EU Commission

Jim Brunsden

By Arthur Beesley in London

Europe is transfixed these days by Brexit, terrorism, migrants and the populist advance. But the riddle of Greece remains.

A damning new report by the IMF’s in-house inspectorate finds fault on several grounds with the fund’s approach to the country. This is backwards-looking exercise, which takes stock of bailouts for Greece, Ireland and Portugal. Yet there are clear implications for the next phase of the long battle to restore fiscal stability in Athens.

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Jim Brunsden

Nearly six months after knuckling down to work on the next stage of overhauling EU bank rules, finance ministers will meet in Luxembourg on Friday to acknowledge that they aren’t where they want to be.

Rather than being able to hail progress in the next steps of the euro area’s ambitious “Banking Union” reform programme, instead they have to tackle fundamental splits over how to take the project forward. If they can.

The divisions are laid bare in a package of documents prepared by the Netherlands, which holds the rotating presidency of the EU, and which is trying to chart a course for future negotiations before handing the reins over to Slovakia at the end of the month.

To pick through the splits, the FT Brussels blog has posted an annotated copy of the main Dutch document here (just click on the parts highlighted yellow:)

At the centre of the ruckus is the Commission’s proposal for the euro area to create a centralised system to guarantee bank depositors, known as the EDIS.

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Jim Brunsden

For many of us, the idea of Germany getting tough on its own carmakers is about as likely as a French minister admitting he prefers Australian wine, or Viktor Orbán offering free hugs to asylum seekers.

But over the past few months, German regulators have been making a good show of doing exactly that. Chastened by the discovery in the US that Volkswagen had been cheating in emissions tests, officials have leapt into overdrive, probing manufacturers including Daimler’s Mercedes-Benz, General Motors’ Opel, as well as Fiat.

In Germany’s latest move, the country’s transport ministry is calling on the EU to tighten its ban on emissions test cheating – a far cry from its efforts last year to water down EU plans for more realistic environmental testing of cars. Ministers will discuss the German requests today in Luxembourg, as part of a debate on the dieselgate scandal.

So what exactly is going on? Read more

Jim Brunsden

In countless zombie movies there is the classic moment where a member of the dwindling band of survivors is cornered and desperately opens fire on the oncoming tide of walking dead. Despite firing off round after round, to the despair of our hero, the enemies keep approaching until the fateful click of his empty gun that tells him the game is up.

It’s a predicament not unlike that of German Finance Minister Wolfgang Schäuble as he fights a rearguard action to ward off Brussels plans for a common eurozone scheme to guarantee bank deposits.

The idea, known as EDIS, is loathed in Berlin on the grounds that it could force Germany to help cover the costs of bank failures elsewhere in Europe. At the same time, perhaps unsurprisingly, it is lauded in Southern Europe as a guarantee that capitals will be helped to cope with financial crises.

So far, Mr Schäuble has thrown all kinds of obstacles at the proposal, which was unveiled by the European Commission late last year. He has insisted on a tough programme to close loopholes in existing regulations which he says must be fulfilled before EDIS is even considered. He has also questioned the very legal foundations of the plan – saying parts of it have budgetary implications for nations that go beyond what is allowed under the EU treaties.

Despite all this, discussions on the text have rumbled on for months in the EU’s Council of Ministers.

Now, however, Germany is seeking to hit Brussels where it really hurts: with its own rules of procedure.

In a joint paper with Finland, obtained by the FT, Germany seeks to hoist the European Commission up by its institutional petard, accusing it of failing to respect “requirements under primary law and the Better Regulation principles” by not carrying out a full “impact assessment” before presenting the EDIS plan in November.

It’s the Brussels equivalent of trying to take down Al Capone for tax evasion. But hey, it worked.

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Jim Brunsden

By Mehreen Khan in London

The International Monetary Fund’s latest recommendations on Greek debt relief have leaked.

