EU Commission

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

Peter Spiegel

On Tuesday, Frans Timmermans, the European Commission’s first vice president who has been tasked with streamlining and overhauling the way Brussels operates, presented one of his signature initiatives – the so-called “better regulation” package aimed at scrutinising more carefully the rules Brussels imposes on businesses.

As the FT wrote after our hour-long interview with Timmermans, he is a relatively late convert to the Brussels reformist camp, having changed his view after a lot of soul-searching in 2005, when his native Netherlands voted against an EU constitutional treaty that he himself helped negotiate.

Perhaps Timmermans’ most notable contribution to the EU reform debate since then was a June 2013 Dutch government report he helped author that spelled out 54 different policy areas that should not be ceded to Brussels. Now Timmermans gets to practice what he preached – even more so, now that David Cameron, the newly re-elected British prime minister, has launched his attempt to renegotiate Britain’s relationship with the EU focused on many of the same reform issues. Timmermans is widely expected to be the European Commission’s point man in those talks with London.

As is frequently our practice at the Brussels Blog, below we offer an annotated transcript of our interview. Timmermans’ responses have been slightly edited for clarity. We started with that 2013 Dutch report, since much of what Timmermans recommended back then appears to be part of his agenda now that he’s in Brussels – ideas that were also articulated in a November 2013 op-ed in the FT.

I didn’t know you would bring this up but you do because it clearly shows that what I think and what I want to do is more or less in line with what I proposed as foreign minister, and those who say, well, ‘He’s only doing this to appease David Cameron’ can see that I’ve been thinking about this for quite some time.

Actually, it all started with an op-ed that I wrote in your newspaper, and Jean-Claude Juncker picked up on that and when he asked me to do this with him, he referred to some of the ideas that I had written down in the Financial Times. So, this was very much part of his thinking and his programme, as it was in Martin Schulz’s thinking, and this is what they both brought forward in the electoral campaign.

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Peter Spiegel

Juncker, left, with Greek prime minister Alexis Tsipras at last month's EU summit in Brussels

The Greek daily To Vima has a nice scoop this afternoon about a document they’ve been leaked purporting to be a new proposal from Jean-Claude Juncker, the president of the European Commission, on how to break the standoff between Athens and its creditors.

According to the To Vima report, the plan envisions a deal with Greece that completely cuts out the International Monetary Fund and releases about €5bn in aid to Athens from three different sources: the €1.8bn remaining in the EU’s portion of the current bailout; €1.9bn in profits from Greek bonds purchased by the European Central Bank back in 2010; and another €1.3bn or so in additional Greek bond profits the ECB will get in July.

In exchange, Greece would agree to adopt a relatively short list of economic reforms that are significantly narrower from those being sought by the IMF and a German-led group of hardliners within the eurozone.

The Commission’s spokeswoman responsible for economic issues, former Reuters correspondent Annika Briedthardt, has already distanced the Commission from the document, saying in a tweet that she’s not aware the proposal actually exists:

Other commission officials are similarly playing down its importance. “We have many documents,” said one, only half-jokingly.

Although nobody is admitting the provenance of the document, what it appears to be is one in a series of proposals going back and forth between the Commission and Athens in an effort to find common ground, rather than a full-blown “Juncker Plan” to cut the Gordian Knot. Read more

Peter Spiegel

Group photo, distributed by the European Commission, of "sherpas" at last month's meeting

The agenda for next month’s EU summit has the potential to become very full very fast. European leaders are already facing a fraught decision over whether to extend economic sanctions against Russia, which expire in July.

Then there’s the ongoing Greek fiscal crisis, which could come to a head in June, when Athens’ current bailout ends. And now David Cameron, the rechristened UK prime minister, has signaled he will launch his renegotiation of Britain’s relationship with the EU at the same session.

Almost forgotten in this mix is eurozone leaders’ promise to revisit the future of their monetary union with a new “four presidents’ report” on how to fix the remaining shortcomings, due to be presented in June, too (the four presidents refer to the heads of the European Commission, European Council, European Central Bank and the eurogroup).

In preparation for that report, the so-called “sherpas” for all 28 EU leaders have been meeting periodically in Brussels under the chairmanship of Martin Selmayr, Jean-Claude Juncker’s influential chief of staff. Ahead of the last session on April 27, a summary of where the group stood was circulated to national capitals, and Brussels Blog obtained a copy.

