Brussels to ‘vet' national budgets; new hedgefund rules; SME's week of mourning.
A new EU treaty?
The only sure thing to emerge from the first meeting of the Task Force on Economic Governance was that fundamental change is on the way. Aside from that, there is considerable uncertainty on where Europe goes from here - hardly the reassurance markets have been hungry for.
The high-level group which includes European finance ministers and representatives of the EU institutions, gathered in Brussels last Friday evening to figure out how to put Europe's house in order. Pictured left is President of the European Council Herman Van Rompuy and french Minister of Finance, Christine Lagarde.
There was no shortage of ideas, some of which are radical enough to require a new European Treaty - despite the terror this strikes in the hearts of many.
Top of the agenda is supervision. EU officials want the economic assumptions that underlie national budgets to be "vetted and validated" either by Brussels, a peer group of other member states or an independent panel.
Finance Ministers ducking spending cuts or promising pay rises based on fanciful growth projections would be slapped down and told to try again. This strikes to the core of national financial sovereignty, and it would rein in pre-election spending splurges across the EU27.
Other more "innovative" notions being bandied about include the prospect of some national debt becoming "common debt" in cases where countries are, otherwise, making fair efforts to get their houses in order. Finance ministers were lukewarm on this when it was floated on Friday but it's a sign that Brussels is open to some far-out thinking right now.
One plan that has broad support is stiffer punishments for countries who flout the Stability and Growth Pact - a 1997 deal requiring member states to keep their annual budget deficits lower than 3%.
Sanctions could include missing out on EU funds or losing voting rights at European Council meetings.
All of this causes a number of problems. For one thing, the UK (amongst others) is not inclined to let Brussels check its sums before it publishes its budget, arguing that this push for economic governance has arisen from the crisis in a currency union of which it is not part.
Similarly, the task force will decide in October - at the end of its deliberations - whether what it proposes would require changes to the European Treaty. The UK and Ireland would then hold referendums while Poland, the Czech Republic and others would revisit the domestic constitutional crises sparked by the Lisbon debate.
Germany is quite sure that a new treaty would be necessary but others want to avoid this route at all costs given the time and uncertainty it would bring. There are even fears it would lead to the kind of twin-speed Europe mooted when Ireland rejected the Lisbon Treaty in 2008.
The task force presents an interim report next month and a final version in the autumn but the road to closer fiscal union looks long and treacherous.
MEPs have spent the bones of a year picking over a European Commission proposal designed to tighten the rules for hedgefunds and private equity firms. The plan would introduce mandatory registration for fund managers and increase disclosure requirements but has been the subject of intense lobbying from the industry and London politicians.
Despite having talked the subject to death, deep divisions remain between the European Parliament and Europe's finance ministers.
MEPs want to allow foreign hedgefunds access to all EU countries provided they have a European ‘passport' but national governments would prefer funds to establish themselves in each jurisdiction where they are active.
It now falls back to the European Commission to cobble together a compromise ahead of a final parliament vote in July.
Internal market commissioner Michel Barnier, pictured above, hinted that he is keen on the parliament's idea of a single EU passport for non-EU funds, provided they meet certain conditions such as following OECD tax rules. Paris disagrees, which may make for some awkward negotiations with Barnier, who Sarkozy nominated to the commission late last year.
Happy SME Week. Well, unless you're a small business. Things are far from rosy for Europe's smaller companies, despite their ascent to the top of Europe's political agenda.
The second annual celebration of all things entrepreneurial, which runs until June 1st, is designed to keep up the pro-enterprise momentum that was born with the Small Business Act in June 2008.
Two years since the SME charter was published, things have gone from bad to worse for small firms. The Act includes legislation on late payments, makes positive noises about access to finance, and promotes entrepreneurship and bankruptcy reform.
But through no fault of the Small Business Act, the reality is that SMEs are waiting longer to be paid and have to fight harder for bank loans than at any time in decades.
In southern Europe, companies are waiting up to two years to be paid by public authorities despite the EU's efforts to revitalise its late payments legislation. European businesses have effectively lost €300bn in the past year due to delayed payments - a sum equal to the national debt of Greece.
A revamped Late Payments Directive passed through a key European Parliament committee this month, and will add penal interest rates of 9% for bills not settled by public bodies within 30 days.
For business-to-business transactions, the penalties kick in after 60 days, although some deliberately vague wording was devised to preserve companies' freedom to agree longer payment terms.
How Greek hospitals, which currently take 600 days to pay for medical devices, will manage to pay up within a month seems to have escaped the concern of MEPs.