Open Europe : Daily Press Summary

[Politics.be]

New Open Europe briefing: Greece-style bailout for Spain is impossible, as it could cost up to €650bn Open Europe has today published a new briefing note looking at how the Spanish crisis could evolve in the near future – with a focus on the role of the regions and potential bailout scenarios. The briefing argues that, although some of Spain’s larger regions – such as Catalonia – have significant amounts of debt to roll over this year, the regions alone will not make or break Spain financially. However, regional problems combined with banking sector issues and other pressures could ultimately push the country into a fully-fledged bailout.

Open Europe estimates that taking Spain off the debt markets for three years in a Greece-style bailout would cost between €450bn and €650bn. This is both economically and politically impossible at the moment, given that the lending power of the EFSF and the ESM, the eurozone’s two bailout funds, will only reach €500bn in mid-2014. The briefing suggests that the most likely scenario is a combination of measures, involving a precautionary loan of around €155bn combined with a new bout of ECB liquidity – although even that could, at best, only buy Spain six months to a year.
Open Europe research Open Europe press release

Standoff between Commission and net contributors over 2013 EU budget intensifies;
Mats Persson: Cameron should veto EU budget unless he gets a better deal
EU Commission President José Manuel Barroso has written to all EU Heads of State and Government warning that the 2.79% increase in next year’s draft EU budget agreed by member states on Tuesday was insufficient to meet the EU’s “legal obligations to pay beneficiaries as a result of past commitments”. Die Welt reports that German Foreign Minister Guido Westerwelle issued an immediate rebuttal, arguing that given the tough savings enacted by member states, the “EU budget can't grow disproportionately”.

On his Telegraph blog, Open Europe Director Mats Persson argues that the 2013 draft budget negotiations in which the UK was outvoted should spur the UK government to ensure it gets a good deal from the EU's next long-term budget, set to run between 2014 and 2020, where it has a veto. Mats argues that “Unfortunately the UK is merely pushing for a freeze to overall spending… the UK government would secure a hugely disproportionate benefit by one simple move: repatriating the EU’s so-called structural funds back to Britain and other wealthy states… Not having a new MFF in place would be extremely messy and most member states.”
EU Commission: Barroso's Letter Welt European Voice CityAM Telegraph blogs: Persson Open Europe Research: Reforming the EU budget

Talks of Greek exit from the euro increases within EU institutions
The WSJ quotes a senior unnamed eurozone government official as saying, "The euro exit scenario is increasingly being examined, although the top priority remains to avoid it…But there's a real sense that this actually is Greece's last chance." The article also suggests that Greece has lost between €2bn and €4bn in revenues due to the elections, meaning this funding will need to be found on top of the €11.5bn cuts which need to be made for 2013 – 14.

Die Welt reports that one option under consideration for aiding Greece involves the ECB allowing Athens to retain the profit made by the central bank on Greek bonds which it bought at a significant discount. Speaking on ZDF’s Morgenmagazin programme, Bavaria’s Finance Minister Markus Söder (CSU) said that “ultimately, Greece will have to leave the eurozone”.
BBC EurActiv FT WSJ Irish Times Telegraph Welt FAZ

Market tensions ease slightly on hope of ECB intervention;
Belgian Foreign Minister calls for new ECB mandate
In an interview yesterday, Didier Reynders, Belgian Foreign Minister, argued that the ECB’s mandate should be changed to allow it to support states directly. Reynders did add that, in exchange for such action, rapid progress had to be made towards forming a banking union in the eurozone. Following a meeting in Paris yesterday, the French and Spanish finance ministers both echoed the call for a swift creation of a single bank supervisor for the eurozone, calling for draft plans to be in place by September.

Austrian Central Bank Governor Ewald Nowotny also said in an interview with Bloomberg TV yesterday that there were “pro arguments” for giving the ESM, the eurozone’s permanent bailout fund, a banking licence to allow it to borrow directly from the ECB.
FT FT 2 Guardian European Voice Irish Times Telegraph FT: Subramanian FT: Sandbu FT: Frieda Times

ECB data released yesterday again showed falling demand for credit in the eurozone while banks also tightened their credit standards in the second quarter of the year, both of which hit the level of loans to the real economy.
CityAM WSJ

European funds could lose out on revenues under new proposals from the EU’s markets supervisor, ESMA, which stipulates that all revenues generated by securities lending would now have to be returned to investors and there will be stricter requirements about the types of collateral posted.
Reuters City AM

Reuters reports that France is considering asking the European Commission to place the EU’s trade agreement with South Korea under surveillance to limit a rising imports of South Korean vehicles, French Industry Minister Arnaud Montebourg said yesterday.
Reuters Open Europe research

Le Figaro reports that allies of junior finance minister Benoît Hamon in the governing socialist party could vote against the eurozone’s fiscal treaty in the French parliament.
LeFigaro

The European Commission has said it will postpone the auctioning of new carbon allowances within the EU’s emissions trading system in a bid to increase the price of carbon. Connie Hedegaard, EU Commissioner for Climate Action, said: "The EU ETS has a growing surplus of allowances built up over the last few years. It is not wise to deliberately continue to flood a market that is already oversupplied."
Guardian WSJ FT

Germany’s national scientific academy Leopoldina has produced a new report arguing that biofuels carry significant ecological risks and produce more greenhouse gases than expected, recommending therefore that the EU reconsiders its Renewables Directive which mandates that member states must source 10% of their fuel from biofules and other renewable sources by 2020, reports FAZ.
FAZ FAZ: Müller-Jung

Speaking at yesterday’s launch of Commission proposals to crackdown on the manipulation of benchmark rates, such as LIBOR, EU Justice Commissioner Viviane Reding said, “I was not very much convinced by the action of the Bank . It has already got, years before, a warning that things were going wrong. It has not acted.”
Euractiv


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