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
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.
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
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
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
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
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
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. Read more
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
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. Read more
Lord Hill says that there will be no exceptions for member states who fail to jump into line on banker bonuses. Read more
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. Read more
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. Read more
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? Read more
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. Read more
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!” Read more
Juncker, left, with Schulz ahead of a debate in Hamburg, Germany earlier this week
With voting now underway in Britain and the Netherlands, the first two EU members to go to the polls in the three-day continent-wide election to pick the new European Parliament, Brussels’ favourite parlour game – guessing who will emerge as the next president of the European Commission – has shifted into high gear.
As with almost everything in the EU, from the eurozone crisis to Russian sanctions, all eyes are on Angela Merkel, the German chancellor, and whether she will throw her backing to one of the two “spitzenkandidaten” – the lead candidates for the largest political groupings – or decide to back someone else for the job.
“Nobody knows,” says a top political operative from a German-allied country. “Everybody has their opinions and views, but nobody really knows.”
To play our part in the echo chamber, Brussels Blog has compiled its own completely unscientific odds on where the main candidates stand. And as they say in US sports betting, these odds are for entertainment purposes only. The Brussels Blog does not advocate gambling (though you can do so at the UK’s gaming company Ladbrokes).
With flashes of wit, much earnestness and a certain reluctance to go for the jugular of their opponents, four candidates for the European Commission presidency broke new ground on Monday night by holding a live televised debate designed to drum up public interest in the May 22-25 elections for the European parliament.
If social media are one measure of that interest, the debate may have worked. Halfway through the 90-minute programme, broadcast from the Dutch city of Maastricht, an organiser announced that 10,000 tweets a minute were coming in. The harder question to answer is whether any candidate did enough to convince potential voters that the elections will truly make a difference in a EU blighted by a long recession, mass unemployment and a squeezed welfare state.
Although the debate never turned nasty, Ska Keller, the Greens candidate, got in a sharp jab at Jean-Claude Juncker, the centre-right candidate, when she accused him of “presiding over a tax haven” during his time as prime minister of Luxembourg. An indignant Mr Juncker rejected the charge and managed later to slip in the image-softening remark that one reason why he favoured a EU-wide minimum wage was that he remembered his father’s tough life as a steelworker.
Guy Verhofstadt, a former Belgian prime minister who is the centrist, liberal candidate, turned his fire on José Manuel Barroso, the outgoing Commission president, saying Mr Barroso had never taken a decision without first flying to Berlin and Paris to get the green light. “The Commission needs to lead,” he thundered.
He also put Mr Juncker on the spot by challenging him to explain why his centre-right group still included Silvio Berlusconi, the former Italian prime minister, who caused outrage last weekend by suggesting Germans denied the existence of Nazi concentration camps. But Mr Juncker hit back with the succinct sentence: “I was sickened by the statements of Mr Berlusconi.” Read more
It is safe to assume that there are parts of the UK Treasury already in a tremendous froth over this leaked opinion from the legal advisers to EU finance ministers.
Remember the only thing that would make George Osborne, the UK chancellor, hate the Financial Transaction Tax idea more than he already does would be its extension to currency exchange transactions. Even the European Commission didn’t go that far.
For that reason this opinion from the EU Council legal service will cause a stir, at least in Brussels. It contradicts the Commission’s own legal service (they are making a habit of this on the FTT) and says that there is no law in principle preventing a joint levy on foreign exchange. This effectively reopens a debate that makes London very nervous. Read more