European Union

Europe’s four most powerful men are in peril, fighting for their political lives in some choppy and unusual electoral waters. Whether this week in the case of Britain’s David Cameron or Spain’s Mariano Rajoy, or in the coming months with regard to Matteo Renzi and Francois Hollande, each one is nearing a career-defining reckoning with voters. The four cover opposite ends of the mainstream political spectrum, but share a common fear: being undone by primal anti-establishment forces. Such is the lot of Europe’s political princes.

David Cameron’s verdict There is a touch more optimism in Downing Street on the EU referendum. After a tumultuous week, poll momentum has swung back to Remain (as well as defections). Mr Cameron also delivered a solid TV performance on Sunday night, channelling his inner Winston according to the FT’s Henry Mance. Note the emphasis on this referendum being a no-turning-back decision on the EU – but not on Mr Cameron. His approval ratings have plummeted but he insists this vote is not a verdict on him. It appears he may try, against the odds, to hold on to power after a Brexit win. Given what it would do to his legacy, what does he have to lose?

Matteo Renzi’s star falls Once the golden-child of this political quartet, the restless Italian Socialist is facing a ballot-box revolt. The Five Star movement routed Mr Renzi in Rome’s municipal elections last night, making Virginia Raggi the eternal city’s first female mayor. In a big upset Turin was lost as well to a 31-year old Five Star insurgent, Chiara Appendino. Mr Renzi’s Democratic party did manage to draw the line there, hanging on to Milan and Bolgna, where it was facing a more traditional run-off with centre-right opponents. All eyes are now on the October referendum on constitutional reform that Mr Renzi said he would win or quit. His enemies are circling.

Yesterday was one of those days for Commissioner Andriukaitis; a day where he finds himself defending the Commission’s position on endocrine disrupters*(ED) in front of Members of the European Parliament (MEPs).

Yesterday was a little bit more special than usual though as he came with the long-awaited proposed ED criteria. Heated exchanges were expected. All the protagonists were in the room, ready to play their part. Mr. Poc for the S&D, Mrs. Grossetête for the EPP, Mrs. Girling for ERC and Mr. Eickhout for the Greens. They all came and told our Commissioner what they thought of his criteria. Spoiler alert! They are not happy.

And then something a little strange happened. Commissioner Andriukaitis told them he was “happy” – happy to see that no one really agreed with the Commission’s proposal. He saw the absence of consensus as the sign that we are all moving in the right direction.

Are we really?

I could not say from a scientific or safety perspective. I am no toxicologist or risk assessor. Yet, I would like to share a few observations on how we got and how, despite what he says, we may not be moving in the right direction as far as public decision making is concerned.

The EU relies on the capacity to reach compromises. All parties have to agree to make some sacrifices. In return they gain something, preferably more valuable than what they gave up. In a perfect world everyone is happy, to a certain extent at least.

Reality could not be more different when it comes to ED. Shortly after the publication of the proposal, reactions piled up. Industry, NGOs and Members of the European Parliament, all rapidly issued statements expressing their disappointment. Cefic and their partners regretted the absence of potency while NGOs such as ChemSec and HEAL – and a number of MEPs – blamed the Commission for disregarding the possibility to categorise ED and limiting the observation of adverse effects to human health. In short, NGOs blamed industry lobbying, industry blamed NGOs and both criticised the European Commission.

All this… for that? Years of debate (both at scientific and political level), a legal case brought before the European Court of Justice against the European Commission, and no one is happy.

Could things have been different? My answer is yes. A better outcome could have probably been reached provided all parties had behaved a bit differently.

Let’s start with industry. The chemical industry and its partners underestimated the political and emotional ramifications of this debate. Science is critical of course. Public decisions must rely on solid data and scientific knowledge. Still, as much as some may dislike it, values and in this case emotions also play a role in decision making. This is called politics. If you don’t play the game, get out of your comfort zone and engage, you cannot win. It does not mean one has to agree with all claims and allegations, but one must enter the debate, answer questions decision makers ask and prepare for a negotiation. It is all the more important when the agenda is set by your opponents, as it was the case here.

NGOs… Are we allowed to criticize them? I think so, in particular in this dossier. NGOs who engaged on ED played their role perfectly. They raised awareness, set the political agenda and turned an obscure scientific issue into a societal debate – as they should do. They may however have gone too far from time to time using (creating?) fears that make it all the more difficult for public authorities to take serene decisions.

Finally, a few words about the scientific community, both an actor and a tool in this debate. The “fight” between toxicologists and endocrinologists has certainly played an important role in this dossier. The first ones defended their own corner against the new kids on the block advocating for a new approach of toxicology. Eventually some consensus was found, in particular on the question of potency. Still, it took a long time and their opposition deeply shaped the debate I believe, also at policy level.

