Monthly Archives: November 2010

European structural funds investigation

European structural funds investigation

UPDATE: see below for later reaction from the  European Commission.

The Brussels press corps got a change from Ireland bail-outs on Tuesday, when the European Commission decided to make structural funds the topic of the day.

Pia Ahrenkilde-Hansen, Commission spokeswoman, spent the first 15 minutes of the daily midday briefing vocally defending cohesion funds, in direct response to day 1 of the FT’s expose.

“It is simply not true that cohesion funding lies idle under red tape,” she said, reprising our front-page headline. Her argument, which I expect will find its way onto the FT’s letters page, is that the money isn’t sitting on EU bank accounts – but rather has yet to be called up from member states. Read more

In addition to Europe’s contribution to the 85bn-euro Irish rescue package, 14 members of the eurozone are being stuck with an additional bailout-related bill from Dublin. It comes to 963m euros, and it represents Ireland’s remaining share of the 110bn euro Greek bailout agreed in May.

After securing its own bailout on Sunday, Ireland informed its fellow eurozone partners that it would no longer be able to shoulder its 1.3bn euro commitment to Greece. Before running into its own debt problems, Dublin chipped in 346m euros for that cause earlier this year. The result, according to the rules of that agreement, is that the rest of its obligation will now be divided up among the other participating eurozone members. Read more

How are European Union structural funds managed? That is – literally – the €347bn question.

That’s the amount the EU plans to spend between 2007 and 2013 on around 2m projects designed to boost development across the continent, particularly in its newer, poorer member states. Read more

With all the talk of tumbling eurozone dominos, there is increasing chatter about whether Belgium, one of the founding members of the European Union, might feel the same chill winds as Greece, Ireland, Portugal and others on the “periphery” have felt recently.

At first glance, Belgium looks indeed like a contender for trouble. Its public debt is worth 100 per cent of its GDP, the third highest in the eurozone after Greece and Italy. It has had no government since the last one collapsed in April, and no viable coalitions has yet emerged from the ensuing elections. Read more

Christmas has come early to Brussels’ beleaguered eurocrats, thanks to a ruling from the European Court of Justice. After months of deliberation, the ECJ sided with EU staff in their pay dispute with member states.

Specifically, the court found that Scrooge-like member states overstepped their powers when they sought to cut in half a 3.7 per cent pay raise due thousands of diplomats and staff at the European institutions for 2009.

Civil servant pay is a touchy subject in Brussels, where eurocrats have long had to endure taunts that they are first-class passengers on a champagne-soaked and caviar-laden gravy train. But it has arguably never been so sensitive, given the bleak age of austerity now dawning across Europe. Read more

The statement issued last night by the Eurogroup finance ministers referred to the “fiscal adjustment” and “structural reform” that Ireland will have to undertake as a condition for tens of billions of euros in emergency loans.

But Jan Kees de Jager, the Dutch finance minister, put it more bluntly in his own statement. “Ireland will have to cut fast and deep,” Mr De Jager said. As if that were not unpleasant enough, he ominously added that “The IMF will have a prominent role in drawing up the aid package.” Read more

Brussels has always been sensitive about stories showcasing EU money being spent frivolously, and every year squirms when the European Court of Auditors releases its findings that structural funds are the most problematic bit of the EU budget (even though the situation is improving).

The current budget negotiations for 2011 are stalled, with national leaders led by the UK’s David Cameron reluctant to plough more money into the EU while forcing budget cuts at home, but also harbouring some doubts over the way Brussels then spends the cash. Read more

It has not been easy for the last year to find someone in Brussels willing to say something nice about Greece - the country that fiddled with its financial figures for years, forced European leaders to underwrite a hugely unpopular bailout, and whose hairdressers have apparently been retiring (unbeknownst to German autoworkers) at age 50 and with full benefits.

But Olli Rehn, the European commissioner for economic and monetary affairs – who has lost several weekends to emergency discussions over Greece – offered some rare kind words today. Mr Rehn noted that for the first time, Eurostat, the EU’s statistical agency, was able to certify the government’s books “without any reservations.”

“This is a major achievement, and I want to congratulate the Greek authorities,” the commissioner said. Read more

After days of internecine sniping between leaders of the 16 eurozone countries over Ireland’s debt crisis, officials involved in Tuesday night’s marathon meeting of finance ministers from the euro group say that their session was free of the kind of drama that many had feared heading into the summit.

