Open Europe press summary 23 September 2009

Europe

Proposal for more EU supervision of financial sector could hurt City of London
Open Europe has responded to the European Commission's proposal today to create three new EU authorities with the power to oversee and intervene in national financial markets.

Under the proposal, the Commission will for the first time be granted power to overrule national supervisors, such as the UK's Financial Services Authority, on important issues such as short-selling and recapitalisation of banks. Decisions in the new EU authorities will be taken by a simple majority with the UK having the same voting weight as other member states, meaning that the UK could easily be outvoted on issues of vital importance for the country's financial services industry.

Open Europe argues that the proposal means a significant shift in powers from national supervisors to the EU. In the past, the European Commission has had only regulatory powers, but for the first time it will now be given a direct supervisory role and the power to overrule national authorities, such as the UK's FSA.

The ESFS will be composed of three new supervisory authorities in the banking, securities and insurance and occupational pensions sectors. The Telegraph reports that Germany has serious concerns that the Commission's proposal provides the three new EU supervisory authorities with considerable powers. Berlin says the Commission has overstepped its mandate by pushing for the creation of three agencies with supra-national powers to dictate policies to regulators in each state, including Germany's BaFin watchdog.

Several newspapers report that Mervyn King, the Governor of the Bank of England, is expected to be offered a powerful role within the European Systemic Risk Board. The Times says that the move would be aimed at winning British backing for the plan. In particular, Britain has taken exception to the fact that Jean-Claude Trichet, President of the European Central Bank, will head the ESRB.
Open Europe Press Release Open Europe Briefing Telegraph Times FT City AM Reuters Telegraph

French Minister for Europe: EU should have a defence budget, just as it does for agriculture
In an interview with the EU Affairs Committee of the French National Assembly, French Europe Minister Pierre Lellouche has confirmed that the French Foreign Office is working on the establishment of the new EU diplomatic service, which is provided for in the Lisbon Treaty. He said: "In the Quai d'Orsay, we are already working on defining the nature, the scope and the missions of this new service, in close liaison with our partners."

He also suggests that the EU should have a defence budget, just as it has a budget for agriculture. He says: "In order to progress with 'defence Europe', it should not be that spending linked to security is completely separate from the EU's financial perspectives. Why should three member states contribute to the equivalent of two thirds of the military spending of the 27?... We need to put these questions on the table, in the same way as agricultural policy, technological innovation or the environment."

Lellouche also claimed that further EU enlargement was conditional on ratification of the Lisbon Treaty, saying, "You know France's position and the condition that the entry into force of the Lisbon Treaty constitutes for us." He added: "The French position is to make all new enlargements conditional on the entry into force of the Lisbon Treaty." Reiterating that France is opposed to Turkey's accession to the EU, he said, "Since my appointment, I have met with numerous European colleagues, the majority of whom have confided in me that they share the position of France, but that they cannot express this publicly."

He confirms that he "will do everything" to ensure that Strasbourg stays "European capital", and also says that from next week, members of the committee will be invited to the French Foreign Office every fortnight for working breakfasts to discuss European issues. He also says the government is considering the idea of a "Franco-German minister", which would go to somebody with dual nationality.
French Foreign Office

Ryanair Chief O'Leary offers to debate Lisbon Treaty with Declan Ganley
An article in Business World reports that Ryanair Chairman Michael O'Leary has offered to debate the Lisbon Treaty with Libertas founder Declan Ganley. The Irish Independent also reports that O'Leary has been flying around regional airports in Ireland promoting a Yes vote, alongside EU Transport Commissioner Antonio Tajani. The paper writes, "He [Tajani] wasted no time in reminding the Irish we have enjoyed 'much money' from Europe. The message was clear: a 'No' vote this time will have consequences."

The Irish Times also reports that O'Leary said one thing people should know about Brussels, "it's that these f***ers have very long memories. They stuck it to us enough times... You can never link one with the other, but Ryanair's offer to Aer Lingus is the only airline merger that's been turned down by Brussels on competition grounds in 30 years."

Meanwhile, at a debate at Trinity College Dublin yesterday, Declan Ganley described the second referendum on the Lisbon Treaty as "democracy Brussels-style", and said "It falls on all of us to ask ourselves the question, do we have the courage to demand that our European Union is something that is built on principles of democracy and accountability in the ballot box."

Writing in the Irish Times, Vincent Browne argues that, "By incorporating the EDA [European Defence Agency] in the institutional structure of the EU, the Lisbon Treaty seeks to accord status to a project that, in part, is about boosting the manufacture of arms for sales around the world and seeks to further plans for wars for resources and for the containment of migrants."

