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Issue 17 - 18 March 2013
This newsletter is published by SOMO and WEED.

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Editorial

The EU- and Euro-crisis is fully back: Cyprus is now bankrupt. Slovenia too. In Bulgaria the government had to resign as protests of citizens against austerity became overwhelming. Spreads for Italian bonds are increasing again and the rating agency Fitch has again downgraded the country. Even de UK rating has been downgraded.

At the same time the official forecast of the EU (see European Commission (2013). European Economic Forecast. Winter 2013. Brussels.) predicts a further shrinking of the GDP in the Euro Area (-0.3 per cent) while for the EU 27 the forecast is almost zero growth (+0.1 per cent). The figures for the US are 1.9 per cent and Japan 1 per cent.

A real disaster are the data for unemployment. In the Euro area the rate for 2013 is predicted at a historic high of 12.2 per cent and at 11.15 per cent in the EU 27. In the US unemployment will be at 7.6 per cent and 4.3 per cent in Japan.

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All this has to be seen against the background of an unresolved banking crisis particularly in in Spain. But also in the rest of the EU the financial sector is still fragile. The IMF has just released a report, in which the fund voices its concern over the stability of the EU banking system (see IMF: European Union -Financial System Stability Assessment). Furthermore, the austerity programmes do not bring positive results. Public debt is continuing to grow, while popular protest is increasing massively. For instance, more than one million Portuguese participated under the slogan ‘Troika go to hell’ in demonstrations in 30 cities on 2 March. The country has 10 million inhabitants.

But there is also some light in the darkness: as a result of the election in Italy the austerity strategy has received a heavy blow. Monti, who was following the neo-liberal course of Berlin and the Troika of the IMF, the EU- Commission and ECB, has been marginalised with 10 per cent of the votes. Bersani, from the social democratic party is on top with 29 per cent, but cannot govern without the new political party Cinque Stelle (received 25 per cent of the votes), with its charismatic leader Beppe Grillo. In order to get the new political party or at least parts of it as an ally, Bersani has now presented a proposal under the title Let’s get out of the prison of austerity. In it he promises to advocate a ‘revision of the European stability policies’ and to get rid of the ‘vicious circle of recession and austerity’ (from faz.net/aktuell/wirtschaft/europas-schuldenkrise/italien/regierungsbildung-italiens-wahlsieger-bersani-will-vor-allem-geld-ausgeben-12105170.html).

This movement is an interesting phenomenon. Although participating in national elections for the first time, it received 25 per cent of the votes, which is unique in the history of parliamentarian democracy worldwide. Although many media and politicians in Germany and other Northern member states try to discredit the movement as ‘populist,’ Cinque Stelle reflects a deep frustration over what Habermas calls Façade Democracy and Colin Crouch Post Democracy. This frustration exists in most industrialised countries. But with the Mafia and corruption inside the political system and Berlusconi’s dominance over traditional mass media, Italian citizens have some more reasons to be angry. The support base of the movement is politically and socially heterogeneous. Many young people of 18-25 years have voted for the party, as well as 40 per cent of the workers, 31 per cent of free professionals and 42 per cent of unemployed (Osservatore Elettotale LaPolis; Università di Urbino). The political profile of the programme of Cinque Stelle is clearly centre-left.

As the French president has so far been too weak to really push an alternative to the Merkel and Troika type of crisis management, Italy might shift the balance of power. A first indicator for such a shift might be the warnings of Mario Monti at his last appearance at an EU summit (14/15 March) against too strict austerity policies (see the article in this issue on the results of the March EU-summit: Innovative Approach in Cyprus bailout).

And there is not only Italy. Although not part of the EU, Switzerland held a referendum in which an overwhelming majority spoke out for strict limitations of the income of top managers. The spirit of social justice and fairness is gaining ground in Europe. The winds of change begin to blow.

The European thriller will continue in 2013.


Summaries of the articles in this issue

Innovative Approach in Cyprus bailout - The results of the March EU-summit
EU-Cyprus flag image While the recent EU Council meeting (14-15 March) did not address major issues of the EU crisis, the rescue package for Cyprus has interesting new features, which might point beyond the special case of Cyprus. The bail-in component for creditors has been decided without negotiations with the creditors and leaves them no chance to escape. This might be a model for the rest of the EU and finally put debt relief - at least partially at the expense of the creditors and not the tax payer – on the agenda, writes Peter Wahl.

