Outgoing Cypriot president Demetris Christofias addresses the European Parliament Tuesday.
In this morning’s dead-tree edition of the FT, fellow Brussels Bloggger Josh Chaffin has a report on Cypriot officials launching an offensive to convince other eurozone governments that it is no longer a haven for money laundering.
The effort has included summoning EU ambassadors in Nicosia to the Cypriot finance ministry, where they were given a 23-slide presentation detailing the country’s anit-money laundering efforts. As is our practice here at the Brussels Blog, we’ve decided to post a copy of the report here. Read more
Juncker, right, with potential successor Pierre Moscovici, France's finance minister
Jean-Claude Juncker, the Luxembourg prime minister who heads the eurogroup of finance ministers, set off another round of speculation about his potential successor Monday night when he reiterated that he wanted to step down from the job either by the end of the year or early next year.
Senior officials who should know about leading candidates insist nobody has emerged as a clear front-runner to take over the post, despite Juncker’s Shermanesque declaration. But that hasn’t stopped the guessing game. The criteria are unhelpfully vague. The latest EU treaty basically says that anyone with a pulse can hold the job:
The Ministers of the Member States whose currency is the euro shall elect a president for two and a half years, by a majority of those Member States.
But after two days of gossiping in the halls, here is the sum total of what Brussels Blog has gleaned on the topic, boiled down to three groups of candidates. Read more
This issue has always been a potential dealbreaker: how will Germany’s politically powerful network of small public banks — or Sparkassen — sit under the bailiwick of a single bank supervisor? Until now we’ve mainly seen diplomatic shadow-boxing on the matter. But that fight is beginning in earnest.
As is the custom in Brussels, some ambiguous and unclear summit conclusions are helping spur things along. Chancellor Angela Merkel last week hailed a one particular sentence as a breakthrough for Germany: that the European Central Bank would “be able, in a differentiated way, to carry out direct supervision” over eurozone banks.
To her, that vague language was recognition that the Sparkassen would be treated differently — the ECB would concentrate on big banks and those that are facing troubles, and leave the rest to national authorities. Read more
Tomorrow will mark another milestone in the long meandering path towards a international financial transaction tax, otherwise known as the Tobin tax.
What exactly will happen? Well the European Commission, the EU’s executive arm, will approve a proposal that paves the way for an avande-garde of member states to agree their own Tobin regime. In EU jargon, it’s a proposal authorising “enhanced cooperation”.
Ironically the step forward will come in the shape of a legal admission of defeat, a formal acceptance that there is at present no consensus for a pan-EU levy, let alone enough for a global one.
It is largely a formality. But it means the 11 EU countries that want the levy will be one procedure closer to setting up their own Tobin tax. Such breakaway groups are considered a last resort under EU rules, so any enhanced cooperation must clear various legal hurdles, including proof that a pan-EU deal is impossible for now. Read more
Germany's Angela Merkel, left, and France's François Hollande at the EU summit in Brussels.
With the eurozone crisis response slowing to a crawl, Friday’s early-morning agreement setting a timetable for a new single eurozone bank supervisor is probably best judged with textual analysis, since the deal is so incremental it’s hard to really judge without a close look at the details.
The key change between the communiqué agreed in June and the one agreed Friday is the firming up of when, exactly, the new supervisor, to be run by the European Central Bank, will start and how long it will take to be phased in. The June deal was immensely vague on this point:
We ask the Council to consider these proposals as a matter of urgency by the end of 2012.
Hollande arrives at the Party of European Socialists gathering ahead of the EU summit.
François Hollande, the French president, has just arrived at the socialist confab at The Square meeting centre in Brussels. Read more
Van Rompuy sent the note to national delegations yesterday, ahead of today's summit start.
The issue of a collective budget for the 17 eurozone members has come roaring out of nowhere to become one of the most contentious issues heading into today’s EU summit. It’s included both in the draft conclusions sent around by Herman Van Rompuy, the European Council president, and in his report on the future of the European Monetary Union.
The proposal is so contentious – the French see it as a nascent supranational budget that would spend on things such as unemployment insurance; the Germans a small, targeted fund to help start short-term programmes such as job training schemes – that Van Rompuy yesterday sent around a “background note” to national delegations to flesh out the idea.
The note, seen by Brussels Blog, contains eight separate questions about the eurozone budget and other parts of his EMU report that have drawn controversy, in an apparent attempt to steer tonight’s discussion around the summit table. We’ve posted a copy after the jump. Read more
Legal opinions from the top lawyer to EU ministers are not intended for mass circulation. They are usually virtually unquotable, often studiously ambiguous and always highly political. But the Council legal service’s take on the European Commission plan for a single bank supervisor is a classic.
