Reuters Euro zone summit 2013

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013. REUTERS/ Kai Pfaffenbach

The Euro Zone Crisis is Back

ollowing a fractured Italian election result the mour and creating the conditions for the crisis to flare heat is back on the Euro Zone with its auster- up again. Could that be spur to galvanise policymakers Fity mantra offering little to douse growing so- again, following signs they have soft-pedalled on closer cial unease in southern Europe. The European Central economic integration and building a banking union in Bank’s pledge to do whatever it takes to save the euro recent months? The Reuters Euro Zone Summit held took some heat out of the debt crisis but unless over four days in , Frankfurt, Paris, Madrid and can establish a durable, reform-minded government London pressed a dozen of Europe’s top policymakers it might have put itself outside the ECB’s protection, on their plans, hopes and fears and whether they expect opening a dangerous chink in the currency bloc’s ar- the ECB to have to back up its words with actions.

1 Reuters Euro zone summit 2013

EU’s Barroso urges leaders to stick to austerity goals

By Luke Baker and Michael Stott The result leaves the euro zone’s third BRUSSELS, FebRUARY 26, 2013 largest economy facing an extended period of political uncertainty, with the prospect of uropean Commission President Jose another round of elections if a government Manuel Barroso appealed to EU cannot be formed. In that respect, Italy is Eleaders not to give in to on mirroring Greece, the euro zone country Tuesday after Italian voters roundly reject- that sparked the region’s debt crisis. ed the austerity policies pursued by outgo- Barroso said it was incumbent on all EU ing prime minister . and euro zone countries, especially those Speaking at a Reuters summit on the fu- receiving aid from the bloc’s rescue funds, Commission President Jose ture of the euro zone, Barroso said efforts to to retool their economies and cut deficits Manuel Barroso answers reporters’ questions revive Europe’s economy would take time in an effort to improve competitiveness and during the Reuters Future of the Euro Zone and required determination. The fact Ital- stimulate growth. Summit in Brussels February 26, 2013. ian voters had turned Monti out of office Such a prescription had worked for Lat- REUTERS/Francois Lenoir did not mean his policies, or those advo- via and was showing results in Portugal, Ire- cated by the European Union, were wrong. land, Spain and Greece, he said, with current “I hope we are not going to follow the account deficits narrowing, unit labor costs nificantly, work to increase female partici- temptation to give in to populism because of falling and exports beginning to pick up. pation in the workforce and allow wages to the results in one specific member state,” Bar- While the demands of austerity pro- rise with productivity. roso, speaking with passion, said of the EU’s grams, including deep spending cuts and “We need leadership, democratic leader- efforts to combat the sovereign debt crisis. changes to pensions and labor markets, ship, that has the courage to resist short- “The question we have to ask ourselves were harsh and unpalatable to many, they term considerations and the ability to ex- is the following: should we determine our were necessary, he said. plain to the public what is at stake and what policy, our economic policy, by short-term “It is true that the economic policy that will be the consequences of following an ir- electoral considerations or by what has to be we are implementing in the EU because of responsible path,” Barroso said. done to put Europe back on the path to sus- the financial crisis is a real challenge for po- Such a path would include any delay in tainable growth? For me the answer is clear.” litical leadership,” Barroso acknowledged. implementing reform programs or advo- Monti won just 10 percent of the vote “This requires determination, consisten- cating more public spending, he said, em- in the Sunday/Monday poll, with Italians cy and coherence over time. We never said phasizing that leaders could not afford to overwhelmingly backing the movements it would be easy, it’s going to be difficult, delay or be complacent in overhauling their of former prime minister Silvio Berlusconi and it will remain difficult.” economies. and comedian campaigner , But he said the Commission would not “It’s quite clear after the biggest finan- both of whom reject EU-backed austerity. be unnecessarily rigid when it comes to tar- cial crisis in the euro area there are very Financial markets reacted with alarm. gets, providing extra room to meet deficit tough policy decisions to be taken and Yields on Italian 10-year government goals where necessary, as has already hap- implemented, and for that we need coura- bonds, which reflect the degree of risk in- pened with Greece, Portugal and Spain and geous leadership and leadership that is ef- vestors attach to the country, rose sharply may be required for France. fective not only in taking decisions but in and share prices in tumbled. “We have to have a mix of policies that communicating them,” he said. keep the root of fiscal consolidation and at the “We should be serious when we discuss To read all stories same time promote growth,” he said. “Growth economic policy and not give up to imme- is the answer and growth is the goal.” diate political or party considerations.” Euro Zone Summit: Germany, as the bloc’s largest economy, Despite the turmoil that has shaken Click here had a particular leadership role to play and should open up its service sector more sig- Click here to continue reading