Yesterday, ahead of the latest meeting of eurozone finance ministers on May 24, the IMF repeated it would take part in Greece’s €86bn bailout only if its European partners could prove “the numbers add up”.

A key part of this calculation is for the fund to be fully assured that Greece’s debt mountain is finally placed on a sustainable downward trajectory. Read more

Jim Brunsden

Britain: 2016

Should an extraterrestrial land on Earth tomorrow and decide to base his decision on where to live solely on economic forecasts provided by the European Commission, there’s a fair chance they’d pick the UK.

In country-specific recommendations published yesterday for almost all EU countries, Britain comes out looking pretty good, with a “dynamic” economy, “strong” household balance sheets and a banking sector whose resilience “continues to improve.” Even the risks to the economic outlook are presented as being contained, or mitigated by the government’s “wide-ranging” reform agenda.

All well and good. The only perplexing thing is, how does this fit with the altogether less peppy assessment that the EU Commission made this time last year? What could be happening to change their view? Read more

The three EU chieftains– Jean-Claude Juncker, Donald Tusk, and Martin Schulz – swapped the corridors of power in Brussels for the halls of Rome’s Capitoline Museums on Thursday night, but the magnificent setting only seemed to deepen their gloom about the state of European integration.

The trio was in the Italian capital ahead of Friday’s ceremony to deliver the prestigious Charlemagne award to Pope Francis at the Vatican. But first they had to debate the future of Europe at a time when it appears to be in serious jeopardy amid the rise of populism, weak economic growth, and, the migration crisisRead more

Peter Spiegel

This is Tuesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

The list of big American tech companies being investigated by Margrethe Vestager, the EU’s competition chief, for either antitrust violations or sweetheart tax deals already reads like a “who’s who” of Silicon Valley: Google, Amazon, Apple. Her proclivity for going after US companies, particularly in her tax investigations (American non-tech groups like McDonald’s and Starbucks have also been targeted), has already raised eyebrows in Washington, where Treasury officials and members of Congress have accused her of an anti-American bias.

Ms Vestager has denied singling out US firms, and if she is at all chastened by the American criticism, she’s not showing it: as early as tomorrow, she is expected to roll out a second antitrust case against Google, this time accusing the California company of abusing its dominant position in smartphone operating systems to foist its suite of apps on unsuspecting consumers.

In a speech yesterday, the former Danish economy minister compared Google’s practices to the mother of all EU-US tech antitrust cases, the 1990s-era battle with Microsoft. The comparison is apt for two reasons. First is for the reason Ms Vestager intended: during the time when computing was dominated by PCs, desktops running Microsoft’s ubiquitous Windows operating systems would come “bundled” with a wide range of other Microsoft software, most importantly its Explorer internet browser. Such bundling gradually destroyed browser inventor (and onetime market leader) Netscape, since nobody needed its Navigator browser if your PC came with Explorer. Read more

Christian Oliver

This is Monday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Margrethe Vestager, the Commission's competition chief, and her mobile phone

It often seems that the European Commission’s only real game plan regarding Brexit is to hope that there won’t be any unfortunate spats involving the UK right in the middle of campaign season. That won’t be possible, and there is every sign an imminent decision over whether to allow consolidation among British mobile phone network operators could turn into a political football.

Margrethe Vestager, the EU antitrust chief, has been known to argue that cutting the number of players from four to three in any one market saps competition and, in the case of telecommunications, allows companies to increase phone bills. Her hard-line stance on a 4-to-3 Danish telecoms merger last year suggests she’s also looking to block the £10.5bn purchase by CK Hutchison’s Three of Telefónica’s O2. Or at the very least, she will impose stinging concessions.

