european parliament

European Lawmakers Expand Power of Central Bank Over Top Lenders

September 12, 2013 by NewsMaker

The legislation contains provisions that would give the European Parliament somewhat more oversight of a supervisory body, operating under the aegis of the central bank, when the body assumes its new authority. The vote is an important development, but not the final one, in a winding process that began in early 2012, during one of the most fevered periods in the euro zone financial crisis.

To take effect, the measure still needs approval from European Union governments, though that is expected to be a formality. The Single Supervisory Mechanism, the body it creates, is expected to start work during the autumn of 2014 after the European Central Bank conducts a “stress test” on the lenders coming within its purview.

The idea is that the central bank would do a better job than national supervisors of nipping financial problems in the bud so that governments would not need to resort to bank bailouts that destabilize the euro and penalize taxpayers. Once up and running, the new supervisory authority will have a range of powers to intervene when it detects problems, including the ability to conduct inspections that could lead to sanctions on banks or their managers.

The measure is the first step toward a broader, Europewide vision of banking. The next stage of that effort, creation of a single system for shutting or restructuring banks, is under way. But progress has been slowed by the reluctance of Germany to commit to a banking union that could lead to euro zone nations’ being responsible for one another’s debts.

Even so, the approval on Thursday was among the “most important votes of this parliamentary term,” Michel Barnier, the European Union commissioner overseeing financial services, told lawmakers after the vote. The law, he said, will help to “improve and restore confidence our citizens have in our system, as well as the confidence of the rest of the world in our system.”

Mario Draghi, president of the European Central Bank, issued a statement hailing the vote as “a real step forward in setting up a banking union, which is a core element of a genuine economic and monetary union.”

Lawmakers had delayed the vote, originally scheduled for Tuesday, reflecting demands for more power to oversee the central bank.

The approval came only after the president of the European Parliament, Martin Schulz, told members that Mr. Draghi had agreed to “strong parliamentary oversight” resulting in “a high degree of accountability.”

Under the agreement, the central bank agreed to share detailed records of meetings of the supervisory body with the Parliament, but the bank would not be required to provide copies of the minutes of the body’s meetings.

The European Parliament also would share power with European Union member governments over selection of the head and the deputy head of the supervisory board. And the Parliament’s influential Economic and Monetary Affairs Committee would have the right to summon the supervisory board’s head for hearings. But the Parliament would not have the power to veto actions taken by the supervisory authority or by the central bank’s governing council.

The demands by the Parliament, the legislature of the European Union, were signs of its growing assertiveness.

In his statement, Mr. Draghi said: “We will do our utmost to put in place all organizational requirements, with the aim of assuming our supervisory responsibilities one year after the legislation enters into force, and look forward to working with national authorities to contribute to the restoration of confidence in the banking sector.”

The new Single Supervisory Mechanism will be compulsory for the largest banks operating in the euro area. European Union countries that are not part of the currency bloc can opt to put their banks under the system. Banks with headquarters outside the European Union but with subsidiaries there, like some big American lenders, could see some of their subsidiaries come under the purview of the single supervisory authority.

The lawmakers, meeting in Strasbourg, France, voted 559 to 62, with 19 abstentions, to put the single supervisory body under the aegis of the central bank.

Originally, France and the European Commission called for all 6,000 euro area banks to be directly overseen by the new supervisory structure. But Germany successfully resisted that plan, arguing that supervising so many banks would make the central bank’s job unmanageable. The government in Berlin faced intense pressure from a powerful domestic banking lobby trying to shield many small savings banks from closer scrutiny.

Germany nonetheless agreed to let the European Central Bank, at its discretion, step in and take over supervision of any euro zone bank.

In most cases, only banks holding assets worth 30 billion euros, or $40 billion, or those holding assets greater than 20 percent of their country’s gross domestic product would be directly regulated by the European Central Bank. Central bank officials say that means in practice that about 130 banks, representing about 85 percent of bank assets in the euro zone, would fall under the direct oversight of the new supervisory authority under a formula agreed to by finance ministers last December.

Separately, a senior European Union court official said in an opinion on Thursday that one of the rules devised by European Union officials to stem the euro crisis should be rolled back.

The official, Niilo Jaaskinen, an advocate-general at the European Court of Justice in Luxembourg, said the agency that oversees the European Union’s financial markets should not be allowed to ban short-selling in any member state. The British government had challenged the rules, saying they went beyond the jurisdiction of the agency, the European Securities and Markets Authority, based in Paris.

Opinions handed down by advocates-general are not binding on judges. But judges follow the advice in a majority of cases when they make a definitive ruling months later.