2 Reuters Euro zone summit 2013

Barroso says confident UK will stay in EU

By Paul Taylor and Mike Peacock the single market for goods and services, REUTERS TV BRUSSELS, FebRUARY 26, 2013 the EU’s eastward enlargement, its open trade policy and its leading role in the Video: uropean Commission President Jose fight against climate change. click here Manuel Barroso said on Tuesday he But he conceded it was a “reluctant part- Ewas convinced Britain would vote to ner” when it came to institutional issues. stay in the European Union if a promised The head of the EU executive, which into too many areas of national life, and the referendum takes place, despite opinion proposes legislation and enforces European EU should be self-critical, assess its perfor- polls showing a plurality in favor of leaving. rules, said he was convinced ways would be mance and make improvements that could However, he also told a Reuters Sum- found to enable the 17-nation euro zone to respond to those concerns. mit on the future of the euro zone the EU move forward in closer integration while But he added: “With the greatest of could not revise its policies just because one keeping Britain on board. respect for Britain as a member state, we country was thinking of holding a vote on He cited as an example an agreement in cannot now because one country has a ref- continued membership. December to create a single banking super- erendum, or signals the possibility of hav- Prime Minister David Cameron prom- visor for the euro area, in which solutions ing a referendum, put into question all of ised last month to give Britons an in-out were found to accommodate British inter- our policies because of the concerns of that choice on whether to remain in the 27-na- ests even though London has no intention one country.” tion bloc if he is re-elected in 2015, after of joining a European banking union. trying to negotiate a reform of EU policies Barroso said he understood some Brit- Editing by Mike Peacock to meet British concerns. ish concerns about EU authority stretching “Knowing Britain a little bit, and know- ing how important the business community is and the role that different parts of Brit- ish society can have on this open debate, in case there is a referendum, I am confident that Britain will remain a member of the European Union,” Barroso said. Cameron’s Conservative party wants to “repatriate” to London EU powers over a range of social, employment, justice, police and fisheries policies. His Liberal Democrat coalition partners and the main opposition Labour Party both support EU membership. However, the Eurosceptical UK Inde- pendence Party and some dissident Con- servatives favor outright withdrawal from the bloc, and latest opinion polls show about half of Britons want to leave while just a third say they would vote to stay. Barroso lauded Britain’s contribu- tion to Europe, notably in promoting

Interview transcript: European Union Commission President Jose Manuel Barroso gestures as he answers questions during Click here the Reuters Future of the Euro Zone Summit in Brussels February 26, 2013. REUTERS/Francois Lenoir

3 Reuters Euro zone summit 2013

Italy vote raises risk of euro contagion: Schaeuble

By Noah Barkin and Michael Stott But Schaeuble stated that he saw stable BERLIN, FebRUARY 27, 2013 finances as a condition for growth and said France needed to introduce structural re- erman Finance Minister Wolfgang forms of its own to boost growth. Schaeuble said on Wednesday that “France must also do more here,” GItaly’s inconclusive weekend elec- Schaeuble said. “(French President Fran- tion had raised the risk of market turmoil cois) Hollande knows this and so does spreading to other euro countries and urged Pierre Moscovici.” Italian politicians to form a stable govern- Turning to the Mediterranean island of ment quickly. Cyprus, which is in talks with European of- Speaking to Reuters from the finance ficials on a bailout for its banks, Schaeuble ministry in Berlin as Italy’s borrowing said he hoped for an agreement before Eas- costs hit their highest level in four months, ter, which falls at the end of March. Schaeuble said it was too early to declare German Finance Minister Wolfgang Schaeuble He made clear that Russia must make a the euro crisis solved. attends a cabinet meeting at the Chancellery in contribution, although he declined to ad- “The election result in Italy has sparked Berlin, February 6, 2013. dress speculation that European officials doubts in the market that a stable govern- REUTERS/Fabrizio Bensch may seek to “bail in” Russian depositers by ment can be formed. When such doubts forcing them to take losses on their holdings. arise there is a danger of contagion. We saw “Russia is involved because Russia made this last year when elections in Greece led the euro zone’s third largest economy and a not-insignificant loan to Cyprus and also to political uncertainty. Other countries are rekindling concerns that the bloc’s three- because Russian investors have a very high then infected,” Schaeuble said. year old crisis could intensify after several level of deposits in Cyprus,” he said. Yields on benchmark 10-year Italian months of relative calm. He struck a positive note on the Ger- government bonds hit 4.9 percent in the On Wednesday, solid demand at an Ital- man economy, which contracted by 0.6 wake of the election. This was well below ian government debt auction brought some percent in the fourth quarter of 2012 as 2011 crisis highs of 7.3 percent but sharply relief, pushing European shares and the exports to euro zone partners dried up, sug- higher than the 4.1 percent level at which euro higher. But there were also signs that gesting Germany could tolerate another they traded last month. foreign investors had stayed away from the year of solid wage rises. “Now it is up to those who were elected bond sale. The country’s IG Metall union said on in Italy on Sunday to form a stable govern- Schaeuble, 70, has played an important Wednesday it would seek salary hikes of up ment. The faster they do this, the quicker role in shaping Germany’s response to the cri- to 5.5 percent this year for its 3.7 million the uncertainty will be overcome,” Schaeu- sis, pushing the idea that southern euro states workers in the metal-working and electri- ble added. must consolidate their budgets and reduce cal sectors. “And by the way, I never said the euro cri- debt in order to win back market confidence. “We had a weak fourth quarter last year, sis was over. I only said that we have made The course has led to much economic but all signs are now pointing to a broad- significant progress. We need to continue on pain in countries like Greece, Spain and based recovery in Germany,” Schaeuble said. this path, but we will have setbacks.” Portugal, where unemployment has shot “We will need to cultivate this, not only No party won an overall parliamentary higher and living standards have fallen. the politicians but also those negotiating majority in Italy’s vote, rattling investors in Speaking to Reuters on Tuesday, Schaeu- wages,” he added, saying that a narrowing ble’s French counterpart Pierre Moscovici of labor cost differentials between Ger- REUTERS TV said the Italian vote, which delivered strong many and southern euro countries would scores for former Silvio Berlus- bring stability to the single currency bloc. Video: coni and upstart comic-turned-politician click here Beppe Grillo, showed austerity had gone Additional reporting by Gernot Heller; Writing far enough. by Noah Barkin, Editing by Michael Stott

