In Britain’s popular culture the marketing restrictions on bendy bananas and curly cucumbers have always been associated with the Bureaucrats of Brussels. Nothing so well underpinned a public perception of meddling officials in a foreign country imposing their will on a hapless populace by setting fruit and veg dimensions by millimetre and by degree. The story was always guaranteed to provoke a curious mixture of exasperation and delight.
The Commission has now announced a relaxation of the EU rules. As from July 2009 the EU standards for 26 fruit and vegetable categories will be abandoned altogether and for the 10 most widely purchased, such as apples, strawberries and tomatoes, national governments will be free to permit the public sale of non-classified produce as long as it is labelled as for jam-making or similar.
I suspect that in many cases it is national governments which displayed the real passion for regulating. It’s worth recalling that a year ago Commissioner Verheugen dismissed the idea that the use of imperial measures (pounds and ounces for instance) was illegal under EU law, but this didn’t stop the criminal prosecution of some market traders in Britain for using the old measures.
Certainly past experience suggests that the supermarkets will continue to demand uniformity and quality when negotiating with their suppliers. But at least there should be no more martyrs such as those shopkeepers who did not abide by the rules and were prosecuted in consequence.
The Agriculture Commissioner Mariann Fischer Boel takes credit for the latest moves, but this decision is very much in tune with the campaign for Better Regulation which the Barroso Commission has been pursuing. Its main front-man Commissioner Verheugen is still pushing hard, as you can see from his recent speech. All strength to his elbow!
After all the excitement of an amazing US presidential election, here we stand in the cold light of dawn, wondering what happens next. What can we Europeans expect of President Barack Obama? As others have pointed out, his first duty will be to serve the interests of those who elected him and not the political priorities of friends and neighbours, so we should not raise our hopes too high.
Yet things do seem very different this time. All the evidence suggests that Senator Obama will be a president who is deeply committed to a multilateral approach and who perceives international co-operation as fundamental to meeting the challenges which the US faces. His July trip around Europe gave a strong indication of his global perspective. The deeply unpopular image of America across the world causes him real distress.
Obama was careful during his campaign to avoid giving too many hostages to fortune, but trade was one exception, as the candidate argued that free trade agreements such as NAFTA were responsible for job losses and that outsourcing of production benefited businesses while damaging the interests of their workers.
A strengthened Democrat majority in Congress will not make it any easier to resist protectionist sentiment and no doubt we can expect some early measures such as support for the US auto industry – a distant echo of President Bush’s support to steel and farming in the early days of his first term. There may well be tax changes as well, which make outward investment less attractive to US firms.
There is a small window of opportunity. Over the coming weeks people will seek to breathe new life into global trade negotiations. The new trade commissioner Baroness Ashton has raised the hope of progress for the Doha Round in what I thought a rather convincing BBC interview and Pascal Lamy has offered to stay on at the WTO in pursuit of an agreement.
So will the November 15 summit in Washington open the way for trade talks as the Brazilians hope, I wonder? And will President Sarkozy speak for free trade during the meeting? Maybe it will be easier in the absence of ex-Commissioner Mandelson!
Climate change is an issue where we can confidently assume that the new president will chart a new course. Take a look at his manifesto on energy and climate change. He espouses emissions trading, wants renewables to provide 25 per cent of energy needs by 2025 and sees further investment in biofuels and new technologies. Nuclear power and energy saving also feature on his wishlist.
Europe should feel comfortable with this agenda, but faces some fundamental challenges of its own, in particular whether it can deliver on the commitments already made, without which its current position of leadership will melt away. The broader challenge is to bring China, India and similar economies more directly into global decisions. Real progress by Europe and the US will be an essential precursor of movement here.
The evolution of US policy towards Russia will be of special interest to Europe, intertwined as it is with the issue of Star Wars missile defence.
Medvedev’s clumsy reference to Russia’s anti-missile missiles in Kaliningrad (or are they anti-anti-missile-missiles?) is hardly likely to change US policy, but I suppose was intended to put pressure on the EU and to drive in deeper any wedge between the US and Europe. After all, Russia already has such armaments in situ. For Polish prime minister Donald Tusk Medvedev’s statement was political and not military.
Obama is a man who will take his time. Once in office he will no doubt weigh up the efficacy of the anti-ballistic missile system, its budgetary cost and its political implications. The Pentagon is asking for $65.5 billion for development at a time of severe budgetary pressures. Any improvements in US-Iran relations would also come into the picture. If there is a change in US policy it will be rationally thought through and set in a wider context than just providing comfort for Russia.
