Open Europe press summary: 30 April 2009

Europe

Hedge fund industry warns new EU regulation will drive business away and cause job losses;
Socialist MEPs vow to toughen up proposal: We will not accept such an ineffective regulation
The alternative funds industry has reacted with anger at the Commission's proposal for stricter regulations of hedge funds and private equity groups.

The Commission's proposal, tabled yesterday, would require alternative fund managers, rather than funds themselves, to register and seek government authorisation for the first time. Fund managers would also have to meet reporting, governance and risk management standards, including minimum capital requirements.

The law would apply to all managers of alternative investments that use borrowed money and control at least €100m of assets, covering 30 per cent of hedge fund managers and 90 per cent of hedge fund assets. It would also apply to private equity groups that do not use borrowed money in their funds if they manage minimum assets of €500m and have a five-year lock-in period for their investors.

The Telegraph quotes Antonio Borges, Chairman of the Hedge Fund Standards Board, warning: "This is a blatant attack on the UK and US financial systems by continental countries...With the European elections coming up this is clearly political." The paper notes that over 80% of Europe's alternative investment industry is based in the UK.

The FT quotes Stuart Fraser, Chairman of the Regulatory and Policy Committee of the City of London, saying, "The disclosure requirements would certainly drive the businesses away."

Florence Lombard, Executive Director of the Alternative Investment Management Association, is quoted on Bloomberg warning, "The unintended consequences of these measures may put thousands of jobs in several major European industries under threat and slow down any economic recovery."

Lombard added: "It's perplexing that Brussels is focusing on hedge funds and private equity first. If you were making a priority list of systemically important financial institutions, based on the evidence of recent catastrophes, the hedgies would be low down and the buy-out specialists might not be on it at all."

Meanwhile, City Minister Paul Myners yesterday told a House of Lords committee that he had raised objections to the plans with the Commission. "I have a fear that we are going to see something coming from Europe which leaps on hedge funds and private equity as a source of instability that is not necessarily as well informed as it should be," he said.

However, MEPs - who in practice have a veto over national government in the negotiations - have vowed to toughen up the proposal. Poul Nyrup Rasmussen, President of the Party of European Socialists, said "What we have today is regulation that is inadequate", adding that he would not accept the exemption for private equity group in the current proposal: "Private equity can pop the champagne today but they may not be celebrating for long as we will not accept such an ineffective regulation," he said. The centre-right group in the European Parliament said in a statement that the proposal is "perhaps not enough.

In previous draft proposals, the Commission had suggested an across-the-board de minimis exemption for managers handling less than €250m. Yesterday it emerged that the threshold will be €100m, suggesting that the Commission is beginning to give in to pressure from socialist factions in Brussels.

The proposed legislation needs the backing of both the European Parliament and member states. According to media reports, the proposal is unlikely to get approved before the middle of next year at the earliest. Since the decision is subject to so-called Qualified Majority Voting, the UK doesn't have a veto over the final decision. In the FT, Andrew Hill warns that, "When the debate in Brussels gets political, Britain can simply be outvoted."
WSJ Telegraph Bloomberg FT FT2 FT-Lombard FT-leader Guardian EUobserver Euractiv European Socialists EPP-ED Coulisses de Bruxelles Le Monde

Open Europe debate - European Monetary Union: Second honeymoon or pending divorce?
On Tuesday, Open Europe held a panel debate in Brussels looking at European Monetary Union and the challenges it faces. Open Europe's vice-Chairman and former economic advisor to Tony Blair, Derek Scott, stated that: "Economic and Monetary Union was a major mistake". He said that although it is true that countries have avoided currency crises by being in the euro, currencies, as well as interest rates, are important signals of things going wrong: "When the patient gets sick, all that means is the symptoms get to come out in other areas, and we are beginning to see that in very high levels of unemployment, higher debt and so on."

He concluded that a monetary union "cannot exist without having a political union and you cannot impose a political union."

Ignazio Angeloni, Advisor to the Executive Board of the European Central Bank warned Eastern European countries not to join the euro area too soon, saying "the decision to join the euro area is very similar to marrying. Do it only if you are convinced. Not only your partner should be right, but also you should be ready to marry. Don't also do it because of other problems that you have".

David Marsh, author of "The Euro: The politics of the new global currency", said that Germany will pay a very high price to keep EMU together, whether it will be through the back door or not. EMU is about preserving Germany's export markets, and is something like a holy grail". He concluded, "The only way for the euro to survive is to have a political union. Without that, sooner or later the eurozone will break up."
No link

France secures EU support for controversial 'three strikes and out' internet piracy law
El Mundo reports that France has secured EU support for its controversial internet piracy law, after an agreement was reached yesterday between the European Parliament and member states. The French 'Hadopi' law enables authorities to disconnect internet users who are guilty of illegal downloading after 'three strikes', without a court hearing. Previously the European Parliament had insisted that a court order was necessary to limit internet access.

The Commission, Parliament and Council have all declared that they wanted to conclude negotiations on this legislation prior to the European elections. There will be a second reading of the proposed legislation and a final vote in the European Parliament next week. Meanwhile, the French National Assembly began debating the legislation for the second time yesterday, after it was rejected in early April.
El Mundo Le Figaro Irish Independent Le Point Le Point

Finnish Trade Minister: "The Euro was a mistake for Finland"
Finnish Foreign Trade and Development Minister and former MEP, Paavo Väyrynen, is quoted in Helsingin Sanomat saying that "joining the EMU without Sweden was a mistake". Referring to the drastic downfall of the forestry industry in Finland in the past few years, he said that, in comparison, the Swedish forestry industry which is outside the "expensive Euro is blooming, as it gets a lot of revenue from the expensive euro".
HS

Commission tables proposals on banker's pay and bonuses
The Telegraph reports that Internal Market Commissioner Charlie McCreevy yesterday announced plans to clamp down on banker's pay and bonuses. The article notes that the draft law would give financial regulators the power to intervene in bank remuneration policies deemed to pose risks to the market.

