by Hugo Brady
EU interior ministers are racing to finish a raft of new legislation on terrorism, crime and illegal immigration by the end of the year. One reason for their sudden sense of urgency is politics. Interior officials are anxious to make the most of the last few months of an old regime. If ratified as expected, the EU’s new rulebook, the Lisbon treaty, will give the European Parliament powers for the first time to amend future EU laws in these areas from 2009 onwards.
This is area of international co-operation that has long been the exclusive domain of national governments. For over 20 years, interior ministries – meeting in the EU, UN and Council of Europe – have quietly agreed and implemented inter-governmental agreements on internal security and judicial co-operation between themselves. There was little need to accommodate outside views and concerns. Now officials look nervously to 2009 when euro-parliamentarians should begin to use their new authority.
The ministries are right to be anxious. The European Parliament’s civil liberties and justice and home affairs (JHA) body – known as the LIBE committee – has made no secret of its intention to exercise the new powers to the full. The committee wants to reverse a trend in EU decision-making on terrorism, crime and immigration that many parliamentarians feel is wrongly skewed towards state security at the expense of civil liberties. For example, MEPs have been wary of the member-states’ eagerness to create databases and new information-sharing arrangements for terrorism and other cross-border crimes. They complain that the member-states are conspicuously less interested in reaching an agreement on data protection legislation needed to ensure such data is not mis-used.
The parliament has already demonstrated that it is not afraid to cause the member-states real headaches in internal security co-operation, in order to advance its views. In 2006, MEPs successfully applied to the European Court of Justice to quash an EU-US agreement on the sharing of airline passenger data. (The agreement was rapidly re-negotiated.) The member-states fear similar upsets that could hamper other types of co-operation against terrorism, crime and illegal immigration, if the LIBE committee pursues an agenda defined in outright opposition to the governments’. Some form of rapprochement between the parliament and the governments is needed to avoid a gridlock.
The chief divergence between the two on security matters is really more a problem of style than substance. The language the member-states use to present JHA initiatives to the public is couched almost exclusively in terms of the need to protect citizens from cross-border threats. The language used by the LIBE committee on internal security issues emphasises the need to protect the citizen from the state. Hence their future working relationship must involve a new modus vivendi, one where MEPs learn the language of state security and where the member-states show greater respect for the language of liberty.
The MEPs should bear in mind that their electorates mostly expect JHA co-operation to make them safer. Arguably, they look more to their national parliaments and judiciaries to safeguard their civil liberties. The parliament stands a better chance of achieving its goal of a more balanced justice and security agenda if it can show the EU governments that it is serious about working with them to pass laws that enhance the individual’s security as well as liberty. One idea, symbolic but also highly resonant, would be for the parliament to change the name of the LIBE committee simply to the ‘committee for justice, liberty and security’. Another useful step would be to significantly boost the resources the parliament gives to the analysis of JHA issues. Most proposals in this area are so highly technical in nature that they can only be credibly influenced by those with a full mastery of the issues at hand.
The parliament already enjoys some power over EU policies on border controls, immigration and visas. It has shown itself a perfectly credible partner on security issues linked to these and other areas so long as its role is respected. For example, in 2005 the LIBE committee was successfully wooed by the EU presidency to allow single market rules to be tweaked to allow for the retention of telecoms data for use in terrorism investigations.
EU governments have been dismissive of the parliament’s civil liberties concerns in the past. This is partly because interior ministries believe that it is their responsibility to ensure cross-border security co-operation does not infringe the civil liberties of their own nationals. They should now recognise that MEPs too have a legitimate part to play in this process. A good start would be for officials to involve the LIBE committee fully in the security-related legislation they are currently rushing through. This would be less cynical than waiting until legally obliged to do so under the new treaty. It would also be good politics, setting the tone for a more constructive working relationship in future.
Hugo Brady is a research fellow at the Centre for European Reform.
Friday, March 28, 2008
Wednesday, March 19, 2008
A joint response to the credit crunch
by Katinka Barysch
Ailing banks are being rescued, markets remain frozen, economic numbers are becoming gloomier. Of course, central banks and governments are focusing on fire-fighting, on cutting interest rates, on providing cash to liquidity-starved banks and to consumers. But slowly they are turning their thoughts to what comes next. How do we make sure that similar crises do not happen again?
