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CONTENTS

FOREWORD BY CES HEAD OF RESEARCH

FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

OUR COMPETITORS' VIEWS

HIGHLIGHTS

ANNEX

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Foreword by CES Head of Research

“Watchtower”

“Caritas in veritate”: How Much Food for Thought for the Centre Right?

The timing could not have been better: in the middle of the financial and economic crisis, a day

before the G-8 summit in Rome, the Vatican on July 7 released a 144-page encyclical titled “Charity in

Truth”, extensively dealing, among other things, with issues like globalisation, climate change, the

future of the market economy, and global governance.

Elaborate papal statements on all things social and economic are nothing new. In fact, ever since

the industrial revolution, the Vatican has held strong views on wealth and poverty, work ethics and the

market, progress and the way we live with each other in the modern world. And most of the time in

recent decades, encyclicals have tended to criticize economic liberalism for encouraging greed, while

acknowledging the role of the market in promoting wealth and innovation. In the end, the message

tended to be that without faith in God and a solid ethical foundation for economic behavior, all efforts

to enhance efficiency as well as justice and to make our world more liveable, would be in vain.

In that sense, “Caritas in veritate” is no exception at all. And even in the perceived swipes at “Anglo-

Saxon liberalism”, shareholder value and the focus on short term gains, Pope Benedict XVI has only

continued the habit of his predecessor (and mentor) John Paul II, to redirect his theological guns at

some of the perceived mistakes of the West, after the demise of Communism. But in the end, the

encyclical also and specifically reflects the zeitgeist of the crisis we are in.

Two areas, however, have received more attention than ever before in papal encyclicals: World

climate and global governance. The latter point also contains the most frequently quoted passage of

the document: the call for more “global authority”, after some critique of the functioning of the U.N.

system. This call however, is immediately mitigated by a reaffirmation of the subsidiarity principle (an

integral part of Catholic Social Teaching) and the rejection of a centralization of power. Above all, the

encyclical repeatedly emphasises that it does not aim to propose concrete political concepts or

institutional changes.

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It is worth remembering at this point that one of the “founding fathers“ of capitalism, Adam Smith,

was a highly morally motivated person and that the overriding goal of his “invisible hand” of the

market was precisely to enable the poor to get richer by freeing themselves from the limitations

imposed upon them by premodern society which would have condemned them to abject poverty, if

unchanged. Keeping this in mind, and seeing that “Caritas in veritate”, when it does get political, is by

no means anti-market while critical about aspects of global capitalism, Europe’s centre right can live

with this encyclical very well. There is no ground for leftist triumphalism contained in this document.

The only thing one might wish for, appreciating that the Vatican uses more and more terms like

globalisation, outsourcing and stakeholder value (which must be pretty hard to translate into Latin, by

the way) is that encyclicals might be a bit shorter in future. But that may be a Lutheran pipedream.

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FINANCIAL CRISIS: ACTIONS TAKEN BY EU MEMBER STATES

Austria The European Commission said that it would take a “miracle” for it to rule on Lufthansa's proposed takeover for Austrian Airlines by the end of July, when the two companies' merger agreement expires. The Commission in February announced a separate investigation into whether the terms of the deal are compatible with EU state-aid rules. It has said that it doubts that the price being paid by Lufthansa to acquire the 41.56 per cent stake “reflects the market price for what is being sold”. That investigation is still ongoing. (10/07/2009)nnxxxxxnnnnnnnnnnnnnnnnnnnn,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Lufthansa-Austrian Airline ruling needs 'miracle' (European Voice)

Belgium Belgium has signed protocols to its tax conventions with Luxembourg, Singapore, San Marino, and the Seychelles as well as a tax convention with the Isle of Man and a tax information exchange agreement with Monaco. These signings mean Belgium now has 12 agreements on exchange of information for tax purposes, crossing the threshold for being considered to have substantially implemented the internationally agreed standard in this area. As a consequence, the Progress Report initially published by the OECD Secretariat on 2 April 2009 in conjunction with the G20 has been updated, and Belgium moves into the category of "Jurisdictions that have substantially implemented the internationally agreed tax standard." (16/07/2009)fffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff Belgium makes progress implementing OECD standards on tax information exchange (OECD)

