… fell to 116 dinars against the euro, forcing the the country’s central bank to intervene and spend €80 million of its reserves.

The domestic context in Serbia following a presidential election on 20 May has contributed to this steep decline in market confidence –

Investors moved en masse to offload the currency, [...] in the wake of the failure of the Tadic coalition government, which had come to embody the country’s aspiration to enter the European Union, and the surprise victory of right-wing leader Tomislav Nikolic, who is now experiencing difficulties in forming a government.

Belgrade is also largely dependent on “foreign banks based in EU countries, many of which are Greek and Italian.” This is one of the main reasons for concern over the prospect “of another credit squeeze in the region,” notes the French daily.

The Commission plans to impose a tax on financial transactions throughout the EU, at a rate of 0.1 percent on stocks and bonds and 0.01 percent on other financial products. [This] “could generate up to 57 billion euros, if applied across the EU.

Which is not a sure thing, the paper notes –

Nine countries, including Germany and France, are defending bringing in the tax, but others, like Britain, are opposed because they fear it will provoke financial activities to relocate.

Britain’s Prime Minister has also erupted in “fury” at the summit, writes the Telegraph, quoting David Cameron –

The Financial Transactions Tax is a bad idea. It will put up... the cost of people's pensions, it will cost many, many jobs. It will make Europe less competitive and I will fight it all the way.

This book is a “disgusting litany of false arguments”, announces Frankfurter Rundschau. The German daily notes that Sarrazin, who worked for the IMF, the German Ministry of Finance and the Bundesbank, should have some mastery of the subject, which “he fails to address” –

Sarrazin constructs an opposition between an efficient Northern Europe  and a chaotic South   –  between workers and layabouts, and whites and dark-skinned people. He refers to countries which he claims behave irresponsibly as “Club Med” states. And where does he situate France? In this Club Med! […] As an adversary of the euro, he puts forward a theory as to why Germany has been pro-European until now: the Germans’ persistent enthusiasm for Europe can only be explained by “the moral deadweight of the Nazi era”. This is a book of lies. […] Let’s hope it rots on booksellers’ shelves!

If the radical left-wingers win the 17 June elections and stick to their promise of scrapping the €130 billion bail-out and its austerity requirements, Greece could still stay in the eurozone without financial aid if it introduced a parallel currency. The "Geuro" would come as promissory notes, a form of government-issued debt that can be sold on. It would devaluate sharply against the euro but would allow the government to buy itself some more time to carry out reforms and pass budget cuts... [...] One pre-condition for the scenario to work would be that aid would still come from other euro-countries and the International Monetary Fund [...] Cash-strapped Greek banks would also need to be rescued by creating a European "bad bank" – according to the Deutsche Bank projection.

‘In 2010 and 2011 half of China’s imports from the European Union came from Germany, which is up from 39 percent in 2000.’ This reinforcement of Germany’s significance as a major trading partner of China has also helped bring European business to China. The fact that Europe has not lost market share in China in the last ten years – unlike Japan and the United States – is largely thanks to Germany. Moreover, Germany is one of those few European countries to enjoy a trade surplus with China. Buoyed by the strength of trade relations built up between Beijing and Berlin, the EU therefore has no choice but to weigh up this new economic partner.

That privileged relationship, however, risks harming the relationship between China and the EU, as it is primarily a bilateral one. “The Chinese want a recovery in Europe to be led by the Germans,” writes Le Temps of Geneva. Looking at the conclusion of the study, the Geneva daily warns -

The only possible balance must be through the EU. To convince the Germans to remain good Europeans in this area, however, a strategic partnership between the EU and China must be developed, and with some urgency.

This "unprecedented decision" comes a month after the second reform of the banking sector and in the midst of a financial storm in Spain caused by doubts about whether Greece will remain in the euro zone. The business daily adds -

The Government needs to accept the truth that ... neither Europe nor the international markets trust Spanish banks, and put measures in place to support them.

The ECB audit, which will be completed in two months, has already reached its first conclusion, says the newspaper: it reflects the "deep mistrust of the role played by the Bank of Spain" in taking back the management of the banking sector reforms. However, it adds -

[In terms of] convincing institutions and investors of the seriousness of Spain’s efforts to clean up its act and ensure the solvency of its banking system, ECB cooperation may become a valuable asset rather than a constraint.