In less combustible times, the politics would be more navigable. Ofcom, the UK regulator, has already announced it is hostile to the deal. Just this morning, Britain’s competition and markets authority weighed in, writing to Ms Vestager that the merger a “significant impediment to effective competition” in the UK’s mobile phone market. Ms Vestager could quite easily argue that she represents the sort of “more competitive Europe” that David Cameron, the British prime minister, says he wants. She could argue she is simply protecting the little guy from big corporates who will put his phone bills up. Read more

Jim Brunsden

Mr Moscovici, right, chats with Mr Juncker. He will present the new tax measures next week.

Next week, the European Commission will take its latest step in its ongoing quest to move beyond the LuxLeaks corporate tax avoidance scandal that has periodically dogged President Jean-Claude Juncker.

Pierre Moscovici, the EU’s tax policy chief, is set to unveil a flurry of proposals aimed at tackling so-called base erosion and profit shifting: in other words the aggressive tactics used by multinationals to shrink their tax bills by as much as possible. This morning, we’ve done a story about the new proposals, which we obtained. But we’ve also now posted them here for others to read.

The so-called LuxLeaks revelations emerged shortly after Mr Juncker became commission president in November 2014, and dogged his early days in office. They documented how during his two decades as Luxembourg prime minister, up to 340 multinational companies, ranging from Ikea to Pepsi, funnelled profits through the tiny country to lower their tax bills to as little as 1 per cent.

The commission has embarked on a wave of regulatory changes to close loopholes, including making a renewed push for the longstanding EU goal of having a common consolidated corporate tax base for companies. It is also pursuing high profile competition cases against tax deals Luxembourg and others struck with multinationals such as Apple, Amazon and Fiat.

Most recently, the European Commission ordered Belgium to recoup about €700m from 35 multinational companies that have benefited from the country’s generous fiscal incentive scheme.

Mr Moscovici’s plans, which are outlined in a 13-page summary posted here, enshrine international agreements reached by the Organization for Economic Cooperation and Development into EU law, and in some cases go even further – notably when it comes to restricting the ability of companies to shift of profits from parent companies to lightly taxed subsidiaries. Read more

Duncan Robinson

After weeks of waiting, Gunther Oettinger has replied to a letter from the Polish justice minister that compared the German commissioner’s criticism of Poland’s media reforms with. . . the Nazi’s crimes of the second world war.

The letter, which we’ve posted here, is surprisingly polite, with a perky hand-written “Dear Colleague!” to start. This marked a shift in tone from the original missive from Zbigniew Ziobro, who tartly complained last week:

You [Oettinger] demanded that Poland be placed under ‘supervision’. Such words, spoken by a German politician, have the worst possible connotations for Poles. For me, too. I am the grandson of a Polish officer who, during World War II, fought in [Poland’s] underground Home Army against ‘German supervision’.

But Brussels is determined not to get into a war of words with Warsaw. This tactic was tried and failed with Viktor Orban, the populist leader of Hungary, who was happy to spar in public with the commission over his reforms while becoming increasingly popular at home.

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Jim Brunsden

After receiving two pointed letters from Warsaw, Timmermans seeks a meeting with minister

For days, EU officials had been signaling they would only issue a strongly-worded démarche to Warsaw for its new laws that critics argue undermine democratic norms. But on Wednesday, the European Commission took the unexpected step of moving forward with a formal “rule-of-law procedure” to determine whether the two new laws – one dismissing the management of state TV and radio broadcasters, the other limiting the powers of the constitutional court – pose a “systemic threat” to European norms.

Frans Timmermans, the commission vice-president in charge of rule-of-law issues, announced the decision after Wednesday’s meeting of the 28 commissioners. But he also formally notified Warsaw in a letter that we got our hands on and posted here.

Mr Timmermans letter comes in response to two missives from Warsaw that were far more pointed – including a particularly invective-filled one sent by justice minister Zbigniew Ziorbro on Monday – effectively telling the Dutchman to butt out of Poland’s internal affairs.

