'Grillage People' no more: European Parliament group of Farage and Grillo collapses

Nigel Farage and Beppe Grillo (the 'Grillage People', as @Berlaymonster brilliantly renamed the duo) have just lost their group in the European Parliament.

Latvian MEP Iveta Grigule left #EFDD group today. #EFDD no longer has members from at least 7 countries, so declared dissolved today. #EP
— Jaume Duch (@jduch) October 16, 2014

The Europe of Freedom and Direct Democracy (EFDD) group has collapsed following the departure of Latvian MEP Iveta Grigule, of the Latvian Farmers' Union. We don't know yet what pushed Grigule to leave. Sources from the EFDD group are already circulating their version of what happened:

EFDD sources say Latvian MEP was 'bribed' by @MartinSchulz and @EPPGroup to leave @Nigel_Farage group
— Bruno Waterfield (@BrunoBrussels) October 16, 2014

However, what we know is that Grigule's decision means UKIP, the Five-Star Movement and the other parties that had joined the group will lose a few millions of EU funding. According to our estimates, the EFDD group could have claimed around €3.8 million a year (see here for more details).

As we noted in our previous blog posts, it was not obvious that Farage's group would see through the whole five-year term in the European Parliament - not least because of the differences between UKIP and the Five-Star Movement, the two biggest factions in the group. Still, today's announcement has come a bit out of the blue.

In any case, given UKIP's growing momentum in domestic politics (victorious in the Clacton by-election and riding high in the latest opinion polls), we doubt Farage will be crying into his pint over losing his group in the European Parliament.

It's hard to predict what will happen next. For the moment, MEPs from the dissolved EFDD group will sit as non-attached members - the same status as Marine Le Pen's Front National, Lega Nord and Geert Wilders's Freedom Party, who failed to form their own group during the summer.

Will they all start discussing a possible cooperation? Will any of the (former) EFDD parties look to join forces with Le Pen, allowing her to form a new group? Or will Farage manage to quickly find a substitute for Grigule and re-establish the EFDD group? Time will tell.

Seven reasons we love Slovenia's new Commissioner nominee Violeta Bulc

The first (and only) causality of the European Parliament hearings for Jean-Claude Juncker's new Commission so far, is Slovenia's Alenka Bratusek, who withdrew her candidacy for the post of Vice-President for Energy Union after a being effectively vetoed by MEPs.

She's been replaced by Violeta Bulc, Slovenia's Development Minister, who will face the music next Monday, when MEPs grill her on her suitability for the Transport portfolio (the Energy Union job will go to Slovakia's Maros Sefcovic).

But who is Violeta Bulc? Quite a colourful personality, if the internet is anything to go by. Europe is so often accused of being run by boring bureaucrats, even being accused of being as charismatic as "damp rags." Bulc is anything but. So we've picked out Bulc's best bits, mostly from her CV online for you to savour below.

1. Interesting ideas about energy generation:  "Natural environmental heat can transformed directly into electrical energy," says Bulc. A shame that she most likely won't have the Energy Union brief really as it could have made for an interesting discussion during her EP hearing.

2. She believes in 'Syntrophy' - which is apparently something to do with 'the creative power of nature.' And here's what she had to say about discovering it. (Note the CAPS.)

At various levels and in various dimensions, and every once in a while, something triggers excitement in each and every one of our cells. Love. Surprise. Achievement of a goal. A realisation along the way. A thought. Hope. Birth.

I felt this type of excitement when I was introduced to SYNTROPY. I can hardly express emotions that were flooding me while I was traveling through complex formulas that were mostly incomprehensible to me, yet so familiar that I felt as if they were a part of my life all along.

3.  Positive values: Her business, Vibacom, is run on the values of "the power of positive energy and pure thoughts." This "creates the conditions for prosperity and thrivability." Well, the EU could definitely do with an injection of positive energy...

4. Serious sporting prowess: Not only does she have a black belt in Tae Kwan Do, but she was also a professional basketball player in Yugoslavia, and won athletic championships in javelin. Eat your heart out Vladimir Putin.

5. She blogs: Violeta's blog is well worth a peruse. Here's a post from last month called, "The vibrations of the White Lions in the new Era."

6. She is a qualified Shaman and firewalker: She has a certificate from the Shamanic Academy in Scotland. No explanation offered - and is one needed? She has also received a certificate for "firewalk" and "breathwork" instructor at the recognised school of transpersonal education, Sundoor. Should come in handy during her grilling by MEPs...

7. She's got charisma: In 2010, she won the "Sunny Personality of the Year" prize. We're sure that a sunny disposition will help Bulc in Brussels which is hardly regarded as being among the most uplifting cities in Europe.

While we concede she may be a little out there, she certainly has the potential to shake up the dreary and self-regarding Brussels bubble.

The Stoiber report: a milestone in the fight against EU red tape?

Edmund Stoiber presents his report

Today saw the publication of the final report of the "High Level Group on Administrative Burdens", i.e. an EU taskforce charged with cutting red tape and easing its impact on businesses. The group - chaired by former CSU leader and state Premier of Bavaria, Edmund Stoiber, was put together back in 2007, so its final report has been a long time coming.

As we have been going on about the costs of EU regulation long before it became fashionable - compiling the first ever overall cost figure for EU regulation based on UK government impact assessments in 2009 - this has been a report we have been eagerly anticipating.

The report contains a number of recommendations, some at the EU level and some at the national level. The key EU level recommendations include:

• Adopting a new EU Action programme and strengthening existing EU programmes for reducing overall regulatory costs such as REFIT, as well as setting a net target for reducing regulatory costs and publishing annual statements of the total net cost or benefit of new legislative proposals,
• Setting a net target for reducing EU regulatory costs,
• Introducing a system of offsetting new burdens on businesses stemming from EU legislation by removing existing burdens from elsewhere in the acquis,
• Rigorously applying the “Think Small First” principle and competitiveness test to all proposals, with SMEs and micro-businesses be exempted from EU obligations as far as possible,
• Developing a common EU methodology to measure regulatory costs and benefits and making the evaluation of all EU legislation compulsory on the basis of this in order to measure actual outcomes against original objectives before any proposals for revision or new legislation are made,
• Declaring a political commitment to focus only on those interventions which are indispensable at the EU level and which add the greatest value compared with national or regional action,
• Empowering an independent body to scrutinise the Commission´s impact assessments before the legislative proposal is adopted by the Commission and to assess the evidence base and costs and benefits supporting legislative amendments by the European Parliament and Council before the legislation is adopted.

