Portugal's President Captures New Term

Portuguese voters elected Aníbal Cavaco Silva to a second term as president Sunday, in a message that they want political stability as the country tries to extricate itself from the European sovereign-debt crisis. The seasoned Social Democratic president—who is head of state, but doesn't run the government—is facing tough months ahead.
Amid concerns that Portugal won't be able to repay its debt, Lisbon has been under pressure from its European partners to take a bailout, a measure the government has denied it needs.
With nearly 100% of the votes counted, official results showed Mr. Silva won 53% of valid ballots cast, while Manuel Alegre from the Socialist Party was in second place, with 20%. The remaining votes were divided among four other candidates.
Mr. Silva, 71 years old, will start his second five-year presidential term under great pressure to maintain the political stability that has allowed Portugal to approve a harsh austerity plan and so far to avoid having to ask for outside help.
The minority government of Socialist Prime Minister José Sócrates managed to pass the 2011 budget, which included public-sector wage cuts, reductions in welfare benefits and tax increases, with the help of the Social Democrats, who abstained from voting after forcing the government to accept deeper spending cuts than originally planned. The budget aims to reduce the government's fiscal deficit to 4.6%of gross domestic product in 2011 from an estimated 7.3% of GDP in 2010.
Concern about the country's ability to repay its debt, following the crises that forced the Greek and Irish governments to accept help from the EU and the International Monetary Fund, has pushed the price Portugal has to pay to finance its deficit higher in recent months.If international financial markets continue to demand higher interest rates from Portugal, the country might also be forced to turn to the EU and the International Monetary Fund for help, despite Mr. Sócrates' insistence that won't be necessary.
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Elindult az első európai szemeszter

Az új gazdasági együttműködés elindításaként az Európai Bizottság 2011. január 12-én éves növekedési jelentést (Annual Growth Survey) adott ki, amelyben gazdaságpolitikai és költségvetési prioritásokat javasol a tagállamok számára.
Növekedés, versenyképesség, munkahelyteremtés
A magyar elnökség szerint a jelentés közzététele után azonnal meg kell kezdeni a tárgyalásokat, hogy az uniós állam- és kormányfők márciusi csúcstalálkozóján politikai iránymutatást fogadhassanak el. Az ezek alapján elkészítendő nemzeti gazdasági programok segíteni fognak abban, hogy Európa kilábaljon a válságból, visszanyerje versenyképességét, és beinduljon a munkahelyteremtés.

Az elnökség meggyőződése, hogy az új gazdaságkoordinációs mechanizmus minden tagállam közös érdeke, és a költségvetési fegyelem megerősítésén túl növekedésösztönző, egyensúlyteremtő intézkedésekre van szükség.

Szigorú költségvetés, egyensúly, stabil pénzügyi szektor

Az Európai Bizottság jelentése tíz pontba szedte az uniós országok számára javasolt gazdaságpolitikai intézkedéseket. Eszerint a növekedés alapvető előfeltétele a szigorú költségvetési fegyelem, a makrogazdasági egyensúly és a pénzügyi szektor stabilitása. A foglalkoztatás növeléséhez a munkavállalás vonzóbbá tételére, a nyugdíjrendszerek reformjára, a munkanélküliek foglalkoztatására van szükség. Emellett a Bizottság szerint megfelelő egyensúlyt kell találni a munkahelyek biztonsága és a foglalkoztatás rugalmassága között. A növekedés ösztönzése érdekében a jelentés javasolja az egységes belső piacban rejlő lehetőségek kiaknázását, a magántőke bevonását és a költséghatékony energiához való hozzáférés biztosítását.

A Bizottság szerint az európai félév meg fogja változtatni a tagállami kormányok gazdaság- és költségvetési politikáinak kialakítását. Ha a jelentésben megfogalmazott célok megvalósulnak, „Európa visszatérhet a gyors gazdasági növekedéshez és magasabb foglalkoztatási szinthez” – mondta José Manuel Barroso, a Bizottság elnöke.

