EU

Jean-Claude Trichet, right, with the parliament's economic committee chair, Sharon Bowles

The troika of bailout lenders has not been getting much love at the European Parliament’s ongoing inquiry into its activities in recent weeks. But the criticism is not just coming from MEPs in the throes of election fever. Predictions of the troika’s demise have come from some unexpected quarters, including current and former members of the European Central Bank executive board.

During the hearings, MEPs have particularly criticised the troika — made up of the International Monetary Fund, European Commission and the ECB — for its overly optimistic growth forecasts for bailout countries, which have been repeatedly revised downwards. Perhaps unsurprisingly, they have also suggested that the troika be subject to greater parliamentary oversight.

Hannes Swoboda, the Austrian social democrat who heads the centre-left caucus in the parliament, went further, saying the body is undemocratic, hostile to social rights and that the EU would be better off without it. Read more

EU foreign policy chief Catherine Ashton, left, with Ukrainian opposition leaders in Kiev last week

One of the lingering questions left after Ukraine’s failure to sign its long-negotiated integration treaty with the EU at a November summit in Vilnius – setting off months of protests in Kiev – is whether more needs to be offered to former Soviet republics than the current “Eastern Partnership”, which promises “association” but not future membership with the EU.

A Swedish-led effort to restart that conversation will be discussed at Monday’s meeting of EU foreign ministers, according to a “restricted distribution” document handed out to all 28 capitals ahead of the gathering. According to the “non-paper” – which Brussels Blog has posted here – 12 countries have signed onto the Swedish initiative, most of them former Soviet-bloc EU members, but also the UK and Germany.

Among other things, the paper, titled “20 points on the Eastern Partnership post-Vilnius”, argues quick signatures of treaties with Georgia and Moldova, the only two remaining after Ukraine and Armenia reneged at the last minute. Read more

By Christian Oliver

Expectations from the EU’s 2030 energy and climate targets: The EU will on Wednesday propose a series of energy and climate targets that will have a profound impact on how the continent generates its power. The overarching goals will be accompanied by proposals on the development of shale gas and measures to rescue the EU’s carbon market, which has fallen into disarray. The measures are being hotly contested as the targets are seen as vital to determining power prices and industrial competitiveness.

Early drafts of the package and people close to the talks suggest that the following are the most likely outcomes: Read more

Verhofstadt, right, with his centre-right counterpart in the European parliament, Joseph Daul

Despite the hopes advocates had for a full-scale political campaign for European Commission president this year, the contest thus far has been a rather staid affair: German Social Democrat Martin Schulz, the European parliament president, sewed up the centre-left’s nomination unopposed and nobody yet has formally thrown their hat in the ring on the centre-right.

The one place where an all-out race is underway, however, is among the centrist Liberals, where two high-profile candidates – Guy Verhofstadt, the former Belgian prime minister and Liberal leader in the European parliament, and Olli Rehn, the Finnish economic chief on the European Commission – are locked in a neck-and-neck fight to become the party’s presidential candidate.

The chance of the Liberals – whose two largest parties, the British Liberal Democrats and the German Free Democrats, are expected to take a drubbing in May’s European elections – actually getting the Commission presidency job are slim. But that hasn’t stopped Rehn and Verhofstadt from engaging in a spirited battle ahead of the party voting, which opens January 24 and ends February 1.

Olli Rehn

The latest salvo is over Verhofstadt’s desire to have a two-man debate, which Rehn has apparently refused to participate in. According to an internal party email sent to the two men yesterday and obtained by Brussels Blog (and posted here), a Liberal party leader – whose name has been redacted – says the Rehn team has begged off:

I have this afternoon been informed that it will not be possible for you, Olli, to commit to such a debate by today’s deadline. I have therefore no option than to cancel our plans for a debate and propose to move to our alternative proposed solution, that I have previously communicated to both of you, which is the separate Q&A sessions by each nominee to be webstreamed.

 Read more

Merkel mentioned the "contractual arrangements" in maiden Bundestag speech of her third term

Although the two-day EU summit that begins today in Brussels is nominally about defence policy, the main event most delegations were watching was whether summiteers would sign up to a German-backed plan that would require all eurozone countries to sign annual contracts with Brussels obligating them to liberalise their economies.