The report estimates that were all these to be adopted, businesses in the EU could save up to €41bn per year on top of proposals already adopted by the Commission and European Parliament with an "annual reduction potential" of €33.4bn.

Overall, the recommendations are very welcome and reflect many of the proposals that we have been championing for some time - for example, we first proposed an independent impact assessment board with "real teeth" back in 2009. The report also overlaps with David Cameron's business taskforce report published last year, albeit the Stoiber report does not explicitly call for the adoption of a 'one in, one out' principle when it comes to new regulation. Also, the report does not address big questions like the extent to which the EU should be involved in social and employment policy and the impact of the European Court of Justice in increasing the costs of EU regulation via the back-door as has happened most notably in the case of the Working Time Directive (which the report does not mention). 

Nonetheless the report - together with the nomination of Frans Timmermans as Commissioner for better regulation in a generally reform-orientated Commission - is indicative of a cultural shift within the Commission away from regulation as a process in of itself towards securing concrete outcomes and addressing business concerns. It is certainly, among other things, a nod to concerns raised around the EU and the UK in particular about the EU's tendency to over-regulate and impose excessive costs on businesses and consumers. 

In fact yesterday's Guardian reported that Stoiber explicitly referenced the need to keep the UK on board, and in presenting the report he argued - as passionately as it is possible to when discussing EU regulation - in favour of an EU that is less obtrusive, heavy-handed and opaque. He also admitted that in the past, many politicians and EU officials had seen any EU-level regulation - regardless of its desirability or suitability - as a means to advance the 'EU cause', but that such thinking was now history (although we would say it hasn't completely gone away).  

Overall, it is clear there is a real opportunity to create a more enterprise and business-friendly single market. However, as ever with EU reform the challenge for the new Commission and for national governments will be to translate the rhetoric into concrete action. The fact that the Commission President Barroso has seemingly rejected one of the proposals already - for an independent impact assessment board is concerning.

.@BarrosoEU doesn't support idea of independent body to control impact assessments. "Commission is sufficiently independent & strong."
— Jarno Hartikainen (@JarnoHa) October 14, 2014

This suggests the Commission is nervous about independent scrutiny of its cost estimates for new EU regulation. An independent IA board would be better at catching out harmful proposals - such as the infamous olive oil jug ban - and delivering more measured verdicts on politically contentious issies such as the proposed FTT, where major problems with the Commission’s proposal emerged after it had been tabled and undergone an internal impact assessment. The Commission's resistance suggests that despite much progress, there is still some way to go.

Catalan government calls off independence referendum, but it's not the end of the story

UPDATE (10:55am): 

Catalan President Artur Mas has just been speaking to the press. His remarks were broadly in line with the blog analysis we published earlier (see below).

Two key points from the presser:

• The planned independence referendum will not take place on 9 November. However, somewhat confusingly, Mas said "there will be polling stations and ballot papers" available to hold a "preliminary" vote on the same day. In other words, a purely symbolic, informal referendum (as opposed to the formal, non-binding one previously planned). It remains to be seen how this offer will go down with Catalan voters.

• As we expected, the Catalan leader said he is "at the disposal of the other [Catalan] parties" to call early regional elections. However, he suggested that these elections could only be credible as a proxy for a "definitive" referendum if all the pro-independence parties were to run "as a joint list and on a single programme". Therefore, Mas is clearly using the prospect of early elections to put pressure on the Spanish government, while at the same time trying to hedge his CiU party against the risk of being outflanked by the strongly pro-independence ERC (as we explained below) and taking a beating. 

Meanwhile, Spanish Prime Minister Mariano Rajoy has hailed the cancellation of the Catalan referendum as "excellent news" and reiterated that he's open to dialogue with the Catalan government.

ORIGINAL POST (9:15am):  

The Catalan government has called off the non-binding independence referendum planned for 9 November. It was really just a matter of time. Catalan President Artur Mas had repeatedly stressed that he wanted the consulta to be legal, so that the outcome of the independence vote could be recognised as valid in Spain and beyond. However, the Catalan law used by Mas to call the independence referendum has been temporarily suspended by the Spanish Constitutional Court after the Spanish government lodged a legal challenge against it. Hence, going ahead with the referendum would have meant breaching the law - something the Catalan leader wants to avoid.

Clearly, though, this is not the end of the story. Mas will reportedly set out an alternative 'participative process' (proceso participativo) in a press conference this morning - but his new proposal is unlikely to be welcomed by the other pro-independence parties.

As we noted in previous blog posts, the 'Catalan question' seems to have got to a point where the option of going back to business as usual is not on the table anymore. The decision to call off the 9 November referendum may have opened a window of opportunity for the Spanish and the Catalan governments to engage in real talks.

Spanish Prime Minister Mariano Rajoy may be tempted to shut the door and just ignore Catalan demands, especially after Mas has backed down. However, the Catalan leader still has an ace up his sleeve: he can put further pressure on Madrid by threatening to step down and call early regional elections. A snap vote in Catalonia would very likely see a victory for the hardcore pro-independence Catalan Republican Left (ERC).

The party leader, Oriol Junqueras, said of the decision to cancel the independence referendum yesterday:

"We will have to build up a parliamentary majority to issue a declaration of independence and begin the constituent process of the Catalan Republic".

With a Spanish general election due in November 2015, Rajoy would probably want to avoid having to deal with an ERC-led Catalan government and would therefore be more willing to listen. On the other hand, Mas would be taking a huge gamble himself by threatening to call early elections. The Catalan leader fought the 2012 electoral campaign on the pledge of an independence referendum that he has failed to deliver. Hence, his moderate nationalist Convergence and Union (CiU) party would face the risk of harsh punishment by disappointed pro-independence voters.