4 Reuters Euro zone summit 2013

Spain no nearer bailout after Italy vote: finance minister

By Julien Toyer and Carlos Ruano Earlier on Tuesday, Spanish Foreign MADRID, FebRUARY 26, 2013 Minister Jose Manuel Garcia-Margallo sounded more alarmed, saying there was a pain is no closer to seeking bond- feeling of “extreme concern” over possible buying help from the European movements in bond spreads in reaction to SCentral Bank than it was before It- potential Italian political gridlock. aly’s election, which has triggered renewed But de Guindos said neither market jit- market turmoil, Economy Minister Luis de ters nor the bleaker economic outlook re- Guindos said on Tuesday. leased last week by the European Commis- De Guindos also told Reuters in an inter- sion would deviate the government from its Spain’s Economy Minister Luis de Guindos bites view that he would push ahead with planned economic policy. his glasses as he attends the State of the Nation tax cuts for 2014 and beyond while maintain- Spain, which implemented strong auster- debate at Parliament in Madrid February 20, ing deficit-cutting efforts in a drive to create ity remedies to cut its public deficit from 9.4 2013. REUTERS/Sergio Perez growth and pull Spain out of recession. percent of gross domestic product in 2011 to “Spain is not closer or further from an close to 7 percent in 2012, has now started to OMT program than it was 24 hours ago,” implement more growth-oriented policies. planned banking union, keep control of its he said. De Guindos said the government hoped finances including those of the 17 autono- “We should not pay too much attention the European Commission would grant the mous regions, to finish the clean-up of its to the short-term reaction of the markets country a more “sensible” deficit-cutting path banks and to deliver structural reforms it because markets usually overshoot in the over the next three years. Madrid has already has committed to. short-term. What I hope and expect is that been given an extra year to meet strict deficit This, he said, would go a long way in Italy will finally and eventually get a stable targets and is now hoping for another. closing the gap between the north and government which will continue with the While ruling out new budget cuts for south of the euro zone. reform agenda.” 2013, he said the priority for 2014 was to “There are not first-class or second-class The ECB has taken much of the sting combine fiscal consolidation with stimulus passengers. We are all in the same boat ... out of the euro zone debt crisis by pledging policies, including tax cuts Prime Minister despite the fact that we had seen an in- to buy as many government bonds as nec- Mariano Rajoy committed to when he took creasingly higher fragmentation in capital essary to shore up the currency bloc via a office in December 2011. markets,” he said. program called Outright Monetary Trans- “These are commitments that we have. The ECB bond-buying program was a actions (OMT). We’ll have to combine this commitment backstop for Spain’s struggling economy, The verbal promise alone has been with the continuation of the fiscal consoli- but was no substitute for those reforms. enough to drive down borrowing costs, at dation effort. We think it will be positive The government, over the next two to least until Italy’s election. and will be possible over the next months,” three months, will table a reform of the The premium investors demand to hold de Guindos said. pension system, put forward new laws to Spanish 10-year debt rather than the Ger- He said the new approach would be make the economy more competitive and man benchmark jumped to 393 basis point reflected in the economic program Spain boost access to credit and sell nationalized on Tuesday, a level not seen in several will send to the European Commission by lenders, de Guindos said. weeks. Spain’s blue-chip index Ibex .IBEX April 1, which that will cover 2013, 2014 The sale of lender Bankia (BKIA.MC) was down 2.7 percent at 1600 GMT. and 2015. and smaller former savings bank NCG Spain, which has taken advantage of Banco are still a remote prospect but Cata- REUTERS TV improved market conditions to sell close to lunya Banc is more advanced, with the win- 25 percent of the debt it plans to issue this dow for non-binding bids closing at the Video: year, has set four priorities to keep interna- end of the week. click here tional investors on its side. It wants to complete the euro zone’s Click here to continue reading

