A classic example of EU spin

Here's an example of some good old EU spin for you:

The European Commission today announced the results from the latest Eurobarometer poll - carried out in May during the height of the crisis - with a press release carrying the headline,"EU citizens favour stronger European economic governance". 75 percent of Europeans, we are told by the press release, are in favour of giving the EU a stronger role in the coordination of member states' economic and budgetary policies.

EU Justice Commissioner Viviane Reding - who also is in charge of Communication - comments:

"The clear majority for enhanced European economic governance shows that people see the EU as a decisive part of the solution to the crisis".

Clearly, something fishy is going in here, not least since only 26 percent of people then go on to say that they consider the EU best placed to deal with the financial and economic crisis.

And sure enough, the Commission is trying to take us for a ride. Respondents to the Eurobarometer survey were only asked whether or not "a stronger coordination of economic and financial policies among all EU member states" would be effective to combat the ongoing crisis (see p. 38 here). The question doesn't even mention the role of the EU or the term "European economic governance". Creatively, the Commission then adds up the respondents who think that stronger coordination would be "very effective" (26 percent) and those who only find it "fairly effective" (49 percent) to reach the 75 percent figure.

Seriously, how stupid do they think we are? By no stretch of the imagination is this the same as 75 percent of Europeans being in favour of giving the EU more powers to monitor national economies, which the Commission is trying to make us believe in its press release.

The Eurobarometer could have asked this question instead: “Do you think that the EU should be given more powers to monitor your country’s economy, including decisions on public spending and taxation?” We suspect the result would have been completely different.

What the Commission really should be focussing on is the troubling fact that only 49 percent of respondents think that EU membership is "a good thing" down from 53 percent last year. Or that the percentage of people who think that EU membership is "a bad thing" has reached its highest level in a decade - now at 18 percent (see p. 12).

What's more, the percentage of people who think that EU membership is a good thing has decreased by 5 percent in France and the Netherlands, for example, and by a striking 10 percent in Germany (down to 50 percent) in only one year. Incidentally, these countries are all net contributors to the EU budget.

Is the Commission getting the hints? We hope so, but somehow doubt it.

Ps. If we were to use the same method as the Commission to support our claims, we could add up respondents who said that EU membership is "a bad thing" with those who said it is "neither good nor bad" (29 percent) to obtain a remarkable 47 percent of "EU non-enthusiasts".

This could be interesting

Do you remember all that talk about how national parliaments would be strenghtened under the Lisbon Treaty (something which the pro-Lisbon camp continuously banged on about, presenting it as a 'fact', when in reality it's anything but)?

We've looked at what post-Lisbon life is like for national parliaments many times before (and it ain't that pretty), but it now appears that national parliaments' "new powers" to challenge proposals from the Commission are being tested for the first time.

The Lisbon Treaty says that, in the event that a third of national parliaments - that's 9 - get together to oppose their governments on a piece of legislation, on the specific grounds of 'subsidiarity', and within an 8-week window, then the legislation would have to be reviewed, following which, it would be open to the institution which originated the proposal to choose whether to maintain, amend or withdraw the proposal.

Hardly practical. But the Swedish Parliament (the Riksdag) is determined to give it a try. The Treasury Committee of the Riksdag has raised objections against the Commission's proposed amendments to the Deposit Guarantee Schemes Directive. Under the amended Directive, deposit guarantee schemes must offer depositors up to €50,000, if their bank collapses. The schemes are to be 75 percent pre-funded from bank contributions, with the remainder coming from other sources. However, the Riksdag's Treasury Committee is opposed to a provision in the Commission's proposal which could see Sweden (or any other member state) being forced to lend money to other member states' funds, if these funds face a shortfall in cash.

The Riksdag, going against the Swedish government, said that such mandatory lending could lead to some member states under-funding their deposit schemes, knowing that someone else would be lender of last resort. It also argued that the provision represents a violation of the EU's subsidiarity principle. The Riksdag will now seek to spread the word amongst other parliaments in a bid to get the Commission to reconsider the proposal.

One tiny problem: many national parliaments around Europe are on recess at the moment - including the UK's. To muster the support of an additional eight will be a difficult task indeed.

This is one to watch.

all or nothing?

Over the last few days a story first picked up on EUobserver, then Austrian daily Wirtschafts Blatt and again today on Euractiv looks at the future of EU cohesion (also referred to as regional or structural) policy in the upcoming EU budget negotiations.

The current interest was sparked by a letter to the Commission, penned by Poland, Hungary, Slovakia and the Czech Republic, calling for the European Social Fund (one of the cohesion policy's funding streams) to remain intact. In addition, a recent Polish government policy paper reportedly told its diplomats to ensure that the EU's €50bn a year cohesion spending remains untouched.

The articles all present the debate in stark terms. For example, the EUobserver piece says:

One contact noted there is a danger that the bogeyman of "renationalisation of regional development" - the theory that each EU country should look after its own poor instead of creating a joint pot - could raise its head in the EU budget talks due to the politically painful austerity measures coming into effect across the union.

However, when it comes to regional spending there is no reason for there to be an 'all or nothing' choice. As we have argued before almost half of the EU's regional spending is spent in the richer member states (those with a GDP 90% or higher than the EU average) and much of this spending represents poor value for money, due to the prescriptive top-down rules governing its expenditure.

Repatriating this spending is not the same as abolishing cohesion policy altogether. There is an obvious deal by which countries with 90% or less of average EU GDP continue to receive the funding until they catch up. This should be the goal of cohesion policy after all - to allow those poorer member states to catch up with the richer ones. Once they have done so, they should take on the responsibility of funding their own poorer areas.

Questionable EU priorities

On Friday, the Commission opened up a new fund of €1 million for think tanks and NGOs to further research how to "promote active European Citizenship".

The €1 million fund comes under the 'Europe for Citizens' project, which has a colossal seven year budget of €215 million (2007-2013) and is projected to cost €32.5 million in 2010 alone. As we've argued many times before, these kinds of funding streams are shamelessly biased towards groups which more or less share the Commission’s political agenda of further integration and/or defending the EU status quo.

And sure enough, the project description openly admits that also these fresh funds are designed for organisations which promote “an ever-closer Europe”.

The core objectives of this latest proposal include:

(a) to foster action, debate and reflection related to European citizenship and democracy, shared values, common history and culture through the activities and cooperation of think tanks and within civil society organisations at European level;

The emphasis on democracy is not a bad thing, but is, as ever, ironic. Most citizens across Europe don’t particularly want an elite-driven ever-closer union, artificially created by like-minded bureaucrats in Brussels; and most governments in Europe are forced to take tough decisions on spending, including cutting down on vanity projects – knowing that they will face their electorates and taxpayers for every spending priority they make.

This self-reflecting contradiction in the EU’s communication/citizenship/we-are-the-world spending programmes hasn’t dawned on the Commission yet.