As we reported in today’s dead-tree edition of the FT, the document contains no mention of changing EU treaties any time soon, which will disappoint Cameron, who has included treaty changes as a pillar of his renegotiation campaign. Indeed, the clearest thing to come out of the five-page “note for discussion by sherpas” is that there is not a huge amount of enthusiasm for doing much of anything. Read more

Peter Spiegel

One of the more controversial actions taken by the Juncker Commission in its still-short life was January’s move to make the EU’s crisis-era budget rules more “flexible,” an announcement many took as a signal it was preparing to let both Italy and France off the hook for their recent fiscal transgressions. Which it ultimately did.

According to Commission officials, the so-called “flexibility communication” caused ructions among the 28 commissioners both because of its substance and the process by which it was agreed: the college was only allowed to see a hard copy of the highly-technical document for about a half hour before it was taken away, and then presented for adoption later in the day.

Among those who were angered by the way it was forced through the college over the complaints of some of the Commission’s budget hawks was Chancellor Angela Merkel who, according to our friends and rivals at the German weekly Der Spiegel (no relation), complained to Juncker that “her commissioner” – German Günther Oetttinger – had only received the document a few hours before it was to be approved. “Why ‘your’ commissioner?” Juncker reportedly replied coolly. “That’s my commissioner.”

Now it seems that Berlin is not the only place where objections are being raised about some of the decisions taken in the “flexibility communication”. According to a leaked opinion by the European Council’s legal service – which Brussels Blog got its hands on and has posted here – last month, lawyers on the other side of Rue de la Loi appear to have decided a central part of the new guidelines might be illegal. Read more

Peter Spiegel

Juncker speaks to the press at last week's Group of 20 meeting in Brisbane

Just how does Jean-Claude Juncker plan on getting to €300bn?

With the formal unveiling of his highly-anticipated plan to stimulate growth in the EU just days away – officials say the Commission will decide on it early next week – politicians both in Brussels and in national capitals are abuzz about whether the financial engineering involved will make the €300bn credible.

Emmanuel Macron, the influential French economy minister, has already expressed concern, and in a meeting with a small group of reporters ahead of today’s announcement of his own stimulus plan, Belgium’s Guy Verhofstadt, head of the European Parliament’s centrist Liberals, said he worried the programme would just move around existing funding.

As we reported earlier this week, the plan will take existing cash from the EU budget and the European Investment Bank and use it as seed money for new investment funds in order to attract private capital. The public money would act as a “first loss” tranche, taking the first hit if the investment goes bad, and giving private investors more senior status – something officials hope will “crowd in” all that private cash currently sitting on the sidelines.

The two questions that will be closely watched is just how much public money will be used – and how much new private capital the Commission will forecast coming in over the plan’s three-year period.

According to documents obtained by Brussels Blog, the answer to question one – how much public money will be used – will not only include EU budget and EIB money, but also funds committed by national governments. For instance, the €10bn in new public spending announced this month by Wolfgang Schäuble, the German finance ministry, appears to be counted in the €300bn plan.

How the limited amount of public funding can be leveraged is far more complex. And by nearly all accounts, the public funding will indeed be limited: the plan is explicitly seeking to avoid any new public debt, and officials acknowledge a significant part of it will involve more efficient use of existing public resources and maximising already-approved instruments. Read more

Peter Spiegel

David Cameron, with his Finnish counterpart Alex Stubb, at a summit in Helsinki Thursday

The much-anticipated “emergency meeting” of EU finance ministers David Cameron demanded last month to discuss the €2.1bn surcharge Brussels has levied on Britain begins today – though it is less “emergency” than Cameron may have hoped, since it’s actually finance ministers’ regularly-scheduled November meeting.

As we reported in today’s dead-tree edition of the Financial Times, Italy, the holder of the EU’s rotating presidency, will table a compromise plan at the meeting which would allow Britain – and the Netherlands, which has the second-highest bill, with €643m due at the end of the month – to pay the new EU tab in instalments.

This is unlikely to be enough for the UK, which is seeking both a delay in the due date and a reduction in the bill, but there are growing signs that its allies in the fight, including the Dutch, are inclined to support the plan.

Ahead of the meeting, Brussels Blog obtained a copy of the two-paragraph Italian proposal, and we’ve posted it here. The measure asks the European Commission to come back with an amendment to existing EU rules for paying such bills that would in “exceptional circumstances” allow countries to pay their surcharge in tranches instead of all at once on the December 1 due date. Here’s the key section: Read more

Peter Spiegel

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.

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Peter Spiegel

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 hereRead more

Peter Spiegel

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. Read more