European Union

Source : © European Union, 2016 - EP

Source : © European Union, 2016 - EP

General : The influx of irregular migrants continues to pose a challenge to Europe. According to Frontex 13,800 people had to be rescued in the central Mediterranean over the last week alone. The EU is working on different ways to manage migration better. On Monday 30 May Parliament's civil liberties committee approved proposals concerning migration and cooperation with other countries, paving the way for a better management of the EU's borders. Read on for an overview of what is being proposed.

Source : © European Union, 2016 - EP

General : The influx of irregular migrants continues to pose a challenge to Europe. According to Frontex 13,800 people had to be rescued in the central Mediterranean over the last week alone. The EU is working on different ways to manage migration better. On Monday 30 May Parliament's civil liberties committee approved proposals concerning migration and cooperation with other countries, paving the way for a better management of the EU's borders. Read on for an overview of what is being proposed.

Source : © European Union, 2016 - EP

When I look at Europe, one of the stronger elements that brings us and keeps us together is the culture of Europe. And some of that culture required - long, long ago - major investments. The Colloseum in Rome, the Acropolis in Athens and Alhambra in Granada required in their days major investments. And I'm pretty sure that the people who put the money on the table had they focussed on short-term quarterly figures, had not done those investments. Still today millions of tourists still visit Italy, Greece and Spain to see these major European landmarks.  

At the moment, in my mind, many businesses are preoccupied with the short term. If you will, they are preoccupied with keeping their shareholders satisfied in the short run. And spent too little time on their long-term prospects, too little time on competitiveness and innovation for the long run. This holds back the investment levels in Europe and holds back long-term growth and growth in jobs. So one of our biggest challenges is to ensure companies redirect a good amount of their attention from the next quarter to the next decade.

That requires a long-term vision, and explain that in a convincing way vision to their shareholders. Explain that companies need long-term investments to remain innovative, and expand the competitive advantage they have. That's the key question. To motivate these investments. I think basically it's about survival. Investing in time and in the right way. I understand that may reduce cash flows and dividends in the short term.
This is true for all sectors in the economy, be it households and businesses, but also the public sector. Because governments also face this challenge. We levy taxes today and ask our 'shareholders' - the electorate -  to allow us to invest in education and roads. 

To promote the shift towards the long term and to encourage long-term investments, I recently called on big businesses to stop publishing their quarterly figures. That was extreme, and you don't have to take it literally. I don't mean you should stop informing. I mean to shift the emphasis away from quarterly results. Several companies (Unilever, Aalberts Industries and Heineken) have stressed the importance of publishing relevant results instead of the current quarterly figures. Moreover, more and more investors think the same. That's why I'm glad Larry Fink has been hammering on this anvil for some time in his yearly letter to some of the largest companies in the world. And during a meeting I had last week with around 50 of the largest European multinationals, I felt there was a broad need for change. The CEOs of these companies, however, did stress that they cannot do this on their own, and they're absolutely right. We, the governments, need to built a stable foundation to increase long-term investments.

This can be seen on a European level, where over the last few years the economic and financial landscape has changed dramatically. To create a stable environment, governments needed to get their budgets on a sustainable path and countries needed growth-enhancing structural reforms. Many eurozone governments have delivered in this regard. For example, the labour markets in many countries have been reformed. In Spain for example. Moreover, product markets have been reformed. In Portugal and Italy this has opened up various sectors and stimulated economic growth in both countries. And in the Netherlands, we have reformed pensions and the housing market and lowered taxes on labour. These measures have laid the foundations for further economic growth.

We have also taken further steps to increase the supply of finance to the private sector, to allow it to flourish. This has given rise - among other things - to the Juncker-plan and other initiatives to get credit to the economy. We also set up two landmark initiatives: We established the Banking Union at unprecedented speed and started working on the Capital Markets Union. The Banking Union has been set up to make banks more stable and to weaken the link between banks and sovereigns, which was a major risk during the crisis. In other words, to ensure we are 'open for business' again. The Capital Markets Union is intended to cut the cost of raising capital and reduces the high dependence on bank funding throughout the EU. Both initiatives increase the stability and growth potential of the EU economy. 

At the moment under the Dutch Presidency, we have been working on European tax regimes Therefore we are negotiating new rules against corporate tax avoidance on a European level. The principal aim is to prevent multinationals from exploiting the technicalities of a tax system, or mismatches between different tax systems, in order to reduce or avoid their tax liabilities. I think we are close to a deal and I hope to see common rules before the end of the Dutch presidency. 

So on the one hand, we are providing clear, shared fundamentals to share our information and battle tax avoidance by European cooperation. On the other hand, we need to remain competitive. Supporting research and development are still welcome. 

I think in the end, we should be realistic about our tax policies. In my mind companies will look for all the legal tax-breaks they can find, but more than anything, businesses want certainty. They want predictable tax regimes that enable them to plan further ahead than next year. This is where governments should facilitate businesses. So the Juncker-plan, the Banking Union, the Capital Markets Union and our tax regimes should make Europe more shock-proof and encourage long-term investment. 

