ResEuropa

Greece has a choice. Austerity or Bust

2011-06-30T02:32:00.000-07:00

For Ollie Rehn to get angry, it has to be serious. The mild-mannered European Commissioner for the monetary union lashed out at Germany for saying there should be a Plan B for the Eurozone if Greece fails to implement a €28bn austerity package.

Luckily for Commissioner Rehn, the vote today in the Greek parliament meant that Greece finally commits to doing something serious to tackle a bloated public sector and inefficient tax and revenues service. Today’s vote was a defining moment for Greece and the Eurozone.

Put simply, without austerity measures Greece misses its debt and deficit targets; if the targets are not met, lenders will not make the quarterly aid payments, if those payments are not made then Greece defaults, if Greece defaults then the ensure Eurozone comes under serious pressure. It’s not just the Greeks that are under pressure – but Germany, France – and even the UK, a country outside the Eurozone and not even part of the latest bail-out – are feeling the pressure too. Greece knows what is at stake for its Eurozone partners which is why it has not simply rolled over straight away but rather held out for better terms and supplementary aid measures.

The €120bn bail-out must work – and it can only work if Greece gets its finances in order. The future of the Eurozone is at stake. Forcing Greece out of the single currency is not the solution. It shouldn’t even be an option. Greece will get some benefit in the long term of a devalued Drachma but there would be turmoil in the meantime. It’s not an option for the Eurozone either. A well-placed source in the Council told me last night that the knock-on effect would be enormous.

Heroes:
David Cameron. The UK Prime Minister got assurances that the European Financial Stability Mechanism will not be used for the bail-out at the European Council last Friday. The UK does not have a veto on how the EFSM is used – even though it has contributed 15% of the fund. However Cameron must be hoping that his decision to walk away from the Greek bail-out doesn’t haunt him. A Greek sovereign default could provide a whole new set of problems for the City of London.

José Manuel Barroso. The Commission President has sweetened the pill with EU structural funds – and done so without raising new money. Only a quarter of the €20bn funds allocated to Greece for the period 2007-2013 has been spent which means there is plenty of EU funds for the next 2 years. He has also pledged money to fund an upgrade of the country’s tax IT infrastructure. Despite criticism that this smacks of nation-building for a third-world country, this initiative is a smart move.

Villains: Antonis Samaris. The Centre-Right party leaders were right to round on Greek opposition leader Antonis Samaris last week. He shouldn’t be playing petty political games.

Angela Merckel: The German Chancellor gets a mention for “kicking the can down the road”. The second bail-out could have been avoided if Germany had forced Greece to take action earlier.

Neither a hero nor a villain in this story, Ollie Rehn is more like a referee between Greece and other Member States. The last time anyone saw Ollie angry was when my colleague, Tobias played against him in Sweden-Finland football game and he was unfairly tackled. Mr Rehn is clearly a big believer in fair play which is good news for all the members of the Eurozone that he needs to keep on-side.

Barroso Push on Europe2020 Agenda

2011-02-18T09:30:00.000-08:00

The European Commission President José Manuel Barroso was in London yesterday to meet with British Prime Minister David Cameron in a bid to shore up support for his flagship Europe 2020 strategy.

Mr Barroso is personally spearheading the drive to ensure Member States implement the numerous recommendations laid out in the strategy. Europe 2020 is a successor to the Lisbon Strategy on jobs and growth and is designed to ensure that Europe can compete with emerging economies such as China, India, Brazil and Russia. Inevitably, the strategy is laden with targets for improving productivity, competitiveness, education and skills, both at an EU level and at national level.

This is starting to ruffle feathers in London where Ministers are starting to realize just how intrusive the targets can be. At a Council meeting on Finance Ministers in Brussels on Tuesday, UK Chancellor, George Osborne signalled that the European Union had no place in setting targets for reducing early drop out rates in British schools. Europe 2020 sets a European-wide target of reducing early-school leaving at 10% or less and will publish an action plan next week. The new UK Government is averse to target-setting at the best of times but to have them imposed from Brussels must be especially galling.

However, the UK along with the 26 other Member States, have signed up to the Europe 2020 strategy and can’t cherry-pick the targets they would find easy to meet, as much as they would like to. The EU has no competence in national schools policy and even though a single market is beginning to develop in European universities, the EU has a limited role in higher education too. Nevertheless, Europe2020 is unapologetically focused on education and skills. The competitiveness challenge will only get worse if standards in skills and education are not raised.

The scale of the challenge is considerable. Europe suffers from a massive skills shortage which stems from under-performing schools. In 2009 more than six million young people, 14.4% of all 18 to 24 year olds, left education and training with only secondary school qualifications or even no qualifications at all.

The European Commission wants to have by 2020 at least 90% of young Europeans completing upper secondary school. Europe2020 even has targets for toddlers. Europe’s education ministers have agreed to target that 95% of four year-olds should have access to pre-school education.

Europe is also poor at importing skills. Almost 70 million migrants (about 43% of the world’s total) come to Europe but highly skilled foreign workers account for only 1.7% of all workers in the EU, compared to 9.9% in Australia, 7.3% in Canada and 3.5% in the United States.

Europe2020 sets targets for increases in employment levels also. Employment rates in the working age population should increase from 69% to at least 75%. Of course, this would require growth in the economy – and here too the Europe2020 strategy sets out some priorities for measures that support growth in sectors such as digital communications and renewable energy. In turn, investment in research and development of new technologies is required to reach at least 3% of GDP.

Signing up to these general policy aspirations was easy – who doesn’t want to see employment levels increase or educational standards rise? However, things are starting to get tricky now that national reform programmes, based on the 2020 guidelines, have to be drawn up and “political warnings” issued if progress in structural reforms too slow.

Any Europe-wide strategy for competitiveness and growth will only work if there is continuous political will and on-going peer-pressure. Some of the targets – such as reducing the number of people living below the national poverty lines by 25% and lifting 20million people out of poverty, are very ambitious and may be quietly dropped. However, the Commission will still need to focus on the targets that can be achieved if it improves competitiveness prosperity in the EU.

Political will is difficult to maintain. Already some member states are diverting funds away from R&D as massive budget cuts force governments to make some painful decisions. Commission President Barroso will have to keep up the pressure on national leaders like David Cameron, to stop the Europe2020 project from de-railing and going the same way as its doomed predecessor, the Lisbon strategy.

Human Rights in Europe - Where does the UK stand?

2011-02-11T09:29:00.000-08:00

“IT’S UP EURS”, says today’s Sun Newspaper. The headline in the Daily Express is “BRITAIN IN THE EU: THIS MUST BE THE END”. The Daily Mail’s front page reads; “DAY WE STOOD UP TO EUROPE”.

Its not uncommon of course for the media in the UK to confuse anything “European” with the European Union. Whether it is the Council of Europe, the European Council, the European Courts of Justice or the European Court of Human Rights, they are all “Eurocrats” who can over-ride the UK’s national interests. Of course, serious matters of sovereignty are raised when reporting on any supra-national issue but the media could be more careful about apportioning blame.

The UK Parliament last night kept a ban on the rights of prisoners to the vote despite a ruling from the European Court of Human Rights. It was immediately hailed in the press as a victory against Europe, with implications even for the UK’s membership of the EU – even though the European Court of Human Rights is not an EU institution. European Commission officials can only despair of news reports in the UK which mislead the public on the EU.

Members of Parliament voted overwhelmingly to adopt a backbencher’s motion which calls on the Government to oppose the granting of democratic rights to convicted prisoners. However, it would only be fair to say that the UK government was never instructed to give all prisoners a vote – the ECHR had said that a blanket ban on prisoner votes was incompatible with the European Convention on Human Rights.

The UK Attorney General, Dominic Grieve has acknowledged this and believes that the UK could comply with the most minimum application of voting rights – perhaps for those on sentences of less than four years. He has said that the UK would be in breach of the “rule of law” if it simply ignored rulings from the court. For a country that is a big believer in the rule of law, simply rejecting the rulings is not an option.

The question is: should the UK leave the European Convention on Human Rights and have instead a supreme court in the UK which interprets a Bill of Rights. UK centre-right think-tank, the Policy Exchange, this week issued a timely report on the UK and ECHR jurisdiction which argued that the UK could withdraw from the ECHR’s jurisdiction and quit the European Convention which the UK signed 60 years ago.

The author of the report, Dr Michael Pinto-Duchinsky, believes that mission-creep has meant the court has gone beyond protecting human rights and instead is influencing policy by issuing increasingly eccentric judgements. He also points to the lack of experience of the Courts judgements and a backlog of cases that would take 46 years to clear.

Dr Pinto-Duchinsky believes that withdrawal would not affect UK membership of the EU. However, if the UK does leave the jurisdiction of the ECHR, will there be pressure on the government from human rights groups to sign up to the European Union’s own human rights rules?

In 2007 the UK opted-out from the European Union’s Charter of Fundamental Rights.

An intergovernmental conference in 2007 made the Charter legally binding without incorporating the text into Lisbon Treaty. Nevertheless, the Charter contains no new rights beyond what is covered by the Convention.

The effect of the opt-out protocol will essentially be that the charter cannot be used to challenge current UK legislation in the courts or to introduce new rights in UK law. One argument for the opt-out was that it was unnecessary given that the UK, like all other EU member states was already a signatory to the European Convention of Human Rights which is much more binding. But for how much longer? The United Kingdom has traditionally been a standard-bearer for human rights but withdrawing from international and EU treaties on human rights could damage that much-cherished reputation.

EU Structural and Cohesion Funds need root and branch reform

2011-01-28T06:50:00.000-08:00

Members of the European Parliament are refusing to approve the EU’s 2009 accounts because of irregularities in the way structural funds have been spent by Member States. The European Parliament’s Budgetary Control Committee this week demanded assurances from the European Commission that action will be taken against those EU countries that have mismanaged EU money before it agrees to “sign off” the accounts. Since the European Parliament is the so-called “discharge authority”, effectively relieving the Commission of its management responsibilities for the 2009 budget, this is no idle threat.

It is a novel idea to many, but the European Parliament is assuming the role of a scrupulous auditor and that has set it on a collision course with both the European Council and the European Commission. It’s not the first time that the Parliament has threatened to block the discharge. In 2008, a third of paid-out EU funds were declared as not having been managed according to European Commission rules. However this latest “bras-de-fer” is more likely to force the Commission to take much tougher action. If it does not - and the administering of structural funds continues unreformed - then the whole funding system could un-ravel.

The cohesion and structural fund system of the EU is vast. Designed to aid the poorest regions and sectors of Europe, the funds make up 35% of the EU's annual €130 billion budget. There is some evidence that they do have the effect of protecting the most vulnerable regions in Europe. However, what are we to make of an Elton John concert in Italy funded from structural funds to the tune of €1m and a Slovakia local soccer team funded by €600,000 earmarked for integrating the Roma community? Clearly there is abuse and it is widespread. It reflects badly on the EU which is invariably blamed for misspending rather than the Member State. It’s true that 80% of structural funds are jointly managed by the European Commission and Member State authorities but, in reality, the Commission has very few resources to monitor EU spending on national projects and initiatives. For the little credit the European Commission gets for projects that work and are well-run, they attract much more criticism for a culture of corruption and mismanagement that is seemingly beyond its control.

Would it be in the EU’s interest then to repatriate structural funding to the Member States? The Commission has jealously guarded its spending powers – but at what price? It takes the blame when it is not being tough enough with Member States where spending controls have been lax – and yet when it does take action, it only sours relations with the Member States. It’s a lose-lose situation.

Back in 2003, the then UK Chancellor of the Exchequer, Gordon Brown raised the prospect of “repatriating” structural funds. He believed the policy would be in line with the principle of subsidiarity – under which decisions are devolved to member states where possible. However, the idea was quickly dropped. The UK went onto agree a settlement of €308bn for structural funds for the period 2007-13, €9.4bn of which went to the UK.

It was recognised that for all its faults, structural funding was still important for the single market to function. Its aim is to correct economic imbalances between the wealthiest and poorest regions in Europe by funding job creation schemes in areas hit by industrial decline. It is arguably now even more important to have more cohesion in the EU in order to save the single currency from being vulnerable to further shocks.

However, the failings of the EU funding regime are too serious and too many to ignore. The whole system needs re-calibrating. The Centre for European Policy Studies has said, “In a climate of austerity, this will be a very serious point. The EU can only defend the structural funds if you can justify them and show that you are not misusing them.”
Of course, a number of Brussels insiders will just dismiss this as an over-reaction. Error rates are on the decline – and the Court of Auditors in November last year concluded that in most policy areas, over 95% of payments in 2009 were made correctly. However, MEPs have said that this is an unrepresentative sample of mostly small northern countries.

The Parliament wants Member States to provide assurances that adequate controls are in place but only four countries – Denmark, the UK, the Netherlands and Sweden – have agreed to submit any national management declarations. MEPs are hoping that the Commission will apply further pressure on Member States while they hold out from signing off the 2009 accounts. The Commission is trying to make the case for salvaging most of the structural funds for the next spending round 2013-2020 and MEPs playing hard-ball over the discharge does not help. Or perhaps it could be a blessing in disguise for the Commission: A chance for root and branch reform of structural funding? The huge regional disparities in the single market and in the Eurozone do require public investment programmes that generate local growth in areas abandoned by the private sector but the structural fund system is failing to meet the challenge – and is becoming more of a burden to the European Commission.

David Cameron's Eurosceptic Headache

2011-01-17T05:56:00.000-08:00

The UK Prime Minister, David Cameron, this week faced down a rebellion from back-bench Conservative MPs over Europe. Even after Europe minister David Liddington promised to make last-minute changes to toughen up the European Union (Referendum Lock) Bill, 27 MPs voted against it for not being tough enough on EU sovereignty.
The Bill aims to strengthen the UK procedures for agreeing to or ratifying certain EU decisions and Treaty changes, by providing for a referendum throughout the United Kingdom on any proposed EU treaty or Treaty change which would transfer powers from the UK to the EU.

It's not the first time in his premiership that Mr Cameron has faced a rebellion on Europe: Last year, 37 Tory MPs broke the government line to demand a cut in the EU budget. The question is why David Cameron decided to re-open a Pandora's box when it was entirely avoidable and when the Bill has almost no effect on the relationship between the UK and the EU in any case.

The British Government was keen to play up the significance of the Bill. Foreign secretary, William Hague said at the weekend the plans were "the strongest defence of national democracy put in place anywhere in Europe", and “a massive advance for national democracy”. David Cameron told BBC Radio 5 live on Sunday that “we will make sure that if politicians try to take powers from Westminster to Brussels you, the British people, will be given a referendum". But do the Bill's ambitions match the hyperbole?

The purpose of the Referendum Lock Bill was to ensure that governments abide by promises made to hold referendums on EU Treaty changes. Yet, the government would still in effect have the last word on whether a referendum would be needed. This Bill is not binding on furture parliaments and governments and EU law would still keep its supremacy over UK law. European Court of Justice rulings would still be applicable to the implentation of EU law in the UK.

No wonder then the eurosceptics are not happy. In any event, the Bill misses the point. Many Conservative Party MPs and members were never interested in so-called safeguards against more competences for the EU: they were settled on nothing less than repatriation of large amounts of policy-making from Brussels to London. However, a coaltion with pro-European Liberal Democrats has prevented Mr Cameron from pursuing repatriation of powers. And by refusing to concede to any of the euro-sceptic amendments he has ended up in a position of defending a Bill that was designed to appease his rank and file over Europe but which has only infuriated his euroscpetic members.

One such disgruntled euro-sceptic is Douglas Carswell MP, who wrote on his blog that "This bogus EU Bill is no substitute for the referendum we were promised." He continues to say that “… this Bill will do absolutely zip to halt the European commission proposals being cooked up right now in Brussels, which are to give Eurocrats a direct say over the formation of economic policy in Euro zone, and non-Euro zone countries alike.”

In a nod to his eurosceptics, Mr Cameron was quick to say this week - when French Prime Minister Francois Fillon came to visit - that the UK would take no part in any harmonisation of economic or social policy that may come about in order to support the beleagured single currency.

M. Francois Fillon said, "I've asked the UK to look at the arguments for harmonisation in a favourable light." He added: "I'm not asking the UK to join the eurozone ... [the] British want to remain British". "The question is: is the UK ready to accept or encourage greater integration of the eurozone or is the UK distrustful of that and will it create obstacles and make it more difficult to happen?"

M. Fillon was relieved to hear that Mr Cameron back more social and economic harmonisation for Eurozone countries. But it remains to be seen whether his eurosceptics will be satisfied with his insistence that the UK will not be drawn into new economic governance measures.

The EU Bill has let the genie out of the bottle. This was the week that saw the return of the eurosceptics. And Mr Cameron may need to start thinking of ways of keeping them on board without upsetting his coalition partners. An almost impossible task.

What 2011 has in store for the European Union

2011-01-07T10:07:00.001-08:00

In Paris, British Chancellor George Osborne warns other EU Member States to follow the UK’s example of implementing austere spending cuts to tackle Europe’s deficit problem; In Budapest, the European Commission President berates the Hungarian Government over controversial new media restrictions; In Tallinn, Estonian shoppers are getting used to the Euro which has just replaced the national currency, the Kroon.

So begins the New Year for the European Union. After a miserable 2010, Brussels is hoping for a more successful 2011. There are some promising signs. Estonia has just become the 17th member state to adopt the Euro and the switchover on New Years’ day went smoothly; the new EU financial supervisory advisory bodies are now in operation and the EU’s diplomatic service, the External Action Service is now up and running.

However, the Hungarian Presidency of the European Council has got off to a poor start. The Commission President, Jose Manuel Barroso is in Budapest today where he will raise concerns over new media laws that the OSCE believe gives Viktor Orban and his government sweeping powers to restrict press freedom. The new Hungarian government has also introduced new taxes for foreign firms – mainly German - and a new citizenship law that allows ethnic Hungarians in Slovakia to get a Hungarian passport.

It is not yet clear whether the new media laws, which include forcing journalists to reveal their sources and imposing heavy fines on newspapers for “offending human dignity”, contravene European law but the international criticism has forced the Commission President to put pressure on Budapest. The Hungarians – a relatively new member of the EU – have only just got used to interference from the European Commission. What is new and seemingly even more offensive is the criticism from other Member States in their domestic affairs. On Tuesday 4 January, France, Germany and the UK openly criticised the media law saying it is “incompatible” with European press freedoms. Peer pressure in the EU is not new but direct and public interventions like this is a new departure for Member States and we should expect to see more of it during the course of 2011.

Prime Minister Orban admits that the criticism over the media law, foreign taxes and new citizenship rights for ethnic Hungarians has over-shadowed the start of the Hungarian Presidency but this should not cause any embarrassment for the EU. The rotating presidencies are over-rated – they last just six months, inherit a pre-existing agenda and have no executive powers. Post-Lisbon, it cannot claim to preside over the EU when a new Council President has been appointed on a more permanent basis.

What matters most to the success or otherwise of the EU is not so much the behaviour of the rotating President of the European Council but the political dynamics between the big Member States – in particular the Big 3 – Germany, the UK and France.

George Osborne’s message to G20 counter-parts meeting in Paris on Thursday 6th January has rankled with some EU Member States. To some, Mr Osborne’s warning to Eurozone members that they need to following the UK’s lead and introduce swingeing spending cuts, sounded like hectoring and was reminiscent of the tone that Gordon Brown had taken when he was Chancellor of the Exchequer. However what was most telling was Mr Osborne’s line about the Eurozone needing to adopt more economic governance measures to support the Euro (even if he did not put it in those words). Is this a sign that the UK is not just relaxed about a two-speed Europe but actively willing it? Maybe his advice is sincere. Eitherway, I predict that the UK will have a demonstrably more arms-length relationship with the EU in 2011 even if it means losing influence and its position as one of the leading three member states.

Other predictions for 2011? Well looking at the Commission’s work programme, it will be a busy year for the Internal Market Commissioner Michel Barnier. He will be driving forward new regulations for Credit Rating Agencies, a new framework for bank crisis management, applying new bank stress tests, amending capital requirement directives, reviewing the Market Abuse directive and more besides. Watch out too for a new initiative on the posting of workers and another revision of Working Time rules. There will be proposals for Smart Borders to set up an entry / exit system for immigration control. There will be new rules on EU procurement, a new 10 year plan for transport, new measures on economic governance and, of course, a settlement on the next round of EU spending 2013 – 2020.

It is a heavy regulatory agenda and will force Member State governments to make some of the far-reaching decisions which they have managed to avoid in 2010.

The big policy themes for 2011 will be closer economic convergence, better scrutiny of EU spending and even a direct EU tax – just what the EU needs to make itself popular! Well, of course, it depends on who will be taxed. Besides, there will be a few populist measures aimed at making the consumers life a little easier. 2011 might not be the year when everyone starts to love the EU but it might be the year it is disliked a little bit less. Let’s see how the year ends but the start of the year suggests it’s not quite going to be business as usual.

Bail-outs and Budgets: The Big Three leading Europe

2010-12-18T03:21:00.000-08:00

European leaders are hoping that just two sentences to be added to the Treaty will be enough to put an end to the on-going crisis that has plagued the Eurozone in 2010. EU Heads of State reached an agreement yesterday in the Justus Lipsius building in Brussels on a permanent mechanism for bailing-out stressed Euro-zone countries.