These so-called “contractual arrangements” have been bubbling around for more than a year, but fiercely resisted by Italy and other southern eurozone countries, who view it as another effort by Berlin to dictate economic policy for the rest of the currency union. Angela Merkel, in her maiden speech before the Bundestag after her re-election as German chancellor yesterday, mentioned them yet again as a necessity.

Paris has led the charge to change contracts into more of a two-way street: If eurozone countries are going to be forced to sign such agreements – which in many ways echo the “memorandums of understanding” that now are forced on bailout countries like Greece– then they should get some financial assistance in return.

Originally, Pierre Moscovici, the French finance minister, advocated a eurozone budget accessible to countries that participate and would pool responsibility for things like unemployment insurance. That idea didn’t go very far, but in the last draft of the summit communiqué sent to national delegations last night (and obtained by Brussels Blog) suggests other financial sweeteners – like loans, grants or guarantees – might be in the offing. Read more

Does David Cameron now need a reopening of the EU's treaties more than Angela Merkel does?

We have hardly heard a peep from Britain on the latest leg of Europe’s banking union. It is natural enough given the UK will be outside the proposed system for shuttering shaky banks, which is primarily for eurozone countries. But do not imagine it is unimportant for London. Strictly in terms of David Cameron’s plans to renegotiate Britain’s place in the EU, there has perhaps been no more worrying a development in Brussels all year.

Why? Cameron’s renegotiation strategy is partly based on this assumption: the eurozone will need a banking union to survive, and a fully-fledged banking union will need a re-write of EU treaties before 2017. That necessity opens the door for Cameron to press demands to repatriate powers.

The trouble is that this week’s banking union negotiation is showing that Germany and the eurozone will go to great lengths to avoid giving Cameron the leverage he craves. In one senior EU official’s words: “Nobody wants to give the keys to the UK”. Read more

ECB chief Mario Draghi, left, with eurogroup chair Jeroen Dijsselbloem at last night's meeting

Whenever it comes to eurozone backstops, it usually pays to be beware of fine print and Germans bearing gifts.

Eurozone finance ministers reached a tentative agreement in the early hours of this morning that is significant in this sense: it paves the way for a final deal on a common resolution system for the banking union.

In terms of substance, the big breakthrough is a commitment to establish a common backstop — by 2025 at the latest — that will provide taxpayer support to the bank resolution system, should its resources be overwhelmed in a crisis.

Germany was staunchly opposed so it represents an important concession to Italy, France and the European Commission. What it does not do, however, is detail what form that backstop should take — that is left open. And they have a decade to fight over what the commitment actually entails. Read more

EU's Füle, right, with Ukrainian president Viktor Yanikovich in Kiev earlier this year

Is Twitter the right place to announce major foreign policy changes?

That’s the question on the lips of several EU foreign ministers today after Stefan Füle, the EU Commissioner in charge of neighbourhood policy, put a landmark integration deal with Ukraine on hold via these two tweets Sunday morning.

On his way into to a meeting of EU foreign ministers on Monday Morning, Frans Timmermans, the Dutch foreign minister, attacked not only the medium, but the message as well.

“I think that making policy on the basis of a Twitter notice by Mr Füle is perhaps not the best way of approaching this is issue,” said Mr Timmermans. “I believe the best signal we can give Ukraine is simply that the door is still open.” Read more

Are the Dutch attempting to lead a mutiny on bank reform? It is hard to tell whether the objections are serious enough to unravel the deal last week on the EU rules for handling a bank crisis. But something mildly rebellious is certainly afoot. And it could end in another golden-gloves showdown between Jeroen Dijsselbloem, the Dutch finance minister, and his Swedish sparring partner Anders Borg.

At issue is the draft deal on the bank recovery and resolution directive (BRRD), which was agreed between negotiators for the European parliament and EU member states on Wednesday, brining to a close months of difficult talks. The reforms give all EU countries a rulebook at national level to handle a bank in trouble and, if necessary, bail-in creditors to help foot the bill.

The Dutch, however, are unimpressed. They think the draft agreement offers too much freedom to governments wanting bailout banks with public money, rather than impose losses on bondholders. And it looks like they have a significant number of allies. Read more