THE NEW European Commission of president Jean-Claude Juncker, which will take office for five years on 1 November, is expected to be more political than its predecessors. It also has a clear brief from its boss: more growth and jobs.
Juncker, a consummate European Union insider, a former president of the Eurogroup of eurozone finance ministers and an ex-prime minister of his native Luxembourg, will use powerful vice-presidents to keep his team in line.
And he has an experienced and well-connected team, which is just as well, given the general unpopularity of EU institutions – an increasing problem, and not just in eurosceptic Britain.
As a result, the success of Britain’s nominee, Lord (Jonathan) Hill of Oareford (pictured below), in the important role of commissioner for financial stability, financial services and capital markets union could have significant political relevance for Juncker. This might especially be the case if Britain holds an EU membership referendum after the next election.
Hill, a Conservative PR specialist and lobbyist who has been leader of the House of Lords, will have a lot on his plate. The completion of the European Union (EU) banking union, more work on a capital markets union and measures to help small and medium-sized enterprises are three priorities.
Tentative first steps
His approval by members of the European Parliament (MEPs) followed a problematic first hearing where he stumbled over some technical questions, most notably on Eurobonds. Hill was subsequently summoned to an unprecedented second parliamentary interrogation. This time, with poise and humour, Hill muted most of his critics in the European Parliament’s economic and monetary affairs committee and he was approved for the post.
“I shall work for the common European interest,” he reassured those eurozone lawmakers who had doubted his credentials for the job, citing his close City of London contacts and former lobbying activities. “We’re all agreed there can be no going back to wild risk-taking and no going back to our banks being rescued on the back of taxpayers,” he added.
Lord Hill’s job is one element in a novel restructuring of the commission’s set-up for financial and economic policy-making. He will work under the co-ordination of former Finnish prime minister Jyrki Katainen, who will be the vice-president in charge of jobs, growth, investment and competitiveness, and former Latvian prime minister Valdis Dombrovskis, the vice-president with a responsibility for the “euro and social dialogue”. While these vice-presidents will not have direct responsibility for commission directorate-generals, they will be charged with ensuring policy consistency – a key issue for a body that has 28 commissioners, one for each member state.
Hill will also have to work alongside former French finance minister, the socialist Pierre Moscovici, who has been made commissioner for economic and financial affairs, taxation and customs union. They will be at the sharp end of the new commission’s declared ambition to put economics and finance as its overall endeavour. Whether this new arrangement, with so many overlapping responsibilities, will work effectively remains to be seen.
To different degrees, the four will be immediately involved in conjuring up the so-called “euro package” which aims to generate €300bn (£238bn) in spending over the next three years through public and private funding, and which will include the European Investment Bank to boost growth and jobs. This comes at a time when the International Monetary Fund (IMF) has warned of a 40% chance the eurozone will re-enter recession, with 124 million people at risk of poverty or social exclusion – a record in the EU’s history.
At their hearings, there was a lack of detail about where this stimulus might be sourced, even though the vast sum would be the equivalent of about 2.5% of the EU’s gross domestic product (GDP) and almost 18% of its gross fixed investment.
Lord Hill noted that in that context, the completion of the banking union – where eurozone countries would come under the European Central Bank’s supervision – later this year is central to his job and would involve a single rule book binding on all the EU’s financial institutions.
While he said deposit guarantee schemes (protecting savings of up to €100,000 in the event of a bank going under) should be a feature of the banking union, he added he would not raise the issue again in the short term, in view of the commission’s recent decision not to harmonise rules for such schemes.
As for the capital markets union, Lord Hill agreed on the need to have a financial instruments single market, which would include company securities and insolvency laws.
And while Lord Hill was able to reassure a committee majority of his abilities, some eurozone MEPs maintained doubts about whether their countries and non-euro nations such as Britain could work together in easy harness. Despite opposition, he managed to secure banking regulation powers in his portfolio, but every policy initiative will likely be scrutinised carefully during his five-year tenure, especially by eurozone politicians.
Tax base to hit avoidance
A priority of Moscovici should help address the need for revenue for Juncker’s ‘euro package’, and that is the manipulation of tax bases by major European countries, about which the Frenchman foresees “frank debates” with EU member states. “The [EU’s] common consolidated corporate tax base [CCCTB] proposal should be brought back into the spotlight,” he told MEPs during his hearing. “Not only does it offer major simplification for businesses and foreign investors, but it could also be a potentially powerful tool against tax avoidance.”
When asked by MEPs about the commission’s investigations into Ireland’s potentially illegal subsidies to Apple under EU state aid law, he said as commissioner, he would use all instruments at his disposal to stop international companies from “‘de facto’ choosing their own taxation level”, promising to work closely with his Danish counterpart, incoming competition commissioner Margrethe Vestager.