Germany succeeded in ensuring that the mechanism was only used in extremis. However, it failed to make it a condition that it is activated only as a last resort – an important distinction given Chancellor Merkel’s nervousness about the treaty change.

“The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality” ; – the Eurozone is counting on these two sentences to deal with the single currency’s inherent flaws. It was Germany – with the support of France – that nailed an agreement where others failed. The Italy-Luxembourg proposal for Europe-wide bonds was dismissed as was the Belgian proposal to increase the £440bn fund to buy bonds from at-risk countries.

The European Stability Mechanism will replace the European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM) in 2013. The UK also got what it wanted. The Council agreed to limit explicitly the application of the ESM to Eurozone countries – to reassure UK Prime Minister David Cameron that the UK would not be sucked into any bail-out obligations.

Mr Cameron is having a good summit. He has guaranteed the UK won’t be part of the Eurozone stability mechanism. He has had more mixed results in his other battle to avoid any increase in the EU budget. The UK has agreed to the increase for 2011 to be kept under 3% without giving MEPs anything in return for backing down over demands for a 6% increase. However, Mr Cameron had gone into budget negotiations with the intention for a freeze on the budget.

The European Parliament on 15th December backed down on its demands to have a greater role in the post 2013 multi-annual budget negotiations in return for a limited increase to the 2011 budget. It has been a humiliating end to 2010 for the European Parliament since winning new powers under the Lisbon Treaty 12 months ago. The Council position – held together by the UK and Germany – took the European Parliament to the brink. The alternative would have been a 2011 budget being approved on a month to month basis. The Parliament finally acknowledged the troubles this would bring.

Mr Cameron is reported to have struck a deal last night with Germany and France on the 2013-2020 budgets which would in effect bring about a real-term freeze in EU spending. The acquiescence of the French suggests that this deal would most likely affect the EU cohesion funds which disproportionately affect the Member States in Central and Eastern Europe. Poland will lead the backlash against the deal, if it transpires, given that it is a large beneficiary of cohesion funds. The French will have insisted on ring-fencing agricultural funds. France has been a long-term defender of the Common Agricultural Policy and this time the Germans are supporting them. Germany had recently signed a joint declaration with France calling for a strong CAP.

The UK would get to keep its rebate as part of the deal. France and the UK would be the winners; Poland and her East European neighbours the big losers. This is a scenario that ResEuropa had floated a few weeks ago and while there is no confirmation of the deal, reports in today’s press suggest it could well be on the cards. David Cameron will need to be careful to explain why he is not pressing for reductions in CAP rather than the cohesion funds.

The EU big three have out-foxed the Commission President Mr Barroso who will want to see cohesion funding kept in tact since this funding is regarded as European solidarity in action.

Time will tell whether this summit has marked the start of a powerful axis of UK, France and Germany – or whether it was just the easy thing for Mr Cameron to do since he will not have the appetite to deal with yet more calls to give up the UK rebate. I suspect that this new alliance won’t last for long: It was a minor miracle that the France and Germany could agree on the stability mechanism. Nevertheless this week demonstrates that, even if only for now, the big three are in the driving seat. What both the agreement on the budget and on the stability mechanism show is that when it comes to Europe, Mr Cameron and his coalition government will do almost anything for a quiet life.

Hungary sets out its ambitious EU Presidency Priorities

2010-12-10T09:09:00.000-08:00

The Hungarian Government has published its priorities for the Presidency of the European Union – and they have in mind a very political Presidency with a rather ambitious programme for the next six months.

This is the first time Hungary has held the rotating Presidency position since it became an EU member six years ago and Budapest is determined to make it a success. With the help of Spain and Belgium, both of which were Presidency office-holders in 2010, Hungary has put in a lot of planning and preparation for their big break on the European stage.

Hungary is the eager new kid, showing signs of impatience with the lack of any real progress made by the Council over the last 12 months. In the first half of 2010, Spain was distracted by the fall-out of the financial crisis – and tried to run the Presidency from Madrid rather than send civil servants en masse to Brussels. Belgian civil servants didn’t need to leave home for their Presidency during the second half of 2010 but they had no Government in place to report back to. So while it may not have been an annus horribilis for the EU (it has had worse years), 2010 has been a little pedestrian as far as policy achievements are concerned. Without Mr. Herman van Rompuy at the helm, it would have been hopelessly directionless. The dynamic Hungarians hope to change all that.

While Presidencies are required to push the European interest, they inevitably reflect the national priorities of the office-holder. Hungary will be no exception. The priorities reveal a particular emphasis on issues that have pre-occupied them at home in the hope that there will be a European solution where national measures have failed.

Security of energy supply, the environment, and ethnic minorities and immigration are big priorities for Hungary.

Hungary is vulnerable to severe gas supply disruptions and so will use the opportunity of the EU Presidency to score some quick wins on security of supply. Budapest wants the EU to establish a truly common energy market and has scheduled a special Council meeting on energy on 4 February.

The toxic chemical mudslide which emanated from the Ajka resevoir in western Hungary in October and polluted the Danube river affected 5 European countries. The Hungarians see this as a cross-border issue that requires EU leadership and have prioritised progress for an EU Strategy on the Danube as well as a wider EU water policy.

Hungary has been criticised for the treatment of Roma and the country was offended when France sent hundreds of Roma back to Central Europe. The EU Presidency will include new initiatives to ensure better integration of migrants. Similarly, immigration into the EU – and within the EU - is high on the agenda. Hungary promises a better migrant flow management and will want to secure the accession of Romania and Bulgaria to the Schengen system of free movement. Hungary is also strongly in favour of Turkish membership of the EU and this will set it on a collision course again with France and Austria, which are resolutely against the idea of Turkish membership.

The draft Presidency programme has some very lofty ambitions. The priorities of jobs and growth will be the most pressing on the EU agenda. There will be some tough negotiations on the macroeconomic surveillance mechanism and on European economic governance. The Hungarian Presidency will start on the actual implementation of the EU 2020 strategy. They will work on the Single Market Act in the hope of stimulating job creation and growth through new legislation on taxation, counterfeiting and a revision of the Small Business Act. They will also hope to secure a deal on legislation for a common European patent which has dogged the Belgian Presidency. It will be up to the Hungarians also to make a success of the European External Action Service – the EU diplomatic corps - which has suffered teething problems over the last 12 months.

Hungary also wants to salvage something from the wreckage of the Copenhagen summit on climate change last year. The low key Cancun negotiations are flagging and the China-US bilateral talks have squeezed out the EU as a driving force on climate change policy.

Regardless of its grand ambitions, Hungary will have to prove it is a steady pair of hands and that it can be trusted to steer the EU’s 27 member states through some very difficult decisions. The signs are that it will not be so compromising. At a time when views are deeply polarised on the size of the EU budget, the Hungarians seem indifferent to the austerity pressures to EU spending from the UK and Germany. Speaking earlier this week at the London School of Economics the Hungarian Foreign Ministry Janos Martonuyi said, "I don't think it is time to discuss about percentages and figures. First let's discuss policies, let's discuss substance, and thereafter of course we can look into the financial resources and the possible [...] ceilings or caps as far as the financing of individual policies is concerned," He wasn’t speaking on behalf of the Council, of course, but nevertheless, Mr Martonuyi and his government colleagues will soon have to learn the difference between what Hungary can do in its national interest and its role in leading the European interest.

In Defence of Rompuy-Pompuy

2010-12-10T09:07:00.000-08:00

It’s been a full year since Herman Van Rompuy started his term as President of the European Council. On 19 November 2009, Van Rompuy was chosen unanimously by the European Council, at an informal meeting in Brussels. He took office on 1st December 2009 – the day the Lisbon Treaty came into force – and his term runs until 31st May 2012. He has spent his first twelve months trying to carve out a distinctive role for himself – not easy when the Commission President Jose Barroso is on his second term - and demonstrates his experience with such a strong command of the EU’s internal affairs. And as he tries to present himself to the world as the EU’s international statesman, he is constrained by the so-called High Representative, Baroness Cathy Ashton, who represents both the Commission and the Council to the world. It is no wonder Mr Rompuy is already being written off as a lame duck President. His task looks impossible.

And yet, despite these limitations and against all the odds, Mr Rompuy is making his mark. The best way to judge his record is to measure his achievements against the expectations of the treaty that created him. The European Parliament will (and does) exploit the opportunities that the Treaty presents to them and the European Commission is pleased with a smoother decision-making system that was promised to them, it is the European Council – representing 27 Member States governments – that needs to prove more than most that the Lisbon Treaty does what it says on the tin; namely create better conditions for inter-governmental co-ordination, traditionally a weak-spot under the 6 month rotating presidency system. If Mr Van Rompuy can co-ordinate the Council and reconcile the national interests of 27 different governments, then he will have done not just what the Treaty requires him to do, but also prove to us that the Treaty can get the EU motoring again, particularly at a time of financial crisis and a mounting pressure of protectionism.

On Mr van Rompuy’s elevation, he was ridiculed in the British press as a non-entity. While some had been expecting a figure with an established international status, like Tony Blair – some-one who could stop the traffic; Mr Rompuy, they said would find it difficult to hail a cab. UKIP MEP Nigel Farage MEP caused a storm when he told Mr Rompuy that he had “all the charisma of a damp rag and the appearance of a low-grade bank clerk". The Sun newspaper simply called him Rompuy Pompuy.

The tensions between the two European Presidents are often clear enough. In most cases, the territory that has been carved out between them, is unambiguous. The Council President represents the EU abroad in foreign policy and security matters. The Commission President takes the lead role in climate change. But on energy policy, which is both a security and commission policy area, they have to agree between them who will take the floor. Both Mr Van Rompuy and Mr Barroso were present at the G8 and G20 meetings.

The Lisbon treaty was supposed to have resolved the old question of Henry Kissinger's – “when I want to phone the EU, whom do I call?” The answer wasn’t clear to President Obama as he stood between Mr Van Rompuy and Mr Barroso for the official photo-call at the EU-US Summit in Lisbon on 21st November. But the EU is (for good reason) complex and it would be disingenuous to pretend that it can be led by one person alone.

To even try and answer Mr Kissinger’s question is to ignore the dynamics between the EU institutions. These dynamics have changed a lot in the 12 months, post-Lisbon. The Council’s position vis-à-vis the Commission is stronger but it still relies heavily on the Commission. Mr van Rompuy led a task-force to propose ways of strengthening economic governance for Eurozone members – something that the Commission would normally feel responsible for. The Commission, in response pressed ahead with its own proposals, because it feared that the Council’s measures would be half-hearted. In reality, Mr Rompuy knew he would need to rely on the Commission to initiate new legislation. While this caused some friction between the two institutions, it served to demonstrate that the Council is willing to be pro-active when it needs to be. It did so again last month when the Commission was told to go back to the drawing board over its budget plans. The Council, led by Mr Van Rompuy, made it clear who was running the show.

It has taken President Barroso some time to adjust to the new power-sharing arrangements but he is now thinking more creatively about how he could work with Mr Rompuy to get what he wants from member state leaders. He also needs Mr Rompuy to help him deal with a European Parliament which has become much more strident and demanding after being bestowed with a wider scope of competences under the Lisbon Treaty. MEPs are becoming frustrated with an increasingly cautious Commission. As long as this directs their fire towards President Barosso, then President Van Rompuy is safe.

The Lisbon Treaty has changed the power landscape of the EU in just the last twelve months – and it is to Mr Van Rompuy’s credit that he has not become a victim of it. Instead, he has put the Council back in the game – at a time when neither Germany nor France are providing any effective leadership to the EU. And while he may have ruffled some feathers over at the Commission, he is credited for the way he has deftly handled any inter-institutional fall-outs. MEPs admire the way he has insisted on taking the European interest; something that had been missing at the Council which had normally followed the national interests of its most powerful members. Of course, Mr Van Rompuy has not been perfect. His low profile does not nearly match the importance of his position and he can do more to show he is a safe pair of hands (for instance, instead of adding to the sense of alarm and despair of the Euro-crisis by saying that the entire EU will disintegrate if the Euro fails, he should have kept a cool head and looked beyond the short term troubles). He is after all, supposed to provide the EU with a long term perspective – an important part of the equation when member state governments will always have an eye on the next election. The Lisbon Treaty’s objective for the President of the European Council was for some-one to provide strategy and stability. He needs still to demonstrate he can fulfill these goals. But the Lisbon Treaty is already proving to be the life-line that the EU needed. And President van Rompuy can certainly take some well-earned credit for that.

The Euro: Why we are all in it together

2010-11-26T06:03:00.000-08:00

The European bail-out package for the Irish economy this week seems to have failed in its ultimate objective of containing the threat to the Euro. The buzz-word in Brussels is “contagion” and some serious commentators believe that a full-blown currency crisis is now unavoidable as the markets, having done their worst to Greece and Ireland, now turn on Portugal, Belgium and even Spain. Such widespread contagion in the Eurozone could make the single currency unsustainable and the Euro, as we know it, would not survive another two years.

The unthinkable could still happen. The Euro could disintegrate under the relentless pressure of the markets – its weaknesses now so ruthlessly exposed. However, Germany will not allow it – and so long as Germany will shore up the single currency, the Euro will survive.

And yet, Germany has some responsibility for the latest contagion threat. Chancellor Angela Merkel insisted on a permanent crisis mechanism that included provisions for an “adequate participation of private creditors” - meaning future rescue packages might involve a write-down of existing debt – increasing the risk for private bond investors.

This only served to spook the markets, leading to increased borrowing costs for weaker Euro-zone markets. The German government faces increasing pressure to drop the idea and instead extend the European Financial Stability Facility (EFSF) beyond 2013. A permanent rescue and resolution mechanism would provide stability and good governance for the Eurozone.

The Achilles heel of the Euro has been the “no bail-out” clause of the Eurozone’s stability and growth pact – something that the German Finance Minister, Wolfgang Schäuble acknowledged in a speech in Berlin on 5th November. He said that Europeans could not see how far financial integration would go when the no bail-out clause was signed. UK Chancellor, George Osborne’s decision to a bilateral loan to Ireland demonstrated the extent of the exposure of UK banks to the Irish economy. So, the UK – a non-Eurozone country – is as financially integrated to Euro-zone economies as Eurozone countries are to each other. Euro or no Euro, financial integration is now so advanced that contagion is a threat to weak markets in or out-with the single currency area. As David Cameron is fond of saying in these difficult times, we are all in this together.

While it is true to say that Ireland has been constrained by the Euro and the European Central Bank in how it can adjust to worsening economic conditions, it was never the Euro that brought the country to its knees. The mistakes Ireland made were the same as those that ruined Iceland which like the UK is not a member of the Eurozone.

While the reasons for Ireland’s problems differ from Greece, another Eurozone member – the former was guilty of stoking a housing boom and the latter of profligacy and unsustainable indebtedness - they are both guilty of being irresponsible Eurozone members. Germany will want to ensure that Ireland and Greece change their ways. Greece is already winning praise for the way it is introducing new austerity measures. However, Ireland’s budget could go out of the window if – or rather once – a new Government is elected in January.

Reports of the Euro’s death are somewhat premature. The forecast for growth in the Eurozone is higher than it is for non-Euro countries like the UK. It is also worth keeping in mind, the reason for why weaker economies are struggling so much is because the Euro is so strong – and they can’t devalue to become more competitive internationally. Last week, I raised the prospect of a common corporate tax as a consequence of the EU bail-out of the Irish economy. For some, this was a little far fetched – but no more far fetched, I would argue than a complete disintegration of the single currency. The truth is the Euro needs closer economic governance if it is to survive in its current form. If Germany succeeds in putting in place a rescue mechanism, the Euro will survive; if there is closer co-ordination of national economies, the Euro will prosper. As they say; what doesn’t kill you, makes you stronger.

How the Irish Bail-out could mean an EU Business Tax

2010-11-19T10:41:00.000-08:00

Ireland this week finally accepted the offer of an EU bail-out to halt a contagion spreading across the Euro-zone like wild-fire. Spain and Portugal are also vulnerable to a knock on the door from the man at the IMF and all the stops are being pulled to prevent them going the same way as Ireland and Greece. But the crisis does not begin and end with the PIGS (Portugal, Ireland, Greece and Spain). The banking crisis threatens to engulf the entire Eurozone to the point where it could wipe out the ten year old currency.

This is a crisis that is too good to waste. For Europhiles, the bail-outs present a unique opportunity for an unprecedented fiscal convergence and closer co-ordination of tax rates between Member States – the holy grail of the more ardent euro-federalists.

EU Commission officials joined the IMF and the European Central Bank in a fact-finding trip to Ireland this week to work out just how much Ireland needs to borrow to bail out its banks and perhaps even service the public debt which severe austerity measures have failed to correct. The final figure could be around €90bn.
The Irish Government is expected to announce further austerity measures of around €15bn next week and a 2011 austerity budget will be put to the Dail on 7th December. However, the cuts will not be enough to restore confidence. Germany is putting pressure on the Irish to raise its corporation tax, which at 12.5% is much lower than many other EU economies.

For Ireland it is too heavy a price to pay for a bail-out that they have only accepted with great reluctance.

Elmar Brok, a senior CDU Member of the European Parliament told a party congress in Karlsruhe; "Ireland has two options to consolidate its budget – cut expenses even further or increase taxes like the corporate tax rate,"

This is not the helpful budgetary advice it seems. Mr Brok’s concern is not really about how best the Irish Government can raise its income. He, like his political colleagues in Berlin, have long been concerned about the effect that the low rates of corporation tax in Ireland has had on the German economy. Germany has seen companies re-locate to Ireland thanks to highly competitive tax rates.

It is not just Germany that has seen an opportunity to attack Ireland’s corporation tax – but the UK too.

Britain is poised to help in the bail-outs – either bilaterally, or as part of a European mechanism. British banks reportedly have around $150 billion of exposure to Irish debt.

But the UK too has been a victim of the low rates of Irish corporation tax – and would welcome an increase being part of a European bail-out deal.
For its part, Ireland says the corporation tax rate is non-negotiable; not least because it offers the country its best chance to grow its way out of the crisis. The Irish European Minister Dick Roche bluntly told reporters that "it (corporation tax rates) is certainly not up for negotiation.”

This is hyperbole. It is, of course, up for negotiation. The austerity measures have stalled growth in the economy and the Irish need to look at where they can increase tax receipts. Moreover, the EU member states that have lost out to the advantage that Ireland had in attracting corporations to its shores, will insist on it.
Tax competition has been a sacred cow for EU member states. As member states have increasingly harmonised standards to ensure a level playing field in the single market, tax was the only area left where they could really compete with each-other. Outside of Value Added Tax, where minimum levels and exemptions are agreed at EU level, the European Union has very limited competences for tax policy.

This could all change. Although it may seem far-fetched to assume that the financial crisis could lead to a common corporation tax – particularly since it would require unanimity among all Member States, the terms of debate have changed since the bank bail outs. Low corporation taxes are increasingly seen as an unfair advantage -when each Member State’s economy is so intrinsically linked with each-other and fiscal transfers across the Eurozone are seen as a natural response to asymmetric shocks to the Euro. So rather than more protectionism and the disintegration of the Euro, could the banking bail-outs, in fact result in an EU tax policy that sets common rates for all business operating in the single market?

Row over Euro Bailout Scheme could lead to a Treaty Referendum

2010-11-12T04:54:00.000-08:00

Could we get our referendum on the Lisbon Treaty after all? After nine bad-tempered years in the making – and the many contortions of the major political parties to avoid any chance of a referendum, there is again a real prospect of the Treaty being subjected to a popular vote.

And it is not the work of the British Conservatives that has re-opened the debate - but the Germans.

German Chancellor Angela Merkel is determined to make changes to the Lisbon Treaty to factor in a permanent mechanism that would bail out Eurozone countries in trouble - even if it means galvanising the anti-Lisbon lobby into one last push for a referendum.

It’s still not clear whether adding a permanent mechanism to the Treaty would require ratification from each of the 27 Member States. The Commission is hoping that it can be adopted by a “simplified” procedure (invoking Article 48 of the Lisbon Treaty). This procedure allows for the adoption of minor surgical changes.

It is not an option, either, to go ahead with a bailout mechanism without any treaty change at all. Germany has insisted that any bailout mechanism be enshrined into the Treaty - otherwise it would be contested by Germany’s Constitutional Court.

A report from the think tank Bruegel published this week (9 November) says that any mechanism for financial stability will require a broad revision of the EU treaties.

It was at Deauville, before the October Council where Merkel persuaded the French President Nicolas Sarkozy to support her plans for establishing a permanent fund after Germany was exposed to a hefty 100 billion Euros contribution to the Greek bailout.

A permanent rescue mechanism would be activated in a possible future Greece-type scenario, where “the stability of the euro as a whole is under threat”.

Notwithstanding any prospects of Treaty referendums, the whole initiative is at risk from the markets which have so far reacted negatively.

Bond-holders are being asked to bear a greater risk and cost in case of a bailout in order to protect the taxpayer. This in turn would, as the President of the European Central Bank Jean-Claude Trichet fears, drive up borrowing costs for the most indebted countries. Ireland is at risk of going the way of Greece after news this week that its borrowing costs are being ramped up. Nevertheless, Merkel is adamant that the risk does not fall on the taxpayer.

Frau Merkel also wants to introduce tougher sanctions to deter more feckless members of the Eurozone from running large deficits in the first place. This would either be a loss of voting rights or of EU funding.

