MemHT Portal 04 SEP 2010

Greece’s austerity measures cannot prevent default and will lead to a breakdown of the political order if continued for long, a leading German economist has warned.

By Ambrose Evans-Pritchard in Cernobbio, Italy | Telegraph

“This tragedy does not have a solution,” said Hans-Werner Sinn, head of the prestigious IFO Institute in Munich.

“The policy of forced 'internal devaluation', deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30pc without major riots,” he said, speaking at the elite European House Ambrosetti forum at Lake Como.

“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks,” he said.

Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes.

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By Marco Bertacche and Lorenzo Totaro

Sept. 4 (Bloomberg) -- European Central Bank President Jean-Claude Trichet urged European Union countries to find a unified position over threats to the bloc’s influence at the International Monetary Fund.

The U.S. is pushing to give emerging economies more say on the 24-seat board of directors of the IMF. The U.S. rejection of a proposal last month to maintain the IMF’s executive board in its current form may force EU countries, including Belgium and the Netherlands, to reduce their number of seats.

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See also:
Trichet calls for united EU at the IMF (AFP)
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By Marco Bertacche and Lorenzo Totaro | Bloomberg

European Central Bank President Jean-Claude Trichet said in Cernobbio today that Greece’s exit from the euro would be the “worst possible option.”

The ECB President also urged European Union countries to have a joint position within the International Monetary Fund, adding he was providing his “personal opinion.” Trichet also reiterated that this week’s decision by the board on liquidity operations was taken by consensus.

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Journalists' expenses will be paid if they accompany the European Commission president on foreign trips, in a new public relations drive which will cost taxpayers hundreds of thousands of euros.

By Nick Meo and Martin Banks in Brussels | Telegraph

Jose Manuel Barroso, the former Portuguese prime minister, will also have a photographer and television producer available 24 hours a day, as well as the services of a team of four speechwriters to call on at all times, under the new strategy to boost his media and political profile.

The new measures to "personalise" his image were revealed in a leaked letter written by Viviane Reding, the Justice Commissioner, who is in charge of EU communications.

They have been drawn up as Mr Barroso engages in a three-way power struggle with EU president Herman Van Rompuy, and Catherine Ashton, the head of the new European diplomatic service, both of whom were appointed last year.

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Deutsche Welle

The European Union's trade commissioner Karel de Gucht has sought to fend off allegations of anti-Semitism after criticism by Jewish groups of remarks he made in a radio interview.

Karel de Gucht said in an interview with Belgian broadcaster VRT Thursday that it was "not easy to have, even with moderate Jews, a rational discussion about what is actually happening in the Middle East."

De Gucht said that a "Jewish lobby" that wielded much power over politics in the US and should not be underestimated could block progress toward peace in the Middle East. He added that "most Jews" believed themselves to be right in matters of Israeli-Palestinian policy.

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By Nigel Tutt | Reuters

CERNOBBIO, Italy, Sept 4 (Reuters) - The European Union could agree in the next few weeks a law to regulate hedge funds and private equity operators, blamed by some for financial excesses, an EU commissioner said on Saturday.

Michel Barnier, European Commissioner responsible for financial regulation, said the deal in recent days on a set of pan-European watchdogs showed a political willingness for further post-crisis reforms. [ID:nLDE68123K]

"We are in the last straight. The big work has been done by the European Parliament. There are two or three sensitive points including on the treatment of third countries and the passport for hedge operators," he said.

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Automated Trader

CERNOBBIO, Italy -(Dow Jones)- The European Commission will make a decision on a EUR25 billion restructuring plan for Anglo Irish Bank in the coming weeks, said European Union Competition Commissioner Joaquin Almunia Saturday.

Almunia confirmed he will see Irish Finance Minister Brian Lenihan this week to discuss the restructuring plan.

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By Andra Timu and Irina Savu | Bloomberg

Polish inflation shouldn’t exceed the central bank’s target “by much” as an increase in the value-added tax from next year boost consumer-price growth by 0.3 percentage points, Governor Marek Belka said.

The full effects of the raising of the VAT rate on non-food items by one percentage point to 23 percent are still not known, which has left the bank “in a wait-and-see mode” on future policy decisions, Belka said at a financial conference in Bucharest today.

“Inflation should not exceed the target by much,” he said. Consumer prices rose 2 percent in July, compared with the bank’s target of 2.5 percent.