Article source: http://www.nytimes.com/2013/09/13/business/global/european-lawmakers-expand-power-of-central-bank.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: european parliament, formality, supervisory body

Rules to Ban Menthol and Slim Cigarettes Divide Europeans

June 20, 2013 by NewsMaker Leave a Comment

Led by Poland, which also happens to be one of Europe’s biggest tobacco producers, a bloc of former Communist countries is fighting a rear-guard action against the measures, hoping at least to save slim cigarettes, which are popular with many smokers, often women.

The concern of the rule drafters is that slim cigarettes add an allure that attracts young women to smoking and that menthol cigarettes make it easier for young people of both sexes to start, and be hooked on, smoking.

But Poland stands to lose tobacco industry jobs from the proposed law. Some Polish politicians also worry about seeming highhanded to their sizable number of smokers, an estimated one-third of the population.

“It’s about freedom, to a large extent,” said Roza Grafin von Thun und Hohenstein, a center-right Polish member of the European Parliament, who is known as Roza Thun.

Ms. Thun said she supported the health impulses behind the draft legislation, but after listening to objections from voters at a meeting in Krakow she decided the rules should be relaxed. “People said, ‘When are you going to prohibit us from drinking wine or vodka, or stop us using white sugar? Maybe you will also tell us to go to bed early because going to bed late is also unhealthy.’ ”

The proposed rules would also require that pictures of smoking-related medical problems and written health warnings cover 75 percent of the front and the back of cigarette packs. This provision, though, may be scaled back after haggling among the European health ministers who will be debating the rules in Brussels.

Any new regulations would require the approval of the European Parliament before becoming law.

Tobacco has been a troublesome issue for the European Union’s executive arm, the European Commission, which has run public health campaigns to cut smoking but only recently removed direct agricultural subsidies for growing tobacco.

In December, the commission came up with the proposed tobacco rules. They are supported by Ireland, which holds the European Union’s rotating presidency and argues that the legislation would save lives and money.

“Approximately 700,000 Europeans die every single year of tobacco-related causes,” Ireland’s health minister, James Reilly, said in a speech this year. “Smoking is the largest avoidable health risk in Europe, causing more problems than alcohol, drug abuse and obesity.”

The public health care cost attached to smoking in Europe is an estimated 25.3 billion euros ($33.4 billion) each year, Mr. Reilly said. He cited recent studies showing that 70 percent of smokers in Europe began their habit before age 18.

A particular worry behind the proposal is that thinner or menthol-flavored cigarettes look and taste less harmful than others, giving people a misleading impression that they are safer.

In Poland, menthol cigarettes make up 18 percent of cigarette consumption, with slim cigarettes adding an additional 14 percent, according to the Polish government.

“I think we should not be too dogmatic,” Ms. Thun said. “We are dealing with human beings, their addictions and their habit. We should help the younger generation not to smoke, but I think we won’t achieve anything with a hard line.”

Przemyslaw Noworyta, director of the association that represents Polish tobacco growers, said the industry supported 60,000 jobs, many in areas with little alternative employment. Only Italy grows more tobacco in Europe than Poland.

“For us tobacco growers, this is a catastrophe,” Mr. Noworyta said, adding that demand would simply switch to the black market.

A study by the firm Roland Berger, commissioned by Philip Morris International, predicted that if the legislation passed, the European Union would lose 70,000 to 175,000 jobs and that the black market would thrive.

The report also projected a drop in tax revenue in the European Union of 2.2 billion to 5 billion euros.

“Particularly strong effects will occur in countries with large tobacco sectors, such as Germany, France and Poland,” the report said. “Countries with high demand for slim or menthol cigarettes, such as Bulgaria or Poland, will experience disproportionate losses.”

Article source: http://www.nytimes.com/2013/06/21/business/global/tobacco-creates-new-east-west-divide-in-europe.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: drafters, european parliament, menthol cigarettes

European Lawmakers to Vote on Tougher Carbon Measure

April 15, 2013 by NewsMaker Leave a Comment

LONDON — Efforts to put some bite into Europe’s toothless market for carbon-emission permits face a crucial vote Tuesday in the European Parliament.

Lawmakers will decide whether to let the European Commission take steps that would probably raise the price of emissions credits. At the current prices, polluters have little incentive to clean up their smokestacks.

The vote “is incredibly important,” said Anthony Hobley, head of the climate change practice at the law firm Norton Rose in London. “If it doesn’t go through it would send a very negative signal.”