Bulgaria Kristofor Pavlov, a chief economist at UniCredit Bulbank, told that the bank expected a 6 per cent decline of Bulgaria's GDP in 2009, and a 3 per cent decline in 2010. Thus, the Bulgarian economy is going to drop down to its 2007 level. According to Pavlov, it might reach its lowest point in the 3rd quarter of 2009, and to start growing again at the beginning of 2011. The UniCredit Bulbank team in general believes that the worst effects of the global crisis on the Bulgarian are yet to come. (14/07/2009)………………………,,,,,,,,,,,,, UniCredit: Bulgaria economy to hit rock bottom in July-Sept 2009 (Sofia Novinite)

Data of the National Statistical Institute shows that Bulgaria's industrial output in May 2009 dropped by 22 per cent compared to May 2008, and by 1 per cent compared to April 2009. The total turnover of the Bulgarian industrial plants also decreased by 1,6 per cent in May compared to April 2009, and by 24 per cent compared to May 2008. Bulgaria's retail trade shrank by an average of 13 per cent, going as high as 40 per cent for the car sales sector, in May 2009 compared to May 2008. (10/07/2009)bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb Bulgaria’s industry, trade hit badly by economic crisis (Sofia Novinite)

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Cyprus

These are very bad times for the Cyprus tourism industry. Arrivals are down, spending is down, hotel

occupancy rates are low and bars, cafes, clubs and restaurants are struggling. In the last couple of

weeks Cyprus has even witnessed bickering between the coastal resorts, with the mayor of Ayia Napa

implying on radio that Paphos was exploiting the cases of the swine flu in the Famagusta district to

attract more local tourism. However, the Hotelier's Association chairman Haris Loizides does not lose

optimism and says that the crisis provides indeed a great opportunity to make improvements and

perhaps to re-position Cyprus in the Mediterranean tourist market. (14/07/2009)

Crisis in tourism could provide opportunity for a strategic rethink (Cyprus Mail)

Cyprus' small and medium-sized enterprises (SMEs) will shortly have access to a total of 456 million euros in cheap long-term loans as part of a European Investment Bank (EIB) initiative to support European SMEs. The loans will follow the signing of facility agreements by the EIB and Cyprus' three biggest banks - Bank of Cyprus, Marfin Popular Bank and Hellenic Bank. Finance Minister Charilaos Stavrakis described signing as "a significant step forward", and said that, depending on the exact pricing fixed by each participating bank, SMEs in the sectors of industry, agriculture, commercial services and tourism should be able to take out loans for up to 25 years for as little as 4 per cent per annum. (11/07/2009),,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Cheap long-term loans available to SMEs (Cyprus Mail)

Czech Republic In Strasbourg the Prime Minister of the Czech Republic, Jan Fischer, reported to MEPs on his country's six-month presidency of the European Union, in which the main challenges had been "the three Es": economy, energy policy and the EU's role in the world. On the economy, he listed the measures taken to confront the global economic crisis, including the economic recovery plan, support for the banking sector and the IMF, a rejection of protectionism, lower VAT rates for local services and regulation of financial markets. (15/07/2009) MEPs look back at the Czech Presidency of the EU: "the three Es" (European Parliament)

The Vice-governor of the Czech National Bank (CNB), Miroslav Signer, has said that the economy may contract by more than 3 per cent in 2009. The latest CNB forecast expects a 2.4 per cent drop in GDP which fell annually by 3.4 per cent in the first quarter of 2009. Singer has added that cutting the base interest rate below its current historic minimum of 1.5 per cent will be difficult as it would contradict a policy of protecting households' savings. (15/07/2009)bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbcccccccc Economy may shrink by more than 3 per cent in 2009 (Trend)

