EU

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

Peter Spiegel

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Flag-waving protesters demonstrate against Poland's new media law in Warsaw last week

“I regarded your letter as an attempt to exert pressure upon the democratically elected parliament and government of the sovereign Republic of Poland.” Not a phrase you’d normally expect in official governmental communications between two ministerial-level politicians in the EU. But it was part of an invective-filled response to Frans Timmermans, the European Commission’s first vice-president, from Polish justice minister Zbigniew Ziobro sent Monday night ahead of today’s highly-anticipated European Commission debate on two new laws that many critics believe undermine rule of law in Warsaw.

Despite the tendentious tone of the letter in response to questions on legal changes that will make it difficult for the country’s constitutional court to overturn legislation – and a similarly direct letter from senior diplomat Aleksander Stepkowski in response to concerns about a new Polish media law – officials tell us that Brussels is likely to keep its powder dry at today’s meeting, at least for now. Read more

Peter Spiegel

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It wasn’t so much what she said, it was how she said it. On Monday, Margrethe Vestager, the European Commission’s feared competition chief, announced her latest in a series of cases cracking down on sweetheart tax deals offered to multinationals by ordering Belgium to claw back €700m in illegal tax breaks to at least 35 companies.

The decision itself had been flagged up a month ago by Belgium’s finance minister, Johan Van Overtveldt, so it wasn’t really a surprise. But in announcing the decision, Ms Vestager went out of her way to highlight a common trait of those able to avoid taxes through the Belgian scheme (about €500m of the €700m). “Most of the companies benefiting are European; it is also European companies that avoided the majority of the taxes under the scheme, which they now have to pay,” she said at a midday news conference.

The statement stood out because it comes after American officials have privately raised concerns over the fact that three of the four initial cases in her corporate tax crackdown targeted US companies: Apple, Amazon and Starbucks. Last month, she expanded the list to include McDonald’s. The private grumbling became public in September when Robert Stack, the US Treasury’s man in charge of international tax policy, broke cover to complain about how the investigation would affect American corporate tax revenues, and Ms Vestager acknowledged that she had flagged up European companies in the Belgian scheme to emphasise her services’ impartiality. Read more

Duncan Robinson

The Polish government has sent a punchy defence of its media reforms to Brussels, accusing the EU of getting its facts wrong and warning of the “undesirable effects” any crackdown on Warsaw will bring.

The letter to the European Commission’s first vice president Frans Timmermans, which can be read in full here, lays out Poland’s defence of its decision to sack senior management at state media outlets. Read more

Peter Spiegel

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Even at the time the EU signed its “joint action plan” with Turkey at a high-profile summit in November aimed at stemming the flow of refugees into Europe, Turkish leaders were cautious. “Nobody can guarantee anything,” Ahmet Davutoglu, the Turkish prime minister, said even before the ink on the deal was dry. “I wish I could say the number will decline but I cannot because we do not know what will happen in Syria.” Read more

Peter Spiegel

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David Cameron, the British prime minister, went before his parliament on Tuesday to report on last month’s EU summit, where leaders for the first time debated his request for a renegotiated relationship with Brussels ahead of an in-out referendum at home. During the appearance, he dropped a bit of a bombshell: his ministers will be allowed to campaign for Brexit even if his government recommends staying inside the EU. “It’s never been my intention to strong-arm people into a position they don’t believe in,” he told the House of Commons.

That sets up the prospect of Mr Cameron, widely expected to campaign for membership once he reaches a renegotiation deal at February’s EU summit, on the opposite side of such government luminaries as Iain Duncan Smith, the work and pensions secretary who was once Tory leader himself.

Our Brexit watcher in the FT’s Brussels bureau, Alex Barker, says that while the decision raised eyebrows even within his own party – and may lead many in Brussels to wonder what happened to the sacred British convention of a cabinet’s collective responsibility – there may not have been much else Mr Cameron could have done. Here’s Alex’s take on how Mr Cameron is tackling what may be his hardest Brexit task yet, managing his own party:

For some in Brussels, allowing British cabinet ministers to campaign against their government on such an existential question as EU membership will be bemusing, to say the least. Michael Heseltine, the europhile former cabinet minister, once said Cameron would be a “global laughing stock” if he lifted collective responsibility for the cabinet. Ken Clarke, another of the Tory party’s rare pro-Europeans, said it was a sign of the extraordinary challenge Mr Cameron faces in avoiding “splitting the part” as the referendum campaign revs up.