Carbon emission permits are essentially licenses to release greenhouse gases — the emissions that scientists have linked to global warming. Lawmakers are considering a measure aimed at raising the price of those licenses. Permits are priced in units that allow the holders to emit a ton of greenhouse gases. Because a big user of coal-burning power plants might release millions of tons of greenhouse gases a year, the higher the prices for the permits, the higher the cost for polluting.

But the prices of these allowances, which are traded by manufacturers and financial institutions, have plummeted to about €5 a ton, compared with €7 a ton a year ago and around €25 per ton in 2008.

The European Union introduced its cap and trade program, known as the E.U. Emissions Trading System, in 2005, hoping to force utilities and manufacturers to reduce emissions and put money into low carbon technologies. But prices have dropped to a point at which they are too low to have much influence on investment decisions.

“At the moment the carbon price does not give any signal for investment,” Hans Bünting, chief executive at RWE, one of Germany’s largest utilities, said in a telephone interview. European investment in clean energy fell 25 percent in the first quarter this year from the first quarter of 2012, according to Bloomberg New Energy Finance, a market research group.

Under the European Trading System, companies are allocated permits or can buy them at auction, with each permit allowing for the emission of one ton of carbon dioxide each year. Companies that exceeded their permitted amount would risk heavy fines.

As the system was originally planned, the number of permits available was supposed to be gradually reduced, forcing emissions downward. Permits were also intended to be increasingly sold by auction to polluters rather than granted as allocations.

But persistent economic problems have sharply reduced both power generation and manufacturing, leading to a glut of carbon allowances. Last year, for instance, ArcelorMittal, the Luxembourg-based company that is the world’s biggest steel maker, had 86.9 million tons worth of allowances, but wound up selling about 22 million tons worth for $220 million because it did not produce enough to need them.

The glut of allowances on the market, estimated at about two billion tons, has brought the carbon price down to a level so low that it does little to deter pollution.

With the price of carbon permits so low, European power companies have been burning coal, which is cheap but a big source of emissions, while mothballing gas-fired plants, which are much cleaner. The use of coal for power generation in Britain increased last year by 31.5 percent, while gas use dropped by about 32 percent, according to the government.

A main reason coal is inexpensive in Europe is because it is being spurned by U.S. utilities, which are cashing in on the boom in low-cost shale gas.

Stig Scholset, an analyst at Thomson Reuters Point Carbon, a market research group in Oslo, said that prices of €35 to €40 were needed to encourage electricity generators to switch from coal to gas. Europe is likely to meet its goal of reducing emissions by 20 percent from 1990 levels by 2020, but that will largely be a result of reduced economic activity.

Article source: http://www.nytimes.com/2013/04/16/business/global/european-lawmakers-to-vote-on-tougher-carbon-measure.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: bloomberg, coal burning power plants, european parliament

Parliament Rejects European Budget Agreement

March 13, 2013 by NewsMaker Leave a Comment

E.U. leaders deadlocked over the seven-year plan in November but finally reached a deal last month after a 24-hour marathon of talks that resulted in spending cuts for the first time in the Union’s history.

Lawmakers at the European Parliament cast doubt on that plan Wednesday, casting 506 votes in favor of a resolution demanding significant changes to the way the money should be spent and the option to raise the overall sum in the coming years. There were 161 votes against the resolution and 23 abstentions.

The Union’s budget — for farming, transportation and other infrastructure, and big research projects — amounts to about 1 percent of the bloc’s estimated gross domestic product over its seven-year span. But it involves furious horse-trading as leaders focus on getting the best deal for their own countries, rather than putting the emphasis on pan-European considerations.

The opposition from the Parliament, which was given the formal power to veto budgets under the Lisbon Treaty of 2009, presents a significant hurdle. As a result of the vote Wednesday, the governments of the Union’s 27 member states must now work out another compromise — this time with Parliament. The process could take months.

“It was foreseeable that the European Parliament would refuse,” Martin Schulz, the president of the legislature, said at a news conference shortly after the vote. “We don’t want to see the European Union going in the direction of a deficit union.”

Mr. Schulz was referring to resistance by some national governments to allocating more money at the start of each year to ensure that projects are fully funded from 2014 to 2020, the period of the budget.

The Parliament’s resolution called on E.U. governments to settle their outstanding bills and to give scope to the Parliament and to E.U. governments to move funds among different areas of the budget to meet needs as they arise. That means money that might ordinarily go unspent would be spent, but without changing the overall budget figure.

But the resolution also called for a review of the budget with the possibility of increasing spending. Many members of Parliament said that raising the overall amount of the budget should be an option, particularly if the economic crisis now gripping the Union tapered off. The decision about who would conduct the review is likely to be an important part of the negotiations in coming months.

