Tag Archives: proposal

Proposals for the Cohesion Policy 2014-2020

The Commission has published its proposals which will frame cohesion policy for 2014-2020. The first part of the proposal sets out common rules governing the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF). The second part sets out common rules governing the three main funds delivering the objectives of cohesion policy: the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund (CF).

When adopted, the legislation package will establish a common strategic framework for the ERDF, ESF, CF, the EAFRD and EMFF. A Partnership Contract will be agreed between the Commission and each EU Member State, bringing together all the country’s commitments to delivering European objectives and targets. Before funds are paid out, authorities will have to demonstrate that satisfactory strategic, regulatory and institutional frameworks are in place to ensure the funds are used effectively. The release of additional funds will be dependent on performance. Deficiencies in macroeconomic policy (excessive budget deficits, etc.) will lead to suspension of the cohesion financing. Procedures will be simplified and computerised where possible. Eligibility rules for EU funding instruments will be harmonised.

 

 

The Old New Idea for a Political Union – Misunderstood?

The Greek financial crisis now threatens the whole eurozone. It appears that without substantial debt restructuring Greece is likely to default, and would have to leave the eurozone. This could lead, however, to substantial collateral damage and unintended effects for the whole European banking and financial system. The other option is a very large fiscal transfer from the eurozone core. This second option will lead donor Member States to demand substantial political guarantees for fiscal discipline in Greece and other possible recipients (i.e. Ireland and Portugal).

It looks like the crisis has brought back the idea for a true European political union on the table. The president of the ECB, Jean-Claude Trichet, himself has called for the establishment of a European financial minister.

Now, the idea is not really new. Back in the 1950s there was such a project, called the European Political Community (EPC) that aimed to politically unite the Member States in the European Economic Community (read more about it in the excellent paper by Berthold Rittberger). The main institutional innovation in the EPC was the central role of the bicameral parliamentary body in adopting the budget and the legislation. The EPC project failed, but some of its ideas were later implemented by including the European Parliament in the legislative and budgetary procedures.

Going back to Mr. Trichet’s ideas, we see something completely different. In his framework, the Council would act on the basis of a proposal by the Commission, in liaison with the ECB, to take some measures directly affecting the economy of the Member State that has not implemented its fiscal stability program. There is no role for the European Parliament whatsoever. Apparently Mr. Trichet believes that the very agreement on a stability program is substantial legitimation for a direct involvement in the economic and fiscal policies of a Member State by the Council.

This is quite doubtful. It’s very difficult to imagine how the same people that violently oppose to austerity measures taken by their democratically elected governments will somehow accept direct interference by an institution of the European Union. It’s equally difficult to imagine that the European Parliament will approve such an institutional framework. I can certainly understand the reasonable motives for proposing such a second stage of austerity enforcement, but I’m afraid that such a procedure will decisively worsen the democratic deficit of the European Union.

If and when the governments of the Member States decide that a more profound Treaty revision is needed for establishing tighter fiscal coordination, they will have to consult their national parliaments and the European Parliament. Such consultations are in fact inevitable, since TEU requires the summoning of a Convention to adopt the draft text of the revision (art. 48, para. 2-5 TEU).

 

 

Financial Transactions Tax: the Commission Proposal

The Commission has proposed a two pronged approach for the future taxation of the financial sector. At global level, the Commission supports the idea of a Financial Transactions Tax (FTT). At EU level, the Commission recommends that a Financial Activities Tax (FAT).

Globally, estimated tax revenues from FTT would have been around EUR 60 billion for 2006 for stocks and bonds transactions assuming a tax rate of 0.1 %. According to the Commission the FTT would have to be levied on the broadest possible base to reach its efficiency goal.

In contrast to an FTT, whereby each financial market participant is taxed according to his transactions, the FAT taxes financial corporations and it falls on total profit and wages. For the EU-27, the addition-method FAT could raise up to EUR 25 billion.

Commission Proposes Miranda-Like Procedure for Arrest

The European Commission has proposed a directive to set common minimum standards for the right to information in criminal proceedings throughout the European Union. According to the proposal Member States must ensure that any person who is suspected or accused of having committed a criminal offence is provided promptly with information on his procedural rights in simple and accessible language, including as a minimum:

– the right of access to a lawyer, where necessary free of charge,

– the right to be informed of the charge and, where appropriate, to be given access to the case-file,

– the right to interpretation and translation,

– the right to be brought promptly before a court if the suspected or accused person is arrested.

The Commission says that a number of recent studies have shown that the way suspects are informed of their rights varies widely and that in the majority of cases information on rights is only provided orally, which decreases its effectiveness and makes it more difficult to monitor. The proposal naturally invokes the comparison with the Miranda warning in the US.

Commission Proposes Visa-Free Travel for Albania and Bosnia and Herzegovina

The European Commission has adopted a proposal to enable citizens of Albania and Bosnia and Herzegovina to travel with biometric passports to the Schengen countries without needing a visa.

Are Bank Resolution Funds Necessary?

The Commission proposes the establishment of ex ante resolution funds, funded by a levy on banks, to facilitate the resolution of failing banks in ways which avoid contagion, allow the bank to be wound down in an orderly manner and in a timeframe which avoids the “fire sale” of assets.

This should create a harmonized network of national funds linked to a set of coordinated national crisis management arrangements. The Commission also thinks that an EU Resolution Fund is possible in the longer term.

However, many think that the proposal institutionalizes moral hazard and will encourage banks to hold riskier asset portfolios. France and the UK in particular do not support the idea, and prefer to use the proceeds from any bank tax to finance their budgets.

So are bank resolution funds really necessary? It depends how you look at it. I very much like the analysis by Anthony M. Santomero and Paul Hoffman, saying that:

“(T)hese policy options may offer some hope to sustain the institutions’ lending capacity and consumer confidence for a short period of time. However, in the end, all of these options are no replacement for sound bank management and a sound balance sheet.”

I also don’t see how such funds will resolve typical weaknesses of the legal framework that have resulted in (i) incentives to postpone adequate treatment of failing banks; (ii) higher costs for bank resolution; and (iii) weaknesses in the banking system itself.

Stefano Micossi has said it quite clearly: if supervisors behave correctly, then large residual losses from bank failures become unlikely.

New Directives on Human Trafficking and Sexual Exploitation of Children

The Commission has proposed the adoption of two new directives – a directive on on combating sexual abuse, sexual exploitation of children and child pornography, and a directive on preventing and combating trafficking in human beings and protecting victims.

Both directives will repeal prior framework decisions and will be adopted under the new rules of the Treaty of Lisbon – that means the co-decision procedure – adoption by the Council AND the European Parliament.

As the Commission points out, the two proposals will allow it to monitor and sanction poor implementation of the directives.