Brussels, 23/10/2012 (Agence Europe) - On Tuesday 23 October 2012, during the debate at the European Parliament plenary about the outcome of the recent European Summit, the chair of the ADLE group at the European Parliament, Guy Verhofstadt, warned member states that the EP will block adoption of the two-pack of draft legislation on the Stability and Growth Pact if the European Commission does not unveil provisions to introduce solidarity budget instruments (eurobonds and a redemption fund). The Socialists are making this issue, along with the creation of a contra-cyclical investments fund, a line in the sand.
Where are the proposals to set up a redemption fund and eurobonds?, thundered Verhofstadt in a question to the president of the European Commission, José Manuel Durão Barroso. He said that if no proposals were forthcoming, then MEPs would not approve the two-pack and would stand firm on this because they knew it was the only solution. Former Belgian Prime Minister Verhoftstadt talked of the way Slovenia, with its moderate debt levels (4.7% of GDP in 2011) but growing deficit (6.4% of GDP in 2011), was finding it difficult to roll over debt on the money market because nobody wants to invest in such a small market.
Elisa Ferreira (S&D, Portugal), one of the two EP rapporteurs on the two-pack, told this newsletter that this statement was nothing new and Verhofstadt had pointed out that something that is felt clearly at the EP. She said that the question of partial pooling of the debt of eurozone nations and the creation of a fund for economic growth, with funding of 1% of European GDP, were a line in the sand for most political parties. The EP's plenary guidance for the reports voted upon in committee was very clear in this connection (see EUROPE 10633). She said the Greens, Social Democrats and Liberals would stand firm on this and she hoped the EPP would put its money where its mouth is. She criticised the dominant attitude in Europe of faster progress on tightening budget discipline, yet no progress on budget solidarity questions.
Christian Democrats see things differently. Jean-Paul Gauzes (EPP, Francde) said that the Liberals did not represent all of the European Parliament and the EP had not set a firm line on the question. Gauzes is the second of the two EP rapporteurs on the two-pack. He was commenting in an interview with EUROPE about Verhofstadt's statements. At the Conncil, the member states will not be talking about budget solidarity instruments because Germany opposes them. Ferreira said inter-institutional talks are set for the end of the process, with several three-institution talks scheduled from now until mid-November. The European Summit gave a deadline for reaching agreement on the two-pack - by the end of 2012 (see EUROPE 10714).
Bank supervision. On Tuesday, the political parties at the EP expressd satisfaction at the outcome of the European Summit. Commenting on establishment of a single bank supervision system for the eurozone, the legislation for which is to be introduced later this year, the president of the EPP, Joseph Daul of France, said that all the 6,000 or so banks in the eurozone should be covered and although some banks were too big to fail, then no banks were too small to be supervised at EU level. In order to respond to German concerns, Europe's leaders recommend a different type of supervision for different types of banks with a clear division of labour between European supervisors (the ECB) and national supervisors. On behalf of the S&D party, Hannes Swoboda of Austria promised that the Social Democrats would fight for direct bailout of banks to be brought on stream as soon as possible so that it can help Spanish banks. The longer the process takes to set up, the more likely it is that it will be too late to cover Spanish banks and Spain will have to bail out the banks itself to the tune of some €40 billion. Sarcastically commenting on the decision-making abilities of Europe's leaders to decide exactly the same thing twice in a row, Verhofstadt said the attitude of waiting for nine months (because of Germany's elections) was irresponisble because it risks jeopardising introduction of the common bank supervisory mechanisms, which is needed to make it possible to directly bail out struggling banks. On behalf of the Greens, Rebecca Harms of Germany urged the president of the European Council, Herman Van Rompuy, to move fast on the bank supervision issue and also on harmonising national savings guarantee systems and bank restructuruing schemes. Although the ECB's president, Mario Draghi, has bought some time by the introduction of the ECB's OMT programme for the purcahse of sovereign bonds, which has eased pressure, said Gabriele Zimmer (GUE/NGL, Germany), she criticised the delays in introducing policies that had been decided upon and the lack of clear guidance, the first victims of which are European citizens.
Barroso stressed the importance of breaking the vicious cricle of bank woes leading to member state debt problems, while Van Rompuy pointed out that Eurogroup is responsible for deciding on exactly how the European Stability Mechanism's bank recapitalisation will operate (the ESM has lending capacity of €500 bn). Three triple-A countries - Germany, Finland and the Netherlands - are demanding that legacy assets be excluded from the bailouts. (MB/transl.fl)