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EU official: Spain should tap eurozone bailout fund to recapitalise banks; Spanish PM: Ministries will be required to cut their budgets by 14-15%

28 Mar 2012

Speaking to the press in Seoul, Spanish Prime Minister Mariano Rajoy said that Spanish ministries will be required to cut their budgets by 14-15% as part of the new set of austerity measures due to be unveiled on Friday. Rajoy also said that civil servants’ salaries will be frozen, but not cut. El País reports that Spanish Economy Minister Luis de Guindos has admitted that the new measures will include “limited” tax hikes.

Meanwhile, Expansión notes that a new report by the Spanish Savings Banks Foundation (FUNCAS) has warned that Spain needs to cut its public deficit by €55bn in order to meet its target of 5.3% of GDP by the end of this year – more than the figures suggested by the Spanish government. El País quotes Spanish economist Luis Garicano saying, “If Spain wants to reduce its deficit from 8.51% to 5.3% [of GDP], it will not have to cut €32bn, but between €53bn and €64bn – which is impossible.”

Separately, El País quotes a high-ranking EU official as suggesting that Spain should use money from the EFSF bailout fund to help recapitalise its banks, although both the Commission and the Spanish government have so far ruled out this option.
Expansión Expansión 2 Cinco Días El Mundo Telegraph Times La Tribune El País El País 2 El País 3

Irish referendum set for 31 May, early polls suggest ‘Yes’ vote looks likely;
Commission highlights further problems in Greek privatisation plans

In a report released yesterday, the OECD urged the eurozone to undertake “ambitious structural reforms” and to create “the mother of all firewalls”. The report warned of the conflict between the need for growth and austerity, but broadly supported the eurozone’s current approach.

The Irish government announced yesterday that it will hold a referendum on the fiscal treaty on 31 May with current polls suggest that there is a 60% – 40% split in favour of the treaty, when those who are undecided are excluded, according to the WSJ.

Elsevier reports that, despite long delays, the three leading Dutch parties are close to reaching an agreement on between €12bn and €16bn worth of budget cuts to ensure the Netherlands meets the eurozone deficit targets.

Kathimerini reports that, following a meeting yesterday, the Greek government and the European Commission have said that all but one of Greece’s privatisation projects are facing massive problems and could be delayed further.
FT WSJ Telegraph Mail BBC European Voice Guardian Independent Le Figaro Les Echos Le Monde Les Echos 2 Irish Times Times FT 2 Elsevier BBC European Voice EurActiv WSJ 2 Irish Times 2 Le Monde 2 Les Echos 3 EUobserver FT 3 Welt FAZ Welt 2 DMN Bloomberg Handelsblatt WSJ 3 Expansión Kathimerini Kathimerini 2 Liberation EUobserver 2 WSJ Review & Outlook FT Analysis Liberation 2 La Tribune

German opposition could delay ratification of ‘fiscal treaty’
The German Coalition yesterday met with the opposition SPD and Green parties to discuss the ratification of the ‘fiscal treaty’ and the ESM Treaty, which establishes the eurozone’s permanent bailout fund. The Government wants votes on the two issues to take place simultaneously but the SPD and Greens are calling for the vote on the fiscal treaty to be delayed to take into account of the French Presidential elections and the Irish referendum on the treaty. The Greens also repeated their demand for the introduction of a financial transaction tax in return for their support for the fiscal treaty, the ratification of which requires a two-thirds majority in the Bundestag.

Separately, the parties did agree on a new draft law concerning the participation rights of the Bundestag in decisions on the use of the eurozone’s temporary bailout fund, the EFSF. According to the new law, nearly all decisions will have to be approved by the Parliament as a whole, with only decisions concerning the purchase of government bonds on the secondary market allowed to be delegated to a special committee of MPs. FAZ notes that it is unclear whether this arrangement will also apply to the ESM.
DPA Reuters Welt FAZ FAZ: von Altenbockum Süddeutsche Süddeutsche 2 Handelsblatt Handelsblatt 2 Zeit La Tribune Les Echos

Richard Sulik: “Helping the Greek state was a waste of taxpayers’ money”
Open Europe hosted a debate in London entitled, “Are the Eurozone Bailouts Fair?”. The event was covered by CNBC and the BBC.

Richard Sulik, Chairman of the Slovak Freedom and Solidarity Party (SaS), which opposed Slovakia’s participation in the bailouts argued that it was unfair for states such as Slovakia to have to bail out richer states such as Greece and pointed out that “the average pension in Slovakia was around €400 per month, three times lower than in Greece.” Slovakia had taken steps to restructure its economy while Greece continued to live beyond its means with 25% of the workforce employed in the public sector. As a result Sulik argued it would be far better for both sides if Greece left the euro. He said, “Helping the Greek state was a waste of taxpayers’ money” and would turn the eurozone into a “de facto transfer union”.