EU leaders, at their Brussels summit last week, agreed that the responsibility to clean up the financial mess rested primarily with the banks and mortgage lenders that caused it. But they also promised that European governments were prepared to “take regulatory and supervisory actions where necessary”. Their to-do list is very similar to that of the US government, as laid out by US Treasury Secretary Hank Paulsen on March 14th: regulation that catches up with financial innovation; better ways to identify risky assets and higher capital requirements in case these go sour; and tighter rules for the credit rating agencies that are accused of over-rating packaged debt securities.
Neither the EU nor the US is planning big legislative packages for now. But if another bank or three fails over the next couple of months, the pressure to ‘do something’ would grow. “We are aware of the risk of over-regulation in response to the credit crisis”, said a top US regulator during the Brussels Forum last weekend. “But a response there will be. And we should not be timid.”
With memories of Sarbanes-Oxley still fresh in their minds, Europeans shudder at the thought of the US rushing into new financial markets regulations. Conversely, Americans are worried that cases such as Societe Generale in France, IKB in Germany or Northern Rock in the UK could trigger an over-reaction in some European countries. The risk of unilateral action is probably lower now because the US and the EU have reinforced their communication and co-operation on financial issues in recent years.
This could pay off now in terms of better co-ordination. The challenges of preventing future financial crises are effectively the same in Europe and America. We can look for solutions together. Or we can do so separately and then spend years trying to reconcile them so as not to impede transatlantic capital flows.
Our track record on this is mixed: the EU and the US have long worked together in existing forums, such as the Basel committee on banking supervision. For issues that are not covered there, they set up a financial regulatory dialogue in 2004. But it needed the big political push that came from the establishment of the Transatlantic Economic Council in 2007 for the two sides to make progress on even the most long-standing and vexing issue (namely the reconciliation of accounting standards).
Moreover, transatlantic co-operation can only work if the EU itself has a coherent stance. That does not yet seem to be the case.
In December Italy’s finance minister, Tommaso Padoa-Schioppa, argued that the turmoil showed the need for a European rule-book for banking and more powers at the EU level to supervise pan-European banks. He also pointed out the lack of an EU mechanism for handling crises: “Even with signs of a clear risk of contagion”, he wrote in the FT “no common analysis of the situation, no sharing of confidential information, no co-ordinated communication and no emergency meetings appear to have taken place among EU supervisors”. His EU colleagues in Ecofin were not convinced of the need for stronger EU powers, preferring a more evolutionary approach that leaves responsibility firmly with the member-states.
Is that enough? More than 40 banks in Europe now operate across borders. Imagine if Northern Rock had also sold mortgages in say, Belgium, Poland and Spain. Who would have taken the lead in finding a pan-European solution? Could a plethora of EU supervisors persuade the ECB (and the Bank of England) to help with liquidity?
The next Ecofin meeting in April is supposed to come up with new plans for regulatory convergence, stronger supervision and an EU-wide early warning mechanism. That will be difficult enough, given that some Europeans fear that the Commission may use the current market turmoil for a ‘power grab’ in finance. But the Europeans also need to talk to their counterparts in the US to make sure that whatever they decide fits with the response that is emerging on the other side of the Atlantic.
Katinka Barysch is deputy director of the Centre for European Reform.
Ailing banks are being rescued, markets remain frozen, economic numbers are becoming gloomier. Of course, central banks and governments are focusing on fire-fighting, on cutting interest rates, on providing cash to liquidity-starved banks and to consumers. But slowly they are turning their thoughts to what comes next. How do we make sure that similar crises do not happen again?
EU leaders, at their Brussels summit last week, agreed that the responsibility to clean up the financial mess rested primarily with the banks and mortgage lenders that caused it. But they also promised that European governments were prepared to “take regulatory and supervisory actions where necessary”. Their to-do list is very similar to that of the US government, as laid out by US Treasury Secretary Hank Paulsen on March 14th: regulation that catches up with financial innovation; better ways to identify risky assets and higher capital requirements in case these go sour; and tighter rules for the credit rating agencies that are accused of over-rating packaged debt securities.
Neither the EU nor the US is planning big legislative packages for now. But if another bank or three fails over the next couple of months, the pressure to ‘do something’ would grow. “We are aware of the risk of over-regulation in response to the credit crisis”, said a top US regulator during the Brussels Forum last weekend. “But a response there will be. And we should not be timid.”