The Europeans are keen to seize the initiative on a reform of global economic management at the November 15 Washington summit and produced a detailed set of proposals when they met in Brussels on November 7. The current mood in the US will certainly be responsive to tougher regulation, maybe going further than the European Commission, for instance, would want. How far a new president will respond to giving more power to international organisations such as the IMF remains to be seen. Once again the Democratic dominance in Congress will be an important factor.
Finally there are those issues such as the Middle East conflict and the war in Afghanistan. While Europeans hope for a more proactive US role in the peace process they can also expect the new president to demand greater support against Al-Qaeda. This may be the most challenging element in transatlantic relations over what promises to be a period of far-reaching change.
So Commissioner Viviane Reding has decided to play hardball over telecoms reform. Some weeks ago we discussed how the Commission’s proposed telecoms package would hand over extensive new powers to Brussels.
The European Parliament watered down these proposals in first reading, but it seems that the revised version to be sent to the Council gives little ground on the core issue.
As if to remind the member states just how hopeless their regulators can be, the Commission has demanded that the Belgian regulator should do something about Belgacom.
Belgium’s incumbent operator has retained the lion’s share of residential telecoms business despite a liberalised market and has actually increased its market share for business users by value and by volume.
The message seems to be that competition policy has not done its job. The Commission wants action. This is regulation, raw in tooth and claw. What’s more, it enhances the Commission’s image as defender of the consumer – excellent public relations which build on Reding’s assault on the mobile operators’ text and roaming charges.
In last week’s Venice speech to the incumbent operators Reding set out her philosophy quite clearly, emphasising that the virtues of regulation had recently become rather widely recognised in the context of the credit crisis. No apologies there, then.
So the Commission has given little to the Parliament on the issue of control. The main change to her proposals seems to be the creation of an Office for the European Telecoms Regulators (OETR) managed by a 12-strong board, half of them appointed by the Commission and half by member states. The European Regulatory Group (ERG) would apparently have an advisory role and the Commission would retain a veto over the decisions of national regulators, albeit with some OETR involvement.
Some loss leaders have been abandoned or modified, such as previous proposals on network security, spectrum and policing of the internet, but when telecoms ministers meet on November 27 we can expect some fierce skirmishing in defence of national regulators before a qualified majority can be achieved, and maybe further hastily convened Council meetings before the end of the French presidency.
The package is scheduled to go to second reading in the Parliament in April 2009. The question for Reding is, can she get such a tough package through before the June elections?
There are tentative signs that the dust is beginning to settle after the last few hyperactive weeks, with signs that world leaders have mounted an effective response to the credit crisis. Inter-bank lending seems to be recovering, stock markets appear more stable and the outline of a global approach is beginning to show, following three weeks of frantic decision-making at national, European and at global levels.
As so often happens, it is the force of this crisis which is driving Europe forward. The EU landscape has changed in many ways in the last three weeks. Its political position has been strengthened. There is no question that President Bush’s invitation to Presidents Sarkozy and Barroso to dine with him in Washington last weekend and their joint commitment to a series of global summits must mean that the EU can now claim a real voice in international monetary affairs.
The crisis may be labelled “Made in America”, but its repercussions across the world have made a pan-European approach essential. Never have the implications of globalisation been so clearly demonstrated. Any unilateral country-by-country response, such as the Irish and German proposals on deposit protection, met with a storm of protest.
One curious consequence of the crisis is the transformed relationship between the eurozone and the UK. We used to argue that Britain should adopt the euro lest the UK be excluded from the Eurogroup of countries and so lose influence. How ironical, then, that Gordon Brown should be invited to attend the euro summit on October 12 and become the hero of the hour, transformed into Flash Gordon with his (or rather Chancellor Darling’s) three point model for underwriting inter-bank lending, recapitalising the banks and protecting savers. Brown even takes his place in the family photo of the 15 eurozone ministers!
You could argue that it was precisely the UK’s independence of the euro which made the UK’s actions possible, but taking these drastic measures if everyone else was doing nothing would have been highly risky for the Brits. Incidentally, I wonder how much liquidity the UK’s major banks have received from the ECB since this crisis began. There’s even more interdependence here than meets the eye.
Of course the eurozone’s response to the Brown plan had to be political rather than legal, relying on common commitments and national measures rather than new EU legislation. It is only national governments which have the resources and the legal power to underpin their banks’ capital base.
The attention must now shift to the legislation to be adopted across various institutions to avoid any repetition of the crisis.
