ECB holds interest rates but offers more stimulus measures for banks;
France isolated over plans to use EFSF to recapitalise banks
The ECB held interest rates yesterday, although outgoing ECB President Jean-Claude Trichet did announce a series of measures aimed at helping banks weather the current financial market turmoil and secure longer term funding, including offering banks unlimited shorter term loans will continue until at least July 2012, but could be extended if necessary. Lastly, the ECB will also spend €40bn purchasing covered bonds, which are issued by banks and backed by a specific sources of income. Trichet admitted that the decisions were taken based on “consensus” rather than unanimity.
During his press conference Trichet also stressed that leveraging the EFSF, the eurozone’s bailout fund, through the ECB would not be appropriate. Trichet did call for the EFSF to be maximised and for an urgent recapitalisation of European banks. In a parting shot to EU leaders, with whom Trichet has often disagreed, he said, “Governance has been insufficient…We cannot substitute ourselves for governments.”
European Commission President Jose Manuel Barroso yesterday joined the calls for a recapitalisation of banks, along with Finnish Prime Minister Jyrki Katainen. Katainen said, “The EFSF is not the first solution for this…It must be lender of last resort. I don’t know of any reason why the EFSF should be used before governments,” suggesting he sides with Germany rather than France over how to backstop banks. The FT reports that Dutch and Commission officials also privately support the German plan to use national funds first. The FT reports that the UK Treasury fears that RBS may need a further capital injection if a widespread recapitalisation of European banks takes place. Handelsblatt reports that Germany and France are further divided over EFSF bond buying, with the former wanting to set a specific limit on the amounts the EFSF can buy.
The Dutch Parliament approved the expanded EFSF last night, although there conflicting reports as to whether a deal has been reached in Slovakia, where the SaS party is demanding that the parliament have a greater say over the use of the EFSF if Slovakia is to take part.
In a report published yesterday, the Portuguese Central bank warned that the government would miss its debt and deficit target, thereby breaking the conditions of its bailout programme, unless it takes “significant additional measures” over the next two years. Separately, EurActiv reports that Russia has granted Cyprus a €2.5bn loan to help quell its cash crisis.
FT WSJ European Voice BBC Independent Le Figaro IHT Irish Independent Irish Times Times Guardian Guardian 2 Guardian 3 FAZ FT 2 FT 3 CityAM CityAM 2 Economist Free Exchange CityAM 3 Economist EurActiv FT 4 CityAM 4 Economist 2 FT 5 FT 6 FT 7 FT 8 Economist 3 Expansión Economist 4 EurActiv 2 Il Sole 24 Ore Reuters Reuters 2 Times 2 Independent 2 EUobserver EUobserver 2 EUobserver 3 NRC El País El País 2 Handelsblatt Handelsblatt 2 Handelsblatt 3 Le Monde GFS
Die Zeit: “We need a referendum on Europe”
In Die Zeit, Political Editor Heinrich Wefing argues in favour of a referendum on Europe, as “integration without direct citizen participation, has been the modus operandi of the EU since the begining”. Wefing notes that “the referendum could possibly turn against Europe. That is a risk, but it is also a prerequisite for winning new legitimacy for the project.”.
In an op-ed in the WSJ, former Spanish Prime Minister José María Aznar argues that, “Eurozone member states must share the costs of solving banking crises that occur anywhere in the euro area.”
The Economist‘s Bagehot writes that: “Tory leaders are as sceptical about the euro as ever. But in an emergency, they warily accept, any lifeline will do.”
Irish Times: Beesley FT Editorial FT: Greenspan FT: Stephens WSJ: Fidler WSJ: Nixon WSJ Review&Outlook Zeit: Wefing WSJ: Aznar WSJ: Hasenstab Economist: Charlemagne BBC: Hewitt Economist: Bagehot IHT: Saft IHT: Norris
Elsevier reports that Greece has bought 400 tanks from the US, with upgrades, each costing $4.3 million with further orders likely to follow in the future, which contrasts with the Dutch government’s plans to sell military equipment in an effort to make savings.
Business Insider Elsevier Defence Greece Hellenic defence Geenstijl.nl SvD
Commission proposes suspending structural funds payments to high-deficit countries
The European Commission yesterday proposed that, from 2014 onwards, structural funds payments would be suspended for countries that repeatedly breach the EU’s Stability and Growth Pact’s debt and deficit rules. EUobserver quotes EU Regional Policy Commissioner Johannes Hahn saying, “The recently passed six pack [of EU economic governance legislation] raises the possibility of fining eurozone countries if they don’t stick to deficit rules. So we discussed the theoretical possibility of using money as a final way to bring them back to the right way,” Hahn added that suspension would be a measure of last resort, to be taken only after “a long series of steps.” However, FAZ reports that the measure would apply to all 27 EU countries.
FAZ EUobserver EC Press release
The Mail reports that UK government sources have described the European Parliament’s call for next year’s EU budget to be increased by 4.9%, or £5.3bn, as “unaffordable and unacceptable”. MEP Francesca Balzani, who is in charge of drawing up the Parliament’s position, said the increase was the ‘bare minimum’ Brussels needed to get by.
A poll conducted for German TV station ARD earlier this week found that 53% of Germans oppose further aid to Greece from other EU countries with 42% in favour, 54% believe that last week’s decision by the Bundestag to expand the EFSF was not correct while 38% believed it was correct, 66% preferred to restructure Greece’s debt rather than to expand the rescue package.
The European Court of Justice’s top legal adviser has ruled that charging airlines for their greenhouse gas emissions on flights to, from and within Europe is compatible with international law. Non-EU based airlines had previously challenged the decision, arguing that the trading system amounts to a tax, which is illegal under international rules on aviation.
FT CityAM WSJ European Voice Guardian
The Italian press reports that a group of 45 MPs and Senators from Italian Prime Minister Silvio Berlusconi’s party are planning to push for the creation of a “transitional government” open to centre parties, which would stay in office until the next general elections in 2013.
La Repubblica Corriere della Sera La Stampa
EurActiv reports that a group of 100 scientists has written to the European Commission arging that the Comission’s categorisation of biofuels as carbon neutral “is clearly not supported by the [best available] science”, as it does not take into consideration changes in indirect land use resulting from biofuels production.
The European Parliament’s Culture and Education Committee has decided to impose a voluntary European heritage label on symbolic sites for European history or integration with the aim to promote educational activities and raising public awareness of European common heritage and identity.
EP Press Release Europaportalen