A new Belgian government: Will Brussels control Brussels?

N-VA leader Bart De Wever and new PM Charles Michel

After less than five months, a relatively short period by local standards, a new federal Belgian government has been agreed.  In the light of our analysis in May, "Scenario 2" has materialised: a federal government which includes the Flemish nationalist N-VA, which hopes their centre-right policies may drive the Francophone socialists to return to their historic demands for more decentralisation.

The new coalition is led by 38 year-old Charles Michel, a Francophone liberal and the son of former EU Development Aid Commissioner Louis Michel, and its centre-right programme has just been revealed. Interestingly, there are a few changes on EU policy in the country which probably is the most inclined to EU-federalism. This is clearly the result of the presence of the N-VA, a party which has described itself "euro-realist" since 2011, but is part of a broader shift whereby the Francophone socialists have also dared to criticise EU policies.

Here are some excerpts from the programme which show that Belgium is now fully supporting the drive to empower national Parliaments and subscribes to the philosophy of incoming European Commissioner for 'Subsidiarity' Frans Timmermans that "the EU should do what can only be done by the EU and should leave to member states what can be better done by them":

• "To continue European integration, more legitimacy and transparency are needed. In that respect, the Federal Parliament should play its role with regards to proportionality and subsidiarity".
• "The government wants a smaller and more effective European Commission".
•  It stresses that with regards to eurozone solidarity, "this should be objective, transparent and efficient and should not encroach upon the competence of member states for social security provision".
• "The government wants the integrity of the internal market, to which all EU member states take part, to be respected" (Something the UK government can see as support for insistence that the single market shouldn't fragment as a result of Eurozone integration). 
• "In its EU policy, the government will fight over regulation and unnecessary meddling which contribute to undermining support for European integration". 
• "In order to boost democratic responsibility and to strengthen public support for the project of European integration, the Prime Minister is prepared to discuss with Parliament both ahead and after every European Council Summit in order to inform it about the positions of the government and the results of the European Council and to debate these topics. In order to support this debate, the government will as soon as possible contribute to the Advisory Committee for European Affairs" (This sees Belgium follows in the footsteps of amongst others Denmark, Finland and the Netherlands, which have similar systems, from the duty of governments to obtain a mandate and an obligation to inform MPs).

There is even a whole chapter devoted to "Introducing the principle of subsidiarity":

• "We believe strongly in the principle of subsidiarity whereby the EU focuses on domains and actions where it adds value. Policies should be efficient and at the level closest to the citizen. The Union should also be made aware of the sometimes heavy administrative burdens of regulation it imposes on member states, its citizens and companies. All of that is necessary to repair the credibility of Europe among citizens."

Of course, EU-federalist elements remain: the new Belgian government wants to scrap veto powers in foreign policy (while simultaneously supporting a "strong NATO alliance" as well) and wants more harmonisation of EU asylum and migration policy. Still, anyone supporting reform of the EU - and Belgium, which hosts the EU, seems to understand that this is in its interest, as we have made clear - can take heart.

Italian PM Letta survives key confidence vote: What's next for Italy?

What looked like an imminent political crisis has just been defused in Italy. As we anticipated in our previous posts (see here and here), Italian Prime Minister Enrico Letta has managed to survive a vote of confidence in the Senate - the upper chamber of the Italian parliament where his Democratic Party doesn't hold a majority.

In a last-minute U-turn, Silvio Berlusconi has decided that his party would support the government after all - turning a potential showdown into a mere formality. Nonetheless, what just happened in the Italian Senate does have consequences for the future of Italian politics. Here are a couple of thoughts.

1. Letta stays on, but uncertainty remains over what his government can deliver

The first, and most obvious, immediate consequence of today's vote is that Enrico Letta can stay on as Italian Prime Minister and maintains, at least on paper, his overwhelming parliamentary majority. However, it remains to be seen what Letta and his cabinet can deliver in terms of bold, concrete measures to get Italy going again - not least because some fundamental differences between the parties forming Italy's ruling coalition will remain.

One may argue that, faced with a party mutiny ahead of today's vote, Berlusconi would have finally learnt his lesson and would think twice before triggering new crises in future. But we wouldn't rule out new coalition rows. Berlusconi is famous for his CEO-style handling of his party, and he tends to take all the big decisions on his own - which makes him a very unpredictable coalition partner.    

