters, for the fact that support haemorrhaged.” He concludes, “We should engage now with the fact that Germany is seeking treaty change and seize this opportunity to safeguard the rights of non-euro members. The present balance of powers can be considered, but to suggest that repatriation should be Britain's overriding priority…misreads present risks and realities.”
Meanwhile, Euractiv quotes Open Europe warning that the UK could be consistently outvoted by the eurozone if it votes as a caucus from 2014. Separately, Saturday’s Telegraph reported that an Irish referendum on the transfer of sovereignty stemming from future changes to the EU Treaties intended to secure the eurozone will increase demands in Britain for a popular vote on Europe, and also set off calls for referenda in other European countries such as the Netherlands, Finland and France.
MPs press Government for City safeguards from EU financial regulation
The Times reports that MPs are putting pressure on David Cameron to use his trip to Berlin this week to set out the need for safeguards for the City of London in return for agreement to EU Treaty changes. Andrea Leadsom MP, co-chairman of the new All-Party Parliamentary Group on EU reform, is quoted saying, “We have to come up with our own requests…We need to be able to do what’s in Britain’s interests.”
Meanwhile, EurActiv has published EU Internal Market Commissioner Michel Barnier’s draft proposal – to be unveiled on 15 November – to toughen regulation of credit rating agencies, which involves plans to give the European Securities and Markets Authority powers to temporary suspend sovereign debt ratings in exceptional circumstances. The Sunday Telegraph reported that credit rating agency Moody’s has complained that Barnier’s plans would undermine investors' confidence. Separately, the FT reports on concerns in the Fund Management industry about proposals contained in the EU’s draft Mifid II Directive to restrict the use of derivatives.
Former EU Commissioner Mario Monti is Italy’s new Prime Minister;
Disagreements remain over the new government’s mandate and agenda
Following Silvio Berlusconi’s resignation on Saturday, Italian President Giorgio Napolitano yesterday tasked former EU Commissioner Mario Monti with forming a new government. Monti has already started talks with the leaders of Italian political parties. In a radio interview this morning, the speaker of the lower house of the Italian parliament Gianfranco Fini has said that the new government is expected to be sworn in and obtain the confidence of both the houses of the Italian parliament by the end of this week. Reports in the Italian press suggest that Monti intends to appoint no more than twelve ministers, in large part academics.
Meanwhile, disagreements remain among Italian parties over the mandate and the agenda of the new government. Berlusconi and his party want Monti to stick to the reforms outlined in the letter the Italian government sent to EU leaders ahead of the latest EU summit, and call early elections as soon as these reforms are implemented. Italy’s main opposition party and centre parties want Monti to be given a broader mandate and remain in office until 2013, when the next general elections are scheduled.
Open Europe’s Vincenzo Scarpetta appeared on BBC Radio Wales, the BBC World Service’s The World Today Weekend programme and twice on France 24, arguing that a national unity government led by Mario Monti is the wisest choice for Italy at the moment, but risks undermining democracy if the new cabinet comes in without a clear agenda and a commitment to calling early elections. Vincenzo is also quoted twice in the New Zealand Herald, while Open Europe’s briefing discussing Italy’s economic and political situation is quoted by Italian daily La Stampa.
Separately, the Sunday Telegraph reported that the eurozone's bailout fund, the EFSF, was forced to buy up some of its own bonds at the last auction after demand from outside investors fell short of the €3bn target. Open Europe’s Director Mats Persson appeared on Al Jazeera English yesterday and Open Europe’s Research Director Stephen Booth appeared on Talksporton Friday, both discussing the eurozone crisis.
Bundesbank President warns that ECB will not backstop eurozone member states;
Raoul Ruparel: Cameron’s call for the ECB to become eurozone’s lender of last resort is “economically flawed”
In an interview with the FT, Bundesbank President Jens Weidmann questioned the structure of the EFSF, the eurozone’s bailout fund, stating that leveraging it “is not a magic wand” and that the insurance model has been “put into question by the recent decisions on the [private sector involvement in Greece].” Weidmann also said that the ECB would not become the eurozone’s lender of last resort, adding that this is becoming “an absurd debate in which we are telling institutions: don’t care about the law.”
In an op-ed in the Sunday Telegraph, Open Europe’s Raoul Ruparel wrote that David Cameron’s suggestion that the ECB should fully backstop the eurozone is “not only economically flawed but could be politically divisive – asking the ECB to fulfil such a role could undermine the long-term sustainability of the eurozone, and sacrificing the long run to save the short run is always self-defeating.” Raoul concluded, “At some point, ECB action may become inevitable and unavoidable, but at that point it would be almost impossible for the eurozone to survive in its current form. However, at the moment, it is not the right policy for Mr Cameron to be advocating for the eurozone or for UK-eurozone relations.”
On Friday, Open Europe hosted a conference in Frankfurt examining the role of the ECB in the eurozone crisis. The first panel debate questioned whether the ECB had broken its legal mandate during the crisis. The ECB's Legal Counsel Antonio Sáinz de Vicuña argued that the ECB’s bond buying and other interventions were legal as they were not on primary markets and were necessary to counteract the financial instability and the failure of the credit rating agencies. Professor Markus C. Kerber suggested that these actions were de facto illegal and went against the spirit of the ECB statute.
