Monday 31 May 2010

Digital Agenda for Europe overshadowed by Israel

I meant to write about the TTE Council’s conclusions on the Digital Agenda for Europe, but after the bloodbath by the Israeli Defense Forces (IDF) on board the flotilla heading towards Gaza, I don’t feel up to it right now.

According to news outlets, the EU high representative Ashton has demanded an investigation and the EU ambassadors are meeting in Brussels today. Turkey has withdrawn its ambassador from Israel.

As often, reports from different sources have been contradictory, so it is important to establish the facts of what happened during the boarding of civilian (merchant) vessels on international waters, as well as the justifications for a blockade of 1.5 million inhabitants in Gaza.

If you feel up to it…

Here is a link to the document on the Digital Agenda:

Council conclusions on Digital Agenda for Europe, by the 3017th Council meeting (Transport, Telecommunications and Energy = TTE) Brussels, 31 May 2010.

Ralf Grahn

Euro introduction: Estonia 2011

Despite the dryness of the official proposals, the adoption of the euro in Estonia is an emotional milestone for this writer, who sits some 80 km from the Estonian capital Tallinn.

Among the new member states of the European Union, the following have adopted the euro currency: Slovenia (2007), Cyprus and Malta (2008) and Slovakia (2009).

Estonia is one of the nine EU member states with a derogation, committed to euro introduction. Estonia is the only one to qualify at this moment. The eurozone seems set to grow to 17 countries from the beginning of 2011.

Two relevant documents have now been published under preparatory acts on the EU’s legal portal Eur-Lex.

Article 140 TFEU

Article 140 of the Treaty on the Functioning of the European Union (TFEU) is the main provision: assessment of the achievement towards economic and monetary union (EMU) and the criteria (paragraph 1), decision making on abrogating the derogation (paragraph 2) and the conversion rate and other measures necessary for euro introduction (paragraph 3).

Convergence reports

The European Central Bank and the European Commission published their convergence reports 12 May 2010.

The Commission’s Convergence Report has now been published on Eur-Lex:

Report from the Commission: Convergence Report 2010 (Prepared in accordance with Article 140(1) of the Treaty); Brussels, 12.5.2010 COM(2010) 238 final

The Convergence Report was accompanied by SEC(2010) 598 final.

Council Decision

The Commission’s proposal is based on Article 140(2) TFEU:

Proposal for a Council Decision on the adoption by Estonia of the euro on 1 January 2011; Brussels, 12.5.2010 COM(2010) 239 final (9 pages)

The procedure number is 2010/0135 (NLE).

The proposal presents a brief history of economic and monetary union before it turns to the convergence criteria with regard to Estonia.

After discussing the facts and criteria, the Commission ends with the following assessment summary:

(13) On the basis of reports presented by the Commission and the ECB on the progress made in the fulfillment by Estonia of its obligations regarding the achievement of economic and monetary union, the Commission concluded that:

(a) In Estonia, national legislation, including the Statute of the national central bank, is compatible with Articles 130 and 131 of the Treaty and the Statute of the ESCB and of the ECB.

(b) Regarding the fulfillment by Estonia of the convergence criteria mentioned in the four indents of Article 140(1) of the Treaty:

– The average inflation rate in Estonia in the year ending March 2010 stood at - 0.7 percent, which is well below the reference value, and it is likely to remain below the reference value in the months ahead;

– Estonia is not the subject of a Council decision on the existence of an excessive deficit, with a budget deficit of 1.7% of GDP in 2009;

– Estonia has been a member of ERM II since 28 June 2004; in the two-year period ending 23 April 2010, the Estonian kroon has not been subject to severe tensions and there has been no deviation from the ERM II central rate since kroon's participation;

– As a result of Estonia's very low level of gross public debt, no benchmark longterm government bonds or other appropriate securities are available to assess the durability of convergence as reflected in long-term interest rates. While financial market risk perceptions vis-à-vis Estonia increased at the height of the crisis, their development during the reference period, as well as a broader assessment on the durability of convergence, including Estonia's continued prudent policies, would support a positive assessment on Estonia's fulfilment of the long-term interest rate criterion.

(c) In the light of the assessment on legal compatibility and on the fulfilment of the convergence criteria as well as the additional factors, Estonia fulfils the necessary conditions for the adoption of the euro.

This leads to the proposed Council Decision:

Article 1

Estonia fulfils the necessary conditions for the adoption of the euro. The derogation in favour of Estonia referred to in Article 4 of the 2003 Act of Accession is abrogated with effect from 1 January 2011.

Council Regulation

Council Regulation 974/98 of 3 May 1998 on the introduction of the euro has been amended six times, so the link is to the consolidated version of 1 January 2009.

Regulation 974/98 sets out the changeover measures, based on Article 140(3) TFEU.

Since the Commission has proposed euro adoption for Estonia, following a positive decision, the Council will subsequently have to take the other measures necessary for the introduction of the euro in Estonia:

Proposal for a Council Regulation amending Regulation (EC) No 974/98 as regards the introduction of the euro in Estonia; Brussels, 12.5.2010 COM(2010) 240 final (8 pages)

The procedure number is 2010/0136 (NLE).

Estonia's changeover plan sets the same date for the euro adoption date and for the cash changeover date (1 January 2011), while the country has chosen not to have a "phasing-out" period (Article 1).

Article 2 sets the date of entry into force of the Regulation at 1 January 2011.

This leads to the proposed Council Regulation:

Article 1

The Annex to Regulation (EC) No 974/98 shall be amended in accordance with the Annex to this Regulation.

Article 2

This Regulation shall enter into force on 1 January 2011. This Regulation shall be binding in its entirety and directly applicable in all Member States.

Subjective note

Despite their heavy history, the people of Estonia have made enormous strides forward since regaining independence in 1991, although the financial crisis and the economic downturn took a heavy toll. During these conditions, staying on course for euro adoption has required steely nerves from politicians and resilience from the population.

Today, many Finnish firms are established in Estonia and Estonians are the second largest group of foreign citizens in Finland (after Russians). Mobile workers and tourists commute on ferries between the capitals Helsinki and Tallinn, only 80 km from each other.

Finnish and Estonian are related languages, roughly as far from each other as Swedish and Danish.

Professor Seppo Zetterberg dedicated his thorough history book (in Finnish) to those who have endured their history: Viron historia (Suomalaisen Kirjallisuuden Seura SKS, 2007; 810 pages).

The Finnish public broadcasting corporation YLE has shown a popular TV series Viro – Tuulten pieksemä maa (roughly: Estonia – A windswept country), a dramatic presentation of people and destinies during the first Republic of Estonia, from the Russian Revolution to the Second World War. The last episode will be shown tomorrow.

The Finnish author Sofi Oksanen, whose mother is Estonian, has dealt with Estonian themes, especially under Soviet occupation. Her book Puhdistus (Purge) became not only the number one bestseller in Finland, but it won critical acclaim as well. Oksanen received the Finlandia Prize, the Runeberg Prize and the Literature Prize of the Nordic Council. The Purge is on its way to become an international bestseller.

My warm welcome to the Estonians joining the eurozone in 2011 and my best wishes for the future.

Ralf Grahn

Sunday 30 May 2010

Tracking eurozone crisis measures: Eur-Lex and OJEU silent

Have things improved?

Have the proposals by the Commission been documented as preparatory acts on Eur-Lex and the decisions by the EU or eurozone member states (ECOFIN) published in the Official Journal of the European Union (OJEU) with regard to the Greek rescue loans and terms, the European financial stabilisation mechanism and the Special Purpose Vehicle?

Not by today, except for the Council Regulation 407/2010 and decisions by the European Central Bank (ECB) we have mentioned earlier in various blog posts.

Perhaps the sums involved are too insignificant (a trillion dollars with the IMF).

Perhaps these matters are of no concern to EU citizens.

Perhaps intergovernmental deals fall outside the publishing parameters of the EU.

Perhaps there are other good reasons we have not been told.

One thing is sure: Something has gone badly wrong with regard to transparency from the viewpoint of [openness; corrected] citizens .

Possibly even the markets would be a bit more trusting if exact information “black on white” would be more readily available.

Ralf Grahn

Tracking eurozone crisis measures: Stabilisation mechanism and transparency

With the barbarians at the gate and the sappers in the tunnels, the heads of state or government of the euro area gave the finance ministers orders to mount the defences of the common currency.

