Friday 30 September 2011

Financial Transaction Tax and Multispeed Europe

The UK government's stated opposition to the FTT was hardly unexpected. With the City of London acting as the financial heart of the EU, and a sacred (cash) cow for the UK government in terms of tax receipts, the UK was always going to be resistant to the idea. Barroso, in his State of the Union speech, seemed to recognise this and generally supported a two-speed (or multi-speed) EU.

When the national interest is invoked as a reason for a policy position, it shuts down debate. However, while national interest is part of it, since the UK government supports the idea of FTT in principle, provided it is applied globally, there has been a bit more debate on the idea. I have to admit that I don't fully understand the mechanics of how the tax would puch financial businesses outside the EU and outside the UK: my understanding is that the proposed tax would be applied to transactions where one side of the transaction was in the EU - so even if the financial businesses and banks moved outside the EU, they would have to pay the tax if they wanted to do business in the EU. It would only make sense to move if the business did most or all of its business outside the EU. However there are good points on the fact that a large proportion of the tax would be collected from the City of London, and this would be unfair if the Eurozone mainly benefited. If the income was used to build a safety net for the banking and financial system across the EU (to reduce the burden on taxpayers in the real economy), than that would probably be fairer.

While the Labour party in the UK will probably support the government's resistance, it would be interesting if they decided to support an EU FTT in some form - after all, their leader Ed Miliband has referred to businesses which were "bad" for the economy: would the FTT not make sense in rebalancing these ethical issues by making the financial industry pay a bit more tax to insure against the danger of being (ultimately) underwritten by the taxpayer? The BBC's Robert Peston has an interesting take on the FTT here.

In any case Member States have a veto on the matter, so the UK can block it. But the implications for the EU of a Eurozone FTT haven't received much attention. We already have a multi-speed EU, with some countries in or out of the Euro, the Schengen Zone, the EEA but not EU Members, etc, but these have been in different areas of integration. If you start to adopt different speeds to the internal market in a way that affects the four freedoms, then it could cause some political headaches. It would raise the EU's West Lothian Question. Why should MEPs from the slower countries have votes in areas where their countries aren't affected? Already the British Commissioner couldn't (politically) be the Commissioner for monetary policy since the UK is not a Eurozone member. The more the Eurozone countries pull ahead, the less influence those outside Euroland will have.

Wednesday 28 September 2011

The Commissarial Speech 2011

Barroso has just delivered his State of the (European) Union speech. Last year I pointed out that it was a work programme speech setting out the legislative programme for the year ahead - a bit like the speech from the throne in European constitutional monarchies. This year the speech actually reflected the State of the Union title a bit more, though it was still a Commissarial Speech.

The speech had two themes: the economic crisis and the EU's role in the world. On the economic crisis, Barroso proclaimed the Commission to be the economic government of Europe, and announced several measures on market regulation and on jobs and support for growth. Barroso reminded the Parliament of the Single Market Act announced last year, and urged that it be fast-tracked through the legislative process. He also pointed out that the services legislation had not yet been fully implemented by Member States, and claimed that implementation would spur growth in the economy.

The most notable announcements marked a shift leftwards - perhaps made possible by the leftwards shift of the EPP following the departure of the British Conservatives, and the economic and political pressures of the crisis. Growth is a goal. Barroso announced that the European Investment Bank needed to be reinforced so it could lend to the real economy (though no detail was given on how), and called on an "Erasmus for jobs" which would help with youth unemployment by making more internships and work experience available (however no plan has been put forward yet, apart from calling for industry, national governments and the EU to work together on such a scheme). Project bonds will be launched to finance green projects and transport projects, which will stimulate the economy, while Barroso noted that the Commission will bring forward Eurobond proposals. Some forms of Eurobond will require a treaty change, while others won't. The treaty-friendly Eurobond was coined the "Stability Bond".

The biggest announcement was his support for a Financial Transaction Tax (FTT). This was were Barroso showed the most rhetorical energy on the economy: it is a matter of fairness that the financial industry contributes when the ordinary taxpayer has pumped so much into the sector. Is it fair, Barroso asked, to make the farmer pay more in taxes when they have already contributed so much? However such a tax would require unanimity in the Council, and where it would face a lot of opposition. Given that tax sovereignty was such a big issue in Ireland during the Lisbon Referendums, it might even lead to a referednum, should it come to a Council vote.