Asked about the vote in the European Parliament, the spokesman for the British prime minister, David Cameron, said that his view on the budget deal was “clear and unchanged.”

“The E.U. 27 have set a credit card limit, and that is the right agreement,” said the spokesman, referring to the budget ceiling for 2014-20 agreed to at the last summit meeting. He asked not to be identified, in line with British government policy.

The European Parliament has increasingly become a force to be reckoned with since the Lisbon Treaty. Most notably, in early 2010, it rejected an interim agreement with the United States on sharing information about bank transfers that was intended to help in tracking suspected terrorists, partly on the grounds of privacy concerns.

The Parliament later voted to resume the system on condition of guarantees to ensure protections of citizens’ personal information.

Mr. Schulz said he would formally present the resolution voted on Wednesday to E.U. leaders when they gathered in Brussels for a two-day summit meeting on the bloc’s economy starting Thursday evening.

Austerity also could be a core topic at the meeting if leaders of countries like Spain and France seek to emphasize the need for measures to support growth against calls by leaders of countries like Germany and Finland for budgetary discipline.

Another focus of the meeting is expected to be Cyprus, the latest euro zone country to require a bailout.

The leaders of the 17 countries of the euro area will hold a separate meeting on Thursday night that is to be attended by the newly elected center-right president of Cyprus, Nicos Anastasiades.

Then, on Friday, euro zone finance ministers are expected to assess ways of overcoming the remaining obstacles to a deal.

Cyprus may require about €17 billion, or $22 billion, in aid from the so-called troika — the International Monetary Fund, the European Commission and the European Central Bank — of which up to €10 billion is needed to shore up the banking sector. That is a small amount compared with what has been pledged to Greece but a huge sum for Cyprus, which has a gross domestic product of only about €18 billion.

The scale of the country’s needs has prompted concern about how it could ever repay the money. There are also acute concerns over money laundering.

Another contentious issue is whether troika members will force Cypriot bank depositors to take losses in order to make the country’s debt more manageable.

Stephen Castle contributed reporting from London.

Article source: http://www.nytimes.com/2013/03/14/business/global/parliament-rejects-european-budget-agreement.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: european parliament, lisbon, research projects

Europe Adopts Sweeping Changes to Fishing Policy

February 6, 2013 by NewsMaker Leave a Comment

PARIS — In an outcome hailed by environmentalists, European Union lawmakers voted overwhelmingly Wednesday to overhaul the region’s troubled fisheries policy to end decades of overfishing.

Responding to widespread public dissatisfaction with the current policy, the European Parliament voted 502-137 to impose sustainable quotas by 2015 and end the wasteful practice of discarding unwanted fish at sea. The legislation also returns some management responsibility to E.U. member states.

“The fishermen back home were really determined to wrest control away from Brussels, where the micromanagers have been the absolute ruination of the fisheries policy,” said Struan Stevenson, a Scottish member of Parliament for the European Conservatives and Reformists and the party’s spokesman on the issue. “They’ll all be cock-a-hoop over this.”

Markus Knigge, policy and research director for Pew Environment, said the E.U. legislation was comparable to the Magnuson-Stevens Act, the landmark U.S. law that in 1976 established modern American fisheries management practices, widely seen as superior to the current European regime.

Under current policy, 63 percent of the E.U.’s Atlantic stocks are overfished and 82 percent of its Mediterranean stocks, according to the European Commission.

Wednesday’s vote in Strasbourg marked the first time the European Parliament had shared responsibility for setting fisheries policy, which had been the domain of the European Fisheries Council. The council, dominated by national fisheries ministries with close ties to the industry, has long been criticized for flouting scientific recommendations on catch limits and providing generous subsidies to fleets harvesting even the most vulnerable species.

The parliamentary vote, spearheaded by Ulrike Rodust, the German Socialist who leads the Fisheries Committee, was supported by an alliance of Greens, Liberals, Socialists, and the Conservatives and Reformists. But parliamentary observers said the final tally showed that some lawmakers from parties opposed to the overhaul had crossed the aisles in significant numbers to support it.

Still, the Parliament does not have the final word on the matter. Because the legislation adopted Wednesday goes much further than proposals from the Fisheries Council, the issue will go through a process known as a “trilogue” — a reconciliation of the competing proposals, with the European Commission acting as mediator.

In addition, some E.U. states with significant fishing industries have argued that the Parliament does not have the authority to establish multiyear fishing plans, raising the possibility of a battle over E.U. governance that could lead all the way to the European Court of Justice.