The extraordinary Europe Day ECOFIN Council 9 to 10 May 2010 (document 9596/10) mobilised a European financial stabilisation mechanism by reaching the following conclusions, worth reading in full, before the expected dawn attack by the financial markets:

"The Council and the Member States have decided today on a comprehensive package of measures to preserve financial stability in Europe, including a European Financial Stabilisation mechanism with a total volume of up to EUR 500 billion.

In the wake of the crisis in Greece, the situation in financial markets is fragile and there was a risk of contagion which we needed to address. We have therefore taken the final steps of the support package for Greece, the establishment of a European stabilisation mechanism and a strong commitment to accelerated fiscal consolidation, where warranted.

First, following the successful conclusion of procedures in euro area Member States and the meeting of euro area Heads of State or Government, the way has been cleared for the implementation of the support package for Greece. The Commission has signed today, on behalf of the euro area Member States, the loan agreement with Greece and the first disbursement will proceed, as planned, before 19 May. The Council strongly supports the ambitious and realistic consolidation and reform programme of the Greek government.

Second, the Council is strongly committed to ensure fiscal sustainability and enhanced economic growth in all Member States and therefore agrees that plans for fiscal consolidation and structural reforms will be accelerated, where warranted. We therefore welcome and strongly support the commitment of Portugal and Spain to take significant additional consolidation measures in 2010 and 2011 and present them to the 18 May ECOFIN Council. The adequacy of such measures will be assessed by the Commission in June in the context of the excessive deficit procedure. The Council also welcomes the commitment to announce by the 18 May ECOFIN Council structural reform measures aimed at enhancing growth performance and thus indirectly fiscal sustainability henceforth.

Third, we have decided to establish a European stabilisation mechanism. The mechanism is based on Art. 122.2 of the Treaty [TFEU] and an intergovernmental agreement of euro area Member States. Its activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF.

Art. 122.2 of the Treaty foresees financial support for Member States in difficulties caused by exceptional circumstances beyond Member States’ control. We are facing such exceptional circumstance today and the mechanism will stay in place as long as needed to safeguard financial stability. A volume of up to EUR 60 billion is foreseen and activation is subject to strong conditionality, in the context of a joint EU/IMF support, and will be on terms and conditions similar to the IMF. The mechanism will operate without prejudice to the existing facility providing medium term financial assistance for non euro area Member States' balance of payments.

In addition, euro area Member States stand ready to complement such resources through a Special Purpose Vehicle that is guaranteed on a pro rata basis by participating Member States in a coordinated manner and that will expire after three years, respecting their national constitutional requirements, up to a volume of EUR 440 billion. The IMF will participate in financing arrangements and is expected to provide at least half as much as the EU contribution through its usual facilities in line with the recent European programmes.

At the same time, the EU will urgently start working on the necessary reforms to complement the existing framework to ensure fiscal sustainability in the euro area, notably based on the Commission Communication to be adopted on 12 May 2010. We underline the importance that we attach to strengthening fiscal discipline and establishing a permanent crisis resolution framework.

We underlined the need to make rapid progress on financial market regulation and supervision, in particular with regard to derivative markets and the role of rating agencies. Furthermore, we need to continue to work on other initiatives, such as the stability fee, which aim at ensuring that the financial sector shall in future bear its share of burden in case of a crisis, also exploring the possibility of a global transaction tax. We also agreed to speed up work on crisis management and resolution.

We also reiterate the support of the euro area Member States to the ECB in its action to ensure the stability to the euro area. "

The ECOFIN Council continued with the following information:

The Council also adopted a regulation establishing a European financial stabilisation mechanism.

In addition, the representatives of the governments of the euro area member states adopted a decision to commit to provide assistance through a Special Purpose Vehicle that is guaranteed on a pro rata basis by participating member states in a coordinated manner and that will expire after three years, up to EUR 440 billion, in accordance with their share in the paid-up capital of the European Central Bank and pursuant to their national constitutional requirements.

The representatives of the governments of the 27 EU member states adopted a decision allowing the Commission to be tasked by the euro area member states in this context.


On 10 May 2010 the European Commission published an explanatory press release (MEMO/10/173) on the European stabilisation mechanism. The Commission argued that the assistance would be given as interest-bearing loans, not grants, and as such compatible with the no-bailout rule of Article 125 TFEU.

Council Regulation 407/2010

The Council of the European Union issued Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism; published OJEU 12.5.2010 L 118/1.


The different players have issued press information about the various turns of the crisis tale, but when we looked for hard decisions in the Official Journal of the European Union (OJEU) and under preparatory acts on Eur-Lex around 19 to 21 May, we noticed the absence of official proposals and other decisions, other than Council Regulation 407/2010 and decisions by the European Central Bank (ECB).

A clear paper trail distinguishes the rule of law from government by communiqués.

Have things improved?

Ralf Grahn

Tracking eurozone crisis measures: Barbarians at the gate

Despite the decisions taken with regard to Greece, the battering rams of the markets were pounding the gates of the eurozone castle and sappers were undermining the walls of confidence.

Business as usual was no longer an option for the second largest currency in the world.

We have fundamental reforms to carry out and we will carry out those reforms. It is a major priority for me and for the European Council, said president Herman Van Rompuy in a statement on Greece and solidarity in the Euro Area on the eve of an extraordinary weekend (5 May 2010).

In our latest blog post we tracked the eurozone crisis measures to the activation of financial support for Greece, but now we start to turn towards the responses given to the challenges for the whole eurozone, as well.

The extraordinary meeting of the heads of state or government of the euro area 7 May 2010 issued a statement, which endorsed the implementation of the support package for Greece, described as reflecting the principles of responsibility and solidarity.

16 Musketeers

The national leaders reiterated, in their own words, the motto of the Three Musketeers “all for one, one for all”:

In the current crisis, we reaffirm our commitment to ensure the stability, unity and integrity of the euro area. All the institutions of the euro area (Council, Commission, ECB) as well as all euro area Member States agree to use the full range of means available to ensure the stability of the euro area.

Consolidation and stabilisation

The heads of state or government outlined the next steps towards fiscal consolidation, endorsed the actions of the European Central Bank (ECB) and indicated the establishment of a European stabilisation mechanism during the same weekend:

Today, we agreed on the following:

- First, consolidation of public finances is a priority for all of us and we will take all measures needed to meet our fiscal targets this year and in the years ahead in line with excessive deficit procedures. Each one of us is ready, depending on the situation of his country, to take the necessary measures to accelerate consolidation and to ensure the sustainability of public finances. The situation will be reviewed by the Ecofin Council on the basis of a Commission assessment by the end of June at the latest. We have asked the Commission and the Council to strictly enforce the recommendations addressed to Member States under the Stability and Growth Pact.

- Second, we fully support the ECB in its action to ensure the stability of the euro area.

- Third, taking into account the exceptional circumstances, the Commission will propose a European stabilization mechanism to preserve financial stability in Europe. It will be submitted for decision to an extraordinary ECOFIN meeting that the Spanish presidency will convene this Sunday May 9th.

In addition, the leaders of the euro area were prepared to strengthen economic governance and to make rapid progress on financial markets regulation and supervision.

Practically every timetable was accelerated, with the Europe Day ECOFIN Council called to hammer out the details.

Ralf Grahn

Saturday 29 May 2010

EU consumer rights: Treaty level

If you want the short version of consumer protection aspirations in the EU, you can read the Charter of Fundamental Rights of the European Union, where the programme has been boiled down to one short sentence (in the latest consolidated = updated version on the Treaties and the Charter, OJEU 30.3.2010 C 83):

Article 38 Charter
Consumer protection

Union policies shall ensure a high level of consumer protection.

Shared competence

According to Article 4(2)(f) of the Treaty on the Functioning of the European Union (TFEU) consumer protection is generally a shared competence between the EU and member states. OJEU (30.3.2010 C 83).

General application

We find consumer protection under provisions having general, or horizontal application:

Article 12 TFEU
(ex Article 153(2) TEC)

Consumer protection requirements shall be taken into account in defining and implementing other Union policies and activities.

Approximation of laws

Approximation or harmonisation of laws for the establishment and functioning of the internal market concerns, among other areas, a high level consumer protection in Article 114(3) TFEU.

