UK Government draws up contingency plan for eurozone breakup; France begins to fear contagion as spread with German bund reaches highest level since euro introduction
Prime Minister David Cameron has said the UK Government is drawing up a contingency plan in the event of a breakup of the eurozone, a scenario Business Secretary Vince Cable described as ‘”Armageddon” for the UK’s banking system. The Guardian reports that the planning covers emergency measures to keep the banking system going and involves the Financial Services Authority, the Bank of England and the Treasury.
German Chancellor Angela Merkel has moved to deny rumours that France and Germany were discussing plans for a smaller eurozone, arguing, “We have a single goal and it is to stabilise the eurozone as it is today.” Separately, FTD reports that the German budget deficit in 2012 will be €26.1bn, which the opposition has described as a violation of the constitutional debt brake.
Open Europe’s Director Mats Persson appeared on BBC World News Today and CNN, and Open Europe’s Research Director Stephen Booth appeared on BBC Radio Wales yesterday, both discussing the concept of a slimmed-down eurozone. Open Europe’s Economics analyst Raoul Ruparel was quoted by Channel 4 News, arguing that a smaller eurozone “would be possible, I think a country leaving from the top is better than someone dropping out of the bottom.”
The attention of the bond markets turned to France yesterday, with the spread between France and Germany’s 10-year bonds reaching its highest level since the introduction of the euro. Fears of contagion mounted when Standard & Poor’s mistakenly announced that it had downgraded France’s credit rating. France’s financial watchdog AMF has now launched an investigation into the issue.
Greece’s newly formed national unity government, led by former ECB Vice-President Lucas Papademos, is due to be formally sworn in today. Raoul Ruparel is quoted by the WSJ and WSJ Americas, Greek daily Ta Nea, and The Australian, arguing that Papademos “is the best person for the job, but the plans are still flawed, whoever enacts them.” Separately, Dutch Central Bank Governor Klaas Knot yesterday ruled out the possibility of the ECB adopting more aggressive measures to tackle the eurozone crisis, as he told Dutch MPs, “We have gone pretty far in what we can do but there is not much more that can be expected from us.”
Meanwhile, Italy’s ECB Executive Board member Lorenzo Bini-Smaghi yesterday said that he will resign and take up a teaching post at Harvard University from January 2012, although Italian media reports suggest that he could potentially be appointed as Economy Minister in a Mario Monti-led government of national unity. In what is widely seen as a victory for French President Nicholas Sarkozy, Bini-Smaghi will almost certainly be replaced by a Frenchman.
Guardian FT Telegraph Express WSJ WSJ Americas Ta Nea The Australian Channel 4 News Independent Irish Times Mail Telegraph Telegraph Le Figaro FAZ FTD Handelsblatt FT FT 2 BBC Coulisses de Bruxelles EUobserver Le Figaro Independent City AM Telegraph Telegraph FAZ Independent Telegraph Guardian BBC WSJ Times FT FAZ FT BBC Irish Independent Irish Times FTD EUobserver Irish Independent Le Figaro: Noyer FAZ FT FTD Repubblica FT: Leader FT: Roubini Independent: Darling Guardian: Editorial Guardian: Garton Ash Guardian: Habermas Irish Independent: Molloy Telegraph: Martin Telegraph: Johnson Times: Emmott Times: Rees-Mogg IHT: Freeland IHT: Skaperdas IHT: Saft Irish Times: Fell Evening Standard: Ashton Evening Standard: Hilton FTD: Schmoll Handelsblatt: Krugman Handelsbaltt: Wilhelm FAZ: Frankenberger
Guardian: Cameron is tabling ‘relatively modest demands’ in return for accepting EU Treaty change
The Guardian reports that Angela Merkel has warned David Cameron that unless he accepts unconditional changes to the Lisbon Treaty, then the 17 Eurozone states will draw up their own separate treaty. The paper goes on to report that relations between the two have improved since Cameron indicated he ‘will table relatively modest demands’ in return for his agreement and that ‘the repatriation of social and employment laws will be for a later treaty negotiation.’ In the Telegraph, Bruno Waterfield reports that in response to French plans to create a formal eurozone bloc to become a “union within a union”, Cameron is pushing for “concrete and effective mechanisms” that would allow a blocking minority of countries to stop the eurozone pushing decisions through the EU.