Another important issue is: how long will Letta stay in office for? It's no secret that both him and Italian President Giorgio Napolitano would like the current government to continue at least until after Italy's rotating EU Presidency (July-December 2014) - and then perhaps go to early elections at the beginning of 2015. This would still be much earlier than 2018, when the current parliamentary term is supposed to end.

Questions will also remain over whether, if the crisis deepened once again, Italy would really be able to gain access to the ECB’s bond-buying programme, the OMT. As we mentioned above, Letta has clearly won the day - but uncertainty remains over his government's ability to push through unpopular measures.

Crucially, the ECB has made it clear that any country accessing the OMT must have a credible government in place to enforce the necessary conditionality attached to bond purchases (very likely to involve significant structural reform and budget cuts).

2. This is not the end for Berlusconi, but he's just been dealt a hard blow 

There's another reason why today's confidence vote is significant. Looking beyond the appearances (and the last-minute coup de théâtre) Silvio Berlusconi has, in substance, seen his plan to bring Letta's government down disrupted by a rebellion from within his own party. Last weekend's decision to pull his ministers out of cabinet has therefore proved a miscalculation, and will have at least two consequences:

• Berlusconi's threats to bring the government down if he's voted out of parliament as a result of his recent tax fraud conviction are no longer credible; 

• 25 senators from Berlusconi's party have this morning announced the creation of a breakaway group in the Italian Senate, irrespective of how the rest of the party would have voted. Though far from certain at this stage, today's defectors may well decide to follow up and quit Berlusconi's party - which in turn may reduce Il Cavaliere's electoral strength.

Berlusconi has shown his resilience several times, so we are unlikely to be witnessing the end of his political career just yet - even after he's ousted from parliament. Let's not forget that polls suggest he maintains quite large public support, with the help of his control over a large swathe of the media. We wouldn't expect him to take this challenge lying down. That said, his leadership of Italy's centre-right forces has today unequivocally been put into question.

These are our preliminary thoughts. We'll continue monitoring the situation in Italy very closely, so keep following us on Twitter @OpenEurope and @LondonerVince for all the updates.

Quango unchained: The EU's subculture you've probably never heard of (but that thinks it embodies your expectations)

EU 'grassroots' engagement

Beyond the spotlight of high-profile crisis meetings of EU leaders exists a very different community. A group that can almost be likened to a sub-culture. They meet in over-sized buildings in Brussels or at conferences and hotels around Europe. You will almost certainly never have heard of them. These are the EU's committees and quangos. Some useful, some completely irrelevant.

Topping this group is the European Economic and Social Committee. If you've never come across it, don't worry - you're in an overwhelming majority and haven't really missed out on anything. The EESC exists in order to act as "a bridge between Europe and organised civil society" by acting as a point of consultation for the EU by bringing together 'representatives of civil society' - 344 from across the whole EU. In practice the majority of these are representatives of trade unions, the third sector and academia, although business people are also represented.

There's only one problem: no one actually quite knows that the EESC actually does. In recent memory, we have yet to see evidence of it actually having had a measurable effect on a single piece of EU policy. The areas it is involved with are well covered by national authorities, the Commission and the European Parliament - which for better or worse actually has some powers.

It's not that the EESC makes "bad" decisions or is actively harmful. The body - much like its cousin the Committee of the Regions - is simply completely irrelevant in terms of what is happening in the real world. And yet, it has a budget of around €130m a year.

The absence of any meaningful impact of a body like the EESC on the multiple crises plaguing the eurozone borders on being comical. We learned today that EESC has appointed a new President, Henri Malosse. He clearly has grand plans for his tenure:

"Henri Malosse is keenly aware of the disconnect between Europe and its citizens, a fact again brought home by the Greek and Cyprus crises. Convinced that one of the answers lies in a rebalancing of forces in Brussels, he wants the European Union's second assembly to do more to embody people's real expectations in areas such as job creation, combating youth alienation, protection of savings and access to health care."