The Commission has already put forward a new proposal to safeguard depositors up to €100,000 per person, replacing the current €20,000 limit. Will this apply in Iceland, I wonder, under EEA rules? Stronger regulatory measures have been proposed for banks and insurance companies and guidelines on state aid for guaranteeing deposits and bailing out banks have been issued by the Commission. President Barroso is emerging from the crisis with much credit – I would think his place is secure if he wants to serve a second term as Commission President.
The issue of bank regulation will be hotting up. Will central banks be given more responsibility? The British are certainly talking about it in relation to the Bank of England, and the subject will be on the agenda of the coming summit meetings in the context of post-Bretton Woods. For the eurozone, that must mean more responsibility for the ECB.
The crisis has triggered some interesting political developments. Take the Lisbon Treaty, for instance. Brian Cowen, The Irish Taoiseach, is committed to presenting the December EU summit with proposals to reverse Ireland’s rejection of the draft Treaty.
Mr Cowen argues that the EU has saved Ireland from a financial meltdown similar to Iceland’s and hopes that the Irish voters will appreciate this. He says that had his country not been part of the EU and the eurozone and without the support from the European Central Bank (about €70bn apparently) it could never have weathered the storm.
The Irish leader clearly hopes that this experience, plus reassurances on sensitive issues such as abortion and defence, will be enough to obtain a “yes” vote in a second referendum. The pressure is certainly mounting as the June deadline for European elections comes closer.
This will coincide with more straitened economic times as recession bites, public spending rises and jobs are lost across Europe. Things are far from returning to normal, and as someone said, the new normal will not be the old normal.
Just a week ago I suggested that continental Europe seemed rather detached from the global credit crisis. Whoops! What terrible timing!
In the last seven days Europe has been hit by the storm force winds of this crisis. Liquidity has dried up, governments have been forced to rescue one institution after another, Iceland’s banking system seems close to meltdown, the Irish, the Greeks and the Germans have promised open-ended guarantees for bank deposits and the European Commission has been left floundering as the cry of sauve qui peut echoes across the EU.
Even Peter Mandelson has been brought back to London to shore up Gordon Brown’s war cabinet.
The Paris meeting of the Big Four was a show of solidarity but little more. The participants looked forward to tighter regulation in the future, but offered nothing at an EU level to cope with the current crisis.
It is only the state aid rules which have offered any sort of EU framework for national measures and several banking mergers and bailouts have been rapidly approved.
Deposit guarantees are a different matter. Commissioner Neelie Kroes fiercely attacked the Irish government for failing to discuss its guarantee scheme with Brussels in advance. It seems that she has made some progress concerning the detailed application of the scheme but not in the fundamental principle of an open-ended guarantee. The Brits and the French may now be forced to introduce similar deposit security, especially if the Germans go ahead, but the taxpayer liabilities are formidable.
It all demonstrates the massive cross-border implications of such measures. Inside or outside the eurozone, Europe must find ways to work more closely together in tackling the crisis.
While the United States and Britain reel from one catastrophe to another in the storm of the sub-prime crisis, the eurozone has seemed remarkably detached, until recently anyway. For the Americans and the Brits the news is totally dominated by stories of collapsing banks, bail-outs, vast lines of credit insurance which turn out to be no insurance at all, and an American administration desperately seeking a safe path for the US economy over the quicksands of collapsing confidence.
I’m not saying that the Land of the Euro is immune from the impact of this crisis – it clearly is not. The turbulence over Fortis Bank, to name but one of the repercussions, deepens the black hole for the missing Belgian government.
But there does seem to be a difference. The US and UK economies are so much more dependent on their financial services sector than most of the countries of the eurozone. What’s more, the great bubble of house prices linked with high mortgage commitments brings this crisis straight to everyone’s front door in Britain and America.
Maybe the continental reaction is also different because the power centres of the eurozone are so widely dispersed. It’s not like London or New York/Washington where the various regulatory institutions are perceived to work closely together. The European Central Bank from its fortress in Frankfurt is responsible for providing liquidity for the banking system across 15 countries; the framework for EU financial services regulation across the EU is crafted and overseen by Brussels; and individual member states have their own particular responsibilities for applying the rules, such as the clamp-down on short selling.
It’s striking to see how different players are reacting to the crisis. In the UK there may be talk of international co-operation, but the British government makes no mention whatever of the European legal framework, although it is evident that most of the legislation governing the solvency of banks and other financial bodies and the activities of financial services firms derives from EU decisions.
As for continental reaction, note the contrast between President Sarkozy and Charlie McCreevy, Commissioner responsible for the financial services sector. The French President is determined to push for more regulation and reserves particular venom for ratings agencies.