Telegraph Guardian Open Europe Research
Italian Senate adopts new package of savings and economic reforms;
Berlusconi’s party split over idea of national unity government
The Italian Senate has today adopted the new package of savings and economic reforms Italy committed to at the latest meeting of EU leaders, while the lower house of the Italian parliament is set to approve the package tomorrow. The adoption of the package will pave the way for Berlusconi’s resignation. Meanwhile, Il Sole 24 Ore reports that Berlusconi is facing an internal rebellion in his party, as some key members – including several Italian ministers – have voiced opposition to the idea of a national unity government led by former EU Commissioner Mario Monti, and insist on early elections.
However, according to La Stampa, yesterday Berlusconi reportedly told a meeting of MPs and Senators from his party, “We can’t go against the markets. If we triggered early elections, I would be blamed for the collapse of the stock markets, bank failures and spiralling borrowing costs.” La Repubblica suggests that, should he be appointed as the next Italian Prime Minister, Mario Monti would aim for a slim cabinet with only twelve ministers. The article notes that Monti would prefer a cabinet of all technocrats, but the presence of politicians cannot be ruled out in order to secure a broader support in the Italian parliament.
An article in El País quotes Open Europe’s estimate that, at a borrowing cost of around 6.7% on its 10-year bonds, Italy would face an extra €28bn in interest payments over the next three years, while Mats Persson was quoted in CityAM as saying: “Anything is better than keeping Berlusconi…I hope he can muster political consensus in the short term and pull together a unity government with the legitimacy and clout to get through longer-term measures.” Open Europe’s Vincenzo Scarpetta is quoted by Bloomberg as saying that Monti is a good candidate to lead a government of national unity, because he “would back liberalisation of Italy’s labour market and would be able to draw support from both sides of the political spectrum.”
BBC El País La Stampa La Stampa 2 La Stampa 3 Repubblica Repubblica 2 Il Sole 24 Ore WSJ WSJ 2 Irish Independent Economist: Leader Economist: Italy briefing IHT Les Echos Il Sole 24 Ore: ReglingFAZ Independent FT FT Guardian FTD Times City AM Bloomberg
Andrea Leadsom MP: The work on how best to repatriate powers from the EU has begun
On Conservative Home, co-chairman of the new All-Party Parliamentary Group on European Reform Andrea Leadsom MP writes that: “it is vital that we are not simply passengers in a journey towards a Eurozone fiscal union, but that we also take a long hard look at what Britain wants out of the almost inevitable treaty changes that lie ahead…our purpose is to set out and identify priority areas for the repatriation of powers and our challenge is to do this in a way that does not deprive us of access to the single market. The APPG will consider both the ‘what’ and the ‘how’.”
Separately, Open Europe’s Stephen Booth argues that: “With greater eurozone integration looking increasingly likely, there is a real risk that non-euro members, such as the UK, are consistently outvoted by a eurozone ‘caucus’ on crucial votes regarding not only social and employment law but other issues of vital importance to the UK’s interests, such as on financial services and the wider single market. The need has therefore never been greater for a comprehensive plan to get powers back from the EU as part of the long-term political settlement to reshape Europe in the wake of the current crisis”.
Conservative Home: Booth Conservative Home: Leadsom
Following yesterday’s finding by the European Court of Auditors that approximately 3.7% of last year’s EU budget was affected by error, Open Europe are quoted in the Mail arguing that: “The EU budget is too large, too complex and completely irrational. UK taxpayers send billions to Brussels and receive some of it back, but with various strings attached on how it can be spent… The UK should use its veto over the upcoming negotiations on the long-term EU budget to demand significant cuts and reform of the outdated policies that it is funding.”
Daily Mail Express
Junior doctors not complying with EU’s Working Time Directive
The Telegraph reports that although almost all NHS trusts now claim to comply with the EU’s Working Time Directive, which came into force in August 2009, the Royal College of Surgeons have said that many junior doctors are working additional hours over and above the 48 hour limit as “internal locums”, which are not recorded under the system. Bob Greatorex of the RCS said that “They are doing this in order to keep services going and for patient safety purposes”, as the 48-hour rotas often meant there were not enough doctors on duty, even though strictly speaking such measures are not legal under the Directive.
Telegraph Open Europe Research
Bild reports that EU Health Commissioner John Dalli will propose a plan in December that will make the registration and identification of cats and dogs obligatory.
EUobserver reports that Germany is considering an EU visa ban on Russian officials implicated in the murder of lawyer Sergei Magnitsky, and that one option would be to unilaterally ‘red flag’ the individuals, which would force all 25 Schengen members to keep them out.
This post originally appeared on Open Europe.
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