This did not go down well in Bulgaria the EU’s poorest country. Prime Minsiter Borissov said; "I would support [the proposals], but let's first discuss the mechanism. Imagine that you have a 3.5% or 4% deficit, and the sanctions include freezing of EU funding. The country would not solve its deficit problem: it would sink even deeper"

The new rules would the UK which has opted out of the EU, but the UK would nevertheless support Germany’s attempts to bring greater rigour to Eurozone deficit control.

The next Head of State summit will take place on December 16-17 where it is expected there will be some form of agreement on the whether the Treaty needs to be changed and whether it would need to be ratified again. The Commission on the other hand will deliver its own proposals on new EU budget rules amending the Eurozone’s original Stability and Growth Pact in December.

Berlin believes that all 27 member states, including the UK – and not just the Eurozone countries should be subjected to the new budget deficit regime to give the single market as a whole the stability it needs. Paris, on the other-hand is reluctant for the Eurozone countries to take decisions that would affect all 27 member states.

The bail-out debate has opened a whole pandora’s box of contentious issues and the EU will have to tread carefully if it is to avoid creating a split in the Eurozone between the deficit sinners and the deficit saints. And it is the cohesion of the whole of the European Union – and not just the Eurozone – that is at stake. If the bailout mechanism does trigger a treaty change and even a referendum, the Euro-sceptics will have their chance to strike.

Barnier's Single Market Act - A Defining Moment for the EU?

2010-11-11T07:09:00.000-08:00

Listening to Michel Barnier, the Commissioner for the Internal Market at the European Parliament yesterday, got me thinking. Are we about to witness the start of a new phase in the growth of the single market?

The ambition is big enough. The Commissioner spoke of the proposed Single Market Act as a motor for deeper and closer integration, sweeping away the structural barriers that have frustrated the development of the internal market over the ways. The new Act would re-launch the single market, he said. It would be our best hope for growth – adding 4% to the EU’s GDP annually. It would bring about a realization of a genuine single market in transport and energy, both important growth areas, if they weren’t being hamstrung by national protectionism.

I have no doubt he is right to conclude that market integration will help the economy grow – and help Europe become more competitive globally. But the Vision Thing will require a lot of vested interests being tackled and a lot of sacred cows being slaughtered. For instance, a key component of the Single Market Act is tax co-ordination – sensitive at the best of times. Some Member States, understandably, believe that tax differentials can give them a fair competitive edge against European trading partners – and that it doesn’t stop them from being good members of the internal market.

The Single Market Act could prove to be one of the big landmark events in EU history. But looking at the evidence so far, I’m not so convinced. I’ve seen the Services Directive, which was launched by the Commission to a great fanfare, fizzle and become a shadow of the revolutionary turning point in the single market it was meant to be. Besides the Commission’s workplan for single market measures in 2011 looks particularly lacklustre – a bit more so-called Smart Regulation measures, some new initiatives on debt recovery, a common consolidated corporate tax base, an airports package and maybe something on VAT. Despite the big talk, the Commission is still quite hesitant.
There are nevertheless some big plans for a digital single market which the Belgian minister for Economy and Reform, Mr Vincent van Quickenborne emphasized at the same event in the European Parliament yesterday.

Michel Barnier’s speech on the Single Market Act is not quite up there with Paul Henri Spaak’s address to the European Parliament in June 1961 and the Single Market Act cannot match the defining moments of Jacques Delors’ “Completing the Single Market” White Paper 25 years ago. But perhaps it can be comparable to the 1997 Single Market Action Plan – a programme of objectives to give a boost to a flagging ideal. Of course, it all depends on political will and political leadership. Delors, Mitterand and Kohl – and yes even, Lord Cochfield and Mrs Thatcher, could offer the leadership required in 1985. Tony Blair and Gerhardt Schroeder led the way in 1997; who can give the single market the leadership it needs if it is to go to the next level?

French-British Defence Deal could provide a breakthrough for

2010-11-08T07:31:00.001-08:00

“Sovereignty is not isolationism”; so said French President Sarkozy when he signed a historic agreement with UK Prime Minister on defence co-operation.
The deal between the UK and France aims for quite some far-reaching measures that will pool the defence capabilities of both countries for the next 50 years.

David Cameron was keen also to assure the media that the UK would not be restricted in making strategic defence decisions by pooling resources and capabilities with the French.

Does this new entente cordiale mark a step towards a deeper EU defence policy, or does it in fact create a pragmatic alternative that would in reality preclude any closer EU-level co-operation?

Britain and France are the two largest military spenders in the EU and therefore form the essential pillars of any EU defence ambitions. The two governments account for almost half of all military spending in the EU. However, both have a very different approach to EU defence policy. France, only recently a full member of NATO, have traditionally been enthusiastic about an EU role in defence; the UK have been careful to pick and choose areas for more EU co-operation, preferring to develop a leading role for itself in NATO.

When US Secretary of State, Hilary Clinton came to Brussels last month, she implied that impending cuts to the UK defence budget would only undermine the usefulness of the UK within NATO – and as a military ally of the US. The UK Government, nevertheless, pressed on with stringent cuts to its defence budget.

The Strategic Defence and Security Review (SDSR), which the UK Government issued on 19th October, foresees significant cuts in military capabilities with 8 percent cuts to the defence budget over the next four years
The budget cuts are the main reason for the UK’s decision to enter a pragmatic bilateral relationship with France.

The UK-France deal includes the creation of a joint expedition force, the shared use of aircraft carriers as well as cooperation for the maintenance and spare parts of strategic airlift capabilities. What has been deemed as ‘modest’ combined efforts on the safety and effectiveness of both countries’ nuclear weapons are also part of the deal.

An emergency deployment force will have 5000 service-men and women from each country, with land, sea and air components and with commanders rotating between UK and France.

Some of this makes good practical sense for both parties –. The UK won’t have its second carrier until 2020 but once it does, the French can use it as an alternative to the unreliable “Charles de Gaulle”.

The extent of nuclear cooperation established by the deal underscores the will to retain absolutely independent nuclear capabilities, maintaining mutual secrecy of the strength of the French ‘force de frappe’ vs. the British submarine ballistic missile force.

However, Strategic airlift continues to be a problem for Europe which it is only now dealing with the new Airbus A400M, already late in schedule, set to be delivered only in 2012

A recent centre for European reform paper says that “London must invest the same political energy it has devoted to France towards exploring additional savings with other European countries.
Certainly the SDSR, has opened the possibility of closer defence co-operation with Germany, Italy, the Netherlands and Spain.
The SDSR says that the EU has a role to play in “promoting security and prosperity”.
That the SDSR does not see bilateral co-operation on defence operations and capabilities as an alternative to a fully-formed EU defence policy is striking – not least because its principal author is Defence Secretary, Liam Fox, an ardent Euro-sceptic who was, in opposition, keen to seethe UK withdraw from the European Defence Agency and openly opposed a stronger foreign policy that would result from the Lisbon Treaty.
That does not mean the UK Government has not been critical where it believes European military operations have failed. The EU mission in support of security sector reform in Guinea-Bissau and the military training mission for Somali security forces has raised eyebrows in the Foreign Office. But the UK wants to keep the EU’s military deployment in Bosnia-Herzegovina
Notwithstanding some highly effective EU military programmes, EU defence policy has been stagnant, on the whole, since the Iraq war. The success of the France-UK deal could provide the EU with an impetus to further develop EU co-operation on defence and security. The so-called Common Security and Defence Policy still falls short of any workable EU-wide decision-making capacity.

However, that is to assume the France-UK deal will work in practice. In 1998, both countries signed the St Malo defence accord which was within the NATO framework. Just five years later, it was forgotten as France became the UK’s biggest critic for going to war with Iraq.

Maternity leave rights will test UK’s patience with Europe

2010-11-08T07:29:00.000-08:00

“Choose your battles carefully” would be Machiavelli’s advice to David Cameron. The British Prime Minister was in Brussels this week with a mission to freeze the EU budget for 2011. It is a battle he is set to lose.
The showdown over the budget was Mr Cameron’s first real foray as Prime Minister into hard-nosed European negotiations. His attack on the proposed budget increase at his week’s European Summit rallied the more Eurosceptic wing in his party. However, after failing to repatriate powers to the UK, as he had promised to do before the election, and now failing to prevent a rise to the EU budget, he will need to find another battle to win if he is to confirm his Euro-realist credentials.
He doesn’t need to wait long. After lying low on employment and social legislation, the European Commission has chosen a time of increasing unemployment across Europe to propose to extend maternity leave. The Council has already pushed back any major extension of paid leave for new mothers but the UK Government, more than most, will want to resist any new maternity leave rights. So far, David Cameron has kept quiet since his coalition partners will not want to take such a hard line. However, he will soon have to take a view and come out fighting if he is to please his own party which believes that the EU has no role to play at all in employment and social affairs.
Last week the European Parliament adopted the Estrela Report on the “improvement of the health and safety at work of workers who are pregnant or have recently given birth”.
MEPs want to increase paid maternal leave to 20 paid weeks and make a two-week paid paternal leave mandatory across the EU.
"Maternity cannot be regarded as a burden on social security systems, it is an investment in our future," argued the author of the Parliament’s Report, Portuguese Socialist MEP Edite Estrela.
The Estrela report proposes minimum maternity leave should be extended from 14 to 20 weeks, six weeks of which would be taken immediately after childbirth. The rules would apply to self-employed workers. Workers on maternity leave must be paid their full salary, which must be 100% of their last monthly salary or their average monthly salary. The report also says that member states must give fathers the right to fully paid paternity leave of at least two weeks within the period of maternity leave. Female workers cannot be fired from the beginning of a pregnancy to at least six months following the end of the maternity leave.
Sometimes an issue exposes cultural divisions as much as political ones. This is one such issue. The vote by and large followed national lines with a high cohesion ratio of 72,54% among MEP votes from the same state. Of the UK MEPs that voted, 54 voted against and only 3 in favour. The liberal group ALDE was divided right in the middle on the issue. UK Liberals were opposed to the report.
Liz Lynne a UK Lib Dem MEP on the social and employment committee said that at a time of economic recovery, it would not be acceptable to impose such a heavy burden on businesses. And in any case, it would only give employers further reason not to employ young women.
The report did not take into consideration who would be picking up the bill. Responsibilities for paying for maternity leave vary across Europe. France will oppose the Parliament’s position since it will be the Government that would be responsible for an additional €1.3 billion.
What is remarkable is that the report received most support from the southern states. The so-called PIGS plus Ireland, all without exception voted overwhelmingly for the legislative proposal. Bankrupt Greece voted 14 for the proposition and 0 against. Italy had 57 votes for and one vote against the proposition. Spain had 37 for and 1 against, Ireland voted 11 for and 0 against.
The European Small Business Association estimates the cost for these proposals from the Parliament would be in the region of €121bn between now and 2030. The proposed 2.9% increase in the EU budget would cost the UK a further €500m in contributions. The maternity rights proposals present a much bigger challenge to David Cameron. Certainly much more tax-payers money is at stake. Is he ready to go to battle, again?

Cathy Ashton gets her EU Foreign Service – with a little help from William Hague

2010-11-08T07:24:00.001-08:00

The EU institutions have, despite some last-minute political wrangling, reached a settlement on a new European diplomacy service. The Lisbon Treaty allowed for an External Action Service with the objective of matching Europe’s economic status in the world with a similar diplomatic clout.

However Cathy Ashton, the EU’s High Representative for Foreign Affairs, had to contend with competing demands from MEPs, national governments and the European Commission, all with different views on what the scale and scope of the new foreign service operations should look like.

In Strasbourg this week MEPs voted to adopt the European External Action Service Staff Regulation, the Financial Regulation and the EEAS 2010 budget. The EAS will now be operational on schedule - from 1st December.

EU foreign ministers in July already paved the way for the EAS to be operational from 1st December. Member State governments – including the UK Conservatives, who had been critical of the EAS plans before they came to office – were keen for the EAS to be a success.

However, rows broke out soon after over the budget and over appointments. Nevertheless, Cathy Ashton has defied her critics – and she has had many – by casting aside controversy over the budget and over national and georaphical quotas for the EAS staffing regulations. The vote this week means, the High Representative can now get on with the business of appointing around 80 senior diplomats. She will then, over the next two years, recruit officials from the Council General Secretariat and from national diplomatic services. Eventually, the EAS is expected to be staffed by around 6,000 officials.
The EAS is possibly the most significant of the innovations brought about by the Lisbon Treaty. And it was the unqualified support of the British Foreign Secretary, William Hague that helped make it happen

In a major speech on foreign policy on 1st July, William Hague set out his vision for a United Kingdom that is “highly active and activist in our approach to the European Union and the exercise of its collective weight in the world”. This was not the Euro-passive Conservative Government we had been led to expect

This represented a major shift in Hague’s view of the world. In opposition, he was particularly hostile to the EU external relations policy as conceived by Lisbon. As shadow foreign secretary, he was bitterly opposed to the appointment of Tony Blair as EU Council President, fearing that, as an international statesman, Mr Blair would give the EU too much legitimacy on the world stage.

And now, Mr Hague is making the case for a stronger British presence within the EU institutions. He says that the number of British “A” officials has fallen by 205 since 2007, he says; “As a new Government we are determined to put this right”.

Although there is no guarantee that nationality provides any support for any particular national policy, it is important for the UK that British diplomacy is ingrained in the new External Action Service.

William Hague understands the real-politik of a common European foreign and defence policy and the EAS is a practical way of demonstrating Europe’s power to the world – at a time when the UK, France and Germany are losing their individual impact on world events and when their bilateral relations with countries like India and China are becoming less relevant to world affairs.

Spending cuts at the UK Foreign Office and Ministry of Defence, announced this week, was in part made possible because of the new powers and responsibilities of the External Action Service.

So the EU’s High Representative for foreign affairs – and former Labour peer, Cathy Ashton can thank William Hague for the success this week in securing a smooth transition to a powerful new global institution. Mr Hague has paved the way for a powerful international diplomatic service which will finally give the EU a single voice in the world. But Cathy Ashton must receive her fair share of praise for the success in setting up the EAS. She has confounded her critics – who have from the day she was appointed dismissed her as a light-weight - by keeping a cool head and single-handedly creating the momentum she needed to drive through her plans

MEPs square up to National Governments over the EU Budget

2010-11-08T07:14:00.001-08:00

The British public is bracing itself next week for deep spending cuts when the Chancellor of the Exchequer, George Osborne unveils plans for unprecedented reductions to departmental budgets in the Comprehensive Spending Review on Wednesday.

Ireland and the Baltic states are already experiencing the pain that comes with their national austerity measures. Other European countries like Sweden, France and Germany are also scaling back public sector spending. Even the new left wing government in Greece is slashing the public sector – although it hardly has a choice in the matter after a humiliating European bail-out.

It is understandable then that EU member state governments were appalled at the European Commission’s proposal to increase the EU budget by nearly 6%. At a time, when difficult decisions on job cuts and wage freezes in the public sector are being made by national governments, the EU asks for more money.

It is, of course, the centre-right governments across Europe that are introducing the austerity measures they believe will stabilise their economies and help bring about a sustainable recovery. Some are more enthusiastic than others. Nevertheless, the European centre-right consensus is real cuts need to be made and need to made immediately.

It is strange then that the Centre-Right majority in the European Parliament has taken an entirely different view when it comes to the European Union budget. The European People’s Party believe that there should be more public spending – not less – for the
EU to invest in growth and jobs for the future.

Sidonia Jedzejewska – a Polish MEP in the Centre Right EPP Group, is drafting the European Parliament’s report on the 2011 budget. He believes that the EU should be able to properly fund cross-border education and training programmes if it is to add value.

When the European Council agreed to a lower budget increase than the 5.9% proposed by the Commission, the European Parliament, led by the EPP, responded by re-instating the 5.9% increase. This matters because after the Lisbon Treaty, the European Parliament now has a say in the Budget. Previously it would just be asked to approve the over-all amount. Now it can negotiate on individual budgets for transport and fisheries and so on. MEPs have already threatened to block funding for ITER, the international nuclear fusion reactor project.

On October 5, after a bruising debate, the Budget Committee of the EU Parliament voted to reject the Council’s proposal to limit the increase to 2.91%. The Council said that a 5.9% increase on 2010 – giving an overall EU budget of €130.14billion – was “politically unrealistic”.

The UK government goes further. It sees the proposal increase as – at the very least – insensitive.

Earlier this week, British Prime Minister David Cameron told a joint press conference in London with Danish counterpart Lars Lokke Rasmussen that the figures should be progressively "reduced rather than increased." The UK's net transfer to EU institutions is set to rise from £6.4 billion this year to £8.3 billion in 2011-12.

On 30th September, Vince Cable, the UK’s business minister spoke to MEPs in the European Parliament: He said; “At a time when national governments, including mine, are having to make very painful cuts in public spending, no one can understand why the European budget is not being subjected to the same discipline.” Clearly, this has fallen on deaf ears.

The most audacious part of the Commission’s budget plans is the four percent increase for administration costs. The Commission has even gone to the European Court of Justice to save planned pay increases for EC officials after Council threatened to impose a freeze.

The European Parliament – along with the Commission – believe that there is a need to increase EU funds to compensate for the short-falls that will come about in national public spending. MEPs are particularly concerned that infrastructure and regional development projects would suffer. However they go much further than ring-fencing investment projects – they have also rejected a Council proposal for a €820.71m cut to the hugely bloated agriculture and fisheries sectors.

While tax payers have been asked to indirectly or directly shoulder the costs of getting through the financial crisis, can the EU conceivably demand for more?

National governments are forced to take measures to cut national defence spending, reduce child benefits, postpone school building schemes, lay off thousands of workers. Is this the right time for MEPs to make the case for more money for cross-border student exchange schemes, bee-keeping research or the Palestinian Authority? MEPs are worried that if the EU does less, it would become less relevant. If the EU does less, but does it well, they should have nothing to fear. The EU budget should not be used as a substitute for another European stimulus package. It should be there to support growth, jobs and prosperity, for the long-term success of the single market.

The fight over the EU budget is set to rumble on. The European Parliament will vote on the Committee’s recommendation during the plenary session in Strasbourg next week.

Although the Parliament will continue to push the limits of its mandate and test the patience of the Council in doing so, ultimately it does not have the power to impose its will on the national governments. Perhaps, instead MEPs should reconcile itself to the political imperative across Europe. Rather than re-start a debate over stimulus versus austerity, it should accept the new reality, while securing as best it can its constituent interests.

William Hague spells out plans for EU Scrutiny

2010-10-08T10:47:00.001-07:00

UK Foreign Minister, William Hague this week sent a warning shot to the European Union – the sovereignty of the British parliamentary system is paramount and any future EU treaty will be put to a referendum – by law.
Mr Hague was giving his keynote speech on foreign affairs at the Conservative Party Conference and he underlined the government’s commitment to introduce an amendment to the European Communities Act 1972 to ensure that any treaties “giving away power” would be put to a public vote before ratification. This would put the UK on the same footing as Ireland. The Irish have voted on any new EU treaty since 1987. The Foreign Secretary also said he would follow through on his election promise to introduce a United Kingdom Sovereignty Act – making it clear where the ultimate authority in the UK lies.

Party conference is a great opportunity for any politician to play to the gallery and Mr. Hagues’ tough words on Europe was music to their ears. However, on re-reading his speech, his bark was much worse than his bite.
After the traumatic ratification process of the Lisbon Treaty, there is no appetite in the EU or in any of it member states for another institutional treaty.
At the Conservative Party conference in 2009, there were calls for a referendum on the repatriation of powers in the field of employment and judicial affairs. It was believed that this could strengthen a Conservative Government’s hand in demanding opt-outs in those areas.

The Conservatives, now in office, seem to have backed off from attempts to renegotiate shared competences with the EU. This may be because they are sharing power with the more euro-enthusiastic Liberal Democrats in a coalition government. It might also be because it would be just too difficult – and may even undermine any attempts to get a good deal from the on-going bargaining over the EU budget.
All that was left for Mr Hague to say on Tuesday in Birmingham was to say that his government would, “reaffirm once and for all the sovereignty of our ancient parliament”, I suppose to protect the legislature from encroaching demands from Brussels.

Again, this is not such a radical departure from what is already acknowledged elsewhere in Europe. One of the reasons for the delay in ratifying Lisbon was that the German constitutional courts had been asked to rule on whether the Lisbon Treaty would have any effect on the sovereignty of the Bundestag.
Mr Hague pointed out to party representatives, “EU law has effect in this country because - and solely because - Parliament wills that it should. Parliament passed the 1972 European Communities Act…..I can tell you today that we will legislate this autumn to underline that. A sovereignty clause on EU law will place on the statute book this eternal truth: what a sovereign parliament can do, a sovereign parliament can also undo.”

This has been met with some bemusement in Brussels where it is considered that the Lisbon Treaty actually offers a greater role for national parliaments to block EU legislation. Indeed there is some frustration in the European Commission that there is not enough scrutiny of EU laws by national assemblies. The scrutiny committees in both the House of Lords and the House of Commons are under-resourced and lack the time and political weight to properly scrutinize European legislation.
Mr Hague does acknowledge that the new sovereignty clause is hardly ground-breaking. He says, “It will not alter the existing order in relation to EU law. But it will put the matter beyond speculation…This clause will enshrine this key principle in the law of the land.”