Makes sense. If only the EESC got a bit more power, than we're sure that the collapsed interbank lending market would be restored over-night. A few more EESC conferences would do wonders to bring down unsustainable debt levels in the eurozone. Meanwhile, hire a few more EESC staff and the 27.2% record unemployment rate in Spain would be immediately reversed. If only the EESC could be given enough cash to  embody "real people's expectations", the EU's democratic deficit would practically be closed already. 

Some of Malousse's tweets are also something else:

@citizen_e @euromeet I support This excellent initiative to create a common european identy thanks to education ! #EESC #Windofchange 18/04
— Henri Malosse (@MalosseHenri) April 9, 2013

It's really time to put the #citizen in the engine of #UE and bring#Europe on the right tracks ! #EESC #18april #WindofChange
— Henri Malosse (@MalosseHenri) April 7, 2013

Our point? The EESC is emblematic of the EU's Achilles heel: its incredible difficulty in adapting to changing economic and political circumstances. Everyone knows that the EESC and Committee of the Regions - which together cost taxpayers around €215m - are pointless bodies. They're by-products of a long bygone era, premised on the odd principle that in order for "civil society" and "the regions" to have influence, they need their own dedicated institutions in Brussels. In spite of all of this, they remain in place, partly because they're enshrined in the EU Treaties and it therefore requires unanimity to scrap them.

As we pointed out in our dedicated report on EU quangos, several of the EU's 52 agencies suffer from similar flaws. Scrapping 10 of the least useful, and imposing efficiency savings on the rest, would save taxpayers a total of around €668m.

Not a huge amount of money in the grand scheme of things, but the symbolic value of Europe's failure to address even the most obvious examples of waste and bureaucratic inertia, speaks volumes.

Suggested reading material for the Commission

Bearing in mind that it is often said that someone's choice of newspapers reflects their particular political prejudices, the details of the newspaper subscriptions of the EU Commission’s spokespeople, revealed by Handelsblatt’s Ruth Berschens, are very telling indeed. Ruth writes that:

"All 32 spokespeople and their deputies read the British Financial Times, at least eleven order the French Le Monde, while six order the Italian Corriere della Sera and the Spanish El País. German papers on the other hand do not reach such lofty readership heights in Brussels. Currently not a single spokesman has a subscription to for example, the widely circulated Süddeutsche Zeitung”. 

Now of course, you can read a paper without a subscription and we're sure that the Commission keeps an eye on the German debate in various different ways. Still, it's an indication of something. While all the papers above are certainly respectable and informative, they are limited by the fact that they are all quite close to the establishment in their respective countries, and also generally afford the Commission relatively favourable coverage. Limiting your reading to the above papers will certainty not give you the widest perspective of what is really happening on the ground. There is also a great big German-sized geographical hole.
 
As Ruth herself goes on to point out, this leaves the Commission flying blind in the face of public opinion in the EU’s most crucial player: 

“How can EU officials and European politicians understand German sensibilities, if they do not speak any German and do not consult the German media? Short summaries of German newspaper article translated into English are not enough to suddenly make eurocrats experts on Germany. The flip-side of this low sensitivity to the domestic political constraints of the federal government are the completely exaggerated expectations of Germany.” 

Here are a few recent comments from the German media from the last few months that the Commission’s spokespeople may have missed: 

“Eurobonds undermine confidence in the fact that we can learn any lessons from the causes of the crisis. Athens’ sloppiness and denial would be tolerated while inaction would be seen as an attractive course in other countries. Why bother with reforms, why bother to make welfare systems, labour markets and the public sector sustainable when money will just fall from the sky?”- Florian Eder, Die Welt’s Brussels correspondent, 25th May 

“Hands off ‘Made in Germany’… this label is the envy of the world…Made in Brussels is the exact opposite – expensive regulations that shackle the economy.”- Prof. Ernst Elitz, founding director of Deutschlandradio, writing in Bild, 17th January 

"In dealing with Member States, the European Commission is rigorous. There is no measure that is too harsh when it comes to restructuring their budgets... However, when it comes to the salaries of the 45,000 EU officials, they exercise anything but restraint - this not only damages the credibility of all savings claims, but the reputation of the EU as a whole.”- Hendrik Kafsack writing in FAZ, 2nd March 

“In wanting to protect taxpayers, the UK is on the right side in the debate over bank capital rules... If Europe does not lead the way, the next crisis will again be an expensive one for taxpayers.”- Alexander Hagelücken, Süddeutsche’s economic correspondent, 4th May 

While we would encourage the Commission to go directly to the source and consult as many original German newspapers as possible, they could do far worse than signing up to our daily press summary which pulls together various sources from all over Europe…and it's free!

