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Commission asks for 6.8% budget increase; UK contribution to rise by £890m; French Budget Minister: budget “impossible, unjustifiable and unacceptable”

26 Apr 2012

The European Commission presented its proposal for a 6.8% increase to the 2013 EU budget yesterday. Under the new plans, UK taxpayers’ contributions to the EU will increase by £890m.

The Commission stressed that the budget increase resulted from commitments taken several years ago, as part of the EU’s 2007-2013 financing programme which comes to an end next year. The draft budget provides a 5.7% increase in spending on the EU’s diplomatic service, the EEAS.

Financial Secretary to the Treasury Mark Hoban stated that it was “unacceptable for the Commission to propose an inflation-busting budget increase when governments across Europe are making difficult decisions on public spending". French budget minister Valerie Pecresse denounced the proposal as “impossible, unjustifiable and unacceptable”. Dutch finance minister Jan Kees de Jager added that it was “unthinkable”. German Europe Minister Michael Link said “I do not believe it helps to build understanding when on one hand, Member States impose ever new savings packages upon themselves, while on the other, the Commission continuously demands more money for its budget”.

Open Europe Director Mats Persson writes on his Telegraph blog “Remember, this is the same Commission that is currently drawing up blueprints for austerity in the member states. The Commission says it needs the cash in order to honour spending commitments made in previous years…True, the mechanics differ from national budgets, but apart from that, the EU budget is facing exactly the same pressure as national spending programmes: if there’s not enough cash in the pot, prioritise”. Mats’ blog is cited in City AM, the New Statesman, the Telegraph and the Daily Mail. Mats also appeared on BBC World yesterday, discussing the budget proposals. Politik Heute cites Open Europe’s report on the effectiveness of the EU’s 52 quangos.
Telegraph blogs: Persson EUobserver FT IHT CityAM Mail Times Express Express: Leader Sun Sun: Leader Irish Times EUobserver 2 La Tribune IHT New Statesman Welt FAZ Heute

Frankfurter Allgemeine Zeitung cites Open Europe’s figures showing that the ECB’s exposure to the PIIGS now tops €917bn, an increase of 106% from a year ago. The article notes that €703bn of that exposure is in lending to banks in these struggling countries.
No link

Germany to miss European Commission’s deadline for implementation of Data Retention Directive
Süddeutsche reports that Germany is to miss the European Commission’s deadline for implementation of the EU’s Data Retention Directive, which expires at midnight tonight. German Interior Minister Hans-Pieter Friedrich said that the government is still working on the implementing law, although German Justice Minister Sabine Leutheusser-Schnarrenberger – from Merkel’s junior coalition partner FDP – said, “In the history of European integration, there isn’t any directive which is more controversial and problematic than the Data Retention Directive.”

Draghi’s calls for ‘growth compact’ backed by Merkel;
IMF warns of problems in Spanish banking sector

Speaking to the European Parliament yesterday ECB President Mario Draghi called for a ‘growth compact’ in the eurozone focused on structural reforms aimed at boosting competitiveness. The call was supported by German Chancellor Angela Merkel, who said “We need growth in the form of sustainable initiatives, not simply economic stimulus programmes that just increase government debt,” in what could be seen as a veiled criticism of the type of growth reforms pursued by French Presidential candidate Francois Hollande. Il Sole 24 Ore reports that Italy and Germany are working on a set of initiatives to promote growth in Europe, which they will jointly present at the next meeting of EU leaders in June.

The FT reports that an IMF study has found continuing exposure of the smaller Spanish regional banks (cajas) to the bust real estate sector, and recommends that the government encourage banks to move these assets into ‘private asset management shells’.

El País reports that the regional governments in Andalusia and the Basque Country have refused to implement measures proposed by the Spanish government to save €10bn on education and health spending. Catalonia has sought legal advice with a view to taking the government’s proposed cuts to the Constitutional Court, on grounds that education and health spending should be managed by the regions.   .