Európai szemeszter

Az éves növekedési jelentés közzététele az európai szemeszternek vagy félévnek nevezett koordinációs ciklus kezdete. Ennek keretében a tagállamok a Stabilitási és Növekedési Egyezmény szabályai, illetve az Európa 2020 stratégia szerint összhangba hozzák a közös uniós célkitűzésekkel makrogazdasági és költségvetési politikájukat, valamint szerkezetireform-intézkedéseiket. Mindez fontos lépés az európai szintű gazdasági kormányzás irányába.

A gazdasági kormányzás megerősítését célzó európai félév eljárási rendjét a tagállamok 2010 szeptemberében hagyták jóvá. Az idei évtől kezdve a Bizottság minden januárban előterjeszti majd az Unió gazdasági helyzetét és a fő kihívásokat elemző jelentését, amely egyben ajánlásokat is tartalmaz a tagállamok számára. Az Európai Parlamentben és a Tanácsban egyaránt megvitatandó éves növekedési jelentés szolgál alapjául azoknak az iránymutatásoknak és következtetéseknek, amelyeket az Európai Tanács tavaszi ülésén fogad el, és amelyek nyomán a tagállamok áprilisban véglegesítik középtávú költségvetési stratégiájukat és nemzeti reformprogramjaikat.

A Bizottság 10 prioritása (1-3 stabilitás, 4-7 munkaerőpiaci reform, 8-10 növekedés beindítása):

1. Implementing a rigorous fiscal consolidation

2. Correcting macro economic imbalances

3. Ensuring stability of the financial sector

4. Making work more attractive

5. Reforming pensions systems

6. Getting the unemployed back to work

7. Balancing security and flexibility

8. Tapping the potential of the Single Market

9. Attracting private capital to finance growth

10. Creating cost-effective access to energy

Commission Survey
Euvonal

Belgium passes the EU Presidency flag to Hungary

Hungary took the rotating presidency of the Council of the European Union from Belgium during a spectacular evening ceremony held in the presence of 270 guests on 6 January 2011. Yves Leterme, acting Prime Minister of Belgium, and Viktor Orbán, Prime Minister of Hungary attended the ceremonial event hosted in the Cupola Hall of the Houses of Parliament (the seat of MPs as well as the government).
From 1st January 2011, it is going to be task of the Hungarian Presidency of the Council of the European Union to shape the issues on the agenda of the European Union in line with the interests of the 27 Member States. In order to maintain the course amidst its many obligations, the Hungarian Presidency has defined the topics that it considers to be of outstanding significance. The Hungarian Presidency wishes to work along four priorities during the first half of 2011. Beside this, it intends to keep in the focus point the human factor, as the basis for intelligent, sustainable and inclusive growth when dealing with all other issues ranging from the economy, through common policies to the issue of enlargement.
Growth and employment for preserving the European social model
The entire Union is defined by a period of economic rearrangement. The Hungarian Presidency will continue the process of consolidation. It is convinced that the key to success is in the future oriented growth strategy of the EU and in the reinforcement of economic policy coordination.
The Europe 2020 strategy wishes to improve or to preserve the living conditions of European citizens, therefore it has to have the creation of jobs and sustainable competitiveness in the focus. Thus the Hungarian Presidency wishes to improve the situation of small and medium enterprises, which are the drivers for job creation and also wishes to call the attention of Member States to the impact that demography and family policy can have on employment and economic growth. In the framework of the initiative to decrease poverty, the Presidency wishes to pay increased attention to the struggle against child poverty and will strive for tangible, European-level measures in the field of the integration of the Roma-people.
Stronger Europe
The internal policies of the EU are structured around three basic elements: food, energy and water. Therefore the Hungarian Presidency attaches great importance to strengthen policies in these fields, thereby also reinforcing Europe. The review of the Common Agriculture Policy, the definition of a common energy policy and a new area, the drafting of a European water policy all serve this purpose. Parallel to the debate on preserving water resources, the European strategy on the development of the Danube-region will also be adopted during the Hungarian Presidency. Hungary wishes to conduct a real and tangible debate on the afore-mentioned issues. This is indispensable in order to make sure that these policies that strength cohesion and solidarity between Member States provide a solid foundation for the next multi-annual financial framework of the Union.
Citizen friendly Union
The EU also has to deal with issues that have a direct relevance on the everyday lives of citizens. Thus Hungary intends to further the implementation of the Stockholm Program, to move forward the enlargement of the Schengen area to include Bulgaria and Romania in order to provide a free movement of people and to protect fundamental rights. Beside all these, it is the objective of the Hungarian Presidency to direct the attention of Member States to cultural diversity as a European value that needs to be protected. Cultural diversity will be a defining theme of cultural events during the Presidency.
Enlargement and neighbourhood policy
Hungary wishes to pay particular attention to taking the enlargement process further and to providing an integration perspective for the Western Balkans region. The Hungarian Presidency will do everything it can to conclude the accession talks with Croatia during the first half of 2011. It is also a priority objective to strengthen the Eastern dimension of the neighbourhood policy, in the framework of which, Hungary will host the second Eastern Partnership Summit in May 2011.
www.eu2011.hu