Moscovici said he would use the EU ‘code of conduct group for business taxation’ to assess national rules that might allow harmful tax competition. “I will give a priority to encouraging a review and strengthening of the process so that this instrument can complement state aid procedures,” he told MEPs.
In striving for “social justice”, the socialist said he would also turn his attention to outside the EU. “I will be actively working to ‘export’ our principles of good governance internationally,” he said. “Discussions with Switzerland to dismantle unfair corporate tax regimes have been successful, and I would be in favour of opening similar dialogues with other countries.”
Moscovici also noted that by 2015, he hopes to report on member states’ progress in implementing EU recommendations for taming tax havens and aggressive tax planning. “This will be the time to see what further steps are needed to protect member states’ tax bases against harmful regimes, in a co-ordinated way as well as to monitor progress in dealing with aggressive tax planning,” he said.
Another key economic commissioner will be former Polish deputy prime minister Elzbieta Bienkowska (pictured), who will become EU commissioner for industry, the internal market, entrepreneurship and small and medium-sized enterprises (SME).
Her job is important, because the role will combine the cross-border regulation liberalisation brief held by former internal market commissioners with the interventionist budgets of industry commissioners.
She promised that she would “insist on simplification and predictability for businesses”, with a special attention to SMEs. “All initiatives that I put forward will be the subject to an SME test to ensure that they do not disproportionately impact SMEs,” she told MEPs during her confirmation hearing on 2 October.
Bienkowska promised to fight the perception that the EU internal market only benefited multinational companies by ensuring that “small first will be a principle that will apply at all levels”.
She also wants to significantly reduce the time needed to set up a business in any EU country by “deploying an electronic one-stop shop”.
This move would be meant to give more support to entrepreneurs who want to start new businesses in Europe. Cutting red tape will also be a priority to judge by her statements during the hearing. Bienkowska promised to review legislation identified as the most burdensome by businesses in Europe. “This list will be analysed yet again so that I have such influence over it,” Bienkowska told MEPs.
“I know businesses, I know what their life looks like, so I can reassure you that this won’t be an empty list that will be put on the back burner,” she pledged. One MEP told her, however, that she was a “career bureaucrat”, never having worked in the private sector. Bienkowska confirmed the latter, but stressed her experience as an infrastructure minister.
To that end, she promised to develop a plan in 2015 to support EU industry and boost its competitiveness.
As for Juncker’s vice-presidents, charged with coordinating the work of these departmental commissioners, centre-right politician Katainen was scrutinised by MEPs over his advocacy of austerity, especially in the EU’s southern flank following the 2008 crisis. He insisted: “The external world needs to see a firewall to show the EU can withstand any future bank failures.”
That said, he did indicate there would be some backing for pump-priming the economy. “Supporting SMEs and strengthening the union’s industrial base are top priorities in helping industry to increase its GDP share to 20% by 2020,” he added. Katainen also noted the need to diversify capital markets. In a statement that might not find favour in Britain, he said: “I’m happy if the London market grows but would also be pleased if Frankfurt and Paris do as well. More needs to be done to limit the dominance of London.”
When asked about China, he said: “There’s no need to fear competition from there because Europe can compete in the value-added aspects of markets.”
Also, Andrus Ansip – Estonia’s prime minister for the past nine years – will be vice-president for the EU’s so-called digital single market for borderless intra-EU e-commerce and m-commerce. He noted that his native (and notably internet-friendly) country has seen 96% of the population this year use e-signatures to make tax declarations. Altogether, Estonians deploy 175 million e-signatures annually to transact business – thus saving one week of effort per year, or 2% of the GDP, he claimed.
Ansip declared that “paperless government can be achieved, but first a digital market must be created”. Currently, there are 28 separate markets with different regimes for electronic communication, he noted.
He commended the use of e-prescriptions, which have become very popular in Greece and Sweden – not least among older citizens. “If people like the system, they will use it,” he said. But, of course, data protection is essential, he warned, noting that cyber-attacks in Europe had jumped some 48% this year over 2013, while an estimated 120,000 attacks occur worldwide every day.
He will work with Frans Timmermans, former Dutch foreign minister, who will be the first vice-president of better regulation, inter-institutional relations, the rule of law and charter of fundamental rights, being Juncker’s deputy.
One of his first tasks will be to craft a ‘transparency register’ of lobbyists. For the moment, there is a voluntary register, but Timmermans promised MEPs this would be made compulsory by the end of 2016. He will also lead a ‘better regulation’ agenda, hastening the removal of EU red tape. This will certainly appeal to the Cameron government if it wins the 2015 election and prepares for in/out EU negotiations. ?