The Irish Times reports that a fresh constitutional challenge to the Treaty, that could delay Berlin's ratification until after Ireland's referendum, was lodged on Monday, which argued that laws created to allow ratification of the Treaty in Germany do not sufficiently guarantee the role of the constitutional court as "guardian of the constitution".
Irish Times Irish Times 2 Irish Times 3 Irish Times 4 Irish Times 5 Irish Times 6 Irish Times 7 Irish Times 8 Irish Times 9 Irish Times 10 Irish Times 11 Irish Times 12 Irish Times 13 Irish Times 14 Irish Times 15 The Parliament Irish Independent Irish Independent 2 Irish Independent 3 EurActiv

Lord Leach of Fairford: The EU is "anti-free market"
The Telegraph features thoughts from several leading British business figures on the benefits and drawbacks of the EU. Lord Leach of Fairford, a Director of Jardine Matheson, and Chairman of Open Europe, suggests the EU is fundamentally "anti-free market" and is quoted saying, "Britain is so constrained by regulations that we are being dragged down into the least competitive sector of the world. It is very strange that we, as a great champion of the free market, should find our relations with China, India and Brazil projected through an introspective, protectionist, anti-free market prism."

Simon Wolfson, Chief Executive of Next, adds that: "I think that the big benefit of the EU is the free movement of goods and the free movement of labour, and this becomes more important as the EU expands east. But the costs of what started as a free trade agreement and the burdens of regulation and bureaucracy are increasing every year. Unless Europe can change its ways, the negatives will outweigh the benefits."

The article suggests that the EU's Alternative Investment Fund Managers Directive could threaten London's role as a financial centre, and quotes Simon Walker, Chairman of the British Venture Capital Association, saying: "It's a bit like the community saying we are not into bull-fighting so we are going to ban bull-fighting when the only country affected is Spain". He adds, "I've always thought of myself as someone who is broadly supportive of the EU as a concept but it does upset you when you see the willingness to inflict damage on one's sector by other countries".
Telegraph

Intense lobbying against AIFM Directive is underway
A Bloomberg article looks at the EU's proposed Alternative Investment Fund Managers (AIFM) Directive, citing extensively from a recent event organised by Open Europe and Policy Exchange where European Socialist Party President Poul Nyrup Rasmussen addressed hundreds of hedge fund and private equity managers in London's Guildhall. The article quotes from Open Europe's recent research on the proposals, pointing out that the new Directive could cost funds as much as €1.9 billion through increased compliance costs in the first year and €985 million annually thereafter.

Swiss paper Le Temps also cites the research, noting that the hedge fund and private equity industry contributed €9 billion in tax revenues to EU governments in 2008, and that intense lobbying over the Directive is currently underway.

Meanwhile, the BBC quotes German Finance Minister Peer Steinbrück saying, the UK has "particular difficulties" regulating hedge funds "to put it politely."
Bloomberg Le Temps Hedge Co Net Open Europe events Open Europe research BBC

Philip Johnston: 'Europe needs to face up to the migration challenge'
In an attempt to tackle EU immigration issues, various proposals have been aired, including the establishment of an EU frontier force of about 400 and "burden sharing", strongly supported by the French, reports Philip Johnston in the Telegraph.
He claims that as the immigration crisis grows, pressure will be applied on Britain, in particular, to take more asylum seekers because other European countries, rightly or wrongly, believe the UK acts as a magnet to many migrants who speak English, have communities in Britain and believe that work or benefits are easily available to sustain them.
Telegraph Independent: Leader Le Monde Guardian: Travis Guardian: Leader Times Times2 Messaggero

David Cameron appeals to Vaclav Klaus over Lisbon Treaty ratification;
David Miliband: Are the Conservatives going to live with it, or are they going to fight it?
The Mail reports that Conservative leader David Cameron has written a letter to Czech President Vaclav Klaus reassuring Mr Klaus that if he withheld his signature from the Lisbon Treaty, thereby delaying its ratification, Mr Cameron would stage a referendum in Britain if he is elected at the next General Election. The paper also reports that a close source to Mr Cameron said the letter did not explicitly urge Mr Klaus to hold up the Treaty.

Meanwhile, in an interview with the Telegraph Foreign Secretary David Miliband described the Conservative Party's policy on Europe as "a massive strategic weakness", and said that any pledge to hold a referendum on the EU could condemn Britain to years on the sideline in Brussels. He accused David Cameron and Shadow Foreign Secretary William Hague of surrendering to "euro-extremism" adding, "The Tories have to decide: are they going to live with it [the Lisbon Treaty] or are they going to fight it? I don't often quote Lord Tebbit but in this he is completely right - 'there is no third way'".

He added, "It is obvious to me that if they choose to fight it they are condemning a possible Conservative government to years of endless, futile, useless fighting with the EU."
Mail Conservative Home Ceske Noviny Standard Telegraph Iain Dale's diary

Sarkozy could walk out of G20 summit over bonuses;
US clashes with France and Germany over capital requirements
In an interview with the Telegraph, French Finance Minister Christine Lagarde has said that bonuses are top of President Sarkozy's list of issues to tackle at the G20 summit in Pittsburgh. She added that Sarkozy could walk out of the G20 summit without a "substantial, significant and detailed" deal on reining in bankers' bonuses. "I hope that we will save [Mr Sarkozy] the trouble of having to walk out," she said, adding, "I would find it absolutely outrageous and extraordinary if leaders of other countries did not understand the necessity to change the system and not go back to business as usual."