Is even virtual democracy too dangerous for the EU?

A lot of attention has been paid in recent weeks to the European Parliament-funded virtual reality experience, Citzalia, which recreates life in the Parliament online.

As its weblog states, it is "a role playing game and social networking forum wrapped in a virtual 3D world that captures the essence of the European Parliament." All for the tidy sum of €275,000.

In The Sunday Telegraph, Christopher Booker made the suggestion that "We are given virtual democracy in exchange for real power”.

However, it seems that even "virtual democracy" cannot be trusted by the EU.

The Guardian reported that in the new taxpayer-funded virtual world, "Avatars of European commission officials will also wander the halls 'correcting' mistaken views about the EU." The developer stresses that "there won't be any censorship, but there is a huge risk that misinformation could be fed in. They won't be editing for views, but having these people in can sort of correct things."

Given the EU's inability to accept what voters tell it in the real world, it is hardly surprising that Alles tonenit cannot trust ordinary citizens (who, let us not forget, are paying for this through the EU budget) to have their own debate online, without the need for EU supervision (sorry, "correction").

Aid yes, but be sure to wave the EU flag

A famous Chinese proverb says: "When the finger points at the moon, the foolish man looks at the finger". We don't know if EU Commissioner for Humanitarian Aid Kristalina Georgieva (in action in the picture) is familiar with Chinese proverbs, but this one she would do well to contemplate.

In an interview with EurActiv, Georgieva lamented that - unlike the US - the EU's humanitarian efforts in the aftermath of the recent floods in Pakistan have barely been visible in TV and press coverage of the disaster.

So says Georgieva,

"Raising the visibility of Europe and making sure that our flag shines when we are abroad helping people in need is something that I find incredibly important. Especially now, when we are still not through with the economic and financial crises and it is hard for people here, and we also have our own disasters at home".

Say what? You would think that the existence or not of EU flags is the last thing anyone (not least the 14 million victims) cares about on the ground of Southern Asia's worst flooding in 80 years. But the EU's Aid Commissioner knows her priorities.

Euractiv also noted that "Georgieva said she was telling humanitarian organisations that they should do more to help the EU to help them by flying the EU flag". So EU flag first, then aid, is that the message?

Of course Europe should give emergency aid to Pakistan - and much of it (given that it is properly targeted and effective - which unfortunately EU aid too often isn't). But the EU's obsession with visibility and flag-waving is becoming more disturbing by the day.

What's next, a fine for Pakistan for failing to fly the EU flag?

The cost of living

An interesting article on Spanish website Cotizalia.

It looks at recent Eurostat data, which shows that, since the euro came into force, Spain and Greece have seen the highest increases in the cost of living throughout the EU. In comparison to the rest of the EU27 index, the cost of living in Spain has increased by 14.5 percent and in Greece by 14.8 percent, whereas it has remained reasonably stable in Germany.

A pretty toxic political combination when coupled with high unemployment, which shows no sign of abating anytime soon.

Obama to meet with the EU's various Presidents after all

Looks like U.S. President Barack Obama will meet with his "European counterparts" (at least in terms of pay, they're on par), Commission president Jose Manuel Barroso and the President of the European Council Herman Van Rompuy, after all. A NATO summit in Lisbon on 20 November will be used to make up for the Obama Snub earlier this year.

"Presidents Van Rompuy and Barroso are looking forward to this opportunity to meet again with President Obama to reaffirm the transatlantic agenda and advance EU-U.S. cooperation on issues of mutual concern," the Commission said today.

Now, the big question is: who will get the opportunity to shake the great man's hand first?

Third time unlucky

Euractiv has returned from its summer break with a rather good, albeit concerning, story about concerns over German EU Energy Commissioner Günther Oettinger's extra-curricular activities. It has been revealed that he has been forced to re-submit his 'declaration of interests' three times and it's still not right.

It seems that Oettinger has repeatedly failed to disclose the full list of trusteeships he undertakes and Stern reports that German prosecutors are checking whether he committed a criminal offence by lying in his affidavit, following charges made by German management consultant Andreas Frank.

Makes you wonder whether other Commissioners are also being economical with the truth when it comes to potential conflicts of interest? And if Oettinger is unable to fill out a simple form at the third time of asking, is he really capable of solving the EU's pressing issues of energy security and liberalisation?

You can access the various Commissioners' declarations here:
http://ec.europa.eu/commission_2010-2014/index_en.htm

The Same Old Story?

The eurozone is experiencing some economic growth again. Data published the other day by Eurostat shows that eurozone GDP expanded by 1% in the second quarter of 2010 from the first quarter, and by a flattering 1.7% in comparison with the second quarter of 2009.

This is good news for a range of different reasons. But behind these figures loom a familiar problem: the eurozone's highest growth rate in more than three years comes with huge competitiveness gaps between stronger and weaker eurozone economies. The contrast between the impressive 2.2% expansion experienced by the German economy and - for example - the meagre 0.2% growth registered in Spain and Portugal is concerning, to say the least. Not to speak of the 1.5% contraction in Greek GDP over the same time period.

The recent sovereign debt crisis has shown that the single currency has failed to deliver on one of its major promises - boosting economic convergence and reducing gaps in competitiveness between eurozone members. Even when growing, one of the eurozone's deepest structural problems - its asymmetry - continues to smoulder beneath an aggregate surface.

As Ambrose Evans-Pritchard points out,

What in fact occurred is that Germany surged ahead with an undervalued currency, exporting Mercedes and BMWs to China. While Spain, Italy and Portugal are being left ever further behind in a split-level union with an overvalued currency. The data is cruelly double-edged.

Or, in the words of Carsten Brzeski of ING,

It's the same old story: Germany in a league of its own, carrying a few of its neighbours along; and beneath that, the laggards that are teetering on the brink of recession.

"Cutting" the budget - Brussels style

The media reported last week that EU member states have agreed to push for €3.6 billion worth of "cuts" to the EU budget for 2011, bringing the new total figure to €126.6 billion.

The BBC highlighted the news with the headline, "EU budget plans for 2011 cut by ministers". But just in case someone missed it, this is not really "cuts" in the sense that the EU's overall budget will be downsized. The "cuts" still represent a 2.9 percent increase from the budget for 2010, but a more modest increase than what the Commission's original proposal envisaged. Predictably, even this modest modification will be resisted by the Commission and the European Parliament, with a a spokesman for Budget Commissioner Janusz Lewandowski, saying: “It is not our intention to redo our numbers” (numbers which include a pay rise for the Commission and all other EU officials.)

We're eagerly awaiting the day when the word "austerity" enters the Brussels vocabulary.

Lacking confidence

In global affairs, the EU seems to suffer from a peculiar lack of confidence, stemming from its all too frequent failure to come up with anything meaningful to say on the world stage.