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Estonia Estonia's current account swung back into positive territory in May, posting a strong 627.6 million kroons ($56US.1 million) surplus after a 103 million kroons deficit in April. This brings the combined January-May surplus to 523 million kroons, compared with a 14.3-billion-kroons deficit over the same period last year. The value of exports has dropped 30 per cent year-on-year, with the value of imports plummeting 40 per cent. The financial account reverted to a positive balance of 455 million kroons as other large investments by credit institutions and non-financial companies offset increased direct investment abroad by Estonia. (15/07/2009)ffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff,,,,,,,,,,,, Estonian current account posts large surplus in May (World Markets Research Centre)

France As the US debates the merits of a second stimulus package, France and Germany appear determined to resist a further large-scale discretionary boost to their economies. Although bracing itself for social unrest this autumn, the French government believes it has done enough to support the economy. Its 26 billion euro stimulus package, unveiled late last year, comes on top of one of the most generous social safety nets in the industrialised world. (21/07/2009) Berlin and Paris reluctant on further boosts (Financial Times)

Workers at a failed French car parts supplier are threatening to blow up their factory unless the company’s two biggest clients – Renault and PSA Peugeot Citroen – come up with extra compensation. Employees of the engine parts maker New Fabris have rigged up a series of gas canisters inside a factory workshop which they say will be detonated on 31st July if the two carmakers fail to pay 30,000 euros to each of the 366 workers facing unemployment. (13/07/2009)nnnnnnnccccccccccccccccnnnnn French workers threaten to blow up plant (Financial Times)

Job losses across the European Union continue to outnumber job gains, with the highest number of

announced lay-offs recorded in June in France and Britain, a fresh EU report showed. The situation in

the labour market in the 27-member bloc keeps deteriorating, according to a monthly monitor

conducted by the European Commission and published on 10th July. France with 19,625 announced

lay-offs and Britain with 11,528 jobs to go, topped the June list of EU countries with the highest

number of restructuring cases in the labour market, followed by the Czech Republic (3,070), Poland

(2,310) and Germany (1,960). (13/07/2009),,,,,,,,,,,,,,,,,,,,,,,,,………………………………………………………………....

Britain and France record highest June job cuts (EU Observer)

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Peugeot has failed in a legal attempt to overturn a multi-million euro fine imposed for anti-competitive behaviour, but the European Court of First Instance did lower the penalty by 10 per cent. The European Commission fined Peugeot 49.5 million euros in 2005 for trying to prevent Dutch car dealers from selling to foreign customers. The Commission found that over a six-year period, from 1997-2003, Peugeot refused to pay performance bonuses for cars sold by dealers in the Netherlands to non-Dutch customers and threatened to reduce the number of cars supplied to some dealers. At this time car prices in the Netherlands were significantly lower than in neighbouring countries. (09/07/2009)mm,ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc Peugeot fine upheld (European Voice)

Germany German exports rose by 0.3 per cent in May from the month before, raising hopes of a tentative economic recovery. Imports declined 2.1 per cent, pushing Germany's trade balance to a surplus of 10.3 billion euros, the highest since December 2008. However, exports were still 24.5 per cent lower than a year ago, with Germany enduring its worst recession since World War II. Analysts said the data raised hopes that exports would continue to improve in the coming months. (09/07/2009)cccccccccccc German exports spark economy hope (BBC)

The volume of goods leaving German factories in May surged more than in any month in nearly 16 years, adding to hopes that Europe’s largest economy is beginning to claw its way back from a deep recession. Industrial production was 3.7 per cent higher in May than in April, the German economics ministry reported, although overall volumes were still 17.9 per cent below the levels of a year before. (08/07/2009) German factory output surges (Financial Times)