The Commissioner, by contrast, is keeping a low profile. He doesn’t like interfering with markets and plays down the need for drastic action on the regulatory front. He has even said that (unregulated) hedge funds and private equity should not be “tarred with the same brush” as the regulated sector.
Nonetheless, McCreevy must be seen to act, and sure enough the Commission is expected to come forward this week with some new proposals tightening up banks’ capital requirements in relation to securitised debt, although according to reports he has been persuaded by the banking sector not to go too far. Rating agencies will also face registration requirements, though short of the controls which the French and Germans would like.
The German finance minister Peter Steinbrück believes that the US will cease to be the global financial superpower following the credit crisis. He blames Washington for its failure to introduce stricter regulation despite European demands and has told journalists that in ten years time “we will see 2008 as a fundamental rupture”.
Apparently the Minister was particularly stung by the actions of a state-owned bank, which earned the soubriquet of Deutschland’s Dümste Banker from Bild Zeitung after it transferred €350m to Lehman Brothers two hours before Lehmans folded. Steinbrück is pushing for much tougher regulatory measures than McCreevy envisages.
After the Enron and WorldCom crises the US introduced Sarbanes-Oxley, a complex set of rules and red tape which many now see as over-reaction. Policy-makers now face another challenge – of preventing the excesses which produced the credit meltdown from ever recurring.
The Commission’s proposals will be a first step for Europe, although getting even such modest measures through Council and Parliament will be tough, given the impending European elections in June 2009. Maybe, though, this will be the opportunity for the EU to take the initiative in establishing a worldwide framework of regulation which does not throw Baby out with the Bathwater.
You can see just how irritated the Commission is that the Independent (telecoms) Regulatory Group (IRG) with 31 European members should have been registered as a private company under Belgian law, to do things which (she believes) should be left to the 27-member European Regulators Group (ERG) set up by the Commission. IRG, she says, is (just like Belgian football) ”alien to the Community approach”.
The Commissioner was speaking on the proposals for a new framework for European telecoms currently being discussed in the EP and Council. What she wants is an EECMA, a European Electronic Communications Market Authority, which would combine the functions of the ERG with those of the European Network and Information Security Agency, the body set up in 2004 to deal with cyber crime and cyber terrorism.
The Commissioner is fighting the good fight to extend the power of a European regulatory regime to the 27 member countries of the EU. The Commission believes that national regulators are too protective of national markets and inconsistent in applying EU policy.
For many people, though, this is a fight too far.
The proposals do appear to give untrammelled power to the Commission in managing telecoms policy, with little scope for parliamentary scrutiny and a significant transfer of power to Brussels. EECMA seems to have scant right of initiative and almost no scope to act.
Commissioner Reding does push hard for consumer rights – her battle for capping mobile phone charges was highly successful in its own terms, although the operators will always seek other ways to restore their margins – and has some support in the Parliament and Council, but the proposal to protect the position of the heads of national regulatory bodies from dismissal will be contentious in the Council and the bid to make freed-up spectrum more freely available at a European level will face fierce opposition.
I look forward to seeing just how far the Commission succeeds in what is in effect a major centralisation of power in the highly sensitive sector of telecommunications.
The OSCE seems to have serious doubts about Georgia’s role and there are even suggestions that the conflict was provoked by Vice President Cheney in order to boost McCain’s cause in the US elections.
Rash initiatives by the Georgian government in South Ossetia were almost certainly the trigger for the Russian action, but a trigger which Moscow had long been anticipating. The campaign was surely a far-reaching and thoroughly planned operation to damage the regime of President Mikhail Saakashvili, to assert Russia’s right to dictate political developments in its near abroad and to block NATO expansion in Ukraine and the Caucasus.
The tensions had been building for some time, apparently including a mounting level of cyber attacks on Georgian official websites similar to those previously experienced by Estonia, and reprisals against Russian sites by so-called “hacktivists” who specialise in DDOS – Distributed Denial of Service, where websites are sabotaged by swamping.
It is the scale of Russian actions in Georgia which may prove deeply counter-productive for Moscow. It seems likely to strengthen the US presence in the region and will raise the level of scepticism about Russia’s good faith in its international dealings. It will no doubt give quite a boost for those who wish to build new oil and gas pipelines which bypass Russia. Much will depend on how quickly the Russians withdraw from occupied Georgian territory and engage with OSCE and EU. There is no denying, though, that NATO expansion now looks much more challenging than it was before August 8. European members of the Alliance will have no enthusiasm for extending the guarantees of Article 5 to the Caucasus.