One thing is certain: the time of political posturing on either side is coming to an end. The sooner the Spanish and the Catalan government agree to sit at the negotiating table, the better.

Meet the new Belgian Finance Minister, an ally on EU reform

Good news for EU reform keeps coming from Belgium. After the publication of the new coalition agreement, which we've analysed here, it has today been announced that Johan Van Overtveldt will be the country's new Finance Minister. A former editor-in-chief of Belgian business magazine Trends, he was elected to the European Parliament in May with the New Flemish Alliance (N-VA) - Belgium's biggest political party and a member of the UK Conservatives' ECR group.

Van Overtveldt's pro-EU reform credentials are beyond doubt.

Last month, he said in an interview that he wanted "no political union" (see the headline in the picture), and added:

"We need a more social Europe, but first the monetary union should be anchored on a healthy basis. When national economies perform better economically, countries will start taking initiatives which go in a social direction anyway...A uniform European minimum wage, for example, is complete non-sense. It would at least need to differ for each country. A minimum wage is a sovereign competence of member states."

Furthermore, the new Belgian Finance Minister is a strong supporter of a 'capital markets union' - a key item on the agenda of the new EU Financial Services Commissioner, the UK's Lord Hill.

An expert in monetary economics (and a personal acquaintance of the late Nobel Prize winning economist Milton Friedman), Van Overtveldt also has an interesting take on the future of the Eurozone. In 2011, for instance, Open Europe hosted the launch of his book, 'The end of the Euro'. On that occasion, Van Overtveldt said he had "always been a doubter" of the sustainability of the single currency, and added:  

"The only solution for Greece is to leave the euro...in order to save itself and its democracy."

That said, Van Overtveldt has made clear that, despite his scepticism on whether the single currency may ultimately survive, he supports the efforts to keep the eurozone together. The new Belgian Finance Minister is in favour of "more economic powers for Europe", but opposes Eurobonds or fiscal transfers. This sounds very close to Germany's stance.

On banking union, Van Overtveldt wrote in April:

"The single resolution mechanism is too complex and takes too much time in order to be able to take action...The banking union as currently conceived leads to banks in weaker countries to do as much as they can to borrow from banks in stronger countries...Moral hazard is more than ever haunting the eurozone, like the Loch Ness monster."

Importantly, Van Overtveldt has also warned against a “big leap” towards fiscal union in the Eurozone, saying it would effectively create "two European Unions" - and, according to him, effectively lead to the end of the EU. Hence, we can expect the new Belgian Finance Minister to pay good attention to the concerns of the UK and other non-Eurozone countries when it comes to safeguarding the integrity of the single market.

Between The Rock and a hard place: Spain threatens to shut UK out of EU crime databases

The WSJ reports today that Spain is using its dispute with the UK over Gibraltar to hold up/block the UK's re-entry into a number of EU crime and policing laws. 

To recap, the UK has already decided to exercise its block opt-out of over 130 EU crime and policing laws and, at the time, it was announced that the Government would like to opt back into around 35 of them - but it can only do this after exercising the opt-out. The opt-out takes effect on the 1 December, so time is running out if the UK wants a seamless transition.

For the record, we have long urged the UK Government to use this opportunity to negotiate bi-lateral or intergovernmental cooperation outside the auspices of the ECJ, which these 'opt-ins' would fall under for the first time (i.e. they increase the power of the EU institutions over the 35 laws). Any fundamental rethink has seemingly been shelved for now (partly due to the constraints of Coalition) but Justice Minister Chris Grayling and Theresa May have indicated this will be part of a Tory renegotiation.

For the vast bulk of these 35 laws, including the controversial European Arrest Warrant (EAW), the European Commission is responsible for admitting the UK back into these arrangements and, in July, the UK reached agreement with the European Commission on re-entry. However, there are handful which require unanimous agreement from other national governments before the UK can re-enter. These mainly cover data-sharing arrangements related to the Schengen agreement, which are used to share data on wanted criminals, terrorists, etc, which the UK wants access to.

What does this mean? Well it's all getting extremely tight for time - the Government has promised a vote in Parliament on the 35 opt-ins, which is unlikely to be plain sailing by any means with many Conservative MPs opposed both in principle and on the detail of some these laws, the EAW in particular. The UK could conceivably opt back in to just those laws the Commission has agreed to, while negotiations on the remainder continue (Spain reportedly thinks the UK should opt back into a few more EU laws as part of the package). However, this would mean the UK had no access to security databases at a time when the threat of terrorism is high and, less importantly, only draw out a parliamentary process that is already likely to be uncomfortable for the Government.

In all likelihood a last-minute deal will be done, not least because other member states have all signed up to the agreement with the UK and are just as frustrated that Spain is using an unrelated bilateral dispute to potentially disrupt important EU cooperation on terrorism. Still, it looks like Spain is going to make this as uncomfortable as possible for the UK, and Conservative ministers will be under huge domestic pressure not to give into Spain's demands.

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.

Slovenia fights back - but maybe it's a few months too late?

Gone but not yet forgotten

The European Parliament and the political machines that dominate it were, according to many, not supposed to select the President of the European Commission - but they got their man. MEPs, led by Spitzenkandidaten Martin Schultz and Jean-Claude Juncker outplayed the member states through a clever use of ambiguous treaty wording and a political deal, which in turn was driven by pure German domestic politics.

Having installed Juncker as Commission President MEPs took the individual candidates, nominated by the member states, to task. According to the Treaties, the EP can accept or reject the entire Commission, but MEPs have turned this into de facto votes on individual Commissioners, with intra-EP politics meaning some nominees may be taken 'hostage'. Having called back the UK's Lord Hill for a second hearing - creating jitters in Downing Street - MEPs finally voted down Slovenian candidate Alenka Bratušek. She was today forced to resign - despite Juncker himself insisting on her candidacy. MEPs seemed to have made their point - it has voted down individual nominees in the past, and as we predicted, the EP was bound to claim a scalp. 

