BNE Blog

What can Europe do for women?

March 10th, 2014

 

Last week, in the run up to International Women’s Day, BNE hosted an event focusing on the role Europe has played and should play in the lives of women. The breakfast panel discussion was sponsored by Mentore, an organisation that helps companies provide diversity in the boardroom.

The panellists were the Head of the European Commission Representation Office in the UK, Jacqueline Minor, a founding member of the 30 % Club, Baroness Mary Goudie, the assistant Government whip Amber Rudd MP , the CEO of Mentore, Emma Avignon, and a leading member of the Davies’ Review (Women on Boards) Denise Wilson. The debate was moderated by journalist Michelle Perry, editor of the online financial magazine CFO World.

What has Europe done?

Jacqueline Minor, Head of the European Commission Representation in the UK,  kicked off the presentations observing that a number of European Directives started addressing the issue of equal pay for work of equal value and equal treatment from as early as the 1970’s. Ms Minor went on to remark that 40 years down the line there is still an average 16 pc pay gap and that “somewhat shockingly that gap is even bigger in the United Kingdom (..), at 20 pc.” She also highlighted the absence of women in leading roles in the FTSE 100, with just four female CEOs and not one female chair.

Later in the debate the conversation turned to the issue of whether there should be mandated quotas to improve the numbers of women on company boards. The very morning of the event the Business Secretary Vince Cable, an opponent of quotas, had announced his support for women-only shortlists for head-hunters searching for candidates to fill board positions.

Ms Minor defended the EU legislative proposal currently being examined by EU ministers. The Directive would compel companies to favour women over equally qualified men for supervisory board seats with the aim to reach a 40 pc quota of female directors by 2020.  “If you don’t have a signal from the top, you can change the culture but it takes a long time. And who sets the culture? The people at the top set the culture,” Minor said.

Targets or quotas? National or European?

Amber Rudd, Conservative Member for Hastings and Rye and Assistant Government Whip, observed that there are issues of great importance to women that are better dealt with at European level, such as for instance the fight against human trafficking, which is clearly a cross border issue. “If we work together on that clearly we can have a much bigger impact in supporting women”. But she went on to say that she does not think Europe has a role to play in other areas such as putting more women on boards or addressing the gender pay gap. “Those are problems are up to individual countries to make sure they address,” she said.

Baroness Goudie, a Labour peer, echoed that sentiment. “I don’t believe in quotas,” she said. “I have never believed in quotas, including in all-women shortlists”.  She went on to explain how she has been fighting for better representation of women on boards through the 30pc Club, a voluntary organisation of CEOs who want to engage with the issue. “We have now 76 chairmen of the FTSE 100 companies signed up,” she said. “Our aim is to hopefully have up to 30 pc of women on boards by 2015.”

Denise Wilson, a leading member of the steering committee of Women on Boards, the UK Government’s own review on the issue of women’s access to top of the corporate ladder, talked about her preference of targets over quotas. “I don’t think legislation is always effective, particularly with British boards. They are very creative: look at what we have seen in (the area of) the remuneration of bankers.” She went to say that targets are more effective because “they are set voluntarily from within the organisation, depending on what their starting point is and what their strategy is.  Targets are owned by the organisations themselves. Therefore, there is much more energy in trying to achieve them, because they are published, and what gets measures tends to get done.”

Getting women board-ready

Emma Avignon, CEO of Mentore, added that nobody really disputes the principle that leadership teams should be more diverse and that this would be beneficial to the organisations themselves.  Threats of legislation and quotas aside, companies are under pressure to deliver change but the role of organisations such as Mentore is to make sure that there are in fact enough individuals who are ‘board-ready’, through boosting their confidence and helping them network.  “We’ve got these wonderful senior women but they are invisible, not in their organisation but outside,” Avignon said. “To be a non-exec of a FTSE 100 board you have to have some experience of being a non-exec, you cannot just step up to that role.”

Women in politics

On women in the political system, Head of the European Commission in the UK Jacqueline Minor raised findings from the OSCE showing that women are far better represented when elected under proportional representation, where lists of candidates are put to voters. She also pointed to Nordic countries which achieve a much better gender balance in their parliaments, unlike the UK which currently stands 22%, which Minor said, demonstrated that where quota systems had been enforced, they were effective.

From the floor, the Labour Prospective Parliamentary Candidate for Norwich North, Jessica Asato explained how the Labour party had proven that all-women shortlists were the only way to sustain equality, given that every previous open selection process in the Labour party had returned a male candidate.

Amber Rudd responded that it was no surprise that quotas delivered results, as they were forcing change, and that the principle of pre-selecting candidates on gender did not necessarily deliver the best person for the job. Rudd added that she was very proud to have been selected on an open list, against other candidates, both male and female.

