EU Commission

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. 

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. 

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. 

There is only one topic in the brasseries of Brussels, at least among the EU crowd: Which portfolios will President-elect Jean-Claude Juncker give to his 27 incoming commissioners? Which is why we here at Brussels Blog were rather pleased when the organisation chart above purporting to show where the negotiations stood last Saturday landed in our in-box.

We had no obvious reason to doubt its authenticity when we got it. Such leaks are commonplace in Brussels, and are occasionally a lubricant for political negotiations. Without going into too much detail, it was realistic to conclude the document was being worked on by Juncker’s inner circle.

But once we took a closer look at the line-up, we began to scratch our heads. The negotiations are fluid and the document is three days old, so there would naturally be changes. But it went beyond that. After a call to several trusted sources involved in the talks, it quickly became clear that something strange was afoot. The chart includes glaring inconsistencies, unbelievable political gambles and factual inaccuracies – all set amidst a few things that ring absolutely true.

At the FT, we’ve had a long discussion about how to handle this leak. We’ve decided to publish the chart with a serious health warning, as well as a guide to what is wrong and what may be correct (whether by accident or design). We leave the rest to the Poirots of Brussels, who seem to like nothing more than chewing over what Juncker may decide. Can Brussels survive another week of this speculation-fest? 

Van Rompuy meeting with Britain's David Cameron at Downing Street on Monday

The less-watched parallel process to selecting the new head of the European Commission has been Herman Van Rompuy’s effort, backed by several member states, to come up with a work programme for the new commission president that will lock him in for the next five years when it comes to policy programmes and priorities.

Even though advocates of such an idea appear to be pushing the same policies that are mentioned in nearly every EU summit communiqué, several countries – including strange bedfellows like the Netherlands and Italy – have argued such an agenda is in some ways more important than the leader who takes over the commission in November. They insist it will enable Europe’s prime ministers to put their stamp on the next commission and its priorities after the European Parliament was seen to have dragged the current one around.

As a first step towards agreeing such a programme, Van Rompuy, the outgoing European Council president, on Monday circulated a four-page “strategic agenda” for the new commission, which he hopes to get agreed at this week’s high-stakes EU summit. We wrote about it here, but as usual for readers of Brussels Blog, we’re providing a bit more detail for those more interested, including a copy of the document, which we’ve posted here

Campaign manager Selmayr, left, with Juncker on election night in Brussels last month.

In a town that is reading every tea leaf available to divine whether Jean-Claude Juncker, the ex-Luxembourg prime minister and front-runner for next European Commission president, will actually get the job, it seemed a rather big leaf of tea.

Martin Selmayr, the workaholic German lawyer who served as Juncker’s savvy campaign manager during last month’s European Parliament elections, took many EU officials by surprise when it was announced Wednesday he had been appointed to a top job in the London-based European Bank for Reconstruction and Development (see announcement here, under the “Five new senior management appointments” heading).

Many in Brussels had tipped Selmayr as Juncker’s chief of staff if he won the presidency. Prior to working for Juncker, Selmayr had been chief of staff to Luxembourg’s current commissioner, Viviane Reding, and he is close to the man who holds the powerful chief of staff job under José Manuel Barroso, fellow brainy German lawyer Johannes Laitenberger.

Is Selmayr’s departure a sign Juncker’s prospects for winning the presidency are dimming and he’s bailing out of a sinking ship? On Twitter, Selmayr denied it, tweeting: “You really think Juncker needs me to win? Believe in democracy!”