The government is raising taxes and keeping expenditures in check to hold public debt below 55 percent of gross domestic product and avoid mandatory spending cuts. Poland is required to bring the gap in line with the European Union limit of 3 percent of GDP by 2012 after it widened to 7.1 percent last year as GDP growth slowed to 1.8 percent, the lowest in almost a decade.

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By Elisabetta Povoledo | NYT

MILAN — Some 20 years ago, Marco Deragna, a Roma whose family has been in Italy for generations, moved to a field on the outskirts of metropolitan Milan and made his home there.

Today, his prefab house on wheels — painted bright yellow with dark green shutters — is part of a sizable nucleus of mostly well-kept dwellings that house about 120 Roma, along with their horses, dogs, chickens, turkeys and even peacocks. But the camp’s days are numbered.

The Milan government plans to shut several of the city’s 12 authorized camps. The settlement where Mr. Deragna lives is set to become a transitory encampment for evicted Roma, with a maximum stay of three years.

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Deutsche Welle

With coalition talks deadlocked in Belgium and the Netherlands, both European countries have been plunged into political crisis.

Nearly three months after inconclusive elections in the Netherlands, the Dutch Liberal Party and the Christian Democratic Alliance have failed to form a coalition government with the support of the far-right Party of Freedom (PVV) led by anti-Islamist politician Geert Wilders.

Wilders told a news conference in The Hague that his party had lost confidence in the CDA's ability to form a stable government.

"The trust of the Freedom Party in the Christian Democrats has recently declined to a low point," Wilders said in a statement broadcast on national television. "We didn't cause this mess. We are a stable party."

The country has been in political stalemate since the June 9 parliamentary elections in which the ruling CDA lost half its seats, to 21, while the PVV emerged with 24 seats. Political observers see support for Wilders increasing further should fresh elections be called.

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Reuters

Hungary can skip IMF financing if the government tables a credible economic programme, but the Fund's backing would help in case of increased global risk aversion, a top central banker said on Saturday.

"If Hungarian economic policymakers can present to investors a decisive, broad and credible economic programme ... the risks to renewing Hungary's debt would moderate," National Bank of Hungary Deputy Governor Ferenc Karvalits told the daily Nepszabadsag.

"If that happens, we will not need further financing from the IMF," Karvalits said.

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Automated Trader

ALPBACH, Austria -(Dow Jones)- The European Investment Bank expects to reduce its 2010 lending by 18% because of lower corporate lending demand, its president told Dow Jones Newswires Friday.

The European Investment Bank, or EIB, expects to extend total credits of EUR65 billion in 2010, down from EUR79 billion in 2009, EIB President Philippe Maystadt said.

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By Yoo Choonsik and Rachel Armstrong | ABC News

GWANGJU, South Korea (Reuters) - G20 delegates agreed on Saturday global economic recovery would endure although the speed of expansion may slow, a South Korean official said.

Kim Jae-chun, deputy governor of South Korea's central bank who co-chaired the meeting of G20 finance and central bank deputies, also told reporters they thought market reaction to concerns about economic slowdown was overblown.

"There was an agreement that the (global) recovery will continue even though the speed may slow from the level we thought of two to three months ago," Kim said after their meeting in the country's southwestern city of Gwangju.

Another official from a member country, who spoke on condition of anonymity, said there was discussion about the issue of readjusting representation on the International Monetary Fund's executive board but declined to elaborate.

John Lipsky, the IMF's first deputy managing director, declined to comment when asked if the issue would be resolved soon.

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By Ewa Krukowska | Bloomberg

The European Union Climate Commissioner said higher carbon prices are needed to drive innovations as nations establish a framework to cut emissions.

Pollution allowances in the EU’s emissions-trading system, the world’s largest, lost 40 percent from their 2008 levels as the global financial crisis hampered growth and reduced industrial output. Permits for December 2010 closed today at 15.74 euros ($20.28), compared with 26.47 euros two years ago.

“If there’s really a prospect that the carbon market continues and in a way that is interesting for business, that could be one of the tools to get a higher carbon price,” EU Climate Commission Connie Hedegaard said in an interview after an informal, two-day meeting of climate envoys in Geneva.

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BY Corey Robinson | Jamaica Observer

The European Union today donated $23 million for the construction of three addition classrooms, a teachers facility and the erection of security fencing at the End Time Basic School in Waterhouse, Kingston.

