Monthly Archives: June 2011

It took six years of negotiations, but Croatia’s entry into the European Union is now officially a formality.

In a mad dash to the finish line, the Hungarian presidency managed to squeeze in one last mini-summit to consecrate the deal before the clock runs out on their six-month stint at the EU Council’s helm Thursday evening.

Now comes the behind-the-scenes work of translating that political agreement into an accession treaty which can be signed and ratified by the existing 27 EU members – and the Croats, of course. The drafting and translating into 23 languages should be done by the end of the year; the actual accession date is set for 1 July 2013. Read more

Peter Spiegel

If the Greek crisis has taught us anything over the past few weeks it’s that going from a bail-out back into the financial markets is hard, and any rescue programme should be very conservative when it comes to estimating how much private-sector borrowing a bailed-out country will be able to do.

The recent scare occurred because a Greek gap opened in March 2012, when the original €110bn bail-out programme envisioned Athens dipping back into the bond market. Everyone now acknowledges this is impossible, particularly with 10-year Greek bonds still over 16 per cent, despite Wednesday’s rally driven by the successful Greek parliamentary vote on austerity measures.

As our friends and rivals at the Wall Street Journal have pointed out, detailed reports on Ireland show its programme has become much more conservative, with only about €3.4bn in private-sector borrowing called for in 2012 (originally it was €12.3bn; Greece was supposed to raise €15.9bn in the first quarter of 2012 alone). Read on for our first look at Portugal’s financing assumptions. Read more

EU budget negotiations, which kick off this week, are about three things: the size of the overall pot of money; which countries will pay into that pot; and which countries will get money out of it.

For those following the debate, here is your cut-out-and-keep Excel guide to those questions, plucked from 2009, the latest year for which figures have been compiled.

Over 70 per cent of the EU’s money comes from five countries: Germany, France, Italy, Spain and the UK, in that order. But most of the money comes back to them, too. France (with its EU farm subsidies) gets the biggest amount back, followed by Germany, Spain, Italy and Poland (with its farmers and its roads funded by EU development funds).

As the debate gets underway for the next seven-year budget framework, we thought we’d crunch the numbers to establish who the biggest winners and losers are. (Check out the outcomes for all 27 countries in this spreadsheetRead more

Peter Spiegel

Cameron and Barroso last week at Downing Street, where they discussed the EU budget

Amid all the hand-wringing about the Greek parliamentary vote on the key €28b austerity package this afternoon in Athens, the European Commission will meet to give its final assent to its proposed EU budget for the next seven-year cycle, normally the most-watched event on the Brussels agenda.

Much of the outlines of the budget have already been reported on the pages of the FT, but many will be watching the top line: just how much will the Commission, which, as the EU’s executive branch, has the responsibility for kicking off the 18-month negotiations, propose member countries should contribute to Brussels’ budget?

This will be a big question for David Cameron, British prime minister, who has made cutting down on Brussels’ spending the centre of his Europe strategy. For reference sake, after the jump we are re-publishing a letter Cameron got his French and German counterparts to sign calling for an effective freeze on the seven-year budget plan, known as the mutli-annual financial framework in eurocrat-ese. Read more

Peter Spiegel

Olli Rehn, the European commissioner for economic and monetary affairs

The debate in the Greek parliament has begun, and pressure is building ahead of the key meeting of eurozone finance ministers on Sunday which – in the event of parliament’s passage of a new €28bn austerity plan – will both approve a quick €12bn in aid to Athens and set up the outlines for second Greek bail-out package. Read more

Peter Spiegel

Draghi meets German chancellor Angela Merkel in Berlin last week

Mario Draghi meets German chancellor Angela Merkel in Berlin last week

UPDATE: Draghi has been confirmed, but not before lots of horse-trading. See our story here.

Day two of the European Union summit is already underway, and among the issues we will be watching closely is the nomination of Mario Draghi to become head of the European Central Bank, which even at this late date appears not entirely a done deal.

As we’ve been reporting for several weeks, France has been grumpy that Draghi’s confirmation will lead to two Italians on the ECB’s executive board and no Frenchman, since the current president, Jean-Claude Trichet, is retiring. Nicolas Sarkozy, the French president, thought he had a deal with Italian prime minister Silvio Berlusconi for the second Italian, Lorenzo Bini Smaghi, to resign.

But Bini Smaghi, citing the ECB’s independence, has resisted political pressure, and is rumoured to be holding out for Draghi’s current job: head of the Bank of Italy. Berlusconi, however, has an alternate candidate in mind and has thus far resisted French pressure. Read more

Peter Spiegel

UPDATE: The summit has broken up for the evening, and they’ve published the final conclusions on Greece. Only minor tweaks from draft version. Complete statement can be read here.

When the summit of European leaders began this evening, the big hole in the draft conclusions circulated to Brussels diplomats was language on Greece. Brussels Blog has now obtained a copy of that section, and though it contains few surprises, it does raise some key points that are worth highlighting.