Title XV of Part Three TFEU

The main provision on consumer protection is Article 169 TFEU:

Article 169 TFEU
(ex Article 153 TEC)

1. In order to promote the interests of consumers and to ensure a high level of consumer protection, the Union shall contribute to protecting the health, safety and economic interests of consumers, as well as to promoting their right to information, education and to organise themselves in order to safeguard their interests.

2. The Union shall contribute to the attainment of the objectives referred to in paragraph 1 through:

(a) measures adopted pursuant to Article 114 in the context of the completion of the internal market;

(b) measures which support, supplement and monitor the policy pursued by the Member States.

3. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall adopt the measures referred to in paragraph 2(b).

4. Measures adopted pursuant to paragraph 3 shall not prevent any Member State from maintaining or introducing more stringent protective measures. Such measures must be compatible with the Treaties. The Commission shall be notified of them.

After this introduction we can turn to the proposed Directive on consumer rights.

Ralf Grahn

Tracking eurozone crisis measures: Activating financial support for Greece

The moment of truth for Greece arrived. On 23 April 2010 the president of the Euro Group, the European Commission and the ECB took note of the request by the Greek government to activate the financial support mechanism, which was being prepared by the Commission, the ECB and the IMF (press release IP/10/446).

A few days later, amidst speculation on the markets, the president of the European Commission José Manuel Barroso made a statement on the progress being made on the programme (28 April 2010; MEMO/10/157). The following day came a calming statement from commissioner Olli Rehn regarding the work on the Greek programme to reverse the debt spiral and to restore competitiveness.

On 2 May 2010 the euro area member states and the IMF agreed with Greece on three year financial support programmes of up to € 110 billion, of which € 30 billion to be made available by the eurozone members in 2010.

Commissioner Olli Rehn and IMF managing director Dominique Strauss-Kahn recognised that the programme demands great sacrifice from the Greek people. A sustained, multi-year effort will be needed.

The statement by the Eurogroup gave the seal of approval by the eurozone member states, saying that

… euro area Ministers unanimously agreed today to activate stability support to Greece via bilateral loans centrally pooled by the European Commission under the conditions set out in their statement of 11 April. Parliamentary approval, needed in some Member States prior to the release of the first tranche, is expected to follow swiftly.

With regard to the formal decisions, the Euro Group had this to say:

The main elements of policy conditionality, as endorsed today, will be enshrined in a Council Decision under Articles 126 and 136 TFEU to be formally adopted in the coming days and further detailed in a Memorandum of Understanding, to be concluded between the Greek authorities and the Commission on behalf of euro area Member States.

The eurozone and the IMF had practically brought the Greek rescue package to a conclusion, preventing default on 19 May, and expressed their confidence in the measures adopted by the government of Greece, but later events showed that significant market operators were less optimistic and that negative sentiments were spreading towards the euro currency as a whole, and especially Spain and Portugal.

Ralf Grahn

EU telecom markets: “Is there progress?”

In How silly can it get? Consumers facing telecoms markets in EU (28 May 2010) we looked at one concrete example: the trouble and cost for Henrik Alexandersson, an expat worker in the European Parliament.

The personal summary of top euroblogger Julien Frisch (28 May 2010) on the EU’s 15th progress report on the single European electronic communications market was simple and effective:

My own progress report on European electronic communication: Is there progress?

I still have to find a national operator when I move to another EU country instead of having one European mobile phone operator with the same prices and services wherever I am.

Free movement

Mobility and the internal market are the main benefits of the European Union for people and businesses, we are told.

Few first lectures about the EU fail to mention:

… an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured ...

Fact or fiction?

15th progress report

Yes, we have advanced to the 15th progress report on EU telecom markets, but ─ as Julien said ─ where is the progress?

This leads to a number of questions, worth discussion, in these times when ever fewer people leave home without a 3G mobile phone and a notebook, enabling and requiring data services.

Where are the voices of business travelers, mobile workers and students, as well as tourists? Say something, do something!

Why are the national politicians and regulators allowed to drag their feet? Are businesses and consumers sheep?

Have people found alternative ways to cope with the difficulties caused by the fragmented electronic communications markets? Do you buy 27 pre-paid cards for your grand tour of the European Union? Do you find free wireless networks (wi-fi; WLAN) wherever you go?

Hoping to hear from you.

Telecommunications Council

By the way, the Transport, Telecommunications and Energy (TTE) Council meets on Monday, 31 May 2010.

Information society commissioner Neelie Kroes will present the Digital Agenda for Europe, and the Council will adopt conclusions.

According to the background note, the TTE Council endorses an ambitious agenda. (Is anyone dedicated enough to check which words they used the fourteen previous times they studied the progress report?)

There will be an exchange of views on the "European Code of rights of users of electronic communications services", a pet project of the Spanish presidency of the Council of the European Union.

The laudable aim of the policy debate is to contribute to simple and easily accessible information for EU citizens on their rights established in the Regulatory framework for electronic communications and services and other relevant EU legislation.

There are no links or document references in the TTE Council background note to the draft conclusions on the Digital Agenda or the proposed users’ code.

However, we can rest assured that nothing is more important for the 27 governments representing 27 different markets than ambitious action and simple and accessible information for EU citizens ─ every year.

Ralf Grahn

Friday 28 May 2010

How silly can it get? Consumers facing telecoms markets in EU

After presenting the Digital Agenda for Europe, first reactions to the Digital Agenda and the EU progress report on the single European electronic communications market at a general level, now for a concrete example of how 27 fragmented national telecoms markets affect businesses, consumers and public affairs in real life in the European Union.

The conclusion is: How silly can it get?

One of the most prolific eurobloggers is Henrik Alexandersson, who works in the European Parliament for the Pirate MEP Christian Engström (Green group).

Alexandersson’s usual place of work is the EP in Brussels, Belgium. Naturally, he travels back to Sweden at times. Like the rest of the MEPs and staff, he has to take part in the monthly migration of the European Parliament to Strasbourg, France.

In his blog post (in Swedish) Hej, jag heter Henrik. Jag är datormissbrukare (roughly: Hello, I’m Henrik. I’m a dataholic; 27 May 2010), Alexandersson starts by wondering at the primitive standards and proprietary software hampering PCs in the EP offices.

Then follows a tragicomic description of the multiple notebooks and wireless dongles forced on Alexandersson by fragmented telecoms markets and incompatible software, plus the horrendous costs of data roaming.

For those who believe that the “common market” was instituted in 1957, the post is illuminating.

If you want to get a sense of the original text, Google translate provided an almost comprehensible version in English. (Ångdator can be understood as “steam age PC”).

Neelie Kroes and her merry men have a real challenge ahead of them, if they want Europe to advance from the Egypt of the steam engine era to the promised land of the information society.

Ralf Grahn

EMU convergence programme Czech Republic

On 26 April 2010 the Council examined the updated convergence programme of the Czech Republic, which covers the period 2009 to 2012:

COUNCIL OPINION on the updated convergence programme of the Czech Republic, 2009-2012; published OJEU 28.5.2010 C 138/1.

In the wake of the financial and economic crisis, this is how the Council introduced the state of the Czech public economy:

The global crisis had a strong impact on the Czech economy. Following a three-year period of growth above 6 %, real GDP grew by only 2.5 % in 2008 and declined by 4 % in 2009, according to the updated convergence programme. The economy was mainly affected through the trade channel, but also through confidence effects, a tightening of credit conditions, and shrinking foreign investment inflows. The authorities reacted determinedly to the crisis.

The Czech National Bank reduced its key policy interest rate from 3.75 % in mid-2008 to 1 % currently, and the government designed and implemented a sizeable fiscal stimulus package in line with the European Economic Recovery Plan (EERP), amounting to 2,2 % of GDP in 2009. The Czech koruna depreciated by about one fifth against the euro between mid-July 2008 and mid-February 2009 (it then appreciated by some 14 % by mid-February 2010). In the current immediate post-crisis period, the Czech economy does not suffer from important macroeconomic vulnerabilities. The main challenge is to reduce the high structural government deficit, estimated at around 6 % of GDP in 2009, to a sustainable level. Furthermore, it is also important to ensure a rapid adjustment of the labour market to the downturn and progress towards long-lasting convergence. On 2 December 2009, in view of the planned deficit for 2009, the Council decided on the existence of an excessive deficit and issued recommendations to bring the deficit below the 3 % of GDP threshold by 2013.