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France’s Economy, Finance and Foreign Trade Minister Pierre Moscovici leaves 11 Downing Street in London February 25, 2013. REUTERS/Suzanne Plunkett

French finance minister: “Worrying” Italy vote shows Europe needs growth

By Jean-Baptiste Vey and Mark John “The message from Italy is: ‘Be careful, forecast that the deficit would fall to 3.7 PARIS, February 26, 2013 when you are in a situation in which you percent this year. He did not give a new set ask populations to make sacrifices for long of forecasts but reaffirmed the mid-term taly’s inconclusive election shows Eu- periods, at the end you risk having pro- aim of a balanced budget in 2017. rope’s leaders must give voters across the tests’,” Moscovici said in his Paris office. Asked about signs of a growing diver- Iregion hope of stronger growth to offset “There needs to be another perspective gence between France, the euro zone’s sec- painful austerity, French Finance Minister - which is growth again,” he said in an in- ond largest economy, and EU economic Pierre Moscovici said on Tuesday. terview, one of a number Reuters is con- powerhouse Germany, Moscovici pointed France’s Socialist government, which last ducting with top euro zone policymakers to efforts to boost the French business sec- week acknowledged it will not hit its 2013 this week. tor through tax breaks of labor reforms. deficit-cutting target, has long insisted that Defending France’s call to be granted “This is the reason why this government efforts to rein in debt across the euro zone another year to hit a 2013 target of cutting is deeply committed to implementing a must be counter-balanced by measures to its public deficit to three percent of output, strong policy to regain competitiveness ... It’s bolster its sickly economies. Moscovici said further cuts than those al- by investment it’s by hiring that we will find Germany and others are less keen on ready announced by President Francois the perspective of growth and employment.” that view. Hollande were not possible given France’s A committed pro-European who voted Moscovici said the political deadlock anemic growth rate and unemployment in favour of the EU constitution thrown emerging from Italy’s general election was stuck at over 10 percent. out in 2005 by French and Dutch voters, “no doubt a worry” and hoped that centre- “That’s why I don’t want us to do the Moscovici nonetheless said measures to leftist would be able to three percent now ... if we did, we’d kill off promote growth should take precedence use his majority to form a solid the little (2013) growth we have of around over new moves to deepen EU integration. and reformist government. 0.1 percent and we would set ourselves up “The people in Europe will only believe But while he said the painful austerity for a political and social crisis that at some again in Europe if they see perspectives of reforms undertaken by outgoing technocrat point would feed into populism at election growth and employment. If people feel that premier Mario Monti had been necessary, time,” he said. Europe is too far away from them, if they he told the Reuters Euro Zone Summit “What I am asking for is some time, feel that Europe is only sacrifice, if they feel that Italy and Europe also needed to be not an indulgence. I think the European that Europe doesn’t create fairness, then given “another perspective”. Commission understands France’s situa- there is no way to have a stronger institu- tion ... For me, France made the effort that tions for Europe,” he said. REUTERS TV was needed in 2013 and I promise that in 2014 we will do all we can to ensure that Additional reporting by Yann Le Guernigou Video: the deficit is below three percent.” and Leigh Thomas. Editing by Catherine click here Moscovici put the 2012 deficit at around Bremer/Mike Peacock 4.5 percent and noted the Commission

