Daily Press Summary
German ratification of ESM and fiscal treaty delayed following request from Constitutional Court; FAZ: Merkel pressured German President to ignore request from Karlsruhe
Following a request from the Constitutional Court, German President Joachim Gauck announced he would not sign off either the fiscal treaty or the ESM – the eurozone’s permanent bailout fund – after their expected ratification by the German Parliament next week. Following complaints that the treaties restrict the sovereign budgetary competence of the Bundestag, the Court said it wanted to examine their legality. A decision is expected within two to three weeks, meaning that the ESM is unlikely to be approved by Germany by 1 July, the date on which it is due to be launched.
German Finance Minister Wolfgang Schäuble criticised the decision, saying, “I do not think it is wise for constitutional bodies to communicate publicly with one another.” FAZ reports that the judges were “shocked” that German Chancellor Angela Merkel had allegedly urged Gauck to ignore their request, which they claim could have triggered a constitutional crisis. However, Merkel’s spokesperson denied that this had taken place. Meanwhile, the Finnish parliament ratified the ESM treaty yesterday, while the Slovak parliament did so this morning.
EUobserver FT Telegraph Welt FAZ FAZ 2 ARD Handelsblatt Bild Slovak Spectator Slovak Spectator 2
German academics and opinion formers: Monetary and fiscal policy must be strictly separated again
Writing in FAZ, the Jena Alliance for the renewal of the social market economy – a network of prominent organisations, institutions and individuals including Professor Michael Wohlgemuth of Bayreuth University – argue in favour of a new European policy based on free market principles, noting, “We should not ask taxpayers to pay the bill for the debt crisis.”
They argue for strict budgetary discipline in the eurozone, noting that “the withdrawal of certain countries from the currency union cannot be excluded when this relieves the burden on them. Countries that rely on permanent transfers will one day grow tired of being constantly patronized while at the same time expected to be grateful for it.” They suggest that “monetary and fiscal policy must be strictly separated again. Voting rights in the ECB should comply with the capital and liabilities…The ECB should return to its proper mandate.” They conclude, “As convinced advocates of a Europe of citizens living in peace and freedom, we remember the motto of the European Union: ‘Unity in Diversity’.”
Writing in the Guardian, Die Zeit Editor Josef Joffe argues that Merkel’s “critics should stop accusing her of Teutonic arrogance. Why should she take on everyone's debts?...Merkel's tormentors – mainly US and British economists – would have a much more compelling case if they could show that Keynesianism to the max has worked in their countries. Yet, 10% deficits (now declining) have not turned the tide of unemployment in the Anglo world, nor have trillions in extra liquidity…The Chancellor could point to the painful homework her country did in the mid-noughties – when German unemployment topped out at five million (now down to under three million) – above all on welfare and labour-market reforms.”
Economist: Leader IHT: Tornell & Westermann Guardian: Joffe Economist: Leader Economist: Charlemagne Economist: Schumpeter Times: Wergin FT: Buiter Telegraph: Warner
Eurozone split over whether to ease terms of Greek bailout;
Greece refuses to sack any more public sector workers
Eurozone finance ministers differed yesterday over whether to ease Greece’s bailout programme with those from the triple-A countries staunchly against any significant renegotiation. French Economy Minister Pierre Moscovici said ahead of yesterday’s meeting, “Europe has to be sensitive to the feelings of the Greek people, and take measures in order to help the country achieve growth.”
However, the Dutch, Belgian and Austrian finance ministers said they expected little flexibility in the terms of the bailout agreement. Changes to the programme were not discussed in detail at the meeting, with decisions delayed until the EU/ECB/IMF troika provides an updated report. It was agreed that the €1bn withheld from the previous tranche of bailout funds would be paid out, although this will be used to cover Greece’s capital contribution to the ESM, the eurozone’s permanent bailout fund.
The new Greek cabinet was finalised and sworn in yesterday, while at the first cabinet meeting Greek Prime Minister Antonis Samaras announced that his ministers would take a 30% pay cut and encouraged them to use government cars as little as possible in an attempt to set an example for the nation. The government also announced that, in a move needed to gain the support of Democratic Left in the coalition, it will not be making any more cuts to public sector jobs, stating that the necessary savings in spending will come instead from forced retirements, although this plan will need to be approved by the eurozone.
Kathimerini FT CityAM WSJ Kathimerini 2 BBC Guardian IHT Irish Times FT 2
Spain expected to make official request for a bank bailout today;
IMF and Ireland criticise Spanish rescue plan
The results of the independent Spanish bank stress tests conducted by Oliver Wyman and Roland Berger were released last night, with the bank recapitalisation needs put at between €16bn and €25bn in a base scenario and €51bn and €62bn in an adverse scenario. The reports also suggested that the three largest Spanish banks – Santander, BBVA and Caixabank – would not need additional funds. Spain is expected to make an official request for financial assistance later today, after Spanish Finance Minister Luis de Guindos said he would send the letter off as soon as he returns to Madrid.
