Banking union and the EBA: where do we stand?

Yesterday, EU finance ministers failed to reach an agreement on a single eurozone banking supervisor. Ahead of the meeting, the Cypriot Presidency put forward a new compromise proposal aimed at concluding a deal before the next EU summit on 13-14 December.

We have had a look at the latest drafts. Starting with the new voting rules within the EU-27 banking watchdog, the European Banking Authority, these are the most interesting changes proposed by the Presidency:

Voting on technical standards/end of restrictions on financial activities/EBA budget

European Commission proposal: QMV - meaning that countries outside the eurozone which do not want to join the new ECB-led Single Supervisory Mechanism (SSM) risk being in permanent minority

Cypriot Presidency proposal: QMV stays, but it must include at least a simple majority of countries participating in the SSM (say at least nine, assuming that only eurozone countries join the SSM) and a simple majority of countries not participating in the SSM (say at least six, assuming that none of the non-eurozone countries joins the SSM)

This goes in the right direction, although we proposed going one step further and having all decisions in this group adopted by 'double QMV' - i.e. a qualified majority of participating countries and a qualified majority of non-participating countries.

Voting on breaches of EU law/dispute settlement

European Commission proposal: An independent panel (composed of three people) takes a decision. The decision is considered as automatically adopted unless it is rejected by a simple majority of member states - including at least three countries participating in the SSM and three countries not participating in the SSM

Cypriot Presidency proposal: A larger independent panel (composed of seven people) takes a decision. The decision is considered as automatically adopted unless it is rejected by a simple majority of member states participating in the SSM and a simple majority of member states not participating in the SSM

And here is where the main problems with the Presidency's proposal lie, according to us:

•  A larger panel is good in principle. However, the proposal fails to specify how many of the seven members should be from countries not participating in the SSM;

•  Even assuming a three 'ins' + three 'outs' + the Chairperson composition of the panel, decisions would still be taken by simple majority - i.e. four of seven members;

• Overturning a decision taken by the panel becomes even more difficult under the Presidency's proposal, given that a simple majority of 'ins' and a simple majority of 'outs' are both needed to do so. Therefore, the proposal would end up giving the independent panel (and the EBA) more power. This is why we proposed that, instead of this 'reverse majority' system, decisions taken by the independent panel should be confirmed by both a qualified majority of countries participating in the SSM and a qualified majority of countries not participating in the SSM.

Enough technicalities for now - we will look at the ECB Regulation in a separate blog post.

Thanks for coming

Those who worried that the Lisbon Treaty and the creation of a permanent EU president would sideline the rotating presidency held by national governments have been proved right. Spanish Daily El Mundo notes that during a speech in the European Parliament yesterday, neither President Herman Van Rompuy, nor President Barroso mentioned or thanked Spain’s EU Presidency for its role in last week’s European Council summit. It seems that even the fact that Van Rompuy sat next to Spaniard Diego Lopez Garrido (pictured on the left), the secretary of state for the EU, failed to remind the officials of Spain’s role. Barroso managed to find the time, however, to thank Catherine Ashton, the Parliament, the Commission, and the Council.

There are a number of potential reasons for the omission. The incident could be part of a larger EU effort to avoid any discussion of Spain, hoping people will forget it may be the next eurozone domino to fall. Or perhaps it demonstrates that the Brussels elite have little time for national governments or that there are simply so many presidencies within the EU that it's becoming difficult to remember them all.

Obama's not the only one confused by Lisbon

The Obama "snub" continues to gather headlines in today's papers. PJ Crowley, the US Assistant Secretary of State, today confirmed that the uncertainty created by the new posts created under the Lisbon Treaty had been a major factor in Obama's decision to withdraw, saying:

"Because of the changes involving the establishment of a EU council president and a European commission president on top of the rotating EU presidency, I think it's taking some time to work through exactly how various high-level meetings will happen."

And it seems it's not only the Americans who haven't got a clue who they're meant to be talking to. Le Figaro notes that, on his visit to the EU this week, Mongolian President Tsakhia Elbegdorj was left perplexed as to which of the EU's various presidents he was speaking to at any one time. After one meeting, he said:

“I have just been received by the European Council President, I was received yesterday by the President of the European Parliament and after this meeting I will meet the President of the European Council...Er...”

Quite.

The EU in 2010

As 2009 draws to a close, Open Europe today looks ahead to 2010 and what the EU has in store.

From 1 January 2010, Spain takes over the six-month rotating 'presidency', currently held by Sweden.

The new Lisbon Treaty rules mean that the country holding the Presidency is stripped of its power to 'represent' the EU because of the appointment of a permanent EU President and Foreign Minister. However, Spanish ministers will chair most meetings of the Council of Ministers, and as the first in the next 'trio' of presidencies, Spain gets to lay out an agenda for the EU for the first six months of the year.

In a new briefing note, Open Europe outlines the main priorities for the Spanish EU Presidency, and takes a look ahead to key events and developments in the EU in 2010.

Key things in the pipeline:

- New social legislation to bolster 'European citizenship', including turning the EU into a "factory of rights" Yikes!
- "Common economic governance", including the creation of controversial new EU financial supervisory authorities and new rules for managers of alternative investment funds
- Speedy establishment of the new EU Foreign Service - hoped to become "the biggest diplomatic service in the world"
- Efforts to turn the controversial 'Stockholm Programme' into concrete justice and home affairs legislation

What's clear is that the Spanish government wants to use its Presidency to achieve greater political, social and economic integration in Europe - to work for a more 'unified' EU. This is fundamentally at odds with British priorities for the EU in 2010. Reformist governments must resist moves towards 'building Europe' for the sake of it, and instead concentrate on promoting economic reform.

In particular, the Spanish government's determination to push for new EU social legislation over the next six months and beyond should ring alarm bells at Westminster. The UK Conservatives have said that if they win next year's election, they will fight for control over social and employment policy to be returned to the UK where it can be properly controlled closer the people it affects. This kind of legislation already represents a huge regulatory burden in the UK, and the Spanish government's talk of turning the EU into a 'factory of rights' tells us fundamental reform is more urgent than ever.

Please click here to read the briefing: The EU in 2010 - what to expect from the Spanish Presidency:

http://action.openeurope.org.uk/page/m/4b660976/1ba9f669/85d4f97/7c5561ff/2392946743/VEsH/