Greece Loses EU Voting Power In Blow To Sovereignty
Greek Prime Minister Orders Inquiry Into Debt Crisis
Threat To City Of London
Calls For Brown To Go Nuclear In City Battle With EU
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By Ambrose Evans-Pritchard, Telegrapg.co.UK | 16 February 2010
The council of EU finance ministers said Athens must comply with austerity demands by March 16 or lose control over its own tax and spend policies altogether. If it fails to do so, the EU will itself impose cuts under the draconian Article 126.9 of the Lisbon Treaty in what would amount to economic suzerainty. While the symbolic move to suspend Greece of its voting rights at one meeting makes no practical difference, it marks a constitutional watershed and represents a crushing loss of sovereignty.
"We certainly won't let them off the hook," said Austria's finance minister, Josef Proll, echoing views shared by colleagues in Northern Europe. Some German officials have called for Greece to be denied a vote in all EU matter until it emerges from "receivership". The EU has still refused to reveal details of how it might help Greece raise €30bn (£26bn) from global debt markets by the end of June. Investors are unsure whether this is part of Kabuki play of "constructive ambiguity" to pressure Greece and keep markets guessing, or reflects the deep reluctance by Germany to be drawn deeper in an EU fiscal union.
Greek bonds sold off as ten-year yields jumped to 6.42%, but the euro rallied to $1.3765 against the dollar as broader issues resurfaced in currency markets. Jean-Claude Juncker, head of the Eurogroup, hinted that ministers have already agreed on a support mechanism, should it be necessary. It will most likely involve by bilateral aid by eurozone states. He said proposals for an IMF bailout— backed by Britain— were "absurd" and would shatter the credibility of monetary union.
Many Germans disagree, including Otmar Issing, once the backbone of the European Central Bank. He said an EU rescue for Greece would be fatal, arguing that unflinching rigour is the only way to hold monetary union together without political union. Tuesday's EU verdict amounted to a thumbs down on Greece's earlier austerity efforts, viewed as too reliant on one-off measures and too light on spending cuts.
Greece must reduce its deficit from 12.7% of GDP to 3% in three years. Greek customs officials expressed their anger by kicking off a three-day strike, the first of many stoppages set to culminate in a general strike next week. However, premier George Papandreou has won support from key political parties and a majority of the people. Greece may yet surprise critics by mustering its Spartan Spirit.
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Greek Prime Minister Orders Inquiry Into Debt Crisis
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By James Quinn | 16 February 2010
Mr Papandreou, who is under pressure to produce a scapegoat for the crisis, wants to prove to other European Union leaders that no stone has been left unturned in questioning how the situation occurred. Greece owes some €220bn (£190bn) to overseas banks, equivalent to 115% of its gross domestic product. In a speech to a meeting of his cabinet, Mr Papandreou said: "We haven't asked for money from German, French, Italian or any other taxpayers. What we want is political support to end profiteering and the defamation of our country."
Mr Papandreou is trying to separate the country's national statistics agency from its finance ministry— to solve an age-old problem of politically-manipulated statistics— while also trying to push through a three-year fiscal consolidation plan. Meanwhile Angela Merkel, the German Chancellor, criticised investment banks for the role they may have played in helping Greece to mask its fiscal problems: "It would be a disgrace if it turned out to be true that banks that already pushed us to the edge of the abyss were also party to falsifying Greek statistics".
Her comments were in reference to a derivatives deal arranged by Goldman Sachs in 2001 which allowed the Greek government to mask its budget deficit by deferring interest payments. George Papaconstantinou, the country's finance minister, said the Goldman deal was entirely legal and within EU guidelines at the time.
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Threat To City Of London As EU Parliament Seeks To Whittle Away Power To Veto
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By Ambrose Evans-Pritchard | 2 February 2010
The 'City of London' [[the UK's financial center, roughly equivalent to 'Wall Street': normxxx]]could find itself at the mercy of the European Parliament. The Euro-MPs in charge of drafting the rules for oversight bodies covering banking and markets aim to make it much harder for Britain or other states to use an "emergency brake" to block decisions on regulation, and perhaps to strip them of their veto altogether. Alistair Darling, the Chancellor, thought he had secured a safeguard clause in a deal with fellow EU ministers late last year. The agreement stipulates that states can take their case to the European Council— the supreme EU body made up by heads of government— where decisions are taken by unanimity, if they think that a ruling by a trio of EU supervisory authorities "impinges on in any way on the fiscal responsibilities of the member states."
That is not end of the matter, however, since the European Parliament has broad legislative powers and can rewrite the text. All the major blocs in the assembly vowed last November that they would not agree to "water down" the original plans for the new bodies, which are to have "binding powers" to impose decisions. Sven Giegold, a German Green MEP and 'rapporteur' in charge of markets regulation, said the veto on fiscal matters is so vague and sweeping that it enables states to block almost anything. "A European supervisory system in which each government could veto decisions would be rather silly. This veto— as defined— has to go," he said.