Greece Unemployment in Greece shot up to 9.4 per cent in April, its biggest annual jump on record, due mainly to a slowdown in construction and holiday bookings, official figures showed on 14th July. The National Statistical Service (NSS) said the April jobless figure increased from 7.7 per cent last year. “The increase in unemployment appears to be due to falling employment in manufacturing and construction and a delay in the start of the full operation of tourism enterprises on the islands,” an NSS statement said. Last week, the Association of Greek Tourism Enterprises said that arrivals at 13 of the country’s international airports for the first six months of 2009 was 10 per cent lower than last year, with the average visitor also expected to spend less money while on holiday. The industry body said the drop was likely to lead to the loss of an estimated 19,000 jobs in the tourism sector. (15/07/2009) Largest ever leap in jobless rate (Kathimerini)

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Hungary The Hungarian Economics Ministry has revealed that businesses will get access to a total of HUF 50bn (EUR 181.95mn) in loan guarantee as of August 2009. Among others, small and medium-sized firms (SMEs), large businesses, IT firms, construction companies, waste management firms and logistics companies will be able to receive state support. Companies will be able to take out working capital loans worth between 125 million HUF and 5 billion HUF each for a five-year period from the local-based development bank MFB by the end of December 2011. (15/07/2009) Economy Ministry launches HUF 50bn loan guarantee (Esmerk)

Erste Bank Hungary received a 100 million euro loan from the European Bank for Reconstruction and Development (EBRD). It stated that the purpose of the loan was to finance the provision of loans to the small and medium-sized enterprises (SMEs) sector. Eligible companies for financing under the scheme included businesses with a workforce of not more than 249 employees and revenues of up to 50 million euros per year. The size of the individual loans was limited to 1.5 million euros. Recently, the EBRD, European Investment Bank (EIB) and World Bank (WB) announced a joint effort to disburse 24.5 billion euros of funds for the banking sector in Central and Eastern Europe and the credit line to Erste Bank Hungary was part of the project. (13/07/2009)………………………………………… EBRD provides EUR 100mn credit line to Erste Bank Hungary (Hungary Today)

Prime Minister Gordon Bajnai said that the government is taking measures to correct structural weaknesses in Hungary's economy in addition to those aimed at managing the effects of the global economic crisis. Mr Bajnai cited the government's pension reform as an example of such economic measures intended to address structural defects, asserting that the reform has made Hungary's pension system sustainable for the next 30 or 40 years, increased job incentives and spurred economic growth as well. Mr Bajnai said that in 2010, tax amendments will reduce the amount of taxes that companies pay by 400 billion HUF (EUR 1.44bn). The prime minister remarked that Hungary will not require further loans from the International Monetary Fund (IMF) if the market's confidence in the country continues to increase at the same pace as it has over recent weeks. (09/07/2009)ddddddddddddddddddddddddddddddddddddddd Government economic policy (Hungarian News Agency)

Ireland Two thirds of Irish bank staff admit to not being aware of European Investment Bank funding for small firms, despite a concerted push from Brussels to loosen the flow of liquidity to businesses across Europe. The Irish Small and Medium Enterprises Association accuses banks of ignoring millions of euros in EIB funding earmarked for struggling SMEs. The EIB has made 350 million euros available at a reduced rate through commercial banks across Europe, but business lobby groups have continued to express concern that the funding is not getting to those who need it most. (08/07/2009) Irish banks 'ignoring' EIB funds for SMEs (EurActiv)

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Italy In his encyclical, Pope Benedict XVI called for a radical rethinking of the global economy, criticizing a growing divide between rich and poor and urging the establishment of a ''true world political authority'' to oversee the economy and work for the ''common good.'' He criticized the current economic system, ''where the pernicious effects of sin are evident,'' and urged financiers in particular to ''rediscover the genuinely ethical foundation of their activity.'' He also called for ''greater social responsibility'' on the part of business. Reportedly delayed to take into consideration the financial crisis, it was released by the Vatican on the eve of the G8 Summit, which started in Italy on 8th July , and before Benedict was expected to receive President Obama at the Vatican on 10th July.