This is probably also why EU leaders attach such a huge importance to summits and institutions, such as the External Action Service - they serve as a way for the EU to cover up the absence of substantive policies.

As we've argued before, this is completely the wrong approach. Being an influential voice in the world stems from being a competitive and vibrant global actor with real policies on offer - not from obsessing about family photos, meetings and artificially created institutions. The rest of the world usually sees through the EU's charades, as was evident from the infamous "Obama snub" back in February, when it emerged that the American President had decided to give the EU-US summit a miss this year.

Now we hear that the EU is hoping that a summit with the Americans will go ahead after all, slightly postponed. EU officials hope that they can tack on a meeting to a Nato summit in Lisbon in November.

The newly appointed EU Ambassador to the US João Vale de Almeida - who apparently hopes that he will be "the leading show" among European representatives in Washington DC - complains in the FT about the lack of attention the US gives the EU. “Not being a problem does not mean we should not be a priority,” he says. "There’s untapped potential in this relationship ... We can co-operate better on foreign policy, from Iran to Pakistan, to the Middle East and the Balkans", which is probably true, but again, the focus must be on substance and not handshakes for the sake of them.

A senior US administration official quoted in the FT explains in plain American why the EU shouldn't have too high hopes about incorporating President Obama into its meetings-and-institutions culture:

This president is not a schmoozer – he doesn’t hang out. We don’t feel the need to profess love because it’s a fact of life that Europe is our main partner, in everything that we do in the world … Do you need to say that all the time?

Apparently you do.

So, while EU officials sob about their hurt feelings, here are some suggested themes for an EU-US summit, which could help lure Obama to Europe:

• How to create a financial regulatory framework which underpins global initiatives rather than undermines them;
• How to create a cost-effective model for cutting emissions - one that the rest of world can follow;
• How to cut tariffs and reform rules of origin to free up global trade;
  
• How to produce fewer and better laws to make Europe a more attractive market;
• How to put the money where your mouth is on defence.

Just to start off with.

'We've only held up a mirror'

The Slovakian Parliament has overturned the decision by the country's previous government to help fund the €110bn eurozone bailout of Greece. Slovak MPs voted by 69 to two to refuse to take part. Slovak Finance Minister Ivan Miklos trashed the logic behind the bailout, telling the Slovak Parliament:

I do not consider it solidarity if it is solidarity between the poor and the rich, of the responsible with the irresponsible, or of taxpayers with bank owners and managers.

The European Commission, being the non-political organisation that never meddles in national politics that it is, rushed to condemn the move. EU Economic Affairs Commissioner Olli Rehn yesterday said,

I can only regret this breach of solidarity within the euro area and I expect the eurogroup and the [economic and finance ministers'] Council to return to the matter in their next meeting.

And in what can only be considered a thinly veiled threat, Mr. Rehn's spokesman added that Slovakia will not face any legal penalty for its Greek u-turn but should expect unspecified "political consequences."

But Mr. Miklos had a thing or two to say himself,

It's true the top politicians in the eurozone are not excited by our position and that we have irritated them quite a lot. But this is only because they have been creating alibis for themselves and we have held up their behaviour to a mirror.

Bulls-eye!

NB: At the same time, Slovak MPs did back the country's participation in the eurozone's overarching €750 billion bailout fund, the European Financial Stability Facility (EFSF), which puts Slovak taxpayers on the hook for €4.4 billion.

EU tax: the reactions from around Europe

EU Commissioner Lewandowski hasn't exactly hit a home run with his comments about the Commission's forthcoming proposals for an EU tax.

The idea was outright rejected by the German government, which pointed out that its coalition agreement stated: “We reject an EU-tax or the involvement of the EU in national tax and duty collection.” A spokesperson from the German ministry of finance told today’s FTD that “Nothing has changed in this stance.”

As expected, the British government also gave the idea the cold shoulder, with Treasury Minister Lord Sassoon saying that the British Government

“is opposed to direct taxes financing the EU budget. The UK believes that taxation is a matter for member states to determine at a national level and would have a veto over any plans for such taxes.”

Also France, which in the past has advocated fiscal centralisation and an EU tax, doesn't seem particularly impressed. “We judge this idea of a European tax perfectly ill-timed,” said France's junior minister for Europe, Pierre Lellouche. “Any extra tax is currently unwelcome. It is much more the time for the member states and also European institutions to make savings.”

Okay, it's not the idea of transferring fiscal sovereignty but the timing that rubs Monsieur Lellouche the wrong way, but still.

But Lewandowski does have some supporters. A spokesperson for the Austrian Minister of Finance Josef Pröll, for exampe, tells Die Presse that

“if we use [a financial transaction tax] as a source of finance for the EU, it eases the burden for net contributors. Whether the financial transaction tax goes into the domestic budget or is used for the refinancing of the EU or a small amount is transferred to the EU is not that important”.

Having previously confirmed his commitment to a financial transaction tax his support was somewhat expected. Spanish Prime Minister Zapatero also said he would consider a concrete proposal from the Commission “with interest” and “maximum attention,” if “the idea behind it is strengthening the European Union,” reports EFE.

Media reactions haven't been overly positive either (at least from the Big Three). Einar Koch, Chief Correspondent of German tabloid Bild, exclaims "EU tax, no thank you!” He argues that “The EU desperately needs structural reforms in its expenditures instead of new sources of revenue.” Another attack comes from Dutch MEP Derk-Jan Eppink who says that the proposals should be fought “with fire and sword,” according to Standaard.

"More money from less citizens?" asks Clemens Wergin in Die Welt. He points to Europe’s shrinking population and the apparent failure in Brussels “to understand [the] basic correlation between demographic trends and governmental expenditures.”

A commentary in Focus at last finds something positive in a potential direct tax. Giving the European Parliament a say in tax jurisdiction would force MEPs to justify the added burden of additional expenditure to their constituencies. This could actually cause the parliament to take its role of budgetary oversight seriously, instead of constantly propose spending increases to fund their own pet projects. An interesting thought.

Judging from these reactions, Brussels latest attempt at grabbing fiscal powers will last about as long as England in the World Cup. But this being EU politics, we doubt the idea will go away so quickly. As we've noted before, there's a dangerous temptation for the net contributing member states here, which Lewandowski is trying to exploit and test (with limited success so far).

Brussels specialises in repackaging and rebranding ideas (but with the substance unchanged), in order to overcome opposition.

Let's wait and see until Lewandowski has actually tabled his proposals. The outcome is still far from clear.

EU-tax back on the agenda

Today's FT Deutschland splash reveals that EU Budget Commissioner Janusz Lewandowski will in September table different options for introducing an EU tax to fund the bloc's budget. Apparently, Mr. Lewandowski believes that the current drive in Europe to cut spending is making governments more receptive to the idea of a single tax.

