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
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.
Germany's Angela Merkel at Thursday's cabinet meeting, where new budget targets were decided.
After last month’s tension-filled EU summit – an all-night affair to agree the EU’s €960bn seven-year budget – the two-day gathering beginning today is expected to pale by comparison to a considerable degree. “A bit boring is not a bad thing on this occasion,” said one senior diplomat involved in pre-summit negotiations.
Although Hungarian prime minister Victor Orbán is expected to address the international press today following his government’s controversial passage of constitutional amendments which critics claim may violate the rule of law, the only real issue that could potentially generate much heat inside the gathering is the ongoing austerity versus growth debate that has been swirling since last month’s Italian elections.
There has already been some shadow boxing on the issue between France’s François Hollande and Germany’s Angela Merkel ahead of the summit – with Hollande making the case for France to get a one-year pass on its EU deficit targets, while Merkel conspicuously announcing her own intention to get to a balanced budget a year earlier than required. Read more
IMF chief Lagarde, left, with the EU Commission's Olli Rehn at last night's meeting in Luxembourg
For those trying to figure out what the highly-anticipated EU treatise to be unveiled at next week’s summit on the future of the eurozone will say, it’s worth having a closer read at the International Monetary Fund report presented last night to eurozone finance ministers at their gathering in Luxembourg.
The concluding statement presented by Christine Lagarde, the IMF chief, contains almost all the elements being weighed by EU leaders who are writing the report, and Lagarde was quite open about the fact she actively consulted two of the institutions involved in its drafting: the European Central Bank and the European Commission. Indeed, Olli Rehn, the commission’s economic honcho, explicitly endorsed the report at a press conference last night.
The most likely areas of consensus are in Lagarde’s three long-term recommendations for a eurozone banking and fiscal union, though several of them remain controversial, particularly in Berlin, and it remains unclear whether the four EU institutions drawing up their plan will be as willing to confront the German government as head-on as the IMF has. Read more
Next week marks the one-year anniversary of the tidal wave that unleashed a disaster at Japan’s Fukushima nuclear facility and forced a profound shift in Europe’s nuclear debate.
Within weeks of the disaster, Angela Merkel, the German chancellor, decided to switch course and phase out the country’s nuclear plants – a move that was subsequently copied by Switzerland and Belgium.
Talk of a nuclear revival that once filled the air in Italy and other member states – encouraged by the industry and supportive governments – has been dashed. Even in France, Europe’s nuclear champion, public opinion has turned increasingly negative.
But in spite of Fukushima, one European Union member state has lost none of its nuclear ardour: Lithuania. Read more
Angela Merkel and José Manuel Barroso talk on the sidelines of Monday's EU summit.
The Deutsche Börse and NYSE Euronext exchange mega-merger is dead, the objections of competition officials prevailed, but it followed a tremendous political tussle in Brussels, full of intrigue and skulduggery. Here are some of the snippets from the final days:
The Merkel change of heart: A great mystery in this merger case was the deafening silence from Berlin. Angela Merkel, the German chancellor, was always said to be on the verge of intervening on behalf of the German exchange. But opportunities to say something came and went. Her reluctance was put down to coalition divisions and a complicated political picture in Hessen, the home state of DB.
But in the final days, Merkel did have her say, at least in private. Read more
France and Germany may be divided over the key issues on the agenda of today’s European Union summit. But President Nicolas Sarkozy and Chancellor Angela Merkel have found common ground in the need to hammer Italy over its heavy debt load.
The leaders of the EU’s biggest and most powerful member states called in Silvio Berlusconi, the Italian prime minister, this morning for a pre-summit tongue-lashing. The message they delivered, according to one diplomat familiar with the discussion, was that Italy must deliver “specific and convincing reform measures soon.” They communicated a similar message to Berlusconi at a gathering on Saturday evening held by the centre-right European People’s Party.
Sarkozy also expressed his displeasure with Italy’s refusal to make way for a Frenchman on the European central bank’s executive board, according to the diplomat. France is due to lose its seat when Jean-Claude Trichet steps down as ECB president at the end of the month to be replaced by Mario Draghi, the outgoing president of the Bank of Italy. Berlusconi infuriated the French this week when he declined to free up a seat on the powerful decision-making committee by refusing to name current board member Lorenzo Bini Smaghi as Draghi’s replacement. Read more
Gerhard Schröder’s unexpected re-emergence as a voice for European fiscal integration may or may not change minds in increasingly eurosceptic Germany. But in our half-hour interview, the former chancellor made a pretty heart-felt case that the country’s leadership should be pressing ahead with pro-EU economic policies, even if they are unpopular.
Given the limited space we have in the daily newspaper, we thought Brussels Blog readers might be interested in a fuller account of his views on the issue. As we noted, Schröder was careful not to directly attack his successor, Angela Merkel, for her recent handling of the crisis – something done last month by Helmut Kohl, who unlike Schröder is a member of Merkel’s own political party.