Put all these ingredients together and what do you get? A “dead end” debate, with everyone standing on its positions and making it almost impossible to reach a good compromise.

This is not the end of the story of course. The proposal will now go to the European Parliament and Member States. And if they oppose it (the Environment, Public Health and Food Safety committee will most likely do), the end is nowhere to be seen.

One can only hope that one day someone reminds everyone that the point of all this is to make a decision that would actually protect people’s health and the environment – not stick to stubborn positions of principle that make you look good.

I know, this is most likely wishful thinking. Well, hope springs eternal!

Pauline Tawil

*Endocrine-disrupting chemicals are substances that alter the functions of the hormonal system and consequently cause adverse effects to humans and/or to the environment. 

Monday 20 June 2016
Lisbon
11.30 Meeting with Prime Minister António Costa
12.45 Press conference
13.15 Working lunch
15.00 Meeting with President Marcelo Rebelo de Sousa

Tuesday 21 June 2016
10.00 Meeting with President of Israel Reuven Rivlin (photo opportunity - press statements ±11.00)
6-month badge/special accreditation will be required to access the Justus Lipsius VIP entrance
15.00 Meeting with Minister of Foreign Affairs of the Netherlands Bert Koenders

Wednesday 22 June 2016
15.30 Meeting with Federal Chancellor of Austria Christian Kern (photo opportunity)

Thursday 23 June 2016
12.45 Meeting with Palestinian President Mahmoud Abbas (photo opportunity - press statements ±13.15)
6-month badge/special accreditation will be required to access the Justus Lipsius VIP entrance

Friday 24 June 2016
10.30 Meeting with European Parliament President Martin Schulz, Prime Minister of the Netherlands Mark Rutte and European Commission President Jean-Claude Juncker (Berlaymont)

THE COUNCIL OF THE EUROPEAN UNION:

1.         RECALLS that major steps have been taken at unprecedented speed over the past years to establish the Banking Union. After a comprehensive assessment of all significant credit institutions in the Banking Union, the Single Supervisory Mechanism was fully established in 2014 and the Single Resolution Mechanism has become operational in 2016.

2.         Furthermore, RECALLS the fact that almost all Member States have transposed and implemented into national law the relevant legal provisions of the single rulebook. This has ensured more consistent regulation and high-quality supervision across the EU by: stronger prudential requirements for banks, introduced under the Capital requirements Directive and Regulation (CRDIV/CRR); a new recovery and resolution framework for banks, established under the Bank Recovery and Resolution Directive (BRRD); the functioning of national Deposit Guarantee Schemes (DGSs), enhanced by the Deposit Guarantee Scheme Directive (DGSD).

3.         As for the SRF, REITERATES that participating Member States agreed on 8 December 2015 on a harmonised Loan Facility Agreement with the Single Resolution Board (SRB), providing national credit lines to the SRB to support the national compartments of the SRF in case of possible funding shortfalls in that compartment following resolution cases of banks during the transition period. All Member States that have not yet signed the Loan Facility Agreement with the SRB  commit to do so as soon as possible, ultimately by September 2016.

4.         CONSIDERS that these achievements, combined with the ECB's measures as well as national measures, made a significant contribution to financial stability, reversing the fragmentation of financial markets, mitigating moral hazard and reducing the risk for the involvement of public financial means.

5.         Building on the important progress made, and in the context of the deepening of the Economic and Monetary Union, REAFFIRMS the importance of the Banking Union with a view of its completion.

6.         RECOGNIZES that, to this end,  further steps will be have to be taken  in terms of reducing and sharing risks in the financial sector, in the appropriate sequence, in order to address a number of remaining challenges.

7.         UNDERLINES the importance of the work being carried out by several institutions at Banking Union, EU28 and international level, in particular work by the Commission to:

a)             propose amendments to the legislative framework in view of implementing the Total Loss Absorbing Capacity (TLAC) standard and reviewing the minimum requirement for own funds and eligible liabilities (MREL). The Council will seek to ensure consistent rules and adequate amounts for the bail-inable buffers that contribute to an efficient and orderly resolution process in line with BRRD for all credit institutions for which bail-in would be the validated resolution strategy.

b)             put forward a proposal on a common approach to the bank creditor hierarchy, to enhance legal certainty in case of resolution.

c)             propose amendments to the CRR/CRDIV as part of an overall review exercise, which would result in:

i.   harmonisation or further specification of options and national discretions (ONDs) granted to MS, which could also contribute to the objective of reducing financial fragmentation;

ii.  implementing and finalising remaining Basel reforms including the introduction of a leverage ratio, possibly set higher than 3% for systemic banks, and the introduction of a net stable funding ratio;

d)            propose a legislative proposal for minimum harmonisation in the field of insolvency law in the context of the Capital Markets Union (CMU), which may also support efforts to reduce future levels of non-performing loans;

e)             conduct further work on examining whether and how harmonizing the rules and application of moratorium tools can contribute to the stabilisation by the relevant authorities of an institution in the period before, and possibly after, an intervention.