After discussing various aspects and assumptions, with a view to sustainable convergence, the Council invited the Czech Republic to:

(i) implement the 2010 budget rigorously and avoid expenditure slippages; in line with the Council Recommendation under Article 126(7), target, in the context of the 2011 and 2012 budgets, a larger budgetary adjustment than the one planned in the programme and specify in more detail the measures that are necessary to correct the excessive deficit by 2013 at the latest;

(ii) take action to improve budgetary procedures and to enforce and monitor more rigorously the medium-term budgetary targets; in particular, avoid upward revisions of expenditure ceilings beyond the revisions permitted by the budgetary rules;

(iii) implement the necessary reforms in order to improve the long-term sustainability of public finances.

The Czech Republic is also invited to add in its next update of the convergence programme more substantial information in the separate chapter on progress made to bring the excessive deficit situation to an end, as requested by the Council in its recommendations under Article 126(7) of 2 December 2009.

Further reading

Since the date of the Council opinion on the Czech Republic, the European Central Bank (ECB) and the European Commission have published their convergence reports, which contain more detail and allow for comparison with other euro area hopefuls.

The ECB Convergence Report 2010 was published 12 May 2010. The 359 page report is available on the ECB website in 21 languages.

The Commission’s Convergence Report 2010 was published 12 May 2010 under the responsibility of the Directorate-General for Economic and Financial Affairs (226 pages).

The 2010 convergence reports examine nine countries, committed by the treaty to adopt the euro: Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania and Sweden.

Ralf Grahn

Thursday 27 May 2010

Tracking eurozone crisis measures: Hopeful informality

According to the agenda of the Spanish presidency of the Council of the European Union, the informal Euro Group and an informal meeting of finance ministers of all EU countries (ECOFIN) together with the governors of the central banks took place in Madrid 16 to 17 April 2010.

After the informal ECOFIN Council the Spanish minister of economy Elena Salgado remarked that the ministers had reached consensus on almost everything, citing the stability and convergence programmes as an example. This would make formal conclusions possible shortly.

Fiscal consolidation had started and economic growth is gaining pace in almost all countries. Commissioner Olli Rehn was working on proposals for better economic policy coordination and supervision. National budgetary frameworks had been discussed, said Salgado (16 April 2010).

At the press conference on 17 April 2010, commissioner Olli Rehn welcomed the positive reception of ideas to strengthen economic peer review. Concrete proposals would be forthcoming on 12 May 2010.

The outward appearances, at least, were hopeful.

Ralf Grahn

EU progress report on single European electronic communications market

In the context of the Europe 2020 strategy and the Digital Agenda for Europe, the European Commission has published its annual report (for 2009) on the progress towards a single European electronic communications market:


The report is available in Spanish, Czech, German, English, French, Latvian, Maltese, Portuguese, Slovenian and Swedish (10 out of 23 EU languages).

Two short excerpts:

This Communication reports on market and regulatory developments in the EU’s electronic communications sector in 2009.

Consumers and businesses are still faced with 27 different markets and are thus not able to take advantage of the economic potential of a single market.

After analysis of market developments, the regulatory environment and consumer issues, the report reaches the following conclusions:

To move closer to a true single market, it is vital to step up efforts to address the issues identified in this Communication. The Commission will continue to closely monitor market developments so that problems can be tackled swiftly. In line with the Digital Agenda and the measures it outlines on spectrum, universal service, the regulatory treatment of NGAs [next generation access networks] and privacy, the Commission will also take a number of targeted measures:

(1) to address the divergences in regulatory approaches and the lack of timely and effective enforcement of remedies;

(2) to lay solid foundations for a correct and timely implementation of the revised regulatory framework and;

(3) to ensure an effectively functioning Body of European Regulators for Electronic Communications (BEREC).

These measures will in turn strengthen competition for the benefit of consumers and ensure that operators function in an environment which allows them to adapt their business models to new realities.

A press release from the Commission, available in 19 languages, offers an overview of the findings, and it hammers in the message that consumers and businesses still face 27 fragmented national markets: Telecoms: citizens and businesses pay the price for inconsistent application of EU rules (25 May 2010; IP/10/602).

The Commission has also released an explanatory summary: Telecoms: citizens and businesses pay the price for inconsistent application of EU rules - country by country breakdown of 15th Progress Report on European Telecoms Market 2009 and glossary (25 May 2010; MEMO/10/211).

The material can also be accessed from the Commission’s (Information society) thematic page.

Additional materials include the Staff working document SEC(2010) 630 (two parts; not yet on Eur-Lex under preparatory acts) and excerpts with country chapters.

Neelie Kroes

My impression is that information society commissioner Neelie Kroes continues her no-nonsense approach in searching for the European public good in the same vein as when she headed competition affairs. Consumers and businesses have reasons to wish her success. The obstacles are often found closer to home.

Ralf Grahn

EMU convergence programme Bulgaria

On 26 April 2010 the Council examined the updated convergence programme of Bulgaria, which covers the period 2009 to 2012:

COUNCIL OPINION on the updated convergence programme of Bulgaria, 2009-2012; published OJEU 27.5.2010 C 137/12.

The Council opinion presents the background:

Before the onset of the global economic and financial downturn Bulgaria had witnessed strong real GDP growth underpinned by fast credit expansion and large foreign investment inflows. The robust economic activity, however, was accompanied by increasing macroeconomic imbalances such as the build-up of a very large external deficit and private debt as well as substantial inflationary pressures. The FDI-led investment boom and high wage increases, far exceeding productivity gains, aggravated these imbalances. As the global economic crisis unfolded, economic activity was hit hard, resulting in a contraction of real GDP by 5 % in 2009.

The main goal of the medium-term budgetary strategy is to maintain a balanced general government budget throughout the programme period.

The government gross debt ratio is well below the Treaty reference value throughout the programme period. It is estimated at close to 15 % of GDP in 2009, slightly up from the year before.

As an EU member only from 2007, Bulgaria is not yet a part of the eurozone. The country has a lot to do to catch up with the rest of the union, which requires continued reform efforts.

After a more detailed discussion and given the need for sustainable convergence, the Council reached the following fairly benign conclusions, inviting Bulgaria to:

(i) continue implementing strict fiscal policies and adopt further consolidation measures to achieve the programme target for 2010 with a view to sustaining the on-going adjustment in the external imbalances and safeguarding investor confidence in the economy; in particular, contain public sector wage growth in order to contribute to overall wage moderation and improve competitiveness;

(ii) strengthen the efficiency of public spending by vigorously implementing the planned structural reforms in the area of public administration, healthcare, education, and pensions in order to boost productivity and ensure sustainable convergence within the European Union.

Further reading

Since the date of the Council opinion on Bulgaria, the European Central Bank (ECB) and the European Commission have published their convergence reports, which contain more detail and allow for comparison with other euro area hopefuls.

The ECB Convergence Report 2010 was published 12 May 2010. The 359 page report is available on the ECB website in 21 languages.

The Commission’s Convergence Report 2010, published 12 May 2010 under the responsibility of the Directorate-General for Economic and Financial Affairs (226 pages).

Ralf Grahn

Eurozone: Budget consolidation in Austria

On 26 April 2010 the Council examined the updated stability programme of Austria, which covers the period 2009 to 2013:

COUNCIL OPINION on the updated stability programme of Austria, 2009-2013; OJEU 27.5.2010 C 137/7.

The Opinion describes the effects of the financial and economic crisis, which pushed the Austrian economy into the deepest recession in post-war history. Public finances deteriorated significantly. The Council decided on 2 December 2009 that an excessive deficit existed in Austria and issued a recommendation to correct the deficit by 2013.

In comparison with the 3 per cent government deficit and 60 per cent government debt to GDP, the reference values of the Stability and Growth Pact, the Opinion offers the following picture:

The Austrian stability programme estimates the general government deficit in 2009 at 3.5 % of GDP. Government gross debt is estimated at 66.5 % of GDP in 2009, up from 62.5 % in the year before.

The Council makes the evaluation that overall, in 2010 the budgetary strategy set out in the programme is consistent with the Council recommendation under Article 126(7) TFEU. However, from 2011 on, taking into account the risks, the budgetary strategy may not be consistent with the Council recommendation under Article 126(7) TFEU.

The consolidation path outlined in the programme, starting in 2011 is not underpinned by appropriate measures. In addition, the budgetary strategy is not sufficient to bring debt-to-GDP ratio back on a downward path.

