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Prof. Dr  Wolfgang Schumann

11.03.11: Eurozone debt crisis intensifies on eve of summit - 2 views

  • Moody's cut Spain's debt rating yesterday (10 March), pushing the euro lower and deepening the sense of crisis in the 17-nation currency bloc on the eve of a crucial EU summit in Brussels.
  • A French presidential source said euro zone leaders would discuss Portugal's measures to cope with its financial problems at Friday's summit but they were not working on a rescue plan. EU sources said Portuguese Prime Minister Jose Socrates is under intense pressure from his peers and the European Central Bank to announce additional austerity measures and accelerate economic reforms. The sources said he would make a statement to the leaders at the start of a summit on Friday on his commitment to deeper reforms, including to the labour market
Prof. Dr  Wolfgang Schumann

10.01.11: Core EU states put squeeze on Portugal to accept bail-out - 0 views

  • Major European powers are putting the squeeze on Portugal to follow Greece and Ireland and knock on the doors of EU and IMF bail-out resources. Reports over the weekend quote senior European sources as saying Berlin, Paris and other core eurozone capitals are leaning heavily on Lisbon to apply for a financial rescue, although the Portuguese government continues to deny that any pressure is being mounted.
  • The eurozone core fears that if a firewall is not built around Portugal, investor nervousness could spread to Spain, a much larger economy than those of the two states - Greece and Ireland - that have already been bailed out. However, formal negotiations with Lisbon have yet to begin, the source continued, and discussions have yet to match the pace of similar talks ahead of the Greek bail-out last May or that of Ireland last November. Should Portugal decide to ask for a rescue, the bill would amount to between €60 and €80 billion, the source said.
Prof. Dr  Wolfgang Schumann

Hungary outlines EU presidency priorities (SETimes.com) - 0 views

  • Hungary, which is due to replace Belgium at the EU helm on January 1st, has said that further consolidation and enlargement of the 27-nation bloc will be among the key priorities of its six-month chairmanship of the Union.
Prof. Dr  Wolfgang Schumann

14.12.10: Should Slovakia prepare the re-introduction of its national currency? - 0 views

  • Slovakia, which joined the eurozone last year, should have a 'plan B' to return to its national currency, the country's parliamentary speaker, Richard Sulik, has said, amid frustration over the way the eurozone is handling the debt crisis. "The time is ripe for Slovakia to stop blindly trust in what eurozone leaders say and prepare a plan B. This is the re-introduction of the Slovak koruna," Mr Sulik said in an opinion piece published in the bussiness daily Hospodarske noviny on Sunday (12 December).
  • The Slovak centre-right government has repeatedly called for private investors to feel the pain of any rescue operation under the eurozone umbrella. It considers the Greek bail-out a mistake that made European governments a hostage to financial markets. The parliamentary speaker said it is "irresponsible" for states to risk financial problems at home by taking on the liabilities of their debt-ridden colleagues under the European Financial Stability Facility, a temporary bail-out tool agreed in May and currently providing aid to Ireland.
Prof. Dr  Wolfgang Schumann

13.12.10: Treaty change to provide for a permanent European Stability Mechanism from mi... - 0 views

  • A two-sentence paragraph to be inserted into the Lisbon Treaty will prepare the legal groundwork for a permanent European Stability Mechanism (ESM) from mid-2013 onwards, under which the costs of future eurozone bail-outs may also be shared by sector private sector participants.

    "The member states whose currency is the euro may establish a stability mechanism to safeguard the stability of the euro area as a whole. The granting of financial assistance under the mechanism will be made subject to strict conditionality," reads the paragraph, contained in draft EU summit conclusions seen by this website on Monday (13 December).