 

 

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EU Financial Services reform

December 5th, 2013

Last week BNE sponsored an event with support from Citi, at the congress of the Alliance of Liberals and Democrats for Europe (ALDE) in London, where Prime Ministers,  ministers, MPs and MEPs from liberal parties across the EU came together to finalise the party’s manifesto for the 2014 European Elections.

High-level speakers on the panel were Chief Secretary to the Treasury, Danny Alexander, Chair of the European Parliament’s Economic and Monetary Affairs Committee, Sharon Bowles, Head of European Banks Research for Citi, Ronit Ghose, and German FDP MEP Wolf Klinz, who also sits on the EP Economic and Monetary Affairs Committee.

Danny Alexander, Chief Secretary to the Treasury said that the impact of the crisis on the UK economy was one of the worst, leaving our economy around 13% smaller that it would have been. Despite positive signs of recovery, he said, now wasn’t the time to forget the difficulties of the past nor to abandon changes that had already been made.

Alexander said that in the UK the Lib Dems would be the “only party of Europe” campaigning firmly for Britain to remain in the EU at next year’s European elections. As not only Britain’s capital, but the financial capital of
Europe, London does more trade in one day than the rest of Europe combined. Which is why, Alexander said, anti-European views were potentially so damaging to our economy.

Alexander highlighted the changes to financial regulations in the EU and UK which would “not only regain trust but which will help to prevent a repeat of past mistakes in the banking sector”. For example, having
changed the way remuneration and bonuses were paid, the Government had helped to encourage more long term decision making, unlike the culture of short-term risk-taking of the past.

Other positive changes had been the giving responsibility for oversight back to the Bank of England, improving bank resolvability and separating retail from investment banking.

In future, said Alexander, the EU should focus on completing the Single Market, particularly in digital and energy, while ensuring its integrity in financial services for the whole EU as the Eurozone further integrates. The EU should also focus on completing free trade agreements such as the TTIP currently under negotiation with the USA, in which financial services should be included. These reforms were only possible to achieve, said Alexander, with Britain as an active member from within the EU.

Economic and Monetary  Affairs Committee Chair, Sharon Bowles, said that the 40 pieces of financial services legislation passed during this Parliament sounded like a lot, but these had followed directly from the 42 set out in the G20 action  plan. The measures had also been implemented as strictly as possible, given that the majority have been regulations rather than directives –  which would have allowed member states greater flexibility.

On the progress of Banking Union, Bowles said that only half of the 3 legs were on track, with the other half stuck while details are thrashed out. Bowles said that with hindsight, the EU “should have started with resolution and made sure that was agreed before embarking on the others. As it is, this is taking much longer than we hoped”.

So while the supervision by the ECB is now agreed, finding common ground on deposit guarantees is proving difficult, as it is on the resolution fund, about which the remaining question is what the European element will be, which will inevitably not be as deep as some had envisaged Looking ahead, Bowles outlined the most important future steps over the next 5 years:

1) The introduction of greater scrutiny into the system
2) Breaking down ECB barriers, so there is democratic oversight of supervision – which has begun but there needs to be much more
3) A tussle between the markets and those controlling them
4) Market funding needs to be more fluid and available

Ronit Ghose, Head of European Banks Research at Citi, highlighted the significant steps that the EU has taken to ensure future stability: the banking union (with the UK as observers or even quasi-participants) and the reduction of links between sovereigns and banks – particularly given the route from financial markets to sovereigns was what made the second leg of the crisis so damaging.

On specific achievements the EU has made or is making, Ghose listed the single rule book; working towards a single supervisory mechanism; stress tests (AQR) which will be very powerful and useful in strengthening the system.

One of the clearest demonstrations that the system has changed for the better, said Ghose, was that much bigger buffers have been created due to the Basel III rules, so capital ratios to balance sheet have demonstrably changed for the better. In 2008, the capital held be a bank of say €800bn is estimated next year to be €1.7-1.8 trillion.

To go along with this, he said, “better drivers are needed as well as bigger airbags”. To this end, he said, there has been a wholesale change to leadership at the top of all banks, including senior management and boards, so the difference in
culture and personnel is real.

Though banks are accused of not lending enough in the real economy, this lack of credit growth after a recession follows an historical pattern, so was to be expected at this point in the cycle.

If bank lending had reduced, he said, this is a policy issue which the Bank of England with its Funding for Lending scheme and the ECB with its long term refinancing operation (LTRO) were trying to rectify.

Wolf Klinz MEP,German FDP party, member of the European Parliament’s Economic and Monetary Affairs Committee, said that since the financial crisis, politicians have been under huge pressure from the public to act, at times, he said: “I have felt almost under physical pressure.”

The cumulative impact of the resulting stream of legislation is yet to be seen, said Klinz, which is why he has requested an assessment of regulatory reach so far this term from Michel Barnier, EU Internal Market Commissioner.
Klinz said he hoped to receive the response by the end of this Parliament next year.

