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UK welcomes revised draft of European fiscal treaty as “real progress”

12 Jan 2012

The UK Government yesterday welcomed the latest draft of the new European fiscal treaty as “real progress.” David Cameron’s official spokesman said, “Our position has always been that this agreement is fundamentally about fiscal rules for the eurozone and how to conduct fiscal policy in the eurozone. That seems to be the nature of the draft agreement as it currently stands.” A new round of negotiations on the fiscal treaty will take place today. 

Separately, the FT reports that Chancellor George Osborne came under pressure from the Commons Treasury Committee yesterday to explain Britain’s negotiating tactics at last December’s Brussels summit, which resulted in the UK veto. He refused to deny a leaked version of Britain’s negotiating position, which included introducing a veto into the future transfer of powers to European financial supervisory bodies.

Open Europe is quoted in the WSJ as saying, “From the UK’s point of view, there are some significant changes [in the new draft], at this stage marking a victory for Cameron and Clegg.” Open Europe is also quoted in the Telegraph, noting that “from the eurozone’s point of view, the draft may actually be worse news than the previous version, as the markets could judge the watering down of the enforcement mechanisms through the EU institutions as a weakness similar to those haunting the original Stability and Growth Pact.”

Open Europe is credited for publishing the latest version of the fiscal treaty on the Telegraph, Times and WSJ’s live blogs, and by the Independent, City AM, French business daily Les Echos, EurActiv France, Spanish business daily El Economista, Public Service Europe, Danish financial news site Børsen Online and Finnish magazine Talouselämä.   

Meanwhile, the Polish media report that the absence of participation rights for non-euro countries at eurozone summits in any of the three drafts of the ‘fiscal pact’ is a defeat for the Polish government, which had been keen to secure a “place at the table”. Rzeczpospolita’s Assistant Editor Marek Magierowski writes, “Before December’s summit and shortly afterwards the Prime Minister played out a political spectacle entitled ‘we are entering Europe’s fast lane’ [but] made an elementary mistake: he promised the people something that from the beginning was beyond his reach.”
Open Europe blog Independent Independent 2 EUobserver FT FT 2 FT 3 EurActiv European Voice EUobserver Telegraph Times: Live blog Telegraph: Live blog WSJ: Live blog El Economista EurActiv France Les Echos City AM Public Service Europe Børsen online Talouselämä WSJ Gazeta Wyborcza Gazeta Wyborcza 2 Rzeczpospolita Rzeczpospolita: Magierowski TVN Wprost

Merkel suggests Germany could speed up its ESM capital contributions;
Fitch warns of “cataclysmic” event in the eurozone without ECB intervention
Following a meeting with German Chancellor Angela Merkel, Italian Prime Minister Mario Monti yesterday reiterated his call for political and market recognition of Italy’s efforts to cut its deficit, saying, “High interest rates could have been justified when markets were mistrustful of Italian economic policy, but they are no longer legitimate now those same markets have said they appreciated the efforts Italy is making.” Peter Altmaier, Merkel’s Parliamentary Secretary, said, “I wish that above all, Mario Monti brings forward the Italian reforms before he expresses wishes in respect of his European partners.” Merkel and Monti also agreed on the need for deep structural reforms to boost growth and competitiveness in the eurozone.  

Merkel also stated her commitment to introduce the ESM, the permanent eurozone bailout fund, earlier than scheduled and “to perhaps pay in more capital at the start…if the others are ready to do it.” Meanwhile, economic data released yesterday showed that the German economy contracted by 0.25% in the last quarter of 2011, although it still posted 3% growth for the year.

David Riley, Head of sovereign ratings at Fitch, warned yesterday that there could be a “cataclysmic” collapse of the euro unless the ECB offers a full financial backstop to countries such as Italy. In a speech to the Italian parliament this morning Monti said that the ECB could feel “more relaxed” about its role once the new ‘fiscal pact’ is adopted, hinting that it could then be willing to increase its purchases of government debt.

Expansión reports that the Spanish government is considering introducing sanctions against regions running excessive deficits. Meanwhile, Moody’s has threatened to downgrade the ratings of all Spanish regions if the government does not adopt concrete measures to strengthen central budgetary controls within the next three months, reports El Mundo.