Dr Christian Schulz, Senior Economist at Berenberg Bank, argued that the eurozone crisis was first and foremost a knock-on effect of the US subprime crisis and the collapse of Lehman Brothers. It is vital to prevent contagion between eurozone states and was in everyone’s interests, including Slovakia’s, to back the bailouts. Schulz claimed the exit of Greece from the euro would be very difficult and damaging, pointing out that despite everything, the majority of Greek people do not wish to leave. He said the Troika’s programme in Greece would work better if they followed Mr Sulik’s economic programme, including the Slovakian flat tax.
Open Europe events

New poll confirms loss of public support for Monti and his government
According to a new IPR Marketing poll published by La Repubblica, public support for Italian Prime Minister Mario Monti decreased from 59% to 55% over the last month – in large part due to the impact of the proposed labour market reforms. Support for the Italian government as a whole also fell from 53% to 50%. Speaking to the press, Monti played down these results, arguing, “Despite the decline over the past few days…this government enjoys great support in the polls, unlike [Italian] political parties.”
Repubblica Corriere della Sera Repubblica 2 La Stampa Il Sole 24 Ore Rai News 24

The Telegraph’s live blog quotes Open Europe’s blog commenting on the latest ECJ annual report, which showed that the UK was condemned for failing to implement EU law a much lower number of times than France, Germany, Italy and Spain between 2007 and 2011.
Open Europe blog Telegraph: Live blog

New Polls confirm gap between Hollande and Sarkozy continues to narrow

Nicolas Sarkozy’s lead in the first round polls is confirmed by three polling institutions this week. In the latest OpinionWay-Fiducial poll for Le Figaro, he leads on 28%, compared to Francois Hollande’s 27%. The gap between the two frontleaders in the second round continues to narrow, as Sarkozy receives his highest share of voting intentions since November on 46%, behind Hollande on 54%.


Separately in a Liberation interview today, Nicolas Sarkozy’s special advisor Henri Guaino outlined his proposals for France’s suspension of its Schengen membership, claiming that “it is perfectly possible to suspend the Schengen treaty until it has been reformed, there are several countries in Europe which are not in Schengen”. On his Coulisses de Brussels blog French journalist Jean Quatremer points out that France would only be able to close it borders for an indefinite period if it left the European Union.
Liberation Coulisses de Bruxelles blog Le Figaro Le Figaro 2

Euractiv reports that, following David Cameron's proposed crackdown on binge drinking through minimum pricing, a European Commission official has said, “From the EU’s tax policy angle, the Commission believes minimum tax rates to be preferable to minimum pricing for alcohol.”

Eurogroup head Jean-Claude Juncker has called for an alternative to a euro-wide financial transactions tax. In a conference in Brussels yesterday he claimed that although he “strongly supports” holding the financial sector responsible for the eurocrisis, policymakers should “seek another instrument” as “a eurozone [FTT] would be shooting oneself in the foot”. German Finance Minister Wolfgang Schauble recently advocated that the eurozone should “try something different” to the Commission’s proposals.
Le Point Le Point 2 Open Europe blog WSJ

Following international pressure, a senior Commission official has said the EU would consider limiting its new aviation tax, under the Emissions Trading Scheme, to its own airspace, but only as part of a global deal on plane emissions, Reuters reports.
WSJ Reuters

MEPs narrowly agreed yesterday to allow the personal data of air passengers to be transferred to the US Department of Homeland Security, under so-called ‘Passenger Name Records’.
WSJ Associated Press

The European Parliament’s Trade Committee voted yesterday not to submit the controversial Anti-Counterfeiting Trade Agreement (ACTA) Treaty to the European Court of Justice for review; instead it will be subject to a full plenary vote in June. The EU as a whole will not be able to ratify the treaty unless it receives Parliamentary approval.
WSJ European Voice EUobserver Le Figaro: Malmström

The Telegraph reports that the European Commission is facing pressure to overhaul the staffing regulations of the EU’s diplomatic service, the EEAS, after it emerged that generous holiday entitlements topped up by flexitime mean that EU diplomats can rack up to 17 weeks of holiday per year, leaving embassies and delegations empty for "many months".

EUobserver reports that MEPs in the budgetary control committee have put on hold the procedures of the food safety, medicines and environment agencies after a review into the accounts of EU institutions suggested that there were potential conflicts of interest.

The European Commission will today propose establishing a new centre to co-ordinate the fight against cybercrime, reports DPA.
DPA Welt Le Figaro: Malmström

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