Estonia enters euro zone

IT WAS a moment the Estonian government - one of a line of liberal, pro-Western coalitions that have ruled the country since 1992 - had been awaiting for years.
At midnight on New Year's Eve, Estonia abandoned its post-Soviet currency, the kroon, in favour of the euro - its last remaining big policy goal since securing membership of the EU and NATO in 2004.

EEA-jelentés: nincs messze a 20 százalék

Az Európai Környezetvédelmi Ügynökség (EEA) múlt heti jelentése szerint az Európai Uniónak sikerült jelentős eredményeket elérnie a szennyezőanyag‑kibocsátás csökkentése és a megújuló energiaforrások alkalmazásának bővítése terén. Az EU kibocsátása az 1990-es évi kibocsátáshoz képest 17 százalékkal csökkent. „A jelentés közzétételének időpontja tökéletes, tekintve, hogy megkezdődtek a cancúni klímatárgyalások” – mondta Jerzy Buzek, az EP elnöke.

„A klímaváltozás kihat a polgárainkra: az ivóvíz minőségére, a táplálékra, amit megeszünk, a levegőre, mit belélegzünk. Nincs egyszerű megoldás. A jogalkotóknak, az üzletembereknek és a polgároknak együtt kell működniük. Többet kell tenni az éghajlatváltozás megfékezéséért. Az EU-nak meg kell felelnie a 30 százalékos CO2-csökkentési céljának, ahogy azt Európai Parlament múlt heti határozata megállapította”.
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Dublin unveils radical austerity programme

The Irish government has unveiled a far-reaching austerity package with sweeping cuts and tax hikes in an effort to meet the tough conditions of an €85 billion EU-IMF bail-out plan, an architecture of adjustment that will radically alter the very structure of how the country is run.

It is a plan that will hit every citizen and sector of the Irish economy, but will hit working people, students and low-income earners the hardest, a move that has already provoked both a deep fury from many but also a bitter resignation amongst others.

Key measures include a slashing of welfare benefits, a hiking and broadening of income taxes, a sharp increase in university fees, the imposition of property taxes and water charges. Dublin hopes to save €15 billion over the next four years, including €10 billion in cuts and €5 billion in new taxes and other sources of revenue. The shocking sums come atop a total of €14.6 billion in austerity measures introduced in the wake of the wider economic crisis.

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"As Ireland is a small, open economy, our economic recovery will be export-led. This plan stimulates exports, increasing productivity and rebuilding competitiveness," the government said in a statement. The plan forecasts economic growth of 2.75 percent of GDP on average over 2011-2014, and hopes this will result in the creation of some 90,000 new jobs.