For Klinz, the way to save the taxpayer in future was to ensure a banking recovery and resolution mechanism is finalised and implemented, as well as breaking the fatal relationship between sovereigns and banks.

Klinz highlighted the potential danger posed by further integration within the Eurozone which will entail a greater split between the Eurozone and the rest.

He also raised the dilemma posed by member states introducing their own measures before waiting for EU rules in certain areas – for example the UK’s introduction of a ringfence in the banking sector – when new EU rules were likely in many of these areas, which then member states would have to adopt in addition to what they had themselves already implemented, leaving a messy, patchy system.

Klinz praised the ECB’s Outright Monetary Transactions (OMT) scheme, where the Bank purchased bonds issued by member-states in bond markets under certain conditions, but said that some were less positive, having dubbed
this scheme “Out of Mandate Transactions”, accusing the ECB of over-reaching its remit.

 

 

 

 

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Liberal Democrat Party Conference Blog: Does Britain’s economic future lie in Europe?

September 18th, 2013

By Lucy Thomas


BNE’s conference season began last night with the first in a series of joint events with Centre for European Reform and Open Europe, sponsored by Citi. The panel were asked ‘Does Britain’s economic future lie in Europe?’
The emphatic answer from Secretary of State for Scotland, Michael Moore, was yes. Drawing parallels between the debate on an EU referendum and the Scottish referendum to be held next year, Moore summarised the benefits of both the Union in the UK and the EU with three figures: five million people in Scotland benefit from being in an integrated single market of 60 million, who in turn benefit from the EU single market of 500 million.

He highlighted the need for reform and urged that the argument needed to be made “with more vigour, otherwise we will lose the argument irretrievably”. Moore admitted that politicians don’t always do a good enough job of standing up for the EU and where countries can work together on issue like the environment and crime – some of which even the Conservatives have been willing to champion as well over the years.

If there were to be a no vote in an EU referendum, there would be a consensus to get back into the EU, but this would be after a negotiation process, which is far from certain.

For Moore, the Government’s referendum lock, guaranteeing a referendum if there were a major transfer of power from the UK to the EU, was a very sensible and clear one, whereas it was not at all clear where Ed Miliband stood on this.
Given that there will be a requirement to respond to Eurozone and therefore transfer of power in the coming years, there is a real need to be ready to make the argument.

For James Forsyth, Political Editor of the Spectator, Britain’s economic future could not only lie in Europe given that the region accounted for 28.7 per cent of world economic output when we joined, and now it is more like 18 per cent, so should be global in our outlook and vision for how we fit into interdependent world.

The relative decline in the EU economically was not the “sclerosis” some claim: growth in the EU had been 16.2 per cent, whereas in the rest of the world this had been close to 35 per cent. So our economic future would not prosper to the extent it should if it lay only in there.

Although the single market was clearly a huge benefit for Britain, said Forsyth, “the benefits fall if it becomes most regulated single market” and it was illogical that all EU rules and regulations apply to all businesses whether they export or not, given that only a third of British businesses export, so the others do not see any benefit.

The issue of EU immigration also distorted Britain’s economic outlook, said Forsyth. The freedom of movement in Europe meant that Britain clamped down on other areas, making it very difficult for people to come here and work from those places growing fastest. “We should be trying to develop those relationships, instead we have a policy saying anyone can come from Romania and Bulgaria but we turn away Indian entrepreneurs.”

Forsyth saw the Lib Dem policy on a referendum lock and David Cameron’s referendum pledge as similar: “there will be a treaty change which sets out transfer of power… Tories might be keener on renegotiation, but they are not the only ones who have to deal with it.”

On trade, Forsyth acknowledged that there were “some advantages for negotiating things as the EU”, but that if Britain were outside, we would “still be the six or seven largest economy in the world so people would still want to do deals with us. We shouldn’t have to go at slowest pace of slowest economy.”

Sarah Ludford, London MEP and spokesman on Justice and Home Affairs said that Britain’s future “is not either/or” and that it is possible to be “in the EU and be open to the world best by influencing EU policies.” She disagreed with James Forsyth that Britain would have as good a chance in negotiating free trade agreements: “outside the EU we would get some kind of deal but nowhere near as good a deal as if with rest of the EU. The route to Washington is through Brussels, not direct.”

An example of this was the free trade agreement currently under negotiation between the EU and US which could prove to be worth £10bn per year to UK GDP, and will set standards to be the benchmark for the rest of the world.” Baroness Ludford acknowledged that there were example of over-regulation in the EU, such as the working time directive, but the need to set global standards remains.

The recent CBI poll showing that 8 out of 10 businesses supported EU membership was in Ludford’s view, in large part down to the potential loss of bargaining power.

