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Wednesday, September 10, 2014

Lord Hill is the EU's new financial services Commissioner - but what is his remit and who does he report to?

With the future of the UK seemingly hanging by a thread it is understandable that events north of the border are dominating attention, but today's announcement of the new European Commission also has far-reaching consequences for the future of the UK's EU membership and the EU itself.

As we set out in our flash analysis, the appointment of Lord Hill to the key financial services portfolio (pending approval by MEPs) is a win for the UK, and the general reformist outlook of the Commission, with other crucial posts (Internal Market and Competition) held by liberal, pro-free trade, non-eurozone countries, provides grounds for cautious optimism.

What will Lord Hill's portfolio include?
  • Overseeing the creation of the banking union – a crucial policy for the eurozone but also one which threatens to split the EU into euro-ins and outs. In his new role, Lord Hill can ensure this does not happen. That being said, this is a very tricky role to manage (with numerous competing interests), especially for a non-eurozone country.
  • Power to review the role of the European supervisory authorities, institutions which have been controversial in the UK since their creation.
  • Responsibility for a 'Capital Markets Union'. While this remains vague it could be a good initiative for the UK since London is already the centre of European capital markets. Lord Hill can base the union around the single market rather than the eurozone.
As the charts below show, the Commission has also been re-organised with a series of policy clusters, with the UK being at the heart of all the major decisions relating to the single market, jobs and growth and the Eurozone. Each 'cluster' will be headed by a Vice-President, previously a largely meaningless role but now with additional agenda setting powers and the ability to stop legislative proposals from other Commissioners.

Lord Hill will 'report' to two Vice Presidents who will "steer and co-ordinate" depending on the issue at hand - the new "Jobs, Growth, Investment and Competitiveness" VP Jyrki Katainen and the "Euro and Social Dialogue" VP Valdis Dombrovskis (both of whom are former PMs). In terms of the two VPs, Dombrovskis is likely to supervise the banking union aspects of Lord Hill's post while Katainen will oversee the more single market aspects, although even here, there is plenty of scope for overlap.

Lord Hill's portfolio also has some overlap (and therefore potential conflict) with France's new Economic and Monetary Affairs Commissioner Pierre Moscovici .The potential for Anglo-French clashes within the Commission is relatively limited since Moscovici will be primarily tasked with macroeconomic eurozone policies rather than financial markets, but one potentially fraught area could the be Financial Transaction Tax or a Common Consolidated Corporate Tax Base. Juncker has asked Moscovici to finalise negotiations over both.

It remains to be seen how the relationship between VPs and different clusters will work in practice, especially as Juncker himself has insisted that "In the new Commission, there are no first or second-class Commissioners", and since decisions in the College of Commissioners have traditionally been taken by a majority of all Commissioners in a secret vote. However, Juncker also made clear that the Vice-Presidents “can stop any initiative, including legislative initiatives” of other commissioners – effectively acting as “a filter”.

Time will tell how potential disputes play out or are resolved and to what extent the VPs can truly veto proposals. What is clear is that the relationship between these four men could be crucially important.


Peter van Leeuwen said...

Neither French nor British commissioners could act “on behalf of” their country. If Mr Hill were not to act in the interest of the eurozone, I'd expect the centre of gravity for e.g. the banking union to quickly move even more to the 'Eurogroup' which will become stronger if it will get a full-time chairman next year.

Denis Cooper said...

So now the appointed Juncker has decided to appoint subordinates who can veto proposals; but our elected national representatives do not have the same power of veto over EU proposals in most cases, even though during the 1975 referendum we were promised that they would always have that power of veto to exercise on our behalf, and since that referendum we have never been asked directly whether we agreed with them losing it.

Peter van Leeuwen said...

@Denis Cooper: As you know, your national representatives have over time ratified a number of treaties in which sovereignty is pooled and many veto powers abolished. The EU cannot be blamed for this, these were British decisions.
Give and take being part of the process, the UK has also benefited from these agreements. A good example was Margereth Thatcher's signing of the Single European Act.

Anonymous said...

Peter van Leeuwen

And QMV? Who's interest is that in?

I will never forget the whole bunch of "lemming" EU nations standing against the UK on the subject of the FTT - and now look where that is.

The EU refuses to sort out the core flaws in the structure of the Euro and kicks the can down the street everytime a decision is required. It is obvious to all that this is not a union of nations when one nation, Germany, has the final say.

The UK and the MananaZone nations interests are now diametrically opposed. The MananaZone and EU will continue to force through legislation that will pass on the cost and risk of their ongoing disaster to the UK.

In 2008, EU output accounted for c.22% of world GDP. I believe that it may sit at 17-18% currently and is forecast to be 12% by 2020. I have not seen any policy or view coming out of Europe that is going to change this.

The world gallops on at full speed whilst the EU and MananaZone rots and goes backwards.

Our children have a bleak future - all in the name of a political project that has gone very badly wrong.



Howard Leedham said...

Well this is a very informative article. but we couldn't expect what 'll happen next.lets see.By the way thank for sharing this information.