And They're Off...For the 19th time

The EU summit has officially kicked off in Brussels, and talks are expected to drag on until late night. So far, little seems to be moving, and live blogs covering the summit are languishing a bit. However, courtesy of EurActiv France, we have got hold of the updated version of the draft conclusions of the meeting. The following new bits have caught our attention:

1) The conclusions now mention the €120bn 'growth package' discussed by Angela Merkel, François Hollande, Mario Monti and Mariano Rajoy in Rome last week. The total amount would be given by:

• a €10bn capital increase for the European Investment Bank, which would boost its lending capacity by €60bn;

• €55bn worth of structural funds which would be "devoted to growth-enhancing measures in the coming period";

• €4.5bn investment in transport, energy and broadband infrastructure under the pilot phase of so-called 'EU project bonds'.

However, as we have already discussed here, here and here, none of these investments represents a significant boost in solving the crisis. 

2)  The updated conclusions take account of Herman Van Rompuy's proposals for a banking union (in case you missed our reaction to the proposals, click here). The conclusions state that any upcoming legislation designed to set up a banking union "should allow for specific differentiations between euro and non-euro area member states in areas that are preponderantly linked to the functioning of the monetary union and the stability of the euro area rather than to the single market."

According to the new draft, "Existing legislative proposals on bank resolution and deposit guarantees should be adopted before the end of the year. Building on these, the Commission will submit before the end of 2012 further legislative proposals on a single European banking supervision system covering all banks, a European deposit guarantee scheme and a European bank resolution scheme."

This is in line with the European Commission's objective of having the banking union up and running from 2013, which, as we noted before (see here), looks overly-optimistic.

No mention is made of short-term measures to keep borrowing costs down - which France, Italy and Spain are particularly keen on. Should these be turned into the final conclusions of the summit, markets will likely be disappointed and the ball will once again be back in the ECB's court - which, by the way, seems to already be laying the ground for a new interest rate cut, although we doubt that will suffice either.

Up in the air: Can the EU’s tax on airline emissions ever work in its current form?

You can’t say Brussels wasn’t warned. After protests and criticism from various non-member states and international organisations, the European Union’s decision to impose a carbon tax on flights in and out of the EU has fallen flat, as China announced it would ignore it and the US Congress prepares to ramp up action against it. It seems quite a feat, even for the EU, to get China and the US on the same side of a trade dispute.

The new legislation, which came into effect this year, forces all airlines flying in or out of Europe to buy carbon permits (from the EU’s Emission’s Trading Scheme) to cover their emissions. This is intended to help Brussels meet its 2020 commitment to reduce greenhouse gas emissions by 20% from 1990 levels. Until now, the aviation industry’s environmental impact had not been regulated – and in that sense the EU’s proposal may be positive as a first salvo. The move has been welcomed by environmentalists, who point out that airlines’ share of world emissions (currently 3%) is set to soar in the coming years.

Interestingly enough, governments are far more vocal about the drawbacks of the trading scheme than its impact on the airlines specifically. This is because airlines could actually stand to gain under the new scheme, according to a report in The Economist. Under the plan airlines will only be charged for 15% of the carbon that they emit – or possibly less if their government has an offsetting scheme. The scheme will give airlines a valid excuse to raise prices to compensate for the higher operating costs – although the chances of them using the opportunity to squeeze out more profits cannot be ruled out. By increasing ticket prices by just 25 eurocents, Ryanair stands to gain more than €10 million from the new scheme. The lax carbon quota also means that the scheme is unlikely to achieve its environmental aims, although this is true of much of the EU ETS. In sum, there is a good chance that consumer behaviour won’t be affected by the small price rise, and that airlines will increase the number of flights as their profits rise. This would further undermine the weak environmental credentials of the policy.

