OECD slashes eurozone growth forecast and issues warning over potential break-up
The OECD yesterday slashed its forecast for eurozone economic growth in 2012 to just 0.2%, stating that the eurozone already “appears to be in a mild recession”. OECD Chief Economist Pier Carlo Padoan said, “The eurozone must urgently take stronger measures…The ECB should buy bonds, and set a limit to yields or a floor to bond value.” The OECD also warned that a eurozone break-up was unlikely but not impossible, adding that it could send the whole of the OECD bloc into recession if it happened.
Meanwhile, in a speech in Berlin yesterday, Polish Foreign Minister Radoslaw Sikorski urged Germany to act to save the euro and the EU from “a crisis of apocalyptic proportions.” Sikorski said, “I demand of Germany that, for your own sake and for ours, you help [the eurozone] survive and prosper…I will probably be the first Polish Foreign Minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity. You have become Europe’s indispensable nation.” He also warned the UK over any attempts to block deeper eurozone integration, saying, “We would prefer you [the UK] in, but if you cannot join, please allow us to forge ahead.”
EurActiv reports that the latest set of guidelines on the full implementation of the EFSF, the eurozone’s bailout fund, are expected to be approved at today’s eurogroup meeting. Discussions will also likely take place on the potential for Treaty change amongst only eurozone members. Finnish Prime Minister Jyrki Katainen warned against this scenario saying, “I am not too sure if it will get wider support. The disadvantage of this proposal is that it would bypass the EU, the Commission would have a very small role.” His concerns were echoed by Luxembourg Prime Minister Jean-Claude Juncker.
The WSJ reports that struggling eurozone governments are increasing pressure on their domestic banks to continue purchasing their sovereign debt. The ECB purchased €8.58bn in government bonds last week, taking its total purchases to over €200bn. Separately, Bank of England Governor Mervyn King suggested yesterday that the eurozone crisis has cost the UK economy €15bn in lost economic activity, according to the Telegraph. Open Europe’s Raoul Ruparel is quoted in the Financial Post discussing Germany’s role in the eurozone crisis.
FT WSJ Times EurActiv IHT Le Figaro BBC EUobserver Telegraph IHT Telegraph EUobserver BBC Coulisses de Bruxelles Telegraph FT 2 IHT Irish TimesIrish Times WSJ 2 CityAM WSJ 3 CityAM 2 FT 3 FT 4 WSJ 4 European Voice 2 Telegraph Mail FP IHT: Taylor Le Figaro: Sorman Le Figaro: de Kerdrel BBC: Hewitt FT: Sikorski FT: Rachman FT Editorial FT: Pisani-Ferry FT: Das WSJ: Zhong WSJ: Hannon WSJ Heard on the Street WSJ Heard on the Street 2Guardian: Beck Financial Times Deutschland Bild: Genscher Reuters Spiegel Welt Süddeutsche Zeitung OECD Kathimerini FTD DPA Handelsblatt El Pais El Economista
La Tribune: S&P may put France’s credit rating on ‘negative’ outlook within the next 10 days
According to several sources contacted by French business daily La Tribune, Standard & Poor’s may in the next week to 10 days put France’s credit rating on a ‘negative’ outlook – a move which usually precedes a downgrade. A separate article in the paper reports on a Harris Interactive poll showing that only 6% of interviewed French citizens would be “certainly ready” and 24% would be “probably ready” to buy French bonds at current market rates.
Meanwhile, a leaked European Commission report seen by Italian daily La Repubblica reveals that Italy is likely to be told at the end of today’s meeting of eurozone finance ministers that it needs to adopt a new package of savings worth at least €11bn as quickly as possible. At today’s auction, Italy sold €7.5bn worth of medium and long-term debt. The interest rate offered on three-year bonds was 7.89%, higher than the 7.56% offered on 10-year bonds, notes Il Corriere della Sera.
Separately, an article in El País reports that Spain’s incoming centre-right government may have to adopt austerity measures worth between €15bn and €30bn early next year, depending on what the country’s deficit at the end of 2011. Secretary-General of Spanish Partido Popular, María Dolores de Cospedal, yesterday confirmed that the new government will enter into office on 22 December.
La Tribune Le Monde La Tribune Corriere della Sera Repubblica Repubblica FT CityAM El País La Razón: Arias Cañete Expansión Corriere della Sera
The German Constitutional Court is today due to decide whether it considers it democratically acceptable that decisions on Germany’s participation in future eurozone bailouts are made by a special committee of only nine MPs in the German Bundestag.
