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EUROPEAN UNION

Europe’s leaders bicker as Brexit reality bites

The European Parliament's chief called on Sunday for Britain to begin proceedings to leave the EU at a summit this week, as Germany suggested the country should be given time to "reconsider".

Europe's leaders bicker as Brexit reality bites
"Remainers" ponder an uncertain future. Photo: AFP

Amid confusion and dissent over the timetable for any “Brexit”, Martin Schulz told German newspaper Bild am Sonntag that a period of limbo would “lead to even more insecurity and thus endanger jobs”.

“Hesitating simply to accommodate the party tactics of the British Conservatives hurts everyone,” Schulz, a German Social Democrat, said.

“That is why we expect the British government to now deliver. The summit on Tuesday is the right time.”

However German Chancellor Angela Merkel's chief of staff insisted there was no rush to show Britain the door.

“The political leadership in London should have the chance to reconsider once again the consequences of a withdrawal,” Peter Altmaier told the RND media group.

He noted that once Britain left the union, it would be a “serious turning point with many consequences”.

Altmaier had earlier told German public radio that he had “no indication” that British Prime Minister David Cameron would start the Brexit process Tuesday.

“I tend to think that the application will be filed in the coming weeks or months, possibly only by a new government,” he said.

After it has been formed, the new British government will “then sort itself out and, as the case may be, present its application. We should all wait calmly for that”.

However the four biggest groups in the European Parliament have also drawn up a draft resolution calling for Cameron to set the Brexit ball rolling on Tuesday, Germany's Frankfurter Allgemeine Sonntagszeitung reported.

This was crucial, the groups wrote, “to avoid damaging uncertainty for all and to preserve the integrity of the union”.

They added that “no new relationship of whatever kind between the United Kingdom and the EU can be agreed before (Britain's) exit accord has been completed”.

Cameron said Friday in the wake of the shock referendum outcome favouring Britain leaving the EU that he would resign his office by October and leave the Brexit negotiations to his successor.

To begin the withdrawal process, Britain must invoke Article 50 of the EU's Lisbon treaty, which has never been used before.The first step is to inform the European Council of member states, which sets the clock ticking on a two-year timetable of negotiations.

The EU will hold a summit in Brussels Tuesday and Wednesday to discuss the fallout from the British vote and the European Parliament will also hold a special session.

Foreign ministers from the EU's six founding states meeting in Berlin on Saturday urged Britain to begin the exit process “as soon as possible”.

Merkel, however, was more cautious, saying it was up to Britain to decide when to begin withdrawal proceedings, although they should not “drag on forever”.

“There is no reason to be nasty in the negotiations. We have to follow the rules of the game,” she said.

ENERGY

How European countries are spending billions on easing energy crisis

European governments are announcing emergency measures on a near-weekly basis to protect households and businesses from the energy crisis stemming from Russia's war in Ukraine.

How European countries are spending billions on easing energy crisis

Hundreds of billions of euros and counting have been shelled out since Russia invaded its pro-EU neighbour in late February.

Governments have gone all out: from capping gas and electricity prices to rescuing struggling energy companies and providing direct aid to households to fill up their cars.

The public spending has continued, even though European Union countries had accumulated mountains of new debt to save their economies during the Covid pandemic in 2020.

But some leaders have taken pride at their use of the public purse to battle this new crisis, which has sent inflation soaring, raised the cost of living and sparked fears of recession.

After announcing €14billion in new measures last week, Italian Prime Minister Mario Draghi boasted the latest spending put Italy, “among the countries that have spent the most in Europe”.

The Bruegel institute, a Brussels-based think tank that is tracking energy crisis spending by EU governments, ranks Italy as the second-biggest spender in Europe, after Germany.

READ ALSO How EU countries aim to cut energy bills and avoid blackouts this winter

Rome has allocated €59.2billion since September 2021 to shield households and businesses from the rising energy prices, accounting for 3.3 percent of its gross domestic product.

Germany tops the list with €100.2billion, or 2.8 percent of its GDP, as the country was hit hard by its reliance on Russian gas supplies, which have dwindled in suspected retaliation over Western sanctions against Moscow for the war.

On Wednesday, Germany announced the nationalisation of troubled gas giant Uniper.

France, which shielded consumers from gas and electricity price rises early, ranks third with €53.6billion euros allocated so far, representing 2.2 percent of its GDP.

Spending to continue rising
EU countries have now put up €314billion so far since September 2021, according to Bruegel.

“This number is set to increase as energy prices remain elevated,” Simone Tagliapietra, a senior fellow at Bruegel, told AFP.

The energy bills of a typical European family could reach €500 per month early next year, compared to €160 in 2021, according to US investment bank Goldman Sachs.

The measures to help consumers have ranged from a special tax on excess profits in Italy, to the energy price freeze in France, and subsidies public transport in Germany.

But the spending follows a pandemic response that increased public debt, which in the first quarter accounted for 189 percent of Greece’s GDP, 153 percent in Italy, 127 percent in Portugal, 118 percent in Spain and 114 percent in France.

“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” Tagliapietra said.

“This is clearly not sustainable from a public finance perspective. It is important that governments make an effort to focus this action on the most vulnerable households and businesses as much as possible.”

Budget reform
The higher spending comes as borrowing costs are rising. The European Central Bank hiked its rate for the first time in more than a decade in July to combat runaway inflation, which has been fuelled by soaring energy prices.

The yield on 10-year French sovereign bonds reached an eight-year high of 2.5 percent on Tuesday, while Germany now pays 1.8 percent interest after boasting a negative rate at the start of the year.

The rate charged to Italy has quadrupled from one percent earlier this year to four percent now, reviving the spectre of the debt crisis that threatened the eurozone a decade ago.

“It is critical to avoid debt crises that could have large destabilising effects and put the EU itself at risk,” the International Monetary Fund warned in a recent blog calling for reforms to budget rules.

The EU has suspended until 2023 rules that limit the public deficit of countries to three percent of GDP and debt to 60 percent.

The European Commission plans to present next month proposals to reform the 27-nation bloc’s budget rules, which have been shattered by the crises.

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