This leftward shift is not all it might seem, however. Parts of this plan are hard for the Commission to deliver and may not actually happen (the FTT being the most obvious). But Barroso made passing reference to the need to reform the labour market and pension funds. As no actual plans, or even a direction, were given to these reforms, it will be interesting to see what proposals will surface.

Finally, Barroso made a few more general points on Europe and Europe's place in the world. The Commission would protect citizens' rights, including their free movement and Schengen rights. Nobody wants to see a G2 (of the US and China), but the EU needs to play its part in the world and take more responsibility. The COmmission's role in foreign policy - hard foreign policy, rather than development aid and trade - is quite limited, so Barroso could wax rhetorically here about Europe's potential role without making concrete proposals. He did, however make reference to the need for a European defence industry: though nothing was announced, maybe there will be some form of market reforms of further industry co-operation through the European Defence Agency.

Overall the speech was better than last year's - now we need to see how much progress will be made on these promises.

The Parliamentary Response:

Daul (EPP Leader) improved his performance this year. Though still a pro-Commission waffle (leading me to wonder whether Ashton was listening to improve her French or just tuning out), he said his group would support more public-private partnership in education, training and R&D, where more investment was needed, as well as a job erasmus.

Schulz (S&D Leader), who gave one of the better parliamentary speeches last year, floundered this year. Maybe it was because the key issue of the FTT was taken by Barroso, but there was no discussion or analysis of the proposals Barroso put forward, and no questions on the labour and pension reforms Barroso mentioned in passing. Instead of playing a good opposition, Schulz critiqued the use of "19th centuary Vienna Congress methods" of diplomacy which was being "bullied by the markets" - it may be true, but Schulz should be holding Barroso to account, and proposing alternatives, rather than devoting the whole speech to talking about the "other place". Politically, Schulz even failed to stake a claim on the FTT, despite the Party of European Socialists (that make up the vast majority of the S&D group in Parliament) campaigning on the issue.

Verhofstadt (ALDE), the Liberal group leader, has become the federalists' Farage, and focused entirely on a pro-intergration message. Like the S&D, the Liberal leader's central policy idea of the Eurobond was given a place in Barroso's speech, so maybe it left him without anything to say on the actual policies in the speech. The best line he delivered pointed out that it was all very well telling the Parliament about these plans, but "Now you have to say it in the other place" - the "other place" being the European Council.

Zahradil (ECR leader) is the only change in leader since the last speech (an indication of the political turbulance in the right wing group over the last year). While he agreed with Barroso's market measures, he attacked the proposed FTT, saying it would drive financial industries abroad. The rest of the speech attacked the federalism of the other groups, and the Euro, asking if some countries would leave the currency union and if other countries would reconsider their commitment to joining. Though he did not want the Euro to fail, he sharply criticised any of the proposals to change things in the Eurozone as increasing the EU's powers. This provides a handy political cover for playing up the anti-federalist credentials of the group, while not providing any alternatives on how to solve the Eurozone crisis.

Harms (Greens/EFA) hit out against the lack of action on sustainable development since 2007/8 when it was considered a priority, calling the proposals: "Small scale measures, taken too late". Bisky (United Left Leader) said he supported the Commission as far as it brings in good financial regulation, FTT and Eurogroup measures. He also spent a lot of time criticising the intergovernmental approach to solving the crisis. Farage (EFD) said that Barroso was doing more of the same of what was failing, and attacked him for being unelected. He said that people wanted trade, European co-operation, to work in other European capitals and Erasmus but without the EU. I've already written about the differences between free trade and the internal market: what Farage is proposing seems to be the end of the internal market - if so, he should come out and say it and campaign on it, instead of pretending that the same level of trade can be maintained without the EU structures. In his responce, Barroso retorted that Farage had failed to get elected to the UK Parliament, and that he should campaign for withdrawing from the EU there, since the European Parliament couldn't grant it.

Scoring Parliament

It was hardly the most inspiring parliamentary response. Little attention was paid to the actual policies (effectively limited to the ECR rejection of FTT and the Greens/EFA criticism that the project bonds plan and other measures weren't good enough), but there was a lot of time wasted on bashing the Council for being too intergovernmental. They had the Commission President in front of them! This was their opportunity to stake out their policy positions for the year - what they wanted to see happen, what they thought of the Commission's plans - but they failed to articulate an alternative. This might not be too serious for the EPP and ALDE (or even the ECR), which supported Barroso as Commission President, and are essentially the Commission's political base for delivering its economic and market policy. However the S&D, Greens and United Left should have been doing more do provide an alternative.

