Monthly Archives: May 2011

Ask most people what the causes of the financial crisis were, and you will get an answer encompassing unsustainable bank lending, out-of-kilter US property prices, greedy banks and inept regulation.

Ask the European Parliament what the causes were, and the answer is simpler: not enough European Union.

That is the conclusion of the parliament’s special committee on the financial, economic and social crisis, which after sitting for 18 months and sending delegations to countries hit by the said crisis, has issued recommendations to prevent it happening again. The answer: member states have to boost their contribution to the EU budget from 1.06 per cent of economic output currently to 5-10 per cent. 

Fellow Brussels Blogger Peter Spiegel gives a comprehensive account in today’s paper of how European integration is not just slowing down, it appears to be unravelling.

His argument is that the two most visible achievements of the European Union – namely, the single currency and the Schengen passport-free travel zone – are under unprecedented assault.

What about the third and last great European grand projet: the right of EU citizens to live and work anywhere in an EU country other than their own? A core benefit of European integration, it is a used by an estimated 12m Europeans – a population roughly the size of Belgium.

That, too, may be in an early form of trouble, put under pressure by a blend of populism, high unemployment and a lack of political will to defend gains made over the past six decades. 

In the corridors of Brussels’ elegant Stanhope Hotel on Wednesday afternoon, the well-turned-out movers-and-shakers of the European energy world were marvelling at the sizeable budget and high-profile guest list for the event they were attending. 

European officials have been arguing for weeks that, for all the hand-wringing over the future of Greece, the rumour it would leave the euro was fantasy.

Reintroducing the drachma would not only be too costly, they argue, but Greece’s debt situation would actually get worse – a devalued drachma would mean all of Athens’ euro-denominated loans would suddenly cost even more to pay off.

But on Wednesday, Maria Damanaki, Greece’s European commissioner, became the most senior Greek official to raise the possibility, issuing a statement that “Greece being distanced from the euro is now on the table” and urging Athens to move urgently.

“Either we agree with our creditors on a programme of tough sacrifices and results, undertaking our responsibilities to our past, or we return to the drachma,” Damanaki, the EU maritime and fisheries commissioner, said in the statement. 

European leaders and policymakers tend to take a dim view of credit ratings agencies – those watchdogs of Anglo-Saxon capitalism who fell asleep on the job while Lehman Brothers and other banks were gorging themselves on toxic securities.

But they may want to read the latest report on Greece from Fitch, one of the largest ratings agencies. It suggests that Eurozone governments and the International Monetary Funds should be preparing to write another cheque to Athens. It also hints that any delay in paying Greece’s bondholders – an idea that has increasingly gained traction among policymakers – could have nasty consequences. 

Maria Fekter, the Austrian finance minister, said what many of her colleagues appeared to be thinking when she turned up the pressure on Dominique Strauss-Kahn to resign as head of the International Monetary Fund. 

People, not companies, are at the heart of the battle over the European Union’s passport-free travel zone. France, Italy and Denmark are trying to crack down on the movement of migrants across their borders. The European Commission is concerned that the so-called Schengen system could be undermined. But business should be worried, too. 

Tuesday saw Catherine Ashton at the European Parliament in Strasbourg. But leaving Brussels did not mean a vacation from the torrent of criticism that has rained down on the European Union’s first foreign policy chief.

Just after Ashton finished debating Syria, Libya and other foreign policy hot spots with MEPs, Franziska Brantner, the German Green who serves as the parliamentary group’s foreign policy spokesperson, released a blistering critique.

“EU foreign policy is suffering from a chronic lack of direction, leadership and imagination under Cathy Ashton’s watch, despite the fact the union today has more foreign policy competences and instruments than ever,” said Brantner, long an advocate of the new EU diplomatic corps. “Clearly, Cathy Ashton is failing to grasp what her job is.”

 

Pakistan looks set to snag a European Union perk it has long coveted: admission to the bloc’s GSP+ trade programme. But the death last week of Osama bin Laden in a compound just up the road from Islamabad may cast a shadow over the country’s entry.

The Generalised System of Preferences, or GSP, is an EU programme that aims to help developing countries by reducing tariffs on their exports to Europe. GSP+ is an even better bargain. For the poorest countries, it eliminates tariffs altogether, provided they commit to protecting human rights and good governance. Together, the programmes covered some €53.3bn in EU imports in 2009.

By a narrow margin, Pakistan has repeatedly missed out on GSP+ in the past. It seems its economy is a bit too dynamic, based on the numerical criteria cooked up by EU trade wonks. That should now change after Karel De Gucht, the trade commissioner, won commission support on Tuesday for a GSP revamp. 

A good chunk of the Brussels press corps is in Berlin this week for an annual trip by foreign media to meet German government leaders. On Tuesday morning this included a session with Guido Westerwelle, the German foreign minister, where he vociferously defended the embattled Cathy Ashton.

Ashton, the EU’s foreign policy chief, has come under surprisingly public attack recently for her handling of the north Africa crisis, particularly from Belgium’s foreign minister Steven Vanackere, who made a rare public rebuke of her performance last month in a Belgian newspaper interview.

But Westerwelle insisted Berlin, at least, was on her side. “Germany and myself, we will support Cathy Ashton,” he told the motley group of Brussels-based journalists who had assembled at the foreign ministry. “She has our full support and especially my personal support.”