The second session looked at whether, economically, the ECB could become the eurozone’s lender of last resort. Open Europe’s Raoul Ruparel argued that such a move would only offer a liquidity boost to some eurozone countries and so would not solve any of their solvency or structural problems, adding that the extra money may detract from the necessary reforms which need to be made. Dr. Ignazio Angeloni, Advisor to the ECB Executive Board, argued that the ECB had taken on more risk than usual but that it was necessary for the central bank to do so since financial markets were not functioning correctly. Angeloni added that the ECB was also shifting risk away from financial markets and that it was less likely to impact taxpayers if it were on the books of the ECB than on private banks.
Professor Dr. Helmut Siekmann, from the Goethe University of Frankfurt, suggested that solving the crisis must fall on eurozone member states and that the ECB can only help to smooth this process. Siekmann also stressed that there are substantial flaws in financial markets which have exacerbated the crisis and since these will not be solved by ECB intervention, neither will the crisis.
Eurozone leaders keep up pressure on Greece;
Der Spiegel: Germany drawing up contingency plans for Greece’s eurozone exit
Over the weekend, German Chancellor Angela Merkel and French President Nicolas Sarkozy held a conference call with new Greek Prime Minister Lucas Papademos, in which they suggested that “the payment of the next tranche of aid cannot be made unless” the government implements all the reforms agreed to at the latest EU summit, according to a statement by Sarkozy’s office. A confidence vote will be held on the new Greek government on Wednesday, after which Papademos will meet with the other eurozone finance ministers and attempt to convince them to release the next tranche of bailout funds.
Meanwhile, Der Spiegel reports that the German government is drawing up contingency plans for Greece leaving the eurozone, with three scenarios of varying severity envisaged. Under the so-called “basic” scenario a Greek exit would contribute to the strengthening of the eurozone, now shorn of its weakest link. Under the "worst-case-scenario", contagion would spread to Spain and Italy, which would necessitate the deployment of the EFSF, with a upgraded strength of around a billion euros. Finally, under a "worst-worst-case-scenario” Greek debt would skyrocket due to devaluation of the new currency, resulting in stagnation lasting for decades, which would also suck in other countries.
32% of Dutch want to return to national currency, 47% are in favour of ‘Northern euro’
A new poll shows that 32% of Dutch prefer a return to the Guilder, while 47% favours a Northern Euro, up from 38% six months ago. Meanwhile, Patrick Van Schie, the head of the think tank of the VVD, the party of Dutch PM Mark Rutte, has said that a Northern Euro, without France, should be considered and that a decision on a new currency is needed.
Dutch media report that, on Friday, Dutch politician Geert Wilders announced that his party, the PVV, will start an investigation into the costs and benefits of re-introducing the Guilder as the Netherlands’ national currency. Depending on the outcome of the investigation, Wilders is planning to propose a national referendum on whether the Netherlands should leave the eurozone.
CDU party congress expected to endorse Merkel’s EU policy
The FT reports that German chancellor Angela Merkel’s CDU party is expected to endorse a resolution that will pledge continued German support for struggling eurozone states, provided they work towards reducing their debt burdens, implement competitiveness boosting reforms, and commit to maintaining balanced budgets in future. The resolution will also call for the European Stability Mechanism (ESM), which is set to succeed the EFSF in 2013, to be turned into a fully-fledged European monetary fund, along the lines of the International Monetary Fund, although it will reject sovereign debt-pooling via eurobonds. However Handelsblatt reports on its front page that "increased euroscepticism" is threatening relations between the German coalition parties, and that the FDP’s internal referendum on the ESM could scupper the coalition if a majority of the party’s members vote against it.
Separately, DPA reports that the German Constitutional Court will decide on 29 November whether a special nine-member Bundestag committee will be allowed to make a decision on the design and powers of the EFSF. Earlier the judges had issued an injunction against the proposal.
In the Sunday Times, former FT Editor Andrew Gowers wrote, “It’s confession time. Exactly ten years ago, I was cheering as the preparations to launch notes and coins for Europe’s bold new single currency reached their climax…In the years that followed, with the euro establishing itself as an instrument of European power and integration, I was one of those celebrating its success and urging Britain to join the party. I now believe I was wrong.”
PA reports that the CBI has called for a full review of the EU’s Temporary Agency Workers Directive, which came into effect in October, giving improved pay and holiday rights to temps. A survey of over 460 firms found that only one in six planned to increased recruitment of temporary workers, with one in five expecting to cut back. The CBI said it wanted Government-inspired “gold-plating” of the EU directive to be stripped out.
A new Metroscopia poll on next Sunday’s Spanish general elections credits opposition Partido Popular with 192-196 seats in the lower house of the Spanish parliament, while the Socialist Party would only get 110-113 seats, reports El País.
Writing in Les Echos, French journalist Guillaume Maujean notes that the austerity package unveiled by the French government last week is “based on a growth prospect of 1% [of GDP] for 2012, which is still considered very optimistic. A more severe downturn or a relapse into recession in the French economy would once again deal a serious blow to the government’s objectives. Rating agencies may downgrade France’s rating – not by mistake this time.”
Saturday’s Express reported that a draft EU directive which seeks to bring the UK’s housing sector into line with Continental practice could bring down house prices in the UK, as it would force buy-to-let landlords into selling their properties as the EU where landlords are not eligible for a buy-to-let mortgage based on rental income, but solely on their personal income.
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