In view of the new assessment and in the light of the recommendation under Article 126 TFEU of 2 December 2009, the Council of the European Union invited Austria to:

(i) substantiate the measures deemed necessary to underpin the planned consolidation from 2011 onwards, in order to achieve the recommended average annual fiscal effort of 0,75 % of GDP and bring the general government deficit below the 3 % of GDP reference value by 2013; and seize, as prescribed in the EDP recommendation, any opportunities beyond the fiscal effort, including from better economic conditions, to accelerate the reduction of the gross debt ratio back towards the 60 % of GDP reference value;

(ii) further improve the budgetary framework to reinforce fiscal discipline at all levels of government through enhanced transparency and accountability notably by aligning legislative, administrative and financing responsibilities between the different levels of government and by strengthening enforcement mechanisms under the internal stability pact.

Austria is also invited to submit in time for the assessment of the effective action under the excessive deficit procedure an addendum to the programme to report on progress made in the implementation of the Council recommendation under Article 126(7) of 2 December 2009 and to outline in some detail the consolidation strategy that will be necessary to progress towards the correction of the excessive deficit.

The Opinion is useful as an example of the periodic assessment of a eurozone government’s economic and budgetary policies, as well as peer pressure towards action.

Ralf Grahn

Wednesday 26 May 2010

Tracking eurozone crisis measures: Financial supervision and better governance in motion

Even if the Greek aid package and eurozone stabilisation are the main focus of our tracking exercise, financial regulation and supervision are related areas worth mentioning.

On 12 April 2010 the European Central Bank (ECB) and the European Commission held a joint conference on financial integration and stability, the legacy of the crisis (IP/10/417).

The ECB president Jean-Claude Trichet reminded that the financial supervisory framework in the EU will be based on two pillars. The micro-prudential pillar, the European System of Financial Supervisors (ESFS), will be composed of the national supervisors and three European Supervisory Authorities (ESAs). The European Systemic Risk Board (ESRB) will form the macro-prudential pillar.

According to Trichet, the ECB stands ready to support the ESRB:

in particular taking into account the important presence of the members of the General Council of the ECB in the ESRB and the fact that the ECB will provide the secretariat and analytical, statistical, logistical and administrative support to the ESRB, as required under the legislative proposals. Preparatory work at the ECB has been organised through the setting up of an ad hoc team and is under way so that the ESRB can take up its work after its formal establishment. The ECB is in the process of enhancing its capabilities for monitoring and assessing financial stability risks. Only a number of weeks ago, we reformed our Directorate Financial Stability and Supervision into a Directorate General Financial Stability with more resources.

Internal market commissioner Michel Barnier’s speaking points (in French) stressed the need for proper regulation and supervision of integrated European financial markets.

Further reading: the Commission’s web page on financial services supervision.

On 15 April 2010, Olli Rehn spoke about reinforcing economic governance in Europe (SPEECH/10/160). The commissioner for economic and monetary policy said that the aim of the Europe 2020 strategy is to mobilise growth drivers in order to modernise our social market economies. The second pillar is the consolidation of public finances.

Rehn outlined enhancing economic policy coordination through three main building blocks: reinforcing the Stability and Growth Pact, deepening and broadening economic surveillance and setting up a permanent crisis resolution mechanism.

Ralf Grahn

First reactions: Digital Agenda for Europe 2010─2020

After presenting the “raw materials” in Digital Agenda for Europe 2010─2020 (25 May 2010), we turn to the first euroblog reactions we have encountered with regard to this blueprint for the information society in Europe.

On 19 May 2010 the European Commission published:

The Communication from the European Commission: A Digital Agenda for Europe; Brussels, 19.5.2010 COM(2010)245 final (42 pages)


Datonomy looked at the preceding resolution by the European Parliament in: Wiping the slate clean... (10 May 2010).

Intellectual Property Watch mentioned the digital competitiveness reports, published two days ahead of the Digital Agenda: EU Previews Digital Agenda To 2020 (17 May 2010).

Pirate MEP Christian Engström has asked for contributions from net activists and interested citizens: EU’s Digital Agenda – Request For Comments (19 May 2010).

In a first appraisal, La Quadrature du Net found the Communication generally to be in the public interest, but open standards had suffered a setback and dangers continue to loom with regard to the fundamental freedoms of net users: Caution equired for the future EU Net policies (19 May 2010).

La Quadrature du Net also published a complementing press release: Digital Agenda: Caution equired for the future EU Net policies (press release) (19 May 2010)., Jörg-Olaf Schäfers, has a brief comment on the absence of an unequivocal commitment to net censorship on grounds of child pornography (in German): 5 + 1 vor elf (EU-Agenda, JMStV, romantische Verkläring, böses Netz)(19 May 2010).

Spreeblick, Simon Columbus, offers critical comments about net censorship aspirations within the Commission and the power of industrial lobbies (in German): Europas digitale Zukunft (19 May 2010).

Erika Mann commented on a related study on markets: Some comments on the EPC report on a Digital Single Market (25 May 2010).

On a lighter note, Julien Frisch compared the rhetoric of Neelie Kroes and Martin Luther King Jr, in: Kroes & King (20 May 2010).

Neelie Kroes

Yesterday, the information society commissioner Neelie Kroes presented the reasons for the Digital Agenda, saying that none of the pressing challenges of our time will be solved without a strong ICT component, referring to the transformative potential of ICTs: Address at ‘World Congress of Information Technology’ Amsterdam 25 May 2010 (SPEECH/10/258).

Kroes spoke at the World Congress of Information Technology (WCIT 2010) in Amsterdam, a huge gathering of business leaders, public officials and opinion leaders. In addition to plenums, the following themes or “tracks” are discussed: Creative industries, eGovernment, eHealth, eInclusion, Energy, Mobility, Security and safety, Sharing space (geo information), Water and Finance.

Look out for new posts on the Digital Agenda and various aspects of the information society in Europe on multilingual, the aggregator of EU facts and opinions.

Ralf Grahn

Tuesday 25 May 2010

Eurozone and economy now top themes on

Lately the ‘eurozone’ and the ‘economy’ generally have been top themes on multilingual, which has grown to aggregate 577 euroblogs.

The new coalition government in the ‘unitedkingdom’ has also elicited a fair number of blog posts, as the tangled relationship between ‘britain’ and the rest of Europe.

However, practically all areas of EU activities are covered by passionate eurobloggers, many of them able to communicate more to the point than the institutions.

Although biased, as one of the editors, I feel that the portal has evolved into a solid and timely source for solid information and opinion on European Union affairs.

Besides the rewarding view of all headlines, you can opt for the editors’ choice on the front page, subscribe to RSS feeds of all posts or the promoted ones, as well as subscribe to the daily and weekly newsletter.

Take a look at!

Ralf Grahn

Tracking eurozone crisis measures: Greek aid from words towards deeds

On Sunday, 11 April 2010 the finance ministers of the Euro Group held a teleconference, where they agreed to prepare the activation of support, jointly with the IMF, for Greece. Support by the eurozone countries during the first year of the three year package was set at €30 billion, in the form of conditional, interest-bearing loans.

The Euro Group statement adds some details to the principles presented 25 March 2010: Tracking eurozone crisis measures: Collective defence doctrine and foundations (24 May 2010).

Euro Group statement

Statement on the support to Greece by Euro area Members States; Brussels, 11 April 2010

Following the statement by the Heads of State and Government of the Euro area on 25 March, Euro area Members States have agreed upon the terms of the financial support that will be given to Greece, when needed, to safeguard financial stability in the Euro area as a whole.

Euro area Members States are ready to provide financing via bilateral loans centrally pooled by the European Commission as part of a package including International Monetary Fund financing.

The Commission, in liaison with the ECB, will start working on Monday April 12th, with the International Monetary Fund and the Greek authorities on a joint programme (including amounts and conditionality, building on the recommendations adopted by the Ecofin Council in February). In parallel, Euro area Members States will engage the necessary steps, at national level, in order to be able to deliver a swift assistance to Greece.

Euro area Member States will decide the activation of the support when needed and disbursements will be decided by participating Member States.

The programme will cover a three-year period. The euro area Member States are ready to contribute for their part up to € 30 billion in the first year to cover financing needs in a joint programme to be designed with and cofinanced by the IMF. Financial support for the following years will be decided upon the agreement of the joint programme.

