In this week’s newsletter, we focus on the following five topics: the EU climate change policy faces some opposition; Ireland is to exit its bail-out programme very soon; including fingerprints in passports is lawful; Europe as a continent of immigration; and debates about the stress tests for banks.
Domestic hurdles to the European climate policy
The 28 ministers of Environment failed to agree on a reduction of cars’ CO2-emissions during a meeting of the Council in Luxembourg. On one side, Germany, the UK and central European countries resisted a deal, while on the other side, southern European countries, led by Italy, and Scandinavian countries wanted to stick to the compromise reached before last summer with the European Parliament. The Scandinavian countries even suggested voting on the issue, but this was refused as well. The disagreement is about whether the level of CO2-emissions should reach maximum 95 g/km already in 2020, as previously intended, or only in 2024. Germany prefers the latter, as it would give more time to its car industry (which produces a lot of powerful – and polluting – cars) to invest in new technologies. It claims that it would only be a “limited change”, saying that 2020 would remain the deadline for 80% of the car fleet of a producer, but the European Commissioner for Climate, Connie Hedegaard, disagrees. France stayed silent, while the Italian minister denounced a “missed opportunity”. A new compromise will have to be negotiated with the European Parliament.
The circumstances of Germany’s decision were also commented. The CDU recently received a nearly €700,000 donation from the owners of BMW, so some critics wondered whether it had influenced the German position. But the donators explained that the gift was already decided last spring and differed until now to avoid giving the impression that they tried influencing the elections. Moreover, Germany managed to convince the UK and, according to rumours, the counterpart would be that Germany will be readier to accommodate the UK regarding the banking union.
Ireland to exit bailout programme in December
The Irish PM, Enda Kenny, announced this week at a party conference that his country would finally be able to exit its bailout programme in December. Ireland has asked international support after saving its banks at dramatic costs for the taxpayers. Mr Kenny warned that the difficult times were not over and that there would be more austerity, but at least the “economic emergency” period will end. He affirmed that the “huge sacrifices” borne by the population were having positive results, although growth forecasts have been slashed as in many other developed countries, and he predicted a deficit of 4.8% of the GDP for next year, lower than the target of 5.1%. Ireland would be the first of the 4 bailed-out European countries (the other three are Greece, Portugal and Cyprus) to exit its programme. Its progresses have enabled Ireland to already regain some trust by investors and credit agencies.
The CJEU says it is lawful to include fingerprints in passports
In case C-291/12, Schwarz v Stadt Bochum , the CJEU declared that the Council Regulation 2252/2004, which provides that passports must contain two fingerprints, is lawful (including in light of the Charter of Fundamental Rights of the EU). The Court expressed doubts about the fact that the regulation infringed the right to the respect of private life (Article 7 CFR) and the protection of personal data (Article 8 CFR). In any case, even if there was such a restriction to these rights, it was proportionate to the aim pursued by the regulation, i.e., the prevention of fraudulent use of passports: the regulation was appropriate, as it reduced the risk that unauthorised persons are allowed to enter the EU by fraud, and it did not “go beyond what is necessary to achieve [that] aim”. Indeed, the claimant did not suggest less restrictive, but equally efficient measures. Moreover, the Court also noted that the regulation included appropriate restrictions on the use of the stored data, precisely enabling the prevention of any misuse and infringement to fundamental rights.
Source: CJEU website.
Europe as continent of immigration
In an interview with Der Spiegel, the EP President, Martin Schulz, declared that “Europe is a continent of immigration. Following the drowning of hundreds of migrants in the Mediterranean Sea in the past 2 weeks, Mr Schulz called for a radical rethinking of the asylum policy: Europe should acknowledge its attraction power and that it could not let alone countries such as Italy and Malta. He declared that his own country of origin, Germany, being the richest and politically strongest EU State at the moment, should let more refugees and immigrants in and criticised the German government’s denial that there is a problem with the current European immigration policy. Mr Schulz suggested that there should be a legal way of entering the Union for migrants, to prevent them from being the prey of human traffickers, and that their inflow should be distributed among all States. This does not mean, of course, that Europe can solve all of the world’s problems, said Mr Schulz, but European immigration laws need to be modernised.
In the meantime, Italy reacted to the repeated tragedies by raising the number of naval and aerial patrols to increase the chances that migrants in trouble will be rescued in time. It will particularly focus on the immigration route coming from Libya, since “Libya is currently a non-State” in the words of Mario Mauro, the Italian defence minister. Libya’s PM reaffirmed in a meeting with his Maltese counterpart that his government was determined to tackle the issue, but the Libyan authorities are still weak and human traffickers sometimes use sophisticated strategies. In addition, more migrants will be transferred from Lampedusa (which is a small island with only 6,000 inhabitants) to the mainland, to provide some relief to the island. Italy decided not to wait for help from the EU, which is uncertain and would anyway be slow to come because of a lack of political will. The Italian PM, Enrico Letta, also indicated that Frontex was not enough aware of the problem, having its seat in Warsaw.
Not so stressful stress tests for European banks?
In a few months, the single supervisory mechanism (1st pillar of the European banking union) will be functional. The ECB will then send experts to look at the banks’ balance sheets and determine whether they present a risk or not: stress tests will simulate the effects of a financial crisis on the banks. This new round of stress tests will be very important, not only for the banks assessed, but also for the credibility of the supervisor (the ECB and the network of national regulators). Indeed, former tests under the supervision of the European Banking Authority (EBA) were too lenient and failed to spot problems, e.g., with the Spanish banks. On the other hand, banks warn about the potential consequences of a too severe test, if too many banks fail to pass it: this could undermine confidence in the European financial system. So, Germany, France and Italy are currently trying to influence the tests to prevent potentially dramatic consequences for their domestic banks. Moreover, it is not clear who would pay the missing billions of euros in banks’ capital. Several countries, such as Spain and Italy, want a common European fund that could provide support to fragile banks, while Germany insists that a European intervention (this time, via the European Stability Mechanism – ESM) should only take place after money from a national fund has been fully used. The latter solution would, however, not really break the vicious link between bank debt and sovereign debt. Mario Draghi, the President of the ECB, has already urged the Member States to find a solution before the beginning of the tests.
Note: While the USA has taken serious action to reform and sanitise its banking system, the EU and its Member States still prefer to hide potential holes in their banks’ balance sheets, arguing that the disclosure of sensitive information could spark uncertainty and another financial crisis. But Europe cannot stay close an eye forever! It needs to act, so that its financial system can restart on a sound basis and regain the trust of investors. Furthermore, as long as banks lack capital and try to hide it, credit will not flow in the economy and growth will not restart. The USA is at the origin of the global financial crisis of 2008-2009, but it has also acted boldly enabling a quicker economic rebound.
The European Parliament will hold another plenary session in Strasbourg. The agenda can be found here. Debated topics will include the multi-annual financial framework (MFF), the European Neighbourhood’s Policy, organised crime, etc. In addition, Aung San Suu Kyi will come to receive the Sakharov prize she had won in 1990.
The Foreign Affairs Council will meet on Monday in Luxembourg. And the Eastern Partnership Youth Forum will take place in Kaunas from 22 to 25 October. More information can be found here.