MEPs now seem to be pushing their luck further - attempting to tell the Slovenian Government who they should appoint as their new candidate, with both the EPP and S&D calling for the nomination to go to social-democrat MEP Tanja Fajon. Slovenia, however, is pushing back. The country's PM has issued a statement saying:

"The Slovenian Prime Minister expects political groups in the European Parliament to abide by EU law and the fundamental democratic principle in selecting candidates for commissioners" 

In other words, the Slovenians say, this is for their Government - not MEPs - to decide.

Will MEPs stand back? We will see. To be fair, Slovenia has a new government and we can't blame it for events over the least few months. But we can't help asking, isn't this exactly what member states were asking for when agreeing to the Spitzenkandidaten in the first place?

The UK's Lord Hill is approved as EU financial services Commissioner - What next?

The final discussions and votes in the European Parliament's committees over the nominees for the new European Commission are currently taking place with most of the results already in.

As expected, Lord Hill has been approved as new EU Commissioner for financial services by 42 to 16 votes. The vote was on his actual portfolio, meaning that despite some speculation, he wasn't stripped of any of the responsibilities (i.e. ones relating to the banking union).

What does this mean for the UK? 

As we argued here, the appointment of Lord Hill as EU Commissioner for financial services is a victory for the UK - but not a make-or-break issue in the wider context of David Cameron's EU renegotiation strategy. The key negotiations will remain between national governments. We would also caution against drawing too much from Lord Hill's comments in front of the European Parliament - as we noted, this is ultimately an exercise in telling the European Parliament what they wanted to hear and trying to please everyone. The key will be to judge Lord Hill on what he does and how he works with the likes of Frans Timmermans in trying to change the culture of the Commission. Clearly, however, it will be important for Hill to not forget to mind public opinion at home as, for better or worse, he will be seen as some sort of a bellwether for the UK's approach.

What are the other verdicts of the day?

As for the other nominees, Finland's Jyrki Katainen was approved for his role as Vice-President for Jobs, Growth, Investment and Competitiveness by 98 to 52. A surprisingly close vote, possibly reflecting a weaker than expected performance in the hearings from someone of whom many had high expectations but also the fact that he failed to convince the left that he is no longer an arch proponent of the austerity approach.

In spite of all the controversies about his ties to the oil industry and his declaration of financial interests, Spain's candidate Miguel Arias Cañete has been approved as Energy Commissioner by 77 to 48 votes, but may face supervision by Commission Vice-President Frans Timmermans.

France's Pierre Moscovici also got the green light from MEPs as new Commissioner for Economic and Financial Affairs, Taxation and Customs Union by 31 to 15 votes. There may be some less than enthusiastic reactions in the German media tomorrow, so keep an eye out for our daily press summary. 

As expected, MEPs have rejected Slovenia's Alenka Bratušek by an overwhelming 112 to 13 votes. Bratušek had been proposed as Vice-President for Energy Union, but has been judged 'not fit' to be a Commissioner, meaning that she will have to be replaced.

The vote on Valdis Dombrovskis will take place later tonight, but he's also expected to go through.

Therefore, Bratušek is the only real 'victim' of the hearings. In addition, MEPs have also demanded that the Hungarian nominee, Tibor Navracsics, be given a different portfolio. Navracsics had been proposed as Commissioner for Education, Culture, Youth and Citizenship.

What happens next?

• The priority will be to find a substitute for Bratušek. At the moment, it's unclear who will replace her, and how long the process will take. Slovenia had put forward four nominees. The list of names included another woman, centre-left MEP Tanja Fajon. However, Fajon may not be seen as senior enough for a vice-presidency. Furthermore, she comes from a different political group (the European Socialists and Democrats, S&D). Bratušek belongs to the liberal ALDE group, which is likely to demand that she be replaced with someone from the same political family. Over the past hour, the name of Violeta Bulc, currently serving as Slovenia's Deputy Prime Minister, has also emerged as a possible candidate to replace Bratušek.

• Once Slovenia puts forward a new candidate, and provided that he/she gets the go-ahead from the European Parliament, there are broadly three possible scenarios:   

1) Timmermans becomes Cañete's supervisor: It has been reported that Frans Timmermans could, in addition to his current portfolio, also become responsible for 'sustainable development'. This means he would de facto supervise Cañete, and would also probably involve scrapping the post of Vice-President for Energy Union - meaning that the new Slovenian nominee would be handed a 'lighter' portfolio. As per Navracsics, he could perhaps keep the Education portfolio while being stripped of the Culture and Citizenship briefs.

2) Mini-reshuffle: Some reports have also suggested that Slovakia’s Maroš Šefčovič could become the Vice-President for Energy Union. Navracsics would become Commissioner for Transport and Space, and the new Slovenian nominee would get the Education portfolio. An alternative could be to make Austria’s Johannes Hahn the Vice-President for Energy Union, with Navracsics becoming Enlargement Commissioner and the new Slovenian nominee again taking the Education portfolio.

3) Tweaking portfolios: Another solution would be to give Navracsics, as in the first scenario, a ‘downgraded’ portfolio (i.e. without the Culture and Citizenship briefs), and keeping the new Slovenian nominee as Vice-President for Energy Union. However, the concerns over the seniority of the person and the ability to provide oversight of Cañete would remain significant.

• The European Parliament's final vote on the whole Commission is scheduled for 22 October. It may be pushed back if finding a substitute for Bratušek takes too long, but that looks unlikely.

• The new Commission will enter office on 1 November.

Things are progressing in a broadly positive way for the UK and the wider EU reform agenda. However, whether the Commission will in the end deliver reform - and whether it can function well internally given the new structure - very much remains to be seen.

Hill likely to be approved but Bratusek down as Juncker Commission edges closer

Hill's hearing was less of a duel than expected

Following another long day of hearings the make-up of the Juncker Commission is becoming clearer.

The UK’s Commissioner-designate Lord Hill had his second hearing in front of the Economic and Monetary Affairs Committee today and by almost all accounts performed well. While he was at ease and fluid as in his first appearance, he was importantly much clearer and more specific on the details of what he would like to achieve (for example on capital markets and banking union). This, combined with his extensive written answers, means that there is no grounding for rejecting Hill on content.