City AM reports that the funding crisis for European banks looks to be easing slightly after issues of unsecured debt, a key source of bank funding, reached six month highs last week. Le Monde reports that the ECB’s Governing Council is not expected to cut interest rates at today’s meeting. Bloomberg reports that a deal on the Greek voluntary restructuring is said to be close, although some hedge funds are still refusing to participate. The article cites Open Europe’s breakdown of the shares of Greek debt held by different groups of bondholders.
FT CityAM IHT Le Figaro Irish Times Times FT 2 WSJ CityAM 2 CityAM 3 FT Insight CityAM 4 WSJ 2 Irish Times Times 2 Times 3 Le Monde Il Sole 24 Ore Repubblica El Mundo ABC Expansión Welt FAZ Suddeutsche Hurryiet Daily Bloomberg WSJ Review&Outlook FT: Phelps FT: Wagstyl FT: Atkins Times: King Conservative Home: Lilico

New research reveals three out of four ECHR rulings go against the UK
The Mail reports that new research commissioned by backbench Conservative MPs, headed by Chris Heaton-Harris, reveals that since Britain subscribed to the jurisdiction of the European Court of Human Rights in 1966 there have been more than 350 rulings on whether the UK has violated rights under the convention. The number of judgments made against the UK is 271, against only 86 in which it was successful. In a further 50 cases the UK reached a settlement with the claimant, typically agreeing to pay compensation in return for an agreement to drop the case. In the 1980s, the average number of cases concluded by the ECHR concerning alleged UK violation of human rights law was 2.6 per year. In the 1990s it tripled to 7.8 – and in the 2000s it almost tripled again to 29.3. 

The report from legal researcher Robert Broadhurst calls for the UK Parliament to be given the power to overturn ECHR judgments, which would require the approval of all other signatories to the ECHR. Should this not prove possible, “the only viable option would be for the UK to extract itself from the jurisdiction of the Strasbourg court altogether,” the report adds. The report says that, by introducing a British Bill of Rights, the country could still meet its obligations to respect human rights.
Mail Mail: Editorial

In a letter to the Telegraph, the heads of the Royal Colleges of Surgeons and Physicians warn that weak EU rules for testing language competence and the “stifling” effects of the EU’s Working Time Directive on doctors’ training can put patients’ care at risk and require “urgent action”.
Open Europe research Telegraph Telegraph: Letters 

Osborne leaves the door open for increased UK contributions to the IMF
In his appearance before the Treasury Select Committee yesterday, Chancellor George Osborne said, “Britain is prepared to make additional contributions to the IMF alongside other shareholders…We are enthusiastic supporters of a well-resourced IMF.” Osborne suggested that the matter would be discussed at the next G20 summit and that Britain would only contribute to the IMF general resources fund, not a eurozone specific one, and if other IMF countries did so as well.
CityAM Guardian Times Telegraph Mail 

City AM reports that EU Internal Market Commissioner Michel Barnier is considering putting forward plans for an EU-wide structural reform of the banking sector, potentially creating a rival proposal to that made by the Vickers Commission in the UK. Separately, EUobserver reports that Barnier yesterday unveiled plans to better integrate the European market for card, internet and mobile payments.
Open Europe research City AM EUobserver 

During his joint press conference with German Chancellor Angela Merkel yesterday, Italian Prime Minister Mario Monti said, “The ideal situation would be to have [a financial transactions tax] globally. It could make sense if it were among all 27 EU countries. I’m not sure if it makes sense only at eurozone level.”
ANSA Independent EUobserver 

EUobserver reports that the European Commission announced yesterday that it will take the Council to the ECJ after EU member states refused to endorse the Commission’s proposal to increase EU civil servants’ salaries by 1.7% this year.

EU Economic and Monetary Affairs Commissioner Olli Rehn warned yesterday that Hungary is the only country on the Commission’s excessive deficit ‘caution list’ as it failed to take “effective action” to reduce its deficit to below 3% of GDP, and that unless this is addressed, the country could have its EU cohesion funds frozen.
IHT WSJ EurActiv European Voice Irish Times Welt FTD FTD: Leader 

Il Sole 24 Ore reports that the Italian bankers’ association ABI is considering taking the EU’s banking watchdog EBA to the ECJ over plans to force European banks to increase their core Tier-One capital to 9%.
Il Sole 24 Ore 

Le Figaro reports that a new study by the COE-Rexecode institute – based on EU data on working time across Europe – shows that French full-time employees work on average about six weeks less than their German counterparts every year.
Le Figaro 


An article in the Mail discusses whether an independent Scotland could stay in the EU and keep the pound.
Mail Open Europe blog 


An internal EU report seen by the Independent has concluded that the prospect of a viable Palestinian state within the pre-1967 borders has been “continuously undermined” by Israeli settlement activity to the extent that “the window for a two-state solution is rapidly closing.”

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