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UK Foreign Secretary to launch study into impact and potential repatriation of EU law; 100 MPs write to David Cameron urging an EU referendum in next Parliament

28 Jun 2012

The FT reports that UK Foreign Secretary William Hague will seek to launch an audit of the impact of EU law on Britain this summer, with the potential view to identifying areas of EU policy that could repatriated to the UK. However, the proposed study of the “balance of the EU’s existing competences” – which was contained in the coalition agreement – has yet to be signed off by Lib Dem leader Nick Clegg. Open Europe’s Director Mats Persson is quoted saying that the exercise might throw up more modest ideas about changes that could be made within European directives rather than through full-scale treaty change. The article also quotes Andrea Leadsom MP predicting that a referendum on a re-negotiated relationship with the EU will be needed in the next Parliament.

Meanwhile, Conservative Home reports that nearly 100 MPs have written to David Cameron urging him “to place on the Statute Book before the next General Election a commitment to hold a referendum during the next Parliament on the nature of our relationship with the European Union”, though leaving the exact question of the referendum open.
Conservative Home FT FT 2 EUobserver

Germany and France fail to agree on common position ahead of EU summit;
Handelsblatt: ‘Yes’ to Europe means ‘No’ to debt pooling
PA reports that, at their meeting in Paris yesterday, German Chancellor Angela Merkel and French President François Hollande failed to reach a common position in preparation for today’s meeting of EU leaders in Brussels, as they continue to disagree on a number of issues. Merkel reiterated that debt pooling is the “wrong way to go”, while Hollande said Europe needs to “deepen economic and monetary and, tomorrow, political union”, presenting a different timeline. Il Sole 24 Ore reports that Italian Prime Minister Mario Monti has suggested that Italy may not participate in so-called ‘enhanced cooperation’ on the financial transaction tax unless his proposal to use the eurozone’s rescue funds to buy bonds of peripheral euro countries is accepted.

On the front page of Handelsblatt, under the headline, “Nein! No! Non!”, the paper’s former Editor Gabor Steingart argues that Merkel’s rejection of debt pooling was the best moment of her Chancellorship, and that “this is the Merkel that one wishes to see more often.” He adds, “Now she has to explain to our friends at the summit that that it helps no one if Germany passes the fruits of its labour around liberally. It is actually the other way around: ‘Yes’ to Europe means ‘No’ to Barroso’s ideas.”

Meanwhile, ahead of today’s EU summit, European officials were working behind the scenes on a number or proposals to ease the eurozone crisis in the short term including, the eurozone bailout funds purchasing government bonds, removing seniority from the ESM, the eurozone’s permanent bailout fund, and using special investment vehicles to provide the Spanish rescue package – presumably to avoid the money increasing Spanish debt levels.
Handelsblatt: Steingart
WSJ CityAM Times FT CityAM 2 EUobserver IHT Le Figaro Kathimerini Irish Times Times 2 FT Editorial WSJ Review&Outlook Il Sole 24 Ore Il Sole 24 Ore 2 La Stampa Corriere della Sera Repubblica Cinco Días Bild Welt Süddeutsche Spiegel Le Figaro El País Les Echos Expansión

New Open Europe briefing: Banking and/or fiscal union cannot deliver an answer to the current eurozone crisis;
European leaders express reservations over plans for banking and fiscal union
Open Europe has published a briefing note summarising the various ideas floated for a fiscal and banking union in the wake of the eurozone crisis, noting that none constitutes a realistic short-term, or even medium-term, solution to the crisis, given Germany’s insistence on an effective veto over other member states’ spending over a certain level as a precondition for more integration. The briefing estimates that, taken together, an EU bank resolution fund and deposit guarantee scheme will need to be worth at least €600bn to be credible – though could increase to trillions in a crisis situation – with a direct credit line to either the ECB or national treasuries, meaning that it’s very difficult to separate a banking union from a fiscal union.  

The Telegraph quotes Open Europe’s Mats Persson saying, “A key question for the UK is whether it really wants the ECB tasked with supervising a banking union in which cannot take part itself, and how to avoid barriers to financial trade in the eurozone for UK firms if this happens.” Open Europe’s briefing on the plans for fiscal and banking union was cited by the Telegraph, El Mundo, Rzeczpospolita and Der Standard.