(08/07/2009) Pope urges forming new world economic order to work for the 'Common Good' (New York Times)

Latvia The IMF has put forward new conditions for Latvia to receive further loans that are difficult to meet, the prime minister said. He declined to say what conditions the IMF was putting on its granting of further loans. Latvia has already got agreement from the European Union for a further 1.2 billion euros of funding. The IMF has yet to agree on a tranche of 200 million euros it delayed from earlier this year. The loans are part of a 7.5 billion euro rescue. Prime Minister Dombrovskis has said that Latvia now has funding and could manage without the IMF loans, but that the backing of the Fund for the whole programme is necessary. (15/07/2009) Latvia PM says latest talks with IMF difficult (CNBC)

Lithuania Lithuania may follow neighboring Latvia in reducing old age pensions. According to the Ministry of Social Security and Labor, the average old age pension in May was 812 litas – about one-third of the average monthly wage. This is already about 20 per cent lower than the replacement rate in Western Europe. (08/07/2009) Government may implement pension cuts (The Baltic Times)

Malta Malta’s economy is facing its first test following the successful EU accession and euro adoption. It experienced a sustained expansion starting in the middle of the decade, driven by export diversification and value-added upgrading. Banks weathered the initial stage of the crisis relatively unscathed. Yet, the unfavorable external environment is now challenging the economy’s resilience, threatening to unravel past efforts at fiscal consolidation, and possibly holding back the reform impetus, even as the convergence process remains incomplete. For Malta to fully grasp its growth opportunity and close the income gap with the euro area, the country needs to build consensus around a renewed reform strategy. (14/07/2009)………000000000000000000000………………………………… Malta—2009 Article IV Consultation, Concluding Statement of the Mission (IMF)

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Poland The Polish parliament on 17th July amended this year's budget in a 232 to 186 vote with three abstentions. The new budget foresees a deficit rise from 18.18 billion zloty to 27.18 billion zloty (6 billion to 8.87 billion dollars), earnings at 272.9 billion zloty (30.1 billion zloty less than planned) and spending cuts to the tune of 21.13 billion zloty. Finance Minister Jacek Rostowski told reporters that the amended budget marked the first step in the government's anti-crisis plan. He added that there would be no more amendments to the 2009 budget. (19/07/2009)ff fffffffffffffff Polish parliament amends 2009 budget (BBC Monitoring Europe)

Slovakia According to revised estimates released by Eurostat on 8th July 2009, Slovakia recorded the highest GDP fall in Q1 2009 within the EU, which represented 11.4 per cent compared to the same period in 2008. Bank analysts say that the main reason behind this fall is the recession in the Eurozone countries, which negatively influences foreign demand. Slovakia's economy is being hit mainly by the fall of Germany's economy as that is its main business partner. Analysts say that the first signs of the revival of Slovakia's economy should be seen in 2010. (10/07/2009)ffffffffffffffffffffffffffffffffff Country records highest GDP fall in Q1 2009 within EU (SME)

Wages in Slovak industry fell in May for the first time since February 2006, with the average wage decreasing by 1.3 per cent on the year to 734.77 euros, while in April they increased by 2 per cent to 719.81 euros. Inflation adjusted, wages sank by 3.4 per cent in May, compared to 0.3 per cent in April, Slovak Statistical Office said. (09/07/2009)ffffffffcccccccccccccccccccccccccccccccccccdccccccff Wages in Slovak industry in May fall first time since Feb 2006 (Czech News Agency)

Sweden Sven Hegelund, the EBRD Board Director for Sweden, Iceland and Estonia, speaks about the challenges of this presidency and maps the cooperation with the Bank in two areas of common interest - financial crisis and climate change. Sweden will build on the European Union's crisis response so far. There is still a need to manage the immediate crisis, but focus must now partly shift towards sustaining long-term recovery. “We need to restore functioning financial markets and confidence in them, including strengthening the supervisory system for the financial markets. Also, there is a need for starting to work on an exit strategy from the large-scale borrowing of governments to restore public finances after the crisis. We expect the EBRD to continue to play a very important role in the response to the financial crisis, both within parts of the EU and equally important in the Union's Eastern neighbourhood and beyond.” (09/07/2009) Sweden and the EU presidency (ENP Newswire)