  • German Chancellor Angela Merkel has pressed EU leaders to accept the treaty change as she fears Germany's powerful constitutional court may raise objections to the €440 billion temporary European Financial Stability Facility (EFSF), agreed in May and set to provide aid to Ireland. While EU policymakers insist the temporary facility and earlier aid to Greece do not contravene the EU treaty's 'no bail-out clause', Berlin is keen to remove any legal uncertainty, with a number of legal challenges currently under examination by the German court.
  • The treaty change is to take place under a new procedure introduced under the Lisbon Treaty - the simplified revision procedure - allowing for limited treaty changes without the setting up of a convention, on condition that new powers are not transferred from the national to EU level. In the draft conclusions, EU leaders also call on euro area finance ministers and the commission to finalise work on setting up the permanent aid mechanism, including features that could force sovereign bond holders to accept diminished returns on their investments, should a eurozone government be forced to call for aid under the ESM from 2013 onwards. The move stands in marked contrast to aid terms recently agreed for Ireland, under which holders of Irish sovereign debt and senior debt in Irish banks were not forced to accept a 'haircut.' Instead, Irish taxpayers will indirectly pay back the €85 billion borrowed from the EU-IMF for many years to come. Analysts say this move was partially designed to prevent further instability in the European banking sector, with many firms considerably exposed to the Irish market.
Prof. Dr  Wolfgang Schumann

13.12.10 Germany wants political co-operation to be deepened - 0 views

  • German finance minister Wolfgang Schaeuble has said his country is willing to discuss greater harmonisation of eurozone tax policy, adding that the next decade is likely to see Europe take significant steps towards closer political union. The remarks, made in Germany's mass-selling Bild am Sonntag newspaper on Sunday (12 December), come as EU leaders look set to agree a limited EU treaty change this week in order to set up a permanent crisis mechanism to provide financial support to struggling eurozone states.
  • Meeting in the German town of Freiburg on Friday, French President Nicolas Sarkozy and German Chancellor Angela Merkel also said eurozone leaders must draw a fundamental lesson from the ongoing debt crisis and take steps towards political integration, including the harmonisation of tax policies or labour law. These initiatives would foster greater convergence of eurozone economies and "show this is not just about currency issues but also about political co-operation, which has to be deepened," said Ms Merkel.
  • Germany has successfully won its demand for the permanent mechanism to include the private sector sharing in future bail-out costs, reports the BBC. Such a decision could significant raise the borrowing costs of 'peripheral' eurozone states, as investors demand extra yields to cover the costs of a potential debt restructuring under the new mechanism.
Prof. Dr  Wolfgang Schumann

Naurin (2010): Out in the cold? Flexible integration and the political status of Euro o... - 0 views

  • A common argument against flexible integration as a solution to increased preference heterogeneity is that a likely consequence for those member states opting out of the enhanced cooperation is a loss of status and influence generally in the European Union (EU). It has been argued, for example, that the decisions by Denmark, Sweden and the UK not to join the Euro is considered to be free-riding, which leads to a bad reputation and exclusion from informal networks. We test this proposed free-rider effect by comparing the network capital of Euro-outsiders with insiders in the Council of the EU, using survey data of more than 600 member state representatives. The findings speak strongly against the free-rider hypothesis, as the Euro-outsiders are highly ranked in terms of network capital.
Prof. Dr  Wolfgang Schumann

02.11.10: Brussels lays down plans for permanent bailout mechanism - 0 views

  • With the future of the euro currency in the balance, the European Commission on Wednesday (1 December) outlined details for a permanent strategy to help countries at risk of defaulting on their debts.
  • The European Commission presented plans for fundamental treaty changes that will extend the current aid mechanism – the European Financial Stability Facility – beyond its 2013 sunset provision. Details of the proposal will be debated by European leaders at their next EU summit on 16-17 December. The changes, which have been rumoured in financial markets for weeks, would increase risk for sovereign investors. Under the proposal, bonds issued after June 2013 would include a provision to allow creditors to renegotiate new terms if the country is on the brink of insolvency.
Prof. Dr  Wolfgang Schumann

25.11.10: Is Slovakia the only member state recognizing the dangers of the current atte... - 0 views

  • Since it came to power in July this year, the Slovak centre-right government has called for private investors to feel the pain of any rescue operation under the eurozone umbrella. It considers the Greek bail-out "essentially a mistake" and a "precedent" that made European governments a "hostage" of financial markets. "If we continue this way, we are close to a pyramid scheme," the Slovak prime minister, Iveta Radicova, told journalists after the Wednesday government session dealing mainly with Ireland (24 November). She warned that a system of accumulating debts eventually risked falling like "a house made of cards". "Once again, taxpayers are expected to pay the bill. Once again, the banks are being rescued," Ms Radicova said, hinting that Lisbon and Madrid could be next going cap in hand to their EU colleagues.
Prof. Dr  Wolfgang Schumann

