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.

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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

Wolfgang Schäuble, centre, last week with Jeroen Dijsselbloem, right, and Dutch aide Hans Vijlbrief

EU finance ministers start descending on Brussels this evening for what is expected to be at least two days of marathon negotiations over the second leg of the EU’s nascent banking union: a new agency to deal with failing banks and an accompanying rescue fund to recapitalise them or wind them down.

Senior EU officials have begun to worry that, despite this being the second such gathering in as many weeks, differences are still so significant that a deal may not get done by the time the ministers’ bosses – the EU’s presidents and prime ministers – arrive in Brussels Thursday for their own end-of-the-year summit.

But if it falls to them, officials say the heads of government are unlikely to make final decisions on the resolution system at their two-day summit – and would only set new political parameters for their finance ministers, who might be forced to come back to Brussels over the winter holiday. Joy to the world.

So just where are the differences? The Lithuanians, as holders of the EU’s rotating presidency, helpfully produced a 19-page note for all delegations heading into tonight’s start of the talks, which Brussels Blog got its hands on and posted here. A summary on its main points after the jump. 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

Sweden's Borg, centre, during last night's meeting, where he sparred with his Dutch counterpart

It’s become something of a routine in the EU’s ongoing effort to build a “banking union” that finance ministers try to come to a deal at their normal Brussels meetings – only to fail and call a special emergency session at the 11th hour before a crucial summit.

It happened last December when ministers held a last-minute emergency meeting to agree a new EU supervisor for all eurozone banks; it happened again in June to get to a deal on rules for how much creditors should lose when a bank fails. After yesterday’s 15-hour marathon on a new EU bank resolution authority, ministers will now have one last shot next Wednesday before the last EU summit of the year begins the next day.

The hold-up this time is a dispute over how a new EU-wide bank rescue fund should function. And if anyone is looking for evidence of how much work still needs to be done, consider these two documents which were circulated among finance ministers late last night – one here outlining an emergency backup to the fund and another here on a new treaty to set up the fund. Both are almost completely substance free, meaning a lot must be done before Wednesday. Read more

Wolfgang Schäuble, the German finance minister, during the marathon talks on Tuesday

EU finance ministers meeting late into the night are edging closer to a deal on a new European bank executioner. But as always in the eurozone crisis, ministers have become hung up on small but potential significant details. Officials say the differences are significant enough that a final deal will have to be delayed until next week.

Brussels Blog got its hand on “Terms of Reference” circulated by the Lithuanians, who hold the rotating EU presidency, around 6:30pm this evening that includes some details that are new – but have already raised objections in certain quarters. We’ve posted a copy of the 10-page document hereRead more

David Cameron

David Cameron, UK prime minister, has been loudly campaigning for a crackdown on EU migration in an effort to curb the influx of workers from poorer member states to Britain.

But on Monday, the Tory-led government tried to block key amendments to EU legislation that seeks to do exactly that: reduce the inflow of workers from central and eastern Europe to wealthier member states.The so-called “posting of workers directive” was agreed by member states in 1996 to make it easier for EU workers to carry out work outside of their home country for a limited period of time.

But a number of countries led by France, Germany and Belgium have over the years complained that the directive was being used inappropriately to undercut local labour rules in richer countries. Essentially, workers from poorer countries offered their services at below market prices without asking for any social security contributions. Read more

Mario Draghi, left, stands next to Noonan at last week's finance ministers' meeting

Given the eurozone crisis has, for more than a year, failed to seriously rankle the financial markets, those of us still preoccupied with its aftermath and how it is changing Europe can occasionally feel like a small band of obsessives offering up Talmudic pronouncements of interest to a dwindling number of fellow crisis junkies.

But occasionally one of those textual debates rises to the level of importance that’s worth the attention of a broader audience. And one of those occasions seems to have occurred over the last couple of weeks regarding Ireland and the European Central Bank’s bond-buying programme, known as Outright Monetary Transactions (OMT).

For those who haven’t been following this obsessively, the discussion is important because most officials and market analysts credit OMT with, essentially, ending the hair-on-fire phase of the eurozone crisis last year. Read more

Demonstrators in Berlin protest against alleged US spying activities in July.

In today’s dead-tree edition of the FT, we report on a draft of a stinging report the European Commission will issue Wednesday which could send shock waves through the US tech industry: unless the Obama administration changes the way it handles online data of European citizens, American companies like Google and Facebook will have to find another way to do business in the EU.

Given the importance of the Commission’s review of the 13-year-old “safe harbour” agreement with the US – which allows American firms to operate in Europe under US privacy rules because of an assumption that Washington treats the data similarly to European governments – and the fact we got our hands on it before its official release, we thought Brussels Blog readers might be interested in a bit more detail about the Commission’s findings. Read more

Van Rompuy at last month's EU summit. Will December's summit agree to the contracts?

When is a eurozone bailout not a eurozone bailout?

It’s a question that sherpas to the EU’s presidents and prime ministers will be grappling with on Tuesday when they are scheduled to debate a new proposal from Herman Van Rompuy, the European Council president, intended to further centralise economic decision-making in Brussels.