Verhofstadt and Farage have essentially become copies of each other for this set piece event on their respective sides. However Farage can rest easy knowing that he's done his political job by delivering a punchy speech, even if it doesn't do much in holding the Commission to account. Verhofstadt, on the other hand, advocates a position that needs strong and clear articulation, and which also demands a role of questioning the Commission and holding it to account (even as a pro-Commission party). He didn't measure up to this role.

(How did you score in Barroso Buzzword Bingo? You can read the Twittersphere comments on the speech here: #SOTEU).

Monday 26 September 2011

Barroso's Buzzword Bingo: 2011 Edition

It's that time of year again, with Barroso's State of the [European] Union address. At 9:00 a.m. CET on Wednesday this week, Barroso will make his speech to the European Parliament, setting out his vision (or lack thereof) of the future of the still-crisis-stricken Union.

Last year we ran a Barroso Buzzword Bingo over at Bloggingportal, and this blog is joining in for this year's round. To play the game, you pick 10 words or phrases that you think will pop up in the speech, and once you've got them all - bingo! You can watch the speech live here, and comment on Twitter with us (and the new official State of the Union Twitter account) using the #SOTEU hashtag. Let's hope an MEP playing along will shout out bingo in plenary.

Here's my list:

1. Solidarity.
2. Robust action.
3. Economic crisis.
4. Fiscal convergence.
5. Security.
6. Competitiveness.
7. European Added Value.
8. Community Method.
9. Innovative.
10. Federalism/Federal (a risky one, but it might be a way of trying to get some national press attention).

You can add your own list over at Bloggingportal (& in the comments below!) - if you need inspiration, Jon Worth and Polscieu have already written theirs.

Europese Dag van de Talen

Het is de Europese Dag van de Talen! Vandaag is dus en goede dag vreemde talen te praktiseren: kijk naar een Franse televisieprogramma, praat met een Duitse vriend (of vriendin), lees naar een Spaans krant, of luisteren naar de Nederlandse radio.

Heb geen zorg, of je en vreemde taal niet vloeiend kunt spreken!

Veel succes!

Friday 23 September 2011

Deal on the European Protection Order Directive

The Council and Parliament have reached a deal on the European Protection Order Directive, originally proposed by Member States, ensuring that it will sail through the first and second legislative readings. The EPOD is aimed at protecting people subject to protection orders under their national criminal law, while allowing them to exercise their free movement rights (draft legislation PDF here). The Directive would apply to protection orders made by national authorities under criminal law (there's a separate measure dealing with civil law), which impose restrictions on persons that pose a risk to another such as:

"(a) a prohibition from entering certain localities, places or defined areas where the protected person resides or that he visits;

(b) a prohibition or regulation of contact, in any form, with the protected person, including by phone, electronic or ordinary mail, fax or any other means; or

(c) a prohibition or regulation on approaching the protected person closer than a prescribed
distance." [Article 5]

Protection orders would be issued normally by Member States under their national law, but if the person they are meant to protect resides in another Member State or wants to move to another Member State, they can request a EPO to extend the protection in the original national protection order so they are covered in their host Member State. So the proposed EPOD works on a modified mutual recognition model - the national measures made in one Member State are recognised and enforced in another Member State, though in this case a request for a European version would need to be made, and then the executing Member State would transpose it via a national measure. The Directive would only apply to victims/potential victims of crime, and not witnesses, so it isn't part of some European witness protection scheme.

From a legal perspective, this modified route to mutual recognition is quite interesting, and shows some movement on the use of mutual recognition measures by allowing for the difference in Member State's legal systems (a mix of criminal, civil and administrative measures). I haven't taken a close look at the jurisdiction/competence issues around the mini-Member State directives that will be EPOs, however. Hopefully the Parliament hasn't missed anything it might later regret...

Thursday 22 September 2011

Schengen Wars 2

Romania and Bulgaria's Schengen aspirations are being put on hold again, with the Netherlands and Finland opposing the phased introduction of the two countries into the border-free zone due to concerns over their levels of corruption. Before the vote, Romania blocked tulips from being imported across its border. Their accession was blocked earlier this year in January, which also saw inept diplomacy by Romania.