Ludford also concluded that UKIP was a very English phenomenon: the arguments of UKIP only resonated with English people, whereas in Scotland, Wales and Ireland, people could feel European as well as Scottish, Wales and Irish. For the Liberal Democrats “the UKIP threat should not be addressed by being a being a little Englander.. UKIP appeal to people who feel they’ve lost out or alienated in the world and we will not appeal to those people, so no point in tailoring our appeal to people who do not share our outlook on life.”

On immigration, it was essential, said Ludford, to clarify the distinction between the free movement of people in Europe – part of the single market – and immigration more generally. Because of free movement “there are between one and two million Brits living abroad… which not necessarily all of them realise”.

This did not, said Ludford, militate against our ability to manage non-EU entry to immigrants from the rest of the world, such as the entrepreneurs from India James Forsyth mentioned.

Ludford concluded that the Norwegian option, favoured by some as an alternative to full EU membership, was nonsensical for Britain: “How can some in this country complain about loss of sovereignty and then want to be like Norway, home of ‘fax democracy’? It makes no sense.”

“Business has been sitting on the side lines for far too long and we need to speak up” said Alan Houmann, Managing Director of Citi. The benefits of membership for him were clear: trading blocs generate growth, and the UK should be part of the world’s largest trading bloc, worth 19 per cent of global trade and the numerous free trade agreements it already has as well as those it will soon have.

Houmann added that there was an argument for reform but that should be done from the inside: “John Major said ‘you have to be on the pitch and playing hard, not sitting on the side lines.’”

A number of foreign investors had begun to make their positions clear, said Houmann, giving the example of the recent Japanese intervention pointing out that the 1300 Japanese companies in the UK and creation of 130,000 jobs was due to the UK’s position as a gateway to Europe.

The debate on Europe, Houmann said “is an old persons debate. Young people see themselves as European and want to be European. It is important to allow people to be that.”

In Citi’s many conversations with political leaders in France and German, Houmann said that it was clear that “Britain is pushing at an open door” with our reform agenda, with German officials behind closed doors referred to the Commission as “not fit for purpose”. Likewise the Dutch government’s review of EU power suggested 130 reforms.

Responding to questions from the floor on the EU debate, James Forsyth said it was “important not to use Europe as an excuse for our problems”, and that there was a danger people want to polarise the debate so that they wrongly characterise all those who criticise the EU and call for reform as being in favour of UKIP. Forsyth added that Britons did not feel the emotional attachment to the EU that other members of the union do, as numerous surveys have concluded. While he could feel an emotional attachment to the United Kingdom, the same was not true with the EU.

For this reason, if an argument can be made that Britain were better off outside the EU he would vote to leave – whereas with the UK that would never be the case.

Forsyth identified Labour voters as the crucial target for both sides in the EU referendum campaign, which explained, he said, Nigel Farage’s emphasis on immigration as an appealing issue to Labour voters, likewise, why the Labour party focus on workers’ rights as a reason to stay in the EU.

The pro-European argument that Britain would be “uncivilised” if we left the EU – scrapping paid holiday for example – would not wash, said Forsyth, given that many of these areas would be regulated by the British government anyway.

Michael Moore raised the need to personalise the debate around Europe and make it relevant to people’s lives, for example highlighting consumer protections, reduced mobile phone charges and cheap flights. Moore also said that the EU had not been given enough credit for its breakthroughs in competition law and breaking monopolies which had been far better on scale than in done by one country alone.

Moore highlighted the regional benefits for large parts of the country in terms of investment and job creation, for example in the North East which relied on Nissan and others to invest in factories and the supply chain. Most of these cars would be exported into Europe because of the common set of standards, but how long would such investors remain in the UK if we were no longer in the EU?

Baroness Ludford suggested that it was more effective to hear companies talk about how jobs were linked to export opportunities rather than large numbers which did not mean anything on their own: firms such as Nissan, Airbus, Rolls Royce and others who people have heard of and sound credible on this issue.

Britain also failed to trumpet its own achievements and influence, said Ludford, such as how English had become the lingua franca in the EU institutions, compared to the dominance of French in 1977. Also, we should take the credit we are due for our legal influence on competition law and our contribution to the underpinnings of the convention and other huge pieces of work.

The cultural affinities and the values, such as democracy, rule of law and human rights also needed to be raised more by pro-Europeans, as well as the value of the European Union in having enshrined peace on the continent for so many years.

On the role of the media in the European debate, Michael Moore said that the case had to be made in all forms of media and that “wishing away” the more sceptical parts of the press was not going to achieve anything: “We can’t complain about the weather, we have to get out there and make the argument in a way people understand and appreciate”.

How Britain approached the renegotiation of its relationship with the EU was vital to get right, said Moore, and should be seen “not as a unilateral negotiation, but will be achieved by sitting in long meetings with like-minded people, not saying ‘unless we get this we are walking out’”.

