News from the EU - September 2010

EU Finance Ministers back financial supervision reforms
On 7 September 2010, EU finance ministers gave their endorsement to a sweeping overhaul of financial supervision in the EU. The reforms include the creation of three supervisory authorities with binding powers over the EU financial sector, and the creation of a European Systemic Risk Board (ESRB) to monitor threats to the EU economy as a whole.

Europe's move, which it is hoped will forestall another Greek-style bailout and the collapse of the euro, follows the sweeping Wall Street reforms that President Barack Obama signed into law in July.

Other supervisory bodies that will oversee banking, financial markets, insurance and pensions were also agreed by the EU finance ministers. They include the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority. These bodies will have the power to intervene in the affairs of individual countries if EU members agree that the domestic regulator is failing in its duties.

The endorsement followed a provisional (and compromise) agreement and paves the way for a final agreement on the supervisory package when the European Parliament votes on it on 22 September 2010, allowing the three authorities and the ESRB to start work on 1 January 2011.
Source: www.bbc.co.uk/news/business-11220469
-----------------------------------------------------------------------------------------------------------------------------------------European Commission holds first contract law roundtable with business and consumer groups
On 7 September 2010, the European Commission (EC) held the first meeting of business, consumer and legal practitioners' groups to discuss European contract law.

Problems summarised:

  • At present, different national contract laws lead to higher transaction costs for businesses.
  • Companies, particularly small businesses, cannot exploit economies of scale in the EU's Single Market.
  • Consumers suffer because there are fewer goods sold across borders, leading to less choice and higher prices.

Progress towards a European contract law could help resolve the problems listed above. The EC is seeking to build a consensus among key stakeholders on the best way forward on European contract law. It wants to ensure that proposals being drafted by a group of contract law experts (IP/10/595) meet the needs of both consumers and businesses, especially small and medium-sized enterprises (SMEs). On 1 July 2010, the EC proposed options for a European contract law in a strategic policy paper and opened a public consultation (IP/10/872).

Source: IP/10/1095
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-----------------------------------------------------------------------------------------------------------------------------------------Population of foreign citizens in the EU27 in 2009
On 7 September 2010, a news release was issued by Europa based on a report by Eurostat, the statistical office of the European Union. The report looked at the composition of foreign citizens in the EU27 Member States, EFTA and Candidate countries:

  • 31.9 million foreign citizens lived in the EU27 Member States at the start of 2009, of which 11.9 million were citizens of another EU27 Member State. The remaining were citizens of countries outside the EU27, in particular from other European countries (7.2 million), Africa (4.9 million), Asia (4.0 million) and the American continent (3.3 million). Foreign citizens accounted for 6.4 percent of the total EU27 population. The proportion of foreign citizens varied between less than 1 percent in Poland, Romania and Bulgaria and 44 percent in Luxembourg
  • In 2009, the largest numbers of foreign citizens were recorded in Germany (7.2 million persons), Spain (5.7 million), the United Kingdom (4.0 million in 2008), Italy (3.9 million) and France (3.7 million). More than 75 percent of the foreign citizens in the EU27 lived in these Member States.
  • Among the EU27 Member States, the highest percentage of foreign citizens in the population was observed in Luxembourg (44 percent of the total population), followed by Latvia (18 percent),Cyprus and Estonia (both 16 percent), Spain (12 percent), Ireland (11 percent) and Austria (10 percent). The percentage of foreign citizens was 1 percent or less in Poland, Romania, Bulgaria and Slovakia.
  • More than a third of foreign citizens in the EU27 came from another Member State
  • In 2009, 37 percent of the foreign citizens living in the EU27 were citizens of another EU27 Member State. The largest groups were from Romania (2.0 million or 6 percent of the total number of foreign citizens in the EU27), Poland (1.5 million or 5 percent), Italy (1.3 million or 4 percent) and Portugal (1.0 million or 3 percent). Among the citizens of countries outside the EU27, the largest groups were from Turkey (2.4 million or 8 percent of the total number of foreign citizens in the EU27), Morocco (1.8 million or 6 percent) and Albania (1.0 million or 3 percent).
  • On average in 2009, foreign citizens living in the EU27 were significantly younger than the population of nationals (median age4 34.3 years compared with 41.2 years). This was true in all Member States except Estonia, Latvia and Poland. The largest differences were recorded in Italy (32.3 compared with 43.9), Finland (33.0 compared with 42.1) and Denmark (32.1 compared with 41.0).
  • Amongst foreign citizens, those from countries outside the EU27 were younger than those from other EU27 Member States (median age 33.0 years compared with 36.9 years).