First is the pressure they are placing on Antonis Samaras, the Greek opposition leader, to back the €28bn in austerity measures to be voted on next week. Officials say Samaras got a firm lecture from centre-right heads of government this afternoon during a pre-summit caucus in Brussels – and one official said he gave as good as he got.

In the draft conclusions, the leaders are more diplomatic, but still clear: they want cross-party support for the package, despite Samaras’ public declaration that he won’t back it. A critical €12bn aid payment is contingent on passing the package, and Athens will default on its debt if they don’t get the loan by mid-July. The section on the need for broad political backing is after the jump: Read more

The Socialist group were the first to gather in the traditional pre-summit party huddles, the real start of the festivities here in Brussels. Under a well-worn tradition, EU leaders from the major political groupings meet over lunch to coordinate their positions – and share gossip, one presumes – ahead of the actual leaders’ meeting today and tomorrow.

Well, that’s the idea anyway. In the Socialists’ case, none of their national leaders – including Spain’s José Luis Zapatero and Greece’s George Papandreou – were in attendance at the Albert Hall venue in downtown Brussels.

That left a hodge podge of opposition leaders, ministers, European commissioners, and other lesser-known officials as the only attendees to a pre-summit meeting for a summit to which they are not invited. The only exception was Cathy Ashton, the EU foreign policy supremo, who gets a look in on some of the council debates. Read more

Peter Spiegel

Over at the largest pre-summit gathering, the centre-right European Peoples’ Party which is meeting across from the Belgian royal palace, the most highly-anticipated arrival was Antonis Samaras, the Greek opposition leader.

Heading into the caucus, Samaras repeated what he said in today’s Financial Times: that although he supports reform efforts, he can’t back the package proposed by the ruling Socialist government. Read more

Peter Spiegel

Herman Van Rompuy, who as president of the European Council, will chair the summit

Although the eyes of Europe are on Athens, the two-day summit of European heads of government that starts today in Brussels may have little to add to the ongoing debate over what to do about Greece’s debt crisis.

That’s because most of the tough decisions left – particularly how to involve private bondholders in shouldering some of the cost of another Greek bail-out – have been put in the hands of finance ministers, who must hash out their differences before an emergency meeting July 3.

Economic issues will hardly be off the agenda, however, especially tonight. In his letter to European leaders, Herman Van Rompuy, president of the European Council, said tonight’s dinner will be focused on the economy – though largely issues that are not particularly controversial or have been decided by finance ministers. Read more

Behind-the-scenes preparations ahead of the summit of European leaders on Thursday and Friday have yielded one final piece of agreement on managing EU borders, cobbled together in the last few hours.

Reliable sources tell Brussels Blog there has been a breakthrough in the negotiations to bolster Frontex, the EU’s budding border guard agency.

The new regulations — which still have to formally approved by parliament later this year — will give Frontex the ability to buy or lease equipment such as helicopters, planes and patrol boats for the first time.

Currently, it has to beg, borrow or steal whatever surplus kit national border guards can spare, an arrangement which has hampered its operational capabilities since it was founded in 2005. Read more

Put it down to all those bankers and Eurocrats: Luxembourgers are once again Europe’s richest citizens.

The Grand Duchy’s gross domestic product per person is 283 per cent of the EU average, according to 2010 data released this morning by Eurostat — itself based in Luxembourg. That’s a whopping 6.6 times larger than Bulgaria, the bloc’s laggard, whose GDP per person is a mere 43 per cent of EU output.

That gap between richest and poorest is 0.2 points larger than last year both because Luxembourg’s GDP share rose (from 272 per cent) and Bulgaria’s dropped (from 44 per cent). All figures are adjusted for purchasing power changes, so exchange rates don’t factor in.

 Read more

Peter Spiegel

Acting IMF chief John Lipsky arrives for EU meetings in Luxembourg on Monday

Did the International Monetary Fund really mean to take a swipe at Europe’s continued bickering over how to deal with private holders of Greek bonds? According to John Lipsky, the Fund’s acting managing director, the tough language may have been the result of an editing hiccup. Read more

Corien Wortmann-Kool, a Dutch MEP, trekked to Luxembourg for breakfast this morning with finance ministers from her political group, the European People’s Party. The hope was that meeting over coffee and croissants might help to narrow differences between the European parliament and the member states over the sprawling “six pack” legislation, which would force eurozone countries to rein in spending and make their economies more competitive. It is one of the eurozone’s chief policy responses to a crippling debt crisis.

But the breakfast meeting yielded no breakthroughs – in part because many of the finance ministers did not turn up. After a contentious meeting to discuss the Greek debt crisis that lasted into the wee hours of the morning, they either could not rouse themselves from bed or were simply too busy.