Spanish and Italian 10-year borrowing costs shot up to their highest levels this year, whilst German 10-year bonds yields hit a record low, exacerbating the differences in borrowing costs between European countries to a new high. European stock markets also suffered their largest one-day drop in three weeks.

Aggravating these problems, Moody’s downgraded 26 Italian financial institutions by one to four notches, on Monday night and the cost of insuring against Spanish default hit a record high.

The financial firewall – the European Stability Mechanism – is a  500bn rescue system set up by European leaders. Some analysts are questioning whether this will be sufficient to rescue the larger economies at risk, such as Spain and Italy. Luke Spajic, a senior fund manager at Pimco bond investors told the Financial Times –

It’s looking alarming right now. The market is effectively trying to price a disorderly exit for Greece.

The FT added that calls were mounting for decisive action from European policy makers to avoid more systemically important countries being "dragged down by concerns over Greece."

Echoing German concerns about the ability of the Greek political parties to form a government after the elections on May 6, Der Spiegel explains that "for Berlin, the situation in Greece is reminiscent of the Weimar Republic" and evokes the spectre of the regime that emerged in Germany after the First World War. With its stability undermined, it became a breeding ground for Nazism-

The so-called “shame'”of the Germans at [the conditions imposed by the] Versailles Peace Treaty seems to the Greeks to be echoed in the objectives of the financial recovery conditions demanded by Brussels. As in 1920s Germany, it is the extremist parties who benefit.

While it would be desirable for Greece to leave the euro zone, Der Spiegel notes,

Nobody can force the Greeks to leave the euro. But it is clear that it would be in their own interest. ...The exit of Greece from the euro zone is the only chance for the country to recover. The Greeks would have their own currency, that they could devalue. This would mean imports would be more expensive and exports would be cheaper ... Solidarity between European countries is not tied to membership of the euro, and this is why other countries must help Greece with its huge debts.

The weekly puts forward another argument: The departure of Greece from the monetary union "would be a strong signal to other bankrupt countries: you don’t blackmail Europe".

After a worrying time about this 'renegotiation' European officials are saying today that they are now willing to help the French president complete the treaty of fiscal discipline through a growth initiative. Indeed, the 'claims' made by François Hollande reassured Brussels, because the projects already underway continue.

Les Echos adds that the President of the European Commission, Jose Manuel Barroso, said that he is happy to benefit from the opportunity created by the arrival of François Hollande to encourage a boosting of investment, provided it does not go back on the necessary deleveraging.” However, the paper warns:

This sudden urge to increase growth projects, however, risks clashing with the reality of public finances. For the EIB to recapitalise, 10 billion euros must be found, while in order to reallocate unspent structural funds, the states would have to transfer to Brussels the 82 billion they promised but have yet to hand over due to delays. And that is without including the 80 billion euro bill for building up capital for the future European Stability Mechanism (SPM). (...) Without cash in the coffers, the growth debate is about toeing a fine line between budgetary discipline and plunging into recession.

the Achilles heel of Spanish banks. Toxic assets due to real estate continue to rise, and there are more and more buildings on banks' balance sheets that have been acquired as a result of unpaid loans.

"Is Germany to blame for the housing bubble in Spain?" in turn asks ABC. The newspaper quotes a report from a Japanese bank, Nomura, which states that German and French banks had a role in the current situation-

the policy of low interest rates that the European Central Bank (ECB) applied in the years preceding the crisis has helped the moribund German economy to recover, but it was also a decisive factor that caused housing bubbles in peripheral European countries, [...] exacerbated by capital flows from the German and French banks.

To address the risk of bankruptcy of banks exposed to toxic assets related to real estate, the government "requires [the banks] to put aside larger provisions" for such credits, concludes El País.

Suggesting a fiscal union could come about within ten years, Mr Draghi said this would involve the transfer of sovereignty from member states to a central authority.” Such would be the political dimension of the “growth agenda” according to Draghi.

In the view of Le Figaro, the “Growth Pact” promoted by Draghi is expected to balance the “Fiscal Pact” adopted by 25 of the 27 member countries to redress their finances. This growth requires “structural reforms to 'facilitate the work of entrepreneurs’”, notes the French newspaper, adding that “the head of the ECB summed up in three words his doctrine on the issue: 'Flexibility, mobility, fairness.’”