Jyrki Katainen, the Finnish finance minister who is also the chief economic spokesman for the centre-right caucus of European political parties, called the discussion “pragmatic” and said it focused on the Irish banking sector and how any aid would help restructure it in a way that could stop the bleeding. Read more

Brussels bureau chief Peter Spiegel says Ireland and Portugal face a grilling on their budgets at the meeting of EU finance ministers in Brussels, and that pressure is building on these countries to take rescue aid, as fear of debt contagion across the eurozone increases.

The clash over next year’s EU budget has widely been viewed as a contest between the austere and the profligate. The end result, after a final round of negotiations collapsed in the wee hours of the night, is that the forces of austerity, led by UK prime minister David Cameron and his Dutch and Danish allies, prevailed over a spendthrift European parliament.

But there is another – often overlooked – element to the debate that animated the member states’ unexpectedly stubborn stance: a desire to punish a Parliament that has grown increasingly assertive – some say grasping – since the Lisbon treaty came into force in December.

“There’s a feeling that they’re just going to keep pushing and pushing for more power. So it’s better to confront them now,” one diplomat explained. Read more

“Plus ça change, plus c’est la meme chose,” the French adage goes. It might as well have been coined for the arrival of the new government announced late on Sunday. The shake-up that Nicolas Sarkozy first mooted over the summer has turned into a far more limited reshuffling of the lower orders.

The most significant change for Brussels is the one that didn’t happen: finance minister Christine Lagarde will stay put. At one point expected to move to Foreign affairs, the well-regarded former lawyer now looks likely to remain in her role until the presidential elections in spring 2012.

Her departure during the latest eurozone wobble would undoubtedly have raised questions about a change of strategy in Paris. The effect would have been compounded by the fact her opposite number in Germany, Wolfgang Schäuble, only recently came back in action after suffering health problems. Read more

The collapse in Irish and Portuguese bond prices last week triggered another round of frantic weekend meetings and emergency phone calls among European policymakers and central bankers as they sought ways to restore market calm. Yet to some observers, those efforts were ironic since the turmoil was seemingly just what Germany, the EU’s biggest and most powerful member, had ordered up.

“Isn’t this exactly what they want?” one diplomat asked. Read more

When world leaders wrap up their G-20 talks in Seoul on Friday, the European and American contingent will have less than a week to sleep in their own beds before they head off again to another round of summitting, back-to-back NATO and EU-US gatherings in Lisbon next week.

Although there is lots of substance on the agenda – Afghanistan, missile defence, global economic stagnation – the atmospherics of the events will also be closely watched, particularly since President Barack Obama skipped out on May’s EU-US summit, causing much hand-wringing in Brussels and other European capitals.

U.S. officials are acutely aware of the narrative developing on this side of the ocean since the cancelled Madrid summit: that Mr Obama, despite coming into office amidst a surge of European popularity, is now seen as neglecting his transatlantic allies and showering attention instead on leaders elsewhere in the world. This week, those U.S. officials are fanning out to combat that narrative. Read more

The European Union’s 27 member states may have agreed to reopen the bloc’s governing treaties to set up a new bailout system for any future Greece-like debt implosions, but just what that system will look like is expected to be the next great debate of the ongoing euro crisis.

As our Fankfurt correspondent Ralph Atkins reported, Wolfgang Schauble, the German finance minister, has thrown out a general outline. But the first significant stab at getting to the nuts and bolts was unveiled Tuesday morning by a group of economists that includes a former general counsel and a former deputy director of the International Monetary Fund.

The proposal, published by the Brussels-based think tank Bruegel, is almost as interesting for its account of the history of trying to set up such permanent bailout systems in the past – almost all failures – than it is on the substance of its policy proscriptions for the future, however. Read more

It’s been a quiet week in Brussels, with much of the city away thanks to a two-day bank holiday and a fall break in the school year. Those who have remained in town continue to debate the fallout of last week’s European summit, where all 27 countries fell in line behind German chancellor Angela Merkel and decided to amend the EU’s treaties to create a new bailout system for potential future Greeces.

Much of the discussion over lunches and in opinion journals has focused on two related questions: Is the decision to follow Ms Merkel into the precarious process of treaty change yet another sign of Germany becoming something of a continental hegemon when it comes to driving Europe’s economic policies? And just how painful will the next round of treaty change be?

Charles Grant, director of the Centre for European Reform, has a nice summary of the debate up on his group’s website, with some telling insights about the mood in France over the recent bluster from Berlin: Read more