In order to set incentives for Greece to return to market financing, Euro area Members States loans will be granted on non-concessional interest rates. The pricing formula used by the IMF is an appropriate benchmark for setting Euro area Members States bilateral loan conditions, albeit with some adjustments. Variable-rate loans will be based on 3-month Euribor. Fixed-rate loans will be based upon the rates corresponding to Euribor swap rates for the relevant maturities. A charge of 300 basis points will be applied. A further 100 basis points are charged for amounts outstanding for more than 3 years. In conformity with IMF charges, a one-off service fee of maximum 50 basis points will be charged to cover operational costs.

For instance, as of April 9th, for a three year fixed-rate loan granted to Greece, the rate would be around 5%.

The Eurogroup is confident that the determined efforts of the Greek authorities and of its European Partners will allow to overcome the fiscal and structural challenges of the Greek economy. In this context, the Eurogroup welcomes the budget execution in the first months of the year, which shows that the measures taken so far are bearing fruit.

Supportive statements

The official communications on 11 April 2010 included a Commission press release MEMO/10/123, a statement by the president of the European Council Herman Van Rompuy and a short supportive statement by IMF managing director Dominique Strauss-Kahn.

In the media

EurActiv: Euro zone readies 30bn euros to rescue Greece (12 April, updated 15 April 2010)

EUbusiness: ECB’s Trichet says Greek aid plan ‘positive’ (12 April 2010)

Still government by communiqués, but the eurozone statement was a clear step towards deeds to save Greece from default and the euro area from chaos.

Ralf Grahn

Digital Agenda for Europe 2010─2020

In the context of the Europe 2020 strategy for jobs and growth, the European Commission has published the Digital Agenda. Instead of a five year plan as earlier, the new version of the Digital Agenda now encompasses the whole decade 2010─2020.

The overall aim of the Digital Agenda is to deliver sustainable economic and social benefits from a digital single market based on fast and ultra fast internet and interoperable applications.

The Communication from the European Commission: A Digital Agenda for Europe; Brussels, 19.5.2010 COM(2010)245 final (42 pages)

The Digital Agenda is available in Spanish, German, English, French, Italian, Polish and Portuguese.

For an overview, in 22 languages, you can see the Commission’s press release: Digital Agenda: Commission outlines action plan to boost Europe's prosperity and well-being (Brussels, 19 May 2010; IP/10/581).

More material is found on the web pages of D-G Information Society, including a detailed ten page summary: Digital Agenda for Europe: key initiatives (Brussels, 19 May 2010; MEMO/10/200).

On the same page, there is also a link to an explanatory memorandum laying out the benefits for EU citizens: Digital Agenda for Europe: what would it do for me? (Brussels, 19 May 2010; MEMO/10/199; 7 pages).

There is a link to Europe’s Digital Competitiveness Report:

Vol. I; Brussels 17.5.2010 SEC(2010) 627 (127 pages)

Vol. II ICT Country profiles; Brussels 17.5.2010 SEC(2010) 627 (68 pages)

Seven priority areas

The Digital Agenda outlines seven priority areas for action:

- creating a Digital Single Market

- improving the framework conditions for interoperability between ICT products and services

- boosting internet trust and security

- guaranteeing the provision of much faster internet access

- encouraging investment in research and development

- enhancing digital literacy, skills and inclusion

- applying ICT to address social challenges such as climate change, rising healthcare costs and the ageing population.

Commissioner Neelie Kroes and the Commission have presented their views on the European information society for the next decade. The Communication offers a starting point for both action and discussion in this area crucial for our future.

Ralf Grahn

Monday 24 May 2010

EU and eurozone membership paradoxes

The Copenhagen criteria for accession to the European Union require, among other things, democracy. Thus, the EU would not qualify for membership.

According to Eurostat, in 2009 the government deficit in the euro area was 6.3 per cent and government debt at 78.7 per cent of GDP.

Following the financial crisis and the economic downturn, which led to huge bail-outs and high unemployment, the eurozone as a whole wildly overshoots the reference values of 3 per cent and 60 per cent of GDP.

Thus, the eurozone as a whole would fail the convergence criteria of the Stability and Growth Pact for euro introduction, based on the figures for last year.

Here are the main Eurostat findings:

In 2009 the largest government deficits in percentage of GDP were recorded by Ireland (-14.3%), Greece (-13.6%) the United Kingdom (-11.5%), Spain (-11.2%), Portugal (-9.4%), Latvia (-9.0%), Lithuania (-8.9%), Romania (-8.3%), France (-7.5%) and Poland (-7.1%). No Member State registered a government surplus in 2009. The lowest deficits were recorded by Sweden (-0.5%), Luxembourg (-0.7%) and Estonia (-1.7%). In all, 25 Member States recorded a worsening in their government balance relative to GDP in 2009 compared with 2008, and two (Estonia and Malta) an improvement.

At the end of 2009, the lowest ratios of government debt to GDP were recorded in Estonia (7.2%), Luxembourg (14.5%), Bulgaria (14.8%), Romania (23.7%), Lithuania (29.3%) and the Czech Republic (35.4%). Twelve Member States had government debt ratios higher than 60% of GDP in 2009: Italy (115.8%), Greece (115.1%), Belgium (96.7%), Hungary (78.3%), France (77.6%), Portugal (76.8%), Germany (73.2%), Malta (69.1%), the United Kingdom (68.1%), Austria (66.5%), Ireland (64.0%) and the Netherlands (60.9%).

Is there any correlation between both sets of membership criteria?

Ralf Grahn

Tracking eurozone crisis measures: Collective defence doctrine and foundations

How do the heads of state or government of the eurozone countries add to our knowledge about crisis prevention and mitigation at the time of the Spring European Council?

Statement by the heads of state and government of the euro area; Brussels, 25 March 2010


The participants stated that ‘ambitious and decisive’ action by the Greek government should allow Greece to regain the full confidence of the markets. Greece had not requested financial assistance, so no decision was taken to activate such assistance.

The euro area member states reaffirmed their willingness to safeguard stability in the euro area as a whole.

However, the eurozone member states outlined an aid package, should the market disturbances continue or deepen:

As part of a package involving substantial International Monetary Fund financing and a majority of European financing, Euro area member states, are ready to contribute to coordinated bilateral loans.

This mechanism, complementing International Monetary Fund financing, has to be considered ultima ratio, meaning in particular that market financing is insufficient. Any disbursement on the bilateral loans would be decided by the euro area member states by unanimity subject to strong conditionality and based on an assessment by the European Commission and the European Central Bank. We expect Euro-Member states to participate on the basis of their respective ECB capital key.

The objective of this mechanism will not be to provide financing at average euro area interest rates, but to set incentives to return to market financing as soon as possible by risk adequate pricing. Interest rates will be non-concessional, i.e. not contain any subsidy element. Decisions under this mechanism will be taken in full consistency with the Treaty framework and national laws.

We reaffirm our commitment to implement policies aimed at restoring strong, sustainable and stable growth in order to foster job creation and social cohesion.

Furthermore, we commit to promote a strong coordination of economic policies in Europe. We consider that the European Council must improve the economic governance of the European Union and we propose to increase its role in economic coordination and the definition of the European Union growth strategy.

The current situation demonstrates the need to strengthen and complement the existing framework to ensure fiscal sustainability in the euro zone and enhance its capacity to act in times of crises.

For the future, surveillance of economic and budgetary risks and the instruments for their prevention, including the Excessive Deficit Procedure, must be strengthened. Moreover, we need a robust framework for crisis resolution respecting the principle of member states' own budgetary responsibility.

We ask the President of the European Council to establish, in cooperation with the Commission, a task force with representatives of Member States, the rotating presidency and the ECB, to present to the Council, before the end of this year, the measures needed to reach this aim, exploring all options to reinforce the legal framework.

From Greece to collective defence doctrine

It is remarkable that the most significant outcomes at the Spring European Council were not brought about by the institution, but cooked up at the margins, by a gathering even more informal than the Euro Group.

The national leaders of the eurozone countries proclaimed the doctrine of ‘collective defence’ for the common currency.

