Deauville Task Force Fails To Provide A Framework Agreement For European Economic Governance

I thought for sure that a strong Framework Agreement for regional european economic governance would come from the Herman Van Rompuy task force meeting  in Deauville; and was most surprised that none did, yet the absence of a Framework Agreement, really does not change my convictions. 

Here in my blog, EconomicReview Journal, I write on sovereignty and seigniorage in light of growing global governance. And I relate that in the United States, the Dodd Frank legislation established a Federal Financial Regulator, that being the Treasury Secretary, and granted him wide discretionary power of the economy. From the Robert Wenzel, EconomicPolicy Journal article Secret SEC Meeting with Goldman Sachs and JP Morgan, I conclude that in the US, through an October 6, 2010, meeting of bankers, investment bankers and SEC officials, that an elite group of stakeholders has arisen to act as a “banking, lending, credit, and investment Regulatory Council”, supporting the Financial Regulator in overseeing the US economy. I believe that the Dodd Frank legislation, empowers the Federal Financial Regulator, to intervene in the foreclosure moratorium issue; and that at some point in the future he will provide a solution that integrates the banks with the Government in state corporate governance over housing, bandking, and mortgage securitization. Perhaps, Annaly Capital Management, NLY, may have a role to play, given that it has done so well in the Government debt field.

And I envision that out of bank bond defaults like those of Anglo Irish Bank where some bond holders are not paid in whole by the national central bank, and out of a continuing falling, FXE,  from 138.78 will result in further stock deflation, and then a stock liquidity crisis will emerge, where there will not be enough buyers for sellers of bonds as well as stocks, causing small business failures and banks to become sorely decapitalized, resulting in the president of the ECB arising to be an “Eurozone credit seignior” and provider of liquidity to Europe. I also believe that framework agreements will be announced in Europe providing for fiscal federalism giving a whole new meaning to the term European Economic Governance. Yes, I foresee a greater fiscal union. Fiscal federalism will result in the Eurozone evolving into a region of global governance where national sovereignty is a concept of a bygone era.

The word Segnior comes from old English and means top dog banker who takes a cut. Many Europeans will come to trust in him, and conduct their economic affairs through him, as he will oversee all banking, lending, credit and investment throughout the entire Eurozone. The word, will and way of the Seignior will be the law of the Continent.

Helplul Articles on the Deauville Van Rompuy task force meeting.

1) Ralitsa Kovacheva provides the best coverage of all in EUInside article The Devil of Deauville.

2)  FXZillion carries the Ian Taylor of the Guardian report that European Commission officials concede that there has been a Franco-German stitch-up over new euro rules. Germany and France have agreed to soften a rigid new regime of fines for countries breaking the eurozone’s budget rules a week before a crucial EU summit is supposed to ratify a punitive system aimed at shoring up the single currency. Senior EU officials preparing the new rules, which have been devised to immunise the euro against a similar kind of collapse that it faced as a result of the Greek debt crisis, put a brave face on the sudden Franco-German hijack.

But European Commission officials conceded that there had been a Franco-German stitch-up to weaken the way the new euro regime would operate and to leave it more vulnerable to political horsetrading.

In a another highly contentious move, Angela Merkel, the German chancellor, Nicolas Sarkozy, the French president, also agreed to reopen the Lisbon Treaty, the EU’s quasi-constitution, in order to force countries that find themselves in a crisis such as the one suffered by Greece to declare insolvency and to forfeit their voting rights in EU councils.

At a summit on the Normandy coast on Monday evening, Sarkozy yielded to German pressure to reopen the treaty in return for Berlin dropping its insistence that sanctions for fiscal sinners in the eurozone be automatic. The call to reopen the treaty will run into strong resistance, with European leaders exhausted by the bad-tempered nine years it took to finalise the Lisbon pact which came into force last year.

It could also spell trouble for David Cameron, the prime minister, who opposed the treaty and will come under pressure to hold a referendum in Britain if it is renegotiated. “If EU politicians want a new treaty, they must first give the people a referendum. Now is the chance for cast-iron Dave to make good on his reneged promise to hold an EU referendum. I’ll believe that when I see it,” said Marta Andreasen, the Ukip MEP. Cameron will argue that even if the treaty is reopened, the changes affect only the eurozone countries and not Britain, meaning there is no need for a British vote.

For the past six months, EU leaders have been drawing up plans for “European economic governance” as a response to the sovereign debt crisis in Greece that nearly destroyed the euro and produced an unprecedented €750bn (£658bn) euro crisis fund. Insisting that the Greek disaster must never be allowed to repeat itself, they stressed there would be new disciplines for the 16 countries using the euro, entailing swingeing fines for debt and deficit delinquents.

Herman Van Rompuy, the EU council president, was put in charge of a “task force” of finance officials from across the EU to draft the new regime. It met for the last time on Monday and its proposals go to an EU summit next week. In parallel, the European Commission delivered legislative proposals.

