Berlusconi vows to resign but does not specify when; Interest rate on Italian 10-year bonds above 7% for the first timeItalian Prime Minister Silvio Berlusconi yesterday offered his resignation to Italian President Giorgio Napolitano. The decision came after yesterday’s vote on the 2010 budget review confirmed that the government no longer held a majority in the lower house of the Italian parliament. However, Berlusconi failed to indicate a date, only saying that he will step down after the economic reforms he committed to at the latest meeting of EU leaders are adopted by the Italian parliament. Berlusconi also made clear that, although the final decision on this issue remains with the Italian President, he sees early elections as the only possible way forward after his resignation, adding that he will not run for another mandate.
Meanwhile, Pier Luigi Bersani, the leader of Italy’s main opposition party, has said that “at the moment, the conditions are not there” for his party to vote in favour of the Italian government’s proposed economic reforms in parliament. This morning, the markets have reacted badly to the high level of uncertainty over Italy’s political future. The interest rate on Italy’s 10-year bonds has risen above 7% for the first time, and the interest rate on Italy’s short and medium-term debt is currently higher than on its long-term debt – a phenomenon seen in Greece, Ireland and Portugal before they were forced to ask for a bailout.
Open Europe’s Vincenzo Scarpetta is quoted in the Telegraph arguing, “With the Italian public turning against him and the euro crisis escalating, neither Italy nor the world economy can afford to run on Berlusconi’s timeline any longer.” Vincenzo also appeared on BBC Radio Wales and France 24 yesterday, discussing the future of Italy after Berlusconi’s resignation. Open Europe’s briefing estimating that, at current borrowing costs, Italy could face an extra €28bn in interest payments on its debt over the next three years was cited by the FT‘s live blog, the Telegraph‘s live blog, Business Insider and Zerohedge. Open Europe’s Raoul Ruparel is quoted by Channel 4 News arguing that the eurozone’s bailout fund, the EFSF, is not big enough to bailout Italy, adding, “You have to consider the political implications of making money available at that level to the tune of €2tr…Putting up that level of guarantees is not feasible at the moment.”
European Commission officials will be in Rome today to seek clarifications over the Italian government’s planned emergency measures. Several Italian papers note that the Commission doubts that Italy will meet the balanced budget target by 2013.
Il Sole 24 Ore Il Sole 24 Ore 2 Il Sole 24 Ore 3 EUobserver EUobserver 2 Italian Presidency’s communiqué Independent IHT Guardian Guardian 2 Guardian: Leader Times Times: Leader Le Figaro Telegraph Telegraph: Editorial Welt Welt Welt Mail Mail Sun Mail La Stampa BBC Radio Wales FT: Live blog Telegraph Corriere della Sera Repubblica BBC Repubblica 2 La Stampa Rehn’s letter EC Questionnaire FT CityAM WSJ European Voice FT 2 WSJ 2 WSJ 3 FT 3 FT: Dinmore Bild Irish Times FAZ Express FAZ Business Insider
New Open Europe report: Repatriating EU social policy for jobs and growth
Open Europe has today published a new report examining the nature, costs and benefits of EU social and employment policy, including the possible avenues that could be used to repatriate powers over EU social and employment law to the UK.
The report estimates that EU social law currently costs UK business and the public sector £8.6bn a year and that cutting the cost of these regulations by 50% could result in a boost in economic output equivalent to the creation of 140,000 new jobs in Britain. Under a scenario where the benefits of deregulation would be split between higher employment and increased productivity, which is more likely, a 50% cut could generate the equivalent of 60,000 new jobs in the UK in addition to adding £4.3bn to economic output.
The report argues that, although social and employment law comes with benefits, it remains unclear that there is any significant merit to deciding these laws at the EU level rather than nationally. Open Europe sets out a ‘double lock’ which could serve as a model for restoring UK control over EU powers. Firstly, this would require a protocol exempting the UK from EU social law to be inserted in the EU Treaties. Secondly, in cases of a dispute with the EU institutions, the Government or Parliament would have the right to veto a proposal with an impact on UK social policy at the European Council, where unanimity applies. Simultaneously, the European Court of Justice would need to be stripped of its right to review the application of the opt-out, reducing the risk of EU social policy being imposed on the UK via the backdoor.
Osborne: EU financial transactions tax would cost half a million jobs across Europe
During talks in Brussels, Chancellor George Osborne rebuked the European Commission and member states who support the introduction of an EU-wide Financial Transaction Tax, arguing, “What I find difficult to accept is that we are going to spend a huge amount of time discussing [the FTT] in the middle of a crisis in the European economy…when it is already clear, both from the euro and non-eurozone, that there is not anything like unanimity for it.” He also argued that the burden of the tax would fall not on banks but on pensioners, and that according to the Commission’s own research, an EU-wide FTT could reduce the EU’s GDP by up to 3.5%, and lead to the loss of half a million jobs around Europe.