So the foreign secretary’s speech does not herald a departure with the UK’s relationship with the EU. Brussels can breathe a collective sigh of relief. The coalition government’s package of EU policies amounts to little more than symbolism.
Messrs. Cameron and Hague had successfully buried the issue of the Lisbon Treaty during the general election campaign, they still run the risk of encouraging the euro-sceptic wing of the Conservative Party to amend the Sovereignty Bill during its parliamentary passage. The Conservative leadership will be desperate to contain this prospect since it would not only put the UK on a collision course with Brussels but also create tensions with their Liberal Democrat coalition partners.
Given their political limitations, the Conservative leadership will need to look elsewhere to restrict the expansion of EU decision-making post-Lisbon. David Cameron has hinted at negotiating the application of the “so-called” passerelle clause in the Lisbon Treaty.

This article allows the European Council to switch decision-making from unanimity to qualified majority (but not in foreign affairs or defence). This could significantly widen the scope of EU influence. However, Gordon Brown had already negotiated the insertion of a provision that the passerelle cannot be used without the agreement of both houses of Parliament.

So what red meat is left for the euro-sceptic wing of the Conservative Party?
Firstly, the UK is notorious for gold-plating EU directives. Where other Member States implement the spirit of the directive, the UK follows it to the last letter.
Secondly, the Lisbon Treaty envisaged national parliaments playing a fuller role in EU legislative scrutiny. However, the EU scrutiny committees in the Houses of Parliament are under-resourced – and although there is a wealth of talent in the House of Lords committee, it is difficult to find experienced MPs wanting to serve on the Commons committee. The Committees should initiate debate on draft directives before they are adopted by the EU institutions.

In Denmark, parliamentary committees mandate ministers on the line they should take in EU negotiations. And ministers are then required to report back to their committee after their Council meeting. Of course, this would not work quite so well in the UK. However, we do have some talented MEPs in Brussels and the scrutiny committees could and should invite them to take part on a regular basis.
For the Conservatives, the issue of parliamentary scrutiny of EU legislation is clearly important. They are restricted in their ambitions despite some grand-sounding initiatives. However, the new government could make a real impact by improving the scrutiny mechanisms already available to them.

Will the UK sign up to European Economic Governance?

2010-10-01T09:03:00.001-07:00

Brussels was brought to a standstill yesterday by 100,000 trade unionists from across Europe who were demonstrating against plans being drawn up by the European Commission that would penalise member state governments that fail to rein in their deficits.

Trade Unions across Europe are concerned that the fiscal conditions being placed on Member State governments by the EU will lead to more job losses and threaten economic growth.

The conditions are being drawn up to ease market fears over unsustainable public spending after the “shock and awe” €750billion plan to protect the Eurozone from collapsing during the weekend of May 7-9th.

The Commission believes that the €110bn EU bail-out of Greece earlier this year shows that without any fiscal union there is no guarantee that the whole system won’t fall apart when a shock hits the system. Olli Rehn, the Commissioner for monetary affairs has said: “We need stronger and better EU economic policy co-ordination”. In other words; more economic governance. And this spells trouble for the UK’s relations with the EU.

For now, the idea of more EU “economic governance” has not registered in the UK. It is seen as a Eurozone response to a Eurozone problem.

However, the German Chancellor is insisting that it should be a matter for all 27 Member States. This is to ensure that the French don’t get it all their own way. Germany is concerned that France will form a political bloc with the more “fiscally-relaxed” member states rather than agree to serious structural economic reforms. France is more ambitious about fiscal union but not so keen on the budgetary constraints that Germany is insisting on.

There are inevitably conflicting views on what economic governance would look like. If applies to all of the EU27 Member States, then the UK will want to see a minimalist framework – a sort of code of good fiscal conduct. However, BusinessEurope – the employer’s federation want to see co-ordination of demographic pressures on pensions, stress-testing of public finances and monitoring of labour, product, services and capital markets.

The European Central Bank has not shied away from proposing a radical agenda for European control of deficit and spending. In June this year, the ECB proposed an independent EU fiscal agency to monitor public finances; financial sanctions and the even removal of voting rights in EU institutions.

The ECB believed that Member States had not been stringent enough in applying the fiscal rules that exist. Apart from ignoring the pressures that governments were under to revive their economies following the financial crisis, the ECB solution would be an unacceptable loss of fiscal autonomy. Its response is that Greece had de facto lost fiscal autonomy after it was bailed out.

But member states are not going to give up the fiscal controls that easily. What might be more acceptable is the Commission’s less ambitious plans to synchronise preparations of national budgets. The idea is that governments would submit national economic programmes to the Commission every April. Commission experts will look at the plans and advise the Council, which in turn will issue country-specific policy guidance in July. Only then would member states finalise their budgets and present to their national parliaments.

This arrangement was agreed in September but the UK managed to get a concession and the UK government will continue to present the budget first to the House of Commons and only then would it submit the budget to the Commission and Council “for their consideration”.

The Coalition Government in the UK is looking on with some trepidation. The Conservative Prime Minister and Chancellor will be resistant to anything that smacks of undermining national fiscal autonomy. The LibDem deputy Prime Minister and Business Secretary are likely to see some merit in better fiscal co-ordination. Divisions within the coalition on Europe will, at last, surface after the governments best efforts to ignore their differences.

Sarkozy’s “Blustery Spat” over EU Rebuke

2010-10-01T08:57:00.000-07:00

Tempers are still frayed in the Berlaymont this week. Nerves are still raw and noses not yet quite back into joint following what was probably the most ill-tempered working lunch of Europe’s leaders for a long time.

Despite the earnest agenda that had been prepared, the heads of government from the EU’s 27 Member States had to restrain themselves from turning the European Council lunch into a bun fight.

Instead of using the opportunity to flesh out the EU’s foreign policy post-Lisbon or develop new measures on economic governance following the Euro-crisis, the lunch, according to the FT, instead turned “into a blustery spat” over France’s expulsion – or voluntary relocation scheme - of Roma.

Put simply, the European Commission believes this contravenes the sacred cows of free movement for EU nationals and non-discrimination of EU nationals. The Roma that were sent back to Romania are EU nationals and the Commissioner for Justice, Fundamental Rights and Citizenship – and Vice President of the Commission to boot, Madame Viviane Reding is on the warpath.

At first, the formidable Mme Reding was measured in her response to President Sarkozy’s initiative to offer money to Roma who had set up camps in France. It was when she claimed to have found out that the French Government were being “duplicitous” in what they had been telling the Commission, she went nuclear. The Commission Vice President said that the policy was worthy of Vichy France.

This did not go down too well in Paris. President Sarkozy bounded into Brussels last week for the Council Summit looking for a show-down with the Commission – something which always plays well at home.

Sarkozy slammed Viviane Reding for her "deeply shocking" and "insulting" comments. However, he couldn’t help himself from going further. He suggested that perhaps Luxembourg – Mme Reding’s Member State – would want to accommodate Roma travellers. This only undermined his position that France was well within its rights and that it was an infringement of national sovereignty to order the Government to change policy that had been designed to crack down on crime and disorder.

Although President Barroso tried to quell the dispute, he was forced to defend his Vice President when President Sarkozy harangued him in front of EU leaders. The result? Mme Reding apologised only for the Vichy remark. President Barroso stood his ground on the substantive allegations that were levelled at the French Government.

President Sarkozy was publicly isolated. He had failed to rally any political support from his European colleagues. It was a shame that serious issues around economic governance and EU foreign policy were sidelined.

However some fundamental principles were re-established. The Council President Herman Van Rompuy concluded that the European Commission has the responsibility of overseeing the application of EU law in the areas of freedom of movement and non-discrimination.

Another positive result for the Commission was an invitation from the Summit to the Commission to write the strategy for Roma travellers.

As for M. Sarkozy, he was sent back to the Palace Elysee with his tail between his legs, facing the prospect of Mme Reding taunting him with infringement procedures for contravening EU laws.

Another Day, Another Euro

2010-08-05T04:38:00.000-07:00

There has been some ill-informed nonsense written about the Euro since Greece was bailed out with the help of Eurozone members.

Some economists, who should know better, claimed that the crisis would spread to other vulnerable euro countries like Italy and Spain; that these countries would have no choice but to leave the single currency and that even Germany might walk away and start printing Deutschmarks again.

However, the Euro is much stronger than that - and is designed to withstand such shocks. It can, of course, be improved by enforcing strict deficit rules and by creating, which it now is, an emergency bail-out fund. What does not need to happen is any so-called economic governance. National budgets should not be subject to ECOFIN approval and tax policy should remain a useful competitive tool not be remotely part of any european fiscal union. The European Central Bank however does need to be more political in interest rate decisions and take into account more inflationary pressures in a Euro member state that is struggling. But thats as far as it goes.

I resisted joining in the clamour for quick fix solutions and rather stood back and watch the debate burn itself out. The Greek crisis has been dealt with and the Euro moves on

I read with interest some opinion polls which shows that two thirds of voters noe believe the EU is more relevant than ever following the financial crisis. thsi is remarkable considering no-one particularly liked being asked to bail out the Greek system as though it were some kind of perverse award for their fecklessness.

It was unfortunate that UK Deputy PM used the excuse of the Greek financial crisis as the reason why he changed his mind on the urgency of austere deficit cuts. Regardless, none of this of course excuses the fact that he campaigned to win Lib Dem votes without telling his voters that he had changed his mind.

What is also strange is that the Conservatives did not join on the bandwagon and launch a tirade against the Euro just when it was at its weakest. Perhaps this can be explained by the realisation that a weakened EU was not in the UK's interests. david Cameron himself said so during a visit to Paris shortly after becoming Premier.

Observers are mystified as to just how muted Cameron, Hague and Osborne have been on Europe - especially when there is a real chance to put the boot in.

The junior coalition partners can be credited for keeping the eurosceptic wing of the Conservatives reined in but how long can this last? At a Progress meeting in the House of Commons, chaired by the new MP for Wolverhampton, Emma Reynolds, Labour Party members came together to find ways of putting a wedge in the coalition on the issue of Europe. While every-one agreed that Europe is not a priority for voters, it is the coalition's achille's heel. Although there is no sign yet of a coalition split Labour is watching closely for any sign of fracture.

The Coalition Government's approach to the EU and its key partners has been surprising but commendable. But dont be fooled. It does not mark any shift of the Conservatives policies on Europe. It is pure RealPolitik. There was genuine fear that the weakened Euro would drag the UK back into a recession. But here we are - out of the storm. Another Day - another Euro. The single currency carries on.

The European Union – the policy that dares not speak its name

2010-04-27T04:26:00.002-07:00

The second in a series of three party leader debates, last week, featured the thorny issue of the role of the UK in the European Union – or as the broadcaster, Sky News put it EU interference in the UK.

It presented front-runner, the Conservative leader, David Cameron with an opportunity to claw back some ground lost to Nick Clegg, the Liberal Democrat leader who dramatically stole Mr Cameron’s thunder in the first leaders’ debate. The Liberal Democrats are considered to be soft on the European Union and David Cameron’s more sceptical position was thought to hold more appeal to wavering voters. However, to the dismay of Conservative supporters, Mr Cameron decidedly failed to land a killer-blow on the Liberal Democrat leader.

This can only be explained by Mr Cameron’s determination to keep the question of the EU on the margins of his election campaign. In 2001, the Conservatives under the leadership of William Hague put their EU policies – particularly on the Euro – at the centre of their campaign and failed to gain any ground on Labour as a result. Mr Cameron has learnt the lesson from this doomed campaign and has so far avoided the issue of the EU as much as possible for fear of exposing the divisions in his party concerning Europe.

Rather than going in for the kill, Mr Cameron spent his time during the debate on Europe defending the Conservative Party’s position from Nick Clegg’s accusations that the Conservatives would put the UK on the sidelines. Gordon Brown gave the goldilocks pitch of dismissing both his opponents approach on Europe – the Liberal Democrats for being to hot on Brussels, the Conservatives for being to cold. Labour, he said, has it just about right.

Mr Cameron told viewers that he wanted to repatriate certain powers from the EU, although he didn’t elaborate on how or where he would try to negotiate opt-outs. The Conservative party manifesto suggests that criminal justice is one such area where they would try to claw back more national sovereignty. The Liberal Democrat manifesto, by contrast, favours more EU co-operation on criminal justice and homeland security.

The Conservative leader repeated his promise that he would hold a referendum if there was ever another change to the institutional relationship between the UK and the EU. However, this failed to differentiate him from the canny Mr Clegg who also offers the same deal. Nick Clegg even rattled Mr Cameron when he reminded the audience that he dropped his “cast-iron” guarantee for a referendum on the Lisbon Treaty once the treaty was finally ratified.

David Cameron was clear about the Conservative’s policy to refuse entry to the single currency. But again, he could not score points against his Liberal Democrat opponents who had modified their position in support of the single currency by adding Gordon Brown’s caveats that the country should join “only when the economic conditions were right” and even then only after a positive referendum result.

Mr Clegg ‘s strategy was clearly to marginalise Mr Cameron on his decision to leave the Centre-Right EPP Group in the European Parliament and form a group with – as he calls them - a “bunch of nutters”. This allowed Gordon Brown to dismiss Cameron’s Conservatives simply as anti-European.

Perhaps it was a mistake for Mr Clegg to remind the audience of his understanding of the European Union from his days as a “Eurocrat” adviser to the former Trade Commissioner, Sir Leon Brittan, but Mr Clegg was savvy enough to know that he shouldn’t try to sound as Euro-sceptical as the Conservatives might have done just to appeal to the gallery. Instead, he articulated the case for stronger EU co-operation to help bring about stronger financial service regulation and action on climate change.

Mr Brown took a low-key approach but nevertheless repeated the Blairite offer of putting the UK at the heart of Europe and not on the sidelines. He stuck to a pragmatic defence of the EU, repeatedly claiming that three million jobs depended on UK membership.

Both Mr Clegg and Mr Brown performed as they had been expected to by those familiar with their EU policies. The only surprise of the Europe debate was that Mr Cameron took trouble to tone down his more euro-sceptic views – which for many, should have been his strongest card of the evening, certainly in trying to find some clear blue water between himself and his main threat Mr Clegg. His most effective intervention on the issue of Europe came during a discussion on immigration where he promised a cap on the number of people from newly-joined EU countries settling in the UK.

The three main parties’ manifesto commitments on the EU vary only in so far as tone. With the Lisbon Treaty out of the way, and the single currency only a distant prospect, the manifestos could comfortably avoid making any substantive policy decisions one way or the other.

The Conservative’s policy pledges emphasise the role of the US and NATO “as the ultimate guarantee on Europe’s Security.” Labour, however sees the UK playing a strong role in European defence, in “partnership with NATO.” The Labour Party manifesto points at “the poverty of the Tory vision […] summed by their false choice between alliance with the United States and one with Europe.”

It suits Labour of course to paint the Conservatives as being on the fringes of mainstream decision-making in Europe. It describes David Cameron’s decision to take his MEPs out of the Centre-Right Group, the EPP (the largest Group in the Parliament) as “anti-European” and would only undermine Britain’s influence in the EU. However, Gordon Brown left it to Nick Clegg in the TV debate to turn on David Cameron for allying the Conservatives with niche political parties in the European Union.

The manifesto commitments on Europe were successful in keeping the issue low on the electoral agenda and the Leader’s debate also succeeded in creating a full-blown clash on the UK’s position in Europe. The only surprise from both the manifestos and the debates on Europe is that David Cameron restrained himself from a full-blooded eurosceptic attack on his new nemesis, the Euro-friendly Nick Clegg. He did, however, allow himself to repeat more than once the slogan from the 2001 election campaign, “In Europe but not run by Europe”.

Ashton Critics seize on “half-baked” Euro-Diplomacy Service. Can the Baroness Survive the Onslaught?

2010-04-27T04:26:00.000-07:00

European Union Foreign Ministers are meeting today (26 April 2010) in Luxembourg to consider controversial proposals prepared by Baroness Ashton for a new External Action Service (EAS) which will be responsible for all EU diplomatic services around the world. The EU’s High Representative for Foreign Affairs and Security Policy desperately needs approval from Member States for her EAS blue-print which has been dogged by criticism for its proposed structure and budgets.

The High Representative has published new proposals a month after her original plan issued on March 25th, was roundly slammed for creating the role of an all-powerful Secretary-General. The new structure sees a triumvirate running the 7,000- strong service. One of the triumvirates would deputise for her at official diplomatic visits. It is not known whether this would be another Commissioner, with a remit in external policy – or even a Foreign Minister from one of the Member States. The Lisbon Treaty does not provide for an official deputy but the three posts are expected to be occupied by heavy-weights in order to give the High Representative the support she clearly needs if she is to make the EAS a success.

The new structure, already provisionally agreed by ambassadors to the EU, is designed to reflect the prevailing interests of the Commission and the Council in EU foreign policy – the Commission, because it is still reluctant to relinquish control over budgets for delegations to countries around the world; and the Council because Member States retain full responsibilities for their foreign policies. However, the new command structure, while trying to accommodate both the Council and the Commission, runs the risk of creating further confusion over who is running the EU’s foreign policy.

A more immediate concern for Baroness Ashton is the growing criticism from MEPs over the lack of accountability of the new EAS. A German Christian Democrat MEP, Ingeborg Graessle, has said that the Ashton proposals are in violation of European laws since they do not provide for any accountability to the European Commission or to the European Parliament.

German MEP Elmar Brok, who is responsible for writing the European Parliament’s report on the proposals, has threatened to pull the plug on the proposals if they are not changed to improve accountability to the Parliament. MEPs refuse to believe the claim by Baroness Ashton will be budget-neutral (ie: would not cost more than the costs of the structure that it will replace). The European Parliament has the power to block the budget for the EAS if it does not agree to its proposed structure.

Once foreign ministers give their approval to the plans today, attention will turn to MEPs who are already critical not just of the plans but also of the architect. The proposals are seen as an important test of the credibility of the newly-appointed High Representative – who just four months into office, has been dismissed by many as a “lightweight” and could even bring about her downfall.

Cathy Ashton took office as soon as the Lisbon Treaty was ratified and was the UK’s candidate for the role after British Foreign Secretary turned it down.

UK Prime Minister Gordon Brown was criticized at home for nominating some-one who had so little experience on the international stage. Baroness Ashton was appointed Trade Commissioner only when Lord Mandelson was recalled to Government. It was also seen as a victory for the French who were free to put their man – Michel Barnier – in the coveted Internal Market Commissioner position. Stephen Booth, Director of the Brussels and London think tank “Open Europe” dismissed her as a “complete lightweight”.

The French Foreign Minister, Bernard Savage immediately criticized Baroness Ashton for failing to turn up in Haiti to fly the EU flag after the earthquake. She told journalists she didn’t do “disaster tourism”. She was also criticized by the French Europe Minister, Pierre Lelouche for going to Ukraine for the inauguration of the pro-Russian Ukranian President Viktor Yanukovich rather than a major European defence conference in Majorca. The French have also criticized her for going to London every weekend and having de-briefing sessions on a Friday at the Foreign and Commonwealth Office.

On 8th March, The High Representative faced down her critics at a meeting of European foreign ministers in Córdoba. Her position had been so badly weakened, she took with her a letter signed by David Miliband and Swedish foreign secretary Carl Bildt saying that EU foreign ministers should get behind her and her plans for the EAS. The storm abated for a short while, before the French President, Nicolas Sarkozy summoned her to the Elysée Palace where he reportedly gave her a dressing down for “amateurism” and, quelle horreur - having such a poor command of French. Monsieur Lelouche made an impertinent offer to arrange a residential French language class for the High Representative.

However, to British ears, the sniping sounded like Paris begrudged losing control of international diplomacy – a policy sphere that France guarded jealously. And given that she needed time to learn the ropes, Baroness Ashton was given the benefit of the doubt. Nevertheless, the negative response to her proposals for the EAS has put Baroness Ashton in a very dangerous place. Der Spiegel last week reports that there is a growing body of MEPs from across the political spectrum who question whether she is the right person for the job. With a basic salary of €323,000, she is the world’s highest paid female politician and MEPs wonder whether she is out of her depth.

The European People’s Party – a coalition of European Centre-Right parties in the European Parliament – have been sceptical about Baroness Ashton’s capabilities from the outset. Not long after she was approved by the European Parliament, an official spokesperson for the EPP Chairman, Joseph Daul went on record as saying; “We expect a lot from the position of High Representative. So far she has not met that level of expectation. We are not trying to destroy her but want an improvement in her work.” He even was far as saying; “It’s not right to assume she is there for five years. She can be removed. Something must change.”

Political point-scoring alone cannot explain the Ashton-bashing. The EPP cannot get rid of her and have her replaced by one of their own – the deal was always going to be a Centre Left High Representative in return for living with a Centre-Right President – Mr Van Rompuy. It cannot be explained either by Anglophobia since the French were happy with securing the Internal Market portfolio for Michel Barnier and in fact the French President had even boasted that they had beaten the British in securing the job. The only explanation is turf-war politics – The French and Germans want a say in the appointment of key EU ambassadors in the new EAS, concerned that it will become a British Foreign Office writ large. It doesn’t help either that in addition, the Commission President is behind a power grab for the EU aid and development funds.

