Group items matching

in title, tags, annotations or url

The European Central Bank turned a blind eye to "irresponsible lending" by German, French, British and Belgian banks, the European Union's former ambassador to the United States, John Bruton has said. In a damning speech at the London School of Economics on Monday (7 March) evening, Mr Bruton, also a former Irish prime minister of the same conservative political stripe as the current leader-elect, Enda Kenny, has accused Frankfurt of failing to use its powers to rein in speculative bubbles in countries such as Ireland and Spain.

"From 2000 on, British, German, Belgian, French banks, and banks of other EU countries lent irresponsibly to the Irish banks in the hope that they too could profit from the then obtaining Irish construction bubble," he said. "They were supervised by their home central banks, and by the ECB ... who seemingly raised no objection to this lending."

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.

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.

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.

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.

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."

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.

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."

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.

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.

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.

The Bulgarian deputy prime minister, who is also the country's finance minister, appears to have let the cat out of the bag on the date of an Irish bailout, telling Bulgarian reporters on Wednesday (17 November) that despite Irish insistence to the contrary, he expects a package will be cobbled together some time next week. Print Comment article "I expect a bailout decision to be taken within a week," Simeon Djankov said at a small briefing following a meeting of EU finance ministers, after reporters asked about the European Commission, European Central Bank and the International Monetary Fund's upcoming mission to Dublin.

Meanwhile, details on the composition of the EU-IMF troika team, who in effect, through their mission to oversee Irish austerity and budget plans will maintain a degree of authority over the elected government of Ireland, are being kept secret. The European Commission, the IMF and the ECB will not release the names or backgrounds of those involved or even the number of officials in the team other than to say, according to EU economy spokesman Amadeu Tardio: "There will be more than two but fewer than 10 people going."

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.

Britain and other European Union countries put their weight behind Franco-German calls for tougher eurozone rules at a summit today (29 October), agreeing on "limited" changes to the EU's main treaty in return for a cap on the EU budget.

Officials struggled to deliver the message that legal tricks could accommodate both Germany's push for treaty change and conflicting calls from several other countries which had rejected the idea. Regarding treaty change, the key word is "simplified", officials explained. A simplified provision, enshrined in Article 48, Section 6 of the Lisbon Treaty, allows member countries to unanimously adopt a decision amending all or part of the main elements of the Treaty on the Functioning of the EU (TFEU), which governs how the Union carries out its work. Such a procedure would avoid the need to call a constitutional convention, experts explained. In addition, the European Parliament would only be "consulted" instead of enjoying full voting rights as part of the normal co-decision procedure. The changes to the treaty are to be settled by mid-2013, before the expiry of the present emergency fund agreed earlier this year to deal with crises such as the one that hit Greece. The objective is to replace that with a permanent mechanism. The simplified treaty change procedure will not enter into force until it is approved by member states in accordance with their constitutions. Most EU countries are expected to ratify the decision by a simplified procedure in their parliaments. As for Ireland, it remains unclear whether a change effected in this way would require another referendum.

UK Prime Minister David Cameron appears to have been instrumental in forging a deal, lending his backing to Franco-German calls for treaty change in return for keeping a lid on the EU's 2011 budget. 11 member states, including Britain, France and Germany, will send a letter to the European Commission and Parliament today saying that their plans to increase the EU budget by 5.9% in 2011 are "especially unacceptable at a time when we are having to take difficult decisions at national level to control public expenditure". The letter was signed by the leaders of the UK, Germany, France, the Netherlands, Sweden, the Czech Republic, Denmark, Austria, Finland, Slovenia and Estonia. The bloc's finance ministers had earlier voted for a limited increase in the EU budget of 2.9%. "We are clear that we cannot accept any more than the 2.9% increase proposed by the finance ministers," the leaders say in the letter. Cameron argued that a planned increase in the EU budget would cost his country's taxpayers the equivalent of one billion euros. The 2.9% rise would still cost them £435m (500m euros). Parliament to fight back By agreeing to cap the budget, EU leaders set themselves on a collision course with the European parliament, which has the power to approve or reject the proposed budget. Negotiations between the European Parliament and the Council, which represents the 27 member countries, over the EU's 2011 budget kicked off on 27 October (see 'Background'). "If Cameron is prepared to give up the British rebate [...] then we can for sure discuss a reduction of the budget," said Martin Schulz, leader of the Socialist & Democrats group in the European Parliament, speaking to EUX.TV, the European policy news channel powered by EurActiv. "The European budget is not to be compared with national budgets," said Schulz. "There are no own resources. We have no European taxes. We have no own money. It is money coming from the member states. We can make no debts. The British budget must be reduced because there is enormous debt. Europe has no debts," he said.

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.

Albania on Wednesday (16 December) took another step towards EU membership when the European Commission sent Tirana a voluminous questionnaire about its readiness to join the bloc.

Helmuth Lohan, head of the EU mission in Tirana, handed the questionnaire – a 384-page document with 2,280 questions – to Prime Minister Sali Berisha, the EU Delegation in Albania announced on its website. 

"The questionnaire attaches particular importance to the 'Copenhagen political criteria' for EU accession. Good governance, the rule of law, judiciary reform, the fight against corruption, media freedom – these are all key issues which will form the core of our assessment," read a statement from the EU delegation. 

When the reform treaty was drafted, EU governments decided to expand the legislature from 736 to 751 members, so as to reflect the enlarged union. Elections for the current European Parliament took place in June, however, when the Lisbon Treaty's future was still uncertain following its rejection by referendum in Ireland. Some countries benefitting from the extra seats, such as Spain or Sweden, elected "reserve MEPs" who will take their observer status as soon as national governments take a decision on the matter. But others, notably France, did not. This complicates the matter even further, as they are now likely to send national parliamentarians as observers and hold early European elections for the extra seats once the legal basis for their full powers is in place.

Ahmet Davutoglu, Turkey's foreign minister, said an Irish 'yes' to the Lisbon Treaty would create the legal conditions for future EU enlargements and pleaded passionately for his country's accession to the Union.