With memories of Sarbanes-Oxley still fresh in their minds, Europeans shudder at the thought of the US rushing into new financial markets regulations. Conversely, Americans are worried that cases such as Societe Generale in France, IKB in Germany or Northern Rock in the UK could trigger an over-reaction in some European countries. The risk of unilateral action is probably lower now because the US and the EU have reinforced their communication and co-operation on financial issues in recent years.
This could pay off now in terms of better co-ordination. The challenges of preventing future financial crises are effectively the same in Europe and America. We can look for solutions together. Or we can do so separately and then spend years trying to reconcile them so as not to impede transatlantic capital flows.
Our track record on this is mixed: the EU and the US have long worked together in existing forums, such as the Basel committee on banking supervision. For issues that are not covered there, they set up a financial regulatory dialogue in 2004. But it needed the big political push that came from the establishment of the Transatlantic Economic Council in 2007 for the two sides to make progress on even the most long-standing and vexing issue (namely the reconciliation of accounting standards).
Moreover, transatlantic co-operation can only work if the EU itself has a coherent stance. That does not yet seem to be the case.
In December Italy’s finance minister, Tommaso Padoa-Schioppa, argued that the turmoil showed the need for a European rule-book for banking and more powers at the EU level to supervise pan-European banks. He also pointed out the lack of an EU mechanism for handling crises: “Even with signs of a clear risk of contagion”, he wrote in the FT “no common analysis of the situation, no sharing of confidential information, no co-ordinated communication and no emergency meetings appear to have taken place among EU supervisors”. His EU colleagues in Ecofin were not convinced of the need for stronger EU powers, preferring a more evolutionary approach that leaves responsibility firmly with the member-states.
Is that enough? More than 40 banks in Europe now operate across borders. Imagine if Northern Rock had also sold mortgages in say, Belgium, Poland and Spain. Who would have taken the lead in finding a pan-European solution? Could a plethora of EU supervisors persuade the ECB (and the Bank of England) to help with liquidity?
The next Ecofin meeting in April is supposed to come up with new plans for regulatory convergence, stronger supervision and an EU-wide early warning mechanism. That will be difficult enough, given that some Europeans fear that the Commission may use the current market turmoil for a ‘power grab’ in finance. But the Europeans also need to talk to their counterparts in the US to make sure that whatever they decide fits with the response that is emerging on the other side of the Atlantic.
Katinka Barysch is deputy director of the Centre for European Reform.
Thursday, March 13, 2008
Dmitry Medvedev – Putin clone or the new man?
by Bobo Lo
As Dmitry Medvedev walked across Red Square to join the concert celebrating his crushing victory in the Russian presidential elections, he could have been forgiven for wondering whether he had reached the pinnacle of achievement or been handed a poisoned chalice. For someone who had just garnered more than 70 per cent of the popular vote, he looked remarkably ill at ease.
Perhaps it was the knowledge that the electorate had not voted for him so much as for the man walking beside him. Vladimir Putin has not only dominated Russian politics over the past eight years, but is arguably the strongest leader his country has seen since the death of Stalin more than 50 years ago.
Mr Medvedev can seek comfort in precedent. In August 1999, Boris Yeltsin picked out a virtual unknown to be his heir-apparent in the Kremlin. His choice, Vladimir Putin, was almost universally disrespected as a puppet with little ability or even personality. Russia’s chattering classes were liberal in their scorn and predicted that the oligarchs who dominated in the 1990s would continue to manipulate the political process.
The key question today is whether Dmitry Medvedev can replicate Putin’s feat. Will he become his own man, a ‘new man’ for a new era, or will he forever be in thrall to the siloviki (security figures) who have dominated Russian politics under Putin?
The new president starts out with some important advantages. He has a decent record of public service and has managed to avoid scandal and charges of incompetence. He is a ‘Mr Cleanskin’, which counts for something in a country where corruption is endemic and the public cynical. He has few serious enemies, and plays well to a foreign and particularly Western audience. Most importantly, he is Putin’s personal choice, so the chances of lasting out his presidential term are good.