 Read more

Peter Spiegel

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It was exactly five years ago that Viktor Orban, then Hungary’s recently-elected prime minister, rushed a new media law though his super-majority in parliament to create a powerful press monitoring authority controlled by party appointees. The law set off months of claims and counterclaims between Brussels and Budapest, and helped cement Mr Orban’s status as the EU’s problem-child-in-chief.
Now Poland’s newly-elected Law and Justice party seems to be taking a page out of the Orban playbook by pushing a media law of its own that would sack management of the country’s public TV and radio broadcasters in an effort to end criticism of the government. Read more

Christian Oliver

Why don’t they want Belgian chocolates? Or Italian spaghetti?

Europe’s frustration is mounting over its slow, difficult trade negotiations with Japan. The 15th round of talks is coming in February next year, and Europe is hungry for signs that it is worth carrying on.

In October, Japan joined the US and 10 other nations in sealing the Trans-Pacific Partnership, which covers 40 per cent of the global economy. But there is little sign of that momentum carrying over into a quick deal with Europe.

Mauro Petriccione, Brussels’ chief negotiator with Japan, warned on Thursday that enthusiasm for an accord with the world’s third biggest economy could wane if the deal is not finalised next year.

“If we don’t make it in 2016, we’ll have to explain why, and we cannot exclude a resurgence of the scepticism towards the possibility of a new Japan-EU [free trade agreement] that we had before we started,” he told reporters. “It took us a long time to persuade sceptics that it was worth trying this. If they see that we don’t succeed in 2016, they will start asking themselves questions again.” Read more

Britain's David Cameron addresses the press on his way into the EU summit on Thursday evening

David Cameron is in a hole. His flagship policy to curb EU migration – a four-year ban on benefits for migrant workers – looks doomed. When it was announced more than a year ago, Cameron was told it violated a fundamental EU principle of non-discrimination. If the EU stands for anything, it is ensuring EU workers don’t pay a higher effective tax rate on the basis of their passport.

This was flagged up by British officials at the time. Cameron nevertheless ploughed on. While Downing Street were drafting the Conservative party election manifesto, aides suggested leaving out the four-year idea. He ploughed on. When Mr Cameron preparing a letter to other EU leaders on his reform demands, he was told by Whitehall and Brussels the four-year ban was all but impossible and should be dropped. He ploughed on.

The final reckoning may come this evening. Cameron makes a make-or-break pitch for the idea. Having spent far too long trying to understand how the problem will be fixed, it may also be my last opportunity to inflict a benefit reform listicle on Brussels Blog readers.

So while there is still time: behold the nine ways Cameron’s four-year benefits saga may end.

 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

Jim Brunsden

Luxembourg's Pierre Gramegna, chair of Tuesday's meeting, calls the session to order

With the festive season comes all kinds of traditions in Brussels: mulled wine, Saint Nicholas, and another deadline for nations to strike a deal on a financial transactions tax.

But while last year ministers found themselves empty handed when a December deadline for an agreement rolled around, this year it’s different. Sort of.

As Bruxellois bought their sapins de noel (Christmas trees) on the pavement outside the EU summit building, inside another Sapin (Michel), the French finance minister who has been one of the tax’s biggest champions, was full of holiday cheer.

During a meeting of EU finance ministers, Sapin (the minister) hailed a breakthrough moment in the nearly three-year slog for an FTT, which would issue a levy on all stock and a derivative trades in the ten EU countries who are part of the scheme.

Could this Christmas miracle really be true? Could there really be a deal?

In practice, it’s more like half of a deal. Pierre Moscovici, the EU commissioner in charge of tax issues, found a convoluted combination of tenses to sum it up: “We have now the main parameters of what this FTT should be, and hopefully will be.” Read more

Peter Spiegel

Refugees crossing Greece's border with Macedonia wait to enter a camp earlier this week

The EU’s debate over how to deal with the ongoing refugee crisis has been so full of jargon and euphemisms that in can be nearly impossible for anyone outside the Brussels bubble to know what, exactly, leaders are actually discussing.