Under the draft laws last month from Olli Rehn, commissioner for monetary affairs, countries would face fines of 0.2% of GDP for flouting the stability and growth pact, the euro rulebook which limits budget deficits to 3% of GDP and national debt levels to 60%. The penalties would come almost automatically, decided by the commission and could only be stopped subsequently by a qualified majority vote of EU governments. The system was designed to try to avoid the kind of political trade-offs inevitable if the decisions were taken by EU governments. Germany, as the EU’s fiscal disciplinarian, was the strongest supporter of the automatic fines and the commission. Sarkozy led the opposition, arguing for the primacy of politics and elected governments over national budgets. The Franco-German agreement said any sanctions applied would be “automatic”, but made clear that any decision to fine would be by EU finance ministers and not the commission, increasing the likelihood of political dealmaking. “Back in 2004 it was France and Germany that weakened the stability pact. Now they are doing it again,” said a senior commission official. The German media despaired of Merkel’s concessions. “The government has failed grandiosely,” said FT Deutschland, “in its campaign to make the new stability pact a real instrument of budget discipline.”

3) EuroIntelligence reports A political stability pact in exchange for an uncertain Treaty change on voting rights withdrawal  A decision to impose sanctions must be preceded by a vote in the European Council on the basis of QMV; once that the vote is taken, the procedure becomes semi-automatic, but sanctions can only be imposed after a delay of six months; France in turns pledged to support Germany’s request to change the Treaty to allow a temporary suspension of voting rights for deficit sinners; Jorg Assmussen claims that Germany prevailed with its automaticity request; Tremonti says that the pact is, and remains, political at its heart, and it also more flexible in its definition of fiscal sustainability than before.

4) FinFacts reports The Franco-German agreement requires President Van Rompuy to submit proposals for “a robust crisis resolution framework” by March 2011, with a final treaty change to be agreed by 2013. German Deputy Finance Minister Jörg Asmussen said the deal represented a “clear strengthening of the rules of the Stability and Growth Pact.”

The latest proposals will allow the European Commission to place countries on watch for sanction even if they aren’t violating the budget rules, which require countries to keep their budget deficits below 3% of GDP (gross domestic product) and total debt below 60% of GDP. The agreement proposes  a two-step enforcement process: first, the Commission would designate countries that are close to or already violating the rules, a step that will require the assent of a qualified majority of EU countries.  The second step will enable the Commission to impose sanctions automatically, unless a qualified majority of countries votes to block the sanctions.

Van Rompuy said in a statement that the task force also agreed to recommend the creation of a mechanism for broader economic surveillance, an early warning system to detect risks of such problems as real estate bubbles or strong differences in competitiveness. “The crisis has shown that sound budgets are not enough to guarantee sustainable economic growth. That’s why we recommend this surveillance mechanism. Ultimately, this may result in sanctions for countries in the Eurozone only,” he said.

The finance ministers also agreed establishing public institutions at a national level to provide independent analysis and forecasts on domestic fiscal policy matters. Van Rompuy said he would now report to the European Council to get the backing of heads of state and government next week. The agreements would then be turned into legislation. “These measures should be in place as quickly as possible,” he said.

5) OpenEurope reports:

Prospect of new EU treaty leads to calls on Cameron to seek repatriation of powers from Brussels: Following yesterday’s Franco-German deal to push for EU treaty changes to change the eurozone’s rules, David Cameron has come under fresh pressure to ask for EU powers back to Britain in return for backing a new round of Treaty changes and hold a referendum should these impact on the UK. The FT notes that the UK Government said it would consider a “limited” change to the treaties, but “would not accept anything that involves a transfer of power from Westminster to Brussels”. 

Writing on the Spectator Coffee House blog, Open Europe Director Mats Persson argues, “Rather than instinctively reaching for the veto, David Cameron should back [German Chancellor Angela] Merkel’s demands, in return for the repatriation of powers to the UK, along the lines of the original Tory election manifesto.” He added, “This package could then, possibly, be put to a public vote, and be turned into a genuine referendum on EU reform. The net effect of a new EU treaty would then be fewer powers for Brussels and more for Westminster.” On Conservative Home, Tim Montgomerie cites Mats’ post and notes “Liberal Democrats won’t like the idea…but as ‘good Europeans’ do they really want to oppose the need to improve the Eurozone’s workings? In the constant horse-trading between the Coalition partners…Mr Clegg needs to be convinced of the importance of EU reform to the Conservatives. As long as the process is subject to popular vote how can the Liberal Democrats object? Open Europe is quoted in the Express saying that a new treaty would present “an ideal opportunity” for the UK to repatriate powers and Mats is also quoted in the Mail.

 A leader in the Irish Times, argues, “For Ireland’s political class the prospect of another treaty referendum is nightmarish. It had been hoped – indeed, promised – that Lisbon II would be the last for decades.”