On the other hand, the circumstances of his election – or rather selection – suggest that he faces a real battle in establishing himself as a credible political figure. It is hard to escape the feeling that Putin chose him because he was the least threatening, rather than most capable, of the possible candidates. As a ‘made man’ who models himself consciously on his patron, Medvedev represents the best bet for preserving Putin’s policies and legacy.
Just to make sure, however, Putin is moving into the White House as Prime Minister. The presidential succession has shown that he is far from ready to ride into the sunset (or lie on a Sardinian beach). Although Kremlin insiders had speculated that he might become Russia’s Deng Xiaoping – a ‘father of the nation’ above the trappings of high office – Putin has opted for the safety of institutional legitimacy.
It is unclear how all this will work. There is no tradition of dual power (dvoevlastie) in Russia. On the rare occasions it has been tried, it has failed, with unfortunate and sometimes disastrous consequences. If nature abhors a vacuum, then Russians have a similar aversion to power-sharing.
There is some speculation that an underestimated Medvedev could ‘do a Putin’, in other words, take power incrementally and surreptitiously. However, this would require not just his predecessor’s backing but also departure from the political stage. The constitution gives the president enormous powers at the expense of the government and legislature, but in Russia influence has always rested with strong personalities over weak institutions. As long as Putin remains politically active, Medvedev will have little opportunity (or inclination) to make his mark.
We should moderate our expectations accordingly. Under Medvedev, Russia will remain much as it is – a semi-authoritarian capitalist system, dominated by vested interests. There will be some softening around the edges, but these will be of a cosmetic rather than substantive character. In foreign policy, Putin’s presence will ensure that Russia maintains a tough stance with the West and a proprietorial interest towards its neighbourhood. The Kremlin will stay committed to the vision of Russia as a great global power, and will pursue this aggressively. Dmitry Medvedev may eventually become more than a Putin clone, but the advent of Post-Putin Man remains a distant prospect.
Bobo Lo is director of the Russia and China Programmes at the Centre for European Reform.
As Dmitry Medvedev walked across Red Square to join the concert celebrating his crushing victory in the Russian presidential elections, he could have been forgiven for wondering whether he had reached the pinnacle of achievement or been handed a poisoned chalice. For someone who had just garnered more than 70 per cent of the popular vote, he looked remarkably ill at ease.
Perhaps it was the knowledge that the electorate had not voted for him so much as for the man walking beside him. Vladimir Putin has not only dominated Russian politics over the past eight years, but is arguably the strongest leader his country has seen since the death of Stalin more than 50 years ago.
Mr Medvedev can seek comfort in precedent. In August 1999, Boris Yeltsin picked out a virtual unknown to be his heir-apparent in the Kremlin. His choice, Vladimir Putin, was almost universally disrespected as a puppet with little ability or even personality. Russia’s chattering classes were liberal in their scorn and predicted that the oligarchs who dominated in the 1990s would continue to manipulate the political process.
The key question today is whether Dmitry Medvedev can replicate Putin’s feat. Will he become his own man, a ‘new man’ for a new era, or will he forever be in thrall to the siloviki (security figures) who have dominated Russian politics under Putin?
The new president starts out with some important advantages. He has a decent record of public service and has managed to avoid scandal and charges of incompetence. He is a ‘Mr Cleanskin’, which counts for something in a country where corruption is endemic and the public cynical. He has few serious enemies, and plays well to a foreign and particularly Western audience. Most importantly, he is Putin’s personal choice, so the chances of lasting out his presidential term are good.
On the other hand, the circumstances of his election – or rather selection – suggest that he faces a real battle in establishing himself as a credible political figure. It is hard to escape the feeling that Putin chose him because he was the least threatening, rather than most capable, of the possible candidates. As a ‘made man’ who models himself consciously on his patron, Medvedev represents the best bet for preserving Putin’s policies and legacy.
Just to make sure, however, Putin is moving into the White House as Prime Minister. The presidential succession has shown that he is far from ready to ride into the sunset (or lie on a Sardinian beach). Although Kremlin insiders had speculated that he might become Russia’s Deng Xiaoping – a ‘father of the nation’ above the trappings of high office – Putin has opted for the safety of institutional legitimacy.
It is unclear how all this will work. There is no tradition of dual power (dvoevlastie) in Russia. On the rare occasions it has been tried, it has failed, with unfortunate and sometimes disastrous consequences. If nature abhors a vacuum, then Russians have a similar aversion to power-sharing.