James Forsyth said that the inevitability of treaty change meant that there would be a renegotiation for all EU members, therefore Britain would not be in the position where it had to threaten to leave if it didn’t get what it wanted. But, he added, much will depend on how the other member states react to Britain’s demands: “If Angela Merkel continues to show the positive signs she currently is that is fine, but if nobody is listening to you, it is a worrying sign.”

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Over 170 senior business leaders and Business Secretary back BNE Manifesto for European Reform

July 3rd, 2013

Over 174 business leaders said on Monday that reform of Britain’s relationship with the European Union needs to start now.

The 174-strong list includes 45 business leaders from top-listed global companies supporting Business for New Europe’s Business Manifesto for Reform in a personal capacity, of which 36 are listed on the FTSE, 8 on the NYSE, 2 on the CAC 40 and 2 on DAX 30.

The breadth of support shows how widely the business community supports this reform agenda, from small and medium sized manufacturers and entrepreneurs to well-known high street names in retail, energy, banking, telecoms, insurance, publishing and law.

The manifesto was launched at a cross-party event in Westminster on Monday morning with support from the Business Secretary Vince Cable, Margot James MP, Personal Private Secretary to Lord Green the Trade Minister, Emma Reynolds MP, the Shadow Minister for Europe and David McAllister, a close confidante of German Chancellor Angela Merkel and key player in the German CDU party.

Vince Cable said, “Being part of the single market gives UK business access to the world’s largest trading bloc, worth £11 trillion… Through successful trade negotiations we are opening up new markets for British companies to grow, as well as improving existing ones.  We are currently negotiating a free trade agreement between Europe and India and will start formal discussions with the US – the biggest prize of all – very shortly.” He added, “Let’s be clear. Leaving the EU is neither a good nor a realistic economic option for this country.”

Chairman of BNE, Roland Rudd said, “This manifesto is about what we believe needs to happen now. The EU needs reform. The inescapable logic of the euro crisis is increased competitiveness. Demanding unilateral opt-outs will alienate allies. We need radical reform of the EU for all its members. It would be deeply ironic if the UK were to consider leaving the EU having just helped create a massive Euro-American trade area.”

Conservative MP and member of the Number 10 policy board, Margot James MP, agreed, pointing out that “it is vital that we make life easier for SMEs, and complete the Single Market. The EU needs radical reform, and I would encourage all parties to support this initiative.”

Shadow Europe Minister, Emma Reynolds MP, said it was “absolutely essential that we argue the case for reform for all EU member states from within the EU, rather than blackmailing our partners. It is clear from this manifesto that British business not only supports the UK’s EU membership but also wants us to lead the reform agenda in Europe.”

David McAllister quoted German President Joachim Gauck, who said Germany would like the UK to stay in the EU, and that it is in both countries interests for it to do so. McAllister went on to note that the reforms set out in the BNE Manifesto were in line with German thinking and that this was something Germany could support.

The manifesto calls for progress in five areas: completing the Single Market in digital, energy, transport and telecoms; free trade agreements; making the EU work better for small and medium sized enterprises; enhancing the City as the world’s financial centre in Europe and streamlining the EU.

Roland Rudd said, “we are delighted that the political campaign British Influence is launching the Our Biggest Market campaign, spelling out the benefits of the world’s largest trading bloc, and supporting the manifesto.”

Photos – Rex Features

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The Future of the EU – Debate with Guy Verhofstadt MEP, Professor Anand Menon, Emma Reynolds MP, Martin Callanan MEP and Professor Simon Hix

June 7th, 2013

By Liam Murphy

With just over a year to go until the European elections, on Monday 3 June in London, Business for New Europe and the European Parliament Information Office brought together senior policy makers, journalists and economists to look ahead to next year’s European elections, the potential results, as well as the impact on the future of the EU from 2014.

Kicking off the panel discussion, Guy Verhofstadt, Leader of the Alliance of Liberals and Democrats in Europe, said a “new fundamental law for the EU” would be necessary to secure the bloc’s future stability. The former Belgian Prime Minister called for “a more integrated Europe” to address the inherent failure in how it is governed. He warned that in 20-25 years, not one EU country will be a member of the G8. The future of the EU, he argued, must therefore entail a reinvention of sovereignty at a European level if it is to prosper in an increasingly globalised world.

Professor Anand Menon of King’s College London, cautioned against a rushed push towards further integration. The EU, he said, is changing, and members need to change their relationship with it, not least because of the different regulatory requirements of those inside and outside the eurozone. Menon noted that the current political climate presented a golden opportunity for David Cameron and other European leaders to secure valuable reforms such as the repatriation of more powers to national parliaments. However, the PM’s strategy of distancing himself from the forums where decisions are made, while still saying he wants reform, was “barking mad.” He went on to say that though a referendum on UK membership of the EU is “unavoidable,” treaty change will remain unlikely due to the reluctance of EU leaders to go to the polls.