Dublin appears to have won the day against pressure from other EU member states and the commission that it hike its ultra-low corporation tax of 12.5 percent, calling the rate "a cornerstone of our industrial policy".

Acquiescing to an IMF demand that labour costs be slashed, pay for minimum wage earners will be reduced by a full 12 percent, higher than the 10 percent that had been predicted, from €8.65 an hour to €7.65.

Low-income earners have in recent years enjoyed considerable relief from income tax, with as many as 45 percent of employees not paying at all. This era has come to an end, with income tax from now on to be applied on all who earn over €15,300 a year, down from the current €18,300. The government hopes to raise an additional €1.9 billion this way.

VAT will also be jacked up a total of two percent, spread over the last two years of the four-year package, while water charges will be introduced by 2014.

Social welfare spending is to be lacerated by €2.8 billion and student 'registration fees' will climb from €1,500 to €2000, an adjustment of 33 percent. The figure is not as high however as had been feared, with early reports suggesting a doubling to €3,000.

The cuts in 2011 will be worth some four percent of GDP and over the four-year period, equivalent to a full 11 percent.

As part of the cuts to spending, public service staff levels will be reduced by 24,750 positions and salary adjustments, including a 10 percent pay cut and a new pension scheme for fresh hires, will shave off €1.2 billion in costs over the next four years.

Property owners will now be subject to a tax for the first time, to be initiated in 2012, and business owners will be slapped with a local services levy.

Euobserver

Lisbon 2010

“This summit was not as exciting as other summits because we basically agreed on everything.”

Obama on the EU-US summit in Lisbon

Ireland to request bailout package from European Unio

Ireland's Finance Minister, Brian Lenihan, is to recommend the debt laden country make a formal application for a bailout loan from the European Union and the IMF. He gave no indication of how much will be needed but said it would not be a 'three-figure sum' - reports today have put figure needed as high as €120bn - but said it would be "tens of billions of euros".

A rescue from the EU, European Central Bank and International Monetary Fund has been wideley expected despite strong denials from Ireland. The recommendation will be made when the government meets later today to finalise a four-year plan to cut its budget deficit, he told RTE, the Irish broadcaster.

"The key issue is ensure we do not have a collapse of the banking sector," Mr Lenihan said in an interview. He acknowledged that Irish banks have become too dependant on ECB funds and had to be "weaned" a way from this funding. Mr Lenihan described the funding being applied for as 'a standby fund' and said not all of it would necessarily be drawn down.

Details of the bailout - or the conditions attached - will be the subject of discussion. However, the Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's low corporation tax rate is raised.

Telegraph

Germany ups pressure on Ireland over business tax

Germany stepped up pressure on Ireland to raise its corporate tax rate on Tuesday with a senior finance expert in Chancellor Angela Merkel's party saying the Irish government could do so without hurting growth.

Dublin's 12.5 percent corporate tax rate, one of the lowest in the 27-nation European Union, has been a key part of its economic strategy and crucial to tempting big employers like Google Inc and Pfizer to Ireland.

Irish borrowing costs have surged in recent weeks and the country is now under pressure to ask the EU for financial assistance to help it cope with its fragile banks. It is unclear what kind of reforms the EU could demand in exchange for aid. But Michael Meister, a deputy leader in parliament and finance expert for Merkel's Christian Democrats (CDU), said the country needed to consider raising the levy. "The Irish rates are below the European Union average," Meister told Reuters on the sidelines of the CDU annual party congress in the southwestern city of Karlsruhe. "I therefore see here at least a possibility, given the high (Irish) budget deficit, to improve revenues without causing a negative impact on growth," he added.

The low rate is a source of irritation in some European capitals, including Berlin, which view it as unfair competition and there has been a real fear in Dublin that Europe would demand an increase. Meister's comments come one day after Elmar Brok, a senior CDU lawmaker who has sat in the European Parliament since 1980, said Ireland may have no choice but to raise the rate. "Ireland has two options to consolidate its budget -- cut expenses even further or increase taxes like the corporate tax rate," Brok said at the congress in Karlsruhe.