What stands in the way of long-term investments? There are three mechanisms at play in my mind, that cause short-termism.

The first mechanism is asymmetry of information. Shareholders can observe the short-term effects of company policies on share prices, but this is much harder for long-term effects. I think this is why shareholders tend to look back at the last three months instead of forward to the next three years. This means that companies have an incentive to boost short-term results at the expense of long-term results. And it's very hard for shareholders to figure out that this choice has been made. Moreover, following George Akerlof's 'market for lemons' model, shareholders cannot possibly be expected to distinguish a real long term strategy from a strategy that is presented as long-term, but is in fact only meant to cover short-term losses. According to Akerlof, if a company fails to produce the short-term results that shareholders like to see, managers can quite easily claim that the disappointing short-term numbers are not disappointing at all, because the company has increased its long-term value, even if this is not the case. 

We need to address this. I think accountancy can play a vital role in this regard. Accountants can help us figure out relevant indicators to measure a company's long-term strategy. They can help us enrich the meaning of a company's value. Solid, reliable reporting on its long-term strategy can help shift the attention of shareholders and firms from quarterly numbers to the long term.

The second mechanism is remuneration. The current remuneration models depend on short-term results. The experiences of the financial sector during the crisis have learned how harmful this can be for the economy as a whole. But I also think this issue deserves wider attention beyond the financial sector. We can solve this problem by rethinking variable remuneration structures. In the Netherlands, for example, clawback and malus schemes are incorporated into Dutch law. And our Corporate Governance Code seeks to promote remuneration policies that stimulates long-term value creation. The question is, of course, is this enough?

The third and final mechanism simply is human nature. From behavioural economics, we know that people are poor planners who tend to extrapolate future performance from past results. What's more, we tend to overstate the importance of short-term results and disregard future challenges. This is what's known as the 'planning fallacy', which was described by Nobel prize-winner Daniel Kahneman and his collaborator Amos Tversky. The idea is that the time and capital required to complete future tasks and the risks entailed are systematically underestimated. According to Kahneman and Tversky, we succumb to the planning fallacy even when we know that similar tasks in the past took more time and capital, and involved greater risks than envisaged. 

I have no illusions that we can change human nature very easily. But being aware is the start of changing behaviour. We must remove impediments that prevent firms from acting in their own long-term interest and investing for the future. But this can only be done if we work together. Governments can create a level playing field and establish the right parameters. Accountants have to work out a way to calculate long-term figures and assess long-term strategy in a reliable and relevant way.
And companies need to invest. With information that reflects a realistic ambition. With remuneration that reflects the interest of the firm. And with focus on the next decade rather than next quarter. 

We need to establish a business climate with a level playing field, string institutions, a stable and clear policy environment, banks that are open for business and well functioning capital markets. Allowing European businesses to redirect their attention from ticking the investor's box to long-term investments for growth in Europe.

Thank you.

General : The European Parliament Conference of Presidents, uniting the EP president and political group leaders, agreed on Thursday 2 June on a mandate for an inquiry committee to look into the so-called Panama Papers, which revealed detailed information on off-shore companies and their ultimate beneficiaries.

Source : © European Union, 2016 - EP

General : The European Parliament Conference of Presidents, uniting the EP president and political group leaders, agreed on Thursday 2 June on a mandate for an inquiry committee to look into the so-called Panama Papers, which revealed detailed information on off-shore companies and their ultimate beneficiaries.

Source : © European Union, 2016 - EP

Welcome to Thursday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

A political saga that is reaching Hollywood levels of incremental sequels and rehashed storylines lumbered on yesterday when the European Commission made good on its threat to officially accuse Poland’s conservative government of endangering the rule of law.

In a feat of diplomatic gymnastics, Brussels published a “negative opinion” of the government’s paralysis of Poland’s highest court, which has left the country in constitutional crisis. But it stopped short of calling for a resulting punishment, stressing that “dialogue” would still continue.

Warsaw is keen on dialogue: dialogue can last a long time, and is cheap. It is under little threat at home from a weak opposition, and paying lip service to strongly worded letters from the EU is a small price to pay for a reform human rights groups say infringes Poles’ democratic rights.

Diplomatic chatter suits Brussels, too. Having threatened Warsaw with punishment only for the Poles to call its bluff, Brussels is left looking distinctly powerless and needs a way out. In the end, Poland’s governing Law and Justice party may agree that a quiet climbdown and compromise is the smartest outcome. But they hold the cards.

Read more

On 2 June 2016, the EU-U.S. Ministerial Meeting on Justice and Home Affairs, hosted by the Netherlands Presidency of the Council of the EU, took place in Amsterdam. This meeting is held usually twice a year, to evaluate and advance Trans-Atlantic cooperation in the areas of freedom, security and justice.