Source: STAT/10/129
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-----------------------------------------------------------------------------------------------------------------------------------------Markit EU Productivity PMITM
On 6 September 2010, Markit published its EU Productivity PMI for August 2010. It shows that productivity growth remained broad-based across EU in August, but slowed further.

Key points:

  • Each of EU 'big-four' recorded productivity gains.
  • All twenty-three monitored sectors saw higher output per worker in August.

Source: www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=6989
-----------------------------------------------------------------------------------------------------------------------------------------No justification for the UK's EU budget rebate, says EU budget commissioner
Speaking to German business daily Handelsblatt on 6 September 2010, the EU budget commissioner Janusz Lewandowski said: "The rebate for Britain has lost its original justification. Although he says there is no longer any justification for the UK's EU budget rebate - worth about 6bn euros (£5bn) last year, a UK government spokesman said the rebate "remains fully justified. It's a matter of fairness as without the rebate, the UK's net contribution as a percentage of national income would be twice as big as France's, and 1½ times bigger than Germany's. This is because of expenditure distortions from policies such as the CAP, which still accounts for more than 40 percent of the EU budget."

Source, various, including: www.france24.com/en/20100906-eu-budget-chief-attacks-british-rebate and www.independent.co.uk/news/business/news/treasury-rejects-eu-move-to-scrap-britains-rebate-2072288.html
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-----------------------------------------------------------------------------------------------------------------------------------------On 3 September 2010, first estimates of eurozone retail sales in July 2010 were published by Eurostat, the statistical office of the European Union:

  • In July 2010, compared with June 2010, the volume of retail tradeincreased by 0.1 percent in both theeuro area(EA16) and theEU27. In Juneretail trade rose by 0.2 percent and 0.3 percent respectively.
  • In July 2010, compared with July 2009, the retail sales index rose by 1.1 percent in theeuro areaand by 1.0 percent in theEU27.

Monthly changes

  • In July 2010, compared with June 2010, "Food, drinks and tobacco" grew by 0.3 percent in theeuro areaand by 0.1 percent in theEU27.
  • The non food sector decreased by 0.1 percent in theeuro area, but rose by 0.2 percent in theEU27.
  • Among the Member States for which data are available, total retail trade increased in nine and declined in ten. The highest increases were observed inPortugal(+3.0 percent),Malta (+2.9 percent) andFrance(+2.2 percent), and the largest decreases inRomania(-10.5 percent),Spain(-3.0 percent) andLithuania(-1.4 percent).

Annual changes

  • In July 2010, compared with July 2009, "Food, drinks and tobacco" grew by 1.4 percent in theeuro areaand by0.5 percentin theEU27.
  • The non food sector increased by 1.8 percent and 2.5 percent respectively.
  • Among the Member States for which data are available, total retail trade rose in eleven and decreased in eight. The highest increases were observed inFrance(+6.1 percent),Poland (+5.2 percent) andFinland(+4.5 percent).The largest decreases were observed inLithuania(-8.8 percent),Romania(-8.0 percent) andBulgaria(-4.8 percent).

STAT/10/128
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-----------------------------------------------------------------------------------------------------------------------------------------Markit Eurozone Composite PMITM - final data
On 3 September 2010, Markit published the Markit Eurozone Composite PMI for August 2010. It shows Germany and France continued to lead the Eurozone recovery in August, as growth remained weak in Italy and Spain

Key points:

  • Final Eurozone Composite Output Index posted 56.2 in August, down from 56.7 in July.
  • Recoveries continued in manufacturing and services - but remained dependent on strong growth in Germany and France.
  • Employment rose at fastest rate since April 2008, with jobs added in Germany, France and Italy.