He said,

Many countries want to be unburdened. In this way, the door has been opened to think about revenues that are not claimed by finance ministers...If the EU had more of its own revenues, then transfers from national budgets could be reduced. I hear from several capitals, including important ones like Berlin, that they would like to reduce their contribution.

The thinking is that if the Commission raised its own taxes, then the burden on member states' budgets would be reduced, and member states would pay 'less' to the EU.

This logic is of course fundamentally twisted as the burden on taxpayers - which surely is what matters in the end - would be exactly the same. Only thing that would change is the layer of government that raises the taxes. The Commission is effectively trying to play on governments' desire to be seen as cutting spending as a pretext to concentrate taxation powers in Brussels. The views of taxpayers - the folks who will actually pay for this - are simply ignored.

Pretty disingenuous.

According to Lewandowski, possible sources of an EU tax include a financial transaction tax, levies involving the Emissions Trading Scheme and/or a levy on air travel. EUobserver reports that the Commission hopes that a deal on an EU-tax can be reached during the Danish Presidency in 2012.

Unsurprisingly, Lewandowski's comments have already provoked pretty strong reactions, with German Finance Ministry spokesman Tobias Romeis telling reporters in Berlin that, "Calls to introduce an EU-tax are in opposition to the position the government established in its coalition treaty, in which it says that we will deny an EU tax or EU involvement in national taxes."

So the German coalition government says it will oppose an EU tax, but what about the British one?

This would seem like an obvious one for the Coalition to squash given that it represents a massive step towards a federal Europe. But you can also see the temptation.

A direct EU tax on, say, financial transactions or travel is easier to 'hide' than a line in the annual budget. The problem is that the UK's contribution to the EU is going up all the time - despite the almost universal belief in Britain that the EU budget is exceptionally poor value for taxpayers' money. The UK's net contribution is projected to rise to £10.3 billion in 2014/15 (according to the Coalition's June budget), meaning that in a decade, the UK's net contribution has increased by around 230%.


This continuous increase has become a bi-annual embarrassment, which any UK government would like to put an end to (particularly when everyone is talking austerity). Creating an arrangement under which the UK's EU contribution actually doesn't show up in the budget would do the trick.

In the end, though, it's very unlikely that the Coalition would be able to pull it off even if it wanted to - particularly as it has to get around its pledge to hold a referendum on transferring powers to the EU. And let's remember, most of Cameron's Cabinet genuinely don't want an EU-tax for a range of reasons, including ones relating to ideology and democracy.

This debate will most certainly drag on.

"One-in, One-out" for UK laws but EU're welcome anytime

The Government has today announced that it is to introduce a one-in, one-out system of regulation whereby "When Ministers seek to introduce new regulations which impose costs on business or the third sector, they will have to identify current regulations with an equivalent value that can be removed."

This is clearly a welcome initiative, as it will make regulatory costs (which are too often overlooked in austerity discussions) similar to spending, in that ministers would have to prioritise amongst different pieces of regulation just as they have to prioritise what to spend money on.

But what about rules and regulations coming from Brussels? Our research, based on the Government's own Impact Assessments, shows that in 2009, 59 percent of the annual cost arising from all regulation introduced since 1998, £32.8 billion, stemmed from EU legislation. So that's around £19bn. (Note that this includes all regulations introduced since 1998 - when the government started to produce IAs - which gave rise to a cost in 2009, as opposed to the government's figures which only include new regulations introduced last year).

Unfortunately, the Government has decided to duck the uncomfortable question and not include regulations from the EU in the scheme.

This could prove problematic for several reasons.

Firstly, it will limit the impact of the scheme, as it will not cover the bulk of the cost of regulation. As a point of comparison, imagine the Coalition having a series of proposals for how to get the country’s public finances in order, but only having full control of 40% (or less) of the actual budget.

Secondly, ignoring the impact of EU legislation leads to unrealistic expectations of delivery. This, in turn, could undermine the credibility and legitimacy of the Coalition government's entire regulatory reform drive.

Thirdly, and perhaps most importantly, the point of the budgets is to ensure regulatory prioritisation within departments. If so much of the annual regulatory cost originates in the EU – then how much of a real “prioritisation” can actually take place? This is particularly true for departments/agencies such as the DfT, FSA, HSE and DEFRA whose regulatory output is almost completely dominated by EU laws - in come cases over 90% of the cost (see table).


In addition, the Conservative party has been – rightly – a critic of ‘EU overregulation’ in the past. In a speech in May 2009, launching the party’s European election campaign, David Cameron said:

“Our next task is to fight the EU's culture of centralisation and over-regulation. Brussels can be a force for economic dynamism - but too often it acts like an economic millstone.”

Starting off with launching a flagship proposal which doesn't address EU regulation doesn't look too good, and gives the impression that the Coalition Government is in denial over how much impact laws stemming from Brussels has on the UK economy.

But there is another way.

According to negotiation theory, in the interaction between domestic and international (EU) politics, governments strengthen their bargaining power if they can convince their negotiation partners that their mandate from voters and business at home is very restricted – and that they are ready to stick to that mandate.

That is how the Coalition Government should use the one-in one-out scheme.

EU legislation should have to meet the same stringent criteria as domestic legislation (including being signed off by the Coalition's "Regulatory Policy Committee") . At a very early stage in EU negotiations, the UK Government should give its negotiators the authority to reject proposals that do not meet its priorities and threaten to break its own regulatory budget. UK ministers must make clear to their EU partners that they simply do not have the mandate to sign up to a proposal that will break their departmental regulatory budget. This would strengthen the UK's negotiating hand massively.

It would be radical but not more radical than other member states simply choosing not to implement EU laws properly or resisting CAP reform, for example.

The EU's WTD is a spectacular failure - what will the Coalition do about it?

We have looked extensively at the EU's draconian Working Time Directive in the past (see here, here, here, here, here, and here for example) warning that it just won't go away. It is back in the headlines again, after a new survey has highlighted the negative impact it has on the NHS.

The survey of 500 senior surgeons for the Royal College of Surgeons warned that the rules were creating a generation of “clock-watchers” with a “lazy work ethic” who no longer felt personal responsibility for their patients. Among consultants who did comply with the 48 hour limit, 56 percent said they had only done so at the expense of patient safety.

And today we hear of further analysis by the RCS, showing that thousands more patients are now waiting longer than 18 weeks for surgery due to the EU rules. In fact, waiting times had been dropping since the 1990s but the WTD rules for junior doctors, which were implemented last August, has reversed the trend. The proportion of NHS patients having to wait longer than the 18-week target for non-emergency surgery such as hip replacements had almost doubled from 1.5 percent 18 months ago to nearly three percent in March this year.

As RCS President John Black put it, “To say the European Working Time Regulations has failed spectacularly would be a massive understatement.”