There were, of course, those who questioned his impartiality and independence but as we pointed out here, these complaints seemed to have little to do with Hill himself (who has few direct connections to the City left) and more with the fact he was from the UK. As liberal MEP Sylvie Goulard said:

“He took the exercise very seriously…We think it is unfair just to reject him because of his passport.”

Furthermore, compared to other Commissioners (Spain’s Miguel Arias Cañete springs to mind) Hill has far less recent and direct contact with his industry in question. His approval is now widely expected tomorrow.

Equally Cañete looks set to survive following a significant amount of political wrangling with the centre-right EPP sticking to its guns to ensure that the centre-left S&D does not try to block him – mostly by threatening to hold up the approval of France’s Pierre Moscovici, who incidentally also looks set to be confirmed.

As we always said though, things are looking less rosy for Slovenia’s Alenka Bratusek, who struggled on content during her appearance and also faces accusations of corruption over her nomination process. In fact it seems as part of the cross-party deal, she is likely to be rejected, meaning a new representative will need to be found for the post of Vice President for Energy Union.

Finding a new nominee for this position will be tricky not least because Bratusek is an experienced politician from a newer member state and contributed to the much debated gender balance of the new Commission. One option would be for Slovenian to put forward another one of its four nominees such as Tanja Fajon MEP, although she is unlikely to be considered high profile enough for the VP slot, meaning some reshuffling will still be needed (the FT has a plausible option here).

The other hearings from today went more or less as expected with the Netherlands Frans Timmermans particularly impressing, while Finland’s Jyrki Katainen produced a solid display in an area he has extensive experience in.

With Czech Vera Jourova now confirmed after being held up, the main wrangling will be over where to put Hungary’s Tibor Navracsics and who will fill Bratusek’s role. Much of this is expected to be decided tomorrow although with no firm timeline. One final issue which remains to be resolved is the exact split of powers between Commissioners and how the VPs will work with the standard Commissioners. Jean-Claude Juncker may have to provide further detail to the EP on this before he gets the final OK.

However, in the end, after pushing its luck earlier on the European Parliament now seems to have regained its control and sense of perspective.

Timmermans comes out fighting for EU Reform

Vice-President Commissioner Designate for Better Regulation Frans Timmerman's hearing at the European Parliament Conference of Presidents has just wrapped up, and the man who we've hailed as a  thought leader for EU Reform came out pushing many of the reforms we have long been arguing for

Seamlessly switching between five languages, he had some rather important things to say.

On regulation, he said that the EU needs a fundamental 'culture change' in the way in which it regulates to adopt a more "common sense" approach. Impact Assessments will have to be overhauled, and existing legislation needs to be assessed for its effectiveness. Regulations that doesn't make sense should be scrapped, so that business can feel an "immediate relief".

#Timmermans: Commission's impact assessment board has to be composed of ppl who can act w/out vested interests #EPhearings2014
— Open Europe (@OpenEurope) October 7, 2014

#Timmermans: What I am proposing is to change culture of the way in which we regulate in a more common sense manner (cites oil-jug gate)
— Open Europe (@OpenEurope) October 7, 2014

#Timmermans: I will present a better regulation review proposing regulations that shld be withdrawn within a year #EPhearings2014
— Open Europe (@OpenEurope) October 7, 2014

Consistent with his - and the Dutch government's - motto "National where possible, European where necessary," Timmermans had some strong things to say on respecting national parliaments:

#Timmermans: "This European Union will not be built against the will of the national parliaments nor the member states." MEPs need to engage
— Open Europe (@OpenEurope) October 7, 2014

#Timmermans: My principle of subsidiarity is you'll only take action on higher level if that's only way to achieve goals you want to attain.
— Open Europe (@OpenEurope) October 7, 2014

#Timmermans: If confirmed I will take debates directly to national parliaments #EPhearings2014
— Open Europe (@OpenEurope) October 7, 2014

On the need for more transparency and scrutiny, Timmermans said there will be increased scrutiny on behind the scenes deal-making and lobbying.

#Timmermans, we will make sure that there is a Mandatory transparency lobby list - currently only voluntary. #EPhearings2014
— Open Europe (@OpenEurope) October 7, 2014

On the institutional divide between euro-ins and euro outs:

#Timmermans reiterates that he does not support separate institutions for the #eurozone #EPhearings2014
— Open Europe (@OpenEurope) October 7, 2014

There was some stuff that may not go down as well in No 10, such as Timmerman's insistence on the importance of the European Convention of Human Rights (see here), and his description of the European Arrest Warrant as a "great success."

#Timmermans defends European Arrest Warrant, "a great success". We desperately need EAW. #EPhearings2014
— Open Europe (@OpenEurope) October 7, 2014

#Timmermans agrees that UK objections to application of #ECHR justified, but that opting out EU court rulings sets dangerous precedent.
— Open Europe (@OpenEurope) October 7, 2014

All in all, this was a strong performance that has already received good reviews on twitter and beyond. The response of the EP will be interesting to gauge and may give an indication as to how hard he will find it to push through some of these reform efforts in the coming years.

Showdown between France and Commission set to test EU’s budget rules

It has been widely reported over the weekend that the European Commission (EC) is seriously considering rejecting France’s new budget proposal which will see it run a deficit of 4.3% next year rather than the EC target of 3%.

As the graph above shows, France has strayed significantly from the path originally agreed with the EC, even after it requested and was granted additional time to meet its deficit targets just last year.

Importantly, this is the first time a country has flagrantly flouted the budget rules. Other countries have missed their targets or asked for extensions, but with the presumption of good faith and serious efforts being made to meet said targets. However, with its latest budget France has rejected the previously agreed cuts (worth 0.8% of GDP) and offered just 0.2% of GDP in savings. In other words it has flat out chosen to ignore the rules.