They were not willing or able to take the detailed decisions on mutual aid, but they laid the foundations for lending at average rates of interest:

• Intergovernmental, decisions requiring unanimity
• By euro area member states
• Minority participation but leading role for the International Monetary Fund (IMF)
• Coordinated bilateral loans
• Conditionality
• Assessment by the European Commission and the ECB
• Country shares based on ECB capital key
• Loans bearing interest, not subsidised
• Unspecified incentives for return to market financing of sovereign debt
• National legal and budget decisions as needed

There are limits to what the EU member states or the euro area countries can do within the treaty framework. It is something of an irony that for more profound action they have to resort to classical intergovernmental cooperation.

Did the markets doubt the ability of the euro area members to walk the talk?

Did the markets distrust the Greek government’s promises, or did they bet on Greece going broke anyway (with, perhaps, a gentle push)?

Soon enough the eurozone countries were going to wake up to the fact that both the Greek economy and the euro currency itself faced an existential threat. They could give up resistance or they had to bring out the big guns.

Ralf Grahn

Sunday 23 May 2010

Tracking eurozone crisis measures: Reinforcing the Maginot Line?

In March, were the European leaders on top of things, or were they reinforcing the Maginot Line?

The main issues for the March 2010 European Council were the Europe 2020 strategy, the upcoming G20 summit and the next steps concerning climate change.

However, the Spring European Council gave some attention to questions regarding the Stability and Growth Pact, relevant to the eurozone crisis measures we are tracking in this series of blog posts.

These were important matters, but were our leaders prepared for later events?

European Council 25 to 26 March 2010


European Council 25/26 March 2010 conclusions (document EUCO 7/10)

Economic monitoring

Among monitoring mechanisms intended for the Europe 2020 strategy for jobs and growth ─ the successor to the Lisbon strategy ─ the European Council mentioned the following relevant to economic policy coordination as well as strengthened coordination and surveillance of the budgetary discipline of eurozone countries (point 6,page 5):

c) Overall economic policy coordination will be strengthened by making better use of the instruments provided by Article 121 of the Treaty (TFEU)

d) Coordination at the level of the eurozone will be strengthened in order to address the challenges the euro area is facing. The Commission will present by June 2010 proposals in that respect, making use of the new instruments for economic coordination offered by Article 136 of the Treaty (TFEU).

The integrity of the Stability and Growth Pact and the specific responsibility of the ECOFIN Council in overseeing its implementation were mentioned, in point 6(f).

Rapid decisions were required on the Commission’s proposals to ensure the quality, reliability and timeliness of national data; point 6(h).

Task force on economic governance

The European Council initiated the Van Rompuy task force on economic governance:

7. The European Council asks the President of the European Council to establish, in cooperation with the Commission, a task force with representatives of the Member States, the rotating presidency and the ECB, to present to the Council, before the end of this year, the measures needed to reach the objective of an improved crisis resolution framework and better budgetary discipline, exploring all options to reinforce the legal framework.

Financial regulation and supervision

The European Council wanted rapid progress on financial regulation and supervision, incentives in the financial sector and a report on a “Tobin tax”:

8. Rapid progress is required on the strengthening of financial regulation and supervision both within the EU and in international fora such as the G20, while ensuring a level-playing field at the global level. Progress is particularly needed on issues such as capital requirements; systemic institutions; financing instruments for crisis management; increasing transparency on derivative markets and considering specific measures in relation to sovereign credit default swaps; and implementation of internationally agreed principles for bonuses in the financial services sector. The Commission will shortly present a report on possible innovative sources of financing such as a global levy on financial transactions.

Internal and international progress

The European Council was not oblivious of the need for progress:

9. This requires that the EU make rapid progress on all these issues internally. In particular, work on the new European supervisory framework needs to be concluded in time for the European Systemic Risk Board and the three European Supervisory Authorities to begin work in early 2011.

10. The Council and the Commission will report back on these issues to the June 2010 European Council, ahead of the Toronto Summit.

Correct me if I am wrong, but my feeling is that the complicated structures of EU decision making were not amenable to quick and decisive action. There was not yet a sense of ‘clear and present danger’ strong enough to cut through the differences between the member states.

Ralf Grahn

Tracking eurozone crisis measures: Beware the ides of March

In Tracking Eurozone crisis measures: Half empty or half full? (23 May 2010) we recapitulated the official ECB and EU decisions published and sketched the road map to track the communications from the institutions and informal groups on the eurozone crisis and economic governance in a few blog posts.

Even if most of the flurry of activities has been seen in May, we have cause to see how our leaders have acted to avert the dangers.

Beware the ides of March offers a reasonable starting point for brief retrospection, although the storm had been brewing for a time.

ECOFIN 16 March 2010

3003rd Council meeting Economic and Financial Affairs, Brussels, 16 March 2010 (document 7498/10)

On the excessive deficit procedure – follow-up to the decision on Greece, ECOFIN reached the following conclusions:

The Council examined a communication from the Commission assessing action taken by Greece in response to the decision it took on 16 February on the correction of Greece's excessive deficit.

The Council welcomed the first report by Greece, submitted on 8 March, and the Commission's communication. It shared the Commission's view that Greece is appropriately implementing the Council's decision and Greece's stability programme. It welcomed the additional measures announced by the Greek government on 3 March, amounting to 2% of gross domestic product (GDP) and consisting of permanent revenue-increasing measures and permanent expenditure cuts in equal shares. In line with the Commission's assessment, the Council considered that these additional measures appear sufficient to safeguard budgetary targets for 2010, provided that they are implemented effectively, fully and in a timely manner.

In its 16 February decision, adopted under article 126(9) of the Treaty on the Functioning of the European Union, the Council:

– gave notice to Greece to bring its government deficit below 3% of GDP, the reference value set by the EU treaty, by 2012;

– set out a timetable of measures to be taken, including a target of 8.7% of GDP for its 2010 budgetary deficit, which represents a 4 percentage points reduction from the estimated 12.7% deficit for 2009;

– set 16 March as the first of a series of deadlines for reporting on measures taken;

– stated that, to the extent that a number of risks associated with the specified deficit and debt ceilings materialise, Greece would announce, in its first report, additional measures to ensure that the 2010 budgetary target is met.

Greece has been subject to an excessive deficit procedure since April 2009.

Caesar: The ides of March are come.

Soothsayer: Ay, Caesar; but not gone.

(Shakespeare: Julius Caesar Act III, Scene I)

Greece was under close ECOFIN scrutiny and the Greek government had announced corrective measures, but the full force gale had not yet lifted them up to say nothing about taking them home.

Ralf Grahn

Tracking eurozone crisis measures: Half empty or half full?

The European Central Bank has published its formal decisions: Eurozone crisis: ECB decisions (21 May 2010) and earlier blog posts with references to ECB decisions published in the OJEU. (Operations are important, but a separate matter.)

The EU measure published is Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism, in the OJEU 12.5.2010 L 118/1: Background: European financial stabilisation mechanism (13 May 2010) and discussion in some later posts.

The preparatory act directly linked to the eurozone crisis was the recommendation for a decision on Greek corrective measures (available 21 languages, but not in English; here a link to the French version):

Recommandation en vue d'une DÉCISION DU CONSEIL adressée à la Grèce en vue de renforcer et d'approfondir la surveillance budgétaire et mettant la Grèce en demeure de prendre des mesures pour procéder à la réduction du déficit jugée nécessaire pour remédier à la situation de déficit excessif ; Bruxelles, le 4.5.20010 SEC(2010) 560 final.

Otherwise the decisions or proposals concerning eurozone rescue measures have not been published centrally and officially, in the Official Journal of the European Union or as preparatory acts (COM or SEC documents) on Eur-Lex: Eurozone crisis: Roundup of official information (OJEU) (19 May 2010) and Eurozone crisis: Roundup of preparatory documents on Eur-Lex (19 May 2010).

This is still the situation as per today, 23 May 2010.

Road map

The dearth of central and official publishing does not mean that the Council (ECOFIN), the heads of state or government of the euro area countries, the Euro Group and the European Commission have refrained from communicating altogether. We just have to look for the bits and pieces elsewhere.

For the convenience of readers and our own enlightenment, we aim to track the communications from the institutions and informal groups on the eurozone crisis and economic governance in a few blog posts.

Ralf Grahn

Saturday 22 May 2010

UK euro entry: Sour grapes?

The Liberal Democrats seem to have easily agreed to the demand by the Conservative Party to exclude the introduction of the euro currency, as stated in the coalition programme:

We will ensure that Britain does not join or prepare to join the Euro in this Parliament.