The headline is that the Commission’s supervision blueprint — as announced in September — is illegal in key parts. More important, though, is the detail of the argument and the challenges it poses to finding a diplomatic solution before the end of the year.
Before diving into the argument and quoting key sections, it is worth sumarising and explaining some of the implications. Read more
Britain's David Cameron meets EU's Herman Van Rompuy at Downing Street last year.
Aides to Herman Van Rompuy, the European Council president, have circulated an updated draft of conclusions for next week’s EU summit and, according to a copy obtained by Brussels Blog, they have retained controversial proposals for a single eurozone budget and “contracts” between eurozone countries and Brussels on economic reform programmes.
Unlike the previous proposal by Van Rompuy’s staff, which was labeled “guidelines” and intended only to generate discussion, the current text (a copy of which we’ve posted here) comes in formal “draft conclusions” form – a technical yet significant difference, meaning there was widespread support for the ideas in talks with eurozone member states.
As we reported ahead of this week’s Conservative party conference in the UK, the idea of a eurozone budget has even gained support from the British government, which views it as a way for the 17 eurozone countries to increase their spending on a European level even as the UK freezes its commitment to the EU-wide budget for all 27 members.
However, in a tweak of the Van Rompuy language that appears aimed at Britain, the communiqué makes clear that any plans for a eurozone budget – or “fiscal capacity” in eurospeak – would be separate from negotiations over the EU-wide budget, which is known as the multiannual financial framework: Read more
In today’s dead-tree version of the FT, we have a front-page story on an eight-page “draft guidelines for the conclusions” for this month’s EU summit, a document that includes some bold new ideas, like requiring eurozone countries to sign “individual contractual arrangements” with Brussels on their economic reform plans.
We thought we’d post the document (see it here) for Brussels Blog readers to get a fuller view. The parts we found most interesting begin on page 7. Senior officials caution the draft is being used to stimulate debate so that Herman Van Rompuy, the European Council president, can come up with a more concrete consensus heading into the summit about what can be achieved.
Indeed, the cover sheet of the draft calls it a “state of progress regarding the various topics on the agenda”; still, since it was cobbled together after Van Rompuy’s series of meetings with eurozone leaders over the past month, it reflects the thinking of a lot of national leaders, particularly in the bloc’s largest countries. Read more
Who will succeed José Manuel Barroso as president of the European commission?
That question has long been debated around the corridors and coffee bars ofBrussels. But it gained special urgency after Barroso’s state-of-the-union speech in Strasbourg last week. In it, Barroso suggested that each political party nominate their own choice for commission president and place that person atop their list for the 2014 European elections.
The idea is to generate some much-needed excitement for EU elections that tend to suffer from paltry voter turnout.
“This would be a decisive step to make the possibility of a European choice offered by these elections even clearer. I call on the political parties to commit to this step and thus to further Europeanise these elections,” Barroso said.
So that begs the question: who is generating the most buzz as the next commission president? Who has the right stuff? As a service to our readers, Brussels Blog has decided to present a list of early contenders from each of the major political families. Read more
Is it possible to have one supervisor for eurozone banks, while keeping 17 different paymasters for when things go wrong?
It is the big potential problem of phasing in a banking union – while prudential responsibility is centralized under one supervisor, the means to pay for bank failure isn’t. One cynical diplomat likened it to “telling all cars to suddenly change sides and drive on the left of the road – but leaving the lorries to drive on the right.”
Just think through what would happen in the case of a failed financial institution once the European Central Bank takes over supervision.
Under the Brussels banking union plan, the ECB will have the power to shut down the lender by removing its license to operate. But in practice it would require the authorisation of the bank national authority. As we know, some banks perform vital functions for the economy and are too big to fail. For the ECB to pull the plug, someone would have to be available to pay for winding it up or bailing it out. Read more
Luxembourg's Yves Mersch, left, arriving at an ECB executive board meeting in Finland last year.
Yves Mersch’s path to a seat on the European Central Bank’s powerful six-member executive board has been rocky.
The head of the Luxembourg central bank was, at first, not even considered a leading candidate for the position, which was being vacated by a Spaniard and, Madrid assumed, would be filled by a Spaniard. But a caucus of northern European countries balked at putting another southerner on the board, so inflation hawk Mersch became their candidate.
That set off months of nasty backroom battles, where the Spanish insisted on compensation – at one point they held out for the head of the new €500bn eurozone rescue fund, which was supposed to go to German economist Klaus Regling – in exchange for acceding to Mersch. Luxembourg retaliated by holding up plans to give Spain more time to hit tough budget targets.
