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European Commission recommends giving Spain an extra year to cut deficit

31 May 2012

EU Economic and Monetary Affairs Commissioner Olli Rehn said yesterday that the European Commission was “ready” to recommend giving Spain an extra year to bring its deficit down to 3% of GDP, “on the condition that Spain presents a convincing budgetary plan for 2013-2014 and controls excessive spending in the autonomous regions and other sub-national entities.” Despite Rehn’s announcement, Spain’s borrowing cost remain high this morning. Meanwhile, the European Commission has also urged the Spanish government to present a recapitalisation plan for Bankia quickly. Spanish Economy Minister Luis de Guindos told the parliament this morning that the total financing needs of the banking sector will be known by the end of June, Expansión reports.  

Open Europe’s recent report on Spain’s short-term prospects in the eurozone was cited by Anthony Harrington on his QFinance blog.
FT WSJ Independent Irish Independent European Voice Süddeutsche Les Echos El País Telegraph Guardian Times Times: Hosking Irish Times La Tribune El Mundo Expansión FT 2 WSJ 2 Expansión 2 El Mundo 2 El Mundo 3 IHT QFinance: Harrington

Tsipras renews pledge to scrap bailout agreement as new poll gives SYRIZA the lead
A new VPRC poll published by Greek magazine Epikaira gives left-wing SYRIZA the lead with 30% of vote intentions, followed by centre-right New Democracy on 26.5% and the Socialist PASOK party on 12.5%. A separate Pulse poll for Greek weekly To Pontiki credits both SYRIZA and New Democracy with 24.5% of vote intentions. During a campaign speech in Athens yesterday, SYRIZA leader Alexis Tsipras said, “We insist that you can either implement the bailout deal or overturn it. We will overturn it as soon as parliament opens.” Kathimerini notes that SYRIZA is expected to unveil its economic programme shortly.  

Yesterday’s Open Europe event looking at the forthcoming Greek elections featuring Nobel economics laureate Christopher Pissarides was covered by Bloomberg and Greek TV station ANT1TV.
CityAM Kathimerini Epikaira Independent: Krugman Corriere della Sera: Schröder Bloomberg  

Paul Goodman: Osborne set to gamble on “EU renegotiation referendum”
In the FT, Paul Goodman of Conservative Home argues that UK Chancellor George Osborne is set to “gamble” on committing “the Tories at the next election to an EU renegotiation referendum. Such a gambit would disrupt the UK Independence party, which is committed to an in-out poll; outmanoeuvre Ed Miliband, who is mulling the same option; and spike the guns of the London Mayor, who is flaunting his eurosceptic views”.  

In the Spectator, Political Editor James Forsyth argues that “There are signs from No 10 that Cameron might be amenable to the idea” of using EU Treaty changes that may arise from the Eurozone crisis to seek concessions for the UK. In a podcast accompanying the publication of this week’s Spectator, Open Europe’s Mats Persson discusses the prospects of the euro and Britain’s place in Europe.
FT: Goodman Spectator Podcast Conservative Home: Howarth  

Commission calls for eurozone banking union
The Commission yesterday called on the eurozone to set up a ‘banking union’ to allow the burden of bank failures and deposit guarantees to be shared at the eurozone level, although it admitted moves towards this would take time. It also called for the ESM, the permanent eurozone bailout fund, to be allowed to lend directly to banks. Many of these proposals have been previously rejected by countries such as Germany, Finland and the Netherlands.
WSJ BBC Telegraph Irish Times Irish Times 2 Welt

Safe haven flows rise as Commission calls for further cuts in the eurozone
Market jitters increased yesterday as the European Commission warned of “financial disintegration” in the eurozone and issued a series of reports highlighting the huge reforms needed at both the European and national level. The news sparked a capital flight to safe havens with Germany and France both seeing their borrowing costs reach record lows.  

All the 14 countries covered by the reports (the bailout countries are excluded) were encouraged to implement further fiscal consolidation and structural reforms. France came under fire for “optimistic” growth assumptions in its budget projections, leading the Commission to conclude that on the current path France would miss its target of a 3% deficit by 2013. The report was also critical of new French President Francois Hollande’s plan to increase the minimum wage and repeal of Sarkozy’s increase to the retirement age. The German deficit cutting plan was described as “plausible”, although the Commission warned budgetary control and regional level should be increased, while wages should also be allowed to rise faster.  

The non-binding report on the UK economy broadly backed the Government’s deficit cutting plans, but did call for more “growth enhancing expenditure” and suggested that growth may fall short of the Government’s estimates. Commission President José Manuel Barroso also said he will propose a roadmap and a "calendar" for more European integration at the next EU summit in June.
FT CityAM WSJ WSJ 2 CityAM 2 FT 2 FT 3 IHT EurActiv Les Echos Le Figaro Le Figaro 2 Le Monde FT: Gapper CityAM: Smith CityAM: Heath WSJ: Goolsbee BBC: Hewitt BBC: Peston FT: Goodman

Schröder: SPD could win if it doesn’t copy Hollande’s measures
Former German Chancellor Gerhard Schröder told French weekly Le Point that “if the SPD does not make the mistake of copying [French Socialist President] Hollande’s programme, then we’re in with a chance” ahead of German elections next year. He praised Hollande’s “growth-oriented policies” but added that “his lack of will to implement structural reforms remains problematic.
Le Monde Les Echos

Ireland set for ‘Yes’ vote on fiscal treaty today
Ireland votes today on the ratification of the European fiscal treaty. Polls predict a low turnout and a victory for the ‘Yes’ vote. However, up to one fifth of voters remain undecided, and anti-austerity sentiment remains a driving force of the ‘No’ campaign. Ahead of the referendum, the Irish government released data indicating that unemployment levels remained high on 14.3%. Sinn Fein, which has campaigned against the treaty on the grounds of economic hardship, currently leads opinion polls on 24%.
FT BBC EurActiv Irish Independent Irish Times Le Monde Les Echos Nouvel Observateur Liberation FAZ Times WSJ WSJ: Ganley

The EU Commission has launched legal action against Germany, likely to result in a fine, over its failure to comply with the terms of the Data Retention Directive which mandates storing citizens’ data on internet activity and telephone calls for a six-month period. Germany did initially implement the Directive but the law was overturned after the country’s Constitutional Court ruled it was unconstitutional.
Handelsblatt Deutsche Welle

Der Spiegel reports that German diplomats have been “irritated” by French President Francois Hollande’s calls for military intervention in Syria, an option the German government currently rejects.
Spiegel Welt Süddeutsche  

Die Welt reports that senior and influential figures within the German Green party are pushing for a special party congress to be convened to discuss the party’s approach to the fiscal treaty and the eurozone rescue more widely, seeing it as an opportunity to present the public with an alternative to Chancellor Merkel’s current strategy.

In its latest convergence report, the ECB has found that all eight non-euro EU member states legally obliged to join the single currency in the future have failed to meet the entry criteria, in particular keeping their debt below 60% of GDP and deficit below the 3% of GDP.
BBC Les Echos Reuters ECB: Convergence Report

European Voice reports that at a meeting of EU ministers to discuss the next EU multi-year budget, seven member states including Finland, Germany, the Netherlands, Sweden and the UK, criticised the European Commission’s budget proposals arguing for cuts of at least €100bn to the €1,025bn proposed budget. Another group of 14 member states defended cohesion spending.
European Voice  

European Voice reports that the European Commission is expected to propose new rules on the recognition of electronic ‘signatures’ to enable ‘e-IDs’ to be mutually recognisable across borders. The proposal is the last of twelve Commission projects aimed at boosting the single market.
European Voice  


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