La Stampa believes that in fact “the single currency is trying to change its face” and that –

… if the promises of the last days were to be realised, there would begin a significant reversal of the fundamental functions between the EU and the member states: the responsibility for expenditure would go to the former, and control over budgets to the latter. [Through the European Investment Bank], the EU will fund major infrastructure, capable of boosting employment, at rates much lower than what Rome or Madrid, to say nothing of Athens or Lisbon, would have to pay.

The directive drastically tightens the definition of a bank’s capital reserves and hugely increases the level they are required to have, so that each institution has a cushion of funds to absorb violent economic shocks. According to the European Banking Authority, the hundred largest European banks would need to find some 485 billion euros of capital in order to comply with Basel 3.

The bill provides that each bank keeps 7% of its equity capital in reserve. The UK wants to increase this requirement to solidify its deposit banks. France, however, wants the funds involved in insurance subsidiaries to be excluded. Le Figaro says:

The debates will likely be very heated and may lead to adoption of the text being postponed until May 15. However, failure seems forbidden, as Europe needs to prove today that it is moving forward on the path to strengthen its banking system.

Last week, Le Monde reported that the European Commissioner for Internal Market, Michel Barnier, wants to ask banks how they have used the 1,000 billion euros, which were injected by the European Central Bank to avoid the credit crunch.

The main measures of this plan are: complete opening up of labour markets, both private and public, to all European citizens – including Romanians and Bulgarians – “appropriate minimum wages” that will let employees live off their labour, mutual recognition of degrees, and lower labour taxes.

The Commission hopes the most potential lies in the health sectors, services for the elderly, development of a sustainable climate-friendly economy, and in IT, though it remains to be seen whether states will allow interference in their social affairs. The plan will be discussed at the EU summit in June.

Talks are bogged down, however, because “the Hungarian government has responded to European concerns with bogus promises”. The left-leaning daily continues –

For weeks, the Hungarian government has been aware of the conditions, which it has refused to accept. [...] The situation is clear. Brussels wants an end to the subversion of democracy, which must be restored. Orbán does not want to commit to such a change.

For its part, rival left-wing daily Népszabadság points out that –

… the government is in tight spot. […] The conditions for the loan, which have been known since January, have not changed. The state will have to guarantee the independence of the National Bank and the reliable functioning of the justice system. […] And that is not all: other problems have emerged with the new fundamental laws – notably with regard to legislation on the family and the electoral code –  because Europe now believes that our country’s new constitutional system should be examined in its entirety. […] With regard to the very precise conditions concerning the justice system, it is clear that the rule of law is a point of honour for the EU. Brussels is not willing to negotiate on this point.

PM Mario Monti attempted to dispel fears and blamed Spain’s enduring economic troubles and weak international growth. According to the Turin daily, he has also privately lashed out at the Italian entrepreneurs’ association, which has shaken the government by criticising its labour reform for being too watered down and compliant to trade union demands. Writing in La Stampa, Bill Emmot, former editor in chief of The Economist, says -

It would be wrong to pay too much attention to daily or weekly market movements, as they have more to do with animal psychology. [...] But behind them lies a substantial truth: neither Europe nor Italy’s sovereign debt problems have been solved. If recession in Italy or Spain is slightly worst than expected, they will fall short of their deficit reduction targets. That will call into question the issue of political will. [...] Monti’s reforms have been huge compared to those of previous governments, but not are not adequate to the task he faces. He started a modest liberalisation program, gave a mild stimulus to the forces of competitivity, and launched a labour reform that will not make history. No bond buyer could get the feeling that Italy’s growth perspectives have been radically transformed.

According to Pesticide action network-Europe (PAN-Europe) and Générations futures, the European Commission and member states have approved about fifty molecules (used in a dozen pesticides), which are suspected of toxic effects on humans or the environment. The incriminated substances were authorised thanks to a 'resubmission' policy which allows companies to bypass the 1991 European Directive on the evaluation of risks linked to phytosanitary molecules in use in the different EU countries.