Spectator: Persson Open Europe blog Telegraph Mail Express Conservative Home Conservative Home: Melanchthon FT: Leader

German press: Sarkozy got the better of Merkel in EU Treaty change deal: In a front page editorial, FAZ columnist Werner Mussler describes the Franco-German deal as “a sham”. He argues that while France has gained a clear victory, “the German government hasn’t obtained any real concessions”, as a treaty change is far from certain as it requires all 27 members to agree. RP quotes an EU diplomat saying “it was terrible – the Germans are like a poodle of the French”. The article quotes German liberal MEP Silvana Koch-Mehrin saying, “It can be feared that now more German taxes are being sacrificed at the altar of the Franco-German friendship.” 

In Die Welt Jan Dams argues that the struggling eurozone countries “will be sure to prevent any treaty change, and Sarkozy knows this too.” An article in Sueddeutsche Zeitung argues, “The talk of changing the treaties sounds promising but is in fact nothing but noises about what may come. A ‘yes’ from Paris won’t suffice to persuade Britain, let alone highly indebted countries like Italy and Spain.”

Dutch dailies Het Financieele Dagblad and De Volkskrant both note that many countries, including the Netherlands and Sweden, were concerned by Germany’s willingness to water down the proposed debt and deficit rules. FAZ quotes Swedish Finance Minister Anders Borg saying, “I’m a little bit surprised that we did not have the full 100% backing for fiscal discipline from Germany.” The paper also notes that chairman of the eurozone Jean Claude Juncker has said that the value of the agreement is limited.

 On his Economist blog, Charlemagne notes that, “More than 24 hours after the [task force] meeting, there is still no official text of the report that will be sent to the summit of European leaders next week. There seems to be much tweaking going on in capitals […] The agreement seems further proof of the EU axiom these days: Franco-German agreement is necessary for any deal, but it is not sufficient.” French-German Agreement (in French) FD HLN Volkskrant: Leader Eurointelligence FAZ Handelsblatt FAZ 2 Spiegel Handelsblatt: Berschens Handelsblatt RP Le Monde FD Welt 

AIFM Directive: Ministers reach agreement to give EU supervisor power over market access for offshore funds; National marketing rules to be phased out by 2018: EU finance ministers yesterday reached a deal on the AIFM Directive, following concessions from both the UK and France. The compromise will see national rules on marketing rights for funds and managers based outside the EU being phased out by 2018. The new European Securities and Markets Authority (ESMA) will then be given exclusive powers to decide the rules under which funds and managers are allowed to enter the EU market and be granted pan-European marketing rights (a so-called passport).

EU Internal Market Commissioner Michel Barnier is quoted by the Times saying: “France accepted the idea of a passport and the UK accepted that ESMA would have a role. I think that everyone is coming out with their heads held high.” City Minister Mark Hoban is quoted by European Voice saying that yesterday’s agreement was a “significant advance” from the situation in May, when EU member states were about to agree on rules that would have “closed the EU market to funds from third countries, undermining competition and closing off a source of investment to the EU economy.”  

French Economy Minister Christine Lagarde is quoted by Reuters France arguing: “We could have undoubtedly done better, but this is a quantum leap.” The proposal still requires the backing of the European Parliament before it can become law. The FT reports that diplomats said that a final deal with MEPs could be concluded within weeks or even days.

FT Telegraph EUobserver WSJ WSJ: Real Time Brussels blog BBC European Voice Reuters France  El País Bloomberg Times Irish Times Irish Independent FAZ Handelsblatt Volkskrant Sueddeutsche OE research

European Commission announces proposals for an EU tax and a review of the UK’s rebate: The European Commission yesterday announced its proposals for the EU budget post 2013. These include proposals for EU taxes, in a bid to reduce the EU’s reliance on member states’ direct contributions, and a review of the UK’s rebate. Proposals for an EU tax include: a share of a financial transaction or financial activities tax; the auctioning of EU green house gas emission allowances; an EU charge related to air transport; a separate EU VAT rate; an EU energy tax; and an EU corporate income tax. The Commission also proposed issuing EU bonds to fund infrastructure projects. This would allow the EU to borrow against the EU budget, which is guaranteed by national governments.

Open Europe’s Stephen Booth is quoted in the Telegraph and Rzeczpospolita saying: “It would be completely unacceptable for governments to hand the unelected European Commission the powers to raise taxes from citizens. The EU budget is in urgent need of reform and remains hugely wasteful, but this won’t be solved by giving the EU new powers to demand more money”. The BBC reports that the UK, Netherlands, Germany and France have all rejected the idea of direct EU taxes. 

The Commission paper also launched a veiled criticism on the UK’s rebate noting: “The ‘juste retour’ debate” has had a “negative impact on the quality of delivery and reduced the EU added value”. MEPs will vote on the EU budget later today.

Open Europe press release European Commission European Voice BBC EU Observer Euractiv Euobserver Irish Times European Commission press release Telegraph NRC Handelsblad NOS EU Observer Handelsblatt Maerkische Allgemeine Rzeczpospolita


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