In total, the WTD costs the UK economy between £3.5 and £3.9 billion every year (at a time of austerity) - making this the costliest EU law on the UK statute book. This also makes it one of the more conspicuous examples of an EU regulation which continues to generate heavy costs year on year but that still remains unaddressed. It's also a blow to those who claim that EU social policy is effectively dead.

The combination of the rules for on-call time, compensatory rest and the 48-hour limit has for years imposed heavy burdens on public sectors and business across Europe (in Sweden, the Netherlands and Germany for example) - without sufficient benefits in return. Trying to centrally plan how the working week should be organised for 27 different countries (with different healthcare systems, labour market models etc.) was always bound to spell trouble.

And very few European governments particularly like the WTD (the European Parliament is a different story). At least 15 member states are currently using the opt-out from the 48 hour working week to get around the on-call time/rest rules. But because of the difficulties in changing EU laws once agreed, the WTD remains in place despite all the costs and evidence.

The question now is: what will the Coalition government do about this spectacular failure? We have argued before that the UK should seek a comprehensive opt-out from EU social and employment policy, along the lines of what the Tories envisioned in opposition.

There are a range of reasons why this would be a sensible policy. Although we won't repeat all the reasons here, it would, for example, be consistent with the Coalition's pledge to cut costs and bring decision-making powers closer to communities, business and families. It would also be the only way to ensure that the UK (and other countries) won't lose their opt-out from the 48-hour working week - which is continuously coming under attack from the European Parliament and narrow interests in Brussels.

Losing this derogation would increase the annual cost of the WTD to the UK economy to between £9.2 billion and £11.9 billion - a ridiculous amount at any time, but particularly now.

In 2007 - what now feels like a century ago - David Cameron said that

“It will be a top priority for the next Conservative government to restore social and employment legislation to national control."

The Tory election manifesto then toned down this rhetoric quite a bit:

"We want to restore national control over those parts of social and employment legislation which have proved most damaging to our businesses and public services. For instance the application of the Working Time Directive on the NHS."

This pledge, in turn, was dropped from the Coalition agreement, which merely states,

"We will examine the balance of the EU’s existing competences and will, in particular, work to limit the application of the Working Time Directive in the United Kingdom."

Quite an evolution...

A spokesman for the Department of Health was quoted in today's Telegraph, saying:

“On the European Working Time Directive, the Health Secretary will support the Business Secretary in future negotiations on its revision, including maintenance of the opt-out.”

Not exactly the toughest statement, but better than nothing. Having dropped its pledge for repatriation, the Coalition Government needs to make the renegotiation of the WTD an absolute priority; it would save an awful a lot money and be consistent with the Coalition's pledge to scrap unwanted laws. To fail to deliver in even this, the most obvious area of EU renegotiation, would leave a very bad taste.

And here there are allies to be found around Europe - it's just a matter of going to work.

Bolkestein vs. Verhofstadt

Frits Bolkestein, the former Commissioner for the Internal Market and former leader of the Dutch liberals, isn't shying away from frank talk. Earlier this year he penned a dynamite article together with Roman Herzog, former German President and Luder Gerken, Director of German think-tank CEP, warning that the EU was at the risk of "completely breaking down" if it did not win back the support of its citizens.

Bolkestein has now taken aim at arch-federalist Guy Verhofstadt, the Belgian leader of the liberal group in the European Parliament. In name, the two veterans are fellow "liberals", on policy, however (at least on EU policy), they're poles apart.

In an interview with Belgian magazine Knack on Friday (not online), Bolkestein takes the gloves off, calling Verhofstadt’s proposals for EU taxes and EU bonds “ridiculous”, saying “if they do that, then we don’t know where it will end”.

He goes on to say

Verhofstadt should shut up. I have told Hans Van Baalen, who leads the Dutch liberals in the EP, that he needs to resist [Verhofstadt’s proposals]. They should bring that up in the group, they should not let that happen. They need to tell Verhofstadt: you speak in the name of who? Then he will have to acknowledge that he is only speaking for himself.

On Greece and the Euro, Bolkestein says:

How is it possible that Greece has become member of the Eurozone? Who has been sleeping? I have done my best to keep the Italians out. I have pressed [former Dutch Finance Minister] Gerrit Zalm, although that didn’t take much. In Italy he was known as Il Duro, as Il Perfido. Ah, it hasn’t gone the right way.

Interestingly, he said that one of his three main achievements in politics was that “I have given a different turn to opinions on the EU. I was actually the first eurosceptic politician.”

Tough talk. But he's raising the ever so pertinent question - who are the EU federalists (of which there are many in the European Parliament) actually talking for?

We're eagerly awaiting round 2.

Hungary declares "economic freedom fight" with EU and IMF

The new Hungarian government, and its Prime Minister Viktor Orbán, has decided it's had enough of being dictated to by the EU and the IMF, which both recently halted bailout-loan talks, saying Hungary wasn't doing enough to make durable cuts in state spending.

Orbán's government has said it will adhere to the 2010 budget-deficit target - 3.8% of GDP - set under the terms of its current loan agreement with the IMF and EU. But it insists how it goes about it shouldn't be the IMF or the EU's concern.

"It's an economic freedom fight," said a senior official in Mr. Orbán's administration. "We are getting back the financial independence of the country."

This will certainly prove to be an interesting backdrop to the ongoing EU discussions regarding 'economic government'.

Peseta dreams and euro nightmares

A recent Eurobarometer poll has found that the majority of Spaniards, a sizeable 54 percent, believe that “without the euro, with the peseta, we would have been able to confront the economic crisis”. Somewhat surprisingly, perhaps, this is higher than the eurozone average of 45 percent. (In a 2007 Open Europe poll, 51 percent of the Spanish said they would prefer the peseta over the euro – so the peseta has been missed for some time).

In an interview with Spanish daily La Vanguardia, the Head of the European Commission's Representation in Barcelona, Manel Camós, has set out a rather customary EU explanation as to why people hold such odd views: ignorance, what else?

Says Camós:

This makes us think that the public has not understood the advantages of the euro because the experts, in general, are convinced that thanks to the euro we have had the [economic] development that we have had and that we can overcome the crisis.

He goes on “both interest rates and the inflation rate have decreased. Before the euro in Spain the interest rate was higher than 14% and now, in spite of the crisis, it is around 4%".

Ah, Señor Camós, those ill-informed Spaniards who don’t understand that the single currency only comes with benefits. How can they believe the words of people like the EU President Herman Van Rompuy, when he now admits that the euro served as a “sleeping pill” for the eurozone? Or the Bundesbank President Axel Weber when he points out, in the wake of the crisis that "the benefits of monetary union, in particular lower interest rates and the elimination of exchange rate risk, have not always been used wisely and have tempted some countries to live beyond their means" (e.g, the Spanish housing bubble)?