“As is often the case in stories about European regulations, the issue is a complicated one”, remarks Le Monde which continues :

Manufacturers, the Commission explains in so many words, were effectively allowed to decide to volontarily take off the market a substance under evaluation while benefiting from a grace period until the end of 2011, when it was to be, in fact, removed. This gave them time to 'resubmit' a mini-application of certification [which requires less data regarding product toxicity]. This fast-track procedure is only possible, Brusselles explains, 'on the condition that there are no clear toxic effects detected during the preliminary study carried out by the reporting Member State.' The NGOs see things from a different angle. François Veillerette, president of Future Generations, sees a "gift" to the industry in the form of a "certification on the cheap". According to the two NGOs, 87 molecules have already attempted to use the fast-track approach and 64 have obtained final certification using this method. For anti-pesticide activists, this "gift" is the result of a compromise with agribusiness chemists in order to reduce the risk of litigation

Germany, with a rate of 5.7% of unemployed seems like a jobs paradise (only the Netherlands, Austria and Luxemburg have lower rates). As German daily Die Welt puts in in a headline, "Berlin is advertising to Europeans" to attract labour.

Some regions and some sectors in Germany are in a full employment situation and are urgently seeking German-speaking, foreign workers. A migration expert quoted by the paper, however, warns that expectations should not be too high. "Germany is not a first choice for skilled labour, it is in competition with other States," he says. This concerns for example English-speaking academics who are more likely to seek work in Great Britain. Berlin is not expecting a massive assault of Greek and Spanish unemployed, Die Welt concludes.

However, this is not because of financial extravagance: “The incomes of residents in these countries are so limited in comparison to their expenses that they simply can’t afford to save more”, explains an expert quoted by DGP. At the beginning of the decade, the average Pole could put by 11-12% of his income, now that figure has declined by 30%. The main reason for the change has been a slump on property markets, which traditionally absorb the bulk of surplus income. In line with Eurostat’s methodology, mortgages are a form of saving. The decline in house prices has lowered the real value of mortgage installments, and thus reduced the overall level of saving. 

The cuts will affect spending in all jurisdictions. Ministries will see their budgets reduced by at least 17 percent on average compared to 2011 (at least 10 billion euros), and officials will have their salaries frozen for the second year in a row.

In total, the central government is to cut 17.5 billion euros from its deficit, the regions 15.6 billion, and the municipalities one billion. The social sector is also being affected, as Social Security is to save around one billion euros.

Added to this are new tax revenues: getting rid of tax deductions for companies and bringing higher VAT for certain goods and services. For El País, “the goal seems to be within reach, but the recession complicates everything” –

The question is whether the cuts have reached their limit. If this is the case, radical changes in the administrative structure should be undertaken. We must also compensate for the increase in spending caused by the interest payments on the public debt [...] The key to success remains in how we spread the burden.

The charge for using data services such as email and web browsing will be capped at 70 cents a megabyte, a fraction of the €2-€5 charged by most operators across the EU. The cap will fall to just 20 cents by 2014, all but eliminating a lucrative sideline for telecoms operators. Many of their share prices dropped after the agreement.

The regulation was first proposed by the European Commission last summer to fight what it called “roaming rip-off”, with operators charging more than triple the normal rate for calls made while in another EU country. The European Parliament approved the move on March 27 and national governments the next day, with a final green light expected by June.

The move is sure to take the “summer bite out of mobile phone” charges racheted up over the holiday period, the Guardian notes, adding that this is –

… the culmination of a lengthy struggle between Brussels and mobile carriers, who say they will have to raise prices for other services. Cross-border charges are reckoned to generate up to 5% of revenues.

There is no comparable adjustment in contemporary economic history [...] Spain is at a diabolical crossroads: the deficit, which has swollen, forces us to make cuts that will sicken the already ailing economy [...] If the deadline is not extended, experts say, Spain will be unable to meet its objectives.

A “snip of the scissors” of 55 billion euros through to the end of 2013 will start with the launch of the 2012 budget on Friday, March 30. El País suspects Spain is stepping onto a rocky road –

The recent disagreement between the Commission and Madrid and the outcry provoked in Spain by the austerity mantra of the most orthodox countries is making any easing off on the deficit targets all the more difficult.

As El Mundo announces, the party of Angela Merkel intends to examine the reforms Spain has initiated, and on 2 April a delegation of parliamentarians from the CDU will travel to Madrid –

Altering Spain’s deficit target has raised suspicions in Germany and in Merkel's party [...]  The goal of the visit is twofold: to ensure that after the general strike of March 29 the reform programme will not shed a single gramme, and to verify that the change in the objective of the deficit is not a ruse to gain time, but a sign the country is doing its utmost.

