Friday, November 18, 2011

An unholy alliance between MEPs and banks

A 260-page declaration of class war was issued in Cannes earlier this month.

The final report of the B20 summit, a gathering of business chiefs coinciding with the Group of 20 meeting for political leaders, contains this explicit demand: “Restore fiscal stability by reducing public spending rather than by increasing corporate taxation.” If a software package is ever developed to translate executive speak into plain English, it might just transform that sentence into: “Indulge the wealthy; make life miserable for everyone else.”

It would be comforting if this paper was destined to gather dust. Tragically, that core demand is already being put into effect in many countries, without the governments and institutions overseeing its implementation having any democratic mandate to do so. We saw how George Papandreou was browbeaten into retreating when he dared to suggest that the Greek people should be allowed to vote in a referendum on austerity. Less widely-reported, the Irish finance minister Michael Noonan has lately described as “sacrosanct” the deficit reduction targets set for his country by the European Union and International Monetary Fund. When standing for election in February this year, the same Noonan pledged to renegotiate the diktats he now regards as “sacrosanct”.

Can the European Parliament strike a blow for the disadvantaged? In theory, the EU’s only directly-elected institution can. In practice, it seldom does.

This week, the Parliament’s economics and monetary affairs committee will probably approve its official position paper on the innocuous-sounding but highly dangerous “European semester” arrangement.

Even though that arrangement usurps democracy by requiring the national governments of EU states to have their annual budgets vetted by the unelected European Commission, most MEPs sitting on that committee appear untroubled. The draft version of the paper they are considering merely recommends a few tweaks to the Commission’s proposals such as keeping MEPs abreast of what other EU bodies get up to.

It is telling that Pervenche Berès has drawn up the Parliament’s paper. As chairwoman of the economic and monetary affairs committee, she made it to number eight on the “Top 50 Power List” compiled by the Accountancy Age in 2008. According to the magazine, she has been prepared to “ruffle the feathers” of the International Accounting Standards Board by querying moves by that (ironically unaccountable) private sector body to converge US business reporting standards with those used in the rest of the world.

Affront to democracy

Rather than making a habit of ruffling feathers among the titans of finance, Berès is generally accommodating towards them. She has combined holding one of the more coveted positions within the Parliament’s structures with membership of the European Parliamentary Financial Services Forum (EPFSF).

That forum is another affront to democracy. In return for an annual fee of 8,000 euros, banks and other providers of financial services enjoy privileged access to the MEPs who are supposed to be regulating their sector. Companies who are not fully signed up to the forum can still take part in the “briefing sessions” it organises, provided they pay 200 euros each time. If political parties were holding fund-raisers, where businesspeople coughed up comparable sums to have chinwags with ministers, the press would rightly be curious.

While Berés told Spinwatch, a group monitoring relations between business and politics, in 2008 that she was not an active member of the EPFSF, the forum’s own website indicates that she chaired at least five of its meetings between 2003 and 2008. In 2005, she was in the hot seat for a discussion on mortgages, where the two “guest speakers” came from BVBA and BNP Paribas. There is no suggestion that Berès benefitted personally from the discussion. But the fact she was also chairwoman of the economic and monetary affairs committee surely meant there was a conflict of interests involved. She cannot seriously claim that a corporate-funded body is a neutral or objective forum for debate.

Among the corporate participants in the forum are Barclays, DeutscheBank, Goldman Sachs, the International Swaps and Derivatives Association (ISDA) and the crediting ratings agency Standard and Poor’s.

Hedge funds write the script

The ISDA has been lobbying to ensure that EU rules on hedge funds end up being to its liking. Its work has inevitably brought it in close contact with another French MEP, Jean-Paul Gauzés, who has been tasked with preparing the Parliament’s official positions on hedge funds and credit ratings agencies. Guess what? Gauzés is also a member of the financial services forum.

The influence of hedge fund lobbying on the Parliament was apparent from the outset. During the first debate on proposed new rules that the economic and monetary affairs committee held in 2009, German MEP Wolf Klinz argued that the recommendation on the table failed to distinguish between different types of investment funds. “The problem is the one-size-fits-all approach,” he said.

I checked a briefing paper that the EPFSF circulated on the same proposals in 2009. It closely resembled Klinz’s comments by warning of a “one-size-fits-all approach of regulation to a very heterogeneous group of fund types”. The resemblance is unlikely to be accidental. Klinz is the current chairman of the forum.

Also this week, Michel Barnier, the EU’s single market commissioner, is scheduled to come forward with new proposals on credit ratings agencies. Don’t be surprised if the MEP put in charge of responding to them sits on the aforementioned forum.

Theodore Roosevelt once spoke of an “unholy alliance” between business and politics. That kind of alliance is commonplace in Brussels.

●First published by New Europe, 14 November 2011.

No comments:

Post a Comment