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Merkel fails to obtain absolute parliamentary majority for second Greek bailout within her coalition; German Constitutional Court rules that 9-man special Bundestag EFSF Committee is ‚Äúlargely unconstitutional‚ÄĚ

28 Feb 2012

The Bundestag approved the second Greek bailout package by 496 votes in favour to 90 against, with 5 abstentions. Despite voicing their concerns over the package’s shortcomings, the opposition SDP and Green parties voted with the government. Only far-left Die Linke voted against the package. However, a total of 20 coalition MPs either voted against the government or abstained, meaning that Chancellor Angela Merkel was unable to secure a symbolically important absolute parliamentary majority of 311 out of 620 votes based solely on coalition MPs.

In a speech preceding the vote, Merkel admitted that the bailout did not offer “a 100% guarantee of success”, but that the alternative of an uncontrolled Greek default would be even worse. Merkel also announced that providing other eurozone members followed suit, Germany would pay half of its cash contribution – a total of €11bn - to the eurozone’s new permanent bailout fund, the ESM, this year and the other half next year, so that the fund would have an effective lending capacity of €500bn after only two years instead of the five originally envisaged.

reports that most MPs only received the full 726 page documentation covering all aspects of the package over the weekend. The paper interviewed a number of MPs ahead of the vote who admitted that they intended to vote in favour of the bailout even though they had not read the full document. On his Telegraph blog, Mats Persson notes that the vote “marked another low-water mark for parliamentary scrutiny” and “that discontent over the bailouts is slowly chipping away at Merkel’s Coalition majority…This matters for the eurozone as this is far from being the last crisis-related vote we’ll see in the Bundestag”. Open Europe’s live coverage of the debate and vote in the Bundestag yesterday, as well as Open Europe’s blog post looking at the extent to which German MPs were able to exercise proper scrutiny was featured by the Guardian and Telegraph live blogs.

This morning the German Constitutional Court ruled that the Bundestag’s 9-man special committee to determine the use of the eurozone’s temporary bailout fund, the EFSF, was “largely unconstitutional” on the grounds that parliament must be more involved in decisions concerning the euro rescue. The Court ruled that the committee could decide on the purchases of government bonds on financial markets using the eurozone’s temporary bailout fund, the EFSF, in instances where speed and confidentiality were of the essence. Die Welt notes that the decision could slow down the deployment of further German loan guarantees as part of eurozone bailouts.
Bild Welt Spiegel FAZ Süddeutsche Spiegel 2 Welt 2 Bild 2 Handelsblatt FAZ 2 FTD Times Mail Guardian European Voice EurActiv Telegraph FT WSJ CityAM The Irish Times La Tribune Les Echos Guardian: Live Blog Telegraph: Live Blog German Constitutional Court Ruling Telegraph blogs: Persson

ECB suspends use of Greek debt as collateral after S&P downgrades Greece to ‘selective default’;
Troika expected to approve next tranche of Portuguese bailout today
The ECB has suspended the use of Greek government bonds (or bonds guaranteed by the Greek state) as collateral for its liquidity provisions to European banks this morning. The move comes after S&P downgraded Greece to a “selective default”. The rating is likely to be upgraded once the voluntary restructuring is complete.

ECB lending to Greek banks, upon which they are reliant, will now move to the Greek Central Bank’s Emergency Liquidity Assistance (ELA) programme, which has lower collateral requirements potentially allowing them to continue to access loans with Greek bonds as collateral.

The EU/IMF/ECB troika will today announce its assessment of the Portuguese bailout and is expected to approve the release of the next tranche of bailout funds. Separately, AFP reports that the meeting of eurozone leaders after this week’s EU summit has been cancelled, although eurozone finance ministers will still meet ahead of the summit on Thursday.

The Dutch parliament will discuss the second Greek bailout this afternoon and although no formal vote is expected, parties are likely to indicate whether or not they support the plan. Eén Vandaag reports that the Dutch Court of Auditors criticised the lack of control on spending by the ESM, the permanent eurozone bailout fund.
ECB Press release FT WSJ CityAM EUobserver EUobserver 2 Il Sole 24 Ore Corriere della Sera Monde La Tribune Les Echos European Voice BBC Kathimerini Reuters Expansión Kathimerini 2 Les Echos 2 FT 2 La Tribune Les Echos 3 FT 3 WSJ 2 IHT Guardian BBC Público La Tribune 2 EUobserver 3 FT: Peel EUobserver Telegraaf Letter de Jager NRC Bloomberg Een Vandaag Publico DPA FAZ: Kohler FAZ: Steltzner Reuters 2 Times: King Les Echos 4