Such is the case with a draft communiqué for next week’s EU summit, circulated to national capitals on Monday. The document (which Brussels Blog got its hands on and has posted here) includes seven measures leaders would agree, if the draft is adopted. But all seven may be impossible to understand to those not following every twist and turn in the debate.

As a public service, Brussels Blog hereby offers a translation from eurocrat-ese into English of the migration section of the draft communiqué.

 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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Peter Spiegel

The Belgian government raised the terrorist alert level for Brussels to its highest level on Saturday, an indication authorities think an attack is “imminent” amid an ongoing manhunt for the last remaining accused Paris attacker, believed to be still at large in the Belgian capital.

Metro lines were closed and Belgian officials issued an appeal to the local population to avoid crowded places, including “concerts, major events, train stations and airports, public transport [and] places of high commercial concentration”. Read more

Peter Spiegel

Apple's Tim Cook, left, chats with CBS's Les Moonves at Sun Valley, Idaho in July

With Margrethe Vestager handing down her decision last month that Starbucks and Fiat received unfair tax benefits from the Netherlands and Luxembourg, most believe it is just a matter of time before the EU competition chief does the same with the biggest of the tax cases she is examining: Apple’s comfortable arrangement with Ireland.

But in case anyone in Brussels expected Ireland to distance itself from the California-based tech giant ahead of the Vestager decision, the FT’s man in Dublin, Vincent Boland, has sent Brussels Blog a note on just how close the relationship remains – as evidenced by the reception chief executive Tim Cook received on a rare visit to the Irish capital:

Cook was on his way to Cork, where he announced that Apple’s operations in the south coast city would expand to create up to 1,000 new jobs by the middle of 2017. That will take the total workforce there to 6,000 – which he said would represent a quarter of the company’s workforce in Europe.

It is the sort of announcement the Irish government loves. Enda Kenny, the Taoiseach (prime minister) tweeted a photograph of himself and a smiling Apple boss: “Great to chat with Tim Cook on the day apple announce 1000 new jobs in Cork.”

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Duncan Robinson

After a string of bad-tempered, late-night summits, leaders from across the EU agreed an ambitious programme of policies to try to solve the refugee crisis.

There has been one – pretty major – hitch: member states have so far been reluctant or unable to do what they said they would. Now, in a bid to get national capitals to hurry up, Operation Guilt Trip is go. Read more

Duncan Robinson

Faced with a once in a generation refugee crisis, and a brewing humanitarian disaster in the western Balkans, Germany has stepped up. . . and pledged 45 extension cords.

Berlin’s donation of a few dozen power cables to Croatia has been revealed as part of an attempt by Brussels to pressure member states by demonstrating the deficit between their pledges of help for Europe’s refugees and their actions – and going into excruciatingly granular detail in the process. Read more

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

Peter Spiegel

Regling, right, with European Central Bank president Mario Draghi at a press conference

Klaus Regling has been the head of the eurozone’s rescue funds – first the temporary European Financial Stability Facility, now the permanent European Stability Mechanism – since the outset of the debt crisis, a perch that has given him a unique insight into the five years of occasionally contentious deliberations over the bloc’s five bailouts: Greece, Ireland, Portugal, Spain and Cyprus.

But as the EFSF turned into the ESM, and as the €500bn ESM gained staff and authority, Regling’s own role in eurozone debates has grown – particularly on the issue of Greek debt, where he has been a frequent and outspoken critic of the argument, made both in Athens and by the International Monetary Fund, that the heavy debt burden is what ails the Greek economy.

Two years ago, in an interview with our friends and rivals at the Wall Street Journal, Regling in essence sounded the death knell for a November 2012 deal where eurozone governments had promised debt relief for Athens as long as it achieved a primary budget surplus – something it achieved by the end of 2013. As Regling predicted, the eurozone did not restructure Greece’s debts despite Athens living up to its side of the 2012 agreement and posting a surplus.

In an interview this week with the Financial Times, Regling has done something similar. As part of July’s controversial €86bn bailout deal, creditors again held out the promise of debt relief. And Regling is now suggesting that even if it does occur, a restructuring will not be on the scale Athens and the IMF had been arguing for just four months ago.

Our story on the Regling interview is here, but as is our practice at the Brussels Blog, we’re offering an annotated (and slightly edited for length) transcript for readers who want to hear more from Regling below. 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