They have not yet taken office - nor even been nominated, yet the new Commissioners have already face a list of demands from some of the European Union's leading thinkers. The Bruegel Report issues memos to the new Commission and makes interesting reading. I highlight some of the demands to the prospective Commissioners for Financial Services, Internal Market, Industry and Competition - the four portfolios, in my opinion most likely to go to a UK nomination (I have since ruled out Trade or Environment).
Memo to Financial Services Commissioner
Public institutions necessary to make a single EU financial system sustainable should be created. Many considered that such a system could look after itself with regulation and supervision being secondary issues. Effective supervision cannot be neglected and the EU must choose between an abandonment of a single EU financial system or the build up of institutions to suit financial integration.
• Be wary of excessive or poorly conceived regulation which could restrict Europe’s competitiveness and growth potential. Ill thought through reactions to the current financial crisis could hinder recovery.
• Act on both a short and long term agenda. In the short term, comprehensive recapitalisation and restructuring is needed as part of a system-wide approach to fix the banking crisis, either EU wide or across the main continental European countries (as British and Scandinavian countries can be considered autonomous).
• Depending on the severity of the crisis, significant public sector investments into financial institutions may be required. In this case innovative solutions will be needed to prevent massive distortions in the European economy.
• In the long term, for financial stability there must be effective supervision, protection and a capacity to manage future crises. Financial efficiency should also be improved to enhance Europe’s growth potential.
• Financial fairness should be pursued though protection of weaker players in the system which may include consumers, investors or potential competitors to established players.
• Continue, defend and promote financial integration with harmonisation of rules and regulations as well as effective enforcement mechanisms to ensure compliance and implementation.
• Publish ‘a clear vision for the financial system Europe needs’ reflecting the four dimensions previously described and to work to build a consensus for this vision among member states and the public. Over the next six months, a comprehensive Subsidiary review is to be carried out by the Commission’s services.
• You must determine which tasks to be taken from, and given back to member states and which new bodies may be required to carry them out. Partnership with the newly elected European Parliament should be a core tenet of the commissioner’s ambitions.
The Commissioner for Competitions Policy
• Competition policy has developed into a powerful instrument for enforcing a set of consistent rules across Europe.
• The impact and significance of EU competition can be divided into both internal and external dimensions. The former provides a consistent set of rules through a coherent implementation of competition law and spreads the competition culture across Europe. The latter is that Europe speaks with one voice on competition matters to countries such as the US and China.
• Europe has been at the forefront of competition policy and has been referred to as the world’s leading jurisdiction in antitrust matters, but there are major policy challenges ahead that need to be addressed:
• Enforce state aid rules and keep the rules of competition policy intact and firmly enforced in times of economic crisis, particularly in the area of state aid.
• Continue the policy of a ‘more economic approach’ and to focus on markets and consumer benefit in order to preserve competition, not competitors.
• Strengthen the role of efficiencies in merger control when approving or blocking mergers and clarify which dynamic efficiencies are acceptable.
• Strengthen the emphasis on supply side factors in defining relevant antitrust markets or downgrade market definition as an antitrust screening device.
• Protect consumers through effective competition, rather than by direct regulatory intervention and increase coordination
• Broaden and deepen global ties with competition regulators and emerging countries with a view to strengthening competition ties with the authorities of developed countries, especially the US.
The Commissioner for the Single Market
• The current economic crisis presents the biggest test ever to the cohesion of the EU’s single market. The biggest test faced by the Commissioner for the Single Market will be to uphold single market rules and to prevent backsliding by individual member states.
• Existing single-market rules must be strictly enforced and the existing instrument of the single market scoreboard strengthened.
• ‘Business as usual’ is not, on its own a strategy for the single market. The strategy must be comprehensive and clear at the outset to all stakeholders with long term plans explained in detail. The commissioner’s approach should be to refer to the global role of Europe and its single market as a force for good on the global scale.
• A truly integrated market for services in Europe must implemented in the form of the services directive, which although having already been adopted will need to be properly implemented. This directive is a key part of the EU’s economic policy, currently known as the Lisbon Strategy.
• A number of member states, possibly many, are unlikely to have all the rules in place by the end of this year, depriving businesses of a border-free services market. A clear strategy towards these member states should me adopted which helps those with genuine problems, while giving a strict timetable to those who fail to cooperate.
• The EU’s success as a global standard-setter relies primarily on the single market remaining intact and under the current pressure and needs a coordinated approach across its institutions, Commission department. It also needs a common ‘face’ to defend and to promote the single market to external governments and businesses.
• It is proposed that you:
- Coordinate European stakeholders’ efforts to define a global regulatory standard-setting approach for the EU.
- Use the EU’s external standard-setting power as an additional argument to convince EU governments to cooperate.
- Expand the regulatory dialogue with other countries and international institutions.
The Commissioner for Enterprise and Industry Policy
• Avoid the ‘zombification’ of Europe’s economy. Governments may be tempted to encourage or force banks to provide credit to businesses which are not viable in the current form to prevent them from restructuring if that means making significant redundancies. Such action would turn them into ‘zombie banks’ which are insolvent but protected by national authorities and would have similar effects on other businesses.
• You should defend the vision of a European Union leads in frontier innovation, breeds world-class new companies and maintains the prosperity of its citizens. The emphasis should be on creating the right framework conditions for success.
• Ensure that the policy responses to the crisis do not weaken European economic integration. There is a distinct risk that government action will lead to the fragmentation of Europe’s single market which is among the EU’s most valuable but also most fragile assets.
• You should make the restructuring of industries severely damaged by the crisis the main focus of your term. This is a temporary but crucial task as existing policy tools such as competition policy and single market policy may not suffice to meet the challenges given the magnitude of the economic shock.
• You may wish to take a similar approach to Etienne Davignon, you predecessor in the late 1970s and early 1980s when national governments’ support of troubled sectors threatened the common market. The ‘Davignon Plan’, implemented in the 1980s involved accepting governments’ state aid in exchange for coordinated restructuring plans that drastically reduced production capacity.
• A similar approach could now be used in the automotive sector which suffers from structural overcapacity as a result of changing market conditions and has been badly hit by the crisis. Davignon’s approach of joint action by the member states, spearheaded by the Commission could be usefully replicated today.
• Industry specific EU task forces should be formed that would help you to coordinate national governments’ moves and to suggest relevant EU decisions. Such task forces would report to you and if well designed and managed, could play a powerful role providing a shared understanding of industry dynamics and could be a catalyst of joint actions where a fragmentation of policy initiatives is leading to demonstrably inefficient outcomes.