The grant was made possible under the European Union’s Poverty Reduction Programme. The project will be monitored by the Jamaica Social Investment Fund (JSIF).

During a ground-breaking ceremony this morning, Principal of the basic school Janet Hall-Hope, was full of gratitude.

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EurActiv

The United States is behind the wall of secrecy surrounding global trade talks to combat counterfeiting, say EU policy sources, who claim that American officials are refusing to let their European counterparts publish the draft agreement online.

American officials blocked European attempts to publish the latest draft of the global Anti-Counterfeiting Trade Agreement (ACTA) on an EU website after a Washington-based round of negotiations in August.

The European Commission, which has been feeling the heat from lobby groups and the European Parliament for greater transparency in the negotiations, debriefed MEPs on the August negotiations yesterday (1 September).

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The European Union last night took its first major step towards the creation of three super regulators that could eventually take direct responsibility for the oversight of individual member states’ financial systems.

By Harry Wilson | Telegraph

In what constitutes a complete overhaul of European financial regulation, politicians agreed to the creation of new regulators to oversee the region’s banks, insurers, pensions funds and broader financial markets.

The three European Supervision Authorities (ESA) will sit above individual national regulators and will in time gain sweeping powers that will allow them to intervene in the running of national financial institutions and markets.

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By Leigh Phillips

EUOBSERVER / BRUSSELS - After months of tough negotiations, the three sides of the EU triangle came to agreement on Thursday on the creation of financial supervisors intended to put an end to economic crises such as those of the last three years before they appear.

The European Commission, the European Parliament and the EU member states reached a political deal to set up a European Systemic Risk Board and three separate agencies to monitor securities, banks and insurance companies.

Internal market commissioner Frenchman Michel Barnier called the deal "a crucial milestone".

With the new supervisory bodies, the bloc will have "the control tower and the radar screens needed to identify risks, the tools to better control financial players and the means to act fast, in a co-ordinated way," he said.

The deal reached by representatives of the three sides of the European triangle must still be approved by finance ministers of the member states, who are expected to give the go-ahead next Tuesday, and the full sitting of the European Parliament, who are likely to themselves sign off later this month.

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See also:
Deal struck on financial reform (European Voice)

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By Matej Hruska | EUobserver

Despite raising its GDP expectation for this and next year, the European Central Bank decided at its meeting on Thursday (2 September) to keep the benchmark interest rate at one percent for the 16th consecutive month and to continue with unlimited lending until the end of the year.

The ECB raised its growth forecast for 2010 and 2011 after a better than expected second quarter performance from the euro area. The EU's statistical office reported on Thursday in its first estimate that GDP went up by 1.0 percent in both the 16-nation euro area and the EU27 in the second quarter of 2010.

According to the updated ECB estimates, annual real GDP growth will range between 1.4 percent and 1.8 percent in 2010 and between 0.5 percent and 2.3 percent in 2011. A June forecast estimated GDP would rise 1 percent this year and 1.2 percent in 2011.

Despite the positive GDP growth expectations, the ECB will keep offering banks unlimited one-week and one-month loans to raise their liquidity until at least 18 January 2011. Previously, the ECB had committed to lend banks unlimited cash until at least mid-October.

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By Martin Banks | The Parliament

Commission president José Manuel Barroso is to give an annual ‘state of the union’ address as part of a revamped communications policy, it has emerged.

The first address will be next Tuesday in Strasbourg before MEPs at their parliamentary plenary.

The move, which was announced by the commission, is said to be part of an attempt to “personalise” the image of Barroso.

However, it has come under immediate fire from eurosceptics who say the ‘state of the union’ address is usually used by heads of state, for example US president Barack Obama.

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Joanne Harris | Hegde Funds Review

Negotiations on the European Union’s (EU) alternative investment fund managers (AIFM) directive are resuming with a revised compromise proposal from the Belgian government, holding the EU presidency.

The compromise, which is yet to be agreed by the European council, would replace the general approach agreed earlier this year when Spain held the six-month rotating presidency.

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By Tom Brady | Irish Independent

IRELAND has forced the withdrawal of a controversial EU plan to allow Israel access to sensitive personal data on Irish citizens.

The proposal was taken off the table at a European Commission meeting in Brussels yesterday following an objection lodged by the Government.

The Irish representative, a senior official from the Department of Justice, had intended to vote against the proposal at the meeting.