So are the concerns over the levels of corruption in Bulgaria and Romania justified? The Commission helps and monitors the reform and implementation of changes in the justice system required by EU membership through the "Co-operation and Verification Mechanism" (or CVM). The latest reports on Bulgaria (PDF) and Romania (PDF) were delivered in July. Both reports documented progress, but there's still a long way to go.

The Bulgarian report raises concerns over corruption and over accountability of the judiciary (p.3-4):

"Since last summer, a number of acquittals in cases involving high-level corruption, fraud and organised crime have exposed serious deficiencies in judicial practice in Bulgaria. These deficiencies have not been properly analysed or followed up by the leadership of the judiciary, the Supreme Judicial Council, the General Prosecutor and the President of the Supreme Court of Cassation. Although the revised Judicial System Act adopted in December strengthens the judiciary's accountability, the law has not yet been implemented as intended. The quality and transparency of several important appointments within the judiciary since the beginning of this year have been questioned, leading to unprecedented public protests and a debate on possible constitutional amendments. In addition, allegations of corruption within the judiciary are still not pursued in a systematic way as recommended by the Commission.


Judicial appointments still lack the necessary level of transparency and credibility. An important senior appointment by the Supreme Judicial Council in November 2010 raised concerns as regards the lack of transparency and competitive character. The entry into force of the newly amended provisions of the Judicial Systems Act in
January 2011, has unfortunately not yet improved the situation as regards senior appointments, which have been still carried out under the old rules and lacked real assessment of the professional qualifications, managerial skills and personal integrity of candidates. Furthermore, a recent nomination was followed by allegations of conflict of interest and procedural irregularities in an ongoing trial handled by the successful candidate. As a protest, two members of the Supreme Judicial Council resigned and criticised the appointment decisions as pre-determined. The subsequent mobilisation of professional associations of magistrates and civil society calling for reform of the Supreme Judicial Council sends an important signal of support for judicial reform. Recommendations by civil society to hold public debates and announce the names of candidates at an earlier stage are laudable. The appointment of highly competent and motivated magistrates of unquestionable integrity via transparent procedures, in particular for the new specialised court for organised crime, is indispensable to successfully implement judicial reform.


Criminal investigations against magistrates are still not systematically launched by the
prosecution upon allegations of corruption. The decision of the Supreme Judicial Council in June to involve a magistrate with a disciplinary record in the recruitment panel for the new specialised criminal court raises serious concerns. Overall, there is a lack of consistent disciplinary practice. These problems remain a major factor undermining public trust in the judiciary."

Policing in the area of organised crime is also an area of concern (p.5):

"In spite of persevering police actions to tackle organised crime, the overall results need to be significantly improved. Although the joint team on organised crime achieved several indictments related to important organised crime-groups and some convictions have been rendered, other important cases have been concluded with acquittals since the Commission's last annual report. In appeal, severe detention sentences have been pronounced but not yet enforced in one emblematic organised crime case. Weaknesses exist in the collection of evidence, the protection of witnesses as well as in investigative strategies, comprehensive financial investigations and the securing of assets. The General Prosecutor should systematically analyse the reasons for acquittals in high level cases, make recommendations for the handling of future cases when shortcomings in the procedure have been identified and appeal the acquittal decisions when it appears that the Courts did not properly assess the evidence provided."

The report notes a lack of "convincing results" regarding corruption, with cases against former ministers and MPs, and cases involving fraud of EU funds ending in acquittal (p.6):

"The analysis of some of these cases by the Commission and independent experts demonstrated serious weaknesses in judicial and investigative practice. These weaknesses mainly concern the collection of evidence, the protection of witnesses and the general lack of investigative strategies, comprehensive financial investigations and securing of assets. Coordination within the prosecution and between the prosecution and the police should be improved. These weaknesses are compounded by an out-dated Penal Code. Court practice is permissive and excessively cautious, overly attentive to procedures at the expense of delivering justice. While the revision of the Penal Code is advancing, immediate corrective measures, such as the use of interpretative rulings by the Supreme Court of Cassation or legislative amendments should be considered, since the new Penal Code cannot be expected to enter into force before late 2013."