6 Reuters Euro zone summit 2013

Bond-buying plan is there to be used: ECB’s Coeure

By Paul Carrel and Sakari Suoninen in financial markets weakens incentives to FRANKFURT, FebRUARY 27, 2013 move forward, so there is wisdom in that remark,” he said. “We have to show that re- e Guindos also told Reuters in forms are already bearing fruit.” an intervieThe European Central When ECB chief began DBank’s bond-purchase program is forming the OMT plan last July, yields on “not a nuclear deterrent” and is available Spanish bonds were well above 7 percent. for use, ECB policymaker Benoit Coeure Now they are trading just above 5 percent said, with Ireland and Portugal candidates though they were led higher by Italian to tap the plan when they gain more access yields after Italy’s inconclusive election. to debt markets. The ECB would not respond to that sort The ECB launched the program - of move and it would be a mistake to think dubbed Outright Monetary Transactions it was fixated on the fluctuations of govern- (OMT) - last September to counter inves- ment bond yields, Coeure said. tor fears of a euro zone break-up but it has “If yields go up because of political yet to deploy it, with some policymakers at events, there is not much the ECB can the bank preferring to keep it under wraps. do, that’s not related to monetary policy Coeure, the ECB Executive Board Benoit Coeure, executive board member of the whatsoever,” Coeure said. “What matters member in charge of market operations European Central Bank (ECB) poses for a photo to us is how monetary policy signals are who would supervise day-to-day running after an interview with Reuters in Frankfurt transmitted to the real economy. I would of the OMT, said the program was ready February 26, 2013. REUTERS/Ralph Orlowski focus more on say lending to companies, to for use if countries had bond market access households.” and an aid plan with Europe’s bailout fund. The ECB was reviewing its collat- “No, it’s not a nuclear deterrent,” Coeure plan but not just yet. eral framework to make cheap money said in a discussion at a Reuters summit on To qualify “we need to see issuance at more accessible to small- and mid- the future of the euro zone, when asked if it different points along the curves and we sized firms, he added. would be best for the plan never to be used. need to have a sense that issuance is regu- Coeure also said concerns about Ire- “They are here to be used if countries meet lar,” Coeure said. “On our side, we’re ready.” land’s bank debt restructuring being mon- the conditions,” he said. “So this is the discus- Not all ECB policymakers are keen on the etary financing would be alleviated if the sion that we’re having in particular when it plan. Belgium’s Luc Coene, a member of the plan allowed the Central Bank of Ireland comes to Ireland and Portugal, that OMTs 23-man policymaking Governing Council to sell the government bonds acquired can be available at some point when countries that includes the six Executive Board mem- through the deal quicker. have regained sufficient market access, which bers, said last month the program was like a Turning to his native France, Coeure is not the case today in our judgment.” nuclear deterrent, better not used. joined the ECB’s German policymakers - Portugal and Ireland, both of which are Bundesbank chief Jens Weidmann was Weidmann and Joerg Asmussen - in press- recipients of European aid, have begun re- the only Council member to oppose the ing Paris to reduce its deficit as close as pos- turning to debt markets and Irish Finance plan from the outset, which he described as sible to its 3 percent/GDP goal this year. Minister Michael Noonan said last week “tantamount to financing governments by “We would like to see action in 2013, his country plans to apply for the OMT printing banknotes”. because we think it is a matter of cred- Weidmann is also concerned that the ibility,” he said. “We need to see corrective REUTERS TV calming effect the OMT program has had action not on taxes, but on spending, and on financial markets has reduced the incen- action should be taken this year.” Video: tive for euro zone governments to reform. click here Coeure concurred. Additional reporting by Mike Peacock, Luke “There is a risk that the relative calm Baker and Paul Taylor in Brussels