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UnitedcKingdom Unemployment climbed by a record 281,000 to hit 2.38 million in the three months to May, the

highest level since October 1995. The bigger-than-expected jump in unemployment, which includes

those not claiming jobless benefits, is the largest rise since records began in 1971. The jobless rate has

climbed to 7.6 per cent — the highest since January 1997. However, the number of people claiming

jobless benefits rose by a smaller than expected 23,800 in June, lower than May’s increase of 30,800.

Analysts had expected a rise of around 41,000. (15/07/2009)mmmmmmmmmmmmmmmmmmmmm

UK unemployment hits 14-year high of 2.38m (Times)

FINANCIAL CRISIS: ACTIONS TAKEN WORLDWIDE

UnitedfStates Timothy F. Geithner is using a trip to Europe and the Middle East this week to shore up confidence in the U.S. economy and the dollar, though he warned that the struggle against the global recession is far from over. Mr. Geithner and Alistair Darling, British Chancellor of the Exchequer, said that the United States and its economic partners have responded well to the financial crisis that nearly crippled world markets last fall. (17/07/2009) Traveling Geithner displays optimism but warns of recovery risks (Washington Times) Arnold Schwarzenegger emerged from a meeting late on 20th July of the “big five” political leaders in California to announce that, at long last, a deal had been reached on closing the state’s $26 billion budget deficit. (21/07/2009) California's lawmakers finally reach a deal to close the state's gaping budget deficit (The Economist)

China

China’s economy grew by 7.9 per cent between April and June, confirming the impression that the

country has recovered from the financial crisis with astonishing speed. The reading, which even

surprised researchers at China's central bank, leaves the country easily on course to hit its target of 8

per cent annual gross domestic product (GDP) growth. GDP growth was 6.1 per cent in the first

quarter, but a surge in bank lending and the government's four trillion Yuan (413 billion euros) fiscal

stimulus package has succeeded in turning the economy around. According to the last figures, China is

currently printing almost three times as much new money as the United States to fuel the credit

boom.c(23/07/2009)00000000000000000000000000000000000000000000000000000000000000000

Surprise rebound shows China stocks are still a good long-term bet (The Guardian)

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People's Bank of China calls for closer supervision of lending and guarding against risks amid

government-promoted explosion in bank lending; surge in lending has been instrumental in helping

China recover from global financial crisis; has also sparked fears of asset bubbles and inflation.

(14/07/2009)

China bank may rein in lending surge (Wall Street Journal)

Russia

Russia’s economy shrank 10.1 per cent in the first half of this year, its worst decline since the early

1990s. The credit crunch, falling commodity prices and a gradual Rouble devaluation have shattered

10 years of rapid growth but there are signs that the pace of economic decline is slowing.

(15/07/2009)

Russian economy plummets 10.1% (Financial Times)

Japan

Japan’s trade surplus widened for the first time since October 2007, largely as imports declined at a

faster pace. Ministry of Finance data released on Thursday showed that the country’s trade surplus

reached Y508 billion ($5.4billion), while imports dropped 41.9 per cent to Y4,092 billion, a slightly

slower decline than May’s 42 per cent drop. (23/07/2009)fffffffffffffddddddddddddddddddddddffffff

Lula has big Japan exports decline at slower pace (Financial Times)

India

Sharm al-Shaykh: Calling the Non-Aligned Movement (NAM) a "moral force" for the equitable

transformation of a world going through the worst economic crisis "in living memory," Prime Minister

Manmohan Singh said the 118-nation grouping must ensure the steps planned to revive the global

economy take into account the developing world's concerns. He was speaking at the Non Aligned

Movement summit which got under way here on 15th July. (15/07/2009)ffffffffffffdddddddddddddddd

Indian PM urges using "weight" of NAM in tackling economic crisis (BBC Monitoring South Asia)