Meanwhile, some European leaders have expressed reservations over Council President Herman Van Rompuy’s proposals for a banking union in Europe laid out earlier this week. Swedish Prime Minister Fredrik Reinfeldt said he was “very critical” of the proposal while the country’s junior finance minister, Peter Norman, said it “wasn’t reasonable” that ministers only had three days before the summit to consider the paper, according to Svenska Dagbladet.  

Angela Merkel said, “I decisively reject the presumption in this report that the principle of collectivisation takes priority.” Czech Prime Minister Petr Necas warned, “Some proposals like the banking union could have an extremely damaging impact on the Czech economy.” Dutch Prime Minister Mark Rutte told the parliament yesterday that “first the problems in Spain's and Italian banking sector should be solved”, before further backstops are introduced – including a common EU deposit guarantee scheme. Bulgaria and Poland have also expressed reservations, according to Reuters.
Open Europe press release Open Europe briefing Independent Telegraph Irish Times El Mundo Rzeczpospolita Der Standard SvD Europaportalen EUobserver Irish Times Bild Welt Spiegel FAZ FT: Lex Nu.nl Reuters

UK to contribute €1.6bn to EIB capital increase
At their two-day summit in Brussels, EU leaders are expected to increase the capital of the European Investment Bank by an extra €10bn, with Britain contributing €1.6bn. Open Europe’s Christopher Howarth, is quoted in the Times, Telegraph and Mail as saying, “This feels an awful lot like spending for the sake of spending without doing anything to solve the eurozone crisis. We fear this won’t be good use of taxpayers’ cash.” Open Europe’s Director Mats Persson is quoted by the Guardian as saying, “It’s not clear whether the additional EIB cash will actually do anything to stem the crisis, in particular since the ECB just flushed Europe with €1 trillion worth of credit without achieving a major boost to investment.”
Telegraph Times Sun Guardian

28% of Germans would vote to leave the EU;
Poll suggests Germans are more concerned by unemployment than inflation
The FT reports on a YouGov poll which shows that, if there were a referendum on euro membership today, 43% of Germans would vote to keep the euro while 41% would favour a return to the D-Mark. If the referendum were on EU membership, 51% of Germans would vote to stay compared to 28% who would vote to leave.

Furthermore, the poll shows that 43% of Germans think that closer integration is a “good idea”, even if it means losing the national power to decide on taxes and spending, against 38% who disagree. 53% of respondents in Germany said they would prefer government action to reduce unemployment even if it meant higher inflation, while only 22% backed anti-inflation policies even if it meant an increase in unemployment.

Cyprus to get full-blown bailout;
Spain’s borrowing costs reach unsustainable levels ahead of EU summit
Eurozone finance ministers said in a statement that Cyprus will get a full-blown bailout “in the framework of a comprehensive adjustment programme”. Cyprus has also sought financial assistance from the IMF. The amount of the rescue package is likely to be fixed in the next few weeks.

Meanwhile, the interest rate on Spain’s ten-year bonds has reached above 7% again – a level widely deemed as unsustainable. Separately, Italy is to sell €5.5bn worth of five and ten-year bonds in a key auction today. The lower house of the Italian parliament yesterday gave its final approval to the government’s first package of labour market reforms. La Repubblica notes that, in total, 87 of the 209 MPs from Silvio Berlusconi’s party did not vote in favour of the package – seven voted against, 34 abstained and 46 were absent.
Eurogroup statement El País El Mundo Il Sole 24 Ore Il Sole 24 Ore 2 Repubblica 2 FT WSJ WSJ 2 WSJ 3 IHT: Griffin and Kashyap Le Figaro: Aftalion Welt: Zschäpitz FAZ: Nonnenmacher

Open Europe’s recent briefing outlining the potential alternatives to EU membership if the UK decided to the leave the EU altogether is cited by Reuters.

Bloomberg reports that Slovenian Prime Minister Janez Jansa said in a radio interview that his country might have to seek a bailout as early as next month, if the Slovenian parliament fails to adopt legislation to curb public spending.

In an interview with Bild, Professor Hans-Jürgen Papier, former head of the German Constitutional Court, warns that a referendum on a new constitution risks endangering the country’s political stability, arguing, “I currently see absolutely no willingness on the part of the German people to replace the proven Basic Law with a new constitution enabling them to be integrated into a federal European state.”
Bild Welt

In an interview with FT Deutschland, Executive Board Member Peter Praet argues that “there is no doctrine that the interest rate can’t be below 1%”. Praet’s remarks have been seen as a sign that the ECB may be preparing for an interest rate cut.
FTD: Praet Les Echos  

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