EU officials insist that the decision to move forward with the review were unrelated to the impolitic letters. Instead, they say, commissioners felt the procedure would lend some structure to their dialogue with Warsaw; otherwise, it would have remained unclear how either side would proceed. Read more

Jim Brunsden

The revelations that Volkswagen was rigging emissions tests have left a trail of destruction in their wake: a once proud European champion has seen its reputation dragged through the mud, millions of owners of “clean diesel” cars have found out they were hoodwinked and – most importantly for Brussels – the EU’s current system for policing auto manufacturers has been exposed as deeply flawed.

EU officials and politicians now regularly lament that it was the US’s powerful Environmental Protection Agency, rather than any European authority, that revealed the company’s use of illegal defeat devices to cheat in emissions tests – even though the practice was going on right under everyone’s noses on both sides of the Atlantic.

Although most of the power to test and certify vehicles falls to national regulators, the European Commission has come in for its share of the blame in failing to better enforce rules in this area. As we reported last week, it is preparing plans for overhauling the EU’s moribund car approval system. But will they go far enough?

A draft of the measures, obtained by Brussels Blog and posted here, makes it clear that the commission views the VW scandal as a game changer. Prior to the revelations, the commission was planning a limited overhaul of EU requirements; much more far reaching options are now on the table. Read more

Duncan Robinson

Davutoglu, left, and Tusk embrace after last month's EU-Turkey summit in Brussels

During the height of the Donbass crisis, Ukrainian diplomats repeatedly managed to get President Petro Poroshenko into EU summit meetings even when he wasn’t explicitly invited – something that drove Herman Van Rompuy, then the European Council president, to distraction.

Are Turkish diplomats now trying to repeat the Ukrainian model?

Ahmet Davutoglu, the Turkish prime minister, is now scheduled to be in Brussels on Thursday – the same day the final two-day EU summit of the year kicks off – as part of a mini-summit of EU leaders hosted by Austrian Chancellor Werner Faymann.

The gathering, which is to be held at the Austrian embassy, will include leaders of several countries who back an upcoming “resettlement” proposal by the European Commission, which would push EU countries to take anywhere from 200,000 to 500,000 Syrian asylum seekers currently in Turkey.

Thus far, the attendees include Jean-Claude Juncker, the commission president, along with German Chancellor Angela Merkel and the leaders of Sweden, Greece, Finland, Luxembourg, Belgium and the Netherlands. And now Davutoglu as well.

Donald Tusk, Van Rompuy’s successor as summit chairman, has made it clear that Davutoglu will not attend the summit itself, particularly since the Turkish prime minister was already feted at a summit of his very own just two weeks ago. Tusk’s displeasure is shared by several other countries who don’t think it is proper for other foreign leaders to gatecrash the EU party. Read more

Jim Brunsden

Since he took office a year ago as the EU’s financial services commissioner, Jonathan Hill has become renowned for his low key, calm approach – except when it comes to how he feels about car hire companies.

The details remain sketchy, but the demons of some previous holiday trauma seem to haunt this otherwise affable politician. Last week, he used the medium of Twitter to call on people to “Let us know your worst holiday car hire experience.”

A hearing he held last year with a committee of the UK House of Lords (of which he is also a member) become dominated by the issue of insuring rented cars, as peers took turns to let off steam about their encounters with unscrupulous rust bucket purveyors.

What, you may ask, has this got to do with Hill’s remit as the grandly titled European commissioner for financial stability, financial services and capital markets union?

The answer is: quite a lot, and this became clearer when the Commission published a policy paper on tackling the day-to-day financial irritants that people encounter when crossing borders, be it a lack of transparency on the fees you are charged when you transfer money abroad, an inability to take your health insurance policy with you when you move to another country or, yes, frustrations with ludicrously high insurance premiums on hire cars. Read more

Christian Oliver

Johan Van Overtveldt, Belgium's finance minister, has vowed to fight Vestager

Margrethe Vestager, the EU’s competition chief, is regularly in the headlines for her corporate tax battles with big US companies: Google, Amazon, Apple and now McDonald’s. But don’t overlook her investigation into Belgium’s tax perks scheme for multinationals. A verdict appears to be imminent, and the repercussions will be felt well beyond the country of 11m.

