Renzi arrives at the EU summit in Brussels on Thursday and quickly took issue with Barroso

If you read the EU’s budget rules, it appears to be a cut and dried affair: if the European Commission has concerns that a eurozone country’s budget is in “particularly serious non-compliance” with deficit or debt limits, it has to inform the government of its concerns within one week of the budget’s submission. Such contact is the first step towards sending the budget back entirely for revision.

As the FT was the first to report this week, the Commission decided to notify five countries – Italy, France, Austria, Slovenia and Malta – that their budgets may be problematic on Wednesday. Helpfully, the Italian government posted the “strictly confidential” letter it received from the Commission’s economic chief, Jyrki Katainen, on its website today.

But at day one of the EU summit in Brussels, the letter – and Italy’s decision to post it – suddenly became the subject of a very public tit-for-tat between José Manuel Barroso, the outgoing Commission president, and Matteo Renzi, the Italian prime minster.

Barroso fired the first shot at a pre-summit news conference, expressing surprise and annoyance that Renzi’s government had decided to make the letter public. For good measure, he took a pop at the Italian press, which in recent days has been reporting that Barroso was the one pushing for a hard line against Rome, and implying he was motivated by his desire to score political points back home in Portugal, where he has long been rumoured as a potential presidential candidate after leaving the Commission:

The first thing I will say is this: If you look at the Italian press, if you look at most of what is reported about what I’ve said or what the Commission has said, most of this news is absolutely false, surreal, having nothing to do with reality. And if they coincide with reality, I think it’s by chance.

 

Juncker addresses the European Parliament before the vote approving his new Commission

It started out as an internecine turf war within the incoming regime of Jean-Claude Juncker. But it is quickly metastasising into what could be one of the first international policy fights of the Juncker Commission.

The dispute centres on a previously obscure trade arbitration system that allows companies that believe they can’t get a fair hearing in front of national courts to appeal to an international dispute resolution panel known as ISDS, for investor-state dispute settlement.

The systems have become relatively commonplace in international investment treaties, but they suddenly – and to the surprise of many advocates – have become the single biggest bone of contention among opponents of the world’s biggest trade deal, the pact currently being negotiated between the US and EU.

Opposition from social democrats in Germany, the country where ISDS was ironically invented, has put ISDS on the front-burner politically, and Juncker – urged on, officials say, by his powerful chief of staff, German lawyer Martin Selmayr – has clearly sided with the sceptics. The stance has led to an open confrontation with Cecilia Malmström, his incoming trade commissioner who supported a similar ISDS system in the just-completed EU trade deal with Canada.

But as we reported in today’s dead-tree edition of the FT, free-trading countries are fighting back. A letter signed by ministers from 14 member states – including Britain, Spain, Portugal, Sweden and the Czech Republic – pointedly reminds Juncker that ISDS was included in the negotiating mandate that all 27 member states gave to the Commission last year. We’ve posted a copy of the letter here

Having trouble following the fight over the EU’s budget rules? You’re not alone. They are fiendishly complicated, particularly since nearly every eurozone country is at risk of violating a different part of them.

Is your deficit over 3 per cent of economic output? Then you’re in the “excessive deficit procedure”. Is your deficit under 3 per cent but at risk of going over? Then you’re in the “preventative arm”. What if your deficit is under 3 per cent, but your national debt is over 60 per cent of gross domestic product? Well, you can still be in an “excessive deficit procedure” if you don’t cut the debt fast enough.

There are so many iterations that the European Commission has an entire 115-page “vade mecum” – fancy Latin for “guidebook” – for those trying to figure out how they work.

The complexity of the rules has made it particularly difficult to judge the new Italian budget, submitted – along with all other eurozone countries, save bailout countries Greece and Cyprus – to the European Commission on Wednesday. 

Latvia's Valdis Dombrovskis was heckled by some MEPs at his hearing on Monday.

After six hours of testimony over the last week between Pierre Moscovici and Valdis Dombrovskis, some MEPs are still fuming that they have no idea which one will be in charge of ruling on national budgets as part of the EU’s annual review process.

Moscovici, the former French finance minister, has been nominated economics commissioner and is seen by centre-right MEPs as too lax on fiscal matters; Dombrovskis, a former Latvian prime minister, will be vice-president for the euro and seen by the centre-left as a disciple of the EU’s austerity school of economics.

As we reported last week, going into their confirmation hearings it looked like the two men would basically share the role. But neither gave clear answers of how their division of labour would work at their hearings, leading French MEP Sylvie Goulard, the top Liberal on the economics committee, to heckle Dombrovskis: “So we don’t know?” she shouted after he failed to explain who would represent the eurozone at international fora like the IMF and G-20.

In an effort to gain clarity, the economic committee leadership on Monday sent a letter to Jean-Claude Juncker, the incoming commission president, asking for further clarification. We’ve obtained his response, and posted it here. It doesn’t provide a huge amount of additional clarity. 

Hyon Hak Bong presenting his credentials to Queen Elizabeth two years ago

Hyon Hak Bong, North Korea’s envoy to the EU, has his work cut out.

The instructions from Pyongyang are clear: re-open a dialogue on human rights with the EU that was suspended in 2003. That’s a tall order in itself, but it is made even more difficult by the fact that he must simultaneously reassure sceptical Europeans that camps for political prisoners simply do not exist in North Korea.