Nonetheless, the Irish government, which currently holds the rotating presidency of the Union, has said it hopes to wrap up an agreement by the end of June.

Maria Damanaki, the European fisheries commissioner, said he welcomed the vote, noting in a statement that the Parliament had endorsed “the approach put forward by the commission” — a not-so-subtle reference to the fact that her own proposals had been watered down by national fisheries ministers.

In concrete terms, the measures Wednesday require that by 2015, all European quotas be set at the optimal catch level, known as “maximum sustainable yield.” The fishing industry had called for introducing that standard on a case-by-case basis starting in 2020.

The legislation also requires the elimination of excess fishing capacity — a perennial problem for European fisheries — by removing boats from the fishing fleets. The measure also would deny subsidy payments to fisheries that did not respect the law, including by failing to provide accurate catch data.

The Parliament also voted for a strict ban on discarding, the environmentally and economically costly practice in which fish are thrown back into the sea, often dead or dying, because they could not be legally caught. Fleets will have to modify their equipment so they do not accidentally catch fish they are prohibited from taking.

Mr. Stevenson said the timetable on some of the issues might turn out to be “unrealistic,” particularly a blanket discard ban by Jan. 1, 2014.

“All sorts of work has to be done,” he said. “Fishermen have to adapt their methods, adapt their gear. But I believe that by 2018 at the latest, we’ll see the discarding of fish as history.”

Article source: http://www.nytimes.com/2013/02/07/business/global/europe-adopts-sweeping-changes-to-fishing-policy.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: close ties, cock a hoop, european parliament

José Manuel Barroso, European Commission Chief, Assails Britain Over Treaty Veto

December 13, 2011 by NewsMaker Leave a Comment

On Tuesday, as the British cabinet prepared for its first full meeting since Mr. Cameron’s veto on Friday, José Manuel Barroso, the president of the European Commission, told the European Parliament in Strasbourg, France, that Mr. Cameron had sought “a specific protocol on financial services, which, as presented, was a risk to the integrity of the internal market” — a reference to the vast European Union trade area.

“This made compromise impossible,” he said. “All other heads of government were left with the choice between paying this price or moving ahead without the U.K.’s participation and accepting an internal agreement among them.”

Mr. Barroso’s remarks seemed certain to fuel the anger of the so-called euroskeptic lawmakers in Mr. Cameron’s dominant Conservative Party who are pressing for a renegotiation of Britain’s entire relationship with the other 26 countries in the European Union.

Mr. Cameron’s veto has also angered Nick Clegg, the leader of the Liberal Democrats, the junior coalition partner, who was conspicuously absent when the British Parliament assembled Monday for a raucous debate on events at the summit.

As members of the Labour opposition shouted “Where’s Clegg?” Mr. Cameron seemed at pains to offer soothing words to those afraid that he had so alienated his European allies that Britain was bound to leave the European Union altogether on Monday.

“Britain remains a full member of the E.U., and the events of the last week do nothing to change that,” Mr. Cameron said. “Our membership of the E.U. is vital to our national interest. We are a trading nation, and we need the single market for trade, investment and jobs.”

In his speech on Tuesday, Mr. Barroso offered a contrasting vision, suggesting that British refusal to give ground had left it standing alone, despite efforts by European officials to introduce compromise proposals to bridge the gap between the majority of European Union members and Britain.

He said the compromise would have shielded European Union states outside the 17-nation euro zone from discrimination. Britain boasts the biggest economy of those outside the euro zone, but it relies for at least half its trade on the countries that do use the single currency.

“Unfortunately, that compromise proved impossible,” Mr. Barroso said, “and so it was not possible to have a solution that could allow all 27 member states to agree in the framework of current treaties.”

“Last week, most heads of state or government of the member states showed their willingness to move ahead with European integration toward a fiscal stability union. They showed that they want more Europe, not less,” he said, implicitly criticizing the British for a lack of European spirit.

The veto has plunged British politics into turmoil.

But, after vitriol poured out at Mr. Cameron over the weekend — from the Labour Party, from prominent Liberal Democrats in the coalition government, from European diplomats — Monday’s session in Parliament was oddly anticlimactic. Buoyed by the compliments of anti-European backbenchers in the Conservative Party, who said they would have vetoed the treaty if Mr. Cameron had signed it, the prime minister appeared relaxed and self-assured, exuding the easy confidence that is one of his strongest political assets.

He told Parliament, as he has said all along, that he exercised Britain’s veto because the proposed treaty changes, meant to avert future European economic disaster by strengthening fiscal discipline, gave no assurances to safeguard the future of London’s financial services industry, a critical part of the British economy.