The WSJ notes that a major area of contention is capital requirements and the recapitalisation of banks. US officials, led by Treasury Secretary Timothy Geithner, want to erect tough new capital requirements but French and German officials argue that this would require their banks to raise much more capital than US institutions. Because US banks such as Citigroup Inc., Bank of America Corp., and J.P. Morgan Chase & Co., were required to hold more capital than most of their foreign competitors before the crisis, European banks have a longer way to catch up.

The BBC notes that German Finance Minister Peer Steinbrück has accused the UK of blocking tougher financial rules ahead of the G20 summit. It quotes him saying, "There clearly is a lobby in London that wants to defend its competitive advantage tooth and claw." He added that "We will deeply change the rules of the game for financial markets."
Telegraph WSJ City AM Irish Independent WSJ 2 BBC

Poland and Estonia win court challenge over EU limits on emissions;
Ruling threatens EU's entire 'cap and trade' scheme
Bloomberg reports that Poland and Estonia have won court challenges to EU limits set on their CO2 emissions for energy and manufacturing companies. Reuters notes that the European Court of First Instance in Luxembourg said today that "The Commission exceeded its powers" and that the judgment could open the door for other EU states to try and increase their quotas of carbon permits under the EU emissions trading scheme (ETS).

Under the EU's ETS, countries get a certain allowance of carbon emissions rights that they apply to industry such as power plants and steel mills, which can then be traded, setting a price on emitting carbon. But Poland, Estonia and other countries had argued that their quotas were unfairly small under the second trading phase of the scheme.

A concern among EU carbon market participants is that the ruling, if upheld on appeal, could cause an unravelling of the whole cap and trade market - Europe's flagship scheme to fight climate change - which depends on a tight cap on emissions. EU CO2 permits for December declined in London, trading as much as 5 percent to their lowest price since July 7, effectively reducing the price to pollute.
Reuters Bloomberg Open Europe research

Presentation of EU budget shows German payments hitting historic highs
The presentation of the annual accounts of the EU by the European Commission has shown that German contributions to the EU budget have hit new historic highs, making it again the largest net donor to the EU budget, reports EUObserver. It notes that Greece was the largest net recipient of funds from the EU's 2008 budget, having received roughly €6.3 billion, far ahead of Poland in second place on €4.4 billion. The UK's net contribution to the EU budget fell from €4 billion in 2007 to less than €1 billion in 2008, primarily due to the country's weaker exchange rate with the euro since the financial crisis.
EU Observer Handelsblatt Welt Zeit FAZ Presse Beursduivel EC Press Release European Commission Report European Commission Report 2

EUObserver reports that French President Nicolas Sarkozy has called for an additional summit on climate change to be held before the UN summit in Copenhagen in December. The call comes as the Guardian reports that China, the world's biggest polluter, has pledged a "notable" decrease in the carbon intensity of their economy, a positive step towards reaching an agreement in the Copenhagen in December.
EUobserver Guardian

In an interview with Le Figaro Mariann Fischer Boel, the European Agriculture Commissioner, said that the system of milk quotas will disappear by 2015. She continued to say she is doing everything she can to stabilise the European dairy market after a series of strikes by dairy farmers.
Le Figaro

A report published by the European Commission yesterday described the price structure for current accounts offered by European banks as: "very opaque making it almost impossible for consumers to know how much they are paying."
Times Irish Independent EUobserver European Voice EurActiv WSJ

Polish Daily Wprost24 reports on a leaked document drafted by the Polish Embassy in Berlin, which warns the Polish Foreign Minister that "due to the new German law enforcing the powers of the German Parliament, the country will become a much more difficult partner in certain areas of European decision making process, especially in the sphere of justice and home affairs, in particular on issues of harmonisation of criminal law and family law with cross-border effects."
Wprost24

Sueddeutsche reports that Economic and Monetary Affairs Commissioner Joaquín Almunia considers a global tax on financial transactions to be "a very good idea". He said that the revenues could be used as development aid for poor countries and that the G20 should "ponder and discuss" this idea during the summit in Pittsburg. With the exception of Austria and France, most EU member states are sceptical towards global financial market taxes.
Sueddeutsche

Writing on Conservative Home, Charles Tannock MEP argues that the "Conservatives must now make a stronger case for what the EU can achieve in Britain's interests, particularly following the creation of the ECR Group in the European Parliament...We need to develop further our ideas of reform and avoid peddling myths about the EU as UKIP does in order to try to make the case for Britain abandoning the EU."
Conservative Home: Tannock


Open Europe is an independent think tank campaigning for radical reform of the EU. For information on our research, events and other activities, please visit our website: openeurope.org.uk or call us on 0207 197 2333.