The Romanian report shows some significant improvements, as well as highlighting areas that need a lot of progress. I won't quote from the report to the same extent as the Bulgarian one - I'd recommmend reading both to get a fuller picture of the situation in both countries - but I'll quote to summary paragraphes from the start (p.3):

"Since the Commission's last annual report, Romania took significant steps to improve the efficiency of judicial procedures and continued preparations for the entering into force of four new codes which are the foundation for a modern judicial process. In advance of the implementation of the new codes, the Small Reform Law has brought improvements for the celerity of the judicial process. Romania also responded swiftly to the Commission’s recommendation by adopting a new legal framework for the National Integrity Agency. The National Integrity Agency has been operational under this new legal framework and started to re-establish its track record of investigations. Although not part of the CVM benchmarks, the authorities decided to carry out reviews of the judicial system and of public procurement and to make an evaluation of anti-corruption policy. During the same period, the National
Anticorruption Directorate (DNA) showed a continuously convincing track record in the investigation of high-level corruption cases.

Despite this progress since July 2010, consistency and results in a number of areas remain a challenge. Progress in the fight against corruption still needs to be pursued. Several important high-level cases remain delayed in court for several years and have also seen little movement during this period. Urgent action must be taken to accelerate these trials and prevent them being struck down because of reaching statute-barred periods. The fight against corruption should remain a top priority and be coordinated with the help of a new comprehensive and robust anti-corruption strategy. Urgent measures are needed to improve the recovery of the proceeds of crime, the pursuit of money laundering and protection against conflict of interest in the management of public funds. Better results should be demonstrated in the confiscation of unjustified assets and in delivering dissuasive sanctions for incompatibilities."

Though the domestic reasons for blocking Romania and Bulgaria's phased entry into the Schengen Zone may have more to do with political pressure from the far-right, there are real concerns over the handeling of corruption in romania and Bulgaria. It's true that both countries meet the technical requirements for entry, and that adding this judicial and policing requirements is moving the goalposts, but these issues do need to be tackled as obligations of EU membership. While the politicking might be distasteful - and condemned by both the EPP and the S&D groups in the European Parliament - there is truth to the contention that it's harder to get EU Member States to comply with EU conditions once they're in the club.

Wednesday 21 September 2011

Our Commissioner, for a given value of "our"...

The Commissioner for Financial Programming and Budget, Janusz Lewandowski, has been held up by the ruling Civic Platform Party in Poland as a means of getting the country a lot more money from the EU budget:

"Speaking in a wood-panelled room among fellow Civic Platform members, Lewandowski says: "We're talking about billions, even 300 billion zloty [€69 billion]. Thanks to this money we could reduce youth unemployment, even by half."

Fellow party member and foreign minister Radek Sikorski then pops up, adding: "That's what these elections are about. They are about money for Poland and who will get more of it. Why do we think we will do better? Because we have a strong team [gestures to Lewandowski] which can negotiate successfully.""

This has raised questions over the Commissioner's oath of independence, which Commissioners give when they are sworn into office to pledge that they will work in the general interest, and remain independent of national governments. EUObserver has reported that the Commission asserts that this was in line with the Commission's Code of Conduct:

"Commission spokeswoman Pia Ahrenkilde Hansen on Tuesday (20 September) said he did not cross the line because his remarks were of a "general" nature.

"The president [Barroso] is aware of the participation of the commissioner in this specific activity and it's our opinion that the commissioner, who intervened in a personal capacity, passed a very general message about the benefits of the general budget to Poland ... This activity, for which the commission punctually gave its agreement, is compatible with the code of conduct," she said."

Having a "national Commissioner" is a big issue. While there are far too many Commissioners, reatining one per Member State is a sticking point that is unlinkely to go away soon - the prospective loss of a Commissioner for 10 out of every 15 years was a major reason for the Irish rejection of the Lisbon Treaty in the first referendum, despite equal treatment of the proposed rotation of Commissioners between big and small Member States. Though the Commissioners may swear independence (you can find the oath as a PDF here), they are generally held to be a national voice in the College of Commissioners.

At the moment Commissioners are nominated by national governments,* accepted by the Commission President elect, and elected by the European Parliament (as part of the Commission as a whole), with the Commission being accountable to the EP between elections. The independence of the Commission, and the indivdual Commissioners could be strengthened by bringing an end to the national nominations. So while there could still be one Commissioner per Member State, the choice of who the Commissioner actually is would be for the Commission President and the Parliament to decide. However, this would require a treaty change.

*The Council adopts a list of Commissioners based on the suggestions of Member States which are effectively Member State nominations in practice. (Art. 17(7) TEU.