Daily Press Summary
Irish economy unexpectedly slipped back into recession at the end of 2011
Eurozone looks to have entered a recession in the first quarter of 2012
Data released yesterday showed that the Irish economy unexpectedly slipped back into a recession at the end of 2011, as GDP contracted by 0.2% in the final quarter. Crucially, GNP (which strips out the earnings of large foreign companies) fell by 2.2% in the final quarter of 2011, despite being forecast to grow by 1.5%. Much of the decline was down to lower than expected export growth. Despite the dip, Irish GDP still grew by 0.7% over the course of 2011.
Meanwhile, data released yesterday showed that output growth in Germany slowed in March, economic activity contracted in France and manufacturing across the eurozone fell sharply, all suggesting the eurozone has entered a recession in the first quarter of 2012.
Spanish ten year borrowing costs rose above 5.5% yesterday for the first time since January as markets became increasingly concerned over Spain due to weak eurozone growth. The WSJ reports that mortgage costs in Spain, Italy and Portugal have been rising significantly, heaping further pressure on the struggling economies. The WSJ reports that, ahead of regional elections in Andalusia on Sunday, the governing Partido Popular looks set to win a majority, a result which would be seen as a validation of their austerity policies.
The FT reports, that according to a leaked ‘options note’, the Commission supports merging the EFSF and the ESM, the eurozone’s temporary and permanent bailout funds respectively, to give a combined lending capacity of €940bn. However, the note accepts that the current German preference is to have the funds run in parallel for the next year at which point the EFSF will be wound down as planned. Handelsblatt reports that Merkel is facing a rebellion from some MPs in her governing coalition who are opposed to combining or running the funds in parallel.
In an interview with Handelsblatt, former ECB Executive Board member Jürgen Stark warns of inflation risks from the ECB lending operations, saying, “Historically, we know that any particularly strong expansion of the central bank balance sheet leads to inflation in the medium term.” Stark adds that given the three year timeline on the loans he does not believe that the ECB can easily absorb the excess liquidity.
FT CityAM WSJ Telegraph Guardian Le Monde Les Echos La Tribune FT 2 WSJ 2 Le Monde 2 FT 3 CityAM 2 WSJ 3 Le Monde 3 Les Echos 2 Independent IHT Kathimerini Il Sole 24 Ore Repubblica Expansión FT 4 WSJ 4 La Tribune 2 FT 5 FT 6 WSJ 6 FT: Mallaby FT Editorial WSJ: Mingardi WSJ: Fidler Les Echos 3 FT 7 WSJ 5 Handelsblatt IFA Nederlands Dagblad FD Irish Times Handelsblatt 2
Commission argues FTT could save member states billions on their EU budget contributions
At yesterday’s conference dedicated to the EU’s next long term financial framework (2014 – 2020), EU Commission President Jose Manuel Barroso and Budget Commissioner Janusz Lewandowski made a fresh pitch for the introduction of an EU-wide financial transaction tax. Under the Commission’s proposals two-thirds of the revenue would flow directly into the EU budget, replacing up to half of member states’ direct contributions, with member states keeping the remaining third for themselves. Although the move could in theory save the UK around €7.6bn (£6.4bn) per year, the Commission’s model ignores the fact that over 70% of the EU’s financial transactions take place in the UK and the tax would have a negative impact on the UK economy.
WSJ EUobserver European Voice Les Echos
EU set to clash with China over free trade
The WSJ reports that the EU could initiate its own investigations of Chinese anti-competitive practices, even if EU companies are unwilling to come forward with complaints for fear of potential retaliation from the Chinese Government. A possible result could be the imposition of new tariffs on Chinese goods to offset the impact of Chinese government subsidies. EU Trade Commissioner Karel De Gucht is quoted as saying: "What we have to do is protect the European interest… We will not accept governments putting pressure on our companies".
The Economist’s Charlemagne criticises the Commission’s recent proposal to let the EU close its public procurement markets to firms from countries that exclude European competitors, arguing that: “It seems perverse, at a time of stringent austerity, for countries to deny themselves a means of controlling spending. The plan puts the interests of producers above those of consumers and taxpayers… It [also] runs against the thrust of Europe’s response to the euro crisis, which is to boost competitiveness, not to coddle inefficiency.”
WSJ WSJ: Review & Outlook Economist: Charlemagne
Latest poll reveals impact of Toulouse massacre on French elections;
Le Pen elbowed out of third position as calls for referendum on the euro
A BVA poll published yesterday evening shows the impact of the Toulouse killings on the French Presidential campaign. Francois Hollande, Socialist frontrunner, slips by 1.5% to 29.5%, as Nicolas Sarkozy progresses by 2% to 28%. Sarkozy has used the crisis as an opportunity to introduce security as theme in the campaign, and pledged to crack down on terrorist websites and training camps.
The poll places far-left candidate Jean-Luc Melenchon on 14%, ahead of Front National leader Marine Le Pen, who had maintained a steady third position in the polls since December. Melenchon has risen by 5% in the last month. Marine Le Pen has included a proposal for a referendum on the euro in her election manifesto, reports Le Figaro.
Le Monde Nouvel Observateur FT WSJ Le Monde 2 Les Echos Le Monde 3 Les Echos 2 Le Monde 4 Le Figaro
Following the news that the UK’s contribution to the EU budget between 2010 and 2014 will be £1.8bn higher than expected, Open Europe are quoted in the Express as saying, “It is deeply concerning that the Government has managed to grossly underestimate the UK’s net contribution, especially when it means that taxpayers are paying in even more to what is a flawed and wasteful EU budget. The EU budget urgently needs to be cut and spent far better.”
The first audit of the big three ratings agencies by the EU’s financial regulator, the European Securities and Markets Authority, concluded that they must improve their transparency, IT and internal controls, and strengthen the committees that oversee decisions on individual securities, reports the FT.
Budapest has submitted proposals for reforms of its judicial system and freedom of press legislation for review by the Hungarian Parliament, following EU pressure. Hungary has yet to review its controversial laws on religious freedoms. Secretary-General of the Council of Europe, Thorbjoern Jaglan, said that Viktor Orban’s government had responded “constructively”.
EUobserver reports that the European Commission has said it wants the ECJ to fine Portugal €40,000 a day for failing to adhere to EU rules on telecoms services set out in 2010.