The European Union has acted quickly with its ceasefire proposals, some strong words and convening of a special summit in Brussels, where deep divisions of opinion were papered over and a united Franco-German position carried the day.
Europe is at pains to stress that the EU makes common cause with the Americans, but its rhetoric has been much more cautious. Sanctions have been rejected and dialogue sustained. If President Sarkozy and his colleagues can make real progress in their talks with the Russian leadership, even to the extent of launching a programme to resolve the “frozen conflicts” of South Ossetia and Abkhazia, then that would be a very considerable achievement
Russia needs the EU quite as much as the EU needs Russia, if only to counterbalance and moderate American policies in the region. While keeping the pinch of salt to hand (and remembering the black belt), it’s interesting to see what President Medvedev had to say to Euronews in defending the Russian position and expounding on the EU-Russia relationship.
Collapse of the Doha Round after seven years of negotiation must have been a major disappointment for the European Commission. As the Barroso team moves towards the twilight year of its five year term a positive result in Geneva would have somewhat alleviated the gloom following the Irish referendum, the suspension of the Lisbon Treaty process and the stormy economic environment facing Europe.
For Commissioner Peter Mandelson it was a bitter personal blow, since negotiation of a new global trade agreement was almost the raison d’être of his five years in Brussels.
Doha was named the WTO’s Development Round. It was intended to reflect the change in priorities which gave more recognition to the needs of developing countries and acknowledged the emergence of new economic powers. Unlike previous rounds, this was not a private party between the European Union and the United States. The powerhouse economies such as Brazil, India and China were major players and the poorer developing countries were expected to be major beneficiaries.
The talks apparently foundered on Indian and Chinese demands for a high level of protection against surges in food imports. The United States was fiercely opposed to these safeguard arrangements. So was Brazil and other agricultural exporters among the developing countries.
Impending elections played their part, certainly as far as the US was concerned, but also in India – see Carl Mortishead’s analysis in the London Times of the Indian political situation.
Failure in Geneva marks the end of an era when policy-makers across the globe pushed to open up trade and when vast numbers of people across the world benefited from rising living standards as a result.
There will be attempts to rescue something from the wreckage, but there are big dangers ahead. Protectionism is a real risk in a time of economic downturn. A new US president could be tempted down the same path as was taken by Bush in his early years, when he rushed to protect US steel and agriculture. Bilateral deals are likely to increase.
Europe has a crucial role to play in this uncertain environment. At least the EU maintains its commitment to an open world trading system and it must play to its considerable strengths to defend it. The fact that European trade policy is set at one remove from the pressures of national politics is a great advantage: even an irritable Sarkozy can be resisted. The Barroso Commission must keep up the good fight through the rest of its term of office.
As Brussels goes on holiday, so does this blogger. Back in September!
It seems that the Dutch were particularly cautious in their approach, as Netherlands radio made clear. The Srebrenica massacre remains an especially awful memory for the Dutch (although it was actually an indictment of the whole UN operation). They stress that the arrest of Ratko Mladic and Goran Hadzic is the vital next step.
Notwithstanding these reservations, the developments in Serbia must be a great satisfaction for Commissioner Rehn and the Commission as a whole. A few weeks ago it looked as if the Socialists might throw in their lot with the nationalist Radicals and take Serbia down a more easterly path, but the formation of the coalition with President Boris Tadic’s Democratic Party was reminiscent of that period in the late1970s when a fledgling Portuguese democracy was under threat and rescued by the determination of Portugal’s social democrats to join the European mainstream.
It seems unlikely that there will be any turning back for Serbia, but for a view from closer to home see Antal Dániel’s blog.
There is no doubt that the successful easterly expansion of the European Union is the EU’s greatest achievement of recent years. Its influence continues to spread among candidates, associates and partners. Of course the introduction of the acquis freed up trade and stimulated economic growth, but its impact has been much more profound:it has introduced a system of ethics into business and even into personal relationships for countries where communist regimes had totally eliminated any such standards.
But old habits die hard. Joining the EU is not an automatic guarantee of change and I suppose that the latest European Commission reports on Rumania and Bulgaria are evidence of that. By the way, Italy is also in the spotlight for the corruption in Naples.
The Commission has been tougher in its reports than many people expected, especially in relation to Bulgaria, but given the pressure it is under for managing the EU budget it had little choice. What’s more, the Commission has an obligation to give maximum support to those local forces seeking fundamental reform. And that includes the vast majority of the people themselves.
