October 1, 2010

 

Press Summary Archive

Ireland’s public deficit will rise to 32% of GDP because of bank bailout; Greece set to grant tax amnesty

01 October 2010


Irish Finance Minister Brian Lenihan said yesterday that “there will be a significant increase in [Ireland’s] public deficit due to the financial support we are providing to our banks, which amounts to around 20% of GDP”. After the bank bailout – which may be worth up to €50 billion – Ireland’s public deficit will therefore attain a record 32% of GDP, while government debt is expected to reach 100% of GDP by the end of the year, Le Monde reports. However, both Eurogroup Chairman Jean-Claude Juncker and IMF Chief Dominique Strauss-Kahn have said that they do not expect Ireland to tap the €440 billion European Financial Stability Facility (EFSF). 

An article in the Economist notes: “There is speculation that, if bond yields rise further, Ireland and Portugal might soon be forced to borrow from the EFSF […] That is unlikely. […] But if Ireland were eventually forced to borrow from the EFSF, the fund might find it hard to impose conditions harsher than the ones it has volunteered for already. You cannot ask a non-smoker to give up cigarettes”.

In City AM, Allister Heath argues: “There is one aspect of the Irish crisis that everybody appears to have forgotten about. Yet it goes a long way towards explaining Ireland’s problems. It is, quite simply, its membership of the dysfunctional single currency, an institution which it should never have joined”.

In the Telegraph, Jeremy Warner argues: “Stuck with a monetary policy which is essentially set to suit German needs, Ireland could be condemned to a semi-permanent deflationary funk”.

In the Independent, Hamish McRae argues: “The [eurozone’s] ‘one-size-fits-all’ interest rate caused huge problems during the boom years, for had Ireland and Spain been in control of their own interest rates they might have slowed the expansion of their property bubbles”.

RTBF reports that Portugal has announced 5% cuts in public sector salaries and a 2% VAT increase after the European Commission urged the government to speed up the consolidation of its public finances. Les Echos reports that Portugal will also try to raise between €7 billion and €9 billion through new government bonds auctions by the end of the year.   

The FT notes that the Greek parliament has pushed through legislation granting in effect a tax amnesty to millions of citizens, in a move that goes against advice from the EU, the ECB and the IMF.
Le Monde Le Monde 2 BBC: Flanders BBC: Flanders 2 EUobserver City AM: Heath RTBF Economist Euractiv Les Echos Irish Independent Times 2 Times Guardian ABC ABC IHT: Merry WSJ WSJ WSJ: Analysis WSJ: Fidler Express Mail Mail: Synon Mail: Brummer Telegraph: Warner Telegraph Independent Independent: Leader FT FT 2 FT: Analysis FT: Leader Telegraph Independent: McRae Independent: McRae 2 FT Handelsblatt Telegraph: Warner

German fund managers accuse France of protectionism on the AIFM Directive
Handelsblatt reports that the German funds industry is concerned about Germany siding with France in negotiations over the AIFM Directive. President of the European Venture Capital and Private Equity Association Uli Fricke is quoted saying: “We are concerned that the German government is supporting France’s position […] The suspicion is that France is trying to shut off its market for unloved competitors”.
Handelsblatt Open Europe research

Cable tells MEPs: Cut EU budget or face backlash
Business Secretary Vince Cable told MEPs yesterday that the EU will face a “big backlash” if its own budget is not subject to the same public spending disciplines being imposed at national level. “At a time when national governments, including mine, are having to make very painful cuts in public spending, no one can understand why the European budget is not being subject to the same discipline”, he said.
Open Europe blog FT Mail Euractiv

New Dutch government commits to stopping transfers of powers to the EU
The coalition agreement unveiled yesterday by the three parties set to form the new government in the Netherlands notes that "with the Lisbon treaty the limit has been reached for transfers of national competences to the EU for the coming period". BN/De Stem reports that Dutch incoming Prime Minister Mark Rutte has said that the coalition will demand a further €1 billion reduction on the country’s yearly €7 billion contribution to the EU budget, as well as keeping the current €1 billion rebate.
BN/De Stem NRC 1 NRC 2 WSJ BBC Dutch coalition agreement Dutch government agreement with PVV

