Daily Press Summary
Slovakian political parties reach deal to back eurozone bailout fund
Political parties in Slovakia have agreed to ratify the expansion of the eurozone’s bailout fund, the EFSF, by the end of the week after the initial vote was rejected on Tuesday and the collapse of the four-party coalition government. An election is now expected to be held on 10 March 2012. It is widely reported that opposition leader Robert Fico, a former Prime Minister, is expected to do well at the elections due to the unpopularity of the outgoing government's austerity measures.
Meanwhile, SaS leader Richard Sulik defended his actions in an interview with Sme, saying, “Our stance was clear. It was blackmail and we rejected it...Who is responsible for the lack of compliance with the eurozone’s rules? Those people [who are now] proposing a new solution...It is ridiculous.”
BBC Guardian EUobserver Welt Le Monde Les Echos WSJ IHT EurActiv Hospodarske Noviny Hospodarske Noviny 2 Hospodarske Noviny 3 Sme
Mats Persson: Asking Slovaks to bail out countries that have failed to enact reforms risks creating “huge moral hazard”
In an op-ed in the WSJ, Open Europe’s Director Mats Persson argues that, having achieved painful reforms and restructuring of its banking sector, “Slovakia is now being asked to provide loan guarantees to bail out countries that failed to enact similar reforms. You don't have to be a paid-up member of the Austrian school of economics to see the potential for moral hazard on a huge scale.”
He goes on to explain, “First, banks in several Triple-A economies, including Germany, continue to live under the protection of sovereign bailouts and ECB liquidity. They have not been forced to restructure and recapitalise…Second, the sovereign bailouts have transferred private-sector risk to the books of taxpayer-backed institutions. In combination with the cheap and plentiful liquidity that the ECB has provided to European banks, this has created perverse incentives, possibly leading banks to chase profits through higher yields on peripheral sovereign debt and thereby increasing their exposure to the crisis.” He concludes that moving forward the eurozone must keep “one vital lesson in mind: Conditionality is king. Failing to impose costs on those responsible for the crisis, particularly the banks, not only sows the seeds for future economic problems but also fuels political divisions. The eurozone can ill-afford more of either.”
Open Europe’s Raoul Ruparel was quoted in the Guardian saying, “Even if Slovakia's no vote becomes a yes vote by the end of the week, I do think it will encourage those countries that have already expressed their reservations about the lack of control over the guarantees they have offered – the Netherlands, Finland, Germany and Austria in particular – to be more vocal in the future.” Open Europe's Pieter Cleppe was interviewed on Czech TV commenting on the political limits to euro bailouts.
Guardian WSJ: Persson BBC: Hewitt Welt: Stürmer Czech TV: Cleppe
German professor: ECB’s role in eurozone crisis must be challenged
Speaking at an event organised by Open Europe in Brussels, Professor Markus C. Kerber, the author of a legal complaint against ECB President Jean-Claude Trichet at the EU’s General Court in Luxembourg, argued that “bailouts might be justified as an emergency measure, but keeping the emergency alive makes it illegal. There are no permanent emergencies.” He explained that the so-called “sterilisation” of government bonds purchased by the ECB, which is meant to offset any inflationary effects, “is a pure lie, which is no longer believed even inside the ECB”, according to what he heard from his contacts there. He added that his lawsuit “is of historical importance, because if the ECB is not stopped, it can continue with both qualitative and quantitative easing.”
European banks resist proposals for greater recapitalisation;
Barroso: Banks receiving public funds should have bonuses and dividends limited
European Commission President José Manuel Barroso yesterday outlined his ‘roadmap’ for the eurozone, imploring eurozone leaders to find a quick resolution in Greece, recapitalise European banks and increase the size of the EFSF, the eurozone’s bailout fund, but stopped short of offering more specific details. Barroso called for banks which receive public funds to aid recapitalisation to be prevented from issuing large bonuses or dividends.
Meanwhile, the FT reports that eurozone officials are considering a plan to leverage the EFSF by using it to insure against 20%-40% of losses on peripheral sovereign debt. Reuters reports that it received confirmation from eurozone officials that an increase in write downs for Greek bond holders of between 30% and 50% is being considered.
Separately, European banks have responded negatively to the suggestion that they will need to meet a core tier one capital ratio of 9%, effectively bringing forward the EU implementation of Basel III rules. European banks, led by those in France, have suggested that instead of increasing their capital holdings to meet the new requirements, they could deleverage. In a statement yesterday, French Budget Minister Valérie Pécresse said for the first time that France is willing to recapitalise its banks at the national level if necessary and would not rely on the EFSF.
FT CityAM WSJ Independent EUobserver BBC El País Expansión Businessweek BBC: Peston La Tribune FT 2 Reuters France Le Figaro FT 3 EurActiv 2 Guardian Times FT 4 Irish Times Reuters Mail Sun Irish Independent Irish Times 2 Le Figaro: Allègre WSJ: Smith FT: Grant FT: Soros FT Editorial Irish Independent: McWilliams Guardian: Garton Ash Guardian: Rasmussen Mail: Brummer Mail: King Dagens Industri Le Monde The Local
Westerwelle: We need a treaty change within a year
German Foreign Minister Guido Westerwelle yesterday called for an EU treaty change within the next year, although he did admit that an intergovernmental agreement may be necessary if some member states do not want to take part. However, Irish Prime Minister Enda Kenny argued against any treaty change, warning that it risked creating an undesirable two-tier EU.
El País: Westerwelle Les Echos FT
In a keynote speech in the lower house of the Italian parliament this morning, Italian Prime Minister Silvio Berlusconi has insisted that “there are no credible alternatives” to his government at the moment. In a politically significant gesture, opposition MPs did not attend the speech. The vote of confidence will take place tomorrow.
Corriere della Sera WSJ Repubblica
The Times reports that Nick Clegg will today warn that Britain “will not abide reforms that undermine recovery in the City”, saying, “We’ve left the European Commission in no doubt that the UK expects fair regulation of European financial services.” He will continue, “I will not hide my frustration at the fact that Whitehall has become so much better at saying ‘no’ to Europe than getting the rest of Europe to say ‘yes’ to us.”
Times CityAM: Krol Express
Writing in the Telegraph, Clive Aslet, Editor at Large of Country Life, argues that the Commission’s plans for the Common Agricultural Policy “will not make the lives of British farmers any simpler.”
Telegraph: Aslet EUobserver BBC Le Monde WSJ EurActiv Welt
A report in the FT Deutschland argues that MEPs and companies are “abusing the European Parliament for promotional events.” The article cites the example of one Polish MEP who invited guests to presentations that included test-drives of a new model of Opel car. Heinz has also had banners and a two-meter ketchup bottle on display during a Parliament dinner.
EurActiv Deutschland notes that opposition to European Commission plans to ban plastic bags is growing among MEPs, after a new UK study has showed that the life cycles of potential alternatives are worse than those of plastic bags.
EUobserver reports that the European Commission has recommended that Serbia be given EU candidate status, but said that talks could only start after the normalisation of Serbia’s relations with Kosovo.
BBC EUobserver Le Monde WSJ
EUobserver reports that yesterday EU Foreign Minister Baroness Catherine Ashton told MEPs that the offer of concluding an association agreement with Ukraine “should remain on the table”, despite the jailing of former Ukrainian Prime Minister Yulia Tymoshenko.
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