Ireland is relying on exports to help the economy grow by a forecast 1.75 percent next year and has repeatedly said it will not increase the rate it taxes the output of multi-nationals. A 2008 report by the Organization for Economic Cooperation and Development said that on average studies find that a one percentage point increase in the effective corporate tax rate leads to a 3.7 percent decline in foreign direct investment.
Reuters

Chinese premier pledges support for euro, EU trade

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EU agrees trade concessions to flood-hit Pakistan

The European Union has agreed to make trade concessions to Pakistan to help it overcome the impact of flooding, diplomats say. They say the deal could allow Pakistan significant reductions in duties paid on textile exports to EU countries.

Any move to grant Pakistan a waiver on textile duties would also require the consent of the World Trade Organisation (WTO) to ensure trade rules are not violated. The details will be determined in the coming weeks, with the European Commission working with the WTO to finalise how the concessions can be be implemented.

Meanwhile, some of the estimated 10 million Pakistanis displaced from their homes by the massive July monsoon floods have begun tentative salvage operations.

BBC

Orban Confirms Hungary Pledge to Meet European Union Budget Deficit Limit

Hungarian Premier Viktor Orban reiterated his Cabinet’s pledge to cut the budget deficit to no more than 3 percent of economic output in 2011 as the country braces for currency volatility.
“This year we can’t stretch further than 3.8 percent and for next year, I don’t suggest stretching further than 3 percent,” Orban said in a speech to Parliament, referring to the budget targets.

Hungary last week gave up a drive to raise next year’s deficit target, bowing to pressure from the European Union, which helped give a 20 billion-euro bailout ($26 billion) to the country two years ago. The government’s commitment to the target came after EU finance ministers told Hungarian officials during a meeting in Brussels last week that they had no other choice if the country wanted backing from the bloc, Economy Minister Gyorgy Matolcsy said on Sept. 8.

The Economy Ministry will submit the 2011 budget and future tax plans to the government in the middle of October, Matolcsy said today.

Bloomberg

EU expected to expand free trade agreements to South Korea

The European Union wants to expand its free trade agreements to include South Korea and is expected to reach an agreement between its trade ministers after the weekend.

The lifting of import tariffs would be a boost to the Korean automakers Hyundai and Kia Motors Corp. who are known for manufacturing low-cost vehicles.

The delay before the weekend and the objection to the free trade agreement comes primarily from Italy and its automaker Fiat Spa. Fiat fears unfair price competition if the import tariffs are lifted since the company operates in the same small to mid-size sedan market segment. The Italian automaker is also trying to carve out a niche in the US auto market now that it owns a 25% stake in Chrysler.

The free trade agreement would save EU exporters 1.6 billion euros and the exporters 1.1 billion annually based on all traded goods. The EU would benefit from the new free trade agreement as it would allow European exporters to more easily trade their goods in the South Korean market without specific standards or requirements.

examiner.com

Európai szemeszter

Az uniós országok pénzügyminiszterei jóváhagyták azt a javaslatot, mely szerint a jövő évtől kezdve minden tagállam még a nemzeti jóváhagyás előtt ismerteti a többi tagországgal költségvetési tervét.

A jövőre induló rendszer értelmében az Európai Bizottság jelentése alapján a tagállamok kormányait képviselő Tanács minden év elején meghatározza majd az unió előtt álló gazdasági kihívásokat, és stratégiai iránymutatásokat ad ezek leküzdéséhez. A tagországoknak ezt figyelembe véve április végéig szükség esetén módosítaniuk kell középtávú pénzügyi stratégiájukat, illetve nemzeti reformprogramjukat. Nyáron a tagállamok ugyancsak uniós iránymutatást kapnak a következő évre vonatkozó költségvetésükkel kapcsolatban. A rendszer - a miniszterek keddi brüsszeli üléséről kiadott közlemény szerint - lehetővé teszi, hogy fél éven át párhuzamosan figyelemmel kövessék a tagországok gazdaságpolitikáját, és időben kiderüljön, ha az eltérést mutat az uniós iránytól, illetve ha egyensúlytalanság van kibontakozóban.