This may seem like semantics but it puts the EC and the EU more broadly in a tough position. With much of peripheral Europe failing to meet the fiscal rules agreed under the Stability and Growth Pact (SGP), the Fiscal compact and the European Semester, many have already been questioning the effectiveness of these tools. Ultimately, the EC risks replaying one of the key features of the previous crisis – letting a big country break the SGP and then being unable to effectively enforce it for other countries, helping to facilitate the large build-up of sovereign debt.

This is therefore a key test of the viability of the new rules and whether this time will really be any different. Combined with the renewed bank stress tests and bail-in rules, the coming months are an important testing ground for the new financial architecture which the Eurozone has put in place.

Sadly, as Reuters highlights, another fudge looks to be on the cards. While the EC will probably reprimand France to the fullest extent before getting to outright fines, it will also work up a new looser programme which gives it more time. This helps all sides save face and avoids the risk of further weakening French President Francois Hollande to the benefit of the Front Nationale (something which the EU wants to avoid).

As for what happens now, the EC will provide a verdict on the budget by the end of the month in what will be one of the last acts of the Barroso Commission. This is of course all complicated by the hand-over of the EC and the wrangling over who will actually be in charge of enforcing the budget agreements. When all is said and done another muddle through is likely, but with the Eurozone facing economic stagnation investors may be less than convinced by such moves.

Juncker bitten by the hand that fed him as the European Parliament undermines his Commission

Juncker and Schulz in happier times...

The letter from European Parliament (EP) President Martin Schulz to European Commission President Jean-Claude Juncker has now been published in full and contains an extensive list of questions for the UK’s Lord Hill, the Czech Republic’s Vera Jourová and Hungary’s Tibor Navracsics who have all been invited back for some form of second hearing early next week (whether or not these will be ‘full public hearings’ again remains to be seen).

While the EP is certainly entitled to ask questions and has a role to play in the vetting process, we think the whole situation is getting a bit out of hand and that the Commissioner-designates are being set an almost impossible task. Let us outline a few reasons why.

1) Politicians expected to have the knowledge of technocrats. The EP was the driving force behind increasing the politicisation of the Commission, mostly through the Spitzenkandidaten process. With a more political Commission those inside will ultimately be more politicised, as will decision making. Nearly all the candidates are politicians with little technical experience. However, the EP is subjecting them to a level of scrutiny which no national incoming minister would be expected to pass on a brief they have in most cases never overseen. They seem more akin to the hearings a new central banker would face – the arch technocrats.

At the same however, MEPs are very intolerant of any Commissioners holding – as they see it – the ‘wrong’ political views meaning nominees have to tread a tightrope and try to appease a range of competing interests, e.g. promoting trade while protecting social standards, maintaining budgetary discipline while allowing for ‘flexibility’, or cutting energy costs while pursing green policies. This has led to accusations of a lack of coherence on the part of some Commissioners. This confusion over the Commission’s role is largely of the EP’s own making and sets an almost impossible task for the candidates.

2) Trying to force Commissioners to commit to policies ex-ante. This is simply a bad way to make policy. Sure, the candidates should outline key priorities and ideas, however, asking them whether they will or won’t pursue numerous policy proposals or will rule out certain actions over their entire five-year term seems to be overstepping the mark. Ultimately, the proposals the Commission will take forward are the result of a combined decision with the EP and member states and will be subject to economic and political circumstance.

3) The EP has a legislative role in trialogue negotiations, not in these hearings. Following on from the above point, the EP does not have a right to try to restrict the policy options of the Commission ex-ante. The EP has a role in the trialogue negotiations around legislation and can influence and change Commission proposals there. It should not double up this role by trying to tie the hands of new Commissioners by forcing them to take a policy stance before they have even had a chance to get an overview of their brief.

4) Hearings caught up in political games. There is no doubt that the hearings have become embroiled in political games, mostly between the centre right EPP and centre left S&D. While political trade-offs and negotiations are expected, these should not spill over into the public hearings and hamper the assessment of the competence of Commissioners.

5) Judging Commissioners on different and conflicting criteria. It is also obvious that there is no clear consensus on what basis to judge Commissioners. Some have been opposed on the basis of political allegiances, some on the basis of their nationality and some on their experience/knowledge (or a mix of the above). This picking and choosing of criteria once again undermines the process and makes it impossible for the Commissioners to know on what level they are being assessed. This has led to attempts to try to please everyone further worsening the scrutiny process.

The Commission has always been about a balance between political and technical expertise – it both proposes laws and is responsible for upholding them. There are legitimate questions that can be asked about potential conflicts of interest and a basic grasp of the policy issues at hand nut the EP has hugely overstepped the mark by seeking to pin down Commissioners to particular political agendas.

The Spitzenkandidaten process was all about establishing greater political control over the Commission’s agenda (as we warned). The great mistake that EU leaders made over the appointment of Juncker (we’re not talking about Juncker himself, but giving into the EP over the process) has clearly had the effect of emboldening MEPs further. The Commission – and now the nominees – are the piggy in the middle in the increasingly fraught power battle between national governments and the EP. Throw in a large dose of intra-EP politicking and individual egos, and it is a recipe for chaos and one that is likely to further distance the EU institutions from electorates across Europe, particularly if the EP makes the running despite itself hardly securing a vote of confidence in May’s elections.

What would a British withdrawal from the ECHR mean for its EU membership?

Justice Minister Chris Grayling has today announced that a new Conservative Government could pull Britain out of the European Court of Human Rights in Strasbourg unless it secures Council of Europe agreement that the UK Parliament has the final say over its rulings. Grayling wants to ensure that the UK Supreme Court is the “ultimate arbiter of human rights matters”.

Under the plan, the Conservatives would repeal Labour’s Human Rights Act and put the text of the original Human Rights Convention into a new British Bill of Rights.

Parliament would be asked to vote every time the Strasbourg court judged that UK law was incompatible with the European Convention on Human Rights, and the judgment would be binding only if MPs agreed it should be enacted. A future Conservative government would try to negotiate with the Council of Europe, which oversees the convention, but if no agreement could be struck, they say the UK would be “left with no alternative” but to withdraw.

So is this compatible with the UK’s EU membership?