25.11.10: Tough problems for the Hungarian presidency - 0 views

  • The incoming Hungarian presidency of the European Union is bracing itself for an unexpectedly difficult six months (Jan-June 2011) at the helm, likely to test the diplomatic skills of the presidency first-timers to the full. The ongoing fight to shore up eurozone stability, together with calls for EU treaty change and acrimonious EU budget talks are among the prickly issues on the packed agenda, with Turkish accession talks and the Roma ethnic question also potential flashpoints.
  • Some EU and member state officials have been alarmed at what they perceive as a concentration of power under Herman Van Rompuy, the bloc's first president of the European Council, the body representing EU leaders. "Mr Van Rompuy has taken on a number of issues that should instead be run by the rotating presidency, helped by the current political limbo surrounding the Belgian government," one Polish official said earlier this month.
Prof. Dr  Wolfgang Schumann

23.11.10: Merkel - euro in 'serious condition'. Rehn - adoption of the Irish budget in ... - 0 views

  • German Chancellor Angela Merkel on Tuesday (23 November) warned that the euro is in an "exceptionally serious" situation as the European Commission issued a veiled warning to the Irish political class not to topple the government. "I don't want to paint a dramatic picture, but I just want to say that a year ago we couldn't imagine the debate we had in the spring and the measures we had to take," she said in a speech in Berlin to the Confederation of German Employers, the BDA.
  • Meanwhile, EU economy commissioner Olli Rehn issued a veiled warning to Irish opposition politicians not to topple the government. Speaking to reporters in Strasbourg asking about worries the Fianna Fail-Green government in Dublin could fall, Mr Rehn said: "Stability is important." "We don't have a position on the domestic democratic politics of Ireland but it is essential that the budget will be adopted in time and we will be able to conclude the negotiations on the EU-IMF programme in time."
Prof. Dr  Wolfgang Schumann

24.11.10: Ireland unveils radical austerity program to meet conditions of the EU-IMF ba... - 0 views

  • The Irish government has unveiled a far-reaching austerity package with sweeping cuts and tax hikes in an effort to meet the tough conditions of an €85 billion EU-IMF bail-out plan, an architecture of adjustment that will radically alter the very structure of how the country is run.
  • It is a plan that will hit every citizen and sector of the Irish economy, but will hit working people, students and low-income earners the hardest, a move that has already provoked both a deep fury from many but also a bitter resignation amongst others. Key measures include a slashing of welfare benefits, a hiking and broadening of income taxes, a sharp increase in university fees, the imposition of property taxes and water charges.
  • Dublin appears to have won the day against pressure from other EU member states and the commission that it hike its ultra-low corporation tax of 12.5 percent, calling the rate "a cornerstone of our industrial policy". Acquiescing to an IMF demand that labour costs be slashed, pay for minimum wage earners will be reduced by a full 12 percent, higher than the 10 percent that had been predicted, from €8.65 an hour to €7.65.
Prof. Dr  Wolfgang Schumann

23.11.10: Will Portugal and Spain be the next victims of the debt crisis? - 0 views

  • Portuguese, Spanish and EU leaders, alarmed at the seemingly unquenchable vengeance of this marketplace leviathan, insisted that the two Iberian nations were very far from having to follow Ireland and Greece in asking for bail-outs.
  • EU economics chief Olli Rehn sought to buttress the the standing of Portugal insisting on the "very different" situation between Lisbon and Dublin, while the head of the eurozone, Luxemburgish Prime Minister Jean-Claude Juncker described the market vigilantism against Portugal and Spain as "not justified". Railing against the state of affairs, Mr Rehn told MEPs on Monday: "Any talk of deconstruction of the European project is irresponsible. All member states would have been in a much more difficult situation without the European Union and its political shield."
Prof. Dr  Wolfgang Schumann