Emma Reynolds MP, the Shadow Europe Minister, agreed with Professor Menon that it was important the UK remains engaged with the EU, describing the constant talk of a referendum as a “distraction.” She argued that both economically and politically, it was in the UK and EU’s interests that the former did not leave the fold, touting Justice and Home Affairs as an example of an issue area the UK could lead to the benefit of all parties. Ms. Reynolds dismissed the most likely alternatives to full membership, describing the Norwegian model as a “fax democracy,” and the Swiss model as being entirely unworkable due to the number of bilateral agreements that would have to be signed. The shadow minister said that what the public really cared about were jobs, welfare, and the economy, and that an in/out referendum should only be held in the event of a significant treaty change.

However, for Conservative MEP Martin Callanan, the crucial issue facing the EU was the lack of a common identity, what he called a “demos.” He went on to say that “democracy means an affinity with institutions, a common space, but that doesn’t exist.” Despite this, Professor Simon Hix, Head of the Department of Government at the London School of Economics, suggested that next year’s European elections could help remedy this. While the election of MEPs usually serves as a sort of mid-term poll for the government, factors such as the eurocrisis, the rise of euroscepticism, and that there will be rival candidates for the European Commission presidency, should increase the salience of the EU in voters’ minds. He went on to say that the elections were an opportunity to change the debate on Europe and give people the opportunity to decide what kind of EU they really want.

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David Cameron will watch closely as Tusk concedes treaty-breaking possibility of Polish euro referendum

March 30th, 2013

By Patrick O’Brien

David Cameron and Donald Tusk (Photo: Gazeta.pl)

Polish Prime Minister Donald Tusk took a big political gamble when he conceded the principle of holding a referendum on Polish euro membership on March 26.

Pressure from the opposition pushed him into it and the repercussions could be far reaching.

When Poland joined the EU in 2004, it did so without any opt-out from the euro.

Poland – like other new joiners – is legally bound to join the euro when it meets the economic criteria. Strictly speaking, they have no choice in the matter, just flexibility as to when.

The latter flexibility effectively gives Poland a veto, but no new joiner has explicitly said it will resile from its treaty obligations and not join the euro, so this is new.

This will be watched very closely by David Cameron because he is similarly pushing the terms of the UK’s EU membership to the limits. He will welcome any other member state that shakes up the existing order in the EU.

Donald Tusk made the concession as he sought to gain sufficient parliamentary support to alter an element of the Polish constitution, requiring national currency to be issued by the Polish National Bank.

Public opinion in Poland has traditionally been very much in favour of the euro; it had been seen as a means to guarantee Polish economic security, but, recent polls suggest that the euro crisis has turned Poles from enthusiasts – with 60% backing Euro membership in recent years, into pessimists – with only 25% now in favour of joining and 68% against.

Polish pessimism is in line with the current surge in scepticism in mainstream politics and populist movements across Europe. Many have come to associate the EU and the euro with crisis. The subsequent rush to integrate as remedy to these crises has been seen at worst as anti-democratic and lacking in popular legitimacy.  Brussels and the single currency have come to many to represent the cause, rather than the solution, to their problems.

Euro-scepticism, was traditionally a preserve of politics on the margins, but has gained political traction throughout the EU. In the UK, hard-line euro-sceptics ‘UKIP’ have never been stronger, consistently polling at 17%. Scepticism, however, is no longer confined to fringe movements; the issue is now core for centrist parties in the UK who fear losing votes to parties like UKIP that are striking a chord with voters.

Developments in countries like the Netherlands (where two-thirds now believe the EU to be anti-democratic) or Germany, which has produced its first explicit anti-EU party ‘Alternative for Germany’, have shown a desire to challenge orthodoxy. In Southern Europe populist movements like Beppe Grillo’s 5 Star Movement in Italy and Syriza in Greece have gained popular support.

In Poland, Donald Tusk intends to fight his 2015 election campaign from a pro-EU stance and on entry into the single currency, confident that a strong public relations campaign can sway public opinion as it did pre accession (78% in favour). But what if people vote no? It will cause a de-facto constitutional crisis in the EU.

With a Polish exit from the EU unlikely, a no vote would probably require a renegotiation or redefinition or Poland’s place within the EU.

For now, Polish membership is very much linked to entry into the single currency, as Tusk states, by the end of the decade “being in the euro, will mean being in the European Union,” but the consequences of promising a referendum will be watched very closely in Downing Street.