It’s likely that non-EU member states are kicking up a fuss because the new scheme implies a loss of sovereignty. China’s foreign Ministry accused the EU of applying “unilateral” measures to the global airline industry. Under the new scheme, airlines (all of which are state-owned in mainland China) pay for 15% of the carbon burnt across entire trips, rather than just that used flying over Europe. Airlines would therefore essentially be taxed outside of the EU’s jurisdiction. In addition, there is less scope for non-EU governments to impose their own tax to off-set carbon emissions – a big issue given the questionable format of the EU tax.

Beijing and Washington are also wary of Brussels’ wider meddling in global environmental standards. The EU’s mooted Fuel Quality Directive is set to impose regulation which would reduce the lifecycle intensity of greenhouse gasses emitted by the transport industry. Such a move would jeopardise US and Chinese interests in high carbon fuel, which has a ruthlessly efficient lobby industry. It’s likely that China and the US are partly arguing against the current measures, as they hope to thwart further EU plans and avoid setting a precedence of adhering to EU environmental standards.

Regulating the airline industry has valid environmental aims but in this case the EU’s proposal looks to not only fall short of these goals but also of foreign policy and consumer protection consideration. This comes as no surprise given the EU’s track record on the environment, as Open Europe has shown. It’s a reasonable opening gambit, but the EU should now focus on negotiating with China and the US to find a global consensus on how best to approach the issue.

À la recherche du temps perdu

Tomorrow, another meeting between the leaders of Germany and France will take place in Paris.

For anyone who has lost track of all those EU summits designed to fix the eurozone, we've made an attempt here to compile a list. We start at the beginning of 2010, when the eurocrisis really emerged:

2010

February 11 – Informal European Council meeting. EU leaders reach deal to bail out Greece. European Council President Herman Van Rompuy says "Euro area member states will take determined and co-ordinated action if needed to safeguard stability in the euro area as a whole. The Greek government has not requested any financial support."

March 25 – Eurozone leaders agree on EU-IMF safety net topping "20-22 billion euro" for Greece.

May 2 – EU and IMF decide on €110 billion bailout for Greece.

May 9 – EU and IMF decide on "nuclear" €750 billion bailout package (just after UK General Election and during local German elections). The UK, despite not having an elected government in place and not being a member of the eurozone, decides to take part in the €60bn EFSM bailout fund but not the larger €440bn EFSF.

June 17 ­– EU summit discusses European "economic governance".

October 18 – Merkel and Sarkozy, meeting in Deauville, France, agree on EU treaty change to handle future crises. Proposals for confiscating EU voting rights, preemptive and automatic sanctions for budget sinners.

October 28-29 – EU summit "sealed a solid pact to strengthen the euro", says European Council President Herman Van Rompuy. A permanent fund will be set up to bolster the euro in times of crisis, and the EU will have extra powers of scrutiny over national budgets.

November 28 - EU finance ministers give go-ahead to a €85bn bailout package for Ireland at emergency meeting in Brussels.

December 16-17 – EU summit decides on changes to the EU's governing treaty to set up a European Stability Mechanism (ESM) to replace the temporary bailout facilities post-2013.

2011

4 February 2011 - EU leaders fail to reach agreement on Franco-German “pact for competitiveness” that would see stronger coordination of six areas of fiscal and economic policies in the eurozone, in return for increasing the size and scope of the EU’s temporary bail-out fund.

March 11 – Summit of Eurozone leaders decide on "Pact for the Euro which establishes a stronger economic policy coordination for competitiveness and convergence", agree to boost lending capacity of the EFSF to €440bn and determine ESM will be €500 billion.

March 24-25 – EU summit endorses eurozone decisions on permanent eurozone bailout mechanism post-2013 and economic governance plan, but fails to decide on Portuguese bailout.

May 3 - Portugal announces that it has reached an agreement with the EU/IMF for a €78bn bailout.

May 6 – “Secret” meeting of EU finance ministers in Luxembourg discusses private sector contribution to possible second Greek bailout. Eurogroup chief Jean-Claude Juncker says Eurozone economic policies should only be conducted in "dark secret rooms".

May 17 - EU finance ministers agree Portugal's €78bn bailout.

June 23-24 – EU leaders decide on Mario Draghi to become new ECB President, as Greece is forced to agree to more austerity cuts, after the EU/IMF/ECB had found a €5.5bn black hole in the existing austerity package.