19.11.10: Ireland's corporate tax "non-negotiable"? - 0 views

  • Eurozone neighbours are pressing Ireland to raise the 12.5% corporation tax rate as part of negotiations for a rescue package but Dublin is resisting, arguing that it is crucial for foreign investment. Irish Deputy Prime Minister Mary Coughlan told parliament the corporate tax rate was "non-negotiable". European Minister Dick Roche echoed that comment, saying "it is certainly not up for negotiation". "There has been some very unhelpful chatter in the background in the last few days about our corporation profit tax. Where would be the sense of destroying one of the great drivers of growth?" he told BBC television. Britain and Germany have long viewed low Irish taxes as a form of unfair competition and the finance ministers of Austria and France said the corporation tax may have to be raised as part of any deal. Michael Meister, a deputy leader in parliament and finance expert for Angela Merkel's Christian Democrats (CDU), said the country needed to consider raising the levy. "The Irish rates are below the European Union average," Meister told Reuters on the sidelines of the CDU annual party congress on Tuesday (16 November). "I therefore see here at least a possibility, given the high [Irish] budget deficit, to improve revenues without causing a negative impact on growth," he added. Meister's comments come one day after Elmar Brok, a senior CDU lawmaker who has sat in the European Parliament since 1980, said Ireland may have no choice but to raise the rate. "Ireland has two options to consolidate its budget – cut expenses even further or increase taxes like the corporate tax rate," Brok said at the congress in Karlsruhe.
Prof. Dr  Wolfgang Schumann

22.11.10: Ireland's Green Party announced it will leave the coalition - 0 views

  • Ireland's Green Party, the junior partner in the country's governing coalition with centre-right Fianna Fail, has announced it is to pull the plug on the alliance, calling on the government to announce elections in January.
  • However, despite misgivings, most party members were won to the side of sticking with the coalition by the party leadership's argument that it would be better to stay in and deliver on some of the party's policy hopes than be outside. In a vote over backing an agreement for government with Fianna Fail, 85 percent of members endorsed the party leadership's strategy. The leading opposition parties, the centre-right Fine Gael and centre-left Labour - on track to form a coalition after any election - offer a virtually identical response to the crisis to the government. On Monday afternoon, Fine Gael leader Enda Kenny made a fresh call for immediate elections.
Prof. Dr  Wolfgang Schumann

Irish government applies for EU#-IMF bail-out of up to € 90 billion - 0 views

  • The Irish government has applied for an EU-IMF bail-out of up to €90 billion to save its banking sector from collapse and reduce its borrowing costs, a move that in effect places Irish democracy, like that of Greece, under the protectorship of experts from Brussels and Washington.

    Ireland's finance minister, Brian Lenihan, made the announcement speaking to public radio on Sunday evening (21 November) that he would recommend the application to a cabinet meeting later that night. The taoiseach, the country's prime minister, Brian Cowen, publicly addressed his nation, admitting to what had been denied for a week.

Prof. Dr  Wolfgang Schumann

17.11.10: EU-IMF troika heading to Dublin to oversee budget preparations - 0 views

  • Ireland's fiscal sovereignty was hanging by a thread late on Tuesday evening (16 November) as eurozone finance ministers announced that EU and IMF overseers were to head to Dublin to supervise preparations for a fresh round of cuts for the next four years to ensure that they are as deep as necessary. Print Comment article Dublin appeared to stand up to massive pressure from the European Central Bank and other countries that use the euro, particularly Spain and Portugal, to sign up to a bail-out, with Taoiseach Brian Cowen announcing to the Dail, the country's parliament, that the debt-addled country will not apply for assistance.
  • Earlier in the afternoon, the Wall Street Journal reported that finance ministers were in fact looking at a dual package of between €45 and €50 billion to bail out Irish banks and a broader sum of €80 to €100 billion to shore up the country's public finances, quoting unnamed sources. One contact close to the discussions told EUobserver they "could neither confirm nor deny" the report, while another said the numbers in the Wall Street Journal article "are not a figment of anyone's imagination." In such a situation, reported the WSJ, the IMF would chip in about half the aid that the EU and the UK together would provide. The non-eurozone UK is reportedly under pressure to contribute to any deal, given the heavy exposure of British banks in Ireland, particularly RBS, although Prime Minister David Cameron has recently voiced support for the idea of bilateral financial support for its one-time colony. Shares in UK financial institutions have slid over the past week as a result of the tumult.
Prof. Dr  Wolfgang Schumann