7 Reuters Euro zone summit 2013

EU trade chief hopes to clinch U.S. trade deal by late 2014

By Robin Emmott deal could add 0.5 percent a year to the BRUSSELS, February 27, 2013 EU economy and 0.4 percent to the U.S. economy by 2027. he United States and European De Gucht said the deal was so weighty Union cannot afford to let transat- that signs of progress, before completion of Tlantic trade talks fail after they are a deal, could have a positive economic effect. launched in June, the EU’s trade chief said But the reverse was also true, he warned. on Wednesday, warning that both sides’ Following the collapse of global trade standing and prosperity in the world de- talks in 2008, both the United States and pended on their success. Europe have sought to tie up as many Washington and Brussels will begin talks free-trade agreements as possible and this towards a deal encompassing half the world’s bilateral accord represent the pinnacle of economic output just a few months after the those ambitions. EU launches talks with Japan in March, EU Such a deal was first discussed three de- Trade Commissioner Karel De Gucht told cades ago and considered too difficult be- the Reuters Euro Zone summit. cause of policies protecting the farm sector Benefits to the U.S. and EU economies, on both sides of the Atlantic. suffering from the aftermath of global fi- De Gucht said agriculture would be part nancial crisis, could be tangible even before of the discussions. “We have chosen the a deal is signed, while wrapping up talks by path of a deep and comprehensive agree- the end of 2014 was “not impossible” De ment,” he said, saying barriers for compa- Gucht said in Brussels. nies in areas ranging from data protection “This is about the weight of the western, to regulation and government contracts free world in world economic and politi- could disappear. cal affairs,” said De Gucht, one of the EU’s De Gucht, a former Belgian foreign most powerful commissioners who is nego- minister, said while there were no deadline, tiating trade deals with more than 80 coun- November 2014 represented a good target European Union Trade Commissioner Karel De tries on behalf of the EU’s 27 countries. for a U.S. accord because his term as trade Gucht looks on during the Reuters Future of the “Once we have started, failing is not an commissioner ends then and the United Euro Zone Summit in Brussels February 27, 2013. option. It would be very detrimental for States holds midterm elections. REUTERS/Francois Lenoir both the European Union and the United After that, six months could be lost, he States if we were not to succeed,” he said. said. U.S. President endorsed De Gucht also said the current value of create 400,000 jobs in Europe alone. But talks this month and the EU’s leaders have the euro did not represent a problem for the the complexity of the negotiations meant it also backed the plan, hoping a deal with EU’s exporters. “The euro is not at a forbid- could take several years to reach a deal. Washington will help Europe pull out of its ding level” for European trade, he said. “This is a negotiation that is going to debt crisis. Not content with an accord with the take time. I don’t think you could do it in At a time when the euro zone is in re- United States, the European Union will less than three years,” De Gucht said. cession and the United States expects only launch trade talks with Japan, the world’s “With the United States, we have to crack modest growth this year, an EU-U.S. trade third largest economy at the end of March a number of very hard nuts, but we at least REUTERS TV in Tokyo, De Gucht said. But he said the we know them. In Japan, it’s very much about going would be slower. internally changing a mentality,” he said. Video: An EU-Japan accord would bring to- France and Italy have been worried click here gether two trading partners responsible for a third of global economic output and could Click here to continue reading

8 Reuters Euro zone summit 2013

EU gamble risks killing UK’s “golden goose”: Mandelson

By Andrew Osborn and politicians for causing the 2008 financial crisis. teria service where you bring your own tray Guy Faulconbridge Mandelson, one of the architects of for- and pick out what’s on offer and then leave. LONDON, FebRUARY 25, 2013 mer Prime Minister ’s “New La- “That’s not how the European Union bour” Party and a cabinet minister in the works.” rime Minister David Cameron risks governments of Blair and Gordon Brown, If Britain sought consensual change as wrecking Britain’s financial center said Cameron’s European policy was a central player in European affairs then Pwith his bid to wrest back powers schizophrenic because so many members of London could defend its economy and help from the European Union ahead of a vote his ruling Conservative Party wanted him shape the EU’s future, he argued. on whether to leave, one of the UK’s most to get Britain out of the EU. “If on the other hand we are saying you influential Europhiles says. “It’s rather schizoid. He describes the have got to revise all your treaties to create a Peter Mandelson, one of Britain’s EU in positive and flattering terms ... then separate category of membership for Brit- most powerful men, told Reuters Cam- on the other hand the other David Cam- ain, then forget it,” Mandelson said. eron was imperilling the country’s future eron talks about the EU as if it’s some alien He said isolation and ultimately insignifi- by promising to claw back powers from the body, some sort of monster, something cance awaited Britain outside the EU, whose EU and to hold an in-out membership ref- that’s attacking us rather than serving us.” $16.5 trillion economy makes up about 22 erendum by the end of 2017. Mandelson warned that Cameron was percent of global gross domestic product, Attempts to negotiate a new type of staking Britain’s future place in the world according to IMF data. Britain’s economy EU membership for Britain would fail, the on an unpredictable referendum that could makes up 3.4 percent of global GDP. former government minister and EU trade easily be hostage to domestic issues. “If Britain was out of the EU, we simply commissioner said, while a ‘Brexit’ would “When you think what’s at stake for would not have an economic future in set- isolate its $2.5 trillion economy and un- us politically and economically it’s a heck ting ourselves up as some Swiss-style safe dermine the City of London’s position as of a gamble,” said Mandelson, a member haven for derivatives trading and hedge Europe’s financial capital. of a group of senior politicians who have fund industries and for those who want to “I don’t see any circumstances in which come together since Cameron’s January 23 dodge taxes,” he said. Britain’s financial sector and the City of speech offering a referendum to campaign Mandelson, who served as European London can thrive or flourish if we are not for British to stay inside the EU. Commissioner for trade from 2004 to an integral part of the single financial ser- Mandelson, who refused to call the out- 2008, said many British people were reluc- vices market in Europe,” Mandelson said come of a possible referendum, said the Brit- tant Europeans, but that British interests in an interview which kicks off a four-day ish public were split three ways: one third were best served by being at the top table of Reuters euro zone summit featuring inter- keen to stay in, one third ready to leave and European decision-making. views with Europe’s top policymakers. one third wanting to reform the EU. “It boils down to this: Britain’s ability to “We risk killing the golden goose, which Cameron says he also wants Britain to shape the regulatory agenda from the in- in any case has done a pretty good job of remain a member of the EU, but that the side,” he said. “Frankly I think the City has shooting itself in the foot already, but 27-member bloc needs reform, greater got to do a darn site better job of ... bring- which nonetheless remains a key compo- accountability, and that Britain needs a ing home to people the importance of its nent of our GDP and an important eco- new settlement. role in our economy and what the dangers nomic driver in Britain.” He insists a new round of euro zone in- are of our drifting apart from Europe.” London is home to over one third of the tegration will require treaty change, giving As the euro zone economy recovers global foreign exchange market, though its him the opportunity to renegotiate Britain’s from a sovereign debt crisis after the Eu- bankers have been castigated by voters and terms of EU membership. ropean Central Bank’s pledge to save the Critics fear he will get little change from euro, Britain could find its financial sector EU partners and could inadvertently push migrating to the continent if it tried to dis- Complete coverage of the Euro Zone: Britons into deciding to leave. tance itself from Europe, he warned. Click here Mandelson said Britain could not cherry pick its membership terms “as if it’s a cafe- Click here to continue reading

