Monthly Archives: September 2013

Moscovici, left, and Rehn at press conference where Rehn held the new French budget aloft

After an hour-long meeting this afternoon up in Olli Rehn’s office in the European Commission’s Berlaymont headquarters, Rehn and Pierre Moscovici, the French finance minister, wandered down to a crowded press area to make the expected enthusiastic noises about Paris’s economic reform effort.

But what might be most noticeable about the appearance was not what was said but what was done: Moscovici handed over a copy of France’s 2014 budget, which he had unveiled in Paris just yesterday.

“Pierre has given me the draft budget law for 2014 for France,” Rehn said, holding aloft the document, marked “Projet de Loi de Finances 2014” on the cover. “This is the real spirit of governance at the European level.”

To the uninitiated, the display might have appeared to be a bit of empty symbolism, a courtesy Moscovici was paying to the perpetually besieged Rehn. But there was nothing symbolic about the handover. This year, for the first time in EU history, every eurozone member must submit its national budget to Rehn’s office for review within the next two weeks – before they are debated by national parliaments. 

Reactions around Europe to Angela Merkel’s sweeping victory in Sunday’s German parliamentary elections were mixed. As expected, fellow leaders – particularly those of the centre-right persuasion – sent their congratulations while some on the centre-left called for Merkel to join the Social Democrats in a grand coalition.

In Italy, the Berlusconi-owned newspaper Il Giornale warned the result left the EU “in the hands of the chancellor who helped exacerbate the economic crisis.”

The differing views reflect increasingly polarising opinions towards Merkel across the eurozone. Just last week, the German Marshall Fund published its annual “Transatlantic Trends” report, which included polling of 11 EU countries (plus Turkey) and their views of Merkel’s handling of the eurozone crisis.

 

Will a bank resolution phoenix rise from the ashes of the latest banking union debate? True to form, EU finance ministers used their informal gathering in Vilnius last week to tear into Brussels’ blueprint to empower itself as the top executioner for Europe’s ailing banks, leaving the path ahead uncertain.

This is a rite of passage for banking union proposals: the hammering the Commission endured at a meeting in Cyprus discussing its previous initiative — making the ECB the eurozone’s top bank supervisor — was something to behold.

Nevertheless it looks like a significant re-write of the Commission plan is looming, especially if a deal is to be agreed by December. Here we list 9 compromises to placate the German-led hold-outs, in roughly descending order of likelihood. The vast majority will probably be necessary for a compromise to be reached.

1. Change the executioner

 

This is a bad day for Europe’s financial transaction tax. The legal adviser to EU finance ministers — the Council legal service — has concluded that one of the main provisions of the Brussels designed tax is discriminatory, overreaches national jurisdiction and infringes the EU treaties.

 

In a June letter, Anastasiades called Bank of Cyprus his country's "mega-systemic bank".

After the upheaval of March’s prolonged fight over Cyprus’s €10bn bailout, much of the ensuing debate has focused on the island’s largest remaining financial institution, the Bank of Cyprus, which was saved from shuttering but faces an uncertain future.

The bank’s fate was highlighted in a letter from Cyprus’s president to EU leaders in June, where he argued that eurogroup finance ministers had not properly dealt with the “urgent need” to address the “severe liquidity strain” the bailout had placed on the country’s last “mega-systemic bank”.

“I stress the systemic importance of BoC, not only in terms of the banking system but also for the entire economy,” Nicos Anastasiades wrote at the time.

Well, the European Commission’s soon-to-be-released first review of the Cyprus programme, a draft of which was obtained by Brussels Blog and posted here, shows that the fate of the bank is still somewhat unresolved – and that the EU has decided to make Nicosia’s promise to live up to the original bailout terms a primary condition for easing onerous capital controls which still hamper economic activity.