It is by no means certain that this plan would inevitably result in Britain withdrawing from the Convention. But, if this were to happen, Grayling has insisted that the plans are consistent with EU membership. Nevertheless, it is clear that the growing links between the European Convention on Human Rights and the EU makes the matter complicated.

All EU member states have ratified the convention and being a signatory of the convention has effectively become a pre-condition for new countries seeking to join the EU. However, there is no formal requirement in the EU treaties binding on existing member states such as the UK to remain signatories of the convention.

Article 2 of the Treaty on European Union states that the Union is founded on “…the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities...” Elsewhere the EU treaties state that:

“Fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, shall constitute general principles of the Union's law.”

Neither of these EU treaty clauses appear to be incompatible with UK withdrawal from the convention and remaining a member of the EU. If the UK were to withdraw, there would certainly be much political fallout and, in theory, other EU member states have the power to suspend the UK Government’s EU voting rights if they unanimously “determine the existence of a serious and persistent breach” of these values. But it would be hard to argue that UK withdrawal from the convention would be a breach of these values in itself – particularly given the commitment to enshrine the convention in domestic law.

Would the UK remain bound by EU human rights law?

The short answer is yes - when applying EU law in the UK. Even complete withdrawal from the convention would still mean that the UK would continue to be bound by the EU’s Charter of Fundamental Rights (which basically replicates the ECHR) and the EU Court of Justice’s interpretation of these rights as they apply to EU law, which in turn is either implemented in UK law or has direct effect. The ECJ’s ruling that insurers could no longer determine their premium on the basis of gender is a prime example.

A further complication is that the Lisbon Treaty gives the EU the legal basis to join the convention in its own right. This could see the European Court of Human Rights court ruling on EU laws which apply in Britain and greater use of the convention by the EU Court of Justice. New European Commission President Jean-Claude Juncker has said he would like to see the EU accede to the convention under his term, but it is important to remember that the UK retains a veto over EU accession to the convention and the logical position would be to use it.

When is money not "real money"? Let's ask the European Commission...

There is a select group of masochists out there (us included) who devote their time to studying the inner workings of the EU budget. Its a very dry and technical process but at the end of the day the numbers matter - the UK's gross annual contribution (post rebate) this year is around €14.7bn, which easily exceeds the £7bn in fresh tax cuts David Cameron pledged at the Tory party conference yesterday.

Today, Commission President Barroso urged member states to sign off on a €4.7bn 'top up' to this year's budget, an issue we covered back in June. What struck us however was some of the language in a separate Q&A put out by the Commission, which contains gems like:

"The EU budget consists of commitment appropriations and payment appropriations. Broadly speaking, commitments are usually higher than payment appropriations and do not constitute "real money"; they could be compared to the amount mentioned in a contract any household or private company commits itself to pay at the completion of any given work. Payments, on the other hand, are "real money"; they are what the EU budget has to pay, again, just like any household or private company has to pay the builders once any contracted work is completed."

However, it is highly disingenuous to describe new spending commitments in the budget as not "real money" given that they are inextricably linked with payments: as the Commission itself is fond of saying, today's commitments are tomorrow's payments while today's payments are yesterday's commitments. 

It might however explain why the Commission is so frivolous when it comes to making new spending promises before then pressuring national governments to stump up extra cash i.e. "real money" to make up the difference.

Updated: UK Commissioner called back for second hearing – what happens now?

A couple of developments since we posted the original blog below.

Importantly, the European Parliament’s Economics Committee failed to reach an agreement over Pierre Moscovici and has delayed a decision on whether to approve him or not until 9.30pm CET tonight. Given his clear knowledge and experience in the area as a former French Finance Minister, the objection is clearly being driven by a fundamental split between the EPP (led by the CDU) and the S&D (led by the French socialists) over whether he is the right man for the job given his political allegiances and the fact France has repeatedly missed the deficit targets agreed with the European Commission over the past few years.

As regards Lord Hill, @Brunobrussels points out that a letter will be sent by European Parliament President Martin Schulz to Commission President Jean-Claude Juncker outlining some key questions for the UK’s nominee. It is unclear exactly what these questions will include, but the focus will be on his knowledge of issues such as the banking union, Eurobonds and financial regulation in general. There may also be questions around exactly what will be under his purview and his relationship with the Vice-Presidents. It also seems that concerns over Hungarian Commissioner Tibor Navracsics are growing, as we warned here. Overall, the process is at risk of descending into in-fighting and horse trading between the EPP and S&D (if it hasn’t already) – and Lord Hill has certainly got caught up in that.

 ********************* Original blog below **********************

UK Commissioner designate Lord Hill yesterday faced the European Parliament’s Economic and Monetary affairs committee which has to judge if he is suitable for the proposed role of Commissioner for Financial Services, Financial Stability and Capital Markets Union. 

While Hill went out of his way to charm MEPs, in what the FT terms an “unprecedented move” the committee has recalled Hill for a second hearing early next week (likely Monday), reportedly due to concerns over his lack of detailed knowledge of the brief.

Having watched the hearing it was clear that Hill struggled on the minute details of some of the more technical questions from MEPs, some of whom have been dealing with this area for years. However, even some members of other UK parties have come to Hill’s defence. Labour MEP Richard Corbett wrote on his blog: 

“When all is said and done, he performed far better than many of the other candidate Commissioners.”

 Former Lib Dem MEP and Chair of the EP Econ committee Sharon Bowles tweeted this morning: 

“If you only give commissioners designate 2 weeks to prepare, on sensitive dossiers second hearings/written follow up inevitable.”

Having watched the other Commissioner hearings Hill is certainly not alone in struggling to come up to speed in such a short time. For example, the centre-right EPP group has issued a stark criticism of Commissioner-Designate for Regional Policy Corina Creţu for failing to provide details on how she will tackle the build-up of delayed cohesion payments. Employment Commissioner designate Marianne Thyssen has also taken flak for not knowing details of the posted workers directive, while proposed Digital Commissioner Gunther Oettinger was criticised for being too vague on surveillance, net neutrality and other specifics of his brief. In short, many Commissioners are struggling to tread the fine line of trying to please all sides in the European Parliament (thereby sticking to vague and uncontroversial answers).