However, the final amount of funding given to Spain is not expected to be finalised until the next meeting of eurozone finance ministers on the 9 July. The decision over whether the funds would be senior to other Spanish debt was not cleared up completely, although the funds will be provided by the EFSF and then transferred to the ESM once it becomes operational.
The IMF yesterday warned that the Spanish rescue plan was flawed since it would add to Spanish government debt, suggesting that the money be lent directly to the banking system instead. Meanwhile, the ECB is expected to loosen its collateral rules relating to mortgage-backed-securities in an attempt to help Spanish banks, which hold a large amount of these products, access liquidity more easily. Separately, the lower house of the Spanish parliament ratified the fiscal treaty yesterday – 311 MPs voted in favour and 19 against.
WSJ Irish Times FT CityAM IHT EUobserver El País El País 2 El Mundo Expansión El País 3 Expansión 2 Il Sole 24 Ore Expansión 3 Expansión 4 Telegraph FT 2 CityAM 2 WSJ 2 EUobserver FT Analysis Irish Times 2 Irish Independent
Monti: Delay in tackling the euro crisis risks backlash against EU integration
In an interview with La Stampa and other European papers, Italian Prime Minister Mario Monti warned, “In order to get out well of the eurozone crisis, and the crisis of the European economy, there is an ever-growing need for greater integration. However, if the [EU leaders] fail to tackle the eurozone’s problems quickly, the will of national public opinions, governments and also parliaments would turn upon that greater integration, which is, nonetheless, necessary. This is a risk I can see even in our own parliament, which has been traditionally pro-EU integration and now is not anymore.”
EUobserver El País: Monti Guardian Guardian: Monti La Stampa: Monti Le Figaro EUobserver 3 El País Times Mail FT CityAM Irish Times FT 2 WSJ Bloomberg View WSJ Review&Outlook Corriere della Sera
New ECJ ruling on Working Time Directive “involves extra costs for business”
The European Court of Justice has ruled that workers who fall sick during their annual leave are entitled to take corresponding paid leave at a later date. The ruling which is based on the EU’s Working Time Directive is legally binding in all the member states. The UK’s Employment Relations Minister Norman Lamb said the case reinforced previous judgments, but added, “I do not believe that the directive had to be interpreted in this way, which involves extra cost for business.”
Open Europe research Open Europe research 2 Independent Mail BBC
France to join Westerwelle’s ‘Future of Europe’ group next month
The Times reports that, from next month, France will join German Foreign Minister Guido Westerwelle’s ‘Future of Europe’ group – a group of ten EU member states, excluding the UK, that has been meeting to discuss the future political architecture of the EU, including the prospect of creating a European finance minister, a beefed up European border police force and a European army. In an interview with Le Figaro, Westerwelle said, “We need to discuss without taboos the ways to strengthen Europe and make it more effective and capable to act.”
Separately, in an interview with several European papers, Italian Prime Minister Mario Monti said, “Look at the UK: from the economic point of view, the decision not to join the euro may have had some advantages in the short term, but the UK’s influence on determining the broad orientations of European policies has weakened.”
The Economist’s Bagehot writes that “the chances of Britain leaving the EU in the next few years are higher than they have ever been.”
Times Le Figaro: Westerwelle La Stampa: Monti Economist: Bagehot
Ed Miliband to change Labour’s stance on EU migration
In a speech today, Labour leader Ed Miliband will say, “It was a mistake not to impose transitional controls on accession from Eastern European countries. We severely underestimated the number of people who would come here. We were dazzled by globalisation and too sanguine about its price.” He will promise measures to help British workers, including setting up an early-warning system, run by the Migration Advisory Council, to highlight areas where the workforce is “dominated by low-wage labour from other countries” and forcing medium and large employers to declare if more than a quarter of their workforce is foreign.
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EU Internal Market Commissioner Michel Barnier writes in the FT that proposed US regulation of derivatives could conflict with EU rules, and warns, “The danger is that many of the requirements would apply to companies in the EU and to trades between the EU and US clients. American rules would take primacy over those in Europe.”
The Mail notes that Britain is being sued by the European Commission for £15m in uncollected duties on imports of garlic that should have gone to the EU budget. The Government has refused to pay on the grounds that customs officers took all responsible precautions to collect the correct rate of tax.
EUobserver reports that MEPs on the International Trade Committee have rejected the controversial Anti-Counterfeit Trade Agreement (ACTA). The final vote in the European Parliament’s plenary is scheduled for 4 July.