July 21 – Eurozone leaders agree second bailout for Greece worth €109 billion and widen scope of EFSF so that it can issue “precautionary lines of credit” to possibly Italy and Spain, aid in the recapitalisation of struggling banks and purchase government bonds on the secondary market.

August 16 ­ – Merkel and Sarkozy meet in Paris. German government plays down expectations of investors. Both governments rule out Eurobonds, for now.

Keep your diaries clear because this list is likely to get considerably longer before we're through.

Brussels: Shut down?

August is no doubt the month when most Brussels folk choose to go on vacation - spending a couple of weeks in the countryside or taking advantage of the competitive market for air travel to go abroad, for instance.

That's alright - everyone has the right to a break (within reason). However, we are moved to ask if the entire of Brussels has gone away recently? Dealing with EU issues, it can be a touch

frustrating if everyone you try and get hold of is out of the office.

Some days, it can feel like trying to catch someone at their desks in Brussels is like expecting EU leaders to learn how to take No for an answer.

(clue: it won't happen)

City of Europe

This week the IHT reported that the EU had recruited French architect Christian de Portzamparc "to devise a comprehensive, 15-year plan" for Brussels "that would not only create new office space but also provide an architectural framework symbolizing the European Union."

Portzamparc said:

"I thought of a big and beautiful idea, that took this historic axis, linking the old and the new. It would be a city of Europe, with lots of periods present. It's a formidable opportunity... I told them it should be like a downtown American city, with three skyscrapers, yes, but with open islands, keeping historic buildings, with pocket parks."

The idea to transform Brussels into the "city of Europe" has been around for a while - but not yet picked up anywhere in the British press.

The Commission calls it “Operation Face-lift”. And the Commissioner in charge says the idea of the project is “to create an urban design with a strong symbolic identity”. They want to more than double the office area occupied by the Commission in Brussels, from 170,000 square metres to 400,000. According to German magazine Spiegel that's 10,000 extra offices for the swelling tribe of bureaucrats, as well as 40,000 square meters of commercial space and 110,000 square meters of apartments. "The idea is that EU administrators can stay in their idyll even after the workday ends. They can shop, go for a beer and even go home to bed all within the European Quarter."

Spiegel notes:

“All of this construction will cost hundreds of millions of euros, possibly even billions. There are no exact numbers for the project at this early planning stage, not even estimates. The necessary funds will be added into the budget later, little by little and in manageable amounts. By then, presumably, today's building dreams will long since be yesterday's decisions and by their own intrinsic momentum they will prevail against any critics and skeptics. So far, at any rate, only a few Members of the European Parliament have even raised an objection to the delusions of grandeur in Brussels.

That is hardly surprising. After all the planners and developers in the Commission, Council and Parliament like to abide by a tried and tested principle: More offices mean more EU.”

We called the relevant Commission department and an official said it is too early to give any estimation of costs, as no concrete proposals for building have been issued. He also said the winner of the competition has teamed up with several other architects to draft a proposal, but they are not receiving any funding by the European Commission. However it’s pretty clear the cost of the building will come out of the EU budget.

The next steps of the project are:
2009: further work on the urban design
2009 – 2011: realisation of a binding urban plan
from 2011: construction of new buildings.

The Commission currently already occupies 61 buildings in Brussels, and a press release from the Commission in March tells us that it spent €206.9 million in buildings in Brussels alone in 2008 – including EUR 77.4 million in rent and EUR 129.5 million in expenditure on property purchases.

According to the BBC, the last renovation of the Commission (the 15-year resurrection of the asbestos-ridden Berlaymont) cost a billion euros.

Spiegel also notes that:

“In addition, the EU Commission has another large-scale construction project in its sights. This one is to be erected four kilometers away, behind the outline of the Atomium, Brussels' symbol from the 1958 World's Fair. There are plans to build a conference center here with capacity for 3,500 visitors, as well as a gigantic shopping mall and Belgium's largest parking lot. The new location would also place a further 300,000 square meters of office space -- an area the size of 40 soccer fields -- at the EU Commission's disposal.”

EUobserver wrote about this in January, and noted that a German MEP had criticised the Commission for secrecy in the decision-making process. She also claimed that one of the Commissioner’s special advisors, Richard Boomer, is a Belgian real estate developer whose partner was one of the authors of the proposal for this project.