South-Africa

In delivering the first five-year policy framework for South Africa, former Minister of Finance Trevor

Manuel said that the government would be pursuing an infrastructure investment programme to

dampen the effects of the recession in South Africa. He said that the global financial crisis had

particularly hit South Africa's key mining and manufacturing sectors and is likely to have a huge

dampening effect on the economy at least until 2010. (15/07/2009)

Trevor Manuel says South Africa will pursue infrastructure investment to cushion effects of

recession (Africa Today - Reuters)

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HIGHLIGHTS

Defining common criteria to share the financial burden of bank bailouts in the event of a crisis should be one of the EU's priorities in order to shield Europe's economy from future turmoil, according to an group of the bloc's major financial players. In a joint appeal, representatives of Europe's major banks and financial industry players called for progress on supporting transnational financial groups in the event of failure. The appeal comes as the European Commission is drafting new detailed rules for EU-wide financial supervision. New draft legislation is expected in the autumn. (20/07/2009)dd000000000 Calls growing for 'burden-sharing' on bank bailouts (EurActiv)

Crisis-hit banks seeking European Union regulatory approval for state aid may have to sell assets and curb their market and geographical expansion, according to a draft EU document on bank restructuring rules. Competition Commissioner Neelie Kroes, tasked with ensuring fair play in the EU, is expected to present the guidelines on 23rd July. (17/07/2009)ffffkkkkkkkkkkkkkkk vvvvvvvvvvvvvvvvv EU plans to tighten state aid rules for banks (EurActiv)

The first meeting of the High Level Brazil-EU Macroeconomic and Financial Dialogue was held in Brazil on 16th July 2009. Participants discussed in depth the current global economic situation and likely future developments, exchanged views on the impact of the crisis on the Brazilian and EU economies and each side's policies in stimulating economic growth and promoting sustainable development. (17/07/2009)vccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccvvvvvvv First EU-Brazil Macroeconomic and Financial Dialogue (European Commission) G8 Summit: G8 Leaders met in the city of L’Aquila from 8th to 10th July 2009 and amongst other topics discussed the state of the world economy and the extraordinary measures taken. While noting signs of stabilisation and improved confidence, they reaffirmed their commitment to implementing the decisions made at the Washington and London Summits. Policy action to support the world economy and repair the financial system will continue as long as needed to ensure sustainable and long-lasting growth. Reforms of financial regulations will be implemented swiftly, ensuring a level playing field. Leaders also committed themselves to tackle the social dimension of the crisis. They agreed on the need to developing common principles and standards, the "Lecce Framework", which builds on existing initiatives of the OECD and other relevant international organizations and which will be brought to the next G20 Summit in Pittsburgh. Leaders also agreed on the need to address excessive price volatility in energy and agricultural products and to improve the functioning of global commodity markets. They stressed the importance of fostering an open, receptive climate for foreign investment and promoting innovation, while effectively tackling counterfeiting and piracy. (10/07/2009) G8 Summit: Chair's Summary (G8italia2009)

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The 9th FEMIP ministerial meeting took take place on 7th July in Brussels. Finance ministers from the 27 EU Member States and Mediterranean countries discussed the support for economic development provided by FEMIP in a difficult economic situation and examined the strategic goals for 2009-2011.c(07/07/2009)ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc Euro-Mediterranean Finance Ministers meet in Brussels (EIB)

ECOFIN Meeting: The Council opened excessive deficit procedures for Latvia, Lithuania, Malta, Poland and Romania, issuing recommendations on corrective measures to be taken, and adopted a new recommendation on measures to be taken by Hungary to correct its excessive deficit. It adopted conclusions on pro-cyclicality, which is the term given to the perceived exacerbation on fluctuations on volatile financial markets. The conclusions assess work in progress aimed at reducing pro-cyclical effects of financial regulation, as regards bank capital requirements and accounting standards for instance, as well as of remuneration schemes in the financial sector. The Council adopted a programme granting assistance of 47 energy projects under the European Economic Recovery Plan, for a total of 3.98 billion euros in 2009 and 2010. It also reviewed a number of member states’ stability and convergence programmes. (07/07/2009)ffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffff Council conclusions (Council of the European Union)