9 Reuters Euro zone summit 2013

EU’s Barnier: banker bonus curb good for Britain

By John O’Donnell and Paul Taylor BRUSSELS, FebRUARY 28, 2013

rime Minister David Cameron risks wrecking Britain’s financial center Pwith his bid to wrest back powers from the European Union ahead of a vote on whether to leave, one of the UK’s most influential Europhiles says. Britain should welcome a cap on bank- ers’ bonuses agreed by European Union lawmakers on Thursday as a fair response to European Commissioner for Internal Market and Services Michel Barnier answers reporters’ questions taxpayers’ anger over the huge cost of rescu- during an interview with Reuters at the EU Commission headquarters in Brussels February 28, 2013. ing imprudent banks, Europe’s top finan- REUTERS/Francois Lenoir cial regulator said. EU Internal Market Commissioner Michel Barnier said he did not believe the that could put European banks at a disad- funds and private equity firms. curbs would drive banks out of the City of vantage in attracting staff. These investors are now excluded from London, Europe’s biggest financial centre, to Barnier rejected criticism of the regu- such curbs, though they face curbs on pay less regulated markets outside the European lation, which will hit Europe’s financial later this year under another EU law. Union such as Switzerland or Singapore. capital, London, hardest, saying it was Barnier’s message is unlikely to sat- “I don’t think it is likely that banks that just one aspect of a broader rulebook that isfy his critics in Britain. They accuse the have an interest in working today and to- would make Europe’s financial system Frenchman, who is in charge of writing morrow in the single market will take the more stable and transparent. new EU financial laws, of driving a conti- risk of leaving the single market simply be- The former French foreign minister said nental agenda to overhaul finance, shack- cause of this reason of the remuneration of bankers needed to understand citizens’ out- ling the City of London. their executives,” he said at a Reuters Sum- rage at having to pick up the cost of reckless But the commissioner said he had mit on the future of the euro zone. risk-taking encouraged by the bonus culture. gone to lengths to accommodate the de- He was speaking hours after EU law- “Banks, like hedge funds, are not out- mands of Britain and its Finance Minister makers, country representatives and the side society. They are a part of society and George Osborne. executive European Commission struck a it is in their interest to pay heed to what The change in the law is set to be intro- provisional deal on new banking regulation citizens think. The time has come for a duced as part of a wider body of legislation, including higher capital requirements and bit of moderation.” known as Basel III, which demands that increased transparency by banks. The fact that Europe was drawing the banks set aside roughly three times more A ceiling on bonuses, the only one of its lessons from past misbehavior “is positive for capital and build up cash buffers to cover kind globally, is perhaps the most radical British citizens,” he said, adding that Europe risk such as unpaid loans. aspect of the new rules, and runs the risk of was fortunate to have the City of London Britain had argued successfully for ad- establishing an uneven global playing field financial centre in its single market. ditional flexibility to demand its banks set Barnier also said he hoped that other aside higher capital than that foreseen for Follow Reuters Summits areas of the world would follow Europe’s the wider European Union. on Twitter: example in regulating bankers’ pay but de- @reuters_summits clined to be drawn on whether he wished Additional reporting by Luke Baker; Writing by to extend stricter bonus regime to hedge Paul Taylor

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Deepening social crisis threatens fabric of EU