But he did take a more subtle dig. He made the case that politicians need to push through unpopular policies if they believe in them – and then noted he paid the price for reforms in German labour and social benefit policies, collectively known as Agenda 2010, which are now credited with leading to an economic turnaround. Read more
Merkel and Sarkozy at their post-summit news conference Tuesday evening in Paris
The letter Nicolas Sarkozy and Angela Merkel sent yesterday to the president of the European Council, Herman Van Rompuy, contains a lot of ideas that have been discussed previously in Brussels and not gone very far, raising questions as to how much of the new Franco-German agenda can actually be implemented.
But reading between the lines of the letter, one theme that has gone almost unnoticed is the seeming sidelining of the institution that is supposed to be at the centre of European integration: the European Commission, the EU’s executive branch headed by José Manuel Barroso.
Suggesting that Van Rompuy head regular summits of eurozone heads of state as “the cornerstone of the enhanced economic governance of the euro area” is only part of the seemingly anti-Commission tenor of the plan. Read more
Beleaguered Japanese officials are already grappling with a humanitarian crisis wrought by a biblical earthquake and tsunami, and the prospect of apocalyptic meltdowns at a pair of stricken nuclear reactors. Add to their list of woes one European commissioner.
That would be Gunther Oettinger, the energy commissioner, whose ill-judged remarks about the crisis on Wednesday have helped to make a bad situation worse. Read more
In this morning’s paper, we have a scoop on the contents of the draft conclusions for today’s European summit, which were circulated to heads of government by Herman Van Rompuy, the European Council president, ahead of the meeting.
As is our practice here at the Brussels Blog, we thought we’d give our readers a deeper dive into the document itself by posting its contents, with some explanatory annotations. We’re just posting the segments on the eurozone economy; there are several pages on energy and innovation, which is the nominal main subject of the summit.
The section on the debt crisis is included as an addendum at the end of the conclusions and entitled “Statement by the Heads of State or Government of the Euro Area and the EU Institutions”. Be forewarned that this could change over lunch, when leaders debate its contents: Read more
Here at the Brussels blog, we’re keeping a close eye on the run-up to next Friday’s rare one-day summit of European Union heads of government. And nothing is occupying more of our attention than whether leaders will actually tackle the ongoing eurozone crisis at the conclave.
One of the events that had been closely monitored by the tea-leaf readers was Tuesday night’s private dinner outside Berlin between the two main antagonists in the debate, José Manuel Barroso, president of the European Commission, and Angela Merkel, the German chancellor.
According to people we have talked to, however, there was little meeting of the minds. Even though the dinner lasted for well over three hours – and almost all of it was occupied by discussions of economic policy – there is still no agreement on whether to put reforms touted by Barroso, including a revamp of the EU’s €440bn bail-out fund, on next week’s agenda. Read more
Angela Merkel, the German chancellor, was one of the last to arrive at the pre-summit gathering of centre-right leaders outside Brussels, but on the way in, she had some calming words to offer.
Some diplomats had feared Merkel would insist on new language to be included in the otherwise benign treaty amendment scheduled to be debated tonight, making the approval process more complicated.
But she told reporters she is backing “very limited treaty change”, a signal there will likely be little opposition from Berlin. Read more
The EU’s final two-day heads of government summit of 2010 starts Thursday and early betting is that it will be much quieter than the last time the 27 leaders assembled in Brussels, a gathering that set off a bond market panic which the continent is still recovering from.
The main event will be Thursday night, when the leaders are expected to sign off on a brief change in the EU’s treaty to allow for the creation of a new financial rescue system to replace the current, temporary €750bn bail-out fund.
There is still some nervousness that Angela Merkel, the German chancellor, may push for additional language in the text to make explicit that the new bail-out system can only be accessed as a “last resort,” or ultima ratio in Latin, the phrase being used by the cognoscenti.
But Merkel did not mention the ultima ratio demand in her list of principles before the Bundestag Wednesday, and there seems to be little appetite among other members to let her bulldoze the new language in – particularly since it could cause more confusion among bond traders, who might wonder what all the other resorts are before the last one. Read more
The opening feature of any EU summit is the gathering of heads of government at their partisan caucuses. These days none is more important than the European People’s Party, the right-wing EU coalition that includes Angela Merkel, Nicolas Sarkozy and Silvio Berlusconi. Read more
The call by Angela Merkel to reopen the European Union’s treaties in a major address to the Bundestag is already generating reaction from heads of government in other member states as they begin descending on Brussels for a two-day summit.
Ms Merkel worked the phones the day before the summit, calling several of her counterparts in an attempt to shore up support – a sign of just how precarious her position is and her need to come out of the summit with a victory following intense criticism at home for her political deal-making to win over reluctant allies. Read more
Greece has got a pat on the back in its first post-bailout report from the European Commission, the ECB and the IMF. “The programme is off to a very strong start,” they said in Athens. So that should be a green light for the next €9bn tranche of the total €110bn rescue package to be paid out next month.
But there is a fly in the ointment. Plucky little Slovakia, a eurozone member state that knows all about tough austerity measures, is refusing to sign up for its contribution to the rescue plan.
In spite of fierce pressure from Brussels, the new government in Bratislava is adamant that it would be wrong to pay its hard-earned taxpayers’ money to another eurozone member that has “consistently carried out irresponsible fiscal policy.” It is prepared to back the European Financial Stability Facility – the €750bn standby rescue package set up to stop contagion from the Greek crisis – but not the original Greek bailout. Read more