11.11.10: Irish turmoil reignites eurozone debt crisis - 0 views

  • Fresh turmoil in the Irish and Portuguese debt markets has reignited the eurozone's fiscal crisis, with record borrowing costs in the two states sparking bail-out expectations and concerns over possible contagion. Irish borrowing costs on benchmark 10-year bonds jumped half a percentage point to a euro-era record of 8.64 percent on Wednesday (10 November), a weighty 6.19 percent higher than their German equivalent.
  • The dramatic rise followed a sell-off of Irish bonds by investors after LCH.Clearnet – one of Europe's biggest clearing houses – upped the amount of deposit it requires on all Irish positions to 15 percent. Ireland's debt is now judged to be as risky as Greece's this spring when member states scrambled to agree a bail-out for Greece, with Lisbon also forced to pay record amounts during a bond issuance on Wednesday.
Prof. Dr  Wolfgang Schumann

29.10.10: 'Small, small, small' EU treaty change to deliver 'quantum leap' - 0 views

  • European leaders have given way to German demands for a change to the European treaties, but the procedure for the change and its size has been calculated explicitly to avoid the danger that it could provoke referendums in some EU states.
  • Viritually all EU member states had vehemently opposed any treaty change going into the summit, but in the end they were convinced by Germany's need for the change in order to avoid a legal clash with its Karlsruhe-based Constitutional Court. The leaders agreed to construct a permanent crisis mechanism to fill the void left when the existing but temporary €110 billion bail-out package for Greece and €440 billion fund set up for the eurozone as a whole expire in 2013. According to diplomats, it is currently unclear whether this new mechanism would involve participation of eurozone members alone or the full 27 EU member states, including those who do not use the euro. Germany is worried that any permanent structure could run afoul of treaty rules forbidding EU bail-outs of member states and be struck down by the country's strict Constitutional Court, thus opening the euro once again to an assault by markets as occurred in the spring. Caught between the need for a structural change and their fear of both the activism of Karlsruhe and the growing euroscepticism of citizens, the other leaders signed off on the move only so long as the change envisaged was "small, small, small - the smallest possible ... in order to ensure there is no possibility of referendums," in the words of a Danish diplomat speaking to EUobserver. The method EU leaders chose to achieve the change will be via what is called the "special revision procedure," introduced by the Lisbon Treaty, under which the treaty can be amended by the European Council alone, so long as there is unanimity and the changes do not extend the competences of the European Union.
Prof. Dr  Wolfgang Schumann

28.10.10: EU leaders give green light to tweak treaty in order to allow for the creatio... - 0 views

  • European Union leaders have come to a consensus that the bloc's treaty must be changed, although only in a limited fashion, in order to allow for the creation of a permanent bail-out fund for member states. "Today we took important decisions to strengthen the euro," European Council President Herman Van Rompuy told reporters at a press conference in the early morning hours of Friday (29 October).
  • Initially horrified at the Franco-German demand for a wholesale re-writing of the EU rulebook only a year after the Lisbon Treaty had been approved, the other EU leaders are now warming to the idea of a "limited" tweaking of the treaty in a way that they hope will avoid major political fall-out. "Heads of state and government agree on the need for member states to establish a permanent crisis mechanism to safeguard the financial stability of the euro area as a whole and invite the president of the European Council to undertake consultations with the members of the European Council on a limited treaty change required to that effect," the draft conclusions of a two-day summit in Brussels read.
  • "No country is opposed in principle to a moderate treaty change but they want to know what the political and legal consequences of this would be," said one source close to the discussions. Two moves have been tentatively agreed. EU Council President Herman Van Rompuy is to be tasked with exploring whether such a limited change can be done via a simplified revision procedure, in which EU leaders can make the change without having to call a full Intergovernmental Conference (IGC) - involving negotiations between the governments, consultations with the European Parliament and the participation of the European Commission, which could open a Pandora's Box of other new proposals. Mr Van Rompuy would also explore whether legally this can be done without the tweak having to be presented to national parliaments for approval, which would almost certainly grind down the process, or even further, whether such a move would provoke referendums in some countries, notably Ireland, which maintains a constitutional requirement that any shift in powers from Dublin to Brussels be approved in a vote by the people. He would report back to the European Council in December.
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