In the end, the northerners won out. Mersch was nominated, and Spain was left empty handed. Everyone thought the fight was over. Everyone thought too soon: this morning, the European Parliament announced it was postponing Mersch’s confirmation hearing scheduled for Monday because no women candidates were considered for the job. Read more
Monti, left, and Katainen at last week's meeting between the two prime ministers in Helsinki
It is axiomatic that politics make strange bedfellows, but it would be hard to find stranger bedfellows than Finland, the orneriest of the eurozone’s austere north, and Italy, the biggest debtor in its troubled south.
Even before the eurozone debt crisis put the two countries on a collision course, Helsinki and Rome had their run-ins, particularly after Parma beat out a Finnish competitor to host the European Food Safety Authority – and then-prime minister Silvio Berlusconi poured salt in the wound by suggesting EU officials would prefer Parma’s famous ham to Finnish smoked reindeer.
But are there suddenly signs of a thaw – or even an alliance? First, Berlusconi’s successor, Mario Monti, last week decided to visit Helsinki for meetings with Jyrki Katainen, Finland’s prime minister. Now, top officials from Berlusconi’s centre-right party appear to be adopting a Finnish plan to help lower Italian borrowing costs. Read more
Spain's Mendez de Vigo, right, with his Danish counterpart at a Brussels meeting in May.
An otherwise uneventful meeting of 27 European ministers in Brussels was upended Tuesday when Inigo Méndez de Vigo, Spain’s EU minister, issued a statement saying Madrid, Rome and Paris all agreed countries were not doing enough to implement eurozone crisis decisions taken at last month’s high-stakes summit.
The statement (see it here, in Spanish) appeared to be a coordinated attack on Germany, where senior officials have spent weeks sending conflicting messages on what, exactly, was agreed at the summit and when decisions will be implemented – a big deal for Spain, since the measures could eventually mean the eurozone and not the Spanish government will be liable for debt incurred during Spain’s bank bailout.
One problem: there was no three-country agreement. And now Rome and Paris are running away from Méndez de Vigo’s statement as fast as they can. Read more
Planning for a European banking union is racing ahead, in spite of the considerable political obstacles. The vision is for two, five or even ten years in the future. But be in no doubt: the institutional turf war is already afoot.
It was on display today in the pages of the international press. Speaking to the FT Jose Manuel Barroso, the European commission president, laid out his vision of a banking union built on the foundations of existing EU institutions.
At the same time Christian Noyer, the governor of the Bank of France, made his pitch in the Wall Street Journal for eurozone central banks to provide “the backbone of the financial union”.
The clashing views highlight the great unanswered question of the banking union: if power over banks is centralised, who will be given control? Cui bono? These three scenarios lay down the broad templates for a union, and the institutions that would stand to win and lose depending on the outcome.
1. An EU banking union
Broadly as outlined by Barroso. A single supervisor, resolution regime and deposit guarantee fund serving all 27 member states. Should the UK refuse to take part — which it will — arrangements would be found to enable the other members to go forward. This union would cover countries outside and inside the single currency club, but remain within an EU framework.
Treaty change would not be necessary, at least according to the commission. Read more
Some issues to bear in mind when considering whether a European banking union is a realistic possibility. The difficulties highlighted are not impossible to overcome. But it would be a wrench.
1. Germans don’t like strong EU supervision of their banks. Berlin is fond of federal EU solutions. But it is even more keen on running its own banks. The political links — especially between the state and regional savings banks — are particularly strong in Germany. To date Berlin has proved one of the biggest opponents of giving serious clout to existing pan-EU regulators.
2. Germans really don’t like strong EU supervision of their banks. There is again some wishful thinking about Berlin shifting position. Angela Merkel did say she supported EU supervision. But there were important caveats. She referred to supervision of “systemically important banks” — which is likely to exclude the smaller Sparkassen banks and the 8 Landesbanks. To some analysts, this represents a giant loophole. She also did not explain what kind of supervision. Berlin may only support tweaks to the current system.
3. Germans don’t like underwriting foreign bank deposits. Another pillar of a banking union is common deposit insurance. To Berlin this proposal represents another ingenious scheme to pick the pocket of German taxpayers. A weaker proposal to force national deposit guarantee schemes to lend to each other in emergencies has been stuck for two years in the Brussels legislative pipeline. Most countries opposed it. German ministers say it could be considered, once there is a fiscal union across the eurozone. So don’t wait around.
Francois Hollande rather enjoys issuing blood-curdling warnings to the City of London. During the campaign he declared his “real enemy” to be ”the world of finance” and post-election he is not toning down the rhetoric.
How ironic then that Hollande’s first major piece of EU financial regulation will see him largely siding with European banks (and yes, that includes the British ones) against calls from the UK and ECB for tougher rules.
Diplomacy in Brussels can be a funny business. Hard as it is to believe, in this negotiation the big beasts of City banking have been privately cheering on the French. Next week, when finance ministers meet to negotiate a deal, we’ll all be able to see if Hollande changes Paris’ tune. Read more