Az uniós zsargonban európai szemeszternek nevezett új rendszert az EU-n belüli gazdasági együttműködés javításán dolgozó - Herman Van Rompuy EU-elnök vezette - munkacsoport dolgozta ki. A csoportot (amely gyakorlatilag a pénzügyminiszterekből áll) annak érdekében állították fel a tagországok állam- és kormányfői, hogy dolgozzon ki olyan szabályokat, amelyek lehetővé teszik a gazdasági válságok megelőzését, illetve könnyebb kezelhetőségét a jövőben. Van Rompuy a kormányfők október végi találkozóján számol be arról, milyen javaslatok születtek a munkacsoportban.

Sweden, Finland urge EU to open peace institute

Sweden and Finland are urging the European Union to create an independent peace institute to broaden the scope of the bloc's peacekeeping efforts around the world.

Swedish Foreign Minister Carl Bildt and his Finnish counterpart Alexander Stubb say an independent think tank could have better opportunities to help solve conflicts than traditional diplomacy. Their proposed institute would be modeled on the U.S. Institute of Peace, which is funded by the U.S. Congress but run by an independent board.

The ministers sent a letter with the suggestion to EU foreign policy chief Catherine Ashton on Friday. They said they hoped to get support from other EU member countries for the initiative.

EU, Euro Zone GDP posts fastest growth in four years

Gross Domestic Product in both the European Union and the Eurozone increased 1 percent during the second quarter of 2010, compared with the previous quarter, according to first estimates released by Eurostat. The figures show the EU and the Euro Zone have rebounded strongly as compared to the first quarter of the year. According to the statistical office of the European Union, growth rates in the first quarter of 2010 were 0.3 percent in both zones.

GDP growth in the EU and the euro common area was the fastest in four years, outstripping rivals United States and Japan. In comparison, the United States GDP increased 0.4 percent during the second quarter of 2010, after 0.9 percent rise in the first quarter of 2010. In Japan, GDP rose a nominal 0.1 percent in the second quarter of 2010, after 1.1 percent growth in the previous quarter.

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Germany and France lead way in 'two-speed recovery'

The economic recovery of the eurozone slightly lost its momentum in August, with most of the growth dependent on the performance of Germany and France, a purchasing managers' index survey published on Monday (23 August) showed.

According to the preliminary figures from Markit, a UK-based research firm, the eurozone composite output index, which measures activity across the private sector, including the manufacturing and services sectors, fell to a two-month low of 56.1 in August, down from 56.7 in July.

While the outcome of the whole single currency bloc is "solid," Markit wrote in a press release, there are "worrying divergences" between national economies, as growth is largely dependent on Germany and France.

"Growth in the rest of the euro area slowed to near stagnation, and services even contracted again as austerity measures bite," Chris Williamson, the company's chief economist said.

There is little evidence to suggest that buoyant business conditions from France and Germany "are spilling over to the benefit of the periphery," he added, noting that this could spell further divergence in the euro area's "two-speed recovery."

Flash estimates from the EU statistic office Eurostat, published on 13 August, confirmed Germany as a leader of Europe's economic recovery with a GDP growth rate of 2.2 percent in the second quarter of 2010, the best German result since re-unification in 1990. France's GDP increased by 0.6 percent, while Spain, Italy and Portugal each reported increases of less than 0.5 percent. The EU's overall growth was 1.7 percent.

