Friday

27th May 2016

Agenda

German court and Dutch elections to shape WEEK ahead

  • The German court is seen as unlikely to reject the ESM (Photo: Al Fed)

Germany's highest court takes centre stage once more this week with a ruling on the constitutionality of the eurozone's permanent bailout fund.

The decision, due Wednesday (12 September), is generally seen as unlikely to reject the €700 billlion fund - the European Stability Mechanism - but to set conditions for its use.

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Several lawsuits have been filed against both the ESM and the German-driven fiscal discipline treaty on the grounds that they risk undermining the powers of the Bundestag.

The challenges have delayed the set-up of the fund, due to go into force in July, and underlined the political tightrope walked by German Chancellor Angela Merkel, who has responsibilities towards the eurozone as whole and her own electorate.

The same day will also see the European Commission unveil its proposals for a banking union.

It has been locked in a struggle with Germany over how far-reaching the legislation should be. While Brussels is keen to see all 6,000 of the eurozone's banks come under centralised authority so potential problems can be spotted early on, Berlin only wants big banks to be supervised in any meaningful way by a European watchdog. Experts suggest, however, that badly-run and under-funded regional and local banks are where Europe's real banking problems lie.

The proposal will be spelled out in detail by commission president Jose Manuel Barroso in his annual state of the union speech.

This year's speech has more resonance than usual with almost daily headlines about the possibility of Greece leaving the eurozone, as well as the sheer breadth of the to-do list considered needed to put the eurozone right.

Listeners will be looking for clues on how a future EU should look, with Barroso involved in a group of top EU politicians drawing up a paper on the issue.

The other big event mid-week is the Dutch election, with the Netherlands host to an increasingly bitter debate about the merits of the European Union.

Dependable budget hawks when it came to debt-ridden Greece, the worsening economic situation in Netherlands altered the political debate inside the country. The Hague itself is now under pressure to introduce measures to bring its budget deficit down to within EU rules. But many Dutch resent Brussels' new budgetary oversight powers as well as more aid being given to Greece.

With the Dutch debate seen as one likely to happen in many other member states - particularly Germany, where an election is due next year - the outcome will be closely analysed in Brussels. Prime Minister Marc Rutte's centre-right liberals (VVD) head the polls, followed by labour.

EU finance ministers will round off the week with an informal meeting in Cyprus, where once again Greece will form the backdrop to the gathering.

Eurozone finance ministers are waiting for a report, due later this month, on the country's reform progress before deciding on whether to pay out the next tranche of money to Athens - without which it cannot pay its bills. Cyprus' own request for a bailout is also expected to be discussed.

Nato mulls use of new drones near Libya

EUobserver has learned Nato may send powerful new drones near the Libyan coast should it receive permission from Libya's new unity government.

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