However, German Finance Minister Wolfgang Schäuble said, “We will wait 20 years before doing anything if we wait for the last island on this planet…We may have to do it in the eurozone rather than the EU.” Handelsblatt‘s EU correspondent Ruth Berschens argues that the UK might still end up being affected because the Commission’s legislative proposal contains a “crafty trick” to tax all transactions carried out on behalf of investors based in the eurozone, even if they are actually executed by companies based in London or New York.
EurActiv reports that Liberal Democrat MEP Sharon Bowles, head of the European Parliament’s Committee on Economic and Monetary Affairs, indicated that a compromise deal could be struck which would involve exempting pension funds from the tax. Open Europe is quoted in the article, arguing, “An EU financial transaction tax would be clearly biased against the UK, which is home to Europe’s largest financial centre, and would in turn require a complex burden-sharing arrangement in order to make it equitable.”
Open Europe Research Telegraph FT FT Analysis CityAM WSJ EurActiv Express Irish Independent Irish Independent: O’Donovan Handelsblatt: Berschens
Greece still without new PM as disagreements continue
Greek leaders again failed to reach an agreement on the new Prime Minister and the structure of the national unity government yesterday. Current Greek Prime Minister George Papandreou had reportedly asked his ministers to submit their resignations yesterday, paving the way for the new government. However, negotiations dragged on, as Lucas Papademos, the leading candidate to succeed Papandreou, demanded that no time limit be set for how long the new government will be in office and that he has substantial control over who is in his cabinet. Antonis Samaras, leader of the opposition New Democracy, is also delaying negotiations by refusing to sign a letter confirming his intent to fully implement the latest bailout package. EU finance ministers have said they will not release the next tranche of Greek bailout funds until they receive the letter of intent.
EurActiv reports that Commision President José Manuel Barroso has told the European Peoples’ Party that the eurozone will look for representation in the IMF saying, “the Commission will make proposals towards a more consolidated European voice and representation in international fora and institutions such as the IMF.” When asked by the BBC‘s Nick Robinson whether the eurozone crisis could provide an opportunity for Britain to renegotiate its relationship with the EU, he responded by saying, “Oh the British, what can I say…in principle, all member states of the EU should be members of the euro…in the future euro area and European Union will basically be the same.”
In the FT, Martin Wolf argues, “Only fear of the consequences of a break-up is now keeping [the euro] together. The question is whether that will be enough. I suspect the answer is, no…A eurozone built on one-sided deflationary adjustment [austerity] will fail. That seems certain. If the leaders of the eurozone insist on that policy, they will have to accept the result.”
FT WSJ EurActiv European Voice Irish Times Irish Times 2 FAZ IHT Guardian Times Irish Times 3 FT 2 Telegraph FT 3 FT 4 EurActiv 2 EurActiv 3 Guardian 2 BBC Today Times 2 Irish Independent: Molloy Irish Independent: McWilliams Independent: McRae Guardian: Elliott Guardian: Freedland Mail: Brummer FT: Wolf FT Editorial FT: Plender CityAM: Heath WSJ Review&Outlook
Sarkozy foresees “two-speed Europe”
Speaking at a debate in Strasbourg yesterday, French President Nicolas Sarkozy said, “We are 27 [in the EU]. Eventually, we will obviously need to open to the Balkans. Then we will be 32, 33, or 34. Nobody believes that federalism, full integration, is feasible at 33, 34, or 35 countries…There will clearly be two European speeds: one speed towards greater integration in the eurozone and a more con-federal speed in the EU.”
Europe 1 Le Figaro
PA reports that Nick Clegg will today warn MEPs that Europe faces a future of “perpetual decline” unless it reforms to make itself more competitive. He will argue, “Too many European economies suffer from low productivity or inflexible workforces. Or red tape that strangles businesses.” The BBC’s Political Editor Nick Robinson said on the Today programme that Nick Clegg will also warn that there should not be “two clubs in Europe.”
PA BBC Today
The Nord Stream pipeline, which will transport gas directly from Russia to Germany via the Baltic Sea, was officially opened yesterday in the presence of the leaders of Germany, the Netherlands and Russia, the Prime Minister of France, and EU Energy Commissioner Günther Oettinger, reports EUobserver.
EUobserver Gazeta Wyborcza CIRE
Les Echos reports that, according to a poll of voting intentions conducted by IFOP, the French Socialist presidential candidate François Hollande, at 32.5%, far surpasses French President Nicolas Sarkozy, who attracts only 25.5%. Front National leader Marine Le Pen, is credited with 19% of support.
This post originally appeared on Open Europe.
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