There are some signs of encouragement for Baroness Ashton’s supporters. Its been acknowledged in diplomatic circles that she has developed a chemistry with US Secretary of State, Hilary Clinton and that the appointment of Poul Skytte Christofferon, former Danish Ambassador to the EU, as her special adviser, is considered generally as a good thing.

Nevertheless, there is a real threat that the Baroness might not survive much longer. Brussels is watching the UK election very closely to see what will happen. Should Labour lose the General Election in the UK, she would lose the support of her biggest backer. Her detractors could petition for her replacement – perhaps with David Milliband, the outgoing British Foreign Secretary.

Lib-Dems and Labour come together to expose Tory weaknesses on Europe

2010-02-25T01:29:00.000-08:00

Last night the Liberal Democrats and Labour came together to present a progressive common cause united against the reactionary forces of Conservatisim. Or at least it was an opportunity for them to steal a march on a Tory policy that seems doggedly rooted in the Major years untouched by the uber-modernising David Cameron.

Chris Bryant MP, Europe Minister and Ed Davey MP- Lib Dem Shadow Foreign Minister spoke at a Westminister event last night on the issue of the Conservative Party's policy on Europe. And they started with Tory MEPs record in the European Parliament.

They said that in the last few weeks Tory MEPs have voted against measures to tackle tax evasion and tax havens.

Chris Bryant warned that if the Conservatives win the election they will do everything in their power to get opt-outs on EU social protection measures such as maternity leave.

Ed Davey wents as far as calling many Tories "mouth-frothing xenophobes. He said that the Conservatives were actually taking a step back into out-right euro-scepticism. Michael Howard when Home Secretary actually helped set up Europol. Now the Tories oppose the European Arrest Warrant and Eurojuste. As part of the Stockholm Process, the Uk will have the choice to opt-in or opt-out of measures over teh next five years. We should be asking the question now - what will the Conservatives do if elected - opt-in or out of Eurojuste?

If David Cameron thinks that he has got rid of Europe as an election issue by dumping his cast-iron guarantee for a referendum, then last night showed that both Labour and the Lib Dems are willing to open a common front and make the Conservatives squirm a little over what exactly they intend to do on some very critical questions.

Blooded and Bloodied - The New Commission has been initiated by the European Parliament but only after MEPs get their scalp

2010-01-22T08:45:00.000-08:00

Over the last two weeks, the European Parliament held hearings with every single prospective Commissioner – except the President. The hearings are the only occasion for Members of the European Parliament (MEPs) to genuinely bring some influence to bear on the formation of the next Commission. While Commissioner Hearings are a useful exercise in casting some light on a rather secretive selection process, do they really inject the kind of accountability that the Commissioners like to pretend it does and do MEPs really feel that they have held the Commission to account after listening to a series of set-piece answers?

Questions are designed to test the nominee’s credentials, size up their commitment to the European agenda – over and above any national interests – and scrutinize their priorities for the next five years.

The Hearings certainly put the candidates’ probity and record to the test. The Commissioner-designate from Bulgaria, Rumania Jeleva, was allocated the humanitarian aid portfolio but was compelled to stand down after accusations that she failed to fully declare her financial interests while she was an MEP.

As an exercise in determining the policies and priorities for the prospective Commissioner’s five year mandate, it was a disappointment but only because the candidates played safe by repeating the lines of their predecessors. This was to be expected since they will have been prepped in advance by advisers to the incumbent Commissioners and, of course, because the President of the Commission, Jose Manuel Barroso has already set a course for his second term.

If the Hearings were designed to expose gaps in the candidate’s knowledge of their portfolios, it worked. Some arrived with a clear command of their briefs; notably Connie Hedegaard, who chaired the Copenhagen Climate Change summit on behalf of the Danish Government and now commissioner designate for Climate Action. Others who are new to their allocated policy responsibilities such as Joacquini Almunia, the respected Spanish Commissioner for Economic Affairs and now designate for Competition, demonstrated less expertise in the All eyes were on Baroness Ashton – the newly-appointed High Representative for Foreign Policy and Security – returned to the Parliament for a second time to face MEPs. This time she appeared in her capacity as the nominated Vice President of the European Commission and Commissioner responsible for External Affairs. Members of the Parliament’s Foreign Affairs committee were keen to hear more about how she would undertake her duties as arguably the EU’s answer to Hilary Clinton. Alas, it was a lacklustre performance. Many MEPs commented on her responses as unfocused, uninspiring, showing only a superficial knowledge of the world issues. She failed to clearly prioritise her agenda, mentioning every continent other than Oceania as her priority.

It was her British compatriots on the Foreign Affairs committee that gave Baroness Ashton the toughest grilling. Conservative members tried to embarrass the former Labour leader of the House of Lords with questions about her past employment in the CND.

Nevertheless, she remained composed and confident throughout the hearing, honestly admitting her lack of knowledge on certain issues. In any case there was no real danger that MEPs would object to her candidature given the unanimous backing she received for the High Representative position by Member States

Mutterings over the performance by Neelie Kroes, the Commissioner-designate for the newly-created Digital Agenda role, caused some nervousness in President Barroso’s camp. She was the only nominee to be called back for a second smaller meeting, in which coordinators of the main political groups came out satisfied by her more solid opinions and agenda for Digital Europe. Her poor showing at the Hearing surprised many given that she was respected for her grip on the competition portfolio in the previous Commission.

Members of the highly influential internal market committee wanted to see how far the French Michel Barnier would differ from the Irish Charlie McCreevy in the powerful Internal Market Commissioner role. His nomination caused a fracas with the British when the French President gloated that his appointment represented a defeat for the Anglo-Saxon model. M Barnier, however, was at pains to reassure members of the committee that he would not blindly follow a French model of market economics. He played down prospects of heavy-handed regulation under his stewardship of the internal market role. He even quoted Adam Smith – an icon of the free-market British.

The Commissioner Hearings provided the European Parliament with a chance to flex their muscles. The recently-ratified Lisbon Treaty gives MEPs new decision-making powers in more policy areas – such as Justice and Home Affairs and Sport. Parliament was certainly keen to demonstrate its prowess. The reality is, however, that MEPs cannot veto individual candidates although it can refrain from approving the entire Commission team. On Monday evening (18 January), co-ordinators from the political groups met to discuss Rumania Jeleva’s candidature and it soon became clear that MEPs would reject the Commission if Ms Jeleva remained in post. The Socialist & Democrat Group was particularly adamant. The leadership of the European People’s Party responded to pressure from the Socialists with a half-hearted request for the head of Slovakia's socialist nominee, Maroš Šefcovic, nominated for the lowly inter-institutional relations role, ostensibly for comments he was
supposed to have made at a conference in 2005 that Roma were “exploiting the Slovak welfare system”. However EPP Leader Joseph Daul backed down admitting he did not have the stomach for “blood and corpses”.

This outbreak of political posturing has only served to delay the process of assembling a new College of Commissioners. The College was due to be approved by a parliamentary vote on 26th January. The most likely replacement for Ms Jeleva should be Kristalina Georgieva, currently, Vice-President of the World Bank. Her hearing should take place on February 3rd. The parliamentary vote will now take place on 9th February. It will be an anti-climax to a long and wearisome process that started with political-horse-trading over President Barroso’s re-appointment and the uncertainty of when if ever the Lisbon Treaty would ever be signed, meaning the existing Commission had to stay on as a caretaker Commission after its official mandate expired in November 2009.

The Hearings have dominated events in the European Parliament last week. However, there has been a lot of noise and too little light for the Hearings to be of any real worth to MEPs and the general public. The prospective Commissioners will feel that they have escaped the Hearings without too much damage being inflicted. In reality, they have all benefited from safety in numbers and owe their individual mandate not to the Parliament but to their own national Governments still.

Iceland referendum and EU acession talks is a Perfect Storm

2010-01-13T06:48:00.000-08:00

Iceland is gearing up for EU acession talks to begin in March this year. In a case of seriously unfortunate timing, Iceland is holding a referendum on the Icesave Bill on either 27th February or 6th March. In early March the Icelandic Government will also enter formal acession negotataions with the EU.

UK Chancellor, Alastair Darling hinted darkly on 4th January that the British Government would block Icelandic membership if they did not sign the bank repayment deal. Since then, Icelandic President Grimmson declared that he would not sign the bill and instead referred the issue to a national vote. Icelanders are certain to reject the anglo-dutch deal.

Although the British Foreign Office has since given assurances that the UK won't interfere with the Icelandic negotiations on EU membership, the reality is that the UK may beforced to take a stronger line once the Referendum rejects the repayment arrangements - not least because it will not want to be seen as being forced to back down at a time when the UK is in the middle of a febrile election period.

The problems for Iceland's acession plans don't end there. Germany and France have said that they will not make any concessions to Iceland - even if they are generally positive about Icelandic membership. The first two sectors that will be negotiated are fisheries and agriculture. Icelandic waters are rich pickings for European fishermen and fisheries represent a quarter of Icelandic exports. This will be a big test of Iceland's appetite for EU membership. At a time when it is trying to recover from the financial disaster, it is being asked to submit to strict EU quotas. IN adition, the French will be scrutinising very closely the talks on Icelandic membership of the Common Agricultural Policy. Iceland's 3,000 farmers fear that CAP membership will reduce local agricultural production by up to 50%. Nevertheless CAP membership does offer other benefits to Iceland.

The Germans are even more lukewarm about the prospect of Icelandic acession. The CSU - Angela Merckel's sister party has said it is not the EU's duty to "save" countries in trouble.

Despite this, Iceland could still expect a fast-track process. The country already meets 80% of the community acquis. True - there has already been a delay in achieving candidate status. The country had expected to gain candidate status in December but it was only because of internal EU wrangling over Lisbon appointments that delayed the decision. The present European Commission is a caretaker one with no mandat to make new decisions. Iceland must wait until its successor is properly in place. The Council can only confer candidate status after a recommendation from the EU executive. These recommendations need parliamentary approval too.

Iceland is still hopeful of EU membership in two years and membership of the Euro in four years.

One of the biggest attractions of EU membership for Iceland would be to join the Euro, after the virtual destruction of its currency. This, however, requires a preliminary period of two years during which the Icelandic krona would need to be within the narrow band of the Exchange Rate Mechanism. It would be difficult for Iceland to negotiate an exemption from this requirement, which is embedded in the Maastricht treaty

Iceland is a member of the European Economic Area, and participates in many EU programmes, including the Schengen agreement. Understandably it was disappointed that the Union did not mobilize itself quickly to come to the stricken country's aid, forcing it to turn instead to countries such as Russia and Japan, with which it has no formal links.

Despite the widespread disappointment with the EU, many Icelanders appear to have concluded that their best bet for the future would be to join the Union as soon as possible. Membership has never been so popular.

However, the dispute with the UK and the Netherlands over bank bailouts - as well as indignation in Rekjavik that it is forced to beg its Nordic neighbours for IMF support, could mean public support for EU membership could soon wane. Iceland needs to redouble its efforts to improve bilateral relations with key EU member states to ensure there is no further delay to EU acession talks. There is every risk that the country could be blind-sided by adverse developments from IMF loan talks and the Icesave bail-out referendum. Its essential then that it strengthens informal as well as the more formal channels of communications with the EU and its members (the UK in particular). It should demonstrate its European credentials by hosting a major informal EU summit in Rekjavik later this year to draw a line under the banking crisis fall-out and set about finding a pan-European solution to guaranteeing bank deposits. Iceland should regain its confidence after a series of polital and economic blows and set out what it can do to bring something to the European table.

The Spanish take on the EU Presidency yet we now have a new President of the European Council. So, who will be calling the shots in 2010?

2009-12-22T08:20:00.000-08:00

On January 1st 2010, Spain will take over the rotating Presidency of the European Union. José Luis Rodríguez Zapatero, the socialist President of Spain, will, with his government lead the European Council for the next six months. Spain will set the agenda in Council, preside over Council meetings, lead negotiations and attempt to broker compromises between the member states on current European Affairs and a set of predefined priorities.

And yet, we also have – thanks to the implementation on 1st December 2009 of the Lisbon Treaty – a permanent President of the European Council in the person of former Belgian Premier, Herman van Rompuy, whose job it is to chair the European Council, which consists of the Heads of State of the EU’s 27 Member States. The Lisbon Treaty was meant to bring about more consistency in policy-making at the centre of the EU decision-making machinery; so why does the EU persist with its six-month Presidency where each Member State has Buggin’s Turn at the top of the table?

National capitals have to prepare their priorities well in advance of the start of their turn at the Presidency (Spain has been preparing for over a year). For some, the Presidency is an opportunity to show-case their government at the European level; for others, it’s just a distraction. National ministers are required to spend more time in Brussels and much of the civil service becomes pre-occupied with matters that are not necessarily core to their department. Rotating presidencies do not make for consistent policy-making. Often the priorities of one Presidency are completely at odds with those of its successor.

For now, at least, it will be business as usual for the rotating Presidency system. Herman van Rompuy has no administration that he can instruct to run the constituent parts of the Council. The European Council will continue to be assisted by the General Secretariat of the Council, and as such, the President will depend on the advice and support of the staff of the General Secretariat.

The new foreign affairs council will be chaired by the High Representative – another position created by the Lisbon Treaty. Former European Trade Commissioner, Baroness Ashton will perform this function. Unlike the President, she will have her own department – the European External Action Service (EEAS) - which is expected to be operational in April 2010 and will act as the EU diplomatic corps, drawing advisers from Foreign Ministries across the European Union. Already, President van Rompuy has made the point of keeping foreign ministers out of the European Council meetings now that they have a dedicated Foreign Affairs Council. There are signs that a turf war is about to break out between the Foreign Affairs Council and the General Affairs Council, which since its split from External Relations Council (when it was known by the acronym, GAERC – General Affairs and External Relations Council), focuses mainly on co-ordination across policy areas or preparation for the European Council. It is rumoured that trade policy and enlargement will fall under the remit of the Foreign Affairs council, despite the General Affairs Council’s attempts to keep the policy areas within its own mandate.

The Foreign Affairs Council is unique in that it is chaired by the High Representative rather than the Presidency. The High Representative will also appoint her own representatives to chair the constituent parts of the European External Action Service, such as the Political and Security committee. All other Councils – such as the Economic and Financial Affairs Council made up of 27 Finance Ministers - will continue to be chaired by the relevant minister from the rotating presidencies. The Committee of Permanent Representations (COREPER) which comprises of the EU 27 Ambassadors and deputy Permanent Representatives) and the Council working groups, made up of national officials based in Brussels - will continue to be chaired by the rotating Presidencies too.

The role of President of the European Council is very new and the job description provided by the text in the Lisbon Treaty is deliberately vague. It can be as elastic as the office-holder wants it to be. If Tony Blair had been appointed, there is no doubt that he would have set to work straight away on building a power-base, very much modelled on Baroness Ashton’s EEAS. President van Rompuy is much more limited in his ambition. Nevertheless, it is not inconceivable that the remit of the permanent President’s role (and accordingly that of the General Secretariat) will, at some point, expand to the point where it rivals the rotating Presidency in setting the Council agenda and pushing through legislation on behalf of the 27 Member States.

The Lisbon Treaty and its implementation impose a complex political balancing act on the Spanish Presidency. Mr Zapatero has been careful to work closely with the new President of the European Council to avoid potential friction over the two presidential roles. They agreed in mid-December to create a working group to coordinate their activities for the next six months. Mr Zapatero told Mr van Rompuy; “Mr Council President, the rotating presidency is at your disposal to support you in taking up appropriately the role of leadership and political steering of the European Council”. However, it seems unlikely that Spain will handover the fruit of months of preparation to someone appointed just last November. It appears that Messrs Zapatero and Van Rompuy have already agreed that Madrid will Chair the EU-US and EU-Latin America Summits, which in principle are to be led by the Council President. So far so good. But what about the implications for the long term future of the Presidency?

The Council President could evidently fully replace Country Presidencies, yet one could argue that rotating presidencies add specific expertise and funding that a single President could not deliver. There’s a case to be made for either system but as events unfold and turf wars break out, as they inevitably will, it will be hard to make a case for both.

Chancellor sets out challenge of EU financial regulation threats in Pre-Budget Report

2009-12-09T11:38:00.000-08:00

Not many clues in the UK Chancellor's Pre-Budget report today on how the Treasury is preparing to defend the City of London against new measures coming from Brussels aimed to restrict the financial services sector. Much less was there any ideas of what the rationale would be when there is, according to some, pressure in the UK economy to reduce dependence on the financial services sector.

New Internal Market Commissioner, Michel Barnier, is on record as saying that the City of London is an asset to Europe. However, there is real anxienty in the Square Mile that the European Commission proposals on market regulation will put the City in a competitive disadvantage and that the Government is not properly geared up to take the battle to Brussels. The Anglo-Saxon model has been castigated by the French, Dutch, Belgian and Germans for the financial crisis even though their banks too were horribly exposed.

The Pre-Budget Report says that the Government is "closely involved in negotiating the proposed Alternative Investment Fund Manager Directive" and that it "has been working to secure substantial improvements". Still early days I suppose but its not clear that the Government has developed a fully operational strategy yet to deal with the regulatory threats to its hedge fund and private equity industry.

The Pre-Budget Report also says that the Government is "actively engaged in EU efforts to amend the Capital Requirements Directive to provide a state-of-the-art prudential framework for credit institutions and investment firms in the EU." Current proposals will raise the amount of capital banks must hold against resecuritisations and assets held in their trading books: "The UK is strongly supportive of the adoption of these rules and will continue to ensure that EU legislation appropriately strengthens prudential standards while being consistent with international agreements."

Another priority is “Solvency II”: "contributing to the development of modern and risk-based EU-wide solvency requirements for insurers that protect Europe’s claimants, savers and pensioners. What would be good to know is what the Government's position on the tax consequences of the Directive is.

The British have a real fight on their hands to defend the interests of the City. It will also have to square its position with its claim to take a global leadership role in cracking down on "excessive risk-taking" in in financial services as well as reducing over-reliance on the financial sector in the British economy.

"For a Free Market Europe" - Syed Kamall

2009-12-07T04:27:00.000-08:00

Syed Kamall - the Conservative MEP for London kindly sent me a copy of his new book -"For a Free Market Europe" - a collection of his articles over the last three years setting out his views on a European Union which should do more to promote free market liberalism.

Syed has been consistent champion of free market values in the European Parliament since he became an MEP in 2005. He is a leading figure in the Brussels Network - which brings together conservatives and centre-right figures in Europe who want to campaign for small-state government. This collection of short articles illuste=rates his commitment to the free-market cause.

Some highlights:

The dilemma of being a free market classical liberal in the European Parliament:
He starts from the fundamental nature of the European Union and its basic premise: Should it be a free-market coalition of sovereign states or should it try to ape the "cross-continental socialist model"?

Should pro-free-market MEP’s work within the system to change it or attack it from the outside? Should some liberalism be an adequate compromise as the “perfect” free-market is unachievable?

The are big questions. However, Syed seems to think the answer is easy. He says the EU should provide a marketplace and a framework of basic rules and minimum standards – better to be an unregulated single market than one subject to overbearing directives

Politicians can only do what they can with the tools available – therefore free-market liberal MEP’s should work from within the system to change it

He applies his free-market thinking to environment policy too: The liberalisation of trade does not cause environmental damage, he says; “Calls for higher taxes often have precious little to do with real environmental factors but a lot to do with environmental posturing or the need to raise new revenue”

“Globalisation and free trade are not only the key to enriching this planet; they may also prove to be the key to saving it.”

Whether you agree with Syed Kamall or not, his written articles over the last few years show that he is on of the most consistent and energetic campaigners of the free market in the European Parliament.

Fight is on for the 73rd Seat

2009-12-04T04:55:00.000-08:00

Dan Hamilton writes in ConservativeHome that the Ministry of Justice in the UK has not yet directed the lectoral Commission to allocate the new seat to the UK due to it under the Lisbon Treaty rules: http://alturl.com/7vzo

Notwithstanding the conclusion he makes that this somehow shows the Labour Government has threatened British interest by not yet naming the 73rd MEP, Hamilton does make a good case for decision sooner rather than later.

It looks like the UK's 73rd seat would go to the West Midlands which would mean the Conservatives would get another MEP. Perhaps this is why there is no rush to make the nomination. If the extra seat goes to London, then Labour would get the extra MEP - Anne fairweather.

In any case, the new MEP - Tory or Labour would have to wait until 2011 (by which time a complex legal protocol will be ratified by national governments) before they are able to cast a vote as a full Member.

Barroso II - Winners and Losers

2009-11-30T10:26:00.001-08:00

Last week William Hague said that the appointment of Baroness Ashton as High Representative was the result of a deal done by Brown with the French to allow Sarkozy to secure the prized Internal Market post for his nomination Michel Barnier.

Whether a deal was done or not, Ashton’s appointment opened the way for the French to secure the job. This has implications for the City of London which faces a raft of EU regulatory measures. The French have been critical of the anglo-saxon model which they blame for the credit crisis and are more keen than the British on regulatory solutions to problems in the banking sector.

Along with France – the other winner is Belgium. Not only did they win the Council President job with the appointment of former PM Herman von Rompuy, they have also secured the powerful Trade job. Karel de Grucht who replaced his compatriot Louis Michel as Development Commissioner when Michel left to become an MEP in June, is a free-market neo-liberal.