“The choice was a treaty with the proper safeguards or no treaty,” he said. “The result was no treaty.”

Mr. Cameron’s veto left Britain standing alone in Europe. All the other 26 European Union countries either agreed to the proposals, which will be negotiated according to intergovernmental agreements, or said they would seek the approval of their parliaments back home.

Reporting was contributed by Rick Gladstone from New York, Steven Erlanger from Paris, Nicholas Kulish from Berlin, and Stephen Castle from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=7f80eb80f90e4d99fd8592349b50e9ff

Filed Under: Business News Tagged With: european allies, european parliament, mr cameron

As Euro Crisis Deepens, Calls for Central Bank to Act

October 5, 2011 by NewsMaker Leave a Comment

Mr. Trichet is scheduled to hold the last news conference of his eight-year term on Thursday in Berlin, amid speculation that the bank could cut its benchmark interest rate just three months after raising it.

Some analysts doubt that the central bank will reverse course so quickly, but they are nearly unanimous in thinking that it will need to do something at its monetary policy meeting on Thursday to respond to the deteriorating conditions in the euro zone economy and the banking system.

Recent events have highlighted the bank’s role as the only institution in the euro area with the flexibility and resources to respond quickly to a crisis that seems to grow more acute by the day.

Euro zone governments are struggling to approve a bailout fund in a politically charged process that has focused an improbable amount of international attention on the parliamentary debates in Finland and Slovakia. Yet the fund, at a proposed 440 billion euros ($585 billion), already appears inadequate for the growing scale of the crisis.

At the same time, fears about European banks seem to be coming true. For instance, Dexia, a French and Belgian institution, may break up because of its exposure to Greek debt.

“We are coping with the worst crisis since World War II,” Mr. Trichet said Tuesday before the Economic and Monetary Affairs Committee of the European Parliament.

Analysts at the Royal Bank of Scotland see a better than even chance that the European Central Bank will cut its benchmark rate to 1.25 percent from 1.5 percent on Thursday, but they acknowledge that it is not an easy call.

The European Central Bank’s governing council, which includes the chiefs of the central banks of the 17 members of the European Union that use the euro, is divided and has been sending conflicting signals. Earlier this year, Mr. Trichet clearly flagged rate moves in advance.

“When I listen to what the governing council members have said in the last few days, there is no consensus,” said Michael Schubert, an economist in Frankfurt for Commerzbank.

One argument for cutting rates on Thursday is that Mr. Trichet will want to do a favor for his successor, Mario Draghi, governor of the Bank of Italy. Mr. Draghi, who will take office Nov. 1, will be under pressure to establish his credentials as an inflation fighter, and he risks undermining his credibility if he oversees a rate cut immediately upon assuming the presidency.

But inflation hard-liners like Jens Weidmann, the president of the Bundesbank, are likely to argue vehemently against a rate cut even though evidence is building that Europe is going into a recession. Inflation in the euro area probably rose to an annual rate of 3 percent in September, according to official estimates, well above the central bank’s target of about 2 percent.

The European Central Bank might seek a compromise and take less controversial steps to show it is not watching idly as the banking crisis becomes more acute. It could revive its purchase of secured debt issues by banks, for example, or extend low-interest lending to struggling institutions.

None of those moves would solve the debt crisis, though, nor would a large rate cut, for that matter. But the central bank is unlikely to take more radical steps, like printing money to buy huge quantities of government bonds to relieve the banks of damaged assets.

Mr. Trichet signaled Tuesday that political leaders should not expect the central bank to rescue them. “We cannot substitute for governments,” he told the parliamentary panel.

As for his own plans, he said he was looking forward to retirement on the coast of Brittany.

Article source: http://www.nytimes.com/2011/10/05/business/global/ecb-looks-poised-for-action-at-thursday-meeting.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: central banks, euro zone, european parliament

Europe to Vote on Tougher Rules for Currency

September 28, 2011 by NewsMaker Leave a Comment

While steering far clear of transferring actual authority over national budgets here, the revamped rules, scheduled for a vote Wednesday in the European Parliament, are described as tougher, more credible and more sophisticated than the original set, on paper at least.

Laid out in six pieces of legislation and known as the six-pack, the rules contain the same targets for euro zone members as the old ones: budget deficits of no more than 3 percent of gross domestic product and a maximum debt level of 60 percent of gross domestic product.

But this time, the drafters hope the policing system will be more credible. In part, that is because countries that break rules will face the prospect of sanctions sooner, and a new voting system will make it harder for finance ministers to block them, as has happened.

