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Slow take-up of voluntary Greek write-down plan raises prospect of forced restructuring; Latest poll shows continued rise of fringe parties in Greece

05 Mar 2012

There has been a slow take-up of the Greek voluntary restructuring offer, despite investors having only until Thursday evening to decide if they wish to participate or not. Charles Dallara, Head of the Institute for International Finance (IIF) which negotiated on behalf of a large number of private bondholders, warned that the complexity of the deal meant that investors were taking time to fully understand it, adding, “They’re asking a lot of questions”. Meanwhile, Der Spiegel yesterday reported that the ECB doubts that the participation rate will be high enough to push through the voluntary restructuring, citing an ECB source as saying that “probably the Collective Action Clauses (CACs) will have to be activated,” which would force all bondholders to take part. Open Europe’s Raoul Ruparel was quoted by the Sunday Telegraph and the Telegraph arguing that CACs will most likely be triggered. This would give rise to big questions over the funding of Greek banks.

In an interview with Österreich yesterday, Austrian Chancellor Werner Faymann said, “I would not trust anyone who says that [the current level of help] for Greece is enough...For Greece it depends on whether they can stick to these [austerity] measures over several elections.” Open Europe’s briefing, which found that in 2015 85% of Greek debt will be owned by taxpayer-backed institutions, was reported on the front page of FAZ’s economics section. Open Europe’s blog summarising last week’s EU summit was quoted by the Telegraph live blog on Friday. 

Kathimerini reports that Greek Prime Minister Lucas Papademos told EU leaders at last week’s summit that the Greek elections will be held on either 29 April or 6 May. The paper also published a poll conducted by Public Issue, which suggested that up to nine parties could gain seats in the Greek parliament, compared to five currently. New Democracy was on 28%, with PASOK on 11%, the Democratic Left on 16%, the Coalition of the Radical Left on 12% and the Communist party on 11%.

The dispute between the Bundesbank and the ECB escalated over the weekend as Bundesbank President Jens Weidmann told Der Spiegel that eurozone central banks had taken “substantial risks onto their balance sheet which is at the limits of their mandate.” Overnight deposits held with the ECB hit a record high of €821bn on Friday. Open Europe’s Raoul Ruparel is quoted by New Europe discussing the impact of the ECB’s long term lending operations.

Speaking after Friday’s EU summit, Spanish Prime Minister Mariano Rajoy announced that Spain will only cut its deficit to 5.8% of GDP this year, well above the 4.4% target agreed with the European Commission by the previous Spanish government. El Mundo reports that, according to EU officials, the Commission may accept the deviation in return for an “irreversible commitment” that the Spanish government will bring the deficit down to 3% of GDP by the end of 2013.  
FT CityAM WSJ Kathimerini Kathimerini 2 Independent FT 2 Manager Magazin EUobserver FT Weekend FT Weekend 2 FAZ Telegraph: Live blog Sunday Telegraph Telegraph New Europe WSJ 2 WSJ 3 WSJ 4 FT 3 El País Expansión Spanish government press review FT Weekend FTD FAZ 2 FAZ 3 Handelsblatt Telegraph: Bootle WSJ: Nixon FT: Davies FT: Munchau FT: Barber FT Weekend Saturday's Times Saturday's Guardian Saturday's Mail Saturday's Express Saturday's Express: Roycroft-Davis Saturday's Independent Saturday's Independent: Leader

Michael Fallon MP: Some EU financial services proposals “verge on the discriminatory, verge on protectionism”
Open Europe organised a debate in London on Friday, discussing the potential impact of the eurozone crisis on the UK’s financial services industry. Jonathan Faull – Director General for the Internal Market at the European Commission – said that the UK is “most certainly” listened to when new EU financial services laws are drafted, stressing that the UK “has never been outvoted” on financial regulation during Michel Barnier’s term as EU Internal Market Commissioner. Angela Knight CBE, CEO of the British Bankers’ Association, warned of “increasing nationalism and home bias in the financial system”, and argued that EU financial regulation tends to restrict market access for non-EU countries.

Austrian MEP Hannes Swoboda, who chairs the Socialist group in the European Parliament, argued that “we need some [financial] regulation”, but criticised the European Commission for not living up to its commitment to reduce the burden of EU regulation, adding, “We distract and devastate the sentiment for Europe with too much regulation.” Swedish Socialist MEP Göran Färm discussed why Sweden’s failed attempt to introduce a financial transactions tax in the early 1990s can no longer be used as an argument against an EU-wide FTT.