Another winner is Germany. Although likely to be disappointed that they didn’t keep the Industry brief, they have taken the Energy Commissioner job with Gunter Oettinger as the replacement for Gunter Verheugen. Germany has a lot of commercial energy interests so should be delighted.

The Spanish too will be happy with getting the Competition portfolio – although there were expectations that their nomination would get Economic and monetary affairs.

I would argue that Finland is another winner. Ollie Rehn who was widely respected while the Commissioner for Enlargement, gets economic and monetary issues.

I understand that Antonio Tajani is not happy with the Industry and enterprise portfolio. I think he was keen to stay at Transport. However, he should be pleased that pharmaceutical controls have been transferred to him from Health to Industry.

Neelie Kroes will be disappointed at getting the new portfolio of digital policy. The only reason Dutch PM Balkenende appointed her (she is not a member of his CDA party) is because he was assured she would get competition again.

Sweden’s Cecillia Mallstrom gets Home Affairs. She is a liberal left wiinger and this will put her in contention with the more conservative Roman Catholic Viviane Reding from Luxembourg who gets the Justice portfolio. This policy enjoys a higher profile under Lisbon and so this policy area could lead to some controversy over the next 5 years.

Johannes Hahn from Austria is the new Regions Commissioner. Austria gets little EU regional funding so this is probably a good thing. ON the other hand Romania a big beneficiary of agricultural funds gets….. Agriculture (DAacian Ciolos who studied agriculture in France and did an internship in DG AGRI).

Barossohas gone ahead with his plan to create a Commissioner for Clime Action – this goes to the Danish Connie Hedegaarde – the Danes are proud of their tough line on climate change and Connie will be a tough taskmaster.

Androulla Vassiliou – moves from health to Education and Culture despite her best efforts to stay.

EU and Industry need closer dialogue on tobacco smuggling

2009-11-20T10:10:00.000-08:00

I understand that there is a motion for resolution doing the rounds in the European Parliament basically banning any contact between the tobacco industry and the EU institutions. If this is true, not only is it gratuitously prohibitive and an ill-thought-out interpretation of what is in the Framework Convention on Tobacco Control, it is also smacks of posturing which could result in bad governance: Particularly at a time when EU policy-makers need to work closely with the tobacco industry to crack down on the growing threat of counterfeit and contraband tobacco.

Tobacco smuggling undermines both the industry as well as EU Member States. The imperative for EU action is the €8bn revenue loss for EU governments in 2008.Tobacco smuggling cost the industry €700m last year.

The Organised Crime, Contraband and Counterfeiting Forum is about to embark on a campaign for a more joined-up approach to fight tobacco smuggling. Some MEPs have already signed up to the cause – such as Bill Newton Dunn (UK, ALDE), Edit Herzog (Hun, S&D) and Andreas Schwab (Ger, EPP). Newton-Dunn wants a European version of the FBI to counter the smuggling trade. How well would they be able to contribute to policy development on this if they were banned from speaking to the industry

OLAF too is talking about the need for greater cross-border co-operation. So far the only co-ordinated effort is being led by the WHO through the FCTC and this just calls on governments to “monitor and collect data on cross border trade in tobacco products including illicit trade”.

The EU should allocate more manpower to stop smuggling (according to the EC Customs Directorate, there are now 10,000 fewer customs officers across the EU than five years ago). MEPs and Commission officials need to be better educated about the industry and how it can help reduce the smuggling. Likewise, EU governments would do well to recognise that it is the sharp excise duties that lead to such big price differentials which has created the boom in illicit trade.

In short - both the industry and the institutions need more dialogue right now - not less

France and Germany - not Belgium and UK - are the real victors of yesterday's EU deal

2009-11-20T03:46:00.000-08:00

Ok so I was wrong last night. I had underestimated Fredrick Reinfeldt. The Swedish Prime Minsiter managed to find a consenus and before they even finished eating their line-caught bass. Against the odds, all 27 European leaders agreed on the Council's nomination for Council President and High Representative. I had predicted a majority vote and to be fair there was every reason to think that unanimity would be impossible. After it became clear that Tony Blair could not muster the necessary support, more names were added to the mix. There were calls for the two posts to strike a balance between North and South, East and West, Male and Female, Left and Right. An almost impossible task.

I also predicted that Former French Minister, Elizabeth Guigou would get the Foreign Affairs job. She didn't - it went to Baroness Ashton, the current Trade Commissioner and former Leader of the House of Lords in the UK. Cathy Ashton has won respect for her command of the brief in the 12 months she has been in the Trade job since she stepped in to replace Lord Mandelson. She was well liked by President Barroso who was instrumental in her successful nomination (she will be Vice President of the Commission as well as representing the Council on foreign policy).

I predicted that Van Rompuy - the unassuming Belgian premier would get the President job - so one out of three aint bad. Mr Van Rompuy is the ultimate consensus candidate. He won't stop the traffic but he will be a stabilising force and will be more than able to broker agreements between member states on european legislation.

Mr Van Rompuy was championed by Sarkozy and Merckel who were keen to prevent a high-profile President (such as Tony Blair) who would steal some of their lime-light. The new Franco-German alliance was successful in getting their Stop-Blair candidate through but I think equally so in allowing the British to think they have done well out of getting the second prize. The High Representative job is potentially very powerful but the British originally wanted an influential economic or industrial post. However, the French have a clear run at the Internal Market position - a role long coveted by Sarkozy and the Germans may go for Trade or stay with industry. Between them they will have removed the anglo-saxon domination of European economic policy of recent years.

The Ultimate Behind Closed Doors Deal

2009-11-19T04:42:00.000-08:00

Its happening in Brussels over dinner tonight - there will be no unanimity but will be decided on majority support (qualified majority at that). Shame the rest of us dont get a say in the matter.

Im still sticking by my prediction: Von Rompuy as President and Guigot as Foreign Affairs (or could Catherine Ashton get it).

What does a Liberal mean in the Europesn Parliament?

2009-11-19T04:07:00.000-08:00

I had always thought that many of the national delegations in the ALDE Group made for very uncomfortable bedfellows. A loose coalition of "liberal" interests, some are free-market evangelicals who would make Lady Thatcher blanche. Others are see themselves as socially progressive first and are comfortable with the state taking responsibility for the well-being of more vulnerable citizens - even if it means social engineering and sometimes even state control of certain aspects of the economy. The British Liberal Democrats would fit into the latter camp - tehir Finance Spokesman, Vince Cable had even advocated the nationalisation of the banks following the financial crisis - something even the Centre-Left Labour governmemt could not countenance doing.

There are other ALDE members who would better fit with the free-market right - of course the FDP is the best example of this. The FDP after years of being in theb wilderness has become a minority partner in the German Government. FDP politicians have secured some senior positons in the Merckel Administration - such as Business, Foreign Affairs, Health (watch for spending cuts) and even International Development (which it had wanted to abolish!). It will be interesting to see how the coalition develops. The FDP regard the CDU as pro-big government and in favour of big spending and high taxes - the FDP dismisses the CDU as "socialists who go to church". It will be a difficult coalition I suspect. As a right wing party, the CDU might seem like natural allies but the FDP would never dream of sitting with them in the EPP Group in the European Parliament. Its strange that the FDP fit in so naturally with ALDE but then again the issue of tax and spending is not so big in the European Parliament. The issue of European integration of course is - which is why the pro-internal market FDP could not hook up with the newly formed European Conservatives and Reformists either.

I was at an interesting event yesterday in Brussels with Alexander Graf Lambsdorff the influential German MEP, who as a member of the liberal pro-free market FDP. He said he was happy to work with the ECR on market issues but they rub eachother up the wrong way on integration issues. I'm a big fan of Lambsdorff's political skills. He said that the FDP is very pro-market but it is also highly aware that markets can and do fail. The more I get to know about ALDE the more fascinating I find it - a lose coalition of parties held together only by their championing of the European Union, civil liberties and, less so, the free market. The pro free-market Guy Verhofstadt the Groups new leader and former Belgium PM is a million miles from his predecessor the more progressive Graham Watson

Darling deserves more credit for his role in handling the financial crisis

2009-11-18T09:07:00.000-08:00

Sometimes you come across something which makes you wonder just how anglo-centric your view of the world is. Nothing wrong in that necessarily – I am after all English and very proud (for all our faults) to be so. But even as a proud Englander, I like to think I can take a helicopter view of all things European. However I was jolted by a Financial Times poll on who was the most effective Finance Minister in Europe is. That Christine Lagarde, the French Finance Minister, tops the poll, is no great surprise. Cool and commanding, she made her management of the financial crisis seem effortless. France has come out of the recession earlier than most and has a healthy balanced economy. However, it is by no means out of the woods yet. Even though Mme Lagarde topped the poll, the French economy ranked number 9 among the panel of experts who factored in political influence, economic assessment of each country and the credibility of each politicians.

No surprise too Brian Lenihan came bottom (out of 19) as Finance Minister for Ireland – the experts ranked the economic status 19 out of 19.

However, I think the unassuming Mr Darling should have ranked higher than 7. True his polling has been dragged down by a poor showing on the economy assessment (UK came 12th because of the disproportionate effect of the financial crisis on the City of London) but it was acknowledged he scored well on credibility (he came 4th). But overall he only ranked 7th – behind Italy’s Giulo Treomonti, for heaven’s sake. He is ranked higher than Lagarde for credibility but lower than German Finance Minister Peer “We are all doomed” Steinbruck. Steinbruck is the Vince Cable of European politics – quick to sound the alarm bells but would be less than helpful in a crisis. Darling has shown the same cool-headed leadership as Mme Lagarde. He should be in second place at least. However, maybe Ive just observed him more closely than the others and I’m just saying that from the Anglocentric perspective of things.

ETS - the next sub-prime? Should we just tax carbon instead?

2009-11-17T01:45:00.000-08:00

I never realised just how huge carbon trading has become. From nothing it has become a €84bn business in London. If the US Congress adopts a cap and trade scheme the value of the market could rise to €3,000.

The European Union's Emissions Trading Scheme (the largest cap and trade carbon market in the world) is arguably the cheapest way to encourage carbon emissions. But there are fears that there will be too much price volatility - coupled with political uncertainties . Wild volatility would not provide any useful price signal for investment in life long assets such as nuclear power stations. Trading will be vulnerable to shocks and destroy at a stroke a company's competitiveness. In short it carries risks - huge risks

Would tax be a better way to deliver carbon emission reduction targets?. It offers greater certainty and is easy to administer. Hopefully US Congress will learn from the weaknesses of the European system and hopefully, there will be some changes agreed to cap and trade at Copenhagen in December. Nevertheless, I can't help thinking good old fashioned taxation might have been preferable all along

shadowy power games expose EU's democratic deficit

2009-11-17T01:28:00.000-08:00

I know it just the nature of things in a club of 27 different countries but the Swedish PM's heroic efforts to find a consensus candidate for the EU President job will result in the lowest common denominator. Worse than that it exposes the democratic gulf that exists in the new post-Lisbon.

I'm no federalist but I am becoming sympathetic to the idea of giving the President a democratic mandate. It might cause a division - possibly between left and right, north and south or east and west - but at least it would produce strong leadership.

Two leading women Commissioners, Nellie Kroes and Margot Wallstrom this week gave their support to former Latvian PM - Vaira Vika-Freiberga aka "The Iron Lady Mark II" for the EU President job which will be decided by European leaders behind closed doors on Thursday. Kroes and Wallstrom say that it is "utterly undemocratic" that more women do not hold senior EU positions. Oh but come on! Utterly unrepresentative, maybe but not one popular vote will have been cast for any of them. Nothing personal - I rate them both highly - but they need to be careful in future when describing whats democratic and whats not.

Have Socialists let Centre-Right choose a candidate just to spike Blair?

2009-10-30T02:40:00.000-07:00

What has been most surprising about last nights dinner discussions in Brussels the role of the Presidency and Foreign representative jobs being created by the Lisbon Treaty is that the European Left have capitulated so quickly on the Presidency job.

Are we expected to believe that the socialist parties are more interested in holding the office of Foreign Representatives when the President job should be alot more powerful in terms of setting the political agenda for the EU. Of course, it's still not clear just how big the job will be - and that was something EU leaders did discuss only very loosely at dinner last night - but it will still be a powerful counterpoint to the position of the European Commission President - and if a member of the centre-right EPP has just been appointed to Commission President position then it is reasonable for the Socialists to go for the top Council job.

I can only assume that opposition among the socialist parties to Blair's candidacy is so great that they conceded this early to spike any potential Blair bandwagon. Blair was counting not so much on the support of Socialist PMs like Zaparto in any case. He did however need the firm support of Merckel and Sarkozy. The Franco-German axis is back - and unconstrained by any centre-right partners in the UK. Sarkozy was enthusiastic in his early support for Blair but has shown he is quite fickle lately -while Merckel has cannily kept counsel on who her favourite contender would be.

The British Press have now assumed that with Blair out of the running for President, then UK Foreign Secretary David Milliband is somehow favourte for the EU Foreign Affairs job. He would make a good candidate certainly - he is from a Centre-Left party and he gave a very-well recieved speech recently mapping out his vision of a post-Lisbon Europe - however, there are stronger candidates such as the French Socialist former Europe minister, Elizabeth Guigou. While Milliband could certainly match Ms Guigou's talents, No 10 would be very reluctant to let him go - his departure would force a by-election in his South Shields constituency. EU think tank veteran Stanley Crossick suggests that if the UK nominate Chris Patten for the post, we would be more likely to win it. Mr Patten - a former EU Commissioner - is hugely experienced in international affairs and would be a restraining influence on his more eurosceptic conservative colleagues. However he is from the centre-right and of course the Socialists will want one of their own for this post.

As for the Presidency job - I am going to be brave and make a prediction. If Tony Blair is too rich for their blood - then the Franco-German axis will go for a compromise candidate - and Herman van Rompoy - Belgian PM would be the classic compromise candidate.

Its not so surprising that this has come down to a tradition Left-Right fight but the fact that the Socialists have just simply sat back and let the Centre-Right pick the top job for one of their own warrants further explanation.

Bruegel Report - Memo to the new Commissioners

2009-09-22T13:03:00.000-07:00

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.

Euro-Parliament Grand Coalition would freeze out Tories

2009-09-22T12:55:00.000-07:00

While Westminster is still to be roused from its long summer slumber, the European Parliament is back at work. New (and returning) MEPs hit the ground running after the Euro elections in June. Already, new political groups have been formed, senior posts agreed, new Rapporteurs appointed to carry on legislation left over from the previous parliament – and last weeks’ last minute approval of President Barosso for third term at the Commission. However, the real work is yet to start.

So what can we expect from the new Parliament? A study by LSE Professor Simon Hix attempts to give a flavour of what the political dynamics will look like. Written for the Swedish Institute for European Policy Studies, “Return of the Grand Coalition” says that because of the success of the smaller parties, neither the centre-right or the centre-left could have the strength to dominate the new Parliament.

He says that the proportional increase in the seat shares of the smaller political groups has come "at the expense of the three main groups – the European People’s Party (EPP), the Socialists and Democrats (S&D) and the centrist Alliance of Liberals and Democrats (ALDE). The EPP have gone down "from 36.7% to 36.0%, the Socialists from 27.6% to 25.0%, and ALDE from 12.7% to 11.4%" of total seats.
Although the Centre Right have fared better than the Centre Left, it is the groups to the right of the EPP that have done much better this time round – at the expense of the Big 3. The European Conservatives and Reformists (including UK Conservatives) have 7.5% of the proportional make-up of the House.

Because the UK Conservatives have defected from the EPP to the new ECR, the German CDU/CSU delegation will dominate but the Italian, French and Polish MEPs will be more influential in the new group than in the old group.The Germans will also dominate the S&D and (along with the British) the ALDE Groups.

I remember when UK’s Labour delegation was larger than the German SPD delegation – in fact it was the largest single group in the Parliament – some 62 MEPs out of 84 UK MEPs (its now down to 11). Yet even with 62 MEPs, the German delegation managed to get its way every time – because of internal faction-fighting in the EPLP (For a day-to-day account of the EPLP’s “glory” days, read the new book by former Labour MEP, Anita Pollack).

Professor Hix says that what is striking about the political groups in the last parliament was the high level of cohesion – higher than that for Democrats or Republicans in the US – quite remarkable when you think of all the nationalities – and various national pressures involved.

Already we are seeing the Franco-German axis making a come-back. This is mostly because the largest group - the EPP has no UK members and the UK's interests - particularly in financial services-where the French and Germans from both left and right want to see more regulation while the UK (again from left and right) want to see - on the whole - a light touch approach. My guess is that we will see the EPP and ALDE and S&D work together more than before - and smaller parties frozen out. It will in some respects resemble the Grand Coalition that has kept Angela Merckel in power for the last four years.

EU leaders say exit strategy from fiscal stimuli must wait until recovery is sustainable

2009-09-18T02:52:00.000-07:00

"The bonus bubble burst tonight" - so said Frederick Reinfeldt - the Swedish Premier after announcing the conclusions to a special EU summit yesterday. Reinfeldt said it was time for the talking to stop and time to take action on banker's bonuses.

Sounds pretty definitive - we can expect EU measures to unilaterally crack down on excessive rewards for risk-taking in the financial services. Reinfeldt, who chaired the Summit, said the public will not stand for profits to remain in private hands while losses come at taxpayers expense. Apart from holding the EU Preseidency, there is good reason to sit up and take notice of the Swedes when they start talking about learning lessons from the banking crisis. Their bail-out of busted banks in the 1990's and subsequently returning a profit for the taxpayer was the model for Gordon Brown when he led the international response to the global banking collapse. So it's a little disappointing that despite the hyperbole from Reinfeldt, his idea of remuneration caps do not feature in the informal common position - only a suggestion that it could be picked up at G20 as a multilateral solution.

Sarkozy, of course was keen on the bonus caps. Berlesconi less so - he says that acting on irresponsible speculation was much more important.

Apart from the economy, mitigation costs of climate change was he other big issue - the Commission wants to raise €100bn by 2020 for mitigation costs. Member States yesterday agreed to a commitment of €7bn upfront annual payments.

The main message, however from the Summit that the exit strategy from the fiscal stimuli should not be applied until the recovery is secured.

Summit Conclusions: http://alturl.com/i68u

Barroso finally gets second term mandate

2009-09-17T03:15:00.000-07:00

Jose Manuel Barroso has been given the support from the European Parliament to start a second mandate as President of the European Commission.

Mr Barroso secured 382 votes in support of his nomination (more than the 269 threshold he would have need in the muhc tougher conditions that would have been set by the Lisbon Treaty). There were 219 votes against and the remainder abstained.

The vote was held in a secret ballot but in reality, Mr Barroso was already assured of three large political groups. Last week, he had met the leaders of the EPP Group (centre-right and the largest group in the Parliament), ALDE (including the UK liberal democrats) and the ECR (including UK Conservatives) who had pledged support for him at the vote earlier today. The ALDE Group leader, Guy Verhofstadt (former Belgian Premier and a contender for Commission President last time round when he had lost out to Barroso) had withheld support until he was able to secure some important concessions for his Group. One of the concessions made to Verhofstadt was to create a special Commissioner post for justice and civil liberties – as well as pledge a new economic recovery plan and a single financial market regulator.

In a three hour debate yesterday, Mr Barroso spelt out his concessions to ALDE on top of his earlier manifesto pledges. They included root and branch EU funding reform in order to source further funding from Member State governments for the Commission and a common approach to migration. Its not clear what the UK conservative-dominated ECR Group - which is also supporting Barroso - think of these concessions.

Mr Barroso stopped short of offering anything substantial to the Socialist Group parties – such as their demands for a new Posting of Workers Directive – although he did say he would look into how best to bring about a new framework for public services

The response from leading figures in the Socialists and Democrats (S&D) has been very negative – Leader of the S&D Group, Martin Schutz says that Barroso’s Presidency would be the weakest in the EU’s history. He has clearly forgotten all about Jacques Santer.

Earlier this month, Mr Barroso issued a 41 page document “Political Guidelines for the next Commission” which set out his priorities for the next term. However, they did not differ from what he had set out in a two page letter to Government leaders in July.

In his document, Barroso proposes that the Lisbon Strategy for growth and jobs, the renewed social agenda, the Stability and Growth Pact, competition and state aid policy, the Sustainable Development Strategy, the climate change and energy strategy, the European Research Area, and the Hague and now the Stockholm programmes on justice and home affairs, all be "channelled" to deliver by 2020 “the kind of social market economy that he says Europeans are calling for”.

Barroso now has to start the difficult task of building a team of Commissioners around him – based on Member State nominations but subject to European Parliament approval.

UKIP leadership in disarray

2009-09-16T03:00:00.000-07:00

What an extraordinary turn of events. Marta Andreasson - serial whistle-blower - has resigned from her post as UKIP Treasurer over Paul Nuttal's (Party Chair)insistence that the salary of a UKIP official be doubled. Marta was the trophy candidate for UKIP at the Euro-elections after she gained notoriety for blowing the whistle on Commission spending when she was the Chief Auditor. For UKIP it was, of course, a gift that she had agreed to be one of their candidates.

Only weeks after UKIP - agains the odds - returned 13 MEPs to Brussels, the party seems to be falling apart at the seams. Not least because its leader the charismatic and charming Mr Nigel Farage has resigned to concentrate on fighting John Bercow for his Buckinghamshire seat at the next UK General Election. Not only does it seem bad form to stand against the Speaker of the House - it seems futile. Mr Farage says he wants to give the elctorate a more traditionally conservative alternative. Yet how does he square this with efforts to make the party more appealing to working class and traditionally Labour supporting voters.