Source: www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=6981
-----------------------------------------------------------------------------------------------------------------------------------------Markit Eurozone Services PMITM - final data
On 3 September 2010, Markit published the Markit Eurozone Services PMI for August 2010. It shows service sector recovery still led by France and Germany in August. Activity rose in Italy and Ireland, but Spain fell back into contraction

Key points:

  • Final Services Business Activity Index at three-month high of 55.9 in August.
  • Big-two still leading the recovery. Activity rose in Italy and Ireland, but fell slightly in Spain.
  • Service providers maintained positive outlook. Confidence rose in Germany, Italy and Ireland.

Source: www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=6980
-----------------------------------------------------------------------------------------------------------------------------------------European Union reaches agreement on reforms to financial supervision, officials say
On 2 September 2010, BBC News reported that the European Union has reached agreement on reforms to financial supervision, officials have said.

EU states and the European Commission agreed to create agencies that from next year are to oversee banks, insurers, and financial markets. The deal must still be approved by European finance ministers and the European Parliament.

Overview

  • Under the compromised agreement, three new pan-EU financial watchdogs will be created by the start of next year to oversee banks, insurance companies and trading on markets.
  • The three new watchdogs will enjoy limited power to overrule decisions made by national regulators and have a final say when arbitrating a dispute between EU member states, such as the multinational bailout of Fortis at the beginning of the financial crisis. If no agreement can be reached, they can even impose supervisory decisions on the financial institution concerned.
  • The new watchdogs will also be able to monitor how national supervisors implement their obligations under EU law. If these obligations are implemented incorrectly, they may raise the alarm, issue instructions to the national supervisor concerned and, if these go unheeded, directly instruct the financial institution to remedy any breach of EU law.

Europe's move follows the sweeping Wall Street reforms that President Barack Obama signed into US law in July.

It is hoped the agreements in Europe and the US will help stop a repeat of the financial crisis in which loose supervision of companies was blamed for contributing to financial problems resulting in the recession.  If everything goes well, the first- ever pan-EU financial supervision system would be in place as early as January 2011.

Sources: www.bbc.co.uk/news/business-11171800
http://big5.cri.cn/gate/big5/english.cri.cn/6826/2010/09/03/1821s592580.htm
European Parliament press release 2/9/2010
-----------------------------------------------------------------------------------------------------------------------------------------ECB raises eurozone growth forecasts
On 2 September 2010, the European Central Bank (ECB) raised its forecast for eurozone growth for this year and next year:

  • ECB President Jean-Claude Trichet said the upgrade reflected the "stronger-than-expected rebound" in the zone's economy. He forecast GDP growth of between 1.4 percent and 1.8 percent for this year, and between 0.5 percent and 2.3 percent next year.
  • Earlier, the ECB kept eurozone interest rates on hold at 1 percent, as had been expected. It is the 16th month running that rates have stayed at this record low, as the ECB continues to seek to help economies recover from the global downturn.

Source: www.ecb.int/press/pressconf/2010/html/is100902.en.html
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-----------------------------------------------------------------------------------------------------------------------------------------Swedish Move Highlights Uneven Europe Recovery
On 2 September 2010, the New York Times reported that the Swedish central bank raised its benchmark interest rate to help head off inflation as the country's economy surges, highlighting the divergence of growth in Europe.

The Swedish Riksbank raised the benchmark rate, known as the repo rate, to 0.75 percent from 0.50 percent. It had been raised from a record low of 0.25 percent in July.

Source: www.nytimes.com/2010/09/03/business/global/03rates.html?_r=2&ref=business
-----------------------------------------------------------------------------------------------------------------------------------------GDP in the Eurozone: First estimates for Q2 of 2010
On 2 September 2010, according to first estimates released by Eurostat (the statistical office of the European Union), GDP increased by 1.0 percent in both the euro area (EA16) and the EU27 during the Q2 of 2010, compared with the previous quarter:

  • In Q1 of 2010, growth rates were +0.3 percent in both zones.
  • Compared with Q2 of 2009, seasonally adjusted GDP increased by 1.9 percent in both the euro area and the EU27, after +0.8 percent and +0.7 percent respectively for the previous quarter.