The BBC reports that the Commission's proposals recommend that firms should be able to claim back bonuses already paid. The article quotes McCreevy saying, "It is neither sensible nor sane that pay incentives encourage excessive risk taking for short-term gain. Incentives need to be aligned with long-term, firm-wide profitability."
BBC Telegraph El Mundo El País

French farmers receive 8 billion euros in European subsidies each year
Le Monde reports that a website will be launched today which enables people to search for an individual, company or village and find out the amount of farming subsidies they receive.

However, the article notes that the system is still not completely transparent as individuals can disguise the amount they receive by hiding behind companies. The article emphasises that amongst those who receive the most financial assistance are not farmers but companies from the dairy, poultry and pig farming industries. In total, France receives 8 billion euros in EU CAP subsidies annually.

Meanwhile, Le Monde notes that Germany is still refusing to publish information on the list of recipients of Common Agricultural Policy subsidies despite mounting pressure from the European Commission.
Le Monde Le Monde

Commission proposes EU's budget for 2010
EUobserver reports that the European Commission yesterday proposed its €139 billion budget for 2010. 40% of the budget will be paid to the EU's farmers, while 45% will be spent on regional projects. EU Commissioner Siim Kallas said, "The budget targets measures to help avert an even sharper downturn."

The article notes that an increase of 12 percent has been proposed for programmes linked to research and energy while, while the EU's satellite navigation programme, Galileo, is set to receive an extra 8 percent next year.
EUobserver

Commission weighs whether Germany can maintain migration restrictions for Eastern European workers
Süddeutsche reports that the Commission is scrutinising the German Federal Government's request to maintain labour market restrictions on migrants from the EU's new member states. The article notes that Germany and Austria are the only two member states still applying these restrictions, while Belgium and Denmark have agreed to open their borders on 1 May.

Employment Commissioner Vladimir Spidla is quoted saying: "We respect the right of all member states to maintain transitional rules in the case of serious disruptions of the employment market." Handelsblatt quotes Saxony's Minister President Stanislaw Tillich saying, "Saxony pleads for targeted migration of skilled labour from Eastern Europe".
No link

Speakers from five EU parliaments express joint concern over 'uncertain' future of the EU without Lisbon Treaty
Yesterday, speakers from the parliaments of five EU member states warned about an uncertain future for the EU without the Lisbon Treaty. Representatives from Germany, France, Italy, Poland and Hungary joined forces to encourage member states to ratify the Treaty, calling it "an indispensable solution for the action capacity of the EU", DPA reports.
DPA AFP

Ageing population will raise public expenditure in the EU by 4.7% of GDP up to 2060
FTD reports that the EU Commission is demanding member states to undertake reforms to combat demographic change. FAZ reports that Commissioners Joaquín Almunia and Vladimir Spidla presented a report on Wednesday, which says that the EU's ageing population will raise public expenditure by 4.7% of GDP until 2060.

Writing in the Telegraph, Ambrose Evans-Pritchard notes that, "The EU's working age population will peak next year before tipping into decline for half a century".
Telegraph: Evans-Pritchard FTD

Israel threatens to end EU's role in Middle East peace talks
EUobserver reports that Israel is deeply unhappy with public comments made by EU officials regarding its government and the Palestinian peace process and has threatened to end the EU's mediation role in the region.

Deputy Director for Europe at the Israeli Foreign Ministry, Rafi Barak, reportedly told European ambassadors, "if these declarations continue, Europe will not be able to be part of the diplomatic process, and both sides will lose."
EUobserver

Open Europe's research on the EU's structural and regional funds was cited on Czech website Ekonom and Polish website Parkiet.
Ekonom Parkiet Open Europe briefing

FT: The EU faces a tough year in 2010
An article in the FT notes that "a combination of soaring budget deficits and feeble economic recovery threatens to make 2010 a year of challenges no less demanding than those of the past 12 months." The article notes that 13 of the eurozone's 16 countries are expected to have budget deficits above 3 per cent of GDP and that Barclays Capital estimates that 11 of the 16 eurozone states will have debt-to-GDP ratios of more than 60 per cent, the ceiling set for countries wishing to adopt the euro.
FT

Garton Ash: We are not going to have a single, united European democracy any time soon
Writing for the Guardian's Comment Is Free site, Timothy Garton Ash argues, "The people of Europe vote by not voting. They speak about Europe by not speaking about Europe. So let's face it: we do not have a functioning, legitimate and effective Europe-wide direct democracy, nor will we any time soon."
Guardian: Garton Ash

Germany has cut its growth forecast, admitting that its economy will contract by 6 percent this year in the worst recession of any major country in the Western world.
Telegraph

In a letter to European People's Party (EPP) group leader Joseph Daul, Conservative leader David Cameron has confirmed the party will leave the EPP group in the European Parliament after the June elections.
The Parliament

A leader in the Sun writes that "William Hague's pledge that a Conservative government would try to kill off the EU Lisbon Treaty is welcome."
Sun: Leader

In an article looking at the European Court of Justice's ruling on the property rights of Britons in Cyprus, FAZ comments that "the times when decisions of the European Court of Justice were undervalued are over", adding that "Many of the court's judgements have huge political significance".
Eurotopics

Silvio Berlusconi's wife has condemned his attempts to get a beauty queen, showgirl and reality TV star to stand as candidates in the European elections.
Independent Times

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