My guess is that Paul Nuttall - a working class boy from Bootle will take on Lord Pearson - - until recently a member of the Conservatives to become Mr Farage's replacement. It will be interesting to see what develops but the general impression of disarray among the leadership will not help them.

I recently had dinner with Nigel Farage - and was impressed with his ambitions to make his party more appealing to the mainstream of politics. Nigel is the best company and hugely personable but I cant help thinking he has made a poor decision here. We will see what pans out but I would imagine that potential donors to the party are for now a little nervous.

Why McMillan-Scott was expelled

2009-09-16T02:27:00.000-07:00

The Conservatives have expelled the former leader of Conservative MEPs, Edward McMillan-Scott from the party. This is extraordinary. Mr McMillan Scott is a highly-respected parliamentarian and I remember him as a compelling figure in the European Parliament when I worked there almost ten years ago.

McMillan Scott was expelled for standing against Michal Kaminski - a fellow member fo the newly formed European Conservatives and Reformists - for a Vice President of Parliament post which Mr McMillan Scott had won.

McMillan Scott had always been a reluctant member of the new political grouping - feeling more at home with the mainstream European People's Party and it will be interesting to see what he does next (he had said before his expulsion that he would not necessarily leave the ECR to re-join the EPP and that he had stood for the Vice President job as a genuine independent).

He is unsurprisingly angry - saying the decision is vengeful and fruitless. He says that to be "expelled on a point of principle is disgraceful".

Cameron has long wanted to sideline Europe as an issue for his party and I supose by expelling a member of its European Parliamentary Party (particularly a senior and serious figure like McMillan Scott) sends a warning shot across the bows of other potential rebels and keep the more avidly pro-European MEPs in line. The Conservative Leadership knows the threat of a party divided over Europe and will want to keep a lid on any hint of division.

Could Baroness Vadera be the UK Commissioner? And who would be sitting with her at the next College of Commissioners?

2009-06-29T13:26:00.000-07:00

My money's on Shriti Vadera being the next European Commissioner. Its such a no-brainer I don't know why I hadn't suggested it before. Now it looks as though Lord Mandelson has given Baroness Vadera his blessing. Its been leaked in the weekend pres that Gordon is thinking of nominating Shriti - a politician entirely of his making - rather than Geoff Hoon who had previously been the favourite. I had assumed that when he left government after the European elections, it was to pave the way to his nomination. But the prospect of an embassing defeat for Labour in Hoon's constituency if he was sent to Brussels was always going to be a dark cloud hanging over his chances. No such problem for Baroness Vadera - a member of the House of Lords. It helps that she is a woman. Barroso has said he wants more women to be nminated to his Commission. The current holder Baroness Ashton is also a woman of course but she has only ever been considered as an interim appointment to allow Brown pull off his masterstroke by bringing Mandelson into his government in 2008. Vadera will either get Trade or Competition.

What about the other names being considered by Member States across the EU? 20 of the 27 Commissioners could be new - so who could they be?

Lithuanian finance minister, Algirdas Semeta has already replaced Dalia Grybauskaitė, the EU budget Commissioner, after the latter was elected President of Lithuania last month. It is expected that Semeta will keep the budget portfolio in the new Commission.

Polish Prime Minister Donald Tusk has chosen Janusz Lewandowski, a member of the European Parliament (EPP-ED) who was re-elected in June, to replace Danuta Hübner, currently commissioner for regional policy, who herself also won a seat in the Euro-elections.

Other possible new Commissioners include the Former Swedish Prime Minister, Carl Bildt (centre-right) who might take the Communication Strategy Commissioner Margot Wallstrom’s place. Industry Commissioner, Gunter Verheugen is retiring and there is equal support for rivals Peter Hinze (centre-right) and Martin Schluz (Socialist Group Leader). Commissioner for Justice, Freedom and Security, Jacques Barrot may have to stand aside to allow President Sarkozy to nominate French Agriculture Minister Michel Barnier to be the new Commissioner for the Internal Market. Another candidate is the Chairman of the regulatory body for financial markets in France – Jean-Pierre Jouyet. Hence it is widely believed that the French are campaigning hard to get the Internal Market job which has been in the hands of the laissez-faire pro-free market Charlie McCreevy and the French have led the way in calling for tougher regulations in the sector.

I expect the Estonian, Siim Kalls to keep his job as Commissioner for Administrative Affairs. So too is Health Commissioner Androulla Vassilou from Cyprus. Italian Antonio Tajani, Transport Commissioner, is expected to be renominated but serve in a different role. Rather unusually, Viviane Reding is expected to serve a third term with the same portfolio after coming top in the European elections. Greek Stavros Dimas is also likely to stay. He wants to remain as the Environment Commissioner for as long as he keeps the responsibilities that are going to form part of a newly proposed DG for Climate Change. He faces a serious challenge from the UK if Gordon Brown cannot keep the Trade portfolio. Malta’s Joe Borg, the Maritime and Fisheries Commissioner wants to stay but may be replaced. Slovenia’s Janez Potocnik, Science Commissioner, may stay unless former PM Anon Rop wants the job. Finland has confirmed Olli Rehn, the enlargement Commissioner as its candidate – although he is rumoured to want the job as the High Representative for Foreign Affairs and Security Policy once the Lisbon Treaty is ratified. Meglena Kuneva, the Consumer Affairs Commissioner from Bulgaria is almost certain likely to be re-nominated. Vladimir Spidla (socialist) the Employment Commissioner from the Czech Republic is also likely to stay despite a strong challenge from the Europe Minister Alexander Vondra (centre-right).

Spain’s Joaquin Almunia, Economic and Monetary Affairs Commissioner, may be called back to Madrid to become Finance Minister and could be replaced by fellow Socialist, Lopez Aguilar. Slovakia may replace Jan Figel, the Education Commissioner with Maros Sfcovic. Former Belgian PM, Yves Leterme may replace Louis Michel, the Development Commissioner since Michel is standing down. Nellie Kroes, the Competition Commissioner from the Netherlands is set to be replaced by NATO Secretary Japp de Hoop Scheffer or Europe Minister Frans Timmermans. There are a number of potential names for Ireland’s candidate following the announcement that Charlie McCreevy, Internal Market Commissioner is retiring. Among them are former PM John Bruton and former European Parliament President Pat Cox. The Austrian Benita Ferrero-Waldner, External Affairs Commissioner, is expected to be replaced by former federal chancellor, Wolfgang Schussel. Danish Mariann Fischer Boel, Agriculture Minister is expected to stand down as is Laszlo Kovacs, the Taxation Commissioner, from Hungary. So too is Romanian Leonard Oban, the Multilingualism Commisioner, and Andris Piebalgs, the Energy Commissioner from Latvia.

Centre-Right anti-federalists form new political group

2009-06-22T04:11:00.000-07:00

The Conservatives have succeeded in forming a new political group within the European Parliament. Tory MEPs led by Geoffrey van Orden MEP have put together a grouping of MEPs from eight different member states - meeting the requirement of having at least one MEP from seven different EU countries. Negotiations over the last couple of days led by Van Orden and the Party's shadow minister for Europe, Mark Francois, have focused on getting commitments from individual MEPs from across the EU27 that they could peel away from the centre-right EPP Group and among new MEPs enetering the Parliament for the first time.

The Conservatives had already secured agreement from the Polish Law and Justice Party which returned 15 MEPs and from the Czech Civic Democratic Party which returned 9 MEPs. The new group includes single MEPs from Belgium, the Netherlands, Hungary, Latvia and Finland.

All member parties have varying domestic political agendas but can claim to be united in their opposition to what they pericieve as federalism. The new Group will be called the European Conservatives and Reformists Group. The Prague Declaration sets out their common values; namely free enterprise, personal responsibility, sustainability, family-values, transatlantic security, effectively controlled immigration, modern public services and greater transparency of EU funds. They will have to carve out a niche for themselves in the Parliament by finding ways of making the Group more distinctive from natural political allies. To this end, they call themselves "Euro-realists" - neither as enthusiastically pro-European as EPP members nor as euro-sceptic as the anti-EU parties such as UKIP.

Already the business community is nervous about the new dynamics of the European Parliament now that the Conservatives have left the EPP. There is a feeling that the EPP - the largest political group in the Parliament - will be effectively a Franco-German alliance and that their approach to business regulation will prevail in the Parliament now that the Conservatives are no longer parliamentary partners. The European Commission President, Jose Manuel Barroso (himself a former centre-right PM from Portugal) has already expressed his "regret" at this move by the UK Conservatives.

Nevertheless, David Cameron has expressed a willingness to co-operate with the EPP. This is the first real practical test of his judgement as leader. He will be keen for this to work. If he senses that the Group will be too euro-sceptic for his mainstream members and the wider public to stomach, it wouldn't surprise me if he would effectively hand the whip back to the EPP Group on everything outside the on-going debates on the Lisbon Treaty.

UK govt succeeds in changing EU proposals on financial services supervision

2009-06-19T10:32:00.000-07:00

The UK has done well to get the EU Summit to share its concerns over the transfer of powers away from national authorities in the financial services sector and has now seemed to have pledged to safeguard the powers of national authorities.

The Czech presidency, along with France, Germany and the UK, reached an agreement in creating the 'European Systemic Risk Board' and the UK succceeded in getting a compromise on the nomination of the Chair. It will finally be given to someone named by the general council of the European Central Bank (where a British governor sits), and not simply to the ECB governor. Another major concession made to the UK; a clause will be included to financial supervision regulations currently being considered stipulating that any mediation between two national supervisors will not have any consequences on the "fiscal sovereignty" of member states.

The Czech presidency already approved the text, and it has been endorsed by the European Council on June 19th 2009. The Council has called for the framework for EU supervision to be implemented in the course of 2010. But lets see what the Commission makes of it all in October

The French and Germans are playing games but it is the Irish who are causing sleepless nights for Barroso

2009-06-19T08:53:00.000-07:00

It was complicated enough in the days when the appointment of new Commissioners was subject to political bartering and backroom deals. Now the negotiations are not only highly political but institutional and legal too.

The coming Irish referendum on the Lisbon treaty is causing all kinds of headaches in terms of timing (the Summit this week agreed provisions for the concerns raised by the Irish in a new annex of the Treaty).

Before the euro elections earlier this month, the Parliament deferred the Commissioners appointment to November, when the referendum results will be known. The Nice Treaty (currently in effect) allows for the nomination of a total of 26 European Commissioners, hence leaving one member state deprived of a representative.The Lisbon Treaty makes provision for the nomination of a commissioner per Member State. We have no way of knowing which rules will apply to the make up of the new Commission until we know the outcome of the Lisbon ratification process. How can Commissioners be nominated, approved by the Parliament and appointed to new jobs if we don't know yet how many Commissioners there wil be?

While this is a headache for the Commission, it does offer some political convenience to member states, since it gives them time promote their favoured candidates for a top job and secure policy commitments from the Commission President. Angela Merkel, for instance, wants to wait until the outcome of national elections in September where she is confident of good result for her party following a strong showing in the Euro-election results. If she succeeds in getting the Social democrats out of the government coalition, she will be free to nominate a Christian democrat.

But postponing the Commission nomination so that it falls under the Lisbon Treaty regime invites another legal problem. People tend to forget that the Lisbon Treaty will not be implemented for a few years, and, even more importantly, is contested by constitutional courts.

In the meantime, the President of the Commission has to be nominated. The European Council gathering this week for the last time under the Czech presidency unanimously called for the renewal of José Manuel Barroso as president of the college of commissioners. Uncertainties prevailed at the Summit about the legal effect of this nomination. Nicolas Sarkozy and Angela Merkel called for this decision to be merely informal and political, whereas Sweden asked for the decision to be legally binding. Fredrik Reinfeldt, the Swedish PM, declared that he feared “uncertainty” and that the EU needed a stable force at this time of transition. In the end, EU leaders only showed an informal and political support to Barroso's nomination to start a second term as President. They put off the legal endorsement of Barroso until mid July when the Parliament is expected to vote on the matter.

However this half-hearted support for Barroso from Council is only half the story. There is a dilemma over when the Parliament's endorsement or otherwise should take place. Should it take place in July, under the Nice treaty, which asks only for a simple majority of the voters? Or should it take place after the Irish referendum, as requested by France, to fall under the Lisbon Treaty regime, hence requiring an absolute majority, much more difficult to achieve?

Even Angela Merkel, who declared a clear support for Barroso's candidature, said that reaching even a simple majority in Parliament will be easier said than done. Whyso? Barroso is facing opposition from the Greens, the Socialists, some Liberal Democrats, and even some from his own group the PPE, who intend to present another candidate in the person of Mr Guy Verhofstadt, Belgium’s former PM.

But altogether, this opposition represents 294 MEPs, which is clearly not a majority (there are 736 MEPs in total). But they maybe will count with the 93 MEPs who are not affiliated yet. However, since the ballot is actually secret, it is difficult to make any sensible prediction.

My money is still on Barroso getting re-nominated - simple or absolute majority. The nomination of Barroso is seen by many as the only solution to resolve the financial crisis and assure continuity in the European Union policies. Asked about his priorities for his second mandate; the former Portuguese prime minister said he would first focus on tackling the financial and economic crisis. Striking a deal at the UN global climate talks in Copenhagen is his second short-term priority, he said.

Furthermore, rumors are flying bout the possible the possible commissioners. Only 7 out of 27 are expected to renew their mandate.

France is pushing to get Barnier, former Agriculture ministry and newly elected MEP, as the Commissioner for Internal Market. However, seeing that this portfolio is significant for the financial supervision reform, Sarkozy might propose the nomination of Jean-Pierre Jouyet, chairman of the French financial market authority.

On the other hand, Merkel stated that she would nominate the Commissioner only when the portfolios are done being attributed to Member States. However, it seems that she plans for Wolfgang Schäuble, Christian Democrat Interior minister, to be the next German EU commissioner, even though others already declared their interests. On the contrary, in Luxembourg, the choice seems to be made, and Viviane Reding should be assured to go on being the Commissioner for the information society portfolio for the third time. In the UK, Geoff Hoon might replace Mandelson, but it would lead to a by-election in his constituency which would be another blow to the already beleagured Prime Minister if Labour were to lose it at a time he is focusing on his fight-back.

Centre-Right Parties Make a Clean Sweep

2009-06-10T00:15:00.000-07:00

Centre-Right Parties Celebrate Electoral Advances Across Europe
The European Parliament elections presented voters across Europe with their first opportunity to cast a verdict on how the EU has responded to the economic crisis that has gripped its 27 Member States. The result was a surprising endorsement of centre-right governments across Europe. Centre-left governments – particularly the Labour government in the UK - fared less well.

The elections should really be a vote on how well sitting MEPs have served their constituents and a mandate for another five years of scrutinising laws made in Brussels and Strasbourg. There is, however, always a temptation to present the European elections as a snapshot of public opinion across the EU 27 Member States. In many ways, that is understandable. Given that voters are not choosing or rejecting a European government, they will take the opportunity to register support or opposition to their own country’s leaders. The political parties’ European groups nevertheless promote pan-European manifestos that address issues such as immigration, climate change and unemployment.

Even though centre-right governments enjoyed a strong showing, there were no significant, pan-European trends to call. The extremist parties enjoyed a surge in support in some Member States but a slump in others. Even the lower turnout – a slip from 45.47% in 2004 to 43.09% in 2009 - can be attributed to factors that varied from country to country.

One clear pattern that has emerged is the consolidation of support for the centre right parties. In the “Big Five” Member States – Germany, UK, France, Italy and Spain, the leading centre-right parties came top of the polls.

The Party of European Socialists (PES) will be dismayed by their poor results. Their share of the vote has fallen from 27.6% to just 22%. The PES had hoped that the centre-right parties who govern Germany, France and Italy would be punished for the economic downturn that has driven up unemployment. However, the French president, Nicolas Sarkozy, German chancellor Angela Merkel, and the Italian prime minister Silvio Berlusconi all saw their parties’ support hold up. In most cases, they faced divided and weak opposition.

In Germany, chancellor Angela Merkel’s Christian Democratic Union and a regional sister party, the CSU, won a total of 42 seats. Their tally is down seven but the result puts the centre-right far ahead of the Social Democratic Party (SPD), the junior party in the governing Grand Coalition. The CDU/CSU remains the largest party in the EPP. The CDU / CSU. With 20.8%, the SPD had its worst result in nationwide elections since the Second World War. This is huge blow to the SPD, which is gearing up for heavy losses in the general election on 27 September. Angela Merkel should be in a stronger position after the elections, not having to keep her opponents on board. Still, she may form a coalition with the liberal Free Democrats, following a surge in their support at the Euro-elections.

In France, the Socialists’ complacency led them to suffer a heavy defeat on Thursday. M. Sarkozy’s personal approval ratings have been in the low 30s yet his UMP won 30 seats – up by 13 from the 2004 elections. The Socialists lost 17 MEPs and ended up with just 14. Francois Bayrou, the centrist who came third in the presidential election of 2007 suffered a humiliating defeat. He tried to use the European campaign to attack M. Sarkozy and build support for another presidential bid in 2012. This seems to have run into the ground following his poor showing in the polls.

Martine Aubry, the new Socialist leader, admitted her party was no longer credible, that it needed to stop internal divisions and make some profound reforms. These elections might plunge the already weak party into further disarray. Many are already referring to the electoral earthquake in 2002 when the party's presidential candidate, Lionel Jospin, failed to reach the second round.

The leader of the New Anti-Capitalist Party, Olivier Besancenot who achieved notoriety for leading a strong left-wing response to the economic downturn also failed to make any breakthrough in the election.

In contrast to M.Sarkozy, Italy’s prime minister Silvio Berlusconi could claim that personal popularity was enough to see off his opponents – even if his party, the People of Liberty Party (PDL) won a smaller share of the vote than expected. The fact that PDL did not reach the 40 per cent share Mr Berlusconi hoped for can be attributed to the ongoing scandal over claims of an inappropriate relationship with Noemi Leitzia, an 18 year old model. Mr Berlusconi won 29 seats compared to the 22 seats won by the centre-left Democratic Party (DP). He was helped by a strong showing from the Lega Nord, a right-wing party that forms part of the governing coalition.

Antonio Di Pietro, a former state prosecutor and fierce critic of Mr Berlusconi, saw his support almost quadruple compared to 2004 to 8%, which will give his party a total of eight MEPs.

The centre-right also made big gains in Poland. Prime Minister Donald Tusk's Civic Platform party won 45.3% of the vote – twice as much as his 2004 results, giving him 25 seats. The nationalist and conservative opposition Law and Justice party was second with 29.5% (15 seats). The Law and Justice Party will join the UK Conservatives in a new political group in the European Parliament. The results confirm a clear trend in Poland towards the Centre-Right at the expense of both the far right and the far left.

United Kingdom voters turned on the governing Labour Party in spectacular style. Labour scored its lowest share of the vote since the days of Ramsay Macdonald.

Spain’s socialist prime minister, Jose Zapatero, seemed get off lightly compared to the drubbing that political commentators were expecting. The Spanish socialists slipped into second place, but they lost just three MEPs and their opponents, Partido Popular, lost a seat.

Fears that the eurosceptic parties would make further in-roads in the European Parliament were unfounded. Despite a strong showing from the United Kingdom Independence Party (UKIP) which came second in the share of the overall UK vote, the Independence-Democracy group, lost votes and the threat from the anti-Lisbon Treaty party, Libertas never materialised.

The Greens say they ran an EU-wide and EU focused campaign but their results across the EU-27 were highly variable. In Germany, the Greens slightly improved on their result from 2004, winning 12.1% of the and gaining one MEP, for a total of 14, In France, the Green Party, headed by Daniel Cohn-Bendt surprisingly finished in third place – just 0.6% behind the Socialists. They won 8 new seats and now have 14 MEPs. Yet in Italy, all the Greens MEPs were defeated and in the UK Green Party didn’t make the gains in the UK as they had hoped.

The election of two British National Party MEPs sent political shockwaves through the UK. Yet the far-right fared even better in the Netherlands where the controversial Gert Wilders Freedom Party came second with 16.9% of the vote. The party is openly anti-Islamic, and Wilders has been refused entry to the UK because of his inflammatory views. The far right made significant gains too, in Austria, where it scored nearly 18% of the vote, and in Slovakia, Hungary and Denmark. However, again there was no pan-European trend since the National Front lost 3 seats in France, three were lost in Latvia and were wiped out in Poland.

The voter turnout across Europe, although generally lower than in 2004, cannot be attributed to any single factor. In some countries such as Poland, the fall in turn out (27.4% - up from 20.87% in 2004) can be attributed to general satisfaction of the EU. However, the proportions of voters in the UK (34.8%) Germany (43.33%), France (40.48%) remain stubbornly low, owing to the growing cynicism and lack of interest towards EU politics.

Even though the British Conservatives (with 26 MEPs) are leaving the centre-right bloc, the European People’s Party (EPP) remains by far the largest political group in the European Parliament, notching up a total of 263 against 163 for the Socialist Group, the PES. The latter won 54 fewer seats than in 2004. The Liberal and Democrat Group (ALDE) has lost 20 MEPs but remains the third largest political grouping in the Parliament with 80 members.