Or EU Commissioner for Competition Joaquín Almunia, a Spaniard himself, when he notes that countries like Greece, Portugal and Spain have experienced “a permanent loss of competitiveness since they are members of the Economic and Monetary Union”?

The truth is that keeping up with German monetary policy has undercut Spanish competitiveness and put strains on the economy, while low ECB interest rates have served to fuel the Spanish housing bubble, the effects of which we now see. At the same time, devaluation to put this right is now not an option for Spain which in turn will make the adjustment much more painful for ordinary people. Surely, any serious commentator or official must take this into account before accusing people of not getting it?

In fact, it wasn’t the people who got it wrong on the euro, as Mr Camós seems to suggest, but the self-appointed EU elite (as we’ve documented here).

At least some of them now have the courage to admit it.

Should the EU spend money on culture?

There has been some confusion surrounding a story in Monday's Telegraph. The headline, which reads "EU's secret £400m for 'crazy' projects", confuses two separate types of EU spending.

The 'secret £400m' relates to spending recorded on the Commission's EU funds database that is marked as "confidential". A budget line (e.g. humanitarian aid or justice and home affairs) and recipient country is provided but there are no details on how the money was spent or which organisation(s) spent it. Between 2007 and 2009 there were 727 such 'confidential' grants. The website merely states that "In certain cases, some parts of the information displayed on a particular grant or contract may be masked, e.g. for security reasons," which is pretty vague when it comes to £400m of taxpayers' money!

However, this should not be confused with the various culture projects cited in the article, which are not 'confidential' but funded through the EU's culture programme that supports a range of projects of arguably differing value (some good, some irrelevant and far too many outright wasteful). What counts as a worthy project will always involve a degree of subjective judgement - and we appreciate that the people involved in a project in most cases genuinely feel that their individual project adds value. However, at a time when virtually every European government is tightening its belt, the EU continues to propose budget increases and award projects which cannot possibly qualify as good value for taxpayers' money (which is both the fault of the Commission and member states). This is simply unacceptable.

EU spending on cultural projects is particularly interesting in this regard. Public money on culture is always controversial precisely because of the subjectivity involved. It's also interesting because it illustrates the crucial, real-life trade-off: spending £160,000 on a 'flying gorillas' dance troupe is all very well, but if taxpayers are faced with a choice between having their money spent on flying gorillas or a few extra nurses - we suspect most of them would prefer the latter. In an economic downturn, with Europe smack in the middle of a sovereign debt crisis, this is the trade-off we're facing.

And even leaving this aside, should the EU really be involved in culture in the first place or is this better handled nationally, regionally or locally? Here there's also a democracy problem: involving the EU moves accountability for these controversial spending decisions a step further from citizens and there is no one to punish at the ballot box if taxpayers feel their money is being spent inappropriately. This, in turn, breeds contempt and the type of sentiments that the Commission professes it wants to work against through its various cultural and communication programmes.

However, what should be said is that when it comes to the cultural programme, the Commission is commendably transparent about where and by whom the money is spent (the UK also has its own system which you can search) - which is not always the case for the rest of the EU budget. So to clear this up, these projects were not funded via a 'secretive' EU fund and the details of the funding can be accessed publicly online.

News just in

Home Secretary Theresa May has just announced to the House of Commons that the UK has decided to opt in to negotiations on the European Investigation Order (EIO). It will give foreign police forces the right to request UK police to seek and share evidence on suspects. This clearly poses fundamental questions about safeguards for civil liberties and the new pressures it will place on police resources.

Let us first give May some credit for giving a statement in person and allowing questions to be put to her rather than issuing a mere written statement (She has done good work on parliamentary scrutiny of EU issues in the past). However, it should also be said that MPs have not previously had the chance to scrutinise the proposal either in the European Scrutiny Committee or in the House.

The truth is that, although May did her best to push the 'nothing to see here line', the Government cannot guarantee how the final directive will look until after negotiations with other member states and MEPs in the European Parliament, which under the Lisbon Treaty now have powers to co-decide in justice and home affairs.

May said that signing up to the directive did not present a loss of sovereignty. But John Redwood made the valid and important point that if the UK doesn't have the ability (which it doesn't) to opt out of the European Investigation Order if it ends up as something "different to what was advertised" after negotiations then this must imply a loss of sovereignty.

The Home Secretary admitted today that there are aspects of the current proposal the Government does not like. This will now be decided by qualified majority voting, meaning the UK is powerless to veto the EIO either if these unwanted elements are retained or if new and unforeseen amendments are added along the way.

This is not to mention the fact that, as a result of Lisbon, the European Court of Justice will have the power to make rulings on how the EIO is interpreted in the UK.

Given this Government's pledges to protect civil liberties and reduce bureaucracy in public services, such as the police, this is surely too big a gamble to take.

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Who's an extremist?

Good blog post we've just noticed from Ed West on the Telegraph website here.

He takes issue with former Labour Europe Minister Denis MacShane, who described Nigel Farage, leader of the UKIP MEPs in the European Parliament, as "extremist" on Twitter, when mentioning that he was to be on last night's Question Time.

Please read it, but for those without time - this is a rather choice observation by West:

"So which side are the extremists?...[the] Wikipedia definition puts it: 'In democratic societies, individuals or groups that advocate the replacement of democracy with a authoritarian regime are usually branded extremists, in authoritarian societies the opposite applies.' If opposing this new empire in Europe makes one an extremist, then count me in."

If it wasn't for me

We have just come across this rather amusing snippet from Labour leadership contender Ed Balls who, we learn via the Today programme, single-handedly prevented Britain from joining the euro in the latter part of the last decade (and the first part of this decade)

Ed Balls has previous on this - but has never been quite so bare faced in his determination to claim ALL the credit for the decision not to join the Euro:

“On the Euro, I think most people would say, if it hadn’t been for me, we may well have joined the single currency”

Where the problem comes is with the notion that the Labour Government would have been able to 'sow up' Britain's entry into the euro but for Balls' intervention. Additionally - it is a revealing portrait of how voters were treated on all things EU under the previous Government. What about the small matter of the referendum that would have been required? Does Balls not think the public might have had a rather more important say in the matter?

How to deal with the imbalances

We have looked before at the interesting report from ING on how much a eurozone break-up would cost, arguing that any such estimate must be weighed against the medium to long-term alternatives (i.e. wealth transfers between member states and permanent losses of competiveness) of keeping the eurozone intact, questions which the ING note leaves unanswered.

However, a study by Capital Economics has now looked at just that, predicting that the break-up of the eurozone would be beneficial for both weaker and stronger members, because it would bring about the necessary rebalancing of the region's economy.