Spanish government unveils worse-than-expected deficit figures for 2011
Spanish Treasury Minister Cristóbal Montoro announced yesterday that Spain’s public deficit at the end of 2011 was 8.51% of GDP – well above the 6% target agreed with the European Commission. El País notes that Spanish regions are in large part responsible for the gap. Spanish business daily Cinco Días notes that, taking into account the austerity package of around €15bn adopted by the Spanish government last December, Spain will still need to cut its deficit by around €29bn if it is to meet its target for this year (4.4% of GDP). Some of the main Spanish papers feature editorials urging the Spanish government to renegotiate its deficit reduction targets with the European Commission.  Meanwhile, Expansión reports that foreign investors have reduced their purchases of Spanish debt.
FT  WSJ Le Monde El País El País 2 El Mundo El Mundo 2 Expansión Expansión 2 Expansión 3 Cinco Días Cinco Días: Editorial La Tribune Les Echos

Eustice: EU farm policy needs “fundamental transformation combined with a major shift of power back to national governments”
George Eustice MP has an article in the Western Morning News arguing for reform of the EU’s Common Agricultural Policy (CAP), which would involve giving national governments the freedom to innovate within broad objectives set by the EU aimed at enhancing biodiversity, delivering food security and animal welfare. He argues that the UK should use this freedom to convert the single farm payment should into a tradeable market in transferable biodiversity obligations so that that farmers on highly productive land could choose to forego their subsidy entitlement, while those on more marginal land might opt in to more environmental obligations.

Open Europe’s report on EU agricultural reform is also reported in the Western Morning News. The paper quotes Open Europe’s Christopher Howarth, as saying: "For decades, UK governments have complained about the EU's farm policy but never offered an alternative vision of their own. The coalition Government now has a huge opportunity to reverse this trend in on-going EU budget talks, but the window for doing so is closing quickly and the UK risks squandering this opportunity. The EU's farm policy currently costs taxpayers and consumers around Europe almost £90 billion a year, but in the UK, only 13 per cent of EU farm spending is explicitly aimed at protecting and enhancing the environment while farmers are currently paid not to farm, which is simply a terrible use of scarce public resources."
Open Europe press release Open Europe research Western Morning News Western Morning News: Eustice Conservative Home

Michel Barnier announced that the Commission would present draft regulation on non-EU bids on public procurement contracts by the end of the month, which he defended, stating, “it is not a protectionist measure, it is a question of using the same tools [as the others]”.
Les Echos

Speaking at a conference in Brussels, Europe Minister David Lidington has called for “lighter” EU regulation. “It is crazy to implement regulation which harms jobs and growth,” he said.
The Parliament Open Europe research: Financial services Open Europe research: Social policy

PM snubs Socialist candidate on visit to London
David Cameron has declined Francois Hollande’s invitation to meet in London tomorrow, when the Socialist frontrunner visits the capital ahead of the French presidential election in April. Cameron publicly endorsed Nicolas Sarkozy’s re-election campaign two weeks ago.  Hollande, who pledged to introduce a ‘patriotic’ 75% tax rate on incomes over €1m yesterday, leads Sarkozy in the first round polls by 4.5 percentage points, down from a 7 point lead ten days ago.
Le Monde Monde2 Les Echos FT Independent

The FT reports that France, Belgium, Spain and Portugal have all lifted bans on short-selling which were imposed in August last year. The prohibition was lifted thanks to a material decrease in market volatility. Greece is the only country in Europe which retains a short-selling ban.

The UK’s failure to impose EU-wide employment laws on Gibraltar could result in a summoning from the ECJ. The European Commission has stated that Gibraltar was not covered when the legislation was imposed throughout the UK. This amendment affects up to 10 million employees in the EU.

European Voice

EU states agreed to extend sanctions against Belarus and Syria yesterday.  The new measures include freezing the assets and banning EU-wide travel of 21 Belarusian public officials accused of repressing regime dissidents. Syrian central bank assets will be frozen, and the gold, precious metals and diamond trade with Damascus banned.

The WSJ reports that MEPs are expected to back the withdrawal of CO2 emissions permits in order to stabilise the price of carbon within the EU’s emissions trading system.
WSJ EurActiv

reports that Serbia is soon to receive EU candidate status.
EUobserver Monde Les Echos

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