8.         In this context, UNDERLINES the following key steps:

a)             On the Commission´s banking proposals set out under paragraph 7, the Council invites the Commission to put forward the proposals as soon as possible and by no later than the end of 2016. On that basis, the Council will start technical work immediately in view of a swift implementation. The Council underlines the importance of considering European specificities when implementing global regulatory standards, including Basel standards, in the EU;

b)             On the common backstop for the Single Resolution Fund, the Council takes note of the intention of Member States to start work in September 2016 if and when all participating Member States have fully transposed the BRRD. In this context, the Council will also take stock of the establishment of the bridge financing arrangements, noting that participating Member States are committed to sign the Loan Facility Agreement by that time. They reaffirm the need to have the common backstop fully operational at the latest by the end of the transition period.  When the work is completed, it may be decided, in line with the risk reduction measures mentioned in paragraph (a), that the backstop may become operational ahead of the end of the transition period;[1]

c)             On the regulatory treatment of sovereign exposures, the Council agrees to await the outcomes of the Basel Committee. Following the work of the Basel Committee the Council will consider possible next steps in the European context;

d)            On a European Deposit Insurance Scheme (EDIS), the Council will continue constructive work at technical level. Negotiations at political level will start as soon as sufficient further progress has been made on the measures on risk reduction, as mentioned above. In this context, the Council takes note of the intention of Member States to have recourse to an IGA when political negotiations on EDIS start;

e)             The Council will assess annually the progress made on the above mentioned measures towards completing the Banking Union.

9.         REAFFIRMS that the discussions on measures relevant to all Member States continue to take place at the level of EU28 to ensure that the Banking Union remains open to all Member States and in view of preserving the single market within the EU.

 [1] Arrangements concerning the SRF backstop will be fiscally neutral over the medium term, ensure equivalent treatment across all Member states participating and incur no costs for Member states not participating in the Banking Union.

Not necessarily bad news? (Illustration: Michel Gaillard)

Not that anyone in Britain cares what the French think. As a matter of fact, even the French themselves don’t care that much. They have other ‘cats to whip’ as they say around here: social unrest, terrorist murders, drunk hooligans. There have been surprisingly little surveys in this normally poll-obsessed country, and while the British polls are quoted and analysed by some media, Le Monde recently simply shrugged their shoulders and drily noted that ‘In France, the Brexit provokes neither debate nor consensus‘. Others, like the financial monthly Capital, summarised the shoulder-shrugging differently: ‘Brexit? Not necessarily bad news!’.

In this context it is interesting to have a closer look at some data tables kindly provided by Céline Bracq and Gaël Sliman from the Odoxa polling institute. A poll they conducted earlier this spring for the daily newspaper Le Parisien highlights that a majority of French citizens would rather like the UK to remain in the European Union. The poll was very quickly and rather superficially quoted upon in the Financial Times, but did not seem to raise any eyebrows on the other side of the Channel. But then again: who cares in Britain what anybody else might think on the continent?

As could be expected, the data on the French attitude towards a potential Brexit reveal more about the French themselves than about the UK’s role in Europe. To no surprise they are deeply split both on UK membership, as they are on most EU matters.

One of the questions simply asked whether the Brexit referendum was ‘an important event for Europe’. It appears that the event is indeed considered important across all age groups (around 65%), but most of all among the over 65 years-old (79%). As for almost all things European, the higher the CSP or the revenues per household, the stronger the concern among respondents. More interestingly, although not too surprising for those who follow French attitudes towards Europe since the 2005 referendum, is the divergence between voters of traditional mainstream parties (they are over 80%, no matter left or right, to consider the event important) and those who find themselves close to the Front national or the extreme left-wing parties, where the scores are significantly lower.

The comparison with other European countries is also of interest. It appears that the French are less opposed to a Brexit than people in Italy, German or Spain (where between 65% and 76% of respondents declared themselves ‘favourable’ to British membership. In France only 54% have this attitude. It also seems that their patience is wearing out: in a similar poll in 2013, 58% of them were displeased with the prospect of a Brexit, today only 42% declare themselves ‘opposed’.

Finally, independently from the Brexit question, the poll also enquired about current attitudes toward the Euro. Bad news for the Front National: 68% of the French seem to be determined to keep the Euro. That’s a score that the ‘Remainers’ in a for the time being hypothetical ‘Frexit’ referendum would hardly achieve. Contradictory? Not in the French mind, it seems.

Albrecht Sonntag, EU-Asia Institute
at ESSCA School of Management.
Follow us on Twitter: @Essca_Eu_Asia

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