There is some speculation that an underestimated Medvedev could ‘do a Putin’, in other words, take power incrementally and surreptitiously. However, this would require not just his predecessor’s backing but also departure from the political stage. The constitution gives the president enormous powers at the expense of the government and legislature, but in Russia influence has always rested with strong personalities over weak institutions. As long as Putin remains politically active, Medvedev will have little opportunity (or inclination) to make his mark.
We should moderate our expectations accordingly. Under Medvedev, Russia will remain much as it is – a semi-authoritarian capitalist system, dominated by vested interests. There will be some softening around the edges, but these will be of a cosmetic rather than substantive character. In foreign policy, Putin’s presence will ensure that Russia maintains a tough stance with the West and a proprietorial interest towards its neighbourhood. The Kremlin will stay committed to the vision of Russia as a great global power, and will pursue this aggressively. Dmitry Medvedev may eventually become more than a Putin clone, but the advent of Post-Putin Man remains a distant prospect.
Bobo Lo is director of the Russia and China Programmes at the Centre for European Reform.
Monday, March 10, 2008
The Czechs in the EU: In the middle of the class
by Charles Grant
On a recent visit to Prague, people kept asking me how the Czech Republic was doing as EU member-state, and whether it was a successful member. With the Czechs preparing to take over the rotating presidency of the EU next January, a lot of people outside the Czech Republic will start to ask that question, too.
In my view, the Czechs are neither at the top nor the bottom of the ‘class of 2004’, that is the group of countries that joined the EU almost four years ago. They have not been curmudgeonly and difficult, as have, say, the Poles, threatening to veto the Lisbon treaty because of its voting rules, or the Greek Cypriots, who have prevented the EU ending the isolation of Northern Cyprus because of their conflict with Turkey. But the Czech Republic has not become an easy-going, middle-of-the-road member like Slovenia.
The Czechs have not been afraid to take strong positions on a number of issues. On the positive side (as far as the CER is concerned), the Czechs are ardent free-traders, always voting against anti-dumping duties as a matter of principle. The government believes that EU foreign policy should take account of human rights, and vigorously seeks to promote them in countries like Belarus, Burma, Cuba and Iran. The economy has performed quite well (certainly compared with Hungary), growing by about 6 per cent a year. It meets most of the ‘Maastricht criteria’ that aspiring euro members should comply with.
But the Czechs have put aside their plans to join the euro. This is because President Vaclav Klaus, a Thatcherite eurosceptic, is deeply hostile to monetary union. Although an over-valued crown is hurting Czech exporters such as Skoda, and two thirds of the country’s trade is with the eurozone, the Czechs are unlikely to join the euro so long as Klaus is in office (he has just begun a second five-year term).
On other issues, too, Klaus often takes idiosyncratic positions that put Prague at odds with other EU capitals. He is the only EU leader to argue that climate change is not a problem, and his interventions have ensured that Prime Minister Topolanek’s government is hesitating over supporting some of the European Commission’s recent proposals on climate change.
Part of Klaus’s strange political genius is that he manages to be pro-US, and particularly pro-Bush, while enjoying a warm relationship with Vladimir Putin. His Atlanticism spurs him to welcome American radars onto Czech soil, as part of the US’s controversial (and unpopular among Czechs) missile defence system. Yet Klaus also defends Putin from his western critics, praises his achievements in Russia, and speaks proudly of the medal that the Russian president recently bestowed upon him. Perhaps it is not so strange for the leader of a small and rather weak country – that was invaded only 40 years ago – to be so respectful of the powerful, whether or not they are democrats.
When I was last in Prague, just before the country joined the EU, everybody complained about corruption. On my recent visit I was told that the problem was no better. At all levels of government, apparently, bribery may play a role. The courts, too, suffer from this malaise. The fact that corruption afflicts many other countries that have recently joined the EU – as well as some of the older members – is no excuse. During the 1990s the Czech Republic seemed in many ways the most advanced of the countries applying for membership. When it comes to governance, the Czechs are no longer ahead of the pack, and have fallen behind the Baltic states.
The Czechs are natural allies of the British. If one listens to people in the Czech government talking of the need to slash spending on the common agricultural policy, they sound like officials in the British Treasury. The Czechs support close transatlantic ties and are wary of European federalism.