Dutch Minister of Security and Justice Ard van der Steur welcomed representatives of the United States of America, Attorney General Loretta E. Lynch and Deputy Secretary of Homeland Security Alejandro Mayorkas. He also welcomed Commissioner for Migration, Home Affairs and Citizenship, Dimitris Avramopoulos and Commissioner for Justice, Consumers and Gender Equality, Věra Jourová, representing the European Union.

In this Ministerial meeting, the EU and the United States reaffirmed their commitment to  closer cooperation, especially in the context of evolving and shared challenges that affect the security and rights of citizens on both sides of the Atlantic.

Today's signing of the "Umbrella" agreement[1] represented a major step forward in EU-U.S. relations. The agreement sets high standards for the protection of personal data transferred by law-enforcement authorities. It also strengthens legal certainty and enhances the rights of citizens which in turn will facilitate EU-U.S. cooperation to combat crime, including terrorism. The EU and the United States are committed to work together in the implementation of this agreement to ensure that it benefits both citizens and law enforcement cooperation. The next step will be to seek approval by the European Parliament.

During the Ministerial Meeting, the delegations focused on ways to address the migration crisis, on their respective visa policies, and on information sharing in the context of security, on counterterrorism policies and terrorist financing, on money laundering, data protection and on practical cooperation to tackle transnational organised crime.  The exchange of views covered issues including the protection of refugees, global resettlement efforts, effective border management and dismantling organised criminal migrant smuggling networks.

The EU and the United States first discussed ways to address global migration by developing safe, regular and orderly migration processes whilst ensuring international protection for those who need it. The discussion focused on opportunities to mutually reinforce and coordinate their actions in this respect while also establishing high security standards. They agreed that the current migration and refugee challenges require global solutions through increased international cooperation and regional action.  In this respect they reaffirmed their commitment to work together in the lead-up to the upcoming UNGA High Level Meeting addressing large movements of refugees and migrants and to the U.S. hosted Leader-Level Refugee Summit, to be held in September 2016 in New York.

The EU and U.S. exchanged views on visa issues and the respective legal frameworks. They agreed to maintain their constructive dialogue at all levels to achieve mutually beneficial solutions. 

The EU and the U.S. discussed initiatives to improve counterterrorism efforts, including border security, screening of travellers and information sharing, as well as cooperation to better identify terrorist and foreign fighter travel.  They also agreed to reinforce their dialogue on Chemical, Biological, Radioactive and Nuclear material and on its possible use by terrorist networks. They discussed legislative initiatives to improve information sharing, and to streamline efforts to combat terrorist financing and money laundering.

They also discussed a 5 year review of the 2010 EU-U.S. Mutual Legal Assistance Treaty, a key mechanism for transatlantic criminal justice cooperation. The EU and the U.S. confirmed that the Treaty is working effectively and identified areas for further practical improvement. The US and the EU committed to implementing those recommendations. These recommendations include enhancing training and specialisation of practitioners, improving the way joint investigation teams work together, using technology to avoid delays, and making it easier to track criminal proceeds by identifying bank accounts.  Facilitating access to electronic evidence is a particular concern of the review, and the participants committed to improving their practices through which they obtain such evidence.

Following up to the commitment made at the EU - U.S. Summit in March 2014, the EU and the U.S. reiterated their desire to tackle jointly the issue of transnational child sex offenders, acknowledging the operational conclusions of an EU - U.S. expert meeting held in September 2015. The EU and the United States recognized the importance of improving operational cooperation to protect children from transnational sex offenders.

Concluding the discussions, Europol and the US jointly presented the results of a successful EU-U.S. operation that brought together law enforcement authorities from across Europe and the US to dismantle an important drug trafficking network and seize the proceeds of their crimes.

The EU and the United States committed to continuing their regular dialogue and to hold another Ministerial meeting in the second half of 2016. 

 [1] Agreement between the European Union and the United States of America on the protection of personal data when transferred and processed for the purpose of preventing, investigating, detecting or prosecuting criminal offences, including terrorism. 

Moreda-Riviere Trefilerías v Commission
Competition
The General Court dismisses the actions brought by the four Spanish companies which had participated in the cartel on the European pre-stressing steel market

Moreda-Riviere Trefilerías v Commission
Competition
The General Court dismisses the actions brought by the four Spanish companies which had participated in the cartel on the European pre-stressing steel market

Bogendorff von Wolffersdorff
Principles of Community law
A name containing several tokens of nobility and freely chosen by a German in another Member State of which he also holds the nationality does not necessarily have to be recognised in Germany

Bogendorff von Wolffersdorff
Principles of Community law
A name containing several tokens of nobility and freely chosen by a German in another Member State of which he also holds the nationality does not necessarily have to be recognised in Germany

Vervloet and Others
Freedom of establishment
In Advocate General Kokott’s view, Belgium’s guarantee for ARCO financial cooperatives infringes EU law