The EPP had been the predominant group in the last European Parliament with 284 MEPs (including 26 UK Conservatives) while the Socialist Group contained 215 members. However the gap has widened and the European People’s Party can expect the support of the UK Conservatives and its allies in the new right-wing grouping on many pieces of legislation going through parliamentary committees.

The strong showing by the EPP parties will change the nature of the European Parliament. There will be less consensus-seeking and a clearer demarcation between left and right. The president of the Parliament come from the EPP and centre right members will have first pick of the most powerful committees. The Commission president Jose Barroso, himself a former centre right prime minister of Portugal, will be relieved that he can push his post-2010 “competitiveness and growth” programme through the European Parliament, without being troubled too much by Socialist Group delays.

The 2009 election results mean that the centre-right will be the dominant force in European politics. The EPP has increased its lead in the European Parliament, Moreover, the collapse in the support for the centre-left in the major Member States such as France, Italy, the UK, Germany, Spain and Poland point to a European Council with a strong centre-right presence.

Should Europe Regulate to Protect Personal Data on the Net?

2009-04-18T04:58:00.000-07:00

Facebook had to back down when it proposed plans to keep personal data entered onto its site - as though it were its own personal property - even if the subscriber closed the account. Google's new Street View service which trained roving cameras on unsuspecting bystanders in 25 UK cities prompted Privacy International to file a complaint with the Information Commissioner. Google has since backed off.

No doubt, on-line media is pushing the boundaries of what many of us are comfortable with. Equally, the authorities, whose job it is to protect our privacy, are struggling to keep up with new innovations. However, do the actions of Facebook and Google prove that industry is capable of regulating itself because it is responsive to customer concerns? Or does it expose the fact that we are woefully ill-prepared for the fast moving developments in new Web 2.0 capabilities?

The European Commission is beginning to believe that new legislation is needed. The Commission recently filed a complaint against the UK government for allowing secret trials by BT and Phorm where internet users habits were monitired without permission. This has led to a Commission review of the regulary regimes in the EU 27 Member States.

It is necessary for industry and government to come together to map out a framework - ideally a voluntary but robust code of conduct - to counter the alarming increase in data privacy breaches. It is industry's interest to reach a consensus with the Commission since flagrant abuses of data protection serve only to damage the reputation of social network and on-line media sites.

It will be up to the industry to show the Commission that it is serious about data protection. Otherwise, new regulations will be introduced - and they could be highly restrictive.

There is every danger that new regulations could be over-imposing and heavy-handed. On 19 February 2009, the Article 29 Working Party concluded that the activities of search engines should "fall under the EU Data Protection Directive” which states that "personal data may be processed only if the data subject has unambiguously given his consent" – the so-called “opt-in” option. This move would represent a radical turnaround in comparison to how search engines have so far worked. Since a query is considered to be personal data, Google and Yahoo will be requested to ask the consent of every single user in order to store this information. Regulators also agreed that these provisions apply to search engines based outside EU, provided they "use automated equipment based in one of the member states for the purposes of processing personal data".

Perhaps the real issue is the enforcement of existing safeguards. They are simply ignored and the sanctions are weak. The EU Data Protection Directive is 14 years old - its provisions are outdated and unclear. It makes sense to review the legislation but it makes more sense to secure a clear commitment from the Commission that the industry can and will responsibly regulate itself.

EU Competition Law and Public Affairs

2009-03-01T06:01:00.000-08:00

Its a mystery to me why its so readily assumed by pretty much every-one in Public Affairs that lobbying has no place in supporting anti-trust files doing the rounds in Brussels and that anything to do with EU competition law is best left with the lawyers alone to deal with. That's why it was refreshing to see that from the lawyer's perspective, political engagement can be of enormous help to a company is the subject of a competition inquiry or is having to deal with DG COMP officials for whatever other reason. Of course, lobbying officials handling competition cases is a no-no but there are compelling reasons for building up political support and developing an understanding of your rationale.

Some of Brussels leading competition lawyers have written on this subject in the latest issue of Concurrences. They concuer that competition is as political as it is legal. Public Affairs brings some accountability to the process and a little transparency can ensure EC officials handle the case more carefully and diligently. Lobbying in the competition arena does require some sensitivity and it is important to know your audience and not over-do it but good lobbying can add practical understanding od the real-world effects made by the Commission and national competition officials.

The Court of Public Opinion is as instructive as the Courts of Law and lawyers increasingly recognise the importance of public affairs in support of their clients' case. Stephen Kinsella says its no longer enough to just defend the client in written submissions and closed hearings - publlic and shareholder perceptions of the case could alos have a significant impact. Kinsella says that many lawyers work in specialised fields and have a blind-spot when it come to other policy issues that will impact on a decision; not taking into account the officials from other Commission departments that have some knowledge and insight into the case. Public affairs consultants can give guidance on how to interpret messages from other DGs.

Kinsella says that there are many political elements to decision-making in antitrust cases. Sector-specific expertise is needed as is an understanding of national interests and even in some cases, engagement with MEPs can help. He reckons, "Consultants can be invaluable in helping put together a strategy and work out where some additional investment in time might pay off in influencing the outcome." Admittedly its sometime hard to identify which bit of your political engagement can have direct effect on the outcome but its generally felt by the legal profession in Brussels that it can add a great deal to the client's armoury or at least insure against a worst case scenario.

Philip Marsden notes that it is important to create a climate where the regulatory and political institutions are more receptive to the clients' business model. Officials in the EU institutions are aware that they live in a regulatory bubble - most have come straight from academia and have never worked in industry and so will welcome a better understanding of the real effects of their decisions.

In summary, the lawyers agree that while you should not attempt to lobby the officials dealing with the case or influence anyone who might put pressure on case handlers, it is a brave and foolish company that operates in Europe without
public affairs advice. Public affairs in the UK has traditionally developed alongside the PR market but in Brussels there is increasing need for skilled publc affairs advice to complement the legal sector. I have always thought it odd that lobbying in the EU anti-trust field has been so under-developed for so long.

UK unions push for early implementation of EU agency worker rules

2009-02-28T07:42:00.000-08:00

The UK Department for Business and Regulatory Reform is burdened with a rather onerous title and, worse a very inconvenient acronym (DBERR). So it probably should come as no surprise that is responsible for creating one of the most inelegant and soulless phrases I have come across for a while. The "Comparator Worker" is some-one who does the same job as you at the same company as you and recieves the same salary as you, only difference being s/he is on a temporary contract.

There should not even be any reason to come up with a new name for what is already understood universally as a temporary worker except DBERR is to carry out a consultation on how best to define such a worker as part of its preparations for the implementation of new EU legislation on agency workers. Businesses want to ensure that there is a clear difference between a temporary worker and a permanent one even if the nature of their work is the same. However Union leaders from the GMB and Unite will be giving a different interpretation when they see Gordon Brown in Bristol today.

The UK reluctantly agreed to a new EU Directive that would give temporary workers to pay as much to temps who have been in the job at least 12 weeks as they would to permanent employees (if their jobs can be similarly defined) and also award the same levels of redundancy to the temp (after 12 weeks) as they would to permanent employees. This arrangement removes the disincentive to employ some-one on a permanent contract as well as any possibility of discriminating against the agency worker if s/he have been working effectively as a permanent employee. The Unions will want to see the measures adopted as law in the UK by April 2010 but business wants to wait until the EU deadline of the end of 2011.

Lord Mandelson will have a view. As will Harriet Harman. Somehow, I'm not sure they will be the same as eachothers.....

E-campaigning trend will decentralise UK political parties

2009-02-28T07:17:00.000-08:00

The UK Centre-Left is preparing to play catch-up in a Centre-Right domintaed blogosphere. Leading weblog commmentators and campaigners from the world of New Labour - such as Derek Draper and Tom Watson MP - are coming together at a Conference organised by think-tank, Progress in London today, to examine how they can harness new media to transform the Labour Party's campaigning.

Of course, many enthusiasts for e-campaigners will point to Obama's remarkable Presidential election campaign as the model for using internet social networking as an effective way of reaching out to voters. Obama's team were highly successful in amassing a huge network of active supporters, prepared to rally more support for Barack Obama in their local communities.

The problem for this model in the UK, however, is that political parties here are much more centralised than they are in the US. Pretty much all political messages and means of campaigning are centrally engineered.

Could e-campaigning lead to decentralised political parties in the UK? Nick Anstead, lecturer in politicas at the University of East Anglia writes in February's Progress Magazine, "We are leaving the mass media age, which was defined by collective information consumption, and entering a period of selective and participatory media..... In order to compete in such an atomised environment, parties must also be decentralised."

As for the race to dominate the blogosphere, the Weekly Political Note from Bell Pottinger Public Affairs points to a stronger Centre-Right presence. It says, "Of those listed in "The Total Politics Top 100 UK Political Blogs", 48 are on the right of the political spectrum and just 30 on the left. The BPPA political note generously gives ResEuropa a mention - although I should point out that it is neither in the Top 100 nor is it politically aligned to either the left or the right!

As soon as the European Election campaigns start in earnest, no doubt we will see UK bloggers try to tackle some European issues. However, there is no sense yet that politicians of either side of the political fence have any real sense of knowing how they could use not just their blogs but other on-line social networking tools, to improve their electoral chances.

McCreevy insists that the Commission should not regulate its way out of financial crisis

2009-02-26T08:22:00.000-08:00

I was at a Conference today in Brussels organised by the European Commission to bring together widely varying views on how private equity and hedge funds should be regulated in the European Union (ostensibly in light of the current financial crisis - although in realty as a result from the European Parliament early last year). The Internal Market Commissioner, Charlie McCreevy - in a keynote speech continues to warn his fellow-policy makers that we cannot regulate our way out of the financial crisis and in any case private equity investment was never part of the problem - but can be part of the solution. Despite bring criticised from within the Commission for being too supportive of private equity, he again made a point of separating private equity from hedge funds. He knows very well it suits his opponents to some-times lump them together.

The Commissioner was generous enough to share his slot with another key-note speaker - his most ardent critic, former Danish PM and leading Socialist in the European Parliament, Poul Nyrup Rasmussen. The Danish MEP continues to push for heavy regulation for the sector. He gave a withering attack on the European Venture Capital Association (EVCA) who, in its submission to the Commission's consultation said that any company that does not abide by the industry's code of conduct could be excluded from its membership. He took this as a reason for why self-regulation would not work - ie: the consequences for non-compliance are too small. (This was more than a little unfair to EVCA since their submission was highly detailed and well thought-through)

It was up to Sir Michael Rake to explain just exactly what self-regulation means in practice and how it should work. He should know - he is the Chairman of the private equity oversight group in the UK - the "Guidelines Monitoring Group", set up following the Walker Review. Since the Walker Review into private equity governance, the UK has set the standard in bringing about higher levels of transparency. Sir Michael told us that compliance is actually rather high. In other words, self-regulation actually works.

However, what Rasmussen really wants is more conditions to be put on Private Equity. The risk for the industry is that when the Commission does come up with its recommendations on improving transparency, that Socialist MEPs would add yet other cumbersome conditions. Rasmussen is clearly paving the way for this. Although he will not get very far while Charlie McCreevy is still in charge, he and his supporters in the Socialist Group may fare better under his successor before he or she puts their feet under the table this Autumn.

2009-02-24T08:44:00.000-08:00

Internal Market Committee could disappear in European Parliament Shake-Up

I'm getting word that the all-powerful Internal Market and Consumer protection Committee, IMCO, could be disbanded as part of a radical shake-up of the European Parliament's committee system. There is a powerful lobby within parliament that wants to see the legal aspects of the committee go to the JURI Committee (legal affairs) while the responsibility for economic and industrial aspects of the internal market would go to ITRE (industry, research and energy).

ITRE would lose energy to Environment (ENVI) which in turn would lose responsibility for public health and food safety. A new committee would be formed for health issues.

A dedicated health committee is long over-due, in my opinion. The suggested reforms gives greater weight to health policy at EU level as initiatives such as the Health services directive pushes the sector higher up the EU agenda. Likewise, energy policy should, to some degree, be considered as part of the environmental agenda (although the Industry Committee must too play an important role in promoting the interests of the energy sector). IMCO has been showing some signs of dysfunctionality with consumer protection issues not being given the prominence that it might perhaps deserve. Although, given the sketchy information we have so far, its not entirely clear whether consumer protection policy is better served elsewhere in the parliament.

The idea is for health and consumer affairs to be dealt with in a single committee - effectively mirroring the responsibilities of the Commission's DG SANCO (health and consumer). Like Energy and Environment, it may seem like a natural fit but it could in fact be a recipe for constant conflict - the new committee would have to deal with the complexities of the pharmaceutical package, which includes directives on information to patients. The interests of the big pharma companies will not always be palatable to powerful consumer groups in Brussels. Again, the Industry committee would need to play a supportive role in forming a coherent parliamentary response to Commission initiatives that affect the sector.

None of this is a done deal and there will be some gnashing of teeth before any overhaul of the committee system is completed. Nonetheless, we can expect some big changes being put in place for the 2009-14 Parliament.

Could the Euro-Elections Finish Off Gordon?

2009-02-21T14:30:00.000-08:00

Talk this week of another leadership challenge to Gordon Brown is rightly dismissed as absurd by the UK press. Nevertheless, it hasnt stopped the UK press from playing up the story. It stems from Deputy Labour Leader, Harriet Harman's drive to get Cabinet action to curb bonuses to bankers. So the theory goes; she is making noises to appeal to the left wing vote of her party and so, it follows, she is positioning herself to take over from Gordon should he fall under a bus. However, Harriet Harman has been doggedly pursuing the issue of city bonuses for nigh on a year. Does she want the job? Most likely, and she would be vying for the mainstream left support of the party along with Ed Balls (ignore the stories that his wife, Yvette Cooper would be the ideal Stop Harriet candidate - for Cooper, read Balls).

More seriously, the Labour High Command are bracing themselves for a dire outcome to the European Elections in June. If Labour come third, then Gordon Brown would be looking as weak and vulnerable as he was last Summer. The BNP are campaigning hard to increase the percentage of the vote they got in the Northwest in 2004 (6.4%) to the 9% they would need to secure an MEP in the region. This would be bad enough but if they won another seat in the Yorskshire and Humberside region, there would be no hiding place for the PM.

Even in this scenario, I don't think that there would be an organised coup against Gordon Brown. I have said that he will feel increasingly compelled to see through the full 5 year mandate to steer the economy through the recession and wait until May 2010 before he calls an election. However, it won't prevent certain colleagues from positioning themselves should he decide to quit early or at least raise their profile over the next 12 months.

Lord Mandelson's determination to see through his controversial proposals to reform Royal Mail against the wishes of a considerable body of Labour MPs will also be a dangerous flashpoint for the PM. Brown could shrug of any revolt over the Royal Mail bill and reinforce his credentials as a radical reformer of public services. It will be the European Elections that would inflict fresh wounds on an already beleagured Prime Minister. Since Harriet Harman is heading the election campaign, she is in real danger of being blamed should the results be disastrous.

2009-02-21T13:33:00.000-08:00

"British Jobs for British Workers" - EU rules may need to be re-written to clarify workers rights

It will be interesting to see what the outcome will be at an unusual meeting between the EU's top business and trade union leaders on Wednesday (25th feb). The crunch summit between John Monks, general secretary of the European Trades Union Confederation (ETUC) and Ernest-Antoine Seilliere of BusinessEurope, hosted by the European Commission, will tackle the thorny issue of how best to prevent workers being undermined when a company from another Member State brings across its own employees to service a contract.

The Posting of Workers Directive, which has been in force since 1996, means that so-called "posted workers" would be covered by the host country's terms and conditions and that collective agreements reached between unions and employers should apply to posted workers. In other words, if you had to move country for a limited period of time, you should expect to enjoy the same benefits as host country workers as a minimum. However, a recent spate of wildcat strikes in the UK in protest of foreign companies eschewing the local labour force in favour of its own workers has got people asking whether the EU rules surrounding "posted workers" are perversely undermining employment standards; an indigenous workforce being sacrificed for the hgher cause of free movement of people in the European single market.

The ETUC blames a recent European Court of Justice judgement for undermining the founding principles of the "Posted Workers" directive. Suddenly, it seemed that the conditions set out in the directive were no longer the minimum that an employer was obliged to honour but rather the maximum. BusinessEurope will be adamant at Wednesday's meeting that no revision of the directive is necessary. They say that to go further would mean posted workers would be discriminated against. Wednesday's meeting will be critical for the European Commission which is itself reluctant to review the directive. The Commission says that the court ruling merely reflects the variety of industrial relations in member states. Although, the pressure will be hard to resist, particularly when the British Nationalist Party is making hay out of the issue in its Europan elections campaign, the Commission will want to avoid any risk of protectionist tendencies creeping in. I have to say that the Commission cannot just wish the problem away. The Services Directive will be implemented this year and this will only increase the amount of workers being posted to another Member State.

The Political Fall-Out in the UK

The row over the posted-workers at IREM, an Italian company, of work it is doing at Total oil refinery in Lincolnshire that has caused something that looks suspiciously like a rift in the Cabinet.

Lord Mandelson has defended the European directive that provides for the arrangements where workers are posted from one EU country to another, while Alan Johnson has said that the EU directive needs to be reviewed.

Nevertheless, the Government line now is that it has been assured Total that the work was open to British workers and that the terms and conditions for Italian workers than would have been to the local workforce.

So That's What They Meant By "Social Dumping"?

Some MEPs from the Socialist Group in the European Parliament have long argued for measures that prevent "social dumping" whereby companies take advantage of the gap between the conditions of the Member State of the guest company and those of the host state.

Now the European Court of Justice says that the Directive limits the level of protection guaranteed to posted workers. Neither the host Member State nor the social partners can ask for more favourable conditions, that go beyond the mandatory rules for minimum protection in the Directive. In effect, while it provides minimum employment protection, it does not guarantee for posted workers rights to be negotioated by collective bargaining in the host state where the employment conditions of host workers are better than the guest workers.

The ETUC wants Member States to revisit the directive and build in extra employment protections into the directive.

The Directive itself is not controversial and has been succesfully freeing up labour mobility for years. However a recent judgement on the directive - called "Laval, Rüffert and Commission v Luxembourg " *has rather negatively interpreted the local workers rights assumed in the directive.

The European Parliament adopted a report by a broad majority on 22 October 2008 ( “Challenges to collective agreements in the EU”) and the Commission’s forum on ’Workers’ rights and economic freedoms’ organised on 9 October 2008 also considered the need for a review. The ETUC is already mobilising support for a review of the directive since it believes the recent ECJ rulings have challenged the original intention of the European legislator.

Whats the Laval Judgement?

Laval, a Latvian company won the tender for construction work at a school in Sweden. They posted their workers from Latvia to Sweden to fulfil the contract. The Swedish unions started negotiations with Laval in order to sign a collective agreement with regard to wages and other working conditions. Laval did not want to pay the wages requested and so they signed a collective agreement in Latvia - and not Sweden. In response, the Swedish negotiations, the Swedish trade unions took action by blockading the construction site.

With regard to the right to strike as a fundamental right, the ECJ applied the "proportionality test". The Court said that collective action for the protection of the workers of the host State (Sweden) against "social dumping" (undermining the conditions for host state workers) may constitute an overriding reason of "public interest". The means of blockading action by a trade union falls within the objective of protecting workers. But in the actual case concerned the action could not be justified due to an incorrect implementation of the posting of workers Directive.Most of the judgement concerns the interpretation of this Directive. The ECJ found that negotiation at the place of work, on a case-by-case basis, when minimum rates of pay are not determined in accordance with one of the means provided for by the posting of workers directive, are not permissible under the Directive. The Court heavily criticised the Swedish collective bargaining system, saying that it created uncertainty for businesses since they had no way of knowing what the conditions they would have to guarantee before they would post their existing workers from Latvia to Sweden.

The ETUC wants regulation for the joint and several liability of main contractors and intermediaries, at least where the payment of tax, social security contributions and wages is concerned. The Commission produced a paper on this on 2 July 2008 but the ETUC says it doesn't go far enough. They are looking for further rights to transnational collective bargaining, not available under the Posting of Workers Directive.

A Resolution drafted by Jan Andersson MEP and adopted by the European Parliament in October last years says that the ECJ in recent rulings has interpreted the directive in such a way that effectively changes the directive from one setting minimum standards to one setting maximum standards.The Jan Andersson Resolution says it is up to Member States to implement the directive - the way it was intended to be since labour market legislation and rules concerning negotiations and collective agreements are the competence of Member States.At EU level it proposes:new legislative proposals to prevent conflicting interpretation in the future. This should include a partial review of the PWD, "with specific regard to the issues of applicable working conditions, pay levels, the principle of equal treatment of workers in the context of free movement of services, respect for different labour models and the duration of posting".re-casting the directive so that it is made explicit that it does not prohibit member states and social partners from "demanding more favourable conditions, aimed at equal treatment of workers, and that there are assurances that Community legislation can be implemented on the basis of all the existing labour market models."new EC measures to combat "letterbox-companies" "which have been created, sometimes even directly by the main contractor in the host country, for the sole purpose of carrying out business in the host country, in order to circumvent the full application of host country rules and regulations in particular with regard to wages and working condition"immediately adopt the Temporary Agency Workers Directive.