Read more >

Addressing an arch evil of globalisation - strong measure against tax avoidance in Commission’s draft for FTT
The new draft of the EU-Commission for the Financial Transaction Tax (FTT) has presented an additional measure against tax avoidance: the so-called 'issuance principle.' It allows to tax transactions also outside the geographical realm of the countries participating in the FTT. The importance of this proposal goes far beyond the FTT as such. It addresses an arch evil of globalisation: the asymmetry between transnationally operating capital and political regulation.

read more >

Derivatives regulation almost not applied to non-financial corporations
EU flagIn August 2012, the European Market Infrastructure Regulation (EMIR) was put into place to regulate the over-the-counter trading of derivatives (on the contents see March 2012 newsletter and information from the FSA) but some technical standards were to be implemented later. In March 2013, important technical standards proposed by the European Securities and Markets Authority (ESMA) and the EC have finally been adopted. However, there was an opposition in the European Parliament against important details of the standards. A group of conservative and liberal MEPs attempted to weaken the standards by proposing large-scale exemptions for over-the-counter (OTC) derivative activity by non-financial ‘real economy’ corporations. Their proposal would have meant that industrial and commodity conglomerates would have had carte-blanche to speculate far beyond their actual need to hedge risks from their commercial activity. However, due to opposition from other MEPs and civil society organisations, the attempt failed in the final vote.

Read more >

Short overview on some reforms currently moving forward
EU parliament imageBanking: The European Parliament (EP), the Council of Ministers and the EC agreed on certain aspects for the revision of the capital requirements directivein their trilogue negotiations on 28 February 2013, such as limiting remuneration in the banking sector. However, the compromise on final text is not yet available and some decisions still need to be taken. In addition, the EP process on the banking recovery and resolution plans is moving forward. For more details, see the calendar below and the next newsletter issue.

Money Laundering: The European Commission (EC) has published a draft revision of the EU’s anti-money laundering directive on 5 February 2013, which is the start of the co-decision making process at the European Parliament and the Council of Ministers (see next newsletter).

Key information documents (KID) for packaged retail investment products: Individual investors’ investment products (PRIPS) will be required to give more information but will not be regulated on what assets they contain. The European Parliament’s rapporteur draft report is being amended and the vote in the responsible EP committee is scheduled for 27 May 2013.

Credit Rating Agencies: On 16 January 2013, the European Parliament has approved the compromise which had been agreed on in December in the trilogue (see previous newsletter). With this EP decision, the review of the credit rating agency regulation has now also been formally finalized.

Calendar
For background to the official agenda of European institutions, see the following websites: The links made in the following calendar refer to the procedure files on which you can find the dates of the different stages (past and future) of decisions by the EC, EP and Council on the particular draft EU law.
2013
March
  • 20, ECON (Brussels): Consideration draft report on Reforming EU banking structure , and amendments on the Fight against Tax Fraud
  • 20, EC (Brussels): Scheduled launch Green Paper consultation on long term financing of the European economy, and publication of next steps to reinforce the Economic and Monetary Union
  • 20, WTO (Geneva): Committee on Trade in Financial Services discussion of financial reforms and GATS/WTO rules
  • 21, ECON (Brussels): vote on UCITS V (remuneration & depositary functions)
  • 26, ECON (Brussels): Meeting
  • 27, ECOFIN Coreper level (Brussels): approval of final version of CRD-4 and CRR
  • 26-30, Tunis (World Social Forum): Annual meeting
  • ?, EC (Brussels): Proposal for a European Framework for Money Market Funds (Shadow banking)
April
May
June
July
  • 1, EP (Strasbourg): Indicative plenary vote on UCITS V
  • 2, EP (Strasbourg): Indicative plenary vote on implementing enhanced cooperation in the area of FTT
  • 2- 4, EP (Strasbourg): Plenary vote Reforming EU banking structure report
  • 1- 4 ?, EP (Strasbourg): Scheduled Plenary vote Implementing enhanced cooperation in the area of FTT
  • 8-9, ECON (Brussels): Meeting
  • 18-19, G20 (Moscow): Joint G20 Finance and Labour Ministers meeting
  • 19- 20, G20 (Moscow): Finance Ministers and Central Bank Governors' meet
  • ?, EC (Brussels): Proposal on Reforming EU banking structure (Liikanen report follow up)
September
  • 2-5, G20 (St. Petersburg): Finance Ministers' Deputies meet           
  • 5, ECON (Brussels): Meeting
  • 5-6, G20 (St. Petersburg): Leaders' Summit chaired by Russia
  • 10, EP (Strasbourg): Indicative date plenary vote bank crisis management / Recovery and Resolution Directive
  • 16-17, ECON (Brussels): Meeting
  • 23-24, ECON (Brussels): Meeting
  • 30, ECON (Brussels): Meeting
October
  • 8, EP (Strasbourg): Estimated plenary vote on MiFID-II and MiFIR
  • 10-11, G20 (Washington): Finance Ministers and Central Bank Governors meet
  • 11-13, IMF/World Bank (Washington): Annual meetings   
  • 14, ECON (Brussels): Meeting
  • 24-25, European Council (Brussels): Two-day Summit of heads of state
November
  • 4-5, ECON (Brussels): Meeting
  • 25-26, ECON (Brussels): Meeting
December
  • 2, ECON (Brussels): Meeting
  • 5, ECON (Brussels): Meeting
  • 16-17, ECON (Brussels): Meeting
  • 19, European Council (Brussels): Two-day Summit of heads of state