De Standaard reports that Luc Coene, Belgian Central Bank Governor, has admitted that struggling bank Dexia will soon need a capital injection.
FT FT 2 CityAM WSJ EUobserver Le Figaro Corriere della Sera Le Monde Les Echos Standaard Sueddeutsche Business Week Business Week 2 FTD Les Echos Le Figaro Focus MNI Trends: Van Overtveldt Il Sole 24 Ore El País Irish Times Süddeutsche Spiegel FAZ

‘Yes’ campaign stumbles as Irish referendum on fiscal pact approaches
The FT reports that the ‘Yes’ campaign for the referendum on the fiscal pact in Ireland is faltering as the Irish trade union movement said it would not support the treaty. Opponents of the treaty are also threatening the government with legal action over its €2.2m campaign which they claim breaks the requirement that all campaign material funded by public money be impartial. Polls show 30% in favour, 23% against but with 39% still undecided. The Irish government also rejected the possibility of delaying the referendum yesterday.
FT Irish Independent

Hollande details proposals for fiscal treaty renegotiation; Calls for EU-wide FTT and Eurobonds to finance infrastructure investment
At a press conference yesterday, Socialist frontrunner to the French Presidency Francois Hollande detailed his four proposals for a renegotiation of the fiscal compact. These are the creation of a financial transaction tax, the introduction of Eurobonds to finance infrastructure projects, rather than the mutualisation of European debt, freeing up the European Investment Bank’s financing opportunities, and the use of leftover EU structure funds.

He stressed that a renegotiation of the fiscal treaty was politically feasible, claiming that the Irish referendum could provide an opportunity to add growth clauses. Former Italian Prime Minister Silvio Berlusconi commented yesterday that Hollande “could inject new energy into Europe, by refusing the fiscal treaty”, while the president of Greek Socialist PASOK party, Evangelos Venizelos said he hoped Hollande “would change the power relationship in Brussels”.  

Herman Van Rompuy’s spokesman warned that “renegotiation the treaty would aggravate instabilities and send the wrong signal to the ECB”. Incumbent Sarkozy criticised the proposals “the only way to relieve market pressure is to repay our debt”.
Irish Times Le Monde Le Monde 2 Les Echos Les Echos 2 Les Echos 3 Le Monde 3 Le Monde 4 Les Echos FT WSJ

European Parliament’s ECON Committee backs FTT

The European Parliament’s Economic and Monetary Affairs Committee (ECON) has voted in favour of an EU-wide financial transactions tax despite Mario Draghi, the president of the European Central Bank, telling the committee against it. City AM reports that the committee’s new proposals would include measures to catch trades made outside the EU by questioning a security’s “legal ownership rights”?if a buyer doesn’t pay the levy. Bloomberg reports that the Commission will now include an exemption for pension funds that hold securities for the long term.
EUobserver 2 EUobserver Bloomberg CityAM

The Spanish government has agreed with professional football clubs that they will have until 2020 to solve their outstanding debts with Spain’s Tax Agency – which amount to a total €752m. A spokesman for EU Competition Commissioner Joaquín Almunia has confirmed that the European Commission is investigating whether the deal gives Spanish football clubs an unfair advantage vis-à-vis their European competitors, reports La Vanguardia.    
La VanguardiaEl País

Fitch confirms Dutch triple-A despite on-going questions over deficit targets
Talks over the Dutch budget will continue today, despite reports last night that a deal had been reached.Meanwhile, Fitch issued a warning yesterday that it does not expect the Netherlands to meet its deficit target this year, although reiterated that its Triple-A rating is safe, mostly due to its low debt level compared to other triple-A countries. Open Europe’s Raoul Ruparel is quoted by World Politics Review discussing the problems in the Netherlands.

Kathimerini reports that Greece is in talks to delay its deficit targets by one year to 2015, after Greek Finance Minister Filippos Sachinidis held talks with IMF officials on the issue over the weekend.
KathimeriniKathimerini 2WSJ

EUobserver reports that the European Parliament’s Legal Affairs Committee has endorsed changes to working conditions for EU officials designed to save over €1bn a year. The changes include a 5% reduction of staff employed in the EU institutions and agencies, and an increase in the retirement age from 63 to 65. The new measures now have to be approved by MEPs in the plenary session.

RTP reports that the ‘April Captains’ – the revolutionary soldiers who overthrew Portugal’s dictatorship in 1974 – refused to take part in the commemorations of the Carnation Revolution yesterday, in protest against the tough austerity measures being imposed on the Portuguese people.  
RTPEl País

A new IPR Marketing poll published by La Repubblica shows that support for Italian Prime Minister Mario Monti has fallen from 55% to 51% over the last month.

Le Monde reports that EU Foreign Minister Baroness Catherine Ashton has asked the Ukrainian government for permission to visit former Prime Minister and opposition leader Yulia Tymoshenko, who is currently hunger striking in prison.
Le Monde Welt Süddeutsche

The European Commission has decided to take Hungary to the ECJ for two infringement cases concerning the independence of the country’s data protection authority and the retirement age of judges, prosecutors and public notaries. The Commission also said it is satisfied with the changes made to the Hungarian Central Bank’s statute. 
EC Press Release

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