Earlier this week, Johan Van Overtveldt, finance minister, told the De Standaard daily that Belgium was “highly likely” to have to claw back €700m from companies that have benefited from Belgium’s special tax incentives package.

Van Overtveldt is promising to resist Vestager’s tax justice campaign, but she isn’t a commissioner to change her mind too quickly. Read more

Peter Spiegel

Barack Obama speaks with Angela Merkel on the sidelines of the Paris climate summit

Now that the EU has signed a tentative deal with Turkey to help it stem the flow of migrants coming from the Middle East, Brussels appears to be turning to other allies for help – including the US.

According to diplomats, the Obama administration has for months been asking for a “wish list” from the EU on ways it can help, and in recent weeks it finally got that list from the European Commission. Brussels Blog got its hands on the five-page memo, titled “Potential areas of US political and operational support on international immigration and refugee crisis”, and has posted it here. (To give credit where credit is due, our friends and rivals over at the Italian daily La Stampa got their hands on it before we did.)

The document contains few surprises, including a lot of requests for US funding. But there are a couple of “asks” that are particularly interesting. First, the Commission is seeking Washington’s help in pressuring Sunni allies in the Gulf to both help with money and with the more politically combustible issue of accepting some of the hundreds of thousands of refugees that have been fleeing Syria. Or, in the words of the document:

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Christian Oliver

Does postponing her first trip to China for "important matters" mean tax cases imminent?

Danes are known for being fastidious about appointments. So it’s a really big deal that Margrethe Vestager, the EU competition commissioner, has cancelled her first trip to China. She was supposed to be there on Thursday and Friday.

The commission admits that something is up: “Due to important matters requiring her presence and full attention in Brussels, the commissioner will have to postpone the visit to China,” said a spokesperson.

We may be reading too much into these runes at the Brussels Blog, but there is a clamorous army of lawyers in Brussels simultaneously saying that we are reaching endgame in the landmark tax avoidance cases involving Fiat, Starbucks, Apple and Amazon. Read more

Christian Oliver

Oh dear. It’s like Fifa all over again.

How was it that the Americans managed to unearth all the rottenness in Volkswagen, Europe’s top carmaker? How come the Europeans were asleep at the wheel again?

That pretty much summed up the shame-faced mood at today’s session of the European Parliament’s environmental committee, where MEPs wanted lots of answers from the European Commission. And didn’t really get any.

Christofer Fjellner, a Swedish centre-right MEP, captured the spirit: “Of course it’s embarrassing that it’s the Americans that show us we have a problem. It could be telling that it is the Americans because in Europe, in member states, we are not up to the task of scrutinising our own heroes the way we should.” Read more

Christian Oliver

Margrethe Vestager, the EU's antitrust chief

Margrethe Vestager seems to be preparing for a marathon court battle.

At a parliamentary committee on Thursday, she gave a clear sign that she had the political will to issue tough landmark decisions on the sweetheart tax deals that EU countries have been issuing to multinationals.

But she also gave away a tell-tale clue that her officials are steeling themselves for a firestorm of litigation in what will become some of the defining cases of the Juncker commission. She won’t be rushed into a verdict before she has a “quality” case, she told the committee.

The Danish commissioner was appearing before the Brussels parliamentarians to give an update on four landmark tax investigations – Apple in Ireland, Starbucks in the Netherlands and Fiat and Amazon in Luxembourg.

Most critically, she robustly defended the commission’s revolutionary approach of treating “comfort letters” as state aid – effectively defining the letters (which are pre-emptive tax rulings, intended to reassure multinationals about whether their corporate structures aimed at to avoiding high tax bills are legal) as illegal subsidies. Read more