Deutsche Welle Sueddeutsche
Mats Persson: Cameron may have more leverage in Europe than he thinks
On the Spectator‘s Coffee House blog, Open Europe’s Director Mats Persson writes, “As has been widely pointed out, if Cameron asks for too much in return for Britain’s agreement to EU Treaty change, Germany could push for a treaty involving only the 17 members of the currency area, stripping Britain of its veto…However, the level of Ordnungspolitik that the Germans want will be very difficult to achieve outside the existing EU-wide architecture. Giving the European Court of Justice final say over EU budget rules and introducing automatic sanctions for states that break the rules — which the Germans are very keen on to avoid history repeating itself — really does require a Treaty change among the EU-27…Cameron may therefore have more leverage over a Treaty change than he thinks.”
He goes on to argue, “What, then, should Cameron ask for? Guarantees around the Working Time Directive would be virtually pointless, as this law is subject to qualified majority voting among EU ministers and co-decision with MEPs…Repatriating EU employment law in any meaningful way would also be difficult through the ‘limited’ Treaty change that Germany is pushing for. Rather, as the eurozone crisis continues to give rise to mis-directed financial laws, an ’emergency brake’ to insulate the City of London from growth-damaging intrusions should clearly be a priority. Open Europe will set out how this could work in practice in a report to be published next week.”
Meanwhile, a European Parliament internal document seen by AFP reveals that MEPs “will insist on organising a Convention” to discuss Treaty change. The document suggests that MEPs are looking at a six-month public consultation across the 27 EU member states.
Coffee House blog: Persson EUbusiness
Government study finds that a minority of EU health and safety regulations impose “unnecessary costs” on British business
A Government study has concluded that a minority of EU health and safety laws are imposing “unnecessary costs” on British businesses “without obvious benefits,” reports the Telegraph. The report, produced by Prof. Ragnar Löfstedt of King’s College London, found that almost two-thirds of new health and safety regulations introduced between 1997 and 2009 originated in the EU, with EU Directives accounting for 94% of the cost of UK health and safety regulations introduced between 1998 and 2009. Löfstedt said that his “overarching recommendation” to UK ministers was to seek a more sensible, “risk-based and evidence-based” approach to EU safety regulations. However, the report also notes that the ministers’ scope for amending these regulations is “severely limited”.
Telegraph Telegraph: Johnston Open Europe research
In a letter to the Independent, Bill Cash MP warns, “The advocacy by the Prime Minister and the Chancellor of a eurozone fiscal union would amount to a two–tier Europe…This would be damaging to British national interests by reason of the block majority vote within the eurozone fiscal union (and with it, the likelihood of other member states voting with Germany), which would undermine the single market and the City of London.”
Independent letters: Cash
An advisory board to the European Banking Authority yesterday sent a letter to EU finance ministers urging them to create a pan-European bank guarantee scheme. The issue is set to be discussed at tomorrow’s meeting of EU finance ministers but is likely to be rejected by economically stronger member states, since they would be asked to guarantee the liabilities of other countries’ banks.
In an interview with Le Figaro, Hervé Mariton – an MP from French President Nicolas Sarkozy’s UMP party – argues, “There must be transfers of sovereignty [to the EU] in those areas where member states have been ‘bad students’ – in the financial, budgetary and monetary domains – but, at the same time, one needs to give a large place to the subsidiarity principle, and repatriate certain policies which would be better managed at the national level.”
Le Figaro: Mariton
On Conservative Home, Anthony Browne writes, “If the EU really do push [a financial transactions tax]…then it could prove the trigger that pushes the UK’s withdrawal from the EU.”
Conservative Home: Browne
EUobserver reports that, prior to next year’s overhaul of EU data privacy rules, the European Commission has relaxed its stance on the so-called ‘right to be forgotten’, following persistent lobbying from US and EU online companies.
The Guardian reports that UK lawyers will today lobby David Cameron to put in a formal bid for London to become the new destination for the European patents court and relocate it from its existing site in Munich.
The BBC reports that, during yesterday’s talks, the US and the EU have agreed to explore the possibility of a bilateral trade agreement. “We must intensify our efforts to realise the untapped potential of transatlantic economic co-operation to generate new opportunities for jobs and growth,” a joint statement said.
BBC European Voice
This post originally appeared on Open Europe.