Apart from some assertions which are now generally accepted, for example that the so-called PIIGS countries have lost competitiveness, it makes a couple of other interesting observations that are worth flagging up here:

• The report shows that large divergences in competitiveness emerged during the life of the eurozone not just between Germany and the PIIGS, but also between Germany and some of the countries comprising the so-called ‘northern bloc’ within the eurozone. While Germany's real effective exchange rate (REER) continued to fall, now standing at around 95 (according to a standard they use, which puts the year 2000 at 100), France’s REER has risen by 10% over the period, its competitive position therefore deteriorating by about 15% in relation to Germany. The authors note that this is a significant enough shift, but other countries have fared much worse, with Belgium’s REER rising by about 12% and the Netherlands’ by 18%, putting both countries at a substantial disadvantage against Germany. A similar development can be seen in unit labour costs (ULCs), with Germany’s ULCs now standing about 5% above their level in 2000, while France’s, Belgium’s and the Netherlands’ are all up over 20% since the euro was launched. The conclusion of the report is therefore that the so-called ‘northern bloc’ might do much better through the departure of Germany – rather than that of the PIIGS.

• The report also claims that Germany and the northern bloc “should cut taxes and increase public spending so as to boost demand within the zone at the same time as the deficit countries are making the opposite correction.” This is, however, a disputed argument, as the report acknowledges.

It should be noted that not everybody agrees that Germany's increase in competiveness and the imbalances within the Eurozone are simply caused by the Euro. ECIPE Director Fredrik Erixon argues that "the Eurozone has not given the sort of boost to German exports that many people, including Commission chief Barroso, is now suggesting". He argues that this view fails on two accounts, pointing to how German growth boomed along with a nominal strengthening of the Euro, and suggesting that Germany really increased its trade through political reforms that managed to bring labour costs down (and more competitive).

The following two assertions of how monetary union has caused imbalances in competitiveness are however rarely disputed:

- ill-suited eurozone interest rates have led to booms and busts in fast growing economies (Ireland, Spain, ...) which didn't follow the (slow) growth path of Germany and its neighbours.

- the absence of monetary pressure has prevented other countries from conducting structural reforms to keep up with Germany. As EU President Herman Van Rompuy (who was also the architect of Belgium's euro sign-up) correctly explained in his 2007 book, “In search of wisdom”:

“The monetary pressure in Belgium has fallen away with the disappearance of the Belgian franc. This because the euro is standing far away from us and is, moreover, very strong in recent years. The absence of that external pressure makes it extra difficult for the government to act. Without those sticks behind the door, society easily sinks away in reform fatigue.”

He recently also described the euro as “a sleeping pill”.

These insights should lead us to question whether the measures currently being contemplated by EU leaders to save the Euro (more budgetary supervision among other things) will be enough to deal with those root causes of economic imbalances. One alternative may be large fiscal transfers, but what we can be sure about is that voters (the ones who will actually be paying for the fiscal transfers) do not want them. The other more radical alternative, as the Capital Economics report suggests, might be an orderly break-up of the euro into smaller and more sustainable currencies.

Home truths

A great report on EUobserver today features some very revealing comments by a, disappointingly, anonymous EU official about the "mushrooming" cost of the EU institutions, and their total disengagement from the debates going on across Europe about the need to cut government budgets, and improve value for money for EU taxpayers.

The official said:

"Austerity measures at the moment have yet to really set in, but in the autumn, this is going to be tangible, with salary and social benefit reductions, pension cuts. People will begin to feel it, and people will look at us and say: 'How is it that they are immune, they keep growing when we are having to cut back?' The number one issue should be to stop the mushrooming of the institutions. We don't need new institutions. There is a tendency to think every time there is a new problem, the EU can solve it with a new institution."

This sage official then goes on to promote another extremely sensible idea, one with which we have concurred before:

"We should also shut down the Economic and Social Committee and Committee of the Regions. These institutions were born when the parliament had no power, was not a factor. Now this is a duplication. There is no real need for these bodies."

He certainly gets our vote on that. It is a shame that the identity of this official is not shared, although he would certainly shoot any chance of career advancement in the foot with his outspoken comments which confirm many of the gripes people have with the EU institutions. Nonetheless, a few home truths such as these delivered to his colleagues might go a long way.

It also comes amid what is shaping up to be a fierce battle over the EU's 2011 budget. The Commission wants an increase of 6%, compared to the 2010 budget, while national ambassadors want to limit that to 2.8%, which one MEP branded 'offensive', and member states potentially want to push for actual cuts to the budget, i.e. the 2011 budget to be less than the 2010 budget.

A scandalous prospect to be sure, but regardless, let’s hope this wave of realism penetrates the mindset of a few more European politicians. After all, is it really so outrageous to suggest that there is more than a sliver of fat that could afford to be trimmed from the EU budget, or that employees of the European institutions cannot expect continuous rises to their salary and benefits while their compatriots working in member states hunker down for pay freezes and renegotiations of their benefits package?

Under the influence?

The public affairs firm Waggener Edstrom issued their first ever study of the influence of EU affairs blogs yesterday, ranking the Open Europe blog 7th overall.

Here is the top ten:
BBC | Gavin Hewitt’s Europe
FT Brussels Blog
The Digger
Fistful of Euros
Jon Worth / Euroblog
Stanley’s Blog
Open Europe blog
Julien Frisch | Watching Europe
ECJ Blog
Neelie Kroes

The full study is available here:
http://www.openeurope.org.uk/docs/Waggeneredstromindex.pdf

We attended the launch yesterday and the discussion sought to compare the EU blogging culture with the vibrancy of political blogging in the US.

Unsurprisingly, everyone concluded that it is nowhere near as advanced and there was also much lament that the 'tone' of debate was rather tame in comparison. But more interesting was some people's assumptions rather than their analysis.

The complexity of the various institutions and the fact that there tends to be more interest in national personalities were cited as temporary obstacles to a more US-style cut-throat "democratic debate" or clash of ideas, which could be overcome with time. Someone suggested that blogging could provide the glue to create the "dream of a European public space" for political debate.

It was hard not to leave the room feeling that a rather fundamental point had been missed but it was also a striking reminder of how (some of) the people who have been in Brussels a little too long have cut themselves off from the outside world.

The "politics of EU integration" (more or less Europe) is an entirely different species to "EU politics" (how the EU policymaking machine works). Understandably, Waggener Edstrom, a public affairs firm, is only really interested in the latter because its business is to serve clients who are seeking to influence the outcome of EU policy, and this means targeting MEPs or the people drafting legislation in the Commission, for example.

The impression was that most people in the room either live in denial that there is a distinction or are simply too caught up in the 'Brussels bubble' to recognise there is a debate about the former.

The real 'clash of ideas' is to be found in the debate about the future path of EU integration (Should the euro crisis be used to further greater political and economic integration? Should EU taxpayers be bailing out other member states? etc). If the Brussels elite really want a democratic debate it should surely start by engaging with these rather more fundamental questions.

Financial supervision: a gamble or a victory?