Variation in components of GDP

  • During the second quarter of 2010, household final consumption expenditure increased by 0.5 percent in both the euro area and the EU27 (after +0.2 percent and +0.1 percent respectively in the previous quarter). Investments increased by 1.8 percent in the euro area and by 1.7 percent in the EU27 (after -0.4 percent and -0.6 percent respectively).
  • Exports increased by 4.4 percent in the euro area and by 4.0 percent in the EU27 (after +2.4 percent and +2.0 percent). Imports increased by 4.4 percent in the euro area and by 4.0 percent in the EU27 (after +4.0 percent and +3.6 percent).

US and Japanese GDP

  • In the United States, GDP increased by 0.4 percent during Q2 of 2010, after +0.9 percent in Q1 of 2010.
  • In Japan GDP increased by 0.1 percent in the Q2 of 2010, after +1.1 percent in the previous quarter.
  • Compared with the Q2 of 2009, GDP increased by 3.0 percent in the United States (after +2.4 percent in the previous quarter) and by 1.9 percent in Japan (after +4.4 percent).

Source: STAT/10/127
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-----------------------------------------------------------------------------------------------------------------------------------------Euro industrial producer price index for July 2010
On 2 September 2010, figures released by Eurostat (the statistical office of the European Union),show that in July 2010 compared with June 2010, the industrial producer price index rose by 0.2 percent in both the euro area (EA16) and the EU272. In June 2010, prices increased by 0.3 percent in both zones. In July 2010 compared with July 2009, industrial producer prices gained 4.0 percent in the euro area and 4.4 percent in the EU27.

Monthly changes

  • In July 2010, compared with the previous month, prices in total industry excluding the energy sector increased by 0.1 percent in both the euro area and the EU27.
  • Prices in the energy sector rose by 0.6 percent and 0.2 percent respectively.
  • Intermediate goods gained 0.1 percent in the euro area and 0.2 percent in the EU27.
  • Non-durable consumer goods increased by 0.1 percent and 0.2 percent respectively.
  • Durable consumer goods and capital goods remained stable in the euro area and rose by 0.2 percent and 0.1 percent respectively in the EU27.
  • Among Member States for which data are available, the highest increases in the total index were recorded in Bulgaria (+2.3 percent), Cyprus (+1.8 percent), Denmark and the Netherlands (both +0.9 percent). Decreases were observed in Greece (-1.2 percent), Hungary (-0.6 percent), Spain and Lithuania (both -0.2 percent), Italy and Slovenia (both -0.1 percent).

Annual changes

  • In July 2010 compared with July 2009, prices in total industry excluding the energy sector increased by 2.0 percent in the euro area and by 2.2 percent in the EU27.
  • Prices in the energy sector gained 9.7 percent and 10.0 percent respectively.
  • Intermediate goods rose by 4.5 percent in both zones.
  • Durable consumer goods increased by 0.9 percent in the euro area and by 1.3 percent in the EU27.
  • Capital goods gained 0.5 percent and 0.9 percent respectively. Non-durable consumer goods rose by 0.2 percent in the euro area and by 0.5 percent in the EU27.
  • Among Member States for which data are available, the largest increases in the total index were observed in Malta (+15.1 percent), Hungary (+9.9 percent), Bulgaria (+9.0 percent) and Finland (+7.7 percent). The only decrease was observed in Slovakia (-0.7 percent).

Source: STAT/10/126
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-----------------------------------------------------------------------------------------------------------------------------------------EC approved the exchange of audit working papers with Australia and the United States of America
On 1 September 2010, the European Commission (EC) adopted a decision recognising the adequacy of the auditor oversight authorities of Australia and the United States of America. Adequacy refers to the ability of a third country authority to fulfil the requirements set out in the EU's Statutory Audit Directive (2006/43/EC) and, in particular, its capacity to enter into reciprocal working arrangements with the EU Member States on the exchange of audit working papers or other relevant documents between competent authorities. This also covers the preservation of the confidentiality of any such documents that authorities from third countries may receive from EU Member States.

The Commission decision will enable the exchange of audit working papers between the EU Member States' oversight authorities and their Australian and US counterparts. This will contribute to reinforcing international co-operation on audit oversight which will ultimately lead to increased investor protection.

More information is available at: http://ec.europa.eu/internal_market/auditing/relations/index_en.htm

FAQs have been published at: MEMO/10/390

Source: IP/10/1083
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