Up till now, shareholders profited from their shares only if they sold them. This strategy has helped Apple become the largest company in the world based on market capitalisation. "It is unfortunate that the 'managers' of many developed countries haven’t taken a similar attitude," laments Hospodářské Noviny, citing the extravagant behaviour of European governments -

They obviously let themselves be carried away by the economy based on debt, which is somehow more attractive than an economy based on profit. It’s easier to pay out benefits and watch how the following government (from the opposition benches) will pull through. It's like calling in a dietician and, over a well-heaped plate, asking how to lose weight. [...] Apple is thinking of paying out about a tenth of the money accumulated. What government can boast of such numbers?

A German finance minister is not the born candidate to preside the Eurogroup. Arithmetic and the balance of power in Europe are against it. In normal times, it would simply be excluded that a representative of the country that is already the strongest member – and which wants, in addition, to impose its national culture of austerity throughout Europe – also be responsible for monetary issues.

In the absence of other candidates, Italy's Mario Monti and the Finn Jyrki Katainen are out of the running because their compatriots already occupy key EU positions (Mario Draghi at the European Central Bank and Olli Rehn, the EU Commissioner for Financial and Economic affairs), Schäuble at least has the required stature, the Munich daily says. Junker, whose mandate ends in June 2012, has already said that he will not stand again. Schäuble, himself, said the next president must come from a country rated triple A by the rating agencies, thus limiting the choice to Germany, Finland or the Netherlands. In the meantime, he will have to wait until June for backing from France – after the presidential and legislative elections.

In Italy the situation is not much better, notes La Repubblica: in February 2012 Fiat sales fell by 16.6 percent over February 2011. Fiat Group CEO Sergio Marchionne is meeting with Italian Prime Mario Monti today (March 16) to discuss Fiat's strategy for the coming years.

The European partners are insisting on the credibility of the policy of budget cuts to calm the interminable euro crisis. Europe has made it clear that there is nothing more important than austerity [...] and responded to the challenge of Rajoy. [...] Spain is the new frontier of fear in the EU: too big to fail, too big to be bailed out and too big for the markets to forgo a lynching for violation of 2012’s deficit targets. [...] The punishment is in line with the challenge: everyone was expecting a reprimand [while acknowledging the target of 5.8%], and the Commission has demonstrated that it will not make concessions.

For its part, daily El Mundo interprets Eurogroup’s decision as “Olli Rehn’s revenge". The Commissioner for Economic and Monetary Affairs “had set a course for Spain” –

For the bureaucrats in Brussels, it was particularly abominable that [Rajoy’s] announcement came on the day of the signing of the fiscal compact. [Rehn] has sought to reaffirm his authority in the prism of the new budgetary rules, and that is the argument that he presented to member states to convince them to demand a Solomon-like division of the deviation announced by Rajoy. The result is yet another makeshift solution made in Brussels [...] We were surprised by Eurogroup’s urgent insistence on a further 0.5% cut in Spain, at a time when the 2012 budget has not yet been drafted.

… a crucial instrument to guarantee a fair contribution from the financial sector to the cost of the financial crisis.

The initiative is not unprecedented. The European Commission already proposed a duty on transactions involving shares, derivatives and other financial products last September, which met with immediate opposition from the United Kingdom and Sweden. This time around, the ministers point out that they are willing to seek “alternatives” if a solution has not been planned within the next six months – a remark, which SZ believes is evidence of an important development "if you read between the lines” –

The nine signatories send a very clear message: we can go it alone. [According to the provisions of EU treaties] states can enter into agreement for reinforced cooperation if they come together in a group of no less than nine. That is why this short letter reads almost like a heavy-handed threat to colleagues who have yet to make up their minds. All those concerned have been warned: the overwhelming likelihood is that the tax will be introduced.

Finally the daily notes that the letter will also have an internal impact on signatory countries, notably France and Germany: it will enable Nicolas Sarkozy to aspire to more votes in presidential elections in April and May, and give Angela Merkel something to offer the Geman opposition, which made the introduction of a Tobin tax a condition for its endorsement of the fiscal compact.