Conservative MP Michael Fallon, who sits on the House of Commons’ Treasury Select Committee, warned that some of the EU’s regulatory proposals affecting the financial services sector “verge on the discriminatory, verge on protectionism, and undermine the competitive position of Europe.” He also suggested that there is not much use discussing an EU-wide FTT because “we’re going to veto it. We’re not going to accept anything like it.”
Open Europe events

In a piece on Conservative Home discussing the Conservative Party’s options for their next electoral manifesto, Open Europe’s Christopher Howarth argues that, in light of eurozone moves towards greater integration, it is clear that “at some point new membership terms will need to be defined [for the UK].”
Conservative Home: Howarth Open Europe blog

German Foreign Minister: We need to resurrect the European Constitution
In an interview with Welt am Sonntag, German Foreign Minister Guido Westerwelle said that it was “important to open the next chapter of European integration”, arguing, “I regret that it has not been possible to adopt a truly European Constitution. We’ve noted that the Lisbon Treaty has design flaws. Many decision-making mechanisms are too complicated, and there is still a lack of transparency and clarity. Europe needs a common constitution, which the citizens should decide over in a referendum.” Westerwelle also argued in favour of a directly elected European President, and a bicameral parliamentary system, with the European Council becoming an upper chamber alongside the European Parliament.
Welt am Sonntag: Westerwelle

Some of the UK’s wealthiest landowners receive millions from EU farm subsidies
An investigation by the BBC’s Panorama programme has revealed that, under the EU’s Common Agricultural Policy (CAP), some of the UK’s wealthiest landowners, including members of the Royal Family, are receiving millions of pounds in EU subsidies. Under the current system, CAP payments are linked to the amount of agricultural land a person owns, meaning the richest and largest landowners often receive the biggest payments. The investigation found that in 2010, across the UK, 709 recipients got more than £250,000, 133 were given at least £500,000 and 47 received more than a million pounds.
PA Mirror Open Europe research

Separately, a Red C poll for the Sunday Business Post has found that Irish voters would approve the new European ‘fiscal treaty’ on budgetary discipline by a majority of 60% to 40% once those who answered “don’t know” have been excluded.
FT WSJ FT Editorial

Rzeczpospolita reports that Polish PM Donald Tusk has said that, legal advice permitting, he would try to get the ‘fiscal treaty’ ratified in the Polish parliament with an ordinary majority as opposed to the two-thirds majority required for constitutional changes. Law and Justice, the biggest opposition party, has said it will vote against the treaty, meaning that a two-thirds majority cannot be guaranteed.

The Telegraph reports that, in order to align UK law with several ECJ rulings on EU working time rules, the Government is to introduce plans to grant workers extra time off if they fall ill during their holidays. The Government estimates that the new rules will cost UK employers more than £100m a year.
Open Europe research Telegraph

EU Justice Commissioner Vivane Reding is expected to propose introducing quotas for women on the boards of public companies by the end of the month.
IHT Guardian FT FT 2 Spiegel Welt Mail

City AM reports that the Mayor of London Boris Johnson has complained that the UK follows EU regulations more closely than other member states, adding, “We gold plate it, we over-egg it...We make it very difficult sometimes for our businesses to comply in a reasonable way.”
City AM

Reports of ‘anti-Hollande’ pact create tensions within German coalition
Following reports by Der Spiegel of a verbal agreement between the leaders of Germany, Italy, Spain and the UK not to meet Socialist candidate François Hollande ahead of the French presidential election, German Foreign Minister Guido Westerwelle expressed “deep concerns” over German politicians’ involvement in French politics, adding, “There should be no doubt that Germany will work very well with any government chosen by the French people.” The French and German governments have both denied any ‘anti-Hollande’ pact.
Spiegel Independent Le Figaro EurActiv Irish Times  Les Echos Le Monde La Tribune EUobserver Süddeutsche Le Monde

The Telegraph reports that senior sources from the UK’s insurance industry have warned that the EU’s Solvency II rules for the insurance sector could force cuts in pay-outs to pensioners by bet­ween 10% and 20%.
Open Europe research Telegraph

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