While the visceral hatred of all things EU and euro among the conservative power base should not be underestimated, one reason for this seemingly effortless agreement brings to mind the “sour grapes” in Aesop’s fable The Fox and the Grapes.

The latest edition from the House of Commons Library: Economic Indicators, May 2010 (Research Paper 10/35, 13 May 2010; 40 pages) tells us the following about government deficits:

The UK’s 12% deficit in 2010 is expected to be the largest in the EU, with Ireland’s 11.7% second highest. A 10% UK deficit in 2011 would be below Ireland’s 12.1% and only slightly above that of Greece (9.9%, though the IMF programme envisages 7.6%). However, the UK’s gross debt would remain less than two-thirds of Greece’s.

The UK’s gross public debt was estimated to rise from 68.1 per cent in 2009 to 86.9 per cent of GDP in 2011 (page vii).

According to the EMU convergence criteria (or Maastricht criteria) for the third stage in economic and monetary union (EMU) low inflation is a necessity, so the UK would fail the price stability test.

Britain has not participated in the exchange-rate mechanism for two years without devaluation against the euro (its favourite remedy for economic ills), so it clearly fails to qualify.

Failing on all grounds, the United Kingdom could not introduce the euro in a foreseeable future even if it wanted to. Somehow the invisible hand of the markets seems to guard Britain in comparison with the eurozone basket cases.

In such circumstances it is easy to trumpet defeat as victory.

Ralf Grahn

Herman Van Rompuy on task force meeting to improve EU economic governance

The European Union (eurozone) and the International Monetary Fund have pledged €110 billion to rescue Greece and up to €750 billion for other contingencies with regard to euro stabilisation. Markets have continued to tumble.

It would have been astonishing if the EU finance ministers had approached the meeting of the task force on improved economic governance without a sense of urgency.

Initiated by the European Council and chaired by its president Herman Van Rompuy, the task force on crisis resolution and better budget discipline held its exploratory first meeting in Brussels yesterday, 21 May 2010.

Given the urgency and gravity of the issues, we have reasons to read the statement of Van Rompuy carefully and in full:

Remarks by Herman Van Rompuy, President of the European Council, following the first meeting of the Task force on economic governance (21 May 2010)

Today we had the first meeting of the Task Force on economic governance. It was a very useful meeting. I could feel a sense of urgency and a spirit of cooperation around the table. Everyone shares the will to go forward together.

As you probably know, the Task Force consists of representatives of all 27 Member States – mostly Ministers of Finance -, plus Commissioner Rehn from the Commission, President Trichet from the European Central Bank, Prime-minister Juncker from the Eurogroup and myself as chairman. All key actors are around the table.

Today was the start of a process. We did more than just identify the issues on the table. We have already found agreement on the four main objectives and also on the direction in which we will move forward for each of them.

I consider this as an important step upon which we can build in the forthcoming meetings.

Now, which are the four main objectives on which everybody agreed?

First objective: We should achieve greater budgetary discipline. In other words, we need to strengthen the Stability and Growth Pact and make it more effective.

Second objective: We need to find means to reduce the divergences in competitiveness between the Member States, at least when these divergences are too big. This is necessary to reach a more even economic development within the European Union, and in particular, in the euro area.

Third objective: We need to have an effective crisis mechanism in order to be able to deal with problems such as those we see today in the Eurozone.

The fourth objective is linked to the third: We need to strengthen economic governance, in institutional terms, in order to be able to act quicker and in a more coordinated and more efficient manner.

These are the four central priorities on which we will move forward.

The Commission contributed with an important Communication which contained a number of proposals. I, personally, have put some thinking points on the table as too have some Member States. Undoubtedly other Member States will follow suit with their proposals before the end of May. I welcome this active participation in our collective work very much.

On the basis of all this we will work on a comprehensive agreement. The Task Force we will meet twice more before the summer. Preparatory work will be done by a group of 'Sherpa's'. We will present a "Progress Report" to the European Council of 17 June. What do we aim for?

Our agreement should result in a stronger economic cohesion within the Union. This is vital for 27 countries with a common internal market and for a zone of 16 countries sharing a single currency.

Moreover, such cohesion is required in order to act in an effective and credible manner. The approach should be seen in the context of our considerable efforts to strengthen the structural economic growth within the Union, such as we are doing with the EU 2020 strategy.

A final point: we all want to draw the lessons from this difficult period. In the past, corrective measures were taken too late; the available legal instruments were not used sufficiently. That's why we need to act in a number of ways:

• in prevention and in correction;

• in the fields of the budget and of competitiveness;

• in the eurozone and in the European Union as a whole.

All Member States and all EU institutions need to work together on this.

I am deeply convinced that we can surmount this crisis. The measures we have taken for Greece (on 2 May) and in a broader framework (on 7 and 9 May) have proven that the European Union is able to act. We must now continue this work so we can avoid a repetition of these problems in the future.

Therefore, as I said previously, I am very glad that all members of the Task Force share the will to bring this about.

We are still planning to have our work ready before the European Council of October, instead of December.

Not a bad start for the Van Rompuy task force, but the challenges are huge for our economic security and future prosperity.

Ralf Grahn

Improving EU economic governance: Impressive Herman Van Rompuy

Winston Churchill is said to have quipped that the Labour leader Clement Attlee was a man who had much to be modest about.

At (s)election time British tabloids, which pray at the shrine of John Bull, were more derisory in their outpourings about the new President of the European Council, Herman Van Rompuy, often misleadingly labeled as the “EU President”. This funny little foreigner came from, of all places, Belgium. The latest national tragedy is that Van Rompuy has “failed” to send Nigel Farage (a member of the European Parliament, not the European Council) a get well card.

I have to admit a conflict of interest of potentially damaging proportions: I have not sent Farage a get well card, either, although I wish to see him restored to full physical, mental and moral health.

Farage, this paragon of British political culture, has described Van Rompuy as a man with "all the charisma of a damp rag" and told that he has the "appearance of a low-grade bank clerk".

I have one suggestion to everyone who has been fed the story of European integration and cooperation in the same vein as the collective memory of the Blitz in England.

See for yourself.

The task force meeting on EU economic governance was preceded by a cacophony of conflicting messages from national politicians on crisis resolution and better budget discipline. The pressures to succeed are great, but the treaties severely limit the options for improvement. This was the exploratory, first task force meeting. Trying to achieve some sort of purpose and order into a collection of representatives from 27 member states must be a superhuman task.

After the task force meeting, the chairman Herman Van Rompuy held a press conference. True, he had a prepared script and he fielded only four questions, but I found his clarity and quiet determination impressive. (The recorded video clip does not contain the questions and answers, but Van Rompuy’s replies in English and French were both precise and measured.)

Let this be my get well card to English tabloids.

Ralf Grahn

Friday 21 May 2010

Eurozone governance: Cameron nixes treaty change

According to the BBC, UK prime minister David Cameron has politely told chancellor Angela Merkel in Berlin that he wants to play a positive role in Europe and that a strong eurozone is in the UK’s own interest.

However, Cameron excludes any treaty change giving the European Union more powers to shore up the eurozone, and he referred to the unanimity rule and the British veto. Cameron also excluded British participation in “bolstering” the euro. (By this I understand financial stabilisation measures.)

These are essentially the same things Cameron said the previous day, when he met president Nicolas Sarkozy in Paris.

UK government programme

While adding non-participation in financial stabilisation, what Cameron said is contained in the agreement between the Conservatives and the Liberal Democrats: The Coalition: our programme for government.

Here are three relevant excerpts:

We will ensure that there is no further transfer of sovereignty or powers over the course of the next Parliament.

We will amend the 1972 European Communities Act so that any proposed future treaty that transferred areas of power, or competences, would be subject to a referendum on that treaty – a ‘referendum lock’. We will amend the 1972 European Communities Act so that the use of any passerelle would require primary legislation.

We will ensure that Britain does not join or prepare to join the Euro in this Parliament.

The inadequacy of the Lisbon Treaty rules on economic governance is in plain view. If monetary union without fiscal and political union is a structural weakness, there are two coherent responses for EU leaders:

1) Make necessary changes to the EU treaties, or
2) openly act to dismantle the eurozone.

Best wishes for the eurozone, while vetoing necessary treaty change, comes awfully close to the Leninist saying to give the Mensheviks support in the same way as the rope supports a hanged man.

Ralf Grahn