“We cannot go back in time and prevent the current crisis,” said Guy Verhofstadt, a former Belgian prime minister and leader of the centrist deputies in the European Parliament, “but we finally have armed ourselves with the right measures to avoid future ones.”

Yet nobody can predict whether the new rules will stand up better than the old ones if challenged by the euro zone’s two big members, Germany and France. That is crucial because, in the history of euro rule bending, Greece’s concealment of its true public finances — which came to light almost two years ago — was only the most flagrant example.

When the euro was created, France met the rules set by the currency’s founders because of a windfall from the state-owned utility, France Télécom. Overnight, the French budget deficit shrank by 0.5 percent of G.D.P.

In 2003, Paris and Berlin exceeded the deficit limits set in the rule book, the Stability and Growth Pact. Faced with the prospect of sanctions and potential fines, Paris and Berlin used their political muscle to tear up the pact, and a weakened version was adopted in 2005.

The new sanctions system is even tougher than in the original because countries that break rules will be pressed early on to make a cash deposit — in a noninterest-bearing account — worth 0.2 percent of G.D.P.

If they then fail to correct their course, the deposit will be converted to a fine and forfeited.

And while the European Commission still must have the finance ministers’ permission to punish errant countries, the voting system has been adjusted to make this significantly harder to block.

In another innovation, countries with high debt that resist reducing it by a specified amount may also be fined in a similar way. Had such a system been in place before, Italy — with a debt ratio of twice the maximum target — would have been required to consolidate more rapidly.

Instead, Italy concentrated on controlling its budget deficit. That was not enough, however, to keep it from getting caught up in the crisis as worries over sovereign debt levels spread around Europe’s periphery.

The revised rules are expected to pass the Parliament, their final hurdle, though Socialist opposition to some parts could make for a close vote. Once enacted, the rules would begin to take effect in stages in January, with the rules on debt delayed until 2015.

If approved, an early warning system would be established to spot developments like asset bubbles, including the housing booms that later collapsed in Spain and Ireland. Countries thought to be at risk could find themselves in an “excessive imbalance procedure” that could also lead to sanctions.

Under the new rules, targets would apply to all 27 European Union members, but fines could be levied only on the 17 members that use the euro.

Supporters of the new rules contend that financial markets have overlooked their importance, because reaching agreement has been so tortuous and time-consuming.

But will the rules work?

“What we have is a very strict and very intrusive surveillance regime,” said one European Union official not authorized to speak publicly. “You are only one decision away from potentially having to face sanctions.”

But he also acknowledged the challenges ahead in identifying looming problems like asset bubbles because much will rely on interpretation of data.

Article source: http://feeds.nytimes.com/click.phdo?i=302dd6224fa7b704422927f8f5882dca

Filed Under: Business News Tagged With: european parliament, finance ministers, flagrant example

E.U. Seeks Power to Block Bilateral Energy Deals

September 7, 2011 by NewsMaker Leave a Comment

BRUSSELS — The European Union’s executive arm announced plans Wednesday aimed at stopping countries in the bloc from striking bilateral deals that cede too much power to oil and gas exporters like Russia.

Europe needs to look “beyond its borders to ensure the security of energy supplies” and “act together and speak with one voice,” the E.U. energy commissioner, Günther Oettinger said at a news conference.

The proposal represents a bid by the authorities in Brussels to take more control over a sector where countries zealously guard their sovereignty, and where powerful utilities still dominate a number of key energy markets.

Mr. Oettinger said he wanted the right to demand information on energy deals involving member states and third countries before such deals are signed. Under the plan, the commission would publicize any concerns. If those concerns were ignored, the commission could sue member states to change the terms of any agreements that threatened to jeopardize the Union’s overall energy security.

The proposal would require approval by member states and the European Parliament, and governments could balk if major oil and natural gas companies vying for new contracts in places like Libya insist that sharing such information would jeopardize their negotiations.

But Mr. Oettinger said he was “optimistic” of passage after national leaders in February backed the idea for more centralized management of international energy deals. He also said the commission could be trusted to preserve confidentiality in commercially sensitive cases.

The E.U. authorities struggled last year to make sure Poland and Russia gave other operators access to a natural gas pipeline called Yamal, which is partly owned by Gazprom, the Russian monopoly gas exporter.

Europe’s relations with Russia in the energy sphere have long been tricky.

Russia supplies nearly a quarter of Europe’s natural gas. But those supplies have been interrupted in recent years because of disputes between Russia and its neighbors, like Ukraine, leading to severe shortages in parts of Europe during the depths of winter.

Mr. Oettinger said there were not “any immediate concerns” about cutoffs this coming winter as a result of continuing tension between Russia and Ukraine.