While the drafting process is confidential, it is understood that the Spanish 'rapporteur' in charge of banking regulation, also favours limiting the veto. The Parliament is drawing up its version for a planned 'First Reading' by early summer. If the text clashes with Mr Darling's Council version— as it undoubtedly will— the two sides must thrash out a final compromise. Mats Persson, director of the think tank Open Europe, said the move by Euro-MPs to unpick Mr Darling's deal is a threat to Britain's financial industry.
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He added that even if the veto survives for "crisis decisions" the proposals still allow the three regulatory bodies to make binding decision on day-to-day matters by simple majority vote (SMP), with an appeals process also by majority vote. Whatever happens, the EU apparatus will have the final say on how the City runs itself, ending a 300-hundred year tradition of self-rule at a single stroke. Peter Skinner, a UK Labour MEP drafting a report on the insurance part of the three-legged structure, said he doubted that matters would ever reach the point where Britain would be overruled, adding that it would be absurd if a majority of states with no real financial industry were to impose decisions on a global financial hub such as London.
Mr Skinner is pushing for a system that gives the Financial Service Authority and other regulators a stronger say. But ultimately the conclusions of all the MEPS involved in the process will be moulded together into one position that must reflect the will of European Parliament. That body is in no mood to do favours for Britain or the City of London.
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Calls For Brown To Go Nuclear In City Battle With EU
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By Ambrose Evans-Pritchard | 11 June 2010
Britain cannot veto the massive shift in regulatory power to Brussels now under way. Internal market laws are decided by qualified majority voting (QMV), and London has few friends in this fight. What Gordon Brown can do at next week's EU summit it to play the 'Luxembourg card' by invoking "vital national interest", if he is willing to risk a showdown with fellow leaders. This has no legal status. It is the political equivalent of a stamping bull, or a viper's rattle. It means back off, or we strike.
"This is an extremely serious crisis," said David Heathcote-Amory, former Europe Minister and now a key Tory MP on the European Scrutiny Committee. "Once we lose of control over the 'City of London' we will never get it back, and the consequences could be catastrophic. I think we are in 'Luxembourg terrritory'. If the City was in Paris you could be pretty sure that French would fight like tigers to save it," he said.
"The Continental countries have no interest in the health of the City, and some want to turn the tourniquet tighter. I fear the Commission is going to get its way since we have such a weak government," he said. Downing Street has given no hint that Mr Brown intends to put up serious resistance. City leaders doubt he will go to the wall for the sake of detested bankers. It is easier to claim a cosmetic victory on fiscal sovereignty, letting the killer detail go through.
One British minister admitted privately that UK strategy is to play for time in the hope that "other governments start getting cold feet about giving new powers to the EU". Some might, but our ally Ireland remained silent at a meeting of EU finance ministers this week, unwilling to waste political capital on Dublin's Canary Dwarf. It relies on EU favour to survive its own desperate crisis.
France's Charles de Gaulle was the last EU leader to opt for a showdown in the "empty chair crisis" in 1965, withdrawing his officials from Brussels after the commission pushed its luck too far. It led to the Luxembourg Compromise. No country since has ever pulled the trigger on vital interests. Disputes have always been resolved in time. Lord Turner, the head of the Financial Services Authority, said in April that the banking crisis would either lead to "more Europe, or less Europe" since the current half-way house is unworkable.
Brussels has seized on events to offer more Europe. "It's now or never: if we cannot reform the financial sector when we have a real crisis, when will we"?, said Commission president Jose Manuel Barroso. While earlier talk of an EU super-regulator has been dropped, the same goal is being achieved by other means. The plan is to create three "authorities" with a permanent staff and powers to impose "binding" decisions on states. Appeals go to the European Court. There is to be a European Banking Authority in London, an Insurance Authority in Frankfurt, and a Securities Authority in Paris.
Lord Turner fired a warning shot on Thursday, questioning plans to bring London's securities houses under EU oversight. "Frankly, this is an area that when it gets Europeanized you sometimes get things that are not actually to do with good regulation. If one was absolutely confident that European supervision was going to be completely politics-free, in a neutral, technocratic fashion, we would be more relaxed," he said.
There is little doubt that Brussels is exploiting the backlash against finance to bring the City under its thumb. Its own Larosiere Report concluded that hedge funds were marginal players in the credit crisis. Yet that has not stopped it drafting draconian rules for hedge funds as well, with chunks copied from French law. What is the purpose, if not to hobble a successful British industry?
Christen Thomson from the Alternative Investment Management Association said 80% of Europe's hedge funds are in Britain, supporting 40,000 jobs, and are already regulated by the FSA. "A whole galaxy of hedge fund strategies would be impossible under this law and it is not necessary. The FSA tracks the top 40 funds and knows the level of systemic risk, and it keeps the cowboys out," he said.
Britain has long fudged matters in dealings with the EU, hoping that common sense will prevail, as it often does. But the assault on the City may be a line too far. London has been the centre of global finance for three hundred years. Either the British government controls the City, or the EU apparatus controls it. This cannot be fudged.
Normxxx
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This may end the EU as it is currently structured. Let us hope so. It may also go the other way and further erode capitalism in Europe. That will be a real disaster.
ReplyDeleteDonald Sheldon