Yet despite their natural sympathy for the UK, many Czechs complain of being ignored by the British. Ministers in London seldom find time to visit Prague – though French ministers are often in town, cultivating partnerships with the Czechs. Last autumn, when Czech ministers spoke out in favour of the British stance on Zimbabwe, and said they would boycott the EU-Africa summit if Robert Mugabe turned up, nobody in London bothered to call Prague to say thank you. The British are generally not the most popular people in Europe. They should therefore do more to nurture close ties with those who share their world view, such as the Czechs.
Charles Grant is director of the Centre for European Reform.
On a recent visit to Prague, people kept asking me how the Czech Republic was doing as EU member-state, and whether it was a successful member. With the Czechs preparing to take over the rotating presidency of the EU next January, a lot of people outside the Czech Republic will start to ask that question, too.
In my view, the Czechs are neither at the top nor the bottom of the ‘class of 2004’, that is the group of countries that joined the EU almost four years ago. They have not been curmudgeonly and difficult, as have, say, the Poles, threatening to veto the Lisbon treaty because of its voting rules, or the Greek Cypriots, who have prevented the EU ending the isolation of Northern Cyprus because of their conflict with Turkey. But the Czech Republic has not become an easy-going, middle-of-the-road member like Slovenia.
The Czechs have not been afraid to take strong positions on a number of issues. On the positive side (as far as the CER is concerned), the Czechs are ardent free-traders, always voting against anti-dumping duties as a matter of principle. The government believes that EU foreign policy should take account of human rights, and vigorously seeks to promote them in countries like Belarus, Burma, Cuba and Iran. The economy has performed quite well (certainly compared with Hungary), growing by about 6 per cent a year. It meets most of the ‘Maastricht criteria’ that aspiring euro members should comply with.
But the Czechs have put aside their plans to join the euro. This is because President Vaclav Klaus, a Thatcherite eurosceptic, is deeply hostile to monetary union. Although an over-valued crown is hurting Czech exporters such as Skoda, and two thirds of the country’s trade is with the eurozone, the Czechs are unlikely to join the euro so long as Klaus is in office (he has just begun a second five-year term).
On other issues, too, Klaus often takes idiosyncratic positions that put Prague at odds with other EU capitals. He is the only EU leader to argue that climate change is not a problem, and his interventions have ensured that Prime Minister Topolanek’s government is hesitating over supporting some of the European Commission’s recent proposals on climate change.
Part of Klaus’s strange political genius is that he manages to be pro-US, and particularly pro-Bush, while enjoying a warm relationship with Vladimir Putin. His Atlanticism spurs him to welcome American radars onto Czech soil, as part of the US’s controversial (and unpopular among Czechs) missile defence system. Yet Klaus also defends Putin from his western critics, praises his achievements in Russia, and speaks proudly of the medal that the Russian president recently bestowed upon him. Perhaps it is not so strange for the leader of a small and rather weak country – that was invaded only 40 years ago – to be so respectful of the powerful, whether or not they are democrats.
When I was last in Prague, just before the country joined the EU, everybody complained about corruption. On my recent visit I was told that the problem was no better. At all levels of government, apparently, bribery may play a role. The courts, too, suffer from this malaise. The fact that corruption afflicts many other countries that have recently joined the EU – as well as some of the older members – is no excuse. During the 1990s the Czech Republic seemed in many ways the most advanced of the countries applying for membership. When it comes to governance, the Czechs are no longer ahead of the pack, and have fallen behind the Baltic states.
The Czechs are natural allies of the British. If one listens to people in the Czech government talking of the need to slash spending on the common agricultural policy, they sound like officials in the British Treasury. The Czechs support close transatlantic ties and are wary of European federalism.
Yet despite their natural sympathy for the UK, many Czechs complain of being ignored by the British. Ministers in London seldom find time to visit Prague – though French ministers are often in town, cultivating partnerships with the Czechs. Last autumn, when Czech ministers spoke out in favour of the British stance on Zimbabwe, and said they would boycott the EU-Africa summit if Robert Mugabe turned up, nobody in London bothered to call Prague to say thank you. The British are generally not the most popular people in Europe. They should therefore do more to nurture close ties with those who share their world view, such as the Czechs.
Charles Grant is director of the Centre for European Reform.
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