The empty seats at the breakfast table highlighted a broader concern of Wortmann-Kool: that the Greek crisis is so consuming that there is little energy or capacity to complete the six pack, let alone anything else. “As you can imagine at the moment, Greece is the issue,” she told Brussels Blog this morning, complaining that “the decision-making power in Europe seems to be lacking.” Read more

Peter Spiegel

Greek riot police confront protestors in front of parliament in Athens on Wednesday

Just as one Greek crisis appears to be dissipating, another one flares up that risks pushing Athens into default in a matter of weeks. For those struggling to follow along, here’s another one of our quick primers – and a guide for what to watch for in the coming days.

For much of the last month, officials have been fretting that unless they can piece together a new €120bn bail-out for Greece by next week, Athens would run out of money. The first default by an advanced economy in 60 years would ensue, potentially wreaking havoc across the eurozone.

The reason behind the fear was a complicated domino effect that started with the International Monetary Fund: the IMF was going to withhold its €3.3bn in aid due this month unless the European Union could ensure Greece could pay its bills for another year. Greece, however, is going to be unable to pay its bills next year without a new bail-out. Read more

Peter Spiegel

Greek finance minister George Papaconstantinou, right, with his German and Spanish counterparts before the start of Tuesday's meeting.

As expected, Tuesday evening’s meeting of eurozone finance ministers to discuss a new Greek bail-out produced few results, other than an agreement to meet again Sunday evening. That session will be a last-gasp effort to reach a consensus before Monday’s much-anticipated formal ministerial meeting, where officials are hoping a deal can be finalised.

But as we reported in today’s paper, the assembled ministers got a pretty dire picture of what would happen if they decided to proceed with a German-backed plan to get private investors to take part in the bail-out by swapping most existing Greek bonds with new bonds that wouldn’t have to be repaid for seven years.

To give Brussels Blog readers more insight into the thinking of the European Commission, which produced the memo outlining the scenario for eurozone ministers – titled “Options for private-sector involvement in financing a macro-economic adjustment programme for Greece: Note for the Europgroup” – we thought we’d post a few relevant exceprts. Read more

Barroso at EU-Russia summit

José Manuel Barroso, the European commission president, emerged from the latest EU-Russia summit with a conditional pledge from Moscow to lift a blanket ban on European vegetables imposed more than a week ago in the midst of a deadly E. coli outbreak.

Moscow’s concession may bring a conditional sigh of relief from European farmers, who have been devastated by the outbreak. But it underscores the simmering tension between the two trading partners when it comes to the health and sanitary standards that govern agricultural goods.

Russia has become the biggest market for EU exports of meat and vegetables. But if it is an important customer, it is also a hugely demanding one. The chief complaint among EU producers is that Moscow uses arbitrary health and sanitary standards to restrict their goods – be it German pork or Dutch apples. Read more

Peter Spiegel

Monday night, the work of EU finance ministers meeting in Brussels today to unravel the Greek debt crisis got a whole lot harder: Standard & Poor’s downgraded Greek sovereign bonds to just a few notches above default.

If ministers were hoping to “re-purpose” Greek debt in a way that would prevent the eurozone’s first-ever default, S&P is basically telling them: Good luck; we don’t believe you can do it.

But a closer reading of the S&P report may give the eurozone leaders an out: the credit rating agency seems to have ignored the possibility that the new Greek bail-out will opt for a roll-over of Greek bonds, a plan backed by the European Central Bank, instead of a debt swap, which is supported by Germany. Read more

Hungarian finance minister Gyorgy Matolcsy, left, at last month's meeting of EU finance ministers

It is no secret that in the waning days of their European Union presidency, the Hungarians are going for broke trying to broker a deal on the “six pack” – the sprawling legislative package that would provide new tools, including fines, to force member states to rein in excessive spending and reform their economies.

The six pack is one of the bloc’s chief responses to the debt crisis, and pushing it over the finish line would surely rank as the high point of Hungary’s first ever turn in the EU’s big chair. (Depending on whom you ask, it could also mark an historic moment in the march toward an ever-closer European union.)

While the chances of finding common ground between member states, the European commission and a muscle-flexing parliament seemed remote just a few weeks ago, the Hungarians are not ready to give up just yet. The next hurdle comes Tuesday, when Hungarian diplomats will present a possible compromise to EU finance ministers at a dinner in Brussels. Read more

Peter Spiegel

Barroso, left, and Verhofstadt

Fellow Brussels Blogger Josh Chaffin has a fun piece in today’s paper on MEP Guy Verhofstadt, the former Belgian prime minister who has moved into a central role in the suddenly intensifying negotiations over the so-called “Six Pack” – the six legislative measures that would give the EU the power to fine member states that don’t get their fiscal houses in order.

In the story, Josh quotes a 2004 US diplomatic cable we obtained through WikiLeaks where Pat Cox, then the European parliament president, gave Rockwell Schnable, the US ambassador to the EU, a run-down on how Verhofstadt was handling losing the European Commission presidency to José Manuel Barroso. As we said in the story, Cox said Verhofstadt was “devastated”.

As we frequently do here at the Brussels Blog, we thought we’d give readers a bit more on the cable. After the jump, we’ve included the entire section where Cox talks about Verhofstadt. It’s an interesting read.  Read more