An article in yesterday’s Telegraph celebrated the ‘victory’ of George Osborne, who, it claimed, secured an agreement at yesterday’s ECOFIN meeting that one of the new pan-European financial regulators – the European Banking Authority (EBA) – will have its seat in London. The European Parliament has demanded that all three of the new supervisors be based in Frankfurt, and working under the auspices of a 'quasi-umbrella' organisation.

But is this really a victory? There was absolutely no way that member states were going to accept the EP's proposal to make Frankfurt the sole supervisory centre - it is politically impossible and MEPs know that. Remember, Germany already has the most important financial institution of them all, the ECB, and there's at least one francophone President who has no intention of allowing another key-institution be handed over to the Germans.

That is presumably why the French press also left aside the geography of the proposal, and focussed on the vital aspect: how much power that will be transferred from member states to these new authorities. Reuters France notes that,

the UK, under the pressure of its peers and of the European Parliament, has notably accepted the principle that the new European Supervisory Authorities for banks, markets and insurances will be able to address a financial institution directly – bypassing national supervisors – in emergency situations.

This is potentially huge as it will for the first time - via the EBA, ESMA and EIOPA (the three supervisors in question) - give the EU direct supervisory powers, with their decisions taking precedence over those of national supervisors. We knew that this would be the case for Credit Rating Agencies' EU operations (which kind of makes sense), but the UK now seems to have lost the plot on extending the scope beyond CRAs.

To be fair to Osborne, he's fighting the legacy of the previous UK government and his leverage is highly limited as this will all be decided by Qualified Majority.

As a 'concession' EU finance ministers agreed that the Council (rather than the Commission, as the Commission wants, or the new EU Systemic Risk Board, which the EP insists on) will determine when an “emergency situation” occurs. But this was always the Council's position. And as was made very clear at a debate Open Europe organised on the topic on Monday - there are few safeguards in place against this mechanism being misused or hijacked by political/ideological interests in the future. Crucially, the decision on whether to call an "emergency" will be taken by simple majority, meaning that the UK has exactly the same voting strength as everyone else (despite being home to the bulk of Europe's financial sector).

The potential pitfall ought to be obvious. Only a couple of months ago EU leaders used a clause in the Treaties (Article 122), designed for natural disasters and "exceptional occurrences beyond [member states']control" to make taxpayers in one country liable for the mistakes of a government in a different country, in a decision which involved majority vote (when it should have been unanimity), and which took the EU a huge step closer to a common bond (and fiscal federalism). Using Article 122 in this way was absolutely inconceivable when the Lisbon Treaty was discussed and ratified, particularly as the Treaties clearly and unequivocally prohibit bailouts (see here and here to get a feel for just how arbitrarily EU leaders used Article 122).

Give EU leaders "emergency powers" and they could well use them to justify the most dramatic and previously unthinkable measures. The recent ban on short-selling in Germany also ought to give an indication of how such measures stand the risk of being driven by politics rather than economic reality or long-term thinking.

There could be cases where strong and decisive action at the EU-level could be beneficial, but think about this: what exactly would the new EU supervisors have prevented in the financial crisis - given that the causes of the crisis were inherently global; a credit bubble in the US, global trade imbalances and so forth.

The new EU bodies will also be in charge of drawing up a 'single rule book' in the EU's financial services market and implementing uniform technical standards across Europe, overriding national authorities. This could actually benefit the City of London by ensuring the consistent implementation of directives and standards across the bloc, i.e. uniform application of UCITS IV so that fund managers can market their funds in all member states without additional barriers.

However, here there are also possible pitfalls. All of this assumes that the UK will actually write the single rulebook - which is a heroic assumption indeed (think the AIFM Directive). And as William Underhill, Chairman of the City of London Law Society's Company Law Committee, pointed out at Open Europe's debate:

What are the boundaries of the single EU rulebook that lies behind a lot of this new architecture?...The assumption is that the single rulebook in all circumstances justifies the change, whereas I think we still need to look at each specific proposal, each technical standard that comes forward needs to be justified against more subsidiarity principles.

In other words, the risk is that the EU, incrementally and over time, resorts to more interventions, in the name of a single rulebook.

So there are possible benefits, but it could also go in the completely opposite direction. A leader in today's Wall Street Journal describes the potential consequences:

One need not be conspiracy-minded or euroskeptic to see that more harmonization of regulation and supervision means less room for the U.K. to outcompete its rivals on the Continent. The transfer of power to the EU being negotiated this week in Brussels will, of necessity even if not by design, erode the U.K.'s competitive advantages in the financial sphere.

So this amounts to a pretty serious gamble. After all, the EU needs more safeguards against arbitrary government, not fewer.

We are where we are

The phrase "we are where we are" was oft repeated in this evening’s debate in the House of Commons – but sadly for many MPs it seems that ‘where we are’ was anywhere other than the Green benches judging by the numbers in attendance.

While a Hansard transcript is not yet available to link to for those interested in the debate – there are a few worthwhile interventions to take note of.

NB: This was a debate to approve a motion on the EU’s External Action Service – allowing the Government to give its official approval to the launch of the EEAS at the next meeting of EU leaders.

David Lidington made clear that EU Foreign Minister Cathy Ashton and the EEAS may only represent an EU common position where it has been agreed by unanimity among member states ahead of time. Of course while that may work in practice, EU embassies will likely be offering positions before they become official in an informal manner in third countries.

The Europe Minister also said (in what we suspect is a dig at the European Parliament over their refusal to agree to the EEAS blueprint before they got everything they wanted) that those who argued that Lisbon would be an end to the institutional turf wars “were plainly wrong”. He also said that member states had resisted the proposals of the EP that it be able to hold official ‘confirmation’ hearings of the heads of EU delegations, and to bring the entire service under the control of the Commission (and by extension the European Parliament).

Mr Lidington also said that the Government accepted that, despite promises of budget neutrality for the service, the start-up costs and the burden of bringing over national secondees to Brussels would require start-up funding – of which he estimated the UK’s share would be approx £1.1 million (before any reduction for the rebate).

Interestingly, former Europe Minister Chris Bryant suggested that it was “optimistic” to believe that only £1.1mn additional funding would be needed (we share his opinion on this) and that there may be pressures from other member states further down the line for the EU to shoulder some of the cost burden of foreign representation.

Mr Bryant also said that there was no assurance in the agreement that no additional money could be requested in order for the EEAS to provide consular services – something which the UK and other countries are opposed to anyway.

And finally Richard Ottaway, new Chair of the Foreign Affairs Committee in Parliament, said that he thought the increased role for the new EU delegations – the fact that they represent the EU as a whole rather than the Commission – was potentially “one of the most significant changes” introduced under the Lisbon Treaty.

Update: The results of the division were 321 in favour of the motion, 12 against. Parliament stamps its approval on the EEAS.