Monday

4th Jul 2022

Agenda

This WEEK in the European Union

  • An overhaul of the bloc's agriculture policy is on the agenda this coming Wednesday (Photo: caese)

The dynamic duo at the heart of European power, Germany’s Angela Merkel and France’s Nicolas Sarkozy, are to meet once again on Sunday in Berlin and thrash out their substantial differences over how to respond to the ever-worsening eurozone debt crisis, a black hole of a threat that US President Barack Obama has described as a danger to the global economy.

As pressure mounts globally for Europe to act decisively to bring an end to its crisis, the pair are likely to focus on how - and whether - to organise a massive recapitalisation of the bloc’s banks, options on a potential multi-trillion leveraging of the eurozone’s rescue fund, and the scale of haircuts to be imposed on investors in Greek debt in any renegotiation of the country’s bail-out.

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Germany is understood to be pressing for up to a 50 percent write-down, having come to the conclusion that Greece is simply incapable of servicing its ever-ballooning debtload and that it is better to swallow some substantial losses in a controlled fashion than to risk a disorderly default that could pull down the whole of the European financial system.

France, certainly the partner in the weaker position as its banks are much more heavily exposed to Greek debt and that of the wider European periphery, is frightened that such a writedown will sink its banks, forcing it to spend substantial public sums to keep them afloat. In so doing the country will almost certainly lose its triple-A credit rating. Already, France’s

Merkel for her part has hinted that the eurozone must be ready itself for a Greek default, while Sarkozy has said that such a move would be the end of Europe.

The two also disagree as to whether the European Financial Stability Facility should be limited in its purchase of government bonds.

The EU, the European Central Bank and the International Monetary Fund continue to weigh up the dispersal of Greece’s sixth tranche of bail-out cash - the final decision of which has been kicked down the road to November, despite Athens’ earlier insistence that it is likely to run out of money to pay its pensions and public servants by mid-October.

Almost all eurozone parliaments have given their assent to a strengthening of the EFSF with Malta and Slovakia the last two powers to do so. Malta is expected to give the nod to the changes, agreed on 21 July by EU premiers and presidents, on Monday. The vote has been delayed from 6 October after a former prime minister raised objections to the plan.

Slovakia remains a wild card. One of the four parties in the governing coalition, the Freedom and Solidarity party (SaS) - a rigidly libertarian grouping, is opposed to the whole concept of a bail-out fund. However, in the last 24 hours, the party has indicated that a compromise may be in the offing, but the demands the SaS have put on the table may be unacceptable.

The SaS said it would back the changes to the EFSF if the government set up a parliamentary committee to oversee dispersal of EFSF cash, with each party given a veto - in effect allowing the party another means of blocking the release of monies to indebted countries. Its second demand would see the country refuse participation in the permanent bail-out fund, the European Stability Mechanism, due to replace the EFSF in 2013.

Slovakia is to vote on Tuesday, but if a solution is not found before then, the government may fall, and potentially upending the eurozone’s battle plan.

But just because Europe is consumed by existential economic crisis, it does not mean that the legislative wheels elsewhere have ground to a halt.

Climate

Environment ministers are to gather in Luxembourg on Monday to adopt the EU’s position ahead of the upcoming United Nations conference on climate change in Durban, South Africa from 28 November to 9 December, the follow-up to the disastrous UN climate meeting in Copenhagen two years ago.

Ministers will consider whether to back a continuation of the Kyoto Protocol beyond the end of 2012, a move supported by much of the developing world, as it places greater responsibility on richer countries for reductions in greenhouse gases and for paying for much of the cost associated with combatting climate change.

A battle between rich and poor countries over this very issue lay at the heart of the lack of global consensus achieved in Copenhagen. With the US having taken its eye off the climate ball and unlikely to deliver an emissions trading system any time soon, the EU appears to have come around to the idea that a second commitment period is acceptable.

The same day, foreign ministers will also meet in the Grand Duchy to consider recent developments in Syria, Libya and the Yemen - as well as the Middle East peace process in the wake of the September UN General Assembly. Ministers are also expected to discuss the situation in Belarus and Iran.

Europe ministers will on Tuesday continue preparations for the upcoming autumn EU summit from 17-18 October and assess the state of play of the bloc’s positions ahead of the G20 meeting in Cannes from 3-4 November.

The European Commission meanwhile on Tuesday is expected to adopt proposals surrounding ‘direct-to-consumer-advertising’ of prescription drugs. A highly controversial subject, the industry would like to see similar rules to those that exist in the US, where drug companies freely advertise to patients their products.

CAP

On Wednesday, the EU executive will also adopt proposals for a revamp of the Common Agricultural Policy after 2013. The aim is to rebalance the CAP between different sectors, regions and states and link payments more closely to environmental protection rather than the production of food and feed.

The same day, the commission will adopt the 2011 enlargement package - a strategy paper on the future widening of European Union membership, an opinion on the membership application of Serbia, a formal favourable opinion on Croatia’s accession and progress reports on eight other candidate and potential candidate countries.

Over in the European Parliament, MEPs will debate the decision by two member states to block the access of Bulgaria and Romania to the borderless Schengen zone and vote on the implementation of UN rules on the trafficking of firearms.

But the highlight of the chamber’s week will be the official opening of Parliamentarium, its new multi-million-euro visitors’ centre in Brussels.

Poland calls for overhaul of EU agricultural funding

Poland's top farm official has brandished the EU's common agricultural policy as "two-speed" and common "only in name", calling for a new system with reduced direct payments for farmers and increased money to help restructure the sector.

G7, Nato, gas anxiety and Ukraine top This WEEK

EU energy ministers and environment ministers are expected to reach common positions on different aspects of the Fit for 55 package — as the continent is increasingly worried about energy prices and future supplies.

EU leaders talk Ukraine candidacy This WEEK

EU leaders will gather in Brussels and discuss Ukraine's candidacy status, and the impact of Russia's invasion of the country on energy and defence. European Central Bank chief Christine Lagarde will give a briefing to MEPs on inflation to MEPs.

Taxonomy and Ukraine on top This WEEK

MEPs will vote on an objection to the EU Commission's proposal to classify, temporarily, gas and nuclear energy investment as 'green', under the so-called taxonomy. Meanwhile, EU finance ministers are expected to approve Poland's recovery plan.

EU leaders zoom in on sanctions and energy This WEEK

EU leaders are gathering in Brussels after they got stuck on imposing on oil embargo on Russia. Poland's recovery plan gets approved and Danish voters will vote in a historic referendum this week.

Economic worries and Hungary on the spot Next WEEK

Eurozone finance ministers will discuss the economic worries with the backdrop of Russia's invasion of Ukraine, agriculture ministers are set to talk food prices, and EU affairs ministers will put Hungary on the spot in the Article 7 procedure.

Opinion

Nato's Madrid summit — key takeaways

For the most part Nato and its 30 leaders rose to the occasion — but it wasn't without room for improvement. The lesson remains that Nato still doesn't know how or want to hold allies accountable for disruptive behaviour.

MEPs boycott awards over controversial sponsorship

Two MEPs have withdrawn their nominations from the MEPs Awards over the Swiss pharmaceutical company Novartis's participation as a sponsor — currently involved in an alleged bribery scandal in Greece.

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