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Cyprus II – there was time, they did get it right, but it was not the place for on-the-job training for new head of eurogroup

March 27th, 2013

By Phillip Souta

As we – and many others – wrote last week, Mark 1 of the Cyprus deal was a complete shambles. The fact that the Troika and the Cypriot government arrived at the right conclusion in deal Mark 2 was a relief for the markets, but we should not move on from this without looking at the lessons that need to be learned.

The departure of the crisis-hardened Jean-Claude Juncker as head of the eurogroup left a gap in experience which probably contributed to the remarkable oversight that raiding savers under €100,000 for 10% would send  shockwaves through the eurozone.

It will now take even more explicit and clear assurances that eurozone depositors of less than €100,000 will have their savings guaranteed to stop depositors in Spain, Italy and Greece from cleaning out their bank accounts at the next sign of trouble. This is the lesson that the new head of the eurogroup, Jeroen Dijsselbloem, should ponder over the coming weeks as he continues to settle into one of the most market sensitive jobs in the eurozone.

 

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There’s still time to get Cyprus deal right

March 18th, 2013

By Liam Murphy

Cypriots woke up on Saturday to the news that deposit holders would bear a significant amount of the burden in a deal aimed at rescuing the banking sector. Those with savings of less than €100,000 will face a ‘tax’ of 6.75 per cent, while those with holdings in excess of this figure will face a hit of up to 9.99 per cent.

The logic, if you want to call it that, behind the deposit ‘tax’ is clear, but it was an ill-advised move which sets a dangerous precedent.

There were very few other options for Cyprus to choose, faced with the scale of the problem. However, forcing savers of modest sums to hand over a significant portion of their savings will not only give the EU a bad name, but risk the faith of thousands across Europe, who have so far lived through bailout and austerity programmes with relatively good grace.

The Eurozone countries could never have agreed to pay out the full required bailout (€17 billion). Relative to the size of the small island nation’s GDP, this is an enormous figure, and it would have almost certainly defaulted. On top of that, the sorry state of Cypriot banks’ finances meant that some deposit holders were always going to be targeted.

There were also other forces at play in the background, not least election-year politicking in Germany. The Social Democrats have used the Cypriot bailout to put pressure on Chancellor Angela Merkel. At issue is that the island is a known tax haven for Russian deposit holders, and not a small portion of these holdings are seen as having been generated from illegal activities. That Germans would be ‘bailing-out’ Russian deposit holders is politically toxic, and Merkel could never have signed off on it.

The assertion by President Nicos Anastasiades that there was no option but to hit smaller savers and business owners (those with deposits of under €100,000) is hard to believe. The President himself had alluded to applying a higher ‘tax’ of up to 60 per cent on those holding more than the €100,000 threshold. Christine Lagarde, the head of the IMF, has also advocated the imposition of similarly high rates. The deal as it currently stands is regressive, making the poor suffer while the rich get away relatively lightly.

The Cypriot government will extend Monday’s bank holiday for an extra day so as to ensure there is no run on the banks before it meets tomorrow to debate the deal at 4pm (GMT). Yet, even if parliament ratifies the package, it will have done irreparable damage to recovery efforts in the Eurozone. The principle of deposit insurance has been disregarded and the security of holdings in other troubled Eurozone countries (Spain, Portugal, Greece, Italy) has been cast into doubt. There is no reason to assume that these measures can’t be implemented elsewhere.

In an environment of universal austerity, that large deposit holders are once again getting off the hook is not likely to sit well with European voters. The Cypriot government has until 4pm (GMT) tomorrow, when parliament meets, to negotiate a more progressive solution to its financial troubles.

Mr Anastasiades faces a difficult task to get the rescue package as it currently stands through parliament after four members of Diko, the junior partner in the coalition government, threatened to vote against it. He would do well to heed the advice of Panicos Demetriades, the central bank governor, who has said that small savers should be excluded from the levy to respect the EU guarantee on bank deposits up to €100,000. There is still time.

Posted in Economy, Euro, European Politics, Financial Services | Comments Off

Britain and the Future of Europe – Debate with David Miliband, Liam Fox, Hugo Dixon and Andrew Lilico

February 12th, 2013

By Conor Brennan

David Cameron’s EU negotiating strategy is “putting a gun to our own heads” warned Former Foreign Secretary David Miliband, while Conservative MP Liam Fox would support Britain leaving the EU if the Prime Minister did not get a “good deal”.

Speaking at an event hosted by Business for New Europe and the City of London Corporation on Monday 11 February, Miliband argued that membership of the EU was good for Britain as we have done well out of the Single Market and have “never lost a vote on financial services.”

Photograph: Jeff Gilbert

Debating the future of Britain in Europe before an audience of 250 business leaders, academics, British and foreign journalists and members of the diplomatic community, Miliband said that the current strategy by the government was “putting a gun to our own heads” and he stressed the importance of local associations in the future of global competiveness.