Under the 9-page plan (first uncovered by our friends and rivals at Reuters; we’ve posted the copy we got our hands on here), a country that is struggling economically could agree to a “contractual agreement” with Brussels that legally codifies its economic reform programme.

In return, that country could avail itself of a low-cost loan that would only be disbursed in tranches to insure compliance with the “contractual arrangement”. Oh, and one other thing: the European Commission would monitor the country to make sure its complying with the “contractual arrangement”.

Legally-binding economic reform agreement. Low-cost eurozone loans. European Commission monitoring missions. Sounds a bit like a bailout, no? Well, because it would be available to all eurozone countries, Van Rompuy doesn’t call it a bailout. In eurocrat-ese, it’s a “solidarity mechanism”. And if sherpas give it the signoff Tuesday, it will be debated by EU leaders at their December summitRead more

Rehn, left, with President José Manuel Barroso at Wednesday's press conference

It may have appeared that Olli Rehn, the EU’s economic chief, today was siding with Washington in the going transatlantic tussle over Germany’s current account surplus by launching an inquiry into whether the surplus was harming growth in the rest of Europe.

But Rehn went out of his way to make clear that he was no fan of the US Treasury department report that pushed the dispute into overdrive last month.

Speaking at a press conference announcing the European Commission’s decision to launch the “in-depth review” of Germany’s surplus, Rehn said the US Treasury’s report was “to my taste somewhat simplified and too straight forward”. Read more

Rehn, right, consults with Germany's Wolfgang Schäuble at last month's IMF meetings.

Over the last few weeks, the normally über-dismal science of German economic policymaking has unexpectedly become stuff of international diplomatic brinkmanship, after the US Treasury department accused Berlin of hindering eurozone and global growth by suppressing domestic demand at a time its economy is growing on the backs of foreigners buying German products overseas.

The accusation not only produced the expected counterattack in Berlin, but has become the major debating point among the economic commentariat. Our own Martin Wolf, among others, has taken the side of Washington and our friend and rival Simon Nixon over at the Wall Street Journal today has backed the Germans.

Now comes the one voice that actually can do something about it: Olli Rehn, the European Commission’s economic tsar who just made his views known in a blog post on his website. Why should Rehn’s views take precedence? Thanks to new powers given to Brussels in the wake of the eurozone crisis, he can force countries to revise their economic policies – including an oversized current account surplus – through something soporifically known as the Macroeconomic Imbalance Procedure.

On Wednesday, Rehn will announce his decision on whether Germany will be put in the dock for exactly what the US has been accusing it of: building up a current account surplus at the expense of its trading partners. And if Rehn’s blog post is any indication, he’s heading in exactly that direction. Read more

So this is it. Google’s revised offer to settle the European Commission probe into its search business has been described extensively in the press. But the actual text and screenshots of how new Google searches will look under the proposal were not published, much to the annoyance of the complainants asked for confidential feedback. One of the parties has decided to revolt and set the documents free. We’re publishing them here in full.

Before the legal text, a screenshot: this is what Google proposes its EU sites will look like for a restaurant search. Note the three “Almunia links” — what negotiators are calling the forced search results that display competitors’ offerings — that appear under the paid-for “sponsored” Google search results. Under the revised offer, they are spruced up with bigger fonts, icons and two lines of text.

And here is what a search for an iPod would look like. It’s important to note that the Almunia links (to rival price comparison sites Supaprice, Kelkoo and Shopzilla) are still paid for through an auction, but the minimum offer price has been reduced. More on the objections to that at the bottom of the post.

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The three-year Brussels probe into Google’s search business seems to be meandering towards a thundering anticlimax. With every legal twist, revised settlement offer and procedural shuffle, the case is losing the zip that made it a cause célèbre in the antitrust world. The opposing camps, meanwhile, appear ever more entrenched and polarised. Nobody is satisfied.

For now Joaquín Almunia, the EU competition chief, is still ploughing towards a settlement, rather than issuing formal charges. But it has been a bumpy ride. The protracted process will have many more months or years to run, especially with legal appeals. There could still be surprises, even perhaps a charge-sheet, the so-called “statement of objections”. The anti-Google camp are far from surrendering. The details still matter.

The latest inch-forward came on Monday with Almunia seeking feedback on Google’s second settlement bid. The terms of the latest package will not be published, for various reasons that are hard fathom. Even so, all the complainants and most journalists covering the case now have a copy of the offer or have been talked through it. Below is a medley of insights on what is on the table and what to expect next: Read more

Ireland's Enda Kenny, left, and Germany's Angela Merkel meeting last year in Berlin

With just over a month of funding left in Ireland’s €67.5bn three-year bailout, Irish prime minister Enda Kenny sent a subtly-worded letter to his fellow EU leaders as they gathered in Brussels today for their two-day summit.

At first glance, the letter (we’ve posted a copy here) seems to simply repeat messages that Kenny has made in the past: he’s weighing whether to request a line of credit after they exit the bailout; he wants quick completion of the eurozone’s “banking union”; he continues to hit his bailout targets.

But a closer read between the lines shows a more complicated game going on. In essence, Kenny is reminding other leaders they have failed to live up to promises made to Ireland last year that would have significantly lowered the Dublin’s sovereign debt levels. An annotated look at the letter after the jump.

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