But as the talks got under way yesterday morning, the commission indicated that the proposal was being withdrawn because of the concerns raised by the Irish.

In Dublin yesterday Justice Minister Dermot Ahern admitted that he had been somewhat surprised by the commission's decision, but said it was recognition of the good work that had been done by his officials since he had first highlighted the concerns at a meeting of EU justice and home affairs ministers in July.

He said the Irish objection was justified in the wake of the discovery that agents of the Israeli state had tampered with the details on Irish passports.

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See also:
Data sharing plan with Israel dropped after Irish objections (EUobserver)

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By Valentina Pop

EUOBSERVER / BRUSSELS – The European Commission has in an internal report called into question the legality of France's recent dismantling of Roma camps and repatriations of roughly one thousand Romanian and Bulgarian citizens.

"The Commission is seeking detailed information from the French authorities on whether and to which extent the safeguards required by the Free Movement Directive have been applied in recent cases," reads the report, seen by EUobserver.

The 25-page long document, signed by three commissioners responsible for justice, home affairs and social affairs, requests "full clarification" on the voluntary repatriations, under which adults are paid €300 and children €100 to return home.

"The fact alone that a lump sum is paid to EU citizens in case of return is (…) not sufficient for taking these returns out of the scope of the EU's free movement principles."

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EurActiv

The European Commission is preparing a new Single Market Act designed to boost job creation and stimulate growth, according to an internal paper seen exclusively by EurActiv.

The overhaul of the single market contains a raft of around 30 proposals, including new legislation in areas like taxation, counterfeiting and helping small businesses.

Internal Market Commissioner Michel Barnier chaired a subgroup of nine EU commissioners which met twice in June to finalise the report. The final document is expected on 6 October.

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CNBC

The world’s most developed economies, which have been racking up spending since the mid-1960s, face record levels of debt as a result of the 2008-9 financial crisis and have little room for maneuver, the International Monetary Fund warned on Wednesday.

Despite the stark warning and the prospect that the wealthiest nations face years of belt-tightening, the fund also said that the risk of default by heavily indebted European countries like Greece, Ireland and Portugal had been significantly overestimated.

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By Howard Schneider | Washington Post

Will the U.S. government ever default?

It's not a pleasant thought for anyone holding some of the roughly $9 trillion in U.S. government bonds and notes currently in public hands - or for anyone hoping the global economy can stay on an even keel.

But the economists at the International Monetary Fund are paid to ponder the improbable, and in papers published on Wednesday fund staff examined where the U.S. and other developed countries fit on a continuum between easy living and disaster.

We're farther along than you might think.

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Times of India

BRUSSELS: The European Union began to disburse on Thursday 264 million euros in aid to help 19 of the most vulnerable African, Caribbean and Pacific countries cope with the global economic crisis.

The funding is the second part of a 500-million-euro (640-million-dollar) programme launched last year to help countries "most affected by the crisis due to their poor resilience to external shocks," the European Commission said.

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Telegraph

The Bundesbank said in a statement that its six-member board "unanimously agreed" to ask Christian Wulff, the German President, to remove Mr Sarrazin, 65, from his post. It said the bank's corporate governance commissioner "unreservedly supports" the decision.

Mr Wulff's office said he had received the request from the Bundesbank and was considering it. It did not say when he was expected to make a decision.

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By Jim Brunsden | European Voice

Commission fails in bid to get postal firm to repay €572 million in state aid to the German government.

The European Court of Justice (ECJ) today ruled that Deutsche Post, Germany's national postal operator, does not have to repay €572 million in state aid to the German government.

The ECJ rejected an appeal brought by the European Commission against a decision by the General Court in July 2008 annulling a Commission decision that the money was illegal state aid and should be repaid.

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By Augustin Palokaj | WAZ EUobserver

Croatia is doing its best to meet the last outstanding criteria in order to conclude the marathon accession talks for membership in the European Union. Yet, the question is still in the air whether its own citizens really want to join that club.

According to the results of a survey by Eurobarometer, published last week, only 26 percent of Croatian citizens are of the opinion that their country's membership in the EU would be "a good thing." Croatian scepticism is second only to Iceland, the latest candidate country that started accession talks recently. In Iceland, a paltry 19 percent of citizens consider EU membership a good thing. The EU average stands at 49 percent - also down by a few percentage points from last year's figure, but still higher than the number of citizens who take a negative view of membership.

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