But the E.U. authorities are continuing to push plans to build a pipeline called Nabucco to deliver natural gas to Europe from the Caspian region, bypassing Russia.

On Wednesday, Mr. Oettinger reiterated his call for E.U. governments to give him a mandate to negotiate an agreement with Azerbaijan and Turkmenistan on a trans-Caspian gas pipeline.

That pipeline would be a key feeder for Nabucco. But Russia has long held influence in the Caspian region and wants to tap natural gas there, too.

Mr. Oettinger also said he could request similar mandates in the future in cases where the E.U. would be relying on energy infrastructure located outside the Union, like Desertec, a solar and wind energy project in North Africa.

Desertec is a project aiming to deliver as much as 15 percent of E.U. electricity needs through high-voltage transmission lines under the Mediterranean Sea.

E.U. officials said negotiating contracts at the Union level could make it easier to ensure the security of investments in solar power in countries like Tunisia, Libya, Morocco and Algeria.

Article source: http://www.nytimes.com/2011/09/08/business/global/eu-seeks-power-to-bloc-bilateral-energy-deals.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: energy security, european parliament, natural gas pipeline

Europe’s Growth May Be Weaker Than Expected

August 30, 2011 by NewsMaker Leave a Comment

But Mr. Trichet told a special session of the European Parliament’s economic committee, called to discuss the debt crisis in Europe, that inflation could remain above the bank’s target level of 2 percent “over the months ahead” and predicted that growth would continue at a “modest pace.”

The central bank plans to release a new forecast in early September.

Other senior officials on Monday underscored concern about weaker growth prospects for the euro zone, which is still reeling from a series of debt crises that began in Greece.

Olli Rehn, the European commissioner for economic and monetary affairs, addressing the same committee, said that “short-term growth prospects have somewhat worsened compared to our spring forecast.”

Mr. Rehn emphasized the dangers posed by continuing bouts of volatility, saying that “financial markets and the real economy move now more in synchrony.” That made Mr. Rehn “seriously concerned about continued financial turbulence spilling over to and potentially harming the recovery of the real economy.”

Mr. Rehn also appeared to reject suggestions from Christine Lagarde, the managing director of the International Monetary Fund, that the euro zone’s bailout fund should be used to provide a big injection of capital to European banks.

“E.U. banks are significantly better capitalized now than they were one year ago,” Mr. Rehn said. He noted that in recent months European banks had “increased their capital by some 50 billion euros,” or $72.5 billion.

“Those banks whose capital positions were found to be too weak by the stress tests were required to take appropriate action within six to nine months,” he continued. “Private sector solutions — rights issues, sale of assets, mergers, etc. — are preferred. However, public sector intervention is required, if such private sector solutions were unavailable. This process is now moving forward.”

The most immediate concern for officials remains Greece, which is awaiting another bailout worked out by European leaders in July. But that plan has become mired in concern about how the Greek government will pay back the huge sums of money that have been promised.

On Monday, European officials sought to ease the logjam over the bailout, with Finland appearing to show greater flexibility over demands that Greece provide collateral in exchange for further aid to its economy. “We are not there to cause problems, we are there to solve problems,” the Finnish foreign trade minister, Alexander Stubb, told reporters at a news conference in Helsinki. “Never underestimate the pragmatism of a country like Finland or the inventiveness of an institution like the E.U.”

At the same news conference, Werner Hoyer, the deputy foreign minister of Germany, said, “Finland doesn’t have the reputation as a troublemaker, so I’m very optimistic.”

Failing to resolve the dispute over collateral — which could come in the form of Greek property or government assets — could derail aid to Greece and throw Europe back into crisis as the central bank seeks to defend other vulnerable countries, like Spain and Italy, in the bond markets and to contain their borrowing costs.

Jean-Claude Juncker, the prime minister of Luxembourg and president of the Eurogroup, a forum of euro zone finance ministers, told the parliamentary committee in Brussels that there should soon be a proposal to resolve the “collateral guarantee difficulty.” Mr. Juncker said governments were “working on a proposal which I hope all euro zone member states will be happy with.”

The dispute over how to guarantee money lent to Greece is not the only uncertainty hanging over the bailout package. Greece wants banks and other investors to swap at least 90 percent of their existing holdings for new bonds that would be worth less but carry guarantees. To make sure that target is met, the Greek government wants to extend the swap by four years to include bonds maturing as late as 2024.

Article source: http://feeds.nytimes.com/click.phdo?i=cfaa02011d85c34c39a476bb1b29717b

Filed Under: Business News Tagged With: european parliament, growth prospects, target level