Former Secretary of State for Defence, Dr Liam Fox stated that he did not want to remain in the EU “at any price”.  He claimed that currently the EU project was “unsustainable” because it is seven per cent of global population and 25 per cent of GDP but spends 50 per cent of social welfare spending.“Europe needs to change” claimed Dr Fox, citing barriers to competiveness and the democratic deficit as areas in need of reform. He supported David Cameron’s pledge for an in/out referendum, adding that it is not an excuse to deny the people a say in Europe’s destiny because you may be scared of the outcome.

Editor-at-Large of Reuters News Hugo Dixon said the UK needs to be “an active member of a reformed union”. Highlighting three ways to pursue this agenda, Dixon stated that Britain needed to build alliances and “play the diplomatic game”; stop talk of unilateral repatriation of powers and instead seek to develop multilateral agreements;and finally understand the differences that still exist within the EU and how this is impeding a closer fiscal union.

Andrew Lilico, director and principal of Europe Economics, argued that the EU is foremost a political project and its “internal logic” is driving it towards a unified federation of states. He added that this will leave Britain outside the core of possibly 23 member states with little influence over decisions and rules that it is affected by. Lilico dismissed the idea that a federation of States is “just hearsay” and compared this to before the formation of the Euro currency – people did not think it would come to fruition.

Addressing this point David Miliband argued that the Treaty of Rome proposed an “ever closer union of the peoples of Europe” and in this regard the EU has successfully offered free movement of people and improved tolerance of different cultures in Europe. Hugo Dixon disagreed Europe “was on the brink of greater integration”, claiming that even the banking union has rolled back on many fiscal union integration policies.

Concluding the debate chaired by Roland Rudd chairman of BNE, Dr Liam Fox criticised the Euro as a “flawed concept” by allowing the wrong countries to join. He also stated that people were told “the sky would fall in” if Britain did not join the Euro or the Schengen agreement, when clearly neither has happened, which should be borne in mind. Lilico added that Britain “had lost influence by not joining the Euro” and this was exactly problem that it will have in the future.

 

Posted in EU Referendum, Euro, European Politics, UK Politics | Comments Off

A serious week in Europe with budget cuts, progress in Ireland and common sense on fisheries

February 9th, 2013

By Phillip Souta

David Cameron and Angela Merkel worked together to cut the EU's 2014-2020 budget

It was not “standing up to the EU” that delivered the Prime Minister’s objective of a slimmer EU budget, it was pragmatism and alliance building.

We have been calling for radical reform of the EU budget since we were founded in 2006 and last year published a fully costed Alternative EU Budget which would have saved the UK over €10 billion.

David Cameron and Angela Merkel managed to deliver a 3.3 per cent cut in the 2014-2020 budget compared to 2007-2013. We are still spending too much on agriculture and the wasteful practice of recycling cohesion funds from rich members to rich members’ regions still continues. Spending on growth enhancing measures will go up by 37 per cent by €34 billion though. A budget that reflects economic hardships faced by voters across Europe and spends more on growth finally sends the right message.

The PM achieved this through strong arguments and building partnerships with Germany, Denmark, the Netherlands and Sweden. He was particularly succesful in getting the support of Sweden and the Netherlands which in turn made it far more likely that Germany would strongly back northern calls for a slimmer budget.

He ignored the theological Eurosceptics who would start with threatening a veto over demands in the full knowledge they could never be met. The outcome also provides a powerful argument for why the Tories should re-join the mainstream centre-right European People’s Party grouping in the European Parliament given that there is a good chance it may veto the deal in March. Outside it, they have less influence.

It was not just the European Council that made headlines this week. Ireland announced the liquidation of the failed Anglo Irish bank, easing the state’s debt burden and taking it a step closer to emerging from the 2010 bailout program by the end of this year.

Even the European Parliament, unloved even by EU standards, managed to get into the news for the right reasons by voting for an end to Common Fisheries Policy ‘discards’ – the practice of throwing unwanted fish back into the sea. Finally, fisheries quotas will be dictated by evidence of sustainable fish stocks designed to allow them to recover by 2020. The reform was passed by 502 against 127 votes.

Europe woke up to 2013 not with 15 or 16 eurozone members, but the full complement of 17. I won bets made at the height of the crisis with people who just couldn’t see the euro surviving. Now, money is flowing back to the periphery and Spain, Ireland and Portugal are seeing increased exports and competitiveness through albeit painfully lowered labour costs.

Amongst all of this, the importance of being practical and building alliances is a lesson which will not be lost on David Cameron when he tries to persuade our partners to allow some core competences to be repatriated back to Britain. He will be lauded next week by the eurosceptics of his party for bringing back a cut to the EU budget. The uncomfortable truth they have to face is that they would abolish the European budget and walk away from the EU tomorrow if they could, but their leader prefers to be in the thick of it.

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Posted in EU Budget, European Politics | Comments Off

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