Euobserver

Germany turbocharges EU economy

The strongest economic growth in Germany in two decades powered Europe's economic recovery ahead of the United States. The eurozone economy grew by 1 percent in the second quarter, its biggest quarterly expansion since the second quarter of 2006, the European Union's Eurostat statistics agency said Friday.

...

Beating all analyst forecasts, Germany's economy in the second quarter of 2010 grew by 2.2 percent compared to the first three months of the year, its fastest growth in two decades. In comparison with the same time last year, Germany's economy grew by 4.1 percent, the Federal Statistical Office said Friday.

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France proposes EU reaction force for natural disasters

French President Nicolas Sarkozy has called for the EU to set up a joint rapid reaction force to handle natural disasters such as earthquakes, wildfires and floods. In a letter to European Commission President Jose Manuel Barroso published on Sunday (15 August), Mr Sarkozy addressed the issue of the EU's ability to react under its own name in connection to the recent floods in Pakistan.

"It seems essential, for obvious political and humanitarian reasons, that Europe shows its solidarity with the Pakistani people visibly. The interest of Europe is also to ensure the development and stability of this country," he wrote. Following the earthquake in Haiti and wildfires in Russia, says the letter, the EU "must take the necessary measures and build a real EU reaction force ... that draws on the resources of the member states." France is to draw up proposals for the force in the near future, it adds.

Paris announced Sunday that a plane with 60 tonnes of humanitarian aid will be sent to Pakistan, with Mr Sarkozy saying France is prepared to use its Nato military forces to help transport the aid. France has already allocated €1 million to Pakistan since the start of the floods, which are estimated to have affected 20 million people.

Last Wednesday (11 August), the commission said it would provide Pakistan with €10 million in immediate emergency aid, in addition to €30 million allocated in July. EU foreign ministers are to also discuss a long term aid plan for Pakistan at an informal meeting in September.

With wildfire smog returning to Moscow over the weekend, Russia itself indicated it would be interested in joining a multilateral crisis response force. "The United States and the EU have now come to the same conclusion. I think we will come to this, and such capabilities will have to be established," he told the Ria Novosti news agency.

Euobserver Link

Slovakia: No Funds for Greece Bailout

Slovakia’s parliament rejected the nation’s participation in a loan for Greece, ending the European Union’s unity in handling the sovereign-debt crisis. The 69-1 vote, with 14 abstentions, reversed a decision by the previous Cabinet to lend Greece 816 million euros ($1.1 billion). Prime Minister Iveta Radicova's month-old government opposed the aid, saying poor countries shouldn’t pay for the profligacy of richer peers.

“The Slovak share is small, so it shouldn’t have much impact on the big picture,” said Timothy Ash, head of emerging markets research at Royal Bank of Scotland Plc in London. “On the other hand, the rejection is clearly a disappointment for the European Commission as Slovaks are thinking outside the box.”

Olli Rehn, the EU’s economic affairs commissioner, called Slovakia’s decision a “breach of the commitment” the previous government made as part of the so-called eurogroup of countries. “The eurogroup’s decision was a crucial act at a critical moment to safeguard financial stability of the euro area as a whole, including Slovakia,” Rehn said today in a statement. “I can only regret this breach of solidarity within the euro area, and I expect the Eurogroup and the Ecofin Council to return to the matter in their next meeting.”

Slovak Finance Minister Ivan Miklos has said EU fiscal rules should be changed to allow for the default of euro-member nations. Slovakia, the euro region’s poorest member by per- capita gross domestic product, was asked to pay too large a share of the Greek loan package, he said July 30.

“Many people in Germany and rich EU countries would have a lot of understanding for the Slovak position,” Ash said. “It shouldn’t be inevitable that every country gets a bailout.”

Earlier, lawmakers approved Slovakia’s participation in the European Financial Stabilization Facility, an entity that would sell debt secured by 440 billion euros in national guarantees and use the proceeds to provide loans to distressed euro-region members. Slovakia’s share in potential guarantees amounts to 4.4 billion euros.

Bloomberg