Speaking to the Financial Times on a mission to Brussels, it was clear that the London-based ambassador was part of a broader Pyongyang charm offensive towards the EU. Last month, Kang Sok Ju, one of the supremos in the ruling Workers’ party, visited Germany, Belgium, Switzerland and Italy.

Currently seen as a destination for only the hardiest foreign investors, the impoverished nation of 25m would benefit from some more business with Europe (and the access to hard currency that brings). Real progress on that prickly human rights dossier would certainly help “develop relations further”, as Mr Hyon puts it.

North Korea wants the EU to stop co-sponsoring UN resolutions against Pyongyang’s human rights record, but Mr Hyon may find Brussels bureaucrats ever-so-fussy about those infuriating details – like the penal system. Europeans will be focusing on the testimonies of North Korean defectors, who describe the horrific conditions in the country’s gulags, telling of rape, summary executions, starvation and back-breaking labour in penal mines.

According to Mr Hyon, this is all a fiction. He said that the EU needed to understand who the defectors were: “These are the riff-raff who have escaped through fear of the legal treatment they will receive for their crimes. So they attack North Korea and take money to do so…. We do not have political prisons. We have prisons like those in Belgium and the UK, where prisoners are being educated.” 

Pierre Moscovici arrives in Paris for the government's confidence vote earlier this month.

One of the most highly anticipated confirmation hearings in the European Parliament this week will be that of Pierre Moscovici, the former French finance minister tapped to be the European Commission’s new economic chief, who will appear before the economic affairs committee on Thursday morning.

Members of the parliament’s centre-right grouping, the European People’s party, have vowed to give him a grilling on whether he will vigorously enforce the EU’s tough budget rules – particularly since he comes from a French Socialist government that has advocated more flexibility in the rules.

As we reported in today’s dead-tree edition of the FT, Jean-Claude Juncker, the incoming Commission president, took the unusual step of issuing a legal decision that spells out in black and white Moscovici’s relationship with the Commission’s new vice president in charge of the euro, Valdis Dombrovskis, a former Latvian prime minister with a reputation as a deficit hawk. Here’s the relevant paragraph:

 

 

We have posted the entire 6-page document here. Most of it is unsurprising boilerplate – though there is a somewhat intriguing US-style line of succession among the vice presidents on page 2, which ranks Dutchman Frans Timmermans first and Finland’s Jyrki Katainen last. 

Malmstrom makes a point during her unexpectedly contentious hearing on Monday

It is rare that an obscure bit of international trade arcana turns into a major political kafuffle, but that’s just what appears to have happened on Monday over a relatively obscure arbitration system proposed for a new EU-US trade pact.

Although there is much substance behind the dispute, what really has Brussels insiders buzzing is the role played by Martin Selmayr, the increasingly powerful head of Jean-Claude Juncker’s transition team.

According to several EU officials, Selmayr – a workaholic German lawyer who is expected to become Juncker’s chief of staff when the Luxembourger assumes the European Commission presidency – changed the written testimony of Cecilia Malmström, the incoming trade commissioner, before it was submitted to the European parliament without her knowledge.

Dutch Liberal Marietje Schaake, a rising star within the European parliament, first made the accusation publicly during Malmström’s confirmation hearing on Monday afternoon (a video of her revelation can be seen here).

Schaake’s allegation is supported by a copy of the commissioner’s final testimony obtained by Brussels Blog and posted here. The document shows dozens of edits made by Selmayr that were recorded by the word processing programme’s track changes at 8:38am on Sunday. MEPs say the testimony landed in their in-box less than 20 minutes later. 

Lord Hill says that there will be no exceptions for member states who fail to jump into line on banker bonuses. 

Commission nominee Phil Hogan, left, with Irish prime minister Enda Kenny

Much of the back-room plotting ahead of next week’s European Parliament confirmation hearings for the new European Commission has focused on four controversial nominees who are likely to face a tough grilling: Britain’s Jonathan Hill, Hungary’s Tibor Navracsics, Slovenia’s Alenka Bratusek and Spain’s Miguel Arias Cañete.

But suddenly Ireland’s Phil Hogan has moved into a strange spotlight.

The incoming agriculture commissioner has threatened Irish MEP Nessa Childers with legal action over a letter she sent to fellow parliamentarians opposing his appointment as commissioner.

In the letter (which we have posted here), Childers alleges that Hogan, while a member of the Irish parliament, agreed to try to prevent a “Traveller family” from moving into public housing in his constituency. Childers argues this makes him an unsuitable nominee.

Hogan has responded by sending some letters of his own: legal threats from his lawyers at Mason Hayes & Curran, alleging that Childers’ claims were untrue and defamatory. We have those three letters, labeled “strictly private & confidential”, here, here and here

Juncker's "key political challenges" session will feature Ukraine, EU-US trade and budget rules

Fresh with their newly-minted portfolios in hand, the 28 members of the incoming Juncker commission headed off for an “informal seminar” on the outskirts of Brussels by bus Thursday morning for a bit of team-building.

As we reported in this morning’s dead-tree edition of the FT, one of the highlights of the two day gathering will be a debate this afternoon on the EU’s budget rules between the new economic affairs commissioner, France’s Pierre Moscovici, and one of the new economic vice presidents, Finland’s Jykri Katainen.

According to a copy of the agenda for the two-day event, which Brussels Blog got its hands on and has posted here, the budget rules are one of three “key political challenges” that will be debated in a two-hour session after lunch. The other two are Ukraine and the increasingly controversial EU-US trade agreement.