Eurogroup Meeting: Eurogroup Ministers discussed the economic situation and the effect that the crisis would have on potential growth. Euro area GDP is forecast to fall by 4 per cent in 2009 and recover to only 0.1 per cent in 2010, according to the Commission's spring forecasts. Ministers discussed the outlook for price developments in the euro area and followed up to its budgetary discussions in Prague. They also discussed the Commission's opinions on the Stability Programmes of euro area members Austria, Belgium, Slovakia and Slovenia and the excessive deficit procedure for Malta. (06/07/2009) Eurogroup meeting on 6th July 2009 (European Commission)

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OUR COMPETITORS VIEWS

S&D Calling on the Commission Presidency candidate José Manuel Barroso to “enter immediately into a

serious and intensive political dialogue with our Group”, Mr Schulz sets out 11 key issues that

“correspond to the urgent expectations of our citizens towards the European Union”. Amongst others:

a new Recovery Plan for Europe, European Employment Pact, Social Progress Pact, effective regulation

and supervision of the financial markets, stronger and more effective European financial instruments

including a new initiative for Eurobonds, new mutual solidarity across EU Member States, and a

coherent European economic strategy for after 2010, centred on the interdependence of economic,

social and environmental progress. (13/07/2009)bbbbbbbbbbbbbbbbbbccccccccccccccccccccccccccccc

Socialists and Democrats spell out demand for a new direction for Europe (S&D Newsroom)

ALDE/ADLE

Members of the Alliance of Liberals and Democrats (ALDE) welcomed the vote in the Icelandic

Parliament to submit an application for EU membership. Diana Wallis MEP, reconfirmed as a Vice-

President of the European Parliament, said: "I have long supported an application by EEA members

like Iceland to join the EU," said Wallis. "The recent financial crisis, paradoxically, has provided the

strongest argument yet of the importance of safety in numbers and the attraction of belonging to a

pole of stability like the Eurozone. When global financial storms are sweeping across the planet it pays

to be part of a broader currency area bound by solidarity and collective fiscal discipline." (17/07/2009)

Iceland's intentions to join EU a sign of EU's enduring attraction (ALDE News)

Centre For European Studies

FINANCIAL CRISIS WATCH

www.thinkingeurope.eu

Last updated on 23/07/2009 To view full articles click on hyperlinks.

GUE/NGL In response to Prime Minister Fredrik Reinfeldt's presentation of the Swedish EU Presidency’s priorities to the European Parliament in Strasbourg, during which he stressed the twofold challenge facing the presidency - i.e. climate change and the economic crisis -, GUE/NGL President Lothar Bisky underlined that the European Union needs greater transparency and democracy and to put its people at the heart of policy-making. For her part, Swedish GUE/NGL MEP Eva-Britt Svensson emphasized that both the financial and the climate crises were the result of "inadequate political decisions". But what is missing above all are responses to the demands of people and particularly working people. "What I, together with citizens throughout Europe, want from the Swedish presidency are actions to counteract social dumping. We need to see action to ensure social protection and the rights of workers as well as for increased gender equality," MEP Svensson concluded. (15/07/2009) Swedish presidency needs to prioritise people and put an end to 'casino capitalism' (GUE/NGL Newsroom)

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Centre For European Studies

FINANCIAL CRISIS WATCH

www.thinkingeurope.eu

Annex

Quarterly report on the Euro Area Volume 8 N° 2 (2009)

Highlights in this issue:

- Recent economic developments and short-term prospects

- Assessing the effectiveness of banking support measures

- A mid-year review of budgetary policy in the euro area

- Focus: The impact of the economic and financial crisis on potential growth

- Focus: Dealing with the economic and budgetary challenges posed by population ageing in times of

crisis

<<Source: European Commission>>