Furthermore, let’s not forget that the outgoing Internal Market Commissioner Michel Barnier – who oversees financial services – had little to no experience of the area before he took over the post having been Agriculture Minister in France.

What happens next?

Hill’s second hearing will likely be early next week. Following the hearing another committee vote/discussion will be held on whether to approve him. These ‘votes’ are informal since the EP does not have direct say over each Commissioner, or which roles they fulfil, but only over the Commission as a whole. There are a few different scenarios over how this could play out:

1) The committee eventually approves Hill: The EP will then eventually have to decide whether to approve the whole Commission. As we have pointed out before, it seems likely that the EP will request that at least one or two of the suggested Commissioners are replaced (if only to flex its muscles). There will then be a negotiation until the EP and Commission President Jean-Claude Juncker (and member states) reach an agreement.

2) The committee does not give Hill approval but he goes ahead anyway: Since the EP cannot veto specific people or roles, it is possible they could reach a deal on the overall Commission set up even without explicitly endorsing Hill. This would certainly hamper Hill in his role since he will be forced to engage with and report to MEPs, however, it should not stop him from fulfilling his brief.

3) The committee does not approve of Hill: In this instance, the committee would fail to approve Hill even after a second hearing and would request he be replaced when they negotiate with Juncker over the final approval of the whole Commission. This would be a difficult negotiation and would raise tensions between the UK and EU. Furthermore, even Cameron were to nominate someone else, it's not clear any UK candidate with direct financial experience/expertise would be more in line with EP thinking and sensitivities. Either way this would be a huge snub and would certainly play into the hands of UKIP and others who want the UK to leave the EU.

4) A re-shuffle: Hill is only one of several candidates who failed to impress MEPs - indeed none of the nominees so far have sailed through, with Spain's Miguel Arias Cañete and Hungary's Tibor Navracsics, both EPP, in trouble (as we predicted) and Slovenia's Alenka Bratusek also facing a tough inquisition. Meanwhile, the EPP could retaliate by blocking one S&D's nominees, with France's Pierre Moscovici the most likely victim. As such, the FT reports there are rumours in Brussels that a "major reshuffle" could be on the cards with the same personnel being moved to 'less problematic' posts. There is a precedent - in 2004, Barroso agreed to swap around a couple of his Commissioners to appease MEPs. Such an approach would fit with the concerns of MEPs which seem to be more centred around the UK having the financial services brief rather than Hill himself.

However, taking financial services away from Hill (even if he is compensated with another big post like Internal Market or Competition) would also be seen as huge slap in the face for Cameron, the City of London, and the UK as a whole. This would probably be the worst outcome in terms of trying to keep the UK in the EU and would play on many of the concerns raised by UKIP.

Ultimately, the most likely scenario remains that Lord Hill is approved albeit with added scrutiny. That said, it seems almost certain the Parliament will request some changes, as it has almost always done, it remains an open question upon whom they will ultimately focus their attention.

David Cameron and his Ministers continue to tread fine line on EU migration reform

UPDATE: The Prime Minister has now given his conference speech. This is the passage on EU migration:

"Immediate access to our welfare system, paying benefits to families back home, employment agencies signing up people from overseas, not recruiting here, numbers that have increased faster than we in this country wanted and at a level that was too much for our communities and for our labour markets. All of this has to change and it will be at the very heart of my renegotiation strategy for Europe. Britain: I know you want this sorted, so I will go to Brussels, I will not take no for an answer and when it comes to free movement I will get what Britain needs."

So, no new policy announcement today. However, David Cameron's reference to the "numbers that have increased" and "at a level that was too much for our communities" leaves the question we posed below hanging. He could argue that tackling migrants' access to benefits (particularly in-work benefits) will help with the numbers, as it could reduce the incentive for some to migrate, particularly those at the lower end of the job market. Will he be prepared (or be allowed) to stop there?

Original post: The Times and the Mail today both feature stories on the increasing pressure on David Cameron to take a stronger stance on migration from the EU.

The Times suggests that senior figures within his party are calling on him to use his renegotiation to explore the introduction of quotas on migrants from existing EU member states. It quotes London Mayor Boris Johnson saying that

“We all want change, we all want a renegotiation. We want sensible control of the numbers of people coming in. I think you would agree that it is the right and duty of every state to have some idea of how many people want to settle in its boundaries, what jobs they propose to do there, and how much they cost the local authorities. Isn’t that fair enough?”

As we have noted before, the free movement debate is about fairness and volume. So far, David Cameron and his Ministers have concentrated on the former - rules on migrants' access to benefits can be changed through secondary EU legislation via QMV and co-decision with MEPs and there is widespread support for addressing the issue among like-minded countries in Northern Europe. David Cameron is also on the record saying that he wants new conditions placed on migrants from countries that join the EU in future. However, the latter issue, addressing the numbers of migrants coming from existing EU member states is much tougher - it means addressing what is seen as a fundamental tenet of the EU and altering it would require unanimous agreement, almost certainly via treaty change.

Home Secretary Theresa May and Foreign Secretary Philip Hammond have both been quoted on the subject today, but both have stuck to line that an 'emergency brake' or measures to tackle the numbers of migrants would apply to new members of the EU, not existing ones.

May said:

"This is an area where David Cameron and I have said we need to look to the future to talk about the rules, particularly for countries coming into the EU in the future, and putting some sort of brake on their access to full free movement. For example, one idea we’ve suggested is they shouldn’t have full free movement rights until their GDP, their economy, is at a certain level compared to other economies within the EU."

Similarly, Hammond told an Open Europe fringe event that:

“It isn’t going to be enough just to look at benefit abuse...We are going to have to look at how we accommodate future new member states with the implementation of free movement, future new member states and how we restrict them. We are going to have to look at how we deal with destabilising flows."

There has been speculation that Cameron will address the issue in some way in his conference speech today, it will be interesting to see how he treads what is an increasingly fine line.