By Luke Baker and Robin Emmott Europe, the situation is clearly not socially REUTERS TV BRUSSELS . February 28, 2013 sustainable. The outlook for these countries is extremely bleak,” said Zsolt Darvas, a re- Euro Zone Videos he worst of Europe’s sovereign debt search fellow in international economics at click here crisis may be over in terms of finan- Bruegel, a Brussels think-tank that provides Tcial turmoil but the region now faces input to EU policymaking. a social crisis that has potential to tear the “There’s a very high probability that if education or becoming employed. European Union and its single currency the economic situation doesn’t improve in a The scheme is part of a 6-billion-euro project apart. very strong and visible way, governments will initiative to tackle youth unemployment in Political and economic analysts speaking fail and the catastrophe will come, they will the worst-hit corners of Europe over the at the Reuters Euro Zone Summit said the leave the euro,” he said. next decade, a plan that will be discussed in decision last September by the European “They are in a spiral. The question is, more detail at a meeting of EU leaders at a Central Bank to buy government bonds in when will it stop.” summit in Brussels on March 14-15. unlimited amounts set a floor under one Greece, where it took two elections last But analysts are concerned the steps are part of the crisis, but did nothing to prevent year before a government was formed that too little, too late to heal unemployment worsening social strife. backed the austerity program imposed by which is set to scar the southern reaches of Rising popular unrest has been most im- the EU, is a particular concern. And Italy, Europe for a generation to come. mediately visible in the Italian election re- which may have to follow Greece in hold- Clemens Fuest, a research director in sults, where voters overwhelmingly rejected ing a second poll if a government does not public finance at Oxford University and the austerity programs supported by outgo- emerge, is an increasing threat. the incoming chief of Germany’s ZEW ing Prime Minister Mario Monti and advo- “The major risk is that the political sys- economic institute, said he saw the social cated by the European Union. tem breaks down, that’s still a major risk in dimensions of the crisis worsening rapidly, Similar problems are brewing in Spain Greece,” said Darvas. especially in Spain and Greece. and Greece, where youth unemployment “If the current government were to fall “I absolutely think it can get a lot worse. stands at 50 percent and people are facing apart, it would be extremely difficult to keep That is really the current plausible scenario a ‘lost generation’ of joblessness and frustra- Greece inside the euro. We see in Spain the for a break-up of the currency union,” he tion. Portugal, and to an extent Ireland, are social pressure is increasing. In Italy, financial told the Reuters summit on Wednesday. “It in a similar fix. And there have been strikes markets will decide what happens, they will may very well be that in these countries at and demonstrations from Belgium to Cy- wait for what emerges, but something radi- some point the population will say ‘we don’t prus and France. cal may have to be done.” believe that things will get better’.” “If you look at unemployment in southern There is a rising awareness among EU The choice at that point would either be leaders and policymakers about the social for the euro zone to attempt a large-scale dimension of the crisis, but it is only now, program of redistribution to the south, more than three years in, that steps are being which Fuest said he did not expect, “or the taken to address the problem. decision to leave the currency union, devalue European labor ministers met in Brus- and try another way”. sels on Thursday to discuss steps needed to “I think the degree of desperation has to improve job training and employment and be high for people to take that risk. But if head off the threat that joblessness could de- things continue, if unemployment goes up stabilize the EU. to 30 percent or something in Spain, there They agreed on a “youth guarantee certainly is the danger that might happen.” A picture illustration taken with the multiple scheme” focused on ensuring that young exposure function of the camera shows a one people under 25 receive either an offer of Additional reporting by Paul Taylor in Brussels Euro coin and a map of Europe, January 9, 2013. work, further education or work-related and Paul Carrel in Frankfurt, editing by Reuters/Kai Pfaffenbach training at least four months after leaving Mike Peacock

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Summit Speakers

Benoit Coeure Clemens Fuest Zsolt Darvas Executive Board Member Economist Research Fellow ECB Oxford University Bruegel

Guy Verhofstadt Joaquin Almunia Jorg Asmussen Leader of centrist ALDE group Vice-President Executive Board Member European Commision ECB

Jose Barroso Karel De Gucht Kenneth Clarke President Trade Commissioner Minister and Member of Parliament European Commission European Commission British Government

Luis De Guindos Michel Barnier Wolfgang Schauble Finance Minister Commissioner for Finance Minister Spanish Government Internal Market/Services German Government European Commission

Peter Mandelson Pierre Moscovici Former European Commissioner Finance Minister and ex-Business Secretary French Government British Government

FOR MORE INFORMATION: Michael Peacock [email protected] Luke Baker [email protected] Paul Taylor [email protected] Michael Stott [email protected] Benjamin Beavan [email protected] Nina Andrikian [email protected]

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