ECJ ruling on insurers’ right to discriminate between sexes could result in “higher premiums for everyone”
The WSJ reports that a legal adviser to the European Court of Justice, Advocate General Juliane Kokott, said yesterday that insurers shouldn't be able to charge men and women different rates for their products. Insurers are currently exempted from part of EU discrimination law. The Mail quotes Conservative MEP Ashley Fox arguing that if the ECJ’s judges accept Kokott’s opinion it could spell the end for cheap car insurance deals for women. “If this opinion becomes EU law it will mean higher premiums for everyone”, he said.
EUobserver WSJ Mail De Tijd: leader

Belgian PM wary of sanctions proposed as part of new EU economic governance
EFE reports that the Belgian Prime Minister Yves Leterme has criticised the new EU system of sanctions being proposed for countries with trade or current account imbalances. “Sanctions in the field of structural funds are not the best form to face the problems that we are tackling”, he said, adding that “more preventative actions” should be taken.

The Economist’s Charlemagne discusses the Commission’s proposals for stronger economic governance and notes: “Powers like these might have done something about Greece. But would they have saved Spain or Ireland? Both had healthy public finances before the crash, and yet are now among the most troubled countries”. It continues: “The plans would give Brussels unprecedented power to intervene […] The Commission would be less of an impartial referee and more of an active player in domestic politics. Gauging competitiveness is a murky business, with no obvious benchmarks. In any case, balancing spending and taxes, deciding the level of wages and reforming labour markets ought to be tasks for elected leaders, not appointed bureaucrats […] The next time protesters hit Brussels, they may not just march past the Commission, but right into it”.
EFE Europa Press Economist: Charlemagne Eurozone Watch FAZ

Commission says Europe must spend €1 trillion by 2020 to meet climate change targets
European Voice notes that a leaked report from the European Commission has revealed that the EU must spend €1 trillion by 2020 on upgrading the electricity grid system if it is to meet its climate change goals. The paper hints that the Commission’s Energy DG will seek more money for infrastructure projects in the next EU budget.
European Voice

The European Commission is taking the UK to court over the Government's failure to investigate BT's secret trials of the controversial Phorm technology that can track internet users' browsing history. The Commission says that under EU law the UK ought to have an independent national authority to supervise interception of communications.
BBC BBC 2 EUobserver Euractiv Mirror Telegraph FT

Speaking in Prague, EU Taxation Commissioner Algirdas Semeta outlined his approach to taxation issues, including proposals to create a common consolidated corporate tax base, review VAT and focus energy taxation on the issues of climate change and energy efficiency.
Baltic Course

Radio.cz reports that a row has erupted between Czech President Václav Klaus and the Czech Foreign Minister Karel Schwarzenberg, with Klaus claiming Schwarzenberg is not doing enough to secure a cast-iron opt out from the Lisbon Treaty’s Charter of Fundamental Rights – a condition that Klaus put on ratifying the Treaty.
Radio.cz

At a conference in Brussels organised by the Madariaga Foundation on EU taxation, Poul Nyrup Rasmussen, President of the Party of European Socialists said that a financial transaction tax of 0.005% would raise €260 billion in Germany alone in its first year.
Madariaga Foundation

European Voice reports that the European Commission has ordered France and Spain to scrap taxes imposed on telecoms companies to fund public television. AFP notes that the French Economy Minister Christine Lagarde’s office has already said that the French government “has no intention at all to modify current legislation”.
European Voice Le Monde AFP

EUobserver notes that EU member states are likely to come under pressure to give up seats on the board of the IMF in talks with Asian leaders in Brussels next week.
EUobserver

Euractiv reports that the Belgian EU Presidency has confirmed that the EU will hold regular stress tests of European banks.
Euractiv La Tribune

The EU may take the UK to the ECJ if it does not change clauses in the 2007 Finance Act which limit multinationals’ multi-billion pound claims for tax refunds, reports the FT.
FT

Former German Foreign Minister Joschka Fischer has predicted economic realism will gradually soften Austrian, French and German opposition to Turkey’s EU accession. “Europe's future economy will depend on its openness. We need immigration, that's the maths of it. Either we Europeans wake up or we become poorer”, he said.
EUobserver